Document:

Exhibit 10.1

EXHIBIT 10.1

 

AMENDMENT AND RESTATEMENT OF THE

COMPUTER SCIENCES CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

AND SUMMARY PLAN DESCRIPTION

Effective as of February 14, 2006

ARTICLE I

Purpose

          The purpose of this Supplemental Executive Retirement Plan ("Supplemental Plan") is to provide retirement benefits to designated officers and key executives of Computer Sciences Corporation (the "Company") in addition to retirement benefits that may be payable under the Computer Sciences Corporation Employee Pension Plan, and in addition to any other retirement plan (other than the social security system to the extent provided herein) under which benefits may be payable with respect to such person. This document is also intended to constitute the Summary Plan Description for the Supplemental Plan.

          It is intended that this Supplemental Plan be a plan "for a select group of management or highly compensated employees" as set forth in Section 201(2) of the Employee Retirement Income Security Act of 1974.

          Subject to Articles X and XXX hereof, benefits under this Supplemental Plan shall be payable solely from the general assets of the Company and no Participant or other person shall be entitled to look to any source for payment of such benefits other than the general assets of the Company.

ARTICLE ll

Effective Date/Restatement Date

          The Supplemental Plan was effective as of September 1, 1985. The Supplemental Plan was amended and restated effective as of January 1, 2005 (the "2005 Restatement"), and is hereby amended and restated effective as of February 14, 2006 (the "2006 Restatement" and, together with the 2005 Restatement, the "Restatements"), which Restatements are intended as good faith compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations and other Treasury Department guidance promulgated thereunder ("Section 409A"). The Restatements shall only apply to "amounts deferred" (within the meaning of Section 409A) in taxable years beginning after December 31, 2004, and any earnings thereon (collectively, "Post-2004 Deferrals"). The provisions of the Supplemental Plan in existence prior to the Restatements shall continue to govern "amounts deferred" (within the meaning of Section 409A) in taxable years beginning before January 1, 2005, and any earnings thereon (collectively, "Pre-2005 Deferrals"). 

 

As such, the Restatements divide the Plan into two parts: Part A, which is applicable solely to Pre-2005 Deferrals, and Part B, which is applicable solely to Post-2004 Deferrals.

ARTICLE III

Participants

          No person shall be a Participant in this Supplemental Plan unless (a) such individual is specifically designated as such in a written instrument executed by the Chief Executive Officer of the Company (the "Chief Executive Officer"), and (b) such individual has consented to be governed by the terms of this Supplemental Plan by execution of a written instrument in form satisfactory to the Company.

          A person shall cease to be a Participant in this Supplemental Plan in the event of (a) a Plan amendment having such effect, or (b) the occurrence of an event described in this Supplemental Plan which terminates such participation, or (c) prior to a Change in Control (as hereinafter defined), the Chief Executive Officer notifies such person, in writing, of the discontinuance of such person's participation pursuant to Article XVIII and/or Article XXVII of this Supplemental Plan. In determining whether any person shall commence or cease to be a Participant herein, the Chief Executive Officer, acting in such capacity, shall have complete and unfettered discretion.

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PART A

All capitalized terms used in this Part A shall have the definitions provided for in this Part A or Articles I, II or III of this Supplemental Plan.

ARTICLE IV

Part A Retirement Benefits

          The amount of retirement benefit payable under Part A to each Participant upon Separation from Service (as defined in paragraph (d) below) shall be as determined in this Article IV, except as otherwise provided in Articles XIX, XX and XXI.

          (a)     A Participant who is entitled to receive a benefit under the Computer Sciences Corporation Employee Pension Plan ("Pension Plan"), shall be entitled to receive an excess benefit under Part A of this Supplemental Plan (a "Part A Excess Benefit"). The Part A Excess Benefit hereunder vests at the time that the Participant becomes vested under the Pension Plan. The Part A Excess Benefit is the additional monthly amount calculated as follows: the additional monthly amount which the Participant would otherwise be entitled to receive as a single life annuity under the Pension Plan at the date of commencing payment of the Part A Excess Benefit, if the limitations imposed by Sections 401(a)(17) and 415 of the Code were not applied, less any benefits that the Participant is entitled to receive as a single life annuity at that date under Appendix M of the Pension Plan, and provided further, that in making such calculation:
(i)     all deferrals of salary under the Company's Deferred Compensation Plan shall be disregarded, as if no deferrals had been made;

(ii)    compensation for periods of time prior to date of first participation in this Supplemental Plan shall be disregarded and not taken into account; and

(iii)   compensation from all affiliates of the Company shall be taken into account, as if such affiliates were participating employers in the Pension Plan.

Notwithstanding anything herein to the contrary, the amount payable pursuant to this paragraph (a) shall be limited to the maximum amount otherwise payable pursuant to this paragraph (a) that qualifies as a Pre-2005 Deferral.

          In addition to the benefit described in this paragraph (a), a benefit as described in paragraph (b) following may be payable to the Participant. The Participant shall automatically commence receiving Participant's Part A Excess Benefit on the date on which the Participant commences to receive benefits under the Pension Plan.

          (b)     A Participant who has a Separation from Service (as hereinafter defined) on or after attaining age sixty-two (62) shall receive an amount determined under this paragraph (b). A Participant who has a Separation from Service prior to attaining age

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sixty-two (62) shall only receive an amount determined under this paragraph (b) if he or she is entitled to an early separation benefit pursuant to Article V(b), a pre-retirement death benefit pursuant to Article VII(b)(ii) or a disability benefit pursuant to Article VIII. Amounts payable pursuant to this paragraph (b) shall be paid monthly in the form of a life annuity. Payments shall commence on the first day of the calendar month that is on or immediately after a Participant's Separation from Service date. The monthly amount payable shall be equal to (i) one-twelfth (1/12) of fifty percent (50%) of the Participant's Average Base Salary Rate (as defined in paragraph (d) below), minus (ii) the amount determined under paragraph (c) below. The resulting amount will be proportionately reduced pursuant to paragraph (e) below if the Participant has a Separation from Service prior to attaining age sixty-two (62) and/or with fewer than twelve (12) years of Continuous Service. Notwithstanding anything herein to the contrary, the amount payable pursuant to this paragraph (b) shall be limited to the maximum amount otherwise payable pursuant to this paragraph (b) that qualifies as a Pre-2005 Deferral.

          (c)     The amount determined under this paragraph (c) shall generally be equal to the primary social security benefit paid or payable to the Participant at the time benefits commence under Part A of this Supplemental Plan, whether or not the Participant is denied social security benefits because of other income or voluntarily forgoes social security income. However, where a Participant commences to receive benefits under Part A of this Supplemental Plan prior to attaining the minimum age (the "Minimum Social Security Age") at which he will be entitled to commence receiving social security benefits (currently age sixty-two (62)), his benefits under this Plan shall be reduced by the amount of social security benefits it is estimated he would be entitled to receive monthly. The estimated social security benefit will be calculated based on the Participant's compensation through his Separation from Service date as though he were the Minimum Social Security Age on such date, and in accordance with social security rules in effect at the time of his Separation from Service.

          (d)     The term "Base Salary Rate" means the annual salary rate of a Participant from the Company and all Affiliates exclusive of overtime, bonus, incentive or any other type of special compensation. The term "Average Base Salary Rate" means the average of the highest three (3) of the last five (5) Base Salary Rates of a Participant which are the Base Salary Rates in effect on his Separation from Service date and on the same day and month for each of the four (4) years (or the period of Continuous Service if fewer than four (4) years) immediately preceding the Separation from Service date. If the period of Continuous Service as of a Participant's Separation from Service date is (i) less than two years but more than one year, "Average Base Salary Rate" means the average of the Base Salary Rate on his Separation from Service date and on the same day and month of the immediately preceding year, or (ii) less than one year, "Average Base Salary Rate" means the Base Salary Rate on his Separation from Service date.

          Unless otherwise determined in writing with respect to a Participant by the Chief Executive Officer, the term "Continuous Service" means the period of service without interruption of a person commencing as of the date of hire of such person by the Company or an Affiliate and ending on the date of separation from service for any 

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reason from the Company and all Affiliates ("Separation from Service"). The term "Affiliate" means a corporation or other entity of which fifty-one percent (51%) or more of the capital stock or capital or profits interest (in the case of a noncorporate entity) is directly or indirectly owned by the Company. A medical leave of absence not exceeding twelve (12) months authorized by a Company written policy or any other leave of absence authorized by a Company written policy or approved in writing by the Chief Executive Officer shall not be deemed an interruption in Continuous Service or a Separation from Service.

          In the event the Company acquires a corporation or other entity ("Acquisition"), and any employee of Acquisition, by written determination of the Chief Executive Officer of the Company, becomes a Participant in the Supplemental Plan, such Participant's period of Continuous Service shall commence no sooner than the date Acquisition becomes an Affiliate of the Company unless the Company's Chief Executive Officer otherwise determines and so confirms in writing.

          (e)     If a Participant has a Separation from Service prior to attaining age sixty-two (62) and/or with fewer than twelve (12) years of Continuous Service, then the benefit determined under paragraph (b) of this Article IV (after subtracting the amount determined under paragraph (c) of this Article IV) shall be proportionately reduced by five percent (5%) for each year under age sixty-two (62), and then further reduced by 1/12 for each year under twelve (12) years of Continuous Service, pro-rated, in each case, on a completed-months basis.

          By way of example, assume that a Participant entitled to receive a benefit determined under paragraph (b) has a Separation from Service at age sixty-one (61) and four (4) completed months, with ten (10) years and one (1) completed month of Continuous Service and an Average Base Salary Rate of $300,000. Assume further that the monthly amount calculated under paragraph (c) is $1,500. The monthly benefit determined under paragraph (b) would be equal to $11,000 (one-twelfth (1/12) of fifty percent (50%) of $300,000, or $12,500, minus $1,500), reduced by 3.33% (1/12 of 5% for each of the eight months under age sixty-two (62)) to $10,634, and further reduced by 15.97% (1/12 of 1/12 for each of the twenty-three (23) months under twelve (12) years of Continuous Service) to $8,936.

          Unless expressly determined to the contrary in writing by the Chief Executive Officer, no period of service completed by a person after attainment of age sixty-five (65) and no adjustment to any person's Base Salary Rate which occurs after attainment of age sixty-five (65) shall be taken into account in computing benefits hereunder.

ARTICLE V

Eligibility for Benefits

 

          (a)     Except as otherwise provided in paragraph (a) of Article IV, and in paragraph (b) of this Article V, and in Articles VII, VIII, IX and X: 

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(i)     Participants shall become eligible to commence receiving retirement benefits under Part A of this Supplemental Plan after Separation from Service on or after attaining age sixty-two (62) and such benefits shall be calculated in accordance with the provisions of Article IV; 

(ii)    no Participant in Part A of this Supplemental Plan shall have any vested interest in or right to receive a benefit hereunder until attainment of the age of sixty-two (62); and 

(iii)   unless otherwise determined in writing by the Chief Executive Officer, any interruption in the Continuous Service of a Participant herein prior to the attainment of age sixty-two (62) shall terminate the participation in Part A of this Supplemental Plan of such Participant, and no benefit under Part A shall be payable to or with respect to such Participant.

          (b)     A Participant whose Separation from Service occurs on or after attaining age fifty-five (55), but prior to attaining age sixty-two (62), will be entitled to a special early separation benefit, payable monthly as calculated in accordance with the provisions of Article IV(b), if such benefit is approved by the Chief Executive Officer in his or her sole and unfettered discretion. Under special circumstances, the Board of Directors of the Company may approve a special early separation benefit for a Participant whose Separation from Service occurs prior to attaining age fifty-five (55).

ARTICLE Vl

Form of Benefit Payments

          (a)     Except as provided in Articles Vll and XIX, benefits payable based on the calculations in Article IV of Part A of this Supplemental Plan shall be paid monthly for the life-time of the Participant (unless an optional form is selected under paragraphs (b) or (c) of this Article Vl). Upon the death of the Participant, benefits shall continue to be paid to the Participant's spouse for the lifetime of such spouse at the rate of fifty percent (50%) of Participant's benefit (and to be calculated without regard to the offset in Article IV(a) regarding Appendix M of the Pension Plan), provided certain conditions are met. The conditions of such Spousal Benefit are (1) that the spouse shall be married to the Participant as of the date of the Participant's Separation from Service and (2) the spouse shall be no more than five years younger than the Participant. In the event the spouse is more than five years younger than the Participant, the Participant may elect to receive benefit payments in the form of a joint and survivor option as described in paragraph (c) following.

          (b)     Any Participant, who before September 1, 1993 has commenced to receive benefits and has not made a written election to receive an annuity pursuant to paragraph (a) preceding or paragraph (c) following, shall be entitled to one hundred twenty (120) monthly benefit payments in the amount specified in paragraph (b) of Article IV preceding and a life annuity of the Part A Excess Benefit as defined in paragraph (a) of Article IV preceding. If a Participant, who before September 1, 1993, 

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has commenced to receive benefits and has not made a written election to receive an annuity pursuant to paragraph (a) preceding or paragraph (c) following, dies after Separation from Service and before receiving one hundred and twenty (120) monthly benefit payments, the remainder of the one hundred and twenty (120) monthly benefit payments shall be made to the Participant's designated beneficiary or, if no such beneficiary is then living or no such beneficiary can be located, to the Participant's estate. In the event a Participant has made a written election, prior to September 1, 1993, to receive an annuity pursuant to paragraph (a) preceding or paragraph (c) following, no benefit shall be payable under this paragraph (b), except that any Part A Excess Benefit under the Pension Plan, as provided in paragraph (a) of Article IV, shall be payable at the rate of fifty percent (50%) thereof to the Participant's spouse.

          (c)     In the event that the Participant's spouse is more than five years younger than Participant, at any time prior to the later of September 1, 1993 or the commencement of benefits under Part A of this Supplemental Plan, a Participant may, in lieu of receiving benefits in the form described in paragraph (a) of this Article Vl, elect to receive benefit payments under Part A of this Supplemental Plan in the form of a joint and survivor option providing monthly benefits for the lifetime of the Participant with a stipulated percentage of such amount continued after the Participant's death to the spouse to whom the Participant is married as of the date of the Participant's Separation from Service, for the lifetime of such spouse. The amount of monthly payments available under this option shall be determined by reference to factors such as the Participant's life expectancy, the life expectancy of the Participant's spouse, prior benefits received under the Supplemental Plan, and the percentage of the Participant's monthly benefit which is continued after the Participant's death to the Participant's spouse, so that the value of the joint and survivor option is the actuarial equivalent of the benefits otherwise payable under paragraph (a) (or paragraph (b) if the Participant has elected coverage under paragraph (b) preceding) of this Article Vl inclusive of the Participant and the spousal fifty percent (50%) survivor benefits, which shall be calculated assuming the Participant's spouse was exactly five years younger than Participant. In determining the monthly amount payable under the joint and survivor option with respect to any Participant, the Company may rely upon such information as it, in its sole discretion, deems reliable, including but not limited to, the opinion of an enrolled actuary or annuity purchase rates quoted by an insurance company licensed to conduct an insurance business in the State of California. The election of a joint and survivor option is irrevocable after benefit payments have commenced, and the monthly amount payable during the lifetime of the Participant shall in no event be adjusted by reason of the death of the Participant's spouse prior to the death of the Participant, or by reason of the dissolution of the marriage between the Participant and such spouse, or for any other reason.

ARTICLE Vll

Pre-Retirement Death Benefits

          In the event of the death of a Participant hereunder during a period of Continuous Service and participation in Part A of this Supplemental Plan and after 

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attainment of age 55 (or if death occurs before age 55, then following approval of the Board of Directors of the Company in special circumstances), the beneficiary or the spouse of the Participant shall be entitled to benefits as provided below in paragraphs (a) and (b):

          (a)     Participant's spouse shall be entitled to a fifty percent (50%) or the actuarial equivalent spousal benefit (as determined pursuant to Article Vl, paragraphs (a) or (c), as applicable), attributable to Participant's Part A Excess Benefit under Article IV(a) above calculated as of the Participant's date of death (and to be calculated without regard to the offset in Article IV(a) regarding Appendix M of the Pension Plan), and with such spousal benefit to be reduced in an amount equal to any Qualified Pre-Retirement Survivor Annuity benefit under the Pension Plan relating to benefits on Appendix M thereof. This spousal benefit shall be automatically payable commencing on the same date on which spousal benefits commence under the Pension Plan.

          (b)     At the written election of the Participant, either a benefit under paragraph (i) below or a benefit under paragraph (ii) below shall be paid by the Company. Such election shall be signed by the Participant and notarized and, if the Participant is married at the time of election, the election must also be signed by the Participant's spouse and notarized. The latest election on file in the Company's records shall be controlling. If no election has been made by the Participant, a benefit under paragraph (ii) below shall be paid by the Company.
(i)     A lump sum death benefit shall be payable by the Company to the Participant's designated beneficiary or, if no such beneficiary is then living or no such beneficiary can be located, to the Participant's estate. The amount of such death benefit shall be two (2) times the Participant's Base Salary Rate in effect on the date of the Participant's death. On the written request of a beneficiary but subject to the approval in writing of the Chief Executive Officer, the amount payable under this paragraph (b)(i) may be paid to a beneficiary in monthly or other installments over a period not exceeding one hundred and twenty (120) months. 

(ii)    Participant's spouse shall receive a spousal fifty percent (50%) or the actuarial equivalent spousal benefit (as determined pursuant to Article Vl, paragraphs (a) or (c), as applicable), attributable to Participant's benefit under Article IV(b) above calculated as of the Participant's date of death. In the event a Participant is not married at the time of Participant's death and the Participant has elected the fifty percent (50%) spousal benefit, a lump sum death benefit shall be payable in accordance with paragraph (b)(i) preceding. 

          No benefits shall be payable under this Article Vll if the Participant's death occurs as a result of an act of suicide within twenty-five (25) months after commencement of participation in this Supplemental Plan. Notwithstanding anything herein to the contrary, the amount payable pursuant to this Article VII shall be limited to the maximum amount otherwise payable pursuant to this Article VII that qualifies as a Pre-2005 Deferral.

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ARTICLE Vlll

Disability Benefits

          A disability benefit is payable under Part A of this Supplemental Plan, as follows:

          (a)     If a Participant has a Separation from Service by reason of Permanent Disability (as hereinafter defined) prior to attaining age sixty-two (62) and on or after attaining age fifty-five (55) (or, in special circumstances, if such Separation from Service occurs prior to attaining age fifty-five (55) and has been approved for this benefit by the Board of Directors of the Company), then: 
(i)     the Participant shall become eligible to commence receiving his or her Part A Excess Benefit under paragraph (a) of Article IV, as calculated thereunder as of the Separation from Service date (this benefit shall be automatically payable commencing on the same date on which benefits commence under the Pension Plan); and 

(ii)    the Participant shall become eligible to commence receiving a benefit under paragraph (b) of Article IV, as calculated thereunder as of the Separation from Service date.

Notwithstanding anything herein to the contrary, the amount payable pursuant to this Article VIII shall be limited to the maximum amount otherwise payable pursuant to this Article VIII that qualifies as a Pre-2005 Deferral.

          (b)     "Permanent Disability" shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, unless a different definition applies for a Participant in an employment agreement approved by the Compensation Committee of the Board of Directors, in which case that different definition shall also apply to Part A of this Supplemental Plan. The Participant shall not be deemed to have a Permanent Disability until proof of the existence thereof shall have been furnished to the Board of Directors of the Company in such form and manner, and at such times, as the Board of Directors may require. Any determination by the Board of Directors of the Company that the Participant does or does not have a Permanent Disability shall be final and binding upon the Company and the Participant.

ARTICLE IX

Right to Amend, Modify, Suspend or Terminate Plan

          By action of the Company's Board of Directors, the Company may amend, modify, suspend or terminate Part A of this Supplemental Plan without further liability to any employee or former employee or any other person. Notwithstanding the preceding sentence:

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          (a)     Part A of this Supplemental Plan may not be amended, modified, suspended or terminated as to a Participant whose Separation from Service has occurred and who is entitled to receive or has commenced to receive benefits under Part A of this Supplemental Plan, without the express written consent of such Participant or, if deceased, such Participant's designated beneficiary or, if no beneficiary is then living or if no beneficiary can be located, such Participant's legal representative; and

          (b)     following a Change in Control (as defined in Article X), Part A of this Supplemental Plan may not be amended, modified, suspended or terminated as to any Participant who was a Participant prior to such Change in Control, without the express written consent of such Participant.

          (c)     Part A of this Supplemental Plan may not be amended, modified, suspended or terminated as to a Participant with respect to benefits already accrued under paragraph (a) of Article IV, without the express written consent of such Participant, but may be amended, modified, suspended or terminated as to a Participant with respect to benefits not yet accrued under paragraph (a) of Article IV without such consent.

ARTICLE X

Change in Control

          The term "Change in Control" means, after the effective date of this Supplemental Plan, (a) the acquisition by any person, entity or group (as defined in Section 13(d)3 of the Securities Exchange Act of 1934, as amended) as beneficial owner, directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the combined voting power of the then outstanding securities of the Company, (b) a change during any period of two (2) consecutive years of a majority of the Board of Directors as constituted as of the beginning of such period, unless the election of each director who was not a director at the beginning of such period was approved by vote of at least two-thirds of the directors then in office who were directors at the beginning of such period, (c) a sale of substantially all of the property and assets of the Company, (d) a merger, consolidation, reorganization or other business combination to which the Company is a party and the consummation of which results in the outstanding voting securities of the Company being exchanged for or converted into cash, property and/or securities not issued by the Company, (e) a merger, consolidation, reorganization or other business combination to which the Company is a party and the consummation of which does not result in the outstanding voting securities of the Company being exchanged for or converted into cash, property and/or securities not issued by the Company, provided that the outstanding voting securities of the Company immediately prior to such business combination (or, if applicable, the securities of the Company into which such voting securities are converted as a result of such business combination) represent less than 50% of the voting power of the Company immediately following such business combination, or (f) any other event constituting a change in control of the Company for purposes of Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934.

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          In the event a Participant who was a Participant as of the date of a Change in Control either (a) has an involuntary Separation from Service for any reason (which, for purposes of this Article X, shall include a voluntary Separation from Service for Good Reason, as hereinafter defined) within thirty-six full calendar months following such Change in Control, or (b) has a voluntary Separation from Service for any reason other than Good Reason (including the death of the Participant) more than twelve (12) full calendar months after, but within thirty-six (36) full calendar months following, such Change in Control, such Participant shall be entitled to receive immediately upon such Separation from Service, without regard to approval by the Chief Executive Officer or any other person(s) (1) benefits attributable to paragraph (a) of Article IV hereunder in accordance with Articles IV, Vl, VII and VlIl, as applicable, with such benefits to commence when benefits under the Pension Plan commence, and (2) benefits attributable to paragraph (b) of Article IV hereunder in accordance with Articles IV, Vl, VII and VlIl, as applicable, with such benefits to commence at the time set forth in paragraph (b) of Article IV. Such benefits under paragraph (b) of Article IV shall be calculated as if, on the date of such Separation from Service, the Participant (i) had completed a number of years of Continuous Service equal to the greater of twelve (12) or the actual number of years of his or her Continuous Service, and (ii) had attained an age equal to the greater of sixty-two (62) or his or her actual age. Notwithstanding anything herein to the contrary, the amount payable pursuant to this Article X shall be limited to the maximum amount otherwise payable pursuant to this Article X that qualifies as a Pre-2005 Deferral.

          For purposes of Part A of this Supplemental Plan, a Participant's voluntary Separation from Service shall be deemed to be for "Good Reason" if it occurs within six months of any of the following without the Participant's express written consent:

          (a)     a substantial change in the nature, or diminution in the status, of the Participant's duties or position from those in effect immediately prior to the Change in Control;

          (b)     a reduction by the Company in the Participant's annual base salary as in effect on the date of a Change in Control or as in effect thereafter if such compensation has been increased and such increase was approved prior to the Change in Control;

          (c)     a reduction by the Company in the overall value of benefits provided to the Participant, as in effect on the date of a Change in Control or as in effect thereafter if such benefits have been increased and such increase was approved prior to the Change in Control (as used herein, "benefits" shall include all profit sharing, retirement, pension, health, medical, dental, disability, insurance, automobile, and similar benefits);

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          (d)     a failure to continue in effect any stock option or other equity-based or non-equity based incentive compensation plan in effect immediately prior to the Change in Control, or a reduction in the Participant's participation in any such plan, unless the Participant is afforded the opportunity to participate in an alternative incentive compensation plan of reasonably equivalent value;

          (e)     a failure to provide the Participant the same number of paid vacation days per year available to him prior to the Change in Control, or any material reduction or the elimination of any material benefit or perquisite enjoyed by the Participant immediately prior to the Change in Control;

          (f)     relocation of the Participant's principal place of employment to any place more than 35 miles from the Participant's previous principal place of employment;

          (g)     any material breach by the Company of any stock option or restricted stock agreement; or

          (h)     conduct by the Company, against the Participant's volition, that would cause the Participant to commit fraudulent acts or would expose the Participant to criminal liability;

provided that for purposes of clauses (b) through (e) above, "Good Reason" shall not exist (A) if the aggregate value of all salary, benefits, incentive compensation arrangements, perquisites and other compensation is reasonably equivalent to the aggregate value of salary, benefits, incentive compensation arrangements, perquisites and other compensation as in effect immediately prior to the Change in Control, or as in effect thereafter if the aggregate value of such items has been increased and such increase was approved prior to the Change in Control, or (B) if the reduction in aggregate value is due to reduced performance by the Company, the business unit of the Company for which the Participant is responsible, or the Participant, in each case applying standards reasonably equivalent to those utilized by the Company prior to the Change in Control.

          Not later than the occurrence of a Change in Control, the Company shall cause to be transferred to a grantor trust described in Section 671 of the Code, assets equal in value to all accrued obligations under Part A of this Supplemental Plan as of one day following a Change in Control, in respect of both active employees of the Company and retirees as of that date. Such trust by its terms shall, among other things, be irrevocable. The value of liabilities and assets transferred to the trust shall be determined by one or more nationally recognized firms qualified to provide actuarial services as described in Section 4 of the Computer Sciences Corporation Severance Plan for Senior Management and Key Employees. The establishment and funding of such trust shall not affect the obligation of the Company to provide supplemental pension payments under the terms of Part A of this Supplemental Plan to the extent such benefits are not paid from the trust.

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ARTICLE Xl

No Assignment

          Benefits under Part A of this Supplemental Plan may not be assigned or alienated and shall not be subject to the claims of any creditor.

ARTICLE Xll

Administration

          This Supplemental Plan shall be administered by the Chief Executive Officer or by such other person or persons to whom the Chief Executive Officer may delegate functions hereunder. With respect to all matters pertaining to this Supplemental Plan, the determination of the Chief Executive Officer or his designated delegate shall be conclusive and binding. The Chief Executive Officer shall be eligible to participate in this Supplemental Plan in the same manner as any other employee; provided, however, that the designation of the Chief Executive Officer as a Participant and any other action provided herein with respect to the Chief Executive Officer's participation shall be taken by the Compensation Committee of the Board of Directors of the Company.

ARTICLE Xlll

Release

          In connection with any benefit or benefit payment under Part A of this Supplemental Plan, or the designation of any beneficiary or any election or other action taken or to be taken under Part A of the Supplemental Plan by any Participant or any other person, the Company, acting through its Chief Executive Officer or his delegate, may require such consents or releases as are reasonable under the circumstances, and further may require any such designation, election or other action to be in writing and in form reasonably satisfactory to the Chief Executive Officer or his delegate.

ARTICLE XIV

No Waiver

          The failure of the Company, the Chief Executive Officer or any other person acting on behalf thereof to demand a Participant or other person claiming rights with respect to a Participant to perform any act which such person is or may be required to perform hereunder shall not constitute a waiver of such requirement or a waiver of the right to require such act. The exercise of or failure to exercise any discretion reserved to the Company, its Chief Executive Officer or his delegate, to grant or deny any benefit to any Participant or other person under Part A of this Supplemental Plan shall in no way require the Company, its Chief Executive Officer or his delegate to similarly exercise or fail to exercise such discretion with respect to any other Participant.

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ARTICLE XV

No Contract

          This Supplemental Plan is strictly a voluntary undertaking on the part of the Company and, except with respect to the obligations of the Company upon and following a Change in Control, which shall be absolute and unconditional, shall not be deemed to constitute a contract or part of a contract between the Company (or an Affiliate) and any employee or other person, nor shall it be deemed to give any employee the right to be retained for any specified period of time in the employ of the Company (or an Affiliate) or to interfere with the right of the Company (or an Affiliate) to discharge or retire any employee at any time, nor shall this Supplemental Plan interfere with the right of the Company (or an Affiliate) to establish the terms and conditions of employment of any employee.

ARTICLE XVI

Indemnification

          The Company shall defend, indemnify and hold harmless the Officers and Directors of the Company acting in their capacity as such (and not as Participants herein) from any and all claims, expenses and liabilities arising out of their actions or failure to act hereunder, excluding fraud or willful misconduct.

ARTICLE XVII

Claim Review Procedure

          Benefits will be provided to each Participant or beneficiary as specified in Part A of this Supplemental Plan. 

          (a)     If such person (a "Claimant") believes that the Claimant has not been provided with benefits due under Part A of this Supplemental Plan, then the Claimant has the right to make a written claim for benefits under the Plan. If such a written claim is made, and the Administrator wholly or partially denies the claim, the Administrator shall provide the Claimant with written notice of such denial, setting forth, in a manner calculated to be understood by the Claimant:
(i)     the specific reason or reasons for such denial;

(ii)    specific reference to pertinent Plan provisions on which the denial is based;

(iii)   a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and

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(iv)     an explanation of the Plan's claims review procedure and time limits applicable to those procedures, including a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) if the claim is denied on appeal.

          (b)     The written notice of any claim denial pursuant to paragraph (a) of this Article XVII shall be given not later than thirty (30) days after receipt of the claim by the Administrator, unless the Administrator determines that special circumstances require an extension of time for processing the claim, in which event:
(i)     written notice of the extension shall be given by the Administrator to the Claimant prior to thirty (30) days after receipt of the claim;

(ii)    the extension shall not exceed a period of thirty (30) days from the end of the initial thirty (30) day period for giving notice of a claim denial; and 

(iii)   the extension notice shall indicate (A) the special circumstances requiring an extension of time and (B) the date by which the Administrator expects to render the benefit determination.

          (c)     The decision of the Administrator shall be final unless the Claimant, within sixty (60) days after receipt of notice of the claims denial from the Administrator, submits a written request to the Board of Directors of the Company, or its delegate, for an appeal of the denial. During that sixty (60) day period, the Claimant shall be provided, upon request and free of charge, reasonable access to , and copies of, all documents, records and other information relevant to the claim for benefits. The Claimant shall be provided the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits as part of the Claimant's appeal. The Claimant may act in these matters individually, or through his or her authorized representative.

          (d)     After receiving the written appeal, if the Board of Directors of the Company, or its delegate, shall issue a written decision notifying the Claimant of its decision on review, not later than thirty (30) days after receipt of the written appeal, unless the Board of Directors of the Company or its delegate determines that special circumstances require an extension of time for reviewing the appeal, in which event:
(i)     written notice of the extension shall be given by the Board of Directors of the Company or its delegate prior to thirty (30) days after receipt of the written appeal; 

(ii)    the extension shall not exceed a period of thirty (30) days from the end of the initial thirty (30) day review period; 

(iii)   the extension notice shall indicate (A) the special circumstances requiring an extension of time and (B) the date by which the Board of Directors of the Company or its delegate expects to render the appeal decision.

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          The period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is received by the Board of Directors of the Company or its delegate, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing of the appeal. If the period of time for reviewing the appeal is extended as permitted above, due to a claimant's failure to submit information necessary to decide the claim on appeal, then the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

          (e)     In conducting the review on appeal, the Board of Directors of the Company or its delegate shall take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. If the Board of Directors of the Company or its delegate upholds the denial, the written notice of decision from the Board of Directors of the Company or its delegate shall set forth, in a manner calculated to be understood by the Claimant:
(i)     the specific reason or reasons for the denial

(ii)    specific reference to pertinent Plan provisions on which the denial is based;

(iii)   a statement that the Claimant is entitled to be receive, upon request and free of charge, reasonable access to , and copies of, all documents, records and other information relevant to the claim for benefits.

(iv)    A statement of the Claimant's right to bring a civil action under ERISA 502(a).

          (f)     If the Plan or any of its representatives fail to follow any of the above claims procedures, the Claimant shall be deemed to have duly exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under ERISA Section 502(a), including but not limited to the filing of an action for immediate declaratory relief regarding benefits due under the Plan.

ARTICLE XVIII

Termination of Benefits and Participation

          Prior, but only prior to a Change in Control, the retirement benefits payable to any Participant under Part A of this Supplemental Plan, and the participation of such Participant in Part A of this Supplemental Plan, may be terminated with respect to benefits under paragraph (b) of Article IV (but not with respect to benefits under paragraph (a) of Article IV) if in the judgment of the Chief Executive Officer, upon the advice of counsel, such Participant, directly or indirectly:

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          (a)     breaches any obligation to the Company under any agreement relating to assignment of inventions, disclosure of information or data, or similar matters; or

          (b)     competes with the Company, or renders competitive services (as a director, officer, employee, consultant or otherwise) to, or owns more than a 5% interest in, any person or entity that competes with the Company; or

          (c)     solicits, diverts or takes away any person who is an employee of the Company or advises or induces any employee to terminate his or her employment with the Company; or

          (d)     solicits, diverts or takes away any person or entity that is a customer of the Company, or advises or induces any customer or potential customer not to do business with the Company; or

          (e)     discloses to any person or entity other than the Company, or makes any use of, any information relating to the technology, know-how, products, business or data of the Company or its subsidiaries, suppliers, licensors or customers, including but not limited to the names, addresses and special requirements of the customers of the Company.

Article XIX

Lump-Sum Acceleration

          (a)     This Article XIX applies to benefits payable under paragraph (a) of Article IV and under paragraph (b) of Article IV. 

          (b)     At any time within three (3) years after the occurrence of a Change in Control, a Participant or the Participant's Surviving Spouse may elect to receive a lump sum payment, in an amount determined below, sixty (60) days after giving written notice of the Participant's desire or the Participant's Surviving Spouse's desire to receive such lump sum benefit, to the person designated to administer Part A of this Supplemental Plan under Article XII. The date which is sixty (60) days after the notice is given shall be the "Commencement Date." The lump sum payment shall be determined in accordance with paragraphs (c) and (d) of this Article XIX, and then shall be reduced by a penalty equal to ten percent (10%) of such payment which shall be irrevocably forfeited.

          (c)     The lump sum payment shall equal the lump sum value of the Participant's (or the Participant's Surviving Spouse's, if applicable) remaining Benefit as of the Commencement Date, but only to the extent such amount qualifies as a Pre-2005 Deferral. The lump sum value shall be computed by using the present value basis as is required under Section 417(e) of the Code at the Commencement Date for determining lump sums under qualified plans. 

          (d)     In calculating the lump sum payment, the Cost of Living Adjustment called for under Article XXI shall be taken into account as follows: The Company shall 

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determine the average of the 3 most recent adjustments under Article XXI (or the 3 most recent adjustments that would have occurred had Article XXI been in effect for all relevant periods). That average so-determined shall be deemed to apply for purposes of all future years for purposes of making the lump sum calculation.

ARTICLE XX

Hardship Withdrawal

          (a)     This Article XX applies to benefits payable under paragraph (a) of Article IV and under paragraph (b) of Article IV, and is applicable only to Participants who have commenced receiving retirement benefits under Part A of this Supplemental Plan.

          (b)     "Hardship" of a Participant shall mean an unforeseeable emergency which constitutes a severe financial hardship resulting from any one or more of the following:
(i)     sudden and unexpected illness or accident of the Participant or of a dependent (as defined in Section 152(a)of the Code) of the Participant;

(ii)    loss of the Participant's property due to casualty; or

(iii)   any other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the Participant's control.

          (c)     Whether a Participant has incurred a Hardship shall be determined by the person designated to administer Part A of this Supplemental Plan under Article XII, in his discretion on the basis of all relevant facts and circumstances and in accordance with nondiscriminatory and objective standards, uniformly interpreted and consistently applied.

          (d)     A Participant may make a withdrawal from the Participant's account, in the form of a lump sum, on account of the Participant's Hardship, only to the extent that the Hardship is not otherwise relievable:
(i)     through reimbursement or compensation by insurance or otherwise, or

(ii)    by liquidation of the Participant's assets (to the extent that such liquidation does not itself cause a Hardship).

          (e)     The amount of the lump sum hardship withdrawal shall not exceed the current lump sum value of the remaining benefits otherwise due, as determined immediately prior to the hardship distribution, and as determined by using the methodology described in paragraphs (c) and (d) of Article XIX, without regard to the penalty provision of paragraph (b) of Article XIX.

          (f)     If a hardship lump sum distribution is made to a Participant, the amount of future benefits under Part A of this Supplemental Plan shall be reduced, as follows: 

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(i)     First, the current lump sum value of the benefits otherwise due shall be determined immediately prior to the hardship distribution by using the methodology described in paragraphs (c) and (d) of Article XIX, without regard to the penalty provision of paragraph (b) of Article XIX.

(ii)    Second, the amount of the lump sum hardship distribution to be made shall be subtracted from the amount so determined. The resulting net amount is called the "Resulting Net Value." 

(iii)   Third, all future benefit payments shall be adjusted downward, to an amount that has a lump sum present value equal to the Resulting Net Value. Such lump sum present value shall be calculated using the methodology described in paragraphs (c) and (d) of Article XIX, without regard to the penalty provision of paragraph (b) of Article XIX.

          (g)     Participants may request a Hardship withdrawal from either benefits otherwise payable under paragraph (a) of Article IV or under paragraph (b) of Article IV, or from benefits payable under both paragraphs (a) and (b).

          (h)     The provisions of this Article XX shall be equally applicable to Participant's Surviving Spouse.

ARTICLE XXI

Cost of Living Adjustment

          (a)     This Article XXI applies to benefits payable on or after August 13, 2001 under paragraph (b) of Article IV, but does not apply to benefits payable under paragraph (a) of Article IV.

          (b)     On the first day of each fiscal year of the Company, following commencement of payment of benefits to the Participant (or that Participant's Surviving Spouse, as applicable) hereunder, the benefits payable to that Participant (or that Participant's Surviving Spouse) shall be subject to an upward adjustment, as follows:
(i)     Benefits payable shall be increased by an amount equal to the lesser of (A) the greater of zero or the most recently published annual percent change in the Consumer Price Index (as hereinafter defined), as computed to the nearest one-tenth of one percent (0.1) for the twelve consecutive reference months of March of the prior calendar year through and including February of the current calendar year ; or (B) five percent (5%).

