Document:

<PAGE>
                                                                   EXHIBIT 10.68

                            STOCK PURCHASE AGREEMENT

                                      among

                    THE S.T.A.R. HUMAN RESOURCE GROUP, INC.,

                       STAR ADMINISTRATIVE SERVICES, INC.,

                           THE SHAREHOLDERS LISTED ON
                           SCHEDULE I ATTACHED HERETO,

                                       and

                                      UICI

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                                TABLE OF CONTENTS

<Table>
<Caption>

                                                                                                       PAGE
<S>                                                                                                    <C>
1.   Purchase and Sale of the Shares.....................................................................2

     1.01 Purchase of the Shares from the Shareholders...................................................2

     1.02 Further Assurances.............................................................................2

     1.03 Purchase Price for the Shares..................................................................2

     1.04 Net Worth Adjustment and CNA Adjustment........................................................3

     1.05 Earned Premium Adjustment......................................................................5

     1.06 Payment of Earned Premium Adjustment...........................................................8

     1.07 Shareholders' Representative...................................................................9

     1.08 Closing.......................................................................................11

     1.09 Allocation of Purchase Price..................................................................11

2.   Representations of the Shareholders Regarding the Shares...........................................11

3.   Representations of the Shareholders, SHRG and SAS..................................................12

     3.01 Organization..................................................................................12

     3.02 Capitalization of the Companies...............................................................12

     3.03 Subsidiaries and Affiliates...................................................................13

     3.04 Authorization.................................................................................13

     3.05 Financial Statements..........................................................................13

     3.06 Absence of Undisclosed Liabilities............................................................14

     3.07 Litigation....................................................................................14

     3.08 Insurance.....................................................................................14

     3.09 Personal Property.............................................................................15

     3.10 Intellectual Property.........................................................................16

     3.11 Leases........................................................................................18

     3.12 Real Estate...................................................................................19

     3.13 Inventory.....................................................................................19

     3.14 Accounts Receivable...........................................................................19

     3.15 Tax Matters...................................................................................19

     3.16 Books and Records.............................................................................20

     3.17 Contracts and Commitments.....................................................................20

     3.18 Compliance with Agreements and Laws...........................................................22
</Table>

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                                TABLE OF CONTENTS
                                   (continued)

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<Caption>

                                                                                                       PAGE
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     3.19 Employee Relations............................................................................23

     3.20 Employee Benefit Plans........................................................................24

     3.21 Absence of Certain Changes or Events..........................................................27

     3.22 Customers.....................................................................................29

     3.23 Prepayments and Deposits......................................................................29

     3.24 Indebtedness to and from Officers, Directors and Shareholders.................................29

     3.25 Banking Facilities............................................................................29

     3.26 Powers of Attorney and Suretyships............................................................30

     3.27 Conflicts of Interest.........................................................................30

     3.28 Regulatory Approvals..........................................................................30

     3.29 Disclosure....................................................................................30

     3.30 Knowledge.....................................................................................31

4.   Representations of the Buyer.......................................................................31

     4.01 Organization and Authority....................................................................31

     4.02 Authorization.................................................................................31

     4.03 Investment Representation.....................................................................31

5.   Access to Information; Public Announcements........................................................31

     5.01 Access to Management, Properties and Records..................................................31

     5.02 Public Announcements..........................................................................32

6.   Pre-Closing Loan...................................................................................32

7.   Conditions to Obligations of the Buyer.............................................................32

     7.01 Truth of Representations and Warranties; Compliance with Covenants and Obligations............32

     7.02 Performance by the Shareholders, SHRG and SAS.................................................32

     7.03 Governmental Approvals........................................................................32

     7.04 Consent of Lenders, Lessors and Other Third Parties...........................................33

     7.05 Adverse Proceedings...........................................................................33

     7.06 Opinion of Counsel............................................................................33

     7.07 Employment Contracts..........................................................................33

     7.08 Office Lease..................................................................................33
</Table>

                                      -ii-

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                                TABLE OF CONTENTS
                                   (continued)

<Table>
<Caption>

                                                                                                       PAGE
<S>                                                                                                    <C>
     7.09 Cross-Indemnification Agreement................................................................33

     7.10 Closing Deliveries.............................................................................33

8.   Conditions to Obligations of the Shareholders.......................................................34

     8.01 Truth of Representations and Warranties of the Buyer; Compliance with Covenants and
          Obligations....................................................................................34

     8.02 Corporate Proceedings..........................................................................34

     8.03 Governmental Approvals.........................................................................34

     8.04 Adverse Proceedings............................................................................34

     8.05 Cross-Indemnification Agreement................................................................34

     8.06 Closing Deliveries.............................................................................35

9.   Indemnification.....................................................................................35

     9.01 By the Shareholders, SHRG and SAS..............................................................35

     9.02 By the Buyer...................................................................................36

     9.03 Claims for Indemnification.....................................................................36

     9.04 Defense by the Indemnifying Party..............................................................36

     9.05 Payment to the Buyer of Indemnification Obligation.............................................37

     9.06 Payment to the Shareholders of Indemnification Obligation......................................37

     9.07 Survival of Representations; Claims for Indemnification........................................37

     9.08 Limits on Indemnification......................................................................38

10.  Post-Closing Agreements of the Shareholders.........................................................38

     10.01 Proprietary Information.......................................................................38

     10.02 No Solicitation or Hiring of Former Employees.................................................38

     10.03 Non-Competition Agreement.....................................................................39

     10.04 Cooperation...................................................................................39

11.  Post-Closing Agreements of the Buyer................................................................39

     11.01 Monthly Report of Earned Premium..............................................................39

     11.02 Advisory Board................................................................................40

12.  Dispute Resolution..................................................................................40

     12.01 General.......................................................................................40

     12.02 Consent of the Parties........................................................................40
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                                      -iii-

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                                TABLE OF CONTENTS
                                   (continued)

<Table>
<Caption>

                                                                                                       PAGE
<S>                                                                                                    <C>
     12.03 Arbitration...................................................................................40

13.  Brokers.............................................................................................41

     13.01 For the Shareholders, SHRG and SAS............................................................41

     13.02 For the Buyer.................................................................................41

14.  Notices.............................................................................................41

15.  Successors and Assigns..............................................................................42

16.  Entire Agreement; Amendments; Attachments...........................................................42

17.  Severability........................................................................................43

18.  Investigation of the Parties........................................................................43

19.  Expenses............................................................................................43

20.  Governing Law.......................................................................................43

21.  Section Headings....................................................................................43

22.  Counterparts........................................................................................44
</Table>

                                      -iv-

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                                TABLE OF CONTENTS
                                   (continued)

<Table>
<Caption>

                                                                           PAGE
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Disclosure Schedule:

  3.02  -  Capitalization of the Companies
  3.03  -  Subsidiaries and Affiliates
  3.04  -  Authorization
  3.06  -  Absence of Undisclosed Liabilities
  3.07  -  Litigation
  3.08  -  Insurance
  3.09  -  Personal Property
  3.10  -  Intellectual Property
  3.11  -  Leases
  3.14  -  Accounts Receivable
  3.15  -  Tax Matters
  3.17  -  Contracts and Commitments
  3.18  -  Compliance with Agreements and Laws
  3.19  -  Employee Relations
  3.20  -  Employee Benefit Plans
  3.21  -  Absence of Certain Changes or Events
  3.22  -  Customers
  3.23  -  Prepayments and Deposits
  3.24  -  Indebtedness to and from Officers, Directors and Stockholders
  3.25  -  Banking Facilities
  3.26  -  Powers of Attorney and Suretyships
  3.27  -  Conflicts of Interest
  3.28  -  Regulatory Approvals

Exhibits:

  A     -  Form of Convertible Subordinated Note
  B     -  Form of Pledge Agreement
  C     -  Pro Forma Closing Date Balance Sheets
  D     -  Form of Registration Rights Agreement
  E     -  Form of Opinion of Snell & Wilmer L.L.P.
  F     -  Form of Office Lease
  G     -  Form of Cross-Indemnification Agreement
</Table>

                                       -v-

<PAGE>

                            STOCK PURCHASE AGREEMENT

         This agreement (the "Agreement") is made and entered into as of the
28th day of February, 2002 by and among UICI, a Delaware corporation (the
"Buyer"), with its principal office at 4001 McEwen, Suite 200, Dallas, Texas
75244, The S.T.A.R. Human Resource Group, Inc., an Arizona corporation ("SHRG"),
STAR Administrative Services, Inc., an Arizona corporation ("SAS"), with both
SHRG and SAS (sometimes referred to collectively herein as the "Companies")
having their principal offices at 2036 East Camelback Road, Phoenix, Arizona
85016, and the shareholders listed on Schedule I attached hereto (individually,
a "Shareholder" and collectively, the "Shareholders"), who own all of the issued
and outstanding capital stock of SHRG and SAS.

Preliminary Statement

         1. SHRG currently operates the business of providing general agency
services in respect of the STAR Plans (as such term is defined in Subsection
1.05(b) hereof) and SAS currently operates the business of providing third party
administration services in respect of the STAR Plans (collectively, the "STAR
Business").

         2. Each of the Shareholders owns the number of the issued and
outstanding shares (collectively, the "SHRG Shares") of the common stock, no par
value per share (the "SHRG Common Stock"), of SHRG set forth opposite his or her
name on Schedule I attached hereto, which SHRG Shares in the aggregate represent
all of the issued and outstanding shares of capital stock of SHRG.

         3. Each of the Shareholders owns the number of the issued and
outstanding shares (collectively, the "SAS Shares") of the common stock, no par
value per share (the "SAS Common Stock"), of SAS set forth opposite his or her
name on Schedule I attached hereto, which SAS Shares in the aggregate represent
all of the issued and outstanding shares of capital stock of SAS.

         4. The Buyer desires to purchase, and the Shareholders desire to sell,
all of the SHRG Shares and the SAS Shares (the SHRG Shares and the SAS Shares
are sometimes referred to collectively as the "Shares") for the consideration
set forth below, subject to the terms and conditions of this Agreement.

         5. Immediately following consummation of the transactions contemplated
hereby, Buyer intends to cause the assets of SHRG and SAS to be contributed to
The MEGA Life and Health Insurance Company, an Oklahoma corporation and a wholly
owned subsidiary of the Buyer ("MEGA") (such transaction being referred to as
the "MEGA Contribution Transaction").

         NOW, THEREFORE, in consideration of the representations, warranties and
mutual promises hereinafter set forth and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:

                                       1
<PAGE>

1.       Purchase and Sale of the Shares

         1.01 Purchase of the Shares from the Shareholders. Subject to and upon
the terms and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), each Shareholder shall sell,
transfer, convey, assign and deliver to the Buyer, and the Buyer shall purchase,
acquire and accept from each Shareholder, all the Shares owned by such
Shareholder, as set forth opposite such Shareholder's name on Schedule I
attached hereto. At the Closing each Shareholder shall deliver to the Buyer
certificates evidencing the Shares owned by such Shareholder duly endorsed in
blank or with stock powers duly executed by such Shareholder.

         1.02 Further Assurances. At any time and from time to time after the
Closing, at the Buyer's request and without further consideration, each of the
Shareholders shall promptly execute and deliver such instruments of sale,
transfer, conveyance, assignment and confirmation, and take all such other
action as the Buyer may reasonably request, more effectively to transfer, convey
and assign to the Buyer, and to confirm the Buyer's title to, all of the Shares
owned by such Shareholder, to put the Buyer in actual possession and operating
control of the assets, properties and business of the Companies, to assist the
Buyer in exercising all rights with respect thereto and to carry out the purpose
and intent of this Agreement.

         1.03 Purchase Price for the Shares.

                  (a) The purchase price to be paid by the Buyer for the Shares
shall be an amount not to exceed Forty Million Dollars ($40,000,000) (the
"Purchase Price"), subject to adjustment pursuant to Subsections 1.03(c), 1.04,
and 1.05 hereof. The Purchase Price shall be payable at Closing (i) in cash to
the extent of $25,000,000, less the amount of any adjustments pursuant to
Subsections 1.03(c), and 1.04 hereof, if any (the "Initial Payment"), which
shall be paid as specified in Subsection 1.03(b), and (ii) by delivery to the
Shareholders of convertible subordinated notes issued by the Buyer substantially
in the form attached hereto as Exhibit A (the "Notes") representing the
respective contingent interests of the Shareholders in the Earned Premium
Adjustment (as such term is defined in, and as such amount is calculated in
accordance with, Section 1.05 hereof); provided that all such Notes issued at
the Closing shall be held by the Buyer as pledgee pursuant to a pledge agreement
substantially in the form attached hereto as Exhibit B (the "Pledge Agreement")
until the Settlement Date (as such term is defined in Subsection 1.06 hereof).

                  (b) At the Closing, the Buyer shall deliver to each of the
Shareholders such Shareholder's pro rata share of the Initial Payment, in the
respective amount set out opposite each such Shareholder's name on Schedule I
hereto, by cashier's or certified check, by wire transfer of immediately
available funds to such account or accounts as previously designated by the
Shareholders' Representative (as defined in Section 1.07 hereof), or in such
other manner as the parties hereto agree.

                  (c) If the Buyer makes a Pre-Closing Loan (as defined in
Section 6 hereof), the amount of the Initial Payment shall be reduced by the
amount of the Pre-Closing Loan.

                                       2
<PAGE>

                  (d) On the Settlement Date, as provided in Section 1.06
hereof, if the Earned Premium Adjustment is $-0- , the Buyer shall destroy the
Notes issued at the Closing. On the Settlement Date, if the Earned Premium
Adjustment is a positive amount, the Buyer shall at its option either (x) pay an
amount in cash equal to the Earned Premium Adjustment (which shall then
represent the aggregate principal amount of the Notes) together with payment of
all accrued but unpaid interest on the Notes, and thereby fully satisfy and
discharge the Notes, or (y) deliver to each of the Shareholders such
Shareholder's Note, in accordance with Subsection 1.06 of the Stock Purchase
Agreement and the terms of the Notes.

         1.04 Net Worth Adjustment and CNA Adjustment. The Purchase Price set
forth in Subsection 1.03 hereof shall be subject to adjustment, whether on or
after the date of the Closing (the "Closing Date") as follows:

                  (a) The Shareholders have commissioned Gaintner Bandler Reed
PLC, independent public accountants for the Companies (the "Company Auditors"),
to conduct a full audit in accordance with generally accepted auditing standards
of the assets, liabilities, revenues, operations, books and records of each of
the Companies as at and for the year ended December 31, 2001. The Shareholders
have caused the Company Auditors to deliver to the Buyer financial statements
for each of the Companies consisting of a balance sheet as of December 31, 2001
(the "Audited Balance Sheet") and the related statements of income,
shareholders' equity and cash flows of each of the Companies for the fiscal year
then ended, together with the opinion of the Company Auditors to the effect that
such financial statements fairly present the financial condition of each of the
Companies as of the respective dates indicated therein and results of operations
of each of the Companies for the respective periods indicated therein, and that
such financial statements were prepared in accordance with U.S. Generally
Accepted Accounting Practices ("GAAP"), applied consistently with past practices
(the "Audited Financial Statements"). The Buyer and its designated firm of
independent certified accountants shall have the right to review the work papers
of the Company Auditors utilized in preparing the Audited Financial Statements,
and shall have full access to the books, records, properties and personnel of
the Companies subsequent to the Closing Date for purposes of verifying the
accuracy and fairness of the presentation of the Audited Financial Statements.

                  (b) Attached to this Agreement as Exhibit C is an estimated
pro forma balance sheet of each of the Companies as of the Closing Date (the
"Pro Forma Closing Date Balance Sheets"), which represent the parties' best
estimate of the assets, liabilities and shareholders' equity of each of the
Companies as of the Closing Date. The Pro Forma Closing Date Balance Sheets
reflect a combined net worth of the Companies in the amount of $2,011,230
assuming for purposes of the calculation thereof that the amount of the
Pre-Closing Loan is classified as equity rather than indebtedness of SHRG.

