Document:

Exhibit 10.2

    
      

    

    Limited
      Settlement Agreement

    

    This
      Settlement Agreement is entered into this 24th day of August, 2006, between
      The
      Narragansett Electric Company d/b/a National Grid ("National Grid"), Southern
      Union Company ("Southern Union"), the Department of the Attorney General for
      the
      State of Rhode Island (the "Attorney General"), and the Rhode Island Department
      of Environmental Management ("RIDEM") (collectively the "Parties").

    

    WHEREAS,
      the
      Parties to this Settlement Agreement participated in the Rhode Island Division
      of Public Utilities and Carriers (the "Division") proceeding concerning the
      Joint Petition of National Grid and Southern Union (the "Joint Petition") for
      the approval of the sale of Southern Union's Rhode Island gas distribution
      assets to National Grid (the "Division Proceeding"); and

    

    WHEREAS,
      the
      Attorney General and RIDEM asked the Division to condition approval of the
      sale
      on the imposition of an escrow to
      secure
      the payment of a potential judgment on environmental contamination claims
      relating to the Bay Street Area of Tiverton, Rhode Island (the "Bay Street
      Area"); and

    

    WHEREAS,
      Southern Union and National Grid opposed the imposition of an escrow;
      and

    

    WHEREAS,
      the
      Division entered a Report and Order ("Order"), dated July 25, 2006, approving
      the Joint Petition without requiring as a condition of such approval the posting
      of an escrow; and

    

    WHEREAS,
      as
      parties to the Division Proceeding, the Attorney General and RIDEM have the
      right to appeal from the Order; and 

    

    WHEREAS,
      certain
      of the Parties have ongoing disputes concerning, among other things, the
      responsibilities for claimed environmental contamination in the Bay Street
      Area,
      and believe this Settlement Agreement is in the best interests of the people
      of
      the State of Rhode Island.

    

    NOW,
      THEREFORE, in
      consideration of the Recitals hereto and other good and valuable consideration,
      the receipt and sufficiency of which are hereby acknowledged, the Parties,
      intending to be legally bound, hereby agree as follows: 

    

    (1) National
      Grid and the Attorney General (acting on behalf of the State of Rhode Island)
      shall execute a letter agreement in the form annexed hereto as Exhibit A, which
      provides, in relevant part, that if a final, non-appealable money judgment
      is
      entered in favor of the State against Southern Union in
      connection with the alleged environmental contamination in the Bay Street Area,
      and the State cannot collect on such judgment, then National
      Grid will pay the 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    State
      up
      to $13,000,000 towards such unsatisfied judgment, all pursuant to the terms
      of
      Exhibit A. 

    

     

    (2)          
      (a)
      Southern Union will conduct supplemental site investigations (consistent with
      site investigations protocols previously accepted by RIDEM and conducted by
      Southern Union) on the following three properties [Lots 13-03, 16-01 and 16-02]
      if RIDEM determines that conditions pose an imminent hazard [as defined in
      the
      RIDEM Remediation Regulations in Section 3.31] on those properties;

    

    (b)
      Southern Union will implement interim remedial action  plans
      acceptable to RIDEM for the following six properties [Lots 13-03, 16-01, 16-02,
      15-01, 17-03 and 21-04] if RIDEM determines that conditions pose an imminent
      hazard on those properties ;

    

    (c)
      If
      RIDEM is able to secure appropriate access to the following properties [21-2A,
      21-1, 15-2, 16-10, 7-3, & 22-01] which, to date, Southern Union has
      requested but been denied access, as described in the Supplemental and Phase
      2
      Site Investigation Report, Southern Union will conduct a site investigation
      consistent with the site investigations protocols previously accepted by RIDEM
      and conducted by Southern Union. The refusal of any property owner to grant
      access or permission hereunder, or the failure of RIDEM to gain access, to
      perform work shall not alter the rights, defenses and remedies of such property
      owner or of Southern Union. Furthermore, if any lot covered under this
      subsection is found to contain contaminants that are deemed to pose an imminent
      hazard by RIDEM as defined under the RIDEM Remediation Regulations, then such
      sites shall be subject to the requirements of 2(a & b);

