Document:

EXECUTION COPY

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                                 $1,250,000,000
                                CREDIT AGREEMENT

                                   dated as of
                                 AUGUST 18, 2004

                                      AMONG

                      KINDER MORGAN ENERGY PARTNERS, L.P.,
                                 as the Company,

                        KINDER MORGAN OPERATING L.P. "B",
                           as the Subsidiary Borrower,

                            THE LENDERS PARTY HERETO,

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                          as the Administrative Agent,
                   the Issuing Bank and the Swingline Lender,

                                 CITIBANK, N.A.,
                                       and
                              JPMORGAN CHASE BANK,
                          as the Co-Syndication Agents,

                                       and

                         HARRIS NESBITT FINANCING, INC.,
                                       and
                               BARCLAYS BANK PLC,
                         as the Co-Documentation Agents

                     ______________________________________

                          WACHOVIA CAPITAL MARKETS LLC
                                       and
                         CITIGROUP GLOBAL MARKETS, INC.,
                 as Joint Lead Arrangers and Joint Book Managers

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<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I. DEFINITIONS.........................................................2

  SECTION 1.01 Defined Terms...................................................2
  SECTION 1.02 Classification of Loans and Borrowings.........................22
  SECTION 1.03 Accounting Terms; Changes in GAAP..............................22
  SECTION 1.04 Interpretation.................................................22

ARTICLE II. THE CREDITS.......................................................24

  SECTION 2.01 Commitments....................................................24
  SECTION 2.02 Loans and Borrowings...........................................24
  SECTION 2.03 Requests for Committed Borrowings..............................25
  SECTION 2.04 Competitive Bid Procedure......................................25
  SECTION 2.05 Swingline Loans................................................28
  SECTION 2.06 Letters of Credit..............................................29
  SECTION 2.07 Funding of Borrowings..........................................34
  SECTION 2.08 Interest Elections.............................................34
  SECTION 2.09 Termination and Reduction of Commitments.......................36
  SECTION 2.10 Repayment of Loans; Evidence of Debt...........................36
  SECTION 2.11 Prepayment of Loans............................................38
  SECTION 2.12 Fees...........................................................38
  SECTION 2.13 Interest.......................................................40
  SECTION 2.14 Alternate Rate of Interest.....................................41
  SECTION 2.15 Increased Costs................................................41
  SECTION 2.16 Break Funding Payments.........................................42
  SECTION 2.17 Taxes..........................................................43
  SECTION 2.18 Payments Generally; Pro Rata Treatment; Sharing of
               Set-offs.......................................................44
  SECTION 2.19 Mitigation Obligations; Replacement of Lenders.................46
  SECTION 2.20 Telephonic Notices.............................................46

ARTICLE III. CONDITIONS PRECEDENT.............................................47

  SECTION 3.01 Conditions Precedent to the Initial Credit Event...............47
  SECTION 3.02 Conditions Precedent to All Credit Events......................48
  SECTION 3.03 Conditions Precedent to Conversions............................49
  SECTION 3.04 Delivery of Documents..........................................49

ARTICLE IV. REPRESENTATIONS AND WARRANTIES....................................49

  SECTION 4.01 Organization and Qualification.................................49
  SECTION 4.02 Authorization, Validity, Etc...................................49
  SECTION 4.03 Governmental Consents, Etc.....................................50
  SECTION 4.04 No Breach or Violation of Agreements or Restrictions, Etc......50

                                      -i-
<PAGE>

  SECTION 4.05 Properties.....................................................50
  SECTION 4.06 Litigation and Environmental Matters...........................50
  SECTION 4.07 Financial Statements...........................................51
  SECTION 4.08 Disclosure.....................................................51
  SECTION 4.09 Investment Company Act.........................................51
  SECTION 4.10 Public Utility Holding Company Act.............................51
  SECTION 4.11 ERISA..........................................................52
  SECTION 4.12 Tax Returns and Payments.......................................52
  SECTION 4.13 Compliance with Laws and Agreements............................52
  SECTION 4.14 Purpose of Loans...............................................52
  SECTION 4.15 Foreign Assets Control Regulations, etc........................53

ARTICLE V. AFFIRMATIVE COVENANTS..............................................53

  SECTION 5.01 Financial Statements and Other Information.....................53
  SECTION 5.02 Existence, Conduct of Business.................................56
  SECTION 5.03 Payment of Obligations.........................................56
  SECTION 5.04 Maintenance of Properties; Insurance...........................56
  SECTION 5.05 Books and Records; Inspection Rights...........................57
  SECTION 5.06 Compliance with Laws...........................................57
  SECTION 5.07 Use of Proceeds................................................57

ARTICLE VI. NEGATIVE COVENANTS................................................57

  SECTION 6.01 Liens..........................................................57
  SECTION 6.02 Fundamental Changes............................................58
  SECTION 6.03 Restricted Payments............................................58
  SECTION 6.04 Transactions with Affiliates...................................58
  SECTION 6.05 Restrictive Agreements.........................................58
  SECTION 6.06 Financial Covenants............................................59

ARTICLE VII. EVENTS OF DEFAULT................................................59

  SECTION 7.01 Events of Default and Remedies.................................59

ARTICLE VIII. THE ADMINISTRATIVE AGENT........................................62

  SECTION 8.01 Appointment, Powers and Immunities.............................62
  SECTION 8.02 Reliance by Administrative Agent...............................63
  SECTION 8.03 Defaults; Events of Default....................................63
  SECTION 8.04 Rights as a Lender.............................................63
  SECTION 8.05 INDEMNIFICATION................................................63
  SECTION 8.06 Non-Reliance on Agents and other Lenders.......................64
  SECTION 8.07 Action by Administrative Agent.................................65
  SECTION 8.08 Resignation or Removal of Administrative Agent.................65
  SECTION 8.09 Duties of Co-Syndication Agents and
  Co-Documentation Agents.....................................................65

ARTICLE IX. GUARANTY..........................................................66

                                      -ii-
<PAGE>

  SECTION 9.01 Guaranty.......................................................66
  SECTION 9.02 Continuing Guaranty............................................66
  SECTION 9.03 Effect of Debtor Relief Laws...................................69
  SECTION 9.04 Waiver.........................................................69
  SECTION 9.05 Full Force and Effect..........................................69

ARTICLE X. MISCELLANEOUS......................................................70

  SECTION 10.01 Notices, Etc..................................................70
  SECTION 10.02 Waivers; Amendments...........................................71
  SECTION 10.03 Payment of Expenses, Indemnities, etc.........................72
  SECTION 10.04 Successors and Assigns........................................75
  SECTION 10.05 Assignments and Participations................................75
  SECTION 10.06 Survival; Reinstatement.......................................77
  SECTION 10.07 Counterparts; Integration; Effectiveness......................77
  SECTION 10.08 Severability..................................................78
  SECTION 10.09 Right of Setoff...............................................78
  SECTION 10.10 Governing Law; Jurisdiction; Consent to Service of Process....78
  SECTION 10.11 WAIVER OF JURY TRIAL..........................................79
  SECTION 10.12 Confidentiality...............................................80
  SECTION 10.13 Interest Rate Limitation......................................80
  SECTION 10.14 EXCULPATION PROVISIONS........................................81

                                     -iii-
<PAGE>

SCHEDULES:

Schedule 1.01     Commitments
Schedule 4.01     Existing Subsidiaries
Schedule 6.05     Existing Restrictions

EXHIBITS:

Exhibit 1.01A     Form of Assignment and Acceptance
Exhibit 1.01B-1   Subsidiary Borrower Letter of Credit
Exhibit 1.01B-2   Other Existing Letters of Credit
Exhibit 1.01-C    Form of Committed Note
Exhibit 1.01-D    Form of Competitive Note
Exhibit 1.01-E    Form of Swingline Note
Exhibit 2.03      Form of Borrowing Request
Exhibit 2.04-A    Form of Competitive Bid Request
Exhibit 2.04-B    Form of Notice to Lenders of Competitive Bid
Request
Exhibit 2.04-C    Form of Competitive Bid
Exhibit 2.06      Form of Letter of Credit Request
Exhibit 2.07      Form of Notice of Account Designation
Exhibit 2.08      Form of Interest Election Request
Exhibit 2.11      Form of Notice of Prepayment
Exhibit 5.01      Form of Compliance Certificate

                                      -iv-
<PAGE>

                                CREDIT AGREEMENT

           THIS CREDIT AGREEMENT, dated as of August 18, 2004 (this "Agreement")
is among:

           (a)  Kinder  Morgan  Energy   Partners,   L.P.,  a  Delaware  limited
partnership (the "Company");

           (b)   Kinder   Morgan   Operating   L.P.  "B",  a  Delaware   limited
partnership (the "Subsidiary Borrower");

           (c)  the  banks  and  other  financial  institutions  listed  on  the
signature  pages hereof under the caption  "Lenders" (the "Lenders" and together
with each other  Person that  becomes a Lender  pursuant  to Section  2.01(b) or
Section 10.05, collectively, the "Lenders");

           (d)  Wachovia  Bank,   National   Association,   a  national  banking
association,  individually as a Lender and as the  administrative  agent for the
Lenders (in such latter  capacity  together  with any other  Person that becomes
Administrative Agent pursuant to Section 8.08, the "Administrative Agent");

           (e) Citibank, N.A., and JPMorgan Chase Bank, as Co-Syndication Agents
(the "Co-Syndication Agents"); and

           (f)  Harris  Nesbitt  Financing,  Inc.,  and  Barclays  Bank PLC,  as
Co-Documentation Agents (the "Co-Documentation Agents").

                             PRELIMINARY STATEMENTS

           The Company and the Subsidiary  Borrower have requested that a credit
facility be extended to them pursuant to which:  (a) the Company may borrow from
the Lenders (i) to repay in full the principal and accrued interest on all loans
and other amounts  outstanding (if any) under (A) that certain Credit  Agreement
dated as of October 15, 2002 among the Company,  the  Subsidiary  Borrower,  the
subsidiary guarantors parties thereto, the lenders party thereto, Wachovia Bank,
National  Association,  as the  administrative  agent,  the issuing bank and the
swingline  bank,  and the other agents named  therein,  (as amended to date, the
"Existing  Multi-Year  Credit  Agreement") and (B) that certain Credit Agreement
dated as of October  14, 2003 among the  Company,  the  lenders  party  thereto,
Wachovia Bank, National  Association,  as the administrative agent and the other
agents named therein  (together with the Existing  Multi-Year  Credit  Agreement
collectively,  the "Existing Credit Agreements"),  (ii) to back commercial paper
issuance,  and (iii) for general working  capital and other general  partnership
purposes;  and (b) the Company may obtain the  issuance of letters of credit and
the  letters of credit  (including  the  Subsidiary  Borrower  Letter of Credit)
issued or otherwise  outstanding under the Existing  Multi-Year Credit Agreement
will be deemed to be letters of credit issued hereunder.

           NOW, THEREFORE, the parties hereto agree as follows:

<PAGE>

                                   ARTICLE I.
                                   DEFINITIONS

           SECTION 1.01 Defined Terms. As used in this Agreement,  the following
terms have the meanings specified below:

           "ABR",  when used in  reference to any Loan or  Borrowing,  refers to
whether such Loan, or the Loans  comprising such  Borrowing,  bear interest at a
rate determined by reference to the Alternate Base Rate.

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

           "Administrative  Questionnaire" means an Administrative Questionnaire
in the form supplied by the Administrative Agent.

           "Affiliate"  of any  Person  shall mean (i) any  Person  directly  or
indirectly  controlled  by,  controlling or under common control with such first
Person,  (ii) any  director  or officer  of such  first  Person or of any Person
referred  to in clause  (i) above and (iii) if any Person in clause (i) above is
an individual,  any member of the immediate family (including parents, siblings,
spouse  and  children)  of  such   individual  and  any  trust  whose  principal
beneficiary is such  individual or one or more members of such immediate  family
and any Person who is  controlled  by any such member or trust.  For purposes of
this definition,  any Person that owns directly or indirectly 25% or more of the
securities  having  ordinary voting power for the election of directors or other
governing  body of a  corporation  or 25% or more of the  partnership  or  other
ownership interests of any other Person (other than as a limited partner of such
other  Person)  will be deemed to  "control"  (including,  with its  correlative
meanings,  "controlled by" and "under common control with") such  corporation or
other Person.

           "Agreement"  has the meaning  specified in the  introduction  to this
Agreement (subject, however, to Section 1.04(v) hereof).

           "Alternate  Base Rate" means,  for any day, a rate per annum equal to
the greater of (a) the Federal Funds  Effective  Rate in effect on such day plus
1/2 of 1% and (b) the Prime  Rate in  effect  for such  day.  Any  change in the
Alternate  Base  Rate due to a change  in the Prime  Rate or the  Federal  Funds
Effective  Rate shall be effective from the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.

           "Applicable  Margin"  means  at any time  and  from  time to time,  a
percentage per annum equal to the applicable  percentage set forth below for the
corresponding Performance Level set forth below:

                                      -2-
<PAGE>

          -----------------------------------
                             LIBOR Borrowings
              Performance         Margin
                 Level          Percentage
                 -----          ----------
          -----------------------------------

                  I               .29%
          -----------------------------------

                 II               .35%
          -----------------------------------

                 III              .45%
          -----------------------------------

                 IV               .60%
          -----------------------------------

                  V               .80%
          -----------------------------------

           The  Applicable  Margin  shall  be  determined  by  reference  to the
Performance  Level in effect from time to time, and any change in the Applicable
Margin  shall  be  effective  from  the  effective  date  of the  change  in the
applicable Performance Level giving rise thereto.

           "Applicable  Percentage"  means,  with  respect  to any  Lender,  the
percentage of the Total Commitment  represented by such Lender's Commitment.  If
the Total Commitment has terminated or expired, the Applicable Percentages shall
be determined  based upon the Total  Commitment most recently in effect,  giving
effect to any assignments.

           "Application" has the meaning specified in Section 2.06(c).

           "Assignment  and  Acceptance"  means  an  assignment  and  acceptance
entered  into by a Lender and an  assignee  (with the consent of any party whose
consent is required by Section 10.05), and accepted by the Administrative Agent,
in the form of Exhibit  1.01A or any other form  approved by the  Administrative
Agent.

           "Available  Cash" means,  with  respect to any fiscal  quarter of the
Company (a "Test  Quarter"),  an amount  equal to the  algebraic  sum of (a) the
aggregate of all cash distributions actually made to and received by the Company
from the  Subsidiaries  in respect of their  Capital  Stock  during  such fiscal
quarter  minus (b) the  aggregate  amount of all cash  disbursements,  including
disbursements for operating  expenses,  payments of principal of and interest on
Indebtedness and taxes (net of amounts received or to be received by the Company
from  the  Subsidiaries  as  reimbursement   for  such  amounts),   and  capital
expenditures (net of any borrowings to fund such capital expenditures  permitted
pursuant  to this  Agreement),  actually  paid by the  Company  during such Test
Quarter,  plus, in the case of a decrease,  or minus, in the case of an increase
(c) the  amount by  which,  as at the end of such Test  Quarter,  cash  reserves
necessary in the  reasonable  discretion  of the  Company's  management  for the
proper conduct of the business of the Company and the Subsidiaries subsequent to
such Test Quarter, decreased or increased from the amount of such reserves as at
the end of the immediately preceding fiscal quarter.

           "Availability  Period" means the period from the  Effective  Date, to
the earlier of the Maturity Date and the date of termination of the Commitments.

           "Bankruptcy Code" has the meaning specified in Section 9.01(a).

                                      -3-
<PAGE>

           "Benefit  Arrangement"  means at any time an  employee  benefit  plan
within  the  meaning  of  Section  3(3)  of  ERISA  which  is  not a  Plan  or a
Multiemployer  Plan and which is maintained or otherwise  contributed  to by any
member of the ERISA Group.

           "Board" means the Board of Governors of the Federal Reserve System of
the United States of America.

           "Board of Directors" means, with respect to any Person,  the Board of
Directors  of such Person or any  committee  of the Board of  Directors  of such
Person  duly  authorized  to act on  behalf of the  Board of  Directors  of such
Person.

           "Board  Resolution"  means,  with respect to any Person,  a copy of a
resolution  certified by the Secretary or an Assistant  Secretary of such Person
to have been duly  adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such  certification,  and  delivered to the
Administrative Agent.

           "Bonds"  means  the Port  Facility  Refunding  Revenue  Bonds  (Enron
Transportation  Services,  L.P. Project) Series 1994 in the aggregate  principal
amount of $23,700,000, as issued by the Jackson-Union Regional Port District.

           "Borrowers"  means,  collectively,  the  Company  and the  Subsidiary
Borrower and "Borrower" means either one of them.

           "Borrowing"  means (a) a  Committed  Borrowing  or (b) a  Competitive
Borrowing.

           "Borrowing  Date"  means the  Business  Day upon  which any Letter of
Credit is to be issued or any Loan is to be made available to the Company.

           "Borrowing Request" has the meaning specified in Section 2.03.

           "Business Day" means any day that is not a Saturday,  Sunday or other
day on which  commercial  banks in  Houston,  Texas,  New  York,  New  York,  or
Charlotte,  North Carolina,  are authorized or required by law to remain closed;
provided  that,  when  used in  connection  with a  Eurodollar  Loan,  the  term
"Business  Day"  shall  also  exclude  any day on which  banks  are not open for
dealings in dollar deposits in the London interbank market.

           "Capital Lease  Obligations"  of any Person means the  obligations of
such  Person  to pay  rent  or  other  amounts  under  any  lease  of (or  other
arrangement  conveying  the  right  to use)  real  or  personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such Person under GAAP,
and the  amount of such  obligations  shall be the  capitalized  amount  thereof
determined in accordance with GAAP.

           "Capital  Stock"  means,  with  respect  to any  Person,  any and all
shares,  interests,  rights to purchase,  warrants,  options,  participations or
other equivalents  (however  designated) of such Person's equity,  including all
common stock and preferred  stock, any limited or general  partnership  interest
and any limited liability company member interest.

                                      -4-
<PAGE>

           "Change  in  Control"  means  either  (a)  the  acquisition   through
beneficial  ownership or otherwise  after the date hereof by any person (as such
term is used in section  13(d) and section  14(d)(2) of the  Exchange  Act as in
effect on the date hereof) or related persons constituting a group (as such term
is used in Rule 13d-5 under the Exchange Act as in effect on the date hereof) of
30% of the Voting Stock of the General  Partner;  or (b) individuals who, at the
beginning  of any  period  of 12  consecutive  months,  constitute  the  General
Partner's  Board  of  Directors  cease  for any  reason  (other  than  death  or
disability) to constitute a majority of the General Partner's Board of Directors
then in office.

           "Change in  Control  Event"  means the  execution  of any  definitive
agreement which, when fully performed by the parties thereto,  would result in a
Change in Control.

           "Change in Law" means (a) the adoption of any law, rule or regulation
after the date of this Agreement,  (b) any change in any law, rule or regulation
or in the  interpretation or application  thereof by any Governmental  Authority
after the date of this  Agreement or (c) compliance by any Lender or the Issuing
Bank (or, for purposes of Section 2.15(b),  by any lending office of such Lender
or by such  Lender's or the Issuing  Bank's  holding  company,  if any) with any
request,  guideline or directive (whether or not having the force of law) of any
Governmental  Authority made or issued after the date of this Agreement.  If any
Lender (or its applicable lending office or its holding company, as the case may
be) shall be,  or shall  determine  itself  to be,  required  by any law,  rule,
regulation,  request, guideline or directive (whether or not having the force of
law) relating to capital  requirements  adopted after the date of this Agreement
or any  change  in the  interpretation  or  application  of any  thereof  by any
Governmental  Authority  after  the  date of  this  Agreement  (each a  "Capital
Requirement")  to maintain (and in either such case such Lender,  lending office
or holding company,  as the case may be, does in fact maintain)  capital against
such Lender's unused Commitment (or any portion thereof), in whole or in part as
a result of such unused Commitment (or portion),  either alone or in combination
with any proposed or agreed  extension  thereof  (whether or not such  extension
shall be by its terms at the time be  effective),  extending  or being deemed to
extend  for a period  of more  than one year  from its  inception  or to have an
original  maturity  of more than one year or  otherwise  to last for a period of
time sufficient to require  maintenance of capital against it, a "Change in Law"
shall be deemed to have occurred for purposes of Section 2.15(b) with respect to
such Capital Requirement.

           "Charges" has the meaning specified in Section 10.13.

           "Class",  when used in reference to any Loan or Borrowing,  refers to
whether such Loan, or the Loans comprising such Borrowing,  are Committed Loans,
Swingline Loans or Competitive Loans.

           "Co-Documentation   Agents"   has  the  meaning   specified   in  the
introduction to this Agreement.

           "Co-Syndication Agents" has the meaning specified in the introduction
to this Agreement.

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

                                      -5-
<PAGE>

           "Commitment"  means,  with respect to each Lender,  the commitment of
such Lender to make Committed Loans and to acquire  participations in Letters of
Credit and Swingline Loans  hereunder,  expressed as an amount  representing the
maximum aggregate amount of such Lender's  Committed Credit Exposure  hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section 2.09
and (b) increased  pursuant to Section 2.01 or reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 10.05. The
initial amount of each Lender's Commitment is set forth on Schedule 1.01 hereto,
or in the  Assignment  and  Acceptance  pursuant to which such Lender shall have
assumed its Commitment, as applicable.

           "Committed  Borrowing"  means (a) a borrowing  comprised of Committed
Loans of the same Type,  made,  converted  or continued on the same date and, in
the case of Eurodollar  Loans, as to which a single Interest Period is in effect
or (b) a Swingline Loan.

           "Committed  Credit Exposure" means, with respect to any Lender at any
time, the sum of the  outstanding  principal  amount of such Lender's  Committed
Loans and its LC Exposure and Swingline Exposure at such time.

           "Committed Loan" means a Loan made pursuant to Section 2.03.

           "Committed  Note" means a promissory  note of the Company  payable to
the order of each Lender, in substantially the form of Exhibit 1.01-C,  together
with all modifications, extensions, renewals and rearrangements thereof.

           "Communications" has the meaning specified in Section 10.01.

           "Company"  has the  meaning  specified  in the  introduction  to this
Agreement.

           "Company  Debt Rating"  means,  with respect to the Company as of any
date of determination,  the rating that has been most recently announced by each
of S&P or Moody's for any non-credit  enhanced,  unsecured long-term senior debt
issued or to be issued by the Company. For purposes of the foregoing:

           (a) if, at any time,  neither S&P nor Moody's  shall have in effect a
Company Debt Rating, the Applicable Margin or the Facility Fee Rate, as the case
may be, shall be set in accordance with Performance Level V under the definition
of "Applicable Margin" or "Facility Fee Rate", as the case may be;

           (b) if the ratings  established  by S&P and Moody's shall fall within
different Performance Levels, the Applicable Margin or the Facility Fee Rate, as
the case may be, shall be based upon the higher rating; provided, however, that,
if the lower of such ratings is two or more Performance  Levels below the higher
of such ratings, the Applicable Margin or the Facility Fee Rate, as the case may
be, shall be based upon the rating that is one Performance Level above the lower
rating;

           (c) if any rating  established  by S&P or Moody's  shall be  changed,
such change  shall be effective as of the date on which such change is announced
publicly by the rating agency making such change; and

                                      -6-
<PAGE>

           (d) if S&P or Moody's  shall  change the basis on which  ratings  are
established by it, each reference to the Company Debt Rating announced by S&P or
Moody's shall refer to the then equivalent rating by S&P or Moody's, as the case
may be.

           "Competitive  Bid"  means an offer by a Lender to make a  Competitive
Loan substantially in the form of Exhibit 2.04-C.

           "Competitive  Bid Rate" means,  with respect to any Competitive  Bid,
the Margin or the Fixed Rate, as  applicable,  offered by the Lender making such
Competitive Bid.

           "Competitive  Bid  Request"  means  a  request  by  the  Company  for
Competitive  Bids in accordance with Section 2.04  substantially  in the form of
Exhibit 2.04-A.

           "Competitive Borrowing" means a borrowing consisting of a Competitive
Loan or  concurrent  Competitive  Loans of the same  Type,  as to which a single
Interest  Period is in effect and made on the same date by the Lender or Lenders
whose Competitive Bid(s) as all or as a part of such borrowing,  as the case may
be, has (or have) been  accepted  by the  Company  under the  bidding  procedure
described in Section 2.04.

           "Competitive Loan" means a Loan made pursuant to Section 2.04.

           "Competitive  Note" means a promissory note of the Company payable to
the order of a Lender,  in  substantially  the form of Exhibit 1.01-D,  together
with all modifications, extensions, renewals and rearrangements thereof.

           "Consolidated  Assets"  means,  at  the  date  of  any  determination
thereof,  the total assets of the Company and the Subsidiaries as set forth on a
consolidated  balance sheet of the Company and the  Subsidiaries  for their most
recently completed fiscal quarter, prepared in accordance with GAAP.

           "Consolidated  EBITDA"  means,  for any  period,  the  EBITDA  of the
Company and the Subsidiaries for such period determined on a consolidated  basis
in accordance with GAAP.

           "Consolidated  Indebtedness"  means, at the date of any determination
thereof,  Indebtedness  of the  Company  and the  Subsidiaries  determined  on a
consolidated basis in accordance with GAAP.

           "Consolidated  Interest Expense" means, for any period,  the Interest
Expense of the Company and the  Subsidiaries  for such  period  determined  on a
consolidated basis in accordance with GAAP.

           "Consolidated  Net  Tangible  Assets"  means,  at  the  date  of  any
determination  thereof,  Consolidated Assets after deducting therefrom:  (a) all
current  liabilities,  excluding (i) any current liabilities that by their terms
are extendable or renewable at the option of the obligor  thereon to a time more
than 12 months after the time as of which the amount thereof is being  computed;
and (ii) current  maturities of long-term  debt;  and (b) the value,  net of any
applicable reserves, of all goodwill, trade names, trademarks, patents and other
like intangible

                                      -7-
<PAGE>

assets,  all as set forth,  or on a pro forma  basis  would be set  forth,  on a
consolidated  balance sheet of the Company and the  Subsidiaries  for their most
recently completed fiscal quarter, prepared in accordance with GAAP.

           "Credit  Event"  means the making of any Loan or the  issuance or the
extension of any Letter of Credit.

           "Default"  means any event or condition  which upon notice,  lapse of
time or both would, unless cured or waived, become an Event of Default.

           "Delegate"  means Kinder Morgan  Management,  LLC, a Delaware limited
liability company.

            "dollars"  or "$"  refers to lawful  money of the  United  States of
America.

           "EBITDA" means (without duplication),  with respect to any period for
any Person, the Net Income of such Person,  increased (to the extent deducted in
determining  Net  Income for such  period)  by the sum of (a) all  income  taxes
(including  state  franchise  taxes  based upon  income) of such  Person paid or
accrued according to GAAP for such period; (b) Consolidated  Interest Expense of
such Person for such  period;  and (c)  depreciation  and  amortization  of such
Person for such period determined in accordance with GAAP.

           "Effective  Date" means the date  occurring  on or before  August 31,
2004 on which the conditions  specified in Section 3.01 are satisfied (or waived
in accordance with Section 10.02).

           "Eligible  Assignee"  means (a) any Lender;  (b) any Affiliate of any
Lender; (c) a commercial bank organized or licensed under the laws of the United
States, or a state thereof, and having total assets in excess of $1,000,000,000;
(d) a commercial  bank organized  under the laws of any other country which is a
member of the OECD, or a political  subdivision of any such country,  and having
total  assets  in excess of  $1,000,000,000,  provided  that such bank is acting
through a branch or agency  located in the country in which it is  organized  or
another  country which is also a member of the OECD; and (e) a finance  company,
insurance company or other financial institution or fund (whether a corporation,
partnership,  trust or other  entity) that is engaged in making,  purchasing  or
otherwise  investing in commercial  loans in the ordinary course of its business
and  having  a  combined  capital  and  surplus  or  total  assets  of at  least
$100,000,000.

           "Environmental  Laws"  means all  laws,  rules,  regulations,  codes,
ordinances,  orders,  decrees,  judgments,   injunctions,   notices  or  binding
agreements  issued,  promulgated or entered into by any Governmental  Authority,
relating in any way to the  environment,  preservation or reclamation of natural
resources,  the  management,  release or  threatened  release  of any  Hazardous
Material or to health and safety matters.

           "Environmental   Liability"   means  any  liability,   contingent  or
otherwise   (including  any  liability  for  damages,   costs  of  environmental
remediation,  fines, penalties or indemnities), of the Company or any Subsidiary
directly  or  indirectly  resulting  from or  based  upon (a)  violation  of any
Environmental Law, (b) the generation, use, handling,  transportation,  storage,
treatment or disposal of any Hazardous Materials,  (c) exposure to any Hazardous
Materials, (d) the release of

                                      -8-
<PAGE>

any Hazardous Materials into the environment, or (e) any contract,  agreement or
other consensual  arrangement  pursuant to which liability is assumed or imposed
with respect to any of the foregoing.

           "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.

           "ERISA Group" means the Company,  any Subsidiary and all members of a
controlled  group of corporations  and all trades or businesses  (whether or not
incorporated)  under  common  control  which,  together  with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Code.

           "Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, bear interest at a
rate determined by reference to the LIBOR Rate.

           "Event of Default" has the meaning specified in Section 7.01.

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

           "Excluded Taxes" means, with respect to the Administrative Agent, any
Lender,  the Issuing Bank or any other recipient of any payment to be made by or
on  account of any  Obligation,  (a) income or  franchise  taxes  imposed on (or
measured  by)  its  net  income  by the  United  States  of  America,  or by the
jurisdiction under the laws of which such recipient is organized or in which its
principal  office  is  located  or,  in the case of any  Lender,  in  which  its
applicable  lending  office is located,  (b) any branch profits taxes imposed by
the  United  States  of  America  or  any  similar  tax  imposed  by  any  other
jurisdiction  in  which  either  Borrower  is  located  and (c) in the case of a
Foreign  Lender  (other  than an  assignee  pursuant to a request by the Company
under Section  2.19(b)),  any withholding tax that is imposed on amounts payable
to such Foreign  Lender at the time such Foreign  Lender becomes a party to this
Agreement or is  attributable to such Foreign  Lender's  failure or inability to
comply with Section  2.17(e),  except to the extent that such  Foreign  Lender's
assignor (if any) was entitled, at the time of assignment, to receive additional
amounts from a Borrower with respect to such withholding tax pursuant to Section
2.17(a).

           "Execution  Date"  means  the  earliest  date  upon  which all of the
following  shall have occurred:  counterparts  of this Agreement shall have been
executed by the Borrowers  and each Lender listed on the signature  pages hereof
and the Administrative Agent shall have received counterparts hereof which taken
together,  bear  the  signatures  of the  Borrowers  and  each  Lender  and  the
Administrative Agent.

           "Existing  Credit  Agreements"  has  the  meaning  specified  in  the
Preliminary Statements.

           "Existing  Letters of Credit"  means,  collectively,  the  Subsidiary
Borrower  Letter of Credit and the letters of credit  issued  under the Existing
Multi-Year Credit Agreement listed on Exhibit 1.01B-2 .

                                      -9-
<PAGE>

           "Existing  Multi-Year  Credit Agreement" has the meaning specified in
the Preliminary Statements.

           "Facility Fee" has the meaning specified in Section 2.12(a).

           "Facility  Fee  Rate"  means at any time  and  from  time to time,  a
percentage per annum equal to the applicable  percentage set forth below for the
corresponding Performance Level set forth below:

          -----------------------------------
             Performance      Facility Fee
                Level            Rate
                -----            ----
          -----------------------------------

                  I               .085%
          -----------------------------------

                 II               .100%
          -----------------------------------

                 III              .125%
          -----------------------------------

                 IV               .150%
          -----------------------------------

                  V               .200%
          -----------------------------------

The Facility Fee Rate shall be determined by reference to the Performance  Level
in effect  from time to time and any  change in the  Facility  Fee Rate shall be
effective from the effective  date of the change in the  applicable  Performance
Level giving rise thereto.

           "Federal  Funds  Effective  Rate"  means,  for any day,  the weighted
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds  transactions with members of the Federal Reserve System
arranged by Federal funds brokers,  as published on the next succeeding 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 (rounded  upwards,  if
necessary,  to the  next  1/100 of 1%) of the  quotations  for such day for such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

           "Fee Letter" has the meaning specified in Section 2.12.

           "Fixed  Rate"  means,  with  respect  to  any  Competitive  Loan  (or
Competitive  Borrowing) (other than a Eurodollar Competitive Loan or Competitive
Borrowing),  the fixed rate of interest  per annum  specified  by the  Lender(s)
making  such  Competitive  Loan  (or  the  Competitive   Loans  comprising  such
Competitive Borrowing) in its (or their) related Competitive Bid(s).

           "Fixed  Rate  Loan"  means a  Competitive  Loan  bearing
interest at a Fixed Rate.

           "Foreign Lender" means any Lender that is organized under the laws of
a jurisdiction other than that in which either Borrower is located. For purposes
of this  definition,  the United  States of America,  each state thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.

                                      -10-
<PAGE>

           "GAAP" means generally accepted  accounting  principles in the United
States of America  from time to time,  including  as set forth in the  opinions,
statements and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and the Financing Accounting Standards
Board.

           "General  Partner"  means  Kinder  Morgan  G.P.,  Inc., a    Delaware
corporation.

           "Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

           "Guarantee"  of  or  by  any  Person  (the  "guarantor")   means  any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of  guaranteeing  any  Indebtedness  or other  obligation of any
other  Person  (the  "primary  obligor")  in any  manner,  whether  directly  or
indirectly,  and including any obligation of the guarantor,  direct or indirect,
(a) to purchase or pay (or advance or supply  funds for the  purchase or payment
of) such  Indebtedness  or other  obligation  or to  purchase  (or to advance or
supply funds for the purchase of) any security for the payment  thereof,  (b) to
purchase or lease  property,  securities or services for the purpose of assuring
the owner of such  Indebtedness or other obligation of the payment thereof,  (c)
to maintain  working  capital,  equity capital or any other financial  statement
condition  or  liquidity  of the  primary  obligor so as to enable  the  primary
obligor to pay such  Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty  issued to support such
Indebtedness or obligation;  provided, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.

           "Guaranteed Obligations" has the meaning specified in Section 9.01.

           "Guaranty" means the guaranty of the Company contained in Article IX.

           "Hazardous  Materials" means all explosive or radioactive  substances
or wastes and all  hazardous or toxic  substances,  wastes or other  pollutants,
including  petroleum or petroleum  distillates,  asbestos or asbestos containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

           "Hedging  Agreement"  means any interest rate  protection  agreement,
foreign currency  exchange  agreement,  commodity price protection  agreement or
other interest or currency exchange rate or commodity price hedging arrangement.

           "Indebtedness"  of any Person  means,  without  duplication,  (a) all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind,  (b) all  obligations  of such Person  evidenced by bonds,
debentures,  notes or similar  instruments,  (c) all  obligations of such Person
under conditional sale or other title retention  agreements relating to property
acquired by such Person,  (d) all  obligations  of such Person in respect of the
deferred purchase price of property or services or any other similar  obligation
upon which interest charges

                                      -11-
<PAGE>

are customarily  paid (excluding trade accounts payable incurred in the ordinary
course of business), (e) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right,  contingent or otherwise,  to
be secured by) any Lien on property owned or acquired by such Person, whether or
not the  Indebtedness  secured  thereby has been assumed,  (f) all Guarantees by
such  Person of  Indebtedness  of others  (provided  that in the event  that any
Indebtedness  of the  Company  or any  Subsidiary  shall  be  the  subject  of a
Guarantee by one or more Subsidiaries or by the Company, as the case may be, the
aggregate  amount  of the  outstanding  Indebtedness  of  the  Company  and  the
Subsidiaries  in respect thereof shall be determined by reference to the primary
Indebtedness so guaranteed,  and without  duplication by reason of the existence
of any such Guarantee),  (g) all Capital Lease  Obligations of such Person,  (h)
all obligations,  contingent or otherwise, of such Person as an account party in
respect of letters of credit and  letters of guaranty  and (i) all  obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances.  The
Indebtedness  of any Person shall include the  Indebtedness  of any other Person
(including  any  partnership  in which such Person is a general  partner) to the
extent such Person is liable  therefor  as a result of such  Person's  ownership
interest in or other  relationship  with such  entity,  except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

           "Indemnified Parties" has the meaning specified in Section 10.03.

           "Indemnified  Taxes"  means  Taxes  other than  Excluded Taxes.

           "Indemnity Matters" means, with respect to any Indemnified Party, all
losses,  liabilities,  claims and damages  (including  reasonable legal fees and
expenses).

           "Information    Memorandum"   means   the   Confidential  Information
Memorandum dated July 2004.

           "Interest  Election  Request"  has the meaning  specified  in Section
2.08.

           "Interest Expense" means (without  duplication),  with respect to any
period for any Person (a) the aggregate amount of interest,  whether expensed or
capitalized, paid, accrued or scheduled to be paid during such period in respect
of the  Indebtedness  of such Person  including (i) the interest  portion of any
deferred  payment  obligation;  (ii) the  portion  of any rental  obligation  in
respect of Capital Lease Obligations  allocable to interest expenses;  and (iii)
any non-cash  interest  payments or accruals,  all determined in accordance with
GAAP, less (b) Interest Income of such Person for such period.

           "Interest  Income" means,  with respect to any period for any Person,
interest actually received by such Person during such period.

           "Interest  Payment  Date"  means  (a)  with  respect  to any ABR Loan
(including  a  Swingline  Loan),  the last  Business  Day of each  March,  June,
September  and  December,  (b) with  respect to any  Eurodollar  Loan,  the last
Business Day of the Interest  Period  applicable  to the Borrowing of which such
Loan is a part  and,  in the case of a  Eurodollar  Borrowing  with an  Interest
Period of more than three  months'  duration,  each day prior to the last day of
such Interest  Period that occurs at intervals of three months'  duration  after
the first day of such  Interest  Period  and (c) with  respect to any Fixed Rate
Loan, the last day of the Interest Period

                                      -12-
<PAGE>

applicable  to the  Borrowing of which such Loan is a part and, in the case of a
Fixed Rate  Borrowing  with an  Interest  Period of more than 90 days'  duration
(unless otherwise specified in the applicable Competitive Bid Request), each day
prior to the last day of such  Interest  Period that occurs at  intervals  of 90
days' duration after the first day of such Interest Period,  and any other dates
that are specified in the applicable Competitive Bid Request as Interest Payment
Dates with respect to such Borrowing.

           "Interest Period" means (a) with respect to any Eurodollar Borrowing,
the  period  commencing  on  the  date  of  such  Borrowing  and  ending  on the
numerically  corresponding  day in the calendar month that is one, two, three or
six months  thereafter,  as the  Company  may elect and (b) with  respect to any
Fixed Rate  Borrowing,  the period  (which shall not be less than 7 days or more
than 180 days)  commencing on the date of such  Borrowing and ending on the date
specified in the applicable Competitive Bid Request;  provided,  that (i) if any
Interest  Period  would end on a day other than a Business  Day,  such  Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of any Eurodollar Borrowing, such next succeeding Business Day would fall in the
next calendar  month,  in which case such Interest  Period shall end on the next
preceding  Business  Day,  (ii) any Interest  Period that  commences on the last
Business Day of a calendar  month (or on a day for which there is no numerically
corresponding  day in the last calendar month of such Interest Period) shall end
on the last Business Day of the last calendar month of such Interest  Period and
(iii) no Interest Period shall end after the Maturity Date. For purposes hereof,
the date of a Borrowing  initially  shall be the date on which such Borrowing is
made  and,  in the  case  of a  Committed  Borrowing,  thereafter  shall  be the
effective date of the most recent conversion or continuation of such Borrowing.