(ii)    Such adjustments, if any, shall be calculated for each year, irrespective of any other year's adjustment. For example, if the CPI change in four successive years is 3%, 6%, 7% and 3%, the Company would implement corresponding increases equal to 3%, 5%, 5% and 3%.

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          (c)     The "Consumer Price Index" is "The Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average for All Items, 1982-84=100" as published by the Bureau of Labor Statistics.

          (d)     In the event that the Bureau of Labor Statistics reissues CPI data to correct an error in previously published CPI data, any affected benefits will be recalculated by the Company.

ARTICLE XXII

Certain Further Payments By the Company

          (a)     This Article XXII applies to benefits payable under paragraph (a) of Article IV and under paragraph (b) of Article IV.

          (b)     The Company shall be obligated to make certain further payments to Participants as set forth in this Article XXII. 

          (c)     In the event that any amount or benefit payable to the Participant by the Company on or after August 13, 2001 pursuant to Part A of this Supplemental Plan (collectively, the "Taxable Benefits") is subject on or after August 13, 2001 to the tax imposed under Section 3121 of the Code (the "FICA Tax"), or any similar tax that may hereafter be imposed, the Company shall pay to the Participant at the time specified in paragraph (d) below, the Tax Reimbursement Payment (as hereinafter defined). The "Tax Reimbursement Payment" is defined as an amount, which when reduced by any FICA Tax paid by the Participant on the Taxable Benefits (but without reduction for any Federal, state or local income taxes on such Taxable Benefits), shall be equal to the amount of any Federal, state or local income taxes payable because of the inclusion of the Tax Reimbursement Payment in the Participant's adjusted gross income, by applying the highest applicable marginal rate of Federal, state and local income taxation, respectively, for the calendar year in which the Tax Reimbursement Payment is to be made.

          (d)     For purposes of determining the amount of the Tax Reimbursement Payment, the Participant shall be deemed:
(i)     to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made; and

(ii)    to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Participant's adjusted gross income.) 

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          (e)     The Tax Reimbursement Payment attributable to a Taxable Benefit shall be paid to the Participant not more than thirty (30) days following the incurrence of the FICA Tax. If the amount of such Tax Reimbursement Payment cannot be finally determined on or before the date on which payment is due, the Company shall pay to the Participant an amount estimated in good faith by the Company to be the minimum amount of such Tax Reimbursement Payment and shall pay the remainder of such Tax Reimbursement Payment as soon as the amount thereof can be determined. 

 

 

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PART B

All capitalized terms used in this Part B shall have the definitions provided for in this Part B or Articles I, II or III of this Supplemental Plan.

ARTICLE XXIII

Part B Retirement Benefits

          The amount of retirement benefit payable under Part B to each Participant upon Separation from Service (as defined in paragraph (d) below) shall be as determined in this Article XXIII, except as otherwise provided in Articles XXXVIII, XXXIX and XL.

          (a)     A Participant who is entitled to receive a benefit under the Computer Sciences Corporation Employee Pension Plan ("Pension Plan"), shall be entitled to receive an excess benefit under Part B of this Supplemental Plan (a "Part B Excess Benefit"). The Part B Excess Benefit hereunder vests at the time that the Participant becomes vested under the Pension Plan. The Part B Excess Benefit is the additional monthly amount calculated as follows: the additional monthly amount which the Participant would otherwise be entitled to receive as a single life annuity under the Pension Plan at the date of commencing payment of the Part B Excess Benefit, if the limitations imposed by Sections 401(a)(17) and 415 of the Code, were not applied, less any benefits that the Participant is entitled to receive as a single life annuity at that date under Appendix N of the Pension Plan, and provided further, that in making such calculation:
(i)     all deferrals of salary under the Company's Deferred Compensation Plan shall be disregarded, as if no deferrals had been made;

(ii)    compensation for periods of time prior to date of first participation in this Supplemental Plan shall be disregarded and not taken into account; and

(iii)   compensation from all affiliates of the Company shall be taken into account, as if such affiliates were participating employers in the Pension Plan.

Notwithstanding anything herein to the contrary, the amount payable pursuant to this paragraph (a) shall be limited to the maximum amount otherwise payable pursuant to this paragraph (a) that qualifies as a Post-2004 Deferral.

          In addition to the benefit described in this paragraph (a), a benefit as described in paragraph (b) following may be payable to the Participant. The Participant shall automatically commence receiving Participant's Part B Excess Benefit on the date on which the Participant commences to receive benefits under the Pension Plan.

          (b)     A Participant who has a Separation from Service on or after attaining age sixty-two (62) shall receive an amount determined under this paragraph (b). A Participant who has a Separation from Service prior to attaining age sixty-two (62) shall 

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only receive an amount determined under this paragraph (b) if he or she is entitled to an early separation benefit pursuant to Article XXIV(b), a pre-retirement death benefit pursuant to Article XXVI(b)(ii) or a disability benefit pursuant to Article XXVII. Amounts payable pursuant to this paragraph (b) shall be paid monthly in the form of a life annuity. Payments shall commence on the first day of the calendar month that is on or immediately after a Participant's Separation from Service date. The monthly amount payable shall be equal to (i) one-twelfth (1/12) of fifty percent (50%) of the Participant's Average Base Salary Rate (as defined in paragraph (d) below), minus (ii) the amount determined under paragraph (c) below, unless Participant is also entitled to a benefit under Article IV(b) of Part A of this Supplemental Plan, in which case such reduction shall be offset by the amount by which the benefit under Article IV(b) of Part A of this Supplemental Plan is reduced. The resulting amount will be proportionately reduced pursuant to paragraph (e) below if the Participant has a Separation from Service prior to attaining age sixty-two (62) and/or with fewer than twelve (12) years of Continuous Service. Notwithstanding anything herein to the contrary, the amount payable pursuant to this paragraph (b) shall be limited to the maximum amount otherwise payable pursuant to this paragraph (b) that qualifies as a Post-2004 Deferral.

          (c)     The amount determined under this paragraph (c) shall generally be equal to the primary social security benefit paid or payable to the Participant at the time benefits commence under Part B of this Supplemental Plan, whether or not the Participant is denied social security benefits because of other income or voluntarily forgoes social security income. However, where a Participant commences to receive benefits under Part B of this Supplemental Plan prior to attaining the minimum age (the "Minimum Social Security Age") at which he will be entitled to commence receiving social security benefits (currently age sixty-two (62)), his benefits under this Plan shall be reduced by the amount of social security benefits it is estimated he would be entitled to receive monthly. The estimated social security benefit will be calculated based on the Participant's compensation through his Separation from Service date as though he were the Minimum Social Security Age on such date, and in accordance with social security rules in effect at the time of his Separation from Service.

          (d)     The term "Base Salary Rate" means the annual salary rate of a Participant from the Company and all Affiliates exclusive of overtime, bonus, incentive or any other type of special compensation. The term "Average Base Salary Rate" means the average of the highest three (3) of the last five (5) Base Salary Rates of a Participant which are the Base Salary Rates in effect on his Separation from Service date and on the same day and month for each of the four (4) years (or the period of Continuous Service if fewer than four (4) years) immediately preceding the Separation from Service date. If the period of Continuous Service as of a Participant's Separation from Service date is (i) less than two years but more than one year, "Average Base Salary Rate" means the average of the Base Salary Rate on his Separation from Service date and on the same day and month of the immediately preceding year, or (ii) less than one year, "Average Base Salary Rate" means the Base Salary Rate on his Separation from Service date.

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          Unless otherwise determined in writing with respect to a Participant by the Chief Executive Officer, the term "Continuous Service" means the period of service without interruption of a person commencing as of the date of hire of such person by the Company or an Affiliate and ending on the date of "separation from service" (as defined under Section 409A) for any reason from the Company and all Affiliates ("Separation from Service"). The term "Affiliate" means a corporation or other entity of which fifty-one percent (51%) or more of the capital stock or capital or profits interest (in the case of a noncorporate entity) is directly or indirectly owned by the Company. A medical leave of absence not exceeding twelve (12) months authorized by a Company written policy or any other leave of absence authorized by a Company written policy or approved in writing by the Chief Executive Officer shall not be deemed an interruption in Continuous Service or a Separation from Service.

          In the event the Company acquires a corporation or other entity ("Acquisition"), and any employee of Acquisition, by written determination of the Chief Executive Officer of the Company, becomes a Participant in the Supplemental Plan, such Participant's period of Continuous Service shall commence no sooner than the date Acquisition becomes an Affiliate of the Company unless the Company's Chief Executive Officer otherwise determines and so confirms in writing.

          (e)     If a Participant has a Separation from Service prior to attaining age sixty-two (62) and/or with fewer than twelve (12) years of Continuous Service, then the benefit determined under paragraph (b) of this Article XXIII (after subtracting the amount determined under paragraph (c) of this Article XXIII) shall be proportionately reduced by five percent (5%) for each year under age sixty-two (62), and then further reduced by 1/12 for each year under twelve (12) years of Continuous Service, pro-rated, in each case, on a completed-months basis.

          By way of example, assume that a Participant entitled to receive a benefit determined under paragraph (b) has a Separation from Service at age sixty-one (61) and four (4) completed months, with ten (10) years and one (1) completed month of Continuous Service and an Average Base Salary Rate of $300,000. Assume further that the monthly amount calculated under paragraph (c) is $1,500. The monthly benefit determined under paragraph (b) would be equal to $11,000 (one-twelfth (1/12) of fifty percent (50%) of $300,000, or $12,500, minus $1,500), reduced by 3.33% (1/12 of 5% for each of the eight months under age sixty-two (62)) to $10,634, and further reduced by 15.97% (1/12 of 1/12 for each of the twenty-three (23) months under twelve (12) years of Continuous Service) to $8,936.

          Unless expressly determined to the contrary in writing by the Chief Executive Officer, no period of service completed by a person after attainment of age sixty-five (65) and no adjustment to any person's Base Salary Rate which occurs after attainment of age sixty-five (65) shall be taken into account in computing benefits hereunder.

          (f)     Notwithstanding anything herein to the contrary: no distributions to a Specified Employee (as hereinafter defined) under Part B of this Supplemental Plan that are to be made as a result of the Specified Employee's Separation from Service for any 

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reason other than the Specified Employee's death or "disability" (as such term is defined under Section 409A) shall be made or commence prior to the date that is six months after the date of Separation from Service, or such shorter period that, in the opinion of such counsel, is sufficient to avoid the imposition of the additional tax under Section 409A(a)(1)(B) or any other taxes or penalties imposed under Section 409A (the "Section 409A Taxes"); provided that any distributions that otherwise would have been payable during such six-month (or shorter) period, plus interest accrued thereon at a rate equal to the 120-month rolling average yield to maturity of the index called the "Merrill Lynch U.S. Corporates, A Rated, 15+ Years Index" as of December 31 of the year preceding the year in which the Separation from Service occurs, compounded annually, shall be distributed in lump sum on the first day following the expiration of such six-month (or shorter) period. For purposes of Part B of this Supplemental Plan the term "Specified Employee" shall mean any Plan B Participant who is a "specified employee" (as such term is defined under Section 409A) of the Company. The "identification date" (as defined under Section 409A) for purposes of identifying Specified Employees shall be September 30 of each calendar year. Individuals identified on any identification date shall be treated as Specified Employees for the 12-month period beginning on January 1 of the calendar year following the year of the identification date. In determining whether an individual is a Specified Employee as of an identification date, all individuals who are nonresident aliens during the entire 12-month period ending on such identification date shall be excluded for purposes of determining which individuals will be Specified Employees.

ARTICLE XXIV

Eligibility for Benefits

          (a)     Except as otherwise provided in paragraph (a) of Article XXIII, in paragraph (b) of this Article XXIV, and in Articles XXVI, XXVII, XXVIII and XXIX, and subject to paragraph (g) of Article XXIII:
(i)     Participants shall become eligible to commence receiving retirement benefits under Part B of this Supplemental Plan after Separation from Service on or after attaining age sixty-two (62) and such benefits shall be calculated in accordance with the provisions of Article XXIII; 

(ii)    no Participant in Part B of this Supplemental Plan shall have any vested interest in or right to receive a benefit hereunder until attainment of the age of sixty-two (62); and 

(iii)   unless otherwise determined in writing by the Chief Executive Officer, any interruption in the Continuous Service of a Participant herein prior to the attainment of age sixty-two (62) shall terminate the participation in Part B of this Supplemental Plan of such Participant, and no benefit under Part B shall be payable to or with respect to such Participant.

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          (b)     A Participant whose Separation from Service occurs on or after attaining age fifty-five (55), but prior to attaining age sixty-two (62), will be entitled to a special early separation benefit, payable monthly as calculated in accordance with the provisions of Article XXIII(b), if such benefit is approved by the Chief Executive Officer in his or her sole and unfettered discretion. Under special circumstances, the Board of Directors of the Company may approve a special early separation benefit for a Participant whose Separation from Service occurs prior to attaining age fifty-five (55).

ARTICLE XXV

Form of Benefit Payments

          (a)     Except as provided in Articles XXVl and XXXVIII, benefits payable based on the calculations in Article XXIII of Part B of this Supplemental Plan shall be paid monthly for the life-time of the Participant, unless at the time payment of benefits to a Participant commence (1) the Participant is married and (2) the Spousal Benefit conditions set forth in this paragraph (a) are not met. Except as provided in Articles XXVl and XXXVIII, upon the death of the Participant, benefits shall continue to be paid to the Participant's spouse for the lifetime of such spouse at the rate of fifty percent (50%) of Participant's benefit (and to be calculated without regard to the offset in Article XXIII(a) regarding Appendix N of the Pension Plan), provided certain conditions set forth in this paragraph (a) are met. The conditions of such Spousal Benefit are (1) that the spouse shall be married to the Participant as of the date of the Participant's Separation from Service and (2) the spouse shall be no more than five years younger than the Participant. Except as provided in Articles  XXVl and XXXVIII, in the event at the time payment of benefits to a Participant commence the Participant is married and the spouse is more than five years younger than the Participant, the Participant shall receive benefit payments in the form of a joint and survivor option as described in paragraph (b) following.

          (b)     In the event that at the time payment of benefits to a Participant commence (1) Participant is married and (2) Participant's spouse is more than five years younger than Participant, Participant shall receive benefit payments under Part B of this Supplemental Plan in the form of a joint and survivor option providing monthly benefits for the lifetime of the Participant with fifty percent (50%) of such amount continued after the Participant's death to the spouse to whom the Participant is married as of the date of the Participant's Separation from Service, for the lifetime of such spouse. The amount of monthly payments available under this option shall be determined by reference to factors such as the Participant's life expectancy, the life expectancy of the Participant's spouse, prior benefits received under the Supplemental Plan, and the percentage of the Participant's monthly benefit which is continued after the Participant's death to the Participant's spouse, so that the value of the joint and survivor option is the actuarial equivalent of the benefits otherwise payable under paragraph (a) of this Article XXV inclusive of the Participant and the spousal fifty percent (50%) survivor benefits, which shall be calculated assuming the Participant's spouse was exactly five years younger than Participant. In determining the monthly amount payable under the joint and survivor option with respect to any Participant, the 

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Company may rely upon such information as it, in its sole discretion, deems reliable, including but not limited to, the opinion of an enrolled actuary or annuity purchase rates quoted by an insurance company licensed to conduct an insurance business in the State of California. The monthly amount payable during the lifetime of the Participant shall in no event be adjusted by reason of the death of the Participant's spouse prior to the death of the Participant, or by reason of the dissolution of the marriage between the Participant and such spouse, or for any other reason.

ARTICLE XXVl

Pre-Retirement Death Benefits

          Except as provided in Article XXXVIII, in the event of the death of a Participant hereunder during a period of Continuous Service and participation in Part B of this Supplemental Plan and after attainment of age 55 (or if death occurs before age 55, then following approval of the Board of Directors of the Company in special circumstances), the beneficiary or the spouse of the Participant shall be entitled to benefits as provided below in paragraphs (a) and (b):

          (a)     Participant's spouse shall be entitled to a fifty percent (50%) or the actuarial equivalent spousal benefit (as determined pursuant to Article XXV, paragraphs (a) or (c), as applicable), attributable to Participant's Part B Excess Benefit under Article XXIII(a) above calculated as of the Participant's date of death (and to be calculated without regard to the offset in Article XXIII(a) regarding Appendix N of the Pension Plan), and with such spousal benefit to be reduced in an amount equal to any Qualified Pre-Retirement Survivor Annuity benefit under the Pension Plan relating to benefits on Appendix N thereof. This spousal benefit shall be automatically payable commencing on the same date on which spousal benefits commence under the Pension Plan.

          (b)     A benefit under paragraph (i) below or a benefit under paragraph (ii) below shall be paid by the Company, whichever is determined by the Administrator to be greater value (on an actuarial equivalence basis) at the time of the Participant's death.
(i)     A lump sum death benefit shall be payable by the Company to the Participant's designated beneficiary or, if no such beneficiary is then living or no such beneficiary can be located, to the Participant's estate, payable within thirty (30) days of the Participant's death. The amount of such death benefit shall be two (2) times the Participant's Base Salary Rate in effect on the date of the Participant's death.

(ii)    Participant's spouse shall receive a spousal fifty percent (50%) or the actuarial equivalent spousal benefit (as determined pursuant to Article XXV, paragraphs (a) or (b), as applicable), attributable to Participant's benefit under Article XXIII(b) above calculated as of the Participant's date of death. In the event a Participant is not married at the time of Participant's death, a lump sum death benefit shall be payable in accordance with paragraph (b)(i) preceding.

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          No benefits shall be payable under this Article XXVI if the Participant's death occurs as a result of an act of suicide within twenty-five (25) months after commencement of participation in this Supplemental Plan. Notwithstanding anything herein to the contrary, the amount payable pursuant to this Article XXVI shall be limited to the maximum amount otherwise payable pursuant to this Article XXVI that qualifies as a Post-2004 Deferral.

ARTICLE XXVll

Disability Benefits

          A disability benefit is payable under Part B of this Supplemental Plan, as follows:

          (a)     If a Participant has a Separation from Service by reason of Permanent Disability (as hereinafter defined) prior to attaining age sixty-two (62) and on or after attaining age fifty-five (55) (or, in special circumstances, if such Separation from Service occurs prior to attaining age fifty-five (55) and has been approved for this benefit by the Board of Directors of the Company), then: 
(i)     the Participant shall become eligible to commence receiving his or her Part B Excess Benefit under paragraph (a) of Article XXIII, as calculated thereunder as of the Separation from Service date (this benefit shall be automatically payable commencing on the same date on which benefits commence under the Pension Plan, subject to paragraph (f) of Article XXIII); and 

(ii)    the Participant shall become eligible to commence, subject to paragraph (f) of Article XXIII, receiving a benefit under paragraph (b) of Article XXIII, as calculated thereunder as of the Separation from Service date.

Notwithstanding anything herein to the contrary, the amount payable pursuant to this Article XXVII shall be limited to the maximum amount otherwise payable pursuant to this Article XXVII that qualifies as a Post-2004 Deferral.

          (b)     "Permanent Disability" shall mean the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months, unless a different definition applies for a Participant in an employment agreement approved by the Compensation Committee of the Board of Directors, in which case that different definition shall also apply to Part B of this Supplemental Plan. The Participant shall not be deemed to have a Permanent Disability until proof of the existence thereof shall have been furnished to the Board of Directors of the Company in such form and manner, and at such times, as the Board of Directors may require. Any determination by the Board of Directors of the Company that the Participant does or does not have a Permanent Disability shall be final and binding upon the Company and the Participant.

28

 

ARTICLE XXVIII

Right to Amend, Modify, Suspend or Terminate Plan

          By action of the Company's Board of Directors, the Company may amend, modify, suspend or terminate Part B of this Supplemental Plan without further liability to any employee or former employee or any other person. Notwithstanding the preceding sentence:

          (a)     Part B of this Supplemental Plan may not be amended, modified, suspended or terminated as to a Participant whose Separation from Service has occurred and who is entitled to receive or has commenced to receive benefits under Part B of this Supplemental Plan, without the express written consent of such Participant or, if deceased, such Participant's designated beneficiary or, if no beneficiary is then living or if no beneficiary can be located, such Participant's legal representative.

          (b)     Following a Change in Control (as defined in Article XXIX), Part B of this Supplemental Plan may not be amended, modified, suspended or terminated as to any Participant who was a Participant prior to such Change in Control, without the express written consent of such Participant.

          (c)     Part B of this Supplemental Plan may not be amended, modified, suspended or terminated as to a Participant with respect to benefits already accrued under paragraph (a) of Article XXIII, without the express written consent of such Participant, but may be amended, modified, suspended or terminated as to a Participant with respect to benefits not yet accrued under paragraph (a) of Article XXIII without such consent.

          (d)     Notwithstanding anything herein to the contrary, termination of Part B of this Supplemental Plan shall not be a distribution event for any benefits provided for under Part B of this Supplemental Plan unless permitted under Section 409A without the imposition of the Section 409A Taxes.

ARTICLE XXIX

Change in Control

          The term "Change in Control" means the consummation of a "change in the ownership" of the Company, a "change in effective control" of the Company or a "change in the ownership of a substantial portion of the assets" of the Company, in each case, as defined under Section 409A.

          In the event a Participant who was a Participant as of the date of a Change in Control either (a) has an involuntary Separation from Service for any reason (which, for 

29

 

purposes of this Article XXIX, shall include a voluntary Separation from Service for Good Reason, as hereinafter defined) within thirty-six full calendar months following such Change in Control, or (b) has a voluntary Separation from Service for any reason other than Good Reason (including the death of the Participant) more than twelve (12) full calendar months after, but within thirty-six (36) full calendar months following, such Change in Control, such Participant shall be entitled to receive immediately upon such Separation from Service, without regard to approval by the Chief Executive Officer or any other person(s) (1) benefits attributable to paragraph (a) of Article XXIII hereunder in accordance with Articles XXIII, XXV, XXVI and XXVII, as applicable, with such benefits to commence in accordance with paragraph (a) of Article XXIII, subject to paragraph (f) of Article XXIII, and (2) benefits attributable to paragraph (b) of Article XXIII hereunder in accordance with Articles XXIII, XXV, XXVI and XXVII, as applicable, with such benefits to commence at the time set forth in paragraph (b) of Article XXIII, subject to paragraph (f) of Article XXIII. Such benefits under paragraph (b) of Article XXIII shall be calculated as if, on the date of such Separation from Service, the Participant (i) had completed a number of years of Continuous Service equal to the greater of twelve (12) or the actual number of years of his or her Continuous Service, and (ii) had attained an age equal to the greater of sixty-two (62) or his or her actual age. Notwithstanding anything herein to the contrary, the amount payable pursuant to this Article XXIX shall be limited to the maximum amount otherwise payable pursuant to this Article XXIX that qualifies as a Post-2004 Deferral.

          For purposes of Part B of this Supplemental Plan, a Participant's voluntary Separation from Service shall be deemed to be for "Good Reason" if it occurs within six months of any of the following without the Participant's express written consent:

          (a)     a substantial change in the nature, or diminution in the status, of the Participant's duties or position from those in effect immediately prior to the Change in Control;

          (b)     a reduction by the Company in the Participant's annual base salary as in effect on the date of a Change in Control or as in effect thereafter if such compensation has been increased and such increase was approved prior to the Change in Control;

          (c)     a reduction by the Company in the overall value of benefits provided to the Participant, as in effect on the date of a Change in Control or as in effect thereafter if such benefits have been increased and such increase was approved prior to the Change in Control (as used herein, "benefits" shall include all profit sharing, retirement, pension, health, medical, dental, disability, insurance, automobile, and similar benefits);

          (d)     a failure to continue in effect any stock option or other equity-based or non-equity based incentive compensation plan in effect immediately prior to the Change in Control, or a reduction in the Participant's participation in any such plan, unless the Participant is afforded the opportunity to participate in an alternative incentive compensation plan of reasonably equivalent value;

30

 

          (e)     a failure to provide the Participant the same number of paid vacation days per year available to him prior to the Change in Control, or any material reduction or the elimination of any material benefit or perquisite enjoyed by the Participant immediately prior to the Change in Control;

          (f)     relocation of the Participant's principal place of employment to any place more than 35 miles from the Participant's previous principal place of employment;

          (g)     any material breach by the Company of any stock option or restricted stock agreement; or

          (h)     conduct by the Company, against the Participant's volition, that would cause the Participant to commit fraudulent acts or would expose the Participant to criminal liability;

provided that for purposes of clauses (b) through (e) above, "Good Reason" shall not exist (A) if the aggregate value of all salary, benefits, incentive compensation arrangements, perquisites and other compensation is reasonably equivalent to the aggregate value of salary, benefits, incentive compensation arrangements, perquisites and other compensation as in effect immediately prior to the Change in Control, or as in effect thereafter if the aggregate value of such items has been increased and such increase was approved prior to the Change in Control, or (B) if the reduction in aggregate value is due to reduced performance by the Company, the business unit of the Company for which the Participant is responsible, or the Participant, in each case applying standards reasonably equivalent to those utilized by the Company prior to the Change in Control.

          Not later than the occurrence of a Change in Control, the Company shall cause to be transferred to a grantor trust described in Section 671 of the Code, assets equal in value to all accrued obligations under Part B of this Supplemental Plan as of one day following a Change in Control, in respect of both active employees of the Company and retirees as of that date. Such trust by its terms shall, among other things, be irrevocable. The value of liabilities and assets transferred to the trust shall be determined by one or more nationally recognized firms qualified to provide actuarial services as described in Section 4 of the Computer Sciences Corporation Severance Plan for Senior Management and Key Employees. The establishment and funding of such trust shall not affect the obligation of the Company to provide supplemental pension payments under the terms of Part B of this Supplemental Plan to the extent such benefits are not paid from the trust.

ARTICLE XXX

No Assignment

          Benefits under Part B of this Supplemental Plan may not be assigned or alienated and shall not be subject to the claims of any creditor.

31

 

ARTICLE XXXl

Administration

          This Supplemental Plan shall be administered by the Chief Executive Officer or by such other person or persons to whom the Chief Executive Officer may delegate functions hereunder. With respect to all matters pertaining to this Supplemental Plan, the determination of the Chief Executive Officer or his designated delegate shall be conclusive and binding. The Chief Executive Officer shall be eligible to participate in this Supplemental Plan in the same manner as any other employee; provided, however, that the designation of the Chief Executive Officer as a Participant and any other action provided herein with respect to the Chief Executive Officer's participation shall be taken by the Compensation Committee of the Board of Directors of the Company.

ARTICLE XXXll

Release

          In connection with any benefit or benefit payment under Part B of this Supplemental Plan, or the designation of any beneficiary or any election or other action taken or to be taken under Part B of the Supplemental Plan by any Participant or any other person, the Company, acting through its Chief Executive Officer or his delegate, may require such consents or releases as are reasonable under the circumstances, and further may require any such designation, election or other action to be in writing and in form reasonably satisfactory to the Chief Executive Officer or his delegate.

ARTICLE XXXIII

No Waiver

          The failure of the Company, the Chief Executive Officer or any other person acting on behalf thereof to demand a Participant or other person claiming rights with respect to a Participant to perform any act which such person is or may be required to perform hereunder shall not constitute a waiver of such requirement or a waiver of the right to require such act. The exercise of or failure to exercise any discretion reserved to the Company, its Chief Executive Officer or his delegate, to grant or deny any benefit to any Participant or other person under Part B of this Supplemental Plan shall in no way require the Company, its Chief Executive Officer or his delegate to similarly exercise or fail to exercise such discretion with respect to any other Participant.

ARTICLE XXXIV

No Contract

          This Supplemental Plan is strictly a voluntary undertaking on the part of the Company and, except with respect to the obligations of the Company upon and following a Change in Control, which shall be absolute and unconditional, shall not be deemed to constitute a contract or part of a contract between the Company (or an 

32

 

Affiliate) and any employee or other person, nor shall it be deemed to give any employee the right to be retained for any specified period of time in the employ of the Company (or an Affiliate) or to interfere with the right of the Company (or an Affiliate) to discharge or retire any employee at any time, nor shall this Supplemental Plan interfere with the right of the Company (or an Affiliate) to establish the terms and conditions of employment of any employee.

ARTICLE XXXV

Indemnification

          The Company shall defend, indemnify and hold harmless the Officers and Directors of the Company acting in their capacity as such (and not as Participants herein) from any and all claims, expenses and liabilities arising out of their actions or failure to act hereunder, excluding fraud or willful misconduct.

ARTICLE XXXVI

Claim Review Procedure

          Benefits will be provided to each Participant or beneficiary as specified in Part B of this Supplemental Plan. 

          (a)     If such person (a "Claimant") believes that the Claimant has not been provided with benefits due under Part B of this Supplemental Plan, then the Claimant has the right to make a written claim for benefits under the Plan. If such a written claim is made, and the Administrator wholly or partially denies the claim, the Administrator shall provide the Claimant with written notice of such denial, setting forth, in a manner calculated to be understood by the Claimant:
(i)     the specific reason or reasons for such denial;

(ii)    specific reference to pertinent Plan provisions on which the denial is based;

(iii)   a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and

(iv)     an explanation of the Plan's claims review procedure and time limits applicable to those procedures, including a statement of the Claimant's right to bring a civil action under ERISA Section 502(a) if the claim is denied on appeal.

          (b)     The written notice of any claim denial pursuant to paragraph (a) of this Article XXXVI shall be given not later than thirty (30) days after receipt of the claim by the Administrator, unless the Administrator determines that special circumstances require an extension of time for processing the claim, in which event:

33

 
(i)     written notice of the extension shall be given by the Administrator to the Claimant prior to thirty (30) days after receipt of the claim;

(ii)    the extension shall not exceed a period of thirty (30) days from the end of the initial thirty (30) day period for giving notice of a claim denial; and 

(iii)   the extension notice shall indicate (A) the special circumstances requiring an extension of time and (B) the date by which the Administrator expects to render the benefit determination.

          (c)     The decision of the Administrator shall be final unless the Claimant, within sixty (60) days after receipt of notice of the claims denial from the Administrator, submits a written request to the Board of Directors of the Company, or its delegate, for an appeal of the denial. During that sixty (60) day period, the Claimant shall be provided, upon request and free of charge, reasonable access to , and copies of, all documents, records and other information relevant to the claim for benefits. The Claimant shall be provided the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits as part of the Claimant's appeal. The Claimant may act in these matters individually, or through his or her authorized representative.

          (d)     After receiving the written appeal, if the Board of Directors of the Company, or its delegate, shall issue a written decision notifying the Claimant of its decision on review, not later than thirty (30) days after receipt of the written appeal, unless the Board of Directors of the Company or its delegate determines that special circumstances require an extension of time for reviewing the appeal, in which event:
(i)     written notice of the extension shall be given by the Board of Directors of the Company or its delegate prior to thirty (30) days after receipt of the written appeal; 

(ii)    the extension shall not exceed a period of thirty (30) days from the end of the initial thirty (30) day review period; 

(iii)   the extension notice shall indicate (A) the special circumstances requiring an extension of time and (B) the date by which the Board of Directors of the Company or its delegate expects to render the appeal decision.

          The period of time within which a benefit determination on review is required to be made shall begin at the time an appeal is received by the Board of Directors of the Company or its delegate, without regard to whether all the information necessary to make a benefit determination on review accompanies the filing of the appeal. If the period of time for reviewing the appeal is extended as permitted above, due to a claimant's failure to submit information necessary to decide the claim on appeal, then the period for making the benefit determination on review shall be tolled from the date on which the notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.

34

 

          (e)     In conducting the review on appeal, the Board of Directors of the Company or its delegate shall take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. If the Board of Directors of the Company or its delegate upholds the denial, the written notice of decision from the Board of Directors of the Company or its delegate shall set forth, in a manner calculated to be understood by the Claimant:
(i)     the specific reason or reasons for the denial

(ii)    specific reference to pertinent Plan provisions on which the denial is based;

(iii)   a statement that the Claimant is entitled to be receive, upon request and free of charge, reasonable access to , and copies of, all documents, records and other information relevant to the claim for benefits.

(iv)    A statement of the Claimant's right to bring a civil action under ERISA 502(a).

          (f)     If the Plan or any of its representatives fail to follow any of the above claims procedures, the Claimant shall be deemed to have duly exhausted the administrative remedies available under the plan and shall be entitled to pursue any available remedies under ERISA Section 502(a), including but not limited to the filing of an action for immediate declaratory relief regarding benefits due under the Plan.

ARTICLE XXXVII

Termination of Benefits and Participation

          Prior, but only prior to a Change in Control, the retirement benefits payable to any Participant under Part B of this Supplemental Plan, and the participation of such Participant in Part B of this Supplemental Plan, may be terminated with respect to benefits under paragraph (b) of Article XXIII (but not with respect to benefits under paragraph (a) of Article XXIII) if in the judgment of the Chief Executive Officer, upon the advice of counsel, such Participant, directly or indirectly:

          (a)     breaches any obligation to the Company under any agreement relating to assignment of inventions, disclosure of information or data, or similar matters; or

          (b)     competes with the Company, or renders competitive services (as a director, officer, employee, consultant or otherwise) to, or owns more than a 5% interest in, any person or entity that competes with the Company; or

          (c)     solicits, diverts or takes away any person who is an employee of the Company or advises or induces any employee to terminate his or her employment with the Company; or

35

 

          (d)     solicits, diverts or takes away any person or entity that is a customer of the Company, or advises or induces any customer or potential customer not to do business with the Company; or

          (e)     discloses to any person or entity other than the Company, or makes any use of, any information relating to the technology, know-how, products, business or data of the Company or its subsidiaries, suppliers, licensors or customers, including but not limited to the names, addresses and special requirements of the customers of the Company.

Article XXXVIII

Lump-Sum Acceleration

          (a)     This Article XXXVIII applies to benefits payable under paragraph (a) of Article XXIII, paragraph (b) of Article XXIII, paragraph (a) of Article XXVI and paragraph (b)(ii) of Article XXVI, and also to benefits (the "Contingent Rights") that could otherwise become payable after the Commencement Date (as defined in paragraph (b) below) under paragraph (a) of Article XXIII, paragraph (a) of Article XXV and paragraph (b) of Article XXV (including any Part B Excess Benefit payable to the Participant under paragraph (a) of Article XXIII, any Spousal Benefit that could become payable under paragraph (a) of Article XXV relating to a Part B Excess Benefit under paragraph (a) of Article XXIII, any Spousal Benefit that could become payable under paragraph (a) of Article XXV relating to a benefit under paragraph (b) of Article XXIII, any Spousal Benefit that could become payable under paragraph (b) of Article XXV relating to a Part B Excess Benefit under paragraph (a) of Article XXIII and any Spousal Benefit that could become payable under paragraph (b) of Article XXV relating to a benefit under paragraph (b) of Article XXIII).

          (b)     Within 30 days after an individual first becomes a Participant (or no later than December 31, 2006 for individuals who became Participants on or prior to that date), each Participant shall have the opportunity to elect to receive (or, in the event that the Participant's death precedes the Commencement Date, to have Participant's Surviving Spouse receive) a lump sum payment, in an amount determined under paragraphs (c), (d) and (e) below, under the circumstances described in this paragraph (b). Notwithstanding the foregoing, no election hereunder will be effective unless made prior to the earlier of (i) the date of such Participant's Separation from Service or (ii) the occurrence of a Change in Control. In the event that a Change in Control occurs and the Participant has a Separation from Service for any reason prior to the Change in Control, or has a Separation from Service for any reason prior to the third anniversary of such Change in Control, then the lump sum payment pursuant to this Article XXXVIII shall become payable within thirty (30) days after the Commencement Date, subject to paragraph (f) of Article XXIII if the date of the Separation from Service is after the Change in Control. The "Commencement Date" is the later of (i) the date of such Separation from Service, (ii) the occurrence of the Change in Control, or (iii) January 1, 2007.

36

 

          (c)     The lump sum payment shall equal the lump sum value of the Participant's and/or the Participant's Surviving Spouse's, as applicable, remaining Benefit as of the Commencement Date (the "Remaining Benefit"), but only to the extent such amount qualifies as a Post-2004 Deferral. The Remaining Benefit with respect to the Contingent Rights shall be calculated as follows:
(i)     For purposes of computing the lump sum value with respect to the Part B Excess Benefit provided for under paragraph (a) of Article XXIII in the event that, as of the Commencement Date, payment of such benefit has not yet commenced, the Remaining Benefit shall be the present value on the Commencement Date of the actuarial equivalent of the benefit that would have otherwise been paid under paragraph (a) of Article XXIII if the Participant had commenced receipt of such benefit at normal retirement age (age 65) under the Pension Plan; 

(ii)    For purposes of computing the lump sum value with respect to the Spousal Benefit that otherwise would have become payable under paragraph (a) of Article XXV or paragraph (b) of Article XXV upon the death of the Participant with respect to the Part B Excess Benefit under paragraph (a) of Article XXIII in the event that the Commencement Date occurs during the lifetime of the Participant, the Remaining Benefit shall be the actuarial equivalent at the Commencement Date of the Spousal Benefit that otherwise would have become payable under paragraph (a) of Article XXV or paragraph (b) of Article XXV, as applicable, as determined under the basis required under Section 417(e) of the Code at the Commencement Date for determining lump sums under qualified plans; and 

(iii)   For purposes of computing the lump sum value with respect to the Spousal Benefit that otherwise would have become payable under paragraph (a) of Article XXV or paragraph (b) of Article XXV upon the death of the Participant with respect to the benefit under paragraph (b) of Article XXIII in the event that the Commencement Date occurs during the lifetime of the Participant, the Remaining Benefit shall be the actuarial equivalent at the Commencement Date of the Spousal Benefit that otherwise would have become payable under paragraph (a) of Article XXV or paragraph (b) of Article XXV, as applicable, as determined under the basis required under Section 417(e) of the Code at the Commencement Date for determining lump sums under qualified plans. 

          (d)     The lump sum value of the Remaining Benefit shall be computed by using the present value basis as is required under Section 417(e) of the Code at the Commencement Date for determining lump sums under qualified plans.

          (e)     In calculating the lump sum payment to be paid under this Article XXXVIII, the Cost of Living Adjustment called for under Article XL shall be taken into account as follows: The Company shall determine the average of the 3 most recent adjustments 

37

 

under Article XL. That average so-determined shall be deemed to apply for purposes of all future years for purposes of making the lump sum calculation.

          (e)     Any election pursuant to this Article XXXVIII is irrevocable unless otherwise permitted under Section 409A without the imposition of the Section 409A Taxes. 

ARTICLE XXXIX

Hardship Withdrawal

          (a)     This Article XXXIX applies to benefits payable under paragraph (a) of Article XXIII and under paragraph (b) of Article XXIII, and is applicable only to Participants who have commenced receiving retirement benefits under Part B of this Supplemental Plan.

