Document:

Exhibit 4.4

                              KEYSPAN CORPORATION

                                      and

   The Bank of New York, as Collateral Agent, Custodial Agent and Securities
                                 Intermediary

                                      and

                JPMorgan Chase Bank, as Purchase Contract Agent

                               PLEDGE AGREEMENT

                            Dated as of May 6, 2002

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                               TABLE OF CONTENTS

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                                                                          PAGE

ARTICLE 1
        DEFINITIONS
        SECTION 1.01.  Definitions...........................................3

ARTICLE 2
        PLEDGE
        SECTION 2.01.  Pledge................................................8
        SECTION 2.02.  Control; Financing Statement..........................8
        SECTION 2.03.  Termination...........................................8

ARTICLE 3
        DISTRIBUTIONS ON PLEDGED COLLATERAL
        SECTION 3.01.  Income Distributions..................................9
        SECTION 3.02.  Principal Payments Following Termination Event........9
        SECTION 3.03.  Principal Payments Prior to or on Purchase Contract
                         Settlement Date.....................................9
        SECTION 3.04.  Payments to Purchase Contract Agent..................10
        SECTION 3.05.  Assets Not Properly Released.........................10

ARTICLE 4
        CONTROL
        SECTION 4.01.  Establishment of Collateral Account..................11
        SECTION 4.02.  Treatment as Financial Assets........................11
        SECTION 4.03.  Sole Control by Collateral Agent.....................11
        SECTION 4.04.  Securities Intermediary's Location...................11
        SECTION 4.05.  No Other Claims......................................12
        SECTION 4.06.  Investment and Release...............................12
        SECTION 4.07.  Statements and Confirmations.........................12
        SECTION 4.08.  Tax Allocations......................................12
        SECTION 4.09.  No Other Agreements..................................12
        SECTION 4.10.  Powers Coupled with an Interest......................12

ARTICLE 5
        INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY MEDS AND
        REESTABLISHMENT OF CORPORATE MEDS
        SECTION 5.01.  Initial Deposit of Notes.............................13
        SECTION 5.02.  Establishment of Treasury MEDS.......................13
        SECTION 5.03.  Reestablishment of Corporate MEDS....................14

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                                                                          PAGE

        SECTION 5.04.  Termination Event....................................15
        SECTION 5.05.  Cash Settlement......................................17
        SECTION 5.06.  Early Settlement and Cash Merger Early Settlement....18
        SECTION 5.07.  Application of Proceeds in Settlement of Purchase
                        Contracts...........................................19
        SECTION 5.08.  Tax Event Redemption.................................21

ARTICLE 6
        VOTING RIGHTS - PLEDGED NOTES
        SECTION 6.01.  Voting Rights........................................22

ARTICLE 7
        RIGHTS AND REMEDIES
        SECTION 7.01.  Rights and Remedies of the Collateral Agent..........23
        SECTION 7.02.  Tax Event Redemption.................................24
        SECTION 7.03.  Initial Remarketing..................................24
        SECTION 7.04.  Interim Remarketing..................................25
        SECTION 7.05.  Substitutions........................................26

ARTICLE 8
        REPRESENTATIONS AND WARRANTIES; COVENANTS
        SECTION 8.01.  Representations and Warranties.......................26
        SECTION 8.02.  Covenants............................................27

ARTICLE 9
        THE COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE SECURITIES
        INTERMEDIARY
        SECTION 9.01.  Appointment, Powers and Immunities...................28
        SECTION 9.02.  Instructions of the Company..........................29
        SECTION 9.03.  Reliance by Collateral Agent and Securities
                        Intermediary........................................29
        SECTION 9.04.  Rights in Other Capacities...........................29
        SECTION 9.05.  Non-Reliance on Collateral Agent, the Custodial
                        Agent and Securities Intermediary...................30
        SECTION 9.06.  Compensation and Indemnity...........................30
        SECTION 9.07.  Failure to Act.......................................31
        SECTION 9.08.  Resignation of Collateral Agent, the Custodial
                        Agent and Securities Intermediary...................32
        SECTION 9.09.  Right to Appoint Agent or Advisor....................33
        SECTION 9.10.  Survival.............................................33
        SECTION 9.11.  Exculpation..........................................33

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                                                                          PAGE

ARTICLE 10
        AMENDMENT
        SECTION 10.01.  Amendment Without Consent of Holders................34
        SECTION 10.02.  Amendment with Consent of Holders...................34
        SECTION 10.03.  Execution of Amendments.............................35
        SECTION 10.04.  Effect of Amendments................................36
        SECTION 10.05.  Reference of Amendments.............................36

ARTICLE 11
        MISCELLANEOUS
        SECTION 11.01.  No Waiver...........................................36
        SECTION 11.02.  Governing Law; Submission to Jurisdiction...........36
        SECTION 11.03.  Notices.............................................37
        SECTION 11.04.  Successors and Assigns..............................37
        SECTION 11.05.  Counterparts........................................37
        SECTION 11.06.  Severability........................................37
        SECTION 11.07.  Expenses, Etc.......................................38
        SECTION 11.08.  Security Interest Absolute..........................38
        SECTION 11.09.  Notice of Tax Event, Tax Event Redemption and
                         Termination Event..................................39

Exhibit A -  Instruction from Purchase Contract Agent to Collateral Agent
              (Establishment of Treasury MEDS)
Exhibit B -  Instruction from Collateral Agent to Securities Intermediary
              (Establishment of Treasury MEDS)
Exhibit C -  Instruction from Purchase Contract Agent to Collateral Agent
              (Reestablishment of Corporate MEDS)
Exhibit D -  Instruction from Collateral Agent to Securities Intermediary
              (Reestablishment of Corporate MEDS)
Exhibit E -  Notice of Cash Settlement from Securities Intermediary to
             Purchase Contract Agent (Cash Settlement Amounts)
Exhibit F -  Instruction to Custodial Agent
              (Regarding Remarketing)
Exhibit G -  Instruction to Custodial Agent
              (Withdrawal from Remarketing)

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                               PLEDGE AGREEMENT

         PLEDGE AGREEMENT, dated as of May 6, 2002, among KEYSPAN CORPORATION,
a New York corporation (the "Company"), THE BANK OF NEW YORK, a New York
banking corporation, as collateral agent (in such capacity, together with its
successors in such capacity, the "Collateral Agent"), as
custodial agent (in such capacity, together with its successors in such
capacity, the "Custodial Agent"), and as securities intermediary with respect
to the Collateral Account (in such capacity, together with its successors in
such capacity, the "Securities Intermediary"), and JPMORGAN CHASE BANK, a New
York banking corporation, as purchase contract agent and as attorney-in-fact
of the Holders from time to time of the Securities (as defined in the Purchase
Contract Agreement) (in such capacity, together with its successors in such
capacity, the "Purchase Contract Agent") under the Purchase Contract
Agreement.

                                   RECITALS

         The Company and the Purchase Contract Agent are parties to the
Purchase Contract Agreement dated as of the date hereof (as modified and
supplemented and in effect from time to time, the "Purchase Contract
Agreement"), pursuant to which 8,000,000 Corporate MEDS (as defined herein)
will be issued (9,200,000 Corporate MEDS if the over-allotment option granted
in the Underwriting Agreement (as defined herein) is exercised in full).

         Each Corporate MEDS, at issuance, consists of a unit comprised of (a)
a stock purchase contract (a "Purchase Contract") under which the Holder will
purchase from the Company on the Purchase Contract Settlement Date, for an
amount equal to $50 (the "Stated Amount"), a number of shares of the Company's
common stock, par value $0.01 per share ("Common Stock"), equal to the
Settlement Rate and (b) either beneficial ownership of a Note (as defined
below) or an Applicable Ownership Interest in the Treasury Portfolio (as
defined below).

         Pursuant to the terms of the Purchase Contract Agreement and the
Purchase Contracts, the Holders of the Securities have irrevocably authorized
the Purchase Contract Agent, as attorney-in-fact of such Holders, among other
things, to execute and deliver this Agreement on behalf of such Holders and to
grant the pledge provided herein of the Collateral (as defined herein) to
secure the Obligations (as defined herein).

         Accordingly, the Company, the Collateral Agent, the Securities
Intermediary, the Custodial Agent and the Purchase Contract Agent, on its own

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behalf and as attorney-in-fact of the Holders from time to time of the
Securities, agree as follows:

                                   ARTICLE 1
                                  DEFINITIONS

         SECTION 1.01.  Definitions.  For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise
requires:

          (a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;

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

          (c)   the following terms which are defined in the UCC shall have the
meanings set forth therein: "certificated security," "control," "financial
asset," "entitlement order," "securities account" and "security entitlement";

          (d) the following terms have the meanings assigned to them in the
Purchase Contract Agreement: "Act", "Affiliate", "Applicable Ownership
Interest", "Bankruptcy Code", "Board Resolution", "Business Day", "Cash
Merger", "Cash Merger Early Settlement", "Cash Merger Early Settlement Date",
"Cash Settlement", "Certificate", "Early Settlement", "Early Settlement Date",
"Failed Initial Remarketing", "Failed Final Remarketing", "Final
Remarketing","Holder","Initial Remarketing", "Initial Remarketing Date",
"Interim Remarketing", "Interim Remarketing Date"," Notes", "Officers'
Certificate", "Opinion of Counsel", "Outstanding Securities", "Purchase
Contract", "Purchase Contract Settlement Date", "Purchase Price", "Quotation
Agent", "Redemption Amount", "Remarketing Agent", "Remarketing Agreement",
"Remarketing Fee", "Security", "Separate Notes Purchase Price", "Settlement
Rate", "Successful Initial Remarketing", "Successful Interim Remarketing",
"Tax Event", "Tax Event Redemption", "Tax Event Redemption Date", "Termination
Event", "Treasury Portfolio", "Treasury Portfolio Purchase Price" and
"Underwriting Agreement"; and

          (e)   the following terms have the meanings given to them in this
Section 1.01(e):

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         "Agreement" means this Pledge Agreement, as the same may be amended,
modified or supplemented from time to time.

         "Cash" means any coin or currency of the United States as at the time
shall be legal tender for payment of public and private debts.

         "Collateral" means the collective reference to:

                 (i) all investment property and other financial assets from
         time to time credited to the Collateral Account, including, without
         limitation, (A) the Notes and security entitlements relating thereto
         that are a component of the Corporate MEDS from time to time, (B) the
         Applicable Ownership Interests (as specified in Clause (i) of the
         definition of such term) of the Holders with respect to the Treasury
         Portfolio which are a component of the Corporate MEDS from time to
         time; (C) any Treasury Securities and security entitlements relating
         thereto delivered from time to time upon establishment of Treasury
         MEDS in accordance with Section 5.02 hereof and (E) payments made by
         Holders pursuant to Section 5.05 hereof;

                (ii) all Proceeds of any of the foregoing (whether such Proceeds
         arise before or after the commencement of any proceeding under any
         applicable bankruptcy, insolvency or other similar law, by or against
         the pledgor or with respect to the pledgor); and

                (iii) all powers and rights now owned or hereafter acquired
         under or with respect to the Collateral.

         "Collateral Account" means the securities account of The Bank of New
York, as Collateral Agent, maintained by the Securities Intermediary and
designated "The Bank of New York, as Collateral Agent of KeySpan Corporation,
as pledgee of JPMorgan Chase Bank, as the Purchase Contract Agent on behalf of
and as attorney-in-fact for the Holders".

         "Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor shall have become such pursuant
to the applicable provisions of the Purchase Contract Agreement, and
thereafter "Company" shall mean such successor.

         "Corporate MEDS" means the collective rights and obligations of a
Holder of a Corporate MEDS Certificate in respect of a Note or an appropriate
Applicable Ownership Interests of the Treasury Portfolio, as the case may be,
subject in each case to the Pledge thereof, and the related Purchase Contract;

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provided that the appropriate Applicable Ownership Interests (as specified in
clause (ii) of the definition of such term) of the Treasury Portfolio shall
not be subject to the Pledge.

         "Corporate MEDS Certificate " means a certificate evidencing the
rights and obligations of a Holder in respect of the number of Corporate MEDS
specified on such certificate.

         "Obligations" means, with respect to each Holder, the collective
reference to all obligations and liabilities of such Holder under such
Holder's Purchase Contract, the Purchase Contract Agreement and this Agreement
or any other document made, delivered or given in connection herewith or
therewith, in each case whether on account of principal, interest (including,
without limitation, interest accruing before and after the filing of any
petition in bankruptcy, or the commencement of any insolvency, reorganization
or like proceeding, relating to such Holder, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding), fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to the Company or the Collateral Agent or
the Securities Intermediary that are required to be paid by the Holder
pursuant to the terms of any of the foregoing agreements).

         "Permitted Investments" means any one of the following which shall
mature not later than the next succeeding Business Day:

                (1) any evidence of indebtedness with an original maturity of
         365 days or less issued, or directly and fully guaranteed or insured,
         by the United States of America or any agency or instrumentality
         thereof (provided that the full faith and credit of the United States
         of America is pledged in support of the timely payment thereof or such
         indebtedness constitutes a general obligation of it);

                (2) deposits, certificates of deposit or acceptances with an
         original maturity of 365 days or less of any institution which is a
         member of the Federal Reserve System having combined capital and
         surplus and undivided profits of not less than $200.0 million at the
         time of deposit (and which may include the Collateral Agent);

                (3) investments with an original maturity of 365 days or less
         of any Person that is fully and unconditionally guaranteed by a bank
         referred to in clause (2);

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                (4) repurchase agreements and reverse repurchase agreements
         relating to marketable direct obligations issued or unconditionally
         guaranteed by the United States of America or issued by any agency
         thereof and backed as to timely payment by the full faith and credit
         of the United States of America;

                (5) investments in commercial paper, other than commercial paper
         issued by the Company or its affiliates, of any corporation
         incorporated under the laws of the United States or any State
         thereof, which commercial paper has a rating at the time of purchase
         at least equal to "A-1" by Standard & Poor's Ratings Services ("S&P")
         or at least equal to "P-1" by Moody's Investors Service, Inc.
         ("Moody's"); and

                (6) investments in money market funds (including, but not
         limited to, money market funds managed by the Collateral Agent or an
         affiliate of the Collateral Agent) registered under the Investment
         Company Act of 1940, as amended, rated in the highest applicable
         rating category by S&P or Moody's.

         "Person" means any legal person, including, without limitation, any
individual, corporation, estate, partnership, joint venture, association,
joint-stock company, limited liability company, trust, unincorporated
organization or government or any agency or political subdivision thereof.

         "Pledge" means the lien and security interest created by this
Agreement.

         "Pledged Applicable Ownership Interests" means the Applicable
Ownership Interests (as specified in clause (i) of the definition thereof) of
the Holders with respect to the Treasury Portfolio from time to time credited
to the Collateral Account and not then released from the Pledge.

         "Pledged Notes" means Notes and security entitlements with respect
thereto from time to time credited to the Collateral Account and not then
released from the Pledge.

         "Pledged Securities" means the Pledged Notes, the Pledged Applicable
Ownership Interests or the Pledged Treasury Securities, collectively.

         "Pledged Treasury Securities" means Treasury Securities and security
entitlements with respect thereto from time to time credited to the Collateral
Account and not then released from the Pledge.

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         "Proceeds" has the meaning ascribed thereto in the UCC and includes,
without limitation, all interest, dividends, cash, instruments, securities,
financial assets (as defined in ss.8-102(a)(9) of the UCC) and other property
received, receivable or otherwise distributed upon the sale, exchange,
collection or disposition of any financial assets from time to time held in
the Collateral Account.

         "Purchase Contract Agent" has the meaning specified in the paragraph
preceding the recitals of this Agreement.

         "Separate Notes" means Notes which are not components of Corporate
MEDS.

         "TRADES" means the Treasury/Reserve Automated Debt Entry System
maintained by the Federal Reserve Bank of New York pursuant to the TRADES
Regulations.

         "TRADES Regulations" means the regulations of the United States
Department of the Treasury, published at 31 C.F.R. Part 357, as amended from
time to time. Unless otherwise defined herein, all terms defined in the TRADES
Regulations are used herein as therein defined.

         "Transfer" means in the case of certificated securities in registered
form, delivery as provided in ss.8-301(a) of the UCC, indorsed to the
transferee or in blank by an effective endorsement; in the case of Treasury
Securities, registration of the transferee as the owner of such Treasury
Securities on TRADES; and in the case of security entitlements, including,
without limitation, security entitlements with respect to Treasury Securities,
a securities intermediary indicating by book entry that such security
entitlement has been credited to the transferee's securities account.

         "Treasury MEDS" means, following the substitution of Treasury
Securities for Notes as collateral to secure a Holder's obligations under the
Purchase Contract, the collective rights and obligations of a Holder of a
Treasury MEDS Certificate in respect of such Treasury Securities, subject to
the Pledge thereof, and the related Purchase Contract.

         "Treasury MEDS Certificate" means a certificate evidencing the rights
and obligations of a Holder in respect of the number of Treasury MEDS
specified on such certificate.

         "Treasury Securities" means zero-coupon U.S. treasury securities
(CUSIP No. 912803ADS) which mature on May 15, 2005.

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         "UCC" means the Uniform Commercial Code as in effect in the State of
New York from time to time.

         "Value" means, with respect to any item of Collateral on any date, as
to (1) Cash, the face amount thereof, (2) Treasury Securities or Notes, the
aggregate principal amount thereof at maturity and (3) Applicable Ownership
Interests (as specified in clause (i) of the definition of such term), the
appropriate percentage of the aggregate principal amount at maturity of the
Treasury Portfolio.

                                   ARTICLE 2
                                    PLEDGE

         SECTION 2.01. Pledge. Each Holder, acting through the Purchase
Contract Agent as such Holder's attorney-in-fact, and the Purchase Contract
Agent, acting solely as such attorney-in-fact, hereby pledges and grants to
the Collateral Agent, as agent of and for the benefit of the Company, a
continuing first priority security interest in and to, and a lien upon and
right of set-off against, all of such Person's right, title and interest in
and to the Collateral to secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or
otherwise) of the Obligations. The Collateral Agent shall have all of the
rights, remedies and recourses with respect to the Collateral afforded a
secured party by the UCC, in addition to, and not in limitation of, the other
rights, remedies and recourses afforded to the Collateral Agent by this
Agreement.

         SECTION 2.02.  Control; Financing Statement.

          (a) The Collateral Agent shall have control of the Collateral
Account pursuant to the provisions of Article 4 of this Agreement.

          (b) Subsequent to the date of initial issuance of the Securities,
the Purchase Contract Agent shall deliver to the Collateral Agent a copy of
the financing statement prepared by the Company and filed in the Office of the
Secretary of State of the State of New York and any other jurisdictions which
the Company deems necessary, authorized by the Purchase Contract Agent, as
attorney-in-fact for the Holders, as Debtors, and describing the Collateral,
such filing to be undertaken by the Company.

         SECTION 2.03.  Termination.  As to each Holder, this Agreement and the
Pledge created hereby shall terminate upon the satisfaction of such Holder's
Obligations. Upon such termination, the Collateral Agent shall Transfer such

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Holder's portion of the Collateral to the Purchase Contract Agent for
distribution to such Holder in accordance with its interest, free and clear of
any lien, pledge or security interest created hereby.

                                   ARTICLE 3
                      DISTRIBUTIONS ON PLEDGED COLLATERAL

         SECTION 3.01. Income Distributions. All income distributions received
by the Collateral Agent on account of the Pledged Notes, the Pledged
Applicable Ownership Interests or Permitted Investments from time to time held
in the Collateral Account shall be distributed to the Purchase Contract Agent
(ABA No. 021000021, A/C No. 10202063.1, Re: KeySpan Corporation) for the
benefit of the applicable Holders as provided in the Purchase Contracts or
Purchase Contract Agreement.

         SECTION 3.02. Principal Payments Following Termination Event. All
payments received by the Collateral Agent following a Termination Event of (1)
the aggregate principal amount of the Pledged Notes or securities entitlements
thereto, or (2) the Pledged Applicable Ownership Interests, or (3) the
principal amount of the Pledged Treasury Securities, shall be distributed to
the Purchase Contract Agent for the benefit of the applicable Holders for
distribution to such Holders in accordance with their respective interests.

         SECTION 3.03.  Principal Payments Prior to or on Purchase Contract
Settlement Date.