                  (c) Promptly following the Closing (but in no event later than
20 business days thereafter), the Buyer shall prepare and deliver to the
Shareholders' Representative balance sheets of each of the Companies as of the
Closing Date (the "Actual Closing Date Balance Sheets") and the related
statement of income for each of the Companies for the portion of the year then
ended (the "Closing Period Income Statements"). Such Actual Closing Date Balance
Sheets and Closing Period Income Statements will fairly and accurately present
the financial

                                       3
<PAGE>

condition of each of the Companies as of the Closing Date and results of
operations of each of the Companies for the period then ended, and will be
prepared by the Buyer in accordance with GAAP, subject to normal and recurring
audit adjustments. The Shareholders' Representative and its designated firm of
independent certified accountants shall have the right to review the work papers
of the Buyer utilized in preparing the Actual Closing Date Balance Sheets and
the Closing Date Income Statements, and shall have full access to the books,
records, properties and personnel of the Companies after the Closing Date for
purposes of verifying the accuracy and fairness of the presentation of the
Actual Closing Date Balance Sheets and the Closing Period Income Statements. In
the event that the Shareholders' Representative disagrees with the Closing Date
Combined Net Worth (as defined in Subsection 1.04(d)), the Shareholders'
Representative shall, within 15 days after delivery of the Actual Closing Date
Balance Sheets and Closing Period Income Statements, deliver to the Buyer a
Dispute Notice in accordance with Subsection 1.05(d) hereof.

                  (d) If the combined net worth of the Companies as reflected in
the Actual Closing Date Balance Sheets plus the dollar amount of the Pre-Closing
Loan (the "Closing Date Combined Net Worth") is less than the combined net worth
of the Companies as reflected in the Pro Forma Closing Date Balance Sheets, the
Purchase Price shall be reduced by an amount, if any (the "Net Worth
Adjustment"), equal to the difference; provided, however, that no adjustment to
the Purchase Price shall be made if the amount of the difference is less than
$100,000. Any such Net Worth Adjustment shall first be paid in accordance with
Subsection 1.06(a) hereof and any additional shortfall shall be reimbursed by
the Shareholders Pro Rata to the Buyer within 10 days after the Buyer's written
demand. For purposes of this Agreement, the term "Pro Rata" shall mean with
respect to a Shareholder the respective percentage set forth opposite such
Shareholder's name under the column "% of SHRG Proceeds" on Schedule I hereto.

                  (e) The Shareholders have informed the Buyer that pursuant to
the termination effective March 1, 2002 of SHRG's and SAS's existing agreements
with CNA Financial Corporation or a subsidiary thereof ("CNA"), CNA will at some
time subsequent to the Closing Date conduct an audit of amounts due and owing as
between SHRG, SAS and CNA (the "CNA Audit"). The parties hereto agree that the
Closing Date Balance Sheet should accurately reflect such amounts as may be due
and owing to or from CNA, as the case may be. Accordingly, in the event that the
results of the CNA Audit would, if known prior to the date of delivery of the
Actual Closing Date Balance Sheets, have resulted in a change to the Actual
Closing Date Balance Sheets, the dollar amount of the positive or negative
effect on the combined Closing Date Net Worth of the Companies due to such
change will be applied either (i) to increase the Purchase Price (if the results
of the CNA Audit would have increased the combined Closing Date Net Worth of the
Companies) with such amount payable in cash by Buyer to each Shareholder for his
or her Pro Rata share of such increase or (ii) to decrease the Purchase Price
(if the results of the CNA Audit would have decreased the combined Closing Date
Net Worth of the Companies) with such decrease to be paid in accordance with
Section 1.06(a) hereof and any additional shortfall shall be reimbursed by the
Shareholders pro rata to the Buyer within 10 days after the Buyer's written
demand (it being agreed and understood that the adjustment to the Purchase Price
to be made hereunder, if any, shall not be subject to the

                                       4
<PAGE>

$100,000 limitation set forth in Section 1.04(d) or any limitation set forth in
Section 9.08 hereof).

         1.05 Earned Premium Adjustment.

                  (a) In addition to the Initial Payment as described in
Subsection 1.03(b) and as adjusted in accordance with Subsection 1.04, the
Purchase Price shall consist of the Earned Premium Adjustment, if any, which
shall be in an amount ranging from $-0- to a maximum of $15,000,000, as
calculated in the manner hereinafter described. If prior to May 31, 2003 UICI or
MEGA shall sell, dispose or otherwise transfer to an unaffiliated third party
all or substantially all of the assets comprising the STAR Business (a "Sale
Transaction"), other than pursuant to a Merger Event (as such term is defined
below), then in such event, upon the consummation of the Sale Transaction, the
Earned Premium Adjustment shall be deemed to equal $15,000,000, and no
calculation of Annualized Premium shall be required. The Buyer will notify the
Shareholders' Representative promptly following the occurrence of a Sale
Transaction prior to May 31, 2003.

                  (b) Unless a Sale Transaction has occurred prior to May 31,
2003, the Earned Premium Adjustment will be calculated based on the amount of
the Annualized Earned Premium (as defined below) as shown on the books of MEGA
in respect of the STAR Plans (as defined below) plus the Third Party Earned
Premiums (as defined below), in each case for the applicable Measurement Period
(as defined below). For purposes of this Subsection 1.05, the following
capitalized terms shall have the respective meanings set forth below:

                  "Annualized Earned Premium" shall mean an amount equal to the
net earned premiums attributable to the STAR Plans plus the Third Party Earned
Premiums during the Measurement Period, all calculated in accordance with
Historical GAAP and annualized on the basis of a 12-month/365 day year.

                  "Downgrade Event" shall mean the assignment by A.M. Best & Co.
to MEGA on or prior to April 15, 2003 of a rating lower than "A- (Excellent),"
provided that such downgrading is not due in whole or in part to the negative
performance of the STAR Business.

                  "Historical GAAP" with respect to calculation of Annualized
Earned Premium shall mean GAAP as applied consistent with the past practices of
SHRG to the calculation of net earned premiums attributable to the STAR Plans,
as such GAAP is in effect on the Closing Date, regardless of any changes or
additions to GAAP that may occur after the Closing Date.

                  "Measurement Period" shall mean the three-month period
commencing March 1, 2003 to and inclusive of May 31, 2003; provided, however,
that if a Downgrade Event, a Merger Event, or a Termination Event occurs on or
before April 15, 2003, at the option of the Shareholders exercised by written
notice from the Shareholders' Representative to the Buyer within 30 days
following the first such event to occur, "Measurement Period" shall mean the two
full calendar months immediately preceding the month in which such Downgrade
Event, Merger Event or Termination Event occurs.

                  "Merger Event" shall mean the occurrence (on or prior to April
15, 2003) of (a) sale by UICI of substantially all of its assets or (b) merger
or consolidation by UICI with another

                                       5
<PAGE>

corporation, with such other corporation being the survivor in the merger or
consolidation, and in each case either (x) if the transferee of such assets or
the survivor in such merger or consolidation is not a regulated insurance
company, such transferee or survivor shall have been assigned a corporate debt
rating of less than "BBB" by Moody's or Standard & Poor's, or (y) if the
transferee of such assets or the survivor in such merger or consolidation is a
regulated insurance company, such transferee or survivor shall have been
assigned a rating lower than "A- (Excellent)" by A.M. Best & Co.

                  "STAR Plans" means certain programs and policies of sickness
and accident insurance known as (i) STARBRIDGE Sickness and Accident Plan, (ii)
Fundamental Care, (iii) Fundamental Care Plus, (iv) ProDrivers Choice, (v)
STARAssist, and (vi) HealthBasic Sickness and Accident Plan.

                  "Termination Event" shall mean either (i) termination by MEGA
on or prior to April 15, 2003 of the employment of Tim Cook without cause, or
(ii) voluntary discontinuance by MEGA on or prior to April 15, 2003 of the STAR
Business other than due to a Sale Transaction.

                  "Third Party Earned Premiums" shall mean the net earned
premium written during the Measurement Period by Guarantee Trust Life Insurance
Company ("GTL") or by any other underwriter that writes policies in respect of
the STAR Plans during Measurement Period.

                  (c) If and to the extent the Annualized Earned Premium is
greater than $70,000,000, then in such event the Earned Premium Adjustment will
be an amount equal to 75% of the difference between (x) the Annualized Earned
Premium and (y) $70,000,000; provided however, that the Earned Premium
Adjustment shall not in any event exceed $15,000,000. If and to the extent that
the Annualized Earned Premium is equal to or less than $70,000,000, then in such
event the Earned Premium Adjustment shall be $-0-. For example, (i) if the
Annualized Earned Premium is $80,000,000, then the Earned Premium Adjustment
will be $7,500,000; (ii) if the Annualized Earned Premium is greater than
$90,000,000, then the Earned Premium Adjustment will in all cases be
$15,000,000; and (iii) if the Annualized Earned Premium is $70,000,000 or less,
the Earned Premium Adjustment in all cases will be $-0-.

                  (d) Unless a Sale Transaction has occurred prior to May 31,
2003, within 15 calendar days after October 1, 2003, the Buyer will send to the
Shareholders' Representative the Buyer's good faith calculation of the amount of
Annualized Earned Premium and Earned Premium Adjustment as calculated pursuant
to this Subsection 1.05. The amount of the Annualized Earned Premium and the
Earned Premium Adjustment, as determined by the Buyer in accordance with the
preceding paragraphs (a) and (c), shall be final and binding upon the
Shareholders and the Shareholders' Representative, unless the Shareholders'
Representative gives written notice within fifteen 15 calendar days after
receipt of the Buyer's calculation of the Annualized Earned Premium and the
Earned Premium Adjustment, which written notice shall specify in reasonable
detail the nature and extent of such disagreement (the "Dispute Notice"). In the
event of any dispute between the parties with respect to the Annualized Earned
Premium or the Earned Premium Adjustment, the parties shall first use their best
efforts to resolve such dispute among themselves. If the parties are unable to
resolve the dispute within thirty 30

                                       6
<PAGE>

calendar days after the date of the Dispute Notice, the dispute will be
submitted to arbitration in accordance with the following provisions of this
Subsection 1.05. The Buyer and the Shareholders may extend the Shareholders'
review period by mutual written agreement.

                           (i) The Shareholders' Representative will designate a
firm of independent certified accountants to represent all of the Shareholders
in the arbitration process, and all of the Shareholders shall be bound by and
comply with the decisions, actions and agreements made by such accountants. The
Shareholders' Representative and its designated firm of independent certified
accountants shall have the right to review the work papers of the Buyer utilized
in preparing the calculation of Annualized Earned Premium and the Earned Premium
Adjustment, and shall have reasonable access to the books and records of the
Companies following the date the Buyer submits the Annualized Earned Premium and
the Earned Premium Adjustment to the Shareholders for purposes of verifying the
accuracy of the calculation of the Annualized Earned Premium and the Earned
Premium Adjustment.

                           (ii) Within 10 calendar days after the end of the
30-day period following receipt of the Dispute Notice during which the parties
shall have attempted to resolve the dispute among themselves, the Buyer and the
Shareholders' Representative shall designate in writing one arbitrator who is
experienced in insurance, accounting and finance matters (the "arbitrator") to
resolve the dispute; provided, that if the parties hereto cannot agree on an
arbitrator within such 10-day period, the arbitrator shall be selected by the
American Arbitration Association in Dallas, Texas. Failure by either the Buyer
or the Shareholders' Representative to notify the other party of its selection
and approval of the arbitrator and to consummate the selection process set forth
in this subparagraph (ii) within the allotted time periods shall foreclose such
failing party from the selection of the arbitrator. The arbitrator so designated
shall not be an employee, consultant, officer, director or shareholder of any
party hereto or any Affiliate of any party to this Agreement.

                           (iii) Within 15 days after the selection of the
arbitrator, the arbitrator, the Buyer and the Shareholders' Representative shall
meet, at which time the Buyer and the Shareholders' Representative shall be
required to set forth in writing their respective proposals and issues related
to the amount of Annualized Earned Premium and Earned Premium Adjustment, with
accompanying work papers and accounting support.

                           (iv) The arbitrator shall set a date for a hearing,
which shall be no later than 30 days after the submission of written proposals
pursuant to subparagraph (d)(iii) above, to discuss each of the issues
identified by the Buyer and the Shareholders' Representative. The arbitration
shall be governed by the rules of the American Arbitration Association;
provided, that the arbitrator shall have sole discretion with regard to the
admissibility of evidence.

                           (v) The arbitrator shall, within thirty (30) days
after receiving the positions of both the Shareholders' Representative and Buyer
and all supplementary supporting documentation requested by the arbitrator,
render its decision as to the calculation of the Annualized Earned Premium and
the Earned Premium Adjustment, which decision shall be (x) set forth in writing,
(y) limited to endorsing either Buyer's or the Shareholders' Representative's
position as most accurate in light of the facts presented, and (z) final and

                                       7
<PAGE>

binding on, and nonappealable by, the Shareholders and the Buyer. The arbitrator
may conduct an audit of any information or documentation if such audit will
facilitate a decision. The fees and expenses of the arbitrator and of any audit
requested by the arbitrator shall be paid entirely by the party whose position
was not endorsed.

                           (vi) The Shareholders shall be responsible for paying
all fees, costs and disbursements of both the Shareholders' Representative and
for any accountant selected by the Shareholders' Representative to assist them
in any discussions or in the arbitration.

                           (vii) Any arbitration pursuant to this Subsection
1.05 shall be conducted in Dallas, Texas. Any arbitration award may be entered
in and enforced by any court having jurisdiction thereover and the parties
hereby consent and commit themselves to the jurisdiction of the courts of the
State of Texas for purposes of the enforcement of any arbitration decision.

         1.06 Payment of Earned Premium Adjustment.

                  (a) On the tenth business day following the final
determination of the Earned Premium Adjustment, if any (the "Settlement Date"),
the Buyer shall pay to the Shareholders such Earned Premium Adjustment, if any.
If the amount of the Earned Premium Adjustment is $-0-, the Notes issued by the
Buyer at the Closing and held by the Buyer in accordance with Subsection 1.03(a)
of this Agreement and the Pledge Agreement shall be destroyed by the Buyer and
no amount shall be paid to any of the Shareholders in respect thereof. If the
amount of the Earned Premium Adjustment is a positive amount after all
adjustments pursuant to this Agreement, the Buyer shall at its option either (x)
pay an amount in cash equal to the Earned Premium Adjustment (which shall then
represent the aggregate principal amount of the Notes), together with payment of
all accrued but unpaid interest on the Notes, and thereby fully satisfy and
discharge the Notes, or (y) deliver to each of the Shareholders such
Shareholder's Note, in accordance with Subsection 1.06 of the Stock Purchase
Agreement and the terms of the Notes. In either case the Shareholders shall be
required to surrender the Notes issued at the Closing for such cash payment or
Notes, as the case may be. Because such Notes will initially be held by the
Buyer as pledgee pursuant to the Pledge Agreement, each of the Shareholders
hereby irrevocably appoints the Buyer as its agent to surrender such Notes in
exchange for such cash payment or issuance of replacement Notes, and to deliver
such cash or replacement Notes, as applicable, to the Shareholders. The amount
of the Earned Premium Adjustment shall be subject to reduction in the event that
a Net Worth Adjustment is required pursuant to Subsection 1.04(d) or Subsection
9.05 hereof, by reducing the amount of cash otherwise payable pursuant to
Subsection 1.06(b) or by reducing the principal amount of the Notes otherwise
deliverable pursuant to Subsection 1.06(c), as applicable.

                  (b) If the Buyer elects to pay cash as provided above to
satisfy and discharge the Notes issued at Closing, then the amount of the Earned
Premium Adjustment to be paid to each Shareholder shall be such Shareholder's
Pro Rata share, as designated in Schedule I hereto, of the Earned Premium
Adjustment, and such amount shall be paid on the Settlement Date by cashier's or
certified check or by wire transfer of immediately available funds to such
account or accounts as previously designated by the Shareholders'
Representative. Any such cash payment of Earned Premium Adjustment, if any,
shall include interest on any such amount computed at

                                       8
<PAGE>

the rate of 6% per annum simple interest commencing on the Closing Date and
accruing to and including the Settlement Date, which shall represent payment of
interest on the Notes issued at the Closing.

                  (c) If the Buyer elects to deliver replacement Notes as
provided above, then the Buyer will issue on the Settlement Date to each
Shareholder a Note in replacement of the Note initially issued at the Closing
having a principal amount equal to such Shareholder's Pro Rata share, as
designated in Schedule I hereto, of the Earned Premium Adjustment. Any such
delivery of replacement Notes shall be accompanied by delivery of a cash payment
equal to interest on the Earned Premium Adjustment amount computed at the rate
of 6% per annum simple interest commencing on the Closing Date and accruing to
and including the Settlement Date, which shall represent payment of interest on
the Notes issued at the Closing.

                  (d) The Notes issued at the Closing shall have the terms set
out on Exhibit A hereto. In addition, at the Closing the Shareholders and UICI
will enter into a Registration Rights Agreement substantially in the form of
Exhibit D hereto.

