Document:

<PAGE>   1
                                                                   EXHIBIT 10.69

                            ASSET PURCHASE AGREEMENT

       ASSET PURCHASE AGREEMENT, dated as of October 13, 1998, by and between
MONTAUP ELECTRIC COMPANY, a Massachusetts corporation (the "SELLER"), and NRG
ENERGY, INC., a Delaware corporation (the "BUYER").

       WHEREAS, the Buyer desires to purchase, and the Seller desires to sell,
the Purchased Assets upon the terms and conditions hereinafter set forth in this
Agreement:

       NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and intending
to be legally bound hereby, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

       1.1 DEFINITIONS. (a) As used in this Agreement, the following terms have
the meanings specified in this Section 1.1(a).

       (1)    "AFFILIATE" has the meaning set forth in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act.

       (2)    "ALLOWANCE" means (i) an authorization by the Administrator of the
United States Environmental Protection Agency under the Acid Rain Program to
emit up to one ton of sulfur dioxide during or after a specified calendar year;
or (ii) an authorization by the Massachusetts Department of Environmental
Protection under the state Nitrogen Oxides ("NOX") Budget Program authorizing
the emission of up to one ton of NOX during the ozone season, May 1 through
September 1 of each year.

       (3)    "ANCILLARY AGREEMENTS" means the Wholesale Standard Offer Service
Agreement and the Interconnection Agreement.

       (4)    "BENEFIT ARRANGEMENT" means any employment, severance or similar
contract or arrangement of any plan, policy, fund, program or contract or
<PAGE>   2

arrangement providing for compensation, bonus, profit-sharing, stock option, or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangements),
health or medical benefits, disability benefits, workers' compensation,
supplemental unemployment benefits, severance benefits and postemployment or
retirement benefits (including compensation, pension, health, medical or life
insurance or other benefits) that: (i) is not an Employee Plan: (ii) is entered
into, maintained, administered or contributed to, as the case may be, by Seller
or any of its Affiliates: (iii) covers any employee or former employee of Seller
employed in the United States: and (iv) does not terminate immediately prior to
the Closing.

       (5)    "BILL OF SALE" means the Bill of Sale to be delivered at the
Closing with respect to those Purchased Assets which constitute personal
property and which are to be transferred at the Closing, substantially in the
form of Exhibit A hereto.

       (6)    "BUSINESS DAY" shall mean any day other than Saturday, Sunday and
any day which is a legal holiday or a day on which banking institutions in
Boston, Massachusetts are authorized by law or other governmental action to
close.

       (7)    "BUYER REPRESENTATIVES" means the Buyer's accountants, counsel,
environmental consultants, financial advisors and other authorized
representatives.

       (8)    "CAPITAL EXPENDITURES" means those capital expenditures which are
identified as capital expenditures on Schedule 1.1(a)(8) hereto.

       (9)    "CLOSING AMOUNT" means the sum of the amount set forth in clause
(i) of Section 3.1 and the Estimated Adjustment Amount.

       (10)   "CERCLA" means the Federal Comprehensive Environmental Response,
Compensation and Liability Act.

       (11)   "CODE" means the Internal Revenue Code of 1986, as amended.

       (12)   [RESERVED]

                                        2

<PAGE>   3

       (13)   "EASEMENTS" means, with respect to those Purchased Assets which
constitute Real Estate, the reservations of easements to be included in the
deeds of conveyance or by separate instrument with respect to such Real Estate,
substantially as set forth in Schedules 1.1(a)(13) and 5.12 hereto.

       (14)   "EMISSION REDUCTION CREDITS" means credits, in units that are
established by the environmental regulatory agency with jurisdiction over the
facility that has obtained the credits, resulting from a reduction in the
emissions of air pollutants from an emitting source or facility (including,
without limitation, and to the extent allowable under applicable law, reductions
from shut-downs, control of emissions beyond that required by applicable law,
and fuel switching), that have been certified by an applicable regulatory
authority as complying with the law and regulations governing the establishment
of such credits (including, without limitation, that such emissions reductions
are enforceable, permanent, quantifiable, real and surplus). Emission Reduction
Credits include certified air emissions reductions, as described above,
regardless as to whether the regulatory agency certifying such reductions
designates such certified air emissions reductions by a name other than
"emissions reduction credits".

       (15)   "EMPLOYEE PLAN" means any "employee benefit plan", as defined in
with Section 3(3) of ERISA, that: (i) is subject to any provision of ERISA; (ii)
is maintained, administered or contributed to by Seller or any of its ERISA
Affiliates; and (iii) covers any employee or former employee of Seller.

       (16)   "ENCUMBRANCES" means any mortgages, pledges, liens, security
interests, conditional and installment sale agreements, activity and use
limitations, conservation easements, easements, deed restrictions, encumbrances
and charges of any kind.

       (17)   "ENVIRONMENTAL LAWS" means all federal, state and local laws,
regulations, rules, ordinances, codes, decrees, judgments, directives, or
judicial or administrative orders relating to pollution or protection of the
environment, natural resources or human health and safety, including, without
limitation, laws relating to Releases or threatened Releases of Hazardous
Substances (including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise relating to the
(i) of manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances.

                                        3

<PAGE>   4

       (18)   "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

       (19)   "ERISA AFFILIATE" of any entity means any other entity which,
together with such entity, would be treated as a single employer under Section
414 of the Code.

       (20)   "ESTIMATED ADJUSTMENT AMOUNT" means the Seller's good faith
reasonable estimate of an Adjustment Amount for the Closing, which estimate
shall be provided to the Buyer no later than two (2) Business Days before the
applicable Closing.

       (21)   "EUA" means Eastern Utilities Associates. The name "Eastern
Utilities Associates" means the trustee or trustees for the time being (as
trustee or trustees but not personally) under an Agreement and Declaration of
Trust dated April 2, 1928, as amended, which is hereby referred to, and a copy
of which, as amended, has been filed with the Secretary of The Commonwealth of
Massachusetts. Any agreement, obligation, or liability made, entered into, or
incurred by or on behalf of EUA binds only its trust estate, and no and
shareholder, director, trustee, officer, or agent thereof assumes or shall be
held to any liability therefor.

       (22)   "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

       (23)   "FEDERAL POWER ACT" means the Federal Power Act of 1935, as
amended.

       (24)   "FERC" means the Federal Energy Regulatory Commission.

       (25)   "FIRPTA AFFIDAVIT" means the Foreign Investment in Real Property
Tax Act Certification and Affidavit substantially in the form of Exhibit B
hereto.

       (26)   "HAZARDOUS SUBSTANCES" means (a) any petrochemical or petroleum
products, radioactive materials, radon gas, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid which may contain levels of
polychiorinated biphenyls; (b) any chemicals, materials or substances defined as
or included in the

                                        4

<PAGE>   5

definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"restricted hazardous materials," "extremely hazardous substances," "toxic
substances," "contaminants," or "pollutants" or words of similar meaning and
regulatory effect; or (c) any other chemical, material or substance, exposure to
which is prohibited, limited or regulated by any applicable Environmental Law.

       (27)   "HOLDING COMPANY ACT" means the Public Utility Holding Company Act
of 1935, as amended.

       (28)   "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.

       (29)   "INCOME TAX" means any federal, state, local or foreign Tax (a)
based upon, measured by or calculated with respect to net income, profits or
receipts (including, without limitation, capital gains Taxes and minimum Taxes)
or (b) based upon, measured by or calculated with respect to multiple bases
(including, without limitation, corporate franchise taxes) if one or more of the
bases on which such Tax may be based, measured by or calculated with respect to,
is described in clause (a), in each case together with any interest, penalties,
or additions to such Tax.

       (30)   "INDENTURE" means the Brockton Edison Company Indenture of First
Mortgage and Deed of Trust dated as of September 1, 1948, as supplemented and
modified.

       (31)   "INDEPENDENT ACCOUNTING FIRM" means such independent accounting
firm of national reputation mutually appointed by the Seller and the Buyer.

       (32)   "INSTRUMENT OF ASSUMPTION" means the Instrument of Assumption
substantially in the form of Exhibit C hereto relating to the assumption by the
Buyer of the liabilities and obligations of the Seller described therein.

       (33)   "INTERCONNECTION AGREEMENT" means the Interconnection Agreement
substantially in the form of Exhibit D hereto.

       (34)   "MAINTENANCE EXPENDITURES" means those maintenance expenditures
which are identified as maintenance expenditures on Schedule 1.1(a)(34) hereto.

                                        5

<PAGE>   6

       (35)   "MATERIAL ADVERSE EFFECT" means any change in or effect on the
Purchased Assets after the date of this Agreement that is materially adverse to
the condition (financial or otherwise) of the Purchased Assets, taken as a
whole, and, if applicable, the operation or business of the Purchased Assets,
taken as a whole, other than, in all cases, (i) any change or effect resulting
from changes in the international, national, regional or local wholesale or
retail markets for electric power, (ii) any change or effect resulting from
changes in the international, national, regional or local markets for any fuel
used at the Purchased Assets, (iii) any change or effect resulting from changes
in the North American, national, regional or local electric transmission
systems, and (iv) any materially adverse change in or effect on the Purchased
Assets which is cured (including by the payment of money) by the Seller before
the Termination Date.

       (36)   "MDTE" means the Massachusetts Department of Telecommunications
and Energy.

       (37)   "NPDES" means the National Pollutant Discharge Elimination System.

       (38)   "PERMITTED ENCUMBRANCES" means, where applicable, (i) those
Encumbrances set forth in Schedule 1.1(a)(38); (ii) the Easements; (iii) those
exceptions to title regarding the Purchased Assets listed in Schedule 5.6: (iv)
all exceptions, restrictions, covenants, easements, charges, rights of way and
monetary and non-monetary encumbrances which are matters of record, including,
without limitation, those matters set forth in the Specimen Title Policy, except
for such encumbrances which secure indebtedness; (v) with respect to any date
before the Closing Date, Encumbrances created by the Indenture or any
indebtedness: (vi) Encumbrances incurred in connection with the Seller's
purchase of properties or assets after the date of its Seller Financial
Statement securing all or a portion of the purchase price therefor: (vii)
statutory liens for current taxes or assessments not yet due or delinquent or
the validity of which is being contested in good faith by appropriate
proceedings; (viii) mechanics', carriers', workers', repairers' and other
similar liens arising or incurred in the ordinary course of business relating to
obligations as to which there is no default on the part of the Seller or the
validity of which are being contested in good faith by appropriate proceedings:
(ix) zoning, entitlement, conservation restriction, order of conditions and
other land use and environmental regulations by governmental authorities: and
(x) such other liens, imperfections in or failure of title, charges, easements,
restrictions and encumbrances which do not materially detract from the value of
the Purchased Assets as currently used or

                                        6

<PAGE>   7

materially interfere with the present use of the Purchased Assets and do not, in
the aggregate, have a Material Adverse Effect.

       (39)   "PERSON" means any individual, a partnership, a limited liability
company, a joint venture, a corporation, a trust, an unincorporated organization
and a governmental entity or any department or agency thereof.

       (40)   "PURCHASED ASSETS" means the assets set forth on Schedule
1.1(a)(40) hereto.

       (41)   "RELEASE" means release, spill, leak, discharge, dispose of, pump,
pour, emit, empty, inject, leach, dump or allow to escape into or through the
environment.

       (42)   "RETAIL COMPANIES" means, as applicable, each, any or all of
Blackstone Valley Electric Company, Eastern Edison Company and Newport Electric
Corporation.

       (43)   "RIPUC" means the Rhode Island Public Utilities Commission.

       (44)   "SCHEDULED MAINTENANCE AND CAPITAL EXPENDITURES AMOUNT" means the
aggregate amount, if any, of all funds actually expended on, or for which
liabilities were accrued with respect to, Maintenance Expenditures and Capital
Expenditures by the Seller during the period beginning on the date hereof and
ending on the Closing Date.

       (45)   "SEC" means the Securities and Exchange Commission.

       (46)   "SECURITIES ACT" means the Securities Act of 1933, as amended.

       (47)   "SELLER'S AGREEMENTS" means those agreements listed on Schedule
5.14(a), the Collective Bargaining Agreement and the Memorandum of
Understanding.

       (48)   "SETTLEMENT AGREEMENTS" means any agreement or agreements that
have been approved by the MDTE in Docket No. 96-24, RIPUC in Docket Nos. 2514
and 2592 and by the FERC in Docket Nos. ER97-2800-000. ER97-3127-000,

                                        7

<PAGE>   8

ER97-2338-000 and ER97-3200-000, together with all conditions, terms or
modifications imposed by those agencies.

       (49)   "SPECIMEN TITLE POLICY" means for those Purchased Assets
constituting Real Estate, the commitments for title insurance issued by Lawyers
Title Insurance Corporation, a copy of which is attached at Scheduled 5.12
hereto.

       (50)   "STANDARD OFFER SERVICE" means the electric service, if any,
required to be provided by one or more of the Retail Companies to its retail
customers who do not elect to purchase electricity from an alternative supplier
in the market.

       (51)   "SUBSIDIARY" when used in reference to any other Person means any
entity of which outstanding securities having ordinary voting power to elect a
majority of the Board of Directors or other Persons performing similar functions
of such entity are owned directly or indirectly by such other Person.

       (52)   "TAXES" means all taxes, charges, fees, levies, penalties or other
assessments imposed by any United States federal, state or local or foreign
taxing authority, including, but not limited to, income, excise, property,
sales, transfer, franchise, payroll, withholding, social security or other
taxes, including any interest, penalties or additions attributable thereto.

       (53)   "TAX RETURN" means any return, report, information return or other
document (including any related or supporting information) required to be
supplied to any authority with respect to Taxes.

       (54)   "TRANSFERABLE PERMITS" means those Permits and Environmental
Permits set forth in Schedule 1.1(a)(54).

       (55)   "WARN ACT" means the Federal Worker Adjustment Retraining and
Notification Act of 1988.

       (56)   "WHOLESALE STANDARD OFFER SERVICE AGREEMENT" means the Wholesale
Standard Offer Service Agreement between the Retail Companies and the Buyer,
substantially in the form of Exhibit E hereto, relating to Standard Office
Service.

       (b)    Each of the following terms has the meaning specified in the
Section or Schedule set forth opposite such term:

                                       8
<PAGE>   9

<PAGE>   10

<TABLE>
<CAPTION>
         Term                                                Section/Schedule
         ----                                                ----------------
<S>                                                          <C>
         Adjustment Amount                                   Schedule 3.2
         Adjustment Assets                                   3.2(a)
         Adjustment Statement                                3.2(a)
         Assumed Liabilities                                 2.3
          Benefit Plans                                      5.11(a)
          Buyer                                              Recitals
          Buyer Benefit Plans                                7.10
         Buyer Employee                                      7.10
         Buyer Required Regulatory Approvals                 6.3(b)
         Buyer Window                                        7.10
         CB Employees                                        7.10
         CDPUC                                               Schedule 5.3(b)
         Closing                                             4.1
         Closing Amount                                      3.1
         Closing Conditions                                  4.1
         Closing Date                                        4.1
         Coles River Water Line                              5.12
         Collective Bargaining Agreement                     7.10
         Direct Claim                                        9.2(c)
         Employees                                           7.10
         Environmental Permits                               5.9(a)
         Excluded Assets                                     2.2
         Excluded Liabilities                                2.4
         Final Order                                         8.1(c)
         Indemnifiable Loss                                  9.1(a)
         Indemnifying Party                                  9.1(d)
         Indemnitee                                          9.1(c)
         Independent Appraiser                               3.3
         Inventory Adjustment Amount                         Schedule 3.2
         Memorandum of Understanding                         7.10
         MePUC                                               Schedule 5.3(b)
         Montaup Employees                                   7.10
         Non-Union Buyer Employees                           7.10
         NRC                                                 Schedule 5.3(b)
         Permitted Policy Exceptions                         8.2(f)
         Permits                                             5.16(a)
         Prior Welfare Plans                                 7.10
</TABLE>

                                       9
<PAGE>   11

<TABLE>
<S>                                                          <C>
         Purchase Price                                      3.1
         Real Estate                                         5.12
         Remediaton Adjustment Amount                        Schedule 3.2
         Replacement Welfare Plans                           7.10
         Seller                                              Recitals
         Seller Financial Statements                         5.4
         Seller Required Regulatory Approvals                5.3(b)
         Somerset Station                                    Schedule 1.1(a)(40)
         Termination Date                                    10.1(b)
         Third Party Claim                                   9.2(a)
         UWUA                                                7.10
</TABLE>

                                   ARTICLE II

                                PURCHASE AND SALE

       2.1 THE SALE. Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement, at the Closing the Seller will sell,
assign, convey, transfer and deliver to the Buyer, and the Buyer will purchase
and acquire from the Seller, free and clear of all Encumbrances (except for
Permitted Encumbrances), all of the Seller's right, title -and interest in, to
and under the Purchased Assets.

       2.2 EXCLUDED ASSETS. Notwithstanding any provision herein to the
contrary, the Purchased Assets shall not include the rights and assets,
described or referred to in Schedule 2.2 (herein referred to as the "EXCLUDED
ASSETS").

       2.3 ASSUMED LIABILITIES. On the Closing Date, the Buyer shall assume and
agree to discharge, pursuant to the Instrument of Assumption, and to the fullest
extent permitted by law, all of the liabilities and obligations of the Seller,
direct or indirect, known or unknown, absolute or contingent which principally
relate to the Purchased Assets, including, without limitation, such liabilities
and obligations described or referred to in Schedule 2.3. All of such
liabilities and obligations to be assumed by the Buyer under this Section 2.3
(excluding any Excluded Liabilities) are referred to herein as the "ASSUMED
LIABILITIES." It is understood and agreed that nothing in this Section 2.3 shall
constitute a waiver or release of any claims arising out of the contractual
relationships between the Seller and the Buyer.

                                       10
<PAGE>   12

       2.4 EXCLUDED LIABILITIES. The Buyer shall not assume or be obligated to
pay, perform or otherwise discharge the liabilities or obligations set forth on
Schedule 2.4. All such liabilities and obligations not being assumed pursuant to
this Section 2.4 are herein called the "EXCLUDED LIABILITIES."

                                   ARTICLE III

                                 PURCHASE PRICE

       3.1 PURCHASE PRICE. The purchase price for the Purchased Assets shall be
the sum of (i) $54,750,000 and (ii) the Adjustment Amount (the "PURCHASE
PRICE").

       3.2 PURCHASE PRICE ADJUSTMENT. (a) Within sixty (60) days after the
Closing, the Seller shall prepare and deliver to the Buyer a statement (the
"ADJUSTMENT STATEMENT") with respect to any adjustment to the Purchase Price in
respect of the Purchased Assets and other items set forth on Schedule 3.2 (the
"ADJUSTMENT ASSETS"). The Adjustment Statement shall be prepared using the same
generally accepted accounting principles, policies and methods -as the Seller
has historically used in connection with the calculation of the value of the
Adjustment Assets reflected on such Adjustment Statement. The Buyer agrees to
cooperate with the Seller in connection with the preparation of the Adjustment
Statement and related information, and shall provide to the Seller such hooks,
records and information as may be reasonably requested from time to time.

       (b)    The Buyer may dispute all or a part of the Adjustment Amount:
provided, however, that the Buyer shall notify the Seller in writing of the
disputed amount, and the basis of such dispute, within thirty (30) days of the
Buyer's receipt of the Adjustment Statement. In the event of a dispute with
respect to any part of the Adjustment Amount, the Buyer and the Seller shall
attempt to reconcile their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive on the parties. If the
Buyer and the Seller are unable to reach a resolution of such differences within
thirty (30) days of receipt of the Buyer's written notice of dispute to the
Seller, the Buyer and the Seller shall submit the amounts remaining in dispute
for determination and resolution to the Independent Accounting Firm, which shall
be instructed to determine and report to the parties, within thirty (30) days
after such submission, upon such remaining disputed amounts, and such report
shall be final, binding and conclusive on the parties hereto

                                       11
<PAGE>   13

with respect to the amounts disputed. The fees and disbursements of the
Independent Accounting Firm shall be allocated between the Buyer and the Seller
so that the Buyer's share of such fees and disbursements shall be in the same
proportion that the aggregate amount of such remaining disputed amounts so
submitted by the Buyer to the Independent Accounting Firm that is unsuccessfully
disputed by the Buyer (as finally determined by the Independent Accounting Firm)
bears to the total amount of such remaining disputed amounts so submitted by the
Buyer to the Independent Accounting Firm.

       (c)    Within thirty (30) days after the Buyer's receipt of the
Adjustment Statement the Buyer shall pay all undisputed amounts or if there is a
dispute with respect to any amount on such Adjustment Statement within five (5)
Business Days after the final determination of any amounts on the Adjustment
Statement, the Buyer shall pay to the Seller an amount equal to the disputed
Adjustment Amount as finally determined to be payable with respect to the
Adjustment Statement. All Adjustment Statement payments shall be less the
Estimated Adjustment Amount: provided, however, that if such amount shall be
less than zero then the Seller will pay to the Buyer the amount by which such
amount is less than zero. Any amount paid under this Section 3.2(c) shall be
paid with interest for the period commencing on the Closing Date through the
date of payment, calculated at the prime rate of BankBoston in effect on the
Closing Date, and in cash by federal or other wire transfer of immediately
available funds.

       3.3 ALLOCATION OF PURCHASE PRICE. The Buyer and the Seller shall use
their good faith efforts to agree to allocate the Purchase Price to the
Purchased Assets within forty-five (45) days of the date of this Agreement The
Buyer and the Seller may jointly agree to obtain the services of an independent
engineer or appraiser (the "INDEPENDENT APPRAISER") to assist the parties in
determining the fair value of the Purchased Assets for purposes of such
allocation. If such an appraisal is made, both the Buyer and the Seller agree to
accept the Independent Appraiser's determination of the fair value of the
Purchased Assets. The parties shall jointly select the Independent Appraiser.
The cost of the appraisal shall be borne equally by the Buyer and the Seller.
Each of the Buyer and the Seller agrees to file Internal Revenue Service Form
8594, and all federal, state, local and foreign Tax Returns, in accordance with
such agreed allocation. Each of the Buyer and the Seller shall report the
transactions contemplated by the Agreement for federal Income Tax and all other
tax purposes in a manner consistent with the allocation determined pursuant to
this Section 3.3. Each of the Buyer and the Seller agrees to provide the other
promptly with any other information required to complete Form 8594. Each of the
Buyer and the Seller shall

                                       12
<PAGE>   14

notify and provide the other with reasonable assistance in the event of an
examination, audit or other proceeding regarding the agreed upon allocation of
the Purchase Price.

       3.4 PRORATION. The Buyer and the Seller agree that all of the items
normally prorated, including those listed on Schedule 3.4 relating to the
Purchased Assets, will be prorated as of the Closing Date, with the Seller
liable to the extent such items relate to any time period through the Closing
Date, and the Buyer liable to the extent such items relate to periods subsequent
to the Closing Date.

       In connection with any proration under this Section 3.4, in the event
that actual figures are not available at the Closing Date, the proration shall
be based upon the actual figures for the preceding year (or appropriate period)
for which such figures are available and such amounts shall be reprorated upon
request of either the Seller, on the one hand, or the Buyer, on the other hand,
made within sixty (60) days of the date that the actual amounts become
available. The Seller and the Buyer agree to furnish each other with such
documents and other records as may be reasonably requested in order to confirm
all adjustment and proration calculations made pursuant to this Section 3.4.

                                   ARTICLE IV

                                   THE CLOSING

       4.1 TIME AND PLACE OF CLOSING. Upon the terms and subject to the
satisfaction of the conditions contained in Article VIII of this Agreement (the
"CLOSING CONDITIONS"), the closing of the sale of the Purchased Assets
contemplated by this Agreement (the "CLOSING") will take place at the offices of
McDermott, Will & Emery, 75 State Street, Suite 1700, Boston, MA 02109-1807 at
10:00 A.M. (local time) on such date as the parties may agree, which date is as
soon as practicable, but no later than fifteen (15) Business Days, following the
date on which all of the Closing Conditions have been satisfied or waived; or at
such other place or time as the parties may agree; provided, however, that the
Closing Date shall be deemed to occur at midnight on the last day of the month
in which the Closing occurs. The date and time at which the Closing actually
occurs is hereinafter referred to as the "CLOSING DATE."

                                       13
<PAGE>   15

       4.2 PAYMENT OF PURCHASE PRICE. Upon the terms and subject to the
satisfaction of the conditions contained in this Agreement, in consideration of
the aforesaid sale, assignment, conveyance, transfer and delivery of the
Purchased Assets, the Buyer will pay or cause to be paid to the Seller the
Purchase Price.

       4.3 DELIVERIES BY SELLER. At the Closing, the Seller will deliver to the
Buyer the following items:

       (a)    A Bill of Sale, duly executed by the Seller for the personal
property included in the Purchased Assets;

       (b)    All consents, waivers or approvals with respect to the Purchased
Assets or the consummation of the transactions connected to the sale of the
Purchased Assets, as the case may be, contemplated by this Agreement, to the
extent specifically required hereunder;

       (c)    Each Ancillary Agreement associated with the sale of the Purchased
Assets, duly executed by the Seller;

       (d)    An opinion of counsel and certificate (as contemplated by Section
8.2) with respect to the Purchased Assets;

       (e)    One or more deeds for conveyance of the Real Estate (substantially
as set forth in Schedule 5.12 hereto) constituting part of the Purchased Assets
to the Buyer, reserving the Easements (if not contained in a separate document),
with quitclaim covenants but no other covenants or warranty of title, duly
executed and acknowledged by the Seller and in recordable form;

       (f)    A FIRPTA Affidavit executed by the Seller;

       (g)    All such other instruments of assignment or conveyance as shall,
in the reasonable opinion of the Buyer and its counsel, be necessary to transfer
to the Buyer the Purchased Assets in accordance with this Agreement and where
necessary or desirable, in recordable form; and

       (h)    Such other agreements, documents, instruments and writings as are
required to be delivered by the Seller at or prior to the Closing Date pursuant
to this Agreement or otherwise required in connection herewith.

                                       14
<PAGE>   16

       4.4 DELIVERIES BY THE BUYER. At the Closing, the Buyer will deliver to
the Seller the following items:

       (a)    Closing Amount by wire transfer of immediately available funds or
such other means as are agreed upon by the Seller and the Buyer:

       (b)    Each Ancillary Agreement associated with the sale of the Purchased
Assets, duly executed by the Buyer;

       (c)    An opinion of counsel and certificate (as contemplated by Section
8.3) with respect to the Purchased Assets;

       (d)    The Instrument of Assumption with respect to the Assumed
Liabilities, duly executed by the Buyer;

       (e)    All such other instruments of assumption as shall, in the
reasonable opinion of the Seller and its counsel, be necessary for the Buyer to
assume the Assumed Liabilities in accordance with this Agreement; and

       (f)    Such other agreements, documents, instruments and writings as are
required to be delivered by the Buyer at or prior to the Closing Date pursuant
to this Agreement, in connection with the conveyance of any of the Real Estate
(including the delineation of the rights of the Seller and the Buyer therein, to
the satisfaction of the Seller in its sole discretion) or otherwise required in
connection herewith.

                                    ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

       The Seller represents and warrants to the Buyer as follows (all such
representations and warranties, except those regarding the Seller, being made to
the best knowledge of the Seller):

       5.1 ORGANIZATION; QUALIFICATION. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Massachusetts and has all requisite corporate power and authority to own, lease,
and operate its properties and to carry on its business as is now being
conducted. The

                                       15
<PAGE>   17

Seller is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except in each case in those jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect.

