SOUTHERN UNION CO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>exhibit2.txt
<DESCRIPTION>AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
<TEXT>
                                                               Exhibit No. 10(a)


                               SECOND AMENDMENT TO
             SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
                           (LONG-TERM CREDIT FACILITY)


         THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT (LONG-TERM CREDIT FACILITY) (the "Amendment") is made effective as of
April 3, 2003, by and among SOUTHERN UNION COMPANY, a Delaware corporation (the
"Borrower"), the financial institutions listed on the signature pages of the
Credit Agreement (as hereinafter defined) (individually the "Bank" and
collectively the "Banks") and JPMORGAN CHASE BANK, a New York banking
corporation formerly known as THE CHASE MANHATTAN BANK, successor by merger to
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION ("Chase"), in its capacity as agent
(the "Agent") for the Banks.

                                    RECITALS:

         WHEREAS, the Borrower, the Banks and the Agent have executed a certain
Second Amended and Restated Revolving Credit Agreement (Long-Term Credit
Facility) dated effective May 29, 2001, as previously amended by that certain
First Amendment to Second Amended and Restated Revolving Credit Agreement
(Long-Term Credit Facility) dated effective June 10, 2002, by and among the
Borrower, the Banks and the Agent (said Second Amended and Restated Revolving
Credit Agreement, as previously amended, being hereinafter referred to as the
"Credit Agreement"); and

         WHEREAS, the Majority Banks, the Agent and the Borrower desire to
further amend the Credit Agreement in certain respects.

         NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other
goods and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                   AGREEMENTS:

         1. Amendment of Definitions. The definitions of "Consolidated Net
Worth," "Consolidated Total Capitalization," "Consolidated Total Indebtedness"
and "Short-Term Credit Facility Agreement" contained in Section 1 of the Credit
Agreement are hereby amended and restated in their entirety to hereafter be and
read as follows:

         "Consolidated Net Worth" shall mean, for any period for the Borrower
and all Subsidiaries, (a) the sum of the following consolidated items, all
determined in accordance with GAAP and without duplication: the consolidated
stockholders' equity of all classes of stock (whether common, preferred,
mandatorily convertible preferred or preference) of the Borrower and its
Subsidiaries; the Equity-Preferred Securities; the other preferred securities of
the Borrower's Subsidiaries not constituting Equity-Preferred Securities; and
the minority interests in the Borrower's Subsidiaries, less (b) the sum of the
following consolidated items, without duplication: the book amount of any
deferred charges (including, but not limited to, unamortized debt discount and
expenses, organization expenses, experimental and development expenses, but
excluding prepaid expenses) that are not permitted to be recovered by the
Borrower or its applicable Subsidiaries under rates permitted under rate
tariffs, plus (c) the sum of all amounts contributed or paid by the Borrower to
the Rabbi Trusts for purposes of funding the same, but only to the extent such
contributions and payments are required to be deducted from the consolidated
stockholders' equity of the Borrower and its Subsidiaries in accordance with
GAAP.

         "Consolidated Total Capitalization" shall mean at any time the sum of:
(a) Consolidated Net Worth at such time; plus (b) the principal amount of
outstanding Debt (other than (i) the Debt outstanding under the AIG Loan and
(ii) to the extent included in Debt of the Borrower and its Subsidiaries,
Equity-Preferred Securities not to exceed 10% of Consolidated Total
Capitalization [calculated for purposes of this clause without reference to any
Equity-Preferred Securities]) of the Borrower and its Subsidiaries.

         "Consolidated Total Indebtedness" shall mean all Debt of the Borrower
and all Subsidiaries including any current maturities thereof, plus, without
duplication, all amounts outstanding under Standby Letters of Credit and,
without duplication, all Facility Letter of Credit Obligations, less, without
duplication, (i) all Debt of the Borrower outstanding under the AIG Loan and
(ii) to the extent included in Debt of the Borrower and its Subsidiaries,
Equity-Preferred Securities not to exceed 10% of Consolidated Total
Capitalization (calculated for purposes of this clause without reference to any
Equity-Preferred Securities).

         "Short-Term Credit Facility Agreement" means that certain Revolving
Credit Agreement (Short-Term Credit Facility) of even effective date herewith,
executed by and among the Borrower, JPMorgan, as administrative agent, and the
banks or financial institutions now or hereafter a party thereto in connection
with the Short-Term Credit Facility, as the same may be amended, modified,
increased, supplemented, restated and/or replaced from time to time.

         2. New Definitions. The following additional definitions are hereby
added to Section 1 of the Credit Agreement to hereafter be and read as follows:

         "Additional Equity Offering" shall mean (a) a public offering by the
Borrower of additional capital stock in the Borrower resulting in not less than
$100,000,000.00 of net cash equity proceeds being received by the Borrower and
(b) any additional offering or issuance of capital stock, Equity-Preferred
Securities or any other equity interests in Borrower or Southern Union Panhandle
(to the extent permitted under Section 9.5), so long as all net cash proceeds
from any such offering or issuance of equity described in clauses (a) or (b)
above are applied in the following order: (i) first, to payment of the Bridge
Loan until the same is fully paid; (ii) second, for other working capital needs
of the Borrower or any of its Subsidiaries, including without limitation, the
payment of the AIG Loan (but only to the extent not otherwise required to be
applied to the Term Loan Facility, the Obligations under this Agreement and/or
Debt outstanding under the Short-Term Credit Facility in accordance with the
following clauses); (iii) third, 50% of the net cash proceeds, if any, received
by the Borrower in excess of $125,000,000.00 in the aggregate from all
Additional Equity Offerings shall be applied to the Term Loan Facility; and (iv)
fourth, 50% of the net cash proceeds, if any, received by the Borrower in excess
of $125,000,000.00 in the aggregate from all Additional Equity Offerings shall
be applied to Obligations under this Agreement and/or Debt outstanding under the
Short-Term Credit Facility.

         "AIG Entities" shall mean AIG Highstar Capital, L.P., a Delaware
limited partnership, AIG Highstar Funding Corp., a Delaware corporation, and any
other permitted owner and holder of any shares of stock or other equity
interests in Southern Union Panhandle not owned and held by the Borrower or any
of the Borrower's Subsidiaries.

         "AIG Loan" shall mean a credit facility to be provided to the Borrower
by one or more of the AIG Entities in an aggregate principal amount not to
exceed $150,000,000.00 for purposes of financing a portion of the acquisition
costs for the Panhandle Eastern Acquisition, said loan to be (a) non-recourse to
the Borrower and its Subsidiaries, (b) secured only by 28% of the issued and
outstanding stock and other equity interests in Southern Union Panhandle, and
(c) subject to other terms and conditions acceptable to the Agent in all
respects.

         "Bridge Loan" shall mean an unsecured short-term credit facility to be
obtained by the Borrower in an aggregate principal amount not to exceed
$115,000,000.00, and having a final stated maturity on or before September 1,
2003, for purposes of financing a portion of the acquisition costs for the
Panhandle Eastern Acquisition, so long as such short-term credit facility is
obtained upon terms and conditions substantially similar to the terms and
conditions set forth in the term sheet attached hereto as Exhibit D.

         "Equity-Preferred Securities" means (i) Debt, preferred equity or any
other securities that are mandatorily convertible by the issuer thereof at a
date certain, without cash payment by the issuer, into common shares of stock of
the Borrower or (ii) any other securities (A) that are issued by the Borrower or
any Subsidiary, (B) that are not subject to mandatory redemption at any time,
directly or indirectly, (C) that are perpetual or mature not less than 30 years
from the date of issuance, (D) the Debt component, if any, issued in connection
therewith, including any guaranty, is subordinate in right of payment to all
other unsecured and unsubordinated Debt of the issuer of such Debt component
(including any such guaranty, if applicable), and (E) the terms of which permit
the issuer thereof to defer at any time, without any additional payment or
premium, the payment of any and all interest and/or distributions thereon, as
applicable, to a date occurring after the Maturity Date.

          "Exchange Company" shall mean Southern Union Exchange Company, a
Delaware corporation and/or any other entity created and owned by Chicago
Deferred Exchange Corporation that the Borrower hereafter enters into a
"qualified exchange accommodation agreement" with for purposes of facilitating
the Panhandle Eastern Acquisition.

         "Panhandle Eastern" shall mean Panhandle Eastern Pipe Line Company, a
Delaware corporation.

