Document:

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                        MASTER PURCHASE & SALES AGREEMENT

Enron Energy Services, Inc., a Delaware corporation ("EESI"), and EMW Energy
Services Corp., a Delaware corporation ("EMW"), referred to individually as a
"PARTY" and collectively as the "PARTIES," enter into this Master Purchase &
Sales Agreement (together with all Transactions, collectively, this
"AGREEMENT") effective as of December 23, 1999, (the "EFFECTIVE DATE"). The
General Provisions set forth in Appendix "1" will apply to this Agreement.

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ARTICLE 1         TERM
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This Agreement will govern all Transactions, be effective as of the Effective
Date and continue for a period of two (2) years from the Services
Commencement Date (the "PRIMARY TERM"); provided, however, EMW will have the
option to extend the term for an additional two (2) year period (the
"SECONDARY TERM") by providing EESI written notice of such election at least
ninety (90) Days prior to the second (2nd) anniversary of the Services
Commencement Date; provided further, however, that in the event any
Transaction provides for a Period of Delivery extending beyond the Primary
Term, or if applicable, the Secondary Term of this Agreement, then this
Agreement will continue to apply to all such Transactions until all such
Transactions are completed. Termination of this Agreement in all instances
will be subject to Article 10.4.

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ARTICLE 2         SCOPE OF AGREEMENT
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2.1.  CONTRACT FORMATION. EESI and EMW from time to time during the term
      hereof may, but are not obligated to, enter into Transactions for the
      purchase or sale of Gas to which this Agreement will apply. Each
      Transaction will (a) be formed, effectuated and evidenced by a written
      paper-based Transaction Agreement executed by the Parties, including by
      facsimile and/or counterparts; (b) constitute a part of this Agreement;
      (c) be valid and enforceable as a result of the use of these procedures
      for the mutual benefit of the Parties; (d) be resolved, in the case of
      any conflict between the provisions of this Agreement and those
      contained in a Transaction Agreement, in favor of the Transaction
      Agreement and (e) govern all Transactions between the Parties from and
      after the Effective Date.

2.2.  PARTIES BOUND. The Parties will be legally bound by each Transaction
      upon execution of the Transaction Agreement in accordance with this
      Article 2 and acknowledge that each Party will rely thereon in doing
      business related to the Transaction.

2.3.  INTERRUPTIBLE OR FIRM. Each Transaction Agreement will indicate whether
      Gas purchased or sold, and delivered under this Agreement for each
      Transaction is interruptible or firm as set forth in Article 3. If a
      Transaction is not designated as interruptible or firm, it will be
      deemed to be interruptible. When the sale and purchase of Gas under
      this Article 2.3 is deemed interruptible by the Parties as set forth in
      Article 3, nothing herein will obligate Seller to sell and deliver or
      Buyer to purchase and receive any quantity of Gas.

2.4.  TRANSACTION AGREEMENTS. The Parties agree that a Transaction will be
      confirmed by the execution of a Transaction Agreement. Upon execution
      of a Transaction Agreement, the Transaction Agreement shall be (a)
      conclusive evidence of the Transaction made the subject matter thereof,
      (b) binding and enforceable against Seller and Buyer, and (c) the final
      expression of all the terms of such Transaction.

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ARTICLE 3         QUANTITY OBLIGATIONS
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3.1.  SALES BY EESI TO EMW

     A.   EESI'S SALES OBLIGATION. Subject to the conditions and requirements
          of the section entitled "Operations and Delivery" set forth in
          Appendix "1", EESI and EMW will Schedule, or cause to be Scheduled,
          at the Delivery Point(s) on an interruptible or firm basis, as the
          Parties so elect, each Gas Day a quantity of Gas for (a) requested
          Periods of Delivery equal to or in excess of one (1) Month (a
          "FORWARD TRANSACTION") and (b) for any Gas Day for which EMW has
          not requested that EESI provide either the Full Management Services
          or the Imbalance Management Services, requested Periods of Delivery
          during a Month (an "INTRA-MONTH TRANSACTION"), in both cases equal
          to the quantity requested by EMW pursuant to the terms of this
          Agreement (the "REQUESTED QUANTITY"); provided, however, in no
          event will EESI be obligated to sell or deliver an aggregate
          quantity of Gas (i) under all Transactions in excess of 800,000
          MMBtus per
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          Gas Day (the "MAXIMUM AGGREGATE QUANTITY") or (ii) under any one
          Transaction in excess of 40,000 MMBtus per Gas Day (the "MAXIMUM
          DAILY QUANTITY").

     B.   EESI'S FAILURE TO SCHEDULE. If EESI and EMW have elected in a
          Transaction for the sale and purchase and delivery of Gas on a firm
          basis, and if on any Gas Day EESI fails to Schedule the Requested
          Quantity, then such occurrence, unless excused by Force Majeure or
          EMW's failure to perform, will constitute an "EESI DEFICIENCY
          DEFAULT" and the "EESI DEFICIENCY QUANTITY" will be the numerical
          difference between the Requested Quantity and the quantity of Gas
          Scheduled for such Gas Day, stated in MMBtus. In the event of an
          EESI Deficiency Default, EESI will pay EMW the sum of the
          following: (i) an amount equal to the product of the EESI
          Deficiency Quantity and the Replacement Price Differential, PLUS
          (ii) liquidated damages equal to the product of $0.15 per MMBtu and
          the EESI Deficiency Quantity, to compensate EMW for its
          administrative and operational costs. During any Month in which
          EESI's nonperformance under this Article 3.1 B continues for a
          period of 5 consecutive Gas Days EMW may elect upon written notice
          to EESI, without liability, not to recommence Scheduling Gas
          hereunder for the remainder of such Month, but for no longer
          period. Subject to netting pursuant to Article 3.4, payment to EMW
          will be made upon receipt of an invoice by EESI pursuant to this
          Article 3.1 B and otherwise in accordance with the terms of the
          Financial Matters provision set forth in Appendix 1 of this
          Agreement.

