INDEMNIFICATION AGREEMENT

      THIS  INDEMNIFICATION  AGREEMENT dated as of May 28,1998 (the "Agreement")
by and between LIPA ACQUISITION CORP.,  ("ACQUISITION"),  a New York Corporation
located at 333 Earle Ovington Blvd., Suite 403, Uniondale,  New York, 11553 (the
"Indemnitor"),  and each individual identified on Schedule I attached hereto and
hereby made part hereof (each an "Indemnitee," collectively, the "Indemnitees").

                               W I T N E S S E T H

      WHEREAS,  each Indemnitee has agreed to serve,  currently  serves,  or has
served as a director or officer of the  Indemnitor,  or as a director or officer
of Long Island Lighting Company (doing business as "LIPA") subsequent to May 28,
1998,  or  as  a  trustee  or  officer  of  Long  Island  Power  Authority  (the
"Authority"),  or as a director or officer of any  subsidiary  of the  Authority
(other than LIPA),  or while such  director,  officer or trustee,  has agreed to
serve,  currently serves, or has served, at the request of the Indemnitor,  LIPA
(subsequent  to May 28, 1998),  the Authority or any subsidiary of the Authority
(other than LIPA), any other  corporation,  partnership,  joint venture,  trust,
employee benefit plan or other enterprise in any capacity, and

      WHEREAS,  the  Indemnitor  desires to  indemnify  each  Indemnitee  to the
fullest extent permitted by law and each Indemnitee desires to be so indemnified
by the Indemnitor,

      NOW THEREFORE,  in consideration  of each  Indemnitee's  past,  present or
future  service,  and in order to induce the continued  and/or future service of
each current and/or future Indemnitee, the parties hereby agree as follows:

      1. Indemnification.

      (a) The Indemnitor  shall  indemnify and hold harmless each  Indemnitee to
the fullest  extent  permitted by law against any and all  expenses  (including,
without limitation,  investigation expenses and expert witnesses' and attorneys'
fees and  expenses),  losses,  judgments,  fines and amounts paid in  settlement
actually  incurred by an Indemnitee  (net of any related  insurance  proceeds or
other  indemnification  payments  received,  paid  to,  or  on  behalf  of  such
Indemnitee  as  described  in Section  4(b)) in  connection  with any present or
future  threatened,  pending or  completed  claim,  action,  suit or  proceeding
whether civil,  criminal,  administrative  or  investigative  (a  "Proceeding"),
whether or not such  Proceeding is by or in the right of the  Indemnitor,  based
upon,  arising from,  relating to, or by reason of the fact that such Indemnitee
was, is, shall be or shall have been a director or officer of the Indemnitor, or
a director  or  officer  of LIPA  subsequent  to May 28,  1998,  or a trustee or
officer of the  Authority,  or a director  or officer of any  subsidiary  of the
Authority  (other than LIPA),  or while such director,  officer or trustee,  has
agreed  to  serve,  currently  serves,  or has  served,  at the  request  of the
Indemnitor,  LIPA  (subsequent to May 28, 1998), the Authority or any subsidiary
of the Authority (other than LIPA), any other  corporation,  partnership,  joint
venture,  trust,  employee  benefit plan or other  enterprise  in any  capacity;
provided that no  indemnification  may be made to or on behalf of any Indemnitee
if a judgment or other final adjudication adverse to such Indemnitee establishes
that such  Indemnitee's  acts were  committed in bad faith or were the result of
active and deliberate  dishonesty,  and were material to the cause of the action
so adjudicated,  or that such Indemnitee 

<PAGE>

personally  gained in fact a financial  profit or other  advantage to which such
Indemnitee  was  not  legally  entitled,  and  further,  provided  that  no such
indemnification  shall be  required  with  respect  to any  settlement  or other
nonadjudicated disposition of any Proceeding unless the Indemnitor has given its
prior  consent  to  such  settlement  or  disposition,  such  consent  not to be
unreasonably withheld.

