<PAGE>

             LIABILITIES UNDERTAKING AND INDEMNIFICATION AGREEMENT

                  UNDERTAKING dated as of June 26, 1997 by LONG ISLAND POWER
AUTHORITY, a corporate municipal instrumentality and political subdivision of
the State of New York ("LIPA") and, as of the closing of the Merger
Agreement (as herein defined), LONG ISLAND LIGHTING COMPANY, a New York
corporation (the "Surviving Corporation"), in favor of LONG ISLAND LIGHTING
COMPANY, a New York corporation ("LILCO"), any successors and assigns of LILCO
pursuant to paragraph 5(b) herein and MARKETSPAN ELECTRIC SERVICES LLC, a New
York limited liability company formerly known as BL TD MANAGEMENT LLC,
MARKETSPAN GENERATION LLC, a New York limited liability company formerly known
as BL GENERATION LLC, MARKETSPAN TRADING SERVICES LLC, a New York limited
liability company formerly known as BL ENERGY MANAGEMENT LLC, MARKETSPAN
UTILITY SERVICES LLC, a New York limited liability company formerly known as
BL UTILITY SERVICES LLC, MARKETSPAN GAS CORPORATION (DBA BROOKLYN UNION), a
New York corporation formerly known as BL GAS, INC., MARKETSPAN CORPORATE
SERVICES LLC, a New York limited liability company formerly known as BL
CORPORATE SERVICES LLC and MARKETSPAN FINANCE CORPORATION (the "Transferee
Subsidiaries"). All references herein to the Surviving Corporation shall mean
LILCO after the Effective Time (as defined in the Merger Agreement). All
references herein to LILCO shall mean Long Island Lighting Company prior to
the Effective Time.

                             W I T N E S S E T H:

                   WHEREAS, pursuant to an Agreement and Plan of Exchange and
 Merger (the "Merger Agreement") dated as of June 26, 1997 among Parent (used
 herein as therein defined), LILCO, LIPA and LIPA Acquisition Corp., a New
 York corporation ("LIPA Sub"), LIPA Sub is to merge with and into LILCO;

                   WHEREAS, pursuant to the Merger Agreement, the assets and
 properties of LILCO set forth on Schedule A thereto are to be transferred to
 the Transferee Subsidiaries (the "Transferred Assets") and the balance of
 LILCO's assets and properties are to be retained by the Surviving Corporation
 (the "Retained Assets"); and

                   WHEREAS, in partial consideration therefor, the Merger
 Agreement requires LIPA and the Surviving Corporation to execute and deliver
 to LILCO and to each of the Transferee Subsidiaries this Undertaking;

<PAGE>

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

                  1. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Merger Agreement.

                  2. LIPA and the Surviving Corporation, jointly and
severally, hereby undertake, assume and agree, subject to the limitations
contained herein, to pay or discharge, when due any and all:

          a.       Unpaid debts, liabilities or obligations of LIPA, LIPA Sub
                   or the Surviving Corporation relating to the Retained
                   Assets, including, without limitation, liabilities or
                   obligations relating to the Retained Assets resulting or
                   arising from: (i) claims for personal injury or property
                   damage, or (ii) non-performance of any contract, commitment
                   or obligation imposed by law or otherwise; and

          b.       Legal, accounting, investment banking, engineering and
                   similar fees, or other transaction expenses ("Transaction
                   Expenses") incurred by LIPA, LIPA Sub or the Surviving
                   Corporation in connection with the Merger Agreement and the
                   other Basic Agreements or the consummation of the
                   transactions contemplated thereby; and

          c.       Taxes as defined in Schedule D imposed on LIPA or LIPA Sub
                   or for which LIPA or LIPA Sub are responsible pursuant to
                   paragraph 4 of Schedule D; and

          d.       Liabilities or obligations of LIPA, LIPA Sub or the
                   Surviving Corporation resulting or arising from any
                   non-performance by LIPA, LIPA Sub or the Surviving
                   Corporation of any provision of the Merger Agreement or the
                   other Basic Agreements; and

          e.       Liabilities or obligations of LIPA, LIPA Sub or the
                   Surviving Corporation relating to the indemnification of
                   Persons who are officers or directors of the Surviving
                   Corporation or relating to any registration or official
                   statement or other offering document issued by LIPA, LIPA
                   Sub or the Surviving Corporation in connection with any
                   financing required to consummate the transactions
                   contemplated by the Merger Agreement; and

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         f.       Debts, liabilities or obligations of LIPA, LIPA Sub or the
                  Surviving Corporation relating to or arising out of acts or
                  events occurring after the Closing.

