<PAGE>

                                                                       EX-10(r)

================================================================================

                          AMENDED AND RESTATED

                      LIMITED PARTNERSHIP AGREEMENT

                             by and between

                      MISSION ENERGY NEW YORK, INC.
                    a California corporation ("MENY")

                                   and

                         B-41 ASSOCIATES, L.P.,
            a Delaware limited partnership ("York Partners")

                            Made and Entered
                               into as of

                            November 1, 1997

================================================================================
<PAGE>

                 Brooklyn Navy Yard Cogeneration Partners, L.P.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                    Page
<S>                                                                 <C>
PREAMBLE.............................................................-1-

RECITALS.............................................................-1-

ARTICLE I

      DEFINED TERMS..................................................-2-
      1.1   Specific Terms...........................................-2-
      1.2   Additional Defined Terms................................-14-
      1.3   Rules of Construction...................................-14-

ARTICLE II

      ORGANIZATIONAL MATTERS........................................-14-
      2.1   Formation...............................................-14-
      2.2   Name....................................................-15-
      2.3   Business Purpose........................................-15-
      2.4   Place of Business.......................................-15-
      2.5   Certificate of Limited Partnership......................-15-
      2.6   Agent for Service of Process............................-15-
      2.7   Term....................................................-15-

ARTICLE III

      PARTNERS' CAPITAL AND FUNDING COMMITMENTS.....................-15-
      3.1   General Partners........................................-15-
      3.2   Limited Partners........................................-16-
      3.3   Partnership Account.....................................-16-
      3.4   Capital Accounts........................................-16-
      3.5   No Interest on Capital Accounts.........................-16-
      3.6   No Withdrawal from Capital Accounts.....................-16-
      3.7   No Liability of Partners................................-16-
      3.8   No Obligations..........................................-17-
      3.9   Loans...................................................-17-
      3.10  Security Agreement......................................-19-
</TABLE>

                                  -i-
<PAGE>

<TABLE>
<S>                                                                 <C>
ARTICLE IV

      PAYMENTS AND DISTRIBUTIONS TO PARTNERS........................-19-
      4.1   Distribution of Partnership Cash and Assets.............-19-
      4.2   Payments to Partners....................................-20-
      4.3   Loaned Employees; Reimbursement.........................-20-
      4.4   Loans to Partners.......................................-21-
      4.5   Amounts Withheld........................................-21-

ARTICLE V

      ALLOCATIONS OF ITEMS OF
      INCOME AND ITEMS OF DEDUCTION  ...............................-21-
      5.1   In General..............................................-21-
      5.2   Items of Income and Items of Deduction..................-21-
      5.3   Allocation Upon Liquidation.............................-22-
      5.4   Regulatory Allocation Provisions........................-22-
      5.5    Capital Accounts.......................................-25-

ARTICLE VI

      RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNERS.............-27-
      6.1   Management of the Partnership...........................-27-
      6.2   Management Committee....................................-28-
      6.3   Authority of General Partners to Deal with Partnership..-30-
      6.4   Executive Director and Other Officers...................-30-
      6.5   Operators...............................................-31-
      6.6   EWG Approval............................................-31-
      6.7   Certain Duties and Obligations of the General Partners..-31-
      6.8   Other Business of Partners and Affiliates...............-32-
      6.9   Limitation on Liability of General Partners.............-32-
      6.10  Audit Rights............................................-33-
      6.11  Partnership Obligations.................................-33-
      6.12  Title to Partnership Assets.............................-33-

ARTICLE VII

      REPRESENTATIONS, WARRANTIES AND COVENANTS OF
      PARTNERS......................................................-33-
      7.1   Reciprocal Representations and Warranties...............-33-
      7.2   Covenant Regarding Status...............................-34-
</TABLE>

                                  -ii-
<PAGE>

<TABLE>
<S>                                                                 <C>
ARTICLE VIII

      ASSIGNMENTS AND TRANSFERS.....................................-34-
      8.1   Transfers of General Partners Interests.................-34-
      8.2   Transfers of Limited Partner Interests..................-35-
      8.3   Limitations on Transfers of Interests...................-35-
      8.4   Right of First Refusal..................................-36-
      8.5   Effect of Transfers or Withdrawals......................-37-
      8.6   Consent.................................................-38-

ARTICLE IX

      WINDING UP AND LIQUIDATION OF THE PARTNERSHIP.................-38-
      9.1   Events Causing Winding Up...............................-38-
      9.2   Effect of Winding Up....................................-39-
      9.3   Liquidation.............................................-39-

ARTICLE X

      DEFAULTS AND REMEDIES.........................................-40-
      10.1  Event of Default........................................-40-
      10.2  Remedies Available to Nondefaulting Partner.............-40-
      10.3  Nonexclusivity..........................................-41-

ARTICLE XI..........................................................-41-

      BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.
       .............................................................-41-
      11.1  Books and Records.......................................-41-
      11.2  Accounting and Fiscal Year..............................-42-
      11.3  Bank Accounts and Investments...........................-42-
      11.4  Reports.................................................-42-
      11.5  Depreciation and Elections..............................-43-
      11.6  Designation of Tax Matters Partner......................-43-
      11.7  Expenses of Adjustment..................................-43-
      11.8  Budgets and Forecasts...................................-44-

ARTICLE XII.........................................................-45-

      MEETINGS; VOTING RIGHTS OF LIMITED PARTNERS...................-45-
      12.1  Meetings................................................-45-
      12.2  Voting Rights of Limited Partners.......................-46-
      12.3  Written Consent in Lieu of Meeting......................-46-

ARTICLE XIII........................................................-47-
</TABLE>

                                 -iii-
<PAGE>

<TABLE>
<S>                                                                 <C>
      OTHER PROVISIONS..............................................-47-
      13.1  Appointment of General Partners as Attorneys-in-Fact....-47-
      13.2  Amendments..............................................-48-
      13.3  Right of Setoff.........................................-49-
      13.4  Binding Provisions; Successors and Permitted Assigns....-49-
      13.5  Applicable Law..........................................-49-
      13.6  Counterparts............................................-49-
      13.7  Separability of Provisions..............................-50-
      13.8  Article and Section Titles..............................-50-
      13.9  Addresses and Notices...................................-50-
      13.10 Further Action..........................................-50-
      13.11 No Third-Party Beneficiaries............................-50-
      13.12 Waiver..................................................-50-
      13.13 Integration.............................................-51-
      13.14 Waiver of Action for Partition..........................-51-
      13.15 No Recourse and Consequential Damages...................-51-
      13.16 Maximum Lawful Rate.....................................-51-
      13.17 No Bond Closing Date....................................-52-

ARTICLE XIV.........................................................-52-

      DISPUTE RESOLUTION............................................-52-
      14.1  Dispute Resolution......................................-52-
      14.2  Mutual Release..........................................-52-
</TABLE>

                                  -iv-
<PAGE>

                            TABLE OF EXHIBITS

<TABLE>
<CAPTION>
                                                               Section
                                                               -------
<S>            <C>                                             <C>
EXHIBIT A      Partners' Names, Addresses and Interests        Preamble

EXHIBIT B      Form of Construction Loan Note                   3.9.2

EXHIBIT C      Form of Priority Loan Note                       3.9.3

EXHIBIT D      York Partners Security Agreement                  3.10
</TABLE>

                                  -v-
<PAGE>

                              AMENDED AND RESTATED

                          LIMITED PARTNERSHIP AGREEMENT

                                    PREAMBLE

            This AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT (the
"Agreement") is made and entered into as of November 1, 1997, by and among MENY
and York Partners, individually as a "General Partner," and collectively, as the
"General Partners," and the Persons listed on Exhibit A to this Agreement as the
Limited Partners, and such other Partners as are admitted or substituted
pursuant to the terms hereof, for the purpose of forming a limited partner ship
under the laws of the State of Delaware. The Partners hereby amend and restate
the limited partnership, including the terms of the Initial Agreement, the
December Agreement, the Letter Agreement, the Amendment, the Supplemental
Agreement and the Second Supplemental Agreement (all as hereinafter defined),
subject to and effective as of the Bond Closing Date (as hereinafter defined) on
the terms and conditions stated herein.

                                    RECITALS

            A. The Partners formed a Partnership pursuant to a Limited
Partnership Agreement dated as of October 19, 1992 ("Initial Agreement") to
design, construct, develop, own, finance, manage and operate a power facility
located at Brooklyn, New York (the "Project").

            B. The Partners have entered into an Agreement dated as of December
22, 1995 (the "December Agreement"), a Letter Agreement dated as of December 22,
1995 (the "Letter Agreement"), Amendment No. 1 to Limited Partnership Agreement
dated as of January 24, 1996 (the "Amendment"), a Supplemental Agreement dated
as of February 4, 1996 (the "Supplemental Agreement") and a Second Supplemental
Agreement dated as of February 13, 1996 (the "Second Supplemental Agreement")
for the purpose of amending, supplementing or modifying the terms of the Initial
Agreement.


                                  -1-
<PAGE>

                                    ARTICLE I

                                  DEFINED TERMS

            1.1 Specific Terms. The following definitions shall apply for
purposes of this Agreement:

                  1.1.1."Accountants" means a firm of nationally recognized
independent certified public accountants as may be engaged from time to time by
the Partnership.

                  1.1.2."Adjusted Capital Account Deficit" with respect to any
Partner means the deficit balance, if any, in such Partner's Capital Account at
the end of any Fiscal Year, with the following adjustments:

                        (i) credit to such Capital Account any amount that such
Partner is obligated to restore pursuant to any provision of this Agreement or
is deemed to be obligated to restore pursuant to Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5) after taking into account thereunder any changes
during such year in Partnership Minimum Gain and in the minimum gain
attributable to any Partner Nonrecourse Debt; and

                        (ii) debit to such Capital Account the items described
in Regulations Section 1.704-1(b)(2)(ii)(d)(4) through (6).

            The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Sections 1.704-1(b)(2)(ii)(c) and
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.

                  1.1.3."Affiliate" means, when used with reference to a
specified Person, any Person who directly or indirectly controls, is controlled
by or is under common control with the specified Person; provided however, that
neither General Partner nor a General Partner's Affiliates shall be deemed to be
an Affiliate of the Partnership or the other General Partner or any Person
controlling, controlled by or under common control with such other Partner, or
any Person controlled by the Partnership or any officer, director, partner or
shareholder of such other Partner. In addition, "Affiliate", when used with
respect to York Partners or York, shall include Cogeneration Technologies, Inc.,
Haviland Partners L.P., R.V. Associates, L.P., York Cogen Partners, L.P., B-41
Associates, L.P., B-41 Management Corp., RRR'S Ventures Ltd., York Research
Corporation, any Affiliates thereof and any of their respective successors or
assigns.

                  1.1.4."Agreement" means this Amended and Restated Limited
Partnership Agreement, as amended, supplemented or modified from time to time.


                                       -2-
<PAGE>

                  1.1.5."Agency" means the New York City Industrial Development
Agency and any body, board, authority, agency or other governmental agency or
instrumentality which shall hereafter succeed to the powers, duties, obligations
and functions thereof.

                  1.1.6."Amendment" has the meaning set forth in the Recitals.

                  1.1.7."Available Cash Flow" means, as of any Distribution
Date, the excess (if any) for the full calendar quarter next preceding such
Distribution Date of (a) the sum of all cash receipts received by the
Partnership including any reduction in Reserves established in prior calendar
quarters over (b) the Priority Amounts for such calendar quarters.

                  1.1.8."Bond Closing Date" means the date on which the New
Bonds are originally issued which date shall be no later than June 30, 1998.

                  1.1.9."Business Day" means any day other than a day on which
commercial banks in New York, New York are authorized or required to be closed.

                  1.1.10. "Capital Account" has the meaning set forth in Section
3.4

                  1.1.11. "Capital Contribution" means any direct or indirect
contribution by a Partner to the Partnership, including the total amount of
cash, the face amount of any guarantee of a Partnership obligation by a Partner
or Affiliate of a Partner, the face amount of any letter of credit posted by a
Partner or Affiliate of a Partner for a Partnership obligation or security
deposit posted by a Partner or Affiliate of a Partner for a Partnership
obligation of which a Partner has given Notice to the Management Committee (but
only to the extent that the Partner makes a payment pursuant to such guarantee,
or such letter of credit or the security deposit is drawn upon) the fees and
costs incurred by a Partner or Affiliate of a Partner in obtaining and
maintaining any such guarantee, letter of credit or security deposit of which a
Partner has given Notice to the Management Committee, and the fair market value
(as determined by the Management Committee) of any other property contributed to
the Partnership by any Partner (net of liabilities secured by that property
which are deemed assumed or taken subject to by the Partnership under Section
752(c) of the Code).

                  1.1.12. "Closing Date" means October 19, 1992.

                  1.1.13. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

                  1.1.14. "Con Ed" means Consolidated Edison Company of New
York, Inc.


                                  -3-
<PAGE>

                  1.1.15. "Construction" means the design, engineering,
construction testing and start-up of the Project; the verb "Construct" shall
have a correlative meaning.

                  1.1.16. "Construction Loan" means a loan from MENY (in the
capacity as an independent lender to the Partnership, and not as a Partner) to
the Partnership made pursuant to Section 3.9.2.

                  1.1.17. "Construction Loan Rate" means a rate equal to the
rate per annum announced from time to time by Citibank, N.A. as its prime or
base rate plus six percent, compounded daily and calculated on the basis of a
year of 365/366 days and the number of days elapsed (but not greater than the
Maximum Lawful Rate) or such other lower rate as MENY may specify by written
notice to the Partnership.

                  1.1.18. "December Agreement" has the meaning set forth in the
Recitals.

                  1.1.19. "Debt" of any Person means, at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments (excluding "deposit only" or similar endorsements on
instruments payable to the order of such Person), (iii) all obligations of such
Person to pay the deferred purchase price of property or services (except trade
accounts payable arising and proposed to be paid in the ordinary course of
business), (iv) that portion of obligations of such person as lessee under
capital leases which is properly classified as a liability on a balance sheet in
conformity with generally accepted accounting principles, (v) all obligations
described in clauses (i) through (iv) of this definition of others guaranteed by
such Person, whether or not secured by a lien or other security interest on any
asset of such Person, (vi) all obligations described in clauses (i) through (iv)
of this definition of others, whether or not guaranteed by such Person, secured
by a lien or other security interest on any asset of such Person, and (vii) all
liabilities of such Person in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.

                  1.1.20. "Debtor Relief Laws" means any applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, insolvency,
reorganization or similar laws affecting the rights or remedies of creditors
generally, as in effect from time to time.

                  1.1.21. "Defaulting Partner" has the meaning set forth in
Section 10.1.

                  1.1.22. "Delaware Act" means the Delaware Revised Uniform
Limited Partnership Law (6 Del. C. ss. 17-101 et seq.) as from time to time in
effect in the State of Delaware, or any corresponding provision or provisions of
any succeeding or successor law of the State of Delaware.


                                  -4-
<PAGE>

                  1.1.23. "Distribution Account" means, for each Partner, such
Partner's aggregate Capital Contributions reduced by the aggregate distributions
to such Partner.

                  1.1.24. "Distributable Amounts" means amounts available for
distribution to the Partners (including, without limitation, proceeds of any
Long-Term Credit Facility) in accordance with Section 4.1.

                  1.1.25. "Distribution Date" means the Bond Closing Date and
the Business Day immediately following each January 1, April 1, July 1, and
October 1 of each fiscal year commencing April 1, 1998.

                  1.1.26. "Economic Risk of Loss" has the meaning provided by
Regulations Section 1.752-2.

                  1.1.27. "Event of Default" has the meaning set forth in
Section 10.1.

                  1.1.28. "EWG Approval" has the meaning set forth in Section
6.6.