     C.   EMW'S FAILURE TO SCHEDULE. If EESI and EMW have elected in a
          Transaction for the sale and purchase, and delivery of Gas on a
          firm basis, and if on any Gas Day EMW fails to Schedule the
          Requested Quantity, then such occurrence, unless excused by Force
          Majeure or EESI's failure to perform, will constitute an "EMW
          DEFICIENCY DEFAULT" and the "EMW DEFICIENCY QUANTITY" will be the
          numerical difference between the Requested Quantity and the
          quantity of Gas Scheduled for such Gas Day, stated in MMBtus. In
          the event of an EMW Deficiency Default, EMW will pay EESI the sum
          of the following: (i) an amount equal to the product of the EMW
          Deficiency Quantity and the Replacement Price Differential, PLUS
          (ii) liquidated damages equal to the product of $0.15 per MMBtu and
          the EMW Deficiency Quantity, to compensate EESI for its
          administrative and operational costs. During any Month in which
          EMW's nonperformance under this Article 3.1 C continues for a
          period of 5 consecutive Gas Days EESI may elect, upon written
          notice to EMW, without liability, not to recommence Scheduling Gas
          for the remainder of such Month, but for no longer period. Subject
          to netting pursuant to Article 3.4, payment to EESI will be made in
          accordance with the Financial Matters provisions set forth in
          Appendix "1."

3.2.  PURCHASES BY EESI FROM EMW.

     A.   EESI'S PURCHASE OBLIGATION. Subject to the conditions and
          requirements of the section entitled "Operations and Delivery" set
          forth in Appendix "1", EESI and EMW will Schedule, or cause to be
          Scheduled, at the Delivery Point(s) on an interruptible or firm
          basis as the Parties so elect, each Gas Day a quantity of Gas for
          (a) Forward Transactions and (b) for any Gas Day for which EMW has
          not requested that EESI provide either the Full Management Services
          or the Imbalance Management Services, Intra-Month Transactions, in
          both cases equal to the quantity offered by EMW pursuant to the
          terms of this Agreement (the "OFFERED QUANTITY"); provided,
          however, in no event will EESI be obligated to purchase or receive
          an aggregate quantity of Gas in excess of Maximum Aggregate
          Quantity or Maximum Daily Quantity.

     B.   EESI FAILURE TO SCHEDULE. If EESI and EMW have elected in a
          Transaction for the sale and purchase, and delivery of Gas on a
          firm basis, and if on any Gas Day EESI fails to Schedule the
          Offered Quantity, then such occurrence, unless excused by Force
          Majeure or EMW's failure to perform, will constitute an "EESI
          PURCHASE DEFAULT" and the "EESI DEFAULT QUANTITY" will be the
          numerical difference between the Offered Quantity and the quantity
          of Gas Scheduled for such Gas Day, stated in MMBtus. In the event
          of an EESI Purchase Default, EESI will pay EMW the sum of the
          following: (i) an amount equal to the product of the EESI Default
          Quantity and the Replacement Price Differential, PLUS (ii)
          liquidated damages equal to the product of $0.15 per MMBtu and the
          EESI Default Quantity, to compensate EMW for its administrative and
          operational costs. During any Month in which EESI's nonperformance
          under this Article 3.2 B continues for a period of 5 consecutive
          Gas Days, EMW may elect upon written notice to EESI, without
          liability, not to recommence Scheduling Gas for the remainder of
          the Month, but for no

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          longer period. Subject to netting pursuant to Article 3.4, payment
          to EMW will be made in accordance with the Financial Matters
          provisions set forth in Appendix "1."

     C.   EMW'S FAILURE TO SCHEDULE. If EESI and EMW have elected in a
          Transaction for the sale and purchase, and delivery of Gas on a
          firm basis, and if on any Gas Day EMW fails to Schedule the Offered
          Quantity, then such occurrence, unless excused by Force Majeure or
          EESI's failure to perform, will constitute an "EMW SALES DEFAULT"
          and the "EMW DEFAULT QUANTITY" will be the numerical difference
          between the Offered Quantity and the quantity of Gas Scheduled for
          such Gas Day stated in MMBtus. In the event of an EMW Sales
          Default, EMW will pay EESI the sum of the following: (i) an amount
          equal to the product of the EMW Default Quantity and the
          Replacement Price Differential, PLUS (ii) liquidated damages equal
          to the product of $0.15 per MMBtu and the EMW Default Quantity, to
          compensate EESI for its administrative and operational costs.
          During any Month in which EMW's nonperformance under this Article
          3.2 C continues for a period of 5 consecutive Gas Days EESI may
          elect, upon written notice to EMW, without liability, not to
          recommence Scheduling Gas hereunder for the remainder of the Month,
          but for no longer period. Subject to netting pursuant to Article
          3.4, payment to EWSI will be made upon receipt of an invoice by EMW
          pursuant to Article 3.2 B and otherwise in accordance with the
          Financial Matters provisions set forth in Appendix "1".

3.3.  SCHEDULING QUANTITIES AND DELIVERY POINTS. Unless otherwise agreed,
      nothing in this Agreement, and in particular this Article 3, will
      require or permit either Party to Schedule Gas at a point other than at
      a Delivery Point or in quantities in excess of the Requested Quantity
      or Offered Quantity.

3.4.  NETTING.

      A.   INTRAAGREEMENT. In the event that EMW and EESI are each required
           to pay an amount to the other Party in the same Month under this
           Agreement, then such amounts with respect to each Party may be
           aggregated and the Parties may discharge their obligations to pay
           through netting, in which case the Party, if any, owing the
           greater aggregate amount may pay to the other Party the difference
           between the amounts owed.

      B.   INTERAGREEMENT. In the event that a Termination Event occurs under
           either this Agreement or that certain Master Energy Purchase and
           Sale Agreement between the Parties under even date herewith (the
           "MASTER ENERGY AGREEMENT") and EMW and EESI are each required to
           pay an amount to the other Party in the same Month pursuant to
           this Agreement and/or the Master Energy Agreement, then such
           amounts with respect to each Party may be aggregated and the
           Parties may discharge their obligations to pay through netting, in
           which case the Party, if any, owing the greater aggregate amount
           may pay to the other Party the difference between the amounts owed.

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ARTICLE 4         MANAGEMENT SERVICES
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4.1. INITIAL SERVICES. For a period commencing as of the Services
     Commencement Date and extending for a period of six (6) months (the
     "INITIAL PERIOD"), EESI will provide EMW, at no cost, the following
     services (collectively referred to as the "FULL MANAGEMENT SERVICES"):

     A.   LOAD FORECASTING. EESI will estimate the full Gas requirements each
          Gas Day for those customers which EMW has notified EESI that it has
          acquired and for whom EMW desires to purchase Gas each Gas Day from
          EESI (the "LOAD FORECAST") pursuant to Article 3.1. (the "LOAD
          FORECASTING SERVICE").

