Document:

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                                                                    EXHIBIT 10.3

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                               SERVICES AGREEMENT

                                 by and between

        DUKE ENERGY CORPORATION, DUKE ENERGY BUSINESS SERVICES, LLC, PAN
           SERVICE COMPANY, DUKE ENERGY GAS TRANSMISSION CORPORATION

                                       and

                         DUKE ENERGY FIELD SERVICES, LLC

                           Dated as of March 14, 2000

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                                TABLE OF CONTENTS

                                    ARTICLE I
                                  THE SERVICES
<TABLE>
<S>                                                                                         <C>
   SECTION 1.1 THE SERVICES..................................................................1
   SECTION 1.2 MODIFICATION OF SERVICES......................................................2

                                   ARTICLE II
                               COSTS AND EXPENSES

   SECTION 2.1 CHARGES FOR SERVICES..........................................................2
   SECTION 2.2 INVOICES......................................................................3
   SECTION 2.3 AUDIT OF EXPENSES.............................................................3
   SECTION 2.4 ADDITIONAL EQUIPMENT, TECHNOLOGY OR THIRD PARTY SERVICES......................4
   SECTION 2.5 TAXES.........................................................................4

                                   ARTICLE III
                                TERM OF AGREEMENT

   SECTION 3.1 TERM..........................................................................4

                                   ARTICLE IV
                                 INDEMNIFICATION

   SECTION 4.1 INDEMNIFICATION...............................................................4
   SECTION 5.2 SURVIVAL OF INDEMNIFICATION...................................................5

                                    ARTICLE V
                               SCOPE OF AGREEMENT

   SECTION 5.1 RELATIONSHIP OF PARTIES.......................................................5
   SECTION 5.2 ACCESS TO EMPLOYEES...........................................................5
   SECTION 5.3 REASONABLE AVAILABILITY OF PERSONNEL..........................................5
   SECTION 5.4 SCOPE OF DUKE'S AUTHORITY.....................................................6
   SECTION 5.5 INSURANCE.....................................................................6

                                   ARTICLE VI
                            SERVICES REPRESENTATIVES

   SECTION 6.1 SERVICES REPRESENTATIVE.......................................................6

                                   ARTICLE VII
                                 CONFIDENTIALITY

   SECTION 7.1 CONFIDENTIALITY...............................................................7

                                  ARTICLE VIII
                            MISCELLANEOUS PROVISIONS

   SECTION 8.1  COUNTERPARTS..................................................................8
   SECTION 8.2  GOVERNING LAW; JURISDICTION AND FORUM; WAIVER OF JURY TRIAL...................8
   SECTION 8.3  ENTIRE AGREEMENT..............................................................8
   SECTION 8.4  NOTICES.......................................................................9
   SECTION 8.5  SUCCESSORS AND ASSIGNS........................................................9
   SECTION 8.6  HEADINGS; DEFINITIONS........................................................10
   SECTION 8.7  AMENDMENTS AND WAIVERS.......................................................10
   SECTION 8.8  SEVERABILITY.................................................................10
   SECTION 8.9  INTERPRETATION...............................................................10
   SECTION 8.10 SPECIFIC PERFORMANCE.........................................................10
   SECTION 8.11 NO THIRD PARTY BENEFICIARIES.................................................10
   SECTION 8.12 FURTHER ASSURANCES...........................................................10
</TABLE>

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<TABLE>
<S>                                                                                         <C>
   SECTION 8.13 FORCE MAJEURE................................................................11
   SECTION 8.14 ALTERNATIVE DISPUTE RESOLUTION...............................................11
   SECTION 8.15 CONFLICTS OF INTEREST........................................................13
   SECTION 8.16 CONSTRUCTION.................................................................13

EXHIBIT A - SERVICES REPRESENTATIVES........................................................A-1

EXHIBIT B - THE SERVICES....................................................................B-1
</TABLE>

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                               SERVICES AGREEMENT

               This SERVICES AGREEMENT (this "Agreement") is made this 14th day
of March, 2000, by and between Duke Energy Corporation, Duke Energy Business
Services LLC, Pan Service Company and Duke Energy Gas Transmission Corporation
(collectively "Duke"), and Duke Energy Field Services, LLC (the "Company")
(each, a "Party", and collectively, the "Parties").

                                    RECITALS:

               WHEREAS, the Company, Duke Energy Corporation and Phillips
Petroleum Company, a Delaware corporation ("Phillips"), are parties to a
Contribution Agreement, dated as of December 16, 1999 (the "Contribution
Agreement");

               WHEREAS, in accordance with the Contribution Agreement, Duke
Energy Corporation has agreed to cause certain of its midstream natural gas
gathering, processing and marketing operations in the United States and Canada
to be transferred to the Company;

               WHEREAS, Duke has, or can make available, the personnel,
technology, and other resources necessary to provide services to the Company
during the term of this Agreement;

               WHEREAS, the Company desires that Duke furnish to the Company and
its subsidiaries the services described in Exhibit B to this Agreement, and Duke
desires to furnish such services pursuant to the terms hereof; and

               WHEREAS, the Company believes that the provisions of this
Agreement as a whole are fair.

               NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the Parties
hereby agree as follows:

                                    ARTICLE I
                                  THE SERVICES

               Section 1.1   The Services.

               (a) Duke agrees to provide to the Company and its subsidiaries
the services described in Exhibit B (the "Services") for the term described in
Section 3.1.

               (b) Duke shall perform the Services for the Company with the same
degree of care, skill and prudence customarily exercised by it for its own
operations, consistent with industry practices, in compliance with statutory and
regulatory requirements, and in the same manner as such services have been
provided, or were available, to Duke Energy Field Services, Inc. and its
subsidiaries prior to the date of this Agreement.

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               (c) If Duke is unable to perform the Services in accordance with
Section 1.1(b), then Duke shall hire the personnel required to provide such
Services. Duke is authorized to provide any part of the Services either from its
own resources and employees, or, by a subcontractor(s). Subcontractor(s) shall
be made subject to no less stringent performance requirements than Duke is
required to comply with under this Agreement, including confidentiality and
compliance with statutory and regulatory requirements.

               (d) In accordance with the terms and conditions of this Agreement
and the Services described in Exhibit B, Duke shall provide records, financial
information, or other information that is reasonably requested by the Company to
support the Services which may not have been kept or reported in the ordinary
course of business by Duke, even if not provided to the Company prior to the
date hereof. Notwithstanding the foregoing, in the event that the records,
financial information or other information requested by the Company is not
contemplated by the Services or the rate sheet, then Duke and the Company will
negotiate the terms whereby such information will be provided.

               Section 1.2 Modification of Services. The Company reserves the
right to enter into other contracts with third parties in connection with the
Services described in this Agreement. If the Company and Duke mutually consent,
after a reasonable transition period, the Parties may terminate any Service
designated under the "Annual Commitment" subheading of the rate sheet in Exhibit
B. Upon 30 days prior written notice to Duke, the Company may terminate any
Service designated under the "Monthly Commitment" subheading of the rate sheet
in Exhibit B and the monthly fees (if any) for any such terminated Services
shall be prorated through the date of termination. The Company may also request
that Duke provide additional services not provided for in Exhibit B or related
to the Services described therein, and Duke, in its sole discretion, may elect
to provide the additional new services to the Company. In the event that Duke
agrees to provide such requested additional new services to the Company, the
Parties shall create and mutually agree to an addendum to Exhibit B setting
forth the description of the additional new services and other applicable terms
thereto, which addendum shall become effective upon signing by the Parties; and
thereafter in this Agreement all references to "Services" shall also include any
such additional new services.

                                   ARTICLE II
                               COSTS AND EXPENSES

               Section 2.1 Charges for Services. Duke shall charge the Company
for the Services provided under this Agreement in accordance with the rate sheet
described in Exhibit B. In addition to paying the charges in the rate sheet, the
Company shall reimburse Duke for any reasonably expended or incurred out of
pocket travel expenditures and, in accordance with Section 2.4, any additional
amounts reasonably expended or incurred by Duke to satisfy any obligation under
this Agreement. Notwithstanding the foregoing, in no event shall the Company be
responsible for directly paying any salaries, wages, benefits, withholding,
severance payments or any other compensation or payments with respect to the
employees of Duke.

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               Section 2.2 Invoices. Duke shall prepare and deliver to the
Company a monthly invoice by the twenty-fifth day of the month following the
service month that describes the Services provided by Duke and the amount
charged to the Company hereunder; provided, however, if any personnel or assets
of Duke Power ("Duke Power"), a division of Duke Energy Corporation and a public
utility regulated by the North Carolina Utilities Commission ("NCUC"), the South
Carolina Public Service Commission ("SCPSC") and the Federal Energy Regulatory
Commission ("FERC"), are used in the provision of the Services, Duke shall
charge the Company and the Company shall pay Duke in accordance with Duke's
North Carolina and FERC Codes of Conduct and any other applicable regulatory
rules governing affiliate transactions. Each invoice shall be due and payable
within 20 days after receipt by the Company. Duke shall use its reasonable
efforts to invoice all Services no later than 60 days after the performance of
such Services. The Company shall promptly and diligently pay all amounts due to
Duke under this Agreement and any amounts due and owed to Duke which are over 30
days past due during the first two billing periods or 20 days past due after the
first two billing periods shall accrue late fees calculated at the average of
the Prime Rates as reported in the Wall Street Journal during such past due
payment period. In the event of the early termination of any Services hereunder,
the Company shall pay Duke for only those Services and costs (or portions
hereof) that have been (i) properly performed prior to such termination and (ii)
properly committed to in writing by Duke prior to the receipt of such
termination notice.

               Section 2.3 Audit of Expenses. Duke shall maintain complete and
accurate records of and supporting documentation for all amounts billable to the
Company hereunder and shall retain such records for a period of at least two
years following the date of the inclusion in any invoice sent to the Company.
Duke agrees to provide the Company with documentation and other information with
respect to each invoice as may be reasonably requested by the Company to verify
that Duke's charges to the Company are accurate, correct and valid in accordance
with the provisions of this Agreement. The Company and its representatives shall
have access to such records for purposes of verifying all amounts billable to
and payments made by the Company hereunder upon reasonable notice during normal
business hours during the term of this Agreement and such subsequent period for
which Duke is required to maintain such records. If such examination reveals any
inaccuracy in any billing made hereunder, the necessary adjustment in such
billing and payments shall be made promptly, provided that no adjustment for any
billing or payment shall be made after the lapse of two years from the date of
invoice hereof unless challenged in writing prior thereto. If any of the
Services hereunder are performed using Duke Power employees or assets, then
Company agrees to provide Duke with records and other information necessary for
an internal or external audit of affiliate transactions. Duke and its
representatives shall have access to such records and information during normal
business hours during the term of this Agreement and for the same period after
termination of this Agreement that Duke is required to retain similar records
hereunder.

