Document:

bankamendment021208.htm

    Execution
Version

    

    SECOND AMENDMENT TO CREDIT
AGREEMENT

    

    THIS
SECOND AMENDMENT TO CREDIT AGREEMENT, dated as of February 12, 2008 (this “Amendment”), is made
by and among JACO ELECTRONICS, INC., a New York corporation (“Jaco”), INTERFACE
ELECTRONICS CORP., a Massachusetts corporation (“Interface” and,
together with Jaco, collectively, the “Borrowers”), THE CIT
GROUP/BUSINESS CREDIT, INC., a New York corporation, as a Lender, and BANK OF
AMERICA, N.A., as a Lender.

    

    RECITALS:

    

    A.           The
Borrowers, Agent and Lenders are parties to that certain Credit Agreement, dated
as of December 22, 2006 (as amended, modified, restated or supplemented prior to
the date hereof, the “Existing Credit
Agreement”), pursuant to which, among other things, the Lenders extended
to the Borrowers a revolving credit.

    

    B.           The
Borrowers have requested that the Existing Credit Agreement be
amended.

    

    C.           The
Lenders party hereto have agreed to such request, upon the terms and subject to
the conditions and limitations set forth herein, and, to accomplish the
foregoing, the Borrowers and the Lenders party hereto have agreed to execute
this Amendment to the Existing Credit Agreement (as so amended, and as further
amended, modified, restated or supplemented from time to time after the date
hereof, the “Credit
Agreement”).

    

    D.           All
capitalized terms used herein without definition shall have the meanings
ascribed to such terms in the Existing Credit Agreement, unless otherwise
defined herein.

    

    AGREEMENTS:

    

    Accordingly,
in consideration of the premises and the mutual covenants contained herein, and
for other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

    

    ARTICLE
I

    

    AMENDMENTS

    

    1.1 Amendment to Article
I.  The definition of “Fixed Charge Coverage Ratio” in Section
1.01 of the Existing Credit Agreement is hereby amended by inserting the
following proviso at the end thereof:

     

    “;
provided that for any applicable period of determination, beginning with the
four Fiscal Quarter period ended December 31, 2007, the write-offs in connection
with the sale by the Borrowers of Nexus Custom Electronics, Inc. and the
transactions related thereto shall be excluded from EBITDA solely for purposes
of calculating the Fixed Charge Coverage Ratio for such period”.

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
II

    

    REPRESENTATIONS AND
WARRANTIES

    

    The
Borrowers hereby represent and warrant to the Lenders party hereto as
follows:

    

    2.1            Compliance with Credit
Agreement and Other Loan Documents.  After giving effect to
this Amendment, the Borrowers are in compliance with all of the terms and
provisions set forth in the Credit Agreement and in the other Loan Documents to
be observed or performed by the Borrowers.

    

    2.2            Representations in Credit
Agreement and Other Loan Documents.  The representations and
warranties of the Borrowers set forth in the Credit Agreement and the other Loan
Documents are true and correct in all material respects.

    

    2.3            No Event of
Default.  No Default or Event of Default exists under the
Credit Agreement and the other Loan Documents, except as have been previously
waived by the Lenders.

    

    2.4           Material Adverse
Change.  Since June 30, 2006, there has been no change in the
business, assets, operations or financial condition of the Parent and its
subsidiaries, taken as a whole, which could reasonably be expected to have a
Material Adverse Effect.

    

    2.5           Authority.  The
execution and delivery by each Borrower of this Amendment and the performance by
each Borrower of its agreements and obligations under this Amendment and the
Credit Agreement (i) are within the corporate authority of such Borrower, (ii)
have been duly authorized by all necessary corporate action of such Borrower,
(iii) do not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which such Borrower is subject
or any judgment, order, writ, injunction, license or permit applicable to such
Borrower and (iv) do not conflict with the terms of any provision of the
corporate charter or by-laws of such Borrower, or any material agreement or
other material instrument binding upon such Borrower.

    

    2.6           Binding
Obligation.  This Amendment and the other Loan Documents
constitute the legal, valid and binding obligations of each Borrower,
enforceable against such Borrower in accordance with their respective terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors’ rights generally or by
equitable principles relating to enforceability.

    

    2.7           Corporate
Documents.  The articles of incorporation or other charter
document and the bylaws of each Borrower have not been amended or modified since
the Effective Date.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE
IIII

    

    AFFIRMATION AND
ACKNOWLEDGEMENT

    

    Each
Borrower hereby ratifies and confirms all of its Obligations and each Loan
Document and hereby affirms its absolute and unconditional promise to pay all
Obligations under the Credit Agreement.  Each Borrower hereby confirms
that the Obligations under the Credit Agreement are and remain secured pursuant
to the Loan Documents and the Liens granted thereunder as security for the
Obligations are and shall remain in full force and effect.

    

    ARTICLE
IV

    

    CONDITIONS
PRECEDENT

    

    This
Amendment shall become effective and be deemed effective as of the date hereof
(the “Second Amendment
Effective Date”) upon the satisfaction by the Borrowers or waiver by the
Agent of the following conditions precedent:

    

    (a)           Receipt
by Agent of this Amendment, duly executed by the Borrowers and Required
Lenders.

    

    (b)           Each
of the representations and warranties of the Borrowers set forth in this
Amendment shall be true and correct on and as of the date hereof as if made on
and as of such date.

    

    (c)           Receipt
by Agent, in consideration of the preparation of this Amendment by Agent’s
in-house legal department, of a documentation fee of $500.  Such fee
shall be due and payable in full on the date hereof and may, at Agent’s option,
be charged to the Borrowers’ account on the due date thereof.

    

    (c)           
Receipt by Agent of such other documents, instruments, and agreements as Agent
and its counsel may reasonably request.

    

    

    ARTICLE
V

    

    MISCELLANEOUS

    

    5.1           Full Force and
Effect.  As expressly amended hereby, the Credit Agreement
shall continue in full force and effect in accordance with the provisions
thereof.  As used in the Credit Agreement, “hereinafter”, “hereto”,
“hereof” or words of similar import, shall, unless the context otherwise
requires, mean the Credit Agreement as amended by this Amendment.

    

    5.2           Applicable
Law.  This Amendment shall be governed by and construed in
accordance with the internal laws and judicial decisions of the State of New
York.

    

    5.3           Counterparts.  This
Amendment may be executed in one or more counterparts, each of which shall
constitute an original, but all of which when taken together shall constitute
but one and the same instrument.  Delivery of an executed counterpart
by facsimile or other electronic transmission shall be effective as delivery of
a manually executed counterpart.

    

    5.4           Expenses.  The
Borrowers shall reimburse Agent for all reasonable legal fees (including fees
for the use of Agent’s in-house counsel) and expenses, all recordation, filing,
and other fees and expenses incurred by Agent in connection with the
preparation, negotiation, execution and delivery of this Amendment and all other
agreements and documents or contemplated hereby.

    

    5.5           Headings.  The
headings in this Amendment are for the purpose of reference only and shall not
affect the construction of this Amendment.

    

    5.6           Waiver of Jury
Trial.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
BORROWERS AND LENDERS PARTY HERETO EACH WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED
TO THIS AMENDMENT, THE CREDIT AGREEMENT OR THE OTHER LOAN
DOCUMENTS.

    

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    IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their respective proper and duly authorized officers
as of the day and year first above written.

    

    

    
      	
               
      

            	
              JACO
      ELECTRONICS, INC.

            

    

    

    By: /s/ Jeffery D.
Gash                                                                

    

    Name:
Jeffrey D.
Gash                                                                

    

    Title:
CFO                                                                

    

    
      	
               
      

            	
              INTERFACE
      ELECTRONICS CORP.

            

    

    

    By: /s/ Jeffery D.
Gash                                                                

    

    Name:
Jeffrey D.
Gash                                                                

    

    Title:
CFO                                                                

    

    

    THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender

    

    By:           /s/ Andrew
Hausspiegel                                                                

    

    Name:       Andrew
Hausspiegel                                                                

    

    Title:         Vice
President                                                                

    

    

    
      	
               
      

            	
              BANK OF AMERICA, N.A.,
      as a Lender

            

    

    

    By: /s/ Robert
Mahoney                                                                

    

    Name:
Robert
Mahoney                                                                

    

    Title:
Senior Vice
Presidentex10_1.htm

    
      

    

    REMARKETING
      AGREEMENT

     

    February
      8, 2008

     

    Lehman
      Brothers Inc.

     

    745
      Seventh Avenue

     

    New
      York,
      NY 10019

     

    Ladies
      and Gentlemen:

     

    This
      Agreement is dated as of February 8, 2008 (this “Agreement”)
      among Southern Union Company, a Delaware corporation (the
“Company”), Lehman Brothers Inc. (the “Remarketing
      Agent”), and The Bank of New York Trust Company, N.A., as successor to
      JPMorgan Chase Bank, N.A., 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 and
      Pledge Agreement referred to below).

     

    Section
      1.  Definitions.

     

    (a)        Capitalized
      terms used and not defined in this Agreement shall have the meanings set forth
      in the Purchase Contract and Pledge Agreement, dated as of February 11, 2005,
      among the Company, the Purchase Contract Agent, and The Bank of New York Trust
      Company, N.A., as successor to JPMorgan Chase Bank, as Collateral Agent,
      Custodial Agent and Securities Intermediary, as amended from time to time (the
      “Purchase Contract and Pledge Agreement”) or the Indenture,
      dated as of January 31, 1994, between the Company and The Bank of New York
      Trust
      Company, N.A., as successor to JPMorgan Chase Bank, N.A., as the Indenture
      Trustee, as supplemented by the Supplemental Indenture No. 2 dated as of
      February 11, 2005 and to be further supplemented by Supplemental Indenture
      No.
      4, dated as of February 19, 2008, pursuant to which the Senior Notes were
      issued (as so supplemented by Supplemental Indenture No. 2 and Supplemental
      Indenture No. 4, the “Indenture”).

     

    (b)        As
      used in this Agreement, the following terms have the following
      meanings:

     

    “Base
      Prospectus” means the prospectus included in the Registration
      Statement, including all documents incorporated by reference therein as of
      the
      date of this Agreement.

