Document:

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                                                                   EXHIBIT 10.39

                          AMENDED AND RESTATED GUARANTY

                             [_____________] Project

                  THIS AMENDED AND RESTATED GUARANTY, dated as of November __,
2001 (this "Guaranty") made by RELIANT RESOURCES, INC., a Delaware corporation
(the "Guarantor"), in favor of [_____________] TRUST, a Delaware business trust
and the other Persons identified in the definition of Beneficiary below (the
"Beneficiary").

                                   WITNESSETH:

                  WHEREAS, the Beneficiary, Reliant Energy [_____________], LLC,
a Delaware limited liability company (by way of assignment from Reliant Energy
Construction, LLC) (the "Agent"), First Union Trust Company, National
Association, a national banking association ("First Union"), Apple Investments
LLC, a Delaware limited liability company ("Original Owner Trust Parent"), Apple
Equity Capital Trust, a Delaware business trust and Westdeutsche Landesbank
Girozentrale, New York Branch have entered in a Construction Agency Agreement,
dated as of April 27, 2001, as amended by Amendment No. 1 to Construction Agency
Agreement, dated as of July 25, 2001, and as amended by Amendment No. 1 to
Letter of Intent and Amendment No. 2 to Construction Agency Agreements dated
October 23, 2001 (as so amended, the "Existing CAA");

                  WHEREAS, in connection with the Existing CAA, Guarantor
entered into a Guaranty Agreement, dated as of April 27, 2001, in favor of Owner
Trust (the "Original Guaranty");

                  WHEREAS, Owner Trust, Agent, First Union, Apple Investments
2001 Trust ("Owner Trust Parent"), certain lenders and agents for such lenders
and equity participants have amended and restated the Existing CAA by entering
into an Amended and Restated Construction Agency Agreement, dated as of November
__, 2001 (as the same may be amended, supplemented or otherwise modified from
time to time, the "Construction Agency Agreement");

                  WHEREAS, the Construction Agency Agreement requires that
Guarantor amend and restate the Original Guaranty by executing and delivering
this Guaranty as a condition to the obligation of Owner Trust to make Payments
(as defined in the Construction Agency Agreement) thereunder, and Guarantor has
concluded that it will derive substantial benefits from the transactions
contemplated by the Construction Agency Agreement; and

                  WHEREAS, Guarantor is executing and delivering this Guaranty
to induce Owner Trust, the lenders and equity participants to enter into the
Construction Agency Agreement and to induce other Secured Parties from time to
time to enter into Financing Documents (as defined in the Intercreditor
Agreement) in respect of Lease Indebtedness (as defined in the Intercreditor
Agreement);

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                  NOW, THEREFORE, for value received, Guarantor hereby agrees
with and for the benefit of Beneficiary as follows:

                                   ARTICLE I

                                  DEFINED TERMS

                  SECTION 1.01 Interpretation. In this Guaranty, unless a clear
contrary intention appears:

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

                  (b) reference to any Person includes such Person's successors
         and assigns but, if applicable, only if such successors and assigns are
         permitted by this Guaranty, and reference to a Person in a particular
         capacity excludes such Person in any other capacity or individually;

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

                  (d) reference to any agreement (including this Guaranty),
         document or instrument means such agreement, document or instrument as
         amended or modified and in effect from time to time in accordance with
         the terms thereof and, if applicable, the terms of this Guaranty and
         the other Operative Agreements;

                  (e) reference to any Applicable Law means such Applicable Law
         as amended, modified, codified, replaced or reenacted, in whole or in
         part, and in effect from time to time, including rules and regulations
         promulgated thereunder and reference to any section or other provision
         of any Applicable Law means that provision of such Applicable Law from
         time to time in effect and constituting the substantive amendment,
         modification, codification, replacement or reenactment of such section
         or other provision;

                  (f) reference in this Guaranty to any Article, Section,
         Appendix, Schedule or Exhibit means such Article or Section thereof or
         Appendix, Schedule or Exhibit thereto;

                  (g) "hereunder", "hereof", "hereto" and words of similar
         import shall be deemed references to this Guaranty as a whole and not
         to any particular Article, Section or other provision thereof;

                  (h) "including" (and with correlative meaning "include") shall
         be deemed to be followed by the words "without limitation";

                  (i) relative to the determination of any period of time,
         "from" means "from and including" and "to" means "to but excluding";

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                  (j) with reference to any time or date specified herein, time
         is of the essence; and

                  (k) with respect to any rights and obligations of the parties
         under the Operative Agreements, all such rights and obligations shall
         be construed to the extent permitted by Applicable Law.

                  SECTION 1.02 Accounting Terms and Determinations. In this
Guaranty, unless expressly otherwise provided, all terms of an accounting
character used herein shall be construed and interpreted, and all accounting
determinations and computations hereunder shall be made, and all financial
statements required to be delivered shall be prepared, in accordance with GAAP,
as in effect from time to time.

                  SECTION 1.03 Legal Representation of the Parties. This
Guaranty was negotiated by the parties with the benefit of legal representation
and any rule of construction or interpretation otherwise requiring this Guaranty
to be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.

                  SECTION 1.04 Certain Defined Terms.

                  (a) The capitalized terms used herein which are defined in the
Construction Agency Agreement or the Credit Agreement and not otherwise defined
herein have, as used herein, the respective meanings provided for therein.

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

                  "Agent" shall have the meaning set forth in the first recital
to this Guaranty, provided that except for purposes of such recitals, wherever
the term Agent is used in this Guaranty, it shall be deemed to include Lessee.

                  "Beneficiary" shall mean Owner Trust and with respect to the
indemnification provisions of the Lease, each Lease Indemnified Person (as
defined in the Lease).

                  "Board" means the Board of Governors of the Federal Reserve
System of the United States (or any successor).

                  "Business Day" means (a) any day other than a Saturday, Sunday
or other day on which commercial banks in New York City or Houston, Texas are
authorized or required by law to close, or (b) if the applicable Business Day
relates to any LIBOR Payments, any day which is a "Business Day" described in
clause (a) and which is also a day for trading by and between banks in the
London interbank market.

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                  "Capital Lease" means a lease that would be recorded as a
capital lease on the balance sheet of the lessee.

                  "Capital Stock" means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, and any and all equivalent ownership interests in a Person (other
than a corporation), including, partnership interests in partnerships and member
interests in limited liability companies.

                  "Change of Control" means the occurrence of any Person or
group of related Persons, other than REI, Regco, or any of REI's or Regco's
Affiliates, acquiring directly or indirectly in the aggregate more than 30% of
the outstanding shares of the voting stock of Guarantor unless (a) Guarantor is
a wholly-owned Subsidiary of such Person and (b) the stockholders of Guarantor
immediately prior to Guarantor becoming a wholly-owned Subsidiary of such Person
hold shares of stock of such Person immediately after Guarantor becomes a
wholly-owned Subsidiary of such Person representing at least a majority of the
voting power in such Person.

                  "Code" means the Internal Revenue Code of 1986, as amended
from time to time and any successor statute.

                  "Commonly Controlled Entity" means an entity, whether or not
incorporated, that is under common control with Guarantor within the meaning of
Section 4001 of ERISA or is part of a group that includes Guarantor and that is
treated as a single employer under Section 414 of the Code.

                  "Consolidated Net Debt" means, as of any date of
determination, the total principal amount of Debt (other than Subordinated
Affiliate Debt) outstanding on such date less all cash and short-term
investments on such date, all as shown on the consolidated balance sheet of
Guarantor and its Consolidated Subsidiaries.

                  "Consolidated Shareholders' Equity" means, as of any date of
determination, the consolidated common equity (including common stock,
additional paid in capital, retained earnings, and other comprehensive income),
preferred stock, and minority interests of Guarantor and its Consolidated
Subsidiaries.

                  "Consolidated Subsidiary" means, at any date, any Subsidiary
or any other Person, the accounts of which would be consolidated with those of
Guarantor in its consolidated financial statements as of such date.

                  "Construction Agency Agreement" shall have the meaning set
forth in the third recital to this Agreement.

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                  "Controlled" means, with respect to any Person, the ability of
another Person (whether directly or indirectly and whether by the ownership of
voting securities, contract or otherwise) to appoint and/or remove the majority
of the members of the board of directors or other governing body of that Person
(and "Control" shall be similarly construed except when used as part of the
defined term "Change of Control").

                  "Corporate Rating" means the rating assigned by a Rating
Agency (whether indicative or formal) to Guarantor as its corporate or
counterparty rating, as applicable.

                  "Debt" of any Person means, at any date, without duplication,
(a) obligations for the repayment of money borrowed which are or should be shown
on a balance sheet as debt, including the unreimbursed amount of any drawings
under letters of credit issued for the account of such Person, (b) obligations
as lessee under Capital Leases, and (c) guaranties of payment or collection of
any obligations described in clauses (a) and (b) of other Persons; provided,
however, that Debt shall not include (i) any guaranties that may be incurred by
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business or similar transactions, (ii) any obligations or guaranties
of performance of obligations under performance bonds or obligations to
reimburse drawings under letters of credit issued to support obligations that do
not represent money borrowed or raised, so long as such reimbursement
obligations are paid in full within ten (10) Business Days after the date upon
which such obligation arises, (iii) trade payables, (iv) customer advance
payments and deposits arising in the ordinary course of such Person's business,
and (v) the liability of any Person as a general partner of a partnership for
Debt of such partnership, if the partnership is not a Subsidiary of such Person.

                  "Default" means any event or condition which, with the lapse
of time or the giving of notice, or both, would constitute a Guaranty Event of
Default.

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

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

                  "Existing CAA" shall have the meaning set forth in the first
recital to this Agreement.

                  "Guaranty Event of Default" shall have the meaning set forth
in Article V.

                  "Insolvency" means, with respect to any Multiemployer Plan,
the condition that such Plan is insolvent within the meaning of Section 4245 of
ERISA (and "Insolvent" shall be construed accordingly).

                  "Intercreditor Agreement" shall mean the Collateral Agency and
Intercreditor Agreement, dated as of the Closing Date among [_____________]
Trust, as a Borrower,

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[_____________] Trust, as a Borrower, Signal Peak Trust, as a Borrower,
[_____________] County Trust, as a Borrower, Citicorp USA, Inc., as Lender
Agent, Citibank N.A., as Collateral Agent, and certain other Secured Parties and
authorized representatives.

                  "Lessee" shall mean Reliant Energy [_____________], LLC, in
its capacity as lessee under the Lease.

                  "Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment as collateral, security interest, encumbrance, or
other interest in Property to secure payment of any Debt.

                  "Margin Stock" has the meaning assigned to such term (or, in
the case of Regulation T, the term "margin security") in Regulation T or U, as
the case may be.

                  "Material Adverse Effect" means any material adverse effect on
the ability of Guarantor to perform its obligations under this Guaranty.

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

                  "Obligations" shall have the meaning set forth in Section
2.01(a).

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

                  "Permitted Liens" means with respect to any Person:

                  (a) Liens existing on the date hereof;

                  (b) Liens upon the Capital Stock of a Significant Subsidiary
         (or the Capital Stock of a holding company formed to acquire or hold
         such stock) (i) created at the time of the acquisition thereof or
         within one year after such time to only secure all or a portion of Debt
         constituting the purchase price for such Capital Stock or (ii) existing
         thereon (A) at the time of the acquisition thereof or (B) at the time
         at which such Subsidiary first becomes a Significant Subsidiary, so
         long as such Lien was in existence prior to such time;

                  (c) Liens created by Capital Leases provided that the Liens
         created by any such Capital Lease attach only to the Property leased to
         the Guarantor or one of its Subsidiaries pursuant thereto;

                  (d) purchase money Liens securing Debt (including such Liens
         securing Debt incurred within 12 months of the date on which such
         Property was acquired) provided

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         that all such Liens attach only to the Property purchased with the
         proceeds of the Debt secured thereby and only secure the Debt incurred
         to finance such purchase;

                  (e) Liens on accounts (as defined in the applicable Uniform
         Commercial Code at any time in effect), receivables, notes, ownership
         interests, contracts or contract rights created in connection with a
         sale, securitization or monetization of such accounts, receivables,
         notes, ownership interests, contracts or contract rights, and Liens on
         rights of the Guarantor or any Subsidiary related to such accounts,
         receivables, notes, ownership interests, contracts or contract rights
         which are transferred to the purchaser of such accounts, receivables,
         notes, ownership interests, contracts or contract rights in connection
         with such sale, securitization or monetization; provided that such
         Liens secure only the obligations of the Guarantor or any of its
         Subsidiaries in connection with such sale, securitization or
         monetization;

                  (f) Liens on (i) Property owned by a Project Financing
         Subsidiary or (ii) equity interests in a Project Financing Subsidiary
         (including in each case a pledge of a partnership interest, common
         stock or a membership interest in a limited liability company), in each
         case securing any Debt which constitutes a Project Financing;

                  (g) Liens on Property of a Person which exist at the time such
         Person becomes a Significant Subsidiary of the Guarantor which Liens
         were not granted in contemplation of such Person becoming a Significant
         Subsidiary of the Guarantor;

                  (h) extensions, renewals or replacements of any Permitted Lien
         referred to in clauses (a) through (g) of this definition of "Permitted
         Liens", provided that the principal amount of the Debt secured thereby
         is no greater than the greater of (i) the outstanding principal amount
         of such Debt immediately before such extension, renewal, or replacement
         and (ii) the maximum commitment of such Debt or obligation immediately
         before such extension, renewal, or replacement and that any such
         extension, renewal or replacement Lien is limited to the Property
         originally encumbered thereby; and

                  (i) other Liens securing Debt not to exceed 10% of
         Consolidated Shareholders' Equity.

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

                  "Plan" means, at a particular time, any employee benefit plan
that is covered by ERISA and in respect of which Guarantor or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5)
of ERISA.

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                  "Principal Trading Subsidiary" means (a) Reliant Energy
Services, Inc., a Delaware corporation ("RES"), but only for so long as RES is a
Subsidiary of Guarantor or (b) if RES transfers its business and assets to
another Subsidiary of Guarantor, such other Subsidiary.

                  "Project Financing" means any Debt, lease or other obligations
that do not constitute Capital Leases at the time such leases are entered into,
in each case that are incurred to finance a project or group of projects
(including any construction financing) to the extent that such Debt (or other
obligations) are not recourse to the Guarantor or any of its Subsidiaries (other
than a Project Financing Subsidiary) or any of their respective Property other
than the Property of a Project Financing Subsidiary.

                  "Project Financing Subsidiary" means any Subsidiary of the
Guarantor whose principal purpose is to incur Project Financing or to become an
owner of interests in a Person created to conduct the business activities for
which such Project Financing was incurred, and substantially all the fixed
assets of which Subsidiary or Person are those fixed assets being financed (or
to be financed) in whole or in part by one or more Project Financings.

                  "Property" means any interest or right in any kind of property
or asset, whether real, personal or mixed, owned or leased, tangible or
intangible and whether now held or hereafter acquired.

                  "Rating Agencies" means (a) Standard & Poor's Ratings Group, a
division of McGraw-Hill Companies, Inc.; (b) Fitch, Inc.; and (c) Moody's
Investors Service, Inc., or any successor to any of such rating agencies.

                  "Regco" means Center Point Energy, Inc., the holding company
which is expected to become the publicly traded holding company (direct or
indirect) of REI as part of the overall restructuring described in REI's
December 31, 2000 SEC Form 10-K.

                  "Regulation T" and "Regulation U" means Regulation T and U,
respectively, of the Board or any other regulation hereafter promulgated by the
Board to replace the prior Regulation T or U, as the case may be, and having
substantially the same function.

                  "REI" means Reliant Energy, Incorporated, a Texas corporation.

                  "Reorganization" means, with respect to any Multiemployer
Plan, the condition that such Plan is in reorganization within the meaning of
Section 4241 of ERISA.

                  "Reportable Event" means any of the events specified in
Section 4043(b) of ERISA, other than those events as to which the thirty-day
notice period is waived under PBGC Reg. Section 4043.

                  "Responsible Officer" means the chief financial officer, the
chief accounting officer, the senior vice president-finance, the treasurer, an
assistant treasurer, or the comptroller

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of Guarantor or any other officer of Guarantor whose primary duties are similar
to the duties of any of the previously listed officers.

                  "Responsible Trust Officer" means a "Responsible Officer", as
such term is defined in the Trust Agreement.

                  "SEC" means the Securities and Exchange Commission.

                  "Secured Parties" shall have the meaning set forth in the
Intercreditor Agreement.

                  "Significant Subsidiary" means, as of any date, any Subsidiary
of Guarantor (other than a Project Financing Subsidiary) having plant, property,
and equipment net of accumulated depreciation as of the most recent fiscal year
end equal to or greater than 10% of Guarantor's consolidated plant, property,
and equipment net of accumulated depreciation as of the most recent fiscal year
end based on the financial reports which have been delivered under Section
3.01(a).

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

                  "Subordinated Affiliate Debt" means all Debt of Guarantor and
its Subsidiaries to REI or its Subsidiaries which are not Subsidiaries of
Guarantor that is subordinated to the obligations under this Guaranty under
subordination terms substantially similar to or more restrictive than the
subordination terms listed on the attached Exhibit 1.01.

                  "Subsidiary" means, as to any Person, a corporation,
partnership or other entity of which more than 50% of the outstanding shares of
stock or other ownership interests having ordinary voting power (other than
stock or such other ownership interests having such power only by reason of the
happening of a contingency) to elect directors or other managers of such
corporation, partnership or other entity are at the time owned, directly or
indirectly, through one or more Subsidiaries of such Person, by such Person.

                  "Termination Date" shall have the meaning set forth in Section
6.05.

                  SECTION 1.05 Amendment and Restatement. This Guaranty amends
and restates in its entirety the Original Guaranty and, upon effectiveness of
this Guaranty, the terms and provisions of the Original Guaranty shall be
superseded hereby; provided that nothing contained herein shall be construed as
a novation of the Original Guaranty.

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                                   ARTICLE II

                            GUARANTEE AND INDEMNITIES

                  SECTION 2.01 Guarantee of Obligations Under Operative
Agreements.

                  (a) The Guarantor hereby confirms and reaffirms its
obligations under the Original Guaranty. Guarantor irrevocably and
unconditionally guarantees to Beneficiary the due, complete and punctual
performance and observance of all payment obligations of Agent and Lessee under
the Operative Agreements, and the due, complete and punctual performance of, and
compliance with, each and all other obligations, covenants and agreements of
Agent and Lessee under the Operative Agreements (in each case, including any and
all indemnities and liabilities for breach of covenant or warranty now or
hereafter incurred by Agent or Lessee to Beneficiary arising pursuant or with
respect to the Operative Agreements), in each case strictly in accordance with
the terms thereof (all such obligations and other covenants, indemnities and
agreements being referred to herein as the "Obligations"). In the event that
Agent or Lessee fails to pay, perform or observe duly, completely and punctually
any Obligation when and as the same shall be due and payable, or required to be
observed or performed, as the case may be, in accordance with the terms of the
applicable Operative Agreement, Guarantor shall forthwith pay, perform or
observe, as the case may be, such Obligation or cause the same forthwith to be
paid, performed or observed, as the case may be, within five (5) Business Days
following Guarantor's receipt of written notice of such failure signed by a
Responsible Trust Officer of Beneficiary to pay, perform or observe, as the case
may be, regardless of whether or not Beneficiary or anyone on behalf of
Beneficiary shall have instituted any suit, action or proceeding or exhausted
its remedies or taken any steps to enforce any rights against Agent, Lessee or
any other Person or entity to compel any such performance or observance or to
collect all or any part of such amount pursuant to the provisions of the
Operative Agreements or at law or in equity, or otherwise, and regardless of any
other condition or contingency.

                  (b) Guarantor agrees to pay within five (5) Business Days
following Guarantor's receipt of written demand signed by a Responsible Trust
Officer of Beneficiary (which demand shall itemize in reasonable detail the
expenses for which demand is made by Beneficiary) any and all reasonable
expenses (including reasonable attorneys' fees and disbursements) that may be
paid or incurred by Beneficiary in enforcing any rights with respect to, or
collecting, any or all payments due pursuant to the terms of the Operative
Agreements and/or enforcing any rights with respect to, or collecting against,
Guarantor under this Guaranty (whether pursuant to Section 2.01(a) or any other
provision hereof); provided, that Guarantor shall not be liable for any expenses
of Beneficiary if no payment under the Operative Agreements or this Guaranty is
due or determined to be due.

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                  SECTION 2.02 Unconditional Obligations. This Guaranty is a
primary obligation of Guarantor independent of the obligations of Agent or
Lessee under any Operative Agreement, and is an unconditional, absolute, present
and continuing obligation and guarantee of payment and performance (and not
merely of collection), and the validity and enforceability of this Guaranty
shall be absolute and unconditional irrespective of, and, shall not be impaired,
affected or in any way conditioned or contingent upon (a) the making of a demand
(other than a demand on Guarantor as specifically provided in this Guaranty),
the institution of any suit or the taking of any other action to enforce
performance or observance by the Agent or Lessee of any of the Obligations, (b)
the validity, regularity or enforceability of any Operative Agreement or any of
the Obligations or any collateral security, other guarantee, if any, or credit
support therefor or right of offset with respect thereto at any time or from
time to time held by Beneficiary, (c) any defense, setoff or counterclaim (other
than the defense of prior payment or performance by Guarantor, Agent, Lessee or
otherwise of the Obligations) that may at any time be available to or be
asserted by Agent, Lessee or Guarantor against Beneficiary, (d) any attempt to
collect from Agent, Lessee or any other entity or to perfect or enforce any
security or (e) any other action, occurrence or circumstance whatsoever which
might otherwise constitute a defense available to, or a legal or equitable
discharge of, Agent, Lessee or Guarantor. Guarantor waives any requirement that
Beneficiary shall have instituted any suit, action or proceeding or exhausted
its remedies or taken any steps to enforce any rights against Agent, Lessee or
any other Person or entity to compel any such performance or to collect all or
any part of such amount pursuant to the provisions of the Operative Agreements
or at law or in equity, or otherwise.

                  SECTION 2.03 Amendments, etc., With Respect to the
Obligations. Guarantor shall remain obligated hereunder and this Guaranty shall
remain in full force and effect without the necessity of any reservation of
rights against Guarantor and without notice to or further assent by Guarantor,
notwithstanding that (a) any demand for payment or performance or observance of
any of the Obligations made by Beneficiary may be rescinded by Beneficiary and
any of the other Obligations continue to be in effect; (b) the Obligations, or
the liability of any other Person for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may be
renewed, extended, amended, modified, accelerated (in each case in accordance
with the terms of the Operative Agreements), compromised, waived, surrendered or
released by Beneficiary; (c) any Operative Agreement, or any collateral security
document or other guarantee or document executed and delivered in connection
therewith or related thereto, may be amended, modified, supplemented or
terminated, in each case in accordance with its terms, as the parties thereto
may deem advisable; (d) any collateral security, guarantee or right to offset
held by Beneficiary for the payment, performance or observance of the
Obligations may be sold, exchanged, waived, surrendered or released; or (e) any
default with respect to any Obligation may be waived by Beneficiary, in each
case other than with respect to the defense of prior payment or performance by
Guarantor, Agent, Lessee or otherwise of the Obligations. Beneficiary shall not
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Obligations or for this Guaranty or any property
subject thereto. For purposes hereof, "demand" shall include the commencement
and continuance of any legal proceedings.

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                  Guarantor hereby ratifies and confirms any such extension,
renewal, change, sale, release, waiver, surrender, exchange, modification,
amendment, impairment, substitution, settlement, adjustment or compromise and
agrees that the same shall be binding upon it, and hereby waives to the fullest
extent permitted by Applicable Laws any and all defenses, counterclaims or
offsets which it might or could have by reason thereof (other than the defense
of prior payment or performance by Guarantor, Agent, Lessee or otherwise of the
Obligations), it being understood that Guarantor shall at all times be bound by
this Guaranty and remain liable hereunder until the Termination Date.

SECTION 2.04 Guarantor's Obligations Not Affected. Guarantor expressly agrees
that the duties and obligations of Guarantor under this Guaranty shall remain in
full force and effect, without the necessity of any reservation of rights
against Guarantor or notice to or further assent by Guarantor at any time and
from time to time, in whole or in part, and without regard to, and shall not be
impaired, released, discharged, terminated or affected by any of the following
actions or the occurrence of any of the following events:

                  (a) any extension, modification, amendment or renewal of,
         termination, addition or supplement to, or deletion from, any of the
         terms of or indulgence with respect to, or substitutions for, or the
         taking of any action or the giving of any consent with respect to, the
         Obligations or any part thereof or any Operative Agreement or other
         agreement relating thereto at any time;

                  (b) any failure, refusal or omission to enforce any right,
         power or remedy with respect to the Obligations or any part thereof or
         any Operative Agreement or other agreement relating thereto;

                  (c) any waiver of any right, power or remedy or of any default
         with respect to the Obligations or any part thereof or any Operative
         Agreement or other agreement relating thereto or to provide for any
         insurance on the Facility, or to establish or maintain the priority or
         perfection of any interest in the Facility;

                  (d) any release, surrender, compromise, settlement, waiver,
         subordination or modification, with or without consideration, of any
         collateral security or other guarantees with respect to the Obligations
         or any part thereof, or any other obligation of any Person with respect
         to the Obligations or any part thereof;

                  (e) the lack of genuineness, unenforceability, impossibility
         of performance or invalidity of the Obligations or any part thereof or
         the lack of genuineness, unenforceability, impossibility of performance
         or invalidity of any Operative Agreement or other agreement relating
         thereto or the power or authority or lack of power or authority of
         Agent or Lessee to execute and deliver the Operative Agreements or to
         perform any of its obligations thereunder or the lack of existence or
         continuance of Agent, Lessee or any other Person as a legal entity;

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                  (f) any change in the ownership of Agent or Lessee or the
         insolvency, bankruptcy or any other change in the legal status of Agent
         or Lessee or any rejection, modification or release of the obligations
         of Agent, Lessee or those of any Person under the Operative Agreements
         as a result of any bankruptcy, reorganization, insolvency or similar
         proceeding;

                  (g) the change in or the imposition of any Applicable Laws or
         other governmental act that does or might impair, delay or in any way
         affect the validity, enforceability, or the payment when due, of the
         Obligations to the extent not prohibited by Applicable Laws or
         otherwise;

                  (h) the existence of any claim, counterclaim, setoff or other
         rights that Guarantor may have at any time against Agent or any other
         Person in connection herewith or with an unrelated transaction (other
         than the defense of prior payment or performance by Guarantor, Agent,
         Lessee or otherwise of the Obligations);

                  (i) any merger or consolidation of Agent, Lessee or Guarantor
         into or with any other Person, or any sale, lease or transfer of any or
         all of the assets of Agent, Lessee or Guarantor to any other Person;

                  (j) the rights, powers or privileges Beneficiary may now or
         hereafter have against any Person or collateral;

                  (k) any assignment of any Operative Agreement or subletting of
         the Facility or any part thereof or any transfer, sale or other
         disposition of the Facility or any destruction of the Facility or any
         failure of title with respect to any interest in the Facility of
         Beneficiary, Agent or Lessee;

                  (l) any exercise by the Agent of its Purchase Option or Lease
         Option under the Construction Agency Agreement or any exercise by
         Beneficiary of its Owner's Remarketing Requirement under the
         Construction Agency Agreement in respect of some or all Purchase
         Agreements or some or all Equipment or any exercise by Lessee of its
         Lease Purchase Option or Lease Remarketing Option under the Lease in
         respect of the Facility;

                  (m) the failure of Guarantor to receive any benefit from or as
         a result of its execution, delivery and performance of this Guaranty;
         or

                  (n) any other action, omission, occurrence or circumstance
         whatsoever which may in any manner or to any extent constitute a legal
         or equitable defense of Guarantor (other than the defense of prior
         payment or performance by Guarantor, Agent, Lessee or otherwise of the
         Obligations) or vary the risk, prejudice any rights of subrogation,
         limit the recourse or effect a discharge of Guarantor hereunder as a
         matter of law or otherwise

                                       13
<PAGE>

         (other than the defense of prior payment or performance by Guarantor,
         Agent, Lessee or otherwise of the Obligations);

provided that the specific enumeration of the above-mentioned acts, failures or
omissions shall not be deemed to exclude any other acts, failures or omissions,
that are not specifically mentioned above, it being the purpose and intent of
this paragraph that the obligations of Guarantor hereunder shall be absolute and
unconditional and shall not be discharged, impaired or varied except by the
payment, observance or performance to Beneficiary of Agent's and Lessee's
obligations under the Operative Agreements, and then only to the extent of such
payments, observance or performance.

                  In order to hold Guarantor liable hereunder, there shall be no
obligation on the part of Beneficiary at any time to enforce or attempt to
enforce any right or remedy against Agent or Lessee or to resort to any
collateral, property or estates or any other rights or remedies whatsoever.
Without limiting the foregoing, it is understood that repeated and successive
demands may be made and recoveries may be had hereunder but without duplication
of payment as and when, from time to time, Agent or Lessee shall default under
the terms of any of the Operative Agreements and that notwithstanding the
recovery hereunder for or in respect of any given default by Agent or Lessee
under any of the Operative Agreements, this Guaranty shall remain in full force
and effect and shall apply to each and every subsequent default. Each and every
default in any payment, observance or performance of any Obligation of Agent or
Lessee under the Operative Agreements shall give rise to a separate claim and
cause of action hereunder, and, subject to the Intercreditor Agreement, separate
claims or suits may be made and brought, as the case may be, hereunder as each
such default occurs.

                  SECTION 2.05 Waiver by Guarantor. Guarantor unconditionally
waives and releases, to the fullest extent permitted by Applicable Laws, any and
all (a) notices of the acceptance of this Guaranty by Beneficiary and of any
change in the financial condition of Agent; (b) notices of the creation,
renewal, extension or accrual of any Obligation or any of the matters referred
to in Section 2.04 or any notice of or proof of reliance by Beneficiary upon
this Guaranty or acceptance of this Guaranty (the Obligations, and any of them,
shall conclusively be deemed to have been created, contracted, incurred,
renewed, extended, amended or waived in reliance upon this Guaranty and all
dealings between Agent, Lessee or Guarantor and Beneficiary shall be
conclusively presumed to have been had or consummated in reliance upon this
Guaranty); (c) notices which may be required by statute, rule of law or
otherwise, now or hereafter in effect, to preserve intact any rights of any of
Beneficiary against Guarantor; (d) right to interpose all substantive and
procedural defenses of the law of guaranty, indemnification and suretyship,
except the defense of prior payment or prior performance by Guarantor, Agent,
Lessee or otherwise of the Obligations; (e) all rights, defenses and remedies
accorded by Applicable Laws to guarantors or sureties, including any extension
of time conferred by any law now or hereafter in effect; (f) right or claim of
right to cause a marshaling of the assets of Agent or Lessee or to cause
Beneficiary to proceed against Agent or Lessee or any collateral held by
Beneficiary at any time or in any particular order; (g) rights to the
enforcement, assertion or

                                       14
<PAGE>

exercise by Beneficiary of any right, power, privilege or remedy conferred
herein or in any Operative Agreement or otherwise, except as specified in the
Operative Agreements; (h) requirements of promptness or diligence on the part of
Beneficiary; (i) notices of the sale, transfer or other disposition of any
right, title to or interest in any Operative Agreement; (j) demand of payment by
Beneficiary or any other Person from Agent or any other Person indebted or in
any manner liable on or for the Obligations hereby guaranteed; (k) presentment
for payment by Beneficiary or any other Person of the Obligations, protest
thereof and notice of dishonor to any party; or (l) other circumstances
whatsoever (except the defense of prior payment or prior performance by
Guarantor, Agent, Lessee or otherwise of the Obligations) which might otherwise
constitute a legal or equitable discharge, release or defense of a guarantor or
surety, or which might otherwise limit recourse against Guarantor.

                  SECTION 2.06 Payments; Taxes. (a) All payments hereunder shall
be made by wire transfer of immediately available United States dollar funds to
such account at such financial institution as Beneficiary may from time to time
designate in writing.

                  (b) All payments by Guarantor shall be made free and clear of
and without deduction for any and all present or future Impositions. If
Guarantor shall be required by Applicable Law to deduct any Impositions from or
in respect of any amounts payable hereunder, (i) the amounts payable shall be
increased by the amount necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.06), the recipient shall receive an amount equal on an After-Tax-Basis to the
sum it would have received had no such deductions been made, (ii) Guarantor
shall make such deductions, and (iii) Guarantor shall pay the full amount
deducted to the relevant taxing authority or other Governmental Authority in
accordance with all Applicable Laws. Within 15 days after the date of any
deduction of any Imposition, Guarantor will furnish to the relevant Person, the
Agent and the Trustee, the original or a certified copy of a receipt or other
documentation evidencing payment thereof as is reasonably acceptable to such
recipient.

                  (c) Each of the Operative Agreements has been entered into on
the basis of the intention set forth in Section 15.1 of the Construction Agency
Agreement, Section 10.17 of the Credit Agreement and Section 25.1 of the Lease.
The Guarantor agrees and covenants that it shall not (unless required to do so
under Applicable Law) file any tax return, statement or schedule or take any
action inconsistent with such treatment.

                  (d) All obligations of Guarantor pursuant to this Section 2.06
shall survive the expiration, cancellation or termination of this Guaranty.

                  SECTION 2.07 Reinstatement. This Guaranty shall continue to be
effective, or be reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Obligations is invalidated, voided, declared to
be fraudulent or preferential, set aside, rescinded or must otherwise be repaid,
restored or returned to a trustee, receiver or any other Person by Beneficiary
upon the bankruptcy, insolvency, reorganization, arrangement, adjustment,

                                       15
<PAGE>

composition, dissolution, liquidation, or the like, of Agent, Lessee or
Guarantor, or as a result of, the appointment of a custodian, receiver, trustee
or other officer with similar powers with respect to Agent, Lessee or Guarantor
or any substantial part of such Person's respective property, or otherwise, all
as though such payment had not been made notwithstanding any termination of this
Guaranty or any Operative Agreement.

                                  ARTICLE III

                             COVENANTS OF GUARANTOR

                  Guarantor covenants and agrees that so long as any Obligation
remains outstanding and so long as Beneficiary has any obligation to make
Payments to or lease the Facility to Agent, Lessee or any Seller (as defined in
the Construction Agency Agreement) under any Operative Agreement, Guarantor
will, unless Beneficiary shall otherwise consent in writing, comply with the
following covenants:

                  SECTION 3.01 Affirmative Covenants. Guarantor hereby covenants
and agrees as follows:

                  (a) Financial Information. Guarantor will provide the
following to the Beneficiary and the Lender Agent:

                  (i) as soon as practicable and in any event within 120 days
         after the end of each fiscal year of Guarantor, a consolidated balance
         sheet of Guarantor and the Consolidated Subsidiaries of Guarantor as of
         the end of such fiscal year and the related statements of consolidated
         income, retained earnings and cash flows setting forth in comparative
         form the figures for the previous fiscal year (to the extent they
         exist), together with a report thereon by independent certified public
         accountants of nationally recognized standing selected by Guarantor
         (which requirement may be satisfied by Guarantor's Annual Report on
         Form 10-K with respect to such fiscal year as filed with the SEC);

                  (ii) as soon as practicable and in any event within 60 days
         after the end of each of the first three quarters of each fiscal year
         of Guarantor, beginning with the fiscal quarter ending March 31, 2002,
         unaudited consolidated financial statements of Guarantor and the
         Consolidated Subsidiaries of Guarantor consisting of at least a
         consolidated balance sheet as at the close of such quarter and
         statements of consolidated income, retained earnings and cash flows for
         such quarter and for the period from the beginning of such fiscal year
         to the close of such quarter (which requirement may be satisfied by
         Guarantor's Quarterly Report on Form 10-Q with respect to such fiscal
         quarter as filed with the SEC), accompanied by a certificate of a
         Responsible Officer of Guarantor to the effect that such unaudited
         financial statements present fairly the consolidated financial

                                       16
<PAGE>

         condition and results of operations of Guarantor and the Consolidated
         Subsidiaries of Guarantor as of such date for the period then ending;

                  (iii) with each set of statements to be delivered above, a
         certificate in a form satisfactory to Beneficiary, signed by a
         Responsible Officer of Guarantor confirming compliance with Section
         3.02(a) and setting out in reasonable detail the calculations necessary
         to demonstrate such compliance as at the date of the most recent
         balance sheet included in such financial statements and stating that no
         Default or Guaranty Event of Default has occurred and is continuing or,
         if there is any Default or Guaranty Event of Default, describing it and
         the steps, if any, being taken to cure it and describing all
         Subordinated Affiliate Debt then outstanding, if any, and giving the
         name and address for notices of the maker and payee thereof;

                  (iv) (A) within 10 days of the filing thereof, copies of all
         periodic reports (other than (x) reports on Form 11-K or any successor
         form, (y) current reports on Form 8-K that contain no information other
         than exhibits filed therewith and (z) reports on Form 10-K or 10-Q or
         any successor forms) under the Exchange Act (in each case other than
         exhibits thereto and documents incorporated by reference therein))
         filed by Guarantor with the SEC; (B) promptly, and in any event within
         seven (7) days after a Responsible Officer of Guarantor becomes aware
         of the occurrence thereof, written notice of (x) any Guaranty Event of
         Default or any Default, which notice shall include a list of any
         Subordinated Affiliate Debt then outstanding which was not included on
         the most recent list delivered pursuant to Section 3.01(a)(iii),
         including the name and address for notices of the maker and payee of
         such Subordinated Affiliate Debt, (y) the institution of any
         litigation, action, suit or other legal or governmental proceeding
         involving Guarantor or any Subsidiary of Guarantor which could,
         reasonably be expected to have a Material Adverse Effect on Guarantor
         or any final adverse determination in any litigation, action, suit or
         other legal or governmental proceeding involving Guarantor or any
         Subsidiary of Guarantor that would have a Material Adverse Effect on
         Guarantor, or (z) the incurrence by Guarantor or any Significant
         Subsidiary of a material liability or deficiency, or the existence of a
         reasonable possibility of incurring a material liability or deficiency,
         arising out of or in connection with (1) any Reportable Event with
         respect to any Plan, (2) the failure to make any required contribution
         to a Plan, (3) the creation of any Lien in favor of the PBGC or a Plan,
         (4) any withdrawal from, or the termination, Reorganization or
         Insolvency of, any Multiemployer Plan or (5) the institution of
         proceedings or the taking of any other action by the PBGC or Guarantor
         or any Commonly Controlled Entity or any Multiemployer Plan with
         respect to the withdrawal from, or the termination, Reorganization or
         Insolvency of, any Plan; provided, that, as used in this clause (z),
         any liability or deficiency shall be deemed not to be "material" so
         long as the sum of all liabilities and deficiencies referred to in this
         clause (z) at any one time outstanding, individually and in the
         aggregate, is less than $100,000,000; and (C) such other information
         relating to Guarantor or its business, properties, condition and

                                       17
<PAGE>

         operations as Beneficiary (or Lender Agent or Collateral Agent through
         Beneficiary) may reasonably request; and

                  (v) any change in the Corporate Rating by any Rating Agency,
         or the issuance by an additional Rating Agency of a Corporate Rating,
         promptly upon the effectiveness of such change or issuance.