                  1.1.29. "Executive Director" means the Person in charge of the
day-to-day management of the Project as set forth in this Agreement selected in
accordance with Section 6.4.

                  1.1.30. "Exempt Wholesale Generator" or "EWG" has the meaning
set forth in Section 52 of the Public Utility Holding Company Act.

                  1.1.31. "General Partner" means any Person who is admitted to
the Partnership as a general partner and who is at the time of reference a
general partner, in such person's capacity as a general partner of the
Partnership (except as the context may otherwise require), and "General
Partners" means all of the General Partners or, if there is only one then
remaining, the General Partner.

                  1.1.32. "General Partner Management Fee" means a fee
calculated as a percentage of the gross revenues of the Partnership, payable in
accordance with the definition of Priority Amount.

                  1.1.33. "Gross Revenues" means revenues received for the sale
or transfer of electricity, thermal energy and fuel.

                  1.1.34. "Indemnified Person" has the meaning set forth in
Section 6.9.1.


                                  -5-
<PAGE>

                  1.1.35. "Initial Agreement" has the meaning set forth in the
Recitals.

                  1.1.36. "Insurance Requirements" means, with respect to the
Project, policies of insurance maintained as to the Project by or on behalf of
the Partnership with insurance companies acceptable to MENY, and to any lenders
providing a Long-Term Credit Facility, of the following types, in amounts deemed
appropriate by the Management Committee (subject to the requirements set forth
below), and on the following terms (in each case to the extent obtainable at
commercially reasonable rates), unless the Management Committee otherwise
agrees:

                        (a) at all times, comprehensive general liability
insurance (including contractual liability, personal injury, property damage,
owner's protective liability, product liability and completed operations)
covering claims arising out of the ownership, operation, maintenance, condition
or use of the Project;

                        (b) as soon as practicable after such coverage becomes
appropriate in light of the evolution of the Project, all risk insurance (or,
prior to completion of construction and testing, builders' all risk insurance)
covering physical loss or damage, including coverage against fire and sprinkler
leakage, boiler and machinery coverage, for the Project and any and all
materials, equipment and machinery intended for the Project in an amount not
less than the replacement cost of the Project (including labor and installation
costs); and

                        (c) as soon as practicable after such coverage becomes
appropriate in light of the evolution of the Project, such other insurance
(including flood and earthquake) with respect to the Project in such amounts and
against such insurable hazards as is usually carried by businesses of
established reputation operating similar properties and as the lenders under any
related Long-Term Credit Facility may from time to time reasonably request.

Each policy may provide for reasonable deductibles and sublimits, and shall be
in all other respects satisfactory to the lenders under any Long-Term Credit
Facility and to MENY.

                  1.1.37. "Interest" means the entire ownership interest of a
Partner in the Partnership at any particular time as set forth herein. An
Interest of a Person in its capacity as a Limited Partner is at times referred
to herein as a "Limited Partner Interest"; the Interest of a Person in its
capacity as a General Partner is at times referred to herein as a "General
Partner Interest". The percentage Interest of the Partners is as set forth in
Sections 3.1 and 3.2.

                  1.1.38. "Interest Rate" means a rate per annum equal to the
rate announced from time to time by Citibank, N.A. as its prime or base rate
plus one percent (but not greater than the Maximum Lawful Rate).


                                  -6-
<PAGE>

                  1.1.39. "Items of Deduction" means, for any fiscal year, the
Partnership's items of deduction as determined for Federal income tax purposes
(a) without adjustment for the Partnership's items of income as determined for
Federal income tax purposes, (b) without taking into account any items of
Partnership income, gain, loss or deduction specially allocated pursuant to
Section 5.4 and (c) as adjusted pursuant to Section 5.5.3.

                  1.1.40. "Items of Income" means, for any fiscal year, the
Partnership's items of income as determined for Federal income tax purposes, (a)
without adjustment for the Partnership's items of deduction or loss as
determined for Federal income tax purposes, (b) without taking into account any
items of Partnership income, gain, loss or deduction specifically allocated
pursuant to Section 5.4, and (c) as adjusted pursuant to Section 5.5.3.

                  1.1.41. "Letter Agreement" has the meaning as set forth in the
Recitals. 

                  1.1.42. "Limited Partner" means any Person who is admitted to
the Partnership as a limited partner and who is at the time of reference a
limited partner.

                  1.1.43. "Long-Term Credit Facility" means, with respect to the
Project, any long-term credit or financing, including working capital loans and
letters of credit, for all or a portion of the costs of the Project evidenced by
a credit agreement providing for long-term credit or financing, including
working capital loans and letters of credit, at available market competitive
rates and terms constituting Nonrecourse Liability. The New Bonds, New Working
Capital Facility Loans and New Bonds Letters of Credit shall each constitute a
Long-Term Credit Facility.

                  1.1.44. "Long-Term Credit Facility Closing" means, with
respect to any Long-Term Credit Facility, the effective date of the closing of a
Long-Term Credit Facility.

                  1.1.45. "Majority of the Limited Partners" means the holders
of more than 50% of the outstanding percentage Interests of the Limited Partner
Interests; and "Majority of the General Partners" means the holders of more than
50% of the outstanding percentage Interests of the General Partner Interests.

                  1.1.46. "Management Committee" means the committee composed of
two representatives of each General Partner which shall manage the Partnership
in accordance with, and subject to, the provisions of this Agreement.

                  1.1.47. "Maximum Lawful Rate" has the meaning set forth in
Section 13.16.


                                  -7-
<PAGE>

                  1.1.48. "MENY" means the corporation identified as such on
Exhibit A.

                  1.1.49. "MENY Affiliates" means Edison International, a
California corporation, and its Subsidiaries.

                  1.1.50. "New Bonds" means any taxable or tax exempt bonds
issued on or after the Bond Closing Date in an aggregate amount in excess of
$300,000,000, which New Bonds, together with the related instruments and
documents, as amended, supplemented or modified from time to time, shall be
deemed to constitute a Long-Term Credit Facility.

                  1.1.51. "New Bonds Letters of Credit" means letters of credit
issued or obligations incurred pursuant to reimbursement agreements or similar
agreements for the benefit of the Project, vendors and suppliers to the Project,
holders of the New Bonds or persons providing benefits to the Project.

                  1.1.52. "New Working Capital Facility Loans" means loans
advanced for the working capital requirements of the Partnership for the
Project.

                  1.1.53. "Nondefaulting Partners" has the meaning set forth in
Section 10.2.1.

                  1.1.54. "Nonrecourse Liability" means a liability to the
extent that no Partner nor any Affiliate of a Partner bears in respect thereof,
any Economic Risk of Loss.

                  1.1.55. "Notice" means a writing containing the information
required by this Agreement to be communicated to any Person and that is
delivered or sent in the manner specified in Section 13.9 or actually received
by such Person.

                  1.1.56. "Old Bonds" means the Industrial Development Revenue
Bonds (Brooklyn Navy Yard Cogeneration Project) Series 1995A in the aggregate
principal amount of $126,962,850 and the Industrial Development Revenue Bonds
(Brooklyn Navy Yard Cogeneration Project) Series 1995B in the aggregate
principal amount of $126,962,850 issued by the Agency, which Old Bonds, together
with the related instruments and documents, shall not constitute a Long-Term
Credit Facility.

                  1.1.57. "Operator" means the Person who, pursuant to an
operating agreement with the Partnership, performs or causes to be performed
operation, maintenance, and other functions of or related to the Project.

                  1.1.58. "Partner" means any Limited Partner or General
Partner.


                                  -8-
<PAGE>

                  1.1.59. "Partner Loan" means a loan from a General Partner (in
the capacity as an independent lender to the Partnership, and not as a Partner)
to the Partnership pursuant to Section 3.9.1 and shall not include any
Construction Loan.

                  1.1.60. "Partner Nonrecourse Debt" has the same meaning as the
term "partner nonrecourse debt" set forth in Section 1.704-2(b)(4) of the
Regulations.

                  1.1.61. "Partnership" means the limited partnership formed
under this Agreement, as the partnership may from time to time be constituted.

                  1.1.62. "Partnership Account" means the segregated interest
bearing account in the Partnership's name referenced in Section 3.3 into which
the General Partners shall deposit certain receipts of the Partnership as set
forth therein.

                  1.1.63. "Partnership Minimum Gain" means the amount determined
by computing, with respect to each Nonrecourse Liability of the Partnership, the
amount of gain (of whatever character) that would be realized by the Partnership
if it disposed of the Partnership property subject to such liability in a
taxable transaction in full satisfaction of such liability (and for no other
consideration), and by then aggregating the amounts so computed. Partnership
Minimum Gain shall be determined in a manner consistent with the rules of
Regulations Section 1.704-2(d)(1), including the requirement that if the book
value of property subject to one or more Nonrecourse Liabilities (as determined
for purposes of adjusting the Partners' Capital Accounts) differs from its
adjusted tax basis, Partnership Minimum Gain shall be determined with reference
to such book value as provided in Regulations Section 1.704- 2(d)(3).

                  1.1.64. "Person" means a corporation, an association, a
partnership, a limited liability company, an organization, a business, an
individual, a government or a political subdivision thereof, a governmental
agency or any other juridical entity.

                  1.1.65. "Power Sales Agreement" means the Energy Sales
Agreement, dated as of October 31, 1996, between Con Ed and the Partnership, as
such agreement may be supplemented, amended, modified, consolidated or replaced
by a new agreement.

                  1.1.66. "Priority Amounts" means the application of the
Partnership's cash to the following uses in the following order of priority:

                        (a) maintenance, operating and other business expenses
and capital expenditures necessary for the continued safe and economic operation
of the Project, including payments under the agreement with the Operator,


                                  -9-
<PAGE>

expenditures to meet governmental requirements and Reserves in anticipation of
such expenditures;

                        (b) principal, interest, fees, rent, costs and expenses
of the Partnership pursuant to any Long-Term Credit Facility and any and all
Reserves and deposits required by any Long-Term Credit Facility;

                        (c) a General Partner Management Fee equal to 2.5% of
the Gross Revenues of the Partnership for each month prior to and including the
month of the Bond Closing Date payable to each General Partner on the next
following Distribution Date;

                        (d) to the extent that payment of any General Partner
Management Fee or any Royalty Fee have, at the option of the General Partners,
been subordinated or deferred or there is insufficient cash on any prior
Distribution Date to pay the General Partner Management Fee or Royalty Fee, all
such subordinated, deferred or unpaid General Partner Management Fee and Royalty
Fee;

                        (e) a General Partner Management Fee equal to 0.5% of
the Gross Revenues of the Partnership calculated from the first day of the month
after the Bond Closing Date for a period of forty eight (48) calendar months
thereafter payable to York Partners on each Distribution Date;

                        (f) a Royalty Fee equal to 4.5% of the Gross Revenues of
the Partnership calculated from the first day of the month after the Bond
Closing Date for a period of forty-eight (48) calendar months thereafter payable
to York Partners on each Distribution Date;

                        (g) a General Partner Management Fee equal to 2.0% and
2.0% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning forth-eight (48) months after the Bond Closing Date for a
period of sixty (60) calendar months thereafter payable to York Partners and
MENY, respectively, on each Distribution Date;

                        (h) a General Partner Management Fee equal to 1.5% and
1.5% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning one hundred eight (108) months after the Bond Closing Date
for a period of sixty (60) calendar months thereafter payable to York Partners
and MENY, respectively, on each Distribution Date;

                        (i) a General Partner Management Fee equal to 1.0% and
1.0% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning one hundred sixty-eight (168) months after the Bond Closing
Date for


                                  -10-
<PAGE>

a period of sixty (60) calendar months thereafter payable to York Partners and
MENY, respectively, on each Distribution Date;

                        (j) a General Partner Management Fee equal to 0.5% and
0.5% of the Gross Revenues of the Partnership calculated from the first day of
the month beginning two hundred twenty-eight (228) months after the Bond Closing
Date for a period of two hundred forty (240) calendar months thereafter (but in
no event later than October 31, 2036) payable to York Partners and MENY,
respectively, on each Distribution Date;

                        (k) principal, interest, fees, costs and expenses due
under the Construction Loan;

                        (l) scheduled payments in that month of principal and
accrued interest on any subordinated loans, including any Partner Loans;

                        (m) any other Reserves or funds for capital expenditures
established in such amounts as the Management Committee determines in its
reasonable discretion to be necessary;

                        (n) distributions to the Partners pursuant to Article
IV.

                  1.1.67. "Priority Loan" means a loan from a Partner to another
Partner that is subject to the terms and conditions set forth in Section 3.9.

                  1.1.68. "Project" has the meaning set forth in the Recitals.

                  1.1.69. "Project Agreements" means, individually and
collectively, any and all agreements relating to the Project as each may be
amended, supplemented or modified from time to time.

                  1.1.70. "Property" means any parcel of real estate on which
the Project is or is to be located, together with all easements appurtenant
thereto, all improvements constructed thereon, and all personal property owned
or leased by the Partnership and used in connection therewith, including any
interest of the Partnership therein.

                  1.1.71. "Proportionate Share" means, as of the date of
calculation, a fraction the numerator of which is the percentage Interest of the
General Partner Interest held by that General Partner and the denominator of
which is the aggregate of percentage Interests of all General Partner Interests.

                  1.1.72. "PURPA" means the Public Utility Regulatory Policies
Act of 1978, as amended, and the regulations promulgated thereunder.


                                  -11-
<PAGE>

                  1.1.73. "Regulations" means the Income Tax Regulations
(including temporary and proposed) promulgated under the Code by the Internal
Revenue Service, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

                  1.1.74. "Released Claim" has the meaning set forth in Section
14.2.

                  1.1.75. "Released Party" has the meaning set forth in Section
14.2.

                  1.1.76. "Releasing Parties" has the meaning set forth in
Section 14.2.

                  1.1.77. "Reserves" means provisions for contingencies in
accordance with prudent management practices relative to the type of business in
which the Partnership is engaged and the levels of insurance maintained by the
Partnership and generally accepted accounting principles.

                  1.1.78. "Royalty Fee" means a royalty calculated as a
percentage of the gross revenues of the Partnership, payable in accordance with
the definition of Priority Amount.

                  1.1.79. "Second Supplemental Agreement" has the meaning set
forth in the Recitals.

                  1.1.80. "Site Lease" means the Site Lease dated December 19,
1989, between Brooklyn Navy Yard Development Corporation and Cogeneration
Technologies, Inc., as amended and assigned.

                  1.1.81. "Subsidiary" means, when used with reference to a
specified Person, any Affiliate of the specified Person who directly or
indirectly is controlled by such specified Person.

                  1.1.82. "Substituted Partner" means any Partner admitted to
the Partnership as a General Partner or a Limited Partner, as the context
requires, pursuant to Article VIII, whether in lieu of or in addition to an
assigning Partner.

                  1.1.83. "Supplemental Agreement" has the meaning set forth in
the Recitals.

                  1.1.84. "Tax Matters Partner" has the meaning set forth in
Section 11.6.