         "Panhandle Eastern Acquisition" shall mean the acquisition by the
Exchange Company of 100% of all issued and outstanding stock and other equity
interests, if any, in Panhandle Eastern in accordance with the Panhandle Eastern
Acquisition Agreement, so long as such acquisition is in substantial compliance
with the following specified terms:

                (a) immediately after the finalization and consummation of such
         acquisition, Panhandle Eastern is a wholly-owned Subsidiary of the
         Exchange Company;

                (b) the aggregate consideration paid for all stock and other
         equity interests in Panhandle Eastern shall not exceed $663,000,000.00
         in cash, with the source of said cash purchase price to be a
         combination of some or all of the following: (i) $406,000,000.00 of
         "like-kind" exchange proceeds previously received from the prior sale
         to ONEOK, Inc. of the "Southern Union Gas Company" Texas division and
         certain other related assets; (ii) the proceeds of the AIG Loan; (iii)
         the proceeds of the Additional Equity Offering, if any; (iv) the
         proceeds of the Bridge Loan, if required; and (v) other cash, if any,
         held by or available to the Borrower;

                (c) the Exchange Company shall make a Section 338(h)(10)
         election under the Code as part of the closing of such acquisition, and
         as soon as reasonably possible after the finalization and consummation
         of such acquisition, the Exchange Company shall cause Panhandle Eastern
         and each of its applicable Subsidiaries to convert from "C
         corporations" to limited liability companies after receipt of all
         requisite approvals and consents from any Governmental Authority,
         including without limitation, the Federal Energy Regulatory Commission;

                (d) immediately after such conversion of Panhandle Eastern and
         each of its applicable Subsidiaries from "C corporations" to limited
         liability companies, the Exchange Company shall distribute to the
         Borrower 100% of all membership and other equity interests in Panhandle
         Eastern, thus causing Panhandle Eastern to be a wholly-owned Subsidiary
         of the Borrower;

                (e) immediately after such distribution to the Borrower of 100%
         of all membership and other equity interests in Panhandle Eastern, the
         existing Debt of Panhandle Eastern and its Subsidiaries may cause
         Consolidated Total Indebtedness to increase by not more than
         $1,170,000,000.00 in the aggregate, provided that neither the Borrower
         nor any of its Subsidiaries existing prior to such distribution shall
         have, incur or assume any liability with respect to such existing Debt
         of Panhandle Eastern and its Subsidiaries;

                (f) one (1) Business Day after such distribution by the Exchange
         Company to the Borrower of all membership and other equity interests in
         Panhandle Eastern, the Borrower shall distribute to Southern Union
         Panhandle 100% of all membership and other equity interests in
         Panhandle Eastern; and

                (g) all requisite approvals and consents from any Governmental
         Authority with respect to the above-described acquisitions and
         distributions shall have been received by the Borrower in a form
         acceptable to the Agent.

         "Panhandle Eastern Acquisition Agreement" shall mean that certain Stock
Purchase Agreement dated December 21, 2002, by and between CMS Gas Transmission
Company, as seller, Southern Union Panhandle, as purchaser, and the Borrower and
the AIG Entities, as sponsors, as the same may hereafter be amended, modified,
supplemented, restated or replaced (the form of any such amendment,
modification, etc. to be approved by the Agent, such approval to not be
unreasonably withheld, conditioned or delayed), it being contemplated that such
Stock Purchase Agreement will be assigned by the Borrower to the Exchange
Company to facilitate the Panhandle Eastern Acquisition.

         "Panhandle Eastern Refinancing Debt" shall mean any Debt of Panhandle
Eastern and/or any of its Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund, any Debt of Panhandle Eastern and/or any of its Subsidiaries existing
prior to the Exchange Company's acquisition of all stock and other equity
interests in Panhandle Eastern in connection with the Panhandle Eastern
Acquisition, provided, that:

                  (a) the principal amount of such Panhandle Eastern Refinancing
         Debt does not exceed the then outstanding principal amount of the Debt
         so extended, refinanced, renewed, replaced, defeased or refunded;

                  (b) the interest rate or rates to accrue under such Panhandle
         Eastern Refinancing Indebtedness do not exceed the lesser of (i) the
         interest rate or rates then accruing on the Debt so extended,
         refinanced, renewed, replaced, defeased or refunded or (ii) the
         prevailing market interest rate or rates which are then applicable to,
         and generally available for, Debt which is similar in type, amount,
         maturity and other terms to the Indebtedness so extended, refinanced,
         renewed, replaced, defeased or refunded;

                  (c) the maturities, amortization schedules, covenants,
         defaults, remedies, collateral security provisions (or absence thereof)
         and other terms of such Panhandle Eastern Refinancing Indebtedness,
         including without limitation, any restrictions on the payment by
         Panhandle Eastern and/or its applicable Subsidiaries of any dividends
         or other shareholder distributions, are in each case the same or more
         favorable to Panhandle Eastern and/or its applicable Subsidiaries as
         those in the Debt so extended, refinanced, renewed, replaced, defeased
         or refunded; and

                  (d) no Default or Event of Default has occurred and is
         continuing or would result from the issuance or origination of such
         Panhandle Eastern Refinancing Indebtedness.

         "Southern Union Panhandle" shall mean Southern Union Panhandle Corp., a
Delaware corporation formed by the Borrower for the purpose of ultimately owning
and holding 100% of all issued and outstanding equity interests in Panhandle
Eastern.

         "Trunkline LNG Holdings" shall mean CMS Trunkline LNG Holdings, LLC, a
Delaware limited liability company.

         "Trunkline LNG Holdings Sale" shall mean the sale by Panhandle Eastern
to a third-party that is not an Affiliate of the Borrower or any of the AIG
Entities of all or a portion of the issued and outstanding stock and other
equity interests, if any, in Trunkline LNG Holdings, so long as such sale is
finalized and consummated in substantial compliance with the following specified
terms:

                (a) all cash proceeds received by Panhandle Eastern from such
         sale, less customary and reasonable transaction fees and the amount of
         all taxes payable by the Panhandle Eastern attributable to such sale,
         shall by fully distributed by Panhandle Eastern to Southern Union
         Panhandle, and in turn by Southern Union Panhandle to the Borrower and
         the AIG Entities;

                (b) all cash proceeds distributed to the Borrower from such sale
         shall be immediately applied against the Borrower's Debt in the
         following order: (i) first to the Bridge Loan until the same is fully
         paid; (ii) second, 50% of the remaining cash proceeds shall be applied
         to the Term Loan Facility; and (iii) the balance, if any, shall be
         applied to Obligations under this Agreement and/or Debt outstanding
         under the Short-Term Credit Facility; and

                (c) all requisite approvals and consents from any Governmental
         Authority with respect to such sale shall have been received by
         Panhandle Eastern in a form acceptable to the Agent.

         3. Amendment of Required Prepayments. New subparagraphs (d) and (e) are
hereby added to Section 4.1 of the Credit Agreement to read as follows:

                  (d) All cash proceeds distributed to the Borrower from the
         Trunkline LNG Holdings Sale shall be immediately applied against the
         Borrower's Debt in the following order: (i) first to the Bridge Loan
         until the same is fully paid; (ii) second, 50% of the remaining cash
         proceeds shall be applied to the Term Loan Facility; and (iii) the
         balance, if any, shall be applied to Obligations under this Agreement
         and/or Debt outstanding under the Short-Term Credit Facility.

                  (e) All net cash proceeds received by the Borrower from any
         Additional Equity Offerings shall be applied in the following order:
         (i) first, to payment of the Bridge Loan until the same is fully paid;
         (ii) second, for other working capital needs of the Borrower or any of
         its Subsidiaries, including without limitation, the payment of the AIG
         Loan (but only to the extent not otherwise required to be applied to
         the Term Loan Facility, the Obligations under this Agreement and/or
         Debt outstanding under the Short-Term Credit Facility in accordance
         with the following clauses); (iii) third, 50% of the net cash proceeds,
         if any, received by the Borrower in excess of $125,000,000.00 in the
         aggregate from all Additional Equity Offerings shall be applied to the
         Term Loan Facility; and (iv) fourth, 50% of the net cash proceeds, if
         any, received by the Borrower in excess of $125,000,000.00 in the
         aggregate from all Additional Equity Offerings shall be applied to
         Obligations under this Agreement and/or Debt outstanding under the
         Short-Term Credit Facility.

