Document:

Exhibit 4.2

    

    Exhibit
      4.2

     

    
      	
               

              SOUTHERN
                UNION COMPANY

               

            

    

    

    Up
      to $[X00,000,000]

     

    2006
      SERIES A JUNIOR SUBORDINATED NOTES DUE NOVEMBER 1, 2066

    

     

    Dated:
      October 23, 2006

     

    NUMBER
      [XX]CUSIP
      NO: [XXXXXXXXX]

     

    Registered
      Holder: Cede
      & Co.

     

    SOUTHERN
      UNION COMPANY, a corporation duly organized and existing under the laws of
      Delaware (herein referred to as the “Company,” which term includes any successor
      corporation under the Indenture hereinafter referred to), for value received,
      hereby promises to pay to the Registered Holder named above, the principal
      sum
      specified in the Schedule annexed hereto on November 1, 2066 (the “Stated
      Maturity”), in such coin or currency of the United States of America as at the
      time of payment is legal tender for the payment of public and private debt.
      The
      Company further promises to pay to the Registered Holder of this note (the
      “Note”) as hereinafter provided (a) interest on said principal sum (subject to
      deferral as set forth herein) at the rate of 7.20% per annum, in like coin
      or
      currency, semi-annually in arrears on the 1st day of May and November, until
      November 1, 2011, and then at the rate per annum equal to the Three-Month LIBOR
      Rate plus 3.0175% (determined in the manner set forth in the Second Supplemental
      Indenture hereinafter referred to), reset quarterly on the LIBOR Rate Reset
      Dates, in like coin or currency, quarterly in arrears on the 1st day of
      February, May, August and November (each an “Interest Payment Date”), commencing
      May 1, 2007 in the first instance and February 1, 2012 in the second instance,
      from the Interest Payment Date next preceding the date hereof to which interest
      has been paid or duly provided for (unless (i) no interest has yet been paid
      or
      duly provided for on this Note, in which case from October 23, 2006 or (ii)
      the
      date hereof is before an Interest Payment Date but after the related Record
      Date
      (as defined below), in which case from such following Interest Payment Date;
      provided, however, that if the Company shall default in payment of the interest
      due on such following Interest Payment Date, then from the next preceding
      Interest Payment Date to which interest has been paid or duly provided for
      or if
      no interest has yet been paid or duly provided for on this Note, in which case
      from October 23, 2006), until the principal hereof is paid or duly provided
      for,
      plus (b) Additional Interest, as defined in the Indenture, to the extent
      permitted by applicable law, on any interest payment that is not made on the
      applicable Interest Payment Date, which shall accrue at the then prevailing
      rate
      per annum borne by this Note, compounded semi-annually or quarterly, as
      applicable.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The
      interest so payable will, subject to certain exceptions provided in the
      Indenture hereinafter referred to, be paid to the person in whose name this
      Note
      is registered at the close of business on the Record Date next preceding such
      Interest Payment Date. The Record Date shall be the Business Day next preceding
      the Interest Payment Date, unless this Note is registered to a holder other
      than
      The Depository Trust Company or a nominee of The Depository
      Trust Company, in which case the Record Date will be the fifteenth calendar
      day
      preceding such Interest Payment Date whether or not a Business Day. This Note
      may be presented for payment of principal and interest at the corporate trust
      office or agency of The Bank of New York Trust Company, N.A., as paying agent
      for the Company, maintained for that purpose in the Borough of Manhattan, The
      City of New York; provided, however, that payment of interest may be made at
      the
      option of the Company (i) by check mailed to such address of the person entitled
      thereto as the address shall appear on the Register of the Notes or (ii) by
      transfer to an account maintained by the Person entitled thereto as specified
      in
      the Register, provided that proper transfer instructions have been received
      by
      the Record Date. While this Note bears interest at a fixed rate, interest on
      this Note will be computed on the basis of a 360-day year of twelve 30-day
      months, and while this Note bears interest at the Three-Month LIBOR Rate, the
      amount of interest payable on this Note for any period will be computed on
      the
      basis of the actual number of days in the relevant period divided by 360.

     

    At
      the
      Company’s option, it may, on one or more occasions, defer payment of all or part
      of the current and accrued interest otherwise due on the Notes for a period
      of
      up to 10 consecutive years (each period, commencing on the date that the first
      such interest payment would otherwise have been made, an “Optional Deferral
      Period”). A deferral of interest payments may not extend beyond the Stated
      Maturity of the Notes, and the Company may not begin a new Optional Deferral
      Period until it has paid all accrued interest on the Notes from the previous
      Optional Deferral Period.

     

    Any
      deferred interest on the Notes will accrue Additional Interest at a rate equal
      to the Coupon Rate then applicable to the Notes, to the extent permitted by
      applicable law. Once the Company pays all deferred interest payments on the
      Notes, including any Additional Interest accrued on the deferred interest,
      it
      shall be entitled to again defer interest payments on the Notes as described
      above, but not beyond the Stated Maturity of the Notes.

     

    Unless
      the Company has paid all accrued and payable interest on the Notes or if an
      Event of Default has occurred and is continuing, it will not and its
      Subsidiaries shall not do any of the following:

     

    
      	·  	
              declare
                or pay any dividends or distributions, or redeem, purchase, acquire,
                or
                make a liquidation payment on any of the Company’s capital
                stock;

            

    

     

    
      	·  	
              make
                any payment of principal of or interest or premium, if any, on or
                repay,
                repurchase or redeem any of its debt securities that rank on a parity
                with
                or junior in right of payment or upon liquidation to the Notes (including
                debt securities of other series issued under the Indenture);
                or

            

    

     

    
      	·  	
              make
                any guarantee payments on any guarantee of debt securities if the
                guarantee ranks on a parity with or junior in right of payment or
                upon
                liquidation to the Notes.