     B.   NOMINATION. EESI will utilize (i) the Load Forecast during any
          Month for which EMW has requested that EESI provide the Full
          Management Services or the Imbalance Management Services and (ii)
          the amount specified by EMW during any period for which EMW has not
          requested that EESI provide the Full Management Services or the
          Imbalance Management Services for each Month during the Period of
          Delivery as EMW's nomination for said Month ("ORIGINAL NOMINATION")
          in lieu of EMW nominating the Requested Quantity for the applicable
          Month by the Nomination Due Date as required pursuant to the
          section entitled "Operations and Delivery" in the "General Terms &
          Conditions" attached as Appendix "1" to this Agreement (the
          "NOMINATION SERVICE").

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     C.   SCHEDULING. EESI will Schedule (i) the Requested Quantity for
          delivery by EMW's Transporter from the Delivery Point to EMW's
          customers and (ii) the Offered Quantity for receipt by EESI's
          Transporter at the Delivery Point under each Transaction, as
          applicable, each Gas Day, provided, however, in no event will such
          quantity of Gas exceed the Maximum Daily Quantity or be permitted
          if it would cause EMW to exceed the Maximum Aggregate Quantity (the
          "SCHEDULING SERVICE").

     D.   POSITION REPORTING. EESI will regularly monitor the actual Gas
          usage of EMW's customers during the Period of Delivery and track
          developing variances between the actual Gas consumption of EMW's
          customers and the quantity of Gas Scheduled on EMW's behalf,
          including any applicable gas bank and back up balances
          ("VARIANCE"), referred to as the "POSITION REPORT SERVICE").

     E.   IMBALANCE MANAGEMENT SERVICE. EESI will, during any Month for which
          EMW has requested that EESI provide the Full Management Services
          (other than the Invoicing Services), adjust as deemed necessary the
          quantity then currently Scheduled with all Transporters, perform
          imbalance trades and settlements and all other activities deemed
          necessary to assure compliance with the Scheduling tolerances of
          the Transporters (the "IMBALANCE MANAGEMENT SERVICES"). In the
          event a Transporter(s) assess any charge and/or penalty for
          Variances, including the cost of replacement Gas or cash outs (the
          "SERVICE PENALTIES"), EESI will be responsible for all Service
          Penalties properly imposed pursuant to the terms and conditions of
          such Transporters rates and tariffs, as long as (i) such Service
          Penalties are not due to deviations in the actual Gas consumption
          from the Gas consumption data obtained by EESI from or through EMW
          or the telemetering facilities of EMW's customers, as applicable
          (ie, the Load Forecasting Services that EMW is required to receive
          to obtain the Imbalance Management Services), other than those data
          deviations occurring from the gross negligence, willful misconduct
          or bad faith of EESI; and (ii) EMW promptly complied with any and
          all OFO's.

     F.   INVOICING SERVICE. EESI will prepare the written statement setting
          forth Gas Scheduled during the preceding Month, and other charges
          due EMW, including, without limitation, deficiency or default
          charges under Article 3 of this Agreement, as required under the
          Financial Matters provisions set forth in Appendix "1" for all
          purchases of Gas by EESI pursuant to Article 5.2 hereof (the
          "INVOICING SERVICES").

     G.   OTHER ACTIONS. EESI will take such actions and enter into such
          additional agreements as may be required from time to time by EMW
          or third parties so as to enable EESI to perform the above
          referenced actions.

4.2. SUBSEQUENT SERVICES. EESI will provide EMW the Full Management Services
     or any or all of the individual services referenced in Sections A, B, C,
     D or F of Article 4.1 above (it being specifically recognized and agreed
     that EMW may not elect to receive the Imbalance Management Services,
     except as a part of the Full Management Services) commencing as of the 6
     Month anniversary of the Services Commencement Date and extending for
     the Primary Term (plus any Secondary Term) of this Agreement at the
     following prices:

<TABLE>
<CAPTION>
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                                    TIME PERIOD                                                SERVICE COSTS
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<S>                                                                            <C>
      A period from the six (6) Month anniversary of the Services              The actual costs incurred (including
      Commencement Date and extending until the first anniversary of the       out-of-pocket, general and administrative,
      Services Commencement Date; provided, however if an initial firm         employee and employee benefit and any
      commitment underwritten public offering of shares of common stock of     reasonable internal allocations received in
      EMW registered under the Securities Act of 1933, as amended, has not     connection with the provision of the Full
      been consummated on or prior to six (6) Months following the Effective   Management Services) by EESI in providing the
      Date, then EMW may elect to extend this period for an additional six     services selected by EMW, but in no event
      (6) Months beyond the first anniversary of said Services Commencement    will such cost of service exceed an amount
      Date by giving EESI written notice of such election at least ten (10)    equal to $0.30 per MMBtu.
      Days prior to said first anniversary date.
      ------------------------------------------------------------------------ -----------------------------------------------

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      A period from the first anniversary of the Services Commencement Date    An amount equal to $0.25 per MMBtu.
      (or the eighteen (18) month anniversary in the event EMW has extended
      the above period pursuant to the above provisions) and extending
      through the Primary Term of this Agreement.
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      A period from the expiration of the Primary Term and extending through   An amount mutually agreed to by the Parties,
      the Secondary Term, if any, of this Agreement.                           not to exceed $0.50 per MMBtu.
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</TABLE>

4.3. EMW'S OBLIGATION. To enable EESI to perform any or all of the services
     specified as a component of Full Management Services:

     A.   LIMITED NON-EXCLUSIVE AGENT. EMW appoints and authorizes EESI as
          its limited, non-exclusive agent to take actions necessary to
          perform the Full Management Services during the Initial Period and
          any individual service comprising the Full Management Services
          thereafter; provided, however such appointment is a limited agency
          wherein the duties of EESI are specifically limited to the subject
          matter thereof and will not create or result in the imposition on
          EESI of any other duties of any kind, including without limitation
          any duties that otherwise may arise by operation of law. Nothing
          herein will cause EESI to be or to be deemed a party to any
          transportation agreement with EMW's Transporter(s) and
          particularly, without limitation, EESI does not hereby assume any
          obligation, liability or responsibility of EMW to EMW's
          Transporter(s) in connection with the obligation to pay
          transportation invoices.