       5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The Seller has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of the Seller and no other
corporate proceedings on the part of the Seller are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by the Seller, and assuming
that this Agreement constitutes a valid and binding agreement of the Buyer,
subject to the receipt of the Seller Required Regulatory Approvals and the Buyer
Required Regulatory Approvals, constitutes a valid and binding agreement of the
Seller, enforceable against the Seller in accordance with its terms, except that
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally or general principles of equity.

       5.3 CONSENTS AND APPROVALS: NO VIOLATION. (a) Except for such notices or
approvals set forth on Schedule 5.3(a), and other than obtaining the Seller
Required Regulatory Approvals and the Buyer Required Regulatory Approvals,
neither the execution and delivery of this Agreement by the Seller nor the sale
by the Seller of the Purchased Assets pursuant to this Agreement will (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws (or other similar governing documents) of the Seller,
(ii) require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, except (x) where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not have a Material Adverse Effect or
(y) for those requirements which become applicable to the Seller as a result of
the specific regulatory status of the Buyer (or any of its Affiliates) or as a
result of any other facts that specifically relate to the business or activities
in which the Buyer (or any of its Affiliates) is or proposes to be engaged:
(iii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement or other instrument
or obligation to which

                                       16
<PAGE>   18

the Seller is a party or by which the Seller, or any of the Purchased Assets may
be bound, except for such defaults (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained or
which, in the aggregate would not have a Material Adverse Effect or (iv) violate
any order writ injunction decree statute rule or regulation applicable to the
Seller or any of its assets which violation would have a Material Adverse
Effect.

       (b)    Except for such notices or approvals set forth on Schedule 5.3(b)
(the "SELLER REQUIRED REGULATORY APPROVALS"), no declaration, filing or
registration with, or notice to, or authorization, consent or approval of any
governmental or regulatory body or authority is necessary for the consummation
by the Seller of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not obtained or made, will not, in the aggregate, have a
Material Adverse Effect.

       5.4 UNDISCLOSED LIABILITIES. Except as set forth in Schedule 5.4, the
Seller has no liability or obligation relating to the business or operations of
the Purchased Assets, secured or unsecured (whether absolute, accrued,
contingent or otherwise, and whether due or to become due), of a nature required
by generally accepted accounting principles to be reflected in a corporate
balance sheet or disclosed in the notes thereto, which are not accrued or
reserved against in the financial statements of the Seller as of December 31,
1997 (which financial statements (collectively, the "SELLER FINANCIAL
STATEMENTS") have been made available to the Buyer) or disclosed in the notes
thereto in accordance with generally accepted accounting principles, except
those which either were incurred in the ordinary course of business, whether
before or after December 31, 1997, or those which in the aggregate are not
material to the business or operations of the Purchased Assets.

       5.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except (i) as set forth in
Schedule 5.5, or in the reports, schedules, registration statements and
definitive proxy statements filed by the Seller or EUA with the SEC and (ii) as
otherwise contemplated by this Agreement, since December 31, 1997, there has not
been: (a) any Material Adverse Effect with respect to the Purchased Assets; (b)
any damage to, destruction of, or casualty loss with respect to, the Purchased
Assets, whether covered by insurance or not, which had a Material Adverse
Effect; (c) any entry into any agreement, commitment or transaction (including,
without limitation, any borrowing, capital expenditure or capital financing) by
the Seller, which is material to the business or operations of the Purchased
Assets, except agreements, commitments or transactions in the ordinary course of
business or as contemplated herein; or

                                       17
<PAGE>   19

(d) any change by the Seller, with respect to the Purchased Assets, in
accounting methods, principles or practices except as required or permitted by
generally accepted accounting principles.

       5.6 TITLE AND RELATED MATTERS. Except as set forth in Schedules 5.6 and
5.12 and except for Permitted Encumbrances, the Seller has insurable title as
specified in the Specimen Title Policy to each of the Purchased Assets
constituting Real Estate. Except as set forth in Schedule 5.6 and except for
Permitted Encumbrances, the Seller has valid title to the other Purchased Assets
which it purports to own that are reflected in the Seller Financial Statements
(other than those which have been disposed of since the date thereof in the
ordinary course of business), free and clear of all Encumbrances.

       5.7 LEASES. Schedule 5.7 lists, as of the date of this Agreement, all
real property leases, if any, under which the Seller is a lessee or lessor and
which are to be transferred and assigned to the Buyer on the Closing Date.
Except as set forth in Schedule 5.7, to the Seller's knowledge, all such leases
are valid, binding and enforceable in accordance with their terms, and are in
full force and effect; there are no existing material defaults by the Seller
thereunder; and no event has occurred which (whether with or without notice,
lapse of time or both) would constitute a material default by a Seller
thereunder.

       5.8 INSURANCE. Except as set forth in Schedule 5.8, all material policies
of fire, liability, workmen's compensation and other forms of insurance owned or
held by the Seller and insuring the Purchased Assets are in full force and
effect, all premiums with respect thereto covering all periods up to and
including the date as of which this representation is being made have been paid
(other than retroactive premiums which may be payable with respect-to
comprehensive general liability and workmen's compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. Except as described in Schedule 5.8, as of the
date of this Agreement, the Seller has not been refused any insurance with
respect to the Purchased Assets nor has its coverage been limited by any
insurance carrier to which it has applied for any such insurance or with which
it has carried insurance during the last five (5) years.

       5.9 ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 5.9 or in any
public filing by the Seller or EUA pursuant to the Securities Act or the

                                       18
<PAGE>   20

Exchange Act or with any federal, state or local governmental authority having
jurisdiction in the matter:

       (a)    The Seller holds, and is in substantial compliance with, all
material permits, licenses and governmental authorizations ("ENVIRONMENTAL
PERMITS") required for the Seller to conduct the business and operations of the
Purchased Assets under applicable Environmental Laws, and the Seller is
otherwise in compliance with applicable Environmental Laws with respect to the
business and operations of the Purchased Assets except for such failures to hold
or comply with required Environmental Permits, or such failures to be in
compliance with applicable Environmental Laws, which, in the aggregate, are not
reasonably likely to have a Material Adverse Effect with respect to the
Purchased Assets;

       (b)    The Seller has not received any written request for information,
or been notified that it is a potentially responsible party, under CERCLA or any
similar State law with respect to any Real Estate on which the Purchased Assets
are located which has not be resolved or otherwise remedied; and

       (c)    The Seller has not entered into or agreed to any consent decree or
order, and is not subject to any judgment, decree, or judicial order relating to
compliance with any Environmental Law or to investigation or cleanup of
Hazardous Substances under any Environmental Law which has not been resolved or
otherwise remedied, in each case affecting or relating to the Purchased Assets.

The representations and warranties made in this Section 5.9 are the exclusive
representations and warranties of the Seller relating to environmental matters.

       5.10 LABOR MATTERS. The Seller has previously delivered to the Buyer
copies of all collective bargaining agreements, including the Collective
Bargaining Agreement and the Memorandum of Understanding, to which the Seller is
a party and which relate to the business or operations of the Purchased Assets.
Except to the extent set forth in Schedule 5.10 and except for such matters as
will not have a Material Adverse Effect, to the Seller's knowledge: (a) the
Seller is in compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and hours;
(b) the Seller has not received notice of any unfair labor practice complaint
against the Seller pending before the National Labor Relations Board; (c) there
is no labor strike, slowdown or stoppage actually pending or threatened against
or affecting the Seller; (d) the Seller has not received notice that any
representation petition respecting the employees of the Seller

                                       19
<PAGE>   21

has been filed with the National Labor Relations Board: (e) no arbitration
proceeding arising out of or under collective bargaining agreements is pending
against the Seller; and (0 the Seller has not experienced any primary work
stoppage since 1973.

       5.11 ERISA; BENEFIT PLANS. (a) Schedule 5.11(a) lists all Employee Plans
and Benefit Arrangements sponsored, maintained or with respect to which
contributions are made by the Seller with respect to individuals employed at the
Purchased Assets (collectively, "BENEFIT PLANS"). Accurate and complete copies
of all Benefit Plans, and all summary plan descriptions, actuarial reports and
financial statements, as applicable, with respect to the Benefit Plans within
the last year have been made available the Buyer.

       (b)    The Seller and its ERISA Affiliates have fulfilled their
respective obligations under the minimum funding requirements of Section 302 of
ERISA, and Section 412 of the Code, with respect to each Benefit Plan which is
an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
each such plan is in compliance with the-presently applicable provisions of
ERISA and the Code, except where failure to so comply would not have a Material
Adverse Effect. The Seller has not incurred any liability under Section 4062(b)
of ERISA to the Pension Benefit Guaranty Corporation in connection with any
Benefit Plan which is subject to Title IV of ERISA.

       (c)    The Internal Revenue Service has issued a letter to each Benefit
Plan which is intended to qualify for favorable tax treatment under Section
401(a) of the Code that such plan (and its related trust) is exempt from United
States Federal Income Tax under Sections 40 1(a) and 50 1(a) of the Code, and,
to the Seller's knowledge, there has been no occurrence since the date of any
such determination letter which has adversely affected such qualification.

       (d)    Neither the Seller nor any ERISA Affiliate has contributed to a
"multiemployer plan" (as defined in Section 400 1(a)(3) of ERISA) at any time.

       (e)    Neither the Seller nor any ERISA Affiliate has engaged in a
transaction within the meaning of Section 4069 or Section 42 12(c) of ERISA.

       (f)    With respect to each "group health plan" within the meaning of
Section 5000(b)(1) of the Code, the Seller has complied in good faith with the
notice and continuation requirements of Section 4980B of the Code and the
regulations thereunder.

                                       20
<PAGE>   22

       5.12 REAL ESTATE. Schedule 5.12 contains a description of any real
property owned by the Seller and included in the Purchased Assets (the "REAL
ESTATE"). Schedule 5.12 also describes any indebtedness secured by a mortgage or
any other Encumbrance on the Real Estate and sets forth the Specimen Title
Policy. Complete and correct copies of any current surveys in the Seller's
possession or any commitments for title insurance currently in force and in the
possession of the Seller with respect to such real property have heretofore been
delivered by the Seller to the Buyer. The Coles River Water Line described in
paragraph 1 of Schedule 5.6 (the "COLES RIVER WATER LINE") is located entirely
in public rights of way of the Towns of Somerset and Swansea and under a state
highway owned and maintained by the State of Massachusetts, except for that part
of the Coles River Water Line located on the Seller's property over which an
easement will be granted to the Buyer at Closing.

       5.13 CONDEMNATION. Except as set forth in Schedules 5.13 and 5.6, neither
the whole nor any part of the Real Estate or any other real property or rights
leased, used or occupied by the Seller in connection with the ownership or
operation of the Purchased Assets is subject to any pending suit for
condemnation or other taking by any public authority, and, to the knowledge of
the Seller, no such condemnation or other taking has been threatened.

       5.14 CERTAIN CONTRACTS AND ARRANGEMENTS. (a) Except (i) as listed in
Schedule 5.14(a) or any other Schedule to this Agreement, (ii) for contracts,
agreements, personal property leases, commitments, understandings or instruments
which will expire prior to the Closing Date and (iii) for agreements with
suppliers entered into in the ordinary course of business in accordance with
good utility practice, the Seller is not a party to any written contract,
agreement, personal property lease, commitment, understanding or instrument
which is material to the business or operations of the Purchased Assets.

       (b)    Except as set forth in Schedule 5.14(b) each of the material
Seller's Agreement (i) constitutes a valid and binding obligation of the Seller
and to the best knowledge of the Seller constitutes a valid and binding
obligation of the other parties thereto (ii) is in full force and effect and
(iii) may be transferred to the Buyer pursuant to this Agreement and will
continue in full force and effect thereafter, in each case without breaching the
terms thereof or resulting in the forfeiture or impairment of any rights
thereunder.

                                       21
<PAGE>   23

       (c)    Except as set forth in Schedule 5.14(c), there is not, under any
of the Seller's Agreements, any default or event which, with notice or lapse of
time or both, would constitute a default on the part of the Seller, except such
events of default and other events as to which requisite waivers or consents
have been obtained or which would not, in the aggregate, have a Material Adverse
Effect.

       5.15 LEGAL PROCEEDINGS, ETC. Except as set forth in Schedule 5.15, there
are no claims, actions, proceedings or investigations pending or, to the
Seller's knowledge, threatened against or relating to the Seller before any
court, governmental or regulatory authority or body acting in an adjudicative
capacity, which, if adversely determined, would have a Material Adverse Effect.
Except as set forth in Schedule 5.15, the Seller is not subject to any
outstanding judgment, rule, order, writ, injunction or decree of any court,
governmental or regulatory authority which has a Material Adverse Effect.

       5.16 PERMITS. (a) The Seller has all material permits, licenses,
franchises and other governmental authorizations, consents and approvals, other
than with respect to Environmental Laws (collectively, "PERMITS") necessary to
operate the business of the Purchased Assets as presently conducted, except
where the failure to have such Permits would not have a Material Adverse Effect.
Except as set forth in Schedule 5.16(a), the Seller has not received any written
notification that it is in violation of any of such Permits, or any law,
statute, order, rule, regulation, ordinance or judgment of any governmental or
regulatory body or authority applicable to it in the operation of the Purchased
Assets, except for notifications of violations which would not, in the
aggregate, have a Material Adverse Effect. The Seller is in compliance with all
Permits, laws, statutes, orders, rules, regulations, ordinances, or judgments of
any governmental or regulatory body or authority applicable to it in the
operation of the Purchased Assets, except for violations which, in the
aggregate, do not have a Material Adverse Effect.

       (b)    Schedule 5.16(b) sets forth all material Permits and Environmental
Permits other than Transferable Permits.

       5.17 REGULATION AS A UTILITY. The Seller is a public utility company
within the meaning of the Holding Company Act. Except as set forth on Schedule
5.17, the Seller is not subject to regulation as a public utility or public
service company (or similar designation) by the United States, any state of the
United States, any foreign country or any municipality or any political
subdivision of the foregoing.

                                       22
<PAGE>   24

       5.18 TAXES. (i) All Tax Returns required to be filed other than those Tax
Returns the failure of which to file would not have a Material Adverse Effect
have been filed, and (ii) all material Taxes shown to be due on such Tax Returns
have been paid in full. Except as set forth in Schedule 5.18, no notice of
deficiency or assessment has been received from any taxing authority with
respect to liabilities for Taxes of such Seller in respect of the Purchased
Assets, which have not been fully paid or finally settled, and any such
deficiency shown in such Schedule 5.18 is being contested in good faith through
appropriate proceedings. Except as set forth in Schedule 5.18, there are no
outstanding agreements or waivers extending the applicable statutory periods of
limitation for Taxes associated with the Power Plants for any period.

       EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS
ARTICLE V, THE PURCHASED ASSETS ARE BEING SOLD AND TRANSFERRED "AS IS, WHERE
IS," AND THE SELLER IS NOT MAKING ANY OTHER REPRESENTATIONS OR WARRANTIES,
WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, CONCERNING SUCH PURCHASED
ASSETS, INCLUDING, IN PARTICULAR, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED.

                                   ARTICLE VI

                   REPRESENTATIONS AND WARRANTIES OF THE BUYER

       The Buyer represents and warrants to the Seller as follows:

       6.1 ORGANIZATION. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority to own, lease and operate its properties and
to carry on its business as is now being conducted. The Buyer has heretofore
delivered to the Seller complete and correct copies of its Charter and Bylaws
(or other similar governing documents), as currently in effect.

       6.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The Buyer has full power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the

                                       23
<PAGE>   25

consummation of the transactions contemplated hereby have been duly and
validly authorized by the Buyer and no other proceedings on the part of the
Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Buyer, and assuming that this Agreement
constitutes a valid and binding agreement of the Seller, subject to the receipt
of the Buyer Required Regulatory Approvals and the Seller Required Regulatory
Approvals, constitutes a valid and binding agreement of the Buyer, enforceable
against the Buyer in accordance with its terms, except that such enforceability
may be limited by applicable bankruptcy, insolvency, moratorium or other similar
laws affecting or relating to enforcement of creditors' rights generally or
general principles of equity.

       6.3 CONSENTS AND APPROVALS; NO VIOLATION. (a) Except as set forth in
Schedule 6.3, and other than obtaining the Buyer Required Regulatory Approvals
and the Seller Required Regulatory Approvals, neither the execution and delivery
of this Agreement by the Buyer nor the purchase by the Buyer of the Purchased
Assets pursuant to this Agreement will (i) conflict with or result in any breach
of any provision of the Charter and Bylaws (or other similar governing
documents) of the Buyer, (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, (iii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, agreement, lease or other instrument or
obligation to which the Buyer or any of its subsidiaries is a party or by which
any of their respective assets may be bound, except for such defaults (or rights
of termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained.

       (b)    Except as set forth in Schedule 6.3 and the filings by the Buyer
and the Seller required by the HSR Act (such filings and approvals are
collectively referred to as the "BUYER REQUIRED REGULATORY APPROVALS"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of any governmental or regulatory body or authority is
necessary for the consummation by the Buyer of the transactions contemplated
hereby.

       6.4 REGULATION AS A UTILITY. Except as set forth in Schedule 6.4, the
Buyer is not subject to regulation as a public utility or public service company
(or similar designation) by the United States, any State of the United States,
any foreign country or any municipality or any political subdivision of the
foregoing.

                                       24
<PAGE>   26

       6.5 AVAILABILITY OF FUNDS. The Buyer has sufficient funds available to it
or has received binding written commitments from responsible financial
institutions to provide sufficient funds (which commitments have been made
available to the Seller) on the Closing Date to pay the Purchase Price.

                                   ARTICLE VII

                            COVENANTS OF THE PARTIES

       7.1 CONDUCT OF BUSINESS OF THE COMPANY. (a) Except as described in
Schedule 7.1, during the period from the date of this Agreement to the Closing
Date, the Seller will operate the Purchased Assets according to its ordinary and
usual course of business consistent with good industry practice. Without
limiting the generality of the foregoing, and, except as contemplated in this
Agreement or as described in Schedule 7. 1. prior to the Closing Date, without
the prior written consent of the Buyer, the Seller will not with respect to the
Purchased Assets:

       (i)    (x) create, incur or assume any material amount of indebtedness
for money borrowed (including obligations in respect of capital leases), other
than in the ordinary course of business and except for Permitted Encumbrances
and indebtedness which does not create any Encumbrance on the Purchased Assets:
or (y) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person except in the ordinary course of business;

       (ii)   make any material change in the levels of fuel inventory and
materials and supplies inventory customarily maintained by the Seller with
respect to the Purchased Assets, except for such changes which are consistent
with good industry practice;

       (iii)  sell, lease (as lessor), transfer or otherwise dispose of, any of
the Purchased Assets, other than assets used, consumed or replaced in the
ordinary course of business consistent with good industry practice, and not
mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of
the Purchased Assets, other than Permitted Encumbrances;

       (iv)   enter into or amend any real or personal property Tax agreement,
treaty or settlement affecting or relating to the Power Plants;

                                       25
<PAGE>   27

       (v)    enter into any power sales commitment that extends beyond December
31, 1998 or such other date as the parties mutually agree to be the date on
which the Closing is expected to occur; or

       (vi)   enter into any written or oral contract, agreement, commitment or
arrangement with respect to any of the transactions set forth in the foregoing
paragraphs (i) through (v).

             (b)   Notwithstanding anything in Section 7.1(a) to the contrary,
the Seller may, in its sole discretion, make (i) Scheduled Maintenance
Expenditures and Capital Expenditures and (ii) such other maintenance and
capital expenditures as the Seller deems necessary.

             (c)   During the period from the date of this Agreement to the
Closing Date, the Seller will not amend any of the Seller's Agreements other
than in the ordinary and usual course of business or with the Buyer's prior
written consent.

       7.2 ACCESS TO INFORMATION. (a) Between the date of this Agreement and the
Closing Date, the Seller will, during ordinary business hours and upon
reasonable notice (i) give the Buyer and the Buyer Representatives reasonable
access to all books, records, plants, offices and other facilities and
properties constituting the Purchased Assets to which the Buyer is permitted
access by law: (ii) permit the Buyer to make such reasonable inspections thereof
as the Buyer may reasonably request: (iii) furnish the Buyer, at the Buyer's
expense, with such financial and operating data and other information in the
Seller's possession with respect to the Purchased Assets as the Buyer may from
time to time reasonably request: (iv) furnish the Buyer, at the Buyer's expense,
a copy of each material report, schedule or other document filed or received by
them with respect to the Purchased Assets with the SEC, MDTE, CDPUC, RIPUC or
FERC: provided, however, that (A) any such investigation shall be conducted in
such a manner as not to interfere unreasonably with the operation of the
Purchased Assets, (B) the Seller shall not be required to take any action which
would constitute a waiver of the attorney-client privilege and (C) the Seller
need not supply the Buyer with any information which the Seller is under a legal
obligation not to supply. Notwithstanding anything in this Section 7.2 to the
contrary, (i) the Seller will only furnish or provide such access to personnel
and medical records, computer or hard copy, as is required by law, and (ii) the
Buyer shall not have the right to perform or conduct any environmental sampling
or testing at, in, on, or underneath the Purchased Assets.

                                       26
<PAGE>   28

       (b)    For a period of ten (10) years after the Closing Date, the Seller
and its representatives shall have reasonable access to all of the books and
records of the Purchased Assets transferred to the Buyer hereunder to the extent
that such access may reasonably be required by the Seller in connection with
matters relating to or affected by the operation of the Purchased Assets prior
to the Closing Date. Such access shall be afforded by the Buyer upon receipt of
reasonable advance notice and during normal business hours. The Seller shall be
solely responsible for any costs or expenses incurred by them pursuant to this
Section 7.2(b). If the Buyer shall desire to dispose of any such books and
records prior to the expiration of such ten-year period, the Buyer shall, prior
to such disposition, give the Seller a reasonable opportunity at the Seller's
expense, to segregate and remove such books and records as the Seller may
select.

       7.3 EXPENSES. Except to the extent specifically provided herein, whether
or not the transactions contemplated hereby are consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the party incurring such costs and
expenses.

       7.4 FURTHER ASSURANCES. (a) Subject to the terms and conditions of this
Agreement, each of the parties hereto will use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the sale of the Purchased Assets pursuant to this
Agreement. Notwithstanding anything in the previous sentence to the contrary,
the Seller and the Buyer shall use their commercially reasonable efforts to
obtain all Permits and Environmental Permits necessary for the Buyer to operate
the Purchased Assets. From time to time after the date hereof, without further
consideration, the Seller will, at its own expense, execute and deliver such
documents to the Buyer as the Buyer may reasonably request in order to more
effectively vest in the Buyer the Seller's title to the Purchased Assets. From
time to time after the date hereof, the Buyer will, at its own expense, execute
and deliver such documents to the Seller as the Seller may reasonably request in
order to more effectively -consummate the sale of the Purchased Assets pursuant
to this Agreement.

       (b)    In the event that any Purchased Asset shall not have been conveyed
to the Buyer at the Closing, the Seller shall use its best efforts to convey
such asset to the Buyer as promptly as is practicable after the Closing. In the
event that any Easement shall not have been retained by the Seller after the
Closing, the
                                       27
<PAGE>   29
Buyer shall use its best efforts to grant such Easement to the Seller as
promptly as is practicable after the Closing.

       (c)    To the extent that the Seller's rights under any Seller's
Agreement may not be assigned without the consent of another Person which
consent has not been obtained, this Agreement shall not constitute an agreement
to assign the same if an attempted assignment would constitute a breach thereof
or be unlawful, and the Seller, at its expense, shall use its commercially
reasonable efforts to obtain any such required consent(s) as promptly as
possible. The Seller and the Buyer agree that if any consent to an assignment of
any Seller's Agreement shall not be obtained or if any attempted assignment
would be ineffective or would impair the Buyer's rights and obligations under
the Seller's Agreement in question so that the Buyer would not in effect acquire
the benefit of all such rights and obligations, the Seller, to the maximum
extent permitted by law and such Seller's Agreement, shall after the Closing
appoint the Buyer to be the Seller's agent with respect to such Seller's
Agreement, and the Seller shall, to the maximum extent permitted by law and such
Seller's Agreement, enter into such reasonable arrangements with the Buyer as
are necessary to provide the Buyer with the benefits and obligations of such
Seller's Agreement. The Seller and the Buyer shall cooperate and shall each use
their commercially reasonable efforts after the Closing to obtain an assignment
of any such Seller's Agreement to the Buyer.

       (d)    The Seller and the Buyer covenant and agree to negotiate and enter
into in good faith such further agreements for operating the Purchased Assets
after the Closing Date as either the Seller or the Buyer may reasonably request.

       7.5 PUBLIC STATEMENTS. The parties shall consult with each other prior to
issuing any public announcement, statement or other disclosure with respect to
this Agreement or the transactions contemplated hereby and shall not issue any
such public announcement, statement or other disclosure prior to such
consultation, except as may be required by law and except that the parties may
make public announcements, statements or other disclosures with respect to this
Agreement and the transactions contemplated hereby to the extent and under the
Circumstances in which the parties are expressly permitted by the
Confidentiality Agreement to make disclosures of "Proprietary Information" (as
defined in the Confidentiality Agreement).

       7.6 CONSENTS AND APPROVALS. (a) The Seller and the Buyer shall each file
or cause to be tiled with the Federal Trade Commission and the United States

                                       28
<PAGE>   30

Department of Justice any notifications required to be tiled under the HSR Act
and the rules and regulations promulgated thereunder with respect to the
transactions contemplated hereby. The parties shall consult with each other as
to the appropriate time of filing such notifications and shall use their best
efforts to make such filings at the agreed upon times, to respond promptly to
any requests for additional information made by either of such agencies, and to
cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date after each date of filing.

       (b)    The Seller and the Buyer shall cooperate with each other and (i)
promptly prepare and file all necessary documentation, (ii) effect all necessary
applications, notices, petitions and filings and execute all agreements and
documents, (iii) use all commercially reasonable efforts to obtain the transfer
or reissuance to the Buyer of all (including obtaining from applicable
government bodies rights reasonably satisfactory to the Buyer in order for the
Buyer to operate, maintain and repair the Coles River Water Line) Transferable
Permits, consents, approvals and authorizations of all governmental bodies and
(iv) use all commercially reasonable efforts to obtain all necessary consents,
approvals and authorizations of all other parties, in the case of each of the
foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to
consummate the transactions contemplated by this Agreement (including, without
limitation, the Seller Required Regulatory Approvals and the Buyer Required
Regulatory Approvals) or required by the terms of any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument to which the Seller or the Buyer is a party or by
which any of them is bound. The Seller shall have the right to review and
approve in advance all characterizations of the information relating to
Purchased Assets, and each of the Seller and the Buyer shall have the right to
review in advance all characterizations of the information relating to the
transactions contemplated by this Agreement which appear in any filing made in
connection with the transactions contemplated hereby.

       7.7 FEES AND COMMISSIONS. The Seller and the Buyer each represent and
warrant to the other that, except for Reed Consulting Group, which is acting for
and at the expense of the Seller, no broker, finder or other Person is entitled
to any brokerage fees, commissions or finder's fees in connection with the
transaction contemplated hereby by reason of any action taken by the party
making such representation. The Seller and the Buyer will pay to the other or
otherwise discharge, and will indemnify and hold the other harmless from and
against, any and all claims or liabilities for all brokerage fees, commissions
and finder's fees (other than as described above) incurred by reason of any
action taken by such party.

