LETTER OF CREDIT AND
                             REIMBURSEMENT AGREEMENT

                                 by and between

                             KEYSPAN GENERATION LLC

                                       and

                         NATIONAL WESTMINSTER BANK PLC,
                                 NEW YORK BRANCH

                         entered into in connection with

                                   $24,880,000

            New York State Energy Research and Development Authority


                        Electric Facilities Revenue Bonds
                     (Long Island Lighting Company Project),
                                  1997 Series A




                          Dated as of December 1, 2000









                           Jones, Day, Reavis & Pogue
                                    New York
                                   (JP985156)


<PAGE>






<TABLE>
                                TABLE OF CONTENTS
<CAPTION>

<S>                       <C>                                                                                   <C>
ARTICLE I DEFINITIONS.............................................................................................2
         Section 1.1       Definitions............................................................................2
         Section 1.2       Accounting Terms......................................................................12

ARTICLE II LETTER OF CREDIT......................................................................................13
         Section 2.1       Issuance and Reissuance of Letter of Credit...........................................13
         Section 2.2       Agreement to Reimburse the Bank for Letter of
                           Credit Payments; Term Borrowing.......................................................13
         Section 2.3       Interest and Loan Options for the Borrowing...........................................14
         Section 2.4       Repayments and Prepayments of the Borrowing...........................................15
         Section 2.5       Interest Rates and Payment Dates......................................................16
         Section 2.6       Fees..................................................................................16
         Section 2.7       Computation of Interest and Fees......................................................16
         Section 2.8       Inability to Determine Interest Rate..................................................17
         Section 2.9       Payments..............................................................................17
         Section 2.10      Requirements of Law...................................................................18
         Section 2.11      Taxes.................................................................................19
         Section 2.12      Funding Indemnity.....................................................................20
         Section 2.13      Change of Lending Office..............................................................20

ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................................................21
         Section 3.1       Financial Condition...................................................................21
         Section 3.2       No Change.............................................................................21
         Section 3.3       Corporate Existence; Compliance with Law..............................................21
         Section 3.4       Corporate Power; Authorization; Enforceable Obligations...............................22
         Section 3.5       No Legal Bar..........................................................................22
         Section 3.6       Litigation............................................................................22
         Section 3.7       No Default............................................................................22
         Section 3.8       Ownership of Property; Liens..........................................................23
         Section 3.9       Intellectual Property.................................................................23
         Section 3.10      Taxes.................................................................................23
         Section 3.11      Federal Regulations...................................................................23
         Section 3.12      Labor Matters.........................................................................23
         Section 3.13      ERISA.................................................................................24
         Section 3.14      Investment Company Act; Other Regulations.............................................24
         Section 3.15      Subsidiaries..........................................................................24
         Section 3.16      Use of Proceeds.......................................................................24
         Section 3.17      Environmental Matters.................................................................24
         Section 3.18      Accuracy of Information, etc..........................................................25
         Section 3.19      Official Statement....................................................................25



<PAGE>




ARTICLE IV AFFIRMATIVE COVENANTS.................................................................................26
         Section 4.1       Financial Statements..................................................................26
         Section 4.2       Certificates; Other Information.......................................................26
         Section 4.3       Payment of Obligations................................................................27
         Section 4.4       Maintenance of Existence; Compliance..................................................27
         Section 4.5       Maintenance of Property; Insurance....................................................27
         Section 4.6       Inspection of Property; Books and Records; Discussions................................27
         Section 4.7       Notices...............................................................................28
         Section 4.8       Environmental Laws....................................................................28
         Section 4.9       Transaction with Affiliates...........................................................28
         Section 4.10      Remarketing...........................................................................29

ARTICLE V NEGATIVE COVENANTS.....................................................................................29
         Section 5.1       Financial Condition Covenant..........................................................29
         Section 5.2       Liens.................................................................................29
         Section 5.3       Fundamental Changes...................................................................30
         Section 5.4       Disposition of Property...............................................................30
         Section 5.5       Negative Pledge Clauses...............................................................30
         Section 5.6       Limitation on Restrictions on Distributions from Subsidiaries.........................30
         Section 5.7       Company Agreements....................................................................30

ARTICLE VI EVENTS OF DEFAULT.....................................................................................31
         Section 6.1       Events of Default.....................................................................31
         Section 6.2       Remedies Upon an Event of Default.....................................................33

ARTICLE VII CONDITIONS TO ISSUANCE OF LETTER OF CREDIT...........................................................34
         Section 7.1       Documents.............................................................................34
         Section 7.2       No Default:  Representations and Warranties True and Correct..........................35
         Section 7.3       Borrowing Conditions..................................................................35

ARTICLE VIII GENERAL.............................................................................................36
         Section 8.1       Amendments............................................................................36
         Section 8.2       Notices...............................................................................36
         Section 8.3       Costs, Expenses and Taxes.............................................................37
         Section 8.4       Liability of the Bank.................................................................37
         Section 8.5       Setoff................................................................................38
         Section 8.6       Headings and References...............................................................38
         Section 8.7       Governing Law: Waiver Of Jury Trial...................................................38
         Section 8.8       Successors and Assigns................................................................38
         Section 8.9       Severability of Provisions............................................................39
         Section 8.10      Execution in Counterparts.............................................................39
</TABLE>



<PAGE>



SCHEDULES
---------

SCHEDULE 3.15     Subsidiaries
SCHEDULE 5.2(f)   Permitted Liens


EXHIBITS
--------

EXHIBIT A         Form of Letter of Credit
EXHIBIT B         Form of Notice of Conversion, Continuation, Subdivision or
                  Consolidation
EXHIBIT C         Form of Closing Certificate
EXHIBIT D         Form of Opinion of Counsel to Company




<PAGE>




40




                              LETTER OF CREDIT AND
                             REIMBURSEMENT AGREEMENT


         THIS LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of December
1, 2000,  is  entered  into by and  between  KEYSPAN  GENERATION  LLC a New York
limited  liability company (the "Company"),  and NATIONAL  WESTMINSTER BANK PLC,
NEW YORK BRANCH (the "Bank").

                                R E C I T A L S:

         A. New York  State  Energy  Research  and  Development  Authority  (the
"Issuer")  has issued  pursuant to an Indenture of Trust dated as of December 1,
1997 (as  supplemented  or amended  prior to the date of this  Agreement  and as
further  supplemented  or amended from time to time with the written  consent of
the Bank, the  "Indenture"),  by and between the Issuer and The Chase  Manhattan
Bank as trustee (such entity, or its successor as trustee, being the "Trustee"),
$24,880,000  aggregate  principal  amount of Electric  Facilities  Revenue Bonds
(Long Island Lighting Company Project), 1997 Series A (the "Bonds").

         B. The Issuer and Long Island Lighting Company ("LILCO") entered into a
Participation Agreement dated as of December 1, 1997 (as supplemented or amended
prior to the date of this Agreement and as further  supplemented or amended from
time  to  time  with  the  written  consent  of the  Banks,  the  "Participation
Agreement")  pursuant to which LILCO agreed,  among other  things,  to furnish a
letter  of  credit  as  hereinafter  provided.  Subsequent  to the  date  of the
Participation  Agreement,  (i) all the  shares  of  common  stock of LILCO  were
purchased  by a  subsidiary  of Long Island  Power  Authority  ("LIPA") and such
subsidiary  was merged  into LILCO  with the result  that LILCO  became a wholly
owned subsidiary of LIPA, (ii) LILCO transferred all of its fossil fuel electric
generating  units and its  natural gas system (the  "KeySpan  Transfer")  to the
Company,  and (iii) in connection with the KeySpan Transfer,  LILCO assigned and
delegated to the Company,  and the Company accepted and assumed,  all the rights
and  obligations  of  LILCO  under  or  in  connection   with  the  Bonds,   the
Participation Agreement and the Indenture.

         C. The Company  and the Bank have  agreed to enter into this  Agreement
with respect to the Bonds pursuant to which the Bank shall furnish such a letter
of credit in the amount of $27,057,000,  of which (i) $24,880,000  shall support
the payment of principal  of the Bonds (or the portion of the purchase  price of
the Bonds  corresponding  to principal)  and (ii)  $2,177,000  shall support the
payment of up to 210 days' interest on the principal amount of the Bonds (or the
portion of the purchase price of the Bonds corresponding to interest),  computed
at 15% per annum on the basis of a year of 360 days.

         NOW, THEREFORE, in consideration of the premises and to induce the Bank
to issue its  direct-pay  letter of credit,  and  intending to be legally  bound
hereby, the Company and the Bank hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS
                                   -----------

Section 1.1  Definitions.  When used herein,  the following terms shall have the
following  respective  meanings,  which meanings shall be applicable to both the
singular and plural forms of such terms:

         "ABR"  shall mean for any day, a rate per annum  (rounded  upwards,  if
necessary,  to the next 1/16 of 1%) equal to the  greatest of (a) the Prime Rate
in effect on such day and (b) the Federal Funds Effective Rate in effect on such
day plus 0.5%. For such  purposes:  "Prime Rate" shall mean the rate of interest
per annum publicly  announced from time to time by the Bank as its prime rate in
effect  at its  principal  office in New York  City  (the  Prime  Rate not being
intended  to be the lowest rate of  interest  charged by the Bank in  connection
with extensions of credit to debtors).  Any change in the ABR due to a change in
the Prime Rate or the Federal Funds  Effective Rate shall be effective as of the
opening of business on the effective day of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.

         "ABR Loans" shall mean Loans the rate of interest  applicable  to which
is based upon the ABR.

         "Affiliate"  shall  mean  as to any  Person,  any  other  Person  that,
directly or  indirectly,  is in control of, is controlled by, or is under common
control  with,  such  Person.  For purposes of this  definition,  "control" of a
Person means the power,  directly or indirectly,  either to (a) vote 10% or more
of the securities having ordinary voting power for the election of directors (or
persons  performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person,  whether by contract or
otherwise.

         "Agreement"   shall  mean  this  Letter  of  Credit  and  Reimbursement
Agreement,  as the same may be  amended,  restated,  supplemented  or  otherwise
modified from time to time.

         "Applicable  Margin"  shall mean the rate per annum set forth under the
relevant column heading below which  corresponds with the most current rating of
the  Company's  senior  unsecured  long-term  debt issued by S&P and/or  Moody's
respectively:

      ================================== ======================================
                   Ratings                          Applicable Margin
      ================================== ======================================
                    A+/A1                                 0.55%
      ---------------------------------- --------------------------------------
                    A/A2                                  0.60%
      ---------------------------------- --------------------------------------
      ---------------------------------- --------------------------------------
                    A-/A3                                 0.65%
      ---------------------------------- --------------------------------------
      ---------------------------------- --------------------------------------
                  BBB+/Baa1                               0.70%
      ---------------------------------- --------------------------------------
      ---------------------------------- --------------------------------------
                  BBB/Baa2                                0.80%
      ---------------------------------- --------------------------------------
      ---------------------------------- --------------------------------------
                 <BBB-/Baa3                               0.90%
                 -
      ================================== ======================================

         Changes in the Applicable  Margin shall become effective on the date on
which S&P and/or  Moody's  changes  the  rating it has issued for the  Company's
senior unsecured long-term debt. In the event of split ratings,  then the higher
of the two will apply  unless the ratings are more than one level apart in which
case the level  immediately  above the level of the lower rating will apply.  If
neither agency issues a rating, the lowest level will apply.

         "Bank" is defined in the Preamble.

         "Board"  shall mean,  the Board of  Governors  of the  Federal  Reserve
System of the United States (or any successor).

         "Bond  Documents"  shall  mean,  collectively,   the  Bonds,  the  Bond
Resolution,  the Indenture,  the Company Note, the Participation  Agreement, the
Remarketing Agreement, the Purchase Contract, the Official Statement and the Tax
Regulatory Agreement, as each of the same may be amended, restated, supplemented
or otherwise modified from time to time.

         "Bond Resolution"  shall mean the resolution of the Issuer  authorizing
the issuance of the Bonds and  approving  the other Bond  Documents  and related
matters, as amended or supplemented from time to time.

         "Bonds" is defined in Recital A.

         "Borrowing" is defined in Section 2.2(b).

         "Borrowing Conditions" is defined in Section 2.2(b).

         "Borrowing Date" is defined in Section 2.2(b).

         "Business"  shall mean the  business  operated by the Company or any of
its Subsidiaries.

         "Business Day" shall mean a day other than a Saturday,  Sunday or other
day on which commercial banks in New York City are authorized or required by law
to  close,  provided,  that  with  respect  to  notices  and  determinations  in
connection  with, and payments of principal and interest on,  Eurodollar  Loans,
such day is also a day for  trading by and between  banks in Dollar  deposits in
the London interbank eurodollar market.

         "Capital  Lease   Obligations"   shall  mean  as  to  any  Person,  the
obligations  of such Person to pay rent or other  amounts under any lease of (or
other arrangement  conveying the right to use) real or personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such Person  under GAAP
and, for the purposes of this Agreement,  the amount of such  obligations at any
time  shall  be the  capitalized  amount  thereof  at such  time  determined  in
accordance with GAAP.

         "Capital   Stock"   shall   mean   any  and  all   shares,   interests,
participations or other equivalents  (however  designated) of capital stock of a
corporation,  any and all equivalent ownership interests in a Person (other than
a  corporation)  and any and all warrants,  fights or options to purchase any of
the foregoing.

         "Change in  Control"  shall mean (i)  KeySpan  Corporation  ("KeySpan")
ceases to own 100% of the  outstanding  Capital  Stock of the  Company  free and
clear of any Lien or (ii)  during  any  period of up to 24  consecutive  months,
commencing on the date of this  Agreement,  individuals  who at the beginning of
such period were directors of the Company (together with any new directors whose
election by such board of  directors  or whose  nomination  for  election by the
stockholders  of the Company was approved by  two-thirds of the directors of the
Company then still in office who were either  directors at the beginning of such
period or whose  election or nomination for election was previously so approved)
shall cease for any reason  (other than due to death,  disability  or previously
established  mandatory  retirement)  to  constitute  a majority  of the board of
directors of the Company then in effect.

         "Closing Date" shall mean December 11, 2000, provided that on such date
all of the conditions in Section 7.1 have been satisfied.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.

         "Commonly  Controlled  Entity"  shall  mean an  entity,  whether or not
incorporated,  which is under common control with the Company within the meaning
of  Section  414(b)  or  414(c) of the Code and the  regulations  and  published
interpretations thereof.

         "Company" is defined in the Preamble.

         "Company  Agreements"  shall mean,  collectively,  this Agreement,  the
Company  Note,  the  Participation   Agreement,   the  Purchase  Contract,   the
Remarketing  Agreement and the Tax Regulatory  Agreement as each of the same may
be amended, restated, supplemented or otherwise modified from time to time.

         "Company  Note"  shall  mean  the  "Company  Note"  as  defined  in the
Indenture.

         "Consolidated  Capitalization"  shall  mean  at any  date,  the  sum of
Consolidated Net Worth and Consolidated Indebtedness.

         "Consolidated Indebtedness" shall mean at any date, all Indebtedness of
the Company and its  Subsidiaries  at such date,  determined  on a  consolidated
basis in accordance with GAAP, as reflected on the balance sheet.

