GENERATING PLANT
                                 AND GAS TURBINE
                        ASSET PURCHASE AND SALE AGREEMENT

                                       FOR

                   RAVENSWOOD GENERATING PLANTS AND GAS TURBINES
                LOCATED AT LONG ISLAND CITY, QUEENS COUNTY, NEW YORK

                                 By and Between

                   CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

                                       and

                             MARKETSPAN CORPORATION
                                doing business as
                                 KEYSPAN ENERGY






                          Dated as of January 28, 1999



<PAGE>


                                TABLE OF CONTENTS


                                                                        Page


                                    ARTICLE I

                                   Definitions

      SECTION 1.01.  Definitions..................................        1
      SECTION 1.02.  Accounting Terms.............................        13


                                   ARTICLE II

                Purchase and Sale; Assumption of Certain Liabilities

      SECTION 2.01.  Purchase and Sale............................        13
      SECTION 2.02.  Auctioned Assets and Retained Assets.......          13
      SECTION 2.03.  Assumed Obligations and Retained
                          Liabilities.............................        18
      SECTION 2.04.  Third Party Consents.........................        22


                                   ARTICLE III

                                 Purchase Price

      SECTION 3.01.  Purchase Price...............................        22
      SECTION 3.02.  Post-Closing Adjustment......................        22
      SECTION 3.03.  Allocation of Purchase Price.................        24


                                   ARTICLE IV

                                   The Closing

      SECTION 4.01.  Time and Place of Closing....................        25
      SECTION 4.02.  Payment of Purchase Price and
                          Estimated Adjustment Amount.............        26


                                    ARTICLE V

                      Representations and Warranties of Seller

      SECTION 5.01.  Organization; Qualification..................         26
      SECTION 5.02.  Authority Relative to This Agreement.......           26
      SECTION 5.03.  Consents and Approvals; No
                           Violation..............................         26
      SECTION 5.04.  Year 2000....................................         28
      SECTION 5.05.  Personal Property............................         28
      SECTION 5.06.  Real Estate..................................         28
      SECTION 5.07.  Leases.......................................         28
      SECTION 5.08.  Certain Contracts and
                           Arrangements...........................         28
      SECTION 5.09.  Legal Proceedings............................         29
      SECTION 5.10.  Permits; Compliance with Law.................         29
      SECTION 5.11.  Environmental Matters........................         30
      SECTION 5.12.  Labor Matters................................         31
      SECTION 5.13.  ERISA; Benefit Plans.........................         31
      SECTION 5.14.  Taxes .....................................           32
      SECTION 5.15.  Independent Engineering
                           Assessments............................         33
      SECTION 5.16.  Undisclosed Liabilities......................         33
      SECTION 5.17.  Brokers......................................         33
      SECTION 5.18.  Insurance....................................         33


                                   ARTICLE VI

                      Representations and Warranties of Buyer

      SECTION 6.01.  Organization.................................         34
      SECTION 6.02.  Authority Relative to This
                           Agreement..............................         34
      SECTION 6.03.  Consents and Approvals; No
                           Violation..............................         35
      SECTION 6.04.  Availability of Funds........................         36
      SECTION 6.05.  Brokers......................................         36


                                   ARTICLE VII

                            Covenants of the Parties

      SECTION 7.01.  Conduct of Business Relating to
                          the Auctioned Assets....................         37
      SECTION 7.02.  Access to Information........................         39
      SECTION 7.03.  Consents and Approvals;
                           Transferable Permits...................         40
      SECTION 7.04.  Further Assurances...........................         42
      SECTION 7.05.  Public Statements............................         44
      SECTION 7.06.  Tax Matters..................................         44
      SECTION 7.07.  Bulk Sales or Transfer Laws..................         45
      SECTION 7.08.  Storage......................................         45
      SECTION 7.09.  Information Resources........................         45
      SECTION 7.10.  Witness Services.............................         46
      SECTION 7.11.  Consent Orders...............................         46
      SECTION 7.12.  Nitrogen Oxide Allowances....................         46
      SECTION 7.13.     Trade Names...............................         47