     B.   AGGREGATION SERVICES. EMW authorizes EESI, as its limited,
          non-exclusive agent, during the Initial Period and any Month
          thereafter in which EMW has elected to receive the Full Management
          Services or Imbalance Management Services, to include EMW's
          customers in an aggregation pool (either EMW's or EESI's) defined
          by the relevant utility and include EMW's customer's existing
          volume banking and balancing service, full requirements service
          and/or partial requirements service levels, as applicable, in said
          aggregation pool. EMW or its customers will be responsible for
          installing, maintaining and operating all equipment and related
          services required by the applicable utility to receive service
          hereunder. Upon termination of any Transaction Agreement, if EESI
          has billed EMW based on the actual consumption of EMW's customer's,
          then (i) any balance EMW or its customers have in a storage account
          relative to that Transaction Agreement ("STORAGE BALANCE") will be
          settled pursuant to the tariff provisions of the applicable
          Transporter and (ii) EMW and EESI will settle any Storage Balance
          based upon the actual cost of the Gas in the relevant storage
          account, including charges for transportation and fuel.
          Notwithstanding EMW's authorization to allow the inclusion of its
          customers in EESI's aggregation pools, nothing herein shall be
          construed so as to disqualify those aggregated customers from EMW's
          customer base.

     C.   UPSTREAM CAPACITY.

          1.   Under any Transaction Agreement providing for service in which
              EMW has elected to receive the Full Management Services or
              Imbalance Management Services, EESI may elect, as EMW's
              limited, non-exclusive agent, to contract for voluntarily
              released Pipeline capacity and/or storage and/or to elect an
              assignment of firm transportation and storage capacity upstream
              of EMW's Delivery Points (the "UPSTREAM CAPACITY"). Upon such
              election, EESI may utilize such Upstream Capacity so assigned
              and/or released to serve parties other than EMW or its
              customers, including, but not limited to other parties in
              EESI's aggregation pool, if any, and to re-release such
              Upstream Capacity and to retain all proceeds therefrom for
              EESI's own account, subject to recall only in the event of an
              EESI Deficiency Default or an EESI Purchase Default, EMW's
              customer's election to return to their utility sales service
              program or termination of this Agreement; provided, however,
              EESI will be responsible for and pay all transportation,
              unutilized capacity charges and other charges associated with
              the Upstream Capacity.

         2.   Under any Transaction Agreement providing for service in which
              EMW has not elected to receive the Full Management Services or
              Imbalance Management Services, EMW may elect to contract for

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              Upstream Capacity and to re-release such Upstream Capacity and
              to retain all proceeds therefrom for EMW's own account;
              provided, however, EMW will be responsible for and pay all
              transportation, unutilized capacity charges and other charges
              associated with the Upstream Capacity.

         3.   In the event EMW is obligated to take Upstream Capacity
              pursuant to a mandatory release program from any utility
              subsequent to entering into a Transaction Agreement, then EMW
              may request that EESI amend such Transaction Agreement to
              provide for a new Delivery Point at the "receipt point" for the
              Upstream Capacity, in which event EMW will reimburse EESI for
              any and all "net unwind" costs associated with the change of
              such Delivery Point, and a new Contract Price will be
              established pursuant to the provisions of Article 5.2 of this
              Agreement; provided, however, EMW will be responsible for and
              pay all transportation, unutilized capacity charges and other
              charges associated with the Upstream Capacity.

     D.  GAS CONSUMPTION DATA. EMW will provide EESI (or allow EESI access to
         on a weekly basis during the applicable Period of Delivery) the
         actual Gas consumption data for EMW's customers for such week;
         and/or provide or allow EESI to obtain the actual real-time Gas
         consumption data of such customers through existing telemetering
         facilities connected to the natural gas distribution facilities of
         EMW's customer's transporter. Said data consumption information is
         subject to the operational requirements of EMW's customer's
         transporter and will be deemed confidential information pursuant to
         Article 10.7 of this Agreement;

     E.  SERVICE PENALTIES. Be responsible for Service Penalties to the
         extent such Service Penalties are due to deviations in the actual
         Gas consumption from the Gas consumption data obtained by EESI from
         or through EMW on a weekly basis and/or the telemetering facilities
         connected to the Gas distribution facilities of EMW's customer's
         utility, as applicable (other than those data deviations occurring
         from the gross negligence, willful misconduct or bad faith of EESI);
         or EMW's failure to promptly comply with any and all OFO's.

     F.  OTHER ACTIONS. EMW will take such actions and enter into such
         additional agreements as may be required from time to time by EESI
         or third parties so as to enable EESI to perform the above
         referenced actions.

4.4. LIABILITY FOR PERFORMANCE OF FULL MANAGEMENT SERVICES. EESI WILL BE
     LIABLE FOR ANY ACT OR OMISSION BY EESI IN CONNECTION WITH EESI'S
     PERFORMANCE OF THE FULL MANAGEMENT SERVICES OR ANY INDIVIDUAL SERVICE
     COMPRISING THE FULL MANAGEMENT SERVICES DUE TO OR ARISING OUT OF EESI'S
     NEGLIGENCE OR WILLFUL MISCONDUCT; PROVIDED, HOWEVER, IN THE EVENT THE
     PARTIES ARE CONCURRENTLY NEGLIGENT, EESI'S LIABILITY WILL BE LIMITED TO
     THAT PERCENTAGE ASSOCIATED WITH ITS NEGLIGENCE; PROVIDED FURTHER,
     HOWEVER, IN NO EVENT WILL EESI BE LIABLE FOR ANY CLAIM RESULTING, IN
     WHOLE OR PART, FROM THE WILLFUL MISCONDUCT OR BAD FAITH OF EMW.

