Exhibit 10.5

                             EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT (this "Agreement"),  effective as of the 1st day
of January, 1997, is entered into by and between The Brooklyn Union Gas Company,
a New  York  corporation,  hereinafter  referred  to by  name or  either  as the
"Company"  or  "Employer,"  and David L.  Phillips,  hereinafter  referred to as
"Employee."

                                  ARTICLE 1
                                     TERM
      Subject to the provisions for termination  hereinafter set forth, the term
of this  Agreement  shall  commence on the  effective  date hereof and expire on
January  1,  2000;  provided,  however,  that this  Agreement  shall  extend for
successive one-year renewal terms thereafter unless terminated by six (6) months
prior written notice from one party to the other prior to the termination of the
initial or any renewal  term.  The initial term  together with any renewal terms
hereto are hereinafter referred to as the "Term".

                                  ARTICLE II
                               EXECUTIVE DUTIES
      Subject to the terms and conditions  set forth herein,  the Company hereby
employs  Employee,  and Employee  hereby accepts  employment by the Company,  to
serve as Senior Vice President,  Strategic  Planning & Corporate  Development of
the  Company,  and to perform the duties  attendant to such  position.  Employee
shall  perform  such  duties  for the  position  described  herein  in a  manner
consistent  with the  performance  expectations  and standards  established  and
communicated to the


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Employee by the  Company  from time to time.  It is  expressly  understood,  and
agreed,  that Employee shall inure to the position described  hereinabove at the
ultimate  parent  company  level upon the  formation  of a Holding  Company (the
"Holding  Company"),  such  Holding  Company  is  proposed  to be  organized  to
facilitate  and hold the surviving  entity  resulting from the pending merger of
the  Company and Long  Island  Lighting  Company  ("LILCO").  While  serving the
Company, Employee shall report to its Chairman of the Board. Following formation
of the  Holding  Company,  and  completion  of the  pending  merger  with LILCO,
Employee shall report to the President & Chief Operating  Officer of the Holding
Company for a period of one (1) year  following  completion of such merger,  and
thereafter shall report to its Chief Executive  Officer for the remainder of the
Term.  Employee  shall  perform such duties,  assume such  responsibilities  and
devote  such time,  attention  and energy to the  business  of the  Company  and
corporations  affiliated  with the  Company as the Board shall from time to time
require, and shall not during the term of his employment hereunder be engaged in
any other  business  activity  pursued  for  gain,  profit  and other  pecuniary
advantage if such activity  materially  interferes  with  Employee's  duties and
responsibilities  hereunder.  However,  the foregoing  limitations  shall not be
construed as prohibiting Employee from making personal  investments  (including,
but not limited to, the trading of natural  gas,  crude or  electricity  futures
contracts on the NYMEX, or other private investment  activity in publicly traded
stocks of energy related concerns on any public exchange) in such form or manner
as will  neither  require him  materially  to  participate  in the  operation or
affairs of the companies or enterprises in which such  investments  are made nor
violate  the terms of The  Brooklyn  Union Gas  Company's  Statement  of Ethical
Business  Conduct and of Article VII hereof.  Employee may also  participate  in
social, civic, charitable,  religious,  educational or professional associations
so long as such  participation  would not  materially  detract  from  Employee's
ability to perform his duties under this Agreement.


<PAGE>



                                 ARTICLE III

COMPENSATION  AND  BENEFITS  Employee's   compensation shall be:

      (a) The minimum sum of $206,000 per year (the "Base Compensation") payable
in equal monthly  installments on or about the 15th day of each month during the
Term hereof.  With respect to increases in Base  Compensation  based upon merit,
performance,  cost of living,  or  otherwise,  such Base  Compensation  shall be
subject to review  every six (6) months  during the first  eighteen  (18) months
hereof, and annually  thereafter on a schedule  consistent with all other senior
executive officers of the Company.
      (b) An annual incentive  compensation  bonus target of 35% up to an amount
not to exceed 70% of Base  Compensation  for each annual  period during the Term
(the  "Incentive  Compensation"),  determined and payable in accordance with the
Company's  Corporate  Incentive  Compensation  Plan as it may exist from time to
time. The Incentive Compensation shall be paid to Employee pro rata based on the
number of days of  employment  in the year for any partial  years of  employment
hereunder,  except  that,  for  the  first  year  of  this  Term  any  Incentive
compensation  due Employee at the close of fiscal 1997 shall be  calculated  and
paid on a full year basis as if (i) Employee had initiated  employment effective
with  the  fiscal  year of the  Company  on  October  1,  1996 and (ii) the Base
Compensation  (for purposes of calculation of each Incentive  Compensation ) had
begun on October 1, 1996 as well.  The Employee  shall also  participate  in all
applicable  Deferred  Compensation  Plans  of the  Company,  including,  but not
limited to, such plan as adopted on November 15, 1995  entitled  the  "Long-Term
Performance  Incentive  Compensation  Plan"  on a basis no less  favorable  than
similarly  appointed or elected senior officers of the Company, or subsequently,
the Holding Company.