     

    “Final
      Term Sheet” means the final term sheet, substantially in the form of
      Schedule I.

     

    “Issuer
      Free Writing Prospectus” means any “issuer free writing prospectus,” as
      defined in Rule 433 of the 1933 Act Regulations (“Rule 433”),
      relating to the Remarketing or the Remarketed Senior Notes that (i) is required
      to be filed with the Commission by the Company, (ii) is a “road show that is a
      written communication” within the meaning of Rule 433(d)(8)(i), whether or not
      required to be filed with the Commission or (iii) is exempt from filing pursuant
      to Rule 433(d)(5)(i) because it contains a description of the Remarketing or
      the
      Remarketed Senior Notes that does not reflect the final terms, in each case
      in
      the form filed or

     

    
      
              

                  
      
      

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    required
      to be filed with the Commission or, if not required to be filed, in the form
      retained in the Company’s records pursuant to Rule 433(g).

     

    “Preliminary
      Prospectus” means the Base Prospectus, as supplemented by the
      preliminary prospectus supplement dated February 8, 2008 used in connection
      with
      the Remarketing, including the documents incorporated by reference therein
      as of
      the date of such preliminary prospectus supplement; and any reference to any
      amendment or supplement to such Preliminary Prospectus shall be deemed to refer
      to and include any documents filed after the date of such Preliminary
      Prospectus, under the Securities and Exchange Act of 1934, as amended (the
      “Exchange Act”), and incorporated by reference in such
      Preliminary Prospectus.

     

    “Prospectus”
      means the Base Prospectus, as supplemented by the definitive prospectus
      supplement specifically relating to the Remarketed Senior Notes, in the form
      filed with the Commission pursuant to Rule 424(b), including the documents
      incorporated by reference therein as of the date of such Prospectus; and any
      reference to any amendment or supplement to such Prospectus shall be deemed
      to
      refer to and include any documents filed after the date of such Prospectus,
      under the Exchange Act, and incorporated by reference in such
      Prospectus.

     

    “Registration
      Statement” means registration statement no. 333-137998 under the
      Securities Act of 1933, as amended (the “Securities Act”)
      prepared by the Company pursuant to Section 5 hereunder covering,
interalia, the Remarketing of the Remarketed Senior Notes,
      including all exhibits thereto and the documents incorporated by reference
      in
      the prospectus contained in such registration statement, and any post-effective
      amendments thereto.

     

    “Remarketed
      Senior Notes” means the Pledged Senior Notes and the Separate Senior
      Notes, if any, subject to Remarketing as identified to the Remarketing Agent
      by
      the Purchase Contract Agent and the Custodial Agent, respectively, promptly
      after 11:00 a.m., New York City time, on the Business Day immediately preceding
      the first Remarketing Date of the applicable Three-Day Remarketing Period,
      and
      shall include: (a) the Senior Notes of the Holders of Corporate Units who have
      not notified the Purchase Contract Agent prior to 5:00 p.m., New York City
      time,
      on the seventh Business Day immediately preceding the Purchase Contract
      Settlement Date of their intention to effect a Cash Settlement of the related
      Purchase Contracts pursuant to the terms of the Purchase Contract and Pledge
      Agreement or who have so notified the Purchase Contract Agent but failed to
      make
      the required cash payment prior to 11:00 a.m., New York City time, on the sixth
      Business Day immediately preceding the Purchase Contract Settlement Date
      pursuant to the terms of the Purchase Contract and Pledge Agreement, and (b)
      the
      Separate Senior Notes of the holders of Separate Senior Notes, if any, who
      have
      elected to have their Separate Senior Notes be remarketed in such Remarketing
      pursuant to the terms of the Purchase Contract and Pledge
      Agreement.

     

    “Remarketing”
      means the remarketing of the Remarketed Senior Notes pursuant to this
      Remarketing Agreement.

     

    “Senior
      Notes” means the 4.375% Senior Notes due February 16, 2010 of the
      Company issued under the Indenture.

     

    
      
              

                            
                          
      

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    “Settlement
      Date” means, following a Successful Remarketing, with respect to
      a  Remarketing during the Final Three-Day Remarketing Period, February
      19, 2008.

     

    “Time
      of Sale” means 1:30 p.m. New York City time on February 8, 2008 or such
      other time as the Company and the Remarketing Agent may agree to in
      writing.

     

    “Time
      of Sale Information” means the Preliminary Prospectus and the
      information included in Schedule I, at the Time of Sale, including all documents
      incorporated therein by reference, whether any such incorporated document is
      filed before or after the document into which it is incorporated, so long as
      the
      incorporated document is filed before the Time of Sale.

     

    “Transaction
      Documents” means this Agreement, the Purchase Contract and Pledge
      Agreement and the Indenture, in each case as amended or supplemented from time
      to time.

     

    Section
      2.Appointment and Obligations of the Remarketing
      Agent.

     

    (a)        The
      Company hereby appoints the Remarketing Agent as the exclusive Remarketing
      Agent
      with respect to the Remarketing for the purpose of (i) Remarketing the Senior
      Notes on behalf of the holders thereof, (ii) determining, in consultation
      with the Company, in the manner provided for herein and in the Purchase Contract
      and Pledge Agreement and the Indenture, the Reset Rate for the Senior Notes,
      and
      (iii) performing such other duties as are assigned to the Remarketing Agent
      in
      the Transaction Documents.

     

    (b)        Pursuant
      to this Agreement, the Remarketing Agent agrees, unless a Tax Event Redemption
      has occurred prior to such date and subject to the terms and conditions set
      forth herein, to use its reasonable efforts to remarket, (i) on each Remarketing
      Date during the Three-Day Remarketing Period selected by the Company, if any,
      during the Period for Early Remarketing and (ii) on each Remarketing Date during
      the Final Three-Day Remarketing Period if no Successful Remarketing has occurred
      prior to the Final Three-Day Remarketing Period, in each case, in
      accordance with the provisions of the Senior Notes and the Indenture, until
      the
      Senior Notes have been successfully remarketed on a Remarketing Date, the
      Collateral Agent or the Custodial Agent shall have notified the Remarketing
      Agent that the Senior Notes have been tendered for, or otherwise are to be
      included in, the Remarketing, at a price per $1,000 principal amount of Senior
      Notes such that the aggregate price at which such Senior Notes are being
      remarketed will equal approximately (i) if the related Reset Date is not the
      Purchase Contract Settlement Date, the Remarketing Price, or (ii) if the related
      Reset Date is the Purchase Contract Settlement Date, the Contract Settlement
      Price.  Notwithstanding the preceding sentence, the Remarketing Agent
      shall not remarket any Senior Notes for a price less than the price (the
“Minimum Price”) necessary for the aggregate principal amount
      of the Senior Notes being remarketed to have an aggregate price (i) if the
      proposed Reset Date is not the Purchase Contract Settlement Date, equal to
      100%
      of the sum of the Remarketing Treasury Portfolio Purchase Price and the Separate
      Senior Notes Purchase Price, or (ii) if the proposed Reset Date is the Purchase
      Contract Settlement Date, equal to 100% of the aggregate principal amount of
      such Remarketed Senior Notes.  The Remarketing Agent shall not be
      obligated to remarket any Senior Notes if a condition precedent set forth herein
      or in this Agreement to such Remarketing is not fulfilled or if the Remarketing
      of such Senior Notes would violate applicable law.

     

    
      
              

                            
                          
      

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    (c)        In
      connection with each Remarketing, the Remarketing Agent shall determine, in
      its
      sole discretion, the rate per annum, rounded to the nearest one-thousandth
      (0.001) of one percent per annum, that the Senior Notes should bear (the
“Reset Rate”) in order for the Remarketed Senior Notes to have
      an aggregate market value equal to the Final Remarketing Price or the Contract
      Settlement Price, as the case may be, and that in the sole reasonable discretion
      of the Remarketing Agent will enable it to remarket all of the Remarketed Senior
      Notes at the Remarketing Price or Contract Settlement Price, as the case may
      be,
      in such Remarketing, provided that such rate shall not exceed the
      maximum interest rate permitted by law.

     

    (d)        In
      the event of a Failed Remarketing or if no Senior Notes are included in
      Corporate Units, and none of the holders of the Separate Senior Notes elect
      to
      have Senior Notes be remarketed in such Remarketing, the applicable interest
      rate on the Senior Notes will not be reset and will continue to be the Interest
      Rate set forth in the Indenture, as supplemented from time to time.

     

    (e)        If,
      by 4:00 p.m., New York City time, on the last Remarketing Date of any Three-Day
      Remarketing Period, the Remarketing Agent is unable to remarket all of the
      Remarketed Senior Notes at or greater than the Minimum Price, pursuant to the
      terms and conditions hereof, a Failed Remarketing shall be deemed to have
      occurred, and the Remarketing Agent shall so advise, by telephone, the
      Depositary, the Purchase Contract Agent and the Company.  Promptly
      following any Failed Remarketing, the Remarketing Agent shall return, no later
      than the Business Day immediately following the end of such Three-Day
      Remarketing Period, the Separate Senior Notes submitted for Remarketing, if
      any,
      to the Custodial Agent for distribution to the appropriate holders.

     

    (f)        In
      the event of a Successful Remarketing, by approximately 4:30 p.m., New York
      City
      time, on the applicable Successful Remarketing Date, the Remarketing Agent
      shall
      advise, by telephone:

     

    (i)                 the
      Collateral Agent, the Custodial Agent, the Trustee, the Clearing Agency, the
      Depositary, the Purchase Contract Agent and the Company of the Reset Rate
      determined by the Remarketing Agent in such Remarketing, the Subsequent Interest
      Payment Dates and the related Regular Record Dates, any extension by the Company
      of the Stated Maturity of the Remarketed Senior Notes and the aggregate
      principal amount of Remarketed Senior Notes sold in such
      Remarketing;

     

    (ii)                 each
      purchaser (or the Depositary Participant thereof) of Remarketed Senior Notes
      of
      the Reset Rate, the Subsequent Interest Payment Dates and the related Regular
      Record Dates, the Stated Maturity of the Remarketed Senior Notes and the
      aggregate principal amount of Remarketed Senior Notes such purchaser is to
      purchase and the extended maturity date, if applicable; and

     

    (iii)                 each
      such purchaser to give instructions to its Depositary Participant to pay the
      purchase price on the Reset Date in same day funds against delivery of the
      Remarketed Senior Notes purchased through the Depositary’s normal
      procedures.

