Document:

<PAGE>

                                                                    Exhibit 10.7

                                                                  Execution Copy

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

                           Cross Easement Agreement

                            Dated as of May 8, 2001

                                    between

                            Dynegy Roseton, L.L.C.

                                      and

                           Dynegy Danskammer, L.L.C.

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

                      After recording, please return to:

                      Orrick, Herrington & Sutcliffe LLP
                               666 Fifth Avenue
                           New York, New York  10103
                       ATTN:  Christopher J. Moore, Esq.

                               Premises Address:
                           992 River Road (Roseton)
                          994 River Road (Danskammer)
                              Newburgh, New York

   This Cross Easement Agreement affects premises located in Orange County.

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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                      Page
<S>            <C>                                                                    <C>

SECTION 1.     DEFINITIONS...........................................................  2
     Section 1.1    Definitions......................................................  2
SECTION 2.     EASEMENTS.............................................................  2
     Section 2.1    Grant of Easements to Dynegy Roseton by Dynegy Danskammer........  2
     Section 2.2    Grant of Easements to Dynegy Danskammer by Dynegy Roseton........  3
     Section 2.3    General Scope of Easements.......................................  4
     Section 2.4    Interpretation...................................................  5
     Section 2.5    Rules and Regulations............................................  6
SECTION 3.     MISCELLANEOUS.........................................................  7
     Section 3.1    Interpretation...................................................  7
     Section 3.2    Governing Law....................................................  7
     Section 3.3    Entire Agreement.................................................  7
     Section 3.4    Amendment and Modification, Extension, Waiver....................  7
     Section 3.5    Binding Effect...................................................  8
     Section 3.6    Severability.....................................................  8
     Section 3.7    Notices..........................................................  8
</TABLE>
                               LIST OF EXHIBITS

Schedule 1.1  Definitions

Exhibit A-1  - Roseton Real Property
Exhibit A-2  - Danskammer Real Property
Exhibit B  - R-S Power Line Easement

                                      -I-
<PAGE>

                           CROSS EASEMENT AGREEMENT

     THIS CROSS EASEMENT AGREEMENT (this "Agreement"), is dated as of May 8,
                                          ---------
2001, and is entered into by and among DYNEGY ROSETON, L.L.C., a Delaware
limited liability company ("Dynegy Roseton"), and DYNEGY DANSKAMMER, L.L.C., a
                            --------------
Delaware limited liability company ("Dynegy Danskammer"), having offices at 992
                                     -----------------
and 994, respectively, River Road, Newburgh, New York 12550.  Dynegy Roseton and
Dynegy Danskammer may hereinafter be referred to individually as a "Party" and
                                                                    -----
collectively as the "Parties."
                     -------

                                   RECITALS

     A.     Pursuant to a Bargain and Sale Deed with Lien Covenant dated January
30, 2001, and recorded in the Orange County, New York Clerk's Office (the
"Recorder's Office") in Liber 5454 at Page 275 ("Danskammer Deed"), and a Bill
------------------                               ---------------
of Sale dated as of said date, Dynegy Danskammer acquired from Central Hudson
Gas & Electric Corporation, a New York corporation ("Central Hudson") a certain
                                                     --------------
electric generating station known as the "Danskammer Station."
                                          ------------------

     B.     Pursuant to a Bargain and Sale Deed with Lien Covenant dated January
30, 2001, and recorded in the Recorder's Office in Liber 5454 at Page 250
("Roseton Deed") and a certain Bill of Sale dated as of said date, Dynegy
  ------------
Roseton acquired from Central Hudson, Consolidated Edison Company of New York,
Inc., a New York corporation ("Con Edison"), and Niagara Mohawk Power
                               ----------
Corporation, a New York corporation ("Niagara Mohawk"), a certain electric
                                      --------------
generating station known as the "Roseton Station."
                                 ---------------

     C.     The Roseton Station and the Danskammer Station are located on those
certain parcels of real property that were also conveyed (as part of the
conveyance of larger tracts of real property) to Dynegy Roseton and Dynegy
Danskammer, by virtue of the Roseton Deed and Danskammer Deed, such parcels of
real property being more particularly described in Exhibit A-1 (the "Roseton
                                                   -----------       -------
Real Property")and A-2 (the "Danskammer Real Property") attached hereto
-------------                ------------------------
(collectively, the "Real Property").
                    -------------

     D.     In connection with the use and operation of the Roseton Station and
the Danskammer Station, Dynegy Roseton and Dynegy Danskammer require access to,
and certain other rights with respect to, the Danskammer Real Property and the
Roseton Real Property, respectively.

     E.     In order for the Parties each to (i) enjoy the full benefit of their
respective property rights, real or personal, and conduct their respective
businesses thereat, and (ii) fulfill legal requirements, each Party requires
certain easements, licenses, rights-of-way and/or access rights in, on, over and
above, or with respect to, real and/or personal property of the other Party.

                                   AGREEMENT

     NOW, THEREFORE, the Parties, in consideration of the mutual covenants and
agreements contained herein and for One Dollar ($1.00) and other good and
valuable consideration, the receipt whereof and sufficiency of which are hereby
acknowledged, each
<PAGE>

intending to be legally bound and to bind their respective successors and
assigns, hereby mutually agree as follows:

     SECTION 1.   DEFINITIONS

          Section 1.1  Definitions.  Any capitalized terms that are used but not
                       -----------
defined in the body of this Agreement shall have the meanings given to such
terms in the attached Schedule 1.1.
                      ------------

     SECTION 2.   EASEMENTS

          Section 2.1  Grant of Easements to Dynegy Roseton by Dynegy
                       ----------------------------------------------
Danskammer.  Dynegy Danskammer does hereby give, grant, bargain, sell, assign
----------
and convey unto Dynegy Roseton, the following easements and/or rights on the
Danskammer Real Property for the following purposes (collectively, the
"Danskammer Easements"):
---------------------

                  (a)    an easement and right-of-way to use and have Access to
all of the roads located on the Danskammer Real Property as well as the
Danskammer Road access gate and guard house, for the purpose of providing Dynegy
Roseton with such access as is reasonably necessary to the Roseton Real Property
and the Roseton Facilities;

                  (b)    an easement and right-of-way to use, operate, maintain
and provide support in respect of the portion of the "R-S" overhead transmission
lines (the "R-S Power Line") owned by Dynegy Roseton located on the Danskammer
Real Property and that connects the Central Hudson substation (located adjacent
to the Danskammer Station) to the Roseton Station, which easement and right-of-
way includes Access to and from the R-S Power Line over and across the real
property more particularly described in Exhibit B attached hereto("R-S Power
Line Easement");

                  (c)    a non-exclusive right, privilege and license to use
Dynegy Danskammer's rights and benefits under that certain Release and
Conveyance dated February 17, 1950 between Central Hudson and West Shore
Railroad Company ("WS Railroad"), recorded in the Recorder's Office in Liber
                   -----------
1155 at Page 45, for the purpose of affording and providing Dynegy Roseton with
an easement, right of way and right to maintain the R-S Power Line over the WS
Railroad's property ("WS Railroad Property"), in furtherance of and in
                      --------------------
connection with the R-S Power Line Easement;

                  (d)    an easement and right of way to use and maintain a boat
launch/ramp located on the Danskammer Real Property ("Boat Launch Easement"),
                                                      --------------------
including (i) Access to and from such boat launch and (ii) the right to use the
unoccupied portion of the Danskammer Real Property (within reasonable proximity
to the boat/launch ramp) for the storage of boats, trailers, pollution
containment rings, floats, booms and other equipment necessary for Dynegy
Roseton's operation of the Dock Facilities (as hereinafter defined);

                  (e)    an easement and right-of-way to use the railroad tracks
that are located on the Danskammer Real Property for the temporary placement of
railcars as may be reasonably necessary in connection with the use, operation
and/or maintenance of the Roseton Station including Access to and from such
railroad tracks; and

                                       2
<PAGE>

                  (f)    an easement for Access to and the right to use, the
parking lots, access roads, driveways and other such facilities located upon the
Danskammer Real Property as may be reasonably necessary in connection with the
use, operation and/or maintenance of the Roseton Station or otherwise exercising
any of the rights granted in this Section 2.1.

The easements and/or rights granted pursuant to this Section 2.1 shall expressly
include Dynegy Roseton's right to lease, license or otherwise permit Affiliates
or third parties to use such easements upon such terms and for such purposes as
Dynegy Roseton may determine from time to time, subject to the terms and
conditions of this Agreement.