           "Issuing  Bank" means  Wachovia Bank,  National  Association,  in its
capacity as the issuer of Letters of Credit  hereunder,  and its  successors  in
such capacity as provided in Section 2.06(j).

           "Joint  Lead  Arrangers"  means  Wachovia  Capital  Markets  LLC  and
Citigroup Global Markets, Inc.

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

           "LC  Exposure"  means,  at any  time,  the sum of (a)  the  aggregate
undrawn  amount of all  outstanding  Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the applicable Borrower at such time. The LC Exposure of any Lender
at any time shall be its Applicable  Percentage of the total LC Exposure at such
time.

           "Lender"  has  the  meaning  specified  in the  introduction  to this
Agreement.

           "Lenders"  has the  meaning  specified  in the  introduction  to this
Agreement.  Unless the context otherwise  requires,  the term "Lenders" includes
the Swingline Lender.

           "Letter of Credit" means any Existing  Letter of Credit or any letter
of credit issued pursuant to this Agreement.

                                      -13-
<PAGE>

           "Letter of Credit Request" has the meaning specified in Section 2.06.

           "LIBOR" means for any Interest Period:

           (a)  the  rate  per  annum  equal  to  the  rate  determined  by  the
Administrative  Agent to be the  offered  rate that  appears  on the page of the
Telerate  screen (or any successor  thereto)  that  displays an average  British
Bankers  Association  Interest  Settlement  Rate for  deposits  in dollars  (for
delivery on the first day of such  Interest  Period) with a term  equivalent  to
such Interest Period,  determined as of  approximately  11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period; or

           (b)  if  the rate  referenced  in the  preceding  clause (a) does not
appear on such page or service or such page or service  shall not be  available,
the rate per annum equal to the rate determined by the  Administrative  Agent to
be the offered rate on such other page or other service that displays an average
British  Bankers  Association  Interest  Settlement Rate for deposits in dollars
(for delivery on the first day of such Interest  Period) with a term  equivalent
to such Interest Period, determined as of approximately 11:00 a.m. (London time)
two Business Days prior to the first day of such Interest Period; or

           (c)  if the rates referenced in the preceding clauses (a) and (b) are
not available,  the rate per annum determined by the Administrative Agent as the
rate of interest at which  deposits in dollars (for delivery on the first day of
such  Interest  Period  in same day  funds)  in the  approximate  amount  of the
Eurodollar Loan as to which such determination is being made (or, if Wachovia is
making or converting a simultaneous Eurodollar Loan in the approximate amount of
such Eurodollar Loan being made,  continued or converted by Wachovia) and with a
term  equivalent to such Interest  Period would be offered by Wachovia's  London
branch to major banks in the London interbank eurodollar market at their request
at  approximately  11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period.

           "LIBOR Rate" shall mean,  with respect to any Eurodollar Loan for any
Interest Period for such Loan, a rate per annum (rounded upwards,  if necessary,
to the nearest 1/100 of 1%) determined by the  Administrative  Agent to be equal
to the quotient of (i) LIBOR for such Loan for such Interest  Period  divided by
(ii) 1 minus the Reserve Requirement for such Loan for such Interest Period.

           "Lien" means,  with respect to any asset,  (a) any mortgage,  deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such  asset  and (b) the  interest  of a vendor  or a lessor  under any
conditional sale agreement,  capital lease or title retention  agreement (or any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing) relating to such asset.

           "Loan Documents" mean,  collectively,  this Agreement  (including the
Guaranty),  the Notes,  if any, the  Applications,  the Fee Letter and all other
instruments  and  documents  from time to time  executed and delivered by either
Borrower in connection herewith and therewith.

           "Loans" means advances made by the Lenders to the Company pursuant to
this Agreement.

                                      -14-
<PAGE>

           "Margin" means, with respect to any Competitive Loan bearing interest
at a rate based on the LIBOR Rate, the marginal rate of interest,  if any, to be
added to or  subtracted  from the LIBOR Rate to  determine  the rate of interest
applicable  to such Loan,  as  specified  by the Lender  making such Loan in its
related Competitive Bid.

           "Material  Adverse  Effect"  means,  relative  to any  occurrence  of
whatever  nature,  a  material  adverse  effect  on  (a)  the  business  assets,
liabilities or financial  condition of the Company and the Subsidiaries taken as
a  whole,  (b)  the  ability  of  the  Borrowers  to  collectively  perform  the
Obligations or (c) the rights of the  Administrative  Agent, the Issuing Bank or
any Lender against the Borrower  under any material  provision of this Agreement
or any other Loan Document.

           "Material Subsidiary" means any Subsidiary the value of the assets of
which exceeds 5% of Consolidated Assets.

           "Maturity Date" means the earlier of (a) August 17, 2009, and (b) the
acceleration of the Obligations pursuant to Section 7.01.

           "Maximum Rate" has the meaning specified in Section 10.13.

           "Moody's" means Moody's Investors Service, Inc.

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

           "Net Income" means with respect to any Person for any period that net
income of such  Person for such  period  determinant  in  accordance  with GAAP;
provided that there shall be excluded, without duplication, from such net income
(to the extent otherwise included therein):

           (a)  net  extraordinary  gains and losses (other than, in the case of
losses,  losses  resulting  from  charges  against  net income to  establish  or
increase  reserves  for  potential  environmental  liabilities  and reserves for
exposure of such Person under rate cases);

           (b)  net gains or losses in respect of  dispositions  of assets other
than in the ordinary course of business;

           (c)  any gains or losses  attributable  to  write-ups or
write-downs of assets; and

           (d)  proceeds   of  any  key  man   insurance,   or  any
insurance on property, plant or equipment.

           "Net  Worth"  means,  as to the  Company  at any date,  the amount of
partners'  capital of the Company  determined as of such date in accordance with
GAAP.

           "Note" means a Committed Note or a Competitive Note.

           "Notice of Account  Designation" has the meaning specified in Section
2.07.

                                      -15-
<PAGE>

           "Notice of Default" has the meaning specified in Section 7.01.

           "Notice of Prepayment" has the meaning specified in Section 2.11.

           "Obligations" means collectively:

           (a)  the  payment  of  all   indebtedness  and  liabilities  by,  and
performance of all other obligations of, the Company in respect of the Loans;

           (b) all obligations of the Company and the Subsidiary Borrower under,
with respect to, and  relating to the Letters of Credit  whether  contingent  or
matured;

           (c) the  payment of all other  indebtedness  and  liabilities  by and
performance of all other obligations of, the Company and the Subsidiary Borrower
to the  Administrative  Agent,  the  Issuing  Bank and the Lenders  under,  with
respect to, and arising in connection with, the Loan Documents,  and the payment
of all indebtedness  and liabilities of the Company and the Subsidiary  Borrower
to the  Administrative  Agent, the Issuing Bank and the Lenders for fees, costs,
indemnification and expenses (including reasonable attorneys' fees and expenses)
under the Loan Documents;

           (d) the  reimbursement  of all sums  advanced  and costs and expenses
incurred by the  Administrative  Agent under any Loan Document (whether directly
or  indirectly)  in connection  with the  Obligations or any part thereof or any
renewal, extension or change of or substitution for the Obligations or, any part
thereof,  whether such advances, costs and expenses were made or incurred at the
request of either Borrower or the Administrative Agent; and

           (e)  all  renewals,   extensions,   amendments  and  changes  of,  or
substitutions or replacements  for, all or any part of the items described under
clauses (a) through (d) above.

           "OECD"  means  the   Organization   for  Economic   Cooperation   and
Development (or any successor).

           "Other   Taxes"  means  any  and  all  present  or  future  stamp  or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies arising from any payment made  hereunder or from the execution,  delivery
or enforcement of, or otherwise with respect to, this Agreement.

           "Participant" has the meaning specified in Section 10.05(e).

           "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.

           "Performance  Level" means a reference to one of Performance Level I,
Performance Level II, Performance Level III, Performance Level IV or Performance
Level V.

           "Performance  Level I" means, at any date of determination,  that the
Company  shall have a Company  Debt Rating in effect on such date of at least A-
by S&P or at least A3 by Moody's.

                                      -16-
<PAGE>

           "Performance Level II" means, at any date of determination,  (a) that
the Performance  Level does not meet the requirements of Performance Level I and
(b) that the Company  shall have a Company Debt Rating in effect on such date of
at least BBB+ by S&P or at least Baa1 by Moody's.

           "Performance Level III" means, at any date of determination, (a) that
the Performance  Level does not meet the requirements of Performance  Level I or
Performance  Level II and (b) that the Company  shall have a Company Debt Rating
in effect on such date of at least BBB by S&P or at least Baa2 by Moody's.

           "Performance Level IV" means, at any date of determination,  (a) that
the Performance  Level does not meet the  requirements  of Performance  Level I,
Performance  Level II or  Performance  Level III and (b) that the Company  shall
have a Company  Debt Rating in effect on such date of at least BBB- by S&P or at
least Baa3 by Moody's.

           "Performance  Level V" means, at any date of determination,  that the
Performance  Level  does not  meet  the  requirements  of  Performance  Level I,
Performance Level II, Performance Level III or Performance Level IV.

           "Permitted Encumbrances" means:

           (a) Liens  imposed by law for taxes that are not yet due or are being
contested in compliance with Section 5.03;

           (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law,  arising in the ordinary course of business
and securing  obligations that are not overdue by more than 30 days or are being
contested in compliance with Section 5.03;

           (c) pledges and deposits  made in the ordinary  course of business in
compliance with workers'  compensation,  unemployment insurance and other social
security laws or regulations;

           (d)  deposits to secure the  performance  of bids,  trade  contracts,
leases,  statutory obligations,  surety and appeal bonds,  performance bonds and
other  obligations  of a like  nature,  in each case in the  ordinary  course of
business;

           (e)  easements,   zoning  restrictions,   rights-of-way  and  similar
encumbrances  on real property  imposed by law or arising in the ordinary course
of business that do not secure any monetary  obligations  and do not  materially
detract from the value of the affected  property or interfere  with the ordinary
conduct of business of the Company or any Subsidiary;

           (f)  judgment  and  attachment  Liens not giving  rise to an Event of
Default or Liens created by or existing from any litigation or legal  proceeding
that are being contested in compliance with Section 5.03;

           (g) any  interest  or title of a lessor in  property  subject  to any
Capital Lease  Obligation or operating  lease which,  in each case, is permitted
under this Agreement; and

                                      -17-
<PAGE>

           (h) Liens in favor of  collecting  or payor  banks  having a right of
setoff, revocation, refund or chargeback with respect to money or instruments of
the Company or any Subsidiary on deposit with or in possession of such bank;

provided  that the term  "Permitted  Encumbrances"  shall not  include  any Lien
securing Indebtedness, except as provided in clause (g) above.

           "Person" means any natural  person,  corporation,  limited  liability
company, trust, joint venture, association,  company, partnership,  Governmental
Authority or other entity.

           "Plan"  means  any  employee  pension  benefit  plan  (other  than  a
Multiemployer  Plan)  subject to the  provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA,  and in respect of which the Company or
any member of its ERISA Group is (or, if such plan were terminated,  would under
Section 4069 of ERISA be deemed to be) an  "employer" as defined in Section 3(5)
of ERISA.

           "Plantation Pipe Line" means Plantation Pipe Line Company, a Delaware
and Virginia corporation.

           "Pledged Bonds" has the meaning specified in Section 2.06.

           "Prime  Rate"  shall  mean the  rate of  interest  from  time to time
announced  publicly by the  Administrative  Agent at the Principal Office as its
prime commercial lending rate. Such rate is set by the Administrative Agent as a
general  reference  rate of  interest,  taking into  account such factors as the
Administrative Agent may deem appropriate,  it being understood that many of the
Administrative  Agent's commercial or other loans are priced in relation to such
rate, that it is not necessarily the lowest or best rate actually charged to any
customer and that the Administrative  Agent may make various commercial or other
loans at rates of interest having no relationship to such rate.

           "Principal   Office"   shall  mean  the   principal   office  of  the
Administrative  Agent,  presently  located at 301 South College  Street,  TW-10,
Charlotte, North Carolina 28288-0608 or such other location as designated by the
Administrative Agent from time to time.

           "Register" has the meaning specified in Section 10.05.

           "Regulation A" means  Regulation A of the Board,  as the same is from
time to time in effect, and all official rulings and interpretations  thereunder
or thereof.

           "Regulation D" means  Regulation D of the Board,  as the same is from
time to time in effect, and all official rulings and interpretations  thereunder
or thereof.

           "Regulation T" means  Regulation T of the Board,  as the same is from
time to time in effect, and all official rulings and interpretations  thereunder
or thereof.

           "Regulation U" means  Regulation U of the Board,  as the same is from
time to time in effect, and all official rulings and interpretations  thereunder
or thereof.

                                      -18-
<PAGE>

           "Regulation X" means  Regulation X of the Board,  as the same is from
time to time in effect, and all official rulings and interpretations  thereunder
or thereof.

           "Related Parties" means,  with respect to any specified Person,  such
Person's Affiliates and the respective directors,  officers,  employees,  agents
and advisors of such Person and such Person's Affiliates.

           "Required  Lenders"  means,  at any time,  Lenders  having  Committed
Credit Exposures and unused Commitments representing more than 50% of the sum of
the total Committed Credit Exposures and unused Commitments at such time.

           "Requirement of Law" shall mean any law,  statute,  code,  ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit,  certificate,  license,  authorization or other directive or requirement
(whether or not having the force of law),  including  Environmental Laws, energy
regulations and  occupational,  safety and health standards or controls,  of any
Governmental Authority.

           "Reserve  Requirement"  means, for any day as applied to a Eurodollar
Loan, the aggregate  (without  duplication) of the rates (expressed as a decimal
fraction)  of  reserve  requirements  in  effect on such day  (including  basic,
supplemental, marginal and emergency reserves under any regulations of the Board
or other  Governmental  Authority  having  jurisdiction  with  respect  thereto)
dealing with reserve requirements prescribed for eurocurrency funding (currently
referred to as  "Eurocurrency  Liabilities"  in  Regulation  D)  maintained by a
member bank of the Federal Reserve System.  Eurodollar  Loans shall be deemed to
constitute   Eurocurrency   Liabilities  and  to  be  subject  to  such  reserve
requirements  without benefit of or credit for proration,  exceptions or offsets
which may be available from time to time to any Lender under Regulation D.

           "Responsible  Officer"  means, as used with respect to the Company or
the  Subsidiary  Borrower,  the Chairman,  Vice  Chairman,  President,  any Vice
President,  Chief  Executive  Officer,  Chief  Financial  Officer  Controller or
Treasurer of the Delegate.

           "Restricted  Payment"  means  any  distribution   (whether  in  cash,
securities or other  property) with respect to any  partnership  interest in the
Company,  or any  payment  (whether  in cash,  securities  or  other  property),
including  any  deposit,  on account of the  purchase,  redemption,  retirement,
acquisition, cancellation or termination of any such partnership interest or any
option  or other  right to  acquire  any such  partnership  interest;  provided,
however, that (a) distributions with respect to the partnership interests in the
Company that do not exceed,  with respect to any fiscal  quarter of the Company,
the amount of Available  Cash for such quarter shall not  constitute  Restricted
Payments  so long as both before and after the making of such  distribution,  no
Event of Default  or Default  shall have  occurred  and be  continuing,  (b) any
partnership  interest split,  partnership  interest  reverse split,  dividend of
Company  partnership  interests  or similar  transaction  will not  constitute a
Restricted  Payment,  (c) the  application by the Company after the date of this
Agreement to the purchase, redemption, retirement,  cancellation, or termination
of partnership  interests in the Company of an aggregate amount not greater than
the excess of (i)  $100,000,000,  over (ii) the aggregate  amount of all amounts
applied  to  such  purchases,   redemptions,   retirements,   cancellations   or
terminations during the period beginning

                                      -19-
<PAGE>

one day after the Effective Date and extending through and including the date of
this Agreement shall not constitute Restricted Payments, and (d) acquisitions by
officers, directors and employees of the Company of partnership interests in the
Company through  cashless  exercise of options  pursuant to the Company's Common
Unit Option Plan shall not constitute Restricted Payments.

           "S&P"  means  Standard & Poor's  Ratings  Group,  a  division  of The
McGraw-Hill Companies, Inc.

           "SEC"  means  the   Securities   and  Exchange   Commission   or  any
Governmental Authority succeeding to its function.

            "Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation,  limited liability company,  partnership,  association or
other  entity the  accounts  of which  would be  consolidated  with those of the
parent in the  parent's  consolidated  financial  statements  if such  financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership,  association or other
entity (a) of which securities or other ownership  interests  representing  more
than 50% of the equity or more than 50% of the ordinary  voting power or, in the
case of a partnership,  more than 50% of the general partnership  interests are,
as of such date,  owned,  controlled  or held,  or (b) that is, as of such date,
otherwise controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more  subsidiaries  of the  parent.  Unless the context
otherwise  clearly  requires,  references in this Agreement to a "Subsidiary" or
the  "Subsidiaries"  refer to a Subsidiary or the  Subsidiaries  of the Company.
Notwithstanding the foregoing, Plantation Pipe Line shall not be a Subsidiary of
the Company  until such time as its assets and  liabilities,  profit or loss and
cash flow are required under GAAP to be consolidated with those of the Company.

           "Subsidiary  Borrower" has the meaning  specified in the introduction
to this Agreement.

           "Subsidiary  Borrower Letter of Credit" means  irrevocable  letter of
credit No.  5113181  issued by First Union  National Bank (now  Wachovia) in the
original face amount of $24,128,548  for the account of the Subsidiary  Borrower
and for the benefit of Trustee in the form of Exhibit 1.01B-1 hereto.

           "Swingline  Exposure"  means,  at any time,  the aggregate  principal
amount of all Swingline Loans  outstanding at such time. The Swingline  Exposure
of any  Lender  at any time  shall be its  Applicable  Percentage  of the  total
Swingline Exposure at such time.

           "Swingline Lender" means Wachovia Bank, National Association,  in its
capacity as lender of Swingline Loans hereunder.

           "Swingline Loan" means a Loan made pursuant to Section 2.05.

           "Swingline  Note" means a promissory  note of the Company  payable to
the order of the Swingline Lender in  substantially  the form of Exhibit 1.01-E,
together  with  all  modifications,   extensions,  renewals  and  rearrangements
thereof.

                                      -20-
<PAGE>

           "Taxes" means any and all present or future taxes,  levies,  imposts,
duties,  deductions,   charges  or  withholdings  imposed  by  any  Governmental
Authority.

           "Total  Capitalization" means, as to the Company at any date, the sum
of  Consolidated  Indebtedness  (determined  at such  date)  and  the Net  Worth
(determined  as at the end of the most recent fiscal  quarter of the Company for
which financial  statements  pursuant to Section 5.01(a) or Section 5.01(b),  as
applicable, have been delivered).

           "Total Commitment" means the sum of the Commitments of the Lenders.

           "Transactions"  means the execution,  delivery and performance by the
Borrowers  of this  Agreement  and the other Loan  Documents,  the  borrowing of
Loans,  the use of the proceeds  thereof and the Existing  Letters of Credit and
the issuance of the other Letters of Credit hereunder.

           "Trustee"  means  Bank  One,  Texas,  NA, as the  beneficiary  of the
Subsidiary Borrower Letter of Credit and any successor beneficiary.

           "Type",  when used in reference to any Loan or  Borrowing,  refers to
whether  the rate of  interest  on such Loan,  or on the Loans  comprising  such
Borrowing,  is determined  by reference to the LIBOR Rate or the Alternate  Base
Rate.

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

           "Utilization Fee" has the meaning specified in Section 2.12(d).

           "Utilization  Fee Rate"  means at any time and from  time to time,  a
percentage per annum equal to the applicable  percentage set forth below for the
corresponding Performance Level set forth below:

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

                                     Utilization Fee
                  Performance Level       Rate
               ---------------------------------------

                        I                 .075%
               ---------------------------------------

                       II                 .125%
               ---------------------------------------

                       III                .125%
               ---------------------------------------

                       IV                 .125%
               ---------------------------------------

                        V                 .250%
               ---------------------------------------

The  Utilization  Fee Rate shall be determined  by reference to the  Performance
Level in effect from time to time,  and any change in the  Utilization  Fee Rate
shall be  effective  from the  effective  date of the  change in the  applicable
Performance Level giving rise thereto.

           "Voting Stock" means,  with respect to any Person,  securities of any
class or classes of  Capital  Stock in such  Person  entitling  holders  thereof
(whether  at all  times or only so long as no senior  class of stock has  voting
power by reason of any contingency) to vote in the

                                      -21-
<PAGE>

election of members of the Board of  Directors or other  governing  body of such
Person or its managing  member or its general  partner (or its managing  general
partner if there is more than one general partner).

           "Wachovia"  means  Wachovia  Bank,  National   Association,   in  its
individual capacity.

           "Wholly-owned  Subsidiary" means a Subsidiary of which all issued and
outstanding  Capital  Stock  (excluding  (a)  in  the  case  of  a  corporation,
directors'  qualifying  shares, (b) in the case of a limited  partnership,  a 2%
general partner interest and (c) in the case of a limited liability  company,  a
2% managing member interest) is directly or indirectly owned by the Company.

           "Withdrawal  Liability" means liability to a Multiemployer  Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.

           SECTION 1.02 Classification of Loans and Borrowings.  For purposes of
this  Agreement,  Loans may be  classified  and  referred to by Class  (e.g.,  a
"Committed Loan" or a "Competitive Loan") or by Type (e.g., a "Eurodollar Loan")
or by Class and Type  (e.g.,  a  "Eurodollar  Committed  Loan" or a "Fixed  Rate
Loan").  Borrowings  also may be  classified  and referred to by Class (e.g.,  a
"Committed  Borrowing"  or a  "Competitive  Borrowing")  or  by  Type  (e.g.,  a
"Eurodollar  Borrowing" or a "Fixed Rate Borrowing") or by Class and Type (e.g.,
a "Eurodollar Committed Borrowing" or a "Fixed Rate Competitive Borrowing").

           SECTION 1.03  Accounting  Terms;  Changes in GAAP. All accounting and
financial terms used herein and not otherwise  defined herein and the compliance
with each covenant  contained herein which relates to financial matters shall be
determined in accordance with GAAP applied by the Company on a consistent basis,
except to the extent that a deviation  therefrom  is  expressly  stated.  Should
there be a change in GAAP from that in effect on the Execution  Date,  such that
any of the defined  terms set forth in Section 1.01 and/or  compliance  with the
covenants set forth in Article VI would then be calculated in a different manner
or with different  components or any of such covenants and/or defined terms used
therein  would no longer  constitute  meaningful  criteria  for  evaluating  the
matters  addressed  thereby prior to such change in GAAP (a) the Company and the
Required Lenders agree,  within the 60-day period following any such change,  to
negotiate in good faith and enter into an  amendment to this  Agreement in order
to modify the defined terms set forth in Section 1.01 or the covenants set forth
in Article VI, or both, in such respects as shall reasonably be deemed necessary
by the Required  Lenders that the criteria for evaluating the matters  addressed
by such covenants are substantially the same criteria as were effective prior to
any such change in GAAP, and (b) the Company shall be deemed to be in compliance
with such covenants during the 60-day period following any such change, or until
the earlier date of execution of such  amendment,  if and to the extent that the
Company  would  have  been in  compliance  therewith  under  GAAP  as in  effect
immediately prior to such change.

           SECTION  1.04  Interpretation.  In  this  Agreement,  unless  a clear
contrary intention appears:

                                      -22-
<PAGE>

          (i) the singular number includes the plural number and vice versa;

          (ii) reference to any gender includes each other gender;

          (iii) the words "herein",  "hereof" and "hereunder" and other words of
     similar import refer to this Agreement as a whole and not to any particular
     Article, Section or other subdivision;

          (iv)  reference to any Person  includes such Person's  successors  and
     assigns  but,  if  applicable,  only if such  successors  and  assigns  are
     permitted  by this  Agreement,  and  reference  to a Person in a particular
     capacity  excludes  such  Person in any  other  capacity  or  individually;
     provided  that  nothing in this clause (iv) is  intended to  authorize  any
     assignment not otherwise permitted by this Agreement;

          (v) except as expressly provided to the contrary herein,  reference to
     any agreement, document or instrument (including this Agreement) means such
     agreement,  document or instrument as amended, supplemented or modified, or
     extended,  renewed,  refunded,  substituted or replaced, and in effect from
     time to time in accordance  with the terms thereof and, if applicable,  the
     terms hereof,  and reference to any Note or other note or  Indebtedness  or
     other indebtedness includes any note or indebtedness issued pursuant hereto
     in  extension  or  renewal  or  refunding  thereof  or in  substitution  or
     replacement therefor;

          (vi) unless the context indicates otherwise, reference to any Article,
     Section,  Schedule or Exhibit means such Article or Section  hereof or such
     Schedule or Exhibit hereto;

          (vii) the word "including" (and with  correlative  meaning  "include")
     means  including,  without  limiting  the  generality  of  any  description
     preceding such term;

          (viii)with  respect to the determination of any period of time, except
     as  expressly  provided to the  contrary,  the word "from"  means "from and
     including" and the word "to" means "to but excluding";

          (ix)  reference to any law, rule or regulation  means such as amended,
     modified,  codified or reenacted,  in whole or in part,  and in effect from
     time to time; and

          (x) the words  "asset" and  "property"  shall be construed to have the
     same meaning and effect and refer to any and all  tangible  and  intangible
     assets and properties.

                                      -23-
<PAGE>

                                   ARTICLE II.
                                   THE CREDITS

           SECTION 2.01 Commitments. (a) Subject to the terms and conditions set
forth  herein,  each Lender agrees to make  Committed  Loans to the Company from
time to time during the  Availability  Period in an aggregate  principal  amount
that will not result in (i) such Lender's  Committed  Credit Exposure  exceeding
such  Lender's  Commitment  or  (ii)  the  sum of  the  total  Committed  Credit
Exposures, plus the aggregate principal amount of outstanding Competitive Loans,
exceeding the Total Commitment.  In furtherance of the foregoing,  the aggregate
amount of the  Total  Commitment  shall be deemed  used from time to time to the
extent of the aggregate amount of the Competitive  Loans then  outstanding,  and
such deemed use of the Total  Commitment shall be applied to the Lenders ratably
according  to their  respective  Commitments.  Within the  foregoing  limits and
subject to the terms and  conditions  set forth herein,  the Company may borrow,
prepay and reborrow Committed Loans.

           (b) The  Company  shall have the right,  without  the  consent of the
Lenders  but with the prior  approval  of the  Administrative  Agent,  not to be
unreasonably  withheld,  to cause  from  time to time an  increase  in the total
Commitments  of the Lenders by adding to this  Agreement one or more  additional
Lenders  or by  allowing  one or  more  Lenders  to  increase  their  respective
Commitments;  provided  however  (i) no Default  or Event of Default  shall have
occurred  hereunder  which is continuing,  (ii) no such increase shall cause the
aggregate  Commitments  hereunder to exceed $1,500,000,000 and (iii) no Lender's
Commitment shall be increased without such Lender's consent.

           SECTION 2.02 Loans and  Borrowings.  (a) Each Committed Loan shall be
made as part of a Borrowing  consisting  of Committed  Loans made by the Lenders
ratably in  accordance  with their  respective  Commitments.  The failure of any
Lender to make any Loan  required  to be made by it shall not  relieve any other
Lender  of  its  obligations  hereunder;   provided  that  the  Commitments  and
Competitive  Bids of the Lenders are several and no Lender shall be  responsible
for any other Lender's failure to make Loans as required.

           (b) Subject to Section 2.14,  (i) each Committed  Borrowing  shall be
comprised  entirely of ABR Loans or Eurodollar  Loans as the Company may request
in accordance herewith,  and (ii) each Competitive  Borrowing shall be comprised
entirely of  Eurodollar  Loans or Fixed Rate Loans as the Company may request in
accordance  herewith.  Each Swingline Loan shall be an ABR Loan.  Each Lender at
its  option may make any  Eurodollar  Loan by causing  any  domestic  or foreign
branch or Affiliate of such Lender to make such Loan; provided that any exercise
of such option shall not affect the obligation of the Company to repay such Loan
in accordance with the terms of this Agreement.

           (c) At the  commencement  of each Interest  Period for any Eurodollar
Committed  Borrowing,  such Borrowing shall be in an aggregate amount that is an
integral  multiple of $1,000,000 and not less than $3,000,000.  At the time that
each ABR Committed  Borrowing is made,  such Borrowing  shall be in an aggregate
amount that is an integral  multiple of $1,000,000 and not less than $1,000,000;
provided that an ABR Committed  Borrowing may be in an aggregate  amount that is
equal to the entire unused  balance of the Total  Commitment or that is required
to finance the reimbursement of an LC Disbursement as contemplated by Section

                                      -24-
<PAGE>

2.06(f).  Each Swingline Loan shall be in an amount that is an integral multiple
of $100,000 and not less than $5,000,000.  Each Competitive Bid Request shall be
in an aggregate  amount that is an integral  multiple of $1,000,000 and not less
than $25,000,000.  Borrowings of more than one Type and Class may be outstanding
at the same time; provided that there shall not at any time be more than a total
of twelve Eurodollar Committed Borrowings outstanding.

           (d)  Notwithstanding  any  other  provision  of this  Agreement,  the
Company  shall not be entitled to request,  or to elect to convert or  continue,
any Borrowing if the Interest  Period  requested with respect  thereto would end
after the Maturity Date.

           SECTION  2.03  Requests  for  Committed  Borrowings.   To  request  a
Committed  Borrowing,  the Company shall notify the Administrative Agent of such
request by telephone (a) in the case of a Eurodollar  Borrowing,  not later than
10:00 a.m., Charlotte, North Carolina, time, three Business Days before the date
of the proposed  Borrowing  and (b) in the case of an ABR  Borrowing,  not later
than 10:00 a.m.,  Charlotte,  North Carolina,  time, on the date of the proposed
Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall
be confirmed promptly by hand delivery or telecopy to the  Administrative  Agent
of a written Borrowing Request in a form of Exhibit 2.03 (a "Borrowing Request")
and signed by the Company.  Each such telephonic and written  Borrowing  Request
shall specify the following information in compliance with Section 2.02:

           (i) the aggregate amount of the requested Borrowing;

           (ii) the date of such Borrowing, which shall be a Business Day;

           (iii)  whether  such  Borrowing  is  to  be  an  ABR  Borrowing  or a
      Eurodollar Borrowing;

           (iv) in the case of a  Eurodollar  Borrowing,  the  initial  Interest
      Period to  be  applicable  thereto,  which shall be a period  contemplated
      by the definition of the term "Interest Period"; and

           (v) the location and number of the  Company's  account to which funds
     are to be  disbursed, which shall comply with the  requirements of  Section
     2.07.

           If no election as to the Type of Committed  Borrowing  is  specified,
then the requested Committed Borrowing shall be an ABR Borrowing. If no Interest
Period  is  specified  with  respect  to  any  requested   Eurodollar  Committed
Borrowing,  then the Company shall be deemed to have selected an Interest Period
of one month's  duration.  Promptly  following receipt of a Borrowing Request in
accordance  with this Section 2.03, the  Administrative  Agent shall advise each
Lender of the details thereof and of the amount of such Lender's Loan to be made
as part of the requested Borrowing.

           SECTION 2.04 Competitive Bid Procedure.  (a) Subject to the terms and
conditions set forth herein,  from time to time during the  Availability  Period
the  Company  may  request  Competitive  Bids  and may (but  shall  not have any
obligation to) accept Competitive Bids and borrow  Competitive  Loans;  provided
that  the  sum of the  total  Committed  Credit  Exposures  plus  the  aggregate
principal amount of outstanding Competitive Loans, at any time shall not

                                      -25-
<PAGE>

exceed the Total  Commitment.  To request  Competitive  Bids,  the Company shall
notify the Administrative  Agent of such request by telephone,  in the case of a
Eurodollar  Borrowing,  not later than 10:00 a.m.,  Charlotte,  North  Carolina,
time,  four Business Days before the date of the proposed  Borrowing and, in the
case of a Fixed Rate  Borrowing,  not later than 10:00  a.m.,  Charlotte,  North
Carolina,  time,  one Business  Day before the date of the  proposed  Borrowing;
provided that the Company may submit up to (but not more than) three Competitive
Bid Requests on the same day, but a Competitive Bid Request shall not be made on
any of  the  five  Business  Days  next  succeeding  the  date  of any  previous
Competitive  Bid  Request,  unless  any and all such  previous  Competitive  Bid
Requests shall have been withdrawn or all Competitive  Bids received in response
thereto  rejected.  Each  such  telephonic  Competitive  Bid  Request  shall  be
confirmed promptly by hand delivery or telecopy to the Administrative Agent of a
written Competitive Bid Request signed by the Company.  Each such telephonic and
written  Competitive  Bid Request  shall specify the  following  information  in
compliance with Section 2.02:

           (i) the aggregate amount of the requested Borrowing;

           (ii) the date of such Borrowing, which shall be a Business Day;

           (iii)  whether such  Borrowing  is to be a Eurodollar  Borrowing or a
      Fixed Rate Borrowing;

           (iv) the Interest  Period to be applicable to such  Borrowing,  which
      shall be a period  contemplated by the definition  of the  term  "Interest
      Period"; and

           (v) the location and number of the  Company's  account to which funds
      are to be disbursed, which  shall comply with the requirements of  Section
      2.07.

Promptly  following receipt of a Competitive Bid Request in accordance with this
Section,  the  Administrative  Agent  shall  notify the  Lenders of the  details
thereof by telecopy  (in  substantially  the form set forth in Exhibit  2.04-B),
inviting the Lenders to submit Competitive Bids.

           (b) Each Lender may (but shall not have any  obligation  to) make one
or more  Competitive  Bids to the  Company  in  response  to a  Competitive  Bid
Request.  Each  Competitive  Bid by a Lender must be  substantially  the form of
Exhibit 2.04-C and must be received by the Administrative Agent by telecopy,  in
the case of a  Eurodollar  Competitive  Borrowing,  not later than  10:00  a.m.,
Charlotte, North Carolina, time, three Business Days before the proposed date of
such Competitive Borrowing, and in the case of a Fixed Rate Borrowing, not later
than 10:00 a.m., Charlotte,  North Carolina,  time, on the proposed date of such
Competitive Borrowing. Competitive Bids that do not conform substantially to the
form of Exhibit  2.04-C may be rejected  by the  Administrative  Agent,  and the
Administrative   Agent  shall  notify  the  applicable  Lender  as  promptly  as
practicable.  Each Competitive Bid shall specify (i) the principal amount (which
shall be a minimum of  $5,000,000  and an integral  multiple of  $1,000,000  and
which  may equal  the  entire  principal  amount  of the  Competitive  Borrowing
requested  by the Company) of the  Competitive  Loan or Loans that the Lender is
willing to make,  (ii) the  Competitive Bid Rate or Rates at which the Lender is
prepared to make such Loan or Loans (expressed as a percentage rate per annum in
the form of a decimal to no more than four decimal places) and (iii) the

                                      -26-
<PAGE>

Interest  Period  applicable  to each such Loan and the last day thereof  (which
shall  conform  to that  specified  in the  Company's  related  Competitive  Bid
Request).

           (c) The  Administrative  Agent shall  promptly  notify the Company by
telecopy of the Competitive Bid Rate and the principal  amount specified in each
Competitive  Bid and the  identity  of the  Lender  that  shall  have  made such
Competitive Bid.

           (d) Subject only to the provisions of this paragraph, the Company may
accept or reject any  Competitive  Bid in whole or (to the extent  herein  below
provided)  in  part.  The  Company  shall  notify  the  Administrative  Agent by
telephone, confirmed by telecopy in a form approved by the Administrative Agent,
whether and to what  extent it has decided to accept or reject each  Competitive
Bid, in the case of a  Eurodollar  Competitive  Borrowing,  not later than 11:30
a.m.,  Charlotte,  North Carolina,  time, three Business Days before the date of
the proposed Competitive  Borrowing,  and in the case of a Fixed Rate Borrowing,
not later than 11:30 a.m., Charlotte, North Carolina, time, on the proposed date
of the  Competitive  Borrowing;  provided that (i) the failure of the Company to
give such notice shall be deemed to be a rejection of each Competitive Bid, (ii)
the Company shall not accept a Competitive Bid made at a particular  Competitive
Bid Rate if the Company  rejects a Competitive  Bid made at a lower  Competitive
Bid Rate,  (iii) the aggregate  amount of the  Competitive  Bids accepted by the
Company  shall not  exceed the  aggregate  amount of the  requested  Competitive
Borrowing specified in the related  Competitive Bid Request,  (iv) to the extent
necessary to comply with clause (iii) above, the Company may accept  Competitive
Bids at the same Competitive Bid Rate in part, which acceptance,  in the case of
multiple  Competitive  Bids at such Competitive Bid Rate, shall be made pro rata
in  accordance  with the  amount of each such  Competitive  Bid,  and (v) except
pursuant to clause  (iv)  above,  no  Competitive  Bid shall be  accepted  for a
Competitive Loan unless such  Competitive Loan is in a minimum  principal amount
of $5,000,000 and an integral multiple of $1,000,000; provided further that if a
Competitive  Loan  must be in an  amount  less than  $5,000,000  because  of the
provisions of clause (iv) above,  such  Competitive Loan may be for a minimum of
$1,000,000 or any integral  multiple  thereof,  and in calculating  the pro rata
allocation  of  acceptances  of  portions  of  multiple  Competitive  Bids  at a
particular  Competitive  Bid Rate  pursuant to clause (iv) the amounts  shall be
rounded to  integral  multiples  of  $1,000,000  in a manner  determined  by the
Company. A notice given by the Company pursuant to this Section 2.04(d) shall be
irrevocable.

           (e) The  Administrative  Agent shall  promptly  notify  each  bidding
Lender by telecopy whether or not its Competitive Bid has been accepted (and, if
so, the amount and Competitive Bid Rate so accepted), and each successful bidder
will thereupon become bound, subject to the terms and conditions hereof, to make
the Competitive  Loan in respect of which its Competitive Bid has been accepted.
After  completing the  notifications  referred to in the  immediately  preceding
sentence,  the  Administrative  Agent shall notify each Lender of the  aggregate
principal amount of all Competitive Bids accepted.

           (f) Upon determination by the Administrative  Agent of the LIBOR Rate
applicable to any Eurodollar  Competitive Loan to be made by any Lender pursuant
to a  Competitive  Bid that has been  accepted by a Company  pursuant to Section
2.04(d), the Administrative Agent shall notify such Lender of (i) the applicable
LIBOR Rate and (ii) the sum of the applicable  LIBOR Rate plus the Margin bid by
such Lender.

                                      -27-
<PAGE>

           (g) If the Administrative Agent or any of its Affiliates shall at any
time have a Commitment  hereunder and shall elect to submit a Competitive Bid in
its capacity as a Lender,  it shall submit such  Competitive Bid directly to the
Company at least one quarter of an hour earlier than the time by which the other
Lenders are  required to submit  their  Competitive  Bids to the  Administrative
Agent pursuant to paragraph (b) of this Section.