                                  -12-
<PAGE>

                  1.1.85. "Withdrawal" when used with reference to a Partner,
shall mean in lieu of other events of withdrawal specified in Section 17-402(4)
and (5) of the Delaware Act:

                        (a) the filing of a certificate of dissolution or its
equivalent for a General Partner that is a corporation or the revocation of a
charter of a General Partner that is a corporation;

                        (b) the dissolution and commencement of winding up or
liquidation of a General Partner that is a partnership;

                        (c) an attempt by a Partner to withdraw from or to
transfer any of its Interests in the Partnership, except as permitted by Article
VIII;

                        (d) the failure by a General Partner generally to pay
its Debts as they become due or the admission in writing by a General Partner of
its inability to pay its Debts or a general assignment by a General Partner for
the benefit of creditors;

                        (e) the commencement by a General Partner of any case,
proceeding or other action seeking for itself or its Debts any arrangement,
composition, readjustment, liquidation, dissolution or other reorganization or
similar relief under any Debtor Relief Law;

                        (f) in any involuntary case, proceeding or other action
commenced against a General Partner which seeks to have an order for relief
(injunctive or otherwise) entered against the General Partner, as debtor, or
seeks reorganization, arrangement, adjustment, liquidation, dissolution or
composition of it or its Debts under any Debtor Relief Law, (i) a General
Partner fails to bond, discharge or obtain a dismissal of such case, proceeding
or other action within 60 days of its commencement, or (ii) a General Partner
converts the case from one chapter of the Bankruptcy Reform Act of 1978, as
amended, to another chapter, or (iii) a General Partner is the subject of an
order for relief which is not stayed within 30 days from the entry thereof;

                        (g) the filing by a General Partner of an answer or
other pleading admitting or failing to contest the material allegations of a
petition filed against it in any bankruptcy, insolvency or reorganization
proceeding; or

                        (h) the appointment of a trustee, receiver, custodian or
liquidator of a General Partner or of all or any part of its properties, if said
appointment has not been vacated or stayed within 90 days or the seeking,
consenting, or acquiescing of a General Partner to the appointment of a trustee,
receiver, custodian or liquidator of it or of all or any substantial part of its
properties.


                                  -13-
<PAGE>

                  1.1.86. "York Affiliates" means York Research Corporation, a
Delaware corporation, and its Affiliates.

                  1.1.87. "York Partners" means the limited partnership
identified as such on Exhibit A.

                  1.1.88. "York Partners Security Agreement" has the meaning set
forth in Section 3.10.

                  1.1.89. "York Reimbursement Agreement" means the York Partners
Reimbursement Agreement (PMNC) dated as of the date hereof among York Partners,
the Partnership and Edison Mission Energy as amended, supplemented or modified
from time to time.

            1.2 Additional Defined Terms. For the convenience of the parties, in
addition to the defined terms set forth in this Article I, certain other terms
are defined throughout this Agreement.

            1.3 Rules of Construction. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires,
(i) the terms defined in this Article I have the meanings assigned to them in
this Article I and include the plural as well as the singular, (ii) all
accounting terms not otherwise defined have the meanings assigned under
generally accepted accounting principles, (iii) all references in this Agreement
to designated "Articles", "Sections," "Exhibits," "Schedules" and other
subdivisions are to the designated Articles, Sections and other subdivisions of
the body of this Agreement, as it may be amended, (iv) pronouns of either gender
or neuter shall include, as appropriate, the other forms, (v) any references to
regulations or statutes shall be construed as including all provisions
consolidating, amending, succeeding or replacing the statute or regulation
referred to, (vi) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision and (vii) the words "include," "including"
and other words of similar import mean include or including without limitation.

                               ARTICLE II

                         ORGANIZATIONAL MATTERS

            2.1 Formation. The parties hereby form a partnership as a limited
partnership under the laws of the State of Delaware. The rights and liabilities
of the Partners shall be as provided in the Delaware Act, except as otherwise
expressly provided herein.


                                  -14-
<PAGE>

            2.2 Name. The name of the Partnership shall be the name set forth on
the cover sheet hereof or such other name as the General Partners may hereafter
designate by Notice to the Limited Partners and by making any required filings
under the Delaware Act.

            2.3 Business Purpose.

                  2.3.1.The primary business purpose of the Partnership shall be
to design, Construct, develop and operate for profit the Project in order to
provide a substantial and reliable resource of electric and thermal energy and
capacity for sale.

                  2.3.2.The Partnership may engage in any activities whatsoever
that the Partnership may deem proper, convenient or incidental in connection
with any of the foregoing purposes.

            2.4 Place of Business. The principal place of business of the
Partnership shall be Building 41, Brooklyn Navy Yard, Flushing Avenue and
Cumberland Street, County of Kings, New York, or such other place as the General
Partners may hereafter designate by Notice to the Limited Partners. The
Partnership may maintain such other offices and places of business as the
General Partners may deem advisable.

            2.5 Certificate of Limited Partnership. The General Partners have
executed a Certificate of Limited Partnership and filed it in the Office of the
Delaware Secretary of State as required by Section 17-206(a) of the Delaware
Act.

            2.6 Agent for Service of Process. Unless changed by the Management
Committee, the name of the registered agent for service of process on the
Partnership in Delaware shall be United Corporate Services, Inc. The address of
the registered agent and the address of the registered office of the Partnership
in Delaware is 15 East North Street, Dover, Delaware 19901.

            2.7 Term. The Partnership commenced upon the filing of the original
Certificate of Limited Partnership in accordance with the Delaware Act, and
(unless sooner terminated in accordance with any provisions of this Agreement)
shall continue in existence until December 31, 2051.

                               ARTICLE III

                PARTNERS' CAPITAL AND FUNDING COMMITMENTS

            3.1 General Partners. The names, addresses, and Interests of the
General Partners are set forth in Exhibit A attached hereto. On the Closing Date
and as


                                  -15-
<PAGE>

of the date hereof, York Partners and MENY each had a General Partner Interest
with a percentage Interest equal to 5%.

            3.2 Limited Partners. The names, addresses, and Interests of the
Limited Partners are set forth in Exhibit A. On the Closing Date and as of the
date hereof, York Partners and MENY each had a Limited Partner Interest with a
percentage Interest equal to 45%.

            3.3 Partnership Account. A Partnership Account shall be established
and maintained on behalf of the Partnership. The General Partners shall deposit
the proceeds of all Capital Contributions, Construction Loans, and Partner Loans
and any other receipts of the Partnership with respect to the Project into the
Partnership Account promptly upon the receipt thereof by the Partnership or by
any General Partner on its behalf. The amounts held in the Partnership Account
shall be used by the Partnership in a manner consistent with this Agreement. All
disbursements from the Partnership Account shall be made (i) to comply with the
provisions of Section 4.1, (ii) at the direction of the Executive Director, to
pay or reimburse costs of the Project, or (iii) as the Management Committee may
otherwise direct.

            3.4 Capital Accounts. The Partnership has established a separate
capital account on its books (each, a "Capital Account") for each Partner, which
has been and shall be maintained and adjusted in accordance with Section 5.5. As
of January 1, 1997, the Capital Account of each of York Partners and MENY was
$21,414 and ($26,872,446), respectively, after inclusion of all Capital
Contributions made by each Partner and all adjustments required by Section 5.5
through and including December 31, 1996.

            3.5 No Interest on Capital Accounts. The Partnership shall not be
obligated to redeem or repurchase any Interest, and no Partner shall have the
right to withdraw, or receive any return of, its Capital Contribution or amounts
on deposit in its Capital Account, except as specifically provided herein. No
Partner shall be paid any interest on any Capital Contribution made by it to the
Partnership or on its Capital Account.

            3.6 No Withdrawal from Capital Accounts. Partners shall not be
entitled to the withdrawal or return of any portion of their respective Capital
Accounts, except to the extent provided for in this Agreement.

            3.7 No Liability of Partners.

                  3.7.1.Each General Partner may but shall not be obligated to
the Partnership or any Partner to make any loan or Capital Contribution to the
Partnership. No General Partner shall have personal liability for repayment to
the Limited Partners of their Capital Contributions, or for payments to the
Partnership of the negative amounts of the General Partners' Capital Account, if
any.


                                  -16-
<PAGE>

                  3.7.2.No Limited Partner shall be liable for the debts,
liabilities, contracts or any other obligations of the Partnership, and a
Limited Partner shall not be required to lend any funds to the Partnership or to
make any further Capital Contribution to the Partnership. Limited Partners shall
have no liability under this Agreement except pursuant to this Agreement and as
provided by the Delaware Act. A Limited Partner may, under certain
circumstances, be required by applicable law to return to the Partnership, for
the benefit of Partnership creditors, amounts previously distributed to it. If
any Limited Partner is obligated to make any such payment, such obligation shall
be the obligation of such Limited Partner and not of the General Partners.

            3.8 No Obligations. No reference to MENY Affiliates or York
Affiliates herein shall be deemed to imply that any MENY Affiliate (other than
MENY) or any York Affiliate (other than York Partners) has any obligation under
this Agreement.

            3.9 Loans.

                  3.9.1.At any time after the Partnership has received all of
the funds available to it and all contributions and advances to the Partnership
pursuant to this Section 3.9.1, if requested by the Management Committee, either
General Partner may advance to the Partnership in cash or other consideration or
guarantee or otherwise endorse obligations of the Partnership, the amount so
agreed as a Partner Loan. Any Partner Loan shall be evidenced by a note (if
requested by the Partner making the loan), shall bear interest at the rate set
by the Management Committee, which in no event shall be less than the Interest
Rate, shall be nonrecourse to the Partners, and be subject to such other terms
as the Management Committee shall approve.

                  3.9.2.MENY advanced monies to the Partnership in the form of a
Construction Loan to pay Project costs. The principal amount outstanding of all
Construction Loans, including any applicable fees, as of the date hereof is
$128,622,022, without giving effect to the planned and actual utilization of the
proceeds of the sale of the New Bonds to repay a portion of the amount
outstanding of the Construction Loans. The amount of interest outstanding on all
Construction Loans as of the date hereof is $42,745,326. MENY may in its
discretion, after consultation with the Management Committee, from time to time
advance additional amounts. Each Construction Loan shall (i) be evidenced by
entry of the principal amount thereof, together with a fee equal to one percent
of the principal amount thereof, on a Construction Loan Note substantially in
the form of Exhibit B hereto established with respect to the Construction Loan,
(ii) bear interest from the date hereof (A) until the Bond Closing Date, at a
fixed rate of 10 percent per annum compounded daily and calculated on the basis
of a year of 365/366 days and the number of days elapsed, and (B) from and after
the Bond Closing Date, at a variable rate equal to the Construction Loan Rate,
and (iii) be subject to New York law. To the extent that MENY has received
payment of all or any portion of such Loan, the amount paid to the Partner


                                  -17-
<PAGE>

shall be applied first to accrued but unpaid interest on such loan and
thereafter to reduce the principal amount outstanding under such loan. To the
extent the principal of and accrued interest on any Construction Loan is not
repaid from the proceeds of the New Bonds or other Long-Term Credit Facility as
provided in Section 4.1.2, they shall be repaid from the revenues of the
Partnership as a Priority Amount (after giving effect to other priority payments
set forth in the definition of Priority Amounts) based on an annual level debt
service payment amortization of principal and interest over five years
commencing on the Bond Closing Date assuming a fixed interest rate equal to the
Construction Loan Rate in effect on such date, with an adjustment to the fifth
year for variations in the actual accrued interest based on the actual
Construction Loan Rate in effect from time to time. Any unpaid principal or
accrued interest on a Construction Loan after five years from the Bond Closing
Date shall be payable in full from the first available Partnership cash flow
thereafter (after giving effect to other priority payments set forth in the
definition of Priority Amounts). MENY may in its discretion, reduce the rate of
interest charged for the Construction Loan or convert all or some portion of the
Construction Loan to a Capital Contribution by written notice to the Partnership
specifying the effective date and reduced rate of interest or amount of
conversion.

                  3.9.3.MENY has extended loans and advances to York Partners in
the form of a Priority Loan in connection with the Project. The amount
outstanding of the Priority Loan, including any applicable fees and interest, as
of the date hereof is $20,400,000. Such Priority Loan shall (i) be evidenced by
entry of the principal amount thereof, together with a fee equal to one percent
of the principal amount thereof, on a note in the form of Exhibit C hereto
established with respect to the Priority Loan, (ii) bear interest from the date
hereof (A) until the Bond Closing Date, at a fixed rate of 10 percent per annum
compounded daily and calculated on the basis of a year of 365/366 days and the
number of days elapsed, and (B) from and after the Bond Closing Date, at a
variable rate equal to the Construction Loan Rate, and (iii) be subject to New
York law. York Partners shall have the right to prepay all or any portion of the
principal and accrued interest of any Priority Loan. To the extent the principal
of and accrued interest on any Priority Loan has not been repaid from the
proceeds of any Long-Term Credit Facility as provided in Section 4.1.2, they
shall be repaid from York Partners' share of the Available Cash Flow (after
giving effect to priority payments set forth in the definition of Priority
Amounts) based on an annual level debt service payment amortization of principal
and interest of each Priority Loan over five years commencing on the Bond
Closing Date assuming a fixed interest rate equal to the Construction Loan Rate
in effect on such date, with an adjustment to the fifth payment for variations
in the actual accrued interest based on the actual Construction Loan Rate in
effect from time to time. Any unpaid principal or accrued interest on a Priority
Loan after five years from the Bond Closing Date shall be payable in full
thereafter only from the first available moneys arising from York Partners'
share of Available Cash Flow (after giving effect to priority payments set forth
in the definition of Priority Amounts).

            3.10 Security Agreement. To secure the full repayment of the amounts
advanced to York Partners under the Priority Loan, York Partners, MENY and the
Partnership shall enter into a pledge and security agreement substantially in
the form of


                                  -18-
<PAGE>

Exhibit D hereto (the "York Partners Security Agreement"), pursuant to which
York Partners (as evidenced by the consent of all partners of York Partners)
shall grant and pledge to MENY a portion of its Limited Partner Interest equal
to a 30% interest in the Partnership.

                               ARTICLE IV

                 PAYMENTS AND DISTRIBUTIONS TO PARTNERS

            4.1 Distribution of Partnership Cash and Assets.

                  4.1.1.In the event of the winding up of the Partnership, all
Partnership cash and property shall be distributed pursuant to Article IX of
this Agreement.

                  4.1.2.As soon as practicable following a Long-Term Credit
Facility Closing, the Management Committee shall determine if any portion of the
proceeds of the Long-Term Credit Facility are available for distribution as
Distributable Amounts. The Management Committee shall apply those Distributable
Amounts to the following uses and in the following order of priority:

                        (i) Payment of the Old Bonds and any amounts due under
related instruments and documents including amounts due Edison Mission Energy
pursuant to the Reimbursement and Indemnity Agreement dated as of December 22,
1995.

                        (ii) Repayment of any principal, interest and fees with
respect to the Construction Loan.

                        (iii) Replacement with Partnership cash of any guarantee
of a Partnership obligation or a security deposit or letter of credit posted by
a Partner or an Affiliate of a Partner on behalf of the Partnership.

                        (iv) Payment of the remainder to the Partners to cause
their respective Distribution Account to be in proportion to the Partner's
respective percentage Interest and thereafter in proportion to their percentage
Interest, provided, however, that amounts otherwise distributable to York
Partners shall be paid to MENY for the payment of any Priority Loan.

                  4.1.3.The Partnership shall pay to the appropriate Persons the
Priority Amounts identified in clauses (a) and (b) of the definition thereof
when and as required to meet the Partnership's obligations. The Partnership
shall pay to the appropriate Persons all other Priority Amounts on each
Distribution Date, provided, however, that the Partnership shall pay to Edison
Mission Energy all or such portion of the General Partner Management Fee and
Royalty Fee as may be required pursuant to


                                  -19-
<PAGE>

Article II of the York Reimbursement Agreement upon written notice from Edison
Mission Energy specifying the amounts due and payable to Edison Mission Energy.

                  4.1.4.The Management Committee shall distribute the Available
Cash Flow on each Distribution Date to the Partners to cause their respective
Distribution Accounts to be in proportion to the Partners' respective percentage
Interests and thereafter in proportion to their percentage Interests, provided,
however, that amounts otherwise distributable to York Partners shall be paid to
MENY for the payment of any Priority Loan.

            4.2 Payments to Partners. Except as otherwise provided herein, or
hereafter approved by the Management Committee, no payment shall be made by the
Partnership to any Partner, or by any Partner to any other Partner,
respectively, for services of such Partner except that on the Bond Closing Date,
MENY shall pay to York Partners a development fee in the amount of $6 million by
wire transfer to the York Partners' account at Chemical Bank.