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      (c) In addition to the Incentive Compensation program described above, the
Company shall tender to Employee  immediately upon execution of this Agreement a
signing  bonus  together  comprised of (i) a cash payment in the sum of $50,000,
(ii) 20,000  non-qualified  stock  options of the  Company,  exercisable  at the
contemporary  market  price  per  share on the date of  issuance  (the  "Signing
Bonus") based upon (i)  exceptional  performance  demonstrated  by Employee as a
Consultant to the Company in fiscal 1996, and (ii)  Employee's  contribution  to
future  earnings  per share  while  serving  in his  Consultant  capacity,  such
contribution  being  in the  best  financial  interest  of the  Company  and its
shareholders.
      (d) During the Term,  the  Company  shall pay for and the  Employee  shall
receive all employee  benefits as provided to all other  senior  officers of the
Company, pursuant to the Company's Personnel Policies and Procedures Manual, and
other  Benefit  Plan  publications,  as then  adopted and in effect.  Definitive
"Change of Control"  provisions  are provided for herein under Article V hereof,
therefore  Employee shall not be eligible to participate in the Senior Executive
Change Of Control Severance Plan of the Company.  During the Term, such benefits
shall include,


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but not be limited to the following:
            (i)   Standard Group Health and Dental Insurance Policy.
            (ii) Term Life  Insurance  Policy equal to 3 times  Employee's  Base
            Compensation.  (iii)  Participation  in  the  Company's  401(k)  and
            Section 125 Benefits  Plans.  (iv) Five (5) weeks paid vacation each
            year  during  the  Term  hereof.   (v)  Parking  at  the   principal
            headquarters  of  the  Company.  (vi)  A  monthly  (or  annual)  car
            allowance consistent with Company policy for
      senior  executive level officers of the Company plus  insurance,  fuel and
      maintenance. Given Employee's obligation to relocate to the New York area,
      it shall be  permissible  for  Employee  to apply  such  allowance  to his
      existing vehicle.
            (vii) The Company shall reimburse  Employee for reasonable  expenses
      incurred for tax and personal accounting services not to exceed $2,000 per
      year.
            (viii)The  Company  shall  also make  available  to  Employee,  on a
      full-time basis, an administrative  or executive  assistant at the initial
      selection of Employee.
            (ix) The Company shall provide Employee with relocation  coverage to
      enable   Employee  to  relocate  his  principal   residence  and  personal
      belongings  of his immediate  family from Houston,  Texas to the principal
      headquarters in New York City or the greater Tri-State area. To facilitate
      the  relocation  of  Employee  to the New York  area,  the  Company  shall
      reimburse  Employee  his actual  costs  incurred in  connection  with such
      relocation up to a maximum of $120,000. Employee shall provide appropriate
      receipts and documentation to the Company. An advance  reimbursement under
      this Paragraph of $50,000 shall be made


<PAGE>



      to Employee as soon as practicable after execution of this Agreement.  The
      Company will  endeavor to diminish  income tax  exposure to Employee  with
      respect to utilization  and  expenditure  of such  Relocation  Funds.  The
      Employee  shall be entitled to utilize  such  Relocation  Funds toward any
      expenditure which may, directly or indirectly,  result from the relocation
      of  Employee  and his family to New York from  Texas,  including  (but not
      limited to) expenses such as the payment of Employee's  existing  mortgage
      in Houston along with the timely payment of insurance, taxes, assessments,
      utilities,  yard and pool  maintenance  beginning  with the effective date
      hereof and continuing  thereafter until either the Employee's residence is
      sold.  With  respect to the sale of  Employee's  residence  in Texas,  the
      Relocation Funds shall include  applicable  brokerage  fee's,  closing and
      related  costs,  and shall also be used to  compensate  any loss in equity
      calculated  upon the original  purchase price of $542,5000.  Additionally,
      the Relocation  Funds shall include  temporary  living expenses within the
      Tri-State area such as monthly rentals, utilities,  insurance,  applicable
      real property taxes and maintenance. In the event the Relocation Funds are
      not exhausted  after all direct cost receipts are  reimbursed to Employee,
      the residue balance of such Relocation Funds shall be provided to Employee
      to reflect  reimbursement  for the increased  cost-of-living  differential
      between Houston,  Texas and New York City.  Finally,  reasonable  expenses
      such as  moving,  interim  airfare,  lodging,  meals,  transportation  and
      similar  expenses  incurred by Employee or his  immediate  family shall be
      covered  by such  Relocation  Funds.  With  respect to  on-going  business
      expenses  (E.G.  hotel,  meals,  transportation  and airfare)  incurred by
      Employee  during the period of January 1, 1997 thru  January 31, 1997 as a
      result of the pendency of