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ARTICLE 5         PRICING OPTIONS
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5.1. CONTRACT PRICE ELECTION FOR SALES BY EESI TO EMW. The Contract Price
     for all quantities of Gas sold by EESI to EMW pursuant to this
     Agreement will be specified on the applicable Transaction Agreement
     pursuant to one of the following options:

     A.   FORWARD TRANSACTIONS IN EXISTING MARKETS. EMW may elect, subject to
          the maximum Transaction size specified in Article 3.1 A, to receive
          a Contract Price for the purchase of Gas from EESI for any Forward
          Transaction in the markets and at the Delivery Points specified on
          Exhibit "C" (an "EXISTING MARKET") equal to either of the following:

          1.  EMW may request EESI's then current sales price per MMBtu
              applicable to wholesale transactions for the Existing Markets
              based on the applicable index specified for such Existing
              Market for the specified Period of Delivery and adjusted for
              the applicable load shape and applicable locational basis
              adjustment from the Delivery Point to EMW's customers (but
              specifically excluding any premiums for the Full Management
              Services, any individual service comprising the Full Management
              Services or

                                     -6-
<PAGE>

              associated with the Requested Quantity, such as small quantity,
              odd lot or illiquidity premiums or any costs or ancillary charges
              associated with EESI's delivery of the Gas to the Delivery
              Point), the "QUOTED CURVE PRICE", by contacting EESI between
              the hours from 8:00 a.m. to 4:00 p.m. C.T. of each Business Day
              (the "PRICING HOURS") requesting any such price for a specified
              quantity of Gas to be Scheduled during selected Months within a
              selected Period of Delivery; provided, such request must be
              made prior to 11:00 a.m. C.T. of the last trading day of the
              New York Mercantile Exchange ("NYMEX") natural gas futures
              contract for the selected Month (the "MONTHLY DEADLINE"). If
              EMW accepts the Quoted Curve Price within the time period
              specified by EESI, EESI will promptly prepare a Transaction
              Agreement documenting such Transaction. If EMW fails to accept
              the Quoted Curve Price within the time period specified by
              EESI, EMW will be deemed to have declined the Quoted Curve
              Price and no Transaction will be formed and effectuated; or

          2.  EMW may request EESI's final sales price per MMBtu applicable
              to wholesale transactions for the Existing Markets based on the
              applicable index specified for such Existing Market for the
              specified Delivery Point for the specified Period of Delivery
              and adjusted for the applicable load shape and applicable
              locational basis adjustment from the Delivery Point to EMW's
              customers (but specifically excluding any premiums for the Full
              Management Services, any individual service comprising the Full
              Management Services or associated with the Requested Quantity,
              such as small quantity, odd lot or illiquidity premiums or any
              costs or ancillary charges associated with EESI's delivery of
              the Gas to the Delivery Point), as of the end of the applicable
              Business Day (the "SETTLED CURVE PRICE") by contacting EESI
              during the Pricing Hours requesting any such price for a
              specified quantity of Gas to be Scheduled during selected
              Months within a selected Period of Delivery; provided, such
              request must be made prior to the Monthly Deadline. Upon
              receipt of EMW's request, EESI will promptly prepare a
              Transaction Agreement documenting such Transaction and the
              applicable Settled Curve Price. If EMW fails to request the
              Settled Curve Price within the Pricing Hours, then EMW will be
              deemed to have declined the Settled Curve Price and no
              Transaction will be formed and effectuated.

     B.   FORWARD TRANSACTIONS IN NEW MARKETS.

         1.   For any market in the United States that EMW proposes to enter
              that is not specified on Exhibit "C" (a "NEW MARKET"), EMW may
              request, in writing, that EESI provide an applicable index and
              Delivery Point for each New Market upon which the Contract
              Price for sales of Gas by EESI in a Forward Transaction in the
              New Market would be based. EESI will propose such index and
              associated Delivery Point within 10 Business Days of receipt of
              EMW's written request.

         2.   If EMW accepts the proposed index and Delivery Point, then the
              Contract Price for any purchases of Gas by EMW for a Forward
              Transaction in a New Market will be the amount determined
              pursuant to the procedures identified in Article 5.1. A. 1. or
              2. above, as elected by EMW, utilizing the index and Delivery
              Point identified by EESI. Upon establishment of the Contract
              Price for the sale of Gas by EESI in the applicable New Market,
              Exhibit "C" will be amended to reflect such New Market, index
              and Delivery Point

         3.   If EMW rejects the proposed index and Delivery Point, then the
              Parties will use all commercially reasonable efforts to
              determine a mutually agreeable substitute index and Delivery
              Point for the applicable New Market; provided, however, if the
              Parties are unable to determine such mutually acceptable index
              and Delivery Point within a reasonable time period, then the
              Parties will use the Alternate Price Redetermination procedures
              provided in Appendix "1".

         4.   EESI will determine the index and Delivery Point for each New
              Market based on EESI's operational market analysis.

     C.   INTRA-MONTH QUANTITIES. For any Gas Day for which EMW has not
          requested that EESI provide either the Full Management Services or
          the Imbalance Management Services for an Existing Market or New
          Market, as applicable, the Contract Price for the sale of Gas by
          EESI in an Intra-Month Transaction will be the cash price offer per
          MMBtu by EESI for delivery at the applicable delivery point.

                                     -7-
<PAGE>

     D.   SETTLED CURVE PRICE STATEMENTS. EESI will provide, on a Monthly
          basis, a statement for any Existing Market and those mutually
          agreeable New Markets in which EESI is actively engaged in the sale
          of Gas specifying the Settled Curve Price for the current forward
          twelve Month period for each Business Day.

5.2.  CONTRACT PRICE FOR PURCHASES BY EESI FROM EMW. Purchases of Gas by EESI
      subsequent to the expiration of the Initial Period for any Market that
      EMW has not requested that EESI provide either the Full Management
      Services or the Imbalance Management Services, the Contract Price for
      all quantities of Gas purchased by EESI from EMW pursuant to this
      Agreement will be specified on the applicable Transaction Agreement
      pursuant to one of the following options:

      A.  FORWARD TRANSACTIONS IN EXISTING MARKETS. EMW may elect to receive
          a Contract Price for the sale of Gas to EESI for any Forward
          Transaction in an Existing Market equal to either of the following:

          1.  EMW may request EESI's then current purchase price per MMBtu
              applicable to wholesale transactions for the Existing Markets
              based on the applicable index specified for such Existing
              Market for the specified Period of Delivery and adjusted for
              the applicable load shape and applicable locational basis
              adjustment from the Delivery Point to EMW's customers (but
              specifically excluding any premiums for the Full Management
              Services, any individual service comprising the Full Management
              Services or associated with the Offered Quantity, such as small
              quantity, odd lot or illiquidity premiums or any costs or
              ancillary charges associated with EESI's delivery of the Gas to
              the Delivery Point), the "PURCHASE CURVE PRICE" by contacting
              EESI during the Pricing Hours requesting any such price for a
              specified quantity of Gas to be Scheduled during selected
              Months within a selected Period of Delivery; provided, such
              request must be made prior to the Monthly Deadline. If EMW
              accepts the Purchase Curve Price within the time period
              specified by EESI, then EESI will promptly prepare a
              Transaction Agreement documenting such Transaction. If EMW
              fails to accept the Purchase Curve Price within the time period
              specified by EESI, then EMW will be deemed to have declined the
              Purchase Curve Price and no Transaction will be formed and
              effectuated; or

