-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SAGOgX7tb468PXAS+FAViMJ2YGZG4/XtumEleVJWe27qyM2oeavM6+HiamD2YqMX qFQBC8XDatSmjkg+xVZS0g== 0000950109-01-505024.txt : 20020410 0000950109-01-505024.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950109-01-505024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUKE ENERGY CORP CENTRAL INDEX KEY: 0000030371 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 560205520 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04928 FILM NUMBER: 1788750 BUSINESS ADDRESS: STREET 1: 526 SOUTH CHURCH STREET CITY: CHARLOTTE STATE: NC ZIP: 28201-1006 BUSINESS PHONE: 7045946200 MAIL ADDRESS: STREET 1: 422 S CHURCH ST CITY: CHARLOTTE STATE: NC ZIP: 28242 FORMER COMPANY: FORMER CONFORMED NAME: DUKE POWER CO /NC/ DATE OF NAME CHANGE: 19920703 10-Q 1 d10q.txt DUKE ENERGY CORPORATION ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 2001 Commission File Number 1-4928 DUKE ENERGY CORPORATION (Exact name of Registrant as Specified in its Charter) North Carolina 56-0205520 (State or Other Jurisdiction (IRS Employer of Incorporation) Identification No.) 526 South Church Street Charlotte, NC 28202-1904 (Address of Principal Executive Offices) (Zip code) 704-594-6200 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of Common Stock, without par value, outstanding at October 31, 2001......776,143,500 ================================================================================ DUKE ENERGY CORPORATION FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2001 INDEX Item Page - ---- ---- PART I. FINANCIAL INFORMATION 1. Financial Statements......................................................1 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2001 and 2000................................2 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000................................3 Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000................................................4 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2001 and 2000................5 Notes to Consolidated Financial Statements............................6 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.............................................18 PART II. OTHER INFORMATION 1. Legal Proceedings........................................................31 4. Submission of Matters to a Vote of Security Holders......................31 5. Other Information........................................................31 6. Exhibits and Reports on Form 8-K.........................................32 Signatures...............................................................33 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 From time to time, Duke Energy's reports, filings and other public announcements may include assumptions, projections, expectations, intentions or beliefs about future events. These statements are intended as "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. Duke Energy cautions that assumptions, projections, expectations, intentions or beliefs about future events may and often do vary from actual results and the differences between assumptions, projections, expectations, intentions or beliefs and actual results can be material. Accordingly, there can be no assurance that actual results will not differ materially from those expressed or implied by the forward-looking statements. Some of the factors that could cause actual achievements and events to differ materially from those expressed or implied in such forward-looking statements include state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures and affect the speed and degree at which competition enters the electric and natural gas industries; industrial, commercial and residential growth in the service territories of Duke Energy and its subsidiaries; the weather and other natural phenomena; the timing and extent of changes in commodity prices, interest rates and foreign currency exchange rates; changes in environmental and other laws and regulations to which Duke Energy and its subsidiaries are subject or other external factors over which Duke Energy has no control; the results of financing efforts, including Duke Energy's ability to obtain financing on favorable terms, which can be affected by Duke Energy's credit rating and general economic conditions; level of creditworthiness of counterparties to transactions; growth in opportunities for Duke Energy's business units; and the effect of accounting policies issued periodically by accounting standard-setting bodies. i PART I. FINANCIAL INFORMATION
Item 1. Financial Statements. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In millions, except per share amounts) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2001 2000 2001 2000 ---------- ---------- ---------- ---------- Operating Revenues Sales, trading and marketing of natural gas and petroleum products $ 7,428 $ 7,441 $ 26,688 $ 18,277 Trading and marketing of electricity 7,015 5,731 15,523 9,484 Generation, transmission and distribution of electricity 1,402 1,562 4,560 4,077 Transportation and storage of natural gas 253 253 732 779 Gain on sale of equity investment - 407 - 407 Other 620 297 1,286 883 ---------- ---------- ---------- ---------- Total operating revenues 16,718 15,691 48,789 33,907 ---------- ---------- ---------- ---------- Operating Expenses Natural gas and petroleum products purchased 6,998 7,195 25,677 17,504 Net interchange and purchased power 6,264 5,461 14,427 9,047 Fuel used in electric generation 261 215 726 583 Other operation and maintenance 1,218 908 3,059 2,487 Depreciation and amortization 375 300 1,017 864 Property and other taxes 110 111 329 315 ---------- ---------- ---------- ---------- Total operating expenses 15,226 14,190 45,235 30,800 ---------- ---------- ---------- ---------- Operating Income 1,492 1,501 3,554 3,107 Other Income and Expenses 52 55 176 145 Interest Expense 206 257 651 670 Minority Interests 62 31 267 151 ---------- ---------- ---------- ---------- Earnings Before Income Taxes 1,276 1,268 2,812 2,431 Income Taxes 480 498 1,043 939 ---------- ---------- ---------- ---------- Income Before Cumulative Effect of Change in Accounting Principle 796 770 1,769 1,492 Cumulative Effect of Change in Accounting Principle, Net of Tax - - (96) - ---------- ---------- ---------- ---------- Net Income 796 770 1,673 1,492 Preferred and Preference Stock Dividends 4 4 12 14 ---------- ---------- ---------- ---------- Earnings Available For Common Stockholders $ 792 $ 766 $ 1,661 $ 1,478 ========== ========== ========== ========== Common Stock Data Weighted average shares outstanding 775 736 765 735 Earnings per share (before cumulative effect of change in accounting principle) Basic $ 1.02 $ 1.04 $ 2.30 $ 2.01 Diluted $ 1.01 $ 1.03 $ 2.28 $ 2.00 Earnings per share Basic $ 1.02 $ 1.04 $ 2.17 $ 2.01 Diluted $ 1.01 $ 1.03 $ 2.16 $ 2.00 Dividends per share $ - $ - $ 0.825 $ 0.825
See Notes to Consolidated Financial Statements. 1 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions)
Nine Months Ended September 30, ------------------------- 2001 2000 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES $ 3,923 $ 1,887 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures, net of cash acquired (4,049) (3,498) Investment expenditures (1,066) (1,099) Proceeds from sale of equity interest - 400 Other 460 310 ---------- ---------- Net cash used in investing activities (4,655) (3,887) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Long-term debt issuances 2,025 2,755 Common stock issuances and stock option exercises 1,382 130 Payments for the redemption of Long-term debt (1,086) (844) Preferred and preference stock (20) (20) Net change in notes payable and commercial paper (913) 1,189 Distributions to minority interests - (1,217) Contributions from minority interests - 741 Dividends paid (651) (621) Other (10) 35 ---------- ---------- Net cash provided by financing activities 727 2,148 ---------- ---------- Net (decrease) increase in cash and cash equivalents (5) 148 Cash and cash equivalents at beginning of period 622 613 ---------- ---------- Cash and cash equivalents at end of period $ 617 $ 761 ========== ========== Supplemental Disclosures Cash paid for interest, net of amount capitalized $ 635 $ 611 Cash paid for income taxes $ 115 $ 758
See Notes to Consolidated Financial Statements. 2 CONSOLIDATED BALANCE SHEETS (In millions)
September 30, December 31, 2001 2000 (Unaudited) ---------- ---------- ASSETS Current Assets Cash and cash equivalents $ 617 $ 622 Receivables, net of allowance for doubtful accounts 8,447 8,293 Inventory 872 736 Unrealized gains on trading and hedging transactions 2,311 11,038 Other 878 1,466 ---------- ---------- Total current assets 13,125 22,155 ---------- ---------- Investments and Other Assets Investments in affiliates 1,293 1,370 Nuclear decommissioning trust funds 643 717 Pre-funded pension costs 310 304 Goodwill, net 1,625 1,566 Notes receivable 501 462 Unrealized gains on trading and hedging transactions 2,853 4,218 Other 2,070 1,445 ---------- ---------- Total investments and other assets 9,295 10,082 ---------- ---------- Property, Plant and Equipment Cost 37,729 34,615 Less accumulated depreciation and amortization 10,902 10,146 ---------- ---------- Net property, plant and equipment 26,827 24,469 ---------- ---------- Regulatory Assets and Deferred Debits 1,216 1,470 ---------- ---------- Total Assets $ 50,463 $ 58,176 ========== ==========
See Notes to Consolidated Financial Statements. 3
CONSOLIDATED BALANCE SHEETS (In millions) September 30, December 31, 2001 2000 (Unaudited) ---------- ---------- LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 7,065 $ 7,375 Notes payable and commercial paper 951 1,826 Taxes accrued 1,049 261 Interest accrued 210 208 Current maturities of long-term debt and preferred stock 260 470 Unrealized losses on trading and hedging transactions 1,885 11,070 Other 2,106 1,769 ---------- ---------- Total current liabilities 13,526 22,979 ---------- ---------- Long-term Debt 12,130 11,019 ---------- ---------- Deferred Credits and Other Liabilities Deferred income taxes 4,401 3,851 Nuclear decommissioning costs externally funded 643 717 Unrealized losses on trading and hedging transactions 1,249 3,581 Other 1,831 1,885 ---------- ---------- Total deferred credits and other liabilities 8,124 10,034 ---------- ---------- Commitments and Contingencies Guaranteed Preferred Beneficial Interests in Subordinated Notes of Duke Energy Corporation or Subsidiaries 1,407 1,406 ---------- ---------- Minority Interests 2,528 2,435 ---------- ---------- Preferred and Preference Stock Preferred and preference stock with sinking fund requirements 38 38 Preferred and preference stock without sinking fund requirements 209 209 ---------- ---------- Total preferred and preference stock 247 247 ---------- ---------- Common Stockholders' Equity Common stock, no par, 2 billion shares authorized; 776 million and 739 million shares outstanding at September 30, 2001 and December 31, 2000, respectively 6,173 4,797 Retained earnings 6,354 5,379 Accumulated other comprehensive loss (26) (120) ---------- ---------- Total common stockholders' equity 12,501 10,056 ---------- ---------- Total Liabilities and Common Stockholders' Equity $ 50,463 $ 58,176 ========== ==========
See Notes to Consolidated Financial Statements. 4 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (In millions)
Three Months Ended Nine Months Ended September 30, September 30, --------------------- --------------------- 2001 2000 2001 2000 --------- --------- --------- --------- Net Income $ 796 $ 770 $ 1,673 $ 1,492 Other Comprehensive Income (Loss), Net of Tax Cumulative effect of change in accounting principle - - (921) - Foreign currency translation adjustment (125) (12) (313) (60) Net unrealized (losses) gains on cash flow hedges (14) - 1,139 - Reclassification into earnings (290) - 189 - --------- --------- --------- --------- Total other comprehensive (loss) income (429) (12) 94 (60) --------- --------- --------- --------- Total Comprehensive Income $ 367 $ 758 $ 1,767 $ 1,432 ========= ========= ========= =========
See Notes to Consolidated Financial Statements. 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. General Duke Energy Corporation (collectively with its subsidiaries, "Duke Energy") is an integrated energy and energy services provider with the ability to offer physical delivery and management of both electricity and natural gas throughout the U.S. and abroad. Duke Energy provides these and other services through seven business segments. Franchised Electric generates, transmits, distributes and sells electric energy in central and western North Carolina and the western portion of South Carolina. Its operations are conducted primarily through Duke Power and Nantahala Power and Light. These electric operations are subject to the rules and regulations of the Federal Energy Regulatory Commission (FERC), the North Carolina Utilities Commission and the Public Service Commission of South Carolina. Natural Gas Transmission provides interstate transportation and storage of natural gas for customers primarily in the Mid-Atlantic, New England and southeastern states. Its operations are conducted primarily through Duke Energy Gas Transmission Corporation. The interstate natural gas transmission and storage operations are subject to the rules and regulations of the FERC. Field Services gathers, processes, transports, markets and stores natural gas and produces, transports, markets and stores natural gas liquids (NGLs). Its operations are conducted primarily through Duke Energy Field Services, LLC (DEFS), a limited liability company that is approximately 30% owned by Phillips Petroleum. Field Services operates gathering systems in western Canada and 11 contiguous states that serve major natural gas-producing regions in the Rocky Mountain, Permian Basin, Mid-Continent, East Texas-Austin Chalk-North Louisiana, as well as onshore and offshore Gulf Coast areas. North American Wholesale Energy's (NAWE's) activities include asset development, operation and management, primarily through Duke Energy North America, LLC (DENA), and commodity sales and services related to natural gas and power, primarily through Duke Energy Trading and Marketing, LLC (DETM). DETM is a limited liability company that is approximately 40% owned by Exxon Mobil Corporation. NAWE also includes Duke Energy Merchants, which develops new business lines in the evolving energy commodity markets. NAWE conducts its business throughout the U.S. and Canada. International Energy conducts its operations through Duke Energy International, LLC. International Energy's activities include asset development, operation and management of natural gas and power facilities and energy trading and marketing of natural gas and electric power. This activity is targeted in the Latin American, Asia-Pacific and European regions. Other Energy Services is a combination of businesses that provide engineering, consulting, construction and integrated energy solutions worldwide, primarily through Duke Engineering & Services, Inc., Duke/Fluor Daniel (D/FD) and DukeSolutions, Inc. D/FD is a 50/50 partnership between Duke Energy and Fluor Enterprises, Inc. Duke Ventures is comprised of other diverse businesses, primarily operating through Crescent Resources, LLC (Crescent), DukeNet Communications, LLC (DukeNet) and Duke Capital Partners, LLC (DCP). Crescent develops high-quality commercial, residential and multi-family real estate projects and manages land holdings primarily in the southeastern U.S. DukeNet provides fiber optic networks for industrial, commercial and residential customers. DCP, a wholly owned merchant finance company, provides financing, investment banking and asset management services to wholesale and commercial energy markets. 6 2. Summary of Significant Accounting Policies Consolidation. The Consolidated Financial Statements include the accounts of Duke Energy and all majority-owned subsidiaries after the elimination of significant intercompany transactions and balances. These Consolidated Financial Statements reflect all normal recurring adjustments that are, in the opinion of management, necessary to present fairly the financial position and results of operations for the respective periods. Amounts reported in the Consolidated Statements of Income are not necessarily indicative of amounts expected for the respective annual periods due to the effects of seasonal temperature variations on energy consumption and the timing of maintenance of certain electric generating units. Earnings Per Common Share. Basic earnings per share is based on a simple weighted average of common shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options, were exercised or converted into common stock. The numerator for the calculation of basic and diluted earnings per share is earnings available for common stockholders.
- ---------------------------------------------------------------------------------------- Denominator for Earnings per Share (In millions) - ---------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------------- 2001 2000 2001 2000 ---------------------------------------- Denominator for basic earnings per share (weighted average shares outstanding) 775.2 736.4 764.5 734.9 Assumed exercise of dilutive stock options 5.5 4.6 5.6 2.8 ---------------------------------------- Denominator for diluted earnings per share 780.7 741.0 770.1 737.7 - ----------------------------------------------------------------------------------------
Prior year common stock amounts and per share data have been adjusted to reflect the two-for-one common stock split effective January 26, 2001. Accounting for Hedges and Commodity Trading Activities. All derivatives are recorded on the Consolidated Balance Sheets at their fair value as Unrealized Gains or Unrealized Losses on Trading and Hedging Transactions, as appropriate. On the date swaps, futures, forwards or option contracts are entered into, Duke Energy either designates the derivative as held for trading (trading instruments); as a hedge of a forecasted transaction or future cash flows (cash flow hedges); as a hedge of a recognized asset, liability, or firm commitment (fair value hedge); as a normal purchase or sale contract; or leaves the derivative undesignated for contracts not afforded special hedge accounting. Duke Energy also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The time value of options of $3 million was excluded in the assessment of hedge effectiveness for the three months ended September 30, 2001. Commodity Trading. Prior to settlement of any energy contract held for trading purposes, favorable or unfavorable price movement is reported as Natural Gas and Petroleum Products Purchased, or Net Interchange and Purchased Power, as appropriate, in the Consolidated Statements of Income. An offsetting amount is recorded on the Consolidated Balance Sheets as Unrealized Gains or Unrealized Losses on Trading and Hedging Transactions. When a contract to sell energy is physically settled, the fair value entries are reversed and the gross amount invoiced to the customer is included as Sales, Trading and Marketing of Natural Gas and Petroleum Products, or Trading and Marketing of Electricity, as appropriate, in the Consolidated Statements of Income. Similarly, when a contract to purchase energy is physically settled, the purchase price is included as Natural Gas and Petroleum Products Purchased, or Net Interchange and Purchased Power, as appropriate, in the Consolidated Statements of Income. If a contract is not physically settled, the unrealized gain or loss on the Consolidated Balance Sheets is reversed and reclassified to a receivable or payable account. For income statement purposes, the contract is treated as a pure financial instrument, so financial settlement has no effect on the Consolidated Statements of Income. 7 Cash Flow Hedges. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge are included in the Consolidated Statements of Comprehensive Income as Other Comprehensive Income (OCI) until earnings are affected by the hedged item. Settlement amounts and ineffective portions of cash flow hedges are removed from OCI and recorded in the Consolidated Statements of Income in the same accounts as the item being hedged. Duke Energy discontinues hedge accounting prospectively when it is determined that the derivative no longer qualifies as an effective hedge, or when it is no longer probable that the hedged transaction will occur. When hedge accounting is discontinued, the derivative will continue to be carried on the Consolidated Balance Sheets at its fair value with subsequent changes in its fair value recognized in current-period earnings. Gains and losses related to discontinued hedges that were accumulated in OCI will remain in OCI until earnings are affected by the hedged item, unless it is no longer probable that the hedged transaction will occur. Under these circumstances, gains and losses that were accumulated in OCI will be recognized in current-period earnings. Fair Value Hedges. Duke Energy enters into interest rate swaps to convert some of its fixed-rate long-term debt to floating-rate debt and designates such interest rate swaps as fair value hedges. Duke Energy also enters into electricity derivative instruments such as swaps, futures and forwards to manage the fair value risk associated with certain of its unrecognized firm commitments to sell generated power due to changes in the market price of power. Upon designation of such derivatives as fair value hedges, prospective changes in fair value of the derivative and the hedged item are recognized in current earnings. All components of each derivative gain or loss are included in the assessment of hedge effectiveness, unless otherwise noted. Cumulative Effect of Change in Accounting Principle. Duke Energy adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," on January 1, 2001. In accordance with the transition provisions of SFAS No. 133, Duke Energy recorded a net-of-tax cumulative effect adjustment of $96 million, or $0.13 per basic share, as a reduction in earnings. The net-of-tax cumulative effect adjustment reducing OCI and Common Stockholders' Equity was $921 million. For the nine months ended September 30, 2001, Duke Energy reclassified as earnings $504 million of losses from OCI for derivatives included in the transition adjustment related to hedge transactions that settled. The amount reclassified out of OCI will be different from the amount included in the transition adjustment due to market price changes since January 1, 2001. Currently, there are ongoing discussions surrounding the implementation and interpretation of SFAS No. 133 by the Financial Accounting Standards Board's (FASB) Derivative Implementation Group. In June 2001, the FASB approved Issue C15, "Scope Exceptions: Normal Purchases and Normal Sales Exception for Option-Type Contracts and Forwards Contracts in Electricity." Under the guidance of Issue C15, buyers and sellers of electricity are not required to mark-to-market contracts meeting certain criteria. Option-type contracts include capacity contracts that allow the electric industry to meet volatile demand by providing the option to purchase electricity as needed. The FASB concluded if such contracts meet the criteria outlined in Issue C15, they could qualify as a normal purchase or sale under SFAS No. 133. This new SFAS No. 133 implementation guidance became effective July 1, 2001. For contracts previously designated as hedges, Duke Energy treated the change as a de-designation under SFAS No. 133, and the fair value for each qualifying contract on July 1 became the contract's net carrying amount. On October 10, 2001 the FASB approved revisions to the qualifying criteria outlined in Issue C15. The revised guidance becomes effective January 1, 2002. Duke Energy is continuing to determine the impact on its future results of the revision. New Accounting Standards. In June 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." 8 SFAS No. 141 requires all business combinations initiated (as defined by the standard) after June 30, 2001 to be accounted for using the purchase method. Companies may no longer use the pooling method of accounting for future combinations. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 and will be adopted by Duke Energy as of January 1, 2002. SFAS No. 142 requires that goodwill no longer be amortized over an estimated useful life, as previously required. Instead, goodwill amounts will be subject to a fair-value-based annual impairment assessment. The standard also requires acquired intangible assets to be recognized separately and amortized as appropriate. Duke Energy expects that the adoption of SFAS No. 142 will have an impact on future financial statements due to the discontinuation of goodwill amortization expense. For the nine months ended September 30, 2001, amortization expense for goodwill was $108 million. The FASB and the Emerging Issues Task Force continue to field questions surrounding the transition provisions and clarification of key aspects of the standard. Duke Energy is preparing to implement the new standard and has not yet determined the impact on its consolidated results of operations, cash flows or financial position. In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 provides the accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, and early adoption is permitted. Duke Energy is currently assessing the new standard and has not yet determined the impact on its consolidated results of operations, cash flows or financial position. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The new rules supersede SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The new rules retain many of the fundamental recognition and measurement provisions, but significantly change the criteria for classifying an asset as held-for-sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Duke Energy is currently assessing the new standard and has not yet determined the impact on its consolidated results of operations, cash flows or financial position. Reclassifications. Certain prior period amounts have been reclassified in the Consolidated Financial Statements and in Note 4 to conform to the current presentation. Excise and Other Pass Through Taxes. Duke Energy generally presents revenues net of pass through taxes on the Consolidated Statements of Income. 3. Derivative Instruments, Hedging Activities and Credit Risk Commodity Cash Flow Hedges. Certain subsidiaries of Duke Energy are exposed to market fluctuations in the prices of various commodities related to their ongoing power generating and natural gas gathering, processing and marketing activities. Duke Energy closely monitors the potential impacts of commodity price changes, and where appropriate, uses various instruments to lock in margins for a portion of its future sales and generation revenues. These commodity instruments, consisting of swaps, futures, forwards and collared options, serve as cash flow hedges for natural gas, electricity and NGL transactions. The maximum term over which Duke Energy is hedging exposures to the price variability of these commodities is 12 years. For the nine months ended September 30, 2001, the ineffective portion of commodity cash flow hedges and the amount recognized for transactions that no longer qualified as cash flow hedges were not material. As of September 30, 2001, $47 million of after-tax deferred net losses on derivative instruments accumulated in OCI are expected to be reclassified to earnings during the next three months as the hedged transactions occur. These losses will generally be more than offset by the related sales and generation revenues. However, due to the volatility of the commodities markets, the value of the derivative instrument is subject to change prior to its reclassification into earnings. 9 Commodity Fair Value Hedges. Certain subsidiaries of Duke Energy are exposed to changes in fair value of certain if its unrecognized firm commitments to sell generated power due to market fluctuations of the underlying commodity prices. Duke Energy actively evaluates such changes in fair value of such unrecognized firm commitments due to commodity price changes, and where appropriate, uses various instruments to hedge its market risk associated with those firm commitments. These commodity instruments, consisting of swaps, futures and forwards, serve as fair value hedges for the firm commitments associated with generated power sales. The maximum term over which Duke Energy is hedging exposures to the market risk of such items is ten years. For the nine months ended September 30, 2001, the ineffective portion of commodity fair value hedges was not material. Energy Trading Contracts. Duke Energy provides energy supply, structured origination, trading and marketing, risk management and commercial optimization services to large energy customers, energy aggregators and other wholesale companies. These services require Duke Energy to utilize natural gas, electricity, NGL and transportation derivatives and contracts that expose it to a variety of market risks. Duke Energy manages its trading exposure with strict policies that limit its market risk and require daily reporting to management of potential financial exposure. These policies include statistical risk tolerance limits using historical price movements to calculate a daily earnings at risk measurement. Interest Rate (Fair Value or Cash Flow) Hedges. Duke Energy is exposed to risk resulting from changes in interest rates as a result of its issuance of variable-rate debt, fixed-rate securities, commercial paper and auction market preferred stock, as well as interest rate swaps and interest rate lock agreements. Duke Energy manages its interest rate exposure by limiting its variable-rate and fixed-rate exposures to certain percentages of total capitalization, as set by policy, and by monitoring the effects of market changes in interest rates. For the nine months ended September 30, 2001, Duke Energy's existing interest rate derivative instruments and related ineffectiveness were not material to its results of operations, cash flows or financial position. Foreign Currency (Fair Value or Cash Flow) Hedges. Duke Energy is exposed to foreign currency risk that arises from investments in international affiliates and businesses owned and operated in foreign countries. To mitigate risks associated with foreign currency fluctuations, when possible, contracts are denominated in or indexed to the U.S. dollar, or investments may be hedged through debt denominated in the foreign currency. Duke Energy also uses foreign currency derivatives, where possible, to manage its risk related to foreign currency fluctuations. For the nine months ended September 30, 2001, the impact of Duke Energy's existing foreign currency derivative instruments were not material to its results of operations, cash flows or financial position. Market and Credit Risk. Duke Energy's principal markets for power and natural gas marketing services are industrial end-users and utilities located throughout the U.S., Canada, Asia Pacific, Europe and Latin America. Duke Energy has concentrations of receivables from natural gas and electric utilities and their affiliates, as well as industrial customers throughout these regions. These concentrations of customers may affect Duke Energy's overall credit risk in that certain customers may be similarly affected by changes in economic, regulatory or other factors. Where exposed to credit risk, Duke Energy analyzes the counterparties' financial condition prior to entering into an agreement, establishes credit limits and monitors the appropriateness of these limits on an ongoing basis. As of September 30, 2001, Duke Energy had a pre-tax provision of $90 million related to energy sales in California. See Note 8 for further information regarding credit exposure. The change in market value of New York Mercantile Exchange-traded futures and options contracts requires daily cash settlement in margin accounts with brokers. Physical forward contracts and financial derivatives are generally settled at the expiration of the contract term or each delivery period; however, these transactions are also generally subject to margin agreements with the majority of Duke Energy's counterparties. 10 4. Business Segments Duke Energy's reportable segments are strategic business units that offer different products and services and are each managed separately. Management evaluates segment performance based on earnings before interest and taxes (EBIT) after deducting minority interests. EBIT is calculated as follows: - ------------------------------------------------------------------------ Reconciliation of Operating Income to EBIT (In millions) - ------------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30, September 30, -------------------------------------- 2001 2000 2001 2000 -------------------------------------- Operating income $ 1,492 $ 1,501 $ 3,554 $ 3,107 Other income and expenses 52 55 176 145 -------------------------------------- EBIT $ 1,544 $ 1,556 $ 3,730 $ 3,252 - ------------------------------------------------------------------------ EBIT should not be considered as an alternative to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles as an indicator of Duke Energy's operating performance or liquidity. Duke Energy's EBIT is not necessarily comparable to a similarly titled measure of another company. Beginning January 1, 2001, Duke Energy discontinued allocating corporate governance costs for its business segment analysis. Certain reclassifications have been made to information for the period ended September 30, 2000 to conform to the current year presentation. 11
- -------------------------------------------------------------------------------------------------------------------- Business Segment Data (In millions) - -------------------------------------------------------------------------------------------------------------------- Depreciation Capital and Unaffiliated Intersegment Total and Investment Revenues Revenues Revenues EBIT/a/ Amortization Expenditures/c/ ------------------------------------------------------------------------------- Three Months Ended September 30, 2001 Franchised Electric $ 1,431 $ - $ 1,431 $ 607 $ 147 $ 298 Natural Gas Transmission 238 33 271 143 35 238 Field Services 1,331 373 1,704 75 81 148 NAWE 12,995 95 13,090 618 40 1,115 International Energy 390 5 395 74 24 106 Other Energy Services 75 68 143 (22) 34 2 Duke Ventures 258 - 258 51 6 192 Other Operations/b/ - (2) (2) (39) 8 24 Eliminations and Minority interests - (572) (572) 37 - - ----------------------------------------------------------------------------- Total consolidated $ 16,718 $ - $ 16,718 $ 1,544 $ 375 $ 2,123 - -------------------------------------------------------------------------------------------------------------------- Three Months Ended September 30, 2000 Franchised Electric $ 1,435 $ - $ 1,435 $ 616 $ 141 $ 166 Natural Gas Transmission 247 32 279 132 33 447 Field Services 2,087 440 2,527 85 67 53 NAWE 11,143 43 11,186 235 20 558 International Energy 270 - 270 83 25 99 Other Energy Services (29) 105 76 (69) 3 6 Duke Ventures 538 - 538 445 4 253 Other Operations/b/ - (66) (66) (16) 7 206 Eliminations and Minority interests - (554) (554) 45 - - ----------------------------------------------------------------------------- Total consolidated $ 15,691 $ - $ 15,691 $ 1,556 $ 300 $ 1,788 - -------------------------------------------------------------------------------------------------------------------- /a/ EBIT includes intersegment sales accounted for at prices representative of unaffiliated party transactions. /b/ Includes certain unallocated corporate items, as discussed above. /c/ Capital and Investment Expenditures are gross of cash received from acquisitions.
12
- ------------------------------------------------------------------------------------------------------------------------- Business Segment Data (In millions) - --------------------------------------------------------------------------------------------------------------------------- Depreciation Capital and Unaffiliated Intersegment Total and Investment Revenues Revenues Revenues EBIT/a/ Amortization Expenditures/c/ --------------------------------------------------------------------------------- Nine Months Ended September 30, 2001 Franchised Electric $ 3,742 $ - $ 3,742 $ 1,428 $ 439 $ 750 Natural Gas Transmission 712 105 817 460 106 524 Field Services 6,202 1,438 7,640 282 219 455 NAWE 36,223 388 36,611 1,217 101 2,480 International Energy 1,286 10 1,296 218 72 264 Other Energy Services 231 162 393 (9) 41 10 Duke Ventures 393 - 393 94 15 555 Other Operations/b/ - 119 119 (152) 24 83 Eliminations and Minority interests - (2,222) (2,222) 192 - - ------------------------------------------------------------------------------- Total consolidated $ 48,789 $ - $ 48,789 $ 3,730 $ 1,017 $ 5,121 - -------------------------------------------------------------------------------------------------------------------------- Nine Months Ended September 30, 2000 Franchised Electric $ 3,708 $ - $ 3,708 $ 1,476 $ 423 $ 457 Natural Gas Transmission 748 98 846 418 94 914 Field Services 5,231 917 6,148 229 176 268 NAWE 22,586 235 22,821 427 55 1,384 International Energy 725 2 727 274 74 929 Other Energy Services 300 189 489 (52) 9 22 Duke Ventures 609 - 609 478 12 417 Other Operations/b/ - (56) (56) (126) 21 306 Eliminations and Minority interests - (1,385) (1,385) 128 - - ------------------------------------------------------------------------------- Total consolidated $ 33,907 $ - $ 33,907 $ 3,252 $ 864 $ 4,697 - -------------------------------------------------------------------------------------------------------------------------- /a/ EBIT includes intersegment sales accounted for at prices representative of unaffiliated party transactions. /b/ Includes certain unallocated corporate items. /c/ Capital and Investment Expenditures are gross of cash received from acquisitions. Segment assets in the accompanying table are net of intercompany advances, intercompany notes receivable and investments in subsidiaries.
- -------------------------------------------------------------------------- Segment Assets (In millions) - -------------------------------------------------------------------------- September 30, December 31, 2001 2000 ----------------------- Franchised Electric $ 12,901 $ 12,819 Natural Gas Transmission 4,960 4,995 Field Services 7,040 6,266 NAWE 17,203 28,213 International Energy 4,226 4,551 Other Energy Services 192 543 Duke Ventures 1,842 1,967 Other Operations and eliminations/a/ 2,099 (1,178) ----------------------- Total consolidated $ 50,463 $ 58,176 - -------------------------------------------------------------------------- /a/ Includes certain unallocated corporate items. 13 5. Debt In February 2001, DEFS issued $250 million of 6.875% Senior Unsecured Notes due 2011. The proceeds were used to repay DEFS' remaining balance of commercial paper that was issued in connection with the March 2000 combination of Field Services' natural gas gathering, processing and marketing business with Phillips Petroleum's gas gathering, processing and marketing unit. In addition, in November 2001 DEFS issued $300 million of 5.75% Senior Unsecured Notes due 2006. The proceeds will be used to repay short-term debt. In July 2001, Duke Energy redeemed seven issues of its first and refunding mortgage bonds. The redemption was completed to take advantage of the general decline in interest rates. The total face value of the redeemed bonds was $386 million with interest rates ranging from 5.875% to 8.30%. Fees paid in connection with these redemptions totaled approximately $15 million and are not shown separately in the accompanying financial statements. Duke Energy's wholly-owned subsidiary, Duke Capital Corporation, had a $141 million note payable to D/FD as of December 31, 2000. As of September 30, 2001, the note had increased $412 million to $553 million. The weighted average interest rates were 3.87% and 4.44% for the quarter and nine months ended September 30, 2001, respectively. 6. Equity Offerings In March 2001, Duke Energy completed an offering of 25 million shares of common stock, at a price of $38.98 per share, before underwriting discount and other offering expenses. In addition, Duke Energy completed an offering of approximately 31 million units of mandatorily convertible securities (Equity Units) at a price of $25 per unit before underwriting discount and other offering expenses. The Equity Units consist of senior notes of Duke Capital Corporation, and purchase contracts obligating the investors to purchase shares of Duke Energy's common stock in 2004. The number of shares to be issued in 2004 will be based on the stock price at conversion. Also in March 2001, the underwriters exercised options granted to them to purchase an additional 3.75 million shares of common stock and four million Equity Units at the original issue prices, less underwriting discounts, to cover over-allotments made during the offerings. Total net proceeds from the offerings were approximately $1.94 billion and were used to repay short-term debt and for other corporate purposes. 7. Common Stock At Duke Energy's annual meeting of shareholders held on April 26, 2001, shareholders approved an amendment to the Articles of Incorporation to increase the authorized common stock from one billion to two billion shares. 8. Commitments and Contingencies Environmental Matters. In October 1998, the Environmental Protection Agency (EPA) issued a final rule on regional ozone control that required 22 eastern states and the District of Columbia to revise their State Implementation Plans (SIPs) to significantly reduce emissions of nitrogen oxide by May 1, 2003. The EPA's rule was challenged in court by various states, industry and other interests, including Duke Energy and the states of North Carolina and South Carolina. In March 2000, the court upheld most aspects of the EPA's rule. The same court subsequently issued a decision that extended the compliance deadline for implementation of emission reductions to May 31, 2004. In January 2000, the EPA finalized another ozone-related rule under Section 126 of the Clean Air Act that has virtually identical emission control requirements as its October 1998 action, but with a May 1, 2003 compliance date. This rule was challenged in court and on May 14, 2001 the U.S. Court of Appeals for the DC Circuit sided with the EPA on all issues except one. The court remanded the electric generating unit (EGU) growth rate factor determinations used to establish each state's emission cap until the EPA could 14 engage in decision making on how to set the EGU growth rate factors. On August 24, 2001, the DC Circuit suspended the implementation schedule for EGUs until the EPA completes a rulemaking in response to the court's May 14 remand order. This ruling prevents the EPA from implementing the Section 126 program beginning May 1, 2003. Possible new implementation dates range from mid July of 2003 to May 31, 2004. Management estimates that Duke Energy will spend from $500 million to $900 million in capital costs for additional emission controls through 2007 to comply with the new EPA rules. In response to the EPA's October 1998 rule, both North Carolina and South Carolina have revised their SIPs and are awaiting legislative and EPA approval. Legislation was recently introduced in the North Carolina General Assembly that would require North Carolina electric utilities, including Duke Energy, to make significant reductions in emissions of sulfur dioxide and nitrogen oxides from its coal-fired power plants over the next eight to 12 years. Management estimates the cost to Duke Energy of achieving the specified emission reductions in the proposed legislation to be approximately $1.5 billion. The proposed North Carolina legislation includes a provision that allows Duke Energy to recover some or all of these costs from customers. The provisions of the final legislation, if passed into law, could be significantly different from the proposal. Emission control retrofits needed to comply with the new rules are large technical, design and construction projects. These projects will be managed closely to ensure the continuation of reliable electric service to Duke Energy's customers throughout the projects and upon their completion. California Issues. Duke Energy, certain of its subsidiaries, and three current or former executives have been named as defendants, among numerous other corporate and individual defendants, in one or more of a total of six lawsuits brought by or on behalf of electricity consumers in the State of California who seek damages as a result of the defendants' alleged unlawful manipulation of the California wholesale electricity markets. Duke Energy North America (DENA) and DETM have been named among 16 defendants in a class action lawsuit (the Gordon lawsuit) filed against companies identified as "generators and traders" of electricity in California markets. DETM also was named as one of numerous defendants in four additional lawsuits, including two class actions (the Hendricks and Pier 23 Restaurant lawsuits), filed against generators, marketers and traders and other unnamed providers of electricity in California markets. A sixth lawsuit (the Bustamante lawsuit), was brought by the Lieutenant Governor of the State of California and a State Assemblywoman, and includes Duke Energy, certain of its subsidiaries and three current or former executives of Duke Energy among the numerous other corporate and individual defendants. The Gordon and Hendricks class action lawsuits were filed in the Superior Court of the State of California, San Diego County, in November 2000. Three other lawsuits were filed in January 2001, one in Superior Court, San Diego County, and the other two in Superior Court, County of San Francisco. The Bustamante lawsuit was filed in May 2001 in Superior Court, Los Angeles County. These lawsuits generally allege that the defendants manipulated the wholesale electricity markets in violation of state laws against unfair and unlawful business practices and state antitrust laws. Plaintiffs in these lawsuits seek aggregate damages of billions of dollars. The lawsuits each seek the disgorgement of alleged unlawfully obtained revenues for sales of electricity and, in four lawsuits, an award of treble damages. While these matters referenced above are in their earliest stages, management believes, based on its analysis to date of the factual background and the claims asserted in these matters, that their resolution will not have a material adverse effect on Duke Energy's consolidated results of operations, cash flows or financial position. In addition to the lawsuits described in the preceding paragraph, several investigations and regulatory proceedings have commenced at the state and federal levels into the causes of the high wholesale electricity prices in the western U.S. At the federal level, there are numerous proceedings before the FERC. Some parties to those proceedings have made claims for billions of dollars of refunds from sellers of wholesale electricity, including DETM. Some parties have also sought to revoke the authority of DETM and other DENA-affiliated electricity marketers to sell electricity at market-based rates. The FERC is also conducting its own investigation to determine the causes of the high wholesale electricity prices. As a result of these proceedings, the FERC has ordered some sellers, including DETM, to refund, or offset against outstanding accounts receivable, certain amounts billed for sales of electricity in excess of a FERC established proxy 15 price. The proxy price is intended to represent what the FERC believes would have been the market-clearing price in a perfectly competitive market. In June 2001, DETM offset approximately $20 million against amounts owed to it by the California Independent System Operator and the California Power Exchange for sales of electricity during January and February 2001. This offset reduced the $110 million reserve established in the fourth quarter of 2000 to $90 million. Proceedings are ongoing to determine, among other things, the amount of any refunds or offsets for periods prior to January 2001 and the method to be used to determine the proxy price in future months. At the state level, the California Public Utilities Commission has formal and informal investigations in place primarily to determine if power plant operators in California, including DENA, have improperly "withheld," either economically or physically, generation output from the market to manipulate market prices. In addition, the California State Senate formed a Select Committee to Investigate Price Manipulation of the Wholesale Energy Market (Select Committee). The Select Committee has served a subpoena on several Duke Energy subsidiaries seeking data concerning their California market activities. The Select Committee has heard testimony from several witnesses but no one from Duke Energy has been called to testify to date. The California Attorney General also has an investigation under way to determine if any market participants engaged in illegal activity, including antitrust activity, in the course of their sales of electricity into the wholesale markets in the western U.S. The Attorneys General of Washington and Oregon have joined the California Attorney General in a joint investigation of the electricity markets. The California Attorney General has also convened a grand jury to determine whether criminal charges should be brought against any market participants. To date, no Duke Energy employee has been called to testify before the grand jury nor have any criminal charges been filed against Duke Energy or any of its officers, directors or employees in connection with the wholesale electricity markets in the western U.S. Throughout 2001, Duke Energy has conducted its business in California to supply the maximum possible electricity to meet the needs of the state while limiting its exposure to non-creditworthy counterparties and managing the output limitations on its power plants imposed by applicable permits and laws. Since December 31, 2000, Duke Energy has closely managed the balance of questionable receivables, and believes that the current pre-tax provision of $90 million is appropriate. No additional provisions for California receivables have been recorded in 2001. Management believes, based on its analysis to date of the factual background and the claims asserted in these matters, that their resolution will not have a material adverse effect on Duke Energy's consolidated results of operations, cash flows or financial position. Litigation. Exxon Mobil Corporation Arbitration. In December 2000, three subsidiaries of Duke Energy initiated binding arbitration against three subsidiaries of the Exxon Mobil Corporation (collectively, the "Exxon Mobil entities") concerning the parties' joint ownership of DETM and certain related affiliates (collectively, the "Ventures"). At issue is a buy-out right provision in the parties' agreement. The agreements governing the ownership of the Ventures contain provisions giving Duke Energy the right to purchase the Exxon Mobil entities' 40% interest in the Ventures in the event material business disputes arise between the Ventures' owners. Such disputes have arisen, and consequently, Duke Energy exercised its right to buy the Exxon Mobil entities' interest in the Ventures. Duke Energy claims that refusal by the Exxon Mobil entities to honor the exercise is a breach of the buy-out right provision, and seeks specific performance of the provision. Duke Energy has also asserted various additional claims against the Exxon Mobil entities for breach of the agreements governing the Ventures. In January 2001, the Exxon Mobil entities asserted counterclaims in the arbitration and claims in a separate Texas State court action alleging that Duke Energy breached its obligations to the Ventures and to the Exxon Mobil entities. In April 2001, the state court entered an order staying the state court action, and compelling the Exxon Mobil entities to arbitrate their state court claims. To date, the Exxon Mobil entities have not sought to challenge this order in an appellate court. In early October, a hearing was held before an arbitration panel regarding the buyout right and the various claims of Duke Energy and Exxon Mobil against each other. Although the hearing is complete from an evidentiary standpoint, both parties are 16 submitting final briefs, and oral arguments will take place before the panel in November 2001. Duke Energy expects a final decision from the panel before the end of the year. Management believes that the final disposition of this action will not have a material adverse effect on Duke Energy's consolidated results of operations, cash flows or financial position. Duke Energy and its subsidiaries are involved in other legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding performance, contracts and other matters arising in the ordinary course of business, some of which involve substantial amounts. Management believes that the final disposition of these proceedings will not have a material adverse effect on consolidated results of operations, cash flows or financial position. Proposed Acquisition of Westcoast Energy. In September 2001, Duke Energy announced the proposed acquisition of Westcoast Energy Inc. (Westcoast) for $8.5 billion, including assumed debt of approximately $5 billion. Westcoast, headquartered in Vancouver, British Columbia, is a North American energy company with interests in natural gas gathering, processing, transmission, storage and distribution, as well as power generation, international energy businesses, and financial, information technology, and energy services businesses. The proposed transaction provides for the acquisition of all outstanding common shares of Westcoast in exchange for a combination of cash, Duke Energy common shares and exchangeable shares of a Canadian subsidiary of Duke Energy such that 50% of the consideration will be paid in cash and 50% will be paid in stock. The transaction is expected to close by the end of the first quarter 2002, subject to approval of Westcoast's shareholders and regulatory approvals. The transaction will be accounted for using the purchase method of accounting. Further details about the proposed acquisition are in Duke Energy's report on Form 8-K, filed with the Securities and Exchange Commission on September 21, 2001. 17 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. Introduction - ------------ Duke Energy Corporation (collectively with its subsidiaries, "Duke Energy") is an integrated energy and energy services provider with the ability to offer physical delivery and management of both electricity and natural gas throughout the U.S. and abroad. Duke Energy provides these and other services through seven business segments. See Note 1 for descriptions of Duke Energy's business segments. Management's Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements. RESULTS OF OPERATIONS For the quarter ended September 30, 2001, earnings available for common stockholders were $792 million, or $1.02 per basic share. For the comparable 2000 period, earnings available for common stockholders were $766 million, or $1.04 per basic share. The increase was primarily due to earnings from business expansion and growth that occurred during 2001, and decreased interest expense. Partially offsetting these items were the prior year pre-tax gain of $407 million, or an after-tax gain of $0.34 per basic share, on the sale of Duke Energy's 20% interest in BellSouth Carolina PCS and increased minority interest expense. Earnings per share information for 2000 has been restated to reflect the two-for-one common stock split that was effective January 26, 2001. For the nine months ended September 30, 2001, earnings available for common stockholders were $1,661 million, or $2.17 per basic share. For the comparable 2000 period, earnings available for common stockholders were $1,478 million, or $2.01 per basic share. The increase was primarily due to earnings from business expansion and growth that occurred during 2001, and decreased interest expense, partially offset by the prior year gain on the sale of Duke Energy's interest in BellSouth Carolina PCS, increased minority interest expense, and a current year one-time net-of-tax charge of $96 million, or $0.13 per basic share. This one-time charge was the cumulative effect of a change in accounting principle for the January 1, 2001 adoption of Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." Operating income decreased $9 million to $1,492 million for the quarter, and increased $447 million to $3,554 million for the nine months ended September 30, 2001. Earnings before interest and taxes (EBIT) decreased $12 million to $1,544 million for the quarter, and increased $478 million to $3,730 million for the nine months ended September 30, 2001. Operating income and EBIT are affected by the same fluctuations for Duke Energy and each of its business segments. Prior year business segment EBIT amounts have been restated to conform to the current year presentation of corporate cost allocations. See Note 4 for additional information on business segments. EBIT is calculated as follows: - ------------------------------------------------------------------------ Reconciliation of Operating Income to EBIT (In millions) - ------------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30, September 30, -------------------------------------- 2001 2000 2001 2000 -------------------------------------- Operating income $ 1,492 $ 1,501 $ 3,554 $ 3,107 Other income and expenses 52 55 176 145 -------------------------------------- EBIT $ 1,544 $ 1,556 $ 3,730 $ 3,252 - ------------------------------------------------------------------------ EBIT should not be considered as an alternative to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles as an indicator of Duke Energy's 18 operating performance or liquidity. Duke Energy's EBIT may not be comparable to a similarly titled measure of another company. Business segment EBIT is summarized in the following table and is discussed thereafter.
- ------------------------------------------------------------------------------------------------ EBIT by Business Segment (In millions) - ------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------------------- 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------ Franchised Electric $ 607 $ 616 $ 1,428 $ 1,476 Natural Gas Transmission 143 132 460 418 Field Services 75 85 282 229 North American Wholesale Energy 618 235 1,217 427 International Energy 74 83 218 274 Other Energy Services (22) (69) (9) (52) Duke Ventures 51 445 94 478 Other Operations (39) (16) (152) (126) EBIT attributable to minority interests 37 45 192 128 ---------------------------------------------- Consolidated EBIT $ 1,544 $ 1,556 $ 3,730 $ 3,252 - ------------------------------------------------------------------------------------------------
Other Operations primarily include certain unallocated corporate costs. Included in the amounts discussed hereafter are intercompany transactions that are eliminated in the Consolidated Financial Statements. Franchised Electric
- ------------------------------------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------------------- (In millions, except where noted) 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------- Operating revenues $ 1,431 $ 1,435 $ 3,742 $ 3,708 Operating expenses 840 838 2,367 2,290 ---------------------------------------------- Operating income 591 597 1,375 1,418 Other income, net of expenses 16 19 53 58 ---------------------------------------------- EBIT $ 607 $ 616 $ 1,428 $ 1,476 ============================================= Sales - GWh/a/ 22,566 22,639 62,149 63,854 - ------------------------------------------------------------------------------------------------ /a/ Gigawatt-hours
Franchised Electric's EBIT decreased $9 million for the quarter ended September 30, 2001, compared to the same period in 2000. The decrease was primarily due to reclassifying approximately $33 million in mutual insurance distributions to a suspense account as required by the North Carolina Utilities Commission (NCUC), pending the outcome of a regulatory audit that will determine the treatment for these distributions (see "Management's Discussion and Analysis of Results of Operations and Financial Condition, Current Issues - Regulatory Matters" for additional information). Offsetting this reserve were lower operating costs, resulting primarily from decreased nuclear outage costs. For the nine months ended September 30, 2001, Franchised Electric's EBIT decreased $48 million. The decrease was primarily the result of the approximately $33 million reserve and increased operating costs, due to increased nuclear outage costs in the first six months of 2001. Decreased sales to industrial customers, which were impacted by the slowing economy, affected both the quarter and nine-month period. These decreased sales were offset by growth in sales to general service and residential customers, due mainly to an increase in the average number of customers in Franchised Electric's service territory. The following table details the changes in GWh sales and average number of customers compared to the prior year. 19 - ------------------------------------------------------------------------------ Increase (decrease) over prior year Three Months Ended Nine Months Ended - ------------------------------------------------------------------------------ Residential sales 2.7 % 4.4 % General service sales 6.2 % 4.5 % Industrial sales (12.8)% (9.6)% Total Franchised Electric sales (0.3)% (2.7)% Average number of customers 1.5% 1.9 % - ------------------------------------------------------------------------------ Natural Gas Transmission
- -------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ----------------------------------- (In millions, except where noted) 2001 2000 2001 2000 - -------------------------------------------------------------------------------------- Operating revenues $ 271 $ 279 $ 817 $ 846 Operating expenses 131 144 363 439 ------ ------ ------ ------- Operating income 140 135 454 407 Other income, net of expenses 3 (3) 6 11 ------ ------ ------ ------- EBIT $ 143 $ 132 $ 460 $ 418 ====== ====== ====== ======= Throughput - TBtu/a/ 376 346 1,221 1,223 - -------------------------------------------------------------------------------------- /a/ Trillion British thermal units
For the quarter and nine months ended September 30, 2001, EBIT for Natural Gas Transmission increased $11 million and $42 million, respectively, compared to the same periods in 2000. The quarterly results benefited from earnings of Market Hub Partners, which was acquired in September 2000, increased earnings from other miscellaneous projects, and lower operating expenses. The nine-month period also benefited from earnings of Market Hub Partners as well earnings from East Tennessee Natural Gas Company (East Tennessee), which was acquired in March 2000, and increased earnings from other miscellaneous projects. For both the quarter and nine months ended September 30, 2001, the decrease in operating revenues, which was offset by a decrease in operating expenses, resulted from reduced rates that went into effect in December 2000. These reduced rates reflect lower recovery requirements for operating costs at Texas Eastern Transmission, LP, primarily system fuel and Federal Energy Regulatory Commission (FERC) Order 636 transition costs. 20
Field Services - ----------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ---------------------------------------- (In millions, except where noted) 2001 2000 2001 2000 - ---------------------------------------------------------------------------------------- Operating revenues $ 1,704 $ 2,527 $ 7,640 $ 6,148 Operating expenses 1,588 2,405 7,213 5,835 -------- -------- -------- -------- Operating income 116 122 427 313 Other income, net of expenses (5) 9 (5) 5 Minority interest expense 36 46 140 89 --------------------------------------- EBIT $ 75 $ 85 $ 282 $ 229 ======================================= Natural gas gathered and processed/transported, TBtu/d /a/ 8.8 8.2 8.5 7.4 Natural gas liquids (NGL) production, MBbl/d /b/ 412.8 417.0 396.9 349.9 Natural gas marketed, TBtu/d 1.6 0.5 1.6 0.5 Average natural gas price per MMBtu /c/ $ 2.88 $ 4.27 $ 4.88 $ 3.42 Average NGL price per gallon /d/ $ 0.39 $ 0.55 $ 0.49 $ 0.51 - ----------------------------------------------------------------------------------------
/a/ Trillion British thermal units per day /b/ Thousand barrels per day /c/ Million British thermal units /d/ Does not reflect results of commodity hedges EBIT for Field Services decreased $10 million for the quarter ended September 30, 2001, compared to the same period in 2000, primarily due to commodity prices. The decease in revenues was driven by a $1.39 decrease in the average natural gas price per MMBtu and a $0.16 decrease in the average NGL price per gallon. The decrease in expenses resulted primarily from the interaction of Field Services' natural gas and NGL purchase contracts with lower commodity prices, and increased cost reduction efforts and plant consolidation. Field Services' EBIT increased $53 million for the nine months ended September 30, 2001. The increase was primarily due to the addition of Phillips Petroleum's gas gathering, processing and marketing unit's midstream natural gas business in March 2000, which accounted for the majority of the 13% increase in NGL production. A $1.46 increase in the average natural gas price per MMBtu, slightly offset by a $0.02 decrease in the average NGL price per gallon, also contributed to increased revenues. Expenses also increased from the interaction of Field Services' natural gas and NGL purchase contracts with higher natural gas prices, but were slightly offset by increased cost reductions efforts and plant consolidation. 21
North American Wholesale Energy (NAWE) - -------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------------------------- (In millions, except where noted) 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------- Operating revenues $ 13,090 $ 11,186 $ 36,611 $ 22,821 Operating expenses 12,471 10,955 35,363 22,365 ------------------------------------------------------- Operating income 619 231 1,248 456 Other income, net of expenses (5) (4) 3 (8) Minority interest (benefit) expense (4) (8) 34 21 ------------------------------------------------------- EBIT $ 618 $ 235 $ 1,217 $ 427 ======================================================= Natural gas marketed, TBtu/d 12.5 12.0 12.4 11.7 Electricity marketed and traded, GWh 88,801 89,967 199,643 198,518 Proportional megawatt capacity in operation 6,799 5,115 Proportional megawatt capacity owned/a/ 13,119 7,925 - -------------------------------------------------------------------------------------------------------- /a/ Includes under construction or under contract at period end
For the quarter and nine months ended September 30, 2001, EBIT for NAWE increased $383 million and $790 million, respectively, compared with the same periods in 2000. The increases were a result of enhanced performance in natural gas and electricity trading and services and increased earnings from generation assets, resulting primarily from a 33% increase in proportional megawatt capacity in operation. In addition, when compared to the prior year, EBIT increased $60 million for the quarter and $78 million for the nine months from the sale of interests in generating facilities as a result of NAWE executing its portfolio management strategy. Losses at Duke Energy Trading and Marketing, LLC (DETM) resulted in a minority interest benefit for the quarter ended September 30, 2001 while year-to-date earnings resulted in a $13 million increase in minority interest expense when compared to the prior year.
International Energy - -------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------------------------- (In millions, except where noted) 2001 2000 2001 2000 - -------------------------------------------------------------------------------------------------------- Operating revenues $ 395 $ 270 $ 1,296 $ 727 Operating expenses 331 187 1,093 470 ------------------------------------------------------- Operating income 64 83 203 257 Other income, net of expenses 15 7 33 35 Minority interest expense 5 7 18 18 ------------------------------------------------------- EBIT $ 74 $ 83 $ 218 $ 274 ======================================================= Proportional megawatt capacity in operation 4,370 4,306 Proportional megawatt capacity owned /a/ 4,925 4,394 Proportional maximum pipeline capacity in operation, MMcf/d /b/ 255 255 Proportional maximum pipeline capacity owned /a/, MMcf/d 363 255 - -------------------------------------------------------------------------------------------------------- /a/ Includes under construction or under contract at period end /b/ Million cubic feet per day
22 International Energy's EBIT decreased $9 million for the quarter and $56 million for the nine months ended September 30, 2001, compared to the same periods in 2000. The decrease for the nine months was due primarily to a $54 million gain recognized in the first quarter of 2000 from the sale of liquefied natural gas ships. The decrease for both periods includes the effects of reduced power consumption in Brazil due to the government's mandatory energy rationing, which started during the second quarter of 2001, caused by a period of severe drought conditions. Both periods were also affected by the negative impact of foreign currency devaluation on the earnings of the Latin American operations. The effects of the water rationing in Brazil and the foreign currency devaluation associated with Latin America investments were partially offset by inflation adjustment clauses in certain Brazilian power contracts and stronger operational results from other country operations in Latin America, Asia Pacific and Europe. Other Energy Services - ------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------- (In millions) 2001 2000 2001 2000 - ------------------------------------------------------------------ Operating revenues $ 143 $ 76 $ 393 $ 489 Operating expenses 165 145 402 541 ------------------------------------- EBIT $ (22) $ (69) $ (9) $ (52) - ------------------------------------------------------------------ EBIT for Other Energy Services improved $47 million for the quarter and $43 million for the nine months ended September 30, 2001, compared to the same periods in 2000. The current year quarterly results included approximately $29 million of charges at Duke Engineering & Services, Inc. (DE&S) for goodwill impairment. These charges were offset by the prior year's quarterly loss on a Duke/Fluor Daniel (D/FD) project of approximately $42 million and an approximately $27 million charge at DE&S to reflect a more conservative revenue recognition approach on its projects. Year-to-date results were driven by the same items that effected the quarter. Year-to-date operating revenues and expenses also decreased compared to 2000 due to cessation of retail commodity trading activity at DukeSolutions, Inc. Duke Ventures - ------------------------------------------------------------------ Three Months Ended Nine Months Ended September 30, September 30, ------------------------------------- (In millions) 2001 2000 2001 2000 - ------------------------------------------------------------------ Operating revenues $ 258 $ 538 $ 393 $ 609 Operating expenses 207 93 299 131 ------------------------------------- EBIT $ 51 $ 445 $ 94 $ 478 - ------------------------------------------------------------------ Duke Ventures EBIT decreased $394 million for the quarter and $384 million for the nine months ended September 30, 2001, compared with the same periods in 2000. The decrease for both periods was primarily attributable to DukeNet Communications' 2000 sale of its 20% interest in BellSouth Carolina PCS to BellSouth Corporation for a pre-tax gain of $407 million. This decrease was minimally offset by increased earnings at Crescent Resources, LLC, related primarily to increased commercial project sales, and the absence of losses related to DukeNet Communications' BellSouth PCS investment. Excluding the gain on sale from the prior year results, operating revenues and expenses increased due to Duke Capital Partners, which commenced operations in late 2000. Other Impacts on Earnings Available for Common Stockholders For the quarter and nine months ended September 30, 2001, interest expense decreased $51 million and $19 million, respectively, compared to the prior year. The decrease was primarily due to lower interest rates, and the redemption of first and refunding mortgage bonds in July as well as the repayment of short-term borrowings following the equity offering in March. 23 Minority interest expense increased $31 million for the quarter and $116 million for the nine months ended September 30, 2001 compared to the same periods in 2000. Minority interest expense related to joint ventures increased $20 million for the quarter and $72 million for the nine-month period. The increase for both periods was primarily attributable to increased minority interest expense resulting from Field Services' joint venture. Minority interest expense also increased $11 million for the quarter and $44 million for the nine-month period due to the formation of Catawba River Associates, LLC in September 2000. During the first quarter of 2001, Duke Energy recorded a one time net-of-tax charge of $96 million related to the cumulative effect of change in accounting principle for the January 1, 2001 adoption of SFAS No. 133. This charge related to contracts that either did not meet the definition of a derivative under previous accounting guidance or do not qualify as hedges under new accounting requirements. See Notes 2 and 3 for further discussion. The net aggregate change in unrealized gains and losses since December 31, 2000 is due primarily to the implementation of SFAS No. 133 for hedge positions, as well as price volatility and the magnitude of trading activity that Duke Energy has entered into to take advantage of that volatility. LIQUIDITY AND CAPITAL RESOURCES Operating Cash Flows During the nine months ended September 30, 2001 cash flows from operating activities increased $2,036 million over the same period in 2000. This increase is due primarily to price risk management activities, including reduced margin deposit requirements compared to 2000. Operating cash flows were also higher in 2001 due to tax payments made in 2000 related to the 1999 sale of the midwest pipelines. Investing Cash Flows Net cash used in investing activities was $4,655 million for the nine months ended September 30, 2001 compared to $3,887 million for the same period in 2000. The increase in investing activities reflects additional expansion and development expenditures, especially related to NAWE's generating facilities, refurbishment and upgrades to existing assets and minor acquisitions of various businesses and assets. These increases were partially offset by the $390 million acquisition of East Tennessee, the $280 million tender offer for Companhia de Geracao de Energia Eletrica Paranapanema and the $250 million acquisition of Market Hub Partners in 2000. The prior year expenditures were also offset by cash proceeds from the 2000 sale of Duke Energy's 20% interest in BellSouth Carolina PCS to BellSouth Corporation for approximately $400 million. In February 2001, Duke Energy and The Williams Companies, Inc. completed their purchase of Gulfstream Natural Gas System, LLC from Coastal Corporation. The proposed Gulfstream pipeline will be able to deliver approximately 1.1 billion cubic feet of natural gas per day and will extend from Mobile, Alabama, across the Gulf of Mexico and into Florida. The target in-service date for the $1.6 billion project, of which Duke Energy owns half, is June 2002. Financing Cash Flows Duke Energy's consolidated capital structure at September 30, 2001, including short-term debt, was 44% debt, 50% common equity and minority interests, 5% trust preferred securities and 1% preferred stock. Fixed charges coverage, calculated using the Securities and Exchange Commission (SEC) guidelines, was 4.7 times and 4.3 times for the nine months ended September 30, 2001 and 2000, respectively. Duke Energy's growth opportunities, along with dividends, debt repayments and operating requirements, are expected to be funded by cash from operations, external financing, common stock issuances and the proceeds from certain asset sales. Growth opportunities are dependent upon favorable market conditions. Management believes Duke Energy has adequate financial resources to meet its future needs. In February 2001, Duke Energy Field Services, LLC (DEFS) issued $250 million of 6.875% Senior Unsecured Notes due 2011. The proceeds were used to repay DEFS' remaining balance of commercial paper that was issued in connection with the March 2000 combination of Field Services' natural gas 24 gathering, processing and marketing business and Phillips Petroleum's gas gathering, processing and marketing unit. In addition, in November 2001 DEFS issued $300 million of 5.75% Senior Unsecured Notes due 2006. The proceeds will be used to repay short-term debt. Duke Energy's wholly-owned subsidiary, Duke Capital Corporation, had a $141 million note payable to D/FD as of December 31, 2000. As of September 30, 2001, the note had increased $412 million to $553 million. The weighted average interest rates were 3.87% and 4.44% for the quarter and nine months ended September 30, 2001, respectively. In March 2001, Duke Energy completed an offering of 25 million shares of common stock, at a price of $38.98 per share, before underwriting discount and other offering expenses. In addition, Duke Energy completed an offering of approximately 31 million units of mandatorily convertible securities (Equity Units) at a price of $25 per unit before underwriting discount and other offering expenses. The Equity Units consist of senior notes of Duke Capital Corporation and purchase contracts obligating the investors to purchase shares of Duke Energy's common stock in 2004. The number of shares to be issued in 2004 will be based on the stock price at conversion. Also in March 2001, the underwriters exercised options granted to them to purchase an additional 3.75 million shares of common stock and four million Equity Units at the original issue prices, less underwriting discounts, to cover over-allotments made during the offerings. Total net proceeds from the offerings were approximately $1.94 billion and were used to repay short-term debt and for other corporate purposes. In July 2001, Duke Energy redeemed seven issues of its first and refunding mortgage bonds. The redemption was completed to take advantage of the general decline in interest rates. The total face value of the redeemed bonds was $386 million with interest rates ranging from 5.875% to 8.30%. Under its commercial paper facilities and extendable commercial notes programs (ECNs), Duke Energy had the ability to borrow up to $5.3 billion and $5.7 billion at September 30, 2001 and December 31, 2000, respectively. These facilities do not have termination dates. A summary of the available commercial paper and ECNs as of September 30, 2001 is as follows:
- --------------------------------------------------------------------------------------------- Duke Duke Duke Energy Duke Energy Capital Field Energy (In billions) Corporation/a/ Services International Total - --------------------------------------------------------------------------------------------- Commercial Paper $ 1.25 $ 1.55 $ 0.68 $ 0.37/b/ $ 3.85 ECNs 0.50 1.00 - - 1.50 ---------------------------------------------------------------- Total $ 1.75 $ 2.55 $ 0.68 $ 0.37 $ 5.35 - ---------------------------------------------------------------------------------------------
/a/ Duke Capital Corporation is a wholly owned subsidiary of Duke Energy that provides financing and credit enhancement services for its subsidiaries. /b/ Includes ability to issue medium term notes. Severe price movement in the energy markets for trading and hedging activities may result in a rapid change in the availability of cash. To meet these demands, in April 2001, Duke Energy entered into a $1.075 billion unsecured bank credit facility that allows it to issue letters of credit in lieu of actual cash deposits to meet margin requirements. Half of this facility matures in 2002 and the remainder matures in 2004. The total amount of Duke Energy's bank credit and construction facilities available at September 30, 2001 and December 31, 2000, was approximately $4.3 billion and $4.2 billion, respectively. Certain of the credit facilities support the issuance of commercial paper; therefore, the issuance of commercial paper reduces the amount available under these credit facilities. At September 30, 2001, approximately $2.4 billion was outstanding under the commercial paper and ECN programs, and approximately $38 million of borrowings were outstanding under the bank credit and construction facilities. These facilities expire from 2001 to 2004 and the credit facilities are not subject to minimum cash requirements. 25 As of September 30, 2001, Duke Energy and its subsidiaries had effective SEC shelf registrations for up to $5.3 billion in gross proceeds from debt and other securities. Such securities may be issued as Senior Notes, First and Refunding Mortgage Bonds, Subordinated Notes, Trust Preferred Securities, Duke Energy Common Stock, Stock Purchase Contracts or Stock Purchase Units. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Risk Policies. Duke Energy is exposed to market risks associated with interest rates, commodity prices, equity prices, counterparty credit and foreign currency exchange rates. Management has established comprehensive risk management policies to monitor and manage these market risks. Duke Energy's Policy Committee is responsible for the overall approval of market risk management policies and the delegation of approval and authorization levels. The Policy Committee is comprised of senior executives who receive periodic updates from the Chief Risk Officer (CRO) on market risk positions, corporate exposures, credit exposures and overall results of Duke Energy's risk management activities. The CRO has responsibility for the overall management of interest rate risk, foreign currency risk, credit risk and energy risk, including monitoring of exposure limits. There have been no material changes in Duke Energy's market risk since December 31, 2000. CURRENT ISSUES Electric Retail Competition. In 1999 and 2000, the FERC issued its Order 2000 and Order 2000-A regarding Regional Transmission Organizations (RTOs). In these orders, the FERC stressed the voluntary nature of RTO participation by utilities and set minimum characteristics and functions that must be met by utilities that participate in an RTO, including exclusive and independent authority to propose rates, terms and conditions of transmission service provided over the facilities it operates. The order provides for an open, flexible structure for RTOs to meet the needs of the market and provides for the possibility of incentive ratemaking and other benefits for utilities that participate in an RTO. As a result of these rulemakings, Duke Energy and two other investor-owned utilities, Carolina Power & Light Company and South Carolina Electric & Gas, planned to establish GridSouth Transco, LLC (GridSouth), as a for-profit, independent transmission company (or RTO), responsible for operating and planning the companies' combined transmission systems. In March 2001, GridSouth received provisional approval from the FERC. However, in July of 2001, the FERC issued orders recommending that utilities throughout the U.S. combine their transmission systems to create four large independent regional operators, one each in the Northeast, Southeast, Midwest and West. The FERC ordered GridSouth and other utilities in the Southeast to join in 45 days of mediation to negotiate terms of a Southeast RTO. Those mediations are complete and the administrative law judge that presided over the proceedings has issued a report to the FERC, but the FERC has yet to issue an order based on the results. The actual structure of GridSouth and the date that it will become operational depends upon the outcome of the mediation and resolution of all regulatory approvals and technical issues. Management believes that the result of this process, and the establishment and operation of GridSouth or an alternative combined transmission system structure will not have a material adverse effect on Duke Energy's future consolidated results of operations, cash flows or financial position. Environmental Matters. In October 1998, the Environmental Protection Agency (EPA) issued a final rule on regional ozone control that required 22 eastern states and the District of Columbia to revise their State Implementation Plans (SIPs) to significantly reduce emissions of nitrogen oxide by May 1, 2003. The EPA's rule was challenged in court by various states, industry and other interests, including Duke Energy and the states of North Carolina and South Carolina. In March 2000, the court upheld most aspects of the EPA's rule. The same court subsequently issued a decision that extended the compliance deadline for implementation of emission reductions to May 31, 2004. In January 2000, the EPA finalized another ozone-related rule under Section 126 of the Clean Air Act that has virtually identical emission control requirements as its October 1998 action, but with a May 1, 2003 compliance date. This rule was challenged in court and on May 14, 2001 the U.S. Court of Appeals for the 26 DC Circuit sided with the EPA on all issues except one. The court remanded the electric generating unit (EGU) growth rate factor determinations used to establish each state's emission cap until the EPA could engage in decision making on how to set the EGU growth rate factors. On August 24, 2001, the DC Circuit suspended the implementation schedule for EGUs until the EPA completes a rulemaking in response to the court's May 14 remand order. This ruling prevents the EPA from implementing the Section 126 program beginning May 1, 2003. Possible new implementation dates range from mid July of 2003 to May 31, 2004. Management estimates that Duke Energy will spend from $500 million to $900 million in capital costs for additional emission controls through 2007 to comply with the new EPA rules. In response to the EPA's October 1998 rule, both North Carolina and South Carolina have revised their SIPs and are awaiting legislative and EPA approval. Legislation was introduced in the North Carolina General Assembly that would require North Carolina electric utilities, including Duke Energy, to make significant reductions in emissions of sulfur dioxide and nitrogen oxides from its coal-fired power plants over the next eight to 12 years. Management estimates the cost to Duke Energy of achieving the specified emission reductions in the proposed legislation to be approximately $1.5 billion. The proposed North Carolina legislation includes a provision that allows Duke Energy to recover some or all of these costs from customers. The provisions of the final legislation, if passed into law, could be significantly different from the proposal. Emission control retrofits needed to comply with the new rules are large technical, design and construction projects. These projects will be managed closely to ensure the continuation of reliable electric service to Duke Energy's customers throughout the projects and upon their completion. Notice of Proposed Rulemaking (NOPR). On September 27, 2001 the FERC issued a NOPR announcing that the FERC is considering new regulations regarding standards of conduct that would apply uniformly to natural gas pipelines and transmitting public utilities that are currently subject to different gas or electric standards. The proposed standards would change how companies and their subsidiaries interact and share information by broadening the definition of "affiliate" covered by the standards of conduct, from the more narrow definition in the existing regulations. The NOPR also seeks comment on whether the standards of conduct should be broadened to include the separation of those involved in the bundled retail electric sales function from those in the transmission function. The current electric standards apply only to those involved in the wholesale activities. Duke Energy is currently evaluating the impact this NOPR may have on the company and will file comments with the FERC suggesting appropriate revisions to the proposal. Regulatory Matters. Duke Energy was notified on August 3, 2001, that the NCUC and the Public Service Commission of South Carolina (PSCSC) had undertaken a joint investigation, along with the North Carolina Public Staff, regarding certain regulatory accounting entries for 1998 at Duke Power. In its internal review of the fourteen entries in question, Duke Energy concluded that nine of the fourteen items were correctly classified for regulatory accounting treatment. Four of the items were incorrectly classified for regulatory purposes for 1998 only but did not recur thereafter. The classification of the remaining item, distributions from mutual insurance companies, is subject to differing interpretations for regulatory treatment. Duke Energy believes that it appropriately classified this item but is evaluating its classification for future years. As part of their investigation, the NCUC and PSCSC have notified Duke Energy that they will jointly engage an independent firm to conduct an audit of Duke Power's accounting records for reporting periods from 1998 through June 30, 2001. Duke Energy has fully cooperated with the Commissions in their investigation. The NCUC has requested that Duke Energy place the amount of the 2001 mutual insurance distribution, approximately $33 million, in a deferred credit account, pending final outcome of the independent audit. Energy Trading Marketplace. As described in Note 3 to the Consolidated Financial Statements, Duke Energy has receivables and other exposures concentrated from natural gas and electric industry counterparties. With recent changes in energy industry market conditions, including recent developments regarding one of the industry's largest traders and market makers, Enron Corporation, Duke Energy has continued to monitor exposures to credit and market risk using established policies and procedures. Duke Energy has both collateralized and non-collateralized exposures to its counterparties, including Enron Corporation. Duke Energy will continue to monitor the situation closely. California Issues. Duke Energy, certain of its subsidiaries, and three current or former executives have been named as defendants, among numerous other corporate and individual defendants, in one or more of a total of six lawsuits brought by or on behalf of electricity consumers in the State of California who seek damages as a result of the defendants' alleged unlawful manipulation of the California wholesale electricity markets. DENA and DETM have been named among 16 defendants in a class action lawsuit (the Gordon lawsuit) filed against companies identified as "generators and traders" of electricity in California markets. 27 DETM also was named as one of numerous defendants in four additional lawsuits, including two class actions (the Hendricks and Pier 23 Restaurant lawsuits), filed against generators, marketers and traders and other unnamed providers of electricity in California markets. A sixth lawsuit (the Bustamante lawsuit), was brought by the Lieutenant Governor of the State of California and a State Assemblywoman, and includes Duke Energy, certain of its subsidiaries and three current or former executives of Duke Energy among the numerous other corporate and individual defendants. The Gordon and Hendricks class action lawsuits were filed in the Superior Court of the State of California, San Diego County, in November 2000. Three other lawsuits were filed in January 2001, one in Superior Court, San Diego County, and the other two in Superior Court, County of San Francisco. The Bustamante lawsuit was filed in May 2001 in Superior Court, Los Angeles County. These lawsuits generally allege that the defendants manipulated the wholesale electricity markets in violation of state laws against unfair and unlawful business practices and state antitrust laws. Plaintiffs in these lawsuits seek aggregate damages of billions of dollars. The lawsuits each seek the disgorgement of alleged unlawfully obtained revenues for sales of electricity and, in four lawsuits, an award of treble damages. While these matters referenced above are in their earliest stages, management believes, based on its analysis to date of the factual background and the claims asserted in these matters, that their resolution will not have a material adverse effect on Duke Energy's consolidated results of operations, cash flows or financial position. In addition to the lawsuits described in the preceding paragraph, several investigations and regulatory proceedings have commenced at the state and federal levels into the causes of the high wholesale electricity prices in the western U.S. At the federal level, there are numerous proceedings before the FERC. Some parties to those proceedings have made claims for billions of dollars of refunds from sellers of wholesale electricity, including DETM. Some parties have also sought to revoke the authority of DETM and other DENA-affiliated electricity marketers to sell electricity at market-based rates. The FERC is also conducting its own investigation to determine the causes of the high wholesale electricity prices. As a result of these proceedings, the FERC has ordered some sellers, including DETM, to refund, or offset against outstanding accounts receivable, certain amounts billed for sales of electricity in excess of a FERC established proxy price. The proxy price is intended to represent what the FERC believes would have been the market- clearing price in a perfectly competitive market. In June 2001, DETM offset approximately $20 million against amounts owed to it by the California Independent System Operator and the California Power Exchange for sales of electricity during January and February 2001. This offset reduced the $110 million reserve established in the fourth quarter of 2000 to $90 million. Proceedings are ongoing to determine, among other things, the amount of any refunds or offsets for periods prior to January 2001 and the method to be used to determine the proxy price in future months. At the state level, the California Public Utilities Commission has formal and informal investigations in place primarily to determine if power plant operators in California, including DENA, have improperly "withheld," either economically or physically, generation output from the market to manipulate market prices. In addition, the California State Senate formed a Select Committee to Investigate Price Manipulation of the Wholesale Energy Market (Select Committee). The Select Committee has served a subpoena on several Duke Energy subsidiaries seeking data concerning their California market activities. The Select Committee has heard testimony from several witnesses but no one from Duke Energy has been called to testify to date. The California Attorney General also has an investigation under way to determine if any market participants engaged in illegal activity, including antitrust activity, in the course of their sales of electricity into the wholesale markets in the western U.S. The Attorneys General of Washington and Oregon have joined the California Attorney General in a joint investigation of the electricity markets. The California Attorney General has also convened a grand jury to determine whether criminal charges should be brought against any market participants. To date, no Duke Energy employee has been called to testify before the grand jury nor have any criminal charges been filed against Duke Energy or any of its officers, directors or employees in connection with the wholesale electricity markets in the western U.S. 28 Throughout 2001, Duke Energy has conducted its business in California to supply the maximum possible electricity to meet the needs of the state while limiting its exposure to non-creditworthy counterparties and managing the output limitations on its power plants imposed by applicable permits and laws. Since December 31, 2000, Duke Energy has closely managed the balance of questionable receivables, and believes that the current pre-tax provision of $90 million is appropriate. No additional provisions for California receivables have been recorded in 2001. Management believes, based on its analysis to date of the factual background and the claims asserted in these matters, that their resolution will not have a material adverse effect on Duke Energy's consolidated results of operations, cash flows or financial position. Litigation. Exxon Mobil Corporation Arbitration. In December 2000, three subsidiaries of Duke Energy initiated binding arbitration against three subsidiaries of the Exxon Mobil Corporation (collectively, the "Exxon Mobil entities") concerning the parties' joint ownership of DETM and certain related affiliates (collectively, the "Ventures"). At issue is a buy-out right provision in the parties' agreement. The agreements governing the ownership of the Ventures contain provisions giving Duke Energy the right to purchase the Exxon Mobil entities' 40% interest in the Ventures in the event material business disputes arise between the Ventures' owners. Such disputes have arisen, and consequently, Duke Energy exercised its right to buy the Exxon Mobil entities' interest in the Ventures. Duke Energy claims that refusal by the Exxon Mobil entities to honor the exercise is a breach of the buy-out right provision, and seeks specific performance of the provision. Duke Energy has also asserted various additional claims against the Exxon Mobil entities for breach of the agreements governing the Ventures. In January 2001, the Exxon Mobil entities asserted counterclaims in the arbitration and claims in a separate Texas State court action alleging that Duke Energy breached its obligations to the Ventures and to the Exxon Mobil entities. In April 2001, the state court entered an order staying the state court action, and compelling the Exxon Mobil entities to arbitrate their state court claims. To date, the Exxon Mobil entities have not sought to challenge this order in an appellate court. In early October, a hearing was held before an arbitration panel regarding the buyout right and the various claims of Duke Energy and Exxon Mobil against each other. Although the hearing is complete from an evidentiary standpoint, both parties are submitting final briefs, and oral arguments will take place before the panel in November 2001. Duke Energy expects a final decision from the panel before the end of the year. Management believes that the final disposition of this action will not have a material adverse effect on Duke Energy's consolidated results of operations, cash flows or financial position. Duke Energy and its subsidiaries are involved in other legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding performance, contracts and other matters arising in the ordinary course of business, some of which involve substantial amounts. Management believes that the final disposition of these proceedings will not have a material adverse effect on consolidated results of operations, cash flows or financial position. New Accounting Standards. In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires all business combinations initiated (as defined by the standard) after June 30, 2001 to be accounted for using the purchase method. Companies may no longer use the pooling method of accounting for future combinations. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001 and will be adopted by Duke Energy as of January 1, 2002. SFAS No. 142 requires that goodwill no longer be amortized over an estimated useful life, as previously required. Instead, goodwill amounts will be subject to a fair-value-based annual impairment assessment. The standard also requires acquired intangible assets to be recognized separately and amortized as appropriate. Duke Energy expects that the adoption of SFAS No. 142 will have an impact on future financial statements due to the discontinuation of goodwill amortization expense. For the nine months ended September 30, 2001, amortization expense for goodwill was $108 million. The FASB and the Emerging Issues Task Force continue to field questions surrounding the transition provisions 29 and clarification of key aspects of the standard. Duke Energy is preparing to implement the new standard and has not yet determined the impact on its consolidated results of operations, cash flows or financial position. In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 provides the accounting requirements for retirement obligations associated with tangible long-lived assets. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002, and early adoption is permitted. Duke Energy is currently assessing the new standard and has not yet determined the impact on its consolidated results of operations, cash flows or financial position. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The new rules supersede SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The new rules retain many of the fundamental recognition and measurement provisions, but significantly change the criteria for classifying an asset as held-for-sale. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Duke Energy is currently assessing the new standard and has not yet determined the impact on its consolidated results of operations, cash flows or financial position. Proposed Acquisition of Westcoast Energy Inc. In September 2001, Duke Energy announced the proposed acquisition of Westcoast Energy Inc. (Westcoast) for $8.5 billion, including assumed debt of approximately $5 billion. Westcoast, headquartered in Vancouver, British Columbia, is a North American energy company with interests in natural gas gathering, processing, transmission, storage and distribution, as well as power generation, international energy businesses, and financial, information technology, and energy services businesses. The proposed transaction provides for the acquisition of all outstanding common shares of Westcoast in exchange for a combination of cash, Duke Energy common shares and exchangeable shares of a Canadian subsidiary of Duke Energy such that 50% of the consideration will be paid in cash and 50% will be paid in stock. The transaction is expected to close by the end of the first quarter 2002, subject to approval of Westcoast's shareholders and regulatory approvals. The transaction will be accounted for using the purchase method of accounting. Further details about the proposed acquisition are in Duke Energy's report on Form 8-K, filed with the SEC on September 21, 2001. 30 PART II. OTHER INFORMATION Item 1. Legal Proceedings. Duke Energy's subsidiary, Duke Energy Field Services, LLC (DEFS), has resolved its issues with the Colorado Air Pollution Control Division disclosed in Duke Energy's last Form 10-K regarding various asserted non-compliance issues arising from agency inspections of DEFS' Colorado facilities in 2000 and 1999, and arising from compliance issues disclosed to the agency pursuant to permit requirements or voluntarily disclosed to the agency in 2000. These items relate to various specific and detailed terms of the Title V Operating Permits at seven gas plants and two compressor stations in Colorado, including, for example, record keeping requirements, parametric monitoring requirements, delayed filings, and operations inconsistent with throughput limits on particular pieces of equipment. In October 2001, DEFS entered into a Compliance Order and Consent which requires DEFS to pay a penalty of $97,000 and undertake supplemental environmental projects totaling $388,000. In June 2001, DEFS received two administrative Compliance Orders from the New Mexico Environment Department (NMED) seeking civil penalties primarily for historic air permit matters. One order alleges specific permit non-compliance at eleven facilities that occurred periodically between 1996 and 1999. Allegations under this order relate primarily to emissions from certain compressor engines in excess of what were then new operating permit limits. The other order alleges numerous unexcused excursions from an hourly permit limit arising from upset events at one facility's sulfur recovery unit between 1997 and 2001. The NMED applied its civil penalty policy to the alleged violations and calculated the penalties to be approximately $10 million in the aggregate. The NMED has initiated settlement discussions and offered to resolve these matters for an amount lower than the calculated penalties. DEFS is continuing its discussions with the NMED and anticipates that it will resolve all issues relating to the alleged violations. In September 2001, DEFS received a Proposed Agreed Order from the Texas Natural Resource Conservation Commission to settle allegations reflected in a June 2001 notice from the agency relating to DEFS' Port Arthur natural gas processing plant. The Proposed Agreed Order seeks penalties of $278,000 for various items of alleged-noncompliance relating to the facility's air permit and state air regulations, including valve monitoring and repair requirements under 40 CFR 60, subpart KKK. DEFS is discussing settlement terms with the agency. For additional information concerning litigation and other contingencies, see Note 8 to the Consolidated Financial Statements, "Commitments and Contingencies," and Item 3, "Legal Proceedings," included in Duke Energy's Form 10-K for December 31, 2000, which are incorporated herein by reference. Management believes that the resolution of these matters discussed and referred to above will not have a material adverse effect on consolidated results of operations, cash flows or financial position. Item 4. Submission of Matters to a Vote of Security Holders. There were no matters submitted to a vote of the security holders of Duke Energy during the third quarter of 2001. Item 5. Other Information. - ------------------------- As previously announced, on September 20, 2001, Duke Energy, two wholly owned subsidiaries of Duke Energy and Westcoast Energy Inc. (Westcoast) entered into a combination agreement (the "Combination Agreement") providing for the acquisition of all outstanding common shares of Westcoast in exchange for a combination of cash, Duke Energy common shares and exchangeable shares of a Canadian subsidiary of Duke Energy. The material terms of the Combination Agreement are set forth in the Form 8-K as filed by Duke Energy with the Securities and Exchange Commission on September 21, 2001. 31 On November 5, 2001, the parties to the Combination Agreement entered into an amended and restated combination agreement (the "Amended and Restated Combination Agreement"). The Amended and Restated Combination Agreement made certain changes to the Combination Agreement and related agreements, including the Plan of Arrangement. The changes include changes to the Westcoast shareholder election date and measurement periods for determining the exchange ratio, refinements of other timing considerations in connection with the expected consummation of the transaction by the end of the first quarter of 2002, and other technical amendments and clarifications. A full description of the Amended and Restated Combination Agreement is set forth in the Westcoast proxy circular dated November 8, 2001 which is being mailed to Westcoast shareholders on November 16, 2001. This description of provisions of the Amended and Restated Combination Agreement is qualified in its entirety by reference to the Amended and Restated Combination Agreement, a copy of which is attached hereto as Exhibit 10.7 and incorporated by reference herein. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number - ------- 10.1 $537,500,000 364-Day Credit Agreement dated as of April 19, 2001, among Duke Capital Corporation, the Banks listed therein and Bank One, NA, as Administrative Agent. 10.2 $537,500,000 Three-Year Credit Agreement dated as of April 19, 2001, among Duke Capital Corporation, the Banks listed therein and Bank One, NA, as Administrative Agent. 10.3 $550,000,000 364-Day Credit Agreement dated as of August 20, 2001, among Duke Capital Corporation, the Banks listed therein and The Chase Manhattan Bank, as Administrative Agent. 10.4 $550,000,000 Three-Year Credit Agreement dated as of August 20, 2001, among Duke Capital Corporation, the Banks listed therein and The Chase Manhattan Bank, as Administrative Agent. 10.5 $475,000,000 364-Day Credit Agreement dated as of August 29, 2001, among Duke Energy Corporation, the Banks listed therein and The Chase Manhattan Bank, as Administrative Agent 10.6 $475,000,000 Three-Year Credit Agreement dated as of August 29, 2001, among Duke Energy Corporation, the Banks listed therein and The Chase Manhattan Bank, as Administrative Agent 10.7 Amended and Restated Combination Agreement dated as of September 20, 2001, among Duke Energy Corporation, 3058368 Nova Scotia Company, 3946509 Canada Inc. and Westcoast Energy Inc. (b) Reports on Form 8-K A Current Report on Form 8-K filed on September 21, 2001 contained disclosures under Item 5, Other Events; Item 7, Financial Statements and Exhibits; and Item 9, Regulation FD Disclosure. 32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DUKE ENERGY CORPORATION November 13, 2001 /s/ ROBERT P. BRACE ------------------------------------ Robert P. Brace Executive Vice President and Chief Financial Officer November 13, 2001 /s/ KEITH G. BUTLER ------------------------------------ Keith G. Butler Senior Vice President and Controller 33 EX-10.1 3 dex101.txt CREDIT AGREEMENT EXHIBIT 10.1 $537,500,000 364-DAY CREDIT AGREEMENT dated as of April 19, 2001 among DUKE CAPITAL CORPORATION, as Borrower -------- THE BANKS LISTED HEREIN as Banks ----- and BANK ONE, NA as Administrative Agent -------------------- BANC ONE CAPITAL MARKETS, INC. Lead Arranger and Sole Book Runner ---------------------------------- TABLE OF CONTENTS ---------------
PAGE ---- ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01 Definitions............................................ 1 SECTION 1.02 Accounting Terms and Determinations.................... 10 SECTION 1.03 Types and Classes of Borrowings........................ 10 ARTICLE 2 THE CREDITS SECTION 2.01 Commitments............................................ 11 SECTION 2.02 Notice of Borrowings................................... 12 SECTION 2.03 Notice to Banks; Funding of Loans...................... 12 SECTION 2.04 Registry; Notes........................................ 13 SECTION 2.05 Maturity of Loans...................................... 14 SECTION 2.06 Interest Rates......................................... 14 SECTION 2.07 Commitment Fees........................................ 15 SECTION 2.08 Optional Termination or Reduction of Commitments....... 15 SECTION 2.09 Method of Electing Interest Rates...................... 15 SECTION 2.10 Mandatory Termination of Commitments................... 16 SECTION 2.11 Optional Prepayments................................... 16 SECTION 2.12 General Provisions as to Payments...................... 17 SECTION 2.13 Funding Losses......................................... 17 SECTION 2.14 Computation of Interest and Fees....................... 18 SECTION 2.15 Regulation D Compensation.............................. 18 SECTION 2.16 Facility LCs........................................... 18 ARTICLE 3 CONDITIONS SECTION 3.01 Effectiveness.......................................... 23 SECTION 3.02 Credit Extensions...................................... 24 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01 Corporate Existence and Power.......................... 25 SECTION 4.02 Corporate and Governmental Authorization; No Contravention..................................... 25 SECTION 4.03 Binding Effect......................................... 25 SECTION 4.04 Financial Information.................................. 25 SECTION 4.05 Regulation U........................................... 26 SECTION 4.06 Litigation............................................. 26 SECTION 4.07 Compliance with Laws................................... 26 SECTION 4.08 Taxes.................................................. 26 SECTION 4.09 Public Utility Holding Company Act..................... 27
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PAGE ---- ARTICLE 5 COVENANTS SECTION 5.01 Information........................................... 27 SECTION 5.02 Payment of Taxes...................................... 28 SECTION 5.03 Maintenance of Property; Insurance.................... 29 SECTION 5.04 Maintenance of Existence.............................. 29 SECTION 5.05 Compliance with Laws.................................. 29 SECTION 5.06 Books and Records..................................... 29 SECTION 5.07 Maintenance of Ownership of Principal Subsidiaries.... 30 SECTION 5.08 Negative Pledge....................................... 30 SECTION 5.09 Consolidations, Mergers and Sales of Assets........... 31 SECTION 5.10 Use of Proceeds....................................... 31 SECTION 5.11 Transactions with Affiliates.......................... 31 SECTION 5.12 Indebtedness/Capitalization Ratio..................... 32 SECTION 5.13 Post-closing Consents/Waivers......................... 32 ARTICLE 6 DEFAULTS SECTION 6.01 Events of Default..................................... 32 SECTION 6.02 Notice of Default..................................... 35 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01 Appointment; Nature of Relationship................... 35 SECTION 7.02 Administrative Agent and Affiliates................... 36 SECTION 7.03 Action by Administrative Agent........................ 36 SECTION 7.04 Consultation with Experts............................. 36 SECTION 7.05 Liability of Administrative Agent..................... 36 SECTION 7.06 Indemnification....................................... 37 SECTION 7.07 Credit Decision....................................... 37 SECTION 7.08 Successor Administrative Agent........................ 37 SECTION 7.09 Administrative Agent's Fee............................ 37 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair........................................... 38 SECTION 8.02 Illegality............................................ 38 SECTION 8.03 Increased Cost and Reduced Return..................... 39 SECTION 8.04 Taxes................................................. 40 SECTION 8.05 Alternate Base Rate Loans Substituted for Affected Euro-Dollar Loans................................... 42 SECTION 8.06 Substitution of Bank.................................. 43 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices............................................... 44 SECTION 9.02 No Waivers............................................ 44 SECTION 9.03 Expenses; Indemnification............................. 44
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PAGE ---- SECTION 9.04 Sharing of Set-offs.................................. 45 SECTION 9.05 Amendments and Waivers............................... 45 SECTION 9.06 Successors and Assigns............................... 45 SECTION 9.07 Collateral........................................... 47 SECTION 9.08 Confidentiality...................................... 47 SECTION 9.09 Governing Law; Submission to Jurisdiction............ 47 SECTION 9.10 Counterparts; Integration............................ 47 SECTION 9.11 WAIVER OF JURY TRIAL................................. 47 SECTION 9.12 Payments Set Aside................................... 48
iii COMMITMENTS SCHEDULE PRICING SCHEDULE NOTICE ADDRESSES SCHEDULE EXISTING LCS SCHEDULE EXHIBIT A - Note EXHIBIT B-1 - Opinion of General Counsel of the Borrower EXHIBIT B-2 - Opinion of Special Counsel for the Borrower EXHIBIT C - Assignment and Assumption Agreement EXHIBIT D - Extension Agreement EXHIBIT E - Facility LC Application EXHIBIT F - Facility LC iv 364-DAY CREDIT AGREEMENT 364-DAY CREDIT AGREEMENT dated as of April 19, 2001 among DUKE CAPITAL CORPORATION, the BANKS listed on the signature pages hereof and BANK ONE, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent. The parties hereto agree as follows: 1 ARTICLE DEFINITIONS AND ACCOUNTING TERMS 2.1. SECTION Definitions. The following terms, as used herein, have the following meanings: "Additional Bank" means any financial institution that becomes a Bank for purposes hereof in connection with the replacement of a Bank pursuant to Section 8.06. "Administrative Agent" means Bank One, NA, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank. "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a "Controlling Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Commitment" means the aggregate of the Commitments of all the Banks. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Banks. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Alternate Base Rate Loan" means a Loan which, except as otherwise provided in Section 2.06, bears interest at the Alternate Base Rate. 1 "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Alternate Base Rate Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "Applicable Margin" means, with respect to Euro-Dollar Borrowings at any time, the percentage rate per annum which is applicable to such time with respect to Euro-Dollar Borrowings as set forth in the Pricing Schedule. "Approved Officer" means the president, a vice president or the treasurer or assistant treasurer of the Borrower or such other representative of the Borrower as may be designated by any one of the foregoing with the consent of the Administrative Agent. "Assignee" has the meaning set forth in Section 9.06(c). "Available Aggregate Commitment" means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Bank" means each bank or other financial institution listed on the signature pages hereof, each Additional Bank, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors. "Borrower" means Duke Capital Corporation, a Delaware corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Cash Equivalents" means (i) securities issued or unconditionally guaranteed by the United States of America or any agency or instrumentality thereof, backed by the full faith and credit of the United States of America and maturing within 30 days from the date of acquisition, (ii) commercial paper issued by any Person organized under the laws of the United States of America, maturing within 30 days from the date of acquisition and, at the time of acquisition, having a rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, (iii) time deposits and certificates of deposit maturing within 30 days from the date of issuance and issued by a bank or trust company organized under the laws of the United States of America or any state thereof that has combined capital and surplus of at least $500,000,000 and that has (or is a subsidiary of a bank holding company that has) a long-term unsecured debt rating of at least A or the equivalent thereof by S&P or at least A2 or the equivalent thereof by Moody's, (iv) repurchase obligations with a term not exceeding seven (7) days with respect to underlying securities of the types described in clause (i) above entered into with any bank or trust company meeting the qualifications specified in clause (iii) above, and (v) 2 money market funds at least 95% of the assets of which are continuously invested in securities of the type described in clause (i) above. "Class" refers to the determination whether a Loan is a Revolving Credit Loan or a Term Loan. "Collateral Shortfall Amount" is defined in Section 6.01. "Commitment" means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on the Commitment Schedule, and (ii) with respect to each Additional Bank or Assignee which becomes a bank pursuant to Sections 2.01(c) and 9.06(c), the amount of the Commitment thereby assumed by it, in each case as such amount may from time to time be reduced pursuant to Section 2.08, 2.10 or 9.06(c) or increased pursuant to Section 8.06 or 9.06(c). "Commitment Fee Rate" means, on any day, the percentage rate per annum applicable on such day as set forth in the Pricing Schedule. "Commitment Schedule" means the Schedule attached hereto identified as such. "Commitment Termination Date" means, for each Bank, April 18, 2002, as such date may be extended from time to time pursuant to Section 2.01(c) or, if any such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Consolidated Capitalization" means the sum of (i) Consolidated Indebtedness, (ii) consolidated common stockholders' equity as would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles, (iii) the aggregate liquidation preference of preferred stocks (other than preferred stocks subject to mandatory redemption or repurchase) of the Borrower and its Consolidated Subsidiaries upon involuntary liquidation, (iv) the aggregate outstanding amount of all Equity Preferred Securities, and (v) minority interests as would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles. "Consolidated Indebtedness" means, at any date, all Indebtedness of Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. "Consolidated Subsidiary" means, for any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date; unless otherwise specified "Consolidated Subsidiary" means a Consolidated Subsidiary of the Borrower. 3 "Credit Extension" means the issuance of a Facility LC hereunder or the making of a Borrowing. "Credit Rating" is defined in the Pricing Schedule. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Preferred Securities" means any securities, however denominated, (i) issued by the Borrower or any Consolidated Subsidiary of the Borrower, (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 mature no less than 20 years from the date of issuance, (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 Final Maturity Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. 4 "Euro-Dollar Base Rate" has the meaning set forth in Section 2.06(b). "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means a Loan which, except as otherwise provided in Section 2.06, bears interest at the applicable Euro-Dollar Rate. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.06(b) on the basis of a Euro-Dollar Base Rate. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.15. "Event of Default" has the meaning set forth in Section 6.01. "Existing LC" means a letter of credit listed on the Existing LCs Schedule. "Existing LCs Schedule" means the Schedule attached hereto identified as such. "Facility LC" means an Existing LC or a letter of credit issued pursuant to Section 2.16(a). "Facility LC Application" is defined in Section 2.16(c). "Facility LC Collateral Account" is defined in Section 2.16(k). "Federal Funds Effective Rate" means, for any day, an interest rate per annum 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 for such day (or, if such day is not a Domestic Business Day, for the immediately preceding Domestic Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Domestic Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. 5 "Final Maturity Date" means the one-year anniversary of the Commitment Termination Date, as such date may be extended pursuant to Section 2.01(c). "Group of Loans" means at any time a group of Loans of the same Class consisting of (i) all Alternate Base Rate Loans of such Class outstanding at such time or (ii) all Euro-Dollar Loans of such Class having the same Interest Period at such time, provided that, if a Loan of any particular Bank is converted to or made as an Alternate Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been if it had not been so converted or made. "Indebtedness" of any Person means at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all indebtedness of such Person for the deferred purchase price of property or services purchased, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired, (d) all indebtedness under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such Person is liable as lessee, (e) the face amount of letter of credit indebtedness available or to be 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) indebtedness secured by any 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 direct guarantees and sureties in respect of indebtedness referred to in clauses (a) through (f) above of another Person, (h) all amounts payable in connection with mandatory redemptions or repurchases of preferred stock and (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. "Interest Period" means, with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six, or, if deposits of a corresponding maturity are generally available in the London interbank market, nine or twelve, months thereafter, as the Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; 6 provided further that: (x) any Interest Period applicable to any Loan which begins before the Commitment Termination Date and would otherwise end after the Commitment Termination Date shall end on the Commitment Termination Date; and (y) any Interest Period applicable to any Loan which would otherwise end after the Final Maturity Date shall end on the Final Maturity Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment Grade Status" exists as to any Person at any date if all senior long-term unsecured debt securities of such Person outstanding at such date which had been rated by S&P or Moody's are rated BBB- or higher by S&P or Baa3 or higher by Moody's, as the case may be. "LC Fee" is defined in Section 2.16(d). "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One designated by Bank One) in its capacity as issuer of Facility LCs hereunder, First Union National Bank in its capacity as issuer of Facility LCs hereunder, any other Bank listed as the issuer of an Existing LC on the Existing LCs Schedule and any other Bank which accepts a designation by the Borrower and the Administrative Agent as an LC Issuer hereunder. "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.16(e). "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Revolving Credit Loan or a Term Loan made by a Bank pursuant to Section 2.01. "Loan Documents" means this Agreement, the Facility LC Applications and any Notes issued pursuant to Section 2.04. "Material Debt" means Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount exceeding $100,000,000. "Material Plan" has the meaning set forth in Section 6.01(i). 7 "Material Subsidiary" means at any time any Subsidiary of the Borrower having, together with its Subsidiaries, consolidated assets in excess of 10% of the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such time. "Modify" and "Modification" are defined in Section 2.16(a). "Moody's" means Moody's Investors Service, Inc. "Notes" means promissory notes of the Borrower, in the form required by Section 2.04, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice Addresses Schedule" means the Schedule attached hereto identified as such. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Notice of Interest Rate Election" has the meaning set forth in Section 2.09(a). "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all Reimbursement Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Banks or to any Bank, the Administrative Agent, any LC Issuer or any indemnified party arising under the Loan Documents. "Outstanding Credit Exposure" means, as to any Bank at any time, the sum of (i) the aggregate principal amount of its Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the LC Obligations at such time. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is either (i) maintained by a member of the ERISA Group for employees of a member of the ERISA Group or (ii) maintained pursuant to a collective bargaining agreement or 8 any other arrangement under which more than one employer makes contributions and to which a member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Principal Subsidiary" means each of Texas Eastern Transmission Corporation, Algonquin Gas Transmission Company, PanEnergy Corp, and their respective successors. "Pro Rata Share" means, with respect to a Bank, a portion equal to a fraction the numerator of which is such Bank's Commitment and the denominator of which is the Aggregate Commitment. "Quarterly Payment Date" means the first Domestic Business Day of each January, April, July and October. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Date" has the meaning set forth in Section 2.16(f). "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.16 to reimburse the LC Issuers for amounts paid by the LC Issuers in respect of any one or more drawings under Facility LCs. "Required Banks" means at any time Banks (i) having at least 51% of the Aggregate Commitment or (ii) if all of the Commitments shall have been terminated, having at least 51% of the Aggregate Outstanding Credit Exposure. "Revolving Credit Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(a); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Revolving Credit Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Revolving Credit Period" means the period from and including the Effective Date to but not including the Commitment Termination Date. "S&P" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. 9 "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Substantial Assets" means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole. "Term Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(b); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Term Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Three-Year Credit Agreement" means the Three-Year Credit Agreement dated as of April 19, 2001 among the Borrower, certain lenders and Bank One, NA, as administrative agent, as such agreement may be amended or modified from time to time. "Type" means, with respect to any Loan, its nature as an Alternate Base Rate Loan or a Euro-Dollar Loan. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or the Plan under Title IV of ERISA. 2.2. SECTION Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks. 2.3. SECTION Types and Classes of Borrowings. The term "Borrowing" denotes the aggregation of Loans of the Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement 10 either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the Class of Loans comprising such Borrowing (e.g., a "Term Borrowing" is a Borrowing comprised of Term Loans). 3 ARTICLE 4 THE CREDITS 4.1. SECTION Commitments 4.2.(a) Revolving Credit Loans; Facility LCs. During the Revolving Credit Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, (i) to make loans to the Borrower and (ii) to participate in Facility LCs issued upon the request of the Borrower, from time to time, provided that, after giving effect to the making of each such Revolving Credit Loan and the issuance of each such Facility LC, such Bank's Outstanding Credit Exposure shall not exceed its Commitment. Each Borrowing under this subsection shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the Banks ratably according to their Pro Rata Shares. Within the foregoing limits, the Borrower may borrow under this subsection (a), or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this subsection (a). The Commitments to extend credit hereunder shall expire on the Commitment Termination Date. The LC Issuers will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.16. (b) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Borrower on the Commitment Termination Date in an amount up to but not exceeding the amount of its Revolving Credit Loans outstanding on the Commitment Termination Date. Each Borrowing under this subsection (b) shall be made from the Banks ratably according to their Pro Rata Shares. (c) Extension of Commitments. On no more than two separate occasions, the Borrower may, upon notice not less than 45 days but no earlier than 60 days prior to the then current Commitment Termination Date to the Administrative Agent (which shall notify each Bank of receipt of such request), propose to extend the Revolving Credit Period for an additional 364 days measured from the Commitment Termination Date then in effect. Each Bank shall endeavor to respond to such request, whether affirmatively or negatively (such determination in the sole discretion of such Bank), by notice to the Borrower and the Administrative Agent not more than 45 days nor less than 30 days prior to the Commitment Termination Date. Subject to the execution by the Borrower, the Administrative Agent and such Banks of a duly completed Extension Agreement in substantially the form of Exhibit D, the Commitment Termination Date applicable to the Commitment of each Bank so affirmatively notifying the Borrower and the Administrative Agent shall be extended for the period specified above; provided that the Commitment Termination Date shall not be extended unless Banks shall have elected so to extend their Commitments that have Commitments constituting at least the greater of (i) 66 2/3% in 11 aggregate amount of the Commitments in effect at the time any such extension is requested and (ii) the Aggregate Outstanding Credit Exposure on the Commitment Termination Date prior to any extension thereof and after giving effect to any repayment of Loans and/or termination of Facility LCs on such date. Any Bank which does not give such notice to the Borrower and the Administrative Agent shall be deemed to have elected not to extend as requested, and on the Commitment Termination Date determined without giving effect to such requested extension, the Commitment of each non-extending Bank shall terminate, the participations of each non-extending Bank in Facility LCs shall terminate, and the Borrower shall repay all Loans and other Obligations owing to such non-extending Bank. The Borrower may, in accordance with Section 8.06, designate another bank or other financial institution (which may be, but need not be, an extending Bank) to replace a non-extending Bank. The Borrower may revoke its proposal to extend the then current Commitment Termination Date by giving notice of such revocation to the Administrative Agent (which shall notify each Bank of such revocation) at any time prior to the then current Commitment Termination Date and prior to execution by the Borrower of an Extension Agreement. 4.3. SECTION Notice of Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Borrowing") not later than 10:00 A.M. (Chicago time) on (x) the date of each Alternate Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Alternate Base Rate or a Euro-Dollar Rate, (d) the Class of Loans comprising such Borrowing, and (e) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. 4.4. SECTION Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (Chicago time) on the date of each Borrowing, each Bank shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in Chicago, to the Administrative Agent at its address specified in or pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the 12 Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.03 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and, if such Bank shall not have made such payment within two Domestic Business Days of demand therefor, the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Effective Rate and the interest rate applicable thereto pursuant to Section 2.06 and (ii) in the case of such Bank, the Federal Funds Effective Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. (d) The failure of any Bank to make the Loan to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation thereunder to make a Loan on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. 4.5. SECTION Registry; Notes. (a) The Administrative Agent shall maintain a register (the "Register") on which it will record the Commitment of each Bank, each Loan made by such Bank and each repayment of any Loan made by such Bank. Any such recordation by the Administrative Agent on the Register shall be conclusive, absent manifest error. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations hereunder. (b) The Borrower hereby agrees that, promptly upon the request of any Bank at any time, the Borrower shall deliver to such Bank a duly executed Note, in substantially the form of Exhibit A hereto, payable to the order of such Bank and representing the obligation of the Borrower to pay the unpaid principal amount of the Loans made to the Borrower by such Bank, with interest as provided herein on the unpaid principal amount from time to time outstanding. (c) Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and each Bank receiving a Note pursuant to this Section, if such Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each 13 such Loan then outstanding; provided that the failure of such Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Such Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. 4.6. SECTION Maturity of Loans. (a) Each Revolving Credit Loan made by any Bank shall mature, and the principal amount thereof shall be due and payable together with accrued interest thereon, on the Commitment Termination Date. (b) The Term Loans of each Bank shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Final Maturity Date. 4.7. SECTION Interest Rates. (a) Each Alternate Base Rate Loan shall bear interest on the outstanding principal amount thereof for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Alternate Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date and at maturity. Any overdue principal of or overdue interest on any Alternate Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Alternate Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for such day plus the Euro-Dollar Base Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof, and at maturity. "Euro-Dollar Base Rate" means, with respect to a Euro-Dollar Borrowing for the relevant Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Administrative Agent for any reason, the applicable Euro-Dollar Base Rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Administrative Agent, the applicable Euro-Dollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Administrative Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market approximately 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Euro-Dollar Loan and having a maturity equal to such Interest Period. 14 (c) Any overdue principal of or overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the Alternate Base Rate for such day and (ii) the sum of the Applicable Margin for such day plus the Euro-Dollar Base Rate for such day. (d) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks by telecopy, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error unless the Borrower raises an objection thereto within five Domestic Business Days after receipt of such notice. 4.8. SECTION Commitment Fees. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably according to their Pro Rata Shares a commitment fee at the Commitment Fee Rate (determined daily in accordance with the Pricing Schedule). Such commitment fee shall accrue from and including the Effective Date to but excluding the Commitment Termination Date, on the daily average Available Aggregate Commitment. Accrued commitment fees under this Section shall be payable quarterly in arrears on each Quarterly Payment Date and on the Commitment Termination Date. 4.9. SECTION Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of $1,000,000 the aggregate amount of the Commitments in excess of the Aggregate Outstanding Credit Exposure. 4.10. SECTION Method of Electing Interest Rates. (a) The Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: (A) if such Loans are Alternate Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and (B) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Alternate Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.13 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 10:00 A.M. (Chicago time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate 15 principal amount of the relevant Group of Loans, provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection 2.09(a) above; (iii) if the Loans comprising such Group are to be converted, the new Type of Loans and, if the Loans being converted are to be Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of the term "Interest Period." (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to subsection 2.09(a) above, the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If no Notice of Interest Rate Election is timely received prior to the end of an Interest Period for any Group of Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Alternate Base Rate Loans as of the last day of such Interest Period. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.02. 4.11. SECTION Mandatory Termination of Commitments. The Commitment of each Bank shall terminate on the Commitment Termination Date, and any Revolving Credit Loans of such Bank then outstanding (together with accrued interest thereon) shall be due and payable on such date; provided that such Revolving Credit Loans shall be paid with the proceeds from the Term Loans if Term Loans are made on the Commitment Termination Date. 4.12. SECTION Optional Prepayments. (a) The Borrower may (i) upon notice to the Administrative Agent not later than 10:00 A.M. (Chicago time) on any Domestic Business Day prepay on such Domestic Business Day any Group of Alternate Base Rate Loans and (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent not later than 10:00 16 A.M. (Chicago time) prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and together with any additional amounts payable pursuant to Section 2.13. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share of such prepayment and such notice shall not thereafter be revocable by the Borrower. 4.13. SECTION General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (Chicago time) on the date when due, in Federal or other funds immediately available in Chicago, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Alternate Base Rate Loans, or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Effective Rate. 4.14. SECTION Funding Losses. If the Borrower makes any payment of principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted to a Alternate Base Rate Loan or continued as a Euro-Dollar Loan for a new Interest Period (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow, prepay, convert or continue any Euro-Dollar Loans after notice has been given to any Bank in accordance with Section 2.03(a), 2.09(c) or 2.11(b), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense 17 incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to the Borrower a certificate setting forth in reasonable detail the calculation of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 4.15. SECTION Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees (including the LC Fees and fronting fees) shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). 4.16. SECTION Regulation D Compensation. In the event that a Bank is required to maintain reserves of the type contemplated by the definition of "Euro-Dollar Reserve Percentage", such Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable Euro-Dollar Base Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable Euro-Dollar Base Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least three Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. Each such notification shall be accompanied by such information as the Borrower may reasonably request. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in Chicago with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). 4.17. SECTION Facility LCs. (a) Issuance; Existing LCs. Each LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby and trade letters of credit and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time during the Revolving Credit Period upon the request of the Borrower; provided that immediately after each such Facility LC is issued or Modified, the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment. No 18 Facility LC shall have an expiry date later than the Final Maturity Date. The stated account party under any Facility LC may be the Borrower, a Subsidiary of the Borrower or an Affiliate of the Borrower. By their execution of this Agreement, the Borrower and each Bank listed as an issuer of an Existing LC on the Existing LCs Schedule hereby agree that effective as of the Effective Date (i) such Existing LC shall be a Facility LC under this Agreement and subject to the terms hereof, (ii) such Bank shall be an LC Issuer hereunder with respect to such Existing LC, and (iii) the prior reimbursement agreement or letter of credit application of the Borrower and such Bank relating to such Existing LC is replaced by this Agreement. (b) Participations. Upon the occurrence of the Effective Date, with respect to each Existing LC, and upon the issuance or Modification by an LC Issuer of a Facility LC in accordance with this Section 2.16, such LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from such LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share. (c) Notice. Subject to Section 2.16(a), the Borrower shall give the applicable LC Issuer and the Administrative Agent notice of the proposed issuance or Modification of a Facility LC, substantially in the form of Exhibit E (a "Facility LC Application") specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC, such duly completed Facility LC Application to be received prior to 10:00 A.M. (Chicago time) on the Business Day that is at least two Domestic Business Days prior to the proposed date of issuance or Modification of each Facility LC or in the case of a Facility LC substantially in the form of Exhibit F, at least one Domestic Business Day prior to the proposed date of issuance or Modification. Upon receipt of such Facility LC Application, such LC Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Bank, of the contents thereof and of the amount of such Bank's participation in such proposed Facility LC. The issuance or Modification by any LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article 3 (the satisfaction of which such LC Issuer shall have no duty to ascertain), be subject to the condition precedent that such Facility LC shall be satisfactory to such LC Issuer. In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. Subject to the foregoing conditions, the applicable LC Issuer will endeavor to issue or Modify such Facility LC as soon as practicable after receiving such Facility LC Application but in any event within two Domestic Business Days after receiving such Facility LC Application or, in the case of a Facility LC substantially in the form of Exhibit F, within one Domestic Business Day after receiving such Facility LC Application. (d) LC Fees. The Borrower shall pay to the Administrative Agent, for the account of the Banks ratably in accordance with their respective Pro Rata Shares, a letter of credit fee at a per annum rate equal to the sum of (i) the Applicable Margin for Euro-Dollar Loans in effect 19 from time to time plus (ii) 0.125% during any period following the Commitment Termination Date plus (iii) if an Event of Default exists, 1%, on the average daily undrawn stated amount under each Facility LC, such fee to be payable in arrears on each Quarterly Payment Date and the Final Maturity Date (each such fee described in this sentence an "LC Fee"). The Borrower shall also pay to each LC Issuer for its own account (x) a fronting fee at a per annum rate equal to 0.10% on the average daily undrawn stated amount under each Facility LC issued by such LC Issuer, such fee to be payable in arrears on each Quarterly Payment Date and the Final Maturity Date and (y) documentary and processing charges in connection with the issuance or Modification or transfer of and draws under Facility LCs issued by such LC Issuer in accordance with such LC Issuer's standard schedule for such charges as in effect from time to time (or such other amounts as such LC Issuer and the Borrower may agree). (e) Administration; Reimbursement by Banks. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the applicable LC Issuer shall notify the Administrative Agent and the Borrower and the Administrative Agent shall promptly notify each other Bank as to the amount to be paid by such LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of such LC Issuer to the Borrower and each Bank shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. Each LC Issuer shall endeavor to exercise the same care in the issuance and administration of its Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by such LC Issuer, each Bank shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse such LC Issuer on demand for (i) such Bank's Pro Rata Share of the amount of each payment made by such LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.16(f) below, plus (ii) interest on the foregoing amount to be reimbursed by such Bank, for each day from the date of such LC Issuer's demand for such reimbursement (or, if such demand is made after 10:00 A.M. (Chicago time) on such date, from the next succeeding Domestic Business Day) to the date on which such Bank pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Alternate Base Rate Borrowings. (f) Reimbursement by Borrower. The Borrower shall be irrevocably and unconditionally obligated to reimburse the applicable LC Issuer for any amounts to be paid by such LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Bank shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Bank to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of such LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) such LC Issuer's 20 failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. The Borrower shall make such reimbursement (1) on or before 2:00 P.M. (Chicago time) on the applicable LC Payment Date if the Borrower receives notice of the related demand for payment no later than 10:00 A.M. (Chicago time) on such LC Payment Date or (2) if the Borrower receives notice of the related demand for payment later than 10:00 A.M. (Chicago time) on such LC Payment Date, on or before 2:00 P.M. (Chicago time) on the next succeeding Domestic Business Day (such date by which reimbursement must be made (the LC Payment Date under clause (1) or the next succeeding Domestic Business Day under clause (2)) being the "Reimbursement Date"). All such amounts paid by such LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Alternate Base Rate Borrowings for such day if such day falls on or before the applicable Reimbursement Date and (y) the sum of 1% plus the rate applicable to Alternate Base Rate Borrowings for such day if such day falls after such Reimbursement Date. Such LC Issuer will pay to each Bank ratably in accordance with its Pro Rata Share all amounts received by it from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by such LC Issuer, but only to the extent such Bank has made payment to such LC Issuer in respect of such Facility LC pursuant to Section 2.16(e). Subject to the terms and conditions of this Agreement (including without limitation the submission of a Notice of Borrowing in compliance with Section 2.02 and the satisfaction of the applicable conditions precedent set forth in Article 3), the Borrower may request a Borrowing hereunder for the purpose of satisfying any Reimbursement Obligation. (g) Obligations Absolute. The Borrower's obligations under this Section 2.16 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any LC Issuer, any Bank or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuers and the Banks that the LC Issuers and the Banks shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. No LC Issuer shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by any LC Issuer or any Bank under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrower and shall not put any LC Issuer or any Bank under any liability to the Borrower. Nothing in this Section 2.16(g) is intended to limit the right of the Borrower to make a claim against any LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.16(f). 