Information required to be delivered pursuant to the foregoing Sections
3.01(a)(i), (ii), and (iv)(A) shall be deemed to have been delivered on the date
on which such information has been posted on the SEC website on the Internet at
sec.gov/edgar/searches.htm or at another website identified by the Guarantor in
writing to the Administrative Agent and accessible by Beneficiary, any
Certificate Participant, any Lender or any other Secured Party without charge;
provided that if any Lender, Certificate Participant or any other Secured Party
requests delivery of such information, Guarantor shall deliver paper copies of
such information to Administrative Agent or the Collateral Agent as appropriate
(who shall deliver copies to the requesting Lender or Certificate Participant).

                  (b) Existence; Laws. Guarantor will and will cause each
Subsidiary of Guarantor to, do or cause to be done all things necessary (i) to
preserve, renew and keep in full force and effect its corporate existence and
all rights, licenses, permits and franchises and (ii) to comply with all laws
and regulations applicable to it, in each case where the failure to do so,
individually or in the aggregate, would have a Material Adverse Effect on
Guarantor.

                  (c) Access. At any reasonable time and from time to time (but
no more often than once each calendar year if no Default has occurred and is
continuing), Guarantor will permit up to three representatives of Lenders
designated by the Administrative Agent or the Collateral Agent, in each case
acting jointly, on not less than five Business Days' notice, to examine and make
copies of and abstracts from the records and books of account of, and visit the
properties of, Guarantor and to discuss the general business affairs of
Guarantor with its officers and independent certified public accountants;
subject, however, in all cases to the imposition of such conditions as Guarantor
shall deem necessary based on reasonable considerations of safety and security;
provided, however, that notwithstanding the provisions of Section 9.1 of the
Credit Agreement (or the comparable provision of any other Financing Document),
Section 12.1 of the Construction Agency Agreement and Section 22.1 of the Lease,
Administrative Agent and the Lenders, as the case may be, assume sole
responsibility for the condition of any Property of Guarantor so visited and
inspected, the access and egress thereto, and any hazard or defect therein or
thereon, and assume all responsibility for and hereby release and indemnify
Guarantor and its Affiliates and their officers, directors, employees, and
agents against any claim for damage or injury to or by such representatives or
to Guarantor's Property which may be occasioned by inspection and visitation of
Guarantor's Property; provided, further, however, that neither Guarantor nor any
of its Subsidiaries shall be required to disclose to Administrative Agent and
any Lender, or any agents or representatives thereof any information which is
the subject of attorney-client privilege or attorney work-product privilege
properly asserted by the

                                       18
<PAGE>

applicable Person to prevent the loss of such privilege in connection with such
information or which is prevented from disclosure pursuant to a confidentiality
agreement with third parties. The expense of any exercise by the Administrative
Agent or the Collateral Agent and the Lenders of their rights under this Section
3.01(c) shall be for the account of the Collateral Agent and the Lenders, as
applicable unless a Default has occurred and is continuing at the time of the
request or visit.

                  (d) Insurance. Guarantor will and will cause each Subsidiary
to, maintain insurance with responsible and reputable insurance companies or
associations, or to the extent that Guarantor or such Subsidiary deems it
prudent to do so, through its own program of self-insurance, in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses, of comparable size and financial strength and with comparable risks,
except where failure to so maintain insurance would not have a Material Adverse
Effect.

                  (e) Use of Proceeds. Guarantor will cause Agent to use the
proceeds of any Advance Payments made or issued by the Owner Trust to it for the
purposes set forth in the Construction Agency Agreement, and not use the
proceeds of any Advance Payments made or issued by the Owner Trust for any
purpose that would violate the provisions of the Construction Agency Agreement.
Guarantor will not, and will not permit any of its Subsidiaries to engage
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying, within the meaning of
Regulation U, any Margin Stock.

                  (f) Maintenance of Properties. Guarantor will preserve and
maintain, and will cause each Significant Subsidiary to preserve and maintain,
all of its Property that is material to the conduct of its business and keep the
same in good repair, working order and condition, and from time to time make, or
cause to be made, such repairs, renewals and replacements thereto as in the good
faith judgment of Guarantor are necessary or proper so that the business carried
on in connection therewith may be properly conducted at all times, in each case
unless failing to take the actions described above would not result in a
Material Adverse Effect; provided, however, that nothing in this Section 3.01(f)
shall prevent (i) Guarantor from selling, abandoning or otherwise disposing of
any Properties (including the Capital Stock of any Subsidiary of Guarantor), the
retention of which in the good faith judgment of Guarantor is inadvisable or
unnecessary to the business of Guarantor or (ii) any other transaction that is
expressly permitted by the terms of any other provision of this Guaranty,
including, but not limited to, any transaction permitted under Section 3.02(b).

                  (g) Pari Passu Debt. Guarantor will assure that the
obligations of Guarantor under this Guaranty shall at all times rank at least
pari passu with all other unsecured and unsubordinated Debt of Guarantor (other
than Debt which is mandatorily preferred by laws or regulations of general
application).

                                       19
<PAGE>

                  SECTION 3.02 Negative Covenants. Guarantor further covenants
and agrees as follows:

                  (a) Financial Ratio. Guarantor will not permit the ratio of
(i) Consolidated Net Debt to (ii) the sum of Consolidated Shareholders' Equity,
Consolidated Net Debt, and Subordinated Affiliate Debt to exceed 0.6 to 1.0.

                  (b) Sale of Assets. Except as permitted under Section 3.02(c),
Guarantor will not sell, assign, transfer or otherwise dispose of all or
substantially all of its assets other than to one of its Subsidiaries.

                  (c) Consolidation or Merger. Guarantor will not consolidate
with, or merge into, or amalgamate with or into any other Person unless (i) both
before and after giving effect to such merger or consolidation, there exists no
Default or Guaranty Event of Default and (ii) either (A) Guarantor is the
surviving Person or (B) if Guarantor is not the surviving Person, the surviving
Person shall be incorporated or organized under the laws of the District of
Columbia or a state of the United States of America and shall expressly assume
in writing in form and substance reasonably satisfactory to Beneficiary all of
the liabilities and obligations of Guarantor hereunder.

                  (d) Liens. Guarantor will not and will not permit any
Significant Subsidiary of Guarantor to, create, incur, or suffer to exist any
Lien in, of or on the Property of Guarantor or any of its Significant
Subsidiaries, except Permitted Liens.

                                   ARTICLE IV

                   REPRESENTATIONS AND WARRANTIES OF GUARANTOR

                  Guarantor hereby represents and warrants as follows:

                  SECTION 4.01 Corporate Status of Guarantor. Guarantor (i) is
validly organized and existing as a corporation and in good standing under the
laws of the State of Delaware; (ii) is duly authorized or qualified to do
business in and is in good standing in each other jurisdiction in which the
conduct of its business or the ownership or leasing of its property requires it
to be so authorized or qualified to do business, except where the failure to be
so duly authorized or qualified or in good standing, individually or in the
aggregate, would not have a Material Adverse Effect on Guarantor; and (iii) has
the corporate power and authority to conduct its business, as presently
conducted.

                  SECTION 4.02 Corporate Status of Subsidiaries of Guarantor.
Each Subsidiary of Guarantor (i) is validly organized and existing and, if
applicable, in good standing under the laws of the jurisdiction of its formation
and is duly authorized or qualified to do business in and

                                       20
<PAGE>

is in good standing in each other jurisdiction in which the conduct of its
business or the ownership or leasing of its property requires it to be so
authorized or qualified to do business, except where the failure to be so
validly organized and existing or duly authorized or qualified or in good
standing, individually or in the aggregate, would not have a Material Adverse
Effect on Guarantor and (ii) has the power and authority to conduct its
business, as presently conducted, except where the failure to have such power
and authority, individually or in the aggregate, would not have a Material
Adverse Effect on Guarantor.

                  SECTION 4.03 Corporate Powers. Guarantor has the corporate
power to execute, deliver and perform and comply with its obligations under this
Guaranty. This Guaranty has been duly executed and delivered on behalf of
Guarantor.

                  SECTION 4.04 Authorization; No Conflict, Etc. The execution
and delivery by Guarantor of this Guaranty and the performance by Guarantor of
its obligations hereunder have been duly authorized by all requisite corporate
action on the part of Guarantor and do not and will not (i) violate any law, any
order to which Guarantor is subject of any court or other Governmental
Authority, or the certificate of incorporation or bylaws (each as amended from
time to time) of Guarantor; (ii) violate, conflict with, result in a breach of
or constitute (with due notice or lapse of time or both, or any other condition)
a default under, any indenture, loan agreement or other agreement relating to
indebtedness for borrowed money to which Guarantor is a party or by which
Guarantor, or any of its property, is bound (except for such violations,
conflicts, breaches or defaults that, individually or in the aggregate, do not
have or would not have a Material Adverse Effect on Guarantor); or (iii) result
in, or require, the creation or imposition of any material Lien upon any of the
properties of Guarantor.

                  SECTION 4.05 Governmental Approvals and Consents. No
authorization or approval or action by, and no notice to or filing with, any
Governmental Authority is required for the due execution, delivery and
performance by Guarantor of this Guaranty.

                  SECTION 4.06 Obligations Binding. This Guaranty is the legal,
valid and binding obligation of Guarantor enforceable against Guarantor in
accordance with its terms (assuming due and valid authorization, execution and
delivery of this Guaranty by any party other than Guarantor), except as such
enforceability may be (i) limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) subject to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

                  SECTION 4.07 Margin Stock. Neither Guarantor nor any
Subsidiary of Guarantor is principally engaged in, or has as one of its
important activities, the business of extending credit for the purpose of
purchasing or carrying any Margin Stock.

                                       21
<PAGE>

                  SECTION 4.08 Investment Company Act; PUHC Act of 1935. Neither
Guarantor nor any Subsidiary of Guarantor is (i) an "investment company" as
defined in, or otherwise subject to regulation under, the Investment Company Act
of 1940, as amended, or (ii) subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, except Section 9(a)(2) thereof relating
to the acquisition of securities of other public utility companies or public
utility holding companies.

                  SECTION 4.09 Material Adverse Change. From April 30, 2001
through the date hereof, no circumstance or condition has occurred that would
have a Material Adverse Effect.

                  SECTION 4.10 Litigation. Except as disclosed in Guarantor's
Prospectus dated April 30, 2001 or in Guarantor's most recent Form 10-K, 10-Q or
8-K filed with the SEC, there is no litigation, action, suit or other legal or
governmental proceeding pending or, to the best knowledge of Guarantor,
threatened, at law or in equity, or before or by any arbitrator or Governmental
Authority (i) relating to the transactions under this Guaranty or (ii) in which
there is a likelihood of an adverse decision that would have a Material Adverse
Effect.

                  SECTION 4.11 ERISA. Neither Guarantor nor any Significant
Subsidiary has incurred any material liability or deficiency arising out of or
in connection with (i) any Reportable Event or "accumulated funding deficiency"
(within the meaning of Section 412 of the Code or Section 302 of ERISA) with
respect to any Plan that has occurred during the five-year period immediately
preceding the date on which this representation is made or deemed made, (ii) any
failure of a Plan to comply with the applicable provisions of ERISA and the
Code, (iii) any termination of a Single Employer Plan, (iv) any complete or
partial withdrawal by Guarantor or any Commonly Controlled Entity from any
Multiemployer Plan or (v) any Lien in favor of the PBGC or any Plan that has
arisen during the five-year period referred to in clause (i) above. In addition,
no Multiemployer Plan is in Reorganization or is Insolvent, where such
Reorganization or Insolvency, individually or when aggregated with the events
described in the first sentence of this Section 4.11, is likely to result in a
material liability or deficiency of Guarantor or any Significant Subsidiary. As
used in this Section 4.11, any liability or deficiency shall be deemed not to be
"material" so long as the sum of all liabilities and deficiencies referred to in
this Section 4.11 at any one time outstanding, individually and in the
aggregate, is less than $100,000,000.

                  SECTION 4.12 Financial Statements. The audited consolidated
financial statements of Guarantor dated as of December 31, 2000, copies of which
have been delivered to the Beneficiary and the lenders and equity participants
under the Construction Agency Agreement as part of Guarantor's Prospectus dated
April 30, 2001, present fairly the financial condition and results of operations
of Guarantor and its Subsidiaries as of December 31, 2000 and for the periods
then ended, in accordance with GAAP.

                  SECTION 4.13 No Violation. Guarantor is not in violation of
any order, writ, injunction or decree of any court or any order, regulation or
demand of any Governmental

                                       22
<PAGE>

Authority that, individually or in the aggregate, would have a Material Adverse
Effect on Guarantor.

                  SECTION 4.14 Ownership of Agent. Guarantor directly or
indirectly is the beneficial and legal owner of 100% of the membership interests
of Agent or Lessee as applicable.

                  SECTION 4.15 Title to Properties. Each of Guarantor and any
Subsidiary of Guarantor has good title to the Properties reflected in the
financial statements referred to in Section 4.12 and in any financial statements
delivered pursuant to Section 3.01(a), except for (i) Permitted Liens, (ii)
failures of title that would not have a Material Adverse Effect and (iii) such
Properties that have been disposed of subsequent to the dates of the balance
sheets included in such financial statements.

                                   ARTICLE V

                           GUARANTY EVENTS OF DEFAULT

                  SECTION 5.01 Guaranty Events of Default. If any of the
following events (each a "Guaranty Event of Default") shall occur and be
continuing:

                  (a) Guarantor fails to make payment of any Obligation when
         due;

                  (b) Any representation or warranty made by Guarantor under or
         in connection with Article IV shall prove to have been incorrect in any
         material respect when made or deemed made and such materiality shall be
         continuing;

                  (c) Guarantor shall fail to perform or comply with any one or
         more of its obligations under Sections 3.01(a)(iv)(B)(x), 3.02(b),
         3.02(c) or 3.02(d);

                  (d) Guarantor shall fail to perform or comply with any one or
         more of its obligations under this Guaranty (other than those set forth
         in Section 5.01(a) or (c)) and such failure to perform or comply shall
         not have been remedied within thirty (30) days after the earlier of
         notice to Guarantor by Beneficiary or the Administrative Agent or
         discovery thereof by a Responsible Officer of Guarantor;

                  (e) (i) Guarantor, any Significant Subsidiary or the Principal
         Trading Subsidiary fails to pay when due (either at stated maturity or
         by acceleration or otherwise but after applicable grace periods) any
         principal or interest in respect of any Debt of such Person if such due
         but unpaid amount of such Debt of such Person exceeds $100,000,000; or
         (ii) any Debt of the Guarantor, any Significant Subsidiary or the
         Principal Trading Subsidiary becomes due and payable prior to its
         specified maturity as a result of an event of default (however
         described) if the aggregate amount of all such Debt

                                       23
<PAGE>

         that becomes due prior to its stated maturity exceeds $100,000,000;
         provided, however, that this clause (ii) shall not apply to any payment
         required to be made under a guaranty described in clause (c) of the
         definition of Debt;

                  (f) A final judgment or decree shall be rendered against
         Guarantor, any Significant Subsidiary or the Principal Trading
         Subsidiary for the payment of money which, together with all other such
         judgments or decrees then outstanding and unsatisfied against such
         Person exceeds $100,000,000 in aggregate amount and the same shall
         remain undischarged for a period of 90 days, during which the execution
         thereon shall not effectively be stayed, released, bonded or vacated;

                  (g) (i) Guarantor shall incur any liability arising out of (A)
         any "prohibited transaction" (as defined in Section 406 of ERISA or
         Section 4975 of the Code) involving any Plan, (B) the occurrence of any
         "accumulated funding deficiency" (as defined in Section 302 of ERISA)
         by a Plan, whether or not waived, or any Lien in favor of the PBGC or a
         Plan on the assets of Guarantor or any Commonly Controlled Entity, (C)
         the occurrence of a Reportable Event with respect to, or the
         commencement of proceedings under Section 4042 of ERISA to have a
         trustee appointed, or the appointment of a trustee under Section 4042
         of ERISA, to administer or to terminate any Single Employer Plan, which
         Reportable Event, commencement of proceedings or appointment of a
         trustee is likely to result in the termination of such Plan for
         purposes of Title IV of ERISA, (D) the termination of any Single
         Employer Plan for purposes of Title IV of ERISA, (E) withdrawal from,
         or the Insolvency or Reorganization of, a Multiemployer Plan or (F) the
         occurrence of any other event or condition with respect to a Plan, and
         any of such items (A) through (F) above results in or is likely to
         result in a material liability or deficiency of Guarantor; provided,
         however, that for purposes of this Section 5.01(g), any liability or
         deficiency of Guarantor shall be deemed not to be material so long as
         the sum of all liabilities or deficiencies referred to in this Section
         5.01(g) at any one time outstanding, individually and in the aggregate,
         is less than $100,000,000, or (ii) the occurrence of any one or more of
         the events specified in clauses (A) through (F) above if, individually
         or in the aggregate, such event or events would have a Material Adverse
         Effect on Guarantor; or

                  (h) (i) There shall be commenced against the Guarantor or any
         of its Significant Subsidiaries or the Principal Trading Subsidiary any
         case, proceeding or other action (A) seeking a decree or order for
         relief in respect of the Guarantor or any of its Significant
         Subsidiaries or the Principal Trading Subsidiary under any applicable
         domestic or foreign bankruptcy, insolvency, reorganization or other
         similar law, (B) seeking a decree or order adjudging the Guarantor or
         any of its Significant Subsidiaries or the Principal Trading Subsidiary
         a bankrupt or insolvent, (C) seeking reorganization, arrangement,
         adjustment, winding-up, liquidation, dissolution, composition or
         similar relief of or in respect of the Guarantor or any of its
         Significant Subsidiaries or the Principal Trading Subsidiary or its
         debts under any applicable domestic or foreign law or

                                       24
<PAGE>

         (D) seeking the appointment of a custodian, receiver, conservator,
         liquidator, assignee, trustee, sequestrator or other similar official
         of the Guarantor or any of its Significant Subsidiaries or the
         Principal Trading Subsidiary or of any substantial part of its
         Properties, or the liquidation of its affairs, and such petition is not
         dismissed within 90 days or (ii) a decree, order or other judgment is
         entered in respect of any remedies, reliefs or other matters for which
         any petition referred to in (i) above is presented, and such decree,
         order or other judgment is not dismissed within 90 days or (iii) there
         shall be commenced against the Guarantor or any of its Significant
         Subsidiaries or the Principal Trading Subsidiary any case, proceeding
         or other action seeking issuance of a warrant of attachment, execution,
         distraint or similar process against all or any substantial part of its
         assets that results in the entry of an order for any such relief that
         shall not have been vacated, discharged or stayed or bonded pending
         appeal within 90 days from the entry thereof;

                  (i) (A) The commencement by the Guarantor or any of its
         Significant Subsidiaries or the Principal Trading Subsidiary of a
         voluntary case, proceeding or other action under any applicable
         domestic or foreign bankruptcy, insolvency, reorganization or other
         similar law (i) seeking to have an order of relief entered with respect
         to it, (2) seeking to be adjudicated a bankrupt or insolvent, (3)
         seeking reorganization, arrangement, adjustment, winding-up,
         liquidation, dissolution, composition or other similar relief with
         respect to it or its debts under any applicable domestic or foreign law
         or (4) seeking the appointment of or the taking possession by a
         custodian, receiver, conservator, liquidator, assignee, trustee,
         sequestrator or similar official of the Guarantor or any of its
         Significant Subsidiaries or the Principal Trading Subsidiary or of any
         substantial part of its Properties, (B) the making by the Guarantor or
         any of its Significant Subsidiaries or the Principal Trading Subsidiary
         of a general assignment for the benefit of creditors, (C) the Guarantor
         or any of its Significant Subsidiaries or the Principal Trading
         Subsidiary shall take any action in furtherance of, or indicating its
         consent to, approval of, or acquiescence in, any of the acts described
         in clause (A) or (B) above or in Section 5.01(h), or (D) the admission
         by the Guarantor or any of its Significant Subsidiaries or the
         Principal Trading Subsidiary in writing of its inability to pay its
         debts generally as they become due or the failure by the Guarantor or
         any of its Significant Subsidiaries or the Principal Trading Subsidiary
         generally to pay its debts as such debts become due; or

                  (j) A Change of Control shall occur.

Upon the occurrence of any Guaranty Event of Default, Beneficiary may exercise
any right or remedy that may be available hereunder, under any Operative
Agreement or under any Applicable Laws subject to the Intercreditor Agreement.

                                       25
<PAGE>

                                   ARTICLE VI

                                  MISCELLANEOUS

                  SECTION 6.01 No Waiver; Cumulative Remedies. The failure or
delay of Beneficiary in exercising any right or remedy granted it hereunder
shall not operate as a waiver of such right or remedy or be construed to be a
waiver of any breach of any of the terms and conditions hereof or to be an
acquiescence therein. Each and every right, power and remedy herein specifically
given to Beneficiary shall be cumulative and shall be in addition to every other
right, power and remedy herein specifically given or now or hereafter existing
at law, in equity or by statute and the exercise or the beginning of the
exercise of any right, power or remedy shall not be construed as a waiver of the
right to exercise at the same time or thereafter any other right, power or
remedy. A waiver by Beneficiary of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that Beneficiary
would otherwise have.

                  SECTION 6.02 Notices. All notices, demands, declarations,
consents, directions, approvals, instructions, requests and other communications
required or permitted by the terms hereof shall be in writing and shall be given
in accordance with, and at the addresses set forth in, Section 12.2 of the
Construction Agency Agreement, and in the case of Guarantor to the following
address:

                  Reliant Resources, Inc.
                  1111 Louisiana Street, 47th Floor
                  Houston, Texas  77002
                  Attention:     Rex Clevenger
                  Telephone:     (713) 207-3160
                  Facsimile:     (713) 207-0988

                  With a copy to:

                  Reliant Resources, Inc.
                  1111 Louisiana Street, 43th Floor
                  Houston, Texas  77002
                  Attention:        Michael Jines
                  Telephone:        (713) 207-7465
                  Facsimile:        (713) 207-0116

                  SECTION 6.03 Amendments and Waivers; Successors and Assigns.

                  (a) Neither this Guaranty nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified orally, except by an
instrument in writing signed by

                                       26
<PAGE>

Guarantor and Beneficiary and any other Person as required under Section 5 of
the Intercreditor Agreement.

                  (b) This Guaranty shall be binding upon Guarantor and its
successors and permitted assigns and shall inure to the benefit of Beneficiary
and its successors and assigns.

                  (c) Guarantor shall not assign any of its obligations
hereunder without the express prior written consent of Beneficiary. Any such
purported assignment by Guarantor shall be null and void.

                  SECTION 6.04 Severability. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

                  SECTION 6.05 Termination. Subject to the provisions of Section
2.07, this Guaranty and Guarantor's duties and obligations hereunder shall
remain in full force and effect and be binding in accordance with its terms,
until the date on which all Obligations and the obligations of Guarantor
hereunder shall have been satisfied by payment and performance in full (the
"Termination Date").

                  SECTION 6.06 Entire Agreement. This Guaranty constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral between or among Guarantor and Beneficiary with respect to the
subject matter hereof.

                  SECTION 6.07 Article Headings. The headings of the various
Articles and Sections of this Guaranty are for convenience of reference only and
shall not modify, define, expand or limit any of the terms or provisions hereof.

                  SECTION 6.08 Governing Law. THIS GUARANTY SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD
TO THE APPLICATION OF THE INTERNAL LAWS OF ANOTHER JURISDICTION).

                  SECTION 6.09 Submission to Jurisdiction; Waivers; Service of
Process. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY:

                  (i) SUBMITS, FOR ITSELF AND ITS PROPERTY, IN ANY LEGAL ACTION
         OR PROCEEDING RELATING TO THIS GUARANTY, OR FOR RECOGNITION AND
         ENFORCEMENT OF ANY JUDGMENT IN RESPECT HEREOF, TO THE EXCLUSIVE GENERAL
         JURISDICTION OF THE COURTS OF

                                       27
<PAGE>

         THE STATE OF NEW YORK LOCATED IN NEW YORK COUNTY, THE COURTS OF THE
         UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
         APPELLATE COURTS FROM ANY THEREOF;

                  (ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
         BROUGHT IN SUCH COURTS AND WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
         BY LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF
         ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
         INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

                  (iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
         PROCEEDING MAY BE EFFECTED BY DELIVERING A COPY THEREOF BY REGISTERED
         OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
         PREPAID, RETURN RECEIPT REQUESTED TO IT AT ITS ADDRESS SET FORTH IN
         SECTION 6.02 OR AT SUCH OTHER ADDRESS AS IT SHALL HAVE GIVEN NOTICE OF
         TO BENEFICIARY;

                  (iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO
         EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW; AND

                  (v) WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
         ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR
         PROCEEDING RELATING TO THIS GUARANTY OR THE OTHER OPERATIVE DOCUMENTS
         ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.

                  SECTION 6.10 Waiver of Jury Trial. GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTY AND FOR ANY COUNTERCLAIM THERETO.

                  SECTION 6.11 Subrogation. Guarantor hereby acknowledges and
agrees that any rights of Guarantor hereunder to bring any action or exercise
any remedy to recover from Agent or Lessee as a result of Guarantor's payment or
performance of the Obligations, whether by way of subrogation or otherwise, may
not be enforced until all amounts due or that may become due from Agent under
the Operative Agreements shall have been paid in full to the parties entitled
thereto and all obligations of Beneficiary under the Operative Agreements,
whether to a Seller or to the Agent, shall have terminated. Guarantor agrees (i)
not to take any action to hinder or delay the exercise of any right or remedy
granted to Beneficiary under any Operative Agreement or any law applicable
thereto and (ii) not to exercise or pursue any other rights, remedies, powers,
privileges or benefits of any kind hereunder (whether available to

                                       28
<PAGE>

Guarantor hereunder or at law or in equity) until such time as all amounts due
from Agent under the Operative Agreements have been paid in full to the parties
entitled thereto.

                  SECTION 6.12 Survival. All warranties, representations and
covenants made by Guarantor herein or in any certificate or other instrument
delivered by it under this Guaranty shall be considered to have been relied upon
by Beneficiary and shall survive the execution and delivery of this Guaranty,
regardless of any investigation made by Beneficiary. All statements in any such
certificate or other instrument shall constitute warranties and representations
by Guarantor hereunder.

                  SECTION 6.13 Counterparts. This Guaranty may be executed
simultaneously in two or more counterparts each of which shall be deemed an
original, and it shall not be necessary in making proof of this Guaranty to
produce or account for more than one such counterpart.

                  SECTION 6.14 Separate Claims. Notwithstanding anything to the
contrary contained in this Guaranty as to the absolute and unconditional nature
of this Guaranty or any waivers by Guarantor under this Guaranty, following any
payment or performance in full by Guarantor of any amounts due under this
Guaranty, no provision of this Guaranty shall limit the right of the Guarantor,
the Agent, the Lessee or any of their Affiliates to assert against the
Beneficiary or any Person claiming by, through or under Beneficiary in a
separate proceeding any claim arising out of a breach by any such Person.

                            [signature page follows]

                                       29
<PAGE>

                  IN WITNESS WHEREOF, Guarantor has caused this Amended and
Restated Guaranty to be executed as of the day and year first set forth above.

                                            RELIANT RESOURCES, INC.

                                            By:
                                               -------------------------------

                                               Name:
                                               Title:

ACKNOWLEDGED AND AGREED
FOR PURPOSES OF SECTION 1.05

[_____________] TRUST

By:    First Union Trust Company,
       National Association, not in
       its individual capacity, but
       solely as Trustee

       By:
          -----------------------------
           Name:  Michael W. Orendorf
           Title: Vice President<PAGE>
                                                                 EXHIBIT 4(g)(1)

                           REVOLVING CREDIT AGREEMENT

                                      AMONG

                               NORAM ENERGY CORP.

                                   as Borrower

                                       AND

                             THE BANKS PARTY HERETO

                                    as Banks

                                       AND

                                 CITIBANK, N.A.,

                                    as Agent

                                   Co-Agents:

                                BARCLAYS BANK PLC
                       THE FIRST NATIONAL BANK OF CHICAGO
                           NATIONSBANK, OF TEXAS, N.A.

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

                           Dated as of March 31, 1998

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

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                          Page
<S>                   <C>                                                                                 <C>
                                             ARTICLE I

                                  DEFINITIONS AND ACCOUNTING TERMS

   SECTION 1.01.     Certain Defined Terms..................................................................1
   SECTION 1.02.     Computation of Time Periods...........................................................16
   SECTION 1.03.     Accounting Terms......................................................................17
   SECTION 1.04.     Miscellaneous.........................................................................17
   SECTION 1.05.     Ratings...............................................................................17

                                             ARTICLE II

                       AMOUNTS AND TERMS OF THE COMMITTED LOANS AND SWING LOANS

   SECTION 2.01.     The Committed Loans and Swing Loans...................................................17
   SECTION 2.02.     Making the Loans......................................................................18
   SECTION 2.03.     Minimum Tranches......................................................................20

                                             ARTICLE III

                                 AMOUNTS AND TERMS OF THE CAF LOANS

   SECTION 3.01.     The CAF Loans.........................................................................21
   SECTION 3.02.     Competitive Bid Procedure.............................................................21

                                             ARTICLE IV

                                  PROVISIONS RELATING TO ALL LOANS

   SECTION 4.01.     The Loans.............................................................................25
   SECTION 4.02.     Fees..................................................................................25
   SECTION 4.03.     Termination or Reduction of the Commitments...........................................26
   SECTION 4.04.     Interest..............................................................................26
   SECTION 4.05.     Reserve Requirements..................................................................28
   SECTION 4.06.     Interest Rate Determination and Protection............................................29
   SECTION 4.07.     Voluntary Interest Conversion or Continuation of Committed Loans......................29
   SECTION 4.08.     Funding Losses Relating to LIBOR Rate Loans...........................................30
   SECTION 4.09.     Change in Legality....................................................................31
</TABLE>

                                       i

<PAGE>

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

                                          ARTICLE V

                         INCREASED COSTS, TAXES, PAYMENTS AND PREPAYMENTS

   SECTION 5.01.     Increased Costs; Capital Adequacy.....................................................32
   SECTION 5.02.     Payments and Computations.............................................................33
   SECTION 5.03.     Taxes.................................................................................34
   SECTION 5.04.     Sharing of Payments, Etc..............................................................36
   SECTION 5.05.     Voluntary Prepayments.................................................................36
   SECTION 5.06.     Mitigation of Losses and Costs........................................................37
   SECTION 5.07.     Determination and Notice of Additional Costs and Other Amounts........................37

                                        ARTICLE VI

                                   CONDITIONS OF LENDING

   SECTION 6.01.     Conditions Precedent to Initial Loans.................................................38
   SECTION 6.02.     Conditions Precedent to Each Borrowing................................................39

                                       ARTICLE VII

                              REPRESENTATIONS AND WARRANTIES

   SECTION 7.01.     Representations and Warranties of Borrower............................................40

                                     ARTICLE VIII

                           AFFIRMATIVE AND NEGATIVE COVENANTS

   SECTION 8.01.     Affirmative Covenants of Borrower.....................................................43
   SECTION 8.02.     Negative Covenants of Borrower........................................................46

                                     ARTICLE IX

                                  EVENTS OF DEFAULT

   SECTION 9.01.     Events of Default.....................................................................50
   SECTION 9.02.     Cancellation/Acceleration.............................................................53
</TABLE>

                                       ii
<PAGE>

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

                                    ARTICLE X

                                    THE AGENT

   SECTION 10.01.    Authorization and Action..............................................................54
   SECTION 10.02.    Agent's Reliance, Etc.................................................................54
   SECTION 10.03.    Citibank and Affiliates...............................................................55
   SECTION 10.04.    Bank Credit Decision..................................................................55
   SECTION 10.05.    Indemnification.......................................................................55
   SECTION 10.06.    Successor Agent.......................................................................56

                                   ARTICLE XI

                                 MISCELLANEOUS

   SECTION 11.01.    Amendments and Waivers................................................................57
   SECTION 11.02.    Notices...............................................................................58
   SECTION 11.03.    No Waiver; Cumulative Remedies........................................................59
   SECTION 11.04.    Survival of Representations and Warranties............................................59
   SECTION 11.05.    Payment of Expenses and Taxes; Indemnification........................................59
   SECTION 11.06.    Effectiveness; Successors and Assigns; Participations; Assignments....................60
   SECTION 11.07.    Setoff................................................................................65
   SECTION 11.08.    Counterparts..........................................................................65
   SECTION 11.09.    Severability..........................................................................65
   SECTION 11.10.    Integration...........................................................................65
   SECTION 11.11.    GOVERNING LAW.........................................................................66
   SECTION 11.12.    Submission to Jurisdiction; Waivers...................................................66
   SECTION 11.13.    Acknowledgments.......................................................................67
   SECTION 11.14.    Limitation on Agreements..............................................................67
   SECTION 11.15.    Removal of Bank.......................................................................68
</TABLE>

                                      iii

<PAGE>

Exhibits and Schedules

Exhibit 2.02(a)            -   Notice of Borrowing
Exhibit 2.02(e)            -   Notice of Swing Loan
Exhibit 3.02-A             -   Competitive Bid Request
Exhibit 3.02-B             -   Competitive Bid
Exhibit 3.02-C             -   Competitive Bid Confirmation
Exhibit 4.07               -   Notice of Interest Conversion/Continuation
Exhibit 6.01(v)(i)         -   Form of Legal Opinion
Exhibit 6.01(v)(ii)        -   Form of Legal Opinion
Exhibit 11.06(c)           -   Committed Loan Assignment and Acceptance
Exhibit 11.06(i)(a)        -   Committed Note
Exhibit 11.06(i)(b)        -   Swing Note
Exhibit 11.06(i)(c)        -   CAF Note
Schedule I                 -   Schedule of Commitments and Lending Offices
Schedule II                -   Pricing Grid
Schedule 1.01              -   Certain provisions of Indenture
Schedule 6.01(viii)        -   Ownership of Capital Stock of Significant
                               Subsidiaries of Borrower

                                       iv
<PAGE>
                           REVOLVING CREDIT AGREEMENT

                           Dated as of March 31, 1998

         This Revolving Credit Agreement, dated as of March 31, 1998, is made
and entered into among NorAm Energy Corp., a Delaware corporation ("Borrower"),
the Banks (as herein defined) and Citibank, N.A., as administrative and
documentation agent (hereinafter in such capacity, together with any successors
thereto in such capacity, the "Agent"). In consideration of the mutual
agreements, representations and warranties herein set forth, and for other good
and valuable consideration, the parties hereto agree as follows:

                                   ARTICLE I

                        DEFINITIONS AND ACCOUNTING TERMS

                  SECTION 1.01. Certain Defined Terms. As used in this Revolving
Credit Agreement (as amended, supplemented or otherwise modified from time to
time, this "Agreement"), the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

                  "ABR Loan" means a Committed Loan that bears interest at the
         Alternate Base Rate as provided in Section 4.04(a).

                  "Affiliate" of any Person means any other Person that,
         directly or indirectly, Controls or is Controlled by or is under common
         Control with such first Person.

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

                  "Alternate Base Rate" means a fluctuating interest rate per
         annum as shall be in effect from time to time, which rate per annum
         shall at all times be equal to the highest of:

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

                           (b) the sum (adjusted to the nearest 1/4 of 1% or, if
                  there is no nearest 1/4 of 1%, to the next higher 1/4 of 1%)
                  of (i) 1/2 of 1% per annum, plus, (ii) the rate obtained by
                  dividing (A) the latest three-week moving average of secondary
                  market morning offering rates in the United States for
                  three-month certificates of deposit of major United States
                  money market banks, such three-week moving average (adjusted
                  to the basis of a year of 360 days) being determined weekly on
                  each Monday (or, if

<PAGE>

                  any such day is not a Business Day, on the next succeeding
                  Business Day) for the three-week period ending on the previous
                  Friday by Citibank on the basis of such rates reported by
                  certificate of deposit dealers to and published by the Federal
                  Reserve Bank of New York or, if such publication shall be
                  suspended or terminated, on the basis of quotations for such
                  rates received by Citibank from three New York certificate of
                  deposit dealers of recognized standing selected by Citibank,
                  by (B) a percentage equal to 100% minus the average of the
                  daily percentages specified during such three-week period by
                  the Board of Governors of the Federal Reserve System (or any
                  successor) for determining the maximum reserve requirement
                  (including, but not limited to, any emergency, supplemental or
                  other marginal reserve requirement) for Citibank with respect
                  to liabilities consisting of or including (among other
                  liabilities) three-month Dollar non-personal time deposits in
                  the United States, plus (iii) the average during such
                  three-week period of the annual assessment rates estimated by
                  Citibank for determining the then current annual assessment
                  payable by Citibank to the Federal Deposit Insurance
                  Corporation (or any successor) for insuring Dollar deposits of
                  Citibank in the United States; and

                           (c) 1/2 of 1% per annum above the Federal Funds
                  Effective Rate in effect from time to time.