          2.  EMW may request EESI's final purchase price per MMBtu
              applicable to wholesale transactions for the Existing Markets
              based on the applicable index specified for such Existing
              Market for the specified Delivery Point for the specified
              Period of Delivery and adjusted for the applicable load shape
              and applicable locational basis adjustment from the Delivery
              Point to EMW's customers (but specifically excluding any
              premiums for the Full Management Services, any individual
              service comprising the Full Management Services or associated
              with the Offered Quantity, such as small quantity, odd lot or
              illiquidity premiums or any costs or ancillary charges
              associated with EESI's delivery of the Gas to the Delivery
              Point), as of the end of the applicable Business Day (the
              "SETTLED PURCHASE CURVE PRICE") by contacting EESI during the
              Pricing Hours requesting any such price for a specified
              quantity of Gas to be Scheduled during selected Months within a
              selected Period of Delivery; provided, such request must be
              made prior to the Monthly Deadline. Upon receipt of EMW's
              request, then EESI will promptly prepare a Transaction
              Agreement documenting such Transaction and the applicable
              Settled Purchase Curve Price. If EMW fails to request and
              accept the Settled Purchase Curve Price within the Pricing
              Hours, then EMW will be deemed to have declined the Settled
              Purchase Curve Price and no Transaction will be formed and
              effectuated.

      B.  FORWARD TRANSACTIONS IN NEW MARKETS.

         1.   In the event EMW has proposed to enter a New Market and has
              requested that EESI provide an index and Delivery Point for
              each New Market upon which the Contract Price for sales of Gas
              by EESI in a Forward Transaction in the New Market would be
              based, then EMW may additionally request, in writing, that EESI
              utilize such index and Delivery Point in the establishment of
              the Contract Price for purchases of Gas by EESI in a Forward
              Transaction in such New Market.

         2.   If EMW thereafter elects to sell Gas to EESI in a Forward
              Transaction in the specified New Market, then the Contract
              Price for any purchases of Gas by EESI for a Forward
              Transaction in such New Market will be the amount determined
              pursuant to the procedures identified in Article 5.2. A. 1 or
              2. above, as elected by EMW, utilizing the index and Delivery
              Point identified by EESI. Upon

                                     -8-
<PAGE>

              establishment of the Contract Price for the purchase of Gas by
              EESI in the applicable New Market, Exhibit "C" will be amended
              to reflect such New Market, index and Delivery Point.

     C.  INTRA-MONTH QUANTITIES. The Contract Price for the purchase of Gas
         by EESI in an Intra-Month Transaction will be equal to the cash
         price bid per MMBtu by EESI for receipt at the applicable Delivery
         Point.

5.3. SETTLED PURCHASE CURVE PRICE STATEMENTS. EESI will provide, on a Monthly
     basis, a statement for any Existing Market and those mutually agreeable
     New Markets in which EESI is actively engaged in the purchase of Gas
     specifying the Settled Purchase Curve Price for the current forward
     twelve (12) Month period for each Business Day.

5.4. INTENT. The intent of Articles 5.1 and 5.2 is to give EMW the benefit of
     access to EESI's wholesale Gas pricing for retail loads without the
     premiums associated with odd lot or new market illiquidity.

-------------------------------------------------------------------------------
ARTICLE 6         DEFAULTS AND REMEDIES
-------------------------------------------------------------------------------

6.1. EARLY TERMINATION. If a Triggering Event (defined in Article 6.2) occurs
     with respect to either Party at any time during the term of this
     Agreement, the other Party (the "NOTIFYING PARTY") may (i) upon two (2)
     Business Days' written notice to the Affected Party (defined in Article
     6.2), which notice will be given no later than sixty (60) Days after the
     discovery of the occurrence of the Triggering Event, establish a date on
     which all Transactions and this Agreement in respect thereof will
     terminate ("EARLY TERMINATION DATE") except as provided in Article 10.4,
     and (ii) withhold any payments due in respect of such Transactions;
     provided, however, upon the occurrence of any Triggering Event listed in
     item (i) of Article 6.2 as it may apply to any Party, all Transactions
     and this Agreement in respect thereof will automatically terminate,
     without notice, as if an Early Termination Date had been immediately
     declared except as provided in Article 10.4. If an Early Termination
     Date occurs, the Notifying Party will in good faith calculate its Gains,
     Losses and Costs, resulting from termination of each Transaction in the
     manner described above, and aggregate such Gains, Losses and Costs for
     all such terminated Transactions into a single net amount (the
     "TERMINATION PAYMENT"). The Termination Payment will be determined by
     (i) comparing the value of (a) the remaining term, quantities and prices
     under each such Transaction had it not been terminated to (b) the
     equivalent quantities and relevant market prices for the remaining term
     either quoted by a bona fide third party offer or which are reasonably
     expected to be available in the market under a replacement contract for
     each such Transaction and (ii) ascertaining the associated costs and
     attorneys' fees; provided, however, if the Termination Payment is due to
     a Triggering Events listed in item (i) of Article 6.2, then in the event
     the Termination Payment would result in a Gain to the Notifying Party,
     the Termination Payment will be the absolute value of such Gain and in
     the event the Termination Payment is due to a Triggering Events listed
     in item (ii), (iii), (iv), or (v) of Article 6.2, then in the event the
     Termination Payment would result in a Gain to the Notifying Party, the
     Termination Payment will be zero (0). To ascertain the market prices of
     a replacement contract the Notifying Party may consider, among other
     valuations, any or all of the settlement prices of NYMEX natural gas
     futures contracts, quotations from leading dealers in natural gas swap
     contracts and other bona fide third party offers, all adjusted for the
     length of the remaining term and the basis differential. The Notifying
     Party will give the Affected Party written notice of the amount of the
     Termination Payment, inclusive of a statement showing the basis for its
     calculation and determination. The Affected Party will pay the
     Termination Payment to the Notifying Party within ten (10) Days of
     receipt of such notice. At the time for payment of any amount due under
     this Article 6, each Party will pay to the other Party all additional
     amounts payable by it pursuant to this Agreement, but all such amounts
     will be netted and aggregated with any Termination Payment payable
     hereunder. If the Affected Party disagrees with the calculation of the
     Termination Payment, the issue will be submitted to arbitration in
     accordance with this Agreement and the resulting Termination Payment
     will be due and payable within three (3) Business Days after the award.