21 (h) Actions of LC Issuer. Each LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document 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, independent accountants and other experts selected by such LC Issuer. Each LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.16, each LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and any future holders of a participation in any Facility LC. (i) Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Bank, each LC Issuer and the Administrative Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Bank, such LC Issuer or the Administrative Agent may incur (or which may be claimed against such Bank, such LC Issuer or the Administrative Agent by any Person whatsoever), including reasonable fees and disbursements of counsel, by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which any LC Issuer may incur by reason of or in connection with (i) the failure of any other Bank to fulfill or comply with its obligations to such LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Bank) or (ii) by reason of or on account of any LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to such LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Bank, any LC Issuer or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of such LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) any LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.16(i) is intended to limit the obligations of the Borrower under any other provision of this Agreement. 22 (j) Banks' Indemnification. Each Bank shall, ratably in accordance with its Pro Rata Share, indemnify each LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or such LC Issuer's failure to pay under any Facility LC of such LC Issuer after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.16 or any action taken or omitted by such indemnitees hereunder. (k) Facility LC Collateral Account. The Borrower agrees that it will, upon the occurrence (i) of an Event of Default and (ii) (A) at the request of the Administrative Agent with the consent of the Banks having Pro Rata Shares of more than 66 2/3% pursuant to Section 6.01 or (B) at the request of the Banks having Pro Rata Shares of more than 66 2/3% pursuant to Section 6.01 and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuers or the Banks in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Administrative Agent (the "Facility LC Collateral Account") at the Administrative Agent's office at the address specified pursuant to Section 9.01, in the name of the Borrower but under the sole dominion and control of the Administrative Agent, for the benefit of the Banks and in which such Borrower shall have no interest other than as set forth in Section 6.01. The Borrower hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Banks and the LC Issuers, a security interest in all of the Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account and all investments thereof, interest and returns thereon and proceeds thereof to secure the prompt and complete payment and performance of the Obligations. The Administrative Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in Cash Equivalents. Interest and returns realized by such investments shall be credited to the Facility LC Collateral Account and applied as required by Section 6.01. Nothing in this Section 2.16(k) shall either obligate the Administrative Agent to require the Borrower to deposit any funds in the Facility LC Collateral Account or limit the right of the Administrative Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 6.01. (l) Rights as a Bank. In its capacity as a Bank, each LC Issuer shall have the same rights and obligations as any other Bank. 5 ARTICLE 6 CONDITIONS 6.1. SECTION Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): 23 (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telecopy, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent of an opinion of the General Counsel to the Borrower substantially in the form of Exhibit B-1 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) receipt by the Administrative Agent of an opinion of Robinson, Bradshaw & Hinson, P.A., special counsel for the Borrower, substantially in the form of Exhibit B-2 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request.; (d) receipt by the Administrative Agent of a certificate signed by a Vice President, the Treasurer or the Controller of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; (e) receipt by the Administrative Agent of all documents it may have reasonably requested prior to the date hereof relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than April 30, 2001. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. 6.2. SECTION Credit Extensions. The obligation of any Bank to make a Credit Extension on the occasion of any Borrowing or issuance of a Facility LC is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing or receipt by the applicable LC Issuer and the Administrative Agent of a Facility LC Application as required by Section 2.02 or 2.16, as the case may be; (b) the fact that, immediately after such Credit Extension the Aggregate Outstanding Credit Exposure will not exceed the Aggregate Commitment; (c) the fact that, immediately after such Credit Extension, no Default shall have occurred and be continuing; and 24 (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(b) and 4.06) shall be true on and as of the date of such Credit Extension. Each Credit Extension hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Credit Extension as to the facts specified in clauses (b), (c) and (d) of this Section. 7 ARTICLE 8 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: 8.1. SECTION Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business as a foreign corporation in each jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. 8.2. SECTION Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or by-laws of the Borrower or of any agreement (subject to compliance with Section 5.13), judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. 8.3. SECTION Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, if and when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 8.4. SECTION Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2000 and the related consolidated statements of income, cash flows, capitalization and retained earnings for the fiscal year then ended, reported on by Deloitte & Touche, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. 25 (b) Since December 31, 2000, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. 8.5. SECTION Regulation U. The Borrower and its Material Subsidiaries are not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System) and no proceeds of any Credit Extension by the Borrower will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. Not more than 25% of the value of the assets of the Borrower and its Material Subsidiaries is represented by margin stock. 8.6. SECTION Litigation. Except as disclosed in the reports referred to in Section 4.04, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which would be likely to be decided adversely to Borrower or such Subsidiary and, as a result, have a material adverse effect upon the business, consolidated financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or any Note. 8.7. SECTION Compliance with Laws. The Borrower and each Material Subsidiary is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) non-compliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. 8.8. SECTION Taxes. The Borrower and its Material Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Material Subsidiary except (i) where nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or (ii) where the same are contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. 8.9. SECTION Public Utility Holding Company Act. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. 9 ARTICLE 10 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid or any Facility LC remains outstanding: 26 10.1. SECTION Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows, capitalization and retained earnings for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by an Approved Officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of an Approved Officer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five days after any officer of the Borrower with responsibility relating thereto obtains knowledge of any Default, if such Default is then continuing, a certificate of an Approved Officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the filing thereof copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (f) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Material Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Material Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Material Plan is in reorganization, is 27 insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose material liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Material Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Material Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Material Plan or makes any amendment to any Material Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (g) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. Information required to be delivered pursuant to these Sections 5.01(a), 5.01(b) and 5.0.1(e) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Securities and Exchange Commission website on the Internet at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01(c) and (ii) the Borrower shall deliver paper copies of the information referred to in Sections 5.01(a), 5,01(b) and 5.01(e) to any Bank which requests such delivery. 10.2. SECTION Payment of Taxes. The Borrower will pay and discharge, and will cause each Material Subsidiary to pay and discharge, at or before maturity, all their tax liabilities, except where (i) nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Material Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. 10.3. SECTION Maintenance of Property; Insurance. (a) The 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) The Borrower will, and will cause each of its Material Subsidiaries to, maintain (either in the name of the Borrower or in such 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 the Borrower or any such Material Subsidiary 28 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 Borrower or such Material Subsidiary operates self-insure; and will furnish to the Banks, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. 10.4. SECTION Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises material to the normal conduct of their respective businesses; provided that nothing in this Section 5.04 shall prohibit the termination of any right, privilege or franchise of the Borrower or any Material Subsidiary or of the corporate existence of any Material Subsidiary if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks. 10.5. SECTION Compliance with Laws. The Borrower will comply, and cause each Material Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) noncompliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. 10.6. SECTION Books and Records. The Borrower will keep, and will cause each Material Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all financial transactions in relation to its business and activities in accordance with its customary practices; and will permit, and will cause each Material Subsidiary to permit, representatives of any Bank at such Bank's expense (accompanied by a representative of the Borrower, if the Borrower so desires) to visit any of their respective properties, to examine any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired. 10.7. SECTION Maintenance of Ownership of Principal Subsidiaries. The Borrower will maintain ownership of all shares of the common stock of each Principal Subsidiary, directly or indirectly through Subsidiaries, free and clear of all Liens, provided that any Principal Subsidiary may merge with and into the Borrower or another wholly-owned Subsidiary. 10.8. SECTION Negative Pledge. The Borrower will not create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens granted by the Borrower existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $100,000,000; 29 (b) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower and not created in contemplation of such event; (c) any Lien existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition; (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, 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 generally accepted accounting principles; (g) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen 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 generally accepted accounting principles; (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; 30 (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) Liens required by Section 2.16(k) and other similar customary cash collateral requirements with respect to letters of credit upon the occurrence of a default, including, without limitation, such requirements under the Three-Year Credit Agreement; and (m) 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 at which Investment Grade Status does not exist as to the Borrower and (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. 10.9. SECTION Consolidations, Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, Substantial Assets to any Person (other than a Subsidiary); provided that the Borrower may merge with another Person if the Borrower is the corporation surviving such merger and, after giving effect thereto, no Default shall have occurred and be continuing. 10.10. SECTION Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for its general corporate purposes, including liquidity support for outstanding commercial paper. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. 10.11. SECTION Transactions with Affiliates. The Borrower will not, and will not permit any 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 Affiliate unless all such transactions between the Borrower and its Subsidiaries on the one hand and any Affiliate on the other, taken in the aggregate and not individually, shall be on an arms-length basis on terms no less favorable to the Borrower or such Subsidiary than could have been obtained from a third party who was not an Affiliate; provided that the foregoing provisions of this Section shall not prohibit the Borrower and each Subsidiary from (i) declaring or paying any lawful dividend so long as, after giving effect thereto, no Default shall have occurred and be continuing, (ii) issuing and maintaining letters of credit, guaranties and sureties as contingent obligations on behalf of Affiliates, or (iii) the payment of funds and making of capital contributions, loans and other transfers of money to Affiliates or to other Persons, including payments made under letters of credit, guarantees and sureties issued and maintained on behalf of Affiliates, provided that the aggregate amount for all such payments and transfers does not exceed $200,000,000 at any time outstanding. 10.12. SECTION Indebtedness/Capitalization Ratio. The ratio of Consolidated Indebtedness to Consolidated Capitalization will at no time exceed 65%. 31 10.13. SECTION Post-closing Consents/Waivers. The Borrower agrees to obtain and deliver to the Administrative Agent no later than September 1, 2001 (but in any event prior to the occurrence of any Event of Default) waivers, amendments or consents, in form and substance reasonably satisfactory to the Administrative Agent, to the 364-Day Credit Agreement dated as of August 21, 2000 among the Borrower, certain lenders and The Chase Manhattan Bank, as administrative agent, and to the Five-Year Credit Agreement dated as of August 25, 1997 among the Borrower, certain lenders and The Chase Manhattan Bank, as administrative agent, to the extent either such agreement is still in effect, permitting the cash collateralization provisions of this Agreement relating to LC Obligations. 11 ARTICLE 12 DEFAULTS 12.1. SECTION Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or Reimbursement Obligation or shall fail to pay, within five days of the due date thereof, any interest, fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04, 5.08, 5.09, 5.12 or the second sentence of 5.10, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt (other than the Loans) when due or within any applicable grace period; (f) any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto so as to result in the acceleration of the maturity of Material Debt; (g) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any 32 substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to, or shall fail generally to, pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $50,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 90 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (j) a judgment or other court order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Material Subsidiary and such judgment or order shall continue without being vacated, discharged, satisfied or stayed or bonded pending appeal for a period of 45 days; (k) the Borrower shall cease to be a Subsidiary or Affiliate of Duke Energy Corporation; or (l) an "Event of Default" as defined in the Three-Year Credit Agreement shall have occurred and be continuing; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having Pro Rata Shares of more than 66 2/3%, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, (ii) if requested by Banks having Pro Rata Shares of more than 66 2/3%, by notice to the Borrower declare the Loans and all Reimbursement Obligations (together 33 with accrued interest thereon) to be, and the Loans and all Reimbursement Obligations shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and (iii) if requested by Banks having Pro Rata Shares of more than 66 2/3%, by notice to the Borrower and in addition to the continuing right to demand payment of all amounts payable under the Loan Documents, make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice, act or demand, pay to the Administrative Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the "Collateral Shortfall Amount"); provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans and all Reimbursement Obligations (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay forthwith to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. If at any time after the Banks have requested the Borrower to pay the Administrative Agent funds to be held in the Facility LC Collateral Account, the Administrative Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Administrative Agent may make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. The Administrative Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the LC Obligations and any other amounts as shall from time to time have become due and payable by the Borrower to the Banks or the LC Issuers under the Loan Documents. At any time while any Event of Default is continuing, neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After the sooner of (i) the Required Banks waiving the Event(s) of Default that gave rise to requesting the Borrower to pay funds into the Facility LC Collateral Account and (ii) all of the LC Obligations have been indefeasibly paid in full and all Facility LCs have expired or terminated and the Aggregate Commitment has been terminated, any funds remaining in the Facility LC Collateral Account, including accrued interest, after application to any other Obligations then due and owing to the Administrative Agent and the Banks, shall be returned by the Administrative Agent to the Borrower or paid to 34 whomever may be legally entitled thereto at such time. 12.2. SECTION Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. 13 ARTICLE 14 THE ADMINISTRATIVE AGENT 14.1. SECTION Appointment; Nature of Relationship. Bank One is hereby appointed by each of the Banks as its contractual representative (herein referred to as the Administrative Agent) hereunder and under each other Loan Document, and each of the Banks irrevocably authorizes the Administrative Agent to act as the contractual representative of such Bank with the rights and duties expressly set forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article 7. Notwithstanding the use of the defined term "Administrative Agent," it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Bank by reason of this Agreement or any other Loan Document and that the Administrative Agent is merely acting as the contractual representative of the Banks with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Banks' contractual representative, the Administrative Agent (i) does not hereby assume any fiduciary duties to any of the Banks, (ii) is a "representative" of the Banks within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Banks hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Bank hereby waives. The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties to the Banks, or any obligation to the Banks to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Administrative Agent. 14.2. SECTION Administrative Agent and Affiliates. Bank One shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and Bank One and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. 14.3. SECTION Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the 35 foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. 14.4. SECTION Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. 14.5. SECTION Liability of Administrative Agent. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it in good faith to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. 14.6. SECTION Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. 14.7. SECTION Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. 14.8. SECTION Successor Administrative Agent. The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower, with the consent of the Required Banks (such consent not to be unreasonably withheld 36 or delayed), shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder; provided that if such successor Administrative Agent is appointed without the consent of the Borrower, such successor Administrative Agent may be replaced by the Borrower with the consent of the Required Banks. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. 14.9. SECTION Administrative Agent's Fee. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent. 15 ARTICLE 16 CHANGE IN CIRCUMSTANCES 16.1. SECTION Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing: (a) the Administrative Agent determines that deposits in dollars (in the applicable amounts) are not being offered to the Administrative Agent in the relevant market for such Interest Period, or (b) in the case of a Euro-Dollar Borrowing, Banks having 662/3% or more of the aggregate amount of the affected Loans advise the Administrative Agent that the Euro-Dollar Base Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Alternate Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Alternate Base Rate Borrowing. 37 16.2. SECTION Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Leading Office) to make, maintain or fund any of its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the good faith exercise of its discretion. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Alternate Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. 16.3. SECTION Increased Cost and Reduced Return. (a) If on or after the date of this Agreement, in the case of any Loan or Facility LC or any obligation to make Loans or issue or maintain Facility LCs, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Applicable Lending Office) or any LC Issuer with any request or directive (whether or not having the force of law) issued on or after such date of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or any LC Issuer or shall impose on any Bank (or its Applicable Lending Office) or any LC Issuer or on the London interbank market any other condition (other than in respect of Taxes or Other Taxes) affecting its Euro-Dollar Loans, its Note, any Facility LC Application, any Facility LCs, its obligation to make Euro-Dollar Loans or its obligation to issue or to participate in Facility LCs and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) or such LC Issuer of making or maintaining any Euro-Dollar Loan or Facility LC, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) or such LC Issuer under this Agreement or under its Note with 38 respect thereto, by an amount deemed by such Bank or such LC Issuer to be material, then, within 15 days after demand by such Bank or such LC Issuer (with a copy to the Administrative Agent), the Borrower shall pay to such Bank or such LC Issuer such additional amount or amounts as will compensate such Bank or such LC Issuer for such increased cost or reduction; provided that no such amount shall be payable with respect to any period commencing more than 90 days prior to the date such Bank or such LC Issuer first notifies the Borrower of its intention to demand compensation therefor under this Section 8.03(a) unless such increased cost or reduction is imposed on such Bank or such LC Issuer on a retroactive basis. (b) If any Bank or any LC Issuer shall have determined that, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, 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 any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency given or made after the date of this Agreement, has or would have the effect of reducing the rate of return on capital of such Bank or LC Issuer (or its Parent) as a consequence of such Bank's or LC Issuer's obligations hereunder to a level below that which such Bank or LC Issuer (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank or LC Issuer to be material, then from time to time, within 15 days after demand by such Bank or LC Issuer (with a copy to the Administrative Agent), the Borrower shall pay to such Bank or LC Issuer such additional amount or amounts as will compensate such Bank or LC Issuer (or its Parent) for such reduction; provided that no such amount shall be payable with respect to any period commencing less than 30 days after the date such Bank or LC Issuer first notifies the Borrower of its intention to demand compensation under this Section 8.03(b). (c) Each Bank and LC Issuer will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank or LC Issuer to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank or LC Issuer, be otherwise disadvantageous to such Bank or LC Issuer. A certificate of any Bank or LC Issuer claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank or LC Issuer may use any reasonable averaging and attribution methods. 16.4. SECTION Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or any Note or Facility LC Application, and all liabilities with respect thereto, 39 excluding (i) in the case of each Bank, LC Issuer and the Administrative Agent, taxes imposed on its income, net worth or gross receipts and franchise or similar taxes imposed on it by a jurisdiction under the laws of which such Bank, LC Issuer or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank and LC Issuer, any United States withholding tax imposed on such payments except to the extent that such Bank and LC Issuer is subject to United States withholding tax by reason of a U.S. Tax Law Change. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application. "U.S. Tax Law Change" means with respect to any Bank or Participant the occurrence (x) in the case of each Bank listed on the signature pages hereof, after the date of its execution and delivery of this Agreement and (y) in the case of any other Bank, after the date such Bank shall have become a Bank hereunder, and (z) in the case of each Participant, after the date such Participant became a Participant hereunder, of the adoption of any applicable U.S. federal law, U.S. federal rule or U.S. federal regulation relating to taxation, or any change therein, or the entry into force, modification or revocation of any income tax convention or treaty to which the United States is a party. (b) Any and all payments by the Borrower to or for the account of any Bank, LC Issuer or the Administrative Agent hereunder or under any Note or Facility LC Application shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank, LC Issuer or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank, LC Issuer and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank, LC Issuer or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This 40 indemnification shall be paid within 15 days after such Bank, LC Issuer or the Administrative Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter as required by law (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower two completed and duly executed copies of Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, or other documentation reasonably requested by the Borrower, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a U.S. Tax Law Change), such Bank shall not be entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to any Taxes or Other Taxes which would not have been payable had such form been so provided, provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes (it being understood, however, that the Borrower shall have no liability to such Bank in respect of such Taxes). (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will take such action (including changing the jurisdiction of its Applicable Lending Office) as in the good faith judgment of such Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. (g) If any Bank or the Administrative Agent receives a refund (including a refund in the form of a credit against taxes that are otherwise payable by the Bank or the Administrative Agent) of any Taxes or Other Taxes for which the Borrower has made a payment under Section 8.04(b) or (c) and such refund was received from the taxing authority which originally imposed such Taxes or Other Taxes, such Bank or the Administrative Agent agrees to reimburse the Borrower to the extent of such refund, provided that nothing contained in this paragraph (g) shall require any Bank or the Administrative Agent to make available its tax returns (or any other information relating to its taxes which it deems to be confidential). 16.5. SECTION Alternate Base Rate Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make or to continue or convert outstanding Loans as or into 41 Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted to) Euro-Dollar Loans, as the case may be, shall instead be Alternate Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Loans shall be applied to repay its Alternate Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Alternate Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. 16.6. SECTION Substitution of Bank. If (i) the obligation of any Bank to make or to convert or continue outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or 8.04, (iii) any Bank exercises its right not to extend its Commitment Termination Date pursuant to Section 2.01(c), or (iv) Investment Grade Status ceases to exist as to any Bank, then: (a) the Borrower shall have the right, with the assistance of the Administrative Agent, to designate a substitute bank or banks (which may be one or more of the Banks) mutually satisfactory to the Borrower and the Administrative Agent (whose consent shall not be unreasonably withheld or delayed) to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit C hereto, the outstanding Loans, Reimbursement Obligations and Facility LC participations of such Bank and assume the Commitment of such Bank, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans and Reimbursement Obligations plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment and Facility LCs hereunder plus such amount, if any, as would be payable pursuant to Section 2.13 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment, and the Borrower shall cause the termination or cancellation of all Facility LCs issued by such Bank, not later than the date of consummation of such assignment; and (b) if at the time Investment Grade Status exists as to the Borrower and no Default and Event of Default then exists, the Borrower may elect to terminate this Agreement as to such Bank, provided that (i) the Borrower notifies such Bank through the Administrative Agent of 42 such election at least three Euro-Dollar Business Days before the effective date of such termination, (ii) the Borrower repays or prepays the principal amount of all outstanding Loans made by such Bank and Reimbursement Obligations of such Bank plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment and Facility LCs hereunder plus all other amounts payable by the Borrower to such Bank hereunder, not later than the effective date of such termination and (iii) the Borrower causes the termination or cancellation of all Facility LCs issued by such Bank not later than the effective date of such termination. Upon satisfaction of the foregoing conditions, the Commitment of such Bank shall terminate on the effective date specified in such notice. 17 ARTICLE 18 MISCELLANEOUS 18.1. SECTION Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address or telecopy or telex number set forth on the Notice Addresses Schedule, (y) in the case of any Bank or LC Issuer, at its address or telecopy or telex number set forth in its Administrative Questionnaire or the Notice Addresses Schedule or (z) in the case of any party, such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telecopy or telex, when such telecopy or telex is transmitted to the telecopy or telex number specified in this Section and the appropriate answerback or confirmation slip, as the case may be, is received, or (ii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 3 shall not be effective until delivered. 18.2. SECTION No Waivers. No failure or delay by the Administrative Agent, any LC Issuer or any Bank in exercising any right, power or privilege hereunder or under any Note or Facility LC Application shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 18.3. SECTION Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Administrative Agent, any LC Issuer or any Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Administrative Agent, each LC Issuer and each Bank, their respective affiliates and the respective directors, officers, agents and employees 43 of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. 18.4. SECTION Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due with respect to the Obligations held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount then due with respect to the Loans held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Obligations held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under this Agreement. 18.5. SECTION Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent and, if the rights or duties of an LC Issuer are affected thereby, by such LC Issuer); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Obligations or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or interest thereon or any fees hereunder or for termination of any Commitment or (iv) change the percentage of the Commitments or of the aggregate Pro Rata Shares, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. 18.6. SECTION Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may, with (unless an Event of Default then exists) the consent of the Borrower (such consent not to be unreasonably withheld or delayed), at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Obligations. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection 44 with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to the performance by such Participant of the obligations of a Bank thereunder. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree)) of all, of its rights and obligations under this Agreement and its Note (if any), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit C hereto executed by such Assignee and such transferor Bank, with (and only with and subject to) the prior written consent of the Borrower (given in its sole discretion), provided that an Event of Default does not exist, and the Administrative Agent (which shall not be unreasonably withheld or delayed), provided that unless such assignment is of the entire right, title and interest of the transferor Bank hereunder, after making any such assignment such transferor Bank shall have a Commitment of at least $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree). Upon execution and delivery of such instrument of assumption and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required by the Assignee, a Note is issued to the Assignee. If the Assignee is not incorporated under the laws of the United States of America or a state thereof it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. All assignments shall be subject to a transaction fee established by, and payable by the transferor Bank to, the Administrative Agent for its own account (which shall not exceed $4,000). 45 (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note (if any) to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder or modify any such obligations. (e) No Assignee, Participant or other transferee of any Bank's rights (including any Applicable Lending Office other than such Bank's initial Applicable Lending Office) shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. 18.7. SECTION Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. 18.8. SECTION Confidentiality. The Administrative Agent and each Bank agree to keep any information delivered or made available by the Borrower pursuant to this Agreement confidential from anyone other than persons employed or retained by such Bank and its affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby, provided that nothing herein shall prevent any Bank from disclosing such information (a) to any other Bank or to the Administrative Agent, (b) to any other Person if reasonably incidental to the administration of the credit facility contemplated hereby, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) which had been publicly disclosed other than as a result of a disclosure by the Administrative Agent or any Bank prohibited by this Agreement, (f) in connection with any litigation to which the Administrative Agent, any Bank or its subsidiaries or Parent may be a party, (g) to the extent necessary in connection with the exercise of any remedy hereunder, (h) to such Bank's or Administrative Agent's legal counsel and independent auditors and (i) subject to provisions substantially similar to those contained in this Section 9.08, to any actual or proposed Participant or Assignee. 18.9. SECTION Governing Law; Submission to Jurisdiction. This Agreement and each Note (if any) shall be construed in accordance with and governed by the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 18.10. SECTION Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire 46 agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. 18.11. SECTION WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 18.12. SECTION Payments Set Aside. To the extent that the Borrower makes a payment to the Administrative Agent or any Bank, or the Administrative Agent or any Bank exercises any right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Bank in its discretion) to be repaid by the Administrative Agent or such Bank (the "Repaying Party") to a trustee, receiver or any other party, in connection with any proceeding under any debtor relief law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank severally agrees to pay to the Repaying Party upon demand its applicable share of any amount so recovered from or repaid by the Repaying Party, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect. 47 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DUKE CAPITAL CORPORATION By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- Address: 422 South Church Street Charlotte, NC 28202-1904 Attention: Telecopy number: BANK ONE, NA, as Administrative Agent, LC Issuer and a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 2 FIRST UNION NATIONAL BANK, as Co-Syndication Agent and a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 3 WESTDEUTSCHE LANDESBANK GIROZENTRALE, as Co-Syndication Agent and a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 4 DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, as Documentation Agent and a Bank By: -------------------------------------- Name: ------------------------------------ Title: By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 5 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, as Co-Agent and a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 6 ABN AMRO BANK N.V., as Co-Agent and a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 7 BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Co-Agent and a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 8 WACHOVIA BANK, N.A., as Co-Agent and a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 9 UBS AG, STAMFORD BRANCH, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 10 BNP PARIBAS, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 11 TORONTO DOMINION (TEXAS), INC., as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 12 BANCA COMMERCIALE ITALIANA - LOS ANGELES BRANCH, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 13 CITIBANK, N.A., as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 14 THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 15 BARCLAYS BANK PLC, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 16 THE CHASE MANHATTAN BANK, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 17 BANK OF AMERICA, N.A., as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 18 BANCO BILBAO VIZCAYA ARGENTARIA, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 19 WESTPAC BANKING CORPORATION, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 20 SUNTRUST BANK, as a Bank By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- 21 Commitments Schedule -------------------- Bank Commitment ---- ---------- Bank One, N.A. $50,000,000 First Union National Bank $50,000,000 Westdeutsche Landesbank Girozentrale $50,000,000 Deutsche Bank AG New York Branch and/or Cayman Islands Branch $50,000,000 Bayerische Landesbank Girozentrale $37,500,000 ABN AMRO Bank N.V. $37,500,000 Bank of Tokyo-Mitsubishi Trust Company $37,500,000 Wachovia Bank, N.A. $37,500,000 UBS, AG, Stamford Branch $25,000,000 BNP Paribas $25,000,000 Toronto Dominion (Texas), Inc. $25,000,000 Banca Commerciale Italiana - Los Angeles Branch $12,500,000 Citibank, N.A. $12,500,000 The Industrial Bank of Japan, Limited $12,500,000 Barclays Bank PLC $12,500,000 The Chase Manhattan Bank $12,500,000 Bank of America, N.A. $12,500,000 Banco Bilbao Vizcaya Argentaria $12,500,000 Westpac Banking Corporation $12,500,000 SunTrust Bank $12,500,000 -------------------- Total $537,500,000 22
Pricing Schedule ---------------- The "Commitment Fee Rate" and the "Applicable Margin" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day: - --------------------------------------------------------------------------------------------------- LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI - --------------------------------------------------------------------------------------------------- Commitment Fee Rate 0.08% 0.09% 0.105% 0.125% 0.15% 0.20% - --------------------------------------------------------------------------------------------------- Applicable Margin 0.50% 0.55% 0.625% 0.75% 1.0% 1.375% Utilization #33-1/3% - --------------------------------------------------------------------------------------------------- Applicable Margin 0.5625% 0.6125% 0.6875% 0.8125% 1.0625% 1.4375% Utilization >33-1/3% but #66-2/3% - --------------------------------------------------------------------------------------------------- Applicable Margin 0.625% 0.675% 0.75% 0.875% 1.125% 1.5% Utilization >66-2/3% - ---------------------------------------------------------------------------------------------------
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Borrower is rated "A+" or higher by S&P or "A1" or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower is rated "A" or higher by S&P or "A2" or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower is rated "A-" or higher by S&P or "A3" or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower is rated "BBB+" by S&P or "Baa1" by Moody's and (ii) neither Level I Status, Level II Status nor Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower is rated "BBB" by S&P or "Baa2" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status nor Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. "Utilization" means, at any date, the percentage equivalent of a fraction (i) the numerator of which is the Aggregate Outstanding Credit Exposure at such date and (ii) the denominator of which is the aggregate amount of the Commitments at such date (or if such date is after the Commitment Termination Date, the aggregate amount of the Commitments as in effect prior to their termination on the Commitment Termination Date). The credit ratings to be utilized for purposes of this Schedule (a "Credit Rating") are those indicated for or assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating indicated for or assigned to any other debt security of the Borrower shall be disregarded. The ratings in effect for any day are those in effect at the close of business on such day. A change in credit rating will result in an immediate change in the applicable Status. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable Status is the higher of the two. Notice Addresses Schedule ------------------------- DUKE CAPITAL CORPORATION 422 South Church Street Charlotte, NC 28202-1904 Attention: Grady S. Carpenter, Jr. Telephone: (704) 382-7530 Facsimile: (704) 382-9497 Electronic Mail: gcarpent@duke-energy.com BANK ONE, N.A. Administrative Agent's Office, L/C Issuer and Bank One, N.A., Lending Office ------- Bank One, N.A. 1 Bank One Plaza 15th Floor Suite IL1-0429 Chicago, IL 60670 Attention: Brian Zimmer Telephone: (312) 732-2169 Facsimile: (312) 732-7455 Electronic Mail: brian_j_zimmer@bankone.com Account No.: (4811 5286 0000) Ref: Duke Capital ABA #071-000-013 FIRST UNION NATIONAL BANK Credit Contact: -------------- First Union National Bank 201 S. College St. Charlotte, NC 28288 Attention: Mitch Wilson Telephone: (704) 383-5642 Facsimile: (704) 383-7611 Electronic Mail: Administrative Contact: ---------------------- First Union National Bank 201 S. College St. Charlotte, NC 28288 Attention: Chanue Micheal Telephone: (704) 715-1195 Facsimile: (704) 383-7999 Electronic Mail: WESTDEUTSCHE LANDESBANK GIRONZENTRALE Credit Contact: -------------- 1211 Avenue of the Americas New York, NY 10036 Attention: Felicia La Forgla Telephone: (212) 852-6323 Facsimile: (212) 852-6307 Electronic Mail: Administrative Contact: ---------------------- 1211 Avenue of the Americas New York, NY 10036 Attention: Philip Green Telephone: (212) 852-6323 Facsimile: (212) 302-7946 Electronic Mail: DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH Credit Contact: -------------- Deutsche Bank AG New York Branch and/or Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Attention: Joel Makowsky Telephone: (212) 469-7896 Facsimile: (212) 469-5711 Electronic Mail: joel.makowsky@db.com Administrative Contact: ---------------------- Deutsche Bank AG New York Branch and/or Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Attention: Noble Samuel Cheryl H. Mandelbaum Telephone: (212) 250-5374 Facsimile: (212) 669-1707 Electronic Mail: noble.samuel@db.com cheryl.mandelbaum@db.com BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH Credit Contact: -------------- Bayerische Landesbank Girozentrale, Cayman Islands Branch 560 Lexington Avenue 17th Floor New York, NY 10022 Attention: Sean O'Sullivan Telephone: (212) 310-9913 Facsimile: (212) 310-9868 Electronic Mail: sosullivan@baylbny.com Administrative Contact: ---------------------- Bayerische Landesbank Girozentrale, Cayman Islands Branch 560 Lexington Avenue 17th Floor New York, NY 10022 Attention: Patricia Sanchez Telephone: (212) 310-9810 Facsimile: (212) 310-9930 Electronic Mail: psanchez@baylbny.com Attention: Carol Dussie Telephone: (212) 310-9846 Facsimile: (212) 310-9930 Electronic Mail: cdussie@baylbny.com ABN AMRO BANK N.V. Credit Contact: -------------- ABN AMRO Bank N.V. 208 South LaSalle Street Suite 710 Chicago, IL 60604-1003 Attention: Jeffrey Dodd Telephone: (312) 992-5110 Facsimile: (312) 992-5111 Electronic Mail: Administrative Contact: ---------------------- ABN AMRO Bank N.V. 208 South LaSalle Street Suite 1500 Chicago, IL 60604-1003 Attention: Loan Administration Telephone: (312) 992-5150 Facsimile: (312) 992-5155 Electronic Mail: BANK OF TOKYO-MITSUBISHI TRUST COMPANY Credit Contact: -------------- Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, NY 10020-1104 Attention: Nicholas R. Battista Telephone: (212) 782-4333 Facsimile: (212) 782-4979 Electronic Mail: nbattista@btmna.com Attention: Bill Rhodes Telephone: (212) 782-4580 Facsimile: (212) 782-4979 Electronic Mail: brhodes@btmna.com Administrative Contact: ---------------------- Bank of Tokyo-Mitsubishi Trust Company BTM Information Services, Inc. c/o Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, NY 10020-1104 Attention: Rolando Uv Telephone: (201) 413-8570 Facsimile: (201) 521-2304 (201) 521-2305 Electronic Mail: WACHOVIA BANK, N.A. Credit Contact: -------------- Wachovia Bank, N.A. c/o Hann Pirio 191 Peachtree Street 28th Floor Atlanta, GA 30303 Attention: Melonie Willis Telephone: (336) 735-5618 Facsimile: (336) 735-5636 Electronic Mail: Administrative Contact: ---------------------- Wachovia Bank, N.A. c/o Hann Pirio 191 Peachtree Street 28th Floor Atlanta, GA 30303 Attention: Global Corporate Servicing Telephone: Facsimile: Electronic Mail: UBS, AG, STAMFORD BRANCH Credit Contact: -------------- UBS AG, Stamford Branch 677 Washington Blvd. 6th Floor Stamford, CT 06901 Attention: Jennifer Poccia Telephone: (203) 719-3834 Facsimile: (203) 719-4176 Electronic Mail: jennifer.poccia@ubsw.com Administrative Contact: ---------------------- UBS AG, Stamford Branch 677 Washington Blvd. 6th Floor Stamford, CT 06901 Attention: Jennifer Poccia Telephone: (203) 719-3834 Facsimile: (203) 719-4176 Electronic Mail: jennifer.poccia@ubsw.com BNP PARIBAS Credit Contact: -------------- BNP Paribas Project Finance & Utilities Group 787 7th Avenue New York, NY 10019 Attention: Sean Finnegan Telephone: (212) 841-2310 Facsimile: (212) 841-2052 Electronic Mail: sean.finnegan@americas.bnpparibas.com Administrative Contact: ---------------------- BNP Paribas 919 Third Avenue New York, NY 10022-1278 Attention: Tecla Hurley Telephone: (212) 471-6651 Facsimile: (212) 471-6697 Electronic Mail: tecla.hurley@americas.bnpparibas.com TORONTO DOMINION (TEXAS), INC. Credit Contact: -------------- Toronto Dominion (Texas), Inc. 31 West 52nd Street, 18th Floor New York, NY 10016 Attention: Suzanne Eberhard Telephone: (212) 827-7783 Facsimile: (609) 730-8575 Electronic Mail: Administrative Contact: ---------------------- Toronto Dominion (Texas), Inc. 909 Fannin Street, 17th Floor Houston, TX 77010 Attention: Carol Brandt Telephone: (713) 653-8204 Facsimile: (713) 951-9921 Electronic Mail: brandc@tdusa.com BANCA COMMERCIALE ITALIANA - LOS ANGELES BRANCH Credit Contact: -------------- Banca Commerciale Italiana - Los Angeles Branch One William Street New York, New York 10004 Attention: Hannah Plucinski Telephone: (212) 607-3863 Facsimile: (212) 807-2124 Electronic Mail: hplucinski@bci.it Administrative Contact: ---------------------- Banca Commerciale Italiana - Los Angeles Branch One William Street New York, New York 10004 Attention: Isabella Castrogiovanni Telephone: (212) 607-3522 Facsimile: (212) 607-3807 Electronic Mail: Attention: Alex Papace Telephone: (212) 607-3531 Facsimile: (212) 807-3897 Electronic Mail: CITIBANK, N.A. Credit Contact: -------------- Citibank, N.A. 2 Penn's Way Newark, DE 19720 Attention: Nick McKee Telephone: (212) 559-1503 Facsimile: (212) 793-6130 Electronic Mail: nick.mckee@citicorp.com Administrative Contact: ---------------------- Citibank, N.A. 2 Penn's Way Newark, DE 19720 Attention: Tracy Pinkett Telephone: (302) 894-6078 Facsimile: (302) 894-6120 Electronic Mail: tracy.pinkett@citicorp.com THE INDUSTRIAL BANK OF JAPAN, LIMITED Credit Contact: -------------- The Industrial Bank of Japan, Limited 191 Peachtree Street N.E. Suite 3825 Atlanta, GA 30303 Attention: Bill LaDuca Telephone: (404) 524-8770 ext. 105 Facsimile: (404) 524-8509 Electronic Mail: Administrative Contact: ---------------------- The Industrial Bank of Japan, Limited 1251 Avenue of the Americas New York, NY 10020-1104 Attention: Christine Francese Telephone: (212) 282-4097 Facsimile: (212) 282-4480 Electronic Mail: BARCLAYS BANK PLC Credit Contact Barclays Capital 222 Broadway, 8th Floor New York, NY 10038 Attention: Michael J. Brennon Telephone: (212) 412-2851 Facsimile: (212) 412-6709 Electronic Mail: Attention: Sydney Dennis Telephone: (212) 412-2470 Facsimile: (212) 412-7511 Electronic Mail: Administrative Contact: ---------------------- Barclays Group Inc. (USA) 222 Broadway, 11th Floor New York, NY 10038 Attention: Marsha Hamlette Telephone: (212) 412-4081 Facsimile: (212) 412-5306/5307 or 5308 Electronic Mail: THE CHASE MANHATTAN BANK Credit Contact: -------------- The Chase Manhattan Bank 270 Park Avenue 23rd Floor New York, NY 10017 Attention: Paul Farrell Telephone: (212) 270-7653 Facsimile: (212) 270-3089 Electronic Mail: paul.v.farrell@chase.com Administrative Contact: ---------------------- The Chase Manhattan Bank 270 Park Avenue 23rd Floor New York, NY 10017 Attention: Lynette Lang Telephone: (212) 552-7692 Facsimile: (212) 552-5777 Electronic Mail: lynette.lang@chase.com BANK OF AMERICA, N.A. Credit Contact: -------------- Bank of America, N.A. 100 North Tryon Street Mail Code NC1-007-16-13 Charlotte, NC 28255 Attention: Gretchen P. Burud Telephone: (704) 386-8394 Facsimile: (704) 386-1319 Electronic Mail: gretchen.burud@bankofamerica.com Administrative Contact: ---------------------- Bank of America, N.A. Bank of America Plaza 901 Main Street 14th Floor, TX1-492-14-05 Dallas, TX 75202-3714 Attention: Nora J. Taylor Telephone: (214) 209-0175 Facsimile: (214) 290-9440 Electronic Mail: nora.j.taylor@bankofamerica.com BANCO BILBAO VIZCAYA ARGENTARIA Credit Contact: -------------- Banco Bilboa Vizcaya Argentaria, New York Branch 1345 Avenue of the Americas, 45th Floor New York, NY 10105 Attention: Manual Sanchez Telephone: (212) 728-1511 Facsimile: (212) 333-2904 Electronic Mail: Attention: Franceso Alvarez Telephone: (212) 728-1634 Facsimile: (212) 333-2904 Electronic Mail: Administrative Contact: ---------------------- Banco Bilboa Vizcaya Argentaria, New York Branch 1345 Avenue of the Americas, 45th Floor New York, NY 10105 Attention: Francisco Miguens Telephone: (212) 728-1682 Facsimile: (212) 333-2926 Electronic Mail: WESTPAC BANKING CORPORATION Credit Contact: -------------- Westpac Banking Corporation 575 Fifth Avenue 39th Floor New York, NY 10017 Attention: Tony Smith Telephone: (212) 551-1814 Facsimile: (212) 551-1995 Electronic Mail: tonysmith@westpac.com.au Administrative Contact: ---------------------- Westpac Banking Corporation 575 Fifth Avenue 39th Floor New York, NY 10017 Attention: Susan Wildstein Telephone: (212) 551-1960 Facsimile: (212) 551-1998 Electronic Mail: susanwildstein@westpac.com.au SUNTRUST BANK Credit Contact: -------------- SunTrust Bank Mail Code 1929 303 Peachtree Street, 3rd Floor Atlanta, GA 30308 Attention: Steven Newby Telephone: (404) 658-4916 Facsimile: (404) 827-6270 Electronic Mail: steven.newby@suntrust.com Administrative Contact: ---------------------- SunTrust Bank Mail Code 1929 303 Peachtree Street, 3rd Floor Atlanta, GA 30308 Attention: Roshawn Orise Telephone: (404) 230-1939 Facsimile: (404) 575-2730 Electronic Mail: roshawn.orise@suntrust.com Existing LCs Schedule --------------------- None. EXHIBIT A NOTE New York, New York , 2001 ------------ For value received, Duke Capital Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the date specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Bank One, NA, 1 Bank One Plaza, Chicago, Illinois. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, the Bank, if the Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule attached hereto appropriate notations to evidence the foregoing information with respect to the Loans then outstanding; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the 364-Day Credit Agreement dated as of , 2001 among the Borrower, the banks listed on the -------- signature pages thereof and Bank One, NA, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. DUKE CAPITAL CORPORATION By Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount of Amount Type Principal Maturity Notation Date of Loan of Loan Repaid Date Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXHIBIT B-1 OPINION OF GENERAL COUNSEL OF THE BORROWER EXHIBIT B-2 OPINION OF SPECIAL COUNSEL FOR THE BORROWER EXHIBIT C ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of , 200 among [ASSIGNOR] (the ---------- -- "Assignor"), [ASSIGNEE] (the "Assignee"), DUKE CAPITAL CORPORATION (the "Company") and BANK ONE, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the 364-Day Credit Agreement dated as of , 2001 among the ------- Company, the Assignor and the other Banks party thereto, as Banks, and the Administrative Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans and to issue or participate in Facility LCs in an aggregate principal amount at any time outstanding not to exceed $ ;* ----------- WHEREAS, Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $ are outstanding at the date hereof; ------------ WHEREAS, the Assignor holds participations in Facility LCs under the Credit Agreement in the aggregate principal amount of $ outstanding on the date hereof; and --------------- WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $ (the "Assigned Amount"), --------- together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;* NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION . Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. - -------------------------------- 1 The asterisked provisions shall be appropriately revised in the event of an assignment after the Commitment Termination Date. SECTION . Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Administrative Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION . Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.** It is understood that facility fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION . Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the Borrower and the Administrative Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower and the Administrative Agent is evidence of this consent. Pursuant to Section 2.04(c) of the Credit Agreement the Borrower agrees to execute and deliver a Note, if required by the Assignee, payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION . Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into - -------------------------------- 2 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrowers. SECTION . Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION . Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION . Administrative Questionnaire. Attached is an Administrative Questionnaire duly completed by the Assignee. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By Title: [ASSIGNEE] By Title: DUKE CAPITAL CORPORATION By Title: BANK ONE, NA, as Administrative Agent By Title: EXHIBIT D EXTENSION AGREEMENT Bank One, NA, as Administrative Agent under the Credit Agreement referred to below 1 Bank One Plaza Chicago, Illinois 60670 Ladies and Gentlemen: Effective as of [date], the undersigned hereby agrees to extend its Commitment and Commitment Termination Date under the 364-Day Credit Agreement dated as of , 2001 among Duke Capital Corporation (the "Borrower"), the ------- banks parties thereto and Bank One, NA, as Administrative Agent (the "Credit Agreement") for 364 days to [date to which its Commitment Termination Date is to be extended] pursuant to Section 2.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. This Extension Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK] By Title: Agreed and Accepted: DUKE CAPITAL CORPORATION, as Borrower By ----------------------------------- Title: BANK ONE, NA, as Administrative Agent By ----------------------------------- Title: EXHIBIT E FACILITY LC APPLICATION Date: ------------ To: Bank One, NA, as Administrative Agent as LC Issuer ---------------- From: Duke Capital Corporation Re: 364-Day Credit Agreement dated as of April 19, 2001 (as amended from time to time, the "Credit Agreement") among Duke Capital Corporation (the "Borrower"), the Banks parties thereto and Bank One, NA as Administrative Agent The Borrower hereby gives notice pursuant to Section 2.16(c) of the Credit Agreement that the Borrower requests the above-named LC Issuer to issue on or before a Facility LC containing the terms attached hereto as ------------------ Schedule 1 (the "Requested Letter of Credit"). The Requested Letter of Credit will be subject to [UCP 500] [ISP98]. The Borrower hereby represents and warrants to the LC Issuer, the Administrative Agent and the Banks that: (a) ARTICLE immediately after the issuance of the Requested Letter of Credit the Aggregate Outstanding Credit Exposure will not exceed the Aggregate Commitment; (b) immediately after the issuance of the Requested Letter of Credit, no Default shall have occurred and be continuing; and (c) the representations and warranties contained in the Credit Agreement (except the representations and warranties set forth in Sections 4.04(c) and 4.06 of the Credit Agreement) shall be true and correct on and as of the date of issuance of the Requested Letter of Credit. The Borrower hereby authorizes the LC Issuer to issue the Requested Letter of Credit with such variations from the above terms as the LC Issuer may, in its discretion, determine are necessary and are not materially inconsistent with this Facility LC Application. The opening of the Requested Letter of Credit and the Borrower's responsibilities with respect thereto are subject to [UCP 500] [ISP98] as indicated above and the terms and conditions set forth in the Credit Agreement. 3 Terms used herein and not otherwise defined herein have the meanings assigned to them in the Credit Agreement. DUKE CAPITAL CORPORATION By: -------------------------------- Title: ------------------------------ 4 SCHEDULE 1 Please issue an Irrevocable Letter of Credit as set forth below and forward same to the Correspondent for the LC Issuer for delivery to the Beneficiary or, at the LC Issuer's option, forward same directly to the Beneficiary as indicated below (by check "X"). Transmit by: o Courier o Air Mail o Full Telex/SWIFT o Other (specify in detail): ___________ - -------------------------------------------------------------------------------- Advising Bank (Name and Address) For account of ___________ (Name and (LC Issuer use only unless Address) Borrower designates advising bank) _____ _______ - -------------------------------------------------------------------------------- Phone Number (___) _________ Fax Number (___) _________ - -------------------------------------------------------------------------------- To Beneficiary (Name and Address) Amount (Figures) _____________ _____ _______ - -------------------------------------------------------------------------------- (In Words) _____________ - -------------------------------------------------------------------------------- o +/- _______% - -------------------------------------------------------------------------------- Expiry Date:___ At the counters of the LC Issuer - -------------------------------------------------------------------------------- Available against Beneficiary's draft(s) at sight drawn on the LC Issuer and accompanied by the following document(s). o Beneficiary's signed and dated statement stating that:____ o Automatically renewable for___ months or for ___days with a final expiration date of ___ o Copy(ies) of Beneficiary's commercial invoice (s) marked "unpaid": ____ o Other: ______ o The required letter of credit terms and conditions are attached. o Special Conditions: _________ - -------------------------------------------------------------------------------- Complete only when the Beneficiary's bank or Correspondent is to issue its guarantee or undertaking based on the issued Letter of Credit. o Request Beneficiary's bank to issue and deliver their____________(Specify type of bid or performance bond, guarantee, undertaking or other) o In favor of: Name(s) & Attention ____________ Address/Street ___________ Address/City ______ State____Country ________ Telephone ( )_________ Fax Number ( )____________ For an amount not exceeding that specified above, effective immediately and expiring at their office on ___ (At least 30 days prior to Expiry Date above) Cover________ . (specify number or bid or performance bond, etc.) - -------------------------------------------------------------------------------- Drawings (Check where applicable): o Partial drawings prohibited o Multiple drawings prohibited o Tele-facsimile drawings permitted Charges: (Unless specified, all charges will be for Borrower's account) All banking charges other than the LC Issuer's are for o Beneficiary o Borrower Please include a brief description as to the purpose of the Requested Letter of Credit: _______________ Please issue the Requested Letter of Credit subject to: (check one) o ISP98 or o UCP 500. If no selection is made, the Requested Letter of Credit shall be subject to the UCP 500. Duke Capital Corporation By: ----------------------- Title: -------------------- EX-10.2 4 dex102.txt CREDIT AGREEMENT EXHIBIT 10.2 $537,500,000 THREE-YEAR CREDIT AGREEMENT dated as of April 19, 2001 among DUKE CAPITAL CORPORATION, as Borrower THE BANKS LISTED HEREIN as Banks and BANK ONE, NA as Administrative Agent BANC ONE CAPITAL MARKETS, INC. Lead Arranger and Sole Book Runner
TABLE OF CONTENTS ----------------- PAGE ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01 Definitions.............................................................. 1 SECTION 1.02 Accounting Terms and Determinations...................................... 10 SECTION 1.03 Types of Borrowings...................................................... 10 ARTICLE 2 THE CREDITS SECTION 2.01 Commitments.............................................................. 10 SECTION 2.02 Notice of Borrowings..................................................... 10 SECTION 2.03 Notice to Banks; Funding of Loans........................................ 11 SECTION 2.04 Registry; Notes.......................................................... 12 SECTION 2.05 Maturity of Loans........................................................ 12 SECTION 2.06 Interest Rates........................................................... 12 SECTION 2.07 Commitment Fees.......................................................... 13 SECTION 2.08 Optional Termination or Reduction of Commitments......................... 13 SECTION 2.09 Method of Electing Interest Rates........................................ 14 SECTION 2.10 Mandatory Termination of Commitments..................................... 15 SECTION 2.11 Optional Prepayments..................................................... 15 SECTION 2.12 General Provisions as to Payments........................................ 15 SECTION 2.13 Funding Losses........................................................... 16 SECTION 2.14 Computation of Interest and Fees......................................... 16 SECTION 2.15 Regulation D Compensation................................................ 16 SECTION 2.16 Facility LCs............................................................. 17 ARTICLE 3 CONDITIONS SECTION 3.01 Effectiveness............................................................ 22 SECTION 3.02 Credit Extensions........................................................ 23 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01 Corporate Existence and Power............................................ 23 SECTION 4.02 Corporate and Governmental Authorization; No Contravention............... 24 SECTION 4.03 Binding Effect........................................................... 24 SECTION 4.04 Financial Information.................................................... 24 SECTION 4.05 Regulation U............................................................. 24 SECTION 4.06 Litigation............................................................... 25 SECTION 4.07 Compliance with Laws..................................................... 25 SECTION 4.08 Taxes.................................................................... 25 SECTION 4.09 Public Utility Holding Company Act....................................... 25
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ARTICLE 5 COVENANTS SECTION 5.01 Information.............................................................. 25 SECTION 5.02 Payment of Taxes......................................................... 27 SECTION 5.03 Maintenance of Property; Insurance....................................... 27 SECTION 5.04 Maintenance of Existence................................................. 28 SECTION 5.05 Compliance with Laws..................................................... 28 SECTION 5.06 Books and Records........................................................ 28 SECTION 5.07 Maintenance of Ownership of Principal Subsidiaries....................... 28 SECTION 5.08 Negative Pledge.......................................................... 28 SECTION 5.09 Consolidations, Mergers and Sales of Assets.............................. 30 SECTION 5.10 Use of Proceeds.......................................................... 30 SECTION 5.11 Transactions with Affiliates............................................. 30 SECTION 5.12 Indebtedness/Capitalization Ratio........................................ 30 SECTION 5.13 Post-closing Consents/Waivers............................................ 30 ARTICLE 6 DEFAULTS SECTION 6.01 Events of Default........................................................ 31 SECTION 6.02 Notice of Default........................................................ 34 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01 Appointment; Nature of Relationship...................................... 34 SECTION 7.02 Administrative Agent and Affiliates...................................... 34 SECTION 7.03 Action by Administrative Agent........................................... 34 SECTION 7.04 Consultation with Experts................................................ 35 SECTION 7.05 Liability of Administrative Agent........................................ 35 SECTION 7.06 Indemnification.......................................................... 35 SECTION 7.07 Credit Decision.......................................................... 35 SECTION 7.08 Successor Administrative Agent........................................... 36 SECTION 7.09 Administrative Agent's Fee............................................... 36 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair................. 36 SECTION 8.02 Illegality............................................................... 37 SECTION 8.03 Increased Cost and Reduced Return........................................ 37 SECTION 8.04 Taxes.................................................................... 39 SECTION 8.05 Alternate Base Rate Loans Substituted for Affected Euro-Dollar Loans..... 41 SECTION 8.06 Substitution of Bank..................................................... 41 ARTICLE 9 MISCELLANEOUS SECTION 9.01 Notices.................................................................. 42 SECTION 9.02 No Waivers............................................................... 42 SECTION 9.03 Expenses; Indemnification................................................ 42
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SECTION 9.04 Sharing of Set-offs...................................................... 43 SECTION 9.05 Amendments and Waivers................................................... 43 SECTION 9.06 Successors and Assigns................................................... 44 SECTION 9.07 Collateral............................................................... 45 SECTION 9.08 Confidentiality.......................................................... 45 SECTION 9.09 Governing Law; Submission to Jurisdiction................................ 45 SECTION 9.10 Counterparts; Integration................................................ 46 SECTION 9.11 WAIVER OF JURY TRIAL..................................................... 46 SECTION 9.12 Payments Set Aside....................................................... 46
iii COMMITMENTS SCHEDULE PRICING SCHEDULE NOTICE ADDRESSES SCHEDULE EXISTING LCS SCHEDULE EXHIBIT A - Note EXHIBIT B-1 - Opinion of General Counsel of the Borrower EXHIBIT B-2 - Opinion of Special Counsel for the Borrower EXHIBIT C - Assignment and Assumption Agreement EXHIBIT D - [RESERVED] EXHIBIT E - Facility LC Application EXHIBIT F - Facility LC iv THREE-YEAR CREDIT AGREEMENT THREE-YEAR CREDIT AGREEMENT dated as of April 19, 2001 among DUKE CAPITAL CORPORATION, the BANKS listed on the signature pages hereof and BANK ONE, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS 2.1. SECTION Definitions. The following terms, as used herein, have the following meanings: "Additional Bank" means any financial institution that becomes a Bank for purposes hereof in connection with the replacement of a Bank pursuant to Section 8.06. "Administrative Agent" means Bank One, NA, in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank. "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a "Controlling Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Aggregate Commitment" means the aggregate of the Commitments of all the Banks. "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate of the Outstanding Credit Exposure of all the Banks. "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the Federal Funds Effective Rate for such day plus 1/2% per annum. "Alternate Base Rate Loan" means a Loan which, except as otherwise provided in Section 2.06, bears interest at the Alternate Base Rate. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Alternate Base Rate Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "Applicable Margin" means, with respect to Euro-Dollar Borrowings at any time, the percentage rate per annum which is applicable to such time with respect to Euro-Dollar Borrowings as set forth in the Pricing Schedule. "Approved Officer" means the president, a vice president or the treasurer or assistant treasurer of the Borrower or such other representative of the Borrower as may be designated by any one of the foregoing with the consent of the Administrative Agent. "Assignee" has the meaning set forth in Section 9.06(c). "Available Aggregate Commitment" means, at any time, the Aggregate Commitment then in effect minus the Aggregate Outstanding Credit Exposure at such time. "Bank" means each bank or other financial institution listed on the signature pages hereof, each Additional Bank, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Bank One" means Bank One, NA, a national banking association having its principal office in Chicago, Illinois, in its individual capacity, and its successors. "Borrower" means Duke Capital Corporation, a Delaware corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Cash Equivalents" means (i) securities issued or unconditionally guaranteed by the United States of America or any agency or instrumentality thereof, backed by the full faith and credit of the United States of America and maturing within 30 days from the date of acquisition, (ii) commercial paper issued by any Person organized under the laws of the United States of America, maturing within 30 days from the date of acquisition and, at the time of acquisition, having a rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, (iii) time deposits and certificates of deposit maturing within 30 days from the date of issuance and issued by a bank or trust company organized under the laws of the United States of America or any state thereof that has combined capital and surplus of at least $500,000,000 and that has (or is a subsidiary of a bank holding company that has) a long-term unsecured debt rating of at least A or the equivalent thereof by S&P or at least A2 or the equivalent thereof by Moody's, (iv) repurchase obligations with a term not exceeding seven (7) days with respect to underlying securities of the types described in clause (i) above entered into with any bank or trust company meeting the qualifications specified in clause (iii) above, and (v) money market funds at least 95% of the assets of which are continuously invested in securities of the type described in clause (i) above. "Collateral Shortfall Amount" is defined in Section 6.01. "Commitment" means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on Commitment Schedule, and (ii) with respect to each Additional Bank or Assignee which becomes a bank pursuant to Section 9.06(c), the amount of the Commitment thereby assumed by it, in each case as such amount may from time to time be reduced pursuant to Section 2.08, 2.10 or 9.06(c) or increased pursuant to Section 8.06 or 9.06(c). "Commitment Fee Rate" means on any day the percentage rate per annum applicable on such day as set forth in the Pricing Schedule. "Commitment Schedule" means the Schedule attached hereto identified as such. "Commitment Termination Date" means, for each Bank, April 15, 2004, or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Consolidated Capitalization" means the sum of (i) Consolidated Indebtedness, (ii) consolidated common stockholders' equity as would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles, (iii) the aggregate liquidation preference of preferred stocks (other than preferred stocks subject to mandatory redemption or repurchase) of the Borrower and its Consolidated Subsidiaries upon involuntary liquidation, (iv) the aggregate outstanding amount of all Equity Preferred Securities, and (v) minority interests as would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles. "Consolidated Indebtedness" means, at any date, all Indebtedness of Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. "Consolidated Subsidiary" means, for any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date; unless otherwise specified "Consolidated Subsidiary" means a Consolidated Subsidiary of the Borrower. "Credit Extension" means the issuance of a Facility LC hereunder or the making of a Borrowing. "Credit Rating" is defined in the Pricing Schedule. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in Chicago, Illinois are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Preferred Securities" means any securities, however denominated, (i) issued by the Borrower or any Consolidated Subsidiary of the Borrower, (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 mature no less than 20 years from the date of issuance, (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 Commitment Termination Date. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Base Rate" has the meaning set forth in Section 2.06(b). "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means a Loan which, except as otherwise provided in Section 2.06, bears interest at the applicable Euro-Dollar Rate. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.06(b) on the basis of a Euro-Dollar Base Rate. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.15. "Event of Default" has the meaning set forth in Section 6.01. "Existing LC" means a letter of credit listed on the Existing LCs Schedule. "Existing LCs Schedule" means the Schedule attached hereto identified as such. "Facility LC" means an Existing LC or a letter of credit issued pursuant to Section 2.16(a). "Facility LC Application" is defined in Section 2.16(c). "Facility LC Collateral Account" is defined in Section 2.16(k). "Federal Funds Effective Rate" means, for any day, an interest rate per annum 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 for such day (or, if such day is not a Domestic Business Day, for the immediately preceding Domestic Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Domestic Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. "Group of Loans" means at any time a group of Loans consisting of (i) all Alternate Base Rate Loans outstanding at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time, provided that, if a Loan of any particular Bank is converted to or made as an Alternate Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been if it had not been so converted or made. "Indebtedness" of any Person means at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all indebtedness of such Person for the deferred purchase price of property or services purchased, (c) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired, (d) all indebtedness under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such Person is liable as lessee, (e) the face amount of letter of credit indebtedness available or to be 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) indebtedness secured by any 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 direct guarantees and sureties in respect of indebtedness referred to in clauses (a) through (f) above of another Person, (h) all amounts payable in connection with mandatory redemptions or repurchases of preferred stock and (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. "Interest Period" means, with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six, or, if deposits of a corresponding maturity are generally available in the London interbank market, nine or twelve, months thereafter, as the Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; provided further that: any Interest Period applicable to any Loan which would otherwise end after the Commitment Termination Date shall end on the Commitment Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment Grade Status" exists as to any Person at any date if all senior long-term unsecured debt securities of such Person outstanding at such date which had been rated by S&P or Moody's are rated BBB- or higher by S&P or Baa3 or higher by Moody's, as the case may be. "LC Fee" is defined in Section 2.16(d). "LC Issuer" means Bank One (or any subsidiary or affiliate of Bank One designated by Bank One) in its capacity as issuer of Facility LCs hereunder, First Union National Bank in its capacity as issuer of Facility LCs hereunder, any other Bank listed as the issuer of an Existing LC on the Existing LCs Schedule and any other Bank which accepts a designation by the Borrower and the Administrative Agent as an LC Issuer hereunder. "LC Obligations" means, at any time, the sum, without duplication, of (i) the aggregate undrawn stated amount under all Facility LCs outstanding at such time plus (ii) the aggregate unpaid amount at such time of all Reimbursement Obligations. "LC Payment Date" is defined in Section 2.16(e). "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Revolving Credit Loan. "Loan Documents" means this Agreement, the Facility LC Applications and any Notes issued pursuant to Section 2.04. "Material Debt" means Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount exceeding $100,000,000. "Material Plan" has the meaning set forth in Section 6.01(i). "Material Subsidiary" means at any time any Subsidiary of the Borrower having, together with its Subsidiaries, consolidated assets in excess of 10% of the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such time. "Modify" and "Modification" are defined in Section 2.16(a). "Moody's" means Moody's Investors Service, Inc. "Notes" means promissory notes of the Borrower, in the form required by Section 2.04, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice Addresses Schedule" means the Schedule attached hereto identified as such. "Notice of Borrowing" has the meaning set forth in Section 2.02. "Notice of Interest Rate Election" has the meaning set forth in Section 2.09(a). "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loans, all Reimbursement Obligations, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the Borrower to the Banks or to any Bank, the Administrative Agent, any LC Issuer or any indemnified party arising under the Loan Documents. "Outstanding Credit Exposure" means, as to any Bank at any time, the sum of (i) the aggregate principal amount of its Loans outstanding at such time, plus (ii) an amount equal to its Pro Rata Share of the LC Obligations at such time. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is either (i) maintained by a member of the ERISA Group for employees of a member of the ERISA Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pricing Schedule" means the Schedule attached hereto identified as such. "Prime Rate" means a rate per annum equal to the prime rate of interest announced from time to time by Bank One or its parent (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes. "Principal Subsidiary" means each of Texas Eastern Transmission Corporation, Algonquin Gas Transmission Company, PanEnergy Corp, and their respective successors. "Pro Rata Share" means, with respect to a Bank, a portion equal to a fraction the numerator of which is such Bank's Commitment and the denominator of which is the Aggregate Commitment. "Quarterly Payment Date" means the first Domestic Business Day of each January, April, July and October. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Date" has the meaning set forth in Section 2.16(f). "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.16 to reimburse the LC Issuers for amounts paid by the LC Issuers in respect of any one or more drawings under Facility LCs. "Required Banks" means at any time Banks (i) having at least 51% of the Aggregate Commitment or (ii) if all of the Commitments shall have been terminated, having at least 51% of the Aggregate Outstanding Credit Exposure. "Revolving Credit Loan" means a loan made or to be made by a Bank pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Revolving Credit Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Revolving Credit Period" means the period from and including the Effective Date to but not including the Commitment Termination Date. "S&P" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Substantial Assets" means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole. "364-Day Credit Agreement" means the 364-Day Credit Agreement dated as of April 19, 2001 among the Borrower, certain lenders and Bank One, NA, as administrative agent, as such agreement may be amended or modified from time to time. "Type" means, with respect to any Loan, its nature as an Alternate Base Rate Loan or a Euro-Dollar Loan. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or the Plan under Title IV of ERISA. 2.2. SECTION Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks. 2.3. SECTION Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of the Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement by reference to the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans). ARTICLE 3 4 THE CREDITS 4.1. SECTION Commitments 4.2. During the Revolving Credit Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, (i) to make loans to the Borrower and (ii) to participate in Facility LCs issued upon the request of the Borrower, from time to time, provided that, after giving effect to the making of each such Revolving Credit Loan and the issuance of each such Facility LC, such Bank's Outstanding Credit Exposure shall not exceed its Commitment. Each Borrowing under this Section 2.01 shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the Banks ratably according to their Pro Rata Shares. Within the foregoing limits, the Borrower may borrow under this Section 2.01, or to the extent permitted by Section 2.11, prepay Loans and reborrow at any time during the Revolving Credit Period under this Section 2.01. The Commitments to extend credit hereunder shall expire on the Commitment Termination Date. The LC Issuers will issue Facility LCs hereunder on the terms and conditions set forth in Section 2.16. 4.3. SECTION Notice of Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Borrowing") not later than 10:00 A.M. (Chicago time) on (x) the date of each Alternate Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Alternate Base Rate or a Euro-Dollar Rate, and (d) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. 4.4. SECTION Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 12:00 Noon (Chicago time) on the date of each Borrowing, each Bank shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in Chicago, to the Administrative Agent at its address specified in or pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.03 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and, if such Bank shall not have made such payment within two Domestic Business Days of demand therefor, the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Effective Rate and the interest rate applicable thereto pursuant to Section 2.06 and (ii) in the case of such Bank, the Federal Funds Effective Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. (d) The failure of any Bank to make the Loan to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation thereunder to make a Loan on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. 4.5. SECTION Registry; Notes. (a) The Administrative Agent shall maintain a register (the "Register") on which it will record the Commitment of each Bank, each Loan made by such Bank and each repayment of any Loan made by such Bank. Any such recordation by the Administrative Agent on the Register shall be conclusive, absent manifest error. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations hereunder. (b) The Borrower hereby agrees that, promptly upon the request of any Bank at any time, the Borrower shall deliver to such Bank a duly executed Note, in substantially the form of Exhibit A hereto, payable to the order of such Bank and representing the obligation of the Borrower to pay the unpaid principal amount of the Loans made to the Borrower by such Bank, with interest as provided herein on the unpaid principal amount from time to time outstanding. (c) Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and each Bank receiving a Note pursuant to this Section, if such Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of such Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Such Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. 4.6. SECTION Maturity of Loans. Each Revolving Credit Loan made by any Bank shall mature, and the principal amount thereof shall be due and payable together with accrued interest thereon, on the Commitment Termination Date. 4.7. SECTION Interest Rates. (a) Each Alternate Base Rate Loan shall bear interest on the outstanding principal amount thereof for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Alternate Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date and at maturity. Any overdue principal of or overdue interest on any Alternate Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Alternate Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Applicable Margin for such day plus the Euro-Dollar Base Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof, and at maturity. "Euro-Dollar Base Rate" means, with respect to a Euro-Dollar Borrowing for the relevant Interest Period, the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters Screen FRBD as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, provided that, (i) if Reuters Screen FRBD is not available to the Administrative Agent for any reason, the applicable Euro-Dollar Base Rate for the relevant Interest Period shall instead be the applicable British Bankers' Association Interest Settlement Rate for deposits in U.S. dollars as reported by any other generally recognized financial information service as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, and having a maturity equal to such Interest Period, and (ii) if no such British Bankers' Association Interest Settlement Rate is available to the Administrative Agent, the applicable Euro-Dollar Base Rate for the relevant Interest Period shall instead be the rate determined by the Administrative Agent to be the rate at which Bank One or one of its Affiliate banks offers to place deposits in U.S. dollars with first-class banks in the London interbank market approximately 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the first day of such Interest Period, in the approximate amount of Bank One's relevant Euro-Dollar Loan and having a maturity equal to such Interest Period. (c) Any overdue principal of or overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the Alternate Base Rate for such day and (ii) the sum of the Applicable Margin for such day plus the Euro-Dollar Base Rate for such day. (d) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks by telecopy, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error unless the Borrower raises an objection thereto within five Domestic Business Days after receipt of such notice. 4.8. SECTION Commitment Fees. The Borrower shall pay to the Administrative Agent for the account of the Banks ratably according to their Pro Rata Shares a commitment fee at the Commitment Fee Rate (determined daily in accordance with the Pricing Schedule). Such commitment fee shall accrue from and including the Effective Date to but excluding the Commitment Termination Date, on the daily average Available Aggregate Commitment. Accrued commitment fees under this Section shall be payable quarterly in arrears on each Quarterly Payment Date and on the Commitment Termination Date. 4.9. SECTION Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of $1,000,000 the aggregate amount of the Commitments in excess of the Aggregate Outstanding Credit Exposure. 4.10. SECTION Method of Electing Interest Rates. (a) The Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: (A) if such Loans are Alternate Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and (B) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Alternate Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.13 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 10:00 A.M. (Chicago time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans, provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection 2.09(a) above; (iii) if the Loans comprising such Group are to be converted, the new Type of Loans and, if the Loans being converted are to be Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of the term "Interest Period." (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to subsection 2.09(a) above, the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If no Notice of Interest Rate Election is timely received prior to the end of an Interest Period for any Group of Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Alternate Base Rate Loans as of the last day of such Interest Period. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.02. 4.11. SECTION Mandatory Termination of Commitments. The Commitment of each Bank shall terminate on the Commitment Termination Date, and any Revolving Credit Loans of such Bank then outstanding (together with accrued interest thereon) shall be due and payable on such date. 4.12. SECTION Optional Prepayments. (a) The Borrower may (i) upon notice to the Administrative Agent not later than 10:00 A.M. (Chicago time) on any Domestic Business Day prepay on such Domestic Business Day any Group of Alternate Base Rate Loans and (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent not later than 10:00 A.M. (Chicago time) prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and together with any additional amounts payable pursuant to Section 2.13. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share of such prepayment and such notice shall not thereafter be revocable by the Borrower. 4.13. SECTION General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (Chicago time) on the date when due, in Federal or other funds immediately available in Chicago, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Alternate Base Rate Loans, or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Effective Rate. 4.14. SECTION Funding Losses. If the Borrower makes any payment of principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is converted to a Alternate Base Rate Loan or continued as a Euro-Dollar Loan for a new Interest Period (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow, prepay, convert or continue any Euro-Dollar Loans after notice has been given to any Bank in accordance with Section 2.03(a), 2.09(c) or 2.11(b), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to the Borrower a certificate setting forth in reasonable detail the calculation of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 4.15. SECTION Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees (including the LC Fees and fronting fees) shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). 4.16. SECTION Regulation D Compensation. In the event that a Bank is required to maintain reserves of the type contemplated by the definition of "Euro-Dollar Reserve Percentage", such Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable Euro-Dollar Base Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable Euro-Dollar Base Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least three Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. Each such notification shall be accompanied by such information as the Borrower may reasonably request. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in Chicago with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). 4.17. SECTION Facility LCs. (a) Issuance; Existing LCs. Each LC Issuer hereby agrees, on the terms and conditions set forth in this Agreement, to issue standby and trade letters of credit and to renew, extend, increase, decrease or otherwise modify each Facility LC ("Modify," and each such action a "Modification"), from time to time during the Revolving Credit Period upon the request of the Borrower; provided that immediately after each such Facility LC is issued or Modified, the Aggregate Outstanding Credit Exposure shall not exceed the Aggregate Commitment. No Facility LC shall have an expiry date later than the first anniversary of the Commitment Termination Date. The stated account party under any Facility LC may be the Borrower, a Subsidiary of the Borrower or an Affiliate of the Borrower. By their execution of this Agreement, the Borrower and each Bank listed as an issuer of an Existing LC on the Existing LCs Schedule hereby agree that effective as of the Effective Date (i) such Existing LC shall be a Facility LC under this Agreement and subject to the terms hereof, (ii) such Bank shall be an LC Issuer hereunder with respect to such Existing LC, and (iii) the prior reimbursement agreement or letter of credit application of the Borrower and such Bank relating to such Existing LC is replaced by this Agreement. (b) Participations. Upon the occurrence of the Effective Date, with respect to each Existing LC, and upon the issuance or Modification by an LC Issuer of a Facility LC in accordance with this Section 2.16, such LC Issuer shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have unconditionally and irrevocably purchased from such LC Issuer, a participation in such Facility LC (and each Modification thereof) and the related LC Obligations in proportion to its Pro Rata Share. (c) Notice. Subject to Section 2.16(a), the Borrower shall give the applicable LC Issuer and the Administrative Agent notice of the proposed issuance or Modification of a Facility LC, substantially in the form of Exhibit E (a "Facility LC Application") specifying the beneficiary, the proposed date of issuance (or Modification) and the expiry date of such Facility LC, and describing the proposed terms of such Facility LC, such duly completed Facility LC Application to be received prior to 10:00 A.M. (Chicago time) on the Business Day that is at least two Domestic Business Days prior to the proposed date of issuance or Modification of each Facility LC or in the case of a Facility LC substantially in the form of Exhibit F, at least one Domestic Business Day prior to the proposed date of issuance or Modification. Upon receipt of such Facility LC Application, such LC Issuer shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Bank, of the contents thereof and of the amount of such Bank's participation in such proposed Facility LC. The issuance or Modification by any LC Issuer of any Facility LC shall, in addition to the conditions precedent set forth in Article 3 (the satisfaction of which such LC Issuer shall have no duty to ascertain), be subject to the condition precedent that such Facility LC shall be satisfactory to such LC Issuer. In the event of any conflict between the terms of this Agreement and the terms of any Facility LC Application, the terms of this Agreement shall control. Subject to the foregoing conditions, the applicable LC Issuer will endeavor to issue or Modify such Facility LC as soon as practicable after receiving such Facility LC Application but in any event within two Domestic Business Days after receiving such Facility LC Application or, in the case of a Facility LC substantially in the form of Exhibit F, within one Domestic Business Day after receiving such Facility LC Application. (d) LC Fees. The Borrower shall pay to the Administrative Agent, for the account of the Banks ratably in accordance with their respective Pro Rata Shares, a letter of credit fee at a per annum rate equal to the sum of (i) the Applicable Margin for Euro-Dollar Loans in effect from time to time plus (ii) 0.25% during any period following the Commitment Termination Date plus (iii) if an Event of Default exists, 1%, on the average daily undrawn stated amount under each Facility LC, such fee to be payable in arrears on each Quarterly Payment Date, the Commitment Termination Date and the final expiry date of the Facility LCs following the Commitment Termination Date (each such fee described in this sentence an "LC Fee"). The Borrower shall also pay to each LC Issuer for its own account (x) a fronting fee at a per annum rate equal to 0.10% on the average daily undrawn stated amount under each Facility LC issued by such LC Issuer, such fee to be payable in arrears on each Quarterly Payment Date, the Commitment Termination Date and the final expiry date of the Facility LCs following the Commitment Termination Date and (y) documentary and processing charges in connection with the issuance or Modification or transfer of and draws under Facility LCs issued by such LC Issuer in accordance with such LC Issuer's standard schedule for such charges as in effect from time to time (or such other amounts as such LC Issuer and the Borrower may agree). (e) Administration; Reimbursement by Banks. Upon receipt from the beneficiary of any Facility LC of any demand for payment under such Facility LC, the applicable LC Issuer shall notify the Administrative Agent and the Borrower and the Administrative Agent shall promptly notify each other Bank as to the amount to be paid by such LC Issuer as a result of such demand and the proposed payment date (the "LC Payment Date"). The responsibility of such LC Issuer to the Borrower and each Bank shall be only to determine that the documents (including each demand for payment) delivered under each Facility LC in connection with such presentment shall be in conformity in all material respects with such Facility LC. Each LC Issuer shall endeavor to exercise the same care in the issuance and administration of its Facility LCs as it does with respect to letters of credit in which no participations are granted, it being understood that in the absence of any gross negligence or willful misconduct by such LC Issuer, each Bank shall be unconditionally and irrevocably liable without regard to the occurrence of any Default or any condition precedent whatsoever, to reimburse such LC Issuer on demand for (i) such Bank's Pro Rata Share of the amount of each payment made by such LC Issuer under each Facility LC to the extent such amount is not reimbursed by the Borrower pursuant to Section 2.16(f) below, plus (ii) interest on the foregoing amount to be reimbursed by such Bank, for each day from the date of such LC Issuer's demand for such reimbursement (or, if such demand is made after 10:00 A.M. (Chicago time) on such date, from the next succeeding Domestic Business Day) to the date on which such Bank pays the amount to be reimbursed by it, at a rate of interest per annum equal to the Federal Funds Effective Rate for the first three days and, thereafter, at a rate of interest equal to the rate applicable to Alternate Base Rate Borrowings. (f) Reimbursement by Borrower. The Borrower shall be irrevocably and unconditionally obligated to reimburse the applicable LC Issuer for any amounts to be paid by such LC Issuer upon any drawing under any Facility LC, without presentment, demand, protest or other formalities of any kind; provided that neither the Borrower nor any Bank shall hereby be precluded from asserting any claim for direct (but not consequential) damages suffered by the Borrower or such Bank to the extent, but only to the extent, caused by (i) the willful misconduct or gross negligence of such LC Issuer in determining whether a request presented under any Facility LC issued by it complied with the terms of such Facility LC or (ii) such LC Issuer's failure to pay under any Facility LC issued by it after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. The Borrower shall make such reimbursement (1) on or before 2:00 P.M. (Chicago time) on the applicable LC Payment Date if the Borrower receives notice of the related demand for payment no later than 10:00 A.M. (Chicago time) on such LC Payment Date or (2) if the Borrower receives notice of the related demand for payment later than 10:00 A.M. (Chicago time) on such LC Payment Date, on or before 2:00 P.M. (Chicago time) on the next succeeding Domestic Business Day (such date by which reimbursement must be made (the LC Payment Date under clause (1) or the next succeeding Domestic Business Day under clause (2)) being the "Reimbursement Date"). All such amounts paid by such LC Issuer and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to (x) the rate applicable to Alternate Base Rate Borrowings for such day if such day falls on or before the applicable Reimbursement Date and (y) the sum of 1% plus the rate applicable to Alternate Base Rate Borrowings for such day if such day falls after such Reimbursement Date. Such LC Issuer will pay to each Bank ratably in accordance with its Pro Rata Share all amounts received by it from the Borrower for application in payment, in whole or in part, of the Reimbursement Obligation in respect of any Facility LC issued by such LC Issuer, but only to the extent such Bank has made payment to such LC Issuer in respect of such Facility LC pursuant to Section 2.16(e). Subject to the terms and conditions of this Agreement (including without limitation the submission of a Notice of Borrowing in compliance with Section 2.02 and the satisfaction of the applicable conditions precedent set forth in Article 3), the Borrower may request a Borrowing hereunder for the purpose of satisfying any Reimbursement Obligation. (g) Obligations Absolute. The Borrower's obligations under this Section 2.16 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any LC Issuer, any Bank or any beneficiary of a Facility LC. The Borrower further agrees with the LC Issuers and the Banks that the LC Issuers and the Banks shall not be responsible for, and the Borrower's Reimbursement Obligation in respect of any Facility LC shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, any of its Affiliates, the beneficiary of any Facility LC or any financing institution or other party to whom any Facility LC may be transferred or any claims or defenses whatsoever of the Borrower or of any of its Affiliates against the beneficiary of any Facility LC or any such transferee. No LC Issuer shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Facility LC. The Borrower agrees that any action taken or omitted by any LC Issuer or any Bank under or in connection with each Facility LC and the related drafts and documents, if done without gross negligence or willful misconduct, shall be binding upon the Borrower and shall not put any LC Issuer or any Bank under any liability to the Borrower. Nothing in this Section 2.16(g) is intended to limit the right of the Borrower to make a claim against any LC Issuer for damages as contemplated by the proviso to the first sentence of Section 2.16(f). (h) Actions of LC Issuer. Each LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Facility LC, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document 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, independent accountants and other experts selected by such LC Issuer. Each LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Required Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Notwithstanding any other provision of this Section 2.16, each LC Issuer shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and any future holders of a participation in any Facility LC. (i) Indemnification. The Borrower hereby agrees to indemnify and hold harmless each Bank, each LC Issuer and the Administrative Agent, and their respective directors, officers, agents and employees from and against any and all claims and damages, losses, liabilities, costs or expenses which such Bank, such LC Issuer or the Administrative Agent may incur (or which may be claimed against such Bank, such LC Issuer or the Administrative Agent by any Person whatsoever), including reasonable fees and disbursements of counsel, by reason of or in connection with the issuance, execution and delivery or transfer of or payment or failure to pay under any Facility LC or any actual or proposed use of any Facility LC, including, without limitation, any claims, damages, losses, liabilities, costs or expenses which any LC Issuer may incur by reason of or in connection with (i) the failure of any other Bank to fulfill or comply with its obligations to such LC Issuer hereunder (but nothing herein contained shall affect any rights the Borrower may have against any defaulting Bank) or (ii) by reason of or on account of any LC Issuer issuing any Facility LC which specifies that the term "Beneficiary" included therein includes any successor by operation of law of the named Beneficiary, but which Facility LC does not require that any drawing by any such successor Beneficiary be accompanied by a copy of a legal document, satisfactory to such LC Issuer, evidencing the appointment of such successor Beneficiary; provided that the Borrower shall not be required to indemnify any Bank, any LC Issuer or the Administrative Agent for any claims, damages, losses, liabilities, costs or expenses to the extent, but only to the extent, caused by (x) the willful misconduct or gross negligence of such LC Issuer in determining whether a request presented under any Facility LC complied with the terms of such Facility LC or (y) any LC Issuer's failure to pay under any Facility LC after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC. Nothing in this Section 2.16(i) is intended to limit the obligations of the Borrower under any other provision of this Agreement. (j) Banks' Indemnification. Each Bank shall, ratably in accordance with its Pro Rata Share, indemnify each LC Issuer, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct or such LC Issuer's failure to pay under any Facility LC of such LC Issuer after the presentation to it of a request strictly complying with the terms and conditions of such Facility LC) that such indemnitees may suffer or incur in connection with this Section 2.16 or any action taken or omitted by such indemnitees hereunder. (k) Facility LC Collateral Account. The Borrower agrees that it will, upon the occurrence (i) of an Event of Default and (ii) (A) at the request of the Administrative Agent with the consent of the Banks having Pro Rata Shares of more than 66 2/3% pursuant to Section 6.01 or (B) at the request of the Banks having Pro Rata Shares of more than 66 2/3% pursuant to Section 6.01 and until the final expiration date of any Facility LC and thereafter as long as any amount is payable to the LC Issuers or the Banks in respect of any Facility LC, maintain a special collateral account pursuant to arrangements satisfactory to the Administrative Agent (the "Facility LC Collateral Account") at the Administrative Agent's office at the address specified pursuant to Section 9.01, in the name of the Borrower but under the sole dominion and control of the Administrative Agent, for the benefit of the Banks and in which such Borrower shall have no interest other than as set forth in Section 6.01. The Borrower hereby pledges, assigns and grants to the Administrative Agent, on behalf of and for the ratable benefit of the Banks and the LC Issuers, a security interest in all of the Borrower's right, title and interest in and to all funds which may from time to time be on deposit in the Facility LC Collateral Account and all investments thereof, interest and returns thereon and proceeds thereof to secure the prompt and complete payment and performance of the Obligations. The Administrative Agent will invest any funds on deposit from time to time in the Facility LC Collateral Account in Cash Equivalents. Interest and returns realized by such investments shall be credited to the Facility LC Collateral Account and applied as required by Section 6.01. Nothing in this Section 2.16(k) shall either obligate the Administrative Agent to require the Borrower to deposit any funds in the Facility LC Collateral Account or limit the right of the Administrative Agent to release any funds held in the Facility LC Collateral Account in each case other than as required by Section 6.01. (l) Rights as a Bank. In its capacity as a Bank, each LC Issuer shall have the same rights and obligations as any other Bank. ARTICLE 5 CONDITIONS 6.1. SECTION Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telecopy, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent of an opinion of the General Counsel to the Borrower substantially in the form of Exhibit B-1 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) receipt by the Administrative Agent of an opinion of Robinson, Bradshaw & Hinson, P.A., special counsel for the Borrower, substantially in the form of Exhibit B-2 hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request.; (d) receipt by the Administrative Agent of a certificate signed by a Vice President, the Treasurer or the Controller of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; (e) receipt by the Administrative Agent of all documents it may have reasonably requested prior to the date hereof relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than April 30, 2001. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. 6.2. SECTION Credit Extensions. The obligation of any Bank to make a Credit Extension on the occasion of any Borrowing or issuance of a Facility LC is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing or receipt by the applicable LC Issuer and the Administrative Agent of a Facility LC Application as required by Section 2.02 or 2.16, as the case may be; (b) the fact that, immediately after such Credit Extension the Aggregate Outstanding Credit Exposure will not exceed the Aggregate Commitment; (c) the fact that, immediately after such Credit Extension, no Default shall have occurred and be continuing; (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(b) and 4.06) shall be true on and as of the date of such Credit Extension; and (e) the fact that the Borrower's Credit Ratings are BBB, Baa2 or the equivalent from at least two of S&P, Moody's and Fitch, Inc. Each Credit Extension hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Credit Extension as to the facts specified in clauses (b), (c), (d) and (e) of this Section. ARTICLE 7 8 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: 8.1. SECTION Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business as a foreign corporation in each jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. 8.2. SECTION Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or by-laws of the Borrower or of any agreement (subject to compliance with Section 5.13), judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. 8.3. SECTION Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, if and when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. 8.4. SECTION Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2000 and the related consolidated statements of income, cash flows, capitalization and retained earnings for the fiscal year then ended, reported on by Deloitte & Touche, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) Since December 31, 2000, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. 8.5. SECTION Regulation U. The Borrower and its Material Subsidiaries are not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System) and no proceeds of any Credit Extension by the Borrower will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. Not more than 25% of the value of the assets of the Borrower and its Material Subsidiaries is represented by margin stock. 8.6. SECTION Litigation. Except as disclosed in the reports referred to in Section 4.04, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which would be likely to be decided adversely to Borrower or such Subsidiary and, as a result, have a material adverse effect upon the business, consolidated financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or any Note. 8.7. SECTION Compliance with Laws. The Borrower and each Material Subsidiary is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) non-compliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. 8.8. SECTION Taxes. The Borrower and its Material Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Material Subsidiary except (i) where nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or (ii) where the same are contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. 8.9. SECTION Public Utility Holding Company Act. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. ARTICLE 9 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid or any Facility LC remains outstanding: 10.1. SECTION Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows, capitalization and retained earnings for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by an Approved Officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of an Approved Officer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five days after any officer of the Borrower with responsibility relating thereto obtains knowledge of any Default, if such Default is then continuing, a certificate of an Approved Officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the filing thereof copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (f) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Material Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Material Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Material Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose material liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Material Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Material Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Material Plan or makes any amendment to any Material Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (g) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. Information required to be delivered pursuant to these Sections 5.01(a), 5.01(b) and 5.0.1(e) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Securities and Exchange Commission website on the Internet at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01(c) and (ii) the Borrower shall deliver paper copies of the information referred to in Sections 5.01(a), 5,01(b) and 5.01(e) to any Bank which requests such delivery. 10.2. SECTION Payment of Taxes. The Borrower will pay and discharge, and will cause each Material Subsidiary to pay and discharge, at or before maturity, all their tax liabilities, except where (i) nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Material Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. 10.3. SECTION Maintenance of Property; Insurance. (a) The 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) The Borrower will, and will cause each of its Material Subsidiaries to, maintain (either in the name of the Borrower or in such 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 the 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 Borrower or such Material Subsidiary operates self-insure; and will furnish to the Banks, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. 10.4. SECTION Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises material to the normal conduct of their respective businesses; provided that nothing in this Section 5.04 shall prohibit the termination of any right, privilege or franchise of the Borrower or any Material Subsidiary or of the corporate existence of any Material Subsidiary if the Borrower in good faith determines that such termination is in the best interest of the Borrower and is not materially disadvantageous to the Banks. 10.5. SECTION Compliance with Laws. The Borrower will comply, and cause each Material Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) noncompliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. 10.6. SECTION Books and Records. The Borrower will keep, and will cause each Material Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all financial transactions in relation to its business and activities in accordance with its customary practices; and will permit, and will cause each Material Subsidiary to permit, representatives of any Bank at such Bank's expense (accompanied by a representative of the Borrower, if the Borrower so desires) to visit any of their respective properties, to examine any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired. 10.7. SECTION Maintenance of Ownership of Principal Subsidiaries. The Borrower will maintain ownership of all shares of the common stock of each Principal Subsidiary, directly or indirectly through Subsidiaries, free and clear of all Liens, provided that any Principal Subsidiary may merge with and into the Borrower or another wholly-owned Subsidiary. 10.8. SECTION Negative Pledge. The Borrower will not create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens granted by the Borrower existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $100,000,000; (b) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower and not created in contemplation of such event; (c) any Lien existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition; (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, 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 generally accepted accounting principles; (g) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen 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 generally accepted accounting principles; (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) Liens required by Section 2.16(k) and other similar customary cash collateral requirements with respect to letters of credit upon the occurrence of a default, including, without limitation, such requirements under the 364-Day Credit Agreement; and (m) 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 at which Investment Grade Status does not exist as to the Borrower and (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. 10.9. SECTION Consolidations, Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, Substantial Assets to any Person (other than a Subsidiary); provided that the Borrower may merge with another Person if the Borrower is the corporation surviving such merger and, after giving effect thereto, no Default shall have occurred and be continuing. 10.10. SECTION Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for its general corporate purposes, including liquidity support for outstanding commercial paper. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. 10.11. SECTION Transactions with Affiliates. The Borrower will not, and will not permit any 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 Affiliate unless all such transactions between the Borrower and its Subsidiaries on the one hand and any Affiliate on the other, taken in the aggregate and not individually, shall be on an arms-length basis on terms no less favorable to the Borrower or such Subsidiary than could have been obtained from a third party who was not an Affiliate; provided that the foregoing provisions of this Section shall not prohibit the Borrower and each Subsidiary from (i) declaring or paying any lawful dividend so long as, after giving effect thereto, no Default shall have occurred and be continuing, (ii) issuing and maintaining letters of credit, guaranties and sureties as contingent obligations on behalf of Affiliates, or (iii) the payment of funds and making of capital contributions, loans and other transfers of money to Affiliates or to other Persons, including payments made under letters of credit, guarantees and sureties issued and maintained on behalf of Affiliates, provided that the aggregate amount for all such payments and transfers does not exceed $200,000,000 at any time outstanding. 10.12. SECTION Indebtedness/Capitalization Ratio. The ratio of Consolidated Indebtedness to Consolidated Capitalization will at no time exceed 65%. 10.13. SECTION Post-closing Consents/Waivers. The Borrower agrees to obtain and deliver to the Administrative Agent no later than September 1, 2001 (but in any event prior to the occurrence of any Event of Default) waivers, amendments or consents, in form and substance reasonably satisfactory to the Administrative Agent, to the 364-Day Credit Agreement dated as of August 21, 2000 among the Borrower, certain lenders and The Chase Manhattan Bank, as administrative agent, and to the Five-Year Credit Agreement dated as of August 25, 1997 among the Borrower, certain lenders and The Chase Manhattan Bank, as administrative agent, to the extent either such agreement is still in effect, permitting the cash collateralization provisions of this Agreement relating to LC Obligations. ARTICLE 11 DEFAULTS 12.1. SECTION Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or Reimbursement Obligation or shall fail to pay, within five days of the due date thereof, any interest, fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04, 5.08, 5.09, 5.12 or the second sentence of 5.10, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt (other than the Loans) when due or within any applicable grace period; (f) any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto so as to result in the acceleration of the maturity of Material Debt; (g) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to, or shall fail generally to, pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $50,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 90 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (j) a judgment or other court order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Material Subsidiary and such judgment or order shall continue without being vacated, discharged, satisfied or stayed or bonded pending appeal for a period of 45 days; (k) the Borrower shall cease to be a Subsidiary or Affiliate of Duke Energy Corporation; or (l) an "Event of Default" as defined in the 364-Day Credit Agreement shall have occurred and be continuing; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having Pro Rata Shares of more than 662/3%, by notice to the Borrower terminate the Commitments and they shall thereupon terminate, (ii) if requested by Banks having Pro Rata Shares of more than 662/3%, by notice to the Borrower declare the Loans and all Reimbursement Obligations (together with accrued interest thereon) to be, and the Loans and all Reimbursement Obligations shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and (iii) if requested by Banks having Pro Rata Shares of more than 662/3%, by notice to the Borrower and in addition to the continuing right to demand payment of all amounts payable under the Loan Documents, make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice, act or demand, pay to the Administrative Agent an amount in immediately available funds, which funds shall be held in the Facility LC Collateral Account, equal to the difference of (x) the amount of LC Obligations at such time, less (y) the amount on deposit in the Facility LC Collateral Account at such time which is free and clear of all rights and claims of third parties and has not been applied against the Obligations (such difference, the "Collateral Shortfall Amount"); provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans and all Reimbursement Obligations (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and the Borrower will be and become thereby unconditionally obligated, without any further notice, act or demand, to pay forthwith to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. If at any time after the Banks have requested the Borrower to pay the Administrative Agent funds to be held in the Facility LC Collateral Account, the Administrative Agent determines that the Collateral Shortfall Amount at such time is greater than zero, the Administrative Agent may make demand on the Borrower to pay, and the Borrower will, forthwith upon such demand and without any further notice or act, pay to the Administrative Agent the Collateral Shortfall Amount, which funds shall be deposited in the Facility LC Collateral Account. The Administrative Agent may at any time or from time to time after funds are deposited in the Facility LC Collateral Account, apply such funds to the payment of the LC Obligations and any other amounts as shall from time to time have become due and payable by the Borrower to the Banks or the LC Issuers under the Loan Documents. At any time while any Event of Default is continuing, neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in the Facility LC Collateral Account. After the sooner of (i) the Required Banks waiving the Event(s) of Default that gave rise to requesting the Borrower to pay funds into the Facility LC Collateral Account and (ii) all of the LC Obligations have been indefeasibly paid in full and all Facility LCs have expired or terminated and the Aggregate Commitment has been terminated, any funds remaining in the Facility LC Collateral Account, including accrued interest, after application to any other Obligations then due and owing to the Administrative Agent and the Banks, shall be returned by the Administrative Agent to the Borrower or paid to whomever may be legally entitled thereto at such time. 12.2. SECTION Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 13 14 THE ADMINISTRATIVE AGENT 14.1. SECTION Appointment; Nature of Relationship. Bank One is hereby appointed by each of the Banks as its contractual representative (herein referred to as the Administrative Agent) hereunder and under each other Loan Document, and each of the Banks irrevocably authorizes the Administrative Agent to act as the contractual representative of such Bank with the rights and duties expressly set forth herein and in the other Loan Documents. The Administrative Agent agrees to act as such contractual representative upon the express conditions contained in this Article 7. Notwithstanding the use of the defined term "Administrative Agent," it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Bank by reason of this Agreement or any other Loan Document and that the Administrative Agent is merely acting as the contractual representative of the Banks with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Banks' contractual representative, the Administrative Agent (i) does not hereby assume any fiduciary duties to any of the Banks, (ii) is a "representative" of the Banks within the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Banks hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Bank hereby waives. The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto. The Administrative Agent shall have no implied duties to the Banks, or any obligation to the Banks to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Administrative Agent. 14.2. SECTION Administrative Agent and Affiliates. Bank One shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and Bank One and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. 14.3. SECTION Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. 14.4. SECTION Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. 14.5. SECTION Liability of Administrative Agent. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it in good faith to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. 14.6. SECTION Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. 14.7. SECTION Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. 14.8. SECTION Successor Administrative Agent. The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower, with the consent of the Required Banks (such consent not to be unreasonably withheld or delayed), shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder; provided that if such successor Administrative Agent is appointed without the consent of the Borrower, such successor Administrative Agent may be replaced by the Borrower with the consent of the Required Banks. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. 14.9. SECTION Administrative Agent's Fee. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent. ARTICLE 15 16 CHANGE IN CIRCUMSTANCES 16.1. SECTION Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing: (a) the Administrative Agent determines that deposits in dollars (in the applicable amounts) are not being offered to the Administrative Agent in the relevant market for such Interest Period, or (b) in the case of a Euro-Dollar Borrowing, Banks having 66 2/3% or more of the aggregate amount of the affected Loans advise the Administrative Agent that the Euro-Dollar Base Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Alternate Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Euro-Dollar Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Alternate Base Rate Borrowing. 16.2. SECTION Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Leading Office) to make, maintain or fund any of its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the good faith exercise of its discretion. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Alternate Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. 16.3. SECTION Increased Cost and Reduced Return. (a) If on or after the date of this Agreement, in the case of any Loan or Facility LC or any obligation to make Loans or issue or maintain Facility LCs, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Applicable Lending Office) or any LC Issuer with any request or directive (whether or not having the force of law) issued on or after such date of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or any LC Issuer or shall impose on any Bank (or its Applicable Lending Office) or any LC Issuer or on the London interbank market any other condition (other than in respect of Taxes or Other Taxes) affecting its Euro-Dollar Loans, its Note, any Facility LC Application, any Facility LCs, its obligation to make Euro-Dollar Loans or its obligation to issue or to participate in Facility LCs and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) or such LC Issuer of making or maintaining any Euro-Dollar Loan or Facility LC, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) or such LC Issuer under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank or such LC Issuer to be material, then, within 15 days after demand by such Bank or such LC Issuer (with a copy to the Administrative Agent), the Borrower shall pay to such Bank or such LC Issuer such additional amount or amounts as will compensate such Bank or such LC Issuer for such increased cost or reduction; provided that no such amount shall be payable with respect to any period commencing more than 90 days prior to the date such Bank or such LC Issuer first notifies the Borrower of its intention to demand compensation therefor under this Section 8.03(a) unless such increased cost or reduction is imposed on such Bank or such LC Issuer on a retroactive basis. (b) If any Bank or any LC Issuer shall have determined that, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, 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 any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency given or made after the date of this Agreement, has or would have the effect of reducing the rate of return on capital of such Bank or LC Issuer (or its Parent) as a consequence of such Bank's or LC Issuer's obligations hereunder to a level below that which such Bank or LC Issuer (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank or LC Issuer to be material, then from time to time, within 15 days after demand by such Bank or LC Issuer (with a copy to the Administrative Agent), the Borrower shall pay to such Bank or LC Issuer such additional amount or amounts as will compensate such Bank or LC Issuer (or its Parent) for such reduction; provided that no such amount shall be payable with respect to any period commencing less than 30 days after the date such Bank or LC Issuer first notifies the Borrower of its intention to demand compensation under this Section 8.03(b). (c) Each Bank and LC Issuer will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank or LC Issuer to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank or LC Issuer, be otherwise disadvantageous to such Bank or LC Issuer. A certificate of any Bank or LC Issuer claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank or LC Issuer may use any reasonable averaging and attribution methods. 16.4. SECTION Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or any Note or Facility LC Application, and all liabilities with respect thereto, excluding (i) in the case of each Bank, LC Issuer and the Administrative Agent, taxes imposed on its income, net worth or gross receipts and franchise or similar taxes imposed on it by a jurisdiction under the laws of which such Bank, LC Issuer or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank and LC Issuer, any United States withholding tax imposed on such payments except to the extent that such Bank and LC Issuer is subject to United States withholding tax by reason of a U.S. Tax Law Change. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or Facility LC Application or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note or Facility LC Application. "U.S. Tax Law Change" means with respect to any Bank or Participant the occurrence (x) in the case of each Bank listed on the signature pages hereof, after the date of its execution and delivery of this Agreement and (y) in the case of any other Bank, after the date such Bank shall have become a Bank hereunder, and (z) in the case of each Participant, after the date such Participant became a Participant hereunder, of the adoption of any applicable U.S. federal law, U.S. federal rule or U.S. federal regulation relating to taxation, or any change therein, or the entry into force, modification or revocation of any income tax convention or treaty to which the United States is a party. (b) Any and all payments by the Borrower to or for the account of any Bank, LC Issuer or the Administrative Agent hereunder or under any Note or Facility LC Application shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank, LC Issuer or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank, LC Issuer and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank, LC Issuer or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank, LC Issuer or the Administrative Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter as required by law (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower two completed and duly executed copies of Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, or other documentation reasonably requested by the Borrower, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a U.S. Tax Law Change), such Bank shall not be entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to any Taxes or Other Taxes which would not have been payable had such form been so provided, provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes (it being understood, however, that the Borrower shall have no liability to such Bank in respect of such Taxes). (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will take such action (including changing the jurisdiction of its Applicable Lending Office) as in the good faith judgment of such Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. (g) If any Bank or the Administrative Agent receives a refund (including a refund in the form of a credit against taxes that are otherwise payable by the Bank or the Administrative Agent) of any Taxes or Other Taxes for which the Borrower has made a payment under Section 8.04(b) or (c) and such refund was received from the taxing authority which originally imposed such Taxes or Other Taxes, such Bank or the Administrative Agent agrees to reimburse the Borrower to the extent of such refund, provided that nothing contained in this paragraph (g) shall require any Bank or the Administrative Agent to make available its tax returns (or any other information relating to its taxes which it deems to be confidential). 16.5. SECTION Alternate Base Rate Loans Substituted for Affected Euro-Dollar Loans. If (i) the obligation of any Bank to make or to continue or convert outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted to) Euro-Dollar Loans, as the case may be, shall instead be Alternate Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Loans shall be applied to repay its Alternate Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Alternate Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. 16.6. SECTION Substitution of Bank. If (i) the obligation of any Bank to make or to convert or continue outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or 8.04, or (iii) Investment Grade Status ceases to exist as to any Bank, then: (a) the Borrower shall have the right, with the assistance of the Administrative Agent, to designate a substitute bank or banks (which may be one or more of the Banks) mutually satisfactory to the Borrower and the Administrative Agent (whose consent shall not be unreasonably withheld or delayed) to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit C hereto, the outstanding Loans, Reimbursement Obligations and Facility LC participations of such Bank and assume the Commitment of such Bank, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans and Reimbursement Obligations plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment and Facility LCs hereunder plus such amount, if any, as would be payable pursuant to Section 2.13 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment, and the Borrower shall cause the termination or cancellation of all Facility LCs issued by such Bank, not later than the date of consummation of such assignment; and (b) if at the time Investment Grade Status exists as to the Borrower and no Default and Event of Default then exists, the Borrower may elect to terminate this Agreement as to such Bank, provided that (i) the Borrower notifies such Bank through the Administrative Agent of such election at least three Euro-Dollar Business Days before the effective date of such termination, (ii) the Borrower repays or prepays the principal amount of all outstanding Loans made by such Bank and Reimbursement Obligations of such Bank plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment and Facility LCs hereunder plus all other amounts payable by the Borrower to such Bank hereunder, not later than the effective date of such termination and (iii) the Borrower causes the termination or cancellation of all Facility LCs issued by such Bank not later than the effective date of such termination. Upon satisfaction of the foregoing conditions, the Commitment of such Bank shall terminate on the effective date specified in such notice. ARTICLE 17 18 MISCELLANEOUS 18.1. SECTION Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address or telecopy or telex number set forth on the Notice Addresses Schedule, (y) in the case of any Bank or LC Issuer, at its address or telecopy or telex number set forth in its Administrative Questionnaire or the Notice Addresses Schedule or (z) in the case of any party, such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telecopy or telex, when such telecopy or telex is transmitted to the telecopy or telex number specified in this Section and the appropriate answerback or confirmation slip, as the case may be, is received, or (ii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 3 shall not be effective until delivered. 18.2. SECTION No Waivers. No failure or delay by the Administrative Agent, any LC Issuer or any Bank in exercising any right, power or privilege hereunder or under any Note or Facility LC Application shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 18.3. SECTION Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Administrative Agent, any LC Issuer or any Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Administrative Agent, each LC Issuer and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. 18.4. SECTION Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due with respect to the Obligations held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount then due with respect to the Loans held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Obligations held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under this Agreement. 18.5. SECTION Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent and, if the rights or duties of an LC Issuer are affected thereby, by such LC Issuer); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Obligations or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or interest thereon or any fees hereunder or for termination of any Commitment or (iv) change the percentage of the Commitments or of the aggregate Pro Rata Shares, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. 18.6. SECTION Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may, with (unless an Event of Default then exists) the consent of the Borrower (such consent not to be unreasonably withheld or delayed), at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Obligations. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to the performance by such Participant of the obligations of a Bank thereunder. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree)) of all, of its rights and obligations under this Agreement and its Note (if any), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit C hereto executed by such Assignee and such transferor Bank, with (and only with and subject to) the prior written consent of the Borrower (given in its sole discretion), provided that an Event of Default does not exist, and the Administrative Agent (which shall not be unreasonably withheld or delayed), provided that unless such assignment is of the entire right, title and interest of the transferor Bank hereunder, after making any such assignment such transferor Bank shall have a Commitment of at least $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree). Upon execution and delivery of such instrument of assumption and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required by the Assignee, a Note is issued to the Assignee. If the Assignee is not incorporated under the laws of the United States of America or a state thereof it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. All assignments shall be subject to a transaction fee established by, and payable by the transferor Bank to, the Administrative Agent for its own account (which shall not exceed $4,000). (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note (if any) to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder or modify any such obligations. (e) No Assignee, Participant or other transferee of any Bank's rights (including any Applicable Lending Office other than such Bank's initial Applicable Lending Office) shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. 18.7. SECTION Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. 18.8. SECTION Confidentiality. The Administrative Agent and each Bank agree to keep any information delivered or made available by the Borrower pursuant to this Agreement confidential from anyone other than persons employed or retained by such Bank and its affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby, provided that nothing herein shall prevent any Bank from disclosing such information (a) to any other Bank or to the Administrative Agent, (b) to any other Person if reasonably incidental to the administration of the credit facility contemplated hereby, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) which had been publicly disclosed other than as a result of a disclosure by the Administrative Agent or any Bank prohibited by this Agreement, (f) in connection with any litigation to which the Administrative Agent, any Bank or its subsidiaries or Parent may be a party, (g) to the extent necessary in connection with the exercise of any remedy hereunder, (h) to such Bank's or Administrative Agent's legal counsel and independent auditors and (i) subject to provisions substantially similar to those contained in this Section 9.08, to any actual or proposed Participant or Assignee. 18.9. SECTION Governing Law; Submission to Jurisdiction. This Agreement and each Note (if any) shall be construed in accordance with and governed by the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 18.10. SECTION Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. 18.11. SECTION WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 18.12. SECTION Payments Set Aside. To the extent that the Borrower makes a payment to the Administrative Agent or any Bank, or the Administrative Agent or any Bank exercises any right of set-off, and such payment or the proceeds of such set-off or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Bank in its discretion) to be repaid by the Administrative Agent or such Bank (the "Repaying Party") to a trustee, receiver or any other party, in connection with any proceeding under any debtor relief law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred, and (b) each Bank severally agrees to pay to the Repaying Party upon demand its applicable share of any amount so recovered from or repaid by the Repaying Party, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Effective Rate from time to time in effect. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DUKE CAPITAL CORPORATION Address: 422 South Church Street Charlotte, NC 28202-1904 Attention: Telecopy number: BANK ONE, NA, as Administrative Agent, LC Issuer and a Bank FIRST UNION NATIONAL BANK, as Co-Syndication Agent and a Bank WESTDEUTSCHE LANDESBANK GIROZENTRALE, as Co-Syndication Agent and a Bank DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH, as Documentation Agent and a Bank BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, as Co-Agent and a Bank ABN AMRO BANK N.V., as Co-Agent and a Bank BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Co-Agent and a Bank WACHOVIA BANK, N.A., as Co-Agent and a Bank UBS AG, STAMFORD BRANCH, as a Bank BNP PARIBAS, as a Bank TORONTO DOMINION (TEXAS), INC., as a Bank BANCA COMMERCIALE ITALIANA - LOS ANGELES BRANCH, as a Bank CITIBANK, N.A., as a Bank THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a Bank BARCLAYS BANK PLC, as a Bank THE CHASE MANHATTAN BANK, as a Bank BANK OF AMERICA, N.A., as a Bank BANCO BILBAO VIZCAYA ARGENTARIA, as a Bank WESTPAC BANKING CORPORATION, as a Bank SUNTRUST BANK, as a Bank Commitments Schedule -------------------- Bank Commitment ---- ---------- Bank One, N.A. $50,000,000 First Union National Bank $50,000,000 Westdeutsche Landesbank Girozentrale $50,000,000 Deutsche Bank AG New York Branch and/or $50,000,000 Cayman Islands Branch Bayerische Landesbank Girozentrale $37,500,000 ABN AMRO Bank N.V. $37,500,000 Bank of Tokyo-Mitsubishi $37,500,000 Trust Company Wachovia Bank, N.A. $37,500,000 UBS, AG, Stamford Branch $25,000,000 BNP Paribas $25,000,000 Toronto Dominion (Texas), Inc. $25,000,000 Banca Commerciale Italiana - $12,500,000 Los Angeles Branch Citibank, N.A. $12,500,000 The Industrial Bank of Japan, Limited $12,500,000 Barclays Bank PLC $12,500,000 The Chase Manhattan Bank $12,500,000 Bank of America, N.A. $12,500,000 Banco Bilbao Vizcaya Argentaria $12,500,000 Westpac Banking Corporation $12,500,000 SunTrust Bank $12,500,000 ------------------------ Total $537,500,000 Pricing Schedule The "Commitment Fee Rate" and the "Applicable Margin" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