         4. Pledge of Southern Union Panhandle Stock Representation and
Warranty. A new Section 7.17 is hereby added to the Credit Agreement to read as
follows:

                  7.17 No Agreements Prohibiting Pledge of Southern Union
         Panhandle Stock. Except for the applicable negative covenants of this
         Agreement, the Short-Term Credit Facility Agreement, the Term Loan
         Facility and the Bridge Loan, the Borrower is not a party to any
         contract or other agreement with any Person that directly or indirectly
         prohibits the Borrower from granting any Lien against the stock or
         other equity interests in Southern Union Panhandle (whether common,
         preferred or another class of equity ownership) at any time owned and
         held by the Borrower as security for any Debt of the Borrower or any of
         its Subsidiaries.

         5. Additional Equity Offering Affirmative Covenant. New Sections 9.12
and 9.13 are hereby added to the Credit Agreement to read as follows:

                  9.12 Additional Equity Offering. On or before September 1,
         2003, the Borrower agrees to (a) cause the Additional Equity Offering
         to be consummated and finalized, and (b) if the Bridge Loan is then
         outstanding, cause the proceeds received by the Borrower from such
         Additional Equity Offering to be utilized to fully pay the Bridge Loan.

                  9.13 Bridge Loan Commitments. On or before April 4, 2003, the
         Borrower agrees to cause to be delivered to the Agent valid and binding
         written loan commitments for the Bridge Loan, accepted by the Borrower,
         from one or more lenders in an aggregate amount of not less than
         $100,000,000.00.

         6. Amendment of Capital Requirements Negative Covenant. Sections
10.1(a) and 10.1(b) of the Credit Agreement are hereby amended and restated in
their entirety to hereafter be and read as follows:

                  (a) permit its Consolidated Net Worth at the end of any fiscal
         quarter to be less than the sum of (i) $741,887,000, (ii) 40% of
         Consolidated Net Income (if positive) for the period commencing on
         January 1, 2002 and ending on the date of determination, and treated as
         a single accounting period; (iii) the difference between (A) 100% of
         the net proceeds of any issuance of capital or preferred stock or any
         other Equity-Preferred Securities by the Borrower or any consolidated
         Subsidiary, including without limitation, the Additional Equity
         Offering, received by the Borrower or such consolidated Subsidiary at
         any time after January 1, 2002; and (B) the aggregate amount of all
         redemption or repurchase payments hereafter made, if any, by the
         Borrower and any such consolidated Subsidiary in connection with the
         repurchase by the Borrower or any such consolidated Subsidiary of any
         of their respective capital or preferred stock; (iv) without
         duplication, the difference between (A) 100% of the net proceeds
         heretofore and hereafter received by the Borrower and any consolidated
         Subsidiary in respect of the issuance by the Borrower or such
         consolidated Subsidiary of the Structured Securities, and (B) the
         aggregate amount of all redemption payments hereafter made, if any, by
         the Borrower and any such consolidated Subsidiary in connection with
         the redemption of any of the Structured Securities; and (v) the
         minority interests in the Borrower's Subsidiaries.

                  (b) permit the ratio of its Consolidated Total Indebtedness to
         its Consolidated Total Capitalization to be greater than (i) 0.65 to
         1.00 at the end of any fiscal quarter ending prior to the Exchange
         Company's acquisition of all stock and other equity interests in
         Panhandle Eastern in connection with the Panhandle Eastern Acquisition;
         (ii) 0.75 to 1.00 at the end of any fiscal quarter ending on or after
         the Exchange Company's acquisition of all stock and other equity
         interests in Panhandle Eastern in connection with the Panhandle Eastern
         Acquisition, but before the consummation of either the Additional
         Equity Offering or the Trunkline LNG Holdings Sale, (iii) 0.70 to 1.00
         at the end of any fiscal quarter ending on or after the consummation of
         either the Additional Equity Offering or the Trunkline LNG Holdings
         Sale, and (iv) 0.65 to 1.00 at the end of any fiscal quarter ending on
         or after the earlier to occur of (A) the consummation of both the
         Additional Equity Offering and the Trunkline LNG Holdings Sale or (B)
         December 31, 2003.

         7. Amendment of Liens Negative Covenant. Section 10.2(d) of the Credit
Agreement is hereby amended and restated in its entirety to hereafter be and
read as follows:

                  (d) Liens on property existing at the time of acquisition
         thereof by the Borrower or any Subsidiary, including without
         limitation, (i) any property acquired by the Borrower in consummating
         and finalizing any of the Prior Acquisitions, (ii) any Liens existing
         on any property of Panhandle Eastern or any of its Subsidiaries to
         secure existing Debt of Panhandle Eastern or any of its Subsidiaries on
         the date the Exchange Company acquires all stock and other equity
         interests in Panhandle Eastern in connection with the Panhandle Eastern
         Acquisition, and (iii) any Liens against any property of Panhandle
         Eastern or any of its Subsidiaries to secure Panhandle Eastern
         Refinancing Debt (provided such Liens are limited to property of
         Panhandle Eastern or any of its Subsidiaries securing the Debt so
         extended, refinanced, renewed, replaced, defeased or refunded), or
         purchase money Liens placed on an item of real or personal property
         purchased by the Borrower or any Subsidiary to secure a portion of the
         purchase price of such property, including without limitation, any
         Liens against up to 28% of the stock and other equity interests in
         Southern Union Panhandle granted by the Borrower as security for the
         AIG Loan; provided that no such Lien may encumber or cover any other
         property of the Borrower or any Subsidiary.

         8. Amendment of Debt Negative Covenant. Sections 10.3(a) and 10.3(g) of
the Credit Agreement are hereby amended and restated in their entirety to
hereafter be and read as follows:

                  (a) Debt evidenced by the Notes, the Short-Term Credit
         Facility Notes, the Facility Letter of Credit Obligations or
         outstanding under the Term Loan Facility, the AIG Loan, the Bridge Loan
         and any Equity-Preferred Securities (to the extent the same constitutes
         Debt) not in default, as well as (i) existing Debt of Panhandle Eastern
         and/or any of its Subsidiaries otherwise permitted in the definition of
         "Panhandle Eastern Acquisition," (ii) any Panhandle Eastern Refinancing
         Debt, (iii) any loans or advances of proceeds of the AIG Loan, the
         Bridge Loan and/or the Additional Equity Offering by the Borrower to
         Southern Union Panhandle for purposes of financing the Panhandle
         Eastern Acquisition, (iv) any loans or advances by the Borrower to
         Panhandle Eastern and/or any of the Borrower's other Subsidiaries
         permitted under Section 10.4(b) and (v) any working capital credit
         facility or facilities provided directly to Panhandle Eastern and/or
         any of Panhandle Eastern's Subsidiaries by any party other than the
         Borrower, so long as the principal amount of all such outstanding
         working capital facilities, together with the outstanding principal
         amount of any working capital loans or advances by the Borrower to
         Panhandle Eastern and/or any of Panhandle Eastern's Subsidiaries, does
         not exceed $25,000,000 in the aggregate at any time.