            

    

     

    However,
      at any time, including during an Optional Deferral Period or an Event of
      Default, the Company may:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	·  	
              pay
                stock dividends or distributions in additional shares of its capital
                stock;

            

    

     

    
      	·  	
              declare
                or pay a dividend in connection with the implementation of a shareholders’
                rights plan, or issue stock under such a plan or repurchase such
                rights;
                and

            

    

     

    
      	·  	
              purchase
                common stock for issuance pursuant to any employee benefit plans
                or
                dividend reinvestment and direct stock purchase
                plans.

            

    

     

    The
      Company shall give the Trustee written notice of any optional deferral of
      interest not more than 15 Business Days prior to the applicable Interest Payment
      Date. The Trustee shall forward such notice promptly to each Registered Holder
      of Notes.

     

    This
      Note
      is issued pursuant to the Indenture, dated as of May 10, 1995, between the
      Company, as issuer, and The Bank of New York Trust Company, N.A., successor
      to
      JPMorgan Chase Bank, N.A., formerly known as JPMorgan Chase Bank, formerly
      known
      as The Chase Manhattan Bank (National Association), as trustee, as supplemented
      by a Second Supplemental Indenture dated as of October 23, 2006 (as so
      supplemented and as further supplemented or amended from time to time, the
      “Indenture”). Reference is made to the Indenture for a description of the
      respective rights, limitations of rights, obligations, duties and immunities
      thereunder of the Trustee, the Company and the Holders (the word “Holder” or
“Holders” meaning the registered holder or registered holders) of the Notes.
      Capitalized terms used herein but not defined herein shall have the respective
      meanings assigned thereto in the Indenture.

     

    The
      Notes
      of this series shall have an initial aggregate principal amount of Six Hundred
      Million Dollars ($600,000,000).

     

    The
      Notes
      evidenced by this Certificate may be transferred or exchanged only in minimum
      denominations of $1,000 and integral multiples of $1,000 in excess thereof,
      and
      any attempted transfer, sale or other disposition of Notes in a denomination
      of
      less than $1,000 shall be deemed to be void and of no legal effect whatsoever.
      

     

    The
      indebtedness of the Company evidenced by this Note, including the principal
      hereof and interest hereon, is, to the extent and in the manner set forth in
      the
      Indenture, subordinate and junior in right of payment and upon liquidation
      to
      the Company’s obligations to Holders of Senior Indebtedness of the Company and
      each Holder of this Note, by acceptance hereof, agrees to and shall be bound
      by
      such provisions of the Indenture and all other provisions of the Indenture.
      

     

    This
      Note
      shall not be valid or become obligatory for any purpose until the certificate
      of
      authentication hereon shall have been signed by or on behalf of the Trustee
      under the Indenture.

     

    

     

    
      
        
          

           

          -NY12533:208170.1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    IN
      WITNESS WHEREOF, SOUTHERN UNION COMPANY has caused this instrument to be duly
      executed.

     

                                                             
      SOUTHERN UNION COMPANY

    Dated:

    

     

    [Seal]      By:
      ______________________________________

                        Name:

                        Title:

     

     

                              Attest:
      ____________________________________

                        Name:

                        Title:

    

    

     

    TRUSTEE’S
      CERTIFICATE OF AUTHENTICATION

     

    This
      is
      one of the Securities, of the series designated herein, referred to in the
      within-mentioned Indenture. 

     

    THE
      BANK
      OF NEW YORK TRUST

                        COMPANY,
      N.A., as Trustee 

     

    

     

    By:
      ______________________________________

    Authorized
      Officer

    

    

     

    

    
      
        
          

           

          -NY12533:208170.1

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

    REVERSE
      OF NOTE

    As
      provided in and subject to the provisions in the Indenture, the Company shall
      have the option to redeem the Notes of this series at any time on or after
      November 1, 2011, in whole or in part, at the Optional Redemption Price plus
      accrued and unpaid interest thereon, if any, to but excluding the redemption
      date. In addition, if a Special Event shall occur and be continuing, the Company
      may redeem the Notes of this series within 90 days after the occurrence of
      that
      Special Event, in whole but not in part, before November 1, 2011, at the
      Redemption Price plus accrued and unpaid interest thereon, if any, to but
      excluding the redemption date.

     

    In
      the
      case an Event of Default, as defined in the Indenture, shall have occurred
      and
      be continuing, the principal of all of the Notes of this series may be declared,
      and upon such declaration shall become, due and payable, in the manner, with
      the
      effect and subject to the conditions provided in the Indenture.

     

    Any
      consent or waiver by the Holder of this Note given as provided in the Indenture
      (unless effectively revoked as provided in the Indenture) shall be conclusive
      and binding upon such Holder and upon all future Holders of this Note and of
      any
      Note issued in exchange, registration of transfer, or otherwise in lieu hereof
      irrespective of whether any notation of such consent or waiver is made upon
      this
      Note or such other Notes. No reference herein to the Indenture and no provision
      of this Note or of the Indenture shall alter or impair the obligation of the
      Company, which is absolute and unconditional, to pay the principal of and
      interest on this Note, at the places, at the respective times, at the rates
      and
      in the coin or currency herein prescribed. 

     

    As
      provided in the Indenture and subject to certain limitations therein set forth,
      the transfer of this Note may be registered on the Register of the Notes of
      this
      series upon surrender of this Note for registration of transfer at the offices
      maintained by the Company or its agent for such purpose, duly endorsed by the
      Holder hereof or his attorney duly authorized in writing, or accompanied by
      a
      written instrument of transfer in form satisfactory to the Company and the
      Securities registrar duly executed by the Holder hereof or his attorney duly
      authorized in writing, but without payment of any charge other than a sum
      sufficient to reimburse the Company for any tax or other governmental charge
      incident thereto. Upon any such registration of transfer, a new Note or Notes
      of
      authorized denomination or denominations for the same aggregate principal amount
      will be issued to the transferee in exchange herefor. 