         "Consolidated  Net Worth"  shall  mean at any date,  all  amounts  that
would, in conformity  with GAAP, be included on a consolidated  balance sheet of
the Company and its Subsidiaries under stockholders' equity at such date.

         "Contractual  Obligation" shall mean as to any Person, any provision of
any  security  issued by such Person or of any  agreement,  instrument  or other
undertaking  to  which  such  Person  is a party  or by  which  it or any of its
property is bound.

         "Credit Termination Date" is defined in Section 2.1(a).

         "Default"  shall  mean any of the  events  specified  in  Section  6.1,
whether or not any requirement  for the giving of notice,  the lapse of time, or
both, has been satisfied.

         "Disposition" shall mean with respect to any property, any sale, lease,
sale and  leaseback,  assignment,  conveyance,  transfer  or  other  disposition
thereof,  including  the sale of Capital  Stock of any  Subsidiary  owned by the
Company or any of its Subsidiaries.  The terms "Dispose" and "Disposed of" shall
have correlative meanings.

         "Dollars"  and "$" shall mean dollars in lawful  currency of the United
States.

         "Environmental  Law" shall mean any and all  foreign,  federal,  state,
local or municipal  laws,  rules,  orders,  regulations,  statutes,  ordinances,
codes, decrees, requirements of any Governmental Authority or other Requirements
of Law (including common law) regulating,  relating to or imposing  liability or
standards of conduct  concerning  protection of human health or the environment,
as now or may at any time hereafter be in effect.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the rules and regulations issued thereunder.

         "Eurocurrency  Reserve  Requirements" shall mean for any day as applied
to a Eurodollar Loan, the aggregate  (without  duplication) of the maximum rates
(expressed as a decimal fraction) of reserve  requirements in effect on such day
(including  basic,  supplemental,  marginal  and  emergency  reserves  under any
regulations of the Board or other  Governmental  Authority  having  jurisdiction
with  respect  thereto)  dealing  with  reserve   requirements   prescribed  for
eurocurrency  funding  (currently  referred to as "Eurocurrency  Liabilities" in
Regulation D of the Board)  maintained  by a member bank of the Federal  Reserve
System.

         "Eurodollar Base Rate" shall mean, with respect to each day during each
Interest Period  pertaining to a Eurodollar  Loan, the rate per annum determined
on the basis of the rate for  deposits  in  Dollars  for a period  equal to such
Interest Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Telerate  screen as of 11:00 A.M.,  London  time,  two Business
Days prior to the beginning of such Interest Period. In the event that such rate
does not  appear on Page  3750 of the  Telerate  screen  (or  otherwise  on such
screen)  at such  time,  the  "Eurodollar  Base  Rate"  shall be  determined  by
reference to such other  comparable  publicly  available  service for displaying
eurodollar  rates as may be  selected  by the Bank or,  in the  absence  of such
availability,  by  reference  to the rate at which  the Bank is  offered  Dollar
deposits at or about 11:00 A.M.,  London time,  two  Business  Days prior to the
beginning of such Interest Period in the London interbank  eurodollar market for
delivery  on the  first  day of such  Interest  Period  for the  number  of days
comprised therein.

         "Eurodollar Loans" shall mean Loans the rate of interest  applicable to
which is based upon the Eurodollar Rate.

         "Eurodollar  Rate"  shall  mean,  with  respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the nearest
1/100th of 1%):

                              Eurodollar Base Rate
            --------------------------------------------------------
                    1.00 - Eurocurrency Reserve Requirements


         "Event of Default"  shall mean any of the events  described  in Section
6.1.

         "Existing Credit  Facilities"  shall mean (i) the $700,000,000  364-day
revolving credit facility dated as of September 22, 2000 among (inter alios) the
Company as Borrower and The Chase  Manhattan  Bank as  Administrative  Agent and
(ii) the $700,000,000  Credit Facility dated as of October 30, 2000 among (inter
alios) the Company as Borrower and The Chase  Manhattan  Bank as  Administrative
Agent.

         "Federal  Funds  Effective  Rate" shall mean for any day,  the weighted
average of the rates on overnight federal funds transactions with members of the
Federal  Reserve System  arranged by federal funds brokers,  as published on the
next  succeeding  Business Day by the Federal  Reserve Bank of New York,  or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for the day of such transactions  received by the Bank from three
federal funds brokers of recognized standing selected by it.

         "Final  Maturity Date" shall mean the date that is four years after the
Borrowing Date (if any).

         "GAAP"  shall mean  generally  accepted  accounting  principles  in the
United  States  as in effect  from time to time,  except  that for  purposes  of
Section 5.1, GAAP shall be determined on the basis of such  principles in effect
on the date of this Agreement and consistent  with those used in the preparation
of the most recent audited financial  statements  delivered  pursuant to Section
4.1(a). In the event that any "Accounting Change" (as defined below) shall occur
and such change  results in a change in the method of  calculation  of financial
covenants,  standards or terms in this Agreement,  then the Company and the Bank
agree to enter  into  negotiations  in order to amend  such  provisions  of this
Agreement so as to equitably  reflect such  Accounting  Changes with the desired
result that the criteria for evaluating the Company's  financial condition shall
be the same after such Accounting  Changes as if such Accounting Changes had not
been made.  Until such time as such an  amendment  shall have been  executed and
delivered by the Company and the Bank,  all financial  covenants,  standards and
terms in this Agreement  shall continue to be calculated or construed as if such
Accounting Changes had not occurred.  "Accounting  Changes" refers to changes in
accounting  principles  required by the  promulgation  of any rule,  regulation,
pronouncement  or opinion by the  Financial  Accounting  Standards  Board of the
American Institute of Certified Public Accountants or, if applicable, the SEC.

         "Governmental Authority" shall mean any nation or government, any state
or other political subdivision thereof, any agency, authority,  instrumentality,
regulatory  body,  court,  central  bank or other entity  exercising  executive,
legislative,  judicial,  taxing,  regulatory or  administrative  functions of or
pertaining  to  government,  any  securities  exchange  and any  self-regulatory
organization (including the National Association of Insurance Commissioners).

         "Guarantee  Obligations" shall mean as to any Person (the "guaranteeing
person"),  any obligation of (a) the  guaranteeing  person or (b) another Person
(including  any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement,  counterindemnity or similar
obligation,   in  either  case  guaranteeing  or  in  effect   guaranteeing  any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other  third  Person  (the  "primary  obligor")  in any  manner,  whether
directly or  indirectly,  including any obligation of the  guaranteeing  person,
whether or not  contingent,  (i) to purchase any such primary  obligation or any
property  constituting direct or indirect security therefor,  (ii) to advance or
supply funds (1) for the purchase or payment of any such primary  obligation  or
(2) to maintain  working  capital or equity  capital of the  primary  obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property,  securities or services primarily for the purpose of assuring
the owner of any such primary  obligation of the ability of the primary  obligor
to make payment of such primary  obligation or (iv)  otherwise to assure or hold
harmless  the  owner of any such  primary  obligation  against  loss in  respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements  of instruments for deposit or collection in the ordinary course of
business.  The amount of any  Guarantee  Obligation of any  guaranteeing  person
shall  be  deemed  to be the  lower of (a) an  amount  equal  to the  stated  or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable  pursuant to the terms of the instrument  embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable,  in which case
the amount of such  Guarantee  Obligation  shall be such  guaranteeing  person's
maximum reasonably anticipated liability in respect thereof as determined by the
Company in good faith.

         "Hedge  Agreements"  shall mean all interest rate swaps, caps or collar
agreements  or similar  arrangements  dealing  with  interest  rates or currency
exchange rates or the exchange of nominal interest obligations, either generally
or under specific contingencies.

         "Indebtedness"   shall  mean  of  any  Person  at  any  date,   without
duplication,  (a) all  indebtedness of such Person for borrowed  money,  (b) all
obligations  of such  Person for the  deferred  purchase  price of  property  or
services  (other than current trade payables  incurred in the ordinary course of
such Person's business),  (c) all obligations of such Person evidenced by notes,
bonds, debentures or other similar instruments,  (d) all indebtedness created or
arising  under any  conditional  sale or other title  retention  agreement  with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property),  (e) all Capital Lease Obligations of
such Person, (f) all obligations of such Person,  contingent or otherwise, as an
account  party under  acceptances,  letters of credit,  surety  bonds or similar
arrangements,  (g) the liquidation  value of all preferred Capital Stock of such
Person that is  redeemable  at the option of the holder  thereof or that has any
mandatory dividend,  redemption or other required payment that could be required
thereunder prior to the date that is one year after the Final Maturity Date, (h)
all Guarantee  Obligations  of such Person in respect of obligations of the kind
referred to in clauses (a) through (g) above,  (i) all  obligations  of the kind
referred to in clauses (a) through (h) above secured by (or for which the holder
of such obligation has an existing right, contingent or otherwise, to be secured
by) any Lien on property  (including accounts and contract rights) owned by such
Person,  whether or not such Person has assumed or become liable for the payment
of such  obligation,  and (j) for the  purposes  of  Section  6.1(e)  only,  all
obligations of such Person in respect of Hedge  Agreements.  The Indebtedness of
any Person shall include the  Indebtedness  of any other entity  (including  any
partnership in which such Person is a general partner) to the extent such Person
is liable therefor as a result of such Person's  ownership  interest in or other
relationship  with  such  entity,  except  to  the  extent  the  terms  of  such
Indebtedness expressly provide that such Person is not liable therefor.

         "Indemnified Liabilities" is defined in Section 8.3.

         "Indemnitees" is defined in Section 8.3.

         "Indenture" is defined in Recital A.

         "Initial  Stated  Amount"  shall be  Twenty-Seven  Million  Fifty-Seven
Thousand Dollars ($27,057,000).

         "Insolvency"  shall mean with respect to any  Multiemployer  Plan,  the
condition  that such Plan is  insolvent  within the  meaning of Section  4245 of
ERISA.

         "Insolvent" shall mean pertaining to a condition of Insolvency.

         "Intellectual  Property"  shall mean the  collective  reference  to all
rights,  priorities and privileges  relating to intellectual  property,  whether
arising  under  United  States,  multinational  or  foreign  laws or  otherwise,
including copyrights,  copyright licenses, patents, patent licenses, trademarks,
trademark licenses, technology, know-how and processes, and all rights to sue at
law or in equity for any infringement or other impairment thereof, including the
fight to receive all proceeds and damages therefrom.

         "Interest Payment Date" shall mean (a) as to any ABR Loan, the last day
of each  March,  June,  September  and  December  to occur  while  such  Loan is
outstanding and the Final Maturity Date, (b) as to any Eurodollar Loan having an
Interest  Period of three months or less, the last day of such Interest  Period,
(c) as to any  Eurodollar  Loan  having an  Interest  Period  longer  than three
months,  each day that is three months, or a whole multiple  thereof,  after the
first day of such Interest  Period and the last day of such Interest  Period and
(d) as to any Eurodollar  Loan, the date of any repayment or prepayment  made in
respect thereof.

         "Interest  Period" shall mean (i) initially,  the period  commencing on
the initial conversion date with respect to such Eurodollar Loan and ending one,
two, three or six months thereafter, as selected by the Company in its notice of
conversion  given  with  respect  thereto;  and  (ii)  thereafter,  each  period
commencing on the last day of the next preceding  Interest Period  applicable to
such  Eurodollar  Loan and ending one, two, three or six months  thereafter,  as
selected  by the Company by  irrevocable  notice to the Bank not less than three
Business  Days prior to the last day of the then  current  Interest  Period with
respect  thereto;  provided  that, all of the foregoing  provisions  relating to
Interest Periods are subject to the following:

         (A) if any Interest  Period would  otherwise end on a day that is not a
Business  Day,  such  Interest  Period shall be extended to the next  succeeding
Business  Day  unless the  result of such  extension  would be (x) to carry such
Interest  Period into  another  calendar  month or (y) to extend  such  Interest
Period beyond the Final  Maturity  Date, in either of which events such Interest
Period shall end on the immediately preceding Business Day;

         (B) the  Company may not select an  Interest  Period that would  extend
beyond the Final Maturity Date;

         (C) any  Interest  Period  that  begins on the last  Business  Day of a
calendar month (or on a day for which there is no numerically  corresponding day
in the calendar month at the end of such Interest  Period) shall end on the last
Business Day of a calendar month; and

         (D) the Company  shall select  Interest  Periods so as not to require a
payment or prepayment of any Eurodollar  Loan during an Interest Period for such
Loan.

         "Issuer" is defined in Recital A.

         "KeySpan Transfer" is defined in Recital B.

         "Letter of Credit" is defined in Section 2.1(a).

         "Letter of Credit Fee" is defined in Section 2.6(b).

         "Lien"  shall mean any  mortgage,  pledge,  hypothecation,  assignment,
deposit  arrangement,  encumbrance,  lien (statutory or other),  charge or other
security  interest or any  preference,  priority or other security  agreement or
preferential  arrangement  of any  kind  or  nature  whatsoever  (including  any
conditional sale or other title retention agreement and any capital lease having
substantially the same economic effect as any of the foregoing).

         "LILCO" is defined in Recital B.

         "LIPA" is defined in Recital B.

         "LIPA  Option"  shall mean the option  granted to LIPA  pursuant to the
KeySpan Transfer to acquire all of the outstanding capital stock of the Company,
which  option is  exercisable  during the period from May 28, 2001 until May 27,
2002.

         "Loans"  shall mean ABR Loans and/or  Eurodollar  Loans  comprising  in
aggregate the Borrowing, and complying with the provisions of Section 2.3.

         "Material  Adverse Effect" shall mean (a) a material adverse change in,
or a material  adverse  effect upon,  the condition  (financial  or  otherwise),
operations,  assets,  business,  properties  or prospects of the Company and its
Subsidiaries  taken as a whole, (b) a material  impairment in the ability of the
Company to perform any of its  obligations  under any Company  Agreement or Bond
Document or (c) a material adverse effect upon the legality,  validity,  binding
effect or enforceability against the Company or any other Person (other than the
Bank) of any Company Agreement or Bond Document.

         "Material  of  Environmental   Concern"  shall  mean  any  gasoline  or
petroleum (including crude oil or any fraction thereof) or petroleum products or
any hazardous or toxic substances,  materials or wastes, defined or regulated as
such in or under any  Environmental  Law,  including  asbestos,  polychlorinated
biphenyls and urea-formaldehyde insulation.

     "Moody's"  shall mean Moody's  Investors  Service,  Inc. (or any  successor
thereto).

     "Multiemployer  Plan"  shall  mean a Plan that is a  multiemployer  plan as
defined in Section 4001 (a)(3) of ERISA.

         "Non-Excluded Taxes" is defined in Section 2.11(a).

         "Non-U.S. Bank" is defined in Section 2.11(d).
          -------------                ---------------

         "Obligations" shall mean all obligations and liabilities of the Company
to the Bank,  whether  direct or  indirect,  absolute or  contingent,  due or to
become due, or now existing or hereafter  incurred,  which may arise under,  out
of, or in connection with, this Agreement or any other document made,  delivered
or given in connection  herewith or therewith,  whether on account of principal,
interest,   reimbursement  obligations,   fees,  indemnities,   costs,  expenses
(including all fees,  charges and  disbursements of counsel to the Bank that are
required to be paid by the Company  pursuant hereto) or otherwise and including,
without limitation,  the unpaid principal of and interest on (including interest
accruing after the maturity of the Loans and interest  accruing after the filing
of  any  petition  in  bankruptcy,   or  the  commencement  of  any  insolvency,
reorganization  or like  proceeding,  relating to the Company,  whether or not a
claim for post-filing or  post-petition  interest is allowed in such proceeding)
the Loans.