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      Board and other appropriate  employment approvals and, taking into account
      the timing for negotiation of definitive relocation provisions, submission
      of Employee to the Board of Directors for  candidate  approval as a senior
      executive  officer of the Company,  and then final execution  hereof,  the
      Company shall continue to be responsible for Employee's  business expenses
      and all  business  related  travel,  lodging,  meals and similar  expenses
      incurred by Employee.  Such business expenses incurred during January 1997
      shall not be considered part of the Relocation Funds.

                                  ARTICLE IV
                                 TERMINATION
      (a) The Company may terminate this  Agreement,  prior to the expiration of
the Term, for Cause (as defined  below).  "Cause" for purposes of this Agreement
shall only exist if Employee  commits one or more of the acts listed  below and,
if curable,  fails to cure such breach within a period of thirty (30) days after
receipt of written notice from the Board  describing  the breach in detail.  The
acts constituting Cause shall be limited solely to the following:
            (i) willful and  continued  refusal  without  proper  legal cause to
      perform Employee's duties and responsibilities;
            (ii)  conviction of or a plea of nolo  contendere to the charge of a
      crime involving moral turpitude,  dishonesty,  theft,  breach of trust, or
      unethical business conduct;
            (iii) the unauthorized absence of Employee from work (other than for
      sick leave,  disability  or  vacation)  for a period of 30 working days ro
      more during a period of 45 working


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      days; or
            (iv) a material and continued  breach of this Agreement by Employee.
In the event Company terminates  Employee's  employment for Cause, Company shall
pay all of the Employee's  compensation and benefits  pro-rated through the date
of termination  including,  but not limited to,  Employee's  Base  Compensation,
Incentive  Compensation,   Long-Term  Performance  Incentive  Compensation,  the
Signing Bonus and all other applicable benefits listed in Article III hereof.
      (b) The  employment of Employee  hereunder may be terminated by Company on
at least  thirty  (30) days  prior  written  notice  if  Employee  shall  become
permanently  disabled.  Employee shall be deemed to be  permanently  disabled if
Employee has been  substantially  unable to discharge his duties and obligations
under this  Agreement  by reason of  illness,  accident  or  physical  or mental
disability  for a period of 120 calendar days out of any  consecutive  period of
180 calendar days; provided, however, that nothing herein shall limit Employee's
rights under any medical or  disability  plans that are provided by Company.  If
there should be a dispute between Company and Employee as to Employee's physical
or mental  disability  for purposes of this  Agreement,  the  question  shall be
settled by the  opinion of an  impartial  reputable  physician  or  psychiatrist
agreed upon by the parties or their  representatives.  The certification of such
physician  or  psychiatrist  as to the  questioned  dispute  shall be final  and
binding  upon  the  parties  hereto.  In  the  event  Employee's  employment  is
terminated  because of  Employee's  permanent  disability  under  this  Section,
Company shall pay Employee's  compensation  and benefits  pro-rated  through the
date of termination including, but not limited to, Employee's Base Compensation,
Incentive Compensation, Long-Term Performance


<PAGE>



Incentive  Compensation,  the  Signing  Bonus and all other  benefits  listed in
Article III hereof.

     (c) The employment of Employee hereunder shall be automatically  terminated
on the date of  Employee's  death.  Upon the death of  Employee  during the Term
hereof,  Company  shall pay the estate of Employee  the  benefits  described  in
Article IX.