      (b) To the  extent an  Indemnitee  has been  successful,  on the merits or
otherwise,  in the defense of a Proceeding or in the defense of any claim, issue
or matter involved  therein,  such  Indemnitee  shall be entitled as a matter of
right to  indemnification  as  authorized  in Section 1 (a) upon  receipt by the
Indemnitor of a statement from such Indemnitee  requesting such  indemnification
without  further   determination  of  entitlement  to   indemnification  by  the
Indemnitor.  Any other  indemnification under Section 1 (a), unless awarded by a
court,  shall be made by the  Indemnitor  only if authorized in a specific case,

      (i) by the Board of Directors of the Indemnitor, acting by a quorum of its
directors who are not parties to such action or proceeding,  upon a finding that
the Indemnitee has met the standard of conduct so forth in Section 1 (a),

      (ii) if such a quorum is not obtainable  or, even if obtainable,  a quorum
of  disinterested  directors  so  directs,  (x) by the  Board of  Directors  the
Indemnitor upon the opinion in writing of independent  legal counsel  reasonably
acceptable to the Indemnitee and the Indemnitor,  that indemnification is proper
in the  circumstances  because the  applicable  standard of conduct set forth in
Section 1 (a) has been met by such Indemnitee, or (y) by the shareholders of the
Indemnitor upon a finding that such  Indemnitee has met the applicable  standard
of conduct set forth in Section 1 (a).

      (c) The  termination  of any  such  Proceeding  by  judgment,  settlement,
conviction or upon a plea of nolo  contendere,  or its equivalent,  shall not in
itself create a presumption  that the  Indemnitee's  acts were  committed in bad
faith or were the result of active and  deliberate  dishonesty and were material
to the cause of the action or that such Indemnitee  personally  gained in fact a
financial  profit or other  advantage to which such  Indemnitee  was not legally
entitled.  In making a determination of entitlement pursuant to Section 1 (b) or
Section 3, the person or entity  making such  determination  shall  presume that
such Indemnitee is entitled to indemnification.

      2. Method of Payment.

      (a)  Each  Indemnitee   shall,  upon  making  a  written  request  to  the
Indemnitor,  be  entitled  to  receive  promptly  from the  Indemnitor,  and the
Indemnitor shall promptly pay to such  Indemnitee,  by check payable in next-day
funds,  the amount such  Indemnitee  is entitled to receive from the  Indemnitor
pursuant  to  Section 1  ("Indemnified  Amounts").  In making  any such  written
request,  an Indemnitee  shall submit to the Indemnitor a schedule setting forth
in  reasonable  detail the amount  expended  (or  incurred  and  expected  to be
expended) for each Indemnified Amount accompanied by a copy of the relevant bill
or other documentation.

      (b)  Amounts  reasonably  expected  to be  incurred  or  expended  by  the
Indemnitee within six (6) months next succeeding a request by such Indemnitee as
described  below for  expenses.  including  attorneys'  fees,  in defending  any
Proceeding in advance of the final 


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<PAGE>

disposition  thereof  ("Advanced  Amount") shall be paid by the Indemnitor  upon
such Indemnitee's written request,  which shall include a schedule setting forth
in reasonable detail the amount expended,  or reasonably expected to be expended
within the next six (6) months, by such Indemnitee,  accompanied by any relevant
documentation.  An Indemnitee  may make as many requests for an Advanced  Amount
under this  Section 2(b) as such  Indemnitee  may deem  reasonably  necessary to
cover Indemnified Amounts.

      (c) Each  Indemnitee  hereby agrees to repay all  Indemnified  Amounts and
Advanced  Amounts to the  Indemnitor  within ten (10) days  following  the final
resolution of any Proceeding to which such  Indemnified  Amounts and/or Advanced
Amounts relate,  if, and to the extent, it is determined that such Indemnitee is
not entitled to indemnification with respect thereto pursuant to Section 1.

      (d) In the  event  that  an  Indemnitee  is  entitled  to  indemnification
pursuant to Section 1, such Indemnitee  shall have the right to seek payment for
that  portion of  Indemnified  Amounts  which is in excess of  Advanced  Amounts
received by such Indemnitee (the "Unadvanced  Indemnified  Amount") by following
the  procedures  set  forth in  Section  2(a);  provided  that the  schedule  of
Indemnified  Amounts shall in addition set forth each and every Advanced  Amount
received as of the date of such listing in order to calculate the net Unadvanced
Indemnified Amounts. If an Indemnitee is entitled to indemnification pursuant to
Section 1 and the total of the  Advanced  Amounts  theretofore  received by such
Indemnitee  exceeds the total amount of  Indemnified  Amounts,  such  Indemnitee
shall pay the amount of the difference to the Indemnitor within thirty (30) days
after a determination of the amount of such excess.