                                       29
<PAGE>   31

       7.8 TAX MATTERS. (a) All transfer and sales taxes incurred in connection
with this Agreement and the transactions contemplated hereby shall be borne by
the Buyer, and the Buyer, at its own expense, will file, to the extent required
by applicable law, all necessary Tax Returns and other documentation with
respect to all such transfer or sales taxes, and, if required by applicable law,
the Seller will join in the execution of any such Tax Returns or other
documentation. Prior to the Closing Date, the Buyer will provide to the Seller,
to the extent possible, an appropriate certificate of no Tax due from each
applicable taxing authority.

       (b)    With respect to Taxes to be prorated in accordance with Section
3.4 of this Agreement only, the Buyer shall prepare and timely file all Tax
Returns required to be filed with respect to the Purchased Assets, if any, and
shall duly and timely pay all such Taxes shown to be due on such Tax Returns,
The Buyer's preparation of any such Tax Returns shall be subject to the Seller's
approval, which approval shall not be unreasonably withheld. The Buyer shall
make such Tax Returns available for the Seller's review and approval no later
than 25 Business Days prior to the due date for filing such Tax Return. Within
twenty (20) Business Days after receipt of such Tax Return, the Seller shall pay
to the Buyer their proportionate share of the amount shown as due on such Tax
Return determined in accordance with the Section 3.4 of this Agreement.

       (c)    Each of the Buyer and the Seller shall provide the other with such
assistance as may reasonably be requested by the other party in connection with
the preparation of any Tax Return, any audit or other examination by any taxing
authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the requesting party with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. Any information obtained pursuant to
this Section 7.8(c) or pursuant to any other Section hereof providing for the
sharing of information or review of any Tax Return or other schedule relating to
Taxes shall be kept confidential by the parties hereto.

       7.9 SUPPLEMENTS TO SCHEDULES. Prior to the Closing Date the Seller shall
supplement or amend the Schedules required by Section 2.4 and Article V with
respect to any matter relating to the Purchased Assets hereafter arising which,
if existing or occurring at the date of this Agreement, would have been required
to be set forth or described in such Schedules. No supplement or amendment of
any Schedule made pursuant to this Section shall be deemed to cure any breach of
any

                                       30
<PAGE>   32

representation or warranty made in this Agreement unless the parties agree
thereto in writing.

       7.10 EMPLOYEES. (a) The Buyer may offer employment, effective as of the
Closing Date, to those employees of the Seller who are in a function listed in
Schedule 7.10(a) (collectively, "MONTAUP EMPLOYEES"). All such offers of
employment shall be made (i) in accordance with all applicable laws and
regulations and (ii) in the case of employees represented by a bargaining unit
of the Seller, in accordance with the Collective Bargaining Agreement and the
Memorandum of Understanding. Each individual who becomes employed by the Buyer
pursuant to this Section 7.10 shall be referred to herein as a "BUYER EMPLOYEE."
Buyer may commence offering employment to Montaup Employees beginning thirty
days after the date of this Agreement.

       Except as stipulated in the Memorandum of Understanding or as otherwise
agreed to by the Buyer, the Seller will refrain, and will use its best efforts
to cause its Affiliates to refrain, from offering employment from the date of
this Agreement until the Closing Date (the "BUYER WINDOW") to Montaup Employees.
Thereafter, the Seller and its Affiliates may offer employment to Montaup
Employees who were not offered or did not accept a position with the Buyer
during the Buyer Window.

       For all employees employed by the Seller or its Affiliates other than
Montaup Employees to whom the Buyer wants to offer employment, the Buyer and the
Seller shall mutually agree upon the hiring process, transition and timing
thereof.

       (b)    Schedule 7.10(b) sets forth the collective bargaining agreement,
and amendments thereto, to which the Seller is a party in connection with the
Purchased Assets (the "COLLECTIVE BARGAINING AGREEMENT") and the Memorandum of
Understanding with respect thereto (the "MEMORANDUM OF UNDERSTANDING"). With
respect to Montaup Employees who are included in the collective bargaining units
covered by the Collective Bargaining Agreement ("CB EMPLOYEES"), on the Closing
Date, the Buyer will assume the Collective Bargaining Agreement as it relates to
CB Employees to be employed at the Purchased Assets and comply with all
applicable obligations thereunder and will assume and fulfill all obligations
under the Memorandum of Understanding that are specifically designated for the
new owner of the Purchased Assets, including but not limited to the obligation
of such new owner to recognize the Utility Workers Union of America, AFL-CIO and
Local Union No. 396 (collectively, the "UWUA") as the collective bargaining
agent as long as supported by applicable law.

                                       31
<PAGE>   33

       (c)    The Buyer will make a statement, in writing, to the Seller that it
accepts the Collective Bargaining Agreement and the obligations specifically
designated for the new owner of the Purchased Assets under the Memorandum of
Understanding in effect on the Closing Date. With respect to Montaup Employees
who are represented by the UWUA, severance costs under the Memorandum of
Understanding will be the Seller's responsibility.

       (d)    For the period commencing on the Closing Date and ending twelve
(12) months thereafter, the Buyer shall provide all Buyer Employees (other than
those individuals who previously were CB Employees) (collectively, "NON-UNION
BUYER EMPLOYEES") with salary and benefits reasonably comparable, in the
aggregate, to the salary and benefits provided to Montaup Employees (or to
employees of the Seller or its Affiliates in the event that such employees are
hired by the Buyer pursuant to Section 7.10(a) above) immediately prior to the
Closing Date: provided, however, that in the event the Buyer terminates (other
than for cause) the employment of a Non-Union Buyer Employee during the twelve
month period, the Buyer shall continue to provide such Non-Union Employee full
salary and benefits until the end of such period. The Seller acknowledges that
the Buyer has the right to implement different benefit plans to fulfill the
foregoing requirement. The Buyer further covenants to provide the Seller a
schedule summarizing the benefit package it intends to provide Non-Union Buyer
Employees to satisfy its obligation under this Section 7. 10(d) within
seventy-five days after the signing of this Agreement, but in no event later
than thirty days prior to the Closing. All costs under this Section 7.10(d)
shall be the sole and exclusive responsibility of the Buyer.

       (e)    The Buyer shall notify the Seller in each instance that the Buyer
terminates. within eighteen months of the Closing Date, the employment of a
Non-Union Buyer Employee, and such notice shall state the date that the Buyer
terminated the Non-Union Buyer Employee's employment and be delivered to the
Seller within ten business days of such termination.

       (f)    As of the Closing Date, all Non-Union Buyer Employees shall cease
to participate in the employee welfare benefit plans (as such term is defined in
ERISA) maintained or sponsored by the Seller or its Affiliates (the "PRIOR
WELFARE PLANS") and shall, if applicable, commence to participate in welfare
benefit plans of the Buyer or its Affiliates (the "REPLACEMENT WELFARE PLANS").
The Buyer, at its expense, shall (i) waive all limitations as to pre-existing
condition exclusions and waiting periods with respect to Non-Union Buyer
Employees under the Replacement

                                       32
<PAGE>   34

Welfare Plans, other than, but only to the extent of, limitations or waiting
periods that were in effect with respect to such employees under the Prior
Welfare Plans and that have not been satisfied as of the Closing Date, and (ii)
provide each Non-Union Buyer Employee with credit for any co-payments and
deductibles paid prior to the Closing Date in satisfying any deductible or
out-of-pocket requirements under the Replacement Welfare Plans (on a pro-rata
basis in the event of a difference in plan years).

       (g)    Non-Union Buyer Employees shall be given credit for all service
with the Seller and its Affiliates under all employee benefit plans and
programs, and fringe benefit or other employee benefits arrangements of the
Buyer ("BUYER BENEFIT PLANS") in which they become participants. The service
credit given is for purposes of eligibility, vesting and service related level
of benefits, but not benefit accrual. For purposes of benefit accrual, Non-Union
Buyer Employees shall be given credit for all service with the Seller and its
Affiliates under all Buyer Benefit Plans, but the ultimate benefits provided
under the Buyer Benefit Plans may be offset by those previously provided by the
Seller or benefit plans of the Seller, or by the benefits accrued under the
benefit plans of the Seller or otherwise committed to be provided by the Seller
in the future.

       (h)    The Buyer shall take any and all necessary action to cause the
trustee of a defined contribution plan of the Buyer or one of its Affiliates, if
requested to do so by a Buyer Employee, to accept a direct "rollover" of all or
a portion of said employee's distribution from the Eastern Utilities Associates
Employees' Retirement Plan and Eastern Utilities Associates Employees' Savings
Plan.

       (i)    The Seller agrees to timely perform and discharge all requirements
under the WARN Act and under applicable state and local laws and regulations for
the notification of their employees arising from the sale of the Purchased
Assets to the Buyer up to and including the Closing Date for those employees who
will become Buyer Employees effective as of the Closing Date. After the
applicable Closing Date, the Buyer shall be responsible for performing and
discharging all requirements under the WARN Act and under applicable state and
local laws and regulations for the notification of its employees with respect to
the Purchased Assets.

       7.11 RISK OF LOSS. (a) From the date hereof through the Closing Date, all
risk of loss or damage to the property included in the Purchased Assets shall be
borne by the Seller.

                                       33
<PAGE>   35

       (b)    If, before the Closing Date, all or any portion of the Purchased
Assets are taken by eminent domain (or are the subject of a pending or, to the
knowledge of the Seller, contemplated taking which has not been consummated),
the Seller shall notify the Buyer promptly in writing of such fact. If such
taking would have a Material Adverse Effect, the Buyer and the Seller shall
negotiate in good faith to settle the loss resulting from such taking
(including, without limitation, by making a fair and equitable adjustment to the
Purchase Price) and, upon such settlement, consummate the transaction
contemplated by this Agreement pursuant to the terms of this Agreement. If no
such settlement is reached within sixty (60) days after the Seller's having
notified the Buyer of such taking, then the Buyer or the Seller may terminate
this Agreement pursuant to Section 10.1(1).

       (c)    If before the Closing Date all or any material portion of the
Purchased Assets are damaged or destroyed by fire or other casualty, the Seller
shall notify the Buyer promptly in writing of such fact. If such damage or
destruction would have a Material Adverse Effect and the Seller has not notified
the Buyer of its intention to cure such damage or destruction within fifteen
(15) days after its occurrence, the Buyer and the Seller shall negotiate in good
faith to settle the loss resulting from such casualty (including, without
limitation, by making a fair and equitable adjustment to the Purchase Price)
and, upon such settlement, consummate the transactions contemplated by this
Agreement pursuant to the terms of this Agreement. If no such settlement is
reached within sixty (60) days after the Seller's having notified the Buyer of
such casualty, then the Buyer or the Seller may terminate this Agreement
pursuant to Section 10.1(f).

                                  ARTICLE VIII

                       PURCHASED ASSETS CLOSING CONDITIONS

       8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE PURCHASE
TRANSACTIONS. The respective obligations of each party to effect the sale of the
Purchased Assets shall be subject to the fulfillment at or prior to the Closing
Date of the following conditions:

       (a)    The waiting period under the HSR Act applicable to the
consummation of the sale of the Purchased Assets contemplated hereby shall have
expired or been terminated;

                                       34
<PAGE>   36

       (b)    No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the sale of the
Purchased Assets contemplated hereby shall have been issued and remain in effect
(each party agreeing to use its reasonable best efforts to have any such
injunction, order or decree lifted) and no statute, rule or regulation shall
have been enacted by any state or federal government or governmental agency in
the United States which prohibits the consummation of the sale of the Purchased
Assets;

       (c)    All federal, state and local government consents and approvals
required for the consummation of the sale of the Purchased Assets, including,
without limitation, the Seller Required Regulatory Approvals applicable to the
sale of the Purchased Assets and the Buyer Required Regulatory Approvals
applicable to the sale of the Purchased Assets, shall have been obtained or
become Final Orders (a "Final Order" means a final order after all opportunities
for rehearing are exhausted), and such Final Orders shall not impose materially
adverse terms and conditions unless the failure to obtain such consent or
approval would not result in a Material Adverse Effect; and

       (d)    All consents and approvals for the consummation of the sale of the
Purchased Assets contemplated hereby required under the terms of any note, bond,
mortgage, indenture, contract or other agreement to which the Seller or the
Buyer, or any of their Subsidiaries or Affiliates, are a party shall have been
obtained, other than those (i) which if not obtained, would not, in the
aggregate, have a Material Adverse Effect, or (ii) which are governed by Section
7.4(c).

       8.2 CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the Buyer
to effect the sale of the Purchased Assets contemplated by this Agreement shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:

       (a)    There shall not have occurred and be continuing a Material Adverse
Effect;

       (b)    The Seller shall have performed and complied with in all material
respects the covenants and agreements contained in this Agreement which relate
to the Purchased Assets and are required to be performed and complied with by
the Seller on or prior to the Closing Date, and the representations and
warranties of the Seller which relate to the Purchased Assets and are set forth
in this Agreement

                                       35
<PAGE>   37

shall be true and correct in all material respects as of the date of this
Agreement and as of the Closing Date as though made at and as of the Closing
Date;

       (c)    There shall be no Encumbrances on the Purchased Assets by virtue
of the Indenture;

       (d)    The Buyer shall have received certificates from authorized
officers of the Seller, dated the Closing Date, to the effect that, to the best
of such officers' knowledge, the conditions set forth in Sections 8.2(a), (b)
and (c) have been satisfied;

       (e)    All Transferable Permits shall have been assigned or otherwise
transferred to the Buyer without the imposition, as a result of such assignment
or transfer, of new materially adverse terms and conditions:

       (f)    Lawyers Title Insurance Corporation or its successor shall be
willing to issue to the Buyer (without additional premium to the Buyer for
insurance over matters which are not Permitted Policy Exceptions) an owner's
policy of title insurance with respect to the Real Estate in an amount at least
equal to the Purchase Price with only such exceptions to title (collectively,
the "PERMITTED POLICY EXCEPTIONS") (x) as are indicated in the Specimen Title
Policy as permitted exceptions and (y) such additional exceptions, if any, as
shall not, in the aggregate, materially and adversely impair the marketability
of the Real Estate;

       (g)    The Buyer shall have received an opinion from McDermott, Will &
Emery, counsel for the Seller, dated the Closing Date and satisfactory in form
and substance to the Buyer and its counsel, substantially to the effect that;

       (1)    The Seller is a corporation organized, existing and in good
standing under the laws of its state of incorporation and has the corporate
power and authority to execute and deliver this Agreement and those Ancillary
Agreements which relate to the Purchased Assets and to consummate the
transactions contemplated hereby; and the execution and delivery of this
Agreement and such Ancillary Agreements and the consummation of the sale of the
Purchased Assets contemplated hereby have been duly authorized by all requisite
corporate action taken on the part of the Seller;

       (2)    this Agreement and those Ancillary Agreements which relate to the
Purchased Assets have been executed and delivered by the Seller and (assum-

                                       36
<PAGE>   38

ing that the Seller Required Regulatory Approvals and the Buyer Required
Regulatory Approvals are obtained) are valid and binding obligations of the
Seller, enforceable against the Seller in accordance with their terms, except
(A) that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights, and (B) that the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefore may be brought;

       (3)    the execution, delivery and performance of this Agreement and the
Ancillary Agreements by the Seller will not constitute a violation of the
Certificate of Incorporation or Bylaws (or similar governing documents), as in
effect on the Closing Date, of the Seller;

       (4)    the Bill of Sale and other documents described in Section 4.3 are
in proper form to transfer to the Buyer title to the Purchased Assets; and

       (5)    no declaration, filing or registration with, or notice to, or
authorization, consent or approval of any governmental authority is necessary
for the consummation by the Seller of the Closing other than (i) the Seller
Required Regulatory Approvals, all of such Seller Required Regulatory Approvals
which are applicable to the sale of the Purchased Assets hereunder having been
obtained and being in full force and effect with such terms and conditions as
shall have been imposed by any applicable governmental authority, and (ii) such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not obtained or made, would not, in the aggregate have a
Material Adverse Effect.

       As to any matter contained in such opinion which involves the laws of any
jurisdiction other than the federal laws of the United States or the laws of
Massachusetts, such counsel may rely upon opinions of counsel admitted in such
other jurisdictions. Any opinions relied upon by such counsel as aforesaid shall
be delivered together with the opinion of such counsel. Such opinion may
expressly rely as to matters of fact upon certificates furnished by the Seller
and appropriate officers and directors of the Seller and by public officials.

       8.3 CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the Seller
to effect the sale of the Purchased Assets contemplated by this Agreement shall
be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:

                                       37
<PAGE>   39

       (a)    The Buyer shall have performed in all material respects its
covenants and agreements contained in this Agreement which relate to the
Purchased Assets and are required to be performed on or prior to the Closing
Date;

       (b)    The representations and warranties of the Buyer set forth in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made at and as of the
Closing Date;

       (c)    The Seller shall have received a certificate from an authorized
officer of the Buyer, dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in Sections 8.3(a) and (b)
have been satisfied;

       (d)    The Buyer shall have assumed, as set forth in Section 7.10, all of
the applicable obligations under the Collective Bargaining Agreement and the
Memorandum of Understanding as they relate to union employees to be employed at
or in conjunction with the Purchased Assets after the Closing Date;

       (e)    The approvals by the FERC of the Stipulations and Agreements filed
in FERC Docket No. ER97-3127-000 by and between the Office of the Attorney
General of Massachusetts, the Massachusetts Division of Energy Resources,
Eastern Edison Company and the Seller, dated October 29, 1997: Docket No.
ER97-2800-000 by and between the RIPUC, the Rhode Island Division of Public
Utilities and Carriers, Blackstone Valley Electric Company, the Seller and
Newport Electric Corporation: Docket No. ER97-3127-000 and ER97-2800-000 between
the Seller and the Pascoag Fire District of Rhode Island; Docket No. ER97-3
127-000 and ER97-2800-000 between the Seller and the Gas and Electric Department
-of the Town of Middleborough; and Docket No. ER97-2338-000 between the Seller
and the Taunton Municipal Lighting Plant, Pascoag Fire District of Rhode Island
and the Gas and Electric Department of the Town of Middleborough shall continue
to be in full force and effect; and

       (f)    The Seller shall have received an opinion from counsel for the
Buyer acceptable to the Seller, dated the Closing Date and satisfactory in form
and substance to the Seller and the Seller's counsel, substantially to the
effect that:

       (1)    the Buyer is a limited liability company organized, existing and
in good standing under the laws of the State of Delaware and has the power and

                                       38
<PAGE>   40

authority to execute and deliver this Agreement and those Ancillary Agreements
which relate to the Purchased Assets and to consummate the transactions
contemplated hereby; and the execution and delivery of this Agreement and such
Ancillary Agreements and the consummation of the sale of the Purchased Assets
contemplated hereby have been duly authorized by all requisite action taken on
the part of the Buyer;

       (2)    this Agreement and those Ancillary Agreements which relate to the
Purchased Assets have been executed and delivered by the Buyer and (assuming
that the Seller Required Regulatory Approvals and the Buyer Required Regulatory
Approval are obtained) are valid and binding obligations of the Buyer,
enforceable against the Buyer in accordance with their terms, except (A) that
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights and (B) that the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to certain equitable defenses
and to the discretion of the court before which any proceeding therefore may be
brought;

       (3)    the execution, delivery and performance of this Agreement and the
Ancillary Agreements by the Buyer will not constitute a violation of the
Certificate of Formation or Limited Liability Company Agreement (or other
similar governing documents), as in effect on the Closing Date, of the Buyer;

       (4)    the Instrument of Assumption and other instruments described in
Section 4.4 are in proper form for the Buyer to assume the Assumed Liabilities;
and

       (5)    no declaration, filing or registration with, or notice to, or
authorization, consent or approval of any governmental authority is necessary
for the consummation by the Buyer of the Closing other than the Buyer Required
Regulatory Approvals, all of such Buyer Required Regulatory Approvals which are
applicable to the sale of the Purchased Assets hereunder having been obtained
and being in full force and effect with such terms and conditions as shall have
been imposed by any applicable governmental authority.

       As to any matter contained in such opinion which involves the laws of any
jurisdiction other than the federal laws of the United States and the laws of
Massachusetts, such counsel may rely upon opinions of counsel admitted to
practices in such other jurisdictions. Any opinions relied upon by such counsel
as aforesaid

                                       39
<PAGE>   41

shall be delivered together with the opinion of such counsel. Such opinion may
expressly rely as to matters of facts upon certificates furnished by appropriate
officers and directors of the Buyer and its subsidiaries and by public
officials.

                                   ARTICLE IX

                                 INDEMNIFICATION

       9.1 INDEMNIFICATION. (a) The Seller will indemnify, defend and hold
harmless the Buyer from and against any and all claims, demands or suits (by any
Person), losses, liabilities, damages (including consequential or special
damages), obligations, payments, costs and expenses (including, without
limitation, the costs and expenses of any and all actions, suits, proceedings,
assessments, judgments, settlements and compromises relating thereto and
reasonable attorneys' fees and reasonable disbursements in connection therewith)
to the extent the foregoing are not covered by insurance (each, an
"INDEMNIFIABLE LOSS"), asserted against or suffered by the Buyer relating to,
resulting from or arising out of (i) any breach by the Seller of any covenant or
agreement of the Seller contained in this Agreement, (ii) the Excluded
Liabilities or (iii) any breach by the Seller of any representation or warranty
set forth in Section 5.1, 5.2, 5.3 or 5.17 hereof.

       (b)    The Buyer will indemnify, defend and hold harmless the Seller from
and against any and all Indemnifiable Losses asserted against or suffered by the
Seller relating to, resulting from or arising out of (i) any breach by the Buyer
of any covenant or agreement of the Buyer contained in this Agreement, (ii) the
Assumed Liabilities, or (iii) any breach by the Buyer of any representation or
warranty set forth in Article VI hereof.

       (c)    Any Person entitled to receive indemnification under this
Agreement (an "INDEMNITEE") having a claim under these indemnification
provisions shall make a good faith effort to recover all losses, damages, costs
and expenses from insurers of such Indemnitee under applicable insurance
policies so as to reduce the amount of any Indemnifiable Loss hereunder. The
amount of any Indemnifiable Loss shall be reduced (i) to the extent that
-Indemnitee receives any insurance proceeds with respect to an Indemnifiable
Loss and (ii) to take into account any net Tax benefit recognized by the
Indemnitee arising from the recognition of the Indemnifiable Loss and any
payment actually received with respect to an Indemnifiable Loss.

                                       40
<PAGE>   42

       (d)    The expiration, termination or extinguishment of any covenant or
agreement shall not affect the parties' obligations under this Section 9.1 if
the Indemnitee provided the Person required to provide indemnification under
this Agreement (the "INDEMNIFYING PARTY") with proper notice of the claim or
event for which indemnification is sought prior to such expiration, termination
or extinguishment.

       (e)    Buyer and Seller each agree that notwithstanding any provisions in
this Agreement to the contrary, all parties to this Agreement retain their
remedies at law or in equity with respect to willful or intentional breaches of
this Agreement.

       (f)    The rights and remedies of the Seller and the Buyer under this
Article IX are exclusive and in lieu of any and all other rights and remedies
which the Seller and the Buyer may have under this Agreement or otherwise for
monetary relief with respect to (i) any breach or failure to perform any
covenant, agreement, representation or warranty set forth in this Agreement or
(ii) the Assumed Liabilities or the Excluded Liabilities, as the case may be.

       9.2 DEFENSE OF CLAIMS. (a) If any Indemnitee receives notice of the
assertion of any claim or of the commencement of any claim, action, or
proceeding made or brought by any Person who is not a party to this Agreement or
any Affiliate of a party to this Agreement (a "THIRD PARTY CLAIM") with respect
to which indemnification is to be sought from an Indemnifying Party, the
Indemnitee will give such Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than ten (10) calendar days after the
Indemnitee' s receipt of notice of such Third Party Claim. Such notice shall
describe the nature of the Third Party Claim in reasonable detail and will
indicate the estimated amount, if practicable, of the Indemnifiable Loss that
has been or may be sustained by the Indemnitee. -The Indemnifying Party will
have the right to participate in or, by giving written notice to the Indemnitee,
to elect to assume the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel, and the
Indemnitee will cooperate in good faith in such defense at such Indemnitee's own
expense.

       (b)    If within ten (10) calendar days after an Indemnitee provides
written notice to the Indemnifying Party of any Third Party Claim the Indemnitee
receives written notice from the Indemnifying Party that such Indemnifying Party
has

                                       41
<PAGE>   43

elected to assume the defense of such Third Party Claim as provided in the last
sentence of Section 9.2(a). the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnitee in connection with the
defense thereof: provided, however, that if the Indemnifying Party fails to take
reasonable steps necessary to defend diligently such Third Party Claim within
twenty (20) calendar days after receiving notice from the Indemnitee that the
Indemnitee believes the Indemnifying Party has failed to take such steps, the
Indemnitee may assume its own defense, and the Indemnifying Party will be liable
for all reasonable expenses thereof. Without the prior written consent of the
Indemnitee, the Indemnifying Party will not enter into any -settlement of any
Third Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder. If a firm offer is made to settle a Third
Party Claim without leading to liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnitee to that effect. If the Indemnitee fails to consent to such
firm offer within ten (10) calendar days after its receipt of such notice, the
Indemnitee may continue to contest or defend such Third Party Claim and, in such
event, the maximum liability of the Indemnifying Party as to such Third Party
Claim will be the amount of such settlement offer, plus reasonable costs and
expenses paid or incurred by the Indemnitee up to the date of such notice.

       (c)    Any claim by an Indemnitee on account of an Indemnifiable Loss
which does not result from a Third Party Claim (a "DIRECT CLAIM") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event not later than ten (10)
calendar days after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond to such Direct Claim. If the Indemnifying Party does not respond
within such thirty (30) calendar day period, the Indemnifying Party will be
deemed to have accepted such claim. If the Indemnifying Party rejects such
claim, the Indemnitee will be free to seek enforcement of its rights to
indemnification under this Agreement.

       (d)    If the amount of any Indemnifiable Loss, at any time subsequent to
the making of an indemnity payment in respect thereof, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement or payment by or against any other entity,

                                       42
<PAGE>   44

the amount of such reduction, less any costs, expenses or premiums incurred in
connection therewith (together with interest thereon from the date of payment
thereof at the prime rate then in effect of the Bank of Boston, N.A.), will
promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any
indemnity payment, the Indemnifying Party will, to the extent of such indemnity
payment, be surrogated to all rights of the Indemnitee against any third party
in respect of the Indemnifiable Loss to which the indemnity payment relates;
provided, however, that (i) the Indemnifying Party will then be in compliance
with its obligations under this Agreement in respect of such Indemnifiable Loss
and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss,
any and all claims of the Indemnifying Party against any such third party on
account of said indemnity payment is hereby made expressly subordinated and
subjected in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision hereof,
each such Indemnitee and Indemnifying Party will duly execute upon request all
instruments reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights. Nothing in this Section 9.2(d) shall be
construed to require any party hereto to obtain or maintain any insurance
coverage.