     

    
      
              

                            
                          
      

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    The
      Remarketing Agent shall also, if required by the Securities Act or the rules
      and
      regulations promulgated thereunder, deliver to each purchaser a Prospectus
      in
      connection with the Remarketing.

     

    (g)        After
      deducting the Remarketing Fee specified in Section
      4 below, the Proceeds from a Successful Remarketing (i) with respect to
      the
      Senior Notes that are components of the Corporate Units, shall be paid to the
      Collateral Agent in accordance with Section 5.02 of the Purchase Contract and
      Pledge Agreement and (ii) with respect to the Separate Senior Notes, shall
      be
      paid to the Custodial Agent for payment to the holders of such Separate Senior
      Notes in accordance with Section 5.02 of the Purchase Contract and Pledge
      Agreement.

     

    (h)        The
      right of each holder of Separate Senior Notes or Corporate Units to have Senior
      Notes remarketed and sold on any Remarketing Date shall be subject to the
      conditions that (i) the Remarketing Agent conducts a Remarketing pursuant to
      the
      terms of this Agreement, (ii) a Tax Event Redemption has not occurred prior
      to
      such Remarketing Date, (iii) the Remarketing Agent is able to find a
      purchaser or purchasers for Remarketed Senior Notes at or greater than the
      Minimum Price, and (iv) such purchaser or purchasers deliver the purchase price
      therefor to the Remarketing Agent as and when required.

     

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

     

    Section
      3.  Representations and Warranties of the
      Company. The Company represents and warrants (i) as of the Time of Sale and
      (ii) on and as of the Settlement Date, that:

     

    (a)        Each
      of the representations and warranties of the Company as set forth in Section
      3
      (except for paragraphs (a), (b), (c), (d), (e), (g), (i), (j), (k), (m), (n),
      (p), (r), (s), (t), (v), (pp) and (qq) of such section) of the Underwriting
      Agreement dated as of February 7, 2005 relating to the issuance of Equity Units
      by the Company (the “Underwriting Agreement”) among the Company
      and the Underwriters identified in Schedule 1 thereto, is true and correct
      as if
      made on each of the dates specified above; provided that for purposes
      of this Section 3(a), (i) any reference in such sections of the Underwriting
      Agreement to the “Underwriter” or “Underwriters” or the “Representative” or
“Representatives” shall be deemed to refer to the Remarketing
      Agent,  (ii) the “Securities” shall be deemed to refer to the
      Remarketed Senior Notes, (iii) the “Registration Statement”, the “Prospectus” or
      the “Preliminary Prospectus” shall be deemed to refer to such terms as defined
      herein and references to the “Prospectus” shall be deemed to include the Time of
      Sale Information as defined herein, (iv) the “Closing Date” shall be deemed
      to refer to the Settlement Date, (v) “this Agreement”, the “Underwriting
      Agreement”, “hereof”, “herein” and all references of similar import, shall be
      deemed to mean and refer to this Remarketing Agreement and (vi) “the date
      hereof”, “the date of this Agreement” and all similar references shall be deemed
      to refer to the date of this Remarketing Agreement.

     

    
      
              

                            
                          
      

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    (b)        The
      Registration Statement has been declared effective by the Commission or became
      effective upon filing; and no stop order preventing or suspending the use of
      the
      Registration Statement or the Time of Sale Information has been issued and
      no
      proceeding for that purpose or pursuant to Section 8A of the Securities Act
      has
      been initiated or threatened by the Commission.

     

    (c)        The
      documents incorporated by reference in the Time of Sale Information and the
      Prospectus, if any, when they were filed with the Commission conformed in all
      material respects to the requirements of the Exchange Act and the rules and
      regulations of the Commission thereunder and the Trust Indenture Act of 1939,
      as
      amended, and the rules and regulations of the Commission thereunder (the
“Trust Indenture Act”), as applicable, as modified by the
      letter from the Commission dated December 21, 2004 and none of such documents
      contained an untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not misleading; and
      any further documents so filed and incorporated by reference in the Time of
      Sale
      Information or the Prospectus or any further amendment or supplement thereto,
      when such documents are filed with the Commission, will conform in all material
      respects to the requirements of the Exchange Act and the rules and regulations
      of the Commission thereunder or the Trust Indenture Act, as applicable, and
      will
      not contain an untrue statement of a material fact or omit to state a material
      fact required to be stated therein or necessary to make the statements therein,
      in light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall
      not apply to any statements or omissions made in reliance upon and in conformity
      with information relating to the Remarketing Agent furnished in writing to
      the
      Company by the Remarketing Agent expressly for use in the Time of Sale
      Information or the Prospectus.

     

    (d)        On
      the effective date of the Registration Statement, the Registration Statement
      complied (and the Prospectus and any further amendments or supplements to the
      Registration Statement or the Prospectus, when they become effective or are
      filed with the Commission, as the case may be, will comply in all material
      respects with the Securities Act and the rules and regulations of the Commission
      thereunder and the Trust Indenture Act, and on the date hereof did not contain
      any untrue statement of a material fact or omit to state a material fact
      required to be stated therein or necessary in order to make the statements
      therein not misleading; and as of the date hereof, the Remarketing Date, the
      Time of Sale and the Settlement Date, the Registration Statement, the Time
      of
      Sale Information and the Prospectus and any Issuer Free Writing Prospectus
      when
      considered together with the Time of Sale Information will comply in all
      material respects to the requirements of the Securities Act, and such documents
      will not contain any untrue statement of a material fact or omit to state a
      material fact required to be stated therein or necessary in order to make the
      statements therein, in the light of the circumstances under which they were
      made, not misleading; provided that no representation and warranty is
      made as to any statement of eligibility on Form T-1 filed or incorporated by
      reference as part of the Registration Statement, the Time of Sale Information,
      the Prospectus or any Issuer Free Writing Prospectus, or as to information
      relating to the Remarketing Agent contained in or omitted from the Registration
      Statement, the Time of Sale Information, the Prospectusor any Issuer Free
      Writing Prospectus in reliance upon and in conformity with written information
      furnished to the Company by the Remarketing Agent.

     

    
      
              

                            
                          
      

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    (e)        The
      financial statements, together with the related schedules and notes, of the
      Company and its consolidated subsidiaries, and the financial statements,
      together with the related schedules and notes, of Citrus Corp (“Citrus”) and its
      consolidated subsidiaries included or incorporated by reference in the
      Registration Statement, the Prospectus and the Time of Sale Information present
      fairly the financial position of the Company and its consolidated subsidiaries,
      and Citrus and its consolidated subsidiaries at the dates indicated and the
      statements of operations, statement of stockholders’ equity and comprehensive
      income, statement of cash flows of the Company and its consolidated
      subsidiaries, and Citrus and its consolidated subsidiaries for the periods
      specified; said financial statements have been prepared in conformity with
      generally accepted accounting principles in the United States (“GAAP”)
      applied on a consistent basis throughout the periods involved.  The
      supporting schedules, if any, included or incorporated by reference in the
      Registration Statement, the Final Prospectus and the Time of Sale Information
      present fairly in accordance with GAAP the information required to be stated
      therein.

     

    (f)        Any
      Issuer Free Writing Prospectus, as of its issue date and at all subsequent
      times
      through the completion of the Remarketing or until any earlier date that the
      Company notified or notifies the Remarketing Agent as described in Section
      5(f),
      did not, does not and will not include any information that conflicted,
      conflicts or will conflict with the information contained in the Registration
      Statement or the Prospectus, including any document incorporated by reference
      therein and any preliminary or other prospectus deemed to be a part thereof
      that
      has not been superseded or modified.

     

    (g)        This
      Agreement has been duly authorized, executed and delivered by the
      Company.

     

    (h)        Except
      as disclosed in or contemplated by the Registration Statement, the Time of
      Sale
      Information and the Prospectus, there has not been any material adverse change
      in, or any adverse development which materially affects, the business,
      properties, management, financial condition, stockholders’ equity, results of
      operations or prospects of the Company and its subsidiaries taken as a whole
      from the dates as of which information is given in the Registration Statement,
      the Time of Sale Information and the Prospectus.

     

    (i)        The
      Company and its consolidated subsidiaries maintain adequate internal control
      over financial reporting to provide reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles, which includes those policies and procedures that: (1) pertain
      to
      the maintenance of records that in reasonable detail accurately and fairly
      reflect the transactions and dispositions of the assets of the Company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Company are
      being made only in accordance with authorizations of management and directors
      of
      the Company; and (3) provide reasonable assurance regarding the prevention
      or
      timely detection of unauthorized acquisition, use or disposition of the
      Company’s assets that could have a material effect on the financial
      statements; provided, however, that this representation and warranty
      shall not apply to entities acquired after the end of the Company’s most
      recently completed fiscal year.  Except as described in the Time of
      Sale Information or the Prospectus, since the end of the Company’s most recent
      audited fiscal year, there has been (I) no material

     

    
      
              

                            
                          
      

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    weakness
      identified by management, or by the Company’s auditors and communicated to
      management, in the Company’s internal control over financial reporting (whether
      or not remediated) and (II) no change in the Company’s internal control over
      financial reporting that has materially affected, or is reasonably likely to
      materially affect, the Company’s internal control over financial reporting;
provided, however, that this representation and warranty shall not
      apply to entities acquired after the end of the Company’s most recently
      completed fiscal year.

     

    (j)        The
      Company and its consolidated subsidiaries employ disclosure controls and
      procedures that are designed to ensure that information required to be disclosed
      by the Company in the reports that it files or submits under the 1934 Act is
      recorded, processed, summarized and reported, within the time periods specified
      in the Commission’s rules and forms, and is accumulated and communicated to the
      Company’s management, including its principal executive and principal financial
      officer or officers, as appropriate, to allow timely decisions regarding
      disclosure.