          (a) Subject to the provisions of Sections 5.06, 5.08 and 7.03, and
except as provided in clause 3.03(b) below, if no Termination Event shall have
occurred, all payments received by the Collateral Agent of (1) the aggregate
principal amount with respect to the Pledged Notes or security entitlements
with respect thereto, (2) the Pledged Applicable Ownership Interests or (3)
the principal amount of Pledged Treasury Securities, shall be held and
invested in Permitted Investments until the Purchase Contract Settlement Date
and on the Purchase Contract Settlement Date distributed to the Company as
provided in Section 5.07 hereof. Any balance remaining in the Collateral
Account shall be distributed to the Purchase Contract Agent for the benefit of
the applicable Holders for distribution to such Holders in accordance with
their respective interests. The Company shall instruct the Collateral Agent in
writing as to the type of Permitted Investments in which any payments made
under this Section shall be invested, provided, however, that if the Company
fails to deliver such instructions by 10:30 a.m. (New York City time) on the
day such payments are received by the Collateral

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Agent, the Collateral Agent shall invest such payments in the Permitted
Investments described in clause (6) of the definition of Permitted
Investments.

          (b) All payments received by the Collateral Agent of (1) the
aggregate principal amount with respect to the Pledged Notes or security
entitlements with respect thereto, (2) the Applicable Ownership Interests (as
specified in clause (i) of the definition thereof) of the Treasury Portfolio,
or (3) the principal amount of Treasury Securities or security entitlements
with respect thereto, that, in each case, have been released from the Pledge
shall be distributed to the Purchase Contract Agent for the benefit of the
applicable Holders for distribution to such Holders in accordance with their
respective interests.

         SECTION 3.04. Payments to Purchase Contract Agent. The Collateral
Agent shall use all commercially reasonable efforts to deliver payments to the
Purchase Contract Agent hereunder to the account designated by the Purchase
Contract Agent for such purpose not later than 12:00 p.m. (New York City time)
on the Business Day such payment is received by the Collateral Agent;
provided, however, that if such payment is received on a day that is not a
Business Day or after 11:00 a.m. (New York City time) on a Business Day, then
the Collateral Agent shall use all commercially reasonable efforts to deliver
such payment to the Purchase Contract Agent no later than 10:30 a.m. (New York
City time) on the next succeeding Business Day.

         SECTION 3.05. Assets Not Properly Released. If the Purchase Contract
Agent or any Holder shall receive any principal payments on account of
financial assets credited to the Collateral Account and not released therefrom
in accordance with this Agreement, the Purchase Contract Agent or such Holder
shall hold the same as trustee of an express trust for the benefit of the
Company and, upon receipt of an Officers' Certificate of the Company so
directing, promptly deliver the same to the Collateral Agent for credit to the
Collateral Account or to the Company for application to the Obligations of the
Holders, and the Purchase Contract Agent and Holders shall acquire no right,
title or interest in any such payments of principal amounts so received. The
Purchase Contract Agent shall have no liability under this Section 3.05 unless
and until it has been notified in writing that such payment was delivered to
it erroneously and shall have no liability for any action taken, suffered or
omitted to be taken prior to its receipt of such notice.

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                                   ARTICLE 4
                                    CONTROL

         SECTION 4.01.  Establishment of Collateral Account.  The Securities
Intermediary hereby confirms that:

          (a)   the Securities Intermediary has established the Collateral
Account;

          (b)   the Collateral Account is a securities account;

          (c) subject to the terms of this Agreement, the Securities
Intermediary shall identify in its records the Collateral Agent as the
entitlement holder entitled to exercise the rights that comprise any financial
asset credited to the Collateral Account;

          (d) all property delivered to the Securities Intermediary pursuant
to this Agreement or the Purchase Contract Agreement will be credited promptly
to the Collateral Account;

          (e) all securities or other property underlying any financial assets
credited to the Collateral Account shall be registered in the name of the
Purchase Contract Agent and indorsed to the Collateral Agent or in blank,
registered in the name of the Collateral Agent or credited to another
securities account maintained in the name of the Collateral Account.

         SECTION 4.02. Treatment as Financial Assets. Each item of property
(whether investment property, financial asset, security, instrument or cash)
credited to the Collateral Account shall be treated as a financial asset.

         SECTION 4.03. Sole Control by Collateral Agent. Except as provided in
Section 6.01, at all times prior to the termination of the Pledge, the
Collateral Agent shall have sole control of the Collateral Account, and the
Securities Intermediary shall take instructions and directions with respect to
the Collateral Account solely from the Collateral Agent. If at any time the
Securities Intermediary shall receive an entitlement order issued by the
Collateral Agent and relating to the Collateral Account, the Securities
Intermediary shall comply with such entitlement order without further consent
by the Purchase Contract Agent or any Holder or any other Person. Until
termination of the Pledge, the Securities Intermediary will not comply with
any entitlement orders issued by the Purchase Contract Agent or any Holder.

         SECTION 4.04.  Securities Intermediary's Location.  The Collateral
Account, and the rights and obligations of the Securities Intermediary, the

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Collateral Agent, the Purchase Contract Agent and the Holders with respect
thereto, shall be governed by the laws of the State of New York. Regardless of
any provision in any other agreement, for purposes of the UCC, New York shall
be deemed to be the Securities Intermediary's location.

         SECTION 4.05. No Other Claims. Except for the claims and interest of
the Collateral Agent and of the Purchase Contract Agent and the Holders in the
Collateral Account, the Securities Intermediary (without making any
investigation) does not know of any claim to, or interest in, the Collateral
Account or in any financial asset credited thereto. If any Person asserts any
lien, encumbrance or adverse claim (including any writ, garnishment, judgment,
warrant of attachment, execution or similar process) against the Collateral
Account or in any financial asset carried therein, the Securities Intermediary
will promptly notify the Collateral Agent and the Purchase Contract Agent.

         SECTION 4.06. Investment and Release. All proceeds of financial
assets from time to time deposited in the Collateral Account shall be invested
and reinvested as provided in this Agreement. At all times prior to
termination of the Pledge, no property shall be released from the Collateral
Account except in accordance with this Agreement or upon written instructions
of the Collateral Agent.

         SECTION 4.07. Statements and Confirmations. The Securities
Intermediary will promptly send copies of all statements, confirmations and
other correspondence concerning the Collateral Account and any financial
assets credited thereto simultaneously to each of the Purchase Contract Agent
and the Collateral Agent at their addresses for notices under this Agreement.

         SECTION 4.08. Tax Allocations. The Purchase Contract Agent shall file
with the Internal Revenue Service and deliver to the Holders Forms 1099 (or
successor or comparable forms), to the extent required by law, with respect to
payments received by the Holders. Neither the Securities Intermediary nor the
Collateral Agent shall have any tax reporting duties hereunder.

         SECTION 4.09. No Other Agreements. The Securities Intermediary has
not entered into, and prior to the termination of the Pledge will not enter
into, any agreement with any other Person relating to the Collateral Account
or any financial assets credited thereto, including, without limitation, any
agreement to comply with entitlement orders of any Person other than the
Collateral Agent.

         SECTION 4.10. Powers Coupled with an Interest. The rights and powers
granted in this Article 4 to the Collateral Agent have been granted in order
to perfect its security interests in the Collateral Account, are powers
coupled with an

                                      12

<PAGE>

interest and will be affected neither by the bankruptcy of the Purchase
Contract Agent or any Holder nor by the lapse of time. The obligations of the
Securities Intermediary under this Article 4 shall continue in effect until
the termination of the Pledge.

                                   ARTICLE 5
      INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY MEDS AND REESTABLISHMENT
                               OF CORPORATE MEDS

         SECTION 5.01. Initial Deposit of Notes. (a) Prior to or concurrently
with the execution and delivery of this Agreement, the Purchase Contract
Agent, on behalf of the initial Holders of the Corporate MEDS, shall Transfer
to the Collateral Agent, for credit to the Collateral Account, the Notes or
security entitlements relating thereto, and, in the case of security
entitlements, the Securities Intermediary shall indicate by book-entry that a
securities entitlement to such Notes has been credited to the Collateral
Account.

          (b) Prior to any Event of Default, the Collateral Agent agrees to
hold any Notes or security interests relating thereto, constituting a portion
of the Collateral registered in the name of the Purchase Contract Agent, as
attorney-in-fact for the Holders, with appropriate indorsement in the form
delivered to it and shall not re- register such Notes or security interests
relating thereto prior to an Event of Default.

         SECTION 5.02.  Establishment of Treasury MEDS.

          (a) So long as the Treasury Portfolio has not replaced the Notes as
a component of the Corporate MEDS as a result of a Tax Event Redemption, at
any time prior 11:00 a.m. (New York City time) on the Business Day immediately
preceding the Initial Remarketing Date, a Holder of Corporate MEDS shall have
the right to establish or reestablish Treasury MEDS by substitution of
Treasury Securities or security entitlements with respect thereto for the
Pledged Notes comprising a part of such Holder's Corporate MEDS in integral
multiples of 20 Corporate MEDS by:

          (i) Transferring to the Collateral Agent for credit to the
         Collateral Account Treasury Securities or security entitlements with
         respect thereto having a Value equal to the aggregate principal
         amount of the Pledged Notes to be released, accompanied by a notice,
         substantially in the form of Exhibit C to the Purchase Contract
         Agreement, whereupon the Purchase Contract Agent shall deliver to the
         Collateral Agent a notice,

                                      13

<PAGE>

         substantially in the form of Exhibit A hereto, (A) stating that such
         Holder has notified the Purchase Contract Agent that such Holder has
         Transferred Treasury Securities or security entitlements with respect
         thereto to the Collateral Agent for credit to the Collateral Account,
         (B) stating the Value of the Treasury Securities or security
         entitlements with respect thereto Transferred by such Holder and (C)
         requesting that the Collateral Agent release from the Pledge the
         Pledged Notes that are a component of such Corporate MEDS; and

                (ii)   delivering the related Corporate MEDS to the Purchase
         Contract Agent.

         Upon receipt of such notice and confirmation that Treasury Securities
or security entitlements with respect thereto have been credited to the
Collateral Account as described in such notice, the Collateral Agent shall
instruct the Securities Intermediary by a notice, substantially in the form of
Exhibit B hereto, to release such Pledged Notes from the Pledge by Transfer to
the Purchase Contract Agent for distribution to such Holder, free and clear of
any lien, pledge or security interest created hereby.

         (b) Upon credit to the Collateral Account of Treasury Securities or
security entitlements with respect thereto delivered by a Holder of Corporate
MEDS and receipt of the related instruction from the Collateral Agent, the
Securities Intermediary shall release such Pledged Notes and shall promptly
Transfer the same to the Purchase Contract Agent for distribution to such
Holder, free and clear of any lien, pledge or security interest created
hereby.

         SECTION 5.03.  Reestablishment of Corporate MEDS.

          (a) So long as the Treasury Portfolio has not replaced the Notes as
a component of the Corporate MEDS as a result of a Tax Event Redemption, at
any time on or prior to 11:00 a.m. (New York City time) on the Business Day
immediately preceding the Initial Remarketing Date, a Holder of Treasury MEDS
shall have the right to reestablish Corporate MEDS by substitution of Notes or
security entitlements with respect thereto for Pledged Treasury Securities in
integral multiples of 20 Treasury MEDS by:

                (i) Transferring to the Collateral Agent for credit to the
         Collateral Account Notes or security entitlements with respect
         thereto having a principal amount equal to the Value of the Pledged
         Treasury Securities to be released, accompanied by a notice,
         substantially in the form of Exhibit C to the Purchase Contract
         Agreement, whereupon the Purchase Contract Agent shall deliver to the
         Collateral Agent a notice,

                                      14

<PAGE>

          substantially in the form of Exhibit C hereto, stating that such
          Holder hasTransferred the Notes or security entitlements with
          respect thereto to the Collateral Account for credit to the
          Collateral Account and requesting that the Collateral Agent release
          from the Pledge the Pledged Treasury Securities related to such
          Treasury MEDS; and

                (ii)   delivering the related Treasury MEDS to the Purchase
         Contract Agent.

         Upon receipt of such notice and confirmation that Notes or security
entitlements with respect thereto have been credited to the Collateral Account
as described in such notice, the Collateral Agent shall instruct the
Securities Intermediary by a notice substantially in the form of Exhibit D
hereto to release such Pledged Treasury Securities from the Pledge by Transfer
to the Purchase Contract Agent for distribution to such Holder, free and clear
of any lien, pledge or security interest created hereby.

         (b) Upon credit to the Collateral Account of Notes or security
entitlements with respect thereto delivered by a Holder of Treasury MEDS and
receipt of the related instruction from the Collateral Agent, the Securities
Intermediary shall release such Pledged Treasury Securities and shall promptly
Transfer the same to the Purchase Contract Agent for distribution to such
Holder, free and clear of any lien, pledge or security interest created
hereby.

         SECTION 5.04.  Termination Event.

          (a) Upon receipt by the Collateral Agent of written notice from the
Company or the Purchase Contract Agent that a Termination Event has occurred,
the Collateral Agent shall release all Collateral from the Pledge and shall
promptly Transfer:

                (i) any Pledged Notes or security entitlements with respect
         thereto or Pledged Applicable Ownership Interests (if the Treasury
         Portfolio has become a component of the Corporate MEDS as a result of
         a Successful Initial Remarketing, Successful Interim Remarketing or a
         Tax Event Redemption);

                (ii) any Pledged Treasury Securities, and

                (iii) payments by Holders (or the Permitted Investments of
         such payments) pursuant to Section 5.05 hereof,

                                      15

<PAGE>

to the Purchase Contract Agent for the benefit of the Holders for distribution
to such Holders in accordance with their respective interests, free and clear
of any lien, pledge or security interest or other interest created hereby;
provided, however, if any Holder shall be entitled to receive less than $1,000
with respect to its interest in the Applicable Ownership Interests (as
specified in clause (i) of the definition of such term) of the Treasury
Portfolio, the Purchase Contract Agent shall have the right (but not the
obligation) to dispose of such interest for cash and deliver to such Holder
cash in lieu of delivering the Applicable Ownership Interests (as specified in
clause (i) of the definition of such term) of the Treasury Portfolio.

          (b) If such Termination Event shall result from the Company's
becoming a debtor under the Bankruptcy Code, and if the Collateral Agent shall
for any reason fail promptly to effectuate the release and Transfer of all
Pledged Notes, the Pledged Applicable Ownership Interests, the Pledged
Treasury Securities or payments by Holders (or the Permitted Investments of
such payments) pursuant to Section 5.05 hereof, as the case may be, as
provided by this Section 5.04, the Purchase Contract Agent shall:

                (i) use its best efforts to obtain an opinion of a nationally
         recognized law firm reasonably acceptable to the Collateral Agent to
         the effect that, as a result of the Company's being the debtor in
         such a bankruptcy case, the Collateral Agent will not be prohibited
         from releasing or Transferring the Collateral as provided in this
         Section 5.04, and shall deliver or cause to be delivered such opinion
         to the Collateral Agent within ten days after the occurrence of such
         Termination Event, and if (A) the Purchase Contract Agent shall be
         unable to obtain such opinion within ten days after the occurrence of
         such Termination Event or (B) the Collateral Agent shall continue,
         after delivery of such opinion, to refuse to effectuate the release
         and Transfer of all Pledged Notes, Pledged Applicable Ownership
         Interests, the Pledged Treasury Securities and the payments by
         Holders (or the Permitted Investments of such payments) pursuant to
         Section 5.05 hereof or the Proceeds of any of the foregoing, as the
         case may be, as provided in this Section 5.04, then the Purchase
         Contract Agent shall within fifteen days after the occurrence of such
         Termination Event commence an action or proceeding in the court
         having jurisdiction of the Company's case under the Bankruptcy Code
         seeking an order requiring the Collateral Agent to effectuate the
         release and transfer of all Pledged Notes, Pledged Applicable
         Ownership Interests, the Pledged Treasury Securities, or the payments
         by Holders (or the Permitted Investments of such payments) pursuant
         to Section 5.05 hereof, or as the case may be, as provided by this
         Section 5.04; or

                                      16

<PAGE>

                (ii) commence an action or proceeding like that described in
         clause 5.04(b)(i) hereof within ten days after the occurrence of such
         Termination Event.

         SECTION 5.05.  Cash Settlement.

          (a) Upon receipt by the Collateral Agent of (1) a notice from the
Purchase Contract Agent promptly after the receipt by the Purchase Contract
Agent of a notice from a Holder of Corporate MEDS or Treasury MEDS that such
Holder has elected, in accordance with the procedures specified in Section
5.02(c)(i) or (f)(i) of the Purchase Contract Agreement, respectively, to
effect a Cash Settlement and (2) payment by such Holder of Corporate MEDS or
Treasury MEDS by deposit in the Collateral Account prior to 11:00 a.m. (New
York City time) on the fourth Business Day immediately preceding the Purchase
Contract Settlement Date of the Purchase Price in lawful money of the United
States by certified or cashier's check or wire transfer of immediately
available funds payable to or upon the order of the Securities Intermediary,
then the Collateral Agent shall:

                (i)   instruct the Securities Intermediary promptly to invest
         any such Cash in Permitted Investments;

                (ii) instruct the Securities Intermediary to release from the
         Pledge the Corporate MEDS holder's or the Treasury MEDS holder's
         related Pledged Notes, Pledged Applicable Ownership Interests or
         Pledged Treasury Securities, as applicable, as to which such Holder has
         effected a Cash Settlement pursuant to this Section 5.05(a); and

                (iii) instruct the Securities Intermediary to Transfer all such
         Pledged Notes, Pledged Applicable Ownership Interests or the Pledged
         Treasury Securities, as the case may be, to the Purchase Contract
         Agent for the benefit of such Holder, in each case free and clear of
         the Pledge created hereby, for distribution to such Holder.

         The Company shall instruct the Collateral Agent in writing as to the
type of Permitted Investments in which any such Cash shall be invested;
provided, however, that if the Company fails to deliver such written
instructions by 10:30 a.m. (New York City time), the Collateral Agent shall
invest such Cash in the Permitted Investments described in clause (6) of the
definition of Permitted Investments.

         Upon receipt of the proceeds upon the maturity of the Permitted
Investments on the Purchase Contract Settlement Date, the Collateral Agent
shall

                                      17

<PAGE>

(A) pay the portion of such proceeds and deliver any certified or cashier's
checks received, in an aggregate amount equal to the Purchase Price, to the
Company on the Purchase Contract Settlement Date, and (B) release any amounts
in excess of the Purchase Price earned from such Permitted Investments to the
Purchase Contract Agent for distribution to such Holder.

          (b) If a Holder of Corporate MEDS (unless a Tax Event Redemption, a
Successful Initial Remarketing or a Successful Interim Remarketing shall have
occurred) (i) fails to notify the Purchase Contract Agent of its intention to
make a Cash Settlement as provided in paragraph 5.02(c)(i) of the Purchase
Contract Agreement or (ii) does notify the Purchase Contract Agent of its
intention to pay the Purchase Price in cash, but fails to make such payment as
required by paragraph 5.02(c)(ii) of the Purchase Contract Agreement, such
Holder shall be deemed to have consented to the disposition of such Holder's
Pledged Notes in accordance with paragraph 5.02(c)(iii) of the Purchase
Contract Agreement.

          (c) If a Holder of a Treasury MEDS or a Holder of Corporate MEDS (if
a Tax Event Redemption, a Successful Initial Remarketing or a Successful
Interim Remarketing shall have occurred) (i) fails to notify the Purchase
Contract Agent of its intention to make a Cash Settlement as provided in
paragraph 5.02(f)(i) of the Purchase Contract Agreement or (ii) does notify
the Purchase Contract Agent as provided in paragraph 5.02(f)(ii) of the
Purchase Contract Agreement of its intention to pay the Purchase Price in
cash, but fails to make such payment as required by paragraph 5.02(f)(ii) of
the Purchase Contract Agreement, such Holder shall be deemed to have elected
to pay the Purchase Price in accordance with paragraph 5.02(f)(iii) of the
Purchase Contract Agreement.

          (d) As soon as practicable after 11:00 a.m. (New York City time) on
the fourth Business Day immediately preceding the Purchase Contract Settlement
Date, the Collateral Agent shall deliver to the Purchase Contract Agent a
notice, substantially in the form of Exhibit E hereto, stating (i) the amount
of cash that it has received with respect to the Cash Settlement of Corporate
MEDS, (ii) the amount of Cash that it has received with respect to the Cash
Settlement of Treasury MEDS and (iii) the amount of Pledged Notes to be
remarketed in the Final Remarketing pursuant to Section 5.02(c)(iii) of the
Purchase Contract Agreement.