      (d) At the option of  Employee,  Employee  may  terminate  his  employment
hereunder prior to the expiration of the Term as follows:  (i) for any reason by
giving six (6) months  written notice to the Board of Directors of his intent to
terminate this Agreement or (ii)  immediately  upon the occurrence of one of the
following:
            (A) the removal of Employee from the  position(s)  Employee holds on
      the  effective  date of this  Agreement,  including the position of Senior
      Vice President, Strategic Planning & Corporate Development of the Company,
      or any subsequent  position to which Employee has been willingly  promoted
      or elected;
            (B) a material reduction in Employee's  authority or responsibility;
            (C)  relocation of the Company's  headquarters  to a location  other
            than in the
      greater New York City area; or
            (D) any other breach of this Agreement by the Company.
In the event of a voluntary  termination under Section IV(d)(i),  Employee shall
be paid his Base Compensation,  Incentive  Compensation,  Long-Term  Performance
Incentive  Compensation,  and the  Signing  Bonus and other  benefits  hereunder
computed to the date of termination.  Upon voluntary  termination  under Section
IV(d)(ii)(A-D),   Employee  shall  be  paid  his  Base  Compensation,  Incentive
Compensation, Deferred Compensation and the Signing Bonus computed to the end of
the Term,


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in addition to any other benefits paid pursuant to Article V.
      (e)  Notwithstanding  any termination of Employee's  employment  hereunder
howsoever  brought  about,  Article VII and VIII shall  remain in full force and
effect and shall survive the  termination of such employment and this Agreement.
Employee shall continue to perform and render all services  contemplated  herein
up to the effective date of such termination.

                                  ARTICLE V
                  TERMINATION FOLLOWING A CHANGE OF CONTROL
      (a)  Expressly  exempting  the pending  merger of the  Company  with LILCO
pursuant to that certain Plan of Merger  Agreement  executed between the Company
and LILCO on or about  December  29,  1996 and  notwithstanding  anything to the
contrary  contained  herein,  or within the "Senior  Executive Change Of Control
Severance Plan", as adopted,  should Employee at any time within three (3) years
of a Change of Control (as defined below) cease to be an employee of the Company
(or  its  successor),  by  reason  of (i)  termination  by the  Company  (or its
successor)  other than for Cause (which for purposes of this paragraph  shall be
limited to the  following:  (A) a conviction of or a plea of nolo  contendere to
the charge of a felony involving moral turpitude  (which,  through lapse of time
or  otherwise,  is not subject to appeal);  or (B) the  unauthorized  absence of
Employee  from work (other than for sick leave,  disability  or vacation)  for a
period of 30 working  days or more  during a period of 45  working  days or (ii)
voluntary  termination  by Employee for "good reason upon Change of Control" (as
defined below),  the Company (or its successor) shall pay to Employee,  in cash,
within ten (10) days of such  termination the following  severance  payments and
benefits:


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            (i) A lump-sum payment equal to 299% of Employee's Base Compensation
      at the rate stated in Section III(a) of this Agreement; and
            (ii) A  lump-sum  payment  equal to the  amount of any  accrued  but
      unpaid   Incentive    Compensation,    Long-Term   Performance   Incentive
      Compensation  and Signing Bonus and other benefits under this Agreement to
      the date of termination.
The  Company (or its  successor)  shall also  provide  continuing  coverage  and
benefits  comparable to all life, health and disability plans of the Company for
a period of 36 months from the date of termination.
      (b) If the severance payments and other payments owed under this paragraph
to  Employee  ("Parachute   Payments")  exceed  the  largest  parachute  payment
permitted  described in Section 280G of the  Internal  Revenue Code of 1986,  as
amended (the "Code") (i) without a disallowance  of any deduction  under Section
280G of the Code or (ii)  imposition of any excise tax under Section 4999 of the
Code ("Parachute  Limit"),  the following  adjustments to the severance payments
shall be made:
            (i) If the Parachute  Payments  exceed the  Parachute  Limit by less
      than five  percent  (5%) of the total  amount of the  Parachute  Payments,
      Employee  shall  forfeit  his right to receive  the  portion of  Parachute
      Payments in excess of the Parachute Limit; and
            (ii) If the Parachute  Payments  exceed the Parachute  Limit by five
      percent (5%) or more of the total amount of Parachute Payments, the amount
      of the  Parachute  Payments  shall  include a  "gross-up"  payment to make
      Employee whole for the excise tax liability  resulting from such severance
      Parachute Payments.