                  (e) Commencing two years after the Closing Date, any
Shareholder who holds a Note may request a replacement Note which shall have
identical terms and provisions except for the deletion of Section XII
(Successors and Assigns) and Section XIII (Right of Set-Off) thereof.

         1.07 Shareholders' Representative.

                  (a) In order to efficiently administer matters pertaining to
this Agreement such matters are delegated by the Shareholders to the
Shareholders' Representative (as defined herein), including without limitation
(i) the determination of the Closing Date Combined Net Worth, (ii) the waiver of
any condition to the obligations of the Shareholders to consummate the
transactions contemplated hereby, (iii) the defense and/or settlement of any
claims for which the Shareholders may be required to indemnify the Buyer or the
Companies pursuant to Section 9 hereof, and (iv) the review, calculation and
arbitration, if requested, of the amount of the Annualized Earned Premium and
Earned Premium Adjustment, the Shareholders hereby designate Charles A.
Shoumaker as their representative (the "Shareholders' Representative").

                  (b) The Shareholders hereby authorize the Shareholders'
Representative (i) to make all decisions relating to the determination of the
Closing Date Combined Net Worth, the Annualized Earned Premium and the Earned
Premium Adjustment, (ii) to take all action necessary in connection with the
waiver of any condition to the obligations of the Shareholders to consummate the
transactions contemplated hereby, or the defense and/or settlement of any claims
for which the Shareholders may be required to indemnify the Buyer or the
Companies pursuant to Section 9 hereof, (iii) to give and receive all notices
required to be given under this Agreement, and (iv) to take any and all
additional action as is contemplated to be taken by or on behalf of the
Shareholders by the terms of this Agreement.

                  (c) In the event that the Shareholders' Representative dies,
becomes unable to perform his responsibilities hereunder or resigns from such
position, Shareholders holding, prior

                                       9
<PAGE>

to the Closing, a majority of the SHRG Shares as set forth on Schedule I
attached hereto shall select another representative to fill such vacancy with
respect to both SHRG and SAS, and such substituted representative shall be
deemed to be the Shareholders' Representative for all purposes of this
Agreement.

                  (d) All decisions and actions by the Shareholders'
Representative, including, without limitation, any agreement between the
Shareholders' Representative and the Buyer relating to the determination of the
Closing Date Combined Net Worth, the Annualized Earned Premium and the Earned
Premium Adjustment, or the defense or settlement of any claims for which the
Shareholders may be required to indemnify the Buyer and/or the Companies
pursuant to Section 9 hereof, shall be binding upon all of the Shareholders, and
no Shareholders shall have the right to object, dissent, protest or otherwise
contest the same.

                  (e) By his or her execution of this Agreement, each
Shareholder agrees that:

                           (i) the Buyer shall be able to rely conclusively on
the instructions and decisions of the Shareholders' Representative as to the
determination of the Closing Date Combined Net Worth, the Annualized Earned
Premium and the Earned Premium Adjustment, or the settlement of any claims for
indemnification by the Buyer or the Companies pursuant to Section 9 hereof or
any other actions required or permitted to be taken by the Shareholders'
Representative hereunder, and no party hereunder shall have any cause of action
against the Buyer for any action taken by the Buyer in reliance upon the
instructions or decisions of the Shareholders' Representative;

                           (ii) all actions, decisions and instructions of the
Shareholders' Representative shall be conclusive and binding upon all of the
Shareholders and no Shareholder shall have any cause of action against the
Shareholders' Representative for any action taken, decision made or instruction
given by the Shareholders' Representative under this Agreement, except for fraud
or willful breach of this Agreement by the Shareholders' Representative;

                           (iii) the provisions of this Subsection 1.07 are
independent and severable, are irrevocable and coupled with an interest and
shall be enforceable notwithstanding any rights or remedies that any Shareholder
may have in connection with the transactions contemplated by this Agreement;

                           (iv) remedies available at law for any breach of the
provisions of this Subsection 1.07 are inadequate; therefore, the Buyer and the
Companies shall be entitled to temporary and permanent injunctive relief without
the necessity of proving damages if either the Buyer or either of the Companies
brings an action to enforce the provisions of this Subsection 1.07; and

                           (v) the provisions of this Subsection 1.07 shall be
binding upon the executors, heirs, legal representatives and successors of each
Shareholder, and any references in this Agreement to a Shareholder or the
Shareholders shall mean and include the successors to the Shareholders' rights
hereunder, whether pursuant to testamentary disposition, the laws of descent and
distribution or otherwise.

                                       10
<PAGE>

                  (f) All fees and expenses incurred by the Shareholders'
Representative shall be paid Pro Rata by the Shareholders.

         1.08 Closing. The Closing shall take place at the offices of Snell &
Wilmer L.L.P., One Arizona Center, Phoenix, Arizona 85004, at 9:00 a.m.,
Mountain Time, on February 28, 2002 or at such other place, time or date as may
be mutually agreed upon in writing by the parties.

         1.09 Allocation of Purchase Price. Each of the parties agrees that the
total Purchase Price payable pursuant to this Agreement shall be allocated for
all purposes in the manner specified in this Subsection 1.09, and each of the
parties further agrees to report this transaction for federal tax and all other
purposes in accordance with the following purchase price allocation: (i)
$100,000 of the Initial Payment will be allocated to the Non-Competition
Agreements by the Shareholders in favor of the Buyer set forth in Subsection
10.03 of this Agreement, of which amount $80,000 will be allocated to Charles A.
Shoumaker, $10,000 will be allocated to Timothy L. Cook, and $5,000 will be
allocated to each of Alexis M. Murphy and Charles R. Shoumaker, (ii) $1,500,000
shall be allocated to, and represents the fair value of, the SAS Shares, and
(iii) the balance of the Purchase Price, as finally determined, shall be
allocated to, and represents the fair value of, the SHRG Shares.

2.       Representations of the Shareholders Regarding the Shares

         Each Shareholder severally represents and warrants to the Buyer as
follows:

                  (a) Such Shareholder has good and marketable title to the
Shares which are to be transferred to the Buyer by such Shareholder pursuant
hereto, free and clear of any and all covenants, conditions, restrictions,
voting trust arrangements, liens, charges, encumbrances, options and adverse
claims or rights whatsoever. Schedule I attached hereto sets forth a true and
correct description of all Shares owned by such Shareholder.

                  (b) Such Shareholder has the full right, power and authority
to enter into this Agreement and to transfer, convey and sell to the Buyer at
the Closing the Shares to be sold by such Shareholder hereunder and, upon
consummation of the purchase contemplated hereby, the Buyer will acquire from
such Shareholder good and marketable title to such Shares, free and clear of all
covenants, conditions, restrictions, voting trust arrangements, liens, charges,
encumbrances, options and adverse claims or rights whatsoever.

                  (c) Such Shareholder is not a party to, subject to or bound by
any agreement or any judgment, order, writ, prohibition, injunction or decree of
any court or other governmental body which would prevent the execution or
delivery of this Agreement by such Shareholder or the transfer, conveyance and
sale of the Shares to be sold by such Shareholder to the Buyer pursuant to the
terms hereof.

                  (d) No broker or finder has acted for such Shareholder in
connection with this Agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any brokerage or finder's fee or other
commissions in respect of such transactions based upon agreements, arrangements
or understandings made by or on behalf of such Shareholder.

                                       11
<PAGE>

3.       Representations of the Shareholders, SHRG and SAS

         Each of the Shareholders and the Companies, jointly and severally,
represent and warrant to the Buyer that:

         3.01 Organization. Each of SHRG and SAS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona, and has all requisite power and authority (corporate and other) to own
its properties, to carry on its business as now being conducted, to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby and thereby. Except as set forth in Section
3.01 of the Disclosure Schedule attached hereto, each of SHRG and SAS is duly
qualified to do business and in good standing in all jurisdictions in which its
ownership of property or the character of its business requires such
qualification, except where such failure to be so qualified or in good standing
would not individually or in the aggregate have a material adverse effect on
SHRG or SAS. Certified copies of the Articles of Incorporation and Bylaws of
each of SHRG and SAS, as amended to the date of this Agreement, have been
previously delivered to the Buyer, are complete and correct, and no subsequent
amendments have been made thereto or have been authorized.

         3.02 Capitalization of the Companies.

         SHRG's authorized capital stock consists of 1,500 Class A shares of
Common Stock, no par value per share, and 500 Class B shares of Common Stock, no
par value per share, of which 1,500 shares of Class A Common Stock and 500
shares of Class B Common Stock are issued and outstanding on the date hereof and
held of record and beneficially by the Shareholders as set forth on Schedule I.
SAS's authorized capital stock consists of 9,500 Class A shares of Common Stock,
no par value per share, and 500 Class B shares of Common Stock, no par value per
share, of which 1,000 shares of Class A Common Stock and 500 shares of Class B
Common Stock are issued and outstanding on the date hereof and held of record
and beneficially by the Shareholders as set forth on Schedule I. All such issued
and outstanding shares of SHRG Common Stock and SAS Common Stock have been, and
on the Closing Date will be, duly and validly issued and are, or will be on such
date, fully paid and non-assessable. Except as set forth in Section 3.02 of the
Disclosure Schedule attached hereto, there are not outstanding (i) any options,
warrants or other rights to purchase from either SHRG or SAS any capital stock
of either of the Companies; (ii) any securities convertible into or exchangeable
for shares of such stock of SHRG or SAS; or (iii) any other commitments of any
kind for the issuance of additional shares of capital stock or options, warrants
or other securities of SHRG or SAS. No shares of the issued and outstanding
shares of SHRG Common Stock are held in the treasury of SHRG. No shares of the
issued and outstanding shares of SAS Common Stock are held in the treasury of
SAS. The Shareholders executing this Agreement comprise all persons or entities
with any actual or contingent equity interest (including without limitation
options, warrants or other contingent claims or interests) in either SHRG or
SAS.

                                       12
<PAGE>

         3.03 Subsidiaries and Affiliates.

                  (a) Neither SHRG nor SAS owns directly or indirectly, an
equity interest representing 50% or more of the capital stock of, or other
equity interests in, any corporation, partnership, joint venture or other entity
(individually, a "Subsidiary" and, collectively, the "Subsidiaries").

                  (b) Section 3.03 of the Disclosure Schedule attached hereto
sets forth: (i) the name and percentage ownership by any Shareholder of each
corporation, partnership, joint venture or other entity in which such
Shareholder has, directly or indirectly, an equity interest representing 25% or
more of the capital stock thereof or other equity interests therein
(individually, an "Affiliated Entity" and collectively, the "Affiliated
Entities"), which has or at any time in the past three years has engaged in any
transaction with or had a relationship with either of the Companies; (ii) the
jurisdiction of incorporation, capitalization and ownership of each such
Affiliated Entity; (iii) the names of the officers and directors of each such
Affiliated Entity; and (iv) the amount and nature of the transactions between
either of the Companies and such Affiliated Entity during the past three years.

         3.04 Authorization. The execution and delivery by each of SHRG and SAS
of this Agreement and the agreements provided for herein, and the consummation
by each of them of all transactions contemplated hereunder and thereunder by
such Company, have been duly authorized by all requisite corporate action. This
Agreement has been duly executed by each of SHRG, SAS and the Shareholders. This
Agreement and all other agreements and obligations entered into and undertaken
in connection with the transactions contemplated hereby to which either SHRG or
SAS or any of the Shareholders is a party constitute the valid and legally
binding obligations of SHRG, SAS and the Shareholders, enforceable against them
in accordance with their respective terms. The execution, delivery and
performance by SHRG, SAS and the Shareholders of this Agreement and the
agreements provided for herein, and the consummation by SHRG, SAS and the
Shareholders of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to SHRG, SAS or any of the
Shareholders; (b) violate the provisions of the Articles of Incorporation or
Bylaws of SHRG or SAS; (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator; or (d) conflict with or result in the
breach or termination of any term or provision of, or constitute a default
under, or cause any acceleration under, or cause the creation of any lien,
charge or encumbrance upon the properties or assets of SHRG or SAS pursuant to,
any indenture, mortgage, deed of trust or other instrument or agreement to which
it is a party or by which it or any of its respective properties is or may be
bound. Section 3.04 of the Disclosure Schedule attached hereto sets forth a
true, correct and complete list of all consents and approvals of third parties
that are required in connection with the consummation by either SHRG or SAS of
the transactions contemplated by this Agreement, all of which have been, or
prior to the Closing Date will be, received.

         3.05 Financial Statements.

                  (a) The Shareholders have delivered the Audited Financial
Statements to the Buyer. The Shareholders have previously delivered to the Buyer
the unaudited balance sheet of

                                       13
<PAGE>

each of SHRG and SAS as of December 31, 2000 and December 31, 1999 and the
related statements of income, shareholders' equity, retained earnings and
changes in financial condition of each of SHRG and SAS for the years then ended
(collectively, the "Prior Financial Statements"). The Audited Financial
Statements prepared in accordance with GAAP applied consistently with past
practices and have been certified without qualification by the Company's
Accountants. The Prior Financial Statements (together with the Audited Financial
Statements, the "Financial Statements") have been certified by SHRG's and SAS's
chief financial officer as accurately reflecting the books and records of the
Companies in accordance with GAAP. The date of the Audited Balance Sheet is
hereinafter referred to as the "Balance Sheet Date."

                  (b) The Financial Statements fairly present, as of their
respective dates, the financial condition, retained earnings, assets and
liabilities of each of SHRG and SAS and the results of operations of each of
their respective business for the periods indicated. With respect to contracts
and commitments for the provision of services by SHRG and SAS, the Financial
Statements contain and reflect adequate reserves, which are consistent with
previous reserves taken, for all reasonably anticipated material losses and
costs and expenses. The amounts shown as accrued for current and deferred income
and other taxes in the Financial Statements are sufficient for the payment of
all accrued and unpaid federal, state and local income taxes, interest,
penalties, assessments or deficiencies applicable to SHRG and SAS, as
applicable, whether disputed or not, for the applicable period then ended and
periods prior thereto.

         3.06 Absence of Undisclosed Liabilities. Except as and to the extent
(a) reflected and reserved against in the Audited Balance Sheets, (b) set forth
in Section 3.06 of the Disclosure Schedule attached hereto, or (c) incurred in
the ordinary course of business after the date of the Audited Balance Sheets and
not material in amount, either individually or in the aggregate, neither SHRG
nor SAS has any liability or obligation, secured or unsecured, whether accrued,
absolute, contingent, unasserted or otherwise, which is material to the
condition (financial or otherwise) of the assets, properties, business or
prospects of either SHRG or SAS, as applicable. For purposes of this Subsection
3.06, "material" means any amount in excess of $25,000.

         3.07 Litigation. Except as set forth in Section 3.07 of the Disclosure
Schedule attached hereto (a) there is no action, suit or proceeding to which the
SHRG or SAS is a party (either as a plaintiff or defendant) pending or, to the
knowledge of the Shareholders, threatened before any court or governmental
agency, authority, body or arbitrator and, to the knowledge of the Shareholders,
there is no basis for any such action, suit or proceeding; (b) neither SHRG nor
SAS, nor, to the knowledge of the Shareholders, any officer, director or
employee of any of the foregoing, has been permanently or temporarily enjoined
by any order, judgment or decree of any court or any governmental agency,
authority or body from engaging in or continuing any conduct or practice in
connection with the business, assets, or properties of SHRG or SAS; and (c)
there is not in existence on the date hereof any order, judgment or decree of
any court, tribunal or agency enjoining or requiring SHRG or SAS to take any
action of any kind with respect to its business, assets or properties.

         3.08 Insurance. Section 3.08 of the Disclosure Schedule attached hereto
sets forth a true, correct and complete list of all fire, theft, casualty,
general liability, workers compensation, business interruption, environmental
impairment, product liability, automobile and other

                                       14
<PAGE>

insurance policies maintained by SHRG or SAS and of all life insurance policies
maintained on the lives of any of their employees, specifying the type of
coverage, the amount of coverage, the premium, the insurer and the expiration
date of each such policy (collectively, the "Insurance Policies") and all claims
made under such Insurance Policies since January 1, 1998. True, correct and
complete copies of all Insurance Policies have been previously delivered by the
Shareholders or the Companies to the Buyer. The Insurance Policies are in full
force and effect and are in amounts of a nature which are adequate and customary
for SHRG's and SAS's respective businesses. All premiums due on the Insurance
Policies or renewals thereof have been paid, and there is no default under the
Insurance Policies. Except as set forth on Section 3.08 of the Disclosure
Schedule, neither SHRG or SAS has received any notice or other communication
from any issuer of the Insurance Policies since January 1, 2000 canceling or
materially amending any of the Insurance Policies, materially increasing any
deductibles or retained amounts thereunder, or materially increasing the annual
or other premiums payable thereunder, and, to the knowledge of the Shareholders,
no such cancellation, amendment or increase of deductibles, retainages or
premiums is threatened. Except as set forth on Section 3.08 of the Disclosure
Schedule, neither SHRG or SAS has any outstanding claims or any dispute with any
insurance carrier regarding claims, settlements or premiums and neither SHRG nor
SAS has failed to give any notice or present any claim under any Insurance
Policy in due and timely fashion. There are no outstanding requirements or
recommendations by any issuer of the Insurance Policies or by any Board of Fire
Underwriters or other similar body exercising similar functions or by any
governmental authority exercising similar functions which requires or recommends
any changes in the conduct of the business of, or any repairs or other work to
be done on or with respect to any of the properties or assets of, SHRG or SAS.