            4.3 Loaned Employees; Reimbursement. York Partners and MENY each
agree to make or cause to be made available to the Partnership such of their
employees and those of their MENY Affiliates and York Affiliates as are
necessary, in the determination of the Executive Director, to conduct the
business of the Partnership. This obligation shall terminate at such time as (a)
the volume of business being conducted by the Partnership is such that the
Executive Director determines that the Partnership can support its own
autonomous organization with respect to any services theretofore caused to be so
provided to the Partnership or (b) the Partner has withdrawn in a manner
permitted by this Agreement. Each of York Partners, MENY, any York Affiliates
and any MENY Affiliates shall be entitled to be reimbursed by the Partnership
for (a) the portion of its employee expenses including employee expenses
incurred in connection with the satisfaction of General Partner obligations
under Article XI (except Section 11.7)) incurred and fairly attributable to the
operations of the Partnership which shall be deemed to be an amount equal to (i)
the portion of the base salaries of its professional personnel allocable to the
Partnership (determined by the Executive Director based on the proportion of
time spent on the Partnership's operations to all other business activities of
such Person), (ii) multiplied by 1.5; and (b) other reasonable out-of-pocket
expenses preapproved in writing by the Executive Director and incurred directly
by such entity in connection with the Partnership's operations (including
reasonable out-of-pocket expenses incurred in connection with the satisfaction
of General Partner obligations under Article XI (except Section 11.7)); provided
that the aggregate amount of such reimbursement does not exceed levels
authorized for such services and expenses in an authorized budget approved by
the Management Committee. Such payment shall be made by the Partnership at the
direction of the Executive Director (if within a Management Committee approved
budget or, if not, upon authorization by the Management Committee) upon
presentation of reasonably detailed statements describing the provision of such
services and payment of such salaries (and evidencing the payment of such
out-of-pocket expenses) by the


                                  -20-
<PAGE>

Partner or MENY Affiliate or York Affiliate claiming such reimbursement. If the
Management Committee does not approve budgets including amounts reasonably
proposed in good faith by York Partners or MENY to cover the obligations of the
parties under this Section 4.3 and Article XI (except Section 11.7), the
Partners, to the extent of any shortfall, shall be relieved of such obligations.
Any employee of a Partner or its MENY Affiliate or York Affiliate who performs
services for or on behalf of the Partnership pursuant to the foregoing
provisions of this Section 4.3 shall be paid by and remain an employee of the
Partner or the York Affiliate or MENY Affiliate by whom they are employed and
not the Partnership. The York Affiliates and MENY Affiliates are hereby
constituted intended third party beneficiaries of this Section 4.3.

            4.4 Loans to Partners. The Partnership shall not make any loans to
any Partner or to any other Persons without the consent of the General Partners
or, if the loan is to a General Partner or an Affiliate of a General Partner,
without the consent of the other General Partner.

            4.5 Amounts Withheld. All amounts required to be withheld pursuant
to the Code or any applicable provision of any state, local or foreign tax law
with respect to any payment or distribution to the Partners and treated by the
Code (whether or not withheld pursuant to the Code) or any such tax law as
amounts payable by or in respect of any Partner or any Person owning an
interest, directly or indirectly, in such Partner shall be treated as amounts
distributed to the Partner with respect to which such amount was withheld
pursuant to this Article IV for all purposes under this Agreement. The
Management Committee is authorized to withhold from payments or distributions to
the Partners and to pay over to any federal, state, local or foreign government
any amounts required to be so withheld pursuant to the Code or any such tax.

                                ARTICLE V

                         ALLOCATIONS OF ITEMS OF
                      INCOME AND ITEMS OF DEDUCTION

            5.1 In General. Items of Income, Items of Deduction and any other
items of income, gain, deduction and loss of the Partnership shall be determined
and allocated (pursuant to the provisions of this Article V) with respect to
each fiscal year of the Partnership as of the end of such year.

            5.2 Items of Income and Items of Deduction. Subject to the special
allocations set forth in Section 5.4 and until such time as Items of Income and
Items of Deduction are to be allocated under Section 5.3, the Partnership's
Items of Income and Items of Deduction shall be allocated among the Partners in
the following manner:

                  5.2.1.For fiscal year 1996, Items of Income and Items of
Deduction shall be allocated 84.6% to MENY and 15.4% to York Partners.


                                  -21-
<PAGE>

                  5.2.2.For each fiscal year thereafter, Items of Income and
Items of Deduction shall be allocated 95% to MENY and 5% to York Partners.

            5.3 Allocation Upon Liquidation.

                  5.3.1.After giving effect to the special allocations set forth
in Section 5.4 below, the Partnership's remaining Items of Income realized in
the first fiscal year during which the Partnership commences a winding up of the
Partnership (and in any succeeding year) shall be allocated among the Partners
in the following manner:

                        (a) First, to each of the Partners to the extent of and
in proportion to the excess of the deficit balance in such Partner's Capital
Account over the sum of such Partner's allocable share of Partnership Minimum
Gain (as determined under Regulations Section 1.704-2(g)(2)) and minimum gain
attributable to a Partner Nonrecourse Debt (as determined under Regulations
Section 1.704-2(i)(5)) remaining after giving effect to the special allocations
of Section 5.4 (such sum being such Partner's "Allocable Share of Minimum
Gain").

                        (b) Second, to the Partners in the amounts required to
cause the respective balances of their Capital Accounts to be in proportion to
the amounts of cash each would receive if the remaining proceeds of liquidation
were distributed in accordance with Section 4.1.2(iv).

                        (c) Third, the balance to the Partners in proportion to
their percentage Interests.

            5.4 Regulatory Allocation Provisions.

                  5.4.1.Notwithstanding any other provision of this Agreement,
if there is a net decrease in Partnership Minimum Gain during a Partnership
taxable year, each Partner shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, for subsequent years) equal to
such Partner's share of the net decrease in Partnership Minimum Gain (which
share of such net decrease shall be determined under Regulations Section
1.704-2(g)(2)). It is intended that this Section 5.4 shall constitute a "minimum
gain chargeback" as provided by Regulations Section 1.704-2(f). Such section of
the Regulations shall control in the event of a conflict between such section
and this Section 5.4.

                  5.4.2.Notwithstanding any other provision of this Agreement
other than Section 5.4.1, if there is a net decrease in minimum gain during a
Partnership taxable year attributable to a Partner Nonrecourse Debt, any Partner
with a share of minimum gain attributable to such debt at the beginning of such
year (as determined under Regulations Section 1.704-2(i)(5)) shall be specially
allocated items of Partnership income and gain for such year (and, if necessary,
for subsequent years)


                                  -22-
<PAGE>

equal to that Partner's share of the net decrease in such minimum gain (which
share of such net decrease shall be determined under Regulations Sections
1.704-2(i)(4) and 1.704-2(g)(2)). It is intended that this Section 5.4.2 shall
constitute a chargeback of partner nonrecourse debt minimum gain as provided by
Regulations Section 1.704- 2(i)(4) and such section of the Regulations shall
control in the event of a conflict between such section and this Section 5.4.2.

                  5.4.3.No Items of Deduction or items of Partnership deduction
or loss shall be allocated to any Partner to the extent that such allocation
would result in such Partner having an Adjusted Capital Account Deficit. If any
Partner unexpectedly receives any adjustments, allocations or distributions
described in Regulations Section 1.704-1(b)(2) (ii)(d)(4) through (6) which
result in an Adjusted Capital Account Deficit, such Partner shall be allocated
items of Partnership income and gain in an amount and manner sufficient to
eliminate such Adjusted Capital Account Deficit as quickly as possible, provided
that an allocation pursuant to this Section 5.4.3 shall be made only if and to
the extent that such Partner would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Article V (other than Section
5.4.4) have been tentatively made as if this Section 5.4.3 were not in this
Agreement. It is intended that the second sentence of this Section 5.4.3 shall
constitute a "qualified income offset" as provided by Regulations section
1.704-1(b)(2)(ii)(d) and such section of the Regulations shall control in the
event of a conflict between such section and this Section 5.4.3.

                  5.4.4.In the event any Partner has an Adjusted Capital Account
Deficit at the end of any fiscal year, items of Partnership income and gain
shall be specially allocated to such Partner in an amount and manner sufficient
to eliminate such Adjusted Capital Account Deficit as quickly as possible,
provided that an allocation pursuant to this Section 5.4.4 shall be made only if
and to the extent that such Partner would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article V have been
tentatively made as if Section 5.4.3 and this Section 5.4.4 were not in this
Agreement.

                  5.4.5.Items of Partnership deduction and loss and Section
705(a)(2)(B) expenditures that are attributable to indebtedness constituting
Partner Nonrecourse Debt under the Regulations shall be allocated among the
Partners who bear the Economic Risk of Loss for such indebtedness constituting
Partner Nonrecourse Debt under the Regulations in the ratio in which they share
Economic Risk of Loss for such indebtedness. This provision is to be interpreted
in a manner consistent with the requirements of Regulations Section
1.704-2(i)(1).

                  5.4.6.The allocations set forth in Sections 5.4.1 through
5.4.5 hereof (the "Regulatory Allocations") are intended to comply with certain
requirements of the Regulations. It is the intent of the Partners that, to the
extent possible and consistent with the Regulations, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Partnership


                                  -23-
<PAGE>

income, gain, loss, and deduction pursuant to this Section 5.4.6. Therefore,
notwithstanding any other provision of this Article V, other than the Regulatory
Allocations, the General Partners shall make such offsetting special allocations
in whatever manner they determine appropriate so that, after such offsetting
allocations are made, each Partner's Capital Account balance is, to the extent
possible, equal to the Capital Account balance such Partner would have had if
the Regulatory Allocations were not part of the Agreement and all items of
Partnership income, gain, loss or deduction were allocated pursuant to Sections
5.2 and 5.3. In exercising their discretion under this Section 5.4.6, the
General Partners shall take into account future Regulatory Allocations under
Sections 5.4.1 and 5.4.2 that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 5.4.5.

                  5.4.7. For purposes of allocating excess Nonrecourse
Liabilities under Regulations Section 1.752-3(a)(3) the Partners agree that the
Partners' interests in profits are 95% to MENY and 5% to York Partners.

                  5.4.8. In the event that any amount claimed by the Partnership
to constitute a deductible expense in any fiscal year is treated for Federal
income tax purposes as a distribution made to a Partner in its capacity as a
partner of the Partnership and not a guaranteed payment as defined in Section
707(c) of the Code or a payment to a Partner not acting in its capacity as a
partner under Section 707(a) of the Code, then the Partner who is deemed to have
received such distribution shall first be allocated an amount of Partnership
Items of Income, equal to such payment, its Capital Account shall be reduced to
reflect the distribution, and for purposes of this Article V, Items of Income
shall be determined after making the allocation required by this Section 5.4.8.

                  5.4.9. In the event an Interest is assigned by a Partner (or
by an assignee or successor in interest to a Partner) or a new Partner is
admitted to the Partnership, the Management Committee shall close the
Partnership's books on an interim basis, and determine and allocate all Items of
Income, Items of Deduction, and items of Partnership income, gain, deduction and
loss, as of such date. Items of Income, Items of Deduction and items of
Partnership income, gain, deduction and loss, for the remainder of the fiscal
year, shall be determined and allocated for the period from the date the books
are closed on an interim basis to the end of the fiscal year.

                  5.4.10. During each fiscal year, the General Partners,
collectively, shall be allocated no less than the percentage of each material
item of Partnership items of income, gain, deduction and loss as is consistent
with the provisions of Section 4.01 of Rev. Proc. 89-12, 1989-1 C.B. 22 or any
successor provision thereto. In the event that the General Partners' Capital
Accounts at the end of any Fiscal Year would be less than one percent (1%) of
the total positive Capital Accounts of the Partners, the General Partners shall
be specially allocated items of Partnership income and gain, pro rata, in an
amount so that the General Partners' Capital Account balances are equal to one
percent (1%) of the total positive Capital


                                  -24-
<PAGE>

Account balances of the Partners, provided that an allocation pursuant to this
Section 5.4.10 shall be made only if and to the extent that the General
Partners' Capital Accounts would be less than one percent (1%) of the total
positive Capital Account balances of the Partners after all other allocations
provided for in this Article V have been tentatively made as if this Section
5.4.10 were not in this Agreement.

                  5.4.11. Notwithstanding the foregoing provisions of this
Article V, income, gain, loss and deduction with respect to property contributed
to the Partnership by a Partner and property which is revalued pursuant to
Section 5.5.3 shall be shared among the Partners, in the manner prescribed by
Section 704(c) of the Code and Regulations Section 1.704-1(b)(2)(iv)(f)(4), so
as to take account of the variation, if any, between the basis of the property
to the Partnership and its fair market value at the time of contribution or
revaluation.

                  5.4.12. In the event that the Code or any Regulations
promulgated thereunder or any applicable state or local income tax laws or
regulations require allocations of Items of Income, Items of Deduction, items of
Partnership income, gain, deduction, loss or credit different from those set
forth in this Agreement, upon the advice of the Partnership's Accountants, the
General Partners are hereby authorized to make new allocations in reliance upon
the Code, the Regulations, such applicable state and local income tax laws and
regulations and such advice of the Partnership's Accountants and such new
allocations shall be deemed to be made pursuant to the fiduciary obligations of
the General Partners to the Partnership and the Limited Partners, and no such
new allocation shall give rise to any claim or cause of action by any Limited
Partner.

            5.5  Capital Accounts.

                  5.5.1.The Capital Account for each Partner shall reflect the
amount equal to (a) the sum of (i) such Partner's Capital Contributions, (ii)
such Partner's share of Items of Income and items of Partnership income and gain
that are specially allocated to such Partner pursuant to Sections 5.4.1, 5.4.2,
5.4.3, 5.4.4, 5.4.5, 5.4.6, 5.4.8 and 5.4.10, (iii) such Partner's share of
tax-exempt income of the Partnership and (iv) the amount of any Partnership
liabilities paid by such Partner or assumed by such Partner where the
Partnership is relieved of such liability, less (b) the sum of (1) such
Partner's share of Items of Deduction and items of Partnership deduction and
loss that are specially allocated to such Partner pursuant to Sections 5.4.5,
5.4.6 and 5.4.10, (2) such Partner's share of other Partnership expenditures
described in Section 705(a)(2)(B) of the Code, as determined under Regulation
Section 1.704-1(b)(2)(iv)(i), (3) the amount of money distributed to such
Partner by the Partnership, (4) the fair market value of property distributed to
such Partner by the Partnership (net of liabilities secured by such distributed
property which such Partner is deemed to assume or take subject to under Section
752 of the Code), and (5) the amount of any liabilities of such Partner paid by
the Partnership or assumed by the Partnership where the Partner is relieved of
such liability. Each Partner's Capital Account shall be


                                  -25-
<PAGE>

maintained and adjusted in accordance with this Section 5.5. Items of
Partnership income described in clause (a)(iii) and expenditures described in
clause (b)(2) shall be allocated among the Partners in the same manner as Items
of Income, Items of Deduction and items of Partnership, income, gain, deduction
and loss.

                  5.5.2. It is intended that appropriate adjustments shall
thereby be made to Capital Accounts to give effect to any Items of Income, Items
of Deduction and any other items of Partnership income, gain, loss or deduction
that are specially allocated pursuant to this Agreement. A Partner who has more
than one interest in the Partnership shall have a single Capital Account that
reflects all such interests regardless of the class of interests owned by such
Partner and regardless of the time or manner in which such interests were
acquired.