                                  ARTICLE VIII

                                   Conditions

      SECTION 8.01.  Conditions Precedent to Each Party's
                        Obligation To Effect the Purchase
                    and Sale................................               47
      SECTION 8.02.  Conditions Precedent to Obligation
                         of Buyer To Effect the Purchase
                    and Sale................................               48
      SECTION 8.03.  Conditions Precedent to Obligation
                        of Seller To Effect the Purchase
                    and Sale................................               49


                                   ARTICLE IX

                                Employee Matters

      SECTION 9.01.  Employee Matters.............................         51
      SECTION 9.02.  Continuation of Equivalent Benefit
                          Plans/Credited Service..................         52
      SECTION 9.03.  Pension Plan.................................         54
      SECTION 9.04.  401(k) Plan..................................         55
      SECTION 9.05.  Welfare Plans................................         56
      SECTION 9.06.  Short- and Long-Term Disability..............         57
      SECTION 9.07.  Life Insurance and Accidental Death
                          and Dismemberment Insurance.............         57
      SECTION 9.08.  Severance....................................         57
      SECTION 9.09.  Workers Compensation.........................         59


                                    ARTICLE X

                     Indemnification and Dispute Resolution

      SECTION 10.01.  Indemnification.............................         59
      SECTION 10.02.  Third Party Claims Procedures...............         62


                                   ARTICLE XI

                                   Termination

      SECTION 11.01.  Termination.................................         63


                                   ARTICLE XII

                            Miscellaneous Provisions

      SECTION 12.01.  Expenses....................................         63
      SECTION 12.02.  Amendment and Modification;
                           Extension; Waiver......................         64
      SECTION 12.03.  No Survival of Representations or
                           Warranties.............................         64
      SECTION 12.04.  Notices.....................................         64
      SECTION 12.05.  Assignment; No Third Party
                           Beneficiaries..........................         65
      SECTION 12.06.  Governing Law...............................         66
      SECTION 12.07.  Counterparts................................         66
      SECTION 12.08.  Interpretation..............................         66
      SECTION 12.09.  Jurisdiction and Enforcement................         67
      SECTION 12.10.  Entire Agreement............................         68
      SECTION 12.11.  Severability................................         68
      SECTION 12.12.  Conflicts...................................         69




<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)(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 5.03(a)                Contracts Requiring Third
                                        Party Consents
      Schedule 5.08(a)                Material Contracts
      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 9.01(a)                Job Titles
      Schedule 9.01(b)                Collective Bargaining Agreements

      Exhibit A-1                     Form of Ravenswood-Vernon Zoning Lot
                                      Development Agreement between Seller
                                      and Buyer
      Exhibit A-2                     Form of Ravenswood-Rainey Zoning Lot
                                      Development Agreement between Seller
                                      and Buyer
      Exhibit B                       Form of Deed of Conveyance
      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 "A"
                                      House Ground Lease and Easement between
                                      Seller and Buyer
      Exhibit G                       Form of Transition Capacity Agreement
                                      between Seller and Buyer
      Exhibit H                       Summary of Terms and Conditions for
                                      Fuel Supply Agreement for 74th Street
                                      Generating Station between Seller and
                                      Buyer
      Exhibit I                       Summary of Terms and Conditions for "A"
                                      House Operation and Maintenance
                                      Agreement between Seller and Buyer
      Exhibit J                       Form of Ravenswood-Rainey Declaration
                                      of Subdivision Easements
      Exhibit K                       Form of Ravenswood-Vernon Declaration
                                      of Subdivision Easements
      Exhibit L                       Form of Guarantee Agreement
      Exhibit M                       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  January  28,  1999,  by and
                        between CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., a
                        New  York   corporation   ("Seller"),   and   MARKETSPAN
                        CORPORATION doing business as KEYSPAN ENERGY, a New York
                        corporation  ("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" House Ground Lease and  Easement"  means the ground lease
      and easement in respect of certain land  underlying  and  surrounding  the
      Ravenswood  "A" Steam House to be entered into  between  Buyer and Seller,
      the material terms of which shall be substantially as set forth in Exhibit
      F.