     

    Prior
      to
      due presentment for registration of transfer of this Note, the Company, the
      Trustee, and any agent of the Company or the Trustee may deem and treat the
      person in whose name this Note shall be registered upon the Register of the
      Notes of this series as the absolute owner of this Note (whether or not this
      Note shall be overdue and notwithstanding any notation of ownership or other
      writing hereon) for the purpose of receiving payment of or on account of the
      principal hereof and, subject to the provisions on the face hereof, interest
      due
      hereon and for all other purposes; and neither the Company nor the Trustee
      nor
      any such agent shall be affected by any notice to the contrary. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    No
      recourse shall be had for the payment of the principal of or interest on this
      Note, or for any claim based hereon or otherwise in respect hereof, or based
      on
      or in respect of the Indenture or any indenture supplemental thereto, against
      any stockholder, officer, director or employee, as such, past, present or
      future, of the Company or of any successor corporation, either directly or
      through the Company, whether by virtue of any constitution, statute or rule
      of
      law, or by the enforcement of any assessment or penalty or otherwise, all such
      liability being, by the acceptance hereof and as a part of the consideration
      for
      the issue hereof, expressly waived and released. 

     

    The
      Company and, by acceptance of this Note or a beneficial interest in this Note,
      each Holder hereof and any person acquiring a beneficial interest herein, agree
      that for United States federal, state and local tax purposes it is intended
      that
      this Note constitute indebtedness. 

     

    This
      Note
      shall be deemed to be a contract made under the laws of the State of New York
      (without regard to conflicts of laws principles thereof) and for all purposes
      shall be governed by, and construed in accordance with, the laws of said
      State.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    FOR
      VALUE
      RECEIVED, the undersigned hereby sell(s) and transfer(s) unto

     

    _________________________________________________________________________________________________________________ .

                        (please
      insert Social
      Security or other identifying number of assignee)

     

     

     _________________________________________________________________________________________________________________

     

    _________________________________________________________________________________________________________________

     

    _________________________________________________________________________________________________________________

     

    PLEASE
      PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF
      ASSIGNEE

     

    the
      within Note and all rights thereunder, hereby irrevocably constituting and
      appointing

     

    ________________________________________________________________________________________________________________ .

     

    ________________________________________________________________________________________________________________

     

    ________________________________________________________________________________________________________________

     

    ________________________________________________________________________________________________________________

     

    ________________________________________________________________________________________________________________ .

     

     

    agent
      to
      transfer said Note on the books of the Company, with full power of substitution
      in the premises.

     

     

    Dated:
      __________________ __, ____

     

    

     

                                                    ______________________________________

     

     

    NOTICE:
      The signature to this assignment must correspond with the name as written upon
      the face of the within instrument in every particular without alteration or
      enlargement, or any change whatever.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    FORM
      OF
      SCHEDULE FOR ENDORSEMENTS ON GLOBAL NOTES TO REFLECT CHANGES IN PRINCIPAL
      AMOUNT

     

    The
      initial principal amount of this Note is: $100,000,000

     

    Changes
      to Principal Amount of Global Note

     

    
      	
              Date

               

            	
              Principal
                Amount by which this Note is to be Decreased or Increased and the
                Reason
                for the Decrease or Increase

               

            	
              Remaining
                Principal Amount of this Note 

               

            	
              Signature
                of Authorized Officer of TrusteeExhibit 4.3

    Exhibit
      4.3

    
 

    Replacement
      Capital Covenant, dated as of October 23,
      2006
      (this “Replacement
      Capital Covenant”),
      by
      Southern Union Company, a Delaware corporation (together with its successors
      and
      assigns, the “Corporation”),
      in
      favor of and for the benefit of each Covered Debtholder (as defined
      below).

     

     

    Recitals

     

    A. On
      the
      date hereof, the Corporation is issuing $600,000,000 aggregate principal amount
      of its 2006 Series A Junior Subordinated Notes Due 2066 (the “Notes”).

     

    B. This
      Replacement Capital Covenant is the “Replacement Capital Covenant” referred to
      in the Prospectus Supplement, dated October 18, 2006, relating to the
      Notes.

     

    C. The
      Corporation, in entering into and disclosing the content of this Replacement
      Capital Covenant in the manner provided below, is doing so with the intent
      that
      the covenants provided for in this Replacement Capital Covenant be enforceable
      by each Covered Debtholder and the Corporation be estopped from disregarding
      the
      covenants in this Replacement Capital Covenant, in each case to the fullest
      extent permitted by applicable law.

     

    NOW,
      THEREFORE,
      the
      Corporation hereby covenants and agrees as follows in favor of and for the
      benefit of each Covered Debtholder.

     

    SECTION
      1.  Definitions.  Capitalized
      terms used in this Replacement Capital Covenant (including the Recitals) have
      the meanings set forth in Schedule I hereto.

     

    SECTION
      2.  Limitations
      on Redemption and Repurchase of Notes.  The
      Corporation hereby promises and covenants to and for the benefit of each Covered
      Debtholder that the Corporation and its Subsidiaries shall not redeem or
      repurchase all or any part of the Notes on or before October 31, 2036 except
      to
      the extent that the total redemption or repurchase price therefor is equal
      to or
      less than the sum of (i) the Applicable Percentage of the aggregate net
      cash proceeds received by the Corporation or its Subsidiaries from
      non-affiliates during the 180 days prior to the applicable redemption or
      repurchase date from the issuance and sale of Common Stock of the Corporation
      plus
      (ii) 100% of the aggregate net cash proceeds received by the Corporation or
      its Subsidiaries from non-affiliates during the 180 days prior to the
      applicable redemption or repurchase date from the issuance and sale of
      Qualifying Capital Securities of the Corporation (other than Common Stock).
      For
      the avoidance of doubt, persons covered by Corporation’s dividend reinvestment
      plan, direct stock purchase plan and employee benefit plans shall be deemed
      non-affiliates for purposes of this Section 2.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SECTION
      3.  Covered
      Debt.  (a)  The
      Corporation represents and warrants that the Initial Covered Debt is Eligible
      Debt.