      3. Enforcement of Rights under this Agreement.

      The rights to indemnification or advances pursuant to this Agreement shall
be enforceable by any Indemnitee at such Indemnitee's  election (i) in any court
of competent  jurisdiction,  or (ii) by  arbitration  by a single  arbitrator in
accordance  with the  rules of the  American  Arbitration  Association  and such
Indemnitee's  costs and expenses  incurred in connection  with the  Indemnitee's
efforts to establish his or her right to indemnification or advances in any such
judicial  or  arbitration  proceeding  shall be paid by the  Indemnitor,  if the
Indemnitee is successful. If an Indemnitee elects to proceed by arbitration, the
arbitrator  shall  render his or her  decision  and  notify the  parties of such
decision  within thirty (30) days following the initiation of  arbitration.  The
Indemnitor  agrees  to be  subject  to the  jurisdiction  of and be bound by the
determination  of any court or arbitration in which such  proceeding  shall have
been commenced,  continued or appealed. Further, the Indemnitor shall not oppose
an Indemnitee's claim by reason of any prior determination made pursuant to this
Agreement and shall limit its defense to the merits of the claim.  Further,  any
adjudication or arbitration shall be conducted de novo, without prejudice in any
manner whatsoever by reason of any prior determination by the Indemnitor. In any
such judicial or arbitration proceeding, the Indemnitor shall have the burden of
proving by the preponderance of the evidence that the Indemnitee is not entitled
to indemnification or advances hereunder.  Neither the failure of the Indemnitor
(including its Board of Directors, independent legal counsel or shareholders) to
have made a determination  that an Indemnitee is entitled to  indemnification or
advances  in  neither  the  circumstances  nor an  actual  determination  by the
Indemnitor  (including  its Board of  Directors,  independent  legal  counsel or


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<PAGE>

shareholders)  that such  Indemnitee is not so entitled shall be a defense to an
action or create a presumption that such Indemnitee is not so entitled.

      4. Rights to Indemnification and Advances Not Exclusive.

      (a) The rights to  indemnification  and  advances  hereunder  shall not be
deemed  exclusive  of,  or in  limitation  of,  any  other  rights  to  which an
Indemnitee  may  be  entitled  under  any  law,  agreement,   provision  of  the
certificate  of  incorporation  or  by-laws  of  the  Indemnitor,  vote  of  the
shareholders or disinterested Directors of the Indemnitor or otherwise,  both as
to action in such  Indemnitee's  official  capacity  and as to action in another
capacity  while holding such office,  and shall continue after an Indemnitee has
ceased to be a director or officer of the  Indemnitor,  or a director or officer
of LIPA or a trustee or officer of the  Authority,  or a director  or officer of
any subsidiary of the Authority  (other than LIPA),  or to serve, at the request
of the  Indemnitor,  LIPA  (subsequent  to May 28,  1998),  the Authority or any
subsidiary  of  the  Authority  (other  than  LIPA),   any  other   corporation,
partnership,  joint venture, trust, employee benefit plan or other enterprise in
any capacity.

      (b) If an Indemnitee  shall receive payment from any insurance  carrier or
from the plaintiff in any Proceeding or indemnification payments from any entity
if the Proceeding involves such Indemnitee's service with such entity in respect
of  Indemnified  Amounts  after  payments  on account of all or any part of such
indemnified  Amounts have been made by the  Indemnitor,  such  Indemnitee  shall
reimburse the Indemnitor  the amount,  if any, by which the sum of such payments
by such insurance  carrier,  such  enterprise and such plaintiff and payments by
the Indemnitor to such Indemnitee exceed the Indemnified Amounts;  provided that
any such  insurance  proceeds  or  payments  required  to be  reimbursed  to the
insurance  carrier or enterprise  shall not be payments to such  Indemnitee  for
purposes of this Section 4(b).  Upon payment of Indemnified  Amounts  hereunder,
the  Indemnitor  shall,  to the  extent  not  prohibited  under  such  insurance
policies,  be  subrogated  to such  Indemnitee's  rights  against any  insurance
carrier or  enterprise in respect of such  Indemnified  Amounts.  