     

    (k)        Authorization
      of the Indenture.  The Indenture has been duly authorized by the
      Company and qualified under the Trust Indenture Act and, when
      the Supplemental Indenture No. 4 is executed and delivered by the Company
      and the Trustee (and assuming due authorization, execution and delivery of
      the
      Indenture by the Trustee), the Indenture will constitute a legally valid and
      binding agreement of the Company enforceable against the Company in accordance
      with its terms, except as enforcement thereof may be limited by bankruptcy,
      insolvency, reorganization, moratorium or other similar laws relating to or
      affecting the rights and remedies of creditors or by general equitable
      principles.  The Indenture conforms in all material respects to the
      description thereof contained in the Prospectus.

     

    (l)        No
      Conflicts. The execution, delivery and performance by the Company
      of the Indenture and this Agreement and the consummation of the transactions
      herein and therein contemplated will not (i) conflict with or result in a breach
      or violation of any of the terms or provisions of, or constitute a default
      under, or result in the creation or imposition of any lien, charge or
      encumbrance upon any property or assets of the Company or any of its
      subsidiaries or Citrus or any of its subsidiaries pursuant to, any indenture,
      mortgage, deed of trust, loan agreement or other agreement or instrument to
      which the Company or any of its subsidiaries or Citrus or any of its
      subsidiaries is a party or by which the Company or any of its subsidiaries
      or
      Citrus or any of its subsidiaries is bound or to which any of the property
      or
      assets of the Company or any of its subsidiaries or Citrus or any of its
      subsidiaries is subject, (ii) result in any violation of the provisions of
      the
      charter or by-laws or similar organizational documents of the Company or any
      of
      its subsidiaries or Citrus or any of its subsidiaries or (iii) result in the
      violation of any law or statute or any judgment, order, rule  or
      regulation of any court or arbitrator or governmental or regulatory
      authority.

     

    (m)                   No
      Consents Required.  No consent, approval, authorization,
      order, registration or qualification of or with any court or arbitrator or
      governmental or regulatory authority is required for the execution, delivery
      and
      performance by the Company of the Indenture and this Agreement and the
      consummation of the transactions herein and therein contemplated, except for
      the
      Orders described in paragraph (t) below, the registration of the Remarketed
      Senior Notes under the Securities Act and such consents, approvals,
      authorizations, orders and registrations or qualifications as may be required
      under applicable state securities laws in

     

    
      
              

                            
                          
      

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    connection
      with the purchase and distribution of the Remarketed Senior Notes by the
      Underwriters or which have already been obtained or made.

     

    (n)        Appropriate
      Orders Entered.  An
      appropriate order or orders (each, an “Order”) of each governmental authority or
      agency the consent of which was necessary for the Company duly and validly
      to issue and sell the Remarketed Senior Notes pursuant to this Agreement,
      including without limitation the Massachusetts Department of
      Telecommunications and Energy, has been entered, and each such Order is in
      full
      force and effect and has not been modified or repealed in any respect; no filing
      with, or approval, authorization, consent, license, registration, qualification,
      order or decree of, any court or governmental authority or agency, domestic
      or
      foreign, is necessary or required for the due authorization, execution and
      delivery by the Company of the Indenture and this Agreement and the consummation
      or for the performance by the Company of the transactions herein and therein
      contemplated, except (i) such as have been obtained under the Securities Act,
      (ii) as may be required to be obtained under state securities laws and (iii)
      as
      have been obtained pursuant to the Orders or any post closing notices as may
      be
      required by such Order.

     

    (o)        Independent
      Accountants.  PricewaterhouseCoopers LLP, who have
      certified certain financial statements of the Company and its
      subsidiaries, and Citrus and its subsidiaries, is an independent registered
      public accounting firm with respect to the Company and its
      subsidiaries, and Citrus and its subsidiaries, within the meaning of the
      Securities Act and the applicable rules and regulations thereunder adopted
      by
      the SEC and the Public Accounting Oversight Board (United States)
      (PCAOB).

     

    (p)        Significant
      Subsidiaries.  All of the Company’s significant subsidiaries (as
      defined in Rule 1-02(w) of Regulation S-X) as of the date of this Agreement
      are
      included on Attachment I to Annex A hereto.

     

    (q)        Material
      Agreements.  The agreements and other documents filed as exhibits
      to the Company’s Annual Report on Form 10-K for the year ended December 31,
      2006 or as filed as an exhibit to any subsequent filing under the Exchange
      Act,
      constitute all of the outstanding material contracts of the Company and its
      subsidiaries taken as a whole required to be filed as exhibits under Item 601
      of
      Regulation S-K.

     

    Section
      4.  Fees. Upon a Successful
      Remarketing of the Senior Notes, the Remarketing Agent is entitled to a
      remarketing fee (the “Remarketing Fee”) equal to 25 basis points (0.25%) of the
      aggregate principal amount of the Remarketed Senior Notes. The Remarketing
      Agent
      may deduct for itself, the Remarketing Fee from the Proceeds of the Successful
      Remarketing to be remitted to the Collateral Agent and the Custodial Agent;
      provided, however, that under no circumstances may the Remarketing
      Agent deduct an amount greater than the excess of such Proceeds over the Minimum
      Price.

     

    Section
      5.  Covenants of the
      Company.  If and to the extent the Remarketed Senior Notes are
      required (in the view of counsel, which need not be in the form of a written
      opinion, for either the Remarketing Agent or the Company) to be registered
      under
      the Securities Act as in effect at the time of the Remarketing, the Company
      covenants and agrees as follows:

     

    
      
              

                            
                          
      

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    (a)           The
      Company shall prepare the Preliminary Prospectus and the Prospectus, in a form
      approved by the Remarketing Agent, and shall file any such Preliminary
      Prospectus and Prospectus with the Commission within the time periods required
      by the Securities Act and the rules and regulations thereunder.

     

    (b)        The
      Company shall prepare a Final Term Sheet and shall file such Final Term Sheet
      with the Commission in compliance with Rule 433(d) under the Securities Act
      prior to the close of business two business days after the Final Remarketing
      Date; provided that the Company shall furnish the Remarketing Agent
      with copies of any such Final Term Sheet a reasonable amount of time prior
      to
      such proposed filing and will not use or file any such document to which the
      Remarketing Agent or counsel to theRemarketing Agent shall reasonably
      object.

     

    (c)        The
      Company shall file promptly with the Commission any amendment to the
      Registration Statement, the Preliminary Prospectus, the Final Term Sheet or
      the
      Prospectus or any supplement to the Prospectus that may, in the reasonable
      judgment of the Company or the Remarketing Agent, be required by the Securities
      Act or requested by the Commission.

     

    (d)        The
      Company shall file promptly all reports and any definitive proxy or information
      statements required to be filed by the Company with the Commission pursuant
      to
      Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
      of
      the Prospectus and for so long as the delivery of a prospectus is required
      in
      connection with the offering or sale of the Remarketed Senior
      Notes.

     

    (e)        The
      Company shall advise the Remarketing Agent promptly, and confirm such advice
      in
      writing, (i) when any amendment to the Registration Statement has been filed
      or
      becomes effective, (ii) when any supplement to the Prospectus or any amendment
      to the Prospectus has been filed, (iii) of any request by the Commission for
      any
      amendment to the Registration Statement or any amendment or supplement to the
      Time of Sale Information or the Prospectus or the receipt of any comments from
      the Commission relating to the Registration Statement or any other request
      by
      the Commission for any additional information; (iv) of the issuance by the
      Commission of any order suspending the effectiveness of the Registration
      Statement or preventing or suspending the use of the Time of Sale Information
      or
      the Prospectus or the initiation or threatening of any proceeding for any such
      purpose; and the Company shall use its best efforts to prevent the issuance
      of
      any such order suspending the effectiveness of the Registration Statement or
      preventing or suspending the use of the Time of Sale Information or the
      Prospectus and, if any such order is issued, will obtain as soon as possible
      the
      withdrawal thereof.

     

    (f)        The
      Company shall furnish promptly to the Remarketing Agent such copies of the
      following documents as the Remarketing Agent shall reasonably
      request:  (A) conformed copies of the Registration Statement as
      originally filed with the Commission and each amendment thereto (in each case
      excluding exhibits); (B) the Preliminary Prospectus and any amended or
      supplemented Preliminary Prospectus, (C) the Prospectus and any amended or
      supplemented Prospectus; (D) the Final Term Sheet; (E) any issuer free writing
      prospectus referred to in Section 7; and (F) any document incorporated by
      reference in the Prospectus (excluding exhibits thereto); and, if at any time
      when delivery of a prospectus is required in connection with the

     

    
      
              

                            
                          
      

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    Remarketing,
      any event shall have occurred as a result of which the Time of Sale Information
      or the Prospectus as then amended or supplemented would include any untrue
      statement of a material fact or omit to state any material fact necessary in
      order to make the statements therein, in the light of the circumstances under
      which they were made when such Time of Sale Information or Prospectus is
      delivered, not misleading, or if for any other reason it shall be necessary
      during such same period to amend or supplement the Time of Sale Information
      or
      the Prospectus or to file under the Exchange Act any document incorporated
      by
      reference in the Prospectus in order to comply with the Securities Act or the
      Exchange Act, to notify the Remarketing Agent and, upon its request, to file
      such document and to prepare and furnish without charge to the Remarketing
      Agent
      and to any dealer in securities as many copies as the Remarketing Agent may
      from
      time to time reasonably request of an amended or supplemented Time of Sale
      Information or Prospectus that will correct such statement or omission or effect
      such compliance. If at any time following issuance of an Issuer Free Writing
      Prospectus there occurred or occurs an event or development as a result of
      which
      such Issuer Free Writing Prospectus conflicted or would conflict with the
      information contained in the Registration Statement or the Prospectus or any
      preliminary prospectus or included or would include an untrue statement of
      a
      material fact or omitted or would omit to state a material fact necessary in
      order to make the statements therein, in the light of the circumstances
      prevailing at that subsequent time, not misleading, the Company will promptly
      notify the Remarketing Agent and will promptly amend or supplement, at its
      own
      expense, such Issuer Free Writing Prospectus to eliminate or correct such
      conflict, untrue statement or omission.