               Section 2.4 Additional Equipment, Technology or Third Party
Services. If additional equipment, software, technology or third party services
are employed by Duke to perform the Services and the costs associated with such
are (i) not identified in Exhibit B or reflected in the rate sheet and (ii)
exceed two-thousand dollars, then the Company shall pay the cost of such
additional equipment, software, technology or third party services only if
previously approved in writing by the Company. To the greatest extent feasible,
charges for equipment, software, technology and third party services will be
billed directly to the Company. In the case of any emergency, prior written
approval

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of such expenses shall not be required; provided however, that Duke shall obtain
the Company's consent to such emergency services as soon as reasonably
practicable.

               Section 2.5 Taxes. The Company shall pay all taxes, fees or
similar levies imposed on the Services provided hereunder (other than taxes
imposed on Duke's net income, including alternative minimum taxable income,
gain, excess profits or franchise taxes imposed on the capital or net income of
Duke and other than employment taxes imposed with respect to Duke's employees,
except to the extent such taxes are included in the rates designated in Exhibit
B); and, in the event that Duke is required by law to pay any of said taxes,
fees or other similar levies, the Company shall reimburse Duke for such
payments.

                                   ARTICLE III
                                TERM OF AGREEMENT

               Section 3.1 Term. The term of this Agreement shall begin on the
Closing Date of the Contribution Agreement (as such term is defined in the
Contribution Agreement) and remain in effect until December 31, 2000. If both
Duke and the Company desire to renew this Agreement for an additional 12-month
term to begin on January 1 of a particular year, then beginning on August 1 of
the existing year, the Parties shall renegotiate the terms and conditions of
this Agreement (including without limitation the Services to be provided and
their associated expense) which shall be applicable solely for the extended
12-month term.

                                   ARTICLE IV
                                 INDEMNIFICATION

               Section 4.1 Indemnification. DUKE HEREBY AGREES TO INDEMNIFY AND
HOLD HARMLESS THE COMPANY AND ITS RESPECTIVE SUCCESSORS, ASSIGNS, AFFILIATES,
AND ALL OF THE COMPANY'S DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES AND
AGENTS (EACH, AN "INDEMNIFIED PARTY") FROM AND AGAINST ANY AND ALL DAMAGES,
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES), LOSSES,
ACTIONS, CLAIMS, SUITS, LIABILITIES AND COSTS INCURRED BY ANY INDEMNIFIED PARTY
RESULTING FROM THE GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OF DUKE TO THE EXTENT
RELATING TO DUKE'S PERFORMANCE OF (OR FAILURE TO PERFORM) THE SERVICES UNDER
THIS AGREEMENT. NOTWITHSTANDING THE FOREGOING, THE INDEMNIFICATION OBLIGATION OF
DUKE ENERGY GAS TRANSMISSION CORPORATION SHALL BE SEVERAL FROM THE
INDEMNIFICATION OBLIGATIONS OF DUKE ENERGY CORPORATION, DUKE ENERGY BUSINESS
SERVICES, LLC AND PAN SERVICES COMPANY, WHICH COMPANIES SHALL HAVE JOINT AND
SEVERAL INDEMNIFICATION OBLIATIONS HEREUNDER.

               Section 4.2 Survival of Indemnification. Subject to any
applicable statutes of limitation, Duke's obligation under Section 4.1 shall
survive any termination of the Contribution Agreement, the Governance Agreement
by and among Phillips, Duke Energy Corporation and the Company, dated December
16, 1999, those agreements executed at the closing of the transaction

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contemplated by the Contribution Agreement, and this Agreement, and shall
continue thereafter in full force and effect.

      Section 4.3 Limitation of Damages. No Party shall be liable for any
special, indirect, incidental, consequential or punitive damages of any
character resulting from, arising out of, or in any way incident to any act or
omission hereunder, irrespective of whether claims or actions for such damages
are based upon contract, warranty, negligence, gross negligence, strict
liability or any other remedy at law or equity.

                                    ARTICLE V
                               SCOPE OF AGREEMENT

               Section 5.1 Relationship of Parties. Duke shall act as
independent contractor hereunder, and nothing herein shall at any time be
construed to create the relationship of employer and employee, partnership,
principal and agent, broker or finder or joint venturers as between Duke and the
Company.

               Section 5.2 Access to Offices. Employees of the Company shall be
freely allowed to enter and leave the buildings and offices of Duke, subject to
any guidelines imposed by Duke. Employees of Duke shall be freely allowed to
enter and leave the buildings and offices of the Company, subject to any
guidelines imposed by the Company.

               Section 5.3 Reasonable Availability of Personnel. The Company
acknowledges that Duke's employees are involved in the conduct of business for
Duke and may not be required to dedicate the entirety of their business days to
the performance of the Services; provided, however, that Duke agrees to use all
reasonable efforts to have its employees made available at the reasonable
request of the Company throughout the term of this Agreement, and the Parties
agree to make all reasonable efforts to cooperate mutually with each other so as
to achieve the intents and purposes of this Agreement.

               Section 5.4 Scope of Duke's Authority. Without the prior written
consent of the Company, Duke, in performing the Services, shall not borrow or
lend money, except for short-term borrowings (such as commercial paper)
initiated through Duke's Corporate Cash Management in the ordinary course of
business; create any lien or encumbrance; execute, terminate, or amend any
contract in the name of or on behalf of the Company or its subsidiaries;
purchase or sell any asset of the Company or its subsidiaries; execute any
indemnification for the benefit of any party; or take any other action not in
the ordinary course of business of Duke or the Company. When performing this
Agreement, Duke shall receive the Company's written approval before incurring
any third party expense not identified in Exhibit B or reflected in the rate
sheet; provided, however, Duke shall not be obligated to obtain the Company's
prior written consent for any third party expense which is less than
two-thousand dollars ($2000.00).

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               Section 5.5 Insurance. During the term of this Agreement, Duke
shall be required to maintain the following types of insurance, as appropriate
to the Services provided: (a) Workers' Compensation Insurance as required by
state or federal law where the work is being performed; (b) General Liability
Insurance against claims for bodily injury and/or death of and property damage
to third parties; and (c) Business Automobile Liability Insurance against claims
of bodily injury, death and property damage to third parties covering all owned,
leased, and non-leased, and non-owned and hired vehicles.

               Section 5.6 Compliance with Affiliate Rules. The performance of
this Agreement shall be in compliance with all applicable provisions of the
various Codes and Standards of Conduct to which Duke Energy Corporation and its
affiliates are subject by various energy and utility regulatory commissions,
including Duke Energy Corporation's North Carolina Code of Conduct, FERC Code of
Conduct with respect to the relationship between power marketing affiliates and
the electric utility and FERC Standards of Conduct for relations between
interstate pipelines and their marketing affiliates. Any term or condition of
this Agreement that is not in compliance with the various Codes and Standards of
Conduct noted above shall be renegotiated by the Parties.

                                   ARTICLE VI
                            SERVICES REPRESENTATIVES

               Section 6.1 Services Representative. The Parties shall each
appoint one or more representatives (each, a "Representative") to facilitate
communications and performance under this Agreement. Each Party may treat an act
of the Representative of the other Party as being authorized by such other Party
without inquiring behind such act or ascertaining whether such Representative
had authority to so act. The initial Representatives are named in Exhibit A
hereto. Each Party shall have the right at any time and from time to time to
replace its Representative by giving notice in writing to the other Party
setting forth the name of (i) the Representative to be replaced and (ii) the
replacement, and certifying that the replacement Representative is authorized to
act for the Party giving notice in all matters relating to this Agreement.

                                   ARTICLE VII
                                 CONFIDENTIALITY

               Section 7.1   Confidentiality.

               (a) Each Party shall (and each Party shall ensure that its
employees, contractors, subcontractors, agents and affiliates who perform or
receive Services under this Agreement shall) treat as strictly confidential (and
shall not disclose) all information received or obtained as a result of this
Agreement that relates to the other Party or any aspect of its business or
operations.

               (b) A Party may disclose information that would otherwise be
confidential if and only to the extent: (i) required by applicable law or legal
process, provided that the disclosing Party

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has notified the other Party in writing prior to disclosure; (ii) required by
any securities exchange or agency to which the Party is subject, wherever
situated, whether or not the requirement has the force of law, provided that the
disclosing Party has taken all practicable legal steps to prevent such
disclosure and notified the other Party in writing prior to disclosure; (iii)
disclosed on a confidential basis to the professional advisers or auditors of
the Party or to any actual or potential bankers or financiers of that Party;
(iv) that the information has come into the public domain through no fault of
that Party or its employees, affiliates, officers, directors, representatives,
agents, or assigns; (v) that the other Party has given prior approval to such
disclosure; (vi) necessary to enforce, comply with or perform any of the terms
of this Agreement or the other agreements listed in Section 4.2 or the other
agreements contemplated hereby or thereby; or (vii) received from a third party,
unless, to the knowledge of the Party that would otherwise be subject to this
Section 7.1 or its employees, affiliates, officers, directors, representatives,
agents, or assigns, such third party is subject to an independent obligation to
keep such information confidential.

                                  ARTICLE VIII
                            MISCELLANEOUS PROVISIONS

               Section 8.1 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the Parties hereto and delivered (including by facsimile) to
the other Parties.

               Section 8.2 Governing Law; Jurisdiction and Forum; Waiver of Jury
Trial.

               (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
choice of law principles thereof.

               (b) Each Party hereto irrevocably submits to the jurisdiction of
any Delaware state court or any federal court sitting in the State of Delaware
in any action arising out of or relating to this Agreement, and hereby
irrevocably agrees that all claims in respect of such action may be heard and
determined in such Delaware state or federal court. Each Party hereto hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding. The
Parties hereto further agree, to the extent permitted by law, that final and
unappealable judgment against any of them in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified copy of which shall be conclusive evidence of the fact and amount of
such judgment.

               (c) To the extent that any Party hereto has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, each Party hereto hereby irrevocably waives such immunity in respect
of its obligations with respect to this Agreement.

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               (d) Each Party hereto waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in respect of any
action, suit or proceeding arising out of or relating to this Agreement. Each
Party hereto certifies that it has been induced to enter into this Agreement by,
among other things, the mutual waivers and certifications set forth above in
this Section 8.2.

               Section 8.3 Entire Agreement. This Agreement, together with the
exhibits hereto, constitutes the entire agreement of the Parties with respect to
the services and arrangements described herein, and supercedes all prior
contracts or agreements between the Parties solely with respect to the subject
matter hereof, whether written or oral. This Agreement is not intended to confer
upon any person not a party hereto (or their successors and assigns) any rights
or remedies hereunder.