- --------------------------------------------------------------------------------------- LEVEL I LEVEL II LEVEL III LEVEL IV LEVEL V LEVEL VI - --------------------------------------------------------------------------------------- Commitment Fee Rate 0.105% 0.12% 0.135% 0.155% 0.20% 0.25% - --------------------------------------------------------------------------------------- Applicable Margin 0.50% 0.55% 0.625% 0.75% 1.0% 1.375% Utilization #33 1/3% - --------------------------------------------------------------------------------------- Applicable Margin 0.5625% 0.6125% 0.6875% 0.8125% 1.0625% 1.4375% Utilization >331/3% but #66 2/3% - --------------------------------------------------------------------------------------- Applicable Margin 0.625% 0.675% 0.75% 0.875% 1.125% 1.5% Utilization >662/3% - ---------------------------------------------------------------------------------------
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Borrower is rated "A+" or higher by S&P or "A1" or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower is rated "A" or higher by S&P or "A2" or higher by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower is rated "A-" or higher by S&P or "A3" or higher by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower is rated "BBB+" by S&P or "Baa1" by Moody's and (ii) neither Level I Status, Level II Status nor Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower is rated "BBB" by S&P or "Baa2" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status nor Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. "Utilization" means, at any date, the percentage equivalent of a fraction (i) the numerator of which is the Aggregate Outstanding Credit Exposure at such date and (ii) the denominator of which is the aggregate amount of the Commitments at such date (or if such date is after the Commitment Termination Date, the aggregate amount of the Commitments as in effect prior to their termination on the Commitment Termination Date). The credit ratings to be utilized for purposes of this Schedule (a "Credit Rating") are those indicated for or assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating indicated for or assigned to any other debt security of the Borrower shall be disregarded. The ratings in effect for any day are those in effect at the close of business on such day. A change in credit rating will result in an immediate change in the applicable Status. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable Status is the higher of the two. Notice Addresses Schedule ------------------------- DUKE CAPITAL CORPORATION 422 South Church Street Charlotte, NC 28202-1904 Attention: Grady S. Carpenter, Jr. Telephone: (704) 382-7530 Facsimile: (704) 382-9497 Electronic Mail: gcarpent@duke-energy.com BANK ONE, N.A. Administrative Agent's Office, L/C Issuer and Bank One, N.A., Lending Office ------------------------------------------------------------- Bank One, N.A. 1 Bank One Plaza 15th Floor Suite IL1-0429 Chicago, IL 60670 Attention: Brian Zimmer Telephone: (312) 732-2169 Facsimile: (312) 732-7455 Electronic Mail: brian_j_zimmer@bankone.com Account No.: (4811 5286 0000) Ref: Duke Capital ABA #071-000-013 FIRST UNION NATIONAL BANK Credit Contact: -------------- First Union National Bank 201 S. College St. Charlotte, NC 28288 Attention: Mitch Wilson Telephone: (704) 383-5642 Facsimile: (704) 383-7611 Electronic Mail: Administrative Contact: ---------------------- First Union National Bank 201 S. College St. Charlotte, NC 28288 Attention: Chanue Micheal Telephone: (704) 715-1195 Facsimile: (704) 383-7999 Electronic Mail: WESTDEUTSCHE LANDESBANK GIRONZENTRALE Credit Contact: -------------- 1211 Avenue of the Americas New York, NY 10036 Attention: Felicia La Forgla Telephone: (212) 852-6323 Facsimile: (212) 852-6307 Electronic Mail: Administrative Contact: ---------------------- 1211 Avenue of the Americas New York, NY 10036 Attention: Philip Green Telephone: (212) 852-6323 Facsimile: (212) 302-7946 Electronic Mail: DEUTSCHE BANK AG NEW YORK BRANCH AND/OR CAYMAN ISLANDS BRANCH Credit Contact: -------------- Deutsche Bank AG New York Branch and/or Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Attention: Joel Makowsky Telephone: (212) 469-7896 Facsimile: (212) 469-5711 Electronic Mail: joel.makowsky@db.com Administrative Contact: ---------------------- Deutsche Bank AG New York Branch and/or Cayman Islands Branch 31 West 52nd Street New York, NY 10019 Attention: Noble Samuel Cheryl H. Mandelbaum Telephone: (212) 250-5374 Facsimile: (212) 669-1707 Electronic Mail: noble.samuel@db.com cheryl.mandelbaum@db.com BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH Credit Contact: -------------- Bayerische Landesbank Girozentrale, Cayman Islands Branch 560 Lexington Avenue 17th Floor New York, NY 10022 Attention: Sean O'Sullivan Telephone: (212) 310-9913 Facsimile: (212) 310-9868 Electronic Mail: sosullivan@baylbny.com Administrative Contact: ---------------------- Bayerische Landesbank Girozentrale, Cayman Islands Branch 560 Lexington Avenue 17th Floor New York, NY 10022 Attention: Patricia Sanchez Telephone: (212) 310-9810 Facsimile: (212) 310-9930 Electronic Mail: psanchez@baylbny.com Attention: Carol Dussie Telephone: (212) 310-9846 Facsimile: (212) 310-9930 Electronic Mail: cdussie@baylbny.com 3 ABN AMRO BANK N.V. Credit Contact: -------------- ABN AMRO Bank N.V. 208 South LaSalle Street Suite 710 Chicago, IL 60604-1003 Attention: Jeffrey Dodd Telephone: (312) 992-5110 Facsimile: (312) 992-5111 Electronic Mail: Administrative Contact: ---------------------- ABN AMRO Bank N.V. 208 South LaSalle Street Suite 1500 Chicago, IL 60604-1003 Attention: Loan Administration Telephone: (312) 992-5150 Facsimile: (312) 992-5155 Electronic Mail: BANK OF TOKYO-MITSUBISHI TRUST COMPANY Credit Contact: -------------- Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, NY 10020-1104 Attention: Nicholas R. Battista Telephone: (212) 782-4333 Facsimile: (212) 782-4979 Electronic Mail: nbattista@btmna.com Attention: Bill Rhodes Telephone: (212) 782-4580 Facsimile: (212) 782-4979 Electronic Mail: brhodes@btmna.com 4 Administrative Contact: ---------------------- Bank of Tokyo-Mitsubishi Trust Company BTM Information Services, Inc. c/o Bank of Tokyo-Mitsubishi Trust Company 1251 Avenue of the Americas, 12th Floor New York, NY 10020-1104 Attention: Rolando Uv Telephone: (201) 413-8570 Facsimile: (201) 521-2304 (201) 521-2305 Electronic Mail: WACHOVIA BANK, N.A. Credit Contact: -------------- Wachovia Bank, N.A. c/o Hann Pirio 191 Peachtree Street 28th Floor Atlanta, GA 30303 Attention: Melonie Willis Telephone: (336) 735-5618 Facsimile: (336) 735-5636 Electronic Mail: Administrative Contact: ---------------------- Wachovia Bank, N.A. c/o Hann Pirio 191 Peachtree Street 28th Floor Atlanta, GA 30303 Attention: Global Corporate Servicing Telephone: Facsimile: Electronic Mail: 5 UBS, AG, STAMFORD BRANCH Credit Contact: -------------- UBS AG, Stamford Branch 677 Washington Blvd. 6th Floor Stamford, CT 06901 Attention: Jennifer Poccia Telephone: (203) 719-3834 Facsimile: (203) 719-4176 Electronic Mail: jennifer.poccia@ubsw.com Administrative Contact: ---------------------- UBS, AG, Stamford Branch 677 Washington Blvd. 6th Floor Stamford, CT 06901 Attention: Jennifer Poccia Telephone: (203) 719-3834 Facsimile: (203) 719-4176 Electronic Mail: jennifer.poccia@ubsw.com BNP PARIBAS Credit Contact: -------------- BNP Paribas Project Finance & Utilities Group 787 7th Avenue New York, NY 10019 Attention: Sean Finnegan Telephone: (212) 841-2310 Facsimile: (212) 841-2052 Electronic Mail: sean.finnegan@americas.bnpparibas.com Administrative Contact: ---------------------- BNP Paribas 919 Third Avenue New York, NY 10022-1278 Attention: Tecla Hurley Telephone: (212) 471-6651 Facsimile: (212) 471-6697 Electronic Mail: tecla.hurley@americas.bnpparibas.com 6 TORONTO DOMINION (TEXAS), INC. Credit Contact: -------------- Toronto Dominion (Texas), Inc. 31 West 52nd Street, 18th Floor New York, NY 10016 Attention: Suzanne Eberhard Telephone: (212) 827-7783 Facsimile: (609) 730-8575 Electronic Mail: Administrative Contact: ---------------------- Toronto Dominion (Texas), Inc. 909 Fannin Street, 17th Floor Houston, TX 77010 Attention: Carol Brandt Telephone: (713) 653-8204 Facsimile: (713) 951-9921 Electronic Mail: brandc@tdusa.com BANCA COMMERCIALE ITALIANA - LOS ANGELES BRANCH Credit Contact: -------------- Banca Commerciale Italiana - Los Angeles Branch One William Street New York, New York 10004 Attention: Hannah Plucinski Telephone: (212) 607-3863 Facsimile: (212) 807-2124 Electronic Mail: hplucinski@bci.it Administrative Contact: ---------------------- Banca Commerciale Italiana - Los Angeles Branch One William Street New York, New York 10004 Attention: Isabella Castrogiovanni Telephone: (212) 607-3522 Facsimile: (212) 607-3807 Electronic Mail: Attention: Alex Papace Telephone: (212) 607-3531 Facsimile: (212) 807-3897 Electronic Mail: 7 CITIBANK, N.A. Credit Contact: -------------- Citibank, N.A. 2 Penn's Way Newark, DE 19720 Attention: Nick McKee Telephone: (212) 559-1503 Facsimile: (212) 793-6130 Electronic Mail: nick.mckee@citicorp.com Administrative Contact: ---------------------- Citibank, N.A. 2 Penn's Way Newark, DE 19720 Attention: Tracy Pinkett Telephone: (302) 894-6078 Facsimile: (302) 894-6120 Electronic Mail: tracy.pinkett@citicorp.com THE INDUSTRIAL BANK OF JAPAN, LIMITED Credit Contact: -------------- The Industrial Bank of Japan, Limited 191 Peachtree Street N.E. Suite 3825 Atlanta, GA 30303 Attention: Bill LaDuca Telephone: (404) 524-8770 ext. 105 Facsimile: (404) 524-8509 Electronic Mail: Administrative Contact: ---------------------- The Industrial Bank of Japan, Limited 1251 Avenue of the Americas New York, NY 10020-1104 Attention: Christine Francese Telephone: (212) 282-4097 Facsimile: (212) 282-4480 Electronic Mail: 8 BARCLAYS BANK PLC Credit Contact -------------- Barclays Capital 222 Broadway, 8th Floor New York, NY 10038 Attention: Michael J. Brennon Telephone: (212) 412-2851 Facsimile: (212) 412-6709 Electronic Mail: Attention: Sydney Dennis Telephone: (212) 412-2470 Facsimile: (212) 412-7511 Electronic Mail: Administrative Contact: ---------------------- Barclays Group Inc. (USA) 222 Broadway, 11th Floor New York, NY 10038 Attention: Marsha Hamlette Telephone: (212) 412-4081 Facsimile: (212) 412-5306/5307 or 5308 Electronic Mail: THE CHASE MANHATTAN BANK Credit Contact: -------------- The Chase Manhattan Bank 270 Park Avenue 23rd Floor New York, NY 10017 Attention: Paul Farrell Telephone: (212) 270-7653 Facsimile: (212) 270-3089 Electronic Mail: paul.v.farrell@chase.com 9 Administrative Contact: ---------------------- The Chase Manhattan Bank 270 Park Avenue 23rd Floor New York, NY 10017 Attention: Lynette Lang Telephone: (212) 552-7692 Facsimile: (212) 552-5777 Electronic Mail: lynette.lang@chase.com BANK OF AMERICA, N.A. Credit Contact: -------------- Bank of America, N.A. 100 North Tryon Street Mail Code NC1-007-16-13 Charlotte, NC 28255 Attention: Gretchen P. Burud Telephone: (704) 386-8394 Facsimile: (704) 386-1319 Electronic Mail: gretchen.burud@bankofamerica.com Administrative Contact: ---------------------- Bank of America, N.A. Bank of America Plaza 901 Main Street 14th Floor, TX1-492-14-05 Dallas, TX 75202-3714 Attention: Nora J. Taylor Telephone: (214) 209-0175 Facsimile: (214) 290-9440 Electronic Mail: nora.j.taylor@bankofamerica.com BANCO BILBAO VIZCAYA ARGENTARIA, NEW YORK BRANCH Credit Contact: -------------- Banco Bilboa Vizcaya Argentaria, New York Branch 1345 Avenue of the Americas, 45th Floor New York, NY 10105 Attention: Manual Sanchez Telephone: (212) 728-1511 Facsimile: (212) 333-2904 Electronic Mail: 10 Attention: Franceso Alvarez Telephone: (212) 728-1634 Facsimile: (212) 333-2904 Electronic Mail: Administrative Contact: ---------------------- Banco Bilboa Vizcaya Argentaria, New York Branch 1345 Avenue of the Americas, 45th Floor New York, NY 10105 Attention: Francisco Miguens Telephone: (212) 728-1682 Facsimile: (212) 333-2926 Electronic Mail: WESTPAC BANKING CORPORATION Credit Contact: -------------- Westpac Banking Corporation 575 Fifth Avenue 39th Floor New York, NY 10017 Attention: Tony Smith Telephone: (212) 551-1814 Facsimile: (212) 551-1995 Electronic Mail: tonysmith@westpac.com.au Administrative Contact: ---------------------- Westpac Banking Corporation 575 Fifth Avenue 39th Floor New York, NY 10017 Attention: Susan Wildstein Telephone: (212) 551-1960 Facsimile: (212) 551-1998 Electronic Mail: susanwildstein@westpac.com.au 11 SUNTRUST BANK Credit Contact: -------------- SunTrust Bank Mail Code 1929 303 Peachtree Street, 3rd Floor Atlanta, GA 30308 Attention: Steven Newby Telephone: (404) 658-4916 Facsimile: (404) 827-6270 Electronic Mail: steven.newby@suntrust.com Administrative Contact: ---------------------- SunTrust Bank Mail Code 1929 303 Peachtree Street, 3rd Floor Atlanta, GA 30308 Attention: Roshawn Orise Telephone: (404) 230-1939 Facsimile: (404) 575-2730 Electronic Mail: roshawn.orise@suntrust.com 12
Existing LCs Schedule --------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Expiration Beneficiary Bank Amount Date LOC# ----------- ---- ------ ---------- ---- - ---------------------------------------------------------------------------------------------------------------------------------- Cal. P.X. Trading Svcs. Wachovia Bank, N.A. $ 1,500,000 06/01/02 LC968-111247 - ---------------------------------------------------------------------------------------------------------------------------------- California Power Exchange Corp. Wachovia Bank, N.A. $ 1,500,000 05/24/01 LC968-093869 Requires 30 Day Advance Renewal - ---------------------------------------------------------------------------------------------------------------------------------- PG & E Trading - Power, L.P. Bank One, NA $ 50,000,000 4/30/01 00325050 - ---------------------------------------------------------------------------------------------------------------------------------- Enron Power Marketing Westdeutsche Landesbank $ 50,000,000 06/29/01 LC# 22703100793WLB Girozentrale - ---------------------------------------------------------------------------------------------------------------------------------- Enron Power Marketing UBS AG, Stamford Branch $ 87,300,000 04/30/01 Y028747 - ---------------------------------------------------------------------------------------------------------------------------------- PG & E Trading - Power, L.P. UBS AG, Stamford Branch $ 2,500,000 4/30/01 Y028886 - ---------------------------------------------------------------------------------------------------------------------------------- Enron Power Marketing Citibank, N.A. $ 75,000,000 04/30/01 LC# NY-00880-30029451 - ---------------------------------------------------------------------------------------------------------------------------------- Enron Power Marketing First Union National Bank $135,000,000 05/15/01 LC# SM416174C - ---------------------------------------------------------------------------------------------------------------------------------- Nevada Power Wachovia Bank, N.A. $ 726,000 04/11/02 LC968-118723 - ---------------------------------------------------------------------------------------------------------------------------------- Nevada Power Wachovia Bank, N.A. $ 726,000 04/11/02 LC968-118724 - ---------------------------------------------------------------------------------------------------------------------------------- Nevada Power The Chase Manhattan Bank $ 1,391,500 08/08/01 P-204234 - ---------------------------------------------------------------------------------------------------------------------------------- Salt River Agricultural Project Wachovia Bank, N.A. $ 8,428,799 11/30/01 LC968-121937 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- Sierra Pacific Power Co. Wachovia Bank, N.A. $ 1,144,000 04/11/02 LC968-118614 - ---------------------------------------------------------------------------------------------------------------------------------- Sierra Pacific Power Co. Wachovia Bank, N.A. $ 572,000 04/11/02 LC968-118679 ------------ - ---------------------------------------------------------------------------------------------------------------------------------- $415,788,299 - ----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A NOTE New York, New York ___________, 2001 For value received, Duke Capital Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the date specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Bank One, NA, 1 Bank One Plaza, Chicago, Illinois. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, the Bank, if the Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule attached hereto appropriate notations to evidence the foregoing information with respect to the Loans then outstanding; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Three-Year Credit Agreement dated as of _______, 2001 among the Borrower, the banks listed on the signature pages thereof and Bank One, NA, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. DUKE CAPITAL CORPORATION By Title:
Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------------------------------- Amount of Amount Type Principal Notation Date of Loan of Loan Repaid Maturity Date Made By - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------
EXHIBIT B-1 OPINION OF GENERAL COUNSEL OF THE BORROWER EXHIBIT B-2 OPINION OF SPECIAL COUNSEL FOR THE BORROWER EXHIBIT C ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 200_ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), DUKE CAPITAL CORPORATION (the "Company") and BANK ONE, NA, a national banking association having its principal office in Chicago, Illinois, as Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Three-Year Credit Agreement dated as of _______, 2001 among the Company, the Assignor and the other Banks party thereto, as Banks, and the Administrative Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans and to issue or participate in Facility LCs in an aggregate principal amount at any time outstanding not to exceed $__________;* WHEREAS, Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; WHEREAS, the Assignor holds participations in Facility LCs under the Credit Agreement in the aggregate principal amount of $______________ outstanding on the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;* NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION . Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. - ------------------- 1 The asterisked provisions shall be appropriately revised in the event of an assignment after the Commitment Termination Date. SECTION . Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Administrative Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION . Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.** It is understood that facility fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION . Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the Borrower and the Administrative Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower and the Administrative Agent is evidence of this consent. Pursuant to Section 2.04(b) of the Credit Agreement, the Borrower agrees to execute and deliver a Note, if required by the Assignee, payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION . Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into - ------------------- 2 Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrowers. SECTION . Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION . Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION . Administrative Questionnaire. Attached is an Administrative Questionnaire duly completed by the Assignee. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ------------------------------------------- [ASSIGNOR] By Title: [ASSIGNEE] By Title: DUKE CAPITAL CORPORATION By Title: BANK ONE, NA, as Administrative Agent By Title: EXHIBIT D RESERVED EXHIBIT E FACILITY LC APPLICATION Date:____________ To: Bank One, NA, as Administrative Agent _______________ as LC Issuer From: Duke Capital Corporation Re: Three Year Credit Agreement dated as of April 19, 2001 (as amended from time to time, the "Credit Agreement") among Duke Capital Corporation (the "Borrower"), the Banks parties thereto and Bank One, NA as Administrative Agent The Borrower hereby gives notice pursuant to Section 2.16(c) of the Credit Agreement that the Borrower requests the above-named LC Issuer to issue on or before _________________ a Facility LC containing the terms attached hereto as Schedule 1 (the "Requested Letter of Credit"). The Requested Letter of Credit will be subject to [UCP 500] [ISP98]. The Borrower hereby represents and warrants to the LC Issuer, the Administrative Agent and the Banks that: ARTICLE (a) immediately after the issuance of the Requested Letter of Credit the Aggregate Outstanding Credit Exposure will not exceed the Aggregate Commitment; (b) immediately after the issuance of the Requested Letter of Credit, no Default shall have occurred and be continuing; and (c) the representations and warranties contained in the Credit Agreement (except the representations and warranties set forth in Sections 4.04(c) and 4.06 of the Credit Agreement) shall be true and correct on and as of the date of issuance of the Requested Letter of Credit. The Borrower hereby authorizes the LC Issuer to issue the Requested Letter of Credit with such variations from the above terms as the LC Issuer may, in its discretion, determine are necessary and are not materially inconsistent with this Facility LC Application. The opening of the Requested Letter of Credit and the Borrower's responsibilities with respect thereto are 6 subject to [UCP 500] [ISP98] as indicated above and the terms and conditions set forth in the Credit Agreement. Terms used herein and not otherwise defined herein have the meanings assigned to them in the Credit Agreement. DUKE CAPITAL CORPORATION By: --------------------------------- Title: ------------------------------ 7 SCHEDULE 1 Please issue an Irrevocable Letter of Credit as set forth below and forward same to the Correspondent for the LC Issuer for delivery to the Beneficiary or, at the LC Issuer's option, forward same directly to the Beneficiary as indicated below (by check "X"). Transmit by: [ ]Courier [ ]Air Mail [ ]Full Telex/SWIFT [ ]Other (specify in detail):________
- ------------------------------------------------------------------------------------------------------------- Advising Bank (Name and Address) For account of ___________ (Name and Address) (LC Issuer use only unless Borrower designates advising bank) - ------- ------- ------------------------------------------------------ Phone Number (___) _______ Fax Number (___) ________ - ------------------------------------------------------------------------------------------------------------- To Beneficiary (Name and Address) Amount (Figures) ____ - ------ ------------------------------------------------------ (In Words) ____ ------------------------------------------------------ o +/- -------% ------------------------------------------------------ Expiry Date: ______ At the counters of the LC Issuer - -------------------------------------------------------------------------------------------------------------
Available against Beneficiary's draft(s) at sight drawn on the LC Issuer and accompanied by the following document(s). [ ] Beneficiary's signed and dated statement stating that:____ [ ] Automatically renewable for _____ months or for _____ days with a final expiration date of _____ [ ] Copy(ies) of Beneficiary's commercial invoice (s) marked "unpaid":_____ [ ] Other:______ [ ] The required letter of credit terms and conditions are attached. [ ] Special Conditions:_____ ================================================================================ Complete only when the Beneficiary's bank or Correspondent is to issue its guarantee or undertaking based on the issued Letter of Credit. [ ] Request Beneficiary's bank to (Specify type of bid or performance issue and deliver their ____ bond, guarantee, undertaking or other) [ ] In favor of: Name(s) & Attention _______ Address/Street _______ Address/City _____ State _____ Country _____ Telephone ( )___________ Fax Number ( )____________ For an amount not exceeding that specified above, effective immediately and expiring at their office on______ (At least 30 days prior to Expiry Date above) Cover ______. (specify number or bid or performance bond, etc.) ================================================================================ Drawings (Check where applicable): [ ]Partial drawings prohibited [ ]Multiple drawings prohibited [ ]Tele-facsimile drawings permitted Charges: (Unless specified, all charges will be for Borrower's account) All banking charges other than the LC Issuer's are for [ ]Beneficiary [ ]Borrower Please include a brief description as to the purpose of the Requested Letter of Credit: _____________ 8 Please issue the Requested Letter of Credit subject to: (check one) [ ]ISP98 or [ ]UCP 500. If no selection is made, the Requested Letter of Credit shall be subject to the UCP 500. Duke Capital Corporation By: ------------------------------- Title: ----------------------- 9 EX-10.3 5 dex103.txt CREDIT AGREEMENT EXHIBIT 10.3 $550,000,000 364-DAY CREDIT AGREEMENT dated as of August 20, 2001 among Duke Capital Corporation, The Banks Listed Herein, Bank of America, NA., as Syndication Agent and The Chase Manhattan Bank, as Administrative Agent --------------------- J.P. Morgan Securities Inc. and Banc of America Securities LLC Joint Lead Arrangers and Joint Bookrunners First Union National Bank, Bank One, NA and Citibank, N.A. Documentation Agents TABLE OF CONTENTS PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions ........................................... 1 SECTION 1.02. Accounting Terms and Determinations.................... 11 SECTION 1.03. Types of Borrowings ................................... 12 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend................................... 12 SECTION 2.02. Notice of Committed Borrowings...................... 13 SECTION 2.03. Bid Rate Borrowings .................................. 14 SECTION 2.04. Notice to Banks; Funding of Loans...................... 18 SECTION 2.05. Registry; Notes........................................ 19 SECTION 2.06. Maturity of Loans; Effect of Cash Collateralization of Letters of Credit...................................... 19 SECTION 2.07. Interest Rates......................................... 20 SECTION 2.08. Fees................................................... 22 SECTION 2.09. Optional Termination or Reduction of Commitments....... 22 SECTION 2.10. Method of Electing Interest Rates ..................... 22 SECTION 2.11. Mandatory Termination of Commitments .................. 24 SECTION 2.12. Optional Prepayments................................... 24 SECTION 2.13. General Provisions as to Payments...................... 24 SECTION 2.14. Funding Losses ........................................ 25 SECTION 2.15. Computation of Interest and Fees ...................... 26 SECTION 2.16. Regulation D Compensation ............................. 26 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness ......................................... 27 SECTION 3.02. Borrowings ............................................ 28 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Organization and Power ................................ 29 i PAGE ---- SECTION 4.02. Corporate and Governmental Authorization; No Contravention ......................................... 29 SECTION 4.03. Binding Effect ........................................ 29 SECTION 4.04. Financial Information ................................. 29 SECTION 4.05. Regulation U .......................................... 30 SECTION 4.06. Litigation ............................................ 30 SECTION 4.07. Compliance with Laws .................................. 30 SECTION 4.08. Taxes.................................................. 31 SECTION 4.09. Public Utility Holding Company Act..................... 31 ARTICLE 5 COVENANTS SECTION 5.01. Information ........................................... 31 SECTION 5.02. Payment of Taxes....................................... 33 SECTION 5.03. Maintenance of Property; Insurance .................... 33 SECTION 5.04. Maintenance of Existence .............................. 34 SECTION 5.05. Compliance with Laws................................... 34 SECTION 5.06. Books and Records...................................... 34 SECTION 5.07. Maintenance of Ownership of Principal Subsidiaries..... 34 SECTION 5.08. Negative Pledge........................................ 35 SECTION 5.09. Consolidations, Mergers and Sales of Assets ........... 36 SECTION 5.10. Use of Proceeds........................................ 36 SECTION 5.11. Transactions with Affiliates........................... 37 SECTION 5.12. Indebtedness/Capitalization Ratio...................... 37 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default ..................................... 37 SECTION 6.02. Notice of Default ..................................... 39 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization ......................... 40 SECTION 7.02. Administrative Agent and Affiliates ................... 40 SECTION 7.03. Action by Administrative Agent......................... 40 SECTION 7.04. Consultation with Experts ........................... 40 SECTION 7.05. Liability of Administrative Agent ..................... 40 SECTION 7.06. Indemnification........................................ 41 SECTION 7.07. Credit Decision ....................................... 41 ii SECTION 7.08. Successor Administrative Agent ......................... 41 SECTION 7.09. Administrative Agent's Fee ............................. 42 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair ................................................ 42 SECTION 8.02. Illegality ............................................ 43 SECTION 8.03. Increased Cost and Reduced Return ..................... 43 SECTION 8.04. Taxes ................................................. 45 SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans.................................................. 47 SECTION 8.06. Substitution of Bank; Termination Option............... 48 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices ............................................... 49 SECTION 9.02. No Waivers............................................. 49 SECTION 9.03. Expenses; Indemnification ............................. 49 SECTION 9.04. Sharing of Set-offs.................................... 50 SECTION 9.05. Amendments and Waivers................................. 50 SECTION 9.06. Successors and Assigns................................. 50 SECTION 9.07. Collateral............................................. 52 SECTION 9.08. Confidentiality........................................ 52 SECTION 9.09. Governing Law; Submission to Jurisdiction.............. 53 SECTION 9.10. Counterparts; Integration.............................. 53 SECTION 9.11. WAIVER OF JURY TRIAL................................... 53 PRICING SCHEDULE SCHEDULE I - Duke Capital Corporation Credit Facilities (Being Replaced by this Agreement and the Related Agreement) EXHIBIT A - Note EXHIBIT B - Form of Bid Rate Quote Request EXHIBIT C - Form of Invitation for Bid Rate Quotes EXHIBIT D - Form of Bid Rate Quote EXHIBIT E-1 - Opinion of General Counsel of the Borrower EXHIBIT E-2 - Opinion of Special Counsel for the Borrower EXHIBIT F - Opinion of Davis Polk & Wardwell, Special Counsel for the Administrative Agent EXHIBIT G - Assignment and Assumption Agreement EXHIBIT H - Extension Agreement iii 364-DAY CREDIT AGREEMENT 364-DAY CREDIT AGREEMENT dated as of August 20, 2001 among DUKE CAPITAL CORPORATION, the BANKS listed on the signature pages hereof, BANK OF AMERICA, N.A., as Syndication Agent, and THE CHASE MANHATTAN BANK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Additional Bank" means any financial institution that becomes a Bank for purposes hereof in connection with the replacement of a Bank pursuant to Section 8.06. "Administrative Agent" means The Chase Manhattan Bank in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank. "Affiliate" means, as to any Person (the "specified Person") (i) any Person that directly, or indirectly through one or more intermediaries, controls the specified Person (a "Controlling Person") or (ii) any Person (other than the specified Person or a Subsidiary of the specified Person) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless otherwise specified, "Affiliate" means an Affiliate of the Borrower. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Bid Rate Loans, its Bid Rate Lending Office. "Approved Officer" means the president, a vice president, the treasurer, an assistant treasurer or the controller of the Borrower or such other representative of the Borrower as may be designated by any one of the foregoing with the consent of the Administrative Agent. "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank or other financial institution listed on the signature pages hereof, each Additional Bank, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Bid Rate (General)" has the meaning set forth in Section 2.03(d). "Bid Rate (General) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rates (General) pursuant to Section 2.03. "Bid Rate (General) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (General) Auction. "Bid Rate (Indexed) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rate (Indexed) Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Bid Rate (Indexed) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (Indexed) Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01). "Bid Rate (Indexed) Margin" has the meaning set forth in Section 2.03(d). 2 "Bid Rate Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Bid Rate Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Bid Rate Lending Offices for its Bid Rate (Indexed) Loans, on the one hand, and its Bid Rate (General) Loans, on the other hand, in which case all references herein to the Bid Rate Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Bid Rate Loan" means a Bid Rate (Indexed) Loan or a Bid Rate (General) Loan. "Bid Rate Quote" means an offer by a Bank to make a Bid Rate Loan in accordance with Section 2.03. "Borrower" means Duke Capital Corporation, a Delaware corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Commitment" means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on the signature pages hereof, and (ii) with respect to each Additional Bank or Assignee which becomes a bank pursuant to Sections 8.06 and 9.06(c), the amount of the Commitment thereby assumed by it, in each case as such amount may from time to time be reduced pursuant to Section 2.09, 2.11, 8.06 or 9.06(c) or increased pursuant to Section 8.06 or 9.06(c). "Commitment Termination Date" means, for each Bank, August 19, 2002, as such date may be extended from time to time with respect to such Bank pursuant to Section 2.01(c) or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Committed Loan" means a Loan made by a Bank pursuant to Section 2.01 (a) or 2.01(b); provided that, if any loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Capitalization" means the sum of (i) Consolidated Indebtedness, (ii) consolidated common stockholders' equity as would appear on a 3 consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles, (iii) the aggregate liquidation preference of preferred stocks (other than preferred stocks subject to mandatory redemption or repurchase) of the Borrower and its Consolidated Subsidiaries upon involuntary liquidation, (iv) the aggregate outstanding amount of all Equity Preferred Securities and (v) minority interests as would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles. "Consolidated Indebtedness" means, at any date, all Indebtedness of Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. "Consolidated Subsidiary" means, for any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date; unless otherwise specified "Consolidated Subsidiary" means a Consolidated Subsidiary of the Borrower. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface 4 water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Preferred Securities" means any securities, however denominated, (i) issued by the Borrower or any Consolidated Subsidiary of the Borrower, (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 mature no less than 20 years from the date of issuance, (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 date occurring after the first anniversary of the later of (A) the Commitment Termination Date and (B) the "Termination Date" under the Related Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" means the applicable rate per annum determined in accordance with the Pricing Schedule. 5 "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Chase Manhattan Bank and Bank of America, N.A. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.16. "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreements" means the credit facilities identified in Schedule I hereto, as amended and in effect on the Effective Date. "Facility Fee Rate" has the meaning set forth in the Pricing Schedule. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, 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 Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Chase Manhattan Bank (or its successor as Administrative Agent) on such day on such transactions as determined by the Administrative Agent. "Final Maturity Date" means, for each Bank, the first anniversary of its Commitment Termination Date or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day; provided that the Final Maturity Date for all Banks shall be no later than August 19, 2007. "Fixed Rate Loans" means Euro-Dollar Loans or Bid Rate Loans (excluding Bid Rate (Indexed) Loans bearing interest at the Base Rate) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time, provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to 6 Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been if it had not been so converted or made. "Indebtedness" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services purchased, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired, (iv) all indebtedness under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such Person is liable as lessee, (v) the face amount of all outstanding letters of credit issued for the account of such Person (other than letters of credit relating to indebtedness included in Indebtedness of such Person pursuant to another clause of this definition) and, without duplication, the unreimbursed amount of all drafts drawn thereunder, (vi) indebtedness secured by any 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), (vii) all direct guarantees of Indebtedness referred to above of another Person, (viii) all amounts payable in connection with mandatory redemptions or repurchases of preferred stock and (ix) 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. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six, or, if deposits of a corresponding maturity are generally available in the London interbank market, nine or twelve, months thereafter, as the Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; (2) with respect to each Bid Rate (Index) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and 7 ending such number of months thereafter (but not less than one month) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; and (3) with respect to each Bid Rate (General) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and provided further that: (x) no Interest Period applicable to any Loan of any Bank which begins before such Bank's Commitment Termination Date may end after such Bank's Commitment Termination Date; and (y) no Interest Period applicable to any Loan of any Bank may end after such Bank's Final Maturity Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment Grade Status" exists as to any Person at any date if all senior long-term unsecured debt securities of such Person outstanding at such date which had been rated by S&P or Moody's are rated BBB- or higher by S&P or Baa3 or higher by Moody's, as the case may be. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. 8 "Loan" means a Committed Loan or a Bid Rate Loan and "Loans" means Committed Loans or Bid Rate Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(b). "Material Debt" means Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount exceeding $150,000,000. "Material Plan" has the meaning set forth in Section 6.01(i). "Material Subsidiary" means at any time any Subsidiary of the Borrower having, together with its Subsidiaries, consolidated assets in excess of 10% of the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such time. "Moody's" means Moody's Investors Service, Inc. "Notes" means promissory notes of the Borrower, in the form required by Section 2.05, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder, "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Bid Rate Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.10(b). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under 9 Section 412 of the Internal Revenue Code and is either (i) maintained by a member of the ERISA Group for employees of a member of the ERISA Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pricing Schedule" means the Pricing Schedule attached hereto. "Prime Rate" means the rate of interest publicly announced by The Chase Manhattan Bank in New York City from time to time as its Prime Rate. Each change in the Prime Rate shall be effective from and including the day such change is publicly announced. "Principal Subsidiary" means each of Texas Eastern Transmission Limited Partnership, Algonquin Gas Transmission Company, PanEnergy Corp, and their respective successors. "Quarterly Payment Date" means the first Domestic Business Day of each January, April, July and October. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Related Agreement" means the Three-Year Credit Agreement dated as of the date hereof among the Borrower, the banks and other financial institutions and Agents from time to time parties thereto, as amended and in effect from time to time. "Required Banks" means at any time Banks (i) having at least 51% of the sum of the aggregate amount of the Commitments or (ii) if all the Commitments shall have been terminated, holding at least 51% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(a); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Revolving Credit Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. 10 "Revolving Credit Period" means, with respect to any Bank, the period from and including the Effective Date to but not including its Commitment Termination Date. "S&P" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Substantial Assets" means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole. "Term Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(b); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Term Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or the Plan under Title IV of ERISA. "Utilization" has the meaning set forth in the Pricing Schedule. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public 11 accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Fixed Rate Borrowing" is a Euro-Dollar Borrowing or a Bid Rate Borrowing (excluding any such Borrowing consisting of Bid Rate (Indexed) Loans bearing interest at the Base Rate), and a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Bid Rate Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. (a) Revolving Credit Loans. During its Revolving Credit Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection from time to time in amounts such that the aggregate principal amount of Revolving Credit Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this subsection shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments in effect on the date of Borrowing; provided that, if the Interest Period selected by the Borrower for a Borrowing would otherwise end after the Commitment Termination Dates of some but not all Banks, the Borrower may in its Notice of Committed Borrowing elect not to borrow from those Banks whose Commitment Termination Dates fall prior to the end of such Interest Period. Within the foregoing limits, the Borrower may borrow under this subsection (a), or to the extent permitted by Section 2.12, prepay Loans and reborrow at any time during the Revolving Credit Periods under this subsection (a). (b) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Borrower on its 12 Commitment Termination Date in an amount up to but not exceeding the amount of its Commitment; provided that no Bank shall be obligated to make a loan pursuant to this subsection if any Commitment is extended on such date pursuant to Section 2.01(c). Each Borrowing under this Section 2.01(b) shall be made from the several Banks having the same Commitment Termination Date ratably in proportion to their respective Commitments. (c) Extension of Commitments. On no more than four separate occasions, the Borrower may, upon not less than 45 days but no earlier than 60 days notice prior to the then current Commitment Termination Dates to the Administrative Agent (which shall notify each Bank of receipt of such request), propose to extend the Commitment Termination Dates for an additional one-year period measured from the Commitment Termination Dates then in effect. Each Bank shall endeavor to respond to such request, whether affirmatively or negatively (such determination in the sole discretion of such Bank), by notice to the Borrower and the Administrative Agent not more than 45 days nor less than 28 days prior to such Bank's Commitment Termination Date. Subject to the execution by the Borrower, the Administrative Agent and such Banks of a duly completed Extension Agreement in substantially the form of Exhibit H, the Commitment Termination Date applicable to the Commitment of each Bank so affirmatively notifying the Borrower and the Administrative Agent shall be extended for the period specified above; provided that no Commitment Termination Date of any Bank shall be extended unless Banks having Commitments in an aggregate amount equal to at least 66 2/3% in aggregate amount of the Commitments in effect at the time any such extension is requested shall have elected so to extend their Commitments. Any Bank which does not give such notice to the Borrower and the Administrative Agent shall be deemed to have elected not to extend as requested, and the Commitment of each nonextending Bank shall terminate on its Commitment Termination Date determined without giving effect to such requested extension. The Borrower may, in accordance with Section 8.06, designate another bank or other financial institution (which may be, but need not be, an extending Bank) to replace a non-extending Bank. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, 13 (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate; and (d) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Bid Rate Borrowings. (a) The Bid Rate Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks at any time prior to their respective Commitment Termination Dates to make offers to make Bid Rate Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Bid Rate Quote Request. When the Borrower wishes to request offers to make Bid Rate Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Bid Rate Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a Bid Rate (Indexed) Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day, (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Bid Rate Quotes requested are to set forth a Bid Rate (Indexed) or a Bid Rate (General) Rate or both such rates. 14 The Borrower may request offers to make Bid Rate Loans for more than one Interest Period in a single Bid Rate Quote Request. (c) Invitation for Bid Rate Quotes. Promptly upon receipt of a Bid Rate Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Bid Rate Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Bid Rate Quotes offering to make the Bid Rate Loans to which such Bid Rate Quote Request relates in accordance with this Section. (d) Submission and Contents of Bid Rate Quotes. (i) Each Bank may submit a Bid Rate Quote containing an offer or offers to make Bid Rate Loans in response to any Invitation for Bid Rate Quotes. Each Bid Rate Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective); provided that Bid Rate Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) 1:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction. Subject to Articles 3 and 6, any Bid Rate Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Bid Rate Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Bid Rate Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000 and (y) may 15 not exceed the principal amount of Bid Rate Loans for each Interest Period for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Bid Rate Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a Bid Rate (Indexed) Auction, the margin above or below the applicable London Interbank Offered Rate (the "Bid Rate (Indexed) Margin") offered for each such Bid Rate Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of a Bid Rate (General) Auction, the rate of interest per annum (specified to the nearest I/10,000th of I%) (the "Bid Rate (General)") offered for each such Bid Rate Loan, and (E) the identity of the quoting Bank. A Bid Rate Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Bid Rate Quotes. (iii) Any Bid Rate Quote shall be disregarded if: (A) it is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection 2.03(d)(ii); (B) it contains qualifying, conditional or similar language beyond that contemplated by Exhibit D; (C) it proposes terms other than or in addition to those set forth in the applicable Invitation for Bid Rate Quotes; (D) it arrives after the time set forth in subsection 2.03(d)(i); or (E) the Commitment Termination Date of the Bank submitting such Bid Rate Quote falls prior to the last day of the requested Interest Period for which such Bank offers to make a Bid Rate Loan. 16 (e) Notice to Borrower. The Administrative Agent shall promptly but in no event later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), notify the Borrower of the terms (x) of any Bid Rate Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Bid Rate Quote that amends, modifies or is otherwise inconsistent with a previous Bid Rate Quote submitted by such Bank with respect to the same Bid Rate Quote Request. Any such subsequent Quote shall be disregarded by the Administrative Agent unless such subsequent Quote is submitted solely to correct a manifest error in such former Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Loans for which offers have been received for each Interest Period specified in the related Bid Rate Quote Request, (B) the respective principal amounts and Bid Rate (Indexed) Margins or Bid Rate (General) Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Bid Rate Loans for which offers in any single Bid Rate Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Bid Rate Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Bid Rate Quote in whole or in part; provided that: (i) the aggregate principal amount of each Bid Rate Borrowing may not exceed the applicable amount set forth in the related Bid Rate Quote Request, (ii) the principal amount of each Bid Rate Borrowing must be $10,000,000 or a larger multiple of $1,000,000, and 17 (iii) acceptance of offers may only be made on the basis of ascending Bid Rate (Indexed) Margins or Bid Rate (General) Rates, as the case may be. (g) Allocation by Administrative Agent. If offers are made by two more Banks with the same Bid Rate (Indexed) Margins or Bid Rate (General), as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Rate Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Bid Rate Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and, if such Bank shall not have made such payment within two Domestic Business Days of demand therefor, the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made, available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the 18 Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. (d) The failure of any Bank to make the Loan to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make a Loan on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. SECTION 2.05. Registry; Notes. (a) The Administrative Agent shall maintain a register (the "Register") on which it will record the Commitment of each Bank, each Loan made by such Bank and each repayment of any Loan made by such Bank. Any such recordation by the Administrative Agent on the Register shall be conclusive, absent manifest error. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations hereunder. (b) The Borrower hereby agrees that, promptly upon the request of any Bank at any time, the Borrower shall deliver to such Bank a duly executed Note, in substantially the form of Exhibit A hereto, payable to the order of such Bank and representing the obligation of the Borrower to pay the unpaid principal amount of the Loans made to the Borrower by such Bank, with interest as provided herein on the unpaid principal amount from time to time outstanding. (c) Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and each Bank receiving a Note pursuant to this Section, if such Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of such Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Such Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans; Effect of Cash Collateralization of Letters of Credit. (a) Each Revolving Credit Loan made by any Bank shall mature, and the principal amount thereof shall be due and payable together with accrued interest thereon, on the Commitment Termination Date of such Bank. 19 (b) The Term Loans of each Bank shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Final Maturity Date of such Bank. (c) Each Bid Rate Loan included in any Bid Rate Borrowing shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the last day of the Interest Period applicable to such Borrowing. (d) If any provision of any debt instrument or other agreement or instrument binding upon the Borrower, including without limitation this Agreement, would be contravened by any deposit required to cash collateralize any letter of credit obligations under any other debt instrument or other agreement or instrument, the Borrower shall either (x) obtain a waiver of such provision, (y) prepay the debt incurred under such debt instrument and terminate such debt instrument or (z) make other arrangements satisfactory to the Required Banks; it being understood and agreed that the risk of any such contravention shall be borne solely by the Borrower and not by the Banks and shall in no event constitute a defense available to the Borrower for nonperformance of its obligations hereunder. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date, at maturity and on the date of termination of the Commitments in their entirety. Any overdue principal of or overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means the rate appearing on Page 3750 of the Telerate Service Company (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of the Telerate Service, as may be nominated by the British Bankers' 20 Association for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not so available at such time for any reason, then the "London Interbank Offered Rate" for such Interest Period shall be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation furnished by the remaining Euro-Dollar Reference Bank or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. (c) Any overdue principal of or overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Loan at the date such payment was due and (ii) the Base Rate for such day. (d) Subject to Section 8.01(a), each Bid Rate (Indexed) Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(b) as if each Euro-Dollar Reference Bank were to participate in the related Bid Rate (Indexed) Borrowing ratably in proportion to its Commitment) plus (or minus) the Bid Rate (Indexed) Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Bid Rate (General) Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Bid Rate (General) quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or overdue interest on any Bid Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. 21 (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks by telecopy, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error unless the Borrower raises an objection thereto within five Domestic Business Days after receipt of such notice. SECTION 2.08. Fees. (a) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Bank a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding such Bank's Commitment Termination Date, on the daily average aggregate amount of such Bank's Commitment (whether used or unused) and (ii) from and including such Bank's Commitment Termination Date to but excluding the date such Bank's Loans shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of such Bank's Committed Loans. (b) Payments. Accrued fees under this Section for the account of any Bank shall be payable quarterly in arrears on each Quarterly Payment Date and upon such Bank's Commitment Termination Date and Final Maturity Date (and, if later, the date the Loans of such Bank shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time, or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of $1,000,000 the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and 22 (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.14 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans, provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection 2.10(a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans being converted are to be Fixed Rate Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of the term "Interest Period". (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to subsection 2.10(a) above, the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If no Notice of Interest Rate Election is timely received prior to the end of an Interest Period for any Group of Loans, the 23 Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans as of the last day of such Interest Period. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.02. SECTION 2.11. Mandatory Termination of Commitments. The Commitment of each Bank shall terminate on such Bank's Commitment Termination Date, and any Revolving Credit Loans of such Bank then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. Optional Prepayments. (a) The Borrower may (i) upon notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on any Domestic Business Day prepay on such Domestic Business Day any Group of Base Rate Loans or any Bid Rate Borrowing bearing interest at the Base Rate pursuant to Section 8.01 (a) and (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent not later than 11:00 A.M. (New York City time) prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and together with any additional amounts payable pursuant to Section 2.14. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Except as provided in subsection 2.12(a), the Borrower may not prepay all or any portion of the principal amount of any Bid Rate Loan prior to the maturity thereof except with the express written consent of the Bank holding such Bid Rate Loan. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.13. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 1:00 P.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank in like funds its ratable share of each such payment received by the Administrative Agent for the 24 account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Bid Rate Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.14. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Euro-Dollar Loan is converted to a Base Rate Loan or continued as a Euro-Dollar Loan for a new Interest Period (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.12(c), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to the Borrower a certificate setting forth in reasonable detail the calculation of the 25 amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.15. Computation of Interest and Fees. Interest based on the Prime Rate and facility fees hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.16. Regulation D Compensation. In the event that a Bank is required to maintain reserves of the type contemplated by the definition of "Euro-Dollar Reserve Percentage", such Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least three Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. Each such notification shall be accompanied by such information as the Borrower may reasonably request. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). 26 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telecopy, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent of (i) an opinion of the general counsel of the Borrower, substantially in the form of Exhibit E-1 hereto and (ii) an opinion of Robinson, Bradshaw & Hinson, P.A., special counsel for the Borrower, substantially in the form of Exhibit E-2 hereto, and, in each case, covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) receipt by the Administrative Agent of an opinion of Davis Polk & Wardwell, special counsel for the Administrative Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Administrative Agent of a certificate signed by a Vice President, the Treasurer, an Assistant Treasurer or the Controller of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; (e) receipt by the Administrative Agent of all documents it may have reasonably requested prior to the date hereof relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and (f) receipt by the Administrative Agent of evidence satisfactory to it of the payment of all principal of and interest on any loans outstanding under, and all accrued commitment fees under, the Existing Credit Agreements and the cancellation or the expiration of any letter of credit issued thereunder; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than 27 August 20, 2001. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. The Borrower and the Banks party to the Existing Credit Agreements, comprising the "Required Banks" as defined therein, hereby agree that (i) the commitments of the lenders under the Existing Credit Agreements shall terminate in their entirety immediately and automatically upon the effectiveness of this Agreement, without further action by any party to the Existing Credit Agreements, (ii) all accrued fees under the Existing Credit Agreements shall be due and payable at such time and (iii) subject to the funding loss indemnities in the Existing Credit Agreements, the Borrower may prepay any and all loans outstanding thereunder on the date of effectiveness of this Agreement. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03; (b) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(c) and 4.06) shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section. 28 ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Organization and Power. The Borrower is duly organized, validly existing and in good standing under the laws of Delaware and has all requisite powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, if and when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2000 and the related consolidated statements of income, cash flows, capitalization and retained earnings for the fiscal year then ended, reported on by Deloitte & Touche, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. 29 (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 2001 and the related unaudited consolidated statements of income and cash flows for the six months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such six-month period (subject to normal year-end adjustments and the absence of footnotes). (c) Since December 31, 2000, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.05. Regulation U. The Borrower and its Material Subsidiaries are not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System) and no proceeds of any Borrowing or issuance of Letters of Credit by the Borrower will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. Not more than 25% of the value of the assets of the Borrower and its Material Subsidiaries is represented by margin stock. SECTION 4.06. Litigation. Except as disclosed in the reports referred to in Section 4.04, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which would be likely to be decided adversely to Borrower or such Subsidiary and, as a result, have a material adverse effect upon the business, consolidated financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or any Note. SECTION 4.07. Compliance with Laws. The Borrower and each Material Subsidiary is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) non-compliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. 30 SECTION 4.08. Taxes. The Borrower and its Material Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Material Subsidiary except (i) where nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or (ii) where the same are contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.09. Public Utility Holding Company Act. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows, capitalization and retained earnings for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous 31 fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by an Approved Officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of an Approved Officer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five days after any officer of the Borrower with responsibility relating thereto obtains knowledge of any Default, if such Default is then continuing, a certificate of an Approved Officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (f) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Material Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Material Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Material Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose material liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Material Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Material Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Material Plan or makes any amendment to any Material Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth 32 details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (g) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. Information required to be delivered pursuant to these Sections 5.01(a), 5.01(b) and 5.01(e) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Securities and Exchange Commission website on the Internet at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01(c) and (ii) the Borrower shall deliver paper copies of the information referred to in Sections 5.01(a), 5.01(b) and 5.01(e) to any Bank which requests such delivery. SECTION 5.02. Payment of Taxes. The Borrower will pay and discharge, and will cause each Material Subsidiary to pay and discharge, at or before maturity, all their tax liabilities, except where (i) nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Material Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property; Insurance. (a) The 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) The Borrower will, and will cause each of its Material Subsidiaries to, maintain (either in the name of the Borrower or in such 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 the 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 Borrower or such Material Subsidiary operates 33 self-insure; and will furnish to the Banks, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. SECTION 5.04. Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate or other legal existence and their respective rights, privileges and franchises material to the normal conduct of their respective businesses; provided that nothing in this Section 5.04 shall prohibit the termination of any right, privilege or franchise of the Borrower or any Material Subsidiary or of the corporate or other legal existence of any Material Subsidiary or the change in form of organization of the Borrower or any Material Subsidiary if the Borrower in good faith determines that such termination or change is in the best interest of the Borrower, is not materially disadvantageous to the Banks and, in the case of a change in the form of organization of the Borrower, the Administrative Agent has consented thereto. SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause each Material Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) noncompliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.06. Books and Records. The Borrower will keep, and will cause each Material Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all financial transactions in relation to its business and activities in accordance with its customary practices; and will permit, and will cause each Material Subsidiary to permit, representatives of any Bank at such Bank's expense (accompanied by a representative of the Borrower, if the Borrower so desires) to visit any of their respective properties, to examine any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired. SECTION 5.07. Maintenance of Ownership of Principal Subsidiaries. The Borrower will maintain ownership of all common equity interests of each Principal Subsidiary, directly or indirectly through Subsidiaries, free and clear of all Liens, provided that any Principal Subsidiary may merge or consolidate with or into the Borrower or another wholly-owned Subsidiary. 34 SECTION 5.08. Negative Pledge. The Borrower will not create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens granted by the Borrower existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $100,000,000; (b) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower and not created in contemplation of such event; (c) any Lien existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition; (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, 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 generally accepted accounting principles; (g) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen 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 generally accepted accounting principles; (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 35 (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) 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 at which Investment Grade Status does not exist as to the Borrower and (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; and (m) Liens not otherwise permitted by the foregoing clauses of this Section securing obligations in an aggregate principal or face amount at any date not to exceed $500,000,000. SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, Substantial Assets to any Person (other than a Subsidiary); provided that the Borrower may merge with another Person if the Borrower is the corporation surviving such merger and, after giving effect thereto, no Default shall have occurred and be continuing. SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for its general corporate purposes, including liquidity support for outstanding commercial paper and acquisitions. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. 36 SECTION 5.11. Transactions with Affiliates. The Borrower will not, and will not permit any 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 Affiliate unless all such transactions between the Borrower and its Subsidiaries on the one hand and any Affiliate on the other, taken in the aggregate and not individually, shall be on an arms-length basis on terms no less favorable to the Borrower or such Subsidiary than could have been obtained from a third party who was not an Affiliate; provided that the foregoing provisions of this Section shall not prohibit the Borrower and each Subsidiary from (i) declaring or paying any lawful dividend so long as, after giving effect thereto, no Default shall have occurred and be continuing, (ii) issuing and maintaining letters of credit, guaranties and sureties as contingent obligations on behalf of Affiliates, or (iii) the payment of funds and making of capital contributions, loans and other transfers of money to Affiliates or to other Persons, including payments made under letters of credit, guarantees and sureties issued and maintained on behalf of Affiliates, provided that the aggregate amount for all such payments and transfers does not exceed $200,000,000 at any time outstanding. SECTION 5.12. Indebtedness/Capitalization Ratio. The ratio of Consolidated Indebtedness to Consolidated Capitalization will at no time exceed 65%. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay, within five days of the due date thereof, any interest, fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04, 5.08, 5.09, 5.12 or the second sentence of 5.10, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; 37 (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt (other than the Loans) when due or within any applicable grace period; (f) any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto so as to result in the acceleration of the maturity of Material Debt; (g) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to, or shall fail generally to, pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $50,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be 38 appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 90 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (j) a judgment or other court order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Material Subsidiary and such judgment or order shall continue without being vacated, discharged, satisfied or stayed or bonded pending appeal for a period of 45 days; (k) the Borrower shall cease to be a Subsidiary or Affiliate of Duke Energy Corporation; or (1) an "Event of Default" as defined in the Related Agreement shall have occurred and be continuing; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having more than 66-2/3% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) if requested by Banks holding more than 66-2/3% in aggregate principal amount of the Loans, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. 39 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Administrative Agent and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 7.03. Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Administrative Agent. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The 40 Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it in good faith to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Administrative Agent. The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower, with the consent of the Required Banks (such consent not to be unreasonably withheld or delayed), shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties 41 of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder; provided that if such successor Administrative Agent is appointed without the consent of the Borrower, such successor Administrative Agent may be replaced by the Borrower with the consent of the Required Banks. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. SECTION 7.09. Administrative Agent's Fee. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent. ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing or Bid Rate (Indexed) Borrowing: (a) the Administrative Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Euro-Dollar Borrowing, Banks having 66-2/3% or more of the aggregate amount of the affected Loans advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate 42 Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Borrowing is a Bid Rate (Indexed) Borrowing, the Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund any of its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the good faith exercise of its discretion. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date of this Agreement, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of any related Bid Rate Quote, in the case of any Bid Rate Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) issued on or after such date of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of 43 Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition (other than in respect of Taxes or Other Taxes) affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction; provided that no such amount shall be payable with respect to any period commencing more than 90 days prior to the date such Bank first notifies the Borrower of its intention to demand compensation therefor under this Section 8.03(a). (b) If any Bank shall have determined that, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, 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 any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency given or made after the date of this Agreement, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; provided that no such amount shall be payable with respect to any period commencing less than 30 days after the date such Bank first notifies the Borrower of its intention to demand compensation under this Section 8.03(b). (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the 44 need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Administrative Agent, taxes imposed on its income, net worth or gross receipts and franchise or similar taxes imposed on it by a jurisdiction under the laws of which such Bank or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments except to the extent that such Bank is subject to United States withholding tax by reason of a U.S. Tax Law Change. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. "U.S. Tax Law Change" means with respect to any Bank or Participant the occurrence (x) in the case of each Bank listed on the signature pages hereof, after the date of its execution and delivery of this Agreement and (y) in the case of any other Bank, after the date such Bank shall have become a Bank hereunder, and (z) in the case of each Participant, after the date such Participant became a Participant hereunder, of the adoption of any applicable U.S. federal law, U.S. federal rule or U.S. federal regulation relating to taxation, or any change therein, or the entry into force, modification or revocation of any income tax convention or treaty to which the United States is a party. (b) Any and all payments by the Borrower to or for the account of any Bank or the Administrative Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums 45 payable under this Section 8.04) such Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Administrative Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter as required by law (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower two completed and duly executed copies of Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, or other documentation reasonably requested by the Borrower, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a U.S. Tax Law Change), such Bank shall not be entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to any Taxes or Other Taxes which would not have been payable had such form been so provided, provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes (it being understood, however, that the Borrower shall have no liability to such Bank in respect of such Taxes). 46 (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will take such action (including changing the jurisdiction of its Applicable Lending Office) as in the good faith judgment of such Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. (g) If any Bank or the Administrative Agent receives a refund (including a refund in the form of a credit against taxes that are otherwise payable by the Bank or the Administrative Agent) of any Taxes or Other Taxes for which the Borrower has made a payment under Section 8.04(b) or (c) and such refund was received from the taxing authority which originally imposed such Taxes or Other Taxes, such Bank or the Administrative Agent agrees to reimburse the Borrower to the extent of such refund, provided that nothing contained in this paragraph (g) shall require any Bank or the Administrative Agent to seek any such refund or make available its tax returns (or any other information relating to its taxes which it deems to be confidential). SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or to continue or convert outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted to) Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first 47 day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Bank; Termination Option. If (i) the obligation of any Bank to make or to convert or continue outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or 8.04, (iii) any Bank exercises its right not to extend its Commitment Termination Date pursuant to Section 2.01(c) or (iv) Investment Grade Status ceases to exist as to any Bank, then: (a) the Borrower shall have the right, with the assistance of the Administrative Agent, to designate a substitute bank or banks (which may be one or more of the Banks) mutually satisfactory to the Borrower and the Administrative Agent (whose consent shall not be unreasonably withheld or delayed) to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto, the outstanding Loans of such Bank and assume the Commitment of such Bank, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder and all other amounts payable by the Borrower to such Bank hereunder plus such amount, if any, as would be payable pursuant to Section 2.14 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment; and (b) if at the time Investment Grade Status exists as to the Borrower, the Borrower may elect to terminate this Agreement as to such Bank, provided that (i) the Borrower notifies such Bank through the Administrative Agent of such election at least three Euro-Dollar Business Days before the effective date of such termination and (ii) the Borrower repays or prepays the principal amount of all outstanding Loans made by such Bank plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder plus all other amounts payable by the Borrower to such Bank hereunder, not later than the effective date of such termination. Upon satisfaction of the foregoing conditions, the Commitment of such Bank shall terminate on the effective date specified in such notice. 48 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address or telecopy or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telecopy or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telecopy or telex, when such telecopy or telex is transmitted to the telecopy or telex number specified in this Section and the appropriate answerback or confirmation slip, as the case may be, is received or (ii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 3 shall not be effective until delivered. SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Administrative Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether 49 or not such Indemnitee shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due with respect to the Loans held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount then due with respect to the Loans held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under this Agreement. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for termination of any Commitment (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) change the provisions of Section 9.04. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. 50 (b) Any Bank may, with the consent (unless an Event of Default then exists) of the Borrower (such consent not to be unreasonably withheld or delayed), at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to the performance by such Participant of the obligations of a Bank thereunder. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree)) of all, of its rights and obligations under this Agreement and its Note (if any), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and only with and subject to) the prior written consent of the Administrative Agent (which shall not be unreasonably withheld or delayed) and, so long as no Event of Default has occurred and is continuing, the Borrower (given in its sole discretion), provided that unless such assignment is of the entire right, title and interest of the transferor Bank hereunder, after making any such assignment such transferor Bank shall have a Commitment of at least $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree). Upon execution and delivery of such instrument of assumption and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such 51 instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required by the Assignee, a Note is issued to the Assignee. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. All assignments shall be subject to a transaction fee established by, and payable by the transferor Bank to, the Administrative Agent for its own account (which shall not exceed $5,000). (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note (if any) to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder or modify any such obligations. (e) No Assignee, Participant or other transferee of any Bank's rights (including any Applicable Lending Office other than such Bank's initial Applicable Lending Office) shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Confidentiality. The Administrative Agent and each Bank agrees to keep any information delivered or made available by the Borrower pursuant to this Agreement confidential from anyone other than persons employed or retained by such Bank and its affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby; provided that nothing herein shall prevent any Bank from disclosing such information (a) to any other Bank or to the Administrative Agent, (b) to any other Person if reasonably incidental to the administration of the credit facility contemplated hereby, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) which had 52 been publicly disclosed other than as a result of a disclosure by the Administrative Agent or any Bank prohibited by this Agreement, (f) in connection with any litigation to which the Administrative Agent, any Bank or its subsidiaries or Parent may be a party, (g) to the extent necessary in connection with the exercise of any remedy hereunder, (h) to such Bank's or Administrative Agent's legal counsel and independent auditors and (i) subject to provisions substantially similar to those contained in this Section 9.08, to any actual or proposed Participant or Assignee. SECTION 9.09. Governing Law; Submission to Jurisdiction. This Agreement and each Note (if any) shall be construed in accordance with and governed by the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.10. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 53 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DUKE CAPITAL CORPORATION By: /s/ S. L. LOVE ------------------------------------- Title: Assistant Treasure Address: 422 South Church Street Charlotte, NC 28202-1904 Attention: S. L. Love Telecopy number: 704-382-9497 Commitments - ----------- $28,170,731.71 THE CHASE MANHATTAN BANK By /s/ PAUL V. FARRELL ------------------------------------- Title: Vice President $28,170,731.71 BANK OF AMERICA, N.A. By /s/ GRETCHEN P. BURUD ------------------------------------- Title: Managing Director $24,146,341.46 THE BANK OF TOKYO- MITSUBISHI, LTD., NEW YORK BRANCH By /s/ NICHOLAS R. BATTISTA ------------------------------------- Title: Attorney-in-Fact $24,146,341.46 BANK ONE, NA By /s/ MICHAEL MURPHY ------------------------------------ Title: Director $24,146,341.46 BARCLAYS BANK PLC By /s/ SYDNEY G. DENNIS ------------------------------------- Title: Director $24,146,341.46 CITIBANK, N.A. By /s/ J. NICHOLAS MCKEE ------------------------------------- Title: Managing Director $24,146,341.46 DEUTSCHE BANK AG NEW YORK BRANCH By /s/ HANS C. NARBERHAUS ------------------------------------- Title: Vice President By /s/ JOEL MAKOWSKY ------------------------------------- Title: Vice President $24,146,341.46 FIRST UNION NATIONAL BANK By /s/ JOE K. DANCY ------------------------------------- Title: Vice President $17,439,024.39 ABN AMRO BANK N.V. By /s/ JEFFREY DODD ------------------------------------- Title: Group Vice President By /s/ SONNY K. TRAN ------------------------------------- Title: Assistant Vice President $17,439,024.39 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By /s/ SEAN O'SULLIVAN ------------------------------------- Title: Vice President By /s/ PETER OBERMANN ------------------------------------- Title: Senior Vice President $17,439,024.39 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ HARRY YERGEY ------------------------------------- Title: Sen. Vice President & Manager By /s/ LEE WARD ------------------------------------- Title: Assistant Vice President $17,439,024.39 CREDIT SUISSE FIRST BOSTON By /s/ ANDREA F. SHKANE ------------------------------------- Title: Vice President By /s/ KRISTIN LEPRI ------------------------------------- Title: Assistant Vice President $17,439,024.39 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ LAURA SCHUMACHER ------------------------------------- Title: Assistant Vice President By /s/ FREDERIC LAHNER ------------------------------------- Title: Vice President $17,439,024.39 FLEET NATIONAL BANK By /s/ RITA M. CAHILL ------------------------------------- Title: Managing Director $17,439,024.39 THE INDUSTRIAL BANK OF JAPAN, LIMITED By /s/ JAMES W/ MASTERS ------------------------------------- Title: Senior Vice President $17,439,024.39 THE NORTHERN TRUST COMPANY By /s/ DONALD D. DABISCH ------------------------------------- Title: Vice President $17,439,024.39 SOCIETE GENERALE By /s/ DAVID BIRD ------------------------------------- Title: Vice President $17,439,024.39 TD SECURITIES (USA) INC. BY /s/ CAROL BRANDT ------------------------------------- Title: Vice President $17,439,024.39 UBS AG, STAMFORD BRANCH By /s/ WILFRED V. SAINT ------------------------------------- Title: Associate Director By /s/ PATRICIA O'KICKI ------------------------------------- Title: Director $17,439,024.39 WACHOVIA BANK, N.A. By /s/ YANN PIRIO ------------------------------------- Title: Vice President $10,731,707.32 THE BANK OF NEW YORK By /s/ JOHN W. HALL ------------------------------------- Title: Vice President $10,731,707.32 THE BANK OF NOVA SCOTIA BY /s/ WILLIAM E. ZARRETT ------------------------------------- Title: Managing Director $10,731,707.32 BNP PARIBAS By /s/ ROBERT J. MUNCZINSKI ------------------------------------- Title: Managing Director By /s/ OLIVIER SERRA ------------------------------------- Title: Vice President $10,731,707.32 CIBC, INC. By /s/ M. SANJEEVA SENANAYAKE ------------------------------------- Title: Executive Director $10,731,707.32 CREDIT LYONNAIS NEW YORK BRANCH By /s/ Philippe SOUSTRA ------------------------------------- Title: Executive Vice President $10,731,707.32 KBC BANK By /s/ JEAN-PIERRE DIELS ------------------------------------- Title: First Vice President By /s/ EDWARD J. EIJLERS ------------------------------------- Title: Assistant Vice President $10,731,707.32 MELLON BANK, N.A. By /s/ ROGER E. HOWARD ------------------------------------- Title: Vice President $10,731,707.32 NATIONAL AUSTRALIA BANK LTD. By /s/ FRANK J. CAMPIGLIA ------------------------------------- Title: Vice President $10,731,707.32 ROYAL BANK OF CANADA BY /s/ SHERYL GREENBERG ------------------------------------- Title: Senior Manager $10,731,707.32 THE SANWA BANK LIMITED By /s/ P. BARTLETT WU ------------------------------------- Title: Vice President $10,731,707.32 SUMITOMO MITSUI BANKING CORPORATION By /s/ DAVID A BUCK ------------------------------------- Title: Senior Vice President $10,731,707.32 SUNTRUST BANK, ATLANTA By /s/ STEVEN I. NEWBY ------------------------------------- Title: Vice President $10,731,707.32 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By /s/ FELICIA LA FORGIA ------------------------------------- Title: Vice President By /s/ ANTHONY ALESSANDRO ------------------------------------- Title: Manager Total Commitments $550,000,000 ======================= BANK OF AMERICA, N.A., as Syndication Agent By /s/ GRETCHEN P. BURUD ------------------------------------- Title: Managing Director THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ PAUL V. FARRELL ------------------------------------- Title: Vice President Address: 270 Park Avenue New York, NY 10017 Attention: Paul V. Farrell Telecopy number: (212) 270-7625
Pricing Schedule ---------------- The "Euro-Dollar Margin" and the "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day: - ---------------------------------------------------------------------------------------------------- LEVEL I LEVEL LEVEL LEVEL LEVEL LEVEL II III IV V VI - ---------------------------------------------------------------------------------------------------- Facility Fee .080% .090% .105% .125% .150% .200% - ------------- - ---------------------------------------------------------------------------------------------------- Euro-Dollar Margin - ------------------ Committed Loans: Utilization (less than) 33-1/3% .170% .210% .245% .275% .400% .600% Utilization (equal to/greater than) 33-1/3%, (less than) 66-2/3% .420% .460% .495% .525% .650% .850% Utilization (equal to/greater than) 66-2/3% .545% .585% .620% .650% .775% .975% - ----------------------------------------------------------------------------------------------------
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Borrower is rated "A+" or higher by S&P or "AI" or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower is rated "A" by S&P or "A2" by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower is rated "A-" by S&P or "A3" by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower is rated "BBB+" by S&P or "Baal" by Moody's and (ii) neither Level I Status, Level II Status nor Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower is rated "BBB" by S&P or "Baa2" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status nor Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. The "Utilization" applicable to any date is the percentage equivalent of a fraction the numerator of which is the aggregate outstanding principal amount of the Loans determined at such time after giving effect, if one or more Loans are being made at such time, to any substantially concurrent application of the proceeds thereof to repay one or more other Loans and the denominator of which is the aggregate amount of the Commitments at such date. If for any reason any Loans remain outstanding following the termination of the Commitments, Utilization will be deemed to be more than 66 2/3%. The credit ratings to be utilized for purposes of this Schedule are those indicated for or assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating indicated for or assigned to any other debt security of the Borrower shall be disregarded. The ratings in effect for any day are those in effect at the close of business on such day. A change in credit rating will result in an immediate change in the applicable Status. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable Status is the higher of the two. 2 SCHEDULE I DUKE CAPITAL CORPORATION CREDIT FACILITIES (Being Replaced by this Agreement and the Related Agreement) 1. Credit Agreement (364-Day Facility) dated as of August 21, 2000 among Duke Capital Corporation, the lenders party thereto and The Chase Manhattan Bank, as administrative agent. 2. Credit Agreement (5-Year Facility) dated as of August 25, 1997 among Duke Capital Corporation, the lenders party thereto and The Chase Manhattan Bank, as administrative agent. EXHIBIT A NOTE New York, New York August 20, 2001 For value received, Duke Capital Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the date specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, 270 Park Avenue, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, the Bank, if the Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule attached hereto appropriate notations to evidence the foregoing information with respect to the Loans then outstanding; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the 364-Day Credit Agreement dated as of August 20, 2001 among the Borrower, the banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. DUKE CAPITAL CORPORATION By -------------------------------------- Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount of Amount Type Principal Maturity Notation Date of Loan of Loan Repaid Date Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXHIBIT B FORM OF BID RATE QUOTE REQUEST ------------------------------ [Date] To: The Chase Manhattan Bank (the "Administrative Agent") From: Duke Capital Corporation (the "Borrower") Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of August 20, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent and the Administrative Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Bid Rate Quotes for the following proposed Bid Rate Borrowing(s): Date of Borrowing: --------------------------- Principal Amount* Interest Period** - ----------------- ----------------- $ Such Bid Rate Quotes should offer a Bid Rate [(General), (Indexed) or both]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. DUKE CAPITAL CORPORATION By -------------------------------------- Title: - -------------------------- *Amount must be $10,000,000 or a larger multiple of $1,000,000. **Not less than one month (Bid Rate (Indexed) Auction) or not less than 7 days (Bid Rate (General) Auction), subject to the provisions of the definition of Interest Period. EXHIBIT C FORM OF INVITATION FOR BID RATE QUOTES -------------------------------------- To: [Name of Bank] Re: Invitation for Bid Rate Quotes to Duke Capital Corporation (the "Borrower") Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of August 20, 2001 among the Borrower, the Banks parties thereto, Bank of America, N.A., as Syndication Agent, and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Bid Rate Quotes to the Borrower for the following proposed Bid Rate Borrowing(s): Date of Borrowing: ------------------------ Principal Amount Interest Period - ---------------- --------------- $ Such Bid Rate Quotes should offer a Bid Rate [(Indexed), (General) or both]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.] (New York City time) on [date]. THE CHASE MANHATTAN BANK By --------------------------------------- Authorized Officer EXHIBIT D FORM OF BID RATE QUOTE ---------------------- To: The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Attention: Re: Bid Rate Quote to Duke Capital Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated --------- 20 , we hereby make the following Bid Rate Quote on the following terms: -- 1. Quoting Bank: --------------------------------------- 2. Person to contact at Quoting Bank: ----------------------------------------------------- 3. Date of Borrowing: ----------------------------------- 4. We hereby offer to make Bid Rate Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Bid Rate Amount** Period*** [(Indexed)****] [(General)*****] - -------- --------- --------------- ---------------- $ $ provided, that the aggregate principal amount of Bid Rate Loans for which the above offers may be accepted shall not exceed $ .]** --------- - ----------------- *As specified in the related Invitation. **Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger of multiple of $1,000,000. ***Not less than one month or less than 30 days, as specified in the related Invitation, but no bid may be submitted for an Interest Period extending beyond bidder's Commitment Termination Date. No more than five bids are permitted for each Interest Period. ****Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". *****Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%). We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the 364-Day Credit Agreement dated as of August 20, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and yourselves, as Administrative Agent, irrevocably obligates us to make the Bid Rate Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated: By: ---------------- ------------------------------------- Authorized Officer 2 EXHIBIT E-1 OPINION OF GENERAL COUNSEL OF THE BORROWER August 20, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: I am the Deputy General Counsel of Duke Capital Corporation (the "Borrower") and have acted as its counsel in connection with the 364-Day Credit Agreement (the "Credit Agreement"), dated as of August 20, 2001, among the Borrower, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms defined in the Credit Agreement are used herein as therein defined. This opinion letter is being delivered pursuant to Section 3.01(b) of the Credit Agreement. In such capacity, I or attorneys under my direct supervision have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and any Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or, to my knowledge, of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or, to my knowledge, result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. 3. Except as disclosed in the reports referred to in Section 4.04 of the Credit Agreement, to my knowledge (but without independent investigation), there is no action, suit or proceeding pending or threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, which would be likely to be decided adversely to the Borrower or such Subsidiary and, as a result, to have a material adverse effect upon the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or which in any manner draws into question the validity of the Credit Agreement or any Notes. 4. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. The phrase "to my knowledge", as used in the foregoing opinion, refers to my actual knowledge without any independent investigation as to any such matters. I am a member of the Bar of the State of North Carolina and do not express any opinion herein concerning any law other than the law of the State of North Carolina, the General Corporation Law of the State of Delaware and the federal law of the United States of America. This opinion is rendered to you in connection with the above-referenced matter and may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other Person, firm or corporation without my prior written consent, except for Additional Banks and Assignees. My opinions expressed herein are as of the date hereof, and I undertake no obligation to advise you of any changes of applicable law or any other matters that may come to my attention after the date hereof that may affect my opinions expressed herein. Very truly yours, 2 EXHIBIT E-2 OPINION OF ROBINSON, BRADSHAW & HINSON, P.A., SPECIAL COUNSEL FOR THE BORROWER August 20, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: We have acted as counsel to Duke Capital Corporation, a Delaware corporation, in connection with the 364-Day Credit Agreement (the "Credit Agreement"), dated as of August 20, 2001, between the Duke Capital Corporation, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms used herein and not defined shall have the meanings given to them in the Credit Agreement. This opinion letter is being delivered pursuant to Section 3.01(b) of the Credit Agreement. In connection with this opinion, we also examined originals, or copies identified to our satisfaction, of such other documents and considered such matters of law and fact as we, in our professional judgment, have deemed appropriate to render the opinions contained herein. Where we have considered it appropriate, as to certain facts we have relied, without investigation or analysis of any underlying data contained therein, upon certificates or other comparable documents of public officials and officers or other appropriate representatives of the Borrower. In rendering the opinions contained herein, we have assumed, among other things, that the Credit Agreement and any Notes to be executed (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency of official, and (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the Borrower's certificate of incorporation or by-laws or any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. In addition, we have assumed that the Credit Agreement fully states the agreement between the Borrower and the Banks with respect to the matters addressed therein, and that the Credit Agreement constitutes a legal, valid and binding obligation of each Bank, enforceable in accordance with its respective terms. The opinions set forth herein are limited to matters governed by the laws of the State of North Carolina and the federal laws of the United States, and no opinion is expressed herein as to the laws of any other jurisdiction. For purposes of our opinions, we have disregarded the choice of law provisions in the Credit Agreement and, instead, have assumed with your permission that the Credit Agreement and the Notes are governed exclusively by the internal, substantive laws and judicial interpretations of the State of North Carolina. We express no opinion concerning any matter respecting or affected by any laws other than laws that a lawyer in North Carolina exercising customary professional diligence would reasonably recognize as being directly applicable to the Borrower, the Loans, the Letters of Credit, or any of them. Based upon and subject to the foregoing and the further limitations and qualifications hereinafter expressed, it is our opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Borrower and the Notes, if and when issued, will constitute legal, valid and binding obligations of the Borrower, in each case, enforceable against the Borrower in accordance with its terms. The opinions expressed above are subject to the following qualifications and limitations: 1. Enforcement of the Credit Agreement and the Notes is subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors' rights generally. 2. Enforcement of the Credit Agreement and the Notes is subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law) by which a court with proper jurisdiction may deny rights of specific performance, injunction, self-help, possessory remedies or other remedies. 3. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or any Note that (i) purport to excuse a party for liability for its own acts, (ii) purport to make void any act done 2 in contravention thereof, (iii) purport to authorize a party to act in its sole discretion, (iv) require waivers or amendments to be made only in writing, (v) purport to effect waivers of constitutional, statutory or equitable rights or the effect of applicable laws, (vi) impose liquidated damages, penalties or forfeiture, or (vii) purport to indemnify a party for its own negligence or willful misconduct. Indemnification provisions in the Credit Agreement are subject to and may be rendered unenforceable by applicable law or public policy, including applicable securities law. 4. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or the Notes purporting to require a party thereto to pay or reimburse attorneys' fees incurred by another party, or to indemnify another party therefor, which may be limited by applicable statutes and decisions relating to the collection and award of attorneys' fees, including but not limited to North Carolina General Statutes ss. 6-21.2. 5. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement purporting to waive the right of jury trial. Under North Carolina General Statutes ss. 22B-10, a provision for the waiver of the right to a jury trial is unconscionable and unenforceable. 6. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement concerning choice of forum or consent to the jurisdiction of courts, venue of actions or means of service of process. 7. It is likely that North Carolina courts will enforce the provisions of the Credit Agreement providing for interest at a higher rate resulting from a Default or Event of Default (a "Default Rate") which rate is higher than the rate otherwise stipulated in the Credit Agreement. The law, however, disfavors penalties, and it is possible that interest at the Default Rate may be held to be an unenforceable penalty, to the extent such rate exceeds the rate applicable prior to a default under the Credit Agreement. Also, since North Carolina General Statutes ss. 24-10.1 expressly provides for late charges, it is possible that North Carolina courts, when faced specifically with the issue, might rule that this statutory late charge preempts any other charge (such as default interest) by a bank for delinquent payments. The only North Carolina case which we have found that addresses this issue is a 1978 Court of Appeals decision, which in our opinion is of limited precedential value, North Carolina National Bank v. Burnette, 38 N.C. App. 120, 247 S.E.2d 648 (1978), rev'd on other grounds, 297 N.C. 524, 256 S.E.2d 388 (1979). While the court in that case did allow interest after default (commencing with the date requested in the complaint) at a rate six percent in excess of pre-default interest, we are unable to determine from the opinion that any question was raised as to this being penal in nature, nor does the court address 3 the possible question of the statutory late charge preempting a default interest surcharge. Therefore, since the North Carolina Supreme Court has not ruled in a properly presented case raising issues of its possible penal nature and those of North Carolina General Statutes ss. 24-10.1, we are unwilling to express an unqualified opinion that the Default Rate of interest prescribed in the Credit Agreement is enforceable. 8. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement relating to evidentiary standards or other standards by which the Credit Agreement are to be construed. This opinion letter is delivered solely for your benefit in connection with the Credit Agreement and, except for any Additional Bank or any Assignee which becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement, may not be used or relied upon by any other Person or for any other purpose without our prior written consent in each instance. Our opinions expressed herein are as of the date hereof, and we undertake no obligation to advise you of any changes of applicable law or any other matters that may come to our attention after the date hereof that may affect our opinions expressed herein. Very truly yours, 4 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT -------------------------------------- August 20, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Dear Sirs: We have participated in the preparation of the 364-Day Credit Agreement (the "Credit Agreement") dated as of August 20, 2001 among Duke Capital Corporation, a Delaware corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Administrative Agent"), and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes, if and when issued, constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person, firm or corporation without our prior written consent, except for Additional Banks and all Participants. Very truly yours, 2 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of , 20 among [ASSIGNOR] (the ------------ --- "Assignor"), [ASSIGNEE] (the "Assignee"), [DUKE CAPITAL CORPORATION,] and THE CHASE MANHATTAN BANK, as Administrative Agent (the "Administrative Agent"). WITNESSETH WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the 364-Day Credit Agreement dated as of August 20, 2001 among Duke Capital Corporation (the "Borrower"), the Assignor and the other Banks party thereto, as Banks, Bank of America, N.A., as Syndication Agent, and the Administrative Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $ ;* ---------------------- WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $ are outstanding at the date hereof; and ---------------- WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $ the "Assigned Amount"), ------------ together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;* NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the - -------------------------------- *The asterisked provisions shall be appropriately revised in the event of an assignment after the Commitment Termination Date. Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, [the Borrower,] and the Administrative Agent, the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.* It is understood that facility fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent to Assignment. This Agreement is conditioned upon the consent of [the Borrower] and the Administrative Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by [the Borrower] and the Administrative Agent is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver a Note, if required by the Assignee, payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower, - -------------------------------- *Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 2 or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 8. Administrative Questionnaire. Attached is an Administrative Questionnaire duly completed by the Assignee. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By --------------------------------------- Title: [ASSIGNEE] By --------------------------------------- Title: [DUKE CAPITAL CORPORATION By --------------------------------------- Title:] THE CHASE MANHATTAN BANK, as Administrative Agent By --------------------------------------- Title: 4 EXHIBIT H EXTENSION AGREEMENT The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement referred to below 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: Effective as of [date], the undersigned hereby agrees to extend its Commitment and Commitment Termination Date under the 364-Day Credit Agreement dated as of August 20, 2001 among Duke Capital Corporation, (the "Borrower"), the banks parties thereto, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Credit Agreement") for one year to [date to which its Commitment Termination Date is to be extended] pursuant to Section 2.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. This Extension Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK] By --------------------------------------- Title: Agreed and Accepted: DUKE CAPITAL CORPORATION, as Borrower By --------------------------------------- Title: THE CHASE MANHATTAN BANK, as Administrative Agent By --------------------------------------- Title: 2 EX-10.4 6 dex104.txt CREDIT AGREEMENT EXHIBIT 10.4 $550,000,000 THREE-YEAR CREDIT AGREEMENT dated as of August 20, 2001 among Duke Capital Corporation, The Banks Listed Herein, Bank of America, N.A., as Syndication Agent and The Chase Manhattan Bank, as Administrative Agent -------------------------------------- J.P. Morgan Securities Inc. and Banc of America Securities LLC Joint Lead Arrangers and Joint Bookrunners First Union National Bank, Bank One, NA and Citibank, N.A. Documentation Agents TABLE OF CONTENTS PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions .................................................. 1 SECTION 1.02. Accounting Terms and Determinations .......................... 13 SECTION 1.03. Types of Borrowings .......................................... 13 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend .......................................... 13 SECTION 2.02. Notice of Committed Borrowings ............................... 15 SECTION 2.03. Bid Rate Borrowings .......................................... 16 SECTION 2.04. Notice to Banks; Funding of Loans ............................ 20 SECTION 2.05. Registry; Notes .............................................. 21 SECTION 2.06. Maturity of Loans; Effect of Cash Collateralization of Letters of Credit .......................................... 21 SECTION 2.07. Interest Rates ............................................... 22 SECTION 2.08. Fees ......................................................... 24 SECTION 2.09. Optional Termination or Reduction of Commitments ............. 24 SECTION 2.10. Method of Electing Interest Rates ............................ 25 SECTION 2.11. Mandatory Termination of Commitments ......................... 26 SECTION 2.12. Optional Prepayments ......................................... 26 SECTION 2.13. General Provisions as to Payments ............................ 27 SECTION 2.14. Funding Losses ............................................... 28 SECTION 2.15. Computation of Interest and Fees ............................. 28 SECTION 2.16. Letters of Credit ............................................ 28 SECTION 2.17. Regulation D Compensation .................................... 31 SECTION 2.18. Takeout of Swingline Loans ................................... 32 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness ................................................ 33 SECTION 3.02. Borrowings and Issuance of Letters of Credits ................ 35 i PAGE ---- ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Organization and Power ....................................... 36 SECTION 4.02. Corporate and Governmental Authorization; No Contravention .............................................. 36 SECTION 4.03. Binding Effect ............................................... 36 SECTION 4.04. Financial Information ........................................ 36 SECTION 4.05. Regulation U ................................................. 37 SECTION 4.06. Litigation ................................................... 37 SECTION 4.07. Compliance with Laws ......................................... 37 SECTION 4.08. Taxes ........................................................ 38 SECTION 4.09. Public Utility Holding Company Act ........................... 38 ARTICLE 5 COVENANTS SECTION 5.01. Information .................................................. 38 SECTION 5.02. Payment of Taxes ............................................. 40 SECTION 5.03. Maintenance of Property; Insurance ........................... 40 SECTION 5.04. Maintenance of Existence ..................................... 41 SECTION 5.05. Compliance with Laws ......................................... 41 SECTION 5.06. Books and Records ............................................ 41 SECTION 5.07. Maintenance of Ownership of Principal Subsidiaries ........... 42 SECTION 5.08. Negative Pledge .............................................. 42 SECTION 5.09. Consolidations, Mergers and Sales of Assets .................. 43 SECTION 5.10. Use of Proceeds .............................................. 44 SECTION 5.11. Transactions with Affiliates ................................. 44 SECTION 5.12. Indebtedness/Capitalization Ratio ............................ 44 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default ............................................ 44 SECTION 6.02. Notice of Default ............................................ 47 SECTION 6.03. Cash Cover ................................................... 47 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization ................................ 47 SECTION 7.02. Administrative Agent and Affiliates .......................... 47 ii PAGE ---- SECTION 7.03. Action by Administrative Agent ............................... 47 SECTION 7.04. Consultation with Experts .................................... 48 SECTION 7.05. Liability of Administrative Agent ............................ 48 SECTION 7.06. Indemnification .............................................. 48 SECTION 7.07. Credit Decision .............................................. 48 SECTION 7.08. Successor Administrative Agent ............................... 49 SECTION 7.09. Administrative Agent's Fee ................................... 49 SECTION 7.10. Documentation Agents ......................................... 49 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair ..... 50 SECTION 8.02. Illegality ................................................... 50 SECTION 8.03. Increased Cost and Reduced Return ............................ 51 SECTION 8.04. Taxes ........................................................ 52 SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans .... 55 SECTION 8.06. Substitution of Bank; Termination Option ..................... 55 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices ...................................................... 56 SECTION 9.02. No Waivers ................................................... 57 SECTION 9.03. Expenses; Indemnification .................................... 57 SECTION 9.04. Sharing of Set-offs .......................................... 57 SECTION 9.05. Amendments and Waivers ....................................... 58 SECTION 9.06. Successors and Assigns ....................................... 58 SECTION 9.07. Collateral ................................................... 60 SECTION 9.08. Confidentiality .............................................. 60 SECTION 9.09. Governing Law; Submission to Jurisdiction .................... 61 SECTION 9.10. Counterparts; Integration .................................... 61 SECTION 9.11. WAIVER OF JURY TRIAL ......................................... 61 PRICING SCHEDULE SCHEDULE I - Duke Capital Corporation Credit Facilities (Being Replaced by this Agreement and the Related Agreement) EXHIBIT A - Note EXHIBIT B - Form of Bid Rate Quote Request EXHIBIT C - Form of Invitation for Bid Rate Quotes iii EXHIBIT D - Form of Bid Rate Quote EXHIBIT E-1 - Opinion of General Counsel of the Borrower EXHIBIT E-2 - Opinion of Special Counsel for the Borrower EXHIBIT F - Opinion of Davis Polk & Wardwell, Special Counsel for the Administrative Agent EXHIBIT G - Assignment and Assumption Agreement EXHIBIT H - Extension Agreement iv THREE-YEAR CREDIT AGREEMENT THREE-YEAR CREDIT AGREEMENT dated as of August 20, 2001 among DUKE CAPITAL CORPORATION, the BANKS listed on the signature pages hereof, BANK OF AMERICA, N.A., as Syndication Agent, and THE CHASE MANHATTAN BANK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Additional Bank" means any financial institution that becomes a Bank for purposes hereof in connection with the replacement of a Bank pursuant to Section 8.06. "Administrative Agent" means The Chase Manhattan Bank in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank. "Affiliate" means, as to any Person (the "specified Person") (i) any Person that directly, or indirectly through one or more intermediaries, controls the specified Person (a "Controlling Person") or (ii) any Person (other than the specified Person or a Subsidiary of the specified Person) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless otherwise specified, "Affiliate" means an Affiliate of the Borrower. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office, (iii) in the case of its Bid Rate Loans, its Bid Rate Lending Office and (iv) in the case of its Swingline Loans, its Swingline Lending Office. "Approved Officer" means the president, a vice president, the treasurer, an assistant treasurer or the controller of the Borrower or such other representative of the Borrower as may be designated by any one of the foregoing with the consent of the Administrative Agent. "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank or other financial institution listed on the signature pages hereof, each Additional Bank, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1 % plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Syndicated Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Bid Rate (General)" has the meaning set forth in Section 2.03(d). "Bid Rate (General) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rates (General) pursuant to Section 2.03. "Bid Rate (General) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (General) Auction. "Bid Rate (Indexed) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rate (Indexed) Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Bid Rate (Indexed) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (Indexed) Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01). "Bid Rate (Indexed) Margin" has the meaning set forth in Section 2.03(d). 2 "Bid Rate Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Bid Rate Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Bid Rate Lending Offices for its Bid Rate (Indexed) Loans, on the one hand, and its Bid Rate (General) Loans, on the other hand, in which case all references herein to the Bid Rate Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Bid Rate Loan" means a Bid Rate (Indexed) Loan or a Bid Rate (General) Loan. "Bid Rate Quote" means an offer by a Bank to make a Bid Rate Loan in accordance with Section 2.03. "Borrower" means Duke Capital Corporation, a Delaware corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Commitment" means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on the signature pages hereof, and (ii) with respect to each Additional Bank or Assignee which becomes a bank pursuant to Sections 8.06 and 9.06(c), the amount of the Commitment thereby assumed by it, in each case as such amount may from time to time be reduced pursuant to Section 2.09, 2.11, 8.06 or 9.06(c) or increased pursuant to Section 8.06 or 9.06(c). "Commitment Termination Date" means, for each Bank, August 20, 2004, as such date may be extended from time to time with respect to such Bank pursuant to Section 2.01 (d) or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Committed Loan" means a Syndicated Loan or a Swingline Loan. "Consolidated Capitalization" means the sum of (i) Consolidated Indebtedness, (ii) consolidated common stockholders' equity as would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles, (iii) the aggregate liquidation preference of preferred stocks (other than preferred stocks subject to mandatory redemption or repurchase) of the Borrower and its Consolidated Subsidiaries upon involuntary liquidation, (iv) the aggregate 3 outstanding amount of all Equity Preferred Securities and (v) minority interests as would appear on a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries prepared in accordance with generally accepted accounting principles. "Consolidated Indebtedness" means, at any date, all Indebtedness of Borrower and its Consolidated Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. "Consolidated Subsidiary" means, for any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date; unless otherwise specified "Consolidated Subsidiary" means a Consolidated Subsidiary of the Borrower. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Documentation Agent" means each of First Union National Bank, Bank One, NA and Citibank, N.A., in its capacity as a documentation agent in connection with the credit facility provided under this Agreement. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, 4 distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "Equity Preferred Securities" means any securities, however denominated, (i) issued by the Borrower or any Consolidated Subsidiary of the Borrower, (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 mature no less than 20 years from the date of issuance, (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 date occurring after the first anniversary of the later of (A) the Commitment Termination Date and (B) the "Termination Date" under the Related Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means (i) a Syndicated Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" means the applicable rate per annum determined in accordance with the Pricing Schedule. 5 "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Chase Manhattan Bank and Bank of America, N.A. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.17. "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreements" means the credit facilities identified in Schedule I hereto, as amended and in effect on the Effective Date. "Facility Fee Rate" has the meaning set forth in the Pricing Schedule. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, 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 Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Chase Manhattan Bank (or its successor as Administrative Agent) on such day on such transactions as determined by the Administrative Agent. "Final Maturity Date" means, for each Bank, the first anniversary of its Commitment Termination Date or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day; provided that the Final Maturity Date for all Banks shall be no later than August 20, 2007. "Fixed Rate Loans" means Euro-Dollar Loans, Swingline Loans or Bid Rate Loans (excluding Swingline Loans or Bid Rate (Indexed) Loans bearing interest at the Base Rate) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time, provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to 6 Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been if it had not been so converted or made. "Indebtedness" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services purchased, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired, (iv) all indebtedness under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such Person is liable as lessee, (v) the face amount of all outstanding letters of credit issued for the account of such Person (other than letters of credit relating to indebtedness included in Indebtedness of such Person pursuant to another clause of this definition) and, without duplication, the unreimbursed amount of all drafts drawn thereunder, (vi) indebtedness secured by any 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), (vii) all direct guarantees of Indebtedness referred to above of another Person, (viii) all amounts payable in connection with mandatory redemptions or repurchases of preferred stock and (ix) 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. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six, or, if deposits of a corresponding maturity are generally available in the London interbank market, nine or twelve, months thereafter, as the Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; (2) with respect to each Swingline Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending 7 such number of days thereafter (but not more than 10 Euro-Dollar Business Days) as the Borrower may elect in such notice; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; (3) with respect to each Bid Rate (Index) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of months thereafter (but not less than one month) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; and (4) with respect to each Bid Rate (General) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and provided further that: (x) no Interest Period applicable to any Loan of any Bank which begins before such Bank's Commitment Termination Date may end after such Bank's Commitment Termination Date; and (y) no Interest Period applicable to any Loan of any Bank may end after such Bank's Final Maturity Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment Grade Status" exists as to any Person at any date if all senior long-term unsecured debt securities of such Person outstanding at such date which had been rated by S&P or Moody's are rated BBB- or higher by S&P or Baa3 or higher by Moody's, as the case may be. 8 "Issuing Bank" means The Chase Manhattan Bank and any other Bank that may agree to issue letters of credit hereunder, in each case as issuer of a Letter of Credit hereunder. "Letter of Credit" means a letter of credit to be issued or issued hereunder by the Issuing Bank in accordance with Section 2.16. "Letter of Credit Liabilities" means, for any Bank and at any time, such Bank's ratable participation in the sum of (x) the amounts then owing by the Borrower in respect of amounts drawn under Letters of Credit and (y) the aggregate amount then available for drawing under all Letters of Credit. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Committed Loan or a Bid Rate Loan and "Loans" means Committed Loans or Bid Rate Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(b). "Material Debt" means Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount exceeding $150,000,000. "Material Plan" has the meaning set forth in Section 6.01(i). "Material Subsidiary" means at any time any Subsidiary of the Borrower having, together with its Subsidiaries, consolidated assets in excess of 10% of the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such time. "Moody's" means Moody's Investors Service, Inc. "Notes" means promissory notes of the Borrower, in the form required by Section 2.05, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. 9 "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Bid Rate Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.10(b). "Notice of Issuance" has the meaning set forth in Section 2.16(b). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is either (i) maintained by a member of the ERISA Group for employees of a member of the ERISA Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pricing Schedule" means the Pricing Schedule attached hereto. "Prime Rate" means the rate of interest publicly announced by The Chase Manhattan Bank in New York City from time to time as its Prime Rate. Each change in the Prime Rate shall be effective from and including the day such change is publicly announced. "Principal Subsidiary" means each of Texas Eastern Transmission Limited Partnership, Algonquin Gas Transmission Company, PanEnergy Corp, and their respective successors. 10 "Quarterly Payment Date" means the first Domestic Business Day of each January, April, July and October. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Reimbursement Obligations" means, at any time, the aggregate of all obligations of the Borrower then outstanding under Section 2.16 to reimburse the Issuing Banks for amounts paid by the Issuing Banks in respect of any one or more drawings under Letters of Credit. "Related Agreement" means the 364-Day Credit Agreement dated as of the date hereof among the Borrower, the banks and other financial institutions and Agents from time to time parties thereto, as amended and in effect from time to time. "Required Banks" means at any time Banks (i) having at least 51 % of the sum of the aggregate amount of the Commitments or (ii) if all the Commitments shall have been terminated, holding at least 51% of the sum of the aggregate unpaid principal amount of the Loans and the aggregate Letter of Credit Liabilities. "Revolving Credit Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(a); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Revolving Credit Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Revolving Credit Period" means, with respect to any Bank, the period from and including the Effective Date to but not including its Commitment Termination Date. "S&P" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. 11 "Substantial Assets" means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole. "Swingline Bank" means The Chase Manhattan Bank and its successors. "Swingline Lending Office" means, as to the Swingline Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Swingline Lending Office) or such other office as such Bank may hereafter designate as its Swingline Lending Office by notice to the Borrower and the Administrative Agent. "Swingline Loan" means a loan made by the Swingline Bank pursuant to Section 2.01(c). "Swingline Takeout Loan" means a Base Rate Loan made pursuant to Section 2.18. "Syndicated Loan" means a Loan made by a Bank pursuant to Section 2.01(a) or 2.01(b); provided that, if any loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Syndicated Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Term Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(b); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Term Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or the Plan under Title IV of ERISA. 12 "Unrefunded Swingline Loans" has the meaning set forth in Section 2.18(b). "Utilization" has the meaning set forth in the Pricing Schedule. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Fixed Rate Borrowing" is a Euro-Dollar Borrowing, a Swingline Borrowing or a Bid Rate Borrowing (excluding any such Borrowing consisting of Swingline Loans or Bid Rate (Indexed) Loans bearing interest at the Base Rate), and a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Bid Rate Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. (a) Revolving Credit Loans. During its Revolving Credit Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection from time to time in amounts such that the aggregate principal amount of Revolving Credit Loans by such Bank, together with its Letter of Credit Liabilities and its participating interests in any Unrefunded Swingline Loans, at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this subsection (other than a Swingline Takeout Borrowing) shall be in an aggregate principal amount of $10,000,000 or any larger multiple of 13 $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments in effect on the date of Borrowing; provided that, if the Interest Period selected by the Borrower for a Borrowing would otherwise end after the Commitment Termination Dates of some but not all Banks, the Borrower may in its Notice of Committed Borrowing elect not to borrow from those Banks whose Commitment Termination Dates fall prior to the end of such Interest Period. Within the foregoing limits, the Borrower may borrow under this subsection (a), or to the extent permitted by Section 2.12, prepay Loans and reborrow at any time during the Revolving Credit Periods under this subsection (a). (b) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Borrower on its Commitment Termination Date in an amount up to but not exceeding the amount of its Commitment; provided that no Bank shall be obligated to make a loan pursuant to this subsection if any Commitment is extended on such date pursuant to Section 2.01(d). Each Borrowing under this Section 2.01 (b) shall be made from the several Banks having the same Commitment Termination Date ratably in proportion to their respective Commitments. (c) Swingline Loans. From time to time prior to its Commitment Termination Date, the Swingline Bank agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection from time to time in amounts such that (i) the aggregate principal amount of all Loans at such time outstanding together with the aggregate amount of all Letter of Credit Liabilities at such time shall not exceed the aggregate amount of all Commitments and (ii) the aggregate principal amount of Swingline Loans at any time outstanding shall not exceed $100,000,000. Within the foregoing limits, the Borrower may borrow under this subsection, repay or, to the extent permitted by Section 2.12, prepay Loans and reborrow at any time; provided that the proceeds of a Swingline Borrowing may not be used, in whole or in part, to refund any prior Swingline Borrowing. Each Borrowing under this subsection shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02). (d) Extension of Commitments. On no more than two separate occasions, the Borrower may, upon not less than 45 days but no earlier than 60 days notice prior to the then current Commitment Termination Dates to the Administrative Agent (which shall notify each Bank of receipt of such request), propose to extend the Commitment Termination Dates for an additional one-year period measured from the Commitment Termination Dates then in effect. Each 14 Bank shall endeavor to respond to such request, whether affirmatively or negatively (such determination in the sole discretion of such Bank), by notice to the Borrower and the Administrative Agent not more than 45 days nor less than 28 days prior to such Bank's Commitment Termination Date. Subject to the execution by the Borrower, the Administrative Agent and such Banks of a duly completed Extension Agreement in substantially the form of Exhibit H, the Commitment Termination Date applicable to the Commitment of each Bank so affirmatively notifying the Borrower and the Administrative Agent shall be extended for the period specified above; provided that no Commitment Termination Date of any Bank shall be extended unless Banks having Commitments in an aggregate amount equal to at least the greater of (i) 66 2/3% in aggregate amount of the Commitments in effect at the time any such extension is requested and (ii) the sum of the aggregate principal amount of the Loans outstanding at such time plus the aggregate amount of the Letter of Credit Liabilities at such time, after giving effect to any repayment of Loans and/or termination of Letters of Credit on such date, shall have elected so to extend their Commitments. Any Bank which does not give such notice to the Borrower and the Administrative Agent shall be deemed to have elected not to extend as requested, and the Commitment of each non-extending Bank shall terminate on its Commitment Termination Date determined without giving effect to such requested extension. The Borrower may, in accordance with Section 8.06, designate another bank or other financial institution (which may be, but need not be, an extending Bank) to replace a non-extending Bank. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing or Swingline Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Swingline Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be Swingline Loans or Syndicated Loans, (d) in the case of a Syndicated Borrowing, whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate; and 15 (e) in the case of a Euro-Dollar Borrowing or a Swingline Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Bid Rate Borrowings. (a) The Bid Rate Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks at any time prior to their respective Commitment Termination Dates to make offers to make Bid Rate Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) Bid Rate Quote Request. When the Borrower wishes to request offers to make Bid Rate Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Bid Rate Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a Bid Rate (Indexed) Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day, (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Bid Rate Quotes requested are to set forth a Bid Rate (Indexed) or a Bid Rate (General) Rate or both such rates. The Borrower may request offers to make Bid Rate Loans for more than one Interest Period in a single Bid Rate Quote Request. (c) Invitation for Bid Rate Quotes. Promptly upon receipt of a Bid Rate Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Bid Rate Quotes substantially in the form 16 of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Bid Rate Quotes offering to make the Bid Rate Loans to which such Bid Rate Quote Request relates in accordance with this Section. (d) Submission and Contents of Bid Rate Quotes. (i) Each Bank may submit a Bid Rate Quote containing an offer or offers to make Bid Rate Loans in response to any Invitation for Bid Rate Quotes. Each Bid Rate Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:30 A.M. (New York City time) on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective); provided that Bid Rate Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) 1:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction. Subject to Articles 3 and 6, any Bid Rate Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Bid Rate Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Bid Rate Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000 and (y) may not exceed the principal amount of Bid Rate Loans for each Interest Period for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Bid Rate Loans for which offers being made by such quoting Bank may be accepted, 17 (C) in the case of a Bid Rate (Indexed) Auction, the margin above or below the applicable London Interbank Offered Rate (the "Bid Rate (Indexed) Margin") offered for each such Bid Rate Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of a Bid Rate (General) Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Bid Rate (General)") offered for each such Bid Rate Loan, and (E) the identity of the quoting Bank. A Bid Rate Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Bid Rate Quotes. (iii) Any Bid Rate Quote shall be disregarded if: (A) it is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection 2.03(d)(ii); (B) it contains qualifying, conditional or similar language beyond that contemplated by Exhibit D; (C) it proposes terms other than or in addition to those set forth in the applicable Invitation for Bid Rate Quotes; (D) it arrives after the time set forth in subsection 2.03(d)(i); or (E) the Commitment Termination Date of the Bank submitting such Bid Rate Quote falls prior to the last day of the requested Interest Period for which such Bank offers to make a Bid Rate Loan. (e) Notice to Borrower. The Administrative Agent shall promptly but in no event later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the 18 Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), notify the Borrower of the terms (x) of any Bid Rate Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Bid Rate Quote that amends, modifies or is otherwise inconsistent with a previous Bid Rate Quote submitted by such Bank with respect to the same Bid Rate Quote Request. Any such subsequent Quote shall be disregarded by the Administrative Agent unless such subsequent Quote is submitted solely to correct a manifest error in such former Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Loans for which offers have been received for each Interest Period specified in the related Bid Rate Quote Request, (B) the respective principal amounts and Bid Rate (Indexed) Margins or Bid Rate (General) Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Bid Rate Loans for which offers in any single Bid Rate Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Bid Rate Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Bid Rate Quote in whole or in part; provided that: (i) the aggregate principal amount of each Bid Rate Borrowing may not exceed the applicable amount set forth in the related Bid Rate Quote Request, (ii) the principal amount of each Bid Rate Borrowing must be $10,000,000 or a larger multiple of $1,000,000, and (iii) acceptance of offers may only be made on the basis of ascending Bid Rate (Indexed) Margins or Bid Rate (General) Rates, as the case may be. (g) Allocation by Administrative Agent. If offers are made by two more Banks with the same Bid Rate (Indexed) Margins or Bid Rate (General), as the 19 case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Rate Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Bid Rate Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and, if such Bank shall not have made such payment within two Domestic Business Days of demand therefor, the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. 20 (d) The failure of any Bank to make the Loan to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make a Loan on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. SECTION 2.05. Registry; Notes. (a) The Administrative Agent shall maintain a register (the "Register") on which it will record the Commitment of each Bank, each Loan made by such Bank and each repayment of any Loan made by such Bank. Any such recordation by the Administrative Agent on the Register shall be conclusive, absent manifest error. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations hereunder. (b) The Borrower hereby agrees that, promptly upon the request of any Bank at any time, the Borrower shall deliver to such Bank a duly executed Note, in substantially the form of Exhibit A hereto, payable to the order of such Bank and representing the obligation of the Borrower to pay the unpaid principal amount of the Loans made to the Borrower by such Bank, with interest as provided herein on the unpaid principal amount from time to time outstanding. (c) Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and each Bank receiving a Note pursuant to this Section, if such Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of such Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Such Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans; Effect of Cash Collateralization of Letters of Credit. (a) Each Revolving Credit Loan made by any Bank shall mature, and the principal amount thereof shall be due and payable together with accrued interest thereon, on the Commitment Termination Date of such Bank. (b) The Term Loans of each Bank shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Final Maturity Date of such Bank. (c) Each Swingline Loan included in any Swingline Borrowing and each Bid Rate Loan included in any Bid Rate Borrowing shall mature, and the principal 21 amount thereof shall be due and payable (together with interest accrued thereon), on the last day of the Interest Period applicable to such Borrowing. (d) If any provision of any debt instrument or other agreement or instrument binding upon the Borrower, including without limitation this Agreement, would be contravened by any deposit required to cash collateralize any letter of credit obligations under any other debt instrument or other agreement or instrument, the Borrower shall either (x) obtain a waiver of such provision, (y) prepay the debt incurred under such debt instrument and terminate such debt instrument or (z) make other arrangements satisfactory to the Required Banks; it being understood and agreed that the risk of any such contravention shall be borne solely by the Borrower and not by the Banks and shall in no event constitute a defense available to the Borrower for nonperformance of its obligations hereunder. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date, at maturity and on the date of termination of the Commitments in their entirety. Any overdue principal of or overdue interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1 % plus the Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means the rate appearing on Page 3750 of the Telerate Service Company (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of the Telerate Service, as may be nominated by the British Bankers' Association for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not so available at such time for any reason, then the "London Interbank Offered Rate" for such Interest Period shall be the 22 average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation furnished by the remaining Euro-Dollar Reference Bank or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. (c) Any overdue principal of or overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Loan at the date such payment was due and (ii) the Base Rate for such day. (d) Each Swingline Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the Base Rate for such day or such other rate as may be from time to time determined by mutual agreement between the Swingline Bank and the Borrower. Interest on each Swingline Loan shall be payable at the maturity of such Loan. Any overdue principal of or interest on any Swingline Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (e) Subject to Section 8.01(a), each Bid Rate (Indexed) Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(b) as if each Euro-Dollar Reference Bank were to participate in the related Bid Rate (Indexed) Borrowing ratably in proportion to its Commitment) plus (or minus) the Bid Rate (Indexed) Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Bid Rate (General) Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Bid Rate (General) quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. 23 Any overdue principal of or overdue interest on any Bid Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1 % plus the Base Rate for such day. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks by telecopy, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error unless the Borrower raises an objection thereto within five Domestic Business Days after receipt of such notice. SECTION 2.08. Fees. (a) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Bank a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding such Bank's Commitment Termination Date, on the daily average aggregate amount of such Bank's Commitment (whether used or unused) and (ii) from and including such Bank's Commitment Termination Date to but excluding the date such Bank's Loans and Letter of Credit Liabilities shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of such Bank's Committed Loans and Letter of Credit Liabilities. (b) Letter of Credit Fees. The Borrower shall pay to the Administrative Agent (i) for the account of the Banks ratably a letter of credit fee accruing daily on the aggregate amount then available for drawing under all outstanding Letters of Credit at a rate per annum equal to the then applicable Euro-Dollar Margin (assuming for this purpose Utilization exceeding 66 2/3%) and (ii) for the account of each Issuing Bank a letter of credit fronting fee accruing daily on the aggregate amount then available for drawing under all Letters of Credit issued by such Issuing Bank at a rate per annum of 0.10% (or such other rate as may be mutually agreed from time to time by the Borrower and such Issuing Bank). (c) Payments. Accrued fees under this Section for the account of any Bank shall be payable quarterly in arrears on each Quarterly Payment Date and upon such Bank's Commitment Termination Date and Final Maturity Date (and, if later, the date the Loans and Letter of Credit Liabilities of such Bank shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans or Letter of Credit Liabilities are outstanding at such time, or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of 24 $1,000,000 the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans and Letter of Credit Liabilities. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Syndicated Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.14 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans, provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection 2.10(a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans being converted are to be Fixed Rate 25 Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of the term "Interest Period". (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to subsection 2.10(a) above, the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If no Notice of Interest Rate Election is timely received prior to the end of an Interest Period for any Group of Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans as of the last day of such Interest Period. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.02. SECTION 2.11. Mandatory Termination of Commitments. The Commitment of each Bank shall terminate on such Bank's Commitment Termination Date, and any Revolving Credit Loans of such Bank then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. Optional Prepayments. (a) The Borrower may (1) upon notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on any Domestic Business Day prepay on such Domestic Business Day any Group of Base Rate Loans, any Swingline Borrowing or any Bid Rate Borrowing bearing interest at the Base Rate pursuant to Section 8.01 (a) and (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent not later than 11:00 A.M. (New York City time) prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and together with any additional amounts payable pursuant to Section 2.14. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Except as provided in subsection 2.12(a), the Borrower may not prepay all or any portion of the principal amount of any Bid Rate Loan prior to the 26 maturity thereof except with the express written consent of the Bank holding such Bid Rate Loan. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.13. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 1:00 P.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank in like funds its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans, Swingline Loans or Letter of Credit Liabilities or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Bid Rate Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate. 27 SECTION 2.14. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Euro-Dollar Loan is converted to a Base Rate Loan or continued as a Euro-Dollar Loan for a new Interest Period (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.12(c), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to the Borrower a certificate setting forth in reasonable detail the calculation of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.15. Computation of Interest and Fees. Interest based on the Prime Rate and facility fees hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and Letter of Credit fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.16. Letters of Credit. (a) Subject to the terms and conditions hereof, each Issuing Bank agrees to issue Letters of Credit hereunder from time to time before its Commitment Termination Date upon the request of the Borrower; provided that, immediately after each Letter of Credit is issued (i) the aggregate amount of the Letter of Credit Liabilities plus the aggregate outstanding amount of all Loans shall not exceed the aggregate amount of the Commitments and (ii) the aggregate Letter of Credit Liabilities shall not exceed $300,000,000. Upon the date of issuance by the Issuing Bank of a Letter of Credit, the Issuing Bank shall be deemed, without further action by any party hereto, to have sold to each Bank, and each Bank shall be deemed, without further action by any party hereto, to have purchased from the Issuing Bank, a participation in such Letter of Credit and the related Letter of Credit Liabilities in the proportion its Commitment bears to the aggregate Commitments; provided that if the scheduled Commitment Termination Date of a Bank falls prior to the expiry date of a Letter of Credit then outstanding and the Commitments of the other Banks are extended on such date in accordance with Section 2.01(d), such Bank's participation in such Letter of Credit shall terminate on its Commitment Termination Date, and the participations of the other Banks therein shall be redetermined pro rata in 28 proportion to their Commitments after giving effect to the termination of the Commitment of such former Bank. (b) The Borrower shall give the Issuing Bank notice at least three Domestic Business Days prior to the requested issuance of a Letter of Credit specifying the date such Letter of Credit is to be issued, and describing the terms of such Letter of Credit and the nature of the transactions to be supported thereby (such notice, including any such notice given in connection with the extension of a Letter of Credit, a "Notice of Issuance"). Upon receipt of a Notice of Issuance, the Issuing Bank shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Bank of the contents thereof and of the amount of such Bank's participation in such Letter of Credit. The issuance by the Issuing Bank of each Letter of Credit shall, in addition to the conditions precedent set forth in Article 3, be subject to the conditions precedent that such Letter of Credit shall be in such form and contain such terms as shall be reasonably satisfactory to the Issuing Bank and that the Borrower shall have executed and delivered such other instruments and agreements relating to such Letter of Credit as the Issuing Bank shall have reasonably requested. The Borrower shall also pay to the Issuing Bank for its own account issuance, drawing, amendment and extension charges in the amounts and at the times as agreed between the Borrower and the Issuing Bank. The extension or renewal of any Letter of Credit shall be deemed to be an issuance of such Letter of Credit, and if any Letter of Credit contains a provision pursuant to which it is deemed to be extended unless notice of termination is given by the Issuing Bank, the Issuing Bank shall timely give such notice of termination unless it has theretofore timely received a Notice of Issuance and the other conditions to issuance of a Letter of Credit have also theretofore been met with respect to such extension. (c) No Letter of Credit shall have a term extending or extendible beyond the first anniversary of the Commitment Termination Date of the applicable Issuing Bank. (d) Upon receipt from the beneficiary of any applicable Letter of Credit of any notice of a drawing under such Letter of Credit, the Issuing Bank shall notify the Administrative Agent and the Administrative Agent shall promptly notify the Borrower and each other Bank as to the amount to be paid as a result of such demand or drawing and the payment date. The Borrower shall be irrevocably and unconditionally obligated forthwith to reimburse the Issuing Bank for any amounts paid by the Issuing Bank upon any drawing under any Letter of Credit, without presentment, demand, protest or other formalities of any kind. All such amounts paid by the Issuing Bank and remaining unpaid by the Borrower shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the Base Rate for such day plus, if such amount remains unpaid for more than 29 two Domestic Business Days, 1%. In addition, each Bank will pay to the Administrative Agent, for the account of the applicable Issuing Bank, immediately upon such Issuing Bank's demand at any time during the period commencing after such drawing until reimbursement therefor in full by the Borrower, an amount equal to such Bank's ratable share of such drawing (in proportion to its participation therein), together with interest on such amount for each day from the date of the Issuing Bank's demand for such payment (or, if such demand is made after 12:00 Noon (New York City time) on such date, from the next succeeding Domestic Business Day) to the date of payment by such Bank of such amount at a rate of interest per annum equal to the Federal Funds Rate. The Issuing Bank will pay to each Bank ratably all amounts received from the Borrower for application in payment of its reimbursement obligations in respect of any Letter of Credit, but only to the extent such Bank has made payment to the Issuing Bank in respect of such Letter of Credit pursuant hereto. (e) The obligations of the Borrower and each Bank under subsection 2.16(d) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, under all circumstances whatsoever, including without limitation the following circumstances: (i) the use which may be made of the Letter of Credit by, or any acts or omission of, a beneficiary of a Letter of Credit (or any Person for whom the beneficiary may be acting); (ii) the existence of any claim, set-off, defense or other rights that the Borrower may have at any time against a beneficiary of a Letter of Credit (or any Person for whom the beneficiary may be acting), the Banks (including the Issuing Bank) or any other Person, whether in connection with this Agreement or the Letter of Credit or any document related hereto or thereto or any unrelated transaction; (iii) any statement or any other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; (iv) payment under a Letter of Credit to the beneficiary of such Letter of Credit against presentation to the Issuing Bank of a draft or certificate that does not comply with the terms of the Letter of Credit; provided that the determination by the Issuing Bank to make such payment shall not have been the result of its willful misconduct or gross negligence; or 30 (v) any other act or omission to act or delay of any kind by any Bank (including the Issuing Bank), the Administrative Agent or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this subsection (v), constitute a legal or equitable discharge of the Borrower's or the Bank's obligations hereunder. (f) The Borrower hereby indemnifies and holds harmless each Bank (including the Issuing Bank) and the Administrative Agent from and against any and all claims, damages, losses, liabilities, costs or expenses which such Bank or the Administrative Agent may incur (including, without limitation, any claims, damages, losses, liabilities, costs or expenses which the Issuing Bank may incur by reason of or in connection with the failure of any other Bank to fulfill or comply with its obligations to such Issuing Bank hereunder (but nothing herein contained shall affect any rights the Borrower may have against such defaulting Bank)), and none of the Banks (including the Issuing Bank) nor the Administrative Agent nor any of their officers or directors or employees or agents shall be liable or responsible, by reason of or in connection with the execution and delivery or transfer of or payment or failure to pay under any Letter of Credit, including without limitation any of the circumstances enumerated in subsection 2.16(e) above, as well as (i) any error, omission, interruption or delay in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, (ii) any loss or delay in the transmission of any document required in order to make a drawing under a Letter of Credit, and (iii) any consequences arising from causes beyond the control of the Issuing Bank, including without limitation any government acts, or any other circumstances whatsoever in making or failing to make payment under such Letter of Credit; provided that the Borrower shall not be required to indemnify the Issuing Bank for any claims, damages, losses, liabilities, costs or expenses, and the Borrower shall have a claim for direct (but not consequential) damage suffered by it, to the extent found by a court of competent jurisdiction to have been caused by (x) the willful misconduct or gross negligence of the Issuing Bank in determining whether a request presented under any Letter of Credit complied with the terms of such Letter of Credit or (y) the Issuing Bank's failure to pay under any Letter of Credit after the presentation to it of a request strictly complying with the terms and conditions of the Letter of Credit. Nothing in this subsection 2.16(f) is intended to limit the obligations of the Borrower under any other provision of this Agreement. To the extent the Borrower does not indemnify the Issuing Bank as required by this subsection, the Banks agree to do so ratably in accordance with their Commitments. SECTION 2.17. Regulation D Compensation. In the event that a Bank is required to maintain reserves of the type contemplated by the definition of "Euro-Dollar Reserve Percentage", such Bank may require the Borrower to pay, 31 contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least three Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. Each such notification shall be accompanied by such information as the Borrower may reasonably request. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). SECTION 2.18. Takeout of Swingline Loans. (a) In the event that any Swingline Borrowing shall not be repaid in full at or prior to the maturity thereof the Administrative Agent shall, on behalf of the Borrower (the Borrower hereby irrevocably directing and authorizing the Administrative Agent so to act on its behalf), give a Notice of Borrowing requesting the Banks, including the Swingline Bank, to make Base Rate Loans on the maturity date of such Swingline Borrowing in an aggregate amount equal to the unpaid principal amount of such Swingline Borrowing. Each Bank will make the proceeds of such Base Rate Loans available to the Administrative Agent for the account of the Swingline Bank on such date in accordance with Section 2.04. The proceeds of such Base Rate Borrowing shall be immediately applied to repay such Swingline Borrowing. (b) If, for any reason, a Base Rate Borrowing may not be (as determined by the Administrative Agent in its sole discretion), or is not, made pursuant to subsection (a) above to refund Swingline Loans as required by said clause, then, effective on the date such Borrowing would otherwise have been made, each Bank severally, unconditionally and irrevocably agrees that it shall purchase an 32 undivided participating interest in such Swingline Loans ("Unrefunded Swingline Loans") in an amount equal to the amount of the Loan which otherwise would have been made by such Bank pursuant to subsection (a), which purchase shall be funded by the time such Loan would have been required to be funded pursuant to Section 2.04 by transfer to the Administrative Agent, for the account of the Swingline Bank, in immediately available funds, of the amount of its participation. (c) Whenever, at any time after the Swingline Bank has received from any Bank payment in full for such Bank's participating interest in a Swingline Loan, the Swingline Bank (or the Administrative Agent on its behalf) receives any payment on account thereof, the Swingline Bank (or the Administrative Agent, as the case may be) will promptly distribute to such Bank its participating interest in such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment is subsequently required to be returned, such Bank will return to the Swingline Bank (or the Administrative Agent, as the case may be) any portion thereof previously distributed by the Swingline Bank (or the Administrative Agent, as the case may be) to it. (d) Each Bank's obligation to purchase and fund participating interests pursuant to this Section shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation: (i) any setoff, counterclaim, recoupment, defense or other right which such Bank or the Borrower may have against the Swingline Bank, or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or the failure to satisfy any of the conditions specified in Article 3; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement by the Borrower or any Bank; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed 33 counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telecopy, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent of (i) an opinion of the general counsel of the Borrower, substantially in the form of Exhibit E-1 hereto and (ii) an opinion of Robinson, Bradshaw & Hinson, P.A., special counsel for the Borrower, substantially in the form of Exhibit E-2 hereto, and, in each case, covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) receipt by the Administrative Agent of an opinion of Davis Polk & Wardwell, special counsel for the Administrative Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Administrative Agent of a certificate signed by a Vice President, the Treasurer, an Assistant Treasurer or the Controller of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; (e) receipt by the Administrative Agent of all documents it may have reasonably requested prior to the date hereof relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and (f) receipt by the Administrative Agent of evidence satisfactory to it of the payment of all principal of and interest on any loans outstanding under, and all accrued commitment fees under, the Existing Credit Agreements and the cancellation or the expiration of any letter of credit issued thereunder; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than August 20, 2001. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. The Borrower and the Banks party to the Existing Credit Agreements, comprising the "Required Banks" as defined therein, hereby agree that (i) the commitments of the lenders under the Existing Credit Agreements shall terminate in their entirety immediately and automatically upon the effectiveness of this Agreement, without further action by any party to the Existing Credit Agreements, (ii) all accrued fees under the Existing Credit Agreements shall be due and payable at such time and (iii) subject to the funding 34 loss indemnities in the Existing Credit Agreements, the Borrower may prepay any and all loans outstanding thereunder on the date of effectiveness of this Agreement. SECTION 3.02. Borrowings and Issuance of Letters of Credits. The obligation of any Bank to make a Loan on the occasion of any Borrowing and the obligation of the Issuing Bank to issue (or renew or extend the term of) any Letter of Credit is subject to the satisfaction of the following conditions; provided that if such Borrowing is a Swingline Takeout Borrowing, only the conditions set forth in clauses 3.02(a) and 3.02(b) must be satisfied: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03 or receipt by the Issuing Bank of a Notice of Issuance as required by Section 2.16(b), as the case may be; (b) the fact that, immediately after such Borrowing or issuance of such Letter of Credit (and, in the case of any Swingline Borrowing, at any time prior to the tenth day following the maturity thereof), (i) the sum of the aggregate outstanding principal amount of the Loans and the aggregate amount of Letter of Credit Liabilities will not exceed the aggregate amount of the Commitments, (ii) the aggregate outstanding principal amount of Swingline Loans will not exceed $100,000,000 and (iii) the aggregate amount of Letter of Credit Liabilities will not exceed $300,000,000; (c) the fact that, immediately after such Borrowing or issuance of such Letter of Credit, no Default shall have occurred and be continuing; (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(c) and 4.06) shall be true on and as of the date of such Borrowing or issuance of such Letter of Credit; (e) the fact that the Borrower's senior unsecured long-term debt securities are rated at least BBB, Baa2 or the equivalent by at least two of S&P, Moody's and Fitch, Inc.; and (f) in the case of a Term Loan Borrowing, receipt by the Administrative Agent for the account of each Bank making a Term Loan pursuant to Section 2.01 (b) hereof of a term loan fee equal to 0.10% of the principal amount of such Bank's Term Loan. Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing 35 as to the facts specified in clauses (b), (c), (d) and (e) of this Section (unless such Borrowing is a Swingline Takeout Borrowing, in which case the Borrower shall be deemed to represent and warrant as to the facts specified in clause (b) of this Section). ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Organization and Power. The Borrower is duly organized, validly existing and in good standing under the laws of Delaware and has all requisite powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, if and when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2000 and the related consolidated statements of income, cash flows, capitalization and retained earnings for the fiscal year then ended, reported on by Deloitte & Touche, 36 copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 2001 and the related unaudited consolidated statements of income and cash flows for the six months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such six-month period (subject to normal year-end adjustments and the absence of footnotes). (c) Since December 31, 2000, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.05. Regulation U. The Borrower and its Material Subsidiaries are not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System) and no proceeds of any Borrowing or issuance of Letters of Credit by the Borrower will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. Not more than 25% of the value of the assets of the Borrower and its Material Subsidiaries is represented by margin stock. SECTION 4.06. Litigation. Except as disclosed in the reports referred to in Section 4.04, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which would be likely to be decided adversely to Borrower or such Subsidiary and, as a result, have a material adverse effect upon the business, consolidated financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or any Note. SECTION 4.07. Compliance with Laws. The Borrower and each Material Subsidiary is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities 37 (including, without limitation, ERISA and Environmental Laws) except where (i) non-compliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 4.08. Taxes. The Borrower and its Material Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Material Subsidiary except (i) where nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or (ii) where the same are contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.09. Public Utility Holding Company Act. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid or any Letter of Credit Liabilities remain outstanding: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows, capitalization and retained earnings for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing; 38 (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by an Approved Officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of an Approved Officer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five days after any officer of the Borrower with responsibility relating thereto obtains knowledge of any Default, if such Default is then continuing, a certificate of an Approved Officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (f) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Material Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Material Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Material Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose material liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Material Plan under Section 4041 (c) of ERISA, a copy of such 39 notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Material Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Material Plan or makes any amendment to any Material Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (g) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. Information required to be delivered pursuant to these Sections 5.01(a), 5.01 (b) and 5.01 (e) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Securities and Exchange Commission website on the Internet at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01 (c) and (ii) the Borrower shall deliver paper copies of the information referred to in Sections 5.01(a), 5.01 (b) and 5.01 (e) to any Bank which requests such delivery. SECTION 5.02. Payment of Taxes. The Borrower will pay and discharge, and will cause each Material Subsidiary to pay and discharge, at or before maturity, all their tax liabilities, except where (i) nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Material Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property; Insurance. (a) The 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) The Borrower will, and will cause each of its Material Subsidiaries to, maintain (either in the name of the Borrower or in such 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 40 general area by companies of established repute engaged in the same or a similar business; provided that self-insurance by the 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 Borrower or such Material Subsidiary operates self-insure; and will furnish to the Banks, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. SECTION 5.04. Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate or other legal existence and their respective rights, privileges and franchises material to the normal conduct of their respective businesses; provided that nothing in this Section 5.04 shall prohibit the termination of any right, privilege or franchise of the Borrower or any Material Subsidiary or of the corporate or other legal existence of any Material Subsidiary or the change in form of organization of the Borrower or any Material Subsidiary if the Borrower in good faith determines that such termination or change is in the best interest of the Borrower, is not materially disadvantageous to the Banks and, in the case of a change in the form of organization of the Borrower, the Administrative Agent has consented thereto. SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause each Material Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) noncompliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.06. Books and Records. The Borrower will keep, and will cause each Material Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all financial transactions in relation to its business and activities in accordance with its customary practices; and will permit, and will cause each Material Subsidiary to permit, representatives of any Bank at such Bank's expense (accompanied by a representative of the Borrower, if the Borrower so desires) to visit any of their respective properties, to examine any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired. 41 SECTION 5.07. Maintenance of Ownership of Principal Subsidiaries. The Borrower will maintain ownership of all common equity interests of each Principal Subsidiary, directly or indirectly through Subsidiaries, free and clear of all Liens, provided that any Principal Subsidiary may merge or consolidate with or into the Borrower or another wholly-owned Subsidiary. SECTION 5.08. Negative Pledge. The Borrower will not create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens granted by the Borrower existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $100,000,000; (b) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower and not created in contemplation of such event; (c) any Lien existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition; (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, 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 generally accepted accounting principles; (g) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen 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 42 appropriate provisions are being maintained in accordance with generally accepted accounting principles; (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; (1) 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 at which Investment Grade Status does not exist as to the Borrower and (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; and (m) Liens not otherwise permitted by the foregoing clauses of this Section securing obligations in an aggregate principal or face amount at any date not to exceed $500,000,000. SECTION 5.09. Consolidations, Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, Substantial Assets to any Person (other than a Subsidiary); provided that the Borrower may merge with another Person if the Borrower is the corporation surviving such merger and, after giving effect thereto, no Default shall have occurred and be continuing. 43 SECTION 5.10. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for its general corporate purposes, including liquidity support for outstanding commercial paper and acquisitions. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. SECTION 5.11. Transactions with Affiliates. The Borrower will not, and will not permit any 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 Affiliate unless all such transactions between the Borrower and its Subsidiaries on the one hand and any Affiliate on the other, taken in the aggregate and not individually, shall be on an arms-length basis on terms no less favorable to the Borrower or such Subsidiary than could have been obtained from a third party who was not an Affiliate; provided that the foregoing provisions of this Section shall not prohibit the Borrower and each Subsidiary from (i) declaring or paying any lawful dividend so long as, after giving effect thereto, no Default shall have occurred and be continuing, (ii) issuing and maintaining letters of credit, guaranties and sureties as contingent obligations on behalf of Affiliates, or (iii) the payment of funds and making of capital contributions, loans and other transfers of money to Affiliates or to other Persons, including payments made under letters of credit, guarantees and sureties issued and maintained on behalf of Affiliates, provided that the aggregate amount for all such payments and transfers does not exceed $200,000,000 at any time outstanding. SECTION 5.12. Indebtedness/Capitalization Ratio. The ratio of Consolidated Indebtedness to Consolidated Capitalization will at no time exceed 65%. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or Reimbursement Obligation or shall fail to pay, within five days of the due date thereof, any interest, fees or any other amount payable hereunder; 44 (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04, 5.08, 5.09, 5.12 or the second sentence of 5.10, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt (other than the Loans) when due or within any applicable grace period; (f) any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto so as to result in the acceleration of the maturity of Material Debt; (g) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to, or shall fail generally to, pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; 45 (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title 1V of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $50,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 90 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (j) a judgment or other court order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Material Subsidiary and such judgment or order shall continue without being vacated, discharged, satisfied or stayed or bonded pending appeal for a period of 45 days; (k) the Borrower shall cease to be a Subsidiary or Affiliate of Duke Energy Corporation; or (1) an "Event of Default" as defined in the Related Agreement shall have occurred and be continuing; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having more than 66-2/3% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) if requested by Banks holding more than 66-2/3% in aggregate principal amount of the Loans, by notice to the Borrower declare the Loans and all Reimbursement Obligations (together with accrued interest thereon) to be, and the Loans and all Reimbursement Obligations shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans and all Reimbursement Obligations (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. 46 SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.01 (c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. SECTION 6.03. Cash Cover. The Borrower agrees, in addition to the provisions of Section 6.01 hereof, that upon the occurrence and during the continuance of any Event of Default, it shall, if requested by the Administrative Agent upon the instruction of the Banks having at least 66 2/3% in the aggregate amount of the Commitments (or, if the Commitments shall have been terminated, holding at least 66 2/3% of the Letter of Credit Liabilities), deposit with the Administrative Agent an amount in immediately available funds (which funds shall be held as collateral pursuant to arrangements mutually satisfactory to the Administrative Agent and the Borrower) equal to the aggregate amount available for drawing under all Letters of Credit then outstanding at such time, provided that, upon the occurrence of any Event of Default specified in Section 6.01 (g) or 6.01 (h) with respect to the Borrower, the Borrower shall pay such amount forthwith without any notice or demand or any other act by the Administrative Agent or the Banks. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Administrative Agent and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 7.03. Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. 47 SECTION 7.04. Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Administrative Agent. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it in good faith to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, 48 made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Administrative Agent. The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower, with the consent of the Required Banks (such consent not to be unreasonably withheld or delayed), shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder; provided that if such successor Administrative Agent is appointed without the consent of the Borrower, such successor Administrative Agent may be replaced by the Borrower with the consent of the Required Banks. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. SECTION 7.09. Administrative Agent's Fee. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent. SECTION 7.10. Documentation Agents. None of the Documentation Agents, in their capacity as such, shall have any duties or obligations of any kind under this Agreement. 49 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing or Bid Rate (Indexed) Borrowing: (a) the Administrative Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Euro-Dollar Borrowing, Banks having 66-2/3% or more of the aggregate amount of the affected Loans advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Syndicated Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Borrowing is a Bid Rate (Indexed) Borrowing, the Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund any of its Euro-Dollar Loans and such 50 Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the good faith exercise of its discretion. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date of this Agreement, in the case of any Committed Loan or Letter of Credit or any obligation to make Committed Loans or issue or participate in any Letter of Credit or (y) the date of any related Bid Rate Quote, in the case of any Bid Rate Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) issued on or after such date of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition (other than in respect of Taxes or Other Taxes) affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans or its obligations hereunder in respect of Letters of Credit and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan or of issuing or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the 51 Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction; provided that no such amount shall be payable with respect to any period commencing more than 90 days prior to the date such Bank first notifies the Borrower of its intention to demand compensation therefor under this Section 8.03(a). (b) If any Bank shall have determined that, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, 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 any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency given or made after the date of this Agreement, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; provided that no such amount shall be payable with respect to any period commencing less than 30 days after the date such Bank first notifies the Borrower of its intention to demand compensation under this Section 8.03(b). (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or any Note, and all liabilities with respect thereto, 52 excluding (i) in the case of each Bank and the Administrative Agent, taxes imposed on its income, net worth or gross receipts and franchise or similar taxes imposed on it by a jurisdiction under the laws of which such Bank or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments except to the extent that such Bank is subject to United States withholding tax by reason of a U.S. Tax Law Change. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. "U.S. Tax Law Change" means with respect to any Bank or Participant the occurrence (x) in the case of each Bank listed on the signature pages hereof, after the date of its execution and delivery of this Agreement and (y) in the case of any other Bank, after the date such Bank shall have become a Bank hereunder, and (z) in the case of each Participant, after the date such Participant became a Participant hereunder, of the adoption of any applicable U.S. federal law, U.S. federal rule or U.S. federal regulation relating to taxation, or any change therein, or the entry into force, modification or revocation of any income tax convention or treaty to which the United States is a party. (b) Any and all payments by the Borrower to or for the account of any Bank or the Administrative Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) 53 arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Administrative Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter as required by law (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower two completed and duly executed copies of Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, or other documentation reasonably requested by the Borrower, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a U.S. Tax Law Change), such Bank shall not be entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to any Taxes or Other Taxes which would not have been payable had such form been so provided, provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form) required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes (it being understood, however, that the Borrower shall have no liability to such Bank in respect of such Taxes). (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will take such action (including changing the jurisdiction of its Applicable Lending Office) as in the good faith judgment of such Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. (g) If any Bank or the Administrative Agent receives a refund (including a refund in the form of a credit against taxes that are otherwise payable by the Bank or the Administrative Agent) of any Taxes or Other Taxes for which the Borrower has made a payment under Section 8.04(b) or (c) and such refund was received from the taxing authority which originally imposed such Taxes or Other 54 Taxes, such Bank or the Administrative Agent agrees to reimburse the Borrower to the extent of such refund, provided that nothing contained in this paragraph (g) shall require any Bank or the Administrative Agent to seek any such refund or make available its tax returns (or any other information relating to its taxes which it deems to be confidential). SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or to continue or convert outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted to) Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Bank; Termination Option. If (i) the obligation of any Bank to make or to convert or continue outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or 8.04, (iii) any Bank exercises its right not to extend its Commitment Termination Date pursuant to Section 2.01 (d) or (iv) Investment Grade Status ceases to exist as to any Bank, then: (a) the Borrower shall have the right, with the assistance of the Administrative Agent, to designate a substitute bank or banks (which may be one or more of the Banks) mutually satisfactory to the Borrower, the Administrative 55 Agent, the Issuing Banks and the Swingline Bank (whose consent shall not be unreasonably withheld or delayed) to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto, the outstanding Loans of such Bank and assume the Commitment and Letter of Credit Liabilities of such Bank, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans and funded Letter of Credit Liabilities plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder and all other amounts payable by the Borrower to such Bank hereunder plus such amount, if any, as would be payable pursuant to Section 2.14 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment; and (b) if at the time Investment Grade Status exists as to the Borrower, the Borrower may elect to terminate this Agreement as to such Bank, provided that (i) the Borrower notifies such Bank through the Administrative Agent of such election at least three Euro-Dollar Business Days before the effective date of such termination, (ii) the Borrower repays or prepays the principal amount of all outstanding Loans made by such Bank plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder plus all other amounts payable by the Borrower to such Bank hereunder, not later than the effective date of such termination and (iii) if at the effective date of such termination, any Letter of Credit Liabilities or Swingline Loans are outstanding, the conditions specified in Section 3.02 would be satisfied (after giving effect to such termination) were the related Letters of Credit and Swingline Loans made on such date. Upon satisfaction of the foregoing conditions, the Commitment of such Bank shall terminate on the effective date specified in such notice. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address or telecopy or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telecopy or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall 56 be effective (i) if given by telecopy or telex, when such telecopy or telex is transmitted to the telecopy or telex number specified in this Section and the appropriate answerback or confirmation slip, as the case may be, is received or (ii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent or any Issuing Bank under Article 2 or Article 3 shall not be effective until delivered. SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Administrative Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due with respect to the Loans and Letter of Credit Liabilities held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount then due with respect to the Loans and Letter of Credit Liabilities held by such other Bank, the Bank receiving such 57 proportionately greater payment shall purchase such participations in the Loans and Letter of Credit Liabilities held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments with respect to the Loans and Letter of Credit Liabilities held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under this Agreement. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent, the Swingline Bank or any Issuing Bank are affected thereby, by such Person); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or the amount to be reimbursed in respect of any Letter of Credit or any interest thereon or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or for reimbursement in respect of any Letter of Credit or interest thereon or any fees hereunder or for termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans and Letter of Credit Liabilities, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) change the provisions of Section 9.04. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may, with the consent (unless an Event of Default then exists) of the Borrower (such consent not to be unreasonably withheld or delayed), at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans and Letter of Credit Liabilities. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower, the Issuing Banks, the Swingline Bank and the Administrative Agent shall continue to deal solely and directly with such Bank in 58 connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to the performance by such Participant of the obligations of a Bank thereunder. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree)) of all, of its rights and obligations under this Agreement and its Note (if any), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and only with and subject to) the prior written consent of the Issuing Banks, the Swingline Bank, the Administrative Agent (which shall not be unreasonably withheld or delayed) and, so long as no Event of Default has occurred and is continuing, the Borrower (given in its sole discretion), provided that unless such assignment is of the entire right, title and interest of the transferor Bank hereunder, after making any such assignment such transferor Bank shall have a Commitment of at least $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree). Upon execution and delivery of such instrument of assumption and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required by the Assignee, a Note is issued to the Assignee. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are 59 payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. All assignments shall be subject to a transaction fee established by, and payable by the transferor Bank to, the Administrative Agent for its own account (which shall not exceed $5,000). (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note (if any) to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder or modify any such obligations. (e) No Assignee, Participant or other transferee of any Bank's rights (including any Applicable Lending Office other than such Bank's initial Applicable Lending Office) shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Confidentiality. The Administrative Agent and each Bank agrees to keep any information delivered or made available by the Borrower pursuant to this Agreement confidential from anyone other than persons employed or retained by such Bank and its affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby; provided that nothing herein shall prevent any Bank from disclosing such information (a) to any other Bank or to the Administrative Agent, (b) to any other Person if reasonably incidental to the administration of the credit facility contemplated hereby, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) which had been publicly disclosed other than as a result of a disclosure by the Administrative Agent or any Bank prohibited by this Agreement, (f) in connection with any litigation to which the Administrative Agent, any Bank or its subsidiaries or Parent may be a party, (g) to the extent necessary in connection with the exercise of any remedy hereunder, (h) to such Bank's or Administrative Agent's legal counsel and independent auditors and (i) subject to provisions substantially 60 similar to those contained in this Section 9.08, to any actual or proposed Participant or Assignee. SECTION 9.09. Governing Law; Submission to Jurisdiction. This Agreement and each Note (if any) shall be construed in accordance with and governed by the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.10. Counterparts; Integration. This Agreement maybe signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE ISSUING BANKS, THE SWINGLINE BANK AND THE BANKS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 61 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DUKE CAPITAL CORPORATION By /s/ S. L. Love ------------------------------------ Title: Assistant Treasure Address: 422 South Church Street Charlotte, NC 28202-1904 Attention: S. L. Love Telecopy number: Commitments - ----------- $28,170,731.71 THE CHASE MANHATTAN BANK By /s/ Paul V. Farrell ------------------------------------ Title: Vice President $28,170,731.71 BANK OF AMERICA, N.A. By /s/ Gretchen P. Burud ------------------------------------ Title: Managing Director $24,146,341.46 THE BANK OF TOKYO- MITSUBISHI, LTD., NEW YORK BRANCH By /s/ Nicholas R. Battista ------------------------------------ Title: Attorney-in-Fact $24,146,341.46 BANK ONE, NA By /s/ Michael Murphy ------------------------------------ Title: Director $24,146,341.46 BARCLAYS BANK PLC By /s/ Sydney G. Dennis ------------------------------------ Title: Director $24,146,341.46 CITIBANK, N.A. By /s/ J. Nicholas McKee ------------------------------------ Title: Managing Director $24,146,341.46 DEUTSCHE BANK AG NEW YORK BRANCH By /s/ Hans C. Narberhaus ------------------------------------ Title: Vice President By /s/ Joel Makowsky ------------------------------------ Title: Vice President $24,146,341.46 FIRST UNION NATIONAL BANK By /s/ Joe K. Dancy ------------------------------------ Title: Vice President $17,439,024.39 ABN AMRO BANK N.V. By /s/ Jeffrey Dodd ------------------------------------ Title: Group Vice President By /s/ Sonny K. Tran ------------------------------------ By /s/ Sonny K. Tran ------------------------------------ Title: Assistant Vice President $17,439,024.39 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By /s/ Sean O'Sullivan ------------------------------------ Title: Vice President By /s/ Peter Obermann ------------------------------------ Title: Senior Vice President $17,439,024.39 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ Harry Yergey ------------------------------------ Title: Sen. Vice President & Manager By /s/ Lee Ward ------------------------------------ Title: Assistant Vice President $17,439,024.39 CREDIT SUISSE FIRST BOSTON By /s/ Andrea E. Shkane ------------------------------------ Title: Vice President By /s/ Kristin Lepri ------------------------------------ Title: Assistant Vice President $17,439,024.39 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ Laura Schumacher ------------------------------------ Title: Assistant Vice President By /s/ Frederic Lahner ------------------------------------ Title: Vice President $17,439,024.39 FLEET NATIONAL BANK By /s/ Rita M. Cahill ------------------------------------ Title: Managing Director $17,439,024.39 THE INDUSTRIAL BANK OF JAPAN, LIMITED By /s/ James W. Masters ------------------------------------ Title: Senior Vice President $17,439,024.39 THE NORTHERN TRUST COMPANY By /s/ Donald D. Dabisch ------------------------------------ Title: Vice President $17,439,024.39 SOCIETE GENERALE By /s/ David Bird ------------------------------------ Title: Vice President $17,439,024.39 TD SECURITIES (USA) INC. By /s/ Carol Brandt ------------------------------------ Title: Vice President $17,439,024.39 UBS AG, STAMFORD BRANCH By /s/ Wilfred V. Saint ------------------------------------ Title: Associate Director By /s/ Patricia O'Kicki ------------------------------------ Title: Director $17,439,024.39 WACHOVIA BANK, N.A. By /s/ Yann Pirio ------------------------------------ Title: Vice President $10,731,707.32 THE BANK OF NEW YORK By /s/ John W. Hall ------------------------------------ Title: Vice President $10,731,707.32 THE BANK OF NOVA SCOTIA By /s/ William E. Zarrett ------------------------------------ Title: Managing Director $10,731,707.32 BNP PARIBAS By /s/ Robert J. Munczinski ------------------------------------ Title: Managing Director By /s/ Olivier Serra ------------------------------------ Title: Vice President $10,731,707.32 CIBC, INC. By /s/ M. Sanjeeva Senanayake ------------------------------------ Title: Executive Director $10,731,707.32 CREDIT LYONNAIS NEW YORK BRANCH By /s/ Philippe Soustra ------------------------------------ Title: Executive Vice President $10,731,707.32 KBC BANK By /s/ Jean-Pierre Diels ------------------------------------ Title: First Vice President By /s/ Edward J. Eijlers ------------------------------------ Assistant Vice President $10,731,707.32 MELLON BANK, N.A. By /s/ Roger E. Howard ------------------------------------ Title: Vice President $10,731,707.32 NATIONAL AUSTRALIA BANK LTD. By /s/ Frank J. Campiglia ------------------------------------ Title: Vice President $10,731,707.32 ROYAL BANK OF CANADA By /s/ Sheryl Greenberg ------------------------------------ Title: Senior Manager $10,731,707.32 THE SANWA BANK LIMITED By /s/ P. Bartlett Wu ------------------------------------ Title: Vice President $10,731,707.32 SUMITOMO MITSUI BANKING CORPORATION By /s/ David A. Buck ------------------------------------ Title: Senior Vice President $10,731,707.32 SUNTRUST BANK, ATLANTA By /s/ Steven J. Newby ------------------------------------ Title: Vice President $10,731,707.32 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By /s/ Felicia La Forgia ------------------------------------ Title: Vice President By /s/ Anthony Alessandro ------------------------------------ Title: Manager - ------------------ Total Commitments $550,000,000 ================== BANK OF AMERICA, N.A., as Syndication Agent By /s/ Gretchen P. Burud ------------------------------------ Title: Managing Director THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ Paul V. Farrell ------------------------------------ Title: Vice President Address: 270 Park Avenue New York, NY 10017 Attention: Paul V. Farrell Telecopy number: (212) 270-7625 Pricing Schedule ---------------- The "Euro-Dollar Margin" and the "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
- ------------------------------------------------------------------------------------------------------------------------------ | | LEVEL I | LEVEL | LEVEL | LEVEL | LEVEL | LEVEL | | | | II | III | IV | V | VI | |----------------------------------------------|------------|------------|------------|------------|------------|------------| | Facility Fee | .105% | .120% | .135% | .155% | .200% | .250% | | ------------ | | | | | | | |----------------------------------------------|------------|------------|------------|------------|------------|------------| | Euro-Dollar Margin | | | | | | | | ------------------ | | | | | | | | | | | | | | | | Syndicated Loans (other | | | | | | | | than Term Loans): | | | | | | | | | | | | | | | | Utilization | (less than) 33 1/3% | .145% | .180% | .215% | .245% | .350% | .550% | | | | | | | | | | Utilization | (less than) 33 1/3%, (greater than) 66 2/3%| .395% | .430% | .465% | .495% | .600% | .800% | | | | | | | | | | Utilization | (greater than) 66 2/3 | .520% | .555% | .590% | .620% | .725% | .925% | | | | | | | | | | | | | | | | | | Term Loans | .895% | .930% | .965% | .995% | 1.100% | 1.300% | - ------------------------------------------------------------------------------------------------------------------------------
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Borrower is rated "A+" or higher by S&P or "A1" or higher by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower is rated "A" by S&P or "A2" by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower is rated "A-" by S&P or "A3" by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower is rated "BBB+" by S&P or "Baa1" by Moody's and (ii) neither Level I Status, Level II Status nor Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower is rated "BBB" by S&P or "Baa2" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status nor Level IV Status exists. "Level VI Status" exists at any date if, at such date, no other Status exists. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status exists at any date. The "Utilization" applicable to any date is the percentage equivalent of a fraction the numerator of which is the sum of (i) the aggregate outstanding principal amount of the Loans determined at such time after giving effect, if one or more Loans are being made at such time, to any substantially concurrent application of the proceeds thereof to repay one or more other Loans plus (ii) the aggregate amount of the Letter of Credit Liabilities of all Banks at such time and the denominator of which is the aggregate amount of the Commitments at such date. If for any reason any Loans or Letter of Credit Liabilities remain outstanding following the termination of the Commitments, Utilization will be deemed to be more than 66 2/3%. The credit ratings to be utilized for purposes of this Schedule are those indicated for or assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating indicated for or assigned to any other debt security of the Borrower shall be disregarded. The ratings in effect for any day are those in effect at the close of business on such day. A change in credit rating will result in an immediate change in the applicable Status. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable Status is the higher of the two. 2 SCHEDULE I DUKE CAPITAL CORPORATION CREDIT FACILITIES (Being Replaced by this Agreement and the Related Agreement) 1. Credit Agreement (364-Day Facility) dated as of August 21, 2000 among Duke Capital Corporation, the lenders party thereto and The Chase Manhattan Bank, as administrative agent. 2. Credit Agreement (5-Year Facility) dated as of August 25, 1997 among Duke Capital Corporation, the lenders party thereto and The Chase Manhattan Bank, as administrative agent. EXHIBIT A NOTE New York, New York August 20, 2001 For value received, Duke Capital Corporation, a Delaware corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the date specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, 270 Park Avenue, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, the Bank, if the Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule attached hereto appropriate notations to evidence the foregoing information with respect to the Loans then outstanding; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Three-Year Credit Agreement dated as of August 20, 2001 among the Borrower, the banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. DUKE CAPITAL CORPORATION By ------------------------------------ Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL - ------------------------------------------------------------------------------- Amount of Amount Type Principal Maturity Notation Date of Loan of Loan Repaid Date Made By - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 2 EXHIBIT B FORM OF BID RATE QUOTE REQUEST ------------------------------ [Date] To: The Chase Manhattan Bank (the "Administrative Agent") From: Duke Capital Corporation (the "Borrower") Re: Three-Year Credit Agreement (the "Credit Agreement") dated as of August 20, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent and the Administrative Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Bid Rate Quotes for the following proposed Bid Rate Borrowing(s): Date of Borrowing: _______________________ Principal Amount* Interest Period** - ----------------- ---------------- $ Such Bid Rate Quotes should offer a Bid Rate [(General), (Indexed) or both]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. DUKE CAPITAL CORPORATION By ------------------------------------ Title: - ------------------------ * "Amount must be $10,000,000 or a larger multiple of $1,000,000. ** "Not less than one month (Bid Rate (Indexed) Auction) or not less than 7 days (Bid Rate (General) Auction), subject to the provisions of the definition of Interest Period. EXHIBIT C FORM OF INVITATION FOR BID RATE QUOTES -------------------------------------- To: [Name of Bank] Re: Invitation for Bid Rate Quotes to Duke Capital Corporation (the "Borrower") Pursuant to Section 2.03 of the Three-Year Credit Agreement dated as of August 20, 2001 among the Borrower, the Banks parties thereto, Bank of America, N.A., as Syndication Agent, and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Bid Rate Quotes to the Borrower for the following proposed Bid Rate Borrowing(s): Date of Borrowing: ___________________ Principal Amount Interest Period - ---------------- --------------- $ Such Bid Rate Quotes should offer a Bid Rate [(Indexed), (General) or both]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.] (New York City time) on [date]. THE CHASE MANHATTAN BANK By ------------------------------------ Authorized Officer EXHIBIT D FORM OF BID RATE QUOTE ---------------------- To: The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Attention: Re: Bid Rate Quote to Duke Capital Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated ________________, 20__, we hereby make the following Bid Rate Quote on the following terms: 1. Quoting Bank: ____________________________ 2. Person to contact at Quoting Bank: ___________________________________ 3. Date of Borrowing: _________________________________* 4. We hereby offer to make Bid Rate Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Bid Rate Amount** Period*** [(Indexed)****] [(General)*****] - -------- --------- --------------- ---------------- $ $ provided, that the aggregate principal amount of Bid Rate Loans for which the above offers may be accepted shall not exceed $___________.] - ------------------------ * As specified in the related Invitation. ** Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger of multiple of $1,000,000. *** Not less than one month or less than 30 days, as specified in the related Invitation, but no bid may be submitted for an Interest Period extending beyond bidder's Commitment Termination Date. No more than five bids are permitted for each Interest Period. **** Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000 of l%) and specify whether "PLUS" or "MINUS". ***** Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%). We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Three-Year Credit Agreement dated as of August 20, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and yourselves, as Administrative Agent, irrevocably obligates us to make the Bid Rate Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated: By: -------------------- ------------------------------------ Authorized Officer 2 EXHIBIT E-1 OPINION OF GENERAL COUNSEL OF THE BORROWER August 20, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: I am the Deputy General Counsel of Duke Capital Corporation (the "Borrower") and have acted as its counsel in connection with the Three-Year Credit Agreement (the "Credit Agreement"), dated as of August 20, 2001, among the Borrower, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms defined in the Credit Agreement are used herein as therein defined. This opinion letter is being delivered pursuant to Section 3.01 (b) of the Credit Agreement. In such capacity, I or attorneys under my direct supervision have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and any Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or, to my knowledge, of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or, to my knowledge, result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. 3. Except as disclosed in the reports referred to in Section 4.04 of the Credit Agreement, to my knowledge (but without independent investigation), there is no action, suit or proceeding pending or threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, which would be likely to be decided adversely to the Borrower or such Subsidiary and, as a result, to have a material adverse effect upon the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or which in any manner draws into question the validity of the Credit Agreement or any Notes. 4. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. The phrase "to my knowledge", as used in the foregoing opinion, refers to my actual knowledge without any independent investigation as to any such matters. I am a member of the Bar of the State of North Carolina and do not express any opinion herein concerning any law other than the law of the State of North Carolina, the General Corporation Law of the State of Delaware and the federal law of the United States of America. This opinion is rendered to you in connection with the above-referenced matter and may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other Person, firm or corporation without my prior written consent, except for Additional Banks and Assignees. My opinions expressed herein are as of the date hereof, and I undertake no obligation to advise you of any changes of applicable law or any other matters that may come to my attention after the date hereof that may affect my opinions expressed herein. Very truly yours, 2 EXHIBIT E-2 OPINION OF ROBINSON, BRADSHAW & HINSON, P.A., SPECIAL COUNSEL FOR THE BORROWER August 20, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: We have acted as counsel to Duke Capital Corporation, a Delaware corporation, in connection with the Three-Year Credit Agreement (the "Credit Agreement"), dated as of August 20, 2001, between the Duke Capital Corporation, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms used herein and not defined shall have the meanings given to them in the Credit Agreement. This opinion letter is being delivered pursuant to Section 3.01(b) of the Credit Agreement. In connection with this opinion, we also examined originals, or copies identified to our satisfaction, of such other documents and considered such matters of law and fact as we, in our professional judgment, have deemed appropriate to render the opinions contained herein. Where we have considered it appropriate, as to certain facts we have relied, without investigation or analysis of any underlying data contained therein, upon certificates or other comparable documents of public officials and officers or other appropriate representatives of the Borrower. In rendering the opinions contained herein, we have assumed, among other things, that the Credit Agreement and any Notes to be executed (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency of official, and (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the Borrower's certificate of incorporation or by-laws or any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. In addition, we have assumed that the Credit Agreement fully states the agreement between the Borrower and the Banks with respect to the matters addressed therein, and that the Credit Agreement constitutes a legal, valid and binding obligation of each Bank, enforceable in accordance with its respective terms. The opinions set forth herein are limited to matters governed by the laws of the State of North Carolina and the federal laws of the United States, and no opinion is expressed herein as to the laws of any other jurisdiction. For purposes of our opinions, we have disregarded the choice of law provisions in the Credit Agreement and, instead, have assumed with your permission that the Credit Agreement and the Notes are governed exclusively by the internal, substantive laws and judicial interpretations of the State of North Carolina. We express no opinion concerning any matter respecting or affected by any laws other than laws that a lawyer in North Carolina exercising customary professional diligence would reasonably recognize as being directly applicable to the Borrower, the Loans, the Letters of Credit, or any of them. Based upon and subject to the foregoing and the further limitations and qualifications hereinafter expressed, it is our opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Borrower and the Notes, if and when issued, will constitute legal, valid and binding obligations of the Borrower, in each case, enforceable against the Borrower in accordance with its terms. The opinions expressed above are subject to the following qualifications and limitations: 1. Enforcement of the Credit Agreement and the Notes is subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors' rights generally. 2. Enforcement of the Credit Agreement and the Notes is subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law) by which a court with proper jurisdiction may deny rights of specific performance, injunction, self-help, possessory remedies or other remedies. 3. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or any Note that (i) purport to excuse a party for liability for its own acts, (ii) purport to make void any act done in contravention thereof, (iii) purport to authorize a party to act in its sole discretion, (iv) require waivers or amendments to be made only in writing, (v) purport to effect waivers of constitutional, statutory or equitable rights or the effect of applicable laws, (vi) impose liquidated damages, penalties or forfeiture, or (vii) purport to indemnify a party for its own negligence or willful misconduct. Indemnification provisions in the Credit Agreement are subject to and may be rendered unenforceable by applicable law or public policy, including applicable securities law. 2 4. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or the Notes purporting to require a party thereto to pay or reimburse attorneys' fees incurred by another party, or to indemnify another party therefor, which may be limited by applicable statutes and decisions relating to the collection and award of attorneys' fees, including but not limited to North Carolina General Statutes ss. 6-21.2. 5. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement purporting to waive the right of jury trial. Under North Carolina General Statutes ss. 22B-10, a provision for the waiver of the right to a jury trial is unconscionable and unenforceable. 6. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement concerning choice of forum or consent to the jurisdiction of courts, venue of actions or means of service of process. 7. It is likely that North Carolina courts will enforce the provisions of the Credit Agreement providing for interest at a higher rate resulting from a Default or Event of Default (a "Default Rate") which rate is higher than the rate otherwise stipulated in the Credit Agreement. The law, however, disfavors penalties, and it is possible that interest at the Default Rate may be held to be an unenforceable penalty, to the extent such rate exceeds the rate applicable prior to a default under the Credit Agreement. Also, since North Carolina General Statutes ss. 24-10.1 expressly provides for late charges, it is possible that North Carolina courts, when faced specifically with the issue, might rule that this statutory late charge preempts any other charge (such as default interest) by a bank for delinquent payments. The only North Carolina case which we have found that addresses this issue is a 1978 Court of Appeals decision, which in our opinion is of limited precedential value, North Carolina National Bank v. Burnette, 38 N.C. App. 120, 247 S.E.2d 648 (1978), rev'd on other grounds, 297 N.C. 524, 256 S.E.2d 388 (1979). While the court in that case did allow interest after default (commencing with the date requested in the complaint) at a rate six percent in excess of pre-default interest, we are unable to determine from the opinion that any question was raised as to this being penal in nature, nor does the court address the possible question of the statutory late charge preempting a default interest surcharge. Therefore, since the North Carolina Supreme Court has not ruled in a properly presented case raising issues of its possible penal nature and those of North Carolina General Statutes ss. 24-10.1, we are unwilling to express an unqualified opinion that the Default Rate of interest prescribed in the Credit Agreement is enforceable. 8. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement relating to evidentiary standards or other standards by which the Credit Agreement are to be construed. This opinion letter is delivered solely for your benefit in connection with the Credit Agreement and, except for any Additional Bank or any Assignee which becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement, may not be 3 used or relied upon by any other Person or for any other purpose without our prior written consent in each instance. Our opinions expressed herein are as of the date hereof, and we undertake no obligation to advise you of any changes of applicable law or any other matters that may come to our attention after the date hereof that may affect our opinions expressed herein. Very truly yours, 4 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT -------------------------------------------- August 20, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Dear Sirs: We have participated in the preparation of the Three-Year Credit Agreement (the "Credit Agreement") dated as of August 20, 2001 among Duke Capital Corporation, a Delaware corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Administrative Agent"), and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.01 (c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes, if and when issued, constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person, firm or corporation without our prior written consent, except for Additional Banks and all Participants. Very truly yours, 2 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of ______________, 20__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), [DUKE CAPITAL CORPORATION,] THE CHASE MANHATTAN BANK [AND OTHER ISSUING BANK(S)], as Issuing Bank(s), THE CHASE MANHATTAN BANK, as Swingline Bank, and THE CHASE MANHATTAN BANK, as Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Three-Year Credit Agreement dated as of August 20, 2001 among Duke Capital Corporation (the "Borrower"), the Assignor and the other Banks party thereto, as Banks, Bank of America, N.A., as Syndication Agent, and the Administrative Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower and participate in Letters of Credit in an aggregate principal amount at any time outstanding not to exceed $_________;* WHEREAS, Syndicated Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, Letters of Credit with a total amount available for drawing thereunder of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans and Letter of Credit Liabilities, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;* - ------------------------ * The asterisked provisions shall be appropriately revised in the event of an assignment after the Commitment Termination Date. NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Syndicated Loans made by, and Letter of Credit Liabilities of, the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, [the Borrower,] the Issuing Banks, the Swingline Bank and the Administrative Agent, the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.* It is understood that facility and Letter of Credit fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent to Assignment. This Agreement is conditioned upon the consent of [the Borrower,] the Issuing Banks, the Swingline Bank and the Administrative Agent pursuant to Section 9.06(c) of the Credit Agreement. The - ------------------------ * Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 2 execution of this Agreement by [the Borrower,] the Issuing Banks, the Swingline Bank and the Administrative Agent is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver a Note, if required by the Assignee, payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 8. Administrative Questionnaire. Attached is an Administrative Questionnaire duly completed by the Assignee. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By ------------------------------------ Title: [ASSIGNEE] By ------------------------------------ Title: [DUKE CAPITAL CORPORATION By ------------------------------------ Title:] THE CHASE MANHATTAN BANK, as Issuing Bank, Swingline Bank and Administrative Agent By ------------------------------------ Title: [ISSUING BANK] By ------------------------------------ Title: 4 EXHIBIT H EXTENSION AGREEMENT The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement referred to below 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: Effective as of [date], the undersigned hereby agrees to extend its Commitment and Commitment Termination Date under the Three-Year Credit Agreement dated as of August 20, 2001 among Duke Capital Corporation, (the "Borrower"), the banks parties thereto, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Credit Agreement") for one year to [date to which its Commitment Termination Date is to be extended] pursuant to Section 2.01 (d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. This Extension Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK] By ------------------------------------ Title: Agreed and Accepted: DUKE CAPITAL CORPORATION, as Borrower By ------------------------------------ Title: THE CHASE MANHATTAN BANK, as Administrative Agent By ------------------------------------ Title: 2 EX-10.5 7 dex105.txt CREDIT AGREEMENT EXHIBIT 10.5 $475,000,000 364-DAY CREDIT AGREEMENT dated as of August 29, 2001 among Duke Energy Corporation, The Banks Listed Herein, Bank of America, NA., as Syndication Agent and The Chase Manhattan Bank, as Administrative Agent ------------------------------ J.P. Morgan Securities Inc. and Banc of America Securities LLC Joint Lead Arrangers and Joint Bookrunners Barclays Bank PLC, The Bank of Tokyo-Mitsubishi, Ltd., New York Branch and Deutsche Banc Alex. Brown Inc. Documentation Agents TABLE OF CONTENTS PAGE ---- ARTICLE I DEFINITIONS SECTION 1.01. Definitions .................................................. 1 SECTION 1.02. Accounting Terms and Determinations .......................... 11 SECTION 1.03. Types of Borrowings .......................................... 11 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend .......................................... 12 SECTION 2.02. Notice of Committed Borrowings ............................... 13 SECTION 2.03. Bid Rate Borrowings .......................................... 13 SECTION 2.04. Notice to Banks; Funding of Loans ............................ 17 SECTION 2.05. Registry; Notes .............................................. 18 SECTION 2.06. Maturity of Loans ............................................ 19 SECTION 2.07. Interest Rates ............................................... 19 SECTION 2.08. Fees ......................................................... 21 SECTION 2.09. Optional Termination or Reduction of Commitments ............. 21 SECTION 2.10. Method of Electing Interest Rates ............................ 22 SECTION 2.11. Mandatory Termination of Commitments ......................... 23 SECTION 2.12. Optional Prepayments ......................................... 23 SECTION 2.13. General Provisions as to Payments ............................ 24 SECTION 2.14. Funding Losses ............................................... 25 SECTION 2.15. Computation of Interest and Fees ............................. 25 SECTION 2.16. Regulation D Compensation .................................... 25 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness ................................................ 26 SECTION 3.02. Borrowings ................................................... 27 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Organization and Power ....................................... 28 i PAGE ---- SECTION 4.02. Corporate and Governmental Authorization; No Contravention ........................................................ 28 SECTION 4.03. Binding Effect ............................................... 28 SECTION 4.04. Financial Information ........................................ 28 SECTION 4.05. Regulation U ................................................. 29 SECTION 4.06. Litigation ................................................... 29 SECTION 4.07. Compliance with Laws ......................................... 29 SECTION 4.08. Taxes ........................................................ 30 SECTION 4.09. Public Utility Holding Company Act ........................... 30 ARTICLE 5 COVENANTS SECTION 5.01. Information .................................................. 30 SECTION 5.02. Payment of Taxes ............................................. 32 SECTION 5.03. Maintenance of Property; Insurance ........................... 32 SECTION 5.04. Maintenance of Existence ..................................... 33 SECTION 5.05. Compliance with Laws ......................................... 33 SECTION 5.06. Books and Records ............................................ 33 SECTION 5.07. Negative Pledge .............................................. 33 SECTION 5.08. Consolidations, Mergers and Sales of Assets .................. 35 SECTION 5.09. Use of Proceeds .............................................. 35 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default ............................................ 36 SECTION 6.02. Notice of Default ............................................ 38 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization ................................ 38 SECTION 7.02. Administrative Agent and Affiliates .......................... 38 SECTION 7.03. Action by Administrative Agent ............................... 38 SECTION 7.04. Consultation with Experts .................................... 39 SECTION 7.05. Liability of Administrative Agent ............................ 39 SECTION 7.06. Indemnification .............................................. 39 SECTION 7.07. Credit Decision .............................................. 40 SECTION 7.08. Successor Administrative Agent ............................... 40 SECTION 7.09. Administrative Agent's Fee ................................... 40 SECTION 7.10. Documentation Agents ......................................... 40 ii PAGE ---- ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair ..... 41 SECTION 8.02. Illegality ................................................... 41 SECTION 8.03. Increased Cost and Reduced Return ............................ 42 SECTION 8.04. Taxes ........................................................ 43 SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans .... 46 SECTION 8.06. Substitution of Bank; Termination Option ..................... 46 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices ...................................................... 47 SECTION 9.02. No Waivers ................................................... 48 SECTION 9.03. Expenses; Indemnification .................................... 48 SECTION 9.04. Sharing of Set-offs .......................................... 48 SECTION 9.05. Amendments and Waivers ....................................... 49 SECTION 9.06. Successors and Assigns ....................................... 49 SECTION 9.07. Collateral ................................................... 51 SECTION 9.08. Confidentiality .............................................. 51 SECTION 9.09. Governing Law; Submission to Jurisdiction .................... 51 SECTION 9.10. Counterparts; Integration .................................... 52 SECTION 9.11. WAIVER OF JURY TRIAL ......................................... 52 PRICING SCHEDULE SCHEDULE I - Duke Energy Corporation Credit Facility (Being Replaced by this Agreement and the Related Agreement) EXHIBIT A - Note EXHIBIT B - Form of Bid Rate Quote Request EXHIBIT C - Form of Invitation for Bid Rate Quotes EXHIBIT D - Form of Bid Rate Quote EXHIBIT E-1 - Opinion of General Counsel of the Borrower EXHIBIT E-2 - Opinion of Special Counsel for the Borrower EXHIBIT F - Opinion of Davis Polk & Wardwell, Special Counsel for the Administrative Agent EXHIBIT G - Assignment and Assumption Agreement EXHIBIT H - Extension Agreement iii 364 DAY CREDIT AGREEMENT 364-DAY CREDIT AGREEMENT dated as of August 29, 2001 among DUKE ENERGY CORPORATION, the BANKS listed on the signature pages hereof, BANK OF AMERICA, N.A., as Syndication Agent, and THE CHASE MANHATTAN BANK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Additional Bank" means any financial institution that becomes a Bank for purposes hereof in connection with the replacement of a Bank pursuant to Section 8.06. "Administrative Agent" means The Chase Manhattan Bank in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Bid Rate Loans, its Bid Rate Lending Office. "Approved Officer" means the president, the treasurer, an assistant treasurer or the controller of the Borrower or such other representative of the Borrower as may be designated by any one of the foregoing with the consent of the Administrative Agent. "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank or other financial institution listed on the signature pages hereof, each Additional Bank, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Committed Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Bid Rate (General)" has the meaning set forth in Section 2.03(d). "Bid Rate (General) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rates (General) pursuant to Section 2.03. "Bid Rate (General) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (General) Auction. "Bid Rate (Indexed) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rate (Indexed) Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Bid Rate (Indexed) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (Indexed) Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01). "Bid Rate (Indexed) Margin" has the meaning set forth in Section 2.03(d). "Bid Rate Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Bid Rate Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Bid Rate Lending Offices for its Bid Rate (Indexed) Loans, on the one hand, and its Bid Rate (General) Loans, on the other hand, in which case all references herein to the Bid Rate Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. 2 "Bid Rate Loan" means a Bid Rate (Indexed) Loan or a Bid Rate (General) Loan. "Bid Rate Quote" means an offer by a Bank to make a Bid Rate Loan in accordance with Section 2.03. "Borrower" means Duke Energy Corporation, a North Carolina corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Commitment" means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on the signature pages hereof, and (ii) with respect to each Additional Bank or Assignee which becomes a bank pursuant to Sections 8.06 and 9.06(c), the amount of the Commitment thereby assumed by it, in each case as such amount may from time to time be reduced pursuant to Section 2.09, 2.11, 8.06 or 9.06(c) or increased pursuant to Section 8.06 or 9.06(c). "Commitment Termination Date" means, for each Bank, August 28, 2002, as such date may be extended from time to time with respect to such Bank pursuant to Section 2.01(c) or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Committed Loan" means a Loan made by a Bank pursuant to Section 2.01 (a) or 2.01(b); provided that, if any loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Consolidated Subsidiary" means, for any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date; unless otherwise specified "Consolidated Subsidiary" means a Consolidated Subsidiary of the Borrower. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Documentation Agent" means each of Barclays Bank PLC, The Bank of Tokyo-Mitsubishi, Ltd., New York Branch and Deutsche Banc Alex. Brown Inc., 3 in its capacity as a documentation agent in connection with the credit facility provided under this Agreement. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Endowment" means the Duke Endowment, a charitable common law trust established by James B. Duke by Indenture dated December 11, 1924. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or 4 identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" means the applicable rate per annum determined in accordance with the Pricing Schedule. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Chase Manhattan Bank and Bank of America, N.A. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.16. "Event of Default" has the meaning set forth in. Section 6.01. "Existing Credit Agreement" means the credit facility identified in Schedule I hereto, as amended and in effect on the Effective Date. "Facility Fee Rate" has the meaning set forth in the Pricing Schedule. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, 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 Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Chase Manhattan Bank (or its successor as Administrative Agent) on such day on such transactions as determined by the Administrative Agent. 5 "Final Maturity Date" means, for each Bank, the first anniversary of its Commitment Termination Date or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day; provided that the Final Maturity Date for all Banks shall be no later than August 28, 2007. "Fixed Rate Loans" means Euro-Dollar Loans or Bid Rate Loans (excluding Bid Rate (Indexed) Loans bearing interest at the Base Rate) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time, provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been if it had not been so converted or made. "Indebtedness" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services purchased, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired, (iv) all indebtedness under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such Person is liable as lessee, (v) the face amount of all outstanding letters of credit issued for the account of such Person (other than letters of credit relating to indebtedness included in Indebtedness of such Person pursuant to another clause of this definition) and, without duplication, the unreimbursed amount of all drafts drawn thereunder, (vi) indebtedness secured by any 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), (vii) all direct guarantees of Indebtedness referred to above of another Person, (viii) all amounts payable in connection with mandatory redemptions or repurchases of preferred stock and (ix) 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. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six, or, if deposits of a corresponding maturity are generally available in the London interbank market, nine or twelve, months thereafter, as the Borrower may elect in such notice; provided that: 6 (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; (2) with respect to each Bid Rate (Index) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of months thereafter (but not less than one month) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; and (3) with respect to each Bid Rate (General) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and provided further that: (x) no Interest Period applicable to any Loan of any Bank which begins before such Bank's Commitment Termination Date may end after such Bank's Commitment Termination Date; and (y) no Interest Period applicable to any Loan of any Bank may end after such Bank's Final Maturity Date. 7 "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment Grade Status" exists as to any Person at any date if all senior long-term unsecured debt securities of such Person outstanding at such date which had been rated by S&P or Moody's are rated BBB- or higher by S&P or Baa3 or higher by Moody's, as the case may be. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Committed Loan or a Bid Rate Loan and "Loans" means Committed Loans or Bid Rate Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(b). "Material Debt" means Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount exceeding $150,000,000. "Material Plan" has the meaning set forth in Section 6.01(1). "Material Subsidiary" means at any time any Subsidiary of the Borrower having, together with its Subsidiaries, consolidated assets in excess of 10% of the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such time. "Moody's" means Moody's Investors Service, Inc. "Mortgage Indenture" means the First and Refunding Mortgage between the Borrower and The Chase Manhattan Bank, as successor trustee, dated as of December 1, 1927, as amended or supplemented from time to time. "Notes" means promissory notes of the Borrower, in the form required by Section 2.05, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. 8 "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Bid Rate Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.10(b). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is either (i) maintained by a member of the ERISA Group for employees of a member of the ERISA Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pricing Schedule" means the Pricing Schedule attached hereto. "Prime Rate" means the rate of interest publicly announced by The Chase Manhattan Bank in New York City from time to time as its Prime Rate. Each change in the Prime Rate shall be effective from and including the day such change is publicly announced. "Quarterly Payment Date" means the first Domestic Business Day of each January, April, July and October. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. 9 "Related Agreement" means the Three-Year Credit Agreement dated as of the date hereof among the Borrower, the banks and other financial institutions and Agents from time to time parties thereto, as amended and in effect from time to time. "Required Banks" means at any time Banks (i) having at least 51% of the sum of the aggregate amount of the Commitments or (ii) if all the Commitments shall have been terminated, holding at least 51% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(a); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Revolving Credit Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Revolving Credit Period" means, with respect to any Bank, the period from and including the Effective Date to but not including its Commitment Termination Date. "S&P" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Substantial Assets" means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole. "Term Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(b); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Term Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. 10 "Trust" means The Doris Duke Trust, a trust established by James B. Duke by Indenture dated December 11, 1924 for the benefit of certain relatives. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or the Plan under Title IV of ERISA. "Utilization" has the meaning set forth in the Pricing Schedule. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Fixed Rate Borrowing" is a Euro-Dollar Borrowing or a Bid Rate Borrowing (excluding any such Borrowing consisting of Bid Rate (Indexed) Loans bearing interest at the Base Rate), and a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Bid Rate Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). 11 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. (a) Revolving Credit Loans. During its Revolving Credit Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection from time to time in amounts such that the aggregate principal amount of Revolving Credit Loans by such Bank at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this subsection shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments in effect on the date of Borrowing; provided that, if the Interest Period selected by the Borrower for a Borrowing would otherwise end after the Commitment Termination Dates of some but not all Banks, the Borrower may in its Notice of Committed Borrowing elect not to borrow from those Banks whose Commitment Termination Dates fall prior to the end of such Interest Period. Within the foregoing limits, the Borrower may borrow under this subsection (a), or to the extent permitted by Section 2.12, prepay Loans and reborrow at any time during the Revolving Credit Periods under this subsection (a). (b) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Borrower on its Commitment Termination Date in an amount up to but not exceeding the amount of its Commitment; provided that no Bank shall be obligated to make a loan pursuant to this subsection if any Commitment is extended on such date pursuant to Section 2.01(c). Each Borrowing under this Section 2.01(b) shall be made from the several Banks having the same Commitment Termination Date ratably in proportion to their respective Commitments. (c) Extension of Commitments. On no more than four separate occasions, the Borrower may, upon not less than 45 days but no earlier than 60 days notice prior to the then current Commitment Termination Dates to the Administrative Agent (which shall notify each Bank of receipt of such request), propose to extend the Commitment Termination Dates for an additional one-year period measured from the Commitment Termination Dates then in effect. Each Bank shall endeavor to respond to such request, whether affirmatively or negatively (such determination in the sole discretion of such Bank), by notice to the Borrower and the Administrative Agent not more than 45 days nor less than 28 days prior to such Bank's Commitment Termination Date. Subject to the execution by the Borrower, the Administrative Agent and such Banks of a duly completed Extension Agreement in substantially the form of Exhibit H, the 12 Commitment Termination Date applicable to the Commitment of each Bank so affirmatively notifying the Borrower and the Administrative Agent shall be extended for the period specified above; provided that no Commitment Termination Date of any Bank shall be extended unless Banks having Commitments in an aggregate amount equal to at least 66 2/3% in aggregate amount of the Commitments in effect at the time any such extension is requested shall have elected so to extend their Commitments. Any Bank which does not give such notice to the Borrower and the Administrative Agent shall be deemed to have elected not to extend as requested, and the Commitment of each non-extending Bank shall terminate on its Commitment Termination Date determined without giving effect to such requested extension. The Borrower may, in accordance with Section 8.06, designate another bank or other financial institution (which may be, but need not be, an extending Bank) to replace a non-extending Bank. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate; and (d) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Bid Rate Borrowings. (a) The Bid Rate Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks at any time prior to their respective Commitment Termination Dates to make offers to make Bid Rate Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. 13 (b) Bid Rate Quote Request. When the Borrower wishes to request offers to make Bid Rate Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Bid Rate Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a Bid Rate (Indexed) Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day, (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Bid Rate Quotes requested are to set forth a Bid Rate (Indexed) or a Bid Rate (General) rate or both such rates. The Borrower may request offers to make Bid Rate Loans for more than one Interest Period in a single Bid Rate Quote Request. (c) Invitation for Bid Rate Quotes. Promptly upon receipt of a Bid Rate Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Bid Rate Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Bid Rate Quotes offering to make the Bid Rate Loans to which such Bid Rate Quote Request relates in accordance with this Section. (d) Submission and Contents of Bid Rate Quotes. (i) Each Bank may submit a Bid Rate Quote containing an offer or offers to make Bid Rate Loans in response to any Invitation for Bid Rate Quotes. Each Bid Rate Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:30 A.M. (New York City time) 14 on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective); provided that Bid Rate Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) 1:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction. Subject to Articles 3 and 6, any Bid Rate Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Bid Rate Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Bid Rate Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000 and (y) may not exceed the principal amount of Bid Rate Loans for each Interest Period for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Bid Rate Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a Bid Rate (Indexed) Auction, the margin above or below the applicable London Interbank Offered Rate (the "Bid Rate (Indexed) Margin") offered for each such Bid Rate Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of a Bid Rate (General) Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Bid Rate (General)") offered for each such Bid Rate Loan, and (E) the identity of the quoting Bank. 15 A Bid Rate Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Bid Rate Quotes. (iii) Any Bid Rate Quote shall be disregarded if: (A) it is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection 2.03(d)(ii); (B) it contains qualifying, conditional or similar language beyond that contemplated by Exhibit D; (C) it proposes terms other than or in addition to those set forth in the applicable Invitation for Bid Rate Quotes; (D) it arrives after the time set forth in subsection 2.03(d)(i); or (E) the Commitment Termination Date of the Bank submitting such Bid Rate Quote falls prior to the last day of the requested Interest Period for which such Bank offers to make a Bid Rate Loan. (e) Notice to Borrower. The Administrative Agent shall promptly but in no event later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), notify the Borrower of the terms (x) of any Bid Rate Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Bid Rate Quote that amends, modifies or is otherwise inconsistent with a previous Bid Rate Quote submitted by such Bank with respect to the same Bid Rate Quote Request. Any such subsequent Quote shall be disregarded by the Administrative Agent unless such subsequent Quote is submitted solely to correct a manifest error in such former Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Loans for which offers have been received for each Interest Period specified in the related Bid Rate Quote Request, (B) the respective principal amounts and Bid Rate (Indexed) Margins or Bid Rate 16 (General) Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Bid Rate Loans for which offers in any single Bid Rate Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Bid Rate Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Bid Rate Quote in whole or in part; provided that: (i) the aggregate principal amount of each Bid Rate Borrowing may not exceed the applicable amount set forth in the related Bid Rate Quote Request, (ii) the principal amount of each Bid Rate Borrowing must be $10,000,000 or a larger multiple of $1,000,000, and (iii) acceptance of offers may only be made on the basis of ascending Bid Rate (Indexed) Margins or Bid Rate (General) Rates, as the case may be. (g) Allocation by Administrative Agent. If offers are made by two more Banks with the same Bid Rate (Indexed) Margins or Bid Rate (General), as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Rate Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Bid Rate Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Banks; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank 17 of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and, if such Bank shall not have made such payment within two Domestic Business Days of demand therefor, the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. (d) The failure of any Bank to make the Loan to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make a Loan on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. SECTION 2.05. Registry; Notes. (a) The Administrative Agent shall maintain a register (the "Register") on which it will record the Commitment of each Bank, each Loan made by such Bank and each repayment of any Loan made by such Bank. Any such recordation by the Administrative Agent on the Register shall be conclusive, absent manifest error. Failure to make any such recordation, 18 or any error in such recordation, shall not affect the Borrower's obligations hereunder. (b) The Borrower hereby agrees that, promptly upon the request of any Bank at any time, the Borrower shall deliver to such Bank a duly executed Note, in substantially the form of Exhibit A hereto, payable to the order of such Bank and representing the obligation of the Borrower to pay the unpaid principal amount of the Loans made to the Borrower by such Bank, with interest as provided herein on the unpaid principal amount from time to time outstanding. (c) Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and each Bank receiving a Note pursuant to this Section, if such Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of such Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Such Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. (a) Each Revolving Credit Loan made by any Bank shall mature, and the principal amount thereof shall be due and payable together with accrued interest thereon, on the Commitment Termination Date of such Bank. (b) The Term Loans of each Bank shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Final Maturity Date of such Bank. (c) Each Bid Rate Loan included in any Bid Rate Borrowing shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date, at maturity and on the date of termination of the Commitments in their entirety. Any overdue principal of or overdue interest on any Base Rate Loan 19 shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means the rate appearing on Page 3750 of the Telerate Service Company (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of the Telerate Service, as may be nominated by the British Bankers' Association for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not so available at such time for any reason, then the "London Interbank Offered Rate" for such Interest Period shall be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such interest Period in an amount approximately equal to the principal amount of the Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation furnished by the remaining Euro-Dollar Reference Bank or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. (c) Any overdue principal of or overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Loan at the date such payment was due and (ii) the Base Rate for such day. 20 (d) Subject to Section 8.01(a), each Bid Rate (Indexed) Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(b) as if each Euro-Dollar Reference Bank were to participate in the related Bid Rate (Indexed) Borrowing ratably in proportion to its Commitment) plus (or minus) the Bid Rate (Indexed) Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Bid Rate (General) Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Bid Rate (General) quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or overdue interest on any Bid Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (e) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks by telecopy, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error unless the Borrower raises an objection thereto within five Domestic Business Days after receipt of such notice. SECTION 2.08. Fees. (a) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Bank a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding such Bank's Commitment Termination Date, on the daily average aggregate amount of such Bank's Commitment (whether used or unused) and (ii) from and including such Bank's Commitment Termination Date to but excluding the date such Bank's Loans shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of such Bank's Committed Loans. (b) Payments. Accrued fees under this Section for the account of any Bank shall be payable quarterly in arrears on each Quarterly Payment Date and upon such Bank's Commitment Termination Date and Final Maturity Date (and, if later, the date the Loans of such Bank shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time, or (ii) ratably reduce from time to time by an aggregate 21 amount of $10,000,000 or any larger multiple of $1,000,000 the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.14 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 11:00 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans, provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection 2.10(a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans being converted are to be Fixed Rate 22 Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of the term "Interest Period". (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to subsection 2.10(a) above, the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If no Notice of Interest Rate Election is timely received prior to the end of an Interest Period for any Group of Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans as of the last day of such Interest Period. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.02. SECTION 2.11. Mandatory Termination of Commitments. The Commitment of each Bank shall terminate on such Bank's Commitment Termination Date, and any Revolving Credit Loans of such Bank then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. Optional Prepayments. (a) The Borrower may (i) upon notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on any Domestic Business Day prepay on such Domestic Business Day any Group of Base Rate Loans or any Bid Rate Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a) and (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent not later than 11:00 A.M. (New York City time) prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and together with any additional amounts payable pursuant to Section 2.14. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Except as provided in subsection 2.12(a), the Borrower may not prepay all or any portion of the principal amount of any Bid Rate Loan prior to the 23 maturity thereof except with the express written consent of the Bank holding such Bid Rate Loan. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.13. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 1:00 P.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank in like funds its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Bid Rate Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate. 24 SECTION 2.14. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Euro-Dollar Loan is converted to a Base Rate Loan or continued as a Euro-Dollar Loan for a new Interest Period (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.12(c), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to the Borrower a certificate setting forth in reasonable detail the calculation of the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.15. Computation of Interest and Fees. Interest based on the Prime Rate and facility fees hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.16. Regulation D Compensation. In the event that a Bank is required to maintain reserves of the type contemplated by the definition of "Euro-Dollar Reserve Percentage", such Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least three Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. Each such notification shall be accompanied by such information as the Borrower may reasonably request. 25 "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telecopy, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent of (i) an opinion of the general counsel of the Borrower, substantially in the form of Exhibit E-1 hereto and (ii) an opinion of Robinson, Bradshaw & Hinson, P.A., special counsel for the Borrower, substantially in the form of Exhibit E-2 hereto, and, in each case, covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) receipt by the Administrative Agent of an opinion of Davis Polk & Wardwell, special counsel for the Administrative Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Administrative Agent of a certificate signed by a Vice President, the Treasurer, an Assistant Treasurer or the Controller of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; 26 (e) receipt by the Administrative Agent of all documents it may have reasonably requested prior to the date hereof relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and (f) receipt by the Administrative Agent of evidence satisfactory to it of the payment of all principal of and interest on any loans outstanding under, and all accrued commitment fees under, the Existing Credit Agreements and the cancellation or the expiration of any letter of credit issued thereunder; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than August 29, 2001. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. The Borrower and the Banks party to the Existing Credit Agreement, comprising the "Required Banks" as defined therein, hereby agree that (i) the commitments of the lenders under the Existing Credit Agreement shall terminate in their entirety immediately and automatically upon the effectiveness of this Agreement, without further action by any party to the Existing Credit Agreement, (ii) all accrued fees under the Existing Credit Agreement shall be due and payable at such time and (iii) subject to the funding loss indemnities in the Existing Credit Agreement, the Borrower may prepay any and all loans outstanding thereunder on the date of effectiveness of this Agreement. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03; (b) the fact that, immediately after such Borrowing the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (c) the fact that, immediately after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(c) and 4.06) shall be true on and as of the date of such Borrowing. 27 Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d). ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Organization and Power. The Borrower is duly organized, validly existing and in good standing under the laws of North Carolina and has all requisite powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, if and when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 2000 and the related consolidated statements of income, cash flows, capitalization and retained earnings for the fiscal year then ended, reported on by Deloitte & Touche, copies of which have been delivered to each of the Banks, fairly present, in 28 conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 2001 and the related unaudited consolidated statements of income and cash flows for the six months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and changes in financial position for such six-month period (subject to normal year-end adjustments and the absence of footnotes). (c) Since December 31, 2000, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.05. Regulation U. The Borrower and its Material Subsidiaries are not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System) and no proceeds of any Borrowing by the Borrower will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. Not more than 25% of the value of the assets of the Borrower and its Material Subsidiaries is represented by margin stock. SECTION 4.06. Litigation. Except as disclosed in the reports referred to in Section 4.04, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which would be likely to be decided adversely to Borrower or such Subsidiary and, as a result, have a material adverse effect upon the business, consolidated financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or any Note. SECTION 4.07. Compliance with Laws. The Borrower and each Material Subsidiary is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) 29 non-compliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 4.08. Taxes. The Borrower and its Material Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Material Subsidiary except (i) where nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or (ii) where the same are contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.09. Public Utility Holding Company Act. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows, capitalization and retained earnings for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated 30 balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by an Approved Officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of an Approved Officer of the Borrower stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five days after any officer of the Borrower with responsibility relating thereto obtains knowledge of any Default, if such Default is then continuing, a certificate of an Approved Officer of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on forms 10-K, 10-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (f) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Material Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Material Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Material Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose material liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Material Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Material Plan pursuant to Section 4063 of ERISA, a copy of such notice; 31 or (vii) fails to make any payment or contribution to any Material Plan or makes any amendment to any Material Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (g) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. Information required to be delivered pursuant to these Sections 5.01(a), 5.01(b) and 5.01(e) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Securities and Exchange Commission website on the Internet at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01 (c) and (ii) the Borrower shall deliver paper copies of the information referred to in Sections 5.01(a), 5.01 (b) and 5.01 (e) to any Bank which requests such delivery. SECTION 5.02. Payment of Taxes. The Borrower will pay and discharge, and will cause each Material Subsidiary to pay and discharge, at or before maturity, all their tax liabilities, except where (i) nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Material Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property; Insurance. (a) The 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) The Borrower will, and will cause each of its Material Subsidiaries to, maintain (either in the name of the Borrower or in such 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 the Borrower or any such Material 32 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 Borrower or such Material Subsidiary operates self-insure; and will furnish to the Banks, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. SECTION 5.04. Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate or other legal existence and their respective rights, privileges and franchises material to the normal conduct of their respective businesses; provided that nothing in this Section 5.04 shall prohibit the termination of any right, privilege or franchise of the Borrower or any Material Subsidiary or of the corporate or other legal existence of any Material Subsidiary or the change in form of organization of the Borrower or any Material Subsidiary if the Borrower in good faith determines that such termination or change is in the best interest of the Borrower, is not materially disadvantageous to the Banks and, in the case of a change in the form of organization of the Borrower, the Administrative Agent has consented thereto. SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause each Material Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) noncompliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.06. Books and Records. The Borrower will keep, and will cause each Material Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all financial transactions in relation to its business and activities in accordance with its customary practices; and will permit, and will cause each Material Subsidiary to permit, representatives of any Bank at such Bank's expense (accompanied by a representative of the Borrower, if the Borrower so desires) to visit any of their respective properties, to examine any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired. SECTION 5.07. Negative Pledge. The Borrower will not create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: 33 (a) Liens granted by the Borrower existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $100,000,000; (b) the Lien of the Mortgage Indenture securing Indebtedness outstanding on the date of this Agreement or issued hereafter; (c) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower and not created in contemplation of such event; (d) any Lien existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition; (e) 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, (f) 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, provided that such Indebtedness is not increased and is not secured by any additional assets; (g) 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 generally accepted accounting principles; (h) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen 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 generally accepted accounting principles; (i) 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 34 similar obligations or arising as a result of progress payments under government contracts; (j) 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; (k) Liens with respect to judgments and attachments which do not result in an Event of Default; (1) 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; (m) 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 at which Investment Grade Status does not exist as to the Borrower and (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; and (n) Liens not otherwise permitted by the foregoing clauses of this Section securing obligations in an aggregate principal or face amount at any date not to exceed $500,000,000. SECTION 5.08. Consolidations, Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, Substantial Assets to any Person (other than a Subsidiary); provided that the Borrower may merge with another Person if the Borrower is the corporation surviving such merger and, after giving effect thereto, no Default shall have occurred and be continuing. SECTION 5.09. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for its general corporate purposes, including liquidity support for outstanding commercial paper and acquisitions. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. 35 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay, within five days of the due date thereof, any interest, fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04, 5.07, 5.08, or the second sentence of 5.09, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt (other than the Loans) when due or within any applicable grace period; (f) any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto so as to result in the acceleration of the maturity of Material Debt; (g) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to, or shall fail generally to, pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; 36 (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $50,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 90 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (j) a judgment or other court order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Material Subsidiary and such judgment or order shall continue without being vacated, discharged, satisfied or stayed or bonded pending appeal for a period of 45 days; (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than trustees and participants in employee benefit plans of the Borrower and its Subsidiaries or the Endowment or Trust, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of 50% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period (together with any successors nominated or appointed by such directors in the ordinary course) shall cease to constitute a majority of the board of directors of the Borrower; or 37 (1) an "Event of Default" as defined in the Related Agreement shall have occurred and be continuing; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having more than 66-2/3% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) if requested by Banks holding more than 66-2/3% in aggregate principal amount of the Loans, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.01 (c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Administrative Agent and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 7.03. Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without 38 limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Administrative Agent. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it in good faith to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. 39 SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Administrative Agent. The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower, with the consent of the Required Banks (such consent not to be unreasonably withheld or delayed), shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder; provided that if such successor Administrative Agent is appointed without the consent of the Borrower, such successor Administrative Agent may be replaced by the Borrower with the consent of the Required Banks. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. SECTION 7.09. Administrative Agent's Fee. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent. SECTION 7.10. Documentation Agents. None of the Documentation Agents, in their capacity as such, shall have any duties or obligations of any kind under this Agreement. 40 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing or Bid Rate (Indexed) Borrowing: (a) the Administrative Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Euro-Dollar Borrowing, Banks having 66-2/3% or more of the aggregate amount of the affected Loans advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Borrowing is a Bid Rate (Indexed) Borrowing, the Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund any of its Euro-Dollar Loans and such 41 Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the good faith exercise of its discretion. If such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after (x) the date of this Agreement, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of any related Bid Rate Quote, in the case of any Bid Rate Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) issued on or after such date of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition (other than in respect of Taxes or Other Taxes) affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction; provided that no such amount shall be payable 42 with respect to any period commencing more than 90 days prior to the date such Bank first notifies the Borrower of its intention to demand compensation therefor under this Section 8.03(a). (b) If any Bank shall have determined that, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, 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 any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency given or made after the date of this Agreement, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; provided that no such amount shall be payable with respect to any period commencing less than 30 days after the date such Bank first notifies the Borrower of its intention to demand compensation under this Section 8.03(b). (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Administrative Agent, taxes imposed on its income, net worth or gross receipts and franchise or similar taxes 43 imposed on it by a jurisdiction under the laws of which such Bank or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments except to the extent that such Bank is subject to United States withholding tax by reason of a U.S. Tax Law Change. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. "U.S. Tax Law Change" means with respect to any Bank or Participant the occurrence (x) in the case of each Bank listed on the signature pages hereof, after the date of its execution and delivery of this Agreement and (y) in the case of any other Bank, after the date such Bank shall have become a Bank hereunder, and (z) in the case of each Participant, after the date such Participant became a Participant hereunder, of the adoption of any applicable U.S. federal law, U.S. federal rule or U.S. federal regulation relating to taxation, or any change therein, or the entry into force, modification or revocation of any income tax convention or treaty to which the United States is a party. (b) Any and all payments by the Borrower to or for the account of any Bank or the Administrative Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid 44 within 15 days after such Bank or the Administrative Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter as required by law (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower two completed and duly executed copies of Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, or other documentation reasonably requested by the Borrower, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a U.S. Tax Law Change), such Bank shall not be entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to any Taxes or Other Taxes which would not have been payable had such form been so provided, provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes (it being understood, however, that the Borrower shall have no liability to such Bank in respect of such Taxes). (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will take such action (including changing the jurisdiction of its Applicable Lending Office) as in the good faith judgment of such Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. (g) If any Bank or the Administrative Agent receives a refund (including a refund in the form of a credit against taxes that are otherwise payable by the Bank or the Administrative Agent) of any Taxes or Other Taxes for which the Borrower has made a payment under Section 8.04(b) or (c) and such refund was received from the taxing authority which originally imposed such Taxes or Other Taxes, such Bank or the Administrative Agent agrees to reimburse the Borrower 45 to the extent of such refund, provided that nothing contained in this paragraph (g) shall require any Bank or the Administrative Agent to seek any such refund or make available its tax returns (or any other information relating to its taxes which it deems to be confidential). SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or to continue or convert outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted to) Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Bank; Termination Option. If (i) the obligation of any Bank to make or to convert or continue outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or 8.04, (iii) any Bank exercises its right not to extend its Commitment Termination Date pursuant to Section 2.01(c) or (iv) Investment Grade Status ceases to exist as to any Bank, then: (a) the Borrower shall have the right, with the assistance of the Administrative Agent, to designate a substitute bank or banks (which may be one or more of the Banks) mutually satisfactory to the Borrower and the Administrative Agent (whose consent shall not be unreasonably withheld or 46 delayed) to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto, the outstanding Loans of such Bank and assume the Commitment of such Bank, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder and all other amounts payable by the Borrower to such Bank hereunder plus such amount, if any, as would be payable pursuant to Section 2.14 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment; and (b) if at the time Investment Grade Status exists as to the Borrower, the Borrower may elect to terminate this Agreement as to such Bank, provided that (i) the Borrower notifies such Bank through the Administrative Agent of such election at least three Euro-Dollar Business Days before the effective date of such termination and (ii) the Borrower repays or prepays the principal amount of all outstanding Loans made by such Bank plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder plus all other amounts payable by the Borrower to such Bank hereunder, not later than the effective date of such termination. Upon satisfaction of the foregoing conditions, the Commitment of such Bank shall terminate on the effective date specified in such notice. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address or telecopy or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telecopy or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telecopy or telex, when such telecopy or telex is transmitted to the telecopy or telex number specified in this Section and the appropriate answerback or confirmation slip, as the case may be, is received or (ii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 3 shall not be effective until delivered. 47 SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Administrative Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due with respect to the Loans held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount then due with respect to the Loans held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under this Agreement. 48 SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Administrative Agent are affected thereby, by the Administrative Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any interest thereon or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) change the provisions of Section 9.04. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may, with the consent (unless an Event of Default then exists) of the Borrower (such consent not to be unreasonably withheld or delayed), at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to the performance by such Participant of the obligations of a Bank thereunder. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of 49 this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree)) of all, of its rights and obligations under this Agreement and its Note (if any), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and only with and subject to) the prior written consent of the Administrative Agent (which shall not be unreasonably withheld or delayed) and, so long as no Event of Default has occurred and is continuing, the Borrower (given in its sole discretion), provided that unless such assignment is of the entire right, title and interest of the transferor Bank hereunder, after making any such assignment such transferor Bank shall have a Commitment of at least $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree). Upon execution and delivery of such instrument of assumption and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required by the Assignee, a Note is issued to the Assignee. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. All assignments shall be subject to a transaction fee established by, and payable by the transferor Bank to, the Administrative Agent for its own account (which shall not exceed $5,000). (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note (if any) to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder or modify any such obligations. (e) No Assignee, Participant or other transferee of any Bank's rights (including any Applicable Lending Office other than such Bank's initial 50 Applicable Lending Office) shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Confidentiality. The Administrative Agent and each Bank agrees to keep any information delivered or made available by the Borrower pursuant to this Agreement confidential from anyone other than persons employed or retained by such Bank and its affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby; provided that nothing herein shall prevent any Bank from disclosing such information (a) to any other Bank or to the Administrative Agent, (b) to any other Person if reasonably incidental to the administration of the credit facility contemplated hereby, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) which had been publicly disclosed other than as a result of a disclosure by the Administrative Agent or any Bank prohibited by this Agreement, (f) in connection with any litigation to which the Administrative Agent, any Bank or its subsidiaries or Parent may be a party, (g) to the extent necessary in connection with the exercise of any remedy hereunder, (h) to such Bank's or Administrative Agent's legal counsel and independent auditors and (i) subject to provisions substantially similar to those contained in this Section 9.08, to any actual or proposed Participant or Assignee. SECTION 9.09. Governing Law; Submission to Jurisdiction. This Agreement and each Note (if any) shall be construed in accordance with and governed by the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. 51 SECTION 9.10. Counterparts; Integration. This Agreement maybe signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE BANKS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 52 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DUKE ENERGY CORPORATION By /s/ S. L. LOVE -------------------------------- Title: Assistant Treasure Address: 422 South Church Street Charlotte, NC 28202-1904 Attention: Sherry Love Telecopy number: 704-382-9497 Commitments - ----------- $24,329,268.29 THE CHASE MANHATTAN BANK By /s/ PAUL FARRELL -------------------------------- Title: Vice President $24,329,268.29 BANK OF AMERICA, N.A. By /s/ GRETCHEN P BURUD -------------------------------- Title: Managing Director $20,853,658.54 THE BANK OF TOKYO- MITSUBISHI, LTD., NEW YORK BRANCH By /s/ NICHOLAS R BATTISTA -------------------------------- Title: Attorney-in-Fact 53 $20,853,658.54 BANK ONE, NA By /s/ MICHAEL MURPHY -------------------------------- Title: Director $20,853,658.54 BARCLAYS BANK PLC By /s/ SYDNEY G DENNIS -------------------------------- Title: Director $20,853,658.54 CITIBANK, N.A. By /s/ I NICHOLAS MCKEE -------------------------------- Title: Vice President $20,853,658.54 DEUTSCHE BANK AG NEW YORK BRANCH By /s/ HANS C NARBERHAUS -------------------------------- Title: Vice President By /s/ JOEL MAKOWSKY -------------------------------- Title: Vice President $20,853,658.54 FIRST UNION NATIONAL BANK By /s/ JOE K DANCY -------------------------------- Title: Vice President 54 $15,060,975.61 ABN AMRO BANK N.V. By /s/ JEFFREY DODD -------------------------------- Title: Group Vice President By /s/ SONNY K. TRAN -------------------------------- Title: Assistant Vice President $15,060,975.61 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By /s/ SEAN O'SULLIVAN -------------------------------- Title: Vice President By /s/ PETER OBERMANN -------------------------------- Title: Senior Vice President $15,060,975.61 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ HARRY YERGEY -------------------------------- Title: Sen. Vice President & Manager By /s/ LEE WARD -------------------------------- Title: Asst. Vice President 55 $15,060,975.61 CREDIT SUISSE FIRST BOSTON By /s/ ANDREA SHKANE -------------------------------- Title: Vice President By /s/ KRISTIN LEPRI -------------------------------- Title: Assistant Vice President $15,060,975.61 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ LAURA SHUMACHER -------------------------------- Title: Assistant Vice President By /s/ FREDERIC LAHNER -------------------------------- Title: Vice President $15,060,975.61 FLEET NATIONAL BANK By /s/ RITA M. CAHILL -------------------------------- Title: Managing Director $15,060,975.61 THE INDUSTRIAL BANK OF JAPAN, LIMITED By /s/ JAMES W. MASTERS -------------------------------- Title: Senior Vice President 56 $15,060,975.61 THE NORTHERN TRUST COMPANY By /s/ DONALD D DABISCH -------------------------------- Title: Vice President $15,060,975.61 SOCIETE GENERALE By /s/ DAVID BIRD -------------------------------- Title: Vice President $15,060,975.61 TD SECURITIES (USA) INC. By /s/ CAROL BRANDT -------------------------------- Title: Vice President $15,060,975.61 UBS AG, STAMFORD BRANCH By /s/ WILFRED V. SAINT -------------------------------- Title: Associate Director By /s/ PATRICIA O'KICKI -------------------------------- Title: Director 57 $15,060,975.61 WACHOVIA BANK, N.A. By /s/ YANN PIRIO -------------------------------- Title: Vice President $9,268,292.68 THE BANK OF NEW YORK By /s/ JOHN W. HALL -------------------------------- Title: Vice President $9,268,292.68 THE BANK OF NOVA SCOTIA By /s/ WILLIAM E. ZARRETT -------------------------------- Title: Managing Director $9,268,292.68 BNP PARIBAS By /s/ ROBERT I. MUNCZINSKI -------------------------------- Title: Managing Director By /s/ OLIVIER SERRA -------------------------------- Title: Vice President $9,268,292.68 CIBC, INC. By /s/ M. SANJEEVA SENANAYAKE -------------------------------- Title: Executive Director 58 $9,268,292.68 CREDIT LYONNAIS NEW YORK BRANCH By /s/ PHILIPPE SOUSTRA -------------------------------- Title: Executive Vice President $9,268,292.68 KBC BANK By /s/ JEAN-PIERRE DIELS -------------------------------- Title: First Vice President By /s/ EDWARD J. EIJLERS -------------------------------- Title: Assistant Vice President $9,268,292.68 MELLON BANK, N.A. By /s/ ROGER E. HOWARD -------------------------------- Title: Vice President $9,268,292.68 NATIONAL AUSTRALIA BANK LTD. By /s/ FRANK I. CAMPIGLIA -------------------------------- Title: Vice President $9,268,292.68 ROYAL BANK OF CANADA By /s/ SHERYL GREENBERG -------------------------------- Title: Senior Manager 59 $9,268,292.68 THE SANWA BANK LIMITED By /s/ P. BARTLETT WU -------------------------------- Title: Vice President $9,268,292.68 SUMITOMO MITSUI BANKING CORPORATION By /s/ DAVID A. BUCK -------------------------------- Title: Senior Vice President $9,268,292.68 SUNTRUST BANK, ATLANTA By /s/ STEVEN I. NEWBY -------------------------------- Title: Vice President 60 $9,268,292.68 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH By /s/ FELICIA LA FORGIA -------------------------------- Title: Vice President By /s/ ANTHONY ALESSANDRO -------------------------------- Title: Manager - ----------------- Total Commitments $475,000,000 ================= BANK OF AMERICA, N.A., as Syndication Agent By /s/ GRETCHEN P BURUD -------------------------------- Title: Managing Director THE CHASE MANHATTAN BANK, as Administrative Agent By /s/ PAUL FARRELL -------------------------------- Title: Vice President Address: 270 Park Avenue New York, NY 10017 Attention: Paul V. Farrell Telecopy number: (212) 270-7625 61 Pricing Schedule ---------------- The "Euro-Dollar Margin" and the "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day:
- ------------------------------------------------------------------------------------------------- LEVEL I LEVEL LEVEL LEVEL LEVEL LEVEL LEVEL II III IV V VI VII - ------------------------------------------------------------------------------------------------- Facility Fee .060% .070% .080% .105% .125% .150% .200% - ------------ - ------------------------------------------------------------------------------------------------- Euro-Dollar Margin - ------------------ Committed Loans: Utilization (less than) 33 1/3% .090% .130% .170% .195% .225% .350% .550% Utilization > 33 1/3%, - (less than) 66 2/3% .190% .230% .270% .295% .325% .450% .650% Utilization > 66 2/3% .290% .330% .370% .395% .425% .550% .750% - - -------------------------------------------------------------------------------------------------