     

    (g)        Prior
      to filing with the Commission (A) any amendment to the Registration Statement
      or
      supplement to the Prospectus or (B) any Prospectus pursuant to Rule 424 under
      the Securities Act, the Company shall furnish a copy thereof to the Remarketing
      Agent and counsel to the Remarketing Agent; and shall not file any such
      amendment or supplement that shall be reasonably disapproved by the Remarketing
      Agent promptly after reasonable notice.

     

    (h)        As
      soon as practicable, but in any event not later than eighteen months, after
      the
      effective date of the Registration Statement, the Company shall make “generally
      available to its security holders” an “earnings statement” of the Company and
      its subsidiaries (which need not be audited) complying with  Section
      11(a) of the Securities Act and the rules and regulations thereunder (including,
      at the option of the Company, Rule 158 under the Securities Act).  The
      terms “generally available to its security holders” and “earnings statement”
shall have the meanings set forth in Rule 158 under the Securities
      Act.

     

    (i)        The
      Company shall take such action as the Remarketing Agent may reasonably request
      in order to qualify the Remarketed Senior Notes for offer and sale under the
      securities or Blue Sky laws of such jurisdictions as the Remarketing Agent
      may
      reasonably request; provided that the Company shall not be required to
      (i) qualify as a foreign corporation or other entity or as a dealer in
      securities in any such jurisdiction where it would not otherwise be required
      to
      so qualify, (ii) file any general consent to service of process in any such
      jurisdiction or (iii) subject itself to taxation in any such jurisdiction if
      it
      is not otherwise so subject.

     

    (j)        The
      Company shall furnish the Remarketing Agent with such information and documents
      as the Remarketing Agent may reasonably request in connection with the
      transactions contemplated hereby, and to make reasonably available to the
      Remarketing Agent and any

     

    
      
              

                            
                          
      

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    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 to
      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.

     

    Section
      6.  Payment of Expenses. The Company agrees
      to pay (a) all costs incident to the preparation and printing of
      the Registration Statement, any Time of Sale Information, the Prospectus and
      any
      Permitted Free Writing Prospectus and any amendments or supplements thereto,
      (b)
      all costs of distributing the Registration Statement, any Time of Sale
      Information, the Prospectus and any Permitted Free Writing Prospectus and any
      amendments or supplements thereto, (c) any fees and expenses of qualifying
      the
      Remarketed Senior Notes under the securities laws of the several jurisdictions
      as provided in Section 5(i) and of preparing, printing and distributing a Blue
      Sky Memorandum, if any (including any related fees and expenses of counsel
      to
      the Remarketing Agent), (d) all other costs and expenses incident to the
      performance of the obligations of the Company hereunder and the Remarketing
      Agent hereunder, (e) the costs and expenses (including without limitation any
      damages or other amounts payable in connection with legal or contractual
      liability) associated with the reforming of any contracts for the offer relating
      to the Remarketing or the Remarketed Senior Notes made by the Remarketing Agent
      caused by a breach of the representation contained Section 5(e), and (f) the
      reasonable fees and expenses of counsel to the Remarketing Agent in connection
      with their duties hereunder.

     

    Section
      7. Free Writing Prospectuses.

     

    (a)        Subject
      to Section 5(b), the Company represents and agrees that, unless it obtains
      the
      prior consent of the Remarketing Agent and the Remarketing Agent
      represents and agrees that, unless it obtains the prior consent of the Company,
      it has not made and will not make any offer relating to the Remarketing or
      the
      Remarketed Senior Notes that would constitute an “issuer free writing
      prospectus” as defined in Rule 433 under the Securities Act, or that would
      otherwise constitute a “free writing prospectus” as defined in Rule 405 under
      the Securities Act, required to be filed with the Commission; provided
      however, that prior to the preparation of the Final Term Sheet in
      accordance with Section 5(b) of this Agreement, the Remarketing Agent is
      authorized to use preliminary terms of the Remarketed Senior Notes in
      communications conveying information relating to the Remarketing to
      investors.  Each of the Final Term Sheet and any such free writing
      prospectus consented to by the Company and the Remarketing Agent is referred
      to
      as a “Permitted Free Writing Prospectus”.

     

    (b)        The
      Company represents that it has treated or agrees that it will treat each
      Permitted Free Writing Prospectus as an “issuer free writing prospectus” as
      defined in Rule 433 under the Securities Act, and has complied and will comply
      with the requirements of Rule 433 applicable to any Permitted Free Writing
      Prospectus, including timely filing with the Commission where required,
      legending and record keeping.

     

    Section
      8.  Conditions to the Remarketing
      Agent’s Obligation.  The obligations of the
      Remarketing Agent hereunder shall be subject to the following
      conditions:

     

    
      
              

                            
                          
      

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    (a)           The
      representations and warranties of the Company contained or incorporated by
      reference herein shall be true and correct in all material respects on and
      as of
      the dates and times such representations and warranties are made as set forth
      in
      Section 3 hereof, and the statements of the Company and its officers made in
      any
      certificates delivered pursuant to this Agreement shall be true and correct
      on
      and as of the Settlement Date.

     

    (b)        (i)
      Trading generally shall not have been suspended or materially limited on the
      New
      York Stock Exchange, (ii) trading of any securities of the Company shall not
      have been materially suspended or limited on the New York Stock Exchange, (iii)
      a general moratorium on commercial banking activities in New York shall not
      have
      been declared by either Federal or New York State authorities, (iv) no material
      disruption has occurred in commercial banking or securities settlement or
      clearance services in the United States or (v) there shall not have occurred
      a
      material adverse change in the financial markets, any outbreak or escalation
      of
      hostilities involving the United States or the declaration by the United States
      of a national emergency or war or other calamity or crisis, if the effect of
      any
      such event specified in this clause (b) in the judgment of the Remarketing
      Agent
      makes it impracticable or inadvisable to proceed with the Remarketing or the
      delivery of the Remarketed Senior Notes on the terms and in the manner
      contemplated in the Transaction Documents.

     

    (c)        Subsequent
      to the execution and delivery of this Agreement, no event or condition of a
      type
      described in Section 3(h) above shall have occurred or shall exist, which event
      or condition is not described in the Prospectus (excluding any amendment or
      supplement thereto) and the effect of which in the judgment of the Remarketing
      Agent makes it impracticable or inadvisable to proceed with the offering, sale
      or delivery of the Remarketing Senior Notes on the terms and in the manner
      contemplated by this Agreement and the Prospectus.

     

    (d)        The
      Preliminary Prospectus, the Prospectus, the Final Term Sheet and any Issuer
      Free
      Riding Prospectus shall have been timely filed with the Commission; no stop
      order preventing or suspending the use of the Registration Statement or of
      any
      part thereof or any Time of Sale Information shall have been issued and no
      proceeding for that purpose or pursuant to Section 8A of the Securities Act
      shall have been initiated or threatened by the Commission; and any request
      of
      the Commission for inclusion of additional information in the Registration
      Statement, the Time of Sale Information or the Prospectus or otherwise shall
      have been complied with.

     

    (e)        The
      Company shall have furnished to the Remarketing Agent a certificate, dated
      the
      Settlement Date, of the chief financial officer or chief accounting officer
      of
      the Company and one additional senior executive officer of the Company who
      is
      satisfactory to the Remarketing Agent stating that: (1) to the knowledge of
      such
      officers, no order preventing or suspending the use of the Registration
      Statement or any Time of Sale Information or prohibiting the sale of the
      Remarketed Senior Notes is in effect, and no proceedings for such purpose or
      pursuant to Section 8A of the Securities Act are pending before or threatened
      by
      the Commission; (2) the representations and warranties of the Company in Section 3 are true and correct on and as of the
      Settlement Date and the Company has performed in all material respects all
      covenants and agreements contained herein to be performed on its part at or
      prior to the Settlement Date; and (3) the Registration Statement, as of its
      effective date, and the Time of Sale Information, as of the Time of Sale, did
      not contain any untrue statement of a material fact and did not omit to
      state

     

    
      
              

                            
                          
      

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    any
      material fact required to be stated therein or necessary to make the statements
      therein not misleading and the Prospectus, as of the date of the prospectus
      supplement comprising part of such Prospectus and as of the Settlement Date,
      did
      not or does not contain any untrue statement of material fact or omit to state
      a
      material fact required to be stated therein or necessary to make the statements
      therein, in light of the circumstances under which they were made, not
      misleading.

     

    (f)        On
      the first successful Remarketing Date and the Settlement Date, the Remarketing
      Agent shall have received letters addressed to the Remarketing Agent and dated
      such respective dates, in form and substance reasonably satisfactory to the
      Remarketing Agent, of PricewaterhouseCoopers LLP, the independent registered
      public accounting firm of the Company, containing statements and information
      of
      the type customarily included in accountants’ “comfort letters” with respect to
      the financial statements and certain financial information contained or
      incorporated by reference in the Time of Sale Information and the Prospectus;
      provided that the letters delivered on the Settlement Date shall use a
“cut-off” date no earlier than February 12, 2008.

     

    (g)        (i)
      Locke Lord Bissell & Liddell LLP, outside counsel for the Company, shall
      have furnished to the Remarketing Agent, at the request of the Company, their
      written opinion, dated the Settlement Date and addressed to the Remarketing
      Agent, in form and substance reasonably satisfactory to the Remarketing Agent,
      to the effect set forth in Annex A and (ii) Robert M. Kerrigan, III, Vice
      President, Assistant General Counsel and Secretary of the Company, shall have
      furnished to the Remarketing Agent, at the request of the Company, his written
      opinion, dated the Settlement Date, and addressed to the Remarketing Agent,
      in
      form and substance reasonably satisfactory to the Remarketing Agent, to the
      effect set forth in Annex B.

