GENERATING PLANT
                                  AND GAS TURBINE
                         ASSET PURCHASE AND SALE AGREEMENT

                                        FOR

                             ASTORIA GENERATING PLANTS
                    LOCATED AT ASTORIA, QUEENS COUNTY, NEW YORK,
                                GOWANUS GAS TURBINES
                    LOCATED AT BROOKLYN, KINGS COUNTY, NEW YORK
                                        AND
                                NARROWS GAS TURBINES
                    LOCATED AT BROOKLYN, KINGS COUNTY, NEW YORK

                                   By and Between

                   CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
                                        and

                          ASTORIA GENERATING COMPANY, L.P.

                             Dated as of March 2, 1999


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                                     -2 -
                                 TABLE OF CONTENTS


                                                                 Page


                                     ARTICLE I
                                    Definitions

      SECTION 1.01.     Definitions                                     1
      SECTION 1.02.     Accounting Terms                               14


                                     ARTICLE II
                          Purchase and Sale; Assumption of
                                Certain Liabilities

      SECTION 2.01.     Purchase and Sale                             15
      SECTION 2.02.     Auctioned Assets and Retained Assets          15
      SECTION 2.03.     Assumed Obligations and Retained Liabilities  19
      SECTION 2.04.     Third Party Consents                          24
      SECTION 2.05.     Franchise Property                            25



                                    ARTICLE III
                                   Purchase Price

      SECTION 3.01.     Purchase Price                                26
      SECTION 3.02.     Post-Closing Adjustment                       26
      SECTION 3.03.     Allocation of Purchase Price                  27


                                     ARTICLE IV
                                    The Closing

      SECTION 4.01.     Time and Place of Closing                     29
      SECTION 4.02.     Payment of Purchase Price and Estimated Adjustment
                        Amount                                        29


                                     ARTICLE V
                      Representations and Warranties of Seller

      SECTION 5.01.     Organization; Qualification                   29
      SECTION 5.02.     Authority Relative to This Agreement          29
      SECTION 5.03.     Consents and Approvals; No Violation          30
      SECTION 5.04.     Year 2000                                     31
      SECTION 5.05.     Personal Property                             31
      SECTION 5.06.     Real Estate                                   31
      SECTION 5.07.     Leases                                        32
      SECTION 5.08.     Certain Contracts and Arrangements            32
      SECTION 5.09.     Legal Proceedings                             32
      SECTION 5.10.     Permits; Compliance with Law                  33
      SECTION 5.11.     Environmental Matters                         33
      SECTION 5.12.     Labor Matters                                 34
      SECTION 5.13.     ERISA; Benefit Plans                          35
      SECTION 5.14.     Taxes                                         36
      SECTION 5.15.     Independent Engineering Assessments           36
      SECTION 5.16.     Undisclosed Liabilities                       37
      SECTION 5.17.     Brokers                                       37
      SECTION 5.18.     Insurance                                     37


                                     ARTICLE VI
                      Representations and Warranties of Buyer

      SECTION 6.01.     Organization                                  38
      SECTION 6.02.     Authority Relative to This Agreement          38
      SECTION 6.03.     Consents and Approvals; No Violation          38
      SECTION 6.04.     Availability of Funds                         40
      SECTION 6.05.     Brokers                                       40


                                    ARTICLE VII
                              Covenants of the Parties

      SECTION 7.01.  Conduct of Business Relating to the  Auctioned
                     Assets                                           40
      SECTION 7.02.  Access to Information                            43
      SECTION 7.03.  Consents and Approvals; Transferable   Permits   45
      SECTION 7.04.  Further Assurances                               46
      SECTION 7.05.  Public Statements                                48
      SECTION 7.06.  Tax Matters                                      48
      SECTION 7.07.  Bulk Sales or Transfer Laws                      49
      SECTION 7.08.  Storage.                                         49
      SECTION 7.09.  Information Resources.                           50
      SECTION 7.10.  Witness Services.                                50
      SECTION 7.11.  Consent Orders                                   50
      SECTION 7.12.  Nitrogen Oxide Allowances                        51
      SECTION 7.13.  Trade Names                                      51
      SECTION 7.14.  NYPA Agreements                                  51
      SECTION 7.15.  Narrows                                          51


                                    ARTICLE VIII
                                     Conditions

     SECTION 8.01.  Conditions Precedent to Each Party's Obligation To
                    Effect the Purchase and Sale                      52
     SECTION 8.02.  Conditions Precedent to Obligation of Buyer To
                    Effect the Purchase and Sale                      53
     SECTION 8.03.  Conditions Precedent to Obligation of Seller To
                    Effect the Purchase and Sale                      55


                                     ARTICLE IX

                                  Employee Matters

      SECTION 9.01.  Employee Matters                                 56
      SECTION 9.02.  Continuation of Equivalent Benefit Plans/Credited
                     Service                                          58
      SECTION 9.03.  Pension Plan                                     59
      SECTION 9.04.  401(k) Plan                                      61
      SECTION 9.05.  Welfare Plans                                    61
      SECTION 9.06.  Short- and Long-Term Disability                  63
      SECTION 9.07.  Life Insurance and Accidental Death and
                     Dismemberment Insurance                          63
      SECTION 9.08.  Severance                                        63
      SECTION 9.09.  Workers Compensation                             65


                                     ARTICLE X
                       Indemnification and Dispute Resolution

      SECTION 10.01.    Indemnification                               65
      SECTION 10.02.    Third Party Claims Procedures                 68


                                     ARTICLE XI
                                    Termination

      SECTION 11.01.    Termination                                   69


                                    ARTICLE XII
                              Miscellaneous Provisions

      SECTION 12.01.    Expenses                                      69
      SECTION 12.02.    Amendment and Modification;Extension;Waiver   70
      SECTION 12.03.    No Survival of Representations or Warranties  70
      SECTION 12.04.    Notices                                       70
      SECTION 12.05.    Assignment; No Third Party Beneficiaries      71
      SECTION 12.06.    Governing Law                                 72
      SECTION 12.07.    Counterparts                                  72
      SECTION 12.08.    Interpretation                                72
      SECTION 12.09.    Jurisdiction and Enforcement                  73
      SECTION 12.10.    Entire Agreement                              74
      SECTION 12.11.    Severability                                  74
      SECTION 12.12.    Conflicts                                     75




<PAGE>


                               SCHEDULES AND EXHIBITS


      Schedule 2.02(a)(ii)    Spare Parts
      Schedule 2.02(a)(iii)(A)Buyer Personal Property Located on Buyer Real
                                    Estate
      Schedule 2.02(a)(iii)(B)Buyer Personal Property Located on Seller Real
                                    Estate
      Schedule 2.02(a)(iii)(C)Buyer Personal Property Located on NYPA
            Real Estate
      Schedule 2.02(a)(iii)(D)NYPA Personal Property
      Schedule 2.02(a)(iv)    Assigned Contracts
      Schedule 2.02(a)(v)     Transferable Permits
      Schedule 2.02(a)(vi)    SO2 Allowances
      Schedule 2.02(b)(ii)(A) Seller Personal Property Located on Buyer Real
                              Estate
      Schedule 2.02(b)(ii)(C) Communications Equipment
      Schedule 2.03(a)(iv)    Seller Consent Orders
      Schedule 2.03(a)(xii)   Assumed Seller Obligations under NYPA Agreements
      Schedule 2.05(a)        Franchise Property
      Schedule 5.03(a)        Contracts Requiring Third Party Consents
      Schedule 5.08(a)        Material Contracts
      Schedule 5.09           Legal Proceedings
      Schedule 5.10(a)(i)     Exceptions Under Permits
      Schedule 5.10(a)(ii)    Non-Environmental Violations
      Schedule 5.10(b)        Nontransferable Permits and Environmental
                              Permits
      Schedule 5.11           Environmental Matters
      Schedule 5.13           Benefit Plans
      Schedule 5.15(a)        Exceptions to Independent Engineering Assessment
      Schedule 5.15(b)        Changes to Auctioned Assets
      Schedule 5.16           Other Undisclosed Liabilities
      Schedule 7.14           Rights and Interests under NYPA Agreements
      Schedule 7.15           Narrows
      Schedule 9.01(a)        Job Titles
      Schedule 9.01(b)        Collective Bargaining Agreements


      Exhibit A-1             Form of Astoria Zoning Lot Development
                              Agreement between Seller and Arthur Kill Acquiror
      Exhibit A-2             Form of Astoria Zoning Lot Development
                              Agreement between Seller and Buyer
      Exhibit A-3             Form of Gowanus Zoning Lot Development
                              Agreement between Seller and Buyer
      Exhibit B-1             Form of Deed of Conveyance for Queens
                              County
      Exhibit B-2             Form of Deed of Conveyance for Kings County
      Exhibit C               Form of FIRPTA Affidavit
      Exhibit D               Form of Opinion of John D. McMahon, Esq.,
                              General Counsel of Seller
      Exhibit E               Form of Opinion of Counsel to Buyer
      Exhibit F               Summary of Terms and Conditions for
                              License for A-10 Dock between Seller and Buyer
      Exhibit G               Form of Transition Capacity Agreement
                              between Seller and Buyer
      Exhibit H               Summary of Terms and Conditions for
                              License for A-0 Dock between Seller and Buyer
      Exhibit I               Form of Astoria Declaration of
                              Subdivision Easements
      Exhibit J               Form of Gowanus Declaration of
                              Subdivision Easements
      Exhibit K               Form of Guarantee Agreement
      Exhibit L               Form of Opinion of Counsel to Guarantor

<PAGE>




     


                                    GENERATING   PLANT  AND  GAS  TURBINE  ASSET
                              PURCHASE  AND  SALE   AGREEMENT   (including   the
                              Schedules hereto,  this "Agreement"),  dated as of
                              March 2, 1999, by and between  CONSOLIDATED EDISON
                              COMPANY OF NEW YORK,  INC., a New York corporation
                              ("Seller"),  and ASTORIA GENERATING COMPANY, L.P.,
                              a   Delaware   limited    partnership    ("Buyer",
                              collectively with Seller, the "Parties").


                  WHEREAS  Seller has offered the  Auctioned  Assets (as defined
                  herein) for sale at auction pursuant to the Order  Authorizing
                  the Process for  Auctioning of Generation  Plant issued by the
                  PSC (as defined herein) and effective as of July 21, 1998; and

                  WHEREAS Buyer desires to purchase, and Seller desires to sell,
                  the Auctioned Assets upon the terms and conditions hereinafter
                  set forth.


                  NOW,  THEREFORE,  in  consideration  of the mutual  covenants,
                  representations,  warranties  and agreements  hereinafter  set
                  forth,  and intending to be legally bound hereby,  the Parties
                  agree as follows:


                                     ARTICLE I

                                    Definitions

                  SECTION 1.01.  Definitions.  (a)  As used in this
                  Agreement, the following terms have the following meanings:

                  "A-0  License"  means  the  license  from  Buyer to  Seller in
                  respect  of the A-0 dock at  Astoria,  the  material  terms of
                  which shall be substantially as set forth in Exhibit H.

                  "A-10  License"  means  the  license  from  Seller to Buyer in
                  respect of the A-10 dock at  Astoria,  the  material  terms of
                  which shall be substantially as set forth in Exhibit F.

                  "Accountants" shall have the meaning set forth in Section
                  3.02(b).

                  "Adjustment Amount" shall have the meaning set forth in
                  Section 3.02(a).

                  "Adjustment Date" shall have the meaning set forth in
                  Section 3.02(c).

                  "Adjustment Statement" shall have the meaning set forth in
                  Section 3.02(a).

                  "Affected Employees" shall have the meaning set forth in
                  Section 9.01(a).

                  "Affected Union Employees" shall have the meaning set forth
                  in Section 9.01(b).

                  "Affiliate"  shall have the meaning set forth in Rule 12b-2 of
                  the  General  Rules  and  Regulations   under  the  Securities
                  Exchange Act of 1934, as amended.

                  "Agreement" shall have the meaning set forth in the
                  Preamble.

                  "Allocation" shall have the meaning set forth in Section
                  3.03.

                  "Ancillary  Agreements"  means the Continuing Site Agreements,
                  the Declaration of Easements  Agreements,  the Declarations of
                  Subdivision Easements,  the Zoning Lot Development Agreements,
                  the Transition Capacity  Agreement,  the deeds contemplated by
                  Section  8.02(e)(i) and any other agreement to which Buyer and
                  Seller  are  party and which is  expressly  identified  by its
                  terms as an Ancillary Agreement hereunder.

                  "Applicable Law" shall have the meaning set forth in
                  Section 3.03.

                  "Arthur Kill Acquiror" means the person referred to as
                  "Buyer" in the Generating Plant and Gas Turbine Asset
                  Purchase and Sale Agreement for Arthur Kill Generating
                  Plants and Astoria Gas Turbines between Seller and such
                  person.

                  "Assumed Consent Order Obligations" shall have the meaning set
                  forth in Section 2.03(a)(iv).

                  "Assumed Obligations" shall have the meaning set forth in
                  Section 2.03(a).

                  "Assumed Seller  Obligations Under NYPA Agreements" shall have
                  the  meaning  set  forth  in  Section  2.03(a)(xii).  "Astoria
                  Continuing Site Agreement"  means the Astoria  Continuing Site
                  Agreement dated as of even date herewith
                  between Seller and Buyer.

                  "Astoria   Declaration   of   Easements"   means  the  Astoria
                  Declaration  of  Easements  by Seller  dated as of January 27,
                  1999, as amended.

                  "Astoria  Declaration  of  Subdivision  Easements"  means  the
                  Astoria  Declaration  of  Subdivision  Easements to be made by
                  Seller  substantially  in the form of  Exhibit  I,  except for
                  changes required by any  Governmental  Authority to the extent
                  that no such  change  materially  and  adversely  impairs  the
                  continued  use  and  operation  of  the  Auctioned  Assets  as
                  currently conducted.

                  "Astoria  Zoning  Lot  Development  Agreement"  means  (a) the
                  Astoria Zoning Lot  Development  Agreement  between Seller and
                  Arthur Kill Acquiror,  in the form of Exhibit A-1, if executed
                  and  delivered  prior to the  Closing  Date or (b) the Astoria
                  Zoning Lot Development Agreement between Seller and
                  Buyer, in the form of Exhibit A-2.

                  "Auctioned Assets" shall have the meaning set forth in
                  Section 2.02(a).

                  "Benefit Plans" shall have the meaning set forth in Section
                  5.13.

                  "Bidder Confidentiality Agreements" shall have the meaning
                  set forth in Section 7.02(b).

                  "Business Day" means any day other than  Saturday,  Sunday and
                  any day  which is a legal  holiday  or a day on which  banking
                  institutions  in New York are authorized or required by law or
                  other action of a Governmental Authority to close.

                  "Buyer" shall have the meaning set forth in the Preamble.

                  "Buyer Assets" shall have the meaning set forth in Section
                  2.03(a)(x).

                  "Buyer Benefit Plans" shall have the meaning set forth in
                  Section 9.02(c).

                  "Buyer  Facilities"  shall mean the "Parcel B Facilities"  and
                  "Parcel  D  Facilities"  under  the  Astoria   Declaration  of
                  Easements,  together with the  respective  "Buyer  Facilities"
                  under each of the Gowanus and Narrows Declaration of Easements
                  Agreements.

                  "Buyer Indemnitees" shall have the meaning set forth in
                  Section 10.01(a).

                  "Buyer  Material  Adverse  Effect"  shall have the meaning set
                  forth in Section 6.03(a).

                  "Buyer Real Estate" shall have the meaning set forth in
                  Section 2.02(a)(i).

                  "Buyer Required  Regulatory  Approvals" shall have the meaning
                  set forth in Section 6.03(b).

                  "Buyer's 401(k) Plans" shall have the meaning set forth in
                  Section 9.04(a).

                  "Buyer's Pension Plans" shall have the meaning set forth in
                  Section 9.03(a).

                  "Buyer's Welfare Plans" shall have the meaning set forth in
                  Section 9.05(a).

                  "Closing" shall have the meaning set forth in Section 4.01.

                  "Closing Date" shall have the meaning set forth in Section
                  4.01.

                  "Code" means the Internal Revenue Code of 1986, as amended.

                  "Collective Bargaining Agreement" shall have the meaning
                  set forth in Section 9.01(b).

                  "Communications  Equipment"  means  the  equipment,   systems,
                  switches  and lines used in  connection  with voice,  data and
                  other communications activities.

                  "Confidentiality Agreement" means the Confidentiality
                  Agreement  dated  September 22, 1998 between  Seller and Orion
                  Power Holdings, Inc.

                  "Continued Employee" shall have the meaning set forth in
                  Section 9.01(a).

                  "Continued Non-Union Employee" shall have the meaning set
                  forth in Section 9.02(a).

                  "Continued Union Employee" shall have the meaning set forth
                  in Section 9.01(b).

                  "Continuing Site Agreements" means the Astoria Continuing
                  Site Agreement, the Gowanus Continuing Site Agreement and
                  the Narrows Continuing Site Agreement.

                  "Contracts" shall have the meaning set forth in Section
                  2.02(a)(iv).

                  "Conveyance Plans" shall have the meaning set forth in
                  Section 2.02(a)(i).

                  "Declaration of Easements Agreements" means the Astoria
                  Declaration of Easements, the Gowanus Declaration of
                  Easements Agreement and Narrows Declaration of Easements
                  Agreement.

                  "Declarations of Subdivision Easements" means the Astoria
                  Declaration of Subdivision Easements and the Gowanus
                  Declaration of Subdivision Easements.

                  "Emission  Reduction Credits" means credits, in units that are
                  established  by  the  environmental   regulatory  agency  with
                  jurisdiction over the source or facility that has obtained the
                  credits,  resulting  from a reduction in the  emissions of air
                  pollutants from an emitting source or facility (including, and
                  to the extent allowable under applicable law,  reductions from
                  retirements,  control of  emissions  beyond  that  required by
                  applicable  law and  fuel  switching),  that:  (i)  have  been
                  certified by NYSDEC as complying with the law and  regulations
                  of the State of New York governing the  establishment  of such
                  credits  (including  that such emissions  reductions are real,
                  enforceable,  permanent and  quantifiable);  or (ii) have been
                  certified  by any other  applicable  regulatory  authority  as
                  complying   with  the  law  and   regulations   governing  the
                  establishment  of such credits  (including that such emissions
                  reductions are real, enforceable, permanent and quantifiable).
                  Emission  Reduction  Credits  include  certified air emissions
                  reductions,  as  described  above,  regardless  of whether the
                  regulatory agency  certifying such reductions  designates such
                  certified  air  emissions  reductions  by a  name  other  than
                  "emissions reduction credits".

                  "Encumbrances" means any mortgages,  pledges,  liens, security
                  interests,   conditional  and  installment   sale  agreements,
                  activity  and  use   limitations,   exceptions,   conservation
                  easements, rights-of-way, deed restrictions,  encumbrances and
                  charges of any kind.

                  "Environmental  Laws"  means all  former,  current  and future
                  Federal, state, local and foreign laws (including common law),
                  treaties,  regulations,  rules,  ordinances,  codes,  decrees,
                  judgments, directives or orders (including consent orders) and
                  Environmental  Permits, in each case, relating to pollution or
                  protection of the environment or natural resources,  including
                  laws relating to Releases or threatened Releases, or otherwise
                  relating   to   the   generation,   manufacture,   processing,
                  distribution,   use,  treatment,   storage,   arrangement  for
                  disposal,  transport,  recycling  or  handling,  of  Hazardous
                  Substances.

                  "Environmental Liability" means all liabilities,  obligations,
                  damages,  losses, claims, actions,  suits, judgments,  orders,
                  fines,  penalties,  fees, expenses and costs,  including:  (i)
                  remediation costs, engineering costs, environmental consultant
                  fees,  laboratory fees,  permitting fees,  investigation costs
                  and defense costs and reasonable attorneys' fees and expenses;
                  (ii) any claims,  demands and causes of action  relating to or
                  resulting from any personal injury (including wrongful death),
                  property damage (real or personal) or natural resource damage;
                  and (iii) any penalties,  fines or costs  associated  with the
                  failure to comply with any Environmental Law.

                  "Environmental Permits" means the permits, licenses, consents,
                  approvals and other governmental  authorizations  with respect
                  to  Environmental   Laws  relating   primarily  to  the  power
                  generation  operations  of the  Generating  Plants  or the Gas
                  Turbines.

                  "ERISA" means the Employee Retirement Income Security Act
                  of 1974, as amended.

                  "ERISA Affiliate" shall have the meaning set forth in
                  Section 5.13.

                  "Estimated Adjustment Amount" shall have the meaning set
                  forth in Section 4.02.

                  "FERC" means the Federal Energy Regulatory Commission.

                  "Federal Power Act" shall have the meaning set forth in
                  Section 5.03(b).

                  "Filed  Seller SEC  Documents"  means the reports,  schedules,
                  forms, statements and other documents filed by Seller with the
                  Securities and Exchange  Commission since January 1, 1997, and
                  publicly available prior to the date of this Agreement. "Final
                  Allocation" shall have the meaning set forth in Section 3.03.

                  "Franchise Property" shall have the meaning set forth in
                  Section 2.05(a).

                  "GAAP" shall have the meaning set forth in Section 1.02.

                  "Gas  Turbines"  means the gas turbine units  comprised of the
                  Astoria GT1, Gowanus GT1 through GT4 and Narrows GT1 and
                  GT2.

                  "Generating  Facilities" means the Generating  Plants, the Gas
                  Turbines and any additional generating plants, gas turbines or
                  other  generating  facilities  constructed  by Buyer after the
                  Closing Date at the site of any Auctioned Assets.

                  "Generating  Plants"  means  the  two  retired  steam  turbine
                  generating  units  designated as Astoria units 1 and 2 and the
                  three operating steam turbine  generating  units designated as
                  Astoria units 3, 4 and 5.

                  "Governmental  Authority" means any court,  administrative  or
                  regulatory agency or commission or other  governmental  entity
                  or instrumentality,  domestic, foreign or supranational or any
                  department thereof.

                  "Gowanus   Continuing  Site   Agreement"   means  the  Gowanus
                  Continuing  Site  Agreement  dated  as of even  date  herewith
                  between Seller and Buyer.

                  "Gowanus Declaration of Easements Agreement" means the Gowanus
                  Declaration  of  Easements  Agreement  dated  as of even  date
                  herewith between Seller and Buyer.

                  "Gowanus  Declaration  of  Subdivision  Easements"  means  the
                  Gowanus  Declaration  of  Subdivision  Easements to be made by
                  Seller  substantially  in the form of  Exhibit  J,  except for
                  changes required by any  Governmental  Authority to the extent
                  that no such  change  materially  and  adversely  impairs  the
                  continued  use  and  operation  of  the  Auctioned  Assets  as
                  currently conducted.

                  "Gowanus Zoning Lot Development Agreement" means the
                  Gowanus Zoning Lot  Development  Agreement  between Seller and
                  Buyer in the form of Exhibit A-3.



<PAGE>


                  "Guarantee  Agreement" means the Guarantee  Agreement dated as
                  of  even  date   herewith   between   Guarantor   and   Seller
                  substantially in the form of Exhibit K.

                  "Guarantor" means Orion Power Holdings, Inc.

                  "Hazardous   Substances"   means  (i)  any   petrochemical  or
                  petroleum  products,  crude oil or any fraction thereof,  ash,
                  radioactive  materials,  radon gas, asbestos in any form, urea
                  formaldehyde  foam  insulation or  polychlorinated  biphenyls,
                  (ii) any chemicals, materials, substances or wastes defined as
                  or  included  in the  definition  of  "hazardous  substances,"
                  "hazardous   wastes,"   "hazardous   materials,"   "restricted
                  hazardous materials," "extremely hazardous substances," "toxic
                  substances,"   "contaminants"  or  "pollutants"  or  words  of
                  similar  meaning  and  regulatory   effect  contained  in  any
                  Environmental  Law or  (iii)  any  other  chemical,  material,
                  substance or waste which is  prohibited,  limited or regulated
                  by any Environmental Law.

                  "HSR Act" means the Hart-Scott-Rodino Antitrust
                  Improvements Act of 1976, as amended.