       (e)    A failure to give timely notice as provided in this Section 9.2
will not affect the rights or obligations of any party hereunder except if, and
only to the extent that, as a result of such failure, the party which was
entitled to receive such notice was actually prejudiced as a result of such
failure.

                                    ARTICLE X

                           TERMINATION AND ABANDONMENT

       10.1 TERMINATION. (a) This Agreement may be terminated at any time prior
to the Closing Date by mutual written consent of the Seller and the Buyer.

       (b)    This Agreement may be terminated by the Seller or the Buyer if the
Closing has not occurred on or before the second anniversary of the date of this
Agreement (the "TERMINATION DATE"); provided that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before such date; and
provided, further, that if on the second anniversary of the date of this
Agreement the conditions

                                       43
<PAGE>   45

to the Closing set forth in Section 8.1(c) shall not have -been fulfilled but
all other conditions to the Closing shall be fulfilled or shall be capable of
being fulfilled, then the Termination Date shall be the day which is thirty (30)
months from the date of this Agreement.

       (c)    This Agreement may be terminated by either the Seller or the Buyer
if (i) any governmental or regulatory body, the consent of which is a condition
to the obligations of the Seller or the Buyer to consummate the Closing shall
have determined not to grant its or their consent and all appeals of such
determination shall have been taken and have been unsuccessful, (ii) one or more
courts of competent jurisdiction in the United States or any State shall have
issued an order, judgment or decree permanently restraining, enjoining or
otherwise prohibiting the Closing, and such order, judgment or decree shall have
become final and nonappealable or (iii) any statute, rule or regulation shall
have been enacted by any State or federal government or governmental agency in
the United States which prohibits the consummation of the Closing.

       (d)    This Agreement may be terminated by the Buyer, if there has been a
material violation or breach by the Seller of any agreement, representation or
warranty contained in this Agreement which has rendered the satisfaction of any
condition to the -obligations of the Buyer to effect the Closing impossible and
such violation or breach has not been waived by the Buyer.

       (e)    This Agreement may be terminated by the Seller, if there has been
a material violation or breach by the Buyer of any agreement, representation or
warranty -contained in this Agreement which has rendered the satisfaction of any
condition to the - -obligations of the Seller to effect the Closing impossible
and such violation or breach has not been waived by the Seller.

       (f)    This Agreement may be terminated by either of the Seller or the
Buyer in accordance with the provisions of Section 7.11(b) or (c).

       10.2 PROCEDURE AND EFFECT OF TERMINATION. In the event of termination of
this Agreement and abandonment of the transactions contemplated hereby by either
or both of the parties pursuant to Section 10.1, written notice thereof shall
forthwith be given by the terminating party 'to the other party and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:

                                       44
<PAGE>   46

       (a)    said termination shall be the sole remedy of the parties hereto
with respect to breaches of any agreement, representation or warranty contained
in this Agreement and none of the parties hereto nor any of their respective
trustees, directors, officers or Affiliates, as the case may be, shall have any
liability or further obligation to the other party or any of their respective
trustees, directors, officers or Affiliates, as the case may be, pursuant to
this Agreement, except in each case as stated in this Section 10.2 and in
Sections 7.2(b), 7.3 and 7.7; and

       (b)    all filings, applications and other submissions made pursuant to
this Agreement, to the extent practicable, shall be withdrawn from the agency or
other Person to which they were made.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

       11.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
the Seller and the Buyer.

       11.2 WAIVER OF COMPLIANCE; CONSENTS. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any obligation,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.

       11.3 NO SURVIVAL. Subject to the provisions of Section 10.2, each and
every representation, warranty and covenant contained in this Agreement (other
than the covenants contained in Sections 3.2, 7.2(b), 7.3, 7.4, 7.7, 7.8 and
7.10 and in Articles IX and X (which covenants shall expire in accordance with
their terms), the representations, and warranties contained in Section 5.1, 5.2,
5.3, 5.17 and Article VI (which shall survive the Closing for a period of one
year) and the provisions of this Article XI (which shall survive indefinitely))
shall expire with, and be terminated and extinguished by, the consummation of
the sale of the Purchased Assets and the transfer of the Assumed Liabilities
related thereto pursuant to this Agreement; and

                                       45
<PAGE>   47

none of the Seller, the Buyer or any officer, director, trustee or Affiliate of
any of them shall be under any liability whatsoever with respect to any such
representation, warranty or covenant.

       11.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by facsimile
transmission, telexed or mailed by overnight courier or registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice: provided that notices of a change of address shall be effective
only upon receipt thereof):

                  (a)      If to the Seller, to:

                                    c/o EUA Services Corporation
                                    750 West Center Street
                                    West Bridgewater, MA 02379
                                    Facsimile: (508) 583-8932
                                    Attention:  Manager - Power Resources

                                    with a copy to:

                                    McDermott, Will & Emery
                                    75 State Street
                                    Suite 1700
                                    Boston, MA 62 109-1807
                                    Facsimile:  (617) 345-5077
                                    Attention:  David A. Fazzone, P.C.

                  (b)      if to the Buyer, to:

                                    NRG Energy, Inc.
                                    1221 Nicollet Mall
                                    Minneapolis, MN 55403-2445
                                    Attention: Craig Mataczynski
                                    President, NRG North America
                                    Facsimile: (612) 373-5430

                                    with a copy to:

                                       46
<PAGE>   48

                                    NRG Energy, Inc.
                                    1221 Nicollet Mall
                                    Minneapolis, MN 55403-2445
                                    Attention:  James Bender General Counsel
                                    Facsimile: (612) 373-5392

       11.5 ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
hereto, including by operation of law without the prior written consent of the
other party, nor is this Agreement intended to confer upon any other Person
except the parties hereto any rights or remedies hereunder; except that the
Buyer may assign its rights hereunder to a wholly-owned Subsidiary or Affiliate,
provided that the Buyer will remain liable for all its obligations hereunder.

       11.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts (regardless of the
laws that might otherwise govern under applicable Massachusetts principles of
conflicts of law) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies.

       11.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

       11.8 INTERPRETATION. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.

       11.9 SCHEDULES AND EXHIBITS. All Exhibits and Schedules referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.

       11.10 ENTIRE AGREEMENT. This Agreement, and the Ancillary Agreements,
including the Exhibits, Schedules, documents, certificates and instruments
referred to herein or therein, embody the entire agreement and understanding of
the parties hereto in respect of the transactions contemplated by this
Agreement. There are no restrictions, promises, representations, warranties,
covenants or undertakings,

                                       47
<PAGE>   49

other than those expressly set forth or referred to herein or therein. It is
expressly acknowledged and agreed that there are no restrictions, promises,
representations, warranties, covenants or undertakings contained in any material
made available to the Buyer (including the Information Memorandum, dated April,
1998, previously made available to the Buyer by the Seller and Reed Consulting
Group). This Agreement supersedes all prior agreements and understandings
between the parties with respect to such transactions.

       11.11 BULK SALES OR TRANSFER LAWS. The Buyer acknowledges that the Seller
will not comply with the provision of any bulk sales or transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
The Buyer hereby waives compliance by the Seller with the provisions of the bulk
sales or transfer laws of all applicable jurisdictions.

       11.12 CONFIDENTIALITY. All documents and other papers and other
information given by either party hereto to the other party shall be considered
confidential and shall be used only for the purposes intended. If this Agreement
is terminated without the Closing having taken place, all documents and other
papers of either party which have been delivered to the other party and all
copies, summaries and extracts thereof shall be returned. Whether or not the
Closing takes place, all disclosures made by either party hereto to the other
party shall be treated as confidential and not used by such party for its own
benefit or disclosed to others, except insofar as the information contained in
such disclosures is readily ascertainable from public or published information,
or trade sources, or already known or subsequently developed by such party
independently of such disclosures, or received from a third party not under any
obligation to the party to whom such information pertains and the parties hereto
acknowledge that they and their respective representatives may provide such
documents and other papers and information in response to legal, judicial or
administrative process or applicable governmental, regulatory or administrative
statutes, laws, ordinances, codes, rules, regulations or orders, but only that
portion of the documents and other papers and information which, in the written
opinion of counsel for such party, is legally required to be furnished, and,
provided that such party notifies the other party of any such obligation to
provide any such document or other papers or information prior to such
disclosure and fully cooperates with such other party to protect the
confidentiality of such documents and other papers and information.

                                       48
<PAGE>   50

       IN WITNESS WHEREOF, the Seller and the Buyer have caused this agreement
to be signed by their respective duly authorized officers as of the date first
above written.

                                    MONTAUP ELECTRIC COMPANY

                                    By:  /s/  Kevin A. Kirby
                                       -----------------------------------
                                    Name: Kevin A. Kirby
                                    Title: Vice President

                                    NRG ENERGY, INC.

                                    By:  /s/  Craig Mataczynksi
                                       -----------------------------------
                                    Name: Craig Mataczynski
                                    Title: President, NRG North America

                                       49
<PAGE>   51

                               FIRST AMENDMENT TO

                            ASSET PURCHASE AGREEMENT

       This FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT, dated as of April 26,
1999 (this "Amendment"), among MONTAUP ELECTRIC COMPANY ("Seller") and SOMERSET
POWER LLC ("Buyer").

                                   WITNESSETH:

       WHEREAS, Buyer (as assignee of NRG Energy, Inc.) and Seller have entered
into an Asset Purchase Agreement, dated as of October 13, 1998 (the "Asset
Purchase Agreement" capitalized terms used but not defined herein shall have the
respective meanings set forth in the Asset Purchase Agreement).

       WHEREAS, Section 7.9 of the Asset Purchase Agreement required the Seller
to supplement or amend the Schedules required by Section 2.4 and Article V of
the Asset Purchase Agreement and accordingly, the parties to this Amendment wish
to amend the Asset Purchase Agreement pursuant to the terms hereof.

       NOW, THEREFORE, in consideration of the premises and of the agreements
contained herein, the parties hereto agree as follows:

       SECTION 1. AMENDMENTS TO ASSET PURCHASE AGREEMENT. (a) The following
schedules are hereby deleted in their entirety and replaced by the corresponding
schedules attached hereto and made a part hereof:

       Schedule 1.1 (a)(8)
       Schedule 1.1 (a)(34)
       Schedule l.1(a)(54)
       Schedule 2.2
       Schedule 5.6
       Schedule 5.9
       Schedule 5.14(a)
       Schedule 5.16(b)

       (b)    Schedule 5.12 is hereby amended by adding the following
attachments attached hereto and make a part hereof:

<PAGE>   52

       Title Commitment -- SWANSEA
       Title Commitment -- SOMERSET STATION
       Title Commitment -- DIGHTON

       SECTION 2. POST-CLOSING ADJUSTMENTS. The parties agree that (a) the
amount due from Buyer on the Closing Date as the Closing Amount is only the
amount set forth in clause (i) of Section 3.1;

       (b)    any Adjustment Amount and any amounts to be pro-rated in
accordance with Section 3.4 shall be determined and paid in accordance with the
provisions of Section 3.2; and

       (c)    the amounts to be pro-rated in accordance with Section 3.4 shall
also include:

              (i)    proration of Seller prepayments associated with a mid-month
       Closing Date including without limitation taxes, salaries and benefits;

              (ii)   payment of $17,529.33 to Seller from Buyer for the 1999 SO2
       auction proceeds;

              (iii)  payment of $16,212 to Buyer from Seller to compensate Buyer
       for certain expenses it incurs in connection with Seller's operation of
       the switchyard for the 18 month period of the Temporary Switchboard
       Easement; and

              (iv)   payment to Seller by Buyer for the cost of goods and
       services received by Buyer that were shipped or provided after the
       Closing Date under Seller's Purchase Orders and which were billed to and
       paid by the Seller.

       SECTION 3. CLOSING DATE. Notwithstanding the provisions of Section 4.1 of
the Asset Purchase Agreement the Closing Date is the date of this Amendment.

       SECTION 4. REFERENCE TO AND EFFECT ON THE ASSET PURCHASE AGREEMENT. (a)
Each reference in the Asset Purchase Agreement to "this Agreement", "hereunder",
"hereof', and "herein", and in the Asset Purchase Agreement to the "Asset
Purchase Agreement", or words of like import referring to the Asset Purchase
Agreement shall mean and be a reference to the Asset Purchase Agreement, as
amended hereby.

                                        2

<PAGE>   53

       (b)    Except as specifically amended above, the Asset Purchase Agreement
shall remain in full force and effect.

       (c)    This Amendment shall be limited precisely as written and, except
as expressly provided herein, shall not be deemed to (i) be a consent to any
waiver or modification of any other term or condition of the Asset Purchase
Agreement or any of the instruments or documents referred to therein or (ii)
prejudice any right or rights which the parties may now have or may have in the
future under or in connection with the Asset Purchase Agreement or any of the
instruments or documents referred to therein.

       SECTION 5. EFFECTIVENESS. This Amendment shall become effective
immediately upon the execution and delivery by each party hereto of a
counterpart of this Amendment.

       SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
MASSACHUSETTS PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL MATTERS, INCLUDING BUT
NOT LIMITED TO MATTERS OF VALIDITY, CONSTRUCTION, EFFECT, PERFORMANCE AND
REMEDIES.

       SECTION 7. COUNTERPARTS. This Amendment may be executed iN counterparts,
each of which when so executed and delivered shall be deemed an original and all
of which together shall constitute one and the same instrument.

                  [Remainder of page left intentionally blank]

                                        3

<PAGE>   54

       IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be executed and delivered on its behalf by its duly authorized representative
on the date first above written.

                                    MONTAUP ELECTRIC COMPANY

                                    By:  /s/  Kevin A. Kirby
                                       ------------------------------------
                                    Name:   Kevin A. Kirby
                                    Title:  Vice President

                                    SOMERSET POWER LLC

                                    By: /s/ Craig A. Mataczynski
                                       ------------------------------------
                                    Name: Craig A. Mataczynski
                                    Title: President

                                        4<PAGE>   1
                                                                   EXHIBIT 10.71

                             ASSET SALES AGREEMENT

                                  BY AND AMONG

                       NIAGARA MOHAWK POWER CORPORATION,

                    ROCHESTER GAS AND ELECTRIC CORPORATION,

                            OSWEGO HARBOR POWER LLC,

                                      AND

                                NRG ENERGY, INC.

                           Dated as of April 1, 1999

<PAGE>   2

                             ASSET SALES AGREEMENT

        ASSET SALES AGREEMENT, dated as of April 1, 1999, (this "Agreement") by
and among Niagara Mohawk Power Corporation, a New York corporation (the
"Seller"), Rochester Gas and Electric Corporation, a New York corporation
("RG&E"), NRG Energy, Inc., a Delaware corporation ("Parent") and Oswego Harbor
Power LLC, a Delaware limited liability company and a wholly- owned subsidiary
of Parent (the "Buyer").

        WHEREAS, the Buyer desires to purchase, and the Seller and RG&E desire
to sell, the Purchased Assets (as defined herein) upon the terms and conditions
hereinafter set forth in this Agreement;

        NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, the parties
hereto agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

               1.1    Definitions.   As used in this Agreement, the following
terms have the meanings specified in this Section 1.1(a).  For capitalized
terms used in this subsection (a) but not defined herein, see subsection (b).

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

                            (2)  "Ancillary Agreements" means the Site
               Agreement, the Transition Power Agreement, the Interconnection
               Agreement, the assumption of the RG&E Agreement and such
               documentation as is necessary for the Buyer to assume the
               Seller's rights and obligations with respect to the Purchased
               Assets under the PILOT (as defined in Section 4.3(f)) and the
               COIDA Lease/Sublease (as defined in Section 4.3(e)).

                            (3)  "Bill of Sale" means the Bill of Sale to be
               delivered at the Closing with respect to the Purchased Assets

                                       1

<PAGE>   3

               which constitute personal property and which are to be
               transferred at such Closing, substantially in the form of
               Exhibit A hereto.

                            (4)  "Business Day" shall mean any day other than
               Saturday, Sunday and any day which is a legal holiday or a day
               on which banking institutions in New York City are authorized by
               law or other governmental action to close.

                            (5)  "Buyer Representatives" means the Buyer's and
               Parent's accountants, employees, counsel, environmental
               consultants, financial advisors and other authorized
               representatives.

                            (6)  "Capital Expenditures" means (i) those capital
               expenditures which are identified on Schedule 7.1 and (ii) those
               anticipated environmental remediation costs, identified on
               Schedule 7.1.

                            (7)  "CERCLA" means the Federal Comprehensive
               Environmental Response, Compensation and Liability Act and any
               amendment thereto.

                            (8)  "COBRA" means the Consolidated Omnibus
               Reconciliation Act of 1985, as amended.

                            (9)  "Code" means the Internal Revenue Code of
               1986, as amended.

                            (10) "Collective Bargaining Agreement" means the
               Collective Bargaining Agreement, dated as of April 15, 1996,
               between the Seller and Local 97 of the International Brotherhood
               of Electrical Workers ("IBEW"), as well as the memoranda of
               understanding and other documents which are incorporated by
               reference and made part of the Collective Bargaining Agreement.

                                       2

<PAGE>   4

                            (11) "Confidentiality Agreement" means the
               Confidentiality Agreement, dated September 1998, between the
               Seller and Parent.

                            (12) "Easements" means, with respect to the Real
               Property, the reservations of easements to be included in the
               deeds of conveyance with respect to such assets and easements
               for the benefit of third parties.

                            (13) "Encumbrances" means any mortgage pledges,
               liens, security interests, and conditional and installment sale
               agreements, activity and use limitations, Easements (other than
               those set forth in the Ancillary Agreements), deed restrictions,
               encumbrances or charges of any kind.

                            (14) "Environmental Laws" means all Federal, state,
               local and foreign laws, regulations, rules, ordinances, codes,
               decrees, judgments, directives, or judicial or administrative
               orders which relate to pollution or protection of the
               environment, natural resources (including, without limitation,
               ambient air, surface water, groundwater, land, surface and
               subsurface strata) or human health and safety, including,
               without limitation, laws which relate to Releases or threatened
               Releases of Hazardous Substances or otherwise relate to the
               manufacture, processing, distribution, use, treatment, storage,
               Release, transport or handling of Hazardous Substances.

                            (15) "ERISA" means the Employee Retirement Income
               Security Act of 1974, as amended.

                            (16) "Exchange Act" means the Securities Exchange
               Act of 1934, as amended.

                            (17) "Federal Power Act" means the Federal Power
               Act of 1935.

                            (18) "FERC" means the Federal Energy Regulatory
               Commission.

                                       3

<PAGE>   5
                            (19) "FIRPTA Affidavit" means the Foreign
               Investment in Real Property Tax Act Certification and Affidavit
               substantially in the form of Exhibit B hereto.

                            (20) "Gas Pipeline 63 Agreement" means a Gas
               Pipeline Agreement which may be negotiated by the Buyer and the
               Seller with respect to sale of capacity to the Buyer on such
               pipeline.

                            (21) "Governmental Entity" means any governmental
               or regulatory authority, agency, commission, body or other
               governmental entity or subdivision, other than the Internal
               Revenue Service or the New York Department of Taxation and
               Finance.

                            (22) "Hazardous Substances" means any chemicals,
               materials or substances defined as or included in the definition
               of "hazardous substances,""hazardous wastes,""hazardous
               materials,""restricted hazardous materials,""extremely hazardous
               substances,""toxic substances,""contaminants"or "pollutants" or
               words of similar meaning or substance found in any Environmental
               Law, exposure to which is prohibited, limited or regulated by
               such Environmental Law.

                            (23) "Holding Company Act" means the Public Utility
               Holding Company Act of 1935, as amended.

                            (24) "HSR Act" means the Hart-Scott-Rodino
               Antitrust Improvements Act of 1976, as amended.

                            (25) "Income Tax" means any federal, state, local
               or foreign Tax (a) based upon, measured by or calculated with
               respect to net income, profits or receipts (including, without
               limitation, capital gains Taxes and minimum Taxes) or (b) based
               upon, measured by or calculated with respect to multiple bases
               (including, without limitation, corporate franchise taxes) if
               one or more of the bases on which such Tax may be based,
               measured by or calculated with respect to, is

                                       4

<PAGE>   6

               described in clause (a), in each case together with any
               interest, penalties, or additions to such Tax.

                            (26) "Indentures" means the Mortgage Trust
               Indenture, dated as of October 1, 1937 between Central New York
               Power Corporation and The Marine Midland Trust Company of New
               York, as amended, modified and supplemented from time to time
               and the First Mortgage Indenture, dated September 1, 1918,
               between Bankers Trust Co., as Trustee, and RG&E, as amended,
               modified and supplemented from time to time.

                            (27) "Instrument of Assumption" means the
               Instrument of Assumption substantially in the form of Exhibit B
               hereto relating to the assumption by the Buyer of the
               liabilities and obligations of the Seller.

                            (28) "Interconnection Agreement" means the
               Interconnection Agreement, to be dated as of the Closing Date,
               in substantially the form of Exhibit C hereto, between the
               Seller and the Buyer (it being understood that such items as
               service points, metering points, auxiliary load charges when the
               station is generating and the services to be provided Seller,
               will be the subject of further negotiation and agreement).

                            (29) "Laws" means any federal, state, local or
               foreign law, statute, ordinance, rule, regulation, judgment,
               order, injunction, decree, arbitration award, agency
               requirement, license or permit of any Governmental Entity.

                            (30) "Maintenance Expenditures" means those
               maintenance expenditures which are identified on Schedule 7.1.

                            (31) "Maintenance and Capital Expenditures Amount"
               means the aggregate amount of all funds actually expended on, or
               for which liabilities were accrued in accordance with generally
               accepted accounting principles applied on a consistent basis with
               respect to, Maintenance Expenditures and Capital Expenditures by
               the Seller or RG&E, if any,

                                       5

<PAGE>   7

               during the period beginning on the date hereof and ending on the
               Closing Date.

                            (32) "Material Adverse Effect" means any change or
               changes in, or effect on, the Purchased Assets that is, or in
               the aggregate are, materially adverse to the business, assets,
               operations or conditions (financial or otherwise) of the
               Purchased Assets, taken as a whole, other than (i) any change or
               effect affecting the international, national, regional or local
               electric industry as a whole, and not the Purchased Assets
               exclusively and specifically, resulting from changes in the
               international, national, regional or local wholesale or retail
               markets for electric power, (ii) any change or effect resulting
               from changes in the international, national, regional or local
               markets for any fuel used at the Purchased Assets, (iii) any
               change or effect resulting from changes in the North American,
               national, regional or local electric transmission systems (iv)
               any change or effect resulting from changes in Laws or in
               industry standards, (v) any materially adverse change in or
               effect on the Purchased Assets which is cured (including by the
               payment of money) by the Seller before the Termination Date and
               (vi) any materially adverse change resulting from this Agreement
               and the transactions contemplated hereby.

                            (33) "Permitted Encumbrances" means (i) the
               Easements, (ii) those exceptions to title to the Purchased
               Assets listed in Schedule 5.8, (iii) with respect to any date
               before the Closing Date, Encumbrances created by the Indentures,
               (iv) statutory liens for current Taxes or assessments not yet
               due or delinquent or the validity of which is being contested in
               good faith by appropriate proceedings, provided that the
               aggregate amount so contested does not exceed $500,000, (v)
               mechanics', carriers', workers', repairers' and other similar
               liens arising or incurred in the ordinary course of business
               relating to obligations as to which there is no default on, the
               part of the Seller or the validity of which are being contested
               in good faith by appropriate proceedings, provided that the
               aggregate amount so contested does not exceed $500,000, (vi)
               zoning, entitlement, conservation restriction and other land use

                                       6

<PAGE>   8

               and environmental regulations by governmental authorities, (vii)
               the COIDA Lease/Sublease, (viii) the PILOT and (ix) such other
               liens, imperfections in or failure of title, charges, easements,
               leases, licenses, restrictions, Encumbrances, encroachments and
               defects which do not materially detract from the value or
               interfere with the present use of the Purchased Assets and
               neither secure indebtedness, nor individually or in the
               aggregate, create a Material Adverse Effect (the liens set forth
               in (iv) and (v) being collectively referred to as "Indemnifiable
               Liens").

                            (34) "Person" means an individual, a partnership, a
               limited liability company, a joint venture, a corporation, a
               trust, an unincorporated organization and a governmental entity
               or a department or agency thereof.

                            (35) "PSC" means the New York Public Service
               Commission.

                            (36) "Purchased Assets" means, subject to the
               Easements and Section 2.2,  all of the right, title and interest
               in, to and under the real and personal property, tangible or
               intangible, of the Seller and RG&E constituting the Oswego Steam
               Station or used principally for generation purposes in
               connection with such site including, but not limited  to, the
               following assets owned by the Seller and RG & E:

                      (i)   the real estate (including all buildings,
        structures and other improvements thereon) described on Schedule 5.14
        as associated with the Oswego Steam Station and the South Oswego Tank
        Farm (the "Real Property");

                      (ii)  all inventories of fuels, supplies, materials and
        critical spares located on or in transit to the Real Property on the
        Closing Date, and all warranties against manufacturers or vendors
        relating thereto, to the extent that such warranties are freely
        transferable;

                                       7

<PAGE>   9

                      (iii) the machinery, equipment, vehicles, furniture and
        other personal property located on the Real Property on the Closing
        Date, including, without limitation, the items of personal property
        included in Schedule 1.1(a) (36) (iii) as being associated with th
        Oswego Steam Station and all warranties against manufacturers or
        vendors relating thereto, to the extent that such warranties are freely
        transferable;

                      (iv)  the Transferable Permits listed on Schedule 1.1(a)
        (45) as being associated with the Oswego Steam Station;

                      (v)   all books, operating records, operating, safety and
        maintenance manuals, engineering design plans,.  blueprints and as-
        built plans, specifications, procedures and similar items in the
        Seller's possession relating specifically to the aforementioned assets
        other than books of account; and

                      (vi)  certain allowances associated with the Oswego Steam
        Station as set forth on Schedule 1.1(a) (36) (vi).

                            (37) "Release" means a release, spill, leak,
               discharge, disposal of, pumping, pouring, emitting, emptying,
               injecting, leaching, dumping or otherwise allowing to escape
               into or through the environment.

                            (38) "RG&E Agreement" means the Exit Agreement,
               dated as of June 8, 1998, between the Seller and RG&E.

                            (39) "SEC" means the Securities and Exchange
               Commission.

                            (40) "Securities Act" means the Securities Act of
               1933, as amended.

                            (41) "Site Agreement" means the Site Agreement, to
               be dated as of the Closing Date, in substantially the form of
               Exhibit D hereto, between the Seller and the Buyer (it being
               understood that such items as service points, metering
               points, auxiliary load charges when the station is generating

                                       8

<PAGE>   10

               and the services to be provided Seller, will be the subject of
               further negotiation and agreement).

                            (42) "Subsidiary" when used in reference to any
               other Person means any entity of which outstanding securities
               having ordinary voting power to elect a majority of the Board of
               Directors or other Persons performing similar functions of such
               entity are owned directly or indirectly by such other Person.

                            (43) "Taxes" means all taxes, payments in lieu of
               taxes under the PILOT, charges, fees, levies, penalties or other
               assessments imposed by any United States federal, state or local
               or foreign taxing authority, including, but not limited to,
               income, excise, property, sales, transfer, franchise, payroll,
               withholding, social security or other taxes, including any
               interest, penalties or additions attributable thereto.

                            (44) "Tax Return" means any return, report,
               information return or other document (including any related or
               supporting information) required to be filed with any authority
               with respect to Taxes.