         "Official  Statement" shall mean the Official  Statement dated December
18,  1997,  regarding  the  issuance  and  sale by the  Issuer  of its  Electric
Facilities Revenue Bonds (Long Island Lighting Company Project), 1997 Series A.

         "Other  Taxes"  shall  mean  any and all  present  or  future  stamp or
documentary  taxes or any other  excise or  property  taxes,  charges or similar
levies arising from any payment made  hereunder or from the execution,  delivery
or  enforcement  of, or otherwise  with respect to, this  Agreement or any other
Company Agreement.

         "Participation Agreement" is defined in Recital B.

         "PBGC" shall mean the Pension Benefit Guaranty Corporation  established
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.

         "PSC" means the Public Service  Commission of the State of New York, or
any successor or other agency or authority of the state of New York from time to
time having a similar jurisdiction.

         "PSC  Order"  means,  at any  time,  the  order or orders by the PSC in
effect at such time that  authorize the Company to enter into this Agreement and
the other Company Agreements,  to request the Bank to issue the Letter of Credit
hereunder and to incur initial  Indebtedness  to the Bank hereunder in an amount
not less  than the  Initial  Stated  Amount.  The PSC  Order  shall be deemed to
include the petition for such order by the Company.

         "Person" shall mean an individual,  partnership,  corporation,  limited
liability company,  business trust, joint stock company,  trust,  unincorporated
association,  joint venture,  Governmental Authority or other entity of whatever
nature.

         "Plan"  shall  mean any  pension  plan  which is covered by Title IV of
ERISA and in respect of which the Company or a Commonly  Controlled Entity is an
"employer" as defined in Section 3(5) of ERISA.

         "Properties"  mean  the  facilities  or  properties  owned,  leased  or
operated by the Company or any of its Subsidiaries.

     "Purchase Contract" shall mean the Purchase Contract,  dated as of December
22, 1997 among the Issuer,  the  Company,  JP Morgan  Securities,  Inc.,  Lehman
Brothers Inc., Merrill Lynch & Co., and M.R. Beal and Company.

         "Regulation  U" shall mean  Regulation U of the Board as in effect from
time to time.

         "Remarketing  Agent" shall mean the "Remarketing  Agents" as defined in
the Indenture.

         "Remarketing Agreements" shall mean, on any date of determination,  any
of the  following  agreements  as shall be in effect on such date in  accordance
with the terms of the Indenture:  the Remarketing Agreement dated as of December
30, 1997,  among the Company and JP Morgan  Securities,  Inc. as the same may be
amended from time to time, or any remarketing  agreement between the Company and
successor Remarketing Agents.

         "Reorganization" shall mean with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.

         "Reportable  Event"  shall  mean any of the events set forth in Section
4043 (b) of ERISA,  other  than  those  events as to which the thirty day notice
period is waived under  subsections  .27, .28, .29, .30, .31, .32, .34 or .35 of
PBGC Reg. ss.4043.

         "Requirement  of Law" shall mean, as to any Person,  the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule  or  regulation  or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

         "Responsible Officer" shall mean the president,  treasurer or secretary
of the  Company,  but in any event,  with  respect  to  financial  matters,  the
treasurer of the Company.

         "RMP   Request"   shall   mean  a  request   by  the   Trustee   for  a
"Redemption/Mandatory  Purchase  Drawing" in accordance with, and as defined in,
the Letter of Credit.

         "S&P" shall mean Standard & Poor's  Ratings  Services (or any successor
thereto).

         "SEC" shall mean the Securities and Exchange Commission,  any successor
thereto and any analogous Governmental Authority.

         "Single  Employer Plan" shall mean any Plan that is covered by Title IV
of ERISA, but that is not a Multiemployer Plan.

         "Solvent" shall mean, when used with respect to any Person, means that,
as of any date of  determination,  (a) the amount of the "present  fair saleable
value" of the assets of such Person will, as of such date,  exceed the amount of
all "liabilities of such Person,  contingent or otherwise",  as of such date, as
such quoted terms are determined in accordance with applicable federal and state
laws governing determinations of the insolvency of debtors, (b) the present fair
saleable  value of the assets of such Person will,  as of such date,  be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured,  (c) such Person will not have,
as of such date, an  unreasonably  small amount of capital with which to conduct
its business,  and (d) such Person will be able to pay its debts as they mature.
For purposes of this  definition,  (i) "debt" means liability on a "claim",  and
(ii)  "claim"  means any (x) fight to  payment,  whether  or not such a right is
reduced to  judgment,  liquidated,  unliquidated,  fixed,  contingent,  matured,
unmatured,  disputed,  undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a fight to  payment,  whether  or not such  fight to an  equitable  remedy is
reduced  to  judgment,  fixed,  contingent,   matured  or  unmatured,  disputed,
undisputed, secured or unsecured.

         "Stated  Amount" shall be  Twenty-Seven  Million  Fifty-Seven  Thousand
Dollars ($27,057,000) or such lesser amount pursuant to Section 2.1(c).

         "Subsidiary" as to any Person,  shall mean a corporation,  partnership,
limited  liability  company  or other  entity of which  shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership  interests  having  such  power only by reason of the  happening  of a
contingency)  to elect a majority of the board of directors or other managers of
such  corporation,  partnership  or other  entity are at the time owned,  or the
management of which is otherwise controlled,  directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to  "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.

         "Tax Regulatory  Agreement"  shall mean the "Tax Regulatory  Agreement"
defined in the Indenture.

         "Tender  Request"  shall  mean a request by the  Trustee  for a "Tender
Drawing" in accordance with, and as defined in, the Letter of Credit.

         "Trustee" is defined in Recital A.

         "Type" shall mean with  respect to a Loan,  whether such Loan is an ABR
Loan or a Eurodollar Loan.

Section 1.2 Accounting  Terms.  All accounting  terms not  specifically  defined
herein shall be construed in accordance  with GAAP consistent with those applied
in the preparation of the financial  statements  referred to in Section 3.1, and
all financial  data  supplied  pursuant to this  Agreement  shall be prepared in
accordance with such principles.

                                   ARTICLE II

                                LETTER OF CREDIT
                                ----------------

Section 2.1       Issuance and Reissuance of Letter of Credit.

          (a) Issuance of Letter of Credit.  Subject to the terms and conditions
     of this  Agreement,  the Bank agrees to issue to the Trustee,  on and as of
     the Closing Date, an irrevocable direct-pay letter of credit (together with
     any  substitute  letter of credit issued  pursuant to Section  2.1(c),  the
     "Letter of Credit") in the form of Exhibit A attached hereto,  to expire on
     December 11, 2001, or such earlier date on which the Letter of Credit shall
     have  terminated  in  accordance  with its terms (the  "Credit  Termination
     Date").

          (b) Extension of Credit  Termination Date. The Credit Termination Date
     may be  extended  by the  Bank for a  further  term of one year in its sole
     discretion  upon written  request of the Company made no less than 75 days,
     and no more than 125 days, prior to the then applicable Credit  Termination
     Date. If the Bank consents to the requested  extension then upon payment of
     any  applicable fee and delivery to the Bank of such  documentation  as the
     Bank may  reasonably  require,  the  Credit  Termination  Date  shall be so
     extended. The Bank will confirm whether or not it consents to the requested
     extension  no later than 30 days  after  receipt  of the  request  from the
     Company.  Unless  and  until  the Bank  delivers  a notice  confirming  the
     requested  extension,  the Bank has no  obligation  to extend the Letter of
     Credit beyond December 11, 2001.

          (c)  Reissuance  of Letter of Credit.  If at any time, or from time to
     time, prior to the then applicable  Credit  Termination  Date, a portion of
     the Bonds shall be redeemed or retired in  accordance  with the  Indenture,
     the Bank shall  deliver to the  Trustee,  upon  surrender  of the Letter of
     Credit, a substitute  letter of credit in an amount  calculated in the same
     manner as the  Initial  Stated  Amount of the  Letter of  Credit,  but with
     respect to the reduced aggregate  outstanding principal amount of the Bonds
     (and with respect to any  proportionate  reduced  amount for the payment of
     interest,  determined in accordance  with Exhibit A attached  hereto) after
     giving  effect to such  redemption  or  retirement  of Bonds and  otherwise
     having terms  identical to the Letter of Credit,  including the same Credit
     Termination Date.

Section 2.2       Agreement to Reimburse the Bank for Letter of Credit Payments;
                  Term Borrowing.
                  --------------------------------------------------------------

          (a)  Reimbursement  by Company.  Subject to the  provisions of Section
     2.2(b) below,  the Company  hereby agrees to reimburse and pay to the Bank,
     on the date each  payment  or  disbursement  is made by the Bank  under the
     Letter of Credit  honoring  any  demand  for  payment  made by the  Trustee
     thereunder  (including  amounts  in  respect  of the  reinstatement  of the
     Interest  Component (as defined in the Letter or Credit) at the election of
     the Bank  notwithstanding  any failure of the Company to reimburse the Bank
     for any previous drawing to pay interest on the Bonds),  an amount equal to
     such payment or disbursement.  Any amount (including any amount referred to
     in  Section  2.2(b)(ii))  not so paid on such  date  shall  bear  interest,
     payable on demand, in accordance with Section 2.5(c)(ii).

          (b) Term  Borrowing.  (i) If the Bank makes a payment or  disbursement
     under  the  Letter  of Credit in  response  to a Tender  Request  or an RMP
     Request and, on the date of such payment or  disbursement,  the  conditions
     precedent set forth in Section 7.3 (the "Borrowing  Conditions")  have been
     satisfied,  such payment shall constitute a term borrowing made by the Bank
     to the Company on the date of (such date being the "Borrowing  Date"),  and
     in the amount of, such payment or  disbursement  (such term borrowing being
     the "Borrowing").  (ii) If the Borrowing Conditions are not so satisfied on
     the date of such payment or  disbursement,  the Company  shall  immediately
     reimburse  the Bank in respect of the  amount so paid or  disbursed  to the
     Company,  in accordance with Section 2.2(a). For the avoidance of doubt, if
     at any time the Borrowing  shall have been made under this  Agreement,  any
     subsequent  payment or  disbursement by the Bank under the Letter of Credit
     must be  immediately  reimbursed by the Company in accordance  with Section
     2.2(a), it being agreed that only one term borrowing (the Borrowing) may be
     made under this Agreement.

          (c) Reimbursement Obligation Absolute and Unconditional. The Company's
     obligation  to reimburse  the Bank when due for payments and  disbursements
     made by the  Bank  under  the  Letter  of  Credit  shall  be  absolute  and
     unconditional  under  any and all  circumstances  and  irrespective  of any
     setoff,  counterclaim  or defense to payment  that the  Company may have or
     have had against the Bank, including,  without limitation, any counterclaim
     or defense  which is based upon (i) the  failure of such demand for payment
     to conform to the terms of the  Letter of Credit,  (ii) any  failure of the
     Issuer or the  Company to receive  all or any part of the  proceeds  of the
     sale of the  Bonds,  (iii) any  non-application  or  misapplication  by the
     Issuer,  the Trustee or any other person of the proceeds of such demand for
     payment   or   (iv)   the   illegality,    invalidity,    irregularity   or
     unenforceability of the Bonds or the Letter of Credit;  provided,  however,
     that (A) the Company  shall not be obligated to reimburse  the Bank for any
     wrongful  payment  or  disbursement  made by the Bank  under the  Letter of
     Credit as a result of acts or omissions constituting intentional or willful
     misconduct  on the part of the Bank or any of its  officers,  employees  or
     agents,  and (B) except as specifically  provided herein,  the Company does
     not waive any legal rights to which it is entitled.

          Section 2.3 Interest and Loan  Options for the  Borrowing.  (a) On the
     Borrowing Date, the Borrowing shall comprise a single ABR Loan.  Thereafter
     from time to time the Company may,  subject to the terms of this Agreement,
     elect,  by  notice  to the  Bank  in  the  form  of  Exhibit  B  (completed
     appropriately)   delivered  in  accordance  with  Section  2.3(b),  to  (w)
     subdivide the Borrowing  into one or more Loans and further  subdivide such
     Loans  into  other  Loans,  (x)  consolidate  Loans of the same Type into a
     single  Loan,  (y) convert  Loans from one Type to another and (z) continue
     Loans as Loans of the same Type.

          (b) The  following  conditions  shall apply to all such  subdivisions,
     consolidations,  conversions and  continuations:  (i) no Loan shall be of a
     principal  amount less than  $1,000,000;  (ii) each Loan shall either be an
     ABR Loan or a  Eurodollar  Loan;  (iii)  there  shall be no more  than five
     different  Interest  Periods,  and no more  than five  Eurodollar  Loans in
     existence  at  any  one  time;   (iv)  the   conversion,   subdivision   or
     consolidation of any ABR Loan into one or more Eurodollar Loans may only be
     effected  upon no less than  three (3)  Business  Days'  prior  irrevocable
     notice to the Bank thereof;  (v) the continuation of any Eurodollar Loan at
     the end of its current Interest Period into a new Interest Period as one or
     more  Eurodollar  Loans may only be  effected  upon no less than  three (3)
     Business  Days'  prior  irrevocable  notice to the Bank  thereof;  (vi) the
     conversion, subdivision or consolidation of any Eurodollar Loan into one or
     more ABR Loans may only be effected  upon no less than one (1) Business Day
     prior  irrevocable  notice  to the  Bank  thereof;  (vii)  the  conversion,
     subdivision, consolidation or continuation of a Eurodollar Loan may only be
     made on the last day of an Interest  Period with  respect  thereto;  (viii)
     each  notice  of  conversion,   subdivision  or   consolidation   into,  or
     continuation  as, a Eurodollar Loan shall specify the length of the initial
     or new Interest Period therefor; (ix) no Loan may be converted,  subdivided
     or  consolidated  into, or continued as, a Eurodollar Loan when any Default
     or  Event  of  Default  has  occurred  and is  continuing  unless  the Bank
     otherwise  agrees in writing  in its sole  discretion;  (x) if the  Company
     fails to give a valid  notice in  respect  of a  Eurodollar  Loan,  or if a
     Eurodollar Loan cannot (by virtue of the conditions in this Section 2.3(b))
     be  continued  as a  Eurodollar  Loan,  as of the last day of the  Interest
     Period  applicable  thereto,  such Eurodollar  Loan shall be  automatically
     converted to an ABR Loan on the last day of such Interest Period;  and (xi)
     each Interest Period  applicable to a Eurodollar Loan shall comply with the
     definition of "Interest Period" in Section 1.1.

          Section 2.4 Repayments and  Prepayments of the  Borrowing.(a)  (a) The
     Borrowing  shall be repaid in full in four equal  installments  one on each
     anniversary  of the Term Advance Date ending with the Final  Maturity Date.
     For such purposes, on each such anniversary one or more Loans comprising an
     aggregate  principal  amount  equal to 25% of the  principal  amount of the
     Borrowing shall be repaid in full.