           SECTION 2.05 Swingline Loans. (a) Subject to the terms and conditions
set forth herein,  the Swingline  Lender agrees to make  Swingline  Loans to the
Company  from time to time  during  the  Availability  Period,  in an  aggregate
principal  amount  at any  time  outstanding  that  will not  result  in (i) the
aggregate principal amount of outstanding  Swingline Loans exceeding $25,000,000
or (ii) the sum of the total  Committed  Credit  Exposures,  plus the  aggregate
principal  amount  of  outstanding   Competitive  Loans,   exceeding  the  Total
Commitment;  provided that the Swingline  Lender shall not be required to make a
Swingline Loan to refinance an outstanding  Swingline Loan. Within the foregoing
limits and subject to the terms and conditions set forth herein, the Company may
borrow, prepay and reborrow Swingline Loans.

           (b) To  request a  Swingline  Loan,  the  Company  shall  notify  the
Administrative Agent of such request by telephone  (confirmed by telecopy),  not
later than 12:00 noon, Charlotte, North Carolina, time, on the day of a proposed
Swingline  Loan.  Each such notice shall be  irrevocable  and shall  specify the
requested  date  (which  shall be a Business  Day) and  amount of the  requested
Swingline  Loan.  The  Administrative  Agent (if not the Swingline  Lender) will
promptly  advise  the  Swingline  Lender of any such  notice  received  from the
Company.  So long as the  Swingline  Lender  and the  Administrative  Agent  are
Wachovia  or (if not  Wachovia),  the same  institution  is  acting  both as the
Administrative  Agent and as the Swingline  Lender,  the Swingline  Lender shall
make each  Swingline  Loan  available to the Company by means of a credit to the
deposit account of the Company with the Swingline Lender  identified in the most
recent Notice of Account  Designation by 3:00 p.m.,  Charlotte,  North Carolina,
time, on the requested date of such Swingline Loan.

           (c)  The  Swingline  Lender  may  by  written  notice  given  to  the
Administrative Agent not later than 12:00 noon, Charlotte, North Carolina, time,
on any  Business  Day  require  the  Lenders to acquire  participations  on such
Business Day in all or a portion of the Swingline Loans outstanding. Such notice
shall  specify the  aggregate  amount of Swingline  Loans in which  Lenders will
participate. Promptly upon receipt of such notice, the Administrative Agent will
give notice  thereof to each  Lender,  specifying  in such notice such  Lender's
Applicable  Percentage  of such  Swingline  Loan or Loans.  Each  Lender  hereby
absolutely and unconditionally agrees, upon receipt of notice as provided above,
to pay to the  Administrative  Agent,  for the account of the Swingline  Lender,
such Lender's Applicable Percentage of such Swingline Loan or Loans. Each Lender
acknowledges  and  agrees  that its  obligation  to  acquire  participations  in
Swingline  Loans  pursuant to this paragraph is absolute and  unconditional  and
shall not be affected by any circumstance  whatsoever,  including the occurrence
and  continuance of a Default or Event of Default or reduction or termination of
the Total  Commitment,  and that each such  payment  shall be made  without  any
offset, abatement, withholding or reduction whatsoever. Each Lender shall comply
with its  obligation  under  this  paragraph  by wire  transfer  of  immediately
available  funds, in the same manner as provided in Section 2.07 with respect to
Loans made by such Lender (and Section 2.07 shall apply,  mutatis  mutandis,  to
the payment

                                      -28-
<PAGE>

obligations of the Lenders),  and the Administrative Agent shall promptly pay to
the  Swingline  Lender  the  amounts so  received  by it from the  Lenders.  The
Administrative  Agent  shall  notify the  Company of any  participations  in any
Swingline Loan acquired pursuant to this paragraph,  and thereafter  payments in
respect of such Swingline Loan shall be made to the Administrative Agent and not
to the Swingline  Lender.  Any amounts received by the Swingline Lender from the
Company (or other party on behalf of the Company) in respect of a Swingline Loan
after  receipt  by  the   Swingline   Lender  of  the  proceeds  of  a  sale  of
participations  therein shall be promptly remitted to the Administrative  Agent;
any such amounts received by the Administrative Agent shall be promptly remitted
by the  Administrative  Agent to the Lenders that shall have made their payments
pursuant to this paragraph and to the Swingline  Lender,  as their interests may
appear.  The purchase of  participations  in a Swingline  Loan  pursuant to this
paragraph  shall not  relieve  the  Company or the  Subsidiary  Borrower  of any
default in the payment thereof.

           SECTION 2.06 Letters of Credit.

           (a) Existing Letters of Credit.  The parties hereto  acknowledge that
on and after the Effective Date the Existing  Letters of Credit shall be Letters
of Credit issued by the Issuing Bank for the account of the Subsidiary  Borrower
in the case of the Subsidiary  Borrower  Letter of Credit,  and the Company with
respect to all other Existing Letters of Credit pursuant to this Agreement.  The
Subsidiary  Borrower  hereby  pledges,  assigns,  transfers  and delivers to the
Issuing Bank all its right, title and interest to all Bonds purchased with funds
drawn under the Subsidiary Borrower Letter of Credit (the "Pledged Bonds"),  and
hereby grants to the Issuing Bank a first lien on, and security interest in, its
rights, title and interest in and to the Pledged Bonds, the interest thereon and
all proceeds thereof or substitutions  therefor,  as collateral security for the
prompt and complete  payment  when due of the amounts  payable in respect of the
Subsidiary Borrower Letter of Credit.  During such time as any Bonds are Pledged
Bonds,  the Issuing  Bank shall be  entitled to exercise  all of the rights of a
holder of Bonds with respect to voting,  consenting and directing the Trustee as
if the Issuing Bank were the owner of such Bonds,  and the  Subsidiary  Borrower
hereby grants and assigns to the Issuing Bank all such rights.

           (b) General.  Subject to the terms and  conditions  set forth herein,
the Company  may  request the  issuance of Letters of Credit for its own account
individually or for its own account and that of any Subsidiary as co-applicants,
in a form  reasonably  acceptable  to the  Administrative  Agent and the Issuing
Bank, at any time and from time to time during the Availability  Period.  In the
event of any  inconsistency  between the terms and  conditions of this Agreement
and the terms and conditions of any Application (as defined in Section  2.06(c))
or other  agreement  submitted by the Company to, or entered into by the Company
with,  the  Issuing  Bank  relating  to any  Letter  of  Credit,  the  terms and
conditions of this Agreement shall control.

           (c)  Notice  of  Issuance,  Amendment,  Renewal,  Extension;  Certain
Conditions.  To request the  issuance  of a Letter of Credit (or the  amendment,
renewal or extension of an outstanding Letter of Credit), the Company shall hand
deliver or telecopy (or transmit by electronic  communication,  if  arrangements
for doing so have been approved by the Issuing Bank) to the Issuing Bank and the
Administrative  Agent  (not less  than  five  Business  Days in  advance  of the
requested date of issuance, amendment, renewal or extension) a notice (a "Letter
of  Credit  Request")  requesting  the  issuance  of  a  Letter  of

                                      -29-
<PAGE>

Credit, or identifying the Letter of Credit to be amended,  renewed or extended,
the date of issuance,  amendment,  renewal or extension,  the date on which such
Letter of Credit is to expire  (which shall comply with  Section  2.06(d)),  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. If requested by the Issuing Bank, the Company also
shall submit a letter of credit  application on the Issuing Bank's standard form
(an  "Application")  in  connection  with any request for a Letter of Credit.  A
Letter of Credit shall be issued, amended, renewed or extended only if (and upon
issuance,  amendment,  renewal or extension of each Letter of Credit the Company
shall be deemed to represent  and warrant  that),  after  giving  effect to such
issuance,  amendment,  renewal or extension (i) the LC Exposure shall not exceed
$300,000,000 and (ii) the sum of the total Committed Credit Exposures,  plus the
aggregate principal amounts of outstanding  Competitive Loans, at any time shall
not  exceed  the Total  Commitment.  Upon the  issuance,  amendment,  renewal or
extension  of  each  Letter  of  Credit,   the  Issuing  Bank  will  notify  the
Administrative  Agent, who, in turn, will notify the Lenders,  of the amount and
type of such  Letter of Credit  that is issued,  amended,  renewed  or  extended
pursuant to this Agreement.

           (d) Expiration Date. Each Letter of Credit (other than the Subsidiary
Borrower  Letter of Credit) shall expire at or prior to the close of business on
the  earlier  of (i) the date one year  after the date of the  issuance  of such
Letter of Credit (or, in the case of any renewal or extension thereof,  one year
after such renewal or  extension)  and (ii) the date that is five  Business Days
prior to the Maturity Date.

           (e)  Participations.  On  the  Effective  Date  with  respect  to the
Existing  Letters of Credit and by the  issuance of each other  Letter of Credit
(or an  amendment  to a Letter of Credit  increasing  the  amount  thereof)  and
without any further  action on the part of the Issuing Bank or the Lenders,  the
Issuing Bank hereby grants to each Lender,  and each Lender hereby acquires from
the  Issuing  Bank,  a  participation  in such  Letter of  Credit  equal to such
Lender's  Applicable  Percentage of the aggregate  amount  available to be drawn
under  such  Letter  of  Credit.  In  consideration  and in  furtherance  of the
foregoing,  each Lender hereby absolutely and  unconditionally  agrees to pay to
the  Administrative  Agent,  for the account of the Issuing Bank,  such Lender's
Applicable  Percentage of each LC Disbursement  made by the Issuing Bank and not
reimbursed by the Company on the date due as provided in Section 2.06(f),  or of
any reimbursement payment required to be refunded to the Company for any reason.
Each   Lender   acknowledges   and  agrees  that  its   obligation   to  acquire
participations  pursuant  to this  paragraph  in respect of Letters of Credit is
absolute  and  unconditional  and  shall  not be  affected  by any  circumstance
whatsoever,  including  any  amendment,  renewal or  extension  of any Letter of
Credit or the occurrence and  continuance of a Default or an Event of Default or
reduction or termination of the Commitments, and that each such payment shall be
made without any offset, abatement, withholding or reduction whatsoever.

           (f) Reimbursement. If the Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit,  the Borrower for whose account such Letter of
Credit  was  issued  shall  reimburse  such LC  Disbursement  by  paying  to the
Administrative  Agent an amount  equal to such LC  Disbursement  not later  than
12:00  noon,  Charlotte,  North  Carolina,  time,  on  the  date  that  such  LC
Disbursement  is made,  if such Borrower  shall have received  notice of such LC
Disbursement prior to 10:00 a.m., Charlotte, North Carolina, time, on such date,
or, if such notice has not been received by such Borrower  prior to such time on
such date, then not later

                                      -30-
<PAGE>

than 12:00 noon, Charlotte,  North Carolina,  time, on (i) the Business Day that
such Borrower  receives such notice,  if such notice is received  prior to 10:00
a.m.,  Charlotte,  North  Carolina,  time,  on the day of  receipt,  or (ii) the
Business Day  immediately  following  the day that such  Borrower  receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that if such Borrower fails to make such payment when due,  then,  upon
demand by the  Issuing  Bank sent to the  Administrative  Agent and each  Lender
before 10:00 a.m., Charlotte,  North Carolina,  time, each Lender shall pursuant
to Section 2.07 on the same day make available to the  Administrative  Agent for
delivery to the Issuing Bank,  immediately available funds in an amount equal to
such Lender's Applicable Percentage of the amount of such payment by the Issuing
Bank,  and the funding of such amount  shall be treated as the funding of an ABR
Loan by such Lender to such Borrower.  Notwithstanding anything herein or in any
other Loan Document to the contrary,  the funding obligations of the Lenders set
forth in this Section  2.06(f)  shall be binding  regardless of whether or not a
Default or an Event of Default shall exist or the other conditions  precedent in
Article III are satisfied at such time. If and to the extent any Lender fails to
effect any payment due from it under this Section 2.06(f) to the  Administrative
Agent,  then interest shall accrue on the obligation of such Lender to make such
payment from the date such  payment  became due to the date such  obligation  is
paid in full at a rate per annum equal to the Federal Funds  Effective Rate. The
failure of any Lender to pay its Applicable  Percentage of any payment under any
Letter of Credit shall not relieve any other Lender of its obligation  hereunder
to pay to the  Administrative  Agent its  Applicable  Percentage  of any payment
under any Letter of Credit on the date  required,  as  specified  above,  but no
Lender  shall be  responsible  for the failure of any other Lender to pay to the
Administrative  Agent  such other  Lender's  Applicable  Percentage  of any such
payment.

           (g) Obligations  Absolute.  The Company's obligation to reimburse (or
in the  case  of the  Subsidiary  Borrower  Letter  of  Credit,  the  Subsidiary
Borrower's  obligation  to reimburse)  LC  Disbursements  as provided in Section
2.06(f) shall, to the extent  permitted by law, be absolute,  unconditional  and
irrevocable,  and shall be performed  strictly in  accordance  with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of:

          (i) any lack of  validity or  enforceability  of any Letter of Credit,
     this Agreement or any other Loan Document,  or any term or provision herein
     or therein;

          (ii) any  amendment or waiver of or any consent to departure  from all
     or any of the  provisions  of any Letter of Credit,  this  Agreement or any
     other Loan Document;

          (iii) the existence of any claim, setoff,  defense or other right that
     either  Borrower,  or any Affiliate  thereof or any other Person may at any
     time have against the beneficiary  under any Letter of Credit,  the Issuing
     Bank, the Administrative  Agent or any Lender or any other Person,  whether
     in  connection  with this  Agreement  or any  other  related  or  unrelated
     agreement or transaction;

          (iv) 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;

(v)

<PAGE>

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

          (vi)  any  other  act or  omission  to act or delay of any kind of the
     Issuing Bank, the Lenders,  the Administrative Agent or any other Person or
     any other event or circumstance  whatsoever,  whether or not similar to any
     of the foregoing,  that might, but for the provisions of this Section 2.06,
     constitute a legal or equitable discharge of either Borrower's  obligations
     hereunder.

Neither the  Administrative  Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties,  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,  including  any of the
circumstances specified in clauses (i) through (vi) above, as well as 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 for whose
account such Letter of Credit was issued to the extent of any direct damages (as
opposed to consequential  damages,  claims in respect of which are hereby waived
by each  Borrower to the extent  permitted by  applicable  law) suffered by such
Borrower  that are caused by the Issuing  Bank's  failure to exercise the agreed
standard of care (as set forth below) in  determining  whether  drafts and other
documents presented under a Letter of Credit comply with the terms thereof.  The
parties  hereto  expressly  agree that the Issuing Bank shall have exercised the
agreed standard of care in the absence of gross negligence,  willful  misconduct
or  unlawful  conduct on the part of the  Issuing  Bank.  Without  limiting  the
generality of the foregoing,  it is understood  that the Issuing Bank may accept
documents  that appear on their face to be in  substantial  compliance  with the
terms of a Letter of Credit,  without  responsibility for further investigation,
regardless of any notice or  information  to the contrary,  and may make payment
upon  presentation  of documents  that appear on their face to be in substantial
compliance  with the terms of such Letter of Credit;  provided  that the Issuing
Bank shall have the right,  in its sole  discretion,  to decline to accept  such
documents  and to  make  such  payment  if  such  documents  are  not in  strict
compliance with the terms of such Letter of Credit.

           (h)  Disbursement  Procedures.   The  Issuing  Bank  shall,  promptly
following its receipt thereof,  examine all documents  purporting to represent a
demand for payment  under a Letter of Credit.  The Issuing  Bank shall  promptly
notify the  Administrative  Agent and the Borrower for whose account such Letter
of Credit was issued by  telephone  (confirmed  by  telecopy) of such demand for
payment and whether  the Issuing  Bank has made or will make an LC  Disbursement
thereunder;  provided  that any  failure to give or delay in giving  such notice
shall not relieve  either  Borrower of its  obligation  to reimburse the Issuing
Bank and the Lenders with respect to any such LC Disbursement.

           (i)  Interim  Interest.  If  the  Issuing  Bank  shall  make  any  LC
Disbursement,  then,  unless  the  Company  (or,  in the case of the  Subsidiary
Borrower  Letter of Credit,  the Subsidiary  Borrower)  shall  reimburse such LC
Disbursement in full on the date specified in

                                      -32-
<PAGE>

Section  2.06(f),  the unpaid amount thereof shall bear  interest,  for each day
from the date such LC  Disbursement is made to the date that the Company (or, in
the case of the Subsidiary  Borrower Letter of Credit, the Subsidiary  Borrower)
reimburses  such LC  Disbursement  (or all  Lenders  make  the  payments  to the
Administrative  Agent  contemplated by Section  2.06(f) and treated  pursuant to
said Section as  constituting  the funding of ABR Loans),  at the rate per annum
then applicable to ABR Committed Loans.

           (j) Replacement of the Issuing Bank. The Issuing Bank may be replaced
at any time by written agreement among the Borrowers,  the Administrative Agent,
the replaced  Issuing Bank and the successor  Issuing Bank.  The  Administrative
Agent shall notify the Lenders of any such  replacement  of the Issuing Bank. At
the time any such replacement  shall become  effective,  the Borrowers shall pay
all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to
Section 2.12(b). From and after the effective date of any such replacement,  (i)
the  successor  Issuing  Bank shall have all the rights and  obligations  of the
Issuing Bank under this Agreement with respect to Letters of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all  previous  Issuing  Banks,  as the  context  shall  require.  After  the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall  continue to have all the rights and  obligations of an
Issuing Bank under this Agreement with respect to Letters of Credit issued by it
prior to such replacement, but shall not be required to issue additional Letters
of Credit.

           (k) Cash  Collateralization.  If (i) any Event of Default shall occur
and be continuing, on the Business Day that the Company receives notice from the
Administrative  Agent or the Required  Lenders (or, if the maturity of the Loans
has been accelerated,  Lenders with LC Exposure representing greater than 51% of
the total LC Exposure) demanding the deposit of cash collateral pursuant to this
paragraph or (ii) a Change in Control shall occur,  the Company shall deposit in
an account  with the  Administrative  Agent,  in the name of the  Administrative
Agent and for the  benefit  of the  Lenders,  an amount in cash  equal to the LC
Exposure as of such date plus any accrued and unpaid interest 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 with
respect to either Borrower  described in clause (g) or (h) of Section 7.01. Such
deposit shall be held by the Administrative  Agent as collateral for the payment
and performance of the obligations of the Borrowers under this Agreement and the
other Loan Documents. The Administrative Agent shall have exclusive dominion and
control,  including the exclusive right of withdrawal,  over such account. 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, but
only in investments rated at least AA (or equivalent) by at least one nationally
recognized rating agency, if such deposit has been made by reason of a Change in
Control  having  occurred,  and in any event at the Company's  risk and expense)
such  deposits  shall not bear  interest.  Interest or profits,  if any, on such
investments shall accumulate in such account and may, subject to the immediately
preceding sentence be reinvested from time to time. Moneys in such account shall
be applied by the  Administrative  Agent to  reimburse  the Issuing  Bank for LC
Disbursements  for which it has not been  reimbursed  and,  to the extent not so
applied, shall be held for the satisfaction of the reimbursement  obligations of
the  Borrowers for the LC Exposure at such time or, if the maturity of the Loans
has been accelerated (but

                                      -33-
<PAGE>

subject to the consent of Lenders with LC Exposure representing greater than 51%
of the total LC  Exposure),  be  applied  to satisfy  other  obligations  of the
Borrowers under this Agreement and the other Loan  Documents.  If the Company 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 applied as
aforesaid) shall be returned to the Company within three Business Days after all
Events of Default have been cured or waived.

           SECTION 2.07 Funding of  Borrowings.  (a) Each Lender shall make each
Loan to be made by it hereunder on the proposed date thereof by wire transfer of
immediately  available funds by 2:00 p.m., Charlotte,  North Carolina,  time, to
the account of the Administrative  Agent most recently designated by it for such
purpose by notice to the Lenders; provided that Swingline Loans shall be made as
provided in Section 2.05. Not later than 2:00 p.m.  (Charlotte,  North Carolina,
time) on the proposed  Borrowing  Date,  each Lender will make  available to the
Administrative  Agent,  for the  account  of the  Company,  at the office of the
Administrative Agent in funds immediately available to the Administrative Agent,
such  Lender's  Loans to be made on such  Borrowing  Date.  The  Company  hereby
irrevocably authorizes the Administrative Agent to disburse the proceeds of each
Borrowing requested pursuant to this Section 2.07 in immediately available funds
by  crediting  or wiring such  proceeds  to the  deposit  account of the Company
identified in the most recent Notice of Account Designation substantially in the
form of Exhibit 2.07 hereto (a "Notice of Account Designation") delivered by the
Company to the Administrative  Agent or otherwise agreed upon by the Company and
the  Administrative  Agent from time to time;  provided that ABR Committed Loans
made to finance the  reimbursement of an LC Disbursement as provided in Sections
2.06(e)  and (f) shall be remitted  by the  Administrative  Agent to the Issuing
Bank.

           (b) Unless the Administrative Agent shall have received notice from a
Lender  prior to the  proposed  date of any  Borrowing  (or prior to 12:00 noon,
Charlotte,  North Carolina,  time, on such date in the case of an ABR Borrowing)
that such  Lender  will not make  available  to the  Administrative  Agent  such
Lender's share of such Borrowing,  the Administrative Agent may assume that such
Lender has made such share  available  on such date in  accordance  with Section
2.07(a) and may, in reliance upon such assumption, make available to the Company
a  corresponding  amount.  In such  event,  if a Lender has not in fact made its
share of the applicable  Borrowing  available to the Administrative  Agent, then
the  applicable   Lender  and  the  Company   severally  agree  to  pay  to  the
Administrative Agent forthwith on demand such corresponding amount with interest
thereon, for each day from the date such amount is made available to the Company
to the date of payment to the  Administrative  Agent, at (i) in the case of such
Lender, the Federal Funds Effective Rate or (ii) in the case of the Company, the
interest rate  applicable  to ABR Loans.  If such Lender pays such amount to the
Administrative  Agent,  then such amount shall  constitute  such  Lender's  Loan
included in such Borrowing.

           SECTION 2.08 Interest  Elections.  (a) Subject to Section 2.14,  each
Committed  Borrowing  initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar  Committed  Borrowing,  shall
have  an  initial  Interest  Period  as  specified  in such  Borrowing  Request.
Thereafter,  subject to Section  2.14,  the  Company  may elect to convert  such
Borrowing to a different  Type or to continue such Borrowing and, in the case of
a Eurodollar  Committed Borrowing,  may elect Interest Periods therefor,  all as
provided in this Section 2.08. The Company may elect different options with

                                      -34-
<PAGE>

respect to different portions of the affected Borrowing, in which case each such
portion  shall  be  allocated  ratably  among  the  Lenders  holding  the  Loans
comprising such Borrowing,  and the Loans  comprising each such portion shall be
considered  a  separate  Borrowing.   This  Section  2.08  shall  not  apply  to
Competitive  Borrowings or Swingline  Borrowings,  which may not be converted or
continued.

           (b) To make an election  pursuant to this Section  2.08,  the Company
shall notify the Administrative  Agent of such election by telephone by the time
that a Borrowing  Request  would be required  under  Section 2.03 if the Company
were  requesting a Committed  Borrowing of the Type resulting from such election
to be made on the effective date of such election. Each such telephonic Interest
Election  Request shall be irrevocable  and shall be confirmed  promptly by hand
delivery or telecopy to the Administrative  Agent of a written Interest Election
Request in the form of Exhibit 2.08 (an "Interest Election Request").

           (c) Each  telephonic  and written  Interest  Election  Request  shall
specify the following information in compliance with Section 2.02:

          (i) the Borrowing to which such Interest Election Request applies and,
     if different  options are being elected with respect to different  portions
     thereof,  the portions thereof to be allocated to each resulting  Borrowing
     (in which case the  information  to be specified  pursuant to clauses (iii)
     and (iv) below shall be specified for each resulting Borrowing);

          (ii) the effective date of the election made pursuant to such Interest
     Election Request, which shall be a Business Day;

          (iii) whether the  resulting  Borrowing is to be an ABR Borrowing or a
     Eurodollar Borrowing; and

          (iv)  if  the  resulting  Borrowing  is a  Eurodollar  Borrowing,  the
     Interest  Period  to be  applicable  thereto  after  giving  effect to such
     election,  which shall be a period  contemplated  by the  definition of the
     term "Interest Period".

           If any such Interest Election Request requests a Eurodollar Borrowing
but does not specify an  Interest  Period,  then the Company  shall be deemed to
have selected an Interest Period of one month's duration.

           (d) Promptly  following receipt of an Interest Election Request,  the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.

           (e) If the  Company  fails  to  deliver  a timely  Interest  Election
Request with respect to a Eurodollar Committed Borrowing prior to the end of the
Interest Period  applicable  thereto,  then,  unless such Borrowing is repaid as
provided  herein,  at the end of such Interest  Period such  Borrowing  shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if
and so long as an Event of Default is continuing  (i) no  outstanding  Committed
Borrowing may be converted to or continued as a Eurodollar Borrowing and

                                      -35-
<PAGE>

(ii) unless repaid, each Eurodollar Committed Borrowing shall be converted to an
ABR Borrowing at the end of the Interest Period applicable thereto.

           SECTION 2.09  Termination  and Reduction of  Commitments.  (a) Unless
previously terminated, the Commitments shall terminate on the Maturity Date.

           (b) The  Company  may at any  time  terminate,  or from  time to time
reduce,  the  Total  Commitment,  in whole or in  part;  provided  that (i) each
partial  reduction  of the Total  Commitment  shall be in an  amount  that is an
integral  multiple  of  $1,000,000  and not less  than  $5,000,000  and (ii) the
Company shall not terminate or reduce the Commitments if, after giving effect to
any concurrent  prepayment of the Loans in accordance with Section 2.11, the sum
of the total Committed Credit Exposures,  plus the aggregate principal amount of
outstanding Competitive Loans, would exceed the Total Commitment.

           (c) The Company shall notify the Administrative Agent of any election
to terminate or reduce the Total Commitment under Section 2.09(b) at least three
Business  Days prior to the  effective  date of such  termination  or reduction,
specifying  such election and the effective  date  thereof.  Promptly  following
receipt of any notice, the Administrative  Agent shall advise the Lenders of the
contents thereof.  Each notice delivered by the Company pursuant to this Section
2.09 shall be  irrevocable;  provided that a notice of  termination of the Total
Commitment  delivered  by the Company may state that such notice is  conditioned
upon the effectiveness of other credit facilities, in which case such notice may
be revoked by the Company (by notice to the Administrative  Agent on or prior to
the  specified  effective  date)  if  such  condition  is  not  satisfied.   Any
termination  or  reduction  of the Total  Commitment  shall be  permanent.  Each
reduction of the Total  Commitment  shall be made  ratably  among the Lenders in
accordance with their respective Commitments.

           (d) The Total Commitment shall automatically  terminate on the date a
Change in Control occurs.

           SECTION 2.10  Repayment of Loans;  Evidence of Debt.  (a) The Company
hereby  unconditionally  promises to pay (i) to the Administrative Agent for the
account of each Lender the then unpaid  principal  amount of each Committed Loan
on the Maturity Date, (ii) to the  Administrative  Agent for the account of each
Lender having a Competitive Loan outstanding the then unpaid principal amount of
each Competitive Loan on the last day of the Interest Period  applicable to such
Loan, and (iii) to the Swingline Lender the then unpaid principal amount of each
Swingline Loan on demand therefor by the Swingline Lender.  In addition,  if the
sum of the total Committed Credit Exposures, plus the aggregate principal amount
of the outstanding Competitive Loans, exceeds the Total Commitment,  the Company
shall  pay to the  Administrative  Agent  for  the  account  of each  Lender  an
aggregate principal amount of Committed Loans sufficient to cause the sum of the
total Committed  Credit  Exposures,  plus the aggregate  principal amount of the
outstanding  Competitive  Loans, not to exceed the Total  Commitment;  provided,
however, if the repayment of the outstanding  Committed Loans does not cause the
total Committed  Credit  Exposures,  plus the aggregate  principal amount of the
outstanding Competitive Loans, to be equal to or less than the Total Commitment,
the Company  shall  deposit in an account with the  Administrative  Agent in the
name of the Administrative  Agent and for the benefit of the Lenders,  an amount
in cash equal to the amount by which the

                                      -36-
<PAGE>

sum of the total Committed Credit Exposures, plus the aggregate principal amount
of the outstanding  Competitive Loans, exceeds the Total Commitment,  which cash
deposit  shall  be held by the  Administrative  Agent  for  the  payment  of the
Obligations of the Borrowers  under this Agreement and the other Loan Documents.
The Administrative  Agent shall have exclusive  dominion and control,  including
the  exclusive  right of  withdrawal,  over such account other than any interest
earned on the investment of such deposit (which investments shall be made at the
option and sole discretion of the Administrative  Agent, but only in investments
rated at least AA (or equivalent) by at least one nationally  recognized  rating
agency, unless an Event of Default shall have occurred and be continuing, and in
any event at the Company's  risk and expense).  Interest or 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 has not been  reimbursed  and,  to the extent not so
applied, shall be held for the satisfaction of the reimbursement  obligations of
the  Borrowers for the LC Exposure at such time, or if the maturity of the Loans
has been accelerated (but subject to the consent of the Lenders with LC Exposure
representing  greater than 51% of the total LC Exposure),  be applied to satisfy
other  obligations  of the  Borrowers  under this  Agreement  and the other Loan
Documents.  At any time when the sum of the total  Committed  Credit  Exposures,
plus the aggregate  principal amount of outstanding  Competitive Loans, does not
exceed the Total  Commitment and so long as no Default or Event of Default shall
then exist,  upon the request of the Company the amount of such  deposit (to the
extent not applied as aforesaid)  shall be returned to the Company  within three
Business Days after receipt of such request.

           (b) On the date that a Change in Control  occurs,  the Company  shall
repay the  outstanding  principal  amount  of the  Loans  and all other  amounts
outstanding  hereunder and under the other Loan  Documents and shall comply with
the provisions of Section 2.06(k).

           (c) Each Lender shall maintain in accordance  with its usual practice
an account or accounts evidencing the indebtedness of the Company to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

           (d) The  Administrative  Agent  shall  maintain  accounts in which it
shall  record  (i) the  amount of each Loan made  hereunder,  the Class and Type
thereof  and the  Interest  Period  applicable  thereto,  (ii) the amount of any
principal  or interest  due and  payable or to become due and  payable  from the
Company to each Lender hereunder and (iii) the amount of any sum received by the
Administrative  Agent hereunder for the account of the Lenders and each Lender's
share thereof.

           (e) The entries made in the accounts  maintained  pursuant to Section
2.10(c) or (d) shall be prima facie evidence of the existence and amounts of the
obligations  recorded  therein;  provided  that the failure of any Lender or the
Administrative  Agent to maintain such accounts or any error or conflict therein
shall not in any manner affect the  obligation of the Company to repay the Loans
in accordance with the terms of this Agreement.

           (f) Any Lender may request  that Loans made by it be  evidenced  by a
Committed  Note or a Competitive  Note,  as the case may be. In such event,  the
Company shall prepare,  execute and deliver to such Lender a Committed Note or a
Competitive Note, as the

                                      -37-
<PAGE>

case  may be.  Thereafter,  the  Loans  evidenced  by such  promissory  note and
interest  thereon shall at all times  (including  after  assignment  pursuant to
Section  10.05) be  represented  by one or more  promissory  notes in such forms
payable to the order of the payee named therein.

           SECTION  2.11  Prepayment  of Loans.  (a) The Company  shall have the
right at any time and from time to time to prepay any  Borrowing  in whole or in
part, subject to prior notice in accordance with Section 2.11(b);  provided that
the Company shall not have the right to prepay any Competitive  Loan without the
prior consent of the Lender thereof.

           (b) The Company  shall notify the  Administrative  Agent (and, in the
case of  prepayment  of a Swingline  Loan,  the  Swingline  Lender) by telephone
(confirmed  by telecopy in the form of Exhibit 2.11 (a "Notice of  Prepayment"))
of any  prepayment  hereunder  (i) in the  case of  prepayment  of a  Eurodollar
Committed Borrowing, not later than 11:00 a.m., Charlotte, North Carolina, time,
three  Business  Days  before  the  date  of  prepayment,  (ii)  in the  case of
prepayment of an ABR Committed Borrowing,  not later than 11:00 a.m., Charlotte,
North  Carolina,  time,  on the  date of  prepayment  or  (iii)  in the  case of
prepayment  of a Swingline  Loan,  not later than 11:00 a.m.,  Charlotte,  North
Carolina, time, on the date of prepayment. Each such notice shall be irrevocable
and shall specify the  prepayment  date,  Type and the principal  amount of each
Borrowing  or  portion  thereof to be  prepaid;  provided  that,  if a notice of
prepayment is given in connection  with a conditional  notice of  termination of
the  Commitments as contemplated by Section 2.09, then such notice of prepayment
may be revoked if such  notice of  termination  is  revoked in  accordance  with
Section 2.09. Each partial  prepayment  shall be in an aggregate amount not less
than, and shall be an integral multiple of, the amounts shown below with respect
to the applicable Type of Loan or Borrowing:

          ----------------------------------------------------
                 Type of          Integral        Minimum
              Loan/Borrowing     Multiple of  Aggregate Amount
              --------------     -----------  ----------------
          ----------------------------------------------------
          Eurodollar Committed   $1,000,000     $3,000,000
          Borrowing
          ----------------------------------------------------
          ABR Committed           1,000,000      1,000,000
          Borrowing
          ----------------------------------------------------
          Swingline Loan            100,000      5,000,000
          ----------------------------------------------------

Promptly following receipt of any such notice relating to a Committed Borrowing,
the  Administrative  Agent shall advise the Lenders of the contents thereof.  If
the Company fails to designate  the Type of  Borrowings  to be prepaid,  partial
prepayments  shall be applied first to the outstanding ABR Borrowings  until all
such outstanding principal of ABR Borrowings are repaid in full, and then to the
outstanding principal amount of Eurodollar  Borrowings.  Each partial prepayment
of any Committed  Borrowing shall be in an amount that would be permitted in the
case of an advance of a  Committed  Borrowing  of the same Type as  provided  in
Section 2.02. Each prepayment of a Committed  Borrowing shall be applied ratably
to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied
by accrued interest to the extent required by Section 2.13.

           SECTION   2.12  Fees.   (a)  The   Company   agrees  to  pay  to  the
Administrative  Agent  for the  account  of each  Lender  a  facility  fee  (the
"Facility Fee"),  which shall accrue at the applicable  Facility Fee Rate on the
daily amount of the  Commitment of such Lender,  whether used or unused and when
the Commitment has terminated,  on the outstanding Loans of such Lender,  during
the period from the date of this Agreement to the later of (i) the date on which

                                      -38-
<PAGE>

such  Commitment  terminates  and (ii) the date on which  the  Loans are paid in
full. Accrued Facility Fees shall be payable in arrears on the last Business Day
of March, June, September and December of each year and on the date on which the
Commitments terminate and the date the Loans are paid in full, commencing on the
first  such date to occur  after the date  hereof.  All  Facility  Fees shall be
computed on the basis of a year of 365 or 366 days, as the case may be and shall
be payable for the actual  number of days elapsed  (including  the first day but
excluding the last day).

           (b) The Company agrees to pay (i) to the Administrative Agent for the
account of each Lender a participation fee with respect to its participations in
Letters  of  Credit,  which  shall  accrue  at a rate  per  annum  equal  to the
Applicable  Margin on the  average  daily  amount of such  Lender's  LC Exposure
(excluding any portion thereof  attributable  to unreimbursed LC  Disbursements)
during the period from and  including  the  Effective  Date to but excluding the
later of the date on which such Lender's  Commitment  terminates and the date on
which such Lender ceases to have any LC Exposure, and (ii) to the Issuing Bank a
fronting  fee,  which shall  accrue at a rate per annum equal to .125% times the
daily maximum  amount  available to be drawn under each Letter of Credit issued,
renewed or extended  during the  Availability  Period,  but not to exceed in any
event  .125% of the  original  face  amount of each  Letter of Credit so issued,
renewed or extended.  The Company also agrees to pay the Issuing Bank's standard
fees with respect to the issuance, amendment, renewal or extension of any Letter
of Credit or the processing of drawings thereunder.  Accrued  participation fees
and fronting fees shall be payable in arrears on the last Business Day of March,
June, September and December of each year,  commencing on the first such date to
occur after the Effective Date;  provided that all such fees shall be payable on
the date on which the Commitments terminate and any such fees accruing after the
date on which the Commitments  terminate  shall be payable on demand.  Any other
fees payable to the Issuing  Bank  pursuant to this  paragraph  shall be payable
within 10 days after  demand.  All  participation  fees shall be computed on the
basis of a year of 365 or 366 days, as applicable,  and shall be payable for the
actual  number of days elapsed  (including  the first day but excluding the last
day).

           (c) The Company agrees to pay to each of the Administrative Agent and
Wachovia  Capital  Markets  LLC,  for their own  accounts,  fees  payable in the
amounts and at the times specified in that letter  agreement dated July 15, 2004
among the Company, the Joint Lead Arrangers, Wachovia and Citibank (as from time
to time amended, the "Fee Letter").

           (d) The  Company  agrees to pay to the  Administrative  Agent for the
account of each Lender a utilization fee (the  "Utilization  Fee"),  which shall
accrue at the applicable Utilization Fee Rate on:

           (i) each  Lender's Commitment  (whether  used or unused) for each day
     during the period from the  Effective  Date to the Maturity  Date, on which
     the  sum of the  total  Committed  Credit  Exposures,  plus  the  aggregate
     principal amount of outstanding Competitive Loans, exceeds 50% of the Total
     Commitment, and

           (ii) each Lender's Committed  Credit Exposure for each day during the
     period from the  Maturity  Date to the date on which the  Committed  Credit
     Exposures of all Lenders,  are paid in full or reduced to zero,  on the sum
     of the total Committed Credit

                                      -39-
<PAGE>

     Exposures,  plus  the aggregate principal amount of outstanding Competitive
     Loans,  exceeds  50% of  the  Total  Commitment,  determined  as of the day
     immediately  preceding the Maturity Date.

All Utilization Fees shall be payable in arrears on the last day of March, June,
September  and  December  of each  year  and on the date  the  Committed  Credit
Exposures of all Lenders and all  Competitive  Loans are paid in full or reduced
to zero commencing on the first of such dates to occur after the Effective Date.
All  Utilization  Fees  shall be  computed  on the basis of a year of 365 or 366
days,  as the case may be,  and shall be payable  for the actual  number of days
elapsed (including the first day but excluding the last day).

           (e) All fees  payable  hereunder  shall be paid on the dates due,  in
immediately  available  funds,  to the  Administrative  Agent (or to the Issuing
Bank,  in the  case of fees  payable  to it) (for  distribution,  in the case of
Facility Fees and Utilization Fees, to the Lenders).  Except as required by law,
fees paid shall not be refundable under any circumstances..

           SECTION 2.13 Interest.  (a) The Loans  comprising  each ABR Borrowing
(including each Swingline Loan) shall bear interest at a rate per annum equal to
the Alternate Base Rate.