<PAGE>



The  foregoing  calculations  of the amounts of any  Parachute  Payments and the
determination  of whether any such payments  exceed the Parachute Limit shall be
made in accordance with Section 280G of the Code.
      (c) As used in this Section,  voluntary  termination by Employee for "good
reason upon Change of Control"  shall mean (i) the removal of Employee  from the
position(s)  Employee  holds on the  effective  date of this  Agreement,  or any
subsequent  position to which Employee has been  willingly  promoted or elected;
(ii) a material  reduction  in  Employee's  authority or  responsibility;  (iii)
relocation of the Company's  headquarters  to a location  other than the greater
New York City area; or (iv) any other breach of this Agreement by the Company.
      (d) As used in this  Agreement,  a "Change of Control"  shall be deemed to
have  occurred if (i) any  "Person"  (as such term is used in Section  13(d) and
14(d) of the Securities Exchange Act), directly or indirectly,  of securities of
the Company  representing  more than  twenty-five  percent (25%) of the combined
voting  power  of  the  Company's  ten   outstanding   securities  or  (ii)  the
stockholders of the Company approve a merger or consolidation  that would result
in the voting  securities of the Company  outstanding  immediately prior thereto
continuing to represent  (either by remaining  outstanding or by being converted
into  voting  securities  of  the  surviving  entity)  at  least  sixty-six  and
two-thirds percent (66 2/3%) of the total voting power represented by the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation,  or the stockholders of the Company approve a plan
of complete  liquidation  of the Company or an agreement for sale or disposition
by the  Company of all or  substantially  all of the  Company  assets;  provided
again, however, as hereinabove described, the pending merger of the Company with


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LILCO is hereby explicitly excluded from this definition of "Change of Control".
 
     (e) The  Company  shall pay any  attorney's  fees  incurred  by Employee in
reasonably seeking to enforce the terms of this Article V.

                                  ARTICLE VI
                              DUTIES OF EMPLOYEE
      (a) Employee's  duties shall be those which are  customarily  attendant to
his position  described above.  Employee  recognizes and agrees that he owes the
Company a fiduciary duty of loyalty, fidelity and allegiance to act at all times
in the best  interests  of the Company  and to do no act which would  injure the
business of the Company, its interests or reputation. Employee's duty of loyalty
shall extend  throughout  the term of his  employment  hereunder and shall apply
after  termination of such  employment to the extent set forth in this Agreement
and as recognized by law.
      (b) In keeping with  Employee's  fiduciary  duty to the Company,  Employee
agrees that  during his  employment  hereunder,  he shall not  knowingly  become
involved in a conflict between his personal  interests and those of the Company,
and upon  discovery  thereof,  shall not allow  such  conflict  of  interest  to
continue.

                                 ARTICLE VII
                                NONCOMPETITION
      The Employee agrees that all payments,  compensation, and benefits payable
to the  Employee  under  this  Agreement  shall  be  subject  to the  Employee's
compliance with the provisions of this


<PAGE>



Article VII.
(A) Except as provided for under Article II of this  Agreement,  while  employed
hereunder  and for  the  greater  of (i) a  period  of one  year  following  the
termination of this Agreement by reason of the expiration of its Term as defined
in Article I hereof or (ii) the  remainder  of the Term,  if this  Agreement  is
terminated  before such expiration as defined in Article I hereof,  whichever is
longer, (the "Restricted Period"), neither Employee or corporation,  partnership
or other entity  controlled by or under common control with Employee will (a) in
the States of New York, New Jersey and Connecticut  travel,  canvas or advertise
for,  or  otherwise  assist,  render  services  to,  become  employed  by,  be a
consultant to, or invest in any business  entity or with any individual  engaged
in, or engage  directly or indirectly in, any line or liens of business  carried
on or  contemplated  which,  directly  or  indirectly,  is a  competitor  of the
Company,  (b) solicit business or otherwise deal directly or indirectly with any
customers  or persons who were  employees of customers or vendors of the Company
at any time,  (c)  directly or  indirectly  divert or attempt to divert from the
Company, any business in which it has been engaged during the Term of Employee's
employment  with the  Company,  or in which it might  reasonably  be expected to
become  engaged,  (d) directly or  indirectly  interfere or attempt to interfere
with the  relation  ships  between the  Company,  its  customers,  employees  of
customers  or  vendors,  (e)  directly  or  indirectly  interfere  or attempt to
interfere with the relationship of  employer-employee  or principal and agent of
any person bearing such relationship to the Company,  nor directly or indirectly
divert or attempt to divert any such person from employment or representation of
the Company;  provided,  however,  that Employee  shall not be prohibited by the
terms of this Paragraph from investing in and owning not more than one percent


<PAGE>



(1%) of the  outstanding  shares of common stock of any  corporation  engaged in
similar  business  to the  Company,  the  shares  of which are  publicly  traded
pursuant to the Securities  Exchange Act of 1934,  and/or  passively invest as a
limited partner in any  non-publicly  traded security similar to the business of
the Company.  (B) Employee has carefully  read and  considered the provisions of
this Article VII and, having done so, agrees that the  restrictions set forth in
this  Article  are fair and  reasonable,  and are  reasonably  required  for the
protection of the Company,  its officers,  directors,  employees,  creditors and
shareholders.  Employee  understands  that the  restrictions  contained  in this
Article  may limit his  ability to engage in a business  similar to the  Company
business,  but acknowledges that he will receive  sufficiently high renumeration
and other benefits from the Company hereunder to justify such restrictions.  (c)
In the event that any  provision of this Article VII relating to the  Restricted
Period and/or the areas of restriction shall be declared by a court of competent
jurisdiction  to exceed  the  maximum  time  period or areas  such  court  deems
reasonable  and  enforceable  by the court shall  become and  thereafter  be the
maximum time period and/or areas.