         SECTION 5.06. Early Settlement and Cash Merger Early Settlement. Upon
receipt by the Collateral Agent of a notice from the Purchase Contract Agent
that a Holder of Securities has elected to effect either (i) Early Settlement
of its obligations under the Purchase Contracts forming a part of such
Securities in accordance with the terms of the Purchase Contracts and Section
5.07 of the Purchase Contract Agreement or (ii) Cash Merger Early Settlement
of its

                                      18

<PAGE>

obligations under the Purchase Contracts forming a part of such Securities in
accordance with the terms of the Purchase Contracts and Section 5.04(b)(2) of
the Purchase Contract Agreement (which notice shall set forth the number of
such Purchase Contracts as to which such Holder has elected to effect Early
Settlement or Cash Merger Early Settlement), and that the Purchase Contract
Agent has received from such Holder, and paid to the Company as confirmed in
writing by the Company, the related Purchase Price pursuant to the terms of
the Purchase Contracts and the Purchase Contract Agreement and that all
conditions to such Early Settlement or Cash Merger Early Settlement have been
satisfied, then the Collateral Agent shall release from the Pledge, (1)
Pledged Notes or the Pledged Applicable Ownership Interests in the case of a
Holder of Corporate MEDS or (2) Pledged Treasury Securities, in the case of a
Holder of Treasury MEDS, in each case with a Value equal to the product of (x)
the Stated Amount times (y) the number of Purchase Contracts as to which such
Holder has elected to effect Early Settlement or Cash Merger Early Settlement,
and shall instruct the Securities Intermediary to Transfer all such Pledged
Applicable Ownership Interests or Pledged Notes or Pledged Treasury
Securities, as the case may be, to the Purchase Contract Agent for the benefit
of such Holder, in each case free and clear of the Pledge created hereby, for
distribution to such Holder. A Treasury MEDS holder may settle early only in
integral multiples of 20 Purchase Contracts and a Corporate MEDS holder, if a
Tax Event Redemption, a Successful Initial Remarketing or a Successful Interim
Remarketing has occurred, may settle early only in integral multiples of
80,000 Purchase Contracts.

         SECTION 5.07.  Application of Proceeds in Settlement of Purchase
Contracts.

          (a) If a Holder of Corporate MEDS (unless a Successful Initial
Remarketing, Successful Interim Remarketing or a Tax Event Redemption has
occurred) has not elected to make an effective Cash Settlement by notifying
the Purchase Contract Agent in the manner provided for in Section 5.02(c)(i)
of the Purchase Contract Agreement or does notify the Purchase Contract Agent
as provided in paragraph 5.02(c)(i) of the Purchase Contract Agreement of its
intention to pay the Purchase Price in cash, but fails to make such payment as
required by paragraph 5.02(c)(ii) of the Purchase Contract Agreement, such
Holder shall be deemed to have elected to pay for the shares of Common Stock
to be issued under such Purchase Contracts from the Proceeds of the
remarketing of the related Pledged Notes. In such event, the Collateral Agent
shall instruct the Securities Intermediary to Transfer the related Pledged
Notes to the Remarketing Agent for remarketing. Upon receiving such Pledged
Notes, the Remarketing Agent, pursuant to the terms of the Remarketing
Agreement, will use commercially reasonable best efforts to remarket such
Pledged Notes. The Remarketing Agent will deposit the Proceeds of such Final
Remarketing (less,

                                      19

<PAGE>

to the extent permitted by the Remarketing Agreement, the Remarketing Fee) in
the Collateral Account, and the Collateral Agent shall invest the Proceeds of
the remarketing in Permitted Investments set forth in clause (6) of the
definition of Permitted Investments. On the Purchase Contract Settlement Date,
the Purchase Contract Agent shall consult with the Collateral Agent regarding
the instruction the Collateral Agent shall give to the Securities Intermediary
in order to apply a portion of the Proceeds from such remarketing equal to the
aggregate principal amount of such Pledged Notes to satisfy in full such
Holder's obligations to pay the Purchase Price to purchase the shares of
Common Stock under the related Purchase Contracts and the balance of the
Proceeds from the remarketing, if any, that shall be transferred to the
Purchase Contract Agent for the benefit of such Holder for distribution to
such Holder.

         If the Remarketing Agent advises the Collateral Agent in writing that
there has been a Failed Final Remarketing, the Collateral Agent, for the
benefit of the Company shall, at the written direction of the Company,
exercise the Company's rights as a secured party with respect to the Pledged
Notes and dispose of the Pledged Notes in accordance with applicable law or
deliver the Pledged Notes to the Company to retain. Following such action, the
Holder's obligations to pay the Purchase Price for the shares of Common Stock
will be satisfied in full.

          (b) If a Holder of a Treasury MEDS or a Holder of Corporate MEDS (if
a Tax Event Redemption, a Successful Initial Remarketing or a Successful
Interim Remarketing has occurred) has not elected to make an effective Cash
Settlement by notifying the Purchase Contract Agent in the manner provided for
in Section 5.02(f)(i) of the Purchase Contract Agreement, or has given such
notice but failed to make such payment in the manner required by Section
5.02(f)(ii) of the Purchase Contract Agreement, such Holder shall be deemed to
have elected to pay for the shares of Common Stock to be issued under such
Purchase Contracts from the Proceeds of the related Pledged Treasury
Securities or Pledged Applicable Ownership Interests, as the case may be.
Promptly, after 11:00 a.m. (New York City time) on the Business Day
immediately prior to the Purchase Contract Settlement Date, the Collateral
Agent shall invest the Cash Proceeds of the maturing Pledged Treasury
Securities or Pledged Applicable Ownership Interests, as the case may be, in
Permitted Investments set forth in clause (6) of the definition of Permitted
Investments, unless prior to 10:30 a.m. (New York City time) on such date, the
Company shall otherwise instruct the Collateral Agent as to the type of
Permitted Investments in which any such Cash Proceeds shall be invested.
Without receiving any instruction from any such Holder, the Collateral Agent
shall apply the Proceeds of the related Pledged Treasury Securities or Pledged
Applicable Ownership Interests, as the case may be, to the settlement of such
Purchase Contracts on the Purchase Contract Settlement Date. In the event the
sum of the Proceeds from the related Pledged Treasury Securities or Pledged

                                      20

<PAGE>

Applicable Ownership Interests, as the case may be, and the investment
earnings from the investment in Permitted Investments exceeds the aggregate
Purchase Price of the Purchase Contracts being settled thereby, the Collateral
Agent shall instruct the Securities Intermediary to distribute such excess,
when received, to the Purchase Contract Agent for the benefit of such Holder
for distribution to such Holder.

          (c) Prior to 11:00 a.m. (New York City time) on the Business Day
immediately preceding the Initial Remarketing Date, but no earlier than the
Payment Date immediately preceding such date, Holders of Separate Notes may
elect to have their Separate Notes remarketed under the Remarketing Agreement
and subject to the terms of any supplemental remarketing agreement, by
delivering their Separate Notes, along with a notice of such election,
substantially in the form of Exhibit F hereto, to the Custodial Agent. After
such time, such election shall become an irrevocable election to have such
Separate Notes remarketed in the Initial Remarketing and, in the case of a
Failed Initial Remarketing, in any Interim Remarketing and the Final
Remarketing. The Custodial Agent shall hold Separate Notes in an account
separate from the Collateral Account in which the Pledged Securities shall be
held. Holders of Notes electing to have their Separate Notes remarketed will
also have the right to withdraw that election by written notice to the
Custodial Agent, substantially in the form of Exhibit G hereto, prior to 11:00
a.m. (New York City time) on the Business Day immediately preceding the
Initial Remarketing Date, upon which notice the Custodial Agent shall return
such Separate Notes to such Holder.

         Promptly after 11:00 a.m. on the Business Day immediately preceding
the Initial Remarketing Date, any Interim Remarketing Date or the Final
Remarketing Date, as applicable, the Custodial Agent shall notify the
Remarketing Agent of the aggregate principal amount of the Separate Notes to
be remarketed and will deliver to the Remarketing Agent for remarketing all
Separate Notes delivered to the Custodial Agent pursuant to this Section
5.07(c) and not withdrawn pursuant to the terms hereof prior to such date.
After deducting the Remarketing Fee to the extent permitted under the terms of
the Remarketing Agreement, the Remarketing Agent will remit to the Custodial
Agent the remaining portion of the proceeds of such Remarketing for the
benefit of such Holders. In the event of a Failed Initial Remarketing, a
Failed Interim Remarketing or a Failed Final Remarketing, the Remarketing
Agent will promptly return such Separate Notes to the Custodial Agent, and, in
the event of a Failed Final Remarketing, the Custodial Agent shall deliver
such Separate Notes to the appropriate Holders.

         SECTION 5.08. Tax Event Redemption. If the Collateral Agent receives
written notice that a Tax Event Redemption has occurred while Notes are still
credited to the Collateral Account, the Collateral Agent shall apply the

                                      21

<PAGE>

Redemption Amount to purchase the Treasury Portfolio and the Collateral Agent
shall credit the Applicable Ownership Interests (as specified in clause (i) of
the definition of such term) of the Treasury Portfolio to the Collateral
Account and shall transfer the Applicable Ownership Interests (as specified in
clause (ii) of the definition of such term) of the Treasury Portfolio to the
Purchase Contract Agent for the benefit of the Holders of the Corporate MEDS.
Upon credit to the Collateral Account of the Applicable Ownership Interests
(as specified in clause (i) of the definition of such term) of the Treasury
Portfolio having a Value equal to the aggregate principal amount of the
Pledged Notes, the Collateral Agent shall cause the Securities Intermediary to
release the Pledged Notes from the Collateral Account and shall promptly
transfer the Pledged Notes to the Company.

                                   ARTICLE 6
                         VOTING RIGHTS - PLEDGED NOTES

         SECTION 6.01. Voting Rights. Subject to the terms of the Section 4.02
of the Purchase Contract Agreement, the Purchase Contract Agent may exercise,
or refrain from exercising, any and all voting and other consensual rights
pertaining to the Pledged Notes or any part thereof for any purpose not
inconsistent with the terms of this Agreement and the Purchase Contract
Agreement; provided, that the Purchase Contract Agent shall not exercise or
shall not refrain from exercising such right, as the case may be, if, in the
judgment of the Purchase Contract Agent, such action would impair or otherwise
have a material adverse effect on the value of all or any of the Pledged
Notes; and provided, further, that the Purchase Contract Agent shall give the
Company and the Collateral Agent at least five Business Days' prior written
notice of the manner in which it intends to exercise, or its reasons for
refraining from exercising, any such right. Upon receipt of any notices and
other communications in respect of any Pledged Notes, including notice of any
meeting at which holders of the Notes are entitled to vote or solicitation of
consents, waivers or proxies of holders of the Notes, the Collateral Agent
shall use reasonable efforts to send promptly to the Purchase Contract Agent
such notice or communication, and as soon as reasonably practicable after
receipt of a written request therefor from the Purchase Contract Agent,
execute and deliver to the Purchase Contract Agent such proxies and other
instruments in respect of such Pledged Notes (in form and substance
satisfactory to the Collateral Agent) as are prepared by the Company and
delivered to the Purchase Contract Agent with respect to the Pledged Notes.

                                      22

<PAGE>

                                   ARTICLE 7
                              RIGHTS AND REMEDIES

         SECTION 7.01.  Rights and Remedies of the Collateral Agent.

          (a) In addition to the rights and remedies specified in Section 5.07
hereof or otherwise available at law or in equity, after an event of default
(as specified in Section 7.01(b) below) hereunder, the Collateral Agent shall
have all of the rights and remedies with respect to the Collateral of a
secured party under the UCC (whether or not the UCC is in effect in the
jurisdiction where the rights and remedies are asserted) and the TRADES
Regulations and such additional rights and remedies to which a secured party
is entitled under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted. Without limiting the generality of the
foregoing, such remedies may include, to the extent permitted by applicable
law, (1) retention of the Pledged Notes, Pledged Treasury Securities or the
appropriate Pledged Applicable Ownership Interests in full satisfaction of the
Holders' obligations under the Purchase Contracts and the Purchase Contract
Agreement or (2) sale of the Pledged Notes, Pledged Treasury Securities or the
appropriate Pledged Applicable Ownership Interests in one or more public or
private sales.

          (b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is unable
to make payments to the Company on account of the appropriate Pledged
Applicable Ownership Interests, or on account of principal payments of any
Pledged Treasury Securities as provided in Article 3 hereof, in satisfaction
of the Obligations of the Holder of the Securities of which such appropriate
Pledged Applicable Ownership Interests or such Pledged Treasury Securities, as
applicable, are a part under the related Purchase Contracts, the inability to
make such payments shall constitute an event of default hereunder and the
Collateral Agent shall have and may exercise, with reference to such Pledged
Treasury Securities or Pledged Applicable Ownership Interests, as applicable,
any and all of the rights and remedies available to a secured party under the
UCC and the TRADES Regulations after default by a debtor, and as otherwise
granted herein or under any other law.

          (c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably
authorized to receive and collect all payments of (i) the principal amount of
the Pledged Notes, (ii) the principal amount of the Pledged Treasury
Securities and (iii) the Pledged Applicable Ownership Interests. subject, in
each case, to the provisions of Article 3 hereof, and as otherwise granted
herein.

                                      23

<PAGE>

          (d) The Purchase Contract Agent and each Holder of Securities agrees
that, from time to time, upon the written request of the Collateral Agent or
the Purchase Contract Agent, such Holder shall execute and deliver such
further documents and do such other acts and things as the Collateral Agent
may reasonably request in order to maintain the Pledge, and the perfection and
priority thereof, and to confirm the rights of the Collateral Agent hereunder.
The Purchase Contract Agent shall have no liability to any Holder for
executing any documents or taking any such acts requested by the Collateral
Agent hereunder, except for liability for its own grossly negligent acts, its
own grossly negligent failure to act or its own willful misconduct.

         SECTION 7.02. Tax Event Redemption. Upon the occurrence of a Tax
Event Redemption while Notes are still credited to the Collateral Account, the
Redemption Amount, plus any accrued and unpaid interest payable on the Tax
Event Redemption Date with respect to the principal amount of the Pledged
Notes shall be credited to the Collateral Account by the Collateral Agent upon
receipt thereof from the Indenture Trustee, on or prior to 12:30 p.m., New
York City time on such Tax Event Redemption Date, by federal funds check or
wire transfer of immediately available funds. The Collateral Agent is hereby
authorized to present the Pledged Notes for payment as may be required by
their respective terms. Upon receipt of such funds, the Pledged Notes shall be
released from the Collateral Account. In the event such funds are credited to
the Collateral Account, the Collateral Agent, at the written direction of the
Company, shall instruct the Securities Intermediary to (a) apply an amount
equal to the Redemption Amount of such funds to purchase the Treasury
Portfolio from the Quotation Agent for credit to the Collateral Account and
(b) promptly remit the remaining portion of such funds, if any, to the
Purchase Contract Agent for payment to the Holders of Corporate MEDS.

         SECTION 7.03. Initial Remarketing. The Collateral Agent shall, by
11:00 a.m., New York City time, on the Business Day immediately preceding the
Initial Remarketing Date, without any instruction from any Holder of Corporate
MEDS, present the related Pledged Notes to the Remarketing Agent for
remarketing. Upon receiving such Pledged Notes, the Remarketing Agent,
pursuant to the terms of the Remarketing Agreement, will use its commercially
reasonable best efforts to remarket such Pledged Notes on the Initial
Remarketing Date at a price of at least 100.25% of the sum of the Treasury
Portfolio Purchase Price plus the Separate Notes Purchase Price. After
deduction as the Remarketing Fee of an amount not exceeding 25 basis points
(.25%) of the sum of the Treasury Portfolio Purchase Price plus the Separate
Notes Purchase Price from any amount of such Proceeds in excess of the sum of
the Treasury Portfolio Purchase Price plus the Separate Notes Purchase Price,
the Remarketing Agent will remit the entire amount of the Proceeds of the
Pledged Notes from such remarketing to the

                                      24

<PAGE>

Collateral Agent on or prior to 12:00 p.m., New York City time, on the third
Business Day immediately following the Initial Remarketing Date by check or
wire transfer in immediately available funds at such place and at such account
as may be designated by the Collateral Agent in exchange for the Pledged
Notes. In the event the Collateral Agent receives such Proceeds, the
Collateral Agent will, at the written direction of the Company, apply an
amount equal to the Treasury Portfolio Purchase Price to purchase from the
Quotation Agent the Treasury Portfolio and promptly remit the remaining
portion of such Proceeds to the Purchase Contract Agent for payment to the
Holders of Corporate MEDS. With respect to Separate Notes, any proceeds of the
Initial Remarketing in excess of the Remarketing Fee attributable to the
Separate Notes will be remitted to the Custodial Agent for payment to the
holders of Separate Notes. The Collateral Agent shall Transfer the Treasury
Portfolio to the Collateral Account and the Pledged Applicable Ownership
Interests will secure the obligation of all Holders of Corporate MEDS to
purchase Common Stock of the Company under the Purchase Contracts constituting
a part of such Corporate MEDS, in substitution for the Pledged Notes, which
shall be released from the Collateral Account. In the event of a Failed
Initial Remarketing, the Notes presented to the Remarketing Agent pursuant to
this Section 7.03 for Remarketing shall be redeposited into the Collateral
Account.

         SECTION 7.04. Interim Remarketing. The Collateral Agent shall, by
11:00 a.m., New York City time, on the Business Day immediately preceding any
Interim Remarketing Date, without any instruction from any Holder of Corporate
MEDS, present the related Pledged Notes to the Remarketing Agent for
remarketing. Upon receiving such Pledged Notes, the Remarketing Agent,
pursuant to the terms of the Remarketing Agreement, will use its commercially
reasonable best efforts to remarket such Pledged Notes on the Interim
Remarketing Date at a price of at least 100.25% of the sum of the Treasury
Portfolio Purchase Price plus the Separate Notes Purchase Price. After
deduction as the Remarketing Fee of an amount not exceeding 25 basis points
(.25%) of the sum of the Treasury Portfolio Purchase Price plus the Separate
Notes Purchase Price from any amount of such Proceeds in excess of the sum of
the Treasury Portfolio Purchase Price plus the Separate Notes Purchase Price,
the Remarketing Agent will remit the entire amount of the Proceeds of the
Pledged Notes from such remarketing to the Collateral Agent on or prior to
12:00 p.m., New York City time, on the third Business Day immediately
following the Interim Remarketing Date by check or wire transfer in
immediately available funds at such place and at such account as may be
designated by the Collateral Agent in exchange for the Pledged Notes. In the
event the Collateral Agent receives such Proceeds, the Collateral Agent will,
at the written direction of the Company, apply an amount equal to the Treasury
Portfolio Purchase Price to purchase from the Quotation Agent the Treasury
Portfolio and promptly remit the remaining portion of such

                                      25

<PAGE>

Proceeds to the Purchase Contract Agent for payment to the Holders of
Corporate MEDS. With respect to Separate Notes, any proceeds of any Interim
Remarketing in excess of the Remarketing Fee attributable to the Separate
Notes will be remitted to the Custodial Agent for payment to the holders of
Separate Notes. The Collateral Agent shall Transfer the Treasury Portfolio to
the Collateral Account and the Pledged Applicable Ownership Interests will
secure the obligation of all Holders of Corporate MEDS to purchase Common
Stock of the Company under the Purchase Contracts constituting a part of such
Corporate MEDS, in substitution for the Pledged Notes, which shall be released
from the Collateral Account. In the event of such Interim Remarketing results
in a Failed Interim Remarketing, the Notes presented to the Remarketing Agent
pursuant to this Section 7.04 for Remarketing shall be redeposited into the
Collateral Account.

         SECTION 7.05. Substitutions. Whenever a Holder has the right to
substitute Treasury Securities, Notes or security entitlements for any of them
or the appropriate Applicable Ownership Interests (as defined in clause (i) of
the definition of such term) of the Treasury Portfolio, as the case may be,
for financial assets held in the Collateral Account, such substitution shall
not constitute a novation of the security interest created hereby.