                  3. Notwithstanding anything to the contrary contained above,
the debts, liabilities and obligations assumed by LIPA and the Surviving
Corporation shall not include any:

         a.       Unpaid debts, liabilities or obligations of Parent, LILCO or
                  the Transferee Subsidiaries relating to the Transferred
                  Assets, including, without limitation, liabilities or
                  obligations relating to the Transferred Assets resulting or
                  arising from: (i) claims for personal injury or property
                  damage, or (ii) non-performance of any contract, commitment
                  or obligation imposed by law or otherwise; or

         b.       Except as provided in Section 6.8 of the Generation Purchase
                  Right Agreement, Transaction Expenses incurred by Parent,
                  LILCO or the Transferee Subsidiaries in connection with the
                  Merger Agreement or the other Basic Agreements or the
                  consummation of the transactions contemplated thereby; or

         c.       Taxes as defined in Schedule D imposed on Parent, LILCO or
                  the Transferee Subsidiaries or for which Parent, LILCO or
                  the Transferee Subsidiaries are responsible pursuant to
                  paragraphs 3 and 4 of Schedule D; or

         d.       Liabilities or obligations of LILCO or the Transferee
                  Subsidiaries resulting or arising from any non-performance by
                  LILCO or the Transferee Subsidiaries of any provision of the
                  Merger Agreement or any other Basic Agreement; or

         e.       Liabilities or obligations of Parent, LILCO or the
                  Transferee Subsidiaries arising under the Merger Agreement
                  or the other Basic Agreements; or

         f.       Debts, liabilities or obligations incurred by Parent, LILCO
                  or the Transferee Subsidiaries after the Closing; or

         g.       Liabilities or obligations of Parent, LILCO or the
                  Transferee Subsidiaries relating to severance, change of
                  control or similar payments payable to executives of LILCO
                  in connection with the Closing; or

         h.       Liabilities or obligations of Parent, LILCO or the Transferee
                  Subsidiaries relating to the indemnification of
                  Persons who were officers or directors of LILCO

                                     -3-
<PAGE>

                  prior to the Closing or relating to any proxy or
                  registration statement issued by LILCO or The Brooklyn Union
                  Gas Company or any affiliate or successor of either in
                  connection with the transactions contemplated by the Merger
                  Agreement; or

         i.       Liabilities or obligations of Parent, LILCO or the
                  Transferee Subsidiaries relating to Company
                  Dissenting Shares or any other shares of any Person
                  exercising their rights under Section 410 of the
                  NYBCL; or

         j.       Liabilities or obligations of LILCO or the Transferee
                  Subsidiaries relating to or arising out of any filing or
                  other submission by Parent, LILCO or the Transferee
                  Subsidiaries with any Governmental Authority; or

         k.       Liabilities or obligations of LIPA or LIPA Sub relating to or 
                  arising out of any information provided by Parent, LILCO or 
                  the Transferee Subsidiaries to LIPA in writing for inclusion 
                  in any filing or other submission by LIPA or LIPA Sub with any
                  Governmental Authority or in any offering document prepared by
                  LIPA or LIPA Sub in connection with any financing required to
                  consummate the transactions contemplated by the Merger 
                  Agreement.

                  4. Nothing contained herein shall require LIPA or the
Surviving Corporation to pay or discharge any debt, liability or obligation to
any third party expressly assumed hereby so long as LIPA or the Surviving
Corporation shall in good faith contest or cause to be contested the amount or
validity thereof (and perform their obligations (to the extent applicable)
pursuant to Section 5 hereof), in which case LIPA or the Surviving Corporation,
as the case may be, shall give LILCO and the Transferee Subsidiaries written
notice of its action and the basis therefor and keep LILCO and the Transferee
Subsidiaries informed of the progress and disposition thereof.

                  5. a. Other than as specifically stated above, neither LIPA
nor the Surviving Corporation assumes any debt, liability or obligation of LILCO
by this Undertaking, and it is expressly understood and agreed that all debts,
liabilities and obligations not assumed hereunder by LIPA or the Surviving
Corporation shall remain the sole obligation of LILCO, its successors and
assigns and, subject to the provisions of Paragraph 5(b) herein, no person, firm
or corporation other than LILCO and the Transferee Subsidiaries shall have any
rights under this Undertaking or the provisions contained herein.

                  b. Effective upon the Closing Date, LILCO may assign its
rights, obligations and interests hereunder to the Parent or any affiliate
thereof.