          (b)     "Hardship" of a Participant shall mean an unforeseeable emergency which constitutes a severe financial hardship of the Participant or beneficiary resulting from an illness or accident of the Participant or beneficiary, the Participant's or beneficiary's spouse, or the Participant's or beneficiary's dependent (as defined in section 152(a)); loss of the Participant's or beneficiary's property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or beneficiary.

          (c)     Whether a Participant has incurred a Hardship shall be determined by the person designated to administer Part B of this Supplemental Plan under Article XLI, in his discretion on the basis of all relevant facts and circumstances and in accordance with nondiscriminatory and objective standards, uniformly interpreted and consistently applied.

          (d)     A Participant may make a withdrawal from the Participant's account, in the form of a lump sum, on account of the Participant's Hardship, only to the extent that the Hardship is not otherwise relievable:
(i)     through reimbursement or compensation by insurance or otherwise, or

(ii)     by liquidation of the Participant's assets (to the extent that such liquidation does not itself cause a Hardship).

          (e)     The amount of the lump sum hardship withdrawal shall not exceed (i) the current lump sum value of the remaining benefits otherwise due, as determined immediately prior to the hardship distribution, and as determined by using the methodology described in paragraphs (c) and (d) of Article XXXVIII or (ii) the amount reasonably necessary to satisfy the emergency need (which may include amounts necessary to pay any Federal, state, or local income taxes or penalties reasonably anticipated to result from the distribution).

38

 

          (f)     If a hardship lump sum distribution is made to a Participant, the amount of future benefits under Part B of this Supplemental Plan shall be reduced, as follows: 
(i)     First, the current lump sum value of the benefits otherwise due shall be determined immediately prior to the hardship distribution by using the methodology described in paragraphs (c) and (d) of Article XXXVIII.

(ii)    Second, the amount of the lump sum hardship distribution to be made shall be subtracted from the amount so determined. The resulting net amount is called the "Resulting Net Value." 

(iii)   Third, all future benefit payments shall be adjusted downward, to an amount that has a lump sum present value equal to the Resulting Net Value. Such lump sum present value shall be calculated using the methodology described in paragraphs (c) and (d) of Article XXXVIII.

          (g)     Participants may request a Hardship withdrawal from either benefits otherwise payable under paragraph (a) of Article XXIII or under paragraph (b) of Article XXIII, or from benefits payable under both paragraphs (a) and (b).

          (h)     The provisions of this Article XXXIX shall be equally applicable to Participant's Surviving Spouse.

ARTICLE XL

Cost of Living Adjustment

          (a)     This Article XL applies to benefits payable on or after August 13, 2001 under paragraph (b) of Article XXIII, but does not apply to benefits payable under paragraph (a) of Article XXIII.

          (b)     On the first day of each fiscal year of the Company, following commencement of payment of benefits to the Participant (or that Participant's Surviving Spouse, as applicable) hereunder, the benefits payable to that Participant (or that Participant's Surviving Spouse) shall be subject to an upward adjustment, as follows:
(i)     Benefits payable shall be increased by an amount equal to the lesser of (A) the greater of zero or the most recently published annual percent change in the Consumer Price Index (as hereinafter defined), as computed to the nearest one-tenth of one percent (0.1) for the twelve consecutive reference months of March of the prior calendar year through and including February of the current calendar year ; or (B) five percent (5%).

(ii)    Such adjustments, if any, shall be calculated for each year, irrespective of any other year's adjustment. For example, if the CPI change in four successive years is 3%, 6%, 7% and 3%, the Company would implement corresponding increases equal to 3%, 5%, 5% and 3%.

39

 

          (c)     The "Consumer Price Index" is "The Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average for All Items, 1982-84=100" as published by the Bureau of Labor Statistics.

          (d)     In the event that the Bureau of Labor Statistics reissues CPI data to correct an error in previously published CPI data, any affected benefits will be recalculated by the Company.

ARTICLE XLI

Certain Further Payments By the Company

          (a)     This Article XLI applies to benefits payable under paragraph (a) of Article XXIII, paragraph (b) of Article XXIII and Article XXXVIII.

          (b)     The Company shall be obligated to make certain further payments to Participants as set forth in this Article XLI. 

          (c)     In the event that any amount or benefit payable to the Participant by the Company on or after August 13, 2001 pursuant to Part B of this Supplemental Plan (collectively, the "Taxable Benefits") is subject on or after August 13, 2001 to the tax imposed under Section 3121 of the Code (the "FICA Tax"), or any similar tax that may hereafter be imposed, the Company shall pay to the Participant at the time specified in paragraph (d) below, the Tax Reimbursement Payment (as hereinafter defined). The "Tax Reimbursement Payment" is defined as an amount, which when reduced by any FICA Tax paid by the Participant on the Taxable Benefits (but without reduction for any Federal, state or local income taxes on such Taxable Benefits), shall be equal to the amount of any Federal, state or local income taxes payable because of the inclusion of the Tax Reimbursement Payment in the Participant's adjusted gross income, by applying the highest applicable marginal rate of Federal, state and local income taxation, respectively, for the calendar year in which the Tax Reimbursement Payment is to be made.

          (d)     For purposes of determining the amount of the Tax Reimbursement Payment, the Participant shall be deemed:
(i)     to pay Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made; and

(ii)    to pay any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from the deduction of such state or local taxes if paid in such year (determined without regard to limitations on deductions based upon the amount of the Participant's adjusted gross income.) 

40

 

          (e)     The Tax Reimbursement Payment attributable to a Taxable Benefit shall be paid to the Participant not more than thirty (30) days following the incurrence of the FICA Tax. If the amount of such Tax Reimbursement Payment cannot be finally determined on or before the date on which payment is due, the Company shall pay to the Participant an amount estimated in good faith by the Company to be the minimum amount of such Tax Reimbursement Payment and shall pay the remainder of such Tax Reimbursement Payment as soon as the amount thereof can be determined. 

          (f)     Notwithstanding anything in this Article XLI to the contrary, in no event shall the Tax Reimbursement Payment exceed the actual amount of the FICA Tax.

41psa

    
      

    

     

     

    

      EXECUTION
        COPY

      

       

      

       

      PURCHASE
        AND SALE AGREEMENT

       

      between

       

      SOUTHERN
        UNION COMPANY

       

      and

       

      NATIONAL
        GRID USA

       

      

       

      Dated
        as of February 15, 2006

      

      

       

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

          
            

          

        

      

      TABLE
        OF CONTENTS

       

      Page

      

      
        	 	
                ARTICLE
                  I

              	 
	 	
                DEFINITIONS

              	 
	
                Section
                  1.1

              	
                Certain
                  Defined Terms.

              	
                 
                  1

              
	
                Section
                  1.2

              	
                Other
                  Defined Terms.

              	
                11

              
	 	
                ARTICLE
                  II

              	 
	 	
                PURCHASE
                  AND SALE

              	 
	
                Section
                  2.1

              	
                Purchase
                  and Sale of Assets and Stock.

              	
                13

              
	
                Section
                  2.2

              	
                Assumed
                  Liabilities.

              	
                13

              
	
                Section
                  2.3

              	
                Retained
                  Liabilities.

              	
                14

              
	
                Section
                  2.4

              	
                Condition
                  on Assignment or Assumption of Contracts and
                  Rights.

              	
                15

              
	
                Section
                  2.5

              	
                Settlement
                  of Intercompany Accounts.

              	
                16

              
	 	
                ARTICLE
                  III

              	 
	 	
                PURCHASE
                  PRICE

              	 
	
                Section
                  3.1

              	
                Purchase
                  Price.

              	
                16

              
	
                Section
                  3.2

              	
                Adjustment
                  to Estimated Purchase Price.

              	
                16

              
	 	
                ARTICLE
                  IV

              	 
	 	
                REPRESENTATIONS
                  AND WARRANTIES OF BUYER

              	 
	
                Section
                  4.1

              	
                Organization,
                  Existence and Qualification.

              	
                17

              
	
                Section
                  4.2

              	
                Authority
                  Relative to this Agreement and Binding Effect.

              	
                18

              
	
                Section
                  4.3

              	
                Governmental
                  and Other Required Consents.

              	
                18

              
	
                Section
                  4.4

              	
                Availability
                  of Funds.

              	
                18

              
	
                Section
                  4.5

              	
                Filings.

              	
                18

              
	
                Section
                  4.6

              	
                Brokers.

              	
                18

              
	
                Section
                  4.7

              	
                Litigation.

              	
                19

              
	
                Section
                  4.8

              	
                Independent
                  Investigation.

              	
                19

              
	
                Section
                  4.9

              	
                Investment
                  Intent; Investment Experience; Restricted
                  Securities.

              	
                19

              
	
                Section
                  4.10

              	
                PUHCA.

              	
                19

              
	 	
                ARTICLE
                  V

              	 
	 	
                REPRESENTATIONS
                  AND WARRANTIES OF SELLER

              	 
	
                Section
                  5.1

              	
                Organization,
                  Existence and Qualification.

              	
                19

              
	
                Section
                  5.2

              	
                Authority
                  Relative to this Agreement and Binding Effect.

              	
                20

              
	
                Section
                  5.3

              	
                Governmental
                  and Other Required Consents.

              	
                20

              
	
                Section
                  5.4

              	
                Capitalization
                  of the Subsidiaries; Title to Stock.

              	
                20

              
	
                Section
                  5.5

              	
                Title
                  to Assets; Encumbrances.

              	
                21

              
	
                Section
                  5.6

              	
                Financial
                  Statements.

              	
                21

              
	
                Section
                  5.7

              	
                Compliance
                  with Legal Requirements; Governmental Permits.

              	
                22

              
	
                Section
                  5.8

              	
                Legal
                  Proceedings; Outstanding Orders.

              	
                22

              
	
                Section
                  5.9

              	
                Taxes.

              	
                22

              
	
                Section
                  5.10

              	
                Intellectual
                  Property.

              	
                23

              
	
                Section
                  5.11

              	
                Personal
                  Property.

              	
                23

              
	
                Section
                  5.12

              	
                Material
                  Contracts.

              	
                24

              
	
                Section
                  5.13

              	
                Employee
                  Benefit Matters.

              	
                24

              
	
                Section
                  5.14

              	
                Employee
                  and Labor Matters.

              	
                26

              
	
                Section
                  5.15

              	
                Environmental
                  Matters.

              	
                27

              
	
                Section
                  5.16

              	
                Absence
                  of Certain Changes or Events.

              	
                28

              
	
                Section
                  5.17

              	
                Regulatory
                  Matters.

              	
                29

              
	
                Section
                  5.18

              	
                Brokers.

              	
                29

              
	
                Section
                  5.19

              	
                Disclaimer.

              	
                29

              
	
                Section
                  5.20

              	
                Insurance.

              	
                30

              
	
                Section
                  5.21

              	
                Absence
                  of Undisclosed Liabilities.

              	
                30

              
	
                Section
                  5.22

              	
                Sufficiency
                  of Assets.

              	
                30

              
	
                Section
                  5.23

              	
                PUHCA.

              	
                31

              
	
                Section
                  5.24

              	
                Filings.

              	
                31

              
	 	
                ARTICLE
                  VI

              	 
	 	
                COVENANTS

              	 
	
                Section
                  6.1

              	
                Covenants
                  of Seller.

              	
                31

              
	
                Section
                  6.2

              	
                Covenants
                  of Buyer.

              	
                35

              
	
                Section
                  6.3

              	
                Governmental
                  Filings.

              	
                36

              
	
                Section
                  6.4

              	
                Seller
                  Marks.

              	
                38

              
	
                Section
                  6.5

              	
                Acknowledgment
                  by Buyer.

              	
                38

              
	
                Section
                  6.6

              	
                Transition
                  Plan.

              	
                39

              
	
                Section
                  6.7

              	
                Purchase
                  of Leased Assets.

              	
                39

              
	
                Section
                  6.8

              	
                Meter
                  Reading.

              	
                39

              
	
                Section
                  6.9

              	
                Insurance.

              	
                40

              
	
                Section
                  6.10

              	
                Risk
                  of Loss.

              	
                41

              
	
                Section
                  6.11

              	
                Outstanding
                  Payments and Bank Accounts.

              	
                41

              
	
                Section
                  6.12

              	
                Collective
                  Bargaining Agreements.

              	
                41

              
	
                Section
                  6.13

              	
                Alternative
                  Proposals.

              	
                42

              
	 	
                ARTICLE
                  VII

              	 
	 	
                CONDITIONS
                  PRECEDENT

              	 
	
                Section
                  7.1

              	
                Seller’s
                  Conditions Precedent to Closing.

              	
                43

              
	
                Section
                  7.2

              	
                Buyer’s
                  Conditions Precedent to Closing.

              	
                44

              
	 	
                ARTICLE
                  VIII

              	 
	 	
                CLOSING

              	 
	
                Section
                  8.1

              	
                Closing.

              	
                45

              
	 	
                ARTICLE
                  IX

              	 
	 	
                TERMINATION

              	 
	
                Section
                  9.1

              	
                Termination
                  Rights.

              	
                46

              
	
                Section
                  9.2

              	
                Limitation
                  on Right to Terminate; Effect of Termination.

              	
                47

              
	 	
                ARTICLE
                  X

              	 
	 	
                EMPLOYEE
                  MATTERS

              	 
	
                Section
                  10.1

              	
                Employee
                  Agreement.

              	
                48

              
	 	
                ARTICLE
                  XI

              	 
	 	
                TAX
                  MATTERS

              	 
	
                Section
                  11.1

              	
                Purchase
                  Price Allocation.

              	
                48

              
	
                Section
                  11.2

              	
                Cooperation
                  with Respect to Like-Kind Exchange.

              	
                49

              
	
                Section
                  11.3

              	
                Transaction
                  Taxes.

              	
                49

              
	
                Section
                  11.4

              	
                Real
                  and Personal Property Taxes.

              	
                50

              
	
                Section
                  11.5

              	
                Other
                  Taxes.

              	
                50

              
	
                Section
                  11.6

              	
                Straddle
                  Period.

              	
                51

              
	
                Section
                  11.7

              	
                Cooperation
                  on Tax Matters.

              	
                51

              
	
                Section
                  11.8

              	
                Tax
                  Returns.

              	
                51

              
	
                Section
                  11.9

              	
                Effect
                  of Indemnity Payments.

              	
                51

              
	
                Section
                  11.10

              	
                Survival
                  of Obligations.

              	
                52

              
	
                Section
                  11.11

              	
                Dispute
                  Resolution.

              	
                52

              
	
                Section
                  11.12

              	
                Termination
                  of Tax Agreements.

              	
                52

              
	 	
                ARTICLE
                  XII

              	 
	 	
                INDEMNIFICATION

              	 
	
                Section
                  12.1

              	
                Indemnification
                  by Seller.

              	
                52

              
	
                Section
                  12.2

              	
                Indemnification
                  by Buyer.

              	
                53

              
	
                Section
                  12.3

              	
                Limitations
                  on Seller’s Liability.

              	
                53

              
	
                Section
                  12.4

              	
                Limitation
                  on Buyer’s Liability.

              	
                56

              
	
                Section
                  12.5

              	
                Claims
                  Procedure.

              	
                56

              
	
                Section
                  12.6

              	
                Exclusive
                  Remedy.

              	
                57

              
	 	
                ARTICLE
                  XIII

              	 
	 	
                GENERAL
                  PROVISIONS

              	 
	
                Section
                  13.1

              	
                Expenses.

              	
                57

              
	
                Section
                  13.2

              	
                Notices.

              	
                57

              
	
                Section
                  13.3

              	
                Assignment.

              	
                59

              
	
                Section
                  13.4

              	
                Successor
                  Bound.

              	
                59

              
	
                Section
                  13.5

              	
                Governing
                  Law.

              	
                59

              
	
                Section
                  13.6

              	
                Cooperation.

              	
                59

              
	
                Section
                  13.7

              	
                Construction
                  of Agreement.

              	
                59

              
	
                Section
                  13.8

              	
                Publicity.

              	
                60

              
	
                Section
                  13.9

              	
                Waiver.

              	
                60

              
	
                Section
                  13.10

              	
                Parties
                  in Interest.

              	
                60

              
	
                Section
                  13.11

              	
                Section
                  and Paragraph Headings.

              	
                60

              
	
                Section
                  13.12

              	
                Amendment.

              	
                60

              
	
                Section
                  13.13

              	
                Entire
                  Agreement.

              	
                61

              
	
                Section
                  13.14

              	
                Counterparts.

              	
                61

              
	
                Section
                  13.15

              	
                Severability.

              	
                61

              
	
                Section
                  13.16

              	
                Consent
                  to Jurisdiction.

              	
                61

              

      

      

      

      

      

      

       

      
        
          
            -
              -

            

          

           

        

        
           

          
            

          

        

        
           

          
            

             

          

        

      

      LIST
        OF EXHIBITS

      
 

      
        
          	
                  Exhibit
                    6.6

                	
                  Transition
                    Services

                
	
                  Exhibit
                    8.1(d)

                	
                  Litigation
                    Support Agreement

                
	
                  Exhibit
                    10.1

                	
                  Employee
                    Agreement

                

        

      

       

       

      LIST
        OF SCHEDULES

      
        
          	
                  Schedule
                    1.1(a)

                	
                  Base
                    Statement

                
	
                  Schedule
                    1.1(b)

                	
                  Certain
                    Excluded Assets

                
	
                  Schedule
                    1.1(c)

                	
                  Permits

                
	
                  Schedule
                    2.2

                	
                  Assumed
                    Proceedings

                
	
                  Schedule
                    4.3

                	
                  Buyer’s
                    Governmental and Other Required Consents

                
	
                  Schedule
                    5.2

                	
                  Seller’s
                    Authority

                
	
                  Schedule
                    5.3

                	
                  Seller’s
                    Governmental and Other Required Consents

                
	
                  Schedule
                    5.5(a)

                	
                  Encumbrances

                
	
                  Schedule
                    5.5(b)

                	
                  Easements

                
	
                  Schedule
                    5.6

                	
                  Financial
                    Statements

                
	
                  Schedule
                    5.7

                	
                  Compliance
                    with Legal Requirements; Governmental Permits

                
	
                  Schedule
                    5.8

                	
                  Legal
                    Proceedings; Outstanding Orders

                
	
                  Schedule
                    5.9

                	
                  Taxes

                
	
                  Schedule
                    5.10

                	
                  Intellectual
                    Property

                
	
                  Schedule
                    5.12

                	
                  Material
                    Contracts

                
	
                  Schedule
                    5.13(a)

                	
                  Employee
                    Plans

                
	
                  Schedule
                    5.13(j)

                	
                   Post-Retirement
                    Welfare Benefits

                
	
                  Schedule
                    5.13(l)

                	
                  Severance
                    or Other Compensation

                
	
                  Schedule
                    5.14(a)

                	
                  Labor
                    Agreements

                
	
                  Schedule
                    5.14(b)

                	
                  Labor
                    Matters

                
	
                  Schedule
                    5.14(c)

                	
                  Labor
                    Complaints

                
	
                  Schedule
                    5.15

                	
                  Environmental
                    Matters

                
	
                  Schedule
                    5.16

                	
                  Absence
                    of Certain Changes or Events

                
	
                  Schedule
                    5.17

                	
                  Regulatory
                    Matters

                
	
                  Schedule
                    5.18

                	
                  Brokers

                
	
                  Schedule
                    5.20

                	
                  Seller’s
                    Insurance

                
	
                  Schedule
                    5.21

                	
                  Absence
                    of Undisclosed Liabilities

                
	
                  Schedule
                    5.22(a)

                	
                  Sufficiency
                    of Assets

                
	
                  Schedule
                    5.22(b)

                	
                  .Location
                    of Assets

                
	
                  Schedule
                    6.1

                	
                  Conduct
                    of the Business Prior to the Closing Date

                
	
                  Schedule
                    6.2(c)

                	
                  Seller
                    Guarantees and Surety Instruments

                
	
                  Schedule
                    6.7

                	
                  Leased
                    Assets

                
	
                  Schedule
                    6.12(a)

                	
                  Renewal
                    or Extension of Collective Bargaining Agreement

                
	
                  Schedule
                    6.12(b)

                	
                  Early
                    Renewal or Extension of Collective Bargaining
                    Agreement

                

        

      

      

      
        
          
            -
              v
              -

          

           

        

        
           

          
            

          

        

        
           

          
            

             

          

        

      

      PURCHASE
        AND SALE AGREEMENT

       

      This
        PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of the 15th day of
        February, 2006, by and between SOUTHERN UNION COMPANY, a Delaware corporation
        (“Seller”), and NATIONAL GRID USA, a Delaware corporation (“Buyer”). Capitalized
        terms used herein shall have the meanings ascribed to them in Article I,
        unless
        otherwise provided.

       

      W
        I T N E S S E T H :

       

      WHEREAS,
        Seller or a Subsidiary owns all of the Assets and Seller owns, directly or
        indirectly, all of the capital stock of each Subsidiary; and

       

      WHEREAS,
        Buyer desires to purchase, and Seller desires to sell, the Assets owned by
        Seller and the capital stock of each Subsidiary, subject in all respects
        to the
        provisions of this Agreement.

       

      NOW,
        THEREFORE, in consideration of the premises and other good and valuable
        consideration, the receipt and sufficiency of which are hereby acknowledged,
        the
        parties hereby agree as follows:

       

       

      ARTICLE
        I  

       

       

      DEFINITIONS

       

      Section
        1.1  Certain
        Defined Terms. 

       

      For
        purposes of this Agreement, the following terms have the meanings specified
        or
        referred to in this Article I (such definitions to be equally applicable
        to both
        the singular and plural forms of the terms defined):

       

      “Affiliates”
        or “Affiliated Entities” —
        shall
        have the following meaning: entities shall be deemed “Affiliated” as to each
        other to the extent (i) one of the entities directly or indirectly controls
        the
        other, or the direct or indirect control of one of the entities is exercised
        by
        the officers, directors, stockholders, or partners of the other entity (whether
        or not such persons exercise such control in their capacities as officers,
        directors, stockholders, or partners) or (ii) is deemed to be an Affiliate
        under
        existing statutes or regulations of the SEC.

       

      “Assets”
        — means all
        of
        the assets, properties, rights, claims, contracts and interests of every
        type
        and description, real, personal or mixed, tangible and intangible, owned
        by
        Seller, directly or indirectly through any Subsidiary or any Affiliate of
        Seller, and relating primarily to the Business other than the Excluded
        Assets.

       

      Without
        in any way limiting or expanding the foregoing, the Assets shall include
        all
        right, title and interest of Seller and its Affiliates in, to and under the
        following:

       

      	(a)  	
              all
                Real Property;

            

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      

       

      	(b)  	
              all
                tangible personal property, including machinery, mobile and immobile
                equipment, furniture, furnishings, vehicles, tools, tooling, dies,
                stores,
                parts, supplies and other tangible personal property that is either
                (x)
                located on the Real Property or (y) primarily related to the
                Business;

            

       

      	(c)  	
              the
                Assumed Contracts, including all rights to receive goods and services
                purchased pursuant to such Contracts and to assert claims and take
                other
                actions in respect of breaches or other violations
                thereof;

            

       

      	(d)  	
              all
                Permits (to the extent transferable) held by Seller or any of its
                Affiliates that are used, required or necessary for the lawful ownership
                or operation of the Business (including the Permits listed on Schedule
                1.1(c));

            

       

      	(e)  	
              any
                intellectual property owned by any
                Subsidiary;

            

       

      	(f)  	
              all
                books and records relating primarily to the
                Business;

            

       

      	(g)  	
              all
                rights under express or implied warranties relating primarily to
                the
                Business from suppliers to the Business;

            

       

      	(h)  	
              inventory
                related primarily to the Business;

            

       

      	(i)  	
              prepaid
                expenses, advance payments, deposits and prepaid items, including
                prepaid
                interest and deposits with lessors, suppliers or utilities, which
                relate
                primarily to the Business;

            

       

      	(j)  	
              accounts
                receivable arising out of the conduct of the Business, including
                any
                payments received by Seller or any of its Affiliates with respect
                thereto
                after the Closing Date, and unpaid interest accrued on any accounts
                receivable and any security or collateral relating
                thereto;

            

       

      	(k)  	
              promotional
                and advertising materials relating primarily to the Business, including
                all catalogs, brochures, plans, customer lists, supplier lists, manuals,
                handbooks, equipment and parts lists, and dealer and distributor
                lists, to
                the extent that any of the foregoing materials do not include the
                name
                “Southern Union”, “Southern”, “SU” or “SUG”; provided, however, that Buyer
                shall be entitled to copies of any such excluded materials, and shall
                be
                entitled to use any such excluded materials provided that Buyer covers
                or
                removes such retained names from such
                materials;

            

       

      	(l)  	
              all
                rights, privileges, claims, demands, causes of action, claims in
                bankruptcy, indemnification agreements with, and indemnification
                rights
                against, third parties, warranty claims (to the extent transferable),
                offsets and other claims relating primarily to the
                Business;

            

       

      	(m)  	
              any
                and all goodwill associated primarily with the Business;
                and

            

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      

       

      	(n)  	
              the
                confidentiality agreements entered into by or on behalf of Seller
                or any
                of its Affiliates in connection with the sale of the Business or
                related
                to any third party bid to purchase all or any part of the assets
                of the
                Business (collectively, the “Sales Process Confidentiality Agreements”).
                

            

       

      “Assumed
        Contract”—
means
        any Contract to which Seller or any of its Affiliates is a party that relates
        primarily to the Business, other than Contracts included in Excluded Assets
        and
        listed on Schedule
        1.1(b).

       

      “Assumed
        Environmental Liabilities”—
means
        all Environmental Liabilities of Seller or any Subsidiary relating to the
        Business or the Assets, whether arising or relating to the period before
        or
        after the Closing, other than the Retained Environmental
        Liabilities.

       

      “Assumed
        Indebtedness”—
means
        all debt issued under the Indenture, dated as of January 1, 1922 between
        Seller
        (as successor to The Providence Gas Company), and U.S. Bank Trust Company,
        National Association (as successor to Rhode Island Hospital Trust Company),
        as
        Trustee, and all indentures supplemental thereto.

       

      “Base
        Statement”—
means
        the statement as to the Working Capital of the Business as of September 30,
        2005
        set forth in Schedule
        1.1(a).

       

      “Business”—
means
        the business and operations conducted in Rhode Island by Seller and the
        Subsidiaries, including:

       

      	(a)  	
              the
                regulated and non-regulated gas distribution business conducted in
                Rhode
                Island by Seller through
                New England Gas Company and the provision of related services and
                products
                and the engagement in related activities, including agreements as
                to
                appliances and other equipment installed or serviced in Rhode Island
                by
                Seller through New England Gas Company;
                and

            

       

      	(b)  	
              all
                activities conducted by any of the Subsidiaries, including the appliance
                and equipment installation and servicing
                businesses.

            

       

      “Business
        Day”—
means
        any day that is not a Saturday, Sunday or other day on which banks in New
        York
        City are
        authorized or required by law to close.

       

      “CERCLA”
        —
means
        the Comprehensive Environmental Response Compensation and Liability Act (42
        U.S.C. section 9601 et
        seq.),
        as
        amended.

       

      “Claim
        Notice”—
means
        a written notice of a claim given by a party seeking indemnification pursuant
        to
        the terms of this Agreement that specifies in reasonable detail the nature
        of
        the Losses and the estimated amount of such Losses (in each case to the extent
        known).

       

      “Confidentiality
        Agreement” —
means
        that certain confidentiality agreement dated as of January 31, 2006, between
        Buyer and Seller.

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      

       

      “Consent”—
means
        any approval, consent, ratification, waiver, clearance or other authorization
        from any Person.

       

      “Contract”—
means
        any agreement, contract, document, note, bond, indenture, mortgage, deed
        of
        trust, lease, sublease, instrument, obligation, promise or undertaking (whether
        written or oral) that is legally binding, including Easements.

       

      “Current
        Assets”—
means
        the current Assets (other than Excluded Assets) of the Business as reflected
        in
        the categories set forth on the Base Statement as of the relevant date of
        determination and prepared in accordance with Schedule
        1.1(a).

       

      “Current
        Liabilities” —
means
        the current Assumed Liabilities of the Business as reflected in the categories
        set forth on the Base Statement as of the relevant date of determination
        and
        prepared in accordance with Schedule
        1.1(a).

       

      “Easements”
        —
means
        all easements, rights of way, Permits, prescriptive rights and other ways
        of
        necessity, whether or not of record, relating to real property.

       

      “Encumbrance”—
means
        any charge, adverse claim, lien, option, encumbrance, mortgage, pledge or
        security interest.

       

      “Environmental
        Claim”—
means
        any and all written administrative, regulatory or judicial actions, suits,
        demands, demand letters, claims, liens, investigations, proceedings or notices
        of noncompliance or violation by any third party (including any Governmental
        Body) alleging potential liability (including potential liability for
        enforcement, investigatory costs, damages, Losses, contribution,
        indemnification, cost recovery, compensation, injunctive relief, cleanup
        costs,
        governmental resource costs, removal costs, remedial costs, natural resources
        damages, property damages, personal injuries or penalties) arising out of,
        based
        on or resulting from (a) the presence, or Release or threatened Release into
        the
        environment, of any Hazardous Materials at any location operated, leased
        or
        managed by Seller or any Subsidiary; (b) any violation of any Environmental
        Law; or (c) the storage, transportation, treatment, disposal, discharge,
        recycling or Release of Hazardous Materials at any location other than any
        location operated, leased or managed by Seller or any Subsidiary.

       

      “Environmental
        Law”
—
means
        any Order or Legal Requirement relating to pollution or protection of human
        health or the environment or natural resources, including those relating
        to (a)
        emissions, discharges, Releases or threatened Releases of Hazardous Material
        into the environment (including ambient air, surface water, groundwater or
        land), and (b) the treatment, storage or disposal of Hazardous
        Material.

       

      “Environmental
        Liability”—
means
        any liability, responsibility or obligation arising out of or relating
        to:

       

      	(a)  	
              the
                presence of any Hazardous Material in the fixtures, structures, soils,
                groundwater, surface water or air on, under or about or emanating
                from the
                Assets and properties, in each case currently or formerly used, operated,
                owned, leased, controlled, 

            

       

      	(b)  	
              possessed,
                occupied or maintained by a Person (including predecessors-in-interest
                to
                such Person) and any such Hazardous Material emanating to adjoining
                or
                other properties;

            

       

      	(c)  	
              the
                storage, disposal, Release, threatened Release, discharge, spillage,
                loss,
                seepage or filtration of Hazardous Materials by a Person (including
                predecessors-in-interest to such Person) or its employees, agents
                or
                contractors from, on, under or about the assets or properties currently
                or
                formerly used, operated, owned, leased, controlled, possessed, occupied
                or
                maintained by such Person (including predecessors-in-interest to
                such
                Person) or the presence therein or thereunder of any underground
                or
                above-ground tanks for the storage of fuel, oil, gasoline and/or
                other
                petroleum products or by-products or other Hazardous
                Material;

            

       

      	(d)  	
              the
                violation or noncompliance or alleged violation or noncompliance
                by a
                Person (including predecessors-in-interest to such Person) or its
                employees, agents or contractors of any Environmental
                Law;

            

       

      	(e)  	
              the
                failure by a Person or its employees, agents, or contractors to have
                obtained or maintained in effect any Environmental Permit as a result
                of
                its or their conduct, actions or operations or the use, operation,
                ownership, lease, control, possession, occupancy, maintenance or
                condition
                of such Person’s assets or properties;

            

       

      	(f)  	
              the
                storage, transportation, treatment, disposal, discharge, recycling
                or
                Release of Hazardous Materials, or the arrangement for same, by a
                Person
                or a predecessor-in-interest to such Person, at any Off-Site
                Location;

            

       

      	(g)  	
              any
                and all Proceedings arising out of any of the above-described matters,
                including Proceedings by Governmental Bodies for enforcement,
                investigation, monitoring, cleanup, containment, removal, treatment,
                response, restoration, remedial or other actions or damages and
                Proceedings by any third party seeking damages, contribution,
                indemnification, cost recovery, compensation or injunctive relief;
                and

            

       

      	(h)  	
              any
                and all remedial work and other corrective action (including investigation
                or monitoring of site conditions, or any clean-up, containment, treatment,
                response, restoration or removal) taken by, or the costs of which
                are
                imposed upon, a Person arising from any of the above-described
                matters.

            

       

      “ERISA”—
means
        the Employee Retirement Income Security Act of 1974, as amended, or any
        successor law, and regulations and rules issued pursuant to that act or any
        successor law.

       

      “Excluded
        Assets”—
means
        the following assets, each of which shall be excluded from the Assets, and
        not
        acquired by Buyer, at Closing:

       

      	(a)  	
              assets
                of Seller located outside of the State of Rhode Island (none of which
                relate primarily to the Business), other than the assets identified
                on
                Schedule
                5.22(b);

            

       

      	(b)  	
              cash
                and cash equivalents (including cash held by the Subsidiaries), other
                than
                petty cash held locally for the benefit of the
                Business;

            

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      

       

      	(c)  	
              assets
                to be retained by Seller as set forth in the Employee
                Agreement;

            

       

      	(d)  	
              the
                stock record and minute books of Seller;

            

       

      	(e)  	
              duplicate
                copies of all books and records transferred to Buyer, and all records
                (other than the Sales Process Confidentiality Agreements) prepared
                in
                connection with the sale of the Business (including bids received
                from
                third parties and analyses relating to the Business), in each case
                subject
                to the confidentiality provisions of Section
                6.1(d);

            

       

      	(f)  	
              inventory
                disposed of by Seller or any Subsidiary after the date of this Agreement
                to the extent such dispositions are not prohibited by this Agreement
                or
                are approved by Buyer pursuant to Section
                6.1;

            

       

      	(g)  	
              rights
                to refunds of Taxes for periods on or prior to the Closing Date payable
                with respect to the Business, assets, properties or operations of
                Seller
                or any member of any affiliated group of which any of them is a
                member;

            

       

      	(h)  	
              accounts
                owing, by and among Seller and its Affiliates, including the Subsidiaries
                (other than accounts owing between or among the
                Subsidiaries);

            

       

      	(i)  	
              all
                deferred tax assets or collectibles;

            

       

      	(j)  	
              any
                insurance policy, bond, letter of credit or other similar item, and
                any
                cash surrender value in regard thereto;

            

       

      	(k)  	
              the
                Seller Marks, subject to the provisions of Section
                6.4;

            

       

      	(l)  	
              Seller’s
                ownership interest in Gooding Realty; and

            

       

      	(m)  	
              the
                other assets listed in Schedule
                1.1(b).

            

       

      “Final
        Order”
—
means
        an action by a Governmental Body as to which (a) no request for stay of the
        action is pending, no such stay is in effect and if any time period is permitted
        by statute or regulation for filing any request for such stay, such time
        period
        has passed, (b) no petition for rehearing, reconsideration or application
        for
        review of the action is pending and the time for filing any such petition
        or
        application has passed, (c) such Governmental Body does not have the action
        under reconsideration on its own motion and the time in which such
        reconsideration is permitted has passed, and (d) no appeal to a court or
        a
        request for stay by a court of the Governmental Body’s action is pending or in
        effect and the deadline for filing any such appeal or request has
        passed.

       

      “GAAP”—
means
        generally accepted United States accounting principles, applied on a consistent
        basis.

       

      “Good
        Utility Practices”—
means
        any of the practices, methods and activities approved by a significant portion
        of the gas distribution industry as good practices applicable to operations
        

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      of
        similar design, size and capacity or any of the practices, methods or activities
        which, in the exercise of reasonable judgment by an operator of a gas
        distribution business in light of the facts known at the time the decision
        was
        made, would have been reasonably expected to accomplish the desired result
        at a
        reasonable cost consistent with good business practices, reliability, safety,
        expedition and applicable law. Good Utility Practices are not intended to
        be
        limited to the optimal practices, methods or acts to the exclusion of all
        others, but rather to be practices, methods or acts generally accepted in
        the
        gas distribution industry.

       

      “Governmental
        Body”—
means
        any of the following that possesses competent jurisdiction:

       

      (a)  federal,
        state, county, local, municipal or other governmental body;

       

      (b)  governmental
        or quasi-governmental authority of any nature (including any governmental
        agency, branch, department, official or entity and any court or other tribunal);
        or

       

      (c)  any
        governmental body entitled to exercise any administrative, executive, judicial,
        legislative, police, regulatory or taxing authority or power of any
        nature.

       

      “Hazardous
        Material”—
means
        any waste or other chemical, material or substance that is listed, defined,
        designated, or classified as, or otherwise determined to be, hazardous,
        radioactive, toxic, or a pollutant or a contaminant, or words of similar
        import,
        under or pursuant to any Environmental Law, including any admixture or solution
        thereof, and specifically including oil, natural gas, petroleum and all
        derivatives thereof or synthetic substitutes therefor, asbestos or
        asbestos-containing materials, any flammable substances or explosives, any
        radioactive materials, any toxic wastes of substances, urea formaldehyde
        foam
        insulation, toluene or polychlorinated biphenyls.

       

      “HSR
        Act”
—
means
        the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or
        any
        successor law, and regulations and rules issued by the U.S. Department of
        Justice or the Federal Trade Commission pursuant to that act or any successor
        law.

       

      “IRC”
—
means
        the Internal Revenue Code of 1986, as amended.

       

      “IRS”
—
means
        the Internal Revenue Service or any successor agency.

       

      “Knowledge”
—
means
        with respect to Seller, the actual knowledge, after due inquiry, of Julie
        H.
        Edwards, Seller’s Senior Vice President and Chief Financial Officer, Michael I.
        German, Seller’s Senior Vice President, Utility Operations, Thomas C. Robillard,
        President and Chief Operating Officer of New England Gas Company, Sharon
        Partridge, Vice President, Finance, of New England Gas Company, Michael
        Sullivan, Vice President, Operations, of New England Gas Company, William
        Pratt,
        Director, Marketing & Business Development, of New England Gas Company,
        D’Anna Soehnge, Vice President, Human Resources, of New England Gas Company,
        Kevin England, Manager of Environmental Compliance of New England Gas Company,
        and Karen Czaplewski, Vice President, Customer Service & I.T., of New
        England Gas Company.

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      “Legal
        Requirement”
—
means
        any federal, state, county, local, municipal, foreign, international,
        multinational or other administrative Order, constitution, law, ordinance,
        adopted code, principle of common law, regulation, rule, directive, approval,
        notice, tariff, franchise agreement, statute or treaty.

       

      “Losses”
        —
means
        all claims, losses, liabilities, causes of action, costs and expenses
        (including, without limitation, involving theories of negligence or strict
        liability and including court costs and reasonable attorneys’ fees and
        disbursements in connection therewith).