     

    (b)  (i)  During
      the period commencing on the earlier of (x) the date two years and 30 days
      prior to the final maturity date for the then effective Covered Debt and
      (y) the date on which the Corporation gives notice of redemption of the
      then effective Covered Debt, if such redemption is in whole or in part and,
      after giving effect to such redemption, the outstanding principal of such
      Covered Debt would be less than $100,000,000, or (ii) if earlier than the
      date specified in clauses (x) and (y) of this Section 3(b)(i), on
      the date on which the Corporation or a Subsidiary of the Corporation repurchases
      the then effective Covered Debt in whole or in part and, after giving effect
      to
      such repurchase, the outstanding principal amount of such Covered Debt would
      be
      less than $100,000,000, the Corporation shall identify the series of Eligible
      Debt that will become the Covered Debt on the related Redesignation Date in
      accordance with the following procedures:

     

    (A)  the
      Corporation shall identify each series of its then outstanding long-term
      indebtedness for money borrowed that is Eligible Debt;

     

    (B)  if
      only
      one series of the Corporation’s then outstanding long-term indebtedness for
      money borrowed is Eligible Debt, such series shall become the Covered Debt
      commencing on the related Redesignation Date;

     

    (C)  if
      the
      Corporation has more than one outstanding series of long-term indebtedness
      for
      money borrowed that is Eligible Debt, then the Corporation shall identify the
      series that has the latest occurring final maturity date as of the date the
      Corporation is applying the procedures in this Section 3(b) and such series
      shall become the Covered Debt on the upcoming Redesignation Date;

     

    (D)  the
      series of outstanding long-term indebtedness for money borrowed that is
      determined to be Covered Debt pursuant to clause (B) or (C) above shall be
      the
      Covered Debt for purposes of this Replacement Capital Covenant for the period
      commencing on the related Redesignation Date and continuing to but not including
      the Redesignation Date as of which a new series of outstanding long-term
      indebtedness is next determined to be the Covered Debt pursuant to the
      procedures set forth in this Section 3(b); and

     

    (E)  in
      connection with such identification of a new series of Covered Debt, the
      Corporation shall give the notice provided for in Section 3(d) within the time
      frame provided for in such section.

     

    
      
        
        

      

      
        -
          2
          -

        
          

        

      

      
        
        

      

    

    (c)  Notwithstanding
      any other provisions of this Replacement Capital Covenant, if a series of
      Eligible Senior Debt has become the Covered Debt in accordance with Section
      3(b), on the date on which the Corporation or a Subsidiary of the Corporation
      issues a new series of Eligible Subordinated Debt, then immediately upon such
      issuance such series shall become the Covered Debt and the applicable series
      of
      Eligible Senior Debt shall cease to be Covered Debt.

     

    (d)  Notice.
      In
      order to give effect to the intent of the Corporation described in Recital
      C
      and
      Section 5(c),
      the
      Corporation covenants that (a) simultaneously with the execution of this
      Replacement Capital Covenant, or as soon as practicable after the date hereof,
      it shall give notice to the Holders of the Initial Covered Debt, in the manner
      provided in the indenture relating to the Initial Covered Debt, of this
      Replacement Capital Covenant and the rights granted to such Holders hereunder;
      (b) so long as the Corporation is a reporting company under the Securities
      Exchange Act, the Corporation will include in each annual report filed with
      the
      Commission on Form 10-K under the Securities Exchange Act a description of
      the
      covenant set forth in Section 2 and identify the series of long-term
      indebtedness for borrowed money that is Covered Debt as of the date such Form
      10-K is filed with the Commission; (c) if a series of the Corporation’s
      long-term indebtedness for money borrowed (1) becomes Covered Debt or (2) ceases
      to be Covered Debt, give notice of such occurrence within 30 days to the holders
      of such long-term indebtedness for money borrowed in the manner provided for
      in
      the indenture, fiscal agency agreement or other instrument under which such
      long-term indebtedness for money borrowed was issued and report such change
      in
      the Corporation’s next quarterly report on Form 10-Q or annual report on Form
      10-K, as applicable; (d) if, and only if, the Corporation ceases to be a
      reporting company under the Securities Exchange Act, post on its website the
      information otherwise required to be included in Securities Exchange Act filings
      pursuant to clauses (b) and (c) above; and (e) promptly upon request by any
      Holder of Covered Debt, provide such Holder with an executed copy of this
      Replacement Capital Covenant.

     

    SECTION
      4.  Termination
      and Amendment.
      (a)  The
      obligations of the Corporation pursuant to this Replacement Capital Covenant
      shall remain in full force and effect until the earliest date (the “Termination
      Date”)
      to
      occur of (i) [_______], 2036, (ii) the date, if any, on which the Holders
      of at least 51% by principal amount of the then effective series of Covered
      Debt
      consent or agree in writing to the termination of the obligations of the
      Corporation hereunder and (iii) the date on which the Corporation ceases to
      have
      any series of outstanding Eligible Senior Debt or Eligible Subordinated Debt
      (in
      each case without giving effect to the rating requirement in clause (ii) of
      the
      definition of each such term). From and after the Termination Date, the
      obligations of the Corporation pursuant to this Replacement Capital Covenant
      shall be of no further force and effect with respect to the Holders, or
      otherwise.

