COLONIAL GAS COMPANY

                       Retention Bonus Plan



      In order to provide  incentives for key employees of the Company to remain
in the employ of the Company during a period of uncertainty  involving  industry
consolidation and the exploration of strategic  alternatives by the Company, the
Company has adopted,  effective  October 19, 1998 (the  "Effective  Date"),  the
following retention bonus plan:

      1.  Participating  employees  designated  by the Company  ("Participants")
shall be  entitled  to receive a cash bonus in the amount set forth below if the
Participant is  continuously  employed by the Company or its successor or any of
their  respective  subsidiaries  or affiliates from the Effective Date until the
earliest to occur of the following:

           (i)  January 19, 2000 (15 months after the Effective
                Date);

           (ii) the date which is 90 days after a change in
                control of the Company;

           (iii)termination of the Participant's employment by the
                Company without cause or by the Participant for
                Good Reason (as hereinafter defined); or

           (iv) termination of the Participant's  employment by reason of death,
                permanent disability or retirement.

      2. The amount payable under this Plan shall be as follows:

           (i)  for   senior   officers   designated   in   Tier  I   ("Tier   I
                Participants"),  an  amount  equal  to 75% of the  Participant's
                annual salary in effect as of the Effective Date; and

           (ii) for all other Participants  ("Tier II Participants"),  an amount
                equal to 50% of the Participant's  annual salary in effect as of
                the Effective Date.

      3. The terms  "change in  control",  "cause",  "Good  Reason",  "permanent
disability" and "retirement" as used herein shall have the meanings set forth in
the Employment  Agreement  between the Company and the  Participant in effect on
the Effective Date (or if the  Participant  has no such  agreement,  then in the
standard  form of  Employment  Agreement  entered  into by the Company  with its
officers).

      4. In the event that the  Company is  consolidated  or merged with or into
any other  corporation  or entity,  the term "Company" as used herein shall mean
such  other  corporation  or entity  (the  "successor"),  and this Plan shall be
binding upon such successor.

      5.  Amounts  payable   hereunder  shall  be  subject  to  appropriate  tax
withholding.

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      6. This Plan  shall  inure to the  benefit of and be  enforceable  by each
Participant's heirs and personal or legal  representatives.  Upon the death of a
Participant  any amount that would be payable if he or she had continued to live
shall be paid in accordance with the terms of this Plan to his or her designated
beneficiary or, if none has been designated, to his or her estate.

      7. This Plan may be amended by the  Company  but no such  amendment  shall
adversely  affect the rights of any  Participant  under this Plan  without  such
Participant's consent.



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                Schedule of Participating Employees


Tier 1:    J.P. Harrington, F. L. Putnam, Jr., F.L. Putnam, III,
           C. W. Sawyer,
           N. Stavropoulos

Tier 2:    All other officers who have executed Employment
           Agreements dated as of October 13,1998