          Section 2.2  Grant of Easements to Dynegy Danskammer by Dynegy
                       -------------------------------------------------
Roseton. Dynegy Roseton does hereby give, grant, bargain, sell, assign and
-------
convey unto Dynegy Danskammer, the following easements and/or rights on the
Roseton Real Property for the following purposes (collectively, the "Roseton
                                                                     -------
Easements"):
---------

                  (a)    an easement, right-of-way and right to use and have
Access to the access gates and guard house located on the Roseton Real Property,
including Access to and from the Roseton Real Property from the three access
gates located along River Road as well as an easement and right-of-way to all of
the roads located on Roseton Real Property for the purpose of providing Dynegy
Danskammer with such access as is reasonably necessary to the Danskammer Real
Property and the Danskammer Facilities;

                  (b)    the right to use the Gasoline Fueling Station (subject
to the terms of a separate agreement to be entered into providing for cost
allocation and for allocation procedures as to the volumes of fuel transferred
to the Gasoline Fueling Station by each Party and consumed by each Party), and
an easement for Access to and from the Gasoline Fueling Station;

                  (c)    an easement, right-of-way and right to have Access to
and/or use of those portions of the dock facilities presently located on the
Roseton Real Property (the "Dock Facilities") for purposes of unloading fuel oil
                            ---------------
(which easement shall not limit or affect the existing easement granted to
Dynegy Danskammer by the easement agreement dated December 20, 1996 from Central
Hudson, Con Edison and Niagara Mohawk to Central Hudson, recorded in the
Recorder's Office in Liber 4695 at Page 239, and which easement agreement has
been assigned to Dynegy Danskammer), including all catwalks and mooring cells,
but excluding any other equipment located on or pertaining to the Dock
Facilities;

                  (d)    an easement and right to use, operate and maintain,
together with Access to the oil pipelines owned by Dynegy Roseton (i) from the
Fuel Oil Storage Tanks to and including the Fuel Oil Pump House and (ii) from
and including the Fuel Oil Pump House to the Dock Facility, in each case, to
transport fuel oil in both directions and to utilize one-sixth of the total
capacity of the Fuel Oil Storage Tanks (subject to the terms of a separate
agreement to be entered into providing for scheduling coordination and cost
allocations);

                  (e)    an easement and right to use, operate and maintain,
together with Access to the Fresh Water Pipelines and Metering Facilities, but
excluding from the foregoing, any fresh water pipelines and any metering
facilities which only serve the Roseton Facilities;

                                       3
<PAGE>

                  (f)    the right to store (until subsequently removed by or on
behalf of Dynegy Roseton pursuant to the terms of a separate agreement to be
entered into providing for the allocation of the cost of such removal) the oil
ash by-product from Danskammer Units 1 and 2 in the fly ash pit ("Ash Pit")
located at the Roseton Wastewater Treatment Facility, including Access to and
from the Ash Pit;

                  (g)    an easement and right-of-way for Access to and the
right to use the railroad tracks that are located on the Roseton Real Property
for the temporary placement of railcars as may be reasonably necessary in
connection with the use, operation and/or maintenance of the Danskammer Station;
and

                  (h)    an easement for Access to and the right to use, the
parking lots, access roads, driveways and other such facilities located upon the
Roseton Real Property as may be reasonably necessary in connection with the use,
operation and/or maintenance of the Danskammer Station or otherwise exercising
any of the rights granted in this Section 2.2.

The easements and/or rights granted pursuant to this Section 2.2 shall expressly
include Dynegy Danskammer's right to lease, license or otherwise permit
Affiliates or third parties to use such easements and/or rights upon such terms
and for such purposes as Dynegy Danskammer may determine from time to time,
subject to the terms and conditions of this Agreement.

          Section 2.3    General Scope of Easements.
                         --------------------------

                  (a)    Except as otherwise expressly provided herein, each
easement and each right, privilege and license granted hereby is and shall be a
perpetual grant, transfer, conveyance and right of Access to and Use (subject to
the terms of this Agreement) to the Grantee thereof and to any future owner of
the real property, improvements and facilities benefited thereby.

                  (b)    Neither Party may use any portion of said party's Real
Property burdened by any easement, right or privilege granted to the other party
hereunder if such Use would materially adversely affect the Use and enjoyment by
the other party of the rights granted to it hereunder.

                  (c)    All easements granted herein shall be deemed easements
appurtenant to the parcel of real property benefited thereby and shall run with
such real property and shall be deemed covenants running with the real property
burdened thereby.

                  (d)    Notwithstanding Sections 2.1 and 2.2 hereof or any
other provisions in this Agreement to the contrary, each Party burdened by any
easement and/or right-of-way ("Burdened Party") shall have the right to relocate
such easement and/or right-of-way on its respective parcels provided that, 1)
the easement, and/or right-of-way as so relocated will serve the same purpose as
that of said easement and/or right-of-way immediately prior to such relocation
and will allow the extent and manner of utilization available to the other Party
immediately prior to such relocation; 2) the proposed relocation would not
materially interfere with, or materially increase the cost of the operation and
maintenance of the parcel(s) benefited by such easement and/or right-of-way; and
3) such relocation shall be done at the sole expense of the Burdened Party.

                                       4
<PAGE>

                  (e)    The Parties acknowledge and agree that (i) Dynegy
Roseton contemplates adding additional facilities to the Roseton Real Property,
which may include the building one or more additional electric generation units
or other related or unrelated facilities (the "Additional Facilities"); (ii) in
connection with the development, use, operation and/or maintenance of any such
Additional Facilities, Dynegy Roseton may use, or assign to an Affiliate or a
third party the right to use, subject to the terms and conditions of this
Agreement, a portion of the easements and/or other rights relating to the
Danskammer Real Property granted pursuant to Section 2.1 hereof, except that the
R-S Power Line Easement and the easement described in Section 2.1(c) shall not
be so used or assigned, and (iii) if those of the Danskammer Easements permitted
to be used or assigned as described above are used in accordance with the terms
and provisions of this Agreement, Dynegy Danskammer will not object to the use
of the Danskammer Easements by Dynegy Roseton in connection with the Additional
Facilities on the basis that such use is a material expansion of the rights
granted on the date hereof.

                  (f)    The Parties further acknowledge and agree that (i)
Dynegy Roseton intends to lease all or a portion of its interest in the Roseton
Real Property pursuant to a Site Lease Agreement (the "Roseton Site Lease")
entered into with Roseton OL LLC (the "Roseton OL") with respect to a portion of
the Roseton Real Property, (ii) Dynegy Danskammer intends to lease all or a
portion of its interest in the Danskammer Real Property pursuant to a Site Lease
Agreement (the "Danskammer Site Lease") entered into with Danskammer OL LLC (the
"Danskammer OL") with respect to a portion of the Danskammer Real Property and
(iii) the Danskammer Easements will be used by, or assigned to, the Roseton OL
and the Roseton Easements will be used by, or assigned to, the Danskammer OL.

                  (g)    At any time upon the request of either Party (including
upon the expiration or earlier termination of the sublease by the Roseton OL of
a portion of the Roseton Real Property to Dynegy Roseton or of the sublease by
the Danskammer OL of a portion or all of the Danskammer Real Property to Dynegy
Danskammer, as applicable), the Parties agree to cooperate with each other and
to enter into mutually agreeable arrangements, each acting reasonably and in
good faith, with respect to joint operation, maintenance and use of, and
allocations of costs and expenses with respect to, the facilities and associated
equipment specified in Section 2.2(b), (c) or (d); provided, that, unless
otherwise mutually agreed, all costs and expenses shall be shared by the parties
based upon their respective use of such facilities and equipment.

          Section 2.4    Interpretation.  The following shall apply in
                         --------------
interpreting any easement and any right, privilege and license granted pursuant
to this Agreement:

                  (a)    Each easement and each right, privilege and license
granted herein is irrevocable except by written agreement of the Parties, or
except as expressly provided herein.

                  (b)    With respect to any easement created by this Agreement,
the words "in," "upon," to," "on," "over," "above," "through" and/or "under"
shall be interpreted to include all of such terms.

                  (c)    Each easement and each right, privilege and license
granted herein may be enjoyed without charge or fee to Grantee of the easement.

                                       5
<PAGE>

                  (d)    Each easement and each right, privilege and license
granted herein is also a grant of the additional right of Access over Grantor's
real property to accomplish the purpose of such easement or right, privilege and
license, to perform any obligations hereunder, and to comply with any legal
requirements affecting Grantee or its property and/or improvements.

                  (e)    Any easement granted to one Party includes the right to
(i) trim, cut, treat and/or remove, by manual, mechanical, and chemical means,
any and all trees, brush and other vegetation within the easement area, as well
as such trees, brush and vegetation outside of the easement area deemed
reasonably necessary or desirable by such Party for the safe and secure
operation of its facilities; and (ii) obtain Access to such Party's Real
Property for the purpose of performing the aforementioned acts.

                  (f)    Subject to the provisions of applicable laws (including
applicable environmental laws), each easement granted herein shall include the
right to construct, install, maintain, repair and replace any and all pipes,
conduits, poles, wires and cables to transport electricity, telephone, telegraph
and other electronic signals, water, coolant, waste water and fuel to and from
the various parcels described herein as well as for storm and sanitary sewer
purposes; and the right to maintain fences, berms, walls, gates and security
equipment and alarms; such scope is not intended to be all inclusive but to set
forth examples of the types of utilities, services and rights which are
permitted within the easements and rights of way; provided, that, except with
the prior consent of the Burdened Party, such right shall not include any right
to relocate (except as expressly provided in Section 2.3(c)) or expand any
easement. It is intended that there shall be included within such grant and
definition any and all rights and easements needed for the construction,
operation, maintenance, repair, alteration and renovation of the facilities in
such easement areas; whether any such rights and easements are presently in use,
or needed in the future.

                  (g)    This Agreement shall not be terminated nor shall any of
the rights granted or conveyed hereunder be extinguished, diminished, lost or
otherwise impaired, or be merged into or with any other estate, in whole or in
part, by any circumstance of any character or for any reason whatsoever,
including any of the following: (i) any loss or destruction of, or damage to,
the Roseton Facilities or the Danskammer Facilities, or any component thereof or
interruption or cessation in use or possession thereof or any part thereof by
Dynegy Roseton or Dynegy Danskammer, respectively for any reason whatsoever and
of whatever duration, (ii) any condemnation, requisition, expropriation, seizure
or other taking of title to or use of the Roseton Facilities or the Danskammer
Facilities, or any component thereof by any governmental entity or otherwise,
(iii) any prohibition, limitation or restriction on the use by any Party of all
or any part of its property or the interference with such use by any party, or
any eviction by paramount title or otherwise, (iv) any inadequacy, incorrectness
or failure of the description of any easement or right of way granted herein or
any part thereof or any rights or property in which an interest is intended to
be granted or conveyed by this Agreement, (v) the insolvency, bankruptcy,
reorganization or similar proceedings by or against any Party, or (vi) any other
reason whatsoever, whether similar or dissimilar to any of the foregoing.