                  "Applicable Facility Fee Rate" means the rate per annum set
         forth in Schedule II for the relevant Ratings Level applicable from
         time to time. The Applicable Facility Fee Rate shall change when and as
         the Ratings Level changes.

                  "Applicable Lending Office" means, with respect to each Bank,
         such Bank's Domestic Lending Office in the case of an ABR Loan, a Swing
         Loan or a Fixed Rate Loan or such Bank's LIBOR Lending Office in the
         case of a LIBOR Rate Loan.

                  "Applicable Margin" means, as to any Committed LIBOR Rate
         Loan, the rate per annum set forth in Schedule II for the relevant
         Ratings Level applicable from time to time. The Applicable Margin for
         any Committed LIBOR Rate Loan shall change when and as the applicable
         Ratings Level changes.

                  "Arranger" means Citicorp Securities, Inc.

                  "Banks" means the lenders listed on the signature pages hereof
         and each Purchasing Bank that becomes a party hereto pursuant to
         Section 11.06(c).

                  "Bank Affiliate" has the meaning specified in Section
         11.06(c).

                                       2
<PAGE>

                  "Board" means the Board of Governors of the Federal Reserve
         System of the United States (or any successor).

                  "Borrowed Money" of any Person means any Indebtedness of such
         Person for or in respect of money borrowed or raised by whatever means
         (including acceptances, deposits and lease obligations under Capital
         Leases); provided, however, that Borrowed Money shall not include (a)
         any guarantees that may be incurred by endorsement of negotiable
         instruments for deposit or collection in the ordinary course of
         business or similar transactions, (b) any obligations or guarantees of
         performance of obligations under a franchise, performance bonds,
         franchise bonds, obligations to reimburse drawings under letters of
         credit issued in accordance with the terms of any safe harbor lease or
         franchise or in lieu of performance or franchise bonds or other
         obligations that do not represent money borrowed or raised, which
         reimbursement obligations in each case shall be payable in full within
         ten (10) Business Days after the date upon which such obligation
         arises, (c) trade payables or (d) customer advance payments and
         deposits arising in the ordinary course of such Person's business.

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

                  "Borrowing" means either a Committed Borrowing, a Swing
         Borrowing or a CAF Borrowing.

                  "Business Day" means a day other than a Saturday, Sunday or
         other day on which commercial banks in New York City are authorized or
         required by law to close; provided, that when used in connection with a
         LIBOR Rate Loan, the term "Business Day" shall also exclude any day on
         which commercial banks are not open for dealings in Dollar deposits in
         the London interbank market.

                  "CAF Borrowing" means a borrowing consisting of a CAF Loan
         under Section 3.01 made on the same day by the Bank or Banks whose
         Competitive Bid or Bids have been accepted pursuant to Section 3.02(d).

                  "CAF Facility" has the meaning specified in Section 3.01.

                  "CAF LIBOR Rate Loan" means any CAF Loan that bears interest
         at the LIBOR Rate plus or minus the relevant CAF Margin.

                  "CAF Loan Assignee" has the meaning specified in Section
         11.06(d).

                  "CAF Loan Assignment and Acceptance" means an assignment and
         acceptance executed in connection with the assignment of any CAF Loan
         to a CAF Loan Assignee in

                                       3
<PAGE>

         the manner set forth in Section 11.06(d). Each CAF Loan Assignment and
         Acceptance to be registered in the Register shall set forth (a) the
         full name of such CAF Loan Assignee; (b) such CAF Loan Assignee's
         address for notices and its lending office address (in each case to
         include telephone, telex and facsimile transmission numbers); and (c)
         payment instructions for all payments to such CAF Loan Assignee, and
         must contain an agreement by such CAF Loan Assignee to comply with the
         provisions of Sections 11.06(d), 11.06(g) and 11.06(h) to the same
         extent as any Bank.

                  "CAF Loan" means a Loan made to Borrower pursuant to Section
         3.01 by a Bank in response to a Competitive Bid Request.

                  "CAF Margin" means, as to any Competitive Bid relating to a
         CAF LIBOR Rate Loan, the margin (expressed as a percentage rate per
         annum in the form of a decimal to no more than four decimal places) to
         be added to or subtracted from the LIBOR Rate in order to determine the
         interest rate acceptable to such Bank with respect to such CAF LIBOR
         Rate Loan.

                  "CAF Rate" means, as to any Competitive Bid made by a Bank
         pursuant to Section 3.02(b), (i) in the case of a CAF LIBOR Rate Loan,
         the CAF Margin added to or subtracted from, as the case may be, the
         LIBOR Rate, and (ii) in the case of a Fixed Rate Loan, the fixed rate
         of interest, in each case, offered by such Bank.

                  "Capital Lease" means a lease that, in accordance with GAAP,
         would be recorded as a capital lease on the balance sheet of the
         lessee.

                  "Citibank" means Citibank, N.A., a national banking
         association.

                  "Code" means the Internal Revenue Code of 1986, as amended
         from time to time, and any successor statute.

                  "Commitment" means, with respect to each Bank, the obligation
         of such Bank to make Committed Loans in an aggregate principal amount
         at any one time outstanding not to exceed the amount set forth under
         such Bank's name on Schedule I attached hereto under the caption
         "Commitment," as such amount may be changed from time to time pursuant
         to Sections 4.03 and 11.06, and "Commitments" means the Commitment of
         all of the Banks.

                  "Committed Borrowing" means a borrowing consisting of a Loan
         under Section 2.01 (a) in each case of the same Type and having in the
         case of Committed LIBOR Rate Loans the same Interest Period, made on
         the same day by the Banks.

                                       4
<PAGE>

                  "Committed LIBOR Rate Loan" means any Committed Loan that
         bears interest at the LIBOR Rate plus the Applicable Margin.

                  "Committed Loan Assignment and Acceptance" has the meaning
         specified in Section 11.06(c).

                  "Committed Loans" has the meaning specified in Section
         2.01(a).

                  "Commonly Controlled Entity" means an entity, whether or not
         incorporated, that is under common control with Borrower within the
         meaning of Section 4001 of ERISA or is part of a group that includes
         Borrower and that is treated as a single employer under Section 414 of
         the Code.

                  "Competitive Bid" has the meaning specified in Section
         3.02(b).

                  "Competitive Bid Confirmation" has the meaning specified in
         Section 3.02(d).

                  "Competitive Bid Request" has the meaning specified in Section
         3.02(a).

                  "Consolidated Capitalization" means the sum of (a)
         Consolidated Shareholders' Equity, (b) Consolidated Indebtedness for
         Borrowed Money and (c) without duplication, any Mandatory Payment
         Preferred Stock.

                  "Consolidated Indebtedness" means, as of any date of
         determination, the sum of (i) the total Indebtedness as shown on the
         consolidated balance sheet of Borrower and its Consolidated
         Subsidiaries, determined without duplication of any Guarantee of
         Indebtedness of Borrower by any of its Consolidated Subsidiaries or of
         any Guarantee of Indebtedness of any such Consolidated Subsidiary by
         Borrower or any other Consolidated Subsidiary of Borrower, and any
         Mandatory Payment Preferred Stock, less (ii) such amount of
         Indebtedness attributable to amounts then outstanding under receivables
         facilities or arrangements to the extent that such amount would not
         have been shown as Indebtedness on a balance sheet prepared in
         accordance with GAAP prior to January 1, 1997, less (iii) with respect
         to any Indexed Debt Securities that are Fully Hedged and the
         liabilities in respect of which as shown on the consolidated balance
         sheet of Borrower and its Consolidated Subsidiaries have increased from
         the amount of liabilities in respect thereof at the time of their
         issuance by reason of an increase in the price of the Indexed Asset
         relating thereto, the excess of (a) the aggregate amount of liabilities
         in respect of such Indexed Debt Securities at the time of determination
         over (b) the initial amount of liabilities in respect of such Indexed
         Debt Securities at the time of their issuance, provided that at the
         time of determination such increase in the price of the Indexed Asset
         relating to such Indexed Debt Securities has not been recorded on such
         consolidated balance sheet.

                                       5
<PAGE>

                  "Consolidated Net Tangible Assets" means the total amount of
         assets of the Company and its Subsidiaries less, without duplication,
         (a) total current liabilities (excluding Indebtedness for Borrowed
         Money due within 12 months); (b) all reserves for depreciation and
         other asset valuation reserves, but, excluding reserves for deferred
         federal income taxes arising from accelerated amortization or
         otherwise; (c) all intangible assets such as goodwill, trademarks,
         trade names, patents and unamortized debt discount and expense carried
         as an asset; and (d) all appropriate adjustments on account of minority
         interests of other persons holding common stock of any Subsidiary; all
         as reflected in the Company's audited consolidated balance sheet most
         recently delivered pursuant hereto prior to the date of a determination
         of Consolidated Net Tangible Assets hereunder.

                  "Consolidated Shareholders' Equity" means, as of any date of
         determination, the total assets of Borrower and its Consolidated
         Subsidiaries less all liabilities of Borrower and its Consolidated
         Subsidiaries. (As used in this definition, "liabilities" means all
         obligations that, in accordance with GAAP consistently applied, would
         be classified on a balance sheet as liabilities, including, without
         limitation, (a) Indebtedness; (b) deferred liabilities; and (c)
         Indebtedness of Borrower or any of its Consolidated Subsidiaries that
         is expressly subordinated in right and priority of payment to other
         liabilities of Borrower or such Consolidated Subsidiaries, but in any
         case excluding as at such date of determination any Junior Subordinated
         Debt owned by any Hybrid Preferred Securities Subsidiary).

                  "Consolidated Subsidiary" means, at any date, any Subsidiary
         or any other Person, the accounts of which under GAAP would be
         consolidated with those of Borrower in its consolidated financial
         statements as of such date.

                  "Controlled" means, with respect to any Person, the ability of
         another Person (whether directly or indirectly and whether by the
         ownership of voting securities, contract or otherwise) to appoint
         and/or remove the majority of the members of the board of directors or
         other governing body of that Person (and "Control" and "Controls" shall
         be similarly construed).

                  "Default" means any event that, with the lapse of time or
         giving of notice, or both, or any other condition, would constitute an
         Event of Default.

                  "Default Rate" means with respect to any overdue amount owed
         by Borrower hereunder, a rate per annum equal to (a) in the case of
         overdue principal with respect to any Loan, the sum of the interest
         rate in effect at such time with respect to such Loan under Section
         4.04 plus 2%; provided, that in the case of overdue principal with
         respect to any Committed LIBOR Rate Loan, after the end of the Interest
         Period with respect to such Loan, the Default Rate shall equal the rate
         set forth in clause (b) below and (b) in the case of

                                       6
<PAGE>

         overdue interest with respect to any Loan, Facility Fees or other
         amounts payable by Borrower hereunder, the sum of the Alternate Base
         Rate in effect at such time plus 2%.

                  "Dollars" and the symbol "$" mean the lawful currency of the
         United States of America.

                  "Domestic Lending Office" means, with respect to any Bank, the
         office of such Bank specified as its "Domestic Lending Office" on
         Schedule I attached hereto, or such other office of such Bank as such
         Bank may from time to time specify to Borrower and the Agent.

                  "Effective Date" has the meaning specified in Section
         11.06(a).

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

                  "Event of Default" has the meaning specified in Section 9.01.

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

                  "Facility Fee" has the meaning specified in Section 4.02(a).

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

                  "Fixed Rate Loan" means any CAF Loan made by a Bank pursuant
         to Section 3.02 based upon a fixed percentage rate per annum offered by
         such Bank, expressed as a decimal (to no more than four decimal
         places), and accepted by Borrower.

                  "Fully Hedged" means, with respect to any Indexed Debt
         Securities, that Borrower or any Consolidated Subsidiary of Borrower
         either (i) owns or has in effect rights providing substantially the
         economic effect, in such context, of owning, a sufficient amount of the
         Indexed Asset relating thereto to satisfy completely its obligations at
         maturity of the Indexed Debt Securities or (ii) has in effect a hedging
         arrangement sufficient to enable it to satisfy completely its
         obligations at maturity of the Indexed Debt Securities.

                                       7
<PAGE>

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

                  "Governmental Authority" means any nation or government, any
         state or other political subdivision thereof and any entity exercising
         executive, legislative, judicial, regulatory or administrative
         functions of or pertaining to government.

                  "Guarantee" means, as to any Person (the "guaranteeing
         person"), any obligation of (a) the guaranteeing person or (b) another
         Person (including, without limitation, any bank under any letter of
         credit) to induce the creation of which the guaranteeing person has
         issued a reimbursement, counterindemnity or similar obligation, in
         either case guaranteeing or in effect guaranteeing any principal of any
         Indebtedness for Borrowed Money (the "primary obligations") of any
         other third Person in any manner, whether directly or indirectly,
         including, without limitation, any obligation of the guaranteeing
         person, whether or not contingent, (i) to purchase any such primary
         obligation or any property constituting direct or indirect security
         therefor, (ii) to advance or supply funds for the purchase or payment
         of any such primary obligation or (iii) otherwise to assure or hold
         harmless the owner of any such primary obligation against loss in
         respect thereof. The amount of any Guarantee of any guaranteeing person
         shall be deemed to be the lower of (a) an amount equal to the stated or
         determinable amount of the primary obligation in respect of which such
         Guarantee is made and (b) the maximum amount for which such
         guaranteeing person may be liable pursuant to the terms of the
         instrument embodying such Guarantee, unless such primary obligation and
         the maximum amount for which such guaranteeing person may be liable are
         not stated or determinable, in which case the amount of such Guarantee
         shall be such guaranteeing person's maximum reasonably anticipated
         liability in respect thereof as determined by Borrower in good faith
         (and "guaranteed" and "guarantor" shall be construed accordingly).

                  "Highest Lawful Rate" means, with respect to each Bank, the
         maximum nonusurious interest rate, if any, that at any time or from
         time to time may be contracted for, taken, reserved, charged or
         received with respect to any Loan or on other amounts, if any, due to
         such Bank pursuant to this Agreement or any other Loan Document under
         applicable law. The term "applicable law" as used in this definition
         means, with respect to each Bank, that law in effect from time to time
         that permits the charging and collection by such Bank of the highest
         permissible lawful, nonusurious rate of interest on the transactions
         herein contemplated including, without limitation, the laws of each
         State that may be held to be applicable, and of the United States of
         America, if applicable.

                  "HII" means Houston Industries Incorporated, a Texas
         corporation.

                  "Hybrid Preferred Securities" means preferred stock issued by
         any Hybrid Preferred Securities Subsidiary.

                                       8
<PAGE>

                  "Hybrid Preferred Securities Subsidiary" means any Delaware
         business trust (or similar entity) (i) all of the common equity
         interest of which is owned (either directly or indirectly through one
         or more Wholly-Owned Subsidiaries) at all times by Borrower, (ii) that
         has been formed for the purpose of issuing Hybrid Preferred Securities
         and (iii) substantially all of the assets of which consist at all times
         solely of the Junior Subordinated Debt and payments made from time to
         time on the Junior Subordinated Debt.

                  "Indebtedness" of any Person means the sum of (a) all items
         (other than capital stock, capital surplus and retained earnings) that,
         in accordance with GAAP consistently applied, would be included in
         determining total liabilities as shown on the liability side of a
         balance sheet of such Person as at the date on which the Indebtedness
         is to be determined and (b) the amount of all Guarantees by such
         Person; provided, however, that Indebtedness of a Person shall not
         include any Junior Subordinated Debt owned by any Hybrid Preferred
         Securities Subsidiary or any Guarantee by Borrower of payments with
         respect to any Hybrid Preferred Securities.

                  "Indenture" means the Indenture between the Borrower
         (successor in interest to Arkla, Inc.) and Citibank, as trustee, dated
         December 1, 1986, as supplemented by the First Supplemental Indenture
         dated as of September 30, 1988 and by the Second Supplemental Indenture
         dated as of November 15, 1989 (copies of all of which have been made
         available by Borrower to each Bank), irrespective of whether such
         Indenture or either of such Supplemental Indentures is at any time
         amended, terminated, waived, defeased or otherwise modified or is
         otherwise no longer in effect.

                  "Indexed Asset" means, with respect to any Indexed Debt
         Security, (i) any security or commodity that is deliverable upon
         maturity of such Indexed Debt Security to satisfy the obligations under
         such Indexed Debt Security at maturity or (ii) any security, commodity
         or index relating to one or more securities or commodities used to
         determine or measure the obligations under such Indexed Debt Security
         at maturity thereof.

                  "Indexed Debt Securities" means any security issued by
         Borrower or any Consolidated Subsidiary of Borrower that (a) in
         accordance with GAAP, is shown on the consolidated balance sheet of
         Borrower and its Consolidated Subsidiaries as Indebtedness or a
         liability and (b) the obligations at maturity of which may be satisfied
         completely by the delivery of, or the amount of such obligations are
         determined by reference to, (1) an equity security issued by an issuer
         other than Borrower or any such Consolidated Subsidiary or (2) an
         underlying index, commodity or security.

                  "Insolvency" means, with respect to any Multiemployer Plan,
         the condition that such Plan is insolvent within the meaning of Section
         4245 of ERISA (and "Insolvent" shall be construed accordingly).

                                       9
<PAGE>

                  "Interest Period" means, for each Committed LIBOR Rate Loan
         comprising part of the same Committed Borrowing, the period commencing
         on the date of such Committed LIBOR Rate Loan or the date of the
         conversion of any Committed Loan into such Committed LIBOR Rate Loan,
         as the case may be, and ending on the last day of the period selected
         by Borrower pursuant to Section 2.02 or 4.07, as the case may be, and,
         thereafter, each subsequent period commencing on the last day of the
         immediately preceding Interest Period and ending on the last day of the
         period selected by Borrower pursuant to Section 4.07. The duration of
         each such Interest Period shall be one, two, three, six or, with the
         consent of all the Banks, twelve months, as Borrower may select by
         notice pursuant to Section 2.02(a) or 4.07 hereof; provided, however,
         that:

                           (i)   any Interest  Period that would otherwise
                  extend beyond the Termination Date shall end on the
                  Termination Date;

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

                           (iii) any Interest Period that begins on the last
                  Business Day of a calendar month (or on a day for which there
                  is no numerically corresponding day in the calendar month at
                  the end of such Interest Period) shall end on the last
                  Business Day of a calendar month.

                  "Investment" of any Person means any investment so classified
         under GAAP, and, whether or not so classified, includes (a) any direct
         or indirect loan, advance or extension of credit made by it to any
         other Person, whether by means of purchase of debt or equity
         securities, loan, advance, Guarantee or otherwise; (b) any capital
         contribution to any other Person; and (c) any ownership or similar
         interest in any other Person.

                  "Junior Subordinated Debt" means subordinated debt of Borrower
         or any Subsidiary of Borrower (i) that is issued at par to a Hybrid
         Preferred Securities Subsidiary in connection with the issuance of
         Hybrid Preferred Securities, (ii) the payment of the principal of which
         and interest on which is subordinated (with certain exceptions) to the
         prior payment in full in cash or its equivalent of all senior
         indebtedness of the obligor thereunder and (iii) that has an original
         tenor no earlier than 30 years from the issuance thereof.

                  "LIBOR Lending Office" means, with respect to any Bank, the
         office of such Bank specified as its "LIBOR Lending Office" on Schedule
         I attached hereto (or, if no such office

                                       10
<PAGE>

         is specified, its Domestic Lending Office), or such other office of
         such Bank as such Bank may from time to time specify to Borrower and
         the Agent.

                  "LIBOR Rate" means (a) for any Interest Period for each
         Committed LIBOR Loan rate comprising part of the same Committed
         Borrowing, an interest rate per annum (rounded upward to the nearest
         whole multiple of 1/100 of 1% per annum, if such rate per annum is not
         such a multiple) equal to the rate per annum at which deposits in
         Dollars are offered by the principal office of the Reference Bank in
         London, England to prime banks in the London interbank market at 11:00
         A.M. (London time) two Business Days before the first day of such
         Interest Period in an amount substantially equal to the Reference
         Bank's Committed LIBOR Rate Loan comprising part of such Borrowing and
         for a period equal to such Interest Period and (b) with respect to any
         CAF LIBOR Rate Loan of a specified maturity requested pursuant to a
         Competitive Bid Request, an interest rate per annum (rounded upward to
         the nearest whole multiple of 1/16 of 1% per annum, if such rate per
         annum is not such a multiple) equal to the rate per annum at which
         deposits in Dollars are offered by the principal office of the
         Reference Bank in London, England to prime banks in the London
         interbank market at 11:00 A.M. (London time) two Business Days before
         the date of borrowing of such CAF LIBOR Rate Loan in an amount
         substantially equal to the principal amount of such CAF LIBOR Rate Loan
         and with a maturity comparable to the maturity applicable to such CAF
         LIBOR Rate Loan.

                  "LIBOR Rate Loan" means a Loan that bears interest at the
         LIBOR Rate as provided in Section 4.04(b).

                  "Lien" means any mortgage, deed of trust, pledge,
         hypothecation, assignment, deposit arrangement, charge, security
         interest, encumbrance or lien of any kind whatsoever (including any
         Capital Lease).

                  "Loan" means a Committed Loan, a Swing Loan or a CAF Loan.

                  "Loan Documents" means this Agreement, any Notes issued
         hereunder and any document or instrument executed in connection with
         the foregoing.

                  "MAE Representation Date" means (i) during the period from the
         date hereof through and including the date the initial Borrowing
         hereunder is made, September 30, 1997, and (ii) at all times after the
         date the initial Borrowing hereunder is made, the date of the then most
         recent financial statements delivered to the Banks pursuant to Section
         7.01(m) or to the Agent pursuant to Section 8.01 (a).

                                       11
<PAGE>

                  "Majority Banks" means, at any time, Banks having at least 51%
         of the aggregate Commitments or, if the Commitments have been
         terminated, 51% of the aggregate Commitments in effect immediately
         prior to such termination.

                  "Mandatory Payment Preferred Stock" means any preference or
         preferred stock of Borrower or of any Consolidated Subsidiary (in each
         case other than any issued to Borrower or its Subsidiaries and other
         than Hybrid Preferred Securities or Junior Subordinated Debt) that is
         subject to mandatory redemption, sinking fund or retirement provisions;
         provide that any amounts subject to any mandatory redemption, sinking
         fund or retirement provisions due and payable prior to the Termination
         Date or within one year following the Termination Date will not be
         considered Mandatory Payment Preferred Stock.

                  "Margin Stock" means any margin stock (as defined in
         Regulation U), any margin stock (as defined in Regulation G) and any
         margin security (as defined in Regulation T).

                  "Material Adverse Effect" means any material adverse effect on
         the ability of Borrower to perform on a timely basis its obligations
         under this Agreement or any other Loan Document to which it is a party.

                  "Money Fund" means the Person, accounts or series of accounts
         in or through which the cash management practices and operations of HII
         and its Consolidated Subsidiaries are consolidated from time to time
         for purposes of conducting certain investing and/or borrowing
         activities for HII and various of such Subsidiaries, consisting
         primarily of a combination of (i) intercompany advances and related
         intercompany obligations to repay such advances, (ii) short-term
         investments and (iii) borrowings from third parties. As of the
         Effective Date, the Money Fund is operated by Houston Industries
         FinanceCo GP.

                  "Moody's" means Moody's Investors Service, Inc. or any
         successor to its debt ratings business.

                  "MRT" means Mississippi River Transmission Corporation, a
         Delaware corporation.

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

                  "NGT" means NorAm Gas Transmission Company, a Delaware
         corporation.

                  "Note" or "Notes" means any promissory note or notes issued
         pursuant to Section 11.06(i) hereof.

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

                                       12
<PAGE>

                  "Notice of Interest Conversion/Continuation" has the meaning
         specified in Section 4.07(a).

                  "Notice of Swing Loan" has the meaning specified in Section
         2.02(e).

                  "Other Taxes" has the meaning specified in Section 5.03(b).

                  "Participant" has the meaning specified in Section 11.06(b).

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

                  "Permitted Liens" means (a) Liens permitted by paragraphs (a)
         through (s) of Section 1007 of the Indenture (which paragraphs are set
         forth on Schedule 1.01); and (b) mortgage Liens securing Indebtedness
         in an aggregate amount which, together with all other Indebtedness of
         the Company or a Restricted Subsidiary secured by a mortgage Lien
         permitted by this clause (b) (not including Indebtedness permitted to
         be secured under clause (a) above) and the Value of all Sale and
         Leaseback Transactions in existence at such time (other than any Sale
         and Leaseback Transaction which, if such Sale and Leaseback Transaction
         had been a Lien, would have been permitted by paragraph (k) of Section
         1007 of the Indenture), does not at the time of incurrence of such
         Indebtedness exceed 5% of the Consolidated Net Tangible Assets.

                  "Person" means an individual, partnership, corporation
         (including a business trust), joint stock company, trust,
         unincorporated association, joint venture, government (or any political
         subdivision or agency thereof) or any other entity of whatever nature.

                  "Plan" means, at a particular time, any employee benefit plan
         that is covered by ERISA and in respect of which Borrower or a Commonly
         Controlled Entity is (or, if such plan were terminated at such time,
         would under Section 4069 of ERISA be deemed to be) an "employer" as
         defined in Section 3(5) of ERISA.

                  "Principal Property" means any natural gas distribution
         property, natural gas pipeline or gas processing plant located in the
         United States, except any such property that in the opinion of the
         Board of Directors of Borrower is not of material importance to the
         total business conducted by the Company and its Consolidated
         Subsidiaries. "Principal Property" shall not include any oil or gas
         property or the production or proceeds of production from an oil or gas
         producing property or the production or any proceeds of production of
         gas processing plants or oil or gas or petroleum products in any
         pipeline or storage field.

                                       13
<PAGE>

                  "Pro Rata Percentage" means, with respect to any Bank, a
         fraction (expressed as a percentage), the numerator of which is the
         amount of such Bank's Commitment and the denominator of which is the
         Commitments of all of the Banks.

                  "Property" means any interest or right in any kind of property
         or asset, whether real, personal or mixed, owned or leased, tangible or
         intangible and whether now held or hereafter acquired.

                  "Purchasing Banks" has the meaning specified in Section
         11.06(c).

                  "Ratings Level" means the ratings level applicable from time
         to time as set forth on Schedule II, which is based on the ratings of
         the Borrower's senior unsecured long-term debt by S&P or Moody's in
         accordance with Section 1.05 hereof.

                  "Reference Bank" means Citibank or any successor thereto
         pursuant to Section 4.04(g).

                  "Register" has the meaning specified in Section 11.06(e)
         hereof.

                  "Regulation G," "Regulation T" and "Regulation U" means
         Regulation G, T and U, respectively, of the Board or any other
         regulation hereafter promulgated by the Board to replace the prior
         Regulation G, T or U, as the case may be, and having substantially the
         same function.

                  "Reorganization" means, with respect to any Multiemployer
         Plan, the condition that such Plan is in reorganization within the
         meaning of Section 4241 of ERISA.

                  "Reportable Event" means any of the events set forth in
         Section 4043(b) of ERISA, other than those events as to which the
         thirty-day notice period is waived under PBGC Reg. Section 4043.

                  "Responsible Officer" means the chief financial officer, the
         chief accounting officer, an assistant treasurer, the treasurer or the
         comptroller of Borrower or any other officer of Borrower whose primary
         duties are similar to the duties of any of the previously listed
         officers.

                  "Restricted Subsidiary" means any Subsidiary of the Borrower
         which owns a Principal Property.

                  "S&P" means Standard & Poor's Ratings Group, a division of
         McGraw-Hill, Inc. on the date hereof, or any successor to its debt
         ratings business.

                                       14
<PAGE>

                  "Sale and Leaseback Transaction" means any arrangement with
         any Person providing for the leasing to the Borrower or any Restricted
         Subsidiary of any Principal Property (except for temporary leases for a
         term, including any renewal thereof of not more than three years and
         except for leases between the Borrower and a Restricted Subsidiary or
         between Restricted Subsidiaries), which Principal Property has been or
         is to be sold or transferred by the Borrower or any Restricted
         Subsidiary to such Person.

                  "SEC" means the Securities and Exchange Commission.

                  "Secured Indebtedness" means, with respect to any Person, all
         Indebtedness secured (or for which the holder of such Indebtedness has
         an existing right, contingent or otherwise, to be secured) by any Lien
         on any Property (including, without limitation, accounts and contract
         rights) owned by such Person or any of its Subsidiaries, even though
         such Person has not assumed or become liable for the payment of such
         Indebtedness.

                  "Significant Subsidiary" has the meaning specified in Rule 405
         under the Securities Act of 1933, as amended through the Effective
         Date; provided, however, that no Subsidiary shall be deemed to be a
         Significant Subsidiary for purposes of this Agreement solely on the
         basis of its losses. Unless otherwise specifically provided, each
         reference herein to a Significant Subsidiary shall mean a Significant
         Subsidiary of the Borrower.

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

                  "Subsidiary" means, as to any Person, a corporation,
         partnership or other entity of which more than 50% of the outstanding
         shares of stock or other ownership interests having ordinary voting
         power (other than stock or such other ownership interests having such
         power only by reason of the happening of a contingency) to elect
         directors or other managers of such corporation, partnership or other
         entity are at the time owned, directly or indirectly through one or
         more Subsidiaries of such Person, by such Person.

                  "Swing Borrowing" means any Swing Loan.

                  "Swing Line Bank" means Citibank.

                  "Swing Line Commitment" has the meaning specified in Section
         2.01(b).

                  "Swing Line Facility" has the meaning specified in Section
         2.01(b).

                  "Swing Loan" means an advance made by the Swing Line Bank
         pursuant to Section 2.01(b).

                                       15
<PAGE>

                  "Taxes" has the meaning specified in Section 5.03(a).

                  "Termination Date" means March 31, 2003 or any earlier date on
         which (a) the Commitments have been cancelled or terminated in
         accordance with this Agreement or (b) all unpaid principal amounts of
         the Loans hereunder have been declared due and payable in accordance
         with this Agreement.

                  "Tranche" means the collective reference to Committed LIBOR
         Rate Loans, the Interest Period with respect to all of which begin on
         the same date and end on the same later date (whether or not such Loans
         shall originally have been made on the same day).

                  "Transferee" has the meaning specified in Section 11.06(g).

                  "Transfer Effective Date" has the meaning specified in Section
         11.06(c).

                  "Triggering Event" has the meaning specified in Section
         5.07(b).

                  "Type" refers to the determination of whether a Loan is an ABR
         Loan or a Committed LIBOR Rate Loan (or a Committed Borrowing comprised
         of such Loans).

                  "Unrated" means no senior unsecured long-term debt of the
         Borrower is rated by S&P and no senior unsecured long-term debt of the
         Borrower is rated by Moody's.

                  "Value" means, with respect to a Sale and Leaseback
         Transaction, as of any particular time, the amount equal to the greater
         of (1) the net proceeds from the sale or transfer of the property
         leased pursuant to such Sale and Leaseback Transaction or (2) the fair
         value, in the opinion of the Board of Directors, of such property at
         the time of entering into such Sale and Leaseback Transaction, in
         either case divided first by the number of full years of the term of
         the lease and then multiplied by the number of full years of such term
         remaining at the time of determination, without regard to any renewal
         or extension options contained in the lease.

                  "Wholly-Owned" means, with respect to any Subsidiary of any
         Person, a Subsidiary, all the outstanding capital stock (other than
         directors' qualifying shares required by law) or other ownership
         interest of which are at the time owned by such Person or by one or
         more Wholly-Owned Subsidiaries of such Person, or both.

                  SECTION 1.02. Computation of Time Periods. In this Agreement,
in the computation of periods of time from a specified date to a later specified
date, unless otherwise specified herein, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."

                                       16
<PAGE>

                  SECTION 1.03. Accounting Terms. Unless otherwise specified in
this Agreement, all accounting terms used herein shall be construed in
accordance with GAAP as in effect from time to time.

                  SECTION 1.04. Miscellaneous. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section, Schedule and Exhibit references are to Articles
and Sections of and Schedules and Exhibits to this Agreement, unless otherwise
specified.

                  SECTION 1.05. Ratings. A rating, whether public or private, by
S&P or Moody's shall be deemed to be in effect on the date of announcement or
publication by S&P or Moody's, as the case may be, of such rating or, in the
absence of such announcement or publication, on the effective date of such
rating and will remain in effect until the announcement or publication of, or
(in the absence of such announcement or publication) the effective date of, any
change in such rating. In the event the standards for any rating by Moody's or
S&P are revised, or such rating is designated differently (such as by changing
letter designations to numerical designations), then the references herein to
such rating shall be deemed to refer to the revised or redesignated rating for
which the standards are closest to, but not lower than, the standards at the
date hereof for the rating which has been revised or redesignated, all as
determined by the Majority Banks in good faith. Long-term debt supported by a
letter of credit, guaranty or other similar credit enhancement mechanism shall
not be considered as senior unsecured long-term debt. If either Moody's or S&P
has at any time more than one rating applicable to senior unsecured long-term
debt of the Borrower, the lowest such rating shall be applicable for purposes
hereof. For example, if Moody's rates some senior unsecured long-term debt of
the Borrower Baal and other such debt of the Borrower Baa2, the senior unsecured
long-term debt of the Borrower shall be deemed to be rated Baa2 by Moody's.

                                   ARTICLE II

            AMOUNTS AND TERMS OF THE COMMITTED LOANS AND SWING LOANS

                  SECTION 2.01. The Committed Loans and Swing Loans. (a) Each
Bank severally agrees, on the terms and subject to the conditions hereinafter
set forth, to make revolving credit Loans (the "Committed Loans") to Borrower
from time to time on any Business Day during the period from the Effective Date
until the Termination Date in an aggregate principal amount not to exceed at any
time outstanding an amount equal to such Bank's Commitment minus such Bank's Pro
Rata Percentage of the sum of (1) the aggregate principal amount of the Swing
Loans then outstanding plus (2) the aggregate principal amount of all CAF Loans
then outstanding; provided that no Committed Loan shall be made as a Committed
LIBOR Rate Loan after the day that is one month prior to the Termination Date;
and provided, further, that in no event shall the aggregate principal amount of
Committed Loans, Swing Loans and CAF Loans outstanding at any time exceed

                                       17
<PAGE>

the lesser of (i) $350,000,000 and (ii) the aggregate amount of the Commitments
at such time. Each Committed Borrowing by Borrower shall be in an aggregate
principal amount of $10,000,000 (in the case of Committed LIBOR Rate Loans) or
$5,000,000 (in the case of ABR Loans), or an integral multiple of $1,000,000 in
excess thereof, and shall consist of Loans of the same Type made on the same day
by the Banks ratably according to their respective Pro Rata Percentages. Within
the limits of the Commitments and this Section 2.01(a), Borrower may borrow,
prepay pursuant to Section 5.05 and reborrow under this Section 2.01(a). The
principal amount outstanding on the Committed Loans shall mature and, together
with accrued and unpaid interest thereon, shall be due and payable on the
Termination Date. The Borrower shall give a Notice of Borrowing each time it
desires that a Committed Loan be made. Each such Notice of Borrowing shall
provide that the Borrower requests that Committed Loans be made ratably by the
Banks in accordance with their respective Pro Rata Percentages. The Borrower may
give multiple Notices of Borrowing on the same day.

                  (b) The Swing Line Bank agrees, on the terms and conditions
hereinafter set forth, to make Swing Loans to the Borrower from time to time on
any Business Day from the Effective Date until the Termination Date (or, if
earlier, the date the Swing Line Commitment is terminated or cancelled) in an
aggregate principal amount which shall not exceed at any time outstanding the
amount set opposite the Swing Line Bank's name on the signature pages hereof
under the caption "Swing Line Commitment", as such amount may be reduced
pursuant to Section 4.03(b) (such amount, as it may have been so reduced, being
the Swing Line Bank's "Swing Line Commitment" and the loan facility provided by
this Section 2.01(b) being the "Swing Line Facility"); and, provided further
that no Swing Loan shall be made if, following the making of such Swing Loan,
the aggregate principal amount of Committed Loans, CAF Loans and Swing Loans
would exceed the aggregate amount of the Commitments of the Banks. No Swing Loan
shall be used for the purpose of funding the payment of principal of any other
Swing Loan. Each Swing Loan shall be in an amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof and shall bear interest as provided in
Section 4.04(a) or, if relevant, Section 4.04(e). The terms and conditions of
the Swing Line Commitment and the Swing Loans (other than terms and conditions
relating to the interest rate, tenor or term of any such Swing Loan) may be
modified from the terms and conditions provided herein upon mutual agreement of
Borrower and the Swing Line Bank. Within the limits of the Swing Line Facility
and within the limits referred to in this Section, the Borrower may borrow under
this Section 2.01(b), repay pursuant to Section 5.02(d) or prepay pursuant to
Section 5.05 and reborrow under this Section 2.01(b).