         3.09 Personal Property. Section 3.09 of the Disclosure Schedule
attached hereto sets forth (i) a true, correct and complete list of all items of
tangible personal property owned by SHRG or SAS as of the date hereof having
either a net book value per unit or an estimated fair market value per unit in
excess of $25; or not owned by SHRG or SAS but in the possession of or used in
the business of SHRG or SAS and having rental payments therefor in excess of $50
per month or $500 per year (collectively, the "Personal Property"); and (ii) a
description of the owner of, and any agreement relating to the use of, each item
of Personal Property not owned by SHRG or SAS and the circumstances under which
such Property is used. Except as disclosed in Section 3.09 of the Disclosure
Schedule:

                  (a) SHRG or SAS, as the case may be, has good and marketable
title to each item of Personal Property free and clear of all liens, leases,
encumbrances, claims under bailment and storage agreements, conditional sales
contracts, security interests, charges and restrictions, except for liens, if
any, for personal property taxes not due;

                  (b) no officer, director, shareholder or employee of either
SHRG or SAS, nor any spouse, child or other relative or affiliate thereof, owns
directly or indirectly, in whole or in part, any of the Personal Property
described in Section 3.09 of the Disclosure Schedule;

                  (c) each item of Personal Property not owned by SHRG or SAS is
in such condition that upon the return of such property to its owner in its
present condition at the end of the relevant lease term or as otherwise
contemplated by the applicable agreement between SHRG

                                       15
<PAGE>

or SAS, as the case may be, and the owner or lessor thereof, the obligations of
SHRG or SAS, as the case may be, to such owner or lessor will be discharged;

                  (d) the Personal Property is in good operating condition and
repair, normal wear and tear excepted, is currently used by either SHRG or SAS
in the ordinary course of its business and normal maintenance has been
consistently performed with respect to the Personal Property; and

                  (e) SHRG and SAS own, or otherwise have the right to use, all
of the Personal Property now used by them in the operation of their business or
the use of which is necessary for the performance of any material contract,
letter of intent or proposal to which any of them is a party.

         3.10 Intellectual Property.

                  (a) Section 3.10(a) of the Disclosure Schedule attached hereto
sets forth a true and complete list, and where appropriate, a description, of
all trade names, trademarks, service marks, logos, registered copyrights,
patents (including registrations and applications to register or renew the
registration of any of the foregoing), computer software, customer lists, trade
secrets and all other items of intangible property owned by, or used in the
business of, SHRG or SAS, including without limitation all intellectual property
rights relating to the STAR Plans (the "Intellectual Property").

                  (b) Section 3.10(b) of the Disclosure Schedule attached hereto
sets forth a list of (i) all licenses and other agreements to which SHRG or SAS
is a party and pursuant to which SHRG or SAS has granted to any other person or
entity the right to use any Intellectual Property and (ii) all licenses and
other agreements to which SHRG or SAS is a party and pursuant to which SHRG or
SAS is authorized to use any Intellectual Property (collectively, the "License
Agreements").

                  (c) Except as otherwise disclosed in Section 3.10(c) of the
Disclosure Schedule:

                           (i) SHRG or SAS is the sole and exclusive owner of
all right, title and interest in and to the Intellectual Property, including
without limitation any and all property rights, intellectual and otherwise, in
and to the STAR Plans and the customer lists of SHRG and SAS, free and clear of
all liens, security interests, charges, encumbrances, and other adverse claims
and each of SHRG and SAS has made all filings and registrations and taken all
such other actions as necessary or appropriate to confirm and maintain all
rights in such Intellectual Property;

                           (ii) To the knowledge of the Shareholders, SHRG or
SAS has the valid right and authority to use the Intellectual Property in
connection with the conduct of its business in the manner presently conducted,
and such use does not conflict with, infringe upon or violate any rights of any
other person, corporation or entity;

                                       16
<PAGE>

                           (iii) neither SHRG, SAS nor any of the Shareholders
has received notice of, or has any knowledge of any basis for, a pleading or
threatened claim, interference action or other judicial or adversarial
proceeding against SHRG or SAS that any of their operations, activities,
products, services or publications infringes any patent, trademark, trade name,
copyright, trade secret or other property right of a third party, or that either
is illegally or otherwise using the trade secrets, formulae or property rights
of others;

                           (iv) there are no outstanding, nor to the knowledge
of the Shareholders, any threatened disputes or other disagreements with respect
to any of the License Agreements;

                           (v) there are no outstanding, nor to the knowledge of
the Shareholders, any threatened disputes or other disagreements with respect to
infringement or misrepresentation by a third party of any of the Intellectual
Property;

                           (vi) all registered trademarks and service marks,
registered copyrights, and patents included in the Intellectual Property and
listed in Section 3.10(a) of the Disclosure Schedule are valid and subsisting;

                           (vii) there are no actions that must be taken within
180 days following the Closing Date that, if not taken, will result in the loss
of rights of registration or applications to register any of the Intellectual
Property;

                           (viii) none of the rights and interests currently
possessed by SHRG or SAS in the Intellectual Property shall be terminated,
limited or compromised in any respect as a result of the Buyer's acquisition or
ownership of SHRG and SAS, or any of the transactions contemplated hereby;

                           (ix) SHRG and SAS are in compliance with their
respective policies concerning privacy or confidentiality of customer data, and
all such policies are in compliance with all applicable laws;

                           (x) any information contained in any customer list
that comprises part of the Intellectual Property used by SHRG or SAS in
connection with the issuance of SHRG or SAS was obtained and is maintained in
compliance with all applicable laws;

                           (xi) the Intellectual Property and any applicable
License Agreements are sufficient to conduct SHRG's or SAS's business as
presently conducted;

                           (xii) SHRG or SAS has taken all steps reasonably
necessary to protect its right, title and interest in and to the Intellectual
Property and the License Agreements; and

                           (xiii) no officer, director, shareholder or employee
of SHRG or SAS, nor any spouse, child or other relative or affiliate thereof,
owns or has any interest in, directly or indirectly, in whole or in part, any of
the Intellectual Property or the License Agreements.

                                       17
<PAGE>

         3.11 Leases.

                  (a) Section 3.11 of the Disclosure Schedule attached hereto
sets forth a true, correct and complete list as of the date hereof of all leases
of real property, identifying separately each ground lease, to which SHRG nor
SAS is a party (collectively, the "Leases"). True, correct and complete copies
of all Leases and all amendments, modifications and supplemental agreements
thereto, have previously been delivered by the Shareholders, SHRG or SAS to the
Buyer.

                  (b) The Leases are in full force and effect, are binding and
enforceable against each of the parties thereto in accordance with their
respective terms and, except as set forth on Section 3.11 of the Disclosure
Schedule, have not been modified or amended since the date of delivery to the
Buyer. No party to any Lease has sent written notice to the other claiming that
such party is in default thereunder and that such default remains uncured.
Except as set forth on Section 3.11 of the Disclosure Schedule, there has not
occurred any event which would constitute a breach of or default in the
performance of any covenant, agreement or condition contained in any Lease, nor
has there occurred any event which with the passage of time or the giving of
notice or both would constitute such a breach or material default. Neither SHRG
or SAS is obligated to pay any leasing or brokerage commission relating to any
Lease and, except as set forth on Section 3.11 of the Disclosure Schedule, will
not have any obligation to pay any leasing or brokerage commission upon the
renewal of any Lease. Except as set forth on Section 3.11 of the Disclosure
Schedule, no construction, alteration or other leasehold improvement work with
respect to any of the Leases remains to be paid for or to be performed by SHRG
or SAS.

                  (c) Except as set forth on Section 3.11 of the Disclosure
Schedule, all utility systems serving the property under Lease, public or
private, are in good operating condition, all installation charges therefor have
been fully paid and all service charges therefor have been or will be paid by
SHRG or SAS up to and including the Closing Date. Since January 1, 2000, neither
SHRG or SAS has experienced any material interruption in the delivery of
adequate quantities of any utilities (including, without limitation,
electricity, natural gas, potable water, water for cooling or similar purposes
and fuel oil) or other public services (including, without limitation, sanitary
and industrial sewer service) required in the operation of its business during
such period.

                  (d) Except as set forth on Section 3.11 of the Disclosure
Schedule, the real property under Lease is not located in any special flood
hazard area designated by any federal, state, county or local governmental
agencies (collectively, the "Governmental Agencies") having jurisdiction over
such real property.

                  (e) To the knowledge of SHRG and SAS, the real property under
Lease complies with the requirements of all building, zoning, subdivision,
health, safety, environmental, pollution control, waste products, sewage control
and all other applicable statutes, laws, codes, ordinances, rules, orders,
regulations and decrees (collectively, the "Governmental Regulations") of any
and all Governmental Agencies. SHRG and SAS have obtained, and the Shareholders
or SHRG or SAS have previously provided the Buyer with copies

                                       18
<PAGE>

of, all consents, permits, licenses and approvals required by any Governmental
Regulations. Such consents, permits, licenses and approvals are in full force
and effect and have been properly and validly issued. There is no action pending
or, to the knowledge of the Shareholders, threatened by any Governmental
Agencies claiming that the real property under Lease violates any Governmental
Regulations or threatening to shut down the business of SHRG or SAS.

                  (f) All of the buildings, fixtures and other improvements
located on the property under Lease are in good operating condition and repair,
and, to the knowledge of the Shareholders, the operation thereof as presently
conducted is not in violation of any applicable building code, zoning ordinance
or other law or regulation.

         3.12 Real Estate. Neither SHRG nor SAS owns any real property (the
"Real Estate").

         3.13 Inventory. Neither SHRG nor SAS maintains any items of inventory
for sale to customers in the ordinary course business.

         3.14 Accounts Receivable. Section 3.14 of the Disclosure Schedule
attached hereto sets forth a true, correct and complete list of the accounts and
notes receivable of SHRG and SAS (the "Accounts Receivable"), including the
aging thereof as of the date hereof. All Accounts Receivable arose out of the
sales of services in the ordinary course of business and are collectible in the
face value thereof within 90 days after the date of invoice, using normal
collection procedures, net of the reserve for doubtful accounts set forth
thereon, which reserve is adequate and was calculated in accordance with GAAP.

         3.15 Tax Matters.

                  (a) Except as set forth on Section 3.15 of the Disclosure
Schedule attached hereto:

                           (i) Within the times and in the manner prescribed by
law, each of SHRG and SAS has timely filed all federal, state and local tax
returns and all tax returns for foreign countries, provinces and other
governing' bodies having jurisdiction to levy taxes upon them which are required
to be filed;

                           (ii) Each of SHRG and SAS has timely paid all taxes,
interest, penalties, assessments and deficiencies which have become due or which
have been claimed to be due, including without limitation income, franchise,
real estate, sales and withholding taxes and other employee benefits, taxes and
imports;

                           (iii) To the knowledge of the Shareholders, all tax
returns filed by SHRG and SAS for the taxable years ending 1995 through 2000
constitute complete and accurate representations of the respective tax
liabilities of SHRG and SAS for such years and accurately set forth all items
(to the extent required to be included or reflected in such returns) relevant to
their future tax liabilities, including the tax bases of their properties and
assets;

                           (iv) Neither SHRG nor SAS has waived or extended any
applicable statute of limitations relating to the assessment of federal, state,
local or foreign taxes;

                                       19
<PAGE>

                           (v) No examinations of the federal, state, local or
foreign tax returns of SHRG or SAS is currently in progress nor, to the
knowledge of the Shareholders, threatened and no deficiencies have been asserted
or assessed against either SHRG or SAS as a result of any audit by the Internal
Revenue Service or any state or local taxing authority and no such deficiency
has been proposed or threatened; and

                           (vi) Neither SHRG or SAS has filed a consent pursuant
to Section 341(f) of the Internal Revenue Code of 1954, as amended (the "Code")
relating to collapsible corporations nor has any such corporation agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code).

                  (b) Section 3.15 of the Disclosure Schedule attached hereto
sets forth those taxable years for which the tax returns of SHRG and SAS have
been reviewed or audited by applicable federal, state, and local taxing
authorities and those tax years for which said tax returns have received
clearances or other indications of approval from applicable federal, state, and
local taxing authorities. To the knowledge of the Shareholders, no issue or
issues have been raised in connection with any prior or pending review or audit
of said federal, state, or local tax returns which the Shareholders reasonably
believe may be expected to be raised in the future by such taxing authorities in
connection with the audit or review of the tax returns of SHRG or SAS.

         3.16 Books and Records. The general ledgers and books of account of
each of SHRG and SAS, all federal, state and local income, franchise, property
and other tax returns filed by SHRG and SAS are in all material respects
complete and correct and have been maintained in accordance with good business
practice and in accordance with all applicable procedures required by laws and
regulations.

         3.17 Contracts and Commitments.

                  (a) Section 3.17 of the Disclosure Schedule attached hereto
contains a true, complete and correct list and description of the following
contracts and agreements, whether written or oral (collectively, the
"Contracts"):

                           (i) all loan agreements, indentures, mortgages and
guaranties to which SHRG or SAS is a party or by which SHRG or SAS or any of
their property is bound;

                           (ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations, personal property leases
and lease purchase agreements to which SHRG or SAS is a party or by which SHRG
or SAS or any of their property is bound;

                           (iii) all contracts, agreements, commitments,
purchase orders or other understandings or arrangements to which SHRG or SAS is
a party or by which SHRG or SAS or any of their property is bound which (A)
involve payments or receipts by SHRG or SAS of more than $10,000 in the case of
any single contract, agreement, commitment, understanding or arrangement under
which full performance (including payment) has not been rendered by all parties
thereto or (B) which may materially adversely affect the condition (financial or
otherwise) or the properties, assets, business or prospects of SHRG or SAS;

                                       20
<PAGE>

                           (iv) all collective bargaining agreements, employment
and consulting agreements, executive compensation plans, bonus plans, deferred
compensation agreements, pension plans, retirement plans, employee stock option
or stock purchase plans and group life, health and accident insurance and other
employee benefit plans, agreements, arrangements or commitments to which SHRG or
SAS is a party or by which SHRG or SAS or any of their property is bound;

                           (v) all agency, distributor, sales representative,
franchise or similar agreements to which SHRG or SAS is a party or by which SHRG
or SAS or any of their property is bound;

                           (vi) all contracts, agreements or other
understandings or arrangements between either SHRG or SAS and any Affiliated
Entities or affiliates;

                           (vii) all leases, whether operating, capital or
otherwise, under which SHRG or SAS is lessor or lessee;

                           (viii) all contracts, agreements or other
arrangements imposing a non-competition or non-solicitation obligation on SHRG
or SAS;

                           (ix) all contracts, agreements or other
understandings or arrangements between SHRG or SAS and either (A) CNA or any
subsidiary thereof or (B) GTL or any subsidiary thereof; and

                           (x) any other material agreements or contracts
entered into by SHRG or SAS, including without limitation all agreements and
contracts with clients, customers, insurance carriers and reinsurers.