     

    
      
        
        

      

      
        -
          3
          -

        
          

        

      

      
        
        

      

    

    (b)  This
      Replacement Capital Covenant may be amended or supplemented from time to time
      by
      a written instrument signed by the Corporation with the consent of the Holders
      of at least 51% by principal amount of the then effective series of Covered
      Debt, provided that this Replacement Capital Covenant may be amended or
      supplemented from time to time by a written instrument signed by the Corporation
      (and without the consent of the Holders) if such amendment or supplement is
      not
      adverse to the Holders of the then-effective series of Covered Debt and an
      officer of the Corporation has delivered to the Holders of the then-effective
      series of Covered Debt in the manner provided for in the indenture, fiscal
      agency agreement or other instrument with respect to such Covered Debt a written
      certificate stating that, in his or her determination, such amendment or
      supplement is not adverse to the Holders of the then-effective series of Covered
      Debt.

     

    (c)  For
      purposes of Sections 4(a) and 4(b), the Holders whose consent or agreement
      is
      required to terminate, amend or supplement this Replacement Capital Covenant
      or
      the obligations of the Corporation hereunder shall be the Holders of the then
      effective Covered Debt as of a record date established by the Corporation that
      is not more than 30 days prior to the date on which the Corporation proposes
      that such termination, amendment or supplement becomes effective.

     

    SECTION
      5.  Miscellaneous.
      (a)  This
      Replacement Capital Covenant shall be governed by and construed in accordance
      with the laws of the State of New York without regard to choice of law
      principles.

     

    (b)  This
      Replacement Capital Covenant shall be binding upon the Corporation and its
      successors and assigns and shall inure to the benefit of the Covered Debtholders
      as they exist from time-to-time (it being understood and agreed by the
      Corporation that any Person who is a Covered Debtholder at the time such Person
      acquires or immediately after such Person sells Covered Debt shall retain its
      status as a Covered Debtholder for so long as the series of long-term
      indebtedness for borrowed money owned by such Person is Covered Debt and, if
      such Person initiates a claim or proceeding to enforce its rights under this
      Replacement Capital Covenant after the Corporation has violated its covenants
      in
      Section 2 and before the series of long-term indebtedness for money borrowed
      held by such Person is no longer Covered Debt, such Person’s rights under this
      Replacement Capital Covenant shall not terminate by reason of such series of
      long-term indebtedness for money borrowed no longer being Covered
      Debt).

     

    (c)  The
      Corporation acknowledges that reliance by each Covered Debtholder upon the
      covenants in this Replacement Capital Covenant is reasonable and foreseeable
      by
      the Corporation and that, were the Corporation to disregard its covenants in
      this Replacement Capital Covenant, each Covered Debtholder would have sustained
      an injury as a result of its reliance on such covenants.

     

    
      
        
        

      

      
        -
          4
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    (d)  All
      demands, notices, requests and other communications to the Corporation under
      this Replacement Capital Covenant shall be deemed to have been duly given and
      made if in writing and (i) if served by personal delivery upon the Corporation,
      on the day so delivered (or, if such day is not a Business Day, the next
      succeeding Business Day), (ii) if delivered by registered post or certified
      mail, return receipt requested, or sent to the Corporation by a national or
      international courier service, on the date of receipt by the Corporation (or,
      if
      such date of receipt is not a Business Day, the next succeeding Business Day),
      or (iii) if sent by telecopier, on the day telecopied, or if not a Business
      Day,
      the next succeeding Business Day, provided that the telecopy is promptly
      confirmed by telephone confirmation thereof, and in each case to the Corporation
      at the address set forth below, or at such other address as the Corporation
      may
      thereafter post on its website as the address for notices under this Replacement
      Capital Covenant:

     

    Southern
      Union Company

     

    Attention:  

     

    Facsimile
      No:  

     

    

     

    
      
        
        

      

      
        -
          5
          -

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      Corporation has caused this Replacement Capital Covenant to be executed by
      its
      duly authorized officer as of the day and year first above written.

     

                                                                Southern
      Union
      Company

     

     

                                                                By:   
      /s/Robert M. Kerrigan, III

                                                                    Name: 
Robert
      M.
      Kerrigan, III

                                                                    Title:   
      Vice President, Assistant General 

                                                                          Counsel
      and Secretary

     

     

    

    
      
        
          -
            6 -

          NY12533:207803.5

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
        

      

    

     

    Definitions

     

    “Alternative
      Payment Mechanism”
means,
      with respect to any securities or combination of securities referred to in
      the
      definition of Qualifying Capital Securities, that such securities or related
      transaction agreements include a provision to the effect that, if the
      Corporation has exhausted its rights to defer Distributions at its option
      pursuant to an Optional Deferral Provision or if any Mandatory Trigger Provision
      has become applicable, the Corporation may or shall, as applicable, unless
      a
      Market Disruption Event has occurred and is continuing, (i) issue and sell
      shares of its common stock and/or Qualifying Non-Cumulative Preferred Stock,
      as
      applicable, during the 180 days prior to each applicable Distribution Date,
      in
      amount such that the net proceeds of such sale shall equal or exceed such
      Distributions and (ii) apply the net proceeds of such sale to pay
      Distributions to be paid in full.

     

    “Applicable
      Percentage”
means,
      in respect of any issuance and sale of Common Stock during the 180 days prior
      to
      the date of redemption or repurchase of any Notes, 400%.

     

    “Board
      of Directors”
means
      the Board of Directors of the Corporation or a duly constituted committee
      thereof.

     

    “Business
      Day”
means
      each day other than (i) a Saturday or Sunday or (ii) a day on which banking
      institutions in the City of New York are authorized or obligated by law,
      regulation or executive order to close.

     

    “Commission”
means
      the United States Securities and Exchange Commission.