                  SECTION 2.02. Making the Loans. (a) Each Committed Borrowing
under Section 2.01 shall be made on Borrower's oral or written notice given by
Borrower to the Agent (i) not later than 11:00 A.M. (New York City time) on the
third Business Day prior to the date of the proposed Committed Borrowing in the
case of a Committed LIBOR Rate Loan and (ii) not later than 11:00 A.M. (New York
City time) on the first Business Day prior to the date of the proposed Committed
Borrowing in the case of an ABR Loan. With respect to any oral notice of
borrowing given by Borrower, Borrower shall promptly thereafter confirm such
notice in writing. Each written

                                       18
<PAGE>

notice of borrowing and each confirmation of an oral notice of borrowing shall
be in substantially the form of Exhibit 2.02(a) hereto ("Notice of Borrowing").
Each Notice of Borrowing shall be signed by Borrower and shall specify therein
the requested (i) date of such Committed Borrowing, (ii) Type of Loans
comprising such Committed Borrowing, (iii) aggregate amount of such Committed
Borrowing and (iv) with respect to any Committed LIBOR Rate Loan, the Interest
Period for each such Loan (which shall be the same for all Loans comprising such
Committed Borrowing). The Agent shall promptly deliver a copy of each Notice of
Borrowing to each Bank, but in any event the Agent will endeavor to deliver such
copy no later than 11:30 A.M. (New York City time) on the relevant borrowing
date. Each Bank shall, before 12:00 Noon (New York City time) on the date of
such Committed Borrowing, make available to the Agent at its address referred to
in Section 11.02, in immediately available funds, such Bank's applicable Pro
Rata Percentage of such Committed Borrowing. The Agent shall, no later than 1:00
P.M. (New York City time), make such funds available to Borrower at the Agent's
aforesaid address. Each Notice of Borrowing shall be irrevocable and binding on
Borrower.

                  (b) Unless the Agent shall have received notice from a Bank
prior to the date of any Committed Borrowing that such Bank will not make
available to the Agent such Bank's applicable Pro Rata Percentage of such
Committed Borrowing, the Agent may assume that such Bank has made such portion
available to the Agent on the date of such Committed Borrowing in accordance
with Section 2.02(a) and the Agent may, in reliance upon such assumption, make
available to Borrower on such date a corresponding amount. If such amount is
made available to the Agent on a date after such date of Committed Borrowing,
such Bank shall pay to the Agent on demand an amount equal to the product of (i)
the daily average Federal Funds Effective Rate during such period, times (ii)
the amount of such Bank's applicable Pro Rata Percentage of such Committed
Borrowing, times (iii) a fraction, the numerator of which is the number of days
that elapse from such date of Committed Borrowing to the date on which such
Bank's applicable Pro Rata Percentage of such Committed Borrowing shall have
become immediately available to the Agent and the denominator of which is 360. A
certificate of the Agent submitted to any Bank with respect to any amounts owing
under this Section 2.02(b) shall be conclusive in the absence of manifest error.
If such Bank shall repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Banks Loan as part of such Committed Borrowing for
purposes of this Agreement. If such Bank's applicable Pro Rata Percentage of
such Committed Borrowing is not in fact made available to the Agent by such Bank
within three (3) Business Days of such date of Committed Borrowing, the Agent
shall be entitled to recover such amount with interest thereon at the rate per
annum, equal to (i) the Alternate Base Rate (in the case of ABR Loans) or (ii)
the Federal Funds Effective Rate (in the case of Committed LIBOR Rate Loans), on
demand, from Borrower.

                  (c) The failure of any Bank to make the Loan to be made by it
as part of any Committed Borrowing shall not relieve any other Bank of its
obligation, if any, hereunder to make its Loan on the date of such Committed
Borrowing, but no Bank shall be responsible for the failure

                                       19
<PAGE>

of any other Bank to make the Loan to be made by such other Bank on the date of
any Committed Borrowing.

                  (d) Notwithstanding any other provision of this Agreement, at
no time shall there be more than twelve Committed Borrowings outstanding at any
time (for purposes of this Section 2.02(d), all ABR Loans shall count as one
Committed Borrowing).

                  (e) Each Swing Loan shall be made on notice, given not later
than 2:00 P.M. (New York City time), or such later time as agreed to by the
Borrower and the Swing Line Bank, on the date of the proposed Swing Loan, by
Borrower to the Swing Line Bank and the Agent. Each such notice of a Swing Loan
(a "Notice of Swing Loan") shall be by telephone, confirmed immediately in
writing, or telecopier, specifying therein the requested (i) date of such Swing
Loan, (ii) amount of such Swing Loan and (iii) maturity of such Swing Loan
(which maturity shall be no later than the earlier of the Termination Date and
the tenth day after the requested date of such Swing Loan). Each written Notice
of Swing Loan and each written confirmation of a telephonic Notice of Swing Loan
shall be in substantially the form of Exhibit 2.02(e). The Swing Line Bank will
make the amount of each Swing Loan available to the Agent at the Agents address
referred to in Section 11.02 in same day funds (and the Agent shall promptly
make such funds available to Borrower at such address) or make such amount
available to Borrower as agreed between the Swing Line Bank and Borrower.
Notwithstanding anything herein to the contrary, the Swing Line Bank may suspend
its obligation to make Swing Loans so long as the senior unsecured long-term
debt of any Bank is rated below BBB- by S&P or below Baa3 by Moody's or if any
Bank fails to comply with Section 2.04.

                  SECTION 2.03. Minimum Tranches. All Borrowings, prepayments,
conversions and continuations of Committed Loans hereunder and all selections of
Interest Periods hereunder shall be in such amounts and be made pursuant to such
elections so that, after giving effect thereto, the aggregate principal amount
of the Loans comprising each Tranche of Committed LIBOR Rate Loans shall be
equal to $10,000,000 or an integral multiple of $1,000,000 in excess thereof.

                  SECTION 2.04. Participation in Swing Loans. Upon written
demand by the Swing Line Bank, with a copy of such demand to the Agent, each
other Bank shall purchase from the Swing Line Bank, a participating interest in
each Swing Loan in an amount equal to such other Bank's Pro Rata Percentage of
each Swing Loan as of the date of such purchase, by making available for the
account of its Applicable Lending Office to the Agent for the account of the
Swing Line Bank, by delivery to the Agent at its address referred to in Section
11.02, in same day funds; an amount equal to the portion of the outstanding
principal amount of and interest on the Swing Loans to be purchased by such
other Bank. Promptly after receipt of such funds from the purchasing Banks, the
Agent shall transfer such funds to the Swing Line Bank. The Borrower hereby
agrees to each such purchase. Each Bank agrees to purchase its Pro Rata
Percentage of each Swing Loan on (A) the Business Day on which demand therefor
is made by the Swing Line Bank, provided

                                       20
<PAGE>

notice of such demand is given not later than 11:00 A.M. (New York City time) on
such Business Day or (B) the first Business Day next succeeding such demand if
notice of such demand is given after such time. Upon any sale by the Swing Line
Bank to any other Bank of a participating interest in any Swing Loan pursuant to
this Section 2.04, the Swing Line Bank represents and warrants to such other
Bank that the Swing Line Bank is the legal and beneficial owner of such interest
being sold by it, free and clear of any liens, but makes no other representation
or warranty. The Swing Line Bank shall have no responsibility or liability to
any other Bank with respect to the Swing Loans, any participation sold, this
Agreement or any party hereto, and no Bank shall have any recourse against the
Swing Line Bank with respect to the Swing loans, any participation sold, this
Agreement or any party hereto, except that the Swing Line Bank shall pay to each
Bank that purchases a participation in a Swing Loan pursuant to this Section
2.04 such Bank's ratable share of the payments, if any, actually received by the
Swing Line Bank on such Swing Loan. Any sale of a participating interest
pursuant to this Section 2.04 may, at the Swing Line Bank's option, be evidenced
by a participation agreement or other document in substantially the same form as
any participation agreement or other document customarily used by the Swing Line
Bank to evidence its sale of a participating interest in a loan. If and to the
extent that any Bank shall not have so made the amount required by this Section
2.04 available to the Agent, such Bank agrees to pay to the Agent forthwith on
demand such amount together with interest thereon, for each day from the date of
demand by the Swing Line Bank until the date such amount is paid to the Agent,
at the Federal Funds Rate for the account of the Swing Line Bank.

                                  ARTICLE III

                       AMOUNTS AND TERMS OF THE CAF LOANS

                  SECTION 3.01. The CAF Loans. From time to time on any Business
Day during the period from the Effective Date until the Termination Date,
Borrower may request CAF Loans from the Banks in amounts such that the aggregate
principal amount of Committed Loans, Swing Loans and CAF Loans outstanding at
any time shall not exceed the aggregate amount of the Commitments at such time
(the "CAF Facility"). Under the terms and conditions set forth below, Borrower
may borrow, repay pursuant to Section 3.02(h) and reborrow under this Section
3.01.

                  SECTION 3.02. Competitive Bid Procedure. (a) In order to
request a CAF Loan, Borrower shall deliver to the Agent a written notice in the
form of Exhibit 3.02-A, attached hereto (a "Competitive Bid Request"), to be
received by the Agent (i) in the case of each CAF LIBOR Rate Loan, not later
than 3:00 P.M. (New York City time), five (5) Business Days before the borrowing
date specified for such CAF LIBOR Rate Loan and (ii) in the case of each Fixed
Rate Loan, not later than 11:00 A.M. (New York City time), two (2) Business Days
before the borrowing date specified for such Fixed Rate Loan. Each Competitive
Bid Request shall in each case refer to this Agreement and specify (i) the date
of Borrowing of such CAF Loans (which shall be a Business

                                       21
<PAGE>

Day), (ii) the aggregate principal amount thereof, (iii) whether the CAF Loans
then being requested are to be CAF LIBOR Rate Loans or Fixed Rate Loans, (iv)
the maturity date for each CAF Loan requested to be made and (v) the interest
payment dates for each CAF Loan requested to be made. The Agent shall promptly
notify each Bank by telex or facsimile transmission of the contents of each
Competitive Bid Request received by it. Each Competitive Bid Request may solicit
bids for CAF Loans in an aggregate principal amount of $10,000,000 or an
integral multiple of $1,000,000 in excess thereof and for not more than three
alternative maturity dates for such CAF Loans. The maturity date for each CAF
Loan shall be not less than seven (7) days nor more than two hundred seventy
(270) days after the applicable date of CAF Borrowing (and in any event shall
not extend beyond the Termination Date). On each date on which the Borrower
delivers to the Agent a Competitive Bid Request, Borrower agrees to pay to the
Agent, solely for the account of the Agent, a non-refundable fee in the amount
of $3,500.

                  (b) Each Bank may, in its sole discretion, irrevocably offer
to make one or more CAF Loans to Borrower responsive to each Competitive Bid
Request from Borrower. Any such irrevocable offer by a Bank must be received by
the Agent, in the form of Exhibit 3.02-B hereto (a "Competitive Bid"), (i) in
the case of each CAF LIBOR Rate Loan, not later than 10:30 A.M. (New York City
time), four (4) Business Days before the borrowing date specified for such CAF
LIBOR Rate Loan and (ii) in the case of each Fixed Rate Loan, not later than
9:30 A.M. (New York City time) on the borrowing date specified for such Fixed
Rate Loan. Competitive Bids that do not conform substantially to the format of
Exhibit 3.02-B may be rejected by the Agent after conferring with, and upon the
instruction of, Borrower, and the Agent shall notify the Bank of such rejection
as soon as practicable. Each Competitive Bid shall refer to this Agreement and
(i) specify the maximum principal amount of CAF Loans for each maturity date
(which shall be in an aggregate principal amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof and which may equal, but not
exceed, the principal amount requested for such maturity date by Borrower) and
the aggregate maximum principal amount of CAF Loans for all maturity dates
(which amount, with respect to any Bank, may exceed such Bank's Commitment) that
the Bank is willing to make to Borrower; and (ii) specify the CAF Rate at which
the Bank is prepared to make each such CAF Loan. A Competitive Bid submitted by
a Bank pursuant to this Section 3.02(b) shall be irrevocable.

                  (c) The Agent shall (i) in the case of each CAF LIBOR Rate
Loan, not later than 11:00 A.M. (New York City time) three (3) Business Days
before the borrowing date specified for such CAF LIBOR Rate Loan and (ii) in the
case of each Fixed Rate Loan, not later than 10:00 A.M. (New York City time) on
the borrowing date specified for such Fixed Rate Loan, notify Borrower in
writing of all the Competitive Bids made (arranging each such bid in ascending
interest rate order), and the CAF Rate or Rates and the maximum principal amount
of each CAF Loan in respect of which a Competitive Bid was made, and the
identity of the Bank that made each bid. The Agent shall send a copy of all
Competitive Bids to Borrower for its records as soon as practicable after
completion of the bidding process set forth in this Section 3.02.

                                       22
<PAGE>

                  (d) Borrower may in its sole and absolute discretion, subject
only to the provisions of this Section 3.02(d), accept or reject any Competitive
Bid referred to in Section 3.02(c); provided, however, that the aggregate amount
of Borrower's Competitive Bids so accepted by Borrower may not exceed the lesser
of (i) the principal amount of the CAF Borrowing requested by Borrower or (ii)
the amount of the Commitments less the aggregate principal amount of Committed
Loans, Swing Loans and CAF Loans made to Borrower and outstanding at such time
after giving effect to the application of the proceeds of such CAF Borrowing on
the borrowing date therefor. Borrower shall notify the Agent in writing whether
and to what extent it has decided to accept or reject any or all of the bids
referred to in Section 3.02(c) by delivering to the Agent a written notice in
the form of Exhibit 3.02-C hereto (a "Competitive Bid Confirmation"), (i) in the
case of each CAF LIBOR Rate Loan, not later than 1:00 P.M. (New York City time),
three (3) Business Days before the borrowing date specified for such CAF LIBOR
Rate Loan and (ii) in the case of each Fixed Rate Loan, not later than 11:00
A.M. (New York City time) on the borrowing date specified for such Fixed Rate
Loan, which Competitive Bid Confirmation shall specify the principal amount of
CAF Loans for each relevant maturity date to be made by each such bidding Bank
(which amount for each such maturity date shall be equal to or less than the
maximum amount for such maturity date specified in the Competitive Bid of such
Bank, and for all maturity dates included in such Competitive Bid shall be equal
to or less than the aggregate maximum amount specified in such Competitive Bid
for all such maturity dates); provided, however, that (A) the failure by
Borrower to so deliver a Competitive Bid Confirmation shall be deemed to be a
rejection of all the bids referred to in Section 3.02(c); (B) Borrower shall not
accept a bid made at a particular CAF Rate for a particular maturity if Borrower
has decided to reject a bid made at a lower CAF Rate for such maturity; (C) if
Borrower shall accept bids made at a particular CAF Rate for a particular
maturity but shall be restricted by other conditions hereof from borrowing the
maximum principal amount of CAF Loans in respect of which bids at such CAF Rate
have been made, then Borrower shall accept a pro rata portion of each bid made
at such CAF Rate based as nearly as possible on the respective maximum principal
amounts of CAF Loans offered to be made by the relevant Banks pursuant to such
bids; and (D) no bid shall be accepted for a CAF Loan by any Bank unless such
CAF Loan is in an aggregate principal amount not less than $5,000,000 or an
integral multiple of $1,000,000 in excess thereof. Notwithstanding the
foregoing, if it is necessary for Borrower to accept a pro rata allocation of
the bids made in response to a Competitive Bid Request (whether pursuant to the
events specified in clause (C) above or otherwise) and the available principal
amount of CAF Loans to be allocated among the Banks is not sufficient to enable
CAF Loans to be allocated to each Bank in an aggregate principal amount not less
than $5,000,000 or in integral multiples of $1,000,000 in excess thereof, then
the Borrower shall, subject to clause (D) above, select the Banks to be
allocated such CAF Loans and shall round allocations up or down to the next
higher or lower multiple of $1,000,000 as it shall deem appropriate; provided
that the allocations among the Banks to be allocated such CAF Loans shall be
made pro rata based as nearly as possible on the respective maximum principal
amounts of CAF Loans offered to be made by such Banks. The Competitive Bid
Confirmation given by Borrower pursuant to this Section 3.02(d) shall be
irrevocable.

                                       23
<PAGE>

                  (e) Upon receipt by the Agent from the Reference Bank of the
LIBOR Rate applicable to any CAF LIBOR Rate Loan to be made by any Bank pursuant
to a Competitive Bid that has been accepted by Borrower pursuant to Section
3.02, the Agent shall notify such Bank of the applicable LIBOR Rate.

                  (f) If the Agent shall at any time elect to submit a
Competitive Bid in its capacity as a Bank, it shall submit such bid directly to
Borrower by (i) in the case of a CAF LIBOR Rate Loan, not later than 10:15 A.M.
(New York City time), and (ii) in the case of a Fixed Rate Loan, not later than
9:15 A.M. (New York City time), in each case, on the Business Day on which the
other Banks are required to submit their bids to the Agent pursuant to Section
3.02(b) above.

                  (g) If Borrower accepts pursuant to Section 3.02(d) one or
more of the offers made by any Bank or Banks, the Agent shall promptly notify
each Bank that has made such an offer of the aggregate amount of such CAF Loans
to be made on such borrowing date for each maturity date and of the acceptance
or rejection of any offers to make such CAF Loans made by such Bank. Each Bank
that is to make a CAF Loan shall, before 12:00 Noon (New York City time) on the
borrowing date specified in the Competitive Bid Request applicable thereto, make
available to the Agent at its office set forth in Section 11.02 the amount of
CAF Loans to be made by such Bank, in immediately available funds. The Agent
shall, no later than 1:00 P.M. (New York City time) on such borrowing date, make
such funds available to Borrower at the Agents aforesaid address. As soon as
practicable after each borrowing date, the Agent shall notify each Bank of the
aggregate amount of CAF Loans advanced on such borrowing date and the respective
maturity dates thereof.

                  (h) Borrower shall repay to the Agent for the account of each
Bank that has made a CAF Loan (or the CAF Loan Assignee in respect thereof, as
the case may be) on the maturity date of each CAF Loan (such maturity date being
that specified by Borrower for repayment of such CAF Loan in the related
Competitive Bid Request) the then unpaid principal amount of such CAF Loan.
Borrower shall not have the right to prepay any principal amount of any CAF
Loan.

                  (i) All notices required by this Section 3.02 shall be made in
accordance with Section 11.02 hereof; provided, however, that each request or
notice required to be made under Section 3.02(a) or 3.02(d) by Borrower may be
made by the giving of telephone notice to the Agent that is promptly confirmed
by delivery of a notice in writing (in substantially the form of Exhibit 3.02-A
or Exhibit 3.02-C as the case may be) to the Agent.

                                       24
<PAGE>

                                   ARTICLE IV

                        PROVISIONS RELATING TO ALL LOANS

                  SECTION 4.01. The Loans. (a) Each Bank shall maintain in
accordance with its usual practice an account or accounts evidencing
indebtedness of Borrower to such Bank resulting from each Committed Loan, each
Swing Loan and each CAF Loan of such Bank from time to time, including the
amounts of principal and interest payable and paid to such Bank from time to
time under this Agreement.

                  (b) The Agent shall maintain the Register pursuant to
subsection 11.06(e) and a subaccount therein for each Bank, in which shall be
recorded (i) the amount of each Committed Loan, Swing Loan and CAF Loan made by
the Banks through the Agent hereunder, the type thereof and each Interest Period
applicable thereto, (ii) the amount of any principal or interest due and payable
or to become due and payable from Borrower to each Bank hereunder and (iii) both
the amount of any sum received by the Agent hereunder from Borrower and each
Bank's share thereof.

                  (c) The entries made in the Register and the accounts of each
Bank maintained pursuant to subsection 4.01(a) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of Borrower therein recorded; provided, however, that the failure of
any Bank or the Agent to maintain the Register or any such account, or any error
therein, shall not in any manner affect the obligation of Borrower to repay
(with applicable interest) the Loans actually made to Borrower in accordance
with the terms of this Agreement.

                  SECTION 4.02. Fees. (a) Borrower agrees to pay to the Agent
for the account of each Bank a facility fee (the "Facility Fee") on the average
daily amount of such Bank's Commitment (whether used or unused), from the date
hereof in the case of each Bank listed on the signature pages hereof and from
the effective date specified in the Committed Loan Assignment and Acceptance
pursuant to which it became a Bank in the case of each other Bank until the
Termination Date, payable in arrears beginning on June 30, 1998 and continuing
quarterly thereafter on the last day of each March, June, September and December
during the term of this Agreement, and on the Termination Date, at a rate per
annum equal to the Applicable Facility Fee Rate in effect from time to time.

                  (b) The Facility Fees payable under Section 4.02(a) and the
fees payable under Section 4.02(c) shall be calculated by the Agent on the basis
of a 365- or 366-day year, as the case may be, for the actual days (including
the first day but excluding the last day) occurring in the period for which such
fee is payable.

                  (c) Borrower agrees to pay to the Agent for the account of
each Bank a usage fee at a rate of 1/8% per annum on the aggregate outstanding
principal amount of all Loans owed to such

                                       25
<PAGE>

Bank (other than CAF Loans) at all times during which the aggregate outstanding
principal amount of all Loans (other than CAF Loans) exceeds 50% of the
Commitments of the Banks, payable quarterly in arrears on the last day of each
March, June, September and December hereafter, commencing March 31, 1998, and on
the Termination Date.

                  (d) Borrower shall pay to the Agent for its own account, the
fees in the amounts and on the dates agreed to in writing by Borrower and the
Agent from time to time.

                  SECTION 4.03. Termination or Reduction of the Commitments. (a)
Borrower shall have the right, upon at least three (3) Business Days'
irrevocable notice to the Agent, to terminate in whole or permanently reduce
ratably in part the unused portions of the Commitments, provided that (a) each
partial reduction shall be in the aggregate principal amount of $10,000,000 or
an integral multiple of $1,000,000 in excess thereof, (b) no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayments made under Section 5.05 hereof by Borrower on the effective date
thereof, the aggregate principal amount of Loans made to Borrower and then
outstanding would exceed the Commitments then in effect, and (c) no such
termination or reduction shall be permitted if, after giving effect thereto, the
Swing Line Commitment would exceed the Commitments then in effect. Any
termination or reduction of any of the Commitments shall be permanent.

                  (b) Borrower shall have the right, upon at least three (3)
Business Days' irrevocable notice to the Agent and the Swing Line Bank, to
terminate in whole or permanently reduce ratably in part the unused portion of
the Swing Line Commitment, provided that (a) each partial reduction shall be in
the aggregate principal amount of $10,000,000 or an integral multiple of
$1,000,000 in excess thereof and (b) no such termination or reduction shall be
permitted if, after giving effect thereto and to any prepayments made under
Section 5.05 hereof by Borrower on the effective date thereof, the aggregate
principal amount of Swing Loans made to Borrower and then outstanding would
exceed the Swing Line Commitment then in effect. Any termination or reduction of
the Swing Line Commitment shall be permanent.

                  SECTION 4.04. Interest. Borrower shall pay interest on the
unpaid principal amount of each Loan made by each Bank from the date of such
Loan until such principal amount shall be paid in full, at the times and at the
rates per annum set forth below:

                  (a) Each ABR Loan and each Swing Loan shall bear interest at a
rate per annum equal at all times to the lesser of (i) the Alternate Base Rate
and (ii) the Highest Lawful Rate, payable quarterly in arrears on the last day
of each March, June, September and December, commencing on March 31, 1998 and on
the Termination Date. Additionally, accrued interest on each ABR Loan shall be
payable when such ABR Loan is converted pursuant to Section 4.07, and accrued
interest on each Swing Loan shall be payable on each date on which principal of
such Swing Loan is paid.

                                       26
<PAGE>

                  (b) Each LIBOR Rate Loan shall bear interest at a rate per
annum equal at all times to (i) in the case of each Committed LIBOR Rate Loan,
the lesser of (A) the sum of the LIBOR Rate for the applicable Interest Period
for such Loan plus the Applicable Margin in effect from time to time and (B) the
Highest Lawful Rate, payable on the last day of such Interest Period and, if
such Interest Period has a duration of more than three months, quarterly on each
day that is at the end of each three month period within such Interest Period,
and on the Termination Date and (ii) in the case of each CAF LIBOR Rate Loan,
the lesser of (A) the sum of the LIBOR Rate applicable to such Loan plus or
minus, as the case may be, the CAF Margin specified by the Bank making such Loan
with respect to such Loan in its Competitive Bid submitted pursuant to Section
3.02(b) and (B) the Highest Lawful Rate, payable on the date or dates specified
in the relevant Competitive Bid Request.

                  (c) Each Fixed Rate Loan shall bear interest at a rate per
annum equal at all times to the lesser of (i) the fixed rate of interest offered
by the Bank making such Loan and accepted by Borrower pursuant to Section 3.02
and (ii) the Highest Lawful Rate, payable on the date or dates specified in the
relevant Competitive Bid Request.

                  (d) Interest payable under Sections 4.04(a) and 4.04(e) (to
the extent that the calculation of the Default Rate thereunder is based on the
Alternate Base Rate) shall be calculated by the Agent on the basis of a 365- or
366-day year, as the case may be, for the actual days (including the first day
but excluding the last day) occurring in the period in which such interest is
payable. Interest payable under Sections 4.04(b), (c) and (e) (to the extent
that the calculation of the Default Rate is based on either the LIBOR Rate or
the rate set forth in Section 4.04(c)) shall be calculated by the Agent on the
basis of a 360-day year for the actual days (including the first day and
excluding the last day) occurring in the period for which such interest is
payable.

                  (e) Notwithstanding the foregoing, if all or a portion of (i)
the principal amount of any Loan, (ii) any interest payable thereon, or (iii)
any Facility Fee or other amount payable hereunder shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), such overdue
amount shall bear interest, payable from time to time on demand, at a rate per
annum equal to the lesser of (A) the Highest Lawful Rate and (B) the Default
Rate, in each case from the date of such non-payment until such amount is paid
in full (as well after as before judgment).

                  (f) Each determination of an interest rate by the Agent
pursuant to any provisions of this Agreement shall be conclusive and binding on
Borrower and the Banks in the absence of manifest error. The Agent shall, at the
request of Borrower, deliver to Borrower a statement showing in reasonable
detail the quotations used by the Agent in determining LIBOR Rates.

                  (g) The Reference Bank shall use its best efforts to finish
quotations of rates to the Agent as contemplated hereby. If the Reference Bank
shall be unable or shall otherwise fail to supply such rates to the Agent upon
its request, (i) the Agent (after consultation with Borrower and

                                       27
<PAGE>

the Banks) shall, by notice to Borrower and Banks, designate another Bank as the
Reference Bank, and upon such designation, such Bank that is unable or fails to
supply such rates shall cease to be the Reference Bank; and (ii) until the new
Reference Bank is so designated no LIBOR Rate Loans shall be made and no Loans
shall be continued as or converted into Committed LIBOR Rate Loans. If the
Reference Bank shall for any reason no longer have a Commitment, Swing Line
Commitment or any Loans, the Agent (after consultation with Borrower and the
Banks) shall, by notice to Borrower and the Banks, designate another Bank as the
Reference Bank, and upon such designation such Bank that no longer has a
Commitment, Swing Line Commitment or any Loans shall cease to be the Reference
Bank.

                  SECTION 4.05. Reserve Requirements. (a) Borrower agrees to pay
to each Bank that requests compensation under this Section 4.05 in accordance
with the provisions set forth in Section 5.07(b), so long as such Bank shall be
required to maintain reserves against "Eurocurrency liabilities" under
Regulation D of the Board (or, so long as such Bank shall be required by the
Board or by any other Governmental Authority to maintain reserves against any
other category of liabilities that includes deposits by reference to which the
interest rate on LIBOR Rate Loans is determined as provided in this Agreement or
against any category of extensions of credit or other assets of such Bank that
includes any LIBOR Rate Loans), an additional amount (determined by such Bank
and notified to Borrower pursuant to the provisions set forth in Section
5.07(b)) representing such Bank's calculation or, if an accurate calculation is
impracticable, reasonable estimate (using such method of allocation to such
Loans of Borrower as such Bank shall determine in accordance with Section
5.07(a)) of the actual costs, if any, incurred by such Bank during the relevant
Interest Period or during the period a CAF LIBOR Rate Loan made by such Bank was
outstanding, as the case may be, as a result of the applicability of the
foregoing reserves to such Committed LIBOR Rate Loans or CAF LIBOR Rate Loans,
which amount in any event shall not exceed the product of the following for each
day of such Interest Period or each day during the period such CAF LIBOR Rate
Loan was outstanding, as the case may be:

                           (i)   the principal amount of the relevant Committed
                  LIBOR Rate Loans or CAF LIBOR Rate Loans made by such Bank
                  outstanding on such day; and

                           (ii)  the difference between (A) a fraction, the
                  numerator of which is the LIBOR Rate (expressed as a decimal)
                  applicable to such Committed LIBOR Rate Loan or CAF LIBOR Rate
                  Loan, as the case may be (expressed as a decimal), and the
                  denominator of which is one minus the maximum rate (expressed
                  as a decimal) at which such reserve requirements are imposed
                  by the Board or other Governmental Authority on such date,
                  minus (B) such numerator; and

                           (iii) a fraction, the numerator of which is one and
                  the denominator of which is 360.

                                       28
<PAGE>

                  (b) The agreements in this Section 4.05 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

                  SECTION 4.06. Interest Rate Determination and Protection. (a)
The rate of interest for each Committed LIBOR Rate Loan shall be determined by
the Agent two (2) Business Days before the first day of each Interest Period
applicable to such Loan. The Agent shall give prompt notice to Borrower and the
Banks of the applicable interest rate determined by the Agent for purposes of
Section 4.04(b) hereof.

                  (b) If, with respect to any Committed LIBOR Rate Loans, prior
to the first day of an Interest Period (i) the Agent shall have determined
(which determination shall be conclusive and binding upon Borrower) that, by
reason of circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the LIBOR Rate for such Interest
Period or (ii) the Agent shall have received notice from the Majority Banks that
the LIBOR Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Banks (as determined in good
faith and certified by such Banks) of making or maintaining their affected
Committed LIBOR Rate Loans during such Interest Period or that Dollar deposits
for the relevant amounts and Interest Period for the respective Committed LIBOR
Rate Loans are not available to them in the London interbank market, the Agent
shall give telecopy or telephonic notice thereof to Borrower and the Banks as
soon as practicable thereafter. If such notice is given, (A) any Committed LIBOR
Rate Loans requested to be made on the first day of such Interest Period shall
be made as ABR Loans, (B) any Committed Loans that were to have been converted
on the first day of such Interest Period to Committed LIBOR Rate Loans shall be
continued as ABR Loans and (C) any outstanding Committed LIBOR Rate Loans shall
be converted, on the first day of such Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Agent, no further Committed LIBOR Rate Loans
shall be made or continued as such, nor shall Borrower have the right to convert
Committed Loans to Committed LIBOR Rate Loans.

                  SECTION 4.07. Voluntary Interest Conversion or Continuation of
Committed Loans. (a) Borrower may on any Business Day, upon its irrevocable oral
or written notice of interest conversion/continuation given by it to the Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed interest conversion or continuation in the case of
conversion into or continuation as a Committed LIBOR Rate Loan, (i) convert
Committed Loans of one Type into Committed Loans of another Type; (ii) convert
Committed LIBOR Rate Loans for a specified Interest Period into Committed LIBOR
Rate Loans for a different Interest Period; or (iii) continue Committed LIBOR
Rate Loans for a specified Interest Period as Committed LIBOR Rate Loans for the
same Interest Period; provided, however, that (A) any conversion of any
Committed LIBOR Rate Loans into Committed LIBOR Rate Loans for a different
Interest Period, or into ABR Loans, or any continuation of Committed LIBOR Rate
Loans for the same Interest Period shall be made on, and only on, the last day
of an Interest Period for such Committed LIBOR Rate Loans; (B) no Committed Loan
may be converted into or continued as a

                                       29
<PAGE>

Committed LIBOR Rate Loan by Borrower so long as an Event of Default has
occurred and is continuing; (C) no Committed Loan may be converted into or
continued as a Committed LIBOR Rate Loan after the date that is one month prior
to the Termination Date, (D) no Committed Loan may be converted into or
continued as a Committed LIBOR Rate Loan if, after giving effect thereto,
Section 2.03 would be contravened, and (E) each conversion and each continuation
shall treat all Loans comprising a particular Committed Borrowing alike, with
the result that at all times (except as contemplated by Section 4.09(a)) each
Committed Borrowing will consist of a Loan of the same Type, having (in the case
of Committed LIBOR Rate Loans) the same Interest Period and originally made on
the same day by the Banks. With respect to any oral notice of interest
conversion/ continuation given by Borrower under this Section 4.07(a), Borrower
shall promptly thereafter confirm such notice in writing. Each written notice of
interest conversion/continuation given by Borrower under this Section 4.07(a)
and each confirmation of an oral notice of interest conversion/ continuation
given by Borrower under this Section 4.07(a) shall be in substantially the form
of Exhibit 4.07 hereto ("Notice of Interest Conversion/Continuation"). Each such
Notice of Interest Conversion/Continuation shall specify therein the requested
(x) date of such interest conversion or continuation; (y) the Committed Loans to
be converted or continued; and (z) if such interest conversion or continuation
is into Committed LIBOR Rate Loans, the duration of the Interest Period for each
such Committed LIBOR Rate Loan. The Agent shall promptly deliver a copy of each
Notice of Interest Conversion/Continuation to each Bank. Each Notice of Interest
Conversion/Continuation shall be irrevocable and binding on Borrower. Inasmuch
as a conversion or continuation pursuant to this Section 4.07(a) does not
require any Bank to advance additional amounts, the Borrower shall not be
required to satisfy the conditions in Section 6.02 as a condition to giving a
Notice of Interest Conversion/Continuation.

                  (b) If Borrower shall fail to deliver to the Agent a Notice of
Interest Conversion/Continuation in accordance with Section 4.07(a) hereof, or
to select the duration of any Interest Period for the principal amount
outstanding under any Committed LIBOR Rate Loan by 11:00 A.M. (New York City
time) on the third Business Day prior to the last day of the Interest Period
applicable to such Loan in accordance with Section 4.07(a), the Agent will
forthwith so notify Borrower and the Banks (provided that the failure to give
such notice shall not affect the conversion referred to below) and such
Committed Loans will automatically, on the last day of the then existing
interest Period therefor, convert into ABR Loans.

                  SECTION 4.08. Funding Losses Relating to LIBOR Rate Loans. (a)
Borrower agrees, without duplication of any other provision under this
Agreement, to indemnify each Bank and to hold each Bank harmless from any loss
or expense that such Bank may sustain or incur as a consequence of (i) default
by Borrower in payment when due of the principal amount of or interest on any
LIBOR Rate Loan, (ii) default by Borrower in making a borrowing of, conversion
into or continuation of LIBOR Rate Loans after Borrower has given a notice
requesting the same in accordance with the provisions of this Agreement, (iii)
default by Borrower in making any prepayment after Borrower has given a notice
thereof in accordance with the provisions of this

                                       30
<PAGE>
Agreement or (iv) the making of a prepayment of LIBOR Rate Loans or the
conversion of Committed LIBOR Rate Loans into ABR Loans, on a day that is not
the last day of an Interest Period with respect thereto, including, without
limitation, in each case, any such loss or expense arising from the reemployment
of funds obtained by it or from fees payable to terminate the deposits from
which such funds were obtained. The calculation of all amounts payable to a Bank
under this Section 4.08(a) shall be made pursuant to the method described in
Section 5.07(a), but in no event shall such amounts exceed the amounts that
would have been payable assuming such Bank had actually funded its relevant
LIBOR Rate Loan through the purchase of a deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of such LIBOR Rate Loan and having a
maturity comparable to (A) with respect to any Committed LIBOR Rate Loan, the
relevant Interest Period and (B) with respect to any CAF LIBOR Rate Loan, the
maturity set forth in the Competitive Bid applicable thereto; provided, that
each Bank may find each of its LIBOR Rate Loans in any manner it sees fit, and
the foregoing assumption shall be utilized only for the calculation of amounts
payable under this Section 4.08(a).

                  (b) The agreements in this Section 4.08 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

                  SECTION 4.09. Change in Legality. (a) Notwithstanding any
other provision of this Agreement, if any Bank shall notify the Agent that the
introduction of or any change in or in the interpretation or application of any
law or regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Bank or its LIBOR Lending Office
to perform its obligations hereunder to make LIBOR Rate Loans or to find or
maintain LIBOR Rate Loans hereunder, (i) the obligation of such Bank to make, or
to convert Committed Loans into, or to continue Committed LIBOR Rate Loans as,
LIBOR Rate Loans shall be suspended until the Agent shall notify Borrower that
the circumstances causing such suspension no longer exist; (ii) Borrower shall,
at its option, either prepay in full all Committed LIBOR Rate Loans of such Bank
then outstanding, or convert all such Loans to ABR Loans, on the respective last
days of the then current Interest Periods with respect to such Loans (or within
such earlier period as required by law), accompanied, in the case of any
prepayments, by interest accrued thereon (and, in the case of any such
conversion, the Borrower shall pay accrued interest thereon at the time of such
conversion and such converted Loans will otherwise continue to be considered as
a part of the respective Borrowings that they were a part of prior to such
conversion); (iii) Borrower shall, with respect to each CAF LIBOR Rate Loan of
such Bank, take such action as such Bank shall reasonably request; (iv) any
request by Borrower for a Borrowing comprised of Committed LIBOR Rate Loans
shall, as to such Bank, be deemed a request for an ABR Loan to be made on the
same day as the Committed LIBOR Rate Loans of the other Banks and such ABR Loan
shall be considered as part of such Borrowing; and (v) all payments and
prepayments of principal that would otherwise have been applied to repay the
LIBOR Rate Loans that would have been made by such Bank or the converted LIBOR
Rate Loans shall instead be applied to repay the ABR Loans made by such Bank in
lieu of such LIBOR Rate Loans or resulting from the conversion of such LIBOR
Rate Loans and

                                       31
<PAGE>

shall be made at the time that payments on the Committed LIBOR Rate Loans of the
other Banks are made. Each Bank agrees that it will use reasonable efforts to
designate a different Applicable Lending Office for the LIBOR Rate Loans due to
it affected by this Section 4.09, if such designation will avoid the illegality
described in this Section 4.09 so long as such designation will not be
disadvantageous to such Bank as determined by such Bank in its sole discretion
acting in good faith.