          (b) The  Company  may at any  time and from  time to time  prepay  the
     Loans, in whole or in part,  without premium or penalty,  upon  irrevocable
     notice delivered to the Bank at least three (3) Business Days prior thereto
     in the case of  Eurodollar  Loans and at least one (1)  Business  Day prior
     thereto in the case of ABR Loans,  which notice shall  specify (x) the date
     and amount of prepayment  and (y) which Loans are to be prepaid;  provided,
     however, that (i) if a Eurodollar Loan is prepaid on any day other than the
     last day of the Interest Period applicable thereto,  the Company shall also
     pay any amounts owing pursuant to Section 2.12 and (ii) each such voluntary
     partial  prepayment  shall be in an amount equal to  $1,000,000  or a whole
     multiple of $500,000 in excess  thereof.  If any such notice is given,  the
     amount  specified  in such  notice  shall  be due and  payable  on the date
     specified  therein,  together  with  accrued  interest  to such date on the
     amount prepaid.

          (c) Upon  the  occurrence  of a Change  of  Control,  whether  arising
     through the  exercise of the LIPA Option or  otherwise,  the Company  shall
     either (x) if at such time the  Borrowing has been drawn,  immediately  (i)
     repay in full the  Borrowing,  all interest  accrued and unpaid thereon and
     all other fees and amounts accrued or outstanding  under this Agreement and
     (ii) cause the Letter of Credit to be  terminated  and returned to the Bank
     or (y) otherwise,  immediately  use its best efforts to cause the Letter of
     Credit to be  terminated  and returned to the Bank,  or failing  that,  the
     Company shall  immediately  deposit with, and under the exclusive  dominion
     and  control of, the Bank cash of an amount  equal to the Stated  Amount of
     the  Letter of  Credit  as cash  collateral  for the  Company's  contingent
     obligation  to  reimburse  the  Bank  for  any  subsequent  amount  paid or
     disbursed  by the Bank  under the Letter of Credit.  For the  avoidance  of
     doubt,  the  foregoing  obligation  to  cash  collateralize  the  Company's
     reimbursement  obligation shall not affect such reimbursement  obligations,
     which shall remain in full force and effect.  The Company agrees to execute
     such  documents  and take all such other steps as the Bank shall require to
     create and perfect a security  interest in such cash collateral in favor of
     the Bank for such purposes.

          Section 2.5 Interest Rates and Payment  Dates.(a) (a) Each  Eurodollar
     Loan shall bear  interest  for each day during  each  Interest  Period with
     respect thereto at a rate per annum equal to the Eurodollar Rate determined
     for such day plus the Applicable Margin.

          (b) Each ABR Loan shall bear interest at a rate per annum equal to the
     ABR plus the Applicable Margin.

          (c) (i) If all or a portion of the principal  amount of any Loan shall
     not be paid when due (whether at the stated  maturity,  by  acceleration or
     otherwise),  such overdue  amount  shall bear  interest at a rate per annum
     equal to the rate that would  otherwise be applicable  thereto  pursuant to
     the  foregoing  provisions  of this  Section  plus 2%, and (ii) if all or a
     portion  of any  interest  payable  on any Loan or any fee or other  amount
     payable  hereunder  including  any amount to be  reimbursed  under  Section
     2.2(a)  shall not be paid when due  (whether  at the  stated  maturity,  by
     acceleration  or  otherwise),  such overdue amount shall bear interest at a
     rate per annum equal to the rate then  applicable  to ABR Loans plus 2%, in
     each case,  with  respect to clauses (i) and (ii)  above,  from the date of
     such non-payment until such amount is paid in full.

          (d)  Interest  shall be payable in  arrears on each  Interest  Payment
     Date,  provided  that interest  accruing  pursuant to paragraph (c) of this
     Section shall be payable from time to time on demand.

          Section 2.6 Fees. (a)The Company agrees to pay to the Bank on or prior
     to 30 days after the Closing  Date, a commitment  fee of Thirteen  Thousand
     Five Hundred  Twenty-Eight Dollars  ($13,528.00),  which represents 5 basis
     points (0.05%) of the Initial Stated Amount of the Letter of Credit.

          (b) The  Company  agrees to pay the  Bank,  as  consideration  for the
     issuance  of the  Letter of  Credit,  a fee (the  "Letter  of Credit  Fee")
     computed at an annual rate of 40 basis points  (0.40%) of the Stated Amount
     of the  Letter  of  Credit  for the  period  that the  Letter  of Credit is
     outstanding.  The  Letter of Credit  Fee is due and  payable  quarterly  in
     arrears, on the last business day of each quarter that the Letter of Credit
     remains  outstanding  and on the  Credit  Termination  Date.  The Letter of
     Credit Fee will be computed on the basis of the  average  Stated  Amount of
     the Letter of Credit for the payment  period in  question.  For purposes of
     determining  the Letter of Credit Fee only, the Stated Amount of the Letter
     of Credit  shall not be  reduced  by any  amounts  that may have been drawn
     under the Letter of Credit but have not been  reimbursed  to the Bank as of
     the date on which any such fee is payable to the Bank.

          (c) The Company agrees to pay to the Bank, on the date of each draw by
     the Trustee under the Letter of Credit,  a fee equal to One Hundred Dollars
     ($100.00).

          (d) The  Company  agrees to pay to the Bank,  on the  Borrowing  Date,
     whether or not the Borrowing Conditions are then satisfied,  an arrangement
     fee of an amount  equal to 20 basis  points  (0.20%) of the amount  paid or
     disbursed to the Trustee by the Bank on such date.

          Section 2.7  Computation  of Interest and Fees.  (a)Interest  and fees
     payable  pursuant hereto shall be calculated on the basis of a 360-day year
     for the actual days  elapsed,  except  that,  with respect to ABR Loans the
     rate of interest on which is calculated on the basis of the Prime Rate, the
     interest  thereon  shall be  calculated on the basis of a 365- (or 366-, as
     the case may be) day year for the actual  days  elapsed.  The Bank shall as
     soon  as  practicable  notify  the  Company  of  each  determination  of  a
     Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
     change in the ABR or the  Eurocurrency  Reserve  Requirements  shall become
     effective  as of the  opening of  business  on the day on which such change
     becomes effective. The Bank shall as soon as practicable notify the Company
     and the Bank of the  effective  date and the amount of each such  change in
     interest rate.

          (b) Each determination of an interest rate by the Bank pursuant to any
     provision of this Agreement  shall be conclusive and binding on the Company
     in the absence of  manifest  error.  The Bank shall,  at the request of the
     Company,  deliver to the Company a statement showing the quotations used by
     the Bank in determining any interest rate pursuant to Section 2.5(a).

          Section 2.8  Inability to  Determine  Interest  Rate.  If prior to the
     first day of any Interest Period:

          (a) the Bank  shall  have  determined  (which  determination  shall be
     conclusive and binding upon the Company)  that, by reason of  circumstances
     affecting the relevant  market,  adequate and reasonable means do not exist
     for ascertaining the Eurodollar Rate for such Interest Period, or that such
     Eurodollar rate is not available; or

          (b) the Bank shall have determined that the Eurodollar Rate determined
     or to be determined for such Interest Period will not adequately and fairly
     reflect  the cost to the Bank (as  conclusively  certified  by the Bank) of
     making or maintaining its affected Loans during such Interest Period,

          the Bank shall give fax or telephonic notice thereof to the Company as
     soon as practicable thereafter. If such notice is given, (x) any Loans that
     were to have been  converted  on the first day of such  Interest  Period to
     Eurodollar  Loans shall be continued as ABR Loans,  and (y) any outstanding
     Eurodollar  Loans shall be converted,  on the last day of the  then-current
     Interest Period, to ABR Loans.  Until such notice has been withdrawn by the
     Bank, no further Eurodollar Loans shall be continued as such, nor shall the
     Company have the right to convert Loans to Eurodollar Loans.

          Section 2.9 Payments.  (a) All payments (including  prepayments) to be
     made by the Company hereunder,  whether on account of principal,  interest,
     fees or otherwise,  shall be made without setoff or counterclaim  and shall
     be made prior to 12:00 Noon, New York City time, on the due date thereof to
     the Bank,  at the office  specified in Section 8.2 (and such account as the
     Bank shall have  notified to the Company) (or as otherwise  notified to the
     Company by the Bank), in Dollars and in immediately available funds. If any
     payment hereunder (other than payments on the Eurodollar Loans) becomes due
     and  payable on a day other  than a Business  Day,  such  payment  shall be
     extended  to  the  next  succeeding  Business  Day.  If  any  payment  on a
     Eurodollar Loan becomes due and payable on a day other than a Business Day,
     the maturity thereof shall be extended to the next succeeding  Business Day
     unless the result of such  extension  would be to extend such  payment into
     another  calendar  month,  in which event such payment shall be made on the
     immediately  preceding  Business  Day. In the case of any  extension of any
     payment of principal  pursuant to the  preceding  two  sentences,  interest
     thereon shall be payable at the then applicable rate during such extension.

          Section 2.10 Requirements of Law. (a) If the adoption of or any change
     in any Requirement of Law or in the  interpretation or application  thereof
     or  compliance  by the Bank with any request or  directive  (whether or not
     having  the  force of law)  from  any  central  bank or other  Governmental
     Authority made subsequent to the date of this Agreement:

               (i) shall subject the Bank to any tax of any kind whatsoever with
               respect to this Agreement or any  Eurodollar  Loan made by it, or
               change the basis of  taxation  of payments to the Bank in respect
               thereof  (except for  Non-Excluded  Taxes covered by Section 2.11
               and  changes in the rate of tax on the  overall net income of the
               Bank);

               (ii) shall impose, modify or hold applicable any reserve, special
               deposit,  compulsory loan or similar  requirement  against assets
               held by, deposits or other  liabilities in or for the account of,
               advances,  loans or other  extensions  of credit by, or any other
               acquisition  of funds  by,  any  office  of the Bank  that is not
               otherwise  included in the  determination  of the Eurodollar Rate
               hereunder; or

               (iii) shall impose on the Bank any other condition,

and the result of any of the  foregoing is to increase the cost to the Bank,  by
an amount that the Bank deems to be material,  of converting into, continuing or
maintaining  Eurodollar Loans, or to reduce any amount  receivable  hereunder in
respect  thereof,  then, in any such case,  the Company  shall  promptly pay the
Bank, upon its demand,  any additional  amounts necessary to compensate the Bank
for such  increased  cost or  reduced  amount  receivable.  If the Bank  becomes
entitled to claim any additional  amounts  pursuant to this paragraph,  it shall
promptly  notify  the  Company  of the event by reason of which it has become so
entitled.

          (b) If the Bank  shall have  determined  that the  adoption  of or any
     change in any  Requirement  of Law  regarding  capital  adequacy  or in the
     interpretation  or  application  thereof or  compliance  by the Bank or any
     corporation  controlling  the Bank with any request or directive  regarding
     capital  adequacy  (whether  or not  having  the  force  of law)  from  any
     Governmental  Authority made subsequent to the date of this Agreement shall
     have the  effect  of  reducing  the rate of  return  on the  Bank's or such
     corporation's  capital as a consequence of its  obligations  hereunder to a
     level below that which the Bank or such corporation could have achieved but
     for such  adoption,  change or compliance  (taking into  consideration  the
     Bank's or such corporation's  policies with respect to capital adequacy) by
     an amount deemed by the Bank to be material,  then from time to time, after
     submission by the Bank to the Company of a written  request  therefor,  the
     Company  shall pay to the Bank such  additional  amount or  amounts as will
     compensate the Bank for such reduction; provided that the Company shall not
     be required to  compensate  the Bank  pursuant  to this  paragraph  for any
     amounts  incurred  more  than six  months  prior to the date  that the Bank
     notifies  the  Company  of  the  Bank's  intention  to  claim  compensation
     therefor;  and provided further that, if the  circumstances  giving rise to
     such claim have a retroactive  effect,  then such six-month period shall be
     extended to include the period of such retroactive effect.

          (c) A certificate as to any  additional  amounts  payable  pursuant to
     this Section  submitted by the Bank to the Company  shall be  conclusive in
     the absence of manifest error.  The obligations of the Company  pursuant to
     this  Section  shall  survive the  termination  of this  Agreement  and the
     payment of the Loans and all other amounts payable hereunder.

          Section 2.11 Taxes.  (a) All payments  made by the Company  under this
     Agreement  shall be made  free and  clear  of,  and  without  deduction  or
     withholding  for or on account of, any present or future  income,  stamp or
     other  taxes,  levies,  imposts,   duties,  charges,  fees,  deductions  or
     withholdings,  now or hereafter  imposed,  levied,  collected,  withheld or
     assessed by any  Governmental  Authority,  excluding  net income  taxes and
     franchise  taxes  (imposed in lieu of net income taxes) imposed on the Bank
     as a result of a  present  or former  connection  between  the Bank and the
     jurisdiction  of  the  Governmental  Authority  imposing  such  tax  or any
     political  subdivision or taxing  authority  thereof or therein (other than
     any such connection arising solely from the Bank having executed, delivered
     or performed its obligations or received a payment under, or enforced, this
     Agreement).  If any  such  non-excluded  taxes,  levies,  imposts,  duties,
     charges,  fees, deductions or withholdings  ("Non-Excluded Taxes") or Other
     Taxes are  required  to be withheld  from any  amounts  payable to the Bank
     hereunder,  the  amounts so payable to the Bank shall be  increased  to the
     extent  necessary to yield to the Bank (after  payment of all  Non-Excluded
     Taxes and Other Taxes) interest or any such other amounts payable hereunder
     at the  rates or in the  amounts  specified  in this  Agreement,  provided,
     however,  that the  Company  shall not be  required  to  increase  any such
     amounts payable to the Bank with respect to any Non-Excluded Taxes (i) that
     are  attributable to the Bank's failure to comply with the  requirements of
     paragraph  (d) or (e) of  this  Section  or (ii)  that  are  United  States
     withholding  taxes  imposed on amounts  payable to the Bank at the time the
     Bank  becomes  a party to this  Agreement,  except to the  extent  that the
     Bank's  assignor  (if any) was  entitled,  at the  time of  assignment,  to
     receive   additional   amounts  from  the  Company  with  respect  to  such
     Non-Excluded Taxes pursuant to this paragraph.

          (b) In addition, the Company shall pay any Other Taxes to the relevant
     Governmental Authority in accordance with applicable law.

          (c) Whenever any Non-Excluded  Taxes or Other Taxes are payable by the
     Company,  as promptly as possible  thereafter the Company shall send to the
     Bank,  a certified  copy of an original  official  receipt  received by the
     Company  showing  payment  thereof.   If  the  Company  fails  to  pay  any
     Non-Excluded  Taxes  or Other  Taxes  when  due to the  appropriate  taxing
     authority  or fails to remit  to the Bank the  required  receipts  or other
     required documentary evidence, the Company shall indemnify the Bank for any
     incremental  taxes,  interest or penalties  that may become  payable by the
     Bank as a result of any such failure.