     

     

    “Common
      Equity Units”
means
      a
      security or combination of securities that (i) gives the holders (a) a
      beneficial interest in a fixed income security of the Corporation (including
      a
      debt security, a trust preferred security of a subsidiary trust or preferred
      stock) that has a maturity no greater than six years and (b) a beneficial
      interest in a stock purchase contract; (ii) includes a remarketing feature
      pursuant to which the fixed income security is required to be remarketed to
      new
      investors within four years from the date of issuance of the security; and
      (iii)
      provides for the proceeds raised in the remarketing to be used to purchase
      a
      determinable number of shares of Common Stock (which may be determinable within
      a range) pursuant to the stock purchase contract.

     

    “Common
      Stock”
means
      common stock of the Corporation (including treasury shares of common stock
      and
      shares of common stock sold pursuant to the Corporation’s dividend reinvestment
      plan, direct stock purchase plan and employee benefit plans).

     

    “Corporation”
has
      the
      meaning specified in the introduction to this instrument.

     

    
      
        
        

      

      
        I-1

        
          

        

      

      
        
        

      

    

    “Covered
      Debtholder”
means
      each Person (whether a Holder or a beneficial owner holding through a
      participant in a clearing agency) that buys, holds or sells long-term
      indebtedness for money borrowed of the Corporation during the period that such
      long-term indebtedness for money borrowed is Covered Debt, provided that a
      Person who has sold all its right, title and interest in Covered Debt shall
      cease to be a Covered Debtholder at the time of such sale if, at such time,
      the
      Corporation has not breached or repudiated, or threatened to breach or
      repudiate, its obligations hereunder.

     

    “Covered
      Debt”
means
      (i) at the date of this Replacement Capital Covenant and continuing to but
      not
      including the first Redesignation Date, the Initial Covered Debt and (ii)
      thereafter, commencing with each Redesignation Date and continuing to but not
      including the next succeeding Redesignation Date, the Eligible Debt identified
      pursuant to Section 3(b) as the Covered Debt for such period.

     

    “Distribution
      Date”
means,
      as to any securities or combination of securities, the dates on which periodic
      Distributions on such securities are scheduled to be made.

     

    “Distribution
      Period”
means,
      as to any securities or combination of securities, each period from and
      including a Distribution Date for such securities to but not including the
      next
      succeeding Distribution Date for such securities.

     

    “Distributions”
means,
      as to a security or combination of securities, dividends, interest payments
      or
      other income distributions to the holders thereof that are not Subsidiaries
      of
      the Corporation.

     

    “Eligible
      Debt”
means,
      at any time, Eligible Subordinated Debt or, if no Eligible Subordinated Debt
      is
      then outstanding, Eligible Senior Debt.

     

    “Eligible
      Senior Debt”
means,
      at any time in respect of any issuer, each series of outstanding long-term
      indebtedness for money borrowed of such issuer that (i) upon a bankruptcy,
      liquidation, dissolution or winding up of the issuer, ranks most senior among
      the issuer’s then outstanding classes of indebtedness for money borrowed;
      (ii) is then assigned a rating by at least one NRSRO (provided that this
      clause shall apply on a Redesignation Date only if on such date the issuer
      has
      outstanding senior long-term indebtedness for money borrowed that satisfies
      the
      requirements of clauses (i), (iii) and (iv) that is then assigned a
      rating by at least one NRSRO); (iii) has an outstanding principal amount of
      not less than $100,000,000; and (iv) was issued through or with the
      assistance of a commercial or investment banking firm or firms acting as
      underwriters, initial purchasers or placement or distribution agents. For
      purposes of this definition as applied to securities with a CUSIP number, each
      issuance of long-term indebtedness for money borrowed that has (or, if such
      indebtedness is held by a trust or other intermediate entity established
      directly or indirectly by the issuer, the securities of such intermediate entity
      have) a separate CUSIP number shall be deemed to be a series of the issuer’s
      long-term indebtedness for money borrowed that is separate from each other
      series of such indebtedness.

     

    “Eligible
      Subordinated Debt”
means,
      at any time in respect of any issuer, each series of the issuer’s then
      outstanding long-term indebtedness for money borrowed that (i) upon a
      bankruptcy, liquidation, dissolution or winding up of the issuer, ranks
      subordinate to the issuer’s then outstanding series of indebtedness for money
      borrowed that ranks most senior; (ii) is then assigned a rating by at least
      one
      NRSRO (provided that this clause (ii) shall apply on a Redesignation Date only
      if on such date the issuer has outstanding subordinated long-term indebtedness
      for money borrowed that satisfies the requirements in clauses (i), (iii) and
      (iv) that is then assigned a rating by at least one NRSRO); (iii) has an
      outstanding principal amount of not less than $100,000,000; and (iv) was issued
      through or with the assistance of a commercial or investment banking firm or
      firms acting as underwriters, initial purchasers or placement or distribution
      agents. For purposes of this definition as applied to securities with a CUSIP
      number, each issuance of long-term indebtedness for money borrowed that has
      (or,
      if such indebtedness is held by a trust or other intermediate entity established
      directly or indirectly by the issuer, the securities of such intermediate entity
      have) a separate CUSIP number shall be deemed to be a series of the issuer’s
      long-term indebtedness for money borrowed that is separate from each other
      series of such indebtedness.

     

    
      
        
        

      

      
        I-2

        
          

        

      

      
        
        

      

    

    “Explicit
      Replacement Covenant”
means,
      as to any security or combination of securities, that the Corporation has made
      a
      covenant substantially similar to the Replacement Capital Covenant to the effect
      that the Corporation will redeem or repurchase such securities only if and
      to
      the extent that the total redemption or repurchase price is equal to or less
      than the net proceeds received from the issuance and sale of Qualifying Capital
      Securities, substantially as defined herein but as applied to such securities
      instead of to the Notes, raised within 180 days prior to the applicable
      redemption or repurchase date, and that the Board of Directors has determined
      that such covenant is binding on the Corporation for the benefit of one or
      more
      series of the Corporation’s long-term indebtedness for money borrowed to the
      same extent as this Replacement Capital Covenant is binding on the Corporation
      for the benefit of the Holders of the Initial Covered Debt.