6.2. TRIGGERING EVENT means, with respect to a Party (the "AFFECTED PARTY"),
     a "MAJOR BREACH" which will occur upon (i) either Party (a) making an
     assignment for the benefit of creditors, (b) filing a petition or not
     opposing a proceeding under any bankruptcy or similar law, including,
     without limitation, receivership or dissolution pursuant to federal or
     state law, or has such petition filed against it which remains
     undismissed for 30 days, or (c) becoming insolvent or is unable to pay
     its debts when due;(ii) unless excused by Force Majeure, EESI

                                     -9-

<PAGE>

     fails to Schedule the Requested Quantity or EMW fails to Schedule the
     Offered Quantity, as applicable, for five (5) consecutive Gas Days in any
     three (3) cumulative Months in a twelve (12) cumulative Month period;
     (iii) either Party's failing to make payment when due within five (5) days
     of receipt of notice of such failure (except good faith disputes); (iv)
     any Party's representation hereunder proving to be false or misleading in
     a material respect, causing a material adverse effect on such Party's
     ability to perform under this Agreement or (v) the happening of any other
     event specified in any Transaction Agreement as a "Major Breach".

6.3. OTHER EVENTS. If either Party under a Transaction is regulated by a
     federal, state or local regulatory body, and such body will disallow all or
     any portion of any costs incurred or yet to be incurred by such Party under
     any provision of this Agreement, such action will neither operate to excuse
     such Party from performance of any obligation nor give rise to any right of
     such Party to any refund or retroactive adjustment of the Contract Price
     provided in any Transaction. Notwithstanding the foregoing, if either
     Party's activities hereunder become subject to regulation of any kind
     whatsoever under any law to a greater or different extent than that
     existing on the Effective Date and such regulation either (i) renders this
     Agreement illegal or unenforceable or (ii) materially adversely affects the
     business of the Affected Party, with respect to its financial position or
     otherwise, then in the case of (i) above, either Party, and in the case of
     (ii) above, only the Party affected (for purposes of this Article only, the
     "DEFAULTING PARTY"), will at such time have the right to declare an Early
     Termination Date in accordance with the provisions hereof; provided,
     notwithstanding the rights of the Parties to declare an Early Termination
     Date as above stated, the Defaulting Party will be liable for payment of
     the Termination Payment calculated by the other Party pursuant to Article
     6.1.

6.4.  OFFSET.

     A.   INTRAAGREEMENT. Each Party reserves to itself all rights, set-offs,
          counterclaims and other remedies and defenses consistent with Article
          10.3 (to the extent not expressly herein waived or denied) which such
          Party has or may be entitled to arising from or out of this Agreement.
          All outstanding Transactions and the obligations to make payment in
          connection therewith or under this Agreement may be offset against
          each other, set off or recouped therefrom.

     B.   INTERAGREEMENT. Each Party reserves, in the event that a Termination
          Event occurs under either this Agreement or the Master Energy
          Agreement, to itself all rights, set-offs, counterclaims and other
          remedies and defenses consistent with Article 10.3 (to the extent not
          expressly herein waived or denied) which such Party has or may be
          entitled to arising from or out of this Agreement. All outstanding
          Transactions and the obligations to make payment in connection
          therewith or under this Agreement or the Master Energy Agreement may
          be offset against each other, set off or recouped therefrom.

-------------------------------------------------------------------------------
ARTICLE 7         FORCE MAJEURE
-------------------------------------------------------------------------------

This Article 7 is the sole and exclusive excuse of performance permitted under
this Agreement and all other excuses at law or in equity are WAIVED to the
extent permitted by law. Except with respect to payment obligations, in the
event either Party is rendered unable, wholly or in part, by Force Majeure to
carry out its obligations hereunder, it is agreed that upon such Party's giving
notice and full particulars of such Force Majeure to the other Party as soon as
reasonably possible (such notice to be confirmed in writing), the obligations of
the Party giving such notice, to the extent they are affected by such event,
will be suspended from the inception and during the continuance of the Force
Majeure for a period not to exceed sixty (60) days in the aggregate during any
twelve (12) Month period, but for no longer period. The Party receiving notice
of Force Majeure may immediately take such action as it deems necessary at its
expense for the entire sixty (60) day period or any part thereof. The Parties
expressly agree that upon the expiration of the sixty (60) day period, the Force
Majeure will no longer apply to the obligations hereunder and both EMW and EESI
will be obligated to perform. The cause of the Force Majeure will be remedied
with all reasonable diligence and dispatch; provided, unless otherwise agreed,
no provision herein will require or permit EESI or EMW to Schedule quantities of
Gas (i) in excess of the Requested Quantity or Offered Quantity or (ii) at
points other than the Delivery Point(s).

                                      -10-
<PAGE>

-------------------------------------------------------------------------------
ARTICLE 8         TAXES
-------------------------------------------------------------------------------