                            (45) "Transferable Permits" means those Permits (as
               hereinafter defined) which are transferable by the Seller to the
               Buyer and are set forth in Schedule 1.1(a) (45).

                            (46) "Transferring Employee Records" means all
               personnel files related to the Seller's personnel who will
               become employees of the Buyer to the extent such files (a)
               pertain to (i) skill and development training and resumes, (ii)
               seniority histories, (iii) salary and benefit information, (iv)
               Occupational Safety and Health Administration medical reports.,
               and (v) active medical restriction forms and (b) are allowed to
               be disclosed under applicable legal requirements.

                            (47) "Transition Power Agreement" means the Power
               Purchase Agreement, dated as of April 1, 1999, to be

                                       9

<PAGE>   11

               effective as of the Closing Date between the Buyer and the
               Seller, attached hereto as Exhibit E.

                            (48) "WARN Act" means the Federal Worker Adjustment
               Retraining and Notification Act of 1988.

               (b)    Each of the following terms has the meaning specified in
the Section set forth opposite such term:

<TABLE>
<CAPTION>
Term                                                             Section
----                                                             -------
<S>                                                              <C>
Assumed Obligations                                              2.3 (b)
Audit Date                                                       5.5
Buyer Employee                                                   7.10 (a)
Buyer Required Regulatory Approvals                              6.3 (b)
Closing                                                          4.1
Closing Date                                                     4.1
COIDA                                                            4.3 (e)
COIDA Lease/Sublease                                             4.3 (e)
Contracts                                                        5.16 (a)
Direct Claim                                                     9.2 (c)
Employee Transition Credit                                       3.1
Environmental Permits                                            5.11 (a)
Excluded Assets                                                  2.2
Excluded Liabilities                                             2.4
Final Order                                                      8.1 (c)
Indemnifiable Loss                                               9.1 (a)
Indemnifying Party                                               9.1 (d)
</TABLE>

                                       10

<PAGE>   12

<TABLE>
<S>                                                              <C>
Indemnitee                                                       9.1 (c)
New York Tax                                                     7.8 (a)
Non-Union Employee                                               7.10 (c)
NRC                                                              5.3 (b)
PILOT                                                            4.3 (f)
Permits                                                          5.17
Purchase Price                                                   3.1
Replacement Welfare Plans                                        7.10 (d)
RGE Board Approval                                               5.2
Seller Required Regulatory Approvals                             5.3 (b)
Tax Audit                                                        9.3 (a)
Termination Date                                                 10.1 (b)
Third Party Claim                                                9.2 (a)
Transfer Taxes                                                   7.8 (a)
Vehicle Amount                                                   3.1 (c)
</TABLE>

                                   ARTICLE II

                               PURCHASE AND SALE

               2.1    The Sale.  Upon the terms and subject to the satisfaction
of the conditions contained in this Agreement, at the Closing the Seller and
RG&E will sell, assign, convey, transfer and deliver to the Buyer, and the
Buyer will purchase and acquire from the Seller and RG&E, free and clear of all
Encumbrances (except for Permitted Encumbrances) the Purchased Assets.

               2.2    Excluded Assets.  Notwithstanding any provision herein to
the contrary, the Purchased, Assets shall not include the following assets of
the Seller or RG&E (herein referred to as the "Excluded Assets"):

                                       11

<PAGE>   13

               (a)    all cash, cash equivalents, bank deposits, accounts
receivable, and any income, sales, payroll or other tax receivables;

               (b)    certificates of deposit, shares of stock, securities,
bonds, debentures, evidences of indebtedness, interests in joint ventures,
partnerships, limited liability companies and other entities;

               (c)    the names "Niagara Mohawk"and "Rochester Gas & Electric"
and any related or similar trade names, trademarks, service marks or logos;

               (d)    the transmission, distribution, substation and
communication facilities and related support equipment described or referred to
in Schedule 2.2(d) or described or referred .to as an "Excluded Asset" or an
asset of "Seller" in the "Separation Document" (as defined in the Site
Agreement) or any document or exhibit referred to or incorporated by reference
in the Separation Document or which are otherwise indicated in any such
document as remaining with the Seller or any of its Affiliates after the
Closing;

               (e)    any refund or credit (i) of Taxes paid or required to be
reimbursed by the Seller prior to the Closing.  Date in respect of the
Purchased Assets, whether such refund is received as a payment or as a credit
against Taxes payable or (ii) arising under any power purchase agreement that
is subject to cost of service regulation and relating to a period before the
Closing Date;

               (f)    all personnel records, other than Transferring Employee
Records, or other records; and

               (g)    the emission allowances, emission reduction credits and
greenhouse gas emissions listed on Schedule 2.2(g).

               2.3    Assumed Obligations. (a) On the Closing Date, the Buyer
shall deliver to the Seller and RG&E the Instruments of Assumption pursuant to
which the Buyer shall assume and agree to discharge all of the liabilities and
obligations of the Seller and RG&E, direct or indirect, known or unknown,
absolute or contingent, which relate to the Purchased Assets, other than
Excluded Liabilities, in accordance with the respective terms and subject to
the respective conditions thereof, including, without limitation, the following
liabilities and obligations:

                                       12

<PAGE>   14

                      (i)   all liabilities and obligations of the Seller under
               (a) the Transferable Permits associated with the Purchased
               Assets in accordance with the terms thereof, (b) contractual
               obligations of the Seller relating to the Purchased Assets which
               survive following the Closing, which are transferable, which
               were entered into in the ordinary course of business and which
               are not, individually or in the aggregate, material to the
               Purchased Assets, including the contracts referred to in Section
               7.1(b) and (c) liabilities for fuel and stores in transit;
               except in each case, to the extent such liabilities and
               obligations, but for a breach hereunder by the Seller, would
               have been paid, performed or otherwise discharged on or prior to
               the Closing Date or to the extent the same arise out of any such
               breach;

                      (ii)  all liabilities and obligations associated with the
               Purchased Assets in respect of Taxes for which the Buyer is
               liable pursuant to Sections 3.3 or 7.8;

                      (iii) all liabilities and obligations associated with the
               Purchased Assets for which the Buyer has agreed to indemnify the
               Seller and RG&E pursuant to Section 9.1;

                      (iv)  all liabilities and obligations with respect to the
               Employees employed at the Purchased Assets after the Closing
               Date for which the Buyer is responsible pursuant to Section 7.10
               and the terms of the Collective Bargaining Agreement;

                      (v)   any liability, obligation or responsibility under
               or related to former, current or future Environmental Laws or
               the common law, whether such liability or obligation or
               responsibility is known or unknown, contingent or accrued,
               arising as a result of or in .  connection with (a) except as
               set forth in Section 2.4 (iii), any violation or alleged
               violation of Environmental Law, whether prior to or on or after
               the Closing Date, with respect to the ownership or operation of
               the Purchased Assets; (b) loss of life, injury to persons or
               property or damage to natural resources (whether or not such
               loss, injury or damage arose or was made manifest before the
               Closing Date or arises or becomes manifest after the Closing
               Date), caused (or allegedly caused) by the presence or Release
               of Hazardous Substances at, on, in, under, or migrating from the
               Purchased Assets either prior to or on or

                                       13

<PAGE>   15

               after the Closing Date, including, but not limited to, Hazardous
               Substances contained in building materials at the Purchased
               Assets or in the soil, surface, water, sediments, groundwater, or
               in other environmental media at the Purchased Assets; (c) loss of
               life, injury to persons or property or damage to natural
               resources caused (or allegedly caused) by the off-site disposal,
               storage, transportation, discharge, Release, recycling, or the
               arrangement for such activities, of Hazardous Substances, on or
               after the Closing Date, in connection with the ownership or
               operation of the Purchased Assets; (d) the investigation and/or
               remediation (whether or not such investigation or remediation
               commenced before the Closing Date or commences after the Closing
               Date) of Hazardous Substances that are present or have been
               Released either prior to or on or after the Closing Date at, on,
               in, under, adjacent to or migrating from the Purchased Assets,
               including, but not limited to, Hazardous Substances contained in
               building materials at the Purchased Assets or in the soil,
               surface water, sediments, groundwater, landfill cells, or in
               other environmental media at or adjacent to the Purchased Assets
               and (e) the investigation and/or remediation of Hazardous
               Substances that are disposed, stored, transported, discharged,
               Released, recycled, or the arrangement of such activities, on or
               after the Closing Date, in connection with the ownership or
               operation of the Purchased Assets, at any off-site location;
               provided, as to all of the above, that nothing set forth in this
               subsection 2.3(a) shall require the Buyer to assume any
               liabilities that are expressly excluded in Section 2.4;

                      (vi)  any and all liabilities and obligations, other than
               fines, penalties or assessments, of the Seller and RG&E with
               respect to the Purchased Assets under the agreements or consent
               orders set forth on Schedules 5.l1(a)--(d);

                      (vii) all liabilities incurred by the Seller or RG&E with
               respect to Maintenance Expenditures and Capital Expenditures
               associated with the Purchased Assets but only to the extent such
               liabilities were included in the Maintenance and Capital
               Expenditures Amount;

                      (viii)any Taxes on the ownership, sale, operation or use
               of the Purchased Assets on or after the Closing Date; except for
               any Income

                                       14
<PAGE>   16

               Taxes attributable to income (including proceeds representing
               the Purchase Price or proceeds of other asset sales) received by
               the Seller;

                      (ix)  all obligations of the Seller with respect to the
               operation and ownership of the Purchased Assets pursuant to the
               agreements described in Section 7.13;

                      (x)   the obligations of the Seller and/or RG&E set forth
               on Schedule 5.16;

                      (xi)  the RG&E Agreement; and

                      (xii) all rights and obligations of the Seller with
               respect to the Real Property under the COIDA Lease/Sublease and
               the PILOT.

               (b)    All of the foregoing liabilities and obligations to be
assumed by the Buyer under Section 2.3(a) (excluding any Excluded Liabilities)
are referred to herein as the "Assumed Obligations".  It is understood and
agreed that nothing in this Section 2.3 shall constitute a waiver or release of
any claims arising out of the contractual relationships between the Seller,
RG&E and the Buyer.

               2.4    Excluded Liabilities.  The Buyer shall not assume or be
obligated to pay, perform or otherwise discharge the following liabilities or
obligations:

                      (i)   any liabilities or obligations of the Seller or
               RG&E in respect of any Excluded Assets or other assets of the
               Seller or RG&E which are not Purchased Assets;

                      (ii)  any liabilities or obligations in respect of Taxes
               attributable to Purchased Assets for taxable periods ending on
               or before the Closing Date, except for Taxes for which the Buyer
               is liable pursuant to Section 3.3 or Section 7.8;

                      (iii) any fines, penalties or assessments imposed by a
               Governmental Entity with respect to a violation or alleged
               violation of Environmental Law which occurred prior to the
               Closing Date and any liabilities, obligations, or
               responsibilities relating to the disposal, storage,
               transportation, discharge, Release, recycling, or the arrange-

                                       15
<PAGE>   17

               ment for such activities, by the Seller, of Hazardous Substances
               that were generated at the Purchased Assets, at any off-site
               location, where the disposal, storage, transportation,
               discharge, Release, recycling or the arrangement for such
               activities at said off-site location occurred prior to the
               Closing Date, provided that for purposes of this Section 2.4,
               "off-site location"does not include any location to which
               Hazardous Substances disposed of or Released at the Purchased
               Assets have migrated;

                      (iv)  except as provided in Section 16.3 of the Site
               Agreement, any liabilities, obligations or responsibilities
               relating to (a) the property, equipment or machinery within the
               switchyards for which the Seller will retain either a fee
               interest or an Easement, (b) the transmission lines delineated
               in the Easements or (c) any Seller's operations on, or usage of,
               the Easements, including, without limitation, liabilities,
               obligations or responsibilities arising as a result of or in
               connection with (1) any violation or alleged violation of
               Environmental Law and (2) loss of life, injury to persons or
               property or damage to natural resources, except to the extent
               caused by Buyer;

                      (v)   any liabilities or obligations relating to any
               personal injury, discrimination, wrongful discharge, unfair
               labor practice or similar claim or cause of action resulting
               from actions occurring prior to the Closing Date;

                      (vi)  any payment obligations of the Seller for goods
               delivered or services rendered prior to the Closing;

                      (vii) any liabilities or obligations imposed upon,
               assumed or retained by the Seller pursuant to the Site Agreement
               or any other Ancillary Agreement; and

                      (viii)any liabilities, obligations or responsibilities
               relating to any Benefit Plan or any "employee pension benefit
               plan" (as defined in Section 3(2) of ERISA) maintained by the
               Seller or any trade or business (whether or not incorporated)
               which is under common control as a single employer, with the
               Seller under Section 414(b), (c), (m) or (o) of the Code ("ERISA
               Affiliate"), including any multiemployer plan, maintained by or
               contributed to by the Seller or

                                       16
<PAGE>   18

               any ERISA Affiliate, or as to which the Seller or any ERISA
               Affiliate is obligated to contribute to, at any time, including
               any such liability (A) to the Pension Benefit Guaranty
               Corporation under Title IV of ERISA; (B) relating to a
               multiemployer plan; (C) with respect to non-compliance with the
               notice and benefit continuation requirements of COBRA; (D) with
               respect to any noncompliance with ERISA or any other applicable
               laws; or (E) with respect to any suit, proceeding or claim which
               is brought against the Buyer, any Benefit Plan, ERISA Affiliate
               Plan, any fiduciary or former fiduciary of any such Benefit Plan
               or ERISA Affiliate Plan.

        All such liabilities and obligations not being assumed pursuant to
Section 2.4 are herein called the "Excluded Liabilities."

                                  ARTICLE III

                                 PURCHASE PRICE

               3.1    Purchase Price.  The purchase price for the Purchased
Assets shall be an amount equal to the sum of (a) $66 million, (b) Assumed
Obligations, (c) the Vehicle Amount (as hereinafter defined) and (d) the
Adjustment Amount less an amount (the "Employee Transition Credit") of up to
$1,140,000, as determined pursuant to Schedule 3.1(d) (collectively, the
"Purchase Price").  The "Vehicle Amount"shall be the cost required to buy out
the leases of all vehicles which the Buyer elects to purchase which are
presently leased by the Seller for use with the Purchased Assets, which shall
be determined as set forth on Schedule 3.1(c).

               3.2    Allocation of Purchase Price.  The Buyer and the Seller
shall use their good faith best efforts to agree upon an allocation among the
Purchased Assets and the Ancillary Agreements of the Purchase Price consistent
with Section 1060 of the Code and the Treasury Regulations thereunder within
180 days of the date of this Agreement but in no event less than 30 days prior
to the Closing.  Any post closing adjustments pursuant to Section 3.4 shall be
jointly made and agreed to within sixty (60) days following the Closing in a
manner consistent with the allocation determined pursuant to this Section 3.2.
Each of the Buyer, RG&E and the Seller agree to file Internal Revenue Service
Form 8594, and all federal, state, local and foreign Tax Returns, in accordance
with such agreed allocation.  Each of the Buyer, RG&E and the Seller shall
report the transactions contemplated by the Agreement for Tax purposes in a
manner consistent with the allocation determined

                                       17
<PAGE>   19

pursuant to this Section 3.2.  Each of the Buyer, RG&E and the Seller agrees to
provide the other promptly with any other information reasonably required to
complete Form 8594.  Each of the Buyer, RG&E and the Seller shall notify the
other in the event of an examination, audit or other proceeding regarding the
agreed upon allocation of the Purchase Price.

               3.3    Proration.  (a) The Buyer and the Seller agree that all
of the items normally prorated, including those listed below, relating to the
business and operation of the Purchased Assets will be prorated as of the
Closing Date, with the Seller liable to the extent such items relate to any
time period through the Closing Date, and the Buyer liable to the extent such
items relate to periods subsequent to the Closing Date:

                      (i)   except as provided in Section 7.8(a), Taxes,
               assessments and other similar charges, if any, on or with
               respect to the business and operation of the Purchased Assets
               and with respect to a Taxable Period that begins before but does
               not end on the Closing Date shall be (1) prorated to the extent
               such Tax is measured by time to the Seller based on the number
               of days in such Taxable Period, up to and including the Closing
               Date, and to the Buyer based on the number of days in such
               Taxable Period after the Closing Date, and (2) to the extent
               such Tax is measured by income, receipts or pertains to the
               business and operation of the Purchased Assets, allocated
               between Buyer and Seller based on a closing of the books on the
               Closing Date with respect to the business and operation of the
               Purchased Assets.

                      (ii)  rent, Taxes and all other items payable by or to
               the Seller under any of the power purchase agreements that are
               subject to cost of service regulation;

                      (iii) sewer rents and charges for water, telephone,
               electricity and other utilities and payments under the COIDA
               Lease/Sublease; and

                      (iv)  rent under any leases of real or personal property
               included in the Purchased Assets.

        (b)    In connection with the prorations referred to in (a) above, in
the event that actual figures are not available at the Closing Date, the
proration shall be based

                                       18
<PAGE>   20

upon the actual Taxes or fees for the preceding year (or appropriate period)
for which actual Taxes or fees are available and such Taxes or fees shall be
reprorated upon request of either the Seller, on the one hand, or the Buyer, on
the other hand, made within sixty (60) days of the date that the actual amounts
become available.  The Seller and the Buyer agree to furnish each other with
such documents and other records as may be reasonably requested in order to
confirm all adjustment and proration calculations made pursuant to this Section
3.3.

               3.4    Purchase Price Adjustments. (1)  Within 60 days after the
Closing, the Seller shall prepare and deliver to the Buyer statements (each, an
"Adjustment Statement") which reflect (i) the number of barrels of petroleum
oil inventory at or in connection with the Purchased Assets as of the Closing
Date, (ii) the Maintenance and Capital Expenditures Amount applicable to the
Purchased Assets and (iii) the Employee Transition Credit for any employees who
were expected to become employees of the Buyer for purposes of the Estimated
Purchase Price but who did not (the "ETC Adjustment").  For each barrel of fuel
oil inventory at or in connection with the Purchased Assets as of the Closing
Date less than 1.5 million barrels, the Seller shall pay to the Buyer the
amount of $15.00.  For each barrel of fuel oil inventory at or in connection
with the Purchased Assets as of the Closing Date in excess of 1.5 million
barrels, the Buyer shall pay to the Seller the lesser of (x) $15.00 per barrel
or (y) the Seller's actual delivered cost for each such barrel of fuel oil, as
reflected on the books of the Seller and assuming the first-in, first-out
method of inventory accounting.  The aggregate amount of all such per barrel
payments is the "Oil Inventory Adjustment Amount."  The Maintenance and Capital
Expenditures Amount, the Oil Inventory Adjustment Amount (if positive) and the
ETC Adjustment shall be additions to the Purchase Price and the Oil Inventory
Adjustment Amount, if negative, shall be a subtraction from the Purchase Price.

        The Oil Inventory Adjustment Amount, the Maintenance and Capital
Expenditures Amount and the ETC Adjustment are referred to collectively as the
"Adjustment Amount."  Each Adjustment Statement shall be prepared using the
same generally accepted accounting principles, policies and methods as the
Seller has historically used in connection with the calculation of the items
reflected on such Adjustment.  The Buyer agrees to cooperate with the Seller in
connection with the preparation of each Adjustment Statement and related
information, and shall provide to the Seller such books, records, and
information as may be reasonably requested from time to time.

                                       19
<PAGE>   21

               (b)    The Buyer or Seller may dispute an Oil Inventory
Adjustment Amount, a Maintenance and Capital Expenditures Amount or the ETC
Adjustment; provided, however, that the Buyer shall notify the Seller in
writing of the disputed amount, and the basis of such dispute, within ten (10)
Business Days of the Buyer's receipt of the applicable Adjustment Statement.
In the event of a dispute with respect to any part of any Adjustment Amount,
the parties shall attempt to reconcile their differences.  If the Buyer and the
Seller are unable to reach a resolution of such differences within.  30 days of
receipt of a written notice of dispute, the Buyer shall submit the amounts
remaining in dispute for determination and resolution to a third party mutually
agreed upon by the Buyer and the Seller, which shall be instructed to determine
and report to the parties, within 30 days after such submission, upon such
remaining disputed amounts, and such report shall be final, binding and
conclusive on the parties hereto with respect to the amounts disputed.  The
fees and disbursements of such third party shall be allocated between the Buyer
and the Seller so that the Buyer's share of such fees and disbursements shall
be in the same proportion that the aggregate amount of such remaining disputed
amounts so submitted by the Buyer to such third party that is unsuccessfully
disputed by the Buyer (as finally determined by such third party) bears to the
total amount of such remaining disputed amounts so submitted by the Buyer to
such third party.

               (c)    Within ten (10) Business Days after the Buyer's receipt
of an Adjustment Statement, the Buyer or Seller, as the case may be, shall pay
all undisputed amounts, and if there is a dispute with respect to any amount on
such Adjustment Statement, within five (5) Business Days after the final
determination of any amounts on such Adjustment Statement, the Buyer or Seller,
as the case may be, shall pay to the other party an amount equal to the
disputed Adjustment Amount as finally determined pursuant to subsection (b) to
be payable with respect to such Adjustment Statement.  Any amount paid under
this Section 3.4(c) shall be paid with interest for the period commencing on
the Closing Date through the date of payment, calculated at the base rate of
Citibank N.A. in effect on the Closing Date, and in cash by federal or other
wire transfer of immediately available funds.

                                   ARTICLE IV

                                  THE CLOSING

               4.1    Time and Place of Closing.  Upon the terms and subject to
the satisfaction of the conditions contained in Article VIII of this Agreement,
the closing

                                       20
<PAGE>   22

of the sale of the Purchased Assets contemplated by this Agreement (the
"Closing") will take place at the offices of Sullivan & Cromwell in New York,
at 10:00 A.M.  (local time) on such date as the parties may agree which date is
as soon as practicable, but no later than fifteen (15) Business Days, following
the date on which all of the conditions contained in Article VIII have been
satisfied or waived, or at such other place or time as the parties may agree.
The date and time at which the Closing actually occurs is hereinafter referred
to as the "Closing Date."

               4.2    Payment of Purchase Price.  Upon the terms and subject to
the satisfaction of the conditions contained in this Agreement, in
consideration of the aforesaid sale, assignment, conveyance, transfer and
delivery of the Purchased Assets, the Buyer will pay or cause to be paid to the
Seller and RG&E at the Closing an amount in the aggregate (the "Estimated
Purchase Price") equal to the sum of (i) $66 million and (ii) the Vehicle
Amount minus the Employee Transition Credit in United States dollars by wire
transfer of immediately available funds or by such other means as are agreed
upon by the Seller and the Buyer.  Not later than five (5) Business Days prior
to the Closing Date, the Seller shall notify the Buyer of the respective
amounts to be paid to the Seller and to RG&E, which shall be determined
pursuant to the Agreement regarding the Sale of Oswego Unit 6, dated as of June
8, 1998, between the Seller and RG&E.

               4.3    Deliveries by the Seller.  At the Closing, the Seller and
RG&E will deliver the following to the Buyer:

               (a)    The Bill of Sale, duly executed by the Seller and RG&E;

               (b)    All consents, waivers or approvals obtained by the Seller
and/or RG&E with respect to  the Purchased Assets, the transfer of any
Transferable Permit related to the Purchased Assets, or the consummation of the
transactions connected to the sale of the Purchased Assets, contemplated by
this Agreement, to the extent specifically required hereunder;

               (c)    An opinion of counsel and certificate (as contemplated by
Section 8.2) with respect to the Purchased Assets;

               (d)    One or more bargain and sale deeds with lien covenants
conveying the Real Estate related to the Purchased Assets, subject to the
applicable Easements, Permitted Encumbrances and exceptions, duly executed and
acknowl-

                                       21
<PAGE>   23

edged by the Seller and RG&E and in recordable form along with TP-584 Forms and
Equalization and Transfer Reports, in the form attached hereto as Exhibit
4.3(d);

               (e)    An assignment of the Seller's rights and obligations with
respect to the Real Property under the Lease/Sublease, dated August 1, 1998,
between the Seller and the County of Oswego Industrial Development Agency
("COIDA"), under which the Real Property, together with other real property to
be retained by the Seller, is leased to COIDA and subleased to the Seller, (the
"COIDA - Lease/Sublease"), with an assumption by the Buyer and consent of COIDA
in recordable form, along with a TP-584 Form.

               (f)    An assignment of the Seller's rights and obligations with
respect to the Real Property under the Payment in Lieu of Taxes Agreement dated
September 30, 1998 ("PILOT") between the Seller and COIDA, with an assumption
by the Buyer;

               (g)    FIRPTA Affidavits executed by the Seller and RG&E;

               (h)    All such other instruments of assignment or conveyance as
shall, in the reasonable opinion of the Buyer and its counsel, be necessary to
transfer to the Buyer the Purchased Assets, in accordance with this Agreement
and where necessary or desirable, in recordable form; and

               (i)    Such other agreements, documents, instruments and
writings, including the Ancillary Agreements, as are required to be delivered
by the Seller and/or RG&E at or prior to the Closing Date pursuant to this
Agreement or otherwise required in connection herewith.

               4.4    Deliveries by the Buyer.  At the Closing, the Buyer will
deliver the following to the Seller and RG&E:

               (a)    The Estimated Purchase Price and any amounts payable
under Section 3.3 by wire transfer of immediately available funds or such other
means as are agreed upon by the Seller and the Buyer;

               (b)    Opinions of counsel and certificates (as contemplated by
Section 8.3) with respect to the Purchased Assets;

                                       22
<PAGE>   24

               (c)    The Instruments of Assumption with respect to the Assumed
Obligations, duly executed by the Buyer;

               (d)    All such other instruments of assumption as shall, in the
reasonable opinion of the Seller and its counsel, be necessary for the Buyer to
assume the Assumed Obligations related to the Purchased Assets in accordance
with this Agreement;

               (e)    All tax certificates applicable to the transfers
contemplated by this Agreement, including, without limitation, direct pay
permits and tax exemption certificates;

               (f)    The assumptions referred to in Sections 4.3(e) and
4.3(f); and

               (g)    Such other agreements, documents, instruments and
writings., including the Ancillary Agreements, as are required to be delivered
by the Buyer at or prior to the Closing Date pursuant to this Agreement or
otherwise required in connection herewith.

                                   ARTICLE V

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

        The Seller represents and warrants to the Buyer with respect to itself
insofar as it relates to the Purchased Assets as follows (all such
representations and warranties, other than in Sections 5.1, 5.2, 5.3, 5.4 and
5.5, being made to the best knowledge of the Seller, after reasonable inquiry
or investigation).  RG&E represents and warrants to the Buyer with respect to
itself insofar as it relates to Unit 6 of Oswego Steam Station ("Unit 6") the
matters set forth in Sections 5.1, 5.2, 5.3, 5.8, 5.14, 5.15 (only as to the
Contracts and other arrangements defined therein to which it is a party) and
5.16 (all such representations and warranties other than in Sections 5.1, 5.2
and 5.3 being true to the best knowledge after reasonable inquiry or
investigation).

               5.1    Organization; Qualification.  Each of the Seller and RG&E
is a corporation duly organized, validly existing and in good standing under
the laws of the State of New York and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its
business as is now being con-

                                       23
<PAGE>   25

ducted. The Seller has heretofore delivered to the Buyer complete and correct
copies of its Certificate of Incorporation and Bylaws as currently in effect.