                                   ARTICLE 8
                   REPRESENTATIONS AND WARRANTIES; COVENANTS

         SECTION 8.01. Representations and Warranties. Each Holder from time
to time, acting through the Purchase Contract Agent as attorney-in-fact (it
being understood that the Purchase Contract Agent shall not be liable for any
representation or warranty made by or on behalf of a Holder), hereby
represents and warrants to the Collateral Agent (with respect to such Holder's
interest in the Collateral), which representations and warranties shall be
deemed repeated on each day a Holder Transfers Collateral that:

          (a)   such Holder has the power to grant a security interest in and
lien on the Collateral;

          (b) such Holder is the sole beneficial owner of the Collateral and,
in the case of Collateral delivered in physical form, is the sole holder of
such Collateral and is the sole beneficial owner of, or has the right to
Transfer, the Collateral it Transfers to the Collateral Agent for credit to
the Collateral Account, free and clear of any security interest, lien,
encumbrance, call, liability to pay money or other restriction other than the
security interest and lien granted under Article 2 hereof;

                                      26

<PAGE>

          (c) upon the Transfer of the Collateral to the Collateral Agent for
credit to the Collateral Account, the Collateral Agent, for the benefit of the
Company, will have a valid and perfected first priority security interest
therein (assuming that any central clearing operation or any securities
intermediary or other entity not within the control of the Holder involved in
the Transfer of the Collateral, including the Collateral Agent and the
Securities Intermediary, gives the notices and takes the action required of it
hereunder and under applicable law for perfection of that interest and
assuming the establishment and exercise of control pursuant to Article 4
hereof); and

          (d) the execution and performance by the Holder of its obligations
under this Agreement will not result in the creation of any security interest,
lien or other encumbrance on the Collateral other than the security interest
and lien granted under Article 2 hereof or violate any provision of any
existing law or regulation applicable to it or of any mortgage, charge,
pledge, indenture, contract or undertaking to which it is a party or which is
binding on it or any of its assets.

         SECTION 8.02. Covenants. The Holders from time to time, acting
through the Purchase Contract Agent as their attorney-in-fact (it being
understood that the Purchase Contract Agent shall not be liable for any
covenant made by or on behalf of a Holder), hereby covenant to the Collateral
Agent that for so long as the Collateral remains subject to the Pledge:

          (a) neither the Purchase Contract Agent nor such Holders will create
or purport to create or allow to subsist any mortgage, charge, lien, pledge or
any other security interest whatsoever over the Collateral or any part of it
other than pursuant to this Agreement; and

          (b) neither the Purchase Contract Agent nor such Holders will sell
or otherwise dispose (or attempt to dispose) of the Collateral or any part of
it except for the beneficial interest therein, subject to the Pledge
hereunder, transferred in connection with the Transfer of the Securities.

                                   ARTICLE 9
         THE COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE SECURITIES
                                 INTERMEDIARY

         It is hereby agreed as follows:

                                      27

<PAGE>

         SECTION 9.01. Appointment, Powers and Immunities. The Collateral
Agent, the Custodial Agent or Securities Intermediary shall act as agent for
the Company hereunder with such powers as are specifically vested in the
Collateral Agent, the Custodial Agent or Securities Intermediary, as the case
may be, by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. The Collateral Agent, the Custodial Agent and
Securities Intermediary shall:

          (a) have no duties or responsibilities except those expressly set
forth in this Agreement and no implied covenants or obligations shall be
inferred from this Agreement against the Collateral Agent, the Custodial Agent
and Securities Intermediary, nor shall the Collateral Agent, the Custodial
Agent and Securities Intermediary be bound by the provisions of any agreement
by any party hereto beyond the specific terms hereof;

          (b) not be responsible for any recitals contained in this Agreement,
or in any certificate or other document referred to or provided for in, or
received by it under, this Agreement, the Securities or the Purchase Contract
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement (other than as against the
Collateral Agent, the Custodial Agent or Securities Intermediary, as the case
may be), the Securities, any Collateral or the Purchase Contract Agreement or
any other document referred to or provided for herein or therein or for any
failure by the Company or any other Person (except the Collateral Agent, the
Custodial Agent or Securities Intermediary, as the case may be) to perform any
of its obligations hereunder or thereunder or for the perfection, priority or,
except as expressly required hereby, maintenance of any security interest
created hereunder;

          (c) not be required to initiate or conduct any litigation or
collection proceedings hereunder (except pursuant to directions furnished
under Section 9.02 hereof, subject to Section 9.06 hereof);

          (d) not be responsible for any action taken or omitted to be taken
by it hereunder or under any other document or instrument referred to or
provided for herein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct; and

          (e) not be required to advise any party as to selling or retaining,
or taking or refraining from taking any action with respect to, any securities
or other property deposited hereunder.

Subject to the foregoing, during the term of this Agreement, the Collateral
Agent, the Custodial Agent and the Securities Intermediary shall take all
reasonable

                                      28

<PAGE>

action in connection with the safekeeping and preservation of the Collateral
hereunder.

         No provision of this Agreement shall require the Collateral Agent,
Custodial Agent or Securities Intermediary to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its
duties hereunder. In no event shall the Collateral Agent, Custodial Agent or
Securities Intermediary be liable for any amount in excess of the Value of the
Collateral. Notwithstanding the foregoing, each of the Collateral Agent,
Custodial Agent and Securities Intermediary in its individual capacity hereby
waives any right of setoff, bankers' lien, liens or perfection rights as
securities intermediary or any counterclaim with respect to any of the
Collateral.

         SECTION 9.02. Instructions of the Company. The Company shall have the
right, by one or more written instruments executed and delivered to the
Collateral Agent, to direct the time, method and place of conducting any
proceeding for the realization of any right or remedy available to the
Collateral Agent, or of exercising any power conferred on the Collateral
Agent, or to direct the taking or refraining from taking of any action
authorized by this Agreement; provided, however, that (i) such direction shall
not conflict with the provisions of any law or of this Agreement or involve
the Collateral Agent in personal liability and (ii) the Collateral Agent shall
be indemnified to its satisfaction as provided herein. Nothing contained in
this Section 9.02 shall impair the right of the Collateral Agent in its
discretion to take any action or omit to take any action which it deems proper
and which is not inconsistent with such direction.

         SECTION 9.03. Reliance by Collateral Agent and Securities
Intermediary. Each of the Securities Intermediary, the Custodial Agent and the
Collateral Agent shall be entitled to rely conclusively upon any
certification, order, judgment, opinion, notice or other written communication
(including, without limitation, any thereof by e-mail or similar electronic
means, telecopy, telex or facsimile) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or
Persons (without being required to determine the correctness of any fact
stated therein) and consult with and conclusively rely upon advice, opinions
and statements of legal counsel and other experts selected by the Collateral
Agent, the Custodial Agent or the Securities Intermediary, as the case may be.
As to any matters not expressly provided for by this Agreement, the Collateral
Agent, the Custodial Agent and the Securities Intermediary shall in all cases
be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions given by the Company in accordance with this
Agreement.

         SECTION 9.04.  Rights in Other Capacities.  The Collateral Agent, the
Custodial Agent and the Securities Intermediary and their affiliates may
(without

                                      29

<PAGE>

having to account therefor to the Company) accept deposits from, lend money
to, make their investments in and generally engage in any kind of banking,
trust or other business with the Purchase Contract Agent, any other Person
interested herein and any Holder of Securities (and any of their respective
subsidiaries or affiliates) as if it were not acting as the Collateral Agent,
the Custodial Agent or the Securities Intermediary, as the case may be, and
the Collateral Agent, the Custodial Agent, the Securities Intermediary and
their affiliates may accept fees and other consideration from the Purchase
Contract Agent and any Holder of Securities without having to account for the
same to the Company; provided that each of the Securities Intermediary, the
Custodial Agent and the Collateral Agent covenants and agrees with the Company
that it shall not accept, receive or permit there to be created in favor of
itself and shall take no affirmative action to permit there to be created in
favor of any other Person, any security interest, lien or other encumbrance of
any kind in or upon the Collateral other than the lien created by the Pledge.

         SECTION 9.05. Non-Reliance on Collateral Agent, the Custodial Agent
and Securities Intermediary. None of the Securities Intermediary, the
Custodial Agent or the Collateral Agent shall be required to keep itself
informed as to the performance or observance by the Purchase Contract Agent or
any Holder of Securities of this Agreement, the Purchase Contract Agreement,
the Securities or any other document referred to or provided for herein or
therein or to inspect the properties or books of the Purchase Contract Agent
or any Holder of Securities. None of the Collateral Agent, the Custodial Agent
or the Securities Intermediary shall have any duty or responsibility to
provide the Company with any credit or other information concerning the
affairs, financial condition or business of the Purchase Contract Agent or any
Holder of Securities (or any of their respective affiliates) that may come
into the possession of the Collateral Agent, the Custodial Agent or the
Securities Intermediary or any of their respective affiliates.

         SECTION 9.06.  Compensation and Indemnity.  The Company agrees to:

          (a) pay the Collateral Agent, the Custodial Agent and the Securities
Intermediary from time to time such compensation as shall be agreed in writing
between the Company and the Collateral Agent or the Securities Intermediary,
as the case may be, for all services rendered by them hereunder;

          (b) indemnify and hold harmless the Collateral Agent, the Custodial
Agent, the Securities Intermediary and each of their respective directors,
officers, agents and employees (collectively, the "Indemnitees"), harmless
from and against any and all claims, liabilities, losses, damages, fines,
penalties and expenses (including reasonable fees and expenses of counsel)
(collectively, "Losses" and individually, a "Loss") that may be imposed on,
incurred by, or asserted against, the Indemnitees or any of them for following
any instructions or

                                      30

<PAGE>

other directions upon which either the Collateral Agent, the Custodial Agent
or the Securities Intermediary is entitled to rely pursuant to the terms of
this Agreement; and

          (c) in addition to and not in limitation of paragraph (b)
immediately above, indemnify and hold the Indemnitees and each of them
harmless from and against any and all Losses that may be imposed on, incurred
by or asserted against, the Indemnitees or any of them in connection with or
arising out of the Collateral Agent's, the Custodial Agent's or the Securities
Intermediary's acceptance or performance of its powers and duties under this
Agreement, provided the Collateral Agent, the Custodial Agent or the
Securities Intermediary has not acted with gross negligence or engaged in
willful misconduct or bad faith with respect to the specific Loss against
which indemnification is sought.

         The provisions of this Section and Section 11.07 shall survive the
resignation or removal of the Collateral Agent, Custodial Agent or Securities
Intermediary and the termination of this Agreement.

         SECTION 9.07. Failure to Act. In the event of any ambiguity in the
provisions of this Agreement or any dispute between or conflicting claims by
or among the parties hereto or any other Person with respect to any funds or
property deposited hereunder, then at its sole option, each of the Collateral
Agent, the Custodial Agent and the Securities Intermediary shall be entitled,
after prompt notice to the Company and the Purchase Contract Agent, to refuse
to comply with any and all claims, demands or instructions with respect to
such property or funds so long as such dispute or conflict shall continue, and
the Collateral Agent, the Custodial Agent and the Securities Intermediary
shall not be or become liable in any way to any of the parties hereto for its
failure or refusal to comply with such conflicting claims, demands or
instructions. The Collateral Agent, the Custodial Agent and the Securities
Intermediary shall be entitled to refuse to act until either:

          (a) such conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by
agreement between the conflicting parties as evidenced in a writing
satisfactory to the Collateral Agent, the Custodial Agent or the Securities
Intermediary; or

          (b) the Collateral Agent, the Custodial Agent or the Securities
Intermediary shall have received security or an indemnity satisfactory to it
sufficient to save it harmless from and against any and all loss, liability or
reasonable out-of-pocket expense which it may incur by reason of its acting.

The Collateral Agent, the Custodial Agent and the Securities Intermediary may
in addition elect to commence an interpleader action or seek other judicial
relief or orders as the Collateral Agent, the Custodial Agent or the
Securities Intermediary

                                      31

<PAGE>

may deem necessary. Notwithstanding anything contained herein to the contrary,
none of the Collateral Agent, the Custodial Agent or the Securities
Intermediary shall be required to take any action that is in its opinion
contrary to law or to the terms of this Agreement, or which would in its
opinion subject it or any of its officers, employees or directors to
liability.

         SECTION 9.08.  Resignation of Collateral Agent, the Custodial Agent and
Securities Intermediary.

          (a) Subject to the appointment and acceptance of a successor
Collateral Agent, Custodial Agent or Securities Intermediary as provided
below:

                (i) the Collateral Agent, the Custodial Agent and the Securities
         Intermediary may resign at any time by giving notice thereof to the
         Company and the Purchase Contract Agent as attorney-in-fact for the
         Holders of Securities;

                (ii) the Collateral Agent, the Custodial Agent and the
         Securities Intermediary may be removed at any time by the Company; and

                (iii) if the Collateral Agent, the Custodial Agent or the
         Securities Intermediary fails to perform any of its material
         obligations hereunder in any material respect for a period of not less
         than 20 days after receiving written notice of such failure by the
         Purchase Contract Agent and such failure shall be continuing, the
         Collateral Agent, the Custodial Agent and the Securities Intermediary
         may be removed by the Purchase Contract Agent, acting at the direction
         of the Holders of Securities.

The Purchase Contract Agent shall promptly notify the Company of any removal
of the Collateral Agent, the Custodial Agent or the Securities Intermediary
pursuant to clause (iii) of this Section 9.08(a). Upon any such resignation or
removal, the Company shall have the right to appoint a successor Collateral
Agent, Custodial Agent or Securities Intermediary, as the case may be, which
shall not be an Affiliate of the Purchase Contract Agent. If no successor
Collateral Agent, Custodial Agent or Securities Intermediary shall have been
so appointed and shall have accepted such appointment within 30 days after the
retiring Collateral Agent's, Custodial Agent's or Securities Intermediary's
giving of notice of resignation or the Company's or the Purchase Contract
Agent's giving notice of such removal, then the retiring Collateral Agent,
Custodial Agent or Securities Intermediary may petition any court of competent
jurisdiction, at the expense of the Company, for the appointment of a
successor Collateral Agent, Custodial Agent or Securities Intermediary. The
Collateral Agent, the Custodial Agent and

                                      32

<PAGE>

the Securities Intermediary shall each be a bank or a national banking
association which has an office (or an agency office) in New York City with a
combined capital and surplus of at least $50,000,000. Upon the acceptance of
any appointment as Collateral Agent, Custodial Agent or Securities
Intermediary hereunder by a successor Collateral Agent, Custodial Agent or
Securities Intermediary, as the case may be, such successor Collateral Agent,
Custodial Agent or Securities Intermediary, as the case may be, shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Collateral Agent, Custodial Agent or Securities
Intermediary, as the case may be, and the retiring Collateral Agent, Custodial
Agent or Securities Intermediary, as the case may be, shall take all
appropriate action, subject to payment of any amounts owed to it hereunder, to
transfer any money and property held by it hereunder (including the
Collateral) to such successor. The retiring Collateral Agent, Custodial Agent
or Securities Intermediary shall, upon such succession, be discharged from its
duties and obligations as Collateral Agent, Custodial Agent or Securities
Intermediary hereunder. After any retiring Collateral Agent's, Custodial
Agent's or Securities Intermediary's resignation hereunder as Collateral
Agent, Custodial Agent or Securities Intermediary, the provisions of this
Article 9 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Collateral
Agent, Custodial Agent or Securities Intermediary. Any resignation or removal
of the Collateral Agent, Custodial Agent or Securities Intermediary hereunder,
at a time when such Person is acting as the Collateral Agent, Custodial Agent
or Securities Intermediary, shall be deemed for all purposes of this Agreement
as the simultaneous resignation or removal of the Collateral Agent, Securities
Intermediary or Custodial Agent, as the case may be.

         SECTION 9.09. Right to Appoint Agent or Advisor. The Collateral Agent
shall have the right to appoint agents or advisors in connection with any of
its duties hereunder, and the Collateral Agent shall not be liable for any
action taken or omitted by, or in reliance upon the advice of, such agents or
advisors selected in good faith. The appointment of agents pursuant to this
Section 9.09 shall be subject to prior written consent of the Company, which
consent shall not be unreasonably withheld.

         SECTION 9.10.  Survival.  The provisions of this Article 9 shall
survive termination of this Agreement and the resignation or removal of the
Collateral Agent, the Custodial Agent or the Securities Intermediary.

         SECTION 9.11. Exculpation. Anything contained in this Agreement to
the contrary notwithstanding, in no event shall the Collateral Agent, the
Custodial Agent or the Securities Intermediary or their officers, directors,
employees or agents be liable under this Agreement to any third party for
indirect, special,

                                      33

<PAGE>

punitive, or consequential loss or damage of any kind whatsoever, including,
but not limited to, lost profits, whether or not the likelihood of such loss
or damage was known to the Collateral Agent, the Custodial Agent or the
Securities Intermediary, or any of them and regardless of the form of action.

                                  ARTICLE 10
                                   AMENDMENT

         SECTION 10.01. Amendment Without Consent of Holders. Without the
consent of any Holders, the Company, when authorized by a Board Resolution,
the Collateral Agent, the Custodial Agent, the Securities Intermediary and the
Purchase Contract Agent, at any time and from time to time, may amend this
Agreement, in form satisfactory to the Company, the Collateral Agent, the
Custodial Agent, the Securities Intermediary and the Purchase Contract Agent,
to:

          (a)   evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company;

          (b) evidence and provide for the acceptance of appointment hereunder
by a successor Collateral Agent, Custodial Agent, Securities Intermediary or
Purchase Contract Agent;

          (c) add to the covenants of the Company for the benefit of the
Holders, or surrender any right or power herein conferred upon the Company,
provided such covenants or such surrender do not adversely affect the
validity, perfection or priority of the Pledge created hereunder; or

          (d) cure any ambiguity (or formal defect), correct or supplement any
provisions herein which may be inconsistent with any other such provisions
herein, or make any other provisions with respect to such matters or questions
arising under this Agreement, provided such action shall not adversely affect
the interests of the Holders in any material respect.

         SECTION 10.02. Amendment with Consent of Holders. With the consent of
the Holders of not less than a majority of the Purchase Contracts at the time
outstanding, by Act of such Holders delivered to the Company, the Purchase
Contract Agent, the Custodial Agent, the Securities Intermediary and the
Collateral Agent, as the case may be, the Company, when duly authorized by a
Board Resolution, the Purchase Contract Agent, the Collateral Agent, the
Securities Intermediary and the Collateral Agent may amend this Agreement for
the purpose of modifying in any manner the provisions of this Agreement or the

                                      34

<PAGE>

rights of the Holders in respect of the Securities; provided, however, that no
such supplemental agreement shall, without the unanimous consent of the
Holders of each Outstanding Security adversely affected thereby in any
material respect:

          (a) change the amount or type of Collateral underlying a Security
(except for the rights of holders of Corporate MEDS to substitute the Treasury
Securities for the Pledged Notes or the Pledged Applicable Ownership
Interests, as the case may be, or the rights of Holders of Treasury MEDS to
substitute Notes or the Applicable Ownership Interests (as specified in clause
(i) of the definition of such term) of the Treasury Portfolio, as applicable,
for the Pledged Treasury Securities), unless such change is not adverse to the
Holders, impair the right of the Holder of any Security to receive
distributions on the underlying Collateral or otherwise adversely affect the
Holder's rights in or to such Collateral; or

          (b) otherwise effect any action that would require the consent of
the Holder of each Outstanding Security affected thereby pursuant to the
Purchase Contract Agreement if such action were effected by a modification or
amendment of the provisions of the Purchase Contract Agreement; or

          (c)   reduce the percentage of Purchase Contracts the consent of whose
Holders is required for the modification or amendment of the provisions of this
Agreement;

provided that if any amendment or proposal referred to above would adversely
affect only the Corporate MEDS or only the Treasury MEDS, then only the
affected class of Holders as of the record date for the Holders entitled to
vote thereon will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of
Holders of not less than a majority of such class; provided, further, that the
unanimous consent of the Holders of each outstanding Purchase Contract of such
class affected thereby shall be required to approve any amendment or proposal
specified in clauses (a) through (c) above.

         It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed amendment, but it shall be
sufficient if such Act shall approve the substance thereof.

         SECTION 10.03. Execution of Amendments. In executing any amendment
permitted by this Section, the Collateral Agent, the Custodial Agent, the
Securities Intermediary and the Purchase Contract Agent shall be entitled to
receive and (subject to Section 7.01 of the Purchase Contract Agreement with
respect to the Purchase Contract Agent) shall be fully authorized and
protected in relying upon, an Opinion of Counsel stating that the execution of
such amendment is authorized

                                      35

<PAGE>

or permitted by this Agreement and that all conditions precedent, if any, to
the execution and delivery of such amendment have been satisfied. The
Collateral Agent, Custodial Agent, Securities Intermediary and Purchase
Contract Agent may, but shall not be obligated to, enter into any such
amendment which affects their own respective rights, duties or immunities
under this Agreement or otherwise.