                  (b) Except as set forth on Section 3.17 of the Disclosure
Schedule:

                           (i) assuming each Contract is a valid and binding
obligation of each of the other parties thereto, each Contract is a valid and
binding obligation of SHRG or SAS, as applicable, enforceable against SHRG or
SAS, as applicable, in accordance with its terms, and SHRG or SAS does not have
any knowledge that any Contract is not a valid and binding obligation of each of
the other parties thereto;

                           (ii) SHRG or SAS has fulfilled all material
obligations required pursuant to the Contracts to have been performed by it, as
the case may be, on its part prior to the date hereof, and SHRG or SAS, as the
case may be, has no reason to believe that it will not be able to fulfill, when
due, all of its obligations under the Contracts which remain to be performed
after the date hereof;

                           (iii) neither SHRG nor SAS is in breach of or default
under any Contract, and no event has occurred, which with the passage of time or
giving of notice or both would constitute such a default, result in a loss of
rights or result in the creation of any lien, charge or encumbrance, thereunder
or pursuant thereto;

                                       21
<PAGE>

                           (iv) to the knowledge of the Shareholders, there is
no existing breach or default by any other party to any Contract, and no event
has occurred, which with the passage of time or giving of notice or both would
constitute a default by such other party, result in a loss of rights or result
in the creation of any lien, charge or encumbrance thereunder or pursuant
thereto;

                           (v) there are not and, since January 1, 2000, have
not been, any claims of a non-routine nature relating to SHRG or SAS by
customers of SHRG or SAS under any warranties, whether express or implied;

                           (vi) neither SHRG nor SAS has entered into any
Contract that expressly restricts its ability to continue or expand the STAR
Business in any market;

                           (vii) neither SHRG or SAS has any written or oral
contracts to perform services which are expected to be performed at, or to
result in, a loss;

                  (c) True, correct and complete copies of all Contracts have
previously been delivered by SHRG or SAS, as applicable, or the Shareholders to
the Buyer.

         3.18 Compliance with Agreements and Laws.

                  (a) SHRG and SAS each have all requisite licenses, permits and
certificates, including environmental, health and safety permits, from
Governmental Agencies necessary to conduct their respective business and own and
operate their respective assets (collectively, the "Permits").

                  (b) Section 3.18 of the Disclosure Schedule attached hereto
sets forth a true, correct and complete list of all such Permits, copies of
which have previously been delivered by SHRG or SAS or the Shareholders to the
Buyer.

                  (c) To the knowledge of the Shareholders, neither SHRG nor SAS
is in violation of any Governmental Regulation (including, without limitation,
any Governmental Regulation relating to building, zoning, environmental,
disposal of hazardous substances, land use or similar matters) relating to its
properties.

                  (d) The business of SHRG and SAS as conducted since January 1,
2000 has not violated, and on the date hereof does not violate, in any material
respect, any Governmental Regulation (including, but not limited to, any of the
foregoing relating to employment discrimination, occupational safety,
environmental protection, hazardous waste, conservation, insurance regulation or
corrupt practices), the enforcement of which would have a material adverse
effect on the results of operations, condition (financial or otherwise), assets,
properties business or prospects of SHRG or SAS. Except as set forth on Section
3.18 of the Disclosure Schedule, neither SHRG or SAS has had notice or
communication from any Governmental Agency or otherwise since January 1, 2000 of
any such violation or noncompliance.

                  (e) Neither SHRG nor SAS is in violation of any Governmental
Regulation, permit, or other environmental or hazardous waste requirement
applicable to SHRG or SAS, or any of the properties occupied under Lease, or any
part thereof, relating to health, safety,

                                       22
<PAGE>

pollution, hazardous waste, environmental or other similar matters, which has
not been entirely corrected and which has or will have a material adverse impact
on the transactions contemplated herein. Neither SHRG nor SAS has received
notice from any Governmental Agency alleging any such violation.

         3.19 Employee Relations.

                  (a) Each of SHRG and SAS is in compliance in all material
respects with all applicable Governmental Regulations respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practice, and there are no arrears in the
payment of wages or social security taxes.

                  (b) Except as set forth in Section 3.19 of the Disclosure
Schedule attached hereto:

                           (i) none of the employees of SHRG or SAS is
represented by any labor union;

                           (ii) there is no unfair labor practice complaint
against SHRG or SAS pending or, to the knowledge of the Shareholders, threatened
before the National Labor Relations Board or any state or local agency;

                           (iii) there is no pending or, to the knowledge of the
Shareholders, threatened labor strike or other material labor trouble affecting
SHRG or SAS (including, without limitation, any organizational drive);

                           (iv) there is no material labor grievance pending or,
to the knowledge of the Shareholders, threatened against SHRG or SAS;

                           (v) there is no pending or, to the knowledge of the
Shareholders, threatened representation question respecting the employees of
SHRG or SAS; and

                           (vi) neither SHRG nor SAS has any continuing
obligation for health, life, medical insurance or other similar fringe benefits
to any former employee of SHRG or SAS.

                  (c) Section 3.19 of the Disclosure Schedule sets forth a true,
correct and complete list of the current payroll of SHRG and SAS, including the
job descriptions and salary or wage rates of each of their employees, showing
separately for each such person who received an annual salary in excess of
$25,000 the amounts paid or payable as salary and bonus payments for the fiscal
year ended December 31, 2001.

                  (d) For purposes of this Subsection 3.19, the term "employee"
shall be construed to include sales agents and other independent contractors who
spend a majority of their working time on the business of SHRG or SAS.

                                       23
<PAGE>

         3.20 Employee Benefit Plans.

                  (a) Employee Plans. Section 3.20 of the Disclosure Schedule
attached hereto contains a true, correct and complete list of all pension,
benefit, profit sharing, retirement, deferred compensation, welfare, insurance,
disability, bonus, vacation pay, severance pay and other similar plans, programs
and agreements, whether reduced to writing or not, relating to the employees of
SHRG and SAS, or maintained at any time since January 1, 2000 by SHRG or SAS or
by any member of any controlled group of corporations, group of trades or
businesses under common control, or affiliated service group (as defined for
purposes of Section 414(b), (c) and (m), respectively, of the Code) (the
"Employee Plans") of which SHRG or SAS is or has been a member (as "ERISA
Affiliate"). Except as set forth in Section 3.20 of the Disclosure Schedule,
neither SHRG nor SAS has obligations, contingent or otherwise, past or present,
under applicable law or the terms of any Employee Plan. None of SHRG, SAS or any
ERISA Affiliate has made any express or implied commitment, whether legally
enforceable or not, to create, incur liability with respect to or cause to
existing employee benefit plan, program, arrangement, contract or scheme.
Neither SHRG nor SAS has contributed to, or has any past or present obligation
to contribute to, any stock option or stock purchase plan or other plan designed
to hold the stock of SHRG or SAS or any of their affiliates. None of the
Employee Plans provides for the payment of separation, severance, termination or
similar-type benefits to any person, or provides for or promises retiree medical
or life insurance benefits to any current or former employee, officer or
director of SHRG or SAS, except to the extent required by law.

                  (b) Prohibited Transactions. None of the Shareholders, SHRG,
SAS or their respective directors, officers, employees or agents, or any "party
in interest" or "disqualified person," as such terms are defined in Section 3 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
Section 4975 of the Code has, with respect to any Employee Plan, engaged in or
been a party to any nonexempt "prohibited transaction," as such term is defined
in Section 4975 of the Code or Section 406 of ERISA, in connection with which,
directly or indirectly, the Buyer or any of its affiliates, directors or
employees or any Employee Plan or any related funding medium could be subject to
either a penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed
by Section 4975 of the Code.

                  (c) Compliance. With respect to all Employee Plans, SHRG and
SAS are in compliance with the requirements prescribed by any and all statutes,
orders or governmental rules or regulations currently in effect, including, but
not limited to, ERISA and the Code, applicable to such Employee Plans. SHRG and
SAS have in all respects performed all obligations required to be performed by
them under, and are not in violation in any respect of, and there has been no
default or violation by any other party with respect to, any of the Employee
Plans. Except as set forth in Section 3.20 of the Disclosure Schedule, none of
the Employee Plans which are subject to Title IV of ERISA has been or will be
terminated in whole or in part within the meaning of ERISA or the Code; no
liability has been incurred to, nor has any event or circumstance occurred, nor
will any event or circumstance occur prior to the Closing Date, which could
result in such a liability being asserted by, the Pension Benefit Guaranty
Corporation with respect to any Employee Plan (other than the payment of annual
premiums under Section 4007 of ERISA); nor has any Employee Plan that is subject
to Part 3 of Subtitle B of Title I of ERISA or Section 412 of the Code, or both,
incurred any "accumulated

                                       24
<PAGE>

funding deficiency" (as defined in ERISA), whether or not waived; nor has SHRG
or SAS failed to pay any amounts due and owing as required by the terms of any
Employee Plan; nor has there been any "reportable event" within the meaning of
Sections 4043(b)(1)-(9) of ERISA, or any event described in Section 4063(a) of
ERISA, with respect to any Employee Plan, other than as disclosed herein or on
accompanying schedules.

                  (d) Multiemployer Plans. None of SHRG nor SAS or any ERISA
Affiliate has ever been obligated to contribute to any "multiemployer plan," as
such term is defined in Section 3(37) of ERISA.

                  (e) Copies of Employee Plans and Related Documents. The
Shareholders or SHRG or SAS have previously delivered to the Buyer true, correct
and complete copies of all Employee Plans which have been reduced to writing and
written descriptions of all Employee Plans which have not been reduced to
writing, and all agreements, including trust agreements and insurance contracts,
related to such Employee Plans, and the Summary Plan Description and all
modifications thereto for each Employee Plan communicated to employees. With
respect to each Employee Plan that is an "employee benefit plan," as such term
is defined in Section 3(3) of ERISA (the "ERISA Plans"), true, correct and
complete copies of (i) the annual actuarial valuation reports for the last five
years, (ii) the Form 5500 and Schedules filed for the last five years and (iii)
any filings made with the Pension Benefit Guaranty Corporation, Internal Revenue
Service or Department of Labor, or any correspondence with or from such
agencies, regarding the termination of any such ERISA Plan, have been delivered
to the Buyer.

                  (f) Qualification. Each Employee Plan and all amendments
thereto intended to qualify under Section 401(a) of the Code have been
determined by the Internal Revenue Service to so qualify, and the trusts created
thereunder have been determined to be exempt from tax under the provisions of
Section 501(a) of the Code, and copies of all determination letters with respect
to each such Employee Plan have been previously delivered by the Shareholders or
SHRG or SAS to the Buyer, and nothing has since occurred which might cause the
loss of such qualification or exemption, no such Employee Plan has been operated
in a manner which would cause it to be disqualified in operation, and all such
Employee Plans have been administered in all material respects in compliance
with and consistent with all applicable requirements of the Code and ERISA,
including, without limitation, all reporting and disclosure requirements.

                  (g) Funding Status.

                           (i) With respect to each Employee Plan which is a
defined benefit plan, as such term is defined in Section 3(35) of ERISA (a
"Defined Benefit Plan"), and that is subject to Section 412 of the Code, the
present value of the actuarial accrued liability, determined on a plan
termination basis, does not exceed the fair market value of the assets held
under each such Plan and allocable to the benefits represented by such
liability, and there is no unpaid contribution due with respect to the plan year
of any such Defined Benefit Plan ended prior to the Closing Date, as required
under the minimum funding requirements of Section 412 of ERISA. For the purpose
of the preceding sentence, the present value of actuarial accrued liability
shall be determined in accordance with the provisions of such Defined Benefit
Plan as

                                       25
<PAGE>

are adopted or negotiated on or before the Closing Date and such laws as are
applicable to such Defined Benefit Plan, and the assumptions used shall be
reasonable in the opinion of the Buyer.

                           (ii) All material contributions, premiums or payments
required to be made with respect to any Employee Plan have been made on or
before their due dates. All such contributions have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed,
and, to the knowledge of SHRG, SAS and the Shareholders, no fact or event exists
which could give rise to any such challenge or disallowance.

                           (iii) All premiums or other payments required by the
terms of any group or individual insurance policies and programs maintained by
SHRG or SAS and covering any present or former employees of SHRG or SAS with
respect to all periods up to and including the Closing Date have been fully paid
for the length of the obligation.

                  (h) Claims and Litigation. There are no pending or to the
knowledge of the Shareholders, threatened claims, suits or other proceedings by
present or former employees of SHRG or SAS or their affiliates, plan
participants, beneficiaries or spouses of any of the above, including claims
against the assets of any trust, involving any Employee Plan, or any rights or
benefits thereunder, other than ordinary and usual claims for benefits by
participants or beneficiaries, and to the knowledge of SHRG, SAS and the
Shareholders, no fact or event exists that could give rise to any such action,
suit or claim.

                  (i) No Implied Rights. Nothing expressed or implied herein
shall confer upon any past or present employee of SHRG or SAS, their respective
representatives, beneficiaries, successors and assigns, nor upon any collective
bargaining agent, any rights or remedies of any nature, including, without
limitation, any rights to employment or continued employment with the Buyer,
SHRG, SAS, or any successor or affiliate; nor shall the Buyer, SHRG, SAS, or
their affiliates be precluded or prevented from terminating or amending any
Employee Plan.

                  (j) Transfer. SHRG and SAS, as applicable, shall take any
actions as may be necessary or appropriate in the reasonable opinion of the
Buyer and the Buyer's counsel under all applicable laws and the terms of the
Employee Plans to establish the Buyer, or an affiliate of the Buyer, as having
all rights and obligations with respect to the Employee Plans assumed pursuant
to this Agreement, including, without limitation, rights with respect to all
annuity or insurance contracts which form a part of any of such Employee Plans,
together with all other Employee Plan assets. The Shareholders shall obtain as
of the Closing Date any and all consents from trustees required to effect any
transfer of any trust(s) related to such assumed Employee Plans to such
Trustee(s) as may be appointed by the Buyer.

                  (k) Except as set forth in Section 3.20 of the Disclosure
Schedule, there has been no amendment to, written interpretation of or
announcement (whether or not written) by SHRG, SAS or any ERISA Affiliate
relating to, or change in employee participation or coverage under, any Employee
Plan that would increase materially the expense of maintaining such Employee
Plan above the level of the expense incurred in respect thereto for the most
recent fiscal year ended prior to the date hereof.

                                       26
<PAGE>

                  (l) Except as provided in the Employee Plans, no employee or
former employee of SHRG, SAS or any ERISA Affiliate will become entitled to any
bonus, retirement, severance, job security or similar benefit or enhanced such
benefit (including acceleration of vesting or exercise of an incentive award) as
a result of the transactions contemplated hereby.

                  (m) Prior to the Closing, the Shareholders, SHRG and SAS shall
take the actions set forth in Section 3.20(m) of the Disclosure Schedule with
respect to the Employee Plans.

         3.21 Absence of Certain Changes or Events.

                  (a) Except as set forth in Section 3.21 of the Disclosure
Schedule attached hereto, since the Balance Sheet Date, neither SHRG nor SAS has
entered into any transaction which is not in the usual and ordinary course of
business consistent with past practice, and, without limiting the generality of
the foregoing, neither SHRG nor SAS has:

                           (i) incurred any material obligation or liability for
borrowed money;

                           (ii) discharged or satisfied any lien or encumbrance
or paid any obligation or liability other than current liabilities reflected in
the Audited Balance Sheet;

                           (iii) mortgaged, pledged or subjected to lien, charge
or other encumbrance any of their respective properties or assets;

                           (iv) sold or purchased, assigned or transferred any
of its tangible assets or cancelled any debts or claims, except for inventory
sold and raw materials purchased in the ordinary course of business;

                           (v) made any material amendment to or termination of
any Contract or done any act or omitted to do any act which would cause the
breach of any Contract;

                           (vi) suffered any losses of personal or real
property, whether insured or uninsured, and whether or not in the control of
SHRG or SAS, as the case may be, in excess of $10,000 in the aggregate, or
waived any rights of any value;

                           (vii) authorized any declaration or payment of
dividends or other distributions by SHRG or SAS, or paid any such dividends, or
authorized any transfer of assets of any kind whatsoever by SHRG or SAS to any
of their respective shareholders with respect to any shares of their capital
stock;

                           (viii) received notice of any litigation;

                           (ix) made any material change in the terms, status or
funding condition of any Employee Plan;

                           (x) engaged any new employee for a salary in excess
of $40,000 per annum;

                                       27
<PAGE>

                           (xi) made, or committed to make, any changes in the
compensation payable to any officer, director, employee or agent of SHRG or SAS,
or any bonus payment or similar arrangements made to or with any of such
officers, directors, employees or agents;

                           (xii) incurred any capital expenditure in excess of
$5,000 in any instance or $25,000 in the aggregate;

                           (xiii) made any material alteration in the manner of
keeping the books, accounts or records of SHRG or SAS, or in the accounting
practices therein reflected;

                           (xiv) suffered any material adverse change in the
combined results of operations, condition (financial or otherwise), assets,
liabilities (whether absolute, accrued, contingent or otherwise), business or
prospects of SHRG or SAS;

                           (xv) issued any stock, bonds or other corporate
securities or granted any option or issue any warrant to purchase or subscribe
for any of such securities or issued any securities convertible into such
securities;

                           (xvi) made, accrued or become liable for any bonus,
profit sharing or incentive payment, except for accruals under existing plans,
if any, or increased the rate of compensation payable or to become payable by it
to any of its officers, directors or employees, other than increases in the
ordinary course of business consistent with past practice;

                           (xvii) made any election or given any consent under
the Code or the tax statutes of any state or other jurisdiction or made any
termination, revocation or cancellation of any such election or any consent or
compromised or settled any claim for past or present tax due;

                           (xviii) waived any rights of material value;

                           (xix) taken or permitted any act or omission
constituting a breach or default under any contract by which it or its
properties are bound;

                           (xx) failed to (i) preserve the possession and
control of its assets and business, (ii) keep in faithful service its present
officers and key employees, (iii) preserve the goodwill of its consumers,
suppliers, agents, brokers and others having business relations with it, and
(iv) keep and preserve its business existing on the date hereof until the
Closing Date;

                           (xxi) failed to operate its business and maintain its
books, accounts and records in the customary manner and in the ordinary and
regular course of business and maintain in good repair its business premises,
fixtures, machinery, furniture and equipment;

                           (xxii) entered into any lease, contract, agreement or
understanding, other than those entered into in the ordinary course of business
calling for payments which in the aggregate do not exceed $20,000 for each such
lease, contract, agreement or understanding; or

                           (xxiii) committed or agreed to do any of the
foregoing in the future.