                  5.5.3. The Capital Accounts of the Partners and the
determination of Items of Income and Items of Deduction shall be adjusted to
reflect a revaluation of Partnership property on the Partnership's books and
records (i) in connection with any contribution of money or other property
(other than an insignificant amount) to the Partnership by a Partner as
consideration for an interest in the Partnership or (ii) in connection with the
liquidation of the Partnership or any distribution of money or other property
(other than an insignificant amount) by the Partnership to a retiring or
continuing Partner as consideration for an interest in the Partnership. In
making such adjustments, the following conditions shall be satisfied:

                        (a) The adjustments shall be based on the fair market
value of Partnership property (taking Section 7701(g) of the Code into account)
as determined by the Management Committee on the date of adjustment;

                        (b) The adjustments shall reflect the manner in which
the unrealized income, gain, loss or deduction inherent in such property (that
has not been reflected in Capital Accounts previously) would be allocated among
the Partners under this Article V if there were a taxable disposition of such
property for such fair market value on such date; and

                        (c) As provided in Section 5.4.11, Items of Income and
Items of Deduction, as computed for tax purposes, with respect to such property
shall thereafter be determined so as to take account of the variation of the
adjusted tax basis and book value of such property in the same manner as under
Section 704(c) of the Code and the Regulations thereunder.

                  5.5.4. In the event that property other than cash is
distributed by the Partnership to any Partner, Capital Accounts shall first be
adjusted to reflect the manner in which the unrealized income, gain, loss and
deduction inherent in such property (that has not been previously reflected in
Capital Accounts) would be allocated, pursuant to this Article V, among the
Partners if there were a taxable disposition of such property for its fair
market value (taking Section 7701(g) of the


                                  -26-

<PAGE>

Code into account) as determined by the Management Committee on the date of
distribution.

                  5.5.5. Upon the transfer of all or any part of an Interest,
the transferor's Capital Account that is attributable to the transferred
Interest shall carry over to the transferee Partner.

                  5.5.6. Income and loss for state and local income tax purposes
shall, to the extent permissible, be allocated among the Partners consistently
with the allocations for Federal income tax purposes. A separate accounting
shall be made of any item allocated for state or local income tax purposes in a
manner different from the allocation of the corresponding item under the Code
for Federal income tax purposes.

                  5.5.7. The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Section 1.704-1(b) of the Regulations, and shall be interpreted and
applied in a manner consistent with such Regulations.

                               ARTICLE VI

            RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNERS

            6.1 Management of the Partnership.

                  6.1.1. The General Partners shall have the exclusive power and
authority to direct and manage the affairs of the Partnership and shall possess
the powers and rights of general partners under the Delaware Act and this
Agreement. The General Partners, within the authority granted to them under this
Agreement, have determined to and hereby agree to exercise such powers and
manage the business of the Partnership through a Management Committee except as
otherwise expressly provided herein.

                  6.1.2. No Limited Partner (except one who is also a General
Partner, and then only in its capacity as a General Partner within the scope of
its authority hereunder) shall participate in the control of, or have any
control over the Partnership business or any authority or right to act for or
bind the Partnership. The Limited Partners hereby consent to the exercise by the
General Partners of the respective powers conferred on them by this Agreement.

            6.2 Management Committee. The Management Committee shall be
constituted, conduct its affairs, exercise its delegated powers and be subject
to limitations thereon as follows:


                                  -27-
<PAGE>

                  6.2.1. The Management Committee shall be comprised of two
representatives (who are also officers or Persons having similar
responsibilities and duties) of each General Partner (the "Management
Committee"). Subject to the provisions of Section 10.2, each General Partner
shall be entitled to one vote in Management Committee decisions for each
percentage of General Partner Interest it holds, except that if the Management
Committee is unable to reach a determination or is otherwise deadlocked on a
decision, subject to the rights of the General Partners pursuant to Section
6.2.4, MENY shall be entitled to cast a deciding or tie breaking vote. One of
the representatives of each General Partner shall cast the vote on behalf of
that General Partner. Each of MENY or York Partners upon appointing a member to
the Management Committee shall give Notice to the other General Partner of the
name of that member. A General Partner may remove and replace that member by
giving Notice to the other General Partner. MENY and York Partners will each
take such action as is internally required within that Partner to provide each
of its members on the Management Committee sufficient authorization to bind and
legally act on behalf of that Partner so long as his or her appointment remains
in effect. Subject to the provisions of Section 10.2, the presence of a
representative of each General Partner with voting powers shall be necessary to
constitute a quorum for the conduct of any meeting except where York Partners
fails to attend a meeting scheduled or fixed by the Management Committee
pursuant to Section 6.2.2. Except where MENY is entitled to cast a deciding or
tie breaking vote in decisions of the Management Committee, decisions of the
Management Committee shall be made by majority vote, evidenced by their votes or
the written consent of one of their respective representatives.

                  6.2.2. The Management Committee shall have regular periodic
meetings at such times as the Management Committee may fix, unless the
Management Committee shall determine otherwise. Any one representative may call
special meetings on at least two Business Days advance Notice. Members of the
Management Committee may participate in a meeting of the Management Committee by
means of conference telephone or similar communication equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to such equipment shall constitute presence
in person in such meeting. Any action required or permitted to be taken at a
meeting of the Management Committee may be taken without a meeting if all
members of the Management Committee consent thereto in writing and the writing
is filed with the minutes of proceedings of the Management Committee.

                  6.2.3. The Management Committee shall establish its rules of
procedure subject to the terms hereof. The Management Committee will cause
minutes of each meeting to be prepared and submitted to the members for
approval. Members of the Management Committee may attend meetings and vote
either in person or through duly authorized proxies.

                  6.2.4. The Management Committee shall be responsible for
action or determination on all matters affecting the Partnership, subject to and


                                  -28-
<PAGE>

consistent with the terms of this Agreement, except (i) the General Partners
will jointly participate and keep the other advised with respect to meetings
with other Persons regarding the following actions and (ii) the General Partners
must unanimously consent to the following actions regardless of the rights any
General Partner has to Management Committee decisions if such actions would have
an adverse impact on the substantive rights of York Partners, including the
General Partner Management Fee and the Royalty Fee:

                        6.2.4.1. The sale or transfer of the Project or major
assets constituting a part of the Project.

                        6.2.4.2. The engagement in any business on behalf of the
Partnership other than the ownership, Construction and operation of the Project.

                        6.2.4.3. Making or revoking any of the elections
referred to in Section 48, 167, 168, 195, 263(c), 709, 732, 754 or 1017 of the
Code, or any similar provisions enacted in lieu thereof; provided, however, that
if such approval is not achieved, then all such elections and other tax
decisions shall be made in such a way as to reduce Partnership taxable income to
the maximum extent possible and take deductions in the earliest taxable year
possible and that an election under Section 754 of the Code will be made if
either General Partner so requests; provided, however, that any incremental
costs and expenses incurred by the Partnership in connection with the
administration of a Section 754 election, shall be borne ratably by the Partners
benefiting from such election.

                        6.2.4.4. The filing by the Partnership of a petition or
answer seeking for itself any arrangement, composition, readjustment,
liquidation, dissolution, or other reorganization or similar relief under any
Debtor Relief Law.

                        6.2.4.5. A change from the limited partnership
organizational structure or any combination or consolidation of the Partnership
with another Person.

                        6.2.4.6. The sale or transfer of the Power Sales
Agreement, a transaction between the Partnership and Con Ed constituting a
buyout or buydown of the rights of the Partnership pursuant to the Power Sales
Agreement or an amendment of the Powers Sales Agreement.

provided, however, if MENY determines to take any of the actions described in
this Section 6.2.4 in acting for the Management Committee by casting a deciding
or tie breaking vote, MENY will provide ten (10) Business Days prior written
notice to York Partners prior to taking such action.

            6.3 Authority of General Partners to Deal with Partnership. The
entering into of any agreement, arrangement or transaction of the Partnership
with a


                                  -29-
<PAGE>

Partner or any Affiliate of a Partner shall be governed solely by the provisions
of this Section 6.3, notwithstanding any other provision of this Agreement to
the contrary. Except as provided in Section 4.3, the Partnership shall not enter
into any agreement, arrangement or transaction with a Partner or any Affiliate
of a Partner, unless the terms of the agreement, arrangement or transaction are
no less favorable than those that the Partnership could obtain from unaffiliated
sources in the area rendering comparable goods or services.

            6.4 Executive Director and Other Officers.

                  6.4.1. An executive director (the "Executive Director") shall
be appointed by the Management Committee to direct the day-to-day activities of
the Partnership and the Project, prepare the proposed agenda for Management
Committee meetings and perform such other duties as from time to time may be
specifically delegated and assigned by the Management Committee. The Executive
Director shall be an employee of MENY or a MENY Affiliate. The Executive
Director may also appoint additional officers, such as an assistant manager,
secretary and/or treasurer, and staff who shall include representatives of MENY,
as the Executive Director deems necessary and desirable, who shall perform such
functions and duties and report to such persons as the Executive Director may
from time to time direct. The Executive Director and any other officer may be
removed by MENY or the Management Committee at any time with or without cause,
but only in either case upon appointment of another Executive Director selected
in accordance with this Section 6.4.

                  6.4.2. The rights, duties and responsibilities of the
Executive Director shall include action on the following matters, subject to and
consistent with the terms of this Agreement:

                        6.4.2.1. The Executive Director shall select and remove
staff hired or discharged in connection with the Project.

                        6.4.2.2. The Executive Director shall approve capital or
other expenditures not covered in the operating and maintenance budgets or the
capital improvements budgets unless any expenditure would cause all expenditures
in any quarter to exceed 110% of the Project Costs for that quarter, in which
event the Executive Director shall seek Management Committee approval for the
expenditure.

                        6.4.2.3. The Executive Director at the expense of the
Partnership shall take or cause to be taken all actions which may be necessary
or appropriate to conduct the day-to-day operations of the Project to achieve
the acquisition, Construction, maintenance, preservation and operation of the
Project in accordance with the provisions of this Agreement and applicable laws
and regulations.

                        6.4.2.4. The Executive Director, at the expense of the
Partnership, shall take such action as may be necessary or appropriate in order
to form


                                  -30-
<PAGE>

or qualify the Partnership under the laws of any jurisdiction in which the
Partnership does business or in order to continue in effect such formation or
qualification. The Executive Director, at the expense of the Partnership, shall
file or cause to be filed in the office of the appropriate authorities of the
States of Delaware and New York, and in each other jurisdiction in which the
Partnership is formed or qualified or doing business, such certificates
(including limited partnership and fictitious name certificates) and other
documents as are required by the statutes, rules or regulations of such
jurisdictions.

                        6.4.2.5. The Executive Director shall procure and
maintain, or cause to be procured and maintained, at the sole expense of the
Partnership, such policies of insurance, in such amounts, as are necessary to
comply with the Insurance Requirements as amended from time to time by the
Management Committee.

            6.5 Operators. The operation and maintenance services for the
Project shall be performed by an Operator who shall be a Person acceptable to
the Management Committee based on the terms and conditions established by the
Management Committee with compensation and other terms based on competitive
industry rates. All such services shall be performed pursuant to a written
agreement with such Person approved by the Management Committee.

            6.6 EWG Approval. The General Partners shall use their commercially
reasonable best efforts to cause the Partnership to obtain promptly any and all
permits, documents, instruments and orders to operate as an EWG as may be
necessary or desirable from the New York State Public Service Commission and the
Federal Energy Regulatory Commission and other third parties (the "EWG
Approval").

            6.7 Certain Duties and Obligations of the General Partners.

                  6.7.1. Each General Partner shall use its best efforts to
assure that the Partnership will be classified for Federal income tax purposes
as a partnership and not as an association taxable as a corporation.

                  6.7.2. The General Partners shall use their best efforts to
preclude the classification of the Partnership as a "publicly traded
partnership" to which Section 7704(a) of the Code applies.

            6.8 Other Business of Partners and Affiliates. Any Partner or its
Affiliates may engage independently or with others in other business ventures of
every nature and description, including the ownership of other properties and
the making or management of other investments. Nothing in this Agreement shall
be deemed to prohibit any Partner or any Affiliate of any Partner from dealing,
or otherwise engaging in business, with Persons transacting business with the
Partnership or from


                                  -31-
<PAGE>

providing services related to the purchase, sale, financing, management,
development or operation of real or personal property, including other
competitive cogeneration facilities or other power plants, and receiving
compensation therefor. Without limiting the generality of the foregoing, the
General Partners will not be obligated to present to the Partnership any
particular investment opportunity which comes to the attention of either of
them, even if such opportunity is of a character which might be suitable for
investment by the Partnership. Neither the Partnership nor any Partner shall
have any right by virtue of this Agreement or the Partnership relationship
created hereby in or to such other ventures or activities or to the income or
proceeds derived therefrom, and the pursuit of such ventures, even if
competitive with the business of the Partnership, shall not be deemed wrongful
or improper.

            6.9 Limitation on Liability of General Partners.

                  6.9.1. The General Partners and their respective Affiliates,
employees, officers, directors, and agents (collectively, the "Indemnified
Persons") shall not be liable, responsible or accountable in damages or
otherwise to the Partnership or to any of the Partners for any act or omission
performed or omitted by any of them after the Closing Date in good faith and
reasonably believed by the Indemnified Person acting or omitting to so act to be
within the scope of the authority granted to it by this Agreement; provided,
however, that no Indemnified Person shall be relieved of liability with respect
to any claim, issue or matter as to which (and to the extent) it shall have been
adjudged to be liable for gross negligence, willful misconduct, fraud or bad
faith. Except in the case (and to the extent) of any such judgment of liability,
the Partnership shall indemnify, defend and hold harmless each Indemnified
Person against any liability, loss, damage, cost, or expense (including
reasonable attorneys' fees and expenses and amounts paid in settlement) actually
and reasonably incurred by any Indemnified Person in connection with any such
act or omission or any claims relating thereto or the defense or settlement
thereof. The satisfaction of any obligation to indemnify and hold the
Indemnified Persons harmless shall be from and limited to Partnership assets,
and no Partner shall have any personal liability on account thereof.

                  6.9.2. All rights of an Indemnified Person to indemnification
hereunder shall survive the dissolution of the Partnership or cessation of
membership of a General Partner in the Partnership if, in accordance with and
not in violation of the terms hereof, a claim for indemnification hereunder is
made by or on behalf of the Person seeking indemnification prior to the time
distribution in liquidation of the assets of the Partnership is made.

            6.10 Audit Rights. Each General Partner, at its own expense, shall
have the right to reasonably audit the books and records of the other General
Partner with respect to any transactions pertaining to this Agreement or the
Project. These audit rights shall expire two years after the close of the fiscal
year in which the


                                  -32-
<PAGE>

transaction occurred. Each Partner may also take written exception to such
employee costs and other expenses within such two year period.

            6.11 Partnership Obligations. To the extent not otherwise expressly
provided to the contrary herein, the Partnership shall pay all fees and expenses
of the Partnership incurred after the Closing Date.

            6.12 Title to Partnership Assets. All Partnership assets, whether
real or personal or mixed and whether tangible or intangible, shall be deemed to
be owned by the Partnership as an entity, and no Partner, individually or
collectively, shall have any ownership interest in such Partnership assets or
any portion thereof. Title to any or all of the Partnership assets may be held
in the name of the Partnership, or one or more nominees, as the Management
Committee may determine. All Partnership assets shall be recorded as the
property of the Partnership on its books and records, irrespective of the name
in which legal title to such Partnership assets is held.

                               ARTICLE VII

          REPRESENTATIONS, WARRANTIES AND COVENANTS OF PARTNERS

            7.1 Reciprocal Representations and Warranties. Each of MENY and York
Partners represents and warrants as to itself to the other party as of the date
hereof as follows:

                  7.1.1. MENY is a corporation duly organized, validly existing
and in good standing under the laws of the State of California. York Partners is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware. B-41 Management Corp. and R.V.
Associates, L.P. are the sole general partners of York Partners. York Partners
has delivered to MENY a true, correct and complete executed copy of each of York
Partners' Organization Documents. Each of MENY and York Partners has all
requisite corporate or partnership power and authority to carry on its business
as now conducted and proposed to be conducted, to enter into this Agreement and
to carry out the transactions contemplated hereby.