          (d) The Bank (or its  successor  as  permitted  assign)  that is not a
     citizen  or  resident  of the  United  States of  America,  a  corporation,
     partnership  or other  entity  created or organized in or under the laws of
     the United States of America (or any jurisdiction  thereof),  or any estate
     or trust  that is  subject to federal  income  taxation  regardless  of the
     source of its income (a "Non-U.S.  Bank") shall  deliver to the Company two
     copies of either U.S.  Internal Revenue Service Form W-8BEN or Form W-8ECI,
     or, in the case of a Non-U.S.  Bank claiming  exemption  from U.S.  federal
     withholding  tax under  Section 871 (h) or 881 (c) of the Code with respect
     to payments of" portfolio interest", a statement in standard form agreed by
     the Company and the relevant  Non-U.S.  Bank acting  reasonably  and a Form
     W-8BEN, or any subsequent versions thereof or successors thereto,  properly
     completed  and  duly  executed  by such  Non-U.S.  Bank  claiming  complete
     exemption from, or a reduced rate of, U.S.  federal  withholding tax on all
     payments by the Company under this Agreement. Such forms shall be delivered
     by each  Non-U.S.  Bank on or  before  the date it  becomes a party to this
     Agreement.  In  addition,  each  Non-U.S.  Bank  shall  deliver  such forms
     promptly  upon  the  obsolescence  or  invalidity  of any  form  previously
     delivered by such Non-U.S.  Bank. Each Non-U.S.  Bank shall promptly notify
     the Company at any time it determines that it is no longer in a position to
     provide any previously  delivered  certificate to the Company (or any other
     form of  certification  adopted  by the U.S.  taxing  authorities  for such
     purpose). Notwithstanding any other provision of this paragraph, a Non-U.S.
     Bank shall not be required to deliver any form  pursuant to this  paragraph
     that such Non-U.S. Bank is not legally able to deliver.

          (e) If the Bank is  entitled  to an  exemption  from or  reduction  of
     non-U.S,  withholding  tax under the law of the  jurisdiction  in which the
     Company is located,  or any treaty to which such  jurisdiction  is a party,
     with  respect to payments  under this  Agreement,  it shall  deliver to the
     Company at the time or times  prescribed  by  applicable  law or reasonably
     requested   by  the  Company,   such   properly   completed   and  executed
     documentation  prescribed by applicable law as will permit such payments to
     be made without withholding or at a reduced rate, provided that the Bank is
     legally entitled to complete, execute and deliver such documentation and in
     the Bank's  judgment such  completion,  execution or  submission  would not
     materially prejudice the legal position of the Bank.

          (f) The  agreements in this Section shall survive the  termination  of
     this  Agreement and the payment of the Loans and all other amounts  payable
     hereunder.

          Section 2.12 Funding  Indemnity.  The Company  agrees to indemnify the
     Bank and to hold the Bank  harmless  from any loss or expense that the Bank
     may  sustain or incur as a  consequence  of (a)  default by the  Company in
     making a conversion  into or  continuation  of  Eurodollar  Loans after the
     Company  has  given a notice  requesting  the same in  accordance  with the
     provisions  of this  Agreement,  (b)  default by the  Company in making any
     prepayment of or  conversion  from  Eurodollar  Loans after the Company has
     given a notice thereof in accordance with the provisions of this Agreement,
     or (c) the making of a prepayment of Eurodollar  Loans on a day that is not
     the  last  day  of  an  Interest   Period  with   respect   thereto.   Such
     indemnification  may include an amount equal to the excess,  if any, of (i)
     the amount of interest that would have accrued on the amount so prepaid, or
     not so  converted  or  continued,  for the  period  from  the  date of such
     prepayment  or of such  failure to convert or  continue  to the last day of
     such  Interest  Period (or, in the case of a failure to borrow,  convert or
     continue, the Interest Period that would have commenced on the date of such
     failure) in each case at the  applicable  rate of  interest  for such Loans
     provided for herein  (excluding,  however,  the Applicable  Margin included
     therein, if any) over (ii) the amount of interest (as reasonably determined
     by the Bank) that would have  accrued to the Bank on such amount by placing
     such amount on deposit for a comparable  period with  leading  banks in the
     interbank  eurodollar  market.  A  certificate  as to any  amounts  payable
     pursuant  to this  Section  submitted  to the  Company by the Bank shall be
     conclusive in the absence of manifest  error.  This covenant  shall survive
     the  termination  of this  Agreement  and the  payment of the Loans and all
     other amounts payable hereunder.

          Section 2.13 Change of Lending Office.  The Bank agrees that, upon the
     occurrence  of any event  giving rise to the  operation  of Section 2.10 or
     2.11(a) with respect to the Bank, it will, if requested by the Company, use
     reasonable  efforts (subject to overall policy  considerations of the Bank)
     to designate  another  lending  office for any Loans affected by such event
     with the object of avoiding the consequences of such event; provided,  that
     such  designation  is made on terms that, in the sole judgment of the Bank,
     cause the Bank and its lending  office(s) to suffer no  economic,  legal or
     regulatory  disadvantage,  and  provided,  further,  that  nothing  in this
     Section shall affect or postpone any of the  obligations  of any Company or
     the rights of the Bank pursuant to Section 2.10 or 2.11(a).

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

         To induce the Bank to enter into this Agreement and to issue the Letter
of  Credit,  the  Company  represents  and  warrants  to the Bank  that and such
representations  and  warranties  shall survive the earlier  termination of this
Agreement:

          Section 3.1 Financial Condition. The audited consolidated (and, to the
     extent available, unconsolidated) balance sheets of the Company at December
     31, 1999, and the related consolidated statements for the fiscal year ended
     on December  31, 1999,  reported on by and  accompanied  by an  unqualified
     report from Arthur  Andersen  L.P.,  present fairly the  consolidated  (and
     unconsolidated) financial condition of the Company as at such date, and the
     consolidated  (and  unconsolidated)  results  of  its  operations  and  its
     consolidated  (and  unconsolidated)  cash flows for the  respective  fiscal
     years then ended. The unaudited consolidated (and, to the extent available,
     unconsolidated)  balance  sheet of the  Company as at June 30, 2000 and the
     related audited consolidated (and, to the extent available, unconsolidated)
     statements of income and cash flows for the six-month  period ended on such
     date,  present  fairly  the  consolidated  (and  unconsolidated)  financial
     condition  of the  Company  as at  such  date,  and the  consolidated  (and
     unconsolidated)  results of its operations and its consolidated  cash flows
     for the  six-month  period  then ended  (subject to normal  year-end  audit
     adjustments).   All  such  financial  statements,   including  the  related
     schedules and notes  thereto,  have been  prepared in accordance  with GAAP
     applied consistently throughout the periods involved (except as approved by
     the aforementioned firm of accountants and disclosed therein).  The Company
     and its  Subsidiaries  do not  have  any  material  Guarantee  Obligations,
     contingent  liabilities and liabilities for taxes, or any long-term  leases
     or unusual forward or long-term commitments, including any interest rate or
     foreign  currency  swap or  exchange  transaction  or other  obligation  in
     respect of derivatives, that are not reflected in the most recent financial
     statements referred to in this paragraph,  except Guarantee  Obligations of
     Indebtedness  of the Company and/or any of its  Subsidiaries so long as the
     Indebtedness  in  respect  of which  such  Guarantee  Obligations  arise is
     reflected in such financial statements. During the period from July 1, 2000
     to and including the date of this  Agreement  there has been no Disposition
     by the Company of any material part of its business or property.

          Section  3.2 No  Change.  Since  December  31,  1999 there has been no
     development or event that has had or could reasonably be expected to have a
     Material Adverse Effect.

          Section 3.3 Corporate Existence;  Compliance with Law. The Company (a)
     is duly organized,  validly existing and in good standing under the laws of
     the jurisdiction of its organization, (b) has the limited liability company
     or, as the case may be, corporate power and authority, and the legal right,
     to own and  operate  its  property,  to lease the  property  it operates as
     lessee and to conduct the business in which it is currently engaged, (c) is
     duly qualified as a foreign corporation and in good standing under the laws
     of each jurisdiction where its ownership, lease or operation of property or
     the  conduct of its  business  requires  such  qualification  and (d) is in
     compliance  with all  Requirements  of Law  except to the  extent  that the
     failure to comply  therewith  could not, in the  aggregate,  reasonably  be
     expected to have a Material Adverse Effect.

          Section 3.4 Corporate Power;  Authorization;  Enforceable Obligations.
     The Company has the limited liability company power and authority,  and the
     legal right,  to make,  deliver and perform the Company  Agreements  and to
     borrow  hereunder.  The Company has taken all necessary  limited  liability
     company action to authorize the execution,  delivery and performance of the
     Company  Agreements  and to authorize the borrowing  hereunder on the terms
     and conditions of this Agreement. No consent, approval or authorization of,
     filing with,  notice to or other act by or in respect of, any  Governmental
     Authority or any other Person is required in connection  with the borrowing
     hereunder  or  with  the  execution,  delivery,  performance,  validity  or
     enforceability  of this Agreement or any of the Company  Agreements,  other
     than (x) the  approval of the PSC as  evidenced by the PSC Order in respect
     of the Company  dated as of December 15, 1997,  and (y) the approval of the
     Issuer,  which PSC Order and  approvals  have been obtained and are in full
     force  and  effect.  Each  Company  Agreement  has been duly  executed  and
     delivered on behalf of the Company.  This Agreement  constitutes,  and each
     other Company Agreement upon execution will constitute,  a legal, valid and
     binding  obligation  of the  Company,  enforceable  against  the Company in
     accordance  with its  terms,  except as  enforceability  may be  limited by
     applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar
     laws  affecting  the  enforcement  of  creditors'  rights  generally and by
     general equitable  principles (whether enforcement is sought by proceedings
     in equity or at law).  The Bonds and the Indenture  have been duly executed
     and delivered by, and constitute the legal,  valid and binding  obligations
     of, the Issuer  enforceable in accordance  with their terms and there is no
     existing default (howsoever described) under the Bonds or the Indenture.

          Section 3.5 No Legal Bar. The execution,  delivery and  performance of
     this Agreement and the other Company  Agreements,  the borrowing  hereunder
     and the use of the proceeds thereof will not violate any Requirement of Law
     or any Contractual Obligation of the Company or any of its Subsidiaries and
     will not result in, or require,  the creation or  imposition of any Lien on
     any of their respective  properties or revenues pursuant to any Requirement
     of  Law  or any  such  Contractual  Obligation.  No  Requirement  of Law or
     Contractual Obligation applicable to the Company or any of its Subsidiaries
     could reasonably be expected to have a Material Adverse Effect.

          Section 3.6 Litigation. No litigation,  investigation or proceeding of
     or before any  arbitrator or  Governmental  Authority is pending or, to the
     knowledge  of the Company,  threatened  by or against the Company or any of
     its Subsidiaries or against any of their respective  properties or revenues
     (a)  with  respect  to  any  of  the  Company  Agreements  or  any  of  the
     transactions  contemplated  hereby or thereby, or (b) that could reasonably
     be expected to have a Material Adverse Effect.

          Section  3.7  No   Default.   Neither  the  Company  nor  any  of  its
     Subsidiaries  is in default under or with respect to any of its Contractual
     Obligations  in any  respect  that could  reasonably  be expected to have a
     Material Adverse Effect. No Default or Event of Default has occurred and is
     continuing.

          Section 3.8 Ownership of Property;  Liens. Each of the Company and its
     Subsidiaries has title in fee simple to, or a valid leasehold  interest in,
     all its real property, and good title to, or a valid leasehold interest in,
     all its other  property,  except to the  extent  failure to have such title
     could not  reasonably be expected to have a Material  Adverse  Effect,  and
     none of such property is subject to any Lien except as permitted by Section
     5.2.

          Section  3.9  Intellectual  Property.  The  Company  and  each  of its
     Subsidiaries  owns,  or is  licensed  to  use,  all  Intellectual  Property
     necessary for the conduct of its business as currently conducted, except to
     the extent  failure to have such  ownership or license could not reasonably
     be expected to have a Material  Adverse Effect.  No material claim has been
     asserted and is pending by any Person challenging or questioning the use of
     any  Intellectual   Property  or  the  validity  or  effectiveness  of  any
     Intellectual  Property,  except  to the  extent  any such  claim  could not
     reasonably  be expected  to have a Material  Adverse  Effect,  nor does the
     Company know of any valid basis for any such claim. The use of Intellectual
     Property  by the  Company  and its  Subsidiaries  does not  infringe on the
     rights of any Person in any material respect, except to the extent any such
     infringement  could not  reasonably be expected to have a Material  Adverse
     Effect.

          Section 3.10 Taxes.  Each of the Company and each of its  Subsidiaries
     has filed or caused to be filed all Federal,  state and other  material tax
     returns  that are  required  to be filed and has paid all taxes shown to be
     due and payable on said  returns or on any  assessments  made against it or
     any of its property and all other taxes,  fees or other charges  imposed on
     it or any of its property by any Governmental Authority (other than any the
     amount or validity of that are currently  being  contested in good faith by
     appropriate  proceedings  and with respect to which  reserves in conformity
     with  GAAP  have  been  provided  on  the  books  of  the  Company  or  its
     Subsidiaries,  as the case may be);  no  material  tax Lien has been filed,
     and, to the knowledge of the Company,  no material claim is being asserted,
     with respect to any such tax, fee or other charge.

          Section  3.11  Federal  Regulations.  No part of the  proceeds  of any
     drawing  under the Letter of Credit will be used for "buying" or "carrying"
     any "margin  stock"  within the  respective  meanings of each of the quoted
     terms under  Regulation U as now and from time to time  hereafter in effect
     or for any purpose that violates the  provisions of the  Regulations of the
     Board.

          Section 3.12 Labor  Matters.  Except as, in the  aggregate,  could not
     reasonably be expected to have a Material Adverse Effect:  (a) there are no
     strikes  or  other  labor  disputes  against  the  Company  or  any  of its
     Subsidiaries pending or, to the knowledge of the Company,  threatened;  (b)
     hours  worked by and  payment  made to  employees  of the  Company  and its
     Subsidiaries  have not been in violation of the Fair Labor Standards Act or
     any other applicable  Requirement of Law dealing with such matters; and (c)
     all payments due from the Company or any of its  Subsidiaries on account of
     employee  health  and  welfare  insurance  have been paid or  accrued  as a
     liability on the books of the Company or the relevant Subsidiary.

          Section  3.13 ERISA.  Neither a Reportable  Event nor an  "accumulated
     funding  deficiency"  (within  the  meaning of  Section  412 of the Code or
     Section 302 of ERISA) has occurred during the five-year period prior to the
     date on which this  representation  is made or deemed made with  respect to
     any Plan,  and each Plan has  complied in all  material  respects  with the
     applicable  provisions  of ERISA and the Code. No  termination  of a Single
     Employer  Plan which could  reasonably  be expected to result in a Material
     Adverse Effect has occurred, and no Lien in favor of the PBGC or a Plan has
     arisen,  during such  five-year  period.  The present  value of all accrued
     benefits under each Single Employer Plan (based on those  assumptions  used
     to fund such Plans) did not, as of the last annual  valuation date prior to
     the date on which this  representation  is made or deemed made,  exceed the
     value of the assets of such Plan  allocable to such  accrued  benefits by a
     material amount. Neither the Company nor any Commonly Controlled Entity has
     had a complete or partial  withdrawal from any Multiemployer  Plan that has
     resulted or could reasonably be expected to result in a material  liability
     under  ERISA,  and neither the Company nor any Commonly  Controlled  Entity
     would become subject to any material  liability  under ERISA if the Company
     or any such Commonly Controlled Entity were to withdraw completely from all
     Multiemployer  Plans as of the  valuation  date most closely  preceding the
     date  on  which  this  representation  is  made  or  deemed  made.  No such
     Multiemployer Plan is in Reorganization or Insolvent.