               Section 8.4 Notices. All notices and other communications to be
given to any Party hereunder shall be sufficiently given for all purposes
hereunder if in writing and delivered by hand, courier or overnight delivery
service or three days after being mailed by certified or registered mail, return
receipt requested, with appropriate postage prepaid, or when received in the
form of a telegram or facsimile and shall be directed, if to a Party hereunder,
to the address or facsimile number set forth below (or at such other address or
facsimile number as such Party shall designate by like notice):

(a)     If to Duke:

                            Duke Energy Corporation
                            422 South Church Street (PB05E)
                            Charlotte, North Carolina 28202-1904
                            Attention: Ellen T. Ruff
                            Fax No.: (704) 382-8137

                            With a copy to:

                            Vinson & Elkins L.L.P.
                            1001 Fannin, Suite 2300
                            Houston, Texas 77002-6760
                            Attention:  Bruce R. Bilger
                            Fax No.: (713) 517-5429

               (b)    If to the Company:

                            Duke Energy Field Services, LLC
                            370 17th Street, Suite 900
                            Denver, Colorado 80202
                            Attention:  Martha B. Wyrsch
                            Fax No.: (303) 605-8902

                            With a copy to:

                            Vinson & Elkins L.L.P.

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                            1001 Fannin, Suite 2300
                            Houston, Texas 77002-6760
                            Attention:  Bruce R. Bilger
                            Fax No.: (713) 517-5429

               Section 8.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and permitted assigns; provided, however, that (a) no Party hereto
will assign its rights or delegate any or all of its obligations under this
Agreement without the express prior written consent of the other Party hereto,
and (b) any assignment of the obligations of either Party hereto shall not
relieve that Party of its obligations under any and all of the provisions of
this Agreement. Notwithstanding the foregoing, any Party may assign its rights
or delegate any or all of its obligations under this Agreement to an affiliate
of such Party without the prior written consent of the other Party.

               Section 8.6 Headings; Definitions. The section and article
headings contained in this Agreement are inserted for convenience of reference
only and will not affect the meaning or interpretation of this Agreement. All
capitalized terms defined herein are equally applicable to both the singular and
plural forms of such terms.

               Section 8.7 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
both Parties, except that the Exhibits hereto may be amended in writing by the
Parties to add, delete or modify the Services, change the rates on the rate
sheet or replace the Representatives. The Company may, only by an instrument in
writing, waive compliance by Duke with any term or provision of this Agreement
on the part of Duke. The waiver by either Party hereto of a breach of any term
or provision of this Agreement shall not be construed as a waiver of any
subsequent breach. Except as otherwise expressly provided herein, no failure to
exercise, delay in exercising or single or partial exercise of any right, power
or remedy by any Party, and no course of dealing between the Parties, shall
constitute a waiver of any such right, power or remedy.

               Section 8.8 Severability. If any provision of this Agreement
shall be held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions of this Agreement shall not be affected
thereby, and there shall be deemed substituted for the provision at issue a
valid, legal and enforceable provision as similar as possible to the provision
at issue.

               Section 8.9 Interpretation. In the event an ambiguity or question
of intent or interpretation arises with respect to this Agreement, this
Agreement shall be construed as if it was drafted jointly by the Parties, and no
presumption or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any provisions of this Agreement.

               Section 8.10 Specific Performance. The Parties hereto agree that
irreparable damage would occur in the event that any Party fails to consummate
the transactions contemplated by this Agreement in accordance with the terms of
this Agreement and that the Parties shall be entitled to specific performance in
such event, in addition to any other remedy at law or in equity, including
temporary restraining orders or temporary or permanent injunctions.

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               Section 8.11 No Third Party Beneficiaries. Except as expressly
provided herein, nothing in this Agreement shall entitle any person other than
Duke or the Company or their respective successors and assigns permitted hereby
to any claim, cause of action, remedy or right of any kind.

               Section 8.12 Further Assurances. Upon the terms and subject to
the conditions hereof, each of the Parties hereto shall use its reasonable best
efforts to take, or cause to take, all appropriate action, and to do or cause to
be done, all things necessary, proper or advisable under applicable laws and
regulations to make effective the transactions contemplated in this Agreement.
Notwithstanding the foregoing, the Company shall be responsible for providing
the information to Duke that is necessary for Duke to perform the Services.

               Section 8.13  Force Majeure.

               (a) No failure or omission to carry out or to observe any of the
terms, provisions or conditions of this Agreement, except the failure to make
payment for sums due hereunder, shall give rise to any claim by a Party against
another, or be deemed a breach of this Agreement, if the same shall have been or
shall be caused by or arise out of any event of force majeure, which term as
used herein shall include (but only to the extent that the affected Party is
unable to perform due to causes and events that are beyond the reasonable
control of the affected Party), but not be limited to, war, hostilities, acts of
the public enemy or of belligerents, sabotage, blockage, revolution,
insurrection, riot or disorder, requisitions or rationing, whether imposed by
law, decree or regulations or by voluntary cooperation of industry at the
insistence or request of any governmental authority or person purporting to act
therefor; compliance with allocation programs, voluntary or mandatory, including
reduction or cessation of production by reason of imposition by any governmental
authority or person purporting to act with government authority, acts of God,
fire, frost, earthquake, storm, or lightning, epidemic, quarantine, strikes or
combination of workmen lockouts or other labor disturbances, explosion,
accidents by fire or otherwise to pipe, storage facilities, installations,
machinery, unanticipated plant outages, delays in acquiring or inability to
acquire permits or licenses necessary to enable the Parties hereto to perform,
lack of adequate fuel, power, raw materials, labor, containers or transportation
facilities, delays or shortages caused by breakdowns, failures or unavailability
of materials or equipment, breakage, mechanical breakdowns or accident to
machinery; delay, breakdown, or destruction of a plant, terminal, or equipment;
provided, however, that the Party so affected thereby will exercise reasonable
efforts pursuant to prudent industry practice to prevent the occurrence of the
force majeure event and to cure the event of force majeure as quickly as
possible so that the Party so affected will be able to carry out and observe all
of the terms, provisions, and conditions of this Agreement, but such Party shall
not be required to settle any labor disputes giving rise to an event of force
majeure hereunder.

               (b) If a Party hereunder is prevented from or delayed in
performing any of its obligations under this Agreement by a force majeure event,
the Party affected shall promptly notify the other in writing of the
circumstances constituting the force majeure event, indicating the performance
obligations which are thereby delayed or prevented and the length of the
resulting delay expected.

               (c) In the event that Duke is excused from supplying a Service in
accordance with the terms of this Section, then the Company shall be free to
acquire the Services from any

                                       10
<PAGE>   14

substitute source, for such period as the Company deems necessary or expedient,
and if so acquired, the Company shall not be obligated to pay Duke for such
Services during such period.

               Section 8.14 Alternative Dispute Resolution. Any dispute arising
out of or relating to this Agreement shall be resolved in accordance with the
procedures specified below.

               (a) Negotiations Between Executives. The Parties shall attempt in
good faith to resolve any dispute arising out of or relating to this Agreement
promptly by negotiation between executives who have authority to settle the
controversy and who are at a higher level of management than the persons with
direct responsibility for administration of this Agreement. Either Party may
give the other party written notice of any dispute not resolved in the normal
course of business. Within 15 days after delivery of the notice, the receiving
Party shall submit to the other a written response. The notice and the response
shall include a statement of each Party's position and a summary of arguments
supporting that position, and the name and title of the executive who will
represent that Party and of any other person who will accompany the executive.
Within 30 days after delivery of the initial notice, the executives of both
Parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to attempt to resolve the dispute. All
reasonable requests for non-privileged and/or non-proprietary information made
by one Party to the other will be honored. All negotiations pursuant to this
clause shall be considered confidential and shall be treated as compromise and
settlement negotiations for purposes of applicable rules of evidence.

               (b) Rights of Parties. Notwithstanding the foregoing, nothing
contained in this Agreement shall limit or restrict in any way the right or
power of a Party at any time (1) to commence and prosecute a proceeding for a
preliminary or temporary injunction or other temporary order pending mediation
or arbitration under this Agreement (i) to restrain a Party from breaching this
Agreement or (ii) for specific enforcement of this Section 8.14, or (2) to
consult with the other Party in an attempt to negotiate a resolution of the
dispute. The Parties agree that any legal remedy available to them with respect
to a breach of this Section will not be adequate and that, in addition to all
legal remedies, each party is entitled to an order specifically enforcing this
Section 8.14.

               (c) Mediation. If the dispute has not been resolved by
negotiation described in Section 8.14(a) within 45 days after the receipt of the
initial notice by the other Party, the Parties shall endeavor to settle the
dispute by mediation conducted in the English language under the then current
Center For Public Resources' CPR Model Mediation Procedure for Business
Disputes. The mediation will be conducted at a site agreed upon by the Parties.
All mediation costs are to be borne equally by the Parties. Each Party shall be
responsible for its own attorney's fees and costs.

               (d) Arbitration. If a dispute or controversy shall arise between
the Parties with respect to any matter covered by this Agreement that has not
been resolved pursuant to either Section 8.14(a) or (c) above, any Party
involved in such controversy shall have the option of submitting the matter to
arbitration in the English language pursuant to the guidelines set forth below.
Demand and submission to arbitration as provided in this Agreement must, unless
otherwise agreed, be made in writing by the requesting Party within the later of
(1) ten (10) days after negotiations and mediation held pursuant to Sections
8.14(a) and (c) above have failed, and such notifying Party intends to submit
the matter for arbitration, and (2) 60 days following the effective date of
notice of the dispute or controversy. The failure to timely submit the matter to
arbitration

                                       11
<PAGE>   15

shall constitute a waiver of the Parties to submit their dispute to arbitration.
If submitted to arbitration, the arbitration shall be binding on the Parties and
the dispute shall be settled in accordance with the Commercial Arbitration Rules
of the American Arbitration Association (the "AAA Rules"), and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. If a dispute involves an amount in controversy of $100,000
or less, there shall be one arbitrator. If a dispute involves an amount in
controversy in excess of $100,000 or a request for preliminary injunction, there
shall be three arbitrators. All arbitration proceedings shall be conducted in
Houston, Texas.

               Section 8.15 Conflicts of Interest. The Company and Duke
understand that conflicts of interest may arise during the course of Duke
providing the Services hereunder. The Company and Duke shall in good faith
cooperate in establishing reasonable guidelines for the Parties to follow in
order to minimize any unavoidable conflicts.

               Section 8.16 Construction. Unless the context requires otherwise:
(a) the gender (or lack of gender) of all words used in this Agreement includes
the masculine, feminine and neuter; (b) references to Articles and Sections
refer to Articles and Sections of this Agreement; (c) references to Exhibits
refer to the Exhibits attached to this Agreement; (d) references to laws refer
to such laws as they may be amended from time to time, and references to
particular provisions of a law include any corresponding provisions of any
succeeding law; (e) references to money refer to legal currency of the United
States of America; and (f) the word "including" means "including, without
limitation."

                                       12
<PAGE>   16

               IN WITNESS WHEREOF, each of the undersigned has caused this
Agreement to be duly executed and delivered on the date first set forth above.