           (b)  The  Loans  comprising  each  Eurodollar  Borrowing  shall  bear
interest (i) in the case of a Eurodollar  Committed  Loan, at the LIBOR Rate for
the Interest  Period in effect for such Borrowing plus the Applicable  Margin or
(ii) in the case of a  Eurodollar  Competitive  Loan,  at the LIBOR Rate for the
Interest  Period in effect for such Borrowing plus (or minus, as applicable) the
Margin applicable to such Loan.

           (c) Each  Fixed  Rate Loan  shall  bear  interest  at the Fixed  Rate
applicable to such Loan.

           (d) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Company hereunder is not paid
when due,  whether at stated  maturity,  upon  acceleration  or otherwise,  such
overdue amount shall bear interest,  after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise  applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the Alternate Base Rate.

           (e) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
to  Section  2.13(d)  shall  be  payable  on  demand,  (ii) in the  event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR Committed
Loan  prior to the end of the  Availability  Period),  accrued  interest  on the
principal  amount  repaid  or  prepaid  shall  be  payable  on the  date of such
repayment or prepayment,  (iii) in the event of any conversion of any Eurodollar
Committed Loan prior to the end of the current Interest Period therefor, accrued
interest on such Loan shall be payable on the effective date of such  conversion
and (iv) all accrued  interest  shall be payable upon  termination  of the Total
Commitment.

                                      -40-
<PAGE>

           (f) All interest  hereunder  shall be computed on the basis of a year
of 360 days,  except that interest  computed by reference to the Alternate  Base
Rate at times when the  Alternate  Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed  (including the
first day but excluding the last day).  The  applicable  Alternate  Base Rate or
LIBOR  Rate  shall  be  determined  by  the   Administrative   Agent,  and  such
determination shall be conclusive absent manifest error.

           SECTION 2.14 Alternate Rate of Interest. If prior to the commencement
of any Interest Period for a Eurodollar Borrowing:

           (a) the Administrative Agent determines (which determination shall be
conclusive  absent  manifest  error) that adequate and  reasonable  means do not
exist for ascertaining the LIBOR Rate for such Interest Period; or

           (b) the Administrative  Agent is advised by the Required Lenders (or,
in the case of a Eurodollar  Competitive Loan, by the Lender that is required to
make such Loan) that the LIBOR Rate for such Interest Period will not adequately
and fairly reflect the cost to such Lenders (or Lender) of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest Period;

then the  Administrative  Agent shall give notice thereof to the Company and the
Lenders by  telephone  or telecopy as promptly as  practicable  thereafter  and,
until the  Administrative  Agent  notifies  the Company and the Lenders that the
circumstances  giving  rise to such  notice no longer  exist,  (i) any  Interest
Election Request that requests the conversion of any Committed  Borrowing to, or
continuation  of any  Committed  Borrowing as, a Eurodollar  Borrowing  shall be
ineffective,  (ii) if any  Borrowing  Request  requests a  Eurodollar  Committed
Borrowing,  such  Borrowing  shall be made as an ABR  Borrowing  and  (iii)  any
request  by  the  Company  for  a  Eurodollar  Competitive  Borrowing  shall  be
ineffective;  provided that (A) if the circumstances  giving rise to such notice
do not affect all the  Lenders,  then  requests by the  Company  for  Eurodollar
Competitive  Borrowings may be made to Lenders that are not affected thereby and
(B) if the  circumstances  giving  rise to such  notice  affect only one Type of
Borrowings, then the other Type of Borrowings shall be permitted.

           SECTION 2.15 Increased Costs. (a) If any Change in Law shall:

           (i) impose, modify or deem applicable any reserve, special deposit or
     similar requirement against assets of, deposits with or for the account of,
     or credit  extended  by, any Lender  (except any such  reserve  requirement
     reflected in the LIBOR Rate) or the Issuing Bank; or

          (ii) impose on any Lender or the Issuing Bank or the London  interbank
     market any other  condition  affecting this  Agreement or Eurodollar  Loans
     made by such Lender or any Letter of Credit or participation therein;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lender of making or maintaining  any  Eurodollar  Loan or Fixed Rate Loan (or of
maintaining  its  obligation  to make any such Loan) or to increase  the cost to
such Lender or the Issuing Bank of participating in,

                                      -41
<PAGE>

issuing or  maintaining  any Letter of Credit or to reduce the amount of any sum
received or receivable by such Lender or the Issuing Bank hereunder  (whether of
principal,  interest or otherwise),  then the Company will pay to such Lender or
the Issuing Bank, as the case may be, such additional  amount or amounts as will
compensate  such  Lender  or the  Issuing  Bank,  as the case  may be,  for such
additional costs incurred or reduction suffered.

           (b) If any Lender or the Issuing Bank  determines  that any Change in
Law regarding capital  requirements has or would have the effect of reducing the
rate of return on such Lender's or the Issuing  Bank's capital or on the capital
of such Lender's or the Issuing Bank's holding company, if any, as a consequence
of this Agreement or the Loans made by, or  participations  in Letters of Credit
held by, such Lender,  or the Letters of Credit issued by the Issuing Bank, to a
level below that which such Lender or the Issuing  Bank or such  Lender's or the
Issuing  Bank's  holding  company could have achieved but for such Change in Law
(taking into  consideration such Lender's or the Issuing Bank's policies and the
policies of such Lender's or the Issuing Bank's holding  company with respect to
capital adequacy), then from time to time the Company will pay to such Lender or
the Issuing Bank, as the case may be, such additional  amount or amounts as will
compensate  such  Lender or the  Issuing  Bank or such  Lender's  or the Issuing
Bank's holding company for any such reduction suffered.

           (c) A  certificate  of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or its
holding  company,  as the case may be, as specified  in paragraph  (a) or (b) of
this  Section  2.15 shall be  delivered  to the Company and shall be  conclusive
absent manifest error. The Company shall pay such Lender or the Issuing Bank, as
the case may be,  the  amount  shown as due on any such  certificate  within  10
Business Days after receipt thereof.

           (d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation  pursuant to this Section 2.15 shall not constitute a waiver
of such  Lender's  or the  Issuing  Bank's  right to demand  such  compensation;
provided  that the Company  shall not be required to  compensate a Lender or the
Issuing Bank pursuant to this Section 2.15 for any increased costs or reductions
incurred  more than six months prior to the date that such Lender or the Issuing
Bank, as the case may be,  notifies the Company of the Change in Law giving rise
to such increased costs or reductions and of such Lender's or the Issuing Bank's
intention to claim compensation  therefor;  provided further that, if the Change
in Law giving rise to such increased  costs or reductions is  retroactive,  then
the six-month  period  referred to above shall be extended to include the period
of retroactive effect thereof.

           SECTION 2.16 Break Funding Payments.  In the event of (a) the payment
of any  principal  of any  Eurodollar  Loan or Fixed Rate Loan other than on the
last day of an Interest Period applicable  thereto  (including as a result of an
Event of Default),  (b) the conversion of any Eurodollar  Loan other than on the
last day of the Interest Period  applicable  thereto,  (c) the failure to borrow
(unless  such  failure was caused by the failure of a Lender to make such Loan),
convert,  continue or prepay any  Eurodollar  Loan, or the failure to convert an
ABR Loan to a Eurodollar  Loan,  on the date  specified in any notice  delivered
pursuant hereto  (regardless of whether such notice is permitted to be revocable
under  Section 2.09 and is revoked in accordance  herewith),  (d) the failure to
borrow any  Competitive  Loan after  accepting the  Competitive Bid to make such
Loan (unless such failure was caused by the failure of a Lender to

                                      -42-
<PAGE>

make such Loan), or (e) the assignment of any Eurodollar Loan or Fixed Rate Loan
other than on the last day of the Interest Period applicable thereto as a result
of a request by the Company  pursuant to Section 2.19,  then, in any such event,
the  Company  shall  compensate  each  Lender  for the  loss,  cost and  expense
attributable  to such event.  In the case of a Eurodollar  Loan, the loss to any
Lender  attributable  to any such  event  shall be deemed to  include  an amount
determined  by such Lender to be equal to the excess,  if any, of (i) the amount
of interest  that such  Lender  would pay for a deposit  equal to the  principal
amount of such Loan for the period  from the date of such  payment,  conversion,
failure or  assignment to the last day of the then current  Interest  Period for
such Loan (or,  in the case of a failure to borrow,  convert  or  continue,  the
duration of the Interest  Period that would have resulted  from such  borrowing,
conversion  or  continuation)  if the interest rate payable on such deposit were
equal to the  LIBOR  Rate for such  Interest  Period,  over  (ii) the  amount of
interest that such Lender would earn on such principal amount for such period if
such Lender were to invest such principal amount for such period at the interest
rate that  would be bid by such  Lender (or an  affiliate  of such  Lender)  for
dollar deposits from other banks in the Eurodollar market at the commencement of
such period.  A  certificate  of any Lender  setting forth any amount or amounts
that such Lender is entitled to receive  pursuant to this  Section 2.16 shall be
delivered to the Company and shall be  conclusive  absent  manifest  error.  The
Company  shall pay such Lender the amount  shown as due on any such  certificate
within 10 Business Days after receipt thereof.

           SECTION 2.17 Taxes.  (a) Any and all payments by or on account of any
obligation  of  either  Borrower  hereunder  shall be made free and clear of and
without  deduction for any  Indemnified  Taxes or Other Taxes;  provided that if
either Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
from such payments,  then (i) the sum payable shall be increased as necessary so
that after making all required deductions  (including  deductions  applicable to
additional  sums payable  under this  Section  2.17) the  Administrative  Agent,
Lender or Issuing  Bank (as the case may be) receives an amount equal to the sum
it would have  received had no such  deductions  been made,  (ii) such  Borrower
shall make such  deductions  and (iii) such  Borrower  shall pay the full amount
deducted to the relevant  Governmental  Authority in accordance  with applicable
law.

           (b) In  addition,  such  Borrower  shall pay any  Other  Taxes to the
relevant Governmental Authority in accordance with applicable law.

           (c) The Company shall indemnify the Administrative Agent, each Lender
and the Issuing Bank, within 10 Business Days after written demand therefor, for
the full amount of any Indemnified  Taxes or Other Taxes (including  Indemnified
Taxes or Other Taxes imposed or asserted on or  attributable  to amounts payable
under this Section 2.17(c)) paid by the Administrative Agent, such Lender or the
Issuing Bank,  as the case may be, and any  penalties,  interest and  reasonable
expenses  arising  therefrom  or  with  respect  thereto,  whether  or not  such
Indemnified  Taxes or Other Taxes were correctly or legally  imposed or asserted
by the relevant Governmental  Authority.  A certificate as to the amount of such
payment or liability  delivered to the Company by a Lender or the Issuing  Bank,
or by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.

           (d) As soon as practicable  after any payment of Indemnified Taxes or
Other  Taxes by the  Company to a  Governmental  Authority,  the  Company  shall
deliver to the

                                      -43-
<PAGE>

Administrative  Agent the  original or a certified  copy of a receipt  issued by
such  Governmental  Authority  evidencing  such  payment,  a copy of the  return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.

           (e) Any  Foreign  Lender that is  entitled  to an  exemption  from or
reduction  of  withholding  tax under the law of the  jurisdiction  in which the
Borrowers are located, or any treaty to which such jurisdiction is a party, with
respect to payments  under this  Agreement  shall deliver to the Company (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law or reasonably requested by the Company, such properly completed and executed
documentation  prescribed by  applicable  law as will permit such payments to be
made without withholding or at a reduced rate.

           (f) If the Administrative  Agent or a Lender determines,  in its sole
discretion,  that it has  received  a refund of any  Taxes or Other  Taxes as to
which it has been indemnified by either Borrower or with respect to which either
Borrower has paid additional amounts pursuant to this Section 2.17, it shall pay
over such refund to such Borrower (but only to the extent of indemnity  payments
made, or additional  amounts paid, by such Borrower under this Section 2.17 with
respect to the Taxes and Other  Taxes  giving rise to such  refund),  net of all
out-of-pocket  expenses of the  Administrative  Agent or such Lender and without
interest  (other than any interest paid by the relevant  Governmental  Authority
with respect to such refund);  provided, that the Borrowers, upon the request of
the Administrative Agent or such Lender, agrees to repay the amount paid over to
either  Borrower (plus any penalties,  interest or other charges  imposed by the
relevant  Governmental  Authority) to the Administrative Agent or such Lender in
the event the  Administrative  Agent or such  Lender is  required  to repay such
refund to such  Governmental  Authority.  This Section shall not be construed to
require the Administrative Agent or any Lender to make available its tax returns
(or any other information  relating to its taxes which it deems confidential) to
the Borrowers or any other Person.

           SECTION  2.18  Payments  Generally;  Pro Rata  Treatment;  Sharing of
Set-offs.  (a) The Company shall make or, in the case of the Subsidiary Borrower
Letter of Credit,  the Subsidiary  Borrower shall make, each payment required to
be made by such  Borrower  hereunder  (whether of principal,  interest,  fees or
reimbursement  of LC  Disbursements,  or under  Section  2.15,  2.16 or 2.17, or
otherwise)  prior to 12:00 noon,  Charlotte,  North Carolina,  time, on the date
when due, in immediately  available funds, without set-off or counterclaim.  Any
amounts  received  after  such time on any date may,  in the  discretion  of the
Administrative  Agent,  be deemed to have been  received on the next  succeeding
Business Day for purposes of  calculating  interest  thereon.  All such payments
shall  be made to the  Administrative  Agent  at its  Principal  Office,  except
payments  to be made  directly  to the  Issuing  Bank  or  Swingline  Lender  as
expressly  provided  herein and except that payments  pursuant to Sections 2.15,
2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto. The
Administrative  Agent shall distribute any such payments  received by it for the
account of any other  Person to the  appropriate  recipient  promptly  following
receipt  thereof.  If any payment  hereunder shall be due on a day that is not a
Business  Day,  the date for payment  shall be  extended to the next  succeeding
Business  Day,  and,  in the case of any  payment  accruing  interest,  interest
thereon  shall  be  payable  for the  period  of such  extension.  All  payments
hereunder shall be made in dollars.

                                      -44-
<PAGE>

           (b) If at any time  insufficient  funds are received by and available
to the Administrative Agent to pay fully all amounts of principal,  unreimbursed
LC  Disbursements,  interest  and fees then due  hereunder,  such funds shall be
applied (i) first,  to pay interest and fees then due  hereunder,  ratably among
the parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties,  and (ii) second, to pay principal and unreimbursed LC
Disbursements then due hereunder,  ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements  then
due to such parties.

           (c) If any  Lender  shall,  by  exercising  any right of  set-off  or
counterclaim  or  otherwise,  obtain  payment in respect of any  principal of or
interest on any of its Committed Loans or  participations in LC Disbursements or
Swingline  Loans  resulting  in  such  Lender  receiving  payment  of a  greater
proportion of the aggregate amount of its Committed Loans and  participations in
LC  Disbursements  and  Swingline  Loans and accrued  interest  thereon than the
proportion  received by any other Lender, then the Lender receiving such greater
proportion  shall  purchase  (for  cash at  face  value)  participations  in the
Committed Loans and  participations  in LC Disbursements  and Swingline Loans of
other  Lenders to the extent  necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance  with the aggregate  amount
of principal of and accrued  interest on their  respective  Committed  Loans and
participations in LC Disbursements and Swingline Loans; provided that (i) if any
such  participations  are purchased and all or any portion of the payment giving
rise  thereto is  recovered,  such  participations  shall be  rescinded  and the
purchase price restored to the extent of such recovery,  without  interest,  and
(ii) the  provisions  of this  paragraph  shall not be construed to apply to any
payment made by either  Borrower  pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the  assignment  of  or  sale  of  a  participation  in  any  of  its  Loans  or
participations in LC Disbursements to any assignee or participant, other than to
a Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of
this paragraph shall apply). Each Borrower consents to the foregoing and agrees,
to the extent it may  effectively  do so under  applicable  law, that any Lender
acquiring a participation  pursuant to the foregoing  arrangements  may exercise
against such Borrower  rights of set-off and  counterclaim  with respect to such
participation  as fully as if such Lender were a direct  creditor of the Company
or  the  Subsidiary  Borrower,  as the  case  may  be,  in the  amount  of  such
participation.

           (d) Unless the  Administrative  Agent shall have received notice from
the Company prior to the date on which any payment is due to the  Administrative
Agent for the  account of the  Lenders or the Issuing  Bank  hereunder  that the
Company  will  not make (or in the case of the  Subsidiary  Borrower  Letter  of
Credit, the Subsidiary Borrower will not make) such payment,  the Administrative
Agent may assume that the applicable Borrower has made such payment on such date
in accordance herewith and may, in reliance upon such assumption,  distribute to
the  Lenders or the  Issuing  Bank,  as the case may be, the amount due. In such
event, if the applicable  Borrower has not in fact made such payment,  then each
of the  Lenders or the Issuing  Bank,  as the case may be,  severally  agrees to
repay to the Administrative  Agent forthwith on demand the amount so distributed
to such Lender or Issuing Bank with interest thereon, for each day from the date
such amount is  distributed  to it to the date of payment to the  Administrative
Agent, at the Federal Funds Effective Rate.

                                      -45-
<PAGE>

           (e) If any Lender shall fail to make any payment  required to be made
by it  pursuant  to  Section  2.05(c),  2.06(e),  2.07(b) or  2.18(d),  then the
Administrative  Agent  may,  in its  discretion  (notwithstanding  any  contrary
provision hereof),  apply any amounts thereafter  received by the Administrative
Agent for the account of such Lender to satisfy such Lender's  obligations under
such Sections until all such unsatisfied obligations are fully paid.

           SECTION 2.19 Mitigation  Obligations;  Replacement of Lenders. (a) If
any Lender  requests  compensation  under Section 2.15, or if either Borrower is
required  to pay  any  additional  amount  to  any  Lender  or any  Governmental
Authority  for the  account of any Lender  pursuant to Section  2.17,  then such
Lender shall use reasonable  efforts to designate a different lending office for
funding or booking its Loans  hereunder or to assign its rights and  obligations
hereunder to another of its offices, branches or affiliates, if, in the judgment
of such Lender,  such  designation or assignment  (i) would  eliminate or reduce
amounts  payable  pursuant to Section  2.15 or 2.17,  as the case may be, in the
future  and (ii)  would not  subject  such  Lender to any  unreimbursed  cost or
expense and would not otherwise be disadvantageous to such Lender.

           (b) If any Lender  requests  compensation  under  Section 2.15, or if
either  Borrower is required to pay any  additional  amount to any Lender or any
Governmental  Authority for the account of any Lender  pursuant to Section 2.17,
or if any Lender  defaults in its obligation to fund Loans  hereunder,  then the
Company may, at its sole expense and effort,  upon notice to such Lender and the
Administrative  Agent,  require  such  Lender to assign  and  delegate,  without
recourse  (in  accordance  with and  subject to the  restrictions  contained  in
Section 10.05),  all its interests,  rights and obligations under this Agreement
to an assignee that shall assume such obligations (which assignee may be another
Lender,  if a Lender  accepts such  assignment);  provided  that (i) the Company
shall have received the prior written consent of the Administrative  Agent (and,
if a Commitment is being assigned, the Issuing Bank and Swingline Lender), which
consent shall not be unreasonably withheld, (ii) such Lender shall have received
payment  of an  amount  equal to the  outstanding  principal  of its  Loans  and
participations  in  LC  Disbursements  and  Swingline  Loans,  accrued  interest
thereon,  accrued fees and all other amounts  payable to it hereunder,  from the
assignee (to the extent of such  outstanding  principal and accrued interest and
fees) or the Company (in the case of all other amounts) and (iii) in the case of
any such assignment  resulting from a claim for compensation  under Section 2.15
or payments  required to be made pursuant to Section 2.17,  such assignment will
result in a reduction in such  compensation  or payments.  A Lender shall not be
required to make any such  assignment and  delegation  if, prior  thereto,  as a
result of a waiver by such Lender or otherwise,  the circumstances entitling the
Company to require such assignment and delegation cease to apply.

           SECTION  2.20  Telephonic  Notices.  Without in any way  limiting the
obligation of the Company or the  Subsidiary  Borrower to confirm in writing any
telephonic  notice it is entitled to give under this Agreement or any other Loan
Document, the Administrative Agent may act without liability upon the basis of a
telephonic notice believed in good faith by the Administrative  Agent to be from
the Company or the Subsidiary Borrower prior to receipt of written confirmation.
In each such case, each of the Company and the Subsidiary Borrower hereby waives
the right to  dispute  the  Administrative  Agent's  record of the terms of such
telephonic notice.

                                      -46-
<PAGE>

                                  ARTICLE III.
                              CONDITIONS PRECEDENT

           SECTION 3.01  Conditions  Precedent to the Initial Credit Event.  The
obligations  of the Lenders to make Loans  hereunder  or the  obligation  of the
Issuing Bank to issue  Letters of Credit  hereunder  shall not become  effective
until the date on which each of the following  conditions is satisfied or waived
in accordance with Section 10.02:

           (a) The Administrative Agent shall have received the following,  each
dated the Execution Date:

           (i) this Agreement executed by each party hereto;

           (ii) if requested by any Lender,  a Committed  Note and a Competitive
     Note executed by the Company and payable to the order of such Lender;

           (iii)  a  certificate  of an  officer  and  of  the  secretary  or an
     assistant secretary  of the  Delegate,  certifying,  inter  alia  (A)  true
     and complete  copies  of each of the  limited liability  company  agreement
     of the  Delegate,  the  certificate  of  incorporation,  as amended  and in
     effect, of the General Partner, the partnership agreements, each as amended
     and in effect,  of the Borrowers,  the bylaws, as amended and in effect, of
     the General Partner and the  resolutions  adopted by the Board of Directors
     of the Delegate (1) authorizing the execution,  delivery and performance by
     each Borrower of this Agreement and the other Loan Documents to which it is
     or will be a party and, in the case of the Company,  the  Borrowings  to be
     made and the Letters of Credit to be issued  hereunder,  (2)  approving the
     forms  of the Loan  Documents  to which  it is a party  and  which  will be
     delivered  at or prior to the initial  Borrowing  Date and (3)  authorizing
     officers of the Delegate to execute and deliver the Loan Documents to which
     such  Borrower is or will be a party and any related  documents,  including
     any  agreement  contemplated  by this  Agreement,  (B) the  incumbency  and
     specimen signatures of the officers of the Delegate executing any documents
     on its behalf and (C) (1) that the  representations  and warranties made by
     such  Borrower in each Loan  Document to which such Borrower is a party and
     which will be delivered at or prior to the initial  Borrowing Date are true
     and correct in all material  respects,  (2) the absence of any  proceedings
     for the  dissolution or liquidation of such Borrower and (3) the absence of
     the occurrence and continuance of any Default or Event of Default;

          (iv) letters from CT  Corporation  System,  Inc. in form and substance
     satisfactory to the  Administrative  Agent  evidencing the obligation of CT
     Corporation  System,  Inc. to accept service of process in the State of New
     York on behalf of each Borrower that is not  authorized to do business as a
     foreign corporation in the State of New York;

          (v) a favorable,  signed opinion addressed to the Administrative Agent
     and  the  Lenders  from  Bracewell  &  Patterson,  L.L.P.,  counsel  to the
     Borrowers, given upon the express instruction of the Borrowers; and

                                      -47-
<PAGE>

          (vi) certificates of appropriate public officials as to the existence,
     good standing and  qualification to do business as a foreign entity of each
     Borrower,  the General  Partner and the Delegate in the States of Texas and
     Delaware.

           (b) The Administrative  Agent shall be reasonably  satisfied that all
required  consents and  approvals of any  Governmental  Authority  and any other
Person in connection  with the  transactions  contemplated  by this Section 3.01
shall have been  obtained  and  remain in effect  (except  where the  failure to
obtain such approvals would not have a Material Adverse Effect).

           (c) The Company  shall have paid to  Wachovia  Capital  Markets  LLC,
Citigroup  Global  Markets,  Inc.,  and the  Administrative  Agent  all fees and
expenses pursuant to the Fee Letter agreed upon by such parties to be paid on or
prior to the Execution Date.

           (d) The Existing Credit Agreements shall have been terminated and all
amounts outstanding thereunder paid in full.

           (e) The  Company  shall have paid to Andrews  Kurth LLP  pursuant  to
Section 10.03 all reasonable fees and  disbursements  invoiced to the Company on
or prior to the Execution Date.

           SECTION 3.02 Conditions  Precedent to All Credit Events.  Except with
respect to  Committed  Credit  Loans  made by the  Lenders  pursuant  to Section
2.06(f),  the  obligation of the Lenders to make any Loans or to issue or extend
any Letter of Credit under this Agreement  (including any Loan made or Letter of
Credit issued  (including for the purpose of the Existing  Letters of Credit) on
the initial Borrowing Date) is subject to the further conditions  precedent that
on the date of such Credit Event:

           (a) The  conditions  precedent  set forth in Section  3.01 shall have
theretofore been satisfied;

           (b) The representations and warranties set forth in Article IV (other
than the  representation  set forth in  Section  4.07(c))and  in the other  Loan
Documents  shall be true and correct in all  material  respects as of, and as if
such  representations  and  warranties  were made on, the Borrowing  Date of the
proposed   Loan  or  Letter  of  Credit,   as  the  case  may  be  (unless  such
representation  and warranty  expressly  relates to an earlier date), and by the
Company's delivery of a Borrowing Request, the Borrowers shall be deemed to have
certified to the Administrative  Agent and the Lenders that such representations
and warranties are true and correct in all material respects;

           (c) The Company shall have  complied  with the  provisions of Section
2.03, Section 2.04 or Section 2.05, as the case may be; and

           (d) No  Default  or Event  of  Default  shall  have  occurred  and be
continuing or would result from such Credit Event.

The  acceptance  of the  benefits  of  each  Credit  Event  shall  constitute  a
representation  and warranty by the Borrowers to each of the Lenders that all of
the conditions specified in this Section 3.02 above exist as of that time.

                                      -48-
<PAGE>

           SECTION 3.03 Conditions  Precedent to Conversions.  The obligation of
the  Lenders  to  convert  or  continue  any  existing  Borrowing  into  or as a
Eurodollar  Borrowing is subject to the condition  precedent that on the date of
such  conversion  or  continuation  no Default  or Event of  Default  shall have
occurred and be continuing  or would result from the making of such  conversion.
The  acceptance of the benefits of each such  conversion or  continuation  shall
constitute a representation and warranty by the Borrowers to each of the Lenders
that no Default or Event of Default  shall have  occurred and be  continuing  or
would result from the making of such conversion or continuation.

           SECTION 3.04  Delivery of  Documents.  All  of  the  Loan  Documents,
certificates,  legal opinions and other documents and papers referred to in this
Article   III,   unless   otherwise   specified,   shall  be  delivered  to  the
Administrative  Agent for the account of each of the Lenders and, except for any
Notes, in sufficient counterparts or copies for each of the Lenders and shall be
satisfactory in form and substance to the Lenders.

                                   ARTICLE IV.
                         REPRESENTATIONS AND WARRANTIES

           Each Borrower makes for itself,  and the Company makes for itself and
the Subsidiary  Borrower,  the following  representations  and warranties to the
Administrative Agent and the Lenders:

           SECTION 4.01 Organization and Qualification.  The Company and each of
the Subsidiaries (a) is a corporation,  partnership or limited liability company
duly organized or formed,  validly  existing and in good standing under the laws
of the  state  of its  incorporation,  organization  or  formation,  (b) has all
requisite corporate,  partnership,  limited liability company or other power and
all material  governmental  licenses,  authorizations,  consents  and  approvals
required to carry on its business as now conducted and (c) is duly  qualified to
do business and is in good standing in every  jurisdiction  in which the failure
to be so qualified would,  individually or together with all such other failures
of the Company and the  Subsidiaries,  have a Material Adverse Effect. As of the
date of this  Agreement,  the Persons and other  entities shown on Schedule 4.01
are  all  of the  Subsidiaries  of the  Company,  and  such  Schedule  4.01  (x)
accurately  reflects  the  direct  owner  of the  Capital  Stock  of  each  such
Subsidiary  owned  by  such  direct  owner,   (y)  accurately   identifies  such
Subsidiaries and (z) accurately sets forth the jurisdictions of their respective
incorporation, organization or formation, as the case may be.

           SECTION 4.02  Authorization,  Validity,  Etc.  Each  Borrower has all
requisite  partnership and other power and authority to execute and deliver, and
to incur and perform its  obligations  under this  Agreement and under the other
Loan Documents to which it is a party and to make the Borrowings hereunder,  and
all such actions have been duly  authorized by all necessary  proceedings on its
behalf.  This  Agreement and the other Loan Documents have been duly and validly
executed  and  delivered  by or on behalf of each  Borrower  party  thereto  and
constitute  valid and legally  binding  agreements of such Borrower  enforceable
against such Borrower in accordance  with the respective  terms thereof,  except
(a) as may be limited by  bankruptcy,  insolvency,  reorganization,  moratorium,
fraudulent transfer,  fraudulent conveyance or other similar laws relating to or
affecting  the  enforcement  of  creditors'  rights  generally,  and by  general
principles  of  equity  (including  principles  of good  faith,  reasonableness,
materiality

                                      -49-
<PAGE>

and fair  dealing)  which may,  among  other  things,  limit the right to obtain
equitable  remedies  (regardless of whether considered in a proceeding in equity
or at law) and (b) as to the  enforceability  of provisions for  indemnification
for violation of applicable  securities laws,  limitations  thereon arising as a
matter of law or public policy.

           SECTION 4.03 Governmental Consents,  Etc. No authorization,  consent,
approval,  license or exemption of or  registration,  declaration or filing with
any  Governmental  Authority,  is necessary for the valid execution and delivery
of, or the incurrence and performance by the Company of its  obligations  under,
any Loan  Document to which it is a party,  except those that have been obtained
and such matters  relating to  performance  as would  ordinarily  be done in the
ordinary course of business after the Execution Date.

           SECTION 4.04 No Breach or Violation of  Agreements  or  Restrictions,
Etc.  Neither the execution and delivery of, nor the incurrence and  performance
by the Company of its  obligations  under,  the Loan  Documents to which it is a
party, nor the extensions of credit contemplated by the Loan Documents, will (a)
breach or violate any applicable Requirement of Law, (b) result in any breach or
violation  of any of the  terms,  covenants,  conditions  or  provisions  of, or
constitute a default  under,  or result in the creation or imposition of (or the
obligation  to create or  impose)  any Lien upon any of its  property  or assets
(other than Liens created or  contemplated  by this  Agreement)  pursuant to the
terms of, any indenture,  mortgage, deed of trust, agreement or other instrument
to  which  it or  any  of the  Subsidiaries  is  party  or by  which  any of its
properties or assets,  or those of any of the  Subsidiaries is bound or to which
it is subject,  except for breaches,  violations  and defaults under clauses (a)
and (b) that neither  individually  nor in the  aggregate  could  reasonably  be
expected to result in a Material Adverse Effect, or (c) violate any provision of
the organic documents of the Company.

           SECTION 4.05 Properties. Each of the Company and the Subsidiaries has
good  title to,  or valid  leasehold  or other  interests  in,  all its real and
personal  property  material to its business,  except for Liens  permitted under
Section 6.01.

           SECTION 4.06  Litigation  and  Environmental  Matters.  (a) Except as
disclosed in the most recent Annual Report on Form 10-K delivered by the Company
to the  Lenders,  there  is no  action,  suit or  proceeding  by or  before  any
arbitrator or Governmental Authority pending against or, to the knowledge of the
Company,  threatened against or affecting the Company or any of the Subsidiaries
(i) as to which there is a reasonable  possibility  of an adverse  determination
and that, if adversely  determined,  could reasonably be expected to result in a
Material   Adverse   Effect  or  (ii)  that  involves  this   Agreement  or  the
Transactions.

           (b) In the ordinary course of its business,  the Company  conducts an
ongoing review of the effect of Environmental  Laws on the business,  operations
and  properties of the Company and the  Subsidiaries,  in the course of which it
identifies and evaluates associated liabilities and costs (including any capital
or  operating  expenditures  required  for  clean-up  or closure  of  properties
currently or previously owned, any capital or operating expenditures required to
achieve or maintain compliance with environmental  protection  standards imposed
by law or as a  condition  of any  license,  permit  or  contract,  any  related
constraints  on  operating  activities,  including  any  periodic  or  permanent
shutdown of any facility or reduction in the level of or change in the nature of
operations conducted thereat, any costs or liabilities in connection

                                      -50-
<PAGE>

with  off-site  disposal  of wastes or  Hazardous  Materials,  and any actual or
potential  liabilities to third parties,  including  employees,  and any related
costs and  expenses).  On the basis of this review,  the Company has  reasonably
concluded that such  associated  liabilities  and costs,  including the costs of
compliance with Environmental Laws, are unlikely to result in a Material Adverse
Effect.

           SECTION 4.07 Financial Statements. (a) The consolidated balance sheet
of the Company  and the  Subsidiaries  as at  December  31, 2003 and the related
consolidated statements of income,  comprehensive income,  partners' capital and
cash flows of the Company and the Subsidiaries for the fiscal year ended on said
date,  with the opinion thereon of  PricewaterhouseCoopers  LLP and set forth in
the Company's  2003 Annual  Report on Form 10-K,  as filed with the SEC,  fairly
present,  in conformity with GAAP, the  consolidated  financial  position of the
Company and the Subsidiaries as of such date and their  consolidated  results of
operations and cash flows for such fiscal year.

           (b) The unaudited  consolidated balance sheets of the Company and the
Subsidiaries  as at June 30, 2004 and the  related  consolidated  statements  of
income and cash flows of the  Company  and the  Subsidiaries  for the  six-month
period  ended on such date and set forth in the  Company's  Quarterly  Report on
Form 10-Q for its fiscal  quarter  then  ended,  as filed  with the SEC,  fairly
present,  in  conformity  with  GAAP  applied  on a basis  consistent  with  the
financial statements referred to in Section 4.07(a), the consolidated  financial
position  of the  Company  and  the  Subsidiaries  as at  said  date  and  their
consolidated  results of their  operations  cash flows for the six-month  period
ended on said date (subject to the absence of footnotes  and to normal  year-end
and audit adjustments).

           (c) Since  December  31,  2003,  there has been no  material  adverse
change in the  business,  assets,  liabilities  or  financial  condition  of the
Company and the Subsidiaries, taken as a whole.

           SECTION 4.08 Disclosure.  All information heretofore furnished by the
Company  to  the  Administrative  Agent  or any  Lender  for  purposes  of or in
connection  with this Agreement or any transaction  contemplated  hereby is, and
all such information  hereafter  furnished by the Company to the  Administrative
Agent or any Lender will be, true and accurate in all  material  respects on the
date as of which such  information is stated or certified.  None of the reports,
financial  statements,  certificates  or other  information  furnished  by or on
behalf of the Company to the  Administrative  Agent or any Lender in  connection
with the syndication or negotiation of this Agreement or delivered hereunder (as
modified  or  supplemented  by other  information  so  furnished)  contains  any
material  misstatement  of fact or omits to state any material fact necessary to
make the statements  therein, in the light of the circumstances under which they
were made, not misleading.

           SECTION 4.09 Investment  Company Act.  Neither the Company nor any of
the Subsidiaries  is, or is regulated as, an "investment  company," as such term
is defined in the Investment Company Act of 1940, as amended.

           SECTION 4.10 Public Utility Holding Company Act.  Neither the Company
nor any of the Subsidiaries is a non-exempt "holding company", or subject to

                                      -51-
<PAGE>

regulation as such, or an  "affiliate"  of a "holding  company" or a "subsidiary
company"  of a  "holding  company",  within the  meaning  of the Public  Utility
Holding Company Act of 1935, as amended.

           SECTION 4.11 ERISA.  Each member of the ERISA Group has fulfilled its
obligations  under  the  minimum  funding  standards  of ERISA and the Code with
respect to each Plan and is in  compliance  in all  material  respects  with the
presently applicable provisions of ERISA and the Code with respect to each Plan.
No member of the ERISA  Group  has (i)  sought a waiver of the  minimum  funding
standard  under  Section 412 of the Code in respect of any Plan,  (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in respect
of any  Benefit  Arrangement,  or made  any  amendment  to any  Plan or  Benefit
Arrangement,  which has resulted or could result in the  imposition of a Lien or
the  posting  of a bond or  other  security  under  ERISA  or the  Code or (iii)
incurred  any  liability  under Title IV of ERISA other than a liability  to the
PBGC for  premiums  under  Section  4007 of  ERISA,  which  waiver,  failure  or
liability could reasonably be expected to result in a Material Adverse Effect.

           SECTION  4.12  Tax  Returns  and   Payments.   The  Company  and  the
Subsidiaries  have caused to be filed all  federal  income tax returns and other
material  tax  returns,  statements  and reports (or  obtained  extensions  with
respect  thereto)  which are  required to be filed and have paid or deposited or
made  adequate  provision in  accordance  with GAAP for the payment of all taxes
(including estimated taxes shown on such returns,  statements and reports) which
are shown to be due pursuant to such returns,  except for taxes being  contested
in good  faith  by  appropriate  proceedings  for  which  adequate  reserves  in
accordance  with GAAP  have been  created  on the books of the  Company  and the
Subsidiaries  and where the  failure to pay such taxes  (individually  or in the
aggregate  for the  Company  and the  Subsidiaries)  would  not have a  Material
Adverse Effect.

           SECTION 4.13 Compliance with Laws and Agreements. Each of the Company
and the  Subsidiaries is in compliance with all laws,  regulations and orders of
any Governmental  Authority applicable to it or its property and all indentures,
agreements and other instruments  binding upon it or its property,  except where
the failure to do so,  individually  or in the aggregate for the Company and the
Subsidiaries,  could not reasonably be expected to result in a Material  Adverse
Effect.

           SECTION 4.14 Purpose of Loans.  (a) All proceeds of the Loans will be
used for the purposes set forth in Section 5.07.

           (b) None of the  proceeds  of the  loans  under the  Existing  Credit
Agreements were, and none of the proceeds of the Loans under this Agreement will
be, used  directly  or  indirectly  for the  purpose of buying or  carrying  any
"margin stock" within the meaning of Regulation U (herein called "margin stock")
or for the purpose of reducing or retiring any indebtedness which was originally
incurred to buy or carry any margin stock,  or for any other purpose which might
constitute this  transaction a "purpose" credit within the meaning of Regulation
T, U or X.  Neither the Company nor any agent  acting on its behalf has taken or
will take any action which might cause this Agreement or any other Loan Document
to violate  Regulation T, Regulation U, Regulation X, or any other regulation of
the Board or to violate the Exchange Act.  Margin stock does not constitute more
than 25% of the assets of the Company or

                                      -52-
<PAGE>

the  Subsidiary  Borrower,   or  of  the  Company  and  the  Subsidiaries  on  a
consolidated basis, and the Company does not intend or foresee that it will ever
do so.

           SECTION 4.15 Foreign Assets Control Regulations, etc.

           (a) Neither any Letter of Credit nor any part of the  proceeds of the
Loans will  violate  the Trading  with the Enemy Act, as amended,  or any of the
foreign assets control  regulations of the United States Treasury Department (31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.