       

      “Material
        Adverse Effect” —
means
        an occurrence or condition that (alone or together with other similar
        occurrences or conditions) has, or is reasonably likely to have, a material
        adverse effect on (a) the business, operation, assets, financial condition
        or
        results of operations of the Business taken as a whole or (b) the ability
        of
        Seller to perform its obligations under this Agreement, including its obligation
        to complete the transactions contemplated herein. For purposes of this
        Agreement, an occurrence or condition shall not constitute a Material Adverse
        Effect if it arises from (i) the announcement of this Agreement, (ii) general
        business, economic or financial market conditions, or (iii) conditions generally
        affecting the industries in which the Business operates, except with respect
        to
        clauses (ii) and (iii) to the extent that such occurrence or condition
        disproportionately impacts the Business.

       

      “Material
        Contract”
—
means
        an Assumed Contract that (a) involves a total commitment by or to any party
        thereto of at least $250,000 on an annual basis and that cannot be terminated
        by
        Seller or any Subsidiary upon 90 days’ notice or less without penalty to Seller
        or any Subsidiary, (b) prohibits or limits the right of the Business to compete
        or prohibits or restricts the ability of the owner of the Business (or any
        of
        its Affiliates) to deal with any Person or in any geographical area, or (c)
        that
        is material to the Business, taken as a whole.

       

      “New
        England Gas Company”
—
means
        New England Gas Company, a division of Seller.

       

      “Off-Site
        Location” —
means
        any real property other than: (a) the real properties currently or formerly
        used, operated, owned, leased, controlled, possessed or occupied by Seller
        or
        any Subsidiary (including their predecessors-in-interest) and (b) the real
        properties adjacent to or in the vicinity of the real property described
        in
        clause (a) of this definition that have been impacted by Hazardous Materials
        that have been Released, disposed, discharged or emitted at the real properties
        described in clause (a) of this definition.

       

      “Order”
—
means
        any award, decision, injunction, judgment, order, writ, decree, ruling,
        subpoena, or verdict entered, issued, made, or rendered by any court,
        administrative agency, other Governmental Body, or by any arbitrator, each
        of
        which possesses competent jurisdiction.

       

      “Organizational
        Documents”
—
means
        the articles or certificate of incorporation and the bylaws of a corporation
        or
        the comparable organizational and governing documents of other
        Persons.

       

      “PCBs”
        —
means
        polychlorinated biphenyls.

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      “Permits”
        —
means
        all authorizations, licenses, identification numbers, permits, certificates
        and
        registrations under any Legal Requirement.

       

      “Permitted
        Encumbrances”
—
means
        any of the following:

       

      	(a)  	
              mechanics’,
                carriers’, workers’ and other similar liens arising in the ordinary course
                of business, which (i)(x) are not yet delinquent or (y) are being
                contested in proceedings in good faith and, in the case of clause
                (y), for
                which adequate reserves have been taken and are reflected in the
                Working
                Capital of the Business as of the Closing Date set forth in the Closing
                Statement, and (ii) in the aggregate are not substantial in amount
                and do
                not interfere with the present use of the Assets to which they
                apply;

            

       

      	(b)  	
              liens
                for (x) current Taxes and assessments not yet due and payable or
                (y) Taxes
                the validity of which is being contested in good faith, and, in the
                case
                of clause (y), for which adequate reserves have been taken and are
                reflected in the Working Capital of the Business as of the Closing
                Date
                set forth in the Closing Statement;

            

       

      	(c)  	
              usual
                and customary non-monetary real property Encumbrances, covenants,
                imperfections in title, Easements, restrictions and other title matters
                (whether or not the same are recorded) that do not materially interfere
                with the operation of that portion of the Business currently conducted
                on
                such real property;

            

       

      	(d)  	
              Encumbrances
                securing the payment or performance of any of the Assumed
                Liabilities;

            

       

      	(e)  	
              all
                applicable zoning ordinances and land use restrictions, provided
                that such
                restrictions do not materially interfere with the operation of that
                portion of the Business currently conducted on such Real Property;
                and

            

       

      	(f)  	
              with
                respect to any Asset that consists of a leasehold or other possessory
                interest in real property, all Encumbrances, covenants, imperfections
                in
                title, Easements, restrictions and other title matters (whether or
                not the
                same are recorded) to which the underlying fee estate in such real
                property is subject that do not currently materially interfere with
                the
                operation of that portion of the Business currently conducted on
                such real
                property.

            

       

      “Person”—
means
        any individual, corporation (including any nonprofit corporation), general
        or
        limited partnership, limited liability company, joint venture, estate, trust,
        association, organization or Governmental Body.

       

      “Proceeding”
—
means
        any claim, action, arbitration, hearing, audit, litigation or suit commenced,
        brought, conducted, or heard by or before, or otherwise involving, any
        Governmental Body or arbitrator.

       

      “Real
        Property” —
means
        all real property owned or leased by Seller or any of its Affiliates (including
        any Subsidiary) and relating primarily to the operation of the Business,
        together with all interests in real property (including Easements) used or
        held
        for use by Seller or any of its Affiliates (including any Subsidiary) and
        relating primarily to the operation of the Business.

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      “Related
        Documents”
—
means
        any Contract provided for in this Agreement to be entered into by one or
        more of
        the parties hereto in connection with the transactions contemplated by this
        Agreement, including the Employee Agreement, the transition agreement
        contemplated by Section 6.6, special warranty deeds or quitclaim deeds (with
        each interest in Real Property owned by Seller to be conveyed to Buyer with
        a
        special warranty deed to the extent Seller was provided with a special warranty
        deed when it acquired such Real Property interest and each interest in Real
        Property owned by Seller to be conveyed to Buyer with a quitclaim deed to
        the
        extent Seller was provided with a quitclaim deed when it acquired such Real
        Property interest), quitclaim blanket easement assignments (one easement
        assignment document per county or applicable jurisdiction; Seller shall not
        be
        obligated to provide a conveyance document for each individual easement unless
        an individual document is required by a Governmental Body having jurisdiction
        in
        order to complete documentation of the transfer to Buyer or to record notice
        of
        the transfer to Buyer), conveyances, motor vehicle certificates of title
        and
        special assignment and assumption instruments.

       

      “Release”
—
means
        any presence, emission, dispersal, disposal, spilling, leaking, emitting,
        discharging, depositing, pumping, pouring, escaping, leaching, dumping,
        releasing or migration into the indoor or outdoor environment (including
        the
        abandonment or disposal of any barrels, containers or other closed receptacles
        containing any Hazardous Materials), or in, into or from any facility, including
        the movement of any Hazardous Materials through the air, soil, surface water,
        groundwater or property.

       

      “Representative”
—
means
        with respect to a particular Person, any director, officer, employee, agent,
        consultant, advisor, or other representative of such Person, including legal
        counsel, accountants and financial advisors.

       

      “Retained
        Environmental Liabilities” —
means
        the following Environmental Liabilities of Seller or its Affiliates, including
        without limitation any Subsidiary: (a) all Environmental Liabilities arising
        out
        of or relating to operations or activities unrelated to the Business, whether
        arising or related to the period before or after Closing, including, without
        limitation, (i) the petroleum marketing business and (ii) litigation related
        to
        the Cory's Lane and Bay Street, Tiverton, Rhode Island sites; (b) all
        Environmental Liabilities relating to the release of mercury, wherever such
        release occurred or occurs and regardless of whether such release occurred
        prior
        to the Closing or occurs at any time after the Closing, which was stored
        at one
        time at Seller's Tidewater Street facility in Pawtucket, Rhode Island, as
        described in Schedule
        5.15
        and
        Seller's due diligence schedule SUG - 007.1 and related materials, including
        without limitation the litigation filed in Providence County Superior Court,
        docket no. PC 06-0356, captioned Angel
        Arriaga, et al, vs. New England Gas Company et al.
        matter;
        (c) all Environmental Liabilities of which Seller has Knowledge arising out
        of
        or relating to the storage, transportation, treatment, disposal, discharge,
        recycling or Release of Hazardous Materials or the arrangement for the same,
        at
        any Off-Site Location, by Seller or any Subsidiary (or any
        predecessor-in-interest) with respect to the Business where such activities
        occurred prior to the Closing Date; (d) all Environmental Liabilities of
        which
        Seller has Knowledge arising out of or related to any real property or assets
        formerly owned by Seller or any Subsidiary with respect to the Business,
        but no
        longer owned (and not being transferred to Buyer) as of the Closing Date,
        with
        the exception that the exclusion set forth in clause (d) shall not apply
        to any
        formerly owned manufactured gas 

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      plant-related
        properties; and (e) any fines or penalties imposed by a Governmental Body
        arising from violations or alleged violations of Environmental Law prior
        to the
        Closing Date.

       

      “SEC”
—
means
        the United States Securities and Exchange Commission or any successor
        agency.

       

      “Settlement
        Interest”—
means,
        with respect to any payment required to be made pursuant to Section 3.2(c)
        (a
“Settlement Payment”), the sum of accrued interest on the amount of such
        Settlement Payment, calculated at the Settlement Rate as from time to time
        in
        effect, for the period from the Closing Date to and including the date upon
        which such Settlement Payment is made (calculated on the basis of the actual
        number of days elapsed in a year of 365 or 366 days, as the case may
        be).

       

      “Settlement
        Rate”—
means,
        on any date, with respect to the Settlement Payment, the “target” federal funds
        rate reported in the “Money Rates” section of the Eastern Edition of
The
        Wall Street Journal published
        for such date. In the event The
        Wall Street Journal ceases
        publication of such federal funds rate or fails on any particular date to
        publish such federal funds rate, the Settlement Rate shall instead refer
        to the
        rate for the last transaction in overnight federal funds arranged prior to
        such
        date by JP Morgan Chase.

       

      “Stock”—
means
        all of the capital stock of the Subsidiaries listed in (a) and (d) of the
        definition of Subsidiary below.

       

      “Subsidiary”—
means
        any of the following:

       

      (a)  Newport
        America Corporation, a Rhode Island corporation;

       

      (b)  Patience
        Realty Corp., a Rhode Island corporation;

       

      (c)  Prudence
        Corporation, a Rhode Island corporation; and

       

      (d)  Valley
        Appliance and Merchandising Company, a Rhode Island corporation.

       

      “Tax”
—
means
        any tax (including any income tax, capital gains tax, value-added tax, sales
        and
        use tax, franchise tax, payroll tax, withholding tax or property tax), levy,
        assessment, tariff, duty (including any customs duty), deficiency, franchise
        fee
        or payment, payroll tax, utility tax, gross receipts tax or other fee or
        payment, and any related charge or amount (including any fine, penalty, interest
        or addition to tax), imposed, assessed or collected by or under the authority
        of
        any Governmental Body.

       

      “Tax
        Return”
—
means
        any return (including any information return), report, statement, schedule,
        notice, form, or other document or information filed with or submitted to,
        or
        required to be filed with or submitted to, any Governmental Body in connection
        with the determination, assessment, collection, or payment of any Tax or
        in
        connection with the administration, implementation, or enforcement of or
        compliance with any Legal Requirement relating to any Tax.

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      “Threatened”
—
shall
        have the following meaning: a claim, dispute, or other matter will be deemed
        to
        have been “Threatened” if any demand or statement has been made or any notice
        has been given, and Seller has Knowledge of the same.

       

      “Working
        Capital”—
means
        the amount by which Current Assets exceeds Current Liabilities as of the
        relevant date of determination, determined in accordance with Schedule 1.1(a).

       

      “Working
        Capital Target”—
means
        $34,529,872.

       

      Section
        1.2  Other
        Defined Terms. 

       

      In
        addition to the terms defined in Section 1.1, certain other terms are defined
        elsewhere in this Agreement as indicated below and, whenever such terms are
        used
        in this Agreement, they shall have their respective defined
        meanings.

       

      Term Section

      Agreement Recitals

      Allocation 11.1

      Alternative
        Proposal 6.13

      Antitrust
        Authorities 6.3

      Assumed
        Liabilities 2.2

      Balance
        Sheet 5.6

      Buyer
        Indemnitees 12.1

      Closing 8.1

      Closing
        Date 8.1

      Closing
        Statement 3.2(a) 

      CPA
        Firm 3.2(b)

      Deductible 12.3(c)

      Divestiture 6.2(a)

      Employee Employee
        Agreement

      Employee
        Agreement 10.1

      Employee
        Plans 5.13(a)

      Environmental
        Permits 5.14(a)(ii)

      ERISA
        Affiliate 5.13(a)

      Estimated
        Purchase Price 3.1

      Final
        Closing Statement 3.2(b)

      Final
        Purchase Price 3.1

      Financial
        Statements 5.6

      Former
        Employee Employee
        Agreement

      Indemnified
        Party 12.5(a)

      Indemnifying
        Party 12.5(a)

      Large
        Volume Meters 6.8

      Leased
        Assets 6.7

      Notice
        Period 12.5(a)

      Objection 3.2(b)

      PBGC 5.13(c)

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      Pre-Closing
        Tax Period 11.5

      Proxy
        Statement 6.1(f)(i)

      PUHCA
        2005 4.10

      Purchase
        Price  3.1

      Representatives 6.1(d)

      Restricted
        Information 6.1(d)

      Retained
        Contract Liabilities 2.2(b)(i)

      Retained
        Liabilities 2.3

      Review
        Period 3.2(b)

      Seller
        Indemnitees 12.2

      Seller
        Marks 6.4

      Seller’s
        Pension Plans Employee
        Agreement

      Seller’s
        401(k) Plan Employee
        Agreement

      Seller’s
        Stockholder Approval 7.1(g)

      Settlement
        Payment 1.1

      Seller's
        Meeting 6.1(f)(iii)

      Straddle
        Period 11.6

      Transition
        Services Agreement 6.6

      Transaction
        Taxes 11.3

      Upset
        Date 9.1(e)

      WARN
        Act Employee
        Agreement

      

       

      ARTICLE
        II  

       

       

      PURCHASE
        AND SALE

       

      Section
        2.1  Purchase
        and Sale of Assets and Stock. 

       

      Upon
        the
        terms and subject to the conditions contained herein, at the Closing, Seller
        shall sell, transfer, assign, convey and deliver to Buyer, and Buyer shall
        purchase and accept delivery from Seller, all of the Assets owned directly
        or
        indirectly by Seller or any of its Affiliates, free and clear of any
        Encumbrances, other than Permitted Encumbrances, and all of the
        Stock.

       

      Section
        2.2  Assumed
        Liabilities. 

       

      In
        further consideration for the sale of the Assets and the Stock, at the Closing,
        and subject to the other terms and conditions of this Agreement, Buyer will
        satisfy Buyer’s obligations under the Employee Agreement and will assume and
        agree to pay, perform and discharge when due, or cause the appropriate
        Subsidiary to pay, perform and discharge when due, all the liabilities and
        obligations, of every kind or nature, of Seller or any of its Affiliates
        arising
        out of or relating to:

       

      (a)  the
        ownership of the Assets and the conduct or operation of the Business prior
        to
        the Closing Date, other than the Retained Liabilities;

       

      (b)  the
        ownership or use of the Assets by Buyer or any Subsidiary or the conduct
        or
        operation of the Business by Buyer or any Subsidiary, in each case after
        the

       

      
        
          -
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      Closing
        Date, including all liabilities, responsibilities and obligations relating
        to or
        arising from the following:

       

       

      (i)  performance
        of the Assumed Contracts included in the Assets and assigned to Buyer at
        Closing
        or retained by any Subsidiary, except that Buyer shall not assume any
        liabilities or obligations for (x) any breach or default by Seller or any
        Subsidiary under any such Contract occurring or arising prior to the Closing
        Date or (y) the payment of money with respect to any obligation arising under
        any such Contract prior to the Closing Date, except in the case of this clause
        (y) to the extent such obligation is reflected in the Working Capital of
        the
        Business as of the Closing Date set forth in the Closing Statement (such
        obligations and liabilities referred to in clauses (x) and (y), the “Retained
        Contract Liabilities”);

       

       

      (ii)  customer
        advances, customer deposits and construction advances, unperformed service
        obligations, Easement relocation obligations, and engineering and construction
        required to complete scheduled construction, construction work in progress,
        and
        other capital expenditure projects, in each case relating to the Business
        and
        outstanding on or arising after the Closing Date;

       

       

      (iii)  the
        Assumed Environmental Liabilities;

       

       

      (iv)  Taxes
        for
        periods after the Closing Date to the extent Buyer or any Subsidiary is legally
        obligated to pay such Taxes in accordance with Article XI;

       

       

      (v)  Proceedings
        based on conduct, actions, inaction, facts, circumstances or conditions arising
        or occurring on or after the Closing Date, Proceedings described in Schedule
        2.2,
        Proceedings arising from or related to any other Assumed Liability;
        and

       

       

      (vi)  the
        Assumed Indebtedness; and

       

      (c)  obligations
        and liabilities of Buyer and its Affiliates under the Employee
        Agreement.

       

      The
        liabilities, responsibilities and obligations to be assumed by Buyer or retained
        by the Subsidiaries pursuant to this Section 2.2 are hereinafter collectively
        referred to as the “Assumed Liabilities.” Subject to the other terms and
        conditions of this Agreement, Buyer, for itself and each of its Affiliates
        (including each Subsidiary upon Closing), hereby irrevocably and unconditionally
        waives and releases Seller from all Assumed Liabilities and all liabilities
        or
        obligations relating to the Business or the Assets to the extent arising
        from
        events or occurrences on or after the Closing Date or to the extent otherwise
        relating to the period after the Closing; provided,
        however,
        that
        for the avoidance of doubt, Buyer and its Affiliates shall not be deemed
        to have
        waived, and nothing in this sentence shall be deemed or interpreted in any
        way
        to limit, any right of indemnification that any Buyer Indemnitee may have
        in
        respect of any such matter pursuant to Article XII. Notwithstanding anything
        in
        this Section 2.2 to the contrary, Assumed Liabilities shall not include any
        liabilities, responsibilities or obligations expressly stated to be Retained
        Liabilities pursuant to Section 2.3.

       

      
        
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      Section
        2.3  Retained
        Liabilities. 

       

      Buyer
        shall not assume, and Seller shall retain and pay, perform and discharge
        when
        due, all of the liabilities and obligations, of every kind and nature, relating
        to or arising from the following (collectively, the “Retained
        Liabilities”):

       

      (a)  all
        obligations of Seller or any Subsidiary with respect to any indebtedness
        for
        money borrowed by Seller or any Subsidiary (including items due to Seller’s
        Affiliates), other than the Assumed Indebtedness, and payment obligations
        arising on or after the Closing Date relating to the Business under any
        equipment or vehicle lease or under any line extension Contracts or similar
        construction arrangements, it being understood and agreed that such leases,
        Contracts and similar arrangements do not create indebtedness for money
        borrowed;

       

      (b)  Taxes
        for
        periods on or prior to the Closing Date to the extent Seller or any Subsidiary
        is legally obligated to pay such Taxes in accordance with Article
        XI;

       

      (c)  Excluded
        Assets and all liabilities or obligations of Seller and its Affiliates related
        to their businesses other than the Business, in each case whether arising
        before, on or after the Closing Date;

       

      (d)  the
        Retained Environmental Liabilities;

       

      (e)  Proceedings
        involving Seller, any Subsidiary, any of the Assets or the Business based
        on
        conduct (including Seller’s or any Subsidiary's performance or failure to
        perform under any Contract included among the Assets), action, inaction,
        facts,
        circumstances or conditions arising or occurring before the Closing Date
        (whether or not such Proceeding existed before the Closing Date), but expressly
        excluding any such liabilities or obligations for Proceedings relating to
        Assumed Liabilities (including Proceedings described in Section 2.2(b)(v));

       

      (f)  the
        Retained Contract Liabilities; and

       

      (g)  obligations
        and liabilities of Seller and its Affiliates under the Employee
        Agreement.

       

      Seller,
        for itself and each of its Affiliates, hereby irrevocably and unconditionally
        waives and releases Buyer and each of its Affiliates from all Retained
        Liabilities.

       

      Section
        2.4  Condition
        on Assignment or Assumption of Contracts and Rights. 

       

      Anything
        in this Agreement to the contrary notwithstanding, this Agreement shall not
        constitute an agreement to assign or assume any Contract or any claim or
        right
        or any benefit arising thereunder or resulting therefrom if an attempted
        assignment or assumption thereof, without the Consent of a third party thereto,
        would constitute a breach thereof. Any transfer or assignment to Buyer by
        Seller
        or any of its Affiliates of any property or property rights or any

      
        
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      Contract
        that requires the Consent of any third party shall be made subject to such
        Consent being obtained. If such Consent is not obtained, or if an attempted
        assignment thereof would be ineffective or would affect the rights of Seller
        or
        its Affiliate thereunder such that Buyer would not in fact receive all such
        rights, Seller will cooperate with Buyer in any arrangement that does not
        constitute a breach of such Contract, including an operating or other services
        agreement if reasonably required by Buyer, reasonably designed to provide
        for
        Buyer the benefits under any such Contract or rights including enforcement
        for
        the benefit of Buyer of any and all rights of Seller or its Affiliates against
        a
        third party or Governmental Body thereto arising out of the breach or
        cancellation by such third party or Governmental Body or otherwise. To the
        extent that Buyer does receive all of the benefits of any such Contract or
        rights pursuant to the preceding sentence, Buyer shall accept, and shall
        indemnify Seller from and against, the burdens (including the out-of-pocket
        costs and expenses incurred by Seller in performing such arrangement) and
        perform the obligations under such Contract as subcontractor of Seller to
        the
        extent of the benefit received, and to the extent such burdens and obligations
        would have constituted an Assumed Liability if such Contract had been
        transferred to Buyer at the Closing. Seller shall and shall cause its Affiliates
        to exercise or exploit their respective rights and options under all such
        Contracts referred to in this Section 2.4 only as reasonably directed by
        Buyer.
        Furthermore, if the other party(ies) to such a Contract subsequently Consent
        to
        the assignment of such Contract to Buyer, Buyer shall thereupon agree to
        assume
        and perform all liabilities and the obligations arising thereunder after
        the
        date of such Consent, at which time such Contract shall be deemed an Asset,
        without the payment of further consideration, and the obligations so assumed
        thereunder shall be deemed Assumed Liabilities.

      

       

      Section
        2.5  Settlement
        of Intercompany Accounts. 

       

      At
        or
        prior to the Closing, Seller shall cause all intercompany payables, receivables
        and loans between New England Gas Company or any of the Subsidiaries relating
        to
        the Business, on the one hand, and Seller and its Affiliates (other than
        New
        England Gas Company and the Subsidiaries), on the other hand, to be settled
        or
        cancelled.

       

       

      ARTICLE
        III  

       

       

      PURCHASE
        PRICE

       

      Section
        3.1  Purchase
        Price. 

       

      Subject
        to the terms and conditions of this Agreement, the aggregate purchase price
        (the
“Purchase Price”) for the Assets owned directly by Seller and for the Stock
        shall be an amount in cash equal to FIVE HUNDRED SEVENTY-FIVE MILLION DOLLARS
        ($575,000,000) less the aggregate outstanding principal amount of, and accrued
        and unpaid interest on, the Assumed Indebtedness as of the Closing Date (the
        “Estimated Purchase Price”), and as adjusted in accordance with Section 3.2
        (as so adjusted, the “Final Purchase Price”), plus the assumption by Buyer at
        Closing of the Assumed Liabilities (including the Assumed
        Indebtedness).

       

      Section
        3.2  Adjustment
        to Estimated Purchase Price.

       

      
        
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      (a)  Within
        90
        days following the Closing Date, Buyer shall prepare and deliver to Seller
        a
        statement (the “Closing Statement”), utilizing the same accounting methods,
        policies, practices, procedures and adjustments as were used in the preparation
        of the Base Statement as described on Schedule
        1.1(a)
        (and
        otherwise in accordance with GAAP, with such exceptions to GAAP as indicated
        on
Schedule 1.1(a))
        and
        shall set forth in reasonable detail the amount of Working Capital of the
        Business as of 11:59 p.m. on the Closing Date (as well as the adjustments
        contemplated in Section 6.8), and a calculation of the adjustment to the
        Estimated Purchase Price that is payable based upon the difference between
        the
        Working Capital Target and the Working Capital in the Closing Statement.
        Seller
        agrees, at no cost to Buyer, to give Buyer and its authorized representatives
        reasonable access to such employees, officers and other facilities and such
        books and records of Seller and its Affiliates as are reasonably necessary
        to
        allow Buyer and its authorized representatives to prepare the Closing Statement.
        The Closing Statement shall be prepared in accordance with Schedule
        1.1(a).
        The
        Base Statement was prepared using the same accounting methods, policies,
        practices, procedures and adjustments as were used in the preparation of
        the
        Financial Statements and otherwise in accordance with GAAP (and with such
        exceptions to GAAP as indicated on Schedule
        1.1(a)).

       

      (b)  Following
        its receipt from Buyer of the Closing Statement, Seller shall have 15 Business
        Days to review the Closing Statement and to inform Buyer in writing of any
        disagreement (the “Objection”) that it may have with the Closing Statement,
        which objection shall specify in reasonable detail Seller's disagreement
        with
        the Closing Statement. If Buyer does not receive the Objection within such
        15-Business Day period, the amount of Working Capital set forth on the Closing
        Statement delivered pursuant to Section 3.2(a) shall be deemed to have been
        accepted by Seller and shall become binding upon Seller. If Seller does timely
        deliver an Objection to Buyer, Buyer shall then have 15 Business Days from
        the
        date of receipt of such Objection (the “Review Period”) to review and respond to
        the Objection. Seller and Buyer shall attempt in good faith to resolve any
        disagreements with respect to the determination of the Working Capital of
        the
        Business as of the Closing Date or the amount of the adjustment to the Estimated
        Purchase Price. If they are unable to resolve all of their disagreements
        with
        respect to the determination of Working Capital of the Business as of the
        Closing Date or the amount of the adjustment to the Estimated Purchase Price
        within 15 Business Days following the expiration of Buyer's Review Period,
        they
        may refer, at the option of either Buyer or Seller, their differences to
        Ernst
& Young, or if Ernst & Young declines to accept such engagement, another
        internationally recognized firm of independent public accountants selected
        jointly by Buyer and Seller, which accountants shall determine, only with
        respect to the disagreements so submitted, whether and to what extent, if
        any,
        the amount of Working Capital of the Business as of the Closing Date set
        forth
        in the Closing Statement requires adjustment. If Buyer and Seller are unable
        to
        so select the independent public accountants within 15 Business Days of Ernst
        & Young declining to accept such engagement, either Buyer or Seller may
        thereafter request that the American Arbitration Association make such selection
        (as applicable, Ernst & Young, the firm selected by Buyer and Seller or the
        firm selected by the American Arbitration Association is herein referred
        to as
        the “CPA Firm”). Buyer and Seller shall direct the CPA Firm to use its
        reasonable best efforts to render its determination within 30 days after
        the
        issue is first submitted to the CPA Firm. The CPA Firm’s determination shall be
        conclusive and binding upon Buyer and Seller. The fees and disbursements
        of the
        CPA Firm shall be shared equally by Buyer and 

       

      
        
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      Seller.
        Buyer and Seller shall make readily available to the CPA Firm all relevant
        books
        and records relating to the Closing Statement and all other items reasonably
        requested by the CPA Firm. The Closing Statement as agreed to by Buyer and
        Seller or as determined by the CPA Firm shall be referred to as the “Final
        Closing Statement.”

       

      (c)  In
        the
        event of a positive difference between Working Capital on the Final Closing
        Statement from the Working Capital Target, Buyer shall pay to Seller in cash
        the
        amount of such difference, plus the Settlement Interest thereon. In the event
        of
        a negative difference between the Working Capital Target from the Working
        Capital on the Final Closing Statement, Seller shall pay to Buyer in cash
        the
        amount of such difference, plus the Settlement Interest thereon. All amounts
        payable under this Section 3.2(c) shall be paid within five Business Days
        of the
        determination of the Final Closing Statement by wire transfer of immediately
        available funds to a bank account in the United States of America designated
        in
        writing by the recipient not less than one Business Day before such
        payment.

       

       

      ARTICLE
        IV  

       

       

      REPRESENTATIONS
        AND WARRANTIES OF BUYER

       

      Section
        4.1  Organization,
        Existence and Qualification. 

       

      Buyer
        is
        a corporation duly incorporated, validly existing, and in good standing under
        the laws of its state of incorporation, with full corporate power and authority
        to conduct its business as it is now being conducted, to own or use the
        properties and assets that it purports to own or use, to perform its obligations
        under all Contracts to which it is a party, and to execute and deliver this
        Agreement and the Related Documents to which Buyer is a party. Buyer is duly
        qualified to do business as a foreign corporation and is in good standing
        under
        the laws of each state in which the failure to be so qualified or in good
        standing would materially adversely affect the business or properties of
        Buyer,
        taken as a whole, or Buyer’s ability to consummate the transactions contemplated
        hereby.

       

      Section
        4.2  Authority
        Relative to this Agreement and Binding Effect. 

       

      The
        execution, delivery and performance by Buyer of this Agreement and the Related
        Documents and the consummation of the transactions contemplated thereby have
        been duly authorized by all necessary corporate action. Neither the execution,
        delivery and performance of this Agreement and the Related Documents by Buyer
        nor the consummation by Buyer of the transactions contemplated thereby will
        (a)
        result in any conflict with or breach or violation of or default under the
        Organizational Documents of Buyer, (b) result in a violation or breach of
        any
        term or provision of or a loss of any right or benefit under, constitute
        a
        default or accelerate the performance required under, result in the termination
        of or a right of termination, cancellation or amendment, or result in the
        creation of any Encumbrance upon any of the respective properties or assets
        of
        Buyer under any material Contract to which Buyer is a party or by which its
        assets are bound, whether with or without notice or the passage of time or
        both,
        or (c) a violation of any Order of any Governmental Body. This Agreement
        constitutes, and the Related Documents to be executed by Buyer when executed
        and
        delivered will constitute, valid and binding obligations of Buyer, enforceable
        against Buyer in accordance with their respective terms, except as such
        enforceability may be limited by (i) bankruptcy or similar laws from time
        to
        time in effect 

       

      
        
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      affecting
        the enforcement of creditors’ rights generally or (ii) the availability of
        equitable remedies generally.

       

      Section
        4.3  Governmental
        and Other Required Consents. 

       

      Except
        for those Consents described in Schedule
        4.3,
        no
        Consent of any Governmental Body or third party is required to be obtained
        by
        Buyer in connection with the execution and delivery by Buyer of this Agreement
        or the Related Documents or the consummation by Buyer of the transactions
        contemplated by this Agreement or the Related Documents. Buyer has no knowledge
        of any facts or circumstances relating to Buyer or its Affiliates that
        reasonably would be likely to preclude or prolong either (i) the receipt
        of such
        required consents or (ii) consummation of the transactions contemplated by
        this Agreement in accordance with its terms.

       

      Section
        4.4  Availability
        of Funds. 

       

      Buyer
        will have available on the Closing Date sufficient funds to enable it to
        consummate the transactions contemplated by this Agreement.

       

      Section
        4.5  Filings. 

       

      No
        statement furnished by Buyer for inclusion in any filing with any Governmental
        Body in connection with obtaining such Governmental Body’s Consent for the
        consummation of the transactions contemplated by this Agreement will contain,
        as
        of the date such information is so provided, any untrue statement of a material
        fact or will omit to state, as of the date such information is so provided,
        any
        material fact that is necessary to make the statements contained therein,
        in
        light of the circumstances under which they were made, not
        misleading.

       

      Section
        4.6  Brokers. 

       

      Except
        for Rothschild, Inc., no broker or finder has acted for or on behalf of Buyer
        or
        any Affiliate of Buyer in connection with this Agreement or the transactions
        contemplated by this Agreement. No broker or finder is entitled to any brokerage
        or finder’s fee, or to any commission, or to any other compensation based in any
        way on agreements, arrangements or understandings made by or on behalf of
        Buyer
        or any Affiliate of Buyer for which Seller or any Affiliate of Seller has
        or
        will have any liability or obligation (contingent or otherwise).

       

      Section
        4.7  Litigation. 

       

      There
        are
        no pending or, to the knowledge of Buyer, threatened Proceedings by any Person
        against Buyer that would reasonably be expected to have a material adverse
        effect on the ability of Buyer to perform or comply with its obligations
        under
        this Agreement and the Related Documents to which Buyer will be a party or
        the
        consummation of the transfer of the Assets and Stock to Buyer and the assumption
        of the Assumed Liabilities by Buyer.

       

      Section
        4.8  Independent
        Investigation. 

       

      
        
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      Buyer
        is
        knowledgeable about the businesses engaged in by Seller through New England
        Gas
        Company and the Subsidiaries and of the usual and customary practices of
        companies engaged in businesses similar to the Business and has had access
        to
        the Assets, the officers and employees of Seller, and the books, records
        and
        files of Seller relating to the Business and the Assets. In making the decision
        to enter into this Agreement and to consummate the transactions contemplated
        hereby, Buyer has relied solely on the basis of its own independent due
        diligence investigation of the Business and upon the representations and
        warranties made in Article V.

       

      Section
        4.9  Investment
        Intent; Investment Experience; Restricted Securities. 

       

      Buyer
        is
        acquiring the Stock for its own account for investment and not with a view
        to,
        or for sale or other disposition in connection with, any distribution of
        all or
        any part thereof in violation of federal or state securities law. In acquiring
        the Stock, Buyer is not offering or selling, and will not offer or sell,
        for
        Seller in connection with any distribution of the Stock, and Buyer does not
        have
        a participation and will not participate in any such undertaking or in any
        underwriting of such an undertaking except in compliance with applicable
        federal
        and state securities laws. Buyer acknowledges that it is able to fend for
        itself, can bear the economic risk of its investment in the Stock, and has
        such
        knowledge and experience in financial and business matters that it is capable
        of
        evaluating the merits and risks of an investment in the Stock. Buyer is an
        “accredited investor” as such term is defined in Regulation D under the
        Securities Act. Buyer understands that the Stock has not been registered
        pursuant to the Securities Act or any applicable state securities laws, that
        the
        Stock will be characterized as “restricted securities” under federal securities
        laws and that under such laws and applicable regulations the Stock cannot
        be
        sold or otherwise disposed of without registration under the Securities Act
        or
        an exemption therefrom.

       

      Section
        4.10  PUHCA. 

       

      Buyer
        is
        a “holding company” under the Public Utility Holding Company Act of 2005 (“PUHCA
        2005”). The execution and delivery of this Agreement by Buyer do not and will
        not violate any provision of PUHCA 2005 or any rules or regulations thereunder
        pertaining to Buyer.

       

       

      ARTICLE
        V  

       

       

      REPRESENTATIONS
        AND WARRANTIES OF SELLER

       

      Section
        5.1  Organization,
        Existence and Qualification. 

       

      Seller
        and each Subsidiary is a corporation duly incorporated, validly existing
        and in
        good standing under the laws of its respective jurisdiction of incorporation,
        with full corporate power and authority to conduct the portion of the Business
        conducted by it as it is now being conducted, to own or use its portion of
        the
        Assets and to perform its obligations under all Contracts to which it is
        a
        party. Seller has full corporate power and authority to execute and deliver
        this
        Agreement and the Related Documents to which Seller is a party. Seller and
        each
        Subsidiary is duly qualified to do business as a foreign corporation and
        is in
        good standing under the laws of the State of Rhode Island and each other
        state
        in which the failure to be so qualified 

       

      
        
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      or
        in
        good standing, individually or in the aggregate, would be reasonably likely
        to
        have a Material Adverse Effect.

       

      Section
        5.2  Authority
        Relative to this Agreement and Binding Effect. 

       

      The
        execution, delivery and performance by Seller of this Agreement, the Related
        Documents and the consummation of the transactions contemplated thereby have
        been duly authorized by all requisite corporate action. Except as set forth
        in
Schedule
        5.2,
        neither
        the execution, delivery and performance of this Agreement and the Related
        Documents by Seller, nor the consummation of the transactions contemplated
        thereby, will (a) result in any conflict with or breach or violation of or
        default under the Organizational Documents of Seller or any Subsidiary, (b)
        result in a violation or breach of any term or provision of or a loss of
        any
        right or benefit under, constitute a default or accelerate the performance
        required under, result in the termination of or a right of termination,
        cancellation or amendment, or result in the creation of any Encumbrance upon
        any
        of the respective properties or assets of Seller or any of its Affiliates
        (including the Subsidiaries) under any Contract to which Seller or any of
        its
        Affiliates (including the Subsidiaries) is a party or by which any of their
        respective assets are bound, whether with or without notice or the passage
        of
        time or both, or (c) a violation of any Order of any Governmental Body, except
        for such exceptions to the foregoing clause (b) that, individually or in
        the
        aggregate, would not be reasonably likely to have a Material Adverse Effect
        or
        that will be cured, waived or otherwise remedied on or prior to the Closing
        Date. This Agreement constitutes, and the Related Documents to be executed
        by
        Seller when executed and delivered will constitute, valid and binding
        obligations of Seller, enforceable against Seller in accordance with their
        respective terms, except as enforceability may be limited by (i) bankruptcy
        or
        similar laws from time to time in effect affecting the enforcement of creditors’
rights generally or (ii) the availability of equitable remedies
        generally.

       

      Section
        5.3  Governmental
        and Other Required Consents. 

       

      Except
        as
        set forth in Schedule
        5.3,
        no
        Consent of any Governmental Body or third party is required to be obtained
        by
        Seller or any Subsidiary in connection with the execution and delivery by
        Seller
        of this Agreement or the Related Documents or the consummation of the
        transactions contemplated by this Agreement or the Related Documents, other
        than
        any Consent the failure of which to be obtained would not be reasonably likely,
        individually or in the aggregate, to have a Material Adverse Effect. Seller
        has
        no knowledge of any facts or circumstances relating to Seller, any Subsidiary
        or
        their Affiliates that reasonably would be likely to preclude or prolong either
        (i) the receipt of such required consents or (ii) consummation of the
        transactions contemplated by this Agreement in accordance with its
        terms.

       

      Section
        5.4  Capitalization
        of the Subsidiaries; Title to Stock. 

       

      (a)  Seller
        owns all of the issued and outstanding shares of the capital stock of Newport
        America Corporation and Valley Appliance and Merchandising Company; Newport
        America Corporation owns all of the issued and outstanding shares of the
        capital
        stock of each of Patience Realty Corp. and Prudence Corporation, in each
        case
        free and clear of any Encumbrances, other than transfer restrictions imposed
        on
        equity securities by federal securities laws, and all of such shares are
        duly
        authorized and validly issued and are fully paid, non-

       

      
        
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      assessable and
        free
        of preemptive rights. None of the Subsidiaries has, or is bound by, any
        outstanding subscriptions, options, warrants, calls, commitments or agreements
        of any character calling for the purchase or issuance of any security of
        any
        such Subsidiary, including any securities representing the right to purchase
        or
        otherwise receive any shares of capital stock or any other equity security
        of
        any such Subsidiary. None of the Subsidiaries may be required to acquire
        by any
        means, directly or indirectly, any capital stock, voting rights, equity
        interests or investments in another Person.