                                 ARTICLE VIII
                               CONFIDENTIALITY
      The Employee agrees that all payments,  compensation, and benefits payable
to the  Employee  under  this  Agreement  shall  be  subject  to the  Employee's
compliance with the provisions of this Article VIII.


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(A) Employee  recognizes  that the services to be performed by him hereunder are
special,  unique,  and  extraordinary and that, by reason of his employment with
the Company, he may acquire Confidential Information concerning the operation of
the Company,  the use or disclosure of which would cause the Company substantial
loss and damages which could not be readily  calculated  and for which no remedy
at law  would  be  adequate.  Accordingly,  Employee  agrees  that he  will  not
(directly or  indirectly)  at any time,  whether  during or after his employment
hereunder,  (i) knowingly use for an important personal benefit any Confidential
Information  that he may learn or has learned by reason of his  employment  with
the Company or (ii)  disclose any such  Confidential  Information  to any person
except (a) in the performance of his obligations to the Company  hereunder,  (b)
as required by applicable  law, (c) in connection  with the  enforcement  of his
rights under this Agreement, (d) in connection with any disagreement, dispute or
litigation  (pending or threatened) between Employee and the Company or (e) with
the  prior  written  consent  of  the  Board  of the  Company.  As  used  herein
"CONFIDENTIAL  INFORMATION"  includes  information with respect to the Company's
products,  facilities and methods,  research and development,  trade secrets and
other  intellectual   property,   systems,   patents  and  patent  applications,
procedures,  manuals, confidential reports, product price lists, customer lists,
financial  information,  business plans,  prospects or opportunities;  PROVIDED,
HOWEVER, that such term shall not include any information that (x) is or becomes
generally  known or available other than as a result of a disclosure by Employee
or (y) is or becomes known or available to Employee on a  nonconfidential  basis
from a source (other than the Company),  which, to Employee's knowledge,  is not
prohibited from disclosing such information to Employee by a legal, contractual,
fiduciary or other obligation to the Company.


<PAGE>



(B)  Employee  confirms  that  all  Confidential  Information  is the  exclusive
property of the company. All business records, papers and documents kept or made
by  Employee  while  employed by the  Company  relating  to the  business of the
Company  shall be and remain the property of the Company at all times.  Upon the
request  of the  Company at any time,  Employee  shall  promptly  deliver to the
Company  and  shall  retain  no copies of any  written  materials,  records  and
documents made by Employee or coming into his  possession  while employed by the
Company  concerning  the business or affairs of the Company  other than personal
materials,  records  and  documents  (including  notes  and  correspondence)  of
Employee not  containing  proprietary  information  relating to such business or
affairs.

                              INJUNCTIVE RELIEF
      Employee  acknowledges that a breach of any of the covenants  contained in
this Article VIII may result in material  irreparable  injury to the Company for
which  there is no  adequate  remedy  at law,  that it will not be  possible  to
measure the damages for such  injuries  precisely and that, in the event of such
breach, any payments remaining under the terms of this Agreement shall cease and
the Company  shall be entitled to obtain a temporary  restraining  order  and/or
preliminary  or  permanent  injunction  restraining  Employee  from  engaging in
activities  prohibited  by this  Article  VII or  such  other  relief  as may be
required to specifically  enforce any of the covenants contained in this Article
VIII.  Employee agrees to and hereby does submit to IN PERSONA injunction in the
appropriate courts of the State of New York.  Employee agrees that the rights of
the Company to obtain an injunction  granted by this  Paragraph of the Agreement
shall not be considered a waiver of its rights to assert


<PAGE>



any other remedies it may have at law or in equity.

                                  ARTICLE IX
                              DEATH OF EMPLOYEE
      In the event of the death of Employee during Employee's term of employment
hereunder,  the Company shall pay to Employee's estate (i) the Base Compensation
which would  otherwise by payable to Employee under this Agreement up to the end
of the  month  in which  such  death  occurs;  (ii) the  Signing  Bonus  and the
Incentive  Compensation,  if any,  which may become  payable to Employee for the
period  prior to the date of death;  and (iii) all  other  benefits  which  have
accrued to date of Employee's death,  including any Deferred  Compensation under
the Company's deferred Compensation Plan.