                  (g) additional Debt of the Borrower and Structured Securities
         of the Borrower and the Southern Union Trusts provided that after
         giving effect to the issuance thereof, there shall exist no Default or
         Event of Default; and: (i) the ratio of Consolidated Total Indebtedness
         to Consolidated Total Capitalization shall be no greater than (A) 0.65
         to 1.00 at all times prior to the date the Exchange Company acquires
         all stock and other equity interests in Panhandle Eastern in connection
         with the Panhandle Eastern Acquisition, (B) 0.75 to 1.00 at all times
         on and after the date the Exchange Company acquires all stock and other
         equity interests in Panhandle Eastern in connection with the Panhandle
         Eastern Acquisition, but before the consummation of either the
         Additional Equity Offering or the Trunkline LNG Holdings Sale, (C) 0.70
         to 1.00 at all times on or after the consummation of either the
         Additional Equity Offering or the Trunkline LNG Holdings Sale, and (D)
         0.65 to 1.00 at all times on and after the earlier to occur of (x) the
         consummation of both the Additional Equity Offering and the Trunkline
         LNG Holdings Sale or (y) December 31, 2003; (ii) the ratio of EBDIT for
         the four fiscal quarters most recently ended to pro forma Cash Interest
         Expense for the following four fiscal quarters shall be no less than
         2.00 to 1.0 at all times; provided, however, that if the additional
         Debt for which the determinations required to be made by this
         subparagraph (g) will be used to finance in whole or in part the
         consideration to be paid by the Borrower for the acquisition of any
         entity otherwise permitted under the terms of this Agreement, the
         determination of EBDIT for purposes of this ratio shall include not
         only the EBDIT of the Borrower and its Subsidiaries for the four fiscal
         quarters most recently ended, but shall also include the EBDIT of such
         entity to be acquired for such four fiscal quarters most recently
         ended; and (iii) (A) such Debt and Structured Securities shall have a
         final maturity or mandatory redemption date, as the case may be, no
         earlier than the Maturity Date and shall mature or be subject to
         mandatory redemption or mandatory defeasance no earlier than the
         Maturity Date (as so extended) and shall be subject to no mandatory
         redemption or "put" to the Borrower or any Southern Union Trust
         exercisable, or sinking fund or other similar mandatory principal
         payment provisions that require payments to be made toward principal,
         prior to such Maturity Date (as so extended); or (B) (x) such
         additional Debt shall have a final maturity date prior to the Maturity
         Date, (y) such additional Debt shall not exceed One Hundred Million
         Dollars ($100,000,000.00) in the aggregate plus Twenty Million Dollars
         ($20,000,000.00) of reimbursement obligations incurred in connection
         with Non-Facility Letters of Credit issued by a Bank or Banks or by any
         other financial institution; provided, however, that for purposes of
         determining the aggregate amount of such additional Debt for purposes
         of this subclause (y), the Debt of the Borrower under the Term Loan
         Facility shall not be included and such Debt under the Term Loan
         Facility shall be deemed to be permitted Debt for purposes of this
         subclause (y), and (z) such additional Debt shall be borrowed from a
         Bank or Banks as a loan or loans arising independent of this Agreement,
         the Short-Term Credit Facility Agreement or the Term Loan Facility or
         shall be borrowed from a financial institution that is not a Bank under
         this Agreement, the Short-Term Credit Facility Agreement or the Term
         Loan Facility.

         9. Amendment of Investment Negative Covenant. Sections 10.4(a) and
10.4(b) of the Credit Agreement are hereby amended and restated in their
entirety to hereafter be and read as follows:

                  (a) stock or other equity interests of (i) the Subsidiaries
         named in Section 7.1; (ii) other entities that are acquired by the
         Borrower or any Subsidiary but that are promptly merged with and into
         the Borrower; (iii) Southern Union Panhandle, Panhandle Eastern and any
         Subsidiaries of Panhandle Eastern acquired as a result of the Panhandle
         Eastern Acquisition; and (iv) the same Qualifying Entities as the
         Qualifying Entities under subparagraph (ii) of the definition of
         "Qualifying Assets," provided that at any one time the aggregate
         purchase price paid for such stock in such Qualifying Entities,
         including the aggregate amount of Debt assumed or deemed incurred by
         Borrower in connection with the purchase of such stock, is not more
         than ten percent (10%) of the Consolidated Net Worth of the Borrower
         and its Subsidiaries as of the applicable determination date, and
         further provided that Investments of the type described in clauses (ii)
         and (iv) of this Section 10.4(a) shall be permitted only after the
         consummation and finalization of both the Additional Equity Offering
         and the Trunkline LNG Holdings Sale and the payment in full of the AIG
         Loan.

                  (b) loans or advances to a Subsidiary, as well as advances of
         proceeds of the AIG Loan, the Bridge Loan and/or the Additional Equity
         Offering by the Borrower to the Exchange Company for purposes of
         facilitating the consummation of the Panhandle Eastern Acquisition;
         provided, however, that the principal amount of such loans and advances
         for working capital purposes at any time outstanding to Panhandle
         Eastern and/or any of Panhandle Eastern's Subsidiaries, together with
         the principal amount of any outstanding working capital credit facility
         or facilities provided directly to Panhandle Eastern and/or any of
         Panhandle Eastern's Subsidiaries by any party other than the Borrower,
         does not exceed $25,000,000 in the aggregate at any time.

         10. Amendment of Subsidiary Stock and Debt Negative Covenant. Section
10.5 of the Credit Agreement is hereby amended and restated in its entirety to
hereafter be and read as follows:

                  10.5 Stock and Debt of Subsidiaries. The Borrower will not,
         and will not permit any Subsidiary to, sell or otherwise dispose of any
         shares of stock, other equity interests or Debt of any Subsidiary, or
         permit any Subsidiary to issue or dispose of its stock (other than
         directors' qualifying shares), except for the following: (i) the sale,
         transfer or issuance of stock, other equity interests or Debt of any
         Subsidiary to the Borrower or another Subsidiary of the Borrower; (ii)
         the sale of up to 28% of all stock and other equity interests owned by
         the Borrower in Southern Union Panhandle upon terms reasonably
         acceptable to the Agent, so long as the proceeds of such equity sale
         are utilized to fully pay the AIG Loan; (iii) the sale of stock in
         Trunkline LNG Holdings and Debt of Trunkline LNG Holdings as a result
         of the Trunkline LNG Holdings Sale; (iv) the issuance by Southern Union
         Trusts of preferred beneficial interests in public offerings of
         Borrower's Structured Securities, and (v) the issuance by other
         Subsidiaries of the Borrower formed for the purpose of issuing
         Equity-Preferred Securities.

         11. Amendment to Sale of Assets Negative Covenant. A new subsection
(ix) is hereby added to the end of Section 10.8 of the Credit Agreement to read
as follows:

                  (ix) Panhandle Eastern may sell all stock in Trunkline LNG
         Holdings pursuant to the Trunkline LNG Holdings Sale.

         12. Dividends and Other Distributions Negative Covenant. A new Section
10.17 is hereby added to the Credit Agreement to read as follows:

                  10.17 Dividends and Other Distributions by Southern Union
         Panhandle. The Borrower will not permit Southern Union Panhandle to
         make any dividends, payments or other distributions of any kind to
         holders of stock or other equity interests in Southern Union Panhandle
         (whether common, preferred or another class of equity ownership) unless
         such dividends, payments or other distributions are made pro-rata to
         the Borrower and each other equity owner based on their respective
         percentage ownership interests held in Southern Union Panhandle.

         13. No Agreements Prohibiting Pledge of Southern Union Panhandle Stock.
A new Section 10.18 is hereby added to the Credit Agreement to read as follows:

                  10.18 No Agreements Prohibiting Pledge of Southern Union
         Panhandle Stock. The Borrower will not enter into any contract or other
         agreement with any Person that directly or indirectly prohibits the
         Borrower from granting any Lien against the stock or other equity
         interests in Southern Union Panhandle (whether common, preferred or
         another class of equity ownership) at any time owned and held by the
         Borrower as security for any Debt of the Borrower or any of its
         Subsidiaries, other than the applicable negative covenants of this
         Agreement, the Short-Term Credit Facility Agreement, the Term Loan
         Facility and the Bridge Loan.

         14. New Exhibit. A new Exhibit D, in the form of Exhibit A attached to
this Amendment, is hereby added to the Agreement.

         15. Other Sections. Except as expressly amended by this Amendment, the
provisions of the Agreement and the Notes shall remain in full force and effect,
and the Borrower acknowledges and reaffirms its liability to the Banks
thereunder. In the event of any inconsistency between this Amendment and the
terms of the Agreement or the Notes, this Amendment shall govern.

         16. Representations and Warranties. The Borrower represents and
warrants to the Banks as of the Borrower's execution of this Amendment and as of
the effective date hereof that:

             a. Representations and Warranties. The representations and
warranties contained in Section 7 of the Credit Agreement, as amended hereby,
are true and correct, and no Default or Event of Default has occurred and is
continuing.

             b. Corporate Power and Authorization. The Borrower is duly
authorized and empowered to execute, deliver and perform its obligations under
this Amendment and to make the borrowings provided for in the Credit Agreement,
and all requisite corporate action on the Borrower's part for the due execution,
delivery and performance of this Amendment has been duly and effectively taken.

             c. Binding Obligations. This Amendment constitutes the legal, valid
and binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms, except as limited by Debtor Laws.

             d. No Conflict or Resultant Lien. The execution, delivery and
performance of this Amendment and the consummation of the transactions
contemplated herein do not and will not violate any provision of, or result in a
default under, the certificate of incorporation or bylaws of the Borrower, or
any contract, agreement or instrument or any governmental requirement to which
the Borrower is subject, or result in the creation or imposition of any Lien
upon any property of the Borrower (other than as contemplated or permitted by
the Credit Agreement).

             e. No Consent. The Borrower's execution, delivery and performance
of this Amendment does not require the consent or approval of any Person.