           (b) Neither the Company nor any Subsidiary (i) is, or will become,  a
Person described or designated in the Specially Designated Nationals and Blocked
Persons  List of the  Office of  Foreign  Assets  Control or in Section 1 of the
Anti-Terrorism  Order  or  (ii)  engages  or  will  engage  in any  dealings  or
transactions,  or is or will be otherwise associated,  with any such Person. The
Company and the Subsidiaries are in compliance,  in all material respects,  with
the USA Patriot Act.

           (c) Neither any Letter of Credit nor any part of the  proceeds of the
Loans will be used, directly or indirectly, for any payments to any governmental
official or employee,  political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended, assuming
in all cases that such Act applies to the Company or one of the Subsidiaries.

                                   ARTICLE V.
                              AFFIRMATIVE COVENANTS

           Until  the  Commitments  have  expired  or  been  terminated  and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC  Disbursements  shall have been  reimbursed,  the Company  covenants  and
agrees with the Lenders that:

           SECTION 5.01 Financial Statements and Other Information.  The Company
will furnish to the  Administrative  Agent, in each case with sufficient  copies
for each Lender:

           (a) within three days after the date in each fiscal year on which the
Company is required to file its Annual Report on Form 10-K with the SEC (i) such
Annual Report, and (ii) its audited  consolidated  balance sheet and the related
consolidated statements of income,  comprehensive income, operations,  partners'
capital and cash flows as of the end of and for such year, setting forth in each
case in  comparative  form  the  figures  as of the end of and for the  previous
fiscal year, all reported on by, and accompanied by an opinion (without a "going
concern" or like  qualification  or exception and without any  qualification  or
exception  as to the scope of their  audit) of,  PricewaterhouseCoopers  LLP, or
other  independent  public  accountants of recognized  national  standing to the
effect  that  such  consolidated  financial  statements  present  fairly  in all
material respects the financial  position,  results of operations and cash flows
of the Company and the  Subsidiaries on a consolidated  basis in accordance with
GAAP; provided,  however, that (x) the Company shall be deemed to have furnished
said Annual Report on

                                      -53-
<PAGE>

Form 10-K for  purposes  of clause  (i) if it shall  have  timely  made the same
available on "EDGAR"  and/or on its home page on the  worldwide web (at the date
of this Agreement located at http://www.kindermorgan.com)  and complied with the
last grammatical  paragraph of this Section 5.01 in respect thereof,  and (y) if
said  Annual  Report   contains  such   consolidated   balance  sheet  and  such
consolidated  statements of results of income,  comprehensive income,  partners'
capital  and cash  flows,  and the  report  thereon of such  independent  public
accountants (without qualification or exception, and to the effect, as specified
above), the Company shall not be required to comply with clause (ii);

           (b) within  three days after each date in each  fiscal  year on which
the Company is required to file a Quarterly Report on Form 10-Q with the SEC (i)
such Quarterly Report,  and (ii) its consolidated  balance sheet and the related
consolidated  statements  of income  and cash flows as of the end of and for the
fiscal  quarter to which said  Quarterly  Report  relates  and the then  elapsed
portion of the fiscal year,  setting forth in each case in comparative  form the
figures  as of the end  and  for the  corresponding  period  or  periods  of the
previous  fiscal year,  all  certified by a  Responsible  Officer as  presenting
fairly  in  all  material  respects  the  financial  condition  and  results  of
operations  of the  Company  and the  Subsidiaries  on a  consolidated  basis in
accordance  with GAAP,  subject to normal  year-end  audit  adjustments  and the
absence of footnotes; provided, however, that (x) the Company shall be deemed to
have furnished said Quarterly Report for purposes of clause (i) if it shall have
timely  made  the same  available  on  "EDGAR"  and/or  on its home  page on the
worldwide    web   (at    the    date   of    this    Agreement    located    at
http://www.kindermorgan.com) and complied with the last grammatical paragraph of
this Section 5.01 in respect thereof,  and (y) if said Quarterly Report contains
such consolidated  balance sheet and consolidated  statements of income and cash
flows, and such certifications, the Company shall not be required to comply with
clause (ii);

           (c)  simultaneously  with  the  delivery  of  each  set of  financial
statements  referred  to  in  clauses  (a)  and  (b)  above,  a  certificate  in
substantially  the form of Exhibit  5.01 signed by an  authorized  financial  or
accounting  officer of the Company (i) setting  forth in  reasonable  detail the
calculations  required to establish  whether the Company was in compliance  with
the requirements of Section  6.06(a),  (b) and (c) on the date of such financial
statements,  and (ii) stating  whether any Default or Event of Default exists on
the date of such  certificate  and,  if any  Default  or Event of  Default  then
exists,  setting  forth the details  thereof and the action which the Company is
taking or proposes to take with respect thereto;

           (d)  simultaneously  with  the  delivery  of  each  set of  financial
statements  referred  to in  clause  (a)  above,  a  statement  of the  firm  of
independent  public  accountants  which  reported on such  statements  (i) as to
whether  anything has come to their  attention to cause them to believe that any
Default or Event of  Default  existed  on the date of such  statements  and (ii)
confirming the  calculations  set forth in the officer's  certificate  delivered
simultaneously  therewith pursuant to clause (c) above; provided,  however, that
such  accountants  shall not be liable to anyone by reason of their  failure  to
obtain knowledge of any Default or Event of Default which would not be disclosed
in the  course of an audit  conducted  in  accordance  with  generally  accepted
auditing standards;

           (e) prompt written notice of the following:

                                      -54-
<PAGE>

           (i) the  occurrence  of any  Default or Event of Default or Change in
     Control Event and

           (ii) any other  development  that results in, or could  reasonably be
     expected to result in, a Material Adverse Effect;

(each  notice  delivered  under  this  Section  5.01(e) to be  accompanied  by a
statement of a  Responsible  Officer  setting  forth the details of the event or
development  requiring  such notice and any action taken or proposed to be taken
with respect thereto);

           (f)  promptly  upon receipt  thereof,  a copy of each other report or
letter  submitted to the Company by independent  accountants in connection  with
any annual,  interim or special  audit made by them of the books of the Company,
and a copy of any  response by the  Company,  or the Board of  Directors  of the
general partner of the Company, to such letter or report;

           (g) without  duplication  of any other  requirement  of this  Section
5.01, promptly upon the mailing thereof to the public unitholders of the Company
generally,  copies of all financial statements,  reports and proxy statements so
mailed;

           (h)  promptly  upon the filing  thereof  with the SEC,  copies of all
registration  statements  (other than the exhibits  thereto and any registration
statements  on Form S-8 or its  equivalent)  and  reports  on Form 8-K which the
Company shall have filed with the SEC;

           (i) if and  when  any  member  of the  ERISA  Group  (i)  gives or is
required  to give  notice to the PBGC of any  "reportable  event" (as defined in
Section  4043 of ERISA)  (other  than such event as to which the  30-day  notice
requirement is waived) with respect to any Plan which might  constitute  grounds
for a termination  of such Plan under Title IV of ERISA,  or knows that the plan
administrator  of any Plan has given or is  required  to give notice of any such
reportable  event,  a copy of the  notice  of such  reportable  event  given  or
required to be given to the PBGC;  (ii)  receives  notice of complete or partial
withdrawal  liability  under Title IV of ERISA or notice that any  Multiemployer
Plan is in reorganization,  is insolvent or has been terminated,  a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate,  impose  liability  (other than for premiums under Section 4007 of
ERISA) in respect  of, or appoint a trustee to  administer  any Plan,  a copy of
such notice;  (iv) applies for a waiver of the minimum  funding  standard  under
Section 412 of the Code, a copy of such application;  (v) gives notice of intent
to terminate any Plan under Section  4041(c) of ERISA, a copy of such notice and
other  information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any Plan or Multiemployer Plan or in respect
of any  Benefit  Arrangement  or makes  any  amendment  to any  Plan or  Benefit
Arrangement  which has resulted or could result in the  imposition  of a Lien or
the posting of a bond or other  security,  a certificate of the chief  financial
officer or the chief accounting  officer of the Company setting forth details as
to such occurrence and action, if any, which the Company or applicable member of
the ERISA Group is required or proposes to take; and

                                      -55-
<PAGE>

           (j) from time to time such other information  regarding the business,
affairs or financial  condition of the Company or any Subsidiary as the Required
Lenders or the Administrative Agent may reasonably request.

           Information  required to be  delivered  pursuant to Section  5.01(a),
5.01(b),  5.01(g) or 5.01(h) above shall be deemed to have been delivered on the
date on which the Company  provides notice to the  Administrative  Agent and the
Lenders  that such  information  has been  posted on  "EDGAR"  or the  Company's
website or another  website  identified  in such  notice and  accessible  by the
Administrative  Agent and the Lenders  without  charge  (and the Company  hereby
agrees to provide such  notice);  provided that such notice may be included in a
certificate delivered pursuant to Section 5.01(c).

           SECTION 5.02  Existence,  Conduct of Business.  The Company will, and
will  cause  each of the  Material  Subsidiaries  to, do or cause to be done all
things necessary to preserve,  renew and keep in full force and effect its legal
existence and the rights, licenses,  permits, privileges and franchises material
to the conduct of its business;  provided that the foregoing  shall not prohibit
any merger,  consolidation,  liquidation or dissolution  permitted under Section
6.02.

           SECTION 5.03 Payment of Obligations. The Company will, and will cause
each of the Subsidiaries to, pay, before the same shall become  delinquent or in
default,  its obligations,  including tax liabilities,  that, if not paid, could
result in a Material  Adverse  Effect,  except  where (a) the validity or amount
thereof is being  contested in good faith by  appropriate  proceedings,  (b) the
Company or such  Subsidiary  has set aside on its books  adequate  reserves with
respect  thereto in  accordance  with GAAP,  and (c) the failure to make payment
pending such contest  could not  reasonably  be expected to result in a Material
Adverse Effect.

           SECTION 5.04  Maintenance of Properties;  Insurance.  (a) The Company
will keep, and will cause each Material  Subsidiary to keep, all property useful
and necessary in its business in good working order and condition, ordinary wear
and tear excepted.

           (b) The Company will maintain or cause to be maintained  with, in the
good faith judgment of the Company, financially sound and reputable insurers, or
through  self-insurance,  insurance  with respect to its properties and business
and the properties and businesses of the Subsidiaries  against loss or damage of
the kinds  customarily  insured  against by business  enterprises of established
reputation  engaged in the same or similar business and similarly  situated,  of
such  types  and in  such  amounts  as are  customarily  carried  under  similar
circumstances   by  such  other   corporations.   Such   insurance  may  include
self-insurance  or be subject to co-insurance,  deductibility or similar clauses
which, in effect, result in self-insurance of certain losses, provided that such
self-insurance is in accord with the approved practices of business  enterprises
of established reputation similarly situated and adequate insurance reserves are
maintained in connection  with such  self-insurance,  and,  notwithstanding  the
foregoing  provisions  of this  Section 5.04 the Company or any  Subsidiary  may
effect workers'  compensation  or similar  insurance in respect of operations in
any state or other  jurisdiction  either  through an insurance  fund operated by
such state or other  jurisdiction  or by causing  to be  maintained  a system or
systems of self-insurance in accord with applicable laws.

                                      -56-
<PAGE>

           SECTION 5.05 Books and Records;  Inspection Rights. The Company will,
and will cause each of the  Subsidiaries  to,  keep  proper  books of record and
account in which full,  true and correct  entries are made of all  dealings  and
transactions in relation to its business and  activities.  The Company will, and
will cause each of the Subsidiaries to, permit any representatives designated by
the  Administrative  Agent or any Lender,  upon  reasonable  prior notice during
normal business hours, to visit and inspect its properties,  to examine and make
extracts from its books and records (subject to compliance with  confidentiality
agreements and applicable  copyright law), and to discuss its affairs,  finances
and condition with its officers and independent accountants,  all at such times,
and as often, as reasonably requested.

           SECTION 5.06  Compliance  with Laws. The Company will, and will cause
each of the  Subsidiaries  to, comply with all Requirements of Law applicable to
it or its property,  except where the failure to do so,  individually  or in the
aggregate,  could not  reasonably  be expected  to result in a Material  Adverse
Effect.

           SECTION 5.07 Use of Proceeds.  The proceeds of the Loans will be used
only for (a)  refinancing  (i) amounts  outstanding  under the  Existing  Credit
Agreements,  (ii) other  Indebtedness of the Company and the  Subsidiaries,  and
(iii) commercial  paper,  and (b) working capital and other general  partnership
purposes.

                                   ARTICLE VI.
                               NEGATIVE COVENANTS

           Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable  hereunder have been paid in full
and all Letters of Credit have expired or  terminated  and all LC  Disbursements
shall have been  reimbursed,  the Company  covenants and agrees with the Lenders
that:

           SECTION  6.01 Liens.  The Company  will not,  and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter  acquired by it, or assign or sell any income or
revenues  (including  accounts  receivable) or rights in respect of any thereof,
except:

           (a) Permitted Encumbrances;

           (b) Liens existing on any property or asset prior to the  acquisition
thereof by the Company or any Subsidiary or existing on any property or asset of
any Person that  becomes a  Subsidiary  after the date hereof  prior to the time
such Person becomes a Subsidiary and securing Indebtedness whose incurrence, for
purposes of this Agreement,  by virtue of acquisition of such property or asset,
or by virtue of such  Person so  becoming  a  Subsidiary,  would not result in a
violation of Section  6.06(a),  (b) or (c);  provided  that (i) such Lien is not
created in  contemplation  of or in  connection  with such  acquisition  or such
Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply
to any other  property  or assets of the Company or any  Subsidiary,  (iii) such
Lien shall  secure only those  obligations  which it secures on the date of such
acquisition  or the date such Person  becomes a Subsidiary,  as the case may be,
and  extensions,  renewals  and  replacements  thereof  that do not increase the
outstanding principal amount thereof.

                                      -57-
<PAGE>

For purposes of this  Section  6.01(c),  the  Indebtedness  so secured  shall be
deemed to have been  incurred  on the last day of the fiscal  quarter  then most
recently ended.

           (c) Liens, not otherwise  permitted by the foregoing  clauses (a) and
(b),  securing  Indebtedness  and  payment  obligations  in  respect  of Hedging
Agreements in an aggregate amount not exceeding 10% of Consolidated Net Tangible
Assets.

           SECTION 6.02 Fundamental  Changes. The Company will not, and will not
permit any Subsidiary to, merge into or  consolidate  with any other Person,  or
permit any other Person to merge into or consolidate with it, or sell, transfer,
lease  or  otherwise   dispose  of  (in  one  transaction  or  in  a  series  of
transactions) all (or substantially  all) of its assets, or all or substantially
all of the stock of or other equity interest in any of the Subsidiaries (in each
case,  whether now owned or  hereafter  acquired),  or  liquidate  or  dissolve,
unless:  (a) at the time thereof and immediately  after giving effect thereto no
Event of Default or Default shall have occurred and be  continuing;  and (b) the
Company is the  surviving  entity or the  recipient of any such sale,  transfer,
lease  or  other  disposition  of  assets,   provided,   that  no  such  merger,
consolidation,  sale, transfer, lease or other disposition shall have the effect
of releasing the Company from any of the Obligations.

           SECTION 6.03 Restricted Payments.  The Company will not, and will not
permit any of the  Subsidiaries  to,  declare or make,  or agree to pay or make,
directly or indirectly, any Restricted Payment.

           SECTION 6.04 Transactions with Affiliates.  The Company will not, and
will not permit any of the Subsidiaries  to, sell,  lease or otherwise  transfer
any property or assets to, or purchase,  lease or otherwise acquire any property
or assets from, or otherwise engage in any other  transactions  with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Company or such  Subsidiary  than could
be  obtained  on  an  arm's-length  basis  from  unrelated  third  parties,  (b)
transactions between or among the Company and the Wholly-owned  Subsidiaries not
involving  any  other  Affiliate,  (c) any  payment  which  would  constitute  a
Restricted Payment but for the proviso to the definition of said term in Section
1.01 and (d) loans and advances by the Company to the General  Partner to enable
the  General  Partner  to pay  general  and  administrative  costs and  expenses
pursuant to the partnership agreement of the Company and in accordance with past
practices.

           SECTION 6.05 Restrictive  Agreements.  The Company will not, and will
not permit any of the Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits,  restricts
or imposes any condition  upon the ability of any Subsidiary to pay dividends or
other  distributions  with respect to any shares of its Capital Stock or to make
or repay loans or advances to the Company or any other such Subsidiary, provided
that the foregoing shall not apply to (a) restrictions and conditions imposed by
law or by this Agreement, (b) customary restrictions and conditions contained in
agreements relating to the sale of all or substantially all of the Capital Stock
or assets of a Subsidiary  pending such sale,  provided  such  restrictions  and
conditions  apply  only to the  Subsidiary  that is to be sold and such  sale is
permitted  hereunder and (c)  restrictions  and conditions  existing on the date
hereof  identified on Schedule 6.05 (but shall apply to any extension or renewal
of,  or  any  amendment  or  modification  expanding  the  scope  of,  any  such
restriction or condition)

                                      -58-
<PAGE>

           SECTION 6.06 Financial Covenants.  The Company will observe and cause
the Subsidiaries to observe each of the following requirements:

           (a) Ratio of Consolidated  Indebtedness to Consolidated  EBITDA.  The
Company will not at any time permit the ratio of  Consolidated  Indebtedness  to
Consolidated  EBITDA for the four full fiscal  quarters most  recently  ended in
respect of which  financial  statements  shall have been  delivered  pursuant to
Section  5.01(a) or (b), as the case may be, to exceed 5.00 to 1.0. For purposes
of this Section  6.06(a),  if during any period the Company  acquires any Person
(or any interest in any Person) or all or substantially all of the assets of any
Person,  the  EBITDA  attributable  to such  assets  or an  amount  equal to the
percentage  of  ownership of the Company in such Person times the EBITDA of such
Person, for such period determined on a pro forma basis (which determination, in
each case,  shall be subject to  approval  of the  Required  Lenders,  not to be
unreasonably  withheld) may be included as Consolidated  EBITDA for such period,
if on the date of such  acquisition  no  Indebtedness  (other than  Indebtedness
permitted  pursuant  to Section  6.06(b))  is  incurred  by reason of and giving
effect to such acquisition and such Person, or the entity acquiring such assets,
as the case may be, is a Subsidiary.  For purposes of  ascertaining  whether the
Required  Lenders have approved a  determination  of the EBITDA  attributable to
acquired  assets,  or  the  assets  of an  acquired  Person,  for  inclusion  in
Consolidated EBITDA for any period pursuant to the foregoing sentence,  a Lender
which  has not,  within  10 days  after  its  receipt  of the  certificate  of a
Responsible  Officer required by the last sentence of Section 5.01,  objected to
the inclusion in Consolidated EBITDA as set forth therein of an amount of EBITDA
attributable to such acquired assets or the assets of such acquired  Person,  as
the case may be, shall be deemed to have approved both the determination of such
amount of EBITDA so included,  and the inclusion thereof in Consolidated  EBITDA
pursuant to the foregoing sentence.

           (b) Total  Indebtedness  (excluding  Indebtedness  of a  consolidated
Subsidiary of the Company owed to the Company or to any Wholly-owned Subsidiary)
of all  consolidated  Subsidiaries  shall at no time exceed 15% of  Consolidated
Indebtedness.

           (c)  Consolidated  Indebtedness  shall at no time exceed 65% of Total
Capitalization.

                                  ARTICLE VII.
                                EVENTS OF DEFAULT

           SECTION 7.01 Events of Default and Remedies.  If any of the following
events ("Events of Default") shall occur and be continuing:

           (a) the  principal  of any Loan or any  reimbursement  obligation  in
respect  of any LC  Disbursement  shall not be paid  when and as the same  shall
become due and  payable,  whether at the due date thereof or at a date fixed for
prepayment thereof or otherwise;

           (b) any  interest on any Loan or any fee or any other  amount  (other
than an amount  referred to in clause (a) of this  Article)  payable  under this
Agreement  or any other Loan  Document  shall not be paid,  when and as the same
shall become due and payable,  and such failure shall continue  unremedied for a
period of three Business Days;

                                      -59-
<PAGE>

           (c) any  representation  or warranty made or, for purposes of Article
III, deemed made by or on behalf of either Borrower herein,  at the direction of
either  Borrower  or by either  Borrower  in any other Loan  Document  or in any
document,  certificate or financial  statement delivered in connection with this
Agreement or any other Loan Document  shall prove to have been  incorrect in any
material respect when made or deemed made or reaffirmed, as the case may be;

           (d) either  Borrower  shall fail to observe or perform any  covenant,
condition or agreement  contained in Section  5.01(e)(i),  5.02 (with respect to
such Borrower's existence) or 5.07 or in Article VI;

           (e) either  Borrower shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement (other than those specified in
Section 7.01(a),  Section 7.01(b) or Section 7.01(d)) or any other Loan Document
to which it is a party and, in any event,  such failure shall remain  unremedied
for 30 calendar  days after the earlier of (i)  written  notice of such  failure
shall have been given to the Company by the  Administrative  Agent or any Lender
or, (ii) a Responsible Officer of either Borrower becomes aware of such failure;

           (f) other  than as  specified  in  Section  7.01(a)  or (b),  (i) the
Company  or any  Subsidiary  fails to make  (whether  as  primary  obligor or as
guarantor or other  surety) any payment of principal of, or interest or premium,
if any, on any item or items of Indebtedness (other than as specified in Section
7.01(a), Section 7.01(b) or Article IX) or any payment in respect of any Hedging
Agreement  beyond any period of grace  provided  with  respect  thereto  (not to
exceed 30 days); provided that the aggregate outstanding principal amount of all
Indebtedness or payment  obligations in respect of all Hedging  Agreements as to
which  such a  payment  default  shall  occur and be  continuing  is equal to or
exceeds  $75,000,000,  or (ii)  the  Company  or any  Subsidiary  fails  to duly
observe,  perform or comply  with any  agreement  with any Person or any term or
condition of any  instrument,  if such failure,  either  individually  or in the
aggregate,   shall  have  resulted  in  the   acceleration  of  the  payment  of
Indebtedness  with an  aggregate  face  amount  which  is  equal  to or  exceeds
$75,000,000;  provided  that this  Section  7.01(f)  shall not apply to  secured
Indebtedness  that becomes due as a result of the voluntary  sale or transfer of
the property or assets securing such Indebtedness,  so long as such Indebtedness
is paid in full when due;

           (g) an involuntary case shall be commenced or an involuntary petition
shall be filed  seeking  (i)  liquidation,  reorganization  or other  relief  in
respect  of the  Company  or any  Material  Subsidiary  or  its  debts,  or of a
substantial part of its assets, under any Federal,  state or foreign bankruptcy,
insolvency,  receivership  or similar law now or hereafter in effect or (ii) the
appointment  of a receiver,  trustee,  custodian,  sequestrator,  conservator or
similar official for the Company or any Material Subsidiary or for a substantial
part of its assets,  and, in any such case,  such  proceeding or petition  shall
continue undismissed for 60 days or an order or decree approving or ordering any
of the foregoing shall be entered;

           (h) the Company,  or any Material  Subsidiary  shall (i)  voluntarily
commence any proceeding or file any petition  seeking  liquidation,  winding-up,
reorganization or other relief under any Federal,  state or foreign  bankruptcy,
insolvency, receivership or similar law now or hereafter in effect, (ii) consent
to the institution  of, or fail to contest in a timely and  appropriate  manner,
any  proceeding  or petition  described in Section  7.01(g),  (iii) apply for or
consent to the

                                      -60-
<PAGE>

appointment  of a receiver,  trustee,  custodian,  sequestrator,  conservator or
similar official for the Company or any Material Subsidiary or for a substantial
part of its assets, (iv) file an answer admitting the material  allegations of a
petition filed against it in any such proceeding,  (v) make a general assignment
for the  benefit  of  creditors  or (vi)  take any  action  for the  purpose  of
effecting any of the foregoing;

           (i) the Company or any Material Subsidiary shall become unable, admit
in writing or fail generally to pay its debts as they become due;

           (j) (i) the General Partner fails to make (whether as primary obligor
or as  guarantor or other  surety) any payment of  principal  of, or interest or
premium, if any, on any item or items of Indebtedness beyond any period of grace
provided  with  respect  thereto  (not to  exceed 30  days);  provided  that the
aggregate outstanding principal amount of all such Indebtedness as to which such
a  payment  default  shall  occur  and be  continuing  is  equal  to or  exceeds
$75,000,000,  or (ii) the  General  Partner  fails to duly  observe,  perform or
comply  with any  agreement  with any  Person  or any term or  condition  of any
instrument,  if such  failure,  individually  or in the  aggregate,  shall  have
resulted in the  acceleration of the payment of  Indebtedness  with an aggregate
face amount which is equal to or exceeds $75,000,000; provided that this Section
7.01(j) shall not apply to secured  Indebtedness that becomes due as a result of
the  voluntary  sale  or  transfer  of the  property  or  assets  securing  such
Indebtedness so long as such Indebtedness is paid in full when due;

           (k) one or more  judgments  for the payment of money in an  aggregate
amount in excess of  $75,000,000  shall be  rendered  against the  Company,  any
Subsidiary or any combination thereof and the same shall remain undischarged for
a period of 30 consecutive  days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to attach or
levy upon any  assets of the  Company  or any  Subsidiary  to  enforce  any such
judgment;

           (l) any  member  of the  ERISA  Group  shall  fail to pay when due an
amount  which it shall have  become  liable to pay under  Title IV of ERISA;  or
notice of intent to  terminate  a Plan shall be filed under Title IV of ERISA by
any member of the ERISA Group, any plan  administrator or any combination of the
foregoing;  or the PBGC shall institute  proceedings  under Title IV of ERISA to
terminate,  to impose  liability  (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be  appointed to  administer  any
Plan;  or a condition  shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Plan must be terminated; or there shall
occur a complete or partial withdrawal from, or a default, within the meaning of
Section  4219(c)(5) of ERISA, with respect to, one or more  Multiemployer  Plans
which  could  cause one or more  members  of the ERISA  Group to incur a current
payment obligation;  and in each of the foregoing instances such condition could
reasonably be expected to result in a Material Adverse Effect;

           (m) either  Borrower or any Affiliate of Borrower  shall  petition or
apply for or obtain any order restricting  payment by the Issuing Bank under any
Letter of Credit or extending the Issuing Bank's  liability under such Letter of
Credit beyond the expiration  date stated therein or otherwise  agreed to by the
Issuing Bank;

                                      -61-
<PAGE>

then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing,  the  Administrative  Agent, may, and upon the written
request of the Required Lenders shall, by written notice  (including notice sent
by  telecopy)  to the  Company (a "Notice  of  Default")  take any or all of the
following actions,  without prejudice to the rights of the Administrative Agent,
any  Lender or other  holder of any of the  Obligations  to  enforce  its claims
against  either  Borrower  (provided  that, if an Event of Default  specified in
Section  7.01(g) or Section  7.01(h)  shall occur with respect to the Company or
any  Subsidiary,  the result of which would occur upon the giving of a Notice of
Default  as  specified  in  clauses  (i),  (ii)  and  (v)  below,   shall  occur
automatically  without  the giving of any Notice of  Default):  (i)  declare the
Total  Commitment  terminated,  whereupon the  Commitments  of the Lenders shall
forthwith  terminate  immediately and any accrued  facility fees shall forthwith
become due and payable  without any other  notice of any kind;  (ii) declare the
principal of and any accrued interest in respect of all Loans, and all the other
Obligations owing hereunder and under the other Loan Documents, to be, whereupon
the same shall become,  forthwith due and payable without  presentment,  demand,
notice of demand or of  dishonor  and  nonpayment,  protest,  notice of protest,
notice of intent to  accelerate,  declaration or notice of  acceleration  or any
other notice of any kind, all of which are hereby waived by each Borrower; (iii)
exercise any rights or remedies  under the Loan  Documents;  (iv)  terminate any
Letter of Credit which may be terminated in accordance  with its terms  (whether
by the giving of written notice to the beneficiary or otherwise); and (v) direct
the Company to comply,  and the Company  agrees that upon receipt of such notice
(or upon the occurrence of an Event of Default  specified in Section  7.01(g) or
Section 7.01(h)) it will comply, with the provisions of Section 2.06(k).

                                  ARTICLE VIII.
                            THE ADMINISTRATIVE AGENT

           SECTION 8.01 Appointment,  Powers and Immunities.  Each Lender hereby
irrevocably appoints and authorizes the Administrative Agent to act as its agent
hereunder  and  under  the  other  Loan   Documents  with  such  powers  as  are
specifically  delegated  to the  Administrative  Agent  by  the  terms  of  this
Agreement and such other Loan Documents,  together with such other powers as are
reasonably  incidental thereto.  The Administrative Agent (which term as used in
this  sentence and in Section 8.05 and the first  sentence of Section 8.06 shall
include  reference to its Affiliates and its  Affiliates'  officers,  directors,
employees, attorneys, accountants, experts and agents): (a) shall have no duties
or responsibilities except those expressly set forth in the Loan Documents,  and
shall not by reason of the Loan  Documents  be a trustee  or  fiduciary  for any
Lender;  (b) makes no  representation or warranty to any Lender and shall not be
responsible  to the Lenders for any  recitals,  statements,  representations  or
warranties contained in this Agreement,  or in any certificate or other document
referred  to or  provided  for  in,  or  received  by any of  them  under,  this
Agreement, or for the value, validity,  effectiveness,  genuineness,  execution,
legality,  enforceability  or  sufficiency  of this  Agreement,  any other  Loan
Document or any other document  referred to or provided for herein or therein or
for any  failure  by  either  Borrower  or any  other  Person  (other  than  the
Administrative  Agent) to perform any of its obligations hereunder or thereunder
or for the  existence  or value of, or the  perfection  or  priority of any Lien
upon,  any  collateral  security  or the  financial  or other  condition  of the
Company, the Subsidiaries or any other obligor or guarantor; (c) except pursuant
to Section 8.07 shall not be required to initiate or conduct any  litigation  or
collection  proceedings  hereunder;  and (d)  shall not be  responsible  for any
action taken or omitted to be taken by it

                                      -62-
<PAGE>

hereunder or under any other document or instrument  referred to or provided for
herein or in connection herewith including its own ordinary  negligence,  except
for its own gross  negligence,  willful  misconduct  or  unlawful  conduct.  The
Administrative Agent may employ agents,  accountants,  attorneys and experts and
shall not be  responsible  for the  negligence or misconduct of any such agents,
accountants,  attorneys  or experts  selected  by it in good faith or any action
taken or omitted to be taken in good faith by it in  accordance  with the advice
of such agents, accountants,  attorneys or experts. The Administrative Agent may
deem  and  treat  the  payee  named in any Note as the  holder  thereof  for all
purposes  hereof unless and until a written notice of the assignment or transfer
thereof permitted hereunder shall have been filed with the Administrative Agent.
The  Administrative  Agent is authorized to release any cash  collateral that is
permitted to be released pursuant to the terms of this Agreement.

           SECTION 8.02 Reliance by  Administrative  Agent.  The  Administrative
Agent  shall  be  entitled  to rely  upon  any  certification,  notice  or other
communication (including any thereof by telephone,  telex, telecopier,  telegram
or cable)  believed  by it to be genuine  and correct and to have been signed or
sent by or on behalf  of the  proper  Person or  Persons,  and upon  advice  and
statements of legal counsel,  independent accountants and other experts selected
by the Administrative Agent in good faith.

           SECTION 8.03 Defaults;  Events of Default.  The Administrative  Agent
shall not be deemed to have knowledge of the occurrence of a Default or an Event
of Default  (other than the  non-payment of principal of or interest on Loans or
of fees or failure to  reimburse  LC  Disbursements)  unless the  Administrative
Agent has received notice from a Lender or a Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of  Default".  In the
event that the Administrative  Agent receives such a notice of the occurrence of
a Default or Event of Default, the Administrative Agent shall give prompt notice
thereof to the Lenders.  In the event of a payment  Default or Event of Default,
the  Administrative  Agent  shall give each  Lender  prompt  notice of each such
payment Default or Event of Default.

           SECTION 8.04 Rights as a Lender.  With respect to its Commitments and
the Loans made by it and its issuance,  or its participation in the issuance, of
each Letter of Credit,  Wachovia  (and any  successor  acting as  Administrative
Agent) in its  capacity  as a Lender  hereunder  shall have the same  rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as the  Administrative  Agent,  and the term  "Lender"  or  "Lenders"
shall, unless the context otherwise indicates,  include the Administrative Agent
in its individual capacity. Wachovia (and any successor acting as Administrative
Agent) and its Affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to and generally engage in any kind of banking,
trust or other business with either  Borrower (and any of its  Affiliates) as if
it were not acting as the Administrative  Agent. Wachovia and its Affiliates may
accept fees and other  consideration from the Company or the Subsidiary Borrower
for services in connection  with this  Agreement or otherwise  without having to
account for the same to the Lenders.

           SECTION 8.05  INDEMNIFICATION.  THE LENDERS  AGREE TO  INDEMNIFY  THE
ADMINISTRATIVE AGENT, THE CO-SYNDICATION AGENTS AND THE CO-DOCUMENTATION  AGENTS
RATABLY  IN  ACCORDANCE  WITH THEIR  APPLICABLE  PERCENTAGES  FOR THE  INDEMNITY
MATTERS AS

                                      -63-
<PAGE>

DESCRIBED IN SECTION  10.03 TO THE EXTENT NOT  INDEMNIFIED  OR REIMBURSED BY THE
COMPANY UNDER SECTION 10.03, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE COMPANY
UNDER SAID  SECTION  10.03 AND FOR ANY AND ALL OTHER  LIABILITIES,  OBLIGATIONS,
LOSSES,  DAMAGES,  PENALTIES,  ACTIONS,  JUDGMENTS,  SUITS,  COSTS,  EXPENSES OR
DISBURSEMENTS  OF ANY  KIND AND  NATURE  WHATSOEVER  WHICH  MAY BE  IMPOSED  ON,
INCURRED BY OR ASSERTED AGAINST THE ADMINISTRATIVE  AGENT, EITHER CO-SYNDICATION
AGENT OR THE  CO-DOCUMENTATION  AGENT IN ANY WAY  RELATING TO OR ARISING OUT OF:
(A) THIS  AGREEMENT OR ANY OTHER LOAN  DOCUMENT  CONTEMPLATED  BY OR REFERRED TO
HEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY, BUT EXCLUDING,  UNLESS A DEFAULT
OR AN EVENT OF DEFAULT HAS OCCURRED  AND IS  CONTINUING,  NORMAL  ADMINISTRATIVE
COSTS AND EXPENSES  INCIDENT TO THE  PERFORMANCE OF ITS AGENCY  DUTIES,  IF ANY,
HEREUNDER OR (B) THE ENFORCEMENT OF ANY OF THE TERMS OF THIS AGREEMENT OR OF ANY
OTHER LOAN  DOCUMENT;  WHETHER  OR NOT ANY OF THE  FOREGOING  SPECIFIED  IN THIS
SECTION 8.05 ARISES FROM THE SOLE OR CONCURRENT NEGLIGENCE OF THE ADMINISTRATIVE
AGENT, EITHER  CO-SYNDICATION AGENT OR THE  CO-DOCUMENTATION  AGENT, AS THE CASE
MAY BE;  PROVIDED THAT NO LENDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE
EXTENT  THEY ARISE FROM THE GROSS  NEGLIGENCE,  WILLFUL  MISCONDUCT  OR UNLAWFUL
CONDUCT  OF THE  ADMINISTRATIVE  AGENT,  EITHER  CO-SYNDICATION  AGENT OR EITHER
CO-DOCUMENTATION AGENT.

           SECTION 8.06  Non-Reliance  on Agents and other Lenders.  Each Lender
acknowledges and agrees that it has,  independently  and without reliance on the
Administrative Agent, either Co-Syndication Agent, either Co-Documentation Agent
or any other  Lender,  and based on such  documents  and  information  as it has
deemed  appropriate,  made  its  own  credit  analysis  of the  Company  and the
Subsidiaries  and its decision to enter into this  Agreement,  and that it will,
independently  and  without  reliance  upon  the  Administrative  Agent,  either
Co-Syndication  Agent,  either  Co-Documentation  Agent or any other Lender, and
based on such  documents and  information  as it shall deem  appropriate  at the
time,  continue to make its own analysis  and  decisions in taking or not taking
action  under  this  Agreement.   Neither  the  Administrative   Agent,   either
Co-Syndication Agent nor either Co-Documentation Agent shall be required to keep
itself  informed as to the  performance or observance by either Borrower of this
Agreement,  the other  Loan  Documents  or any  other  document  referred  to or
provided for herein or to inspect the  properties  or books of either  Borrower.
Except for  notices,  reports  and other  documents  and  information  expressly
required to be furnished to the Lenders by the  Administrative  Agent hereunder,
neither  the  Administrative  Agent,  either  Co-Syndication  Agent  nor  either
Co-Documentation  Agent  shall have any duty or  responsibility  to provide  any
Lender with any credit or other  information  concerning the affairs,  financial
condition or business of either  Borrower (or any of its  Affiliates)  which may
come into the  possession of the  Administrative  Agent,  either  Co-Syndication
Agent, either  Co-Documentation  Agent or any of its respective  Affiliates.  In
this regard,  each Lender  acknowledges  that Andrews Kurth L.L.P.  is acting in
this  transaction  as special  counsel to the  Administrative  Agent only.  Each
Lender will

                                      -64-
<PAGE>

consult  with its own legal  counsel to the extent  that it deems  necessary  in
connection  with  this  Agreement  and  other  Loan  Documents  and the  matters
contemplated herein and therein.

           SECTION  8.07 Action by  Administrative  Agent.  Except for action or
other matters  expressly  required of the  Administrative  Agent hereunder,  the
Administrative  Agent  shall in all  cases  be fully  justified  in  failing  or
refusing to act hereunder unless it shall (a) receive written  instructions from
the  Required  Lenders (or all of the Lenders as  expressly  required by Section
10.02)  specifying  the  action  to be  taken,  and  (b) be  indemnified  to its
satisfaction by the Lenders against any and all liability and expenses which may
be incurred by it by reason of taking or continuing to take any such action. The
instructions  of the  Required  Lenders  (or  all of the  Lenders  as  expressly
required  by  Section  10.02) and any  action  taken or failure to act  pursuant
thereto by the Administrative Agent shall be binding on all of the Lenders. If a
Default or Event of Default has occurred and is continuing,  the  Administrative
Agent shall take such action with respect to such Default or Event of Default as
shall be directed by the Required  Lenders (or all of the Lenders as required by
Section 10.02) in the written instructions (with indemnities)  described in this
Section 8.07;  provided that,  unless and until the  Administrative  Agent shall
have received such directions,  the  Administrative  Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such  Default  or Event of Default  as it shall  deem  advisable  in the best
interests of the Lenders. In no event,  however,  shall the Administrative Agent
be  required  to take any  action  which  exposes  the  Administrative  Agent to
personal liability or which is contrary to this Agreement or applicable law.