                  "Income Tax" means any Federal, state, local or foreign Tax or
                  surtax (i) based upon,  measured by or calculated with respect
                  to net  income,  profits or receipts  (including  the New York
                  State Gross Receipts Tax (including the excess dividends tax),
                  the New York City Public  Utilities  Excise  Tax,  any and all
                  municipal  gross  receipts  Taxes,  capital  gains  Taxes  and
                  minimum  Taxes) or (ii) based upon,  measured by or calculated
                  with respect to multiple bases (including  corporate franchise
                  taxes)  if one or more of the  bases on which  such Tax may be
                  based, measured by or calculated with respect to, is described
                  in clause  (i),  in each  case,  together  with any  interest,
                  penalties, or additions to such Tax.

                  "Indemnifiable Loss" shall have the meaning set forth in
                  Section 10.01(a).

                  "Indemnifying Party" shall have the meaning set forth in
                  Section 10.01(c).

                  "Indemnitee" shall have the meaning set forth in Section
                  10.01(c).

                  "Independent Engineering Assessments" shall have the
                  meaning set forth in Section 5.15.

                  "Interconnection  Facilities"  means those items of  switching
                  equipment,  switchyard controls, protective relays and related
                  facilities  of Seller  that are used by  Seller in  connection
                  with the provision of Interconnection Services.

                  "Interconnection  Services"  means  the  service  provided  by
                  Seller to Buyer to interconnect  the Generating  Facilities to
                  the Transmission System.

                  "Inventory Survey" shall have the meaning set forth in
                  Section 3.02(a).

                  "ISO" means the New York Independent System Operator.

                  "Local 1-2" shall have the meaning set forth in Section
                  9.01(a).

                  "Local 1-2  Collective  Bargaining  Agreement"  shall have the
                  meaning set forth in Section 9.01(a).

                  "Material  Adverse Effect" means any change,  or effect on the
                  Auctioned Assets,  that is materially adverse to the business,
                  operations  or  condition  (financial  or  otherwise)  of  the
                  Auctioned Assets,  taken as a whole, other than (i) any change
                  or  effect  resulting  from  changes  in  the   international,
                  national,  regional  or  local  wholesale  or  retail  energy,
                  capacity or ancillary  services  electric power markets,  (ii)
                  any   change  or  effect   resulting   from   changes  in  the
                  international,  national,  regional or local markets for fuel,
                  (iii) any  change  or effect  resulting  from  changes  in the
                  national,  regional or local  electric  transmission  systems,
                  (iv) any change or effect  resulting  from any bid cap,  price
                  limitation,  market power  mitigation  measure,  including the
                  Mitigation  Measures,   or  other  regulatory  or  legislative
                  measure in respect of  transmission  services or the wholesale
                  or retail  energy,  capacity  or  ancillary  services  markets
                  adopted or approved  (or failed to be adopted or  approved) by
                  FERC, the PSC or any other Governmental  Authority or proposed
                  by any  person,  (v) any change or effect  resulting  from any
                  regulation,  rule,  procedure or order adopted or proposed (or
                  failed to be adopted or  proposed)  by or with  respect to, or
                  related to, the ISO, (vi) any change or effect  resulting from
                  any action or measure  taken or  adopted,  or  proposed  to be
                  taken or adopted, by any local, state,  regional,  national or
                  international   reliability   organization   and   (vii)   any
                  materially adverse change in or effect on the Auctioned Assets
                  which is cured by Seller before the Closing Date.

                  "Mitigation Measures" shall have the meaning set forth in
                  Section 6.03(b).

                  "MMS"  means  the  Material  Management  System,  which  is an
                  information  resources  system  served by  Seller's  mainframe
                  computer.

                  "Narrows   Continuing  Site   Agreement"   means  the  Narrows
                  Continuing  Site  Agreement  dated  as of even  date  herewith
                  between Seller and Buyer.

                  "Narrows Declaration of Easements Agreement" means the Narrows
                  Declaration  of  Easements  Agreement  dated  as of even  date
                  herewith between Seller and Buyer.

                  "Narrows Turbines" shall have the meaning set forth in
                  Section 7.15.

                  "NYPA" means the Power Authority of the State of New York.

                  "NYPA Agreements" means the Indenture, made as of December 13,
                  1974,   between  Seller  and  NYPA,  and  the  NYPA  Operating
                  Agreement.

                  "NYPA  Operating   Agreement"  means  the  Astoria   Operating
                  Agreement dated January 5, 1981,  between NYPA and Seller,  as
                  amended.

                  "NYSDEC" means the New York State Department of
                  Environmental Conservation.

                  "Off-Site"  means any location except (i) the Auctioned Assets
                  and (ii) any location to or under which  Hazardous  Substances
                  present or Released at the Auctioned Assets have migrated.

                  "Offering  Memorandum"  means the  Offering  Memorandum  dated
                  August  1998  describing  the  Generating  Plants  and the Gas
                  Turbines,  and the  materials  delivered  with  such  Offering
                  Memorandum, as such Offering Memorandum and such materials may
                  have been amended or supplemented.

                  "Operating Records" shall have the meaning set forth in
                  Section 2.02(a)(viii).

                  "Party" shall have the meaning set forth in the Preamble.

                  "Permits" means the permits, licenses, consents, approvals and
                  other governmental  authorizations (other than with respect to
                  Environmental Laws) relating primarily to the power generation
                  operations  of the  Generating  Plants  or the  Gas  Turbines.
                  "Permitted Exceptions" means (i) all exceptions, restrictions,
                  easements, charges, rights-of-way and monetary and nonmonetary
                  encumbrances   which   are  set  forth  in  any   Permits   or
                  Environmental  Permits, (ii) statutory liens for current taxes
                  or  assessments  not yet due or  delinquent or the validity of
                  which  is  being   contested  in  good  faith  by  appropriate
                  proceedings, (iii) mechanics', carriers', workers', repairers'
                  and other  similar  liens  arising or incurred in the ordinary
                  course of business  relating to  obligations as to which there
                  is no default on the part of Seller or the  validity  of which
                  are being contested in good faith by appropriate  proceedings,
                  (iv) zoning,  entitlement,  conservation restriction and other
                  land  use  and   environmental   regulations  by  Governmental
                  Authorities,   (v)  such  title   matters  set  forth  in  the
                  Certificate of Title No. NY981606, as amended, the Certificate
                  of Title No.  NY971417,  as amended,  and the  Certificate  of
                  Title No. NY971418,  as amended,  in each case,  issued by the
                  Title  Company,  (vi) all matters  disclosed on the Conveyance
                  Plans  and any  other  facts  that  would be  disclosed  by an
                  accurate  survey  and  physical  inspection  of the Buyer Real
                  Estate,  (vii) Encumbrances,  easements,  obligations or other
                  restrictions  created  pursuant  to or  provided  for  in  any
                  Ancillary Agreement or any NYPA Agreement, (viii) restrictions
                  and regulations imposed by the ISO, any Governmental Authority
                  or any  local,  state,  regional,  national  or  international
                  reliability  council  and  (ix)  such  other  Encumbrances  or
                  imperfections   in  or  failure  of  title  which  would  not,
                  individually  or in the  aggregate,  reasonably be expected to
                  materially  impair  the  continued  use and  operation  of the
                  Auctioned Assets as currently conducted.

                  "person" means any individual,  partnership, limited liability
                  company,  joint venture,  corporation,  trust,  unincorporated
                  organization or Governmental Authority.

                  "PPMIS" means the Power Plant Maintenance  Information System,
                  which is an  information  resources  system served by Seller's
                  mainframe computer.

                  "Prorated Items" shall have the meaning set forth in
                  Section 2.03(a)(viii).

                  "Protective  Relaying System" means the system relating to the
                  Generating  Facilities  comprised of  components  collectively
                  used to  detect  defective  power  system  elements  or  other
                  conditions of an abnormal nature, initiate appropriate control
                  circuit action in response thereto and isolate the appropriate
                  system  elements in order to minimize  damage to equipment and
                  interruption to service.

                  "PSC" means the New York State Public Service Commission.

                  "Purchase Price" shall have the meaning set forth in
                  Section 3.01.

                  "Release"  means  any  release,   spill,  emission,   leaking,
                  dumping,  injection,  pouring, deposit,  disposal,  discharge,
                  dispersal,   leaching  or  migration   into  the   environment
                  (including  ambient  air,  surface  water,  groundwater,  land
                  surface  or   subsurface   strata)  or  within  any  building,
                  structure, facility or fixture.

                  "Restraints" shall have the meaning set forth in Section
                  8.01(b).

                  "Retained Assets" shall have the meaning set forth in
                  Section 2.02(b).

                  "Retained Liabilities" shall have the meaning set forth in
                  Section 2.03(b).

                  "Revenue Meters" means all meters measuring demand, energy and
                  reactive  components,  and all pulse isolation  relays,  pulse
                  conversion relays and associated  totalizing and remote access
                  pulse recorder  equipment,  in each case,  required to measure
                  the transfer of energy between the Parties.

                  "Revocable Consent" shall have the meaning set forth in
                  Section 2.05(a).

                  "Segregated Reimbursement Accounts" shall have the meaning
                  set forth in Section 9.05(b).

                  "Seller" shall have the meaning set forth in the Preamble.

                  "Seller Assets" shall have the meaning set forth in Section
                  2.03(b)(x).

                  "Seller Consent Orders" shall have the meaning set forth in
                  Section 2.03(a)(iv).

                  "Seller Facilities" shall mean the "Parcel A Facilities" under
                  the  Astoria  Declaration  of  Easements,  together  with  the
                  respective  "Seller  Facilities" under each of the Gowanus and
                  Narrows Declaration of Easements Agreements.

                  "Seller Indemnitees" shall have the meaning set forth in
                  Section 10.01(b).

                  "Seller Real Estate" means all real property and leaseholds or
                  other  interests  in real  property of Seller  (including  the
                  premises on which the  Substations  are  located),  other than
                  Buyer Real Estate.

                  "Seller Required Regulatory  Approvals" shall have the meaning
                  set forth in Section 5.03(b).

                  "Seller's 401(k) Plans" shall have the meaning set forth in
                  Section 9.04(a).

                  "Seller's Pension Plans" shall have the meaning set forth
                  in Section 9.03(a).

                  "Seller's  Reimbursement Account Plans" shall have the meaning
                  set forth in Section 9.05(b).

                  "SO2 Allowances"  means allowances that have been allocated to
                  Seller for the  Generating  Plants or the Gas  Turbines by the
                  Administrator  of the United States  Environmental  Protection
                  Agency  under  Title IV of the Clean Air Act  authorizing  the
                  emission of one ton of sulfur dioxide per allowance  during or
                  after the year 2000.

                  "Substations" shall have the meaning set forth in Section
                  2.02(b)(i).

                  "Tax Benefit" means,  with respect to any  Indemnifiable  Loss
                  for any  person,  the  positive  excess,  if  any,  of the Tax
                  liability of such person without regard to such  Indemnifiable
                  Loss over the Tax liability of such person taking into account
                  such   Indemnifiable   Loss,  with  all  other   circumstances
                  remaining unchanged.

                  "Tax Cost" means,  with respect to any  indemnity  payment for
                  any person,  the positive excess, if any, of the Tax liability
                  of such person taking such indemnity payment into account over
                  the  Tax  liability  of such  person  without  regard  to such
                  payment, with all other circumstances remaining unchanged.

                  "Tax Return" means any return,  report,  information return or
                  other   document   (including   any   related  or   supporting
                  information)  required to be supplied  to any  authority  with
                  respect to Taxes. "Taxes" means all taxes, surtaxes,  charges,
                  fees,  levies,  penalties or other assessments  imposed by any
                  United  States  Federal,  state  or local  or  foreign  taxing
                  authority,  including  Income Tax,  excise,  property,  sales,
                  transfer,  franchise,  special franchise,  payroll, recording,
                  withholding,  social security or other taxes, or any liability
                  for taxes  incurred  by reason of joining in the filing of any
                  consolidated,  combined or unitary Tax  Returns,  in each case
                  including  any interest,  penalties or additions  attributable
                  thereto;  provided,  however,  that "Taxes"  shall not include
                  sewer rents or charges for water.

                  "Termination Date" shall have the meaning set forth in
                  Section 11.01(b).

                  "Third Party Claim" shall have the meaning set forth in
                  Section 10.02(a).

                  "Title  Company"  means   Commonwealth  Land  Title  Insurance
                  Company  or  any  other  reputable  title  insurance   company
                  licensed to do business in New York.

                  "Transferable Permits" shall have the meaning set forth in
                  Section 2.02(a)(v).

                  "Transferring Employee Records" shall have the meaning set
                  forth in Section 2.02(a)(viii).

                  "Transferring Employees" shall have the meaning set forth
                  in Section 2.02(a)(viii).

                  "Transition  Capacity Agreement" means the Transition Capacity
                  Agreement  to  be  entered  into  between   Seller  and  Buyer
                  substantially in the form of Exhibit G.

                  "Transmission System" shall have the meaning set forth in
                  Section 2.02(b)(i).

                  "Zoning Lot Development Agreements" means the Astoria
                  Zoning Lot Development Agreement and the Gowanus Zoning Lot
                  Development Agreement.

                  SECTION 1.02.  Accounting  Terms. Any accounting terms used in
                  this  Agreement  or the  Ancillary  Agreements  shall,  unless
                  otherwise specifically provided, have the meanings customarily
                  given them in accordance with United States generally accepted
                  accounting principles ("GAAP") and all financial  computations
                  hereunder or thereunder shall,  unless otherwise  specifically
                  provided,  be computed in  accordance  with GAAP  consistently
                  applied.

                                     ARTICLE II

                Purchase and Sale; Assumption of Certain Liabilities

                  SECTION 2.01. Purchase and Sale. Upon the terms and subject to
                  the   satisfaction   of  the  conditions   contained  in  this
                  Agreement,  at the  Closing,  Seller  agrees to sell,  assign,
                  convey,  transfer  and deliver to Buyer,  and Buyer  agrees to
                  purchase,  assume and acquire  from  Seller all the  Auctioned
                  Assets. In the case of any Auctioned Assets not located at the
                  Generating  Plants  or  Gas  Turbines   (including   supplies,
                  materials  and spare parts  inventory),  Buyer agrees that (i)
                  from and after the Closing,  except to the extent specifically
                  otherwise  provided in the  Ancillary  Agreements,  Buyer will
                  bear  all  risk  of  casualty  or  loss  with  regard  to such
                  Auctioned  Assets   (regardless  of  whether  they  remain  on
                  Seller's  property or  otherwise in Seller's  possession)  and
                  (ii) Seller shall store such  Auctioned  Assets in  accordance
                  with Section 7.08.

                  SECTION  2.02.  Auctioned  Assets  and  Retained  Assets.  (a)
                  Auctioned  Assets.  The term "Auctioned  Assets" means all the
                  assets,  real and  personal  property,  goodwill and rights of
                  Seller  of  whatever  kind and  nature,  whether  tangible  or
                  intangible,  in each  case,  primarily  relating  to the power
                  generation  operations  of the  Generating  Plants  or the Gas
                  Turbines, other than the Retained Assets, including:

                  (i) subject to Section 2.05,  all real property and leaseholds
            or other interests in real property of Seller relating  primarily to
            the power generation  operations of the Generating Plants or the Gas
            Turbines  described  as (A)  Parcels B and D as shown on the Astoria
            Generating  Station  ALTA/ACSM  Land Title Survey dated February 17,
            1999,  (B)  Parcel  A as  shown  on the  Gowanus  Gas  Turbine  Site
            ALTA/ACSM Land Title Survey  Conveyance Plan dated February 23, 1999
            and (C) the  Narrows  Gas  Turbine  Site as shown on the Narrows Gas
            Turbine  Site  ALTA/ACSM  Land Title  Survey  Conveyance  Plan dated
            February  23,  1999,  in each case,  as may  hereafter be amended in
            immaterial respects (collectively, the "Conveyance Plans"), together
            with all buildings,  improvements,  structures and fixtures thereon,
            subject to Permitted Exceptions or Encumbrances  otherwise disclosed
            to Buyer in this Agreement or the Ancillary  Agreements with respect
            thereto (the "Buyer Real Estate");

                  (ii) subject to Section 2.04 and Section 2.05, all inventories
            of fuels, supplies,  materials and spare parts relating primarily to
            the power generation  operations of the Generating Plants or the Gas
            Turbines,  together with and subject to (A) all Permitted Exceptions
            or  Encumbrances  otherwise  disclosed to Buyer in this Agreement or
            the Ancillary Agreements with respect thereto and (B) all warranties
            against  manufacturers and vendors relating  thereto,  including the
            spare parts listed on Schedule 2.02(a)(ii), in each case, other than
            assets that become obsolete or that are used, consumed,  replaced or
            disposed in the  ordinary  course of business  consistent  with past
            practice or as permitted by this Agreement;

                  (iii)  subject  to  Section  2.04 and  Section  2.05,  (A) the
            machinery,  equipment,  facilities,  furniture  and  other  personal
            property  (other  than  vehicles)  relating  primarily  to the power
            generation  operations of the Generating Plants or the Gas Turbines,
            including  a  stand-alone  local  area  network  and other  items of
            personal  property  located  on Buyer  Real  Estate  or  temporarily
            removed from Buyer Real Estate for repairs, servicing or maintenance
            and listed on Schedule  2.02(a)(iii)(A),  (B) machinery,  equipment,
            facilities,  furniture and other personal property located on Seller
            Real  Estate or  temporarily  removed  from  Seller  Real Estate for
            repairs,   servicing   or   maintenance   and  listed  on   Schedule
            2.02(a)(iii)(B), (C) machinery, equipment, facilities, furniture and
            other  personal  property  located on real property owned by NYPA or
            temporarily  removed from such real property for repairs,  servicing
            or  maintenance  and  listed  on  Schedule  2.02(a)(iii)(C)  and (D)
            machinery,  equipment,  facilities,  furniture  and  other  personal
            property listed on Schedule 2.02(a)(iii)(D) to the extent Seller has
            obtained title thereto from NYPA prior to Closing, in each case, (1)
            together  with  and  subject  to (x)  all  Permitted  Exceptions  or
            Encumbrances  otherwise  disclosed to Buyer in this Agreement or the
            Ancillary  Agreements  with respect  thereto and (y) all  warranties
            against manufacturers or vendors relating thereto and (2) other than
            assets that become obsolete or that are used, consumed,  replaced or
            disposed in the  ordinary  course of business  consistent  with past
            practice or as permitted by this Agreement;

                  (iv) subject to Section 2.04, all right, title and interest of
            Seller in, to and under all contracts, agreements, personal property
            leases (whether Seller is lessor or lessee thereunder),  commitments
            and all  other  legally  binding  arrangements  (other  than  Seller
            Consent  Orders),  whether oral or written (A) set forth on Schedule
            2.02(a)(iv)  or  (B)  otherwise  relating  primarily  to  the  power
            generation  operations of the Generating  Plants or the Gas Turbines
            and entered  into by Seller in  accordance  with  Section  7.01 (the
            "Contracts"),  in each case,  to the extent in full force and effect
            on the Closing Date;

                  (v) subject to Section 7.03(c),  the Permits and Environmental
            Permits  that are  transferred  or  transferable  by Seller to Buyer
            (collectively,    the   "Transferable   Permits"),   including   the
            Transferable Permits set forth on Schedule 2.02(a)(v), in each case,
            to the extent in full force and effect on the Closing Date;

                  (vi) the SO2 Allowances listed on Schedule 2.02(a)(vi);

                  (vii)  all  nitrogen   oxide   allowances   allocated  to  the
            Generating  Plants or the Gas  Turbines by NYSDEC under the New York
            State  Nitrogen  Oxides Budget Program that have not been used on or
            prior to the Closing Date (it being understood that, for purposes of
            this Agreement,  one nitrogen oxide allowance shall be deemed "used"
            for each ton of actual  nitrogen  oxide emitted from the  Generating
            Plants or Gas Turbines between May 1 of any year and September 30 of
            such year, inclusive);

                  (viii) (A) all data,  information,  books,  operating records,
            operating, safety and maintenance manuals, engineering design plans,
            blueprints and as-built plans, specifications,  procedures, facility
            compliance  plans,  environmental  procedures and similar records of
            Seller relating primarily to the power generation  operations of the
            Generating  Plants or the Gas  Turbines,  to the extent in  Seller's
            possession or readily available (collectively, "Operating Records"),
            and (B) all  personnel  files  relating to employees of Seller to be
            employed by Buyer after the Closing Date in accordance  with Article
            IX  (the  "Transferring  Employees"),  to  the  extent  in  Seller's
            possession  and  readily  available  and to the  extent  such  files
            pertain  to (1) skill and  development  training  and  resumes,  (2)
            seniority  histories,  (3)  salary  and  benefit  information,   (4)
            Occupational  Safety  and  Health Act  medical  reports,  (5) active
            medical  restriction forms and (6) any other matters,  disclosure of
            which by Seller to Buyer is permitted  under  applicable law without
            the consent of the  Transferring  Employee,  but not  including  any
            performance  evaluations or disciplinary records (collectively,  the
            "Transferring  Employee Records");  provided,  however,  that Seller
            shall be permitted to retain  copies,  or originals to the extent it
            provides  Buyer with copies of same,  of all  Operating  Records and
            Transferring Employee Records; and

                  (ix) (A)  except  as  provided  in  Section  2.02(b)(iv),  the
            software  relating  primarily to the power generation  operations of
            the Generating Plants or the Gas Turbines (provided,  however,  that
            Buyer  acknowledges that it will require licenses from third parties
            in order to be legally  entitled  to use such  software),  and (B) a
            non-exclusive, royalty-free license to use solely in connection with
            the  Auctioned  Assets the  software or other  copyrighted  material
            owned by Seller located at Buyer Real Estate.

                  (b)  Retained Assets.  The term "Retained Assets" means:

                  (i)  the  transmission  and  distribution   facilities  owned,
            controlled   or  operated  by  Seller  for   purposes  of  providing
            point-to-point transmission service, network integration service and
            distribution service and other related purposes,  including the real
            property and equipment  located at the Astoria East Substation,  the
            Astoria West Substation,  the North Queens  Substation,  the Gowanus
            Substation   and  the  Greenwood   Substation   (collectively,   the
            "Substations"),   used  in   controlling   continuity   between  the
            Generating   Plants  and  Gas  Turbines  and  the  transmission  and
            distribution  facilities and for other  purposes (the  "Transmission
            System");

                  (ii)(A)  except  as set  forth in  Section  2.02(a)(iii),  all
            Interconnection Facilities and other transmission,  distribution and
            substation  machinery,  equipment and facilities and related support
            equipment  located on Buyer  Real  Estate or Seller  Real  Estate or
            temporarily removed from Buyer Real Estate or Seller Real Estate for
            repairs,  servicing  or  maintenance,   including  items  listed  on
            Schedule 2.02(b)(ii)(A); (B) all Revenue Meters installed by Seller;
            (C)  Communications  Equipment  and related  support  equipment  (1)
            located on Buyer Real Estate or temporarily  removed from Buyer Real
            Estate for repairs,  servicing or maintenance and listed on Schedule
            2.02(b)(ii)(C)  or  acquired  by  Seller  after  the  date  of  this
            Agreement  and  designated  by  Seller  as a  Retained  Asset or (2)
            located on Seller Real  Estate or  temporarily  removed  from Seller
            Real  Estate for  repairs,  servicing  or  maintenance;  and (D) all
            Protective Relaying Systems not located on Buyer Real Estate;

                  (iii) all cash, cash  equivalents,  bank deposits and accounts
            receivable held or owned by Seller;

                  (iv) (A) all  mainframe  computer  systems of Seller,  (B) the
            code to all software  described in Section  2.02(a)(ix)(B),  and (C)
            all software, copyrights,  know-how or other proprietary information
            relating  primarily  to any other  Retained  Assets or any  Retained
            Liabilities,  including  software,  copyrights,  know-how  or  other
            proprietary  information  licensed  to  Buyer  pursuant  to  Section
            2.02(a)(ix)(B);

                  (v) the names "Consolidated  Edison",  "Con Edison", "Con Ed",
            "Consolidated  Edison Company",  "Consolidated Edison Company of New
            York,  Inc.",   "Consolidated  Edison,  Inc.",  "New  York  Edison",
            "Brooklyn  Edison",  "Staten  Island  Edison" and  "Edison"  and any
            related or similar trade names,  trademarks,  service marks or logos
            (and any rights to and in the same,  including  any right to use the
            same);

                  (vi) subject to Section 7.06(d),  any refund or credit related
            to Taxes or sewer rents or water charges or any other liabilities or
            obligations  in  respect  of the  Auctioned  Assets,  in each  case,
            attributable  to periods (or portions  thereof) prior to the Closing
            Date;

                  (vii) all personnel records (other than Transferring  Employee
            Records) and all other records (other than Operating Records);

                  (viii) (A) all Emission Reduction Credits held or possessed by
            Seller and (B) SO2  Allowances  held or  possessed by Seller and not
            listed on Schedule 2.02(a)(vi); and

                  (ix) any other asset that is not described with  particularity
            in this Agreement as an Auctioned Asset.