         17. Miscellaneous.

             a. In accordance with the terms of Section 13.2 of the Credit
Agreement, this Amendment shall become effective when executed and delivered by
the Borrower, the Agent and the Majority Banks.

             b. No Bank, by its execution of this Amendment, waives any rights
it may have against any person not a party hereto.

             c. This Amendment may be executed in multiple counterparts, each of
which shall constitute an original instrument, but all of which shall constitute
one and the same Amendment.

             d. All capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to such terms in the Credit Agreement.

             e. The invalidity of any one or more covenants, phrases, clauses,
sentences or paragraphs of this Amendment shall not affect the remaining portion
of this Amendment, or any part thereof, and in case of any such invalidity, this
Amendment shall be construed as if such invalid covenants, phrases, clauses,
sentences or paragraphs had not been inserted. The section headings in this
Amendment are for convenience only and shall not limit or in any way affect the
meaning of the terms and provisions of this Amendment.

             f. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS AND THE UNITED STATES OF AMERICA.

         THIS WRITTEN AMENDMENT, TOGETHER WITH THE CREDIT AGREEMENT, THE NOTES
AND THE LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENT OF THE PARTIES.

         THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



<PAGE>


         IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
be effective as of the date first above written.

                             SOUTHERN UNION COMPANY

                             By:    s/ Richard N. Marshall
                                    --------------------------------------------
                             Name:  Richard N. Marshall
                                    --------------------------------------------
                             Title: Treasurer
                                    --------------------------------------------


                             JPMORGAN CHASE BANK, for itself and as Agent for
                             the Banks

                             By:      s/  Ken Sample
                                      ------------------------------------------
                             Name:    Ken Sample
                                      ------------------------------------------
                             Title:   Senior Vice President
                                      ------------------------------------------


<PAGE>


                              BANK ONE, NA
                              (Main Office-Chicago)

                              By:      s/ Sharon K. Webb
                                       -----------------------------------------
                              Name:    Sharon K. Webb
                                       -----------------------------------------
                              Title:   Associate Director
                                       -----------------------------------------


                              WACHOVIA BANK, NATIONAL ASSOCIATION
                              (SUCCESSOR TO FIRST UNION NATIONAL BANK)

                              By:      s/ Yann Pirio
                                       -----------------------------------------
                              Name:    Yann Pirio
                                       -----------------------------------------
                              Title:   Vice President
                                       -----------------------------------------


                              FLEET NATIONAL BANK

                              By:      s/ Charu Mani
                                       -----------------------------------------
                              Name:    Charu Mani
                                       -----------------------------------------
                              Title:   Vice President
                                       -----------------------------------------


                              MIZUHO  CORPORATE  BANK,  LTD.,  FORMERLY  KNOWN
                              AS THE  FUJI BANK, LIMITED

                              By:      s/ Jun Shimmachi
                                       -----------------------------------------
                              Name:    Jun Shimmachi
                                       -----------------------------------------
                              Title:   Vice President
                                       -----------------------------------------


                              MIZUHO CORPORATE BANK (USA)

                              By:      s/ Takuya Honjb
                                       -----------------------------------------
                              Name:    Takuya Honjb
                                       -----------------------------------------
                              Title:   President and CEO
                                       -----------------------------------------




<PAGE>


                              CREDIT LYONNAIS NEW YORK BRANCH

                              By:      s/ Olivier Audemard
                                       -----------------------------------------
                              Name:    Olivier Audemard
                                       -----------------------------------------
                              Title:   Senior Vice President
                                       -----------------------------------------


                              THE BANK OF TOKYO-MITSUBISHI, LTD.

                              By:
                                       -----------------------------------------
                              Name:
                                       -----------------------------------------
                              Title:
                                       -----------------------------------------

                              US BANK,  NATIONAL  ASSOCIATION
                              (FORMERLY  KNOWN  AS  FIRSTAR BANK, N.A.)

                              By:
                                       -----------------------------------------
                              Name:
                                       -----------------------------------------
                              Title:
                                       -----------------------------------------

                               NATIONAL AUSTRALIA BANK LIMITED,
                               A.C.N. 0040444937

                               By:
                                       -----------------------------------------
                               Name:
                                       -----------------------------------------
                               Title:
                                       -----------------------------------------


                               THE NORINCHUKIN BANK,
                               NEW YORK BRANCH

                               By:     s/ Fumiaki Ono
                                       -----------------------------------------
                               Name:   Fumiaki Ono
                                       -----------------------------------------
                               Title:  General Manager
                                       -----------------------------------------

                               CITIZENS BANK OF RHODE ISLAND

                               By:     s/ Marian L. Barrette
                                       -----------------------------------------
                               Name:   Marian L. Barrette
                                       -----------------------------------------
                               Title:  Vice President
                                       -----------------------------------------

                               WESTLB AG (FORMERLY KNOWN AS WESTDEUTSCHE
                               LANDESBANK GIROZENTRALE), A GERMAN BANKING
                               INSTITUTION ORGANIZED UNDER THE LAWS OF THE STATE
                               OF NORTH RHINE-WESTPAHLIA, GERMANY, ACTING
                               THROUGH ITS NEW YORK BRANCH

                               By:     s/ Sal Battinelli   s/ Duncan Robertson
                                       -----------------------------------------
                               Name:   Sal Battinelli         Duncan Robertson
                                       -----------------------------------------
                               Title:  Managing Director      Director
                                       -----------------------------------------


                               KBC BANK, N.V.

                               By:     s/ Rik Scheerlinck
                                       -----------------------------------------
                               Name:   Rik Scheerlinck
                                       -----------------------------------------
                               Title:  Sr. Vice President and General Manager
                                       -----------------------------------------

                               UMB BANK, N.A.

                               By:     s/ David A. Proffitt
                                       -----------------------------------------
                               Name:   David A. Proffitt
                                       -----------------------------------------
                               Title:  Senior Vice President
                                       -----------------------------------------


                               SUNTRUST BANK

                               By:
                                       -----------------------------------------
                               Name:
                                       -----------------------------------------
                               Title:
                                       -----------------------------------------


                              WELLS FARGO BANK TEXAS,
                              NATIONAL ASSOCIATION

                              By:      s/ Andrew J. Watson
                                       -----------------------------------------
                              Name:    Andrew J. Watson
                                       -----------------------------------------
                              Title:   Vice President
                                       -----------------------------------------




<PAGE>


                              MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

                              By:
                                       -----------------------------------------
                              Name:
                                       -----------------------------------------
                              Title:
                                       -----------------------------------------

<PAGE>




                                    EXHIBIT A



                         SUMMARY OF TERMS AND CONDITIONS

                                 BRIDGE FACILITY


Borrower:                             Southern Union Company (the "Borrower").

Guarantors:                           Southern Union Panhandle and other direct
                                      subsidiaries of the Borrower [other than
                                      Panhandle Eastern (as defined below) and
                                      its subsidiaries], referred to herein as
                                      the "Guarantors", and the Guarantors,
                                      together with the Borrower, are sometimes
                                      referred to herein as the "Obligors".

Facility                              Description: Up to $115,000,000 (but not
                                      less than $100,000,000) term loan (the
                                      "Facility") with a maturity of six months
                                      from the date of closing of the Panhandle
                                      Eastern Acquisition (the "Closing Date"),
                                      but in no event later than September 1,
                                      2003 (the "Maturity Date"). The Facility
                                      will be available for drawdown until the
                                      Closing Date, but in no event later than
                                      May 1, 2003.

Security:                             The Facility will be unsecured.

Purpose:                              The Facility will be used (i) to finance a
                                      portion of the Panhandle Eastern
                                      Acquisition of Panhandle Eastern (each as
                                      defined on Schedule 1 hereto) and (ii) to
                                      pay fees and expenses incurred in
                                      connection with the Panhandle Eastern
                                      Acquisition.

Joint Lead Arrangers and              J.P. Morgan Securities Inc. and [Merrill
Bookrunners:                          Lynch Capital Markets] (together, the
                                      "Lead Arrangers").

Administrative Agent:                 JPMorgan Chase Bank ("JPMC" or the
                                      "Administrative Agent").