          Section 2.5  Rules and Regulations.  Each Party may promulgate
                       ---------------------
reasonable rules regulating the conduct of the other Party in the exercise of
rights under this Agreement

                                       6
<PAGE>

provided such rules and regulations do not unreasonably interfere with or impede
the affected Party's rights and easements as set forth herein.

     SECTION 3.   MISCELLANEOUS

          Section 3.1  Interpretation.  When a reference is made in this
                       --------------
Agreement to an Article, Section, Schedule or Exhibit, such reference shall be
to an Article or Section of, or Schedule or Exhibit to, this Agreement unless
otherwise indicated. The headings in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation" or equivalent words. The words "hereof", "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument, statute,
regulation, rule or order defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument, statute,
regulation, rule or order as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes, regulations, rules or orders) by
succession of comparable successor statutes, regulations, rules or orders and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.

          Section 3.2  Governing Law.  This Agreement shall be governed by and
                       -------------
construed in accordance with the laws of the State of New York (regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law).

          Section 3.3  Entire Agreement.  This Agreement, including the
                       ----------------
Exhibits, Schedules, documents, certificates and instruments referred to herein
or therein and other contracts, agreements and instruments contemplated hereby
or thereby, embody the entire agreement and understanding of the Parties in
respect of the transactions contemplated by this Agreement.  There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set forth or referred to herein or therein.

          Section 3.4  Amendment and Modification, Extension, Waiver.  This
                       ---------------------------------------------
Agreement may be amended, modified or supplemented only by an instrument in
writing signed on behalf of each of the Parties; provided, that for so long as
the Roseton Site Lease or the Danskammer Site Lease, as applicable, has not
terminated, the Parties may not, without the prior written consent of the
Roseton OL or the Danskammer OL, as applicable, enter into or consent to any
such amendment, modification or supplement that could reasonably be expected to
diminish, other than in an immaterial respect, the current and residual value,
remaining useful life or utility of the Roseton Station or the Danskammer
Station, as applicable, or cause the Roseton Station or the Danskammer Station,
as applicable, to become "limited use" property within the meaning of Rev. Proc.
75-28, 1975-1 C.B. 752 or Rev. Proc. 76-30, 1976-2 C.B. 647, unless such
modification or supplement is required by Applicable Law or is necessary to
operate or maintain the Roseton Station or the Danskammer Station, as
applicable, in compliance with Applicable

                                       7
<PAGE>

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

          Section 3.5  Binding Effect.  The covenants, conditions, restrictions,
                       --------------
encumbrances, easements, licenses and agreements set forth in this Agreement
shall attach to, burden, and run with the land and the Roseton Real Property and
the Danskammer Real Property or the applicable portion or portions thereof, and
shall be appurtenant to the Roseton Real Property or the Danskammer Real
Property, as appropriate and, together with the remainder of this Agreement,
shall be binding upon the Parties hereto and their respective successors,
assigns, grantees, transferees and tenants and, together with the remainder of
this Agreement, shall inure to the benefit and use of the Parties hereto and
their respective heirs, successors, assigns, grantees, transferees and tenants.
Each grantee of any portion of or interest in the property and each mortgagee
which succeeds to the fee simple ownership of any portion of the property shall
be deemed, by the acceptance of the deed conveying fee simple title to such
person, to have agreed to perform each and every undertaking created hereunder
attributable to the portion of the property in which such grantee or mortgagee
has acquired an interest.

          Section 3.6  Severability.  If any term or other provision of this
                       ------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
Parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the Parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.

          Section 3.7  Notices.  All notices and other communications hereunder
                       -------
shall be in writing and shall be deemed given (as of the time of delivery or, in
the case of a telecopied communication, of confirmation) if delivered
personally, telecopied (which is confirmed) or sent by overnight courier
(providing proof of delivery) to the Parties at the following addresses (or at
such other address for a Party as shall be specified by like notice):

          If to Dynegy Roseton:

               Dynegy  Roseton, L.L.C.
               C/o Dynegy Northeast Generation, Inc.
               992 River Road
               Newburgh, New York 12550
               Telephone No.: (845) 563-4961
               Facsimile No.: (845) 563-4992
               Attention: Daniel P. Thompson, Vice President, Operations

                                       8
<PAGE>

             with a copy to:

             Dynegy Power Corp.
             1000 Louisiana Street, Suite 5800
             Houston, Texas 77002
             Telephone No.: (713) 507-6823
             Facsimile No.: (713) 767-8510
             Attention: Timothy A. Beverick, Esq.

     If to Dynegy Danskammer:

             Dynegy Danskammer, L.L.C.
             c/o Dynegy Northeast Generation, Inc.
             994 River Road
             Newburgh, New York 12550
             Telephone No.: (845) 563-4961
             Facsimile No.: (845) 563-4992
             Attention: Daniel P. Thompson, Vice President, Operations

             with a copy to:

             Dynegy Power Corp.
             1000 Louisiana Street, Suite 5800
             Houston, Texas 77002
             Telephone No.: (713) 507-6823
             Facsimile No.: (713) 767-8510
             Attention: Timothy A. Beverick, Esq.

                                       9
<PAGE>

     IN WITNESS WHEREOF, Dynegy Roseton and Dynegy Danskammer have caused this
Cross Easement Agreement to be signed by their respective duly authorized
officers as of the date of first above written.

                              DYNEGY ROSETON, L.L.C.

                              By:_________________________________
                                 Name:
                                 Title:

                              DYNEGY DANSKAMMER, L.L.C.

                              By:_________________________________
                                 Name:
                                 Title:
<PAGE>

STATE OF NEW YORK        )
                         )  ss:
COUNTY OF NEW YORK       )

          On this ___ day of May 2001, before me, the undersigned, personally
appeared _________________, personally known to me or proved to me on the basis
of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her capacity, and that by his/her signature on the instrument, the
individual, or the person on behalf of which the individual acted, executed the
instrument.

                                    ______________________
                                    Notary

STATE OF NEW YORK        )
                         )  ss:
COUNTY OF NEW YORK       )

          On this ___ day of May 2001, before me, the undersigned, personally
appeared _________________, personally known to me or proved to me on the basis
of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her capacity, and that by his/her signature on the instrument, the
individual, or the person on behalf of which the individual acted, executed the
instrument.

                                    ______________________
                                    Notary
<PAGE>

                                                                    Schedule 1.1
                                                                    ------------

                                  DEFINITIONS
                                  -----------

          "Access" means, subject to the conditions set forth in this Agreement
and a Party's right to impose reasonable security and safety restrictions
protecting its officers, employees, agents, consultants, contractors,
subcontractors, invitees, property and confidential information, full and
unimpeded access and use, in common with Grantor over and through existing
roads, paths, walkways, corridors, hallways, doorways, and other means of entry
or exit, as exist now and from time to time on Grantor's property or, where no
means of access exists, over and through those areas of Grantor's property or
improvements which are reasonably necessary for achieving Grantee's underlying
purposes. Access shall also include access, use and right-of-way for Grantee's
employees, agents, consultants, contractors, subcontractors, vehicles, trucks,
trailers, heavy machinery, equipment, materials, and all other items reasonably
necessary for achieving Grantee's underlying purposes.

          "Affiliate" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of 1934.

          "Agreement" means this Cross Easement Agreement.

          "Danskammer Facilities" means the Danskammer Station and all other
equipment and/or improvements owned by or used in connection with the operation
of the Danskammer Station on the date hereof by Dynegy Danskammer at the site of
the Danskammer Station.

          "Fresh Water Pipelines" shall mean those underground pipelines located
on the Roseton Real Property which are used to carry fresh water from the
Metering Facilities to the Roseton Station and to the Danskammer Station.

          "Fuel Oil Storage Tanks" shall mean those six (6) fuel oil storage
tanks located upon the Roseton Real Property comprised of five (5) 8,000,000
gallon No. 6 fuel oil tanks and one (1) 150,000 gallon No. 2 fuel oil tank.

          "Fuel Oil Pump House" shall mean that fuel oil pump house containing
approximately 798 square feet located upon the Roseton Real Property  and
adjacent to property now or formerly of CSX Rail Corp.

          "Gasoline Fueling Station" shall mean that certain facility that is
used for the benefit of both the Roseton Station and Danskammer Station and for
the on site fueling of Roseton Station and Danskammer Station vehicles, and
which is located on the Roseton Real Property immediately adjacent to a certain
fuel oil transfer pump house.

          "Grantee" means the Party or Parties who enjoy the principal benefit
of the referenced casement, license, right (including attachment rights)
privilege or right-of-way.

                                  SCH. 1.1-1
<PAGE>

          "Grantor" means the owner or owners of the property and/or improvement
granting the referenced easement, license, right (including attachment rights),
privilege or right-of-way.

          "Metering Facilities" shall mean the fresh water transfer meter owned
by Dynegy Roseton which measures water received from the Town of Newburgh and
which is located within a certain meter pit site near River Road.

          "Party" or "Parties" shall have the meaning set forth in the
introductory paragraph of this Agreement.

          "Prudent Industry Practice" shall mean, at a particular time, either
(a) any of the practices, methods and acts engaged in or approved by a
significant portion of the competitive electric generating industry operating in
the eastern United States at such time, or (b) with respect to any matter to
which the practices referred to in clause (a) do not apply, any of the
practices, methods and acts that, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good competitive electric generation business practices, reliability, safety and
expedition.  "Prudent Industry Practice" is not intended to be limited to the
optimum practice, method or act to the exclusion of all others, but rather to be
a spectrum of possible practices, methods or acts having due regard for, among
other things, manufacturers' warranties, the requirements of insurance policies
and the requirements of governmental bodies of competent jurisdiction.