      5. Protection Pending Determination of Entitlement.

      During the interval between the  Indemnitor's  receipt of any Indemnitee's
request  for  indemnification  and the later to occur of (a)  payment in full to
such Indemnitee of the Indemnified  Amounts,  or (b) a final  determination  (if
required) pursuant to Sections 1(b) or 3 that such Indemnitee is not entitled to
indemnification,  the  Indemnitor  shall  protect such  Indemnitee  against loss
which,  for purposes of this  Agreement,  shall mean the taking of the necessary
steps  (whether  or not  such  steps  require  expenditures  to be  made  by the
Indemnitor  at  that  time)  to  stay,  pending  a final  determination  of such
Indemnitee's  entitlement  to  indemnification  (and,  if such  Indemnitee is so
entitled, the payment thereof), the execution,  enforcement or collection of any
judgments,  penalties,  fines or any other amounts for which such Indemnitee may
be liable in order to avoid such Indemnitee's  being or becoming in default with
respect to any such amounts (such necessary steps to include, but not be limited
to, the  procurement  of a surety bond to achieve  such stay),  within three (3)
days after receipt of such Indemnitee's written request therefor,  together with
a written  undertaking  by such  Indemnitee to repay,  no later than twenty (20)
days following receipt of a statement therefor from the Indemnitor,  amounts (if
any) expended by the Indemnitor for such purpose, if it is ultimately 


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<PAGE>

determined (if such  determination is required)  pursuant to Sections 1 (b) or 3
that such  Indemnitee is not entitled to be indemnified  against such judgments,
penalties,  fines  or  other  amounts,  provided  that  in no  event  shall  the
Indemnitor  pay the amount of any such judgment,  penalty,  fine or other amount
except pursuant to Sections 1 (b) or 3.

      6. Successors; Binding Agreement, Retroactive Effect.

      (a)  The  Indemnitor  shall  require  any  successor  (whether  direct  or
indirect,   by  purchase,   merger,   consolidation  or  otherwise)  to  all  or
substantially  all of its business or assets, by agreement in form and substance
reasonably  satisfactory  to each  Indemnitee,  expressly to assume and agree to
perform  this  Agreement  in the same  manner  and to the same  extent  that the
Indemnitor would be required to perform if no such succession had taken place.

      (b) This  Agreement  shall inure to the benefit of and be  enforceable  by
each Indemnitee's personal or legal representatives,  executors, administrators,
successors,  heirs, distributees and devisees. If an Indemnitee should die while
any  amounts  would  still  be  payable  to such  Indemnitee  hereunder  if such
Indemnitee had continued to live, all such amounts,  unless  otherwise  provided
herein,  shall be paid in  accordance  with the terms of this  Agreement to such
Indemnitee's devisee or other designee, or if there be no such designee, to such
Indemnitee's estate.

      (c) This Agreement is intended to be  retroactive  for the benefit of each
Indemnitee  and the full  benefits  hereof  shall be  available in respect of an
alleged or actual occurrence,  acts or failures to act prior to the date of this
Agreement. 

      7. Notice.

      All notices and all other  communications  provided for in this  Agreement
shall be in  writing  and  shall be  deemed  to have  been  given  upon  receipt
delivered  personally or mailed by registered or certified mail (return  receipt
requested)  or  overnight  delivery  service  to the  address  set  forth in the
forepart of this Agreement with respect to the Indemnitor and to the address set
forth in Schedule I with respect to an  Indemnitee  or to such other  address as
the Indemnitor  may have furnished to the  Indemnitees or an Indemnitee may have
furnished to the Indemnitor, in each case in writing in accordance herewith.