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                  6. a. LIPA and the Surviving Corporation (jointly and
severally, the "Indemnifying Party") shall indemnify and hold harmless LILCO
and the Transferee Subsidiaries, and their respective agents, representatives,
employees, officers and directors (each individually, an "Indemnified Party"
and collectively, the "Indemnified Parties") against any action, proceeding,
claim, judgment, settlement, damage, loss, injury, cost or expense, including,
without limitation, reasonable fees and expenses of attorneys and other
professionals (collectively, "Loss"), arising out of or relating to any debt,
liability or obligation assumed by LIPA and the Surviving Corporation hereby.

                  b. An Indemnified Party seeking indemnification pursuant to
Section 6(a) herein with respect to a claim, action or proceeding shall give
prompt notice to the Indemnifying Party of the assertion of any claim, or the
commencement of any action or proceeding, in respect of which indemnity may be
sought hereunder; provided that the failure to give such notice shall not
affect the Indemnified Party's rights to indemnification hereunder, except to
the extent that the Indemnifying Party is actually prejudiced thereby. The
Indemnifying Party shall be entitled to control the handling of any such claim
and to defend or settle any such claim, in its or their sole discretion, with
counsel of its own choosing that is reasonably acceptable to the Indemnified
Party; provided, however, that, in the case of any such settlement, the
Indemnifying Party shall obtain written release of all liability of the
Indemnified Party, in form and substance reasonably acceptable to the
Indemnified Party. Notwithstanding the foregoing, each Indemnified Party shall
have the right to employ its own separate counsel in connection with, and to
participate in (but, except as provided below, not control) the defense of,
such claim, but the fees and expenses of such counsel incurred after notice
from the Indemnifying Party of its assumption of the defense thereof shall be
at the expense of such Indemnified Party unless:

           (i)       the employment of counsel by such Indemnified Party has
                     been authorized by the Indemnifying Party;

           (ii)      counsel to such Indemnified Party shall have reasonably
                     concluded that there may be a conflict on any significant
                     issue between the Indemnifying Party and such Indemnified
                     Party in the conduct of the defense of such claim; or

           (iii)     the Indemnifying Party shall not in fact have employed
                     counsel reasonably acceptable to the Indemnified Party to
                     assume the defense of such claim within twenty (20) days
                     following the receipt by the Indemnifying Party of the
                     notice specified in the first sentence of this Section
                     6(b), in each of which

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<PAGE>

                     cases the fees and expenses of counsel for such
                     Indemnified Party shall be at the expense of the
                     Indemnifying Party;

provided, however, that, with respect to clauses (ii) and (iii) of this
sentence, the Indemnifying Party shall not be obligated to pay the fees and
expenses of more than one law firm, plus local counsel if necessary in each
relevant jurisdiction, for all such Indemnified Parties with respect to any
claims arising out of the same events or facts or the same series of events or
facts. The Indemnifying Party shall not be entitled, without the consent of
such Indemnified Party, to assume or control the defense of any claim as to
which counsel to such Indemnified Party shall have reasonably made the
conclusion that there may be a conflict on any significant issue between the
Indemnifying Party and such Indemnified Party in the conduct of the defense of
such claim as set forth in clause (ii) above, provided that the foregoing
limitation shall apply only with respect to those issues for which there may
be such a conflict.

                  7. This Undertaking shall be governed by the laws of the
State of New York. Any dispute with respect to the interpretation or
enforcement hereof shall be submitted to an alternative dispute resolution
procedure to be agreed by the parties.

                   8. All notices and other communications given or made
pursuant to this Undertaking shall be given or made in accordance with Section
11.2 of the Merger Agreement.


                                     -6-

<PAGE>

                  IN WITNESS WHEREOF, this Undertaking has been executed as of
the date first above written.


                                        LONG ISLAND POWER AUTHORITY


                                        By: /s/ Richard M. Kessel
                                            -------------------------------
                                            Name: Richard M. Kessel
                                            Title: Chairman


                                        By: /s/ Patrick Foye
                                            -------------------------------
                                            Name: Patrick Foye
                                            Title: Deputy Chairman


                  IN WITNESS WHEREOF, this Undertaking has been executed as of
the 28th day of May, 1998.


                                        LONG ISLAND LIGHTING COMPANY


                                        By: /s/ Seth Hulkower
                                            --------------------------------
                                            Name: Seth Hulkower
                                            Title: Executive Director


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