                  (b) For purposes of this Section 4.09, a notice to Borrower
(with a copy to the Agent) by any Bank pursuant to paragraph (a) above shall be
effective on the date of receipt thereof by Borrower.

                                   ARTICLE V

                        INCREASED COSTS, TAXES, PAYMENTS
                                 AND PREPAYMENTS

                  SECTION 5.01. Increased Costs; Capital Adequacy. (a) If after
the date of this Agreement the adoption of or any change in any law or
regulation or in the interpretation or application thereof or compliance by any
Bank with any request or directive (whether or not having the force of law) from
any central bank or other Governmental Authority made subsequent to the date of
this Agreement:

                           (i)   shall subject any Bank to any tax of any kind
                  whatsoever with respect to this Agreement, any Note or any
                  LIBOR Rate Loan made by it, or change the basis of taxation of
                  payments to such Bank in respect thereof (except for (A) Taxes
                  covered by Section 5.03, (B) net income taxes and franchise
                  taxes imposed on such Bank as a result of a present or former
                  connection between the jurisdiction of the government or
                  taxing authority imposing such tax and such Bank other than a
                  connection arising solely from such Bank having executed,
                  delivered or performed its obligations or received a payment
                  under, or enforced, this Agreement or the Loans and (C)
                  changes in the rate of tax on the overall net income of such
                  Bank);

                           (ii)  shall impose, modify or hold applicable any
                  reserve, special deposit, compulsory loan or similar
                  requirement against assets held by, deposits or other
                  liabilities in or for the account of, advances, loans or other
                  extensions of credit by, or any other acquisition of funds by,
                  any office of such Bank that is not otherwise included in the
                  determination of the LIBOR Rate hereunder (except for amounts
                  covered by Section 4.05 or any other Section hereof); or

                           (iii) shall impose on such Bank any other condition;

                                       32
<PAGE>

and the result of any of the foregoing is to increase the actual cost to such
Bank of making, converting into, continuing or maintaining LIBOR Rate Loans or
to reduce any amount receivable hereunder in respect thereof, then, in any such
case, Borrower shall promptly pay such Bank, upon its demand in the manner set
forth in Section 5.07(b), any additional amounts, computed by such Bank in
accordance with Section 5.07(a), necessary to compensate such Bank for such
actual increased cost or reduced amount receivable that is attributable to Loans
or Commitments (to the extent that such Bank has not already been compensated or
reimbursed for such amounts pursuant to any other provision of this Agreement).
If any Bank becomes entitled to claim any additional amounts pursuant to this
Section 5.0 1 (a) from Borrower and elects to do so, it shall promptly notify
Borrower, through the Agent, of the event by reason of which it has become so
entitled in the manner set forth in Section 5.07(b).

                  (b) If any Bank determines in good faith that the introduction
of or any change in or in the interpretation or application of any law or
regulation regarding capital adequacy after the date of this Agreement or
compliance by such Bank or any corporation controlling such Bank with any law or
regulation or any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law) made or issued
after the date of this Agreement does or shall have the effect, as a result of
such Bank's obligations under this Agreement, of reducing the rate of return on
such Bank's or such corporation's capital to a level below that which such Bank
or such corporation could have achieved but for such change or compliance
(taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy), Borrower shall pay to the Agent for the account of
such Bank, from time to time as specified by such Bank in the manner set forth
in Section 5.07(b), additional amounts, computed by such Bank in accordance with
Section 5.07(a), sufficient to compensate such Bank or such corporation in the
light of such circumstances, to the extent that such Bank reasonably determines
such reduction in rate of return is allocable to the existence of such Banks
obligations hereunder.

                  (c) The agreements contained in this Section 5.01 shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.

                  SECTION 5.02. Payments and Computations. (a) All Committed
Loans shall be due and payable on March 31, 2003 or such earlier date as they
may become due pursuant hereto. Borrower shall make each payment (including each
prepayment) hereunder and under the Loans, whether on account of principal,
interest, fees or otherwise, without setoff, counterclaim or other deduction,
not later than 12:00 Noon (New York City time) on the day when due, in Dollars
to the Agent at its address referred to in Section 11.02 in immediately
available funds. The Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal, interest, usage fees under Section
4.02(c) or Facility Fees (to the extent received by the Agent) ratably to the
Banks for the account of their respective Applicable Lending Offices, and like
funds relating to the payment of any other amount payable to any Bank (to the
extent received by the Agent) to such

                                       33
<PAGE>

Bank for the account of its Applicable Lending Office, in each case to be
applied in accordance with the terms of this Agreement.

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

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

                  (d) The Borrower shall repay to the Agent for the account of
the Swing Line Bank the outstanding principal amount of each Swing Loan made by
it on the maturity date specified in the applicable Notice of Swing Loan (which
maturity shall be no later than the earlier of the tenth day after the requested
date of such Swing Loan and the Termination Date).

                  SECTION 5.03. Taxes. (a) Except with respect to withholdings
of United States taxes as provided in Section 5.03(d), any and all payments by
Borrower hereunder or under the Loans shall be made, in accordance with Section
5.02, free and clear of and without deduction or withholding for or on account
of any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding, in the case
of each Bank and the Agent, net income taxes and franchise taxes imposed on it
as a result of a present or former connection between the jurisdiction of the
government or taxing authority imposing such tax and the Agent or such Bank, as
the case may be, other than a connection arising solely from the Agent or such
Bank having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or the Loans (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). Except with respect to withholdings of
United States taxes as provided in Section 5.03(d), if Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Loans to any Bank or the Agent, (i) the sum payable shall
be increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
5.03) such Bank or the Agent (as the case may be) receives an amount equal to
the sum

                                       34
<PAGE>

it would have received had no such deductions been made; (ii) Borrower shall
make such deductions; and (iii) Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law. If requested by any Bank, Borrower shall confirm that all applicable Taxes,
if any, imposed on it by virtue of the transactions under this Agreement have
been properly and legally paid by it to the appropriate taxing authorities by
sending either (A) official tax receipts or notarized copies of such receipts to
such Bank within thirty (30) days after payment of any applicable tax or (B) a
certificate executed by a Responsible Officer of Borrower confirming that such
Taxes have been paid, together with evidence of such payment.

                  (b) In addition, Borrower agrees to pay, in the manner set
forth in Section 5.07(b), any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies that arise from
any payment made hereunder or under the Loans or from the execution, delivery or
registration of, or otherwise with respect to, this Agreement, any Note or the
Loans and for which such Bank or the Agent (as the case may be) has not been
otherwise reimbursed by Borrower under this Agreement (hereinafter referred to
as "Other Taxes").

                  (c) Borrower will indemnify each Bank and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
5.03) paid by such Bank or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, including, without limitation or duplication, any incremental taxes,
interest or penalties that may become payable by the Agent or any Bank as a
result of any failure by Borrower to pay any Taxes or Other Taxes when due to
the appropriate taxing authority or to remit to any Bank the receipts or other
evidence of payment of Taxes or Other Taxes.

                  (d) Each Bank and each CAF Loan Assignee registered in the
Register that is organized under the laws of any jurisdiction other than the
United States of America or a state thereof agrees that it will deliver to
Borrower and the Agent (i) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 or successor applicable form, as the case may
be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable
form. Each such Bank and each such CAF Loan Assignee also agrees to deliver to
Borrower and the Agent two further copies of the said Form 1001 or 4224 and Form
W-8 or W-9, or successor applicable forms or other manner of certification, as
the case may be, on or before the date that any such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form previously delivered by it to Borrower, and such extensions or
renewals thereof as may reasonably be requested by Borrower or the Agent, unless
in any such case an event (including, without limitation, any change in treaty,
law or regulation) has occurred prior to the date on which any such delivery
would otherwise be required that renders all such forms inapplicable or that
would prevent such Bank or such CAF Loan Assignee from duly completing and
delivering any such form with respect to it and such Bank or such CAF Loan
Assignee so advises Borrower and the Agent. Each such Bank and each such CAF
Loan Assignee shall certify (A) in the case of a Form 1001 or 4224,

                                       35
<PAGE>

that it is entitled to receive payments under this Agreement without deduction
or withholding of any United States federal income taxes and (B) in the case of
a Form W-8 or W-9, that it is entitled to an exemption from United States backup
withholding tax. In the event that any such Bank or CAF Loan Assignee fails to
deliver any forms required under this Section 5.03(d), Borrower's obligation to
pay additional amounts under this Section 5.03 to such Bank or CAF Loan Assignee
shall be reduced to the amount that it would have been obligated to pay had such
forms been provided.

                  (e) The agreements in this Section 5.03 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder. Nothing contained in this Section 5.03 shall require Borrower
to pay any amount to any Bank or the Agent in addition to that for which it has
already reimbursed any Bank or the Agent under any other provision of this
Agreement.

                  SECTION 5.04. Sharing of Payments, Etc. If any Bank (a
"benefited Bank") shall at any time receive any payment (other than pursuant to
Section 4.05, 4.08, 5.01 or 5.03) of all or part of its Committed Loans, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by setoff, pursuant to events or proceedings of
the nature referred to in Section 9.01 (g) or 9.01(h), or otherwise), in a
greater proportion than any such payment to or collateral received by any other
Bank, if any, in respect of such other Bank's Committed Loans, or interest
thereon, such benefited Bank shall purchase for cash from the other Banks a
participating interest in such portion of each such other Bank's Committed Loans
or shall provide such other Banks with the benefits of any such collateral, or
the proceeds thereof, as shall be necessary to cause such benefited Bank to
share the excess payment or benefits of such collateral or proceeds ratably with
each of the Banks; provided, however, that if all or any portion of such excess
payment or benefits is thereafter recovered from such benefited Bank, such
purchase shall be rescinded, and the purchase price and benefits returned, to
the extent of such recovery, but without interest. Borrower agrees that any Bank
so purchasing a participation from another Bank pursuant to this Section 5.04 or
Section 2.04 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of setoff) with respect to such
participation as fully as if such Bank were the direct creditor of Borrower in
the amount of such participation.

                  SECTION 5.05. Voluntary Prepayments. Subject to Section 4.08,
Borrower may, upon notice delivered to the Agent not later than 11:00 A.M. (New
York City time) three (3) Business Days (or, in the case of a prepayment of ABR
Loans or Swing Loans, one (1) Business Day) prior to the date of prepayment
stating the aggregate principal amount of the prepayment and the Committed Loans
or Swing Loans, as the case may be, to be prepaid, prepay the outstanding
principal amounts of such Committed Loans comprising part of the same Committed
Borrowing in whole or ratably in part or Swing Loans in whole or in part, as the
case may be, together with accrued interest to the date of such prepayment on
the principal amount prepaid; provided, however, that all such prepayments shall
be made without premium or penalty thereon; and provided further that losses
incurred by any Bank under Section 4.08 shall be payable with respect to each
such

                                       36
<PAGE>

prepayment in the manner set forth in Section 4.08. Such notice shall be
irrevocable, and the payment amount specified in such notice shall be due and
payable on the prepayment date described in such notice, together with accrued
and unpaid interest on the amount prepaid. Partial prepayments with respect to
any Tranche of Committed LIBOR Rate Loans shall be in an aggregate principal
amount equal to the lesser of (a) $10,000,000 or an integral multiple of
$1,000,000 in excess thereof or (b) the aggregate principal amount of such
Tranche of Committed LIBOR Rate Loans then outstanding, as the case may be;
provided, that, no partial prepayment of any Tranche of Committed LIBOR Rate
Loans may be made if, after giving effect thereto, Section 2.03 would be
contravened. Partial prepayments with respect to the ABR Loans and Swing Loans
shall be made in an aggregate principal amount equal to the lesser of (i)
$5,000,000 or an integral multiple of $1,000,000 in excess thereof or (ii) the
aggregate principal amount of ABR Loans or Swing Loans then outstanding, as the
case may be; provided, that, no partial prepayment of ABR Loans may be made if,
after giving effect thereto, any Committed Borrowing would have an outstanding
principal amount less than $5,000,000.

                  SECTION 5.06. Mitigation of Losses and Costs. Any Bank
claiming reimbursement from Borrower under Sections 4.05, 4.08, 5.01 and 5.03
hereof shall use reasonable efforts (including, without limitation, if requested
by Borrower, reasonable efforts to designate a different Applicable Lending
Office of such Bank) to mitigate the amount of such losses, costs, expenses and
liabilities, if such efforts can be made and such mitigation can be accomplished
without such Bank suffering (a) any economic disadvantage for which such Bank
does not receive full indemnity from Borrower under this Agreement or (b) any
legal or regulatory disadvantage.

                  SECTION 5.07. Determination and Notice of Additional Costs and
Other Amounts. (a) In determining the amount of any claim for reimbursement or
compensation under Sections 4.05, 4.08 and 5.01, each Bank may use any
reasonable averaging, attribution and allocation methods consistent with such
methods customarily employed by such Bank in similar situations.

                  (b) Each Bank or, with respect to compensation claimed by the
Agent pursuant to Section 5.03, the Agent, as the case may be, will (i) use best
efforts to notify Borrower through the Agent (in the case of each Bank) of any
event occurring after the date of this Agreement promptly after the occurrence
thereof and (ii) notify Borrower through the Agent (in the case of each Bank)
promptly after such Bank or the Agent, as the case may be, becomes aware of any
event occurring after the date of this Agreement, in either case if such event
(for purposes of this Section 5.07(b), a "Triggering Event") will entitle such
Bank or the Agent, as the case may be, to compensation pursuant to Section 4.05,
4.08, 5.01 or 5.03, as the case may be, and such Bank or the Agent, as the case
may be, elects to request compensation pursuant to Section 4.05, 4.08, 5.01 or
5.03, as the case may be, in respect of such event. Each such notification of a
Triggering Event shall be accompanied by a certificate of such Bank or the
Agent, as the case may be, (1) setting forth in reasonable detail such amount or
amounts as shall be necessary to compensate such Bank or the Agent, as the case
may be, as specified in Section 4.05, 4.08, 5.01 or 5.03, as the case may be,
and

                                       37
<PAGE>

(2) in the case of compensation claimed pursuant to Section 5.01 (a), stating
that such Bank or the Agent is generally requesting similar compensation (to the
extent it is legally entitled to do so) from its similarly situated customers,
which certificate shall be conclusive absent manifest error. Borrower shall pay
to such Bank or to the Agent for its own account, as the case may be, the amount
shown as due on any such certificate within ten (10) Business Days after its
receipt of the same, but in no event will the Borrower be required to pay any
portion of such compensation incurred more than 180 days prior to such
notification, unless such Bank or the Agent, as the case may be, neither had
actual knowledge of, nor should have known of, the circumstances entitling it to
such compensation.

                                   ARTICLE VI

                              CONDITIONS OF LENDING

                  SECTION 6.01. Conditions Precedent to Initial Loans. The
obligation of each Bank to make its initial Loan to Borrower is subject to the
conditions precedent that (a) the Agent shall have received on or before the day
of the initial Borrowing the documents, instruments and opinions set forth in
subsections (i) through (vi) below, in form and substance satisfactory to the
Agent and the Banks and in sufficient copies for each Bank and (b) the
conditions set forth in subsections (vii) through (ix) below shall have been
satisfied:

                           (i)   This Agreement, duly executed by Borrower and
                  each Bank.

                           (ii)  A certificate dated as of the Effective Date of
                  the Assistant Secretary of Borrower certifying (A) the names
                  and true signatures of the officers of Borrower authorized to
                  sign each Loan Document to which Borrower is a party and the
                  notices and other documents to be delivered by Borrower
                  pursuant to any such Loan Document; (B) the Bylaws and
                  Certificate of Incorporation of Borrower as in effect on the
                  date of such certification; (C) the resolutions of the Board
                  of Directors of Borrower approving and authorizing the
                  execution, delivery and performance by Borrower of this
                  Agreement and authorizing the borrowings and other
                  transactions contemplated hereunder; and (D) that attached
                  thereto is a true and correct copy of the Indenture;

                           (iii) A certificate dated as of the Effective Date of
                  a Responsible Officer of Borrower certifying that the
                  representations and warranties of the Borrower contained in
                  Section 7.01 are true and correct in all material respects and
                  no Default or Event of Default exists and certifying the
                  rating on the Effective Date of the senior unsecured long-term
                  debt of Borrower by S&P (which shall be no lower than BBB) and
                  by Moody's (which shall be no lower than Baal).

                                       38
<PAGE>

                           (iv)   Certificates dated on or about the Effective
                  Date of the Secretary of State of the State of Delaware as to
                  the existence and good standing of Borrower.

                           (v)    A favorable opinion of Liddell, Sapp, Zivley,
                  Hill & LaBoon, L.L.P., counsel for Borrower, substantially in
                  the form of Exhibit 6.01(v)(i) hereto, and a favorable opinion
                  of in-house counsel of the Borrower, substantially in the form
                  of Exhibit 6.01(v)(ii) hereto.

                           (vi)   Such other customary supporting documents as
                  the Agent or the Banks, through the Agent, may reasonably
                  request.

                           (vii)  All governmental and third-party approvals
                  necessary in connection with the execution, delivery and
                  performance by Borrower of this Agreement shall have been
                  obtained and be in full force and effect.

                           (viii) Except as disclosed on Schedule 6.01(viii)
                  attached hereto, Borrower shall, as of the Effective Date,
                  own, directly or indirectly through one or more of its
                  Subsidiaries, all of the outstanding capital stock of each
                  Significant Subsidiary of Borrower, free and clear of any
                  Liens.

                           (ix)   The Credit Agreement dated as of December 11,
                  1995 among the Borrower, Citibank, as agent, and various banks
                  providing a $400,000,000 revolving credit facility shall have
                  been terminated and all principal, interest and other amounts
                  owed in connection therewith shall have been paid in full.
                  Each Bank that is a "Bank" under such Credit Agreement hereby
                  waives the requirement of notice of termination set forth in
                  Section 2.04 of such Credit Agreement.

                  SECTION 6.02. Conditions Precedent to Each Borrowing. The
obligation of each Bank to make a Loan to Borrower (including, without
limitation, the initial Loan) shall be subject to the further conditions
precedent that (a) on or prior to the date of such Loan, the Agent shall have
received from Borrower a Notice of Borrowing, Notice of Swing Loan or a
Competitive Bid Confirmation, as the case may be, in accordance with the terms
of this Agreement and (b) on the date of such Loan, the following statements
shall be true and correct (and each of the giving of any applicable Notice of
Borrowing, Notice of Swing Loan or Competitive Bid Confirmation, as the case may
be, and the acceptance by Borrower of the proceeds of such Loan, shall
constitute a representation and warranty by Borrower that on the date of such
Loan such statements are true and correct):

                           (i)   The representations and warranties of Borrower
                  contained in Section 7.01 of this Agreement are true and
                  correct in all material respects on and as of the date of such
                  Loan (except for (1) those representations or warranties or
                  parts thereof that, by their terms, expressly relate solely to
                  a specific date, in which case such representations and
                  warranties

                                       39
<PAGE>

                  shall be true and correct in all material respects as of such
                  specific date; and (2) if such Loan is not a part of the
                  initial Borrowing hereunder and if at the time of such Loan
                  (I) all senior unsecured long-term debt of the Borrower is
                  rated BBB or higher by S&P or is rated Baa2 or higher by
                  Moody's, (II) the Borrower is not Unrated and (III) either (x)
                  all senior unsecured long-term debt of the Borrower is rated
                  BBB+ or higher by S&P and is rated Baal or higher by Moody's
                  or (y) the Borrower is not on credit watch with negative
                  implications with S&P or Moody's (and no similar comment has
                  been made by S&P or Moody's regarding a potential downgrade of
                  any of the Borrower's debt ratings), the representation and
                  warranty set forth in clause (i) of Section 7.01(j)), before
                  and after giving effect to such Loan and to any other Loans to
                  be made on such date, and to the application of the proceeds
                  from such Loan and such other Loans, as though made on and as
                  of such date;

                           (ii)  Borrower shall be in compliance with and shall
                  have performed all agreements and covenants made by it under
                  this Agreement; and

                           (iii) No Default or Event of Default shall have
                  occurred and be continuing or would result from such Loan or
                  any other Loan to be made on such date.

                                  ARTICLE VII

                         REPRESENTATIONS AND WARRANTIES

                  SECTION 7.01. Representations and Warranties of Borrower.
Borrower represents and warrants as follows:

                  (a) Corporate Status of Borrower. Borrower (i) is validly
organized and existing as a corporation and in good standing under the laws of
the State of Delaware; (ii) is duly authorized or qualified to do business in
and is in good standing in each other jurisdiction in which the conduct of its
business or the ownership or leasing of its Property requires it to be so
authorized or qualified to do business, except where the failure to be so duly
authorized or qualified or in good standing, individually or in the aggregate,
would not have a Material Adverse Effect on Borrower; and (iii) has the
corporate power and authority to conduct its business, as presently conducted.

                  (b) Corporate Status of Subsidiaries of Borrower. Each
Subsidiary of Borrower (i) is validly organized and existing as a corporation
and in good standing under the laws of the jurisdiction of its incorporation and
is duly authorized or qualified to do business in and is in good standing in
each other jurisdiction in which the conduct of its business or the ownership or
leasing of its Property requires it to be so authorized or qualified to do
business, except where the failure to be so validly organized and existing or
duly authorized or qualified or in good standing, individually or in the
aggregate, would not have a Material Adverse Effect and (ii) has the corporate
power and

                                       40
<PAGE>

authority to conduct its business, as presently conducted, except where the
failure to have such corporate power and authority, individually or in the
aggregate, would not have a Material Adverse Effect.

                  (c) Corporate Powers. Borrower has the corporate power to
execute, deliver and perform and comply with its obligations under this
Agreement, any Notes and the other Loan Documents to which it is a party. This
Agreement has been, and each other Loan Document to which Borrower is a party
will be, duly executed and delivered on behalf of Borrower.

                  (d) Authorization; No Conflict, Etc. The borrowings by
Borrower contemplated by this Agreement, the execution and delivery by Borrower
of this Agreement and the other Loan Documents to which it is a party and the
performance by Borrower of its obligations hereunder and thereunder have been
duly authorized by all requisite corporate action on the part of Borrower and do
not and will not (i) violate any law, any order to which Borrower or any
Subsidiary of Borrower is subject of any court or other Governmental Authority,
or the certificate of incorporation or bylaws (each as amended from time to
time) of Borrower or any Subsidiary of Borrower; (ii) violate, conflict with,
result in a breach of or constitute (with due notice or lapse of time or both,
or any other condition) a default under, any indenture, loan agreement or other
agreement to which Borrower or any Subsidiary of Borrower is a party or by which
Borrower or any Subsidiary of Borrower, or any of their respective Property, is
bound (except for such violations, conflicts, breaches or defaults that,
individually or in the aggregate, do not have or would not have a Material
Adverse Effect); or (iii) result in, or require, the creation or imposition of
any Lien not permitted hereby upon any of the Properties of Borrower or any
Significant Subsidiary.

                  (e) Approvals and Consents. No authorization or approval or
action by, and no notice to or filing with, any Governmental Authority or other
third party is required for the due execution, delivery and performance by
Borrower of this Agreement and the other Loan Documents to which it is a party.

                  (f) Obligations Binding. This Agreement and the other Loan
Documents to which Borrower is a party are the legal, valid and binding
obligations of Borrower enforceable against Borrower in accordance with their
respective terms (assuming due and valid authorization, execution and delivery
of this Agreement by any party other than Borrower), except as such
enforceability may be (i) limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) subject to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

                  (g) Use of Proceeds; Margin Stop. Neither the Borrower nor any
Subsidiary of the Borrower is engaged in the business of extending credit for
the purpose of purchasing or carrying Margin Stock. Following the application of
the proceeds of each Loan, not more than 25% of the

                                       41
<PAGE>

value of the assets of the Borrower will consist of Margin Stock and not more
than 25% of the value of the assets of the Borrower and its Subsidiaries will
consist of Margin Stock.

                  (h) Title to Properties. Each of Borrower and any Subsidiary
of Borrower has good title to the Properties reflected in the financial
statements referred to in Section 7.01 (m) and in any financial statements
delivered pursuant to Section 8.01(a), except for such Properties that have been
disposed of subsequent to the dates of the balance sheets included in such
financial statements and that are no longer used or useful in the conduct of the
business of Borrower or any Subsidiary of Borrower or that have been disposed of
in the ordinary course of their respective business. As of the date hereof, the
Borrower is the record and beneficial owner of all of the outstanding capital
stock of MRT and NGT, and there are no outstanding options, warrants or other
rights to acquire any capital stock of MRT or NGT.

                  (i) Investment Company Act; PUHC Act of 1935. Neither Borrower
nor any Subsidiary of Borrower is (i) an "investment company" as defined in, or
otherwise subject to regulation under, the Investment Company Act of 1940, as
amended, or (ii) subject to regulation under the Public Utility Holding Company
Act of 1935, as amended, except Section 9(a)(2) thereof relating to the
acquisition of securities of other public utility companies or public utility
holding companies.

                  (j) Material Adverse Change. Since the MAE Representation
Date, there has been no change (i) in the consolidated financial position of the
Borrower or any Consolidated Subsidiary that would have a Material Adverse
Effect or (ii) in the results of operations, business or prospects of Borrower
or any Consolidated Subsidiary that would have a Material Adverse Effect.

                  (k) Litigation. There is no litigation, action, suit or other
legal or governmental proceeding pending or, to the best knowledge of Borrower,
threatened, at law or in equity, or before or by any arbitrator or Governmental
Authority, (i) relating to the transactions under this Agreement or (ii) in
which there is a reasonable possibility of an adverse decision that is likely to
have a Material Adverse Effect.

                  (l) ERISA. Neither Borrower nor any Significant Subsidiary has
incurred any material liability or deficiency arising out of or in connection
with (i) any Reportable Event or "accumulated funding deficiency" (within the
meaning of Section 412 of the Code or Section 302 of ERISA) with respect to any
Plan that has occurred during the five-year period immediately preceding the
date on which this representation is made or deemed made, (ii) any failure of a
Plan to comply with the applicable provisions of ERISA and the Code, (iii) any
termination of a Single Employer Plan, (iv) any complete or partial withdrawal
by Borrower or any Commonly Controlled Entity from any Multiemployer Plan or (v)
any Lien in favor of the PBGC or any Plan that has arisen during the five-year
period referred to in clause (i) above. In addition, no Multiemployer Plan is in
Reorganization or is Insolvent, where such Reorganization or Insolvency,
individually or when

                                       42
<PAGE>

aggregated with the events described in the first sentence of this Section
7.01(l), is likely to result in a material liability or deficiency of Borrower
or any Significant Subsidiary. As used in this Section 7.01(l), any liability or
deficiency shall be deemed not to be "material" so long as the sum of all
liabilities and deficiencies referred to in this Section 7.01(l) at any one time
outstanding, individually and in the aggregate, is less than $25,000,000.

                  (m) Financial Statements. The audited financial statements of
Borrower as of and for the year ended December 31, 1996 and the unaudited
financial statements of Borrower as of and for the nine months ended September
30, 1997, copies of which have been delivered to the Banks, present fairly the
financial condition and results of operations of Borrower as of such dates and
for the year and nine months, respectively, then ended, in conformity with GAAP
and, except as otherwise stated therein, consistently applied.

                  (n) Accuracy of Information. None of the documents or written
information (including financial statements, but excluding financial projections
and forecasts) provided by Borrower to the Banks in connection with or pursuant
to this Agreement contains as of the date thereof or will contain as of the date
thereof any untrue statement of a material fact or omits or will omit to state
as of the date thereof a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The financial projections and forecasts furnished to the Banks by Borrower with
respect to the transactions contemplated under this Agreement were prepared in
good faith and on the basis of information and assumptions that Borrower
believed to be reasonable as of the date of such information.

                  (o) No Violation. Borrower is not in violation of any order,
writ, injunction or decree of any court or any order, regulation or demand of
any Governmental Authority that, individually or in the aggregate, reasonably
could be expected to have a Material Adverse Effect.

                                  ARTICLE VIII

                       AFFIRMATIVE AND NEGATIVE COVENANTS

                  SECTION 8.01. Affirmative Covenants of Borrower. Borrower
covenants that, so long as any Loan remains unpaid or any other amount is owing
by Borrower hereunder or under any other Loan Documents to which it is a party
or any Bank shall have any Commitment or Swing Line Commitment outstanding to
Borrower under this Agreement, Borrower will:

                  (a) Delivery of Financial Statements. Deliver to the Agent for
distribution to the Banks sufficient copies for each of the Banks of the
following:

                                       43
<PAGE>

                           (i)   as soon as practicable and in any event within
                  100 days after the end of each fiscal year of Borrower, an
                  audited consolidated balance sheet of Borrower and the
                  Consolidated Subsidiaries of Borrower as of the end of such
                  fiscal year and the related audited statements of consolidated
                  income, retained earnings and cash flows for such year
                  prepared in conformity with GAAP consistently applied, setting
                  forth in comparative form the figures for the previous fiscal
                  year, together with a report thereon by independent certified
                  public accountants of nationally recognized standing selected
                  by Borrower (which requirement may be satisfied by delivering
                  Borrower's annual report on Form 10-K with respect to such
                  fiscal year as filed with the SEC);

                           (ii)  as soon as practicable and in any event within
                  55 days after the end of each of the first three quarters of
                  each fiscal year of Borrower, unaudited consolidated financial
                  statements of Borrower and the Consolidated Subsidiaries of
                  Borrower consisting of at least a consolidated balance sheet
                  as at the close of such quarter and statements of consolidated
                  income, retained earnings and cash flows for such quarter and
                  for the period from the beginning of such fiscal year to the
                  close of such quarter (which requirement may be satisfied by
                  delivering Borrower's quarterly report on Form 10-Q with
                  respect to such fiscal quarter as filed with the SEC) and
                  accompanied by a certificate of a Responsible Officer of
                  Borrower to the effect that such unaudited financial
                  statements present fairly the consolidated financial condition
                  and results of operations of Borrower and the Consolidated
                  Subsidiaries of Borrower as of such date and for such quarter
                  and for such period and have been prepared in conformity with
                  GAAP in a manner consistent with the financial statements
                  referred to in paragraph (a)(i) above;

                           (iii) with each set of statements to be delivered
                  above, a certificate in a form satisfactory to the Agent,
                  signed by a Responsible Officer of Borrower confirming
                  compliance with Section 8.02(a) and setting out in reasonable
                  detail the calculations necessary to demonstrate such
                  compliance as at the date of the most recent balance sheet
                  included in such financial statements and stating that no
                  Default or Event of Default has occurred and is continuing or,
                  if there is any Default or Event of Default, describing it and
                  the steps, if any, being taken to cure it; and

                           (iv)  (A) within 10 days of the filing thereof,
                  copies of all periodic reports (other than (x) reports on Form
                  11-K or any successor form and (y) current reports on Form 8-K
                  that contain no information other than exhibits filed
                  therewith) under the Exchange Act (in each case other than
                  exhibits thereto and documents incorporated by reference
                  therein)) filed by Borrower with the SEC; (B) promptly, and in
                  any event within seven (7) days after a Responsible Officer of
                  Borrower becomes aware of the occurrence thereof, written
                  notice of (w) any change in, or

                                       44
<PAGE>

                  withdrawal or termination of, the rating of any senior
                  unsecured long-term debt of the Borrower by S&P or Moody's or
                  either S&P or Moody's putting the Borrower on credit watch
                  with negative implications (or making any similar comment
                  regarding a potential downgrade of any of the Borrower's debt
                  ratings), (x) any Event of Default or any Default, (y) the
                  institution of any litigation, action, suit or other legal or
                  governmental proceeding involving Borrower or any Subsidiary
                  of Borrower as to which there is a reasonable possibility of
                  an adverse decision that is likely to have a Material Adverse
                  Effect or any final adverse determination in any litigation,
                  action, suit or other legal or governmental proceeding
                  involving Borrower or any Subsidiary of Borrower that would
                  have a Material Adverse Effect, or (z) the incurrence by
                  Borrower or any Significant Subsidiary of a material liability
                  or deficiency, or the existence of a reasonable possibility of
                  incurring a material liability or deficiency, arising out of
                  or in connection with (1) any Reportable Event with respect to
                  any Plan, (2) the failure to make any required contribution to
                  a Plan, (3) the creation of any Lien in favor of the PBGC or a
                  Plan, (4) any withdrawal from, or the termination,
                  Reorganization or Insolvency of, any Multiemployer Plan or (5)
                  the institution of proceedings or the taking of any other
                  action by the PBGC or Borrower or any Commonly Controlled
                  Entity or any Multiemployer Plan with respect to the
                  withdrawal from, or the termination, Reorganization or
                  Insolvency of, any Plan; provided, that as used in this clause
                  (z), any liability or deficiency shall be deemed not to be
                  "material" so long as the sum of all liabilities and
                  deficiencies referred to in this clause (z) at any one time
                  outstanding, individually and in the aggregate, is less than
                  $20,000,000; and (C) such other information relating to
                  Borrower or its business, properties, condition, Subsidiaries
                  or operations as the Agent (or any Bank through the Agent) may
                  reasonably request.

                  (b) Use of Proceeds. Use the proceeds of each Loan in
accordance with Section 8.02(d) and only for general corporate purposes of
Borrower, including, without limitation, support for commercial paper issued by
Borrower and advances and loans to Affiliates of Borrower.

                  (c) Existences Laws. And will cause each Subsidiary of
Borrower to, do or cause to be done all things necessary (i) to preserve, renew
and keep in fall force and effect its corporate existence and all rights,
licenses, permits and franchises and (ii) to comply with all laws and
regulations applicable to it, in each case where the failure to do so,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect; provided that the Borrower agrees to maintain its
existence at all times irrespective of whether failure to do so could reasonably
be expected to have a Material Adverse Effect.

                  (d) Maintenance of Business Line. Maintain Borrower's
fundamental business of being a local gas distribution company and an owner and
operator of natural gas pipeline systems.

                                       45
<PAGE>

                  (e) Access. And will cause each Significant Subsidiary to, at
any reasonable time and from time to time, permit up to six representatives of
the Banks designated by the Majority Banks, or representatives of the Agent, on
not less than five Business Days' notice, to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
Borrower and each Significant Subsidiary and to discuss the general business
affairs of Borrower and each Significant Subsidiary with their respective
officers and independent certified public accountants; subject, however, in all
cases to the imposition of such conditions as Borrower and each Significant
Subsidiary shall deem necessary based on reasonable considerations of safety and
security. Notwithstanding the foregoing, none of the conditions precedent to the
exercise of the right of access described in the preceding sentence that relate
to notice requirements or limitations on the Persons permitted to exercise such
right shall apply at any time when a Default or an Event of Default shall have
occurred and be continuing.

                  (f) Insurance. And will cause each Significant Subsidiary to,
maintain insurance with responsible and reputable insurance companies or
associations, or to the extent that Borrower or such Significant Subsidiary
deems it prudent to do so, through its own program of self-insurance, in such
amounts and covering such risks as is usually carried by companies engaged in
similar businesses, of comparable size and financial strength and with
comparable risks.

                  (g) Payment of Taxes, Etc. And will cause each Significant
Subsidiary to, pay and discharge, before the same shall become delinquent, all
taxes, assessments, charges, levies and other liabilities, where the failure to
so pay and discharge, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, except so long as the same shall be
contested diligently in good faith.

                  (h) Books and Records. And will cause each Significant
Subsidiary to, maintain adequate books and records in accordance with sound
business practices and GAAP.

                  SECTION 8.02. Negative Covenants of Borrower. Borrower
covenants that, so long as any Loan remains unpaid or any other amount is owing
to Borrower hereunder or under any other Loan Document to which it is a party or
any Bank shall have any Commitment or Swing Line Commitment outstanding to
Borrower under this Agreement, Borrower will not:

                  (a) Financial Ratio. Permit the ratio of Consolidated
Indebtedness for Borrowed Money to Consolidated Capitalization to exceed .55 to
1.0.

                  (b) Restrictions on Liens. And will not permit any Restricted
Subsidiary to, pledge, mortgage or hypothecate, or permit to exist, except in
favor of Borrower or any Restricted Subsidiary, any Lien upon, any Principal
Property at any time owned by Borrower or a Restricted Subsidiary, to secure any
Indebtedness; provided, however, that this restriction shall not apply to or
prevent the creation or existence of any Permitted Lien.

                                       46
<PAGE>

                  (c) Consolidation, Merger or Disposal of Assets. And will not
permit any Significant Subsidiary to, (i) consolidate with, or merge into or
amalgamate with or into, any other Person; (ii) liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution); or (iii) convey, sell,
transfer, lease or otherwise dispose of all or substantially all of its
Properties to any Person; provided, however, that nothing contained in this
Section 8.02(c) shall prohibit (A) a merger in which Borrower is the surviving
entity thereof; (B) mergers involving Significant Subsidiaries in which
Borrower or, if the Borrower is not a party to such merger, a Wholly-Owned
Significant Subsidiary is the surviving entity; (C) the liquidation, winding up
or dissolution of a Significant Subsidiary if all of the Properties of such
Significant Subsidiary are conveyed, transferred or distributed to Borrower or a
Wholly-Owned Significant Subsidiary; (D) the conveyance, sale, transfer, lease
or other disposal of all or substantially all (or any lesser portion) of the
Properties of any Significant Subsidiary to Borrower or a Wholly-Owned
Significant Subsidiary; or (E) the conveyance, sale, transfer, lease or other
disposal of all or substantially all (or any lesser portion) of the Properties
of any Significant Subsidiary to any Subsidiary of Borrower or Affiliate of
Borrower if, in each such case, such Subsidiary or Affiliate is owned 50% or
more by Borrower and if, in each such case, either (1) both (x) the aggregate
book value (determined in accordance with GAAP) of all properties conveyed,
sold, transferred, leased or otherwise disposed of pursuant to this clause (E)
does not exceed $500,000,000 and (y) the aggregate equity value (being aggregate
book value determined in accordance with GAAP minus all related liabilities
transferred) of all properties conveyed, sold, transferred, leased or otherwise
disposed of pursuant to this clause (E) does not exceed $200,000,000, or (2) at
the time of such conveyance, sale, transfer, lease or other disposition, both
(x) the senior unsecured long-term debt of the Borrower is rated BBB or higher
by S&P and Baa2 or higher by Moody's and (y) the Borrower has provided written
evidence to the Agent from S&P and Moody's that such conveyance, sale, transfer,
lease or other disposal will not result in a reduction of the Borrower's senior
long-term unsecured debt ratings by S&P or Moody's or in the Borrower being put
on credit watch with negative implications or similar status; provided that, in
each case covered by this Section 8.02(c), immediately before and after giving
effect to any such merger, dissolution or liquidation, or conveyance, sale,
transfer, lease or other disposition, no Event of Default or Default shall have
occurred and be continuing.