       

      (b)  Except
        as
        set forth in Section 5.4(a), none of the Subsidiaries has any direct or indirect
        interest in any other Person.

       

      Section
        5.5  Title
        to Assets; Encumbrances. 

       

      (a)  Seller
        or
        the appropriate Subsidiary has good and indefeasible title to the Assets
        reflected in the Financial Statements except those that in the aggregate
        are not
        material to the Business and those disposed of since the date of the Financial
        Statements in the ordinary course of business or otherwise disposed of in
        accordance with this Agreement. None of the Assets are subject to any
        Encumbrance except (i) Encumbrances described in Schedule 5.5(a)
        and
        (ii) Permitted
        Encumbrances.

       

      (b)  Except
        as
        set forth in Schedule
        5.5(b),
        Seller
        or the appropriate Subsidiary owns or possesses all Easements necessary to
        conduct the Business as now being conducted without any known conflict with
        the
        rights of others, in each case except to the extent that the failure to own
        or
        possess such Easements would not, individually or in the aggregate, be
        reasonably likely to have a Material Adverse Effect. 

       

      (c)  Except
        in
        cases that individually or in the aggregate are not reasonably likely to
        have a
        Material Adverse Effect, (x) Seller or the appropriate Subsidiary enjoys
        peaceful and undisturbed possession under all material leases of Real Property,
        and (y) all such leases are valid and subsisting and in full force and
        effect.

       

      Section
        5.6  Financial
        Statements.

       

      (a)  Schedule
        5.6
        sets
        forth the unaudited combined statement of assets and liabilities of the Business
        as of September 30, 2005 (the “Balance Sheet”) and the unaudited combined
        statement of profit of the Business for the nine-month period ended September
        30, 2005 (collectively, the “Financial Statements”). Except
        as
        set forth in Schedule
        5.6,
        the
        Financial Statements have been prepared on a pre-tax basis
        consistent with Seller’s consolidated audited financial statements as of, and
        for its fiscal year ended, December 31, 2004, which Seller financial statements
        were prepared, in all material respects, in accordance with GAAP. Except
        as set
        forth in Schedule
        5.6,
        the
        Balance Sheet presents fairly in all material respects the combined financial
        condition of the Business as of its date and the statements of profit included
        in the Financial Statements present fairly in all material respects the combined
        results of operations of the Business for the period covered thereby. The
        books
        and records of Seller and the Subsidiaries from which the Financial Statements
        were derived were complete and accurate in all material respects at the time
        of
        such preparation.

       

      
        
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      (b)  Seller
        and its Affiliates (including the Subsidiaries) maintain a system of internal
        accounting controls with respect to the Business sufficient to provide
        reasonable assurance that (i) transactions are executed in accordance with
        management’s general or specific authorization; (ii) transactions are
        recorded as necessary to permit preparation of financial statements in
        conformity with GAAP and to maintain accountability for assets;
        (iii) access to assets is permitted only in accordance with management’s
        general or specific authorization; and (iv) the recorded accountability for
        assets is compared with existing assets at reasonable intervals and appropriate
        action is taken with respect to any differences.

       

      (c)  Seller
        has established, maintains and evaluates controls and procedures with respect
        to
        the Business that are designed to ensure that material information relating
        to
        the Business is made known to Seller’s Chief Executive Officer and its Chief
        Financial Officer by others in the Business, and such controls and procedures
        are effective to perform the functions for which they were
        established.

       

      Section
        5.7  Compliance
        with Legal Requirements; Governmental Permits. 

       

      Except
        as
        relates to tax matters (which are provided for in Section 5.9), employee
        benefit
        matters (which are provided for in Section 5.13) or environmental matters
        (which
        are provided for in Section 5.15) and except as set forth in Schedule
        5.7,
        (a)
        neither Seller nor any of its Affiliates (including any Subsidiary) is or
        has
        been in violation of any Legal Requirement or Order that is applicable to
        it
        that is material to the conduct or operation of the Business, or to the
        ownership or use of any of the Assets, in either case taken as a whole; and
        (b)
        Seller or the appropriate Subsidiary possesses all Permits from Governmental
        Bodies required by any applicable Legal Requirement or Order material to
        the
        operation of the Business substantially in the manner in which it is currently
        being conducted by Seller and its Affiliates (including the Subsidiaries),
        taken
        as a whole.

       

      Section
        5.8  Legal
        Proceedings; Outstanding Orders. 

       

      Except
        as
        set forth in Schedule
        5.8,
        there
        is no pending or Threatened Proceeding (a) that has been commenced against
        Seller or any of its Affiliates (including any Subsidiary) that would be
        reasonably likely to have an adverse financial effect on the Business of
        more
        than $400,000, or otherwise would be reasonably likely, individually or in
        the
        aggregate, to have a Material Adverse Effect or (b) that challenges, or
        that may have the effect of preventing, delaying, making illegal or otherwise
        interfering with, the transactions contemplated hereby. Except as disclosed
        in
Schedule
        5.8,
        there
        are no outstanding Orders against Seller or its Affiliates (including any
        Subsidiary) that relate to or arise out of the conduct of the Business or
        the
        ownership, condition or operation of the Business or the Assets (other than
        any
        Order relating to rates, tariffs and similar matters arising in the ordinary
        course of business) which individually or in the aggregate would (x) have
        an
        adverse financial effect on the Business of more than $400,000 or (y) otherwise
        be reasonably likely individually or in the aggregate to have a Material
        Adverse
        Effect.

       

      Section
        5.9  Taxes. 

       

      
        
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      Seller
        or
        the appropriate Subsidiary has filed all United States federal, state, local
        and
        foreign Tax Returns required to be filed by Seller or such Subsidiary with
        respect to the Assets, Subsidiaries, or assets of any Subsidiary or requests
        for
        extensions to file such Tax Returns have been timely filed, and Seller or
        such
        Subsidiary has timely paid and discharged or made adequate provision for
        all
        Taxes (other than Retained Liabilities) except where the failure to so file,
        pay, discharge or make adequate provision for are not, individually or in
        the
        aggregate, reasonably likely to have a material impact on the Business. All
        such
        Tax Returns are true, correct and complete in all material respects. There
        are
        no pending audits, other examinations, or Threatened Proceedings relating
        to any
        Tax matters of the Subsidiaries or relating to the Business except as set
        forth
        in Schedule 5.9.
        There
        are no Tax liens on the Assets or the assets of any Subsidiary. As of the
        date
        of this Agreement, neither Seller (with respect to the Business) nor any
        Subsidiary has granted any waiver of any statute of limitations, or any
        extension of a period for the assessment of, any Tax except as set forth
        in
Schedule
        5.9.
        As of
        the Closing Date, none of the Subsidiaries nor the Seller (but only to the
        extent secured by the Business or the Assets) will be a party to, be bound
        by or
        have any obligation under any Tax sharing agreement, Tax indemnity or similar
        agreement, understanding or arrangement pursuant to which any of the
        Subsidiaries or Seller has assumed an obligation to satisfy any Tax obligations
        of another person or entity. Up to and including the Closing Date, none of
        the
        Subsidiaries has carried on its business and other activities in such a way
        that
        would result in the recognition by any Subsidiary of liabilities for Taxes
        after
        the Closing Date as result of such activities (for example, none of the
        Subsidiaries has engaged in a IRC Section 355 transaction nor has engaged
        in any
        activity or accounting practice that is a “reportable transaction” as defined in
        Treas. Reg. Section 1.6011-4). Except for liability for Taxes arising as
        part of
        an affiliated, consolidated or combined group with Southern Union Company
        and
        its Affiliates under Treasury Regulation Section 1.1502-6 or any similar
        provision under state, local or foreign law, none of the Subsidiaries has
        any
        liability for the Taxes of any person as a transferee, or successor or otherwise
        (including any liability under Treasury Regulation Section 1.1502-6 or any
        similar provision of state, local or foreign law). The Subsidiaries have
        withheld and paid all Taxes required to have been withheld and paid in
        connection with amounts paid or owing to any employee, independent contractor,
        creditor, member or other third party. None of the Assets or assets of the
        Subsidiaries are (a) required, pursuant to section 168(g) of the IRC, to
        be
        depreciated under the “alternative depreciation system” within the meaning of
        section 168(g)(2) of the IRC, (b) subject to the provisions of section 168(f)
        of
        the IRC, or (c) subject to a tax benefit transfer lease subject to the
        provisions of former section 168(f)(8) of the IRC. The only representations
        and
        warranties given in respect of tax matters are those contained in this Section
        5.9 and none of the other representations and warranties set forth in this
        Agreement shall be deemed to constitute, directly or indirectly, a
        representation or warranty in respect of tax matters.

       

      Section
        5.10  Intellectual
        Property. 

       

      Except
        as
        set forth on Schedule
        5.10,
        Seller
        and each Subsidiary possesses or has adequate rights to use all trademarks,
        trade names, patents, service marks, brand marks, brand names, computer
        programs, databases, industrial designs and copyrights necessary for the
        operation of the Business in the manner in which it is currently being conducted
        by Seller or such Subsidiary, except for the failure to possess or have adequate
        rights to use such properties 

       

      
        
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      that,
        individually or in the aggregate, would not be reasonably likely to have
        a
        Material Adverse Effect. Except as set forth on Schedule
        5.10,
        Seller
        has no Knowledge of (a) any infringement or claimed infringement by Seller
        or
        any Subsidiary of any patent, trademark, service mark or copyright of others
        or
        (b) any infringement of any patent, trademark, service mark or copyright
        owned
        by or under license to Seller or any Subsidiary except for any such
        infringements of the type described in clause (a) or (b) that are not,
        individually or in the aggregate, reasonably likely to have a Material Adverse
        Effect.

       

      Section
        5.11  Personal
        Property. 

       

      Except
        for such exceptions as are not, individually or in the aggregate, reasonably
        likely to have a Material Adverse Effect, the machinery, equipment and vehicles
        included among the Assets are in normal operating condition and in a state
        of
        reasonable maintenance and repair and are suitable in all material respects
        for
        the purposes for which they are now being used in the conduct of the
        Business.

       

      Section
        5.12  Material
        Contracts. 

       

      Schedule
        5.12
        contains
        a complete list of all Material Contracts. Seller has made available to Buyer
        a
        true and correct copy of each Material Contract, including all amendments
        and
        modifications thereof. Except as described in Schedule 5.12,
        all of
        the Material Contracts are in full force and effect (subject to the expiration
        of the stated term of any such Material Contract in accordance with its terms)
        and there are no defaults under any such Contracts by Seller or any of its
        Affiliates (including the Subsidiaries) or, to Seller's Knowledge, the counter
        parties to such Contracts, except for any failure to be in full force and
        effect
        and for any default that, individually or in the aggregate, would not be
        reasonably likely to have a Material Adverse Effect.

       

      Section
        5.13  Employee
        Benefit Matters. 

       

      (a)  
        Schedule 5.13(a)
        contains
        a true and complete list of each deferred compensation and each incentive
        compensation, stock purchase, stock option and other equity compensation
        plan,
        program, agreement or arrangement; each severance or termination pay, medical,
        surgical, hospitalization, life insurance and other “welfare” plan, fund or
        program (within the meaning of section 3(1) of ERISA); each profit-sharing,
        stock bonus or other “pension” plan, fund or program (within the meaning of
        section 3(2) of ERISA); each employment, termination or severance agreement;
        and
        each other employee benefit plan, fund, program, agreement or arrangement,
        in
        each case, that is sponsored, maintained or contributed to or required to
        be
        contributed to by the Seller or by any trade or business, whether or not
        incorporated (an “ERISA Affiliate”), that together with the Seller would be
        deemed a “single employer” within the meaning of section 4001(b) of ERISA, or to
        which the Seller or an ERISA Affiliate is party for the benefit of any Employee
        or Former Employee of the Seller (the “Employee Plans”).  Seller’s Pension
        Plans and Seller’s 401(k) Plan are the only Employee Plans that are intended to
        be qualified under Section 401(a) of the IRC.  Each employee benefit plan
        (within the meaning of Section 3(3) of ERISA) that is sponsored, maintained
        or
        contributed to or required to be contributed to by Seller or an ERISA Affiliate
        of Seller and that is subject to 

       

      
        
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      Section
        302 or Title IV of ERISA or section 412 of the IRC is hereinafter referred
        to as
        a “Title IV Plan.” 

       

      (b)  With
        respect to each Employee Plan, Seller has heretofore delivered to Buyer true
        and
        complete copies of the Employee Plan and any amendments thereto (or if the
        Employee Plan is not a written Employee Plan, a description thereof), any
        related trust or other funding vehicle, any reports or summaries required
        under
        ERISA or the IRC and the most recent determination letter received from the
        Internal Revenue Service with respect to each Employee Plan intended to qualify
        under section 401 of the IRC.

       

      (c)  No
        liability under Title IV or section 302 of ERISA has been incurred by the
        Seller
        or any ERISA Affiliate that has not been satisfied in full, and no condition
        exists that presents a material risk to the Seller or any ERISA Affiliate
        of
        incurring any such liability, other than liability for premiums due the Pension
        Benefit Guaranty Corporation (“PBGC”) (which premiums have been paid when
        due).  Insofar as the representation made in this Section 5.13(c) applies
        to sections 4064, 4069 or 4204 of Title IV of ERISA, it is made with respect
        to
        any employee benefit plan, program, agreement or arrangement subject to Title
        IV
        of ERISA to which the Seller or any ERISA Affiliate made, or was required
        to
        make, contributions during the five (5)-year period ending on the last day
        of
        the most recent plan year ended prior to the Closing Date.

       

      (d)  The
        PBGC
        has not instituted proceedings to terminate any Title IV Plan and no condition
        exists that presents a material risk that such proceedings will be
        instituted.

       

      (e)  No
        Title
        IV Plan or any trust established thereunder has incurred any “accumulated
        funding deficiency” (as defined in section 302 of ERISA and section 412 of the
        IRC), whether or not waived, as of the last day of the most recent fiscal
        year
        of each Title IV Plan ended prior to the Closing Date.  All contributions
        required to be made with respect to any Employee Plan on or prior to the
        Closing
        Date have been timely made.

       

      (f)  No
        Title
        IV Plan is a “multiemployer pension plan,” as defined in section 3(37) of ERISA,
        nor is any Title IV Plan a plan described in section 4063(a) of ERISA. 
Neither the Seller nor any ERISA Affiliate has made or suffered a “complete
        withdrawal” or a “partial withdrawal,” as such terms are respectively defined in
        sections 4203 and 4205 of ERISA (or any liability resulting therefrom has
        been
        satisfied in full).

       

      (g)  Neither
        the Seller or any Subsidiary, any Employee Plan, any trust created thereunder,
        nor any trustee or administrator thereof has engaged in a transaction in
        connection with which the Seller or any Subsidiary, any Employee Plan, any
        such
        trust, or any trustee or administrator thereof, or any party dealing with
        any
        Employee Plan or any such trust could be subject to either a civil penalty
        assessed pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant
        to
        section 4975 or 4976 of the IRC. 

       

      (h)  Each
        Employee Plan has been operated and administered in all material respects
        in
        accordance with its terms and applicable law, including but not limited to
        ERISA
        and the IRC.

       

      
        
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      (i)  Each
        Employee Plan intended to be “qualified” within the meaning of section 401(a) of
        the IRC is so qualified and the trusts maintained thereunder are exempt from
        taxation under section 501(a) of the IRC. Each Employee Plan intended to
        satisfy
        the requirements of Section 501(c)(9) has satisfied such
        requirements.

       

      (j)  Except
        as
        disclosed in Schedule
        5.13(j),
        no
        Employee Plan provides medical, surgical, hospitalization, death or similar
        benefits (whether or not insured) for Employees or Former Employees of the
        Seller or any Subsidiary for periods extending beyond their retirement or
        other
        termination of service, other than (i) coverage mandated by applicable law,
        (ii)
        death benefits under any “pension plan,” or (iii) benefits the full cost of
        which is borne by the Employee or Former Employee (or his
        beneficiary).

       

      (k)  No
        amounts payable under the Employee Plans will fail to be deductible for federal
        income tax purposes by virtue of section 280G of the IRC.

       

      (l)  Except
        as
        disclosed in Schedule
        5.13(l),
        the
        consummation of the transactions contemplated by this Agreement will not,
        either
        alone or in combination with another event, (i) entitle any Employee, Former
        Employee or officer of the Seller or any Subsidiary to severance pay or any
        other payment, except as expressly provided in this Agreement, or (ii)
        accelerate the time of payment or vesting, or increase the amount of
        compensation due any such Employee, Former Employee or officer.

       

      (m)  There
        are
        no pending, threatened or anticipated claims by or on behalf of any Employee
        Plan, by any employee or beneficiary covered under any such Employee Plan,
        or
        otherwise involving any such Employee Plan (other than routine claims for
        benefits).

       

      (n)  The
        Subsidiaries do not employ any Employees or any other individuals and do
        not
        currently maintain any Employee Plan.

       

      (o)  The
        only
        representations and warranties given in respect of employee benefit matters
        are
        those contained in this Section 5.13 and Section 5.14 and none of the other
        representations and warranties set forth in this Agreement shall be deemed
        to
        constitute, directly or indirectly, a representation or warranty in respect
        of
        employee benefit matters.

       

      Section
        5.14  Employee
        and Labor Matters.

       

      (a)  Schedule
        5.14(a)
        lists
        each collective bargaining, union or other employee association agreement
        to
        which Seller or any of the Subsidiaries is a party or bound with respect
        to the
        Business.

       

      (b)  Except
        as
        set forth on Schedule
        5.14(b)
        with
        respect to the Business:

       

       

      (i)  To
        Seller's Knowledge, (A) no labor union or labor organization has made a pending
        demand for recognition or certification, and (B) there are no 

       

      
        
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      representation
        or certification proceedings or petitions seeking a representation proceeding
        presently pending or Threatened to be brought or filed with the National
        Labor
        Relations Board or any other Governmental Body.

       

       

      (ii)  From
        January 1, 2003 to the date of this Agreement, there has been no actual or,
        to
        Seller's Knowledge, Threatened, strikes, lockouts, slowdowns or work stoppages
        against or affecting the Business.

       

      (c)  Except
        as
        set forth on Schedule
        5.14(c),
        to
        Seller's Knowledge, there are no (i) unfair labor practice charges or complaints
        presently pending or Threatened before the National Labor Relations Board
        or any
        other Governmental Body against Seller or the Subsidiaries; (ii) complaints,
        grievances or arbitrations arising out of any collective bargaining agreement,
        or any charge or complaint with respect to or relating to Seller or any
        Subsidiary presently pending before the Equal Employment Opportunity Commission
        or any other Governmental Body responsible for the prevention of unlawful
        employment practices; or (iii) presently pending or Threatened Proceedings
        against Seller or any Subsidiary by or on behalf of any present or former
        employee, any applicant for employment or classes of the foregoing alleging
        breach of any express or implied Contract, any applicable Legal Requirements
        governing employment or the termination thereof or other discriminatory,
        wrongful or tortious conduct in connection with the employment relationship;
        other than, with respect to (i), (ii) or (iii), charges, complaints or
        Proceedings which, individually or in the aggregate, would not be reasonably
        likely to have a Material Adverse Effect.

       

      (d)  Neither
        Seller nor any Subsidiary is delinquent in any material payments to any present
        or former employees or consultants for any services or amounts required to
        be
        reimbursed or otherwise paid.

       

      (e)  To
        the
        Knowledge of Seller, no employee is in any respect in violation of any
        employment agreement, nondisclosure agreement, common law nondisclosure
        obligation, fiduciary duty, noncompetition agreement, restrictive covenant
        or
        other obligation to a former employer relating to the right of such employee
        to
        be employed by Seller or any Subsidiary or the employee's knowledge or use
        of
        trade secrets or proprietary information. 

       

      Section
        5.15  Environmental
        Matters.

       

      (a)  Except
        as
        set forth in Schedule
        5.15:

       

       

      (i)  Compliance.
        Seller
        and each Subsidiary are in compliance with all Environmental Laws applicable
        to
        the Assets or the Business except where the failure to be in compliance with
        such Environmental Laws would not, individually or in the aggregate, be
        reasonably likely to have an adverse financial effect on the Business of
        more
        than $400,000. Seller and each Subsidiary have been in compliance since January
        1, 2001 with all Environmental Laws applicable to the Assets or the Business
        except where the failure to be in compliance with such Environmental Laws
        would
        not, individually or in the aggregate, reasonably be expected to have a Material
        Adverse Effect. Neither Seller nor any of the Subsidiaries has received any
        written communication that alleges that either Seller or any Subsidiary is
        not
        in compliance with applicable Environmental Laws related to the Assets or
        the

       

      
        
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      Business
        except for any such written communications relating to matters that would
        not,
        individually or in the aggregate, have an adverse financial effect on the
        Business of more than $400,000. To the Knowledge of Seller with respect to
        the
        Assets or the Business, neither Seller nor any Subsidiary has used any waste
        disposal site, or otherwise disposed of, or transported, or arranged for
        the
        transportation of, any Hazardous Materials to any location in violation in
        any
        material respect of any Environmental Law or that is likely to result in
        an
        Environmental Liability of more than $400,000.

       

       

      (ii)  Environmental
        Permits.
        Seller
        and each Subsidiary have obtained or applied in a timely manner, for all
        environmental, health and safety Permits (collectively, the “Environmental
        Permits”) necessary for the construction of their facilities or the conduct of
        their present operations related to the Assets or the Business, and all such
        Environmental Permits are in good standing or, where applicable, a renewal
        application has been timely filed and is pending agency approval, and Seller
        and
        each Subsidiary is in compliance with all terms and conditions of its respective
        Environmental Permits related to the Assets or the Business, in each case
        except
        where the failure to obtain or apply or be in compliance with such Environmental
        Permits or the requirement to make any expenditure in connection with such
        Environmental Permits would not, individually or in the aggregate, have an
        adverse financial effect on the Business of more than $400,000.

       

       

      (iii)  Environmental
        Claims.
        There
        is no Environmental Claim related to the Assets or the Business pending (x)
        against Seller or any of its Affiliates (including any Subsidiary), (y) to
        the
        Knowledge of Seller, against any person or entity whose liability for any
        Environmental Claim Seller or any of its Affiliates (including any Subsidiary)
        has retained or assumed either contractually or by operation of law, or (z)
        against any real or personal property or operations that Seller or any of
        its
        Affiliates (including any Subsidiary) owns, leases or manages, in whole or
        in
        part, or, to the Knowledge of Seller, against any real or personal property
        or
        operations that Seller or any of its Affiliates (including any Subsidiary)
        formerly owned, leased or managed, in whole or in part, which, in the cases
        of
        (x), (y) or (z) would reasonably be expected to have, in the aggregate, an
        adverse financial effect on the Business of more than $400,000.

       

       

      (iv)  Releases.
        Seller
        has no Knowledge of any Releases of any Hazardous Material related to the
        Assets
        or the Business and its current or former assets, properties and operations
        that
        would reasonably be expected to form the basis of any Environmental Claim
        against Seller, or any of its Affiliates (including any Subsidiary), or against
        any person or entity whose liability for any Environmental Claim Seller or
        any
        of its Affiliates (including any Subsidiary) has retained or assumed either
        contractually or by operation of law, or any requirement under any Environmental
        Law to investigate or remediate such Release except for Releases of Hazardous
        Materials, the liability for which would not reasonably be expected to have,
        in
        the aggregate, an adverse financial effect on the Business of more than
        $400,000, or would not constitute an Assumed Liability.

       

       

      (v)  Predecessors.
        Seller
        has no Knowledge, with respect to any predecessor of Seller or any of its
        Affiliates (including any Subsidiary), of any Environmental Claim or
        Environmental Liability related to the Assets or the Business pending or
        threatened, or of any Release of Hazardous Materials that would reasonably
        be
        expected to form the basis of 

       

      
        
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      any
        Environmental Claim or Environmental Liability, that would reasonably be
        expected to have individually
        or in the aggregate, an adverse financial effect on the Business of more
        than
        $400,000.

       

       

      (vi)  Disclosure.
        Seller
        has no Knowledge of any material facts related to the Assets or the Business
        that Seller reasonably believes would form the basis of an Environmental
        Claim
        or Environmental Liability that, individually or in the aggregate, would
        reasonably be expected to have a Material Adverse Effect.

       

      (b)  With
        the
        exception of Section 5.16 and 5.21, the
        only
        representations and warranties given in respect of environmental matters
        and
        compliance with and liability under Environmental Laws
        are
        those contained in this Section 5.15 and none of the other representations
        and
        warranties shall be deemed to constitute, directly or indirectly, a
        representation or warranty in respect of environmental matters and compliance
        with and liability under Environmental Laws.

       

      Section
        5.16  Absence
        of Certain Changes or Events. 

       

      Except
        (a) as set forth in Schedule
        5.16,
        (b) for
        any intercompany receivables or payables that will be paid, cancelled or
        offset
        prior to Closing as contemplated in Section 2.5 and (c) any actions taken
        by
        Seller or any Subsidiary that would be permitted by Section 6.1(a), since
        September 30, 2005, the Business has been conducted in the ordinary course
        (it
        being acknowledged that Seller has conducted a sales process with respect
        to the
        Business and that, in connection therewith, several parties were permitted
        access to confidential information of the Business pursuant to Sales Process
        Confidentiality Agreements). Since September 30, 2005, there has not been
        any
        event or condition, or series of events or conditions, occurring outside
        the
        normal course of business affecting the Assets that individually or in the
        aggregate either (i) has resulted in, or (ii) to Seller’s Knowledge, would be
        reasonably likely to result in, a Material Adverse Effect.

       

      Section
        5.17  Regulatory
        Matters.

       

      (a)  Schedule
        5.17
        sets
        forth all of the currently pending rate filings relating to the Business
        heretofore made by Seller before any Governmental Body and each other currently
        pending rate Proceeding of any Governmental Body relating to the Business
        (other
        than Proceedings that also affect other Persons engaged in a business similar
        to
        the Business such as generic or industry-wide Proceedings).

       

      (b)  All
        currently effective material filings relating to the Business heretofore
        made by
        Seller or any Subsidiary with any Governmental Body were made in material
        compliance with Legal Requirements then applicable thereto and the information
        contained therein was true and correct in all material respects as of the
        respective dates of such filings.

       

      (c)  Seller
        has certificates of public convenience from the Rhode Island Division of
        Public
        Utilities and Carriers or is otherwise legally entitled to provide service
        in
        all areas (a) where it currently provides service to its customers as part
        of the Business or (b) as identified on its tariff.

       

      
        
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      Section
        5.18  Brokers. 

       

      Except
        as
        set forth on Schedule
        5.18,
        no
        broker or finder has acted for or on behalf of Seller or any Affiliate of
        Seller
        in connection with this Agreement or the transactions contemplated by this
        Agreement. No broker or finder is entitled to any brokerage or finder’s fee, or
        to any commission, or to any other compensation based in any way on agreements,
        arrangements or understandings made by or on behalf of Seller or any Affiliate
        of Seller for which Buyer has or will have any liability or obligation
        (contingent or otherwise).

       

      Section
        5.19  Disclaimer. 

       

      Except
        as
        otherwise expressly set forth in this Article V, Seller expressly disclaims
        any
        representations or warranties of any kind or nature, express or implied,
        as to
        the condition, value or quality of the assets or properties currently or
        formerly used, operated, owned, leased, controlled, possessed, occupied or
        maintained by Seller or any Subsidiary, and Seller SPECIFICALLY DISCLAIMS
        ANY
        REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS
        FOR
        ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH ASSETS OR PROPERTIES, OR ANY
        PART
        THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS
        THEREIN, WHETHER LATENT OR PATENT, IT BEING UNDERSTOOD THAT SUCH ASSETS AND
        PROPERTIES ARE BEING ACQUIRED, “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN
        THEIR PRESENT CONDITION, WITH ALL FAULTS AND THAT BUYER SHALL RELY ON ITS
        OWN
        EXAMINATION AND INVESTIGATION THEREOF.

       

      Section
        5.20  Insurance.

       

      (a)  Schedule
        5.20
        sets
        forth a true and complete list of all current policies of property and casualty
        insurance, insuring the properties, assets, employees and/or operations of
        the
        Business (collectively, the “Policies”). All premiums payable under such
        Policies have been paid in a timely manner and Seller and each Subsidiary
        have
        complied in all material respects with the terms and conditions of all such
        Policies.

       

      (b)  All
        material Policies are in full force and effect. Neither Seller nor any of
        its
        Affiliates (including any Subsidiary) is in material default under any
        provisions of the Policies, and there is no claim by Seller or any of its
        Affiliates (including any Subsidiary) or any other Person pending under any
        of
        the Policies as to which coverage has been questioned, denied or disputed
        by the
        underwriters or issuers of such Policies.

       

      Section
        5.21  Absence
        of Undisclosed Liabilities. 

       

      Except
        as
        disclosed on Schedule
        5.21,
        neither
        Seller nor any of its Affiliates (including any Subsidiary) has any indebtedness
        or liability, absolute or contingent, related to the Assets or the Business
        of a
        nature required by GAAP to be reflected in a consolidated corporate balance
        sheet relating solely to the Business, except liabilities, obligations or
        contingencies that (a) are accrued or reserved against in the Financial
        Statements or reflected in the notes thereto, (b) were 

       

      
        
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      incurred
        or accrued in the ordinary course of business (including liens of current
        taxes
        and assessments not in default) since September 30, 2005, or (c) would not
        reasonably be expected, individually or in the aggregate, to have an adverse
        financial effect on the Business of more than $1,000,000.

       

      Section
        5.22  Sufficiency
        of Assets.

       

      (a)  Except
        as
        set forth on Schedule
        5.22(a),
        the
        Assets include all assets, properties and rights necessary for the operation
        of
        the Business consistent with past practice and as currently
        operated.

       

      (b)  Except
        as
        set forth on Schedule
        5.22(b),
        none of
        the assets of Seller or any of its Affiliates which are located outside of
        the
        State of Rhode Island relate primarily to the Business.

       

      Section
        5.23  PUHCA. 

       

      Seller
        is
        not a “holding company” as defined in PUHCA 2005. The execution and delivery of
        this Agreement by Seller does not and will not violate any provision of PUHCA
        2005 or any rules or regulations thereunder pertaining to Seller.

       

      Section
        5.24  Filings. 

       

      No
        statement furnished by Seller or its Affiliates, including the Subsidiaries,
        for
        inclusion in any filing with any Governmental Body in connection with obtaining
        such Governmental Body’s Consent for the consummation of the transactions
        contemplated by this Agreement will contain, as of the date such information
        is
        so provided, any untrue statement of a material fact or will omit to state,
        as
        of the date such information is so provided, any material fact that is necessary
        to make the statements contained therein, in light of the circumstances under
        which they were made, not misleading.

       

       

      ARTICLE
        VI  

       

       

      COVENANTS

       

      Section
        6.1  Covenants
        of Seller. 

       

      Seller
        agrees to observe and perform the following covenants and
        agreements:

       

      (a)  Conduct
        of the Business Prior to the Closing Date.
        With
        respect to the Business, except (x) as contemplated in this Agreement or
        in
Schedule
        6.1,
        (y) as required by any Legal Requirement or Order or (z) as otherwise
        expressly consented to in writing by Buyer, which consent will not be
        unreasonably withheld or delayed, prior to the Closing, Seller will, and
        will
        cause its Affiliates (including each Subsidiary) to:

       

       

      (i)  not
        make
        or permit any change in the general nature of the Business;

       

      
        
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      (ii)  maintain
        the Business in the ordinary course of business consistent with Good Utility
        Practices, and maintain the Assets in their present condition, reasonable
        wear
        and tear excepted, subject to retirements in the ordinary course of
        business;

       

       

      (iii)  not
        enter
        into, assign, amend, renew or extend, any material transaction or Material
        Contract other than in the ordinary course of business, provided that such
        ordinary course exception shall not be applicable to any collective bargaining
        agreement (as to which Section 6.12 shall apply);

       

       

      (iv)  not
        (A)
        sell, lease (as lessor) or dispose of or otherwise transfer or make any Contract
        for the sale, lease (as lessor), disposition or transfer of, or subject to
        any
        Encumbrance (other than a Permitted Encumbrance), any Assets, other than
        (m) the
        sale of inventory in the ordinary course of business or (n) the sale or lease
        (as lessor) of Assets in excess of $100,000 in the aggregate , or (B) purchase
        or lease (as lessee), or make any Contract for the purchase or lease (as
        lessee)
        of, any Assets, other than (x) the purchase of inventory in the ordinary
        course
        of business, (y) pursuant to any capital expenditure reflected in the capital
        expenditure budget previously delivered to Buyer, or (z) the purchase or
        lease
        (as lessee) of Assets in excess of $100,000 in the aggregate;

       

       

      (v)  not
        (A)
        hire any new employee or (B) transfer any existing employee of Seller or
        any
        Affiliate to any position with the Business or any of the Subsidiaries, in
        each
        case unless such employee is a bona fide replacement for either a
        presently-filled position or a vacancy in an authorized position with the
        Business;

       

       

      (vi)  not
        make
        any unbudgeted capital expenditure or capital expenditure commitment in excess
        of $500,000 in
        the
        aggregate except in the event of service interruption, emergency or casualty
        loss;

       

       

      (vii)  comply
        in
        all material respects with all applicable material Legal Requirements and
        Orders, including those relating to the filing of reports and the payment
        of
        Taxes due to be paid prior to the Closing, other than those contested in
        good
        faith for which reserves have been established in accordance with
        GAAP;

       

       

      (viii)  except
        in
        the ordinary course of business or in accordance with the terms of any existing
        Contract which has been disclosed on Schedule
        5.13(l),
        Employee Plan or collective bargaining agreement, not grant any material
        increase or change in total compensation or benefits (taken as a whole) to
        any
        of the Transferred Employees or enter into any employment, severance or similar
        Contract with any Person or amend any such existing Contracts to increase
        any
        amounts payable thereunder or benefits provided thereunder;

       

       

      (ix)  not
        terminate any Material Contract except in the case of a breach of such Contract
        by the other party thereto;

       

       

      (x)  not
        create, incur, assume, guarantee or otherwise become liable with respect
        to any
        indebtedness for money borrowed other than intercompany debt (it being
        understood and agreed that customer advances, customer deposits and construction
        

       

      
        
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      advances
        do not create indebtedness for money borrowed), except pursuant to advances
        made
        by Seller to the Business or to any Subsidiary;

       

       

      (xi)  not
        amend
        the Organizational Documents of any Subsidiary;

       

       

      (xii)  not
        make
        any change in the stock ownership of any Subsidiary and not grant, issue,
        sell,
        dispose of, pledge or otherwise encumber any interest in any Subsidiary;
        

       

       

      (xiii)  solely
        in
        the case of the Subsidiaries, not declare, set aside or pay any non-cash
        dividend or other non-cash distribution with respect to its capital stock;
        

       

       

      (xiv)  to
        the
        extent exclusively relating to the Business or the Subsidiaries, not (A)
        change
        any material financial or Tax accounting methods, policies or practices except
        as required by a change in GAAP, (B) make, revoke or amend any material Tax
        election, (C) file any material amended Tax Return or claim for refund which
        may
        result in an adjustment of any item of income, gain, deduction or loss with
        respect to the Business, (D) consent to extend the period of limitations
        for the
        payment or assessment of any material Tax, (E) enter into any closing agreement
        affecting any material Tax liability or refund, or (F) settle or compromise
        any
        material Tax liability or refund; and 

       

       

      (xv)  not
        make
        any commitment to take any of the actions prohibited by this Section
        6.1(a).

       

      (b)  Access
        to the Business, Assets and Records; Updating Information.

       

       

      (i)  From
        and
        after the date hereof and until the Closing Date, Seller shall permit Buyer
        and
        its Representatives to have, on reasonable notice and at reasonable times,
        reasonable access to all properties, employees, offices and books, papers
        and
        records to the extent that they reasonably relate to the ownership, operation,
        obligations and liabilities of the Business, the Subsidiaries and the Assets;
        provided,
        however,
        that
        such access shall not unreasonably interfere with the operation of the Business;
        and provided,
        further,
        that
        Buyer hereby agrees to defend, indemnify and hold harmless Seller from and
        against all Losses arising out of or relating to Buyer’s access provided
        pursuant to this Section 6.1(b)(i). Without limiting the application of the
        Confidentiality Agreement, all documents or information furnished by Seller
        or
        obtained by Buyer hereunder shall be subject to the Confidentiality Agreement.
        Notwithstanding the foregoing or any provision of the Confidentiality Agreement,
        Seller acknowledges and agrees that, from and after the Closing, all information
        relating to the Business shall be deemed to be confidential information of
        Buyer
        and shall not be subject to the terms of the Confidentiality
        Agreement.

       

       

      (ii)  Seller
        will notify Buyer as promptly as practicable of any (x) significant change
        in
        the ordinary course of business for the Business, (y) material Proceedings
        (Threatened or pending) involving or affecting the Business or the transactions
        contemplated by this Agreement, and (z) unbudgeted capital expenditure or
        commitment in excess of $100,000, individually, and shall use reasonable
        efforts
        to keep Buyer fully informed of such events.

       

      
        
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      (c)  Consents.
        Subject
        to Section 2.4, Seller will use its commercially reasonable efforts and act
        diligently to obtain all necessary Consents required to consummate the
        transactions contemplated hereby in a timely manner, including any Consent
        required under any Legal Requirement or Contract applicable to the Business
        and
        all Consents listed in Schedule 5.3.
        Seller
        will use its commercially reasonable efforts and act diligently to obtain
        all
        necessary Consents of its stockholders, if any, that may be required to
        consummate the transactions contemplated hereby in a timely manner.