      8. Severability.

      If any  provision  or  provisions  of this  Agreement  shall be held to be
invalid,  illegal or unenforceable under any particular circumstances or for any
reason whatsoever (a) the validity, legality and enforceability of the remaining
provisions of this Agreement,  including, without limitation, all other portions
of any  Section,  paragraph  or  clause  of this  Agreement  that  contains  any
provision that has been found to be invalid, illegal or unenforceable,  that are
not themselves invalid, illegal or unenforceable),  or the validity, legality or
enforceability under any other circumstances shall not in any way be affected or
impaired  thereby  and  (b) to  the  fullest  extent  possible  consistent  with
applicable law, the provisions of this Agreement (including, without limitation,
all other  portions of any Section,  paragraph or clause of this  Agreement that
contains  any such  provision  that has been  found to be  invalid,  illegal  or
unenforceable,  that are not themselves invalid,  illegal or unenforceable shall
be deemed  revised,  and shall be  construed  


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<PAGE>

so as to give effect to the intent  manifested by this Agreement  (including the
provision held invalid, illegal or unenforceable).

      9. Miscellaneous.

      This Agreement may not be modified or amended, waived or discharged unless
agreed to in writing by the Indemnitor and by each Indemnitee  against whom such
modification, amendment, waiver or discharge is sought to be asserted. No waiver
by any party  hereto at any time of any breach by any other party  hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
any other party shall be deemed a waiver of similar or dissimilar  provisions or
conditions. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York,  without  giving effect to the  principles of
conflicts of laws  thereof.  Each  Indemnitee  seeking to obtain the benefits of
this Agreement  may, as a condition to receiving  such benefits,  be required by
the Indemnitor to execute a counterpart of this Agreement.


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<PAGE>

      IN WITNESS  WHEREOF,  the  Indemnitor has caused this Agreement to be duly
executed, all as of the day and year first above written.

                                          LIPA ACQUISITION CORP.

                                          By: /s/Richard Kessel
                                              ----------------------------------
                                              Name:
                                              Title:

Accepted and agreed, as
of May 28, 1998, pursuant
to Section 6 hereof

LONG ISLAND LIGHTING COMPANY

By: /s/Richard Kessel
    ---------------------------------
    Name:
    Title:


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<PAGE>

                                   SCHEDULE I

                             Schedule of Indemnitees

Indemnitee                                    Address
----------                                    -------

Richard M. Kessel                             __________________________________

Patrick J. Foye                               __________________________________

Michael Affrunti                              __________________________________

Harvey Auerbach                               __________________________________

Thomas A. Doherty                             __________________________________

Michael L. Faltischek                         __________________________________

Harriet A. Gilliam                            __________________________________

Joseph Janoski                                __________________________________

Rubert H. Hopkins                             __________________________________

Robert McMillan                               __________________________________

Nancy N. Miklos                               __________________________________

Denise Molia                                  __________________________________

Vincent Polimeni                              __________________________________

Jonathan Sinnreich                            __________________________________

James G. Gill                                 __________________________________

Frank Zarb                                    __________________________________

Pauline Balkin                                __________________________________

James D. Bennett                              __________________________________

Frank R. Jones                                __________________________________

Deborah Pfeiffer                              __________________________________

Daniel Sweeney                                __________________________________


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<PAGE>

Stanley B. Klimberg                           __________________________________

Anastasia Song                                __________________________________

Seth D. Hulkower                              __________________________________

David Warren                                  __________________________________

Edward P. Murphy                              __________________________________

Richard J. Bolbrock                           __________________________________

Laurel A. Leat                                __________________________________

In addition to those persons  identified by name in this Schedule I, each person
who has  agreed to serve,  currently  serves,  or has  served as a  director  or
officer of the  Indemnitor,  or as a director or officer of Long Island Lighting
Company (doing  business as "LIPA")  subsequent to May 29, 1998, or as a trustee
or officer of Long Island Power Authority (the "Authority"), or as a director or
officer of any  subsidiary  of the  Authority  (other than LIPA),  or while such
director,  officer or trustee,  has agreed to serve,  currently  serves,  or has
served, at the request of the Indemnitor, LIPA (subsequent to May 28, 1998), the
Authority  or any  subsidiary  of the  Authority  (other than  LIPA),  any other
corporation,  partnership,  joint venture, trust, employee benefit plan or other
enterprise in any capacity shall be deemed an Indemnitee for all purposes of the
Indemnification Agreement to which this Schedule I is attached.


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