           SECTION 8.08 Resignation or Removal of Administrative  Agent. Subject
to the  appointment  and  acceptance  of a  successor  Administrative  Agent  as
provided below, the Administrative Agent may resign at any time by giving notice
thereof to the  Lenders and the  Company,  and the  Administrative  Agent may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal,  the Required  Lenders shall have the right to appoint a
successor  Administrative  Agent  (so long as no  Default  or  Event of  Default
exists) with the prior written  consent of the Company  (which  consent will not
unreasonably be withheld). If no successor  Administrative Agent shall have been
so appointed by the Required  Lenders and shall have accepted  such  appointment
within  thirty (30) days after the  retiring  Administrative  Agent's  giving of
notice  of  resignation  or  the  Required  Lenders'  removal  of  the  retiring
Administrative  Agent, then the retiring  Administrative Agent may, on behalf of
the Lenders,  appoint a successor Administrative Agent (so long as no Default or
Event of Default  exists) with the prior written  consent of the Company  (which
consent  will  not  unreasonably  be  withheld).  Upon  the  acceptance  of such
appointment  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 hereunder.  After any retiring Administrative Agent's resignation or
removal hereunder as  Administrative  Agent, the provisions of this Article VIII
and  Section  10.03  shall  continue in effect for its benefit in respect of any
actions  taken  or  omitted  to be  taken  by it  while  it  was  acting  as the
Administrative Agent.

           SECTION  8.09 Duties of  Co-Syndication  Agents and  Co-Documentation
Agents.  Notwithstanding  the  indemnity  of the  Co-Syndication  Agents and the
Co-Documentation  Agents contained in Section 8.05 and in Section 9.03,  nothing
contained in

                                      -65-
<PAGE>

this Agreement shall be construed to impose any obligation or duty whatsoever on
any Person named on the cover of this  Agreement or elsewhere in this  Agreement
as Co-Syndication Agents,  Co-Documentation Agents, Joint Lead Arranger or Joint
Book Manager, other than those applicable to all Lenders as such.

                                  ARTICLE IX.
                                    GUARANTY

           SECTION  9.01  Guaranty.  (a) In  consideration  of,  and in order to
induce the Administrative Agent and the Lenders to enter into this Agreement and
to induce the  Lenders to make the Loans and the Issuing  Bank to  maintain  the
Subsidiary  Borrower  Letter  of  Credit  and to issue  new  Letters  of  Credit
hereunder,  the  Company  hereby  absolutely,  unconditionally  and  irrevocably
guarantees  the punctual  payment and  performance  when due,  whether at stated
maturity,  by  acceleration  or otherwise,  of the Obligations of the Subsidiary
Borrower,  and  all  covenants  of the  Subsidiary  Borrower,  now or  hereafter
existing  under  this  Agreement  and the  other  Loan  Documents  to which  the
Subsidiary  Borrower is a party,  whether  for  principal,  interest  (including
interest  accruing  or  becoming  owing  both  prior  to and  subsequent  to the
commencement  of any  proceeding  against  or  with  respect  to the  Subsidiary
Borrower  under any  chapter of Title 11 of the United  States  Code,  as now or
hereafter in effect,  or any successor thereto (the "Bankruptcy  Code")),  fees,
commissions,  expenses  (including  reasonable  attorneys' fees and expenses) or
otherwise (all such obligations being the "Guaranteed Obligations"). The Company
agrees  to  pay  any  and  all   expenses   incurred  by  each  Lender  and  the
Administrative Agent in enforcing this Guaranty against the Company.

           (b)  This  Guaranty  is  an  absolute,  unconditional,   present  and
continuing  guaranty  of  payment  and  not of  collectibility  and is in no way
conditioned  upon any  attempt to collect  from the  Subsidiary  Borrower or any
other action, occurrence or circumstance whatsoever.

           SECTION 9.02 Continuing Guaranty. (a) The Company guarantees that the
Guaranteed  Obligations  will be paid strictly in  accordance  with the terms of
this  Agreement and the other Loan  Documents.  The Company  agrees that, to the
maximum extent permitted by applicable law, the Guaranteed  Obligations and Loan
Documents  to which  the  Subsidiary  Borrower  is a party  may be  extended  or
renewed, and indebtedness  thereunder repaid and reborrowed in whole or in part,
without  notice to or assent by the Company,  and that it will remain bound upon
this Guaranty notwithstanding any extension,  renewal or other alteration of any
Guaranteed Obligations or such Loan Documents,  or any repayment and reborrowing
of Loans. To the maximum extent permitted by applicable law, except as otherwise
expressly  provided in this  Agreement  or any other Loan  Document to which the
Company is a party,  the obligations of the Company under this Guaranty shall be
absolute,  unconditional  and  irrevocable,  and shall be performed  strictly in
accordance with the terms hereof under any circumstances whatsoever, including:

            (i) any modification,  amendment, supplement, renewal, extension for
      any period, increase, decrease,  alteration or rearrangement of all or any
      part of the Guaranteed Obligations, or of this Agreement or any other Loan
      Document executed in connection herewith, or any contract or understanding
      among the Company, the Subsidiary

                                      -66-
<PAGE>

      Borrower,  the  Administrative  Agent  and/or  the  Lenders,  or any other
      Person, pertaining to the Guaranteed Obligations;

            (ii) any  adjustment,  indulgence,  forbearance  or compromise  that
      might be  granted  or given by the  Lenders  to the  Company  or any other
      Person liable on the Guaranteed Obligations;

            (iii)   the   insolvency,   bankruptcy,   arrangement,   adjustment,
      composition,  liquidation, disability, dissolution or lack of power of the
      Company,  the  Subsidiary  Borrower or any other Person at any time liable
      for  the  payment  of all or part of the  Guaranteed  Obligations;  or any
      dissolution of the Company,  the Subsidiary Borrower or any sale, lease or
      transfer  of any or all of the  assets of the  Company  or the  Subsidiary
      Borrower,  or  any  changes  in  the  shareholders  of  the  Company,  the
      Subsidiary  Borrower,   or  any  reorganization  of  the  Company  or  the
      Subsidiary Borrower;

            (iv) the invalidity,  illegality or  unenforceability  of all or any
      part of the Guaranteed Obligations,  or any document or agreement executed
      in connection with the Guaranteed Obligations,  for any reason whatsoever,
      including  the  fact  that  (A) the  Guaranteed  Obligations,  or any part
      thereof,  exceeds the amount permitted by law, (B) the act of creating the
      Guaranteed  Obligations  or any  part  thereof  is  ultra  vires,  (C) the
      officers or representatives  executing the documents or otherwise creating
      the Guaranteed  Obligations  acted in excess of their  authority,  (D) the
      Guaranteed  Obligations or any part thereof violate applicable usury laws,
      (E) the Company or the Subsidiary Borrower has valid defenses,  claims and
      offsets  (whether at law or in equity,  by agreement or by statute)  which
      render the Guaranteed  Obligations wholly or partially  uncollectible from
      the Company or the Subsidiary Borrower,  (F) the creation,  performance or
      repayment  of the  Guaranteed  Obligations  (or  execution,  delivery  and
      performance  of  any  document  or  instrument  representing  part  of the
      Guaranteed  Obligations  or executed  in  connection  with the  Guaranteed
      Obligations,   or  given  to  secure  the  repayment  of  the   Guaranteed
      Obligations)   is   illegal,   uncollectible,    legally   impossible   or
      unenforceable,  or (G) this  Agreement,  any other Loan  Document,  or any
      other document or instrument pertaining to the Guaranteed  Obligations has
      been forged or otherwise is irregular or not genuine or authentic;

            (v) any full or partial  release of the  liability of the Company or
      the Subsidiary Borrower on the Guaranteed Obligations or any part thereof,
      or  any  other  Person  now  or  hereafter  liable,  whether  directly  or
      indirectly, jointly, severally, or jointly and severally, to pay, perform,
      guarantee or assure the payment of the Guaranteed  Obligations or any part
      thereof; it being recognized,  acknowledged and agreed by the Company that
      the  Company may be required  to pay the  Guaranteed  Obligations  in full
      without assistance or support of any other Person, and the Company has not
      been induced to enter into this Guaranty on the basis of a  contemplation,
      belief, understanding or agreement that any other Person will be liable to
      perform the Guaranteed  Obligations,  or that the Administrative  Agent or
      any  Lender  will  look to any  other  Person to  perform  the  Guaranteed
      Obligations;

                                      -67-
<PAGE>

            (vi) the taking or accepting of any other  security,  collateral  or
      guaranty,  or  other  assurance  of  payment,  for all or any  part of the
      Guaranteed Obligations;

            (vii)   any    release,    surrender,    exchange,    subordination,
      deterioration,  waste,  loss or impairment of any collateral,  property or
      security, at any time existing in connection with, or assuring or securing
      payment of, all or any part of the Guaranteed Obligations;

            (viii)the  failure of the  Administrative  Agent, the Lenders or any
      other Person to exercise diligence or reasonable care in the preservation,
      protection, enforcement, sale or other handling or treatment of all or any
      part of such collateral, property or security;

            (ix) the fact that any collateral,  security or Lien contemplated or
      intended to be given,  created or granted as security for the repayment of
      the Guaranteed  Obligations shall not be properly perfected or created, or
      shall prove to be unenforceable or subordinate to any other Lien; it being
      recognized and agreed by the Company that the Company is not entering into
      this Guaranty in reliance on, or in  contemplation of the benefits of, the
      validity, enforceability, collectibility or value of any of the collateral
      for the Guaranteed Obligations;

            (x) any  payment by the  Subsidiary  Borrower  or the Company to the
      Administrative  Agent or any  Lender is held to  constitute  a  preference
      under bankruptcy  laws, or for any other reason either the  Administrative
      Agent or any Lender is required to refund such  payment or pay such amount
      to the Subsidiary Borrower or any other Person; or

            (xi) any other  action  taken or omitted to be taken with respect to
      this Agreement,  any other Loan Document, the Guaranteed  Obligations,  or
      any  security  and  collateral  therefor,  whether  or not such  action or
      omission  prejudices  the Company or  increases  the  likelihood  that the
      Company will be required to pay the Guaranteed Obligations pursuant to the
      terms hereof;

it being the  unambiguous  and  unequivocal  intention  of the Company  that the
Company  shall  be  obligated  to  pay  the  Guaranteed  Obligations  when  due,
notwithstanding  any  occurrence,   circumstance,  event,  action,  or  omission
whatsoever, whether contemplated or uncontemplated, and whether or not otherwise
or  particularly  described  herein,  except for the full and final  payment and
satisfaction  of  the  Guaranteed  Obligations  after  the  termination  of  the
Commitments  of all Lenders and the  expiration or termination of the Subsidiary
Borrower Letter of Credit.

           (b) The Company further agrees that, to the fullest extent  permitted
by law,  as  between  the  Company,  on the one hand,  and the  Lenders  and the
Administrative  Agent,  on the other hand,  (i) the  maturity of the  Guaranteed
Obligations  may be  accelerated  as provided in Article VII for the purposes of
this  Guaranty,  notwithstanding  any  stay,  injunction  or  other  prohibition
preventing  such  acceleration  of the Guaranteed  Obligations,  and (ii) in the
event of any  acceleration of the Guaranteed  Obligations as provided in Article
VII, the Guaranteed Obligations (whether or not due and payable) shall forthwith
become due and payable by the Company for the purpose of this Guaranty.

                                      -68-
<PAGE>

           SECTION 9.03 Effect of Debtor  Relief Laws.  If after  receipt of any
payment of all or any part of the  Guaranteed  Obligations,  the  Administrative
Agent,  the Issuing Bank or any Lender is for any reason  compelled to surrender
or voluntarily  surrenders,  such payment to any Person (a) because such payment
is or may be avoided, invalidated, declared fraudulent, set aside, determined to
be void or voidable as a preference, fraudulent conveyance, fraudulent transfer,
impermissible set-off or a diversion of trust funds or (b) for any other reason,
including (i) any judgment,  decree or order of any court or administrative body
having jurisdiction over the Administrative  Agent, the Issuing Bank, any Lender
or any of their  respective  properties or (ii) any  settlement or compromise of
any such claim  effected by the  Administrative  Agent,  the Issuing Bank or any
Lender with any such claimant  (including  the  Subsidiary  Borrower),  then the
Guaranteed  Obligations  or part  thereof  intended  to be  satisfied  shall  be
reinstated  and continue,  and this Guaranty  shall continue in full force as if
such payment had not been received,  notwithstanding  any revocation  thereof or
the cancellation of any instrument evidencing any of the Guaranteed  Obligations
or otherwise;  and the Company shall be liable to pay the Administrative  Agent,
the Issuing Bank and the Lenders,  and hereby does indemnify the  Administrative
Agent,  the Issuing Bank and the Lenders and holds them  harmless for the amount
of such payment so surrendered and all reasonable expenses (including reasonable
attorneys' fees, court costs and expenses  attributable thereto) incurred by the
Administrative Agent, the Issuing Bank or any Lender in the defense of any claim
made  against it that any payment  received  by the  Administrative  Agent,  the
Issuing  Bank  or  any  Lender  in  respect  of all or  part  of the  Guaranteed
Obligations must be surrendered.  The provisions of this paragraph shall survive
the  termination of this  Guaranty,  and any  satisfaction  and discharge of the
Subsidiary  Borrower  by virtue of any  payment,  court  order or any Federal or
state law.

           SECTION 9.04 Waiver. The Company hereby waives promptness, diligence,
notice of acceptance  and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and waives presentment, demand for payment, notice
of intent to accelerate,  notice of dishonor or nonpayment  and any  requirement
that  the  Administrative  Agent  or  any  Lender  institute  suit,   collection
proceedings  or take any other  action to collect  the  Guaranteed  Obligations,
including any requirement  that the  Administrative  Agent or any Lender exhaust
any right or take any action against the Subsidiary Borrower or any other Person
or any  collateral  (it being the  intention of the  Administrative  Agent,  the
Lenders  and the Company  that this  Guaranty is to be a guaranty of payment and
not of collection).  It shall not be necessary for the  Administrative  Agent or
any  Lender,  in order to enforce  any  payment  by the  Company  hereunder,  to
institute  suit or exhaust  its  rights  and  remedies  against  the  Subsidiary
Borrower or any other  Person,  including  others  liable to pay any  Guaranteed
Obligations,  or to enforce its rights against any security ever given to secure
payment  thereof.  The Company  hereby  expressly  waives to the maximum  extent
permitted by applicable  law each and every right to which it may be entitled by
virtue of the  suretyship  laws of the  State of New York or any other  state in
which it may be located,  including  any and all rights it may have  pursuant to
Rule 31,  Texas  Rules of Civil  Procedure,  Section  17.001 of the Texas  Civil
Practice  and  Remedies  Code and Chapter 34 of the Texas  Business and Commerce
Code.

           SECTION  9.05 Full Force and Effect.  This  Guaranty is a  continuing
guaranty and shall  remain in full force and effect until all of the  Guaranteed
Obligations  under  this  Agreement  and the other Loan  Documents  to which the
Subsidiary Borrower is a party and all other amounts payable under this Guaranty
have been paid in full (after the termination of the

                                      -69-
<PAGE>

Commitments  of the Lenders and the  termination or expiration of the Subsidiary
Borrower  Letter of Credit).  All rights,  remedies and powers  provided in this
Guaranty may be  exercised,  and all waivers  contained in this  Guaranty may be
enforced,  only to the extent that the exercise or enforcement  thereof does not
violate any provisions of applicable law which may not be waived.

                                   ARTICLE X.
                                  MISCELLANEOUS

           SECTION 10.01 Notices, Etc. (a) The Administrative Agent, the Issuing
Bank,  any Lender or the  holder of any of the  Obligations,  giving  consent or
notice or making any request of either  Borrower  provided for hereunder,  shall
notify each Lender (in the case of the  Administrative  Agent and/or the Issuing
Bank) and the  Administrative  Agent (in the case of a Lender)  thereof.  In the
event  that the  holder  of any Note or any of the  Obligations  (including  any
Lender) shall transfer such Note or Obligations, it shall promptly so advise the
Administrative  Agent which shall be  entitled  to assume  conclusively  that no
transfer  of any  Note or any of the  Obligations  has been  made by any  holder
(including  any  Lender)  unless  and until the  Administrative  Agent  receives
written notice to the contrary.

           (b) Except with respect to notices and other communications expressly
permitted to be given by telephone, all notices, consents, requests,  approvals,
demands and other communications  (collectively  "Communications")  provided for
herein  shall be in writing  (including  facsimile  Communications)  and mailed,
telecopied or delivered:

           (i)   if to the Company, to it at:

                 500 Dallas, Suite 1000
                 Houston, Texas 77002
                 Attention:C. Park Shaper
                 Telecopy No: (713) 369-9499;

           (ii)  if to the Subsidiary Borrower, to it in care of the Company;

           (iii) if to the Administrative Agent, to it at:

                    c/o Wachovia Capital Markets LLC
                    1001 Fannin Street, Suite 2255
                    Houston, Texas 77002
                    Attention: Russell Clingman
                    Telecopy No.: (713)-650-6354;

           (iv)  if to the Issuing Bank, to it at:

                    c/o Wachovia Capital Markets LLC
                    1001 Fannin Street, Suite 2255
                    Houston, Texas 77002
                    Attention: Russell Clingman
                    Telecopy No.: (713) 650-6354;

                                      -70-
<PAGE>

           (v)   if to the Swingline Lender, to it at:

                    c/o Wachovia Capital Markets LLC
                    1001 Fannin Street, Suite 2255
                    Houston, Texas 77002
                    Attention: Russell Clingman
                    Telecopy No.:  (713) 650-6354; and

           (vi)  if to any  other  Lender,  to it at its  address  (or  telecopy
      number) set forth in the  Administrative  Questionnaire  delivered by such
      Person to the  Administrative  Agent or in the  Assignment  and Acceptance
      executed by such Person;

or, in the case of any party hereto,  such other  address or telecopy  number as
such  party  may  hereafter  specify  for such  purpose  by  notice to the other
parties.

           (c)  Communications  to the Lenders  hereunder  may be  delivered  or
furnished by electronic  communications  pursuant to procedures  approved by the
Administrative  Agent;  provided that the  foregoing  shall not apply to notices
pursuant to Article II unless otherwise agreed by the  Administrative  Agent and
the  applicable  Lender.  The  Administrative  Agent or the Company  may, in its
discretion,  agree to accept notices and other communications to it hereunder by
electronic  communications  pursuant to procedures approved by it; provided that
approval  of  such   procedures   may  be  limited  to  particular   notices  or
communications.

           (d) Any party  hereto may change its address or  telecopy  number for
notices  and other  communications  hereunder  by  notice  to the other  parties
hereto.  All  notices  and other  communications  given to any  party  hereto in
accordance  with the provisions of this  Agreement  shall be deemed to have been
given on the date of receipt.

           SECTION  10.02  Waivers;  Amendments.  (a) No failure or delay by the
Administrative  Agent,  the  Issuing  Bank or any Lender in  exercising,  and no
course of dealing with respect to, any right or power hereunder shall operate as
a waiver thereof,  nor shall any single or partial exercise of any such right or
power, or any abandonment or  discontinuance of steps to enforce such a right or
power,  preclude  any other or further  exercise  thereof or the exercise of any
other  right or power.  No notice  to or demand on either  Borrower  in any case
shall entitle such Borrower to any other or further  notice or demand in similar
or other circumstances.  No waiver of any provision of this Agreement or consent
to any departure therefrom shall in any event be effective unless the same shall
be  permitted  by Section  10.02(b),  and then such  waiver or consent  shall be
effective  only in the  specific  instance  and for the purpose for which given.
Without  limiting  the  generality  of the  foregoing,  the  making of a Loan or
issuance of a Letter of Credit shall not be construed as a waiver of any Default
or Event of Default,  regardless of whether the Administrative Agent, any Lender
or the  Issuing  Bank may have had notice or  knowledge  of such  Default at the
time.

           (b) No  provision  of  this  Agreement  or any  other  Loan  Document
provision may be waived,  amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrowers and the Required  Lenders or
by the Borrowers and the  Administrative  Agent with the consent of the Required
Lenders; provided that no such

                                      -71-
<PAGE>

agreement  shall (i) increase the  Commitment of any Lender  without the written
consent  of such  Lender,  (ii)  reduce the  principal  amount of any Loan or LC
Disbursement or reduce the rate of interest thereon,  or reduce any fees payable
hereunder  or under the Fee Letter,  without the written  consent of each Lender
affected thereby,  (iii) postpone the scheduled date of payment of the principal
amount of any Loan or LC Disbursement (including any payment required by Section
2.10(b)),  or any interest  thereon,  or any fees payable hereunder or under the
Fee  Letter,  or reduce  the amount of,  waive or excuse  any such  payment,  or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (iv) change Section 2.18(b) or (c) in a
manner  that would  alter the pro rata  sharing of  payments  required  thereby,
without the written consent of each Lender,  or (v) release the Company from its
guaranty  contained in Article IX, change any of the  provisions of this Section
10.02(b),  Section 10.05 or the  definition  of "Required  Lenders" or any other
provision  hereof  specifying  the number or percentage  of Lenders  required to
waive,  amend or modify any rights hereunder or make any  determination or grant
any consent  hereunder,  without the written  consent of each  Lender;  provided
further  that no such  agreement  shall amend,  modify or  otherwise  affect the
rights or duties  of the  Administrative  Agent or the  Issuing  Bank  hereunder
without the prior  written  consent of the  Administrative  Agent or the Issuing
Bank, as the case may be.

           SECTION  10.03  Payment of  Expenses,  Indemnities,  etc. The Company
agrees:

           (a) to pay all reasonable expenses of the Administrative Agent in the
administration  (including  advice of counsel as to the rights and duties of the
Administrative Agent and the Lenders with respect thereto) of, and in connection
with the negotiation,  syndication,  investigation,  preparation,  execution and
delivery of, recording or filing of,  preservation of rights under,  enforcement
of, and refinancing,  renegotiation or restructuring  of, the Loan Documents and
any  amendment,   waiver  or  consent  relating  thereto   (including,   without
limitation,  travel, photocopy,  mailing,  courier,  telephone and other similar
expenses of the  Administrative  Agent, the reasonable fees and disbursements of
counsel and other outside  consultants for the Administrative  Agent and, in the
case of  enforcement  of  this  Agreement  and the  other  Loan  Documents,  the
reasonable fees and  disbursements of counsel,  including the allocated costs of
inside counsel,  for each of the Administrative  Agent and the Issuing Bank, and
each Lender);  and promptly reimburse the  Administrative  Agent for all amounts
expended,  advanced or incurred  by the  Administrative  Agent or the Lenders to
satisfy any obligation of either Borrower under this Agreement.

           (b) TO INDEMNIFY THE ADMINISTRATIVE AGENT, THE CO-SYNDICATION AGENTS,
THE CO-DOCUMENTATION  AGENTS, THE ISSUING BANK AND EACH LENDER AND EACH OF THEIR
AFFILIATES AND EACH OF THEIR OFFICERS,  DIRECTORS,  EMPLOYEES,  REPRESENTATIVES,
AGENTS,  ATTORNEYS,  ACCOUNTANTS AND EXPERTS ("INDEMNIFIED  PARTIES") FROM, HOLD
EACH OF THEM HARMLESS  AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF
THEM FOR, THE INDEMNITY MATTERS WHICH MAY BE REASONABLY  INCURRED BY OR ASSERTED
AGAINST OR INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY
THERETO) AS A RESULT OF,  ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY ACTUAL
OR PROPOSED USE BY EITHER BORROWER OF THE

                                      -72-
<PAGE>

PROCEEDS  OF ANY OF THE  LOANS OR ANY  LETTER  OF  CREDIT,  (II) THE  EXECUTION,
DELIVERY AND  PERFORMANCE  OF THE LOAN  DOCUMENTS,  (III) THE  OPERATIONS OF THE
BUSINESS OF THE COMPANY AND THE SUBSIDIARIES, (IV) THE FAILURE OF THE COMPANY OR
ANY  SUBSIDIARY  TO  COMPLY  WITH  THE  TERMS  OF THIS  AGREEMENT,  OR WITH  ANY
REQUIREMENT  OF LAW, (V) ANY INACCURACY OF ANY  REPRESENTATION  OR ANY BREACH OF
ANY WARRANTY OF EITHER BORROWER SET FORTH IN ANY OF THE LOAN DOCUMENTS, (VI) THE
ISSUANCE,  EXECUTION  AND  DELIVERY  OR TRANSFER OF OR PAYMENT OR FAILURE TO PAY
UNDER ANY LETTER OF CREDIT,  (VII) THE PAYMENT OF A DRAWING  UNDER ANY LETTER OF
CREDIT  NOTWITHSTANDING  THE  NON-COMPLIANCE,  NON-DELIVERY  OR  OTHER  IMPROPER
PRESENTATION OF THE MANUALLY  EXECUTED DRAFT(S) AND  CERTIFICATION(S)  OR (VIII)
ANY OTHER  ASPECT  OF THE LOAN  DOCUMENTS,  INCLUDING  THE  REASONABLE  FEES AND
DISBURSEMENTS  OF COUNSEL AND ALL OTHER  EXPENSES  INCURRED IN  CONNECTION  WITH
INVESTIGATING,   DEFENDING  OR  PREPARING  TO  DEFEND  ANY  SUCH  ACTION,  SUIT,
PROCEEDING (INCLUDING ANY INVESTIGATIONS,  LITIGATION OR INQUIRIES) OR CLAIM AND
INCLUDING ALL INDEMNITY MATTERS ARISING BY REASON OF THE ORDINARY  NEGLIGENCE OF
ANY  INDEMNIFIED  PARTY,  BUT EXCLUDING ALL INDEMNITY  MATTERS ARISING SOLELY BY
REASON OF CLAIMS BETWEEN THE LENDERS OR ANY LENDER AND THE ADMINISTRATIVE AGENT,
EITHER  CO-SYNDICATION  AGENT,  OR EITHER  CO-DOCUMENTATION  AGENT OR A LENDER'S
SHAREHOLDERS  AGAINST  THE  ADMINISTRATIVE  AGENT OR  LENDER OR BY REASON OF THE
GROSS  NEGLIGENCE,  WILLFUL  MISCONDUCT  OR UNLAWFUL  CONDUCT ON THE PART OF THE
INDEMNIFIED PARTY SEEKING INDEMNIFICATION.

           (c) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE  INDEMNIFIED
PARTIES  FROM AND AGAINST ANY AND ALL LOSSES,  CLAIMS,  COST  RECOVERY  ACTIONS,
ADMINISTRATIVE ORDERS OR PROCEEDINGS,  DAMAGES AND LIABILITIES TO WHICH ANY SUCH
PERSON MAY BECOME  SUBJECT (I) UNDER ANY  ENVIRONMENTAL  LAW  APPLICABLE  TO THE
COMPANY OR ANY  SUBSIDIARY OR ANY OF THEIR  PROPERTIES OR ASSETS,  INCLUDING THE
TREATMENT  OR DISPOSAL OF  HAZARDOUS  MATERIALS  ON ANY OF THEIR  PROPERTIES  OR
ASSETS,  (II) AS A RESULT OF THE BREACH OR  NON-COMPLIANCE BY THE COMPANY OR ANY
SUBSIDIARY  WITH  ANY  ENVIRONMENTAL  LAW  APPLICABLE  TO  THE  COMPANY  OR  ANY
SUBSIDIARY,  (III) DUE TO PAST OWNERSHIP BY THE COMPANY OR ANY SUBSIDIARY OF ANY
OF THEIR  PROPERTIES  OR ASSETS OR PAST  ACTIVITY ON ANY OF THEIR  PROPERTIES OR
ASSETS WHICH,  THOUGH LAWFUL AND FULLY  PERMISSIBLE AT THE TIME, COULD RESULT IN
PRESENT  LIABILITY,  (IV) THE  PRESENCE,  USE,  RELEASE,  STORAGE,  TREATMENT OR
DISPOSAL OF HAZARDOUS MATERIALS ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED
BY THE BORROWERS OR ANY SUBSIDIARY,  OR (V) ANY OTHER  ENVIRONMENTAL,  HEALTH OR
SAFETY CONDITION IN CONNECTION WITH THE LOAN DOCUMENTS.

                                      -73-
<PAGE>

           (d) No  Indemnified  Party may  settle  any  claim to be  indemnified
without  the consent of the  indemnitor,  such  consent  not to be  unreasonably
withheld;  provided,  that the indemnitor may not reasonably withhold consent to
any settlement that an Indemnified  Party  proposes,  if the indemnitor does not
have the financial  ability to pay all its obligations  outstanding and asserted
against the  indemnitor  at that time,  including the maximum  potential  claims
against the Indemnified Party to be indemnified pursuant to this Section 10.03.

           (e) In the case of any indemnification  hereunder, the Administrative
Agent or Lender,  as  appropriate  shall give  notice to the Company of any such
claim or demand being made against the  Indemnified  Party and the Company shall
have the  non-exclusive  right to join in the defense  against any such claim or
demand;  provided that if the Company provides a defense,  the Indemnified Party
shall  bear its own cost of  defense  unless  there is a  conflict  between  the
Company and such Indemnified Party.

           (f) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING  THE SOLE OR  CONCURRENT  NEGLIGENCE  OF EVERY KIND OR CHARACTER
WHATSOEVER,  WHETHER  ACTIVE  OR  PASSIVE,  WHETHER  AN  AFFIRMATIVE  ACT  OR AN
OMISSION,   INCLUDING,   ALL  TYPES  OF  NEGLIGENT  CONDUCT  IDENTIFIED  IN  THE
RESTATEMENT  (SECOND) OF TORTS OF ONE OR MORE OF THE  INDEMNIFIED  PARTIES OR BY
REASON  OF  STRICT  LIABILITY  IMPOSED  WITHOUT  FAULT ON ANY ONE OR MORE OF THE
INDEMNIFIED  PARTIES.  TO THE EXTENT THAT AN INDEMNIFIED  PARTY IS FOUND TO HAVE
COMMITTED  AN ACT OF GROSS  NEGLIGENCE  OR  WILLFUL  MISCONDUCT  OR  ENGAGED  IN
UNLAWFUL CONDUCT, THIS CONTRACTUAL  OBLIGATION OF INDEMNIFICATION SHALL CONTINUE
BUT  SHALL  ONLY  EXTEND  TO THE  PORTION  OF THE  CLAIM  THAT IS DEEMED TO HAVE
OCCURRED BY REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT
OR UNLAWFUL CONDUCT OF THE INDEMNIFIED PARTY.

           (g) The Company's  obligations under this Section 10.03 shall survive
any termination of this  Agreement,  the payment of the Loans and the expiration
of the Letters of Credit and shall continue thereafter in full force and effect,
for a period of six years.

           (h) To the extent that the Company  fails to pay any amount  required
to be paid by it to the  Administrative  Agent or the  Issuing  Bank  under this
Section 10.03, each Lender severally agrees to pay to the  Administrative  Agent
or the Issuing  Bank, as the case may be, such  Lender's  Applicable  Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim,  damage,  liability or related expense,  as the case
may be, was  incurred by or asserted  against  the  Administrative  Agent or the
Issuing Bank in its capacity as such.

           (i) The Company  shall pay any amounts due under this  Section  10.03
within  thirty  (30) days of the  receipt by the Company of notice of the amount
due.

                                      -74-
<PAGE>

           SECTION  10.04  Successors  and  Assigns.   The  provisions  of  this
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their respective  successors and assigns permitted  hereby.  Nothing in this
Agreement,  expressed  or implied,  shall be construed to confer upon any Person
(other  than  the  parties  hereto,  their  respective  successors  and  assigns
permitted hereby and, to the extent expressly  contemplated  hereby, the Related
Parties of each of the  Administrative  Agent, the Issuing Bank and the Lenders)
any  legal or  equitable  right,  remedy  or claim  under or by  reason  of this
Agreement.

           SECTION 10.05 Assignments and Participations.

           (a) Neither  Borrower may assign its rights or obligations  hereunder
or under the Notes or any Letter of Credit  without the prior  consent of all of
the Lenders and the Administrative Agent.

           (b) Any Lender may assign to one or more  assignees  all or a portion
of its rights and obligations  under this Agreement  (including all or a portion
of its  Commitment  and the Loans at the time  owing to it);  provided  that (i)
except in the case of an  assignment  to a Lender or an  Affiliate  of a Lender,
each of the  Company  and  the  Administrative  Agent  (and,  in the  case of an
assignment  of all or a portion of a Commitment or any Lender's  obligations  in
respect of its LC  Exposure or  Swingline  Exposure,  the  Issuing  Bank and the
Swingline  Lender)  must give their  prior  written  consent to such  assignment
(which consent shall not be unreasonably  withheld),  (ii) except in the case of
an  assignment  to a Lender or an Affiliate of a Lender or an  assignment of the
entire remaining amount of the assigning Lender's Commitment,  the amount of the
Commitment of the assigning  Lender subject to each such assignment  (determined
as of the date the Assignment and Acceptance  with respect to such assignment is
delivered to the Administrative  Agent) shall not be less than $5,000,000 unless
each of the Company and the Administrative  Agent otherwise consent,  (iii) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning  Lender's  rights and obligations  under this Agreement,  (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance,  together with a processing and recordation fee of
$3,500  for each such  assignment,  and (v) the  assignee,  if it shall not be a
Lender,   shall   deliver  to  the   Administrative   Agent  an   Administrative
Questionnaire;  provided  further  that any  consent  of the  Company  otherwise
required  under  this  Section  10.05(b)  shall not be  required  if an Event of
Default has occurred and is continuing.  Upon acceptance and recording  pursuant
to  Section  10.05(d),  from and  after the  effective  date  specified  in each
Assignment and Acceptance,  the assignee thereunder shall be a party hereto and,
to the extent of the interest  assigned by such Assignment and Acceptance,  have
the rights and obligations of a Lender under this  Agreement,  and the assigning
Lender  thereunder  shall,  to the  extent  of the  interest  assigned  by  such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance  covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall  continue to be entitled to the benefits of Sections
2.15, 2.16, 2.17 and 10.03). Any assignment or transfer by a Lender of rights or
obligations  under this Agreement that does not comply with this paragraph shall
be  treated  for  purposes  of this  Agreement  as a sale by  such  Lender  of a
participation  in  such  rights  and  obligations  in  accordance  with  Section
10.05(e).

                                      -75-
<PAGE>

           (c) The Administrative  Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in Charlotte, North Carolina
a copy of each Assignment and Acceptance  delivered to it and a register for the
recordation  of the names and addresses of the Lenders,  and the  Commitment of,
and  principal  amount of the Loans and LC  Disbursements  owing to, each Lender
pursuant to the terms hereof from time to time (the "Register").  The entries in
the Register shall be conclusive,  and each Borrower,  the Administrative Agent,
the Issuing Bank and the Lenders may treat each Person whose name is recorded in
the Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by either Borrower, the Issuing Bank and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.

           (d) Upon its receipt of a duly  completed  Assignment  and Acceptance
executed  by an  assigning  Lender and an  assignee,  the  assignee's  completed
Administrative  Questionnaire  (unless the  assignee  shall  already be a Lender
hereunder),  the processing and recordation fee referred to in Section  10.05(b)
and any written consent to such  assignment  required by Section  10.05(b),  the
Administrative  Agent shall accept such Assignment and Acceptance and record the
information  contained therein in the Register. No assignment shall be effective
for purposes of this  Agreement  unless it has been  recorded in the Register as
provided in this paragraph.

           (e) Any Lender  may,  without  the  consent of either  Borrower,  the
Administrative  Agent or the Issuing Bank,  sell  participations  to one or more
banks or other entities (a  "Participant")  in all or a portion of such Lender's
rights and obligations  under this Agreement  (including all or a portion of its
Commitment  and the  Loans  owing  to  it);  provided  that  (i)  such  Lender's
obligations under this Agreement shall remain unchanged,  (ii) such Lender shall
remain solely  responsible  to the other parties  hereto for the  performance of
such obligations and (iii) the Company,  the  Administrative  Agent, the Issuing
Bank 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.  Any agreement or instrument  pursuant to which a Lender sells such a
participation  shall  provide  that such Lender  shall  retain the sole right to
enforce this Agreement and to approve any amendment,  modification  or waiver of
any provision of this Agreement;  provided that such agreement or instrument may
provide that such Lender will not, without the consent of the Participant, agree
to any  amendment,  modification  or waiver  described  in the first  proviso to
Section  10.02(b) that affects such  Participant.  Subject to Section  10.05(f),
each Borrower agrees that each Participant  shall be entitled to the benefits of
Sections  2.15,  2.16 and 2.17 to the same extent as if it were a Lender and had
acquired  its  interest  by  assignment  pursuant  to Section  10.05(b),  and be
indemnified  under  Section  10.03 as if it were a  Lender.  In  addition,  each
agreement   creating  any  participation   must  include  an  agreement  by  the
Participant to be bound by the provisions of Section 10.12.

           (f) A  Participant  shall not be  entitled  to  receive  any  greater
payment  under Section 2.15 or 2.17 than the  applicable  Lender would have been
entitled to receive with respect to the participation  sold to such Participant,
unless  the  sale of the  participation  to such  Participant  is made  with the
Company's prior written consent. A Participant that would be a Foreign Lender if
it were a Lender  shall not be entitled to the  benefits of Section  2.17 unless
the Company is

                                      -76-
<PAGE>

notified of the  participation  sold to such  Participant  and such  Participant
agrees, for the benefit of the Company, to comply with Section 2.17(e) as though
it were a Lender.

           (g) The Lenders may furnish any information  concerning the Borrowers
in the possession of the Lenders from time to time to assignees and Participants
(including prospective assignees and participants);  provided that, such Persons
agree to be bound by the provisions of Section 10.12 hereof.

           (h)  Notwithstanding  anything in this Section 10.05 to the contrary,
any Lender may assign and pledge its Notes to any  Federal  Reserve  Bank or the
United States Treasury as collateral  security  pursuant to Regulation A and any
operating  circular  issued by such Federal  Reserve  System and/or such Federal
Reserve  Bank.  No such  assignment  and/or  pledge shall  release the assigning
and/or pledging Lender from its obligations hereunder.

           (i)  Notwithstanding  any other  provisions of this Section 10.05, no
transfer or  assignment  of the  interests or  obligations  of any Lender or any
grant of participations therein shall be permitted if such transfer,  assignment
or grant would require either Borrower to file a registration statement with the
SEC or to qualify the Loans under the "Blue Sky" laws of any state.

           SECTION 10.06 Survival; Reinstatement. (a) All covenants, agreements,
representations  and  warranties  made  by  the  Borrowers  herein  and  in  the
certificates  or other  instruments  delivered in connection with or pursuant to
this Agreement shall be considered to have been relied upon by the other parties
hereto and shall survive the  execution  and delivery of this  Agreement and the
making of any Loans and  issuance  of any Letters of Credit,  regardless  of any
investigation made by any such other party or on its behalf and  notwithstanding
that the  Administrative  Agent,  the  Issuing  Bank or any  Lender may have had
notice  or   knowledge   of  any  Default  or  Event  of  Default  or  incorrect
representation  or warranty at the time any credit is  extended  hereunder,  and
shall  continue  in full  force and  effect as long as the  principal  of or any
accrued  interest on any Loan or any fee or any other amount  payable under this
Agreement is outstanding  and unpaid or any Letter of Credit is outstanding  and
so long as the  Commitments  have not expired or  terminated.  The provisions of
Sections 2.15, 2.16, 2.17 and 10.03 and Article VIII shall survive and remain in
full  force  and  effect  regardless  of the  consummation  of the  transactions
contemplated  hereby,  the repayment of the Loans, the expiration or termination
of the  Letters  of  Credit  and  the  Commitments  or the  termination  of this
Agreement or any provision hereof.