Syndication Agent:                    Merrill Lynch Capital Markets.

Borrowing Options:                    LIBOR and Base Rate.

                                      Base Rate means the higher of the
                                      Administrative Agent's prime rate and the
                                      federal funds rate + 0.50%.

                                      LIBOR adjustments for Regulation D will be
charged by Lenders individually.

Pricing:                              Pricing on the commitments and loans will
                                      be at the rates per annum set forth in the
                                      attached Pricing Schedule, expressed in
                                      basis points per annum.

Interest Payments:                    At the end of each applicable Interest
                                      Period.

Interest Periods:                     1, 2 or 3 months.

Drawdown:                             A single drawdown with same day notice if
                                      Base Rate Loans and three business
                                      days' notice if LIBOR Loans.

Optional Prepayments:                 Base Rate Loans may be prepaid at any time
                                      on one business day's notice. LIBOR Loans
                                      may be prepaid upon at least three
                                      business days' notice subject to funding
                                      losses.  Amounts prepaid may not be
                                      reborrowed.

Mandatory Commitment                  100% of the net cash proceeds from the
                                      issuance or incurrence after the

Reductions and Prepayments:           Closing Date of equity or debt by the
                                      Borrower shall be applied to reduce the
                                      commitments under the Facility (if still
                                      in existence) or to prepay the Facility.
                                      100% of the amount of proceeds received by
                                      the Borrower or SUPH from distributions or
                                      loans from Panhandle Eastern, including
                                      distributions received from Panhandle
                                      Eastern upon the Trunkline LNG Holdings
                                      Sale (as defined below). The Borrower will
                                      cause Panhandle Eastern and SUPH to
                                      distribute to the Borrower its share of
                                      any and all net cash proceeds received by
                                      Panhandle Eastern upon such sale or any
                                      other asset sale. Amounts prepaid may not
                                      be reborrowed.

Representations and Warranties:       Customary for credit agreements of this
                                      nature, with respect to the Obligors and
                                      their subsidiaries (including Panhandle
                                      Eastern and its subsidiaries), including
                                      but not limited to:

                                      1.  Existence and qualification; power;
                                          compliance with laws.
                                      2.  Authority; no conflict.
                                      3.  No governmental approvals
                                          required.
                                      4.  Enforceability.
                                      5.  Litigation.
                                      6.  No default.
                                      7.  ERISA compliance.
                                      8.  Use of proceeds; margin regulations.
                                      9.  Tax liability.
                                      10. Financial statements; no material
                                          adverse change.
                                      11. Environmental compliance.
                                      12. Public Utility Holding Company Act;
                                          Investment Company Act.
                                      13. Disclosure.
                                      14. Collateral matters.
                                      15. Panhandle Eastern Acquisition matters.

Conditions:                           Customary in credit agreements of this
                                      nature, including but not limited to:

                                      1.  Absence of default.
                                      2.  Accuracy of representations and
                                          warranties.
                                      3.  Negotiation and execution of
                                          satisfactory credit agreement and
                                          customary closing documentation
                                          (including legal opinions).
                                      4.  Payment of fees.
                                      5.  Consummation of the Panhandle Eastern
                                          Acquisition on terms satisfactory to
                                          the Lenders.
                                      6.  Completion of and satisfaction with
                                          the results of due diligence with
                                          respect to the Borrower and its
                                          subsidiaries and Panhandle Eastern and
                                          its subsidiaries.
                                      7.  Absence of material adverse condition
                                          or material adverse change in or
                                          affecting the business, operations,
                                          property, condition (financial or
                                          otherwise) or prospects of the
                                          Borrower and its subsidiaries, or
                                          Panhandle Eastern and its
                                          subsidiaries, in each case taken
                                          as a whole.
                                      8.  The fact that the Panhandle Eastern
                                          Acquisition and all other elements
                                          of the Transactions shall close
                                          simultaneously with the closing of the
                                          Facility, on terms and conditions
                                          substantially as described to Lenders
                                          prior to the date of the Commitment
                                          Letter, with such changes thereto as
                                          the Lenders may approve in their sole
                                          discretion. .
                                      9.  The fact that the Borrower shall
                                          have received all amendments or
                                          consents under its other existing
                                          financing arrangements that are
                                          necessary or reasonably desirable
                                          to permit the consummation of the
                                          Panhandle Eastern Acquisition on
                                          the terms contemplated thereby,
                                          all of which shall be in form and
                                          substance satisfactory to the Lenders.
                                      10. The fact that the AIG Loan (as
                                          defined in Schedule 1) shall be
                                          funded prior to or simultaneously
                                          with the closing of the Facility,
                                          all on terms and conditions
                                          satisfactory to the Lenders in
                                          their sole discretion
                                      11. Absence of any disruption of or
                                          adverse change (or development that
                                          could reasonably be expected to result
                                          in a material adverse change) in or
                                          affecting U.S. or international loan
                                          syndication, banking, financial or
                                          capital market conditions from those
                                          in effect on the date hereof that,
                                          individually or in the aggregate, in
                                          our good faith judgment has or could
                                          have a material adverse affect on our
                                          ability to fund or syndicate the
                                          Facility, or on the Borrower's
                                          ability to consummate a refinancing
                                          transaction to refinance the Facility
                                          in whole promptly after the Closing
                                          Date.

Covenants of each Obligor:            Customary in credit agreements of this
                                      nature, and applicable to the Obligors and
                                      their subsidiaries (including Panhandle
                                      Eastern and its subsidiaries) including
                                      but not limited to:

                                      1.  Financial statements.
                                      2.  Certificates, notice and other
                                          information.
                                      3.  Preservation of existence; maintenance
                                          of corporate separateness.
                                      4.  Merger, consolidation, etc.
                                      5.  Sale of assets.
                                      6.  Maintenance of insurance.
                                      7.  Payment of taxes and other potential
                                          liens.
                                      8.  Compliance with laws.
                                      9.  Environmental laws.
                                      10. Compliance with ERISA.
                                      11. Negative pledge
                                      12. Accounting changes.
                                      13. Limitation on debt of the Borrower.
                                      14. Prohibition on dividends and other
                                          restricted payments (including
                                          intercompany loans) by the Borrower
                                          while a default exists.
                                      15. Financial covenants consistent with
                                          the amended revolving and term
                                          loan credit facilities including,
                                          but not limited to, the following
                                          (with covenants as defined in the
                                          Amended and Restated Term Loan
                                          Credit Agreement dated as of July
                                          15, 2002, as amended to the
                                          Closing Date, among the Borrower,
                                          the Lenders party thereto, and
                                          JPMC, as agent): (a) Consolidated
                                          Total Indebtedness to Consolidated
                                          Total Capitalization of the Borrower
                                          (each determined without inclusion of
                                          [either (x)] the AIG Loan [or (y) to
                                          the extent included in Debt of the
                                          Borrower and its subsidiaries,
                                          Equity-Preferred Securities (as
                                          defined in Schedule 1) not to
                                          exceed 10% of Consolidated Total
                                          Capitalization (calculated for
                                          purposes of this clause (y)
                                          without reference to any
                                          Equity-Preferred Securities))]
                                          not to exceed (i) 75% at the end
                                          of any fiscal quarter ending on
                                          or after the Exchange Company's
                                          acquisition of all stock and
                                          other equity interests in
                                          Panhandle Eastern in connection
                                          with the Panhandle Eastern
                                          Acquisition, but before the
                                          consummation of either the
                                          Additional Equity Offering or the
                                          Trunkline LNG Holdings Sale (as
                                          defined in Schedule 1 hereto),
                                          (ii) 0.70 to 1.00 at the end of
                                          any fiscal quarter ending on or
                                          after the consummation of either
                                          the Additional Equity Offering or
                                          the Trunkline LNG Holdings Sale,
                                          and (iv) 0.65 to 1.00 at the end
                                          of any fiscal quarter ending on
                                          or after the consummation of both
                                          the Additional Equity Offering
                                          and the Trunkline LNG Holdings
                                          Sale; (b) minimum EBDIT to
                                          interest expense of 2.00 to 1.00,
                                          and (c) minimum Consolidated Net
                                          Worth of not less than the sum of
                                          (i) $751,887,000, (ii) 40% of
                                          Consolidated Net Income (if
                                          positive) for the fiscal quarters
                                          after the Closing Date, treated
                                          as a single period and (iii)
                                          certain adjustments made with
                                          respect to equity additions and
                                          payments with respect to equity.
                                      16. Satisfactory SEC disclosure regarding
                                          the loan.
                                      17. Restriction on agreements that limit,
                                          directly or indirectly, the
                                          Borrower from granting a lien on
                                          the stock or other equity
                                          interests in Southern Union
                                          Panhandle as security for
                                          obligations under the Facility,
                                          with exceptions for negative
                                          pledges under existing credit
                                          agreements of the Borrower to be
                                          specified.