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Borrower is rated higher than "A+" by S&P or higher than "A1" by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower is rated "A+" by S&P or "A1" by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower is rated "A" by S&P or "A2" by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower is rated "A-" by S&P or "A3" by Moody's and (ii) neither Level I Status, Level II Status nor Level III Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower is rated "BBB+" by S&P or "BaaI" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status nor Level IV Status exists. 62 "Level VI Status" exists at any date if, at such date, the Borrower is rated "BBB" by S&P or "Baa2" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status, Level IV Status nor Level V Status exists. "Level VII Status" exists at any date if, at such date, no other Status exists. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level N Status, Level V Status, Level VI Status or Level VII Status exists at any date. The "Utilization" applicable to any date is the percentage equivalent of a fraction the numerator of which is the aggregate outstanding principal amount of the Loans determined at such time after giving effect, if one or more Loans are being made at such time, to any substantially concurrent application of the proceeds thereof to repay one or more other Loans and the denominator of which is the aggregate amount of the Commitments at such date. If for any reason any Loans remain outstanding following the termination of the Commitments, Utilization will be deemed to be more than 66 2/3%. The credit ratings to be utilized for purposes of this Schedule are those indicated for or assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating indicated for or assigned to any other debt security of the Borrower shall be disregarded. The ratings in effect for any day are those in effect at the close of business on such day. A change in credit rating will result in an immediate change in the applicable Status. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable Status is the higher of the two. SCHEDULE I DUKE ENERGY CORPORATION CREDIT FACILITY (Being Replaced by this Agreement and the Related Agreement) Credit Agreement (5-Year Facility) dated as of August 25, 1997 among Duke Energy Corporation, the lenders party thereto and Morgan Guaranty Trust Company of New York, as administrative agent. EXHIBIT A NOTE New York, New York August 29, 2001 For value received, Duke Energy Corporation, a North Carolina corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the date specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, 270 Park Avenue, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, the Bank, if the Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule attached hereto appropriate notations to evidence the foregoing information with respect to the Loans then outstanding; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the 364-Day Credit Agreement dated as of August 29, 2001 among the Borrower, the banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. DUKE ENERGY CORPORATION By -------------------------------------- Title: Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount of Amount Type Principal Maturity Notation Date of Loan of Loan Repaid Date Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXHIBIT B FORM OF BID RATE QUOTE REQUEST ------------------------------ [Date] To: The Chase Manhattan Bank (the "Administrative Agent") From: Duke Energy Corporation (the "Borrower") Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of August 29, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent and the Administrative Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Bid Rate Quotes for the following proposed Bid Rate Borrowing(s): Date of Borrowing: --------------------- Principal Amount Interest Period** - ---------------- ----------------- $ Such Bid Rate Quotes should offer a Bid Rate [(General), (Indexed) or both]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. DUKE ENERGY CORPORATION By ------------------------- Title: - ------------------------ *Amount must be $10,000,000 or a larger multiple of $1,000,000. **Not less than one month (Bid Rate (Indexed) Auction) or not less than 7 days (Bid Rate (General) Auction), subject to the provisions of the definition of Interest Period. EXHIBIT C FORM OF INVITATION FOR BID RATE QUOTES -------------------------------------- To: [Name of Bank] Re: Invitation for Bid Rate Quotes to Duke Energy Corporation (the "Borrower") Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of August 29, 2001 among the Borrower, the Banks parties thereto, Bank of America, N.A., as Syndication Agent, and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Bid Rate Quotes to the Borrower for the following proposed Bid Rate Borrowing(s): Date of Borrowing: --------------------- Principal Amount Interest Period - ---------------- --------------- $ Such Bid Rate Quotes should offer a Bid Rate [(Indexed), (General) or both]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.] (New York City time) on [date]. THE CHASE MANHATTAN BANK By ------------------------- Authorized Officer EXHIBIT D FORM OF BID RATE QUOTE ---------------------- To: The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Attention: Re: Bid Rate Quote to Duke Energy Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated _______________, 20__, we hereby make the following Bid Rate Quote on the following terms: 1. Quoting Bank: ______________________________ 2. Person to contact at Quoting Bank: _______________________________ 3. Date of Borrowing: _____________________________* 4. We hereby offer to make Bid Rate Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Bid Rate Amount** Period** [(Indexed)****] [(General)*****] - -------- -------- --------------- ---------------- $ $ provided, that the aggregate principal amount of Bid Rate Loans for which the above offers may be accepted shall not exceed $__________.]** - -------------------- *As specified in the related Invitation. **Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger of multiple of $1,000,000. ***Not less than one month or less than 30 days, as specified in the related Invitation, but no bid may be submitted for an Interest Period extending beyond bidder's Commitment Termination Date. No more than five bids are permitted for each Interest Period. ****Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". *****Specify rate of interest per annum (rounded to the nearest 1/10,000th of 1%). We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the 3b4-Day Credit Agreement dated as of August 29, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and yourselves, as Administrative Agent, irrevocably obligates us to make the Bid Rate Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated: By: ------------------------- ------------------------- Authorized Officer 2 EXHIBIT E-1 OPINION OF GENERAL COUNSEL OF THE BORROWER August 29, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: I am the Deputy General Counsel of Duke Energy Corporation (the "Borrower") and have acted as its counsel in connection with the 364-Day Credit Agreement (the "Credit Agreement"), dated as of August 29, 2001, among the Borrower, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms defined in the Credit Agreement are used herein as therein defined. This opinion letter is being delivered pursuant to Section 3.01 (b) of the Credit Agreement. In such capacity, I or attorneys under my direct supervision have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of North Carolina. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and any Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or, to my knowledge, of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or, to my knowledge, result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. 3. Except as disclosed in the reports referred to in Section 4.04 of the Credit Agreement, to my knowledge (but without independent investigation), there is no action, suit or proceeding pending or threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, which would be likely to be decided adversely to the Borrower or such Subsidiary and, as a result, to have a material adverse effect upon the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or which in any manner draws into question the validity of the Credit Agreement or any Notes. 4. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. The phrase "to my knowledge", as used in the foregoing opinion, refers to my actual knowledge without any independent investigation as to any such matters. I am a member of the Bar of the State of North Carolina and do not express any opinion herein concerning any law other than the law of the State of North Carolina and the federal law of the United States of America. This opinion is rendered to you in connection with the above-referenced matter and may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other Person, firm or corporation without my prior written consent, except for Additional Banks and Assignees. My opinions expressed herein are as of the date hereof, and I undertake no obligation to advise you of any changes of applicable law or any other matters that may come to my attention after the date hereof that may affect my opinions expressed herein. Very truly yours, 2 EXHIBIT E-2 OPINION OF ROBINSON, BRADSHAW & HINSON, P.A., SPECIAL COUNSEL FOR THE BORROWER August 29, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: We have acted as counsel to Duke Energy Corporation, a North Carolina corporation (the "Borrower"), in connection with the 364-Day Credit Agreement (the "Credit Agreement"), dated as of August 29, 2001, between the Duke Energy Corporation, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms used herein and not defined shall have the meanings given to them in the Credit Agreement. This opinion letter is being delivered pursuant to Section 3.01(b) of the Credit Agreement. In connection with this opinion, we also examined originals, or copies identified to our satisfaction, of such other documents and considered such matters of law and fact as we, in our professional judgment, have deemed appropriate to render the opinions contained herein. Where we have considered it appropriate, as to certain facts we have relied, without investigation or analysis of any underlying data contained therein, upon certificates or other comparable documents of public officials and officers or other appropriate representatives of the Borrower. In rendering the opinions contained herein, we have assumed, among other things, that the Credit Agreement and any Notes to be executed (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any governmental body, agency of official, and (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the Borrower's certificate of incorporation or by-laws or any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. In addition, we have assumed that the Credit Agreement fully states the agreement between the Borrower and the Banks with respect to the matters addressed therein, and that the Credit Agreement constitutes a legal, valid and binding obligation of each Bank, enforceable in accordance with its respective terms. The opinions set forth herein are limited to matters governed by the laws of the State of North Carolina and the federal laws of the United States, and no opinion is expressed herein as to the laws of any other jurisdiction. For purposes of our opinions, we have disregarded the choice of law provisions in the Credit Agreement and, instead, have assumed with your permission that the Credit Agreement and the Notes are governed exclusively by the internal, substantive laws and judicial interpretations of the State of North Carolina. We express no opinion concerning any matter respecting or affected by any laws other than laws that a lawyer in North Carolina exercising customary professional diligence would reasonably recognize as being directly applicable to the Borrower, the Loans, the Letters of Credit, or any of them. Based upon and subject to the foregoing and the further limitations and qualifications hereinafter expressed, it is our opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Borrower and the Notes, if and when issued, will constitute legal, valid and binding obligations of the Borrower, in each case, enforceable against the Borrower in accordance with its terms. The opinions expressed above are subject to the following qualifications and limitations: 1. Enforcement of the Credit Agreement and the Notes is subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors' rights generally. 2. Enforcement of the Credit Agreement and the Notes is subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law) by which a court with proper jurisdiction may deny rights of specific performance, injunction, self-help, possessory remedies or other remedies. 3. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or any Note that (i) purport to excuse a party for liability for its own acts, (ii) purport to make void any act done 2 in contravention thereof, (iii) purport to authorize a party to act in its sole discretion, (iv) require waivers or amendments to be made only in writing, (v) purport to effect waivers of constitutional, statutory or equitable rights or the effect of applicable laws, (vi) impose liquidated damages, penalties or forfeiture, or (vii) purport to indemnify a party for its own negligence or willful misconduct. Indemnification provisions in the Credit Agreement are subject to and may be rendered unenforceable by applicable law or public policy, including applicable securities law. 4. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or the Notes purporting to require a party thereto to pay or reimburse attorneys' fees incurred by another party, or to indemnify another party therefor, which may be limited by applicable statutes and decisions relating to the collection and award of attorneys' fees, including but not limited to North Carolina General Statutes ss. 6-21.2. 5. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement purporting to waive the right of jury trial. Under North Carolina General Statutes ss. 22B-10, a provision for the waiver of the right to a jury trial is unconscionable and unenforceable. 6. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement concerning choice of forum or consent to the jurisdiction of courts, venue of actions or means of service of process. 7. It is likely that North Carolina courts will enforce the provisions of the Credit Agreement providing for interest at a higher rate resulting from a Default or Event of Default (a "Default Rate") which rate is higher than the rate otherwise stipulated in the Credit Agreement. The law, however, disfavors penalties, and it is possible that interest at the Default Rate may be held to be an unenforceable penalty, to the extent such rate exceeds the rate applicable prior to a default under the Credit Agreement. Also, since North Carolina General Statutes ss. 24-10.1 expressly provides for late charges, it is possible that North Carolina courts, when faced specifically with the issue, might rule that this statutory late charge preempts any other charge (such as default interest) by a bank for delinquent payments. The only North Carolina case which we have found that addresses this issue is a 1978 Court of Appeals decision, which in our opinion is of limited precedential value, North Carolina National Bank v. Burnette, 38 N.C. App. 120, 247 S.E.2d 648 (1978), rev'd on other grounds, 297 N.C. 524, 256 S.E.2d 388 (1979). While the court in that case did allow interest after default (commencing with the date requested in the complaint) at a rate six percent in excess of pre-default interest, we are unable to determine from the opinion that any question was raised as to this being penal in nature, nor does the court address 3 the possible question of the statutory late charge preempting a default interest surcharge. Therefore, since the North Carolina Supreme Court has not ruled in a properly presented case raising issues of its possible penal nature and those of North Carolina General Statutes ss. 24-10.1, we are unwilling to express an unqualified opinion that the Default Rate of interest prescribed in the Credit Agreement is enforceable. 8. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement relating to evidentiary standards or other standards by which the Credit Agreement are to be construed. This opinion letter is delivered solely for your benefit in connection with the Credit Agreement and, except for any Additional Bank or any Assignee which becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement, may not be used or relied upon by any other Person or for any other purpose without our prior written consent in each instance. Our opinions expressed herein are as of the date hereof, and we undertake no obligation to advise you of any changes of applicable law or any other matters that may come to our attention after the date hereof that may affect our opinions expressed herein. Very truly yours, 4 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT -------------------------------------- August 29, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Dear Sirs: We have participated in the preparation of the 364-Day Credit Agreement (the "Credit Agreement") dated as of August 29, 2001 among Duke Energy Corporation, a North Carolina corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Administrative Agent"), and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes, if and when issued, constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. In giving the foregoing opinion, (i) we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect and (ii) we have relied, without independent investigation, as to all matters governed by the laws of North Carolina, upon the opinion of the General Counsel of the Borrower, dated August 29, 2001, a copy of which has been delivered to you. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person, firm or corporation without our prior written consent, except for Additional Banks and all Participants. Very truly yours, 2 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of __________, 20__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), [DUKE ENERGY CORPORATION,] and THE CHASE MANHATTAN BANK, as Administrative Agent (the "Administrative Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the 364-Day Credit Agreement dated as of August 29, 2001 among Duke Energy Corporation (the "Borrower"), the Assignor and the other Banks party thereto, as Banks, Bank of America, N.A., as Syndication Agent, and the Administrative Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________;* WHEREAS, Committed Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;* NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the - -------------------- *The asterisked provisions shall be appropriately revised in the event of an assignment after the Commitment Termination Date. Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, [the Borrower] and the Administrative Agent, the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.* It is understood that facility fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent to Assignment. This Agreement is conditioned upon the consent of [the Borrower] and the Administrative Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by [the Borrower] and the Administrative Agent is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver a Note, if required by the Assignee, payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower, - -------------------- *Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 2 or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 8. Administrative Questionnaire. Attached is an Administrative Questionnaire duly completed by the Assignee. 3 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By -------------------------------------- Title: [ASSIGNEE] By -------------------------------------- Title: [DUKE ENERGY CORPORATION By -------------------------------------- Title:] THE CHASE MANHATTAN BANK, as Administrative Agent By -------------------------------------- Title: 4 EXHIBIT H EXTENSION AGREEMENT The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement referred to below 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: Effective as of [date], the undersigned hereby agrees to extend its Commitment and Commitment Termination Date under the 364-Day Credit Agreement dated as of August 29, 2001 among Duke Energy Corporation, (the "Borrower"), the banks parties thereto, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Credit Agreement") for one year to [date to which its Commitment Termination Date is to be extended] pursuant to Section 2.01 (c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. This Extension Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK] By -------------------------------------- Title: 5 Agreed and Accepted: DUKE ENERGY CORPORATION, as Borrower By -------------------------------------- Title: THE CHASE MANHATTAN BANK, as Administrative Agent By -------------------------------------- Title: 6 EX-10.6 8 dex106.txt CREDIT AGREEMENT EXHIBIT 10.6 [CONFORMED COPY] $475,000,000 THREE-YEAR CREDIT AGREEMENT dated as of August 29, 2001 among Duke Energy Corporation, The Banks Listed Herein, Bank of America, N.A., as Syndication Agent and The Chase Manhattan Bank, as Administrative Agent ------------------------------------- J.P. Morgan Securities Inc. and Banc of America Securities LLC Joint Lead Arrangers and Joint Bookrunners Barclays Bank PLC, The Bank of Tokyo-Mitsubishi, Ltd., New York Branch and Deutsche Banc Alex. Brown Inc. Documentation Agents TABLE OF CONTENTS ------------ PAGE ---- ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions ....................................................1 SECTION 1.02. Accounting Terms and Determinations ...........................11 SECTION 1.03. Types of Borrowings ...........................................12 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend ...........................................12 SECTION 2.02. Notice of Committed Borrowings ................................14 SECTION 2.03. Bid Rate Borrowings ...........................................14 SECTION 2.04. Notice to Banks; Funding of Loans .............................18 SECTION 2.05. Registry; Notes ...............................................19 SECTION 2.06. Maturity of Loans .............................................20 SECTION 2.07. Interest Rates ................................................20 SECTION 2.08. Fees ..........................................................22 SECTION 2.09. Optional Termination or Reduction of Commitments...............23 SECTION 2.10. Method of Electing Interest Rates .............................23 SECTION 2.11. Mandatory Termination of Commitments ..........................24 SECTION 2.12. Optional Prepayments ..........................................24 SECTION 2.13. General Provisions as to Payments .............................25 SECTION 2.14. Funding Losses ................................................26 SECTION 2.15. Computation of Interest and Fees ..............................26 SECTION 2.16. Regulation D Compensation .....................................26 SECTION 2.17. Takeout of Swingline Loans ....................................27 ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness .................................................28 SECTION 3.02. Borrowings ....................................................29 PAGE ---- ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Organization and Power ........................................30 SECTION 4.02. Corporate and Governmental Authorization; No Contravention .........................................................31 SECTION 4.03. Binding Effect ................................................31 SECTION 4.04. Financial Information .........................................31 SECTION 4.05. Regulation U ..................................................32 SECTION 4.06. Litigation ....................................................32 SECTION 4.07. Compliance with Laws ..........................................32 SECTION 4.08. Taxes .........................................................32 SECTION 4.09. Public Utility Holding Company Act ............................33 ARTICLE 5 COVENANTS SECTION 5.01. Information ...................................................33 SECTION 5.02. Payment of Taxes ..............................................35 SECTION 5.03. Maintenance of Property; Insurance ............................35 SECTION 5.04. Maintenance of Existence ......................................35 SECTION 5.05. Compliance with Laws ..........................................36 SECTION 5.06. Books and Records .............................................36 SECTION 5.07. Negative Pledge ...............................................36 SECTION 5.08. Consolidations, Mergers and Sales of Assets ...................38 SECTION 5.09. Use of Proceeds ...............................................38 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default .............................................38 SECTION 6.02. Notice of Default .............................................41 ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization .................................41 SECTION 7.02. Administrative Agent and Affiliates ...........................41 SECTION 7.03. Action by Administrative Agent ................................41 SECTION 7.04. Consultation with Experts .....................................41 SECTION 7.05. Liability of Administrative Agent .............................42 SECTION 7.06. Indemnification ...............................................42 ii PAGE ---- SECTION 7.07. Credit Decision ...............................................42 SECTION 7.08. Successor Administrative Agent ................................43 SECTION 7.09. Administrative Agent's Fee ....................................43 SECTION 7.10. Documentation Agents ..........................................43 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair .....43 SECTION 8.02. Illegality ...................................................44 SECTION 8.03. Increased Cost and Reduced Return ............................45 SECTION 8.04. Taxes ........................................................46 SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans ....48 SECTION 8.06. Substitution of Bank; Termination Option .....................49 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices ......................................................50 SECTION 9.02. No Waivers ...................................................50 SECTION 9.03. Expenses; Indemnification ....................................51 SECTION 9.04. Sharing of Set-offs ..........................................51 SECTION 9.05. Amendments and Waivers .......................................51 SECTION 9.06. Successors and Assigns .......................................52 SECTION 9.07. Collateral ...................................................54 SECTION 9.08. Confidentiality ..............................................54 SECTION 9.09. Governing Law; Submission to Jurisdiction ....................54 SECTION 9.10. Counterparts; Integration ....................................54 SECTION 9.11. WAIVER OF JURY TRIAL .........................................55 PRICING SCHEDULE SCHEDULE I - Duke Energy Corporation Credit Facility (Being Replaced by this Agreement and the Related Agreement) EXHIBIT A - Note EXHIBIT B - Form of Bid Rate Quote Request EXHIBIT C - Form of Invitation for Bid Rate Quotes EXHIBIT D - Form of Bid Rate Quote EXHIBIT E-1 - Opinion of General Counsel of the Borrower EXHIBIT E-2 - Opinion of Special Counsel for the Borrower iii EXHIBIT F - Opinion of Davis Polk & Wardwell, Special Counsel for the Administrative Agent EXHIBIT G - Assignment and Assumption Agreement EXHIBIT H - Extension Agreement iv THREE-YEAR CREDIT AGREEMENT THREE-YEAR CREDIT AGREEMENT dated as of August 29,2001 among DUKE ENERGY CORPORATION, the BANKS listed on the signature pages hereof, BANK OF AMERICA, N.A., as Syndication Agent, and THE CHASE MANHATTAN BANK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Additional Bank" means any financial institution that becomes a Bank for purposes hereof in connection with the replacement of a Bank pursuant to Section 8.06. "Administrative Agent" means The Chase Manhattan Bank in its capacity as administrative agent for the Banks hereunder, and its successors in such capacity. "Administrative Questionnaire" means, with respect to each Bank, the administrative questionnaire in the form submitted to such Bank by the Administrative Agent and submitted to the Administrative Agent (with a copy to the Borrower) duly completed by such Bank. "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Base Rate Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office, (iii) in the case of its Bid Rate Loans, its Bid Rate Lending Office and (iv) in the case of its Swingline Loans, its Swingline Lending Office. "Approved Officer" means the president, the treasurer, an assistant treasurer or the controller of the Borrower or such other representative of the Borrower as may be designated by any one of the foregoing with the consent of the Administrative Agent. "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank or other financial institution listed on the signature pages hereof; each Additional Bank, each Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Syndicated Loan which bears interest at the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article 8 or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Bid Rate (General)" has the meaning set forth in Section 2.03(d). "Bid Rate (General) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rates (General) pursuant to Section 2.03. "Bid Rate (General) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (General) Auction. "Bid Rate (Indexed) Auction" means a solicitation of Bid Rate Quotes setting forth Bid Rate (Indexed) Margins based on the London Interbank Offered Rate pursuant to Section 2.03. "Bid Rate (Indexed) Loan" means a loan made or to be made by a Bank pursuant to a Bid Rate (Indexed) Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01). "Bid Rate (Indexed) Margin" has the meaning set forth in Section 2.03(d). "Bid Rate Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Bid Rate Lending Office by notice to the Borrower and the Administrative Agent; provided that any Bank may from time to time by notice to the Borrower and the Administrative Agent designate separate Bid Rate Lending Offices for its Bid Rate (Indexed) Loans, on the one hand, and its Bid Rate (General) Loans, on the other hand, in which case all references herein to the Bid Rate Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. 2 "Bid Rate Loan" means a Bid Rate (Indexed) Loan or a Bid Rate (General) Loan. "Bid Rate Quote" means an offer by a Bank to make a Bid Rate Loan in accordance with Section 2.03. "Borrower" means Duke Energy Corporation, a North Carolina corporation, and its successors. "Borrowing" has the meaning set forth in Section 1.03. "Commitment" means (i) with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on the signature pages hereof, and (ii) with respect to each Additional Bank or Assignee which becomes a bank pursuant to Sections 8.06 and 9.06(c), the amount of the Commitment thereby assumed by it, in each case as such amount may from time to time be reduced pursuant to Section 2.09,2.11, 8.06 or 9.06(c) or increased pursuant to Section 8.06 or 9.06(c). "Commitment Termination Date" means, for each Bank, August 29, 2004, as such date may be extended from time to time with respect to such Bank pursuant to Section 2.01(d) or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Committed Loan" means a Syndicated Loan or a Swingline Loan. "Consolidated Subsidiary" means, for any Person, at any date any Subsidiary or other entity the accounts of which would be consolidated with those of such Person in its consolidated financial statements if such statements were prepared as of such date; unless otherwise specified "Consolidated Subsidiary" means a Consolidated Subsidiary of the Borrower. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Documentation Agent" means each of Barclays Bank PLC, The Bank of Tokyo-Mitsubishi, Ltd., New York Branch and Deutsche Banc Alex. Brown Inc., in its capacity as a documentation agent in connection with the credit facility provided under this Agreement. 3 "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "Effective Date" means the date this Agreement becomes effective in accordance with Section 3.01. "Endowment" means the Duke Endowment, a charitable common law trust established by James B. Duke by Indenture dated December 11, 1924. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or other governmental restrictions relating to the environment or to emissions, discharges, releases of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, chemicals, or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate 4 as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "Euro-Dollar Loan" means (i) a Syndicated Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" means the applicable rate per annum determined in accordance with the Pricing Schedule. "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.07(b) on the basis of a London Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of The Chase Manhattan Bank and Bank of America, N.A. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.16. "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreement" means the credit facility identified in Schedule I hereto, as amended and in effect on the Effective Date. "Facility Fee Rate" has the meaning set forth in the Pricing Schedule. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, 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 Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to The Chase Manhattan Bank (or its successor as Administrative Agent) on such day on such transactions as determined by the Administrative Agent. "Final Maturity Date" means, for each Bank, The first anniversary of its Commitment Termination Date or, if such day is not a Euro-Dollar Business Day, 5 the next preceding Euro-Dollar Business Day; provided that the Final Maturity Date for all Banks shall be no later than August 29, 2007. "Fixed Rate Loans" means Euro-Dollar Loans, Swingline Loans or Bid Rate Loans (excluding Swingline Loans or Bid Rate (Indexed) Loans bearing interest at the Base Rate) or any combination of the foregoing. "Group of Loans" means at any time a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans having the same Interest Period at such time, provided that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been if it had not been so converted or made. "Indebtedness" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all indebtedness of such Person for the deferred purchase price of property or services purchased, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired, (iv) all indebtedness under leases which shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases in respect of which such Person is liable as lessee, (v) the face amount of all outstanding letters of credit issued for the account of such Person (other than letters of credit relating to indebtedness included in Indebtedness of such Person pursuant to another clause of this definition) and, without duplication, the unreimbursed amount of all drafts drawn thereunder, (vi) indebtedness secured by any 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), (vii) all direct guarantees of Indebtedness referred to above of another Person, (viii) all amounts payable in connection with mandatory redemptions or repurchases of preferred stock and (ix) 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. "Interest Period" means: (1) with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six, or, if deposits of a corresponding maturity are generally available in the London interbank market, nine or twelve, months thereafter, as the Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business 6 Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; (2) with respect to each Swingline Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter (but not more than 10 Euro-Dollar Business Days) as the Borrower may elect in such notice; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; (3) with respect to each Bid Rate (Index) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of months thereafter (but not less than one month) as the Borrower may elect in accordance with Section 2.03; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; and (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Euro-Dollar Business Day of a calendar month; and (4) with respect to each Bid Rate (General) Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing and ending such number of days thereafter but not less than 7 days) as the Borrower may elect in accordance with Section 2.03; provided that any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and provided further that: (x) no Interest Period applicable to any Loan of any Bank which begins before such Bank's Commitment Termination Date may end after 7 such Bank's Commitment Termination Date; and (y) no Interest Period applicable to any Loan of any Bank may end after such Bank's Final Maturity Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment Grade Status" exists as to any Person at any date if all senior long-term unsecured debt securities of such Person outstanding at such date which had been rated by S&P or Moody's are rated BBB- or higher by S&P or Baa3 or higher by Moody's, as the case may be. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Committed Loan or a Bid Rate Loan and "Loans" means Committed Loans or Bid Rate Loans or any combination of the foregoing. "London Interbank Offered Rate" has the meaning set forth in Section 2.07(b). "Material Debt" means Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount exceeding $150,000,000. "Material Plan" has the meaning set forth in Section 6.01(i). "Material Subsidiary" means at any time any Subsidiary of the Borrower having, together with its Subsidiaries, consolidated assets in excess of 10% of the total assets of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such time. "Moody's" means Moody's Investors Service, Inc. "Mortgage Indenture" means the First and Refunding Mortgage between the Borrower and The Chase Manhattan Bank, as successor trustee, dated as of December 1, 1927, as amended or supplemented from time to time. "Notes" means promissory notes of the Borrower, in the form required by Section 2.05, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. 8 "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Bid Rate Borrowing (as defined in Section 2.03(f)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.10(b). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof "Plan" means at any time an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and is either (i) maintained by a member of the ERISA Group for employees of a member of the ERISA Group or (ii) maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions. "Pricing Schedule" means the Pricing Schedule attached hereto. "Prime Rate" means the rate of interest publicly announced by The Chase Manhattan Bank in New York City from time to time as its Prime Rate. Each change in the Prime Rate shall be effective from and including the day such change is publicly announced. "Quarterly Payment Date" means the first Domestic Business Day of each January, April, July and October. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. 9 "Related Agreement" means the 364-Day Credit Agreement dated as of the date hereof among the Borrower, the banks and other financial institutions and Agents from time to time parties thereto, as amended and in effect from time to time. "Required Banks" means at any time Banks (i) having at least 51% of the sum of the aggregate amount of the Commitments or (ii) if all the Commitments shall have been terminated, holding at least 51% of the aggregate unpaid principal amount of the Loans. "Revolving Credit Loan" means a loan made or to be made by a Bank pursuant to Section 2.01(a); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Revolving Credit Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Revolving Credit Period" means, with respect to any Bank, the period from and including the Effective Date to but not including its Commitment Termination Date. "S&P" means Standard & Poor's Rating Services, a division of The McGraw-Hill Companies, Inc. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Borrower. "Substantial Assets" means assets sold or otherwise disposed of in a single transaction or a series of related transactions representing 25% or more of the consolidated assets of the Borrower and its Consolidated Subsidiaries, taken as a whole. "Swingline Bank" means The Chase Manhattan Bank and its successors. "Swingline Lending Office" means, as to the Swingline Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Swingline Lending Office) or such other office as such Bank may hereafter designate as its Swingline Lending Office by notice to the Borrower and the Administrative Agent. 10 "Swingline Loan" means a loan made by the Swingline Bank pursuant to Section 2.01(c). "Swingline Takeout Loan" means a Base Rate Loan made pursuant to Section 2.17. "Syndicated Loan" means a Loan made by a Bank pursuant to Section 2.01(a) or 2.01(b); provided that, if any loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Syndicated Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Term Loan" means a loan made or to be made by a Bank pursuant to Section 2.0l(b); provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Term Loan" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "Trust" means The Doris Duke Trust, a trust established by James B. Duke by Indenture dated December 11, 1924 for the benefit of certain relatives. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Unfunded Vested Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the present value of all benefits under such Plan exceeds (ii) the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or the Plan under Title IV of ERISA. "Unrefunded Swingline Loans" has the meaning set forth in Section 2.17(b). "Utilization" has the meaning set forth in the Pricing Schedule. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis 11 consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks. SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to the Borrower pursuant to Article 2 on a single date and for a single Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing (e.g., a "Fixed Rate Borrowing" is a Euro-Dollar Borrowing, a Swingline Borrowing or a Bid Rate Borrowing (excluding any such Borrowing consisting of Swingline Loans or Bid Rate (Indexed) Loans bearing interest at the Base Rate), and a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro Dollar Loans) or by reference to the provisions of Article 2 under which participation therein is determined (i.e., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Bid Rate Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend. (a) Revolving Credit Loans. During its Revolving Credit Period, each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection from time to time in amounts such that the aggregate principal amount of Revolving Credit Loans by such Bank, together with its participating interests in any Unrefunded Swingline Loans, at any one time outstanding shall not exceed the amount of its Commitment. Each Borrowing under this subsection (other than a Swingline Takeout Borrowing) shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(b)) and shall be made from the several Banks ratably in proportion to their respective Commitments in effect on the date of Borrowing; provided that, if the Interest Period selected by the Borrower for a Borrowing would otherwise end after the Commitment Termination Dates of some but not all Banks, the Borrower may in its Notice of Committed Borrowing elect not to borrow from those Banks whose Commitment Termination Dates fall prior to the end of such Interest Period. Within the foregoing limits, the Borrower may borrow under this subsection (a), or to the extent permitted by Section 2.12, prepay Loans and 12 reborrow at any time during the Revolving Credit Periods under this subsection (a). (b) Term Loans. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a loan to the Borrower on its Commitment Termination Date in an amount up to but not exceeding the amount of its Commitment; provided that no Bank shall be obligated to make a loan pursuant to this subsection if any Commitment is extended on such date pursuant to Section 2.01(d). Each Borrowing under this Section 2.01(1,) shall be made from the several Banks having the same Commitment Termination Date ratably in proportion to their respective Commitments. (c) Swingline Loans. From time to time prior to its Commitment Termination Date, the Swingline Bank agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this subsection from time to time in amounts such that (i) the aggregate principal amount of all Loans at such time outstanding shall not exceed the aggregate amount of all Commitments and (ii) the aggregate principal amount of Swingline Loans at any time outstanding shall not exceed $100,000,000. Within the foregoing limits, the Borrower may borrow under this subsection, repay or, to the extent permitted by Section 2.12, prepay Loans and reborrow at any time; provided that the proceeds of a Swingline Borrowing may not be used, in whole or in part, to refund any prior Swingline Borrowing. Each Borrowing under this subsection shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02). (d) Extension of Commitments. On no more than two separate occasions, the Borrower may, upon not less than 45 days but no earlier than 60 days notice prior to the then current Commitment Termination Dates to the Administrative Agent (which shall notify each Bank of receipt of such request), propose to extend the Commitment Termination Dates for an additional one-year period measured from the Commitment Termination Dates then in effect. Each Bank shall endeavor to respond to such request, whether affirmatively or negatively (such determination in the sole discretion of such Bank), by notice to the Borrower and the Administrative Agent not more than 45 days nor less than 28 days prior to such Bank's Commitment Termination Date. Subject to the execution by the Borrower, the Administrative Agent and such Banks of a duly completed Extension Agreement in substantially the form of Exhibit H, the Commitment Termination Date applicable to the Commitment of each Bank so affirmatively notifying the Borrower and the Administrative Agent shall be extended for the period specified above; provided that no Commitment Termination Date of any Bank shall be extended unless Banks having 13 Commitments in an aggregate amount equal to at least 66 2/3% in aggregate amount of the Commitments in effect at the time any such extension is requested shall have elected so to extend their Commitments. Any Bank which does not give such notice to the Borrower and the Administrative Agent shall be deemed to have elected not to extend as requested, and the Commitment of each non-extending Bank shall terminate on its Commitment Termination Date determined without giving effect to such requested extension. The Borrower may, in accordance with Section 8.06, designate another bank or other financial institution (which may be, but need not be, an extending Bank) to replace a non-extending Bank. SECTION 2.02. Notice of Committed Borrowings. The Borrower shall give the Administrative Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing or Swingline Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (a) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Swingline Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (b) the aggregate amount of such Borrowing, (c) whether the Loans comprising such Borrowing are to be Swingline Loans or Syndicated Loans, (d) in the case of a Syndicated Borrowing, whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate; and (e) in the case of a Euro-Dollar Borrowing or a Swingline Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. SECTION 2.03. Bid Rate Borrowings. (a) The Bid Rate Option. In addition to Committed Borrowings pursuant to Section 2.01, the Borrower may, as set forth in this Section, request the Banks at any time prior to their respective Commitment Termination Dates to make offers to make Bid Rate Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. 14 (b) Bid Rate Quote Request. When the Borrower wishes to request offers to make Bid Rate Loans under this Section, it shall transmit to the Administrative Agent by telex or facsimile transmission a Bid Rate Quote Request substantially in the form of Exhibit B hereto so as to be received no later than 10:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a Bid Rate (Indexed) Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day, (ii) the aggregate amount of such Borrowing, which shall be $10,000,000 or a larger multiple of $1,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Bid Rate Quotes requested are to set forth a Bid Rate (Indexed) or a Bid Rate (General) rate or both such rates. The Borrower may request offers to make Bid Rate Loans for more than one Interest Period in a single Bid Rate Quote Request. (c) Invitation for Bid Rate Quotes. Promptly upon receipt of a Bid Rate Quote Request, the Administrative Agent shall send to the Banks by telex or facsimile transmission an Invitation for Bid Rate Quotes substantially in the form of Exhibit C hereto, which shall constitute an invitation by the Borrower to each Bank to submit Bid Rate Quotes offering to make the Bid Rate Loans to which such Bid Rate Quote Request relates in accordance with this Section. (d) Submission and Contents of Bid Rate Quotes. (i) Each Bank may submit a Bid Rate Quote containing an offer or offers to make Bid Rate Loans in response to any Invitation for Bid Rate Quotes. Each Bid Rate Quote must comply with the requirements of this subsection (d) and must be submitted to the Administrative Agent by telex or facsimile transmission at its offices specified in or pursuant to Section 9.01 not later than (x) 2:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:30 A.M. New York City time) 15 on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective); provided that Bid Rate Quotes submitted by the Administrative Agent (or any affiliate of the Administrative Agent) in the capacity of a Bank may be submitted, and may only be submitted, if the Administrative Agent or such affiliate notifies the Borrower of the terms of the offer or offers contained therein not later than (x) 1:00 P.M. (New York City time) on the fourth Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of a Bid Rate (General) Auction. Subject to Articles 3 and 6, any Bid Rate Quote so made shall be irrevocable except with the written consent of the Administrative Agent given on the instructions of the Borrower. (ii) Each Bid Rate Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, (B) the principal amount of the Bid Rate Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger multiple of $1,000,000 and (y) may not exceed the principal amount of Bid Rate Loans for each Interest Period for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Bid Rate Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a Bid Rate (Indexed) Auction, the margin above or below the applicable London Interbank Offered Rate (the "Bid Rate (Indexed) Margin") offered for each such Bid Rate Loan, expressed as a percentage (specified to the nearest 1/10,000th of 1%) to be added to or subtracted from such base rate, (D) in the case of a Bid Rate (General) Auction, the rate of interest per annum (specified to the nearest 1/10,000th of 1%) (the "Bid Rate (General)") offered for each such Bid Rate Loan, and (E) the identity of the quoting Bank. 16 A Bid Rate Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Bid Rate Quotes. (iii) Any Bid Rate Quote shall be disregarded if: (A) it is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection 2.03(d)(ii); (B) it contains qualifying, conditional or similar language beyond that contemplated by Exhibit D; (C) it proposes terms other than or in addition to those set forth in the applicable Invitation for Bid Rate Quotes; (D) it arrives after the time set forth in subsection 2.03(d)(i); or (E) the Commitment Termination Date of the Bank submitting such Bid Rate Quote falls prior to the last day of the requested Interest Period for which such Bank offers to make a Bid Rate Loan. (e) Notice to Borrower. The Administrative Agent shall promptly but in no event later than 11:00 A.M, ("New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), notify the Borrower of the terms (x) of any Bid Rate Quote submitted by a Bank that is in accordance with subsection (d) and (y) of any Bid Rate Quote that amends, modifies or is otherwise inconsistent with a previous Bid Rate Quote submitted by such Bank with respect to the same Bid Rate Quote Request. Any such subsequent Quote shall be disregarded by the Administrative Agent unless such subsequent Quote is submitted solely to correct a manifest error in such former Quote. The Administrative Agent's notice to the Borrower shall specify (A) the aggregate principal amount of Loans for which offers have been received for each Interest Period specified in the related Bid Rate Quote Request, (B) the respective principal amounts and Bid Rate (Indexed) Margins or Bid Rate 17 (General) Rates, as the case may be, so offered and (C) if applicable, limitations on the aggregate principal amount of Bid Rate Loans for which offers in any single Bid Rate Quote may be accepted. (f) Acceptance and Notice by Borrower. Not later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a Bid Rate (Indexed) Auction or (y) the proposed date of Borrowing, in the case of a Bid Rate (General) Auction (or, in either case, such other time or date as the Borrower and the Administrative Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Bid Rate Quote Request for the first Bid Rate (Indexed) Auction or Bid Rate (General) Auction for which such change is to be effective), the Borrower shall notify the Administrative Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection (e). In the case of acceptance, such notice (a "Notice of Bid Rate Borrowing") shall specify the aggregate principal amount of offers for each Interest Period that are accepted. The Borrower may accept any Bid Rate Quote in whole or in part; provided that: (i) the aggregate principal amount of each Bid Rate Borrowing may not exceed the applicable amount set forth in the related Bid Rate Quote Request, (ii) the principal amount of each Bid Rate Borrowing must be $10,000,000 or a larger multiple of $1,000,000, and (iii) acceptance of offers may only be made on the basis of ascending Bid Rate (Indexed) Margins or Bid Rate (General) Rates, as the case may be. (g) Allocation by Administrative Agent. If offers are made by two more Banks with the same Bid Rate (Indexed) Margins or Bid Rate (General), as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Rate Loans in respect of which such offers are accepted shall be allocated by the Administrative Agent among such Banks as nearly as possible (in multiples of $1,000,000, as the Administrative Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determinations by the Administrative Agent of the amounts of Bid Rate Loans shall be conclusive in the absence of manifest error. SECTION 2.04. Notice to Bank; Funding of Loans. (a) Upon receipt of a Notice of Borrowing, the Administrative Agent shall promptly notify each Bank 18 of the contents thereof and of such Bank's share (if any) of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:00 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall (except as provided in subsection (c) of this Section) make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Banks available to the Borrower at the Administrative Agent's aforesaid address. (c) Unless the Administrative Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Administrative Agent such Bank's share of such Borrowing, the Administrative Agent may assume that such Bank has made such share available to the Administrative Agent on the date of such Borrowing in accordance with subsections (b) of this Section 2.04 and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Administrative Agent, such Bank and if such Bank shall not have made such payment within two Domestic Business Days of demand therefor, the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Administrative Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. (d) The failure of any Bank to make the Loan to be made by it as part of any Borrowing shall not relieve any other Bank of its obligation, if any, hereunder to make a Loan on the date of such Borrowing, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. SECTION 2.05. Registry; Notes. (a) The Administrative Agent shall maintain a register (the "Register") on which it will record the Commitment of each Bank, each Loan made by such Bank and each repayment of any Loan made by such Bank. Any such recordation by the Administrative Agent on the Register shall be conclusive, absent manifest error. Failure to make any such recordation, 19 or any error in such recordation, shall not affect the Borrower's obligations hereunder. (b) The Borrower hereby agrees that, promptly upon the request of any Bank at any time, the Borrower shall deliver to such Bank a duly executed Note, in substantially the form of Exhibit A hereto, payable to the order of such Bank and representing the obligation of the Borrower to pay the unpaid principal amount of the Loans made to the Borrower by such Bank, with interest as provided herein on the unpaid principal amount from time to time outstanding. (c) Each Bank shall record the date, amount and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and each Bank receiving a Note pursuant to this Section, if such Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of such Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Such Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.06. Maturity of Loans. (a) Each Revolving Credit Loan made by any Bank shall mature, and the principal amount thereof shall be due and payable together with accrued interest thereon, on the Commitment Termination Date of such Bank. (b) The Term Loans of each Bank shall mature, and the principal amount thereof shall be due and payable, together with accrued interest thereon, on the Final Maturity Date of such Bank. (c) Each Swingline Loan included in any Swingline Borrowing and each Bid Rate Loan included in any Bid Rate Borrowing shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date, at maturity and on the date of termination of the Commitments in their entirety. Any overdue principal of or overdue interest on any Base Rate Loan 20 shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "London Interbank Offered Rate" applicable to any Interest Period means the rate appearing on Page 3750 of the Telerate Service Company (or on any successor or substitute page of such service, or any successor to or substitute for such service, providing rate quotations comparable to those currently provided on such page of the Telerate Service, as may be nominated by the British Bankers' Association for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) as of 11:00 A.M. (London time) two Euro-Dollar Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not so available at such time for any reason, then the "London Interbank Offered Rate" for such Interest Period shall be the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. If any Euro-Dollar Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation furnished by the remaining Euro-Dollar Reference Bank or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. (c) Any overdue principal of or overdue interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 1% plus the higher of (i) the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Loan at the date such payment was due and (ii) the Base Rate for such day. 21 (d) Each Swingline Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the Base Rate for such day or such other rate as may be from time to time determined by mutual agreement between the Swingline Bank and the Borrower. Interest on each Swingline Loan shall be payable at the maturity of such Loan. Any overdue principal of or interest on any Swingline Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (e) Subject to Section 8.01(a), each Bid Rate (Indexed) Loan shall bear interest on the outstanding principal amount thereof; for the Interest Period applicable thereto, at a rate per annum equal to the sum of the London Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.07(b) as if each Euro-Dollar Reference Bank were to participate in the related Bid Rate (Indexed) Borrowing ratably in proportion to its Commitment) plus (or minus) the Bid Rate (Indexed) Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Bid Rate (General) Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Bid Rate (General) quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue principal of or overdue interest on any Bid Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 1% plus the Base Rate for such day. (f) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall give prompt notice to the Borrower and the participating Banks by telecopy, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error unless the Borrower raises an objection thereto within five Domestic Business Days after receipt of such notice. SECTION 2.08. Fees. (a) Facility Fee. The Borrower shall pay to the Administrative Agent for the account of each Bank a facility fee at the Facility Fee Rate (determined daily in accordance with the Pricing Schedule). Such facility fee shall accrue (i) from and including the Effective Date to but excluding such Bank's Commitment Termination Date, on the daily average aggregate amount of such Bank's Commitment (whether used or unused) and (ii) from and including such Bank's Commitment Termination Date to but excluding the date such Bank's Loans shall be repaid in their entirety, on the daily average aggregate outstanding principal amount of such Bank's Committed Loans. 22 (b) Payments. Accrued fees under this Section for the account of any Bank shall be payable quarterly in arrears on each Quarterly Payment Date and upon such Bank's Commitment Termination Date and Final Maturity Date (and, if later, the date the Loans of such Bank shall be repaid in their entirety). SECTION 2.09. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Administrative Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time, or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or any larger multiple of $1,000,000 the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. SECTION 2.10. Method of Electing Interest Rates. (a) The Loans included in each Syndicated Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Committed Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article 8 and the last sentence of this subsection (a)), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day; and (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.14 in the case of any such conversion or continuation effective on any day other than the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Administrative Agent not later than 11:00 A.M. New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans, provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such notice applies, and the remaining portion to which it does not apply, are each $10,000,000 or any larger multiple of $1,000,000. (b) Each Notice of Interest Rate Election shall specify: 23 (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of subsection 2.10(a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans being converted are to be Fixed Rate Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of the term "Interest Period". (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to subsection 2.10(a) above, the Administrative Agent shall notify each Bank of the contents thereof and such notice shall not thereafter be revocable by the Borrower. If no Notice of Interest Rate Election is timely received prior to the end of an Interest Period for any Group of Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans as of the last day of such Interest Period. (d) An election by the Borrower to change or continue the rate of interest applicable to any Group of Loans pursuant to this Section shall not constitute a "Borrowing" subject to the provisions of Section 3.02. SECTION 2.11. Mandatory Termination of Commitments. The Commitment of each Bank shall terminate on such Bank's Commitment Termination Date, and any Revolving Credit Loans of such Bank then outstanding (together with accrued interest thereon) shall be due and payable on such date. SECTION 2.12. Optional Prepayments. (a) The Borrower may (i) upon notice to the Administrative Agent not later than 11:00 A.M. (New York City time) on any Domestic Business Day prepay on such Domestic Business Day any Group of Base Rate Loans, any Swingline Borrowing or any Bid Rate Borrowing bearing interest at the Base Rate pursuant to Section 8.01(a) and (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent not later than 11:00 A.M. (New York City time) prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts 24 aggregating $5,000,000 or any larger multiple of $1,000,000, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment and together with any additional amounts payable pursuant to Section 2.14. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Except as provided in subsection 2.12(a), the Borrower may not prepay all or any portion of the principal amount of any Bid Rate Loan prior to the maturity thereof except with the express written consent of the Bank holding such Bid Rate Loan. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Administrative Agent shall promptly notify each Bank of the contents thereof and of such Bank's share (if any) of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.13. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 1:00 P.M. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address referred to in Section 9.01. The Administrative Agent will promptly distribute to each Bank in like funds its ratable share of each such payment received by the Administrative Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Base Rate Loans or Swingline Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of or interest on, the Bid Rate Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance 25 upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Administrative Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.14. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Euro-Dollar Loan is converted to a Base Rate Loan or continued as a Euro-Dollar Loan for a new Interest Period (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or if the Borrower fails to borrow, prepay, convert or continue any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a), 2.10(c) or 2.l2(c), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow, prepay, convert or continue, provided that such Bank shall have delivered to the Borrower a certificate setting forth in reasonable detail the calculation of the amount of such loss or expense, which certificate shall he conclusive in the absence of manifest error. SECTION 2.15. Computation of Interest and Fees. Interest based on the Prime Rate and facility fees hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.16. Regulation D Compensation. In the event that a Bank is required to maintain reserves of the type contemplated by the definition of "Euro-Dollar Reserve Percentage", such Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum determined by such Bank up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable to such Bank at 26 the place indicated in such notice with respect to each Interest Period commencing at least three Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower at least three Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. Each such notification shall be accompanied by such information as the Borrower may reasonably request. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). SECTION 2.17. Takeout of Swingline Loans. (a) In the event that any Swingline Borrowing shall not be repaid in full at or prior to the maturity thereof the Administrative Agent shall, on behalf of the Borrower (the Borrower hereby irrevocably directing and authorizing the Administrative Agent so to act on its behalf), give a Notice of Borrowing requesting the Banks, including the Swingline Bank, to make Base Rate Loans on the maturity date of such Swingline Borrowing in an aggregate amount equal to the unpaid principal amount of such Swingline Borrowing. Each Bank will make the proceeds of such Base Rate Loans available to the Administrative Agent for the account of the Swingline Bank on such date in accordance with Section 2.04. The proceeds of such Base Rate Borrowing shall be immediately applied to repay such Swingline Borrowing. (b) If, for any reason, a Base Rate Borrowing may not be (as determined by the Administrative Agent in its sole discretion), or is not, made pursuant to subsection (a) above to refund Swingline Loans as required by said clause, then, effective on the date such Borrowing would otherwise have been made, each Bank severally, unconditionally and irrevocably agrees that it shall purchase an undivided participating interest in such Swingline Loans ("Unrefunded Swingline Loans") in an amount equal to the amount of the Loan which otherwise would have been made by such Bank pursuant to subsection (a), which purchase shall be funded by the time such Loan would have been required to be funded pursuant to Section 2.04 by transfer to the Administrative Agent, for the account of the Swingline Bank, in immediately available funds, of the amount of its participation. 27 (c) Whenever, at any time after the Swingline Bank has received from any Bank payment in full for such Bank's participating interest in a Swingline Loan, the Swingline Bank (or the Administrative Agent on its behalf) receives any payment on account thereof; the Swingline Bank (or the Administrative Agent, as the case may be) will promptly distribute to such Bank its participating interest in such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participating interest was outstanding and funded); provided, however, that in the event that such payment is subsequently required to be returned, such Bank will return to the Swingline Bank (or the Administrative Agent, as the case may be) any portion thereof previously distributed by the Swingline Bank (or the Administrative Agent, as the case may be) to it. (d) Each Bank's obligation to purchase and fund participating interests pursuant to this Section shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation: (i) any setoff; counterclaim, recoupment, defense or other right which such Bank or the Borrower may have against the Swingline Bank, or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or the failure to satisfy any of the conditions specified in Article 3; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement by the Borrower or any Bank; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. ARTICLE 3 CONDITIONS SECTION 3.01. Effectiveness. This Agreement shall become effective on the date that each of the following conditions shall have been satisfied (or waived in accordance with Section 9.05): (a) receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telecopy, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (b) receipt by the Administrative Agent of (i) an opinion of the general counsel of the Borrower, substantially in the form of Exhibit E-l hereto and (ii) an opinion of Robinson, Bradshaw & Hinson, P.A., special counsel for the Borrower, substantially in the form of Exhibit E-2 hereto, and, in each case, covering such 28 additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) receipt by the Administrative Agent of an opinion of Davis Polk & Wardwell, special counsel for the Administrative Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) receipt by the Administrative Agent of a certificate signed by a Vice President, the Treasurer, an Assistant Treasurer or the Controller of the Borrower, dated the Effective Date, to the effect set forth in clauses (c) and (d) of Section 3.02; (e) receipt by the Administrative Agent of all documents it may have reasonably requested prior to the date hereof relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent; and (f) receipt by the Administrative Agent of evidence satisfactory to it of the payment of all principal of and interest on any loans outstanding under, and all accrued commitment fees under, the Existing Credit Agreements and the cancellation or the expiration of any letter of credit issued thereunder; provided that this Agreement shall not become effective or be binding on any party hereto unless all of the foregoing conditions are satisfied not later than August 29, 2001. The Administrative Agent shall promptly notify the Borrower and the Banks of the Effective Date, and such notice shall be conclusive and binding on all parties hereto. The Borrower and the Banks party to the Existing Credit Agreement, comprising the "Required Banks" as defined therein, hereby agree that (i) the commitments of the lenders under the Existing Credit Agreement shall terminate in their entirety immediately and automatically upon the effectiveness of this Agreement, without further action by any party to the Existing Credit Agreement, (ii) all accrued fees under the Existing Credit Agreement shall be due and payable at such time and (iii) subject to the funding loss indemnities in the Existing Credit Agreement, the Borrower may prepay any and all loans outstanding thereunder on the date of effectiveness of this Agreement. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions; provided that if such Borrowing is a Swingline Takeout Borrowing, only the conditions set forth in clauses 3.02(a) and 3.02(b) must be satisfied: 29 (a) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02 or 2.03; (b) the fact that, immediately after such Borrowing (and, in the case of any Swingline Borrowing, at any time prior to the tenth day following the maturity or expiry date thereof), (i) the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments and (ii) the aggregate outstanding principal amount of Swingline Loans will not exceed $100,000,000; (c) the fact that, immediately after such Borrowing, no Default shall have occurred and be continuing; (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except the representations and warranties set forth in Sections 4.04(c) and 4.06) shall be true on and as of the date of such Borrowing; and (e) in the case of a Term Loan Borrowing, receipt by the Administrative Agent for the account of each Bank making a Term Loan pursuant to Section 2.01(b) hereof of a term loan fee equal to 0.10% of the principal amount of such Bank's Term Loan. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section (unless such Borrowing is a Swingline Takeout Borrowing, in which case the Borrower shall be deemed to represent and warrant as to the facts specified in clause (b) of this Section). ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Organization and Power. The Borrower is duly organized, validly existing and in good standing under the laws of North Carolina and has all requisite powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and is duly qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not have a material adverse effect on 30 the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.02. Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of; or filing with, any governmental body, agency or official (except for the approval of the obtaining of credit pursuant to this Agreement by the North Carolina Utilities Commission and The Public Service Commission of South Carolina which shall have been obtained not later than the Effective Date) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the articles of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, if and when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31,2000 and the related consolidated statements of income, cash flows, capitalization and retained earnings for the fiscal year then ended, reported on by Deloitte & Touche, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 2001 and the related unaudited consolidated statements of income and cash flows for the six months then ended, copies of which have been delivered to each of the Banks, fairly present, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) of this Section, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operation and 31 changes in financial position for such six-month period (subject to normal year-end adjustments and the absence of footnotes). (c) Since December 31, 2000, there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.05. Regulation U. The Borrower and its Material Subsidiaries are not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System) and no proceeds of any Borrowing by the Borrower will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. Not more than 25% of the value of the assets of the Borrower and its Material Subsidiaries is represented by margin stock. SECTION 4.06. Litigation. Except as disclosed in the reports referred to in Section 4.04, there is no action, suit or proceeding pending against, or to the knowledge of the Borrower threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official which would be likely to be decided adversely to Borrower or such Subsidiary and, as a result, have a material adverse effect upon the business, consolidated financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or any Note. SECTION 4.07. Compliance with Laws. The Borrower and each Material Subsidiary is in compliance in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) non-compliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 4.08. Taxes. The Borrower and its Material Subsidiaries have flied all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Material Subsidiary except (i) where nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or (ii) where the same are contested in good faith by appropriate proceedings. The charges, 32 accruals and reserves on the books of the Borrower and its Material Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.09. Public Utility Holding Company Act. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable hereunder remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 120 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, cash flows, capitalization and retained earnings for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on in a manner consistent with the requirements of the Securities and Exchange Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 60 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of income and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all certified (subject to normal year-end adjustments) as to fairness of presentation, generally accepted accounting principles and consistency by an Approved Officer of the Borrower; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of an Approved Officer of the Borrower stating whether any Default exists on the date of such certificate and, if 33 any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) within five days after any officer of the Borrower with responsibility relating thereto obtains knowledge of any Default, if such Default is then continuing, a certificate of an Approved Officer of the Borrower Setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the filing thereof; copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms l0-K, l0-Q and 8-K (or their equivalents) which the Borrower shall have filed with the Securities and Exchange Commission; (f) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Material Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Material Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Material Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose material liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Material Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Material Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Material Plan or makes any amendment to any Material Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (g) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Bank, may reasonably request. 34 Information required to be delivered pursuant to these Sections 5.01(a), 5.01(b) and 5.0l(e) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Banks that such information has been posted on the Securities and Exchange Commission website on the Internet at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Banks without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.0l(c) and (ii) the Borrower shall deliver paper copies of the information referred to in Sections 5.01(a), 5.01(b) and 5.01(e) to any Bank which requests such delivery. SECTION 5.02. Payment of Taxes. The Borrower will pay and discharge, and will cause each Material Subsidiary to pay and discharge, at or before maturity, all their tax liabilities, except where (i) nonpayment would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Material Subsidiary to maintain, in accordance with generally accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. Maintenance of Property; Insurance. (a) The 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) The Borrower will, and will cause each of its Material Subsidiaries to, maintain (either in the name of the Borrower or in such 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 the 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 Borrower or such Material Subsidiary operates self-insure; and will furnish to the Banks, upon request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried. SECTION 5.04. Maintenance of Existence. The Borrower will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective corporate or other legal existence and their respective rights, privileges and franchises material to the normal conduct of their respective businesses; provided that nothing in this 35 Section 5.04 shall prohibit the termination of any right, privilege or franchise of the Borrower or any Material Subsidiary or of the corporate or other legal existence of any Material Subsidiary or the change in form of organization of the Borrower or any Material Subsidiary if the Borrower in good faith determines that such termination or change is in the best interest of the Borrower, is not materially disadvantageous to the Banks and, in the case of a change in the form of organization of the Borrower, the Administrative Agent has consented thereto. SECTION 5.05. Compliance with Laws. The Borrower will comply, and cause each Material Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, ERISA and Environmental Laws) except where (i) noncompliance would not have a material adverse effect on the business, financial position or results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole, or (ii) the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.06. Books and Records. The Borrower will keep, and will cause each Material Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all financial transactions in relation to its business and activities in accordance with its customary practices; and will permit, and will cause each Material Subsidiary to permit, representatives of any Bank at such Bank's expense (accompanied by a representative of the Borrower, if the Borrower so desires) to visit any of their respective properties, to examine any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all upon such reasonable notice, at such reasonable times and as often as may reasonably be desired. SECTION 5.07. Negative Pledge. The Borrower will not create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens granted by the Borrower existing on the date of this Agreement securing Indebtedness outstanding on the date of this Agreement in an aggregate principal amount not exceeding $l00,000,000; (b) the Lien of the Mortgage Indenture securing Indebtedness outstanding on the date of this Agreement or issued hereafter; (c) any Lien on any asset of any Person existing at the time such Person is merged or consolidated with or into the Borrower and not created in contemplation of such event; 36 (d) any Lien existing on any asset prior to the acquisition thereof by the Borrower and not created in contemplation of such acquisition; (e) 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; (f) 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, provided that such Indebtedness is not increased and is not secured by any additional assets; (g) 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 generally accepted accounting principles; (h) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen 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 generally accepted accounting principles; (i) 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; (j) 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; (k) Liens with respect to judgments and attachments which do not result in an Event of Default; 37 (l) 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; (m) 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 at which Investment Grade Status does not exist as to the Borrower and (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; and (n) Liens not otherwise permitted by the foregoing clauses of this Section securing obligations in an aggregate principal or face amount at any date not to exceed $500,000,000. SECTION 5.08. Consolidations; Mergers and Sales of Assets. The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly, Substantial Assets to any Person (other than a Subsidiary); provided that the Borrower may merge with another Person if the Borrower is the corporation surviving such merger and, after giving effect thereto, no Default shall have occurred and be continuing. SECTION 5.09. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for its general corporate purposes, including liquidity support for outstanding commercial paper and acquisitions. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: 38 (a) the Borrower shall fail to pay when due any principal of any Loan or shall fail to pay, within five days of the due date thereof; any interest, fees or any other amount payable hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04, 5.07, 5.08, or the second sentence of 5.09, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by clause (a) or (b) above) for 30 days after notice thereof has been given to the Borrower by the Administrative Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Debt (other than the Loans) when due or within any applicable grace period; (f) any event or condition shall occur and shall continue beyond the applicable grace or cure period, if any, provided with respect thereto so as to result in the acceleration of the maturity of Material Debt; (g) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to, or shall fail generally to, pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall 39 remain undismissed and unstayed for a period of 90 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $25,000,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $50,000,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any Material Plan against any member of the ERISA Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within 90 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; (j) a judgment or other court order for the payment of money in excess of $50,000,000 shall be rendered against the Borrower or any Material Subsidiary and such judgment or order shall continue without being vacated, discharged, satisfied or stayed or bonded pending appeal for a period of 45 days; (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other than trustees and participants in employee benefit plans of the Borrower and its Subsidiaries or the Endowment or Trust, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of 50% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period (together with any successors nominated or appointed by such directors in the ordinary course) shall cease to constitute a majority of the board of directors of the Borrower; or (l) an "Event of Default" as defined in the Related Agreement shall have occurred and be Continuing; then, and in every such event, the Administrative Agent shall (i) if requested by Banks having more than 66-2/3% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments and they shall thereupon terminate and (ii) if requested by Banks holding more than 66-2/3% in aggregate 40 principal amount of the Loans, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to the Borrower, without any notice to the Borrower or any other act by the Administrative Agent or the Banks, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Administrative Agent shall give notice to the Borrower under Section 6.0l(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE 7 THE ADMINISTRATIVE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Administrative Agent and Affiliates. The Chase Manhattan Bank shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and The Chase Manhattan Bank and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent hereunder. SECTION 7.03. Action by Administrative Agent. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. Consultation with Experts. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any 41 action taken or omitted to be taken by it in good faith in accordance with the advice of such Counsel, accountants or experts. SECTION 7.05. Liability of Administrative Agent. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable to any Bank for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Administrative Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3, except receipt of items required to be delivered to the Administrative Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it in good faith to be genuine or to be signed by the proper Party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees'' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees thereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and 42 information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. Successor Administrative Agent. The Administrative Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Borrower, with the consent of the Required Banks (such consent not to be unreasonably withheld or delayed), shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $250,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder; provided that if such successor Administrative Agent is appointed without the consent of the Borrower, such successor Administrative Agent may be replaced by the Borrower with the consent of the Required Banks. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent. SECTION 7.09. Administrative Agent's Fee. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon between the Borrower and the Administrative Agent. SECTION 7.10. Documentation Agents. None of the Documentation Agents, in their capacity as such, shall have any duties or obligations of any kind under this Agreement. ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Euro-Dollar Borrowing or Bid Rate (Indexed) Borrowing. 43 (a) the Administrative Agent is advised by the Euro-Dollar Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Euro-Dollar Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Euro-Dollar Borrowing, Banks having 66-2/3% or more of the aggregate amount of the affected Loans advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Banks of funding their Euro- Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Administrative Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make Euro- Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least one Domestic Business Day before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Syndicated Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such Borrowing is a Bid Rate (Indexed) Borrowing, the Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or Fund any of its Euro-Dollar Loans and such Bank shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to continue or convert outstanding Loans as or into Euro-Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Bank shall designate a 44 different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not be otherwise disadvantageous to such Bank in the good faith exercise of its discretion. if such notice is given, each Euro-Dollar Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Bank may lawfully continue to maintain and fund such Loan to such day or (b) immediately if such Bank shall determine that it may not lawfully continue to maintain and fund such Loan to such day. SECTION 8.03. Increased Cost and Reduced Return. (a) if on or after (x) the date of this Agreement, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of any related Bid Rate Quote, in the case of any Bid Rate Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, 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 any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) issued on or after such date of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage) against assets of deposits with or for the account of or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the London interbank market any other condition (other than in respect of Taxes or Other Taxes) affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction; provided that no such amount shall be payable with respect to any period commencing more than 90 days prior to the date such Bank first notifies the Borrower of its intention to demand compensation therefor under this Section 8.03(a). (b) If any Bank shall have determined that, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change 45 in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency given or made after the date of this Agreement, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Administrative Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction; provided that no such amount shall be payable with respect to any period commencing less than 30 days after the date such Bank first notifies the Borrower of its intention to demand compensation under this Section 8.03(b). (c) Each Bank will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Administrative Agent, taxes imposed on its income, net worth or gross receipts and franchise or similar taxes imposed on it by a jurisdiction under the laws of which such Bank or the Administrative Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments except to the extent that such Bank is subject to United States withholding tax by reason of a U.S. Tax Law Change. 46 "Other Taxes" means any present or fixture stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. "U.S. Tax Law Change" means with respect to any Bank or Participant the occurrence (x) in the case of each Bank listed on the signature pages hereof, after the date of its execution and delivery of this Agreement and (y) in the case of any other Bank, after the date such Bank shall have become a Bank hereunder, and (z) in the case of each Participant, after the date such Participant became a Participant hereunder, of the adoption of any applicable U.S. federal law, U.S. federal rule or U.S. federal regulation relating to taxation, or any change therein, or the entry into force, modification or revocation of any income tax convention or treaty to which the United States is a party. (b) Any and all payments by the Borrower to or for the account of any Bank or the Administrative Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Administrative Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof (c) The Borrower agrees to indemnify each Bank and the Administrative Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Administrative Agent (as the ease may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Administrative Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter as required by law (but only so long as such Bank 47 remains lawfully able to do so), shall provide the Borrower two completed and duly executed copies of Internal Revenue Service form W-8BEN or W-8ECI, as appropriate, or any successor form prescribed by the Internal Revenue Service, or other documentation reasonably requested by the Borrower, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a U.S. Tax Law Change), such Bank shall not be entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to any Taxes or Other Taxes which would not have been payable had such form been so provided, provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes (it being understood, however, that the Borrower shall have no liability to such Bank in respect of such Taxes). (f) if the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will take such action (including changing the jurisdiction of its Applicable Lending Office) as in the good faith judgment of such Bank (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. (g) if any Bank or the Administrative Agent receives a refund (including a refund in the form of a credit against taxes that are otherwise payable by the Bank or the Administrative Agent) of any Taxes or Other Taxes for which the Borrower has made a payment under Section 8.04(b) or (c) and such refund was received from the taxing authority which originally imposed such Taxes or Other Taxes, such Bank or the Administrative Agent agrees to reimburse the Borrower to the extent of such refund, provided that nothing contained in this paragraph (g) shall require any Bank or the Administrative Agent to seek any such refund or make available its tax returns (or any other information relating to its taxes which it deems to be confidential). SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or to continue or convert outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to 48 Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03(a) or 8.04 with respect to its Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Administrative Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer apply: (a) all Loans which would otherwise be made by such Bank as (or continued as or converted to) Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and (b) after each of its Euro-Dollar Loans has been repaid, all payments of principal which would otherwise be applied to repay such Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Banks. SECTION 8.06. Substitution of Rank; Termination Option. If (i) the obligation of any Bank to make or to convert or continue outstanding Loans as or into Euro-Dollar Loans has been suspended pursuant to Section 8.02, (ii) any Bank has demanded compensation under Section 8.03 or 8.04, (iii) any Bank exercises its right not to extend its Commitment Termination Date pursuant to Section 2.01(d) or (iv) Investment Grade Status ceases to exist as to any Bank, then: (a) the Borrower shall have the right, with the assistance of the Administrative Agent, to designate a substitute bank or banks (which may be one or more of the Banks) mutually satisfactory to the Borrower, the Administrative Agent and the Swingline Bank (whose consent shall not be unreasonably withheld or delayed) to purchase for cash, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto, the outstanding Loans of such Bank and assume the Commitment of such Bank, without recourse to or warranty by, or expense to, such Bank, for a purchase price equal to the principal amount of all of such Bank's outstanding Loans plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder and all other amounts payable by the Borrower to such Bank hereunder plus such amount, if any, as would be payable pursuant to Section 49 2.14 if the outstanding Loans of such Bank were prepaid in their entirety on the date of consummation of such assignment; and (b) if at the time Investment Grade Status exists as to the Borrower, the Borrower may elect to terminate this Agreement as to such Bank, provided that (i) the Borrower notifies such Bank through the Administrative Agent of such election at least three Euro-Dollar Business Days before the effective date of such termination, (ii) the Borrower repays or prepays the principal amount of all outstanding Loans made by such Bank plus any accrued but unpaid interest thereon and the accrued but unpaid fees in respect of such Bank's Commitment hereunder plus all other amounts payable by the Borrower to such Bank hereunder, not later than the effective date of such termination and (iii) if at the effective date of such termination, any Swingline Loans are outstanding, the conditions specified in Section 3.02 would be satisfied (after giving effect to such termination) were the related Swingline Loans made on such date. Upon satisfaction of the foregoing conditions, the Commitment of such Bank shall terminate on the effective date specified in such notice. ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Administrative Agent, at its address or telecopy or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address or telecopy or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address or telecopy or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telecopy or telex, when such telecopy or telex is transmitted to the telecopy or telex number specified in this Section and the appropriate answerback or confirmation slip, as the case may be, is received or (ii) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Administrative Agent under Article 2 or Article 3 shall not be effective until delivered. SECTION 9.02. No Waivers. No failure or delay by the Administrative Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other 50 right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Administrative Agent, including reasonable fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket expenses incurred by the Administrative Agent or any Bank, including reasonable fees and disbursements of counsel, in connection with such Event of Default and collection and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Administrative Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount then due with respect to the Loans held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount then due with respect to the Loans held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments with respect to the Loans held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness under this Agreement. SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if; but only if, such amendment or waiver is in writing and is signed by the Borrower and the 51 Required Banks (and, if the rights or duties of the Administrative Agent or the Swingline Bank are affected thereby, by such Person); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any interest thereon or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for termination of any Commitment, (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement or (v) change the provisions of Section 9.04. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may, with the consent (unless an Event of Default then exists) of the Borrower (such consent not to be unreasonably withheld or delayed), at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Administrative Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower, the Swingline Bank and the Administrative Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Article 8 with respect to its participating interest, subject to the performance by such Participant of the obligations of a Bank thereunder. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). 52 (c) Any Bank may at any time assign to one or more banks or other financial institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree)) of all, of its rights and obligations under this Agreement and its Note (if any), and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit G hereto executed by such Assignee and such transferor Bank, with (and only with and subject to) the prior written consent of the Swingline Bank, the Administrative Agent (which shall not be unreasonably withheld or delayed) and, so long as no Event of Default has occurred and is continuing, the Borrower (given in its sole discretion), provided that unless such assignment is of the entire right, title and interest of the transferor Bank hereunder, after making any such assignment such transferor Bank shall have a Commitment of at least $10,000,000 (unless the Borrower and the Administrative Agent shall otherwise agree). Upon execution and delivery of such instrument of assumption and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required by the Assignee, a Note is issued to the Assignee. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. All assignments shall be subject to a transaction fee established by, and payable by the transferor Bank to, the Administrative Agent for its own account (which shall not exceed $5,000). (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note (if any) to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder or modify any such obligations. (e) No Assignee, Participant or other transferee of any Bank's rights (including any Applicable Lending Office other than such Bank's initial Applicable Lending Office) shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made by reason of the 53 provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Administrative Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Confidentiality. The Administrative Agent and each Bank agrees to keep any information delivered or made available by the Borrower pursuant to this Agreement confidential from anyone other than persons employed or retained by such Bank and its affiliates who are engaged in evaluating, approving, structuring or administering the credit facility contemplated hereby; provided that nothing herein shall prevent any Bank from disclosing such information (a) to any other Bank or to the Administrative Agent, (b) to any other Person if reasonably incidental to the administration of the credit facility contemplated hereby, (c) upon the order of any court or administrative agency, (d) upon the request or demand of any regulatory agency or authority, (e) which had been publicly disclosed other than as a result of a disclosure by the Administrative Agent or any Bank prohibited by this Agreement, (f) in connection with any litigation to which the Administrative Agent, any Bank or its subsidiaries or Parent may be a party, (g) to the extent necessary in connection with the exercise of any remedy hereunder, (h) to such Bank's or Administrative Agent's legal counsel and independent auditors and (i) subject to provisions substantially similar to those contained in this Section 9.08, to any actual or proposed Participant or Assignee. SECTION 9.09. Governing Law; Submission to Jurisdiction. This Agreement and each Note (if any) shall be construed in accordance with and governed by the law of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.10. Counterparts; Integration. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This 54 Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT, THE SWINGLINE BANK AND THE BANKS, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 55 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. DUKE ENERGY CORPORATION By /s/ S. L. LOVE ------------------------------- Title: Assistant Treasure Address: 422 South Church Street Charlotte, NC 28202-1904 Attention: S. L. Love Telecopy number: 704-382-9497 COMMITMENTS - ----------- $24,329,268.29 THE CHASE MANHATTAN BANK By /s/ PAUL FARRELL ------------------------------- Title: Vice President $24,329,268.29 BANK OF AMERICA, N.A. By /s/ GRETCHEN P. BURUD ------------------------------- Title: Managing Director 56 $20,853,658.54 THE BANK OF TOKYO MITSUBISHI, LTD., NEW YORK BRANCH By /s/ NICHOLAS R. BATTISTA ------------------------------- Title: Attorney-in-Fact $20,853,658.54 BANK ONE, NA By /s/ MICHAEL MURPHY ------------------------------- Title: Director $20,853,658.54 BARCLAYS BANK PLC By /s/ SYDNEY G. DENNIS ------------------------------- Title: Director $20,853,658.54 CITIBANK, N.A. By /s/ J. NICHOLAS MCKEE ------------------------------- Title: Vice President 57 $20,853,658.54 DEUTSCHE BANK AG NEW YORK BRANCH By /s/ HANS C. NARBERHAUS ------------------------------- Title: Vice President By /s/ JOEL MAKOWSKY ------------------------------- Title: Vice President $20,853,658.54 FIRST UNION NATIONAL BANK By /s/ JOE K. DANCY ------------------------------- Title: Vice President $15,060,975.61 ABN AMRO BANK NV. By /s/ JEFFREY DODD ------------------------------- Title: Group Vice President By /s/ SONNY K. TRAN ------------------------------- Title: Assistant Vice President $15,060,975.61 BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH By /s/ SEAN O'SULLIVAN ------------------------------- Title: Vice President By /s/ PETER OBERMANN ------------------------------- Title: Senior Vice President 58 $15,060,975.61 COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ HARRY YERGEY ------------------------------- Title: Sen. Vice President & Manager By /s/ LEE WARD ------------------------------- Title: Asst. Vice President $15,060,975.61 CREDIT SUISSE FIRST BOSTON By /s/ ANDREA E. SHKANE ------------------------------- Title: Assistant Vice President $15,060,975.61 DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES By /s/ LAURA SCHUMACHER ------------------------------- Title: Assistant Vice President By /s/ FREDERIC LABNER ------------------------------- Title: Asst. Vice President 59 $15,060,975.61 FLEET NATIONAL BANK By /s/ RITA M. CAHILL ------------------------------- Title: Managing Director $15,060,975.61 THE INDUSTRIAL BANK OF JAPAN, LIMITED BY /s/ JAMES W. MASTERS ------------------------------- Title: Senior Vice President $15,060,975.61 THE NORTHERN TRUST COMPANY BY /s/ DONALD D. DABISCH ------------------------------- Title: Vice President $15,060,975.61 SOCIETE GENERALE BY /s/ DAVID BIRD ------------------------------- Title: Vice President $15,060,975.61 TD SECURITIES (USA) INC. BY /s/ CAROL BRANDT ------------------------------- Title: Vice President 60 $15,060,975.61 UBS AG, STAMFORD BRANCH BY /s/ WILFRED V. SAINT ------------------------------- Title: Associate Director BY /s/ PATRICIA O'KICKI ------------------------------- Title: Director $15,060,975.61 WACHOVIA BANK, NA. BY /s/ YANN PIRIO ------------------------------- Title: Vice President $9,268,292.68 THE BANK OF NEW YORK BY /s/ JOHN W. HALL ------------------------------- Title: Vice President $9,268,292.68 THE BANK OF NOVA SCOTIA BY /s/ WILLIAM F. ZARRETT ------------------------------- Title: Managing Director 61 $9,268,292.68 BNP PARIBAS BY /s/ ROBERT J. MUNCZINSKI ------------------------------- Title: Managing Director BY /s/ OLIVIER SERRA ------------------------------- Title: Vice President $9,268,292.68 CIBC, INC. BY /s/ M. SANJEEVA SENANAYAKE ------------------------------- Title: Executive Director $9,268,292.68 CREDIT LYONNAIS NEW YORK BRANCH BY /s/ PHILIPPE SOUSTRA ------------------------------- Title: Executive Vice President $9,268,292.68 KBC BANK BY /s/ JEAN-PIERRE DIELS ------------------------------- Title: First Vice President BY /s/ EDWARD J. EIJLERS ------------------------------- Title: Assistant Vice President 62 $9,268,292.68 MELLON BANK, N.A. BY /s/ ROGER F. HOWARD ------------------------------- Title: Vice President $9,268,292.68 NATIONAL AUSTRALIA BANK LTD. BY /s/ FRANK J. CAMPIGLIA ------------------------------- Title: Vice President $9,268,292.68 ROYAL BANK OF CANADA By /s/ SHERYL GREENBERG ------------------------------- Title: Senior Manager $9,268,292.68 THE SANWA BANK LIMITED BY /s/ P. BARTLETT WU ------------------------------- Title: Vice President $9,268,292.68 SUMITOMO MITSUI BANKING CORPORATION BY /s/ DAVID A. BUCK ------------------------------- Title: Senior Vice President 63 $9,268,292.68 SUNTRUST BANK, ATLANTA BY /s/ STEVEN J. NEWBY ------------------------------- Title: Vice President $9,268,292.68 WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH BY /s/ FELICIA LA FORGIA ------------------------------- Title: Vice President BY /s/ ANTHONY ALESSANDRO ------------------------------- Title: Manager - ------------------ TOTAL COMMITMENTS $475,000,000 ================== 64 BANK OF AMERICA, N.A., as Syndication Agent BY /s/ GRETCHEN P. BURUD ------------------------------- Title: Vice President THE CHASE MANHATTAN BANK, as Administrative Agent BY /s/ PAUL FARRELL ------------------------------- Title: Vice President Address: 270 Park Avenue New York, NY 10017 Attention: Paul V. Farrell Telecopy number: (212) 270-7625 65 PRICING SCHEDULE ---------------- The "Euro-Dollar Margin" and the "Facility Fee Rate" for any day are the respective percentages set forth below in the applicable row under the column corresponding to the Status that exists on such day: LEVEL I LEVEL LEVEL LEVEL LEVEL LEVEL LEVEL II III IV V VI VII FACILITY FEE .080% .090% .100% .135% .155% .200% .250% - ----------- EURO-DOLLAR MARGIN - ------------------ Syndicated Loans (other than Term Loans): Utilization (less than) 33-1/3% .070% .110% .150% .165% .195% .300% .500% Utilization (greater than or equal to) 33-1/3%, (less than) 66-2/3% .170% .210% .250% .265% .295% .400% .600% Utilization (greater than or equal to) 66-3/4% .270% .310% .350% .365% .395% .500% .700% Term Loans .645% .685% .725% .740% .770% .875% 1.075%
For purposes of this Schedule, the following terms have the following meanings: "Level I Status" exists at any date if, at such date, the Borrower is rated higher than "A+" by S&P or higher than "Al" by Moody's. "Level II Status" exists at any date if, at such date, (i) the Borrower is rated "A+" by S&P or "Al" by Moody's and (ii) Level I Status does not exist. "Level III Status" exists at any date if, at such date, (i) the Borrower is rated "A" by S&P or "A2" by Moody's and (ii) neither Level I Status nor Level II Status exists. "Level IV Status" exists at any date if, at such date, (i) the Borrower is rated "A-" by S&P or "A3" by Moody's and (ii) neither Level I Status, Level II Status nor Level II Status exists. "Level V Status" exists at any date if, at such date, (i) the Borrower is rated "BBB+" by S&P or "Baal" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status nor Level IV Status exists. 66 "Level VI Status" exists at any date if, at such date, the Borrower is rated "BBB" by S&P or "Baa2" by Moody's and (ii) neither Level I Status, Level II Status, Level III Status, Level IV Status nor Level V Status exists. "Level VII Status" exists at any date if, at such date, no other Status exists. "Status" refers to the determination of which of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status, Level VI Status or Level VII Status exists at any date. The "Utilization" applicable to any date is the percentage equivalent of a fraction the numerator of which is the aggregate outstanding principal amount of the Loans determined at such time after giving effect, if one or more Loans are being made at such time, to any substantially concurrent application of the proceeds thereof to repay one or more other Loans and the denominator of which is the aggregate amount of the Commitments at such date. If for any reason any Loans remain outstanding following the termination of the Commitments, Utilization will be deemed to be more than 66 2/3%. The credit ratings to be utilized for purposes of this Schedule are those indicated for or assigned to the senior unsecured long-term debt securities of the Borrower without third-party credit enhancement, and any rating indicated for or assigned to any other debt security of the Borrower shall be disregarded. The ratings in effect for any day are those in effect at the close of business on such day. A change in credit rating will result in an immediate change in the applicable Status. In the case of split ratings from S&P and Moody's, the rating to be used to determine the applicable Status is the higher of the two. 67 SCHEDULE I DUKE ENERGY CORPORATION CREDIT FACILITY (Being Replaced by this Agreement and the Related Agreement) Credit Agreement (5-Year Facility) dated as of August 25, 1997 among Duke Energy Corporation, the lenders party thereto and Morgan Guaranty Trust Company of New York, as administrative agent. 68 EXHIBIT A NOTE New York, New York August 29, 2001 For value received, Duke Energy Corporation, a North Carolina corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the date specified in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of The Chase Manhattan Bank, 270 Park Avenue, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, the Bank, if the Bank so elects in connection with any transfer or enforcement of its Note, may endorse on the schedule attached hereto appropriate notations to evidence the foregoing information with respect to the Loans then outstanding; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Three-Year Credit Agreement dated as of August 29, 2001 among the Borrower, the banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. DUKE ENERGY CORPORATION By ------------------------------ Title: 69 Note (cont'd) LOANS AND PAYMENTS OF PRINCIPAL - -------------------------------------------------------------------------------- Amount of Amount Type Principal Maturity Notation Date of Loan of Loan Repaid Date Made By - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
70 EXHIBIT B FORM OF BID RATE QUOTE REQUEST ------------------------------ [Date] To: The Chase Manhattan Bank (the "Administrative Agent") From: Duke Energy Corporation (the "Borrower") Re: Three-Year Credit Agreement (the "Credit Agreement") dated as of August 29, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent and the Administrative Agent We hereby give notice pursuant to Section 2.03 of the Credit Agreement that we request Bid Rate Quotes for the following proposed Bid Rate Borrowing(s): Date of Borrowing: --------------------- PRINCIPAL AMOUNT* INTEREST PERIOD** - ------------------ ----------------- $ Such Bid Rate Quotes should offer a Bid Rate [(General), (Indexed) or both]. [The applicable base rate is the London Interbank Offered Rate.] Terms used herein have the meanings assigned to them in the Credit Agreement. DUKE ENERGY CORPORATION By ----------------------- Title: - ----------------------- *Amount must be $10,000,000 or a larger multiple of $1,000,000. **Not less than one month (]3id Rate (Indexed) Auction) or not less than 7 days (Bid Rate (General) Auction), subject to the provisions of the definition of Interest Period. 71 EXHIBIT C FORM OF INVITATION FOR BID RATE QUOTES ------------------------------------- To: [Name of Bank] Re: Invitation for Bid Rate Quotes to Duke Energy Corporation (the "Borrower") Pursuant to Section 2.03 of the Three-Year Credit Agreement dated as of August 29,2001 among the Borrower, the Banks parties thereto, Bank of America, N.A., as Syndication Agent, and the undersigned, as Administrative Agent, we are pleased on behalf of the Borrower to invite you to submit Bid Rate Quotes to the Borrower for the following proposed Bid Rate Borrowing(s): Date of Borrowing: ------------------------ PRINCIPAL AMOUNT INTEREST PERIOD - ---------------- --------------- $ Such Bid Rate Quotes should offer a Bid Rate ((Indexed), (General) or both]. [The applicable base rate is the London Interbank Offered Rate.] Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.] New York City time) on [date]. THE CHASE MANHATTAN BANK By --------------------------- Authorized Officer 72 EXHIBIT D FORM OF BID RATE QUOTE ---------------------- To: The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Attention: Re: Bid Rate Quote to Duke Energy Corporation (the "Borrower") In response to your invitation on behalf of the Borrower dated ______________, 20, we hereby make the following Bid Rate Quote on the following terms: 1. Quoting Bank: ----------------------------------- 2. Person to contact at Quoting Bank: ------------------------------------ 3. Date of Borrowing: * --------------------------- 4. We hereby offer to make Bid Rate Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates: Principal Interest Bid Rate Principal Interest Bid Rate Amount** Period*** [Indexed)****] [(General)]*****] - --------- --------- -------------- ----------------- $ - ----------------------------- *As specified in the related Invitation. **Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger of multiple of $1,000,000. ***Not less than one month or less than 30 days, as specified in the related Invitation, but no bid may be submitted for an Interest Period extending beyond bidder's Commitment Termination Date. No more than five bids are permitted for each Interest Period. ****Margin over or under the London Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (rounded to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". *****Specific rate of interest per annum (rounded to the nearest 1/10,000th of 1%). 73 $ provided, that the aggregate principal amount of Bid Rate Loans for which the above offers may be accepted shall not exceed $_____________.]** We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Three-Year Credit Agreement dated as of August 29, 2001 among the Borrower, the Banks listed on the signature pages thereof, Bank of America, N.A., as Syndication Agent, and yourselves, as Administrative Agent, irrevocably obligates us to make the Bid Rate Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated: By: ---------------------------- ---------------------------- Authorized Officer 74 EXHIBIT E-1 OPINION OF GENERAL COUNSEL OF THE BORROWER August 29, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: I am the Deputy General Counsel of Duke Energy Corporation (the "Borrower") and have acted as its counsel in connection with the Three-Year Credit Agreement (the "Credit Agreement"), dated as of August 29,2001, among the Borrower, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms defined in the Credit Agreement are used herein as therein defined. This opinion letter is being delivered pursuant to Section 3.01(b) of the Credit Agreement. In such capacity, I or attorneys under my direct supervision have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of North Carolina. 2. The execution, delivery and performance by the Borrower of the Credit Agreement and any Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (except for the approval of the obtaining of credit pursuant to the Credit Agreement by the North Carolina Utilities Commission and The Public Service Commission of South Carolina, which has been obtained) and do not contravene, or constitute a 75 default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or, to my knowledge, of any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or, to my knowledge, result in the creation or imposition of any Lien on any asset of the Borrower or any of its Material Subsidiaries. 3. Except as, disclosed in the reports referred to in Section 4.04 of the Credit Agreement, to my knowledge (but without independent investigation), there is no action suit or proceeding pending or threatened against or affecting, the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official, which would be likely to be decided adversely to the Borrower or such Subsidiary and, as a result, to have a material adverse effect upon the business, consolidated financial position or consolidated results of operations of the Borrower and its Consolidated Subsidiaries, considered as a whole or which in any manner draws into question the validity of the Credit Agreement or any Notes. 4. The Borrower is not a holding company under the Public Utility Holding Company Act of 1935, as amended. The phrase "to my knowledge", as used in the foregoing opinion, refers to my actual knowledge without any independent investigation as to any such matters. I am a member of the Bar of the State of North Carolina and do not express any opinion herein concerning any law other than the law of the State of North Carolina and the federal law of the United States of America. This opinion is rendered to you in connection with the above-referenced mater and may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other Person, firm or corporation without my prior written consent, except for Additional Banks and Assignees. My opinions expressed herein are as of the date hereof, and I undertake no obligation to advise you of any changes of applicable law or any other matters that may come to my attention after the date hereof that may affect my opinions expressed herein. Very truly yours, 76 EXHIBIT E-2 OPINION OF ROBINSON, BRADSHAW & HINSON, P.A., SPECIAL COUNSEL FOR THE BORROWER August 29, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank as Administrative Agent 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: We have acted as counsel to Duke Energy Corporation, a North Carolina corporation (the "Borrower"), in connection with the Three-Year Credit Agreement (the "Credit Agreement"), dated as of August 29, 2001, between the Duke Energy Corporation, the banks listed on the signature pages thereof, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as Syndication Agent. Capitalized terms used herein and not defined shall have the meanings given to them in the Credit Agreement. This opinion letter is being delivered pursuant to Section 3.01(b) of the Credit Agreement. In connection with this opinion, we also examined originals, or copies identified to our satisfaction, of such other documents and considered such matters of law and fact as we, in our professional judgment, have deemed appropriate to render the opinions contained herein. Where we have considered it appropriate, as to certain facts we have relied, without investigation or analysis of any underlying data contained therein, upon certificates or other comparable documents of public officials and officers or other appropriate representatives of the Borrower. In rendering the opinions contained herein, we have assumed, among other things, that the Credit Agreement and any Notes to be executed (i) are within the Borrower's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of; or filing with, any governmental body, agency of official, and (iv) do not contravene, or constitute a default under, any provision of applicable law or regulation or of the Borrower's 77 certificate of incorporation or by-laws or any agreement, judgment, injunction, order, decree or other instrument binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower. In addition, we have assumed that the Credit Agreement fully states the agreement between the Borrower and the Banks with respect to the matters addressed therein, and that the Credit Agreement constitutes a legal, valid and binding obligation of each Bank, enforceable in accordance with its respective terms. The opinions set forth herein are limited to matters governed by the laws of the State of North Carolina and the federal laws of the United States, and no opinion is expressed herein as to the laws of any other jurisdiction. For purposes of our opinions, we have disregarded the choice of law provisions in the Credit Agreement and, instead, have assumed with your permission that the Credit Agreement and the Notes are governed exclusively by the internal, substantive laws and judicial interpretations of the State of North Carolina. We express no opinion concerning any matter respecting or affected by any laws other than laws that a lawyer in North Carolina exercising customary professional diligence would reasonably recognize as being directly applicable to the Borrower, the Loans, the Letters of Credit, or any of them. Based upon and subject to the foregoing and the further limitations and qualifications hereinafter expressed, it is our opinion that the Credit Agreement constitutes the legal, valid and binding obligation of the Borrower and the Notes, if and when issued, will constitute legal, valid and binding obligations of the Borrower, in each case, enforceable against the Borrower in accordance with its terms. The opinions expressed above are subject to the following qualifications and limitations: 1. Enforcement of the Credit Agreement and the Notes is subject to the effect of applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium and similar laws affecting the enforcement of creditors' rights generally. 2. Enforcement of the Credit Agreement and the Notes is subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law) by which a court with proper jurisdiction may deny rights of specific performance, injunction, self-help, possessory remedies or other remedies. 3. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or any Note that (i) purport to excuse a party for liability for its own acts, (ii) purport to make void any act done 78 in contravention thereof, (iii) purport to authorize a party to act in its sole discretion, (iv) require waivers or amendments to be made only in writing, (v) purport to effect waivers of constitutional, statutory or equitable rights or the effect of applicable laws, (vi) impose liquidated damages, penalties or forfeiture, or (vii) purport to indemnify a party for its own negligence or willful misconduct. Indemnification provisions in the Credit Agreement are subject to and may be rendered unenforceable by applicable law or public policy, including applicable securities law. 4. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement or the Notes purporting to require a party thereto to pay or reimburse attorneys' fees incurred by another party, or to indemnify another party there for, which may be limited by applicable statutes and decisions relating to the collection and award of attorneys' fees, including but not limited to North Carolina General Statutes ss. 6-21.2. 5. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement purporting to waive the fight of jury trial. Under North Carolina General Statutes ss. 22B-l0, a provision for the waiver of the right to a jury trial is unconscionable and unenforceable. 6. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement concerning choice of forum or consent to the jurisdiction of courts, venue of actions or means of service of process. 7. It is likely that North Carolina courts will enforce the provisions of the Credit Agreement providing for interest at a higher rate resulting from a Default or Event of Default (a "Default Rate") which rate is higher than the rate otherwise stipulated in the Credit Agreement. The law, however, disfavors penalties, and it is possible that interest at the Default Rate may be held to be an unenforceable penalty, to the extent such rate exceeds the rate applicable prior to a default under the Credit Agreement. Also, since North Carolina General Statutes ss. 24-10.1 expressly provides for late charges, it is possible that North Carolina courts, when faced specifically with the issue, might rule that this statutory late charge preempts any other charge (such as default interest) by a bank for delinquent payments. The only North Carolina case which we have found that addresses this issue is a 1978 Court of Appeals decision, which in our opinion is of limited precedential value, North Carolina National Rank V. Burnette, 38 N.C. App. 120,247 S.E.2d 648(1978), rev'd on other grounds, 297 N.C. 524,256 S.E.2d 388 (1979). While the court in that case did allow interest after default (commencing with the date requested in the complaint) at a rate six percent in excess of pre-default interest, we are unable to determine from the opinion that any question was raised as to this being penal in nature, nor does the court address 79 the possible question of the statutory late charge preempting a default interest surcharge. Therefore, since the North Carolina Supreme Court has not ruled in a properly presented case raising issues of its possible penal nature and those of North Carolina General Statutes ss. 24-10.1, we are unwilling to express an unqualified opinion that the Default Rate of interest prescribed in the Credit Agreement is enforceable. 8. We do not express any opinion as to the enforceability of any provisions contained in the Credit Agreement relating to evidentiary standards or other standards by which the Credit Agreement are to be construed. This opinion letter is delivered solely for your benefit in connection with the Credit Agreement and, except for any Additional Bank or any Assignee which becomes a Bank pursuant to Section 9.06(c) of the Credit Agreement, may not be used or relied upon by any other Person or for any other purpose without our prior written consent in each instance. Our opinions expressed herein are as of the date hereof; and we undertake no obligation to advise you of any changes of applicable law or any other matters that may come to our attention after the date hereof that may affect our opinions expressed herein. Very truly yours, 80 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE ADMINISTRATIVE AGENT -------------------------------------- August 29, 2001 To the Banks and the Administrative Agent Referred to Below c/o The Chase Manhattan Bank, as Administrative Agent 270 Park Avenue New York, New York 10017 Dear Sirs: We have participated in the preparation of the Three-Year Credit Agreement (the "Credit Agreement') dated as of August 29,2001 among Duke Energy Corporation, a North Carolina corporation (the "Borrower"), the banks listed on the signature pages thereof (the "Banks"), Bank of America, NA., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Administrative Agent"), and have acted as special counsel for the Administrative Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and the Notes, if and when issued, constitute valid and binding obligations of the Borrower enforceable in accordance with their respective terms, 81 except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. In giving the foregoing opinion, (i) we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect and (ii) we have relied, without independent investigation, as to all matters governed by the laws of North Carolina, upon the opinion of the General Counsel of the Borrower, dated August 29,2001, a copy of which has been delivered to you. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by or furnished to any other person, firm or corporation without our prior written consent, except for Additional Banks and all Participants. Very truly yours, 82 EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _______, 20__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), [DUKE ENERGY CORPORATION,] THE CHASE MANHATTAN HANK, as Swingline Bank, and THE CHASE MANHATTAN BANK, as Administrative Agent (the "Administrative Agent"). WITNESSETH WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Three-Year Credit Agreement dated as of August 29, 2001 among Duke Energy Corporation (the "Borrower"), the Assignor and the other Banks party thereto, as Banks, Bank of America, N.A., as Syndication Agent, and the Administrative Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________;* WHEREAS, Syndicated Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $___________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms;* NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION I. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. - ------------------------------ *The asterisked provisions shall be appropriately revised in the event of an assignment after the Commitment Termination Date. 83 SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Syndicated Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, [the Borrower,] the Swingline Bank and the Administrative Agent, the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.* It is understood that facility fees accrued to the date hereof in respect of the Assigned Amount are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent to Assignment This Agreement is conditioned upon the consent of [the Borrower,] the Swingline Bank and the Administrative Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by [the Borrower,] the Swingline Bank and the Administrative Agent is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to execute and deliver a Note, if required by the Assignee, payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 5. Non-reliance on Assignor The Assignor makes no representation or warranty in connection with, and shall have no responsibility - ------------------------------- *Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 84 with respect to, the solvency, financial condition, or statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. SECTION 8. Administrative Questionnaire. Attached is an Administrative Questionnaire duly completed by the Assignee. 85 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By ----------------------------- Title: [ASSIGNEE] By ----------------------------- Title: [DUKE ENERGY CORPORATION By ----------------------------- Title:] THE CHASE MANHATTAN BANK, as Swingline Bank and Administrative Agent By ----------------------------- Title: 86 EXHIBIT H EXTENSION AGREEMENT The Chase Manhattan Bank, as Administrative Agent under the Credit Agreement referred to below 270 Park Avenue New York, New York 10017 Ladies and Gentlemen: Effective as of [date], the undersigned hereby agrees to extend its Commitment and Commitment Termination Date under the Three-Year Credit Agreement dated as of August 29,2001 among Duke Energy Corporation, (the "Borrower"), the banks parties thereto, Bank of America, N.A., as Syndication Agent, and The Chase Manhattan Bank, as Administrative Agent (the "Credit Agreement") for one year to [date to which its Commitment Termination Date is to be extended] pursuant to Section 2.01(d) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. This Extension Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. [NAME OF BANK] By ----------------------------- Title: 87 Agreed and Accepted: DUKE ENERGY CORPORATION, as Borrower By --------------------------- Title: THE CHASE MANHATTAN BANK, as Administrative Agent By --------------------------- Title: 88 EX-10.7 9 dex107.txt AMENDED AND RESTATED COMBINATION AGREEMENT Exhibit 10.7 AMENDED AND RESTATED COMBINATION AGREEMENT AMONG DUKE ENERGY CORPORATION, 3058368 NOVA SCOTIA COMPANY, 3946509 CANADA INC. AND WESTCOAST ENERGY INC. AS OF SEPTEMBER 20, 2001 TABLE OF CONTENTS ----------------- ARTICLE 1 INTERPRETATION 1.1 Definitions..........................................................1 1.2 Interpretation Not Affected by Headings, etc.........................9 1.3 Rules of Construction................................................9 1.4 Date For Any Action.................................................10 1.5 Schedules...........................................................10 ARTICLE 2 THE ARRANGEMENT 2.1 Implementation Steps by Westcoast...................................10 2.2 Implementation Steps by Duke Energy Parties.........................11 2.3 Interim Order.......................................................11 2.4 Articles of Arrangement.............................................11 2.5 Westcoast Circular..................................................12 2.6 Securities Compliance...............................................12 2.7 Preparation of Filings..............................................13 ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF WESTCOAST 3.1 Organization and Standing...........................................15 3.2 Capitalization......................................................15 3.3 Authority and No Conflicts..........................................17 3.4 Consents; Approvals.................................................18 3.5 No Defaults.........................................................19 3.6 Absence of Certain Changes or Events................................19 3.7 Employment Matters..................................................19 3.8 Reports; Financial Statements.......................................21 3.9 Contracts...........................................................22 3.10 Litigation..........................................................23 3.11 Environmental.......................................................23 3.12 Tax Matters.........................................................24 3.13 Pension and Employee Benefits.......................................26 3.14 Affiliates..........................................................29 3.15 Compliance with Laws; Permits.......................................29 3.16 Restrictions on Business Activities.................................30 3.17 Intellectual Property...............................................30 3.18 Insurance...........................................................31 3.19 Property............................................................31 3.20 Regulatory Proceedings..............................................32 3.21 Regulation as a Utility.............................................32 3.22 Futures Trading and Fixed Price Exposure............................32 3.23 Opinion of Financial Advisors.......................................33 3.24 Brokerage and Finders' Fees.........................................33 3.25 Westcoast Rights Plan...............................................33 3.26 Solvency of Westcoast...............................................33 AMENDED AND RESTATED COMBINATION AGREEMENT i ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE DUKE ENERGY PARTIES 4.1 Organization and Standing...........................................34 4.2 Capitalization......................................................34 4.3 Authority and No Conflicts..........................................35 4.4 Consents; Approvals.................................................36 4.5 No Defaults.........................................................36 4.6 Absence of Certain Changes or Events................................37 4.7 Reports; Financial Statements.......................................37 4.8 Litigation..........................................................38 4.9 Environmental.......................................................38 4.10 Nuclear Operations..................................................39 4.11 Compliance with Laws; Permits.......................................39 4.12 Regulatory Proceedings..............................................40 4.13 Futures Trading and Fixed Price Exposure............................40 4.14 Brokerage and Finders' Fees.........................................40 ARTICLE 5 COVENANTS AND AGREEMENTS 5.1 Covenants of Westcoast..............................................40 5.2 Covenants of Duke Energy............................................47 5.3 Access to Information...............................................50 5.4 Indemnification.....................................................50 5.5 Covenants Regarding Non-Solicitation................................51 5.6 Right to Accept a Superior Proposal.................................52 5.7 Employee Benefits and Related Matters...............................53 5.8 Prohibition on Voluntary Liquidation................................54 5.9 Conversion of Westcoast Preferred Shares............................55 5.10 Closing Matters.....................................................55 ARTICLE 6 CONDITIONS 6.1 Mutual Conditions...................................................55 6.2 Additional Conditions to the Obligations of the Duke Energy Parties.56 6.3 Additional Conditions to the Obligations of Westcoast...............58 6.4 Satisfaction of Conditions..........................................59 ARTICLE 7 AMENDMENT AND TERMINATION 7.1 Amendment...........................................................59 7.2 Termination.........................................................60 7.3 Effect of Termination...............................................61 7.4 Effect of Termination Fee Payment...................................63 ARTICLE 8 GENERAL 8.1 Investigation.......................................................64 8.2 Notices.............................................................64 8.3 Assignment..........................................................65 8.4 Binding Effect......................................................65 8.5 Third-Party Beneficiaries...........................................65 8.6 Waiver and Modification.............................................65 8.7 No Personal Liability...............................................65 8.8 Further Assurances..................................................65 AMENDED AND RESTATED COMBINATION AGREEMENT ii 8.9 Expenses............................................................66 8.10 Public Announcements................................................66 8.11 Governing Laws; Consent to Jurisdiction.............................66 8.12 Remedies............................................................66 8.13 Time of Essence.....................................................66 8.14 Entire Agreement....................................................67 8.15 Severability........................................................67 8.16 Counterparts........................................................67 Schedules: A - Form of Affiliate's Letter B - Appropriate Regulatory Approvals C - Form of Arrangement Resolution D - Form of Westcoast Rights Plan Waiver Resolution E - Form of Plan of Arrangement F - Form of Support Agreement G - Form of Voting and Exchange Trust Agreement AMENDED AND RESTATED COMBINATION AGREEMENT iii AMENDED AND RESTATED COMBINATION AGREEMENT THIS AMENDED AND RESTATED COMBINATION AGREEMENT dated as of September 20, 2001 (this "Agreement"), is entered into by and among Duke Energy Corporation, a North Carolina corporation ("Duke Energy"), 3058368 Nova Scotia Company, an unlimited liability company existing under the Laws of the Province of Nova Scotia and an indirect wholly-owned subsidiary of Duke Energy Corporation ("Callco"), 3946509 Canada Inc., a corporation existing under the Laws of Canada and a wholly-owned subsidiary of Callco ("Exchangeco"), and Westcoast Energy Inc., a corporation existing under the Laws of Canada ("Westcoast"). Duke Energy, Callco and Exchangeco are collectively referred to herein as the "Duke Energy Parties." R E C I T A L S The Board of Directors of Westcoast has determined that the business combination to be effected by means of the Plan of Arrangement is advisable and in the best interest of Westcoast and has approved the transactions contemplated by this Agreement and determined to recommend approval of the Plan of Arrangement and other transactions contemplated hereby to the Westcoast Securityholders. The Board of Directors of Duke Energy has determined that the business combination to be effected by means of the Plan of Arrangement is advisable and in the best interest of Duke Energy and has approved the transactions contemplated by this Agreement. In furtherance of such business combination, the Board of Directors of Westcoast has agreed to submit the Plan of Arrangement and other transactions contemplated hereby to the Westcoast Securityholders and the Supreme Court of British Columbia for approval. NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows: ARTICLE 1 INTERPRETATION 1.1 Definitions In this Agreement, unless the context otherwise requires, the following terms shall have the following meanings respectively: "1933 Act" means the United States Securities Act of 1933, as amended; "1935 Act" means the United States Public Utility Holding Company Act of 1935, as amended; "Acquisition Proposal" means any of the following (other than the transactions contemplated by this Agreement or the Arrangement): (a) any merger, amalgamation, AMENDED AND RESTATED COMBINATION AGREEMENT 1 arrangement, share exchange, take-over bid, tender offer, recapitalization, consolidation or business combination directly or indirectly involving Westcoast or any of its Material Subsidiaries (for this purpose, each reference to 5% in the definition of Material Subsidiary shall be deemed to be 10%), (b) any acquisition of assets representing 20% or more of the book value (on a consolidated basis) of the assets of Westcoast and its subsidiaries, taken as a whole (or any lease, long-term supply agreement, exchange, mortgage, pledge or other arrangement having a similar economic effect) in a single transaction or a series of related transactions, (c) any acquisition of beneficial ownership (as defined under Section 13(d) of the Exchange Act) of 20% or more of the Westcoast Common Shares in a single transaction or a series of related transactions, (d) any acquisition by Westcoast of any assets or capital stock of another person (other than acquisitions of capital stock or assets of any other person that are not, individually or in the aggregate, material to Westcoast and its subsidiaries, taken as a whole), or (e) any bona fide proposal to, or public announcement of an intention to, do any of the foregoing; "Affected Employees" has the meaning ascribed thereto in Section 5.7; "affiliate" has the meaning ascribed thereto in the Securities Act, unless otherwise expressly stated herein; "Affiliate's Letter" means a letter, to be substantially in the form and content of Schedule A annexed hereto; "Agreement" has the meaning ascribed thereto in the Preamble; "Appropriate Regulatory Approvals" means those sanctions, rulings, consents, orders, exemptions, permits and other approvals (including the lapse, without objection, of a prescribed time under a statute or regulation that states that a transaction may be implemented if a prescribed time lapses following the giving of notice without an objection being made) of Governmental Entities, or self-regulatory organizations, as set out in Schedule B annexed hereto; "Arrangement" means an arrangement under Section 192 of the CBCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations thereto made in accordance with Section 7.1 hereof or Article 6 of the Plan of Arrangement, or made at the direction of the Court in the Final Order; "Arrangement Resolution" means the special resolution of the Westcoast Securityholders, to be substantially in the form and content of Schedule C annexed hereto; "Articles of Arrangement" means the articles of arrangement of Westcoast in respect of the Arrangement that are required by the CBCA to be sent to the Director after the Final Order is made; "Business Day" means any day on which commercial banks are generally open for business in New York, New York and Vancouver, British Columbia other than a Saturday, a Sunday or a day observed as a holiday in New York, New York under the AMENDED AND RESTATED COMBINATION AGREEMENT 2 Laws of the State of New York or the federal Laws of the United States of America or in Vancouver, British Columbia under the Laws of the Province of British Columbia or the federal Laws of Canada; "Callco" has the meaning ascribed thereto in the Preamble; "CBCA" means the Canada Business Corporations Act as now in effect and as it may be amended from time to time prior to the Effective Date; "Circular" means the notice of the Westcoast Meeting and accompanying management proxy circular, including all schedules and exhibits thereto, to be sent to the Westcoast Securityholders in connection with the Westcoast Meeting; "Code" has the meaning ascribed thereto in Section 3.12(b); "Confidentiality Agreement" means the confidentiality letter agreement dated April 6, 2001 between Duke Energy and Westcoast; "Court" means the Supreme Court of British Columbia; "CRMC" has the meaning ascribed thereto in Section 3.22; "date of this Agreement" means September 20, 2001. "Director" means the Director appointed pursuant to Section 260 of the CBCA; "Dissent Rights" means the rights of dissent in respect of the Arrangement described in Section 3.1 of the Plan of Arrangement; "Duke Energy" has the meaning ascribed thereto in the Preamble; "Duke Energy Common Shares" means the shares of common stock in the capital of Duke Energy; "Duke Energy Disclosure Letter" means that certain letter of disclosure dated as of the date hereof and signed by an authorized officer of Duke Energy and delivered by Duke Energy to Westcoast on or prior to the date hereof; "Duke Energy Documents" has the meaning ascribed thereto in Section 4.7(a); "Duke Energy Environmental Permits" has the meaning ascribed thereto in Section 4.9(b); "Duke Energy Parties" has the meaning ascribed thereto in the Preamble; "Duke Energy Permits" has the meaning ascribed thereto in Section 4.11(b); "Duke Energy SEC Documents" has the meaning ascribed thereto in Section 4.7(a); and AMENDED AND RESTATED COMBINATION AGREEMENT 3 "Duke Energy Stock Plans" means Duke Energy's existing benefit or stock purchase plans which provide for the issuance, grant or sale of Duke Energy Common Shares or options to purchase Duke Energy Common Shares. "Easements" has the meaning ascribed thereto in Section 3.19(b); "Effective Date" means the date shown on the certificate of arrangement to be issued by the Director under the CBCA giving effect to the Arrangement provided that such date occurs on or prior to the date that is 365 days following the date hereof, or such later date as may be mutually agreed upon by the parties hereto; "Effective Time" has the meaning ascribed thereto in the Plan of Arrangement; "Engage" has the meaning ascribed thereto in Section 3.22; "Environmental Laws" means all applicable Laws, including applicable common Law, relating to the protection of the environment (including, without limitation, air, surface water, groundwater and soil) and public health and safety; "ERISA" has the meaning ascribed thereto in Section 3.13(a); "Exchange Act" means the United States Securities Exchange Act of 1934, as amended; "Exchange Ratio" has the meaning ascribed thereto in the Plan of Arrangement; "Exchangeable Shares" means the non-voting exchangeable shares in the capital of Exchangeco, having substantially the rights, privileges, restrictions and conditions set out in Appendix 1 to the Plan of Arrangement; "Exchangeco" has the meaning ascribed thereto in the Preamble; "Excluded Assets" means the assets identified as such in the Westcoast Disclosure Letter, being assets that Westcoast is in the process of disposing; "Expense Fee" means a payment in the amount of $30 million; "Final Order" means the final order of the Court approving the Arrangement, as such order may be amended by the Court at any time prior to the Effective Date, or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed; "First Preferred Shares" means the first preferred shares in the capital of Westcoast, including each series thereof designated and outstanding; "Force Majeure" means (i) an act of God, act of war, civil disturbance or other cause beyond such party's reasonable control and power to remedy or (ii) a strike or other labor dispute, scarcity of supplies or utilities or unavailability or disruption of transportation, which such party is not capable of resolving by an investment or the payment of a commercially reasonable amount of money; AMENDED AND RESTATED COMBINATION AGREEMENT 4 "Form S-3" has the meaning ascribed thereto in Section 2.6(b); "Form S-8" has the meaning ascribed thereto in Section 2.6(c); "governing documents" means, with respect to any person, the certificate or articles of incorporation, by-laws, articles of organization, limited liability company agreement, partnership agreement, formation agreement, joint venture agreement, unanimous shareholder agreement or declaration or other similar governing documents of such person; "Governmental Entity" means any (a) multinational, federal, provincial, territorial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign, (b) subdivision, agent, commission, board, or authority of any of the foregoing, or (c) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under, or for the account of, any of the foregoing; "Hazardous Substance" means any pollutant, contaminant, waste of any nature, petroleum, hazardous substance, hazardous material, toxic substance, dangerous substance or dangerous good, as defined or identified in or regulated by any Environmental Law; "holders" means, when used with reference to the Westcoast Common Shares, the holders of Westcoast Common Shares shown from time to time in the register maintained by or on behalf of Westcoast in respect of the Westcoast Common Shares and, when used with reference to the Exchangeable Shares, the holders of Exchangeable Shares shown from time to time in the register maintained by or on behalf of Exchangeco in respect of the Exchangeable Shares; "Intellectual Property Rights" has the meaning ascribed thereto in Section 3.17(a); "Interim Order" means the interim order of the Court, as the same may be amended, in respect of the Arrangement, as contemplated by Section 2.3; "knowledge" means, with respect to either Duke Energy or Westcoast, the knowledge of any officer of such party after reasonable inquiry; provided that reasonable inquiry shall not require the inquiry of any third party or any Partially Owned Entity; "Laws" means all statutes, regulations, statutory rules, orders, judgments, decrees and terms and conditions of any grant of approval, permission, authority, permit or license of any court, Governmental Entity, statutory body (including The Toronto Stock Exchange and The New York Stock Exchange) or self-regulatory authority; "Material Adverse Effect," when used in connection with Duke Energy or Westcoast, means any change, effect, event or occurrence with respect to its condition (financial or otherwise), properties, assets, liabilities, obligations (whether absolute, accrued, conditional or otherwise), businesses, operations or results of operations or those of its subsidiaries, or in the case of Westcoast, its Partially Owned Entities, that is, or would be AMENDED AND RESTATED COMBINATION AGREEMENT 5 reasonably expected to be, material and adverse to the current or future business, operations, regulatory status, financial condition or results of operations of Duke Energy or Westcoast, as the case may be, and its subsidiaries taken as a whole; provided, however, that a Material Adverse Effect shall not include with respect to any party, any change, effect, event or occurrence with respect to its condition (financial or otherwise), properties, assets, liabilities, obligations (whether absolute, accrued, conditional or otherwise), businesses, operations or results of operations of such party or any of its subsidiaries directly or indirectly arising out of or attributable to any decrease in the market price of Duke Energy Common Shares in the case of Duke Energy or Westcoast Common Shares in the case of Westcoast (but in either case not any change or effect underlying such decrease to the extent such change or effect would otherwise constitute a Material Adverse Effect on such party); "Material Subsidiary" means a subsidiary (i) the assets of which exceed 5% of the total assets of the ultimate parent corporation on a consolidated basis as at the end of the last completed fiscal year of the ultimate parent corporation or (ii) of which the ultimate parent corporation's direct or indirect equity interest in the income (before income taxes and extraordinary items) exceeds 5% of such income of the ultimate parent corporation on a consolidated basis during the last completed fiscal year of the ultimate parent corporation; "Net Engage Position" has the meaning ascribed thereto in Section 3.22; "Nuclear Stations" has the meaning ascribed thereto in Section 4.10; "Open Duke Energy Position" has the meaning ascribed thereto in Section 4.13; "OSC" means the Ontario Securities Commission; "Partially Owned Entity" means, with respect to a specified person, any corporation, partnership, joint venture, limited liability company, unlimited liability company, or other organization, incorporated or unincorporated, which is not a subsidiary of such specified person but in which such specified person, directly or indirectly, owns or controls 15% or more of the outstanding securities or other interests ordinarily entitled to vote in the election of the board of directors or other governing body thereof (or if there are no such voting securities or interests, 15% or more of the equity interest in such entity); provided that Maritimes & Northeast Pipeline and P.T. Puncakjaya Power are not Partially Owned Entities; "person" includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status; "Plan of Arrangement" means the plan of arrangement substantially in the form and content of Schedule E annexed hereto and any amendments or variations thereto made in AMENDED AND RESTATED COMBINATION AGREEMENT 6 accordance with Section 7.1 hereof or Article 6 of the Plan of Arrangement or made at the direction of the Court in the Final Order; "Pre-Effective Date Period" shall mean the period from and including the date hereof to and including the Effective Time on the Effective Date; "Rate Change" has the meaning ascribed thereto in Section 5.1(a)(ix); "Replacement Options" has the meaning ascribed thereto in the Plan of Arrangement; "Representatives" has the meaning ascribed thereto in Section 5.3(a); "SEC" means the United States Securities and Exchange Commission; "Second Preferred Shares" means the second preferred shares in the capital of Westcoast; "Securities Act" means the Securities Act (Ontario) and the rules, regulations and policies made thereunder, as now in effect and as they may be amended from time to time prior to the Effective Date; "subsidiary" means with respect to a specified person, (a) any corporation, partnership, joint venture, limited liability company, unlimited liability company or other organization, incorporated or unincorporated, which is a subsidiary as defined in the Securities Act of such specified person or (b) a partnership of which such specified person or another of its subsidiaries is a general partner or owns beneficially more than 50% of the ownership interests; "Superior Proposal" means any bona fide written proposal by a third party, directly or indirectly, to acquire assets representing more than 50% of the book value (on a consolidated basis) of Westcoast's total assets or more than 50% of the Westcoast Common Shares, whether by way of merger, amalgamation, arrangement, share exchange, take-over bid, recapitalization, sale of assets or otherwise, and that in the good faith determination of the Board of Directors of Westcoast (based upon advice from its financial advisors and outside legal counsel) (a) is reasonably capable of being completed without undue delay, taking into account all legal, financial, regulatory and other aspects of such proposal and the party making such proposal, and (b) would, if consummated in accordance with its terms, result in a transaction more favourable to Westcoast's Securityholders from a financial point of view than the transaction contemplated by this Agreement (including any adjustment to the terms and conditions proposed by Duke Energy as contemplated by Section 5.6(b)); "Support Agreement" means an agreement to be made between Westcoast, Duke Energy, Callco and Exchangeco substantially in the form and content of Schedule F annexed hereto, with such changes thereto as the parties hereto, acting reasonably, may agree; "Tax" and "Taxes" have the respective meanings ascribed thereto in Section 3.12(c); AMENDED AND RESTATED COMBINATION AGREEMENT 7 "Tax Returns" means all returns, declarations, reports, information returns and statements filed or required to be filed with any taxing authority relating to Taxes; "Termination Fee" means a fee equal to $120 million; "Trustee" means the trustee to be chosen by Duke Energy and Westcoast, acting reasonably, to act as trustee under the Voting and Exchange Trust Agreement, being a corporation organized and existing under the Laws of the State of New York or Delaware and authorized to carry on the business of a trust company, and any successor trustee appointed under the Voting and Exchange Trust Agreement; "UEI Conversion Notice" has the meaning ascribed thereto in Section 5.9(b); "Voting and Exchange Trust Agreement" means an agreement to be made between Duke Energy, Exchangeco and the Trustee in connection with the Plan of Arrangement substantially in the form and content of Schedule G annexed hereto, with such changes thereto as the parties hereto, acting reasonably, may agree; "Westcoast" has the meaning ascribed thereto in the Preamble; "Westcoast Common Shares" means the issued and outstanding common shares in the capital of Westcoast, including the associated rights under the Westcoast Rights Plan; "Westcoast Disclosure Letter" means that certain letter of disclosure dated as of the date hereof and signed by an authorized officer of Westcoast and delivered by Westcoast to Duke Energy on or prior to the date hereof; "Westcoast Dividend Reinvestment Plan" means the plan of Westcoast existing on the date hereof pursuant to which holders of Westcoast Common Shares may elect to receive dividends in equivalent value of Westcoast Common Shares in lieu of cash and may make purchases of Westcoast Common Shares; "Westcoast Documents" has the meaning ascribed thereto in Section 3.8(a); "Westcoast Employee Share Purchase Plans" means the share purchase plans for Westcoast employees in Canada (whether registered or unregistered) and the share purchase plans, if any, for Westcoast employees in the United States, in each case, as amended; "Westcoast Environmental Permits" has the meaning ascribed thereto in Section 3.11(b); "Westcoast Meeting" means the special meeting of Westcoast Securityholders, including any adjournment, adjournments, postponement or postponements thereof, to be called and held in accordance with the Interim Order to consider the Arrangement and the Westcoast Rights Plan Waiver Resolution; AMENDED AND RESTATED COMBINATION AGREEMENT 8 "Westcoast Options" means the Westcoast Common Share purchase options granted under the Westcoast Stock Option Plans; "Westcoast Permits" has the meaning ascribed thereto in Section 3.15(b); "Westcoast Pipeline Assets" has the meaning ascribed thereto in Section 3.19(a); "Westcoast Plans" has the meaning ascribed thereto in Section 3.13(a); "Westcoast Rights Plan" means the shareholder rights plan of Westcoast established pursuant to the Shareholders Rights Plan Agreement dated as of April 26, 2000 between Westcoast and Computershare Trust Company of Canada (previously called Montreal Trust Company of Canada); "Westcoast Rights Plan Waiver Resolution" means the ordinary resolution of the holders of Westcoast Common Shares to be substantially in the form and content of Schedule D annexed hereto; "Westcoast SEC Reports" has the meaning ascribed thereto in Section 3.8(a); "Westcoast Securityholders" means the holders of Westcoast Common Shares and the holders of Westcoast Options, collectively; "Westcoast SRA Reports" has the meaning ascribed thereto in Section 3.8(a); "Westcoast Stock Option Plans" means Westcoast's Long-Term Incentive Share Option Plan 1989, as amended effective April 26, 2000 and Westcoast's 1999 Key Employee Plan; 1.2 Interpretation Not Affected by Headings, etc. The division of this Agreement into articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an "Article" or "Section" followed by a number or a letter refer to the specified Article or Section of this Agreement. The terms "this Agreement," "hereof," "herein" and "hereunder" and similar expressions refer to this Agreement (including the Schedules hereto) and not to any particular Article, Section or other portion hereof. 