                                       28
<PAGE>

                  (b) Except as set forth in Section 3.21 of the Disclosure
Schedule attached hereto, since the Balance Sheet Date, (i) SHRG and SAS have
carried on their business diligently and substantially in the same manner as
heretofore and have not made or instituted any unusual or new methods of
purchase, sale, shipment or delivery, lease, management, accounting or
operation, except as agreed to in writing by the Buyer, and (ii) all of the
property of SHRG and SAS have been used, operated, repaired and maintained in a
normal business manner consistent with past practice.

                  (c) Neither SHRG, SAS nor the Shareholders have knowledge of
any existing or threatened occurrence, event or development which, as far as can
be reasonably foreseen, could have a material adverse effect on the business,
properties, assets, condition (financial or otherwise) or prospects of SHRG and
SAS taken as a whole.

         3.22 Customers. Section 3.22 of the Disclosure Schedule attached hereto
sets forth a true, correct and complete list of (a) the names and addresses of
each customer of SHRG and SAS which accounted for more than 5% of the aggregate
earned premium income of SHRG in the fiscal year ended December 31, 2001. Except
as set forth in Section 3.22 of the Disclosure Schedule attached hereto, each of
SHRG and SAS has good customer relations and none of the customers of either
SHRG or SAS has notified it that it intends to discontinue its relationship with
SHRG or SAS as the case may be.

         3.23 Prepayments and Deposits. Section 3.23 of the Disclosure Schedule
attached hereto sets forth all prepayments and deposits, which have been
received by SHRG or SAS as of the date hereof, from customers for services to be
performed, after the Closing Date.

         3.24 Indebtedness to and from Officers, Directors and Shareholders.
Except as set forth in Section 3.24 of the Disclosure Schedule attached hereto,
neither SHRG nor SAS is indebted, directly or indirectly, to any person who is
an officer, director or shareholder of any of the foregoing entities or any
affiliate of any such person in any amount whatsoever other than for salaries
for services rendered or reimbursable business expenses, all of which have been
reflected on the Audited Financial Statements, and no such officer, director,
shareholder or affiliate is indebted to SHRG or SAS except for advances made to
employees of SHRG or SAS in the ordinary course of business to meet reimbursable
business expenses anticipated to be incurred by such obligor.

         3.25 Banking Facilities. Section 3.25 of the Disclosure Schedule
attached hereto sets forth a true, correct and complete list of:

                  (a) each bank, savings and loan or similar financial
institution in which SHRG or SAS has an account or safety deposit box and the
numbers of the accounts or safety deposit boxes maintained by SHRG or SAS
thereat; and

                  (b) the names of all persons authorized to draw on each such
account or to have access to any such safety deposit box facility, together with
a description of the authority (and conditions thereof, if any) of each such
person with respect thereto.

                                       29
<PAGE>

         3.26 Powers of Attorney and Suretyships. Except as set forth in Section
3.26 of the Disclosure Schedule attached hereto, neither SHRG nor SAS has any
general or special powers of attorney outstanding (whether as grantor or grantee
thereof) or has any obligation or liability (whether actual, accrued, accruing,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor or otherwise in respect of the obligation of any person, corporation,
partnership, joint venture, association, organization or other entity, except as
endorser or maker of checks or letters of credit, respectively, endorsed or made
in the ordinary course of business.

         3.27 Conflicts of Interest. Except as set forth in Section 3.27 of the
Disclosure Schedule attached hereto, no officer, director or Shareholder of SHRG
or SAS nor, to the knowledge of the Shareholders, any affiliate of any such
person, now has or within three (3) years of the date hereof had, either
directly or indirectly:

                  (a) an equity or debt interest in any corporation,
partnership, joint venture, association, organization or other person or entity
which furnishes or sells or during such period furnished or sold services or
products to SHRG or SAS, or purchases or during such period purchased from SHRG
or SAS any goods or services, or otherwise does nor during such period did
business with SHRG or SAS; or

                  (b) a beneficial interest in any contract, commitment or
agreement to which SHRG or SAS is or was a party or under which any of them is
or was obligated or bound or to which any of their respective properties may be
or may have been subject, other than stock options and other contracts,
commitments or agreements between SHRG or SAS and such persons in their
capacities as employees, officers or directors of SHRG or SAS. At the option of
the Buyer, all such transactions and relationships disclosed or required to be
disclosed in Section 3.27 of the Disclosure Schedule will be terminated on or
before the Closing Date without any liability to SHRG, SAS or the Buyer.

         3.28 Regulatory Approvals. All consents, approvals, authorizations or
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by SHRG or SAS and which are necessary for the execution
and delivery by the Shareholders, SHRG and SAS of this Agreement or any
documents to be executed and delivered by the Shareholders, SHRG or SAS in
connection herewith are set forth in Section 3.28 of the Disclosure Schedule
attached hereto and have been, or prior to the Closing Date will be, obtained
and satisfied at the sole cost of SHRG or SAS.

         3.29 Disclosure. The information concerning SHRG and SAS set forth in
this Agreement, the Exhibits and Schedules attached hereto and any document,
statement or certificate furnished or to be furnished to the Buyer pursuant
hereto, does not and will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated herein or therein or
necessary to make the statements and facts contained herein or therein, in light
of the circumstances in which they are made, not false and misleading. The
Shareholders, SHRG and SAS have disclosed to the Buyer all material facts
pertaining to the transactions contemplated by this Agreement and the Exhibits
hereto. Copies of all documents

                                       30
<PAGE>

heretofore or hereafter delivered or made available to the Buyer pursuant to
this Agreement were or will be complete and accurate copies of such documents.

         3.30 Knowledge. For purposes of the representations in this Section 3,
"knowledge" of the Shareholders, SHRG or SAS shall mean the actual knowledge of
any Key Employee (as defined below), which such Key Employee is aware of or
could be expected to discover or otherwise become aware of in the course of
conducting a reasonably comprehensive investigation for purposes of complying
with this Agreement. "Key Employee" means any of Charles A. Shoumaker, Timothy
L. Cook, Mary Fischer-McKee, Craig Smith and Susan Bango.

4.       Representations of the Buyer.

         The Buyer represents and warrants to each Shareholder as follows:

         4.01 Organization and Authority. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to execute and
deliver this Agreement and the agreements contemplated herein, and to consummate
the transactions contemplated hereby and thereby.

         4.02 Authorization. The execution and delivery of this Agreement by the
Buyer, and the agreements provided for herein, and the consummation by the Buyer
of the transactions contemplated hereby and thereby, have been duly authorized
by all requisite corporate action. This Agreement constitutes the valid and
legally binding obligations of the Buyer, enforceable against the Buyer in
accordance with its terms. The execution, delivery and performance of this
Agreement and the agreements provided for herein, and the consummation by the
Buyer of the transactions contemplated hereby and thereby, will not, with or
without the giving of notice or the passage of time or both, (a) violate the
provisions of any law, rule or regulation applicable to the Buyer; (b) violate
the provisions of the Buyer's Certificate of Incorporation or Bylaws; (c)
violate any judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) conflict with or result in the breach or termination of any
term or provision of, or constitute a default under, or cause any acceleration
under, or cause the creation of any lien, charge or encumbrance upon the
properties or assets of the Buyer pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which the Buyer is a party or by which
the Buyer is or may be bound.

         4.03 Investment Representation. The Buyer is acquiring the Shares from
each Shareholder for its own account for investment and not with a view to, or
for sale in connection with, any distribution thereof, nor with any present
intention of distributing or selling the same; and, except as contemplated by
this Agreement and the agreements contemplated herein, the Buyer has no present
or contemplated agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof.

5.       Access to Information; Public Announcements.

         5.01 Access to Management, Properties and Records. The Shareholders
shall authorize the release to the Buyer of all files pertaining to the business
or operations of SHRG and SAS held by any Governmental Agencies. The
Shareholders' authorization shall specifically waive

                                       31
<PAGE>

all previous claims of privilege or other restrictions, and in any case where a
release by a present or former employee of SHRG or SAS is necessary, the
Shareholders shall exercise their best efforts to obtain such a release.

         5.02 Public Announcements. The parties agree that any and all general
public announcements or other general public communications concerning this
Agreement and the purchase of the Shares by the Buyer, and the timing, manner
and content of such disclosures, shall be subject to the mutual agreement of the
Shareholders' Representative and the Buyer.

6.       Pre-Closing Loan

         The Buyer has loaned to SHRG $2,580,000 (the "Pre-Closing Loan"),
pursuant to a Term Loan Agreement dated February 26, 2002 between UICI and SHRG,
and SHRG has applied the proceeds of the Pre-Closing Loan as specified in such
agreement. Each of the Shareholders acknowledges that the Buyer shall reduce the
Initial Payment portion of the Purchase Price described in Subsection 1.03
hereof by an amount equal to the principal amount of the Pre-Closing Loan, to be
allocated as set forth on Schedule I hereto.

7.       Conditions to Obligations of the Buyer

         The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each of
which may be waived in writing in the sole discretion of the Buyer:

         7.01 Truth of Representations and Warranties; Compliance with Covenants
and Obligations. The representations and warranties of the Shareholders, SHRG
and SAS shall be true on and as of the Closing Date. The Shareholders, SHRG and
SAS shall have performed and complied with all terms, conditions, covenants,
obligations, agreements and restrictions required by this Agreement to be
performed or complied with by each of them prior to or at the Closing Date.

         7.02 Performance by the Shareholders, SHRG and SAS. At the Closing, the
Shareholders, SHRG and SAS shall have delivered to the Buyer a certificate
signed by each such Shareholder or the President and Vice President of Finance
of SHRG or SAS, as the case may be, certifying that the conditions set forth in
Subsection 7.01 have been satisfied.

         7.03 Governmental Approvals. All governmental agencies, department,
bureaus, commissions and similar bodies, including any insurance regulatory
approvals, the consent, authorization or approval of which is necessary or
material under any applicable law, rule, order or regulation for the
consummation by the Buyer, the Shareholders, SHRG or SAS of the transactions
contemplated by this Agreement and the operation of the business of SHRG and SAS
by the Buyer, shall have consented to, authorized, permitted or approved such
transactions. Without limiting the generality of the foregoing, the obligations
of the Buyer hereunder shall be conditioned upon the ability of MEGA to obtain
licensing prior to the Closing Date to underwrite the STAR Plans (or implement
reinsurance arrangements satisfactory to the Buyer) in all such jurisdictions as
the Buyer considers to be necessary or appropriate for the Buyer's ownership and
operation of SHRG and SAS.

                                       32
<PAGE>

         7.04 Consent of Lenders, Lessors and Other Third Parties. The
Shareholders, SHRG and SAS shall have received all requisite consents and
approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for the Shareholders, SHRG and SAS to consummate
the transactions contemplated by this Agreement, including without limitation,
those set forth in Section 3.04 of the Disclosure Schedule attached hereto.

         7.05 Adverse Proceedings. No action or proceeding by or before any
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Buyer to own the Shares or to own or operate the business of
SHRG and SAS after the Closing.

         7.06 Opinion of Counsel. The Buyer shall have received an opinion of
Snell & Wilmer L.L.P., counsel to the Shareholders, SHRG and SAS, dated as of
the Closing Date, in substantially the form attached hereto as Exhibit E, and as
to such other matters as may be reasonably requested by the Buyer or its
counsel.

         7.07 Employment Contracts. On or prior to the Closing Date, (i) SHRG
and/or SAS, as applicable, and Timothy L. Cook shall have entered into an
employment and non-competition agreement under which Mr. Cook will agree to
serve as SHRG's President and which will have other terms and provisions
satisfactory to the Buyer; (ii) SHRG and/or SAS, as applicable, shall have
entered into employment and non-competition agreements with Craig Smith on terms
satisfactory to the Buyer; and (iii) Charles A. Shoumaker shall have entered
into a non-competition, non-solicitation and cooperation agreement in favor of
the Buyer, SHRG and SAS on terms satisfactory to the Buyer, pursuant to which
Charles A. Shoumaker and Therese M. Shoumaker will continue to be covered on the
same terms as now in effect under SHRG's existing health insurance plan until
January 1, 2005.

         7.08 Office Lease. On or prior to the Closing Date, SHRG and STAR
Equity LLC shall have entered into a lease for the office premises known as
STARBridge Plaza substantially in the form attached hereto as Exhibit F.

         7.09 Cross-Indemnification Agreement. On or prior to the Closing Date,
the Buyer and Charles A. Shoumaker will have entered into a
Cross-Indemnification Agreement substantially in the form attached hereto as
Exhibit G (the "Cross-Indemnification Agreement").

         7.10 Closing Deliveries. The Buyer shall have received at or prior to
the Closing such documents, instruments or certificates as the Buyer may
reasonably request including, without limitation:

                  (a) the stock certificates representing the Shares duly
endorsed in accordance with Subsection 1.01 of this Agreement;

                  (b) such certificates of SHRG's and SAS's officers and of the
Shareholders and such other documents evidencing satisfaction of the conditions
specified in this Section 8 as the Buyer shall reasonably request;

                                       33
<PAGE>

                  (c) certificates of the Secretary of State of the State of
Arizona as to the legal existence and good standing (including tax) of each of
SHRG and SAS;

                  (d) certificates of the Secretary of each of SHRS and SAS
attesting to the incumbency of such Company's officers, the authenticity of the
resolutions authorizing the transactions contemplated by this Agreement, and the
authenticity and continuing validity of the charter documents delivered pursuant
to Subsection 3.01;

                  (e) where required by the applicable Lease, estoppel
certificates from each lessor from whom SHRG or SAS leases real or personal
property consenting to the acquisition of the Shares by the Buyer and the other
transactions contemplated hereby, and representing that there are no outstanding
claims against SHRG and SAS; and

                  (f) a cross receipt executed by the Buyer and the
Shareholders.

8.       Conditions to Obligations of the Shareholders

         The obligations of the Shareholders under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing in the sole discretion of the
Shareholders' Representative, who shall have the power and authority to bind all
of the Shareholders:

         8.01 Truth of Representations and Warranties of the Buyer; Compliance
with Covenants and Obligations. The representations and warranties of the Buyer
in this Agreement shall be true on and as of the Closing Date. The Buyer shall
have performed and complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.

         8.02 Corporate Proceedings. All corporate and other proceedings
required to be taken on the part of the Buyer to authorize or carry out this
Agreement shall have been taken.

         8.03 Governmental Approvals. All governmental agencies, departments,
bureaus, commissions and similar bodies, the consent, authorization or approval
of which is necessary under any applicable law, rule, order or regulation for
the consummation by the Buyer of the transactions contemplated by this Agreement
shall have consented to, authorized, permitted or approved such transactions.

         8.04 Adverse Proceedings. No action or proceeding by or before any
court or other governmental body shall have been instituted or threatened by any
governmental body or person whatsoever which shall seek to restrain, prohibit or
invalidate the transactions contemplated by this Agreement or which might affect
the right of the Shareholders to transfer the Shares.

         8.05 Cross-Indemnification Agreement. On or prior to the Closing Date,
the Buyer and Charles A. Shoumaker will have entered into the
Cross-Indemnification Agreement.