                  SECTION 2.03.  Assumed  Obligations and Retained  Liabilities.
                  (a) Assumed Obligations.  At the Closing,  Buyer shall assume,
                  and from and after the Closing,  shall  discharge,  all of the
                  liabilities  and  obligations,  direct or  indirect,  known or
                  unknown, absolute or contingent, which relate to the Auctioned
                  Assets  or are  otherwise  specified  below,  other  than  the
                  Retained    Liabilities     (collectively,     the    "Assumed
                  Obligations"), including:

                  (i) except as set forth in Section 2.03(b)(ii), any
            liabilities and obligations under the Contracts;

                  (ii) any  liabilities  and  obligations for goods delivered or
            services  rendered  on or after the  Closing  Date  relating  to the
            Auctioned Assets;

                  (iii)  except as set forth in Sections  2.03(b)(iii)  or (iv),
            any Environmental Liability arising out of or in connection with (A)
            any violation or alleged  violation of, or  noncompliance or alleged
            noncompliance  with, any  Environmental  Laws, prior to, on or after
            the Closing Date,  with respect to the ownership or operation of the
            Auctioned Assets,  notwithstanding  that, as contemplated by Section
            7.03(c),  Seller may remain the "holder of record"  with  respect to
            certain  Transferable  Permits,  (B) the  condition of any Auctioned
            Assets prior to, on or after the Closing Date,  including any actual
            or alleged presence,  Release or threatened Release of any Hazardous
            Substance at, on, in, under or migrating onto or from, the Auctioned
            Assets,  prior to, on or after the Closing Date (except for any such
            Release from  equipment or property  owned or operated by Seller and
            located on, or  constituting,  Seller Real Estate  adjacent to Buyer
            Real Estate that (1) occurs on or after the Closing  Date and (2) is
            caused by Seller or its  Affiliates),  (C) any Release or threatened
            Release of any Hazardous Substance on or after the Closing Date from
            the Buyer Facilities or otherwise  originating from, or relating to,
            any equipment  owned or used by Buyer that is located on Seller Real
            Estate  or (D)  the  transportation,  storage,  Release,  threatened
            Release or recycling of, or  arrangement  for such  activities  with
            respect  to,  Hazardous  Substances  generated  in  respect  of  the
            Auctioned  Assets at or to any  location,  on or after  the  Closing
            Date;

                  (iv) any liabilities and obligations relating to the Auctioned
            Assets under the consent orders listed on Schedule  2.03(a)(iv) (the
            "Seller Consent Orders") and identified  thereon as "Assumed Consent
            Order Obligations" (the "Assumed Consent Order Obligations");

                  (v)   except  as  set  forth  in  Section   2.03(b)(iv),   any
            liabilities  and  obligations  with  respect  to the  Permits to the
            extent arising or accruing on or after the Closing Date;
                  (vi) (A) all wages, overtime, employment taxes, severance pay,
            transition  payments,  workers compensation  benefits,  occupational
            safety and  health  liabilities  or other  similar  liabilities  and
            obligations  in  respect  of  Transferring  Employees  to the extent
            arising or accruing on or after the Closing Date,  and (B) all other
            liabilities  and  obligations   with  respect  to  the  Transferring
            Employees for which Buyer is responsible pursuant to Article IX;

                  (vii) (A) any  liabilities  and  obligations  (other  than any
            Environmental Liabilities which are Retained Liabilities) in respect
            of any  personal  injury  or  property  damage  claim  relating  to,
            resulting  from  or  arising  out of the  Generating  Plants  or Gas
            Turbines or (B) any  liabilities  and  obligations in respect of any
            discrimination, wrongful discharge or unfair labor practice claim by
            any  Transferring  Employee,  in the  case of each of the  foregoing
            clauses (A) and (B),  to the extent  arising or accruing on or after
            the Closing Date;

                  (viii) any  liabilities and  obligations,  with respect to the
            periods  that  include the  Closing  Date,  with  respect to real or
            personal  property  rent,  taxes  based on the  ownership  or use of
            property,  utilities  charges and  similar  charges  that  primarily
            relate to the Generating  Plants or the Gas Turbines  (collectively,
            the "Prorated  Items"),  to the extent such Prorated Items relate to
            the period from and after the Closing  Date,  including (A) personal
            property  taxes,  real estate and occupancy  taxes,  assessments and
            other charges (which shall be apportioned or adjusted as provided in
            the Zoning Lot Development Agreements), (B) rent and all other items
            payable by Seller under any  Contract,  (C) any fees with respect to
            any  Transferable  Permit and (D) sewer rents and charges for water,
            telephone,  electricity and other utilities, in each case calculated
            by  multiplying  the amount of any such  Prorated Item by a fraction
            the numerator of which is the number of days in such period from and
            after the Closing Date and the denominator of which is the number of
            days in such period;

                  (ix) any  liabilities  and  obligations  in  respect  of Taxes
            (other than Prorated  Items)  attributable  to the Auctioned  Assets
            arising or accruing  during  taxable  periods (or portions  thereof)
            beginning on or after the Closing Date;

                  (x) any  liabilities  and  obligations in respect of damage to
            property or personal injury or death relating to,  resulting from or
            arising out of any  property,  machinery,  equipment,  facilities or
            systems from time to time owned by Buyer or its  Affiliates  subject
            to the Ancillary  Agreements or employed by Buyer in connection with
            the performance of the Ancillary Agreements ("Buyer Assets"), or any
            Protective  Relaying  System owned by Seller as  contemplated by the
            Continuing Site Agreement, regardless of whether the property damage
            or  personal  injury  is caused  by a Seller  Indemnitee  or a Buyer
            Indemnitee;

                  (xi) any  liabilities  and  obligations  under  the  Ancillary
            Agreements in respect of the Auctioned  Assets to the extent arising
            on or after the Closing Date; and

                  (xii)  any  liabilities   and  obligations   relating  to  the
            Auctioned  Assets under the NYPA  Agreements  and listed on Schedule
            2.03(a)(xii)   (the   "Assumed   Seller   Obligations   under   NYPA
            Agreements");  provided,  however,  that to the extent  required for
            qualification of Buyer,  with respect to the Auctioned Assets, as an
            exempt  wholesale  generator  under the  Energy  Policy Act of 1992,
            Buyer  may  delegate   and/or  assign  its  obligations  to  provide
            electricity and/or steam to NYPA to an Affiliate of Buyer;  provided
            further,  however,  that  no such  delegation  or  assignment  shall
            relieve Buyer of such obligations.

                  (b)  Retained  Liabilities.  Buyer  shall  not  assume  or  be
                  obligated to pay, perform or otherwise discharge the following
                  liabilities or obligations (the "Retained Liabilities"):

                  (i)  any  liabilities  and  obligations  of  Seller  primarily
            relating  to any  Retained  Assets  (other than as  contemplated  by
            Section 2.03(a)(x));

                  (ii)  any  payment  obligations  of  Seller,  including  under
            Contracts,  for goods  delivered or services  rendered  prior to the
            Closing Date;

                  (iii) (A) any Environmental Liability of Seller arising out of
            or  in  connection  with  the  transportation,   storage,   Release,
            threatened   Release  or  recycling  of,  or  arrangement  for  such
            activities  with  respect  to,  Hazardous  Substances  at or to  any
            Off-Site location,  prior to the Closing Date, (B) any Environmental
            Liability of Seller arising out of or in connection with any Release
            or  threatened  Release of any  Hazardous  Substance on or after the
            Closing Date from the Seller  Facilities  or  otherwise  originating
            from, or relating to, any equipment  owned or used by Seller that is
            located on Buyer Real Estate and (C) any liabilities and obligations
            relating to Auctioned Assets under the Seller Consent Orders, except
            Assumed Consent Order Obligations;

                  (iv)  any  monetary  fines  (excluding  (A)  natural  resource
            damages,  (B) cleanup or remediation  costs and (C) other costs of a
            similar  nature)  imposed by a Governmental  Authority to the extent
            arising out of or relating to acts or omissions of Seller in respect
            of the Auctioned Assets prior to the Closing Date;

                  (v) (A) all wages, overtime,  employment taxes, severance pay,
            transition  payments,  workers compensation  benefits,  occupational
            safety and  health  liabilities  or other  similar  liabilities  and
            obligations  in  respect  of  Transferring  Employees  to the extent
            arising  or  accruing  prior to the  Closing  Date and (B) all other
            liabilities  and  obligations   with  respect  to  the  Transferring
            Employees for which Seller is responsible pursuant to Article IX;

                  (vi)  (A) any  liabilities  and  obligations  (other  than any
            Environmental  Liabilities which are Assumed Obligations) in respect
            of any  personal  injury or property  damage  claim  relating to the
            Generating  Plants  or Gas  Turbines  or  (B)  any  liabilities  and
            obligations in respect of any discrimination,  wrongful discharge or
            unfair labor practice  claim by any  Transferring  Employee,  in the
            case of each of the  foregoing  clauses  (A) and (B),  to the extent
            arising out of or relating to acts or  omissions  of Seller prior to
            the Closing Date;

                  (vii) any  liabilities  and  obligations,  with respect to the
            period prior to the Closing Date, for the Prorated Items, calculated
            as set forth in Section 2.03(a)(viii);

                  (viii) any  liabilities  and  obligations  in respect of Taxes
            (other than Prorated  Items)  attributable  to the Auctioned  Assets
            arising or accruing  during  taxable  periods (or portions  thereof)
            ending before the Closing Date,  including Income Taxes attributable
            to  income   realized  by  Seller   pursuant  to  the   transactions
            contemplated by this Agreement;

                  (ix) any liabilities and obligations arising after the date of
            this  Agreement in respect of which Seller has provided  pursuant to
            Section  7.01(d)(ii) that such liabilities and obligations shall not
            be assumed or retained by Buyer;

                  (x) any  liabilities  and  obligations in respect of damage to
            property or personal injury or death relating to,  resulting from or
            arising out of any  property,  machinery,  equipment,  facilities or
            systems from time to time owned by Seller or its Affiliates  subject
            to the Ancillary Agreements or employed by Seller in connection with
            the  performance  of the  Ancillary  Agreements  ("Seller  Assets"),
            regardless  of whether the  property  damage or  personal  injury is
            caused by a Seller Indemnitee or a Buyer Indemnitee;

                  (xi) any  liabilities  and  obligations  under  the  Ancillary
            Agreements in respect of the Retained Assets; and

                  (xii) any liabilities  and  obligations  relating to Auctioned
            Assets under the NYPA Agreements,  except Assumed Seller Obligations
            under NYPA Agreements.

                  SECTION  2.04.  Third  Party  Consents.   (a)  Notwithstanding
                  Section  2.02(a)(ii),  (iii)  or  (iv),  to  the  extent  that
                  Seller's  rights  under any  Contract or  warranty  may not be
                  assigned  without the consent of another  person which consent
                  has not been obtained,  this Agreement shall not constitute an
                  agreement to assign the same if an attempted  assignment would
                  constitute a breach thereof or be unlawful, and Seller, at its
                  expense, shall use its reasonable best efforts to obtain prior
                  to the Closing any such required consents.

                  (b)  Seller  and  Buyer  agree  that  if  any  consent  to  an
                  assignment  of any such  Contract  or  warranty  shall  not be
                  obtained  or if any  attempted  assignment  would in  Seller's
                  reasonable opinion be ineffective or would impair any material
                  rights  and  obligations  of  Buyer  under  such  Contract  or
                  warranty,  as applicable,  so that Buyer would not acquire the
                  benefit of all such  rights and  obligations,  Seller,  to the
                  maximum extent permitted by law and such Contract or warranty,
                  as  applicable,  shall after the Closing  appoint  Buyer to be
                  Seller's   representative  and  agent  with  respect  to  such
                  Contract or warranty, as applicable,  and Seller shall, to the
                  maximum extent permitted by law and such Contract or warranty,
                  as applicable,  enter into such reasonable  arrangements  with
                  Buyer as are  necessary to provide Buyer with the benefits and
                  obligations  of such  Contract  or  warranty,  as  applicable.
                  Seller  and Buyer  shall  cooperate  and shall  each use their
                  reasonable  best  efforts  after  the  Closing  to  obtain  an
                  assignment of each such Contract or warranty,  as  applicable,
                  to Buyer.

                  SECTION 2.05. Franchise Property. (a) Not withstanding Section
                  2.02(a)(i), (ii) and (iii), to the extent it would be unlawful
                  for Buyer to operate, use or maintain the machinery, equipment
                  and property  listed on Schedule  2.05(a)  (collectively,  the
                  "Franchise  Property") to Buyer without Buyer  obtaining  from
                  the City of New York a revocable consent,  franchise agreement
                  or other  arrangement  permitting  Buyer to hold  title to the
                  Franchise Property (the "Revocable Consent"), Seller and Buyer
                  agree that (i) Buyer shall use its reasonable  best efforts to
                  cause  the  Revocable  Consent  to be  entered  into  prior to
                  Closing, including filing a petition with the City of New York
                  in respect  of the  Revocable  Consent  not later than 45 days
                  after the date of this  Agreement,  and Seller shall cooperate
                  in good faith in connection  therewith,  (ii) if the Revocable
                  Consent  has not been  obtained  by Buyer prior to Closing (A)
                  title to the  Franchise  Property  shall be  deemed  not to be
                  transferred  at  Closing,  (B) Seller,  to the maximum  extent
                  permitted  by law,  shall after  Closing  appoint  Buyer to be
                  Seller's   representative   with  respect  to  the   Franchise
                  Property,  (C) Seller  shall  operate,  use and  maintain  the
                  Franchise  Property at Buyer's expense and Buyer shall pay all
                  real and personal  property taxes  applicable  thereto and (D)
                  Buyer shall use its  reasonable  best efforts after Closing to
                  cause the Revocable  Consent to be entered into, at which time
                  title to the Franchise  Property  shall be deemed  transferred
                  from Seller to Buyer  pursuant to this  Agreement,  and Seller
                  shall  cooperate  in good faith in  connection  therewith  and
                  (iii) Buyer shall pay all fees,  charges and other expenses in
                  connection with the Revocable Consent.

                  (b) Seller and Buyer  further  agree that for the  purposes of
                  (i) the  Ancillary  Agreements  and Sections  2.03,  10.01 and
                  10.02 of this Agreement,  the terms "Auctioned Assets", "Buyer
                  Assets"  and  "Buyer  Facilities"  shall in any event  each be
                  deemed  to  include  the  Franchise   Property  and  (ii)  the
                  Ancillary  Agreements,  the  Franchise  Property  shall in any
                  event be deemed to be owned by Buyer.


                                    ARTICLE III

                                   Purchase Price

                  SECTION 3.01.  Purchase Price.  The purchase price for the
                  Auctioned Assets shall be $550,000,000 (the "Purchase
                  Price").

                  SECTION 3.02. Post-Closing Adjustment.  (a) Within 20 Business
                  Days after the Closing,  Seller  shall  prepare and deliver to
                  Buyer a statement (an "Adjustment  Statement")  which reflects
                  the book cost,  as  reflected on the books of Seller as of the
                  Closing  Date, of all fuel  inventory and supplies,  materials
                  and spare parts  inventory  included in the  Auctioned  Assets
                  (the "Adjustment  Amount") and, upon request of Buyer, related
                  accounting  material used by Seller to prepare the  Adjustment
                  Statement.  The Adjustment Amount will be based, in respect of
                  fuel, on the actual fuel inventory on the Closing Date and, in
                  respect  of  supplies,   materials  and  spare  parts,  on  an
                  inventory  survey  conducted within ten Business Days prior to
                  the Closing Date, in each case,  consistent with the inventory
                  procedures  of  Seller  in  effect  as of  the  date  of  this
                  Agreement  (the  "Inventory  Survey").  Seller  will permit an
                  employee, or representative, of Buyer to observe the Inventory
                  Survey.  The Adjustment  Statement shall be prepared using (i)
                  GAAP and (ii) the same rolling  average unit costs that Seller
                  has  historically  used to calculate the book cost of its fuel
                  and  supplies,  materials  and spare  parts  inventory.  Buyer
                  agrees  to  cooperate  with  Seller  in  connection  with  the
                  preparation   of  the   Adjustment   Statement   and   related
                  information,  and shall provide to Seller such access,  books,
                  records and  information  as may be reasonably  requested from
                  time to time.

                  (b) Buyer may dispute the quantity delivered or quality of any
                  inventory  item  shown  on the  Adjustment  Statement,  or the
                  mathematical  calculations  reflected  therein,  by  notifying
                  Seller in writing  of the  disputed  amount,  and the basis of
                  such dispute,  within 20 Business  Days of Buyer's  receipt of
                  the Adjustment Statement;  provided,  however, that in respect
                  of the quality of any  inventory  item,  Buyer may not dispute
                  Seller's  normal and  customary  methods  for  accounting  for
                  excess  inventory.  Buyer  shall have no right to dispute  any
                  other matter in respect of the Adjustment Statement, including
                  historical  rolling  average unit costs used to calculate  the
                  book cost of the inventory or the appropriateness,  under GAAP
                  or otherwise,  of using such  historical  rolling average unit
                  cost to  determine  the book  cost of any  particular  item of
                  inventory.  In the  event of a  dispute  with  respect  to the
                  quantity  or  quality  of  any  inventory  item  shown  on the
                  Adjustment   Statement,   or  the  mathematical   calculations
                  reflected therein, Buyer and Seller shall attempt to reconcile
                  their  differences  and  any  resolution  by  them  as to  any
                  disputed amounts shall be final, binding and conclusive on the
                  Parties.  If Buyer and Seller are unable to reach a resolution
                  of such  differences  within 20  Business  Days of  receipt of
                  Buyer's written notice of dispute to Seller,  Buyer and Seller
                  shall   submit  the   amounts   remaining   in   dispute   for
                  determination and resolution to PricewaterhouseCoopers  LLP or
                  any other  accounting  firm of  recognized  national  standing
                  reasonably acceptable to Seller and Buyer (the "Accountants"),
                  which  shall be  instructed  to  determine  and  report to the
                  Parties,  within 20 Business Days after such submission,  upon
                  such  remaining  disputed  amounts,  and such report  shall be
                  final,  binding and  conclusive on the Parties with respect to
                  the amounts disputed. Buyer and Seller shall each pay one-half
                  of the fees and disbursements of the Accountants in connection
                  with the resolution of such disputed amounts.

                  (c) If the  Adjustment  Amount  is  greater  or less  than the
                  Estimated  Adjustment Amount,  then on the Adjustment Date (as
                  defined below),  (i) to the extent that the Adjustment  Amount
                  exceeds the Estimated  Adjustment  Amount,  Buyer shall pay to
                  Seller the amount of such  excess and (ii) to the extent  that
                  the  Adjustment  Amount is less than the Estimated  Adjustment
                  Amount,   Seller  shall  pay  to  Buyer  the  amount  of  such
                  deficiency.  "Adjustment  Date"  means  (1) if Buyer  does not
                  disagree in any respect  with the  Adjustment  Statement,  the
                  twenty-third  Business Day  following  Buyer's  receipt of the
                  Adjustment  Statement  or (2) if Buyer  shall  disagree in any
                  respect with the Adjustment Statement,  the third Business Day
                  following  either the resolution of such  disagreement  by the
                  Parties  or  a  final  determination  by  the  Accountants  in
                  accordance  with Section  3.02(b).  Any amount paid under this
                  Section  3.02(c)  shall be paid with  interest  for the period
                  commencing  on the Closing  Date  through the date of payment,
                  calculated  at the prime rate of the Chase  Manhattan  Bank in
                  effect on the Closing  Date,  and in cash by wire  transfer of
                  immediately available funds.

                  SECTION  3.03.  Allocation  of  Purchase  Price.  Buyer  shall
                  deliver to Seller at Closing a  preliminary  allocation  among
                  the  Auctioned  Assets of the  Purchase  Price and among  such
                  other  consideration paid to Seller pursuant to this Agreement
                  that is  properly  includible  in  Buyer's  tax  basis for the
                  Auctioned Assets for Federal income tax purposes, and, as soon
                  as practicable  following the Closing (but in any event within
                  10 Business  Days  following  the final  determination  of the
                  Adjustment Amount),  Buyer shall prepare and deliver to Seller
                  a  final  allocation  of the  Purchase  Price  and  additional
                  consideration  described  in the  preceding  clause,  and  the
                  post-closing  adjustment  pursuant to Section 3.02,  among the
                  Auctioned Assets (the  "Allocation").  The Allocation shall be
                  consistent  with  Section  1060 of the Code  and the  Treasury
                  Regulations thereunder. Seller hereby agrees to accept Buyer's
                  Allocation  unless Seller  determines that such Allocation was
                  not prepared in  accordance  with Section 1060 of the Code and
                  the regulations  thereunder  ("Applicable  Law"). If Seller so
                  determines,  Seller shall within 20 Business  Days  thereafter
                  propose any changes  necessary to cause the  Allocation  to be
                  prepared in accordance with Applicable Law. Within 10 Business
                  Days following delivery of such proposed changes,  Buyer shall
                  provide  Seller with a  statement  of any  objections  to such
                  proposed   changes,   together  with  a  reasonably   detailed
                  explanation of the reasons  therefor.  If Buyer and Seller are
                  unable to resolve any disputed  objections  within 10 Business
                  Days  thereafter,  such  objections  shall be  referred to the
                  Accountants,  whose review will be limited to whether  Buyer's
                  Allocation of such disputed items regarding the Allocation was
                  prepared in accordance  with  Applicable  Law. The Accountants
                  shall be  instructed  to deliver to Seller and Buyer a written
                  determination of the proper  allocation of such disputed items
                  within  20  Business  Days.   Such   determination   shall  be
                  conclusive  and  binding  upon  the  parties  hereto  for  all
                  purposes,  and  the  Allocation  shall  be  so  adjusted  (the
                  Allocation,  including the adjustment,  if any, to be referred
                  to as the "Final  Allocation").  The fees and disbursements of
                  the Accountants attributable to the Allocation shall be shared
                  equally by Buyer and Seller.  Each of Buyer and Seller  agrees
                  to timely file  Internal  Revenue  Service Form 8594,  and all
                  Federal,  state, local and foreign Tax Returns,  in accordance
                  with such  Final  Allocation  and to report  the  transactions
                  contemplated  by this Agreement for Federal Income Tax and all
                  other  tax  purposes  in a manner  consistent  with the  Final
                  Allocation.  Each of  Buyer  and  Seller  agrees  to  promptly
                  provide the other party with any  additional  information  and
                  reasonable  assistance  required  to  complete  Form 8594,  or
                  compute  Taxes  arising  in  connection   with  (or  otherwise
                  affected by) the transactions  contemplated hereunder. Each of
                  Buyer and Seller shall timely  notify the other Party and each
                  shall   timely   provide  the  other  Party  with   reasonable
                  assistance  in the  event  of an  examination,  audit or other
                  proceeding regarding the Final Allocation.