Events of Default:                    Customary in credit agreements of this
                                      nature, including but not limited to
                                      the following:

                                      1. Failure to pay any principal when due.
                                      2. Failure to pay interest and fees within
                                         five business days of the due date.
                                      3. Failure to meet covenants (with grace
                                         periods, where appropriate).
                                      4. Representations or warranties false in
                                         any material respect when made.
                                      5. Cross default to Material Debt of the
                                         Borrower or any of its subsidiaries (to
                                         be defined as debt in a principal
                                         amount of at least $10 million).
                                      6. Change of ownership or control of the
                                         Borrower.
                                      7. Failure of (i) the Borrower to own at
                                         least 78% of the capital stock of
                                         Southern Union Panhandle (as defined in
                                         Schedule 1) or (ii) Southern Union
                                         Panhandle to own 100% of the capital
                                         stock of Panhandle Eastern.
                                      8. Credit Agreement or any guarantee shall
                                         be unenforceable or invalid. 9. Other
                                         usual defaults with respect to the
                                         Obligors, including but not
                                         limited to insolvency, bankruptcy,
                                         ERISA and judgment defaults.

Increased Costs/Change of             The credit agreement will contain
Circumstances:                        customary provisions protecting the
                                      Lenders in the event of unavailability of
                                      funding, illegality, increased costs and
                                      funding losses.

Indemnification:                      The Obligors will indemnify the Lenders
                                      against all losses, liabilities, claims,
                                      damages, or expenses relating to their
                                      loans, the Borrower's use of loan proceeds
                                      or the commitments, including but not
                                      limited to reasonable attorneys' fees and
                                      settlement costs (except such as result
                                      from the indemnitee's gross negligence or
                                      willful misconduct).

Transfers and Participations:         Lenders will have the right to transfer or
                                      sell participations in their loans
                                      or commitments with the transferability of
                                      voting rights in the case of
                                      participations limited to changes in
                                      principal, rate, fees and term.
                                      Assignments, which must be in amounts of
                                      at least $5 million, will be allowed
                                      with the consent of the Administrative
                                      Agent and (so long as no Event of Defualt
                                      as to it has occurred and is continuing)
                                      the Borrower (such consent not to be
                                      unreasonably withheld); provided that
                                      assignments will be allowed within the
                                      Lender group and to a Lender's affiliates
                                      without any consent requirement.  In
                                      connection with each assignment, the
                                      assignor Lender will pay the
                                      Administrative Agent a $3,500 processing
                                      fee.

Required Lenders:                     Majority of the aggregate amount of the
                                      commitments.

Expenses:                             The Obligors will pay all legal and other
                                      reasonable out-of-pocket expenses of the
                                      Initial Lenders, Lead Arrangers and the
                                      Administrative Agent to this transaction
                                      and any subsequent amendments or waivers,
                                      including the expenses and reasonable fees
                                      of Davis Polk & Wardwell, special counsel
                                      to the Administrative Agent.

Governing Law:                        New York.


<PAGE>


                   PRICING SCHEDULE TO BRIDGE LOAN TERM SHEET


Commitment Fee and Applicable Margins: A commitment fee, at a rate determined in
accordance with the following table, per annum will be charged on the unused
commitments. The "Eurodollar Margin" applicable to outstanding LIBOR Loans shall
be determined in accordance with the following grid, provided, however that for
all periods subsequent to the date 90 days following the Closing Date, the
Eurodollar Margin shall be the Additional Percentage Per Annum determined in
accordance with the following grid plus 1.00%. The "Base Rate Margin" applicable
to outstanding Base Rate Loans shall be the Eurodollar Margin reduced by 1.00%.

<TABLE>
<CAPTION>
======================================================== ===================== =========================
<S>     <C>    <C>    <C>    <C>    <C>    <C>
                                                              Additional            Commitment Fee
    Rating of the Borrower's unsecured, non-credit           Percentage Per       Percentage Per Annum
               enhanced Senior Funded Debt                        Annum
-------------------------------------------------------- --------------------- -------------------------
-------------------------------------------------------- --------------------- -------------------------

Equal to or  greater  than Baa2 by  Moody's or equal to
or greater than BBB by S&P                                      1.25%                   0.150%
-------------------------------------------------------- --------------------- -------------------------
-------------------------------------------------------- --------------------- -------------------------

Baa3 by Moody's or BBB- by S&P                                  1.50%                   0.175%
-------------------------------------------------------- --------------------- -------------------------
-------------------------------------------------------- --------------------- -------------------------

Equal to or less  than Ba1 by  Moody's  and equal to or
less than BB+ by S&P                                            2.00%                   0.250%
======================================================== ===================== =========================
</TABLE>

In the event that the ratings for Borrower's unsecured, non-credit enhanced
Senior Funded Debt specified by Standard & Poor's Ratings Group and Moody's
Investor Service, Inc. fall within different rating categories which are not
functional equivalents, the Eurodollar Margin shall be based on the higher of
such ratings if there is only one category difference between the functional
equivalents of such ratings, and if there is a two category difference between
the functional equivalents of such ratings, the Eurodollar Margin shall be based
on the rating category which is equivalent to one rating higher than the lower
of the two ratings then in effect.

In the event that Borrower withdraws from having its unsecured, non-credit
enhanced Senior Funded Debt being rated by Moody's Investor Service, Inc. or
Standard and Poor's Ratings Group, so that one or both of such ratings services
fails to rate the Borrower's unsecured, non-credit enhanced Senior Funded Debt,
the component of pricing from the grid set forth above for purposes of
determining the applicable Eurodollar Rate for all Rate Periods commencing
thereafter shall be 2.00% until such time as Borrower subsequently causes its
unsecured, non-credit enhanced Senior Funded Debt to be rated by both of said
ratings services.

The Applicable Margin shall be payable monthly in arrears on each determination
date based on outstanding loans during the period then ended.

Funding Fee: The Borrower shall pay to the Administrative Agent on the Closing
Date, for the account of the Lenders pro rata in accordance with each Lender's
funded Loan amount, a fee equal to [0.25]% of the amount of Loans borrowed on
the Closing Date.

Duration Fee: On the 30th day after the Closing Date, the Borrower shall pay to
the Administrative Agent, for the account of the Lenders pro rata in accordance
with each Lender's outstanding Loan on such day, a fee equal to [0.25]% of the
aggregate principal amount of all Loans outstanding on such day.


<PAGE>




                      SCHEDULE 1 TO BRIDGE LOAN TERM SHEET
        THE PANHANDLE EASTERN ACQUISITION AND CERTAIN RELATED DEFINITIONS


Additional Equity        Shall mean (a) a public offering by the Borrower
Offering:                of  additional  capital  stock in the Borrower
                         resulting in not less than  $100,000,000.00 of net
                         equity  proceeds being received by the Borrower and
                         (b) any  additional  offering  or  issuance  of capital
                         stock,  Equity-Preferred Securities or any other equity
                         interests in Borrower or Southern  Union  Panhandle (to
                         the  extent  permitted  under the  applicable  negative
                         covenants   restricting   issuance   of  stock  in  any
                         Subsidiary  of  Borrower),  so  long  as all  net  cash
                         proceeds  from any such  offering or issuance of equity
                         described  in clauses  (a) or (b) above are  applied in
                         the  following  order:  (i)  first,  to  payment of the
                         Bridge Loan;  and (ii) the  balance,  if any, for other
                         working  capital  needs of the  Borrower  or any of its
                         subsidiaries, including without limitation, the payment
                         of the AIG Loan

AIG  Entities:           Shall mean AIG  Highstar  Capital,  L.P.,  a Delaware
                         limited  partnership,  AIG Highstar Funding Corp.,
                         a Delaware corporation,  and any other permitted
                         owner and holder of any shares of stock or other equity
                         interests  in Southern  Union  Panhandle  not owned and
                         held  by  the   Borrower  or  any  of  the   Borrower's
                         subsidiaries