                                       34
<PAGE>

         8.06 Closing Deliveries. The Shareholders shall have received at or
prior to the Closing such documents, instruments or certificates as they may
reasonably request including, without limitation:

                  (a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions specified in this Section 8
as the Shareholders' Representative shall reasonably request;

                  (b) a certificate of the Secretary of the Buyer attesting to
the incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement;

                  (c) payment of the Initial Payment;

                  (d) a cross receipt executed by the Buyer and the
Shareholders; and

                  (e) the Notes.

9.       Indemnification

         9.01 By the Shareholders, SHRG and SAS. The Shareholders, jointly and
severally, hereby indemnify and hold the Buyer, SHRG and SAS harmless from and
against all claims, damages, losses, liabilities, costs and expenses (including,
without limitation, settlement costs and any legal, accounting or other expenses
for investigating or defending any actions or threatened actions) (collectively,
the "Losses") in connection with each and all of the following:

                  (a) any misrepresentation or breach of any representation or
warranty made by the Shareholders, SHRG or SAS in this Agreement;

                  (b) any breach of any covenant, agreement or obligation of the
Shareholders, SHRG or SAS contained in this Agreement or any other agreement,
instrument or document contemplated by this Agreement;

                  (c) any misrepresentation contained in any statement,
certificate or schedule furnished by the Shareholders, SHRG or SAS pursuant to
this Agreement or in connection with the transactions contemplated by this
Agreement;

                  (d) any violation by SHRG or SAS of, or any failure by SHRG or
SAS to comply with, any law, ruling, order or decree, including any costs
incurred by the Buyer in connection with the transfer of the Shares;

                  (e) any tax liabilities or obligations of SHRG or SAS for all
periods on or prior to the Closing Date, except to the extent reserved for on
the Actual Closing Date Balance Sheets;

                  (f) any cost or liability arising out of either of the
Companies' failure to be qualified to do business or be in good standing in any
jurisdiction in which its ownership of

                                       35
<PAGE>

property or the character of its business requires such qualification (including
any and all costs to obtain such qualification); and

                  (g) any claims against, or liabilities or obligations of, SHRG
or SAS with respect to obligations under Employee Plans not specifically assumed
by the Buyer pursuant to this Agreement.

         9.02 By the Buyer. The Buyer hereby indemnifies and holds the
Shareholders harmless from and against all Losses in connection with each of the
following:

                  (a) any misrepresentation or breach of any representation or
warranty made by the Buyer in this Agreement; and

                  (b) any breach of any covenant, agreement or obligation of the
Buyer contained in this Agreement or any other agreement, instrument or document
contemplated by this Agreement.

         9.03 Claims for Indemnification. Whenever any claim shall arise for
indemnification under this Section 9, the party seeking indemnification (the
"Indemnified Party"), shall promptly notify the party against whom
indemnification is sought (the "Indemnifying Party") of the claim and, when
known, the facts constituting the basis for such claim. In the event of any such
claim for indemnification hereunder resulting from or in connection with any
claim or legal proceedings by a third party, the notice shall specify, if known,
the amount or an estimate of the amount of the liability arising therefrom. The
Indemnified Party shall not settle or compromise any claim by a third party for
which it is entitled to indemnification hereunder without the prior written
consent, which shall not be unreasonably withheld or delayed, of the
Indemnifying Party, who, in the case of the Shareholders' Representative, shall
have the power and authority to bind all of the Shareholders; provided, however,
that if suit shall have been instituted against the Indemnified Party and the
Indemnifying Party shall not have taken control of such suit after notification
thereof as provided in Subsection 9.04 of this Agreement, the Indemnified Party
shall have the right to settle or compromise such claim upon giving notice to
the Indemnifying Party as provided in Subsection 9.04. Failure of the
Shareholders' Representative to give notice to any Shareholder shall not relieve
such Shareholder from its obligations hereunder.

         9.04 Defense by the Indemnifying Party. In connection with any claim
which may give rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person other than the Indemnified Party, the
Indemnifying Party, at the sole cost and expense of the Indemnifying Party, may,
upon written notice to the Indemnified Party, assume the defense of any such
claim or legal proceeding if the Indemnifying Party acknowledges to the
Indemnified Party in writing the obligation of the Indemnifying Party to
indemnify the Indemnified Party with respect to all elements of such claim. If
the Indemnifying Party assumes the defense of any such claim or legal
proceeding, the Indemnifying Party shall select counsel reasonably acceptable to
the Indemnified Party to conduct the defense of such claims or legal proceedings
and at the sole cost and expense of the Indemnifying Party shall take all steps
necessary in the defense or settlement thereof. The Indemnifying Party shall not
consent to a settlement of, or the entry of any judgment arising from, any such
claim or legal proceeding,

                                       36
<PAGE>

without the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed). The Indemnified Party shall be
entitled to participate in (but not control) the defense of any such action,
with its own counsel and at its own expense. If the Indemnifying Party does not
assume the defense of any such claim or litigation resulting therefrom within 30
days after the date such claim is made: (a) the Indemnified Party may defend
against such claim or litigation in such manner as it may deem appropriate,
including, but not limited to, settling such claim or litigation, after giving
notice of the same to the Indemnifying Party, on such terms as the Indemnified
Party may deem appropriate, and (b) the Indemnifying Party shall be entitled to
participate in (but not control) the defense of such action, with its counsel
and at its own expense. If the Indemnifying Party thereafter seeks to question
the manner in which the Indemnified Party defended such third party claim or the
amount or nature of any such settlement, the Indemnifying Party shall have the
burden to prove by a preponderance of the evidence that the Indemnified Party
did not defend or settle such third party claim in a reasonably prudent manner.

         9.05 Payment to the Buyer of Indemnification Obligation. Each of the
Shareholders hereby agrees that any claim for indemnification by the Buyer, SHRG
or SAS under this Section 9 or under any other provision of this Agreement, may,
at the option of the Buyer or SHRG or SAS, as the case may be, be offset against
the principal amount of the Note to be delivered pursuant to Subsection 1.06(c)
or the cash amount payable pursuant to Subsection 1.06(b), as applicable. All
indemnification by the Shareholders hereunder (to the extent not satisfied in
the manner specified in the preceding sentence), shall be effected by payment of
cash or delivery of a cashier's or certified check in the amount of the
indemnification liability. Notwithstanding the joint and several nature of the
representations, warranties and agreements of the Shareholders hereunder, (i)
the indemnification obligations of Charles A. Shoumaker and Therese M. Shoumaker
hereunder shall be limited to the full amount of the Purchase Price, and (ii)
the indemnification obligations of each of the other Shareholders shall be
limited to the respective amounts of the Purchase Price received by them.

         9.06 Payment to the Shareholders of Indemnification Obligation. Any
indemnification to be paid by the Buyer pursuant to this Section 9 shall be made
by wire transfer of immediately available funds to an account designated by the
Shareholders' Representative in the amount of the indemnification liability as
soon as reasonably practicable after (i) such account is so designated or (ii)
the date on which the amount of the indemnification liability is agreed to by
the Buyer and the Shareholders' Representative. The indemnification obligations
to the Buyer shall be limited to the full amount of the Purchase Price.

         9.07 Survival of Representations; Claims for Indemnification. All
representations and warranties made by the Shareholders, SHRG and SAS in this
Agreement, or in any instrument or document furnished in connection with this
Agreement or the transactions contemplated hereby, shall survive the Closing and
any investigation at any time made by or on behalf of the Indemnified Party for
a period of two years, except for claims, if any, (a) asserted in writing prior
to such date identified as a claim for indemnification pursuant to this Section
9, or (b) which are based upon tax matters relating to SHRG, SAS or any of the
Shareholders, which shall survive until finally resolved and satisfied in full.

                                       37
<PAGE>

         9.08 Limits on Indemnification. For purposes of indemnification
pursuant to Sections 9.01 and 9.02, the parties agree that no party may seek
indemnification under this Section 9 unless the aggregate of claims against the
other party or parties exceed $100,000, other than as to matters constituting
fraud or intentional misrepresentation or omission, as to which no "basket"
shall apply. In the event that any party's aggregate claims under this Section 9
exceed $100,000, such party shall be entitled to seek indemnification for all
such claims on a "first dollar" basis, rather than indemnification only for the
amount in excess of $100,000.

10.      Post-Closing Agreements of the Shareholders

         The Shareholders agree that from and after the Closing Date:

         10.01 Proprietary Information.

                  (a) Each of the Shareholders and each of their affiliates (as
such term is defined in the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder) (individually, an "Affiliate" and
collectively "Affiliates") shall hold in confidence and shall use their best
efforts to have all officers, directors and personnel who continue after the
Closing to be employed by any such Shareholder or any Affiliate thereof to hold
in confidence all knowledge and information of a secret or confidential nature
with respect to the business of SHRG and SAS and not to disclose, publish or
make use of the same without the consent of the Buyer, except to the extent that
such information shall have become public knowledge other than by breach of this
Agreement by the Shareholders.

                  (b) If (i) the employment of an officer, director or other
employee of a Shareholder or any Affiliate thereof, to whom secret or
confidential knowledge or information concerning the business of SHRG or SAS has
been disclosed, is terminated and (ii) such individual is subject to an
obligation to maintain such knowledge or information in confidence after such
termination, the Shareholders shall, upon request by the Buyer, take all
reasonable steps at their expense to enforce such confidentiality obligation in
the event of an actual or threatened breach thereof. Any legal counsel retained
by any such Shareholder in connection with any such enforcement or attempted
enforcement shall be selected by such Shareholder, but shall be subject to the
approval of the Buyer, which approval shall not be unreasonably withheld.

                  (c) Each Shareholder agrees that the remedy at law for any
breach of this Subsection 10.01 would be inadequate and that the Buyer shall be
entitled to injunctive relief in addition to any other remedy it may have upon
breach of any provision of this Subsection 10.01.

         10.02 No Solicitation or Hiring of Former Employees. Except as provided
by law, until January 1, 2005, no Shareholder nor any Affiliate thereof shall
(a) solicit any person who was an employee of either SHRG or SAS on the date
hereof or the Closing Date to terminate his or her employment with the Buyer (or
SHRG or SAS, as the case may be) or to become an employee of such Shareholder or
Affiliate, or (b) hire any person who was such an employee on the date hereof or
on the Closing Date.

                                       38
<PAGE>

         10.03 Non-Competition Agreement.

                  (a) Until January 1, 2005, no Shareholder nor any Affiliate
thereof shall, except as an officer or employee of SHRG or SAS: (i) develop,
manufacture, market or sell any product or service which competes with any
existing or proposed product manufactured or service provided by either SHRG or
SAS on or prior to the Closing Date, or (ii) engage in any business competitive
with the business of SHRG or SAS as conducted on the date hereof or on the
Closing Date, in the United States or any other country in which SHRG or SAS
conducted its business during the two years prior to the Closing Date.

                  (b) The parties hereto agree that the duration and geographic
scope of the non-competition provision set forth in this Subsection 10.03 are
reasonable. In the event that any court of competent jurisdiction determines
that the duration or the geographic scope, or both, are unreasonable and that
such provision is to that extent unenforceable, the parties hereto agree that
the provision shall remain in full force and effect for the greatest time period
and in the greatest area that would not render it unenforceable. The parties
intend that this non-competition provision shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective. The Shareholders agree that damages are an inadequate
remedy for any breach of this provision and that the Buyer shall, whether or not
it is pursuing any potential remedies at law, be entitled to equitable relief in
the form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision.

         10.04 Cooperation.

                  (a) The Shareholders agree that they shall cooperate in all
reasonable respects with the Buyer in connection with the consummation of the
MEGA Contribution Transaction, including executing and delivering as requested
any and all shareholder and director consents and other documents necessary and
appropriate to consummate such MEGA Contribution Transaction.

                  (b) In the event a claim is asserted after the Closing against
SHRG, SAS, UICI or MEGA with respect to events or conditions occurring or
existing in connection with, or arising out of, (i) the operation of the STAR
Business prior to the Closing, (ii) the ownership, possession, use or sale of
any assets of the STAR Business prior to the Closing, or (iii) the incurrence or
existence of liabilities of the STAR Business prior to the Closing (including
without limitation with respect to tax matters), the Shareholders will cooperate
with the Buyer in the defense of any such claim.

11.      Post-Closing Agreements of the Buyer

         The Buyer agrees that from and after the Closing Date:

         11.01 Monthly Report of Earned Premium. Beginning with the month of
March, 2002, the Buyer shall send, or shall cause MEGA to send, a monthly report
showing (i) the calculation of Earned Premium in the manner specified in this
Agreement and (ii) the amount of collected

                                       39
<PAGE>

premium with respect to previously reported Earned Premium amounts to the
Shareholders' Representative each month until the occurrence of the Settlement
Date. Each such monthly report shall be sent no later than the 15th day of the
following month.

         11.02 Advisory Board. The Buyer shall not be obligated to create an
Advisory Board with respect to the STAR Business. However, in the event that the
Buyer or MEGA establishes an Advisory Board with respect to the STAR Business,
Charles A. Shoumaker shall be invited to serve as a member of such Advisory
Board on the same terms as the other members thereof who are not executive
employees of UICI or MEGA. This obligation shall terminate on January 1, 2005.

12.      Dispute Resolution.

         12.01 General. In the event that any dispute should arise between the
parties hereto with respect to calculation or determination of the Annualized
Earned Premium Adjustment, such dispute shall be resolved in accordance with the
procedure specified in Subsection 1.05 hereof. In the event of a dispute
regarding any other matter covered by this Agreement, the parties hereto shall
resolve such dispute in accordance with the procedures set forth in this Section
12.

         12.02 Consent of the Parties. In the event of any such dispute between
the parties, the parties shall first use their best efforts to resolve such
dispute among themselves. If the parties are unable to resolve the dispute
within 30 calendar days after the commencement of efforts to resolve the
dispute, the dispute will be submitted to arbitration in accordance with
Subsection 12.03 hereof.

         12.03 Arbitration.

                  (a) Either the Buyer or the Stockholders' Representative may
submit any matter referred to in Subsection 12.03 hereof to arbitration by
notifying the other party hereto, in writing, of such dispute. Within 10 days
after receipt of such notice, the Buyer and the Stockholders' Representative
shall designate in writing one arbitrator to resolve the dispute; provided, that
if the parties hereto cannot agree on an arbitrator within such 10-day period,
the arbitrator shall be selected by the American Arbitration Association. The
arbitrator so designated shall not be an employee, consultant, officer, director
or stockholder of any party hereto or any Affiliate of any party to this
Agreement.

                  (b) Within 15 days after the designation of the arbitrator,
the arbitrator, the Buyer and the Stockholders' Representative shall meet, at
which time the Buyer and the Stockholders' Representative shall be required to
set forth in writing all disputed issues and a proposed ruling on each such
issue.

                  (c) The arbitrator shall set a date for a hearing, which shall
be no later than 30 days after the submission of written proposals pursuant to
paragraph (b) above, to discuss each of the issues identified by the Buyer and
the Stockholders' Representative. Each such party shall have the right to be
represented by counsel. The arbitration shall be governed by the rules

                                       40
<PAGE>

of the American Arbitration Association; provided, that the arbitrator shall
have sole discretion with regard to the admissibility of evidence.

                  (d) The arbitrator shall use his or her best efforts to rule
on each disputed issue within 30 days after the completion of the hearings
described in paragraph (c) above. The determination of the arbitrator as to the
resolution of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and shall be delivered
to the parties hereto.

                  (e) The prevailing party in any arbitration shall be entitled
to an award of reasonable attorneys' fees incurred in connection with the
arbitration. The non-prevailing party shall pay such fees, together with the
fees of the arbitrator and the costs and expenses of the arbitration.

                  (f) Any arbitration pursuant to this Subsection 12.03 shall be
conducted in Dallas, Texas. Any arbitration award may be entered in and enforced
by any court having jurisdiction thereover and the parties hereby consent and
commit themselves to the jurisdiction of the courts of the State of Texas for
purposes of the enforcement of any arbitration award.

13.      Brokers

         13.01 For the Shareholders, SHRG and SAS. Each of the Shareholders,
SHRG and SAS represent and warrant that, no person, firm or corporation has
acted in the capacity of broker or finder on its behalf to bring about the
negotiation of this Agreement. The Shareholders jointly and severally agree to
indemnify and hold harmless the Buyer against any claims or liabilities asserted
against it by any person acting or claiming to act as a broker or finder on
behalf of the Shareholders, SHRG or SAS.

         13.02 For the Buyer. The Buyer agrees to pay all fees, expenses and
compensation owed to any person, firm or corporation who has acted in the
capacity of broker or finder on its behalf to bring about the negotiation of
this Agreement. The Buyer agrees to indemnify and hold harmless the Shareholders
against any claims or liabilities asserted against it by any person acting or
claiming to act as a broker or finder on behalf of the Buyer.