                  ""A" House  Operation  and  Maintenance  Agreement"  means the
      operation and maintenance agreement in respect of the Ravenswood "A" steam
      house to be entered into between Buyer and Seller,  the material  terms of
      which shall be substantially as set forth in Exhibit I.

                  "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 Agreement,
      the Declaration of Easements  Agreement,  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.

                  "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).

                  "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 have the meaning given to such term
      in the Declaration of Easements Agreement.

                  "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 August 24, 1998 between Seller and Buyer.

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

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

                  "Declarations of Subdivision Easements" means the
      Ravenswood-Vernon Declaration of Subdivision Easements and the
      Ravenswood-Rainey 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.

                  "Fuel Supply  Agreement" means the fuel supply agreement to be
      entered into between Buyer and Seller,  the material  terms of which shall
      be substantially as set forth in Exhibit H.

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

                  "Guarantee  Agreement"  means the  Guarantee  Agreement  to be
      entered into between  Guarantor  and Seller  substantially  in the form of
      Exhibit L.

                  "Guarantor" means MarketSpan Corporation doing business as
      KeySpan Energy.

                  "Gas  Turbines"  means the gas turbine units  comprised of the
      Ravenswood GT1 through GT11 units.

                  "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 three steam turbine  generating
      units designated as Ravenswood units 1, 2 and 3.

                  "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.

                  "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.

                  "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)  the  title  matters  set  forth  in  the
      Certificate of Title No. NY971420 issued by the Title Company, as amended,
      (vi) all matters  disclosed on the survey prepared by GEOD Corporation and
      any other facts that would be disclosed by an accurate survey and physical
      inspection of the Buyer Real Estate,(vii) Encumbrances, easements or other
      restrictions  created  pursuant  to  or  provided  for  in  any  Ancillary
      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.

                  "Ravenswood-Rainey Declaration of Subdivision Easements" means
      the  Ravenswood-Rainey  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.

                  "Ravenswood-Vernon Declaration of Subdivision Easements" means
      the  Ravenswood-Vernon  Declaration of Subdivision Easements to be made by
      Seller substantially in the form of Exhibit K, 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.

                  "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.

                  "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 have the meaning given to such term
      in the Declaration of Easements Agreement.

                  "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
      Ravenswood-Vernon  Zoning Lot  Development  Agreement  between  Seller and
      Buyer in the form of  Exhibit  A-1 and the  Ravenswood-Rainey  Zoning  Lot
      Development Agreement between Seller and Buyer in the form of Exhibit
      A-2 hereto.

                  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) 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
            Parcel A and D as shown on ALTA/ACSM  Land Title  Survey  Conveyance
            Plan relating to the Ravenswood Generating Station, dated January 9,
            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,  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, (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,  coal  handling  equipment  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) and (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),  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,  set forth on Schedule
            2.02(a)(iv) or 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 Vernon  Substation  and the
            Rainey  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 attributable to taxable periods (or portions thereof) prior
            to the Closing  Date,  and sewer rents or water charges or any other
            liabilities or obligations paid prior to the Closing Date in respect
            of the Auctioned Assets;

                  (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 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; and

                  (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.

                  (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; and

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

                  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.


                                   ARTICLE III

                                 Purchase Price

                  SECTION 3.01.  Purchase Price.  The purchase price for the
      Auctioned Assets shall be $596,840,000 (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 or minus (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 the Continuing Site Agreement (to the extent necessary) 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 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.

                  (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,  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 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  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 its  properties and to carry on its business as is
      now being conducted.

                  SECTION 6.02. Authority Relative to This Agreement.  Buyer has
      all  necessary  corporate  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
      Buyer  and no  other  corporate  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 Certificate of Incorporation or By-laws (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) the Continuing Site Agreement (to the extent necessary) 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  and (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   (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 has  sufficient
      funds available to it or has received binding written  commitments (copies
      of which  have  heretofore  been  delivered  to  Seller)  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,  except Merrill Lynch & Co.,  Inc.,  which is acting for and at the
      expense of 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.