                                     ARTICLE IV

                                    The Closing

                  SECTION  4.01.  Time and Place of Closing.  Upon the terms and
                  subject to the  satisfaction  of the  conditions  contained in
                  Article VIII, the closing of the sale of the Auctioned  Assets
                  contemplated by this Agreement (the "Closing") will take place
                  on such date as the Parties may agree,  which date shall be as
                  soon as  practicable,  but no later  than ten  Business  Days,
                  following the date on which all of the conditions set forth in
                  Article VIII have been satisfied or waived,  at the offices of
                  Cravath,  Swaine  & Moore in New  York  City or at such  other
                  place or time as the Parties  may agree.  The date and time at
                  which the Closing  actually occurs is hereinafter  referred to
                  as the "Closing Date".

                  SECTION  4.02.   Payment  of  Purchase   Price  and  Estimated
                  Adjustment Amount. At the Closing,  Buyer will pay or cause to
                  be paid to Seller by wire  transfer of  immediately  available
                  funds to an account previously designated in writing by Seller
                  an amount in United  States  dollars equal to (a) the Purchase
                  Price plus (b) Seller's good faith  estimate of the Adjustment
                  Amount (the  "Estimated  Adjustment  Amount"),  which estimate
                  shall be  provided to Buyer no later than five  Business  Days
                  prior to the Closing.


                                     ARTICLE V

                      Representations and Warranties of Seller

                  Seller represents and warrants to Buyer as follows:

                  SECTION  5.01.  Organization;   Qualification.   Seller  is  a
                  corporation  duly  incorporated,  validly existing and in good
                  standing  under  the laws of the State of New York and has all
                  requisite  corporate  power and  authority  to own,  lease and
                  operate the  Auctioned  Assets and to carry on the business of
                  the Auctioned Assets as currently conducted.

                  SECTION 5.02. Authority Relative to This Agreement. Seller has
                  all  necessary  corporate  power and  authority to execute and
                  deliver this  Agreement  and the Ancillary  Agreements  and to
                  consummate the transactions  contemplated  hereby and thereby.
                  The execution and delivery by Seller of this Agreement and the
                  Ancillary  Agreements  and the  consummation  by Seller of the
                  transactions  contemplated  hereby and thereby  have been duly
                  and validly  authorized  by the Board of Trustees of Seller or
                  by a  committee  thereof  to  whom  such  authority  has  been
                  delegated and no other  corporate  proceedings  on the part of
                  Seller  are  necessary  to  authorize  this  Agreement  or the
                  Ancillary  Agreements or the  consummation of the transactions
                  contemplated  hereby  or  thereby.   This  Agreement  and  the
                  Ancillary  Agreements have been duly and validly  executed and
                  delivered by Seller and,  assuming that this Agreement and the
                  Ancillary  Agreements  constitute valid and binding agreements
                  of Buyer and each other party thereto,  subject to the receipt
                  of the  Seller  Required  Regulatory  Approvals  and the Buyer
                  Required  Regulatory  Approvals,  constitute valid and binding
                  agreements of Seller, enforceable against Seller in accordance
                  with their respective terms.

                  SECTION  5.03.  Consents  and  Approvals;  No  Violation.  (a)
                  Subject to obtaining the Seller Required Regulatory  Approvals
                  and the  Buyer  Required  Regulatory  Approvals,  neither  the
                  execution  and  delivery of this  Agreement  or the  Ancillary
                  Agreements  by Seller nor the sale by Seller of the  Auctioned
                  Assets  pursuant to this  Agreement  will (i) conflict with or
                  result in any breach of any  provision of the  Certificate  of
                  Incorporation  or By-laws of Seller,  (ii) except as set forth
                  on Schedule 5.03(a),  result in a default (or give rise to any
                  right of termination,  cancelation or acceleration)  under any
                  of the terms,  conditions  or  provisions  of any note,  bond,
                  mortgage,   indenture,  license,  agreement,  lease  or  other
                  instrument  or  obligation  to which  Seller  is a party or by
                  which Seller,  or any of the Auctioned  Assets,  may be bound,
                  except  for  such   defaults   (or   rights  of   termination,
                  cancelation or acceleration) as to which requisite  waivers or
                  consents have been  obtained or which would not,  individually
                  or in the aggregate, create a Material Adverse Effect or (iii)
                  violate any order, writ, injunction,  decree, statute, rule or
                  regulation  applicable  to Seller,  or the  Auctioned  Assets,
                  except for such violations which would not, individually or in
                  the aggregate, create a Material Adverse Effect.

                  (b) Except for (i)  application by Seller to, and the approval
                  of, the PSC,  pursuant to ss. 70 of the Public  Service Law of
                  the  State  of New  York,  of the  transfer  to  Buyer  of the
                  Auctioned  Assets,  (ii)  the  filings  by  Seller  and  Buyer
                  required  by  the  HSR  Act  and  the  expiration  or  earlier
                  termination  of all waiting  periods under the HSR Act,  (iii)
                  application  by Seller to, and the approval of, FERC under (A)
                  Section  203 of the  Federal  Power Act of 1935 (the  "Federal
                  Power Act") with respect to the  transfer of Auctioned  Assets
                  constituting jurisdictional assets under the Federal Power Act
                  and (B) Section 205 of the Federal  Power Act with  respect to
                  each  Continuing  Site Agreement and any wholesale power sales
                  agreement  to be entered  into by Seller and Buyer,  including
                  the  Transition  Capacity  Agreement,  (iv)  the  issuance  of
                  approval by the New York City  Department of Buildings and, to
                  the extent required,  the New York City Department of Business
                  Services  of the  tax  lot  subdivision  contemplated  by this
                  Agreement in a form  suitable for  submission  to the New York
                  City Department of Finance for the issuance of tax lot numbers
                  and  (v)  declarations,  filings  or  registrations  with,  or
                  notices to, or  authorizations,  consents or approvals of, any
                  Governmental  Authority  which become  applicable to Seller or
                  the  transactions  contemplated  hereby  or by  the  Ancillary
                  Agreements  as a result of the specific  regulatory  status or
                  jurisdiction of incorporation or organization of Buyer (or any
                  of its  Affiliates)  or as a result  of any other  facts  that
                  specifically  relate to the  business or  activities  in which
                  Buyer (or any of its  Affiliates) is or proposes to be engaged
                  (collectively, the "Seller Required Regulatory Approvals"), no
                  declaration,  filing or  registration  with,  or notice to, or
                  authorization,   consent  or  approval  of  any   Governmental
                  Authority is necessary for the  consummation  by Seller of the
                  transactions   contemplated   hereby   or  by  the   Ancillary
                  Agreements,    other   than   such   declarations,    filings,
                  registrations, notices, authorizations,  consents or approvals
                  (A) which, if not obtained or made, would not, individually or
                  in the  aggregate,  create a  Material  Adverse  Effect or (B)
                  which relate to the Transferable Permits.

                  (c) To the  knowledge  of Seller,  there is no reason  that it
                  should   fail  to  obtain  the  Seller   Required   Regulatory
                  Approvals.

                  SECTION  5.04.  Year 2000.  Seller has  informed  Buyer of the
                  status,  as of the  date of this  Agreement,  of  measures  to
                  prevent computer software,  hardware and embedded systems used
                  in  connection  with the  Auctioned  Assets from  experiencing
                  malfunctions  or other usage problems in connection with years
                  beginning  with "20",  except for such  malfunctions  or other
                  usage  problems  which  would  not,  individually  or  in  the
                  aggregate, create a Material Adverse Effect.

                  SECTION 5.05.  Personal Property.  Except for Permitted
                  Exceptions, Seller has good and marketable title, free and
                  clear of all Encumbrances, to all personal property
                  included in the Auctioned Assets.

                  SECTION  5.06.  Real  Estate.  The  Conveyance  Plans  contain
                  descriptions  of the  Buyer  Real  Estate.  Copies of the most
                  recent real property  surveys and title insurance  information
                  in the  possession  of Seller  with  respect to the Buyer Real
                  Estate or any portion  thereof have  heretofore been delivered
                  by Seller to Buyer or made  available for inspection by Buyer,
                  receipt of which is hereby acknowledged by Buyer.

                  SECTION 5.07. Leases. As of the date of this Agreement, Seller
                  is  neither a tenant nor a  licensee  under any real  property
                  leases  or  licenses  which  (a)  are  to be  transferred  and
                  assigned to Buyer on the Closing  Date and (b) (i) provide for
                  annual  payments of more than $100,000 or (ii) are material to
                  the Auctioned Assets.

                  SECTION 5.08.  Certain Contracts and Arrangements.  (a) Except
                  for  (i)  any  contract  or   agreement   listed  on  Schedule
                  2.02(a)(iv) or Schedule  5.08(a) and (ii) Contracts which will
                  expire prior to the Closing  Date or that are  permitted to be
                  entered  into under this  Agreement,  Seller is not a party to
                  any contract  which is material to the business or  operations
                  of the Auctioned  Assets.  Seller has made  available to Buyer
                  for  inspection  true and  complete  copies  of all  contracts
                  listed on Schedule 2.02(a)(iv) or Schedule 5.08(a) and each of
                  the NYPA Agreements.

                  (b)  Each  Contract  (i)   constitutes  a  valid  and  binding
                  obligation  of  Seller,  and,  to  the  knowledge  of  Seller,
                  constitutes  a  valid  and  binding  obligation  of the  other
                  parties thereto,  (ii) to the knowledge of Seller,  is in full
                  force and effect and (iii)  other  than  Contracts  covered by
                  Section 2.04, to the knowledge of Seller,  may be  transferred
                  to Buyer  pursuant to this Agreement and will continue in full
                  force and effect  thereafter,  in each case, without breaching
                  the terms thereof or resulting in the forfeiture or impairment
                  of  any  rights   thereunder,   except   for  such   breaches,
                  forfeitures or impairments which would not, individually or in
                  the aggregate, create a Material Adverse Effect.

                  (c)  There is not,  under any of the  Contracts  or any of the
                  NYPA  Agreements,  any default or event which,  with notice or
                  lapse of time or both,  would  constitute a default by Seller,
                  except for such events of default and other events as to which
                  requisite  waivers or  consents  have been  obtained  or which
                  would not, individually or in the aggregate, create a Material
                  Adverse Effect.

                  SECTION  5.09.  Legal  Proceedings.  Except  as set  forth  on
                  Schedule 5.09 or in the Filed Seller SEC Documents,  as of the
                  date  of  this  Agreement,   there  are  no  claims,  actions,
                  proceedings or investigations  pending or, to the knowledge of
                  Seller,  threatened against or relating to Seller which would,
                  individually  or in the aggregate,  be reasonably  expected to
                  create a Material Adverse Effect. With respect to the business
                  or operations of the  Auctioned  Assets,  Seller is not, as of
                  the  date  of  this  Agreement,  subject  to  any  outstanding
                  judgment,  rule,  order,  writ,  injunction  or  decree of any
                  court, governmental or regulatory authority which would create
                  a Material Adverse Effect. The  representations and warranties
                  of Seller set forth in this  Section  5.09 shall not apply to,
                  and  do not  cover,  any  environmental  matters  which,  with
                  respect to any  representations  and warranties of Seller, are
                  exclusively governed by Section 5.11.

                  SECTION 5.10. Permits;  Compliance with Law. (a) Except as set
                  forth  on  Schedule  5.10(a)(i),   Seller  holds,  and  is  in
                  compliance with, all Permits necessary to conduct the business
                  and operations of the Auctioned Assets as currently conducted,
                  and,  to the  knowledge  of  Seller,  Seller is  otherwise  in
                  compliance   with   all   laws,   statutes,   orders,   rules,
                  regulations,  ordinances  or  judgments  of  any  Governmental
                  Authority  applicable  to the business and  operations  of the
                  Auctioned  Assets,  except for such failures to hold or comply
                  with such Permits,  or such failures to be in compliance  with
                  such laws, statutes, orders, rules, regulations, ordinances or
                  judgments,  which would not, individually or in the aggregate,
                  create a  Material  Adverse  Effect.  Except  as set  forth on
                  Schedule  5.10(a)(ii),  Seller has not  received  any  written
                  notification that it is in violation of any of such Permits or
                  laws,  statutes,  orders,  rules,  regulations,  ordinances or
                  judgments,  except for notifications of violations which would
                  not,  individually  or in the  aggregate,  create  a  Material
                  Adverse Effect. The  representations  and warranties of Seller
                  set forth in this  Section 5.10 shall not apply to, and do not
                  cover, any  environmental  matters which,  with respect to any
                  representations  and  warranties  of Seller,  are  exclusively
                  governed by Section 5.11.

                  (b)  Notwithstanding  the last  sentence  of Section  5.10(a),
                  except as set forth on Schedule 5.10(b), there are no material
                  Permits or material  Environmental Permits that, in each case,
                  are not  Transferable  Permits and are  required  for Buyer to
                  conduct the business and operations of the Auctioned Assets as
                  currently conducted.

                  SECTION 5.11.  Environmental  Matters. (a) Except as set forth
                  in  Schedule  5.11  or  disclosed  in  the  Filed  Seller  SEC
                  Documents,  Seller  holds,  and  is in  compliance  with,  the
                  Environmental  Permits  required  for  Seller to  conduct  the
                  business and  operations of the Auctioned  Assets as currently
                  conducted  under  applicable  Environmental  Laws, and, to the
                  knowledge of Seller,  Seller is otherwise in  compliance  with
                  applicable Environmental Laws with respect to the business and
                  operations of the Auctioned  Assets,  except for such failures
                  to hold or comply  with such  Environmental  Permits,  or such
                  failures to be in  compliance  with such  Environmental  Laws,
                  which would not,  individually  or in the aggregate,  create a
                  Material Adverse Effect.

                  (b) Except as set forth in Schedule  5.11 or  disclosed in the
                  Filed  Seller  SEC  Documents,  Seller  has not  received  any
                  written  notice of violation of any  Environmental  Law or any
                  written request for information with respect thereto,  or been
                  notified that it is a potentially  responsible party under the
                  Federal Comprehensive  Environmental  Response,  Compensation,
                  and Liability Act or any similar state law with respect to any
                  real  property  included  in the Buyer  Real  Estate or in any
                  lease  forming part of the Auctioned  Assets,  except for such
                  matters under such laws as would not,  individually  or in the
                  aggregate, create a Material Adverse Effect.

                  (c) Except as set forth in Schedule  5.11 or  disclosed in the
                  Filed Seller SEC  Documents,  with respect to the business and
                  operations of the Auctioned  Assets,  Seller is not subject to
                  any outstanding judgment, decree or judicial order relating to
                  compliance with any  Environmental  Law or to investigation or
                  cleanup  of   Hazardous   Substances   under  any   applicable
                  Environmental  Law,  except for (i) the Seller  Consent Orders
                  and (ii) such judgments, decrees or judicial orders that would
                  not,  individually  or in the  aggregate,  create  a  Material
                  Adverse Effect.

                  (d) Except as set forth in Schedule  5.11 or  disclosed in the
                  Filed Seller SEC Documents,  as of the date of this Agreement,
                  there are no claims,  actions,  proceedings or  investigations
                  pending, or to the knowledge of Seller,  threatened against or
                  relating  to  Seller,  with  respect  to the  exposure  at the
                  Auctioned Assets of any person to Hazardous Substances, which,
                  if  adversely  determined,   would,  individually  or  in  the
                  aggregate, create a Material Adverse Effect.

                  SECTION  5.12.  Labor  Matters.  Seller  has  previously  made
                  available  to  Buyer  copies  of  all  collective   bargaining
                  agreements  to which Seller is a party or is subject and which
                  relate to the business or operations of the Auctioned  Assets.
                  With respect to the business and  operations  of the Auctioned
                  Assets,  as of the date of this  Agreement,  (a)  Seller is in
                  compliance with all applicable  laws regarding  employment and
                  employment  practices,  terms and conditions of employment and
                  wages and hours, (b) Seller has not received written notice of
                  any unfair labor  practice  complaint  against  Seller pending
                  before the National  Labor  Relations  Board,  (c) there is no
                  labor strike, slowdown or stoppage actually pending or, to the
                  knowledge of Seller,  threatened  against or affecting Seller,
                  (d) Seller has not  received  notice  that any  representation
                  petition  respecting  the  employees  of Seller has been filed
                  with the National Labor  Relations  Board,  (e) no arbitration
                  proceeding  arising  out  of or  under  collective  bargaining
                  agreements  is pending  against  Seller and (f) Seller has not
                  experienced  any primary work stoppage since at least December
                  31, 1996, except, in the case of each of the foregoing clauses
                  (a) through (f),  for such matters as would not,  individually
                  or in the aggregate, create a Material Adverse Effect.

                  SECTION 5.13. ERISA; Benefit Plans. Schedule 5.13 sets forth a
                  list of all material  deferred  compensation,  profit-sharing,
                  retirement  and pension plans and all material bonus and other
                  material  employee benefit or fringe benefit plans maintained,
                  or with  respect to which  contributions  have been  made,  by
                  Seller with respect to current or former employees employed in
                  connection  with  the  power  generation   operations  of  the
                  Generating Plants and the Gas Turbines (collectively, "Benefit
                  Plans").  Seller and each trade or  business  (whether  or not
                  incorporated)  which  are  or  have  ever  been  under  common
                  control,  or which are or have ever been  treated  as a single
                  employer, with Seller under Section 414(b), (c), (m) or (o) of
                  the  Code  (an  "ERISA   Affiliate")   have  fulfilled   their
                  respective  obligations under the minimum funding requirements
                  of Section 302 of ERISA,  and  Section  412 of the Code,  with
                  respect to each  Benefit  Plan which is an  "employee  pension
                  benefit  plan" as defined  in  Section  3(2) of ERISA and each
                  such plan is in compliance  in all material  respects with the
                  presently applicable  provisions of ERISA and the Code, except
                  for such failures to fulfill such  obligations  or comply with
                  such  provisions  which  would  not,  individually  or in  the
                  aggregate,  create a Material  Adverse Effect.  Neither Seller
                  nor any ERISA  Affiliate  has  incurred  any  liability  under
                  Section  4062(b) of ERISA,  or any withdrawal  liability under
                  Section  4201  of  ERISA,  to  the  Pension  Benefit  Guaranty
                  Corporation  in  connection  with any  Benefit  Plan  which is
                  subject  to  Title  IV  of  ERISA  which   liability   remains
                  outstanding,  and there has not been any reportable  event (as
                  defined in  Section  4043 of ERISA)  with  respect to any such
                  Benefit  Plan (other than a  reportable  event with respect to
                  which the 30-day  notice  requirement  has been  waived by the
                  PBGC).  Neither  Seller  nor any  ERISA  Affiliate  or  parent
                  corporation,  within the meaning of Section 4069(b) or Section
                  4212(c) of ERISA, has engaged in any  transaction,  within the
                  meaning of Section  4069(b)  or Section  4212(c) of ERISA.  No
                  Benefit  Plan  and no  "employee  pension  benefit  plan"  (as
                  defined in Section 3(2) of ERISA)  maintained by Seller or any
                  ERISA  Affiliate or to which Seller or any ERISA Affiliate has
                  contributed is a multiemployer plan.

                  SECTION 5.14.  Taxes. With respect to the Auctioned Assets and
                  trades or businesses associated with the Auctioned Assets, (a)
                  all Tax  Returns  required to be filed have been filed and (b)
                  all Taxes shown to be due on such Tax  Returns,  and all Taxes
                  otherwise owed,  have been paid in full,  except to the extent
                  that any failure to file or any failure to pay any Taxes would
                  not,  individually  or in the  aggregate,  create  a  Material
                  Adverse Effect.  No written notice of deficiency or assessment
                  has been  received from any taxing  authority  with respect to
                  liabilities  for Taxes of Seller in respect  of the  Auctioned
                  Assets  which has not been fully  paid or  finally  settled or
                  which is not being contested in good faith through appropriate
                  proceedings, except for any such notices regarding Taxes which
                  would not, individually or in the aggregate, create a Material
                  Adverse Effect. There are no outstanding agreements or waivers
                  extending the applicable  statutory  periods of limitation for
                  Taxes  associated  with the  Auctioned  Assets for any period,
                  except for any such  agreements  or waivers  which  would not,
                  individually  or in the aggregate,  create a Material  Adverse
                  Effect.

                  SECTION 5.15. Independent Engineering Assessments.  (a) Seller
                  has reviewed the 1998 assessments  prepared by Stone & Webster
                  with  respect to the  Generating  Plants and the Gas  Turbines
                  (the "Independent  Engineering  Assessments"),  and, except as
                  set forth on Schedule 5.15(a),  to the knowledge of Seller, as
                  of the date of the Independent Engineering Assessments,  there
                  was no untrue  statement of a material fact or omission of any
                  material fact therein that would  reasonably  suggest that the
                  condition of the Generating Plants and the Gas Turbines, taken
                  as a whole,  as of such  date  was  materially  and  adversely
                  different from that described in such Independent  Engineering
                  Assessments.

                  (b) Except as set forth on Schedule 5.15(b), since the date of
                  the Independent Engineering  Assessments,  there has not been,
                  subject to ordinary wear and tear and to routine  maintenance,
                  any casualty,  physical  damage,  destruction or physical loss
                  with respect to, or, to the  knowledge of Seller,  any adverse
                  change in the physical  condition of, any Generating  Plant or
                  Gas  Turbine,  except  for  such  casualty,  physical  damage,
                  destruction,  physical loss or adverse change which would not,
                  individually  or in the aggregate,  create a Material  Adverse
                  Effect.

                  SECTION  5.16.  Undisclosed  Liabilities.  With respect to the
                  Auctioned  Assets,  there are no liabilities or obligations of
                  any  nature  or  kind   (absolute,   accrued,   contingent  or
                  otherwise)  that would have been required to be set forth on a
                  balance  sheet in  respect of the  Auctioned  Assets or in the
                  notes thereto  prepared in accordance with GAAP, as applied by
                  Seller in connection with its December 31, 1997 balance sheet,
                  except for any such  liabilities or obligations  which (a) are
                  disclosed in or contemplated or permitted by this Agreement or
                  the Ancillary Agreements  (including the Assumed Obligations),
                  (b)  are  disclosed  in  the  Offering  Memorandum,   (c)  are
                  disclosed  in the Filed  Seller SEC  Documents,  (d) have been
                  incurred in the ordinary course of business, (e) are disclosed
                  on Schedule  5.16 or (f) which would not,  individually  or in
                  the aggregate, create a Material Adverse Effect.

                  SECTION 5.17.  Brokers.  No broker,  finder or other person is
                  entitled to any brokerage  fees,  commissions or finder's fees
                  in  connection  with the  transaction  contemplated  hereby by
                  reason of any action taken by Seller,  except Morgan Stanley &
                  Co.  Incorporated,  which is acting for and at the  expense of
                  Seller.

                  SECTION 5.18. Insurance.  Seller carries policies of insurance
                  covering  fire,  workers'  compensation,   property  all-risk,
                  comprehensive   bodily  injury,   property  damage  liability,
                  automobile liability, product liability, completed operations,
                  explosion,  collapse,  contractual liability,  personal injury
                  liability  and  other  forms  of  insurance  relating  to  the
                  Auctioned Assets, or otherwise self-insures in accordance with
                  all  statutory  and  regulatory   criteria  against  any  such
                  liabilities,  which  insurance  is in such  amounts,  has such
                  deductibles   and  retentions  and  is  underwritten  by  such
                  companies  as  would  be  obtained  by  a  reasonably  prudent
                  electric power business.

                  EXCEPT FOR THE  REPRESENTATIONS  AND WARRANTIES  EXPRESSLY SET
                  FORTH IN THIS ARTICLE V, THE  AUCTIONED  ASSETS ARE BEING SOLD
                  AND  TRANSFERRED  "AS IS,  WHERE IS", AND SELLER IS NOT MAKING
                  ANY  OTHER  REPRESENTATIONS  OR  WARRANTIES  WRITTEN  OR ORAL,
                  STATUTORY,  EXPRESS  OR  IMPLIED,  CONCERNING  SUCH  AUCTIONED
                  ASSETS OR WITH  RESPECT  TO THIS  AGREEMENT  OR THE  ANCILLARY
                  AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
                  INCLUDING, IN PARTICULAR WITH RESPECT TO THE AUCTIONED ASSETS,
                  ANY  WARRANTY OF  MERCHANTABILITY  OR FITNESS FOR A PARTICULAR
                  PURPOSE,  ALL OF  WHICH  ARE  HEREBY  EXPRESSLY  EXCLUDED  AND
                  DISCLAIMED BY SELLER AND WAIVED BY BUYER. WITHOUT LIMITING THE
                  GENERALITY OF THE FOREGOING, SELLER MAKES NO REPRESENTATION OR
                  WARRANTY  WITH  RESPECT  TO THE  INFORMATION  SET FORTH IN, OR
                  CONTEMPLATED BY, THE OFFERING MEMORANDUM (EXCEPT TO THE EXTENT
                  EXPRESSLY INCORPORATED BY REFERENCE INTO THIS AGREEMENT).