<TABLE>
<CAPTION>
<S>                                    <C>
DUKE ENERGY CORPORATION                DUKE ENERGY BUSINESS SERVICES LLC

By:/s/ SANDRA P. MEYER                 By: /s/ CECIL O. SMITH, JR.
  ----------------------------------      --------------------------------
  Name: Sandra P. Meyer                  Name: Cecil O. Smith, Jr.
  Title: VP & Corporate Controller       Title: President

PAN SERVICE COMPANY                    DUKE ENERGY GAS TRANSMISSION CORPORATION

By: /s/ DOROTHY M. ABLES               By: /s/ DOROTHY M. ABLES
  ---------------------------------      ---------------------------------
  Name: Dorothy M. Ables                 Name: Dorothy M. Ables
  Title: CFO and Treasurer               Title: Vice President, Chief
                                                Financial Officer and
                                                Treasurer

DUKE ENERGY FIELD SERVICES, LLC

By: /s/ DAVID D. FREDERICK
  ---------------------------------
  Name: David D. Frederick
  Title: Sr. Vice President and CFO
</TABLE>

                                       13
<PAGE>   17
                                  EXHIBIT A

                            SERVICES REPRESENTATIVES

        The Parties to this Services Agreement each hereby appoint a
Representative (as defined in Article VI thereof) to facilitate communications
and performance under this Agreement.

        The initial Representatives of Duke and the Company shall be as follows:

        1. The initial Representative of Duke shall be Sandra P. Meyer, and
shall be contacted according to the procedures set forth in Section 8.14 of this
Agreement at the following address or at the following facsimile number:

               Duke Energy Corporation
               422 S. Church Street
               Charlotte, North Carolina 28202
               Facsimile:  704-373-4749
               Telephone:  704-382-8899

        2. The initial Representative of the Company shall be David D.
Frederick, and shall be contacted according to the procedures set forth in
Section 8.14 of this Agreement at the following address or at the following
facsimile number:

               Duke Energy Field Services, LLC
               370 17th Street, Suite 900
               Denver, Colorado 80202
               Facsimile: 303-595-0480
               Telephone: 303-605-1614

                                      A-1
<PAGE>   18
                             EXHIBIT B: THE SERVICES

                                    ARTICLE I

                             DESCRIPTION OF SERVICES

        Section 1.1 The Services to be provided to the Company by Duke shall be
as described herein:

               (a)     FMIS

                       o Processing transactions and availability of the
                         PeopleSoft tool for AP, AR and GL.
                       o Maintenance of DataMart and access through business
                         objects.

               (b)     Property Tax

                       o Manage all legal compliance functions.
                       o Direct and coordinate Property Tax planning.
                       o Negotiate equitable assessments with state and local
                         taxing officials.
                       o Audit property tax statements and prepare check
                         requisition vouchers.
                       o Represent the Company at local, state and national
                         meetings on property tax.
                       o Provide property tax planning for acquisitions and
                         divestitures.

               (c)     Insurance

                       o Placement and administration of insurance program.
                       o Review of insurance and indemnity language in various
                         contracts.
                       o Claims management and coordination.
                       o Due diligence relative to acquisitions and
                         divestitures.
                       o Placement of special coverage.
                       o General activities.

               (d)     Cash Management

                       o Set cash position
                       o Liquidity management
                       o Execute wire transfers
                       o Maintain bank accounts

               (e)     Shareholder Systems

                       o Shareholder communications
                       o Maintenance of shareholder records and stock transfers

                                      B-1
<PAGE>   19

               (f)     HRMS

                       o Payroll processing
                       o Timesheet reporting
                       o Maintenance of HRMS system
                       o Tax Reporting

               (g)     Records Management

                       o Provide storage and retrieval of past records in Salt
                         Mines.
                       o Imaging of current agreements and contracts.

               (h)     Facilities

                       o Mail service (twice daily pick ups) to 5718 Westheimer
                         location.
                       o Mail service to Denver.
                       o Monitor security access control system at 5718
                         Westheimer location
                       o Create/activate/deactivate badges.
                       o Monitor building space under lease at 5718 Westheimer
                         and oversee lease negotiations
                       o Use of Houston fitness center
                       o Use of Houston health center

               (i)     Finance
                       For routine consultations related to capital market
                       transactions including:

                       o Negotiation of Investment Banking representation
                       o Review of alternative financing options
                       o Providing support with rating agency issues

               (j)     Governmental Affairs (Washington, D.C.)

                       o General support with national legislative and
                         regulatory matters
                       o Assistance with FERC filings
                       o Representation in matters that involve midstream gas
                         business

               (k)     Audit

                       o Assist management and Audit Committee with Risk
                         Assessment.
                       o Develop Audit Plan for Audit Committee approval.
                       o Projects include the following: financial, operational,
                         information technology, contract, joint venture and
                         special requests.

               (l)     FMIS Special Services

                                      B-2
<PAGE>   20

                       o Enhancement of PeopleSoft system by accounting
                       o New modules, new reports and system process changes

               (m)     Corporate Tax Planning

                       o Review tax consequences of acquisitions and
                         dispositions.
                       o Tax planning

               (n)     Media Relations

                       o Review and distribution of all corporate/business unit
                         news releases.
                       o Media placements.
                       o Media relations for IPO and trade show support
                       o Crisis response
                       o Emergency preparedness.

               (o)     HR/Benefits Consulting Charlotte

                       o Executive development/training and succession planning
                       o Administration of compensation programs
                       o EEOC/Diversity issues
                       o Support for recruiting and hiring
                       o Benefit Plan Design
                       o Benefit Plan Compliance
                       o Benefit Plan Communication
                       o Assess implications of acquisitions and divestitures
                       o HRMS special requests to support mass changes and
                         special Business Objects reports

               (p)     Design Graphics

                       o Graphic design, web design, trade show graphics and
                         support.
                       o Advertising.
                       o Computer graphics and presentations.

               (q)     Printing

                       o Stationary printing
                       o Copying services

               (r)     Legal

                       o General legal services, including without limitation,
                         labor and employment, environmental, litigation,
                         finance and securities.

                                      B-3
<PAGE>   21

               (s)     Corporate Security

                       o Conduct investigations, including Ethics Line
                         investigations.
                       o Security assessments.
                       o High profile traveler briefings.
                       o Workplace violence or potential workplace threats and
                         coordination of security services during emergency
                         situations.
                       o Due diligence investigations.
                       o Liaison with law enforcement agencies.
                       o Security training and consulting.

               (t)     Reservoir/Reserves

                       o Attend meetings with producers to acquire information
                         and perform hydrocarbon appraisals, risk assessments,
                         economic evaluations and financial valuations as
                         required.
                       o Using data and/or statistical aggregation to evaluate
                         reserve potential and determine production schedules to
                         support capital contributions for pipeline connections,
                         system expansions and/or modifications.
                       o Perform limited connected supply studies as requested
                         to forecast gathering/processing volumes as a basis for
                         revenue forecasts.
                       o Provide preliminary and due diligence hydrocarbon
                         appraisals, risk assessments, and financial valuations
                         in support of acquisitions
                       o Provide expertise and testimony in support of
                         Regulatory/Legal matters
                       o Prepare and file nominations on Company prorated
                         fields.
                       o Perform data maintenance and maintain files of data
                         received on behalf of Company.
                       o Compile data and issue reports such as Monthly New
                         Volume Attachment Reports and Monthly Production
                         Reports
                       o Research, compile and report on industry new well
                         drilling and permit activity
                       o Prepare and file underground storage reports with
                         regulatory agencies

               (u)    HR Houston

                       o Labor negotiations.
                       o Compensation data.
                       o EEO/Diversity issues.
                       o Recruiting and hiring support.
                       o Special requests to develop/run reports from HRMS for
                         field personnel

               (v)    Information Services - Corporate

                                      B-4
<PAGE>   22

                       o Applications-related products
                       o Operations-related products
                       o Server services
                       o Telecommunications Services
                       o Workstation Services

               (w)     Information Services - Houston

                       o Server Services
                       o Support Services

               (x)     Employee Service Center

                       o Respond to employee benefit questions
                       o Process benefit elections and changes

               (y)     SEC Compliance

                       o Filing fees for periodic filings (including EDGAR)
                       o Printing fees associated with periodic SEC filings

               (z)     Maintenance of books and records

                       o Maintenance of legal and regulatory books and records
                       o Payments to governmental agencies and service agents
                         for corporate governance

               (aa)    Employee Benefits Plans

                       o As elected by the Company

               (bb)    Executive Benefits

                       o For Company executives

                                      B-5
<PAGE>   23
                                   ARTICLE II

                                   RATE SHEET

        See attachment

                                      B-6<PAGE>   1
                                                                    EXHIBIT 10.4

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

                          TRANSITION SERVICES AGREEMENT

                                 by and between

                           PHILLIPS PETROLEUM COMPANY

                                       and

                         DUKE ENERGY FIELD SERVICES, LLC

                           Dated as of March 17, 2000

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

<PAGE>   2

                          TRANSITION SERVICES AGREEMENT

        THIS AGREEMENT is executed this 17th day of March, 2000, but shall have
an effective date ("Effective Date") as of the Closing Date of the Contribution
Agreement, as defined below, by and between Duke Energy Field Services, LLC, a
Delaware limited liability company ("Company"), and PHILLIPS PETROLEUM COMPANY,
a Delaware corporation ("Phillips") (each, a "Party" and collectively, the
"Parties".)

                                   WITNESSETH:

        WHEREAS, Phillips, the Company and Duke Energy Corporation, a North
Carolina corporation, have entered into that certain Contribution Agreement,
dated as of December 16, 1999 ("Contribution Agreement"), pursuant to which Duke
and Phillips have agreed to cause certain of their midstream natural gas
gathering, processing and marketing operations in the United States and Canada
to be transferred to the Company;

        WHEREAS, Phillips has, or can make available to Company, the personnel,
technology, and other resources necessary to provide services to Company during
the term of this Agreement while Company procures or otherwise obtains and makes
available the personnel, technology and resources necessary to conduct
operations of its facilities and assets; and

        WHEREAS, Company desires that Phillips furnish to Company and its
subsidiaries the services described in Exhibit B to this Agreement ("Transition
Services"), and Phillips desires to provide such Transition Services pursuant to
the terms hereof.

        NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and intending to be legally bound hereby, the
Parties agree as follows:

                                    ARTICLE I
                                SCOPE OF SERVICES

        1.1 Transition Services. Phillips agrees to provide to Company and its
subsidiaries the Transition Services described in Exhibit B for the term
described in Section 8.1. Phillips will provide, in its sole discretion, the
personnel, equipment, tools, technology, and other resources necessary to
perform the Transition Services hereunder with the same degree of care, skill
and prudence customarily exercised by it for its own operations, consistent with
industry practices, in compliance with statutory and regulatory requirements,
and in the same manner as such services have been provided, or were available,
to Phillips Gas Company and its subsidiaries prior to the Effective Date. The
services to be provided under this Agreement shall not be increased or enlarged
to cover any operating assets, offices, and assets of the Company other than
those previously used by Phillips Gas Company and its subsidiaries, unless
Company and Phillips shall have agreed in writing on the scope of such increased
or enlarged services and the amount and method of compensation to be applied to
such increased or enlarged services.