                                  ARTICLE X
                            MANDATORY ARBITRATION
      (a) Any dispute,  controversy,  or claim arising out of or relating to any
provision of this Agreement or the interpretation,  enforceability, performance,
breach,  termination,  or validity hereof,  including,  but not limited to, this
arbitration   clause  shall  be  solely  and  finally  settled  by  confidential
arbitration  in the  State of New  York,  in  accordance  with the  Rules of the
American  Arbitration  Association  ("AAA") as modified by the provision of this
Article X.
      (b)  To  the  extent  this  Article  X is  deemed  a  separate  agreement,
independent  from this Agreement,  Article XIV hereof is incorporated  herein by
reference.


<PAGE>



      (c)  The  arbitration   shall  be  conducted  by  a  panel  of  three  (3)
arbitrators,  selected in the following manner:  each party shall select one (1)
arbitrator  within  twenty  (20) days from the date of  receipt of the demand to
commence  arbitration.  If one or both  of the  parties  fails  to  nominate  an
arbitrator,  the AAA shall have the power to select an arbitrator on the party's
behalf.  Within ten (10) days after the  appointment  of the last of the two (2)
arbitrators,  the selected party  arbitrators shall choose a third arbitrator to
serve as the neutral chairman of the panel.
      (d) The parties agree that the provisions of this Article X, including the
rules of the AAA and the laws of the State of New York and the United  States of
America,  as  modified  by the  terms  of  this  Article  X,  shall  govern  the
arbitration of any disputes arising pursuant to this Agreement.  In the event of
any  conflict  between  the  laws of the  State  of New  York  and  the  Federal
Arbitration  Act (9 U.S.C.ss.  et seq.  (1988)) with respect to any  arbitration
conducted  pursuant  to this  Agreement,  to the extent  permissible,  it is the
express  intent of the parties that the law of the Federal  Arbitration  Act, as
modified by this Article X, shall prevail.
      (e) All papers,  documents,  or evidence,  whether written or oral,  filed
with or  presented  to the  arbitrator  shall be deemed by the  parties  and the
arbitrator to be confidential information. No party, expert, or arbitrator shall
disclose in whole or in part to any other  person any  confidential  information
submitted by any other person in connection with arbitration proceedings, except
to the extent (i) required by law or regulation,  (ii)  reasonably  necessary to
assist counsel in the arbitration or preparation for arbitration of the dispute,
or (iii) that such  confidential  information  was  previously,  or subsequently
becomes,  known to the disclosing  party,  or becomes  publicly known through no
fault of the  disclosing  party.  Confidential  information  may be disclosed to
attorneys,


<PAGE>



parties,  and  qualified  outside  experts  requested by any party's  counsel to
furnish  technical or expert  services or to give  testimony at the  arbitration
proceedings;  provided,  however,  that  such  persons  agree  to  maintain  the
confidentiality of such disclosures to them.
            All oral and written  communications  between the parties  issued or
prepared in connection with attempted resolution of any disputes hereunder shall
be deemed to have been  prepared and  communicated  in  furtherance,  and in the
context,  of  dispute  settlement,  and  shall  be  exempt  from  discovery  and
production,  and shall not be admissible as evidence (whether as an admission or
otherwise), in any proceedings for the resolution of the dispute.
      (f) The parties  shall be entitled to  discover  all  documents  and other
information  reasonably  necessary for a full  understanding  of any  legitimate
issue raised in the arbitration. They may use all methods of discovery customary
under New York law, including, but not limited to, depositions,  interrogatories
and requests for admission.  The time periods for compliance shall be set by the
arbitrator, who may also set limits on the scope of such discovery.
            The arbitrator is empowered to issue, on ex parte application of any
party or on his own volition,  any subpoena (including any subpoena duces tecum)
in accordance  with any provision of applicable  law, and to make such orders as
may be necessary for the  arbitrator or persons  designated by the arbitrator to
obtain appropriate or necessary evidence.
            The New York Rules of Evidence shall apply to the proceedings.