                  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 and to applicable  employees of the Seller,  in each case 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  (x)  negotiating  in  good  faith
      modifications   and   amendments  to  this  Agreement  and  the  Ancillary
      Agreements and (y) Buyer agreeing, and causing its Affiliates to agree, to
      propose  and  implement   procedures  for  processing   requests  for  gas
      transportation  in  an  expeditious   manner  (including   procedures  for
      evaluating  requests to connect with local gas delivery  facilities in New
      York City and for  dispute  resolution  relating  thereto)  and such other
      market power mitigation  measures as may be appropriate) 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" House Ground Lease and Easement,  the "A" House Operation
      and  Maintenance  Agreement  and the Fuel Supply  Agreement,  the terms of
      which  shall  be  substantially  as  set  forth  in  Exhibits  F, I and H,
      respectively  and  (ii)  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 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 word "Ravenswood".


                                  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  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 the Continuing Site Agreement, the Declaration
            of Easements Agreement,  each Declaration of Subdivision  Easements,
            each Zoning Lot Development Agreement and the "A" House Ground Lease
            and Easement 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 Exhibit B, (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 Fuel Supply Agreement,  the "A" House Ground
            Lease and  Easement  and the "A"  House  Operation  and  Maintenance
            Agreement,  each in a form and on terms  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; and

                  (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.

                  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) the
            Transition   Capacity  Agreement  and  the  Zoning  Lot  Development
            Agreements and (ii) the Fuel Supply Agreement,  the "A" House Ground
            Lease and  Easement  and the "A"  House  Operation  and  Maintenance
            Agreement, 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)  if  Buyer  has   assigned  its  rights,   interests   and
            obligations in accordance with Section 12.05(a)(ii)(A),

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

                        (ii) the 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;

                        (iii)  the   representations   and   warranties  of  the
                  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);

                        (iv) Seller shall have  received a  certificate  from an
                  authorized  officer of the 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(g)(ii)  and (iii)
                  have been satisfied; and

                        (v) Seller shall have received an opinion  substantially
                  in the  form of  Exhibit  M 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 or at the
      Ravenswood  "A" Steam  House 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  shall cease to be  employees of Seller on the Closing
      Date and 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 (i) in accordance
      with  all  applicable  laws  and  regulations,   and  (ii)  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.

                  (b)  Schedule  9.01(b)  sets forth the  collective  bargaining
      agreements,  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 it relates 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 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
      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)  or (B)  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 the Continuing  Site Agreement or the 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 or Section 7.03. 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.


                                   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:

                        MarketSpan Corporation d/b/a
                          KeySpan Energy
                        One MetroTech Center
                        Brooklyn, New York 11201-3850
                        Telecopy No.:  (718) 696-7139
                        Attention:  General Counsel

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

                     Dickstein Shapiro Morin & Oshinsky LLP
                        2101 L Street NW
                        Washington, D.C. 20037-1526
                        Telecopy No.:  (202) 887-0689
                         Attention: Kenneth Simon, 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) prior to the  Closing,  to a
      wholly-owned  subsidiary  so long as Buyer  shall have duly  executed  and
      delivered  the  Guarantee  Agreement  and  such  assignment  is for all of
      Buyer's rights,  interests and obligations hereunder,  (B) to an Affiliate
      of Buyer in connection  with the transfer of the Auctioned  Assets to such
      Affiliate and (C) 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; provided, further, that such consent shall not
      be required with respect to any  assignment by Buyer pursuant to subclause
      (ii)(A) above.

                  (b)  Notwithstanding  any  provision in this  Agreement to the
      contrary,  prior to the Closing Buyer may, with the prior written  consent
      of Seller,  assign its rights,  interests  or  obligations  hereunder to a
      special  purpose  entity for  financing  purposes in  connection  with the
      acquisition  of the  Auctioned  Assets;  provided,  however,  that no such
      assignment of rights,  interests or  obligations by Buyer shall relieve it
      from the full  liabilities  and obligations  hereunder  unless Buyer shall
      deliver a guarantee agreement in form and substance satisfactory to Seller
      in respect of such liabilities and obligations.

                  (c) 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.

                  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 President
                                                        and CFO


                                          MARKETSPAN CORPORATION doing
                                          business as KEYSPAN ENERGY,

                                                by   /s/ Howard A. Kosel

                                                   Name: Howard A. Kosel
                                                   Title:Vice President