<PAGE>   3

        1.2 Budget Approvals; Emergency Action. Phillips' performance hereunder
shall generally observe the budgetary limitations and standards agreed to by
Phillips and Company in Exhibit B; provided, however, Phillips may take such
actions and make such expenditures as may be reasonably necessary, under laws,
regulations or good industry practices, in order to cure an emergency. Phillips
shall advise Company of such emergencies as soon as practicable and advise it of
the circumstances of such emergencies, the actions taken or proposed, and the
expenditures made, incurred, committed or proposed.

        1.3 Reasonable Availability of Personnel. Except for those Designated
Persons (defined in Exhibit B hereto), Company acknowledges that Phillips'
employees are involved in the conduct of business for Phillips and may not be
required to dedicate the entirety of their business days to the performance of
the Transition Services; provided, however, that Phillips agrees to use all
reasonable efforts to have its employees made available at the reasonable
request of Company throughout the term of this Agreement, and the Parties agree
to make all reasonable efforts to cooperate mutually with each other so as to
achieve the intents and purposes of this Agreement.

        1.4 Scope of Phillips' Authority. Without the prior written consent of
Company, Phillips, in performing the Transition Services, shall not borrow or
lend money; create any lien or encumbrance; participate in any futures or
hedging activities in the name of Company or its subsidiaries; execute,
terminate, or amend any contract in the name of or on behalf of Company or its
subsidiaries; purchase or sell any asset of Company or its subsidiaries; execute
any indemnification for the benefit of any party; or take any other action not
in the ordinary course of business of Phillips or Company.

        1.5 Telecommunications, Radio and Wireless Communications. Where
necessary to allow continuous use of certain telecommunications, radio and
wireless services or facilities that were previously shared by Phillips and
certain facilities or operations of Company or its affiliates (hereinafter
"Shared Communication Facilities"), Phillips and Company shall enter into such
agreements, having terms and conditions and having the same cost sharing basis
as the arrangements that were previously used by Phillips and Company or its
affiliates with regard to the Shared Communications Facilities.

        1.6 Use of Subcontractors. If Phillips is unable to perform the
Transition Services in accordance with Section 1.1, then Phillips shall hire the
personnel required to perform such Transition Services. Phillips is authorized
to provide any part of the Transition Services under this Agreement either from
its own resources and employees, or, upon written consent of Company, by a
subcontractor or subcontractors. Other contractors and subcontractors shall be
made subject to no less stringent performance requirements than Phillips is
required to comply with under this Agreement, including confidentiality and
compliance with statutory and regulatory requirements.

        1.7 Relationship of Parties. Phillips shall control the manner and
method of carrying out the Transition Services. The Parties shall act as
independent contractors, and nothing herein shall at any time be construed to
create the relationship of employer and employee, partnership, principal and
agent, broker or finder or joint venturers as between Phillips and Company.

                                       2
<PAGE>   4

        1.8 Non-Exclusivity. Company reserves the right to enter into other
contracts with third parties in connection with services of the type described
in this Agreement.

                                   ARTICLE II
                             CHARGES AND SETTLEMENT

        2.1 Rates for Transition Services. Phillips shall charge Company for the
Transition Services provided under this Agreement in accordance with Phillips'
fully-burdened actual costs as provided for in Exhibit B. Such rates shall not
include any provision of Transition Services away from Phillips' employees' home
offices; consequently, all reasonable travel and related costs incurred in the
performance of the Transition Services away from Phillips' employees home
offices shall be reimbursed according to Section 2.2 below.

        2.2 Cost Reimbursement Basis for Phillips' Transition Services. All
actual and reasonably incurred out-of-pocket costs and expenses incurred by
Phillips under this Agreement in the performance of Transition Services away
from Phillips' employees' home offices, and any expenses that are not included
in the rates agreed-upon as set forth above, shall be reimbursed by Company
monthly in accordance with the procedures set forth below in Sections 2.3 and
2.4.

        2.3 Additional Equipment, Technology or Third Party Services. If
additional equipment, software, technology or third party services are required
in order for Phillips to perform the Transition Services, and written approval
is given by Company, Company shall pay the cost of such additional equipment,
software, technology or third party services. To the greatest extent feasible,
charges for equipment, software, technology and third party services will be
billed directly to Company. In the case of any emergency, prior written approval
of such expenses shall not be required; provided however, that Phillips shall
obtain Company's consent to such emergency services as soon as reasonably
practicable.

        2.4 Invoicing and Payment. Within thirty (30) calendar days after the
end of each calendar month, Phillips shall submit to Company an invoice covering
the Transition Services performed and expenses incurred during the previous
calendar month, which invoice shall describe in reasonable detail the Transition
Services performed, charges therefor, out-of-pocket costs and expenses incurred
and any other charges or fees provided for hereunder. Company shall make payment
within twenty-five (25) days after receipt of the invoice. Payments shall be
made by electronic fund transfer or equivalent transfer or other means
satisfactory to Phillips in immediately available funds to Phillips' account at
such bank or depository as is designated by Phillips in writing on such
invoices.

        2.5 Late Payments. In the event any payment hereunder is not made when
due, the payment shall accrue interest (beginning on the date the payment is
due) calculated at the prime rate as published in the Wall Street Journal,
between the date said payment is due and the date the payment is made. Such
payment, when made, shall be accompanied by all interest so accrued.

        2.6 Bases for Rates. The rates for Transition Services shall be
calculated to equal the amounts necessary to reimburse Phillips for its
fully-burdened actual costs of providing the Transition Services relating
thereto. Phillips agrees to provide Company with documentation and

                                       3
<PAGE>   5

other information with respect to each invoice as may be reasonably requested by
Company to verify that Phillips' charges to Company are accurate, correct and
valid in accordance with the provisions of this Agreement. If at the close of
any calendar quarter during the term of this Agreement either Party believes
that the amount which is being charged for a particular category of Transition
Services does not equal the fully-burdened costs therefor, the objecting Party
may notify the other Party that it desires to renegotiate the rates being
charged for the Transition Services. The Parties shall promptly thereafter make
reasonable efforts to renegotiate the particular disputed rates prior to the
beginning of the calendar quarter for which the renegotiated rates are to apply.
Such renegotiation shall not, however, relieve the objecting Party of the
obligation for the timely payment or crediting of all invoiced charges pending
renegotiation, or its obligation to perform Transition Services hereunder, as
the case may be.

        2.7 Fees for Additional Transition Services. From time to time the
Company may desire additional services from Phillips not specifically related to
the Transition Services addressed herein. No fees shall be billable for these
additional services unless such services are requested and agreed to in writing
in an addendum to this Agreement prior to performance; thereafter in this
Agreement, all references to "Transition Services" shall also include any such
additional new services. Additional new services will then be provided on either
a fixed-fee or hourly rate, as agreed to at the time, in order to reimburse
Phillips for its fully burdened actual costs of providing such additional new
services.

        2.8 Taxes. Company shall pay all taxes, fees or similar levies imposed
on the Transition Services provided hereunder (other than taxes imposed on
Phillips' net income, including alternative minimum taxable income, gain, excess
profits or franchise taxes imposed on the capital or net income of Phillips, and
other than employment taxes imposed with respect to Phillips' employees, except
to the extent such taxes are included in Phillips' fully-burdened actual costs
as provided in Section 2.6) and, in the event that Phillips is required by law
to pay any of said taxes, fees or other similar levies, Company shall reimburse
Phillips for such payments.

        2.9 Exemption Certificate. Company shall provide Phillips with an
exemption certificate(s), if requested by Phillips, in a form acceptable to the
appropriate taxing authority for Transition Services provided under this
Agreement, and Company shall be responsible for the payment of any taxes, fees
or similar levies imposed on Transition Services provided hereunder if it fails
to do so, or if such taxes are otherwise assessed on such Transition Services.

                                   ARTICLE III
                                      AUDIT

        Company and its representatives shall have the right to audit the
pertinent time records and expense and cost records of Phillips relating to
charges and performance under this Agreement for a period of at least two (2)
years from the date of the origination of such records as follows. Upon written
request by Company and at Company's expense, Company may audit the
above-referenced records of Phillips upon reasonable notice and during business
hours during the term of this Agreement and for two (2) years thereafter for the
purpose of confirming the accuracy of such records and the manner in which such
records have been used in the administration of this Agreement; provided,
however, that any such accountants undertaking the audit shall promptly

                                       4
<PAGE>   6

report to both Parties the results of the audit and whether same shows
compliance with the terms of this Agreement, or as the case may be, a report
setting forth the facts detailing the failure to comply with the terms of this
Agreement. Unless required by legal or administrative process, a Party, as well
as its agents, representatives, employees, auditors, independent contractors,
officers, and directors who obtain actual or constructive knowledge of any
information obtained relative to any audit, shall treat as confidential and not
disclose, divulge, reveal, or report, directly or indirectly, to any third
party, any information obtained during any audit without the other Party's prior
written consent. If any legal or administrative process requires disclosure of
any information obtained during any audit, that Party shall provide prompt
written notice of such process to the other Party, thereby permitting the other
Party to seek a protective order or other appropriate remedy as it deems
necessary in its sole discretion.

                                   ARTICLE IV
                        RELEASES OF LIABILITY; INDEMNITY

        4.1 Release of Claims for Consequential and Other Damages. Subject to
Section 4.2 below, Company hereby releases Phillips and its officers, directors,
employees and agents from and covenants not to sue any of them for, (a) any and
all claims, causes of action, damages, and liabilities of whatsoever nature
(including, but not limited to, property damage, personal injury, death,
liabilities arising out of an employment relationship, workmen's compensation
claims, attorneys' fees, travel costs, interest expense and amounts paid in
settlement) which Company may now or hereafter have (including, but not limited
to, any consequential, incidental, indirect or special damages and losses of
whatsoever nature) which arise out of or relate directly or indirectly to
Phillips' obligations under this Agreement; and (b) expenses and losses
(including, but not limited to, attorneys' fees, travel costs, and interest
expense) relating to such matters.

        4.2 THE RELEASES AND COVENANTS NOT TO SUE STATED ABOVE SHALL NOT APPLY
TO ANY CLAIMS, CAUSES OF ACTION, LIABILITIES, DAMAGES, EXPENSES AND LOSSES WHICH
RESULT PROXIMATELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF PHILLIPS WHICH WOULD OTHERWISE BE RELEASED OR INDEMNIFIED. THE RELEASES AND
COVENANTS NOT TO SUE STATED ABOVE SHALL APPLY TO ALL BREACHES BY PHILLIPS, IF
ANY, OF ALL LESSER STANDARDS OF CONDUCT OR CULPABILITY. IT IS A CONSIDERATION
FOR PHILLIPS' PROVISION OF SERVICES HEREUNDER AND THE INTENT OF THE PARTIES THAT
BY THIS RELEASE, COMPANY WILL RELEASE AND PROTECT PHILLIPS FROM THE CONSEQUENCES
OF PHILLIPS' OWN NEGLIGENCE WHERE THAT NEGLIGENCE IS THE SOLE, CONCURRING OR
CONTRIBUTING CAUSE OF THE INJURY, DEATH OR DAMAGE.