                  7.1.2. Its execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate or partnership
actions on its part, and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of this Agreement or of any
material agreement, lease, judgment, injunction, order, decree or other
instrument binding upon it or, in the case of MENY, any MENY Affiliate, or in
the case of York Partners, any York Affiliate, or (except as contemplated
hereby) result in the creation or imposition of any lien on any of its assets or
assets of, in the case of MENY, any MENY Affiliate, and in the case of York
Partners, any York Affiliate.


                                  -33-
<PAGE>

                  7.1.3. Assuming due authorization, execution and delivery by
the other party hereto, this Agreement represents its legally valid and binding
agreement, enforceable in accordance with its terms except as enforceability may
be limited by any Debtor Relief Law or by equitable principles relating to
enforceability.

            7.2 Covenant Regarding Status. Each of the original parties agrees
that so long as it is a Partner it will maintain its corporate or limited
partnership existence and (to the extent required under applicable laws)
authority and qualification to conduct business where the Partnership does so.

                              ARTICLE VIII

                        ASSIGNMENTS AND TRANSFERS

            8.1 Transfers of General Partners Interests.

                  8.1.1. A General Partner may not sell, transfer, pledge,
encumber or otherwise assign its General Partner Interest, or designate a Person
to be its successor as a General Partner or to be an additional General Partner,
without the prior written consent of the other General Partner.

                  8.1.2. Any transfer of a General Partner Interest shall be a
transfer of a General Partner's entire General Partner Interest and any such
transfer shall be subject to the provisions of the Delaware Act. If there will
be no remaining General Partner after a transfer of a General Partner Interest,
no transfer will be permitted without the prior written consent of all of the
Limited Partners.

                  8.1.3. In the event of the occurrence of any withdrawal
(including without limitation any Withdrawal) of a General Partner (or the
occurrence of any other event resulting in a Person ceasing to be a General
Partner), the business of the Partnership shall be continued by any new and
remaining General Partner or Partners (pursuant to the right to do so which is
hereby granted to them) if (a) there remains at least one General Partner, or
(b) there is no remaining General Partner and all of the Limited Partners within
90 days after the date of such Withdrawal elect to continue the business of the
Partnership and to admit one or more successor General Partners. If the
remaining General Partner elects to continue the business of the Partnership as
permitted above it shall (a) give Notice to the Limited Partners of such
decision and (b) make such amendments to this Agreement and execute and file any
necessary amendments and other documents in connection therewith.

            8.2 Transfers of Limited Partner Interests. A Limited Partner may,
without the consent of the General Partners, sell, transfer, pledge, convey or
otherwise assign all or any portion of its Interest in the Partnership, provided
that if such Limited Partner is the sole Limited Partner, it must retain at
least one percent of the Interests in the Partnership unless arrangements are
made for the admission of a Substituted Partner


                                  -34-
<PAGE>

holding a Limited Partner Interest simultaneously with the transfer of such
Limited Partner's entire Interest.

            8.3 Limitations on Transfers of Interests.

                  8.3.1. In no event may any Partner effect any sale, transfer,
exchange, pledge, encumbrance or other assignment of its Interest if, in the
opinion of counsel for the Partnership specializing in such matters, (a) (if it
occurs after the placement in service of the Project for Federal income tax
purposes) such an assignment, when considered with all other assignments of
Interests in the Partnership within the previous 12 months, would result in the
Partnership's being considered to have been terminated within the meaning of
Section 708 of the Code unless the General Partners shall determine that such a
termination would not be materially adverse to the General Partners or the
Limited Partners or otherwise have any material adverse Federal income tax
consequences to the Partnership or any of the Partners, (b) such an assignment
would violate any applicable federal or state securities laws (including any
investor suitability standards). Prior to any assignment, the assigning Partner
shall deliver to the Partnership an opinion of counsel knowledgeable in such
matters to the effect that none of the consequences described in clause (a) or
(b) will result from such assignment.

                  8.3.2. Each Partner covenants and agrees, for itself and its
Successors and assigns, that it will undertake no action to sell, transfer,
exchange, pledge, encumber or otherwise assign its Interest in the Partnership
or to facilitate trading in Interests if such action, when considered in the
context of all relevant facts and circumstances, might fairly result in the
classification of the Partnership as a "publicly traded partnership" within the
meaning of Section 7704(b) of the Code. The parties further acknowledge that
legal remedies are likely to be inadequate in the event of a breach of the
covenants under this Section 8.3.2 and, therefore, that equitable remedies
(including mandatory injunctive relief) shall be available to the Partnership or
any Partner in the event of any actual or threatened breach.

                  8.3.3. The Partnership need not recognize for any purpose any
assignment of all or any portion of the Interest of a Partner unless (a) there
shall have been filed with the Partnership a duly executed and acknowledged
counterpart of the instrument making such assignment, together with the opinion
of counsel described in Section 8.3.1, (b) such instrument (i) evidences the
written acceptance by the assignee of all of the terms and provisions of this
Agreement and if relating to an assignment of an entire Interest, includes a
request of the assignee to admission to the Partnership as a Substituted
Partner, as if the assignee were the assignor, (ii) represents that the
assignment was made in accordance with all applicable laws and regulations
(including any investor suitability standards) and (iii) in all other respects
is reasonably satisfactory in form and content to the General Partners or
remaining General Partner, (c) in the opinion of counsel to the Partnership,
none of the adverse consequences described in Sections 8.3.1 and 8.3.2 will
result from such assignment (and, in the case


                                  -35-
<PAGE>

of a proposed substitution or addition of a Limited Partner, the admission of
such assignee as a Partner) and such assignment otherwise is in accordance with
the terms of this Agreement, and (d) the assignee or assignor shall have paid
all reasonable legal fees and filing costs incurred by the Partnership in
connection with the substitution of a Limited Partner. Assignees of Interests
shall be recognized as such on the first day of the calendar month following the
month in which the Partnership receives the instrument of assignment provided
for herein.

            8.4 Right of First Refusal.

                  8.4.1. If any General Partner proposes to sell, transfer,
exchange or otherwise assign all or any portion of its General Partner Interest
in the Partnership, it shall give Notice thereof to the other General Partner.
The Notice shall include the name and identity of the prospective assignee, the
date upon which such assignment is proposed to be consummated, which shall not
be more than 180 days after the date of the Notice, and a written copy of the
offer upon which such prospective assignee proposes to acquire such Interest
specifying the price and all of the terms on which the Partner proposes to
assign its Interest. For a period of 30 days following receipt of the Notice,
the other General Partner or its designate shall have an option to purchase the
entire General Partner Interest offered at the price and on the terms set forth
in the Notice. The failure to exercise the option to acquire the entire General
Partner Interest offered shall constitute a waiver thereof with respect to the
transaction described in the Notice. Should the option be exercised, the sale
shall be consummated on or before the later of (a) 30 days after the date on
which the option was exercised or (b) the date specified in the Notice as the
date upon which the proposed assignment was to be consummated, for the price and
on the terms set forth in the Notice, and the General Partners shall execute and
deliver all documents necessary to effectuate the assignment of the General
Partner Interest to the acquiring General Partner. Should the option not be so
exercised or if an option to be exercised by a General Partner becomes
unenforceable by operation of law prior to its execution, then the assigning
General Partner may assign the General Partner Interest so offered, on or before
the date specified in the Notice, for the price and on substantially the terms
previously described to the assignee specified in the Notice. Should such an
assignment not be timely consummated as aforesaid, then the General Partner
Interest shall again become subject to the foregoing option.

                  8.4.2. If the option described in Section 8.4.1 is exercised,
then the costs of the transaction, including recording fees, escrow costs and
attorneys' fees reasonably incurred by the Partnership in connection with the
assignment, shall be shared equally by the acquiring General Partner and the
assigning General Partner. If the assigning General Partner conveys its General
Partner Interest to a Person that is not then a General Partner, all costs of
the transaction shall be borne by the assigning General Partner.


                                  -36-
<PAGE>

                  8.4.3. The option described in this Section 8.4 is (a) in
addition to, and is not a limitation upon, the right to consent or withhold
consent to a proposed assignment and (b) shall remain in full force and effect
with respect to the General Partner Interests of any successor, assignee or
substitute General Partner hereunder to the same extent and in the same manner
as it was applicable to any predecessor General Partner, but shall not apply to
any transfer by a (direct or indirect) successor General Partner to an original
General Partner.

            8.5 Effect of Transfers or Withdrawals.

                  8.5.1. Any General Partner who assigns all of its General
Partner Interest shall cease to have any of the rights or powers of a General
Partner. Any Limited Partner who sells, transfers, conveys or otherwise assigns
all of its Limited Partner Interest in the Partnership shall cease to be a
Limited Partner of the Partnership. The rights of an assignee of an Interest who
does not become a Substituted Partner shall be limited to the receipt of
distributions of its share of amounts distributable pursuant to Section 4.1,
distributions pursuant to Article IX and allocations of Items of Income and
Items of Deduction, as determined under this Agreement.

                  8.5.2. Notwithstanding the Withdrawal of a General Partner or
a transfer of its entire General Partner Interest consented to pursuant to
Section 8.1, such General Partner shall be and remain liable for all obligations
and liabilities incurred by it as a General Partner or by the Partnership prior
to or with respect to activities of the Partnership prior to the time that such
withdrawal, conversion or transfer becomes effective, but shall be free of any
obligation or liability as a General Partner incurred on account of the
activities of the Partnership from and after the time that such withdrawal,
conversion or transfer becomes effective. In the event of a Withdrawal in
violation of the terms of this Agreement, such Partner shall also be liable for
all damages resulting to the Partnership or any Partner as a direct or indirect
result of such breach and the Partnership, in addition to any remedies otherwise
available under applicable law, shall be entitled to offset any such amounts
against any amounts otherwise distributable to the withdrawing General Partner.

                  8.5.3. An assignee of Interests who does not become a
Substituted Partner and who desires to make a further assignment of all or any
portion of an Interest in the Partnership shall be subject to all of the
provisions of this Article VIII to the same extent and in the same manner as any
predecessor Partner desiring to make an assignment of its Interests.

                  8.5.4. All assignees and successors whether or not admitted as
Substituted Partners take any Interest subject to (but shall not be personally
liable for) all then existing or subsequent claims or rights of offset or
set-off against and other liabilities or obligations of their transferors or
predecessors under this Agreement.


                                  -37-
<PAGE>

                  8.5.5. In the event of a withdrawal (including a Withdrawal)
of a General Partner, the withdrawing General Partner shall not be entitled to
receive any value with respect to its Interest in the Partnership or continue to
participate as a General Partner in the management and control of the
Partnership, unless such withdrawal results in the dissolution of the
Partnership pursuant to Article IX in which event the General Partner shall have
the rights provided therein; provided, however, that prior to such dissolution,
such Partner shall continue to be entitled to the benefits incident to its
Interest and to its rights as the provider of a Loan or Construction Loan,
subject to the provisions hereof and such Partner's obligations hereunder and
under applicable law.

            8.6 Consent. Any consent required for the admission or substitution
of a Partner under the provisions of this Article may be withheld in the
absolute discretion of the Partner or Partners entitled to give such consent and
may be arbitrarily withheld by them or any of them.

                               ARTICLE IX

            WINDING UP AND LIQUIDATION OF THE PARTNERSHIP

            9.1 Events Causing Winding Up. The Partnership shall wind up only
upon the happening of any one of the following events:

                  9.1.1. The withdrawal of all of the General Partners and the
failure of the Limited Partners to elect to continue the business of the
Partnership and select at least one mutually acceptable replacement for the
General Partners as provided in Section 8.1.3.

                  9.1.2. The sale or other disposition of all or substantially
all of the Partnership assets.

                  9.1.3. The election by each General Partner and a Majority of
the Limited Partners to wind up the Partnership.

                  9.1.4. The expiration of the fixed term of the Partnership
provided in Section 2.7.

                  9.1.5. The Withdrawal of the last remaining General Partner
pursuant to clauses (e), (f), (g) or (h) of the definition of Withdrawal and the
failure of the Limited Partners to elect to continue the business of the
Partnership and select at least one mutually acceptable replacement for the
General Partner as provided in Section 8.1.3.


                                  -38-
<PAGE>

                  9.1.6. The entry of a decree of judicial dissolution in
accordance with Section 17-802 of the Delaware Act.

            9.2 Effect of Winding Up. The winding up of the Partnership shall be
effective on the day on which the event occurs giving rise to the winding up,
but the Partnership shall not terminate until this Agreement has been canceled
and the assets of the Partnership shall have been distributed as provided in
Section 9.4. Notwithstanding the winding up of the Partnership, prior to the
termination of the Partnership, the business of the Partnership and the affairs
of the Partners, as such, shall continue to be governed by this Agreement,
except as otherwise required by applicable law.

            9.3 Liquidation.

                  9.3.1. Upon winding up of the Partnership, the General
Partners shall liquidate the assets of the Partnership and, after allocating
(pursuant to Article V of this Agreement) all income, gain, loss and deductions
resulting therefrom, shall apply and distribute the proceeds thereof in the
following order:

                        (i) first, to the expenses of liquidation, and to the
setting up of any Reserves which the Management Committee may consider necessary
or advisable;

                        (ii) second, to the payment of debts and obligations of
the Partnership to its secured creditors in accordance with their respective
security rights;

                        (iii) third, to the payment of the debts and obligations
of the Partnership to its unsecured creditors (including any Construction Loan);

                        (iv) fourth, to the payment or other satisfaction of any
obligations secured by guarantees of a Partnership obligation or a letter of
credit or security deposit posted by a Partner on behalf of the Partnership;

                        (v) fifth, to MENY an amount equal to the unpaid balance
of the Priority Loan; and

                        (vi) thereafter, to the Partners in proportion to their
respective positive Capital Accounts.

                  9.3.2. Notwithstanding Section 9.3.1, in the event that the
Management Committee determines that an immediate sale of all or any portion of
the Partnership's assets would cause undue loss to the Partners, the Management
Committee, in order to avoid such loss, may, after giving Notice to all of the
Limited Partners, to the extent not then prohibited by the Delaware Act or the
terms of a Long-Term Credit Facility, either defer liquidation of and withhold
from distribution for a


                                  -39-
<PAGE>

reasonable time any assets of the Partnership except those necessary to satisfy
the Partnership's debts and obligations, or distribute the remaining assets to
the Partners in kind.

                  9.3.3. If any assets of the Partnership are to be distributed
in kind, such assets shall be distributed on the basis of the fair market value
thereof, and any Partner entitled to any interest in such assets shall receive
an interest therein as a tenant-in-common with all other Partners so entitled.
The fair market value of such assets shall be determined by an independent
appraiser to be selected by the General Partners. The Capital Accounts of all
Partners shall be adjusted as of the date of distribution in kind to reflect the
manner in which the unrealized income, gain, loss and deduction inherent in such
property (that has not been previously reflected in Capital Accounts) would be
allocated, pursuant to this Agreement, among the Partners if there were a
taxable disposition of such property for its fair market value (taking Section
7701(g) of the Code into account) on the date of distribution.

                  9.3.4. The General Partners or surviving General Partner shall
cause the cancellation of this Agreement following the liquidation and
distribution of all of the Partnership's assets.

                                ARTICLE X

                          DEFAULTS AND REMEDIES

            10.1 Event of Default. The occurrence of an event of Withdrawal with
respect to a General Partner without the other General Partner's written consent
or a default by a General Partner of any material obligation of such Partner
pursuant to this Agreement shall constitute an event of default ("Event of
Default") hereunder on the part of the Partner with respect to whom such event
occurs (the "Defaulting Partner").