         SECTION 10.04. Effect of Amendments. Upon the execution of any
amendment under this Section, this Agreement shall be modified in accordance
therewith, and such amendment shall form a part of this Agreement for all
purposes; and every Holder of Certificates theretofore or thereafter
authenticated, executed on behalf of the Holders and delivered under the
Purchase Contract Agreement shall be bound thereby.

         SECTION 10.05. Reference of Amendments. Certificates authenticated,
executed on behalf of the Holders and delivered after the execution of any
amendment pursuant to this Section may, and shall if required by the
Collateral Agent or the Purchase Contract Agent, bear a notation in form
approved by the Purchase Contract Agent and the Collateral Agent as to any
matter provided for in such amendment. If the Company shall so determine, new
Certificates so modified as to conform, in the opinion of the Collateral
Agent, the Purchase Contract Agent and the Company, to any such amendment may
be prepared and executed by the Company and authenticated, executed on behalf
of the Holders and delivered by the Purchase Contract Agent in accordance with
the Purchase Contract Agreement in exchange for Certificates representing
Outstanding Securities.

                                  ARTICLE 11
                                 MISCELLANEOUS

         SECTION 11.01. No Waiver. No failure on the part of the Company, the
Collateral Agent, the Securities Intermediary or any of their respective
agents to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Company, the
Collateral Agent, the Securities Intermediary or any of their respective
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided
by law.

         SECTION 11.02.  Governing Law; Submission to Jurisdiction.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN

                                      36

<PAGE>

ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company, the
Collateral Agent, the Custodial Agent, the Securities Intermediary and the
Holders from time to time of the Securities, acting through the Purchase
Contract Agent as their attorney-in-fact, hereby submit 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 the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Company, the Collateral Agent,
the Custodial Agent, the Securities Intermediary and the Holders from time to
time of the Securities, acting through the Purchase Contract Agent as their
attorney-in- fact, irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they 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 11.03. Notices. All notices, requests, consents and other
communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telecopy) delivered to
the intended recipient at the "Address for Notices" specified below its name
on the signature pages hereof or, as to any party, at such other address as
shall be designated by such party in a notice to the other parties. Except as
otherwise provided in this Agreement, all such communications shall be deemed
to have been duly given when transmitted by telecopier or personally delivered
or, in the case of a mailed notice, upon receipt, in each case given or
addressed as aforesaid.

         SECTION 11.04. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the Company, the Collateral Agent, the Custodial Agent, the Securities
Intermediary and the Purchase Contract Agent, and the Holders from time to
time of the Securities, by their acceptance of the same, shall be deemed to
have agreed to be bound by the provisions hereof and to have ratified the
agreements of, and the grant of the Pledge hereunder by, the Purchase Contract
Agent.

         SECTION 11.05. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument, and any of the parties hereto may execute this Agreement
by signing any such counterpart.

         SECTION 11.06. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties

                                      37

<PAGE>

hereto as nearly as may be possible and (ii) the invalidity or
unenforceability of any provision hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.

         SECTION 11.07.  Expenses, Etc..  The Company agrees to reimburse the
Collateral Agent, the Custodial Agent and the Securities Intermediary for:

          (a) all reasonable costs and expenses of the Collateral Agent, the
Custodial Agent and the Securities Intermediary (including, without
limitation, the reasonable fees and expenses of counsel to the Collateral
Agent, the Custodial Agent and the Securities Intermediary), in connection
with (i) the negotiation, preparation, execution and delivery or performance
of this Agreement and (ii) any modification, supplement or waiver of any of
the terms of this Agreement;

          (b) all reasonable costs and expenses of the Collateral Agent, the
Custodial Agent and the Securities Intermediary (including, without
limitation, reasonable fees and expenses of counsel) in connection with (i)
any enforcement or proceedings resulting or incurred in connection with
causing any Holder of Securities to satisfy its obligations under the Purchase
Contracts forming a part of the Securities and (ii) the enforcement of this
Section 11.07;

          (c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any other document referred to herein and all
costs, expenses, taxes, assessments and other charges incurred in connection
with any filing, registration, recording or perfection of any security
interest contemplated hereby;

          (d) all fees and expenses of any agent or advisor appointed by the
Collateral Agent and consented to by the Company under Section 9.09 of this
Agreement; and

          (e) any other out-of-pocket costs and expenses reasonably incurred
by the Collateral Agent, the Custodial Agent and the Securities Intermediary
in connection with the performance of their duties hereunder.

         SECTION 11.08. Security Interest Absolute. All rights of the
Collateral Agent and security interests hereunder, and all obligations of the
Holders from time to time hereunder, shall be absolute and unconditional
irrespective of:

          (a)   any lack of validity or enforceability of any provision of the
Purchase Contracts or the Securities or any other agreement or instrument
relating thereto;

                                      38

<PAGE>

          (b) any change in the time, manner or place of payment of, or any
other term of, or any increase in the amount of, all or any of the obligations
of Holders of the Securities under the related Purchase Contracts, or any other
amendment or waiver of any term of, or any consent to any departure from any
requirement of, the Purchase Contract Agreement or any Purchase Contract or
any other agreement or instrument relating thereto; or

          (c) any other circumstance which might otherwise constitute a
defense available to, or discharge of, a borrower, a guarantor or a pledgor.

         SECTION 11.09. Notice of Tax Event, Tax Event Redemption and
Termination Event. Upon the occurrence of a Tax Event, a Tax Event Redemption
or a Termination Event, the Company shall deliver written notice to the
Purchase Contract Agent, the Collateral Agent and the Securities Intermediary.
Upon the written request of the Collateral Agent or the Securities
Intermediary, the Company shall inform such party whether or not a Tax Event,
a Tax Event Redemption or a Termination Event has occurred.

                               [SIGNATURES ON THE FOLLOWING PAGE]

                                      39

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.

KEYSPAN CORPORATION                         JPMORGAN CHASE BANK, as
                                            Purchase Contract Agent and
                                            as attorney-in-fact of the Holders
                                            from time to time of the Securities

By:     /s/ Gerald Luterman                 By:  /s/ Francine Springer
   ------------------------------------        --------------------------------
   Name:    Gerald Luterman                    Name:  Francine Springer
   Title:   Executive Vice President           Title: Vice President
            and Chief Financial Officer

Address for Notices:                        Address for Notices:

KeySpan Corporation                         450 W. 33rd Street
One MetroTech Center                        New York, New York 10001
Brooklyn, New York 11201                    Telecopier No. (212) 946-8162/8175
Telecopier No.: 718-403-2042                Attention: Institutional Trust
Attention: Treasurer                                   Services

THE BANK OF NEW YORK,
as Collateral Agent, Custodial Agent and
Securities Intermediary

By:   /s/ Kisha Holder
---------------------------------------
   Name:  Kisha Holder
  Title:  Assistant Treasurer

Address for Notices:

The Bank of New York
101 Barclay Street, Floor 21W
New York, New York 10286
Telecopier No.: 212-896-7298
Attention: Corporate Trust Administration

<PAGE>

                                                                     EXHIBIT A

                                  INSTRUCTION
                         FROM PURCHASE CONTRACT AGENT
                              TO COLLATERAL AGENT
                       (Establishment of Treasury MEDS)

The Bank of New York,
as Collateral Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration

      Re:         _______ Corporate MEDS of KeySpan Corporation
                  (the "Company")

                  The securities account of The Bank of New York, as
                  Collateral Agent, maintained by the Securities Intermediary
                  and designated "The Bank of New York, as Collateral Agent of
                  KeySpan Corporation, as pledgee of JPMorgan Chase Bank, as
                  the Purchase Contract Agent on behalf of and as
                  attorney-in-fact for the Holders" (the "Collateral Account")

         Please refer to the Pledge Agreement, dated as of May 6, 2002 (the
"Pledge Agreement"), among the Company, you, as Collateral Agent, as
Securities Intermediary and as Custodial Agent and the undersigned, as
Purchase Contract Agent and as attorney-in-fact for the holders of Corporate
MEDS from time to time. Capitalized terms used herein but not defined shall
have the meaning set forth in the Pledge Agreement.

         We hereby notify you in accordance with Section 5.02 of the Pledge
Agreement that the holder of securities named below (the "Holder") has elected
to substitute $__________ Value of Treasury Securities or security
entitlements with respect thereto in exchange for an equal Value of Pledged
Notes relating to _________ Corporate MEDS and has delivered to the
undersigned a notice stating that the Holder has Transferred such Treasury
Securities or security entitlements with respect thereto to the Securities
Intermediary, for credit to the Collateral Account.

<PAGE>

         We hereby request that you instruct the Securities Intermediary, upon
confirmation that such Treasury Securities or security entitlements thereto
have been credited to the Collateral Account, to release to the undersigned an
equal Value of Pledged Notes in accordance with Section 5.02 of the Pledge
Agreement.

                                          JPMorgan Chase Bank,
Date:                                     as Purchase Contract Agent and as
                                          attorney-in-fact of the Holders from
                                          time to time of the Securities

                                          By:__________________________
                                             Name:
                                             Title:

<PAGE>

Please print name and address of Holder electing to substitute Treasury
Securities or security entitlements with respect thereto for the Pledged
Notes:

-----------------------------               -----------------------------
             Name                           Social Security or other
                                            Taxpayer Identification Number,
                                            if any

------------------------------
           Address

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

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

<PAGE>

                                                                     EXHIBIT B

                                  INSTRUCTION
                             FROM COLLATERAL AGENT
                          TO SECURITIES INTERMEDIARY
                       (Establishment of Treasury MEDS)

The Bank of New York,
as Securities Intermediary
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration

Re:      __________ Corporate MEDS of KeySpan Corporation (the
         "Company")

         The securities account of The Bank of New York, as Collateral Agent,
         maintained by the Securities Intermediary and designated "The Bank of
         New York, as Collateral Agent of KeySpan Corporation, as pledgee of
         JPMorgan Chase Bank, as the Purchase Contract Agent on behalf of and
         as attorney-in-fact for the Holders" (the "Collateral Account")

         Please refer to the Pledge Agreement, dated as of May 6, 2002 (the
"Pledge Agreement"), among the Company, you, as Securities Intermediary,
JPMorgan Chase Bank, as Purchase Contract Agent and as attorney-in-fact for
the holders of Corporate MEDS from time to time, and the undersigned, as
Collateral Agent. Capitalized terms used herein but not defined shall have the
meanings set forth in the Pledge Agreement.

         When you have confirmed that $__________ Value of Treasury Securities
or security entitlements thereto has been credited to the Collateral Account
by or for the benefit of _________, as Holder of Corporate MEDS (the
"Holder"), you are hereby instructed to release from the Collateral Account an
equal Value of Pledged Notes or security entitlements with respect thereto
relating to _____ Corporate MEDS of the Holder by Transfer to the Purchase
Contract Agent.

<PAGE>

                                                   The Bank of New York
                                                   as Collateral Agent
Dated:_______________

                                                   By:_______________________
                                                      Name:
                                                      Title:

<PAGE>

Please print name and address of Holder:

--------------------------------               --------------------------
              Name                             Social Security or other
                                               Taxpayer Identification Number,
                                               if any

---------------------------------
           Address

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

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

<PAGE>

                                                                     EXHIBIT C
                                  INSTRUCTION
                         FROM PURCHASE CONTRACT AGENT
                              TO COLLATERAL AGENT
                     (Reestablishment of Corporate MEDS )

The Bank of New York,
as Collateral Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration

Re:      ____________ Treasury MEDS of KeySpan Corporation (the
         "Company")

         Please refer to the Pledge Agreement dated as of May 6, 2002 (the
"Pledge Agreement"), among the Company, you, as Collateral Agent, as
Securities Intermediary, as Custodial Agent and the undersigned, as Purchase
Contract Agent and as attorney-in-fact for the holders of Treasury MEDS from
time to time. Capitalized terms used herein but not defined shall have the
meaning set forth in the Pledge Agreement.

         We hereby notify you in accordance with Section 5.03(a) of the Pledge
Agreement that the holder of securities named below (the "Holder") has elected
to substitute $__________ Value of Notes or security entitlements with respect
thereto in exchange for $__________ Value of Pledged Treasury Securities and
has delivered to the undersigned a notice stating that the holder has
Transferred such Notes or security entitlements with respect thereto to the
Securities Intermediary, for credit to the Collateral Account.

         We hereby request that you instruct the Securities Intermediary, upon
confirmation that such Notes or security entitlements with respect thereto
have been credited to the Collateral Account, to release to the undersigned
$__________ Value of Treasury Securities or security entitlements with respect
thereto related to _____ Treasury MEDS of such Holder in accordance with
Section 5.03(a) of the Pledge Agreement.

                                            JPMorgan Chase Bank
                                            as Purchase Contract Agent

Dated:_______________                       By:_______________________
                                               Name:
                                               Title:

<PAGE>

Please print name and address of Holder electing to substitute Notes or
security entitlements with respect thereto for Pledged Treasury Securities:

----------------------------                   -------------------------
          Name                                 Social Security or other
                                               Taxpayer Identification Number,
                                               if any

---------------------------------
          Address

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

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

<PAGE>

                                                                     EXHIBIT D

                                  INSTRUCTION
                             FROM COLLATERAL AGENT
                          TO SECURITIES INTERMEDIARY
                      (Reestablishment of Corporate MEDS)

The Bank of New York,
as Securities Intermediary
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration

Re:      ___________ Treasury MEDS of KeySpan Corporation (the "Company")

         The securities account of The Bank of New York, as Collateral Agent,
         maintained by the Securities Intermediary and designated "The Bank of
         New York, as Collateral Agent of KeySpan Corporation, as pledgee of
         JPMorgan Chase Bank, as the Purchase Contract Agent on behalf of and
         as attorney-in-fact for the Holders" (the "Collateral Account")

         Please refer to the Pledge Agreement dated as of May 6, 2002 (the
"Pledge Agreement"), among the Company, you, as Securities Intermediary,
Custodial Agent and Collateral Agent and JPMorgan Chase Bank, as Purchase
Contract Agent and as attorney-in-fact for the holders of Corporate MEDS from
time to time, and the undersigned, as Collateral Agent. Capitalized terms used
herein but no defined shall have the meaning set forth in the Pledge
Agreement.

         When you have confirmed that $ __________ Value of Notes or security
entitlements with respect thereto has been credited to the Collateral Account
by or for the benefit of ________________, as Holder of Treasury MEDS (the
"Holder"), you are hereby instructed to release from the Collateral Account $
__________ Value of Treasury Securities or security entitlements thereto by
Transfer to the Purchase Contract Agent.

                                            The Bank of New York,
                                            as Collateral Agent

Dated:_______________                       By:_______________________
                                               Name:
                                               Title:

<PAGE>

-------------------------------                --------------------------
           Name                                Social Security or other
                                               Taxpayer Identification Number,
                                               if any

-------------------------------
           Address

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

<PAGE>

                                                                     EXHIBIT E

                   NOTICE OF CASH SETTLEMENT FROM COLLATERAL
                       AGENT TO PURCHASE CONTRACT AGENT
                           (Cash Settlement Amounts)

JPMorgan Chase Bank,
as Purchase Contract Agent
450 West 33rd Street
New York, NY 10001
Telecopier No:(212) 946-8162/8175
Attention: Institutional Trust Services

Re:      __________  Corporate MEDS of KeySpan Corporation (the
"Company")
         __________ Treasury MEDS of the Company

         Please refer to the Pledge Agreement dated as of May 6, 2002 (the
"Pledge Agreement"), by and among you, the Company, and The Bank of New York,
as Collateral Agent, Custodial Agent and Securities Intermediary. Unless
otherwise defined herein, terms defined in the Pledge Agreement are used
herein as defined therein.

         In accordance with Section 5.05(d) of the Pledge Agreement, we hereby
notify you that as of 11:00 a.m. (New York City time) on the fourth Business
Day immediately preceding May 16, 2005 (the "Purchase Contract Settlement
Date"), we have received (i) $ _______________ in immediately available funds
paid in an aggregate amount equal to the Purchase Price due to the Company on
the Purchase Contract Settlement Date with respect to ________________
Corporate MEDS, (ii) $ ___________ in immediately available funds paid in an
aggregate amount equal to the Purchase Price due to the Company on the
Purchase Contract Settlement Date with respect to ______ Treasury MEDS and
(iii) based on the funds received set forth in clause (i) above, an aggregate
principal amount of $_________ of Pledged Notes are to be tendered for
purchase in the Final Remarketing.

                                            The Bank of New York,
                                            as Collateral Agent,

Dated:_______________                       By:_______________________
                                               Name:
                                               Title:

<PAGE>

                                                                     EXHIBIT F
                   INSTRUCTION TO CUSTODIAL AGENT REGARDING
                                  REMARKETING
The Bank of New York,
as Custodial Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration

                  Re: Notes of KeySpan Corporation (the "Company")

      The undersigned hereby notifies you in accordance with Section 5.07(c)
of the Pledge Agreement, dated as of May 6, 2002 (the "Pledge Agreement"),
among the Company, you, as Collateral Agent, Custodial Agent and Securities
Intermediary and JPMorgan Chase Bank, as the Purchase Contract Agent and as
attorney-in-fact for the holders of Corporate MEDS from time to time, that the
undersigned elects to deliver $______________ aggregate principal amount of
Separate Notes for delivery to the Remarketing Agent on the Business Day
immediately preceding the Initial Remarketing Date for remarketing pursuant to
Section 5.07(c) of the Pledge Agreement. The undersigned will, upon request of
the Remarketing Agent, execute and deliver any additional documents deemed by
the Remarketing Agent or by the Company to be necessary or desirable to
complete the sale, assignment and transfer of the Separate Notes tendered
hereby. Capitalized terms used herein but not defined shall have the meaning
set forth in the Pledge Agreement.

      The undersigned hereby instructs you, upon receipt of the Proceeds of
such remarketing from the Remarketing Agent, to deliver such Proceeds to the
undersigned in accordance with the instructions indicated herein under "A.
Payment Instructions." The undersigned hereby instructs you, in the event of a
Failed Final Remarketing, upon receipt of the Separate Notes tendered herewith
from the Remarketing Agent, to deliver such Separate Notes to the person(s)
and the address(es) indicated herein under "B. Delivery Instructions."

     With this notice, the undersigned hereby (i) represents and warrants that
the undersigned has full power and authority to tender, sell, assign and
transfer the Separate Notes tendered hereby and that the undersigned is the
record owner of any Notes tendered herewith in physical form or a participant
in The Depositary Trust Company ("DTC") and the beneficial owner of any Notes
tendered herewith by book-entry transfer to your account at DTC, (ii) agrees
to be bound by the terms and conditions of Section 5.07(c) of the Pledge
Agreement and (iii) acknowledges and agrees that after 11:00 a.m. (New York
City time) on the fourth Business Day immediately preceding February 16, 2005,
such election shall

<PAGE>

become an irrevocable election to have such Separate Notes remarketed in the
Initial Remarketing and, in the case of a Failed Initial Remarketing, in any
Interim Remarketing and the Final Remarketing, and that the Separate Notes
tendered herewith will only be returned in the event of a Failed Final
Remarketing.

Date:_____________

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

                                    By:_________________________________
                                       Name:
                                       Title:
                                       Signature Guarantee:___________________

---------------------------
                                            ----------------------------------
      Name                                   Social Security or other Taxpayer
                                             Identification Number, if any
---------------------------
                Address
---------------------------

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

<PAGE>

A.    PAYMENT INSTRUCTIONS

Proceeds of the remarketing should be paid by check in the name of the
person(s) set forth below and mailed to the address set forth below.

Name(s)

(Please Print)
Address

(Please Print)

(Zip Code)

(Tax Identification or Social Security Number)

B.    DELIVERY INSTRUCTIONS

In the event of a failed final remarketing, Notes which are in physical form
should be delivered to the person(s) set forth below and mailed to the address
set forth below.
Name(s)

(Please Print)
Address

(Please Print)

(Zip Code)

(Tax Identification or Social Security Number)

<PAGE>

In the event of a failed final remarketing, Notes which are in book-entry form
should be credited to the account at The Depository Trust Company set forth
below.