        4.3 PHILLIPS SHALL INDEMNIFY AND HOLD COMPANY AND ITS SUCCESSORS,
ASSIGNS, AFFILIATES, AND ALL OF COMPANY'S OFFICERS, DIRECTORS, EMPLOYEES,
REPRESENTATIVES AND AGENTS HARMLESS FROM ANY CLAIMS, CAUSES OF ACTION,
LIABILITIES, DAMAGES, EXPENSES (INCLUDING REASONABLE ATTORNEY'S FEES) AND LOSSES
WHICH RESULT PROXIMATELY AND DIRECTLY FROM THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF PHILLIPS, WHICH ARE NOW OR HEREAFTER ASSERTED BY THIRD PARTIES
AGAINST COMPANY ARISING DIRECTLY OR INDIRECTLY FROM SERVICES PROVIDED BY
PHILLIPS UNDER THIS AGREEMENT.

                                       5
<PAGE>   7

        4.4 Survival of Releases and Indemnification. Nothing contained in this
Agreement shall modify, alter or amend any obligation of Phillips or any
affiliate of Phillips under the Contribution Agreement. Subject to applicable
statutes of limitation, the Parties' obligations under Section 4.1 and 4.3 shall
survive any termination of the Contribution Agreement, the Governance Agreement
by and among Phillips, Duke and the Company, dated December 16, 1999, those
agreements executed as the closing of the transaction contemplated by the
Contribution Agreement, and this Agreement, and shall continue thereafter in
full force and effect.

                                    ARTICLE V
                                 CONFIDENTIALITY

        5.1 Confidentiality Obligation. Both Phillips and Company (and each
Party shall ensure that its employees, contractors, subcontractors, agents and
affiliates who perform or receive Transition Services under this Agreement)
shall treat as strictly confidential (and shall not disclose) all information
received or obtained as a result of this Agreement that relates to the other
Party or any aspect of its business or operations.

        5.2 Disclosure of Information. A Party may disclose information that
would otherwise be confidential if and only to the extent: (a) required by
applicable law, provided that the disclosing Party has notified the other in
writing prior to disclosure and taken all practicable legal steps to prevent
such disclosure; (b) required by any securities exchange or agency to which the
Party is subject, wherever situated, whether or not the requirement has the
force of law, provided that the disclosing Party has taken all practicable legal
steps to prevent such disclosure and notified the other Party in writing prior
to disclosure; (c) disclosed on a confidential basis to the professional
advisers or auditors of the Party or to any actual or potential bankers or
financiers of that Party; (d) that the information has come into the public
domain through no fault of that Party or its employees, affiliates, officers,
directors, representatives, agents, or assigns; (e) that the other Party has
given prior written approval to such disclosure; (f) necessary to enforce,
comply with or perform any of the terms of this Agreement or the other
agreements listed in Section 4.4 or any other agreements contemplated hereby or
thereby; or (g) received from a third party, unless, to the knowledge of the
Party that would otherwise be subject to this Article V or its employees,
affiliates, officers, directors, representatives, agents, or assigns, such third
party is subject to an independent obligation to keep such information
confidential.

                                   ARTICLE VI
                                     NOTICES

        All notices and other communications to be given to either Party
hereunder shall be sufficiently given for all purposes hereunder if in writing
and delivered by hand, courier or overnight delivery service or three days after
being mailed by certified or registered mail, return receipt requested, with
appropriate postage prepaid, or when received in the form of a telegram or
facsimile and shall be directed, if to a Party hereunder, to the address or
facsimile number set forth below (or at such other address or facsimile number
as such Party shall designate by like notice):

                                       6
<PAGE>   8

               (a)  If to Phillips:

                                    Phillips Petroleum Company
                                    1224 Adams Building
                                    Bartlesville, Oklahoma  74004
                                    Attention: Clyde W. Lea
                                    Fax No.: (918) 662-2301

               (b)    If to Company:

                                    Duke Energy Field Services, LLC
                                    370 17th Street, Suite 900
                                    Denver, Colorado 80202
                                    Attention:  Martha B. Wyrsch
                                    Fax No.:  (303) 605-8902

                                   ARTICLE VII
                                  GOVERNING LAW

        THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELEWARE, WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES
THEREOF.

                                  ARTICLE VIII
                                TERM; TERMINATION

        8.1 Term; Termination. This Agreement shall commence on the Effective
Date and shall remain in effect until (a) December 31, 2000, or (b) such earlier
date on which Company shall deliver to Phillips a written release executed by
Company for the benefit of Phillips, releasing Phillips from any further
obligation to provide Transition Services pursuant to this Agreement. Upon
written agreement by both Parties, and subject to renegotiation of applicable
charges necessitated by any changes in internal or external costs of providing
Transition Services, this Agreement may be continued after December 31, 2000 on
a month to month basis.

        8.2 Specific Transition Services Rights. Company may terminate any
specific Transition Service during the term of this Agreement by giving at least
thirty (30) days prior written notice to Phillips, and if such Transition
Service is terminated during a month, any rate agreed upon for the provision of
such Transition Service shall be prorated, with the exception of IT Services
charges which shall not be prorated but shall be reimbursed for the entire month
of such termination.

                                       7
<PAGE>   9

                                   ARTICLE IX
                                   ASSIGNMENT

        This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors and permitted assigns; provided,
however, that (a) no Party hereto will assign its rights or delegate any or all
of its obligations under this Agreement, except to an affiliate or a successor
to all or a substantial portion of the assets or the business of such Party,
without the express prior written consent of either Party hereto, and (b) any
assignment of the obligations of either Party hereto shall not relieve that
Party of its obligations under any and all of the provisions of this Agreement.

                                    ARTICLE X
                              CONFLICT OF INTEREST

        Neither Party shall, and each shall require that its subcontractors
shall not, pay any commissions, fees, or grant any rebates to any employee,
officer or agent of the other Party; nor favor employees, officers or agents of
the other Party with gifts or entertainment of significant cost or value; nor
enter into any business arrangement with employees, officers or agents of the
other Party, other than as a representative of the other Party, without written
approval of such other Party.
                                   ARTICLE XI
                                  FORCE MAJEURE

        11.1 Force Majeure. No failure or omission to carry out or to observe
any of the terms, provisions or conditions of this Agreement, except the failure
to make payment for sums due hereunder, shall give rise to any claim by one
Party against the other, or be deemed a breach of this Agreement, if the same
shall have been or shall be caused by or arise out of any event of Force
Majeure, which term as used herein shall include (but only to the extent that
the affected Party is unable to perform due to causes and events that are beyond
the reasonable control of the affected Party), but not be limited to, war,
hostilities, acts of the public enemy or of belligerents, sabotage, blockage,
revolution, insurrection, riot or disorder, requisitions or rationing, whether
imposed by law, decree or regulations or by voluntary cooperation of industry at
the insistence or request of any governmental authority or person purporting to
act therefore; compliance with allocation programs, voluntary or mandatory,
including reduction or cessation of production by reason of imposition by any
governmental authority or person purporting to act with government authority,
acts of God, fire, frost, earthquake, storm, or lightning, epidemic, quarantine,
strikes or combination of workmen lockouts or other labor disturbances,
explosion, accidents by fire or otherwise to pipe, storage facilities,
installations, machinery, unanticipated plant outages, delays in acquiring or
inability to acquire permits or licenses necessary to enable the Parties hereto
to perform, lack of adequate fuel, power, raw materials, labor, containers or
transportation facilities, delays or shortages caused by breakdowns, failures or
unavailability of materials or equipment, breakage, mechanical breakdowns or
accident to machinery; delay, breakdown, or destruction of a plant, terminal, or
equipment; provided, however, that the Party so affected thereby will exercise
reasonable efforts pursuant to prudent industry practice to prevent the
occurrence of the Force Majeure event and to cure the event of Force Majeure as
quickly as possible so that the Party so affected will be able to carry out and
observe all of the terms, provisions, and conditions

                                       8
<PAGE>   10

of this Agreement, but such Party shall not be required to settle any labor
disputes giving rise to an event of Force Majeure hereunder.

        11.2 Notification of Force Majeure. If a Party hereunder is prevented
from or delayed in performing any of its obligations under this Agreement by a
Force Majeure event, the Party affected shall promptly notify the other in
writing of the circumstances constituting the Force Majeure event, indicating
the performance obligations which are thereby delayed or prevented and the
length of the resulting delay expected. The Party claiming Force Majeure shall
use its best efforts to reduce the losses of the other Party resulting from the
Force Majeure event. The other Party may thereafter grant an extension to the
time required to complete performance of the obligation hereunder.

        11.3 Substitution. In the event that Phillips is excused from supplying
a Transition Service in accordance with the terms of this Section, then Company
shall be free to acquire the Transition Services from any substitute source, for
such period as Company deems necessary or expedient, and if so acquired, Company
shall not be obligated to pay Phillips for such Transition Services during such
period.

                                   ARTICLE XII
                         ALTERNATIVE DISPUTE RESOLUTION

        12.1   Negotiations.

               (a) Any dispute arising out of or relating to this Agreement
shall be resolved in accordance with the procedures specified in this Article.

               (b) The Parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement promptly by negotiation
between executives who have authority to settle the controversy and who are at a
higher level of management than the persons with direct responsibility for
administration of this Agreement. Either Party may give the other Party written
notice of any dispute not resolved in the normal course of business. Within 15
days after delivery of the notice, the receiving Party shall submit to the other
a written response. The notice and the response shall include a statement of
each Party's position and a summary of arguments supporting that position, and
the name and title of the executive who will represent that Party and of any
other person who will accompany the executive. Within 30 days after delivery of
the initial notice, the executives of both Parties shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem
necessary, to attempt to resolve the dispute. All reasonable requests for
non-privileged and/or non-proprietary information made by one Party to the other
will be honored.

               (c) All negotiations pursuant to this clause shall be considered
confidential and shall be treated as compromise and settlement negotiations for
purposes of applicable rules of evidence.

               (d) Notwithstanding the foregoing, nothing contained in this
Agreement shall limit or restrict in any way the right or power of a Party at
any time (i) to commence and

                                       9
<PAGE>   11

prosecute a proceeding for a preliminary or temporary injunction or other
temporary order pending mediation or arbitration under this Agreement (A) to
restrain a Party from breaching this Agreement or (B) for specific enforcement
of this Article, or (ii) to consult with the other Party in an attempt to
negotiate a resolution of the dispute. The Parties agree that any legal remedy
available to them with respect to a breach of this Article will not be adequate
and that, in addition to all legal remedies, each Party is entitled to an order
specifically enforcing this Article.