                  (d) Use of Proceeds; Regulation U. Use of the proceeds of any
Loan (i) to purchase or carry, within the meaning of Regulation U, any Margin
Stock, (ii) to participate in any tender offer for the securities of any Person,
unless such tender offer has been approved by the board of directors, general
partners or other governing body of such Person, (iii) for any purpose that
would violate or result in a violation of any law or regulation or (iv) for any
purpose other than general corporate purposes of the Borrower as contemplated by
Section 8.01(b). Borrower will not, and will not permit any of its Subsidiaries
to engage principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying, within the meaning
of Regulation U, any Margin Stock. Borrower will not use the proceeds of any
Swing Loan to fund the payment of principal of any other Swing Loan.

                                       47
<PAGE>

                  (e) Subsidiary Debt. Permit any Significant Subsidiary to be a
party to, guarantee, assume, create, incur, issue or otherwise be liable in any
manner in connection with or suffer to exist, any Indebtedness or preferred
stock other than (i) Indebtedness and preferred stock which does not exceed at
any time outstanding an aggregate amount for all Significant Subsidiaries of
$100,000,000 (for purposes of this clause (i), the amount of Indebtedness will
be the outstanding principal amount thereof, and the amount of any preferred
stock will be the greater of the par value thereof or the consideration received
in the issuance thereof), (ii) assumed Indebtedness and preferred stock of any
Person that becomes a Subsidiary after the date hereof, if such Indebtedness or
preferred stock is in existence at the time such Person becomes a Subsidiary and
was not created in contemplation thereof and no other Subsidiary is liable
therefor, (iii) Indebtedness owed to and held by, and preferred stock held by,
the Borrower or any Wholly-Owned Subsidiary of the Borrower, (iv) Indebtedness
that is non-recourse to all Significant Subsidiaries, (v) borrowings by
Significant Subsidiaries from the Money Fund, and (vi) Indebtedness existing on
the date hereof, any refinancing thereof in an amount not greater than the
outstanding amount thereof at the time of such refinancing and any preferred
stock existing on the date hereof.

                  (f) Restrictions on Dividends, Intercompany Loans, or
Investments. And will not permit any Significant Subsidiary to, create or
otherwise cause or permit to exist or become effective any explicit and direct
restriction (other than this Agreement) on the ability of any Significant
Subsidiary to (i) pay dividends or make any other distributions on its capital
stock or pay any Indebtedness owed to the Borrower or any Subsidiary of the
Borrower, (ii) make any loans or advances to or investments in the Borrower or
any Subsidiary of the Borrower, or (iii) transfer any of its property or assets
to the Borrower or any Subsidiary of the Borrower.

                  (g) Affiliate Transaction. And will not permit any Subsidiary
of Borrower to, make, directly or indirectly, (i) any transfer, sale, lease or
other disposition of any Property to any Affiliate of Borrower or any Subsidiary
of Borrower or any purchase or acquisition of any Property from any such
Affiliate; or (ii) any other arrangement or transaction directly or indirectly
with or for the benefit of any such Affiliate (including without limitation,
guaranties and assumptions of obligations of any such Affiliate); provided, that
(A) Borrower and any such Subsidiary may enter into any arrangement or other
transaction with any such Affiliate if the monetary or business consideration
arising therefrom would be substantially at least as advantageous to Borrower or
such Subsidiary as the monetary or business consideration which would be
obtained in a comparable arm's length transaction with a Person not an Affiliate
of Borrower or any Subsidiary of Borrower; (B) Borrower and any Subsidiary of
Borrower may become liable in connection with guaranties of the obligations of
any such Affiliate in the ordinary course of business, other than guaranties of
Indebtedness for Borrowed Money; (C) Borrower may make purchases of receivables
of any kind from Subsidiaries of Borrower on terms that any of them deem
acceptable; (D) intercompany borrowings between Borrower and any Subsidiary of
Borrower may be on terms that they deem acceptable, except that loans to HII
shall be subject to section 8.02(i); (E) Borrower may enter into any arrangement
or other transaction with any Wholly-Owned Subsidiary of Borrower, and any

                                       48
<PAGE>

Wholly-Owned Subsidiary of Borrower may enter into any arrangement or other
transaction with Borrower or any other Wholly-Owned Subsidiary of Borrower, in
each case under this clause (E) only if such arrangements and other transactions
do not involve any Person other than Borrower and Wholly-Owned Subsidiaries of
Borrower; and (F) Borrower may enter into arrangements or other transactions
permitted by Section 8.02(c)(E).

                  (h) Payments on Preferred Stock. And will not permit any
Subsidiary of Borrower to, make or agree to make any payment or other
distribution on or in connection with, or purchase, redeem or otherwise acquire
or agree to do so, or convert or exchange or agree to convert or exchange, in
whole or in part, any capital stock or other equity interest of Borrower or any
Subsidiary of Borrower, in whole or in part (including, without limitation,
dividends), in each case if prior to and immediately after giving effect
thereto, any Default or Event of Default exists or would occur.

                  (i) HII Loans. And will not permit any Subsidiary of Borrower
to, make any loan or advance to HII or any Subsidiary of HII (other than
Borrower or any Subsidiary of Borrower), unless (i) such loan or advance is not
subordinated, (ii) no Event of Default exists at the time such loan or advance
is made and none would result therefrom, (iii) the recipient of such loan or
advance is not in default under any material agreement evidencing or relating to
any Indebtedness, and (iv) no event or circumstance of the type referred to in
Section 9.01(g) or 9.01(h) has occurred with respect to such recipient.

                  (j) Additional Mortgage Bonds. Issue any additional mortgage
bonds under the Indenture of Mortgage and Deed of Trust of Borrower dated as of
September 1, 1953, as supplemented, or the Indenture of Mortgage and Deed of
Trust of Entex, Inc. dated as of June 30, 1970, as supplemented, assumed by
Borrower upon the merger of Entex, Inc. with and into the Borrower on February
2, 1988 (together the "Mortgage Indentures") or have outstanding mortgage bonds
under the Mortgage Indentures in excess of the aggregate principal amount
thereof outstanding on September 30, 1988 or extend the stated maturities or
sinking fund redemption dates (beyond their original stated dates) of
outstanding mortgage bonds under the Mortgage Indentures; provided, that
Borrower may issue mortgage bonds under the Mortgage Indentures upon
registration of transfer or exchange of mortgage bonds under the Mortgage
Indentures or in replacement of mutilated, destroyed, lost or stolen mortgage
bonds or in respect of the unredeemed portion of any series of mortgage bonds
under the Mortgage Indentures partially called for redemption, in each case as
provided in the Mortgage Indentures.

                                       49
<PAGE>

                                   ARTICLE IX

                                EVENTS OF DEFAULT

                  SECTION 9.01. Events of Default. The occurrence of any of the
following events with respect to Borrower shall constitute an "Event of
Default":

                  (a) Non-Payment of Principal, Interest and Facility Fee.
Borrower fails to pay, in the manner provided in this Agreement, (i) any
principal payable by it hereunder when due or (ii) any interest, fee or other
amount payable by it under any Loan Document within five (5) Business Days after
its due date; or

                  (b) Change of Control. For any reason, (i) HII fails to own,
directly or indirectly, at least 50% of the economic interest in Borrower or
(ii) HII fails to own, directly or indirectly, at least 50% of the outstanding
shares of stock or other ownership interests having ordinary voting power (other
than stock or such other ownership interests having such power only by reason of
the happening of a contingency) to elect directors or other managers of Borrower
or (iii) the Borrower fails to own, directly or indirectly, at least 50% of the
economic interest in MRT or (iv) the Borrower fails to own, directly or
indirectly, at least 50% of the economic interest in NGT or (v) the Borrower
fails to own at least 50% of the outstanding shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect directors or other managers of MRT or (vi) the Borrower fails to own at
least 50% of the outstanding shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having
such power only by reason of the happening of a contingency) to elect directors
or other managers of NGT; or

                  (c) Breach of Representation or Warranty. Any representation
or warranty by Borrower in Section 7.01 or in any certificate, document or
instrument delivered under this Agreement shall have been incorrect in any
material respect when made or when deemed hereunder to have been made; or

                  (d) Breach of Certain Covenants. Borrower fails to perform or
comply with any one or more of its obligations under Section 8.01(a)(iv)(B)(x)
or Section 8.02; or

                  (e) Breach of Other Obligations. Borrower does not perform or
comply with any one or more of its other obligations under this Agreement (other
than those set forth in this Section 9.01) and such failure to perform or comply
shall not have been remedied within 30 days after the earlier of notice thereof
to it by the Agent or the Majority Banks or discovery thereof by a Responsible
Officer of Borrower; or

                                       50
<PAGE>

                  (f) Other Indebtedness. The maturity of any Indebtedness for
Borrowed Money or Secured Indebtedness of Borrower or any Significant Subsidiary
is accelerated or Borrower or any Significant Subsidiary fails to pay when due
(either at stated maturity or by acceleration or otherwise but subject to
applicable grace periods) any principal or interest in respect of any
Indebtedness for Borrowed Money or Secured Indebtedness of Borrower (other than
Indebtedness of Borrower under this Agreement) or any Significant Subsidiary if
the aggregate principal amount of all such Indebtedness which is accelerated or
for which such failure to pay shall have occurred and be continuing exceeds
$30,000,000; or

                  (g) Involuntary Bankruptcy, Etc. (i) There shall be commenced
against Borrower or any Significant Subsidiary any case, proceeding or other
action (A) seeking a decree or order for relief in respect of Borrower or any
Significant Subsidiary under any applicable domestic or foreign bankruptcy,
insolvency, reorganization or other similar law, (B) seeking a decree or order
adjudging Borrower or any Significant Subsidiary a bankrupt or insolvent, (C)
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or similar relief of or in respect of Borrower or any
Significant Subsidiary or the debts of Borrower or any Significant Subsidiary
under any applicable domestic or foreign law or (D) seeking the appointment of a
custodian, receiver, conservator, liquidator, assignee, trustee, sequestrator or
other similar official of Borrower or any Significant Subsidiary or of any
substantial part of the Properties of Borrower or any Significant Subsidiary, or
the liquidation of the affairs of Borrower or any Significant Subsidiary, and
such petition is not dismissed within 60 days or (ii) a decree, order or other
judgment is entered in respect of any remedies, reliefs or other matters for
which any petition referred to in (i) above is presented or (iii) there shall be
commenced against Borrower or any Significant Subsidiary any case, proceeding or
other action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of the assets of Borrower
or any Significant Subsidiary that results in the entry of an order for any such
relief that shall not have been vacated, discharged or stayed or bonded pending
appeal within 60 days from the entry thereof; or

                  (h) Voluntary Bankruptcy, Etc. (i) The commencement by
Borrower or any Significant Subsidiary of a voluntary case, proceeding or other
action under any applicable domestic or foreign bankruptcy, insolvency,
reorganization or other similar law (A) seeking to have an order of relief
entered with respect to Borrower or any Significant Subsidiary, (B) seeking to
be adjudicated a bankrupt or insolvent, (C) seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other similar
relief with respect to Borrower or any Significant Subsidiary or the debts of
Borrower or any Significant Subsidiary under any applicable domestic or foreign
law or (D) seeking the appointment of or the taking possession by a custodian,
receiver, conservator, liquidator, assignee, trustee, sequestrator or similar
official of Borrower or of any substantial part of the Properties of Borrower or
any Significant Subsidiary; or (ii) the making by Borrower or any Significant
Subsidiary of a general assignment for the benefit of creditors; or (iii)
Borrower or any Significant Subsidiary shall take any action in furtherance of,
or indicating its

                                       51
<PAGE>

consent to, approval of, or acquiescence in, any of the acts described in clause
(i) or (ii) above or in Section 9.01(g); or (iv) the admission by Borrower or
any Significant Subsidiary in writing of its inability to pay its debts
generally as they become due or the failure by Borrower or any Significant
Subsidiary generally to pay its debts as such debts become due; or

                  (i) Enforcement Proceedings. A final judgment or decree for
the payment of money which, together with all other such judgments or decrees
against Borrower or any of its Significant Subsidiaries then outstanding and
unsatisfied, exceeds $30,000,000 in aggregate amount shall be rendered against
Borrower or any Significant Subsidiary and the same shall remain undischarged
for a period of 60 days, during which the execution thereon shall not
effectively be stayed, released, bonded or vacated; or

                  (j) ERISA Events. (i) Borrower or any Significant Subsidiary
shall incur any liability arising out of (A) any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(B) the occurrence of any "accumulated funding deficiency" (as defined in
Section 302 of ERISA) by a Plan, whether or not waived, or any Lien in favor of
the PBGC or a Plan on the assets of Borrower or any Commonly Controlled Entity,
(C) the occurrence of a Reportable Event with respect to, or the commencement of
proceedings under Section 4042 of ERISA to have a trustee appointed, or the
appointment of a trustee under Section 4042 of ERISA, to administer or to
terminate any Single Employer Plan, which Reportable Event, commencement of
proceedings or appointment of a trustee is likely to result in the termination
of such Plan for purposes of Title IV of ERISA, (D) the termination of any
Single Employer Plan for purposes of Title IV of ERISA, (E) withdrawal from, or
the Insolvency or Reorganization of, a Multiemployer Plan or (F) the occurrence
of any other event or condition with respect to a Plan, and any of such items
(A) through (F) above results in or is likely to result in a material liability
or deficiency of Borrower or any Significant Subsidiary; provided, however, that
for purposes of this Section 9.01(j), any liability or deficiency of Borrower or
any Significant Subsidiary shall be deemed not to be material so long as the sum
of all liabilities or deficiencies referred to in this Section 9.01(j) at any
one time outstanding, individually and in the aggregate, is less than
$20,000,000, or (ii) the occurrence of any one or more of the events specified
in clauses (A) through (F) above if, individually or in the aggregate, such
event or events would have a Material Adverse Effect; or

                  (k) Any event or circumstance of the type referred to in
Section 9.01(g) or 9.01(h) occurs with respect to HII if, at the time of such
event or circumstance or any time thereafter during the pendency of such event
or circumstance, the writedown to zero of all amounts advanced to HII or any of
its Subsidiaries by Borrower or any of its Subsidiaries (other than amounts
advanced to Borrower and any of its Subsidiaries) would result in a Default or
an Event of Default.

                                       52
<PAGE>

                  SECTION 9.02. Cancellation/Acceleration. If at any time and
for any reason (whether within or beyond the control of any party to this
Agreement):

                  (a) any of the Events of Default specified in Section 9.01(g)
or 9.01(h) occurs with respect to Borrower, then automatically:

                           (i)  the Commitments, the Swing Line Commitment and
                  the CAF Facility shall immediately be cancelled; and

                           (ii) all Loans made to Borrower, all unpaid accrued
                  interest or fees and any other sum payable by Borrower under
                  this Agreement shall become immediately due and payable; or

                  (b) any other Event of Default specified in Section 9.01
occurs (1) the Swing Line Bank may, while such Event of Default is continuing,
by notice to Borrower, cancel the Swing Line Commitment (whereupon the Swing
Line Commitment shall be deemed to be immediately cancelled) and/or declare all
Swing Loans and all unpaid accrued interest thereon to be immediately due and
payable (whereupon all Swing Loans and all such interest shall be immediately
due and payable), and (2) the Agent, if it has been instructed to do so by the
Majority Banks while such Event of Default is continuing, by notice to Borrower:

                           (i)   shall declare that the Commitments, the Swing
                  Line Commitment and the CAF Facility shall immediately be
                  cancelled (whereupon the Commitments, the Swing Line
                  Commitment and the CAF Facility shall be deemed to be
                  immediately cancelled); and/or

                           (ii)  shall declare that all Loans made to Borrower,
                  all unpaid accrued interest or fees and any other sum payable
                  by Borrower under this Agreement shall become immediately due
                  and payable (whereupon all Loans, all such interest, all such
                  fees and all other sums payable by Borrower under this
                  Agreement shall be immediately due and payable); or

                           (iii) shall declare that all Loans made to Borrower,
                  all unpaid accrued interest or fees and any other sum payable
                  by Borrower under this Agreement shall become due and payable
                  at any time thereafter immediately on demand by the Agent
                  (acting on the instructions of the Majority Banks) (and upon
                  any such demand all Loans, all such interest, all such fees
                  and all other sums payable by Borrower under this Agreement
                  shall be immediately due and payable).

                                       53
<PAGE>
Except as expressly provided above in this Section 9.02, presentment, demand,
protest, notice of intent to accelerate, notice of acceleration and all other
notices of any kind whatsoever are hereby expressly waived by Borrower.

                                   ARTICLE X

                                   THE AGENT

                  SECTION 10.01. Authorization and Action. Each Bank hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under the Loan Documents as are delegated to the Agent
by the terms hereof or of any other Loan Document, together with such powers as
are reasonably incidental thereto. As to any matters not expressly provided for
by this Agreement (including, without limitation, enforcement or collection of
the Notes or payment obligations hereunder), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Majority Banks and such instructions
shall be binding upon all Banks and all holders of Notes; provided, however,
that the Agent shall not be required to take any action which exposes the Agent
to personal liability or which is contrary to any Loan Document or applicable
law. The Agent agrees to give to each Bank prompt notice of each notice given to
it by Borrower pursuant to the terms of this Agreement. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.

                  SECTION 10.02. Agent's Reliance, Etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
any Loan Document, except for its or their own gross negligence or willful
misconduct. Without limitation of the generality of the foregoing, the Agent:
(i) may treat the payee of any Note or any loan account in the Register as the
owner thereof for all purposes until the Agent receives and accepts a written
notice of assignment or transfer thereof; (ii) may consult with legal counsel
(including counsel for Borrower), independent public accountants and other
experts selected by it and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation to any Bank
and shall not be responsible to any Bank for any statements, warranties or
representations (whether written or oral) made in or in connection with any of
the Loan Documents or any other instrument or document; (iv) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or

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<PAGE>

conditions of any of Loan Documents or any other instrument or document on the
part of Borrower or any Subsidiary or to inspect the Property (including the
books and records) of Borrower or any Subsidiary; (v) shall not be responsible
to any Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any of the Loan Documents or any other
instrument or document; and (vi) shall incur no liability under or in respect of
any of the Loan Documents or any other instrument or document by acting upon any
notice (including telephonic notice), consent, certificate or other instrument
or writing (which may be by telecopier, telegram or telex) believed by it to be
genuine and signed, given or sent by the proper party or parties. The Agent
shall not be deemed to have knowledge or notice of the occurrence of any Default
or Event of Default unless the Agent has received notice from a Bank or Borrower
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default".

                  SECTION 10.03. Citibank and Affiliates. With respect to its
Commitment, the Loans owed to it and the Notes issued to it, Citibank shall have
the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent; and the term "Bank" or
"Banks" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, Borrower, any Subsidiary and any Person who may do business
with or own securities of Borrower or any Subsidiary, all as if Citibank were
not the Agent and without any duty to account therefor to the Banks.

                  SECTION 10.04. Bank Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or any other Bank
and based on such financial statements and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Bank also acknowledges that it will, independently and
without reliance upon the Agent or any other Bank and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Loan Documents or
any other instrument or document.

                  SECTION 10.05. INDEMNIFICATION. THE BANKS AGREE TO INDEMNIFY
THE AGENT (TO THE EXTENT NOT REIMBURSED BY BORROWER), RATABLY ACCORDING TO THE
RESPECTIVE PRINCIPAL AMOUNTS OF THE COMMITTED LOANS THEN HELD BY EACH OF THEM
(OR IF NO COMMITTED LOANS ARE AT THE TIME OUTSTANDING OR IF ANY COMMITTED LOANS
ARE HELD BY PERSONS WHICH ARE NOT BANKS, RATABLY ACCORDING TO EITHER (A) THE
RESPECTIVE AMOUNTS OF THEIR COMMITMENTS, OR (B) IF NO COMMITMENTS ARE AT THE
TIME OUTSTANDING, THE RESPECTIVE AMOUNTS OF THE COMMITMENTS IMMEDIATELY PRIOR TO
THE TIME THE

                                       55
<PAGE>

COMMITMENTS CEASED TO BE OUTSTANDING), FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED
ON, INCURRED BY, OR ASSERTED AGAINST THE AGENT IN ANY WAY RELATING TO OR ARISING
OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT FURNISHED
PURSUANT HERETO OR IN CONNECTION HEREWITH, OR ANY ACTION TAKEN OR OMITTED BY THE
AGENT UNDER ANY OF THE LOAN DOCUMENTS OR ANY OTHER INSTRUMENT OR DOCUMENT
FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH, PROVIDED THAT NO BANK SHALL
BE LIABLE FOR ANY PORTION OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS RESULTING
FROM THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITATION OF
THE FOREGOING, EACH BANK AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR
ITS RATABLE SHARE OF ANY OUT-OF-POCKET EXPENSES (INCLUDING COUNSEL FEES)
INCURRED BY THE AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY,
ADMINISTRATION, MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH
NEGOTIATIONS, LEGAL PROCEEDINGS OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF
RIGHTS OR RESPONSIBILITIES UNDER, ANY OF THE LOAN DOCUMENTS OR ANY OTHER
INSTRUMENT OR DOCUMENT FURNISHED PURSUANT HERETO OR IN CONNECTION HEREWITH TO
THE EXTENT THAT THE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY BORROWER,
PROVIDED THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF SUCH EXPENSES RESULTING
FROM THE AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE EVENT THAT THE
AGENT RECEIVES REIMBURSEMENT FOR SUCH EXPENSES FROM BORROWER AT ANY TIME
SUBSEQUENT TO THE AGENT'S RECEIPT OF THE INDEMNIFICATION REQUIRED BY THE
PRECEDING SENTENCE FROM ANY BANK, THE AGENT SHALL PROMPTLY REFUND TO SUCH BANK
ITS RATABLE SHARE OF SUCH REIMBURSED AMOUNT. THIS INDEMNIFICATION INCLUDES THE
ORDINARY NEGLIGENCE OF THE BANKS.

                  SECTION 10.06. Successor Agent. The Agent may resign as Agent
upon 30 days' written notice thereof to the Banks and Borrower and may be
removed at any time with or without cause by the Majority Banks. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Agent which, if such successor Agent is not a Bank, is approved by
Borrower (which approval will not be unreasonably withheld). If no successor
Agent shall have been so appointed by the Majority Banks (and, if not a Bank,
approved by Borrower), and shall have accepted such appointment, within 30 days
after the retiring Agent's giving of notice of resignation or the Majority
Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent, which shall be a commercial bank organized
or licensed under the laws of the United States of America or of any State
thereof and having a

                                       56
<PAGE>

combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations under this Agreement and the other
Loan Documents. After any retiring Agent's resignation or removal hereunder as
Agent, the provisions of this Article X shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.

                                   ARTICLE XI

                                  MISCELLANEOUS

                  SECTION 11.01. Amendments and Waivers. Neither this Agreement,
any Note, any other Loan Document, nor any terms hereof or thereof may be
amended, supplemented or modified except pursuant to an instrument or
instruments in writing executed in accordance with the provisions of this
Section 11.01. The Majority Banks may, from time to time, (a) enter into with
Borrower written amendments, supplements or modifications hereto and to any
Notes and the other Loan Documents for the purpose of adding or changing any
provisions to this Agreement or any Notes or the other Loan Documents or
changing in any manner the rights of the Banks or of Borrower hereunder or
thereunder or (b) waive, on such terms and conditions as the Majority Banks (and
the Agent, with respect to Article X) may specify in such instrument, any of the
requirements of this Agreement or any Notes or the other Loan Documents or any
Default or Event of Default and its consequences; provided, however, that no
such waiver and no such amendment, supplement or modification shall (i) reduce
the amount or extend the scheduled date of maturity of any Note or Loan, or
reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof or increase the amount or extend the
expiration date of any Banks Commitment or Swing Loan Commitment, in each case
without the consent of each Bank affected thereby, (ii) amend, modify or waive
any provision of this Section or reduce the percentage specified in the
definition of Majority Banks, or consent to the assignment or transfer by
Borrower of any of its respective rights and obligations under this Agreement
and the other Loan Documents, in each case without the written consent of all
the Banks, (iii) amend, modify or waive any provision of Article X, or otherwise
affect any right or duty of the Agent, without the written consent of the Agent,
or (iv) amend, modify or waive any provision pertaining to the Swing Line Bank
or the Swing Loans, or otherwise affect any right or duty of the Swing Line
Bank, without the written consent of the Swing Line Bank. Any such waiver and
any such amendment, supplement or modification shall apply equally to each of
the Banks and shall be binding upon Borrower, the Banks, the Agent and all
future holders of the amounts payable hereunder. In the case of any waiver,
Borrower, the Banks and the Agent shall be restored to their former position and
rights hereunder and under any outstanding Notes and any Loan Documents, and any
Default or Event of Default

                                       57
<PAGE>

waived shall be deemed to be cured and not continuing, but no such waiver shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.

                  SECTION 11.02. Notices. Unless otherwise expressly provided
herein, all notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (including by telecopy), and, shall
be deemed to have been duly given or made when delivered by hand, or three days
after being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of Borrower and the
Agent, and as set forth in Schedule I in the case of the other parties hereto,
or to such other address as may be hereafter notified by the respective parties
hereto and any future holders of the amounts payable hereunder:

         Borrower:                  1111 Louisiana
                                    Houston, Texas 77002
         Attention:                 Linda Geiger
                                    Assistant Treasurer
         Telecopy:                  (713) 207-3301

         With a copy to:            Marc Kilbride
                                    Treasurer
         Telecopy:                  (713) 207-3301

         The Agent:                 2 Penn's Way, Suite 200
                                    New Castle, Delaware 19720
         Attention:                 Jennifer Klemaszewski
         Telecopy:                  (302) 894-6120

         With a copy to:            Citicorp Securities, Inc.
                                    1200 Smith, Suite 2000
                                    Houston, Texas 77002
         Attention:                 David B. Gorte, Vice President
         Telecopy:                  (713) 654-2849

provided that any notice, request or demand to or upon the Agent or the Banks
pursuant to Sections 2.02, 3.02, 4.03, 4.07, 5.02 and 5.05 shall not be
effective until received. References herein to the address of the Agent for
purposes of payments or making available funds or for purposes of Section
11.06(e) shall not include the address to which copies of notices to the Agent
are to be sent. An oral notice received by the Agent or a Bank shall be
effective if the Agent or Bank, as the case may be, believes in good faith that
it was given by an authorized representative of the Borrower or

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<PAGE>

the Agent, as the case may be, and acts pursuant thereto, notwithstanding the
absence of written confirmation or any contradictory provision thereof.

                  SECTION 11.03. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Agent or any Bank, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

                  SECTION 11.04. Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of this Agreement.

                  SECTION 11.05. Payment of Expenses and Taxes; INDEMNIFICATION.
Borrower agrees (a) to pay or reimburse the Agent, the Arranger and each
Affiliate of the Agent for all of their respective reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation,
negotiation, execution, delivery, syndication and administration of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, the reasonable fees and
disbursements of Bracewell & Patterson, L.L.P., special counsel to the Agent
(but excluding the fees or expenses of any other counsel), (b) to pay or
reimburse each Bank and the Agent for all its costs and expenses incurred,
during the continuance of any Event of Default, in connection with the
enforcement or preservation of any rights under this Agreement, any Notes, the
other Loan Documents and any such other documents, including, without
limitation, the reasonable fees and disbursements of counsel incurred during the
continuance of any Event of Default and (c) without duplication of any other
provision contained in this Agreement or any Notes, to pay, indemnify, and hold
each Bank and the Agent harmless from, any and all recording and filing fees, if
any, and any and all liabilities (for which each Bank has not been otherwise
reimbursed under this Agreement) with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, any Notes, the other Loan Documents and any such other
documents; and THE BORROWER FURTHER AGREES, WITHOUT DUPLICATION OF ANY OTHER
PROVISION CONTAINED IN THIS AGREEMENT OR ANY NOTES, TO PAY, INDEMNIFY, AND HOLD
EACH BANK, THE ARRANGER, THE CO-AGENTS AND THE

                                       59
<PAGE>

AGENT AND THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS
AND ADVISORS (EACH AN "INDEMNIFIED PARTY") HARMLESS FROM AND AGAINST, ANY AND
ALL OTHER LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REASONABLE LEGAL FEES AND
DISBURSEMENTS OF COUNSEL) WHICH MAY BE IMPOSED BY, INCURRED BY, OR ASSERTED
AGAINST THE INDEMNIFIED PARTIES IN ANY WAY RELATING TO OR ARISING OUT OF THIS
AGREEMENT, ANY NOTES, THE OTHER LOAN DOCUMENTS AND ANY SUCH OTHER DOCUMENTS,
INCLUDING THE EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE AND ADMINISTRATION
THEREOF (ALL THE FOREGOING IN THIS CLAUSE (D), COLLECTIVELY, THE "INDEMNIFIED
LIABILITIES"); PROVIDED, THAT BORROWER SHALL HAVE NO OBLIGATION HEREUNDER TO ANY
INDEMNIFIED PARTY WITH RESPECT TO INDEMNIFIED LIABILITIES ARISING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY; AND PROVIDED
FURTHER, THAT IT IS THE INTENTION OF BORROWER TO INDEMNIFY THE AGENT AND THE
BANKS AGAINST THE CONSEQUENCES OF THEIR OWN NEGLIGENCE. The agreements in this
Section 11.05 shall survive repayment of the Loans and all other amounts payable
hereunder.

                  SECTION 11.06. Effectiveness; Successors and Assigns;
Participations; Assignments. (a) This Agreement shall become effective on March
31, 1998 (the "Effective Date") and thereafter shall be binding upon and inure
to the benefit of Borrower, the Banks, the Agent, all future holders of the
Loans and their respective successors and assigns, except that Borrower may not
assign or transfer any of its rights or obligations under this Agreement without
the prior written consent of each Bank.

                  (b) Any Bank may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other financial institutions (a "Participant") participating
interests in any Loan owing to such Bank, any Note held by such Bank, any
Commitment of such Bank or any other interest of such Bank hereunder and under
the other Loan Documents. In the event of any such sale by a Bank of a
participating interest to a Participant, such Bank's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Bank shall remain solely responsible for the performance thereof, such Bank
shall remain the holder of any such Loan for all purposes under this Agreement
and the other Loan Documents, Borrower and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement and the other Loan Documents and except with
respect to the matters set forth in Section 11.01, the amendment of which
requires the consent of all of the Banks, the participation agreement between
the selling Bank and the Participant may not restrict such Bank's voting rights
hereunder. Borrower agrees that each Participant, to the extent provided in its
participation, shall be entitled to the benefits of

                                       60
<PAGE>

Sections 4.05, 4.08, 5.01 and 5.03 with respect to its participation in the
Commitments and the Loans outstanding from time to time; provided, that no
Participant shall be entitled to receive any greater amount pursuant to such
Sections than the selling Bank would have been entitled to receive in respect of
the amount of the participation sold by such selling Bank to such Participant
had no such sale occurred. Except as expressly provided in this Section
11.06(b), no Participant shall be a third-party beneficiary of or have any
rights under this Agreement or under any of the other Loan Documents.

                  (c) Any Bank may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to any
Affiliate of such Bank that is a bank (a "Bank Affiliate" of such Bank) and,
with the consent of Borrower and the Agent (which in each case shall not be
unreasonably withheld), to one or more additional banks or other Persons (any
such Bank Affiliate, additional bank or other Person purchasing pursuant to this
Section 11.06(c) being a "Purchasing Bank") all or any part of its rights and
obligations under this Agreement pursuant to a Committed Loan Assignment and
Acceptance ("Committed Loan Assignment and Acceptance"), substantially in the
form of Exhibit 11.06(c) executed by such Purchasing Bank, the Swing Line Bank
and such transferor Bank (and, in the case of a Purchasing Bank that is not a
Bank Affiliate of such transferor Bank, by Borrower and the Agent) and delivered
to the Agent for its acceptance and recording in the Register; provided, that
each such sale shall be of a uniform, and not a varying, percentage of all
rights and obligations under and in respect of the Commitment of such Bank;
provided further that each such sale shall be subject to the consent of the
Swing Line Bank (which in each case shall not be unreasonably withheld);
provided further, that the amount of the Commitment assigned in connection with
any such sale shall be not less than 2.5% of the aggregate Commitments of the
Banks, unless such sale is of the entire interest of the transferor Bank, and
the transferor Bank (if it retains any Commitment) shall have a Commitment of
not less than 51% of (a) the total amount of such Bank's Commitment as of the
date on which such Bank first had a Commitment hereunder less (b) the amount of
permanent reductions (other than reductions as a result of sales pursuant to
this Section 11.06) after such date in the amount of such Commitment; provided
further, that in the case of a sale to a Bank Affiliate of such transferor Bank,
Borrower shall not be responsible to such Bank Affiliate for any additional cost
resulting from such sale which is foreseeable at the time of such sale. Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Committed Loan Assignment and Acceptance (the
"Transfer Effective Date"), (i) the Purchasing Bank thereunder shall be a party
hereto and, to the extent provided in such Committed Loan Assignment and
Acceptance, have the rights and obligations of a Bank hereunder with the
Commitments as set forth therein and (ii) the transferor Bank thereunder shall,
to the extent provided in such Committed Loan Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of a
Committed Loan Assignment and Acceptance covering all or the remaining portion
of a transferor Bank's rights and obligations under this Agreement, such
transferor Bank shall cease to be a party hereto). Such

                                       61
<PAGE>

Committed Loan Assignment and Acceptance shall be deemed to amend this Agreement
to the extent, and only to the extent, necessary to reflect the addition of such
Purchasing Bank and the resulting adjustment of Pro Rata Percentages arising
from the purchase by such Purchasing Bank of all or a portion of the rights and
obligations of such transferor Bank under this Agreement and the Loans. On or
prior to the Transfer Effective Date determined pursuant to such Committed Loan
Assignment and Acceptance, (i) appropriate entries shall be made in the accounts
of the transferor Bank and the Register evidencing such assignment and releasing
Borrower from any and all obligations to the transferor Bank in respect of the
assigned Loan or Loans and (ii) appropriate entries evidencing the assigned Loan
or Loans shall be made in the accounts of the Purchasing Bank and Register as
required by Section 4.01 hereof. In the event that any Notes have been issued in
respect of the assigned Loan or Loans, such Notes shall be marked "cancelled"
and surrendered by the transferor Bank to the Agent for return to Borrower.

                  (d) Any Bank may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time assign to
one or more banks or other financial institutions (a "CAF Loan Assignee") any
CAF Loan owing to such Bank, pursuant to a CAF Loan Assignment and Acceptance
executed by the assignor Bank and the CAF Loan Assignee. Upon such execution,
from and after the date of such CAF Loan Assignment and Acceptance, the CAF Loan
Assignee shall, to the extent of the assignment provided for in such CAF Loan
Assignment and Acceptance, be deemed to have the same rights and benefits of
payment and enforcement with respect to such CAF Loan and the same obligation to
share and rights of setoff pursuant to Sections 5.04 and 11.07 as it would have
had if it were a Bank hereunder; provided that unless such CAF Loan Assignment
and Acceptance shall otherwise specify and a copy of such CAF Loan Assignment
and Acceptance shall have been delivered to the Agent for its acceptance and
recording in the Register in accordance with Section 11.06(e), the assignor
thereunder shall act as collection agent for the CAF Loan Assignee thereunder,
and the Agent shall pay all amounts received from Borrower that are allocable to
the assigned CAF Loan directly to such assignor without any further liability to
such CAF Loan Assignee; provided further, that if the CAF Loan Assignee is a
Bank Affiliate of the assignor Bank, Borrower shall not be responsible to such
Bank Affiliate for any additional cost resulting from such assignment which is
foreseeable at the time of such assignment. A CAF Loan Assignee under a CAF Loan
Assignment and Acceptance shall not, by virtue of such CAF Loan Assignment and
Acceptance, become a party to this Agreement or have any rights to consent to or
refrain from consenting to any amendment, supplement, waiver or other
modification of any provision of this Agreement or any related document;
provided that (i) the assignor under such CAF Loan Assignment and Acceptance and
such CAF Loan Assignee may, in their discretion, agree between themselves upon
the manner in which such assignor will exercise its rights under this Agreement
and any related document and (ii) if a copy of such CAF Loan Assignment and
Acceptance shall have been delivered to the Agent for its acceptance and
recording in the Register in accordance with Section 11.06(e), neither the
principal amount of, the interest rate on, nor the

                                       62
<PAGE>

maturity date of any CAF Loan assigned to the CAF Loan Assignee thereunder will
be reduced or postponed, as the case may be, without the written consent of such
CAF Loan Assignee. If a CAF Loan Assignee has caused a CAF Loan Assignment and
Acceptance to be recorded in the Register in accordance with Section 11.06(e),
such CAF Loan Assignee may thereafter, in the ordinary course of its business
and in accordance with applicable law, assign such individual CAF Loan to any
Bank, to any Affiliate or Subsidiary of such CAF Loan Assignee or to any other
financial institution that has total assets in excess of $1,000,000,000 and that
in the ordinary course of its business extends credit of the type evidenced by
such Individual CAF Loan, and the foregoing provisions of this Section 11.06(d)
shall apply, mutatis mutandis, to any such assignment by a CAF Loan Assignee.
Except in accordance with the preceding sentence, CAF Loans may not be further
assigned by a CAF Loan Assignee, subject to any legal or regulatory requirement
that the CAF Loan Assignee's assets must remain under its control.