                                     ARTICLE VI

                      Representations and Warranties of Buyer

                  Buyer represents and warrants to Seller as follows:

                  SECTION  6.01.  Organization.  Buyer is a limited  partnership
                  duly formed,  validly  existing and in good standing under the
                  laws of the State of Delaware and has all requisite  power and
                  authority  to own,  lease and  operate its  properties  and to
                  carry on its business as is now being  conducted.  Buyer shall
                  be duly  qualified  and  licensed  to do business as a foreign
                  corporation  and is in good  standing in the State of New York
                  on or prior to the Closing Date.

                  SECTION 6.02. Authority Relative to This Agreement.  Buyer has
                  all necessary  power and authority to execute and deliver this
                  Agreement  and the  Ancillary  Agreements to which it is party
                  and to consummate  the  transactions  contemplated  hereby and
                  thereby. The execution and delivery by Buyer of this Agreement
                  and such Ancillary Agreements and the consummation by Buyer of
                  the  transactions  contemplated  hereby and thereby  have been
                  duly and validly  authorized  by the Board of Directors of the
                  general partner of Buyer and no other  proceedings on the part
                  of Buyer are  necessary  to authorize  this  Agreement or such
                  Ancillary  Agreements or the  consummation of the transactions
                  contemplated  hereby  or  thereby.  This  Agreement  and  such
                  Ancillary  Agreements have been duly and validly  executed and
                  delivered by Buyer and,  assuming that this  Agreement and the
                  Ancillary  Agreements  constitute valid and binding agreements
                  of Seller and each other party thereto, subject to the receipt
                  of the Buyer  Required  Regulatory  Approvals  and the  Seller
                  Required   Regulatory   Approvals,   this  Agreement  and  the
                  Ancillary  Agreements  constitute valid and binding agreements
                  of Buyer,  enforceable  against Buyer in accordance with their
                  respective terms.

                  SECTION  6.03.  Consents  and  Approvals;  No  Violation.  (a)
                  Subject to obtaining the Buyer Required  Regulatory  Approvals
                  and the Seller  Required  Regulatory  Approvals,  neither  the
                  execution  and  delivery of this  Agreement  or the  Ancillary
                  Agreements  to which it is party by Buyer nor the  purchase by
                  Buyer of the Auctioned  Assets pursuant to this Agreement will
                  (i) conflict  with or result in any breach of any provision of
                  the limited partnership  agreement (or other similar governing
                  documents) of Buyer, (ii) result in a default (or give rise to
                  any right of termination,  cancelation or acceleration)  under
                  any of the terms,  conditions or provisions of any note, bond,
                  mortgage,   indenture,  license,  agreement,  lease  or  other
                  instrument  or  obligation  to  which  Buyer  or  any  of  its
                  subsidiaries  is a party or by which  any of their  respective
                  assets  may  be  bound  or  (iii)  violate  any  order,  writ,
                  injunction,  decree, statute, rule or regulation applicable to
                  Buyer,  or any of its  assets,  except in the case of  clauses
                  (ii)  and  (iii)  for such  failures  to  obtain  a  necessary
                  consent, defaults and violations which would not, individually
                  or in the  aggregate,  have a material  adverse  effect on the
                  ability of Buyer to consummate the  transactions  contemplated
                  by, and discharge its  obligations  under,  this Agreement and
                  the Ancillary Agreements (a "Buyer Material Adverse Effect").

                  (b) Except for (i)  approval of the PSC  pursuant to ss. 70 of
                  the  Public  Service  Law of the  State  of New  York,  of the
                  transfer to Buyer of the Auctioned Assets, (ii) the filings by
                  Buyer and Seller required by the HSR Act and the expiration or
                  earlier  termination of all waiting periods under the HSR Act,
                  (iii) application by Buyer to, and the approval of, FERC under
                  (A) Section 203 of the Federal  Power Act with  respect to the
                  transfer  of  Auctioned  Assets  constituting   jurisdictional
                  assets under the Federal  Power Act and (B) Section 205 of the
                  Federal  Power Act with  respect to (1) each  Continuing  Site
                  Agreement  and  any  wholesale  power  sales  agreement  to be
                  entered  into by Seller and Buyer,  including  the  Transition
                  Capacity Agreement, and (2) authorization to sell capacity and
                  energy from Generating Plants and Gas Turbines at market-based
                  rates  (provided,   however,   that  Buyer  acknowledges  that
                  "market- based rates" for the purpose of this Agreement  means
                  rates that are  subject to any bid cap,  price  limitation  or
                  other market power  mitigation  measure imposed by FERC or PSC
                  in respect  of the New York  State or New York City  wholesale
                  and retail energy and capacity  electric  power markets or any
                  other  restriction  imposed by FERC or PSC with respect to the
                  power generation operations and assets of Buyer, including the
                  FERC Order Accepting  Market Power  Mitigation  Measures dated
                  September  22, 1998,  as modified  (Docket No.  ER98-3169-000)
                  (the  "Mitigation  Measures")),  (iv)  qualification of Buyer,
                  with respect to the Auctioned  Assets,  as an exempt wholesale
                  generator  under  the  Energy  Policy  Act of  1992,  (v)  the
                  issuance  of  approval  by the New  York  City  Department  of
                  Buildings  and,  to the  extent  required,  the New York  City
                  Department  of Business  Services  of the tax lot  subdivision
                  contemplated   by  this  Agreement  in  a  form  suitable  for
                  submission to the New York City  Department of Finance for the
                  issuance of tax lot numbers and (vi)  obtaining  the Revocable
                  Consent  from the City of New York  (collectively,  the "Buyer
                  Required  Regulatory  Approvals"),  no declaration,  filing or
                  registration with, or notice to, or authorization,  consent or
                  approval of any  Governmental  Authority is necessary  for the
                  consummation by Buyer of the transactions  contemplated hereby
                  or by the Ancillary Agreements,  other than such declarations,
                  filings, registrations,  notices, authorizations,  consents or
                  approvals  (A)  which,  if not  obtained  or made  would  not,
                  individually  or in  the  aggregate,  have  a  Buyer  Material
                  Adverse  Effect  or  (B)  which  relate  to  the  Transferable
                  Permits.

                  (c) To the  knowledge  of Buyer,  there is no  reason  that it
                  should fail to obtain the Buyer Required Regulatory Approvals.

                  SECTION  6.04.   Availability   of  Funds.   Buyer  will  have
                  sufficient funds available to it or will have received binding
                  written  commitments  (copies  of which will be  delivered  to
                  Seller when available) from one or more nationally  recognized
                  financial  institutions  to  provide  sufficient  funds on the
                  Closing  Date  to  pay  the  Purchase   Price  and   Estimated
                  Adjustment Amount.

                  SECTION 6.05.  Brokers.  No broker,  finder or other person is
                  entitled to any brokerage  fees,  commissions or finder's fees
                  in  connection  with the  transaction  contemplated  hereby by
                  reason of any action taken by Buyer.


                                    ARTICLE VII

                              Covenants of the Parties

                  SECTION  7.01.  Conduct of Business  Relating to the Auctioned
                  Assets.  (a) Except  with the prior  written  consent of Buyer
                  (such consent not to be unreasonably  withheld) or as required
                  to effect the  purchase and sale of the  Auctioned  Assets and
                  related  transactions  contemplated by this Agreement,  during
                  the  period  from the date of this  Agreement  to the  Closing
                  Date,  Seller will operate the Auctioned  Assets in the usual,
                  regular  and  ordinary  course  and in  accordance  with  good
                  industry  practice  and  applicable  legal  requirements,  and
                  continue to pay accounts payable which relate to the Auctioned
                  Assets in a timely manner, consistent with past practice.

                  (b) Notwithstanding  the foregoing,  except as contemplated in
                  this  Agreement  or the  Ancillary  Agreements,  prior  to the
                  Closing Date, without the prior written consent of Buyer (such
                  consent not to be unreasonably withheld), Seller will not:

                  (i) except for Permitted Exceptions,  grant any Encumbrance on
            the Auctioned Assets securing any indebtedness for borrowed money or
            guarantee or other liability for the obligations of any person;

                  (ii) make any material  change in the levels of fuel inventory
            and  supplies,  materials  and  spare  parts  inventory  customarily
            maintained  by Seller with respect to the  Auctioned  Assets,  other
            than consistent with past practice (including the use of spare parts
            in  connection  with  certain  power  generation  assets  of  Seller
            described  in the  Offering  Memorandum  other  than the  Generating
            Plants or Gas Turbines);

                  (iii) sell, lease (as lessor),  transfer or otherwise  dispose
            of, any of the  Auctioned  Assets,  other than  assets  that  become
            obsolete or assets used, consumed or replaced in the ordinary course
            of business  consistent  with past  practice  (including  the use of
            spare parts in connection  with certain power  generation  assets of
            Seller   described  in  the  Offering   Memorandum  other  than  the
            Generating Plants or Gas Turbines);

                  (iv)  terminate,  materially  extend or  otherwise  materially
            amend any of the  Contracts  (other  than in  accordance  with their
            respective  terms) or waive any default  by, or  release,  settle or
            compromise any material claim against, any other party thereto;

                  (v)  amend any of the  Transferable  Permits,  other  than (A)
            Transferable Permits not material to the operations of the Auctioned
            Assets  as  currently  conducted,  (B) as  reasonably  necessary  to
            complete the transfer of Permits as contemplated hereby, (C) routine
            renewals  or  non-material   modifications  or  amendments  and  (D)
            modifications,  alterations  and amendments  contemplated by Section
            7.03(b);

                  (vi) enter into any Contract for the purchase, sale or storage
            of fuel with respect to the Auctioned  Assets (whether  commodity or
            transportation) with a term in excess of 12 months, if the aggregate
            future   liability  or  receivable   outstanding  on  the  date  for
            measurement  for the purpose of this covenant for all such Contracts
            would be in excess of $2 million,  not  including  any such Contract
            terminable  by notice of not more than 30 days  without  penalty  or
            cost  (other  than  de  minimis  administrative  costs);   provided,
            however,  that  Seller may enter into  Contracts  for the storage of
            fuel with  respect to the  Auctioned  Assets  with a term ending not
            later than December 31, 2000 and otherwise on terms  consistent with
            Seller's past practice;

                  (vii) (A) establish, adopt, enter into or amend any Collective
            Bargaining  Agreement or Benefits  Plans,  except (1) if such action
            would not create a Material  Adverse Effect or (2) as required under
            applicable  law or  under  the  terms of any  Collective  Bargaining
            Agreement  or (B) grant to any  Affected  Employee  any  increase in
            compensation,   except  (1)  in  the  ordinary  course  of  business
            consistent  with past practice or (2) to the extent  required by the
            terms of any Collective Bargaining  Agreement,  employment agreement
            in effect as of the date of this Agreement or applicable law;

                  (viii) enter into any Contract  with respect to the  Auctioned
            Assets for goods or services  not  addressed  in clauses (i) through
            (vii) with a term in excess of 12 months,  if the  aggregate  future
            liability or receivable  outstanding on the date for measurement for
            the  purpose of this  covenant  for all such  Contracts  would be in
            excess of $2 million,  not including any such Contract terminable by
            notice of not more than 30 days without  penalty or cost (other than
            de  minimis   administrative   costs);   provided,   however,   that
            notwithstanding  any  other  provision  of  this  Agreement  to  the
            contrary,   Seller  may  (A)  enter  into  any  Contract  reasonably
            necessary to effect the physical, legal or operational separation of
            the sites on which the Auctioned  Assets are located or to otherwise
            implement   the  change  of  ownership   contemplated   hereby,   or
            subdivision,  of such  sites  or  implement  the  provisions  of the
            Ancillary  Agreements and (B) enter into and record the Declarations
            of Subdivision Easements; or

                  (ix) enter into any  Contract  with  respect to the  Auctioned
            Assets  relating  to  any  of  the  transactions  set  forth  in the
            foregoing clauses (i) through (viii).

                  (c) Without  limiting the  generality of Sections  7.01(a) and
                  (b), to the extent  Section  7.01(a) or (b)  prohibits  Seller
                  from  entering  into any  Contract  for goods and  services in
                  connection  with  maintenance or capital  expenditures,  Buyer
                  agrees that Seller may request  Buyer's  consent to enter into
                  such Contract,  such consent not to be unreasonably  withheld,
                  and to the  extent  Buyer so  consents,  all  liabilities  and
                  obligations  under  such  Contract  shall  constitute  Assumed
                  Obligations and Buyer shall otherwise reimburse Seller for all
                  its expenditures thereunder.

                  (d)  Notwithstanding  anything  in  this  Section  7.01 to the
                  contrary,  Seller may take any  action,  incur any  expense or
                  enter into any obligation with respect to the Auctioned Assets
                  to the extent that (i) all obligations and liabilities arising
                  with respect thereto do not constitute Assumed  Obligations or
                  (ii)  Seller  otherwise  provides  that such  obligations  and
                  liabilities shall not be assumed or retained by Buyer.

                  (e)  Notwithstanding  anything  in  this  Section  7.01 to the
                  contrary, Seller may (i) amend the NYPA Operating Agreement in
                  order to (A)  provide  NYPA with the use of the fuel  handling
                  facilities  related to the A-10 dock at  Astoria  for fuel oil
                  deliveries in accordance with historic fuel deliveries to NYPA
                  at such dock, (B) establish  procedures  for  scheduling  such
                  fuel oil deliveries to provide a fair  allocation of the right
                  to  use  such  fuel  handling  facilities,   (C)  provide  for
                  reimbursement of NYPA for  incremental,  reasonable fuel costs
                  incurred by NYPA to obtain  replacement  fuel when Buyer fails
                  to satisfy its obligations  under the NYPA Agreements  assumed
                  pursuant  to  Section   2.03(a)(xii)   and   relating  to  the
                  obligations  described  in clause  (A) or clause (B) above and
                  (D) provide for the  installation  by NYPA of water meters and
                  the  allocation of charges for water as between NYPA and Buyer
                  based  on  readings  therefrom  and (ii)  obtain  title to the
                  machinery, equipment, facilities, furniture and other personal
                  property listed on Schedule 2.02(a)(iii)(D),  and Buyer agrees
                  that the  Assumed  Seller  Obligations  under NYPA  Agreements
                  shall be deemed amended accordingly.

                  SECTION 7.02.  Access to Information.  (a) Between the date of
                  this Agreement and the Closing Date,  Seller will,  subject to
                  the Confidentiality Agreement,  during ordinary business hours
                  and  upon   reasonable   notice   (i)  give   Buyer   and  its
                  representatives  reasonable access (A) to all books,  records,
                  plants,   offices   and  other   facilities   and   properties
                  constituting the Auctioned  Assets,  including for the purpose
                  of observing the  operation by Seller of the Auctioned  Assets
                  and (B) to the  Auctioned  Assets  that are not located at the
                  Generating Plants or Gas Turbines for the purpose of preparing
                  to store spare parts after the  Closing,  (ii) permit Buyer to
                  make  such  reasonable   inspections   thereof  as  Buyer  may
                  reasonably  request,  (iii) furnish Buyer with such  financial
                  and operating data and other  information  with respect to the
                  Auctioned  Assets as Buyer  may from  time to time  reasonably
                  request,  (iv)  furnish  Buyer  upon  request  a copy  of each
                  material  report,  schedule or other  document with respect to
                  the  Auctioned  Assets  filed by Seller  with,  or received by
                  Seller from, the PSC or FERC; provided,  however, that (A) any
                  such activities  shall be conducted in such a manner as not to
                  interfere  unreasonably  with the  operation of the  Auctioned
                  Assets,  (B) Seller  shall not be  required to take any action
                  which  would  constitute  a  waiver  of  the   attorney-client
                  privilege  and (C) Seller  need not supply  Buyer with (1) any
                  information or access which Seller is under a legal obligation
                  not  to  supply  or  (2)  any  information  which  Seller  has
                  previously supplied to Buyer. Notwithstanding anything in this
                  Section 7.02 to the contrary,  (I) Seller will not be required
                  to provide such  information or access to any employee records
                  other than Transferring Employee Records, (II) Buyer shall not
                  have  the  right  to  perform  or  conduct  any  environmental
                  sampling  or  testing  at, in, on,  around or  underneath  the
                  Auctioned  Assets and (III)  Seller  shall not be  required to
                  provide  such  access  or  information  with  respect  to  any
                  Retained Asset or Retained Liabilities.

                  (b) Unless  otherwise  agreed to in  writing by Buyer,  Seller
                  shall,  for a  period  commencing  on  the  Closing  Date  and
                  terminating   three  years  after  the  Closing   Date,   keep
                  confidential  and  shall  cause  its  representatives  to keep
                  confidential all  Confidential  Information (as defined in the
                  Confidentiality  Agreement)  on the  terms  set  forth  in the
                  Confidentiality  Agreement.  Except  as  contemplated  by  the
                  following  sentence,  Seller shall not release any person from
                  any confidentiality agreement now existing with respect solely
                  to the  Auctioned  Assets  or  waive or  amend  any  provision
                  thereof.  After the Closing Date, upon  reasonable  request of
                  Buyer,  Seller shall,  to the maximum extent  permitted by law
                  and  the  applicable  Bidder  Confidentiality   Agreement  (as
                  defined  below),  appoint Buyer to be Seller's  representative
                  and agent in respect of confidential  information  relating to
                  the  Auctioned  Assets  under the  confidentiality  agreements
                  ("Bidder  Confidentiality   Agreements")  between  Seller  and
                  prospective  purchasers of certain generation assets of Seller
                  of which the Auctioned Assets form part.

                  (c) From and after the Closing  Date,  Buyer shall  retain all
                  Operating  Records  (whether in electronic  form or otherwise)
                  relating  to the  Auctioned  Assets on or prior to the Closing
                  Date. Buyer also agrees that, from and after the Closing Date,
                  Seller shall have the right, upon reasonable request to Buyer,
                  to receive from Buyer copies of any Operating Records or other
                  information  in Buyer's  possession  relating to the Auctioned
                  Assets on or prior to the Closing  Date and required by Seller
                  in order to comply with applicable law. Seller shall reimburse
                  Buyer  for its  reasonable  costs  and  expenses  incurred  in
                  connection with the foregoing sentence.

                  SECTION 7.03.  Consents and Approvals;  Transferable  Permits.
                  (a) Seller and Buyer shall  cooperate  with each other and (i)
                  prepare and file (or otherwise  effect) as soon as practicable
                  all applications,  notices, petitions and filings with respect
                  to and (ii)  use  their  reasonable  best  efforts  (including
                  negotiating in good faith modifications and amendments to this
                  Agreement  and the  Ancillary  Agreements)  to obtain  (A) the
                  Seller  Required  Regulatory  Approvals and the Buyer Required
                  Regulatory Approvals and (B) any other consents,  approvals or
                  authorizations of any other Governmental  Authorities or third
                  parties that are  necessary  to  consummate  the  transactions
                  contemplated  by this  Agreement or the Ancillary  Agreements.
                  Without  limiting the  generality of the  foregoing,  (1) each
                  Party agrees to, upon the other Party's request,  support such
                  other Party's  applications  for  regulatory  approvals of the
                  purchase and sale of the Auctioned Assets contemplated by this
                  Agreement,  (2) Buyer agrees not to seek any relief  from,  or
                  modifications  or amendments in respect of, any bid cap, price
                  limitation or other market power  mitigation  measure or other
                  restriction  with respect to any power  generation  operations
                  and   assets   described   in  or   contemplated   by  Section
                  6.03(b)(iii)(B)(2)  until after the Closing Date and (3) Buyer
                  and  Seller  agree to  defend  any  lawsuits  or  other  legal
                  proceedings,  whether judicial or administrative,  challenging
                  this   Agreement   or  the   Ancillary   Agreements,   or  the
                  consummation  of  the  transactions   contemplated  hereby  or
                  thereby,  including  seeking  to have  any  stay or  temporary
                  restraining  order  entered  by  any  Governmental   Authority
                  vacated or reversed.

                  (b) Upon  execution of this  Agreement,  Seller shall commence
                  the process of transferring to Buyer the Transferable Permits,
                  including  completing  and  filing  applications  and  related
                  documents  with  the  appropriate  Governmental   Authorities.
                  Seller hereby reserves the right to modify, alter or amend any
                  Transferable  Permit  or to refuse to  correct  violations  or
                  deficiencies in respect of any Transferable  Permit as long as
                  such modification, alteration, amendment or refusal would not,
                  individually  or in the aggregate,  create a Material  Adverse
                  Effect.  Seller shall use its reasonable  best efforts to give
                  notice to Buyer of any  modification,  alteration or amendment
                  to any Transferable Permit.

                  (c) Seller shall use its reasonable  best efforts to cooperate
                  with Buyer in the transfer of Transferable Permits to Buyer by
                  Closing.  If the transfer of any Transferable Permit cannot be
                  completed  by  Closing,  Buyer is hereby  authorized,  but not
                  required,  to act as  Seller's  representative  and  agent  in
                  respect  of  such  Transferable  Permit  and to do all  things
                  necessary for effecting  transfer of such Transferable  Permit
                  as soon  after the  Closing  as is  practicable,  with  Seller
                  remaining the  Transferable  Permit "holder of record" in such
                  case until such  transfer  is  completed.  In the case of each
                  such Transferable Permit,  Seller shall, to the maximum extent
                  permitted by law and such Transferable Permit, enter into such
                  reasonable arrangements with Buyer as are necessary to provide
                  Buyer with the benefits and  obligations of such  Transferable
                  Permit.  If  Buyer is able to  complete  the  transfer  of any
                  Transferable  Permit after Closing  without the  occurrence of
                  any  event  that,  if such  event  had  occurred  between  the
                  execution  of this  Agreement  and  the  Closing,  would  have
                  created,  individually or in the aggregate, a Material Adverse
                  Effect,  Seller may substitute Buyer in its place and stead as
                  the Party  responsible  for  completing  the  transfer of such
                  Transferable Permit.

                  SECTION 7.04. Further Assurances. (a) Subject to the terms and
                  conditions of this Agreement, each of the Parties will use its
                  reasonable best efforts to take, or cause to be taken, as soon
                  as possible,  all action,  and to do, or cause to be done,  as
                  soon as possible,  all things  necessary,  proper or advisable
                  under  applicable  laws and regulations to consummate the sale
                  of the Auctioned  Assets pursuant to this Agreement as soon as
                  possible,  including  using its  reasonable  best  efforts  to
                  ensure  satisfaction  of  the  conditions  precedent  to  each
                  Party's obligations hereunder.  Prior to Buyer's submission of
                  any application with a Governmental Authority for a regulatory
                  approval,  Buyer shall submit such  application  to Seller for
                  review  and  comment  and Buyer  shall  incorporate  into such
                  application  any  revisions  reasonably  requested  by Seller.
                  Neither of the Parties will,  without prior written consent of
                  the  other  Party,  take or  fail to  take,  or  permit  their
                  respective  Affiliates  to take or fail to take,  any  action,
                  which would  reasonably  be expected to prevent or  materially
                  impede,  interfere with or delay the consummation,  as soon as
                  possible,  of the transactions  contemplated by this Agreement
                  or the Ancillary  Agreements.  Without limiting the generality
                  of the foregoing, each of the Parties shall use its reasonable
                  best  efforts to  negotiate  in good faith as soon as possible
                  after the date of this  Agreement,  and enter into (i) the A-0
                  License  and the A-10  License,  the  terms of which  shall be
                  substantially as set forth in Exhibits H and F,  respectively,
                  (ii) to the  extent  required  to achieve  subdivision  of the
                  Astoria  site,  one or more  contracts,  agreements  or  other
                  arrangements satisfactory to the New York City Fire Department
                  regarding  fire  prevention  at the Astoria site and (iii) any
                  other agreement reasonably necessary to consummate the sale of
                  the  Auctioned  Assets  pursuant to this  Agreement as soon as
                  possible.