     

    (h)        Locke
      Lord Bissell & Liddell LLP, special tax counsel for the Company, shall have
      furnished to the Remarketing Agent, at the request of the Company, their written
      opinion, dated the Settlement Date and addressed to the Remarketing Agent,
      in
      form and substance reasonably satisfactory to the Remarketing Agent, to the
      effect set forth in Annex C.

     

    (i)        Keegan,
      Werlin & Pabian LLP, Massachusetts counsel for the Company, shall have
      furnished to the Remarketing Agent, at the request of the Company, their written
      opinion, dated the Settlement Date and addressed to the Remarketing Agent,
      in
      form and substance reasonably satisfactory to the Remarketing Agent, to the
      effect set forth in Annex D.

     

    (j)        Davis
      Polk & Wardwell, counsel for the Remarketing Agent, shall have furnished to
      the Remarketing Agent its opinion, addressed to the Remarketing Agent and dated
      the Settlement Date, in form and substance satisfactory to the Remarketing
      Agent.

     

    (k)        Subsequent
      to the earlier of the execution and delivery of this Agreement and the Time
      of
      Sale, (i) no downgrading shall have occurred in the rating accorded any
      securities or preferred stock of or guaranteed by the Company or any of its
      subsidiaries by any “nationally recognized statistical rating organization”, as
      such term is defined by the Commission for purposes of Rule 436(g)(2) under
      the
      Securities Act and (ii) no such organization shall have publicly announced
      that
      it has under surveillance or review, or has changed its outlook with respect
      to,
      its rating of any securities or preferred stock of or guaranteed by the Company
      or any

     

    
      
              

                            
                          
      

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    of
      its
      subsidiaries (other than an announcement with positive implications of a
      possible upgrading).

     

    (l)        No
      action shall have been taken and no statute, rule, regulation or order shall
      have been enacted, adopted or issued by any federal, state or foreign
      governmental or regulatory authority that would, as of the Settlement Date
      prevent the offer or sale of the Remarketed Senior Notes; and no injunction
      or
      order of any federal, state or foreign court shall have been issued that would,
      as of the Settlement Date prevent the offer or sale of the Remarketed Senior
      Notes.

     

    (m)                   The
      Senior Notes shall not have been called for redemption following the occurrence
      of a Tax Event.

     

    (n)        The
      Remarketing Agent shall have received on and as of the Settlement Date
      satisfactory evidence of the good standing of the Company and the Subsidiaries
      (as defined in the opinion of counsel for the Company set forth on Annex A-1
      attached to this Agreement) in their respective jurisdictions of organization
      and their good standing as foreign entities in such other jurisdictions as
      the
      Remarketing Agent may reasonably request, in each case in writing or any
      standard form of telecommunication from the appropriate governmental authorities
      of such jurisdictions.

     

    (o)        On
      or prior to the Settlement Date, the Company shall have furnished to the
      Remarketing Agent such further certificates and documents as the Remarketing
      Agent may reasonably request.

     

    All
      opinions, letters, certificates and evidence mentioned above or elsewhere in
      this Agreement shall be deemed to be in compliance with the provisions hereof
      only if they are in form and substance reasonably satisfactory to counsel for
      the Remarketing Agent.

     

    If
      any
      condition specified in this Section 8 is not
      satisfied when and as required to be satisfied, this Agreement may be terminated
      by the Remarketing Agent by notice to the Company at any time on or prior to
      the
      Remarketing Date, which termination shall be without liability on the part
      of
      any party to any other party, except that Section 6,
Section 9 and Section
      10 shall at all times be effective and shall survive such
      termination.

     

    Section
      9.
 Indemnification.

     

    (a)        The
      Company agrees to indemnify and hold harmless the Remarketing Agent, the
      officers and employees of the Remarketing Agent, and each person, if any, who
      controls such Remarketing Agent within the meaning of either Section 15 of
      the
      Securities Act or Section 20 of the Exchange Act against any loss, claim,
      damage, liability or expense, as incurred, to which the Remarketing Agent or
      any
      of its respective officers, employees or controlling persons may become subject,
      under the Securities Act, the Exchange Act or other federal or state statutory
      law or regulation, or at common law or otherwise (including in settlement of
      any
      litigation, if such settlement is effected with the written consent of the
      Company), insofar as such loss, claim, damage, liability or expense (or actions
      in respect thereof as contemplated below) is related to, arises out of or is
      based on (i) the failure to have an effective Registration Statement under
      the
      Securities Act relating to the Remarketing of Remarketed Senior Notes, if
      required, or the failure

     

    
      
              

                            
                          
      

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    to
      satisfy the prospectus delivery requirements of the Securities Actbut only
      if
      the Company failed to provide the Remarketing Agent with a Prospectus for
      delivery; or (ii) any untrue statement or alleged untrue statement of a material
      fact contained in the Registration Statement (or any amendment or supplement
      thereto), including any information deemed to be a part thereof under the
      Securities Act, or the omission or alleged omission therefrom of a material
      fact, in each case, required to be stated therein or necessary to make the
      statements therein not misleading; or (iii) any untrue statement or alleged
      untrue statement of a material fact contained in the Time of Sale Information,
      the Prospectus and any other preliminary prospectus (or any amendment or
      supplement thereto) or any Issuer Free Writing Prospectus, or the omission
      or
      alleged omission therefrom of a material fact, in each case, necessary in order
      to make the statements therein, in the light of the circumstances under which
      they were made, not misleading; or (iv) in whole or in part, any inaccuracy
      in
      the representations and warranties of the Company contained herein; or (v)
      in
      whole or in part, any failure of the Company to perform its obligations
      hereunder or under law; or (vi) any act or failure to act or any alleged act
      or
      failure to act by any Remarketing Agent in connection with, or relating in
      any
      manner to, the Remarketed Senior Notes or the Remarketing contemplated hereby,
      and which is included as part of or referred to in any loss, claim, damage,
      liability or action arising out of or based on any matter covered by clause
      (ii)
      or (iii) above, and to reimburse the Remarketing Agent and its respective
      officers, employees and controlling persons for any and all expenses (including
      the fees and disbursements of counsel chosen by the Remarketing Agent
      or its respective officers, employees and controlling persons) as such
      expenses are reasonably incurred by such Remarketing Agent or
      such officers, employees or controlling persons in connection with
      investigating, defending, settling, compromising or paying any such loss, claim,
      damage, liability, expense or action; provided, however, that
      the foregoing indemnity agreement shall not apply to any loss, claim, damage,
      liability or expense to the extent, but only to the extent, arising out of
      or
      based upon any untrue statement or alleged untrue statement or omission or
      alleged omission made in reliance upon and in conformity with written
      information furnished to the Company by the Remarketing Agent expressly for
      use
      in the Registration Statement, the Time of Sale Information, the Prospectus
      or
      any other preliminary prospectus (or any amendment or supplement thereto) or
      any
      Issuer Free Writing Prospectus.  The indemnity agreement set forth in
      this Section 9(a) shall be in addition to any
      liabilities that the Company may otherwise have.

     

    The
      Company agrees that no 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 services contemplated by this Agreement, except to the
      extent that any loss, claim, damage, liability or expense resulted from the
      willful misconduct, gross negligence or bad faith of the Remarketing
      Agent.

     

    (b)        The
      Remarketing Agent agrees to indemnify and hold harmless the Company, each
      of its directors, each of its officers who signed the Registration Statement
      and
      each person, if any, who controls the Company within the meaning of the
      Securities Act or the Exchange Act, against any loss, claim, damage, liability
      or expense, as incurred, to which the Company, or any such director, officer
      or
      controlling person may become subject, under the Securities Act, the Exchange
      Act, or other federal or state statutory law or regulation, or at common law
      or
      otherwise (including in settlement of any litigation, if such settlement is
      effected with the written

     

    
      
              

                            
                          
      

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    consent
      of the Remarketing Agent), insofar as such loss, claim, damage, liability or
      expense (or actions in respect thereof as contemplated below) arises out of
      or
      is based on any untrue or alleged untrue statement of a material fact contained
      in the Registration Statement, the Time of Sale Information, the Prospectus
      or
      any other preliminary prospectus (or any amendment or supplement thereto) or
      any
      Issuer Free Writing Prospectus, or arises out of or is based on the omission
      or
      alleged omission to state therein a material fact required to be stated therein
      or necessary to make the statements therein not misleading, in each case to
      the
      extent, but only to the extent, that such untrue statement or alleged untrue
      statement or omission or alleged omission was made in the Registration
      Statement, the Time of Sale Information, the Prospectus or any other preliminary
      prospectus (or any amendment or supplement thereto) or any Issuer Free Writing
      Prospectus, in reliance upon and in conformity with written information
      furnished to the Company by the Remarketing Agent expressly for use therein;
      and
      to reimburse the Company, or any such director, officer or controlling person
      for any legal and other expense reasonably incurred by the Company, or any
      such
      director, officer or controlling person in connection with investigating,
      defending, settling, compromising or paying any such loss, claim, damage,
      liability, expense or action.  The indemnity agreement set forth in
      this Section 9(b) shall be in addition to any
      liabilities that the Remarketing Agent may otherwise have.