14.      Notices

         Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered personally or sent by telex, federal
express, registered or certified mail, postage prepaid, addressed as follows or
to such other address of which the parties may have given notice:

To the Buyer:       UICI
                    Attention:  Executive Vice President and General Counsel
                    4001 McEwen, Suite 300
                    Dallas, Texas  75244
                    (Facsimile) (972) 392-6717

                                       41
<PAGE>

         With a copy to:   W.A. Stewart, Esq.
                           Jones, Day, Reavis & Pogue
                           2727 North Harwood
                           Dallas, Texas  75201
                           (Facsimile) (214) 969-5100

To SHRG, SAS and the Shareholders:

                           c/o Charles A. Shoumaker
                           12876 N. 135th Street
                           Scottsdale, Arizona  85259

         With a copy to:   Quinn Williams, Esq.
                           Snell & Wilmer L.L.P.
                           One Arizona Center
                           409 E. Van Buren St.
                           Phoenix, Arizona  85004-2202
                           (Facsimile) (602) 382-6070

Unless otherwise specified herein, such notices or other communications shall be
deemed received (a) on the date delivered, if delivered personally, (b) three
business days after being sent, if sent by registered or certified mail, or (c)
on the date delivered, if delivered by facsimile with confirmation of receipt.

15.      Successors and Assigns

         This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Buyer, on the one hand, and the Shareholders, SHRG and SAS, on the other hand,
may not assign their respective obligations hereunder without the prior written
consent of the other party; provided, however, that the Buyer may assign this
Agreement, and its rights and obligations hereunder, to a subsidiary or
Affiliate of the Buyer. Any assignment in contravention of this provision shall
be void. No assignment shall release the Buyer, the Shareholders, SHRG or SAS or
the Subsidiaries from any obligation or liability under this Agreement.

16.      Entire Agreement; Amendments; Attachments

                  (a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral and written
and all contemporaneous oral negotiations, commitments and understandings
between such parties. The Buyer and the Shareholders holding a majority of the
Shares (who shall have the authority to bind all of the Shareholders) may amend
or modify this Agreement, in such manner as may be agreed upon, by a written
instrument executed by the Buyer and such majority of the Shareholders.

                                       42
<PAGE>

                  (b) If the provisions of any Schedule or Exhibit to this
Agreement are inconsistent with the provisions of this Agreement, the provisions
of the Agreement shall prevail. The Exhibits and Schedules attached hereto or to
be attached hereafter are hereby incorporated as integral parts of this
Agreement.

17.      Severability

         Any provision of this Agreement which is invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity, illegality or unenforceability, without
affecting in any way the remaining provisions hereof in such jurisdiction or
rendering that or any other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.

18.      Investigation of the Parties

         All representations and warranties contained herein which are made to
the knowledge of a party shall require that such party make reasonable
investigation and inquiry with respect thereto to ascertain the correctness and
validity thereof.

19.      Expenses

         Except as otherwise expressly provided herein, the Buyer, on the one
hand, and the Shareholders, jointly and severally, on the other hand, will pay
all fees and expenses (including, without limitation, legal and accounting fees
and expenses) incurred by them in connection with the transactions contemplated
hereby. In no event will any of the fees or expenses incurred in connection with
this transaction by the Shareholders or the Shareholders' Representative,
including, without limitation, the fees and expenses of counsel to the
Shareholders, be billed to or paid by SHRG or SAS. Each Shareholder shall be
responsible for payment of all sales or transfer taxes arising out of the
conveyance of the Shares owned by such Shareholder.

20.      Governing Law

         This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas. Any action or proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the parties in the courts of the State of Texas, County
of Dallas, or, if it has or can acquire jurisdiction, in the United States
District Court for the Northern District of Texas, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.

21.      Section Headings

         The section headings are for the convenience of the parties and in no
way alter, modify, amend, limit, or restrict the contractual obligations of the
parties.

                                       43
<PAGE>

22.      Counterparts

         This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       44
<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.

                               BUYER:

                               UICI

                               By: /s/ GLENN W. REED
                                  --------------------------------------------
                                  Glenn W. Reed
                                  Executive Vice President and General Counsel

                               SHRG:

                               THE S.T.A.R. HUMAN RESOURCE GROUP, INC.

                               By:   /s/ CHARLES A. SHOUMAKER
                                  --------------------------------------------
                               Name:  Charles A. Shoumaker
                                    ------------------------------------------
                               Title: President
                                     -----------------------------------------

                               SAS:

                               STAR ADMINISTRATIVE SERVICES, INC.

                               By:   /s/ CHARLES A. SHOUMAKER
                                  --------------------------------------------
                               Name:  Charles A. Shoumaker
                                    ------------------------------------------
                               Title: President
                                     -----------------------------------------

                               SHAREHOLDERS:

                               /s/ CHARLES A. SHOUMAKER
                               ------------------------------------------------
                               Charles A. Shoumaker

                               /s/ THERESE M. SHOUMAKER
                               ------------------------------------------------
                               Therese M. Shoumaker

                               /s/ ALEXIS M. MURPHY
                               ------------------------------------------------
                               Alexis M. Murphy

                               /s/ CHARLES R. SHOUMAKER
                               ------------------------------------------------
                               Charles R. Shoumaker

                               /s/ TIMOTHY L. COOK
                               ------------------------------------------------
                               Timothy L. Cook

                                       45<PAGE>
                                                                    EXHIBIT 10.1

                            364-DAY CREDIT AGREEMENT

                                      among

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

                          THE LENDERS IDENTIFIED HEREIN

                                       AND

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

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

                                       AND

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

                           DATED AS OF MARCH 29, 2002

                                  Arranged by:

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

<PAGE>

                                TABLE OF CONTENTS

<Table>
<S>                                                                                                              <C>
SECTION 1.  DEFINITIONS AND ACCOUNTING TERMS......................................................................1
         1.1      Definitions.....................................................................................1
         1.2      Computation of Time Periods....................................................................13
         1.3      Accounting Terms...............................................................................13
         1.4      Time...........................................................................................13

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

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

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

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

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

                                        i
<PAGE>

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

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

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

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

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

                                       ii
<PAGE>

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

SCHEDULES

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

EXHIBITS

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

                                      iii

<PAGE>

                            364-DAY CREDIT AGREEMENT

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

                                    RECITALS

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

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

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

                                   SECTION 1.

                        DEFINITIONS AND ACCOUNTING TERMS

         1.1 DEFINITIONS.

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

                                       2
<PAGE>

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

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

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

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

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

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

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

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

                  "Closing Date" means the date hereof.

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

                                       3
<PAGE>

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

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

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

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

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

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

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

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

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

                                       4
<PAGE>

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

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

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

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

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

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

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

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

                                       5
<PAGE>

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

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

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

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

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

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

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

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

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

                                       6
<PAGE>

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

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

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

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

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

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

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

                                       7
<PAGE>

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

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

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

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

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

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

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

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

                                       8
<PAGE>

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

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

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

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

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

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

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

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

                  "Maturity Date" means March 28, 2003.

                                       9
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                       10
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                       11
<PAGE>

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

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

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

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

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

                                       12
<PAGE>

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

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

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

         1.2 COMPUTATION OF TIME PERIODS.

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

         1.3 ACCOUNTING TERMS.

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

         1.4 TIME.

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

                                   SECTION 2.

                                      LOANS

         2.1 REVOLVING COMMITTED AMOUNT.

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

                                       13
<PAGE>

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

         2.2 LETTER OF CREDIT SUBFACILITY.

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

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

                  (c) Participations.

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

                                       14
<PAGE>

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

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

                                       15
<PAGE>

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

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

                                       16
<PAGE>

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

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

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

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

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

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

                  (k) Indemnification of Issuing Lender.

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

                                       17
<PAGE>

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

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

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

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

                                       18
<PAGE>

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

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

         2.3 METHOD OF BORROWING FOR LOANS.

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

         2.4 FUNDING OF LOANS.

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

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

                                       19
<PAGE>

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

         2.5 CONTINUATIONS AND CONVERSIONS.

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

         2.6 MINIMUM AMOUNTS.

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

                                       20
<PAGE>

         2.7 REDUCTIONS OF REVOLVING COMMITTED AMOUNTS.

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

         2.8 NOTES.

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

         2.9 JOINT AND SEVERAL LIABILITY OF THE BORROWERS.

         Subject to Section 2.10:

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

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

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

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

                                       21
<PAGE>

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

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

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

         2.10 LIMITATION OF LIABILITY OF BORROWERS.

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

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

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

                                       22
<PAGE>

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

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

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

                                   SECTION 3.

                                    PAYMENTS

         3.1 INTEREST.

                  (a) Interest Rate.

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

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

                                       23
<PAGE>

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

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

         3.2 PREPAYMENTS.

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

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

         3.3 PAYMENT IN FULL AT MATURITY.

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

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

                                       24
<PAGE>

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

         3.4 FEES.

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

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

                  (c) Letter of Credit Fees.

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

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

                                       25
<PAGE>

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

         3.5 PLACE AND MANNER OF PAYMENTS.

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

         3.6 PRO RATA TREATMENT.

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

                                       26
<PAGE>

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

         3.7 COMPUTATIONS OF INTEREST AND FEES.

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

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

                                       27
<PAGE>

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

         3.8 SHARING OF PAYMENTS.

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

         3.9 EVIDENCE OF DEBT.

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

                                       28
<PAGE>

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

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

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

                                   SECTION 4.

                      ADDITIONAL PROVISIONS REGARDING LOANS

         4.1 EURODOLLAR LOAN PROVISIONS.

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

                                       29
<PAGE>

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

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

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

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

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

                                       30
<PAGE>

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

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

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

         4.2 CAPITAL ADEQUACY.

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

                                       31
<PAGE>

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

         4.3 COMPENSATION.

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

         4.4 TAXES.

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

                                       32
<PAGE>

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

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

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

                                       33
<PAGE>

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

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

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

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

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

                                       34
<PAGE>

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

         4.5 REPLACEMENT OF LENDERS.

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

                                   SECTION 5.

                              CONDITIONS PRECEDENT

         5.1 CLOSING CONDITIONS.

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

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

                                       35
<PAGE>

                  (b) Organizational Documents.

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

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

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

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

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

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

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

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

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

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

                                       36
<PAGE>

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

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

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

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

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

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

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

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

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

                                       37
<PAGE>

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

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

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

         5.2 CONDITIONS TO LOANS.

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

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

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

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

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

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

                                       38
<PAGE>

                                   SECTION 6.

                         REPRESENTATIONS AND WARRANTIES

         The Borrowers hereby represents and warrants to each Lender that:

         6.1 ORGANIZATION AND GOOD STANDING.

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

         6.2 DUE AUTHORIZATION.

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

         6.3 NO CONFLICTS.

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

         6.4 CONSENTS.

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

                                       39
<PAGE>

         6.5 ENFORCEABLE OBLIGATIONS.

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

         6.6 FINANCIAL CONDITION.

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

         6.7 TAXES.

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

         6.8 COMPLIANCE WITH LAW.

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

         6.9 USE OF PROCEEDS; MARGIN STOCK.

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

                                       40
<PAGE>

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

         6.10 GOVERNMENT REGULATION.

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

         6.11 SOLVENCY.

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

         6.12 ENVIRONMENTAL MATTERS.

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

         6.13 SUBSIDIARIES.

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

         6.14 LITIGATION.

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

                                   SECTION 7.

                              AFFIRMATIVE COVENANTS

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

                                       41
<PAGE>

         7.1 INFORMATION COVENANTS.

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

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

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

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

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

                                       42
<PAGE>

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

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

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

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

                                       43
<PAGE>

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

         7.2 PRESERVATION OF EXISTENCE AND FRANCHISES.

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

         7.3 BOOKS AND RECORDS.

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

         7.4 COMPLIANCE WITH LAW.

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

         7.5 PAYMENT OF TAXES AND OTHER INDEBTEDNESS.

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

                                       44
<PAGE>

         7.6 MAINTENANCE OF PROPERTY; INSURANCE.

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

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

         7.7 USE OF PROCEEDS.

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

         7.8 AUDITS/INSPECTIONS.

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

         7.9 MAINTENANCE OF OWNERSHIP.

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

                                       45

<PAGE>

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

         7.10 DEBT TO CAPITALIZATION RATIO.

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

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

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

                                   SECTION 8.

                               NEGATIVE COVENANTS

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

         8.1 NATURE OF BUSINESS.

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

         8.2. LIENS.

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

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

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

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

                                       46
<PAGE>

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

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

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

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

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

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

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

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

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

                                       47
<PAGE>

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

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

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

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

         8.3 CONSOLIDATION AND MERGER.

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

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<PAGE>

         8.4 SALE OR LEASE OF ASSETS.

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

         8.5. TRANSACTIONS WITH AFFILIATES.

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

         8.6 INDEBTEDNESS.

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

                                       49
<PAGE>

                                   SECTION 9.

                                EVENTS OF DEFAULT

         9.1 EVENTS OF DEFAULT.

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

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

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

                  (c) Covenants. A Borrower shall:

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

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

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

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

                                       50
<PAGE>

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

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

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

                  (h) ERISA. The occurrence of:

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

                                       51
<PAGE>

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

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

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

         9.2 ACCELERATION; REMEDIES.

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

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

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

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

                                       52
<PAGE>

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

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

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

         9.3 ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT.

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

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

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

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

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

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

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

                                       53
<PAGE>

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

                                   SECTION 10.

                                AGENCY PROVISIONS

         10.1 APPOINTMENT.

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

         10.2 DELEGATION OF DUTIES.

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

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<PAGE>

         10.3 EXCULPATORY PROVISIONS.

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

         10.4 RELIANCE ON COMMUNICATIONS.

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

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<PAGE>

         10.5 NOTICE OF DEFAULT.

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

         10.6 NON-RELIANCE ON AGENT AND OTHER LENDERS.

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

         10.7 INDEMNIFICATION.

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

                                       56
<PAGE>

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

         10.8 AGENT IN ITS INDIVIDUAL CAPACITY.

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

         10.9 SUCCESSOR AGENT.

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

                                   SECTION 11.

                                  MISCELLANEOUS

         11.1 NOTICES.

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

                                       57
<PAGE>

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

         11.2 RIGHT OF SET-OFF.

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

         11.3 BENEFIT OF AGREEMENT.

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

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

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

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

                                       58
<PAGE>

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

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

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

                                       59
<PAGE>

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

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

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

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

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

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<PAGE>

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

         11.4 NO WAIVER; REMEDIES CUMULATIVE.

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

         11.5 PAYMENT OF EXPENSES, ETC.

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

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<PAGE>

         11.6 AMENDMENTS, WAIVERS AND CONSENTS.

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

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

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

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

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

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

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

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

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

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

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<PAGE>

         11.7 COUNTERPARTS/TELECOPY.

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

         11.8 HEADINGS.

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

         11.9 DEFAULTING LENDER.

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

         11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND WARRANTIES.

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

         11.11 GOVERNING LAW; VENUE.

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

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<PAGE>

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

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

         11.12 WAIVER OF JURY TRIAL; WAIVER OF CONSEQUENTIAL DAMAGES.

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

         11.13 SEVERABILITY.

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

         11.14 FURTHER ASSURANCES.

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

         11.15 ENTIRETY.

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

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<PAGE>

         11.16 BINDING EFFECT; CONTINUING AGREEMENT.

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

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

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

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

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

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

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

                              DUKE ENERGY FIELD SERVICES CORPORATION,
                              a Delaware corporation

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

<PAGE>

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

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

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

<PAGE>

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

                              JPMORGAN CHASE BANK

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

<PAGE>

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

                              SUNTRUST BANK

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

<PAGE>

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

                              THE BANK OF NOVA SCOTIA

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

<PAGE>

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

                              THE ROYAL BANK OF SCOTLAND PLC

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

<PAGE>

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

                              BANK OF TOKYO-MITSUBISHI TRUST COMPANY

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

<PAGE>

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

                              COMMERZBANK AG, NEW YORK AND
                              GRAND CAYMAN BRANCHES

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

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

<PAGE>

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

                              FIRST UNION NATIONAL BANK

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

<PAGE>

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

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

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

<PAGE>

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

                              U.S. BANK NATIONAL ASSOCIATION

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

<PAGE>

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

                              WELLS FARGO BANK, N.A.

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

<PAGE>

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

                              UBS AG, STAMFORD BRANCH

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

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

<PAGE>

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

                              CREDIT SUISSE FIRST BOSTON

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

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

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