       

      (d)  Confidentiality.
        From
        and
        after the Closing Date, Seller shall, and shall cause its Affiliates and
        their
        respective officers, directors, employees, agents and representatives
        (collectively, “Representatives”)
        to,
        keep confidential and not disclose all information relating to the Business
        (whether in the possession of Seller, its Affiliate or such Representative
        at
        the time of the Closing or subsequently obtained by Seller, any Affiliate
        of
        Seller or any such Representative from Buyer pursuant to this Agreement or
        any
        Related Document) (“Restricted
        Information”),
        and
        shall not directly or indirectly use such Restricted Information for any
        purpose, except as and to the extent permitted by the terms of this Agreement
        or
        any Related Document. The obligation to keep such Restricted Information
        confidential shall continue indefinitely from the Closing Date and shall
        not
        apply to any information which (i) is in the public domain, (ii) is published
        or
        otherwise becomes part of the public domain through no fault of Seller, any
        of
        its Affiliates or any of their Representatives or (iii) becomes available
        to
        Seller, any of its Affiliates or any of their Representatives on a
        non-confidential basis from a source that did not acquire such information
        (directly or indirectly) from Seller or Buyer on a confidential basis.
        Notwithstanding the foregoing, Seller may make disclosures required by law;
        provided,
        that
        Seller, to the extent practicable, shall provide Buyer with prompt notice
        thereof so that Buyer may seek a protective order or other appropriate remedy
        or
        waive compliance with the provisions of this Section 6.1(d). In the event
        that
        such protective order or other remedy is not obtained or Buyer waives compliance
        with the provisions of this Section 6.1(d), Seller shall or shall cause the
        Person required to disclose such Restricted Information to furnish only that
        portion of the information that such Person is advised by an opinion of Seller’s
        counsel is legally required, and, to the extent practicable, Seller shall
        exercise its reasonable best efforts to obtain reliable assurance that
        confidential treatment is accorded the Restricted Information so
        furnished.

       

      (e)  Non-Solicitation
        of Employees.
        Except
        as otherwise set forth in the Employee Agreement, for a period of two years
        after the Closing Date, Seller shall not, and shall cause its Affiliates
        not to,
        without the prior written approval of Buyer, directly or indirectly, solicit,
        encourage, entice or induce any Transferred Employee (as defined in the Employee
        Agreement) to terminate his or her employment with Buyer or any of its
        Affiliates (including, after the Closing, the Subsidiaries), provided,
        however,
        that
        such prohibition shall not apply to any person who responds to a general
        solicitation.

       

      (f)  Board
        Meeting; Duty to Recommend.
        

       

       

      (i)  Proxy
        Statement.
        If the
        Seller's Stockholder Approval is required by the Rhode Island Division of
        Public
        Utilities and Carriers, as soon as reasonably 

       

      
        
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      practicable
        following the date of this Agreement, Seller shall prepare and file with
        the SEC
        a proxy statement in preliminary form (together with any amendments or
        supplements thereto, the “Proxy Statement”) in connection with obtaining the
        Seller's Stockholder Approval. Each of Seller and Buyer shall use their
        respective commercially reasonable efforts to furnish the information required
        to be included by the SEC in the Proxy Statement. After consultation with
        Buyer,
        Seller shall respond promptly to any comments made by the SEC with respect
        to
        the Proxy Statement and cause a definitive Proxy Statement to be mailed to
        its
        stockholders as promptly as practicable following the date of this Agreement,
        and the parties shall respond promptly to any comments with respect to any
        other
        statement or schedule filed by them. No filing of, or amendment or supplement
        to, the Proxy Statement or any other statement or schedule will be made by
        Seller without providing Buyer a reasonable opportunity to review and comment
        on
        the portions thereof pertaining to the transactions contemplated by this
        Agreement. If at any time after the date the Proxy Statement is mailed to
        Seller's stockholders and prior to the Seller Meeting any information relating
        to Seller, Buyer or any of their respective affiliates, officers or directors,
        should be discovered by Seller or Buyer which is required to be set forth
        in an
        amendment or supplement to the Proxy Statement, so that the Proxy Statement
        will
        not include any untrue statement of a material fact or omit to state any
        material fact necessary to make the statements therein, in light of the
        circumstances under which they were made, not misleading, the party which
        discovers such information shall promptly notify the other parties and an
        appropriate amendment or supplement describing such information shall be
        promptly filed with the SEC and, to the extent required by law, rule or
        regulation, disseminated to the stockholders of Seller.

       

       

      (ii)  Buyer
        Information.
        Buyer
        agrees that it will provide Seller with all information concerning Buyer
        necessary or reasonably appropriate to be included in the Proxy
        Statement.

       

       

      (iii)  Seller's
        Stockholder Meeting.
        If the
        Seller's Stockholder Approval is required by the Rhode Island Division of
        Public
        Utilities and Carriers, Seller, acting through the board of directors of
        Seller,
        shall, in accordance with its certificate of incorporation and bylaws and
        with
        applicable law, promptly and duly call, give notice of, convene and hold,
        as
        soon as practicable following the date upon which the Proxy Statement is
        cleared
        by the SEC, and in no event later than 75 days after such date, a special
        meeting of its stockholders for the sole purpose of considering and taking
        action upon this Agreement and the transactions contemplated hereby (the
        “Seller's Meeting”); provided,
        however,
        that in
        lieu of calling a special meeting, Seller shall be entitled to submit this
        Agreement and the transactions contemplated hereby to a vote of its stockholders
        at Seller's 2006 annual meeting of its stockholders (provided such annual
        meeting is held no later than May 15, 2006), in which case references herein
        to
        the “Seller's Meeting” shall be deemed references to Seller's 2006 annual
        meeting of its stockholders. 

       

       

      (iv)  Recommendation.
        Seller,
        acting through the board of directors of Seller, shall (a) recommend adoption
        of
        this Agreement and the transactions contemplated hereby and include such
        recommendation in the Proxy Statement, and (b) use its commercially reasonable
        efforts to solicit and obtain such adoption. Neither the board of directors
        of
        Seller nor any committee thereof shall directly or indirectly (x) withdraw
        (or
        amend or modify in a manner adverse to Buyer), or publicly propose to withdraw
        (or amend or modify 

       

      
        
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      in
        a
        manner adverse to Buyer), the approval, recommendation or declaration of
        advisability by the board of directors of Seller of this Agreement or the
        transactions contemplated hereby or (y) recommend, adopt or approve, or propose
        publicly to recommend, adopt or approve, any Alternative Proposal. 

       

      Section
        6.2  Covenants
        of Buyer. 

       

      Buyer
        agrees to observe and perform the following covenants and
        agreements:

       

      (a)  Consents.
        Buyer
        will use its commercially reasonable efforts and act diligently to assist
        Seller
        in obtaining all necessary Consents required to consummate the transactions
        contemplated hereby in a timely manner, including any Consent required under
        any
        Legal Requirement or Contract applicable to the Business, and all Consents
        listed in Schedule 5.3,
        and
        will use its commercially reasonable efforts and act diligently to obtain
        all
        Consents described in Section 4.3 in a timely manner.

       

      (b)  Access
        to Information.
        After
        Closing, Buyer will, and will cause its Representatives to, afford to Seller,
        including its Representatives, reasonable access to all books, records, files
        and documents related to the Business in order to permit Seller to prepare
        and
        file its Tax Returns and to prepare for and participate in any investigation
        with respect thereto, to prepare for and participate in any other investigation
        and defend any Proceedings relating to or involving Seller, any Subsidiary
        or
        the Business for which Seller may be responsible, to discharge its obligations
        under this Agreement and the other Related Documents to which it is a party
        and
        for other reasonable purposes and will afford Seller reasonable assistance
        in
        connection therewith. Buyer will cause such records to be maintained for
        not
        less than seven years from the Closing Date and will not dispose of such
        records
        without first offering in writing to deliver them to Seller; provided,
        however,
        that in
        the event that Buyer transfers all or a portion of the Business to any third
        party during such period, Buyer may transfer to such third party all or a
        portion of the books, records, files and documents related thereof, provided
        such third party transferee expressly assumes in writing the obligations
        of
        Buyer under this Section 6.2(b). In addition, on and after the Closing Date,
        at
        Seller’s request, Buyer shall make available to Seller and its Affiliates,
        employees, representatives and agents, those employees of Buyer requested
        by
        Seller in connection with any Proceeding, including to provide testimony,
        to be
        deposed, to act as witnesses and to assist counsel; provided,
        however,
        that
        (i) such access to such employees shall not unreasonably interfere with the
        normal conduct of the operations of Buyer and (ii) Seller shall reimburse
        Buyer for the out-of-pocket costs reasonably incurred by Buyer in making
        such
        employees available to Seller. Without limiting the application of Section
        6.1(d), all documents or information furnished by Buyer or obtained by Seller
        or
        its Representatives hereunder shall be subject to Section 6.1(d).

       

      (c)  Seller
        Guarantees and Surety Instruments.
        Buyer
        shall use its commercially reasonable efforts to assist Seller in obtaining
        full
        and complete releases on the guarantees, letters of credit, bonds and other
        surety instruments provided by Seller in connection with the Business or
        for the
        benefit of any Subsidiary, all of which have been listed by Seller on
Schedule 6.2(c).
        For
        purposes of this Section 6.2(c), commercially reasonable efforts shall include:
        (i) Buyer’s assumption of the Contracts on the terms set forth in this
        Agreement; and (ii) an obligation on the part of Buyer to provide a
        guaranty, letter of credit, bond or other surety 

       

      
        
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      instrument
        at Closing to the extent required by any Contract assumed by Buyer or retained
        by any Subsidiary at Closing and, in general, no later than 90 days after
        the
        Closing Date but effective as of the Closing Date, an equivalent surety
        instrument to be substituted for any surety instrument provided by Seller
        to any
        beneficiary in connection with the Business or for the benefit of any
        Subsidiary. Buyer shall indemnify, defend and hold harmless Seller and its
        Affiliates for any and all Losses (in each case without deduction or set
        off)
        incurred on account of Seller’s guarantees, letters of credit, bonds and other
        surety instruments on or after the Closing Date insofar as such Losses relate
        to
        any failure of Buyer or any Subsidiary to perform or discharge any Assumed
        Liability following the Closing.

       

      Section
        6.3  Governmental
        Filings. 

       

      (a)  HSR
        Act Filing.
        Buyer
        and Seller shall use reasonable efforts to make an appropriate filing of
        a
        Notification and Report Form pursuant to the HSR Act with respect to the
        transactions contemplated hereby within ten Business Days following the
        execution of this Agreement. Buyer and Seller shall supply as promptly as
        practicable any additional information or documentary material that may be
        requested pursuant to the HSR Act and shall take all other actions necessary
        to
        cause the expiration or termination of the applicable waiting periods under
        the
        HSR Act as soon as practicable. Buyer and Seller shall comply substantially
        with
        any additional requests for information, including requests for production
        of
        documents and production of witnesses for interviews or depositions, made
        by the
        Antitrust Division of the United States Department of Justice, the United
        States
        Federal Trade Commission or the antitrust or competition law authorities
        of any
        other jurisdiction (the “Antitrust Authorities”) and take all other reasonable
        actions to obtain clearance from the Antitrust Authorities, or if such clearance
        cannot be obtained, to reach an agreement, settlement, consent providing
        for
        divestiture, a “hold separate” agreement, contractual undertakings with third
        parties or any other relief with the concerned Antitrust Authority in order
        to
        permit the consummation of the transactions contemplated by this Agreement.
        Buyer shall exercise its commercially reasonable efforts, and Seller shall
        cooperate fully with Buyer, to prevent the entry in any Proceeding brought
        by an
        Antitrust Authority or any Governmental Body of an Order that would prohibit,
        make unlawful or delay the consummation of the transactions contemplated
        by this
        Agreement. Seller shall not oppose any efforts of Buyer, including Buyer’s
        proffer of consent to any Order, to complete lawfully the transactions
        contemplated by this Agreement, and shall cooperate in good faith with Buyer
        and
        the Antitrust Authorities to the same effect.  Notwithstanding the
        foregoing, neither party shall be required to agree to any sale,
        transfer, license, separate holding, divestiture or other disposition of,
        or to
        any prohibition of or any limitation on, the acquisition, ownership, operation,
        effective control or exercise of full rights of ownership (each, a
“Divestiture”) relating (x) to the Business to the extent such Divestiture would
        have a Material Adverse Effect thereon, (y) to The Narragansett Electric
        Company
        to the extent that such Divestiture constitutes other than an immaterial
        restriction on the operations thereof, or (z) to any material business unit
        of
        such party or any subsidiary or Affiliate of such party to the extent that
        such
        Divestiture would have a material adverse effect thereon.  

       

      (b)  Other
        Regulatory Filings.
        Buyer
        and Seller will, as soon as reasonably practicable following the execution
        of
        this Agreement, but no later than twenty Business Days thereafter with respect
        to the joint application to the Rhode Island Division of Public Utilities
        and
        Carriers, prepare and file with each Governmental Body requests for such
        

       

      
        
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      Consents
        as may be necessary for the consummation of the transactions contemplated
        hereby
        in accordance with the terms of this Agreement. Buyer and Seller will diligently
        pursue such Consents and will cooperate with each other in seeking such
        Consents. To such end, the parties agree to make available the personnel
        and
        other resources of their respective organizations in order to obtain all
        such
        Consents. Each party will promptly inform the other party of any communication
        received by such party from, or given by such party to, any Governmental
        Body
        from which any such Consent is required and of any material communication
        received or given in connection with any Proceeding by a private party, in
        each
        case regarding any of the transactions contemplated hereby, and will permit
        the
        other party to review any communication given by it to, and consult with
        each
        other in advance of any meeting or conference with, any such Governmental
        Body
        or, in connection with any Proceeding by a private party, with such other
        Person, and to the extent permitted by such Governmental Body or other Person,
        give the other party the opportunity to attend and to participate in such
        meetings and conferences. Neither party shall take any action in connection
        with
        obtaining any Consent from any Governmental Body that is intended to create,
        allocate, or shift to the other party any liability arising from the obtaining
        of such Consent. Notwithstanding the foregoing, neither party shall be required
        to agree to any divestiture of or material restriction on, a material business,
        a material asset or a material group of related assets that, in any such
        case,
        is owned or operated by it or any of its Affiliates.

       

      (c)  Seller,
        with the full cooperation of Buyer, shall take all commercially reasonable
        actions necessary to effect the transfer or reissuance of any Permit required
        for the operation of the Assets and the Business, including, without limitation,
        all Environmental Permits, prior to the Closing Date, to the extent required
        by
        applicable Legal Requirements.

       

      Section
        6.4  Seller
        Marks. No
        later
        than 180 days after the Closing Date, Buyer shall cease using any names,
        marks,
        trade names, trademarks and corporate symbols and logos incorporating “Southern
        Union”, “Southern,” “SU,” “SUG,” “New England Gas Company” and “Negasco”
(collectively and together with all other names, marks, trade names, trademarks
        and corporate symbols and logos owned by Seller or any of its Affiliates
        (other
        than the Subsidiaries), the “Seller Marks”); shall use commercially reasonable
        efforts to remove from the Assets any and all Seller Marks and shall amend
        the
        relevant Organizational Documents of each Subsidiary to change the name of
        each
        Subsidiary to a name that does not include any Seller Mark or any name or
        term
        confusingly similar to any Seller Mark. Thereafter, except as required by
        Legal
        Requirement or Order or with the written consent of Seller, Buyer shall not
        use
        any Seller Mark or any name or term confusingly similar to any Seller Mark
        in
        connection with the sale of any products or services, in the corporate or
        doing
        business name of any of its Affiliates or otherwise in the conduct of its
        or any
        of its Affiliates’ businesses or operations. In the event that Buyer breaches
        this Section 6.4, Seller shall be entitled to specific performance of this
        Section 6.4 and to injunctive relief against further violations, as well
        as any
        other remedies at law or in equity available to Seller.

       

      Section
        6.5  Acknowledgment
        by Buyer. 

       

      In
        order
        to induce Seller to enter into and perform this Agreement and the Related
        Documents, Buyer acknowledges and agrees with Seller as follows:

       

      
        
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      THE
        REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE V OF THIS AGREEMENT
        CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SELLER
        TO
        BUYER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY AND BY THE
        RELATED
        DOCUMENTS, AND THERE ARE NO REPRESENTATIONS, WARRANTIES, COVENANTS,
        UNDERSTANDINGS OR AGREEMENTS, ORAL OR WRITTEN, IN RELATION THERETO BETWEEN
        THE
        PARTIES OTHER THAN THOSE INCORPORATED HEREIN AND THEREIN. EXCEPT FOR THE
        REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V OF THIS
        AGREEMENT, BUYER DISCLAIMS RELIANCE ON ANY REPRESENTATIONS OR WARRANTIES,
        EITHER
        EXPRESS OR IMPLIED, BY OR ON BEHALF OF SELLER OR ITS AFFILIATES OR
        REPRESENTATIVES. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BUYER
        ACKNOWLEDGES AND AGREES THAT, EXCEPT AS PROVIDED IN SECTIONS 5.11, 5.15,
        5.16
        AND 5.21 THERE ARE NO REPRESENTATIONS OR WARRANTIES OF SELLER WITH RESPECT
        TO
        THE CONDITION OF THE ASSETS, COMPLIANCE WITH ENVIRONMENTAL LAWS AND
        ENVIRONMENTAL PERMITS OR THE PRESENCE OR RELEASES OF HAZARDOUS MATERIAL IN
        THE
        FIXTURES, SOILS, GROUNDWATER, SURFACE WATER OR AIR ON, UNDER OR ABOUT OR
        EMANATING FROM ANY OF THE PROPERTIES OR ASSETS OF SELLER OR ANY
        SUBSIDIARY.

       

      Section
        6.6  Transition
        Plan. 

       

      Within
        15
        days after the execution date of this Agreement, Buyer shall deliver to Seller
        a
        list of its proposed representatives to a joint transition team, which shall
        include individuals with expertise from various functional specialties
        associated or involved in providing billing, payroll and other support services
        provided to the Business by any automated or manual process using facilities
        or
        employees that are not included among the Assets or Transferred Employees.
        Seller will add its representatives to such team within 15 days after receipt
        of
        Buyer’s list. Such team will be responsible for preparing as soon as reasonably
        practicable after the execution date of this Agreement, and timely implementing,
        a transition plan that will identify and describe substantially all of the
        various transition activities that the parties will cause to occur before
        and
        after the Closing and any other transfer of control matters that any party
        reasonably believes should be addressed in such transition plan, including
        the
        matters set forth on Exhibit
        6.6.
        Buyer
        and Seller shall use their commercially reasonable efforts to cause their
        Representatives on such transition team to cooperate in good faith and take
        all
        reasonable steps necessary to develop a mutually acceptable transition plan
        by
        no later than 60 days after the date of this Agreement. The terms and conditions
        governing such transition activities will be more fully set forth in a
        transition services agreement (the “Transition Services Agreement”) reasonably
        satisfactory to the parties, including the matters set forth on Exhibit
        6.6,
        to be
        executed and delivered by Buyer and Seller at the Closing.

       

      Section
        6.7  Purchase
        of Leased Assets. 

       

      Buyer
        and
        Seller shall use commercially reasonable efforts to arrange for Buyer, on
        the
        Closing Date, to enter into new lease agreements covering the motor vehicles
        and
        other equipment listed on Schedule
        6.7
        and
        leased by the lessors to Seller and/or any Subsidiary as identified on
Schedule
        6.7
        (the
“Leased Assets”), or if unable to do so, then for Buyer to 

       

      
        
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      purchase
        any Leased Assets directly from any such lessor on, or promptly after, the
        Closing Date upon Buyer’s payment directly to any lessor of the purchase price
        for any of the Leased Assets under the applicable lease. Each party shall
        be
        responsible for one-half of any related transfer, registration, sales tax
        or
        similar fees associated with the transfer of such leases from Seller to
        Buyer.

       

      Section
        6.8  Meter
        Reading. 

       

      On
        and
        prior to the Closing Date, Seller shall read the customer meters in their
        normal
        cycle and in due course render the related bills to its customers served
        by the
        Business. Seller shall also read each daily read transportation customer
        meter
        (collectively, “Large Volume Meters”) on the day immediately preceding the
        Closing Date. Seller shall provide Buyer with the last meter reading from
        each
        of the Large Volume Meters made on the day immediately preceding the Closing
        Date as soon as practicable after the Closing Date. After the Closing Date,
        Buyer shall read the customer meters for their first time, in the normal
        cycle,
        and in due course render bills for service during the period between Seller’s
        last reading in the normal cycle and Buyer’s first reading in the normal cycle
        to the customers. Buyer shall determine the volume of gas sold by Seller
        prior
        to the Closing Date through Large Volume Meters by Seller’s meter readings on
        the day immediately preceding Closing Date. Buyer shall determine by allocation
        the volumes of gas sold by Seller through all meters other than Large Volume
        Meters, prior to the Closing Date, and the gas sold by Seller, on and after
        the
        Closing Date and prior to its first meter reading through meters without
        charts.
        Such allocation shall be consistent with Seller’s past practices for unbilled
        revenues. Once such determinations have been made by Buyer, the estimated
        amounts of accounts receivable and earned but unbilled revenue and any other
        related payables or liabilities shall be adjusted based upon such determinations
        for purposes of the Working Capital adjustment.

       

      Section
        6.9  Insurance.

       

      (a)  At
        Buyer’s request, Seller agrees to use commercially reasonable efforts to assert
        and diligently pursue all rights to insurance coverage under the Policies
        (other
        than with respect to Workman’s Compensation and punitive damage policies) and
        any
        past
        insurance policies of Seller relating to the Business or the Assets (such
        Policies
        and past insurance
        policies shall collectively be referred to herein as the “Insurance Policies”)
        with respect to insured claims asserted
        prior to the Closing for
        matters included in the Assumed Liabilities pursuant to Section 2.2(b)(v).
        Seller
        retains
        the exclusive right, in its sole discretion, to make and settle insurance
        claims
        under past insurance policies for all
        matters,
        whether
        relating to Assumed Liabilities or Retained Liabilities. As part of any such
        settlement(s), Seller may relinquish all rights in and to such past insurance
        policies with respect to such matters, including Assumed Liabilities. Seller
        shall remit to Buyer insurance proceeds (net of Seller’s costs and expenses)
        obtained by Seller after Closing with respect to such insured claims allocable
        to the Assumed Liabilities, as determined by the insurers with whom such
        claims
        are settled (or in the absence of such allocation by the insurers, by Seller
        in
        proportion to the weight attributable to the claims related to the Assumed
        Liabilities to the totality of Seller’s claims to such insurers), but in no
        event shall Buyer be entitled to receive more than $4,000,000 (net of Seller’s
        costs and expenses) in the aggregate in respect of the Business under such
        past
        insurance policies. Subject to the preceding sentence, Seller agrees to use
        commercially reasonable efforts to negotiate with 

       

      
        
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      each
        of
        its insurance companies in order to provide Buyer the benefit of the coverage
        under the Policies for all claims asserted on or after the Closing Date (to
        the
        extent available) and to cooperate with Buyer with any efforts to obtain
“tail”
coverage, all at Buyer’s sole cost, with respect to any “claims made policies.”
Seller shall provide access to Buyer to all of the non-privileged information
        relating to these matters and shall consult with Buyer on the progress thereof
        from time to time.

       

      (b)  After
        the
        Closing, Buyer shall be responsible for, and neither Seller nor any of its
        Affiliates shall have any responsibility for, the payment of any deductible
        amounts or underlying limits attributable to the Insurance Policies for claims
        relating to Assumed Liabilities. Buyer acknowledges that certain of the
        Insurance Policies may require Seller or any of its Affiliates to provide
        an
        indemnity to the insurance carrier for deductible amounts and to provide
        collateral to secure such indemnity obligations. Buyer shall enter into an
        indemnification agreement in form mutually acceptable to Buyer and Seller
        wherein Buyer agrees to indemnify and hold harmless Seller or any of its
        Affiliates (as applicable) for any and all of the costs of maintaining such
        collateral and for any charges made against such collateral or indemnification
        payments in connection with claims arising or alleged to arise from the
        operations of the Business required to be paid by Seller of any of its
        Affiliates (as applicable) under or with respect to such Insurance Policies
        from
        and after the Closing Date.

       

      (c)  Seller
        makes no representation or warranty with respect to the applicability, validity
        or adequacy of any Insurance Policies, and Seller shall not be responsible
        to
        Buyer or any of its Affiliates for the failure of any insurer to pay under
        such
        Insurance Policy.

       

      (d)  Nothing
        in this Agreement is intended to provide or shall be construed as providing
        a
        benefit or release to any insurer or claims service organization of any
        obligation under any Insurance Policy. Nothing herein shall be construed
        as
        creating or permitting any insurer or claims service organization the right
        of
        subrogation against Seller or Buyer or any of their Affiliates in respect
        of
        payments made by one to the other under any Insurance Policy.

       

      Section
        6.10  Risk
        of Loss. 

       

      The
        risk
        of any loss, damage, impairment, confiscation or condemnation of any of the
        Assets from any cause whatsoever shall be borne by Seller at all times prior
        to
        the Closing, and by Buyer at all times thereafter. If any such loss, damage,
        impairment, confiscation or condemnation occurs, Seller shall apply the proceeds
        of any insurance policy, judgment or award with respect thereto to impair,
        replace or restore the Assets as soon as possible to their prior condition;
        provided,
        however,
        anything contained in this Agreement to the contrary notwithstanding, Seller
        shall not be obligated to expend sums in excess of the proceeds of any insurance
        policy, judgment or award with respect to any loss, damage, impairment,
        confiscation or condemnation of any of the Assets in order to repair, replace
        or
        restore such Assets to their prior condition. The provisions of this Section
        6.10 shall apply in the event (“Casualty Event”) of any damage or destruction to
        the Assets which would result in the nonsatisfaction of a condition precedent
        to
        Buyer's obligation to consummate this Agreement. If a Casualty Event shall
        occur, Buyer at its option, may proceed to close this Agreement on the Closing
        Date, in which event Seller shall pay or assign to Buyer the proceeds from
        any
        insurance policies 

       

      
        
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      covering
        Assets subject to the Casualty Event to the extent such proceeds are received
        by
        or payable to Seller and have not been used in or committed to the restoration
        or replacement of Assets subject to the Casualty Event as of the Closing
        Date.

       

      Section
        6.11  Outstanding
        Payments and Bank Accounts.

       

      (a)  Notwithstanding
        anything contained herein to the contrary, (i) all of the bank accounts and
        lock
        boxes of Seller used in or in connection with the Business shall be considered
        “Assets” for the purposes of this Agreement and shall be transferred to Buyer at
        the Closing, (ii) any checks that are in the possession of Seller at the
        Closing
        that relate to accounts receivable (or any other asset) included in the Assets
        shall be transferred to Buyer at the Closing and (iii) any checks that are
        in
        the possession of Seller at the Closing that relate to accounts receivable
        (or
        any other asset) not included in the Assets shall be retained by
        Seller.

       

      (b)  From
        and
        after the Closing, (i) if Seller or any of its Affiliates receives or collects
        any funds relating to any accounts receivable (or any other asset) included
        in
        the Assets, Seller or its Affiliates shall remit any such amounts to Buyer
        as
        promptly as practicable but no later than ten (10) days after Seller or any
        of
        its Affiliates receives such sum, and (ii) Seller and its Affiliates shall
        promptly forward all mail, remittances, receipts or other mailings received
        by
        any of them relating to the Business to Buyer.

       

      Section
        6.12  Collective
        Bargaining Agreements. 

       

      Seller
        has advised Buyer that Seller (a) intends to negotiate a renewal or extension
        of
        that certain collective bargaining agreement listed on Schedule
        6.12(a)
        and (b)
        intends to negotiate an early renewal or extension of that certain collective
        bargaining agreement listed on Schedule
        6.12(b).
        Seller
        agrees to negotiate such renewals or extensions diligently to achieve
        commercially reasonable terms and conditions consistent with past practice.
        Seller shall give Buyer access to all information relating to the renewals
        or
        extensions of any such collective bargaining agreement and shall permit Buyer
        to
        consult with Seller and its counsel on the progress thereof from time to
        time.
        Notwithstanding the foregoing, Seller shall have discretion to conduct such
        negotiations in the manner consistent with the foregoing standards, but Seller
        shall not enter into any such renewal or extension without the prior written
        consent of Buyer , such consent not to be unreasonably withheld.

       

      Section
        6.13  Alternative
        Proposals.

       

      (a)  Seller
        agrees that it shall not, and Seller shall cause its Affiliates and its and
        its
        Affiliates' respective Representatives not to, (i) directly or indirectly
        initiate, solicit, knowingly encourage or facilitate (including by way of
        furnishing information) any inquiries or the making or submission of any
        proposal that constitutes, or could reasonably be expected to lead to, an
        Alternative Proposal, (ii) participate or engage in discussions or negotiations
        with, or disclose any non-public information or data relating to Seller or
        any
        of its Affiliates or afford access to the properties, books or records of
        Seller
        or any of its Affiliates to any Person that has made an Alternative Proposal
        or
        to any Person in contemplation of an Alternative Proposal, or (iii) accept
        an
        Alternative Proposal or enter into any agreement, including any letter of
        intent, memorandum of understanding, agreement in principle, merger agreement,
        acquisition 

       

      
        
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      agreement,
        option agreement, joint venture agreement, partnership agreement or other
        similar agreement, arrangement or understanding, (A) constituting or related
        to,
        or that is intended to or could reasonably be expected to lead to, any
        Alternative Proposal or (B) requiring, intended to cause, or which could
        reasonably be expected to cause Seller to abandon, terminate or fail to
        consummate the sale and transfer of the Assets and Stock to Buyer or any
        other
        transaction contemplated by this Agreement. 

       

      (b)  Seller
        shall advise Buyer in writing promptly (but in no event more than the later
        of
        24 hours after Seller's or any Affiliate's receipt thereof) of (i) any request
        for information by any Person in contemplation of an Alternative Proposal,
        (ii)
        any Alternative Proposal received from any Person, (iii) the terms and
        conditions of any such request or proposal, and (iv) the identity of the
        Person
        or group making any such request, Alternative Proposal or inquiry, and Seller
        shall promptly provide to Buyer copies of any written materials received
        in
        connection with any of the foregoing. 

       

      (c)  For
        purposes of this Agreement, “Alternative Proposal” shall mean any bona fide
        proposal, whether or not in writing, for the (i) direct or indirect acquisition
        or purchase of any assets that constitute 10% or more of the net revenues,
        net
        income or the assets (based on the fair market value thereof) of the Business,
        or (ii) direct or indirect acquisition or purchase of any of the Stock;
provided,
        however,
        that
“Alternative Proposal” shall not be deemed to include any proposal to engage in
        any merger, consolidation, restructuring, or other business combination
        transaction, sale of shares of capital stock (other than any tracking or
        similar
        shares related in whole or in part to the Business or any part thereof),
        tender
        offer, exchange offer, recapitalization, stock repurchase program or other
        similar transaction involving Seller, so long as such transaction would not
        result in Seller ceasing to own and conduct all or any part of the Business
        or
        ceasing to own all or any part of the Assets or Stock. 

       

      (d)  Immediately
        after the execution and delivery of this Agreement, Seller shall, and shall
        instruct its Affiliates and its and their respective Representatives to,
        terminate any existing activities, discussions or negotiations with any parties
        conducted heretofore with respect to any possible Alternative Proposal.

       

       

      ARTICLE
        VII  

       

       

      CONDITIONS
        PRECEDENT

       

      Section
        7.1  Seller’s
        Conditions Precedent to Closing. 

       

      The
        obligation of Seller to consummate the transactions contemplated by this
        Agreement shall be subject to fulfillment at or prior to the Closing of the
        following conditions, any one or more of which may be waived in writing by
        Seller:

       

      (a)  Representations
        and Warranties True as of the Closing Date.
        Buyer’s
        representations and warranties in this Agreement shall have been true and
        correct in all material respects as of the date of this Agreement and shall
        be
        true and correct in all material respects as of the Closing Date as if made
        on
        the Closing Date, subject to changes expressly contemplated and permitted
        by
        this Agreement, except that representations and warranties made

       

      
        
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      as
        of, or
        in respect of, only a specified date or period shall be true and correct
        in all
        material respects as of, or in respect of, such date or period.

       

      (b)  Compliance
        with Agreements.
        The
        covenants, agreements and conditions required by this Agreement and the Employee
        Agreement to be performed and complied with by Buyer shall have been performed
        and complied with in all material respects prior to or at the Closing
        Date.

       

      (c)  Certificate.
        Buyer
        shall execute and deliver to Seller a certificate of an authorized officer
        of
        Buyer, dated the Closing Date, stating that the conditions specified in Sections
        7.1(a) and 7.1(b) of this Agreement have been satisfied.

       

      (d)  Governmental
        Approvals.
        Buyer
        and Seller shall have each obtained all Consents of Governmental Bodies by
        Final
        Order that are required in order to consummate the transactions contemplated
        hereby and to transfer the Assets and the Stock to Buyer without Seller
        incurring material liability under any Legal Requirement or Order.

       

      (e)  HSR
        Act.
        The
        applicable waiting period under the HSR Act with respect to the transactions
        contemplated hereby shall have expired or have been terminated.

       

      (f)  No
        Injunctions.
        On the
        Closing Date, there shall be no Orders that operate to restrain, enjoin or
        otherwise prevent the consummation of the transactions contemplated by this
        Agreement.

       

      (g)  Seller’s
        Stockholder Approval.
        This
        Agreement and the transactions contemplated hereby shall have been approved
        by
        the affirmative vote of the holders of at least two-thirds (2/3s) of the
        issued
        and outstanding shares of Seller's common stock (the “Seller’s Stockholder
        Approval”), if required by the Rhode Island Division of Public Utilities and
        Carriers.

       

      (h)  Third
        Party Consents.
        Seller
        shall have obtained all Consents of Persons (other than Governmental Bodies)
        listed on Schedule
        5.3
        that are
        required in order to consummate the transactions contemplated hereby without
        incurring material liability to obtain such Consents and such Consents shall
        remain in full force and effect, other than those the failure of which to
        obtain
        or keep in full force and effect would not, individually or in the aggregate,
        have a Material Adverse Effect.

       

      (i)  Documents.
        Buyer
        shall have delivered or shall stand ready to deliver all the certificates,
        instruments, Contracts and other documents specified to be delivered by it
        hereunder on or before the Closing Date, including pursuant to Section 8.1,
        and
        shall have taken such actions as Seller may have requested pursuant to Section
        11.2.

       

      (j)  Proceedings
        Seeking an Injunction.
        No
        action or proceeding initiated by any Governmental Body seeking an Order
        prohibiting the consummation of the transactions contemplated by this Agreement
        shall be pending.

       

      Section
        7.2  Buyer’s
        Conditions Precedent to Closing. 

       

      
        
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      The
        obligation of Buyer to consummate the transactions contemplated by this
        Agreement shall be subject to fulfillment at or prior to the Closing of the
        following conditions, any one or more of which may be waived in writing by
        Buyer:

       

      (a)  Representations
        and Warranties.
        (i) the
        representations and warranties of Seller set forth in the first and second
        sentences of Section 5.4(a) and the first sentence of Section 5.5(a) of this
        Agreement shall be true and correct, in each case, both at and as of the
        date of
        this Agreement and at and as of the Closing Date, as if made at and as of
        such
        time; and (ii) the representations and warranties of Seller set forth in
        this
        Agreement (other than the representations and warranties of Seller set forth
        in
        the first and second sentences of Section 5.4(a) and the first sentence of
        Section 5.5(a)) shall be true and correct (without giving effect to any
        limitation as to “materiality” or “Material Adverse Effect” set forth therein)
        both at and as of the date of this Agreement and at and as of the Closing
        Date,
        as if made at and as of such time (except to the extent expressly made as
        of an
        earlier date, in which case as of such date), except where the failure of
        such
        representations and warranties to be so true and correct (without giving
        effect
        to any limitation as to “materiality” or “Material Adverse Effect” set forth
        therein) individually or in the aggregate has not had, and would not be
        reasonably likely to have or result in, a Material Adverse Effect.

       

      (b)  Compliance
        with Agreements.
        The
        covenants, agreements and conditions required by this Agreement or the Employee
        Agreement to be performed and complied with by Seller shall have been performed
        and complied with in all material respects prior to or at the Closing
        Date.

       

      (c)  Certificate.
        Seller
        shall execute and deliver to Buyer a certificate of an authorized officer
        of
        Seller, dated the Closing Date, stating that the conditions specified in
        Sections 7.2(a) and 7.2(b) of this Agreement have been satisfied.

       

      (d)  Governmental
        Approvals.
        Buyer
        and Seller shall have each obtained all Consents of Governmental Bodies by
        Final
        Order that are required in order to consummate the transactions contemplated
        hereby. Such Consents of Governmental Bodies shall contain no condition that
        could reasonably be expected to have a material adverse effect on the Assets
        or
        the Business or Buyer or any of its Affiliates. 

       

      (e)  HSR
        Act.
        The
        applicable waiting period under the HSR Act with respect to the transactions
        contemplated hereby shall have expired or have been terminated.

       

      (f)  No
        Injunctions.
        On the
        Closing Date, there shall be no Orders that operate to restrain, enjoin or
        otherwise prevent the consummation of the transactions contemplated by this
        Agreement.

       

      (g)  Documents.
        Seller
        shall have delivered or shall stand ready to deliver all of the certificates,
        instruments, Contracts and other documents specified to be delivered by it
        hereunder, including pursuant to Section 8.1.

       

      
        
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      (h)  No
        Material Adverse Effect.
        No
        occurrence or condition (alone or together with other occurrences or conditions)
        giving rise to a Material Adverse Effect shall have occurred since the date
        of
        this Agreement; for the avoidance of doubt, the failure of Buyer or its designee
        to have a tariff (including reasonable evidence of the existence of such
        tariff)
        sufficient to generate revenues to operate the Business after Closing will
        be
        deemed to be a Material Adverse Effect.

       

      (i)  Third
        Party Consents.
        Seller
        shall have obtained all Consents of Persons (other than Governmental Bodies)
        that are required under any loan or credit agreement, note, mortgage, indenture,
        lease, license, charter or other agreement or instrument in order to consummate
        the transactions contemplated hereby and such Consents shall remain in full
        force and effect, other than those the failure of which to obtain or keep
        in
        full force and effect would not, individually or in the aggregate, have a
        Material Adverse Effect.

       

      (j)  Proceedings
        Seeking an Injunction.
        No
        action or proceeding initiated by any Governmental Body seeking an Order
        prohibiting the consummation of the transactions contemplated by this Agreement
        shall be pending.

       

       

      ARTICLE
        VIII  

       

       

      CLOSING

       

      Section
        8.1  Closing. 