        12.2 Mediation. If the dispute has not been resolved by negotiation
described in Section 12.1 within 45 days after the receipt of the initial notice
by the other Party, the Parties shall endeavor to settle the dispute by
mediation conducted in the English language under the then current Center For
Public Resources' CPR Model Mediation Procedure for Business Disputes. The
mediation will be conducted at a site agreed upon by the Parties. All mediation
costs are to be borne equally by the Parties. Each Party shall be responsible
for its own attorney's fees and costs.

        12.3 Arbitration. If a dispute or controversy shall arise between the
Parties with respect to any matter covered by this Agreement that has not been
resolved pursuant to either Section 12.1 or 12.2 above, any Party involved in
such controversy shall have the option of submitting the matter to arbitration
in the English language pursuant to the guidelines set forth below. Demand and
submission to arbitration as provided in this Agreement must, unless otherwise
agreed, be made in writing by the requesting Party within the later of (i) ten
(10) days after negotiations and mediation held pursuant to Sections 12.1 and
12.2 above have failed, and such notifying Party intends to submit the matter
for arbitration and (ii) 60 days following the effective date of notice of the
dispute or controversy. The failure to timely submit the matter to arbitration
shall constitute a waiver of the Parties to submit their dispute to arbitration.
If submitted to arbitration, the arbitration shall be binding on the Parties and
the dispute shall be settled in accordance with the Commercial Arbitration Rules
of the American Arbitration Association ("AAA Rules"), and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. If a dispute involves an amount in controversy of $100,000
or less, there shall be one arbitrator. If a dispute involves an amount in
controversy in excess of $100,000 or a request for preliminary injunction, there
shall be three arbitrators. All arbitration proceedings shall be conducted in
Houston, Texas.

                                  ARTICLE XIII
                       TRANSITION SERVICES REPRESENTATIVES

        The Parties shall each appoint one or more representatives (each, a
"Representative") to facilitate communications and performance under this
Agreement. Each Party may treat an act of the Representative of the other Party
as being authorized by such other Party without inquiring behind such act or
ascertaining whether such Representative had authority to so act. The initial
Representatives are named in Exhibit A hereto. Each Party shall have the right
at any time and from time to time to replace its Representative by giving notice
in writing to the other Party setting forth the name of (i) the Representative
to be replaced and (ii) the replacement, and certifying that the replacement
Representative is authorized to act for the Party giving notice in all matters
relating to this Agreement.

                                       10
<PAGE>   12
                                   ARTICLE XIV
                                  MISCELLANEOUS

        14.1 Entire Agreement. This Agreement, together with the exhibits
hereto, constitutes the entire agreement of the Parties with respect to the
services and arrangements described herein, and supercedes all prior contracts
or agreements between the Parties solely with respect to the subject matter
hereof, whether written or oral. This Agreement is not intended to confer upon
any person not a party hereto (or their successors and assigns) any rights or
remedies hereunder.

        14.2 Amendments. This Agreement may not be modified or amended, in whole
or in part, except by a supplemental agreement signed by the Parties hereto.

        14.3 Headings; Construction. The Article and Section headings of this
Agreement have been inserted only to facilitate reference and shall have no
bearing on the construction and interpretation of this Agreement. Unless the
context requires otherwise: (a) the gender (or lack of gender) of all words used
in this Agreement includes the masculine, feminine and neuter; (b) references to
Articles and Sections refer to Articles and Sections of this Agreement; (c)
references to Exhibits refer to the Exhibits attached to this Agreement; (d)
references to laws refer to such laws as they may be amended from time to time,
and references to particular provisions of a law include any corresponding
provisions of any succeeding law; (e) references to money refer to legal
currency of the United States of America; and (f) the word "including" means
"including, without limitation."

        14.4 Counterparts. This Agreement and any amendment thereto may be
executed in one or more counterparts, each of which when so executed shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.

        14.5 Waiver. No waiver of any breach of this Agreement shall be held to
be a waiver of any other or subsequent breach. Except as otherwise expressly
provided herein, no failure to exercise, delay in exercising or single or
partial exercise of any right, power or remedy by any Party, and no course of
dealing between the Parties, shall constitute a waiver of any such right, power
or remedy.

                                       11
<PAGE>   13

        IN WITNESS WHEREOF, the Parties have set their hands by their duly
authorized officials as of the date set forth above.

                                      PHILLIPS PETROLEUM COMPANY

                                      By: /s/ JOHN A. CARRIG
                                         ---------------------------------------
                                            Name: John A. Carrig
                                            Title: Vice President and Treasurer

                                      DUKE ENERGY FIELD SERVICES, LLC

                                      By: /s/ DAVID D. FREDERICK
                                         ---------------------------------------
                                            Name: David D. Frederick
                                            Title: Sr. Vice President and CFO

                                       12
<PAGE>   14

                       EXHIBIT A: SERVICES REPRESENTATIVES

        The Parties to this Transition Services Agreement each hereby appoint a
Representative (as defined in Article XIII thereof) to facilitate communications
and performance under this Agreement.

        The initial Representatives of Phillips and the Company shall be as
follows:

        1. The initial Representative of Phillips shall be Jeff W. Sheets, and
shall be contacted according to the procedures set forth in Article VI of this
Agreement at the following address or at the following facsimile number:

               Phillips Petroleum Company
               3 A3 Phillips Building
               Bartlesville, Oklahoma  74004
               Facsimile: (918) 662-1630
               Telephone: (918) 661-9037

        2. The initial Representative of the Company shall be David D.
Frederick, and shall be contacted according to the procedures set forth in
Article VI of this Agreement at the following address or at the following
facsimile number:

               Duke Energy Field Services, LLC
               370 17th Street, Suite 900
               Denver, Colorado 80202
               Facsimile: 303-595-0480
               Telephone: 303-605-1614

                                      A-1
<PAGE>   15

                             EXHIBIT B: THE SERVICES

                                    ARTICLE I
                                    RESOURCES

Phillips will provide the personnel, equipment, tools, technology, and other
resources necessary to perform the Transition Services as set forth and
identified in Article III of this Exhibit. Phillips shall in its sole discretion
hire and fire employees engaged in performing transition services hereunder,
determine their levels of compensation, and otherwise marshal those resources it
deems necessary or proper in order to perform services under this Agreement;
provided, however, that Phillips shall not remove any particular Designated
Person (as defined below) from the performance of Transition Services without
prior consultation with Company.

Upon request of Company, Phillips shall provide specific personnel (each
referred to as a "Designated Person") who were previously engaged in the
performance of services relating to the assets and facilities acquired by
Company from Phillips. Company shall reimburse Phillips for the services of each
such Designated Person as indicated hereinbelow. Phillips will assign each such
Designated Person to perform services relating to Company (including services
that are not specifically provided for in Article III hereof) until the date
(the "Service Termination Date") specified in a written notice from Company to
Phillips indicating that the services of such Designated Person are no longer
required by Company from and after such specified date. Phillips will be
responsible for all severance benefits and other termination costs, if any,
associated with the termination of any Designated Person's employment with
Phillips; provided, however, that if the Service Termination Date with respect
to a Designated Person occurs after the six-month period (or the nine-month
period in the case of a Designated Person who is an accountant) beginning on the
Closing Date (as defined in the Contribution Agreement), then Company shall
reimburse Phillips for the cash severance benefits, if any, paid by Phillips to
such Designated Person, but only if (1) such Designated Person receives a notice
of termination of employment from Phillips within thirty (30) days after such
Designated Person's Service Termination Date and such Designated Person's
employment is actually terminated within sixty (60) days after receipt of such
notice, and (2) such Designated Person's employment is terminated under
circumstances that entitle such Designated Person to severance benefits pursuant
to the terms of the Phillips Layoff Plan as in effect on December 16, 1999. The
amount of any such reimbursement shall not exceed the amount of the cash
severance benefit that would have been paid to such Designated Person under the
terms of the Phillips Layoff Plan as in effect on December 16, 1999.

                                      B-1
<PAGE>   16

                                   ARTICLE II
                             DESCRIPTION OF SERVICES

        The Transition Services to be provided to Company by Phillips shall be
those described herein and any other service agreed to in writing by the Parties
from time to time, subject to modification and amendment by joint written
agreement of the Parties:

                                 (a) IT SERVICES
               Phillips shall perform the computing system management,
information management, and communications services specified hereinbelow
(referred to collectively herein as "the Services").

        Phillips shall provide the Services as an independent contractor in
accordance with the standards of care and competence of the petroleum industry
and in compliance with the standards of data processing/computer industry,
particularly as to complying with software licenses and restricting access to
data.

(i)     IT SERVICES CONTACTS

Phillips Contact Person:            Ronald C. Maxwell

Company Contact Person:             Fred Kesinger

(ii)    SERVICE DESCRIPTIONS
IT Services include the following service types:

O  SYSTEM SUPPORT
O  OPERATION
O  BACKUP AND RECOVERY
O  CHANGE MANAGEMENT
O  CONFIGURATION MANAGEMENT
O  DASD STORAGE MANAGEMENT
O  TAPE MANAGEMENT
O  FUNCTIONS TO BE PERFORMED BY COMPANY
O  FUNCTIONS TO BE PERFORMED BY PHILLIPS

(1)     System Support

Phillips will take responsibility for management and support of systems
software, including the following activities:

                                      B-2
<PAGE>   17

o  apply systems software maintenance
o  install new program products
o  provide version control and release management
o  generate system
o  provide performance tuning
o  provide operational assistance and problem resolution

(2)     Operation

o Phillips will be responsible for normal operation of the Company systems.
o The Phillips Response Center will be manned 24 hours a day, 7 days a week.
o Company will be responsible for production batch scheduling.
o If the Company usage, measured for twenty-four (24) hours daily, exceeds the
  above resources by more than 10% for an extended period of time, defined to
  be three (3) consecutive months, then the charges to Company will be
  increased by the incremental cost to Phillips of providing the additional
  resources required by Company.

(3)     Backup and Recovery

Phillips will generally maintain responsibility for backup and recovery
services, including the following:

o Vault services will be provided by Phillips.
o In the event of disaster, Phillips will have responsibility for providing
  Company production environments, which can be restored at the fallback site
  within 72 hours of a disaster declaration.
o Phillips will perform disaster recovery exercises, with participation of
  Company personnel, on the schedule determined by Phillips Business Recovery
  Services.
o Full volume disk backups will be generated weekly. o Incremental backups and
  database image copies will be generated daily. o Tapes of latest full disk
  backup, daily increment, and image copies will be kept in a vault located
  offsite.