          "Roseton Facilities" means the Roseton Station and any additional
generating plant, and including all other equipment and/or improvements owned by
or used in connection with the operation of the Roseton Station on the date
hereof by Dynegy Roseton at the site of the Roseton Station.

          "Roseton Wastewater Treatment Facility" means the wastewater treatment
facility located upon the Roseton Real Property that is used for the disposal of
wastewater generated by the Roseton Station.

          "Stations" means the Roseton Station and the Danskammer Station.

          "Use" means to operate, maintain, repair, upgrade, clean, install, add
to, alter, remove, inspect, construct, modify, restore, rebuild, replace,
relocate and expand (but if any such addition, relocation or expansion would
unreasonably or materially burden Grantor's Real Property, in each case, the
express, prior written consent of Grantor shall be required, which consent shall
not unreasonably be withheld, delayed or conditioned) (all of the foregoing to
be in accordance with Prudent Industry Practice).

                                  SCH. 1.1-2
<PAGE>

                                                                   EXHIBIT A - 1
                                                                   -------------
                             ROSETON REAL PROPERTY
                             ---------------------

ALL those parcels of land situate in the Town of Newburgh, County of Orange and
State of New York, bounded and described as follows:

                                   PARCEL 1A
                                   ---------

BEGINNING at the southwesterly corner of the herein described parcel, said point
being at the intersection of the northerly line of lands now or formerly of
Amerada Hess Corporation and the centerline of River Road, said point of
beginning also being distant North 49 degrees 50 minutes 24 seconds West 26.00
feet from a Central Hudson Gas and Electric Corporation monument recovered
(leaning), thence along the centerline of River Road the following five (5)
courses and distances:

1.    North 23 degrees 58 minutes 06 seconds East 92.30 feet,
2.    North 26 degrees 12 minutes 36 seconds East 415.37 feet,
3.    North 06 degrees 40 minutes 24 seconds West 107.80 feet,
4.    North 17 degrees 35 minutes 24 seconds West 531.00 feet, thence leaving
      said centerline of River Road,
5.    South 88 degrees 13 minutes 54 seconds East 28.39 feet, to a point on the
      easterly line of River Road, thence along said easterly line of River Road
      the following eight (8) courses and distances:
6.    North 16 degrees 30 minutes 34 seconds West 27.81 feet,
7.    North 04 degrees 36 minutes 36 seconds East 179.41 feet,
8.    North 25 degrees 57 minutes 11 seconds East 168.53 feet,
9.    North 27 degrees 23 minutes 11 seconds East 60.03 feet,
10.   North 19 degrees 43 minutes 36 seconds East 71.98 feet,
11.   North 11 degrees 36 minutes 26 seconds East 259.68 feet,
12.   207.64 feet on a curve to right having a radius of 200.90 feet and a long
      chord of North 41 degrees 13 minutes 16 seconds East 198.55 feet,
13.   North 70 degrees 50 minutes 06 seconds East 319.12 feet,
14.   397.50 feet on a curve to the left having a radius of 245.00 feet and a
      long chord of North 24 degrees 21 minutes 19 seconds East 355.31 feet to a
      point on the easterly line of Danskammer Road, thence running along the
      former division line between Rice and Brooks to the north (Danskammer
      Site) and the Jova Brick Company, Inc. to the south (Roseton Site) the
      following ten (10) courses and distances:
15.   North 52 degrees 03 minutes 46 seconds East 253.71 feet,
16.   South 25 degrees 12 minutes 14 seconds East 140.00 feet,
17.   South 73 degrees 52 minutes 14 seconds East 544.00 feet,
18.   South 83 degrees 37 minutes 44 seconds East 121.42 feet,
19.   South 73 degrees 20 minutes 34 seconds East 330.00 feet,
20.   South 77 degrees 21 minutes 44 seconds East 146.00 feet,
21.   South 73 degrees 15 minutes 44 seconds East 100.00 feet,
22.   South 77 degrees 12 minutes 14 seconds East 144.00 feet,

                                   EXH.A-1-1
<PAGE>

23.   South 67 degrees 42 minutes 14 seconds East 73.50 feet,
24.   South 55 degrees 02 minutes 14 seconds East 217.14 feet to the westerly
      line of lands now or formerly of CSX Rail Corp., thence along said
      westerly line of lands of CSX Rail Corp. the following five (5) courses
      and distances:
25.   South 27 degrees 01 minutes 46 seconds West 565.84 feet,
26.   846.30 feet on a curve to the right, having a radius of 2815.50 feet and a
      long chord of South 35 degrees 38 minutes 26 seconds West 843.11 feet,
27.   South 44 degrees 15 minutes 06 seconds West 488.41 feet to a point on the
      southerly line of lands formerly of the Jova Brick Works (now R.T.I.C.)
      said point also being on the northerly line of lands formerly of the
      Atlantic Refining Company (now R.T.I.C.), thence continuing along the
      aforementioned westerly line of lands now or formerly of CSX Rail Corp.,
28.   South 44 degrees 15 minutes 06 seconds West 1310.89 feet to a point on the
      aforementioned northerly line of lands now or formerly of Amerada Hess
      Corporation, thence along said northerly line of lands now or formerly of
      Amerada Hess Corporation,
29.   North 49 degrees 50 minutes 24 seconds West generally along the southerly
      face of timber cribbing, 888.84 feet to the point of BEGINNING.

                                   EXH.A-1-2
<PAGE>

                               ROSETON PARCEL 4

ALL that parcel of land, now or formerly under the waters of Hudson River,
situated in the Town of Newburgh, County of Orange, bounded and described as
follows:

BEGINNING at a point in the division line between grants of land under water to
J.C. Bancroft Davis by patent dated June 25, 1869 and Governeur M. Armstrong and
others by patent dated November 13, 1869 at its intersection with the easterly
right-of-way line of the Penn Central Railroad, said point 49.56 feet as
measured along said division line from its intersection with the centerline of
said railroad at station 326+601.0; thence into the waters of Hudson River and
along said division line;

1. South 43 degrees 00 minutes 20 seconds East, 369.93 feet to the
northeasterly corner of said grant to J.C. Bancroft Davis; thence along the
easterly line of said grant
2. South 55 degrees 44 minutes 40 seconds West, 1,273.75 feet to its
intersection with the division line between the lands of Central Hudson Gas and
Electric Corporation, by deed dated June 24, 1966 and filed in the Orange County
Clerk's Office in Liber 1747 of Deeds at Page 830 on the north and Hess Oil &
Chemical Corporation on the south; thence along said division line,
3. North 49 degrees 50 minutes 20 seconds West 226.07 to the beforementioned
easterly right-of-way line of the Penn Central Railroad; thence along said
right-of-way line,
4. North 44 degrees 15 minutes 10 seconds East 1,299.41 feet to the point of
BEGINNING.

                                   EXH.A-1-3
<PAGE>

                                   PARCEL 5
                                   --------

ALL that parcel of land, now or formerly under the waters of Hudson River,
situated in the Town of Newburgh, County of Orange, bounded and described as
follows:

BEGINNING at a point in the exterior line of a grant of land under water to
Governeur M. Armstrong and Others by patent dated November 13, 1869 said point
being, South 59 degrees 04 minutes 41 seconds East 395.49 feet from station
326+601.0+ of the centerline of the Penn Central Railroad; thence along said
exterior grant line,

1. North 52 degrees 29 minutes 40 seconds East 394.39 feet; thence departing
from said grant line
2. South 46 degrees 03 minutes 40 seconds East 160.86 feet;
3. South 43 degrees 52 minutes 10 seconds West 390.00 feet and
4. North 46 degrees 03 minutes 40 seconds West 220.00 feet to the point of
BEGINNING.

                                   EXH.A-1-4
<PAGE>

                                    PARCEL 6
                                    --------

ALL that parcel of land, now or formerly under the waters of Hudson River,
situated in the Town of Newburgh, County of Orange, bounded and described as
follows:

BEGINNING at a point in the division line between grants of land under water to
J.C. Bancroft Davis by patent dated June 25, 1869 and Governeur M. Armstrong and
others by patent dated November 13, 1869 at its intersection with the easterly
right-of-way line of the Penn Central Railroad, said point being 33.04 feet as
measured along said division line from its intersection with the centerline of
said railroad at station 326+601; thence along said easterly right-of-way line
the following five (5) courses and distances:

1.   North 44 degrees 15 minutes 10 seconds East 492.08 feet,
2.   753.03 feet on a curve to the left, having a radius of 2,898.00 feet and a
     long chord of North 36 degrees 48 minutes 30 seconds East 750.92 feet,
3.   South 60 degrees 38 minutes 10 seconds East 16.50 feet,
4.   118.73 feet on a curve to the left, having a radius of 2,914.50 feet and a
     long chord of North 28 degrees 11 minutes 50 seconds East 118.71 feet,
5.   North 27 degrees 01 minutes 50 seconds East 554.30 feet to the division
     line between lands of Central Hudson Gas & Electric Corporation,
     Consolidated Edison Company of New York, Inc. and Niagara Mohawk Power
     Corporation, as tenants in common, by deed dated May 14, 1968 on the south
     and Central Hudson Gas and Electric Corporation on the north; thence along
     said division line,
6.   South 64 degrees 57 minutes 10 seconds East 143.02 feet, thence continuing
     along said division line partially on land and partially into the waters of
     the Hudson River,
7.   South 43 degrees 00 minutes 20 seconds East 451.71 feet to the exterior
     line of said grant of land under water to Governeur M. Armstrong and
     others; thence along said exterior line
8.   South 38 degrees 18 minutes 22 seconds West 1,239.88 feet and
9.   South 52 degrees 29 minutes 44 seconds West 700.00 feet to the before
     mentioned division line between the grants of land under water to Governeur
     M. Armstrong and J.C. Bancroft Davis; thence along said division line,
10.  North 43 degrees 00 minutes 20 seconds West 336.45 feet to the point of
     BEGINNING.