               5.2    Authority Relative to this Agreement.  Each of the Seller
and RG&E has full corporate power and authority to execute and deliver this
Agreement and, as applicable, the Ancillary Agreements and to consummate the
transactions contemplated hereby and thereby.  The execution and delivery of
this Agreement and, as applicable, the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of the Seller and no other
corporate proceedings on the part of the Seller are necessary to authorize this
Agreement or the Ancillary Agreements or to consummate the transactions
contemplated hereby and thereby.  With respect to RG&E, this Agreement is
subject to approval by its Board of Directors ("RGE Board Approval") and shall
be presented to the Board of Directors with management's recommendation and
approval not more than 35 days from the date hereof.  This Agreement and, as
applicable, the Ancillary Agreements have been or will be duly and validly
executed and delivered by the Seller and RG&E, and, assuming that this
Agreement and the Ancillary Agreements constitute valid and binding agreements
of the Buyer, subject to the receipt of the Seller Required Regulatory
Approvals (as defined in Section 5.3), RGE Board Approval and the Buyer
Required Regulatory Approvals, constitute, to the extent such Person is a party
thereto, valid and binding agreements of the Seller and RG&E, enforceable
against the Seller and RG&E in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights and to general equity principles (the "Bankruptcy and Equity
Exception").

               5.3    Consents and Approvals; No Violation.  (a)  Other than
obtaining the Seller Required Regulatory Approvals, RGE Board Approval and the
Buyer Required Regulatory Approvals, neither the execution and delivery of this
Agreement and the Ancillary Agreements by the Seller and RG&E nor the sale by
the Seller and RG&E of the Purchased Assets pursuant to this Agreement or
performance under the Ancillary Agreements will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or Bylaws of
the Seller or RG&E, (ii) require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory
authority, except (x) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not,
individually or in the aggregate, create a Material Adverse Effect or (y) for
those requirements which become applicable to the Seller

                                       24
<PAGE>   26

as a result of the specific regulatory status of the Buyer (or any of its
Affiliates) or as a result of any other facts that specifically relate to the
business or activities in which the Buyer (or any of its Affiliates) is or
proposes to be engaged; (iii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which the Seller or RG&E is a party or by
which the Seller, RG&E or any of the Purchased Assets may be bound, except for
such defaults (or rights of termination, cancellation or acceleration) as to
which requisite waivers or consents have been obtained or which, in the
aggregate, would not, individually or in the aggregate, create a Material
Adverse Effect; or (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Seller or RG&E, or any of their respective
assets, which violation, individually or in the aggregate, would create a
Material Adverse Effect.

               (b)    Except for (i) any required approvals under the Federal
Power Act, (ii) any required approvals from the PSC, (iii) the approval, if
required, of the SEC pursuant to the Holding Company Act, (iv) the filings by
the Seller, RG&E and the Buyer required by the HSR Act and the expiration or
earlier termination of all waiting periods under the HSR Act, and (v) the
approval, if required, of the Nuclear Regulatory Commission (the "NRC") (the
filings and approvals referred to in clauses (i) through (v) are collectively
referred to as the "Seller Required Regulatory Approvals"), no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of any governmental or regulatory body or authority is necessary for
the consummation by the Seller and RG&E of the transactions contemplated hereby
or by the Ancillary Agreements, other than such declarations, filings,
registrations, notices, authorizations, consents or approvals which, if not
obtained or made, will not, individually or in the aggregate, create a Material
Adverse Effect.

               5.4    Reports.  Since January 1, 1994, the Seller has filed or
caused to be filed with the SEC, the PSC and the FERC, as the case may be, all
material forms, statements, reports and documents (including all exhibits,
amendments and supplements thereto) required to be filed by them with respect
to the business and operations of the Seller as it relates to the Purchased
Assets under each of the Securities Act, the Exchange Act, New York public
utility laws, the Federal Power Act, the Holding Company Act and the respective
rules and regulations thereunder, all of which complied in all material
respects with all applicable requirements of the appropriate act and the rules
and  regulations thereunder in effect on the date each such report was filed,
and there are no material misstatements or omissions in respect of such
reports.

                                       25
<PAGE>   27

               5.5    Company Reports; Financial Statements.  The Seller has
made available to the Buyer each registration statement, report, proxy
statement or information statement prepared by it since December 31, 1998 (the
"Audit Date"), including (i) the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, and (ii) the Company's Report on Form 8-K dated
March 18, 1999, each in the form (including exhibits, annexes and any
amendments thereto) filed with the SEC (collectively, including any such
reports filed subsequent to the date hereof and any amended reports, the
"Company Reports").  As of their respective dates (or, if amended, as of the
date of such amendment), insofar as the Company Reports relate to the Purchased
Assets, the Company Reports did not, and any Company Reports filed with the SEC
subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading.  With respect to the financial
information relating to the Purchased Assets, each of the consolidated balance
sheets included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents, or will fairly
present, the consolidated financial position of the Company and its
subsidiaries as of its date and each of the consolidated statements of income
and of changes in financial position included in or incorporated by reference
into the Company Reports (including any related notes and schedules) fairly
presents, or will fairly present, the results of operations, retained earnings
and changes in financial position, as the case may be, of the Company and its
subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that will
not be material in amount or effect), in each case in accordance  with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein.

               5.6    Undisclosed Liabilities.  Except as set forth in the
Company Reports, the Seller has no liability or obligation relating to the
business or operations of the Purchased Assets, secured or unsecured (whether
absolute, accrued, contingent or otherwise, and whether due or to become due),
of a nature required by generally accepted accounting principles as they have
been consistently applied by the Seller to be reflected in a corporate balance
sheet or disclosed in the notes thereto, which are not accrued or reserved
against in the Company Reports or disclosed in the notes thereto in accordance
with generally accepted accounting principles, except those which were incurred
after the date of the latest Company Report, all of which have occurred in the
ordinary course of business.

                                       26
<PAGE>   28

               5.7    Absence of Certain Changes or Events.  Except (i) as set
forth in Schedule 5.7, or in the Company Reports, and (ii) as otherwise
contemplated by this Agreement, since December 31, 1998 there has not been: (a)
any Material Adverse Effect; (b) any damage, destruction or casualty loss,
whether covered by insurance or not, which, individually or in the aggregate,
created a Material Adverse Effect; (c) any entry into any agreement, commitment
or transaction (including, without limitation, any borrowing, capital
expenditure or capital financing) by the Seller,  which is material to the
business or operations of the Purchased Assets; or (d) any change by the
Seller, with respect to the Purchased Assets, in accounting methods, principles
or practices except as required or permitted by generally accepted accounting
principles.

               5.8    Title and Related Matters.  Except for Permitted
Encumbrances, the Seller and, with respect to unit 6 the Seller and RG&E, hold
an insurable fee simple title to the Real Property (it being understood that
any title insurance would reflect Permitted Encumbrances).  Insurable fee
simple title is that which is insurable under an ALTA Owner's Policy (10-17-92)
with New York Endorsement Modifications ("New York Title Insurance").  Except
for Permitted Encumbrances, the Seller has good and valid title to the other
Purchased Assets which it purports to own that are reflected in the Company
Reports (other than those which have been disposed of since the date thereof in
the ordinary course of business) and the Seller and RG&E have good and valid
title to Unit 6, in each case, free and clear of all Encumbrances.

               5.9    Leases.   Other than the COIDA Lease/Sublease there are
no real property leases under which the Seller is a lessee or lessor and which
(x) are to be transferred and assigned to the Buyer on the Closing Date and (y)
(i)  provide for annual payments of more than $100,000 in the aggregate or
$10,000 individually or (ii) are material to the business, operations or
financial condition of the Purchased Assets.

               5.10   Insurance.  Except as set forth in Schedule 5.10, all
material policies of fire, liability, worker's compensation and other forms of
insurance owned or held by the Seller and insuring the Purchased Assets are in
full force and effect, subject to the terms of each policy, all premiums with
respect thereto covering all periods up to and including the date as of which
this representation is being made have been paid (other than retroactive
premiums which may be payable with respect to comprehensive general liability
and worker's compensation insurance policies),

                                       27
<PAGE>   29

and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation.  Except as described in Schedule 5.10, as of the
date of this Agreement, the Seller has not been refused insurance with respect
to the Purchased Assets nor has such coverage been limited by any insurance
carrier to which the Seller has applied for any such insurance or with which it
has carried insurance during the last five years.

               5.11   Environmental Matters.  Except as disclosed in Schedules
5.11 (a)-(d):

               (a)    The Seller holds, and is in compliance with, all material
permits, license and governmental authorizations ("Environmental Permits")
required for the Seller to conduct the business and operations of the Purchased
Assets under applicable Environmental Laws, and the Seller is otherwise in
substantial compliance with applicable Environmental Laws with respect to the
business  and operations of the Purchased Assets except for such failures to
hold or comply with required Environmental Permits, or such failures to be in
compliance with applicable Environmental Laws, which, individually or in the
aggregate, are not reasonably likely to create a Material Adverse Effect;

               (b)    The Seller has not received any written request for
information under CERCLA or any similar State law with respect to any on-site
location, except for such liability under such laws as would not be reasonably
likely to, individually or in the aggregate, create a Material Adverse Effect
nor has it been notified in writing that it is a potentially responsible party
under CERCLA or any similar State law;

               (c)    The Seller has not entered into or agreed to any consent
decree or order, and is not subject to any outstanding judgment, decree, or
judicial order relating to compliance with any Environmental Law or to
investigation or cleanup of Hazardous Substances under any Environmental Law;
and

               (d)    To the Seller's best knowledge, except as described in
Schedule 5.11(d), no Releases of Hazardous Substances have occurred at, from,
in, on, or under any Real Property, and no Hazardous Substances are present in,
on, about or migrating from any such Real Property that could give rise to an
Environmental Loss related to the Purchased Assets for which remediation
reasonably could be required,

                                       28
<PAGE>   30

except in any such case to the extent that any such Releases would not,
individually or in the aggregate, create a Material Adverse Effect.

        The representations and warranties made in this Section 5.11 are the
Seller's exclusive representations and warranties relating to environmental
matters.

               5.12   Labor Matters.  The Seller has previously delivered to
the Buyer a copy of the Collective Bargaining Agreement which is the only
collective bargaining agreement which relates to the business or operations of
the Purchased Assets.  With respect to the business or operations of the
Purchased Assets, except to the extent set forth in Schedule 5.12 and except
for such matters as will not, individually or in the aggregate, create a
Material Adverse Effect (a) the Seller is in compliance with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours; (b) the Seller has not received written notice
of any unfair labor practice complaint against the Seller pending before the
National Labor Relations Board; (c) there is no labor strike, slowdown or
stoppage actually pending or threatened against or affecting the Seller; (d)
the Seller has not received notice that any representation petition respecting
the employees of the Seller has been filed with the National Labor Relations
Board; (e) no arbitration proceeding arising out of or under the Collective
Bargaining Agreement is pending against the Seller and (f) the Seller has not
experienced any primary work stoppage in the past five years.  The Seller does
not have any knowledge of any union (other than IBES) claiming to represent the
employees associated with the Purchased Assets and the Seller does not have any
knowledge of any current union organizing activities among its employees by any
other such union, nor does any question concerning representation exist
concerning such employees.

               5.13   Real Property.  Schedule 5.14 contains a schedule of
title documents identifying the Real Property.  True and correct copies of any
current surveys, abstracts or title opinions in the Seller's possession and any
policies of title insurance in effect and in the possession of the Seller with
respect to the Real Property have been made available to the Buyer.  The Real
Property is encumbered by the Indentures, which encumbrances will be released
or discharged at the Closing.  Schedule 5.13 also reflects that the Seller will
be EXCEPTING AND RESERVING to Seller fee simple title and/or a permanent
Easement over parcels of land on which the transmission, distribution,
substation and communication facilities and related support equipment described
or referred to in Section 2.2 (d) are located, together with access to those
facilities, and those fee simple titles and Easements identified as

                                       29
<PAGE>   31

being reserved to seller in the deed or in Exhibit "A"to be annexed to the
deed, together with access to those parcels.

               5.14   Condemnation.  Neither the whole nor any part of the Real
Property or any other real property or rights leased, used or occupied by the
Seller or RG&E in connection with the ownership or operation of the Purchased
Assets is subject to any pending suit for condemnation or other taking by any
public authority or any other Person, and no such condemnation or other taking
has been threatened.

               5.15   Certain Contracts and Arrangements.  (a)   Except for (i)
contracts, agreements, personal property leases, commitments, understandings or
instruments which will expire prior to the Closing Date, (ii) agreements
entered into in the ordinary course of business that are not material to the
Purchased Assets,  (iii) the Collective Bargaining Agreement and (iv) as set
forth in Schedule 5.16 (contracts in (ii), (iii) and (iv) being the
"Contracts"), neither the Seller nor RG&E is a party to any written contract,
agreement, personal property lease, commitment, understanding or instrument
which is material to the business or operations of the Purchased Assets.
Copies of the Contracts have been made available to the Buyer.

               (b)    Each of the Contracts (i) constitutes a valid and binding
obligation of the Seller, and to the best knowledge of the Seller constitutes a
valid and binding obligation of the other parties thereto, (ii) is in full
force and effect, and (iii) other than the COIDA Lease/Sublease and the PILOT,
may be transferred to the Buyer pursuant to this Agreement and will continue in
full force and effect thereafter, in each case without breaching the terms
thereof or resulting in the forfeiture or impairment of any rights thereunder.

               (c)    There is not, under any of the Contracts, any default or
event which, with notice or lapse of time or both, would constitute a default
on the part of any of the parties thereto, except, such events of default and
other events as to which requisite waivers or consents have been obtained or
which would not, individually or in the aggregate, create a Material Adverse
Effect.

               (d)    If the Site Agreement and Interconnection Agreement were
in full force and effect between Seller's generation business and the Seller's
transmission business on the date of this Agreement, (i) the Seller's
generation business would be in material compliance with the terms thereof, and
(ii) except as provided in the Interconnection Agreement, there is no event or
condition that would enable or require the Seller's transmission business to
(x) notify the Seller's generation business

                                       30
<PAGE>   32

of the necessity of an addition to or modification of the Interconnection
Facilities, as defined in Section 1.10 of the  Interconnection Agreement, (y)
operate and/or purchase from the Seller's generation business any of the
equipment or facilities specified in Section 20.0 of the Site Agreement, or (z)
discontinue Interconnection Service as provided for in the Interconnection
Agreement.

               5.16   Legal Proceedings, etc.  There are no claims, actions,
proceedings or investigations pending or threatened against or relating to the
Seller or RG&E before any court, governmental or regulatory authority or body
acting in an adjudicative capacity, which, if adversely determined,
individually or in the aggregate, would create a Material Adverse Effect.
Neither the Seller nor RG&E is subject to any outstanding judgment, rule,
order, writ, injunction or decree of any court, governmental or regulatory
authority which, individually or in the aggregate, would create a Material
Adverse Effect.

               5.17   Permits. (a) The Seller has or will have by the Closing
Date all permits, subdivision approvals, variances, licenses, franchises and
other governmental authorizations, consents and approvals, other than with
respect to Environmental Laws, (collectively, "Permits") necessary to operate
the business of the Purchased Assets as presently conducted, except where the
failure to have such Permits would not, individually or in the aggregate,
create a Material Adverse Effect.  The Seller has not received any written
notification that it is in violation of any of such Permits, or any law,
statute, order, rule, regulation, ordinance or judgment of any governmental or
regulatory body or authority applicable to it, except for notifications of
violations which would not, individually or in the aggregate, create a Material
Adverse Effect.  The Seller is in compliance with all Permits, laws, statutes,
orders, rules, regulations, ordinances, or judgments of any governmental or
regulatory body or authority applicable to it, except for violations which,
individually or in the aggregate, do not create a Material Adverse Effect.

               (b)    Schedule 5.17 (b) sets forth all material Permits and
Environmental Permits other than Transferable Permits (which are set forth on
Schedule 1.1(a) (45)).

               5.18   Tax Matters.  With respect to the Purchased Assets and
trades or businesses associated with the Purchased Assets (i) all Tax Returns
required to be filed, other than those Tax Returns the failure of which to file
would not create a Material Adverse Effect, have been filed, and (ii) all
material Taxes shown to be due on such Tax Returns have been paid in full.

                                       31
<PAGE>   33

               5.19   Compliance with Laws.  The Seller is in compliance with
all applicable laws affecting the Purchased Assets except where the failure to
be in compliance would not, individually or in the aggregate, create a Material
Adverse Effect.

               5.20   Satisfaction of Required Standards.(a) The Purchased
Assets, as currently installed and operated, satisfy the requirements set forth
in the Interconnection Agreement, the Site Agreement and the Transition Power
Agreement, except as otherwise set forth in such agreements.

               (b)    The Excluded Assets do not include any properties,
physical assets, contracts or leases that are individually or in the aggregate,
necessary for the operation of the Purchased Assets.

               5.21   Fuel Oil.  At the Closing, the #6 fuel oil inventory will
be 50% .7% sulfur and 50% 1.5% sulfur, which fuel oil will be usable.

               EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET
FORTH IN THIS ARTICLE V, THE PURCHASED ASSETS ARE BEING SOLD AND TRANSFERRED
"AS IS, WHERE IS,"AND THE SELLER AND RG&E ARE NOT MAKING ANY OTHER
REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED,
CONCERNING SUCH PURCHASED ASSETS, INCLUDING, IN PARTICULAR, ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE HEREBY
EXPRESSLY EXCLUDED AND DISCLAIMED.

                                   ARTICLE VI

             REPRESENTATIONS AND WARRANTIES OF THE BUYER AND PARENT

        The Buyer and Parent represent and warrant to the Seller and RG&E as
follows (all such representations and warranties, except those regarding the
Buyer or Parent, being made to the best knowledge of the Buyer or Parent after
reasonable inquiry or investigation).

                                       32
<PAGE>   34

               6.1    Organization.  Parent is a corporation and the Buyer is a
limited liability company in each case duly organized, validly existing and in
good standing under the laws of the State of Delaware and each has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as is now being conducted.

               6.2    Authority Relative to this Agreement.  Each of the Buyer
and Parent has full corporate power and authority to execute and deliver this
Agreement and, with respect to the Buyer, the Ancillary Agreements and to
consummate the transactions contemplated hereby and thereby.  The execution and
delivery of this Agreement and, with respect to the Buyer, the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the Board of Directors of the
Buyer and, where applicable, Parent and no other corporate proceedings on the
part of the Buyer or Parent are necessary to authorize this Agreement and the
Ancillary Agreements or to consummate the transaction contemplated hereby or
thereby.  This Agreement and, with respect to the Buyer, the Ancillary
Agreements have been duly and validly executed and delivered by the Buyer and
Parent, and assuming that this Agreement and, with respect to the Buyer, the
Ancillary Agreements constitute valid and binding agreements of the Seller and
RG&E, this Agreement and, with respect to the Buyer, the Ancillary Agreements,
subject to the receipt of the Buyer Required Regulatory Approvals and the
Seller Required Regulatory Approvals, constitute valid and binding agreements
of the Buyer and Parent, enforceable against the Buyer and Parent in accordance
with their terms, subject to the Bankruptcy and Equity Exception.

               6.3    Consents and Approvals; No Violation. (a) Other than
obtaining the Buyer Required Regulatory Approvals and the Seller Required
Regulatory Approvals, none of the execution and delivery of this Agreement by
the Buyer and Parent, the execution and delivery of the Ancillary Agreements by
the Buyer and the purchase by the Buyer of the Purchased Assets pursuant to
this Agreement or performance under the Ancillary Agreements will (i) conflict
with or result in any breach of any provision of the constituent documents of
the Buyer or Parent, (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any governmental or regulatory
authority, (iii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, agreement, lease or other instrument or
obligation to which Parent, the Buyer or any of their respective subsidiaries is
a party or by which any of their respective assets may be bound,

                                       33
<PAGE>   35

except for such defaults  (or rights of termination, cancellation or
acceleration) as to which requisite waivers or consents have been obtained.

               (b)    Except for (i) qualification of the Buyer as an exempt
wholesale generator under the Energy Policy Act of 1992, without restriction,
including no restriction on sales to Affiliates, (ii) authorization to sell
power under Section 205 of the FPA, including (A) authorizations required to
implement sales under the Ancillary Agreements, and (B) market based rate
approval for capacity, energy and ancillary services, (iii) approval under
Section 203 of the FPA to transfer contracts and other jurisdictional assets,
(iv) any necessary PSC approvals, (v) the filings by the Buyer and the Seller
required by the HSR Act and (vi) approval of the Interconnection Agreement and
the Transition Power Agreements by FERC (the filings and approvals referred to
in clauses (i) through (vi) are collectively referred to as the "Buyer Required
Regulatory Approvals"), no declaration, filing or registration with, or notice
to, or authorization, consent or approval of any governmental or regulatory
body or authority is necessary for the consummation by the Buyer of the
transactions contemplated hereby or by the Ancillary Agreements.

               6.4    Availability of Funds.  The Buyer will have sufficient
funds available to it or has received binding written commitments from
responsible financial institutions to provide sufficient funds on the Closing
Date to pay the Purchase Price.

                                  ARTICLE VII

                            COVENANTS OF THE PARTIES

               7.1    Conduct of Business Relating to the Purchased Assets. (a)
Except as described in Schedule 7.1, during the period from the date of this
Agreement to the Closing Date, the Seller will operate the Purchased Assets and
related businesses in the usual, regular and ordinary course consistent with
good industry practice, will continue to implement its year 2000 compliance
program and shall use all commercially reasonable efforts to preserve intact
the Purchased Assets and the businesses related thereto, and endeavor to
preserve the goodwill and relationships with customers, suppliers and others
having business dealings with them.  Without limiting the generality of the
foregoing, and, except as contemplated in this Agreement or as described in
Schedule 7.1, prior to the Closing Date, without the prior

                                       34
<PAGE>   36

written consent of the Buyer, the Seller will not with respect to the Purchased
Assets:

                      (i)   (x) except for (1) Permitted Encumbrances and (2)
               indebtedness constituting Excluded Liabilities that does not
               create an Encumbrance on the Purchased Assets, create, incur,
               assume or suffer to exist any indebtedness for borrowed money
               (including obligations in respect of capital leases); or (y)
               assume, guarantee, endorse or otherwise become directly liable
               or responsible (whether directly or indirectly, contingently or
               otherwise) for the obligations of any Person;

                      (ii)  make any material change in the levels of fuel
               inventory and stores inventory customarily maintained by the
               Seller with respect to the Purchased Assets, other than
               consistent with good industry practice;

                      (iii) sell, lease (as lessor), transfer or otherwise
               dispose of, any of the Purchased Assets, other than assets used,
               consumed or replaced in the ordinary course of business
               consistent with good industry practice, including the practice
               of harvesting timber;

                      (iv)  terminate, extend or otherwise amend any real
               property lease to the extent any such extension or amendment
               would require the lease to be disclosed pursuant to Section 5.9;

                      (v)   execute, enter into, terminate or otherwise amend
               (x) any of the Permits or Environmental Permits, other than
               routine renewals or non-material modifications or amendments or
               (y) any other agreement, order, decree or judgment relating to
               the current or any new permit;

                      (vi)  enter into any power sales commitment having a term
               that extends beyond September 30, 1999 or such other date that
               the parties mutually agree to be the date on which the Closing
               is expected to occur;

                      (vii) with respect to the Purchased Assets and related
               businesses, (x) amend or cancel any liability or casualty
               insurance policies related thereto, (y) compromise, settle,
               withdraw, release or abate any

                                       35
<PAGE>   37

               claims made or accruing thereunder or (z) fail to maintain by
               self insurance or with financially responsible insurance
               companies insurance in such amounts and against such risks and
               losses as was in place as of the date of this Agreement for such
               assets and businesses;

                      (viii)enter into any commitment or contract for goods or
               services not addressed in clauses (i) through (vii) above that
               will be delivered or provided after September 30, 1999 or such
               other date that the parties mutually agree to be the date on
               which the Closing is expected to occur, in an amount greater
               than $25,000 or $100,000 in the aggregate; or

                      (ix)  enter into any written or oral contract, agreement,
               commitment or arrangement with respect to any of the
               transactions set forth in the foregoing paragraphs (i) through
               (viii).

               (b)    Notwithstanding anything in this Section 7.1 to the
contrary, the Seller shall allow Buyer to participate in negotiations for third
party contracts for the overhaul of Unit 5 and shall commence such overhaul no
later than September 1, 1999.

               7.2    Access to Information.   (a)  Between the date of this
Agreement and the Closing Date, the Seller will, during ordinary business hours
and upon reasonable notice (i) give the Buyer and the Buyer Representatives
reasonable access to all books, records, plants, offices and other facilities
and properties constituting the Purchased Assets to which the Buyer is not
denied access by law; (ii) permit the Buyer to make such reasonable inspections
thereof as the Buyer may reasonably request; (iii) furnish the Buyer with such
financial and operating data and other information with respect to the
Purchased Assets as the Buyer may from time to time reasonably request,
provided, however, that the Seller will not be required to create special
reports or perform any studies; (iv) furnish the Buyer a copy of each material
report, schedule or other document filed or received by it with respect to the
Purchased Assets with or from the SEC, PSC, NRC or FERC;  provided, however,
that (A) any such investigation shall be conducted in such manner as not to
interfere with the operation of the Purchased Assets, (B) the Seller shall not
be required to take any action which would constitute a waiver of the
attorney-client privilege and (C) the Seller need not supply the Buyer with any
information which the Seller is under a legal obligation not to supply.
Notwithstanding anything in this Section 7.2 to the contrary, (i) the Seller
will only furnish or provide such access to Transferring

                                       36
<PAGE>   38

Employee Records and personnel and medical records as is required by law, legal
process or subpoena and (ii) the Buyer shall not have the right to perform or
conduct any environmental sampling or testing at, in, on, or underneath the
Purchased Assets.

               (b)    All information furnished to or obtained by the Buyer and
the Buyer Representatives pursuant to this Section 7.2 or the Ancillary
Agreements shall be subject to the provisions of the Confidentiality Agreement
and shall be treated as "Proprietary Information"(as defined in the
Confidentiality Agreement).

               (c)    After the Closing Date, each party and their
representatives shall have reasonable access to all of the books and records of
the Purchased Assets, including all Transferring Employee Records, in the
possession of the other party to the extent that such access may reasonably be
required by such party.  Such access shall be afforded by the party or parties
in possession of such books and records upon receipt of reasonable advance
notice and during normal business hours.  The party or parties exercising this
right of access shall be solely responsible for any costs or expenses incurred
by it or them pursuant to this Section 7.2(c).  If the party or parties in
possession of such books and records shall desire to dispose of any such books
and records, such party or parties shall, prior to such disposition, give the
other party or parties a reasonable opportunity at such other party's or
parties'   expense, to segregate and remove such books and records as such
other party or parties may select.

               (d)    The Seller agrees not to release any Person (other than
the Buyer) from any confidentiality agreement now existing with respect to the
Purchased Assets, or waive or amend any provision thereof.

               (e)    Notwithstanding the terms of the Confidentiality
Agreement and Section 7.2 (b) above, the parties agree that prior to the
Closing the Buyer may, if reasonably necessary, reveal or disclose Proprietary
Information to any other Persons in order to obtain financing, and for purposes
of risk management of or with respect to the Purchased Assets, and to such
Persons with whom the Buyer expects it may have business dealings regarding the
Purchased Assets from and after the Closing Date, and, to the extent that
Seller consents, which consent shall not be unreasonably withheld, existing and
potential customers and suppliers.