     

    “Holder”
means,
      as to the Covered Debt then in effect, each holder of such Covered Debt as
      reflected on the securities register maintained by or on behalf of the
      Corporation with respect to such Covered Debt.

     

    “Initial
      Covered Debt”
means
      the 8.25% Senior Notes due 2029, issued by the Corporation on October 27, 1999
      (CUSIP No. 844030AC0).

     

    “Intent-Based
      Replacement Disclosure”
means,
      as to any security or combination of securities issued, directly or indirectly,
      by the Corporation, that the Corporation has publicly stated its intention,
      either in the prospectus or other offering document under which such securities
      were initially offered for sale or in filings with the Commission made by the
      Corporation under the Securities Exchange Act prior to or contemporaneously
      with
      the issuance of such securities, that the Corporation will redeem or repurchase
      such securities only with the proceeds of Qualifying Capital Securities,
      substantially as defined herein but as applied to such securities instead of
      to
      the Notes, raised within 180 days prior to the applicable redemption or
      repurchase date.

     

    
      
        
        

      

      
        I-3

        
          

        

      

      
        
        

      

    

                “Mandatory
      Trigger Provision”
means,
      as to any security or combination of securities, provisions in the terms thereof
      or in the related transaction agreements that (A) require, or at its option
      in
      the case of perpetual Non-Cumulative Preferred Stock permit, the issuer of
      such
      security or combination of securities to make payment of Distributions on such
      securities only in connection with the issuance and sale of shares of its Common
      Stock, or Qualifying Non-Cumulative Preferred Stock, within two years of a
      failure to satisfy one or more financial tests set forth in the terms of such
      securities or related transaction agreements, in amount such that the net
      proceeds of such sale at least equal the amount of unpaid Distributions on
      such
      securities (including without limitation all deferred and accumulated amounts)
      and in either case requires the application of the net proceeds of such sale
      to
      pay such unpaid Distributions, (B) in the case of securities other than
      perpetual Non-Cumulative Preferred Stock, prohibit the issuer from repurchasing
      any shares of its Common Stock prior to the date six months after the issuer
      applies the net proceeds of the sales described in clause (A) to pay such unpaid
      Distributions in full, (C) upon any liquidation, dissolution, winding up,
      reorganization or in connection with any insolvency, receivership or proceeding
      under any bankruptcy law with respect to the issuer, limit the claim of the
      holders of such securities (other than perpetual Non-Cumulative Preferred Stock)
      for Distributions that accumulate during a period in which the Corporation
      fails
      to satisfy one or more financial tests set forth in the terms of such securities
      or related transaction agreements to (x) 25% of the principal amount of such
      securities then outstanding in the case of securities not permitting the
      issuance and sale pursuant to the provisions described in clause (A) above
      of
      securities other than Common Stock or (y) two years of accumulated and unpaid
      Distributions (including compounded amounts thereon) in all other cases and
      (D)
      limit the issuer's use of Qualifying Non-Cumulative Preferred Stock for purposes
      of making payments of Distributions on such securities to a liquidation amount
      not in excess of 25% of the initial aggregate liquidation amount (in the case
      of
      perpetual Non-Cumulative Preferred Stock) or the initial aggregate principal
      amount (in the case of securities other than perpetual Non-Cumulative Preferred
      Stock). No remedy other than Permitted Remedies will arise by the terms of
      such
      securities or related transaction agreements in favor of the holders of such
      securities as a result of the issuer's failure to pay Distributions because
      of
      the Mandatory Trigger Provision or as a result of the issuer's exercise of
      its
      right under an Optional Deferral Provision until Distributions have been
      deferred for one or more Distribution Periods that total together at least
      ten
      years.

     

    “Market
      Disruption Event”
means
      the occurrence or existence of any of the following events or sets of
      circumstances:

     

    
      
        
        

      

      
        I-4

        
          

        

      

      
        
        

      

    

    (i)  trading
      in securities generally, or in the Corporation’s securities specifically, on the
      New York Stock Exchange or any other national securities exchange or
      over-the-counter market on which the Corporation’s common stock or preferred
      stock is then listed or traded shall have been suspended or its settlement
      generally shall have been materially disrupted;

     

    (ii)  the
      Corporation would be required to obtain the consent or approval of a regulatory
      body (including, without limitation, any securities exchange) or governmental
      authority to issue shares of the Corporation’s common stock or Qualifying
      Non-Cumulative Preferred Stock and the Corporation fails to obtain that consent
      or approval notwithstanding the Corporation’s commercially reasonable efforts to
      obtain that consent or; or

     

    (iii)  an
      event
      occurs and is continuing as a result of which the offering document for the
      offer and sale of the Corporation’s common stock or perpetual non-cumulative
      preferred stock would, in the Corporation’s reasonable judgment, contain an
      untrue statement of a material fact or omit to state a material fact required
      to
      be stated in that offering document or necessary to make the statements in
      that
      offering document not misleading and either (A) the disclosure of that event
      at
      the time the event occurs, in the Corporation’s reasonable judgment, would have
      a material adverse effect on the Corporation’s business or (B) the disclosure
      relates to a previously undisclosed proposed or pending material business
      transaction, the disclosure of which would impede the Corporation’s ability to
      consummate that transaction, provided that one or more events described in
      this
      subsection (iii) shall not constitute a Market Disruption Event with respect
      to
      more than one interest payment date.