       

      The
        closing of the purchase and sale of the Assets (the “Closing”) will take place
        at the offices of Fleischman and Walsh, L.L.P., 1919 Pennsylvania Avenue,
        N.W.,
        Suite 600, Washington, D.C. 20006, on the fifth business day after the date
        on
        which the conditions specified in Sections 7.1 and 7.2 (excluding conditions
        that, by their terms, cannot be satisfied until the Closing) are satisfied
        or
        waived, unless another time, date and place is agreed to in writing by the
        parties; provided,
        however,
        that
        neither Seller nor Buyer shall be required to close the transactions
        contemplated by this Agreement until all conditions to the obligations of
        Seller
        or Buyer, as the case may be, shall have been satisfied or waived in accordance
        with the provisions of Article VII. Buyer shall have the right to designate
        any
        of its Subsidiaries to execute any documents or perform any actions on its
        behalf pursuant to this Section 8.1; provided
        that
        such designation shall not relieve Buyer of any of its obligations hereunder.
        The date of the Closing is referred to in this Agreement as the “Closing Date.”
The transactions to be consummated on the Closing Date shall be deemed to
        have
        been consummated as of 12:01 a.m., local time, on the Closing Date. At the
        Closing, the following events shall occur, each event being deemed to have
        occurred simultaneously with the other events.

       

      (a)  Bill
        of Sale; Collective Bargaining Agreement Assignment and
        Assumption.
        Seller
        and Buyer shall execute and deliver a bill of sale and assignment and assumption
        agreement in a form reasonably acceptable to the parties. Seller and Buyer
        shall
        execute and deliver assignment and assumption agreements relating to all
        collective bargaining agreements listed on Schedule
        5.14(a)
        (or any
        successor agreement entered into in accordance with Section 6.12 of this
        Agreement) in a form reasonably acceptable to the parties. 

       

      
        
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      (b)  Stock
        Certificates; Resignations; FIRPTA.
        Seller
        shall deliver to Buyer: (i) the certificates representing the Stock, duly
        and
        validly endorsed to or registered in the name of Buyer or its nominees or
        accompanied by separate stock powers duly and validly executed by Seller,
        (ii)
        letters of resignation, effective as of the Closing Date, from each director
        and
        each officer of each Subsidiary and (iii) a certification of its non-foreign
        status as set forth in Section 1445 of the IRC and the Treasury regulations
        promulgated thereunder.

       

      (c)  Transition
        Services Agreement.
        Seller
        and Buyer shall execute and deliver the Transition Services Agreement in
        a form
        reasonably acceptable to the parties.

       

      (d)  Litigation
        Support Agreement.
        Seller
        and Buyer shall execute and deliver the Litigation Support Agreement,
        substantially in the form attached hereto as Exhibit
        8.1(d).

       

      (e)  Payment
        of Estimated Purchase Price.
        Buyer
        will pay to Seller an amount equal to the Estimated Purchase Price by wire
        transfer, in lawful money of the United States of America in immediately
        available funds, to such account as Seller shall have designated by notice
        to
        Buyer. Notwithstanding any other provision of this Agreement, if Seller does
        not
        deliver the certificates described in clause (iii) of Section 8.1(b) at or
        prior
        to the Closing, Buyer shall be permitted to withhold from the Estimated Purchase
        Price the amount required to be withheld pursuant to Section 1445 of the
        IRC as
        calculated by Buyer in good faith.

       

      (f)  Other
        Related Documents.
        To the
        extent consistent with the other provisions of this Agreement, Seller (or
        the
        appropriate Affiliate of Seller) and Buyer shall execute and deliver such
        other
        Related Documents and shall obtain and deliver such other certificates
        reasonably requested by a party that are necessary in order to satisfy any
        applicable Legal Requirements relating to the transfer of the Assets or the
        Stock to Buyer or the assumption of the Assumed Liabilities by Buyer;
provided,
        however,
        that
        nothing in this clause (f) shall obligate Seller or any Affiliate of Seller
        to
        execute or deliver any document that affects, in a manner adverse to Seller,
        Seller’s liability to Buyer as expressed herein.

       

       

      ARTICLE
        IX  

       

       

      TERMINATION

       

      Section
        9.1  Termination
        Rights. 

       

      This
        Agreement may be terminated in its entirety at any time prior to the
        Closing:

       

      (a)  By
        the
        mutual written agreement of Seller and Buyer;

       

      (b)  By
        Buyer,
        on the one hand, or Seller, on the other hand, in writing if there shall
        be in
        effect a nonappealable Order prohibiting, enjoining or restricting the
        transactions contemplated by this Agreement;

       

      (c)  By
        either
        party in writing if there shall have been a material breach of or any inaccuracy
        in any of the representations or warranties set forth in this Agreement on
        the

       

      
        
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      part
        of
        the other party, which breach is not cured within 30 days following receipt
        by
        the breaching party of written notice of such breach from the terminating
        party,
        or which breach, by its nature, cannot be cured prior to the Closing;
provided,
        however,
        that
        neither party shall have the right to terminate this Agreement pursuant to
        this
        Section 9.1(c) unless the breach of representation or warranty, together
        with
        all other such breaches, would entitle the party receiving such representation
        not to consummate the transactions contemplated by this Agreement under Section
        7.2(a) (in the case of a breach of representation or warranty by Seller)
        or
        Section 7.1(a) (in the case of a breach of representation or warranty by
        Buyer)
        and provided,
        further,
        that
        the terminating party is not then in material breach of any representation,
        warranty, covenant or other agreement contained herein;

       

      (d)  By
        either
        party in writing if there shall have been a material breach of any of the
        covenants or agreements set forth in this Agreement on the part of the other
        party, which breach shall not have been cured within 30 days following receipt
        by the breaching party of written notice of such breach from the terminating
        party, or which breach, by its nature, cannot be cured prior to the Closing
        (provided that the terminating party is not then in material breach of any
        representation, warranty, covenant or other agreement contained
        herein);

       

      (e)  By
        either
        party in writing if the Closing has not occurred by August 25, 2006 (the
“Upset
        Date”); provided,
        however,
        that the
        right to terminate this Agreement under this Section 9.1(e) will not be
        available to any party that is in material breach of its representations,
        warranties, covenants or agreements contained herein; and provided further
        that
        in the event either party's conditions precedent to Closing set forth in
        Sections 7.1(d) or 7.1(e) or Sections 7.2(d) or 7.2(e) have not been satisfied
        prior to the Upset Date but are reasonably capable of being satisfied
        thereafter, then either party may, following written notice to the other,
        extend
        the Upset Date in thirty day increments (up to an aggregate of 120
        days);

       

      (f)  By
        Seller, if at Closing Buyer fails to make the payments required to be made
        by
        Buyer at Closing; or

       

      (g)  By
        Buyer,
        on the one hand, or Seller, on the other hand, in writing if Seller’s
        Stockholder Approval is not obtained upon the taking of such vote at the
        Southern Union Company stockholders’ meeting held for the purposes of obtaining
        such Seller’s Stockholder Approval or any adjournment or postponement thereof;
provided
        that the
        right to terminate this Agreement pursuant to this Section 9.1(g) shall not
        be
        available to Seller if it has not complied with its obligations under Section
        6.1(f).

       

      Section
        9.2  Limitation
        on Right to Terminate; Effect of Termination.

       

      (a)  A
        party
        shall not be allowed to exercise any right of termination pursuant to Section
        9.1 if the event giving rise to the termination right shall be due to the
        willful failure of such party seeking to terminate this Agreement to perform
        or
        observe in any material respect any of the covenants or agreements hereunder
        to
        be performed or observed by such party.

       

      (b)  If
        this
        Agreement is terminated as permitted under Section 9.1, such termination
        shall
        be without liability of or to any party to this Agreement, or any shareholder
        or
        Representative of such party; provided,
        however,
        that if
        such termination shall 

       

      
        
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      result
        from the willful failure of any party to fulfill a condition to the performance
        of any other party or to perform a covenant of this Agreement or from a material
        and willful breach by any party to this Agreement (it being understood that
        the
        failure to cure a breach shall not, by itself, be a willful breach of this
        Agreement), then such party shall (subject to the last sentence of this Section
        9.2(b)) be fully liable for any and all damages sustained or incurred by
        the
        other party. If prior to Closing either party to this Agreement resorts to
        legal
        proceedings to enforce this Agreement, the prevailing party in such proceedings
        shall be entitled to recover all costs incurred by such party including
        reasonable attorney’s fees, in addition to any other relief to which such party
        may be entitled; provided,
        however,
        and
        notwithstanding anything to the contrary in this Section 9.2(b), in no event
        shall either party be entitled to receive any punitive, exemplary, special,
        remote, speculative, indirect or consequential damages (including any damages
        on
        account of lost profits or opportunities) in connection with any termination
        of
        this Agreement.

       

       

      ARTICLE
        X  

       

       

      EMPLOYEE
        MATTERS

       

      Section
        10.1  Employee
        Agreement. 

       

      The
        parties have addressed the transfer of employees and employee benefit matters
        in
        a separate agreement, entitled Employee Agreement, executed and delivered
        of
        even date herewith, the terms and provisions of which agreement are incorporated
        into this Agreement as if fully set forth herein and a copy of which is attached
        hereto as Exhibit
        10.1
        (the
“Employee Agreement”).

       

       

      ARTICLE
        XI  

       

       

      TAX
        MATTERS

       

      Section
        11.1  Purchase
        Price Allocation. 

       

      Within
        180 days after the Closing Date, Buyer and Seller shall use their good faith
        efforts to agree upon the allocation (the “Allocation”) of the Purchase Price to
        the individual assets or classes of assets within the meaning of Section
        1060 of
        the IRC and the Treasury Regulations thereunder. If Buyer and Seller agree
        to
        such Allocation, Buyer and Seller covenant and agree that (a) the values
        assigned to the assets by the parties’ mutual agreement shall be conclusive and
        final for all purposes, (b) neither Buyer nor Seller will take any position
        before any Governmental Body or in any Proceeding that is in any way
        inconsistent with such Allocation and (c) Buyer and Seller shall file all
        federal, state, local and foreign Tax Returns and IRS Forms 8594 and 8883
        (and
        any similar forms required for state or local Tax purposes) in accordance
        with
        the Allocation. Notwithstanding the foregoing, if Buyer and Seller cannot
        agree
        to an Allocation, Buyer and Seller covenant and agree to file, and to cause
        their respective Affiliates to file, all Tax Returns and schedules thereto
        (including, for example, amended returns, claims for refund, and those returns
        and forms required under Section 1060 of the IRC and any Treasury regulations
        promulgated thereunder) consistent with each of such party’s good faith
        Allocations, unless otherwise required because of a change in any Legal
        Requirement. Each of Buyer and Seller agrees to provide the other promptly
        with
        any other information reasonably required to complete Form 8594 and Form
        8883
        (and any similar forms required for state or local Tax 

       

      
        
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      purposes).
        Each of Buyer and Seller shall notify the other in the event of an examination,
        audit or other proceeding regarding the Allocation determined under this
        Section
        11.1.

       

      Section
        11.2  Cooperation
        with Respect to Like-Kind Exchange. 

       

      Buyer
        agrees that Seller may, at Seller’s election prior to the Closing Date, direct
        that all or a portion of the Purchase Price be delivered to a “qualified
        intermediary” (as defined in Treasury Regulation Section 1.1031(k) - 1(g)(4)) in
        order to enable Seller’s relinquishment of the Assets to qualify as part of a
        like-kind exchange of property covered by Section 1031 of the IRC. If Seller
        so
        elects, Buyer shall cooperate with Seller in connection with Seller’s efforts to
        effect such like-kind exchange, which cooperation shall include, without
        limitation, taking such actions as Seller requests in order to enable Seller
        to
        qualify such transfer as part of a like-kind exchange of property covered
        by
        Section 1031 of the IRC (including any actions required to facilitate the
        use of
        a “qualified intermediary”); provided,
        however,
        that
        Buyer shall have no obligation to take (or agree to take) any action that,
        in
        its reasonable discretion, may create any adverse consequences to Buyer,
        including but not limited to adverse Tax, financial or regulatory consequences
        for the transactions contemplated by this Agreement. Notwithstanding anything
        herein, the structuring of the transactions in a manner that qualifies the
        transactions as part of a like-kind exchange shall not be a condition to
        Closing. Buyer agrees that Seller may assign all or part of its rights and
        delegate all or part of its obligations under this Agreement to a person
        or
        entity acting as a qualified intermediary to qualify the transfer of the
        Assets
        as part of a like-kind exchange of property covered by Section 1031 of the
        IRC.
        Any and all representations, obligations, agreements, warranties and covenants
        made by Seller to Buyer in connection with this Agreement shall remain in
        full
        force and effect and continue to inure to the benefit of Buyer, notwithstanding
        any assignment of this Agreement to a third party in connection with such
        Section 1031 exchange. Nothing in this Section 11.2 shall in any manner relieve
        Seller from any of its obligations under this Agreement, and Seller shall
        remain
        primarily liable to Buyer pursuant to the terms of this Agreement. Buyer
        and
        Seller agree in good faith to use reasonable efforts to coordinate the
        transactions contemplated by this Agreement with any other transactions engaged
        in by either Buyer or Seller; provided that such efforts do not result in
        an
        unreasonable delay in the consummation of the transactions contemplated by
        this
        Agreement. Seller shall indemnify and hold Buyer harmless from any out-of-pocket
        cost or expense (including but not limited to legal fees, opinions of counsel
        or
        other costs incurred in implementing any transaction under this Section 11.2),
        or any obligation or liability incurred by Buyer in connection with any action
        taken by Buyer under Section 11.2 or such Section 1031 exchange. Notwithstanding
        anything to the contrary in this Section 11.2, in no event shall Seller transfer
        title to any of the Assets to any Person other than directly to Buyer or
        its
        designee.

       

      Section
        11.3  Transaction
        Taxes. 

       

      All
        transfer, documentary, recording, notarial, sales, use, registration, stamp
        and
        other similar taxes, fees and expenses (including, but not limited to, all
        applicable stock transfer, real estate transfer or gains Taxes and including
        any
        penalties, interest and additions to such tax) (“Transaction Taxes”) incurred in
        connection with this Agreement and the transactions contemplated hereby shall
        be
        borne one-half by Buyer and one-half by Seller, regardless of whether the
        Tax
        authority seeks to collect such Taxes from Seller or Buyer. Buyer and Seller
        shall cooperate in timely making and filing all Tax Returns as may be required
        to comply with 

       

      
        
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      the
        provisions of laws relating to such Transaction Taxes. Seller shall prepare
        all
        tax filings related to any Transaction Taxes. Fifteen days prior to making
        such
        filings, Seller shall provide to Buyer Seller’s work papers for Buyer’s review
        and approval. Buyer shall also be responsible for (a) administering the
        payment of such Transaction Taxes, (b) defending or pursuing any proceedings
        related thereto and (c) paying any expenses related thereto. Seller shall
        give
        prompt written notice to Buyer of any proposed adjustment or assessment of
        any
        Transaction Taxes with respect to the transaction, or of any examination
        of said
        transaction in a sales, use, transfer or similar Tax audit. In any proceedings,
        whether formal or informal, Seller shall permit Buyer to participate and
        control
        the defense of such proceeding and shall take all actions and execute all
        documents required to allow such participation. Seller shall not negotiate
        a
        settlement or compromise of any Transaction Taxes without the prior written
        consent of Buyer, which consent shall not be unreasonably withheld or
        delayed.

       

      Section
        11.4  Real
        and Personal Property Taxes. 

       

      All
        real
        (including public utility realty tax) and personal property Taxes and
        assessments arising with respect to the Assets and the assets of Subsidiary
        and
        any similar utility Taxes of any other jurisdiction shall be prorated between
        Buyer and Seller based on the relative periods of time the Assets were owned
        by
        each respective party or their respective Affiliates during the fiscal period
        for which such Taxes are imposed by the applicable taxing jurisdiction (as
        such
        fiscal period is or may be reflected on the bill rendered by such taxing
        jurisdiction, but in the case of Taxes imposed based on the specific day
        of
        ownership of assets, a fiscal period shall be deemed to be the 365 day period
        ending with such date). Upon receipt by Buyer of the tax bill, invoice or
        other
        statement regarding such real and personal property Taxes, Buyer shall calculate
        the pro
        rata
        share of
        such tax bill, invoice or other statement attributable to Buyer and Seller.
        Buyer then shall forward, as soon as practicable, to Seller a copy of such
        tax
        bill, invoice or statement along with the supporting documentation relating
        to
        the calculation of the pro
        rata
        share to
        Seller. Seller then shall forward to Buyer payment in immediately available
        funds of its pro
        rata
        share of
        such Taxes as soon as practicable in advance of the due date of the tax bill,
        invoice or statement and in time to avoid the incurrence of penalties or
        interest. Upon its receipt of such payment, Buyer will pay the full amount
        of
        the tax bill, invoice or statement to the applicable taxing authority. In
        the
        event Seller first receives a tax bill, invoice or statement relating to
        the
        Assets from a taxing authority, Seller shall immediately forward such tax
        bill,
        invoice or statement to Buyer.

       

      Section
        11.5  Other
        Taxes. 

       

      Except
        as
        otherwise provided in Sections 11.3 and 11.4, Seller shall indemnify Buyer
        from
        and against and in respect of any and all losses incurred by Buyer, which
        may be
        imposed on, sustained, incurred or suffered by or assessed against Buyer,
        directly or indirectly, to the extent relating to or arising from (a) all
        Taxes
        (or the non-payment thereof) of Seller and its Subsidiaries or with respect
        to
        the Assets for all taxable periods ending on or before the Closing Date and,
        with respect to any Straddle Period, the portion of such Straddle Period
        deemed
        to end on and include the Closing Date (“Pre-Closing Tax Period”), (b) all Taxes
        of any member of an affiliated, consolidated, combined or unitary group of
        which
        Seller or any its Subsidiaries (or any predecessor of any of the foregoing)
        is
        or was a member on or prior to the Closing Date, including pursuant to Treasury
        Regulation §1.1502-6 or any analogous or similar state, local, or 

       

      
        
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      foreign
        law or regulation, (c) any and all Taxes of any Person (other than Seller
        and
        its Subsidiaries) imposed on Seller or its Subsidiaries as a transferee or
        successor, by contract or pursuant to any law, rule, or regulation, which
        Taxes
        relate to an event or transaction occurring on or before the Closing, (d)
        any
        Taxes of Seller that do not relate to the Business or the Assets purchased
        pursuant to this Agreement, and (e) any breach or inaccuracy in the
        representations and warranties set forth in Section 5.9.

       

      Section
        11.6  Straddle
        Period. 

       

      In
        the
        case of any taxable period that includes (but does not end on) the Closing
        Date
        (a “Straddle Period”), the amount of any Taxes based on or measured by income or
        receipts of Seller and its Subsidiaries for the Pre-Closing Tax Period shall
        be
        determined based on an interim closing of the books as of the close of business
        on the Closing Date (and for such purpose, the taxable period of any partnership
        or other pass-through entity in which Seller or its Subsidiaries holds a
        beneficial interest shall be deemed to terminate at such time) and the amount
        of
        other Taxes of Seller and its Subsidiaries for a Straddle Period that relates
        to
        the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for
        the
        entire taxable period multiplied by a fraction the numerator of which is
        the
        number of days in the taxable period ending on and including the Closing
        Date
        and the denominator of which is the number of days in such Straddle
        Period.

       

      Section
        11.7  Cooperation
        on Tax Matters. 

       

      Buyer,
        the Seller and its Subsidiaries shall cooperate fully, as and to the extent
        reasonably requested by the other Party, in connection with the filing of
        Tax
        Returns pursuant to this Article XI and any audit, litigation or other
        proceeding with respect to Taxes. Such cooperation shall include the retention
        and (upon the other Party's request) the provision of records and information
        that are reasonably relevant to any such audit, litigation or other proceeding
        and making employees available on a mutually convenient basis to provide
        additional information and explanation of any material provided
        hereunder.

       

      Section
        11.8  Tax
        Returns. 

       

      Except
        as
        otherwise provided in Sections 11.3 and 11.4,

       

      (a)  Seller
        shall prepare and file or cause to be prepared and filed when due (including
        extensions) all Tax Returns that are required to be filed by the Seller or
        the
        Subsidiaries with respect to the Assets or Subsidiaries for taxable years
        or
        periods ending on or before the Closing Date, and Seller shall remit or cause
        to
        be remitted any Taxes due in respect of such Tax Returns. All such Tax Returns
        shall be prepared in a manner consistent with past practice.

       

      (b)  Buyer
        shall prepare and file or cause to be prepared and filed when due all Tax
        Returns that are required to be filed by the Subsidiaries or with respect
        to the
        Assets for taxable years or periods ending after the Closing Date, and Buyer
        shall remit or cause to be remitted any Taxes due in respect of such Tax
        Returns.

       

      
        
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      (c)  Upon
        the
        written request of Buyer setting forth in detail the computation of the amount
        owed, Seller shall pay to Buyer, no later than five (5) days prior to the
        due
        date for the applicable Tax Return, the Taxes for which Seller is liable
        pursuant to Section 11.5 but which are payable with any Tax Return to be
        filed
        by Buyer with respect to any Straddle Period.

       

      Section
        11.9  Effect
        of Indemnity Payments. 

       

      Buyer
        and
        Seller hereby agree that any and all indemnity payments made pursuant to
        this
        Agreement shall, to the maximum extent permitted by applicable law, be treated
        for all Tax purposes as an adjustment to the Purchase Price.

       

      Section
        11.10  Survival
        of Obligations. 

       

      Notwithstanding
        any other provision of this Agreement, the obligations of Buyer and Seller
        set
        forth in this Article XI shall not be subject to any restrictions or limitations
        other than those expressly set forth in this Article XI and shall survive
        the
        Closing.

       

      Section
        11.11  Dispute
        Resolution. 

       

      In
        the
        event that Seller and Buyer disagree as to the amount or calculation of any
        payment to be made under this Agreement relating to Taxes, or the interpretation
        or application of any provision under this Agreement relating to Taxes, the
        Parties shall attempt in good faith to resolve such dispute. If such dispute
        is
        not resolved within sixty (60) days following the commencement of the dispute,
        Seller and Buyer shall jointly retain a nationally recognized law or accounting
        firm, which firm is independent of both parties (the “Independent Firm”), to
        resolve the dispute. The Independent Firm shall act as an arbitrator to resolve
        all points of disagreement and its decision shall be final and binding upon
        all
        parties involved. Following the decision of the Independent Firm, Seller
        and
        Buyer shall each take or cause to be taken any action necessary to implement
        the
        decision of the Independent Firm. The fees and expenses relating to the
        Independent Firm shall be borne equally by Seller and Buyer.

       

      Section
        11.12  Termination
        of Tax Agreements. 

       

      All
        Tax
        allocation, Tax sharing, Tax indemnity or similar agreements between Seller
        or
        any of its Affiliates (other than the Subsidiaries), on the one hand, and
        the
        Subsidiaries, on the other hand, shall be terminated with respect to the
        Subsidiaries prior to the Closing Date, and, after the Closing Date, neither
        Seller or any of its Affiliates (other than the Subsidiaries), on the one
        hand,
        nor the Subsidiaries, on the other hand, shall be bound thereby or have any
        further liability or obligation thereunder to the other party with respect
        to
        periods prior to the Closing Date.

       

      
        
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      ARTICLE
        XII  

       

       

      INDEMNIFICATION

       

      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; and

       

      (d)  the
        Excluded Assets.

       

      Section
        12.2  Indemnification
        by Buyer. 

       

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

       

      (a)  (i)
        any
        representations and warranties made by Buyer in this Agreement or in any
        certificate furnished by or on behalf of Buyer to Seller pursuant to this
        Agreement not being true and correct when made, or (ii) any representations
        and
        warranties made by Buyer 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 12.2(a)(ii) to have been made by Buyer 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 12.2(a)(ii)
        to
        have been made by Buyer as of such date;

       

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

       

      (c)  the
        Assumed Liabilities.

       

      Section
        12.3  Limitations
        on Seller’s Liability. 

       

      Notwithstanding
        anything to the contrary in this Agreement, the liability of Seller under
        this
        Agreement and any documents delivered in connection herewith or contemplated
        hereby shall be limited as follows:

       

      (a)  EXCEPT
        TO
        THE EXTENT ARISING OUT OF FRAUD, IN NO EVENT SHALL SELLER BE LIABLE TO THE
        BUYER
        INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL,
        REMOTE OR SPECULATIVE DAMAGES; provided,
        however,
        that if
        Buyer is held liable to a third party for any of such damages and Seller
        is
        obligated to indemnify Buyer for the matter that gave rise to such damages,
        then
        Seller shall be liable for, and obligated to reimburse Buyer for, such
        damages.

       

      (b)  Notwithstanding
        anything in this Agreement to the contrary, for purposes of Section 12.1
        and
        this Section 12.3, (x) a breach of a representation or warranty shall be
        deemed
        to exist either if such representation or warranty is actually inaccurate
        or
        breached or would have been inaccurate or breached if such representation
        or
        warranty had not contained any limitation or qualification as to materiality,
        Material Adverse Effect (which instead will be read as adverse effect or
        change)
        or similar language, or any dollar limitation or threshold and (y) the amount
        of
        Losses in respect of any breach of a representation or warranty, including
        any
        deemed breach resulting from the application of clause (x), shall be determined
        without regard to any limitation or qualification as to materiality, Material
        Adverse Effect (which instead will be read as adverse effect or change) or
        similar language or any dollar limitation or threshold set forth in such
        representation or warranty.

       

      (c)  Except
        as
        provided below, the representations and warranties of Seller set forth in
        this
        Agreement shall survive the Closing until the date that is eighteen months
        after
        the Closing Date; provided
        however,
        that
        (i) the representations and warranties set forth in Section 5.2 (Authority
        Relative to this Agreement and Binding Effect), in the first two sentences
        of
        Section 5.4(a) (Capitalization of the Subsidiaries; Title to Stock), in Section
        5.5(a) (Title to Assets; Encumbrances), and in Section 5.18 (Brokers) shall
        survive indefinitely, (ii) the representations and warranties set forth in
        Section 5.9 (Taxes) shall survive for a period equal to the applicable statute
        of limitations for the taxable year for each Tax (giving effect to any
        extensions or waivers thereof), and (iii) the representations and warranties
        set
        forth in Section 5.15 (Environmental Matters) shall survive until the second
        anniversary of the Closing Date. The other terms of this Agreement and the
        agreements delivered in connection herewith shall survive the Closing. All
        representations and warranties, covenants and agreements of Seller under
        this
        Agreement and the indemnities granted by Seller in Section 12.1 shall
        terminate at 

       

      
        
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      5:00
        p.m., East Coast time, on the applicable survival termination date set forth
        above; provided,
        however,
        that
        such indemnities shall survive with respect only to any specific matter that
        is
        the subject of a proper Claim Notice delivered in good faith in compliance
        with
        the requirements of this Section 12.3 until the earlier to occur of (i) the
        date on which a final nonappealable resolution of the matter described in
        such
        Claim Notice has been reached, including the determination of all related
        Losses, if any, regardless of when such Losses are finally determined or
        (ii) the date on which the matter described in such Claim Notice has
        otherwise reached final resolution, including the determination of all related
        Losses, if any, regardless of when such Losses are finally determined. In
        no
        event shall any amounts be recovered from Seller under Section 12.1 or otherwise
        for any matter for which a Claim Notice is not delivered to Seller prior
        to the
        close of business on the applicable expiration date set forth
        above.

       

      (d)  Notwithstanding
        anything to the contrary in this Agreement, in no event shall Seller indemnify
        the Buyer Indemnitees, or be otherwise liable in any way whatsoever to the
        Buyer
        Indemnitees, for any Losses (determined after giving effect to the other
        provisions of this Section 12.3) otherwise subject to indemnification by
        Seller
        pursuant to Section 12.1(a) (other than in respect of any claim for any
        inaccuracy or breach (or deemed inaccuracy or breach) of the representations
        and
        warranties contained in the first two sentences of Section 5.4(a) or in Sections
        5.5(a) or (c), which claims shall not be subject to the limitations set forth
        in
        this Section 12.3(d)) until the Buyer Indemnitees have incurred Losses otherwise
        indemnifiable pursuant to Section 12.1(a) that in the aggregate exceed Five
        Million Dollars ($5,000,000) (the
        “Deductible”), after which Seller shall then be liable for all Losses incurred
        by the Buyer Indemnitees that are indemnifiable pursuant to Section 12.1(a)
        in
        excess of such amount up to the maximum amount set forth in Section 12.3(e).
        Losses subject to indemnification by Seller pursuant to Section 12.1(a) (other
        than in respect of any claim for any inaccuracy or breach (or deemed inaccuracy
        or breach) of the representations and warranties contained in the first two
        sentences of Section 5.4(a) or in Section 5.5(a)) relating to any single
        breach
        or series of related breaches by Seller shall not constitute Losses, and
        therefore shall not be applied toward the Deductible or be indemnifiable
        hereunder, unless such Losses relating to any single breach or series of
        related
        breaches exceed $20,000.

       

      (e)  Notwithstanding
        anything to the contrary in this Agreement, (i) in no event shall Seller
        indemnify the Buyer Indemnitees, or be otherwise liable in any way whatsoever
        to
        the Buyer Indemnitees, for any Losses (determined after giving effect to
        the
        other provisions of this Section 12.3) otherwise subject to indemnification
        by
        Seller pursuant to Section 12.1(a) (other than in respect of any claim for
        any
        inaccuracy or breach (or deemed inaccuracy or breach) of the representations
        and
        warranties contained in the first two sentences of Section 5.4(a) or in Sections
        5.5(a) or (c)) that in the aggregate exceed One Hundred Million Dollars
        ($100,000,000), and (ii) in no event shall Seller indemnify the Buyer
        Indemnitees, or be otherwise liable in any way whatsoever to the Buyer
        Indemnitees, for any Losses (determined after giving effect to the other
        provisions of this Section 12.3) otherwise subject to indemnification by
        Seller
        pursuant to Section 12.1(a) (solely in respect of any claim for any inaccuracy
        or breach (or deemed inaccuracy or breach) of the representations and warranties
        contained in the first two sentences of Section 5.4(a) or in Sections 5.5(a)
        or
        (c)) that in the aggregate exceed the Purchase Price; provided,
        however,
        that in
        the event Seller makes any indemnification payment to any Buyer Indemnitee
        for
        any Loss pursuant to Section 12.1(a), regardless of whether such claim is
        for
        any inaccuracy or breach (or deemed inaccuracy or 

       

      
        
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      breach)
        of the representations and warranties contained in the first two sentences
        of
        Section 5.4(a) or in Sections 5.5(a) or (c), then the amount of such payment
        shall be credited against each of the limitations set forth in clause (i)
        and
        clause (ii) of this Section 12.3(e).

       

      (f)  Seller
        shall have no liability for any portion of any claim or Loss for which (i)
        Buyer
        receives or is entitled to receive (and which are collectible) any insurance
        proceeds or any indemnity, contribution or other similar payment from any
        other
        insurer or other third party (whether in a lump sum or stream of payments)
        or
        (ii) Buyer recovers or is entitled to recover through rates, provided that
        Buyer
        shall have made a good faith effort to recover any such claim or loss through
        rates and that such recovery is not indeterminable due to the terms of any
        rate
        settlement agreed to by Buyer. No cost or expense relating to any such claim
        or
        Loss that is actually recovered on the basis of the foregoing shall be included
        in determining the extent of Losses suffered by the Buyer Indemnitees for
        purposes of Section 12.3(c) or Section 12.3(d). Buyer agrees to use its
        commercially reasonable efforts to give timely and effective written notice
        to
        the appropriate insurance carrier(s) of any occurrence or circumstances that,
        in
        the judgment of Buyer consistent with its customary risk management practices,
        appear likely to give rise to a claim against Buyer that is likely to involve
        one or more insurance policies of Buyer. Any such notice shall be given in
        good
        faith by Buyer without regard to the possibility of indemnification payments
        by
        Seller under Section 12.1, and shall be processed by Buyer in good faith
        and in
        a manner consistent with its risk management practices involving claims for
        which no third party contractual indemnification is available. Buyer agrees
        that
        (x) if it is entitled to receive payment from Seller for a Loss, and
        (y) if Buyer has obtained insurance that may cover the claim or matter
        giving rise to such Loss, then (z) such insurance shall be primary coverage
        and Buyer will make a claim under such insurance (if such claim can be made
        in
        good faith) before enforcing its right to receive payment from Seller. If
        at any
        time subsequent to the receipt by a Buyer Indemnitee of an indemnity payment
        from Seller hereunder, such Buyer Indemnitee (or any Affiliate thereof) receives
        any recovery, settlement or other similar payment with respect to the Loss
        for
        which it receives such indemnity payment, such Buyer Indemnitee shall promptly
        pay to Seller an amount equal to the amount of such recovery, less any expense
        incurred by such Buyer Indemnitee (or its Affiliates) in connection with
        such
        recovery, but in no event shall any such payment exceed the amount of such
        indemnity payment.

       

      (g)  Notwithstanding
        any language contained in any Related Document (including deeds and other
        conveyance documents relating to the Real Property), the representations
        and
        warranties of Seller set forth in this Agreement will not be merged into
        any
        such Related Document and the indemnification obligations of Seller, and
        the
        limitations on such obligations, set forth in this Agreement shall control.
        No
        provision set forth in any such Related Document shall be deemed to enlarge,
        alter or amend the terms or provisions of this Agreement.

       

      Section
        12.4  Limitation
        on Buyer’s Liability. 

       

      EXCEPT
        TO
        THE EXTENT ARISING OUT OF FRAUD, IN NO EVENT SHALL BUYER BE LIABLE TO THE
        SELLER
        INDEMNITEES FOR ANY EXEMPLARY, PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL,
        REMOTE OR SPECULATIVE DAMAGES; provided,
        however,
        that if
        Seller is held liable to a third party for any of such damages and Buyer
        is
        obligated to indemnify Seller for the matter that gave rise to such damages,
        then Buyer shall be liable for, and obligated to reimburse Seller for, such
        damages.

       

      
        
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      Section
        12.5  Claims
        Procedure.

       

      (a)  All
        claims for indemnification under Section 12.1 or 12.2, or any other provision
        of
        this Agreement except as otherwise expressly provided in this Agreement,
        shall
        be asserted and resolved pursuant to this Article XII. Any Person claiming
        indemnification hereunder is referred to as the “Indemnified Party” and any
        Person against whom such claims are asserted hereunder is hereinafter referred
        to as the “Indemnifying Party.” In the event that any Losses are asserted
        against or sought to be collected from or threatened to be sought from an
        Indemnified Party by a third party, including a Governmental Body, said
        Indemnified Party shall with reasonable promptness provide to the Indemnifying
        Party a Claim Notice. The Indemnifying Party shall not be obligated to indemnify
        the Indemnified Party with respect to any such Losses if the Indemnified
        Party
        fails to notify the Indemnifying Party thereof in accordance with the provisions
        of this Agreement in reasonably sufficient time so that the Indemnifying
        Party’s
        ability to defend against the Losses is not prejudiced. The Indemnifying
        Party
        shall have 30 days from the personal delivery or receipt of the Claim Notice
        (the “Notice Period”) to notify the Indemnified Party (i) whether or not it
        disputes the liability of the Indemnifying Party to the Indemnified Party
        hereunder with respect to such Losses and/or (ii) whether or not it
        desires, at the sole cost and expense of the Indemnifying Party, to defend
        the
        Indemnified Party against such Losses; provided,
        however,
        that any
        Indemnified Party is hereby authorized prior to and during the Notice Period
        to
        file any motion, answer or other pleading that it shall reasonably deem
        necessary or appropriate to protect its interests or those of the Indemnifying
        Party (and of which it shall have given notice and opportunity to comment
        to the
        Indemnifying Party) and not prejudicial to the Indemnifying Party. In the
        event
        that the Indemnifying Party notifies the Indemnified Party within the Notice
        Period that it desires to defend the Indemnified Party against such Losses,
        the
        Indemnifying Party shall have the right to defend all appropriate proceedings,
        and with counsel of its own choosing, which proceedings shall be promptly
        settled or prosecuted by them to a final conclusion. If the Indemnified Party
        desires to participate in, but not control, any such defense or settlement
        it
        may do so at its sole cost and expense. If requested by the Indemnifying
        Party,
        the Indemnified Party agrees to cooperate with the Indemnifying Party and
        its
        counsel in contesting any Losses that the Indemnifying Party elects to contest
        or, if appropriate and related to the claim in question, in making any
        counterclaim against the Person asserting the third party Losses, or any
        cross-complaint against any Person. No claim may be settled or otherwise
        compromised without the prior written consent of the Indemnifying
        Party.

       

      (b)  The
        Indemnified Party shall provide reasonable assistance to the Indemnifying
        Party
        and provide access to its books, records and personnel as the Indemnifying
        Party
        reasonably requests in connection with the investigation or defense of the
        Losses. The Indemnifying Party shall promptly upon receipt of reasonable
        supporting documentation reimburse the Indemnified Party for out-of-pocket
        costs
        and expenses incurred by the latter in providing the requested
        assistance.

       

      (c)  With
        regard to third party claims for which Buyer or Seller is entitled to
        indemnification under Section 12.1 or 12.2, such indemnification shall be
        paid
        by the Indemnifying Party upon (i) the entry of an Order against the Indemnified
        Party and the expiration of any applicable appeal period or (ii) a settlement
        with the consent of the 

       

      
        
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      Indemnifying
        Party, provided that no such consent need be obtained if the Indemnifying
        Party
        fails to respond to the Claim Notice as provided in Section 12.5(a).
        Notwithstanding the foregoing but subject to Section 12.5(a), and provided
        that
        there is no dispute as to the applicability of indemnification, expenses
        of
        counsel to the Indemnified Party shall be reimbursed on a current basis by
        the
        Indemnifying Party as if such expenses are a liability of the Indemnifying
        Party.

       

      Section
        12.6  Exclusive
        Remedy. 

       

      Except
        (i) for claims arising out of fraud or criminal misrepresentation, and (ii)
        as
        otherwise provided in Sections 3.2(b), 6.4, 9.2 or 11.11, the rights, remedies
        and obligations of the Buyer Indemnitees and the Seller Indemnitees set forth
        in
        this Article XII will be the exclusive rights, remedies and obligations of
        such
        Persons after the Closing with respect to all post-Closing claims relating
        to
        this Agreement, the events giving rise to this Agreement and the transactions
        provided for herein or contemplated hereby or thereby. Except as provided
        above,
        no Proceeding for termination or rescission, or claiming repudiation, of
        this
        Agreement may be brought or maintained by either party against the other
        following the Closing Date no matter how severe, grave or fundamental any
        breach, default or nonperformance may be by one party. Accordingly, except
        as
        otherwise provided in this Section 12.6, the parties hereby expressly waive
        and
        forego any and all rights they may possess to bring any such
        Proceeding.

       

       

      ARTICLE
        XIII  

       

       

      GENERAL
        PROVISIONS

       

      Section
        13.1  Expenses. 

       

      Except
        as
        otherwise specifically provided herein, each party will pay all costs and
        expenses of its performance of and compliance with this Agreement, provided,
        however,
        that
        notwithstanding anything to the contrary contained herein, Buyer will pay
        the
        filing fees associated with the HSR Act.

       

      Section
        13.2  Notices. 