               (f)    Except as required by law, unless otherwise agreed to in
writing by the Buyer, for a period commencing on the Closing Date and
terminating three years after such date the Seller and RG&E shall keep all
Proprietary Informa-

                                       37
<PAGE>   39
tion confidential and (i) shall not disclose or reveal any Proprietary
Information to any Person other than "Sellers' Representatives"(as defined
below) who are actively and directly participating in the transactions
contemplated hereby or who otherwise need to know the Proprietary Information
for such purpose and shall cause those Persons to observe the terms of this
Section 7.2 (f) and (ii) shall not use Proprietary Information for any purpose
other than consistent with the terms of this Agreement. Each of the Seller and
RG&E shall continue to hold all Proprietary Information according to the same
internal procedures and with the same degree of care regarding its secrecy and
confidentiality as currently applicable thereto. Each of the Seller and RG&E
shall notify the Buyer of any unauthorized disclosure to third parties that it
discovers, and shall endeavor to prevent any further such disclosures. Each of
the Seller and RG&E shall be responsible for any breach of the terms of this
Section 7.2 (f) by it or any of its representatives.

               After the Closing Date, in the event that the Seller or RG&E is
requested pursuant to, or required by, applicable law or regulation or by legal
process to disclose any Proprietary Information, or any other information
concerning the Purchased Assets, or the transactions contemplated hereby, the
Seller or RG&E, as applicable, shall provide the Buyer with prompt notice of
such request or requirement in order to enable the Buyer to seek an appropriate
protective order or other remedy, to consult with the Seller or RG&E, as
applicable, with respect to taking steps to resist or narrow the scope of such
request or legal process, or to waive compliance, in whole or in part, with the
terms of this Section 7.2 (f).  The Seller or RG&E, as applicable, agrees not
to oppose any action by the Buyer to obtain a protective order or other
appropriate remedy after the Closing Date.  In the event that no such
protective order or other remedy is obtained, or that the Buyer waives
compliance with the terms of this Section 7.2 (f), the Seller or RG&E, as
applicable, shall furnish only that portion of the Proprietary Information
which the Seller or RG&E, as applicable, is advised by counsel is legally
required.  In any such event the Seller or RG&E, as applicable, shall use its
reasonable best efforts to ensure that all Proprietary Information and other
information that is so disclosed will be accorded confidential treatment.
Seller's Representatives shall mean the Seller's or RG&E's accountants,
employees, counsel, environmental consultants and other authorized
representatives.

               7.3    Expenses.  Except to the extent specifically provided
herein and except for the cost of ALTA surveys, the cost of which shall be
shared by the Seller and the Buyer, whether or not the transactions
contemplated hereby are consummated, all costs and expenses incurred in
connection with this Agreement and

                                       38
<PAGE>   40

the transactions contemplated hereby shall be borne by the party incurring such
costs and expenses.  Any title insurance obtained by the Buyer shall be at the
Buyer's sole expense.

               7.4    Further Assurances.   (a)  Subject to the terms and
conditions of this Agreement, each of the parties hereto will use its best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the sale of the Purchased Assets
pursuant to this Agreement, including without limitation using its best efforts
to ensure satisfaction of the conditions precedent to each party's obligations
hereunder.  Notwithstanding anything in the previous sentence to the contrary,
the Seller and the Buyer shall use commercially reasonable efforts to obtain
all Permits and Environmental Permits necessary for the Buyer to operate the
Purchased Assets.  Neither of the parties hereto will, without prior written
consent of the other party, take or fail to take any action, which would
reasonably be expected to prevent or materially impede, interfere with or delay
the transactions contemplated by this Agreement.  From time to time after the
date hereof, without further consideration, the Seller and RG&E will, at their
own expense, execute and deliver such documents to the Buyer as the Buyer may
reasonably request in order to vest more effectively in the Buyer title to the
Purchased Assets subject to Permitted Encumbrances and Schedule 5.8.  From time
to time after the date hereof, the Buyer will, at its own expense, execute and
deliver such documents to the Seller and RG&E as such party may reasonably
request in order to consummate more effectively the sale of the Purchased
Assets pursuant to this Agreement.

               (b)    In the event that any Purchased Asset shall not have been
conveyed to the Buyer at the Closing, the Seller and RG&E shall use their best
efforts to convey such asset to the Buyer as promptly as is practicable after
the Closing.  In the event that any easement necessary or desirable for the
Seller's ongoing operations shall not have been retained by the Seller after
the Closing, the Buyer shall use its best efforts to grant such Easement to the
Seller as promptly as is practicable after the Closing.

               (c)    The Seller agrees to provide reasonable support to the
Buyer after the Closing with respect to any action on the part of the Buyer in
connection with the proposed Multi-Fuel Burn Project, the repowering of the
Oswego facility, or changes in fuel usage at the facility.

                                       39
<PAGE>   41

               7.5    Public Statements.  The parties shall consult with each
other prior to issuing any public announcement, statement or other disclosure
with respect to this Agreement or the transactions contemplated hereby and
shall not issue any such public announcement, statement or other disclosure
prior to such consultation, except as may be required by law and except that
the parties may make public announcements, statements or other disclosures with
respect to this Agreement and the transactions contemplated hereby to the
extent and under the circumstances in which the parties are expressly permitted
by the Confidentiality Agreement to make disclosures of "Proprietary
Information"(as defined in the Confidentiality Agreement).

               7.6    Consents and Approvals.   (a) The Seller, RG&E (if
applicable) and the Buyer shall each file or cause to be filed with the Federal
Trade Commission and the United States Department of Justice any notifications
required to be filed under the HSR Act and the rules and regulations
promulgated thereunder with respect to the transactions contemplated hereby.
The parties shall consult with each other as to the appropriate time of filing
such notifications and shall use their best efforts to make such filings at the
agreed upon time, to respond promptly to any requests for additional
information made by either of such agencies, and to cause the waiting periods
under the HSR Act to terminate or expire at the earliest possible date after
the date of filing.

               (b)    The Seller and the Buyer shall cooperate with each other
and (i) promptly prepare and file all necessary documentation, (ii) effect all
necessary applications, notices, petitions and filings and execute all
agreements and documents, (iii) use all commercially reasonable efforts to
obtain the transfer or reissuance to the Buyer of all necessary Transferable
Permits, consents, approvals and authorizations of all governmental bodies and
(iv) use all commercially reasonable efforts to obtain all necessary consents,
approvals and authorizations of all other parties, in the case of each of the
foregoing clauses (i), (ii), (iii) and (iv), necessary or advisable to
consummate the transactions contemplated by this Agreement (including, without
limitation, the Seller Required Regulatory Approvals and the Buyer Required
Regulatory Approvals) or required by the terms of any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument to which the Seller or the Buyer is a party or by
which either of them is bound.  Each of the Seller and the Buyer shall have the
right to review in advance all characterizations of the information relating to
the transactions contemplated by this Agreement which appear in any filing made
in connection with the transactions contemplated hereby.

                                       40
<PAGE>   42

               (c)    The Seller and the Buyer shall cooperate with each other
and promptly prepare and file notifications with, and request tax clearances
from, state and local taxing authorities in jurisdictions in which a portion of
the Purchase Price may be required to be withheld or in which the Buyer would
otherwise be liable for any Tax liabilities of the Seller pursuant to such
state and local Tax law.

               (d)    The Seller, RG&E (as applicable) and the Buyer agree to
execute and deliver the Ancillary Agreements at the Closing.

               (e)    Parent agrees to cause the Buyer to perform its
obligations hereunder.

               7.7    Fees and Commissions.  The Seller, RG&E and the Buyer
each represent and warrant to the other that, except for Merrill Lynch & Co.
and Donaldson Lufkin & Jenrette Securities Corporation, which are acting for
and at the expense of the Seller, and Chase Securities, Inc., which is acting
for and at the expense of the Buyer, no broker, finder or other Person is
entitled to any brokerage fees, commissions or finder's fees in connection with
the transaction contemplated hereby by reason of any action taken by the party
making such representation.

               7.8    Tax Matters.  (a)   Other than the New York Real Estate
Transfer Tax (the "New York Tax"), which is the Seller's and RG&E's obligation,
the Buyer shall be solely liable for and shall pay all applicable sales,
transfer, use, stamp, conveyance, value added, recording, excise, New York
Petroleum Business Tax and other similar Taxes, if any, together with all
recording or filing fees, notarial fees and other similar costs of Closing,
that may be imposed upon, or payable, collectible or incurred in connection
with the transfer of the Purchased Assets to the Buyer or otherwise as a result
of the transfer of the Purchased Assets ("Transfer Taxes").  The Buyer shall
release, indemnify and hold harmless Seller and RG&E with respect to all
Transfer Taxes, other than the New York Tax.  The Buyer, at its own expense,
will file, to the extent required by applicable law, all necessary Tax Returns
and other documentation with respect to all such Transfer Taxes, and if
required by applicable law, the Seller will join in the execution of any such
Tax Returns or other documentation.

               (b)    With respect to Taxes to be prorated in accordance with
Section 3.4 of this Agreement only, the Buyer shall prepare and timely file all
Tax Returns required to be filed after the Closing with respect to the
Purchased Assets, if

                                       41
<PAGE>   43

any, and shall duly and timely pay all such Taxes shown to be due on such Tax
Returns.  The Buyer's preparation of any such Tax Returns shall be subject to
the Seller's approval, which approval shall not be unreasonably withheld.  The
Buyer shall make such Tax Returns available for the Seller's review and
approval not later than fifteen (15) Business Days prior to the due date for
filing such Tax Return.  Within ten (10) Business Days after receipt of such
Tax Return, the Seller shall pay to the Buyer its proportionate share of the
amount shown as due on such Tax Return determined in accordance with Section
3.4 of this Agreement.

               (c)    Each of the Buyer and the Seller shall  provide the other
with such assistance as may reasonably be requested by the other party in
connection with the preparation of any Tax Return, any audit or other
examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes, and each will retain and provide
the requesting party with any records or information that may be relevant to
such return, audit, or examination, proceedings or determination.  Any
information obtained pursuant to this Section 7.8(c) or pursuant to any other
Section hereof providing for the sharing of information or review of any Tax
Return or other schedule relating to Taxes shall be kept confidential by the
parties hereto.

               (d)    The Buyer shall remit to the Seller any refund or credit
of Taxes with respect to the Purchased Assets to the extent such Taxes are
attributable to any taxable period, or portion thereof, ending on or before the
Closing Date and provide notice of such remittance to RG&E.

               (e)    The Buyer shall pay to the Seller at Closing the portion
of any Taxes previously paid by the Seller with respect to the Purchased Assets
to the extent such Taxes are properly allocable to a taxable period, or portion
thereof, beginning after the Closing Date.

               7.9    Supplements to Schedules.  Prior to the Closing Date, the
Seller and the Buyer shall supplement or amend the Schedules required by
Section 2.4, Article V and Article VI, as the case may be, with respect to any
matter relating to the Purchased Assets, hereafter arising which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth or described in such Schedules.  No supplement or amendment of any
Schedule made pursuant to this Section shall be deemed to cure any breach of
any representation or warranty made in this Agreement unless the parties agree
thereto in writing.

                                       42
<PAGE>   44

               7.10   Employees.  (a)   The Buyer and the Seller agree that the
Buyer shall be a successor within the meaning of the Collective Bargaining
Agreement.  Each person who becomes employed by the Buyer or an Affiliate of
Buyer pursuant to this Section 7.10 shall be referred to herein as a "Buyer
Employee."  The employment of Buyer Employees who are represented by Local No.
97 of the IBEW shall continue in accordance with the Collective Bargaining
Agreement.
               (b)    The Seller has made available to the Buyer the Collective
Bargaining Agreement.  With respect to Buyer Employees who are included in the
collective bargaining unit covered by the Collective Bargaining Agreement
("IBEW Employees"), on the Closing Date, the Buyer or any Affiliate of Buyer
who employs Buyer Employees will assume the Collective Bargaining Agreement as
it relates to such Buyer Employees employed at the Purchased Assets.

               (c)    For the period commencing on the Closing Date and ending
12 months thereafter, and except as the Buyer and any Buyer Employee may
otherwise agree, the Buyer shall provide all Buyer Employees who are not IBEW
Employees ("Non-Union Employees") with total compensation (including, without
limitation, base pay, authorized overtime, bonuses, and benefits contained in
the employee benefit plans, programs and fringe benefit arrangements (excluding
education reimbursement)) which is, in the aggregate, at least equivalent in
value to the Non-Union Employee's total compensation, which shall be based
upon (x) such employee's existing individual base pay, (y) authorized overtime,
if applicable, and (z) an average bonus and benefit component for such
employee's salary plan level, as consistently applied by the Seller,
apportioned according to such employee's base pay.  The Buyer shall also pay
reasonable relocation costs with respect to any Non-Union Employees who shall
relocate at the Buyer's request.

               (d)    As of the Closing Date, all Non-Union Employees shall
cease to participate in the employee welfare benefit plans (as such term is
defined in EPJSA) maintained or sponsored by the Seller or its Affiliates (the
"Prior Welfare Plans") and shall, if applicable, commence to participate in
welfare benefit plans of the Buyer or its Affiliates (the "Replacement Welfare
Plans").  The Buyer shall (i) waive all limitations as to pre-existing
condition exclusions and waiting periods with respect to Non-Union Employees
under the Replacement Welfare Plans, other than, but only to the extent of,
limitations or waiting periods that were in effect with respect to such
employees under the Prior Welfare Plans and that have not been satisfied as of
the Closing Date, and (ii) provide each Non-Union Employee with credit for any
co-payments and deductibles paid prior to the Closing Date in satisfy-

                                       43
<PAGE>   45

ing any deductible or out-of-pocket requirements under the Replacement Welfare
Plans (on a pro-rata basis in the event of a difference in plan years).

               (e)    Non-Union Employees shall be given credit for all service
with the Seller and its Affiliates under all employee benefit plans, programs,
and fringe benefit plans, programs, and fringe benefit arrangements of the
Buyer ("Buyer Benefit Plans") in which they become participants.  The service
credit given is for purposes of eligibility, vesting and service related level
of benefits, but not benefit accrual (except as provided in the following
sentence)  For purposes of benefit accrual, Non-Union Employees shall be given
credit for all service with the Seller and its Affiliates under all Buyer
Benefit Plans, but the ultimate benefits provided under the Buyer Benefit Plans
may be offset by the corresponding benefits previously provided by the Seller
or benefit plans of the Seller, or by the corresponding benefits accrued under
the benefit plans of the Seller or otherwise committed to be provided by the
Seller in the future.  Nothing in this Agreement shall preclude the use of a
"Defined Contribution Plan"in substitution for the "Defined Benefit
Plans"maintained by the Seller.

               (f)    To the extent allowable by law, the Buyer shall take any
and all necessary action to cause the trustee of a defined contribution plan of
the Buyer or one of its Affiliates, if requested to do so by a Non-Union
Employee, to accept a direct "rollover"of all or a portion of said employee's
distribution (excluding securities) from the Seller's Represented and
Non-Represented Employees Savings Fund Plans or the defined benefit Pension
Plan.

               (g)    In addition to the Buyer's obligations with respect to
the Employee Transition Cost set forth in Section 4.2, the Buyer shall pay to
each Non-Union Employee whose employment is terminated by the Buyer or one of
its Affiliates within eighteen months of the Closing Date a severance benefit
package equivalent to that which would have been provided to such individual
upon such termination by the Seller under the Niagara Mohawk Power Corporation
Involuntary Severance Plan as in effect on the Closing Date had such individual
remained continuously employed by the Seller or its Affiliates and had been
eligible for, and entitled to benefits under, such plan on the date of such
termination.

               (h)    The Buyer also shall provide, to each Non-Union Employee
who on the Closing Date is at least 50 years of age and has at least 10 years
of "Service" (as that term is defined in the Niagara Mohawk Pension Plan) and
who is hired by the Buyer, a benefit that is equal to the following amount
("Transition

                                       44
<PAGE>   46

Benefit"): (i) the value of the "Accrued Benefit"each such employee would have
had under the Niagara Mohawk Pension Plan cash balance formula had such
employee remained employed by the Seller for five years after the Closing Date,
assuming such employee had retained the same job with the Seller as such
employee had immediately preceding the Closing Date and had the same
"Compensation,""Interest Credit" (using an annual interest rate of 6.5
percent), and rate of "Pay-Based Credit" (as those terms are defined in the
Niagara Mohawk Pension Plan) as such employee had immediately preceding the
Closing Date; less (ii) the percent value of the "Accrued Benefit" such
employee has under the Niagara Mohawk Pension Plan cash balance formula as of
the Closing Date, plus the "Interest Credit"(as that term is defined in the
Niagara Mohawk Pension Plan) that would have been received on the amount of
such present value had it remained in the Niagara Mohawk Pension Plan for five
years after the Closing Date (assuming the Interest Credit remained at an
annual interest rate of 6.5 percent throughout that five year period).  The
Buyer shall provide the Transition Benefit for each eligible Non-Union Employee
in one or both of the following ways: (A) as vested accrued benefits for such
employee under a qualified retirement plan (or qualified retirement plans)
maintained by the Buyer, with such benefits accruing no later than the end of
the five year period following the Closing Date ("Five Year Period"); and/or
(B) as cash paid to such employee in a lump sum or in multiple payments (e.g.,
through a severance pay plan, a deferred compensation plan, or such other
arrangement deemed appropriate to the Buyer), with such payment(s) to commence
no later than the last day of the year in which such employee's employment with
the Buyer terminates (or, if later, 90 days after such employment terminates).
The present value of the vested accrued benefits described in (A), plus the
present value of the cash payment(s) to be made pursuant to (B), must at least
equal the total amount of the Transition Benefit for the applicable employee
(present value, for purposes of this sentence, shall be computed in the same
manner as the present value of an "Accrued Benefit"in the Niagara Mohawk
Pension Plan is computed).  Notwithstanding anything in this subsection (h) to
the contrary, (1) if an eligible Non-Union Employee voluntarily terminates
employment with the Buyer before the end of the Five Year Period or dies before
the end of the Five Year Period, the Buyer shall have the right to reduce such
employee's Transition Benefit on a pro rata-basis (e.g., if such employee
voluntarily leaves employment with the Buyer after one year, the Buyer could
reduce such Employee's Transition Benefit to 20 percent of the original
Transition Benefit amount)

               (i)    The Buyer and the Seller do not anticipate the issuance
of any notices pursuant to the WARN Act.  Notwithstanding the foregoing, the
Seller agrees to timely perform and discharge all requirements under the WARN
Act and under

                                       45
<PAGE>   47

applicable state and local laws and regulations for the notification of its
employees arising from the sale of the Purchased Assets to the Buyer up to and
including the Closing Date for those employees who will become Employees
effective as of the Closing Date.  After the Closing Date, the Buyer shall be
responsible for performing and discharging all requirements under the WARN Act
and under applicable state and local laws and regulations for the notification
of its employees with respect to the Fossil Assets or the Hydroelectric Assets,
as the case may be.

               (j)    The Buyer shall not be responsible for extending COBRA
continuation coverage to any employees and former employees of Seller who do
not elect to become Buyer Employees, or to any qualified beneficiaries of such
employees and former employees, who become or became entitled to COBRA
continuation coverage before the Closing, including those for whom the Closing
occurs during their COBRA election period.

               (k)    The Seller or the Seller's Affiliates shall remain
responsible for paying Buyer Employees for: (a) all salary, wages, bonuses
and/or incentive compensation that were earned for time worked for the Seller
or the Seller's Affiliates prior to the Closing Date; and (b) all workers'
compensation, disability benefits or other insurance benefits that were accrued
and based upon events occurring prior to the Closing Date.  The Seller or
Seller's Affiliates shall pay to the Buyer as promptly as practicable following
the Closing Date for all vacation and holiday time for Buyer's Employees which
is accrued as of the Closing Date, and the Buyer shall provide to the Buyer
Employees the opportunity either to be paid for such accrued time or to take
such time.

               (l)    Notwithstanding any other provision in this Agreement,
the Buyer shall have no obligation of any kind, and the Seller shall indemnify
and hold the Buyer harmless from, any liability with respect to any employee of
the Seller who does not elect to become a Buyer Employee.

               (m)    Prior to the Closing, the Seller will not fill any open
positions relating to the Purchased Assets without the consent of the Buyer,
which shall not be unreasonably withheld, except in accordance with the
Collective Bargaining Agreement.

               7.11   Risk of Loss.  (a)   From the date hereof through the
Closing Date, all risk of loss or damage to the property included in the
Purchased Assets shall be borne by the Seller and RG&E.

                                       46
<PAGE>   48

               (b)    If, before the Closing Date, all or any portion of the
Purchased Assets is taken by eminent domain or is the subject of a pending or
(to the knowledge of the Seller) contemplated taking which has not been
consummated, the Seller shall notify the Buyer promptly in writing of such
fact.  If the fair market value of the Purchased Assets that are the subject of
such taking is greater than $250,000, the Buyer and the Seller shall negotiate
in good faith to settle the loss resulting from such taking (including, without
limitation, by making a fair and equitable adjustment to the Purchase Price)
and, upon such settlement, consummate the transaction contemplated by this
Agreement pursuant to the terms of this Agreement.

               (c)    If, before the Closing Date, all or any material portion
of the Purchased Assets is damaged or destroyed by fire or other casualty, the
Seller shall notify the Buyer promptly in writing of such fact.  If such damage
or destruction would result in a loss of more than $250,000 and the Seller has
not notified the Buyer of its intention to cure such damage or destruction
within fifteen (15) days after its occurrence, the Buyer and the Seller shall
negotiate in good faith to settle the loss resulting from such casualty
(including, without limitation, by making a fair and equitable adjustment to
the Purchase Price) and, upon such settlement, consummate the transactions
contemplated by this Agreement pursuant to the terms of this Agreement.  If no
such settlement is reached within sixty (60) days after the Seller has notified
the Buyer of such casualty, the Buyer or the Seller may terminate this
Agreement pursuant to Section 10.1 (f).

               (d)    If a taking or damage or destruction in (b) or (c) above
shall affect $250,000 or less in value of the Purchased Assets, the Buyer shall
be entitled to any compensation with respect to a taking and any insurance
proceeds with respect to damage or destruction.

               7.12   Tax Clearance Certificates.  The Buyer shall use
reasonable efforts to provide or obtain from any taxing authority any
certificate, permit, license, or other document necessary to mitigate, reduce
or eliminate any Taxes (including additions thereto or interest and penalties
thereon) that otherwise would be imposed with respect to the transactions
contemplated in this Agreement.

               7.13   NYSERDA Compliance.  Following the Closing, the Buyer
agrees to comply with the Seller's obligations with respect to the ownership
and operation of the Purchased Assets set forth in the participation agreements
and tax regulatory agreements listed on Schedule 7.13.

                                       47
<PAGE>   49

               7.14   Storage of the Buyer's Fuel Oil Prior to the Closing
Date.  The Seller agrees that between the date of this Agreement and the
Closing Date, the Seller will (i) provide for the Buyer weekly a report
disclosing, separately with respect to different sulfur percentages, the amount
of fuel oil on hand at the Purchased Assets, the amount contracted by the
Seller for delivery and the amount of the storage capacity available to the
Buyer, and (ii) receive and store for the Buyer fuel oil in amounts not to
exceed the amount of such free storage capacity.  If the Seller has received
and stored fuel oil for the Buyer, such weekly reports shall also show
separately the amounts in storage for the Buyer and the Seller.  Such Buyer
fuel oil shall be deemed "received"solely for purposes of determining available
capacity when the Buyer advises the Seller in writing that it has ordered such
fuel oil for delivery.  In the event that the Seller shall require, prior to
the Closing Date, for its use at the facility, fuel oil in excess of the
amounts stored for Seller, the Buyer.  agrees to sell to the Seller such
reasonable amounts of the fuel oil stored for the Buyer as the Seller may
request for such purposes, at the Buyer's delivered cost.  In the event the
Closing does not occur and this Agreement terminates, the Seller shall pay the
Buyer for all remaining fuel oil stored for the Buyer at the Buyer's delivered
cost.

               7.15   Gas Pipeline 63 Agreement.  Between the date hereof and
December 31, 1999, the Buyer shall evaluate the proposed Gas Pipeline 63
Agreement and, at Buyer's request, the Buyer and the Seller shall negotiate in
good faith the terms of such an agreement.  The Seller shall promptly notify
the Buyer if it intends to negotiate with another party.  The Buyer shall
promptly notify the Seller if it decides not to negotiate with the Seller.

                                  ARTICLE VIII

                                   CONDITIONS

               8.1    Conditions to Each Party's Obligations to Effect the
Transaction.  The respective obligations of each party to effect the sale of
the Purchased Assets shall be subject to the fulfillment at or prior to the
Closing Date of the following conditions:

                                       48
<PAGE>   50

               (a)    The waiting period under the HSR Act applicable to the
consummation of the sale of the Purchased Assets contemplated hereby shall have
expired or.  been terminated;

               (b)    No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
sale of the Purchased Assets contemplated hereby shall have been issued and
remain in effect (each party agreeing to use reasonable best efforts to have
any such injunction, order or decree lifted) and no statute, rule or regulation
shall have been enacted by any State or Federal government or governmental
agency in the United States which prohibits the consummation of the sale of the
Purchased Assets;

               (c)    All Federal, State and local government consents and
approvals required for the consummation of the sale of the Purchased Assets and
the Seller Required Regulatory Approvals and the Buyer Required Regulatory
Approvals, shall have been obtained and become Final Orders (a "Final Order"
for all purposes of this Agreement means a final order after all opportunities
for rehearing are exhausted (whether or not any appeal thereof is pending) that
has not been revised, stayed, enjoined, set aside, annulled or suspended, with
respect to which any required waiting period has expired; and as to which all
conditions to effectiveness prescribed therein or otherwise by law, regulation
or order have been satisfied) and such Final Orders shall not impose materially
adverse terms or conditions on any of the Seller, RG&E or the Buyer (including
adverse ratemaking determinations as to the Seller or RG&E as to the recovery
of any losses or costs incurred or stranded as a result of the transaction),
provided that any such party may only invoke the foregoing condition if the
terms or conditions have such a material adverse effect on the benefits
expected to be derived from the consummation of the transactions contemplated
hereby that such party reasonably would not have been expected to enter into
this Agreement if such terms or conditions had been known as of the date
hereof;

               (d)    All consents and approvals for the consummation of the
sale of the Purchased Assets contemplated hereby required under the terms of
any note, bond, mortgage, indenture, contract or other agreement to which the
Seller, RG&E or the Buyer, or any of their subsidiaries, is a party shall have
been obtained, other than those which if not obtained, would not, in the
aggregate, create a Material Adverse Effect;

                                       49
<PAGE>   51

               (e)    Obtaining the consent of COIDA to the severing of the
COIDA Lease/Sublease and the PILOT between the Real Property and the real
property included within the PILOT to be retained by Seller; and

               (f)    Obtaining the consent of COIDA to the assignment of the
sublease, as severed to cover the Real Property from Seller to Buyer and the
assumption of the sublease, as severed to cover the Real Property, by Buyer.