                  (b) From time to time after the date hereof,  without  further
                  consideration and at its own expense,  (i) Seller will execute
                  and deliver such  instruments  of  assignment or conveyance as
                  Buyer may reasonably request to more effectively vest in Buyer
                  Seller's title to the Auctioned  Assets  (subject to Permitted
                  Exceptions  and the other  terms of this  Agreement)  and (ii)
                  Buyer will execute and deliver such  instruments of assumption
                  as Seller may reasonably  request in order to more effectively
                  consummate the sale of the Auctioned Assets and the assumption
                  of the Assumed Obligations pursuant to this Agreement.

                  (c)  Seller  shall  not,  and  shall use its  reasonable  best
                  efforts to cause its Affiliates not to, sponsor or support any
                  recommendation or application to effect prior to April 1, 2002
                  (i)  a  reduction  in  the  locational   generation   capacity
                  requirement that 80% of New York City peak electric loads must
                  be met with in-City  generation  capacity,  as in effect as of
                  the date of this Agreement, unless such reduction is justified
                  by a significant change in the transmission  import capability
                  into New York City whether as a result of actions by Seller or
                  others, (ii) a reduction in the $105/kW-year bid and price cap
                  in respect of capacity  under the Mitigation  Measures,  as in
                  effect as of the date of this  Agreement  or (iii) a change in
                  the method of determining required system capability set forth
                  in   NYPP   Billing   Procedure   4-11   (Installed    Reserve
                  Requirements),  as in effect as of the date of this  Agreement
                  that would reduce the installed  reserve  requirements for the
                  winter  capability period applicable to summer peaking systems
                  if such  reduction  would also  reduce  the  annual  price for
                  installed capacity that Buyer could otherwise obtain.

                  (d) Seller shall join or support  Buyer's  application  to the
                  PSC for the certification  required under Section 32(c) of the
                  Public Utility  Holding Company Act of 1935 in order for Buyer
                  to obtain qualification, with respect to the Auctioned Assets,
                  as an exempt  wholesale  generator under the Energy Policy Act
                  of 1992.

                  (e)  Seller  and  Buyer  shall  cooperate  in  good  faith  to
                  establish a transition  committee to consider  operational and
                  business  issues  related  to the  purchase  and  sale  of the
                  Auctioned Assets.

                  (f) Prior to the Closing Date,  Seller shall cooperate in good
                  faith  with  Buyer to  enable  Buyer to  obtain  insurance  in
                  respect of the Auctioned Assets  comparable to that maintained
                  by Seller as of the date of this Agreement.

                  (g) Seller and Buyer shall  cooperate  in good faith to enable
                  Buyer to obtain  fuel  storage  capacity  with  respect to the
                  Auctioned Assets.

                  SECTION  7.05.  Public  Statements.  The Parties shall consult
                  with each  other  prior to issuing  any  public  announcement,
                  statement or other  disclosure with respect to this Agreement,
                  the  Ancillary  Agreements  or the  transactions  contemplated
                  hereby or thereby,  including any  statement  appearing in any
                  filing contemplated hereby or thereby, and shall not issue any
                  such public announcement,  statement or other disclosure prior
                  to such consultation, except as may be required by law.

                  SECTION  7.06.  Tax Matters.  (a) All transfer and sales taxes
                  (including  any petroleum  business  taxes and similar  excise
                  taxes  on sales  of  petroleum  based  products)  incurred  in
                  connection   with   this   Agreement   and  the   transactions
                  contemplated  hereby  shall  be borne by  Buyer.  Buyer  shall
                  prepare and file in a timely manner any and all Tax Returns or
                  other documentation relating to such taxes; provided, however,
                  that, to the extent  required by applicable  law,  Seller will
                  join  in the  execution  of any  such  Tax  Returns  or  other
                  documentation  relating to any such taxes. Buyer shall provide
                  to Seller  copies of each Tax Return  described in the proviso
                  in the  preceding  sentence at least 30 days prior to the date
                  such Tax Return is required to be filed.

                  (b) At  Seller's  election,  but on no less  than 10  Business
                  Days' notice to Buyer,  the transfer of the  Auctioned  Assets
                  and the receipt of the Purchase  Price shall be made through a
                  qualified intermediary in a manner satisfying the requirements
                  of Treasury Regulation Section 1.1031(k)-1(g), so long as such
                  election by Seller does not create a Material  Adverse  Effect
                  and  Seller  indemnifies  Buyer for its  additional  costs and
                  expenses incurred by reason of such election.

                  (c) Each  Party  shall  provide  the  other  Party  with  such
                  assistance  as may  reasonably be requested by the other Party
                  in  connection  with the  preparation  of any Tax Return,  any
                  audit or other  examination  by any taxing  authority,  or any
                  judicial or administrative  proceedings  relating to liability
                  for Taxes,  and each Party shall  retain and provide the other
                  Party with any records or information which may be relevant to
                  such  return,   audit,   examination   or   proceedings.   Any
                  information  obtained  pursuant  to this  Section  7.06(c)  or
                  pursuant to any other Section hereof providing for the sharing
                  of information or review of any Tax Return or other instrument
                  relating  to Taxes shall be kept  confidential  by the parties
                  hereto.

                  (d) If either  Buyer or Seller  receives  a refund of Taxes in
                  respect of the Auctioned Assets for a taxable period including
                  the Closing Date, Buyer shall pay to Seller the portion of any
                  such refund attributable to the portion of such taxable period
                  prior to the Closing  Date,  and Seller shall pay to Buyer the
                  portion of any such refund attributable to the portion of such
                  taxable period on and after the Closing Date.

                  SECTION 7.07. Bulk Sales or Transfer Laws. Buyer  acknowledges
                  that Seller will not comply  with the  provisions  of any bulk
                  sales or transfer laws of any  jurisdiction in connection with
                  the transactions contemplated by this Agreement.  Buyer hereby
                  waives  compliance  by Seller with the  provisions of the bulk
                  sales or transfer laws of all applicable jurisdictions.

                  SECTION  7.08.  Storage.  Seller  shall  store  for  Buyer the
                  Auctioned  Assets  described in the second sentence of Section
                  2.01 until the date that is six months  after the Closing Date
                  or, in respect of all or a portion of such  Auctioned  Assets,
                  until  one or  more  earlier  dates  proposed  by  Buyer  with
                  reasonable advance notice,  which schedule shall be reasonably
                  acceptable to Seller. Buyer agrees to reimburse Seller for its
                  reasonable costs and expenses in connection with such storage.
                  Buyer  agrees  that  Seller  shall have no  responsibility  or
                  liability for the actual removal of such Auctioned Assets from
                  the actual  storage  location,  and that Buyer shall have sole
                  responsibility  therefor.  Notwithstanding  the  provisions of
                  Section  10.01,   Buyer  agrees  that  Seller  shall  have  no
                  liability  for loss or  damage  with  respect  to the  matters
                  contemplated  by this Section 7.08 or such  Auctioned  Assets,
                  and Buyer agrees to hold each Seller Indemnitee  harmless from
                  and against all loss or damage or Indemnifiable Losses, and to
                  indemnify each Seller  Indemnitee from and against all loss or
                  damage or Indemnifiable  Losses incurred,  asserted against or
                  suffered as a result of any storage or other services provided
                  by Seller pursuant to this Section 7.08, in each case,  except
                  to the  extent any such loss or damage or  Indemnifiable  Loss
                  results  in whole  or in part  from the  gross  negligence  or
                  wilful  or  wanton  acts  or  omissions  to act of any  Seller
                  Indemnitee  (or any  contractor or  subcontractor  of Seller).
                  SECTION  7.09.  Information  Resources.  From the Closing Date
                  until the date that is three months  thereafter,  Seller shall
                  provide Buyer with access to Seller's  mainframe computer only
                  to the extent reasonably  necessary to enable Buyer to use the
                  PPMIS and MMS (in read only  mode)  systems  and  applications
                  solely in connection with the Auctioned  Assets.  Buyer agrees
                  that it will not use any such  access  for any  purpose  other
                  than for the use of the PPMIS and MMS systems and applications
                  solely  in  connection  with  the  Auctioned   Assets.   Buyer
                  acknowledges  that,  as long as it retains  access to Seller's
                  mainframe  computer,  Seller,  its employees and third parties
                  may have access to Buyer's  information  resources systems and
                  applications   (including   the  PPMIS  and  MMS  systems  and
                  applications   served   by   Seller's   mainframe   computer).
                  Notwithstanding  the provisions of Section 10.01, Buyer agrees
                  that Seller shall have no liability or  obligation  whatsoever
                  with respect to the matters contemplated by this Section 7.09,
                  and Buyer agrees to hold each Seller Indemnitee  harmless from
                  and against all loss or damage or Indemnifiable Losses, and to
                  indemnify each Seller  Indemnitee from and against all loss or
                  damage or Indemnifiable  Losses incurred,  asserted against or
                  suffered as a result of Buyer's  access to Seller's  mainframe
                  computer  pursuant to this Section 7.09, in each case,  except
                  to the  extent any such loss or damage or  Indemnifiable  Loss
                  results  in whole  or in part  from the  gross  negligence  or
                  wilful  or  wanton  acts  or  omissions  to act of any  Seller
                  Indemnitee (or any contractor or subcontractor of Seller).

                  SECTION 7.10.  Witness  Services.  At all times from and after
                  the Closing Date, each Party shall use reasonable best efforts
                  to make available to the other Party, upon reasonable  written
                  request,  its and its  subsidiaries'  then  current  or former
                  officers, directors,  employees (including former employees of
                  Seller)  and agents as  witnesses  to the extent that (i) such
                  persons may reasonably be required by such requesting Party in
                  connection with any claim, action, proceeding or investigation
                  in which such requesting  Party may be involved and (ii) there
                  is no conflict between Buyer and Seller in such claim, action,
                  proceeding  or  investigation.   Such  other  Party  shall  be
                  entitled  to  receive  from such  requesting  Party,  upon the
                  presentation of invoices for such witness  services,  payments
                  for such  amounts,  relating to  supplies,  disbursements  and
                  other out-of-pocket  expenses and direct and indirect costs of
                  employees who are witnesses,  as may be reasonably incurred in
                  providing such witness services.

                  SECTION  7.11.  Consent  Orders.  Buyer  and  Seller  agree to
                  cooperate  with each other and NYSDEC to facilitate  the entry
                  of a consent  order  between  NYSDEC and Buyer,  wherein Buyer
                  will agree to assume and  perform the  Assumed  Consent  Order
                  Obligations.

                  SECTION  7.12.  Nitrogen  Oxide  Allowances.  Seller agrees to
                  negotiate  in  good  faith  with  NYSDEC  for  nitrogen  oxide
                  allowances  to be  allocated to the  Auctioned  Assets for any
                  period subsequent to the year 2002.

                  SECTION 7.13. Trade Names.  Seller shall not object to the use
                  by Buyer of any  trade  names,  trademarks,  service  marks or
                  logos (and any rights to and in the same,  including any right
                  to  use  the  same)  primarily   relating  to  the  Generating
                  Facilities  that  contain the words  "Astoria",  "Gowanus"  or
                  "Narrows".

                  SECTION  7.14.  NYPA  Agreements.  (a)  Seller  shall,  to the
                  maximum extent permitted by law and the NYPA Agreements, enter
                  into such reasonable  arrangements with Buyer as are necessary
                  to provide  Buyer with the  benefits  of  Seller's  rights and
                  interests under the NYPA Agreements  relating to the Auctioned
                  Assets and set forth on Schedule 7.14.

                  (b) Buyer hereby acknowledges that Seller has provided it with
                  copies of the NYPA Agreements.

                  SECTION 7.15. Narrows.  From the date of this Agreement to the
                  Closing and notwithstanding anything to the contrary contained
                  in Section 7.01,  Seller shall use its reasonable best efforts
                  to obtain in the  following  order of  preference  (a) (i) fee
                  title,  or (ii) a permanent  easement to maintain  and operate
                  the existing Narrows Gas Turbines (the "Narrows  Turbines") at
                  the Narrows Gas Turbine Site in a manner  consistent  with the
                  operation by Seller of the Narrows Turbines in the past or (b)
                  if the  options in clause  (a) above are not  capable of being
                  obtained  within a  reasonable  period  (which  period may run
                  prior to  Closing)  a long term lease with a lease term of not
                  less than 20 years having  terms  reasonably  satisfactory  to
                  Buyer that will permit the  maintenance  and  operation of the
                  Narrows  Turbines at the Narrows Gas Turbine  Site in a manner
                  consistent  with  the  operation  by  Seller  of  the  Narrows
                  Turbines  in the past,  in each case in  respect  of that real
                  property  described on Schedule  7.15.  From the Closing until
                  the third  anniversary  of the date of this  Agreement,  Buyer
                  shall, at its election,  either (x) take over Seller's efforts
                  to obtain such fee title,  easement or long term lease (and in
                  such event Buyer shall keep  Seller  informed of its  efforts,
                  consult  with Seller in its efforts and act in a  commercially
                  reasonable  manner in its efforts) and, in the event Buyer has
                  taken  over  the  efforts  referred  to  above,  Seller  shall
                  reimburse Buyer for its reasonable costs and expenses incurred
                  in pursuing such efforts, or (y) require Seller to continue to
                  use its  reasonable  best  efforts  to obtain  such fee title,
                  easement  or long term lease.  The amounts  paid or payable to
                  obtain  such fee title,  easement  or long term lease shall be
                  the  responsibility  of Seller;  provided,  however,  that the
                  amounts  payable by Seller under this Section 7.15,  including
                  by way of reimbursement to Buyer,  shall not exceed $5 million
                  in the aggregate. Seller's obligations under this Section 7.15
                  shall cease in all respects upon such third anniversary.


                                    ARTICLE VIII

                                     Conditions

                  SECTION 8.01.  Conditions Precedent to Each Party's Obligation
                  To Effect the Purchase and Sale. The respective obligations of
                  each Party to effect the  purchase  and sale of the  Auctioned
                  Assets shall be subject to the  satisfaction or waiver by such
                  Party  on or  prior  to the  Closing  Date  of  the  following
                  conditions,  unless, in the case of Section 8.01(c) below, the
                  PSC  determines  that such  condition  need not be included or
                  complied with:

                  (a)  the  Seller  Required  Regulatory   Approvals  and  Buyer
            Required  Regulatory  Approvals,  other than the Revocable  Consent,
            shall  have  been  obtained  and  all  conditions  to  effectiveness
            prescribed  therein or otherwise by law,  regulation  or order shall
            have  been  satisfied;  provided,  however,  that if at the time any
            Seller  Required  Regulatory  Approval or Buyer Required  Regulatory
            Approval  is  obtained,  a Party  reasonably  expects a request  for
            rehearing  or a  challenge  thereto to be filed or if a request  for
            rehearing  or a  challenge  thereto  has been  filed,  in each case,
            which, if successful,  would cause such Seller  Required  Regulatory
            Approval or Buyer Required Regulatory Approval,  as the case may be,
            to be reversed, stayed, enjoined, set aside, annulled,  suspended or
            substantially  modified,  then such Party may by notice to the other
            Party  within  five  Business  Days  after  receipt  of such  Seller
            Required Regulatory Approval or Buyer Required Regulatory  Approval,
            as the case may be, delay the Closing until the time for  requesting
            rehearing  has expired or until such  challenge is decided,  in each
            case,  whether  or not  any  appeal  thereof  is  pending;  provided
            further,  however,  that if the  Closing is delayed  pursuant to the
            foregoing  provision,  the Termination  Date shall be  automatically
            extended for a period of time equal to the period of such delay;

                  (b) no preliminary  or permanent  injunction or other order or
            decree by any Federal or state court of competent  jurisdiction  and
            no  statute or  regulation  enacted  by any  Governmental  Authority
            prohibiting  the  consummation  of  the  purchase  and  sale  of the
            Auctioned Assets (collectively, "Restraints") shall be in effect;

                  (c)  the ISO  shall  have  become  operational  to the  extent
            reasonably  necessary  to  monitor  market  power in  respect of the
            Auctioned Assets; and

                  (d)  delivery  of  each  Continuing   Site   Agreement,   each
            Declaration of Easements Agreement,  each Declaration of Subdivision
            Easements and each Zoning Lot Development Agreement
            to the Title Company for recording.

                  SECTION 8.02.  Conditions  Precedent to Obligation of Buyer To
                  Effect  the  Purchase  and Sale.  The  obligation  of Buyer to
                  effect  the  purchase  and  sale  of  the   Auctioned   Assets
                  contemplated  by  this  Agreement  shall  be  subject  to  the
                  satisfaction  or  waiver  by Buyer on or prior to the  Closing
                  Date of the following additional conditions:

                  (a) Seller shall have  performed in all material  respects its
            covenants  and  agreements  contained  in this  Agreement  which are
            required to be performed on or prior to the Closing Date;

                  (b) the representations and warranties of Seller which are set
            forth in this Agreement  shall be true and correct as of the date of
            this  Agreement  and as of the Closing Date, as if made at and as of
            such time  (except  to the  extent  expressly  made as of an earlier
            date,  in which case as of such date),  except  where the failure of
            such  representations  and  warranties  to be so  true  and  correct
            (without  giving  effect to any  limitation as to  "materiality"  or
            "Material Adverse Effect" set forth therein) would not, individually
            or in the aggregate, create a Material Adverse Effect;

                  (c) Buyer shall have received a certificate from an authorized
            officer of Seller,  dated the Closing  Date,  to the effect that, to
            the best of such  officer's  knowledge,  the conditions set forth in
            Sections 8.02(a) and (b) have been satisfied;

                  (d) all material  Permits and  Environmental  Permits required
            for Buyer to conduct the business and  operations  of the  Auctioned
            Assets as currently conducted shall have been transferred or will be
            transferable  to  Buyer,  or shall  have  been  obtained  or will be
            obtainable by Buyer,  or shall have been made  available to Buyer in
            accordance with Section 7.03(c), on, prior to or within a reasonable
            period of time after the Closing Date;

                  (e) Buyer  shall  have  received  (i) the deeds of  conveyance
            substantially  in the form of  Exhibits  B-1 and B-2,  respectively,
            (ii) a Foreign Investment in Real Property Tax Act Certification and
            Affidavit  substantially  in the  form of  Exhibit  C and  (iii)  an
            opinion from John D.  McMahon,  Esq.,  General  Counsel of Seller or
            other  counsel  reasonably  acceptable  to Buyer,  dated the Closing
            Date, substantially in the form set forth in Exhibit D;

                  (f)  execution  and  delivery  by  Seller  of  each of (i) the
            Transition   Capacity  Agreement  and  the  Zoning  Lot  Development
            Agreements and (ii) the A-10 License and the A-0 License,  each in a
            form reasonably satisfactory to Buyer;

                  (g) the Title Company shall be willing to issue to Buyer a New
            York form of ALTA (1992) Owner's Title Insurance Policy insuring fee
            title to the Buyer Real Estate in an amount equal to that portion of
            the Purchase Price properly allocable to Buyer Real Estate,  subject
            only to the Permitted Exceptions;

                  (h) Buyer shall have received  originals of the ALTA/ACSM Land
            Title  Surveys  which  include  the Buyer Real Estate in addition to
            other  property,  signed by the  surveyor  with Buyer's name and the
            name of not more than one other Party  designated  by Buyer added to
            the certification set forth thereon; and

                  (i) (x)  There  shall not be any New York  State  Governmental
                  Authority  with  jurisdiction  seeking to  prevent  Buyer from
                  operating the Narrows Turbines on the Narrows Gas Turbine Site
                  in a manner  consistent  with  the  operation  of the  Narrows
                  Turbines  by  Seller  in the past as a result  of the state of
                  title in respect of the real  property  described  in Schedule
                  7.15  and (y) if (x) is not  satisfied,  the  presence  of the
                  state of facts in (x) in and of itself and  without  regard to
                  any other facts or  circumstances,  will not have a reasonable
                  probability  of  materially  and adversely  affecting  Buyer's
                  ability  to  obtain  financing  for  the  acquisition  of  the
                  Auctioned  Assets (it being understood that the obtaining of a
                  "use  permit"  or  equivalent   Permit  from  the  appropriate
                  Governmental   Authority  in  form  and  substance  reasonably
                  satisfactory to Buyer in respect of such real property and the
                  Narrows Turbines by Buyer shall satisfy this condition and the
                  obtaining  of fee  title,  an  easement  or  long  term  lease
                  satisfying the requirements of Section 7.15 shall also satisfy
                  such condition).

                  SECTION 8.03.  Conditions Precedent to Obligation of Seller To
                  Effect the  Purchase  and Sale.  The  obligation  of Seller to
                  effect  the  purchase  and the  sale of the  Auctioned  Assets
                  contemplated  by  this  Agreement  shall  be  subject  to  the
                  satisfaction  or waiver  by Seller on or prior to the  Closing
                  Date of the following additional conditions:

                  (a) Buyer shall have  performed in all  material  respects its
            covenants  and  agreements  contained  in this  Agreement  which are
            required to be performed on or prior to the Closing Date;

                  (b) the  representations and warranties of Buyer which are set
            forth in this Agreement  shall be true and correct as of the date of
            this  Agreement  and as of the Closing Date, as if made at and as of
            such time  (except  to the  extent  expressly  made as of an earlier
            date,  in which case as of such date),  except  where the failure of
            such  representations  and  warranties  to be so  true  and  correct
            (without  giving  effect to any  limitation as to  "materiality"  or
            "Buyer  Material  Adverse  Effect"  set forth  therein)  would  not,
            individually  or in the aggregate,  create a Buyer Material  Adverse
            Effect;

                  (c)  Seller  shall  have  received  a   certificate   from  an
            authorized  officer of Buyer,  dated the Closing Date, to the effect
            that, to the best of such  officer's  knowledge,  the conditions set
            forth in Sections 8.03(a) and (b) have been satisfied;

                  (d) Seller shall have received an opinion substantially in the
            form of  Exhibit  E dated as of the  Closing  Date and from  counsel
            reasonably acceptable to Seller;

                  (e) execution and delivery by Buyer of each of (i)  Transition
            Capacity  Agreement,  the Gowanus Zoning Lot  Development  Agreement
            and,  unless  executed and delivered  prior to the Closing Date, the
            Astoria Zoning Lot  Development  Agreement and (ii) the A-10 License
            and  the A-0  License,  each in a form  reasonably  satisfactory  to
            Seller;
                  (f) Buyer shall have  provided  evidence in form and substance
            reasonably  satisfactory  to Seller of  compliance by Buyer with its
            obligations under Article IX;

                  (g) the Guarantee Agreement shall be in full force and effect;

                  (h) Guarantor  shall have  performed in all material  respects
            its covenants and  agreements  contained in the Guarantee  Agreement
            which are required to be performed on or prior to the Closing Date;

                  (i) the  representations and warranties of Guarantor which are
            set forth in the Guarantee Agreement shall be true and correct as of
            the date of the  Guarantee  Agreement and as of the Closing Date, as
            if made at and as of such time (except to the extent  expressly made
            as of an earlier date, in which case as of such date),  except where
            the failure of such representations and warranties to be so true and
            correct (without giving effect to any limitation as to "materiality"
            or "Guarantor Material Adverse Effect" set forth therein) would not,
            individually  or in  the  aggregate,  create  a  Guarantor  Material
            Adverse Effect (as defined therein);

                  (j)  Seller  shall  have  received  a   certificate   from  an
            authorized  officer of  Guarantor,  dated the Closing  Date,  to the
            effect that, to the best of such officer's knowledge, the conditions
            set forth in Sections 8.03(h) and (i) have been satisfied; and

                  (k) Seller shall have received an opinion substantially in the
            form of Exhibit L dated the Closing Date and from counsel reasonably
            acceptable to Seller.