(4)     Change Management

o Change management will be handled by Phillips.
o Changes initiated by Phillips will be executed during the specified
  maintenance window, and Company will be informed accordingly.
o Changes initiated by Company may be executed at a time requested by Company,
  if this does not impact other Phillips production.
o Phillips will notify the Company contact person of all major changes that
  will impact the system availability at least one week prior to execution.

                                      B-3
<PAGE>   18

(5)     Configuration Management

o Phillips will have responsibility for the management of central processing
  center hardware and will maintain configuration diagrams of equipment.

(6)     DASD Storage Management

Phillips will have responsibility for management of DASD hardware, including:
o allocation of volumes
o monitoring and media failure intervention
o DASD consolidations

Company will have responsibility for:
o backup job processing at the application level
o recovery of files at the application level

(7)     Tape Management

Phillips will have responsibility for management, operation, and support of
tapes, including maintenance:
o vaulting service
o monitoring and media failure intervention
o tape mounts
o physical tape library maintenance
o tape measurement system daily housekeeping
o scratch tape management

(8)     Functions to be Performed by Company

o Company applications will be run under the Phillips production systems and
  will be isolated by use of the appropriate security system.
o Company will handle security administration of data files only for their
  applications.
o All production migration/change control of Company's specific application
  portfolio will be performed by Company.

(9)     Functions to be Performed by Phillips

o Daily, weekly, monthly, and annual scheduled batch production jobs will
  continue to be managed by Phillips.
o Database administration, including physical database design, logical
  database design, restore and recovery, database performance tuning, etc.,
  will continue to be performed by Phillips.

                                      B-4
<PAGE>   19

(iii)   SERVICE HOURS AND PROBLEM MANAGEMENT

(1)     Maintenance Hours
In general, the system and its applications will be available unless a planned
or emergency maintenance period is in effect.

Planned maintenance will take place once a week according to the table below:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                                  Start CST              End CST               Comments
------------------------------------------------------------------------------------------
<S>                               <C>                    <C>                   <C>
                                                                       Monthly, after
        Saturday                    21:00                 03:00      12th workday
------------------------------------------------------------------------------------------
                                                                       Weekly, except
                                                                     after 12th workday
        Saturday                    21:00                 00:00
------------------------------------------------------------------------------------------
        </TABLE>

        The times above are indicating worst case. Generally, services will be
available during the planned maintenance period, or the period of the services
unavailability will be shorter than what is specified above.

        Information about system impact will be communicated to Company's
contact person before noon CST the previous Friday. Notification to Company
needs to be given one week in advance for changes to the normal maintenance
period.

(2)     Problem Management

During Company manned service hours, all Company user problems should be
reported to the Company Help Desk, which will perform first level problem
determination and consult with internal resources before escalation to Phillips
Help Desk.

 Phillips Help Desk will maintain a log of all problems reported.

If the problem cannot be solved immediately over the telephone, Phillips will
continue to work on the problem according to the problem codes and target times
in the Problem Severity Table shown below.

(3)     Systems and Operations Problems

Problem Resolution
Service restoration will generally be provided according to the target times
shown in the problem severity table below.

                                      B-5
<PAGE>   20

                             PROBLEM SEVERITY TABLE

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
                                                                              Phillips
           Code         Description            Impact      Target Time       Activity
------------------------------------------------------------------------------------------
                                                                            Phillips
                                                                          will work
                                                                          continuously
                                          Critical            1 Hour      until normal
            1            Critical         services                        situation is
                                        unavailable                       restored.
------------------------------------------------------------------------------------------
<S>         <C>          <C>            <C>                   <C>         <C>
                                                                              Phillips
                                                                           will work to
                                                                          restore service
                                         Important                        during normal
                                       functions are                      working hours.
                                       unavailable or                     Work will only
                                       response times                     be interrupted
            2             Serious           are              3 Hours       by a Code 1
                                       unacceptable.                         problem.
------------------------------------------------------------------------------------------
                                                                              Phillips
                                         Application,                      will work to
                                        network, or                        restore the
                                          hardware                        service within
            3              Minor         impacted.          1 working     normal working
                                                              day             hours.
------------------------------------------------------------------------------------------
                                           Small
                                        deficiencies
                                           where
                                        improvements
            4          Insignificant     are wanted            Not           As agreed.
                                                           specified
------------------------------------------------------------------------------------------
</TABLE>

                                      B-6
<PAGE>   21

                             (b) TREASURY SERVICES

        Phillips, as agent for Company, will provide the Treasury Management
services stated below in managing the funds of Company, subject to such
restrictions, conditions and limitations as may be deemed appropriate or
desirable by Company, and notice of which has been given by Company to Phillips
in writing signed by the Treasurer or Assistant Treasurer of Company. Phillips
will:

o   Maintain and operate bank accounts in the name of Company, deposit and
    disburse funds therefrom and reconcile such accounts;

o   Make, supervise and confirm transmission of funds to Company's accounts and
    the disbursement of funds from such accounts to others by wire or otherwise,
    in such manner as to provide for the efficient and effective use of
    Company's cash;

o   Maintain lock boxes in Company's name, and collect therefrom, as may be
    needed or requested;

o   Purchase and/or sell and enter into agreements to purchase and/or sell
    foreign currencies as required or requested by Company;

o   Pay for and administer existing foreign and domestic letters of credit,
    charging the cost thereof to Company's account(s), and submit drafts and
    documents and collect amounts owing Company under foreign and domestic
    letters of credit;

o   Endorse checks, drafts and other instruments made payable to Company, and
    deposit the same in one or more of Company's account(s) or when that is
    unfeasible, one or more of Phillips' general bank accounts, commingling such
    funds with Phillips', only as may be necessary;

o   Approve such of Company's invoices which are received by and sent to
    Phillips and issue either Company's check or electronic payment thereof, or
    when that is unfeasible, issue Phillips' check or electronic payment
    instruction in payment thereof and invoice Company for same; and

o   Maintain and administer procurement and travel card programs utilized by
    Company.

        To assist in the management of its cash and to maximize the amount that
may be invested, Company authorizes Phillips to maintain a "zero balance" in any
of Company's bank accounts.

                                      B-7

<PAGE>   22

                    (c) PROPERTY TAX, REAL ESTATE AND CLAIMS

Services Provided:

(1)     Right of Way Activities

o   Research surface title, negotiate and purchase right of way
    grants/easements, and secure tenant agreements for all pipeline construction
    projects.
o   Apply for and secure permits/licenses/easements for city street, county
    road, state and federal highways, railroads, Oklahoma Public School Lands,
    Bureau of Indian Affairs, Bureau of Land Management, University of Texas,
    U.S. Forestry Department, U.S. Corps of Engineers, Texas Parks and Wildlife
    Department and any local, state or federal agency having jurisdiction over
    the land.
o   Maintain and manage record system for lease/term easement
    expiration/renewal/payments to insure rights do not lapse.
o   Record documents with appropriate county.
o   Prepare payments of right of way and damages for pipeline construction
    projects and maintenance claim settlements.
o   Intercede with landowner attempting to stop pipeline construction and
    coordinate the securing of temporary restraining orders if required.
o   Review, negotiate and prepare all documents for release of right of way
    requested by landowners and developers.
o   Coordinate with legal all condemnation proceedings involving fee property,
    leases and easements.
o   Review, negotiate and prepare all documents for the reimbursement of
    expenses for pipeline adjustment due to landowner/developer activities,
    local/state/federal road improvement projects, and U.S. Corps of Engineer
    projects. Intercede to halt all development project activities that threaten
    the safety of the pipeline.
o   Coordinate obtaining of environmental assessments/impact
    statements/archaeological surveys for pipeline projects.
o   Maintain and manage right of way/geographic file system to insure
    utilization of extensive multiple line rights and existing rights for
    project planning.
o   Respond to landowner inquiries concerning pipeline locations and agreements.
o   Review right of way agreements, prepare assignment exhibits, and negotiate
    title cure cost issues involved in asset sales.
o   Prepare staking and construction release letters to field operations for
    the construction of pipelines.
o   Assist in route selection/landowner issues/cost estimations for pipeline
    project planning.
o   Negotiate easements/leases/fee acquisition for boosters and plant locations,
    including title review.
o   Provide status reports on pipeline projects.

                                      B-8
<PAGE>   23

(2)     Real Estate Activities

o   Maintain and manage fee property/lease file system and administer lease
    payment/expiration/renewal system.
o   Appraise/negotiate/coordinate environmental assessment/review title for
    acquisition and sale of fee property.
o   Secure appropriate zoning for facilities and review zoning applications that
    may impact existing facilities.

(3)     Claims Activities

o   Investigate, negotiate, settle, prepare releases and drafts relating to line
    leaks, maintenance operations, livestock, environmental, noise, and personal
    injury claims.
o   Investigate, negotiate, settle and secure collection of settlements due to
    damage to pipeline and company facilities.
o   Handle property damage based small claims actions resulting from operations.

(4)     Tax Activities

o   Collect data, prepare renditions, negotiate values, review tax statements,
    make payments, secure receipts and maintain tax files for personal property
    and real estate.
o   File valuation protests with Assessor and appear before County Board of
    Equalization to appeal tax valuations.
o   Participate in any tax appeal filed in District Court in the capacity of
    record custodian and expert witness. Assist in the preparation of trial
    exhibits, deposition/trial preparation of witnesses, settlement conferences
    and trial. Assist in the preparation of appeals briefs.
o   Provide tax estimates and participate in tax reduction study teams.
o   Review legislation and provide expert testimony before legislative
    committees on proposed Ad Valorem based legislation that impacts operations.

                                      B-9
<PAGE>   24
                                   ARTICLE III
                                CHARGES AND RATES

Phillips shall charge Company for the Transition Services provided under this
Agreement in accordance with the rates set forth hereinbelow, which represents a
reasonable estimate, as determined by Phillips and accepted by Company, of the
amount necessary to reimburse Phillips for its fully-burdened actual costs of
providing the Transition Services relating hereto ("Transition Service
Charges"), incorporating that portion of the following:

                (i) the labor and benefit expense, including all wages,
salaries, compensation, and remuneration paid by Phillips to employees of
Phillips engaged in the provision of Transition Services hereunder together with
the expense of Phillips for workman's compensation, disability benefit
insurance, payroll taxes, employees' pension, welfare and fringe benefits
(including various benefit plans),

                (ii) the overhead costs of the facilities of Phillips that are
engaged in the provision of the Transition Services by Phillips to Company; and

                (iii) all other reasonable and necessary general and
administrative and operating costs and expenses of Phillips.

Out of pocket expenses
In addition to paying the Transition Service Charges, Company shall reimburse
Phillips for any out of pocket expenses and travel expenditures associated with
those Transition Services charged on an hourly basis and any additional amounts
reasonably expended or incurred by Phillips to satisfy any obligation under this
Agreement which has been previously approved in writing by Company. In no event
shall Company pay directly any salaries, wages, withholding, benefits, severance
payments or any other compensation or payments to employees of Phillips.

Rates for specific Transition Services are set forth in the Attached Addendum.

                                      B-10

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