            10.2 Remedies Available to Nondefaulting Partner.

                  10.2.1. Following an Event of Default, the Defaulting
Partner's Management Committee members shall not have any voting rights (but
shall have the right to attend all meetings) and the presence of the General
Partners which are not in default (the "Nondefaulting Partners") shall be
sufficient to constitute a quorum and the vote, consent or participation of the
Nondefaulting Partners shall be sufficient with regard to any matter requiring
the action of the Management Committee hereunder and the Defaulting Partner's
right to withdraw funds from any account of the Partnership from which the
Defaulting Partner could withdraw funds will be suspended.

                  10.2.2. In addition to the foregoing, the Nondefaulting
Partner may, at its option, at any time within one year following the uncured
Event of Default, cause the Partnership to terminate any contracts existing
between the Partnership and


                                  -40-
<PAGE>

the Defaulting Partner or its Affiliates on not less than 90 days' written
Notice, without any further liability thereunder.

                  10.2.3. The Defaulting Partner shall be and remain liable to
the Partnership and to the Nondefaulting Partner for all losses, liabilities,
damages and expenses sustained or incurred by the Partnership and the
Nondefaulting Partner as a result of a Event of Default, including any
additional tax liabilities and interest thereon. The Partnership may elect to
set off against any amounts payable to a Defaulting Partner or any Affiliate the
amount of any of the foregoing losses, liabilities, damages and expenses owed by
the Defaulting Partner to the Partnership.

                  10.2.4. The Nondefaulting Partner shall have the right to
pursue any other remedies available at law.

            10.3 Nonexclusivity. Notwithstanding the provisions of this Article
X, each Partner shall have the right to enforce the provisions of this Agreement
in accordance with the Delaware Act and any other applicable law.

                               ARTICLE XI

       BOOKS AND RECORDS, ACCOUNTING, REPORTS, TAX ELECTIONS, ETC.

            11.1 Books and Records.

                  11.1.1. The books and records of the Partnership shall be
maintained in accordance with generally accepted accounting principles at the
offices of an MENY Affiliate and shall be available for examination there by any
Partner or its duly authorized representatives at any and all reasonable times
upon prior Notice to the General Partners for purposes reasonably related to
such Partner's Interest as a Partner. To the extent required by law, the General
Partners will permit Limited Partners and their assignees, at the expense of
such Limited Partners and assignees, to inspect and copy such books and records
for any purpose reasonably related to the Partner's Interest as a Partner. The
Partnership shall maintain such books and records and provide such financial or
other statements as the Management Committee reasonably deems advisable and as
may be required by the Delaware Act or other applicable law.

                  11.1.2. After the end of each fiscal year, the Tax Matters
Partner shall, at the expense of the Partnership, cause the preparation and
filing of all tax returns of the Partnership. Prior to the filing of a tax
return of the Partnership, the Tax Matters Partner shall provide a copy to the
General Partners for their review and comment.

                  11.1.3. Each General Partner shall have the right at its
expense to audit the books and records of the Partnership. This audit right with
respect to the


                                  -41-
<PAGE>

books and records of the Partnership as to each Partnership fiscal year shall
expire two years after the close of that year.

            11.2 Accounting and Fiscal Year. Subject to Section 448 of the Code,
the books of the Partnership shall be kept on methods of accounting for tax and
financial reporting purposes as required by generally accepted accounting
principles. The fiscal year of the Partnership shall end on December 31 of each
year, or on such other date permitted under the Code as the General Partners
shall determine.

            11.3 Bank Accounts and Investments. The bank accounts of the
Partnership shall be maintained at such banking institutions as the Management
Committee shall determine, and withdrawals shall be made only in the regular
course of Partnership business on the signature of the Executive Director or
such signature or signatures as the Management Committee shall determine. All
deposits and other funds not needed in the operation of the business or not yet
invested may be invested by the Management Committee only in such investments as
the Management Committee may (consistent with the terms of any agreements of the
Partners) expressly authorize. The Management Committee may rely on the advice
of independent investment advisors. The funds of the Partnership shall not be
commingled with the funds of any other Person.

            11.4 Reports.

                  11.4.1. Within 75 days after the end of each tax year, the Tax
Matters Partner, at the expense of the Partnership, shall send or cause to be
sent to each Partner or assignee at any time during the fiscal year ending
during such calendar year such tax information as shall be necessary for the
preparation by such Partner or assignee of its Federal income tax return, and
required state income and other tax returns with regard to jurisdictions in
which the Partnership is formed or qualified or owns Property. With the approval
of the Partners, such approval not to be unreasonably withheld or delayed, the
Tax Matters Partner may file any application for extensions for the filing of
the Partnership tax return.

                  11.4.2. As soon as possible and in any event within 75 days
after the end of each fiscal year of the Partnership (unless otherwise
determined by the Management Committee), MENY, at the expense of the
Partnership, shall send to each Partner or assignee at any time during the
fiscal year then ended (a) a balance sheet as of the end of such fiscal year,
and statements of income, Partners' equity and cash flow for such fiscal year,
all of which shall be prepared in accordance with generally accepted accounting
principles and accompanied by an auditor's report containing an opinion of the
Accountants setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on as to the fairness of the presentation and
generally accepted accounting principles, (b) a report summarizing the fees and
other remuneration and reimbursed expenses for such fiscal year from the
Partnership to the General Partners or any Affiliate of the General Partners and
(c) a statement showing


                                  -42-
<PAGE>

the amounts distributed to each Person pursuant to Section 4.1 who was a Partner
or assignee at any time during such fiscal year with respect to such year.

                  11.4.3. As soon as possible and in any event within 45 days
after the end of each of its first three quarters of each fiscal year of the
Partnership, MENY, at the expense of the Partnership, shall send to each Partner
a balance sheet of the Partnership as of the end of such quarter and related
statements of operations and cash flow for such quarters and for a portion of
the Partnership's fiscal year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corresponding quarter and the
corresponding portion of the Partnership's previous fiscal year.

                  11.4.4. Promptly after the end of each month including the
last month of the fiscal year, MENY, at the expense of the Partnership, shall
prepare and distribute to the Partners a balance sheet showing the Partnership's
assets and liabilities as of the close of the month, and a statement of income
and a statement of cash flow showing the results of operations for the month.

                  11.4.5. Each General Partner shall have the right at
reasonable times, upon written Notice to the other General Partner, to obtain
such other information regarding the affairs of the Partnership as it shall
reasonably request.

            11.5 Depreciation and Elections. With respect to any depreciable
assets of the Partnership, the Partnership may elect to use, so far as permitted
by the provisions of the Code, any depreciation method which is appropriate in
the opinion of the Management Committee. Subject to Section 6.2.4, the
Partnership may, in the discretion of the Management Committee, make or elect
not to make, and may revoke or elect not to revoke, any election permitted or
required to be made by the Partnership for Federal income or state tax purposes.

            11.6 Designation of Tax Matters Partner. MENY is hereby designated
as the "Tax Matters Partner" of the Partnership under Section 6231(a)(7) of the
Code, to manage administrative and judicial tax proceedings conducted at the
Partnership level with respect to Partnership matters. Any Partner or assignee
may participate in such proceedings relating to the determination of Partnership
items at the Partnership level, to the extent permitted by the Code. Expenses of
such proceedings undertaken by the Tax Matters Partner shall be paid from
Partnership assets. Each Partner or assignee who elects to participate in such
proceedings shall be responsible for its own expenses incurred in connection
with such participation.

            11.7 Expenses of Adjustment. The cost of any adjustments to a
Partner or assignee, and the cost of any resulting audits or adjustments of a
Partner's or assignee's tax return, will be borne solely by the affected Partner
or assignee.


                                  -43-
<PAGE>

            11.8 Budgets and Forecasts.

                  11.8.1. Preparation of the Annual Capital and Operating
Budgets. The Executive Director shall prepare and submit to the Management
Committee for discussion, modification and approval by November 1 of each year a
capital budget and operating budget for discussion, modification and approval
for the forthcoming year with respect to the Partnership and the Project. The
capital budget shall consist of a section on appropriations and a section on
expenditures:

                  (a) The appropriations section shall describe each capital
      expenditure item estimated to cost more than $100,000 for which Management
      Committee authorization is expected to be sought during the forthcoming
      year with respect to the Project. At the request of a General Partner, the
      Executive Director shall provide appropriate justification for each such
      item. Capital expenditure items expected to cost less than $100,000 each,
      which are anticipated to be committed to during the upcoming year, may be
      combined and included up to a combined total of $500,000; and

                  (b) The expenditure section shall identify all capital
      expenditure items which have been presented in the appropriation section
      of prior capital budgets which are still ongoing, or are being presented
      in the appropriation section of the current budget with respect to the
      related Project. The expenditure section shall also indicate anticipated
      expenditures for all such items by month during the upcoming year, and by
      year for subsequent years. Such expenditures shall be listed individually
      for capital expenditure items greater than $100,000 and may be combined
      for items less than $100,000 with respect to the related Project.

The operating budget shall identify each category of operating expense. Such
categories shall include fuel costs, operations and maintenance expenses, and
aggregate labor costs (excluding salary figures for specific individuals,
provided that the Management Committee shall have access to detailed information
on any salary which the Partnership is, or is considering becoming, obligated to
pay, whether directly or by reimbursement pursuant to Section 4.3), and shall
otherwise be in accordance with generally accepted accounting principles as
consistently applied by the Partnership. In addition, any other category
requested by the Management Committee for such identification shall be
specifically identified.

                  11.8.2. Approval and Modification of the Budgets. The capital
and operating budgets with respect to the Project shall be reviewed and may be
modified before approval by the Management Committee; such approval may not be
unreasonably withheld. The Executive Director may submit to the Management
Committee for approval a modification of, or supplement to, an approved budget
at any time.


                                  -44-
<PAGE>

                  11.8.3. Financial Forecasts. The Executive Director shall
prepare and submit a financial forecast with respect to the Project to the
Management Committee simultaneously with the budgets. The forecast shall include
estimates of operating expenses and capital expenditures (with items in excess
of $100,000 individually identified), throughputs of fuel, steam, water and
electricity volumes and estimated net income and cash flow by month for the
upcoming year and by quarter for the four years thereafter.

                               ARTICLE XII

               MEETINGS; VOTING RIGHTS OF LIMITED PARTNERS

            12.1 Meetings.

                  12.1.1. Meetings of the Partners for any matter on which the
Limited Partners are entitled to vote may be called by any General Partner, and
shall be called by the General Partners upon receipt of a request in writing
signed by a Majority of the Limited Partners in such capacity. Notice of any
such meeting shall be sent by the General Partners to the Limited Partners
within ten days after their receipt of such a request. Such a request shall
state the purpose of the proposed meeting and the matters proposed to be acted
upon thereat. The requested meeting shall be held at the principal office of the
Partnership or such other location as may be determined by the Management
Committee; provided, however, that with the consent of a majority in Interest of
the Partners, meetings may be held via telephone conference or similar
communication technology. In addition, the General Partners may submit any
matter (upon which the Limited Partners are entitled to act) to the Limited
Partners for a vote by written consent without a meeting, or upon receipt of a
request in writing signed by a Majority of the Limited Partners in such
capacity, shall submit any such matter (upon which the Limited Partners are
entitled to act) to the Limited Partners for a vote by written consent without a
meeting. Assignees which have not been recognized as Substituted Partners as to
any Interests held by them in such capacity shall not be entitled to vote.

                  12.1.2. Notice of any meeting called pursuant to Section 12.1
shall be given either personally or by mail, not less than 15 days nor more than
60 days before the date of the meeting, to each Limited Partner at its record
mailing address. Such Notice shall be in writing, shall state the place, date,
hour and purpose of the meeting, and shall indicate that it is being issued at
the direction of the Partner or Partners calling the meeting. If a meeting is
adjourned to another time or place, and if any announcement of the adjournment
of time and place is made at the meeting, it shall not be necessary to give
Notice of the adjourned meeting. If the adjournment is for more than 45 days or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of adjourned meeting shall be given to each Partner of record entitled to
vote at the meeting. The presence in person or by proxy of the


                                  -45-
<PAGE>

holders of a Majority of the Limited Partners shall constitute a quorum at all
meetings of the Limited Partners; provided, however, that if there is no quorum,
the holders of a majority in Limited Partner Interests of the Limited Partners
who are present or represented by proxy may adjourn the meeting from time to
time without further Notice, until a quorum shall have been obtained. No Notice
of the time, place or purpose of any meeting of the Limited Partners need be
given to any Limited Partner who attends in person or is represented by proxy
(except for a Limited Partner who attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business on
the ground that the meeting is not lawfully called or convened), or to any
Limited Partner entitled to such Notice who, in a writing executed and filed
with the records of the meeting, either before or after the time thereof, waives
such Notice.

                  12.1.3. For the purpose of determining the Limited Partners
entitled to vote at any meeting of the Partnership or any adjournment thereof,
the General Partners or the Limited Partners requesting such meeting may fix, in
advance, a date as the record date for any such determination. The determination
date shall be not more than 60 days nor less than ten days before any such
meeting.

                  12.1.4. Each Limited Partner may authorize any Person to act
for it by proxy in all matters in which a Limited Partner is entitled to
participate, whether by waiving Notice of any meeting, or voting or
participating at a meeting. Every proxy must be signed by the Limited Partner or
its attorney-in-fact. No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the Limited Partner executing it.

                  12.1.5. At each meeting of the Limited Partners, the General
Partners shall appoint such officers and adopt such rules for the conduct of
such meeting as the General Partners shall deem appropriate.

            12.2 Voting Rights of Limited Partners. The Limited Partners shall
have the right to vote only on amendments to this Agreement approved by all
General Partners which affect in a materially adverse way the rights, powers or
duties of the Limited Partners, subject to the provisions of Section 13.2,
provided that such amendments (a) shall not allow the Limited Partners to take
part in the management or control of the Partnership's business, and (b) shall
not, without the written consent of the General Partners, alter the rights,
powers or duties of the General Partners as set forth herein.

            12.3 Written Consent in Lieu of Meeting. In any matter on which
Limited Partners are entitled to vote or take action hereunder or under the
Delaware Act, the written consent or consents setting forth such action or
decision, without a meeting or prior notice, of holders of such Interests as are
so required to so authorize or act, shall suffice for all purposes once
delivered to the Partnership. Prompt notice of


                                  -46-
<PAGE>

the taking of action without a meeting by less than unanimous consent shall be
given to those Partners who have not consented.

                              ARTICLE XIII

                            OTHER PROVISIONS

            13.1 Appointment of General Partners as Attorneys-in-Fact.

                  13.1.1. Each Limited Partner, including each Substituted
Partner, by its execution of this Agreement, irrevocably constitutes and
appoints the General Partners and each of them as its true and lawful
attorneys-in-fact with full power and authority in its name, place and stead to
execute, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be necessary or appropriate to carry out
the provisions of this Agreement, including but not limited to:

                        (a) All certificates and other instruments (including
      counterparts of this Agreement), and all amendments thereto, which the
      General Partners deem appropriate to form, qualify or continue the
      Partnership as a limited partnership (or a partnership in which the
      Limited Partners will have limited liability comparable to that provided
      in the Act), in the jurisdictions in which the Partnership may conduct
      business or in which such formation, qualification or continuation is, in
      the opinion of either of the General Partners, necessary or desirable to
      protect the limited liability of the Limited Partners;

                        (b) All amendments to this Agreement adopted in
      accordance with the terms hereof, and all instruments which the General
      Partners deem appropriate to reflect a change or modification of the
      Partnership in accordance with the terms of this Agreement;

                        (c) All filings and other reports with respect to the
      Partnership required to be made under the Federal laws of the United
      States of America and applicable state laws within the United States of
      America, in connection with the conduct of its business; and

                        (d) All conveyances of Property, and other instruments
      which either of the General Partners reasonably deem necessary in order to
      complete a dissolution and termination of the Partnership pursuant to this
      Agreement.