          Section 3.14 Investment  Company Act; Other  Regulations.  Neither the
     Company nor any of its  Subsidiaries is (i) an "investment  company",  or a
     company "controlled" by an "investment company",  within the meaning of the
     Investment  Company  Act of 1940.  The  Company is not a "holding  company"
     under the Public Utility Holding  Company Act of 1935, as amended.  KeySpan
     Corporation,  the direct  holding  company of the Company,  is a registered
     "holding  company" under the Public Utility Holding Company Act of 1935 and
     is subject to regulation by the SEC.

          Section  3.15  Subsidiaries.  Except as  disclosed  to the Bank by the
     Company in writing from time to time after the Closing  Date,  (a) Schedule
     3.15  sets  forth  the  name  and  jurisdiction  of  incorporation  of each
     Subsidiary and, as to each such Subsidiary, the percentage of each class of
     Capital  Stock  owned  by the  Company  and (b)  there  are no  outstanding
     subscriptions,  options,  warrants,  calls,  rights or other  agreements or
     commitments (other than stock options granted to employees or directors and
     directors'  qualifying  shares) of any nature relating to any Capital Stock
     of  the  Company  or any  Subsidiary,  except  as  created  by the  Company
     Agreements.

          Section 3.16 Use of Proceeds.  The proceeds of each drawing  under the
     Letter of  Credit  shall be used for the sole  purpose  of  payment  to the
     Trustee in respect of the Issuer's  obligation  under the Indenture and the
     Bonds to pay interest on and principal of the Bonds in accordance  with the
     terms of the Bonds and the Indenture.  No proceeds of any drawing under the
     Letter of Credit  will be used to acquire any  security in any  transaction
     which is  subject to Section  13 or 14 of the  Securities  Exchange  Act of
     1934, as amended.

          Section 3.17 Environmental Matters. Except as, in the aggregate, could
     not reasonably be expected to have a Material Adverse Effect:

          (a) the  facilities  or  properties  owned,  leased or operated by the
     Company and any of its Subsidiaries do not contain, and have not previously
     contained,   any   Materials  of   Environmental   Concern  in  amounts  or
     concentrations  or under  circumstances  that  constitute or  constituted a
     violation of, or could give rise to liability under, any Environmental Law;

          (b) neither the Company nor any of its Subsidiaries has received or is
     aware  of any  notice  of  violation,  alleged  violation,  non-compliance,
     liability  or  potential  liability  regarding   environmental  matters  or
     compliance with  Environmental Laws with regard to any of the Properties or
     the Business, nor does the Company have knowledge or reason to believe that
     any such notice will be received or is being threatened;

          (c) Materials of  Environmental  Concern have not been  transported or
     disposed of from the  Properties  in  violation  of, or in a manner or to a
     location that could give rise to liability  under, any  Environmental  Law,
     nor have any Materials of  Environmental  Concern been generated,  treated,
     stored or disposed of at, on or under any of the  Properties  in  violation
     of, or in a manner that could give rise to liability  under, any applicable
     Environmental Law;

          (d) no judicial proceeding or governmental or administrative action is
     pending  or,  to  the  knowledge  of the  Company,  threatened,  under  any
     Environmental  Law to which the  Company  or any  Subsidiary  is or will be
     named as a party with respect to the  Properties or the  Business,  nor are
     there any consent decrees or other decrees, consent orders,  administrative
     orders or other orders, or other  administrative  or judicial  requirements
     outstanding  under any  Environmental Law with respect to the Properties or
     the Business;

          (e) there has been no release or threat of  release  of  Materials  of
     Environmental Concern at or from the Properties, or arising from or related
     to the operations of the Company or any  Subsidiary in connection  with the
     Properties or otherwise in connection with the Business, in violation of or
     in  amounts  or in a  manner  that  could  give  rise  to  liability  under
     Environmental Laws;

          (f)  the  Properties  and  all  operations  at the  Properties  are in
     compliance,  and have in the last five years been in  compliance,  with all
     applicable  Environmental  Laws, and there is no contamination at, under or
     about the Properties or violation of any  Environmental Law with respect to
     the Properties or the Business; and

          (g) neither the  Company nor any of its  Subsidiaries  has assumed any
     liability of any other Person under Environmental Laws.

          Section 3.18 Accuracy of Information, etc. No statement or information
     contained  in  this  Agreement,  or  any  other  document,  certificate  or
     statement  furnished  by or on behalf of the Company to the Bank for use in
     connection with the transactions contemplated by this Agreement,  contained
     as of the date such statement,  information, document or certificate was so
     furnished  any untrue  statement  of a material  fact or omitted to state a
     material fact necessary to make the statements  contained herein or therein
     not misleading. There is no fact known to the Company that could reasonably
     be expected to have a Material  Adverse  Effect that has not been expressly
     disclosed  herein,  or in any other documents,  certificates and statements
     furnished  to  the  Bank  for  use  in  connection  with  the  transactions
     contemplated hereby.

          Section 3.19 Official Statement. Except for information describing the
     issuer of the  letter of credit in support  of the Bonds  contained  in the
     Official  Statement relating to the Bonds, as to which no representation is
     made,  such  Official  Statement as of its date of  issuance,  was, and any
     supplement  or amendment  thereto was and shall be, as of their  respective
     dates, accurate in all material respects for the purposes for which its use
     is,  was  or  shall  be  authorized;   and  such  Official  Statement,   as
     supplemented  or amended,  as of its date did not,  and any  supplement  or
     amendment thereto did not and shall not as of its date,  contain 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.

                                   ARTICLE IV

                              AFFIRMATIVE COVENANTS
                              ---------------------

         Until (i) the  obligation  of the Bank to issue the  Letter of  Credit,
subject to the terms and conditions of this Agreement,  is terminated,  (ii) the
Letter of Credit is surrendered, and (iii) the Obligations are paid in full, the
Company  agrees  that,  unless the Bank  shall  otherwise  expressly  consent in
writing, the Company will:

          Section 4.1 Financial Statements. Furnish to the Bank:

          (a) as soon as  available,  but in any event  within 90 days after the
     end of each fiscal year of the Company, a copy of the audited  consolidated
     balance sheet of the Company and its  consolidated  Subsidiaries  as at the
     end of such fiscal year and the related audited consolidated  statements of
     income and of cash flows for such fiscal year,  setting  forth in each case
     in comparative  form the figures for the previous fiscal year,  reported on
     without  a  "going  concern"  or  like   qualification  or  exception,   or
     qualification  arising  out of the scope of the audit,  by Arthur  Andersen
     L.P.  or other  independent  certified  public  accountants  of  nationally
     recognized standing; and

          (b) as soon as  available,  but in any event  not  later  than 60 days
     after the end of each of the first three  quarterly  periods of each fiscal
     year of the  Company,  the  unaudited  consolidated  balance  sheet  of the
     Company and its consolidated Subsidiaries as at the end of such quarter and
     the related unaudited  consolidated  statements of income and of cash flows
     for such quarter and the portion of the fiscal year through the end of such
     quarter, setting forth in each case in comparative form the figures for the
     previous year, certified by a Responsible Officer as being fairly stated in
     all material respects (subject to normal year-end audit adjustments).

All such  financial  statements  shall be complete  and correct in all  material
respects and shall be prepared in reasonable  detail and in accordance with GAAP
applied  consistently  throughout the periods  reflected  therein and with prior
periods (except as approved by such accountants or officer,  as the case may be,
and disclosed therein).

          Section 4.2 Certificates; Other Information. Furnish to the Bank:

          (a)  concurrently  with  the  delivery  of  any  financial  statements
     pursuant to Section 5.1, (i) a certificate of a Responsible Officer stating
     that,  to the best of such  Responsible  Officer's  knowledge,  the Company
     during such period has observed or performed all of its covenants and other
     agreements,  and satisfied every condition,  contained in this Agreement to
     be  observed,  performed  or  satisfied  by it,  and that such  Responsible
     Officer has obtained no knowledge of any Default or Event of Default except
     as  specified  in such  certificate  and (ii) in the case of  quarterly  or
     annual  financial  statements,  a  compliance  certificate  containing  all
     information and calculations  necessary for determining compliance with the
     provisions of Section 5.1 of this  Agreement  referred to therein as of the
     last day of the fiscal  quarter or fiscal year of the Company,  as the case
     may be;

          (b)  within  fifteen  days  after  the same are  sent,  copies  of all
     financial  statements  and reports that the Company sends to the holders of
     any class of its debt  securities or public equity  securities  and, within
     fifteen days after the same are filed,  copies of all financial  statements
     and reports that the Company may make to, or file with, the SEC; and

          (c) promptly,  such additional  financial and other information as the
     Bank may from time to time reasonably request.

          Section  4.3  Payment of  Obligations.  Pay,  discharge  or  otherwise
     satisfy at or before maturity or before they become delinquent, as the case
     may be, all its material  obligations of whatever nature,  except where (i)
     the amount or validity  thereof is currently  being contested in good faith
     by  appropriate  proceedings  and  reserves  in  conformity  with GAAP with
     respect  thereto  have been  provided  on the books of the  Company  or its
     Subsidiaries,  as the case may be or (ii) the  failure  to do so could  not
     reasonably be expected to have a Material Adverse Effect.

          Section 4.4 Maintenance of Existence;  Compliance.  (a) In the case of
     the Company and each of its Subsidiaries,  (i) preserve,  renew and keep in
     full  force  and  effect  its  limited  liability  or,  as the case may be,
     corporate  existence  and (ii) take all  reasonable  action to maintain all
     rights,  privileges  and  franchises  necessary  or desirable in the normal
     conduct of its  business,  except in the case of clause (ii) above,  to the
     extent  that  failure to do so could not  reasonably  be expected to have a
     Material  Adverse  Effect;  (b) comply with all Company  Agreements,  other
     Contractual  Obligations and  Requirements of Law except to the extent that
     failure  to  comply  with  any  such  other   Contractual   Obligations  or
     Requirements of Law could not, in the aggregate,  reasonably be expected to
     have a Material Adverse Effect;  and (c) without prejudice to the foregoing
     clause  (b),  maintain a PSC Order in force at all times and  maintain  all
     requisite approvals of the Issuer from time to time.

          Section 4.5 Maintenance of Property;  Insurance. (a) Keep all property
     useful and necessary in its business in good working  order and  condition,
     ordinary wear and tear excepted and (b) maintain with financially sound and
     reputable  insurance  companies  insurance  on all its property in at least
     such amounts and against at least such risks (but including,  in any event,
     public  liability,  product  liability  and business  interruption)  as are
     usually  insured  against in the same general area by companies  engaged in
     the same or a similar business.

          Section 4.6  Inspection of Property;  Books and Records;  Discussions.
     (a) Keep  proper  books of  records  and  account in which  full,  true and
     correct entries in conformity  with GAAP and all  Requirements of Law shall
     be made of all  dealings and  transactions  in relation to its business and
     activities and (b) permit  representatives of the Bank to visit and inspect
     any of its  properties and examine and make abstracts from any of its books
     and  records  at any  reasonable  time and as often  as may  reasonably  be
     desired and to discuss the business,  operations,  properties and financial
     and other condition of the Company and its  Subsidiaries  with officers and
     employees  of the Company  and its  Subsidiaries  and with its  independent
     certified public accountants.

Section 4.7       Notices.  Promptly give notice to the Bank of:

          (a) the occurrence of any Default or Event of Default;

          (b)  any (i)  default  or  event  of  default  under  any  Contractual
     Obligation of the Company or any of its  Subsidiaries  or (ii)  litigation,
     investigation  or proceeding that may exist at any time between the Company
     or any of its Subsidiaries and any Governmental Authority,  that, in either
     case,  if not cured or if adversely  determined,  as the case may be, could
     reasonably be expected to have a Material Adverse Effect;

          (c) any material litigation or proceeding affecting the Company or any
     of  its  Subsidiaries  that  are  not  covered  by  insurance  or in  which
     injunctive or similar relief is sought;

          (d) the following  events, as soon as possible and in any event within
     30 days  after the  Company  knows or has reason to know  thereof:  (i) the
     occurrence of any  Reportable  Event with respect to any Plan, a failure to
     make any required contribution to a Plan, the creation of any Lien in favor
     of  the  PBGC  or a Plan  or  any  withdrawal  from,  or  the  termination,
     Reorganization  or  Insolvency  of,  any  Multiemployer  Plan or  (ii)  the
     institution of proceedings or the taking of any other action by the PBGC or
     the Company or any Commonly  Controlled  Entity or any  Multiemployer  Plan
     with respect to the withdrawal from, or the termination,  Reorganization or
     Insolvency of, any Plan; and

          (e) any  development  or event  that has had or  could  reasonably  be
     expected to have a Material Adverse Effect.

Each notice  pursuant to this Section 4.7 shall be accompanied by a statement of
a  Responsible  Officer  setting  forth  details of the  occurrence  referred to
therein and stating what action the Company or the relevant  Subsidiary proposes
to take with respect thereto.

          Section 4.8  Environmental  Laws. (a) Comply in all material  respects
     with,  and ensure  compliance  in all material  respects by all tenants and
     subtenants, if any, with, all applicable Environmental Laws, and obtain and
     comply in all  material  respects  with and  maintain,  and ensure that all
     tenants and subtenants  obtain and comply in all material respects with and
     maintain, any and all licenses, approvals, notifications,  registrations or
     permits required by applicable Environmental Laws.

          (b) Conduct and complete  all  investigations,  studies,  sampling and
     testing,  and all  remedial,  removal  and  other  actions  required  under
     Environmental  Laws and promptly  comply in all material  respects with all
     lawful orders and  directives  of all  Governmental  Authorities  regarding
     Environmental Laws.

          Section 4.9 Transaction with  Affiliates.  Enter into any transaction,
     including any purchase,  sale, lease or exchange of property, the rendering
     of any service or the payment of any management,  advisory or similar fees,
     with any Affiliates (other than the Company) upon fair and reasonable terms
     no less  favorable to the Company or such  Subsidiary,  as the case may be,
     than it would obtain in a comparable arm's length transaction with a Person
     that is not an  Affiliate,  subject  to any  requirement  under the  Public
     Utility Holding Company Act of 1935, as amended.

          Section  4.10  Remarketing.   Use  its  best  efforts  to  assist  the
     Remarketing Agent to remarket the Bonds to new investors in accordance with
     the terms of the Indenture and the Remarketing Agreement.

                                   ARTICLE V

                               NEGATIVE COVENANTS
                               ------------------

         Until  (i) the  obligation  of the Bank to issue  the  Letter of Credit
subject to the terms of this Agreement is terminated,  (ii) the Letter of Credit
is  surrendered,  and (iii) the Obligations are paid in full, the Company agrees
that unless the Bank shall otherwise expressly consent in writing it will not:

          Section  5.1  Financial  Condition  Covenant.  (a) Permit the ratio of
     Consolidated Indebtedness to Consolidated Capitalization as at the last day
     of any fiscal quarter to exceed 0.65:1.0.