------------------
DTC Account Number

Name of Account Party:_________________________________

<PAGE>

                                                                     EXHIBIT G

                   INSTRUCTION TO CUSTODIAL AGENT REGARDING
                          WITHDRAWAL FROM REMARKETING

The Bank of New York,
as Custodial Agent
101 Barclay Street, Floor 21W
New York, New York 10286
Attention: Corporate Trust Administration

                  Re:  Notes of KeySpan Corporation (the "Company")

      The undersigned hereby notifies you in accordance with Section 5.07(c)
of the Pledge Agreement, dated as of May 6, 2002 (the "Pledge Agreement"),
among the Company and you, as Collateral Agent, Custodial Agent and Securities
Intermediary, and JPMorgan Chase Bank, as Purchase Contract Agent and as
attorney-in-fact for the holders of Corporate MEDS from time to time, that the
undersigned elects to withdraw the $_________ aggregate principal amount of
Separate Notes delivered to the Custodial Agent on _________, 200_ for
remarketing pursuant to Section 5.07(c) of the Pledge Agreement. The
undersigned hereby instructs you to return such Notes to the undersigned in
accordance with the undersigned's instructions. With this notice, the
Undersigned hereby agrees to be bound by the terms and conditions of Section
5.07(c) of the Pledge Agreement. Capitalized terms used herein but not defined
shall have the meaning set forth in the Pledge Agreement.

Date:_____________
                                         ------------------------------------
                                         By:_________________________________
                                             Name:
                                             Title:
                                         Signature Guarantee:_________________

---------------------------
                                           ----------------------------------
                  Name                     Social Security or other Taxpayer
                                           Identification Number, if any
---------------------------
                  Address
---------------------------

---------------------------Exhibit 4.5

                             REMARKETING AGREEMENT

         REMARKETING AGREEMENT, dated as of May 6, 2002 (the "Agreement") by
and between KeySpan Corporation, a New York corporation (the "Company"),
JPMorgan Chase Bank, a New York banking corporation, not individually but
solely as Purchase Contract Agent (the "Purchase Contract Agent") and as
attorney-in-fact of the holders of Purchase Contracts (as defined in the
Purchase Contract Agreement (as defined herein)), and J.P. Morgan Securities
Inc. (the "Remarketing Agent").

                                 WITNESSETH:

         WHEREAS, the Company will issue $400,000,000 (or up to $460,000,000
to the extent that the underwriters' overallotment option is exercised)
aggregate Stated Amount of its MEDS Equity Units (the "MEDS Equity Units")
under the Purchase Contract Agreement, dated as of May 6, 2002, by and between
the Purchase Contract Agent and the Company (the "Purchase Contract
Agreement"); and

         WHEREAS, the MEDS Equity Units will initially consist of 8,000,000
(or up to 9,200,000 to the extent that the underwriters' overallotment option
is exercised) units referred to as "Corporate MEDS;" and

         WHEREAS, the Company will issue, under the Indenture (as defined in
Schedule I hereto), concurrently in connection with the issuance of the MEDS
Equity Units $400,000,000 (or up to $460,000,000 to the extent that the
underwriters' overallotment option is exercised) aggregate principal amount of
Notes due 2008 (the "Notes") of the Company; and

         WHEREAS, the Notes forming a part of the Corporate MEDS will be
pledged pursuant to the Pledge Agreement (the "Pledge Agreement"), dated as of
May 6, 2002, by and among the Company, The Bank of New York, as collateral
agent, securities intermediary and custodial agent (the "Collateral Agent")
and the Purchase Contract Agent, to secure a Corporate MEDS holder's
obligations under the related Purchase Contract to purchase common stock of
the Company on May 16, 2005 (the "Purchase Contract Settlement Date"); and

         WHEREAS, the Notes of the Corporate MEDS holders and of the Separate
Note holders electing to have their Notes remarketed will be remarketed by the
Remarketing Agent on the third Business Day immediately preceding February 16,
2005 (the "Initial Remarketing Date"); and

         WHEREAS, in the event of a Failed Initial Remarketing, the Notes of
the Corporate MEDS holders and of the Separate Note holders electing to have
their Notes remarketed may be remarketed by the Remarketing Agent in an
Interim

<PAGE>

Remarketing at any time from the Initial Remarketing Date until the
ninth Business Day immediately preceding the Purchase Contract Settlement
Date; and

         WHEREAS, in the event of a Failed Initial Remarketing (and no
Successful Interim Remarketing), the Notes of the Separate Note holders who
elected to have their Notes remarketed in the Initial Remarketing and of the
Corporate MEDS holders who have elected not to settle the Purchase Contracts
related to their Corporate MEDS by Cash Settlement will be remarketed by the
Remarketing Agent in a Final Remarketing on the third Business Day immediately
preceding the Purchase Contract Settlement Date; and

         WHEREAS, in the event of a Successful Initial Remarketing, the
applicable interest rate on the Notes will be reset on the Initial Remarketing
Date, to the Reset Rate which shall be determined by the Remarketing Agent as
the rate that such Notes should bear in order for the Notes to have an
approximate aggregate market value of 100.25% of the sum of the Treasury
Portfolio Purchase Price and Separate Notes Purchase Price on the Initial
Remarketing Date, provided that the Reset Rate will in no event (i) be less
than 4.90% and (ii) exceed the maximum rate permitted by applicable law; and

         WHEREAS, in the event of a Successful Interim Remarketing, the
applicable interest rate on the Notes will be reset on the Interim Remarketing
Date, to the Reset Rate which shall be determined by the Remarketing Agent as
the rate that such Notes should bear in order for the Notes to have an
approximate aggregate market value of 100.25% of the sum of the Treasury
Portfolio Purchase Price and the Separate Notes Purchase Price on the Interim
Remarketing Date, provided that the Reset Rate will in no event (i) be less
than 4.90% and (ii) exceed the maximum rate permitted by applicable law; and

         WHEREAS, in the event of a Successful Final Remarketing, the
applicable interest rate on the Notes that remain outstanding on and after the
Purchase Contract Settlement Date will be reset on the Final Remarketing Date,
to the Reset Rate which shall be determined by the Remarketing Agent as the
rate that such Notes should bear in order to have an approximate market value
of 100.25% (but not less than 100%) of the aggregate principal amount of the
Notes being remarketed, provided that the Reset Rate will in no event (i) be
less than 4.90% and (ii) exceed the maximum rate permitted by applicable law;
and

         WHEREAS, in the event of a Failed Final Remarketing, the applicable
interest rate on the Notes will be reset on the third Business Day immediately
preceding the Purchase Contract Settlement Date, to the Reset Rate to be
determined by the Remarketing Agent equal to (1) the Three-Year Benchmark
Treasury Rate (as defined in the Indenture) plus (2) the Applicable Spread (as
defined in the Indenture), provided that the Reset Rate will in no event (i)
be less than 4.90% and (ii) exceed the maximum rate permitted by applicable
law; and

                                      2

<PAGE>

        WHEREAS, the Company has requested J.P. Morgan Securities Inc.
("JPMorgan") to act as the Remarketing Agent, and as such to perform
the services described herein; and

         WHEREAS, JPMorgan is willing to act as Remarketing Agent and as such
to perform such duties on the terms and conditions expressly set forth herein;

         NOW, THEREFORE, for and in consideration of the covenants herein
made, and subject to the conditions herein set forth, the parties hereto agree
as follows:

        Section 1. Definitions. Capitalized terms used and not defined in this
Agreement, in the recitals hereto or in the paragraph preceding such recitals
shall have the meanings assigned to them in the Purchase Contract Agreement
or, if not therein defined, the Pledge Agreement.

        Section 2. Appointment and Obligations of Remarketing Agent. (a) The
Company hereby appoints JPMorgan and JPMorgan hereby accepts such appointment,
as the exclusive Remarketing Agent (subject to the right of the Remarketing
Agent to appoint additional remarketing agents hereunder as described below) to:

                (i)  determine in consultation with the Company, in the manner
        provided for herein and in the Indenture, with respect to the Notes,
        (1) in the case of the Initial Remarketing or any Interim Remarketing,
        the Reset Rate that, in the opinion of the Remarketing Agent, will, when
        applied to the Notes, enable the aggregate principal amount of the
        Notes being remarketed to have an approximate aggregate market value,
        subject to the proviso below, of 100.25% of the sum of the Treasury
        Portfolio Purchase Price and the Separate Notes Purchase Price as of the
        Initial Remarketing Date or Interim Remarketing Date, as applicable,
        (2) in the case of the Final Remarketing, the Reset Rate that, in the
        opinion of the Remarketing Agent, will, when applied to the Notes,
        enable a Note to have an aggregate market value of approximately 100.25%
        (but not less than 100%) of its principal amount as of the Final
        Remarketing Date and (3) in the case of a Failed Final Remarketing, the
        Reset Rate equal to (x) the Three-Year Benchmark Treasury Rate (as
        defined in the Indenture) plus (y) the Applicable Spread (as defined in
        the Indenture), provided, in each case, that (A) the Reset Rate will in
        no event be less than 4.90%, and (B) the Company, by notice to the
        Remarketing Agent prior to the eighth Business Day preceding (x) the
        Initial Remarketing Date, in the case of the Initial Remarketing and any
        Interim Remarketing or (y) the Purchase Contract Settlement Date, in the
        case of the Final Remarketing, shall, if applicable, limit the Reset
        Rate so that it does not exceed the maximum rate permitted by applicable
        law; and

                                      3

<PAGE>

               (ii) remarket (1) in the Initial Remarketing on the Initial
          Remarketing Date, the Notes of the Separate Note holders electing to
          have their Notes remarketed and of the Corporate MEDS holders, (2)
          in the case of a Failed Initial Remarketing, in any Interim
          Remarketing on the Interim Remarketing Date for such Interim
          Remarketing, the Notes of the Separate Note holders who elected to
          have their Notes remarketed and of the Corporate MEDS holders, and
          (3) in the case of a Failed Initial Remarketing (and no Successful
          Interim Remarketing), in the Final Remarketing on the Final
          Remarketing Date, the Notes of the Separate Note holders who elected
          to have their Notes remarketed and of the Corporate MEDS holders who
          have failed to notify the Purchase Contract Agent, on or prior to
          5:00 p.m. (New York City time) on the fifth Business Day immediately
          preceding the Purchase Contract Settlement Date, of their intention
          to settle the related Purchase Contracts through Cash Settlement, or
          who have so notified the Purchase Contract Agent but have failed to
          make the required cash payment prior to 11:00 a.m. (New York City
          time) on the fourth Business Day immediately preceding the Purchase
          Contract Settlement Date.

               (iii) if there are no Corporate MEDS outstanding and none of
          the Holders of Separate Notes have elected to have such Separate
          Notes remarketed, determine the Reset Rate as the rate that would
          have been established had a remarketing been held on the Initial
          Remarketing Date.

               (iv) in the event of a Failed Final Remarketing, determine the
          Reset Rate as the rate equal to the Three-Year Benchmark Treasury
          Rate (as defined in the Second Supplemental Indenture) plus the
          Applicable Spread (as defined in the Second Supplemental Indenture).

          In connection with any remarketing contemplated hereby, the
          Remarketing Agent will enter into a Supplemental Remarketing
          Agreement (the "Supplemental Remarketing Agreement") with the
          Company and the Purchase Contract Agent, which shall either be (i)
          substantially in the form attached hereto as Exhibit A (with such
          changes as the Company and the Remarketing Agent may agree upon, it
          being understood that changes may be necessary in the
          representations, warranties, covenants and other provisions of the
          Supplemental Remarketing Agreement due to changes in law or facts
          and circumstances or in the event that the Remarketing Agent is not
          the sole remarketing agent, and with such further changes therein as
          the Remarketing Agent may reasonably request), or (ii) in such other
          form as the Remarketing Agent may reasonably request, subject to the
          approval of the Company (such approval not to be unreasonably
          withheld). Anything herein to the contrary notwithstanding, JPMorgan
          shall not be obligated to act as Remarketing Agent hereunder unless
          the Supplemental Remarketing Agreement is in form and substance
          reasonably satisfactory to JPMorgan. The Company agrees that the
          Remarketing Agent shall have the right, on

<PAGE>

          15 Business Days notice to the Company, to appoint one or more
          additional remarketing agents so long as any such additional
          remarketing agents shall be reasonably acceptable to the Company.
          Upon any such appointment, the parties shall enter into an
          appropriate amendment to this Agreement to reflect the addition of
          any such remarketing agent.

        (b) Pursuant to the Supplemental Remarketing Agreement, the Remarketing
Agent, either as sole remarketing agent or as representative of a group of
remarketing agents appointed as aforesaid, will agree, subject to the terms
and conditions set forth herein and therein, to use its commercially
reasonable best efforts to remarket (i) on the Initial Remarketing Date, the
Notes that the Custodial Agent (as such term is defined in the Pledge
Agreement) and the Purchase Contract Agent shall have notified the Remarketing
Agent are to be included in the Initial Remarketing, at a price per Note such
that the aggregate price for the Notes being remarketed is at least 100.25% of
the sum of the Treasury Portfolio Purchase Price and the Separate Notes
Purchase Price, (ii) in the event of a Failed Initial Remarketing, in any
Interim Remarketing on any Interim Remarketing Date, the Notes that were
included in the Initial Remarketing, at a price per Note such that the
aggregate price for the Notes being remarketed is at least 100.25% of the sum
of the Treasury Portfolio Purchase Price and the Separate Notes Purchase
Price, and (iii) in the event of a Failed Initial Remarketing (and no
Successful Interim Remarketing), in the Final Remarketing on the Final
Remarketing Date, the Notes that the Custodial Agent and the Purchase Contract
Agent shall have notified the Remarketing Agent are to be included in the
Final Remarketing, at a price of approximately 100.25% (but not less than
100%) of the aggregate principal amount of such Notes being remarketed.

        With respect to an Interim Remarketing, the Remarketing Agent shall
notify the Purchase Contract Agent and the Collateral Agent of the Interim
Remarketing Date, not later than two Business Days prior to such Interim
Remarketing Date.

        The Remarketing Agent shall not remarket any Notes for a price per
Note that is less than the price necessary for the Notes to have an aggregate
price equal to 100.25% of the sum of the Treasury Portfolio Purchase Price and
the Separate Notes Purchase Price, in the case of the Initial Remarketing or
any Interim Remarketing, or 100% of the aggregate principal amount of such
Notes, in the case of the Final Remarketing.

        If a Failed Initial Remarketing, Failed Interim Remarketing or Failed
Final Remarketing occurs, the Remarketing Agent shall so advise by telephone
the Purchase Contract Agent, Collateral Agent, Company, Trustee, and
Depositary.

        By approximately 4:30 P.M., New York City time, on the date of a
Successful Remarketing, the Remarketing Agent shall advise, by telephone (i)
the Purchase Contract Agent, Collateral Agent, Company, Trustee, and
Depositary of

                                      5

<PAGE>

the Reset Rate determined in the Successful Remarketing and the
aggregate principal amount of Notes sold in the Successful Remarketing, (ii)
each purchaser (or the Depositary Participant thereof) of the Reset Rate and
the aggregate principal amount of Notes such purchaser is to purchase and
(iii) each purchaser to give instructions to its Depositary Participant to pay
the purchase price on the date three Business Days following the date of a
Successful Remarketing in same day funds against delivery of the Notes
purchased through the facilities of the Depositary.

         In the case of a Failed Final Remarketing, by approximately 4:30
P.M., New York City time, on the date of the Failed Final Remarketing, the
Remarketing Agent shall advise, by telephone the Collateral Agent, Purchase
Contract Agent, Company, Trustee, and Depositary of the Reset Rate.

         After deducting the fee specified in Section 3 below, the proceeds of
such Initial Remarketing, Interim Remarketing or Final Remarketing, as the
case may be, (i) with respect to the Notes which are components of the
Corporate MEDS, shall be paid to the Collateral Agent in accordance with
Section 5.07 of the Pledge Agreement and Section 5.02 of the Purchase Contract
Agreement (each of which Sections are incorporated herein by reference) and
(ii) with respect to the Separate Notes, shall be paid to the Custodial Agent
for payment to the holders of such Separate Notes in accordance with Section
5.02 of the Purchase Contract Agreement. The right of each holder of Separate
Notes or Corporate MEDS to have Notes tendered for the Initial Remarketing,
any Interim Remarketing or the Final Remarketing, as the case may be, shall be
limited to the extent that (i) the Remarketing Agent conducts an Initial
Remarketing and, in the event of a Failed Initial Remarketing, an Interim
Remarketing and, in the event of a Failed Initial Remarketing and no
Successful Interim Remarketing, a Final Remarketing pursuant to the terms of
this Agreement, (ii) Notes tendered have not been called for redemption, (iii)
the Remarketing Agent is able to find a purchaser or purchasers for tendered
Notes at a price of not less than (A) 100.25% of the sum of the Treasury
Portfolio Purchase Price and the Separate Notes Purchase Price, in the case of
the Initial Remarketing or any Interim Remarketing, and (B) 100% of the
principal amount thereof, in the case of the Final Remarketing and (iv) such
purchaser or purchasers deliver the purchase price therefor to the Remarketing
Agent as and when required.

        (c) It is understood and agreed that the Remarketing Agent shall have no
obligation whatsoever to purchase any Notes, whether in the Initial
Remarketing, any Interim Remarketing, the Final Remarketing or otherwise, and
shall in no way be obligated to provide funds to make payment upon tender of
Notes for remarketing or to otherwise expend or risk its own funds or incur or
be exposed to financial liability in the performance of its duties under this
Agreement or the Supplemental Remarketing Agreement, and, without limitation
of the foregoing, the Remarketing Agent shall not be deemed an underwriter of

                                      6

<PAGE>

the remarketed Notes. The Company shall not be obligated in any case to
provide funds to make payment upon tender of Notes for remarketing.

       Section 3. Fees. (a) In the event of a Successful Initial Remarketing or
any Successful Interim Remarketing, the Remarketing Agent shall retain as a
remarketing fee (the "Remarketing Fee") an amount not exceeding 25 basis
points (0.25%) of the sum of the Treasury Portfolio Purchase Price and the
Separate Notes Purchase Price from any amount received in connection with such
Initial Remarketing or such Interim Remarketing in excess of the sum of the
Treasury Portfolio Purchase Price and the Separate Notes Purchase Price.

       (b) In the event of a Successful Final Remarketing, the Remarketing Agent
shall retain as the Remarketing Fee an amount not exceeding 25 basis points
(0.25%), of the principal amount of the remarketed Notes from any amount
received in connection with such Final Remarketing in excess of the aggregate
principal amount of such remarketed Notes.

       Section 4. Replacement and Resignation of Remarketing Agent. (a) The
Company may in its absolute discretion replace JPMorgan as the Remarketing
Agent hereunder by giving notice prior to 3:00 p.m., New York City time on the
thirtieth Business Day immediately prior to the Initial Remarketing Date. Any
such replacement shall become effective upon the Company's appointment of a
successor to perform the services that would otherwise be performed hereunder
by the Remarketing Agent. Upon providing such notice, the Company shall use
all commercially reasonable best efforts to appoint such a successor and to
enter into a remarketing agreement with such successor as soon as reasonably
practicable. The Company shall notify the Purchase Contract Agent and the
Collateral Agent of the appointment of any such successor.

       (b) JPMorgan may resign at any time and be discharged from its duties and
obligations hereunder as the Remarketing Agent by giving notice prior to 3:00
p.m., New York City time on the thirtieth Business Day immediately prior to
(i) the Initial Remarketing Date or (ii) the Final Remarketing Date. Any such
resignation shall become effective upon the Company's appointment of a
successor to perform the services that would otherwise be performed hereunder
by the Remarketing Agent. Upon receiving notice from the Remarketing Agent
that it wishes to resign hereunder, the Company shall appoint such a successor
and enter into a remarketing agreement with it as soon as reasonably
practicable.

       Section 5. Dealing in the Securities. The Remarketing Agent, when acting
hereunder or under the Supplemental Remarketing Agreement, or when acting in
its individual or any other capacity, may, to the extent permitted by law,
buy, sell, hold or deal in any of the Notes, Treasury MEDS, Corporate MEDS or
any other securities of the Company. With respect to any Notes, Treasury MEDS
Equity Units, Corporate MEDS or any other securities of the Company owned by
it, the Remarketing Agent may exercise any vote or join in any action with
like effect as if it did not act in any capacity hereunder. The Remarketing
Agent, in its

                                      7

<PAGE>

individual capacity, either as principal or agent, may also engage in or have
an interest in any financial or other transaction with the Company as freely
as if it did not act in any capacity hereunder. The Company may, to the extent
permitted by law, purchase any Notes that are remarketed by any Remarketing
Agent.