    

    (d)
      Southern Union shall not perform the work described in Paragraph 2 until it
      first obtains RIDEM’s written approval, and Southern Union shall perform its
      obligations under this Paragraph 2 within a reasonable time after receiving
      the
      necessary approvals, assents and access; and

    

    (e)
      With
      respect to any particular property listed or described above in this Paragraph
      2, Southern Union shall be relieved of its obligation to perform the task or
      tasks described in this Paragraph 2 should the property owner(s) of such
      property refuse access or permission, or if RIDEM fails to gain access, to
      perform the work. 

    (3) The
      Attorney General and RIDEM shall not appeal the Order and shall not take any
      further action or position with respect to the Order in any proceeding arising
      out of or relating to the Order.

    

    (4) This
      Settlement Agreement and its provisions shall not constitute or be construed
      as
      an admission of liability or responsibility by any Party with 

    
      
        
        

      

      
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    respect
      to alleged environmental contamination in the Bay Street Area. This Settlement
      Agreement and its provisions shall not be construed as a waiver of any rights,
      remedies or defenses of any Party, except as expressly set forth
      herein. The
      parties acknowledge that nothing contained in this Settlement Agreement limits
      the State's rights or remedies to pursue any and all parties for any and all
      claims the State may have against them, including, but not limited to claims
      related to what is commonly referred to as the Bay Street Area of Tiverton,
      Rhode Island, except that the State and DEM shall give up their right to appeal
      or to have any further involvement in the PUC action referenced herein or any
      related appeal. The parties further acknowledge that nothing contained in this
      Settlement Agreement limits Southern Union's rights, remedies, claims or
      defenses, including its right to pursue any and all third parties for any and
      all claims. 

    

    

    (5) All
      prior
      discussions and agreements with respect to the subject matter hereof are merged
      in this Settlement Agreement which alone constitutes the entire agreement
      between the Parties as to its subject matter. This Settlement Agreement may
      not
      be amended, modified or terminated except by a written agreement signed by
      all
      Parties which specifically references this Settlement Agreement.

    

    (6) This
      Settlement Agreement may be enforced in a court of law.

    

    (7) This
      Settlement Agreement may be signed in counterparts each of which shall be deemed
      an original and all of which together shall constitute one and the same
      instrument. 

    

    

    The
      Narragansett Electric Company

    d/b/a
      National Grid 

    

    /s/
      RONALD T. GERWATOWSKI

    By: 
      Ronald T. Gerwatowski 

    

    Its: 
      Vice President 

    

    

    Southern
      Union Company

    

    

    /s/
      WILLIE C. JOHNSON

    By:
      Willie C. Johnson 

    

    Its: Vice
      President

    

    
      
        
        

      

      
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    Department
      of the Attorney General

    for
      the
      State of Rhode Island

    

    

    

    

    /s/
      Gerald J. Coyne

    By: 
      Gerald J. Coyne

    

    Its: 
      Deputy Attorney General

    

    Rhode
      Island Department of

    Environmental
      Management

    

    

    

    /s/ 
      W. Michael Sullivan

    By:
      W.
      Michael Sullivan

    Its: 
      Director

    

    EXHIBIT
      A

    

    The
      Narragansett Electric Company

    280
      Melrose Street

    Providence,
      RI 02901

    August
      24, 2006

    

    

    Department
      of the Attorney General 

    of
      the
      State of Rhode Island

    Providence,
      Rhode Island

    

    Re:
      Tiverton Environmental Liabilities

     

    Ladies
      and Gentlemen:

     