          Section 5.2 Liens.  Create,  incur, assume or suffer to exist any Lien
     upon any of its property,  whether now owned or hereafter acquired,  except
     for:

          (a) Liens for  taxes not yet due or that are being  contested  in good
     faith by  appropriate  proceedings,  provided that  adequate  reserves with
     respect  thereto  are  maintained  on  the  books  of  the  Company  or its
     Subsidiaries, as the case may be, in conformity with GAAP;

          (b) carriers', warehousemen's,  mechanics', materialmen's, repairmen's
     or other like Liens arising in the ordinary course of business that are not
     overdue  for a period of more than 30 days or that are being  contested  in
     good faith by appropriate proceedings;

          (c) pledges or  deposits in  connection  with  workers'  compensation,
     unemployment insurance and other social security legislation;

          (d) deposits to secure the performance of bids, trade contracts (other
     than for borrowed money), leases, statutory obligations,  surety and appeal
     bonds, performance bonds and other obligations of a like nature incurred in
     the ordinary course of business;

          (e)   easements,   rights-of-way,   restrictions   and  other  similar
     encumbrances  incurred  in the  ordinary  course of business  that,  in the
     aggregate,  are not  substantial  in  amount  and  that do not in any  case
     materially  detract  from the  value of the  property  subject  thereto  or
     materially  interfere  with the  ordinary  conduct of the  business  of the
     Company or any of its Subsidiaries;

          (f)  Liens  in  existence  on the  date of this  Agreement  listed  on
     Schedule  5.2(f),  securing  Indebtedness  outstanding  on the date of this
     Agreement,  provided  that no such Lien is  spread to cover any  additional
     property after the Closing Date and that the amount of Indebtedness secured
     thereby is not increased;

          (g) Liens securing Indebtedness of the Company or any other Subsidiary
     incurred to finance the acquisition of fixed or capital assets  (including,
     without  limitation,  Capital  Lease  Obligations),  provided that (i) such
     Liens shall be created substantially simultaneously with the acquisition of
     such  fixed  or  capital  assets  and  (ii)  such  Liens do not at any time
     encumber   any  property   other  than  the   property   financed  by  such
     Indebtedness;

          (h) any interest or title of a lessor under any lease  entered into by
     the Company or any other  Subsidiary in the ordinary course of its business
     and covering only the assets so leased; and

          (i) Liens not  otherwise  permitted by this Section so long as neither
     (i) the aggregate  outstanding  principal amount of the obligations secured
     thereby nor (ii) the aggregate fair market value (determined as of the date
     such Lien is incurred)  of the assets  subject  thereto  exceeds (as to the
     Company and all Subsidiaries) $5,000,000 at any one time.

          Section 5.3  Fundamental  Changes.  (a) In the case of the Company and
     any Subsidiary,  enter into any merger,  consolidation or amalgamation,  or
     liquidate,  wind up or  dissolve  itself  (or  suffer  any  liquidation  or
     dissolution),  or Dispose of, all or  substantially  all of its property or
     business.

          Section 5.4  Disposition of Property.  Dispose of any of the Company's
     or any Subsidiaries' property, whether now owned or hereafter acquired, or,
     in  the  case  of  any  Subsidiary,  issue  or  sell  any  shares  of  such
     Subsidiary's  Capital Stock to any Person,  except (i) the  Disposition  of
     obsolete or worn out property in the ordinary course of business,  and (ii)
     the sale of inventory in the ordinary course of business.

          Section 5.5 Negative Pledge Clauses.  Enter into or suffer to exist or
     become  effective any agreement that prohibits or limits the ability of the
     Company or any of its  Subsidiaries to create,  incur,  assume or suffer to
     exist any Lien upon any of its property or  revenues,  whether now owned or
     hereafter acquired,  other than (a) this Agreement, (b) the Existing Credit
     Facilities,  and (c) any  agreements  governing any purchase money Liens or
     Capital Lease  Obligations  otherwise  permitted hereby (in which case, any
     prohibition  or  limitation  shall  only be  effective  against  the assets
     financed thereby).

          Section  5.6  Limitation  on   Restrictions  on   Distributions   from
     Subsidiaries.  Create  or  otherwise  cause or  permit  to exist or  become
     effective  any  consensual  encumbrance  or consensual  restriction  on the
     ability of any  Subsidiary to pay dividends or make any other  distribution
     on its Capital Stock other than any encumbrances or restrictions imposed by
     any Governmental Authority.

          Section  5.7  Company  Agreements.  Amend or  supplement  any  Company
     Agreement or consent to any amendment or supplement to any Bond Document.

                                   ARTICLE VI

                                EVENTS OF DEFAULT
                                -----------------

          Section 6.1 Events of  Default.  If any of the  following  event shall
     occur  and be  continuing:  (a)  (i)  the  Company  shall  fail  to pay any
     principal  of any  Loan  when  due in  accordance  with  the  terms of this
     Agreement;  (ii) the Company shall fail to make any  reimbursement  payment
     under Section 2.2(a) when due in accordance therewith; or (iii) the Company
     shall fail to pay any  interest on any Loan,  or any other  amount  payable
     hereunder, within five days after any such interest or other amount becomes
     due in accordance with the terms of this Agreement; or

          (b) any  representation or warranty made or deemed made by the Company
     herein or that is  contained in any  certificate,  document or financial or
     other  statement  furnished by it at any time under or in  connection  with
     this Agreement shall prove to have been inaccurate in any material  respect
     on or as of the date made or deemed made; or

          (c) the Company shall default in the  observance or performance of any
     agreement contained in clause (i) or (ii) of Section 4.4(a), Section 4.7(a)
     or Section 5 of this Agreement; or

          (d) the Company shall default in the  observance or performance of any
     other agreement  contained in this Agreement or any other Company Agreement
     (other than as provided in paragraphs (a) through (c) of this Section), and
     such default shall continue unremedied for a period of 30 days after notice
     to the Company from the Bank; or

          (e) the Company or any of its Subsidiaries shall (i) default in making
     any payment of any principal of any  Indebtedness  (including any Guarantee
     Obligation,  but excluding the Loans) on the scheduled or original due date
     with respect thereto; or (ii) default in making any payment of any interest
     on any such  Indebtedness  beyond the period of grace, if any,  provided in
     the instrument or agreement under which such  Indebtedness was created;  or
     (iii) default in the observance or  performance  of any other  agreement or
     condition  relating to any such Indebtedness or contained in any instrument
     or agreement  evidencing,  securing or relating thereto, or any other event
     shall occur or condition  exist,  the effect of such default or other event
     or condition is to cause,  or to permit the holder or  beneficiary  of such
     Indebtedness   (or  a  trustee  or  agent  on  behalf  of  such  holder  or
     beneficiary)  to  cause,  with the  giving  of  notice  if  required,  such
     Indebtedness  to become due prior to its stated maturity or (in the case of
     any such  Indebtedness  constituting  a  Guarantee  Obligation)  to  become
     payable;  provided,  that a default, event or condition described in clause
     (i), (ii) or (iii) of this  paragraph (e) shall not at any time  constitute
     an Event of Default unless,  at such time, one or more defaults,  events or
     conditions  of the type  described in clauses  (i),  (ii) and (iii) of this
     paragraph  (e) shall  have  occurred  and be  continuing  with  respect  to
     Indebtedness  the  outstanding  principal  amount of which  exceeds  in the
     aggregate $25,000,000; or

          (f) (i) the Company or, should such commencement have or reasonably be
     expected to have a Material Adverse Effect, any of its Subsidiaries,  shall
     commence  any case,  proceeding  or other  action (A) under any existing or
     future  law  of  any  jurisdiction,   domestic  or  foreign,   relating  to
     bankruptcy,  insolvency,  reorganization  or relief of debtors,  seeking to
     have an order  for  relief  entered  with  respect  to it,  or  seeking  to
     adjudicate   it  bankrupt   or   insolvent,   or  seeking   reorganization,
     arrangement, adjustment, winding-up, liquidation,  dissolution, composition
     or other relief with respect to it or its debts, or (B) seeking appointment
     of a receiver,  trustee,  custodian,  conservator or other similar official
     for it or for all or any substantial part of its assets, or the Company or,
     should such  assignment  have or be reasonably  expected to have a Material
     Adverse Effect,  any of its Subsidiaries,  shall make a general  assignment
     for the benefit of its creditors;  or (ii) there shall be commenced against
     the Company or, should such commencement have or be reasonably  expected to
     have  a  Material  Adverse  Effect,  any  of its  Subsidiaries,  any  case,
     proceeding or other action of a nature referred to in clause (i) above that
     (A) results in the entry of an order for relief or any such adjudication or
     appointment  or (B) remains  undismissed,  undischarged  or unbonded  for a
     period of 60 days;  or (iii) there shall be  commenced  against the Company
     or,  should  such  commencement  have or be  reasonably  expected to have a
     Material Adverse Effect, any of its Subsidiaries,  any case,  proceeding or
     other  action  seeking  issuance  of a warrant  of  attachment,  execution,
     distraint or similar  process  against all or any  substantial  part of its
     assets that results in the entry of an order for any such relief that shall
     not have been  vacated,  discharged,  or stayed  or bonded  pending  appeal
     within 60 days from the entry  thereof;  or (iv) the Company or, should any
     such  action  have or be  reasonably  expected  to have a Material  Adverse
     Effect,  any of its Subsidiaries,  shall take any action in furtherance of,
     or indicating its consent to, approval of, or  acquiescence  in, any of the
     acts set forth in clause (i), (ii), or (iii) above;  or (v) the Company or,
     should any such failure or inability have or be reasonably expected to have
     a Material Adverse Effect, any of its Subsidiaries, shall generally not, or
     shall be unable to, or shall  admit in writing  its  inability  to, pay its
     debts as they become due; or

          (g) (i) any Person shall engage in any  "prohibited  transaction"  (as
     defined in Section 406 of ERISA or Section 4975 of the Code)  involving any
     Plan, (ii) any "accumulated  funding deficiency" (as defined in Section 302
     of ERISA),  whether or not waived,  shall exist with respect to any Plan or
     any Lien in favor of the PBGC or a Plan  shall  arise on the  assets of the
     Company or any Commonly  Controlled Entity,  (iii) a Reportable Event shall
     occur with  respect  to, or  proceedings  shall  commence to have a trustee
     appointed,  or a trustee shall be appointed, to administer or to terminate,
     any  Single  Employer  Plan,  which  Reportable  Event or  commencement  of
     proceedings or  appointment  of a trustee is, in the reasonable  opinion of
     the Bank,  likely to result in the termination of such Plan for purposes of
     Title IV of ERISA,  (iv) any  Single  Employer  Plan  shall  terminate  for
     purposes of Title IV of ERISA,  (v) the Company or any Commonly  Controlled
     Entity shall, or in the reasonable  opinion of the Bank is likely to, incur
     any liability in connection  with a withdrawal  from, or the  Insolvency or
     Reorganization  of,  a  Multiemployer  Plan  or (vi)  any  other  event  or
     condition  shall occur or exist with respect to a Plan; and in each case in
     clauses (i) through (vi) above, such event or condition,  together with all
     other such events or conditions, if any, could, in the sole judgment of the
     Bank, reasonably be expected to have a Material Adverse Effect; or

          (h) one or more  judgments  or decrees  shall be entered  against  the
     Company or any of its  Subsidiaries  involving in the aggregate a liability
     (not paid or fully covered by insurance as to which the relevant  insurance
     company has  acknowledged  coverage) of  $25,000,000  or more, and all such
     judgments or decrees  shall not have been  vacated,  discharged,  stayed or
     bonded pending appeal within 30 days from the entry thereof; or

          (i) any approval of the PSC or the Issuer  (including the PSC Order or
     the Bond  Resolution) or any other  Governmental  Authority with respect to
     any Company Agreement shall be modified, rescinded, revoked or set aside or
     otherwise  cease to remain in full force and effect or shall  otherwise not
     authorize the entirety of the advances  (including the Borrowing)  made (or
     deemed  made)  under,  or the  reimbursement  obligations  relating  to any
     drawing under the Letter of Credit arising under,  Section 2.2(a) or (b) of
     this Agreement or any other amounts owing or outstanding hereunder; or

          (j) any "Event of Default" under and as defined in the Indenture shall
     occur and be continuing.

          Section 6.2 Remedies Upon an Event of Default. If any Event of Default
     shall have  occurred and be  continuing,  the Bank may (i) if the Letter of
     Credit  shall not have been  issued,  by notice to the Company  declare the
     obligation  and  commitment of the Bank to issue the Letter of Credit to be
     terminated,  whereupon  the same  shall  forthwith  terminate,  (ii) if the
     Letter  of Credit  shall  have  been  issued,  notify  the  Trustee  of the
     occurrence and  continuance of such Event of Default  whereupon the Trustee
     shall  accelerate  payment of all the  outstanding  Bonds and the  interest
     accrued  thereon  pursuant to and in  accordance  with Section 10.01 of the
     Indenture,  and notify the Trustee of the Bank's determination to terminate
     the  Letter of Credit on the 12th  Business  Day  following  the  Trustee's
     receipt of such notice,  and, in either case, provide a copy of such notice
     to the  Company and the  Issuer,  (iii) if the Letter of Credit  shall have
     been issued and a drawing to pay interest on the Bonds shall have been made
     thereunder (other than such a drawing in respect of the payment of interest
     upon  scheduled or  accelerated  maturity,  or  redemption,  of the Bonds),
     notify the Trustee prior to the tenth day  following  such drawing that the
     Bank  has not  been  reimbursed  for such  drawing  and  that the  Interest
     Component  (as  defined  in the  Letter of  Credit)  in the  amount of such
     drawing  will not be  reinstated,  (iv) require the Company to provide cash
     collateral  in respect of the undrawn  portion of the Stated  Amount of the
     Letter of Credit, whereupon the Company shall deposit with the Bank as cash
     collateral  an  amount  equal to such  undrawn  portion,  (v)  declare  the
     Borrowing  and all  other  principal  amounts  outstanding  hereunder,  all
     interest  thereon and all other amounts  payable  hereunder to be forthwith
     due and payable,  whereupon the Borrowing and all other  principal  amounts
     outstanding  hereunder,  all such interest and all such other amounts shall
     become and be  forthwith  due and  payable,  without  presentment,  demand,
     protest or further  notice of any kind,  all of which are hereby  expressly
     waived by the Company,  (vi) exercise all the rights and remedies  provided
     herein;  provided,  however, that in the event of an actual or deemed entry
     of an  order  for  relief  with  respect  to  the  Company  or  any  of its
     Subsidiaries  under the Federal  Bankruptcy  Code,  (A) the  obligation and
     commitment  of the Bank to issue the  Letter of  Credit  (if the  Letter of
     Credit shall not have been issued) and the  obligation  of the Bank to make
     any  payment or  disbursement  thereunder  as to make the  Borrowing  shall
     automatically  be  terminated,  and  (B)  the  Borrowing  and  all  amounts
     reimbursable on demand pursuant to Section  2.02(a),  all interest  accrued
     and  unpaid  thereon  and  all  other  amounts   payable   hereunder  shall
     automatically become due and payable, without presentment,  demand, protest
     or any notice of any kind, all of which are hereby  expressly waived by the
     Company.