     

    (c)        Promptly
      after receipt by an indemnified party under this Section 9 of notice of the commencement of any action,
      such indemnified party will, if a claim in respect thereof is to be made against
      an indemnifying party under this Section 9, notify
      the indemnifying party in writing of the commencement thereof, but the omission
      so to notify the indemnifying party will not relieve it from any liability
      which
      it may have to any indemnified party for contribution or otherwise than under
      the indemnity agreement contained in this Section 9
      or to the extent it is not prejudiced as a proximate result of such
      failure.  In case any such action is brought against any indemnified
      party and such indemnified party seeks or intends to seek indemnity from an
      indemnifying party, the indemnifying party will be entitled to participate
      in,
      and, to the extent that it shall elect, jointly with all other indemnifying
      parties similarly notified, by written notice delivered to the indemnified
      party
      promptly after receiving the aforesaid notice from such indemnified party,
      to
      assume the defense thereof with counsel reasonably satisfactory to such
      indemnified party; provided, however, if the defendants in any
      such action include both the indemnified party and the indemnifying party and
      the indemnified party shall have reasonably concluded that a conflict may arise
      between the positions of the indemnifying party and the indemnified party in
      conducting the defense of any such action or that there may be legal defenses
      available to it and/or other indemnified parties which are different from or
      additional to those available to the indemnifying party, the indemnified party
      or parties shall have the right to select separate counsel to assume such legal
      defenses and to otherwise participate in the defense of such action on behalf
      of
      such indemnified party or parties.  Upon receipt of notice from the
      indemnifying party to such indemnified party of such indemnifying party’s
      election so to assume the defense of such action and approval by the indemnified
      party of counsel, the indemnifying party will not be liable to such indemnified
      party under this Section 9 for any legal or other
      expenses subsequently incurred by such indemnified party in connection with
      the
      defense thereof unless (i) the indemnified party shall have employed separate
      counsel in accordance with the proviso to the next preceding sentence (it being
      understood, however, that the indemnifying party shall not be liable for the
      expenses of more than one separate counsel (together with local counsel),
      approved by the indemnifying party (the Remarketing Agent in the case of Section

     

    
      
              

                            
                          
      

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    9(b)),
      representing the indemnified parties who are
      parties to such action) or (ii) the indemnifying party shall not have employed
      counsel satisfactory to the indemnified party to represent the indemnified
      party
      within a reasonable time after notice of commencement of the action, in each
      of
      which cases the fees and expenses of counsel shall be at the expense of the
      indemnifying party.

     

    (d)        The
      indemnifying party under this Section 9 shall not
      be liable for any settlement of any proceeding effected without its written
      consent, but if settled with such consent or if there is a final judgment for
      the plaintiff, the indemnifying party agrees to indemnify the indemnified party
      against any loss, claim, damage, liability or expense by reason of such
      settlement or judgment.  Notwithstanding the foregoing sentence, if at
      any time an indemnified party shall have requested an indemnifying party to
      reimburse the indemnified party for fees and expenses of counsel as contemplated
      by Section 9(c) hereof, the indemnifying party
      agrees that it shall be liable for any settlement of any proceeding effected
      without its written consent if (i) such settlement is entered into more than
      30
      days after receipt by such indemnifying party of the aforesaid request and
      (ii)
      such indemnifying party shall not have reimbursed the indemnified party in
      accordance with such request prior to the date of such settlement.  No
      indemnifying party shall, without the prior written consent of the indemnified
      party, effect any settlement, compromise or consent to the entry of judgment
      in
      any pending or threatened action, suit or proceeding in respect of which any
      indemnified party is or could have been a party and indemnity was or could
      have
      been sought hereunder by such indemnified party, unless such settlement,
      compromise or consent (x) includes an unconditional release of such indemnified
      party from all liability on claims that are the subject matter of such action,
      suit or proceeding and (y) does not include a statement as to or an admission
      of
      fault, culpability or a failure to act by or on behalf of any indemnified
      party.

     

    Section
      10.  Contribution.

     

    If
      the
      indemnification provided for in Section 9 is for
      any reason held to be unavailable to or otherwise insufficient to hold harmless
      an indemnified party in respect of any losses, claims, damages, liabilities
      or
      expenses referred to therein, then each indemnifying party shall contribute
      to
      the aggregate amount paid or payable by such indemnified party, as incurred,
      as
      a result of any losses, claims, damages, liabilities or expenses referred to
      therein (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 Remarketed Senior Notes pursuant
      to
      this Agreement or (ii) if the allocation provided by clause (i) above 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 the Remarketing Agent, on the other
      hand, in connection with the statements or omissions or inaccuracies in the
      representations and warranties herein which resulted in such losses, claims,
      damages, liabilities 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 Remarketed Senior Notes pursuant to this Agreement shall
      be
      deemed to be in the same respective proportions as the total aggregate principal
      amount of the Remarketed Senior Notes, and the total Remarketing Fee actually
      received by the Remarketing Agent pursuant to Section
      4 hereof.  The relative fault of the Company, on the one hand, and
      the Remarketing Agent, on the other hand, shall be determined

     

    
      
              

                            
                          
      

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    by
      reference to, among other things, whether any such untrue or alleged untrue
      statement of a material fact or omission or alleged omission to state a material
      fact or any such inaccurate or alleged inaccurate representation or warranty
      relates to information supplied by the Company, on the one hand, or 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.

     

    The
      amount paid or payable by a party as a result of the losses, claims, damages,
      liabilities and expenses referred to above shall be deemed to include, subject
      to the limitations set forth in Section 9(c), any
      legal or other fees or expenses reasonably incurred by such party in connection
      with investigating or defending any action or claim.

     

    The
      provisions set forth in Section 9(c) with respect to
      notice of commencement of any action shall apply if a claim for contribution
      is
      to be made under this Section 10; provided,
however, that no additional notice
      shall be required with respect to
      any action for which notice has been given under Section
      9(c) for purposes of indemnification.

     

    The
      Company and the Remarketing Agent agree that it would not be just and equitable
      if contribution pursuant to this Section 10 were
      determined by pro rata allocation or by any other method of allocation which
      does not take account of the equitable considerations referred to in this Section 10.

     

    Notwithstanding
      the provisions of this Section 10, the Remarketing
      Agent shall not be required to contribute any amount in excess of the amount
      by
      which the Remarketing Fee received by such Remarketing Agent exceeds the amount
      of any damages which the Remarketing Agent has otherwise been required to pay
      by
      reason of such untrue or alleged untrue statement or omission or alleged
      omission.  No person guilty of fraudulent misrepresentation (within
      the meaning of Section 11(f) of the Securities Act) shall be entitled to
      contribution from any person who was not guilty of such fraudulent
      misrepresentation.  For purposes of this Section 10, each officer and employee of the
      Remarketing Agent and each person, if any, who controls the Remarketing Agent
      within the meaning of the Securities Act and the Exchange Act shall have the
      same rights to contribution as the Remarketing Agent, and each director of
      the
      Company, each officer of the Company who signed the Registration Statement,
      and
      each person, if any, who controls the Company within the meaning of the
      Securities Act and the Exchange Act shall have the same rights to contribution
      as the Company.

     

    Anything
      herein to the contrary notwithstanding, the provisions of this Section 10, and the rights of the indemnified parties
      shall be in addition to, and not in limitation of, any rights or benefits
      (including, without limitation, rights to indemnification or contribution)
      which
      such parties may have under any other instrument or agreement.

     

    Section
      11.  Dealing in Securities.  The
      Remarketing Agent, when acting as a Remarketing Agent or in its individual
      or
      any other capacity, may, to the extent permitted by law, buy, sell, hold and
      deal in any of the Remarketed Senior Notes, Corporate Units, Treasury Units
      or
      any of the securities of the Company (together, the
“Securities”).  The Remarketing Agent may exercise
      any vote or join in any action which any beneficial owner of such Securities
      may
      be entitled to exercise or take pursuant to the Indenture with like effect
      as if
      it did not act in

     

    
      
              

                            
                          
      

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    any
      capacity hereunder.  The Remarketing Agent, in its 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.

     

    Section
      12.  Remarketing Agent’s Performance; Duty of Care.

     

    (a)        The
      duties and obligations of the Remarketing Agent shall be determined solely
      by
      the express provisions of this Agreement and the Transaction
      Documents.  No implied covenants or obligations of or against the
      Remarketing Agent shall be read into this Agreement or any of the Transaction
      Documents.  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, as to the truth of the statements expressed in any of such
      documents.  The Remarketing Agent shall be protected in acting upon
      any document or communication reasonably believed by it to have been signed,
      presented or made by the proper party or parties except as otherwise set forth
      herein.  The Remarketing Agent, acting under this Agreement, shall
      incur no liability to the Company or to any holder of Remarketed Senior Notes
      in
      its individual capacity or as Remarketing Agent for any action or failure to
      act, on its part in connection with a Remarketing or otherwise, except if such
      liability is judicially determined to have resulted from its failure to comply
      with the material terms of this Agreement or the gross negligence or willful
      misconduct on its part.  The provisions of this Section 12 shall survive the termination of this
      Agreement.

     

    (b)        The
      Company acknowledges and agrees that (i) the Remarketing, including the
      determination of the Remarketing Price and the Remarketing Fee, is an
      arm’s-length commercial transaction between the Company, on the one hand, and
      the Remarketing Agent, on the other hand, (ii) in connection with the
      Remarketing contemplated hereby and the process leading to such transaction,
      the
      Remarketing Agent is and has been acting solely as Remarketing Agent hereunder
      and is not a fiduciary of the Company, or its stockholders, creditors, employees
      or any other party, (iii) the Remarketing Agent has not assumed or will not
      assume an advisory or fiduciary responsibility in favor of the Company with
      respect to the Remarketing contemplated hereby and the process leading thereto
      (irrespective of whether the Remarketing Agent has advised or is currently
      advising the Company on other matters) and the Remarketing Agent has no
      obligation to the Company with respect to the Initial Remarketing, except the
      obligations expressly set forth in this Agreement, (iv) the Remarketing Agent
      and its affiliates may be engaged in a broad range of transactions that involve
      interests that differ from those of the Company, and (v) the Remarketing Agent
      has not provided any legal, accounting, regulatory or tax advice with respect
      to
      the Remarketing contemplated hereby and the Company has consulted its own legal,
      accounting, regulatory and tax advisors to the extent it deemed
      appropriate.

     

    Section
      13.  Termination.   This Agreement
      shall automatically terminate on the earlier of (x) any Tax Event Redemption
      Date and (y) the Purchase Contract Settlement Date.  If this Agreement
      is terminated pursuant to any of the other provisions hereof, except as
      otherwise provided herein, the Company shall not be under any liability to
      the
      Remarketing Agent and the Remarketing Agent shall not be under any liability
      to
      the Company, except that if this Agreement is terminated by the Remarketing
      Agent because of any failure or refusal on the part of the Company to comply
      with the terms or to fulfill any of the conditions of this Agreement, the
      Company will reimburse the Remarketing Agent for all of its out-of-pocket
      expenses

     

    
      
              

                            
                          
      

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    (including
      the fees and disbursements of its counsel) reasonably incurred by
      it.  Section 9, Section 10 and Section
      12
      hereof shall survive the termination of this Agreement.