    In
      the
      event that the State of Rhode Island obtains a money judgment in a court of
      competent jurisdiction against Southern Union Company, a Delaware corporation
      ("Southern Union"), in connection with the alleged environmental contamination
      in the "Bay Street Study Area" of Tiverton, Rhode Island as defined on Schedule
      A (the "Judgment"), the Judgment becomes final and non-appealable,
      and the State of Rhode Island cannot recover any amounts due to it in respect
      of
      such Judgment from Southern Union because of the occurrence of a Non-Payment
      Event (as defined below), The Narragansett Electric Company, a Rhode Island
      corporation ("Narragansett"), hereby promises to pay any such amounts owed
      (excluding any fines or penalties) to the State of Rhode Island by Southern
      Union; provided, however,
      that in no event shall Narragansett be obligated to pay, in the aggregate,
      more
      than the lesser of (a)

     

    
      
        
        

      

      
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    $13.0
      million or (b) $13.0 million less the aggregate
      amount previously paid by Southern Union in satisfaction of its obligations
      under the Judgment (other than payment of any fines or penalties). For the
      purposes of this letter agreement, "Non-Payment Event" means that Southern
      Union
      does not pay the Judgment within 60 days of receipt of a written demand, with
      written notice to Narragansett.

     

    The
      State
      of
      Rhode Island
      shall
      provide Narragansett and Southern Union with ten (10) days prior written notice
      of its intent to demand payment under this letter agreement. All notices or
      demands on Narragansett and Southern Union under this letter agreement shall
      be
      deemed effective when received, shall be in writing and shall be delivered
      by
      hand, overnight courier or by certified or registered mail, or by facsimile
      transmission promptly confirmed by certified or registered mail, addressed
      to
      Narragansett at the address written above and addressed to Southern Union at
      the
      address listed below, or at such other address or fax number as Narragansett
      or
      Southern Union shall have notified the State
      of
      Rhode Island.

    

    This
      letter agreement shall terminate upon the earlier of (a) payment in full by
      Southern Union of all amounts due under the Judgment or (b) the tenth
      anniversary of the date of this letter agreement. This letter agreement
      constitutes the entire agreement, and supersedes all prior written agreements
      and understandings, and all oral agreements, between Narragansett and
      the
      State of
      Rhode Island
      with
      respect to the subject matter hereof. 

    

    No
      amendment or waiver of any provision of this letter agreement shall be effective
      unless it is in writing and signed by Narragansett and the State
      of
      Rhode Island.

     

    The
      following address shall be used for all notices
      hereunder to Southern Union: Southern Union Company, 5444 Westheimer Road,
      Houston, TX 77056 Attention: Julie H. Edwards, SVP and CFO.

    

      

    

    

    

    

    

    

    [SIGNATURE
      PAGE FOLLOWS]

    

    

    

    

    
      
        
        

      

      
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    Very
      truly yours,

    

    

    THE
      NARRAGANSETT ELECTRIC COMPANY

    

    

    

    By:/s/
      MICHAEL F. RYAN

    Name: 
      Michael F. Ryan

    Title: 
      President

    

    Agreed
      and Accepted:

    

    

    Department
      of the Attorney General of the 

    State
      of
      Rhode Island

    

    

    

    By:
      /s/ GERALD J. COYNE

    Name: 
      Gerald J. Coyne

    Title:  
      Deputy Attorney General

    
      
        
        

      

      
        6Exhibit 10.3

    
      

    

    FIRST
      AMENDMENT TO PURCHASE AND SALE AGREEMENT

    

    THIS
      FIRST AMENDMENT
      dated as
      of August 24, 2006 (this “Amendment”) to Purchase and Sale Agreement dated as of
      February 15, 2006 (the “Purchase Agreement”) made between Southern Union
      Company, a Delaware corporation (“Seller”), and National Grid USA, a Delaware
      corporation (“Buyer”).