                                  ARTICLE VII

                   CONDITIONS TO ISSUANCE OF LETTER OF CREDIT
                   ------------------------------------------

         The  obligation  of the Bank to issue the Letter of Credit  pursuant to
Sections 2.1(a) and 2.1(c) is subject to the following conditions precedent:

          Section  7.1  Documents.  The  Bank  shall  have  received  all of the
     following by no later than the Closing  Date,  each duly executed and dated
     the date of the  issuance of the Letter of Credit (or such other date prior
     thereto  as shall  be  satisfactory  to the  Bank),  in form and  substance
     satisfactory to the Bank:

          (a) This Agreement.  Duly executed counterparts of the Company and the
     Bank of this Agreement.

          (b) Bond  Documents.  Duly  executed or  certified  copies of the Bond
     Documents,  including a transcript  of the  proceedings  of the Issuer with
     respect to the original  issuance  and all  subsequent  actions  taken with
     respect to the Bonds.

          (c)  Closing  Certificate.  A  certificate  of  the  Secretary  or  an
     Assistant  Secretary of the Company  substantially in the form of Exhibit C
     attached  hereto  dated the date of this  Agreement:  (i)  certifying  that
     attached  thereto  are true and  complete  copies  of (A) the  Articles  of
     Organization and Limited Liability Company Agreement of the Company in each
     case as in  effect  on the  date  of  such  certificate,  (B)  extracts  of
     resolutions  of the  Management  Committee  of the  Company  approving  the
     execution   and  delivery  by  the  Company  of  this   Agreement  and  the
     transactions  contemplated  hereby, and (C) all necessary  governmental and
     regulatory  approvals or orders required to be obtained by the Company with
     respect to this Agreement;  (ii) certifying that such  resolutions have not
     been  amended,  modified,  revoked or  rescinded  and are in full force and
     effect  as of the date of such  certificate;  (iii)  certifying  that  such
     governmental  and  regulatory  approvals  and orders have not been amended,
     modified,  revoked or rescinded  and are in full force and effect as of the
     date of such  certificate  and are not subject to rehearing or appeal;  and
     (iv)  certifying  the  names and true  signatures  of the  officers  of the
     Company authorized to sign this Agreement.

          (d)  Opinion  of  Counsel  to the  Company.  The  opinion of Steven L.
     Zelkowitz,  General  Counsel to the  Company  substantially  in the form of
     Exhibit D attached hereto.

          (e) Opinion of Bond Counsel. The opinion of Hawkins, Delafield & Wood,
     bond  counsel,  addressed  to the Bank (or, if not  addressed  to the Bank,
     accompanied  by a letter from such  counsel  advising  the Bank that it may
     rely on the opinions of such counsel) in form and substance satisfactory to
     counsel for the Bank.

          (f) Financial Statements.  (i) Audited consolidated and, to the extent
     available,  unconsolidated financial statements of the Company for the nine
     month period ended  December 31, 1998 and for the 1999 fiscal year and (ii)
     unaudited interim consolidated and, to the extent available, unconsolidated
     financial  statements  of the  Company  for  each  quarterly  period  ended
     subsequent  to the  date  of the  latest  applicable  financial  statements
     delivered  pursuant  to  clause  (i) of this  paragraph  as to  which  such
     financial  statements are available,  and such financial  statements  shall
     not, in the reasonable  judgment of the Bank,  reflect any material adverse
     change in the consolidated financial condition of the Company, as reflected
     in the financial statements referred to in clause (i) of this paragraph.

          (g) Approvals. All governmental and third party approvals necessary in
     connection   with  the  continuing   operations  of  the  Company  and  its
     Subsidiaries  and the  transactions  contemplated  hereby  shall  have been
     obtained and be in full force and effect.

          (h) Fees.  All fees  required to be paid,  and all  expenses for which
     invoices have been presented (including the reasonable fees and expenses of
     Jones,  Day, Reavis & Pogue of an agreed amount),  on or before the Closing
     Date.

          (i)  Reaffirmation  of  Long-Term  Ratings.  The  Company  shall  have
     reaffirmed the indicative rating of its senior unsecured  long-term debt of
     at least A from S&P and A3 from Moody's.

          Section  7.2 No  Default:  Representations  and  Warranties  True  and
     Correct. The Company hereby agrees that both before and after giving effect
     to the issuance of the Letter of Credit, the following  statements shall be
     true and correct:

          (a) No Default  or Event of Default  has  occurred  and is  continuing
     under this Agreement or the Bond Documents; and

          (b) The  representations  and  warranties of the Company  contained in
     Article III hereof are true and correct in all material respects as of each
     such date, with the same effect as though made on each such date.

          Section 7.3 Borrowing Conditions.  The amount paid or disbursed by the
     Bank to the  Trustee  under  the  Letter  of Credit  shall  constitute  the
     Borrowing in accordance  with Section 2.2(b) if on the date of such payment
     or disbursement the following conditions shall all be true:

          (a) No Change of Control  shall have  occurred and LIPA shall not have
     given its notice to the Company to exercise the LIPA Option; and

          (b) No other  Borrowing  shall already have been made, it being agreed
     that  only  are term  borrowing  (the  Borrowing)  may be made  under  this
     Agreement; and

          (c) The  Company  shall  not have  reimbursed  the Bank in full to its
     satisfaction for the amount paid or disbursed by the Bank on such date; and

          (d) The  statements  set forth in Section 7.2(a) and (b) shall be true
     and correct on such date.

                                  ARTICLE VIII

                                     GENERAL
                                     -------

          Section  8.1  Amendments.  No  amendment,  modification,   supplement,
     termination or waiver of, or consent with respect to, any provision of this
     Agreement  shall in any  event be  effective  unless  the same  shall be in
     writing  and signed by the Bank.  No notice to or demand on the  Company in
     any specific case shall entitle the Company to any other or further  notice
     or demand in similar or other  circumstances  where such further  notice or
     demand  is not  expressly  required  by this  Agreement  to be given to the
     Company.

          Section 8.2 Notices.  Each notice,  demand and other  communication in
     connection  with this Agreement  shall be in writing and shall be deemed to
     be given to and served upon the addressee  thereof (a) upon actual delivery
     to the addresses  designated  below for the parties,  respectively,  or (b)
     upon  transmission,  when  sent by  telecopy  or  other  similar  facsimile
     transmission,  or (c)  seventy-two  (72) hours after the deposit thereof in
     any main or  branch  United  States  Post  Office  in New  York,  New York,
     certified mail first-class postage prepaid, addressed as follows:

            If to the Company:  KeySpan Generation LLC
                                One Metro Tech Center
                                Brooklyn, NY 11201
                                Attn:  Treasurer
                                Fax No.: (718) 403-2042

            With a copy to:     KeySpan Corporation
                                One Metro Tech Center
                                Brooklyn, NY 11201
                                Attn: Legal Department
                                Fax No.: (718) 403-3106

            If to the Bank:     National Westminster Bank Plc, New York Branch
                                101 Park Avenue
                                New York, NY 10178
                                Attn: Sheila Shaw / Juanita Baird, Commercial
                                Loans
                                Tel: (212) 401 1406/1420
                                Fax No.: (212) 401 1494

            With a copy to:     Jones, Day, Reavis & Pogue
                                599 Lexington Avenue
                                New York, New 10022
                                Attn: Tom Speechley
                                Fax No.: (212) 755-7306

            If to the Trustee:  The Chase Manhattan Bank
                                450 W. 33rd Street - 15th Floor
                                New York, NY 10001

                                Attn: Capital Markets Fiduciary Services
                                Fax No: (212) 946-8158


          By notice complying with this Section 8.2, each party may from time to
     time change the address to be  thereafter  applicable to it for the purpose
     of this Section.

          Section 8.3 Costs,  Expenses and Taxes.  The Company agrees (i) to pay
     to the Bank, on demand,  all  out-of-pocket  costs and expenses of the Bank
     (including the fees and  out-of-pocket  expenses of counsel for the Bank of
     an agreed amount) in connection with the review of the Bond Documents,  the
     preparation,  execution and delivery of this  Agreement,  any amendments or
     modifications  of (or  supplements to) any of the foregoing and any and all
     other instruments or documents  furnished  pursuant hereto or thereto or in
     connection herewith or therewith,  and all out-of-pocket costs and expenses
     (including  attorneys'  fees and legal  expenses)  incurred  by the Bank in
     connection with the enforcement of this Agreement,  the Bond Documents, any
     such other  instruments  or documents or any collateral  security,  (ii) to
     pay, and to save the Bank  harmless  from all  liability  for, any stamp or
     other  taxes  that may be  payable  in  connection  with the  execution  or
     delivery of this Agreement,  the Letter of Credit,  or any other instrument
     or document  provided for herein or therein or delivered or to be delivered
     hereunder or thereunder or in connection herewith or therewith, and to save
     the Bank harmless from and against any and all liabilities  with respect to
     or resulting  from any delay in paying,  or any failure to pay, such taxes,
     and (iii) to indemnify, pay and hold the Bank and the officers,  directors,
     employees and agents of the Bank (collectively, the "Indemnitees") harmless
     from and against any and all  liabilities,  obligations,  losses,  damages,
     penalties,   actions,   judgments,   suits  and  costs,  including  without
     limitation  attorneys'  fees,  expenses  and  disbursements  of any kind or
     nature whatsoever,  that are not caused by Indemnitees' gross negligence or
     willful  misconduct,  any untrue statement or alleged untrue statement of a
     material fact in this Agreement,  or any other documents furnished pursuant
     hereto or in connection  herewith,  or the omission or alleged  omission to
     state therein a material fact necessary to make the statements  therein not
     misleading  or the  transfer  of,  payment of, or (pursuant to any judicial
     order)  failure  to pay or delay in  paying  under,  the  Letter  of Credit
     (collectively, the "Indemnified Liabilities").

         To the extent that the undertaking to indemnify,  pay and hold harmless
set forth in the preceding  paragraph may be  unenforceable  because it violates
any law or public policy, the Company shall contribute the maximum portion, that
it is  permitted  to pay and satisfy  under  applicable  law, to the payment and
satisfaction of all Indemnified  Liabilities  incurred by the Indemnitees or any
of them. The obligations of the Company under this Section 8.3 shall survive the
termination  of  this  Agreement  and  the  discharge  of  the  Company's  other
Obligations.

          Section  8.4  Liability  of the Bank.  Neither the Bank nor any of its
     officers or directors shall be liable or responsible  for: (i) the use that
     may be made of the  Letter of Credit  or for any acts or  omissions  of the
     Trustee acting in its capacity as Trustee, and any transferee in connection
     therewith; (ii) the validity, sufficiency or genuineness of documents other
     than the Letter of Credit, or of any endorsement(s)  thereon,  even if such
     documents  should  in  fact  prove  to be in any or all  respects  invalid,
     insufficient,  fraudulent  or forged;  (iii)  payment  by the Bank  against
     presentation  of documents  that do not comply with the terms of the Letter
     of Credit,  including  failure of any  documents  to bear any  reference or
     adequate reference to the Letter of Credit; or (iv) any other circumstances
     whatsoever in making or failing to make payment under the Letter of Credit;
     except only that the Company shall have a claim  against the Bank,  and the
     Bank shall be liable to the Company, to the extent, but only to the extent,
     of any direct, as opposed to consequential, damages suffered by the Company
     that the Company  proves were caused by the Bank's  willful  misconduct  or
     gross  negligence in  determining  whether  documents  presented  under the
     Letter of Credit  comply  with the terms of the  Letter of Credit and there
     shall  have been a  wrongful  payment  as a result  thereof  or the  Bank's
     wrongful  failure to pay under the Letter of Credit after the  presentation
     to it by the Trustee (or a successor  trustee  under the  Indenture to whom
     the Letter of Credit has been  transferred in accordance with its terms) of
     a  certificate  strictly  complying  with the terms and  conditions  of the
     Letter of Credit. In furtherance and not in limitation of the foregoing and
     unless the Bank has actual  knowledge to the contrary,  the Bank may accept
     documents that appear on their face to be in order, without  responsibility
     for further  investigation,  regardless of any notice or information to the
     contrary.

          Section 8.5 Setoff. In addition to any rights and remedies of the Bank
     provided by law, the Bank shall have the right, without prior notice to the
     Company,  any such  notice  being  expressly  waived by the  Company to the
     extent  permitted  by  applicable  law,  upon any amount  becoming  due and
     payable  by the  Company  hereunder  (whether  at the stated  maturity,  by
     acceleration  or otherwise),  to set off and  appropriate and apply against
     such  amount any and all  deposits  (general  or  special,  time or demand,
     provisional or final), in any currency, and any other credits, indebtedness
     or  claims,  in any  currency,  in each case  whether  direct or  indirect,
     absolute or contingent,  matured or unmatured, at any time held or owing by
     the Bank or any  branch  or  agency  thereof  to or for the  credit  or the
     account of the  Company,  as the case may be. The Bank  agrees  promptly to
     notify the Company after any such setoff and application  made by the Bank,
     provided that the failure to give such notice shall not affect the validity
     of such setoff and application.

          Section 8.6 Headings and References. Article and Section headings used
     in this  Agreement  are for  convenience  only and  shall  not  affect  the
     construction  of  this  Agreement.   All  references  herein  to  Articles,
     Sections, Recitals, Schedules and Exhibits shall be deemed to be references
     to Articles,  Sections, Recitals, Schedules and Exhibits of this Agreement,
     unless the context indicates otherwise.

          Section 8.7 GOVERNING LAW: WAIVER OF JURY TRIAL.  THIS AGREEMENT SHALL
     BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF
     NEW YORK. THE COMPANY AND THE BANK HEREBY  IRREVOCABLY AND  UNCONDITIONALLY
     WAIVE  TRAIL BY JURY IN ANY LEGAL  ACTION OR  PROCEEDING  RELATING  TO THIS
     AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

          Section 8.8  Successors and Assigns.  This Agreement  shall be binding
     upon the Company and the Bank and their respective  successors and assigns,
     and  shall  inure  to the  benefit  of the  Company  and the  Bank  and the
     successors  and assigns of the Bank.  The Company may not assign its rights
     hereunder or in connection herewith or any interest herein (voluntarily, by
     operation of law or  otherwise)  without the prior  written  consent of the
     Bank.  The Bank may assign its rights and interest  under this Agreement to
     any  Person  with the  prior  written  consent  of the  Company,  not to be
     unreasonably  withheld.  This  Agreement  shall not be  construed  so as to
     confer any right or benefit  upon any person other than the parties to this
     Agreement  and (subject to the  preceding  provisions  of this Section 8.8)
     their respective successors and assigns.

          Section  8.9  Severability  of  Provisions.   Any  provision  of  this
     Agreement that is prohibited or unenforceable in any jurisdiction shall, as
     to such  jurisdiction,  be ineffective to the extent of such prohibition or
     unenforceability  without  invalidating the remaining  provisions hereof or
     affecting  the validity or  enforceability  of such  provision in any other
     jurisdiction.

          Section 8.10 Execution in Counterparts. This Agreement may be executed
     in any number of counterparts, all of which taken together shall constitute
     one and the  same  instrument,  and  any  party  hereto  may  execute  this
     Agreement by signing one or more Counterparts.


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<PAGE>



Delivered at New York, New York, on the day and year first above written.

                                  KEYSPAN GENERATION LLC

                                  By:
                                      --------------------------
                                  Its:

                                  NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH
                                  By: /s/ SCOTT BARTON
                                     ---------------------------
                                  Its:     Senior Vice President

                                  NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH
                                  By: /s/ SCOTT BARTON
                                     ---------------------------
                                  Its:     Senior Vice President