           (b)  To  the  extent  that  any  payments  on  the   Obligations  are
subsequently invalidated,  declared to be fraudulent or preferential,  set aside
or required to be repaid to a trustee,  debtor in possession,  receiver or other
Person under any bankruptcy  law,  common law or equitable  cause,  then to such
extent,  the  Obligations so satisfied  shall be revived and continue as if such
payment or proceeds had not been received.

           SECTION  10.07   Counterparts;   Integration;   Effectiveness.   This
Agreement may be executed in  counterparts  (and by different  parties hereto on
different counterparts),  each of which shall constitute an original, but all of
which when taken together shall  constitute a single  contract.  This Agreement,
the other Loan Documents and the Fee Letter constitute the

                                      -77-
<PAGE>

entire  contract among the parties hereto  relating to the subject matter hereof
and  supersede  any and all  previous  agreements  and  understandings,  oral or
written,  relating to the  subject  matter  hereof  (including  the  Information
Memorandum).  Except as provided in Section 3.01,  this  Agreement  shall become
effective when it shall have been executed by the Administrative  Agent and when
the  Administrative  Agent shall have received  counterparts  hereof which, when
taken  together,  bear the signatures of each of the other parties  hereto,  and
thereafter  shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy shall be effective as delivery
of a manually executed counterpart of this Agreement.

           SECTION 10.08  Severability.  Any provision of this Agreement held to
be invalid,  illegal or  unenforceable  in any  jurisdiction  shall,  as to such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a  particular  jurisdiction  shall not  invalidate  such  provision in any other
jurisdiction.

           SECTION  10.09  Right of Setoff.  If an Event of  Default  shall have
occurred and be  continuing,  each Lender is 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 to or
for the credit or the  account  of either  Borrower  against  any of and all the
Obligations  now or hereafter  existing  under this Agreement and the other Loan
Documents held by such Lender,  irrespective of whether or not such Lender shall
have made any demand under this Agreement and although such  Obligations  may be
unmatured. The rights of each Lender under this Section 10.09 are in addition to
other rights and remedies  (including  other rights of setoff) which such Lender
may have.

           SECTION  10.10  Governing  Law;  Jurisdiction;  Consent to Service of
Process.

           (a) This Agreement and the other Loan Documents shall be construed in
accordance with and governed by the laws of the State of New York.

           (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT AND
THE OTHER LOAN  DOCUMENTS  MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
SITTING IN THE BOROUGH OF  MANHATTAN  OR OF THE UNITED  STATES FOR THE  SOUTHERN
DISTRICT OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS  AGREEMENT,  EACH OF
THE PARTIES HERETO HEREBY  IRREVOCABLY  ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY AND ASSETS,  UNCONDITIONALLY,  THE  NON-EXCLUSIVE  JURISDICTION  OF THE
AFORESAID  COURTS WITH RESPECT TO ANY SUCH ACTION OR  PROCEEDING.  EACH BORROWER
HEREBY  IRREVOCABLY  DESIGNATES,  APPOINTS AND EMPOWERS CT  CORPORATION  SYSTEM,
INC.,  WITH  OFFICES ON THE DATE  HEREOF AT 111 8TH AVENUE,  NEW YORK,  NEW YORK
10011, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE AND ACCEPT FOR AND ON ITS
BEHALF,  AND IN RESPECT OF ITS PROPERTY,  SERVICE OF ANY AND ALL LEGAL  PROCESS,
SUMMONS, NOTICES

                                      -78-
<PAGE>

AND DOCUMENTS  WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING.  IF FOR ANY
REASON SUCH DESIGNEE,  APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS
SUCH, EACH SUCH BORROWER AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT
IN NEW  YORK,  NEW YORK ON THE  TERMS  AND FOR THE  PURPOSES  OF THIS  PROVISION
SATISFACTORY TO THE  ADMINISTRATIVE  AGENT.  EACH BORROWER  FURTHER  IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS  OUT OF ANY OF THE  AFOREMENTIONED  COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES  THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO IT AT ITS ADDRESS PROVIDED IN SECTION 10.01,
SUCH SERVICE TO BECOME EFFECTIVE THIRTY DAYS AFTER SUCH MAILING.  NOTHING HEREIN
SHALL  AFFECT  THE  RIGHT OF THE  ADMINISTRATIVE  AGENT OR ANY  LENDER  TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST EITHER BORROWER IN ANY OTHER JURISDICTION.

           (c) EACH OF THE  BORROWERS  HEREBY  IRREVOCABLY  WAIVES ANY OBJECTION
WHICH  IT MAY  NOW OR  HEREAFTER  HAVE  TO THE  LAYING  OF  VENUE  OF ANY OF THE
AFORESAID  ACTIONS OR  PROCEEDINGS  ARISING  OUT OF OR IN  CONNECTION  WITH THIS
AGREEMENT  BROUGHT  IN THE  COURTS  REFERRED  TO IN CLAUSE  (b) ABOVE AND HEREBY
FURTHER  IRREVOCABLY  WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
THE RIGHT TO PLEAD OR CLAIM,  AND  AGREES  NOT TO PLEAD OR CLAIM,  THAT ANY SUCH
ACTION  OR  PROCEEDING  BROUGHT  IN  ANY  SUCH  COURT  HAS  BEEN  BROUGHT  IN AN
INCONVENIENT FORUM.

           (d) EACH PARTY HERETO HEREBY (i) IRREVOCABLY  WAIVES,  TO THE MAXIMUM
EXTENT  PERMITTED  BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN,  OR IN ADDITION TO, ACTUAL  DAMAGES;  (ii)  CERTIFIES  THAT NO PARTY
HERETO  NOR ANY  REPRESENTATIVE  OR AGENT OR  COUNSEL  FOR ANY PARTY  HERETO HAS
REPRESENTED,  EXPRESSLY OR  OTHERWISE,  OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF  LITIGATION,  SEEK TO  ENFORCE  THE  FOREGOING  WAIVERS,  AND (iii)
ACKNOWLEDGES  THAT IT HAS BEEN  INDUCED  TO ENTER  INTO THIS  AGREEMENT  AND THE
TRANSACTIONS  CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION 10.10.

           SECTION 10.11 WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST  EXTENT  PERMITTED BY APPLICABLE  LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING  DIRECTLY OR INDIRECTLY  ARISING OUT OF OR
RELATING TO THIS  AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY  (WHETHER
BASED ON CONTRACT,  TORT OR ANY OTHER  THEORY).

                                      -79-

<PAGE>

EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF  LITIGATION,  SEEK TO ENFORCE THE FOREGOING  WAIVER AND (B)
ACKNOWLEDGES  THAT IT AND THE OTHER  PARTIES  HERETO HAVE BEEN  INDUCED TO ENTER
INTO  THIS   AGREEMENT   BY,  AMONG  OTHER  THINGS,   THE  MUTUAL   WAIVERS  AND
CERTIFICATIONS IN THIS SECTION 10.11.

           SECTION 10.12 Confidentiality.  Each of the Administrative Agent, the
Issuing  Bank and the Lenders  agrees to  maintain  the  confidentiality  of the
Information (as defined below),  except that Information may be disclosed (a) to
its Affiliates,  directors,  officers and employees and to its agents, including
accountants,  legal  counsel and other  advisors  who have been  informed of the
confidential nature of the information provided,  (b) to the extent requested by
any  regulatory  authority,  including  the  National  Association  of Insurance
Commissioners or any similar  organization,  or any nationally recognized rating
agency  that  requires  access  to  information  about  a  Lender's   investment
portfolio,  (c) to the extent a Lender  reasonably  believes  it is  required by
applicable  laws or regulations or by any subpoena or similar legal process (and
such Lender will provide prompt notice thereof to the Company), (d) to any other
party to this  Agreement,  (e) in  connection  with the exercise of any remedies
hereunder or any suit,  action or proceeding  relating to this  Agreement or any
other Loan Document or the  enforcement of rights  hereunder or thereunder,  (f)
subject to an  understanding  with such Person that such Person will comply with
this Section  10.12,  to any assignee of or Participant  in, or any  prospective
assignee  of or  Participant  in,  any of its rights or  obligations  under this
Agreement,  (g)  with the  consent  of the  Company  or (h) to the  extent  such
Information (i) becomes publicly available other than as a result of a breach of
this Section 10.12 or (ii) becomes  available to the  Administrative  Agent, the
Issuing  Bank or any Lender  from a source  other than a Borrower  (unless  such
source is actually known by the individual providing the information to be bound
by a  confidentiality  agreement  or other legal or  contractual  obligation  of
confidentiality  with  respect to such  information).  For the  purposes of this
Section 10.12, "Information" means all information received from either Borrower
relating to either  Borrower or its  business,  other than any such  information
that is  known  to a  Lender,  publicly  known  or  otherwise  available  to the
Administrative  Agent,  the  Issuing  Bank  or any  Lender  other  than  through
disclosure (a) by a Borrower, or (b) from a source actually known to a Lender to
be bound by a confidentiality agreement or other legal or contractual obligation
of  confidentiality  with respect to such  information.  Any Person  required to
maintain the  confidentiality  of  Information as provided in this Section 10.12
shall be considered to have complied with its obligation to do so if such Person
maintains the  confidentiality of such Information in accordance with procedures
adopted in good  faith to  protect  confidential  Information  of third  parties
delivered to a lender.

           SECTION 10.13  Interest  Rate  Limitation.  Notwithstanding  anything
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees,  charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted  for,  charged,
taken,  received or reserved by the Lender holding such Loan in accordance  with
applicable law, the rate of interest  payable in respect of such Loan hereunder,
together with all Charges  payable in respect  thereof,  shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would have
been payable in respect

                                      -80-
<PAGE>

of such Loan but were not payable as a result of the  operation  of this Section
10.13 shall be cumulated and the interest and Charges  payable to such Lender in
respect of other Loans or periods shall be increased  (but not above the Maximum
Rate therefor) until such cumulated  amount,  together with interest  thereon at
the  Federal  Funds  Effective  Rate to the date of  repayment,  shall have been
received by such Lender.

           SECTION  10.14  EXCULPATION  PROVISIONS.  EACH OF THE PARTIES  HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT, THE NOTES AND (IN
THE CASE OF THE COMPANY AND THE ADMINISTRATIVE  AGENT) THE FEE LETTER AND AGREES
THAT IT IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS  AGREEMENT AND
THE OTHER LOAN  DOCUMENTS;  THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY
INFORMED AND HAS FULL NOTICE AND KNOWLEDGE OF THE TERMS,  CONDITIONS AND EFFECTS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS;  THAT IT HAS BEEN REPRESENTED BY
INDEPENDENT  LEGAL COUNSEL OF ITS CHOICE  THROUGHOUT THE NEGOTIATIONS  PRECEDING
ITS EXECUTION OF THIS AGREEMENT AND THE OTHER LOAN  DOCUMENTS;  AND HAS RECEIVED
THE ADVICE OF ITS ATTORNEY IN ENTERING  INTO THIS  AGREEMENT  AND THE OTHER LOAN
DOCUMENTS;  AND THAT IT RECOGNIZES  THAT CERTAIN OF THE TERMS OF THIS  AGREEMENT
AND THE OTHER LOAN DOCUMENTS RESULT IN ONE PARTY ASSUMING THE LIABILITY INHERENT
IN SOME  ASPECTS  OF THE  TRANSACTION  AND  RELIEVING  THE  OTHER  PARTY  OF ITS
RESPONSIBILITY  FOR SUCH LIABILITY.  EACH PARTY HERETO AGREES AND COVENANTS THAT
IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY  PROVISION
OF THIS AGREEMENT ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH
PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."

                                      -81-
<PAGE>

           The parties  hereto have caused this Agreement to be duly executed as
of the date and year first above written.

                          KINDER MORGAN ENERGY PARTNERS, L.P.,
                          as the Company

                               By:  Kinder Morgan G.P., Inc.,
                                          its General Partner

                               By:  Kinder Morgan Management, LLC,
                                          its Delegate

                                    By:    /s/ Joseph Listengart
                                        --------------------------------
                                    Name:  Joseph Listengart
                                    Title: Vice President

<PAGE>

                          KINDER MORGAN OPERATING L.P. "B",
                          as the Subsidiary Borrower and as a
                          Subsidiary Guarantor

                               By:  Kinder Morgan G.P., Inc.,
                                    its General Partner

                               By:  Kinder Morgan Management, LLC,
                                    its Delegate

                                    By:    /s/ Joseph Listengart
                                        -------------------------------
                                    Name:  Joseph Listengart
                                    Title: Vice President

<PAGE>

                          WACHOVIA BANK, NATIONAL ASSOCIATION,
                          as the Administrative Agent, the Issuing
                          Bank, the Swingline Lender and as a
                          Lender

                          By:    /s/ Russell Clingman
                               -------------------------------------
                          Name:  Russell Clingman
                          Title: Director

<PAGE>

                          CITIBANK, N.A.,
                          as Co-Syndication Agent and as a Lender

                          By:    /s/ Joronne Jeter
                             -------------------------------------
                          Name:  Joronne Jeter
                          Title: Attorney-in-Fact

<PAGE>

                          JPMORGAN CHASE BANK,
                          as Co-Syndication Agent and as a Lender

                          By:    /s/ Robert W. Traband
                                -------------------------------------
                          Name:  Robert W. Traband
                          Title: Vice President

<PAGE>

                          HARRIS NESBITT FINANCING, INC.,
                          as Co-Documentation Agent and as a Lender

                          By:    /s/ Cahal B. Carmody
                               -------------------------------------
                          Name:  Cahal B. Carmody
                          Title: Vice President

<PAGE>

                          BARCLAYS BANK PLC,
                          as Co-Documentation Agent and as a Lender

                          By:    /s/ Nicholas A. Bell
                                -------------------------------------
                          Name:  Nicholas A. Bell
                          Title: Director Loan Transaction Management

<PAGE>

                          THE BANK OF TOKYO-MITSUBISHI, LTD.,
                          HOUSTON AGENCY

                          By:    /s/ Kelton Glasscock
                                -------------------------------------
                          Name:  Kelton Glasscock
                          Title: Vice President and Manager

<PAGE>

                          SUNTRUST BANK

                          By:    /s/ Kelley Brunson
                                -------------------------------------
                          Name:  Kelley Brunson
                          Title: Vice President

<PAGE>

                          THE ROYAL BANK OF SCOTLAND plc

                          By:    /s/ Matthew J. Main
                                -------------------------------------
                          Name:  Matthew J. Main
                          Title: Senior Vice President

<PAGE>

                          WILLIAM STREET COMMITMENT CORPORATION
                          (Recourse only to assets or William
                          Street Commitment Corporation)

                          By:    /s/ Jennifer M. Hill
                                -------------------------------------
                          Name:  Jennifer M. Hill
                          Title: CFO

<PAGE>

                          SUMITOMO MITSUI BANKING CORPORATION

                          By:    /s/ Edward D. Henderson, Jr.
                                -------------------------------------
                          Name:  Edward D. Henderson, Jr.
                          Title: General Manager

<PAGE>

                          COMMERZBANK AG,
                          NEW YORK AND GRAND CAYMAN BRANCHES

                          By:    /s/ Harry Yergey
                                -------------------------------------
                          Name:  Harry Yergey
                          Title: Senior Vice President

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

<PAGE>

                          LEHMAN BROTHERS BANK, FSB

                          By:    /s/ Janine M. Shugan
                                -------------------------------------
                          Name:  Janine M. Shugan
                          Title: Authorized Signatory

<PAGE>

                          CALYON, NEW YORK BRANCH

                          By:    /s/ Jacques Busquet
                                -------------------------------------
                          Name:  Jacques Busquet
                          Title: Executive Vice President

                          By:    /s/ Philippe Soustra
                                -------------------------------------
                          Name:  Philippe Soustra
                          Title: Executive Vice President

<PAGE>

                          DEUTSCHE BANK AG NEW YORK BRANCH

                          By:    /s/ Richard Henshall
                                -------------------------------------
                          Name:  Richard Henshall
                          Title: Director

                          By:    /s/ Oliver Riedinger
                                -------------------------------------
                          Name:  Oliver Riedinger
                          Title: Vice President

<PAGE>

                          UBS LOAN FINANCE LLC

                          By:    /s/ Barbara Ezell-McMichael
                                -------------------------------------
                          Name:  Barbara Ezell-McMichael
                          Title: Associate Director Banking
                                 Products Services US

                          By:    /s/ Winslowe Ogbourne
                                -------------------------------------
                          Name:  Winslowe Ogbourne
                          Title: Associate Director Banking Products
                                 Services US

<PAGE>

                          UFJ BANK LIMITED, NEW YORK BRANCH

                          By:    /s/ L. J. Perenyi
                                -------------------------------------
                          Name:  L. J. Perenyi
                          Title: Vice President

<PAGE>

                          MERRILL LYNCH BANK USA

                          By:    /s/ Preston L. Jackson
                                -------------------------------------
                          Name:  Preston L. Jackson
                          Title: President and CEO

<PAGE>

                          CREDIT SUISSE FIRST BOSTON,
                          acting through its Cayman Islands Branch

                          By:    /s/ Thomas S. Hall
                                -------------------------------------
                          Name:  Thomas S. Hall
                          Title: Vice President

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

<PAGE>

                          WELLS FARGO BANK TEXAS, N.A.

                          By:    /s/ Richard A. Gould
                                -------------------------------------
                          Name:  Richard A. Gould
                          Title: Vice President

<PAGE>

                                                                   SCHEDULE 1.01

                               COMMITMENTS
                               -----------

    Wachovia Bank, National Association    $  114,329,268.29

    Citibank, N.A.                         $  114,329,268.29

    JPMorgan Chase Bank                    $  103,658,536.59

    Harris Nesbitt Financing, Inc.         $   91,463,414.63

    Barclays Bank PLC                      $   91,463,414.63
    The Bank of Tokyo-Mitsubishi, Ltd, --  $   91,463,414.63
    Houston Agency

    SunTrust Bank                          $   91,463,414.63

    The Royal Bank of Scotland plc         $   91,463,414.63
    Goldman Sachs
      William Street Commitment Corporation$   45,731,707.32
      Sumitomo Mitsui Banking Corporation  $   45,731,707.31
    Commerzbank  AG,  New York  and  Grand
    Cayman Branches                        $   51,829,268.29

    Lehman Brothers Bank, FSB              $   51,829,268.29

    Calyon, New York Branch                $   51,829,268.29

    Deutsche Bank AG New York Branch       $   51,829,268.29

    UBS Loan Finance LLC                   $   51,829,268.29

    UFJ Bank Limited, New York Branch      $   27,439,024.39

    Merrill Lynch Bank USA                 $   27,439,024.39

    Credit Suisse First Boston             $   27,439,024.39

    Wells Fargo Bank Texas, N.A.           $   27,439,024.39
                                              --------------

          TOTAL                            $1,250,000,000.00
                                           =================

<PAGE>

                                                                   EXHIBIT 1.01A

                        FORM OF ASSIGNMENT AND ACCEPTANCE

                             Dated: ________________

           Reference is made to the Credit Agreement dated as of August 18, 2004
(as restated,  amended, modified,  supplemented and in effect from time to time,
the "Credit Agreement"),  among Kinder Morgan Energy Partners,  L.P., a Delaware
limited  partnership  (the  "Company"),  Kinder  Morgan  Operating  L.P.  "B", a
Delaware  limited  partnership (the  "Subsidiary  Borrower"),  the Lenders named
therein,  Wachovia Bank, National Association,  as the Administrative Agent (the
"Administrative  Agent") and the other agents named therein.  Capitalized  terms
used herein and not otherwise  defined shall have the meanings  assigned to such
terms in the Credit Agreement.

           This Assignment and Acceptance,  between the Assignor (as defined and
set forth in  Schedule I hereto and made a part  hereof)  and the  Assignee  (as
defined and set forth on  Schedule I hereto and made a part  hereof) is dated as
of the Effective  Date of Assignment (as set forth on Schedule I hereto and made
a part hereof).

           1. The Assignor hereby  irrevocably sells and assigns to the Assignee
without recourse to the Assignor,  and the Assignee hereby irrevocably purchases
and  assumes  from the  Assignor  without  recourse to the  Assignor,  as of the
Effective Date of Assignment, an undivided interest (the "Assigned Interest") in
and to all the  Assignor's  rights,  obligations  and  claims  under the  Credit
Agreement  respecting those, and only those, credit facilities  contained in the
Credit  Agreement  as set  forth on  Schedule  I  (collectively,  the  "Assigned
Facilities",  individually,  an "Assigned Facility"),  in a principal amount for
each Assigned Facility as set forth on Schedule I.

           2. The Assignor (i) makes no  representation  or warranty and assumes
no responsibility with respect to any statements,  warranties or representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of the Credit  Agreement,  any other Loan Document or any other instrument
or  document  furnished  pursuant  thereto,  other than that it is the legal and
beneficial owner of the Assigned Interest and that the Assigned Interest is free
and clear of any adverse  claim;  (ii) makes no  representation  or warranty and
assumes  no  responsibility  with  respect  to the  financial  condition  of the
Borrowers or their  respective  Subsidiaries or the performance or observance by
the  Borrowers  or  their  respective  Subsidiaries  of any  of  its  respective
obligations  under the Credit  Agreement,  any other Loan  Document or any other
instrument or document furnished  pursuant thereto;  and (iii) attaches the Note
if any, held by it evidencing the Assigned  Facility or Facilities,  as the case
may be, and requests that the  Administrative  Agent exchange such Note(s) for a
new Note  payable to the  Assignor (if the Assignor has retained any interest in
the Assigned  Facility or Facilities)  and a new Note payable to the Assignee in
the amount  which  reflects the  assignment  being made hereby (and after giving
effect to any other  assignments  which have become  effective on the  Effective
Date of Assignment).

           3. The  Assignee  (i)  represents  and  warrants  that it is  legally
authorized to enter into this Assignment and  Acceptance;  (ii) confirms that it
has received a copy of the Credit

<PAGE>

Agreement,  together  with  copies of the  financial  statements  referred to in
Section  4.07  thereof,  or if  later,  the  most  recent  financial  statements
delivered  pursuant  to  Section  5.01  thereof,  and such other  documents  and
information as it has deemed appropriate to make its own credit analysis;  (iii)
agrees that it will  independently and without reliance upon the  Administrative
Agent,  the Assignor or any other Lender and based on such other  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 Credit Agreement; (iv)
appoints and  authorizes  the  Administrative  Agent to take such action as such
agent on its behalf and to  exercise  such powers as are  reasonably  incidental
thereto;  (v)  agrees  that it will be bound  by the  provisions  of the  Credit
Agreement  and will  perform in  accordance  with its terms all the  obligations
which by the terms of the Credit Agreement are required to be performed by it as
a Lender;  (vi) confirms that it is an Eligible Assignee;  (vii) if the Assignee
is  organized  under  the laws of a  jurisdiction  outside  the  United  States,
attaches the forms  prescribed  by the Internal  Revenue  Services of the United
States certifying as to the Assignee's  exemption from United States withholding
taxes with respect to all  payments to be made to the Assignee  under the Credit
Agreement  or such other  documents as are  necessary to indicate  that all such
payments  are subject to such tax at a rate by an  applicable  tax  treaty,  and
(viii)  has  supplied   the   information   requested   on  the   administrative
questionnaire provided by the Administrative Agent.

           4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Administrative  Agent for acceptance by it and the Borrowers
and  recording  by the  Administrative  Agent  pursuant to Section  10.05 of the
Credit  Agreement,  effective  as of the  Effective  Date of  Assignment  (which
Effective  Date  of  Assignment  shall,   unless  otherwise  agreed  to  by  the
Administrative Agent, be at least five Business Days after the execution of this
Assignment and Acceptance).

           5. Upon such  acceptance and recording,  from and after the Effective
Date of Assignment,  the Administrative Agent shall make all payments in respect
of the Assigned Interest  (including payments of principal,  interest,  fees and
other  amounts) to the Assignee,  whether such amounts have accrued prior to the
Effective  Date of  Assignment or accrue  subsequent  to the  Effective  Date of
Assignment.  The Assignor and Assignee shall make all appropriate adjustments in
payments  for  periods  prior  to  the  Effective  Date  of  Assignment  by  the
Administrative  Agent or with respect to the making of this assignment  directly
between themselves.

           6. From and after the Effective Date of Assignment,  (i) the Assignee
shall be party to the  Credit  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 claims and rights and be released from
its obligations under the Credit Agreement.

           7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                                      -2-
<PAGE>

           IN WITNESS  WHEREOF,  the parties hereto have caused this  Assignment
and Acceptance to be executed by their  respective duly  authorized  officers on
Schedule I hereto.

                                        ________________________________________

                                        ________________________________________

                                      -3-
<PAGE>

              Schedule I to Assignment and Acceptance

Legal Name of Assignor:_________________________________________________________

Legal Name of Assignee:_________________________________________________________

Effective Date of Assignment:___________________________________________________

                                                  Percentage Assigned of Each
                                                    Facility (to at least 8
                                                     decimals) (Shown as a
                           Principal                percentage of aggregate
                            Amount of                held by all applicable
Assigned Facilities     Assigned Interest                  Lenders)
-------------------     -----------------                  --------------

Commitment                 $_________                       _______%

Committed Loans            $_________                       _______%

Competitive Loans          $_________                       _______%

           Total           $_________

                                      -4-
<PAGE>

                                                                 EXHIBIT 1.01B-2

                        OTHER EXISTING LETTERS OF CREDIT
                        --------------------------------
<TABLE>
<CAPTION>

                                                                                             Expiration     Automatic
    Beneficiary                   Purpose                 Amount              Issuer             Date       Renewable
    -----------                   -------                 ------              ------             ----       ---------
<S>                         <C>                      <C>                 <C>                   <C>              <C>
Bank One Trust Company      Backup OHPA Bonds        $ 26,942,851.72     Wachovia Bank, NA     12/23/2004       No
Travelers                   Worker's Comp - Laser    $    200,000.00     Wachovia Bank, NA     06/04/2004       Yes
Morgan Stanley              Crude Hedges             $100,000,000.00     Wachovia Bank, N.A.   12/31/2004       No
                                                     ---------------

Total Other Existing Letters of Credit               $127,142,851.72

</TABLE>

<PAGE>

                                                                  EXHIBIT 1.01-C

                             FORM OF COMMITTED NOTE
                             ----------------------

[$________________]                                         _____________, _____

           FOR VALUE RECEIVED,  the undersigned,  KINDER MORGAN ENERGY PARTNERS,
L.P., a Delaware limited partnership, (the "Company"), HEREBY PROMISES TO PAY to
the   order  of   _______________________________________________________   (the
"Lender"),  the lesser of (i) such  Lender's  Commitment  and (ii) the aggregate
amount of  Committed  Loans made by the Lender and  outstanding  on the Maturity
Date.  The  principal  amount of the  Committed  Loans made by the Lender to the
Company  shall  be due  and  payable  on the  dates  and in the  amounts  as are
specified  in that  certain  Credit  Agreement  dated as of August 18,  2004 (as
restated,  amended, modified,  supplemented and in effect from time to time, the
"Credit  Agreement")  among the Company,  the Subsidiary  Borrower,  the Lender,
certain  other  lenders  that  are  party  thereto,   Wachovia  Bank,   National
Association,  as Administrative Agent for the Lender and such other lenders, and
the other  agents  named  therein.  All  capitalized  terms used  herein and not
otherwise defined shall have the meanings as defined in the Credit Agreement.

           The Company  promises to pay interest on the unpaid  principal amount
of each Committed Loan outstanding from time to time from the date thereof until
such  principal  amount is paid in full, at such  interest  rates and payable on
such dates as are specified in the Credit Agreement. Both principal and interest
are payable in same day funds in lawful money of the United States of America to
the Administrative  Agent at its Principal Office, or at such other place as the
Administrative Agent shall designate in writing to the Company.

           This Note is one of the Committed Notes referred to in, and this Note
and all provisions herein are entitled to the benefits of, the Credit Agreement.
The  Credit  Agreement,  among  other  things  (a)  provides  for the  making of
Committed  Loans by the Lender and the other lenders to the Company from time to
time, and (b) contains  provisions for  acceleration of the maturity hereof upon
the happening of certain stated events,  for prepayments on account of principal
hereof  prior to the  maturity  hereof  upon the  terms and  conditions  therein
specified,  and for  limitations  on the  amount of  interest  paid such that no
provision  of the Credit  Agreement  or this Note shall  require  the payment or
permit the collection of interest in excess of the Maximum Rate.

           This Note may be held by the Lender for the account of its applicable
lending office and may be transferred from one lending office to another lending
office from time to time as the Lender may determine.

           The  Company  and any  and all  endorsers,  guarantors  and  sureties
severally  waive grace,  demand,  presentment  for payment,  notice of dishonor,
default or intent to accelerate,  protest and notice of protest and diligence in
collecting  and  bringing  of suit  against any party  hereto,  and agree to all
renewals,   extensions  or  partial  payments  hereon  and  to  any  release  or
substitution of security  herefor,  in whole or in part, with or without notice,
before or after maturity.

<PAGE>

           This Note shall be  governed by and  construed  under the laws of the
State of New York and the applicable laws of the United States of America.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management, LLC,
                                       its Delegate

                                       By:    _______________________________
                                       Name:
                                       Title:

                                      -2-
<PAGE>

                                                                  EXHIBIT 1.01-D

                            FORM OF COMPETITIVE NOTE

                                                            _____________, _____

           FOR VALUE RECEIVED,  the undersigned,  KINDER MORGAN ENERGY PARTNERS,
L.P., a Delaware limited partnership, (the "Company"), HEREBY PROMISES TO PAY to
the order of ________________________________  (the "Lender"), the lesser of (i)
the aggregate amount of Commitments of all Lenders and (ii) the aggregate amount
of  Competitive  Loans made by the Lender and  outstanding on the Maturity Date.
The principal amount of the Competitive  Loans made by the Lender to the Company
shall be due and  payable on the dates and in the  amounts as are  specified  in
that certain Credit Agreement dated as of August 18, 2004 (as restated, amended,
modified,  supplemented and in effect from time to time, the "Credit Agreement")
among the Company,  the Subsidiary Borrower,  the Lender,  certain other lenders
that  are  party  thereto,   Wachovia  Bank,   National   Association,   as  the
Administrative Agent for the Lender and such other lenders, and the other agents
named therein. All capitalized terms used herein and not otherwise defined shall
have the meanings as defined in the Credit Agreement.

           The Company  promises to pay interest on the unpaid  principal amount
of each  Competitive  Loan  outstanding  from time to time from the date thereof
until such principal  amount is paid in full, at such interest rates and payable
on such dates as are  specified  in the Credit  Agreement.  Both  principal  and
interest are payable in same day funds in lawful  money of the United  States of
America to the  Administrative  Agent at the Principal  Office, or at such other
place as the Administrative Agent shall designate in writing to the Company.

           This Note is one of the  Competitive  Notes  referred to in, and this
Note and all  provisions  herein are  entitled  to the  benefits  of, the Credit
Agreement. The Credit Agreement,  among other things (a) provides for the making
of  Competitive  Loans by the Lender and the other  lenders to the Company  from
time to time,  and (b)  contains  provisions  for  acceleration  of the maturity
hereof upon the happening of certain stated events,  for  prepayments on account
of principal  hereof prior to the maturity  hereof upon the terms and conditions
therein specified,  and for limitations on the amount of interest paid such that
no provision of the Credit  Agreement or this Note shall  require the payment or
permit the collection of interest in excess of the Maximum Rate.

           This Note may be held by the Lender for the account of its applicable
lending office and may be transferred from one lending office to another lending
office from time to time as the Lender may determine.

           The  Company  and any  and all  endorsers,  guarantors  and  sureties
severally  waive grace,  demand,  presentment  for payment,  notice of dishonor,
default or intent to accelerate,  protest and notice of protest and diligence in
collecting  and  bringing  of suit  against any party  hereto,  and agree to all
renewals,   extensions  or  partial  payments  hereon  and  to  any  release  or
substitution of security  herefor,  in whole or in part, with or without notice,
before or after maturity.

<PAGE>

           This Note shall be  governed by and  construed  under the laws of the
State of New York and the applicable laws of the United States of America.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management, LLC,
                                       its Delegate

                                       By:    _____________________________
                                       Name:
                                       Title:

                                      -2-
<PAGE>

                                                                  EXHIBIT 1.01-E

                             FORM OF SWINGLINE NOTE
                             ----------------------

$25,000,000                                                ______________, _____

           FOR VALUE RECEIVED,  the undersigned,  KINDER MORGAN ENERGY PARTNERS,
L.P., a Delaware limited partnership (the "Company"),  HEREBY PROMISES TO PAY to
the order of __________________________________________________  (the "Swingline
Lender"),  the  lesser  of (i)  $25,000,000  and (ii) the  aggregate  amount  of
Swingline  Loans made by the Swingline  Lender and  outstanding  on the Maturity
Date. The principal  amount of the Swingline Loans made by the Swingline  Lender
to the  Company  shall be due and payable on the dates and in the amounts as are
specified  in that  certain  Credit  Agreement  dated as of August 18,  2004 (as
restated,  amended, modified,  supplemented and in effect from time to time, the
"Credit Agreement") among the Company,  the Subsidiary  Borrower,  the Swingline
Lender,  certain other lenders that are party thereto,  Wachovia Bank,  National
Association,  as  Administrative  Agent for the Swingline  Lender and such other
lenders,  and the other agents named therein.  All capitalized terms used herein
and not  otherwise  defined  shall  have the  meanings  as defined in the Credit
Agreement.

           The Company  promises to pay interest on the unpaid  principal amount
of each Swingline Loan outstanding from time to time from the date thereof until
such  principal  amount is paid in full, at such  interest  rates and payable on
such dates as are specified in the Credit Agreement. Both principal and interest
are payable in same day funds in lawful money of the United States of America to
the  Swingline  Lender at 301 South  College  Street,  TW-10,  Charlotte,  North
Carolina  28288-0608 or such other place as the Swingline Lender shall designate
in writing to the Company.

           This Note is the Swingline Note referred to in, and this Note and all
provisions  herein are entitled to the benefits  of, the Credit  Agreement.  The
Credit  Agreement,  among other  things (a) provides for the making of Swingline
Loans by the Swingline Lender to the Company from time to time, and (b) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated  events,  for  prepayments  on account of  principal  hereof prior to the
maturity  hereof  upon the  terms  and  conditions  therein  specified,  and for
limitations  on the amount of interest paid such that no provision of the Credit
Agreement  or this Note shall  require the payment or permit the  collection  of
interest in excess of the Maximum Rate.

           The  Company  and any  and all  endorsers,  guarantors  and  sureties
severally  waive grace,  demand,  presentment  for payment,  notice of dishonor,
default or intent to accelerate,  protest and notice of protest and diligence in
collecting  and  bringing  of suit  against any party  hereto,  and agree to all
renewals,   extensions  or  partial  payments  hereon  and  to  any  release  or
substitution of security  herefor,  in whole or in part, with or without notice,
before or after maturity.

           This Note shall be  governed by and  construed  under the laws of the
State of New York and the applicable laws of the United States of America.

<PAGE>

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management, LLC,
                                       its Delegate

                                       By:    _______________________________
                                       Name:
                                       Title:

                                      -2-
<PAGE>

                                                                    EXHIBIT 2.03

                            FORM OF BORROWING REQUEST
                            -------------------------

                                Dated __________

Wachovia Bank, National Association,
as Administrative Agent
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

           This  Borrowing  Request is delivered to you by Kinder  Morgan Energy
Partners,  L.P. (the "Company"),  a Delaware limited partnership,  under Section
2.03 of the Credit Agreement dated as of August 18, 2004, (as restated, amended,
modified,  supplemented and in effect, the "Credit  Agreement") by and among the
Company,  the Subsidiary  Borrower,  the Lenders party  thereto,  Wachovia Bank,
National  Association,  as  Administrative  Agent,  and the other  agents  named
therein.

           1. The Company hereby  requests that the Lenders make a Loan or Loans
in the aggregate  principal amount of  $______________  (the "Committed Loan" or
the "Committed Loans")./1

           2. The Company  hereby  requests that the Committed Loan or Committed
Loans be made on the following Business Day:
________________./2

           3. The Company  hereby  requests that the Committed Loan or Committed
Loans bear interest at the following  interest rate, plus the Applicable Margin,
as set forth below:

                                                                      Maturity
                                                                      Date for
                     Principal                       Interest         Interest
                   Component of                       Period           Period
   Type of          Committed        Interest          (if               (if
Committed Loan         Loan            Rate        applicable)       applicable)
--------------         ----            ----        -----------       -----------

           4. The Company hereby requests that the funds from the Committed Loan
or   Committed   Loans   be   disbursed   to   the   following   bank   account:
______________________________.

           5. After giving effect to the requested  Committed  Loan,  the sum of
the  Committed  Credit  Exposures,   plus  the  aggregate  principal  amount  of
Competitive Loans

______________________
1     Complete  with an amount in  accordance  with Section 2.03 of
      the Credit Agreement.

2     Complete with a Business Day in accordance  with Section 2.03
      of the Credit Agreement.

<PAGE>

outstanding  as of the date  hereof  (including  the  requested  Loans) does not
exceed the maximum amount  permitted to be outstanding  pursuant to the terms of
the Credit Agreement.

           6. All of the conditions  applicable to the Committed Loans requested
herein as set forth in the Credit  Agreement  have been satisfied as of the date
hereof and will remain satisfied to the date of such Loans.

           7. All  capitalized  undefined  terms used herein  have the  meanings
assigned thereto in the Credit Agreement.

           IN WITNESS  WHEREOF,  the undersigned have executed this
Borrowing Request this _____ day of _______________, ______.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management, LLC,
                                       its Delegate

                                       By: _________________________________
                                       Name:
                                       Title:

                                      -2-
<PAGE>

                                                                  EXHIBIT 2.04-A

                         FORM OF COMPETITIVE BID REQUEST

Wachovia Bank, National Association,
as Administrative Agent
301 South College Street
Charlotte, North Carolina  28288-0608

Attention: Syndication Agency Services

Ladies and Gentlemen:

           Reference is made to the Credit Agreement dated as of August 18, 2004
(as restated,  amended, modified,  supplemented and in effect from time to time,
the "Credit Agreement"),  among the undersigned,  the Subsidiary  Borrower,  the
Lenders party thereto,  Wachovia Bank, National  Association,  as Administrative
Agent, and the other agents named therein. Capitalized terms used herein and not
otherwise  defined herein shall have the meanings  assigned to such terms in the
Credit  Agreement.  The undersigned  hereby gives you notice pursuant to Section
2.04 of the Credit Agreement that it requests a Competitive  Borrowing under the
Credit  Agreement,  and in that  connection  sets forth below the terms on which
such Competitive Borrowing is requested to be made:

(A)   Borrowing Date of Competitive
      Borrowing (which is a Business Day)         ______________________________

(B)   Aggregate Principal Amount of
      Competitive Borrowing/1                     ______________________________

(C) Interest rate basis/2                         ______________________________

(D) Interest Period and the last
    day thereof /3                                ______________________________

(E) Location and number of Company's account
      to which funds are to be deposited          ______________________________

--------------------------
1     Not less than  $25,000,000 or greater than the unused Total Commitment and
      in integral multiples of $1,000,000.

2     Eurodollar Competitive Borrowing or Fixed Rate Borrowing.

3     Which shall have a duration (i) in the case of a Eurodollar  Loan, of one,
      two,  three or six months and (ii) in the case of Fixed Rate Loan,  of not
      less than seven days nor more than 180 days,  and which,  in either  case,
      shall end not later than the Termination Date.