                                     ARTICLE IX

                                  Employee Matters

                  SECTION  9.01.   Employee  Matters.   (a)  Buyer  shall  offer
                  equivalent   employment  at  the  Auctioned  Assets  to  those
                  employees  of Seller  regularly  assigned by Seller to work at
                  the Auctioned Assets on the Closing Date in the job titles and
                  facilities  listed  in  Schedule  9.01(a)(all  such  employees
                  described  above  and  those  individuals   described  in  the
                  following sentence being hereinafter  referred to as "Affected
                  Employees").  Affected Employees include each such employee of
                  Seller who is not  actively  at work on the  Closing  Date due
                  solely to a  temporary  short-term  absence,  whether  paid or
                  unpaid,  in  accordance  with  applicable  policies of Seller,
                  including as a result of  vacation,  holiday,  personal  time,
                  leave of absence,  union leave, short- or long-term disability
                  leave, military leave or jury duty. Affected Employees whether
                  or not they  accept an offer of  employment  from Buyer  shall
                  cease to be  employees  of Seller on the Closing  Date and, to
                  the extent  they  accept an offer of  employment  from  Buyer,
                  their period of employment by Buyer shall begin on the Closing
                  Date.  Seller  shall  be  responsible  for any  obligation  to
                  provide  employee  benefits to an Affected  Employee  prior to
                  such employee's period of employment by Buyer.

                  All such offers of  employment  will be made (x) in accordance
                  with  all  applicable  laws  and  regulations,   and  (y)  for
                  employees  represented  by Utility  Workers'  Union of America
                  AFL-CIO and its Local Union 1-2 ("Local  1-2"),  in accordance
                  with the Local 1-2 Collective Bargaining Agreement (as defined
                  in  Schedule  9.01(b)).  Each  Affected  Employee  who becomes
                  employed by Buyer  pursuant to this Section  9.01(a)  shall be
                  referred to herein as a "Continued Employee".

                  Buyer  may   commence   discussions   concerning   offers  for
                  employment beginning on the Closing Date to Affected Employees
                  at any time following the date of this Agreement.

                  Seller acknowledges and agrees that Buyer may discharge any of
                  its  obligations  under this  Article  IX  through  one of its
                  Affiliates; provided, however, that Buyer shall in no event be
                  relieved  from the  full  liabilities  and the full  financial
                  responsibility under this Article IX.

                  (b)  Schedule  9.01(b)  sets forth the  collective  bargaining
                  agreement,  and amendments thereto, to which Seller is a party
                  in  connection  with the  Auctioned  Assets  (the  "Collective
                  Bargaining Agreement"). Affected Employees who are included in
                  the  collective  bargaining  unit  covered  by the  Collective
                  Bargaining Agreement are referred to herein as "Affected Union
                  Employees".  Each Continued  Employee who is an Affected Union
                  Employee  shall be  referred to herein as a  "Continued  Union
                  Employee".  On the Closing  Date,  Buyer will assume the terms
                  and conditions of the Collective Bargaining Agreement,  except
                  as set  forth in  Section  9.02(b)  below,  as it  relates  to
                  Affected  Union  Employees  until the  expiration  date of the
                  Collective  Bargaining  Agreement.  Buyer will comply with its
                  legal obligations with respect to collective  bargaining under
                  Federal labor law for the employees at the Auctioned Assets in
                  the  job  titles  or  related  work  responsibilities  of  the
                  Affected  Union  Employees,  and Buyer  will  comply  with all
                  applicable  obligations  thereunder  as the new  owner  of the
                  Auctioned  Assets.  Buyer  shall  recognize  Local  1-2 as the
                  exclusive   collective   bargaining   representative   of  the
                  employees at the Auctioned Assets in the job titles or related
                  work  responsibilities  of the Affected  Union  Employees  and
                  Buyer  agrees   that,   should  any  other   business   entity
                  (regardless  of its  relationship  to Buyer)  acquire all or a
                  portion  of the  Auctioned  Assets  from  Buyer  prior  to the
                  expiration date of the Collective Bargaining Agreement,  Buyer
                  will require such business  entity to (i) offer  employment to
                  Affected  Union  Employees  employed by Buyer at the Auctioned
                  Assets  immediately  prior to the  change in  ownership,  (ii)
                  recognize  Local 1-2 as the  exclusive  collective  bargaining
                  representative of Buyer's employees at the Auctioned Assets in
                  the job titles and work responsibilities of the Affected Union
                  Employees,  and (iii) assume the terms and  conditions  of the
                  Collective  Bargaining  Agreement  as they  relate to Affected
                  Union Employees from the date of such acquisition  through the
                  expiration date of the Collective Bargaining Agreement.

                  SECTION   9.02.    Continuation    of    Equivalent    Benefit
                  Plans/Credited  Service.  (a) For not less  than  three  years
                  following the Closing Date, Buyer shall maintain  compensation
                  (including  base  pay and  bonus  compensation)  and  employee
                  benefits and employee  benefit plans and arrangements for each
                  Continued  Employee who is not a Continued  Union  Employee (a
                  "Continued  Non-Union Employee") which are at least equivalent
                  to  those  provided  pursuant  to the  compensation,  employee
                  benefits and employee benefit plans and arrangements in effect
                  on the Closing  Date for the  Affected  Employees  who are not
                  Affected Union  Employees.  Such total  compensation  shall be
                  based upon (x) such employee's  existing  individual base pay,
                  (y) such employee's  authorized overtime,  if applicable,  and
                  (z)  the  average   bonus  and  benefit   component  for  such
                  employee's  salary  plan  level,  as  consistently  applied by
                  Seller,  apportioned according to such employee's base pay. No
                  provision  of  this  Agreement   shall  affect  any  Continued
                  Non-Union Employee's status as an employee-at-will.

                  (b) From the  Closing  Date until the  expiration  date of the
                  Collective Bargaining  Agreement,  Buyer shall provide to each
                  Continued Union Employee  benefits and employee  benefit plans
                  and arrangements  which are equivalent to those provided under
                  such Collective Bargaining Agreement. Such benefits, plans and
                  arrangements  include the  following:  (i) hospital,  medical,
                  dental,  vision care and prescription drug benefits (including
                  employee  contributions  to be made on a pre-tax basis),  (ii)
                  health care and  dependent  care flexible  spending  accounts;
                  (iii)  employer-provided  basic group term life and accidental
                  death and dismemberment  insurance;  (iv) employee-paid  group
                  universal life and spousal and dependent child life insurance;
                  (v) sick  allowance  (short  term  disability)  and long  term
                  disability  benefits;  (vi) business travel accident insurance
                  and crime protection insurance;  (vii) occupational accidental
                  death insurance;  (viii) adoption  benefits and child care and
                  elder care referral benefits;  (ix) tuition aid benefits;  (x)
                  vacation and  holidays;  (xi)  employee  stock  purchase  plan
                  (including employer matching  contributions) and (xii) defined
                  benefit  pension and 401(k) plan  benefits.  In providing such
                  benefits,   Buyer  shall  have  the  right,   subject  to  any
                  applicable laws, to use different providers from those used by
                  Seller  and to  establish  Buyer's  own  benefit  plans or use
                  Buyer's existing benefit plans. For purposes hereof, except as
                  provided in Section 9.04(b), Buyer shall have no obligation to
                  maintain  a fund  holding  or  measured  by  common  stock  of
                  Seller's  parent under any of Buyer's  plans or  arrangements,
                  notwithstanding  any such fund  maintained by Seller under its
                  plans and arrangements.

                  (c) Continued Employees shall be given credit by Buyer for all
                  service with Seller and its  Affiliates  under all existing or
                  future employee benefit and fringe benefit plans, programs and
                  arrangements  of the Buyer  ("Buyer  Benefit  Plans") in which
                  they become  participants.  The service  credit given by Buyer
                  shall be for purposes of eligibility, vesting, eligibility for
                  early  retirement  and  early  retirement  subsidies,  benefit
                  accrual and  service-related  level of  benefits.  Buyer shall
                  assume and honor all vacation,  sick and personal days accrued
                  and unused by Continued  Employees through the Closing Date in
                  accordance with Seller's applicable policies and arrangements.

                  SECTION 9.03.  Pension  Plan.  (a) Effective as of the Closing
                  Date, Buyer shall have in effect defined benefit pension plans
                  ("Buyer's   Pension  Plans")  intended  to  be  (i)  qualified
                  pursuant to Section 401(a) of the Code and (ii)  nonqualified,
                  in order to provide  for  benefits  which would  otherwise  be
                  payable  under  the  applicable  qualified  plan  but  for the
                  application  of  Sections  401(a)(17)  and  415 of  the  Code,
                  providing  benefits as of the Closing  Date  identical  in all
                  material  respects (except for such changes as may be required
                  by law)  to the  benefits  provided  to  them  under  Seller's
                  Pension  Plans  (as  defined  below),  in  particular  (x) for
                  Continued Non-Union  Employees,  such Buyer's Pension Plans to
                  provide benefits  identical in all material  respects to those
                  benefits   provided   under  Seller's   Retirement   Plan  for
                  Management  Employees  and  Seller's  Supplemental  Retirement
                  Income  Plan,  and (y) for  Continued  Union  Employees,  such
                  Buyer's  Pension  Plans to provide  benefits  identical in all
                  material respects to those provided under Seller's Pension and
                  Benefits Plan  (collectively,  "Seller's  Pension Plans"),  in
                  each case,  as of the Closing  Date.  Buyer  acknowledges  and
                  agrees  that one such  material  respect is to count age after
                  termination   of   employment   for  purposes  of   satisfying
                  requirements  for  early  retirement   eligibility  and  early
                  retirement subsidies.

                  (b)  Continued  Employees  participating  in Seller's  Pension
                  Plans  immediately  prior to the  Closing  Date  shall  become
                  participants  in Buyer's Pension Plans as of the Closing Date.
                  Without limiting the generality of Section 9.02(c),  Continued
                  Employees  shall  receive  credit  for  all  compensation  and
                  service with Seller (subject to the terms of Seller's  Pension
                  Plans) for purposes of eligibility for participation, vesting,
                  eligibility   for  early   retirement  and  early   retirement
                  subsidies and benefit  accrual under  Buyer's  Pension  Plans.
                  Seller shall be responsible for Continued  Employees'  pension
                  benefits  accrued up to the Closing  Date,  and Buyer shall be
                  responsible  for pension  benefits  accrued by such  Continued
                  Employees  on and after the Closing  Date as provided  herein.
                  Buyer may offset against the accrued benefits determined under
                  Buyer's Pension Plans the accrued  benefits  determined  under
                  Seller's  Pension  Plans.  For the  purpose  of  this  Section
                  9.03(b), "accrued benefit" means the amount that would be paid
                  as a life annuity at normal retirement age irrespective of the
                  date of actual  distribution  from either  Seller's or Buyer's
                  Pension  Plans.  Seller  shall make pension  distributions  to
                  Continued  Employees  of the vested  portion of their  accrued
                  benefits  in  accordance  with the terms of  Seller's  Pension
                  Plans as in effect  from time to time.  As soon as  reasonably
                  practicable  following the Closing Date,  Seller shall provide
                  Buyer a list  showing,  as of the  Closing  Date,  the accrued
                  benefit of each  Continued  Employee  under  Seller's  Pension
                  Plans.

                  (c) In the event that any other business entity (regardless of
                  its  relationship  to Buyer)  acquires all or a portion of the
                  Auctioned  Assets  from  Buyer at any time  prior to the third
                  anniversary  of the  Closing  Date in the  case  of  Continued
                  Non-Union  Employees and prior to the  expiration  date of the
                  Collective Bargaining Agreement in the case of Continued Union
                  Employees,  Buyer will  require  such entity to  maintain  the
                  defined  benefit  plans,  provide the benefits  and  recognize
                  compensation  and  service  with  Seller and Buyer to the same
                  extent as Buyer is  required  under  Sections  9.03(a) and (b)
                  above.

                  SECTION  9.04.  401(k) Plan.  (a)  Effective as of the Closing
                  Date,  Buyer  shall  have  in  effect  tax-qualified   defined
                  contribution  plans that include a qualified  cash or deferred
                  arrangement  within the meaning of Section  401(k) of the Code
                  ("Buyer's  401(k) Plans") that will provide  benefits that are
                  identical in all material respects (except for such changes as
                  may be  required  by law) to those  provided  by (i)  Seller's
                  Thrift Savings Plan for Management  Employees,  in the case of
                  Continued  Non-Union  Employees,  and (ii) Seller's Retirement
                  Income  Savings  Plan  for  Weekly  Employees,  in the case of
                  Continued  Union  Employees (such Seller plans herein referred
                  to collectively as "Seller's 401(k) Plans"),  in each case, as
                  of the Closing Date. Each Continued Employee  participating in
                  Seller's  401(k) Plans  immediately  prior to the Closing Date
                  shall become a participant  in Buyer's  401(k) Plans as of the
                  Closing Date. Continued Employees shall receive credit for all
                  service  with Seller for purposes of  eligibility  and vesting
                  under Buyer's 401(k) Plans.

                  (b)  At  such  time  after  the  Closing  Date  as  Seller  is
                  reasonably  satisfied  that  Buyer's  401(k)  Plans  meet  the
                  requirements  for  qualification  under Section  401(a) of the
                  Code,  Seller shall cause to be  transferred to Buyer's 401(k)
                  Plans in a trust-to-trust transfer in common stock of Seller's
                  parent (as provided in the  following  sentence)  and cash (or
                  other property reasonably acceptable to Buyer) an amount equal
                  to the  value  of the  assets  held  in  the  accounts  of all
                  Continued  Employees  (including any outstanding loan balances
                  of Continued  Employees in Seller's 401(k) Plans),  subject to
                  any  qualified   domestic   relations  orders.  In  connection
                  therewith,  Buyer shall  establish  an  investment  fund under
                  Buyer's 401(k) Plans to which shall be transferred  the shares
                  of common stock of Seller's parent (or any successor  thereto)
                  which,  as of  the  date  of  transfer,  are  credited  to the
                  accounts of the  Continued  Employees  under  Seller's  401(k)
                  Plans.  After the Closing Date and prior to any such transfer,
                  Buyer shall  cooperate  with Seller in the  administration  of
                  distributions  to and loan repayments by Continued  Employees.
                  Prior  to such  transfer  of  assets,  Seller  shall  vest any
                  unvested benefits of Continued Employees under Seller's 401(k)
                  Plans.  Following  any such  transfer  of assets,  Buyer shall
                  assume  all   obligations  and  liabilities  of  Seller  under
                  Seller's   401(k)  Plans  with   respect  to  such   Continued
                  Employees, and Seller shall have no further liability to Buyer
                  or any Continued Employee with respect thereto.

                  SECTION 9.05. Welfare Plans. (a) Continued Employees and their
                  dependents who are eligible to participate in Seller's current
                  welfare  benefits  plans,  programs or  arrangements  shall be
                  eligible  to  participate  in  the  welfare   benefits  plans,
                  programs or  arrangements  maintained or  established by Buyer
                  ("Buyer's  Welfare Plans"),  effective as of the Closing Date.
                  Effective as of the Closing Date,  any and all  limitations as
                  to pre-existing conditions and actively-at-work exclusions and
                  waiting periods under Buyer's Welfare Plans shall be waived by
                  Buyer with respect to Continued  Employees and their  eligible
                  dependents to the extent  satisfied under Seller's  applicable
                  Welfare Plans. In addition,  effective as of the Closing Date,
                  Buyer shall  cause  Buyer's  Welfare  Plans to  recognize  any
                  out-of-pocket  health  care  expenses  incurred  by  Continued
                  Employees and their eligible  dependents  prior to the Closing
                  Date and during the  calendar  year in which such Closing Date
                  occurs for  purposes  of  determining  their  deductibles  and
                  out-of-pocket  maximums under Buyer's  Welfare  Plans.  Seller
                  shall retain  responsibility  under Seller's welfare plans for
                  claims  relating to expenses  incurred by Continued  Employees
                  and their eligible dependents prior to the Closing Date. Buyer
                  shall have  responsibility  under  Buyer's  Welfare  Plans for
                  claims  relating to expenses  incurred by Continued  Employees
                  and their eligible dependents on and after the Closing Date.

                  (b)  Effective  as of the  Closing  Date,  Buyer shall have in
                  effect health care and dependent  care  reimbursement  account
                  plans for the benefit of each Continued Employee, the terms of
                  which shall (i) be identical  in all material  respects to the
                  Flexible Reimbursement Account Plans for Management and Weekly
                  Employees of Seller ("Seller's  Reimbursement  Account Plans")
                  as in effect on the Closing Date and (ii) give full effect to,
                  and continue in effect,  salary reduction elections made under
                  Seller's  Reimbursement  Account  Plans.  Prior to the Closing
                  Date,  Seller shall cause the accounts of Continued  Employees
                  under  Seller's  Reimbursement  Account Plans to be segregated
                  into  separate  health care and dependent  care  reimbursement
                  accounts (the "Segregated Reimbursement  Accounts"),  and such
                  Segregated  Reimbursement Accounts shall be transferred to and
                  assumed by Buyer as of the Closing Date.

                  (c) Buyer shall,  subject to any  applicable  laws,  provide a
                  retiree health program  identical in all material  respects to
                  Seller's  retiree  health  program as in effect on the Closing
                  Date to each Continued  Employee who terminates his employment
                  with Buyer within three years after the Closing  Date,  in the
                  case of a Continued Non-Union Employee, and on or prior to the
                  expiration date of the Collective Bargaining Agreement, in the
                  case of a Continued Union Employee,  and, in each case, who at
                  the  time of such  termination  of  employment  satisfies  the
                  eligibility  requirements  for  such  retiree  health  program
                  provided by Buyer; provided, however, that Seller shall remain
                  liable,  pursuant to Seller's retiree health program,  for all
                  Continued  Employees who satisfy,  as of the Closing Date, the
                  eligibility  requirements  then in effect for Seller's retiree
                  health program.

                  SECTION 9.06. Short- and Long-Term Disability. Effective as of
                  the  Closing  Date,  Buyer  shall  have  in  effect  short-and
                  long-term  disability  plans  for  the  benefit  of  Continued
                  Employees,  the cost of which to Continued  Employees shall be
                  the same as under, and the terms of which are identical in all
                  material  respects to, Seller's  applicable plans as in effect
                  as of the  Closing  Date.  Any and  all  waiting  periods  and
                  pre-existing  condition  clauses shall be waived under Buyer's
                  short-  and  long-term   disability   plans  with  respect  to
                  Continued Employees.

                  SECTION  9.07.   Life  Insurance  and  Accidental   Death  and
                  Dismemberment  Insurance.  Effective  as of the Closing  Date,
                  Buyer shall have in effect  group term life  insurance,  group
                  universal life insurance,  accidental death and  dismemberment
                  insurance,  occupational accidental death insurance,  business
                  travel accident insurance and crime protection insurance plans
                  for the benefit of Continued  Employees,  the cost of which to
                  Continued  Employees shall be the same as under,  and terms of
                  which are  identical  in all material  respects  to,  Seller's
                  applicable  plans that  provide  such  benefits  to  Continued
                  Employees immediately prior to the Closing Date.

                  SECTION 9.08. Severance. (a) Effective as of the Closing Date,
                  Buyer shall have in effect a severance plan covering Continued
                  Non-Union  Employees  that  contains  terms  identical  in all
                  material  respects to those under Seller's  Severance Pay Plan
                  for Management Employees as of the Closing Date.

                  (b) Buyer shall,  subject to any  applicable  laws,  provide a
                  special separation  allowance for any Continued Employee whose
                  employment  with Buyer is  terminated  involuntarily  by Buyer
                  other than for cause on or prior to, in the case of  Continued
                  Non-Union  Employees,  three years after the Closing Date and,
                  in the case of Continued Union Employees,  the expiration date
                  of the Collective Bargaining  Agreement.  Such allowance shall
                  be not less  than the sum of four  weeks pay plus one week pay
                  for  each   completed   year  of  service  (as  determined  by
                  aggregating each affected individual's respective service with
                  Seller and Buyer) and shall be payable by Buyer (to the extent
                  not paid pursuant to any Buyer  severance  plan  referenced in
                  Section   9.08(a))   in  a  lump  sum  within  30  days  after
                  termination  of employment.  In addition,  in the case of each
                  Continued  Non-Union  Employee described in the first sentence
                  of this  Section  9.08(b),  Buyer shall pay (to the extent not
                  paid  pursuant  to any  Buyer  severance  plan  referenced  in
                  Section 9.08(a)) the Continued  Non-Union  Employee a lump sum
                  equal to the  excess of (i) the  actuarial  equivalent  of the
                  Employee's  "potential  benefit" under the applicable  Buyer's
                  Pension  Plans,  which  such  Employee  would  receive if such
                  Employee's  employment  continued  until three years after the
                  Closing   Date  and  such   Employee's   base  and   incentive
                  compensation for such deemed additional period was the same as
                  in  effect  on the  date of  such  Employee's  termination  of
                  employment with Buyer,  over (ii) the actuarial  equivalent of
                  such Employee's  "actual benefit" under the applicable Buyer's
                  Pension Plans, as of the date of such  Employee's  termination
                  of  employment  from Buyer.  For the purpose of the  foregoing
                  sentence,  (i) the term "potential benefit" shall refer to the
                  monthly pension that would have been payable to the applicable
                  Employee  commencing  on the first day of the month  following
                  the  latest  of (A)  the  last  day of the  deemed  additional
                  period,  (B)  Employee's  attainment  of age  55,  or (C)  the
                  earlier  of (l) the  first  date as of  which  the sum of such
                  Employee's age and years of service,  as taken into account in
                  determining the actuarial  reduction for commencement prior to
                  normal  retirement  age that is to be applied  to his  accrued
                  benefit under the applicable Buyer's Pension Plans,  equals 75
                  or (2) such  Employee's  attainment  of age 65,  (ii) the term
                  "actual benefit" shall refer to the monthly pension payable to
                  such  Employee  under the  applicable  Buyer's  Pension  Plans
                  commencing as of the date determined in accordance with clause
                  (i) of this  sentence,  and (iii) the actuarial  equivalent of
                  the "potential benefit" and the "actual benefit" shall each be
                  a  lump  sum  payable  as  of  the  date  of  such  Employee's
                  termination of employment from Buyer,  determined on the basis
                  of the interest  rate used to determine the amount of lump sum
                  distributions and, to the extent  applicable,  other actuarial
                  assumptions  then  in  effect  under  the  applicable  Buyer's
                  Pension Plans. Buyer shall also provide outplacement  services
                  to such terminated Continued Non-Union Employee appropriate to
                  the level of the Employee's position and job responsibilities.
                  Buyer  shall also  continue to provide or cause to be provided
                  to any such terminated  Continued  Employee  health  insurance
                  coverage and group term and universal life insurance  coverage
                  at the same  rates as for  active  Continued  Employees  for a
                  period  equal to the number of weeks of  separation  allowance
                  which any such  terminated  Continued  Employee is entitled to
                  from Buyer. Buyer shall have the right to require a release in
                  form  reasonably  satisfactory  to  Buyer as a  condition  for
                  eligibility  to  receive  such   separation   allowance.   The
                  allowance  shall  not  apply  to  Continued   Employees  whose
                  employment  is  terminated  due to death or expiration of sick
                  allowance  or  other   authorized  leave  of  absence  or  who
                  terminate  employment  voluntarily.  If at any time during the
                  three-year  period  following  the Closing  Date,  Buyer shall
                  assign a  Continued  Non-Union  Employee  to work on a regular
                  basis at a  location  that is more than  fifty  miles from the
                  location to which such  Employee is assigned as of the Closing
                  Date,  Buyer shall offer such Employee the option to terminate
                  employment  and receive the  severance  benefits  set forth in
                  this Section 9.08(b) in lieu of the reassignment.

                  SECTION  9.09.  Workers  Compensation.  Effective  as  of  the
                  Closing   Date,   Buyer   shall   have  in  effect  a  workers
                  compensation   program  for  Continued  Employees  that  shall
                  provide  coverage   identical  in  all  material  respects  to
                  Seller's workers compensation program as of the Closing Date.