                                   EXH.A-1-5
<PAGE>

                                                                   EXHIBIT A - 2
                                                                   -------------
                           DANSKAMMER REAL PROPERTY
                           ------------------------

ALL those parcels of land situate in the Town of Newburgh, County of Orange and
State of New York, bounded and described as follows:

                                   PARCEL 1B
                                   ---------

BEGINNING at a point at the intersection of the northerly line of River Road and
the easterly line of Danskammer Road (L. 2190 P. 216) at the south end of said
Danskammer Road, thence along said south end of Danskammer Road the following
three (3) courses and distances:

1.   North 38 degrees 43 minutes 10 seconds West 20.00 feet,
2.   North 38 degrees 04 minutes 20 seconds West 27.42 feet,
3.   North 57 degrees 25 minutes 10 seconds West 2.74 feet to its intersection
     with the westerly line of said Danskammer Road (as conveyed to the Town of
     Newburgh), thence along said westerly line of Danskammer Road the following
     four (4) courses and distances:
4.   North 51 degrees 55 minutes 40 seconds East 191.85 feet,
5.   65.95 feet on a curve to the left having a radius of 80.00 feet and a long
     chord of North 28 degrees 18 minutes 40 seconds East 64.10 feet,
6.   North 04 degrees 41 minutes 40 seconds East 625.32 feet,
7.   1.61 feet on a curve to the right having a radius of 190.00 feet and a long
     chord of North 04 degrees 56 minutes 14 seconds East 1.61 feet to its
     intersection with the northerly line of Parcel 1C, thence along said line
     of Parcel 1C,
8.   North 72 degrees 16 minutes 00 seconds West 323.92 feet to its intersection
     with the easterly line of the Roseton substation (a 51.70 acre parcel to be
     retained by Central Hudson Gas and Electric Corporation), the last
     mentioned point being marked by monument, thence along the easterly line of
     said 51.70 acre parcel the following three (3) courses and distances:
9.   North 09 degrees 47 minutes 10 seconds East 126.23 feet to the southerly
     corner of lands formerly of Ostrander-Ferguson (to be retained by Central
     Hudson Gas and Electric Corporation), thence along the southerly line of
     said Ostrander-Ferguson Parcel,
10.  North 79 degrees 22 minutes 30 seconds East 417.50 feet to the southerly
     corner of lands formerly of Horace (to be retained by Central Hudson Gas
     and Electric Corporation), thence along the southerly line of said Horace
     Parcel,
11.  North 80 degrees 14 minutes 30 seconds East 182.90 feet, thence along the
     easterly line of said Horace Parcel in part -04 minutes West 6.5 feet from
     utility pole no. 17297 and along the easterly line of lands now or formerly
     of Grove,
12.  North 47 degrees 39 minutes 02 seconds East 531.56 feet to a point on the
     southerly line of a 4.92 acre parcel of land conveyed by New York Trap Rock
     Corporation to Central Hudson Gas and Electric Corporation, the last
     mentioned point being distant South 66 degrees 04 minutes West 6.5 feet
     from utility pole no. 17279, thence along the northerly

                                   EXH.A-2-1
<PAGE>

     line of lands now or formerly of Grove and the southerly line of the
     aforementioned 4.92 acre
     parcel,
13.  North 89 degrees 49 minutes 13 seconds West 308.04 feet,
14.  North 89 degrees 48 minutes 56 seconds West 295.13 feet to a 4.1 acre
     parcel of land formerly of Deyo and Tuckosh (to be retained by Central
     Hudson Gas and Electric Corporation), the last mentioned point being
     distant North 24 degrees 07 minutes 29 seconds East 2.66 feet from an iron
     rebar, thence along the easterly line of said Deyo and Tuckosh parcel,
15.  North 03 degrees 56 minutes 54 seconds West 295.13 feet to a point on the
     southerly line of lands now or formerly of New York Trap Rock Corporation
     (Tilcon), thence along the southerly line of said lands now or formerly of
     New York Trap Rock Corporation (Tilcon), the following ten (10) course and
     distances,
16.  South 89 degrees 49 minutes 13 seconds East 295.13 feet,
17.  South 89 degrees 47 minutes 09 seconds East 527.41 feet to a point marked
     by a 2-1/4 inch o.d. pipe found in stones, and being distant South 00
     degrees 01 minute West 13.0 feet from a 16 inch diameter twin oak tree
     blazed,
18.  North 67 degrees 17 minutes 10 seconds East 74.26 feet,
19.  North 30 degrees 09 minutes 09 seconds East 96.00 feet,
20.  North 34 degrees 30 minutes 09 seconds East 61.13 feet,
21.  North 72 degrees 21 minutes 40 seconds East 79.36 feet to a point marked by
     remains of iron pipe found,
22.  North 86 degrees 18 minutes 10 seconds East 94.95 feet,
23.  North 50 degrees 28 minutes 10 seconds East 52.73 feet,
24.  North 89 degrees 29 minutes 36 seconds East passing over a  3/4 inch rebar
     at 0.51 feet, 703.23 feet to a point marked by a twin Maple tree,
25.  South 71 degrees 59 minutes 31 seconds East 839.04 feet to a point on the
     westerly line of a ten foot wide strip of land reputedly of Central Hudson
     Gas and Electric Corp. lying contiguous to the westerly line of lands of
     CSX Rail Corp., the last mentioned pointed being distant North 59 degrees
     12 minutes East 6.7 feet from a  3/4 inch rebar found, thence continuing,
26.  South 71 degrees 59 minutes 31 seconds East 10.12 feet to the
     aforementioned westerly line of lands now or formerly of CSX Rail Corp.,
     thence along the aforementioned westerly line of lands now or formerly of
     CSX Rail Corp. the following six (6) courses and distances:
27.  South 27 degrees 01 minutes 46 seconds West (South 27 degrees 16 minutes
     46 seconds West Deed) 684.24 feet, more or less,
28.  South 27 degrees 01 minutes 46 seconds West 277.23 feet, more or less,
29.  North 62 degrees 58 minutes 14 seconds West 20.5 feet,
30.  South 27 degrees 01 minutes 46 seconds West 500 feet, more or less,
31.  South 62 degrees 58 minutes 14 seconds East 20.5 feet,
32.  South 27 degrees 01 minutes 46 seconds West 1125.15 feet to the northerly
     line of lands formerly of the Jova Brick Company, Inc. (now RTIC), thence
     along the former division line between Rice and Brooks to the north
     (Danskammer Site) and Jova Brick Company, Inc. to the south (Roseton Site)
     the following ten (10) courses and distances:
33.  North 55 degrees 02 minutes 14 seconds West 217.14 feet,
34.  North 67 degrees 42 minutes 14 seconds West 73.50 feet,

                                   EXH.A-2-2
<PAGE>

35.  North 77 degrees 12 minutes 14 seconds West 144.00 feet,
36.  North 73 degrees 15 minutes 44 seconds West 100.00 feet,
37.  North 77 degrees 21 minutes 44 seconds West 146.00 feet,
38.  North 73 degrees 20 minutes 34 seconds West 330.00 feet,
39.  North 83 degrees 37 minutes 44 seconds West 121.42 feet,
40.  North 73 degrees 52 minutes 14 seconds West 544.00 feet,
41.  North 25 degrees 12 minutes 14 seconds West 140.00 feet,
42.  North 31 degrees 35 minutes 17 seconds West 0.69 feet (to close parcel) to
     the easterly line of said Danskammer Road, thence along said easterly line
     of Danskammer Road,
43.  South 51 degrees 55 minutes 40 seconds West 190.72 feet to the point of
     BEGINNING.

Excepting those parcels conveyed by Central Hudson Gas and Electric Corporation
to the Town of Newburgh (Danskammer Road), by deed dated November 27, 1978 and
recorded in the Orange County Clerk's Office in Liber 2190 of Deeds at Page 211
and deed dated December 15, 1980 and recorded in Liber 2190 of Deeds at Page
216.