<PAGE>

           By the delivery of this Competitive Bid Request and the acceptance of
any or all of the  Competitive  Loans offered by the Lenders in response to this
Competitive Bid Request, the undersigned shall be deemed to have represented and
warranted that the applicable  conditions to lending specified in Article III of
the  Credit  Agreement  have been  satisfied  with  respect  to the  Competitive
Borrowing requested hereby.

                               Very truly yours,

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management,
                                      LLC,
                                       its Delegate

                                       By:  _________________________________
                                       Name:
                                       Title:

                                      -2-
<PAGE>

                                                                  EXHIBIT 2.04-B

              FORM OF NOTICE TO LENDERS OF COMPETITIVE BID REQUEST

[Name of Lender]
[Address of Lender]

                                                                          [Date]
Attention:

Ladies and Gentlemen:

           Reference is made to the Credit Agreement dated as of August 18, 2004
(as restated,  amended, modified,  supplemented and in effect from time to time,
the  "Credit  Agreement"),  among  Kinder  Morgan  Energy  Partners,  L.P.  (the
"Company"),  the Subsidiary Borrower, the Lenders party thereto,  Wachovia Bank,
National  Association,  as  Administrative  Agent,  and the other  agents  named
therein.  Capitalized  terms used herein and not otherwise  defined herein shall
have the meanings  assigned to such terms in the Credit  Agreement.  The Company
delivered a Competitive Bid Request  requesting a Competitive Bid on __________,
, pursuant to Section  2.04(a) of the Credit  Agreement,  and in that connection
you  are  invited  to  submit  a  Competitive  Bid  by  [Date] / [Time]./1  Your
Competitive Bid must comply with Section 2.04(b) of the Credit Agreement and the
terms set forth below on which the Competitive Bid Request was made:

(A) Date of Competitive Borrowing       ________________________________________

(B) Principal amount of
      Competitive Borrowing             ________________________________________

(C) Interest rate basis
      (i.e., Eurodollar or Fixed Rate)  ________________________________________

(D) Interest Period and the last
    day thereof/2                       ________________________________________

________________________
1    The Competitive Bid must be received by the Administrative Agent (i) in the
     case of  Eurodollar  Loans,  not later  than 10:00  a.m.  Charlotte,  North
     Carolina, time, three Business Days before the Borrowing Date of a proposed
     Competitive  Borrowing, and (ii) in the case of Fixed Rate Loans, not later
     than 10:00 a.m., Charlotte, North Carolina, time on the Borrowing Date of a
     proposed Cometitive Borrowing.

2    Which may not be a date later than the Termination Date.

<PAGE>

                               Very truly yours,

                               WACHOVIA BANK, NATIONAL
                               ASSOCIATION, as Administrative Agent

                               By:__________________________________________
                               Name:________________________________________
                               Title:_______________________________________

                                      -2-
<PAGE>

                                                                  EXHIBIT 2.04-C

                             FORM OF COMPETITIVE BID

Wachovia Bank, National Association,
as Administrative Agent
301 South College Street
Charlotte, North Carolina  28228-0608                                     [Date]

Attention:  Syndication Agency Services

Ladies and Gentlemen:

           The  undersigned,  [Name of Lender],  refers to the Credit  Agreement
dated as of August 18, 2004 (as restated, amended, modified, supplemented and in
effect from time to time,  the "Credit  Agreement"),  among Kinder Morgan Energy
Partners,  L.P. (the  "Company"),  the  Subsidiary  Borrower,  the Lenders party
thereto,  Wachovia Bank, National Association,  as Administrative Agent, and the
other  agents named  therein.  Capitalized  terms used herein and not  otherwise
defined  herein  shall have the  meanings  assigned  to such terms in the Credit
Agreement.  The  undersigned  hereby makes a Competitive Bid pursuant to Section
2.04(b) of the Credit Agreement, in response to the Competitive Bid Request made
by the Company on  _________________,  ____, and in that  connection  sets forth
below the terms on which such Competitive Bid is made:

(A) Principal Amount/1          ________________________________________________

(B) Competitive Bid Rate/2      ________________________________________________

(C) Interest Period and
    the last day thereof/3      ________________________________________________

           The undersigned  hereby confirms that it is prepared to extend credit
to the Company upon  acceptance  by the Company of this bid in  accordance  with
Section 2.04(d) of the Credit Agreement.

                               Very truly yours,

                               [NAME OF LENDER]

                               By:_____________________________________________
                               Name:
                               Title:

____________________________

1    Not  less  than  $5,000,000  or  greater  than  the  requested  Competitive
     Borrowing and in integral  multiples of $1,000,000  above said  $5,000,000.
     Multiple bids will be accepted by the Administrative Agent.

2    i.e.  LIBOR  Rate + or -  _______%,  in the case of  Eurodollar  Loans,  or
     _____%, in the case of Fixed Rate Loan (in each case, expressed in the form
     of a decimal to no more than four decimal places).

3    The  Interest  Period  must  be  the  Interest  Period   specified  in  the
     Competitive Bid Request.

<PAGE>

                                                                    EXHIBIT 2.06

                        FORM OF LETTER OF CREDIT REQUEST
                        --------------------------------

                                Dated __________

Wachovia Bank, National Association,
as Administrative Agent and as Issuing Bank
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

           This Letter of Credit  Request is delivered  to you by Kinder  Morgan
Energy Partners L.P. (the  "Company"),  a Delaware  limited  partnership,  under
Section 2.06 of the Credit  Agreement dated as of August 18, 2004, (as restated,
amended,  modified,  supplemented,  and in effect from time to time, the "Credit
Agreement") by and among the Company, the Subsidiary Borrower, the Lenders party
thereto,  Wachovia Bank, National Association,  as Administrative Agent, and the
other agents named therein.

           The Company hereby  requests the issuance of a Letter of Credit under
the Credit  Agreement,  and in that  connection sets forth below the information
relating to such Letter of Credit (the "Proposed  Letter of Credit") as required
by Section 2.06(c) of the Credit  Agreement.  The Proposed Letter of Credit must
be issued:

           (a)   on or before ____________________, _____/1

           (b)   for  the   benefit   of   _____________   whose   address  is
                 __________________

           (c)   in the amount of $_________________

           (d)   having an expiry date of ________________, ____/2

           (e)   attached hereto is any special language to be incorporated into
                 the Proposed Letter of Credit.

                                       or

           1.  The  Company  hereby  refers  to Letter  of  Credit  Number  (the
"Expiring  Letter of Credit") which has an existing expiry date of . The Company
hereby  requests  that  [the  expiry  date of the  Expiring  Letter of Credit be
extended to  _____________./2]  [the  Issuing Bank permit the expiry date of the
Expiring  Letter of Credit be extended to  ________________./2]1.  After  giving
effect to the Proposed Letter of Credit,  neither the LC Exposure nor the sum of
the

________________________

1    Must be a date not earlier  than five Busines Days after notice is given to
     the Issuing Bank

2    Must comply with Section 2.06(d) of the Credit Agreement.

<PAGE>

Committed Credit Exposures,  plus the aggregate  principal amount of Competitive
Loans exceeds the maximum  amount  permitted to be  outstanding  pursuant to the
terms of the Credit Agreement.

           2. All of the conditions  applicable to the Loans requested herein as
set forth in the Credit  Agreement have been satisfied as of the date hereof and
will remain satisfied to the date of the Proposed Letter of Credit.

           3. All  capitalized  undefined  terms used herein  have the  meanings
assigned thereto in the Credit Agreement.

           IN WITNESS  WHEREOF,  the undersigned have executed this
Letter of Credit Request this _____ day of _______________, _____.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management, LLC,
                                       its Delegate

                                       By:____________________________________
                                       Name:
                                       Title:

                                      -2-
<PAGE>

                                                                    EXHIBIT 2.07

                  FORM OF NOTICE OF ACCOUNT DESIGNATION
                  -------------------------------------

                                Dated ___________

Wachovia Bank, National Association,
as Administrative Agent
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

           This  Notice of Account  Designation  is  delivered  to you by Kinder
Morgan Energy Partners,  L.P. (the "Company"),  a Delaware limited  partnership,
under  Section  2.07 of the Credit  Agreement  dated as of August  18,  2004 (as
restated,  amended, modified,  supplemented and in effect from time to time, the
"Credit  Agreement")  by and among the Company,  the  Subsidiary  Borrower,  the
Lenders party thereto,  Wachovia Bank, National  Association,  as Administrative
Agent, and the other agents named therein.

           The  Administrative  Agent is hereby  authorized to disburse all Loan
proceeds into the following account(s):

                          [Insert name of bank/
                          ABA Routing Number/
                          and Account Number]

           IN WITNESS  WHEREOF,  the  undersigned  has executed  this  Notice of
Account Designation this _____ day of ___________________, ____.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management, LLC,
                                       its Delegate

                                       By:  ___________________________________
                                       Name:
                                       Title:

<PAGE>

                                                                    EXHIBIT 2.08

                        FORM OF INTEREST ELECTION REQUEST
                        ---------------------------------

                               Dated _____________

Wachovia Bank, National Association,
as Administrative Agent
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

           This  irrevocable   Interest  Election  Request  (the  "Request")  is
delivered to you under Section 2.08 of the Credit  Agreement  dated as of August
18, 2004 (as restated,  amended, modified,  supplemented and in effect from time
to time, the "Credit  Agreement"),  by and among Kinder Morgan Energy  Partners,
L.P., a Delaware limited partnership (the "Company"),  the Subsidiary  Borrower,
the Lenders party thereto (the "Lenders"),  Wachovia Bank, National  Association
as Administrative Agent, and the other agents named therein.

      1.   This Interest Election Request is submitted for the purpose of:

           (a)  [Converting]  [Continuing]  a ____________ Committed Loan [into]
                [as] a ____________ Loan./1

           (b)  The aggregate  outstanding  principal  balance of such Committed
                Loan is $______________.

           (c)  The last day of the current  Interest  Period for such Committed
                Loan is _____________./2

           (d)  The principal  amount of such  Committed  Loan to be [converted]
                [continued] is $_____________./3

           (e)  The requested effective date of the [conversion]  [continuation]
                of such Committed Loan is _______________./4

           (f)  The requested  Interest  Period  applicable  to the  [converted]
                [continued] Committed Loan is
                ____________________./5

____________________________________

1     Delete the bracketed  language and insert  "Alternate Base Rate" or "LIBOR
      Rate", as applicable, in each blank.

2     Insert   applicable   date  for  any  Eurodollar  Loan  being
      converted or continued.

3     Complete  with an amount in  compliance  with Section 2.08 of
      the Credit Agreement.

4     Complete with a Business Day in compliance  with Section 2.08
      of the Credit Agreement.

<PAGE>

      2. No  Default or Event of  Default  exists,  and none will exist upon the
conversion or continuation of the Committed Loan requested herein.

      3. All capitalized  undefined terms used herein have the meanings assigned
thereto in the Credit Agreement.

     IN WITNESS  WHEREOF,  the undersigned  has executed this Interest  Election
Request this _____ day of ___________________, ____.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management, LLC,
                                       its Delegate

                                       By: ____________________________________
                                       Name:
                                       Title:

________________________________________________________________________________

5     Complete for each Eurodollar Loan in compliance with the definition of the
      term "Interest Period" specified in Section 1.01.

                                      -2-
<PAGE>

                                                                    EXHIBIT 2.11

                          FORM OF NOTICE OF PREPAYMENT
                          ----------------------------

Wachovia Bank, National Association,
as Administrative Agent
301 South College Street
Charlotte, North Carolina  28228-0608

Attention:  Syndication Agency Services

Ladies and Gentlemen:

           This  irrevocable  Notice of Prepayment is delivered to you by Kinder
Morgan Energy Partners,  L.P. (the "Company"),  a Delaware limited  partnership,
under  Section  2.11 of the Credit  Agreement  dated as of August  18,  2004 (as
restated,  amended, modified,  supplemented and in effect from time to time, the
"Credit  Agreement"),  by and among the Company,  the Subsidiary  Borrower,  the
Lenders  party   thereto,   Wachovia   Bank,   National   Association,   as  the
Administrative Agent, and the other agents named therein.

           1. The Company hereby  provides  notice to the  Administrative  Agent
that the Company shall repay the following ABR Loans and/or  Eurodollar Loans in
the amount of $_____________./1

           2.  The  Company  shall  repay  the  above-referenced  Loans  on  the
following Business Day: ___________________./2

           3. All  capitalized  undefined  terms used herein  have the  meanings
assigned thereto in the Credit Agreement.

           IN WITNESS  WHEREOF,  the undersigned have executed this
Borrowing Request this _____ day of _______________, _____.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management,
                                      LLC,
                                       its Delegate

_______________________________

1     Complete  with an amount in accordance  with Section  2.11(b)
      of the Credit Agreement.

2     Complete  with a  Business  Day in  accordance  with  Section
      2.11(b) of the Credit Agreement.

<PAGE>

                                       By: ____________________________________
                                       Name:
                                       Title:

                                      -2-
<PAGE>

                                                                    EXHIBIT 5.01

                         FORM OF COMPLIANCE CERTIFICATE

           The    undersigned     hereby    certifies    that    he    is    the
____________________________  of  KINDER  MORGAN  MANAGEMENT,  LLC,  a  Delaware
limited  liability  company,  the delegate of the KINDER  MORGAN  G.P.,  INC., a
Delaware corporation,  general partner of KINDER MORGAN ENERGY PARTNERS, L.P., a
Delaware limited partnership (the "Company"),  and that as such he is authorized
to execute  this  certificate  on behalf of the Company.  With  reference to the
Credit  Agreement dated as of August 18, 2004 (as restated,  amended,  modified,
supplemented  and in  effect  from  time to time,  the  "Agreement")  among  the
Company,  the Subsidiary  Borrower,  Wachovia  Bank,  National  Association,  as
Administrative  Agent,  for the lenders  (the  "Lenders"),  and the other agents
named  therein,  which  are or become a party  thereto,  and such  Lenders,  the
undersigned  represents  and  warrants as follows  (each  capitalized  term used
herein  having the same meaning given to it in the  Agreement  unless  otherwise
specified);

           (a)  Attached  hereto  are the  detailed  computations  necessary  to
      determine whether the Company is in compliance with Sections 6.06(a),  (b)
      and  (c) of the  Agreement  as of the end of the  [fiscal  quarter][fiscal
      year] ending
      ________________.

           (b) There  currently  does not exist any  Default or Event of Default
      under the Agreement.

           EXECUTED AND DELIVERED this _____ day of ________________, ______.

                               KINDER MORGAN ENERGY PARTNERS, L.P.,
                               as the Company

                                  By:  Kinder Morgan G.P., Inc.,
                                       its General Partner

                                  By:  Kinder Morgan Management,
                                      LLC,
                                       its Delegate

                                       By: ____________________________________
                                       Name:
                                       Title:<PAGE>
EXHIBIT 4.1

THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO ISLAND PACIFIC, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.

               AMENDED AND RESTATED SECURED CONVERTIBLE TERM NOTE
               --------------------------------------------------

         FOR VALUE RECEIVED, ISLAND PACIFIC, INC., a Delaware corporation (the
"BORROWER"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore
Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church
Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the "HOLDER") or its
registered assigns or successors in interest, on order, the sum of Seven Million
Dollars ($7,000,000), together with any accrued and unpaid interest hereon, on
to July 12, 2007 (the "MATURITY DATE");

         Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase Agreement
dated as of the date hereof between the Borrower and the Holder (the "PURCHASE
AGREEMENT").

The following terms shall apply to this Note:

ARTICLE I
                             INTEREST & AMORTIZATION

         1.1. INTEREST RATE. Subject to Sections 4.11 and 5.6 hereof, interest
payable on this Note shall accrue at a rate per annum (the "Interest Rate")
equal to the "prime rate" published in The Wall Street Journal from time to
time, plus two percent (2.0%). The prime rate shall be increased or decreased as
the case may be for each increase or decrease in the prime rate in an amount
equal to such increase or decrease in the prime rate; each change to be
effective as of the day of the change in such rate. Interest shall be (i)
calculated on the basis of a 365 day year, and (ii) payable monthly, in arrears,
commencing on August 1, 2004 and on the first business day of each consecutive
calendar month thereafter until the Maturity Date (and on the Maturity Date),
whether by acceleration or otherwise (each, a "REPAYMENT DATE").

         1.2. INTEREST RATE ADJUSTMENT. The Interest Rate shall be calculated on
the last business day of each month hereafter until the Maturity Date (each a
"DETERMINATION DATE") and shall be subject to adjustment as set forth herein. If
(i) the Borrower shall have registered the shares of the Borrower's common stock
underlying each of the conversion of the Note and that certain warrant issued to
Holder on a registration statement declared effective by the Securities and
Exchange Commission (the "SEC"), and (ii) the market price (the "Market Price")
of the Common Stock as reported by Bloomberg, L.P. on the Principal Market (as
defined below) for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty five percent (25%), the Interest Rate for the succeeding calendar
month shall automatically be reduced by 200 basis points (200 b.p.) (2.0%) for
each incremental twenty five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. If (i) the
Borrower shall not have registered the shares of the Borrower's common stock
underlying the conversion of the Note and that certain warrant issued to Holder
on a registration statement declared effective by the SEC and which remains
effective, and (ii) the Market Price of the Common Stock as reported by
Bloomberg, L.P. on the principal market for the five (5) trading days
immediately preceding a Determination Date exceeds the then applicable Fixed
Conversion Price by at least twenty five percent (25%), the Interest Rate for
the succeeding calendar month shall automatically be decreased by 100 basis
points (100 b.p.) (1.0%) for each incremental twenty five percent (25%) increase
in the Market Price of the Common Stock above the then applicable Fixed
Conversion Price. Notwithstanding the foregoing (and anything to the contrary
contained in herein), in no event shall the Interest Rate be less than zero
percent (0%).

         1.3. MINIMUM MONTHLY PRINCIPAL PAYMENTS. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"PRINCIPAL AMOUNT") shall begin on March 1, 2005 and shall recur on the first
business day of each succeeding month thereafter until the Maturity Date (each,
an "AMORTIZATION DATE"). Subject to Article 3 below, beginning on the first
Amortization Date, the Borrower shall make monthly payments to the Holder on
each Repayment Date, each in the amount of $212,121.21, together with any
accrued and unpaid interest to date on such portion of the Principal Amount plus
any and all other amounts which are then owing under this Note, the Purchase
Agreement or any other Related Agreement but have not been paid (collectively,
the "MONTHLY AMOUNT"). Any Principal Amount that remains outstanding on the
Maturity Date shall be due and payable on the Maturity Date.

                                   ARTICLE II
                              CONVERSION REPAYMENT

         2.1. PAYMENT OF MONTHLY AMOUNT IN CASH OR COMMON STOCK. Each month by
the fifth (5th) business day prior to each Amortization Date (the "NOTICE
DATE"), the Holder shall deliver to Borrower a written notice in the form of
Exhibit B attached hereto converting the Monthly Amount payable on the next
Repayment Date in either cash or Common Stock, or a combination of both (each, a
"REPAYMENT NOTICE"). If a Repayment Notice is not delivered by the Holder on or
before the applicable Notice Date for such Repayment Date, then the Borrower
shall pay the Monthly Amount due on such Repayment Date in cash. Any portion of
the Monthly Amount paid in cash on a Repayment Date, shall be paid to the Holder
in an amount equal to 102% of the principal portion of the Monthly Amount due
and owing to Holder on the Repayment Date. If the Holder converts all or a
portion of the Monthly Amount in shares of Common Stock as provided herein, the
number of such shares to be issued by the Borrower to the Holder on such
Repayment Date shall be the number determined by dividing (x) the portion of the
Monthly Amount to be paid in shares of Common Stock, by (y) the then applicable
Fixed Conversion Price. For purposes hereof, the initial "FIXED CONVERSION
PRICE" means 0.37 until the first Two Million Dollars ($2,000,000) of Principal
Amount is converted into Common Stock hereunder, and $0.56 for all remaining
amounts to be converted hereunder.

         2.2. MONTHLY AMOUNT CONVERSION GUIDELINES. Subject to Sections 2.1(a),
2.2, and 3.2 hereof, the Holder shall convert all or a portion of the Monthly
Amount due on each Repayment Date in shares of Common Stock if the average
closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) trading days immediately preceding such
Repayment Date was greater than or equal to 110% of the Fixed Conversion Price,
provided, however, that such conversions shall not exceed twenty five percent
(25%) of the aggregate dollar trading volume of the Common Stock for the five
(5) day trading period immediately preceding delivery of a Notice of Conversion
to the Borrower. Any part of the Monthly Amount due on a Repayment Date that the
Holder has not converted into shares of Common Stock shall be paid by the
Borrower in cash on such Repayment Date. Any part of the Monthly Amount due on
such Repayment Date which must be paid in cash (as a result of the closing price
of the Common Stock on one or more of the five (5) trading days preceding the
applicable Repayment Date being less than 110% of the Fixed Conversion Price)
shall be paid in cash at the rate of 102% of the Monthly Amount otherwise due on
such Repayment Date, within three (3) business days of the applicable Repayment
Date.

         2.3. NO EFFECTIVE REGISTRATION. Notwithstanding anything to the
contrary herein, none of the Borrower's obligations to the Holder shall be
converted into Common Stock unless (i) either (x) an effective current
Registration Statement (as defined in the Registration Rights Agreement)
covering the shares of Common Stock to be issued in connection with satisfaction
of such obligations exists or (y) an exemption from registration of the Common
Stock is available to pursuant to Rule 144 of the Securities Act and (ii) no
Event of Default hereunder exists and is continuing, unless such Event of
Default is cured within any applicable cure period or is otherwise waived in
writing by the Holder in whole or in part at the Holder's option.

         Any amounts converted by the Holder pursuant to this Section 2.2 shall
be deemed to constitute payments of outstanding fees, interest and principal
arising in connection with Monthly Amounts for the remaining Repayment Dates, in
chronological order.

         2.4. OPTIONAL REDEMPTION IN CASH. The Borrower will have the option of
prepaying this Note ("OPTIONAL REDEMPTION") by paying to the Holder a sum of
money equal to one hundred twenty five percent (125%) of the principal amount of
this Note together with accrued but unpaid interest thereon and any and all
other sums due, accrued or payable to the Holder arising under this Note, the
Purchase Agreement, or any Related Agreement (the "REDEMPTION AMOUNT")
outstanding on the day written notice of redemption (the "NOTICE OF REDEMPTION")
is given to the Holder. The Notice of Redemption shall specify the date for such
Optional Redemption (the "REDEMPTION PAYMENT DATE") which date shall be seven
(7) business days after the date of the Notice of Redemption (the "REDEMPTION
PERIOD"). A Notice of Redemption shall not be effective with respect to any
portion of this Note for which the Holder has a pending election to convert
pursuant to Section 3.1, or for conversions initiated or made by the Holder
pursuant to Section 3.1 during the Redemption Period. The Redemption Amount
shall be determined as if such Holder's conversion elections had been completed
immediately prior to the date of the Notice of Redemption. On the Redemption
Payment Date, the Redemption Amount must be paid in good funds to the Holder. In
the event the Borrower fails to pay the Redemption Amount on the Redemption
Payment Date as set forth herein, then such Redemption Notice will be null and
void.

                                  ARTICLE III
                                CONVERSION RIGHTS

         3.1. HOLDER'S CONVERSION RIGHTS. The Holder shall have the right, but
not the obligation, to convert all or any portion of the then aggregate
outstanding principal amount of this Note, together with interest and fees due
hereon, into shares of Common Stock subject to the terms and conditions set
forth in this Article III. The Holder may exercise such right by delivery to the
Borrower of a written notice of conversion not less than one (1) business day
prior to the date upon which such conversion shall occur.

         3.2. CONVERSION LIMITATION.

         Notwithstanding anything contained herein to the contrary, the Holder
shall not be entitled to convert pursuant to the terms of the Note an amount
that would (a) be convertible into that number of shares of Common Stock which,
when added to the number of shares of Common Stock otherwise beneficially owned
by such Holder including those issuable upon exercise of warrants held by such
Holder would exceed 4.99% of the outstanding shares of Common Stock of the
Borrower at the time of conversion or (b) exceed twenty five percent (25%) of
the aggregate dollar trading volume of the Common Stock for the five (5) day
trading period immediately preceding delivery of a Notice of Conversion to the
Borrower. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. The conversion limitation described in this
Section 3.2 shall automatically become null and void without any notice to
Borrower upon the occurrence and during the continuance beyond any applicable
grace period of an Event of Default, or upon 75 days prior notice to the
Borrower, except that at no time shall the beneficial ownership exceed 19.99% of
the Common Stock. Notwithstanding anything contained herein to the contrary, the
number of shares of Common Stock issuable by the Borrower and acquirable by the
Holder at a price below $0.53 per share pursuant to the terms of this Note, the
Purchase Agreement or any Related Agreement, shall not exceed an aggregate of
10,794,906 shares of the Borrower's Common Stock (subject to appropriate
adjustment for stock splits, stock dividends, or other similar recapitalizations
affecting the Common Stock) (the "MAXIMUM COMMON STOCK ISSUANCE"), unless the
issuance of shares hereunder in excess of the Maximum Common Stock Issuance
shall first be approved by the Borrower's shareholders. If at any point in time
and from time to time the number of shares of Common Stock issued pursuant to
the terms of this Note, the Purchase Agreement or any Related Agreement,
together with the number of shares of Common Stock that would then be issuable
by the Borrower to the Holder in the event of a conversion or exercise pursuant
to the terms of this Note, the Purchase Agreement or any Related Agreement,
would exceed the Maximum Common Stock Issuance but for this Section 3.2, the
Borrower shall promptly call a shareholders meeting to solicit shareholder
approval for the issuance of the shares of Common Stock hereunder in excess of
the Maximum Common Stock Issuance.

         3.3. MECHANICS OF HOLDER'S CONVERSION.

                  (a) In the event that the Holder elects to convert this Note
into Common Stock, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion ("NOTICE OF CONVERSION") to the
Borrower and such Notice of Conversion shall provide a breakdown in reasonable
detail of the Principal Amount, accrued interest and fees being converted. On
each Conversion Date (as hereinafter defined) and in accordance with its Notice
of Conversion, the Holder shall make the appropriate reduction to the Principal
Amount, accrued interest and fees as entered in its records and shall provide
written notice thereof to the Borrower within two (2) business days after the
Conversion Date. Each date on which a Notice of Conversion is delivered or
telecopied to the Borrower in accordance with the provisions hereof shall be
deemed a Conversion Date (the "CONVERSION DATE"). A form of Notice of Conversion
to be employed by the Holder is annexed hereto as Exhibit A.

                  (b) Pursuant to the terms of the Notice of Conversion, the
Borrower will issue instructions to the transfer agent accompanied by an opinion
of counsel within one (1) business day of the date of the delivery to Borrower
of the Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) business days after receipt by the Borrower of the Notice of
Conversion (the "DELIVERY DATE"). The Borrower agrees that it will become
eligible to use the DWAC system by the Effectiveness Date (as defined in the
Registration Rights Agreement). In the case of the exercise of the conversion
rights set forth herein the conversion privilege shall be deemed to have been
exercised and the Conversion Shares issuable upon such conversion shall be
deemed to have been issued upon the date of receipt by the Borrower of the
Notice of Conversion. The Holder shall be treated for all purposes as the record
holder of such Common Stock, unless the Holder provides the Borrower written
instructions to the contrary. Conversions will have the effect of lowering the
outstanding principal balance of the Note plus all accrued but unpaid interest
thereon. . The Holder and any assignee, by acceptance of this Note, hereby
acknowledge and agree that due to the provisions of this paragraph, following
any conversion of the Note the unpaid and unconverted principal amount of this
Note may be less than the amount stated on the face of the Note.

         3.4. CONVERSION MECHANICS.

                  (a) The number of shares of Common Stock to be issued upon
each conversion of this Note shall be determined by dividing that portion of the
principal and interest and fees to be converted, if any, by the then applicable
Fixed Conversion Price. Conversions of amounts outstanding under this Note shall
be applied as follows: first to (i) accrued and unpaid fees arising under this
Note or the Related Agreements, as applicable; (ii) then, to accrued and unpaid
interest on this Note and (iii) then to outstanding principal amount applying to
Monthly Amounts for the remaining Repayment Dates in chronological order.

                  (b) The Fixed Conversion Price and number and kind of shares
or other securities to be issued upon conversion is subject to adjustment from
time to time upon the occurrence of certain events, as follows:

                           (i) STOCK SPLITS, COMBINATIONS AND DIVIDENDS. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
in shares of Common Stock, the Fixed Conversion Price or the Conversion Price,
as the case may be, shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.

                           (ii) As soon as practicable after the Borrower files
an amendment to its Certificate of Incorporation increasing the number of shares
of common stock it is authorized to issue (the "Charter Amendment") but in no
event later than August 23, 2004, and at all times thereafter while conversion
rights exist, the Borrower will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the full conversion of this Note. The Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. The Borrower agrees that its issuance of this Note shall
constitute full authority to its officers, agents, and transfer agents who are
charged with the duty of executing and issuing stock certificates to execute and
issue the necessary certificates for shares of Common Stock upon the conversion
of this Note.

                           (iii) SHARE ISSUANCES. Subject to the provisions of
this Section 3.4, if the Borrower shall at any time prior to the conversion or
repayment in full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a person other than the Holder
(except (i) pursuant to Subsections A or B above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof as
disclosed to Holder in writing; or (iii) pursuant to options that may be issued
under any employee incentive stock option and/or any qualified stock option plan
adopted by the Borrower) for a consideration per share (the "Offer Price") less
than the Fixed Conversion Price in effect at the time of such issuance, then the
Fixed Conversion Price shall be immediately reset to 102% of such lower Offer
Price at the time of issuance of such securities. For purposes hereof, the
issuance of any security of the Borrower convertible into or exercisable or
exchangeable for Common Stock shall result in an adjustment to the Fixed
Conversion Price at the time of issuance of such securities.

                           (iv) RECLASSIFICATION, ETC. If the Borrower at any
time shall, by reclassification or otherwise, change the Common Stock into the
same or a different number of securities of any class or classes, this Note, as
to the unpaid Principal Amount and accrued interest thereon, shall thereafter be
deemed to evidence the right to purchase an adjusted number of such securities
and kind of securities as would have been issuable as the result of such change
with respect to the Common Stock immediately prior to such reclassification or
other change.

         3.5. ISSUANCE OF NEW NOTE. Upon any partial conversion of this Note, a
new Note containing the same date and provisions of this Note shall, at the
request of the Holder, be issued by the Borrower to the Holder for the principal
balance of this Note and interest which shall not have been converted or paid.
The Borrower will pay no costs, fees or any other consideration to the Holder
for the production and issuance of a new Note.

                                   ARTICLE IV
                                EVENTS OF DEFAULT

         Upon the occurrence and continuance of an Event of Default beyond any
applicable grace period, the Holder may make all sums of principal, interest and
other fees then remaining unpaid hereon and all other amounts payable hereunder
immediately due and payable. In the event of such an acceleration, within five
(5) days after written notice from Holder to Borrower (each occurrence being a
"DEFAULT NOTICE PERIOD") the amount due and owing to the Holder shall be 125% of
the outstanding principal amount of the Note (plus accrued and unpaid interest
and fees, if any) (the "DEFAULT PAYMENT"). If, with respect to any Event of
Default, the Borrower cures the Event of Default, the Event of Default will be
deemed to no longer exist and any rights and remedies of Holder pertaining to
such Event of Default will be of no further force or effect. The Default Payment
shall be applied first to any fees due and payable to Holder pursuant to the
Note or the Related Agreements, then to accrued and unpaid interest due on the
Note and then to outstanding principal balance of the Note.

         The occurrence of any of the following events set forth in Sections 4.1
through 4.10, inclusive, is an "EVENT OF DEFAULT:"

         4.1. FAILURE TO PAY PRINCIPAL, INTEREST OR OTHER FEES. The Borrower
fails to pay when due any installment of principal, interest or other fees
hereon in accordance herewith, or the Borrower fails to pay when due any amount
due under any other promissory note issued by Borrower, and in any such case,
such failure shall continue for a period of three (3) days following the date
upon which any such payment was due.

         4.2. BREACH OF COVENANT. The Borrower breaches any covenant or any
other term or condition of this Note or the Purchase Agreement in any material
respect, or the Borrower or any of its Subsidiaries breaches any covenant or any
other term or condition of any Related Agreement in any material respect and,
any such case, such breach, if subject to cure, continues for a period of
fifteen (15) days after the occurrence thereof; provided that, if such breach is
of a nature that it can not be cured within fifteen (15) days and Borrower has
taken reasonable steps to cure such default within fifteen (15) days, upon
written notice to and the consent of Laurus, the Borrower will have a
commercially reasonable amount of time to cure such breach before such breach
shall be deemed an Event of Default.

         4.3. BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation or
warranty made by the Borrower in this Note or the Purchase Agreement, or by the
Borrower or any of its Subsidiaries in any Related Agreement, shall, in any such
case, be false or misleading in any material respect on the Closing Date or the
date that such representation or warranty is deemed made, if such representation
or warranty expressly states that it is made as of a specific date.

         4.4. RECEIVER OR TRUSTEE. The Borrower or any of its Subsidiaries shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business; or such a receiver or trustee shall otherwise be
appointed.

         4.5. JUDGMENTS. Any money judgment, writ or similar final process shall
be entered or filed against the Borrower or any of its property or other assets
for more than $250,000, and shall remain unvacated, unbonded or unstayed for a
period of thirty (30) days.

         4.6. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings or relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Borrower or any
of its Subsidiaries.

         4.7. STOP TRADE. An SEC stop trade order or Principal Market trading
suspension of the Common Stock shall be in effect for five (5) consecutive days
or five (5) days during a period of ten (10) consecutive days, excluding in all
cases a suspension of all trading on a Principal Market, provided that the
Borrower shall not have been able to cure such trading suspension within thirty
(30) days of the notice thereof or list the Common Stock on another Principal
Market within sixty (60) days of such notice. The "Principal Market" for the
Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap Market,
NASDAQ National Market System, American Stock Exchange, or New York Stock
Exchange (whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock, or any securities exchange or other
securities market on which the Common Stock is then being listed or traded.

         4.8. FAILURE TO DELIVER COMMON STOCK OR REPLACEMENT NOTE. The Borrower
shall fail (i) to timely deliver Common Stock to the Holder pursuant to and in
the form required by this Note, and Section 9 of the Purchase Agreement, if such
failure to timely deliver Common Stock shall not be cured within two (2)
business days or (ii) to deliver a replacement Note to Holder within seven (7)
business days following the required date of such issuance pursuant to this
Note, the Purchase Agreement or any Related Agreement (to the extent required
under such agreements).

         4.9. DEFAULT UNDER RELATED AGREEMENTS OR OTHER AGREEMENTS. The
occurrence and continuance of any Event of Default (as defined in the Purchase
Agreement or any Related Agreement) or any event of default (or similar term)
under any other indebtedness.

         4.10. CHANGE IN CONTROL. The occurrence of a change in the controlling
ownership of the Company that has, or could reasonably be expected to have a
Material Adverse effect on the practical realization of the security interests
granted to Holder under the applicable Related Agreements.

                           DEFAULT RELATED PROVISIONS

         4.11. PAYMENT GRACE PERIOD. Following the occurrence and continuance of
an Event of Default beyond any applicable cure period hereunder, the Borrower
shall pay the Holder a default interest rate of two percent (2%) per month on
all amounts due and owing under the Note,, which default interest shall be
payable upon demand.

         4.12. CONVERSION PRIVILEGES. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full.

         4.13. CUMULATIVE REMEDIES. The remedies under this Note shall be
cumulative.

                                   ARTICLE V
                                  MISCELLANEOUS

         5.1. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of the Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.

         5.2. NOTICES. Any notice herein required or permitted to be given shall
be in writing and shall be deemed effectively given: (a) upon personal delivery
to the party notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (c) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Borrower at the address provided in the Purchase Agreement executed in
connection herewith, and to the Holder at the address provided in the Purchase
Agreement for such Holder, with a copy to John E. Tucker, Esq., 825 Third
Avenue, 14th Floor, New York, New York 10022, facsimile number (212) 541-4434,
or at such other address as the Borrower or the Holder may designate by ten days
advance written notice to the other parties hereto. A Notice of Conversion shall
be deemed given when made to the Borrower pursuant to the Purchase Agreement.

         5.3. AMENDMENT PROVISION. The term "Note" and all reference thereto, as
used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.

         5.4. ASSIGNABILITY. This Note shall be binding upon the Borrower and
its successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns, and may be assigned by the Holder in accordance with the
requirements of the Purchase Agreement. This Note shall not be assigned by the
Borrower without the consent of the Holder.

         5.5. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of laws. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.

         5.6. MAXIMUM PAYMENTS. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.

         5.7. SECURITY INTEREST AND GUARANTEE. The Holder has been granted a
security interest (i) in certain assets of the Borrower and its Subsidiaries as
more fully described in the Master Security Agreement dated as of the date
hereof and (ii) pursuant to the Stock Pledge Agreement dated as of the date
hereof. The obligations of the Borrower under this Note are guaranteed by
certain Subsidiaries of the Borrower pursuant to the Subsidiary Guaranty dated
as of the date hereof.

         5.8. CONSTRUCTION. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.

         5.9. COST OF COLLECTION. If default is made in the payment of this
Note, the Borrower shall pay to Holder reasonable costs of collection, including
reasonable attorney's fees.

       [Balance of page intentionally left blank; signature page follows.]

<PAGE>

         IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note
to be signed in its name effective as of this 29th day of October, 2004.

                                            ISLAND PACIFIC, INC.

                                            By:________________________________
                                            Name:______________________________
                                            Title:_____________________________

WITNESS:

__________________________

<PAGE>

                                    EXHIBIT A

                              NOTICE OF CONVERSION

(To be executed by the Holder in order to convert all or part of the Note into
Common Stock

[Name and Address of Holder]

The Undersigned hereby converts $_________ of the principal due on [specify
applicable Repayment Date] under the Convertible Term Note issued by ISLAND
PACIFIC, INC. dated [Month] __, 2004 by delivery of Shares of Common Stock of
ISLAND PACIFIC, INC. on and subject to the conditions set forth in Article III
of such Note.

1.       Date of Conversion         _______________________

2.       Shares To Be Delivered:    _______________________

                                               By:______________________________
                                               Name:____________________________
                                               Title:___________________________

<PAGE>

                                    EXHIBIT B

                                CONVERSION NOTICE

(To be executed by the Holder in order to convert all or part of a Monthly
Amount into Common Stock)

[Name and Address of Holder]

Holder hereby converts $_________ of the Monthly Amount due on [specify
applicable Repayment Date] under the Convertible Term Note issued by ISLAND
PACIFIC, INC. dated _______, 200__ by delivery of Shares of Common Stock of
ISLAND PACIFIC, INC. on and subject to the conditions set forth in Article III
of such Note.

1.       Fixed Conversion Price:    $_______________________

2.       Amount to be paid:         $_______________________

3.       Shares To Be Delivered (2 divided by 1):     ______________________

4.       Cash payment to be made by Borrower :        $_____________________

Date: ____________                                LAURUS MASTER FUND, LTD.

                                                  By:___________________________
                                                  Name:_________________________
                                                  Title:________________________

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