                                     ARTICLE X

                       Indemnification and Dispute Resolution

                  SECTION 10.01. Indemnification.  (a) Seller will indemnify and
                  hold harmless Buyer and its  Affiliates  and their  respective
                  directors,  officers,  employees and agents (collectively with
                  Buyer and its Affiliates,  the "Buyer  Indemnitees")  from and
                  against  any and all  claims,  demands or suits by any person,
                  and all losses, liabilities,  damages, obligations,  payments,
                  costs  and  expenses  (including  reasonable  legal  fees  and
                  expenses  and  including   costs  and  expenses   incurred  in
                  connection  with  investigations  and settlement  proceedings)
                  (each, an "Indemnifiable Loss"), as incurred, asserted against
                  or suffered by any Buyer  Indemnitee  relating  to,  resulting
                  from or arising out of:

                  (i) any  breach by  Seller of any  covenant  or  agreement  of
            Seller  contained in this Agreement or, prior to their expiration in
            accordance with Section 12.03,  the  representations  and warranties
            contained in Sections 5.01, 5.02, 5.03 and 5.17;

                  (ii) the Retained Liabilities;

                  (iii)  noncompliance by Seller with any bulk sales or transfer
            laws as provided in Section 7.07; or

                  (iv) any breach by Seller of any Ancillary Agreement.

                  (b) Buyer  will  indemnify  and hold  harmless  Seller and its
            Affiliates  and  their  respective  directors,  officers,  trustees,
            employees and agents  (collectively  with Seller and its Affiliates,
            the "Seller Indemnitees") from and against any and all Indemnifiable
            Losses,  as  incurred,  asserted  against or  suffered by any Seller
            Indemnitee relating to, resulting from or arising out of:

                  (i) any breach by Buyer of any  covenant or agreement of Buyer
            contained  in this  Agreement  or,  prior  to  their  expiration  in
            accordance with Section 12.03,  the  representations  and warranties
            contained in Sections 6.01, 6.02, 6.03 and 6.05;

                  (ii) the Assumed Obligations;

                  (iii) any obligation  resulting from any action or inaction of
            Buyer (A) under any Contract or warranty pursuant to Section 2.04(b)
            (whether acting as principal or representative  and agent for Seller
            pursuant to Section  2.04(b) or otherwise),  (B) pursuant to Section
            2.05 or Section 7.14 (in each case, whether acting as representative
            or  agent  for  Seller  or   otherwise)   or  (C)  pursuant  to  any
            Transferable Permit in respect of which Seller remains the holder of
            record after the Closing Date pursuant to Section 7.03(c); or

                  (iv) any breach by Buyer of any Ancillary Agreement.

                  (c) The amount of any  Indemnifiable  Loss shall be reduced to
                  the  extent  that the  relevant  Buyer  Indemnitee  or  Seller
                  Indemnitee  (each,  an  "Indemnitee")  receives any  insurance
                  proceeds  with respect to an  Indemnifiable  Loss and shall be
                  (i)  increased to take account of any Tax Cost incurred by the
                  Indemnitee  arising  from the  receipt of  indemnity  payments
                  hereunder  (grossed up for such  increase) and (ii) reduced to
                  take  account of any Tax Benefit  realized  by the  Indemnitee
                  arising   from  the   incurrence   or   payment  of  any  such
                  Indemnifiable  Loss. If the amount of any Indemnifiable  Loss,
                  at any time  subsequent to the making of an indemnity  payment
                  in respect  thereof,  is reduced by  recovery,  settlement  or
                  otherwise  under or pursuant  to any  insurance  coverage,  or
                  pursuant to any claim,  recovery,  settlement or payment by or
                  against any other person,  the amount of such reduction,  less
                  any  costs,   expenses  or  premiums  incurred  in  connection
                  therewith,  will  promptly be repaid by the  Indemnitee to the
                  Party  required  to  provide  indemnification  hereunder  (the
                  "Indemnifying Party") with respect to such Indemnifiable Loss.

                  (d) To the fullest extent  permitted by law, neither Party nor
                  any Buyer Indemnitee or any Seller  Indemnitee shall be liable
                  to the other  Party or any other  Buyer  Indemnitee  or Seller
                  Indemnitee for any claims, demands or suits for consequential,
                  incidental, special, exemplary, punitive, indirect or multiple
                  damages  connected with or resulting from any breach after the
                  Closing  Date of this  Agreement or the  Ancillary  Agreements
                  (other  than  breach  of  this  Article  X),  or  any  actions
                  undertaken  in connection  with or related  hereto or thereto,
                  including  any such  damages  which are based  upon  breach of
                  contract,  tort (including negligence and  misrepresentation),
                  breach of warranty,  strict liability,  statute,  operation of
                  law or any other theory of recovery.

                  (e) The rights  and  remedies  of Seller and Buyer  under this
                  Article X are,  solely as between Seller and Buyer,  exclusive
                  and in lieu of any and all other  rights  and  remedies  which
                  Seller and Buyer may have under this Agreement,  the Ancillary
                  Agreements  (except as  expressly  provided in any  Continuing
                  Site Agreement or any  Declaration of Easements  Agreement) or
                  otherwise  for monetary  relief with respect to (i) any breach
                  of, or failure to perform, any covenant or agreement set forth
                  in this  Agreement or the  Ancillary  Agreements  by Seller or
                  Buyer,  (ii) any breach of any  representation  or warranty by
                  Seller or Buyer, (iii) the Assumed Obligations or the Retained
                  Liabilities,  (iv) noncompliance by Seller with any bulk sales
                  or transfer laws and (v) any  obligation in respect of Section
                  2.04,  Section 2.05,  Section 7.03 or Section 7.14. Each Party
                  agrees that the previous sentence shall not limit or otherwise
                  affect any non-monetary right or remedy which either Party may
                  have under  this  Agreement  or the  Ancillary  Agreements  or
                  otherwise  limit  or  affect  either  Party's  right  to  seek
                  equitable   relief,   including   the   remedy   of   specific
                  performance.

                  (f) Buyer  and  Seller  agree  that,  notwithstanding  Section
                  10.01(e),  each  Party  shall  retain,  subject  to the  other
                  provisions of this Agreement,  including Sections 10.01(d) and
                  12.03,  all  remedies at law or in equity with  respect to (i)
                  fraud or wilful or  intentional  breaches of this Agreement or
                  the Ancillary  Agreements and (ii) gross  negligence or wilful
                  or wanton acts or omissions to act of any  Indemnitee  (or any
                  contractor or  subcontractor  thereof) on or after the Closing
                  Date.

                  SECTION  10.02.  Third  Party  Claims  Procedures.  (a) If any
                  Indemnitee receives notice of the assertion of any claim or of
                  the commencement of any claim,  action,  or proceeding made or
                  brought by any person who is not a Party or an  Affiliate of a
                  Party  (a  "Third   Party   Claim")   with  respect  to  which
                  indemnification  is to be sought from an  Indemnifying  Party,
                  the Indemnitee will give such  Indemnifying  Party  reasonably
                  prompt written notice thereof, but in any event not later than
                  20 Business Days after the  Indemnitee's  receipt of notice of
                  such Third Party Claim;  provided,  however, that a failure to
                  give timely  notice will not affect the rights or  obligations
                  of any Indemnitee except if, and only to the extent that, as a
                  result of such failure,  the  Indemnifying  Party was actually
                  prejudiced. Such notice shall describe the nature of the Third
                  Party  Claim  in  reasonable  detail  and  will  indicate  the
                  estimated  amount, if practicable,  of the Indemnifiable  Loss
                  that has been or may be sustained by the Indemnitee.

                  (b) If a Third Party Claim is made against an Indemnitee,  the
                  Indemnifying  Party will be  entitled  to  participate  in the
                  defense  thereof and, if it so chooses,  to assume the defense
                  thereof  with  counsel  selected  by the  Indemnifying  Party;
                  provided,   however,  that  such  counsel  is  not  reasonably
                  objected to by the Indemnitee;  and provided  further that the
                  Indemnifying  Party first  admits in writing its  liability to
                  the Indemnitee  with respect to all material  elements of such
                  claim.  Should the  Indemnifying  Party so elect to assume the
                  defense of a Third Party Claim,  the  Indemnifying  Party will
                  not be  liable  to  the  Indemnitee  for  any  legal  expenses
                  subsequently incurred by the Indemnitee in connection with the
                  defense thereof.  If the  Indemnifying  Party elects to assume
                  the defense of a Third Party Claim,  the  Indemnitee  will (i)
                  cooperate in all  reasonable  respects  with the  Indemnifying
                  Party in  connection  with  such  defense,  (ii) not admit any
                  liability with respect to, or settle, compromise or discharge,
                  any Third Party Claim without the  Indemnifying  Party's prior
                  written consent and (iii) agree to any settlement,  compromise
                  or  discharge  of a Third Party  Claim which the  Indemnifying
                  Party  may  recommend  and which by its  terms  obligates  the
                  Indemnifying  Party to pay the full amount of the liability in
                  connection  with  such  Third  Party  Claim and  releases  the
                  Indemnitee  completely  in  connection  with such Third  Party
                  Claim.  In the event the  Indemnifying  Party shall assume the
                  defense of any Third  Party  Claim,  the  Indemnitee  shall be
                  entitled to participate in (but not control) such defense with
                  its own counsel at its own expense.  If the Indemnifying Party
                  does not assume the defense of any such Third Party Claim, the
                  Indemnitee  may defend the same in such  manner as it may deem
                  appropriate, including settling such claim or litigation after
                  giving  notice to the  Indemnifying  Party of the terms of the
                  proposed  settlement and the Indemnifying  Party will promptly
                  reimburse  the  Indemnitee  upon  written  request.   Anything
                  contained in this  Agreement to the contrary  notwithstanding,
                  no Indemnifying  Party shall be entitled to assume the defense
                  of any Third  Party  Claim if such Third  Party Claim seeks an
                  order,  injunction  or other  equitable  relief or relief  for
                  other than monetary  damages against the Indemnitee  which, if
                  successful,  would materially adversely affect the business of
                  the  Indemnitee;  provided,  however,  that such  Indemnifying
                  Party  shall  continue  to be  obligated  to  such  Indemnitee
                  pursuant  to Section  10.01(a) or (b), as the case may be, for
                  all  Indemnifiable  Losses  relating  to,  resulting  from  or
                  arising out of such Third Party Claim.


                                     ARTICLE XI

                                    Termination

                  SECTION 11.01.  Termination.  (a)  This Agreement may be
                  terminated at any time prior to the Closing by an
                  instrument in writing signed on behalf of each of the
                  Parties.

                  (b) This Agreement may be terminated by Seller or Buyer if the
                  Closing  shall not have occurred on or before the date that is
                  12 months from the date of this  Agreement  (the  "Termination
                  Date");  provided,  however,  that the right to terminate this
                  Agreement  pursuant  to this  Section  ll.01(b)  shall  not be
                  available to any Party whose failure to fulfill any obligation
                  under this  Agreement  has been the cause of, or resulted  in,
                  the failure of the Closing to occur on or before such date.

                  (c) This Agreement may be terminated by either Seller or Buyer
                  if any  Restraint  having  any of the  effects  set  forth  in
                  Section 8.01(b) shall be in effect and shall have become final
                  and nonappealable;  provided,  however, that the Party seeking
                  to terminate this Agreement  pursuant to this Section 11.01(c)
                  shall have used its  reasonable  best  efforts to prevent  the
                  entry of and to remove such Restraint.


                                    ARTICLE XII

                              Miscellaneous Provisions

                  SECTION  12.01.  Expenses.  Except to the extent  specifically
                  provided herein, all costs and expenses incurred in connection
                  with this Agreement and the transactions  contemplated  hereby
                  shall be borne by the Party incurring such costs and expenses,
                  whether  or  not  the  transactions  contemplated  hereby  are
                  consummated.

                  SECTION 12.02. Amendment and Modification;  Extension; Waiver.
                  This Agreement may be amended,  modified or supplemented  only
                  by an  instrument  in writing  signed on behalf of each of the
                  Parties.  Either  Party  may  (i)  extend  the  time  for  the
                  performance  of any of the  obligations  or other  acts of the
                  other   Party,    (ii)   waive   any   inaccuracies   in   the
                  representations and warranties of the other Party contained in
                  this  Agreement or (iii) waive  compliance  by the other Party
                  with any of the  agreements  or  conditions  contained in this
                  Agreement.  Any  agreement  on the part of a Party to any such
                  extension  or  waiver  shall be valid  only if set forth in an
                  instrument  in  writing  signed on behalf of such  Party.  The
                  failure  of a Party to this  Agreement  to  assert  any of its
                  rights under this Agreement or otherwise  shall not constitute
                  a waiver of such rights.

                  SECTION 12.03. No Survival of  Representations  or Warranties.
                  Each and every  representation  and warranty contained in this
                  Agreement,  other  than  the  representations  and  warranties
                  contained  in  Sections  5.01,  5.02,  5.03 and 5.17 and 6.01,
                  6.02,  6.03 and 6.05  (which  representations  and  warranties
                  shall  survive  for 18 months from the  Closing  Date),  shall
                  expire with, and be terminated and extinguished by the Closing
                  and no such  representation  or  warranty  shall  survive  the
                  Closing Date. From and after the Closing Date, none of Seller,
                  Buyer or any officer, director, trustee or Affiliate of any of
                  them shall have any liability  whatsoever  with respect to any
                  such  representation  or  warranty.   The  expiration  of  the
                  representations  and  warranties  contained in Sections  5.01,
                  5.02,  5.03 and 5.17 and 6.01,  6.02,  6.03 and 6.05 shall not
                  affect  the  Parties'  obligations  under  Article  X  if  the
                  Indemnitee  provided the Indemnifying Party with proper notice
                  of the  claim or event  for  which  indemnification  is sought
                  prior to such expiration.

                  SECTION 12.04.  Notices.  All notices and other communications
                  hereunder shall be in writing and shall be deemed given (as of
                  the  time  of  delivery  or,  in  the  case  of  a  telecopied
                  communication,   of  confirmation)  if  delivered  personally,
                  telecopied  (which is confirmed) or sent by overnight  courier
                  (providing  proof of delivery) to the Parties at the following
                  addresses  (or at such other  address  for a Party as shall be
                  specified by like notice):

                  if to Seller, to:

                                          Consolidated Edison Company of New
                        York, Inc.
                        4 Irving Place
                                          New York, NY 10003
                          Telecopy No.: (212) 677-0601
                        Attention:  General Counsel

                 with a copy on or prior to the Closing Date to:

                        Cravath, Swaine & Moore
                        825 Eighth Avenue
                        New York, NY 10019
                          Telecopy No.: (212) 474-3700
                     Attention: George W. Bilicic, Jr., Esq.

                  if to Buyer, to:

                        Astoria Generating Company, L.P.
                        c/o Orion Power Holdings, Inc.
                        111 Market Place
                        Suite 520
                        Baltimore, MD 21202
                        Telecopy No.: (410) 468-3699
                        Attention:    General Counsel

                 with a copy on or prior to the Closing Date to:

                        Thelen Reid & Priest LLP
                        Two Embarcadero Center
                        Suite 2100
                        San Francisco, CA 94111
                        Telecopy No.: (415) 421-1068
                        Attention:     Thomas B. Glascock, Esq.

                  SECTION 12.05. Assignment;  No Third Party Beneficiaries.  (a)
                  This  Agreement  and all of the  provisions  hereof  shall  be
                  binding upon and inure to the benefit of the Parties and their
                  respective  successors and permitted assigns, but neither this
                  Agreement  nor any of the  rights,  interests  or  obligations
                  hereunder  shall  be  assigned  by  any  Party,  including  by
                  operation  of law,  without the prior  written  consent of the
                  other  Party,  except  (i) in the  case  of  Seller  (A) to an
                  Affiliate  of Seller or a third party in  connection  with the
                  transfer of the Transmission System to such Affiliate or third
                  party or (B) to a lending institution or trustee in connection
                  with a pledge or granting of a security interest in all or any
                  part of the Transmission System and this Agreement and (ii) in
                  the case of Buyer (A) to an Affiliate  of Buyer in  connection
                  with the transfer of the  Auctioned  Assets to such  Affiliate
                  and (B) to a lending institution or trustee in connection with
                  a pledge or granting of a security  interest in the  Auctioned
                  Assets  and  this  Agreement;   provided,   however,  that  no
                  assignment  or  transfer  of rights or  obligations  by either
                  Party shall relieve it from the full  liabilities and the full
                  financial   responsibility,   as   provided   for  under  this
                  Agreement,  unless and until the  transferee or assignee shall
                  agree in writing to assume such obligations and duties and the
                  other Party has consented in writing to such assumption.

                  (b) Nothing in this  Agreement  is intended to confer upon any
                  other  person  except  the  Parties  any  rights  or  remedies
                  hereunder or shall create any third party  beneficiary  rights
                  in any person, including, with respect to continued or resumed
                  employment,   any  employee  or  former   employee  of  Seller
                  (including any beneficiary or dependent thereof). No provision
                  of this Agreement  shall create any rights in any such persons
                  in respect of any benefits  that may be provided,  directly or
                  indirectly,  under any employee  benefit  plan or  arrangement
                  except as expressly provided for thereunder.

                  SECTION 12.06. Governing Law. This Agreement shall be governed
                  by and construed in  accordance  with the laws of the State of
                  New York  (regardless of the laws that might otherwise  govern
                  under applicable principles of conflicts of law).

                  SECTION 12.07.  Counterparts.  This Agreement may be
                  executed in two or more counterparts, each of which shall
                  be deemed an original, but all of which together shall
                  constitute one and the same instrument.

                  SECTION  12.08.  Interpretation.  When a reference  is made in
                  this  Agreement to an Article,  Section,  Schedule or Exhibit,
                  such  reference  shall be to an  Article  or  Section  of,  or
                  Schedule  or  Exhibit  to,  this  Agreement  unless  otherwise
                  indicated.  The table of contents  and  headings  contained in
                  this  Agreement are for reference  purposes only and shall not
                  affect  in any  way  the  meaning  or  interpretation  of this
                  Agreement.   Whenever  the  words  "include",   "includes"  or
                  "including" are used in this  Agreement,  they shall be deemed
                  to be followed by the words "without limitation" or equivalent
                  words. The words "hereof",  "herein" and "hereunder" and words
                  of similar import when used in this  Agreement  shall refer to
                  this Agreement as a whole and not to any particular  provision
                  of this  Agreement.  All terms defined in this Agreement shall
                  have  the  defined   meanings   when  used  in  the  Ancillary
                  Agreements  and any  certificate  or  other  document  made or
                  delivered  pursuant hereto or thereto unless otherwise defined
                  therein.  The  definitions  contained  in this  Agreement  are
                  applicable to the singular as well as the plural forms of such
                  terms  and to the  masculine  as well as to the  feminine  and
                  neuter  genders  of  such  term.  Any  agreement,  instrument,
                  statute,  regulation,  rule or order  defined or  referred  to
                  herein or in any agreement or  instrument  that is referred to
                  herein means such agreement,  instrument, statute, regulation,
                  rule or  order  as from  time to  time  amended,  modified  or
                  supplemented,   including   (in  the  case  of  agreements  or
                  instruments)  by  waiver  or  consent  and  (in  the  case  of
                  statutes,  regulations,  rules or  orders)  by  succession  of
                  comparable  successor statutes,  regulations,  rules or orders
                  and  references  to all  attachments  thereto and  instruments
                  incorporated  therein.  References to a person are also to its
                  permitted successors and assigns.

                  SECTION 12.09.  Jurisdiction and Enforcement.  (a) Each of the
                  Parties irrevocably  submits to the exclusive  jurisdiction of
                  (i) the  Supreme  Court  of the  State of New  York,  New York
                  County  and (ii) the  United  States  District  Court  for the
                  Southern  District of New York,  for the purposes of any suit,
                  action or other  proceeding  arising out of this  Agreement or
                  any  transaction  contemplated  hereby.  Each  of the  Parties
                  agrees to commence  any action,  suit or  proceeding  relating
                  hereto  either in the  United  States  District  Court for the
                  Southern  District  of New York or,  if such  suit,  action or
                  proceeding may not be brought in such court for jurisdictional
                  reasons,  in the Supreme  Court of the State of New York,  New
                  York County.  Each of the Parties  further agrees that service
                  of process,  summons,  notice or document by hand  delivery or
                  U.S.  registered mail at the address  specified for such Party
                  in Section  12.04 (or such  other  address  specified  by such
                  Party from time to time  pursuant to Section  12.04)  shall be
                  effective   service  of  process  for  any  action,   suit  or
                  proceeding  brought against such Party in any such court. Each
                  of the  Parties  irrevocably  and  unconditionally  waives any
                  objection  to the  laying  of  venue  of any  action,  suit or
                  proceeding  arising out of this Agreement or the  transactions
                  contemplated  hereby in (i) the Supreme  Court of the State of
                  New York, New York County,  or (ii) the United States District
                  Court  for the  Southern  District  of New  York,  and  hereby
                  further irrevocably and unconditionally  waives and agrees not
                  to plead or claim in any such court that any such action, suit
                  or proceeding brought in any such court has been brought in an
                  inconvenient forum.

                  (b) The Parties agree that  irreparable  damage would occur in
                  the event that any of the  provisions of this Agreement or any
                  Ancillary  Agreement  were not  performed in  accordance  with
                  their  specific  terms  or  were  otherwise  breached.  It  is
                  accordingly  agreed that the  Parties  shall be entitled to an
                  injunction  or  injunctions   to  prevent   breaches  of  this
                  Agreement   or  any   Ancillary   Agreement   and  to  enforce
                  specifically the terms and provisions of this Agreement or any
                  Ancillary  Agreement,  this  being in  addition  to any  other
                  remedy to which they are entitled at law or in equity.

                  SECTION  12.10.   Entire   Agreement.   This  Agreement,   the
                  Confidentiality   Agreement  and  the   Ancillary   Agreements
                  including the Exhibits, Schedules, documents, certificates and
                  instruments referred to herein or therein and other contracts,
                  agreements  and  instruments  contemplated  hereby or thereby,
                  embody the entire  agreement and  understanding of the Parties
                  in respect of the transactions contemplated by this Agreement.
                  There   are  no   restrictions,   promises,   representations,
                  warranties,   covenants  or  undertakings   other  than  those
                  expressly  set forth or referred  to herein or  therein.  This
                  Agreement  and the  Ancillary  Agreements  supersede all prior
                  agreements and understandings between the Parties with respect
                  to the transactions  contemplated by this Agreement other than
                  the Confidentiality Agreement.

                  SECTION 12.11. Severability. If any term or other provision of
                  this  Agreement  is  invalid,  illegal or  incapable  of being
                  enforced  by any  rule  of law or  public  policy,  all  other
                  conditions and provisions of this Agreement shall nevertheless
                  remain in full force and effect.  Upon such determination that
                  any term or other  provision is invalid,  illegal or incapable
                  of being  enforced,  the Parties shall negotiate in good faith
                  to modify this  Agreement so as to effect the original  intent
                  of the Parties as closely as  possible  to the fullest  extent
                  permitted by applicable law in an acceptable manner to the end
                  that the transactions contemplated hereby are fulfilled to the
                  extent possible.



<PAGE>


                  SECTION  12.12.  Conflicts.   Except  as  expressly  otherwise
                  provided  herein or therein,  in the event of any  conflict or
                  inconsistency  between  the  terms of this  Agreement  and the
                  terms of any Ancillary Agreement,  the terms of this Agreement
                  shall prevail.


                  IN  WITNESS  WHEREOF,   Seller  and  Buyer  have  caused  this
                  Agreement  to be signed by their  respective  duly  authorized
                  officers as of the date first above written.



                                          CONSOLIDATED EDISON COMPANY OF NEW
                                          YORK, INC.,

                                            by /s/ Joan S. Freilich
                                            Name: Joan S. Freilich
                                         Title: Executive Vice Presient and CFO


                                           ASTORIA GENERATING COMPANY, L.P.,


                                             BY: ORION POWER NEW YORK GP  II,
                                             INC.,

                                            by  /s/ Jack A. Fusco
                                              Name: Jack A. Fusco
                                              Title: President