       Section 6. Registration Statement and Prospectus. (a) In connection with
the Initial Remarketing and any Interim Remarketing, if and to the extent
required in the view of counsel (which need not be an opinion) for either the
Remarketing Agent or the Company by applicable law, regulations or
interpretations in effect at the time of such Initial Remarketing or such
Interim Remarketing, as applicable, the Company (i) shall use its commercially
reasonable best efforts to have a registration statement relating to the Notes
effective under the Securities Act of 1933 prior to the third Business Day
immediately preceding (A) the February 16, 2005 (in the case of the Initial
Remarketing) or (B) the Interim Remarketing Date (in the case of such Interim
Remarketing), as applicable, (ii) if requested by the Remarketing Agent shall
furnish a current preliminary prospectus and, if applicable, a current
preliminary prospectus supplement to be used by the Remarketing Agent in the
Initial Remarketing or such Interim Remarketing, as applicable, not later than
seven Business Days prior to (A) the Initial Remarketing Date (in the case of
the Initial Remarketing) or (B) the Interim Remarketing Date (in the case of
such Interim Remarketing) (or, in each case, such earlier date as the
Remarketing Agent may reasonably request) and in such quantities as the
Remarketing Agent may reasonably request, (iii) shall furnish a current final
prospectus and, if applicable, a final prospectus supplement to be used by the
Remarketing Agent in the Initial Remarketing or such Interim Remarketing, as
applicable, not later than the third Business Day immediately preceding (A)
the Initial Remarketing Date (in the case of the Initial Remarketing) or (B)
the Interim Remarketing Date (in the case of such Interim Remarketing) in such
quantities as the Remarketing Agent may reasonably request, and shall pay all
expenses relating thereto and (iv) shall, at all times through the ninth
Business Day immediately preceding the Purchase Contract Settlement Date,
advise the Remarketing Agent, promptly after it receives notice thereof, of
the issuance by the U.S. Securities and Exchange Commission (the "SEC") of any
stop order or of any order preventing or suspending the use of the prospectus
referred to in clauses (ii) and (iii) above, of the initiation or threatening
of any proceeding for such purpose, or of any request by the SEC for the
amending or supplementing of the registration statement or the prospectus or
for additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any prospectus, to
use promptly its best efforts to obtain a withdrawal of such order.

       (b) In the event of a Failed Initial Remarketing and no Successful
Interim Remarketing, and in connection with the Final Remarketing, if and to
the extent required in the view of counsel (which need not be an opinion) for
either the Remarketing Agent or the Company by applicable law, regulations or
interpretations in effect at the time of such Final Remarketing, the Company
(i)

                                      8

<PAGE>

shall use its commercially reasonable best efforts to have a registration
statement relating to the Notes effective under the Securities Act of 1933
prior to the third Business Day immediately preceding the Purchase Contract
Settlement Date, (ii) if requested by the Remarketing Agent, shall furnish a
current preliminary prospectus and, if applicable, a current preliminary
prospectus supplement to be used by the Remarketing Agent in the Final
Remarketing not later than seven Business Days prior to the Purchase Contract
Settlement Date (or such earlier date as the Remarketing Agent may reasonably
request) and in such quantities as the Remarketing Agent may reasonably
request, and (iii) shall furnish a current final prospectus and, if
applicable, a final prospectus supplement to be used by the Remarketing Agent
in the Final Remarketing not later than the third Business Day immediately
preceding the Purchase Contract Settlement Date in such quantities as the
Remarketing Agent may reasonably request, and shall pay all expenses relating
thereto.

       (c) If in connection with (i) the Initial Remarketing, (ii) any Interim
Remarketing, or (iii) the Final Remarketing, it shall not be possible, in the
view of counsel (which need not be an opinion) for either the Remarketing
Agent or the Company, under applicable law, regulations or interpretations in
effect at the time of such Initial Remarketing, such Interim Remarketing or
such Final Remarketing to register the offer and sale by the Company of the
Notes under the Securities Act of 1933 as otherwise contemplated by this
Section 6, the Company (i) shall use its commercially reasonable best efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper and advisable to permit and effectuate the offer and
sale of the Notes in connection with the Initial Remarketing, such Interim
Remarketing or the Final Remarketing, as the case may be, without registration
under the Securities Act of 1933 pursuant to an exemption therefrom, if
available, including the exemption afforded by Rule l44A under the rules and
regulations promulgated under the Securities Act of 1933 by the Securities and
Exchange Commission, (ii) if requested by the Remarketing Agent shall furnish
a current preliminary remarketing memorandum to be used by the Remarketing
Agent in the Initial Remarketing, such Interim Remarketing or the Final
Remarketing, as the case may be, not later than seven Business Days prior to
the Initial Remarketing Date, in the case of the Initial Remarketing, the
Interim Remarketing Date, in the case of such Interim Remarketing, or the
Purchase Contract Settlement Date, in the case of the Final Remarketing (or in
either case such earlier date as the Remarketing Agent may reasonably request)
and in such quantities as the Remarketing Agent may reasonably request and
(iii) shall furnish a current final remarketing memorandum to be used by the
Remarketing Agent in the Initial Remarketing, such Interim Remarketing or the
Final Remarketing, as the case may be, not later than the Initial Remarketing
Date, in the case of the Initial Remarketing, the Interim Remarketing Date, in
the case of any Interim Remarketing, or the Final Remarketing Date, in the
case of the Final Remarketing, in such quantities as the Remarketing Agent may
reasonably request, and shall pay all expenses relating thereto.

                                      9

<PAGE>

       (d) The Company shall also use its commercially reasonable best efforts
to take all such actions as may (upon advice of counsel to the Company or the
Remarketing Agent) be necessary or desirable under state securities or blue
sky laws in connection with the Initial Remarketing, any Interim Remarketing
and the Final Remarketing; provided that the Company shall not be required to
qualify as a foreign corporation, file a general consent to service of process
or become subject to taxation in any jurisdiction.

       Section 7. Conditions to the Remarketing Agent's Obligations. (a) The
obligations of the Remarketing Agent under this Agreement and the Supplemental
Remarketing Agreement shall be subject to the terms and conditions of this
Agreement and the Supplemental Remarketing Agreement, including, without
limitation, the following conditions: (i) the Notes tendered for, or otherwise
to be included in the Initial Remarketing, any Interim Remarketing, or Final
Remarketing, as the case may be, have not been called for redemption, (ii) the
Remarketing Agent is able to find a purchaser or purchasers for tendered Notes
(1) in the case of the Initial Remarketing or any Interim Remarketing, at a
price not less than 100.25% of the sum of the Treasury Portfolio Purchase
Price and the Separate Notes Purchase Price, and (2) in the case of the Final
Remarketing, at a price per Note not less than 100% of the principal amount
thereof, (iii) the Purchase Contract Agent, the Collateral Agent, the
Custodial Agent, the Securities Intermediary, the Company and the Trustee
shall have performed their respective obligations in connection with the
Initial Remarketing, the Interim Remarketing and, in the event of a Failed
Initial Remarketing and no Successful Interim Remarketing, in connection with
the Final Remarketing, in each case pursuant to the Purchase Contract
Agreement, the Pledge Agreement, the Indenture, this Agreement and the
Supplemental Remarketing Agreement (including, without limitation, the
Quotation Agent giving the Remarketing Agent notice of the Treasury Portfolio
Purchase Price no later than 5:00 p.m., New York City time, on (A) the Initial
Remarketing Date, in the case of the Initial Remarketing or (B) the Interim
Remarketing Date, in the case of any Interim Remarketing, and the Purchase
Contract Agent and the Custodial Agent giving the Remarketing Agent notice of
the aggregate principal amount, as the case may be, of Notes to be remarketed,
no later than 11:00 a.m., New York City time, on the Business Day prior to the
Initial Remarketing Date or the Final Remarketing Date, as applicable, and, in
each case, the Collateral Agent and the Custodial Agent concurrently
delivering the Notes to be remarketed to the Remarketing Agent), (iv) no Event
of Default (as defined in the Indenture) shall have occurred and be
continuing, (v) the accuracy of the representations and warranties of the
Company included and incorporated by reference in this Agreement and the
Supplemental Remarketing Agreement or in certificates of any officer of the
Company delivered pursuant to the provisions included or incorporated by
reference in this Agreement or the Supplemental Remarketing Agreement, (vi)
the performance by the Company of its covenants and other obligations included
and incorporated by reference in this Agreement and the Supplemental
Remarketing Agreement, and (vii) the satisfaction of the other conditions set
forth and

                                      10

<PAGE>

incorporated by reference in this Agreement and the Supplemental
Remarketing Agreement.

       (b) If at any time during the term of this Agreement, any Event of
Default (as defined in the Indenture) or event that with the passage of time
or the giving of notice or both would become an Event of Default has occurred
and is continuing under the Indenture, then the obligations and duties of the
Remarketing Agent under this Agreement and the Supplemental Remarketing
Agreement shall be suspended until such default or event has been cured. The
Company will promptly give the Remarketing Agent notice of all such defaults
and events of which the Company is aware.

       Section 8. Termination of Remarketing Agreement. This Agreement shall
terminate as to any Remarketing Agent that is replaced on the effective date
of its replacement pursuant to Section 4(a) hereof or pursuant to Section 4(b)
hereof. Notwithstanding any such termination, the obligations set forth in
Section 3 hereof shall survive and remain in full force and effect until all
amounts payable under said Section 3 shall have been paid in full. In
addition, each former Remarketing Agent shall be entitled to the rights and
benefits under Sections 9 and 10 of this Agreement, notwithstanding the
replacement or resignation of such Remarketing Agent.

       Section 9. Remarketing Agent's Performance; Duty of Care. The duties and
obligations of the Remarketing Agent shall be determined solely by the express
provisions of this Agreement and the Supplemental Remarketing Agreement. No
implied covenants or obligations of or against the Remarketing Agent shall be
read into this Agreement or the Supplemental Remarketing Agreement. In the
absence of bad faith on the part of the Remarketing Agent, the Remarketing
Agent may conclusively rely upon any document furnished to it which purports
to conform to the requirements of this Agreement or the Supplemental
Remarketing Agreement, as the case may be, as to the truth of the statements
expressed therein. The Remarketing Agent shall be protected in acting upon any
document or communication reasonably believed by it to be signed, presented or
made by the proper party or parties. The Remarketing Agent shall have no
obligation to determine whether there is any limitation under applicable law
on the Reset Rate on the Notes or, if there is any such limitation, the
maximum permissible Reset Rate on the Notes, and it shall rely solely upon
written notice from the Company (which the Company agrees to provide prior to
the eighth Business Day before (A) the Initial Remarketing Date, in the case
of the Initial Remarketing and any Interim Remarketing and (B) the Final
Remarketing Date, in the case of the Final Remarketing) as to whether or not
there is any such limitation and, if so, the maximum permissible Reset Rate.
The Remarketing Agent shall incur no liability under this Agreement or the
Supplemental Remarketing Agreement to any beneficial owner or holder of Notes,
or other securities, either in its individual capacity or as Remarketing
Agent, for any action or failure to act in connection with the Remarketing or
otherwise in connection with the transactions contemplated by this Agreement
or

                                      11

<PAGE>

the Supplemental Remarketing Agreement. The provisions of this Section 9
shall survive any termination of this Agreement and shall also continue to
apply to every Remarketing Agent notwithstanding its resignation or removal.

       Section 10. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless the Remarketing Agent and its directors, officers,
employees, agents, affiliates and each person, if any, who controls the
Remarketing Agent within the meaning of either Section 15 of the Securities
Act of 1933, as amended (the "1933 Act"), or Section 20 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") (the Remarketing Agent and
each such person or entity being an "Agent Indemnified Party"), as follows:

          (i) from and against any and all losses, claims, damages,
     liabilities and expenses whatsoever, joint or several, as incurred, to
     which such Agent Indemnified Party may become subject under any
     applicable federal or state law, or otherwise, and related to, arising
     out of, or based on (A) the failure to have an effective Registration
     Statement (as defined in the Supplemental Remarketing Agreement) under
     the 1933 Act relating to the Notes, as the case may be, if required, or
     the failure to satisfy the prospectus delivery requirements of the 1933
     Act because the Company failed to provide the Remarketing Agent with a
     Prospectus (as defined in the Supplemental Remarketing Agreement) for
     delivery, or (B) any untrue statement or alleged untrue statement of a
     material fact contained in the Registration Statement or any amendment
     thereto (including any information deemed to be a part of the
     Registration Statement at the time it became effective pursuant to
     paragraph (b) of Rule 430A under the 1933 Act, if applicable), or the
     omission or alleged omission therefrom of a material fact required to be
     stated therein or necessary to make the statements therein, in the light
     of the circumstances under which they were made, not misleading, or (C)
     any untrue statement or alleged untrue statement of a material fact
     contained in any preliminary prospectus or the Prospectus, or any
     amendment or supplement thereto, or the omission or alleged omission
     therefrom of a material fact necessary in order to make the statements
     therein, in the light of the circumstances under which they were made,
     not misleading, or (D) any untrue statement or alleged untrue statement
     of a material fact contained in any preliminary remarketing memorandum or
     any final remarketing memorandum, or any amendment or supplement thereto,
     or the omission or alleged omission therefrom of a material fact
     necessary in order to make the statements therein, in the light or the
     circumstances under which they were made, not misleading, or (E) any
     untrue statement or alleged untrue statement of a material fact contained
     in any other information (whether oral or written) or documents
     (including, without limitation, any documents incorporated or deemed to
     be incorporated by reference in any such information or documents)
     provided by the Company for use in connection with the remarketing of the
     Notes or any of the transactions related thereto, or (F) any breach by

                                      12

<PAGE>

     the Company of any of the representations, warranties or agreements
     included or incorporated by reference in this Agreement or the
     Supplemental Remarketing Agreement, or (G) any failure by the Company to
     make or consummate the remarketing of the Notes (including, without
     limitation, any Failed Initial Remarketing, Failed Interim Remarketing or
     Failed Final Remarketing) or the withdrawal, recession, termination,
     amendment or extension of the terms of such remarketing, or (H) any
     failure on the part of the Company to comply, or any breach by the
     Company of, any of the provisions included or incorporated by reference
     in this Agreement, the Supplemental Remarketing Agreement, the Purchase
     Contract Agreement, the Corporate MEDS, the Treasury MEDS, the Pledge
     Agreement, the Indenture or the Notes (collectively, the "Operative
     Documents") or (I) the remarketing of the Notes, as the case may be, or
     any other transaction contemplated by any of the Operative Documents, or
     the engagement of the Remarketing Agent pursuant to, or the performance
     by the Remarketing Agent of the respective services contemplated by, this
     Agreement or the Supplemental Remarketing Agreement, whether or not the
     Initial Remarketing, any Interim Remarketing or the Final Remarketing or
     the reset of the interest rate on the Notes as contemplated herein
     actually occur;

          (ii) against any and all loss, liability, claim, damage and expense
     whatsoever, as incurred, to the extent of the aggregate amount paid in
     settlement of any litigation or any investigation or proceeding by any
     governmental agency or body, commenced or threatened, or of any claim
     whatsoever related to, arising out of or based on any matter described in
     (i) above; and

          (iii) against any and all expense whatsoever, as incurred (including
     the fees and disbursements of counsel chosen by the Remarketing Agent),
     reasonably incurred in investigating, preparing or defending against any
     litigation, or any investigation or proceeding by any governmental agency
     or body, commenced or threatened, or any claim whatsoever related to,
     arising out or based on any matter described in (i) above, whether or not
     such Agent Indemnified Party is a party and whether or not such claim,
     action or proceeding is initiated or brought by or on behalf of the
     Company to the extent that any such expense is not paid under (i) or (ii)
     above;

provided, however, that the Company shall not be liable under clause (i) (B),
(i) (C), (i) (D) or (i) (E) to the extent any such loss, claim, damage,
liability or expense arises out of any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and conformity with written
information furnished to the Company by the Remarketing Agent expressly for
use in the Registration Statement (or any amendment thereto), any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) or any
preliminary or final remarketing memorandum (or any amendment or supplement
thereto) or any

                                      13

<PAGE>

other documents used in connection with remarketing of the Notes, as the case
may be; provided, further, that with respect to any untrue statement or
omission of a material fact made in any preliminary prospectus, the indemnity
agreement contained in this Section 10(a) shall not inure to the benefit of
the Remarketing Agent to the extent that any such loss, claim, damage or
liability of the Remarketing Agent occurs under the circumstance where (w) the
Company had previously furnished copies of the Prospectus or remarketing
memorandum to the Remarketing Agent, (x) delivery of the Prospectus or
remarketing memorandum was required to be made to such person, (y) the untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact contained in the preliminary prospectus
was corrected in the Prospectus or in a preliminary remarketing memorandum was
corrected in the final remarketing memorandum, and (z) there was not sent or
given to such person, at or prior to the written confirmation of the sale of
Notes to such person, a copy of the Prospectus or remarketing memorandum and
the delivery thereof would have constituted a complete defense to such
person's claim in respect of such untrue statement or omission or alleged
untrue statement or omission; provided, further, that the Company shall not be
liable under clause (i)(G) or (i)(I) to the extent that such loss, claim,
damage, liability or expense has, by final judicial determination, resulted
from the willful misconduct, bad faith or gross negligence of the Remarketing
Agent or by its failure to fulfill, in any material respect, its express
obligations hereunder or under the Supplemental Remarketing Agreement.

         The Company agrees that no Agent Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to
the Company or its respective security holders or creditors relating to or
arising out of the engagement of the Remarketing Agent pursuant to, or the
performance by the Remarketing Agent of its respective services contemplated
by, this Agreement or the Supplemental Remarketing Agreement except to the
extent that any loss, claim, damage, liability or expense is found in a final
judgment by a court of competent jurisdiction to have resulted from the
willful misconduct, gross negligence or bad faith of the Remarketing Agent.

         The Company agrees that, without the Remarketing Agent's prior
written consent, it will not settle, compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any action or
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 10(a) (whether or not the Remarketing Agent's or any
other Agent Indemnified Party is an actual or potential party to such claim,
action or proceeding), unless such settlement, compromise or consent (i)
includes an unconditional release of each Agent Indemnified Party from all
liability arising out of such litigation, investigation, proceeding, action or
claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act by or on behalf of an Agent Indemnified Party.

                                      14

<PAGE>

         (b) The Remarketing Agent agrees to indemnify and hold harmless the
Company, its directors and its officers who sign the Registration Statement,
and each person, if any, who controls the Company within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act (the "Company
Indemnified Parties") to the same extent as the foregoing indemnity from the
Company to the Agent Indemnified Parties, but only with reference to
information relating to such Remarketing Agent furnished to the Company in
writing by such Remarketing Agent expressly for use in the Registration
Statement, any preliminary prospectus, any preliminary remarketing memorandum,
the Prospectus, any remarketing memorandum or any amendments or supplements
thereto or any other documents used in connection with the Remarketing of the
Notes, as the case may be.

         The Company agrees that, without the Remarketing Agent's prior
written consent, it will not settle, compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any action or
claim whatsoever in respect of which indemnification or contribution could be
sought under this Section 10(b) (whether or not the Company or any other
Company Indemnified Party is an actual or potential party to such claim,
action or proceeding), unless such settlement, compromise or consent (i)
includes an unconditional release of each Company Indemnified Party from all
liability arising out of such litigation, investigation, proceeding, action or
claim and (ii) does not include a statement as to, or an admission of fault,
culpability or a failure to act by or on behalf of a Company Indemnified
Party.