                                   EXH.A-2-3
<PAGE>

                                    PARCEL 7
                                    --------

BEGINNING at a point on the easterly line of lands formerly of Penn Central
Railroad now CSX Rail Corp. with its intersection with the division line between
lands of Central Hudson Gas and Electric Corporation, Consolidated Edison
Company of New York, Inc. and Niagara Mohawk Power Corporation, as tenants in
common, by deed dated May 14, 1969 on the south and Central Hudson Gas and
Electric Corporation on the north, said point also being on the northwesterly
projection of the northerly line of Parcel "B" (Conversion Grant) lands under
waters of the Hudson River, Letters Patent dated April 20, 1971 Book 81 Page 70
also filed in the Orange County Clerk's Office May 18, 1971 in Liber 1873 of
Deeds at Page 233, thence along the aforementioned easterly line of lands now or
formerly of CSX Rail Corp.,

1.   North 27 degrees 01 minutes 46 seconds East 3,082.60 feet to the
     southwesterly corner of lands underwater conveyed by Central Hudson Gas and
     Electric Corporation to New York Trap Rock Corporation by deed dated August
     30, 1960 and recorded in the Orange County Clerk's Office in Liber 1567 of
     Deeds at Page 416, thence through the waters of the Hudson River and along
     the southerly line of the aforementioned lands now or formerly of New York
     Trap Rock Corporation,

2.   South 62 degrees 58 minutes 16 seconds East 490.64 feet, thence continuing
     through the waters of the Hudson River the following three courses and
     distances:

3.   South 11 degrees 50 minutes 00 seconds West 1,586.71 feet,

4.   South 38 degrees 18 minutes 16 seconds West 1,734.12 feet to the
     northeasterly corner of the aforementioned Conversion Grant, thence along
     the northerly line of said Conversion Grant, partially under the waters of
     the Hudson River and partially uplands,

5.   North 43 degrees 00 minutes 24 seconds West 451.71 feet and

6.   North 64 degrees 57 minutes 14 seconds West 143.02 feet to the point of
     BEGINNING.

                                   EXH.A-2-4
<PAGE>

                                                                       EXHIBIT B
                            R-S POWER LINE EASEMENT
                            -----------------------

All that easement of right-of-way being fifty (50) feet in width situate in the
Town of Newburgh, County of Orange and State of New York whose centerline (to
the extent not in conflict with property lines of land now or formerly of CSX
Rail Corporation; otherwise, said fifty (50) feet shall be located on one side
of said "R-S Line", as hereinafter defined, to the edge of said CSX Rail
Property, and the balance, on the other side of said R-S Line) is described as
follows:

Beginning at a point on the former division line between lands of Roseton
Tenants-in-Common on the south now Dynegy Roseton, L.L.C. and lands of Central
Hudson Gas and Electric Corporation on the north now Dynegy Danskammer, L.L.C.,
said point also being distant North 55" - 02' - 14" West 4.83 feet from the
westerly line of lands now or formerly of CSX Rail Corp. (formerly Penn Central
Railroad - West Shore Division), thence running generally along the centerline
of existing poles ("R-S" Line) the following six (6) courses and distances:

1.   North 27" - 05' - 00" East 362.47 feet,
2.   North 27" - 57' - 07" East 155.40 feet,
3.   North 64" - 48' - 27" East 229.10 feet,
4.   South 71" - 12' - 22" East 51.50 feet,
5.   South 77" - 18' - 18" East 138.01 feet,
6.   South 89" - 11' - 36" West 139.11 feet, to a point on the southerly line of
     an existing substation fence and the southerly line of a previously
     described easement number Four said point being distant South 62" - 45' -
     23" East 14.7 feet from the southwesterly corner of the aforementioned
     easement number Four.

Bearings conform to NY State (East) 1927 Co-ordinate System.

See Consolidated Rail Corporation to Central Hudson Gas & Electric Corporation
crossings agreement dated June 25, 1992, recorded December 8, 1992 in the Orange
County Clerk's Office in Liber 3716 of Deeds at Page 230 (Mile Post 62.34).

NOTE:  Course number Three crosses the aforementioned lands now or formerly of
       CSX Rail Corp.

                                   EXH.B-1<PAGE>

                                                                   Exhibit 10.8a

                                                                  Execution Copy

--------------------------------------------------------------------------------

                          Exempt Facilities Agreement

                            Dated as of May 8, 2001

                                    between

                            Dynegy Roseton, L.L.C.

                                      and

                                Roseton OL LLC

                             Roseton Units 1 and 2

--------------------------------------------------------------------------------
<PAGE>

                          Exempt Facilities Agreement

          This EXEMPT FACILITIES AGREEMENT, dated as of May 8, 2001 (this
"Exempt Facilities Agreement"), is between DYNEGY ROSETON, L.L.C., a Delaware
----------------------------
limited liability company (the "Company") and ROSETON OL LLC, a Delaware limited
                                -------
liability company (the "Owner Lessor," and collectively with the Company, the
                        ------------
"Parties," and each a "Party").
--------               -----

                              W I T N E S S E T H:

          WHEREAS, pursuant to that certain Asset Purchase and Sale Agreement
(the "APSA"), dated as of August 7, 2000, by and among Dynegy Power Corp. (the
      ----
indirect parent of the Company), Central Hudson Gas & Electric Corporation
("Central Hudson"), Consolidated Edison Company of New York, Inc., and Niagara
----------------
Mohawk Power Corporation, the Company acquired the Roseton Generating Station,
which is comprised of a two unit combined capacity 1200 MW (net) electric
generating facility, and is located in Newburgh, New York (the "Facility");
                                                                --------

          WHEREAS, the sale of the Facility under the APSA included each of the
components listed in Exhibit A hereto (the "Exempt Facilities"), which Exempt
                     ---------              -----------------
Facilities had been financed and/or refinanced by Central Hudson prior to the
sale of the Facility to Company with the proceeds of the issuance and sale by
various governmental authorities of the industrial development revenue bonds or
private activity bonds listed in Exhibit B hereto (the "Revenue Bonds");
                                 ---------              -------------

          WHEREAS, Section 7.13 of the APSA requires that the Company comply
with certain obligations relating to the Exempt Facilities, including causing
any subsequent purchasers of the Facility, to comply with substantially the same
provisions as those contained in Section 7.13 of the APSA;

          WHEREAS, concurrently with the execution and delivery of this Exempt
Facilities Agreement, the Parties are entering into a leveraged sale leaseback
financing (the "Lease Financing") whereby the Company is selling the Facility,
                ---------------
including the Exempt Facilities (the "Lease Assets"), to Roseton OL LLC (the
                                      ------------
"Owner Lessor"), and the Owner Lessor is leasing the Lease Assets, back to the
-------------
Company pursuant to a facility lease agreement between the Parties of even date
herewith (the "Facility Lease");
               --------------

          WHEREAS, the Company desires to comply with its obligations under
Section 7.13 of the APSA, and the Owner Lessor has agreed, subject to the terms
and conditions contained herein, to comply with each of the obligations relating
to the Exempt Facilities contained herein (the "Exempt Facilities Obligations");
                                                -----------------------------
and

          WHEREAS, the Parties desire to set forth their respective rights and
obligations with respect to the Exempt Facilities.
<PAGE>

     NOW, THEREFORE, in consideration of the foregoing premises, the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties agree as
follows:

SECTION 1.  EXEMPT FACILITIES

     Each of (i) the Owner Lessor, as purchaser of the Facility from the
Company, and (ii) the Company, as lessee under the Facility Lease, understands
and agrees that:

          (a)  The Facility includes the Exempt Facilities that have been
financed, and refinanced, in whole or in part, by Central Hudson with the
proceeds of the Revenue Bonds the interest on which, with certain exceptions, is
excluded from gross income for purposes of federal income taxation; and Central
Hudson is the economic obligor in respect of such Revenue Bonds.

          (b)  The basis for such exclusion is the use of the Exempt Facilities
for the purpose of (i) the abatement or control of atmospheric or water
pollution or contamination and/or (ii) the collection, storage, treatment,
utilization, processing or final disposal of solid waste and/or the collection,
storage, treatment, utilization, processing or final disposal of sewage, such
qualifying purposes being discussed in more detail in Sections 2(b) and 3(b)
below.

          (c)  The use of the Exempt Facilities for a purpose other than a
qualifying purpose indicated in Section 1(b) above could impair (i) such
exclusion from gross income of the interest on such bonds, possibly with
retroactive effect, unless appropriate remedial action were taken (which could
include prompt defeasance or redemption of such bonds) and/or (ii) the
deductibility of payment by Central Hudson of interest based on the restrictions
in Section 150(b) of the Internal Revenue Code of 1986, as amended (the "Code").
                                                                         ----

SECTION 2.  OWNER LESSOR'S OBLIGATIONS

     The Owner Lessor, as purchaser of the Facility from the Company,
understands and agrees that:

          (a)  Any breach by the Owner Lessor of its obligations under this
Exempt Facilities Agreement could result in the incurrence by Central Hudson of
additional costs and expenses, including increased interest costs, loss of the
interest deduction for tax purposes and transaction costs relating to any
refinancing, redemption and/or defeasance of all or part of the Revenue Bonds.
The Owner Lessor will indemnify Central Hudson for such additional costs and
expenses.

          (b)  (i) The Owner Lessor agrees that it shall not use, or permit the
use of, the Exempt Facilities for any purpose other than the continuing use of
such Exempt Facilities, and in accordance with the respective tax and/or other
compliance documents for each of the Revenue Bonds, for:

                         (1)  abating or controlling atmospheric or water
pollution or contamination by removing, altering, disposing of or storing
pollutants, contaminants, waste or heat, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(g);

                                       2
<PAGE>

                         (2)  the collection, storage, treatment, utilization,
processing or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or

                         (3)  the collection, storage, treatment, utilization,
processing or final disposal of sewage, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(f);

unless it has obtained at its own expense an opinion addressed to Central Hudson
of nationally recognized bond counsel reasonably acceptable to Central Hudson
that such use will not impair (x) the exclusion from gross income of the
interest on any issue of Revenue Bonds for federal income tax purposes or (y)
the deductibility of Central Hudson's payments of interest based on the
restrictions in Section 150(b) of the Code.

                    (ii) The Owner Lessor reasonably expects, as of the date of
this Agreement, that the Exempt Facilities will continue to be used for the
qualifying purposes set forth in Section 2(b)(i), and for no other purpose, for
the remainder of their useful lives.