                  (e) The Agent shall maintain at its address referred to in
Section 11.02 a copy of each CAF Loan Assignment and Acceptance and each
Committed Loan Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of (i) the names and addresses of the Banks and
the Commitments of, and principal amount of the Loans owing to, each Bank from
time to time and (ii) with respect to each CAF Loan Assignment and Acceptance
delivered to the Agent, the name and address of the CAF Loan Assignee and the
principal amount of each CAF Loan owing to such CAF Loan Assignee. To the extent
permitted by applicable law, the entries in the Register shall be conclusive, in
the absence of manifest error, and Borrower, the Agent and the Banks may (and,
in the case of any Loan or other obligation hereunder not evidenced by a Note,
shall) treat, each Person whose name is recorded in the Register as the owner of
a Loan or other obligation hereunder as the owner thereof for all purposes of
this Agreement and the other Loan Documents, notwithstanding any notice to the
contrary. Any assignment of any Loan or other obligation hereunder not evidenced
by a Note shall be effective only upon appropriate entries with respect thereto
being made in the Register. The Register shall be available for inspection by
Borrower or any Bank or any CAF Loan Assignee at any reasonable time and from
time to time upon reasonable prior notice.

                  (f) Upon its receipt of a Committed Loan Assignment and
Acceptance executed by a transferor Bank, the Swing Line Bank and Purchasing
Bank (and, in the case of a Purchasing Bank that is not then a Bank Affiliate of
such transferor Bank, by Borrower and the Agent) together with payment to the
Agent, for its sole account, of a registration and processing fee of $3,000
(which fee shall not be for the account of Borrower), the Agent shall promptly
accept such Committed Loan Assignment and Acceptance on the Transfer Effective
Date determined pursuant thereto, record the information contained therein in
the Register and give notice of such acceptance and recordation to the Banks and
Borrower. Upon its receipt of a CAF Loan Assignment and Acceptance executed by
an assignor Bank and a CAF Loan Assignee, together with payment to the

                                       63
<PAGE>

Agent of a registration and processing fee of $500 (which fee shall not be for
the account of Borrower), the Agent shall promptly accept such CAF Loan
Assignment and Acceptance, record the information contained therein in the
Register and give notice of such acceptance and recordation to the assignor
Bank, the CAF Loan Assignee and Borrower. The Borrower shall not be responsible
for any legal or other expenses in connection with the preparation and execution
of any Committed Loan Assignment and Acceptance or CAF Loan Assignment and
Acceptance.

                  (g) Each Bank agrees to exercise its best efforts to keep, and
to cause any third party recipient of the information described in this Section
11.06(g) to keep, any information delivered or made available by Borrower to it
(including any information obtained pursuant to Section 8.01) that is clearly
indicated to be confidential information, confidential from anyone other than
Persons employed or retained by such Bank who are or are expected to become
engaged in evaluating, approving, structuring or administering the transactions
contemplated hereunder; provided that nothing herein shall prevent any Bank from
disclosing such information (i) to any other Bank or any Affiliate of any Bank,
(ii) pursuant to subpoena or upon the order of any court or administrative
agency, (iii) upon the request or demand of any Governmental Authority having
jurisdiction over such Bank, (iv) if such information has been publicly
disclosed, (v) to the extent reasonably required in connection with any
litigation to which either the Agent, any Bank, Borrower or their respective
Affiliates may be a party, (vi) to the extent reasonably required in connection
with the exercise of any remedy hereunder, (vii) to such Bank's legal counsel,
independent auditors and other professional advisors, (viii) to any actual or
proposed Participant, Purchasing Bank or CAF Loan Assignee (each, a
"Transferee") that has agreed in writing to be bound by the provisions of this
Section 11.06(g), or (ix) as may be required by law. Unless prohibited from
doing so by applicable law, each Bank will use its best efforts to notify
Borrower of any information that it is required or requested to deliver pursuant
to clause (ii) of this Section 11.06(g) and, if Borrower is not a party to any
such litigation, clause (v) of this Section 11.06(g), prior to such Bank's
delivery of such information.

                  (h) If, pursuant to this Section, any interest in this
Agreement or any Loan is transferred to any Transferee that is organized under
the laws of any jurisdiction other than the United States or any state thereof,
the transferor Bank shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the transferor Bank (for the
benefit of the transferor Bank, the Agent and Borrower) that under applicable
law and treaties no taxes will be required to be withheld by the Agent, Borrower
or the transferor Bank with respect to any payments to be made to such
Transferee in respect of the Loans, (ii) to furnish to the transferor Bank (and,
in the case of any Purchasing Bank or CAF Loan Assignee registered in the
Register, the Agent and Borrower) either U.S. Internal Revenue Service Form 4224
or U.S. Internal Revenue Service Form 1001 (wherein such Transferee claims
entitlement to complete exemption from U.S. federal withholding tax on all
interest payments hereunder) and (iii) to agree (for the benefit of the
transferor

                                       64
<PAGE>

Bank, the Agent and Borrower) to provide the transferor Bank (and, in the case
of any Purchasing Bank or CAF Loan Assignee registered in the Register, the
Agent and Borrower) a new Form 4224 or Form 1001 upon the expiration or
obsolescence of any previously delivered form and comparable statements in
accordance with applicable U.S. laws and regulations and amendments duly
executed and completed by such Transferee, and to comply from time to time with
all applicable U.S. laws and regulations with regard to such withholding tax
exemption.

                  (i) Nothing herein shall prohibit any Bank from pledging or
assigning all or any portion of its Loans to any Federal Reserve Bank in
accordance with applicable law. In order to facilitate such pledge or
assignment, Borrower hereby agrees that, upon request of any Bank at any time
and from time to time after Borrower has made its initial Borrowing hereunder,
Borrower shall provide to such Bank, at Borrower's own expense, a promissory
note, substantially in the form of Exhibit 11.06(i)(a), 11.06(i)(b) or
11.06(i)(c) as the case may be, evidencing the Committed Loans, Swing Loans or
CAF Loans, as the case may be, owing to such Bank.

                  SECTION 11.07. Setoff. In addition to any rights and remedies
of the Banks provided by law, each Bank shall have the right, without prior
notice to Borrower, any such notice being expressly waived by Borrower to the
extent permitted by applicable law, upon any amount becoming due and payable by
Borrower hereunder or under the Loans (whether at the stated maturity, by
acceleration or otherwise) to setoff and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Bank or any branch or
agency thereof to or for the credit or the account of Borrower. Each Bank agrees
promptly to notify Borrower and the Agent after any such setoff and application
made by such Bank, provided that the failure to give such notice shall not
affect the validity of such setoff and application.

                  SECTION 11.08. Counterparts. This Agreement may be executed by
one or more of the parties to this Agreement on any number of separate
counterparts, and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

                  SECTION 11.09. Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

                  SECTION 11.10. Integration. This Agreement and the other Loan
Documents represent the agreement of Borrower, the Agent and the Banks with
respect to the subject matter

                                       65
<PAGE>

hereof, and there are no promises, undertakings, representations or warranties
by the Agent or any Bank relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.

                  SECTION 11.11. GOVERNING LAW. (a) THIS AGREEMENT AND ANY NOTES
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND ANY NOTES
SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.

                  (b) Notwithstanding anything in Section 11.11(a) to the
contrary, nothing in this Agreement or in any Note or any other Loan Documents
shall be deemed to constitute a waiver of any rights which any Bank may have
under applicable federal law relating to the amount of interest which any Bank
may contract for, take, receive or charge in respect of any Loans, including any
right to take, receive, reserve and charge interest at the rate allowed by the
laws of the state where such Bank is located. To the extent that Texas law is
applicable to the determination of the Highest Lawful Rate, the Banks and
Borrower agree that (i) if Article 1.04, Subtitle 1, Title 79, of the Revised
Civil Statutes of Texas, 1925, as amended, is applicable to such determination,
the indicated rated ceiling computed from time to time pursuant to Section (a)
of such Article shall apply, provided that, to the extent permitted by such
Article, the Agent may from time to time by notice to Borrower revise the
election of such interest rate ceiling as such ceiling affects the then current
or future balances of the Loans; and (ii) the provisions of Chapter 15 of
Subtitle 3, Title 79, of the Revised Civil Statutes of Texas, 1925, as amended,
shall not apply to this Agreement or any Note issued hereunder.

                  SECTION 11.12. Submission to Jurisdiction; Waivers. Borrower
hereby irrevocably and unconditionally:

                  (a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the Courts of the State of
New York, in each case located in the county of New York, the courts of the
United States of America for the Southern District of New York, and appellate
courts from any thereof;

                  (b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;

                                       66
<PAGE>

                  (c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to Borrower
at its address set forth in Section 11.02 or at such other address of which the
Agent shall have been notified pursuant thereto;

                  (d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and

                  (e) waives, to the maximum extent permitted by applicable law,
any right it may have to claim or recover in any legal action or proceeding
referred to in this Section 11.12 any special, exemplary, punitive or
consequential damages.

                  SECTION 11.13. Acknowledgments. Borrower hereby acknowledges
that:

                  (a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement, any Notes and the other Loan
Documents;

                  (b) neither the Agent nor any Bank has any fiduciary
relationship with or duty to Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between the
Agent and the Banks, on one hand, and Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and

                  (c) no joint venture exists among the Banks or among Borrower
and the Banks.

                  SECTION 11.14. Limitation on Agreements. All agreements
between Borrower, the Agent or any Bank, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand being made in
respect of an amount due under any Loan Document or otherwise, shall the amount
paid, or agreed to be paid, to the Agent or any Bank for the use, forbearance,
or detention of the money to be loaned under this Agreement, any Notes or any
other Loan Document or otherwise or for the payment or performance of any
covenant or obligation contained herein or in any other Loan Document exceed the
Highest Lawful Rate. If, as a result of any circumstances whatsoever,
fulfillment of any provision hereof or of any of such documents, at the time
performance of such provision shall be due, shall involve transcending the limit
of validity prescribed by applicable usury law, then, ipso facto, the obligation
to be fulfilled shall be reduced to the limit of such validity, and if, from any
such circumstance, the Agent or any Bank shall ever receive interest or anything
that might be deemed interest under applicable law that would exceed the Highest
Lawful Rate, such amount that would be excessive interest shall be applied to
the reduction of the principal amount owing on account of such Bank's Loans or
the amounts owing on other obligations

                                       67
<PAGE>

of Borrower to such Bank under any Loan Document and not to the payment of
interest, or if such excessive interest exceeds the unpaid principal balance of
such Loans and such amounts, such excess shall be refunded to Borrower. All sums
paid or agreed to be paid to the Agent or any Bank for the use, forbearance or
detention of the indebtedness of Borrower to the Agent or any Bank shall, to the
fullest extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full term of such indebtedness until payment in full
of the principal (including the period of any renewal or extension thereof) so
that the interest on account of such indebtedness shall not exceed the Highest
Lawful Rate. Notwithstanding anything to the contrary contained in any Loan
Document, it is understood and agreed that if at any time the rate of interest
that accrues on the outstanding principal balance of any Loan shall exceed the
Highest Lawful Rate, the rate of interest that accrues on the outstanding
principal balance of any Loan owed to any Bank shall be limited to the Highest
Lawful Rate, but any subsequent reductions in the rate of interest that accrues
on the outstanding principal balance of any Loan owed to such Bank shall not
reduce the rate of interest that accrues on the outstanding principal balance of
such Loan below the Highest Lawful Rate until the total amount of interest
accrued on the outstanding principal balance of the Loans owed to such Bank
equals the amount of interest that would have accrued if such interest rate had
at all times been in effect. The terms and provisions of this Section 11.14
shall control and supersede every other provision of all Loan Documents.

                  SECTION 11.15. Removal of Bank. Notwithstanding anything
herein to the contrary, Borrower may at any time, for valid business reasons (as
determined by it in its sole discretion), remove any Bank upon 15 Business Days'
written notice to such Bank and the Agent (the contents of which notice shall be
promptly communicated by the Agent to each other Bank), such removal to be
effective at the expiration of such 15-day notice period; provided, however,
that no Bank may be removed hereunder at a time when a Default or an Event of
Default shall have occurred and be continuing. Each notice by Borrower under
this Section 11.15 shall constitute a representation by Borrower that the
removal described in such notice is permitted under this Section 11.15.
Concurrently with such removal, Borrower shall pay to such removed Bank all
amounts owing to such Bank hereunder and under any Notes in immediately
available funds. Upon full and final payment hereunder of all amounts owing to
such removed Bank, such Bank shall make appropriate entries in its accounts
evidencing payment of all its Loans hereunder and releasing Borrower from all
obligations owing to the removed Bank in respect of the Loans hereunder and
surrender to the Agent for return to Borrower any Notes of Borrower then held by
it. Effective immediately upon such full and final payment, such removed Bank
will not be considered to be a "Bank" for purposes of this Agreement except for
the purposes of any provision hereof that by its terms survives the termination
of this Agreement and the payment of the amounts payable hereunder. Effective
immediately upon such removal, the Commitment and Swing Line Commitment (if any)
of such removed Bank shall immediately terminate. Such removal will not,
however, affect the Commitment of any other Bank hereunder.

                                       68
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or agents thereunto duly authorized, as of
the date first above written.

                            BORROWER:

                            NORAM ENERGY CORP.

                            By: /s/ Marc Kilbride
                               -------------------------------------------------
                            Name: Marc Kilbride
                                 -----------------------------------------------
                            Title: Treasurer
                                  ----------------------------------------------

                            AGENT:

                            CITIBANK, N.A., as Agent

                            By: /s/ Mark Stanfield Packard
                               -------------------------------------------------
                                              Authorized Officer

Swing Line Commitment:      BANKS:

$100,000,000                CITIBANK, N.A.

                            By: /s/ Mark Stanfield Packard
                               -------------------------------------------------
                                              Authorized Officer

                            BARCLAYS BANK PLC

                            By: /s/ Sydney G. Dennis
                               -------------------------------------------------
                                              Authorized Officer

                                       69
<PAGE>

                            THE FIRST NATIONAL BANK OF CHICAGO

                            By: /s/ Madeleine N. Pember
                               -------------------------------------------------
                                                Authorized Officer

                            NATIONSBANK OF TEXAS, N.A.

                            By: /s/ (illegible)
                               -------------------------------------------------
                                                Authorized Officer

                            THE BANK OF NEW YORK

                            By: /s/ Nathan S. Howard
                               -------------------------------------------------
                                                Authorized Officer

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

                            By: /s/ (illegible)
                               -------------------------------------------------
                                                Authorized Officer

                            THE CHASE MANHATTAN BANK

                            By: /s/ (illegible)
                               -------------------------------------------------
                                                Authorized Officer

                                       70
<PAGE>

                            CREDIT SUISSE FIRST BOSTON

                            By: /s/ J. Moran            /s/ S. Karro
                               -------------------------------------------------
                                    J. Moran                S. Karro
                                    Director                Associate

                            DEPOSIT GUARANTY NATIONAL BANK

                            By: /s/ Herbert J. Doughty
                               -------------------------------------------------
                                              Authorized Officer

                            FLEET NATIONAL BANK

                            By: /s/ (illegible)
                               -------------------------------------------------
                                              Authorized Officer

                            TORONTO DOMINION (TEXAS), INC.

                            By: /s/ Jimmy Simien
                               -------------------------------------------------
                                              Authorized Officer

                            UNION BANK OF SWITZERLAND,
                              HOUSTON AGENCY

                            By: /s/ Andrew N. Taylor
                               -------------------------------------------------
                                              Authorized Officer

                            By: /s/ Robert L. Wells
                               -------------------------------------------------
                                              Authorized Officer

                                       71
<PAGE>

                            THE BANK OF NOVA SCOTIA

                            By: /s/ F. C. H. Ashby
                               -------------------------------------------------
                                              Authorized Officer

                            WESTDEUTSCHE LANDESBANK
                              GIROZENTRALE, NEW YORK BRANCH

                            By: /s/ (illegible)
                               -------------------------------------------------
                                              Authorized Officer

                            By: /s/ (illegible)
                               -------------------------------------------------
                                              Authorized Officer

                            MELLON BANK, N.A.

                            By: /s/ Brad S. Miller
                               -------------------------------------------------
                                              Authorized Officer

                                       72
<PAGE>
                                                                 EXHIBIT 2.02(a)

                           FORM OF NOTICE OF BORROWING

__________________________ , __________

Citibank, N.A., as Agent for the
  Banks parties to the Credit
    Agreement referred to below
2 Penn's Way, Suite 200
New Castle, Delaware 19720

Attention:  __________________________________

Ladies and Gentlemen:

         Reference is made to the Revolving Credit Agreement, dated as of March
31, 1998 (the "Credit Agreement") among NorAm Energy Corp., a Delaware
corporation, the Banks named therein, and Citibank, N.A., as Agent (the
"Agent"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby gives you notice pursuant to Section 2.02(a) of the Credit
Agreement that it requests a Committed Borrowing (a "Committed Loan Borrowing")
under the Credit Agreement, and in that connection sets forth below the terms on
which such Committed Loan Borrowing is requested to be made.

(A)      Borrowing Date of Committed Loan
         Borrowing (which is a Business Day)         ___________________________

(B)      Principal Amount of Committed Loan
         Borrowing(1)                                ___________________________

(C)      Interest rate basis(2)                      ___________________________

(D)      Interest Period and the last day thereof(3) ___________________________

         By each of the delivery of this Notice of Borrowing and the acceptance
of any or all of the Loans made by the Banks in response to this request, the
undersigned shall be deemed to have represented and warranted that the
conditions to lending applicable to the undersigned and specified

--------
(1) Not less than (a) $5,000,000 for ABR Loans and (b) $ 10,000,000 for
Committed LIBOR Rate Loans, and in integral multiples of $1,000,000 in excess
thereof.

(2) Committed LIBOR Rate Loan or ABR Loan.

(3) Which shall have a duration in the case of a Committed LIBOR Rate Loan, of
one, two, three or six months, or with the approval of all of the Banks, twelve
months and shall end not later than the Termination Date.

<PAGE>

in Article VI of the Credit Agreement have been satisfied with respect to the
Committed Loan Borrowing requested hereby. The undersigned requests that the
Committed Loan Borrowing requested hereby consist of Committed Loans made
ratably by the Banks in accordance with their respective Pro Rata Percentages.

                                   Very truly yours,

                                   NORAM ENERGY CORP.

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

                                       2
<PAGE>

                                                                 EXHIBIT 2.02(e)

                          FORM OF NOTICE OF SWING LOAN

__________________________ , ____

Citibank, N.A., as Swing Line
  Bank under the Credit
    Agreement referred to below
2 Penn's Way, Suite 200
New Castle, Delaware 19720

Attention:  ____________________________________

Ladies and Gentlemen:

         Reference is made to the Revolving Credit Agreement dated as of March
31, 1998 (the "Credit Agreement") among NorAm Energy Corp., a Delaware
corporation, the Banks named therein, and Citibank, N.A., as Agent (the
"Agent"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Credit Agreement. The
undersigned hereby gives you notice pursuant to Section 2.02(e) of the Credit
Agreement that it requests a Swing Loan ("Proposed Swing Loan") under the Credit
Agreement, and in that connection sets forth below the terms on which such
Proposed Swing Loan is requested to be made.

(A)      Borrowing Date of Proposed Swing Loan
         (which is a Business Day)                 _____________________________

(B)      Principal Amount of Proposed Swing
         Loan(4)                                   _____________________________

         By each of the delivery of this Notice of Swing Loan and the acceptance
of any Loan made in response to this request, the undersigned shall be deemed to
have represented and warranted that the conditions to lending applicable to the
undersigned and specified in Article VI of the Credit Agreement have been
satisfied with respect to the Proposed Swing Loan requested hereby.

                               Very truly yours,

                               NORAM ENERGY CORP.

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

------------
(4) $5,000,000 or an integral multiple of $1,000,000 in excess thereof.
<PAGE>
                                                                  EXHIBIT 3.02-A

                        [FORM OF COMPETITIVE BID REQUEST]

__________________________ , ____

Citibank, N.A., as Agent
2 Penn's Way, Suite 200
New Castle, Delaware 19720

Ladies and Gentlemen:

         Reference is made to the Revolving Credit Agreement, dated as of March
31, 1998 among NorAm Energy Corp., a Delaware corporation, the Banks named
therein and Citibank, N.A., as Agent for such Banks (the "Credit Agreement").
Terms defined in the Credit Agreement are used herein as therein defined.

         This is a Competitive Bid Request pursuant to Section 3.02 of the
Credit Agreement requesting quotes for the following CAF Loans:

<TABLE>
<S>                                       <C>                       <C>                       <C>
Aggregate Principal Amount                $                         $                         $
                                          --------------------      ---------------------     -------------------
CAF Loan Date
                                          --------------------      ---------------------     -------------------
Type of CAF Loan*
                                          --------------------      ---------------------     -------------------
Maturity Date**
                                          --------------------      ---------------------     -------------------
Interest Payment Dates
                                          --------------------      ---------------------     -------------------
</TABLE>

                                        Very truly yours,

                                        NORAM ENERGY CORP.

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

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

*        Fixed Rate Loan or CAF LIBOR Rate Loan.

**       A period of at least 7 days and no longer than 270 days.

Note:    Pursuant to the Credit Agreement, a Competitive Bid Request may be
         transmitted in writing, by telex or by facsimile transmission, or by
         telephone, immediately confirmed by telex or facsimile transmission. In
         any case, a Competitive Bid Request shall contain the information
         specified in the second paragraph of this form.

<PAGE>

                                                                  EXHIBIT 3.02-B

                            [FORM OF COMPETITIVE BID]

__________________________ , ____
Citibank, N.A., as Agent
2 Penn's Way, Suite 200
New Castle, Delaware 19720

Ladies and Gentlemen:

         Reference is made to the Revolving Credit Agreement, dated as of March
31, 1998 among NorAm Energy Corp., a Delaware corporation (the "Company"), the
Banks named therein, and Citibank, N.A., as Agent (as the same may be amended,
supplemented or otherwise modified, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein as therein defined.

         In accordance with Section 3.02 of the Credit Agreement, the
undersigned Bank offers to make CAF Loans thereunder in the following amounts
with the following maturity dates:

CAF Loan Date:  ____________________, 19____

Aggregate Maximum Amount:  $_________________________

<TABLE>
<CAPTION>
Maturity Date 1:                         Maturity Date 2:                       Maturity Date 3:
----------------                         ----------------                       ----------------
<S>                                     <C>                                    <C>
Maximum Amount $___________              Maximum Amount $___________            Maximum Amount $___________

Rate* Amount $_____________              Rate* Amount $____________             Rate* Amount $____________

Rate* Amount $____________               Rate* Amount $____________             Rate* Amount $____________
</TABLE>

         The undersigned hereby confirms that it is prepared to extend credit to
the Company upon acceptance by the Company of this bid in accordance with
Section 3.02(d) of the Credit Agreement.

                                     Very truly yours,

                                     [NAME OF BIDDING BANK]

                                     By:
                                        ----------------------------------------
                                        Name:
                                        Title:
                                        Telephone No.:
                                        Fax:

----------------------
     *   In the case of CAF Loans which are CAF LIBOR Rate Loans, insert CAF
         Margin. In the case of CAF Loans which are Fixed Rate Loans, insert
         fixed rate bid.

<PAGE>
                                                                  EXHIBIT 3.02-C

                     [FORM OF COMPETITIVE BID CONFIRMATION]

__________________________ , ____

Citibank, N.A., as Agent
2 Penn's Way, Suite 200
New Castle, Delaware 19720

Ladies and Gentlemen:

         Reference is made to the Revolving Credit Agreement, dated as of March
31, 1998 among NorAm Energy Corp., a Delaware corporation, the Banks named
therein, and Citibank, N.A., as Agent (the "Agent") (as the same may be amended,
supplemented or otherwise modified, the "Credit Agreement"). Terms defined in
the Credit Agreement are used herein as therein defined.

         In accordance with Section 3.02 of the Credit Agreement, the
undersigned accepts and confirms the offers by the Bank(s) to make CAF Loans to
the undersigned on _________, ____ [CAF Loan Date] under said Section 3.02 in
the (respective) amount(s) set forth on the attached list of CAF Loans offered.

         By delivery of this Competitive Bid Confirmation and the acceptance of
any or all of the CAF Loans offered by the Banks in response to this Competitive
Bid Confirmation, the undersigned shall be deemed to have represented and
warranted that the applicable conditions to lending specified in Article VI of
the Credit Agreement have been satisfied with respect to such CAF Loans.

                                    Very truly yours,

                                    NORAM ENERGY CORP.

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

         [Borrower to attach CAF Loan offer list prepared by Agent with accepted
amount entered by Borrower to the right of each CAF Loan offer].

<PAGE>
                                                                    EXHIBIT 4.07

                   NOTICE OF INTEREST CONVERSION/CONTINUATION

TO: Citibank, N.A., in its capacity as Agent (the "Agent") under that certain
Revolving Credit Agreement dated as of March 31, 1998 (as the same may from time
to time be amended, supplemented or otherwise modified, the "Credit Agreement";
terms defined therein being used herein as so defined) entered into by and among
NorAm Energy Corp., a Delaware corporation (the "Borrower"), the Banks and the
Agent.

         Pursuant to Section 4.07 of the Credit Agreement, this Notice of
Interest Conversion/ Continuation (the "Notice") represents the Borrower's
election to [insert one or more of the following]:

         1. Convert $___________ in aggregate principal amount of Committed
LIBOR Rate Loans with a current Interest Period ending on _____________, to ABR
Loans on ______________.

         2. Convert $____________ in aggregate principal amount of ABR Loans to
Committed LIBOR Rate Loans on _______________. The initial Interest Period for
such Committed LIBOR Rate Loans is requested to be a ____________ (__) month
period.

         3. Convert $____________ in aggregate principal amount of Committed
LIBOR Rate Loans with a current Interest Period ending on ____________, to
Committed LIBOR Rate Loans on ______________. The Interest Period for such
Committed LIBOR Rate Loans is requested to be a _______________ (__) month
period.

         4. Continue $____________ in aggregate principal amount of Committed
LIBOR Rate Loans with a current Interest Period ending on _______________ as
Committed LIBOR Rate Loans. The Interest Period for such Committed LIBOR Rate
Loans is requested to be a ________________ (__) month period.

         5. The Borrower hereby certifies that no Event of Default has occurred
and is continuing.

         6. The specific Committed Loans to be converted or continued pursuant
to this Notice are as follows: [identify, separately for each of the foregoing
paragraphs 1, 2, 3 and 4, the specific Committed Loans to which each such
paragraph is to apply.]

<PAGE>

Dated:
         ----------------------

                                    NORAM ENERGY CORP.

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

         The undersigned Banks hereby consent to the Borrower's request for a
twelve (12) month Interest Period for the Committed LIBOR Rate Loans made by the
Banks to the Borrower specified in Paragraph [2] [3] [4] above.

Dated:
         ----------------------

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

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

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

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

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

                                       2
<PAGE>

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

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

                                       3
<PAGE>
                                                              EXHIBIT 6.01(v)(a)

            [OPINION OF LIDDELL, SAPP, ZIVLEY, HILL & LABOON, L.L.P.]

                                 March 30, 1998

To each of the Banks party to the Revolving Credit Agreement referred to below

         Re: Revolving Credit Agreement among NorAm Energy Corp., Citibank, N.A.
             and various banks

Ladies and Gentlemen:

         We have acted as counsel to NorAm Energy Corp., a Delaware corporation
(the "Borrower"), in connection with that certain Revolving Credit Agreement
dated as of March 30, 1998 (the "Credit Agreement") among the Borrower, the
banks party thereto as "Banks," and Citibank, N.A. as Agent. This opinion is
furnished to you pursuant to Section 6.01(v) of the Credit Agreement.
Capitalized terms used but not defined herein have the respective meanings given
to such terms in the Credit Agreement.

         In connection with the opinions hereinafter expressed, we have examined
signed counterparts of the Credit Agreement. In addition, we have examined the
originals, or copies certified or otherwise identified, of (i) the articles or
certificate of incorporation and bylaws, as amended or restated to the date
hereof, of the Borrower and each Significant Subsidiary, (ii) certain corporate
records of the Borrower as furnished to us by the Borrower, (iii) certificates
of public officials and of representatives of the Borrower, (iv) statutes and
(v) other instruments and documents, as a basis for the opinions hereinafter
expressed.

         In our examination of all agreements and other instruments and
documents in connection with the opinions expressed herein, we have assumed,
without independent investigation, (i) the due execution and delivery pursuant
to due authorization on behalf of the parties thereto, other than the Borrower,
of the Credit Agreement, (ii) the genuineness of all signatures, other than the
signatures of officers and agents of the Borrower and (iii) the authenticity of
all documents submitted to us as

<PAGE>

originals and the conformity to authentic original documents of all copies
submitted to us as certified, conformed or photostatic copies.

         Based upon the foregoing and subject to the assumptions, limitations
and qualifications hereinafter stated, we are of the opinion that:

         1. The Borrower is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and the State of Texas.

         2. To the best of our knowledge, the Borrower does not conduct any
business or own or lease any Property in such a manner or to such an extent as
would require it to be authorized or qualified to do business in any
jurisdiction in which it is not qualified to do business except where the
failure to be so duly authorized or qualified to do business, individually or in
the aggregate, would not have a Material Adverse Effect on the Borrower.

         3. The Borrower has all requisite corporate power and authority to
conduct its business as presently conducted and to execute and deliver, and to
perform its obligations and borrow under, the Credit Agreement.

         4. The execution, delivery and performance by the Borrower of the
Credit Agreement have been duly authorized by all requisite corporate action on
the part of the Borrower, and the Credit Agreement has been duly executed and
delivered by or on behalf of the Borrower.

         5. To the best of our knowledge, the execution, delivery and
performance by the Borrower of the Credit Agreement do not and will not, (i)
violate the articles or certificate of incorporation or bylaws of the Borrower
or any Significant Subsidiary, (ii) violate any order of any Texas, New York,
Delaware or United States federal court or other agency of government having
jurisdiction over the Borrower or any Significant Subsidiary, (iii) violate any
provision of any existing Texas, Delaware, New York or United States federal law
(including without limitation, Regulation G, T, U and X) applicable to the
Borrower or any Significant Subsidiary, (iv) conflict with, result in a breach
of or constitute (with due notice or lapse of time or both or any other
condition) a default under any indenture, agreement or other instrument to which
the Borrower or any Significant Subsidiary is a party and that evidences
Indebtedness for Borrowed Money of the Borrower or any Significant Subsidiary,
except for such conflicts, breaches or defaults that do not have or would not
have a Material Adverse Effect on the Borrower, or (v) result in the creation or
imposition of any material Lien upon any of the Properties of the Borrower or
any Significant Subsidiary.

         6. The Credit Agreement is the legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in accordance with its terms.

         7. If, notwithstanding the provisions of the Credit Agreement selecting
the laws of the State of New York as the governing law for the Credit Agreement,
the Credit Agreement were held

                                       2
<PAGE>

by a court to be governed by the laws of the State of Texas, the Credit
Agreement would, under the laws of the State of Texas, constitute the legal,
valid and binding obligations of the Borrower, enforceable against the Borrower
in accordance with its terms.

         8. To the best of our knowledge, there is no action, suit or proceeding
pending or threatened, at law or in equity, or before or by any Texas, Delaware,
New York or United States federal court or any Texas, Delaware, New York or
United States federal government agency, body or official, (i) relating to the
transactions provided for in the Credit Agreement or (ii) in which there is a
reasonable probability of an adverse decision that is likely to have a Material
Adverse Effect on the Borrower.

         9. To the best of our knowledge, no authorization or approval of, or
action by, and no notice to or filing with, any Texas, Delaware, New York or
United States federal governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of the Credit
Agreement.

         10. Neither the Borrower nor any Significant Subsidiary is an
"investment company" within the meaning of, or otherwise subject to regulation
under, the Investment Company Act of 1940, as amended.

         The opinions set forth above are subject to the following additional
assumptions, limitations and qualifications:

         (A) The opinions set forth above that are stated "to the best of our
knowledge" are based upon reasonable inquiries of an officer or representative
of the Borrower, but are given without any other independent investigation.

         (B) The opinion set forth in Paragraph 1 above as to the good standing
of the Borrower is based solely on a review of certificates of public officials
of the State of Texas and Delaware.

         (C) The opinions as to enforceability set forth in Paragraphs 6 and 7
above are subject to the qualifications that (i) the enforceability of the
Credit Agreement may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws in effect from time to time
affecting the rights of creditors generally and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and (ii) the enforceability of the indemnity
provisions contained in the Credit Agreement may be limited by considerations of
public policy or to the extent claims therefor arise under any applicable
securities laws, and the opinion set forth in Paragraph 6 above is also subject
to the qualification that the enforceability of the Credit Agreement may be
limited by the judicial imposition of an implied covenant of good faith.

         (D) For the purposes of rendering the opinions expressed in Paragraph 7
above, we have assumed that (i) the Agent and the Banks will at all times
(including, without limitation, in

                                       3
<PAGE>

connection with any prepayment of any part of the Loans) comply strictly with
the provisions of Section 11.14 of the Credit Agreement, (ii) all fees and
charges, including, but not limited to, commitment fees and attorneys' fees,
that under applicable laws might constitute interest on the Loans and that may
be collected in connection with the Loans are as set forth in the Credit
Agreement and are, or will be, for services actually rendered, (iii) that
Borrower has not been requested by the Agent and the Banks, as a condition to
the extension of the credit described in the Credit Agreement, to guarantee,
assume or otherwise become liable in any way in respect of, or to secure in any
respect, any indebtedness of any other person to the Agent and the Banks, or to
agree to do so and (iv) that there are not, nor shall there be, any compensating
balances, deposits or other funds frozen, pledged or hypothecated as security
for or otherwise required in connection with the indebtedness incurred pursuant
to the Credit Agreement, which balances, deposits or other sums have been
acquired with loan proceeds.

         (E) We express no opinion with respect to the availability or
enforceability of the following provisions set forth in the Credit Agreement:
(i) any provisions of the Credit Agreement purporting to establish any
evidentiary standard or to waive either illegality as a defense to the
performance of contract obligations or any other defense to such performance
that cannot, as a matter of law, be effectively waived, (ii) any provision of
the Credit Agreement purporting to waive objection to venue, or (iii) any
severability provisions set forth in the Credit Agreement.

         (F) The opinions as to Significant Subsidiaries set forth in Paragraphs
5 and 10 above are based upon the list of Significant Subsidiaries attached
hereto as Attachment 1 which list was provided to us by the Borrower.

         (G) We have not been called upon to, and accordingly do not, express
any opinion as to the various state and federal laws regulating banks or the
conduct of their business that may relate to the Credit Agreement and the
transactions provided for therein.

         (H) The opinion set forth in Paragraph 6 above, insofar as it relates
to the enforceability of New York choice of law provisions set forth in the
Credit Agreement, is subject to the discussion set forth below.

         While the matter is not entirely free from doubt, under Texas choice of
law principles in a properly presented case, a Texas court (or a federal court
applying Texas conflict of law rules) should recognize and give effect to the
governing law provisions in the Credit Agreement, except for matters of
procedure.

         As a factual basis for the conclusion expressed in the preceding
paragraph, we have assumed that the chief executive office of the Agent is
located in the State of New York and that the parties have not conspired to
evade Texas usury laws. No facts have come to our attention that are
inconsistent with these assumptions.

                                       4
<PAGE>

         We are qualified to practice law in the States of Texas and New York,
and we do not hold ourselves out as experts on, or express any opinion herein
concerning, the laws of any jurisdiction other than the existing laws of the
State of Texas and the State of New York, the General Corporation Law of the
State of Delaware and the existing applicable federal laws of the United States.
This opinion is being furnished to each of the Banks, the Agent and Bracewell &
Patterson, L.L.P., as counsel for the Agent, solely for their use. This opinion
speaks as of the date hereof, and we disclaim any obligation to update this
opinion.

                                        Very truly yours,

                                       5
<PAGE>
                                                                    Attachment I
                                                                      to Opinion

                            Significant Subsidiaries

Mississippi River Transmission Corporation

NorAm Energy Management, Inc.

NorAm Field Services Corp.

NorAm Gas Transmission Company

<PAGE>
                                                              EXHIBIT 6.01(v)(b)

                           [IN-HOUSE COUNSEL OPINION]

                                 March 30, 1998

To each of the Banks party to the Revolving Credit Agreement referred to below

         Re: Revolving Credit Agreement among NorAm Energy Corp., Citibank, N.A.
             and various banks

Ladies and Gentlemen:

         As assistant corporate secretary of NorAm Energy Corp., a Delaware
corporation (the "Borrower"), I am furnishing this opinion to you in connection
with that certain Revolving Credit Agreement dated as of March 30, 1998 (the
"Credit Agreement") among the Borrower, the banks party thereto as "Banks," and
Citibank, N.A. as Agent. Capitalized terms used but not defined herein have the
respective meanings given to such terms in the Credit Agreement.