     (g)  The  arbitrator  is  empowered  to  render  the  following  awards  in
accordance  with any  provision of this  Agreement:  (i)  enjoining a party from
performing  any act  prohibited,  or  compelling  a  party  to  perform  any act
required, by the terms of this Agreement and any order entered pursuant


<PAGE>



to this  Agreement or deemed  necessary by the  arbitrator  to resolve  disputes
arising  under or  relating to this  Agreement  or order;  (ii) where,  and only
where,  violations of this Agreement have been found,  shortening or lengthening
any period established by this Agreement or order; and (iii) ordering such other
legal or equitable relief,  including any provisional legal or equitable relief,
or specifying such procedures as the arbitrator  deems  appropriate,  to resolve
any dispute submitted to it for arbitration.
      (h) An award rendered in connection  with an arbitration  pursuant to this
Article X shall be final and binding  upon the parties,  and any  judgment  upon
such  an  award  may  be  entered  and   enforced  in  any  court  of  competent
jurisdiction.
      (i)  Notwithstanding any other provision hereof which may appear to be the
contrary, the parties specifically covenant and agree that no party hereto shall
be entitled to assert any demand for or recover  any  consequential  or punitive
damages,  but that the collection of actual  damages shall be full  compensation
and satisfaction for any breach hereof.
            The parties  agree that the award of the arbitral  tribunal  will be
the sole and  exclusive  remedy  between them  regarding  any and all claims and
counterclaims  between them with respect to the subject matter of the arbitrated
dispute. The parties hereby waive all jurisdictional defenses in connection with
any  arbitration  hereunder or the  enforcement  of any order or award  rendered
pursuant  thereto  (assuming that the terms and  conditions of this  arbitration
clause have been complied with).
            The parties hereby agree that the  relationship  between the parties
is commercial in nature,  and that any disputes  between the parties  related to
this Agreement shall be deemed


<PAGE>



commercial.
      (j) The  arbitrator  shall  apportion  to each party all costs (other than
attorneys'  fees which shall be the  separate  cost of each  party)  incurred in
conducting the  arbitration in accordance  with what he deems most and equitable
under the circumstance.  Any party wishing to make a stenographic  record of the
proceedings may do so at its own expense.

                                  ARTICLE XI
                                 SERVABILITY
      In the event any  provisions  of this  Agreement are held to be invalid or
nonenforceable,  such invalid or  nonenforceable  provisions  shall be separable
from the remainder of the Agreement,  and the remainder of this Agreement  shall
be unaffected by the invalid or nonenforceable provision.

                                 ARTICLE XII
                               ENTIRE AGREEMENT
      This Agreement  constitutes the entire agreement and understanding between
the Company and Employee, whether express or implied, with respect to Employees'
employment  by the  Company  and  supersedes  any and all prior  agreements  and
understandings,  whether  written,  oral or  otherwise,  relating to the subject
matter of this Agreement; provided, however, that the provisions of the Conflict
of Interests and Confidentiality Policies of the Company shall not be superseded
by but shall supplement the terms of this Agreement.



<PAGE>



                                 ARTICLE XIII
                                APPLICABLE LAW

This Agreement  shall be subject to and governed by the laws of the State of New
York. IN WITNESS WHEREOF, the execution hereof shall be effective as of the date
hereinabove indicated.

                         THE BROOKLYN UNION GAS COMPANY

                                    By: /s/ Robert B. Catell
                                    ------------------------
                                    Name:       Robert B. Catell
                                    Title:      Chairman of the Board

                                    EMPLOYEE

                                    By:/s/ David L. Phillips
                                    ------------------------
                                    Name:       David L. Phillips

STATE OF NEW YORK       ss.
                        ss.
COUNTY OF KINGS         ss.

      BEFORE ME, the  undersigned  authority,  on this day  personally  appeared
Robert B. Catell,  the Chairman of the Board of The Brooklyn  Union Gas Company,
known  to me to be  the  person  whose  name  is  subscribed  to  the  foregoing
instrument,  and  acknowledged  to me  that he had  executed  the  same  for the
purposes and consideration therein expressed.
      GIVEN UNDER MY HAND AND SEAL OF OFFICE, the ___ day of January, 1997.

                                       /s/-------------------------------
                                 Notary Public in and for the State of New York



<PAGE>



STATE OF NEW YORK       ss.
                        ss.
COUNTY OF KINGS         ss.

      BEFORE ME, the  undersigned  authority,  on this day  personally  appeared
David L.  Phillips,  individually,  known to me to be the  person  whose name is
subscribed  to the  foregoing  instrument,  and  acknowledged  to me that he had
executed the same for the purposes and consideration therein expressed.
      GIVEN UNDER MY HAND AND SEAL OF OFFICE, the 23 day of January, 1997.

                                          /s/--------------------------------
                                Notary Public in and for the State of New York