1.3 Rules of Construction Unless otherwise specifically indicated or the context otherwise requires, (a) all references to "dollars" or "$" mean United States dollars, (b) words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders, and (c) "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." AMENDED AND RESTATED COMBINATION AGREEMENT 9 1.4 Date For Any Action In the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day. 1.5 Schedules The following Schedules are annexed to this Agreement and are hereby incorporated by reference into this Agreement and form part hereof: Schedule A -- Form of Affiliate's Letter Schedule B -- Appropriate Regulatory Approvals Schedule C -- Form of Arrangement Resolution Schedule D -- Form of Westcoast Rights Plan Waiver Resolution Schedule E -- Form of Plan of Arrangement Schedule F -- Form of Support Agreement Schedule G -- Form of Voting and Exchange Trust Agreement ARTICLE 2 THE ARRANGEMENT 2.1 Implementation Steps by Westcoast Westcoast covenants in favour of the Duke Energy Parties that Westcoast shall: (a) as soon as reasonably practicable, apply in a manner acceptable to the Duke Energy Parties, acting reasonably, under Section 192 of the CBCA for an order approving the Arrangement and for the Interim Order, and thereafter proceed with and diligently seek the Interim Order; (b) lawfully convene and hold the Westcoast Meeting for the purpose of considering the Arrangement Resolution and the Westcoast Rights Plan Waiver Resolution (and for no other purpose unless agreed to by Duke Energy) as soon as reasonably practicable and use its reasonable efforts to convene and hold the Westcoast Meeting on or before December 15, 2001, subject to adjournments or postponements which may be required pursuant to Section 5.6(a); (c) subject to obtaining the approvals as are required by the Interim Order, proceed with and diligently pursue the application to the Court for the Final Order; and (d) subject to obtaining the Final Order and the satisfaction or waiver of the other conditions herein contained in favour of each party, send to the Director, for endorsement and filing by the Director, the Articles of Arrangement and such other documents as may be required in connection therewith under the CBCA to give effect to the Arrangement. AMENDED AND RESTATED COMBINATION AGREEMENT 10 2.2 Implementation Steps by Duke Energy Parties The Duke Energy Parties covenant in favour of Westcoast that, on or prior to the Effective Date and subject to the satisfaction or waiver of the conditions herein contained in favour of each such party: (a) Duke Energy, Callco and Exchangeco shall execute and deliver the Support Agreement; (b) Duke Energy and Exchangeco shall execute and deliver the Voting and Exchange Trust Agreement; and (c) Duke Energy shall issue to the Trustee such number of Duke Energy Common Shares as required by the Voting and Exchange Trust Agreement. 2.3 Interim Order The notice of motion for the application referred to in Section 2.1(a) shall request that the Interim Order provide, among other things: (a) for the class of persons to whom notice is to be provided in respect of the Arrangement and the Westcoast Meeting and for the manner in which such notice is to be provided; (b) that the requisite approval for the Arrangement Resolution shall be 66 2/3% of the votes cast on the Arrangement Resolution by Westcoast Securityholders, voting together as a single class, present in person or by proxy at the Westcoast Meeting (such that each holder of Westcoast Common Shares is entitled to one vote for each Westcoast Common Share held and each holder of Westcoast Options is entitled to one vote for each Westcoast Common Share such holder of Westcoast Options would have received on a valid exercise of Westcoast Options); (c) that, in all other respects, the terms, restrictions and conditions of the governing documents of Westcoast, including quorum requirements and all other matters, shall apply in respect of the Westcoast Meeting; and (d) for the grant of the Dissent Rights. 2.4 Articles of Arrangement The Articles of Arrangement shall, together with such other matters as are necessary to effect the Arrangement, implement the Plan of Arrangement, as a result of which, among other things, each holder of Westcoast Common Shares will be entitled to receive (a) a fraction of an Exchangeable Share per Westcoast Common Share equal to the Exchange Ratio, (b) a fraction of a Duke Energy Common Share per Westcoast Common Share equal to the Exchange Ratio, (c) Cdn$43.80 in cash, without interest, per Westcoast Common Share, or (d) a combination thereof, at the option of the holder, subject, in each case to proration in a manner as may be determined by Duke Energy to provide that approximately 50% of the aggregate consideration to AMENDED AND RESTATED COMBINATION AGREEMENT 11 be received by holders of Westcoast Common Shares will consist of cash and approximately 50% will consist of Exchangeable Shares and Duke Energy Common Stock. 2.5 Westcoast Circular As promptly as reasonably practicable, Westcoast shall prepare the Circular together with any other documents required by the Securities Act, the CBCA or other applicable Laws in connection with the approval of the Arrangement by the Westcoast Securityholders and Westcoast shall give Duke Energy timely opportunity to review and comment on all such documentation and all such documentation shall be reasonably satisfactory to Duke Energy before it is filed or distributed to Westcoast Securityholders; provided, that Duke Energy will provide Westcoast with its comments and any proposed additions and deletions within five Business Days after each receipt of a draft Circular from Westcoast. If Duke Energy shall have advised Westcoast in writing of matters required pursuant to Section 5.2(b)(ii) prior to the Westcoast Meeting, Westcoast shall disclose such matters in the Circular (including by amendment or supplement to the Circular if the Circular shall have been previously filed or distributed) and such disclosure shall be reasonably satisfactory to Duke Energy before it is filed or distributed to Westcoast Securityholders. As promptly as practicable after obtaining the Interim Order, Westcoast shall cause the Circular and other documentation required in connection with the Westcoast Meeting to be sent to each Westcoast Securityholder and filed as required by the Interim Order and applicable Laws, and Westcoast will use its reasonable efforts to cause the Circular to be sent to each Westcoast Securityholder and filed as required by the Interim Order and applicable Laws on or before November 15, 2001. 2.6 Securities Compliance (a) Duke Energy and Westcoast shall use reasonable best efforts to obtain all orders required from the applicable Canadian Governmental Entities to permit the issuance and first resale of (i) the Exchangeable Shares and Duke Energy Common Shares issuable pursuant to the Arrangement, (ii) the Duke Energy Common Shares issuable upon exchange of the Exchangeable Shares from time to time, and (iii) the Duke Energy Common Shares issuable from time to time upon the exercise of the Replacement Options, in each case without qualification with, or approval of, or the filing of any prospectus or similar document, or the taking of any proceeding with, or the obtaining of any further order, ruling or consent from, any Canadian Governmental Entity under any Canadian federal, provincial or territorial securities or other Laws or pursuant to the rules and regulations of any Governmental Entity administering such Laws, or the fulfillment of any other legal requirement in any such jurisdiction (other than, with respect to such first resales, any restrictions on transfer by reason of, among other things, a holder being a "control person" for purposes of Canadian federal, provincial or territorial securities Laws). (b) Duke Energy shall file a registration statement on Form S-3 (or other applicable form) (the "Form S-3") in order to register under the 1933 Act the Duke Energy Common Shares issuable from time to time after the Effective Time upon exchange of the Exchangeable Shares and shall use its reasonable best efforts to cause the Form S-3 to become effective and to maintain the effectiveness of such registration until the AMENDED AND RESTATED COMBINATION AGREEMENT 12 date on which no Exchangeable Shares remain outstanding (other than those Exchangeable Shares held by Duke Energy or any of its affiliates). (c) As promptly as practicable after the Effective Date, Duke Energy shall file a registration statement on Form S-8 (or other applicable form) (the "Form S-8") in order to register under the 1933 Act those Duke Energy Common Shares issuable from time to time after the Effective Time upon the exercise of the Replacement Options. (d) Duke Energy and Westcoast shall take all such steps as may be required to cause the transactions contemplated by this Article 2 and any other dispositions of Westcoast equity securities or acquisitions of Duke Energy equity securities (including, in each case derivative securities) in connection with this Agreement or the transactions contemplated hereby by any individual who is a director or officer of Westcoast, to be exempt under Rule 16b-3 promulgated under the Exchange Act. 2.7 Preparation of Filings (a) Duke Energy and Westcoast shall cooperate in: (i) the preparation of any application for the orders and the preparation of any required registration statements and any other documents reasonably deemed by Duke Energy or Westcoast to be necessary to discharge their respective obligations under United States and Canadian federal, provincial, territorial or state securities Laws in connection with the Arrangement and the other transactions contemplated hereby; (ii) the taking of all such action as may be required under any applicable United States and Canadian federal, provincial, territorial or state securities Laws (including "blue sky laws") in connection with the issuance of the Exchangeable Shares and the Duke Energy Common Shares in connection with the Arrangement or the exercise of the Replacement Options; provided, however, that with respect to the United States "blue sky" and Canadian provincial qualifications neither Duke Energy nor Westcoast shall be required to register or qualify as a foreign corporation or to take any action that would subject it to service of process in any jurisdiction where such entity is not now so subject, except as to matters and transactions arising solely from the offer and sale of the Exchangeable Shares and the Duke Energy Common Shares; and (iii) the taking of all such action as may be required under the CBCA in connection with the transactions contemplated by this Agreement and the Plan of Arrangement. (b) Each of Duke Energy and Westcoast shall promptly furnish to the other all information concerning it and its security holders as may be required for the effectuation of the actions described in Sections 2.5 and 2.6 and the foregoing provisions of this Section 2.7, and each covenants that no information furnished by it (to its knowledge in the case of information concerning its shareholders) in AMENDED AND RESTATED COMBINATION AGREEMENT 13 connection with such actions or otherwise in connection with the consummation of the Arrangement and the other transactions contemplated by this Agreement will contain any misrepresentation (as defined in the Securities Act) or any untrue statement of a material fact or omit to state a material fact required to be stated in any such document or necessary in order to make any information so furnished for use in any such document not misleading in the light of the circumstances in which it is furnished. (c) Each of Duke Energy and Westcoast shall promptly notify the other if at any time before or after the Effective Time it becomes aware that the Circular or an application for an order or a registration statement described in Section 2.6 contains any misrepresentation (as defined in the Securities Act) or any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made, or that otherwise requires an amendment or supplement to the Circular or such application or registration statement. In any such event, Duke Energy and Westcoast shall cooperate in the preparation of a supplement or amendment to the Circular or such other document, as required and as the case may be, and, if required, shall cause the same to be distributed to the Westcoast Securityholders or filed with the relevant securities regulatory authorities. (d) Westcoast shall ensure that the Circular complies with all applicable Laws and, without limiting the generality of the foregoing, that the Circular does not contain any misrepresentation (as defined in the Securities Act) or any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made (other than with respect to any information relating to and provided by the Duke Energy Parties). Without limiting the generality of the foregoing, Westcoast shall ensure that the Circular complies with OSC Rule 54-501 and provides Westcoast Securityholders with information in sufficient detail to permit them to form a reasoned judgment concerning the matters to be placed before them at the Westcoast Meeting. (e) Duke Energy shall ensure that the Form S-3 and Form S-8 comply with all applicable Laws and, without limiting the generality of the foregoing, that such documents do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading in light of the circumstances in which they are made (other than with respect to any information relating to and provided by Westcoast). ARTICLE 3 REPRESENTATIONS AND WARRANTIES of Westcoast Westcoast represents and warrants to the Duke Energy Parties as follows in each case except as set forth in the Westcoast Disclosure Letter (each of which exceptions shall specifically identify the relevant section hereof to which it relates): AMENDED AND RESTATED COMBINATION AGREEMENT 14 3.1 Organization and Standing (a) Each of Westcoast and its subsidiaries has been duly organized or formed and is validly existing under the Laws of its jurisdiction of organization or formation with full corporate or legal power and authority to own, lease and operate its properties and to conduct its businesses as currently owned and conducted except where, individually or in the aggregate, the failure of a subsidiary other than a Material Subsidiary to be so organized, formed or existing or to have such power or authority would not have a Material Adverse Effect on Westcoast. Each of Westcoast and its subsidiaries is duly qualified to do business in each jurisdiction in which the nature of the business conducted by it or the ownership or leasing of its properties requires it to so qualify, except where, individually or in the aggregate, the failure to be so qualified would not have a Material Adverse Effect on Westcoast. (b) Section 3.1 of the Westcoast Disclosure Letter sets forth, as of the date hereof, a true and complete list of each of Westcoast's subsidiaries and Partially Owned Entities, together with (i) the nature of the legal organization of such person, (ii) the jurisdiction of organization or formation of such person, (iii) the name of each Westcoast related person that owns beneficially or of record any equity or similar interest in such person, and (iv) the percentage interest owned by Westcoast or any of its subsidiaries in such person. Neither Westcoast nor any of its subsidiaries is subject to any obligation in excess of $10 million to provide funds to or make any investment in (in the form of a loan, capital contribution or otherwise) any subsidiary, Partially Owned Entity or other person other than Westcoast or a wholly owned subsidiary of Westcoast. (c) Westcoast has heretofore made available to Duke Energy complete and correct copies of its governing documents as well as the governing documents of each of its subsidiaries and Partially Owned Entities, in each case as in effect on the date hereof. 3.2 Capitalization (a) The authorized capital of Westcoast consists of (i) an unlimited number of First Preferred Shares and Second Preferred Shares, each issuable in series, and (ii) an unlimited number of Westcoast Common Shares and there were 4,588,687 First Preferred Shares, Series 2, 8,000,000 First Preferred Shares, Series 5, 5,000,000 First Preferred Shares, Series 6, 6,000,000 First Preferred Shares, Series 7, 6,000,000 First Preferred Shares, Series 8, and 5,000,000 First Preferred Shares, Series 9, issued and outstanding and no Second Preferred Shares issued and outstanding as of September 15, 2001. As of September 15, 2001, there were 123,400,430 Westcoast Common Shares issued and outstanding and no Westcoast Common Shares held in its treasury or by any subsidiary of Westcoast. As of August 31, 2001, there were outstanding Westcoast Options permitting the holders thereof to purchase 5,092,893 Westcoast Common Shares in the aggregate. As of August 31, 2001, there were 1,984,469 Westcoast Common Shares reserved for issuance under the Westcoast Stock Option Plans. As of July 31, 2001, there were 5,900,587 Westcoast Common Shares reserved for issuance under the Westcoast Dividend Reinvestment Plan. From AMENDED AND RESTATED COMBINATION AGREEMENT 15 September 15, 2001 to the date hereof, no First Preferred Shares, Second Preferred Shares or Westcoast Common Shares have been issued by Westcoast or purchased by Westcoast or any of its subsidiaries; from July 31, 2001 to the date hereof, no First Preferred Shares, Second Preferred Shares or Westcoast Common Shares have been reserved by Westcoast; and from August 31, 2001 to the date hereof no Westcoast Options have been granted. (b) All of the Westcoast Common Shares and First Preferred Shares have been duly authorized and are validly issued and fully paid and non-assessable, were not issued in violation of pre-emptive or similar rights or any other agreement or understanding binding upon Westcoast and were issued in compliance with the CBCA, all applicable securities Laws and the governing documents of Westcoast. All of the outstanding shares and other ownership interests of the subsidiaries, the Partially Owned Entities of Westcoast, Maritimes & Northeast Pipeline and P.T. Puncakjaya Power which are held, directly or indirectly, by Westcoast have been (to the knowledge of Westcoast in the case of Partially Owned Entities, Maritimes & Northeast Pipeline and P.T. Puncakjaya Power) duly authorized and are validly issued, fully paid and non-assessable, were not issued in violation of pre-emptive or similar rights and all such shares and other ownership interests are owned directly or indirectly by Westcoast, free and clear of all liens, claims or encumbrances, except for restrictions on transfers contained in governing documents and except where, individually or in the aggregate, the failure of the shares or ownership interest in a subsidiary other than a Material Subsidiary to be so authorized or issued or owned free and clear would not have a Material Adverse Effect on Westcoast. (c) Except as described in Section 3.2(a) above, as of the date hereof, there are no outstanding options, warrants, subscriptions, puts, calls or other rights, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) obligating Westcoast or any of its subsidiaries to offer, issue, sell, redeem, repurchase, otherwise acquire or transfer, pledge or encumber any capital stock of Westcoast, any of its subsidiaries, Partially Owned Entities, Maritimes & Northeast Pipeline or P.T. Puncakjaya Power nor are there outstanding any securities or obligations of any kind of Westcoast or any of its subsidiaries which are convertible into or exerciseable or exchangeable for any capital stock of Westcoast, any of its subsidiaries or any other person and neither Westcoast nor any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities has any obligation of any kind to issue any additional securities or to pay for or repurchase any securities. There are not outstanding as of the date hereof any stock appreciation rights, phantom equity or similar rights, agreements, arrangements or commitments based upon the book value, income or any other attribute of Westcoast or any of its subsidiaries. There are no outstanding bonds, debentures or other evidences of indebtedness of Westcoast or any of its subsidiaries having the right to vote (or that are exchangeable or convertible for or exercisable into securities having the right to vote) with the holders of the Westcoast Common Shares on any matter. As of the date hereof, there are no stockholder agreements, proxies, voting trusts, rights to require registration under securities Laws or other arrangements or commitments to which Westcoast or any of its subsidiaries is a party or bound with respect to the voting, disposition or AMENDED AND RESTATED COMBINATION AGREEMENT 16 registration of any outstanding securities of Westcoast, any of its subsidiaries or any of its Partially Owned Entities. (d) Since June 30, 2001, except for issuances of Westcoast Common Shares pursuant to Westcoast Options granted prior to the date hereof, pursuant to the Westcoast Dividend Reinvestment Plan and upon conversion of First Preferred Shares pursuant to their terms, there have been no Westcoast capital stock, voting securities or securities convertible or exchangeable therefor issued or purchased for cancellation. 3.3 Authority and No Conflicts (a) Westcoast has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby, subject to the approval of Westcoast's Securityholders and the Court as provided in this Agreement with respect to the Plan of Arrangement. The execution and delivery of this Agreement by Westcoast and the consummation by Westcoast of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Westcoast are necessary to authorize this Agreement or to consummate the transactions contemplated hereby other than, with respect to the Westcoast Rights Plan Waiver Resolution, approval of the holders of Westcoast Common Shares and with respect to the completion of the Arrangement, the approval of the Westcoast Securityholders and the Court and the filing of such corporate documents under the CBCA as are provided for in this Agreement. (b) This Agreement has been duly executed and delivered by Westcoast and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as the same may be limited by bankruptcy, insolvency and other applicable Laws affecting creditors' rights generally, and by general principles of equity. (c) The Board of Directors of Westcoast at a meeting duly called and held has determined by the unanimous approval of all directors voting (A) that this Agreement and the transactions contemplated hereby, including the Arrangement and the Westcoast Rights Plan Waiver Resolution, are fair to the Westcoast Securityholders and are in the best interests of Westcoast and (B) to recommend that the Westcoast Securityholders vote in favour of the Arrangement and the Westcoast Rights Plan Waiver Resolution. (d) Neither the execution and delivery of this Agreement by Westcoast nor the performance by it of its obligations hereunder and the completion of the transactions contemplated hereby, will: (i) conflict with, or violate any provision of, the governing documents of Westcoast or any of its subsidiaries or Partially Owned Entities; (ii) subject to the consents, approvals, orders, authorizations, registrations, declarations or filings referred to in Section 3.4 being made or obtained, violate or AMENDED AND RESTATED COMBINATION AGREEMENT 17 breach any Laws applicable to Westcoast, any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities; (iii) subject to the consents, approvals, orders, authorizations, registrations, declarations or filings referred to in Section 3.4 being made or obtained, violate or conflict with or result in the breach of, or constitute a default (or an event that with the giving of notice, the passage of time, or both would constitute a default) under, or entitle any party (with the giving of notice, the passage of time or both) to terminate, accelerate, modify or call any obligations or rights under any credit agreement, note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, franchise, permit, concession, easement or other instrument to which Westcoast or any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities is a party or by which Westcoast or any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities or its or their property is bound or subject; or (iv) result in the imposition of any encumbrance, charge or lien upon or require the sale or give any person the right to acquire any of Westcoast's assets or the assets of any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities, or restrict, hinder, impair or limit the ability of Westcoast, or any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities to carry on the business of Westcoast, any of its subsidiaries or any of its Partially Owned Entities as and where it is now being carried on; except in the case of clauses (ii) through (iv) for any of the foregoing that would not, individually or in the aggregate, have a Material Adverse Effect on Westcoast or materially impair the ability of Westcoast to perform its obligations hereunder or prevent or materially delay the consummation of any of the transactions contemplated hereby. 3.4 Consents; Approvals No consent, approval, order or authorization of, or registration, declaration or filing with, any third party or Governmental Entity is required by or with respect to Westcoast, any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities in connection with the execution and delivery of this Agreement by Westcoast, the performance of its obligations hereunder or the consummation by Westcoast of the transactions contemplated hereby other than (a) any approvals required by the Interim Order, (b) the Final Order, (c) the approval of the Arrangement by the Westcoast Securityholders, (d) such registrations and other actions required under federal, state, provincial, and territorial securities Laws as are contemplated by this Agreement, (e) any filings with the Director under the CBCA, (f) the Appropriate Regulatory Approvals relating to Westcoast and to the extent required, the New York Public Services Commission, and (g) any other consents, approvals, orders, authorizations, registrations, declarations or filings which, if not obtained or made, would not, individually or in the aggregate, have a Material Adverse Effect on Westcoast or prevent or materially delay the consummation of any of the transactions contemplated hereby or materially impair Westcoast's ability to perform its obligations hereunder. AMENDED AND RESTATED COMBINATION AGREEMENT 18 3.5 No Defaults None of Westcoast or any of its Material Subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities or any other party thereto, is in default under or violation of, and there has been no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default or violation of, or permit the termination of, any term, condition or provision of (a) their respective governing documents, (b) any credit agreement, note, bond, mortgage, indenture, contract, agreement, lease, license, franchise, permit, concession, easement or other instrument to which Westcoast or any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities, is a party or by which Westcoast, any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities, or any of its or their property is bound or subject, except, in the case of clause (b), defaults, violations and terminations which, individually or in the aggregate, would not have a Material Adverse Effect on Westcoast. 3.6 Absence of Certain Changes or Events (a) Except as disclosed in the Westcoast SRA Reports or Westcoast SEC Reports filed prior to the date hereof, since December 31, 2000, Westcoast, its subsidiaries and, to the knowledge of Westcoast, its Partially Owned Entities, have conducted their respective businesses only in the ordinary course in a manner consistent with past practice and there has been no Material Adverse Effect with respect to Westcoast or any event, occurrence or development which would be reasonably expected to have a Material Adverse Effect on Westcoast or which materially and adversely affects the ability of Westcoast to consummate the transactions contemplated hereby. (b) Except as disclosed in the Westcoast SRA Reports or Westcoast SEC Reports filed prior to the date hereof, since December 31, 2000, none of Westcoast or any of its subsidiaries, or, to the knowledge of Westcoast, its Partially Owned Entities, has engaged in any conduct that is proscribed during the Pre-Effective Date Period by Section 5.1. 3.7 Employment Matters (a) Except as set forth in the management proxy circular prepared in connection with the Annual Meeting of Westcoast held on April 25, 2001 or Section 3.7 of the Westcoast Disclosure Letter, neither Westcoast nor any of its subsidiaries is a party to any written or oral policy, agreement, obligation or understanding providing for severance or termination payments to, or any employment agreement with, any former or current director, officer or employee other than any agreement which applies to only one individual and which does not provide for payment to such individual in excess of $150,000 in any one calendar year and other than as required by applicable Law for employees without agreements as to notice or severance or pursuant to collective bargaining agreements. AMENDED AND RESTATED COMBINATION AGREEMENT 19 (b) Neither Westcoast nor any of its subsidiaries is a party to any consulting contract, written or oral, providing for compensation of any individual in excess of $350,000 per calendar year. (c) Neither Westcoast nor any of its subsidiaries has agreed to recognize any union or other collective bargaining representative, nor has any union or other collective bargaining representative been certified as the exclusive bargaining representative of any of Westcoast's or any of its subsidiaries' employees. No labor union or representative of the employees of Westcoast or any of its subsidiaries claims to be seeking to represent employees of Westcoast or any of its subsidiaries other than those that are parties to executed collective bargaining agreements identified in Section 3.7 of the Westcoast Disclosure Letter. To the knowledge of Westcoast, no union organizational campaign or representation petitions are currently pending with respect to any of the employees of Westcoast or any of its subsidiaries or Partially Owned Entities. Neither Westcoast nor any of its subsidiaries is a party to, or bound by, any collective bargaining agreement or any other labor contract applicable to any employees of Westcoast or its subsidiaries. All collective bargaining agreements to which Westcoast is a party have been duly ratified and there are no written or oral agreements which modify the terms of any such collective bargaining agreement. No collective bargaining agreements or other labor contracts relating to employees of Westcoast or its subsidiaries are being negotiated. To the knowledge of Westcoast, neither Westcoast nor any of its subsidiaries have breached any of their obligations under any collective bargaining agreements that would have a Material Adverse Effect on Westcoast. There is no labor strike or labor dispute, slowdown, lockout or stoppage actually pending or threatened against or affecting Westcoast or its subsidiaries, individually or in the aggregate, that would be reasonably expected to have a Material Adverse Effect on Westcoast, and Westcoast and its subsidiaries have not experienced any labor strikes or labor disputes, slowdowns, lockouts or stoppages since December 31, 1998, that had a Material Adverse Effect on Westcoast. To the knowledge of Westcoast, no union or collective bargaining representative has applied to have Westcoast or any of its subsidiaries declared a related or successor employer pursuant to applicable labor Laws. (d) All employees and former employees of Westcoast and its subsidiaries have been, or will have been on or before the Effective Date, paid or amounts in respect thereof shall have been accrued for wages, salaries, commissions, bonuses, vacation pay, severance and termination pay, sick pay, and other compensation for all services performed by them or that was accrued by them up to the Effective Date, in accordance with the obligations of Westcoast and its subsidiaries under any employment or labor practices and policies or any collective bargaining agreement or individual agreement to which Westcoast or its subsidiaries is a party, or by which Westcoast or its subsidiaries may be bound, except for, in the case of severance and termination pay, statutory and common law requirements for payment in lieu of reasonable notice of termination. (e) There are no current, pending or, to the knowledge of Westcoast, threatened proceedings before any board or tribunal or claims with respect to employment and AMENDED AND RESTATED COMBINATION AGREEMENT 20 labor Laws, including, but not limited to, employment and labor standards, unfair labor practices, employment discrimination, occupational health and safety, employment equity, pay equity, workers' compensation, human rights and labor relations, other than such proceedings and claims which, individually or in the aggregate, would not have a Material Adverse Effect on Westcoast. Westcoast and its subsidiaries are not subject to any settlement agreement, conciliation agreement, letter of commitment, deficiency letter or consent decree with any present or former employee or applicant for employment, labor union or other employee representative, or any Government Entity or arbitrator relating to claims of unfair labor practices, employment discrimination, or other claims with respect to employment and labor practices and policies that would have a Material Adverse Effect on Westcoast, and no Government Entity or arbitrator has issued a judgment, order, decree, injunction, decision, award or finding with respect to the employment and labor practices or policies of Westcoast or its subsidiaries which currently has or would be reasonably expected to have a Material Adverse Effect on Westcoast. There are no outstanding assessments, penalties, fines, liens, charges, surcharges, or other amounts due and owing pursuant to any workplace safety and insurance legislation by Westcoast or any of its subsidiaries and they have not been reassessed in any material respect under such legislation during the past three years and, to the knowledge of Westcoast, no audit is currently being performed pursuant to any applicable workplace safety and insurance legislation. There are no claims or, to the knowledge of Westcoast, potential claims which may materially and adversely affect accident cost experience. 3.8 Reports; Financial Statements (a) Since January 1, 1998, Westcoast and its subsidiaries have timely filed all forms, reports, schedules, statements and other documents required to be filed with (i) Canadian securities regulatory authorities (collectively the "Westcoast SRA Reports"), (ii) the SEC under the Exchange Act or the 1933 Act (collectively the "Westcoast SEC Reports"), (iii) any other applicable state, provincial or territorial securities authority, and (iv) any other Governmental Entity, except in each case where the failure to file any such forms, reports, schedules, statements or other documents would not have a Material Adverse Effect on Westcoast (all such forms, reports, schedules, statements and other documents are collectively referred to as the "Westcoast Documents"). The Westcoast Documents at the time filed (x) did not contain any misrepresentation (as defined in the Securities Act), (y) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements contained therein not misleading in light of the circumstances under which they were made and (z) complied in all material respects with the requirements of applicable Laws (including, with respect to the Westcoast SEC Reports, the 1933 Act, the Exchange Act and the rules and regulations thereunder). Westcoast has not filed any confidential material change report with the OSC or any other securities authority or regulator or any stock exchange or other self-regulatory authority that at the date hereof remains confidential. AMENDED AND RESTATED COMBINATION AGREEMENT 21 (b) The consolidated financial statements (including, in each case, any related notes thereto) contained in any Westcoast SRA Reports or Westcoast SEC Reports (i) have been prepared in accordance with Canadian generally accepted accounting principles applied on a consistent basis during the periods involved (subject, in the case of unaudited financial statements, to the absence of notes in the case of Westcoast SRA Reports filed prior to the implementation of OSC Rule 51-501), (ii) complied in all material respects with the requirements of applicable securities Laws, and (iii) fairly present, in all material respects, the consolidated financial position, results of operations and cash flows of Westcoast and its subsidiaries as of the respective dates thereof and for the respective periods covered thereby, subject, in the case of unaudited financial statements, to normal, recurring audit adjustments none of which will be material. (c) From January 1, 1998 to the date of this Agreement, there has been no change by Westcoast or its subsidiaries in their accounting policies, methods, practices or principles that are material to Westcoast's consolidated financial statements, except as described in the notes thereto with respect to periods ending prior to the date hereof. 3.9 Contracts Section 3.9 of the Westcoast Disclosure Letter lists (without specifically identifying the subsection of this Section 3.9 to which they relate) as of the date hereof all written or oral contracts, agreements, guarantees, leases and executory commitments other than Westcoast Plans to which Westcoast or any of its subsidiaries is a party and which fall within any of the following categories: (a) contracts not entered into in the ordinary course of Westcoast's and its subsidiaries' business other than those that are not material to the business of Westcoast and its subsidiaries, (b) contracts containing covenants purporting to limit the freedom of Westcoast or any of its subsidiaries to compete in any line of business in any geographic area or to hire any individual or group of individuals, (c) contracts which after the Effective Time would have the effect of limiting the freedom of Duke Energy or its subsidiaries (other than Westcoast and its subsidiaries) to compete in any line of business in any geographic area or to hire any individual or group of individuals, (d) purchase contracts involving in excess of $25 million per year which restrict or limit the purchasing relationships of Westcoast or its subsidiaries, (e) contracts relating to any outstanding commitment for capital expenditures in excess of $100 million other than capital expenditures included in the 2001 capital expenditures budget that was previously approved by the Board of Directors of Westcoast and which was provided to Duke Energy or which were reported to the Board of Directors of Westcoast in the Second Quarter 2001 Outlook previously provided to Duke Energy, (f) contracts with any labor organization or union, (g) except as reflected in the Westcoast financial statements included in the Westcoast SRA Reports for the period ended June 30, 2001, indentures, mortgages, liens, promissory notes, loan agreements, guarantees or other arrangements relating to the borrowing of money by Westcoast or its subsidiaries in excess of $100 million, (h) contracts providing for "earn-outs", "savings guarantees", "performance guarantees", or other contingent payments by Westcoast or any of its subsidiaries involving more than $100 million per year or $250 million over the term of the contract, (i) confidentiality or standstill agreements with any person (the effectiveness of which extends beyond the date that is six months following the date hereof) that restrict Westcoast or AMENDED AND RESTATED COMBINATION AGREEMENT 22 any of its subsidiaries in the use of any information or the taking of any actions by Westcoast or its subsidiaries entered into in connection with the consideration by Westcoast or any of its subsidiaries of any acquisition of equity interests or assets, (j) contracts containing provisions triggered by a change of control of Westcoast or other similar provisions, (k) contracts in favour of directors or officers that provide rights to indemnification and (l) contracts that are material to Westcoast and its subsidiaries taken as a whole other than those that are covered by (a) through (k) of this Section 3.9 or filed in the Westcoast SRA Reports or Westcoast SEC Reports filed prior to the date hereof. All such contracts and all other contracts that are individually material to the business or operations of Westcoast and its subsidiaries are valid and binding obligations of Westcoast or such subsidiaries that are parties thereto and, to the knowledge of Westcoast, the valid and binding obligation of each other party thereto except such contracts which if not so valid and binding would not, individually or in the aggregate, have a Material Adverse Effect on Westcoast. 3.10 Litigation There are no claims, actions, proceedings or investigations pending or, to the knowledge of Westcoast, threatened against Westcoast or any of its subsidiaries or Partially Owned Entities before any Governmental Entity (and Westcoast, its subsidiaries and, to the knowledge of Westcoast, its Partially Owned Entities, have no knowledge of any facts that are likely to give rise to any such claim, action, proceeding or investigation) that would be reasonably expected to have a Material Adverse Effect on Westcoast, or prevent or materially delay consummation of the transactions contemplated by this Agreement. Neither Westcoast nor any of its subsidiaries, nor their respective assets and properties, is subject to any outstanding judgment, order, writ, injunction or decree that has had or would be reasonably expected to have a Material Adverse Effect on Westcoast or that would prevent or materially delay consummation of the transactions contemplated by this Agreement. 3.11 Environmental Except for any matters which individually or in the aggregate are not reasonably likely to result in an expenditure or liability in excess of $20 million: (a) all operations of Westcoast and its subsidiaries and, to the knowledge of Westcoast, any of its Partially Owned Entities have been conducted, and are now, in compliance with all Environmental Laws; (b) Westcoast and its subsidiaries and, to the knowledge of Westcoast, its Partially Owned Entities are in possession of, and in compliance with, all permits, authorizations, certificates, registrations, approvals and consents necessary under Environmental Laws to own, lease and operate their properties and to conduct their respective businesses as they are now being conducted or as proposed to be conducted (collectively the "Westcoast Environmental Permits"); and (c) neither Westcoast nor any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities is subject to: AMENDED AND RESTATED COMBINATION AGREEMENT 23 (i) any Environmental Laws that require any work, repairs, construction, change in business practices or operations, or expenditures, including capital expenditures for facility upgrades, environmental investigation and remediation expenditures, or any other such expenditures; (ii) any written demand or written notice alleging breach of or with respect to liability under any Environmental Laws applicable to Westcoast, any subsidiary of Westcoast or any of its Partially Owned Entities, including any regulations respecting the use, storage, treatment, transportation or disposition (including disposal or arranging for disposal) of Hazardous Substances; (iii) any written demand or written notice with respect to liability, by contract or operation of Environmental Laws applicable to Westcoast or any current or former subsidiary of Westcoast or any of its Partially Owned Entities or any of their respective predecessor entities, divisions or any formerly owned, leased or operated properties or assets of the foregoing, including liability with respect to the presence, release, threatened release or discharge of Hazardous Substances; or (iv) any changes in the terms or conditions of any Westcoast Environmental Permits or any renewal (other than renewals in the ordinary course on the expiry of permits), modification, revocation, reissuance, alteration or amendment of such Westcoast Environmental Permits that are required in connection with the execution or delivery of this Agreement, the consummation of the transactions contemplated hereby or the continuation of business of Westcoast or any subsidiaries of Westcoast or, to the knowledge of Westcoast, any of its Partially Owned Entities following such consummation. 3.12 Tax Matters (a) Westcoast and each of its subsidiaries have timely filed, or caused to be filed, all material Tax Returns required to be filed by them (all of which returns were correct and complete in all material respects), have timely paid, or caused to be paid, Taxes shown to be due and payable thereon, and have satisfied in full in all respects all Tax withholding, deposit and remittance requirements imposed on or with respect to any of Westcoast and its subsidiaries, and Westcoast's most recently published financial statements contain an adequate provision in accordance with Canadian generally accepted accounting principles for all material amounts of Taxes payable in respect of each period covered by such financial statements and all prior periods to the extent such Taxes have not been paid, whether or not due and whether or not shown as being due on any Tax Returns. Westcoast and each of its subsidiaries have made adequate provision in accordance with Canadian generally accepted accounting principles in their books and records for any amount of Taxes material to Westcoast on a consolidated basis and accruing in respect of any accounting period ending subsequent to the period covered by such financial statements. (b) Neither Westcoast nor any subsidiary of Westcoast has received any written notification that any issue involving an amount of Taxes material to Westcoast on a AMENDED AND RESTATED COMBINATION AGREEMENT 24 consolidated basis has been raised (and is currently pending) by the Canada Customs and Revenue Agency, the United States Internal Revenue Service or any other taxing authority, including, without limitation, any sales tax authority, in connection with any of the Tax Returns filed or required to be filed, and no waivers of statutes of limitations or objections to any assessments or reassessments involving an amount of Taxes material to Westcoast on a consolidated basis have been given, filed or requested with respect to Westcoast or any subsidiary of Westcoast. All liability of Westcoast and its subsidiaries for Canadian federal and provincial income and capital taxes has been assessed by the Canada Customs and Revenue Agency and, where applicable, Canadian provincial tax authorities for all fiscal years up to and including the fiscal year ended December 31, 1999. Neither Westcoast nor any of its subsidiaries has received any notice from any taxing authority to the effect that any Tax Return is being examined, and Westcoast has no knowledge of any Tax audit or issue that would be reasonably expected to have a Material Adverse Effect on Westcoast. There are no proposed (but unassessed) additional Taxes applicable to Westcoast or any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities, involving an amount of Taxes material to Westcoast on a consolidated basis and none has been asserted against Westcoast or any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities. There are no Tax liens on any assets of Westcoast or any of its subsidiaries except for Taxes not yet due and payable and those which would not be reasonably expected to result in a Material Adverse Effect on Westcoast. Neither Westcoast nor any of its subsidiaries has received a refund of any Taxes to which it was not entitled. Neither Westcoast nor any of its subsidiaries (i) has made an election to be treated as a "consenting corporation" under Section 341(f) of the United States Internal Revenue Code of 1986 (the "Code") or (ii) is a party to any Tax sharing or other similar agreement or arrangement or any Tax indemnification agreement of any nature with any other person (other than in agreements with Westcoast or any of its subsidiaries) pursuant to which Westcoast or any of its subsidiaries has or could have any material liabilities in respect of Taxes. Westcoast has not made an election under Section 897(i) of the Code to be treated as a domestic corporation for purposes of Sections 897, 1445 and 6039C of the Code. (c) "Tax" and "Taxes" means, with respect to any person, all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all capital taxes, gross receipts taxes, environmental taxes, sales taxes, use taxes, ad valorem taxes, value added taxes, transfer taxes, franchise taxes, license taxes, withholding taxes, payroll taxes, employment taxes, pension plan premiums, excise, severance, social security premiums, workers' compensation premiums, unemployment insurance or compensation premiums, stamp taxes, occupation taxes, premium taxes, property taxes, windfall profits taxes, alternative or add-on minimum taxes, goods and services tax, customs duties or other taxes, fees, imports, assessments or charges of any kind whatsoever, together with any interest and any penalties or additional amounts imposed by any taxing authority (domestic or foreign) on such entity, and any interest, penalties, additional taxes and additions to tax imposed with respect to the foregoing. AMENDED AND RESTATED COMBINATION AGREEMENT 25 3.13 Pension and Employee Benefits (a) Section 3.13 of the Westcoast Disclosure Letter sets forth a list of all employee benefit, health, welfare, supplemental unemployment benefit, bonus, incentive, pension, profit sharing, deferred compensation, stock compensation, stock option, stock purchase, retirement, hospitalization insurance, medical, dental, legal, disability and similar plans or arrangements or practices, whether written or oral, which are sponsored, maintained or contributed to by Westcoast or any of its subsidiaries (collectively referred to as the "Westcoast Plans"). The Westcoast Disclosure Letter states which of the Westcoast Plans are subject to the provisions of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"). For purposes of this Section 3.13, a subsidiary of Westcoast shall be deemed to also include each corporation, trade, business, or entity that would be considered to be a single employer or under common control with Westcoast pursuant to Section 414 of the Code or Section 4001 of ERISA. (b) No step has been taken, no event has occurred and no condition or circumstance exists that has resulted in or could be reasonably expected to result in any Westcoast Plan being ordered or required to be terminated or wound up in whole or in part or having its registration under applicable Laws refused or revoked, or being placed under the administration of any trustee or receiver or regulatory authority or being required to pay any material amount of Taxes, fees, penalties or levies under applicable Laws. There are no actions, suits, claims (other than routine claims for payment of benefits in the ordinary course), trials, demands, investigations, arbitrations or other proceedings which are pending or threatened in respect of any of the Westcoast Plans or their assets which individually or in the aggregate would have a Material Adverse Effect on Westcoast. (c) Westcoast has provided to Duke Energy true, correct and complete copies of all of the Westcoast Plans as amended (or, in the case of any unwritten Westcoast Plan, a description thereof) together with all related actuarial reports, and Westcoast has made available to Duke Energy all other related documentation including, without limitation, funding agreements, trust agreements, funding and financial information returns and statements with respect to each Westcoast Plan, and current plan summaries, booklets and personnel manuals. Westcoast has provided to Duke Energy a true and complete copy of (i) the most recent annual report on Form 5500 filed with the United States Internal Revenue Service with respect to each Westcoast Plan in respect of which such a report was required and (ii) the most recent annual information return filed with the Canada Customs and Revenue Agency with respect to each Westcoast Plan in respect of which such a return was required. (d) All of the Westcoast Plans are and have been established, registered, qualified, invested and administered, in all material respects, in accordance with all applicable Laws, and in accordance with their terms and the terms of agreements between Westcoast or a subsidiary of Westcoast, as the case may be, and their respective employees. No fact or circumstance exists that could adversely affect the existing tax status of a Westcoast Plan. AMENDED AND RESTATED COMBINATION AGREEMENT 26 (e) All obligations of Westcoast or a subsidiary of Westcoast regarding the Westcoast Plans have been satisfied in all material respects. All contributions or premiums required to be made by Westcoast or a subsidiary of Westcoast, as the case may be, under the terms of each Westcoast Plan or by applicable Laws have been made in a timely fashion in accordance with applicable Laws and the terms of the Westcoast Plans. (f) Each Westcoast Plan is fully insured or fully funded (both on a going-concern and solvency basis) and in good standing with such regulatory authorities as may be applicable and, as of the date hereof, no notice of underfunding, noncompliance, failure to be in good standing or otherwise has been received by Westcoast or its subsidiaries from any such regulatory authority. (g) There have been no improper withdrawals, applications or transfers of assets from any Westcoast Plan or the trusts or other funding media relating thereto that remain outstanding and unremedied, and neither Westcoast, nor any subsidiary of Westcoast, nor, to the knowledge of Westcoast, any of their respective agents has been in breach of any fiduciary obligation with respect to the administration of the Westcoast Plans or the trusts or other funding media relating thereto. (h) Westcoast or its subsidiaries may unilaterally amend or terminate, in whole or in part, each Westcoast Plan and take contribution holidays under or withdraw surplus from each Westcoast Plan, subject only to approvals required by Law and, with respect to amendment or termination, the collective agreements disclosed in Section 3.7 of the Westcoast Disclosure Letter. (i) No commitments to improve or otherwise amend any Westcoast Plan have been made except as required by applicable Laws. (j) None of the Westcoast Plans (other than pension plans) provide benefits to retired or former employees or to the beneficiaries or dependants of retired or former employees. (k) No insurance policy or any other contract or agreement affecting any Westcoast Plan requires or permits a retroactive increase in premiums or payments due thereunder. (l) All Westcoast Plans intended to be tax-qualified in the United States have been the subject of determination letters from the United States Internal Revenue Service to the effect that such Westcoast Plans and their related trusts are qualified and exempt from United States Federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and no such determination letter has been revoked nor, to the knowledge of Westcoast, has revocation been threatened, nor has any such Westcoast Plan been amended since the date of its most recent determination letter or application therefor in any respect that would adversely affect its qualification or materially increase its costs and nothing has occurred since the date of such letter that could adversely affect the qualified status of such plan. As to any such Westcoast AMENDED AND RESTATED COMBINATION AGREEMENT 27 Plan, there has been no termination or partial termination of such Westcoast Plan within the meaning of Section 411(d)(3) of the Code. (m) No amount or benefit that could be received (whether in cash or property, the vesting of property or the acceleration of the exerciseability of stock options) as a result of or in connection with the transactions contemplated by this Agreement or the Arrangement (whether or not some other subsequent action or event would be required to cause the receipt of such amount or benefit to occur) by any employee, officer or director of Westcoast or any of its affiliates who is a "disqualified individual" (as such term is defined in proposed United States Treasury Regulation Section 1.280G-1) under any employment, severance or termination agreement, other compensation arrangement or Westcoast Plan currently in effect will fail to be deductible for United States federal income tax purposes by virtue of Section 280G of the Code. (n) None of the Westcoast Plans is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA or any other applicable Law, nor has Westcoast or any subsidiary of Westcoast been obligated to contribute to any such multiemployer plan at any time within the past six years. (o) No employment, severance or termination agreement, other compensation arrangement or Westcoast Plan provides for payment of a benefit, the increase of a benefit amount, the acceleration of contributions or funding, the payment of a contingent benefit or the acceleration of the payment or vesting of a benefit by reason of the execution of this Agreement or the consummation of the transactions contemplated by this Agreement or the Arrangement (whether or not some other subsequent action or event would be required to cause such payment, increase, acceleration, or vesting to be triggered). (p) As to any Westcoast Plan that is subject to Title IV of ERISA, no accumulated funding deficiency, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred, no reportable event within the meaning of Section 4043 of ERISA has occurred, no notice of intent to terminate the plan has been given under Section 4041 of ERISA, no proceeding has been instituted under Section 4042 of ERISA to terminate the plan, and no liability to the United States Pension Benefit Guaranty Corporation has been incurred. (q) As to any Westcoast Plan which is subject to ERISA or the Code, no act, omission or transaction has occurred which would result in imposition on Westcoast or any subsidiary of Westcoast of (i) breach of fiduciary duty liability damages under Section 409 of ERISA, (ii) a civil penalty assessed pursuant to subsections (c), (i) or (l) of Section 502 of ERISA, or (iii) a tax imposed pursuant to Chapter 43 of Subtitle D of the Code. (r) Each trust funding a Westcoast Plan, which trust is intended to be exempt from United States federal income taxation pursuant to Section 501(c)(9) of the Code, satisfies the requirements of such section and has received a favourable determination AMENDED AND RESTATED COMBINATION AGREEMENT 28 letter from the United States Internal Revenue Service regarding such exempt status and has not, since receipt of the most recent favourable determination letter, been amended or operated in a way which would adversely affect such exempt status. 3.14 Affiliates Section 3.14 of the Westcoast Disclosure Letter identifies all persons who, to the knowledge of Westcoast, may be deemed to be affiliates of Westcoast under Rule 145 of the 1933 Act, including all directors and executive officers of Westcoast. 3.15 Compliance with Laws; Permits (a) Westcoast, its subsidiaries and, to the knowledge of Westcoast, its Partially Owned Entities are in compliance, and at all times since January 1, 1998 have complied, with all applicable Laws other than non-compliance which would not, individually or in the aggregate, have a Material Adverse Effect on Westcoast. No investigation or review by any Governmental Entity with respect to Westcoast, any of its subsidiaries, or the knowledge of Westcoast, its Partially Owned Entities, is pending or, to the knowledge of Westcoast, is threatened, nor has any Governmental Entity indicated in writing an intention to conduct the same, other than those the outcome of which would not have a Material Adverse Effect on Westcoast. (b) Westcoast and its subsidiaries and, to the knowledge of Westcoast, its Partially Owned Entities are in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate their properties and to lawfully carry on their businesses as they are now being conducted (collectively, the "Westcoast Permits"), except where the failure to be in possession of such Westcoast Permits would not, individually or in the aggregate, have a Material Adverse Effect on Westcoast, and there is no action, proceeding or investigation pending or, to the knowledge of Westcoast, threatened regarding any of the Westcoast Permits which would have a Material Adverse Effect on Westcoast. None of Westcoast, any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities is in conflict with, or in default or violation of any of the Westcoast Permits, except for any such conflicts, defaults or violations which would not, individually or in the aggregate, have a Material Adverse Effect on Westcoast. (c) None of Westcoast, any of its subsidiaries or, to the knowledge of Westcoast, any directors, officers, agents or employees of Westcoast or any of its subsidiaries has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, or (ii) made any unlawful payment to any government officials or employees or to political parties or campaigns or violated any provision of the United States Foreign Corrupt Practices Act of 1977, as amended in each case which could reasonably be expected to have a material and adverse effect on Westcoast. AMENDED AND RESTATED COMBINATION AGREEMENT 29 3.16 Restrictions on Business Activities There is no agreement, judgment, injunction, order or decree binding upon Westcoast or any of its subsidiaries that has or could be reasonably expected to have the effect of prohibiting, restricting or materially impairing any business practice of Westcoast or any of its subsidiaries, any acquisition of property by Westcoast or any of its subsidiaries or the conduct of business by Westcoast or any of its subsidiaries as currently conducted other than such agreements, judgments, injunctions, orders or decrees which would not, individually or in the aggregate, have a Material Adverse Effect on Westcoast. 3.17 Intellectual Property (a) Westcoast and its subsidiaries, directly or indirectly, own, license or otherwise have legally enforceable rights to use, or can acquire on reasonable terms and without material expense, all patents, patent rights, trademarks, trade names, service marks, copyrights and any applications therefore, technology, know-how, computer software and applications and tangible or intangible proprietary information or materials, that are material to and used in the business of Westcoast and its subsidiaries as presently conducted (the "Intellectual Property Rights"). (b) In the case of Intellectual Property Rights owned by Westcoast or one of its subsidiaries, either Westcoast or one of its subsidiaries owns such Intellectual Property Rights free and clear of any material liens, charges or encumbrances. Westcoast or one of its subsidiaries has an adequate right to the use of the Intellectual Property Rights or the material covered thereby in connection with the services or products in respect of which such Intellectual Property Rights are being used. Westcoast has not received any written notice or claim, nor has it received any other information, stating that the manufacture, sale, licensing, or use of any of the services or products of Westcoast or any of its subsidiaries as now manufactured, sold, licensed or used or proposed for manufacture, sale, licensing or use by Westcoast or any of its subsidiaries in the ordinary course of Westcoast's business as presently conducted infringes on any copyright, patent, trade mark, service mark or trade secret of a third party where such infringement would have a Material Adverse Effect on Westcoast. Westcoast has not received any written notice or claim, nor has it received any other information, stating that the use by Westcoast or any of its subsidiaries of any trademarks, service marks, trade names, trade secrets, copyrights, patents, technology or know-how and applications used in the business of Westcoast and any of its subsidiaries as presently conducted infringes on any other person's trademarks, service marks, trade names, trade secrets, copyrights, patents, technology or know-how and applications where such infringement would have a Material Adverse Effect on Westcoast. Westcoast has not received any written notice or claim, nor has it received any other information, challenging the ownership by Westcoast or any of its subsidiaries or the validity of any of the Intellectual Property Rights. All registered patents, trademarks, service marks and copyright held by Westcoast and its subsidiaries are subsisting, except to the extent any failure to be subsisting would not have a Material Adverse Effect on Westcoast. To the knowledge of Westcoast, there is no material unauthorized use, infringement or AMENDED AND RESTATED COMBINATION AGREEMENT 30 misappropriation of any of the Intellectual Property Rights by any third party, including any employee or former employee of Westcoast or any of its subsidiaries No Intellectual Property Right is subject to any known outstanding decree, order, judgment, or stipulation restricting in any manner the licensing thereof by Westcoast or any of its subsidiaries, except to the extent any such restriction would not have a Material Adverse Effect on Westcoast. 3.18 Insurance Each of Westcoast and its subsidiaries is, and has been continuously since September 1, 1996, insured by reputable and financially responsible insurers in amounts and against risks and losses as are customary for companies conducting their respective businesses. Westcoast's and its subsidiaries' insurance policies are in all material respects in full force and effect in accordance with their terms, no notice of cancellation or termination has been received, and there is no existing default or event which, with the giving of notice or lapse of time or both would constitute a default thereunder. 3.19 Property (a) Westcoast, its subsidiaries and, to the knowledge of Westcoast, its Partially Owned Entities have defensible title (or, with respect to pipelines, equipment and other tangible personal property used in connection with Westcoast's pipeline operations (collectively, "Westcoast Pipeline Assets") title to or interest in the applicable Westcoast Pipeline Assets sufficient to enable Westcoast, its subsidiaries and, to the knowledge of Westcoast, its Partially Owned Entities to conduct their businesses with respect thereto without material interference as it is currently being conducted) to all their material properties and assets, whether tangible or intangible, real, personal or mixed, free and clear of all liens, except for liens disclosed in the Westcoast Documents and liens the existence of which would not have a Material Adverse Effect on Westcoast. (b) The businesses of Westcoast and each of its subsidiaries have been and are being operated in a manner which does not violate (in any manner which would, or which would be reasonably expected to, have a Material Adverse Effect on Westcoast) the terms of any easements, rights of way, permits, servitudes, licenses, leasehold estates and similar rights relating to real property (collectively, "Easements") used by Westcoast and each of its subsidiaries in such businesses. All Easements are valid and enforceable, except as the enforceability thereof may be affected by bankruptcy, insolvency or other Laws of general applicability affecting the rights of creditors generally or principles of equity, and grant the rights purported to be granted thereby and all rights necessary thereunder for the current operation of such businesses where the failure of any such Easement to be valid and enforceable or to grant the rights purported to be granted thereby or necessary thereunder would have a Material Adverse Effect on Westcoast. There are no special gaps in the Easements which would impair the conduct of such businesses in a manner that would, or that would be reasonably expected to, have a Material Adverse Effect on Westcoast, and no part of the Westcoast Pipeline Assets is located on property which is not owned in fee by AMENDED AND RESTATED COMBINATION AGREEMENT 31 Westcoast or a subsidiary of Westcoast or subject to an Easement in favour of Westcoast or a subsidiary of Westcoast, where the failure of such Westcoast Pipeline Assets to be so located would have a Material Adverse Effect on Westcoast. 3.20 Regulatory Proceedings None of Westcoast, any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities, all or part of whose rates or services are regulated by a Governmental Entity, is a party to any proceeding before a Governmental Entity which is reasonably likely to result in orders having a material burden on the future operations or business of Westcoast or any Material Subsidiary of Westcoast nor has written notice of any such proceeding been received by Westcoast, any of its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned Entities. 3.21 Regulation as a Utility (a) Westcoast and all of its "subsidiary companies" and "affiliates", as such terms are defined in the 1935 Act, either are not subject to or are exempt from all provisions of the 1935 Act other than Section 9(a)(2) of the 1935 Act. (b) None of Westcoast or any of its "subsidiary companies" or "affiliates" is subject to regulation as a "holding company" or a "subsidiary company" or "affiliate" of a "holding company", as such terms are defined in the 1935 Act. 3.22 Futures Trading and Fixed Price Exposure The Board of Directors of Westcoast has approved the formation and mandate of the Corporate Risk Management Committee (the "CRMC"). The CRMC is responsible for providing the overall direction on all aspects of Westcoast's business risk management. Such responsibilities include approval and oversight of the aggregate risk limits and the delegation of risk management authority and accountability to the business units and functional units. The business risk management programs of Westcoast and its subsidiaries are consistent with the policies of the CRMC. The Board of Directors of Westcoast has established risk parameters to restrict the level of risk that Engage Energy Canada, Inc. ("Engage") and its subsidiaries are authorized to take with respect to the net position of Engage and its subsidiaries resulting from all physical commodity transactions, exchange traded futures and options and over-the-counter derivative instruments (the "Net Engage Position") and the CRMC monitors the compliance by Engage and its subsidiaries with such risk parameters. The risk parameters established by the Board of Directors of Westcoast as of the date hereof are set forth in Section 3.22 of the Westcoast Disclosure Letter and may be modified only by the Board of Directors of Westcoast. The Net Engage Position is within the risk parameters which have been established by Westcoast's Board of Directors or otherwise approved by Westcoast's Board of Directors. In the case of Westcoast's regulated subsidiaries, risk management programs have been established which govern the actions and conduct of such subsidiaries with respect to their management of gas supply portfolio risk arising from the use of physical commodity AMENDED AND RESTATED COMBINATION AGREEMENT 32 transactions, exchange traded futures and options and over-the-counter derivative instruments. The actions of each regulated subsidiary are reviewed by each of such subsidiary's respective regulatory bodies. Such subsidiaries are in compliance with their stated programs or policies. 3.23 Opinion of Financial Advisors The Board of Directors of Westcoast has received the opinions of Credit Suisse First Boston Corporation and CIBC World Markets Inc., Westcoast's financial advisors, to the effect that, as of the date hereof, the consideration to be received by the holders of Westcoast Common Shares pursuant to the transactions contemplated hereby is fair to the holders of Westcoast Common Shares from a financial point of view and those opinions have not been withdrawn, reserved or modified in any material respect. 3.24 Brokerage and Finders' Fees Except for Westcoast's obligations to Credit Suisse First Boston Corporation and CIBC World Markets Inc., neither Westcoast nor any subsidiary of Westcoast or any shareholder, director, officer or employee thereof, has incurred or will incur on behalf of Westcoast, any brokerage, finders' or similar fee in connection with the transactions contemplated hereby. Copies of all written agreements relating to Westcoast's obligations to Credit Suisse First Boston Corporation and CIBC World Markets Inc. have previously been provided to Duke Energy and all other agreements relating to such obligations are described in Section 3.24 of the Westcoast Disclosure Letter. 3.25 Westcoast Rights Plan None of the execution or the delivery of this Agreement or the taking of any action contemplated by this Agreement results, or will result, in Duke Energy becoming an Acquiring Person (as defined in the Westcoast Rights Plan), provided that, prior to the consummation of the Arrangement, the Westcoast Rights Plan Waiver Resolution is approved by the affirmative vote of a majority of the votes cast by holders of Westcoast Common Shares. 3.26 Solvency of Westcoast Westcoast is not insolvent, and at the time of the consummation of the Arrangement will not be insolvent, as defined in Section 192(2) of the CBCA. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE DUKE ENERGY PARTIES The Duke Energy Parties represent and warrant to Westcoast as follows in each case except as set forth in the Duke Energy Disclosure Letter (each of which exceptions shall specifically identify the relevant section hereof to which it relates): AMENDED AND RESTATED COMBINATION AGREEMENT 33 4.1 Organization and Standing (a) Each of the Duke Energy Parties has been duly organized or formed and is validly existing under the Laws of its jurisdiction of organization or formation with full corporate or legal power and authority to own, lease and operate its properties and to conduct its businesses as currently owned and conducted except where, individually or in the aggregate, the failure of a subsidiary other than a Material Subsidiary to be so organized, formed or existing or to have such power or authority would not have a Material Adverse Effect on Duke Energy. Each of the Duke Energy Parties is duly qualified to do business in each jurisdiction in which the nature of the business conducted by it or the ownership or leasing of its properties requires it to so qualify, except where the failure to be so qualified would not have a Material Adverse Effect on Duke Energy. (b) Duke Energy has heretofore made available to Westcoast complete and correct copies of its governing documents as well as the governing documents of Exchangeco, in each case as in effect on the date hereof. 4.2 Capitalization (a) The authorized capital stock of Duke Energy consists of 12.5 million shares of Preferred Stock, 10.0 million shares of Preferred Stock A, 1.5 million shares of Preference Stock and 2.0 billion Duke Energy Common Shares and there were 2,284,984 shares of Preferred Stock, 2,057,185 shares of Preferred Stock A and no Preference Stock issued and outstanding and 775,386,163 Duke Energy Common Shares issued and outstanding as of September 6, 2001. As of September 6, 2001 there were 55,276,119 Duke Energy Common Shares reserved, in the aggregate, for issuance in respect of the Duke Energy Stock Plans. As of August 31, 2001, there were outstanding options permitting the holders thereof to purchase 20,166,929 Duke Energy Common Shares in the aggregate. (b) All of the outstanding shares of capital stock of the Duke Energy Parties have been duly authorized and are validly issued and fully paid and non-assessable, were not issued in violation of pre-emptive or similar rights or any other agreement or understanding binding upon the Duke Energy Parties and were issued in compliance with all applicable securities Laws and the governing documents of the Duke Energy Parties except where, individually or in the aggregate, the failure of the shares or ownership interest in a subsidiary other than a Material Subsidiary to be so authorized or issued would not have a Material Adverse Effect on Duke Energy. The authorized capital stock of Exchangeco consists of an unlimited number of common shares and an unlimited number of preference shares. As of the date hereof, all of the outstanding capital stock of Exchangeco is owned by N.S. U.L.C. and all of the outstanding capital stock of N.S. U.L.C. is owned indirectly by Duke Energy. (c) Except as described in Section 4.2(a) above, there are no outstanding options, warrants, subscriptions, puts, calls or other rights, agreements, arrangements or commitments (pre-emptive, contingent or otherwise) obligating Duke Energy to offer, AMENDED AND RESTATED COMBINATION AGREEMENT 34 issue, sell, redeem, repurchase, otherwise acquire or transfer, pledge or encumber any capital stock of Duke Energy nor are there outstanding any securities or obligations of any kind convertible into or exercisable or exchangeable for any capital stock of Duke Energy and Duke Energy has no obligation of any kind to issue any additional securities or to pay for or repurchase any securities. There are not outstanding as of the date hereof any stock appreciation rights, phantom equity or similar rights, agreements, arrangements or commitments based upon the book value, income or any other attribute of Duke Energy or any of its subsidiaries. There are no outstanding bonds, debentures or other evidences of indebtedness of Duke Energy or any of its subsidiaries having the right to vote (or that are exchangeable or convertible for or exercisable into securities having the right to vote) with the holders of the Duke Energy Common Shares on any matter as of the date hereof. 4.3 Authority and No Conflicts (a) Each of the Duke Energy Parties has all requisite corporate power and authority to enter into this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Duke Energy Parties and the consummation by the Duke Energy Parties of the transactions contemplated by this Agreement have been duly and validly authorized by all requisite corporate action and no other corporate proceedings on the part of the Duke Energy Parties are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. (b) This Agreement has been duly executed and delivered by the Duke Energy Parties and constitutes a legal, valid and binding obligation of each of the Duke Energy Parties, enforceable against each of them in accordance with its terms, except as the same may be limited by bankruptcy, insolvency and other applicable Laws affecting creditors' rights generally, and by general principles of equity. (c) The Board of Directors of Duke Energy at a meeting duly called and held has determined by the unanimous approval of all directors voting that this Agreement and the transactions contemplated hereby are in the best interests of Duke Energy and the holders of Duke Energy Common Shares. (d) Neither the execution and delivery of this Agreement by the Duke Energy Parties nor the performance by each of them of their obligations hereunder and the completion of the transactions contemplated hereby, will: (i) conflict with, or violate any provision of, the governing documents of any of the Duke Energy Parties; (ii) subject to the consents, approvals, orders, authorizations, registrations, declarations or filings referred to in Section 4.4 being made or obtained, violate or breach any Laws applicable to Duke Energy or any of its subsidiaries; (iii) subject to the consents, approvals, orders, authorizations, registrations, declarations or filings referred to in Section 4.4 being made or obtained, violate or AMENDED AND RESTATED COMBINATION AGREEMENT 35 conflict with or result in the breach of, or constitute a default (or an event that with the giving of notice, the passage of time, or both would constitute a default) under, or entitle any party (with the giving of notice, the passage of time or both) to terminate, accelerate, modify or call any obligations or rights under any credit agreement, note, bond, mortgage, indenture, deed of trust, contract, agreement, lease, license, franchise, permit, concession, easement or other instrument to which Duke Energy or any of its subsidiaries is a party or by which Duke Energy or any of its subsidiaries or its or their property is bound or subject; or (iv) result in the imposition of any encumbrance, charge or lien upon any of Duke Energy's assets or the assets of any of its subsidiaries, or restrict, hinder, impair or limit the ability of Duke Energy or any of its subsidiaries to carry on the business of Duke Energy or any of its subsidiaries as and where it is now being carried on; except in the case of clauses (ii) through (iv) for any of the foregoing that would not, individually or in the aggregate, have a Material Adverse Effect on Duke Energy or materially impair the ability of Duke Energy to perform its obligations hereunder or prevent or materially delay the consummation of any of the transactions contemplated hereby. 4.4 Consents; Approvals No consent, approval, order or authorization of, or registration, declaration or filing with, any third party or Governmental Entity is required by or with respect to any of the Duke Energy Parties in connection with the execution and delivery of this Agreement by the Duke Energy Parties, the performance of their obligations hereunder or the consummation by Duke Energy of the transactions contemplated hereby other than (a) any approvals required by the Interim Order, (b) the Final Order, (c) such registrations and other actions required under federal, state, provincial and territorial securities Laws as are contemplated by this Agreement, (d) any filings with the Director under the CBCA, (e) the Appropriate Regulatory Approvals relating to the Duke Energy Parties, (f) the consents or approvals set forth in Section 4.4 of the Duke Energy Disclosure Letter and (g) any other consents, approvals, orders, authorizations, registrations, declarations or filings which, if not obtained or made, would not, individually or in the aggregate, have a Material Adverse Effect on Duke Energy or prevent or materially delay the consummation of any of the transactions contemplated hereby or materially impair Duke Energy's ability to perform its obligations hereunder. 4.5 No Defaults None of Duke Energy, any of its Material Subsidiaries or, to the knowledge of Duke Energy, any other party thereto, is in default under or violation of, and there has been no event, condition or occurrence which, after notice or lapse of time or both, would constitute such a default or violation of, any term, condition or provision of, or permit the termination of, (a) their respective governing documents, (b) any credit agreement, note, bond, mortgage, indenture, contract, agreement, lease, license, franchise, permit, concession, easement or other instrument to which Duke Energy or any of its subsidiaries is a party or by which Duke Energy or any of its AMENDED AND RESTATED COMBINATION AGREEMENT 36 subsidiaries or any of its or their property is bound or subject, except, in the case of clause (b), defaults and violations which, individually or in the aggregate, would not have a Material Adverse Effect on Duke Energy. 4.6 Absence of Certain Changes or Events Except as disclosed in the Duke Energy SEC Documents filed prior to the date hereof, since December 31, 2000, there has been no Material Adverse Effect with respect to Duke Energy or any event, occurrence or development which would be reasonably expected to have a Material Adverse Effect on Duke Energy or which materially and adversely affects the ability of Duke Energy to consummate the transactions contemplated hereby. 4.7 Reports; Financial Statements (a) Since January 1, 1998 Duke Energy and its subsidiaries have timely filed all forms, reports, schedules, statements and other documents required to be filed with (i) the SEC under the Exchange Act or the 1933 Act (the "Duke Energy SEC Documents"), (ii) any applicable state securities authority and (iii) any other Governmental Entity, except in each case where the failure to file any such forms, reports, schedules, statements or other documents would not have a Material Adverse Effect on Duke Energy (all such forms, reports, schedules, statements and other documents are collectively referred to as the "Duke Energy Documents"). The Duke Energy SEC Documents, at the time filed (x) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements contained therein not misleading in light of the circumstances under which they were made and (y) complied in all material respects with the requirements of applicable Laws (including the 1933 Act, the Exchange Act and the rules and regulations thereunder). (b) The consolidated financial statements (including in each case, any related notes thereto) contained in any Duke Energy SEC Documents (i) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (subject, in the case of unaudited financial statements, to the absence of notes), (ii) complied in all material respects with the requirements of applicable securities Laws, and (iii) fairly present, in all material respects, the consolidated financial position, results of operations and cash flows of Duke Energy and its subsidiaries as of the respective dates thereof and for the respective periods covered thereby, subject, in the case of unaudited financial statements, to normal, recurring audit adjustments none of which will be material. (c) From January 1, 1998 to the date of this Agreement, there has been no change in Duke Energy's accounting policies or methods of making accounting estimates or changes in estimates that are material to such financial statements, except as described in the notes thereto with respect to periods ending prior to the date hereof. AMENDED AND RESTATED COMBINATION AGREEMENT 37 4.8 Litigation There are no claims, actions, proceedings or investigations pending or, to the knowledge of Duke Energy, threatened against Duke Energy or any of its subsidiaries before any Governmental Entity (and Duke Energy and its subsidiaries have no knowledge of any facts that are likely to give rise to any such claim, action, proceeding or investigation) that would be reasonably expected to have a Material Adverse Effect on Duke Energy, or prevent or materially delay consummation of the transactions contemplated by this Agreement. Neither Duke Energy nor any of its subsidiaries, nor their respective assets and properties, is subject to any outstanding judgment, order, writ, injunction or decree that has had or would be reasonably expected to have a Material Adverse Effect on Duke Energy or that would prevent or materially delay consummation of the transactions contemplated by this Agreement. 4.9 Environmental Except for any matters which individually or in the aggregate are not reasonably likely to result in a Material Adverse Effect on Duke Energy: (a) all operations of Duke Energy and its subsidiaries have been conducted, and are now, in compliance with all Environmental Laws; (b) Duke Energy and its subsidiaries are in possession of, and in compliance with, all permits, authorizations, certificates, registrations, approvals and consents necessary under Environmental Laws to own, lease and operate their properties and to conduct their respective businesses as they are now being conducted or as proposed to be conducted (collectively the "Duke Energy Environmental Permits"); and (c) neither Duke Energy nor any of its subsidiaries is subject to: (i) any Environmental Laws that require any work, repairs, construction, change in business practices or operations, or expenditures, including capital expenditures for facility upgrades, environmental investigation and remediation expenditures, or any other such expenditures; (ii) any written demand or written notice alleging the breach of or with respect to liability under any Environmental Laws applicable to Duke Energy or any subsidiary of Duke Energy, including any regulations respecting the use, storage, treatment, transportation or disposition (including disposal or arranging for disposal) of Hazardous Substances; (iii) any written demand or written notice with respect to liability, by contract or operation of Environmental Laws applicable to Duke Energy or any current or former subsidiary of Duke Energy or any of their respective predecessor entities, divisions or any formerly owned, leased or operated properties or assets of the foregoing, including liability with respect to the presence, release, threatened release or discharge of Hazardous Substances; or AMENDED AND RESTATED COMBINATION AGREEMENT 38 (iv) any changes in the terms or conditions of any Duke Energy Environmental Permits or any renewal (other than renewals in the ordinary course on the expiry of permits), modification, revocation, reissuance, alteration or amendment of such Duke Energy Environmental Permits that are required in connection with the execution or delivery of this Agreement, the consummation of the transactions contemplated hereby or the continuation of business of Duke Energy or any subsidiaries of Duke Energy following such consummation. 4.10 Nuclear Operations To the knowledge of Duke Energy, the operations of its Nuclear Steam Generating Stations ("Nuclear Stations") are and have at all times been conducted in material compliance with applicable health, safety, regulatory and other legal requirements. To the knowledge of Duke Energy, the Nuclear Stations maintain emergency plans designed to respond to an unplanned release therefrom of radioactive materials into the environment, liability insurance to the extent required by Law, and such further insurance (other than liability insurance) as is consistent with Duke Energy's view of the risks inherent in the operation of a nuclear power facility. To the knowledge of Duke Energy, plans for the decommissioning of each of the Nuclear Stations and for the short-term storage of spent nuclear fuel conform in all material respects with applicable regulatory or other legal requirements, and such plans have at all times since January 1, 1998 been funded to the extent required by Law (which funded amount is not materially inconsistent, in the aggregate, with Duke Energy's budget projections for the amount required to be spent under such plans) except for any lack of funding which would not have a Material Adverse Effect on Duke Energy. 4.11 Compliance with Laws; Permits (a) Duke Energy and its subsidiaries are in compliance, and at all times since January 1, 1998 have complied, with all applicable Laws other than non-compliance which would not, individually or in the aggregate, have a Material Adverse Effect on Duke Energy. No investigation or review by any Governmental Entity with respect to Duke Energy or any of its subsidiaries is pending or, to the knowledge of Duke Energy, is threatened, nor has any Governmental Entity indicated in writing an intention to conduct the same, other than those the outcome of which would not have a Material Adverse Effect on Duke Energy. (b) Duke Energy and its subsidiaries are in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exemptions, consents, certificates, approvals and orders necessary to own, lease and operate their properties and to lawfully carry on their businesses as they are now being conducted (collectively, the "Duke Energy Permits"), except where the failure to be in possession of such Duke Energy Permits would not, individually or in the aggregate, have a Material Adverse Effect on Duke Energy, and there is no action, proceeding or investigation pending or, to the knowledge of Duke Energy, threatened regarding any of the Duke Energy Permits which would have a Material Adverse Effect on Duke Energy. Neither Duke Energy nor any of its subsidiaries is in conflict with, or in default or violation of any of the Duke Energy Permits, except for any such conflicts, AMENDED AND RESTATED COMBINATION AGREEMENT 39 defaults or violations which, individually or in the aggregate, would not have a Material Adverse Effect on Duke Energy. (c) None of Duke Energy, any of its subsidiaries or, to the knowledge of Duke Energy, any directors, officers, agents or employees of Duke Energy or any of its subsidiaries has (i) used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, or (ii) made any unlawful payment to any government officials or employees or to political parties or campaigns or violated any provision of the United States Foreign Corrupt Practices Act of 1977, as amended in each case which could reasonably be expected to have a material and adverse effect on Duke Energy. 4.12 Regulatory Proceedings Neither Duke Energy nor any of its subsidiaries, all or part of whose rates or services are regulated by a Governmental Entity, is a party to any proceeding before a Governmental Entity which is reasonably likely to result in orders having a material burden on the future operations or business of any Material Subsidiary of Duke Energy nor has written notice of any such proceeding been received by Duke Energy or any of its subsidiaries. 4.13 Futures Trading and Fixed Price Exposure The Market Risk Committee of Duke Energy has established risk parameters to restrict the level of risk that Duke Energy and its subsidiaries are authorized to take with respect to the open position resulting from all physical commodity transactions, exchange traded futures and options and over-the-counter derivative instruments (the "Open Duke Energy Position") and monitors the compliance by Duke Energy and its subsidiaries with such risk parameters. The risk parameters established by the Market Risk Committee of Duke Energy may be modified only by the Market Risk Committee of Duke Energy. The Open Duke Energy Position is within the risk parameters which have been established by the Market Risk Committee of Duke Energy. 4.14 Brokerage and Finders' Fees Neither Duke Energy nor any of its shareholders, directors, officers or employees has incurred or will incur on behalf of Duke Energy, any brokerage, finders' or similar fee in connection with the transactions contemplated hereby, except that Duke Energy has employed Merrill Lynch & Co. as its financial advisor pursuant to a written agreement. ARTICLE 5 COVENANTS AND AGREEMENTS 5.1 Covenants of Westcoast (a) Westcoast agrees as follows until the Effective Date or the earlier termination of this Agreement in accordance with Article 7, in each case except (x) with the consent of Duke Energy to any deviation therefrom, (y) with respect to any matters which are disclosed in Section 5.1 of the Westcoast Disclosure Letter (each of which exceptions AMENDED AND RESTATED COMBINATION AGREEMENT 40 shall specifically identify the relevant subsection hereof to which it relates) or (z) as expressly contemplated by this Agreement or the Plan of Arrangement: (i) Each of Westcoast and its subsidiaries shall (A) carry on its businesses in the usual and ordinary course consistent with past practices, (B) use reasonable best efforts to preserve intact its present business organizations and material rights and franchises, to keep available the services of its current officers and employees, and to preserve its relationships with customers, suppliers and others having business dealings with it, (C) maintain and keep its material properties and assets in as good repair and condition as at the date hereof, subject to ordinary wear and tear, and (D) with respect to wholesale power and energy trading transactions, comply with the risk parameters approved by Westcoast's Board of Directors or, in the case of regulated entities, contained in their program or guidelines and in effect on the date hereof, all to the end that its goodwill and ongoing businesses shall not be impaired in any material respect at the Effective Time. (ii) Westcoast shall not, and it shall not permit any of its subsidiaries to: (A) declare or pay any dividends on, make other distributions or return capital in respect of any of its capital stock or any other equity interests, except for regular quarterly cash dividends on Westcoast Common Shares of Cdn$ 0.34 per share with record and payment dates consistent with past practice, dividends required by the terms of any securities outstanding on the date hereof, dividends, distributions or return of capital payable by a subsidiary to Westcoast or a wholly-owned subsidiary of Westcoast other than an Excluded Asset; (B) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock; (C) issue, sell, pledge, reserve, set aside, dispose of or encumber, repurchase, redeem or otherwise acquire, any shares of its capital stock or any securities or obligations convertible into, exerciseable or exchangeable for, or any rights, warrants, calls, subscriptions or options to acquire, shares of its capital stock, except (1) pursuant to the terms of the Westcoast Dividend Reinvestment Plan, as in effect on the date hereof, (2) as required by the terms of any securities outstanding on the date hereof, (3) pursuant to fully vested Westcoast Options granted prior to the date hereof, (4) the redemption of the Westcoast First Preferred Shares in accordance with this Agreement, or (5) options granted in the ordinary course of business consistent with past practice under the Westcoast Stock Option Plans; or (D) enter into or announce any agreement or arrangement with respect to the sale, voting, registration or repurchase of any shares of its capital stock or any security convertible into or exchangeable for such shares. (iii) Except for capital expenditures (A) included in the 2001 capital expenditures budget that was previously approved by the Board of Directors of Westcoast (including any that are not expended until 2002) or in the Second Quarter 2001 Outlook previously provided to the Board of Directors of Westcoast, each of which was previously provided to Duke Energy, (B) for a business unit that are provided for in, and do not exceed the lesser of $15 million AMENDED AND RESTATED COMBINATION AGREEMENT 41 more than, or 150% of, the amount set forth for such business unit in the forecast 2002 capital expenditure schedule to the Westcoast Five Year Financial Forecast 2001-2005 which was previously provided to the Board of Directors of Westcoast and to Duke Energy and which expenditures are as otherwise contemplated in such forecast; provided, that the aggregate capital expenditures permitted hereunder do not exceed 110% of the capital expenditures provided for Westcoast on a consolidated basis in such forecast and provided further that this covenant shall not apply to capital expenditures related to Maritimes & Northeast Pipeline or P.T. Puncakjaya Power, or (C) that are required under applicable Law, Westcoast shall not, nor shall Westcoast permit any of its subsidiaries to, make or commit to make any capital expenditures (including capital lease obligations) in excess of $10 million individually or in the aggregate other than capital expenditures to repair or replace facilities destroyed or damaged due to casualty or accident (whether or not covered by insurance). (iv) Westcoast shall not, nor shall it permit any of its subsidiaries to, reorganize, recapitalize, consolidate, dissolve, liquidate, amalgamate or merge with any other person, nor acquire or agree to acquire, by amalgamating, merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or by any other manner, any business or person or otherwise acquire or agree to acquire any assets of any other person as to which the total consideration is in excess of $10 million individually (or in respect of a series of related transactions) or $50 million in the aggregate (other than purchases of assets from suppliers or vendors in the ordinary course of business consistent with past practice). Westcoast may not acquire any electric utility assets or any retail gas assets or properties unless Westcoast consults with Duke Energy prior thereto and such acquisition will not, in the opinion of Duke Energy, violate Section 5.1(a)(xiii). (v) Except with respect to the sale of assets of Westcoast or any subsidiary of Westcoast as to which the aggregate market value is not in excess of $10 million individually (or in respect of a series of related transactions) or $50 million in the aggregate and except for the sale of gas and other energy products in the ordinary course of business consistent with past practice, Westcoast shall not, nor shall it permit any of its subsidiaries to sell, pledge, encumber, lease (whether such lease is an operating or capital lease) or otherwise dispose of any assets (other than relating to transactions between two or more wholly-owned Westcoast subsidiaries or between a wholly-owned subsidiary and Westcoast). (vi) Westcoast shall not, nor shall it permit any of its subsidiaries to, (A) incur any indebtedness for borrowed money or purchase money indebtedness or assume, guarantee, endorse or enter into a "keepwell" or similar arrangement with respect to, any indebtedness, other than (1) indebtedness between Westcoast or any of its subsidiaries and another of its subsidiaries, (2) additional indebtedness incurred in the ordinary course of business consistent with past practice in an amount not to exceed $50 million in the aggregate and (3) additional borrowings under credit lines existing as of the date hereof incurred in the ordinary course of business consistent with past practice, (B) enter into interest rate swaps with a AMENDED AND RESTATED COMBINATION AGREEMENT 42 notional amount in excess of $75 million in the aggregate, or (C) enter into any material operating lease or create any mortgages, liens, security interests or other encumbrances on the property of Westcoast or any of its subsidiaries in connection with any indebtedness. (vii) Except as required by applicable Law or any agreement to which Westcoast or any of its subsidiaries is a party on the date hereof, Westcoast shall not, nor shall it permit any of its subsidiaries to: (A) increase the amount of (or accelerate the payment or vesting of) any benefit or amount payable under, any employee benefit plan or any other contract, agreement, commitment, arrangement, plan or policy providing for compensation or benefits to any former, present or future director, officer or employee of Westcoast or any of its subsidiaries; (B) increase (or enter into any commitment or arrangement to increase) the compensation or benefits, or otherwise to extend, expand or enhance the engagement, employment or any related rights, of any former, present or future director, officer, employee or consultant of Westcoast or any of its subsidiaries, except for normal increases for persons who are not directors or officers made in the ordinary course of business consistent with past practice, provided that the overall compensation budget shall not increase by more than 3.5% on an annual basis; (C) whether through its Board of Directors or otherwise, accelerate the vesting of any unvested Westcoast Options or accelerate the release of, or the expiry date of any hold period relating to, any Westcoast Common Shares held in the Westcoast Employee Share Purchase Plans, or otherwise amend, vary or modify such plans or the Westcoast Stock Option Plans; or (D) adopt, establish, enter into or implement any employee benefit plan, policy, severance or termination agreement providing for any form of benefits or other compensation to any former, present or future director, officer or employee of Westcoast or any of its subsidiaries or amend any employee benefit plan, policy, severance or termination agreement. (viii) Westcoast shall not, nor shall it permit any of its subsidiaries to, amend or propose to amend its governing documents. (ix) Subject to applicable Law, Westcoast shall not implement any changes in its or any of its regulated subsidiaries' rates or charges (other than pass-through or tracking rate charges under existing tariffs or rate schedules), standards of service or accounting or execute any agreement with respect thereto that is otherwise permitted under this Agreement (a "Rate Change") that could be reasonably expected to materially decrease the revenues of the business unit implementing such change. Westcoast shall, and shall cause its subsidiaries to, deliver to Duke Energy a copy of each filing or agreement relating to a Rate Change at least five AMENDED AND RESTATED COMBINATION AGREEMENT 43 days prior to the filing or execution thereof. Westcoast shall, and shall cause its subsidiaries to, make all such filings only in the ordinary course of business consistent with past practice. (x) Westcoast shall not, nor shall it permit any of its subsidiaries to, pay, discharge, satisfy, compromise or settle any claims or liabilities prior to the same being due which, individually or in the aggregate, are in excess of $25 million. (xi) Except as required by applicable Laws, Westcoast shall not, nor shall it permit any of its subsidiaries to, enter into, terminate or waive any provision of, exercise any option or relinquish any contractual rights under, or modify in any material respect any contract, agreement, guarantee, lease commitment or arrangement of the nature required to be disclosed by Section 3.9 or any contract which involves payments or receipts by Westcoast or any of its subsidiaries of more than $25 million over the term of such contract or agreement. (xii) Westcoast shall not, nor shall it permit any of its subsidiaries to, make any changes to the existing accounting practices, methods and principles relating to Westcoast or any subsidiary of Westcoast except as required by Law or by Canadian generally accepted accounting principles as advised by Westcoast's or such subsidiary's regular independent accountants, as the case may be. (xiii) Westcoast shall not, nor shall it permit any of its subsidiaries to, engage in any activities which would cause a change in its status, or that of its subsidiaries, under the 1935 Act, or that would impair the ability of Duke Energy to continue to claim an exemption as of right under Rule 2 of the 1935 Act following the Arrangement. (xiv) Westcoast shall not, nor shall it permit any of its subsidiaries to, make or rescind any material tax election. (xv) Westcoast shall not take any action to exempt from, waive or make not subject to (including redemption of outstanding rights) (A) the Westcoast Rights Plan or (B) any takeover Law or other Law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any person (other than Duke Energy and its subsidiaries) or any action taken thereby, including any Take-over Bid (as defined in the Westcoast Rights Plan), which person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom. Westcoast shall not nor shall it permit any subsidiary to, (a) enter into any confidentiality or standstill agreement except as permitted by Section 5.5(a), (b) amend, release any third party from its obligations or grant any consent under any confidentiality or standstill provision or fail to fully enforce any such provision. (xvi) Westcoast shall not, nor shall it permit any of its subsidiaries to, take or fail to take any action which would cause any of Westcoast's representations or AMENDED AND RESTATED COMBINATION AGREEMENT 44 warranties hereunder to be untrue or would be reasonably expected to prevent or materially impede, interfere with or delay the Arrangement. (xvii) Westcoast shall not consent to a holder of Westcoast Common Shares withdrawing or abandoning his or her dissent pursuant to the Dissent Rights or provide notice to the Court under the Final Order that the Appropriate Regulatory Approvals have been obtained, in either case without the prior written consent of Duke Energy. (xviii) Westcoast shall not, nor shall it permit any of its subsidiaries to, agree in writing or otherwise to take any of the actions as described above in clauses (ii) through (xvi). (b) Westcoast shall promptly advise Duke Energy in writing: (i) of any event, condition or circumstance that might be reasonably expected to cause any representation or warranty of Westcoast contained in this Agreement to be untrue or inaccurate on the Effective Date (or, in the case of any representation or warranty made as of a specified date, as of such specified date); (ii) of any Material Adverse Effect on Westcoast or any event, occurrence or development which would be reasonably expected to have a Material Adverse Effect on Westcoast; and (iii) of any material breach by Westcoast of any covenant, obligation or agreement contained in this Agreement. (c) Westcoast shall use its reasonable best efforts to, and shall use its reasonable best efforts to cause its subsidiaries to, perform all obligations required to be performed by Westcoast or any of its subsidiaries under this Agreement, cooperate with Duke Energy in connection therewith, and do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated in this Agreement and, without limiting the generality of the foregoing, Westcoast shall: (i) subject to Section 5.6, at the request of Duke Energy, solicit from the Westcoast Securityholders proxies in favour of approval of the Arrangement Resolution and the Westcoast Rights Plan Waiver Resolution (in a commercially reasonable manner) and use reasonable best efforts to obtain the approval by Westcoast Securityholders of the Arrangement and of the Westcoast Rights Plan Waiver Resolution; (ii) subject to the last sentence of Section 5.6(a), not adjourn, postpone or cancel (or propose adjournment, postponement or cancellation of) the Westcoast Meeting without Duke Energy's prior written consent except as required by Laws or, in the case of adjournment, as may be required by Westcoast Securityholders as expressed by majority resolution; AMENDED AND RESTATED COMBINATION AGREEMENT 45 (iii) use reasonable best efforts to satisfy or cause to be satisfied as soon as reasonably practicable all the conditions precedent that are set forth in Article 6 hereof; (iv) apply for and use reasonable best efforts to obtain as promptly as practicable all Appropriate Regulatory Approvals relating to Westcoast or any of its subsidiaries and, in doing so, to keep Duke Energy reasonably informed as to the status of the proceedings related to obtaining the Appropriate Regulatory Approvals, including, but not limited to, providing Duke Energy the opportunity to be present for all communications with any Governmental Entity and providing Duke Energy with copies of all related applications and notifications, in draft form, in order for Duke Energy to provide its reasonable comments; (v) apply for and use reasonable best efforts to obtain the Interim Order and the Final Order, which Final Order shall be applied for on the basis that it shall be effective only upon Westcoast notifying the Court that the Appropriate Regulatory Approvals have been obtained; (vi) carry out the terms of the Interim Order and the Final Order applicable to it and use reasonable best efforts to comply promptly with all requirements which applicable Laws may impose on Westcoast or its subsidiaries with respect to the transactions contemplated hereby and by the Arrangement; (vii) use reasonable best efforts to defend all lawsuits or other legal, regulatory or other proceedings to which it is a party challenging or affecting this Agreement or the consummation of the transactions contemplated hereby; (viii) use reasonable best efforts to have lifted or rescinded any injunction or restraining order or other order which may adversely affect the ability of the parties to consummate the transactions contemplated hereby; (ix) effect all necessary registrations, filings and submissions of information required by Governmental Entities from Westcoast or any of its subsidiaries in connection with the transactions contemplated hereby; (x) consult with Duke Energy prior to making publicly available its financial results for any period after the date of this Agreement and prior to filing any Westcoast SRA Reports or Westcoast SEC Reports; (xi) use reasonable best efforts to obtain all waivers, consents and approvals from other parties to loan agreements, leases or other contracts required to be obtained by Westcoast or a subsidiary of Westcoast to consummate the transactions contemplated hereby which the failure to obtain would materially and adversely affect the ability of Westcoast or its subsidiaries to consummate the transactions contemplated hereby; and (xii) use reasonable best efforts to ensure that Westcoast's affiliates listed in Section 3.14 of the Westcoast Disclosure Letter execute and deliver to Duke AMENDED AND RESTATED COMBINATION AGREEMENT 46 Energy, on or prior to the date that is 30 days after the date hereof, an Affiliate's Letter. (d) The Board of Directors of Westcoast shall recommend to the Westcoast Securityholders the approval of the Arrangement Resolution and the Westcoast Rights Plan Waiver Resolution; provided that the Board of Directors of Westcoast may withdraw, modify or change its recommendation if prior to the approval of the Arrangement by the Westcoast Securityholders, Westcoast receives a Superior Proposal that was not solicited or encouraged in violation of Section 5.5 and the Board of Directors of Westcoast determines in good faith (based upon the written opinion of its outside legal counsel) that it is necessary for the Board of Directors of Westcoast to take such action in order to discharge properly its fiduciary duties. Any such withdrawal, change or modification of the Westcoast Board of Directors' recommendation of the Arrangement and the Westcoast Rights Plan Waiver Resolution shall not change the approval of the Board of Directors of Westcoast for any purpose or change the obligation of Westcoast to present the Arrangement Resolution and the Westcoast Rights Plan Waiver Resolution (without recommendation) at a duly called and convened Westcoast Meeting in accordance with Westcoast's obligations under this Agreement. (e) Westcoast shall not waive the application of Section 3.1 of the Westcoast Rights Plan to an Acquisition Proposal unless the Acquisition Proposal is a Superior Proposal and Westcoast has complied with Section 5.5 and Section 5.6, provided that, in such case, the waiver cannot be effective until after the Westcoast Meeting and further provided that such waiver cannot be effective if the Arrangement Resolution shall have been approved by the requisite majority of the Westcoast Securityholders at the Westcoast Meeting. (f) Prior to the Effective Time, Westcoast will complete the corporate reorganizations as set forth in Section 5.1(f) of the Westcoast Disclosure Letter, subject only to (i) receipt of any required approval of any provincial regulatory body with respect to any portion of such reorganization which Westcoast shall use its reasonable best efforts to obtain, (ii) receipt of any required approvals under Westcoast's existing debt trust indentures and (iii) approval by Duke Energy of the costs to be incurred to complete such reorganization. 5.2 Covenants of Duke Energy (a) Duke Energy agrees that, until the Effective Date or the earlier termination of this Agreement in accordance with Article 7, in each case except (x) with the consent of Westcoast to any deviation therefrom, (y) with respect to any matters which are disclosed in Section 5.2 of the Duke Energy Disclosure Schedule (each of which exceptions shall specifically identify the relevant subsection hereof to which it relates) or (z) as expressly contemplated by this Agreement or the Plan of Arrangement, Duke Energy shall and will cause its subsidiaries to: AMENDED AND RESTATED COMBINATION AGREEMENT 47 (i) subject to Section 5.2(c)(viii), not adopt or propose to adopt any amendments to its governing documents or the governing documents of Exchangeco which would have a material adverse impact on the consummation of the transactions contemplated hereby; and (ii) not take any action which may jeopardize the exchange of the Westcoast Common Shares by holders of the Westcoast Common Shares in Canada for the purposes of the Income Tax Act (Canada) from being treated on a tax deferred basis under the Income Tax Act (Canada) for holders who are otherwise eligible for such treatment. (b) Duke Energy shall promptly advise Westcoast in writing: (i) of any event, condition or circumstance that might be reasonably expected to cause any representation or warranty of the Duke Energy Parties contained in this Agreement to be untrue or inaccurate on the Effective Date (or, in the case of any representation or warranty made as of a specified date, as of such specified date); (ii) of any Material Adverse Effect on Duke Energy or any event, occurrence or development which would be reasonably expected to have a Material Adverse Effect on Duke Energy; and (iii) of any material breach by any of the Duke Energy Parties of any of their covenants, obligations or agreements contained in this Agreement. (c) Duke Energy shall use its reasonable best efforts to, and shall use its reasonable best efforts to cause its subsidiaries to, perform all obligations required to be performed by it or any of its subsidiaries under this Agreement, cooperate with Westcoast in connection therewith, and do all such other acts and things as may be necessary or desirable in order to consummate and make effective, as soon as reasonably practicable, the transactions contemplated by this Agreement and, without limiting the generality of the foregoing: (i) use reasonable best efforts to satisfy or cause to be satisfied as soon as reasonably practicable all conditions precedent that are set forth in Article 6 hereof; (ii) apply for and use reasonable best efforts to obtain promptly all Appropriate Regulatory Approvals relating to Duke Energy or any of its subsidiaries, and, in doing so, to keep Westcoast reasonably informed as to the status of the proceedings related to obtaining the Appropriate Regulatory Approvals, including, but not limited to, providing Westcoast with copies of all related applications and notifications, in draft form, in order for Westcoast to provide its reasonable comments; (iii) carry out the terms of the Interim Order and Final Order applicable to it and use reasonable best efforts to comply promptly with all requirements which AMENDED AND RESTATED COMBINATION AGREEMENT 48 applicable Laws may impose on the Duke Energy Parties with respect to the transactions contemplated hereby and by the Arrangement; (iv) in respect of holders of Westcoast Common Shares who are not exempt from tax under Part 1 of the Income Tax Act (Canada) and who receive Exchangeable Shares under the Arrangement, to cause Exchangeco to enter into elections with such holders under Section 85 of the Income Tax Act (Canada) and any equivalents thereof under provincial Laws; (v) use reasonable best efforts to defend all lawsuits or other legal, regulatory or other proceedings to which it is a party challenging or affecting this Agreement or the consummation of the transactions contemplated hereby; (vi) use reasonable best efforts to have lifted or rescinded any injunction or restraining order or other order relating to the Duke Energy Parties which may adversely affect the ability of the parties to consummate the transactions contemplated hereby; (vii) effect all necessary registrations, filings and submissions of information required by Governmental Entities from the Duke Energy Parties or their subsidiaries in connection with the transactions contemplated hereby; (viii) cause governing documents of Exchangeco to be amended, among other things, to create the Exchangeable Shares; (ix) reserve or have available a sufficient number of Duke Energy Common Shares for issuance upon the completion of the Arrangement and the exchange from time to time of Exchangeable Shares and the exercise from time to time of Replacement Options and use reasonable best efforts to cause such Duke Energy Common Shares to be approved for listing on The New York Stock Exchange, subject to official notice of issuance, prior to the Effective Time; (x) use reasonable best efforts (A) to cause the Exchangeable Shares to be listed for trading on The Toronto Stock Exchange by the Effective Date and (B) to ensure that Exchangeco remains a "public corporation" within the meaning of the Income Tax Act (Canada) for so long as there are Exchangeable Shares outstanding (other than those Exchangeable Shares held by Duke Energy or any of its affiliates); and (xi) use reasonable best efforts to obtain all waivers, consents and approvals from other parties to loan agreements, leases or other contracts required to be obtained by Duke Energy or any subsidiary of Duke Energy to consummate the transactions contemplated hereby which the failure to obtain would materially and adversely affect the ability of the Duke Energy Parties to consummate the transactions contemplated hereby. AMENDED AND RESTATED COMBINATION AGREEMENT 49 5.3 Access to Information (a) Subject to Section 5.3(b) and applicable Laws, upon reasonable notice to an officer or business unit head of Westcoast, Westcoast shall (and shall cause each of its subsidiaries to) afford the officers, employees, counsel, accountants and other authorized representatives and advisors ("Representatives") of Duke Energy access, during normal business hours from the date hereof and until the earlier of the Effective Date or the termination of this Agreement, to its properties, books, contracts and records as well as to its management personnel; provided that such access shall be provided on a basis that minimizes the disruption to the operations of Westcoast. During such period, Westcoast shall (and shall cause each of its subsidiaries to) furnish promptly to Duke Energy all information concerning Westcoast's business, properties and personnel as Duke Energy may reasonably request. Subject to Section 5.3(b) and applicable Laws, Duke Energy shall afford the Representatives of Westcoast access during normal business hours from the date hereof and until the earlier of the Effective Date or the termination of this Agreement, to such of Duke Energy's management personnel as Westcoast may request, acting reasonably. (b) The Duke Energy Parties and Westcoast acknowledge that certain information received pursuant to Section 5.3(a) will be non-public or proprietary in nature and as such will be deemed to be "Confidential Information" for purposes of the Confidentiality Agreement. The Duke Energy Parties and Westcoast further acknowledge their obligation to maintain the confidentiality of such Confidential Information in accordance with the Confidentiality Agreement. 5.4 Indemnification (a) Duke Energy agrees that all rights to indemnification for acts or omissions occurring prior to the Effective Time existing as of the date hereof in favour of the directors or officers of Westcoast as provided in its governing documents or in written contracts in effect on the date hereof, shall survive the Arrangement and shall continue in full force and effect until the earlier of the expiration of the applicable statute of limitations with respect to any claims against directors or officers of Westcoast arising out of such acts or omissions and the sixth anniversary of the Effective Date, and Duke Energy hereby assumes, effective upon consummation of the Arrangement, all such liability with respect to any matters arising prior to the Effective Time. (b) Duke Energy shall use reasonable best efforts to cause to be maintained in effect, for not less than six years from the Effective Time, policies of directors' and officers' liability insurance that provide substantially the same coverage and contain substantially similar terms and conditions for acts and omissions prior to the Effective Time as is provided under or contained in the policies of the directors' and officers' liability insurance maintained by Westcoast as of the date of this Agreement so long as the annual premium therefor would not be in excess of 200% of the last annual premium paid prior to the date hereof. AMENDED AND RESTATED COMBINATION AGREEMENT 50 5.5 Covenants Regarding Non-Solicitation (a) Westcoast shall immediately cease and cause to be terminated any existing solicitation, encouragement, activity, discussion or negotiation with any parties by Westcoast, any of its subsidiaries or any of its or its subsidiaries' officers, directors, employees, representatives and agents with respect to an Acquisition Proposal whether or not initiated by Westcoast and in connection therewith, Westcoast shall request (and exercise all rights it has to require) the return of information regarding Westcoast and its subsidiaries previously provided to such parties and shall request (and exercise all rights it has to require) the destruction of all materials including or incorporating any information regarding Westcoast and its subsidiaries. (b) Subject to Section 5.6, Westcoast agrees that it shall not, and shall not authorize or permit any of its subsidiaries or any of its or its subsidiaries' officers, directors, employees, representatives or agents, directly or indirectly, to (i) solicit, initiate, encourage or knowingly facilitate, including by way of furnishing information or entering into any form of agreement, arrangement or understanding, any inquiries or the making of any proposals regarding an Acquisition Proposal, (ii) participate in any discussions or negotiations regarding any Acquisition Proposal, (iii) withdraw or modify in a manner adverse to Duke Energy the approval or recommendation of the Board of Directors of Westcoast of the transactions contemplated hereby, (iv) approve or recommend any Acquisition Proposal or (v) enter into any agreement, arrangement or understanding related to any Acquisition Proposal or requiring Westcoast to abandon, terminate or fail to consummate the Arrangement or providing for the payment of any break, termination or other fees or expenses to any person in the event that Westcoast or any of its subsidiaries completes the transactions contemplated hereby or any other transaction with Duke Energy or any of its affiliates agreed to prior to any termination of this Agreement. Notwithstanding the preceding sentence and any other provisions of this Agreement, the Board of Directors of Westcoast may, prior to the approval of the Arrangement by the Westcoast Securityholders, consider, participate in any discussions or negotiations with, or provide information in accordance with the last sentence of this paragraph to, any person who has delivered a bona fide written Acquisition Proposal which was not solicited or encouraged after the date of this Agreement and did not otherwise result from a breach of this Section 5.5 and that the Board of Directors of Westcoast determines in good faith, after consultation with its financial advisors and outside legal counsel, is a Superior Proposal; provided, however, that prior to taking any such action, (x) the Board of Directors of Westcoast must receive written advice of outside counsel that it is necessary for the Board of Directors of Westcoast to take such action in order to discharge properly its fiduciary duties and (y) Westcoast must obtain a confidentiality agreement from the person making such Acquisition Proposal that is substantively the same as the Confidentiality Agreement, including a standstill provision at least as stringent as contained in the Confidentiality Agreement; provided further that Westcoast shall not commence discussions or negotiations with, or provide information to any person who has delivered an unsolicited bona fide written Acquisition Proposal until 48 hours after Westcoast shall have advised Duke Energy of its determination that such Acquisition Proposal constitutes a Superior Proposal AMENDED AND RESTATED COMBINATION AGREEMENT 51 and of its intention to take such actions. Westcoast shall not consider, negotiate, accept, approve or recommend an Acquisition Proposal or provide information to any person proposing an Acquisition Proposal, in each case after the date of the approval of the Arrangement by the Westcoast Securityholders. If Westcoast receives a request for material non-public information from a person who has made an unsolicited bona fide written Acquisition Proposal and Westcoast is permitted, as contemplated under the second sentence of this Section 5.5(b), to negotiate the terms of such Acquisition Proposal, then, and only in such case, the Board of Directors of Westcoast may, subject to the execution by such person of the confidentiality agreement as described in (y) above, provide such person with access to information regarding Westcoast; provided that Westcoast sends a copy of any such confidentiality agreement to Duke Energy promptly upon its execution and Duke Energy is provided with a list of, and copies of, the information provided to such person and is immediately provided with access to similar information to which such person was provided. (c) From and after the date of this Agreement, Westcoast shall promptly (and in any event within 24 hours) notify Duke Energy, at first orally and then in writing, of any inquiries, proposals or offers relating to or constituting an Acquisition Proposal, or any request for non-public information relating to Westcoast or any of its subsidiaries. Such notice shall include a description of the terms and conditions of any proposal, inquiry or offer, the identity of the person making such proposal, inquiry or offer and provide such other details of the proposal, inquiry or offer as Duke Energy may reasonably request. Westcoast shall keep Duke Energy fully informed on a prompt basis of the status, including any change to the material terms, of any such inquiry, proposal or offer. (d) Westcoast shall ensure that its officers, directors and employees and its subsidiaries and their officers, directors and employees and any financial advisors or other advisors or representatives retained by it are aware of the provisions of this Section 5.5, and it shall be responsible for any breach of this Section 5.5 by such officers, directors, employees, financial advisors or other advisors or representatives. 5.6 Right to Accept a Superior Proposal (a) If Westcoast has complied with Section 5.5 with respect thereto, Westcoast may accept, approve, recommend or enter into any agreement, understanding or arrangement in respect of a Superior Proposal prior to the approval of the Arrangement by the Westcoast Securityholders if, and only if (with the exception of a confidentiality agreement the execution of which shall not be subject to the conditions of this Section 5.6), (i) Westcoast has provided Duke Energy with a copy of the Superior Proposal document, (ii) five Business Days shall have elapsed from the later of (x) the date Duke Energy received written notice (a "Section 5.6 Notice") advising Duke Energy that Westcoast's Board of Directors has resolved, subject only to compliance with this Section 5.6, to accept, approve, recommend or enter into an agreement in respect of such Superior Proposal, specifying the terms and conditions of such Superior Proposal and identifying the person making such Superior Proposal, AMENDED AND RESTATED COMBINATION AGREEMENT 52 and (y) the date Duke Energy received a copy of such Superior Proposal, (iii) Westcoast's Board of Directors has determined in good faith (based upon the written opinion of its outside legal counsel) that it is necessary for the Board of Directors of Westcoast to take such action in order to discharge properly its fiduciary duties, (iv) such Superior Proposal does not provide for the payment of any break, termination or other fees or expenses to the other party in the event that Westcoast or any of its subsidiaries completes the transactions contemplated by this Agreement or any other transaction with Duke Energy or any of its affiliates agreed to prior to any termination of this Agreement, and (v) Westcoast has previously or concurrently will have paid to Duke Energy the Termination Fee, if any, payable under Section 7.3. In the event that Westcoast provides Duke Energy with a Section 5.6 Notice on a date that is less than five Business Days prior to the Westcoast Meeting, Westcoast shall adjourn the Westcoast Meeting (without notice on the Arrangement or any related matters) to a date that is not less than five Business Days and not more than 10 Business Days after the date of the Section 5.6 Notice. (b) During the five Business Day period referred to in Section 5.6(a)(ii), Westcoast agrees that Duke Energy shall have the right, but not the obligation, to offer to amend the terms of this Agreement. The Board of Directors of Westcoast will review any proposal by Duke Energy to amend the terms of this Agreement in good faith in order to determine, in its discretion in the exercise of its fiduciary duties, whether Duke Energy's amended proposal upon acceptance by Westcoast would result in such Superior Proposal ceasing to be a Superior Proposal. If the Board of Directors of Westcoast so determines, it will enter into an amended agreement with Duke Energy reflecting Duke Energy's amended proposal. If the Board of Directors of Westcoast continues to believe, in good faith and after consultation with financial advisors and outside counsel, that such Superior Proposal remains a Superior Proposal and therefore rejects Duke Energy's amended proposal, Westcoast may, subject to the terms of this Agreement, accept, approve, recommend or enter into an agreement, understanding or arrangement in respect of such Superior Proposal. (c) Westcoast also acknowledges and agrees that each successive material modification of any Acquisition Proposal shall constitute a new Acquisition Proposal for purposes of Section 5.5 and the requirement under clause (ii) of Section 5.6(a) to initiate an additional five Business Day notice period. 5.7 Employee Benefits and Related Matters Duke Energy agrees, and after the Effective Time will cause Westcoast or any of its subsidiaries, as the case may be, to: (a) from the Effective Time through December 31, 2002, provide Affected Employees, taken as a whole, employee benefits pursuant to employee benefit plans, programs, policies or arrangements maintained by Duke Energy or any subsidiary of Duke Energy providing coverage and benefits which, in the aggregate, are no less favourable than (i) those provided to Affected Employees immediately prior to the Effective Time (other than benefits provided pursuant to Westcoast Employee Share AMENDED AND RESTATED COMBINATION AGREEMENT 53 Purchase Plans) or, (ii) if elected by Duke Energy with respect to all or certain Affected Employees, those provided from time to time after the Effective Time to employees of Duke Energy or its subsidiaries who are similarly situated, in terms of their positions, tenure and geographic locations, to such Affected Employees; "Affected Employees" means individuals who are actively employed by Westcoast or any of its subsidiaries as of the Effective Time, are not subject to a collective bargaining agreement and who remain employed with Duke Energy or any subsidiary of Duke Energy; (b) give each Affected Employee full credit for purposes of determining severance pay and eligibility to participate, vesting and benefit accrual (except for purposes of benefit accrual under any defined benefit pension plans, or to the extent such treatment would result in duplicative accrual on or after the Effective Date of benefits for the same period maintained by Duke Energy or any subsidiary of Duke Energy), for such Affected Employee's service with Westcoast or any subsidiary of Westcoast to the same extent and for the same purpose recognized by Westcoast immediately prior to the Effective Time and previously disclosed to Duke Energy; (c) waive all limitations as to preexisting conditions exclusions with respect to participation and coverage requirements applicable to the Affected Employees under any medical or dental benefit plans maintained by Duke Energy in which such employees may be eligible to participate, other than preexisting conditions exclusions imposed with respect to any Affected Employee immediately prior to such participation under any medical or dental plan maintained by Westcoast for the Affected Employees and other than preexisting conditions exclusions imposed by third-party health benefit providers; and (d) provide that any co-payments and deductibles paid by Affected Employees under a welfare plan maintained by Westcoast during the plan year in which the coverage under a similar type of welfare plan maintained by Duke Energy begins shall be taken into account in satisfying any applicable deductible or out-of-pocket requirements under such Duke Energy welfare plan to the same extent such expenses are taken into account for the benefit of similarly situated employees of Duke Energy and its subsidiaries. Nothing herein shall be construed as (i) requiring Duke Energy to continue the employment of any Affected Employee following the Effective Time, (ii) limiting Duke Energy's ability to amend, modify or terminate any individual employee benefit plan or arrangement of Westcoast, Duke Energy or any of their respective subsidiaries, or (iii) requiring Duke Energy to maintain any particular level of employee benefits for any individual employee following the Effective Time subject to compliance with Section 5.7(a). 