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             LIABILITIES UNDERTAKING AND INDEMNIFICATION AGREEMENT

                  UNDERTAKING dated as of June 26, 1997 by LONG ISLAND LIGHTING
COMPANY, a New York corporation ("LILCO") 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"), in favor of
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), the LONG ISLAND LIGHTING COMPANY, a New
York corporation (the "Surviving Corporation"). 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 LILCO and each of the Transferee Subsidiaries to execute
and deliver to LIPA and the Surviving Corporation this Undertaking;

                  NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which by LILCO
and the Transferee Subsidiaries are

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hereby acknowledged, LILCO and the Transferee Subsidiaries 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. LILCO and the Transferee Subsidiaries, jointly and
severally, hereby undertake, assume and agree, subject to the limitations
contained herein, to pay or discharge, when due:

         a.       Unpaid debts, liabilities or obligations of Parent, LILCO,
                  Surviving Corporation 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; and

         b.       Except as provided in Section 6.8 of the Generation Purchase
                  Right Agreement, legal, accounting, investment banking,
                  engineering and similar fees or other transaction expenses
                  ("Transaction Expenses") incurred by Parent, LILCO or the
                  Transferee Subsidiaries 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 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; and

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

         e.       Debts, liabilities or obligations incurred by Parent or the
                  Transferee Subsidiaries after the Closing; and

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

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        g.        Liabilities or obligations of Parent, LILCO, Surviving
                  Corporation or the Transferee Subsidiaries relating to the
                  indemnification of Persons who were officers or directors of
                  LILCO 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; and

        h.        Liabilities or obligations of Parent, LILCO, Surviving
                  Corporation or the Transferee Subsidiaries relating to
                  Company Dissenting Shares or any other shares of any Person
                  exercising their rights under Section 910 of the NYBCL; and

        i.        Liabilities (other than contingent liabilities) or
                  obligations of Surviving Corporation which would not otherwise
                  be liabilities or obligations assumed hereby by Parent and the
                  Transferee Subsidiaries and which should have been, in
                  accordance with GAAP, reflected on the Closing Date Balance
                  Sheet but which were not so reflected; provided, however, that
                  no claim may be made pursuant to this clause (i) later than
                  fourteen months after the Closing Date;

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

        k.        Liabilities or obligations of LIPA or LIPA Sub relating to
                  or arising out of any information provided by 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; and

        1.        Liabilities or obligations of Parent, LILCO, Surviving
                  Corporation or the Transferee Subsidiaries relating to the
                  debt Parent assumes pursuant to Section 2.1(h) of the Merger
                  Agreement, the New Parent Preferred Stock issued pursuant to
                  Section 1.4(d) of the Merger Agreement and any federal or
                  state securities laws liabilities, including, without
                  limitation, underwriter liability, related to such debt or
                  New Parent Preferred Stock.

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        m.        Liabilities (including, without limitation, underwriter
                  liability) or obligations of Parent, LILCO, Surviving
                  Corporation or Transferee Subsidiaries relating to or arising
                  out of the (i) investment by the Exchange Agent of the Cash
                  Purchase Price in Parent Common Stock and (ii) delivery by the
                  Exchange Agent of the Parent Shares.

                  3. Notwithstanding anything to the contrary contained above,
the debts, liabilities and obligations assumed by LILCO and the Transferee
Subsidiaries shall not include any:

        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; or

        b.        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; or

        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; or

        d.        Liabilities or obligations of LILCO or the Transferee
                  Subsidiaries 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; or

        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; or

         f.       Liabilities or obligations of LIPA, LIPA Sub or the
                  Surviving Corporation arising under the Merger Agreement or
                  any other Basic Agreement; or

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         g.        Except as provided in Section 2(a), (c), (f), (g) and (i),
                   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.

                  4. Nothing contained herein shall require LILCO or any
Transferee Subsidiary to pay or discharge any debt, liability or obligation to
any third party expressly assumed hereby so long as LILCO or such Transferee
Subsidiary 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 6 hereof), in which case LILCO or such Transferee
Subsidiary, as the case may be, shall give LIPA and the Surviving Corporation
written notice of its action and the basis therefor and keep LIPA and the
Surviving Corporation informed of the progress and disposition thereof.

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

                  b. Effective upon the Closing Date, LILCO shall assign its
rights, obligations and interests hereunder to the Parent. LILCO agrees that
it will not transfer any of its assets to Parent or any of the Transferee
Subsidiaries or to any of their respective Affiliates unless and until Parent
shall have assumed all of LILCO's obligations hereunder.

                  6. a. LILCO and the Transferee Subsidiaries (jointly and
 severally, the "Indemnifying Party") shall indemnify and hold harmless LIPA
 and LIPA Sub, 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 LILCO and the Transferee Subsidiaries
 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

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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 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

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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.

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

                                     LONG ISLAND LIGHTING COMPANY

                                     By: /s/ Dr. William J. Catacosinos
                                         ------------------------------
                                         Name: Dr. William J. Catacosinos
                                         Title: Chief Executive Officer


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

                                     MARKETSPAN ELECTRIC SERVICES LLC

                                     By: /s/ Joseph E. Fontana
                                         ------------------------------
                                         Name: Joseph E. Fontana
                                         Title: Vice President

                                     MARKETSPAN GENERATION LLC

                                     By: /s/ Joseph E. Fontana
                                         ------------------------------
                                         Name: Joseph E. Fontana
                                         Title: Vice President

                                     MARKETSPAN TRADING SERVICES LLC

                                     By: /s/ Joseph E. Fontana
                                         ------------------------------
                                         Name: Joseph E. Fontana
                                         Title: Vice President

                                     MARKETSPAN GAS CORPORATION
                                     (DBA BROOKLYN UNION)

                                     By: /s/ Joseph E. Fontana
                                         ------------------------------
                                         Name: Joseph E. Fontana
                                         Title: Vice President

                                     -8-

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                                     MARKETSPAN CORPORATE SERVICES LLC

                                     By: /s/ Joseph E. Fontana
                                         ------------------------------
                                         Name: Joseph E. Fontana
                                         Title: Vice President

                                     MARKETSPAN UTILITY SERVICES LLC

                                     By: /s/ Joseph E. Fontana
                                         ------------------------------
                                         Name: Joseph E. Fontana
                                         Title: Vice President

                                     MARKETSPAN FINANCE CORPORATION

                                     By: /s/ Joseph E. Fontana
                                         ------------------------------
                                         Name: Joseph E. Fontana
                                         Title: Vice President

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