     

    Section
      14.  Notices.  All statements, requests,
      notices and agreements hereunder shall be in writing, and:

     

    (a)        if
      to the Remarketing Agent, shall be delivered or sent by mail, telex or facsimile
      transmission to: Lehman Brothers Inc., 745 Seventh Avenue, New York, NY 10019,
      Fax: (646) 834-8133, Attention: Debt Capital Markets, Natural Resource Group
      (with a copy to the General Counsel at the same address);

     

    (b)        if
      to the Company, shall be delivered or sent by mail, telex or facsimile
      transmission to Southern Union Company, 5444 Westheimer Road, Houston, TX
      77056-5306, Telecopier No.: 713-989-1166; Attention: General Counsel;
      and

     

    (c)        if
      to the Purchase Contract Agent, shall be delivered or sent by mail or facsimile
      transmission to The Bank of New York Trust Company, N.A., 2 North LaSalle
      Street, Suite 1020, Chicago, Illinois 60602; Telecopier No.: 312-827-8542;
      Attention: Renee Maron, Institutional Global Corporate Trust
      Services.

     

    Any
      such
      statements, requests, notices or agreements shall take effect at the time of
      receipt thereof.

     

    Section
      15.  Persons Entitled to Benefit of
      Agreement.  This Agreement shall inure to the benefit of and be
      binding upon each party hereto and its respective successors.  This
      Agreement and the terms and provisions hereof are for the sole benefit of only
      those persons, except that (x) the representations, warranties, indemnities
      and
      agreements of the Company contained in this Agreement shall also be deemed
      to be
      for the benefit of the Remarketing Agent and the person or persons, if any,
      who
      control the Remarketing Agent within the meaning of Section 15 of the Securities
      Act and (y) the indemnity agreement of the Remarketing Agent contained in
      Section 8 of this Agreement shall be deemed to be for the benefit of the
      Company’s directors and officers who sign the Registration Statement, if any,
      and any person controlling the Company within the meaning of Section 15 of
      the
      Securities Act.  Nothing contained in this Agreement is intended or
      shall be construed to give any person, other than the persons referred to
      herein, any legal or equitable right, remedy or claim under or in respect of
      this Agreement or any provision contained herein.

     

    Section
      16.  Survival.  The respective
      indemnities, representations, warranties and agreements of the Company and
      the
      Remarketing Agent contained in this Agreement or made by or on behalf of them,
      respectively, pursuant to this Agreement, shall survive any Remarketing and
      shall remain in full force and effect, regardless of any investigation made
      by
      or on behalf of any of them or any person controlling any of them.

     

    Section
      17.  Governing Law.   This Agreement
      shall be governed by, and construed in accordance with, the laws of New York,
      without regard to conflicts of laws principles.

     

    Section
      18.  Judicial Proceedings.

     

    
      
              

                            
                          
      

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    (a)           Each
      party hereto expressly accepts and irrevocably submits to the non-exclusive
      jurisdiction of the United States Federal or New York State court sitting in
      the
      Borough of Manhattan, The City of New York, New York, over any suit, action
      or
      proceeding arising out of or relating to this Agreement or the Remarketed Senior
      Notes.  To the fullest extent it may effectively do so under
      applicable law, each party hereto irrevocably waives and agrees not to assert,
      by way of motion, as a defense or otherwise, any claim that it is not subject
      to
      the jurisdiction of any such court, any objection that it may now or hereafter
      have to the laying of the venue of any such suit, action or proceeding brought
      in any such court and any claim that any such suit, action or proceeding brought
      in any such court has been brought in an inconvenient forum.

     

    (b)        Each
      party hereto agrees, to the fullest extent that it may effectively do so under
      applicable law, that a judgment in any suit, action or proceeding of the nature
      referred to in Section 18(a) brought in any such
      court shall be conclusive and binding upon such party, subject to rights of
      appeal and may be enforced in the courts of the United States of America or
      the
      State of New York (or any other court the jurisdiction to which the Company
      is
      or may be subject) by a suit upon such judgment.

     

    Section
      19.  Counterparts.   This Agreement
      may be executed in one or more counterparts and, if executed in more than one
      counterpart, the executed counterparts shall each be deemed to be an original
      but all such counterparts shall together constitute one and the same
      instrument.

     

    Section
      20.  Headings.  The headings herein are
      inserted for convenience of reference only and are not intended to be part
      of,
      or to affect the meaning or interpretation of, this Agreement.

     

    Section
      21.  Severability.  If any provision of
      this 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,
      circumstance or jurisdiction, or of rendering any other provision or provisions
      of this Agreement invalid, inoperative or unenforceable to any extent
      whatsoever.

     

    Section
      22.  Amendments.  This Agreement may be
      amended by an instrument in writing signed by the parties hereto.  The
      Company agrees that it will not enter into, cause or permit any amendment or
      modification of the Transaction Documents or any other instruments or agreements
      relating to the Senior Notes or the Corporate Units that would in any way
      adversely affect the rights, duties or obligations of the Remarketing Agent,
      without the prior written consent of the Remarketing Agent.

     

    Section
      23.  Successors and Assigns.  The rights
      and obligations of the Company hereunder may not be assigned or delegated to
      any
      other Person without the prior written consent of Lehman Brothers
      Inc.  The rights and obligations of the Remarketing Agent hereunder
      may not be assigned or delegated to any other Person (other than an affiliate
      of
      the Remarketing Agent) without the prior written consent of the
      Company.

     

    
      
              

                            
                          
      

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        22

        
          

        

      

      
        
        

      

    

    If
      the
      foregoing correctly sets forth the agreement by and between the Company, the
      Remarketing Agent and the Purchase Contract Agent, please indicate your
      acceptance in the space provided for that purpose below.

     

    
      
              

                            
                          
      

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        23

        
          

        

      

      
        
        

      

    

    Very
      truly yours,

     

    SOUTHERN
      UNION COMPANY

     

    

    By: /s/
      RICHARD N.
      MARSHALL         

         
      Name: Richard N. Marshall

         
      Title: Senior Vice President and Chief Financial Officer

         

     

    

    CONFIRMED
      AND ACCEPTED:

    

    LEHMAN
      BROTHERS INC.

    

    By:
      /s/ GREGORY J. HALL     

          Name:
      Gregory J. Hall

          Title:
      Managing Director

    

    

     

    THE
      BANK
      OF NEW YORK TRUST COMPANY, N.A.

     

    not
      individually but solely as Purchase Contract Agent

    and
      as
      attorney-in-fact for the Holders of the Purchase Contracts

     

    By: /s/
      LAWRENCE M.
      KUSCH                                                                                    

          Name:
      Lawrence M. Kusch

          Title:
      Assistant Vice President

     

    
      
              

                  
      
      

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        24

        
          

        

      

      
        
        

      

    

    SCHEDULE
      I

     

    Final
      Term Sheet

     

    

    Filed
      Pursuant to Rule 433

     

    Registration
      No. 333-137998

     

    Free
      Writing Prospectus Dated February 8, 2008

     

    

     

    Term
      Sheet

     

    

     

    Southern
      Union Company

     

    $100,000,000
      6.089% Senior Notes due 2010

     

    

     

    Trade
      Date:                                                February
      8, 2008

     

    Settlement
      Date:                                       February
      19, 2008 (T+6)

    

    Remarketed
      Amount:                               $100,000,000

    

    
      	
              Legal
                Format:

            	
              SEC
                Registered

            

    

    

    Ratings:                                                    
      Baa3 / BBB- / BBB (Moody’s / S&P / Fitch) (negative / negative
      /stable)

    

    
      	
              Security
                Type:

            	
                
                Senior unsecured notes

            

    

    

    Maturity:                                                  
      February 16, 2010

    

    
      	
              Interest
                Rate:

            	
                
                6.089% per annum

            

    

    

    
      	
              Interest
                Payment Dates:

            	
                
                February 16 and August 16 of each
                year

            

    

    

    
      	
              
                First
                  Interest Payment Date

              

            	
               

            

    

    
      	
              After
                the Remarketing:

            	
               
                August 16, 2008

            

    

    

    
      	
              
                Spread
                  to Benchmark

              

            	
               

            

    

    
      	
              Treasury:

            	
               4.00%

            

    

    

    
      	
              Benchmark
                Treasury and Yield:

            	
               
                2.125% TSY due Jan
                2010:  1.954%

            

    

    

    
      	
              Yield
                to Maturity:

            	
               
                5.954%

            

    

    

    
      	
              Remarketing
                Price:

            	
               
                100.25%

            

    

    

    
      	
              Denomination:

            	
               $1,000

            

    

     

    
      	
              Change
                of Control Put:

            	
              If
                Southern Union Company undergoes a “change of control triggering event,”
                as defined in the indenture, holders of the Senior Notes will have
                the
                option to require Southern Union Company to purchase all or
                any

            

    

     

    
      
              

                  
      
      

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        25

        
          

        

      

      
        
        

      

    

    
      	
               

            	
              portion
                of such holders’ Senior Notes at 101% of the aggregate principal amount of
                Senior Notes to be purchased.

            

    

     

    CUSIP:                                                      844030
      AJ5

    

    Remarketing
      Agent:                                                      Lehman
      Brothers Inc.

    

    

    The
      issuer has filed a registration statement (including a prospectus) with the
      SEC
      for the offering to which this communication relates.  Before you
      invest, you should read the prospectus in that registration statement and other
      documents the issuer has filed with the SEC for more complete information about
      the issuer and this offering.  You may get these documents for free by
      visiting EDGAR on the SEC Web site at www.sec.gov.  Alternatively, the
      issuer, any underwriter or any dealer participating in the offering will arrange
      to send you the prospectus if you request it by calling Lehman Brothers Inc.
      toll-free at 1-888-603-5847.  You may also obtain these documents by
      accessing the “Investors” section of Southern Union Company’s website at
      www.sug.com.

     

     

     

     

     

     

     

     

    26

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