       

      All
        notices, requests and other communications hereunder shall be in writing
        and
        shall be deemed to have been given upon receipt if either (a) personally
        delivered with written acknowledgment of such receipt, (b) sent by prepaid
        first
        class mail, and registered or certified and a return receipt requested, as
        of
        the date such receipt indicates by signature, (c) sent by overnight delivery
        via
        a nationally recognized carrier with written acknowledgment of such receipt
        or
        (d) by facsimile with, and as of the date of, completed transmission being
        acknowledged:

       

      If
        to Seller, to:

       

      

       

      Southern
        Union Company

      5444
        Westheimer Road 

      Houston,
        TX 77056

      Attention: Julie
        H.
        Edwards

      SVP
        and
        CFO

      
        Telecopier:
          (713) 989-1166

      

      
        
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      with
        a copy (which shall not constitute notice), to:

       

      

       

      Southern
        Union Company

      5444
        Westheimer Road

      Houston,
        TX 77056

      Attention: Monica
        M.
        Gaudiosi, 

      SVP
        and
        Associate General Counsel

      Telecopier:
        (713) 989-1213

       

      and
        a copy (which shall not constitute notice) to:

      

      Fleischman
        and Walsh, L.L.P.

      1919
        Pennsylvania Avenue, N.W., Suite 600

      Washington,
        D.C. 20006

      Attention:
        Seth M. Warner, Esquire

      Telecopier:
        (202) 265-5706

       

      If
        to Buyer, to:

       

      National
        Grid USA

      25
        Research Dr.

      Westborough,
        MA 01582

      Attention: John
        Cochrane

      Treasurer
        and Chief Financial Officer

      Facsimile:
        508 389-2605

      

      with
        copies (which shall not constitute notice) to:

      

      Skadden,
        Arps, Slate, Meagher & Flom LLP

      1600
        Smith, Suite 4400

      Houston,
        Texas 77002

      Telephone:
        (713) 655-5100

      Facsimile:
        (713) 655-5200

      Attn:
        Frank Ed Bayouth II

       

      and

       

      Skadden,
        Arps, Slate, Meagher & Flom LLP

      4
        Times
        Square

      New
        York,
        NY 10036-6522

      Telephone:
        (212) 735-3000

      Facsimile:
        (212) 735-2000

      Attn:
        Sheldon S. Adler

       

      
        
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      or
        at
        such other address or number as shall be given in writing by a party to the
        other party.

       

      Section
        13.3  Assignment. 

       

      This
        Agreement may not be assigned, by operation of law or otherwise, by any party
        hereto without the prior written consent of the other party hereto, such
        consent
        not to be unreasonably withheld; provided,
        however,
        in the
        event of any such assignment by a party by operation of law without the consent
        of the other party as required above, such other party may consent to such
        assignment after it has occurred and, in such event, this Agreement and all
        the
        provisions hereof shall be binding upon the Person receiving such assignment
        by
        operation of law. Notwithstanding the foregoing, Seller may assign all or
        part
        of its rights or delegate all or part of its duties under this Agreement,
        without the prior written consent of Buyer, to a qualified intermediary chosen
        by Seller to structure all or part of the transactions contemplated hereby
        as a
        like-kind exchange of property covered by Section 1031 of the IRC; provided
        that
        no such assignment or delegation shall relieve Seller of its obligations
        hereunder, and Seller shall remain primarily liable to Buyer pursuant to
        the
        terms of this Agreement.

       

      Section
        13.4  Successor
        Bound. 

       

      Subject
        to the provisions of Section 13.3, this Agreement shall be binding upon and
        inure to the benefit of the parties hereto and their respective successors
        and
        permitted assigns.

       

      Section
        13.5  Governing
        Law. 

       

      The
        validity, performance, and enforcement of this Agreement and all Related
        Documents, unless expressly provided to the contrary, 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.

       

      Section
        13.6  Cooperation. 

       

      Each
        of
        the parties hereto agrees to use its commercially reasonable efforts to take
        or
        cause to be taken all action, and to do or cause to be done all things
        necessary, proper or advisable under applicable laws, regulations or otherwise,
        to consummate and to make effective the transactions contemplated by this
        Agreement, including the timely performance of all actions and things
        contemplated by this Agreement to be taken or done by each of the parties
        hereto.

       

      Section
        13.7  Construction
        of Agreement. 

       

      The
        terms
        and provisions of this Agreement represent the results of negotiations between
        Buyer and Seller, each of which has been represented by counsel of its own
        choosing, and neither of which has acted under duress or compulsion, whether
        legal, economic or otherwise. Accordingly, the terms and provisions of this
        Agreement shall be interpreted and construed in accordance with their usual
        and
        customary meanings, and Buyer and Seller hereby waive the application in
        connection with the interpretation and construction of this Agreement of
        any
        rule of law to the effect that ambiguous or conflicting terms or provisions
        contained in this Agreement shall be interpreted or construed against the
        party
        whose attorney prepared the 

       

      
        
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      executed
        draft or any earlier draft of this Agreement. It is understood and agreed
        that
        neither the specification of any dollar amount in the representations and
        warranties contained in this Agreement nor the inclusion of any specific
        item in
        the Schedules or Exhibits is intended to imply that such amounts or higher
        or
        lower amounts, or the items so included or other items, are or are not material,
        and none of the parties shall use the fact of the setting of such amounts
        or the
        fact of any inclusion of any such item in the Schedules or Exhibits in any
        dispute or controversy between the parties as to whether any obligation,
        item or
        matter is or is not material for purposes hereof. The word “including” in this
        Agreement shall mean including without limitation. Words in the singular
        shall
        be held to include the plural and vice versa and words of one gender shall
        be
        held to include the other genders as the context requires. The terms “hereof,”
“herein,” and “herewith” and words of similar import shall, unless otherwise
        stated, be construed to refer to this Agreement as a whole (including all
        of the
        Schedules and Exhibits hereto) and not to any particular provision of this
        Agreement, and Article, Section, paragraph, Exhibit and Schedule references
        are
        to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
        unless otherwise specified.

       

      Section
        13.8  Publicity. 

       

      Neither
        party hereto shall issue, make or cause the publication of any press release
        or
        other announcement with respect to this Agreement or the transactions
        contemplated hereby, or otherwise make any disclosures relating thereto,
        without
        the consent of the other party, such consent not to be unreasonably withheld
        or
        delayed; provided,
        however,
        that
        such consent shall not be required where such release or announcement is
        required by applicable law or the rules or regulations of a securities exchange,
        in which event the party so required to issue such release or announcement
        shall
        endeavor, wherever possible, to furnish an advance copy of the proposed release
        to the other party.

       

      Section
        13.9  Waiver. 

       

      Except
        as
        otherwise expressly provided in this Agreement, neither the failure nor any
        delay on the part of any party to exercise any right, power or privilege
        hereunder shall operate as a waiver thereof, nor shall any single or partial
        exercise or waiver of any such right, power or privilege preclude any other
        or
        further exercise thereof, or the exercise of any other right, power or privilege
        available to each party at law or in equity.

       

      Section
        13.10  Parties
        in Interest. 

       

      This
        Agreement (including the documents and instruments referred to herein) is
        not
        intended to confer upon any Person, other than the parties hereto and their
        successors and permitted assigns, any rights or remedies hereunder provided,
        however,
        that
        the indemnification provisions in Article XII shall inure to the benefit
        of the
        Buyer Indemnitees and the Seller Indemnitees as provided therein.

       

      Section
        13.11  Section
        and Paragraph Headings. 

       

      The
        section and paragraph headings in this Agreement are for reference purposes
        only
        and shall not affect in any way the meaning or interpretation of this
        Agreement.

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      

       

      Section
        13.12  Amendment. 

       

      This
        Agreement may be amended only by an instrument in writing executed by the
        parties hereto.

       

      Section
        13.13  Entire
        Agreement. 

       

      This
        Agreement, the Exhibits and Schedules hereto and the documents specifically
        referred to herein and the Confidentiality Agreement constitute the entire
        agreement, understanding, representations and warranties of the parties hereto,
        and supersede all prior agreements, both written and oral, between Buyer
        and
        Seller. All Exhibits and Schedules annexed hereto or referred to herein are
        hereby incorporated in and made a part of this Agreement as if set forth
        in full
        herein. Disclosure of any fact or item in any Schedule referenced by a
        particular paragraph or Section in this Agreement shall, should the existence
        of
        the fact or item or its contents be relevant to any other paragraph or Section,
        be deemed to be disclosed with respect to that other paragraph or Section
        whether or not any explicit cross-reference appears therein but only to the
        extent that such relevance is clearly and readily apparent from the face
        of such
        disclosure; provided,
        however,
        that
        notwithstanding the foregoing, no disclosures shall be deemed to be disclosed
        on
Schedule
        5.21
        except
        for such disclosures explicitly set forth thereon or explicitly incorporated
        by
        reference into Schedule
        5.21.

       

      Section
        13.14  Counterparts. 

       

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

       

      Section
        13.15  Severability. 

       

      If
        any
        term or other provision of this Agreement is invalid, illegal or incapable
        of
        being enforced by any rule of law or public policy, all other conditions
        and
        provisions of this Agreement shall nevertheless remain in full force and
        effect
        so long as the economic or legal substance of the transactions contemplated
        hereby is not affected in any manner materially adverse to any party. Upon
        such
        determination that any term or other provision is invalid, illegal or incapable
        of being enforced, the parties hereto shall negotiate in good faith to modify
        this Agreement so as to effect the original intent of the parties as closely
        as
        possible in an acceptable manner to the end that transactions contemplated
        hereby are fulfilled to the greatest extent possible.

       

      Section
        13.16  Consent
        to Jurisdiction. 

       

      The
        parties hereby irrevocably submit to the exclusive jurisdiction of the courts
        of
        the State of New York located in the Borough of Manhattan and the federal
        courts of the United States of America located in the Southern District of
        the
        State of New York over any dispute arising out of or relating to this Agreement
        or any of the transactions contemplated hereby, and each party irrevocably
        agrees that all claims in respect of such dispute or proceeding shall be
        heard
        and determined in such courts. The parties hereby irrevocably waive, to the
        fullest extent 

       

      
        
          -
            -

          

           

        

        
           

          
            

          

        

        
           

        

      

      permitted
        by applicable law, any objection which they may now or hereafter have to
        the
        venue of any dispute arising out of or relating to this Agreement or any
        of the
        transactions contemplated hereby brought in such court or any defense of
        inconvenient forum for the maintenance of such dispute. Each party agrees
        that a
        judgment in any such dispute may be enforced in other jurisdictions by suit
        on
        the judgment or in any other manner provided by applicable law.

       

      

       

      

       

      [signature
        page to follow]

      

      

       

      

       

      
        
          
            

          

           

        

        
           

          
            

          

        

        
           

          
            

          

        

      

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

       

      

      SOUTHERN
        UNION COMPANY 

      

      

      

      By:
        /s/
        Julie H. Edwards 

      Julie
        H.
        Edwards

      Senior
        Vice President and Chief Financial Officer

      

      

      

      NATIONAL
        GRID USA 

      

      

      

      By:
        /s/
        Michael E. Jesanis 

      Michael
        E. Jesanis

      President
        and Chief Executive Officer

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      

      [Signature
        page to Purchase and Sale Agreement between

      Southern
        Union Company and National Grid USA]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

        EXECUTION
          COPY

        

        EMPLOYEE
          AGREEMENT

        

        This
          EMPLOYEE AGREEMENT (this “Agreement”), is made as of the 15th
          day
          of
          February, 2006, by and between SOUTHERN UNION COMPANY, a Delaware corporation
          (“Seller”), and National Grid USA, a Delaware corporation
          (“Buyer”).

        

        W
          I T N E S S E T H:

        

        WHEREAS,
          Seller is engaged in the Business;

        

        WHEREAS,
          Seller and Buyer have entered into the Purchase and Sale Agreement, dated
          as of
          February 15, 2006 (the “Sale Agreement”), in which this Agreement is
          incorporated by reference; 

        

        WHEREAS,
          Buyer intends to offer, or cause an Affiliate of Buyer to offer, employment
          to
          all persons who are employed in the Business; and 

        

        WHEREAS,
          Seller and Buyer have determined that it is desirable to provide detail
          with
          respect to the manner in which assets and liabilities will be allocated
          by and
          among Seller and Buyer in connection with the transactions contemplated
          by the
          Sale Agreement with respect to Employees and Former Employees; 

        

        NOW,
          THEREFORE, in consideration of the respective covenants, representations
          and

        warranties
          herein contained, the parties agree as follows:

        

        ARTICLE
          I

        DEFINITIONS

        

        Section
          1.1 General.
          Capitalized
          terms used in this Agreement (including Schedules to this Agreement) not
          defined
          herein shall have the meanings ascribed to them in the Sale Agreement.
          For
          purposes of this Agreement (including Schedules to this Agreement), the
          following terms shall have the meanings set forth below.

        

        “Base
          Compensation” shall
          mean an Employee’s base hourly wages or base salary, as applicable.

        

        “COBRA”
          shall
          mean the continuation coverage requirements for group health plans under
          Title X
          of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
          and
          as codified in IRC Section 4980B and ERISA Sections 601-608.

        

        “Collective
          Bargaining Agreements” shall
          mean (1) the Collective Bargaining Agreement between New England Gas Company
          and
          United Steelworkers of America, AFL-CIO-CLC, on behalf of United Steelworkers
          of
          America, Local 12431-01, (2) the Collective Bargaining Agreement between
          Southern Union Company d/b/a New England Gas Company 

        
          
            --

            -

             

          

          
             

            
              

            

          

          
             

          

        

        and
          United Steelworkers of America, AFL-CIO-CLC, on behalf of United Steelworkers
          of
          America Local 12431-02, and (3) the Collective Bargaining Agreement between
          New
          England Gas Company and Utility Workers Union of America, AFL-CIO, and
          Local
          Union No. 472.

         

        “Continuation
          Period” shall
          mean the one-year period following the Closing Date.

         

        “Employee”
          shall
          mean a person who is a full-time or part-time employee of Seller, whether
          or not
          covered by a Collective Bargaining Agreement, whose responsibilities pertain
          primarily to the Business on the Closing Date, including an employee who
          is not
          actively at work on the Closing Date because the employee is on workers’
compensation, on an approved leave of absence (including an approved leave
          of
          absence with a legal or contractual right to reinstatement, military leave,
          maternity leave, or leave under the Family and Medical Leave Act of 1993)
          or
          absent due to vacation, disability, illness or other similar circumstance,
          except that a person who is absent due to, and who is on, long-term disability
          shall not be deemed to be an “Employee” hereunder where such person is unable to
          perform the essential functions of his or her job, with or without reasonable
          accommodation (or otherwise consistent with applicable Legal Requirements).
          A
          preliminary list of Employees, as of January 31, 2006, is set forth in
          Schedule
          1.1. 

        

        “For
          Cause” shall
          mean (1) the commission by the Transferred Employee of a criminal or other
          act
          that causes or is reasonably likely to cause economic damage to Buyer or
          injury
          to the business reputation of Buyer, (2) the commission by the Transferred
          Employee of an act of fraud, theft or financial dishonesty in the performance
          of
          the Transferred Employee’s duties, (3) the continuing failure or continuing
          refusal of the Transferred Employee to satisfactorily perform the duties
          of the
          Transferred Employee to Buyer, (4) the disregard or violation by the Transferred
          Employee of the legal rights of any employees of the Buyer or of the Buyer’s
          written policies regarding harassment or discrimination, or (5) any other
          conduct materially detrimental to the Buyer’s business.

        

        “Former
          Employee” shall
          mean a person who was formerly employed by Seller, a former owner of the
          Business, or an Affiliate of either, whose responsibilities pertained primarily
          to the Business and who is not an Employee on the Closing Date.

        

        “Liabilities”
          shall
          mean any direct or indirect liability (whether absolute, accrued or unaccrued,
          fixed or unfixed, choate or inchoate, secured or unsecured, liquidated
          or
          unliquidated, matured or unmatured, known or unknown, contingent or otherwise),
          indebtedness, obligation, expense, claim, charge, cause of action, deficiency,
          guarantee or endorsement of or by a party, including those arising under
          any
          applicable law or action, under any award of any court, administrative
          agency,
          tribunal or arbitrator, and under any contract or undertaking.

        

        “New
          England FAS 106 Reports” shall
          mean “The Southern Union Company Postretirement Medical and Death Benefits for
          ProvEnergy Employees Application of Statement of Financial Accounting Standards
          Nos. 106 and 132 to the Fiscal Year Ending December 31, 2005” and “The Southern
          Union Company Postretirement Medical, Dental and Death Benefits for Valley
          Resources Employees Application of Statement of Financial Accounting Standards
          

        
          
            --

            -

             

          

          
             

            
              

            

          

          
             

          

        

        Nos.
          106
          and 132(R) to the Fiscal Year Ending December 31, 2005,” draft copies of which
          Seller has provided to Buyer.   

        

        “Transferred
          Employee”
          shall
          mean an Employee who accepts Buyer’s offer of employment pursuant to Section 2.3
          and commences employment with Buyer or its Affiliate. 

        

        Section 1.2 Terms
          Defined Elsewhere.
          For
          purposes of this Agreement (including Schedules to this Agreement), the
          following terms have the meanings set forth in the sections
          indicated.

        

        Term     Section

        

         

        Absent
          Employee..........................................2.3(a)

        Absent
          Employee’s Start Date...  .....................2.3(a)

        Agreement
           Preamble

        Buyer
           Preamble

        Buyer’s
          401(k) Plan 3.2

        New
          England VEBAs..................  ................. 4.6

        Sale
          Agreement ..................................... Preamble

        Seller Preamble

        Seller’s
          401(k) Plan 3.2

        Seller’s
          Flex Plan........................................... 4.5

        Seller’s
          Pension Plans 3.1

        Severance
          Benefits ....................................... 2.4(b)

        WARN
          Act................................................. 7.3(a)

         

        ARTICLE
          II

        EMPLOYEES

        

        Section
          2.1 Employee
          List.
          Not
          later than five (5) business days following the execution of the Sale Agreement,
          Seller shall provide to Buyer an updated list, as of the date of the Sale
          Agreement, of Employees originally provided to Buyer in Schedule 1.1, which
          shall consist not only of the names, but also (to the extent permitted
          by
          applicable Legal Requirements) job titles, job locations, Base Compensation,
          employment status (e.g., active, inactive, on leave), date of hire, and
          union or
          non-union status, of all Employees. Seller shall provide Buyer with a revised
          Schedule 1.1, updated as of the Closing Date, within ten (10) days following
          the
          Closing Date. Seller agrees that, during the period following the execution
          of
          the Sale Agreement and prior to the Closing Date, Seller shall not transfer
          an
          employee of Seller or any Affiliate of Seller, whose responsibilities prior
          to
          the transfer do not pertain primarily to the Business, to a position where
          the
          employee has responsibilities that pertain primarily to the
          Business.

        

        Section
          2.2 Collective
          Bargaining Agreements. Effective
          as of the Closing Date, Buyer shall assume and agree to perform all obligations
          of Seller and/or New England Gas 

        
          
            --

            -

             

          

          
             

            
              

            

          

          
             

          

        

        Company under
          the
          Collective Bargaining Agreements, and the Collective Bargaining Agreements
          shall
          thereafter be binding on Buyer. 

         

        Section
          2.3 Offers
          of Employment to Employees 

        

        (a)
          At
          least thirty (30) days prior to the anticipated Closing Date, Buyer shall
          offer
          employment to all Employees (including Employees who are not actively at
          work on
          the Closing Date because the Employee is on workers’ compensation, on an
          approved leave of absence (including an approved leave of absence with
          a legal
          or contractual right to reinstatement, military leave, maternity leave,
          or leave
          under the Family and Medical Leave Act of 1993) or absent due to vacation,
          disability, illness or other similar circumstance (each, an “Absent Employee”)),
          effective as of 12:01 a.m. on the Closing Date (except as provided in the
          following sentence), with at least the same level of Base Compensation
          as was in
          effect for each such Employee immediately prior to the Closing Date. The
          offer
          to an Absent Employee shall be made for employment effective as of the
          expiration of the approved leave of absence or the Absent Employee’s other
          return from workers’ compensation, vacation, disability, illness or other
          similar circumstance, provided that such offer of employment shall remain
          open
          no later than (1) one hundred eighty (180) days following the Closing Date,
          or
          (2) such longer period as may be consistent with applicable Legal Requirements
          (as to each Absent Employee, the “Absent Employee’s Start Date”). An Absent
          Employee who does not return to work after the expiration of an approved
          leave
          of absence or otherwise under the preceding sentence shall not be considered
          a
          Transferred Employee hereunder. Notwithstanding the foregoing, Seller and
          Buyer
          agree that the Employees listed in Schedule 2.3(a) may have the opportunity
          to
          continue employment with Seller; provided that Buyer shall have reasonable
          access to the Employees listed in Schedule 2.3(a) prior to and after the
          Closing
          Date.

        

        (b)
          Buyer
          shall notify Seller of the Employees’ responses to Buyer’s offers of employment
          under this Section 2.3 as soon as administratively feasible after receiving
          each
          Employee’s response. Buyer and Seller shall cooperate fully to facilitate the
          preparation of Buyer’s offers of employment and such offers shall include the
          language set forth in Schedule 2.3(b) or similar language reasonably acceptable
          to Buyer and Seller. 

        

        Section
          2.4 Employment
          of Transferred Employees

        

        (a)
          Buyer
          shall employ, as of 12:01 a.m. on the Closing Date, all of the Employees
          who
          accept Buyer’s offer of employment, except that each Absent Employee shall be
          deemed employed by Buyer as of 12:01 a.m. on the Absent Employee’s Start
          Date.

        

        (b)
          In
          the event that (1) on the Closing Date or during the Continuation Period,
          the
          employment of a Transferred Employee (other than a Transferred Employee
          covered
          by a collective bargaining agreement) is terminated by the Buyer or an
          Affiliate
          of Buyer, other than For Cause, or (2) during the Continuation Period,
          Buyer
          fails to provide a Transferred Employee (other than a Transferred Employee
          covered by a collective bargaining agreement) with at least the same level
          of
          Base Compensation as was in effect immediately prior to the Closing Date,
          then
          Buyer shall be responsible for and shall pay to such Transferred Employee,
          in a
          lump sum payment, not later than sixty (60) days following the date of
          the
          Transferred Employee’s 

        
          
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            -

             

          

          
             

            
              

            

          

          
             

          

        

        termination
          of employment, the following severance benefit (the “Severance Benefits”): two
          weeks of the Employee’s Base Compensation at termination of employment for each
          full or partial year of service, measured from the Transferred Employee’s date
          of hire reflected in Schedule 1.1, not to exceed fifty-two (52) weeks of
          such
          Base Compensation; provided, however, that in no event shall such Severance
          Benefit be less than six (6) weeks of such Base Compensation. The costs
          incurred, directly or indirectly, in connection with the termination of
          employment of any Transferred Employee on or after the Closing Date shall
          be
          borne exclusively by Buyer. Buyer’s obligation to provide the Severance Benefits
          shall be subject to the Transferred Employee executing a release of all
          claims
          against the Buyer and its Affiliates, and the Seller and its Affiliates,
          in a
          form reasonably satisfactory to Buyer.

         

        Section
          2.5 Prior
          Service Credit.
          On and
          after the Closing Date, for each Transferred Employee not covered by a
          Collective Bargaining Agreement and, to the extent consistent with Section
          2.2,
          each Transferred Employee covered by a Collective Bargaining Agreement,
          Buyer
          and its Affiliates shall recognize service for Seller, a former owner of
          the
          Business, or an Affiliate of either, prior to the Closing Date, for all
          employee
          benefit and employment-related purposes, other than for purposes of defined
          benefit plans and post-retirement health, dental and life insurance benefits
          (except as required by Section 3.1 or Section 4.6). 

        

        Section
          2.6 Vacation.
          Buyer
          shall permit each Transferred Employee to carry forward (to the same extent
          allowed to be carried forward by Seller) and to receive paid time off for
          all
          vacation days (including sick days and personal days) accrued prior to
          the
          Closing Date. As soon as administratively feasible following execution
          of the
          Sale Agreement, Seller shall provide to Buyer a list reflecting the paid
          time
          off balances standing to the credit of each Transferred Employee as of
          the date
          of the Sale Agreement. Seller shall provide Buyer with a revised list,
          updated
          as of the Closing Date, within ten (10) days following the Closing Date.
          

        

        ARTICLE
          III

        PENSION,
          401(k) AND NONQUALIFIED PLANS

        

        Section
          3.1 Pension
          Plans. Seller
          has no defined benefit plans that cover the Employees and that are intended
          to
          be qualified plans other than the Southern Union Company ProvEnergy Pension
          Plan
          for Non-Bargaining Unit Employees, the Southern Union Company ProvEnergy
          Pension
          Plan for Bargaining Unit Employees, the Southern Union Company Valley Resources
          Employees’ Retirement Plan and the Southern Union Company Valley Resources
          Employees’ Pension Plan (collectively, “Seller’s Pension Plans”). Effective as
          of the Closing Date, Buyer shall assume sponsorship of, and all assets
          (held in
          trust), liabilities and obligations under, Seller’s Pension Plans, including
          liability for any contributions due on or after the Closing Date. Seller
          and
          Buyer shall take all action necessary and appropriate to establish Buyer,
          effective as of the Closing Date, as successor to Seller as to all rights,
          assets (held in trust), duties, liabilities and obligations under or with
          respect to Seller’s Pension Plans. Buyer shall be responsible for the
          preparation and filing of any annual reports relating to plan years that
          include
          the Closing Date; provided, however, that Seller shall furnish Buyer with
          such
          information concerning Seller’s Pension Plans as is necessary to prepare such
          forms. 

        
          
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            -

             

          

          
             

            
              

            

          

          
             

          

        

        

        Section
          3.2 401(k)
          Plans.
          Seller
          has no defined contribution plan that covers the Employees and that is
          intended
          to be a qualified plan other than the Southern Union Savings Plan, which
          includes a qualified cash or deferred arrangement under IRC Section 401(k)
          (“Seller’s 401(k) Plan”). As of the Closing Date, Seller shall vest the
          Transferred Employees in their account balances under Seller’s 401(k) Plan. If
          the Transferred Employees will be eligible to participate in a defined
          contribution plan maintained by Buyer ("Buyer’s 401(k) Plan"), immediately
          following the Closing Date, Buyer shall take all actions necessary to ensure
          that Buyer’s 401(k) Plan accepts from any Transferred Employee a rollover or
          direct rollover of all of his or her account balance under Seller’s 401(k) Plan,
          including his or her loan balances and related loan documentation; provided
          that
          a Transferred Employee shall only be permitted to roll over his or her
          loan
          balances and related loan documentation if the Transferred Employee makes
          a
          rollover or direct rollover of all of his or her account balance under
          Seller’s
          401(k) Plan. If the Transferred Employees will be eligible to participate
          in
          Buyer’s 401(k) Plan, the trustee or recordkeeper of Seller’s 401(k) Plan shall
          transfer to the trustee or recordkeeper of Buyer’s 401(k) Plan any loan
          documentation for loans to be rolled over or transferred to Buyer’s 401(k)
          Plan. 
          The
          Transferred Employees shall not be required to roll over, or otherwise
          transfer,
          their account balances under Seller’s 401(k) Plan to Buyer’s 401(k) Plan.

        

        Section
          3.3 Nonqualified
          Deferred Compensation Plans and Individual Deferred Compensation and Other
          Arrangements. Except
          as
          provided in Section 4.6, Buyer shall assume no liability or responsibility,
          and
          the Seller shall retain all liabilities and responsibilities, with respect
          to
          (a) the Southern Union Company Supplemental Deferred Compensation Plan,
          which is
          a nonqualified deferred compensation plan maintained by Seller, (b) the
          five (5)
          nonqualified deferred compensation plans listed in Item 1 of Schedule 3.3,
          and
          (c) the three (3) individual deferred compensation and other arrangements
          listed
          in Item 2 of Schedule 3.3. Under the Sale Agreement, “Excluded
          Assets”
          include
          the assets held in the three rabbi trusts listed in Item 3 of Schedule
          3.3 and
          other life insurance policies purchased to support obligations under the
          nonqualified deferred compensation plans and individual deferred compensation
          and other arrangements described in this Section 3.3. 

        

        ARTICLE
          IV

        OTHER
          BENEFITS

        

        Section
          4.1 Welfare
          Benefit Plans. Coverage
          of all Transferred Employees under each Employee Plan that is an “employee
          welfare benefit plan” within the meaning of Section 3(1) of ERISA to which
          Seller or any Affiliate of Seller is a party or by which any of them is
          bound,
          shall cease as of the Closing Date (or in the case of an Absent Employee,
          on the
          Absent Employee’s Start Date, unless sooner terminated in accordance with
          Seller’s policies or the terms of an Employee Plan). To the extent that Buyer
          or
          an Affiliate of Buyer offers health insurance benefits to any employees,
          Buyer
          agrees to offer health insurance benefits to all Transferred
          Employees.  

         

        Section
          4.2 COBRA.
          Seller
          shall provide continuation coverage required under COBRA to all eligible
          Employees and Former Employees and their qualified beneficiaries attributable
          to
          a “qualifying event” (as defined in COBRA) that occurs on or prior to the
          Closing 

        
          
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            -

             

          

          
             

            
              

            

          

          
             

          

        

        Date.
          After the Closing Date, Buyer shall provide continuation coverage required
          under
          COBRA to all eligible Transferred Employees and their qualified beneficiaries
          attributable to a “qualifying event” (as defined in COBRA) that occurs after the
          Closing Date. 

        

        Section
          4.3 Individuals
          on Long-Term Disability. Any
          individual who, as of the Closing Date, is eligible for long-term disability
          benefits shall be covered under Seller’s long-term disability plan. In addition,
          any Employee who, as of the Closing Date, is absent due to short-term
          disability, who does not become a Transferred Employee, and who becomes
          eligible
          for long-term disability benefits under Seller’s long-term disability plan after
          the Closing Date shall be covered under Seller’s long-term disability plan.

        

        Section
          4.4 Workers’
          Compensation. The
          parties agree that workers’ compensation benefits for the Transferred Employees
          will be handled as provided in this Section 4.4. With respect to occurrences
          on
          or after the Closing Date, workers’ compensation benefits shall be subject to
          Buyer’s workers’ compensation policies, programs and plans, and Buyer shall bear
          sole financial responsibility with respect to such benefits. With respect
          to
          occurrences prior to the Closing Date, workers’ compensation benefits shall be
          subject to Seller’s workers’ compensation policies, programs and plans, and
          Seller shall have financial responsibility for all expenses. The expenses
          referred to in the preceding sentence include all expenses not recoverable
          under
          Seller’s insurance (specifically including settlement amounts, third party
          administrator expenses, and expenses as set forth or defined in applicable
          Travelers Insurance agreements such as deductible plan charges, retrospective
          premium adjustments, non-loss responsive premiums and adjustments, miscellaneous
          charges, tax assessments and surcharges, collection
          costs and damages, and collateral costs). 

        

        Section
          4.5 Flexible
          Spending Accounts.
          As soon
          as administratively feasible after the Closing Date, Seller shall transfer
          to
          Buyer’s flexible benefits plan, in cash, any health care and dependent care
          balances standing to the credit of Transferred Employees under
          the
          Southern Union Company Flexible Benefit Plan (“Seller’s Flex Plan”) as of the
          day immediately preceding the Closing Date, and Buyer shall reimburse
          Transferred Employees for
          all
          eligible health and dependent care expenses submitted on or after the Closing
          Date. As soon as administratively feasible after the Closing Date, Seller
          shall
          provide to Buyer a list of those Transferred Employees who
          have
          participated in the health or dependent care reimbursement accounts under
          Seller’s Flex Plan, together with their elections made prior to the Closing Date
          with respect to such accounts, and balances standing to their credit as
          of the
          day immediately prior to the Closing Date. 

        

        Section
          4.6 Post-Retirement
          Benefit Plans. Effective
          as of the Closing Date, Buyer shall assume and be responsible for all
          liabilities and obligations of Seller and/or New England Gas Company to
          provide
          post-retirement health, dental and life insurance benefits described in
          and/or
          valued under the New England FAS 106 Reports, whether such benefits are
          currently being paid or are to be paid in the future to any Employee or
          Former
          Employee, including (a) post-retirement life insurance benefits under the
          agreement listed in Item 2.a of Schedule 3.3, and (b) other post-retirement
          health, dental and life insurance benefits for eligible individuals and
          their
          beneficiaries covered under the plans and arrangements described in Section
          3.3.
          Seller and Buyer shall take all action necessary and appropriate to establish
          Buyer, effective as of the 

        
          
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        Closing
          Date, as successor to Seller as to all rights, assets (held in trust),
          duties,
          liabilities and obligations under or with respect to the “New England VEBAs,” as
          defined in the following sentence. The “New England VEBAs” are (1) the Southern
          Union Company ProvEnergy Non-Bargaining VEBA, (2) the Southern Union Company
          ProvEnergy Bargaining VEBA, and (3) the Valley Gas Company Employee Benefit
          Trust (under which separate accounts are maintained for union and non-union
          benefits). Seller and Buyer shall take all action necessary and appropriate
          to
          have the New England VEBAs make reimbursements for claims incurred prior
          to the
          Closing Date. Seller shall retain all liabilities and responsibilities
          for the
          post-retirement health, dental and life insurance benefits that are not
          described in and/or valued under the New England FAS 106 Reports, specifically
          (a) the post-retirement dental insurance benefit under the agreement listed
          in
          Item 2.a of Schedule 3.3, and (b) the post-retirement health, dental and
          vision
          insurance benefits for the individual and his spouse under the agreement
          listed
          in Item 2.c of Schedule 3.3.  

        ARTICLE
          V

        LIABILITIES

        

        Except
          as
          otherwise provided in this Agreement, Buyer, for itself and its Affiliates,
          assumes and agrees to pay, perform, fulfill and discharge when due all
          Liabilities, including litigation costs, with respect to a Transferred
          Employee
          or a dependent or beneficiary of a Transferred Employee relating to, arising
          out
          of or resulting from employment in connection with the Business prior to,
          on or
          after the Closing Date. Except as otherwise provided in this Agreement,
          Seller
          retains and shall pay, perform, fulfill and discharge all Liabilities with
          respect to Former Employees and Employees who are not Transferred Employees.
          

         

        ARTICLE
          VI

        RECORDS
          AND INFORMATION

        

        Section
          6.1 Records.
          On or
          soon after the Closing Date, Seller shall deliver to Buyer, to the extent
          permitted by applicable Legal Requirements, all personnel files and records
          in
          its possession relating to the Transferred Employees, including active
          contracts, litigation files, annual reviews, grievances and any other
          information that is part of the personnel file of a Transferred Employee.
          Prior
          to the Closing Date, subject to applicable Legal Requirements, Seller shall
          provide Buyer with reasonable access to information and records in its
          possession relating to the Transferred Employees. Subject to applicable
          Legal
          Requirements, from and after the Closing Date, all such files and records
          shall
          be the property of Buyer, provided, that Seller may copy such files and
          records
          prior to transferring them to Buyer. 

        

        Section
          6.2 Access
          to Information.
          From and
          after the Closing Date, Buyer shall afford to Seller reasonable and timely
          access and duplicating rights, during normal business hours and upon reasonable
          advance notice, to the personnel files and records in the possession or
          control
          of Buyer, insofar as such access is reasonably required for a reasonable
          business purpose, subject to applicable Legal Requirements. Without limiting
          the
          foregoing, information may be requested under this Section 6.2 for audit,
          accounting, claims, litigation and tax purposes, as well as for purposes
          of
          fulfilling disclosure and reporting obligations. 

        
          
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        Section
          6.3 Confidentiality.
          Buyer
          and its Affiliates shall preserve the confidentiality, in accordance with
          all
          applicable Legal Requirements, of all information contained in the personnel
          files and records obtained from Seller pursuant to this Agreement.

        

        ARTICLE
          VII

        GENERAL
          PROVISIONS

        

        Section
          7.1 Cooperative
          Actions. Seller
          and Buyer shall cooperate with each other in carrying out, implementing
          and
          defending the terms of this Agreement, including cooperating with each
          other
          with respect to any claims or litigation challenging any of the terms of
          this
          Agreement. Seller and Buyer agree to good faith mutual cooperation in any
          investigation, inquiry or litigation which jointly involves them or in
          which a
          party makes a reasonable request for cooperation. Each party will make
          its
          employees available on a reasonable basis to give testimony and assistance
          in
          connection with any lawsuit, dispute, investigation or proceeding involving
          the
          other party; provided, however, that such other party shall pay for all
          out-of-pocket costs incurred in connection with providing such testimony
          and
          assistance. Except as otherwise provided in this Agreement, each party
          will pay
          all costs and expenses of its performance of and compliance with this
          Agreement.

        

        Section
          7.2 Parties
          in Interest. No
          provision of this Agreement shall confer upon any person, other than the
          parties
          hereto, their Affiliates, successors and permitted assigns, any rights
          or
          remedies hereunder, including any rights or remedies with respect to the
          employment, compensation, benefits or other terms and conditions of employment
          of any person. 

        

        Section 7.3
          WARN Act. 

        

        (a)
          On or
          before the Closing Date, Seller shall provide a list of the name and site
          of
          employment of any and all employees of Seller who have experienced, or
          who will
          experience, an employment loss or layoff (as defined by the Worker Adjustment
          and Retraining Notification Act of 1988 or any similar applicable state
          or local
          law requiring notice to employees in the event of a closing or layoff (the
“WARN
          Act”)) within ninety (90) days prior to the Closing Date. Seller shall update
          this list up to and including the Closing Date. 

        

        (b)
          For a
          period of ninety (90) days after the Closing Date, Buyer shall not engage
          in any
          conduct which would result in an employment loss or layoff for a sufficient
          number of employees of Buyer which, if aggregated with any such conduct
          on the
          part of Seller prior to the Closing Date, would trigger the WARN
          Act.

        

        Section
          7.4 Satisfaction
          of Liabilities by Affiliate.
          Obligations of Buyer hereunder may be satisfied by an Affiliate of
          Buyer.

        

         

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

        

        

        SOUTHERN
          UNION COMPANY 

        

        

        By:
          /s/
          Julie H. Edwards_______________

        Name:
          Julie H. Edwards

        Title:
          Senior Vice President & Chief 

        Financial
          Officer

        

        

        

        NATIONAL
          GRID USA

        

        

        By:
          /s/
          John G. Cochrane_______________

        Name:
          John G. Cochrane

        Title:
          Executive Vice President, Treasurer 

        and
          Chief
          Financial Officer

        

        

        [Signature
          page to Employee Agreement between

        Southern
          Union Company and National Grid USA]

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