               8.2    Conditions to Obligations of the Buyer.  The obligation
of the Buyer to effect the purchase of the Purchased Assets contemplated by
this Agreement shall be subject to the fulfillment at or prior to the Closing
Date of the following additional conditions:

               (a)    There shall not have occurred and be continuing a
Material Adverse Effect;

               (b)    The Seller shall have performed and complied with in all
material respects the covenants and agreements contained in this Agreement that
are required to be performed and complied with by the Seller on or prior to the
Closing Date, and the representations and warranties of the Seller set forth in
this Agreement shall be true and correct as of the date of this Agreement and
as of the Closing Date as though made at and as of the Closing Date;

               (c)    There shall be no Encumbrances on the Purchased Assets by
virtue of the Indenture;

               (d)    The Buyer shall have received certificates from
authorized officers of the Seller, dated the Closing Date, to the effect that,
to the best of such officers' knowledge, the conditions set forth in Sections
8.2(a), (b) and (c) have been satisfied;

               (e)    The Buyer shall have received an opinion of the general
counsel of the Seller, dated the Closing Date and satisfactory in form and
substance to the Buyer and its counsel, substantially to the effect that:

                            (1)  The Seller is a corporation duly organized,
               existing and in good standing under the laws of New York and the
               Seller has the corporate power and authority to execute and
               deliver this Agreement and the Ancillary Agreements and to

                                       50
<PAGE>   52

               consummate the transactions contemplated hereby and thereby; and
               the execution and delivery of this Agreement and such Ancillary
               Agreements and the consummation of the sale of the Purchased
               Assets contemplated hereby have been duly authorized by all
               requisite corporate action taken on the part of the Seller;

                            (2)  This Agreement and those Ancillary Agreements
               have been duly executed and delivered by the Seller and
               (assuming that the Seller Required Regulatory Approvals and the
               Buyer Required Regulatory Approvals are obtained) are valid and
               binding obligations of the Seller, enforceable against the
               Seller in accordance with their terms, (A) subject to the
               Bankruptcy and Equity Exception and (B) except that the remedy
               of specific performance and injunctive and other forms of
               equitable relief may be subject to certain equitable defenses
               and to the discretion of the court before which any proceeding
               therefor may be brought;

                            (3)  The execution and delivery and performance of
               this Agreement and the Ancillary Agreements by the Seller do not
               conflict with the Certificate of Incorporation or Bylaws, as
               currently in effect, of the Seller; and

                            (4)  No declaration, filing or registration with,
               or notice to, or authorization, consent or approval of any
               governmental authority is necessary for the consummation by the
               Seller of the Closing other than (i) the Seller Required
               Regulatory Approvals, all of such Seller Required Regulatory
               Approvals hereunder having been obtained and being in full force
               and effect with such terms and conditions as shall have been
               imposed by any applicable governmental authority, and (ii) such
               declarations, filings, registrations, notices, authorizations,
               consents or approvals which, if not obtained or made, would not,
               in the aggregate create a Material Adverse Effect.

               As to any matter contained in such opinions which involves the
laws of any jurisdiction other than the Federal laws of the United States or
the laws of the State of New York, such counsel may rely upon opinions of
counsel admitted in such

                                       51
<PAGE>   53

other jurisdictions.  Any opinions relied upon by such counsel as aforesaid
shall be delivered together with the opinion of such counsel.  Such opinions
may expressly rely as to matters of fact upon certificates furnished by the
Seller and appropriate officers and directors of the Seller and by public
officials;

               (f)    The Buyer shall have received the qualifications or
approvals set forth in Section 6.3(b) (i) and (ii) hereof;

               (g)    The Buyer shall have obtained all material Environmental
Permits and material Permits; and

               (h)    The Buyer shall be able to obtain New York Title
Insurance.

               8.3    Conditions to Obligations of the Seller and RG&E.  The
obligation of the Seller and RG&E to effect the sale of the Purchased Assets
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date of the following additional conditions:

               (a)    The Buyer and Parent each shall have performed in all
material respects its covenants and agreements contained in this Agreement
which are required to be performed on or prior to the Closing Date;

               (b)    The representations and warranties of the Buyer and
Parent set forth in this Agreement shall be true and correct as of the date of
this Agreement and as of the Closing Date as though made at and as of the
Closing Date;

               (c)    The Seller shall have received a certificate from
authorized officers of Parent and the Buyer, dated the Closing Date, to the
effect that, to the best of such officers'   knowledge, the conditions set
forth in Sections 8.3(a) and (b) have been satisfied;

               (d)    The Buyer shall have assumed, as set forth in Section
7.10, the Collective Bargaining Agreement and, as set forth in Section 2.3(x),
the Contracts, and in 2.3(xi), the RG&E Agreement.

               (e)    The Seller shall have received an opinion from the
general counsel of the Parent, dated the Closing Date and satisfactory in form
and substance to the Seller and their counsel, substantially to the effect
that:

                                       52
<PAGE>   54

                            (1)  Parent is a corporation and the Buyer is a
               limited liability company, in each case duly organized, existing
               and in good standing under the laws of the State of Delaware and
               has the corporate power and authority to execute and deliver
               this Agreement and, with respect to the Buyer, the Ancillary
               Agreements and to consummate the transactions contemplated
               hereby and, with respect to the Buyer, thereby; and the
               execution and delivery of this Agreement and, with respect to
               the Buyer, such Ancillary Agreements and the consummation of the
               sale of the Purchased Assets contemplated hereby have been duly
               authorized by all requisite corporate action taken on the part
               of the Buyer and Parent;

                            (2)  This Agreement and those Ancillary Agreements
               have been duly executed and delivered by the Buyer and Parent
               and (assuming that the Seller Required Regulatory Approvals and
               the Buyer Required Regulatory Approvals are obtained) are valid
               and binding obligations of the Buyer and Parent, enforceable
               against the Buyer and Parent in accordance with their terms, (A)
               subject to the Bankruptcy and Equity Exception and (B) except
               that the remedy of specific performance and injunctive and other
               forms of equitable relief may be subject to certain equitable
               defenses and to the discretion of the court before which any
               proceeding therefor may be brought;

                            (3)  The execution and delivery and performance of
               this Agreement and, with respect to the Buyer, the Ancillary
               Agreements by the Buyer and Parent do not conflict with the
               constituent documents, as currently in effect, of the Buyer or
               Parent; and

                            (4)  No declaration, filing or registration with,
               or notice to, or authorization, consent or approval of any
               governmental authority is necessary for the consummation by the
               Buyer or Parent of the Closing other than the Buyer Required
               Regulatory Approvals, all of such Buyer Required Regulatory
               Approvals having been obtained and being in full

                                       53
<PAGE>   55

               force and effect with such terms and conditions as shall have
               been imposed by any applicable governmental authority.

               As to any matter contained in such opinion which involves the
laws of any jurisdiction other than the federal laws of the United States and
Delaware, such counsel may rely upon opinions of counsel admitted in such other
jurisdictions.  Any opinions relied upon by such counsel as aforesaid shall be
delivered together with the opinion of such counsel.  Such opinion may
expressly rely as to matters of facts upon certificates furnished by
appropriate officers and directors of the Buyer and its subsidiaries and by
public officials.

                                   ARTICLE IX

                                INDEMNIFICATION

               9.1    Indemnification.  (a)  The Seller and, solely with
respect to Unit 6, RG&E will indemnify, defend and hold harmless Parent and the
Buyer from and against any and all claims, demands or suits (by any Person),
losses, liabilities, damages (including consequential or special damages),
obligations, payments, costs and expenses (including, without limitation, the
costs and expenses of any and all actions, suits, proceedings, assessments,
judgments, settlements and compromises relating thereto and reasonable
attorneys'   fees and reasonable disbursements in connection therewith) (each,
an "Indemnifiable Loss"), asserted against or suffered by the Buyer relating
to, resulting from or arising out of (i) any breach by the Seller or RG&E of
any covenant or agreement of the Seller or RG&E contained in this Agreement or
the representations and warranties contained in Sections 5.1, 5.2 or 5.3 hereof
(it being understood that the Seller or RG&E, as the case may be, shall only be
responsible for breaches by itself and not for breaches by the other), (ii) the
Excluded Liabilities, (iii) noncompliance by the Seller with any bulk sales or
transfer laws as provided in Section 11.11 or (iv) the Indemnifiable Liens.

               (b)    Parent and the Buyer will indemnify, defend and hold
harmless the Seller and RG&E from and against any and all Indemnifiable Losses
asserted against or suffered by the Seller or RG&E relating to, resulting from
or arising out of (i) any breach by Parent or the Buyer of any covenant or
agreement of Parent or the Buyer contained in this Agreement or the
representations and warranties contained in Sections 6.1, 6.2 and 6.3 hereof
and (ii) the Assumed Obligations.

                                       54
<PAGE>   56

               (c)    Any Person entitled to receive indemnification under this
Agreement (an "Indemnitee") having a claim under these indemnification
provisions shall make a good faith effort to mitigate and to recover all
losses, damages, costs and expenses from insurers of such Indemnitee under
applicable insurance policies so as to reduce the amount of any Indemnifiable
Loss hereunder.  The amount of any Indemnifiable Loss shall be reduced (i) to
the extent that Indemnitee receives any insurance proceeds with respect to an
Indemnifiable Loss and (ii) to take into account any net Tax benefit recognized
by the Indemnitee arising from the recognition of the Indemnifiable Loss and
any payment actually received with respect to an Indemnifiable Loss.

               (d)    The expiration, termination or extinguishment of any
covenant or agreement shall not affect the parties' obligations under this
Section 9.1 if the Indemnitee provided the Person required to provide
indemnification under this Agreement (the "Indemnifying Party") with proper
notice of the claim or event for which indemnification is sought prior to such
expiration, termination or extinguishment.

               (e)    The rights and remedies of the Seller, RG&E, Parent and
the Buyer under this Article IX are exclusive and in lieu of any and all other
rights and remedies which the Seller, RG&E, Parent and the Buyer may have under
this Agreement or otherwise for monetary relief with respect to (i) any breach
or failure to perform any covenant or agreement set forth in this Agreement or
(ii) the Assumed Obligations or the Excluded Liabilities, as the case may be.

               (f)    The Buyer, RG&E, Parent and the Seller each agree that
notwithstanding any provisions in this Agreement to the contrary, all parties
to this Agreement retain their remedies at law or in equity with respect to
willful or intentional breaches of this Agreement.

               (g)    Any indemnity payment under this Agreement shall be
treated as an adjustment to the Purchase Price for tax purposes.

               9.2    Defense of Claims.  (a)  If any Indemnitee receives
notice of the assertion of any claim or of the commencement of any claim,
action, or proceeding made or brought by any Person who is not a party to this
Agreement or an Affiliate of a party to this Agreement (a "Third Party Claim")
with respect to which indemnification is to be sought from an Indemnifying
Party, the Indemnitee will give such Indemnifying party reasonably prompt
written notice thereof, but in any event

                                       55
<PAGE>   57

not later than ten (10) calendar days after the Indemnitee's receipt of notice
of such Third Party Claim.  Such notice shall describe the nature of the Third
Party Claim in reasonable detail and shall indicate the estimated amount, if
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee.  The Indemnifying Party will have the right to participate in or,
by giving written notice to the Indemnitee, to elect to assume the defense of
any Third Party Claim at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, and the Indemnitee will cooperate in good
faith in such defense at such Indemnitee's own expense.

               (b)    If within ten (10) calendar days after an Indemnitee
provides written notice to the Indemnifying Party of any Third Party Claim the
Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in the last sentence of Section 9.2(a), the Indemnifying Party will
not be liable for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the
Indemnifying Party fails to take reasonable steps necessary to defend
diligently such Third Party Claim within twenty (20) calendar days after
receiving notice from the Indemnitee that the Indemnitee believes the
Indemnifying Party has failed to take such steps, the Indemnitee may assume its
own defense, and the Indemnifying Party will be liable for all reasonable
expenses thereof.  Without the prior written consent of the Indemnitee, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
which would lead to liability or create any financial or other obligation on
the part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder.  If a firm offer is made to settle a Third Party
claim without leading to liability or the creation of a financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder and the Indemnifying Party desires to
accept and agree to such offer, the Indemnifying Party will give written notice
to the Indemnitee to that effect.  If the Indemnitee fails to consent to such
firm offer within ten (10) calendar days after its receipt of such notice, the
Indemnitee may continue to contest or defend such Third Party Claim and, in
such event, the maximum liability of the Indemnifying Party as to such Third
Party claim will be the amount of such settlement offer, plus reasonable costs
and expenses paid or incurred by the Indemnitee up to the date of such notice.

               (c)    Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof,

                                       56
<PAGE>   58

stating the nature of such claim in reasonable detail and indicating the
estimated amount, if practicable, but in any event not later than ten (10)
calendar days after the Indemnitee becomes aware of such Direct Claim, and the
Indemnifying Party will have a period of thirty (30) calendar days within which
to respond to such Direct Claim.  If the Indemnifying Party does not respond
within such thirty (30) calendar day period, the Indemnifying Party will be
deemed to have accepted such claim.  If the Indemnifying Party rejects such
claim, the Indemnitee will be free to seek enforcement of its rights to
indemnification under this Agreement.

               (d)    If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is reduced
by recovery, settlement or otherwise under or pursuant to any insurance
coverage, or pursuant to any claim, recovery, settlement or payment by or
against any other entity, the amount of such reduction, less any costs,
expenses or premiums incurred in connection therewith (together with interest
thereon from the date of payment thereof at the prime rate then in effect of
the Bank of Boston), will promptly be repaid by the Indemnitee to the
Indemnifying Party.  Upon making any indemnity payment, the Indemnifying Party
will, to the extent of such indemnity payment, be subrogated to all rights of
the Indemnitee against any third party in respect of the Indemnifiable Loss to
which the indemnity payment relates; provided, however, that (i) the
Indemnifying Party will then be in compliance with its obligations under this
Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee
recovers full payment of its Indemnifiable Loss, any and all claims of the
Indemnifying Party against any such third party on account of said indemnity
payment is hereby made expressly subordinated and subject in right of payment
to the Indemnitee's rights against such third party.  Without limiting the
generality or effect of any other provision hereof, each such Indemnitee and
Indemnifying Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation and
subordination rights, and otherwise cooperate in the prosecution of such claims
at the direction of the Indemnifying Party.  Nothing in this Section 9.2(d)
shall be construed to require any party hereto to obtain or maintain any
insurance coverage.

               (e)    A failure to give timely notice as provided in this
Section 9.2 will not affect the rights or obligations of any party hereunder
except if, and only to the extent that, as a result of such failure, the party
which was entitled to receive such notice was actually prejudiced as a result
of such failure.

                                       57
<PAGE>   59

               9.3    Tax Contest.  (a) The Buyer shall notify the Seller
and/or RG&E (as applicable) in writing within thirty (30) days of receipt of
written notice of any Federal or State pending or threatened audits,
adjustments or assessments (a "Tax Audit"), which may affect the Seller's or
RG&E's liability for Taxes.  If the Buyer fails to give such notice, the Buyer
shall not be entitled to indemnification for any Taxes arising in connection
with such Tax Audit if such failure to give notice adversely affects the
Seller's or RG&E's right to participate in the Tax Audit.

               (b)    (i) If such Tax Audit relates to any taxable period
ending on or before the Closing or for any Taxes for which the Seller is liable
hereunder, the Seller shall at its expense control the defense and settlement
of such Tax Audit; (ii) if such Tax Audit relates to any taxable period
beginning after the Closing for any Taxes, including without limitation
Transfer Taxes as provided in Section 7.8(a), for which the Buyer is liable in
full hereunder, the Buyer shall at its expense control the defense and
settlement of such Tax Audit, provided the Seller shall be entitled to
participate in such Tax Audit at its expense in such defense and to employ
counsel of its choice at its expense; and (iii) if such Tax Audit relates to a
taxable period, or portion thereof, beginning before and ending after the
Closing and any Tax item cannot be identified as being a liability of either
party or cannot be separated from a Tax item for which the other party is
liable, the Seller shall control the defense and settlement of the Tax Audit.

                                   ARTICLE X

                          TERMINATION AND ABANDONMENT

               10.1   Termination. (a)   This Agreement may be terminated at
any time prior to the Closing Date by mutual written consent of the Seller,
RG&E and the Buyer.

               (b)    Unless Parent, the Seller and RG&E otherwise agree, this
Agreement shall be terminated with respect to RG&E if the RG&E Board Approval
is not received within 35 days after the date hereof.  Upon such termination,
Parent, the Buyer and the Seller agree to appropriately amend this Agreement to
reflect only the sale of the Seller's interest in the Purchased Assets.

               (c)    This Agreement maybe terminated by the Seller, RG&E or
the Buyer if the Closing contemplated hereby shall have not occurred on or
before the

                                       58
<PAGE>   60

first anniversary of the date of this Agreement (the "Termination Date");
provided that the right to terminate this Agreement under this Section 10.1(c)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; and provided, further, that if on the
first anniversary of the date of this Agreement the conditions to the Closing
set forth in Section 8.1(c) shall not have been fulfilled but all other
conditions to the Closing shall be fulfilled or shall be capable of being
fulfilled, then the Termination Date shall be the day which is twenty-one
months from the date of this Agreement.

               (d)    This Agreement may be terminated by the Seller, RG&E or
the Buyer if (i) any governmental or regulatory body, the consent of which is a
condition to the obligations of the Seller, RG&E and the Buyer to consummate
the Closing shall have determined not to grant its or their consent and all
appeals of such determination shall have been taken and have been unsuccessful,
(ii) one or more courts of competent, jurisdiction in the United States or any
State shall have issued an order, judgment or decree permanently restraining,
enjoining or otherwise prohibiting the Closing, and such order, judgment or
decree shall have become final and nonappealable or (iii) any statute, rule or
regulation shall have been enacted by any State or Federal government or
governmental agency in the United States which prohibits the consummation of
the Closing.

               (e)    This Agreement may be terminated by the Buyer, if there
has been a material violation or breach by the Seller or RG&E of any agreement,
representation or warranty contained in this Agreement which has rendered the
satisfaction of any condition to the obligations of the Buyer to effect the
Closing impossible and such violation or breach has not been waived by the
Buyer.

               (f)    This Agreement may be terminated by the Seller or RG&E,
if there has been a material violation or breach by the Buyer of any agreement,
representation or warranty contained in this Agreement which has rendered the
satisfaction of any condition to the obligations of the Seller or RG&E to
effect the Closing impossible and such violation or breach has not been waived
by the Seller or RG&E.

               (g)    This Agreement may be terminated by the Seller or the
Buyer in accordance with the provisions of Section 7.11(b) or (c)

                                       59
<PAGE>   61

               (h)    Notwithstanding the foregoing, RG&E's right to terminate
shall only be with respect to the sale of its ownership interest in Unit 6
hereunder and not with respect to the remaining Oswego Assets.

               10.2   Procedure and Effect of Termination.  In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by any party pursuant to Section 10.1, written notice thereof shall
forthwith be given by the terminating party to the other parties and, subject
to Section 10.1(h), this Agreement shall terminate and the transactions
contemplated hereby shall be abandoned, without further action by any of the
parties hereto.  If this Agreement is terminated as provided herein:

               (a)    Said termination shall be the sole remedy of the parties
hereto with respect to breaches of any agreement, representation or warranty
contained in this Agreement and none of the parties hereto nor any of their
respective trustees, directors, officers or Affiliates, as the case may be,
shall have any liability or further obligation to the other party or any of
their respective trustees, directors, officers or Affiliates, as the case may
be, pursuant to this Agreement, except in each case as stated in this Section
10.2 and in Sections i.2(b), 7.3 and 7.7.

               (b)    All filings, applications and other submissions made
pursuant to this Agreement, to the extent practicable, shall be withdrawn from
the agency or other Person to which they were made.

                                   ARTICLE XI

                            MISCELLANEOUS PROVISIONS

               11.1   Amendment and Modification.  Subject to applicable law,
this Agreement may be amended, modified or supplemented only by written
agreement of the Seller, RG&E (to the extent its interests are affected by such
amendment, modification or supplement), Parent and the Buyer.

               11.2   Waiver of Compliance; Consents.  Except as otherwise
provided in this Agreement, any failure of any of the parties to comply with
any obligation, covenant, agreement or condition herein may be waived by the
party entitled to the benefits thereof only by a written instrument signed by
the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or

                                       60
<PAGE>   62

estoppel with respect to, any subsequent or other failure.  Notwithstanding
anything in this Agreement to the contrary, the condition set forth in Section
8.3(d) cannot be waived by the Seller without the consent of the IBEW.

               11.3   No Survival.  Subject to the provisions of Section 9.2,
each and every representation, warranty and covenant contained in this
Agreement (other than the covenants contained in Sections 3.2, 3.3, 3.4, 7.2,
7.3, 7.4, 7.7, 7.8, 7.10, 7.12, 7.13, 7.14 and 7.15 and in Articles IX and XI
(which covenants shall survive in accordance with their terms) and other than
the representations and warranties contained in Sections 5.1, 5.2 and 5.3
(which representations and warranties shall survive for eighteen months from
the Closing)) shall expire with, and be terminated and extinguished by the
consummation of the sale of the Purchased Assets and the transfer of the
Assumed Obligations pursuant to this Agreement and such representations,
warranties and covenants shall not survive the Closing Date; and none of the
Seller, RG&E, the Buyer or any officer, director, trustee or Affiliate of any
of them shall be under any liability whatsoever with respect to any such
representation, warranty or covenant.

               11.4   Notices.  All notices and other communications hereunder
shall be in writing an shall be deemed given if delivered personally or by
facsimile transmission, telexed or mailed by overnight courier or registered or
certified mail (return receipt requested), postage prepaid, to the parties at
the following address (or at such other address for a party as shall be
specified by like notice; provided that notices of a change of address shall be
effective only upon receipt thereof):

                             (a)    If to the Seller, to:

                                    Niagara Mohawk Power Corporation
                                    300 Erie Boulevard West
                                    Syracuse, NY 13202
                                    Facsimile:   (315) 428-5802
                                    Attention:   Michael J. Kelleher

                                    with a copy to:

                                    Sullivan & Cromwell
                                    1701 Pennsylvania Avenue, N.W.
                                    Washington, D.C.  20006
                                    Facsimile:   (202) 293-6330

                                       61
<PAGE>   63

                                    Attention:    Janet T. Geldzahler, Esq.

                                    Swidler & Berlin
                                    3000 K Street, N.W.
                                    Washington, D.C.  20007
                                    Facsimile:   (202) 424-7501
                                    Attention:   Steven Agresta

                             (b)    If to RG&E, to:

                                    Rochester Gas and Electric Corporation
                                    89 East Avenue
                                    Rochester, N.Y.  14649
                                    Attention:   Michael T. Tomaino

                             (c)    If to the Buyer, to:
                                    NRG Energy, Inc.
                                    1221 Nicollet Mall, Suite 700
                                    Minneapolis, MN 55403-2445
                                    Facsimile:   (612) 373-5430
                                    Attention:   Craig Mataczynski
                                    with a copy to:

                                    Dorsey & Whitney LLP
                                    220 South Sixth Street
                                    Minneapolis, MN 55402-1498
                                    Facsimile:  (612) 340-8738
                                    Attention:   Frank H. Voigt

               11.5   Assignment.  This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any party hereto, including by operation of law without the prior written
consent of the other party, nor is this Agreement intended to confer upon any
other Person except the parties hereto any rights or remedies hereunder.
Notwithstanding the foregoing, no provision of this Agreement shall create any
third party beneficiary rights in any employee or former employee of the Seller
(including any beneficiary or dependent thereof) in respect of continued
employment or resumed employment, and no provision of this

                                       62
<PAGE>   64

Agreement shall create any rights in any such Persons in respect of any
benefits that may be provided, directly or indirectly, under any employee
benefit plan or arrangement except as expressly provided for thereunder.
Notwithstanding the foregoing, (i) the Buyer may assign all of its rights and
obligations hereunder to any wholly owned Subsidiaries of Parent (direct or
indirect) provided that no such assignment will release Parent from any
liabilities or obligations hereunder, and (ii) the Buyer or its permitted
assignee may (a) assign, transfer, pledge or otherwise dispose of its rights
and interests hereunder to a trustee or lending institution(s), or (b) assign
or transfer a portion of such rights and interest to a responsible financial
partner, in either case for the purpose of financing or refinancing; provided,
however, that no such assignment or disposition shall relieve or in anyway
discharge Parent or the Buyer or such assignee from the performance of its
duties and obligations under this Agreement.  The Seller and RG&E agree to
execute and deliver such documents as may be reasonably necessary to accomplish
any such assignment, transfer, conveyance, pledge or disposition of rights
hereunder so long as their rights under this Agreement are not thereby altered,
amended, diminished or otherwise impaired.

               11.6   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 New York principles of
conflicts of law) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies, except where New York
law is preempted by federal law in which event federal law shall govern.

               11.7   Counterparts.  This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

               11.8   Interpretation.  The article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.

               11.9   Schedules and Exhibits.  All Exhibits and Schedules
referred to herein are intended to be and hereby are specifically made a part
of this Agreement.

               11.10  Entire Agreement.  This Agreement, the Confidentiality
Agreement, the RG&E Agreement and the Ancillary Agreements including the

                                       63
<PAGE>   65

Exhibits, Schedules, documents, certificates and instruments referred to herein
or therein, embody the entire agreement and understanding of the parties hereto
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.  It is
expressly acknowledged and agreed that there are no restrictions, promises,
representations, warranties, covenants or undertakings contained in any
material made available to the Buyer pursuant to the terms of the
Confidentiality Agreement (including the Preliminary Information Memorandum,
dated April 1998, the Information Memorandum, dated May 1998, or the Request
for Proposal, dated July 1998, previously made available to the Buyer by the
Seller, Merrill Lynch & Co.  and Donaldson, Lufkin & Jenrette Securities
Corporation).  This Agreement supersedes all prior agreements and
understandings between the parties with respect to such transactions other than
the Confidentiality Agreement.

               11.11  Bulk Sales or Transfer Laws.  The Buyer acknowledges that
the Seller will not comply with the provision of any bulk sales or transfer
laws (other than Section 1141(c) of the New York State Tax Law) of any
jurisdiction in connection with the transactions contemplated by this
Agreement.  The Buyer hereby waives compliance by this Seller with the
provisions of the bulk sales or transfer laws of all applicable jurisdictions.

                          [BALANCE OF PAGE LEFT BLANK]

                                       64
<PAGE>   66

               IN WITNESS WHEREOF, the Seller, RG&E, Parent and the Buyer have
caused this agreement to be signed by their respective duly authorized officers
as of the date first above written.

                               NIAGARA MOHAWK POWER CORPORATION

                               By /s/ Michael J. Kelleher
                                  ----------------------------------------------
                                   Name:    Michael J. Kelleher
                                   Title:   Vice President

                               ROCHESTER GAS AND ELECTRIC CORPORATION

                               By /s/ Michael T. Tomaino
                                  ----------------------------------------------
                                   Name:    Michael T. Tomaino
                                   Title:   Sr. Vice President & General Counsel

                               NRG ENERGY, INC.

                               By /s/ Craig A. Mataczynski
                                  ----------------------------------------------
                                   Name:    Craig A. Mataczynski
                                   Title:   President

                               OSWEGO HARBOR POWER LLC

                               By /s/ Michael O'Sullivan
                                  ----------------------------------------------
                                    Name:    Michael O'Sullivan
                                    Title:   Authorized Representative

                                       65

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00012-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00012-of-00352.parquet"}]]