         (c) If the indemnification provided for in Section 10(a) or 10(b)
hereof is for any reason unavailable to or insufficient to hold harmless any
party seeking indemnification thereunder (an "Indemnified Party") in respect of
any losses, liabilities, claims, damages or expenses referred to therein, then
the Company, on the one hand, and the Remarketing Agent on the other hand, shall
contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such Indemnified Party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Remarketing Agent on the other hand from
the remarketing of the Notes contemplated hereby or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand
and of the Remarketing Agent on the other hand in connection with the
statements, omissions or other matters which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Remarketing Agent on the other hand in connection with the
remarketing of the Notes contemplated hereby shall be deemed to be in the same
respective proportions as the aggregate principal amount of the Notes which
are or are to be remarketed bears to the aggregate fees actually received by the

                                      15

<PAGE>

Remarketing Agent under Section 3 hereof. The relative fault of the Company on
the one hand and the Remarketing Agent on the other hand (i) in the case of an
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, shall be determined by reference to, among
other things, whether such untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or by the Remarketing
Agent on the other hand and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission
and (ii) in the case of any other action or omission shall be determined by
reference to, among other things, whether such action or omission was taken or
omitted to be taken by the Company on the one hand, or by the Remarketing
Agent, on the other hand, and the parties' relative intent, knowledge, access
to information and opportunity to prevent or correct such action or omission.
The Company and the Remarketing Agent agree that it would not be just and
equitable if contribution pursuant to this Section 10(c) were determined by
pro rata allocation or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
10(c). The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an Indemnified Party and referred to above in this
Section 10(c) shall be deemed to include any legal or other expenses incurred
by such Indemnified Party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or any such omission or alleged omission or
any other such action or omission; provided, however, that to the extent
permitted by applicable law, in no event shall the Remarketing Agent be
required to contribute any amount which, in the aggregate, exceeds the
aggregate fees received by it under Section 3 of this Agreement. No
investigation or failure to investigate by any Indemnified Party shall impair
the foregoing indemnification and contribution agreement or any rights an
Indemnified Party may have. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

        (d) Promptly after receipt by any Indemnified Party of written notice of
any claim or commencement of an action or proceeding with respect to which
indemnification may be sought hereunder, such party will notify the party from
whom indemnification is sought (the "Indemnifying Party") in writing of such
claim or of the commencement of such action or proceeding, but failure to so
notify the Indemnifying Party will not relieve the Indemnifying Party from any
liability which it may have to such party seeking indemnification under this
Section 10, and in any event will not relieve the Indemnifying Party from any
other liability that it may have to such party. The Indemnifying Party, upon
request of the Indemnified Party, shall retain counsel reasonably satisfactory
to the Indemnified Party to represent the Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the

                                      16

<PAGE>

reasonable fees and expenses of such counsel related to such proceeding. In
any such proceeding, any Indemnified Party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the contrary, (ii) the
Indemnifying Party has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Party or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them.

        (e) Anything herein or in the Supplemental Remarketing Agreement to the
contrary notwithstanding, the provisions of this Section 10, and the rights of
the Remarketing Agent and the other Indemnified Parties hereunder, shall be in
addition to, and not in limitation of, any rights or benefits (including,
without limitation, rights to indemnification or contribution) which the
Remarketing Agent or any other Indemnified Party may have under any other
instrument or agreement.

        Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.

        Section 12. Term of Agreement. (a) Unless otherwise terminated in
accordance with the provisions hereof and except as otherwise provided herein,
this Agreement shall remain in full force and effect from the date hereof
until the first day thereafter on which no Notes are outstanding, or, if
earlier, the fourth Business Day immediately following the February 16, 2005,
in the case of a Successful Initial Remarketing, the fourth Business Day
immediately following the Interim Remarketing Date, in the case of a
Successful Interim Remarketing, or the Business Day immediately following the
Purchase Contract Settlement Date, in the case of a Successful Final
Remarketing. Anything herein to the contrary notwithstanding, the provisions
of Sections 3, 8, 9, 10 and 12(b) hereof shall survive any termination of this
Agreement and remain in full force and effect.

        (b) All representations and warranties included or incorporated by
reference in this Agreement, the Supplemental Remarketing Agreement or
contained in certificates of officers of the Company submitted pursuant hereto
or thereto, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Remarketing Agent or any of its
controlling persons, or by or on behalf of the Company or the Purchase
Contract Agent, and shall survive the remarketing of the Notes.

        Section 13. Successors and Assigns. Except in the case of a succession
pursuant to the terms of the Purchase Contract Agreement, the rights and
obligations of the Company and the Purchase Contract Agent (both in its
capacity as Purchase Contract Agent and as attorney-in-fact) hereunder may not
be assigned or delegated to any other person without the prior written consent
of the

                                      17

<PAGE>

Remarketing Agent. The rights and obligations of the Remarketing Agent
hereunder may not be assigned or delegated to any other person without the
prior written consent of the Company, except that the Remarketing Agent shall
have the right to appoint additional remarketing agents as provided herein.
This Agreement shall inure to the benefit of and be binding upon the Company,
the Purchase Contract Agent and the Remarketing Agent and its respective
successors and assigns and the other Indemnified Parties (as defined in
Section 10 hereof) and the successors, assigns, heirs and legal
representatives of the Indemnified Parties. The terms "successors" and
"assigns" shall not include any purchaser of Notes or Notes merely because of
such purchase.

       Section 14. Headings. Section headings have been inserted in this
Agreement and the Supplemental Remarketing Agreement as a matter of
convenience of reference only, and it is agreed that such section headings are
not a part of this Agreement or the Supplemental Remarketing Agreement and
will not be used in the interpretation of any provision of this Agreement or
the Supplemental Remarketing Agreement.

       Section 15. Severability. If any provision of this Agreement or the
Supplemental Remarketing Agreement shall be held or deemed to be or shall, in
fact, be invalid, inoperative or unenforceable as applied in any particular
case in any or all jurisdictions because it conflicts with any provisions of
any constitution, statute, rule or public policy or for any other reason,
then, to the extent permitted by law, such circumstances shall not have the
effect of rendering the provision in question invalid, inoperative or
unenforceable in any other case, circumstances or jurisdiction, or of
rendering any other provision or provisions of this Agreement or the
Supplemental Remarketing Agreement, as the case may be, invalid, inoperative
or unenforceable to any extent whatsoever.

       Section 16. Counterparts. This Agreement and the Supplemental Remarketing
Agreement may be executed in counterparts, each of which shall be regarded as
an original and all of which shall constitute one and the same document.

       Section 17. Amendments. This Agreement and the Supplemental Remarketing
Agreement may be amended by any instrument in writing signed by the parties
hereto. The Company and the Purchase Contract Agent agree that they will not
enter into, cause or permit any amendment or modification of the Purchase
Contract Agreement, the Indenture, the Pledge Agreement, the Notes, the MEDS
Equity Units or any other instruments or agreements relating to the Notes or
the MEDS Equity Units which would adversely affect the rights, duties or
obligations of the Remarketing Agent without the prior written consent of the
Remarketing Agent.

       Section 18. Notices. Unless otherwise specified, any notices, requests,
consents or other communications given or made hereunder or pursuant hereto
shall be made in writing or transmitted by any standard form of

                                      18

<PAGE>

telecommunication, including telephone or telecopy, and confirmed in writing.
All written notices and confirmations of notices by telecommunication shall be
deemed to have been validly given or made when delivered or mailed, registered
or certified mail, return receipt requested and postage prepaid. All such
notices, requests, consents or other communications shall be addressed as
follows: if to the Company, to KeySpan Corporation, One Metro Tech Center,
Brooklyn, New York, 11201; if to the Remarketing Agent, to J.P. Morgan
Securities Inc., 277 Park Ave., New York, New York 10172; and if to the
Purchase Contract Agent, to JPMorgan Chase Bank, 450 West 33rd Street, New
York, New York 10001 or to such other address as any of the above shall
specify to the other in writing.

       Section 19. Information. The Company agrees to furnish the Remarketing
Agent with such information and documents as the Remarketing Agent may
reasonably request in connection with the transactions contemplated by this
Remarketing Agreement and the Supplemental Remarketing Agreement, and make
reasonably available to the Remarketing Agent and any accountant, attorney or
other advisor retained by the Remarketing Agent such information that parties
would customarily require in connection with a due diligence investigation
conducted in accordance with applicable securities laws and cause the
Company's officers, directors, employees and accountants to participate in all
such discussions and to supply all such information reasonably requested by
any such person in connection with such investigation.

                                      19

<PAGE>

         IN WITNESS WHEREOF, each of the Company, the Purchase Contract Agent
and the Remarketing Agent has caused this Agreement to be executed in its name
and on its behalf by one of its duly authorized signatories as of the date
first above written.

                                   KEYSPAN CORPORATION

                                   By:  /s/ Gerald Luterman
                                         --------------------------------------
                                   Name:    Gerald Luterman
                                   Title:   Executive Vice President and Chief
                                            Financial Officer

CONFIRMED AND ACCEPTED:

J.P. MORGAN SECURITIES INC.

By:   /s/ Jeffrey J. Zajkowski
    ------------------------------
   Name:  Jeffrey J. Zajkowski
   Title: Managing Director

JPMORGAN CHASE BANK
not individually but solely as Purchase Contract
Agent and as attorney-in-fact for the Holders of the
Purchase Contracts

By:    /s/ Francine Springer
    -----------------------------
    Name:  Francine Springer
    Title: Vice President

<PAGE>

                                                                  Exhibit A to
                                                         Remarketing Agreement

                  Form of Supplemental Remarketing Agreement

         Supplemental Remarketing Agreement dated ______________, ____ among
KeySpan Corporation, a New York corporation (the "Company"), J.P. Morgan
Securities Inc. (the "Remarketing Agent"), and JPMorgan Chase Bank, as
Purchase Contract Agent and attorney-in-fact for the Holders of the Purchase
Contracts (as such terms are defined in the Purchase Contract Agreement
referred to in Schedule I hereto).

         NOW, THEREFORE, for and in consideration of the covenants herein
made, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         1. Definitions. Capitalized terms used and not defined in this
Agreement shall have the meanings assigned to them in the Remarketing
Agreement dated as of May 6, 2002 (the "Remarketing Agreement") among the
Company, the Purchase Contract Agent and the Remarketing Agent, if not defined
in the Remarketing Agreement, the meanings assigned to them in the Purchase
Contract Agreement (as defined in Schedule I hereto).

         2. Registration Statement and Prospectus. The Company has filed with
the Securities and Exchange Commission, and there has become effective, a
registration statement on Form S-3, including a prospectus, relating to the
Notes (as such term is defined on Schedule I hereto). Such Registration
Statement, as amended, and including the information deemed to be a part
thereof pursuant to Rule 430A under the Securities Act of 1933, as amended
(the "1933 Act"), and the documents incorporated or deemed to be incorporated
by reference therein, are hereinafter called, collectively, the "Registration
Statement"; (the related preliminary prospectus dated ____________, including
the documents incorporated or deemed to be incorporated by reference therein,
[and preliminary prospectus supplemented dated __________] are hereinafter
called, [collectively] the "preliminary prospectus";] and the related
prospectus dated _____________, including the documents incorporated or deemed
to be incorporated by reference therein, [and prospectus supplement dated
_________] are hereinafter called, [collectively,] the "Prospectus." The
Company has provided copies of the Registration Statement [, the preliminary
prospectus] and the Prospectus to the Remarketing Agent, and hereby consents
to the use of the [preliminary prospectus] and the Prospectus in connection
with the remarketing of the Notes. (IN THE EVENT THAT A REGISTRATION STATEMENT
IS NOT POSSIBLE OR NOT REQUIRED, INSERT THE FOLLOWING: The Company has
provided to the Remarketing Agent, for use in connection with remarketing of
the Notes (as such term is defined on Schedule I hereto), a [preliminary
remarketing memorandum and] remarketing memorandum and [describe other
materials, if any]. Such remarketing memorandum (including the documents
incorporated or deemed to be

                                      1

<PAGE>

incorporated by reference therein, [and] [describe other materials] are
hereinafter called, collectively, the "Prospectus," [and such preliminary
marketing memorandum (including the documents incorporated or deemed to be
incorporated by reference therein) is hereinafter called a "preliminary
prospectus")]. The Company hereby consents to the use of the Prospectus [and
the preliminary prospectus] in connection with the remarketing of the Notes].
All references in this Agreement to amendments or supplements to the
Registration Statement [, the preliminary prospectus] or the Prospectus shall
be deemed to mean and include the filing of any document under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), which is incorporated or
deemed to be incorporated by reference in the Registration Statement [, the
preliminary prospectus] or the Prospectus, as the case may be.

         3.       Provisions Incorporated by Reference.

         (a) Subject to Section 3(b), the provisions of the Underwriting
Agreement (other than Section 1, Section 2, Section 3, Section 7, Section 9
and Section 10 thereof) are incorporated herein by reference, mutatis
mutandis, except as set forth in Schedule I hereto, and the Company hereby
makes the representations and warranties, and agrees to comply with the
covenants and obligations, set forth in the provisions of the Underwriting
Agreement incorporated by reference herein, as modified by the provisions of
Section 3(b) hereof.

         (b) With respect to the provisions of the Underwriting Agreement
incorporated herein, for the purposes hereof, (i) all references therein to
the "Underwriter" or "Underwriters" shall be deemed to refer to the
Remarketing Agent and all references to the "Representative" or the
"Representatives" shall be deemed to refer to J.P. Morgan Securities Inc.
("JPMorgan"); (ii) all references therein to the "Securities" shall be deemed
to refer to the Notes as defined herein; (iii) all references therein to the
"Closing Date" shall be deemed to refer to the Remarketing Closing Date
specified in Schedule I hereto; (iv) all references therein to the
"Registration Statement", the "Preliminary Prospectus" or the "Prospectus"
shall be deemed to refer to the Registration Statement, the Preliminary
Prospectus and the Prospectus, respectively, as defined herein; (v) all
references therein to this "Agreement," the "Underwriting Agreement,"
"hereof," "herein" and all references of similar import, shall be deemed to
mean and refer to this Supplemental Remarketing Agreement; (vi) all references
therein to "the date hereof," "the date of this Agreement" and all similar
references shall be deemed to refer to the date of this Supplemental
Remarketing Agreement; and (vii) all references therein to any "settlement
date" shall be disregarded.

         4. Remarketing. Subject to the terms and conditions and in reliance
upon the representations and warranties herein set forth or incorporated by
reference herein and in the Remarketing Agreement, the Remarketing Agent
agrees to use its commercially reasonable best efforts to remarket, in the
manner set forth in Section 2(b) of the Remarketing Agreement, the aggregate
principal amount, as the case may be, of Notes set forth in Schedule I hereto
at a purchase price not less

                                      2

<PAGE>

than [100.25% of the sum of the Treasury Portfolio Purchase Price and the
Separate Notes Purchase Price] [100% of the aggregate principal amount of the
Notes]. In connection therewith, the registered holder or holders thereof
agree, in the manner specified in Section 5 hereof, to pay to the Remarketing
Agent a Remarketing Fee equal to an amount not exceeding 25 basis points
(0.25%) of [the sum of the Treasury Portfolio Purchase Price and the Separate
Notes Purchase Price] [such aggregate principal amount,) payable by deduction
from any amount received in connection from such [Initial] [Interim] [Final]
Remarketing in excess of the [sum of the Treasury Portfolio Purchase Price and
the Separate Notes Purchase Price] [aggregate principal amount of the Notes].
The right of each holder of Notes to have Notes tendered for purchase shall be
limited to the extent set forth in the last sentence of Section 2(b) of the
Remarketing Agreement (which is incorporated by reference herein). As more
fully provided in Section 2 (c) of the Remarketing Agreement (which is
incorporated by reference herein), the Remarketing Agent is not obligated to
purchase any Notes in the remarketing or otherwise, and neither the Company
nor the Remarketing Agent shall be obligated in any case to provide funds to
make payment upon tender of Notes for remarketing.

         5. Delivery and Payment. Delivery of payment for the remarketed Notes
by the purchasers thereof identified by the Remarketing Agent and payment of
the Remarketing Fee shall be made on the Remarketing Closing Date at the
location and time specified in Schedule I hereto (or such later date not later
than five Business Days after such date as the Remarketing Agent and the
Company shall agree), which date and time may be postponed by agreement
between the Remarketing Agent and the Company. Delivery of the remarketed
Notes and payment of the Remarketing Fee shall be made to the Remarketing
Agent against payment by the respective purchasers of the remarketed Notes of
the consideration therefor as specified herein, which consideration shall be
paid to the Collateral Agent for the account of the persons entitled thereto
by certified or official bank check or checks drawn on or by a New York
Clearing House bank and payable in immediately available funds or in
immediately available funds by wire transfer to an account or accounts
designated by the Collateral Agent.

         If the Notes are not represented by a Global Security held by or on
behalf of The Depository Trust Company, certificates for the Notes shall be
registered in such names and denominations as the Remarketing Agent may
request not less than one full Business Day in advance of the Remarketing
Closing Date, and the Company, the Collateral Agent and the registered holder
or holders thereof agree to have such certificates available for inspection,
packaging and checking by the Remarketing Agent in New York, New York not
later than 1:00 p.m. on the Business Day prior to the Remarketing Closing
Date.

         6. Notices. Unless otherwise specified, any notices, requests, consents
or other communications given or made hereunder or pursuant hereto shall be
made in writing or transmitted by any standard form of telecommunication,
including telephone or telecopy, and confirmed in writing. All written notices
and

                                      3

<PAGE>

confirmations of notices by telecommunication shall be deemed to have been
validly given or made when delivered or mailed, registered or certified mail,
return receipt requested and postage prepaid. All such notices, requests,
consents or other communications shall be addressed as follows: if to the
Company, to KeySpan Corporation, One Metro Tech Center, Brooklyn, New York,
11201; if to the Remarketing Agent, to J.P. Morgan Securities Inc., 277 Park
Avenue, New York, New York 10172; and if to the Purchase Contract Agent, to
JPMorgan Chase Bank, 450 West 33rd Street, New York, New York 10001 or to such
other address as any of the above shall specify to the other in writing.

         7. Conditions to Obligations of Remarketing Agent. Anything herein to
the contrary notwithstanding, the parties hereto agree (and the holders and
beneficial owners of the Notes will be deemed to agree) that, except to the
extent set forth in Schedule I hereto, the obligations of the Remarketing
Agent under this Agreement and the Remarketing Agreement are subject to the
satisfaction of the conditions set forth in Section 7 of the Remarketing
Agreement (which are incorporated herein by reference), and to the
satisfaction, on the Remarketing Closing Date, of the conditions incorporated
by reference herein from Section 6 of the Underwriting Agreement as modified
by Section 3(b) hereof (including, without limitation, the delivery of
opinions of counsel, officers' certificates and accountants' comfort letters
in form and substance satisfactory to the Remarketing Agent, the accuracy as
of the Remarketing Closing Date of the representations and warranties of the
Company included and incorporated by reference herein and the performance by
the Company of its obligations under the Remarketing Agreement and this
Agreement as and when required hereby and thereby). In addition, anything
herein or in the Remarketing Agreement to the contrary notwithstanding, the
Remarketing Agreement and this Agreement may be terminated by the Remarketing
Agent, by notice to the Company at any time prior to the time of settlement on
the Remarketing Closing Date, if any of the events or conditions set forth in
Section 8 of the Underwriting Agreement, as modified by Section 3(b) hereof,
shall have occurred or shall exist.

         8. Indemnity and Contribution. Anything herein to the contrary
notwithstanding, the Remarketing Agent shall be entitled to indemnity and
contribution on the terms and conditions set forth in the Remarketing
Agreement.

                                      4

<PAGE>

         If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Company and the Remarketing Agent.

                            Very truly yours,

                            KEYSPAN CORPORATION

                            By:______________________________________________
                               Name:
                               Title:

CONFIRMED AND ACCEPTED:

J.P. MORGAN SECURITIES INC.

By: ____________________________________
    Authorized Signatory

[Add other Remarketing Agents, if any]

JPMORGAN CHASE BANK,
not individually but solely as Purchase
Contract Agent and as attorney-in-fact for
the Holders of the Purchase Contracts

By: ____________________________________
    Name:
    Title:

<PAGE>

                                  SCHEDULE I

        Notes subject to the remarketing: Notes due 2008 of the Company (the
"Notes").

        Purchase Contract Agreement, dated as of May 6, 2002 (the "Purchase
Contract Agreement") by and between KeySpan Corporation, a New York
corporation, and JPMorgan Chase Bank, a New York banking corporation, as
Purchase Contract Agent and as attorney-in-fact for the Holders of the
Purchase Contracts.

        Pledge Agreement dated as of May 6, 2002 (the "Pledge Agreement") by
and between KeySpan Corporation, a New York corporation, JPMorgan Chase Bank,
a New York banking corporation, as Purchase Contract Agent and The Bank of New
York, a New York banking corporation, as Collateral Agent, Custodial Agent and
Securities Intermediary.

        Indenture dated as of November 1, 2000 (the "Base Indenture") by and
between KeySpan Corporation, a New York corporation, and JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank), as trustee.

        Second Supplemental Indenture, dated as of May 6, 2002 (the
"Supplemental Indenture" and, together with the Base Indenture, the
"Indenture") by and between KeySpan Corporation, a New York corporation, and
JPMorgan Chase Bank, as trustee.

        Aggregate Principal Amount of Notes: $ ____________

        Underwriting Agreement, dated April 30, 2002 (the "Underwriting
Agreement") among KeySpan Corporation and J.P. Morgan Securities Inc. and the
other underwriters named therein.

        Remarketing Closing Date, Time and Location:__________________

        Other Provisions: [other provisions to be agreed between the Remarketing
Agent and the Company as set forth in Section 3(a) and Section 7]

<PAGE>

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