    

    RECITALS

    

    WHEREAS,
      the parties desire to make certain amendments to the Purchase Agreement to
      the
      extent and in the manner hereinafter set forth;

    

    NOW,
      THEREFORE, in consideration of the premises and agreements contained herein,
      and
      for other good and valuable consideration, the receipt and sufficiency of which
      are hereby acknowledged, and intending to be legally bound hereby, the parties
      hereto hereby agree as follows:

    

    1.
      Defined
      Terms.
      All
      capitalized terms used, but not defined, in this Amendment shall have the
      meanings ascribed or given to them under the terms of the Purchase
      Agreement.

    

    2.
      Amendment
      to Schedule 1.1(b).
      The
      Purchase Agreement is hereby amended by adding to Schedule
      1.1(b)
      the
      following: “IV. All access agreements relating to Retained Environmental
      Liabilities and V. The Privileged Communications.”

    

    3.
      Amendment
      to Section 2.3.
      The
      Purchase Agreement is hereby amended by adding the following provision at the
      end of Section 2.3:

    

    Nothing
      contained in this Agreement shall constitute or be construed as a waiver of
      Seller's attorney-client, work product and other privileges, including with
      respect to any Excluded Asset and any Retained Liability. Seller hereby retains
      all privileged communications with respect to any Excluded Asset and any
      Retained Liability (the "Privileged Communications"). Any transfer of Privileged
      Communications to Buyer hereunder is inadvertent, and Buyer shall immediately
      return any Privileged Communications to Seller upon its discovery that it
      is in possession of the same or upon demand by Seller.

    

    4.
      Amendment
      to Section 12.1.
      The
      Purchase Agreement is hereby amended by amending Section 12.1 in its entirety
      to
      read as follows:

    

    Section
      12.1 Indemnification by Seller.
      From and
      after Closing and subject to the other provisions of this Article XII, Seller
      shall indemnify and hold harmless Buyer, its Representatives, Affiliates (which
      after the Closing shall include the Subsidiaries), successors and permitted
      assigns (collectively, the “Buyer Indemnitees”) from and against any and all
      Losses actually incurred by a Buyer Indemnitee, and resulting
      from:

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)
      (i)
      any representations and warranties made by Seller in this Agreement or in any
      certificate furnished by or on behalf of Seller to Buyer pursuant to this
      Agreement not being true and correct when made, or (ii) any representations
      and
      warranties made by Seller in this Agreement not being true and correct as of
      the
      Closing Date, each of which representations and warranties will be deemed for
      purposes of this Section 12.1(a)(ii) to have been made by Seller as of the
      Closing Date, except that those representations and warranties that are made
      as
      of a specific date will be deemed for purposes of this Section 12.1(a)(ii)
      to
      have been made by Seller as of such date;

    

    (b)
      any
      breach or default by Seller in the performance of its covenants, agreements,
      or
      obligations under this Agreement, the Employee Agreement or the Transition
      Services Agreement; 

    

    (c)
      the
      Retained Liabilities;

    

    (d)
      the
      Excluded Assets; and

    

    (e)
      satisfaction by The Narragansett Electric Company (“Narragansett”) of its
      payment obligations under that certain letter agreement dated August 24, 2006
      made by Narragansett in favor of the State of Rhode Island, as in effect on
      the
      date hereof (the "Tiverton Letter Agreement"), a copy of which has previously
      been provided to Seller. Seller hereby acknowledges that nothing contained
      in
      the Tiverton Letter Agreement shall, for purposes of this Agreement, be deemed
      to limit or modify the definition of Retained Environmental Liabilities, and
      that the rights of the Buyer Indemnitees under this Section 12.1(e) shall be
      in
      addition to any other rights the Buyer Indemnitees have under this Agreement
      in
      respect of any Retained Environmental Liabilities.

    

    5.
      Amendment
      to Section 12.3.
      Section
      12.3 of the Purchase Agreement is hereby amended by adding the following
      subsection (h):

    

    (h)
      Notwithstanding anything in this Agreement to the contrary, (i) the limitations
      set forth in Section 12.3(f) shall not apply to any indemnification obligation
      of Seller under Section 12.1(e) and (ii) for the avoidance of doubt, no
      indemnification payment under Section 12.1(e) shall be deemed to be subject
      to,
      or to otherwise affect, the limitations set forth in Sections 12.3(c), (d)
      or
      (e).