5.8 Prohibition on Voluntary Liquidation Duke Energy shall not, and shall cause its subsidiaries not to, take any action relating to a voluntary liquidation, dissolution or winding-up of Exchangeco, as the case may be, prior to the Redemption Date (as defined in the Plan of Arrangement). AMENDED AND RESTATED COMBINATION AGREEMENT 54 5.9 Conversion of Westcoast Preferred Shares (a) On or prior to September 30, 2001, Westcoast shall deliver a conversion notice (specifying a 30-day notice period) to the holders of the outstanding Westcoast First Preferred Shares, Series 2 regarding the conversion of such shares into Westcoast Common Shares in accordance with the terms of such First Preferred Shares, Series 2. Westcoast shall complete such conversion by such time as is necessary to enable such holders to be holders entitled to receive notice of the Westcoast Meeting. Notwithstanding any other provision of this Agreement, the acts of Westcoast to convert the Westcoast First Preferred Shares, Series 2 in accordance with their terms and this Section 5.9 shall be deemed not to breach or violate or fail to satisfy any representations, warranties, covenants or obligations of Westcoast under this Agreement. (b) Westcoast shall within two Business Days provide written notice to a designated officer of Duke Energy of any conversion notice given to Westcoast by a holder of First Preferred Shares, Series 5 (a "Series 5 Conversion Notice") or any conversion notice given to Westcoast by a holder of UEI Holdings Inc. First Series Preferred Shares (a "UEI Conversion Notice"). Westcoast shall redeem, unless Duke Energy otherwise consents, all such First Preferred Shares, Series 5 in respect of which a Series 5 Conversion Notice is given, in accordance with the terms of such First Preferred Shares, Series 5 and shall redeem, unless Duke Energy otherwise consents, all such UEI Holdings Inc. First Series Preferred Shares in respect of which a UEI Conversion Notice is given, in accordance with the terms of such UEI Holdings Inc. First Series Preferred Shares, as the case may be. Notwithstanding any other provision of this Agreement, the acts of Westcoast to redeem the First Preferred Shares, Series 5 and the UEI Holdings Inc. First Series Preferred Shares in accordance with their respective terms and this Section 5.9 shall be deemed not to breach or violate or fail to satisfy any representations, warranties, covenants or obligations of Westcoast under this Agreement. 5.10 Closing Matters Each of the Duke Energy Parties and Westcoast shall deliver, at the Effective Time, such customary certificates, resolutions and other closing documents as may be required by the other parties hereto, acting reasonably. ARTICLE 6 CONDITIONS 6.1 Mutual Conditions The respective obligations of the parties hereto to consummate the Arrangement shall be subject to the satisfaction of the following conditions on or before the Effective Date: AMENDED AND RESTATED COMBINATION AGREEMENT 55 (a) the Arrangement shall have been approved by the Westcoast Securityholders at the Westcoast Meeting in the manner required by applicable Laws (including any conditions imposed by the Interim Order); (b) the Interim Order and the Final Order shall each have been obtained in form and on terms satisfactory to each of Duke Energy and Westcoast, acting reasonably, and shall not have been set aside or modified in a manner unacceptable to such parties, acting reasonably, on appeal or otherwise; (c) the Form S-3 shall have become effective under the 1933 Act and no stop order suspending the effectiveness of the Form S-3 shall be in effect and no proceedings for such purpose shall be pending before the SEC, and Duke Energy shall have received all United States state securities or "blue sky" authorizations necessary to issue the Duke Energy Common Shares to be issued pursuant to the Arrangement or upon exchange for the Exchangeable Shares; (d) no provision of any applicable Laws and no judgment, injunction, order or decree shall be in effect which restrains or enjoins or otherwise prohibits the consummation of the Arrangement or the transactions contemplated by this Agreement; (e) the Exchangeable Shares issuable pursuant to the Arrangement shall have been conditionally approved for listing on The Toronto Stock Exchange, subject to the filing of required documentation, and the Duke Energy Common Shares issuable at the Effective Time pursuant to the Arrangement, upon exchange of the Exchangeable Shares from time to time and upon exercise of the Replacement Options from time to time shall have been approved for listing on The New York Stock Exchange, subject to official notice of issuance; and (f) the Appropriate Regulatory Approvals shall have been obtained and be in full force and effect and shall not be subject to any stop-order or proceeding seeking a stop-order or revocation; and (g) all other consents, waivers, permits, orders and approvals of any Governmental Entity, and the expiry of any waiting periods, in connection with, or required to permit, the consummation of the Arrangement, the failure to obtain which or the non-expiry of which would constitute a criminal offense, or would, individually or in the aggregate, have a Material Adverse Effect on Duke Energy or Westcoast after the Effective Time, shall have been obtained or received. 6.2 Additional Conditions to the Obligations of the Duke Energy Parties The obligations of the Duke Energy Parties to consummate the Arrangement shall be subject to the satisfaction of the following conditions (each of which is for the exclusive benefit of the Duke Energy Parties and may be waived by Duke Energy on behalf of the Duke Energy Parties) on or before the Effective Date: AMENDED AND RESTATED COMBINATION AGREEMENT 56 (a) Westcoast shall have performed or complied with, in all material respects, each of its obligations, covenants and agreements hereunder to be performed and complied with by it on or before the Effective Time; (b) each of the representations and warranties of Westcoast under this Agreement (which for purposes of this clause (b) shall be read as though none of them contained any Material Adverse Effect or other materiality qualification), except for the representations and warranties set forth in Sections 3.1, 3.2 and 3.3, shall be true and correct in all respects on the date of this Agreement and as of the Effective Date as if made on and as of such date (except for such representations and warranties made as of a specified date, which shall be true and correct as of such specified date) except where the failure of such representations and warranties in the aggregate to be true and correct in all respects would not be reasonably expected to have a Material Adverse Effect on Westcoast. Each of the representations and warranties of Westcoast set forth in Sections 3.1, 3.2 and 3.3 of this Agreement shall be true and correct in all material respects on the date of this Agreement and on the Effective Date as if made on and as of such date (except for such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such specified date); (c) Since the date of this Agreement, there shall have been no Material Adverse Effect with respect to Westcoast or any event, occurrence or development which would be reasonably expected to have a Material Adverse Effect on Westcoast or which would materially and adversely affect the ability of Westcoast to consummate the transactions contemplated hereby; (d) Duke Energy shall have received a certificate of Westcoast addressed to the Duke Energy Parties and dated the Effective Date, signed on behalf of Westcoast by two senior executive officers of Westcoast, confirming that the conditions in Sections 6.2(a), (b) and (c) have been satisfied; (e) there shall not be any action taken, any Law enacted, entered, enforced or deemed applicable by any Governmental Entity or pending or threatened any suit, action or proceeding by any Governmental Entity in connection with the grant of any Appropriate Regulatory Approval or otherwise, (i) seeking to prohibit or restrict the acquisition by Duke Energy or any of its subsidiaries of any Westcoast Common Shares, (ii) challenging or seeking to restrain or prohibit the consummation of the Plan of Arrangement or seeking to obtain from Westcoast or Duke Energy any damages that are material in relation to Westcoast and its subsidiaries taken as a whole, (iii) seeking to prohibit or materially limit the ownership or operation by Duke Energy or any of its subsidiaries of any material portion of the business or assets of Duke Energy, Westcoast or any of their respective subsidiaries or to compel Duke Energy or any of its subsidiaries to dispose of or hold separate any material portion of the business or assets of Duke Energy or Westcoast or any of their respective subsidiaries, as a result of the Plan of Arrangement, (iv) seeking to impose limitations on the ability of Duke Energy or any of its subsidiaries to acquire or hold, or exercise full rights of ownership of, any Westcoast Common Shares, including the right to AMENDED AND RESTATED COMBINATION AGREEMENT 57 vote the Westcoast Common Shares purchased by it on all matters properly presented to the shareholders of Westcoast, (v) seeking to prohibit Duke Energy or any of its subsidiaries from effectively controlling in any material respect the business or operations of Westcoast and its subsidiaries or (vi) imposing any condition or restriction that in the judgment of Duke Energy, acting reasonably, would be materially burdensome to the future operations or business of any business unit of Duke Energy or Westcoast after the Effective Time; (f) the Board of Directors of Westcoast shall have adopted all necessary resolutions, and all other necessary corporate action shall have been taken by Westcoast and its subsidiaries to permit the consummation of the Arrangement; (g) the holders of Westcoast Common Shares shall have approved the Westcoast Rights Plan Waiver Resolution; (h) Duke Energy shall have received a customary "Comfort Letter" from Ernst & Young LLC, dated the Effective Date, in form and substance reasonably satisfactory to Duke Energy, in connection with the procedures undertaken by them with respect to the financial statements of Westcoast and its subsidiaries to be contained in or incorporated by reference into any filing by Duke Energy with the SEC; (i) holders of not more than 10% of the Westcoast Common Shares shall have exercised their Dissent Rights (and not withdrawn such exercise) in respect of the Arrangement; (j) all outstanding Westcoast First Preferred Shares, Series 2 shall have been converted into Westcoast Common Shares in accordance with the terms of such First Preferred Shares, Series 2; (k) the consents and approvals set forth in Section 3.4 of the Westcoast Disclosure Letter shall have been obtained or received; and (l) to the extent required, approval of the New York Public Services Commission under the New York Public Services Law. 6.3 Additional Conditions to the Obligations of Westcoast The obligations of Westcoast to consummate the Arrangement shall be subject to satisfaction of the following conditions (each of which is for the exclusive benefit of Westcoast and may be waived by Westcoast) on or before the Effective Date: (a) the Duke Energy Parties shall have performed or complied with, in all material respects, each of their obligations, covenants and agreements hereunder to be performed and complied with by them on or before the Effective Time; (b) each of the representations and warranties of the Duke Energy Parties under this Agreement (which for purposes of this clause (b) shall be read as though none of them contained any Material Adverse Effect or other materiality qualification), except AMENDED AND RESTATED COMBINATION AGREEMENT 58 for the representations and warranties set forth in Sections 4.1, 4.2 and 4.3, shall be true and correct in all respects on the date of this Agreement and as of the Effective Date as if made on and as of such date (except for such representations and warranties made as of a specified date, which shall be true and correct as of such specified date) except where the failure of such representations and warranties in the aggregate to be true and correct in all respects would not be reasonably expected to have a Material Adverse Effect on Duke Energy. Each of the representations and warranties of the Duke Energy Parties set forth in Sections 4.1, 4.2 and 4.3 of this Agreement shall be true and correct in all material respects on the date of this Agreement and on the Effective Date as if made on and as of such date (except for such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such specified date); (c) Since the date of this Agreement, there shall have been no Material Adverse Effect with respect to Duke Energy or any event, occurrence or development which would be reasonably expected to have a Material Adverse Effect on Duke Energy or which would materially and adversely affect the ability of Duke Energy to consummate the transactions contemplated hereby except those which were disclosed in the Circular as amended or supplemented; (d) Westcoast shall have received a certificate of Duke Energy addressed to Westcoast and dated the Effective Date, signed on behalf of Duke Energy by two senior executive officers of Duke Energy, confirming that the conditions in Sections 6.3(a), (b) and (c) have been satisfied; and (e) the Board of Directors of Duke Energy shall have adopted all necessary resolutions, and all other necessary corporate action shall have been taken by Duke Energy and its subsidiaries, to permit the consummation of the Arrangement. 6.4 Satisfaction of Conditions The conditions precedent set out in Sections 6.1, 6.2 and 6.3 shall be conclusively deemed to have been satisfied, waived or released when, with the agreement of Duke Energy and Westcoast, a certificate of arrangement in respect of the Arrangement is issued by the Director. ARTICLE 7 AMENDMENT AND TERMINATION 7.1 Amendment This Agreement may not be amended except by mutual written agreement of the parties hereto; provided that after approval by the Westcoast Securityholders, no amendment may be made that by Law requires further approval or authorization by the Westcoast Securityholders without such further approval or authorization. AMENDED AND RESTATED COMBINATION AGREEMENT 59 7.2 Termination This Agreement may be terminated and the Arrangement abandoned at any time prior to the Effective Time (notwithstanding any approval of the Arrangement by the Westcoast Securityholders): (a) by the mutual written consent of Duke Energy and Westcoast (without further action on the part of the Westcoast Securityholders if terminated after the Westcoast Meeting); (b) by either Westcoast or Duke Energy, if there shall be any Law that makes consummation of the Arrangement illegal or otherwise prohibited, or if any judgment, injunction, order or decree of a competent Governmental Entity (other than any order from the Court refusing to grant the Final Order) enjoining Duke Energy or Westcoast from consummating the Arrangement shall be entered and such judgment, injunction, order or decree shall have become final and non-appealable; (c) by either Westcoast or Duke Energy, if the Effective Date does not occur on or prior to September 20, 2002; provided, however, that the right to terminate this Agreement under this Section 7.2(c) shall not be available to any party whose failure or whose affiliate's failure to perform any material covenant, agreement or obligation hereunder has been the cause of, or resulted in, the failure of the Effective Date to occur on or before such date; (d) by Duke Energy if, (i) the Board of Directors of Westcoast fails to recommend or withdraws, modifies or changes its approval or recommendation of this Agreement, the Arrangement, the Arrangement Resolution or the Westcoast Rights Plan Waiver Resolution in a manner adverse to Duke Energy or recommends or approves a Superior Proposal, (ii) the Board of Directors of Westcoast fails to affirm its approval or recommendation of this Agreement, the Arrangement, the Arrangement Resolution or the Westcoast Rights Plan Waiver Resolution within 10 Business Days of any written request to do so from Duke Energy, (iii) the Arrangement Resolution and the Westcoast Rights Plan Waiver Resolution are not submitted for approval at the Westcoast Meeting, or the Westcoast Meeting is not held prior to January 31, 2002 or such later date to which the Westcoast Meeting shall have been adjourned or postponed as may be permitted pursuant to Section 5.6(a); provided that in the event a Force Majeure has occurred which makes giving notice of the Westcoast Meeting impractical, or if such notice has already been given, makes holding the Westcoast Meeting impractical on or prior to such date, such date shall be extended until the earlier of the thirty-fifth day after the cessation of such Force Majeure or March 31, 2002, or (iv) Westcoast shall have breached in any material respect its obligations under Section 5.5 or 5.6; (e) (i) by either Westcoast or Duke Energy, if at the Westcoast Meeting, the requisite vote of Westcoast Securityholders to approve the Arrangement shall not be obtained or (ii) by either Westcoast or Duke Energy, if approval of the Court of the Final Order shall not be obtained, or (iii) by Duke Energy, if at the Westcoast Meeting, the AMENDED AND RESTATED COMBINATION AGREEMENT 60 requisite vote of holders of Westcoast Common Shares to approve the Westcoast Rights Plan Waiver Resolution shall not be obtained; (f) by Duke Energy, if Westcoast has breached any of its representations, warranties, agreements or obligations herein which breach would result in the failure to satisfy one or more conditions set forth in Section 6.2(a) or Section 6.2(b) and such breach is not curable or if curable, is not cured within 30 days after notice thereof has been received by the party alleged to be in breach; or (g) by Westcoast, if any of the Duke Energy Parties has breached any of its representations, warranties, agreements or obligations herein which breach would result in the failure to satisfy one or more conditions set forth in Section 6.3(a) or Section 6.3(b) and such breach is not curable or if curable, is not cured within 30 days after notice thereof has been received by the party alleged to be in breach. 7.3 Effect of Termination (a) If this Agreement is terminated in accordance with the provisions of Section 7.2, no party shall have any further liability to perform its obligations hereunder except for the provisions of this Section 7.3 and Section 5.3(b) and Section 8.9; provided that neither the termination of this Agreement nor anything contained in this Section 7.3 shall relieve any party from any liability for any breach by it of this Agreement, including from any inaccuracy in its representations and warranties and any non-performance by it of its covenants and agreements made herein. If it shall be judicially determined that termination of this Agreement was caused by an intentional breach of this Agreement, then, in addition to any other remedies at law or equity for breach of this Agreement, the party so found to have intentionally breached this Agreement shall indemnify and hold harmless the other parties for their out-of-pocket costs, including fees and expenses of their counsel, accountants, financial advisors and other experts and advisors, incident to the negotiation, preparation and execution of this Agreement and related documentation. (b) If this Agreement is terminated: (i) by Duke Energy pursuant to Section 7.2(d); or (ii) by either Party pursuant to Section 7.2(e)(i) or by Duke Energy pursuant to Section 7.2(e)(iii) and at any time after the date of this Agreement and prior to such termination a bona fide Acquisition Proposal with respect to Westcoast or its subsidiaries shall have been made, or any proposal or expression of interest by a third party regarding an Acquisition Proposal shall have been publicly disclosed; then Westcoast will, in the case of a termination by Duke Energy, within three Business Days following any such termination or, in the case of a termination by Westcoast, prior to such termination, pay to Duke Energy in cash by wire transfer in immediately available funds to an account designated by Duke Energy the Termination Fee. AMENDED AND RESTATED COMBINATION AGREEMENT 61 (c) If this Agreement is terminated by either party pursuant to Section 7.2(e)(i) or by Duke Energy pursuant to Section 7.2(e)(iii) and after the date of this Agreement and prior to such termination no bona fide Acquisition Proposal with respect to Westcoast or its subsidiaries shall have been made, and at such time no proposal or expression of interest by a third party regarding an Acquisition Proposal shall have been publicly disclosed and within 12 months after the date of such termination, Westcoast enters into any agreement for an Acquisition Proposal or consummates a transaction that constitutes an Acquisition Proposal, Westcoast will, prior to the earlier of consummation of a transaction that constitutes an Acquisition Proposal, or execution of a definitive agreement with respect thereto, pay to Duke Energy in cash by wire transfer in immediately available funds to an account designated by Duke Energy, the Termination Fee. (d) If this Agreement is terminated by Duke Energy pursuant to Section 7.2(f) and after the date of this Agreement and prior to such termination no bona fide Acquisition Proposal with respect to Westcoast or its subsidiaries shall have been made, and at such time no proposal or expression of interest by a third party regarding an Acquisition Proposal shall have been publicly disclosed, or if this Agreement is terminated by Westcoast pursuant to 7.2(g), then Westcoast or Duke Energy, as the case may be, will, within three Business Days following notice of such termination, pay to the terminating party in cash by wire transfer in immediately available funds to an account designated by the terminating party an amount equal to the Expense Fee as payment in full of the terminating party's costs and expenses in connection with the transactions contemplated by this Agreement. (e) If this Agreement is terminated by Duke Energy pursuant to Section 7.2(f) and at any time after the date of this Agreement and prior to such termination a bona fide Acquisition Proposal with respect to Westcoast or its subsidiaries shall have been made, or any proposal or expression of interest by a third party regarding an Acquisition Proposal shall have been publicly disclosed, then (i) Westcoast will, within three Business Days following any such termination, pay to Duke Energy in cash by wire transfer in immediately available funds to an account designated by Duke Energy an amount equal to the Expense Fee as payment in full of the Duke Energy Parties' costs and expenses in connection with the transactions contemplated by this Agreement and (ii) if within 12 months after the date of such termination, Westcoast enters into any agreement for an Acquisition Proposal or consummates a transaction that constitutes an Acquisition Proposal, Westcoast will, prior to the earlier of consummation of a transaction that constitutes an Acquisition Proposal, or execution of a definitive agreement with respect thereto, pay to Duke Energy in cash by wire transfer in immediately available funds to an account designated by Duke Energy, the Termination Fee minus the amount of any payment previously made pursuant to clause (i) of this subsection (e). (f) If this Agreement is terminated by either party pursuant to Section 7.2(c) or pursuant to Section 7.2(e)(ii) and within 12 months after the date of such termination, Westcoast enters into any agreement for an Acquisition Proposal or consummates a transaction that constitutes an Acquisition Proposal, Westcoast will, prior to the AMENDED AND RESTATED COMBINATION AGREEMENT 62 earlier of consummation of a transaction that constitutes an Acquisition Proposal, or execution of a definitive agreement with respect thereto, pay to Duke Energy in cash by wire transfer in immediately available funds to an account designated by Duke Energy, the Termination Fee minus any payment previously made pursuant to Section 7.3(g). (g) If this Agreement is terminated by either party pursuant to Section 7.2(c) and at the date of such termination any required approval of any provincial regulatory body shall not have been obtained then Westcoast will, in the case of a termination by Duke Energy, within three Business Days following such termination or, in the case of a termination by Westcoast, prior to such termination, pay to Duke Energy in cash by wire transfer in immediately available funds to an account designated by Duke Energy an amount equal to the Expense Fee as payment in full of the Duke Energy Parties' costs and expenses in connection with the transactions contemplated by this Agreement. If this Agreement is terminated by either party pursuant to Section 7.2(c) and at the date of such termination any required approval of Duke Energy's performance of its obligations under this Agreement by the North Carolina Utilities Commission or The Public Service Commission of South Carolina shall not have been obtained, then Duke Energy will, in the event of a termination by Westcoast, within three Business Days following such termination or in the case of a termination by Duke Energy, prior to such termination, pay to Westcoast in cash by wire transfer in immediately available funds to an account designated by Duke Energy an amount equal to the Expense Fee as payment in full of Westcoast's costs and expenses in connection with the transactions contemplated by this Agreement. (h) Solely for purposes of this Section 7.3, (x) each reference to 20% in the definition of Acquisition Proposal shall be deemed to be 25% and (y) for purposes of determining under Section 7.3(b)(ii) whether the condition that an Acquisition Proposal shall have been made or a proposal or expression of interest by a third party regarding an Acquisition Proposal shall have been made or publicly disclosed, the condition shall not be deemed to have been met to the extent (i) the Acquisition Proposal is expressly conditioned upon completion of the transactions contemplated hereby or (ii) the proposal or expression of interest regarding an Acquisition Proposal that is only publicly disclosed is not bona fide made. 7.4 Effect of Termination Fee Payment For greater certainty, the parties hereto agree that if Westcoast pays the Termination Fee to Duke Energy pursuant to the provisions of Section 7.3, Duke Energy shall have no other remedy for any breach of this Agreement by Westcoast, unless Westcoast makes a claim against Duke Energy for breach of a provision of this Agreement, in which circumstances the liability of Westcoast to Duke Energy for damages for claims in respect of breaches of this Agreement shall be subject to a maximum limit equal to the liability of Duke Energy to Westcoast for damages for claims in respect of breaches of this Agreement plus the Termination Fee. AMENDED AND RESTATED COMBINATION AGREEMENT 63 ARTICLE 8 GENERAL 8.1 Investigation Any investigation by a party hereto and its advisors shall not mitigate, diminish or affect the representations and warranties of any other party to this Agreement. 8.2 Notices All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally, telecopied (which is confirmed) or dispatched (postage prepaid) to a nationally recognized overnight courier service with overnight delivery instructions, in each case addressed to the particular party at: (a) If to Westcoast, at: 1333 West Georgia Street Vancouver, British Columbia Canada V6E 3K9 Attention: Senior Vice President, Law and Corporate Secretary Telecopier No.: (604) 488-8088 with a copy to: Torys Suite 3000, Maritime Life Tower Toronto-Dominion Centre Toronto, Ontario Canada M5K 1N2 Attention: Peter E.S. Jewett Philip Symmonds Telecopier No.: (416) 865-7380 (b) If to a Duke Energy Party, at: Duke Energy Corporation 422 South Church Street Charlotte, NC 28201-1244 Attention: Martha B. Wyrsch Telecopier No.: (303) 605-1605 AMENDED AND RESTATED COMBINATION AGREEMENT 64 or at such other address of which any party may, from time to time, advise the other parties by notice in writing given in accordance with the foregoing. 8.3 Assignment No party hereto may assign this Agreement or any of its rights, interests or obligations under this Agreement or the Arrangement (whether by operation of law or otherwise) except that Exchangeco may assign in its sole discretion, any or all of its rights, interests and obligations hereunder to any wholly-owned subsidiary of Duke Energy incorporated in Canada. 8.4 Binding Effect Subject to Section 8.3, this Agreement and the Arrangement shall be binding upon, enure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. 8.5 Third-Party Beneficiaries Except for the agreement set forth in Section 5.4, nothing in this Agreement, express or implied, shall be construed to create any third-party beneficiaries. 8.6 Waiver and Modification Westcoast and the Duke Energy Parties may waive or consent to the modification of, in whole or in part, any inaccuracy of any representation or warranty made to them hereunder or in any document to be delivered pursuant hereto and may waive or consent to the modification of any of the covenants or agreements herein contained for their respective benefit or waive or consent to the modification of any of the obligations of the other parties hereto. Any waiver or consent to the modification of any of the provisions of this Agreement, to be effective, must be in writing executed by the party granting such waiver or consent. 8.7 No Personal Liability (a) No director or officer of any Duke Energy Party or any of their respective subsidiaries shall have any personal liability whatsoever to Westcoast under this Agreement, or any other document delivered in connection with the Arrangement on behalf of a Duke Energy Party. (b) No director or officer of Westcoast or any of its subsidiaries shall have any personal liability whatsoever to any Duke Energy Party under this Agreement, or any other document delivered in connection with the Arrangement on behalf of Westcoast. 8.8 Further Assurances Each party hereto shall, from time to time, and at all times hereafter, at the request of the other parties hereto, but without further consideration, do all such further acts and execute AMENDED AND RESTATED COMBINATION AGREEMENT 65 and deliver all such further documents and instruments as shall be reasonably required in order to fully perform and carry out the terms and intent hereof. 8.9 Expenses Subject to Section 7.3, the parties agree that all expenses of the parties relating to this Agreement and the transactions contemplated hereby, including legal fees, accounting fees, financial advisory fees, regulatory filing fees, all disbursements of advisors, and printing and mailing costs, shall be paid by the party incurring such expenses. 8.10 Public Announcements The initial press release concerning the Arrangement shall be a joint press release and thereafter Duke Energy and Westcoast agree to consult with each other prior to issuing any news releases or public statements with respect to this Agreement or the Arrangement, and to use their respective reasonable best efforts not to issue any news releases or public statements inconsistent with the results of such consultations. Subject to applicable Laws, each party shall use its reasonable best efforts to enable the other parties to review and comment on all such news releases prior to the release thereof. The parties agree to issue jointly a news release with respect to this Arrangement as soon as practicable following the execution of this Agreement. Duke Energy and Westcoast also agree to consult with each other in preparing and making any filings and communications in connection with any Appropriate Regulatory Approvals. 8.11 Governing Laws; Consent to Jurisdiction This Agreement shall be governed by and construed in accordance with the Laws of the Province of British Columbia and the Laws of Canada applicable therein and shall be treated in all respects as a British Columbia contract. Each party hereby irrevocably attorns to the jurisdiction of the courts of the Province of British Columbia in respect of all matters arising under or in relation to this Agreement. 8.12 Remedies The parties acknowledge and agree that an award of money damages would be inadequate for any breach of this Agreement by any party or its representatives and any such breach would cause the non-breaching party irreparable harm. Accordingly, the parties hereto agree that, in the event of any breach or threatened breach of this Agreement by one of the parties, the parties will also be entitled, without the requirement of posting a bond or other security, to equitable relief, including injunctive relief and specific performance, provided such party is not in material default hereunder. Such remedies will not be the exclusive remedies for any breach of this Agreement but will be in addition to all other remedies available at law or equity to each of the parties. 8.13 Time of Essence Time shall be of the essence in this Agreement. AMENDED AND RESTATED COMBINATION AGREEMENT 66 8.14 Entire Agreement This Agreement including the disclosure letters, the agreements and other documents referred to herein constitute the entire agreement among the parties hereto and supersede all other prior agreements, understandings, negotiations and discussions, whether oral or written, among the parties hereto with respect to the matters hereof and thereof. 8.15 Severability If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 8.16 Counterparts This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. AMENDED AND RESTATED COMBINATION AGREEMENT 67 IN WITNESS WHEREOF the parties hereto have executed this Agreement on November 5, 2001 effective as of the date first written above. DUKE ENERGY CORPORATION By: /s/ Richard B. Priory --------------------------------------- Name: Richard B. Priory Title: Chairman, President and Chief Executive Officer 3058368 NOVA SCOTIA COMPANY By: /s/ Fred J. Fowler --------------------------------------- Name: Fred J. Fowler Title: President 3946509 CANADA INC. By: /s/ Fred J. Fowler --------------------------------------- Name: Fred J. Fowler Title: President WESTCOAST ENERGY INC. By: /s/ Michael E.J. Phelps --------------------------------------- Name: Michael E.J. Phelps Title: Chairman and Chief Executive Officer By: /s/ Graham M. Wilson --------------------------------------- Name: Graham M. Wilson Title: Executive Vice President and Chief Financial Officer AMENDED AND RESTATED COMBINATION AGREEMENT 68 SCHEDULE A FORM OF AFFILIATE'S LETTER _______________, 2001 Duke Energy Corporation 422 South Church Street Charlotte, North Carolina 28201-1244 Ladies and Gentlemen: The undersigned acknowledges that as of the date hereof the undersigned may be deemed to be an "affiliate" of Westcoast Energy Inc., a corporation existing under the laws of Canada ("Westcoast"), as the term "affiliate" is used in and for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145") promulgated by the Securities and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended (the "Securities Act"), although nothing contained herein shall be construed as an admission by the undersigned that the undersigned is in fact an affiliate of Westcoast. In connection with the arrangement pursuant to Section 192 of the Canada Business Corporations Act, R.S.C. 1995, c. C-44 (the "Arrangement") to be entered pursuant to the terms and subject to the conditions of the Combination Agreement dated as of September 20, 2001 (the "Agreement"), among Westcoast, 3946509 Canada Inc. ("Exchangeco") and Duke Energy Corporation, a North Carolina corporation ("Duke Energy"), (i) all of the shares of Westcoast Common Stock issued and outstanding immediately prior to the time of the effectiveness of the Arrangement (the "Effective Time") will be exchanged for cash, exchangeable shares of Exchangeco ("Exchangeable Shares"), shares of common stock, no par value per share, of Duke Energy ("Duke Energy Common Stock") or some combination of the foregoing, (ii) immediately after the Effective Time, Duke Energy and its affiliates will own all of the issued and outstanding shares of common stock of Westcoast ("Westcoast Common Stock"), (iii) all of the shares of preferred stock of Westcoast ("Westcoast Preferred Stock") issued and outstanding immediately prior to the Effective Time will remain outstanding as shares of Westcoast Preferred Stock, and (iv) unexpired and unexercised options and warrants to purchase Westcoast Common Stock ("Westcoast Options") will become options to purchase Duke Energy Common Stock ("Duke Energy Options"). In, or as a result of, the Arrangement, the undersigned will receive (i) cash, Exchangeable Shares, Duke Energy Common Stock or some combination of the foregoing, in exchange for all of the shares of Westcoast Common Stock owned by the undersigned immediately prior to the Effective Time and/or (ii) Duke Energy Options in exchange for all of the Westcoast Options owned by the undersigned immediately prior to the Effective Time (such Exchangeable Shares, shares of Duke Energy Common Stock, Westcoast Preferred Stock and Westcoast Options collectively referred to herein as "Securities"). The undersigned agrees with Duke Energy not to sell, transfer or otherwise dispose of any Securities issued to the undersigned in the Arrangement unless (i) such sale, transfer or other disposition is made in conformity with the requirements of Rule 145(d) promulgated under the Securities Act, (ii) an authorized representative of the SEC takes a position in writing reasonably acceptable to Duke Energy to the effect that the SEC would take no action, or that the staff of the SEC would not recommend that the SEC take action, with respect to such sale, transfer or other disposition, and a copy of such written position is delivered to Duke Energy, (iii) the undersigned delivers to Duke Energy a written opinion of counsel, reasonably acceptable to Duke Energy in form and substance, that such sale, transfer or other disposition is otherwise exempt from registration under the Securities Act, or (iv) such sale, transfer or disposition occurs after the earlier of (A) the first anniversary of the Effective Time, provided that, at the time of such sale, transfer or other disposition, the undersigned is not an affiliate of Duke Energy, or (B) the date on which the restrictions upon sale, transfer or disposition under Rule 145 are eliminated pursuant to action of the SEC. The undersigned understands that Duke Energy will not be required to file or maintain the effectiveness of any registration statement under the Securities Act for the purpose of resale of Securities held by the undersigned. The undersigned acknowledges and agrees that appropriate restrictive legends will be placed on certificates representing Securities received by the undersigned in the Arrangement or held by a transferee thereof and that "stop transfer" orders may be entered in the records of the transfer agent for Securities with respect to such shares. Such orders will be removed and such legends will be removed by delivery of substitute certificates upon receipt of an opinion in form and substance reasonably satisfactory to Duke Energy from counsel reasonably satisfactory to Duke Energy to the effect that such legends are no longer required to assure compliance with applicable provisions of the Securities Act. The undersigned acknowledges that the undersigned has carefully read this letter and understands the requirements hereof and the limitations imposed upon the distribution, sale, transfer or other disposition of Securities and the receipt by Duke Energy of this letter is an inducement to Duke Energy to consummate the Arrangement. Notwithstanding any other provision contained herein, this letter and all obligations of the undersigned hereunder shall terminate upon the termination of the Agreement in accordance with its terms. Very truly yours, ------------------------------ ------------------------------ ------------------------------ Agreed and accepted this ___ day of ________, 2001 DUKE ENERGY CORPORATION By: --------------------------------- Name: ------------------------------- Title: ------------------------------ SCHEDULE B APPROPRIATE REGULATORY APPROVALS Canada o receipt of an advance ruling certificate ("ARC") pursuant to Section 102 of the Competition Act (Canada) with respect to the transactions contemplated by this Agreement or the expiration of the waiting period under Part IX of the Competition Act (Canada) and receipt of a letter from the Commissioner of Competition stating that he does not, at that time, intend to make an application under Section 92 of the Competition Act (Canada) with respect to the transactions contemplated by this Agreement o determination by the Minister responsible for Investment Canada under the Investment Canada Act that the Arrangement is of "net benefit to Canada" for purposes of such Act on terms and conditions satisfactory to Duke Energy o approval of acquisition by British Columbia Utilities Commission o exemption orders from the provincial or territorial securities regulators from the registration and prospectus requirements with respect to the Exchangeable Share structure o approval of The Toronto Stock Exchange regarding the conditional listing of the Exchangeable Shares United States o expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 o approval of Federal Energy Regulatory Commission o SEC order exempting Westcoast's public utility subsidiaries under Section 3(b) of the 1935 Act o approval of the North Carolina Utilities Commission and The Public Service Commission of South Carolina of Duke Energy's performance of its obligations under this Agreement to the extent required by Law, including the issuance of its stock o effectiveness of the registration statement on Form S-3 regarding the Duke Energy Common Shares o approval of The New York Stock Exchange regarding the listing of the Duke Energy Common Shares subject to official notice of issuance SCHEDULE C FORM OF ARRANGEMENT RESOLUTION BE IT RESOLVED THAT: 1. The arrangement (the "Arrangement") under Section 192 of the Canada Business Corporations Act (the "CBCA") involving Westcoast Energy Inc. ("Westcoast"), as more particularly described and set forth in the management proxy circular (the "Circular") of Westcoast accompanying the notice of this meeting (as the Arrangement may be or may have been modified or amended) is hereby authorized, approved and adopted. 2. The Plan of Arrangement (the "Plan of Arrangement") involving Westcoast, the full text of which is set out as Appendix F to the Circular (as the Plan of Arrangement may be or may have been modified or amended) is hereby authorized, approved and adopted. 3. Notwithstanding that this resolution has been passed (and the Arrangement adopted) by the shareholders and optionholders of Westcoast or that the Arrangement has been approved by the Supreme Court of British Columbia, the directors of Westcoast are hereby authorized and empowered (i) to amend the Amended and Restated Combination Agreement dated as of September 20, 2001 among Duke Energy Corporation, 3058368 Nova Scotia Company, 3946509 Canada Inc. and Westcoast (the "Combination Agreement") or the Plan of Arrangement to the extent permitted thereby, and (ii) not to proceed with the Arrangement without further approval of the shareholders or optionholders of Westcoast, but only if the Combination Agreement is terminated in accordance with Article 7 thereof. 4. Any officer or director of Westcoast is hereby authorized and directed for and on behalf of Westcoast to execute, under the seal of Westcoast or otherwise, and to deliver articles of arrangement and such other documents as are necessary or desirable to the Director under the CBCA in accordance with the Combination Agreement for filing. 5. Any officer or director of Westcoast is hereby authorized and directed for and on behalf of Westcoast to execute or cause to be executed, under the seal of Westcoast or otherwise, and to deliver or cause to be delivered, all such documents, agreements and instruments and to perform or cause to be performed all such other acts and things as in such person's opinion may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such documents, agreements or instruments and the taking of any such actions. SCHEDULE D FORM OF WESTCOAST RIGHTS PLAN WAIVER RESOLUTION BE IT RESOLVED THAT: 1. The supplement to the Shareholder Protection Rights Plan Agreement (the "Rights Plan") dated as of April 26, 2000 between Westcoast Energy Inc. ("Westcoast") and Computershare Trust Company of Canada, as assignee of Montreal Trust Company of Canada, that provides that notwithstanding anything in the Rights Plan to the contrary, the acquisition of common shares of Westcoast pursuant to the Amended and Restated Combination Agreement (the "Combination Agreement") dated as of September 20, 2001 among Duke Energy Corporation, 3058368 Nova Scotia Company, 3946509 Canada Inc. and Westcoast, as such Combination Agreement may be amended or restated from time to time, and any transactions contemplated by the Combination Agreement, shall not constitute a Flip-In Event (as that term is defined in the Rights Plan), is hereby authorized, adopted and approved pursuant to Section 5.4(d) of the Rights Plan. 2. Any officer or director of Westcoast is hereby authorized and directed for and on behalf of Westcoast to execute or cause to be executed, under the seal of Westcoast or otherwise, and to deliver or cause to be delivered, all such other documents, agreements and instruments and to perform or cause to be performed all such other acts and things as in such person's opinion may be necessary or desirable to give full effect to the foregoing resolution and the matters authorized hereby, such determination to be conclusively evidenced by the execution and delivery of any such documents, agreements or instruments and the taking of any such actions. SCHEDULE E FORM OF PLAN OF ARRANGEMENT ARTICLE 1 INTERPRETATION 1.1 Definitions In this Plan of Arrangement, unless there is something in the subject matter or context inconsistent therewith, the following terms shall have the respective meanings set out below (and grammatical variations of such terms shall have corresponding meanings): "affiliate" has the meaning ascribed thereto in the Securities Act, unless otherwise expressly stated herein; "Aggregate Amount of Cash Elected" means the aggregate amount of cash that would be payable to holders of Westcoast Common Shares based upon the elections made pursuant to Section 2.2(a) before giving effect to the proration provisions of Section 2.2(d); "Aggregate Number of Shares Elected" means the aggregate number of Exchangeable Shares and Duke Energy Common Shares that would be issuable to holders of Westcoast Common Shares based upon the elections made pursuant to Section 2.2(a) before giving effect to the proration provisions of Section 2.2(d); "Ancillary Rights" means the interest of a holder of Westcoast Common Shares who elects or is deemed to have elected to receive Exchangeable Shares as a beneficiary of the trust created under the Voting and Exchange Trust Agreement; "Arrangement" means the arrangement under section 192 of the CBCA on the terms and subject to the conditions set out in this Plan of Arrangement, subject to any amendments or variations thereto made in accordance with Section 7.1 of the Combination Agreement or Article 6 or made at the direction of the Court in the Final Order; "Arrangement Resolution" means the special resolution of the Westcoast Securityholders, to be substantially in the form and content of Schedule C annexed to the Combination Agreement; "Articles of Arrangement" means the articles of arrangement of Westcoast in respect of the Arrangement that are required by the CBCA to be filed with the Director after the Final Order is made; "Business Day" means any day on which commercial banks are generally open for business in New York, New York and Vancouver, British Columbia, other than a Saturday, a Sunday or a day observed as a holiday in New York, New York under the -1- PLAN OF ARRANGEMENT laws of the State of New York or the federal laws of the United States of America or in Vancouver, British Columbia under the laws of the Province of British Columbia or the federal laws of Canada; "Callco" means 3058368 Nova Scotia Company, an unlimited liability company existing under the laws of the Province of Nova Scotia being an indirect wholly-owned subsidiary of Duke Energy; "Canadian Dollar Equivalent" means, in respect of an amount expressed in a currency other than Canadian dollars (the "Foreign Currency Amount") at any date, the product obtained by multiplying: (a) the Foreign Currency Amount, by (b) the noon spot rate of exchange on such date for such foreign currency expressed in Canadian dollars as reported by The Bank of Canada or, in the event such spot rate of exchange is not available, such spot rate of exchange on such date for such foreign currency expressed in Canadian dollars as may be deemed by the Board of Directors of Duke Energy to be appropriate for such purpose (the "Currency Exchange Rate"); "Canadian Resident" means a resident of Canada for purposes of the ITA; "Cash Available" means the Maximum Cash Consideration less the product of (a) the number of Westcoast Common Shares held by Dissenting Shareholders as of the Effective Time, if any and (b) Cdn$43.80; "Cash Election" has the meaning ascribed thereto in Section 2.2(a); "CBCA" means the Canada Business Corporations Act, as amended from time to time prior to the Effective Date; "CCRA" means Canada Customs and Revenue Agency; "Certificate" means the certificate of arrangement giving effect to the Arrangement, issued by the Director pursuant to subsection 192(7) of the CBCA after the Articles of Arrangement have been filed with the Director; "Circular" means the notice of the Westcoast Meeting and accompanying management proxy circular, including all appendices thereto and the accompanying CD-ROM, to be sent to Westcoast Securityholders in connection with the Westcoast Meeting; "Combination Agreement" means the amended and restated agreement made as of the 20th day of September, 2001 among Duke Energy, Callco, Exchangeco and Westcoast, as amended, supplemented and/or restated in accordance therewith prior to the Effective Date, providing for, among other things, the Arrangement; "Court" means the Supreme Court of British Columbia; -2- PLAN OF ARRANGEMENT "Depositary" means Computershare Trust Company of Canada at its offices set out in the Letter of Transmittal and Election Form; "Director" means the Director appointed pursuant to section 260 of the CBCA; "Dissent Rights" has the meaning ascribed thereto in Section 3.1; "Dissenting Shareholder" means a holder of Westcoast Common Shares who dissents in respect of the Arrangement in strict compliance with the Dissent Rights; "Distribution Date" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Drop Dead Date" means the twelve month anniversary of the date of the Combination Agreement, or such other date as may be agreed by the parties to the Combination Agreement; "Duke Energy" means Duke Energy Corporation, a corporation existing under the laws of the State of North Carolina; "Duke Energy Average Price" means 1.54 multiplied by the Weighted Average Trading Price of Duke Energy Common Shares, with such product being expressed to the fourth decimal point. The "Weighted Average Trading Price of Duke Energy Common Shares" shall be an amount determined by dividing the aggregate sale price of all Duke Energy Common Shares sold on the NYSE during the period of 20 consecutive trading days ending on the day that is two Business Days prior to the Effective Date by the total number of Duke Energy Common Shares sold on the NYSE during such period (as reported by Bloomberg) expressed to the fourth decimal point; "Duke Energy Common Shares" means the shares of common stock, no par value per share, in the capital of Duke Energy and any other securities into which such shares may be changed; "Duke Energy Control Transaction" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Effective Date" means the date shown on the Certificate, provided that such date occurs on or prior to the Drop Dead Date; "Effective Time" means 12:01 a.m. (Vancouver time) on the Effective Date; "elected" means elected in a duly completed Letter of Transmittal and Election Form deposited with the Depositary no later than the Election Deadline and, except where the term "election" is used with respect to elections and election forms under the ITA and provincial tax law, "elects" and "election" shall have corresponding meanings; "Election Date" has the meaning ascribed thereto in Section 2.3(a); -3- PLAN OF ARRANGEMENT "Election Deadline" means 4:30 p.m. (local time) at the place of deposit on the Election Date; "Exchangeco" means 3946509 Canada Inc., a corporation existing under the laws of Canada and being a direct subsidiary of Callco; "Exchange Ratio" means, subject to adjustment, if any, as provided in Section 2.4, the number, calculated to four decimal places, equal to Cdn$43.80 divided by the Duke Energy Average Price; provided that if the Weighted Average Trading Price of Duke Energy Common Shares is equal to or less than $36.88, the Exchange Ratio shall be 0.7711 and further, provided that if the Weighted Average Trading Price of Duke Energy Common Shares is equal to or greater than $46.48 the Exchange Ratio shall be 0.6119; "Exchangeable Share Consideration" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Exchangeable Share Price" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Exchangeable Share Provisions" means the rights, privileges, restrictions and conditions attaching to the Exchangeable Shares, which rights, privileges, restrictions and conditions shall be substantially as set out in Appendix 1 hereto; "Exchangeable Shares" means the non-voting exchangeable shares in the capital of Exchangeco, having the rights, privileges, restrictions and conditions set out in the Exchangeable Share Provisions; "Final Order" means the final order of the Court approving the Arrangement as such order may be amended by the Court at any time prior to the Effective Date or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed; "First Preferred Shares" means the first preferred shares in the capital of Westcoast, including each series thereof designated and outstanding; "Governmental Entity" means any (a) multinational, federal, provincial, territorial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign, (b) subdivision, agent, commission, board, or authority of any of the foregoing, or (c) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing; "holders" means, when used with reference to the Westcoast Common Shares, the holders of Westcoast Common Shares shown from time to time in the register maintained by or on behalf of Westcoast in respect of the Westcoast Common Shares and, when used with reference to the Exchangeable Shares, the holders of Exchangeable Shares shown from time to time in the register maintained by or on behalf of Exchangeco in respect of the Exchangeable Shares and, when used with reference to the Westcoast Options, the Persons to whom such options were issued; -4- PLAN OF ARRANGEMENT "Initial Election Date" has the meaning ascribed thereto in Section 2.3(a); "Interim Order" means the interim order of the Court, as the same may be amended, in respect of the Arrangement, as contemplated by Section 2.3 of the Combination Agreement; "ITA" means the Income Tax Act (Canada), as amended; "Letter of Transmittal and Election Form" means the letter of transmittal and election form provided for use by holders of Westcoast Common Shares, to be sent to holders of Westcoast Common Shares as described in Section 2.3 hereof, together with notice of the Election Deadline, in order that holders of Westcoast Common Shares may make the elections described in Section 2.3; "Liquidation Amount" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Liquidation Call Purchase Price" has the meaning ascribed thereto in Section 5.1(a); "Liquidation Call Right" has the meaning ascribed thereto in Section 5.1(a); "Liquidation Date" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Maximum Cash Consideration" means the amount equal to Cdn$21.90 times the aggregate number of Westcoast Common Shares immediately prior to the Effective Time (other than Westcoast Common Shares held by Duke Energy or any affiliate thereof); "Maximum Number of Duke Energy Common Shares" means the number equal to the number of Shares Available multiplied by the aggregate number of Duke Energy Common Shares that would be issuable to holders of Westcoast Common Shares based upon the elections made pursuant to Section 2.2(a) before giving effect to the proration provisions of Section 2.2(d), divided by the Aggregate Number of Shares Elected; "Maximum Number of Exchangeable Shares" means the number equal to the number of Shares Available multiplied by the aggregate number of Exchangeable Shares that would be issuable to holders of Westcoast Common Shares based upon the elections made pursuant to Section 2.2(a) before giving effect to the proration provisions of Section 2.2(d), divided by the Aggregate Number of Shares Elected; "Mixed Election" has the meaning ascribed thereto in Section 2.2(a); "Non-Election Cash Amount" has the meaning ascribed thereto in Section 2.2(b); "Non-Election Shares" has the meaning ascribed thereto in Section 2.2(b); "NYSE" means The New York Stock Exchange, Inc.; -5- PLAN OF ARRANGEMENT "Person" includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status; "Redemption Call Purchase Price" has the meaning ascribed thereto in Section 5.2(a); "Redemption Call Right" has the meaning ascribed thereto in Section 5.2(a); "Redemption Date" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Redemption Price" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Replacement Option" has the meaning ascribed thereto in Section 2.2(f); "Securities Act" means the Securities Act (Ontario) and the rules, regulations and policies made thereunder, as now in effect and as they may be amended from time to time prior to the Effective Date; "Shares Available" means the product, rounded down to the nearest whole number, of the Exchange Ratio multiplied by the aggregate number of Westcoast Common Shares immediately prior to the Effective Time (other than Westcoast Common Shares held by Duke Energy or any affiliate thereof), divided by 2; "Transfer Agent" has the meaning ascribed thereto in Section 5.1(b); "Trustee" means the trustee to be chosen by Duke Energy and Westcoast, acting reasonably, to act as trustee under the Voting and Exchange Trust Agreement, being a corporation organized and existing under the laws of the State of New York or the State of Delaware, and any successor trustee appointed under the Voting and Exchange Trust Agreement; "Voting and Exchange Trust Agreement" means an agreement to be made between Duke Energy, Exchangeco and the Trustee in connection with the Plan of Arrangement substantially in the form of Schedule G annexed to the Combination Agreement, with such changes thereto as the parties to the Combination Agreement, acting reasonably, may agree; "Westcoast" means Westcoast Energy Inc., a corporation existing under the laws of Canada; "Westcoast Common Shares" means the issued and outstanding common shares in the capital of Westcoast immediately prior to the Effective Time; -6- PLAN OF ARRANGEMENT "Westcoast Meeting" means the special meeting of Westcoast Securityholders, including any adjournment, adjournments, postponement or postponements thereof, to be called and held in accordance with the Interim Order to consider the Arrangement and the Westcoast Rights Plan Waiver Resolution; "Westcoast Options" means all Westcoast Common Share purchase options granted under the Westcoast Stock Option Plans; "Westcoast Rights Plan Waiver Resolution" means the ordinary resolution of the holders of Westcoast Common Shares to be substantially in the form and content of Schedule D annexed to the Combination Agreement; "Westcoast Securityholders" means the holders of Westcoast Common Shares and the holders of Westcoast Options, collectively; "Westcoast Stock Option Plans" means Westcoast's Long-Term Incentive Share Option Plan 1989 as amended effective April 26, 2000 and Westcoast's 1999 Key Employee Plan; 1.2 Interpretations Not Affected by Headings The division of this Plan of Arrangement into articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an "Article" or "Section" followed by a number refer to the specified Article or Section of this Plan of Arrangement. The terms "this Plan of Arrangement," "hereof," "herein" and "hereunder" and similar expressions refer to this Plan of Arrangement and not to any particular Article, Section or other portion hereof. 1.3 Rules of Construction Unless otherwise specifically indicated or the context otherwise requires, (a) all references to "dollars" or "$" mean United States dollars, (b) words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders, and (c) "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." 1.4 Date For Any Action In the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day. -7- PLAN OF ARRANGEMENT ARTICLE 2 ARRANGEMENT 2.1 Binding Effect This Plan of Arrangement will become effective at, and be binding at and after, the Effective Time on (i) Westcoast, (ii) Duke Energy, Callco and Exchangeco, (iii) all holders and all beneficial owners of Westcoast Common Shares, (iv) all holders and all beneficial owners of Exchangeable Shares, and (v) all holders and all beneficial owners of Westcoast Options. 2.2 Arrangement Commencing at the Effective Time, the following shall occur and shall be deemed to occur without any further act or formality: (a) Subject to the proration adjustments set forth in Section 2.2(d), each Westcoast Common Share that is not held by (i) a Dissenting Shareholder who is ultimately entitled to be paid the fair value of the Westcoast Common Shares held by such Dissenting Shareholder or (ii) Duke Energy or any affiliate thereof (which shall not be exchanged under the Arrangement and shall remain outstanding as a Westcoast Common Share held by Duke Energy or any affiliate thereof), will be transferred to, and acquired by, Exchangeco, without any act or formality on the part of the holder of such Westcoast Common Share or Exchangeco, free and clear of all liens, claims and encumbrances in exchange for, at the holder's election (or deemed election), (w) Cdn$43.80 in cash without interest (a "Cash Election"); or (x) a fraction of a fully paid and non-assessable Exchangeable Share (and the Ancillary Rights) as is equal to the Exchange Ratio; or (y) a fraction of a fully paid and non-assessable Duke Energy Common Share as is equal to the Exchange Ratio; or (z) a combination of the foregoing, with the aggregate value of the cash portion to be less than Cdn$43.80 and the total number of Exchangeable Shares and/or Duke Energy Common Shares (if any) determined in accordance with Section 2.2(d) (a "Mixed Election"), payable, in each case, in accordance with Article 4, and the name of each such holder of Westcoast Common Shares will be removed from the register of holders of Westcoast Common Shares and added to the register of holders of the Exchangeable Shares or Duke Energy Common Shares, as the case may be, if any, comprising all or part of the consideration to be received by such holder for such transfer, and Exchangeco will be recorded as the registered holder of such Westcoast Common Shares so exchanged and will be deemed to be the legal and beneficial owner thereof; provided, however, that holders of Westcoast Common Shares who are not Canadian Residents will not be entitled to elect or be deemed to have elected to receive Exchangeable Shares (and the Ancillary Rights), and any such election or deemed election otherwise made by any such holder shall be deemed to be an election to receive Duke Energy Common Shares. (b) After application of the proration provisions in Section 2.2(d) to all Westcoast Common Shares in respect of which an election has been made by the holder thereof in accordance with Section 2.2(a), each Westcoast Common Share in respect of which no election has been made by the holder thereof, or in respect of which an effective election has not been made (other than Westcoast Common Shares held by (i) a Dissenting Shareholder -8- PLAN OF ARRANGEMENT who is ultimately entitled to be paid the fair value of the Westcoast Common Shares held by such Dissenting Shareholder and (ii) Duke Energy or any affiliate thereof (which shall not be exchanged under the Arrangement and shall remain outstanding as a Westcoast Common Share held by Duke Energy or any affiliate thereof)) ("Non-Election Shares") will be transferred to, and acquired by, Exchangeco, without any act or formality on the part of the holder of such Westcoast Common Share or Exchangeco, free and clear of all liens, claims and encumbrances, and the holder shall be deemed to have elected to receive in exchange therefor (x) if the Aggregate Amount of Cash Elected equals or exceeds the Cash Available, such number of fully paid and non-assessable Exchangeable Shares (and the Ancillary Rights) if such holder is a Canadian Resident (or such number of fully paid and non-assessable Duke Energy Common Shares if such holder is not a Canadian Resident) as is equal to the Exchange Ratio, (y) if the Aggregate Number of Shares Elected equals or exceeds the Shares Available, Cdn$43.80 in cash, without interest, or (z) if neither Clause (x) or (y) is applicable, (1) an amount of cash, without interest, equal to (A) the Cash Available minus the Aggregate Amount of Cash Elected divided by (B) the number of outstanding Non-Election Shares (the "Non-Election Cash Amount") and (2) the number of Exchangeable Shares (and the Ancillary Rights) if such holder is a Canadian Resident (or the number of Duke Energy Common Shares if such holder is not a Canadian Resident) as is equal to (A) the Exchange Ratio multiplied by (B) a fraction the numerator of which is Cdn$43.80 minus the Non-Election Cash Amount and the denominator of which is Cdn$43.80, in all such cases payable in accordance with Article 4, and the name of each such holder of Westcoast Common Shares will be removed from the register of holders of Westcoast Common Shares and added to the register of holders of the Exchangeable Shares or Duke Energy Common Shares, as the case may be, if any, comprising all or part of the consideration to be received by such holder for such transfer, and Exchangeco will be recorded as the registered holder of such Westcoast Common Shares so exchanged and will be deemed to be the legal and beneficial owner of such Westcoast Common Shares. (c) For greater certainty, a pro rata portion of the total number of Exchangeable Shares, the total amount of cash, and the total number of Duke Energy Common Shares received under the Arrangement by any particular holder will be allocated to every Westcoast Common Share held by that holder at the Effective Time, so that such holder will receive for each Westcoast Common Share held by the holder at the Effective Time the same combination of Exchangeable Shares, cash and/or Duke Energy Common Shares as is received for every other Westcoast Common Share held by that holder at the Effective Time. Notwithstanding any provisions of this Plan of Arrangement, of the aggregate consideration to be received by the holders of Westcoast Common Shares pursuant to the Arrangement, 50% will consist of cash and 50% will consist of Exchangeable Shares and/or Duke Energy Common Shares. (i) The consideration which each holder of Westcoast Common Shares has elected in accordance with Section 2.2(a) to receive in exchange for such holder's Westcoast Common Shares shall be subject to adjustment and proration on the following bases: (ii) if the Aggregate Amount of Cash Elected exceeds the Cash Available, then the amount of cash payable under the Arrangement to each holder of Westcoast Common Shares who has made a Cash Election or a Mixed Election shall be prorated (based on the fraction equal to the Cash Available divided by the Aggregate Amount of Cash Elected) -9- PLAN OF ARRANGEMENT among all such holders of Westcoast Common Shares who made a Cash Election or a Mixed Election so that the aggregate amount of cash payable to all such holders of Westcoast Common Shares who made a Cash Election or a Mixed Election shall be equal to the Cash Available and each such holder of Westcoast Common Shares who made a Cash Election or a Mixed Election shall be entitled to receive cash equal to the amount of cash payable to such holder of Westcoast Common Shares after giving effect to the proration provisions of this Section 2.2(d)(i) and (x) if such holder of Westcoast Common Shares has made a further election to receive Exchangeable Shares or Duke Energy Common Shares in such event, then such holder shall be deemed to have elected to receive the number of Exchangeable Shares per Westcoast Common Share equal to the Exchange Ratio or the number of Duke Energy Common Shares per Westcoast Common Share equal to the Exchange Ratio, as the case may be, in respect of the balance of such holder's Westcoast Common Shares in respect of which cash was elected but not available, or (y) if such holder shall not have made a valid further election to receive Exchangeable Shares or Duke Energy Common Shares, (A) if such holder is a Canadian Resident, such holder shall be deemed to have elected to receive the number of Exchangeable Shares per Westcoast Common Share equal to the Exchange Ratio in respect of the balance of such holder's Westcoast Common Shares in respect of which cash was elected but not available and (B) if such holder is not a Canadian Resident, such holder shall be deemed to have elected to receive the number of Duke Energy Common Shares per Westcoast Common Share equal to the Exchange Ratio in respect of the balance of such holder's Westcoast Common Shares in respect of which cash was elected but not available; and (iii) if the Aggregate Number of Shares Elected exceeds the Shares Available, then (x) the number of Exchangeable Shares issuable under the Arrangement to each holder of Westcoast Common Shares who has elected to receive all or part of the consideration for such holder's Westcoast Common Shares in the form of Exchangeable Shares shall be prorated (based on the fraction equal to the Maximum Number of Exchangeable Shares divided by the aggregate number of Exchangeable Shares that would be issuable to holders of Westcoast Common Shares based upon the elections made pursuant to Section 2.2(a) before giving effect to the proration provisions of this Section 2.2(d)) among all holders who have elected to receive all or part of the consideration for their Westcoast Common Shares in the form of Exchangeable Shares so that the number of Exchangeable Shares issuable to all holders who have elected to receive all or part of the consideration for their Westcoast Common Shares in the form of Exchangeable Shares under the Arrangement shall be equal to the Maximum Number of Exchangeable Shares and each such holder shall be entitled to receive that number of Exchangeable Shares that is equal to the number of Exchangeable Shares issuable to such holder, after giving effect to the proration provisions of this Section 2.2(d)(ii)(x), and an amount of cash, without interest, equal to (A) the difference between the number of Exchangeable Shares such holder elected to receive pursuant to Section 2.2(a) and the number of Exchangeable Shares such holder will be entitled to receive after giving effect to the proration provisions of this Section 2.2(d)(ii)(x), divided by (B) the Exchange Ratio, and multiplied by (C) Cdn$43.80; and (y) the number of Duke Energy Common Shares issuable under the Arrangement to each holder of Westcoast Common Shares who has elected (or is deemed to have elected) to receive all or part of the consideration for such holder's Westcoast Common Shares, as the case may be, in the form of Duke Energy Common Shares shall be prorated (based on the fraction equal to the Maximum Number of -10- PLAN OF ARRANGEMENT Duke Energy Common Shares divided by the aggregate number of Duke Energy Common Shares that would be issuable to holders of Westcoast Common Shares based upon the elections made pursuant to Section 2.2(a) before giving effect to the proration provisions of this Section 2.2(d)) among all holders who have elected to receive all or part of the consideration for their Westcoast Common Shares in the form of Duke Energy Common Shares so that the number of Duke Energy Common Shares issuable to all holders who have elected to receive all or part of the consideration for their Westcoast Common Shares in the form of Duke Energy Common Shares under the Arrangement shall be equal to the Maximum Number of Duke Energy Common Shares and each such holder shall be entitled to receive that number of Duke Energy Common Shares that is equal to the number of Duke Energy Common Shares issuable to such holder, after giving effect to the proration provisions of this Section 2.2(d)(ii)(y), and an amount of cash, without interest, equal to (A) the difference between the number of Duke Energy Common Shares such holder elected (or is deemed to have elected) to receive pursuant to Section 2.2(a) and the number of Duke Energy Common Shares such holder will be entitled to receive after giving effect to the proration provisions of this Section 2.2(d)(ii)(y), divided by (B) the Exchange Ratio, and multiplied by (C) Cdn$43.80. (d) Each of the outstanding First Preferred Shares shall remain outstanding in accordance with its terms. (e) Each Westcoast Option that has not been duly exercised prior to the Effective Time shall be exchanged for or converted into an option (a "Replacement Option") to purchase that number of Duke Energy Common Shares equal to the number of Westcoast Common Shares subject to such Westcoast Option multiplied by the Exchange Ratio. Such Replacement Option shall provide for an exercise price per Duke Energy Common Share equal to (x) the exercise price per Westcoast Common Share of such Westcoast Option immediately prior to the Effective Time divided by the Exchange Ratio, divided by (y) the Currency Exchange Rate for United States dollars on the Effective Date, provided that in no circumstance shall the exercise price per Duke Energy Common Share be less than $.01 and if the calculation results in an exercise price less than $.01, the exercise price shall be deemed to be $.01 per Duke Energy Common Share. If the foregoing calculation results in a Replacement Option being exercisable for a fraction of a Duke Energy Common Share, then the number of Duke Energy Common Shares subject to such Replacement Option shall be rounded down to the next whole number of Duke Energy Common Shares and the total exercise price for the Replacement Option shall be reduced by the exercise price of the fractional Duke Energy Common Share, provided that in no circumstance shall the exercise price per Duke Energy Common Share be less than $.01 and if the calculation results in an exercise price less than $.01, the exercise price shall be deemed to be $.01 per Duke Energy Common Share. The term to expiry, conditions to and manner of exercising, vesting schedule and all other terms and conditions of such Replacement Option will be the same as the terms and conditions of such Westcoast Option (except for the provisions precluding such options from being exercised for less than 100 Westcoast Common Shares at one time or requiring that options be exercised only in blocks of 100 Westcoast Common Shares or multiples thereof), and any document or agreement previously evidencing such Westcoast Option shall thereafter evidence and be deemed to evidence such Replacement Options. Notwithstanding the foregoing, the holder of a Westcoast Option may, at his or her sole option, notify Duke Energy in writing on or before the -11- PLAN OF ARRANGEMENT Effective Time that he or she wishes to increase the exercise price per Duke Energy Common Share for his or her Replacement Option in the event that the value of such Replacement Option immediately after the Effective Time (measured as the difference between the closing price of the Duke Energy Common Shares on the NYSE on the Effective Date and the exercise price for such shares pursuant to such Replacement Option) exceeds the value of the Westcoast Option immediately before the Effective Time (measured as (x) the difference between the closing price of the Westcoast Common Shares underlying such Westcoast Option on The Toronto Stock Exchange on the trading day immediately preceding the Effective Date and the exercise price for such shares pursuant to such Westcoast Option, divided by (y) the Currency Exchange Rate for United States dollars on the Effective Date) to the amount necessary to make the value of such Replacement Option immediately after the Effective Time equal to the value of such Westcoast Option immediately before the Effective Time and in the event such notice is given, the exercise price per Duke Energy Common Share under such Replacement Option shall be deemed to be equal to such amount; provided that in no circumstances shall the exercise price per Duke Energy Common Share be less than $.01. 2.3 Elections (a) The initial election date (the "Initial Election Date") shall be February 28, 2002, unless otherwise agreed in writing by Duke Energy and Westcoast. If, after the Letter of Transmittal and Election Form has been mailed, Westcoast and Duke Energy determine that the Effective Date is not reasonably likely to occur by the tenth Business Day after the Initial Election Date, then the date by which Letters of Transmittal and Election Forms must be received shall be extended to a date which the parties expect to be not more than 10 Business Days before the Effective Date. In the event that the date by which Letters of Transmittal and Election Forms must be received is extended, Westcoast shall provide at least 5 days notice of the new Election Date (and shall provide such notice prior to the Initial Election Date if practicable) to holders of Westcoast Common Shares by means of publication, at least once, in The Globe and Mail; national edition, or any other English language daily newspaper of general circulation in Canada and in a French language daily newspaper of general circulation in the Province of Quebec. Any duly completed Letter of Transmittal and Election Form deposited by the Election Deadline on the Initial Election Date shall not be required to be re-deposited if the date by which Letters of Transmittal and Election Forms must be received is extended pursuant hereto. The Initial Election Date, as extended and published pursuant to the terms hereof, shall be the "Election Date." (b) The Letter of Transmittal and Election Form shall be sent not less than 21 days prior to the Initial Election Date to each holder of record of Westcoast Common Shares. (c) Each Person who, at or prior to the Election Deadline, is a holder of record of Westcoast Common Shares will be entitled, with respect to all or a portion of their shares, to make an election at or prior to the Election Deadline to receive (i) cash, (ii) Exchangeable Shares (and the Ancillary Rights), (iii) Duke Energy Common Shares, or (iv) a combination thereof, in exchange for such holder's Westcoast Common Shares on the basis set forth herein and in the Letter of Transmittal and Election Form; provided that, notwithstanding anything to the contrary herein, a holder of Westcoast Common Shares who is not a Canadian Resident will not be entitled to elect to receive Exchangeable Shares (and the Ancillary Rights) and any -12- PLAN OF ARRANGEMENT such election otherwise made by any such holder shall be and be deemed to be an election to receive Duke Energy Common Shares. (d) Holders of Westcoast Common Shares who are Canadian Residents, other than any such holder who is exempt from tax under the ITA, and who have elected (or who are deemed to have elected) to receive Exchangeable Shares (and the Ancillary Rights) shall be entitled to make an income tax election pursuant to subsection 85(1) of the ITA or, if the holder is a partnership, subsection 85(2) of the ITA (and in each case, where applicable, the analogous provisions of provincial income tax law) with respect to the transfer of their Westcoast Common Shares to Exchangeco by providing two signed copies of the necessary prescribed election forms to the Depositary within 90 days following the Effective Date, duly completed with the details of the number of Westcoast Common Shares transferred and the applicable agreed amounts for the purposes of such elections. Thereafter, subject to the election forms being correct and complete and complying with the provisions of the ITA (or any applicable provincial income tax law), the forms will be signed by Exchangeco and returned to such holders of Westcoast Common Shares within 30 days after the receipt thereof by the Depositary for filing with CCRA (or the applicable provincial taxing authority). Exchangeco will not be responsible for the proper completion of any election form and, except for Exchangeco's obligation to return duly completed election forms which are received by the Depositary within 90 days following the Effective Date, within 30 days after the receipt thereof by the Depositary, Exchangeco will not be responsible for any taxes, interest, penalties or any other costs or damages resulting from the failure by a holder of Westcoast Common Shares to properly complete or file the election forms in the form and manner and within the time prescribed by the ITA (or any applicable provincial income tax law). In its sole discretion, Exchangeco may choose to sign and return an election form received more than 90 days following the Effective Date, but Exchangeco will have no obligation to do so. 2.4 Adjustments to Exchange Ratio The Exchange Ratio, including the minimum and maximum Exchange Ratio used in the calculation thereof, shall be proportionately and appropriately adjusted to reflect fully the effect of (a) any stock split, reverse split, stock dividend (including any dividend or distribution of securities convertible into Duke Energy Common Shares or Westcoast Common Shares), reorganization, recapitalization or other like change with respect to Duke Energy Common Shares or Westcoast Common Shares and (b) any extraordinary dividend or distribution with respect to Duke Energy Common Shares (other than a dividend or distribution referenced in clause (a)), but only if the Weighted Average Trading Price of Duke Energy Common Shares is less than $36.88 as of the Effective Date, in each case of clause (a) or (b) the record date for which occurs after the date of the Combination Agreement and prior to the Effective Time. Regular quarterly cash dividends and increases therein shall not be considered extraordinary for purposes of the preceding sentence. -13- PLAN OF ARRANGEMENT ARTICLE 3 RIGHTS OF DISSENT 3.1 Rights of Dissent Holders of Westcoast Common Shares may exercise rights of dissent with respect to such Westcoast Common Shares pursuant to and in the manner set forth in section 190 of the CBCA as modified by the Interim Order and this Section 3.1 (the "Dissent Rights") in connection with the Arrangement. Holders of Westcoast Common Shares who duly exercise such rights of dissent and who: (a) are ultimately determined to be entitled to be paid fair value for their Westcoast Common Shares shall be deemed to have transferred such Westcoast Common Shares as of the Effective Time, without any further act or formality and free and clear of all liens, claims and encumbrances, to Exchangeco, in consideration for a payment of cash from Exchangeco equal to such fair value; or (b) are ultimately determined not to be entitled, for any reason, to be paid fair value for their Westcoast Common Shares, shall be deemed to have participated in the Arrangement, as of the Effective Time, on the same basis as a non-dissenting holder of Westcoast Common Shares who did not make an election and shall receive cash, Exchangeable Shares or Duke Energy Common Shares on the same basis as holders of Non-Election Shares, but in no case shall Duke Energy, Exchangeco, Callco, Westcoast or any other Person be required to recognize any Dissenting Shareholder as a holder of Westcoast Common Shares after the Effective Time, and the names of each Dissenting Shareholder shall be deleted from the register of holders of Westcoast Common Shares at the Effective Time. ARTICLE 4 CERTIFICATES AND FRACTIONAL SHARES 4.1 Payment of Cash At or promptly after the Effective Time, Exchangeco shall deposit with the Depositary, for the benefit of the holders of Westcoast Common Shares who will receive cash in connection with the Arrangement, cash in the amount of the Cash Available. Upon surrender to the Depositary for transfer to Exchangeco of a certificate which immediately prior to or upon the Effective Time represented Westcoast Common Shares in respect of which the holder is entitled to receive cash under the Arrangement, together with a duly completed Letter of Transmittal and Election Form, and such other documents and instruments as would have been required to effect the transfer of the shares formerly represented by such certificate under the CBCA and the by-laws of Westcoast and such additional documents and instruments as the Depositary may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and after the Effective Time the Depositary shall deliver to such holder the amount of cash such holder is entitled to receive under the Arrangement (together with any unpaid dividends or distributions declared on the Westcoast Common Shares, if any, prior to the -14- PLAN OF ARRANGEMENT Effective Time), and any certificate so surrendered shall forthwith be transferred to Exchangeco. In the event of a transfer of ownership of such Westcoast Common Shares that was not registered in the securities register of Westcoast, the amount of cash payable for such Westcoast Common Shares under the Arrangement may be delivered to the transferee if the certificate representing such Westcoast Common Shares is presented to the Depositary as provided above, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 4.1, each certificate which immediately prior to or upon the Effective Time represented one or more outstanding Westcoast Common Shares that, under the Arrangement, were exchanged or were deemed to be exchanged for cash pursuant to Section 2.2 shall be deemed at all times after the Effective Time to represent only the right to receive upon such surrender the cash payment contemplated by this Section 4.1. 4.2 Issuance of Certificates Representing Exchangeable Shares At or promptly after the Effective Time, Exchangeco shall deposit with the Depositary, for the benefit of the holders of Westcoast Common Shares who will receive Exchangeable Shares (and the Ancillary Rights) in connection with the Arrangement, certificates representing the Maximum Number of Exchangeable Shares. Upon surrender to the Depositary for transfer to Exchangeco of a certificate which immediately prior to or upon the Effective Time represented Westcoast Common Shares in respect of which the holder is entitled to receive Exchangeable Shares under the Arrangement, together with a duly completed Letter of Transmittal and Election Form and such other documents and instruments as would have been required to effect the transfer of the shares formerly represented by such certificate under the CBCA and the by-laws of Westcoast and such additional documents and instruments as the Depositary may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and after the Effective Time the Depositary shall deliver to such holder, a certificate representing that number (rounded down to the nearest whole number) of Exchangeable Shares which such holder has the right to receive (together with any unpaid dividends or distributions declared on the Westcoast Common Shares prior to the Effective Time) and any certificate so surrendered shall forthwith be transferred to Exchangeco. No interest shall be paid or accrued on the cash in lieu of fractional shares, if any, or on unpaid dividends and distributions, if any, payable to holders of certificates that formerly represented Westcoast Common Shares. In the event of a transfer of ownership of Westcoast Common Shares that was not registered in the securities register of Westcoast, a certificate representing the proper number of Exchangeable Shares (together with any unpaid dividends or distributions declared on the Westcoast Common Shares prior to the Effective Time) may be issued to the transferee if the certificate representing such Westcoast Common Shares is presented to the Depositary as provided above, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 4.2, each certificate which immediately prior to or upon the Effective Time represented one or more Westcoast Common Shares that, under the Arrangement, were exchanged or were deemed to be exchanged for Exchangeable Shares pursuant to Section 2.2 shall be deemed at all times after the Effective Time, but subject to Section 4.5, to represent only the right to receive upon such surrender a certificate representing that number (rounded down to the nearest whole number) of Exchangeable Shares (together with any unpaid dividends or distributions declared -15- PLAN OF ARRANGEMENT on the Westcoast Common Shares prior to the Effective Time) which such holder has the right to receive. 4.3 Issuance of Certificates Representing Duke Energy Common Shares At or promptly after the Effective Time, Exchangeco shall deposit with the Depositary, for the benefit of the holders of Westcoast Common Shares who will receive Duke Energy Common Shares in connection with the Arrangement, certificates representing the Maximum Number of Duke Energy Common Shares. Upon surrender to the Depositary for transfer to Exchangeco of a certificate which immediately prior to or upon the Effective Time represented Westcoast Common Shares in respect of which the holder is entitled to receive Duke Energy Common Shares under the Arrangement, together with a duly completed Letter of Transmittal and Election Form and such other documents and instruments as would have been required to effect the transfer of the shares formerly represented by such certificate under the CBCA and the by-laws of Westcoast and such additional documents and instruments as the Depositary may reasonably require, the holder of such surrendered certificate shall be entitled to receive in exchange therefor, and after the Effective Time the Depositary shall deliver to such holder, a certificate representing that number (rounded down to the nearest whole number) of Duke Energy Common Shares which such holder has the right to receive (together with any unpaid dividends or distributions declared on the Westcoast Common Shares prior to the Effective Time) and any certificate so surrendered shall forthwith be transferred to Exchangeco. No interest shall be paid or accrued on the cash in lieu of fractional shares, if any, or on unpaid dividends and distributions, if any, payable to holders of certificates that formerly represented Westcoast Common Shares. In the event of a transfer of ownership of Westcoast Common Shares that was not registered in the securities register of Westcoast, a certificate representing the proper number of Duke Energy Common Shares (together with any unpaid dividends or distributions declared on the Westcoast Common Shares prior to the Effective Time) may be issued to the transferee if the certificate representing such Westcoast Common Shares is presented to the Depositary as provided above, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid. Until surrendered as contemplated by this Section 4.3, each certificate which immediately prior to or upon the Effective Time represented one or more Westcoast Common Shares, under the Arrangement, that were exchanged or were deemed to be exchanged for Duke Energy Common Shares pursuant to Section 2.2 shall be deemed at all times after the Effective Time, but subject to Section 4.5, to represent only the right to receive upon such surrender a certificate representing that number (rounded down to the nearest whole number) of Duke Energy Common Shares (together with any unpaid dividends or distributions declared prior to the Effective Time) which such holder has the right to receive. 4.4 Distributions with Respect to Unsurrendered Certificates No dividends or other distributions paid, declared or made with respect to Exchangeable Shares or Duke Energy Common Shares, in each case with a record date after the Effective Time, shall be paid to the holder of any unsurrendered certificate which immediately prior to the Effective Time represented outstanding Westcoast Common Shares that were exchanged for Exchangeable Shares or Duke Energy Common Shares pursuant to Section 2.2 unless and until the holder of such certificate shall comply with the provisions of Section 4.2 or 4.3, as -16- PLAN OF ARRANGEMENT applicable. Subject to applicable law, at the time such holder shall have complied with the provisions of Section 4.2 or 4.3, as applicable, (or, in the case of clause (ii) below, at the appropriate payment date), there shall be paid to the holder of the certificates formerly representing Westcoast Common Shares, without interest, (i) the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to the Exchangeable Shares or Duke Energy Common Shares, as the case may be, to which such holder is entitled pursuant hereto and (ii) on the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to the date of compliance by such holder with the provisions of Section 4.2 or 4.3 and a payment date subsequent to the date of such compliance and payable with respect to such Exchangeable Shares or Duke Energy Common Shares, as the case may be. 4.5 No Fractional Shares No certificates representing fractional Exchangeable Shares or fractional Duke Energy Common Shares shall be issued upon compliance with the provisions of Section 4.2 or 4.3 and no dividend, stock split or other change in the capital structure of Exchangeco or Duke Energy shall relate to any such fractional security and such fractional interests shall not entitle the owner thereof to exercise any rights as a security holder of Exchangeco or Duke Energy. In lieu of any such fractional securities, each holder otherwise entitled to a fractional interest in an Exchangeable Share or to a fractional interest in a Duke Energy Common Share will be entitled to receive a cash payment from the Depositary equal to the product of such fractional interest and the Weighted Average Trading Price of Duke Energy Common Shares, such amount to be provided to the Depositary by Exchangeco upon request. Such payment with respect to fractional shares is merely intended to provide a mechanical rounding off of, and is not separately bargained for, consideration. If more than one certificate formerly representing Westcoast Common Shares are surrendered for the account of the same holder, the number of Exchangeable Shares or Duke Energy Common Shares for which such certificates have been surrendered shall be computed on the basis of the aggregate number of Westcoast Common Shares represented by the certificates so surrendered. On the date of the notice referred to in Section 7.2 of the Exchangeable Share Provisions, the aggregate number of Exchangeable Shares and the aggregate number of Duke Energy Common Shares for which no certificates were issued as a result of the foregoing provisions of this Section 4.5 shall be deemed to have been surrendered by the Depositary for no consideration to Exchangeco. 4.6 Lost Certificates In the event any certificate which immediately prior to the Effective Time represented one or more outstanding Westcoast Common Shares that were exchanged pursuant to Section 2.2 shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the holder of Westcoast Common Shares claiming such certificate to be lost, stolen or destroyed, the Depositary will issue in exchange for such lost, stolen or destroyed certificate, any cash pursuant to Section 4.1 and/or one or more certificates representing one or more Exchangeable Shares pursuant to Section 4.2 or Duke Energy Common Shares pursuant to Section 4.3 (and any dividends or distributions with respect thereto) in each case deliverable in accordance with Section 2.2. When authorizing such payment in exchange for any lost, stolen or destroyed certificate, the holder to whom cash and/or certificates representing Exchangeable Shares or -17- PLAN OF ARRANGEMENT Duke Energy Common Shares are to be issued shall, as a condition precedent to the issuance thereof, give a bond satisfactory to Westcoast, Exchangeco, Duke Energy and their respective transfer agents in such sum as Westcoast, Exchangeco or Duke Energy may direct or otherwise indemnify Westcoast, Exchangeco and Duke Energy in a manner satisfactory to Westcoast, Exchangeco and Duke Energy against any claim that may be made against Westcoast, Exchangeco or Duke Energy with respect to the certificate alleged to have been lost, stolen or destroyed. 4.7 Extinguishment of Rights Any certificate which immediately prior to the Effective Time represented outstanding Westcoast Common Shares that are not held by a Dissenting Shareholder who is ultimately entitled to be paid fair value of the Westcoast Common Shares held by such Dissenting Shareholder but was exchanged or was deemed to have been exchanged pursuant to Section 2.2, that has not been deposited with all other instruments required by Section 4.1, 4.2 or 4.3, on or prior to the earlier of the fifth anniversary of the Effective Date and the date of the notice referred to in Section 7.2 of the Exchangeable Share Provisions shall cease to represent a claim or interest of any kind or nature to such cash payment and/or as a holder of Exchangeable Shares or Duke Energy Common Shares. On such date, the cash payment and/or the Exchangeable Shares or Duke Energy Common Shares (and any dividends or distributions with respect thereto) to which the former holder of the certificate referred to in the preceding sentence was ultimately entitled shall be deemed to have been surrendered for no consideration to Exchangeco or Duke Energy, as the case may be, together with all entitlements to dividends, distributions, cash and interest in respect thereof held for such former holder. None of Duke Energy, Exchangeco, Callco, Westcoast or the Depositary shall be liable to any Person in respect of any cash payment, Duke Energy Common Shares or Exchangeable Shares (or dividends, distributions and/or cash in lieu of fractional shares) delivered to a public official pursuant to and in compliance with any applicable abandoned property, escheat or similar law. 4.8 Withholding Rights Westcoast, Exchangeco, Callco, Duke Energy and the Depositary shall be entitled to deduct and withhold from any dividend or consideration otherwise payable to any holder of Westcoast Common Shares, Duke Energy Common Shares or Exchangeable Shares such amounts as Westcoast, Exchangeco, Callco, Duke Energy or the Depositary is required to deduct and withhold with respect to such payment under the ITA, the United States Internal Revenue Code of 1986 or any provision of federal, provincial, territorial, state, local or foreign tax law, in each case, as amended. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the holder of the shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, Westcoast, Exchangeco, Callco, Duke Energy and the Depositary are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to Westcoast, Exchangeco, Callco, Duke Energy or the Depositary, as the case may be, to enable it to comply with such deduction or -18- PLAN OF ARRANGEMENT withholding requirement and Westcoast, Exchangeco, Callco, Duke Energy or the Depositary shall notify the holder thereof and remit any unapplied balance of the net proceeds of such sale. 4.9 Termination of Depositary Any Exchangeable Shares or Duke Energy Common Shares, together with any funds held by the Depositary, that remain undistributed to former holders of Westcoast Common Shares nine months after the Effective Date shall be delivered to Exchangeco, upon demand therefor, and holders of certificates previously representing Westcoast Common Shares who have not theretofore complied with Sections 4.1, 4.2 or 4.3 shall thereafter look only to Exchangeco for payment of any claim to cash, Exchangeable Shares, Duke Energy Common Shares, cash in lieu of fractional shares thereof or dividends or distributions, if any, in respect thereof. ARTICLE 5 CERTAIN RIGHTS OF CALLCO TO ACQUIRE EXCHANGEABLE SHARES 5.1 Callco Liquidation Call Right (a) Callco shall have the overriding right (the "Liquidation Call Right"), in the event of and notwithstanding the proposed liquidation, dissolution or winding-up of Exchangeco or any other distribution of the assets of Exchangeco among its shareholders for the purpose of winding-up its affairs, pursuant to Article 5 of the Exchangeable Share Provisions, to purchase from all but not less than all of the holders of Exchangeable Shares (other than any holder of Exchangeable Shares which is an affiliate of Duke Energy) on the Liquidation Date all but not less than all of the Exchangeable Shares held by each such holder upon payment by Callco to each such holder of the Exchangeable Share Price applicable on the last Business Day prior to the Liquidation Date (the "Liquidation Call Purchase Price") in accordance with Section 5.1(c). In the event of the exercise of the Liquidation Call Right by Callco, each holder shall be obligated to sell all the Exchangeable Shares held by such holder to Callco on the Liquidation Date upon payment by Callco to such holder of the Liquidation Call Purchase Price for each such Exchangeable Share, whereupon Exchangeco shall have no obligation to pay any Liquidation Amount to the holders of such shares so purchased by Callco. (b) To exercise the Liquidation Call Right, Callco must notify Exchangeco and Exchangeco's transfer agent (the "Transfer Agent"), as agent for the holders of Exchangeable Shares, and Exchangeco of Callco's intention to exercise such right at least 45 days before the Liquidation Date in the case of a voluntary liquidation, dissolution or winding-up of Exchangeco or any other voluntary distribution of the assets of Exchangeco among its shareholders for the purpose of winding-up its affairs, and at least five Business Days before the Liquidation Date in the case of an involuntary liquidation, dissolution or winding-up of Exchangeco or any other involuntary distribution of the assets of Exchangeco among its shareholders for the purpose of winding up its affairs. The Transfer Agent will notify the holders of Exchangeable Shares as to whether Callco has exercised the Liquidation Call Right forthwith after the expiry of the period during which the same may be exercised by Callco. If -19- PLAN OF ARRANGEMENT Callco exercises the Liquidation Call Right, then on the Liquidation Date, Callco will purchase and the holders of Exchangeable Shares will sell all of the Exchangeable Shares then outstanding for a price per share equal to the Liquidation Call Purchase Price. (c) For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Liquidation Call Right, Callco shall deposit or cause to be deposited with the Transfer Agent, on or before the Liquidation Date, the Exchangeable Share Consideration representing the total Liquidation Call Purchase Price. Provided that such Exchangeable Share Consideration has been so deposited with the Transfer Agent, on and after the Liquidation Date, the holders of the Exchangeable Shares shall cease to be holders of the Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof (including any rights under the Voting and Exchange Trust Agreement), other than the right to receive their proportionate part of the total Liquidation Call Purchase Price payable by Callco, without interest, upon presentation and surrender by the holder of certificates representing the Exchangeable Shares held by such holder and the holder shall on and after the Liquidation Date be considered and deemed for all purposes to be the holder of the Duke Energy Common Shares to which such holder is entitled. Upon surrender to the Transfer Agent of a certificate or certificates representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the CBCA and the by-laws of Exchangeco and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of Callco shall deliver to such holder, the Exchangeable Share Consideration to which such holder is entitled. If Callco does not exercise the Liquidation Call Right in the manner described above, on the Liquidation Date the holders of the Exchangeable Shares will be entitled to receive in exchange therefor the Liquidation Amount otherwise payable by Exchangeco in connection with the liquidation, dissolution or winding-up of Exchangeco pursuant to Article 5 of the Exchangeable Share Provisions. 5.2 Callco Redemption Call Right In addition to Callco's rights contained in the Exchangeable Share Provisions, including the Retraction Call Right (as defined in the Exchangeable Share Provisions), Callco shall have the following rights in respect of the Exchangeable Shares: (a) Callco shall have the overriding right (the "Redemption Call Right"), in the event of and notwithstanding the proposed redemption of the Exchangeable Shares by Exchangeco pursuant to Article 7 of the Exchangeable Share Provisions, to purchase from all but not less than all of the holders of Exchangeable Shares (other than any holder of Exchangeable Shares which is an affiliate of Duke Energy) on the Redemption Date all but not less than all of the Exchangeable Shares held by each such holder upon payment by Callco to each such holder of the Exchangeable Share Price applicable on the last Business Day prior to the Redemption Date (the "Redemption Call Purchase Price") in accordance with 5.2(c). In the event of the exercise of the Redemption Call Right by Callco, each holder shall be obligated to sell all the Exchangeable Shares held by such holder to Callco on the Redemption Date upon payment by Callco to such holder of the Redemption Call Purchase Price for each -20- PLAN OF ARRANGEMENT such Exchangeable Share, whereupon Exchangeco shall have no obligation to redeem, or to pay the Redemption Price in respect of, such shares so purchased by Callco. (b) To exercise the Redemption Call Right, Callco must notify the Transfer Agent, as agent for the holders of Exchangeable Shares, and Exchangeco of Callco's intention to exercise such right at least 60 days before the Redemption Date, except in the case of a redemption occurring as a result of a Duke Energy Control Transaction, an Exchangeable Share Voting Event, an Exempt Exchangeable Share Voting Event or a Distribution Date (each as defined in the Exchangeable Share Provisions), in which case Callco shall so notify the Transfer Agent and Exchangeco on or before the Redemption Date. The Transfer Agent will notify the holders of the Exchangeable Shares as to whether Callco has exercised the Redemption Call Right forthwith after the expiry of the period during which the same may be exercised by Callco. If Callco exercises the Redemption Call Right, then on the Redemption Date, Callco will purchase and the holders of Exchangeable Shares will sell all of the Exchangeable Shares then outstanding for a price per share equal to the Redemption Call Purchase Price. (c) For the purposes of completing the purchase of the Exchangeable Shares pursuant to the Redemption Call Right, Callco shall deposit or cause to be deposited with the Transfer Agent, on or before the Redemption Date, the Exchangeable Share Consideration representing the total Redemption Call Purchase Price. Provided that such Exchangeable Share Consideration has been so deposited with the Transfer Agent, on and after the Redemption Date the holders of the Exchangeable Shares shall cease to be holders of the Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof (including any rights under the Voting and Exchange Trust Agreement), other than the right to receive their proportionate part of the total Redemption Call Purchase Price payable by Callco, without interest, upon presentation and surrender by the holder of certificates representing the Exchangeable Shares held by such holder and the holder shall on and after the Redemption Date be considered and deemed for all purposes to be the holder of the Duke Energy Common Shares to which such holder is entitled. Upon surrender to the Transfer Agent of a certificate or certificates representing Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the CBCA and the by-laws of Exchangeco and such additional documents and instruments as the Transfer Agent may reasonably require, the holder of such surrendered certificate or certificates shall be entitled to receive in exchange therefor, and the Transfer Agent on behalf of Callco shall deliver to such holder, the Exchangeable Share Consideration to which such holder is entitled. If Callco does not exercise the Redemption Call Right in the manner described above, on the Redemption Date the holders of the Exchangeable Shares will be entitled to receive in exchange therefor the Redemption Price otherwise payable by Exchangeco in connection with the redemption of the Exchangeable Shares pursuant to Article 7 of the Exchangeable Share Provisions. -21- PLAN OF ARRANGEMENT ARTICLE 6 AMENDMENTS 6.1 Amendments to Plan of Arrangement Westcoast and Duke Energy reserve the right to amend, modify and/or supplement this Plan of Arrangement at any time and from time to time prior to the Effective Date subject to amendment in the manner provided for in the Combination Agreement, provided that each such amendment, modification and/or supplement must be (i) set out in writing, (ii) approved by Duke Energy, (iii) filed with the Court and, if made following the Westcoast Meeting, approved by the Court, and (iv) communicated to Westcoast Securityholders if and as required by the Court. Any amendment, modification or supplement to this Plan of Arrangement may be proposed by Westcoast and Duke Energy at any time prior to the Westcoast Meeting (provided that Duke Energy shall have consented thereto) with or without any other prior notice or communication, and if so proposed and accepted by the Persons voting at the Westcoast Meeting (other than as may be required under the Interim Order), shall become part of this Plan of Arrangement for all purposes. Any amendment, modification or supplement to this Plan of Arrangement that is approved or directed by the Court following the Westcoast Meeting shall be effective only if (i) it is consented to by each of Westcoast and Duke Energy and (ii) if required by the Court, it is consented to by Westcoast Securityholders voting in the manner directed by the Court. Subject to applicable law, any amendment, modification or supplement to this Plan of Arrangement may be made following the Effective Date unilaterally by Duke Energy, provided that it concerns a matter which, in the reasonable opinion of Duke Energy, is of an administrative nature required to better give effect to the implementation of this Plan of Arrangement and is not adverse to the financial or economic interests of any Westcoast Securityholder. ARTICLE 7 FURTHER ASSURANCES 7.1 Notwithstanding that the transactions and events set out herein shall occur and be deemed to occur in the order set out in this Plan of Arrangement without any further act or formality, each of the parties to the Combination Agreement shall make, do and execute, or cause to be made, done and executed, all such further acts, deeds, agreements, transfers, assurances, instruments or documents as may reasonably be required by any of them in order further to document or evidence any of the transactions or events set out herein. -22- PLAN OF ARRANGEMENT APPENDIX 1 TO THE PLAN OF ARRANGEMENT PROVISIONS ATTACHING TO THE EXCHANGEABLE SHARES OF 3946509 CANADA INC. The Exchangeable Shares shall have the following rights, privileges, restrictions and conditions: ARTICLE 1 INTERPRETATION 1.1 For the purposes of these share provisions: "affiliate" has the meaning ascribed thereto in the Securities Act, unless otherwise expressly stated herein; "Arrangement" means an arrangement under section 192 of the CBCA on the terms and subject to the conditions set out in the Plan of Arrangement to which plan these share provisions are attached as Appendix 1 and which Plan of Arrangement (other than Appendix 1 thereto) is attached to the Combination Agreement as Schedule E, subject to any amendments or variations thereto made in accordance with Article 6 of the Plan of Arrangement or Section 7.1 of the Combination Agreement or made at the direction of the Court in the Final Order; "Automatic Exchange Right" has the meaning ascribed thereto in the Voting and Exchange Trust Agreement; "Board of Directors" means the board of directors of the Company; "Business Day" means any day on which commercial banks are generally open for business in New York, New York and Vancouver, British Columbia, other than a Saturday, a Sunday or a day observed as a holiday in New York, New York under the laws of the State of New York or the federal laws of the United States of America or in Vancouver, British Columbia under the laws of the Province of British Columbia or the federal laws of Canada; "Callco" means 3058368 Nova Scotia Company, an unlimited liability company existing under the laws of the Province of Nova Scotia and an indirect wholly-owned subsidiary of Duke Energy; "Callco Call Notice" has the meaning ascribed thereto in Section 6.3 of these share provisions; "Canadian Dollar Equivalent" means in respect of an amount expressed in a currency other than Canadian dollars (the "Foreign Currency Amount") at any date the product obtained by multiplying: 1-1 (a) the Foreign Currency Amount, by (b) the noon spot exchange rate on such date for such foreign currency expressed in Canadian dollars as reported by the Bank of Canada or, in the event such spot exchange rate is not available, such spot exchange rate on such date for such foreign currency expressed in Canadian dollars as may be deemed by the Board of Directors to be appropriate for such purpose; "CBCA" means Canada Business Corporations Act, as amended from time to time prior to the Effective Date; "Combination Agreement" means the agreement made as of the 20th day of September, 2001 among Duke Energy, Callco, the Company and Westcoast, as amended, supplemented and/or restated in accordance therewith prior to the Effective Date, providing for, among other things, the Arrangement; "Common Shares" means the common shares in the capital of the Company; "Company" means 3946509 Canada Inc., a corporation existing under the CBCA; "Current Market Price" means, in respect of a Duke Energy Common Share on any date, the Canadian Dollar Equivalent of the average of the closing bid and asked prices of Duke Energy Common Shares during a period of 20 consecutive trading days ending two trading days before such date on the NYSE, or, if the Duke Energy Common Shares are not then listed on the NYSE, on such other stock exchange or automated quotation system on which the Duke Energy Common Shares are listed or quoted, as the case may be, as may be selected by the Board of Directors for such purpose; provided, however, that if in the opinion of the Board of Directors the public distribution or trading activity of Duke Energy Common Shares during such period does not create a market which reflects the fair market value of a Duke Energy Common Share, then the Current Market Price of a Duke Energy Common Share shall be determined by the Board of Directors, in good faith and in its sole discretion, and provided further that any such selection, opinion or determination by the Board of Directors shall be conclusive and binding; "Director" means the Director appointed pursuant to section 260 of the CBCA; "Distribution Date" has the meaning ascribed thereto in the Duke Energy Rights Agreement; "Duke Energy" means Duke Energy Corporation, a corporation existing under the laws of the State of Duke North Carolina; "Duke Energy Common Shares" mean the shares of common stock, no par value per share, in the capital of Duke Energy and any other securities into which such shares may be changed; 1-2 "Duke Energy Control Transaction" means any merger, amalgamation, tender offer, material sale of shares or rights or interests therein or thereto or similar transactions involving Duke Energy, or any proposal to carry out the same; and "Duke Energy Dividend Declaration Date" means the date on which the board of directors of Duke Energy declares any dividend on the Duke Energy Common Shares. "Duke Energy Rights Agreement" means the Rights Agreement, dated December 17, 1998, between Duke Energy and The Bank of New York, as Rights Agent; "Effective Date" means the date shown on the certificate of arrangement to be issued by the Director under the CBCA giving effect to the Arrangement; "Effective Time" means 12:01 a.m. (Vancouver time) on the Effective Date; "Exchange Right" has the meaning ascribed thereto in the Voting and Exchange Trust Agreement; "Exchangeable Share Consideration" means, with respect to each Exchangeable Share, for any acquisition of, redemption of or distribution of assets of the Company in respect of, or purchase pursuant to, these share provisions, the Plan of Arrangement, the Support Agreement or the Voting and Exchange Trust Agreement: (a) the Current Market Price of one Duke Energy Common Share deliverable in connection with such action; plus (b) a cheque or cheques payable at par at any branch of the bankers of the payor in the amount of all declared, payable and unpaid, and all undeclared but payable, cash dividends deliverable in connection with such action; plus (c) such stock or other property constituting any declared and unpaid non-cash dividends deliverable in connection with such action, provided that (i) the part of the consideration which represents (a) above shall be fully paid and satisfied by the delivery of one Duke Energy Common Share, such share to be duly issued, fully paid and non-assessable, (ii) the part of the consideration which represents (c) above shall be fully paid and satisfied by delivery of such non-cash items, (iii) any such consideration shall be delivered free and clear of any lien, claim, encumbrance, security interest or adverse claim or interest and (iv) any such consideration shall be paid less any tax required to be deducted and withheld therefrom and without interest; "Exchangeable Share Price" means, for each Exchangeable Share, an amount equal to the aggregate of: (a) the Current Market Price of a Duke Energy Common Share; plus 1-3 (b) an additional amount equal to the full amount of all cash dividends declared, payable and unpaid, on such Exchangeable Share to which the holder is entitled pursuant to the dividend trading rules of any stock exchange on which the Exchangeable Shares then trade; plus (c) an additional amount equal to the full amount of all dividends declared and payable or paid on Duke Energy Common Shares which have not been declared or paid on Exchangeable Shares in accordance herewith; plus (d) an additional amount representing the full amount of all non-cash dividends declared, payable and unpaid, on such Exchangeable Share to which the holder is entitled pursuant to the dividend trading rules of any stock exchange on which the Exchangeable Shares then trade; "Exchangeable Share Voting Event" means any matter in respect of which holders of Exchangeable Shares are entitled to vote as shareholders of the Company, other than an Exempt Exchangeable Share Voting Event, and, for greater certainty, excluding any matter in respect of which holders of Exchangeable Shares are entitled to vote (or instruct the Trustee to vote) in their capacity as Beneficiaries under (and as that term is defined in) the Voting and Exchange Trust Agreement; "Exchangeable Shares" mean the non-voting exchangeable shares in the capital of the Company, having the rights, privileges, restrictions and conditions set forth herein; "Exempt Exchangeable Share Voting Event" means any matter in respect of which holders of Exchangeable Shares are entitled to vote as shareholders of the Company in order to approve or disapprove, as applicable, any change to, or in the rights of the holders of, the Exchangeable Shares, where the approval or disapproval, as applicable, of such change would be required to maintain the equivalence of the Exchangeable Shares and the Duke Energy Common Shares; "Governmental Entity" means any (a) multinational, federal, provincial, territorial, state, regional, municipal, local or other government, governmental or public department, central bank, court, tribunal, arbitral body, commission, board, bureau or agency, domestic or foreign, (b) subdivision, agent, commission, board, or authority of any of the foregoing, or (c) quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the foregoing; "holder" means, when used with reference to the Exchangeable Shares, the holders of Exchangeable Shares shown from time to time in the register maintained by or on behalf of the Company in respect of the Exchangeable Shares and, when used with reference to the Westcoast Options, means the Person to whom such option was issued; "Liquidation Amount" has the meaning ascribed thereto in Section 5.1(a) of these share provisions; "Liquidation Call Right" has the meaning ascribed thereto in the Plan of Arrangement; 1-4 "Liquidation Date" has the meaning ascribed thereto in Section 5.1(a) of these share provisions; "NYSE" means The New York Stock Exchange, Inc.; "Person" includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, Governmental Entity, syndicate or other entity, whether or not having legal status; "Plan of Arrangement" means the plan of arrangement involving and affecting Westcoast, Duke Energy, Callco, the Company, all holders and all beneficial owners of Westcoast Common Shares, all holders and all beneficial owners of Exchangeable Shares and all holders of Westcoast Options under section 192 of the CBCA contemplated in the Combination Agreement, to which these share provisions are attached as Appendix 1; "Purchase Price" has the meaning ascribed thereto in Section 6.3 of these share provisions; "Redemption Call Purchase Price" has the meaning ascribed thereto in the Plan of Arrangement; "Redemption Call Right" has the meaning ascribed thereto in the Plan of Arrangement; "Redemption Date" means the earlier of (a) the day immediately preceding a Distribution Date or (b) the date, if any, established by the Board of Directors for the redemption by the Company of all but not less than all of the outstanding Exchangeable Shares pursuant to Article 7 of these share provisions, which date, in the case of clause (b), shall be no earlier than the eighth anniversary of the Effective Date, unless: (i) there are less than twenty percent (20%) of the number of Exchangeable Shares issuable on the Effective Date outstanding (other than Exchangeable Shares held by Duke Energy and its affiliates, as such number of shares may be adjusted as deemed appropriate by the Board of Directors to give effect to any subdivision or consolidation of or stock dividend on the Exchangeable Shares, any issue or distribution of rights to acquire Exchangeable Shares or securities exchangeable for or convertible into Exchangeable Shares, any issue or distribution of other securities or rights or evidences of indebtedness or assets, or any other capital reorganization or other transaction affecting the Exchangeable Shares), in which case the Board of Directors may accelerate such redemption date to such date prior to the eighth anniversary of the Effective Date as it may determine, upon at least 60 days' prior written notice to the registered holders of the Exchangeable Shares and the Trustee; (ii) a Duke Energy Control Transaction occurs, in which case, provided that the Board of Directors determines, in good faith and in its sole discretion, that it is not reasonably practicable to substantially replicate the terms and conditions of the Exchangeable Shares in connection with such Duke Energy Control Transaction and that 1-5 the redemption of all but not less than all of the outstanding Exchangeable Shares is necessary to enable the completion of such Duke Energy Control Transaction in accordance with its terms, the Board of Directors may accelerate such redemption date to such date prior to the eighth anniversary of the Effective Date as it may determine, upon such number of days' prior written notice to the registered holders of the Exchangeable Shares and the Trustee as the Board of Directors may determine to be reasonably practicable in such circumstances; (iii) an Exchangeable Share Voting Event is proposed, in which case, provided that the Board of Directors has determined, in good faith and in its sole discretion, that it is not reasonably practicable to accomplish the business purpose intended by the Exchangeable Share Voting Event in any other commercially reasonable manner that does not result in an Exchangeable Share Voting Event, which business purpose must be bona fide and not for the primary purpose of causing the occurrence of a Redemption Date, the redemption date shall be the Business Day prior to the record date for any meeting or vote of the holders of the Exchangeable Shares to consider the Exchangeable Share Voting Event and the Board of Directors shall give such number of days' prior written notice of such redemption to the registered holders of the Exchangeable Shares and the Trustee as the Board of Directors may determine to be reasonably practicable in such circumstances; or (iv) an Exempt Exchangeable Share Voting Event is proposed and the holders of the Exchangeable Shares fail to take the necessary action at a meeting or other vote of holders of Exchangeable Shares, to approve or disapprove, as applicable, the Exempt Exchangeable Share Voting Event, in which case the redemption date shall be the Business Day following the day on which the holders of the Exchangeable Shares failed to take such action, provided, however, that the accidental failure or omission to give any notice of redemption under clauses (a), (b) or (c) above to any of such holders of Exchangeable Shares shall not affect the validity of any such redemption; "Redemption Price" has the meaning ascribed thereto in Section 7.1 of these share provisions; "Retracted Shares" has the meaning ascribed thereto in Section 6.1(a) of these share provisions; "Retraction Call Right" has the meaning ascribed thereto in Section 6.1(c) of these share provisions; "Retraction Date" has the meaning ascribed thereto in Section 6.1(b) of these share provisions; "Retraction Price" has the meaning ascribed thereto in Section 6.1 of these share provisions; 1-6 "Retraction Request" has the meaning ascribed thereto in Section 6.1 of these share provisions; "Securities Act" means the Securities Act (Ontario) and the rules, regulations and policies made thereunder, as now in effect and as they may be amended from time to time prior to the Effective Date; "Support Agreement" means the agreement made between Westcoast, Duke Energy, Callco and the Company substantially in the form and content of Schedule F annexed to the Combination Agreement, with such changes thereto as the parties to the Combination Agreement, acting reasonably, may agree; "Transfer Agent" means Computershare Trust Company of Canada or such other Person as may from time to time be appointed by the Company as the registrar and transfer agent for the Exchangeable Shares; "Trustee" means the trustee to be chosen by Duke Energy and Westcoast, acting reasonably, to act as trustee under the Voting and Exchange Trust Agreement, and any successor trustee appointed under the Voting and Exchange Trust Agreement; "Voting and Exchange Trust Agreement" means the agreement made between Duke Energy, Callco, the Company and the Trustee in connection with the Plan of Arrangement substantially in the form and content of Schedule G annexed to the Combination Agreement with such changes thereto as the parties to the Combination Agreement, acting reasonably, may agree; "Westcoast" means Westcoast Energy Inc., a corporation existing under the laws of Canada; "Westcoast Common Shares" means the issued and outstanding common shares in the capital of Westcoast immediately prior to the Effective Time; "Westcoast Options" means all Westcoast Common Share purchase options granted under the Westcoast Stock Option Plans; "Westcoast Stock Option Plans" means Westcoast's Long-Term Incentive Share Option Plan 1989 as amended effective April 26, 2000 and Westcoast's 1999 Key Employee Plan; ARTICLE 2 RANKING OF EXCHANGEABLE SHARES 1-7 2.1 The Exchangeable Shares shall be entitled to a preference over the Common Shares and any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company, among its shareholders for the purpose of winding-up its affairs. ARTICLE 3 DIVIDENDS 3.1 A holder of an Exchangeable Share shall be entitled to receive and the Board of Directors shall, subject to applicable law, on each Duke Energy Dividend Declaration Date, declare a dividend on each Exchangeable Share: (a) in the case of a cash dividend declared on the Duke Energy Common Shares, in an amount in cash for each Exchangeable Share in U.S. dollars, or the Canadian Dollar Equivalent thereof on the Duke Energy Dividend Declaration Date, in each case, corresponding to the cash dividend declared on each Duke Energy Common Share; (b) in the case of a stock dividend declared on the Duke Energy Common Shares to be paid in Duke Energy Common Shares subject to Section 3.2, by the issue or transfer by the Company of such number of Exchangeable Shares for each Exchangeable Share as is equal to the number of Duke Energy Common Shares to be paid on each Duke Energy Common Share; or (c) in the case of a dividend declared on the Duke Energy Common Shares in property other than cash or Duke Energy Common Shares, in such type and amount of property for each Exchangeable Share as is the same as or economically equivalent to (to be determined by the Board of Directors as contemplated by Section 3.6) the type and amount of property declared as a dividend on each Duke Energy Common Share. Such dividends shall be paid out of money, assets or property of the Company properly applicable to the payment of dividends, or out of authorized but unissued shares of the Company, as applicable. 3.2 In the case of a stock dividend declared on the Duke Energy Common Shares to be paid in Duke Energy Common Shares, in lieu of declaring the stock dividend contemplated by Section 3.1(b) on the Exchangeable Shares, the Board of Directors may, in good faith and in its discretion and subject to applicable law and to obtaining all required regulatory approvals, subdivide, redivide or change (the "Subdivision") each issued and unissued Exchangeable Share on the basis that each Exchangeable Share before the subdivision becomes a number of Exchangeable Shares equal to the sum of (i) one Duke Energy Common Share and (ii) the number of Duke Energy Common shares to be paid as a share dividend on each Duke Energy Common Share. In making such Subdivision, the Board of Directors shall consider the effect thereof upon the then outstanding Exchangeable Shares and the general taxation consequences of the Subdivision to the holders of the Exchangeable Shares. In such instance, and notwithstanding any other provision hereof, such Subdivision shall become effective on the 1-8 effective date specified in Section 3.4 without any further act or formality on the part of the Board of Directors or of the holders of Exchangeable Shares. 3.3 Cheques of the Company payable at par at any branch of the bankers of the Company shall be issued in respect of any cash dividends contemplated by Section 3.1(a) and the sending of such a cheque to each holder of an Exchangeable Share shall satisfy the cash dividend represented thereby unless the cheque is not paid on presentation. Subject to applicable law, certificates registered in the name of the registered holder of Exchangeable Shares shall be issued or transferred in respect of any stock dividends contemplated by Section 3.1(b) or any Subdivision contemplated by Section 3.2 and the sending of such a certificate to each holder of an Exchangeable Share shall satisfy the stock dividend represented thereby. Such other type and amount of property in respect of any dividends contemplated by Section 3.1(c) shall be issued, distributed or transferred by the Company in such manner as it shall determine and the issuance, distribution or transfer thereof by the Company to each holder of an Exchangeable Share shall satisfy the dividend represented thereby. No holder of an Exchangeable Share shall be entitled to recover by action or other legal process against the Company any dividend that is represented by a cheque that has not been duly presented to the Company's bankers for payment or that otherwise remains unclaimed for a period of six years from the date on which such dividend was first payable. 3.4 The record date for the determination of the holders of Exchangeable Shares entitled to receive payment of, and the payment date for, any dividend declared on the Exchangeable Shares under Section 3.1 shall be the same dates as the record date and payment date, respectively, for the corresponding dividend declared on the Duke Energy Common Shares. The record date for the determination of the holders of Exchangeable Shares entitled to receive Exchangeable Shares in connection with any Subdivision of the Exchangeable Shares under Section 3.2 and the effective date of such Subdivision shall be the same dates as the record date and payment date, respectively, for the corresponding dividend declared on the Duke Energy Common Shares. 3.5 If on any payment date for any dividends declared on the Exchangeable Shares under Section 3.1 the dividends are not paid in full on all of the Exchangeable Shares then outstanding, any such dividends that remain unpaid shall be paid on a subsequent date or dates determined by the Board of Directors on which the Company shall have sufficient moneys, assets or property properly applicable to the payment of such dividends. 3.6 The Board of Directors shall determine, in good faith and in its sole discretion, economic equivalence for the purposes of Sections 3.1 and 3.2, and each such determination shall be conclusive and binding on the Company and its shareholders. In making each such determination, the following factors shall, without excluding other factors determined by the Board of Directors to be relevant, be considered by the Board of Directors: (a) in the case of any stock dividend or other distribution payable in Duke Energy Common Shares, the number of such shares issued in proportion to the number of Duke Energy Common Shares previously outstanding; 1-9 (b) in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price; (c) in the case of the issuance or distribution of any other form of property (including any shares or securities of Duke Energy of any class other than Duke Energy Common Shares, any rights, options or warrants other than those referred to in Section 3.6(b) above, any evidences of indebtedness of Duke Energy or any assets of Duke Energy) the relationship between the fair market value (as determined by the Board of Directors in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding Duke Energy Common Share and the Current Market Price; and (d) in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the taxation consequences to holders of Duke Energy Common Shares as a result of differences between taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of Exchangeable Shares). 3.7 Except as provided in this Article 3, the holders of Exchangeable Shares shall not be entitled to receive dividends in respect thereof. Notwithstanding any provision of this Article 3 to the contrary, if the Exchangeable Share Price is paid to a holder of an Exchangeable Share by Callco pursuant to the Retraction Call Right, the Redemption Call Right or the Liquidation Call Right or by Duke Energy pursuant to the Exchange Right or the Automatic Exchange Right, the holder of the Exchangeable Share shall cease to have any right to be paid any amount by the Company in respect of any unpaid dividends on such Exchangeable Shares. ARTICLE 4 CERTAIN RESTRICTIONS 4.1 So long as any of the Exchangeable Shares are outstanding, the Company shall not at any time without, but may at any time with, the approval of the holders of the Exchangeable Shares given as specified in Section 10.2 of these share provisions: (a) pay any dividends on the Common Shares or any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends, other than stock dividends payable in Common Shares or any such other shares ranking junior to the Exchangeable Shares, as the case may be; (b) redeem or purchase or make any capital distribution in respect of Common Shares or any other shares ranking junior to the Exchangeable Shares with respect to the payment of dividends or on any liquidation, dissolution or winding-up of the Company or any other distribution of the assets of the Company; (c) redeem or purchase any other shares of the Company ranking equally with the Exchangeable Shares with respect to the payment of dividends or on any liquidation, 1-10 dissolution or winding-up of the Company or any other distribution of the assets of the Company; or (d) issue any Exchangeable Shares or any other shares of the Company ranking equally with, or superior to, the Exchangeable Shares other than by way of stock dividends to the holders of such Exchangeable Shares; The restrictions in Sections 4.1(a), (b), (c) and (d) shall not apply if all dividends on the outstanding Exchangeable Shares corresponding to dividends declared and paid to date on the Duke Energy Common Shares shall have been declared and paid on the Exchangeable Shares. ARTICLE 5 DISTRIBUTION ON LIQUIDATION 5.1 In the event of the liquidation, dissolution or winding-up of the Company or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs, a holder of Exchangeable Shares shall be entitled, subject to applicable law and to the exercise by Callco of the Liquidation Call Right, to receive from the assets of the Company in respect of each Exchangeable Share held by such holder on the effective date (the "Liquidation Date") of such liquidation, dissolution, winding-up or distribution of assets, before any distribution of any part of the assets of the Company among the holders of the Common Shares or any other shares ranking junior to the Exchangeable Shares, an amount per share equal to the Exchangeable Share Price applicable on the last Business Day prior to the Liquidation Date (the "Liquidation Amount"). 5.2 On or promptly after the Liquidation Date, and subject to the exercise by Callco of the Liquidation Call Right, the Company shall cause to be delivered to the holders of the Exchangeable Shares the Liquidation Amount for each such Exchangeable Share upon presentation and surrender of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the CBCA and the articles and by-laws of the Company and such additional documents and instruments as the Transfer Agent and the Company may reasonably require, at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to the holders of the Exchangeable Shares. Payment of the total Liquidation Amount for such Exchangeable Shares shall be made by delivery to each holder, at the address of the holder recorded in the register of the Company for the Exchangeable Shares or by holding for pick-up by the holder at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to the holders of Exchangeable Shares, on behalf of the Company of the Exchangeable Share Consideration representing the total Liquidation Amount. On and after the Liquidation Date, the holders of the Exchangeable Shares shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof (including any rights under the Voting and Exchange Trust Agreement), other than the right to receive their proportionate part of the total Liquidation Amount, unless payment of the total Liquidation Amount for such Exchangeable Shares shall not be made upon presentation and surrender of share certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain 1-11 unaffected until the total Liquidation Amount to which such holders are entitled shall have been paid to such holders in the manner hereinbefore provided. The Company shall have the right at any time on or after the Liquidation Date to deposit or cause to be deposited the Exchangeable Share Consideration in respect of the Exchangeable Shares represented by certificates that have not at the Liquidation Date been surrendered by the holders thereof in a custodial account with any chartered bank or trust company in Canada. Upon such deposit being made, the rights of the holders of Exchangeable Shares, after such deposit, shall be limited to receiving their proportionate part of the total Liquidation Amount for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of such Exchangeable Share Consideration, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the Duke Energy Common Shares delivered to them or the custodian on their behalf. 5.3 After the Company has satisfied its obligations to pay the holders of the Exchangeable Shares the Liquidation Amount per Exchangeable Share pursuant to Section 5.1 of these share provisions, such holders shall not be entitled to share in any further distribution of the assets of the Company. ARTICLE 6 RETRACTION OF EXCHANGEABLE SHARES BY HOLDER 6.1 A holder of Exchangeable Shares shall be entitled at any time, subject to the exercise by Callco of the Retraction Call Right and otherwise upon compliance with the provisions of this Article 6, to require the Company to redeem any or all of the Exchangeable Shares registered in the name of such holder for an amount per share equal to the Exchangeable Share Price applicable on the last Business Day prior to the Retraction Date (the "Retraction Price"), which shall be satisfied in full by the Company causing to be delivered to such holder the Exchangeable Share Consideration representing the Retraction Price. To effect such redemption, the holder shall present and surrender at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to the holders of Exchangeable Shares, the certificate or certificates representing the Exchangeable Shares which the holder desires to have the Company redeem, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the CBCA and the articles and bylaws of the Company and such additional documents and instruments as the Transfer Agent and the Company may reasonably require, and together with a duly executed statement (the "Retraction Request") in the form of Schedule A hereto or in such other form as may be acceptable to the Company: (a) specifying that the holder desires to have all or any number specified therein of the Exchangeable Shares represented by such certificate or certificates (the "Retracted Shares") redeemed by the Company; (b) stating the Business Day on which the holder desires to have the Company redeem the Retracted Shares (the "Retraction Date"), provided that the Retraction Date shall be not less than 10 Business Days nor more than 15 Business Days after the date on which the 1-12 Retraction Request is received by the Company and further provided that, in the event that no such Business Day is specified by the holder in the Retraction Request, the Retraction Date shall be deemed to be the 15th Business Day after the date on which the Retraction Request is received by the Company; and (c) acknowledging the overriding right (the "Retraction Call Right") of Callco to purchase all but not less than all the Retracted Shares directly from the holder and that the Retraction Request shall be deemed to be a revocable offer by the holder to sell the Retracted Shares to Callco in accordance with the Retraction Call Right on the terms and conditions set out in Section 6.3 below. 6.2 Subject to the exercise by Callco of the Retraction Call Right, upon receipt by the Company or the Transfer Agent in the manner specified in Section 6.1 of a certificate or certificates representing the number of Retracted Shares, together with a Retraction Request and such additional documents and instruments as the Transfer Agent and the Company may reasonably require, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7, the Company shall redeem the Retracted Shares effective at the close of business on the Retraction Date and shall cause to be delivered to such holder the total Retraction Price with respect to such shares in accordance with Section 6.4. If only a part of the Exchangeable Shares represented by any certificate is redeemed (or purchased by Callco pursuant to the Retraction Call Right), a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of the Company. 6.3 Upon receipt by the Company of a Retraction Request, the Company shall immediately notify Callco thereof and shall provide to Callco a copy of the Retraction Request. In order to exercise the Retraction Call Right, Callco must notify the Company of its determination to do so (the "Callco Call Notice") within five Business Days of notification to Callco by the Company of the receipt by the Company of the Retraction Request. If Callco does not so notify the Company within such five Business Day period, the Company will notify the holder as soon as possible thereafter that Callco will not exercise the Retraction Call Right. If Callco delivers the Callco Call Notice within such five Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7, the Retraction Request shall thereupon be considered only to be an offer by the holder to sell all but not less than all the Retracted Shares to Callco in accordance with the Retraction Call Right. In such event, the Company shall not redeem the Retracted Shares and Callco shall purchase from such holder and such holder shall sell to Callco on the Retraction Date all but not less than all the Retracted Shares for a purchase price (the "Purchase Price") per share equal to the Retraction Price, which, as set forth in Section 6.4, shall be fully paid and satisfied by the delivery by or on behalf of Callco, of the Exchangeable Share Consideration representing the total Purchase Price, whereupon the Company shall have no obligation to pay the Retraction Price to such holder of Exchangeable Shares so purchased by Callco. For the purposes of completing a purchase pursuant to the Retraction Call Right, Callco shall deposit with the Transfer Agent, on or before the Retraction Date, the Exchangeable Share Consideration representing the total Purchase Price. Provided that Callco has complied with Section 6.4, the closing of the purchase and sale of the Retracted Shares pursuant to the Retraction Call Right shall be deemed to have occurred as at the close of business on the Retraction Date and, for greater certainty, no redemption by the Company of such Retracted Shares shall take place on the Retraction Date. In the event that 1-13 Callco does not deliver a Callco Call Notice within such five Business Day period, and provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7, the Company shall redeem the Retracted Shares on the Retraction Date and in the manner otherwise contemplated in this Article 6. 6.4 The Company or Callco, as the case may be, shall deliver or cause the Transfer Agent to deliver to the relevant holder, at the address of the holder recorded in the register of the Company for the Exchangeable Shares or at the address specified in the holder's Retraction Request or by holding for pick-up by the holder at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company by notice to such holder of Exchangeable Shares, the Exchangeable Share Consideration representing the total Retraction Price or the total Purchase Price, as the case may be, and such delivery of such Exchangeable Share Consideration to the Transfer Agent shall be deemed to be payment of and shall satisfy and discharge all liability for the total Retraction Price or total Purchase Price, as the case may be, to the extent that the same is represented by such Exchangeable Share Consideration. 6.5 On and after the close of business on the Retraction Date, the holder of the Retracted Shares shall cease to be a holder of such Retracted Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive the total Retraction Price or total Purchase Price, as the case may be, unless upon presentation and surrender of certificates in accordance with the foregoing provisions, payment of the total Retraction Price or the total Purchase Price, as the case may be, shall not be made as provided in Section 6.4, in which case the rights of such holder shall remain unaffected until the total Retraction Price or the total Purchase Price, as the case may be, has been paid in the manner hereinbefore provided. On and after the close of business on the Retraction Date, provided that presentation and surrender of certificates and payment of the total Retraction Price or the total Purchase Price, as the case may be, has been made in accordance with the foregoing provisions, the holder of the Retracted Shares so redeemed by the Company or purchased by Callco shall thereafter be considered and deemed for all purposes to be the holder of the Duke Energy Common Shares delivered to it. 6.6 Notwithstanding any other provision of this Article 6, the Company shall not be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent that such redemption of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law. If the Company believes that on any Retraction Date it would not be permitted by any of such provisions to redeem the Retracted Shares tendered for redemption on such date, and provided that Callco shall not have exercised the Retraction Call Right with respect to the Retracted Shares, the Company shall only be obligated to redeem Retracted Shares specified by a holder in a Retraction Request to the extent of the maximum number that may be so redeemed (rounded down to a whole number of shares) as would not be contrary to such provisions and shall notify the holder at least two Business Days prior to the Retraction Date as to the number of Retracted Shares which will not be redeemed by the Company. In any case in which the redemption by the Company of Retracted Shares would be contrary to solvency requirements or other provisions of applicable law, the Company shall redeem the maximum number of Exchangeable Shares which the Board of Directors determines the Company is permitted to redeem as of the Retraction Date on a pro rata basis and shall issue to each holder of Retracted Shares a new certificate, at the expense of the Company, representing the Retracted 1-14 Shares not redeemed by the Company pursuant to Section 6.2. Provided that the Retraction Request is not revoked by the holder in the manner specified in Section 6.7 and Callco does not exercise the Retraction Call Right, the holder of any such Retracted Shares not redeemed by the Company pursuant to Section 6.2 as a result of solvency requirements or other provisions of applicable law shall be deemed by giving the Retraction Request to have instructed the Trustee to require Duke Energy to purchase such Retracted Shares from such holder on the Retraction Date or as soon as practicable thereafter on payment by Duke Energy to such holder of the Retraction Price for each such Retracted Share, all as more specifically provided in the Voting and Exchange Trust Agreement. 