AIG  Loan:               Shall mean a credit  facility  to be provided to
                         the  Borrower by one or more of the AIG  Entities in an
                         aggregate    principal    amount    not    to    exceed
                         $150,000,000.00  for purposes of financing a portion of
                         the  acquisition   costs  for  the  Panhandle   Eastern
                         Acquisition,  said loan to be (a)  non-recourse  to the
                         Borrower,  (b)  secured  only by 28% of the  issued and
                         outstanding   stock  and  other  equity   interests  in
                         Southern Union Panhandle and (c) subject to other terms
                         and conditions  acceptable to the Administrative  Agent
                         in all respects

Equity-Preferred         Shall mean (i) Debt,  preferred  equity or
Securities:              any other  securities that are mandatorily  convertible
                         by the  issuer  thereof a date  certain,  without  cash
                         payment by the issuer,  into common  shares of stock of
                         the Borrower or (ii) any other  securities (A) that are
                         issued by the Borrower or any Subsidiary,  (B) that are
                         not  subject  to  mandatory  redemption  at  any  time,
                         directly  or  indirectly,  (C)  that are  perpetual  or
                         mature  not  less  than  30  years  from  any  date  of
                         issuance,  (D) the Debt  component,  if any,  issued in
                         connection   therewith,   including  any  guaranty,  is
                         subordinate in right of payment to all other  unsecured
                         and  unsubordinated  Debt of the  issuer  of such  Debt
                         component (including any such guaranty, if applicable),
                         and (E) the terms of which permit the issuer thereof to
                         defer at any time,  without any  additional  payment or
                         premium,  the  payment of any and all  interest  and/or
                         distributions   thereon,  as  applicable,   to  a  date
                         occurring  after  [the  date  that  is 364  days  after
                         effectiveness  of the First  Amendment  to the existing
                         Revolving Credit Agreement]

Exchange Company:        Shall mean  Southern  Union  Exchange  Company,  a
                         Delaware corporation and/or any other entity created
                         and owned by Chicago Deferred Exchange Corporation that
                         the Borrower hereafter enters into a "qualified
                         exchange  accommodation  agreement" with for purposes
                         of facilitating the Panhandle Eastern Acquisition

Panhandle Eastern:       Shall mean Panhandle Eastern Pipeline Company, a
                         Delaware corporation

Panhandle Eastern        Shall  mean the  acquisition  by the Exchange Company
Acquisition:             of 100% of all issued and outstanding  stock and
                         other  equity   interests,   if  any,  in  Panhandle
                         Eastern  in accordance with the Panhandle Eastern
                         Acquisition  Agreement, so long as such  acquisition is
                         in substantial compliance with the following specified
                         terms:

          (a)  immediately  after  the  finalization  and  consummation  of such
               acquisition,  Panhandle  Eastern is a wholly-owned  Subsidiary of
               the Exchange Company;

          (b)  the aggregate  consideration  paid for all stock and other equity
               interests in Panhandle  Eastern shall not exceed  $663,000,000.00
               in cash,  with the  source  of said cash  purchase  price to be a
               combination of some or all of the following:  (i) $406,000,000.00
               of "like-kind"  exchange  proceeds  previously  received from the
               prior sale to ONEOK,  Inc. of the  "Southern  Union Gas  Company"
               Texas  division  and  certain  other  related  assets;  (ii)  the
               proceeds of the AIG Loan;  (iii) the  proceeds of the  Additional
               Equity Offering, if any; (iv) the proceeds of the Bridge Loan, if
               required; and (v) other cash, if any, held by or available to the
               Borrower;

          (c)  the Exchange  Company  shall make a Section  338(h)(10)  election
               under the  Internal  Revenue  Code as part of the closing of such
               acquisition,  and  as  soon  as  reasonably  possible  after  the
               finalization and consummation of such  acquisition,  the Exchange
               Company shall cause Panhandle  Eastern and each of its applicable
               subsidiaries  to  convert  from  "C   corporations"   to  limited
               liability  companies after receipt of all requisite approvals and
               consents  from  any  Governmental  Authority,  including  without
               limitation, the Federal Energy Regulatory Commission;

          (d)  immediately  after such conversion of Panhandle  Eastern and each
               of its applicable  subsidiaries  from "C corporations" to limited
               liability companies, the Exchange Company shall distribute to the
               Borrower  100% of all  membership  and other equity  interests in
               Panhandle  Eastern,  thus  causing  Panhandle  Eastern  to  be  a
               wholly-owned Subsidiary of the Borrower;

          (e)  immediately  after such  distribution  to the Borrower of 100% of
               all membership and other equity  interests in Panhandle  Eastern,
               the existing Debt of Panhandle  Eastern and its  subsidiaries may
               cause  Consolidated  Total  Indebtedness  to increase by not more
               than  $1,170,000,000.00  in the aggregate,  provided that neither
               the Borrower nor any of its  subsidiaries  existing prior to such
               distribution  shall  have,  incur or assume  any  liability  with
               respect  to such  existing  Debt  of  Panhandle  Eastern  and its
               subsidiaries;

          (f)  one (1)  Business  Day after such  distribution  by the  Exchange
               Company  to the  Borrower  of all  membership  and  other  equity
               interests in Panhandle Eastern,  the Borrower shall distribute to
               Southern Union  Panhandle 100% of all membership and other equity
               interests in Panhandle Eastern; and

          (g)  all  requisite  approvals  and  consents  from  any  Governmental
               Authority with respect to the  above-described  acquisitions  and
               distributions  shall have been received by the Borrower in a form
               acceptable to the Administrative Agent

Panhandle Eastern  Shall mean that certain  Stock  Purchase  Agreement
Acquisition        dated  December  21,  2002,  by and between CMS Gas
Agreement:         Transmission Company, as seller, Southern Union Panhandle,
                   as purchaser, and the Borrower and the AIG Entities,  as
                   sponsors,  as the same may hereafter  be  amended,  modified,
                   supplemented,   restated  or replaced (the form of any such
                   amendment,  modification,  etc. to be approved by the
                   Administrative  Agent, such approval to not be unreasonably
                   withheld, conditioned or delayed), it being contemplated that
                   such Stock Purchase Agreement will be assigned by the
                   Borrower to the Exchange Company to facilitate  the
                   Panhandle Eastern Acquisition

Southern Union     Shall mean Southern Union Panhandle Corp., a Delaware
Panhandle:         corporation formed by the  Borrower  for the purpose of
                   ultimately  owning and holding  100% of all
                   issued and outstanding equity interests in Panhandle Eastern

Trunkline LNG      Shall mean CMS  Trunkline  LNG  Holdings,  LLC, a Delaware
Holdings:          limited  liability company

Trunkline LNG      Shall mean the sale by Panhandle Eastern to a third-party
Holdings Sale:     that is not an Affiliate of the Borrower or any of
                   the AIG Entities of all or a portion of the issued and
                   outstanding stock and other equity interests, if any, in
                   Trunkline LNG Holdings, so long as such sale is
                   finalized and consummated in substantial
                   compliance with the following specified terms:

                                           (a) all cash proceeds received by
                                               Panhandle Eastern from such sale,
                                               less customary and reasonable
                                               transaction fees and the amount
                                               of all taxes payable by the
                                               Panhandle Eastern attributable to
                                               such sale, shall by fully
                                               distributed by Panhandle Eastern
                                               to Southern Union Panhandle, and
                                               in turn by Southern Union
                                               Panhandle to the Borrower and the
                                               AIG Entities;

                                           (b) all cash proceeds distributed to
                                               the Borrower from such sale shall
                                               be immediately applied against
                                               the Borrower's Debt in the
                                               following order: (i) first to the
                                               Bridge Loan until the same is
                                               fully paid; (ii) second, 50% of
                                               the remaining cash proceeds shall
                                               be applied to the Term Loan
                                               Facility; and (iii) the balance,
                                               if any, shall be applied to Debt
                                               under the Short-Term Revolving
                                               Credit Facility and/or Debt
                                               outstanding under the Long-Term
                                               Revolving Credit Facility; and

                                           (c) all requisite approvals and
                                               consents from any Governmental
                                               Authority with respect to such
                                               sale shall have been received by
                                               Panhandle Eastern in a form
                                               acceptable to the Administrative
                                               Agent.




</TEXT>
</DOCUMENT>