    

    6.
      Amendment
      to Section 12.5.
      Section
      12.5 of the Purchase Agreement is hereby amended by adding the following
      subsection (d):

    

    (d)
      Notwithstanding the foregoing, the provisions of subsections (a), (b) and (c)
      of
      this Section 12.5 shall not apply to any claim for indemnification under Section
      12.1(e). In the event that (i) a Judgment (as defined in the Tiverton Letter
      Agreement) becomes final and nonappealable and (ii) the State of Rhode Island
      

    
      
        
        

      

      
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    provides
      written notice to Narragansett and Seller that the State of Rhode Island intends
      to demand payment from Narragansett under the Tiverton Letter Agreement (a
      "Tiverton Payment Notice"), Buyer shall deliver to Seller evidence, satisfactory
      to Seller, of Narragansett’s payment under such Tiverton Payment Notice in
      accordance with the terms of the Tiverton Letter Agreement, which evidence
      shall
      specify the amount of such payment (a “Narragansett Payment Notice”). Seller
      shall pay to Buyer or its designee, within three Business Days after Seller’s
      receipt of the Narragansett Payment Notice, by wire transfer of immediately
      available funds to an account specified by Buyer, an amount of cash equal to
      the
      amount specified in the Narragansett Payment Notice (but in no event more than
      the lesser of (x) $13 million and (y) the then-remaining amount of liability
      of
      Narragansett under the Tiverton Letter Agreement). 

    

    7.
      Representations
      and Warranties.
      Each of
      the parties to this Amendment hereby represents and warrants to the other that
      (i) it has full organizational power and authority to execute and deliver this
      Amendment and to consummate the transactions contemplated hereby, (ii) the
      execution and delivery of this Amendment by such party have been duly and
      validly authorized by all necessary corporate action on the part of such party
      and (iii) this Amendment has been duly and validly executed and delivered by
      such party and constitutes a valid and binding obligation of such party,
      enforceable against such party in accordance with its terms, except that such
      enforceability (x) may be limited by bankruptcy, insolvency, moratorium or
      other
      similar laws affecting or relating to the enforcement of creditors' rights
      generally and (y) is subject to general principles of equity and the discretion
      of the court before which any proceedings seeking injunctive relief or specific
      performance may be brought.

    

    8.
      No
      Other Modification.
      This
      Amendment amends the Purchase Agreement only to the extent and in the manner
      herein set forth. All references in the Purchase Agreement to the Purchase
      Agreement shall mean the Purchase Agreement as amended by this Amendment. In
      all
      other respects, the terms and conditions of the Purchase Agreement shall remain
      in full force and effect.

    

    9.
      Governing
      Law.
      The
      validity, performance and enforcement of this Amendment shall be governed by
      the
      laws of the State of New York without giving effect to the principles of
      conflicts of law of such state.

    

    10.
      Counterparts.
      This
      Amendment may be executed in multiple counterparts, each of which shall be
      deemed to be an original and all of which together shall constitute one and
      the
      same instrument.

    

    11.
      Headings.
      The
      headings contained in this Amendment are for reference purposes only and shall
      not affect in any way the meaning or interpretation of this
      Amendment.

    
      
        
        

      

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

    

    SOUTHERN
      UNION COMPANY

    

    

    By:
      /s/ WILLIE
      C. JOHNSON

    Name: Willie
      C. Johnson

    Title:
      Vice
      President

    

    

    NATIONAL
      GRID USA

    

    

    By:
      /s/
      MICHAEL E. JESANIS

    Name:
      Michael
      E. Jesanis

    Title:
      President
      and Chief Executive Officer

    

    

    
      
        
        

      

      
        4

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