               (c)  It is expressly understood and agreed that the provisions of
Section 2(b) shall not prohibit the Owner Lessor from (i) suspending the
operation of the Exempt Facilities on a temporary basis and/or (ii) selling
exclusively for cash the Exempt Facilities consisting of personal property, in
whole or in part, including any sale for scrap, provided that in the case of
suspension of operation under clause (i) above, the operation of the Lease
Assets served by such Exempt Facilities shall not theretofore have been, and is
not then being, terminated on a permanent basis, and provided further that in
the case of a sale under clause (ii) above the proceeds of such sale of the
Exempt Facilities shall within six months from the date of sale be expended to
acquire replacement property to be used for the same qualifying purpose as the
Exempt Facilities so sold or be otherwise applied and provided further that the
Owner Lessor has obtained at its own expense an opinion of nationally recognized
bond counsel addressed to and reasonably satisfactory to Central Hudson as to
the exact application of the proceeds of such sale and that any such application
will not impair (x) the exclusion from gross income of the interest on any issue
of Revenue Bonds for federal income tax purposes or (y) the deductibility of
Central Hudson's payments of interest based on the restrictions in Section
150(b) of the Code.

               (d)  The Owner Lessor agrees that it shall not issue, or have
issued on its behalf, any tax-exempt bonds to finance or refinance its
acquisition of the Exempt Facilities; provided that it is expressly understood
and agreed that this clause Section 2(d) shall not prohibit the use of tax-
exempt bonds to finance or refinance any improvement to the Exempt Facilities
made after the date of acquisition or to any assets other than the Exempt
Facilities.

               (e)  The Owner Lessor agrees that it shall give Central Hudson at
least 180 days' prior written notice of any suspension (other than on a
temporary basis) or termination of the operation of the Exempt Facilities, or
any part thereof, and of any sale, exchange, transfer or other disposition of
the Exempt Facilities, or any part thereof, including, but not limited to, a
sale for scrap, such written notice to be provided whether or not an opinion of
counsel is required to be obtained in accordance with Section 2(c).

                                       3
<PAGE>

            (f)  If Central Hudson shall desire to refund any Revenue Bonds, the
Owner lessor shall, at the expense of the Company until the expiration or
earlier termination of the Facility Lease, cooperate with Central Hudson and
with Central Hudson's counsel with respect to such refunding bonds and shall
provide upon request any representations, agreements or covenants that are
reasonably requested concerning its compliance to such date and/or in the future
with the representations, agreements and covenants made herein.

            (g)  Other than under the Lease Financing, if the Owner Lessor shall
sell, exchange, transfer or otherwise dispose of the Exempt Facilities to a
third party, the Owner Lessor shall cause to be included in the documentation
relating to such transaction covenants and agreements on the part of such third
party for the benefit of Central Hudson, and as requested by Central Hudson, the
trustee for the holders of any Revenue Bonds, substantially identical to those
on the part of the Owner Lessor contained in this Exempt Facilities Agreement.

            (h)  The covenants and agreements of the Owner Lessors contained in
this Exempt Facilities Agreement shall continue in effect so long as any of the
Revenue Bonds, including any refunding bonds issued hereafter to refund any
Revenue Bonds, shall remain outstanding, and thereafter, this Exempt Facilities
Agreement shall terminate. At the request of Central Hudson, the Owner Lessor
shall execute further documentation to provide that such covenants and
agreements are also for the benefit of the trustee of the holders of any Revenue
Bonds.

            (i)  Subject to the Owner Lessor's compliance with this Exempt
Facilities Agreement, the Owner Lessor shall not have any liability under the
Revenue Bonds.

            (j)  Until the expiration or earlier termination of the Facility
Lease, the Company shall be obligated to perform, and the Owner Lessor shall be
deemed to have performed, the obligations pursuant to this Section 2.

SECTION 3.  COMPANY'S OBLIGATIONS

     The Company, as lessee under the Facility Lease, understands and agrees
that:

            (a)  Any breach by the Company of its obligations under this Exempt
Facilities Agreement could result in the incurrence by Central Hudson of
additional costs and expenses, including increased interest costs, loss of the
interest deduction for tax purposes and transaction costs relating to any
refinancing, redemption and/or defeasance of all or part of the Revenue Bonds.
The Company will indemnify Central Hudson for such additional costs and
expenses.

            (b)  (i) The Company agrees that it shall not use, or permit the use
of, the Exempt Facilities for any purpose other than the continuing use of such
Exempt Facilities, and in accordance with the respective tax and/or other
compliance documents for each of the Revenue Bonds, for:

                    (1)  abating or controlling atmospheric or water pollution
or contamination by removing, altering, disposing of or storing pollutants,
contaminants, waste or heat, all as contemplated in U.S. Treasury Regulations
Section 1.103-8(g);

                                       4
<PAGE>

                    (2)  the collection, storage, treatment, utilization,
processing or final disposal of solid waste, all as contemplated in U.S.
Treasury Regulations Section 1.103-8(f); or

                    (3)  the collection, storage, treatment, utilization,
processing or final disposal of sewage, all as contemplated in U.S. Treasury
Regulations Section 1.103-8(f);

unless it has obtained at its own expense an opinion addressed to Central Hudson
of nationally recognized bond counsel reasonably acceptable to Central Hudson
that such use will not impair (x) the exclusion from gross income of the
interest on any issue of Revenue Bonds for federal income tax purposes or (y)
the deductibility of Central Hudson's payments of interest based on the
restrictions in Section 150(b) of the Code.

               (ii) The Company reasonably expects, as of the date of this
Agreement, that the Exempt Facilities will continue to be used for the
qualifying purposes set forth in Section 3(b)(i), and for no other purpose, for
the remainder of their useful lives.

          (c)  It is expressly understood and agreed that the provisions of
Section 3(b) shall not prohibit the Company from (i) suspending the operation of
the Exempt Facilities on a temporary basis and/or (ii) selling exclusively for
cash the Exempt Facilities consisting of personal property, in whole or in part,
including any sale for scrap, provided that in the case of suspension of
operation under clause (i) above, the operation of the Lease Assets served by
such Exempt Facilities shall not theretofore have been, and is not then being,
terminated on a permanent basis, and provided further that in the case of a sale
under clause (ii) above the proceeds of such sale of the Exempt Facilities shall
within six months from the date of sale be expended to acquire replacement
property to be used for the same qualifying purpose as the Exempt Facilities so
sold or be otherwise applied and provided further that the Company has obtained
at its own expense an opinion of nationally recognized bond counsel addressed to
and reasonably satisfactory to Central Hudson as to the exact application of the
proceeds of such sale and that any such application will not impair (x) the
exclusion from gross income of the interest on any issue of Revenue Bonds for
federal income tax purposes or (y) the deductibility of Central Hudson's
payments of interest based on the restrictions in Section 150(b) of the Code.

          (d)  The Company agrees that it shall not issue, or have issued on its
behalf, any tax-exempt bonds to finance or refinance its acquisition of the
Exempt Facilities; provided that it is expressly understood and agreed that this
Section 3(d) shall not prohibit the use of tax-exempt bonds to finance or
refinance any improvement to the Exempt Facilities made after the date of
acquisition or to any assets other than the Exempt Facilities.

          (e)  The Company agrees that it shall give Central Hudson at least 180
days' prior written notice of any suspension or termination of the operation of
the Exempt Facilities, or any part thereof, and of any sale, exchange, transfer
or other disposition of the Exempt Facilities, or any part thereof, including,
but not limited to, a sale for scrap, such written notice to be provided whether
or not an opinion of counsel is required to be obtained in accordance with
Section 3(c).

          (f)  If Central Hudson shall desire to refund any Revenue Bonds, the
Parties shall cooperate with Central Hudson and with Central Hudson's counsel
with respect to such

                                       5
<PAGE>

refunding bonds and shall provide upon request any representations, agreements
or covenants that are reasonably requested concerning its compliance to such
date and/or in the future with the representations, agreements and covenants
made herein.

            (g)  Other than under the Lease Financing, if the Company shall
sell, exchange, transfer or otherwise dispose of the Exempt Facilities to a
third party, the Company shall cause to be included in the documentation
relating to such transaction covenants and agreements on the part of such third
party for the benefit of Central Hudson, and as requested by Central Hudson, the
trustee for the holders of any Revenue Bonds, substantially identical to those
on the part of the Company contained in this Exempt Facilities Agreement.

            (h)  The covenants and agreements on the part of the Company
contained in this Exempt Facilities Agreement shall continue in effect so long
as any of the Revenue Bonds, including any refunding bonds issued hereafter to
refund any Revenue Bonds, shall remain outstanding, and thereafter, this Exempt
Facilities Agreement shall terminate. At the request of Central Hudson, the
Company shall execute further documentation to provide that such covenants and
agreements are also for the benefit of the trustee of the holders of any Revenue
Bonds.

            (i)  Subject to the Company's compliance with this Exempt Facilities
Agreement, the Company shall not have any liability under the Revenue Bonds.

            (j)  Promptly after obtaining Actual Knowledge thereof, the Company
shall notify the Owner Lessor if there shall no longer be Revenue Bonds
outstanding during the Term.

SECTION 4.  MISCELLANEOUS

            (a)  Amendment of Sections 2(e) and 3(e). The Company agrees that it
will request Central Hudson to agree to an amendment to the ASPA that removes
the covenant set forth in Section 7.13(e) of the ASPA and replaces such covenant
with a covenant substantially identical to the following:

     The Company shall not undertake, or permit to occur, any suspension
     (other than on a temporary basis) or termination of the operation of
     the Exempt Facilities, or any part thereof, or of any sale, exchange,
     transfer or other disposition of the Exempt Facilities, or any part
     thereof, including, but not limited to, a for scrap (collectively, a
     "Trigger Event"), prior to the day that is at least 45 days' after
      -------------
     the date that the Company shall have provided Central Hudson with a
     copy of a term sheet or other summary describing in reasonable detail
     the principal terms of such Trigger Event in sufficient detail to
     demonstrate that the Owner Lessor is in compliance with its
     obligations hereunder. Such written notice shall be provided whether
     or not an opinion of counsel is required to be obtained in accordance
     with Section 2(c). The Owner Lessor also agrees to provide such other
     information relating to the Trigger Event as Central Hudson shall, at
     any time prior to the closing of the Trigger Event, reasonably
     request to the extent such information is necessary

                                       6
<PAGE>

     or useful to determine compliance by the Owner Lessor with its
     obligations hereunder. The Owner Lessor shall provide such
     information as soon as practicable but in any event, within three (3)
     business days after such information becomes available.