         In connection with the opinions hereinafter expressed, I have examined,
either personally or through other attorneys under my supervision, direction and
control, signed counterparts of the Credit Agreement and the originals, or
copies certified or otherwise identified, of (i) the certificate of
incorporation and bylaws, as amended or restated to the date hereof, of the
Borrower and each Significant Subsidiary, (ii) certain corporate records of the
Borrower, (iii) certificates of public officials, (iv) statutes and (v) other
instruments and documents, as a basis for the opinions hereinafter expressed.

         In my examination of all agreements and other instruments and documents
in connection with the opinions expressed herein, I have assumed, without
independent investigation, (i) the due execution and delivery pursuant to due
authorization on behalf of the parties thereto, other than the Borrower, of the
Credit Agreement, (ii) the genuineness of all signatures, other than the
signatures of officers and agents of the Borrower and (iii) the authenticity of
all documents submitted to me as

<PAGE>

originals and the conformity to authentic original documents of all copies
submitted to me as certified, conformed or photostatic copies.

         Based upon the foregoing and subject to the assumptions, limitations
and qualifications hereinafter stated, I am of the opinion that:

         1. The Borrower is a corporation duly organized and validly existing in
good standing under the laws of the State of Delaware and the State of Texas.

         2. The Borrower does not conduct any business or own or lease any
Property in such a manner or to such an extent as would require it to be
authorized or qualified to do business in any jurisdiction in which it is not
qualified to do business, except where the failure to be so authorized or
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on the Borrower.

         3. The Borrower has all requisite corporate power and authority to
conduct its business as presently conducted and to execute and deliver, and to
perform its obligations and borrow under, the Credit Agreement.

         4. The execution, delivery and performance by the Borrower of the
Credit Agreement have been duly authorized by all requisite corporate action on
the part of the Borrower, and the Credit Agreement has been duly executed and
delivered by or on behalf of the Borrower.

         5. The execution, delivery and performance by the Borrower of the
Credit Agreement do not and will not, (i) violate the articles or certificate of
incorporation or bylaws of the Borrower or any Significant Subsidiary, (ii)
violate any order of any Texas, New York, Delaware or United States federal
court or other agency of government having jurisdiction over the Borrower or any
Significant Subsidiary, (iii) violate any provision of any existing Texas,
Delaware, New York or United States federal law (including without limitation,
Regulation G, T, U and X) applicable to the Borrower or any Significant
Subsidiary, (iv) conflict with, result in a breach of or constitute (with due
notice or lapse of time or both or any other condition) a default under any
indenture, agreement or other instrument to which the Borrower or any
Significant Subsidiary is a party and that evidences Indebtedness for Borrowed
Money of the Borrower or any Significant Subsidiary, except for such conflicts,
breaches or defaults that do not have or would not have a Material Adverse
Effect on the Borrower, or (v) result in the creation or imposition of any
material Lien upon any of the Properties of the Borrower or any Significant
Subsidiary.

         6. There is no action, suit or proceeding pending or, to the best of my
knowledge, threatened, at law or in equity, or before or by any Texas, Delaware,
New York or United States federal court or any Texas, Delaware, New York or
United States federal government agency, body or official, (i) relating to the
transactions provided for in the Credit Agreement or (ii) in which there is a
reasonable probability of an adverse decision that is likely to have a Material
Adverse Effect on the Borrower.

                                       2
<PAGE>

         7. No authorization or approval of, or action by, and no notice to or
filing with, any Texas, Delaware, New York or United States federal governmental
authority or regulatory body is required for the due execution, delivery and
performance by the Borrower of the Credit Agreement.

         8. Neither the Borrower nor any Significant Subsidiary is subject to
regulation under the Public Utility Holding Company Act of 1935, as amended,
except Section 9(a)(2) thereof relating to the acquisition of securities of
other public utility companies or public utility holding companies.

         The opinions set forth above are subject to the following additional
assumptions, limitations and qualifications:

         (A) The opinion set forth in Paragraph 1 above as to the good standing
of the Borrower is based solely on a review of certificates of public officials
of the State of Texas and Delaware.

         (B) The opinions as to Significant Subsidiaries set forth in Paragraphs
5 and 8 above are based upon the list of Significant Subsidiaries attached
hereto as Attachment 1.

         (C) I have not been called upon to, and accordingly do not, express any
opinion as to the various state and federal laws regulating banks or the conduct
of their business that may relate to the Credit Agreement and the transactions
provided for therein.

         I am qualified to practice law in the State of Texas, and I do not hold
myself out as an expert on, or express any opinion herein concerning, the laws
of any jurisdiction other than the existing laws of the State of Texas, the
existing General Corporation Law of the State of Delaware and the existing
applicable federal laws of the United States. This opinion is being furnished to
each of the Banks, the Agent and Bracewell & Patterson, L.L.P., as counsel for
the Agent, solely for their use. This opinion speaks as of the date hereof, and
I disclaim any obligation to update this opinion.

                                         Very truly yours,

                                         Rufus Scott
                                         Attorney at Law

                                       3
<PAGE>

                                                                    Attachment I
                                                                      to Opinion

                            Significant Subsidiaries

Mississippi River Transmission Corporation

NorAm Energy Management, Inc.

NorAm Field Services Corp.

NorAm Gas Transmission Company

<PAGE>
                                                                EXHIBIT 11.06(c)

                    COMMITTED LOAN ASSIGNMENT AND ACCEPTANCE

         COMMITTED LOAN ASSIGNMENT AND ACCEPTANCE (the "Assignment and
Acceptance"), dated as of the date set forth in Item 1 of Schedule I hereto,
among the Transferor Bank set forth in Item 2 of Schedule I hereto (the
"Transferor Bank"), each Purchasing Bank set forth in Item 3 of Schedule I
hereto (each, a "Purchasing Bank"), and Citibank, N.A., as agent for the Banks
under the Credit Agreement described below (in such capacity, the "Agent").

                              W I T N E S S E T H :

         WHEREAS, this Assignment and Acceptance is being executed and delivered
in accordance with Section 11.06(c) of the Revolving Credit Agreement, dated as
of March 31, 1998 among NorAm Energy Corp., a Delaware corporation (the
"Borrower"), the Transferor Bank and the other Banks party thereto, and the
Agent (as from time to time further amended, supplemented or otherwise modified
in accordance with the terms thereof, the "Credit Agreement"; terms defined
therein being used herein as therein defined);

         WHEREAS, each Purchasing Bank (if it is not already a Bank party to the
Credit Agreement) wishes to become a Bank party to the Credit Agreement; and

         WHEREAS, the Transferor Bank is selling and assigning to each
Purchasing Bank, rights, obligations and commitments under the Credit Agreement;

         NOW, THEREFORE, the parties hereto hereby agree as follows:

         1. Upon receipt by the Agent of five counterparts of this Assignment
and Acceptance, to each of which is attached a fully completed Schedule I and
Schedule II, and each of which has been executed by the Transferor Bank, each
Purchasing Bank (and any other person required by the Credit Agreement to
execute this Assignment and Acceptance), the Agent will transmit to the
Borrower, the Transferor Bank and each Purchasing Bank a Transfer Effective
Notice, substantially in the form of Schedule III to this Assignment and
Acceptance (a "Transfer Effective Notice"). Such Transfer Effective Notice shall
set forth, inter alia, the date on which the transfer effected by this
Assignment and Acceptance shall become effective (the "Transfer Effective
Date"), which date shall be the fifth Business Day following the date of such
Transfer Effective Notice or such other date as may be specified therein. From
and after the Transfer Effective Date, each Purchasing Bank shall be a Bank
party to the Credit Agreement for all purposes thereof.

<PAGE>

         2. At or before 12:00 Noon, local time of the Transferor Bank, on the
Transfer Effective Date, each Purchasing Bank shall pay to the Transferor Bank,
in immediately available funds, an amount equal to the purchase price, as agreed
between the Transferor Bank and such Purchasing Bank (the "Purchase Price"), of
the portion being purchased by such Purchasing Bank (such Purchasing Bank's
"Purchased Percentage") of the outstanding Committed Loans, the outstanding
participations purchased by the Transferor Bank pursuant to Section 2.04 or 5.04
of the Credit Agreement and the other amounts owing to the Transferor Bank under
the Credit Agreement. Effective upon receipt by the Transferor Bank of the
Purchase Price from a Purchasing Bank, the Transferor Bank hereby irrevocably
sells, assigns and transfers to such Purchasing Bank, without recourse,
representation or warranty, and each Purchasing Bank hereby irrevocably
purchases, takes and assumes from the Transferor Bank, such Purchasing Bank's
Purchased Percentage of the Commitments of the Transferor Bank and of the
outstanding Committed Loans, such outstanding participations and the other
amounts owing to the Transferor Bank under the Credit Agreement, together with
all instruments, documents and collateral security pertaining thereto.

         3. The Transferor Bank has made arrangements with each Purchasing Bank
with respect to (i) the portion, if any, to be paid, and the date or dates for
payment, by the Transferor Bank to such Purchasing Bank of any fees heretofore
received by the Transferor Bank pursuant to the Credit Agreement prior to the
Transfer Effective Date and (ii) the portion, if any, to be paid, and the date
or dates for payment, by such Purchasing Bank to the Transferor Bank of fees or
interest received by such Purchasing Bank pursuant to the Credit Agreement from
and after the Transfer Effective Date.

         4. (a) All principal payments that would otherwise be payable from and
after the Transfer Effective Date to or for the account of the Transferor Bank
pursuant to the Credit Agreement shall, instead, be payable to or for the
account of the Transferor Bank and the Purchasing Banks, as the case may be, in
accordance with their respective interests as reflected in this Assignment and
Acceptance.

         (b) All interest, fees and other amounts that would otherwise accrue
for the account of the Transferor Bank from and after the Transfer Effective
Date pursuant to the Credit Agreement shall, instead, accrue for the account of,
and be payable to, the Transferor Bank and the Purchasing Banks, as the case may
be, in accordance with their respective interests as reflected in this
Assignment and Acceptance. In the event that any amount of interest, fees or
other amounts accruing prior to the Transfer Effective Date was included in the
Purchase Price paid by any Purchasing Bank, the Transferor Bank and each
Purchasing Bank will make appropriate arrangements for payment by the Transferor
Bank to such Purchasing Bank of such amount upon receipt thereof from the
relevant Borrower.

                                       2

<PAGE>

         5. Concurrently with the execution and delivery hereof, the Transferor
Bank will provide to each Purchasing Bank (if it is not already a Bank party to
the Credit Agreement) conformed copies of all documents delivered on the
Effective Date in satisfaction of the conditions precedent set forth in the
Credit Agreement.

         6. Each of the parties to this Assignment and Acceptance agrees that at
any time and from time to time upon the written request of any other party, it
will execute and deliver such further documents and do such further acts and
things as such other party may reasonably request in order to effect the
purposes of this Assignment and Acceptance.

         7. By executing and delivering this Assignment and Acceptance, the
Transferor Bank and each Purchasing Bank confirm to and agree with each other
and the Agent and the Banks as follows: (i) other than the representation and
warranty that it is the legal and beneficial owner of the interest being
assigned hereby free and clear of any adverse claim, the Transferor Bank makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (ii) the Transferor Bank
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or the performance or observance by
the Borrower of any of its obligations under the Agreement or any other
instrument or document furnished pursuant hereto; (iii) each Purchasing Bank
confirms that it has received a copy of the Credit Agreement, together with
copies of the financial statements referred to in Section 7.01(m), the financial
statements delivered pursuant to Section 8.01(a), if any, and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iv) each
Purchasing Bank will, independently and without reliance upon the Agent, the
Transferor Bank or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Credit Agreement; (v) each Purchasing
Bank appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Agreement as are delegated to the
Agent by the terms thereof, together with such powers as are reasonably
incidental thereto, all in accordance with Article X of the Credit Agreement;
and (v) each Purchasing Bank agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Credit Agreement
are required to be performed by it as a Bank.

         8. Each party hereto represents and warrants to and agrees with the
Agent that it is aware of and will comply with the provisions of Sections 11.06
(g) and 11.06(h) of the Credit Agreement.

                                       3
<PAGE>

         9. Schedule II hereto sets forth the revised Commitments and Pro Rata
Percentages of the Transferor Bank and each Purchasing Bank as well as
administrative information with respect to each Purchasing Bank.

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

         IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers or agents
on Schedule I hereto as of the date set forth in Item 1 or Schedule I hereto.

                                       4
<PAGE>

                                                                   SCHEDULE I TO
                                        COMMITTED LOAN ASSIGNMENT AND ACCEPTANCE

                            COMPLETION OF INFORMATION
                            SIGNATURES FOR ASSIGNMENT
                                 AND ACCEPTANCE

         Re: Revolving Credit Agreement, dated as of March 31, 1998, with NorAm
             Energy Corp.

<TABLE>
<S>               <C>                               <C>
Item 1            (Date of Assignment
                    and Acceptance):                 [Insert date of Assignment and Acceptance]

Item 2            (Transferor Bank):                 [Insert name of Transferor Bank]

Item 3            (Purchasing Bank[s]):              [Insert name[s] of Purchasing Bank[s]]

Item 4            (Signatures of Parties to
                  Assignment and
                  Acceptance):

                                                     ___________________________________________, as
                                                            Transferor Bank

                                                     By___________________________________________
                                                            Title:

                                                     ___________________________________________, as a
                                                            Purchasing Bank

                                                     By___________________________________________
                                                            Title:

                                                     ___________________________________________, as a
                                                            Purchasing Bank

                                                     By___________________________________________
                                                            Title:

</TABLE>

<PAGE>

CONSENTED TO AND ACKNOWLEDGED:

CITIBANK, N.A., as Agent

By _________________________________________
         Title:

NORAM ENERGY CORP.

By _________________________________________
         Title:

[Consents required only to the
extent specified in the Credit
Agreement]

ACCEPTED FOR RECORDATION IN REGISTER:

CITIBANK, N.A., as Agent

By _________________________________________
         Title:

                                       2
<PAGE>

                                                                  SCHEDULE II TO
                                        COMMITTED LOAN ASSIGNMENT AND ACCEPTANCE

                       LIST OF LENDING OFFICES, ADDRESSES
                       FOR NOTICES AND COMMITMENT AMOUNTS

[Name of Transferor Bank]            Revised Commitment:               $________

                                     Revised Pro Rata Percentage:      $________

[Name of Purchasing Bank]            New Commitment:                   $________

                                     New Pro Rata Percentage:          $________

Address for Notices:

[Address]
Attention: ________________________
Telex:_____________________________
Answerback:________________________
Telephone:_________________________
Telecopier:________________________

LIBOR Lending Office:

____________________________________

____________________________________

____________________________________

Domestic Lending Office:

____________________________________

____________________________________

____________________________________

<PAGE>

                                                                 SCHEDULE III TO
                                        COMMITTED LOAN ASSIGNMENT AND ACCEPTANCE

                       [Form of Transfer Effective Notice]

To:      NorAm Energy Corp., [Transferor Bank and each Purchasing Bank]

         The undersigned, as Agent [delegate of the Agent performing
administrative functions of the Agent] under the Revolving Credit Agreement,
dated as of March 31, 1998, among NorAm Energy Corp., the Banks parties thereto
and Citibank, N.A., as Agent, acknowledges receipt of five executed counterparts
of a completed Assignment and Acceptance, as described in Schedule I hereto.
[Note: attach copy of Schedule I from Assignment and Acceptance.] Terms defined
in such Assignment and Acceptance are used herein as therein defined.

         1. Pursuant to such Assignment and Acceptance, you are advised that the
Transfer Effective Date will be _____________.

         2. Pursuant to such Assignment and Acceptance, each Purchasing Bank is
required to pay its Purchase Price to the Transferor Bank at or before 12:00
Noon on the Transfer Effective Date in immediately available funds.

                            Very truly yours,

                            CITIBANK, N.A., as Agent

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

<PAGE>
                                                             EXHIBIT 11.06(i)(a)

                          [FORM OF COMMITTED LOAN NOTE]

$___________                  REVOLVING CREDIT NOTE             __________, ____

         FOR VALUE RECEIVED, the undersigned, NorAm Energy Corp., a Delaware
corporation (the "Company"), hereby unconditionally promises to pay to the order
of _________________ (the "Bank") at the office of Citibank, N.A. located at 2
Penn's Way, New Castle, Delaware 19720, in lawful money of the United States of
America and in immediately available funds, the principal amount of the lesser
of (a) _________ DOLLARS ($_______) or (b) the aggregate unpaid principal amount
of all Committed Loans made by the Bank to the Company pursuant to Section 2.01
of the Revolving Credit Agreement dated as of March 31, 1998 among the Company,
Citibank, N.A., as Agent, the Bank and the other banks that are or may become
parties thereto (as the same may from time to time be amended, supplemented or
otherwise modified, the "Credit Agreement"; terms defined therein being used
herein as so defined), which sum shall be due and payable on such date or dates
as determined in accordance with the Credit Agreement. The final maturity date
of this Revolving Credit Note is the Termination Date.

         The Company further agrees to pay interest in like money at such office
on the unpaid principal amount hereof from time to time from the date hereof at
the rates and on the dates specified in Section 4.04 of the Credit Agreement
until such principal amount is paid in full. Interest on any principal amount
hereof which is not paid when due (whether at the stated maturity thereof, by
acceleration or otherwise) shall bear interest at the rate provided in Section
4.04 of the Credit Agreement until such past due principal is paid in full.

         The holder of this Revolving Credit Note is authorized to record the
date, Type and amount of each Committed Loan made by the Bank pursuant to
Section 2.01 of the Credit Agreement, each continuation thereof, each conversion
of all or a portion thereof to another Type, the date and amount of each payment
or prepayment of principal thereof, and, in the case of Committed LIBOR Rate
Loans, the length of each Interest Period with respect thereto, on the schedule
annexed hereto and made a part hereof and any such recordation shall constitute
prima facie evidence of the accuracy of the information so recorded; provided
that the failure of the Bank to make such recordation or any error in such
recordation shall not limit or otherwise affect the obligations of the Company
hereunder or under the Credit Agreement.

         This Revolving Credit Note is one of the Notes referred to in the
Credit Agreement and is entitled to the benefits thereof, is subject to optional
prepayment in whole or in part as provided therein and is subject to the terms
and conditions thereof.

<PAGE>

         Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts remaining unpaid on this
Revolving Credit Note shall become, or may be declared to be, immediately due
and payable, all as provided therein.

         All parties now and hereafter liable with respect to this Revolving
Credit Note, whether maker, principal, surety or guarantor, waive notice of
dishonor, notice of acceleration, notice of intent to accelerate the maturity
hereof, presentment, demand, protest and notice of protest and all other notices
of any kind.

         THIS REVOLVING CREDIT NOTE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

                                      NORAM ENERGY CORP.

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

                                       2
<PAGE>

                           SCHEDULE OF COMMITTED LOANS

<TABLE>
<CAPTION>
                                                                     Date of             Date of         Amount of
    Date of        Amount of       Type of         Interest        Conversion/         Prepayment        Prepayment
     Loan            Loan            Loan           Period         Continuation        or Payment        or Payment
     ----            ----            ----           ------         ------------        ----------        ----------
<S>                <C>             <C>             <C>             <C>                 <C>               <C>

</TABLE>

<PAGE>
                                                             EXHIBIT 11.06(i)(b)

                            [FORM OF SWING LOAN NOTE]

                                 PROMISSORY NOTE

$___________                                                    __________, ____

         FOR VALUE RECEIVED, the undersigned, NorAm Energy Corp., a Delaware
corporation (the "Company"), hereby unconditionally promises to pay to the order
of Citibank, N.A. (the "Bank") at the Bank's office located at 2 Penn's Way, New
Castle, Delaware 19720, in lawful money of the United States of America and in
immediately available funds, the principal amount of (a) ____________________
DOLLARS ($___________), or, if less, (b) the aggregate unpaid principal amount
of each Swing Loan which is made by the Bank to the Company pursuant to Section
2.01(b) of the Revolving Credit Agreement dated as of March 31, 1998, among the
Company, the Bank, the other banks that are or may become parties thereto and
Citibank, N.A., as Agent (as the same may from time to time be amended,
supplemented or otherwise modified, the "Credit Agreement"; terms defined
therein being used herein as so defined).

         The principal amount of each Swing Loan evidenced hereby shall be
payable on the maturity date therefor set forth on the schedule annexed hereto
(or, if earlier, the Termination Date) and made a part hereof or on a
continuation thereof which shall be attached hereto and made a part hereof (the
"Grid"). The Company further agrees to pay interest in like money at such office
on the unpaid principal amount of each Swing Loan evidenced hereby, at the rate
per annum determined in accordance with Section 4.04 of the Credit Agreement
until such principal amount is paid in full. Interest on any principal amount
hereof which is not paid when due (whether at the stated maturity thereof, by
acceleration or otherwise) shall bear interest at the rate provided in Section
4.04 of the Credit Agreement until such past due principal is paid in full.

         The holder of this Note is authorized to endorse on the Grid the date,
amount and maturity date in respect of each Swing Loan made pursuant to Section
2.01(b) of the Credit Agreement, and each payment of principal with respect
thereto, which endorsement shall constitute prima facie evidence of the accuracy
of the information endorsed; provided, however, that the failure to make any
such endorsement or any error in such endorsement shall not affect the
obligations of the Company in respect of such Swing Loan.

         This Note is one of the Notes referred to in the Credit Agreement, and
is entitled to the benefits thereof.

<PAGE>

         Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein.

         All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety or guarantor, waive notice of dishonor, notice of
acceleration, notice of intent to accelerate the maturity hereof, presentment,
demand, protest and notice of protest and all other notices of any kind.

         Terms defined in the Credit Agreement are used herein with their
defined meanings unless otherwise defined herein. This Note shall be governed
by, and construed and interpreted in accordance with, the law of the State of
New York.

                                       NORAM ENERGY CORP.

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

                                       2
<PAGE>

                             SCHEDULE OF SWING LOANS

<TABLE>
<CAPTION>
        Date of                 Amount of               Maturity                Payment
          Loan                    Loan                    Date                   Date               Authorization
          ----                    ----                    ----                   ----               -------------
<S>                             <C>                    <C>                       <C>                <C>
------------------------- ---------------------- ----------------------- ---------------------- ----------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

------------------------- ---------------------- ----------------------- ---------------------- ----------------------
</TABLE>

<PAGE>
                                                             EXHIBIT 11.06(i)(c)

                          [FORM OF GRID CAF LOAN NOTE]

                                 PROMISSORY NOTE

$___________                                                    __________, ____

         FOR VALUE RECEIVED, the undersigned, NorAm Energy Corp., a Delaware
corporation (the "Company"), hereby unconditionally promises to pay to the order
of _____________________ (the "Bank") at the office of Citibank, N.A. located at
2 Penn's Way, New Castle, Delaware 19720 in lawful money of the United States of
America and in immediately available funds, the principal amount of (a)
___________________ DOLLARS ($__________), or, if less, (b) the aggregate unpaid
principal amount of each CAF Loan which is made by the Bank to the Company
pursuant to Section 3.02 of the Revolving Credit Agreement dated as of March 31,
1998, among the Company, the Bank, the other banks that are or may become
parties thereto and Citibank, N.A., as Agent (as the same may from time to time
be amended, supplemented or otherwise modified, the "Credit Agreement"; terms
defined therein being used herein as so defined).

         The principal amount of each CAF Loan evidenced hereby shall be payable
on the maturity date therefor set forth on the schedule annexed hereto (or, if
earlier, the Termination Date) and made a part hereof or on a continuation
thereof which shall be attached hereto and made a part hereof (the "Grid"). The
Company further agrees to pay interest in like money at such office on the
unpaid principal amount of each CAF Loan evidenced hereby, at the rate per annum
determined in accordance with Section 4.04 of the Credit Agreement and as may be
set forth in respect of such CAF Loan on the Grid, calculated on the basis of a
year of 360 days and actual days elapsed from the date of such CAF Loan until
the due date thereof (whether at the stated maturity, by acceleration or
otherwise) and thereafter at the rates determined in accordance with Section
4.04 of the Credit Agreement. Interest on each CAF Loan evidenced hereby shall
be payable on the date or dates determined in accordance with Section 4.04 of
the Credit Agreement and as may be set forth in respect of such CAF Loan on the
Grid. CAF Loans evidenced by this Note may not be prepaid. The final maturity
date of this Note is no later than the Termination Date.

         The holder of this Note is authorized to endorse on the Grid the date,
amount, interest rate, interest payment dates and maturity date in respect of
each CAF Loan made pursuant to Section 3.02 of the Credit Agreement, and each
payment of principal with respect thereto, which endorsement shall constitute
prima facie evidence of the accuracy of the information endorsed;

<PAGE>

provided, however, that the failure to make any such endorsement or any error in
such endorsement shall not affect the obligations of the Company in respect of
such CAF Loan.

         This Note is one of the Notes referred to in the Credit Agreement, and
is entitled to the benefits thereof.

         Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein.

         All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety or guarantor, waive notice of dishonor, notice of
acceleration, notice of intent to accelerate the maturity hereof, presentment,
demand, protest and notice of protest and all other notices of any kind.

         Terms defined in the Credit Agreement are used herein with their
defined meanings unless otherwise defined herein. This Note shall be governed
by, and construed and interpreted in accordance with, the law of the State of
New York.

                                          NORAM ENERGY CORP.

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

                                       2
<PAGE>

                              SCHEDULE OF CAF LOANS

<TABLE>
<CAPTION>
                                                     Interest
    Date of          Amount of        Interest        Payment         Maturity         Payment
      Loan             Loan             Rate           Dates            Date            Date         Authorization
      ----             ----             ----           -----            ----            ----         -------------
<S>                 <C>              <C>            <C>              <C>               <C>           <C>
----------------- ---------------- --------------- --------------- ---------------- -------------- -------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

----------------- ---------------- --------------- --------------- ---------------- -------------- -------------------
</TABLE>

<PAGE>
                                                                      Schedule I

                                   COMMITMENTS

<TABLE>
<CAPTION>
                                                                                           LIBOR Lending
                                                    Domestic Lending Office          Office (if different than
            Bank                 Commitment         and address for notices           Domestic Lending Office)
<S>                             <C>                <C>                               <C>
Citibank, N.A.                  $37,000,000        399 Park Avenue                   399 Park Avenue
                                                   New York, NY  10043               New York, NY  10043
                                                   Attn:  Sandip Sen                 Attn:  Sandip Sen
                                                   Fax:  212/793-6130                Fax:  212/793-6130

Barclays Bank PLC               $30,000,000        222 Broadway, 11th Floor          222 Broadway, 11th Floor
                                                   New York, NY  10038               New York, NY  10038
                                                   Attn:  Jonathan Berman            Attn:  Jonathan Berman
                                                   Fax:  212/412-7585                Fax:  212/412-7585

The First National Bank         $30,000,000        One First National Plaza          One First National Plaza
of Chicago                                         Suite 0363                        Suite 0363
                                                   Chicago, IL  60670-0363           Chicago, IL  60670-0363
                                                   Attn:  Michael J. Johnson         Attn:  Michael J. Johnson
                                                   Fax:  312/732-3055                Fax:  312/732-3055

NationsBank of Texas,           $30,000,000        901 Main Street                   901 Main Street
N.A.                                               64th Floor                        64th Floor
                                                   Dallas, TX  75202-3714            Dallas, TX  75202-3714
                                                   Attn:  Curtis Anderson            Attn:  Curtis Anderson
                                                   Fax:  214/508-3943                Fax:  214/508-3943

The Bank of New York            $21,000,000        One Wall Street                   One Wall Street
                                                   19th Floor                        19th Floor
                                                   New York, NY  10286               New York, NY  10286
                                                   Attn:  Nathan S. Howard           Attn:  Nathan S. Howard
                                                   Fax:  212/635-7923                Fax:  212/635-7923

The Bank of Tokyo-              $21,000,000        1100 Louisiana, Suite 2800        1100 Louisiana, Suite 2800
Mitsubishi, Ltd.,                                  Houston, TX  77002                Houston, TX  77002
Houston Agency                                     Attn:  David Denbina              Attn:  David Denbina
                                                   Fax:  713/658-0116                Fax:  713/658-0116

The Chase Manhattan             $21,000,000        One Chase Manhattan               One Chase Manhattan
Bank                                               Plaza                             Plaza
                                                   New York, NY  10081               New York, NY  10081
                                                   Attn:  Jaimin Patel               Attn:  Jaimin Patel
                                                   Fax:  212/552-0079                Fax:  212/552-0079

</TABLE>

<PAGE>

<TABLE>
<S>                             <C>                <C>                               <C>
Credit Suisse                   $21,000,000        11 Madison Avenue                 11 Madison Avenue
                                                   19th Floor                        19th Floor
                                                   New York, NY  10010               New York, NY  10010
                                                   Attn:  James Moran                Attn:  James Moran
                                                   Fax:  212/325-8350                Fax:  212/325-8350

Deposit Guaranty                $21,000,000        333 Texas Street                  333 Texas Street
National Bank                                      Shreveport, LA  71101             Shreveport, LA  71101
                                                   Attn:  Herb Doughty               Attn:  Herb Doughty
                                                   Fax:  318/429-1059                Fax:  318/429-1059

Fleet National Bank             $21,000,000        One Federal Street                One Federal Street
                                                   Mail Stop:  MA of 320             Mail Stop:  MA of 320
                                                   Boston, MA  02110                 Boston, MA  02110
                                                   Attn:  Robert Lanigan             Attn:  Robert Lanigan
                                                   Fax:  617/346-0580                Fax:  617/346-0580

Toronto Dominion                $21,000,000        909 Fannin, Suite 1700            909 Fannin, Suite 1700
(Texas), Inc.                                      Houston, TX  77010                Houston, TX  77010
                                                   Attn:  Jimmy Simien               Attn:  Jimmy Simien
                                                   Fax:  713/951-9921                Fax:  713/951-9921

Union Bank of                   $21,000,000        299 Park Avenue                   299 Park Avenue
Switzerland, Houston                               44th Floor                        44th Floor
Agency                                             New York, NY  10171-0026          New York, NY  10171-0026
                                                   Attn:  Mike Donohue, Jr.          Attn:  Mike Donohue, Jr.
                                                   Fax:  212/821-3878                Fax:  212/821-3878

The Bank of Nova                $20,000,000        1100 Louisiana, Suite 3000        1100 Louisiana, Suite 3000
Scotia                                             Houston, TX  77002                Houston, TX  77002
                                                   Attn:  Mark Ammerman              Attn:  Mark Ammerman
                                                   Fax:  713/752-2425                Fax:  713/752-2425

Westdeutsche                    $20,000,000        1211 Avenue of the                1211 Avenue of the
Landesbank                                         Americas                          Americas
Girozentrale, New York                             23rd Floor                        23rd Floor
                                                   New York, NY  10036               New York, NY  10036
                                                   Attn:  Richard Newman             Attn:  Richard Newman
                                                   Fax:  212/852-6307                Fax:  212/852-6307

Mellon Bank, N.A.               $15,000,000        One Mellon Bank Center            One Mellon Bank Center
                                -----------        Room 4425                         Room 4425
                                                   Pittsburgh, PA  15258-0001        Pittsburgh, PA  15258-0001
                                                   Attn:  Brad S. Miller             Attn:  Brad S. Miller
                                                   Fax:  412/236-1840                Fax:  412/236-1840

                                $350,000,000
                                ============

</TABLE>

                                       2
<PAGE>

                                   SCHEDULE II
                                  PRICING GRID
                           (In Basis Points Per Annum)

<TABLE>
<CAPTION>
                                 RATINGS OF THE SENIOR
                                  UNSECURED LONG-TERM                                         APPLICABLE FACILITY
      RATINGS LEVEL              DEBT OF THE BORROWER(5)          APPLICABLE MARGIN                FEE RATE
--------------------------- -------------------------------- ---------------------------- ----------------------------
<S>                         <C>                                  <C>                           <C>
Level I                     AA- or Aa3 or higher                          15.0                          7.0

Level II                    A+/A/A- or A1/A2/A3                           17.0                          9.0

Level III                   BBB+ or Baa1                                  19.0                         11.0

Level IV                    BBB or Baa2                                   23.5                         13.0

Level V                     BBB- or Baa3                                  28.5                         15.0

Level VI                    BB+/BB/BB- or Ba1                             50.0                         20.0
                            Ba2/Ba3

Level VII                   Either of the following                      100.00                        50.0
                            circumstances apply:  (i) the
                            senior unsecured long-term
                            debt of the Borrower is not
                            rated by S&P and is not rated
                            by Moody's, or (ii) none of
                            Ratings Levels I through VI is
                            applicable.
</TABLE>

----------------------
5 The higher of the Moody's and S&P ratings shall apply.

<PAGE>
                                                                   Schedule 1.01

         (a) liens granted pursuant to the Company's Indenture of Mortgage and
Deed of Trust dated as of September 1, 1953, as supplemented;

         (b) undetermined or inchoate liens and charges incidental to
construction, maintenance, development or operation;

         (c) the lien of taxes and assessments for the then current year,

         (d) the lien of taxes and assessments not at the time delinquent;

         (e) the lien of specified taxes and assessments which are delinquent
but the validity of which is being contested at the time by the Company or such
Restricted Subsidiary in good faith and by appropriate proceedings;

         (f) the lien reserved in leases for rent and for compliance with the
terms of the lease in the case of leasehold estates;

         (g) any obligations or duties, affecting the property of the Company or
such Restricted Subsidiary, to any municipality or public authority with respect
to any franchise, grant, license, permit or similar arrangement;

         (h) the liens of any judgments or attachments in an aggregate amount
not in excess of $2,000,000, or the lien of any judgment or attachment the
execution or enforcement of which has been stayed or which has been appealed and
secured, if necessary, by the filing of an appeal bond;

         (i) any lien on any property held or used by the Company or a
Restricted Subsidiary in connection with the exploration for, development of or
production of oil, gas, natural gas (including liquefied gas and storage gas),
other hydrocarbons, helium, coal, metals, minerals, steam, timber, geothermal or
other natural resources or synthetic fuels, such properties to include, but not
be limited to, the Company's or a Restricted Subsidiary's interest in any
minimal fee interests, oil, gas or other mineral leases, royalty, overriding
royalty or net profits interests, production payments and other similar
interests, wellhead production equipment, tanks, field gathering lines,
leasehold or field separation and processing facilities, compression facilities
and other similar personal property and fixtures;

         (j) any lien on oil, gas, natural gas (including liquefied gas and
storage gas), and other hydrocarbons, helium, coal, metals, minerals, steam,
timber, geothermal or other natural resources or synthetic fuels produced or
recovered from any property, an interest in which is owned or leased by the
Company or a Restricted Subsidiary;

<PAGE>

         (k) liens upon any property heretofore or hereafter acquired,
constructed or improved, created at the time of acquisition or within one year
thereafter to secure all or a portion of the purchase price thereof or the cost
of such construction or improvement, or existing thereon at the date of
acquisition, whether or not assumed by the Company or a Restricted Subsidiary,
provided that every such lien shall apply only to the property so acquired or
constructed and fixed improvements thereon;

         (l) any extension, renewal or refunding, in whole or in part, of any
mortgage, pledge, lien or encumbrance permitted by subparagraph (j) above, if
limited to the same property or any portion thereof subject to, and securing not
more than the amount secured by, the mortgage, pledge, lien or encumbrance
extended, renewed or refunded;

         (m) liens upon any property heretofore or hereafter acquired by any
corporation that is or becomes a Restricted Subsidiary after the date hereof
("Acquired Entity"), provided that every such lien (1) shall either (A) exist
prior to the time the Acquired Entity becomes a Restricted Subsidiary or (B) be
created at the time the Acquired Entity becomes a Restricted Subsidiary or
within one year thereafter to secure all or a portion of the acquisition price
thereof and (2) shall only apply to those properties owned by the Acquired
Entity at the time it becomes a Restricted Subsidiary or thereafter acquired by
it from sources other than the Company or any other Restricted Subsidiary;

         (n) the pledge of current assets, in the ordinary course of business,
to secure current liabilities;

         (o) mechanics' or materialmen's liens, any liens or charges arising by
reason of pledges or deposits to secure payment of workmen's compensation or
other insurance, good faith deposits in connection with tenders, leases of real
estate, bids or contracts (other than contracts for the payment of money),
deposits to secure duties or public or statutory obligations, deposits to
secure, or in lieu of, surety, stay or appeal bonds, and deposits as security
for the payment of taxes or assessments or similar charges;

         (p) any lien arising by reason of deposits with, or the giving of any
form of security to, any governmental agency or any body created or approved by
law or governmental regulation for any purpose at any time in connection with
the financing of the acquisition or construction of property to be used in the
business of the Company or a Restricted Subsidiary or as required by law or
governmental regulation as a condition to the transaction of any business or the
exercise of any privilege or license, or to enable the Company or a Restricted
Subsidiary to maintain self-insurance or to participate in any funds established
to cover any insurance risks or in connection with workmen's compensation,
unemployment insurance, old age pensions or other social security, or to share
in the privileges or benefits required for companies participating in such
arrangements;

                                       2
<PAGE>

         (q) any lien of or upon any office equipment, data processing equipment
(including, without limitation, computer and computer peripheral equipment), or
transportation equipment (including, without limitation, motor vehicles,
tractors, trailers, marine vessels, barges, towboats, rolling stock and
aircraft);

         (r) any lien created or assumed by the Company or a Restricted
Subsidiary in connection with the issuance of debt securities the interest on
which is excludable from gross income of the holder of such security pursuant to
the Internal Revenue Code, as amended, for the purpose of financing, in whole or
in part, the acquisition or construction of property to be used by the Company
or a Restricted Subsidiary; or

         (s) the pledge or assignment of accounts receivable, or the pledge or
assignment of conditional sales contracts or chattel mortgages and evidences of
indebtedness secured thereby, received in connection with the sale by the
Company or such Restricted Subsidiary or others of goods or merchandise to
customers of the Company or such Restricted Subsidiary.

                                       3

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