     

    “Non-Cumulative
      Preferred Stock”
means
      preferred or preference stock having Distributions which may be skipped by
      the
      issuer thereof for any number of distribution periods without any remedy arising
      under the terms of such securities or related transaction agreements in favor
      of
      the holders of such securities as a result of such issuer’s failure to pay
      Distributions, other than Permitted Remedies (except for those described under
      clause (iii) of the definition thereof).

     

    “Notes”
has
      the
      meaning specified in Recital A.

     

    “NRSRO”
means
      a
      nationally recognized statistical rating organization within the meaning of
      Rule
      15c3-1(c)(2)(vi)(F) under the Securities Exchange Act.

     

    “Optional
      Deferral Provision”
means,
      as to any security or combination of securities, a provision in the terms
      thereof or of the related transaction agreements, substantially similar to
      Section 4.1 of the Second Supplemental Indenture, to the effect that the issuer
      thereof may, in its sole discretion, defer in whole or in part payment of
      Distributions on such securities for one or more consecutive Distribution
      Periods of up to ten years without any remedy other than Permitted Remedies
      as a
      result of such issuer’s failure to pay Distributions.

     

    
      
        
        

      

      
        I-5

        
          

        

      

      
        
        

      

    

    “Permitted
      Remedies”
means,
      as to any security or combination of securities, any one or more of
      (i) rights in favor of the holders thereof permitting such holders to elect
      one or more directors of the Corporation (including any such rights required
      by
      the listing requirements of any stock or securities exchange on which such
      securities may be listed or traded), (ii) prohibitions on the Corporation
      paying Distributions on or repurchasing common stock or other securities that
      rank junior as to Distributions to such securities for so long as Distributions
      on such securities, including deferred distributions, have not been paid in
      full
      or to such lesser extent as may be specified in the terms of such securities,
      and (iii) provisions obliging the Corporation to cause such unpaid
      Distributions to be paid in full pursuant to an Alternative Payment
      Mechanism.

     

    “Person”
means
      any individual, corporation, partnership, joint venture, trust, limited
      liability company or corporation, unincorporated organization or government
      or
      any agency or political subdivision thereof.

     

    “Qualifying
      Capital Securities”
shall
      mean securities that meet one or more of the following criteria in the
      determination of the Board of Directors reasonably construing the definitions
      and terms of this Replacement Capital Covenant:

     

    (a)  Common
      Stock;

     

    (b)  Common
      Equity Units;

     

    (c)  Non-Cumulative
      Preferred Stock having either:

     

    (i)  (A)
      no
      maturity or a maturity of at least 60 years and (B) Intent-Based
      Replacement Disclosure; or

     

    (ii)  (A)
      a
      maturity of at least 40 years and (B) an Explicit Replacement
      Covenant;

     

    (d)  preferred
      stock having cumulative Distributions and either:

     

    (i)  (A)
      no
      prepayment obligation on the part of the issuer thereof, whether at the election
      of the holders or otherwise, and (B) a requirement that the preferred stock
      converts into common stock of the Corporation within three years from the date
      of issuance at a conversion ratio within a range established at the time of
      issuance of the preferred stock; or

     

    (ii)  (A)
      no
      maturity or a maturity of at least 60 years and (B) either an Explicit
      Replacement Covenant or Intent-Based Replacement Disclosure; or

     

    
      
        
        

      

      
        I-6

        
          

        

      

      
        
        

      

    

    (e)  other
      securities that

     

    (i)  rank
      upon
      on a liquidation, dissolution or winding-up of the Corporation pari
      passu
      with or
      junior to the Notes; and

     

    (ii)  include
      a
      distribution deferral provision, in the terms thereof or in the related
      transaction agreements, substantially similar to Section 4.1 of the Second
      Supplemental Indenture; and

     

    (iii)  have
      a
      maturity greater than 30 years with an Explicit Replacement
      Covenant.

     

    “Qualifying
      Non-Cumulative Preferred Stock”
means
      preferred or preference stock of the Corporation that (i) is Non-Cumulative
      Preferred Stock, (ii) ranks pari
      passu
      with or
      junior to other preferred stock of the Corporation, (iii) is perpetual and
      (iv)
      either by its terms or when taken together with any related transaction
      agreements has either (A) an Explicit Replacement Covenant or (B) a Mandatory
      Trigger Provision and Intent-Based Replacement Disclosure.

     

    “Redesignation
      Date”
means,
      as to the then effective Covered Debt, the earliest of (i) the date that is
      two
      years prior to the final maturity date of such Covered Debt, (ii) if the
      Corporation elects to redeem, or the Corporation or a Subsidiary of the
      Corporation elects to repurchase, such Covered Debt either in whole or in part
      with the consequence that after giving effect to such redemption or repurchase
      the outstanding principal amount of such Covered Debt is less than $100,000,000,
      the applicable redemption or repurchase date and (iii) if the then outstanding
      Covered Debt is not Eligible Subordinated Debt, the date on which the
      Corporation issues long-term indebtedness for money borrowed that is Eligible
      Subordinated Debt.

     

    “Replacement
      Capital Covenant”
has
      the
      meaning specified in the introduction to this instrument.

     

    “Second
      Supplemental Indenture”
means
      the Second Supplemental Indenture, dated as of October [20], 2006, to the
      Indenture, dated as of May 10, 1995, between the Corporation and JPMorgan
      Chase Bank, N.A., as trustee.

     

    “Securities
      Exchange Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “Subsidiary”
means,
      at any time, any Person the shares of stock or other ownership interests of
      which having ordinary voting power to elect a majority of the board of directors
      or other managers of such Person are at the time owned, or the management or
      policies of which are otherwise at the time controlled, directly or indirectly
      through one or more intermediaries (including other Subsidiaries) or both,
      by
      another Person.

     

    I-7

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