If Central Hudson agrees to accept the foregoing covenant in substitution for
the covenant set forth in Section 7.13(e) of the ASPA, the Parties agree to
enter into an amendment hereto, each acting reasonably and in good faith,
deleting Sections 2(e) and 3(e) hereof and substituting, in place thereof,
covenants substantially identical to the new covenant agreed to by Central
Hudson.

          (b)  Amendments and Waivers. No term, covenant, agreement or condition
of this Exempt Facilities Agreement may be terminated, amended or compliance
therewith waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each Party hereto.

          (c)  Notices. Unless otherwise expressly specified or permitted by the
terms hereof, all communications and notices provided for herein to a Party
shall be in writing or by a telecommunications device capable of creating a
written record, and any such notice shall become effective (a) upon personal
delivery thereof, including by overnight mail or courier service, (b) in the
case of notice by United States mail, certified or registered, postage prepaid,
return receipt requested, upon receipt thereof, or (c) in the case of notice by
such a telecommunications device, upon transmission thereof, provided such
transmission is promptly confirmed by either of the methods set forth in clauses
(a) and (b) above, in each case addressed to such Party at its address set forth
below or at such other address as such Party may from time to time designate by
written notice to the other Party.

     If to the Company:

          Dynegy Roseton, L.L.C.
          c/o Dynegy Northeast Generation, Inc.
          992 River Road
          Newburgh, New York  12550
          Telephone No.: (845) 563-4961
          Facsimile No.: (845) 563-4992
          Attention: Daniel P. Thompson, Vice President, Operations

     with a copy to:

          Dynegy Power Corp.
          1000 Louisiana Street, Suite 5800
          Houston, Texas 77002
          Telephone No.: (713) 507-6823
          Facsimile No.: (713) 767-8510
          Attention: Timothy A. Beverick, Esq.

                                       7
<PAGE>

     If to the Owner Lessor:

          Roseton OL LLC
          c/o Wilmington Trust Company
          Rodney Square North
          1100 North Market Street
          Wilmington, DE 19890-0001
          Telephone No.: 302-651-1000
          Facsimile No.: 302-651-8882
          Attention: Corporate Trust Administration

          (d) Survival.  Except for the provisions of Sections 2(a) and 3(a),
which shall survive, the warranties and covenants made by each Party hereto
shall not survive the expiration or termination of this Exempt Facilities
Agreement under Sections 2(h) and 3(h).

          (e) Successors, Assigns and Third-Party Beneficiaries.

                    (i)   This Exempt Facilities Agreement shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the Parties and
their respective successors and assigns as permitted by and in accordance with
the terms hereof.

                    (ii)  Except as expressly provided herein or in the Lease
Financing documents, neither Party may assign its interests or transfer its
obligations herein without the consent of the other Party.

                    (iii) The Parties understand and agree that Central Hudson
is a third-party beneficiary of this Exempt Facilities Agreement.

          (f) Governing Law. This Exempt Facilities Agreement has been delivered
in the State of New York and shall be in all respects governed by and construed
in accordance with the laws of the State of New York including all matters of
construction, validity and performance without giving effect to the conflicts of
laws provisions thereof except New York General Obligations Law Section 5-1401.

          (g) Severability. Any provision of this Exempt Facilities Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

          (h) Counterparts. This Exempt Facilities Agreement may be executed by
the Parties in separate counterparts, each of which, when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

          (i) Headings and Table of Contents. The headings of the sections of
this Exempt Facilities Agreement are inserted for purposes of convenience only
and shall not be construed to affect the meaning or construction of any of the
provisions hereof.

                                       8
<PAGE>

          (j)  Further Assurances. Each Party hereto will promptly and duly
execute and deliver such further documents and assurances for and take such
further action reasonably requested by the other Party, all as may be reasonably
necessary to carry out more effectively the intent and purpose of this Exempt
Facilities Agreement.

          (k)  Limitation of Liability. It is expressly understood and agreed by
the Parties that (a) this Exempt Facilities Agreement is executed and delivered
by Wilmington Trust Company ("Wilmington"), not individually or personally but
                              ----------
solely as manager of the Owner Lessor, in the exercise of the powers and
authority conferred and vested in it pursuant to that certain LLC Agreement of
Roseton OL LLC, dated as of May 1, 2001, (b) each of the representations,
undertakings and agreements herein made on the part of the Owner Lessor is made
and intended not as personal representations, undertakings and agreements by
Wilmington but is made and intended for the purpose for binding only the Owner
Lessor, (c) nothing herein contained shall be construed as creating any
liability on Wilmington individually or personally, to perform any covenant
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the Parties or by any Person claiming by, through or under
the Parties and (d) under no circumstances shall Wilmington be personally liable
for the payment of any indebtedness or expenses of the Owner Lessor or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Owner Lessor under this Exempt Facilities
Agreement.

                                       9
<PAGE>

     IN WITNESS WHEREOF, the Parties have caused this Exempt Facilities
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.

                             DYNEGY ROSETON, L.L.C.

                             By:________________________________________
                                Name:
                                Title:

                             ROSETON OL LLC

                             By: Wilmington Trust Company, not in its individual
                                 capacity but solely as Lessor Manager

                             By:________________________________________
                               Name:
                               Title:
<PAGE>

                                                                       EXHIBIT A
                                                                              to
                                                               Exempt Facilities
                                                                       Agreement
                                                                       ---------

                               Exempt Facilities
                               -----------------

     Dust Collection and Fly Ash Reinjection System.  This system is designed
     ----------------------------------------------
to remove fly ash from boiler exhaust gases and reinject the ash into the boiler
for burning.  The dust collector on each boiler consists of a structural
foundation, a support structure, casing inlet and outlet duct connections,
internal dust and gas separating elements, dust collector hoppers, internal flow
dividers, hopper level sensors, hopper outlet valving and interlocking, and
automatic control and sequencing equipment for continual removal of residue
collected in the hoppers.  The fly ash reinjection system on each boiler
consists of a transport piping system from the dust collector hoppers to the
boiler, motor driven air blowers and air heaters to supply hot transport air,
controls and instrumentation for motors and heaters, and associated electrical
and pneumatic equipment.

     Waste Water Treatment System.  The facilities are designed to remove
     ----------------------------
pollutants from the process discharge water and consist of lift stations, a
gravity transport line to the waste treatment area, four waste water treatment,
settling and neutralizing basins, transfer pumps, piping, chemical injectors,
skimming and final settling facilities; and associated pumps, piping, controls,
instrumentation and electrical equipment;

     Sewage Treatment System.  The sewage treatment system is designed to treat
     -----------------------
raw sanitary sewage and consists of a lift station, gravity transport line, we
wells, a package type sewage treatment plant equipped with aerating blowers,
skimmer, electrical controllers and instrumentation, and associated piping,
pumps, chemical feeders and other controls.

     Fuel Oil Spill Control Facilities.  The fuel oil spill control equipment is
     ---------------------------------
designed to prevent spilled oil from contaminating the Hudson River and consists
of a floating boom used to encircle fuel ships and barges during unloading, a
motorboat, to tow the boom into place, oil separating and monitoring pits for
drainage from fuel oil storage tank areas, and welded steel envelopes around
storage tanks.  A sheet piling baffle extending from above the river water
surface to the river bottom encloses the outlet of the storm and storage tank
farm drain to entrap any oil which may escape from anywhere on the plant
property.

     Smoke Density Meters.  These meters will measure the opacity of stack gases
     --------------------
in order to indicate the presence of abnormal boiler burning conditions that
could lead to unacceptable emissions to the atmosphere.

     Yard Drainage System, Fuel Oil Trench and Oil Tank Berm.  The yard drainage
     -------------------------------------------------------
system is designed to collect drainage water and channel it to the Hudson River
after any contaminant oil has been separated from the drainage flow.  The fuel
oil drainage trench serves to trap any leaks

                                      A-1
<PAGE>

from sunken oil pipelines and thus prevents the seepage of oil into underground
water streams. The oil tank berm is designed to contain spillage from the
Roseton Facility's fuel oil storage tanks.

                                      A-2
<PAGE>

                                                                       EXHIBIT B
                                                                              to
                                                               Exempt Facilities
                                                                       Agreement
                                                                       ---------

                                 Revenue Bonds
                                 -------------

New York State Energy Research and Development Authority "Revenue Bonds" -
Central Hudson

          1.  $4.5 million, 6 1/4% Pollution Control Revenue Bonds (Central
     Hudson Gas & Electric Corporation Projects), Series A, due June 1, 2007
     ($2.496 million relates to the Roseton Plant)

          2.  $41.15 million, Pollution Control Refunding Revenue Bonds (Central
     Hudson Gas & Electric Corporation Projects), 1999 Series C, due August 1,
     2028 ($1.533 million relates to the Roseton Plant)

          3.  $41 million, Pollution Control Refunding Revenue Bonds (Central
     Hudson Gas & Electric Corporation Projects), Series D, due August 1, 2028
     ($1.527 million relates to the Roseton Plant)

                                      B-1

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