                  13.1.2. The appointment by all Limited Partners of the General
Partners as attorneys-in-fact shall be deemed to be a power coupled with an
interest, in recognition of the fact that each of the Partners under this
Agreement will


                                  -47-
<PAGE>

be relying upon the power of the General Partners to act as contemplated by,
this Agreement in any filing and other action by it on behalf of the
Partnership, shall survive the bankruptcy, death, adjudication of incompetence
or insanity, other dissolution of any Person hereby giving such power, and the
transfer or assignment of all or any portion of the Interests of such Person,
and shall not be affected by the subsequent incapacity of the principal;
provided, however, that in the event of the assignment by a Limited Partner of
all of its Interests, the foregoing power of attorney of an assignor Limited
Partner shall survive such assignment only until such time as the assignee shall
have been admitted to the Partnership as a Substituted Partner and all required
documents and instruments shall have been duly executed, filed and recorded to
effect such substitution.

            13.2  Amendments.

                  13.2.1. Each Substituted Partner, additional General Partner
and successor General Partner shall become a signatory hereto by signing such
number of counterpart signature pages to this Agreement, a power of attorney to
the General Partners (in the case of a Substituted Partner holding Limited
Partner Interests), and such other instruments, in such manner, as the General
Partners shall determine. By so signing, each Substituted Partner, additional
General Partner or successor General Partner, as the case may be, shall be
deemed to have adopted and to have agreed to be bound by all of the provisions
of this Agreement.

                  13.2.2. This Agreement may not be amended without the consent
of all Partners, provided, however, MENY may amend this Agreement from time to
time, without the consent of any Partner, (a) to cure any ambiguity, to correct
or supplement any provision herein which may be inconsistent with any other
provision herein, or to make any other provisions with respect to matters or
questions arising under this Agreement that are not inconsistent with the
provisions of this Agreement; (b) to delete or add any provision of this
Agreement required to be so deleted or added by any Federal or state official,
which addition or deletion is deemed by such official to be for the benefit or
protection of the Partners; and (c) to take such actions as may be necessary (if
any) to insure that the Partnership will be treated as a partnership, and that
each Limited Partner will be treated as a limited partner, for Federal income
tax purposes; provided, however, further, that no amendment shall be adopted
pursuant to this Section 13.2.2 unless the adoption thereof (i) is for the
benefit of or not materially adverse to the interests of the other Partners,
(ii) does not affect the rights of Partners to distributions of amounts pursuant
to Article IV or Section 9.3, payment of the General Partner Management Fee or
Royalty Fee or the allocation of Items of Income, Items of Deduction or items of
Partnership income, gain, deduction or loss among the Partners or between the
Limited Partners as a class and the General Partners as a class and (iii) does
not affect the rights of any Person making a Loan to repayment, the limited
liability of the Limited Partners, or the status of the Partnership as a
partnership for Federal income tax purposes.


                                  -48-
<PAGE>

                  13.2.3. If this Agreement is amended as a result of
substituting a Limited Partner, the amendment to this Agreement shall be
sufficient when it is signed by the General Partners and by the Person to be
substituted, and, if a Limited Partner is to be substituted, by the assigning
Limited Partner. If this Agreement is amended to reflect the designation of an
additional or successor General Partner, the amendment to this Agreement shall
be sufficient when it is signed by the other General Partner(s) and by the
additional or successor General Partner. If this Agreement is amended to reflect
the withdrawal of a General Partner and if the business of the Partnership is to
be continued, the amendment to this Agreement shall be sufficient when it is
signed by any remaining and successor or additional General Partners on their
own behalf and on behalf of the withdrawing General Partner, except that if the
withdrawing General Partner is the only remaining General Partner at the time of
withdrawal, the amendment shall also be signed by the Limited Partners or on
their behalf by a duly authorized new General Partner. Each General Partner
hereby consents to any execution of an amendment on its behalf pursuant to the
terms of this Section 13.2.3.

                  13.2.4. In making any amendments, there shall be prepared and
filed by the General Partners such documents and certificates as may be required
under the Delaware Act and under the laws of any other jurisdiction applicable
to the Partnership.

            13.3 Right of Setoff. The Partnership shall have a right of setoff
against distributions of amounts pursuant to Article IV to a Partner in an
amount equal to any withholding tax and any other liability which the
Partnership would not have incurred except for the gross negligence, willful
misconduct or bad faith of such Partner and any other amount then due and
payable for which such Partner is then obligated to the Partnership hereunder.

            13.4 Binding Provisions; Successors and Permitted Assigns. The
covenants and agreements contained herein shall be binding upon, and inure to
the benefit of, the permitted successors and permitted assigns of the respective
parties hereto to the extent provided herein. Notwithstanding any other
provision hereof, no General Partner shall be relieved of any obligations or
liabilities as a general partner as a result of the transfer of an Interest or
substitution of another General Partner except to the extent expressly provided
herein. For purposes of distributions under Articles IV and IX and allocations
under Articles V and IX, the term Partner shall be deemed to include such
Partner's assignees to the extent entitled to recognition hereunder.

            13.5 Applicable Law. This Agreement (except as otherwise provided
herein) shall be construed and enforced in accordance with the laws of the State
of Delaware.

            13.6 Counterparts. This Agreement may be executed in several
counterparts, all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all of the parties have not signed the
same counterpart.


                                  -49-
<PAGE>

            13.7 Separability of Provisions. If any provision of this Agreement
is declared illegal, invalid or unenforceable by a court it will be severed if
the remaining provisions of this Agreement can reasonably and fairly be given
effect without affecting the legal and economic substance of the transactions
contemplated by this Agreement in a manner adverse to any party.

            13.8 Article and Section Titles. Article and Section titles are for
descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.

            13.9 Addresses and Notices. The address of each Partner for all
purposes shall be the address set forth in Exhibit A or such other address of
which the Partnership and each General Partner has received Notice. Any notice,
demand, request or report required or permitted to be given or made to a Partner
under this Agreement shall be in writing and shall be deemed given or made when
delivered in person, or when sent by facsimile transmission or other means of
telecommunication when receipt is confirmed by operators thereof, or one
Business Day after sent to the Partner at such address by registered or
certified overnight mail.

            13.10 Further Action. The parties shall execute and deliver all
documents, provide all information and take or refrain from taking action as may
be reasonably necessary or appropriate to carry out the purposes of this
Agreement. The General Partners recognize that it may be necessary to amend and
restate this Agreement (including provision of maximum permissible voting rights
for any original Partner that is a Limited Partner), reconstitute the
Partnership under the laws of another State, restructure the Partnership or sell
or transfer the assets of the Project, leverage lease the Project or make other
arrangements or take other actions in order to achieve the purposes set forth in
Section 2.3 and each General Partner agrees to negotiate in good faith any
proposed action of the nature described above. Each General Partner will
negotiate in good faith any proposed amendments to this Agreement to alleviate
materially adverse regulatory, tax or other consequences to the Partner or an
Affiliate of the Partner proposing such amendment.

            13.11 No Third-Party Beneficiaries. Except to the extent expressly
provided by name (generic or specific) elsewhere in this Agreement, none of the
provisions of this Agreement shall be for the benefit of or enforceable by any
other person not a party hereto, including but not limited to creditors of the
Partnership.

            13.12 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other breach, covenant, duty,
agreement or condition, nor shall any delay or omission to seek a remedy for any
breach of this Agreement or to exercise the rights accruing to any Partner by
reason of such breach be deemed a waiver by such Partner of its remedies and
rights with respect to such breach.


                                  -50-
<PAGE>

            13.13 Integration. This Agreement constitutes the entire agreement
among the Partners pertaining to the subject matter hereof and supersedes all
prior agreements and understandings between them pertaining to the Project or
the subject matter hereof, including the December Agreement, the Letter
Agreement, the Amendment, the Supplemental Agreement and the Second Supplemental
Agreement.

            13.14 Waiver of Action for Partition. Each of the parties hereto
irrevocably waives during the term of the Partnership and during the period of
its liquidation following any dissolution, any right that it may have to
maintain any action for partition with respect to any of the assets of the
Partnership.

            13.15 No Recourse and Consequential Damages.

                  13.15.1. York Partners and MENY hereby agree that all of the
statements, representations, covenants and agreements contained in this
Agreement are made and intended only for the purpose of binding MENY and York
Partners and establishing the existence of rights and remedies provided for in
this Agreement or in the other agreements referred to herein which can be
exercised and enforced against MENY or York Partners. Therefore, anything
contained in this Agreement or in any other document, agreement or instrument to
the contrary notwithstanding, no recourse shall be had with respect to
enforcement of this Agreement or the obligations of MENY or York Partners
hereunder or for the payment of any payment due under this Agreement or to be
paid or caused to be paid by MENY or York Partners under this Agreement or for
any claim based upon any provision of this Agreement or any of the documents,
agreements or instruments referred to herein, against any past, present or
future Affiliate, stockholder, direct or indirect parent or controlling
corporation, officer, director, employee, servant, partner, incorporator or
agent of MENY or York Partners or any predecessor or successor thereto in its
capacity as such.

                  13.15.2. Notwithstanding anything to the contrary elsewhere in
this Agreement, no Partner nor its Affiliates shall, in any event, be liable to
any other Partner or its Affiliates for any indirect, incidental, special or
consequential damages relating to an alleged breach of this Agreement, including
loss of revenue, cost of capital, loss of business reputation or opportunity
whether such liability arises out of contract, tort (including negligence),
strict liability or otherwise.

            13.16 Maximum Lawful Rate. Notwithstanding anything to the contrary
set forth in this Agreement, if at any time until payment in full of all of the
obligations in respect of any Construction Loan or Priority Loan, the amount of
interest payable thereunder exceeds the amount payable under the highest rate of
interest permissible under any law which a court of competent jurisdiction
shall, in a final determination, deem applicable thereto (the "Maximum Lawful
Rate"), then in such event and so long as the amount payable under the Maximum
Lawful Rate would be so exceeded, the amount of interest payable thereunder
shall be equal to the amount payable under the Maximum Lawful Rate. In no event
shall the total interest payable in


                                  -51-
<PAGE>

respect of any Construction Loan or Priority Loan exceed the amount payable
under the Maximum Lawful Rate. In the event that a court of competent
jurisdiction shall make a final determination that MENY, has received interest
under any Construction Loan or Priority Loan in excess of the amount payable
under the Maximum Lawful Rate, MENY shall, to the extent permitted by applicable
law, promptly apply such excess in the following order: (i) then due and payable
fees, expenses and other charges owed to MENY under this Agreement; (ii) then
due and payable interest payments owed to MENY; (iii) principal payments on any
Construction Loan or Priority Loan (whether or not due and payable); and (iv)
thereafter as a refund to the Partnership or York Partners, as the case may be,
or as a court of competent jurisdiction may otherwise order.

            13.17 No Bond Closing Date. In the event the Bond Closing Date shall
not have occurred on or prior to June 30, 1998, this Agreement shall have no
force and effect and the Partnership shall be governed by the Initial Agreement
as amended, supplemented or modified, excluding this Agreement.

                               ARTICLE XIV

                           DISPUTE RESOLUTION

            14.1 Dispute Resolution.

                  14.1.1. Any claim, controversy or dispute arising out of or
relating to this Agreement or the Project, including any claim, controversy or
dispute as to the arbitrability of any claim, controversy or dispute, shall be
settled by arbitration in New York, New York in accordance with the commercial
arbitration rules of the American Arbitration Association, and judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.

                  14.1.2. The General Partners shall share equally the expense
of the arbitrator(s).

            14.2 Mutual Release. MENY and York Partners each on behalf of itself
and its respective predecessors, successors, assigns, subsidiaries and other
Affiliates, and each of their respective officers, directors, shareholders,
partners, employees, attorneys, agents and servants, and their respective
predecessors, successors and assigns (collectively, the "Releasing Parties"), do
hereby forever release and discharge the other, the other Partners predecessors,
successors, assigns, parents, subsidiaries and other Affiliates, and each of
their respective officers, directors, shareholders, partners, employees,
attorneys, agents and servants, and their respective predecessors, successors,
successors and assigns (the "Released Parties"), from any and all claims
existing, owned, held or alleged, or which claims could, might, or may be


                                  -52-
<PAGE>

claimed to exist, of whatever kind or name, on or prior to the date hereof,
whether direct or indirect, known or unknown, suspected or unsuspected,
liquidated or unliquidated, matured or unmatured, fixed or contingent,
irrespective of how, why, or by reason of what facts such claims arose (all such
claims are herein collectively referred to as "Released Claims") which in any
way relate to, arise out of or are connected with (a) this Agreement or the
Partnership and any liabilities or obligations hereunder or thereunder, and (b)
any and all other actions (or inaction), discussions, negotiations, agreements,
undertakings and other matters concerning the design, construction, development,
ownership, financing, management or operation of the Project in each case
allegedly occurring on or prior to the date hereof provided, however, that the
foregoing covenant and release shall not operate to discharge any loan, advance
or debt extended by any Person or any cost or expense evidenced by this
Agreement or the York Reimbursement Agreement, or to discharge either or both of
the Partners from any of their respective obligations hereafter arising under
this Agreement or any other agreement to which it is a party. Each Partner
hereby agrees, represents and warrants that it realizes and acknowledges that
the foregoing covenant and release has been negotiated and agreed upon in light
of the realization that factual matters now unknown to it may have given or may
hereafter give rise to Released Claims, and that it nevertheless hereby intends
to grant such release and to covenant and agree not to sue or take other action
against the other for any such known or unknown Released Claims.


                                  -53-
<PAGE>

            IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first written above.

                                GENERAL PARTNERS:

                                MISSION ENERGY NEW YORK, INC.,
                                 a California corporation


                                By:
                                   -------------------------------------
                                   Mary Ellen Olson
                                   Vice President

                                B-41 ASSOCIATES, L.P.,
                                 a Delaware limited partnership

                                  By: B-41 Management Corp.,
                                        its Managing General Partner


                                        By:
                                           -----------------------------
                                            Michael Trachtenberg
                                            Vice President

                                LIMITED PARTNERS:

                                MISSION ENERGY NEW YORK, INC.,
                                 a California corporation


                                By:
                                   -------------------------------------
                                   Mary Ellen Olson
                                   Vice President

                                B-41 ASSOCIATES, L.P.,
                                 a Delaware limited partnership

                                   By: B-41 Management Corp.,
                                         its Managing General Partner

                                   By:
                                       ---------------------------------
                                        Michael Trachtenberg
                                        Vice President


                                  -54-
<PAGE>

                                    EXHIBIT A

<TABLE>
<CAPTION>
GENERAL PARTNERS                    INTERESTS
----------------                    ---------
<S>                                 <C>
B-41 ASSOCIATES, L.P.                5%
280 Park Avenue
Suite 2700 West
New York, NY 10017
Attn: Robert M. Beningson
Telephone: 212 557-6200
Facsimile: 212 557-5678

EDISON MISSION ENERGY                5%
18101 Von Karman Avenue
Suite 1700
Irvine, CA 92715
Attn: General Counsel
Telephone: 714 752-5588
Facsimile: 714 752-6401
</TABLE>


<TABLE>
<CAPTION>
LIMITED PARTNERS                    INTERESTS
----------------                    ---------
<S>                                 <C>
B-41 ASSOCIATES, L.P.               45%
280 Park Avenue
Suite 2700 West
New York, NY 10017
Attn: Robert M. Beningson
Telephone: 212 557-6200
Facsimile: 212 557-5678

EDISON MISSION ENERGY               45%
18101 Von Karman Avenue
Suite 1700
Irvine, CA 92715
Attn: General Counsel
Telephone: 714 752-5588
Facsimile: 714 752-6401
</TABLE>