6.7 A holder of Retracted Shares may, by notice in writing given by the holder to the Company before the close of business on the Business Day immediately preceding the Retraction Date, withdraw its Retraction Request, in which event such Retraction Request shall be null and void and, for greater certainty, the revocable offer constituted by the Retraction Request to sell the Retracted Shares to Callco shall be deemed to have been revoked. ARTICLE 7 REDEMPTION OF EXCHANGEABLE SHARES BY THE COMPANY 7.1 Subject to applicable law, and provided Callco has not exercised the Redemption Call Right, the Company shall on the Redemption Date redeem all but not less than all of the then outstanding Exchangeable Shares for an amount per share equal to the Exchangeable Share Price applicable on the last Business Day prior to the Redemption Date (the "Redemption Price"). 7.2 In any case of a redemption of Exchangeable Shares under this Article 7, the Company shall, at least 45 days before the Redemption Date (other than a Redemption Date established in connection with a Duke Energy Control Transaction, an Exchangeable Share Voting Event, an Exempt Exchangeable Share Voting Event or a Distribution Date), send or cause to be sent to each holder of Exchangeable Shares a notice in writing of the redemption by the Company or the purchase by Callco under the Redemption Call Right, as the case may be, of the Exchangeable Shares held by such holder. In the case of a Redemption Date established in connection with a Duke Energy Control Transaction, an Exchangeable Share Voting Event, an Exempt Exchangeable Share Voting Event or a Distribution Date, the written notice of redemption by the Company or the purchase by Callco under the Redemption Call Right will be sent on or before the Redemption Date, on as many days prior written notice as may be determined by the Board of Directors to be reasonably practicable in the circumstances. In any such case, such notice shall set out the formula for determining the Redemption Price or the Redemption Call Purchase Price, as the case may be, the Redemption Date and, if applicable, particulars of the Redemption Call Right. In the case of any notice given in connection with a possible Redemption Date, such notice will be given contingently and will be withdrawn if the contingency does not occur. 7.3 On or after the Redemption Date and subject to the exercise by Callco of the Redemption Call Right, the Company shall cause to be delivered to the holders of the Exchangeable Shares to be redeemed the Redemption Price for each such Exchangeable Share 1-15 upon presentation and surrender at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company in the notice described in Section 7.2 of the certificates representing such Exchangeable Shares, together with such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the CBCA and the articles and by-laws of the Company and such additional documents and instruments as the Transfer Agent and the Company may reasonably require. Payment of the total Redemption Price for such Exchangeable Shares shall be made by delivery to each holder, at the address of the holder recorded in the securities register of the Company or by holding for pick-up by the holder at the registered office of the Company or at any office of the Transfer Agent as may be specified by the Company in such notice, on behalf of the Company of the Exchangeable Share Consideration representing the total Redemption Price. On and after the Redemption Date, the holders of the Exchangeable Shares called for redemption shall cease to be holders of such Exchangeable Shares and shall not be entitled to exercise any of the rights of holders in respect thereof, other than the right to receive their proportionate part of the total Redemption Price, unless payment of the total Redemption Price for such Exchangeable Shares shall not be made upon presentation and surrender of certificates in accordance with the foregoing provisions, in which case the rights of the holders shall remain unaffected until the total Redemption Price has been paid in the manner hereinbefore provided. The Company shall have the right at any time after the sending of notice of its intention to redeem the Exchangeable Shares as aforesaid to deposit or cause to be deposited the Exchangeable Share Consideration with respect to the Exchangeable Shares so called for redemption, or of such of the said Exchangeable Shares represented by certificates that have not at the date of such deposit been surrendered by the holders thereof in connection with such redemption, in a custodial account with any chartered bank or trust company in Canada named in such notice. Upon the later of such deposit being made and the Redemption Date, the Exchangeable Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the holders thereof after such deposit or Redemption Date, as the case may be, shall be limited to receiving their proportionate part of the total Redemption Price for such Exchangeable Shares so deposited, against presentation and surrender of the said certificates held by them, respectively, in accordance with the foregoing provisions. Upon such payment or deposit of such Exchangeable Share Consideration, the holders of the Exchangeable Shares shall thereafter be considered and deemed for all purposes to be holders of the Duke Energy Common Shares delivered to them or the custodian on their behalf; provided that in the case of a Redemption Date established in connection with a Distribution Date, the holders of Exchangeable Shares shall be considered and deemed for the purposes of the Duke Energy Rights Agreement to be and treated as record holders of Duke Energy Common Shares on and after the Redemption Date, regardless of when such payment or deposit of such Exchangeable Share Consideration is made. ARTICLE 8 PURCHASE FOR CANCELLATION 1-16 8.1 Subject to applicable law and the articles of the Company and notwithstanding Section 8.2, the Company may at any time and from time to time purchase for cancellation all or any part of the Exchangeable Shares by private agreement with any holder of Exchangeable Shares. 8.2 Subject to applicable law and the articles of the Company, the Company may at any time and from time to time purchase for cancellation all or any part of the outstanding Exchangeable Shares by tender to all the holders of record of Exchangeable Shares then outstanding or through the facilities of any stock exchange on which the Exchangeable Shares are listed or quoted at any price per share together with an amount equal to all declared and unpaid dividends thereon for which the record date has occurred prior to the date of purchase. If in response to an invitation for tenders under the provisions of this Section 8.2, more Exchangeable Shares are tendered at a price or prices acceptable to the Company than the Company is prepared to purchase, the Exchangeable Shares to be purchased by the Company shall be purchased as nearly as may be pro rata according to the number of shares tendered by each holder who submits a tender to the Company, provided that when shares are tendered at different prices, the pro rating shall be effected (disregarding fractions) only with respect to the shares tendered at the price at which more shares were tendered than the Company is prepared to purchase after the Company has purchased all the shares tendered at lower prices. If only part of the Exchangeable Shares represented by any certificate shall be purchased, a new certificate for the balance of such shares shall be issued at the expense of the Company. ARTICLE 9 VOTING RIGHTS 9.1 Except as required by applicable law and by Article 10, Section 11.1 and Section 12.2, the holders of the Exchangeable Shares shall not be entitled as such to receive notice of or to attend any meeting of the shareholders of the Company or to vote at any such meeting. ARTICLE 10 AMENDMENT AND APPROVAL 10.1 The rights, privileges, restrictions and conditions attaching to the Exchangeable Shares may be added to, changed or removed but only with the approval of the holders of the Exchangeable Shares given as hereinafter specified. 10.2 Any approval given by the holders of the Exchangeable Shares to add to, change or remove any right, privilege, restriction or condition attaching to the Exchangeable Shares or any other matter requiring the approval or consent of the holders of the Exchangeable Shares shall be deemed to have been sufficiently given if it shall have been given in accordance with applicable law subject to a minimum requirement that such approval be evidenced by resolution passed by not less than 66 2/3% of the votes cast on such resolution by holders represented in person or by proxy at a meeting of holders of Exchangeable Shares duly called and held at which the holders of at least 25% of the outstanding Exchangeable Shares at that time are present or represented by proxy; provided that if at any such meeting the holders of at least 25% of the outstanding Exchangeable Shares at that time are not present or represented by proxy within one- 1-17 half hour after the time appointed for such meeting, then the meeting shall be adjourned to such date not less than five days thereafter and to such time and place as may be designated by the Chair of such meeting. At such adjourned meeting, the holders of Exchangeable Shares present or represented by proxy thereat may transact the business for which the meeting was originally called and a resolution passed thereat by the affirmative vote of not less than 66 2/3% of the votes cast on such resolution by holders represented in person or by proxy at such meeting shall constitute the approval or consent of the holders of the Exchangeable Shares. For purposes of this section, any spoiled votes, illegible votes, defective votes and abstentions shall be deemed to be votes not cast. ARTICLE 11 RECIPROCAL CHANGES, ETC. IN RESPECT OF DUKE ENERGY COMMON SHARES 11.1 Each holder of an Exchangeable Share acknowledges that the Support Agreement provides, in part, that Duke Energy will not, without the prior approval of the Company and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 10.2 of these share provisions: (a) issue or distribute Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares) to the holders of all or substantially all of the then outstanding Duke Energy Common Shares by way of stock dividend or other distribution, other than an issue of Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares) to holders of Duke Energy Common Shares who (i) exercise an option to receive dividends in Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares) in lieu of receiving cash dividends, or (ii) pursuant to any dividend reinvestment plan or scrip dividend; (b) issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding Duke Energy Common Shares entitling them to subscribe for or to purchase Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares); or (c) issue or distribute to the holders of all or substantially all of the then outstanding Duke Energy Common Shares: (i) shares or securities of Duke Energy of any class other than Duke Energy Common Shares (other than shares convertible into or exchangeable for or carrying rights to acquire Duke Energy Common Shares); (ii) rights, options or warrants other than those referred to in Section 11.1(b) above; (iii) evidences of indebtedness of Duke Energy; or (iv) assets of Duke Energy, 1-18 unless the economic equivalent on a per share basis of such rights, options, warrants, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously to holders of the Exchangeable Shares. 11.2 Each holder of an Exchangeable Share acknowledges that the Support Agreement further provides, in part, that Duke Energy will not without the prior approval of the Company and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 10.2: (a) subdivide, redivide or change the then outstanding Duke Energy Common Shares into a greater number of Duke Energy Common Shares; (b) reduce, combine, consolidate or change the then outstanding Duke Energy Common Shares into a lesser number of Duke Energy Common Shares; or (c) reclassify or otherwise change the Duke Energy Common Shares or effect an amalgamation, merger, reorganization or other transaction affecting the Duke Energy Common Shares, unless the same or an economically equivalent change shall simultaneously be made to, or in the rights of the holders of, the Exchangeable Shares and such change is permitted under applicable law. The Support Agreement further provides, in part, that the aforesaid provisions of the Support Agreement shall not be changed without the approval of the holders of the Exchangeable Shares given in accordance with Section 10.2. ARTICLE 12 ACTIONS BY THE COMPANY UNDER SUPPORT AGREEMENT 12.1 The Company will take all such actions and do all such things as shall be necessary or advisable to perform and comply with and to ensure performance and compliance by Duke Energy, Callco and the Company with all provisions of the Support Agreement and the Voting Trust and Exchange Agreement applicable to Duke Energy, Callco and the Company, respectively, in accordance with the terms thereof including taking all such actions and doing all such things as shall be necessary or advisable to enforce to the fullest extent possible for the direct benefit of the Company all rights and benefits in favour of the Company under or pursuant thereto. 12.2 The Company shall not propose, agree to or otherwise give effect to any amendment to, or waiver or forgiveness of its rights or obligations under, the Support Agreement or the Voting Trust and Exchange Agreement without the approval of the holders of the Exchangeable Shares given in accordance with Section 10.2 other than such amendments, waivers and/or forgiveness as may be necessary or advisable for the purposes of: (a) adding to the covenants of the other parties to such agreement for the protection of the Company or the holders of the Exchangeable Shares thereunder; 1-19 (b) making such provisions or modifications not inconsistent with such agreement as may be necessary or desirable with respect to matters or questions arising thereunder which, in the good faith opinion of the Board of Directors, it may be expedient to make, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such provisions and modifications will not be prejudicial to the interests of the holders of the Exchangeable Shares; or (c) making such changes in or corrections to such agreement which, on the advice of counsel to the Company, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error contained therein, provided that the Board of Directors shall be of the good faith opinion, after consultation with counsel, that such changes or corrections will not be prejudicial to the interests of the holders of the Exchangeable Shares. ARTICLE 13 LEGEND; CALL RIGHTS; WITHHOLDING RIGHTS 13.1 The certificates evidencing the Exchangeable Shares shall contain or have affixed thereto a legend in form and on terms approved by the Board of Directors, with respect to the Support Agreement, the provisions of the Plan of Arrangement relating to the Liquidation Call Right and the Redemption Call Right, and the Voting and Exchange Trust Agreement (including the provisions with respect to the voting rights, exchange right and automatic exchange thereunder) and the Retraction Call Right. 13.2 Each holder of an Exchangeable Share, whether of record or beneficial, by virtue of becoming and being such a holder shall be deemed to acknowledge each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, in each case, in favour of Callco, and the overriding nature thereof in connection with the liquidation, dissolution or winding-up of the Company or any other distribution of the assets of the Company among its shareholders for the purpose of winding-up its affairs, or the retraction or redemption of Exchangeable Shares, as the case may be, and to be bound thereby in favour of Callco as therein provided. 13.3 The Company, Callco, Duke Energy and the Transfer Agent shall be entitled to deduct and withhold from any dividend or consideration otherwise payable to any holder of Exchangeable Shares such amounts as the Company, Callco, Duke Energy or the Transfer Agent is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada), the United States Internal Revenue Code of 1986 or any provision of provincial, state, territorial, local or foreign tax law, in each case, as amended. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes hereof as having been paid to the holder of the Exchangeable Shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required or permitted to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, the Company, Callco, Duke Energy and the Transfer Agent are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient 1-20 funds to the Company, Callco, Duke Energy or the Transfer Agent, as the case may be, to enable it to comply with such deduction or withholding requirement and the Company, Callco, Duke Energy or the Transfer Agent shall notify the holder thereof and remit any unapplied balance of the net proceeds of such sale. ARTICLE 14 GENERAL 14.1 Any notice, request or other communication to be given to the Company by a holder of Exchangeable Shares shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by telecopy or by delivery to the registered office of the Company and addressed to the attention of the Secretary of the Company. Any such notice, request or other communication, if given by mail, telecopy or delivery, shall only be deemed to have been given and received upon actual receipt thereof by the Company. 14.2 Any presentation and surrender by a holder of Exchangeable Shares to the Company or the Transfer Agent of certificates representing Exchangeable Shares in connection with the liquidation, dissolution or winding-up of the Company or the retraction or redemption of Exchangeable Shares shall be made by registered mail (postage prepaid) or by delivery to the registered office of the Company or to such office of the Transfer Agent as may be specified by the Company, in each case, addressed to the attention of the Secretary of the Company. Any such presentation and surrender of certificates shall only be deemed to have been made and to be effective upon actual receipt thereof by the Company or the Transfer Agent, as the case may be. Any such presentation and surrender of certificates made by registered mail shall be at the sole risk of the holder mailing the same. 14.3 Any notice, request or other communication to be given to a holder of Exchangeable Shares by or on behalf of the Company shall be in writing and shall be valid and effective if given by mail (postage prepaid) or by delivery to the address of the holder recorded in the register of the Company or, in the event of the address of any such holder not being so recorded, then at the last address of such holder known to the Company. Any such notice, request or other communication, if given by mail, shall be deemed to have been given and received on the third Business Day following the date of mailing and, if given by delivery, shall be deemed to have been given and received on the date of delivery. Accidental failure or omission to give any notice, request or other communication to one or more holders of Exchangeable Shares shall not invalidate or otherwise alter or affect any action or proceeding intended to be taken by the Company pursuant thereto. 14.4 Subject to the requirements of National Policy Statement 41 and any successor policy statement or rule of the Canadian Securities Administrators or other applicable law, for greater certainty, the Company shall not be required for any purpose under these share provisions to recognize or take account of Persons who are not recorded as such in the securities register for the Exchangeable Shares. 14.5 If the Company determines that mail service is or is threatened to be interrupted at the time when the Company is required or elects to give any notice to the holders of 1-21 Exchangeable Shares hereunder, the Company shall, notwithstanding the provisions hereof, give such notice by means of publication in The Globe and Mail; national edition, or any other English language daily newspaper or newspapers of general circulation in Canada and in a French language daily newspaper of general circulation in the Province of Quebec, once in each of two successive weeks, and notice so published shall be deemed to have been given on the latest date on which the first publication has taken place. If, by reason of any actual or threatened interruption of mail service due to strike, lock-out or otherwise, any notice to be given to the Company would be unlikely to reach its destination in a timely manner, such notice shall be valid and effective only if delivered personally to the Company in accordance with Section 14.1 or 14.2, as the case may be. 1-22 SCHEDULE A RETRACTION REQUEST [TO BE PRINTED ON EXCHANGEABLE SHARE CERTIFICATES] To 3946509 Canada Inc. ("Exchangeco") and 3058368 Nova Scotia Company ("Callco") This notice is given pursuant to Article 6 of the rights, privileges, restrictions and conditions (the "Share Provisions") attaching to the Exchangeable Shares of Exchangeco represented by this certificate and all capitalized words and expressions used in this notice that are defined in the Share Provisions have the meanings ascribed to such words and expressions in such Share Provisions. The undersigned hereby notifies Exchangeco that, subject to the Retraction Call Right referred to below, the undersigned desires to have Exchangeco redeem in accordance with Article 6 of the Share Provisions: [ ] all share(s) represented by this certificate; or [ ] _________ share(s) only represented by this certificate. The undersigned hereby notifies Exchangeco that the Retraction Date shall be ___________________________. NOTE: The Retraction Date must be a Business Day and must not be less than 10 Business Days nor more than 15 Business Days after the date upon which this notice is received by Exchangeco. If no such Business Day is specified above, the Retraction Date shall be deemed to be the 15th Business Day after the date on which this notice is received by Exchangeco. The undersigned acknowledges the overriding Retraction Call Right of Callco to purchase all but not less than all the Retracted Shares from the undersigned and that this notice is and shall be deemed to be a revocable offer by the undersigned to sell the Retracted Shares to Callco in accordance with the Retraction Call Right on the Retraction Date for the Purchase Price and on the other terms and conditions set out in Section 6.3 of the Share Provisions. This Retraction Request, and this offer to sell the Retracted Shares to Callco, may be revoked and withdrawn by the undersigned only by notice in writing given to Exchangeco at any time before the close of business on the Business Day immediately preceding the Retraction Date. The undersigned acknowledges that if, as a result of solvency provisions of applicable law, Exchangeco is unable to redeem all Retracted Shares, the undersigned will be deemed to have exercised the Exchange Right (as defined in the Voting and Exchange Trust Agreement) so as to require Duke Energy to purchase the unredeemed Retracted Shares. A-1 The undersigned hereby represents and warrants to Callco and Exchangeco that the undersigned: [ ] is (select one) [ ] is not a resident in Canada for purposes of the Income Tax Act (Canada). The undersigned acknowledges that in the absence of an indication that the undersigned is a resident in Canada, withholding on account of Canadian tax may be made from amounts payable to the undersigned on the redemption or purchase of the Retracted Shares. The undersigned hereby represents and warrants to Callco and Exchangeco that the undersigned has good title to, and owns, the share(s) represented by this certificate to be acquired by Callco or Exchangeco, as the case may be, free and clear of all liens, claims and encumbrances. _______ ______________________________________ __________________________ (Date) (Signature of Shareholder) (Guarantee of Signature) [ ] Please check box if the securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares are to be held for pick-up by the shareholder from the Transfer Agent, failing which the securities and any cheque(s) will be mailed to the last address of the shareholder as it appears on the register. NOTE: This panel must be completed and this certificate, together with such additional documents as the Transfer Agent may require, must be deposited with the Transfer Agent. The securities and any cheque(s) resulting from the retraction or purchase of the Retracted Shares will be issued and registered in, and made payable to, respectively, the name of the shareholder as it appears on the register of Exchangeco and the securities and any cheque(s) resulting from such retraction or purchase will be delivered to such shareholder as indicated above, unless the form appearing immediately below is duly completed. Date:__________________ Name of Person in Whose Name Securities or Cheque(s) Are to be Registered, Issued or Delivered (please print): ______________________________________________________ Street Address or P.O. Box: ____________________________________________________ Signature of Shareholder: ______________________________________________________ City, Province and Postal Code: ________________________________________________ Signature Guaranteed by: _______________________________________________________ A-2 NOTE: If this Retraction Request is for less than all of the shares represented by this certificate, a certificate representing the remaining share(s) of Exchangeco represented by this certificate will be issued and registered in the name of the shareholder as it appears on the register of Exchangeco, unless the Share Transfer Power on the share certificate is duly completed in respect of such share(s). A-3 SCHEDULE F FORM OF SUPPORT AGREEMENT SUPPORT AGREEMENT ("Agreement") made as of the ___ day of _____, 200_. B E T W E E N: DUKE ENERGY CORPORATION, a corporation existing under the laws of the State of North Carolina (hereinafter referred to as "Duke Energy"), OF THE FIRST PART, - and - 3058368 NOVA SCOTIA COMPANY, an unlimited liability company existing under the laws of the Province of Nova Scotia (hereinafter referred to as "Callco"), OF THE SECOND PART, - and - 3946509 CANADA INC., a company existing under the laws of Canada (hereinafter referred to as "Exchangeco"), OF THE THIRD PART. WHEREAS, in connection with a combination agreement (the "Combination Agreement") made as of September 20, 2001 among Duke Energy, Exchangeco, Callco and Westcoast Energy Inc., a corporation existing under the laws of Canada ("Westcoast"), Exchangeco is to issue exchangeable shares (the "Exchangeable Shares") to certain holders of common shares in the capital of Westcoast pursuant to the plan of arrangement (the "Arrangement") contemplated by the Combination Agreement; and WHEREAS, pursuant to the Combination Agreement, Duke Energy and Exchangeco have agreed to execute a support agreement substantially in the form of this Agreement on the Effective Date (as defined in the Combination Agreement); NOW, THEREFORE, in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto covenant and agree as follows: ARTICLE 1 INTERPRETATION 1.1 Defined Terms Each term denoted herein by initial capital letters and not otherwise defined herein shall have the meaning ascribed thereto in the rights, privileges, restrictions and conditions (collectively, the "Exchangeable Share Provisions") attaching to the Exchangeable Shares attached as Appendix 1 to the Arrangement and as set out in the Articles of Arrangement of Westcoast, unless the context requires otherwise. 1.2 Interpretation Not Affected by Headings The division of this agreement into articles, sections and other portions and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an "Article" or "Section" followed by a number refer to the specified Article or Section of this Agreement. The terms "this Agreement," "hereof," "herein" and "hereunder" and similar expressions refer to this agreement and not to any particular Article, Section or other portion hereof. 1.3 Rules of Construction Unless otherwise specifically indicated or the context otherwise requires, (a) all references to "dollars" or "$" mean United States dollars, (b) words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders, and (c) "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." 1.4 Date for any Action If the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day. ARTICLE 2 COVENANTS OF DUKE ENERGY AND EXCHANGECO 2.1 Covenants Regarding Exchangeable Shares So long as any Exchangeable Shares not owned by Duke Energy or its Affiliates are outstanding, Duke Energy will: (a) not declare or pay any dividend on the Duke Energy Common Shares unless (i) Exchangeco shall (w) on the same day declare or pay, as the case may be, an equivalent dividend (as provided for in the Exchangeable Share Provisions) on the Exchangeable Shares (an "Equivalent Dividend") and (x) Exchangeco shall have sufficient money or other assets or authorized but unissued securities available to enable the due declaration and the due and punctual payment, in accordance with -2- applicable law, of any such Equivalent Dividend, or (ii) Exchangeco shall (y) subdivide the Exchangeable Shares in lieu of stock dividend thereon (as provided for in the Exchangeable Share Provisions) (an "Equivalent Stock Subdivision"), and (z) have sufficient authorized but unissued securities available to enable the Equivalent Stock Subdivision; (b) advise Exchangeco sufficiently in advance of the declaration by Duke Energy of any dividend on Duke Energy Common Shares and take all such other actions as are reasonably necessary, in cooperation with Exchangeco, to ensure that (i) the respective declaration date, record date and payment date for an Equivalent Dividend on the Exchangeable Shares shall be the same as the declaration date, record date and payment date for the corresponding dividend on the Duke Energy Common Shares, or (ii) the record date and effective date for an Equivalent Stock Subdivision shall be the same as the record date and payment date for the stock dividend on the Duke Energy Common Shares; (c) ensure that the record date for any dividend declared on Duke Energy Common Shares is not less than 10 Business Days after the declaration date of such dividend; (d) take all such actions and do all such things as are reasonably necessary or desirable to enable and permit Exchangeco, in accordance with applicable law, to pay and otherwise perform its obligations with respect to the satisfaction of the Liquidation Amount, the Retraction Price or the Redemption Price in respect of each issued and outstanding Exchangeable Share (other than Exchangeable Shares owned by Duke Energy or its Affiliates) upon the liquidation, dissolution or winding-up of Exchangeco or any other distribution of the assets of Exchangeco among its shareholders for the purpose of winding-up its affairs, the delivery of a Retraction Request by a holder of Exchangeable Shares or a redemption of Exchangeable Shares by Exchangeco, as the case may be, including all such actions and all such things as are necessary or desirable to enable and permit Exchangeco to cause to be delivered Duke Energy Common Shares to the holders of Exchangeable Shares in accordance with the provisions of Article 5, 6 or 7, as the case may be, of the Exchangeable Share Provisions; and (e) take all such actions and do all such things as are reasonably necessary or desirable to enable and permit Callco, in accordance with applicable law, to perform its obligations arising upon the exercise by it of the Liquidation Call Right, the Retraction Call Right or the Redemption Call Right, including all such actions and all such things as are necessary or desirable to enable and permit Callco to cause to be delivered Duke Energy Common Shares to the holders of Exchangeable Shares in accordance with the provisions of the Liquidation Call Right, the Retraction Call Right or the Redemption Call Right, as the case may be. 2.2 Segregation of Funds Duke Energy will cause Exchangeco to deposit a sufficient amount of funds in a separate account of Exchangeco and segregate a sufficient amount of such other assets and property as is -3- necessary to enable Exchangeco to pay dividends when due and to pay or otherwise satisfy its respective obligations under Article 5, 6 or 7 of the Exchangeable Share Provisions, as applicable. 2.3 Reservation of Duke Energy Common Shares Duke Energy hereby represents, warrants and covenants in favour of Exchangeco and Callco that Duke Energy has either issued to the Trustee or reserved for issuance and will, at all times while any Exchangeable Shares (other than Exchangeable Shares held by Duke Energy or its Affiliates) are outstanding, keep available, free from preemptive and other rights, out of its authorized and unissued capital stock such number of Duke Energy Common Shares (or other shares or securities into which Duke Energy Common Shares may be reclassified or changed as contemplated by Section 2.7 hereof) (a) as is equal to the sum of (i) the number of Exchangeable Shares issued and outstanding from time to time and (ii) the number of Exchangeable Shares issuable upon the exercise of all rights to acquire Exchangeable Shares outstanding from time to time and (b) as are now and may hereafter be required to enable and permit Duke Energy to meet its obligations under the Voting and Exchange Trust Agreement and under any other security or commitment pursuant to the Arrangement with respect to which Duke Energy may now or hereafter be required to issue Duke Energy Common Shares, to enable and permit Callco to meet its obligations arising upon exercise by it of each of the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right and to enable and permit Exchangeco to meet its obligations hereunder and under the Exchangeable Share Provisions. 2.4 Notification of Certain Events In order to assist Duke Energy in compliance with its obligations hereunder and to permit Callco to exercise the Liquidation Call Right, the Retraction Call Right and the Redemption Call Right, Exchangeco will notify Duke Energy and Callco of each of the following events at the times set forth below: (a) in the event of any determination by the Board of Directors of Exchangeco to institute voluntary liquidation, dissolution or winding-up proceedings with respect to Exchangeco or to effect any other distribution of the assets of Exchangeco among its shareholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution; (b) promptly, upon the earlier of receipt by Exchangeco of notice of and Exchangeco otherwise becoming aware of any threatened or instituted claim, suit, petition or other proceeding with respect to the involuntary liquidation, dissolution or winding-up of Exchangeco or to effect any other distribution of the assets of Exchangeco among its shareholders for the purpose of winding up its affairs; (c) promptly, upon receipt by Exchangeco of a Retraction Request; (d) promptly following the date on which notice of redemption is given to holders of Exchangeable Shares, upon the determination of a Redemption Date in accordance with the Exchangeable Share Provisions; and -4- (e) promptly upon the issuance by Exchangeco of any Exchangeable Shares or rights to acquire Exchangeable Shares (other than the issuance of Exchangeable Shares and rights to acquire Exchangeable Shares in exchange for outstanding Westcoast Common Shares pursuant to the Arrangement). 2.5 Delivery of Duke Energy Common Shares to Exchangeco and Callco In furtherance of its obligations under Sections 2.1(d) and (e) hereof, upon notice from Exchangeco or Callco of any event that requires Exchangeco or Callco to cause to be delivered Duke Energy Common Shares to any holder of Exchangeable Shares, Duke Energy shall forthwith issue and deliver the requisite number of Duke Energy Common Shares to be received by, and issued to or to the order of, the former holder of the surrendered Exchangeable Shares, as Exchangeco or Callco shall direct. All such Duke Energy Common Shares shall be duly authorized, validly issued and fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance. In consideration of the issuance and delivery of such Duke Energy Common Share, Callco or Exchangeco, as the case may be, shall pay a purchase price equal to the fair market value of such Duke Energy Common Share. 2.6 Qualification of Duke Energy Common Shares Duke Energy covenants that if any Duke Energy Common Shares (or other shares or securities into which Duke Energy Common Shares may be reclassified or changed as contemplated by Section 2.7 hereof) (other than Duke Energy Common Shares held by the Trustee) to be issued and delivered hereunder (including for greater certainty, pursuant to the Exchangeable Share Provisions, or pursuant to the Exchange Right or the Automatic Exchange Rights (all as defined in the Voting and Exchange Trust Agreement)) require registration or qualification with, or approval of, or the filing of any document, including any prospectus or similar document, the taking of any proceeding with, or the obtaining of any order, ruling or consent from, any governmental or regulatory authority under any Canadian or United States federal, provincial, territorial or state securities or other law or regulation or pursuant to the rules and regulations of any securities or other regulatory authority, or the fulfillment of any other United States or Canadian legal requirement (collectively, the "Applicable Laws") before such shares (or other shares or securities into which Duke Energy Common Shares may be reclassified or changed as contemplated by Section 2.7 hereof) may be issued and delivered by Duke Energy at the direction of Exchangeco or Callco, if applicable, to the holder of surrendered Exchangeable Shares or in order that such shares (or other shares or securities into which Duke Energy Common Shares may be reclassified or changed as contemplated by Section 2.7 hereof) may be freely traded thereafter (other than any restrictions of general application on transfer by reason of a holder being a "control person" of Duke Energy for purposes of Canadian provincial securities law or an "affiliate" of Duke Energy for purposes of United States federal or state securities law), Duke Energy will use its reasonable best efforts and in good faith expeditiously take all such actions and do all such things as are necessary or desirable and within its power to cause such Duke Energy Common Shares (or other shares or securities into which Duke Energy Common Shares may be reclassified or changed as contemplated by Section 2.7 hereof) to be and remain duly registered, qualified or approved under United States and/or Canadian law, as the case may be, to the extent expressly provided in the Combination Agreement. Duke Energy will use its reasonable best efforts and in good faith expeditiously take all such actions and do all -5- such things as are reasonably necessary or desirable to cause all Duke Energy Common Shares (or other shares or securities into which Duke Energy Common Shares may be reclassified or changed as contemplated by Section 2.7 hereof) (other than Duke Energy Common Shares held by the Trustee) to be delivered hereunder to be listed, quoted or posted for trading on all stock exchanges and quotation systems on which outstanding Duke Energy Common Shares (or other shares or securities into which Duke Energy Common Shares may be reclassified or changed as contemplated by Section 2.7 hereof) are listed and are quoted or posted for trading at such time. 2.7 Economic Equivalence So long as any Exchangeable Shares not owned by Duke Energy or its Affiliates are outstanding: (a) Duke Energy will not, without prior approval of Exchangeco and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 10.2 of the Exchangeable Share Provisions: (i) issue or distribute Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares) to the holders of all or substantially all of the then outstanding Duke Energy Common Shares by way of stock dividend or other distribution, other than an issue of Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares) to holders of Duke Energy Common Shares who (A) exercise an option to receive dividends in Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares) in lieu of receiving cash dividends, or (B) pursuant to any dividend reinvestment plan or scrip dividend; or (ii) issue or distribute rights, options or warrants to the holders of all or substantially all of the then outstanding Duke Energy Common Shares entitling them to subscribe for or to purchase Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares); or (iii) issue or distribute to the holders of all or substantially all of the then outstanding Duke Energy Common Shares (A) shares or securities of Duke Energy of any class other than Duke Energy Common Shares (other than shares convertible into or exchangeable for or carrying rights to acquire Duke Energy Common Shares), (B) rights, options or warrants other than those referred to in Section 2.7(a)(ii) above, (C) evidences of indebtedness of Duke Energy or (D) assets of Duke Energy, unless the economic equivalent on a per share basis of such rights, options, warrants, securities, shares, evidences of indebtedness or other assets is issued or distributed simultaneously to holders of the Exchangeable Shares. -6- (b) Duke Energy will not without the prior approval of Exchangeco and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 10.2 of the Exchangeable Share Provisions: (i) subdivide, redivide or change the then outstanding Duke Energy Common Shares into a greater number of Duke Energy Common Shares; or (ii) reduce, combine, consolidate or change the then outstanding Duke Energy Common Shares into a lesser number of Duke Energy Common Shares; or (iii) reclassify or otherwise change Duke Energy Common Shares or effect an amalgamation, merger, reorganization or other transaction affecting the Duke Energy Common Shares, unless the same or an economically equivalent change shall simultaneously be made to, or in the rights of the holders of, the Exchangeable Shares. (c) Duke Energy will ensure that the record date for any event referred to in Section 2.7(a) or 2.7(b) above, or (if no record date is applicable for such event) the effective date for any such event, is not less than five Business Days after the date on which such event is declared or announced by Duke Energy (with contemporaneous notification thereof by Duke Energy to Exchangeco). (d) The Board of Directors of Exchangeco shall determine, in good faith and in its sole discretion, economic equivalence for the purposes of any event referred to in Section 2.7(a) or 2.7(b) above and each such determination shall be conclusive and binding on Duke Energy. In making each such determination, the following factors shall, without excluding other factors determined by the Board of Directors of Exchangeco to be relevant, be considered by the Board of Directors of Exchangeco: (i) in the case of any stock dividend or other distribution payable in Duke Energy Common Shares, the number of such shares issued in proportion to the number of Duke Energy Common Shares previously outstanding; (ii) in the case of the issuance or distribution of any rights, options or warrants to subscribe for or purchase Duke Energy Common Shares (or securities exchangeable for or convertible into or carrying rights to acquire Duke Energy Common Shares), the relationship between the exercise price of each such right, option or warrant and the Current Market Price; (iii) in the case of the issuance or distribution of any other form of property (including any shares or securities of Duke Energy of any class other than Duke Energy Common Shares, any rights, options or warrants other than those referred to in Section 2.7(d)(ii) above, any evidences of indebtedness of Duke Energy or any assets of Duke Energy), the relationship between the fair market value (as determined by the Board of Directors of Exchangeco in the manner above contemplated) of such property to be issued or distributed with respect to each outstanding Duke Energy Common Share and the Current Market Price; -7- (iv) in the case of any subdivision, redivision or change of the then outstanding Duke Energy Common Shares into a greater number of Duke Energy Common Shares or the reduction, combination, consolidation or change of the then outstanding Duke Energy Common Shares into a lesser number of Duke Energy Common Shares or any amalgamation, merger, reorganization or other transaction affecting Duke Energy Common Shares, the effect thereof upon the then outstanding Duke Energy Common Shares; and (v) in all such cases, the general taxation consequences of the relevant event to holders of Exchangeable Shares to the extent that such consequences may differ from the taxation consequences to holders of Duke Energy Common Shares as a result of differences between taxation laws of Canada and the United States (except for any differing consequences arising as a result of differing marginal taxation rates and without regard to the individual circumstances of holders of Exchangeable Shares). (e) Exchangeco agrees that, to the extent required, upon due notice from Duke Energy, Exchangeco will use its best efforts to take or cause to be taken such steps as may be necessary for the purposes of ensuring that appropriate dividends are paid or other distributions are made by Exchangeco, or subdivisions, redivisions or changes are made to the Exchangeable Shares, in order to implement the required economic equivalent with respect to the Duke Energy Common Shares and Exchangeable Shares as provided for in this Section 2.7. 2.8 Tender Offers In the event that a tender offer, share exchange offer, issuer bid, take-over bid or similar transaction with respect to Duke Energy Common Shares (an "Offer") is proposed by Duke Energy or is proposed to Duke Energy or its shareholders and is recommended by the Board of Directors of Duke Energy, or is otherwise effected or to be effected with the consent or approval of the Board of Directors of Duke Energy, and the Exchangeable Shares are not redeemed by Exchangeco or purchased by Callco pursuant to the Redemption Call Right, Duke Energy will use its reasonable best efforts expeditiously and in good faith to take all such actions and do all such things as are necessary or desirable to enable and permit holders of Exchangeable Shares (other than Duke Energy and its Affiliates) to participate in such Offer to the same extent and on an economically equivalent basis as the holders of Duke Energy Common Shares, without discrimination. Without limiting the generality of the foregoing, Duke Energy will use its reasonable best efforts expeditiously and in good faith to ensure that holders of Exchangeable Shares may participate in each such Offer without being required to retract Exchangeable Shares as against Exchangeco (or, if so required, to ensure that any such retraction, shall be effective only upon, and shall be conditional upon, the closing of such Offer and only to the extent necessary to tender or deposit to the Offer). Nothing herein shall affect the rights of Exchangeco to redeem (or Callco to purchase pursuant to the Redemption Call Right) Exchangeable Shares, as applicable, in the event of a Duke Energy Control Transaction. -8- 2.9 Ownership of Outstanding Shares Without the prior approval of Exchangeco and the prior approval of the holders of the Exchangeable Shares given in accordance with Section 10.2 of the Exchangeable Share Provisions, Duke Energy covenants and agrees in favour of Exchangeco that, as long as any outstanding Exchangeable Shares are owned by any Person other than Duke Energy or any of its Affiliates, Duke Energy will be and remain the direct or indirect beneficial owner of all issued and outstanding voting shares in the capital of Exchangeco and Callco. Notwithstanding the foregoing, Duke Energy shall not be in violation of this section if any person or group of persons acting jointly or in concert acquires all or substantially all of the assets of Duke Energy or the Duke Energy Common Shares pursuant to any merger of Duke Energy pursuant to which Duke Energy was not the surviving corporation. 2.10 Duke Energy and Affiliates Not to Vote Exchangeable Shares Duke Energy covenants and agrees that it will appoint and cause to be appointed proxyholders with respect to any Exchangeable Shares held by it and its Affiliates for the sole purpose of attending each meeting of holders of Exchangeable Shares in order to be counted as part of the quorum for each such meeting. Duke Energy further covenants and agrees that it will not, and will cause its Affiliates not to, exercise any voting rights which may be exercisable by holders of Exchangeable Shares from time to time pursuant to the Exchangeable Share Provisions or pursuant to the provisions of the CBCA (or any successor or other corporate statute by which Exchangeco may in the future be governed) with respect to any Exchangeable Shares held by it or by its Affiliates in respect of any matter considered at any meeting of holders of Exchangeable Shares. 2.11 Rule l0b-18 Purchases For greater certainty, nothing contained in this Agreement, including the obligations of Duke Energy contained in Section 2.8 hereof, shall limit the ability of Duke Energy or Exchangeco to make a "Rule 10b-18 purchase" of Duke Energy Common Shares pursuant to Rule 10b-18 of the United States Securities Exchange Act of 1934, as amended, or any successor rule. 2.12 Stock Exchange Listing Duke Energy covenants and agrees in favour of Exchangeco that, as long as any outstanding Exchangeable Shares are owned by any Person other than Duke Energy or any of its Affiliates, Duke Energy will use its reasonable best efforts to maintain a listing for such Exchangeable Shares on a Canadian stock exchange. ARTICLE 3 DUKE ENERGY SUCCESSORS 3.1 Certain Requirements in Respect of Combination, etc. Duke Energy shall not consummate any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or -9- substantially all of its undertaking, property and assets would become the property of any other Person or, in the case of a merger, of the continuing corporation resulting therefrom unless, but may do so if: (a) such other Person or continuing corporation (the "Duke Energy Successor") by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, an agreement supplemental hereto and such other instruments (if any) as are reasonably necessary or advisable to evidence the assumption by the Duke Energy Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such Duke Energy Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of Duke Energy under this Agreement; and (b) such transaction shall be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the other parties hereunder or the holders of Exchangeable Shares. 3.2 Vesting of Powers in Successor Whenever the conditions of Section 3.1 have been duly observed and performed, the parties, if required by Section 3.1, shall execute and deliver the supplemental agreement provided for in Section 3.1(a) and thereupon the Duke Energy Successor shall possess and from time to time may exercise each and every right and power of Duke Energy under this Agreement in the name of Duke Energy or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the Board of Directors of Duke Energy or any officers of Duke Energy may be done and performed with like force and effect by the directors or officers of such Duke Energy Successor. 3.3 Wholly-Owned Subsidiaries Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned direct or indirect subsidiary of Duke Energy with or into Duke Energy or the winding-up, liquidation or dissolution of any wholly-owned subsidiary of Duke Energy provided that all of the assets of such subsidiary are transferred to Duke Energy or another wholly-owned direct or indirect subsidiary of Duke Energy and any such transactions are expressly permitted by this Article 3. ARTICLE 4 GENERAL 4.1 Term This Agreement shall come into force and be effective as of the date hereof and shall terminate and be of no further force and effect at such time as no Exchangeable Shares (or securities or rights convertible into or exchangeable for or carrying rights to acquire Exchangeable Shares) are held by any Person other than Duke Energy and any of its Affiliates. -10- 4.2 Changes in Capital of Duke Energy and Exchangeco At all times after the occurrence of any event contemplated pursuant to Sections 2.7 and 2.8 hereof or otherwise, as a result of which either Duke Energy Common Shares or the Exchangeable Shares or both are in any way changed, this Agreement shall forthwith be deemed amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which Duke Energy Common Shares or the Exchangeable Shares or both are so changed and the parties hereto shall execute and deliver an agreement in writing giving effect to and evidencing such necessary amendments and modifications. 4.3 Notices to Parties All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally, telecopied (which is confirmed) or dispatched (postage prepaid) to a nationally recognized overnight courier service with overnight delivery instructions, in each case addressed to the particular party at: (a) If to Duke Energy, at: ________________________________________ ________________________________________ ________________________________________ Attention: _____________________________ Telecopier Number: (_____) _____-______ (b) If to Exchangeco, at: ________________________________________ ________________________________________ ________________________________________ Attention: _____________________________ Telecopier Number: (_____) _____-______ or at such other address of which any party may, from time to time, advise the other parties by notice in writing given in accordance with the foregoing. 4.4 Assignment No party hereto may assign this Agreement or any of its rights, interests or obligations under this Agreement or the Arrangement (whether by operation of law or otherwise) except that Exchangeco may assign in its sole discretion, any or all of its rights, interests and obligations hereunder to any wholly-owned subsidiary of Duke Energy. 4.5 Binding Effect Subject to Section 4.4, this Agreement and the Arrangement shall be binding upon, enure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. -11- 4.6 Amendments, Modifications This Agreement may not be amended or modified except by an agreement in writing executed by Exchangeco, Callco and Duke Energy and approved by the holders of the Exchangeable Shares in accordance with Section 10.2 of the Exchangeable Share Provisions. 4.7 Ministerial Amendments Notwithstanding the provisions of Section 4.6, the parties to this Agreement may in writing at any time and from time to time, without the approval of the holders of the Exchangeable Shares, amend or modify this Agreement for the purposes of: (a) adding to the covenants of any or all parties provided that the board of directors of each of Exchangeco, Callco and Duke Energy shall be of the good faith opinion that such additions will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares; (b) making such amendments or modifications not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the board of directors of each of Exchangeco, Callco and Duke Energy, it may be expedient to make, provided that each such board of directors shall be of the good faith opinion that such amendments or modifications will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares; or (c) making such changes or corrections which, on the advice of counsel to Exchangeco, Callco and Duke Energy, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the board of directors of each of Exchangeco, Callco and Duke Energy shall be of the good faith opinion that such changes or corrections will not be prejudicial to the rights or interests of the holders of the Exchangeable Shares. 4.8 Meeting to Consider Amendments Exchangeco, at the request of Duke Energy, shall call a meeting or meetings of the holders of the Exchangeable Shares for the purpose of considering any proposed amendment or modification requiring approval pursuant to Section 4.6 hereof. Any such meeting or meetings shall be called and held in accordance with the bylaws of Exchangeco, the Exchangeable Share Provisions and all applicable laws. 4.9 Amendments Only in Writing No amendment to or modification or waiver of any of the provisions of this Agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto. -12- 4.10 Governing Laws; Consent to Jurisdiction This Agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein and shall be treated in all respects as a British Columbia contract. Each party hereby irrevocably attorns to the jurisdiction of the courts of the Province of British Columbia in respect of all matters arising under or in relation to this Agreement. 4.11 Severability If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 4.12 Counterparts This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. DUKE ENERGY CORPORATION By: ------------------------------ Name: ------------------------------ Title: ------------------------------ 3946509 CANADA INC. By: ------------------------------ Name: ------------------------------ Title: ------------------------------ 3058368 NOVA SCOTIA COMPANY By: ------------------------------ Name: ------------------------------ Title: ------------------------------ -13- SCHEDULE G FORM OF VOTING AND EXCHANGE TRUST AGREEMENT VOTING AND EXCHANGE AGREEMENT ("Agreement") made as of the ___ day of _________, 2002. BETWEEN: DUKE ENERGY CORPORATION, a corporation existing under the laws of the State of North Carolina (hereinafter referred to as "Duke Energy"), OF THE FIRST PART, - and - 3946509 CANADA INC., a corporation existing under the laws of Canada (hereinafter referred to as "Exchangeco"), OF THE SECOND PART, - and - Computershare Trust Company, Inc. a United States trust company incorporated under the laws of the State of Colorado (hereinafter referred to as the "Trustee"), OF THE THIRD PART. WHEREAS, in connection with the Combination Agreement, Exchangeco may be required to issue Exchangeable Shares to certain holders of common shares in the capital of Westcoast pursuant to the Plan of Arrangement contemplated in the Combination Agreement; and WHEREAS, pursuant to the Combination Agreement, Duke Energy and Exchangeco have agreed to execute a voting and exchange trust agreement substantially in the form of this Agreement; NOW, THEREFORE, in consideration of the respective covenants and agreements provided in this Agreement and for other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the parties hereto covenant and agree as follows: ARTICLE 1 INTERPRETATION 1.1 Definitions In this Agreement, unless the context otherwise requires, the following terms shall have the following meanings respectively: "Affiliate" has the meaning ascribed thereto in the Securities Act, unless otherwise expressly stated herein; "Arrangement" means the arrangement under Section 192 of the CBCA on the terms and subject to the conditions set out in the Plan of Arrangement, subject to any amendments or variations thereto made in accordance with Article 6 of the Plan of Arrangement and Section 7.1 of the Combination Agreement or made at the direction of the Court; "Automatic Exchange Rights" means the benefit of the obligation of Duke Energy to effect the automatic exchange of Exchangeable Shares for Duke Energy Common Shares pursuant to Section 5.12; "Beneficiaries" means the registered holders from time to time of Exchangeable Shares, other than Duke Energy and its Affiliates; "Beneficiary Votes" has the meaning ascribed thereto in Section 4.2; "Business Day" means any day on which (i) commercial banks are generally open for business in New York, New York and Vancouver, British Columbia, other than a Saturday, a Sunday or a day observed as a holiday in New York, New York under the laws of the State of New York or the federal laws of the United States of America or in Vancouver, British Columbia under the laws of the Province of British Columbia or the federal laws of Canada or (ii) the NYSE is open for trading; "Callco" means 3058368 Nova Scotia Company, an unlimited liability company existing under the laws of the Province of Nova Scotia; "CBCA" means the Canada Business Corporations Act as now in effect and as it may be amended from time to time prior to the date hereof; "Combination Agreement" means the combination agreement made as of September 20, 2001 among Duke Energy, Exchangeco, Callco and Westcoast, as amended, supplemented and/or restated in accordance therewith prior to the date hereof, providing for, among other things, the Arrangement; "Court" has the meaning ascribed thereto in the Plan of Arrangement; "Distribution Date" has the meaning ascribed thereto in the Duke Energy Rights Agreement; -2- VOTING AND EXCHANGE TRUST AGREEMENT "Duke Energy Common Shares" means the shares of common stock, no par value per share, in the capital of Duke Energy; "Duke Energy Consent" has the meaning ascribed thereto in Section 4.2; "Duke Energy Meeting" has the meaning ascribed thereto in Section 4.2; "Duke Energy Rights Agreement" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Duke Energy Successor" has the meaning ascribed thereto in Section 10.1(a). "Equivalent Vote Amount" means, with respect to any matter, proposition or question on which holders of Duke Energy Common Shares are entitled to vote, consent or otherwise act, the number of votes to which a holder of one Duke Energy Common Share is entitled with respect to such matter, proposition or question; "Exchange Right" has the meaning ascribed thereto in Section 5.1; "Exchangeable Shares" means the non-voting exchangeable shares in the capital of Exchangeco, having substantially the rights, privileges, restrictions and conditions set out in Appendix 1 to the Plan of Arrangement; "Exchangeable Share Consideration" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Exchangeable Share Price" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Exchangeable Share Provisions" means the rights, privileges, restrictions and conditions attaching to the Exchangeable Shares; "Final Order" means the final order of the Court approving the Arrangement as such order may be amended by the Court at any time prior to the date hereof or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed; "Indemnified Parties" has the meaning ascribed thereto in Section 8.1; "Insolvency Event" means (i) the institution by Exchangeco of any proceeding to be adjudicated a bankrupt or insolvent or to be wound up, or the consent of Exchangeco to the institution of bankruptcy, insolvency or winding-up proceedings against it, or (ii) the filing of a petition, answer or consent seeking dissolution or winding-up under any bankruptcy, insolvency or analogous laws, including the Companies Creditors' Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the failure by Exchangeco to contest in good faith any such proceedings commenced in respect of Exchangeco within 30 days of becoming aware thereof, or the consent by Exchangeco to the filing of any such petition or to the appointment of a receiver, or (iii) the making by Exchangeco of a general assignment for the benefit of creditors, or the admission in writing by Exchangeco of its inability to pay its debts generally as they -3- VOTING AND EXCHANGE TRUST AGREEMENT become due, or (iv) Exchangeco not being permitted, pursuant to solvency requirements of applicable law, to redeem any Retracted Shares pursuant to Section 6.6 of the Exchangeable Share Provisions; "Liquidation Call Right" has the meaning ascribed thereto in the Plan of Arrangement; "Liquidation Event" has the meaning ascribed thereto in Section 5.12(b); "Liquidation Event Effective Time" has the meaning ascribed thereto in Section 5.12(c); "List" has the meaning ascribed thereto in Section 4.6; "NYSE" means The New York Stock Exchange, Inc.; "Officer's Certificate" means, with respect to Duke Energy or Exchangeco, as the case may be, a certificate signed by any one of the authorized signatories of Duke Energy or Exchangeco, as the case may be; "person" includes any individual, firm, partnership, joint venture, venture capital fund, limited liability company, unlimited liability company, association, trust, trustee, executor, administrator, legal personal representative, estate, group, body corporate, corporation, unincorporated association or organization, government body, syndicate or other entity, whether or not having legal status; "Plan of Arrangement" means the plan of arrangement substantially in the form and content of Schedule E annexed to the Combination Agreement and any amendments or variations thereto made in accordance with Section 7.1 of the Combination Agreement or Article 6 of the Plan of Arrangement or made at the direction of the Court in the Final Order; "Redemption Call Right" has the meaning ascribed thereto in the Plan of Arrangement; "Redemption Date" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Retracted Shares" has the meaning ascribed thereto in Section 5.7; "Retraction Call Right" has the meaning ascribed thereto in the Exchangeable Share Provisions; "Securities Act" means the Securities Act (Ontario) and the rules, regulations and policies made thereunder, as now in effect and as they may be amended from time to time prior to the Effective Date; "Support Agreement" means that certain support agreement made as of even date herewith between Exchangeco, Callco and Duke Energy substantially in the form and content of Schedule F to the Combination Agreement, with such changes thereto as the parties to the Combination Agreement, acting reasonably, may agree; -4- VOTING AND EXCHANGE TRUST AGREEMENT "Trust" means the trust created by this Agreement; "Trust Estate" means the Duke Energy Common Shares, any other securities, the Exchange Right, the Automatic Exchange Rights and any money or other property which may be held by the Trustee from time to time pursuant to this Agreement; "Voting Rights" means the voting rights of the Duke Energy Common Shares held by the Trustee in respect of which the Beneficiaries are, in accordance with this Agreement, entitled to instruct the Trustee to vote; "Westcoast" means Westcoast Energy Inc., a corporation existing under the laws of Canada; 1.2 Interpretation Not Affected by Headings, etc. The division of this Agreement into articles, sections and other portions and the insertion of headings are for convenience of reference only and should not affect the construction or interpretation hereof. Unless otherwise indicated, all references to an "Article" or "Section" followed by a number refer to the specified Article or Section of this Agreement. The terms "this Agreement," "hereof," "herein" and "hereunder" and similar expressions refer to this Agreement and not to any particular Article, Section or other portion hereof. 1.3 Rules of Construction Unless otherwise specifically indicated or the context otherwise requires, (a) all references to "dollars" or "$" mean United States dollars, (b) words importing the singular shall include the plural and vice versa and words importing any gender shall include all genders, and (c) "include," "includes" and "including" shall be deemed to be followed by the words "without limitation." 1.4 Date for any Action In the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a Business Day, such action shall be required to be taken on the next succeeding day that is a Business Day. ARTICLE 2 PURPOSE OF AGREEMENT 2.1 Establishment of Trust The purpose of this Agreement is to create the Trust for the benefit of the Beneficiaries and Duke Energy, as herein provided. The Trustee will hold Duke Energy Common Shares in order to enable the Trustee to exercise the Voting Rights and will hold the Exchange Right and the Automatic Exchange Rights in order to enable the Trustee to exercise such rights and will hold the rights relating to the covenant of Duke Energy in Section 3.5 hereof, in each case as trustee for and on behalf of the Beneficiaries as provided in this Agreement. The Trustee will -5- VOTING AND EXCHANGE TRUST AGREEMENT hold the Duke Energy Common Shares for and on behalf of Duke Energy for all other rights associated with such Duke Energy Common Shares other than the Voting Rights. ARTICLE 3 DUKE ENERGY COMMON SHARES 3.1 Issue and Ownership of the Duke Energy Common Shares Duke Energy hereby agrees to issue to, and deposit with, the Trustee from time to time such number of Duke Energy Common Shares so that upon such deposit the Trustee shall hold a number of Duke Energy Common Shares which is equal to the number of Exchangeable Shares issued and outstanding as of such time (other than Exchangeable Shares held by Duke Energy or any Affiliate thereof). Such Duke Energy Common Shares issued pursuant to this Section 3.1 shall be hereafter held of record by the Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries and Duke Energy in accordance with the provisions of this Agreement. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of such Duke Energy Common Shares and shall be entitled to exercise all of the rights and powers of an owner with respect to such Duke Energy Common Shares provided that the Trustee shall: (a) hold such Duke Energy Common Shares and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries and Duke Energy in accordance with the provisions of this Agreement; and (b) except as specifically authorized by this Agreement, have no power or authority to sell, transfer, vote or otherwise deal in or with such Duke Energy Common Shares and such Duke Energy Common Shares shall not be used or disposed of by the Trustee for any purpose other than the purposes for which this Trust is created pursuant to this Agreement. 3.2 Transfer of Duke Energy Common Shares and Dividends to Duke Energy In connection with the exchange by a holder or redemption or retraction of Exchangeable Shares from time to time for Duke Energy Common Shares, the Trustee shall concurrently therewith distribute to Duke Energy such Duke Energy Common Shares from the Trust Estate equal to the number of Exchangeable Shares exchanged by such holder for Duke Energy Common Shares. Upon receipt of any dividend or other distribution on the Duke Energy Common Shares (except to the extent such dividend or distribution is paid in Duke Energy Common Shares), the Trustee shall immediately transfer such dividend or distribution to Duke Energy; provided, however, that the Trustee may not transfer any dividend or distribution on the Duke Energy Common Shares held by the Trustee to Duke Energy pursuant to the preceding clause until such time as an Equivalent Dividend (as defined in the Support Agreement) is declared and paid on the Exchangeable Shares. 3.3 Legended Share Certificates Exchangeco will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Beneficiaries of their right to instruct the Trustee with respect to -6- VOTING AND EXCHANGE TRUST AGREEMENT the exercise of the portion of the Voting Rights in respect of the Exchangeable Shares held by the Beneficiaries. 3.4 Safe Keeping of Certificate If physical certificates representing the Duke Energy Common Shares are held by the Trust, such certificates shall at all times be held in safe keeping by the Trustee or its agent. 3.5 Redemption in Connection with a Distribution Date A holder of Exchangeable Shares who receives Duke Energy Common Shares upon redemption of Exchangeable Shares in connection with a Distribution Date pursuant to the Exchangeable Share Provisions will be treated by Duke Energy for purposes of the Duke Energy Rights Agreement as if such holder were a record holder of Duke Energy Common Shares on and after the Redemption Date, which shall be the day immediately preceding the Distribution Date. ARTICLE 4 EXERCISE OF VOTING RIGHTS 4.1 Voting Rights The Trustee, as the holder of record of Duke Energy Common Shares forming part of the Trust Estate, shall be entitled to all of the Voting Rights, including the right to vote in person or by proxy the Duke Energy Common Shares held by the Trustee on any matter, question, proposal or proposition whatsoever that may properly come before the shareholders of Duke Energy at a Duke Energy Meeting or in connection with a Duke Energy Consent. The Voting Rights shall be and remain vested in and exercised by the Trustee. Subject to Section 6.15 hereof: (a) the Trustee shall exercise the Voting Rights only on the basis of instructions received pursuant to this Article 4 from Beneficiaries entitled to instruct the Trustee as to the voting thereof at the time at which the Duke Energy Meeting is held or a Duke Energy Consent is sought; and (b) to the extent that no instructions are received from a Beneficiary with respect to the Voting Rights to which such Beneficiary is entitled, the Trustee shall not exercise or permit the exercise of such Voting Rights. 4.2 Number of Votes With respect to all meetings of shareholders of Duke Energy at which holders of Duke Energy Common Shares are entitled to vote (each, a "Duke Energy Meeting") and with respect to all written consents sought from Duke Energy's shareholders, including the holders of Duke Energy Common Shares (each, a "Duke Energy Consent"), each Beneficiary shall be entitled to instruct the Trustee to cast and exercise, in the manner instructed, a number of votes equal to the Equivalent Vote Amount for each Exchangeable Share owned of record by such Beneficiary on the record date established by Duke Energy or by applicable law for such Duke Energy Meeting -7- VOTING AND EXCHANGE TRUST AGREEMENT or Duke Energy Consent, as the case may be (collectively, the "Beneficiary Votes"), in respect of each matter, question, proposal or proposition to be voted on at such Duke Energy Meeting or consented to in connection with such Duke Energy Consent. 4.3 Mailings to Shareholders With respect to each Duke Energy Meeting and Duke Energy Consent, the Trustee will use its reasonable efforts promptly to mail or cause to be mailed (or otherwise communicate in the same manner as Duke Energy utilizes in communications to holders of Duke Energy Common Shares subject to applicable regulatory requirements and provided such manner of communications is reasonably available to the Trustee) to each of the Beneficiaries named in the List, such mailing or communication to commence on the same day as the mailing or notice (or other communication) with respect thereto is commenced by Duke Energy to its shareholders: (a) a copy of such notice, together with any related materials, including any proxy or information statement, to be provided to shareholders of Duke Energy; (b) a statement that such Beneficiary is entitled to instruct the Trustee as to the exercise of the Beneficiary Votes with respect to such Duke Energy Meeting or Duke Energy Consent or, pursuant to Section 4.7, to attend such Duke Energy Meeting and to exercise personally thereat the Beneficiary Votes of such Beneficiary; (c) a statement as to the manner in which such instructions may be given to the Trustee, including an express indication that instructions may be given to the Trustee to give: (i) a proxy to such Beneficiary or its designee to exercise personally the Beneficiary Votes; or (ii) a proxy to a designated agent or other representative of the management of Duke Energy to exercise such Beneficiary Votes; (d) a statement that if no such instructions are received from the Beneficiary, the Beneficiary Votes to which such Beneficiary is entitled will not be exercised; (e) a form of direction whereby the Beneficiary may so direct and instruct the Trustee as contemplated herein; and (f) a statement of the time and date by which such instructions must be received by the Trustee in order to be binding upon it, which in the case of a Duke Energy Meeting shall not be earlier than the close of business on the second Business Day prior to such meeting, and of the method for revoking or amending such instructions. For the purpose of determining Beneficiary Votes to which a Beneficiary is entitled in respect of any Duke Energy Meeting or Duke Energy Consent, the number of Exchangeable Shares owned of record by the Beneficiary shall be determined at the close of business on the record date established by Duke Energy or by applicable law for purposes of determining shareholders entitled to vote at such Duke Energy Meeting or to give written consent in -8- VOTING AND EXCHANGE TRUST AGREEMENT connection with such Duke Energy Consent. Duke Energy will notify the Trustee of any decision of the Board of Directors of Duke Energy with respect to the calling of any Duke Energy Meeting or the seeking of any Duke Energy Consent and shall provide all necessary information and materials to the Trustee in each case promptly and in any event in sufficient time to enable the Trustee to perform its obligations contemplated by this Section 4.3. The materials referred to in this Section 4.3 are to be provided to the Trustee by Duke Energy and the materials referred to in Section 4.3(c), (e) and (f) shall be subject to reasonable comment by the Trustee in a timely manner. Duke Energy shall ensure that the materials to be provided to the Trustee are provided in sufficient time to permit the Trustee to comment as aforesaid and to send all materials to each Beneficiary at the same time as such materials are first sent to holders of Duke Energy Common Shares. Duke Energy agrees not to communicate with holders of Duke Energy Common Shares with respect to the materials referred to in this Section 4.3 otherwise than by mail unless such method of communication is also reasonably available to the Trustee for communication with the Beneficiaries. Notwithstanding the foregoing, Duke Energy may at its option exercise the duties of the Trustee to deliver copies of all materials to each Beneficiary as required by this Section 4.3 so long as in each case Duke Energy delivers a certificate to the Trustee stating that Duke Energy has undertaken to perform the obligations set forth in this Section 4.3. 4.4 Copies of Shareholder Information Duke Energy will deliver to the Trustee copies of all proxy materials (including notices of Duke Energy Meetings but excluding proxies to vote Duke Energy Common Shares), information statements, reports (including all interim and annual financial statements) and other written communications that, in each case, are to be distributed from time to time to holders of Duke Energy Common Shares in sufficient quantities and in sufficient time so as to enable the Trustee to send those materials to each Beneficiary, to the extent possible, at the same time as such materials are first sent to holders of Duke Energy Common Shares. The Trustee will mail or otherwise send to each Beneficiary, at the expense of Duke Energy, copies of all such materials (and all materials specifically directed to the Beneficiaries or to the Trustee for the benefit of the Beneficiaries by Duke Energy) received by the Trustee from Duke Energy, to the extent possible, at the same time as such materials are sent to holders of Duke Energy Common Shares. The Trustee will make copies of all such materials available for inspection by any Beneficiary at the Trustee's principal office in Lakewood, Colorado. Notwithstanding the foregoing, Duke Energy at its option may exercise the duties of the Trustee to deliver copies of all materials to each Beneficiary as required by this Section 4.4 so long as in each case Duke Energy delivers a certificate to the Trustee stating that Duke Energy has undertaken to perform the obligations set forth in this Section 4.4. 4.5 Other Materials As soon as reasonably practicable after receipt by Duke Energy or holders of Duke Energy Common Shares (if such receipt is known by Duke Energy) of any material sent or given by or on behalf of a third party to holders of Duke Energy Common Shares generally, including dissident proxy and information circulars (and related information and material) and tender and exchange offer circulars (and related information and material), Duke Energy shall use its -9- VOTING AND EXCHANGE TRUST AGREEMENT reasonable best efforts to obtain and deliver to the Trustee copies thereof in sufficient quantities so as to enable the Trustee to forward such material (unless the same has been provided directly to Beneficiaries by such third party) to each Beneficiary as soon as possible thereafter. As soon as reasonably practicable after receipt thereof, the Trustee will mail or otherwise send to each Beneficiary, at the expense of Duke Energy, copies of all such materials received by the Trustee from Duke Energy. The Trustee will also make available for inspection by any Beneficiary at the Trustee's principal office in Lakewood, Colorado copies of all such materials. Notwithstanding the foregoing, Duke Energy at its option may exercise the duties of the Trustee to deliver copies of all such materials to each Beneficiary as required by this Section 4.5 so long as in each case Duke Energy delivers a certificate to the Trustee stating that Duke Energy has undertaken to perform the obligations set forth in this Section 4.5. 4.6 List of Persons Entitled to Vote Exchangeco shall, (a) prior to each annual and special Duke Energy Meeting or the seeking of any Duke Energy Consent and (b) forthwith upon each request made at any time by the Trustee in writing, prepare or cause to be prepared a list (a "List") of the names and addresses of the Beneficiaries arranged in alphabetical order and showing the number of Exchangeable Shares held of record by each such Beneficiary, in each case at the close of business on the date specified by the Trustee in such request or, in the case of a List prepared in connection with a Duke Energy Meeting or a Duke Energy Consent, at the close of business on the record date established by Duke Energy or pursuant to applicable law for determining the holders of Duke Energy Common Shares entitled to receive notice of and/or to vote at such Duke Energy Meeting or to give consent in connection with such Duke Energy Consent. Each such List shall be delivered to the Trustee promptly after receipt by Exchangeco of such request or the record date for such meeting or seeking of consent, as the case may be, and in any event within sufficient time as to permit the Trustee to perform its obligations under this Agreement. Duke Energy agrees to give Exchangeco notice (with a copy to the Trustee) of the calling of any Duke Energy Meeting or the seeking of any Duke Energy Consent by Duke Energy or its management, together with the record dates therefor, sufficiently prior to the date of the calling of such meeting or seeking of such consent so as to enable Exchangeco to perform its obligations under this Section 4.6. 4.7 Entitlement to Direct Votes Any Beneficiary named in a List prepared in connection with any Duke Energy Meeting or Duke Energy Consent will be entitled (a) to instruct the Trustee in the manner described in Section 4.3 with respect to the exercise of the Beneficiary Votes to which such Beneficiary is entitled or (b) to attend such meeting and personally exercise thereat (or to personally exercise with respect to any Duke Energy Consent), as the proxy of the Trustee, the Beneficiary Votes to which such Beneficiary is entitled. 4.8 Voting by Trustee and Attendance of Trustee Representative at Meeting (a) In connection with each Duke Energy Meeting and Duke Energy Consent, the Trustee shall exercise, either in person or by proxy, in accordance with the instructions received from a Beneficiary pursuant to Section 4.3, the Beneficiary -10- VOTING AND EXCHANGE TRUST AGREEMENT Votes as to which such Beneficiary is entitled to direct the vote (or any lesser number thereof as may be set forth in the instructions); provided, however, that such written instructions are received by the Trustee from the Beneficiary prior to the time and date fixed by the Trustee for receipt of such instruction in the notice given by the Trustee to the Beneficiary pursuant to Section 4.3. (b) The Trustee shall cause a representative who is empowered by it to sign and deliver, on behalf of the Trustee, proxies for Voting Rights to attend each Duke Energy Meeting. Upon submission by a Beneficiary (or its designee) of identification satisfactory to the Trustee's representative, and at the Beneficiary's request, such representative shall sign and deliver to such Beneficiary (or its designee) a proxy to exercise personally the Beneficiary Votes as to which such Beneficiary is otherwise entitled hereunder to direct the vote, if such Beneficiary either (i) has not previously given the Trustee instructions pursuant to Section 4.3 in respect of such meeting or (ii) submits to such representative written revocation of any such previous instructions. At such meeting, upon receipt of a proxy from the Trustee's representative, the Beneficiary exercising such Beneficiary Votes shall have the same rights as the Trustee to speak at the meeting in respect of any matter, question, proposal or proposition, to vote by way of ballot at the meeting in respect of any matter, question, proposal or proposition, and to vote at such meeting by way of a show of hands in respect of any matter, question or proposition. 4.9 Distribution of Written Materials Any written materials distributed by or on behalf of the Trustee pursuant to this Agreement shall be sent by mail (or otherwise communicated in the same manner as Duke Energy utilizes in communications to holders of Duke Energy Common Shares, subject to applicable regulatory requirements and provided such manner of communications is reasonably available to the Trustee) to each Beneficiary at its address as shown on the books of Exchangeco. Duke Energy agrees not to communicate with holders of Duke Energy Common Shares with respect to such written material otherwise than by mail unless such method of communication is also reasonably available to the Trustee for communication with the Beneficiaries. Exchangeco shall provide or cause to be provided to the Trustee for purposes of communication, on a timely basis and without charge or other expense: (a) a current List; and (b) upon the request of the Trustee, mailing labels to enable the Trustee to carry out its duties under this Agreement. Exchangeco's obligations under this Section 4.9 shall be deemed satisfied to the extent Duke Energy exercises its option to perform the duties of the Trustee to deliver copies of materials to each Beneficiary and Exchangeco provides the required information and materials to Duke Energy. -11- VOTING AND EXCHANGE TRUST AGREEMENT 4.10 Termination of Voting Rights Except as otherwise provided herein or in the Exchangeable Share Provisions, all of the rights of a Beneficiary with respect to the Beneficiary Votes exercisable in respect of the Exchangeable Shares held by such Beneficiary, including the right to instruct the Trustee as to the voting of or to vote personally such Beneficiary Votes, shall cease and be terminated immediately, before the delivery by such Beneficiary to the Trustee of the certificates representing such Exchangeable Shares in connection with the exercise by the Beneficiary of the Exchange Right or upon the occurrence of the automatic exchange of Exchangeable Shares for Duke Energy Common Shares, as specified in Article 5 (unless, in either case, Duke Energy shall not have delivered the Exchangeable Share Consideration deliverable in exchange therefor to the Trustee for delivery to the Beneficiaries), or the redemption of Exchangeable Shares pursuant to Article 6 or Article 7 of the Exchangeable Share Provisions, or upon the effective date of the liquidation, dissolution or winding-up of Exchangeco pursuant to Article 5 of the Exchangeable Share Provisions, or the purchase of Exchangeable Shares from the holder thereof by Callco pursuant to the exercise by Callco of the Retraction Call Right, the Redemption Call Right or the Liquidation Call Right. ARTICLE 5 EXCHANGE RIGHT AND AUTOMATIC EXCHANGE 5.1 Grant and Ownership of the Exchange Right Duke Energy hereby grants to the Trustee as trustee for and on behalf of, and for the use and benefit of, the Beneficiaries the right (the "Exchange Right"), upon the occurrence and during the continuance of an Insolvency Event, to require Duke Energy to purchase from each or any Beneficiary all or any part of the Exchangeable Shares held by such Beneficiary and the Automatic Exchange Rights, all in accordance with the provisions of this Agreement. Duke Energy hereby acknowledges receipt from the Trustee as trustee for and on behalf of the Beneficiaries of good and valuable consideration (and the adequacy thereof) for the grant of the Exchange Right and the Automatic Exchange Rights by Duke Energy to the Trustee. During the term of the Trust and subject to the terms and conditions of this Agreement, the Trustee shall possess and be vested with full legal ownership of the Exchange Right and the Automatic Exchange Rights and shall be entitled to exercise all of the rights and powers of an owner with respect to the Exchange Right and the Automatic Exchange Rights, provided that the Trustee shall: (a) hold the Exchange Right and the Automatic Exchange Rights and the legal title thereto as trustee solely for the use and benefit of the Beneficiaries in accordance with the provisions of this Agreement; and (b) except as specifically authorized by this Agreement, have no power or authority to exercise or otherwise deal in or with the Exchange Right or the Automatic Exchange Rights, and the Trustee shall not exercise any such rights for any purpose other than the purposes for which the Trust is created pursuant to this Agreement. -12- VOTING AND EXCHANGE TRUST AGREEMENT 5.2 Legended Share Certificates Exchangeco will cause each certificate representing Exchangeable Shares to bear an appropriate legend notifying the Beneficiaries of: (a) their right to instruct the Trustee with respect to the exercise of the Exchange Right in respect of the Exchangeable Shares held by a Beneficiary; and (b) the Automatic Exchange Rights. 5.3 General Exercise of Exchange Right The Exchange Right shall be and remain vested in and exercisable by the Trustee. Subject to Section 6.15, the Trustee shall exercise the Exchange Right only on the basis of instructions received pursuant to this Article 5 from Beneficiaries entitled to instruct the Trustee as to the exercise thereof. To the extent that no instructions are received from a Beneficiary with respect to the Exchange Right, the Trustee shall not exercise or permit the exercise of the Exchange Right. 5.4 Purchase Price The purchase price payable by Duke Energy for each Exchangeable Share to be purchased by Duke Energy under the Exchange Right shall be an amount per share equal to the Exchangeable Share Price on the last Business Day prior to the day of closing of the purchase and sale of such Exchangeable Share under the Exchange Right. In connection with each exercise of the Exchange Right, Duke Energy shall provide to the Trustee an Officer's Certificate setting forth the calculation of the Exchangeable Share Price for each Exchangeable Share. The Exchangeable Share Price for each such Exchangeable Share so purchased may be satisfied only by Duke Energy delivering or causing to be delivered to the Trustee, on behalf of the relevant Beneficiary, the Exchangeable Share Consideration representing the total Exchangeable Share Price. Upon payment by Duke Energy of such purchase price to the Trustee for the benefit of the Beneficiary, the relevant Beneficiary shall cease to have any right to be paid any amount in respect of declared and unpaid dividends on each such Exchangeable Share by Exchangeco. 5.5 Exercise Instructions Subject to the terms and conditions herein set forth, a Beneficiary shall be entitled, upon the occurrence and during the continuance of an Insolvency Event, to instruct the Trustee to exercise the Exchange Right with respect to all or any part of the Exchangeable Shares registered in the name of such Beneficiary on the books of Exchangeco. To cause the exercise of the Exchange Right by the Trustee, the Beneficiary shall deliver to the Trustee, in person or by certified or registered mail, at its principal office in Lakewood, Colorado or at such other places as the Trustee may from time to time designate by written notice to the Beneficiaries, the certificates representing the Exchangeable Shares which such Beneficiary desires Duke Energy to purchase, duly endorsed in blank for transfer, and accompanied by such other documents and instruments as may be required to effect a transfer of Exchangeable Shares under the CBCA and the by-laws of Exchangeco and such additional documents and instruments as the Trustee, -13- VOTING AND EXCHANGE TRUST AGREEMENT Exchangeco and Duke Energy may reasonably require together with (a) a duly completed form of notice of exercise of the Exchange Right, contained on the reverse of or attached to the Exchangeable Share certificates, stating (i) that the Beneficiary thereby instructs the Trustee to exercise the Exchange Right so as to require Duke Energy to purchase from the Beneficiary the number of Exchangeable Shares specified therein, (ii) that such Beneficiary has good title to and owns all such Exchangeable Shares to be acquired by Duke Energy free and clear of all liens, claims, security interests and encumbrances, (iii) the names in which the certificates representing Duke Energy Common Shares issuable in connection with the exercise of the Exchange Right are to be issued and (iv) the names and addresses of the persons to whom such new certificates should be delivered, and (b) payment (or evidence satisfactory to the Trustee, Exchangeco and Duke Energy of payment) of the taxes (if any) payable as contemplated by Section 5.8 of this Agreement. If only a part of the Exchangeable Shares represented by any certificate or certificates delivered to the Trustee are to be purchased by Duke Energy under the Exchange Right, a new certificate for the balance of such Exchangeable Shares shall be issued to the holder at the expense of Exchangeco. 5.6 Delivery of Duke Energy Common Shares; Effect of Exercise Promptly after the receipt by the Trustee of the certificates representing the Exchangeable Shares which the Beneficiary desires Duke Energy to purchase under the Exchange Right, together with such documents and instruments of transfer and a duly completed form of notice of exercise of the Exchange Right (and payment of taxes, if any payable as contemplated by Section 5.8 or evidence thereof), duly endorsed for transfer to Duke Energy, the Trustee shall notify Duke Energy and Exchangeco of its receipt of the same, which notice to Duke Energy and Exchangeco shall constitute exercise of the Exchange Right by the Trustee on behalf of the Beneficiary in respect of such Exchangeable Shares, and Duke Energy shall promptly thereafter deliver or cause to be delivered to the Trustee, for delivery to the Beneficiary in respect of such Exchangeable Shares (or to such other persons, if any, properly designated by such Beneficiary) the Exchangeable Share Consideration deliverable in connection with the exercise of the Exchange Right; provided, however, that no such delivery shall be made unless and until the Beneficiary requesting the same shall have paid (or provided evidence satisfactory to the Trustee, Exchangeco and Duke Energy of the payment of) the taxes (if any) payable as contemplated by Section 5.8 of this Agreement. Immediately upon the giving of notice by the Trustee to Duke Energy and Exchangeco of the exercise of the Exchange Right, as provided in this Section 5.6, the closing of the transaction of purchase and sale contemplated by the Exchange Right shall be deemed to have occurred, and the Beneficiary of such Exchangeable Shares shall be deemed to have transferred to Duke Energy all of such Beneficiary's right, title and interest in and to such Exchangeable Shares and in the related interest in the Trust Estate and shall cease to be a holder of such Exchangeable Shares and shall not be entitled to exercise any of the rights of a holder in respect thereof, other than the right to receive his proportionate part of the total purchase price therefor, unless such Exchangeable Share Consideration is not delivered by Duke Energy to the Trustee for delivery to such Beneficiary (or to such other person, if any, properly designated by such Beneficiary) within five Business Days of the date of the giving of such notice by the Trustee, in which case the rights of the Beneficiary shall remain unaffected until such Exchangeable Share Consideration is delivered by Duke Energy and any cheque included therein is paid. Upon delivery of such Exchangeable Share Consideration by Duke Energy to the Trustee, the Trustee shall deliver such Exchangeable Share Consideration to such Beneficiary (or -14- VOTING AND EXCHANGE TRUST AGREEMENT to such other person, if any, properly designated by such Beneficiary). Concurrently with such Beneficiary ceasing to be a holder of Exchangeable Shares, the Beneficiary shall be considered and deemed for all purposes to be the holder of the Duke Energy Common Shares delivered to it pursuant to the Exchange Right. 5.7 Exercise of Exchange Right Subsequent to Retraction In the event that a Beneficiary has exercised its right under Article 6 of the Exchangeable Share Provisions to require Exchangeco to redeem any or all of the Exchangeable Shares held by the Beneficiary (the "Retracted Shares") and is notified by Exchangeco pursuant to Section 6.6 of the Exchangeable Share Provisions that Exchangeco will not be permitted as a result of solvency requirements of applicable law to redeem all such Retracted Shares, and provided that Callco shall not have exercised the Retraction Call Right with respect to the Retracted Shares and that the Beneficiary has not revoked the retraction request delivered by the Beneficiary to Exchangeco pursuant to Section 6.7 of the Exchangeable Share Provisions, and provided further that the Trustee has received written notice of same from Exchangeco or Duke Energy, the retraction request will constitute and will be deemed to constitute notice from the Beneficiary to the Trustee instructing the Trustee to exercise the Exchange Right with respect to those Retracted Shares that Exchangeco is unable to redeem. In any such event, Exchangeco hereby agrees with the Trustee and in favour of the Beneficiary promptly to forward or cause to be forwarded to the Trustee all relevant materials delivered by the Beneficiary to Exchangeco or to the transfer agent of the Exchangeable Shares (including a copy of the retraction request delivered pursuant to Section 6.1 of the Exchangeable Share Provisions) in connection with such proposed redemption of the Retracted Shares and the Trustee will thereupon exercise the Exchange Right with respect to the Retracted Shares that Exchangeco is not permitted to redeem and will require Duke Energy to purchase such shares in accordance with the provisions of this Article 5. 5.8 Stamp or Other Transfer Taxes Upon any sale of Exchangeable Shares to Duke Energy pursuant to the Exchange Right or the Automatic Exchange Rights, the share certificate or certificates representing Duke Energy Common Shares to be delivered in connection with the payment of the purchase price therefor shall be issued in the name of the Beneficiary in respect of the Exchangeable Shares so sold or in such names as such Beneficiary may otherwise direct in writing without charge to the holder of the Exchangeable Shares so sold; provided, however, that such Beneficiary (a) shall pay (and none of Duke Energy, Exchangeco or the Trustee shall be required to pay) any documentary, stamp, transfer or other taxes that may be payable in respect of any transfer involved in the issuance or delivery of such shares to a person other than such Beneficiary or (b) shall have evidenced to the satisfaction of the Trustee, Duke Energy and Exchangeco that such taxes, if any, have been paid. 5.9 Notice of Insolvency Event As soon as practicable following the occurrence of an Insolvency Event or any event that with the giving of notice or the passage of time or both would be an Insolvency Event, Exchangeco and Duke Energy shall give written notice thereof to the Trustee. As soon as practicable following the receipt of notice from Exchangeco and Duke Energy of the occurrence -15- VOTING AND EXCHANGE TRUST AGREEMENT of an Insolvency Event, or upon the Trustee becoming aware of an Insolvency Event, the Trustee will mail to each Beneficiary, at the expense of Duke Energy (such funds to be received in advance), a notice of such Insolvency Event in the form provided by Duke Energy, which notice shall contain a brief statement of the rights of the Beneficiaries with respect to the Exchange Right. 5.10 Qualification of Duke Energy Common Shares Duke Energy covenants that if any Duke Energy Common Shares to be issued and delivered pursuant to the Exchange Right or the Automatic Exchange Rights require registration or qualification with or approval of or the filing of any document, including any prospectus or similar document, or the taking of any proceeding with or the obtaining of any order, ruling or consent from any governmental or regulatory authority under any Canadian or United States federal, provincial, territorial or state law or regulation or pursuant to the rules and regulations of any regulatory authority or the fulfillment of any other Canadian or United States federal, provincial, territorial or state legal requirement before such shares may be issued and delivered by Duke Energy to the initial holder thereof or in order that such shares may be freely traded thereafter (other than any restrictions of general application on transfer by reason of a holder being a "control person" of Duke Energy for purposes of Canadian provincial securities law or an "affiliate" of Duke Energy for purposes of United States federal or state securities law), Duke Energy will in good faith take all such actions and do all such things as are necessary or desirable to cause such Duke Energy Common Shares to be and remain duly registered, qualified or approved under United States and/or Canadian law, as the case may be, to the extent expressly provided in the Combination Agreement. Duke Energy will use its reasonable best efforts and in good faith expeditiously take all such actions and do all such things as are reasonably necessary or desirable to cause all Duke Energy Common Shares to be delivered pursuant to the Exchange Right or the Automatic Exchange Rights to be listed, quoted or posted for trading on all stock exchanges and quotation systems on which outstanding Duke Energy Common Shares are listed, quoted or posted for trading at such time. 5.11 Duke Energy Common Shares Duke Energy hereby represents, warrants and covenants that the Duke Energy Common Shares issuable to Beneficiaries as described herein will be duly authorized and validly issued, fully paid and non-assessable and shall be free and clear of any lien, claim or encumbrance. 5.12 Automatic Exchange on Liquidation of Duke Energy (a) Duke Energy will give the Trustee written notice of each of the following events at the time set forth below: (i) in the event of any determination by the Board of Directors of Duke Energy to institute voluntary liquidation, dissolution or winding-up proceedings with respect to Duke Energy or to effect any other distribution of assets of Duke Energy among its shareholders for the purpose of winding up its affairs, at least 60 days prior to the proposed effective date of such liquidation, dissolution, winding-up or other distribution; and -16- VOTING AND EXCHANGE TRUST AGREEMENT (ii) promptly following the earlier of (A) receipt by Duke Energy of notice of, and (B) Duke Energy otherwise becoming aware of, any threatened or instituted claim, suit, petition or other proceedings with respect to the involuntary liquidation, dissolution or winding-up of Duke Energy or to effect any other distribution of assets of Duke Energy among its shareholders for the purpose of winding up its affairs, in each case where Duke Energy has failed to contest in good faith any such proceeding commenced in respect of Duke Energy within 30 days of becoming aware thereof. (b) Promptly following receipt by the Trustee from Duke Energy of notice of any event (a "Liquidation Event") contemplated by Section 5.12(a) above, the Trustee will give notice or cause such notice to be given thereof to the Beneficiaries. Such notice shall be provided to the Trustee by Duke Energy and shall include a brief description of rights of the Beneficiaries with respect to the Automatic Exchange Rights provided for in Section 5.12(c). (c) In order that the Beneficiaries will be able to participate on a pro rata basis with the holders of Duke Energy Common Shares in the distribution of assets of Duke Energy in connection with a Liquidation Event, immediately prior to the effective time (the "Liquidation Event Effective Time") of a Liquidation Event all of the then outstanding Exchangeable Shares shall be automatically exchanged for Duke Energy Common Shares. To effect such automatic exchange, Duke Energy shall purchase each Exchangeable Share outstanding immediately prior to the Liquidation Event Effective Time and held by Beneficiaries, and each Beneficiary shall sell the Exchangeable Shares held by such Beneficiary at such time, for a purchase price per share equal to the Exchangeable Share Price applicable at that time. Duke Energy shall provide the Trustee with an Officer's Certificate in connection with any automatic exchange setting forth the calculation of the Exchangeable Share Price for each Exchangeable Share. (d) The closing of the transaction of purchase and sale contemplated by the automatic exchange of Exchangeable Shares for Duke Energy Common Shares shall be deemed to have occurred immediately prior to the Liquidation Event Effective Time, and each Beneficiary shall be deemed to have transferred to Duke Energy all of the Beneficiary's right, title and interest in and to such Beneficiary's Exchangeable Shares and the related interest in the Trust Estate. Any right of each such Beneficiary to receive declared and unpaid dividends from Exchangeco shall be deemed to be satisfied and discharged and each such Beneficiary shall cease to be a holder of such Exchangeable Shares and Duke Energy shall deliver to the Beneficiary the Exchangeable Share Consideration deliverable upon the automatic exchange of Exchangeable Shares. Concurrently with such Beneficiary ceasing to be a holder of Exchangeable Shares, the Beneficiary shall be considered and deemed for all purposes to be the holder of the Duke Energy Common Shares issued pursuant to the automatic exchange of Exchangeable Shares for Duke Energy Common Shares and the certificates held by the Beneficiary previously representing the Exchangeable Shares exchanged by the Beneficiary with Duke Energy pursuant to such automatic exchange shall thereafter be deemed to represent Duke Energy Common Shares -17- VOTING AND EXCHANGE TRUST AGREEMENT issued to the Beneficiary by Duke Energy pursuant to such automatic exchange. Upon the request of a Beneficiary and the surrender by the Beneficiary of Exchangeable Share certificates deemed to represent Duke Energy Common Shares, duly endorsed in blank and accompanied by such instruments of transfer as Duke Energy may reasonably require, Duke Energy shall deliver or cause to be delivered to the Beneficiary certificates representing Duke Energy Common Shares of which the Beneficiary is the holder. 5.13 Withholding Rights Duke Energy, Exchangeco and the Trustee shall be entitled to deduct and withhold from any consideration otherwise payable under this Agreement to any holder of Exchangeable Shares or Duke Energy Common Shares such amounts as Duke Energy, Exchangeco or the Trustee is required to deduct and withhold with respect to such payment under the Income Tax Act (Canada), the United States Internal Revenue Code of 1986 or any provision of federal, provincial, state, local or foreign tax law, in each case as amended or succeeded. The Trustee may act on the advice of counsel with respect to such matters. To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes as having been paid to the holder of the shares in respect of which such deduction and withholding was made, provided that such withheld amounts are actually remitted to the appropriate taxing authority. To the extent that the amount so required to be deducted or withheld from any payment to a holder exceeds the cash portion of the consideration otherwise payable to the holder, Duke Energy, Exchangeco and the Trustee are hereby authorized to sell or otherwise dispose of such portion of the consideration as is necessary to provide sufficient funds to Duke Energy, Exchangeco or the Trustee, as the case may be, to enable it to comply with such deduction or withholding requirement and Duke Energy, Exchangeco or the Trustee shall notify the holder thereof and remit to such holder any unapplied balance of the net proceeds of such sale. Duke Energy represents and warrants that, based upon facts currently known to it, it has no current intention, as at the date of this Agreement, to deduct or withhold from any consideration paid to holders of Exchangeable Shares any amounts under the United States Internal Revenue Code of 1986. ARTICLE 6 CONCERNING THE TRUSTEE 6.1 Powers and Duties of the Trustee The rights, powers, duties and authorities of the Trustee under this Agreement, in its capacity as trustee of the Trust, shall include: (a) receipt and deposit of Duke Energy Common Shares from Duke Energy as trustee for and on behalf of the Beneficiaries and Duke Energy in accordance with the provisions of this Agreement; (b) granting proxies and distributing materials to Beneficiaries as provided in this Agreement; (c) casting and exercising the Beneficiary Votes in accordance with the provisions of this Agreement; -18- VOTING AND EXCHANGE TRUST AGREEMENT (d) receiving the grant of the Exchange Right and the Automatic Exchange Rights from Duke Energy as trustee for and on behalf of the Beneficiaries in accordance with the provisions of this Agreement; (e) exercising the Exchange Right and enforcing the benefit of the Automatic Exchange Rights, in each case in accordance with the provisions of this Agreement, and in connection therewith receiving from Beneficiaries Exchangeable Shares and other requisite documents and distributing to such Beneficiaries Duke Energy Common Shares and cheques, if any, to which such Beneficiaries are entitled upon the exercise of the Exchange Right or pursuant to the Automatic Exchange Rights, as the case may be; (f) holding title to the Trust Estate; (g) investing any moneys forming, from time to time, a part of the Trust Estate as provided in this Agreement; (h) taking action on its own initiative or at the direction of a Beneficiary or Beneficiaries to enforce the obligations of Duke Energy and Exchangeco under this Agreement; and (i) taking such other actions and doing such other things as are specifically provided in this Agreement. In the exercise of such rights, powers, duties and authorities, the Trustee shall have (and is granted) such incidental and additional rights, powers, duties and authority not in conflict with any of the provisions of this Agreement as the Trustee, acting in good faith and in the reasonable exercise of its discretion, may deem necessary, appropriate or desirable to effect the purpose of the Trust. Any exercise of such discretionary rights, powers, duties and authorities by the Trustee shall be final, conclusive and binding upon all persons. The Trustee in exercising its rights, powers, duties and authorities hereunder shall act honestly and in good faith and with a view to the best interests of the Beneficiaries and shall exercise the care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances. The Trustee shall not be bound to give notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall be specifically required to do so under the terms hereof, nor shall the Trustee be required to take any notice of, or to do, or to take any act, action or proceeding as a result of any default or breach of any provision hereunder, unless and until notified in writing of such default or breach, which notices shall distinctly specify the default or breach desired to be brought to the attention of the Trustee, and in the absence of such notice the Trustee may for all purposes of this Agreement conclusively assume that no default or breach has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein. -19- VOTING AND EXCHANGE TRUST AGREEMENT 6.2 No Conflict of Interest The Trustee represents to Duke Energy and Exchangeco that at the date of execution and delivery of this Agreement there exists no material conflict of interest in the role of the Trustee as a fiduciary hereunder and the role of the Trustee in any other capacity. The Trustee shall, within 90 days after it becomes aware that such material conflict of interest exists, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Article 10. If, notwithstanding the foregoing provisions of this Section 6.2, the Trustee has such a material conflict of interest, the validity and enforceability of this Agreement shall not be affected in any manner whatsoever by reason only of the existence of such material conflict of interest. If the Trustee contravenes the foregoing provisions of this Section 6.2, any interested party may apply to the Court for an order that the Trustee be replaced as trustee hereunder. 6.3 Dealings with Transfer Agents, Registrars, etc. Duke Energy and Exchangeco irrevocably authorize the Trustee, from time to time, to: (a) consult, communicate and otherwise deal with the respective registrars and transfer agents, and with any such subsequent registrar or transfer agent, of the Exchangeable Shares and Duke Energy Common Shares; and (b) requisition, from time to time, (i) from any such registrar or transfer agent any information readily available from the records maintained by it which the Trustee may reasonably require for the discharge of its duties and responsibilities under this Agreement and (ii) from the transfer agent of Duke Energy Common Shares, and any subsequent transfer agent of such shares, the share certificates issuable upon the exercise from time to time of the Exchange Right and pursuant to the Automatic Exchange Rights. Duke Energy and Exchangeco irrevocably authorize their respective registrars and transfer agents to comply with all such requests. Duke Energy covenants that it will supply its transfer agent with duly executed share certificates for the purpose of completing the exercise from time to time of the Exchange Right and the Automatic Exchange Rights. 6.4 Books and Records The Trustee shall keep available for inspection by Duke Energy and Exchangeco at the Trustee's principal office in Lakewood, Colorado correct and complete books and records of account relating to the Trust created by this Agreement, including all relevant data relating to mailings and instructions to and from Beneficiaries and all transactions pursuant to the Exchange Right and the Automatic Exchange Rights. On or before January 15, 2002, and on or before January 15 in every year thereafter, so long as any Duke Energy Common Shares are on deposit with the Trustee, the Trustee shall transmit to Duke Energy and Exchangeco a brief report, dated as of the preceding December 31, with respect to: (a) the property and funds comprising the Trust Estate as of that date; -20- VOTING AND EXCHANGE TRUST AGREEMENT (b) the number of exercises of the Exchange Right, if any, and the aggregate number of Exchangeable Shares received by the Trustee on behalf of Beneficiaries in consideration of the issuance by Duke Energy of Duke Energy Common Shares in connection with the Exchange Right, during the calendar year ended on such December 31; and (c) any action taken by the Trustee in the performance of its duties under this Agreement which it had not previously reported and which, in the Trustee's opinion, materially affects the Trust Estate. 6.5 Income Tax Returns and Reports The Trustee shall, to the extent necessary, prepare and file on behalf of the Trust appropriate United States and Canadian income tax returns and any other returns or reports as may be required by applicable law or pursuant to the rules and regulations of any securities exchange or other trading system through which the Exchangeable Shares are traded. In connection therewith, the Trustee may obtain the advice and assistance of such experts or advisors as the Trustee reasonably considers necessary or advisable (who may be experts or advisors to Duke Energy or Exchangeco). If requested by the Trustee, Duke Energy or Exchangeco shall retain qualified experts or advisors for the purpose of providing such tax advice or assistance. 6.6 Indemnification Prior to Certain Actions by Trustee The Trustee shall exercise any or all of the rights, duties, powers or authorities vested in it by this Agreement at the request, order or direction of any Beneficiary upon such Beneficiary furnishing to the Trustee reasonable funding, security or indemnity against the costs, expenses and liabilities which may be incurred by the Trustee therein or thereby, provided that no Beneficiary shall be obligated to furnish to the Trustee any such security or indemnity in connection with the exercise by the Trustee of any of its rights, duties, powers and authorities with respect to the Duke Energy Common Shares held by the Trustee pursuant to Article 4, subject to Section 6.15, with respect to the Exchange Right pursuant to Article 5, subject to Section 6.15, and with respect to the Automatic Exchange Rights pursuant to Article 5, subject to Section 6.15. None of the provisions contained in this Agreement shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the exercise of any of its rights, powers, duties, or authorities unless funded, given security or indemnified as aforesaid. 6.7 Action of Beneficiaries No Beneficiary shall have the right to institute any action, suit or proceeding or to exercise any other remedy authorized by this Agreement for the purpose of enforcing any of its rights or for the execution of any trust or power hereunder unless the Beneficiary has requested the Trustee to take or institute such action, suit or proceeding and furnished the Trustee with the funding, security or indemnity referred to in Section 6.6 and the Trustee shall have failed to act within a reasonable time thereafter. In such case, but not otherwise, the Beneficiary shall be entitled to take proceedings in any court of competent jurisdiction such as the Trustee might have -21- VOTING AND EXCHANGE TRUST AGREEMENT taken; it being understood and intended that no one or more Beneficiaries shall have any right in any manner whatsoever to affect, disturb or prejudice the rights hereby created by any such action, or to enforce any right hereunder or the Voting Rights, the Exchange Rights or the Automatic Exchange Rights except subject to the conditions and in the manner herein provided, and that all powers and trusts hereunder shall be exercised and all proceedings at law shall be instituted, had and maintained by the Trustee, except only as herein provided, and in any event for the equal benefit of all Beneficiaries. 6.8 Reliance Upon Declarations The Trustee shall not be considered to be in contravention of any of its rights, powers, duties and authorities hereunder if, when required, it acts and relies in good faith upon statutory declarations, certificates, opinions, Lists, reports or other papers or documents furnished pursuant to the provisions hereof or required by the Trustee to be furnished to it in the exercise of its rights, powers, duties and authorities hereunder if such statutory declarations, certificates, opinions, Lists, reports or other papers or documents comply with the provisions of Section 6.9, if applicable, and with any other applicable provisions of this Agreement. 6.9 Evidence and Authority to Trustee Duke Energy and/or Exchangeco shall furnish to the Trustee evidence of compliance with the conditions provided for in this Agreement relating to any action or step required or permitted to be taken by Duke Energy and/or Exchangeco or the Trustee under this Agreement or as a result of any obligation imposed under this Agreement, including in respect of the Voting Rights or the Exchange Right or the Automatic Exchange Rights and the taking of any other action to be taken by the Trustee at the request of or on the application of Duke Energy and/or Exchangeco promptly if and when: (a) such evidence is required by any other section of this Agreement to be furnished to the Trustee in accordance with the terms of this Section 6.9; or (b) the Trustee, in the exercise of its rights, powers, duties and authorities under this Agreement, gives Duke Energy and/or Exchangeco written notice requiring it to furnish such evidence in relation to any particular action or obligation specified in such notice. Such evidence shall consist of an Officer's Certificate of Duke Energy and/or Exchangeco or a statutory declaration or a certificate made by persons entitled to sign an Officer's Certificate stating that any such condition has been complied with in accordance with the terms of this Agreement. Whenever such evidence relates to a matter other than the Voting Rights or the Exchange Right or the Automatic Exchange Rights or the taking of any other action to be taken by the Trustee at the request or on the application of Duke Energy and/or Exchangeco, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, attorney, auditor, accountant, appraiser, valuer, engineer or other expert or any other person whose qualifications give authority to a statement made by him, provided that if such -22- VOTING AND EXCHANGE TRUST AGREEMENT report or opinion is furnished by a director, officer or employee of Duke Energy and/or Exchangeco it shall be in the form of an Officer's Certificate or a statutory declaration. Each statutory declaration, Officer's Certificate, opinion or report furnished to the Trustee as evidence of compliance with a condition provided for in this Agreement shall include a statement by the person giving the evidence: (c) declaring that such person has read and understands the provisions of this Agreement relating to the condition in question; (d) describing the nature and scope of the examination or investigation upon which such person based the statutory declaration, certificate, statement or opinion; and (e) declaring that such person has made such examination or investigation as such person believes is necessary to enable such person to make the statements or give the opinions contained or expressed therein. 6.10 Experts, Advisers and Agents The Trustee may: (a) in relation to these presents act and rely on the opinion or advice of or information obtained from any solicitor, attorney, auditor, accountant, appraiser, valuer, engineer or other expert, whether retained by the Trustee or by Duke Energy and/or Exchangeco or otherwise, and may retain or employ such assistants as may be necessary to the proper discharge of its powers and duties and determination of its rights hereunder and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid; and (b) employ such agents and other assistants as it may reasonably require for the proper determination and discharge of its powers and duties hereunder, and may pay reasonable remuneration for all services performed for it (and shall be entitled to receive reasonable remuneration for all services performed by it) in the discharge of the trusts hereof and compensation for all disbursements, costs and expenses made or incurred by it in the discharge of its duties hereunder and in the management of the Trust. 6.11 Investment of Moneys Held by Trustee Unless otherwise provided in this Agreement, any moneys held by or on behalf of the Trustee which under the terms of this Agreement may or ought to be invested or which may be on deposit with the Trustee or which may be in the hands of the Trustee may be invested and reinvested in the name or under the control of the Trustee, in trust for Duke Energy, in securities in which, under the laws of the State of New York, trustees are authorized to invest trust moneys, provided that such securities are stated to mature within two years after their purchase by the Trustee, and the Trustee shall so invest such moneys on the written direction of Duke Energy. Pending the investment of any moneys as hereinbefore provided, such moneys may be deposited in the name of the Trustee in any chartered bank in the United States of America or, with -23- VOTING AND EXCHANGE TRUST AGREEMENT the consent of Duke Energy, in the deposit department of the Trustee or any other loan or trust company authorized to accept deposits under the laws of the United States of America or any state thereof at the rate of interest then current on similar deposits. Any interest earned or received from moneys held by the trust shall be the property of and distributed to Duke Energy upon demand therefore. 6.12 Trustee Not Required to Give Security The Trustee shall not be required to give any bond or security in respect of the execution of the trusts, rights, duties, powers and authorities of this Agreement or otherwise in respect of the premises. 6.13 Trustee Not Bound to Act on Request Except as in this Agreement otherwise specifically provided, the Trustee shall not be bound to act in accordance with any direction or request of Duke Energy and/or Exchangeco or of the directors thereof until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Trustee, and the Trustee shall be empowered to act and rely upon any such copy purporting to be authenticated and believed by the Trustee to be genuine. 6.14 Authority to Carry on Business The Trustee represents to Duke Energy and Exchangeco that at the date of execution and delivery by it of this Agreement it is authorized to carry on the business of a trust company in the State of Colorado but if, notwithstanding the provisions of this Section 6.14, it ceases to be so authorized to carry on business, the validity and enforceability of this Agreement and the Voting Rights, the Exchange Right and the Automatic Exchange Rights shall not be affected in any manner whatsoever by reason only of such event but the Trustee shall, within 90 days after ceasing to be authorized to carry on the business of a trust company in the State of Colorado, either become so authorized or resign in the manner and with the effect specified in Article 10. 6.15 Conflicting Claims If conflicting claims or demands are made or asserted with respect to any interest of any Beneficiary in any Exchangeable Shares, including any disagreement between the heirs, representatives, successors or assigns succeeding to all or any part of the interest of any Beneficiary in any Exchangeable Shares, resulting in conflicting claims or demands being made in connection with such interest, then the Trustee shall be entitled, at its sole discretion, to refuse to recognize or to comply with any such claims or demands. In so refusing, the Trustee may elect not to exercise any Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands and, in so doing, the Trustee shall not be or become liable to any person on account of such election or its failure or refusal to comply with any such conflicting claims or demands. The Trustee shall be entitled to continue to refrain from acting and to refuse to act until: (a) the rights of all adverse claimants with respect to the Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands -24- VOTING AND EXCHANGE TRUST AGREEMENT have been adjudicated by a final judgment of a court of competent jurisdiction and all rights of appeal have expired; or (b) all differences with respect to the Voting Rights, Exchange Right or Automatic Exchange Rights subject to such conflicting claims or demands have been conclusively settled by a valid written agreement binding on all such adverse claimants, and the Trustee shall have been furnished with an executed copy of such agreement certified to be in full force and effect. If the Trustee elects to recognize any claim or comply with any demand made by any such adverse claimant, it may in its discretion require such claimant to furnish such surety bond or other security satisfactory to the Trustee as it shall deem appropriate to fully indemnify it as between all conflicting claims or demands. 6.16 Acceptance of Trust The Trustee hereby accepts the Trust created and provided for by and in this Agreement and agrees to perform the same upon the terms and conditions herein set forth and to hold all rights, privileges and benefits conferred hereby and by law in trust for the various persons who shall from time to time be Beneficiaries, subject to all the terms and conditions herein set forth. 6.17 Maintenance of Office or Agency Duke Energy will maintain in Vancouver an office or agency where certificates representing Exchangeable Shares may be presented or surrendered for exchange by Beneficiaries and where notices and demands to or upon Duke Energy or Exchangeco in respect of the Exchangeable Shares may be served. Duke Energy will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time Duke Energy shall fail to maintain any such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be served at the Corporate Trust Office of the Trustee, and Duke Energy and Exchangeco hereby appoint the Trustee as their agent to receive all such presentations, surrenders, notices and demands. Furthermore, copies of all Duke Energy proxy materials will be made available for inspection by any Beneficiary at such office or agency. ARTICLE 7 COMPENSATION 7.1 Fees and Expenses of the Trustee Duke Energy and Exchangeco jointly and severally agree to pay the Trustee reasonable compensation for all of the services rendered by it under this Agreement and will reimburse the Trustee for all reasonable expenses (including taxes other than taxes based on the net income of the Trustee, fees paid to legal counsel and other experts and advisors and travel expenses) and disbursements, including the cost and expense of any suit or litigation of any character and any proceedings before any governmental agency reasonably incurred by the Trustee in connection with its duties under this Agreement; provided that Duke Energy and Exchangeco shall have no obligation to reimburse the Trustee for any expenses or disbursements paid, incurred or suffered -25- VOTING AND EXCHANGE TRUST AGREEMENT by the Trustee in any suit or litigation in which the Trustee is determined to have acted in bad faith or with gross negligence, recklessness or willful misconduct. ARTICLE 8 INDEMNIFICATION AND LIMITATION OF LIABILITY 8.1 Indemnification of the Trustee Duke Energy and Exchangeco jointly and severally agree to indemnify and hold harmless the Trustee and each of its directors, officers, employees and agents appointed and acting in accordance with this Agreement (collectively, the "Indemnified Parties") against all claims, losses, damages, reasonable costs, penalties, fines and reasonable expenses (including reasonable expenses of the Trustee's legal counsel) which, without fraud, gross negligence, recklessness, willful misconduct or bad faith on the part of such Indemnified Party, may be paid, incurred or suffered by the Indemnified Party by reason or as a result of the Trustee's acceptance or administration of the Trust, its compliance with its duties set forth in this Agreement, or any written or oral instruction delivered to the Trustee by Duke Energy or Exchangeco pursuant hereto. In no case shall Duke Energy or Exchangeco be liable under this indemnity for any claim against any of the Indemnified Parties unless Duke Energy and Exchangeco shall be notified by the Trustee of the written assertion of a claim or of any action commenced against the Indemnified Parties, promptly after any of the Indemnified Parties shall have received any such written assertion of a claim or shall have been served with a summons or other first legal process giving information as to the nature and basis of the claim. Subject to (ii) below, Duke Energy and Exchangeco shall be entitled to participate at their own expense in the defense and, if Duke Energy and Exchangeco so elect at any time after receipt of such notice, either of them may assume the defense of any suit brought to enforce any such claim. The Trustee shall have the right to employ separate counsel in any such suit and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Trustee unless: (i) the employment of such counsel has been authorized by Duke Energy or Exchangeco; or (ii) the named parties to any such suit include both the Trustee and Duke Energy or Exchangeco and the Trustee shall have been advised by counsel acceptable to Duke Energy or Exchangeco that there may be one or more legal defenses available to the Trustee that are different from or in addition to those available to Duke Energy or Exchangeco and that, in the judgment of such counsel, would present a conflict of interest were a joint representation to be undertaken (in which case Duke Energy and Exchangeco shall not have the right to assume the defense of such suit on behalf of the Trustee but shall be liable to pay the reasonable fees and expenses of counsel for the Trustee). This indemnity shall survive the termination of this Agreement and the resignation or removal of the Trustee. 8.2 Limitation of Liability The Trustee shall not be held liable for any loss which may occur by reason of depreciation of the value of any part of the Trust Estate or any loss incurred on any investment of funds pursuant to this Agreement, except to the extent that such loss is attributable to the fraud, gross negligence, recklessness, willful misconduct or bad faith on the part of the Trustee. -26- VOTING AND EXCHANGE TRUST AGREEMENT ARTICLE 9 CHANGE OF TRUSTEE 9.1 Resignation The Trustee, or any trustee hereafter appointed, may at any time resign by giving written notice of such resignation to Duke Energy and Exchangeco specifying the date on which it desires to resign, provided that such notice shall not be given less than thirty (30) days before such desired resignation date unless Duke Energy and Exchangeco otherwise agree and provided further that such resignation shall not take effect until the date of the appointment of a successor trustee and the acceptance of such appointment by the successor trustee. Upon receiving such notice of resignation, Duke Energy and Exchangeco shall promptly appoint a successor trustee, which shall be a corporation organized and existing under the laws of the State of New York or the State of Delaware, by written instrument in duplicate, one copy of which shall be delivered to the resigning trustee and one copy to the successor trustee. Failing the appointment and acceptance of a successor trustee, a successor trustee may be appointed by order of a court of competent jurisdiction upon application of one or more of the parties to this Agreement. If the retiring trustee is the party initiating an application for the appointment of a successor trustee by order of a court of competent jurisdiction, Duke Energy and Exchangeco shall be jointly and severally liable to reimburse the retiring trustee for its legal costs and expenses in connection with same. 9.2 Removal The Trustee, or any trustee hereafter appointed, may (provided a successor trustee is appointed) be removed at any time on not less than 30 days' prior notice by written instrument executed by Duke Energy and Exchangeco, in duplicate, one copy of which shall be delivered to the trustee so removed and one copy to the successor trustee. 9.3 Successor Trustee Any successor trustee appointed as provided under this Agreement shall execute, acknowledge and deliver to Duke Energy and Exchangeco and to its predecessor trustee an instrument accepting such appointment. Thereupon the resignation or removal of the predecessor trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor under this Agreement, with the like effect as if originally named as trustee in this Agreement. However, on the written request of Duke Energy and Exchangeco or of the successor trustee, the trustee ceasing to act shall, upon payment of any amounts then due it pursuant to the provisions of this Agreement, execute and deliver an instrument transferring to such successor trustee all the rights and powers of the trustee so ceasing to act. Upon the request of any such successor trustee, Duke Energy, Exchangeco and such predecessor trustee shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor trustee all such rights and powers. -27- VOTING AND EXCHANGE TRUST AGREEMENT 9.4 Notice of Successor Trustee Upon acceptance of appointment by a successor trustee as provided herein, Duke Energy and Exchangeco shall cause to be mailed notice of the succession of such trustee hereunder to each Beneficiary specified in a List. If Duke Energy or Exchangeco shall fail to cause such notice to be mailed within 10 days after acceptance of appointment by the successor trustee, the successor trustee shall cause such notice to be mailed at the expense of Duke Energy and Exchangeco. ARTICLE 10 DUKE ENERGY SUCCESSORS 10.1 Certain Requirements in Respect of Combination, etc. Duke Energy shall not consummate any transaction (whether by way of reconstruction, reorganization, consolidation, merger, transfer, sale, lease or otherwise) whereby all or substantially all of its undertaking, property and assets would become the property of any other person or, in the case of a merger, of the continuing corporation resulting therefrom unless, but may do so if: (a) such other person or continuing corporation (herein called the "Duke Energy Successor"), by operation of law, becomes, without more, bound by the terms and provisions of this Agreement or, if not so bound, executes, prior to or contemporaneously with the consummation of such transaction, a trust agreement supplemental hereto and such other instruments (if any) as are satisfactory to the Trustee, acting reasonably, and in the opinion of legal counsel to the Trustee are reasonably necessary or advisable to evidence the assumption by the Duke Energy Successor of liability for all moneys payable and property deliverable hereunder and the covenant of such Duke Energy Successor to pay and deliver or cause to be delivered the same and its agreement to observe and perform all the covenants and obligations of Duke Energy under this Agreement; and (b) such transaction shall be upon such terms and conditions as substantially to preserve and not to impair in any material respect any of the rights, duties, powers and authorities of the Trustee or of the Beneficiaries hereunder. 10.2 Vesting of Powers in Successor Whenever the conditions of Section 10.1 have been duly observed and performed, the Trustee, Duke Energy Successor and Exchangeco shall, if required by Section 10.1, execute and deliver the supplemental trust agreement provided for in Article 11 and thereupon Duke Energy Successor shall possess and from time to time may exercise each and every right and power of Duke Energy under this Agreement in the name of Duke Energy or otherwise and any act or proceeding by any provision of this Agreement required to be done or performed by the Board of Directors of Duke Energy or any officers of Duke Energy may be done and performed with like force and effect by the directors or officers of such Duke Energy Successor. -28- VOTING AND EXCHANGE TRUST AGREEMENT 10.3 Wholly-Owned Subsidiaries Nothing herein shall be construed as preventing the amalgamation or merger of any wholly-owned direct or indirect subsidiary of Duke Energy with or into Duke Energy or the winding-up, liquidation or dissolution of any wholly-owned subsidiary of Duke Energy provided that all of the assets of such subsidiary are transferred to Duke Energy or another wholly-owned direct or indirect subsidiary of Duke Energy and any such transactions are expressly permitted by this Article 10. ARTICLE 11 AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS 11.1 Amendments, Modifications, etc. This Agreement may not be amended or modified except by an agreement in writing executed by Duke Energy, Exchangeco and the Trustee and approved by the Beneficiaries in accordance with Section 10.2 of the Exchangeable Share Provisions. 11.2 Ministerial Amendments Notwithstanding the provisions of Section 11.1, the parties to this Agreement may in writing, at any time and from time to time, without the approval of the Beneficiaries, amend or modify this Agreement for the purposes of (a) adding to the covenants of any or all parties hereto for the protection of the Beneficiaries hereunder provided that the Board of Directors of each of Exchangeco and Duke Energy shall be of the good faith opinion that such additions will not be prejudicial to the rights or interests of the Beneficiaries; (b) making such amendments or modifications not inconsistent with this Agreement as may be necessary or desirable with respect to matters or questions which, in the good faith opinion of the Board of Directors of each of Duke Energy and Exchangeco and in the opinion of the Trustee, having in mind the best interests of the Beneficiaries it may be expedient to make, provided that such Boards of Directors and the Trustee, acting on the advice of counsel, shall be of the opinion that such amendments and modifications will not be prejudicial to the interests of the Beneficiaries; or (c) making such changes or corrections which, on the advice of counsel to Duke Energy, Exchangeco and the Trustee, are required for the purpose of curing or correcting any ambiguity or defect or inconsistent provision or clerical omission or mistake or manifest error, provided that the Trustee, acting on the advice of counsel, and the Board of Directors of each of Duke Energy and Exchangeco shall be of the opinion that such changes or corrections will not be prejudicial to the rights and interests of the Beneficiaries. -29- VOTING AND EXCHANGE TRUST AGREEMENT 11.3 Meeting to Consider Amendments Exchangeco, at the request of Duke Energy, shall call a meeting or meetings of the Beneficiaries for the purpose of considering any proposed amendment or modification requiring approval pursuant hereto. Any such meeting or meetings shall be called and held in accordance with the by-laws of Exchangeco, the Exchangeable Share Provisions and all applicable laws. 11.4 Changes in Capital of Duke Energy and Exchangeco At all times after the occurrence of any event contemplated pursuant to Section 2.7 or 2.8 of the Support Agreement or otherwise, as a result of which either Duke Energy Common Shares or the Exchangeable Shares or both are in any way changed, this Agreement shall forthwith be deemed amended and modified as necessary in order that it shall apply with full force and effect, mutatis mutandis, to all new securities into which Duke Energy Common Shares or the Exchangeable Shares or both are so changed. 11.5 Execution of Supplemental Trust Agreements No amendment to or modification or waiver of any of the provisions of this Agreement otherwise permitted hereunder shall be effective unless made in writing and signed by all of the parties hereto. From time to time Exchangeco, Duke Energy and the Trustee may, subject to the provisions of these presents, and they shall, when so directed by these presents, execute and deliver by their proper officers, trust agreements or other instruments supplemental hereto, which thereafter shall form part hereof, for any one or more of the following purposes: (a) evidencing the succession of Duke Energy Successors and the covenants of and obligations assumed by each such Duke Energy Successor in accordance with the provisions of Article 10 and the successors of any successor trustee in accordance with the provisions of Article 9; (b) making any additions to, deletions from or alterations of the provisions of this Agreement or the Voting Rights, the Exchange Right or the Automatic Exchange Rights which, in the opinion of the Trustee, will not be prejudicial to the interests of the Beneficiaries or are, in the opinion of counsel to the Trustee, necessary or advisable in order to incorporate, reflect or comply with any legislation the provisions of which apply to Duke Energy, Exchangeco, the Trustee or this Agreement; and (c) for any other purposes not inconsistent with the provisions of this Agreement, including to make or evidence any amendment or modification to this Agreement as contemplated hereby, provided that, in the opinion of the Trustee, the rights of the Trustee and Beneficiaries will not be prejudiced thereby. -30- VOTING AND EXCHANGE TRUST AGREEMENT ARTICLE 12 TERMINATION 12.1 Term The Trust created by this Agreement shall continue until the earliest to occur of the following events: (a) no outstanding Exchangeable Shares are held by a Beneficiary; (b) each of Duke Energy and Exchangeco elects in writing to terminate the Trust and such termination is approved by the Beneficiaries in accordance with Section 10.2 of the Exchangeable Share Provisions; and (c) 21 years after the death of the last survivor of the descendants of His Majesty King George VI of Canada and the United Kingdom of Great Britain and Northern Ireland living on the date of the creation of the Trust. 12.2 Survival of Agreement This Agreement shall survive any termination of the Trust and shall continue until there are no Exchangeable Shares outstanding held by a Beneficiary; provided, however, that the provisions of Articles 7 and 8 shall survive any such termination of this Agreement. ARTICLE 13 GENERAL 13.1 Severability If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 13.2 Assignment No party hereto may assign this Agreement or any of its rights, interests or obligations under this Agreement (whether by operation of law or otherwise) except that Exchangeco may assign in its sole discretion, any or all of its rights, interests and obligations hereunder to any wholly-owned subsidiary of Duke Energy. -31- VOTING AND EXCHANGE TRUST AGREEMENT 13.3 Binding Effect Subject to Section 13.2, this Agreement and the Arrangement shall be binding upon, enure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns and to the benefit of the Beneficiaries. 13.4 Notices to Parties All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally, telecopied (which is confirmed) or dispatched (postage prepaid) to a nationally recognized overnight courier service with overnight delivery instructions, in each case addressed to the particular party at: (a) if to Duke Energy or Exchangeco, at: Duke Energy Corporation 422 South Church Street Charlotte, North Carolina 28201-1244 Attention: Martha B. Wyrsch Telecopier Number: (303) 605-1605 (b) if to the Trustee, at: Computershare Trust Company, Inc. 12039 West Alameda Parkway Lakewood, Colorado 80228 Attention: Corporate Trust Telecopier Number: (303) 986-2444 or at such other address of which any party may, from time to time, advise the other parties by notice in writing given in accordance with the foregoing. 13.5 Notice to Beneficiaries Any and all notices to be given and any documents to be sent to any Beneficiaries may be given or sent to the address of such Beneficiary shown on the register of holders of Exchangeable Shares in any manner permitted by the by-laws of Exchangeco from time to time in force in respect of notices to shareholders and shall be deemed to be received (if given or sent in such manner) at the time specified in such by-laws, the provisions of which by-laws shall apply mutatis mutandis to notices or documents as aforesaid sent to such Beneficiaries. 13.6 Counterparts This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. -32- VOTING AND EXCHANGE TRUST AGREEMENT 13.7 Governing Laws; Consent to Jurisdiction This Agreement shall be governed by and construed in accordance with the laws of New York. Each party hereby irrevocably attorns to the jurisdiction of the courts of New York in respect of all matters arising under or in relation to this Agreement and Duke Energy hereby appoints _____________ as its registered office in New York as attorney for service of process. 13.8 United States Tax Characterization The parties hereto recognize and intend that, for United States federal, state and local income, franchise and similar tax purposes, the Trust will be disregarded as an entity separate from Duke Energy pursuant to Treas. Reg. 301.7701-3(b), and no party shall take any position on any tax return or otherwise that is inconsistent with such treatment. -33- VOTING AND EXCHANGE TRUST AGREEMENT IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed as of the date first above written. DUKE ENERGY CORPORATION By: ------------------------------ Name: ------------------------------ Title: ------------------------------ EXCHANGECO By: ------------------------------ Name: ------------------------------ Title: ------------------------------ COMPUTERSHARE TRUST COMPANY By: ------------------------------ Name: ------------------------------ Title: ------------------------------ By: ------------------------------ Name: ------------------------------ Title: ------------------------------ -34- VOTING AND EXCHANGE TRUST AGREEMENT -----END PRIVACY-ENHANCED MESSAGE-----