8.1.     TAXES. Buyer will be responsible for, pay, and/or reimburse Seller for
         all Taxes and/or other charges imposed or levied by any taxing
         authority on or related to any Gas sold and/or delivered to Buyer, all
         other services or property provided in connection therewith or pursuant
         to this Agreement, and any payments made under this Agreement or any
         Agreement related hereto to the extent such Taxes are from time to time
         customarily billed, imposed or levied on or against such Gas, services,
         property or payments. Each Party will and does hereby indemnify,
         release, defend and hold harmless the other Party from and against any
         and all liability for Taxes that are the responsibility of such Party
         pursuant to this Agreement. Either Party, upon request of the other
         Party, will provide a certificate of exemption or other reasonably
         satisfactory evidence of exemption if either Party or any Transaction
         hereunder is exempt from Taxes, and each Party will use reasonable
         efforts to (1) obtain and cooperate in obtaining any exemption or
         reduction of such Taxes and (2) administer this Agreement and implement
         the provisions in accordance with the intent to minimize such Taxes.
         Buyer will not be liable for any Tax for which a valid exemption
         certificate in a form acceptable to the applicable state or local
         taxing authorities is timely completed and timely furnished by Buyer to
         Seller. Buyer may provide Seller additional reasonable Tax instructions
         as are allowed by law (or will provide such if requested by Seller)
         including, but not limited to, Buyer's accrual and payment of Taxes
         and/or special jurisdictional exemptions. However, Seller will proceed
         on the assumption that any applicable Taxes are due unless and until
         Buyer presents Seller satisfactory proof that Buyer is entitled to any
         claimed exemption or reduction in Taxes. Upon presentation of such
         proof, no retroactive adjustments will be made, but Seller will assign
         to Buyer, to the extent assignable, any Claims for refund Seller has
         with respect to any prior payments of Taxes. Seller and Buyer agree to
         cooperate with each other and provide such information to each as is
         reasonably necessary to facilitate the filing of any returns for Taxes
         which are directly related to and imposed on the Gas, services,
         property or payments to be provided under this Agreement. EESI agrees
         to assume Tax liability if it has the benefit of an exemption, which
         said exemption would not otherwise exist for EMW if it had the
         liability, but in no event will EESI assume such liability if the
         exemption is lost or repealed; provided, however, in the event EESI
         fails to qualify for the exemption for any reason, then EMW will
         reimburse EESI for any Tax liability so incurred.

8.2.     TAX RECORDS. During the term of this Agreement and for seven (7) full
         calendar years thereafter, Seller, as limited Tax agent of Buyer, will
         retain on Buyer's behalf, possession of Buyer's Tax records related to
         the Gas sold and/or delivered to Buyer, all other services or property
         provided in connection therewith or pursuant to this Agreement, and any
         payments made under this Agreement or any Agreement related hereto (the
         "TAX RECORDS"). Buyer will have the right to inspect and make copies of
         these Tax Records during normal business hours, in connection with Tax
         returns, reports, audits and litigation with respect to such
         activities, services, materials, equipment, items or payments. Should
         Seller or Buyer become involved in an audit or contest with respect to
         sales, use or other Taxes resulting from this Agreement, they will
         cooperate in the defense of the same.

-------------------------------------------------------------------------------
ARTICLE 9         TITLE, RISK OF LOSS, INDEMNITY AND BALANCING
-------------------------------------------------------------------------------

9.1.     TITLE, RISK OF LOSS AND INDEMNITY. As between the Parties, Seller will
         be deemed to be in exclusive control and possession of Gas Scheduled
         hereunder and responsible for any damage or injury caused by Gas
         Scheduled and delivered to Buyer prior to the Delivery Point. After
         delivery of the Gas at the Delivery Point(s), Buyer will be deemed to
         be in exclusive control and possession thereof and responsible for any
         injury or damage caused thereby. Title and risk of loss related to the
         Gas Scheduled hereunder will pass from Seller to Buyer at the point of
         transfer to Buyer's Transporter at the Delivery Point(s). Seller and
         Buyer each assumes all liability for and will indemnify, defend and
         hold harmless the other Party from any Claims, including injury to and
         death of persons, arising from any act or incident occurring when title
         to Gas is vested in the Indemnifying Party. IT IS THE INTENT OF THE
         PARTIES THAT THIS INDEMNITY AND THE LIABILITY ASSUMED UNDER IT BE
         WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF, INCLUDING, WITHOUT
         LIMITATION, THE NEGLIGENCE OF ANY INDEMNIFIED PARTY, WHETHER SUCH
         NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE;
         PROVIDED, NEITHER PARTY WILL BE LIABLE IN RESPECT OF ANY CLAIM TO THE
         EXTENT THE CLAIM RESULTED FROM THE GROSS NEGLIGENCE, WILLFUL MISCONDUCT
         OR BAD FAITH OF THE INDEMNIFIED PARTY.

                                      -11-
<PAGE>

9.2.     CORRECTION OF IMBALANCES, CASHOUTS AND PENALTIES. Differences between
         Scheduled quantities and actual quantities delivered and received
         hereunder ("IMBALANCES") will be corrected or settled in cash or Gas or
         by offset as the Parties agree within forty-five (45) Days from the
         date of notice of the Imbalance. Additionally, if (i) an Imbalance on
         Buyer's Transporter's system caused by Seller or Seller's Transporter's
         delivery of less or more than the Scheduled quantity for any Gas Day
         (in which case Seller will be the "RESPONSIBLE PARTY") or (ii) an
         Imbalance on Seller's Transporter's system caused by Buyer or Buyer's
         Transporter's receipt of more or less than the Scheduled quantity for
         any Gas Day (in which case Buyer will be the "RESPONSIBLE PARTY"), the
         Responsible Party will be liable for and reimburse to the other Party
         any associated Transporter cashout costs and losses or penalties
         incurred by such other Party to the relevant Transporter. If the tariff
         of either Buyer's or Seller's Transporter provides for cashouts on the
         basis of the aggregation of all over deliveries and under deliveries
         between such Transporter and Buyer or Seller, respectively ("AGGREGATE
         TRANSPORTER IMBALANCE"), and the nature of the Imbalance (over delivery
         or under delivery) attributable to the Responsible Party is the same as
         the Aggregate Transporter Imbalance (over or under delivery), the
         Responsible Party will participate in the other Party's cashout
         settlement of the Aggregate Transporter Imbalance on the basis of only
         the Responsible Party's pro-rata share thereof.

-------------------------------------------------------------------------------
ARTICLE 10        MISCELLANEOUS
-------------------------------------------------------------------------------

10.1.    NOTICES. All notices, including, without limitation, consents, and
         communications made under this Agreement will be made as specified in
         Exhibit "A." Notices required to be in writing will be delivered in
         written form by letter, facsimile or other documentary form. Notice by
         facsimile or hand delivery will be deemed to have been received by the
         close of the Business Day on which it was transmitted or hand delivered
         (unless transmitted or hand delivered after close of the Business Day
         in which case it will be deemed received at the close of the next
         Business Day) or such earlier time confirmed by the receiving Party.
         Notice by overnight mail or courier will be deemed to have been
         received 2 Business Days after it was sent or such earlier time
         confirmed by the receiving Party. Any notices given hereunder in
         respect of the declaration of an Early Termination Date will be also
         sent to the address or facsimile number so specified in Exhibit "A."
         Any Party may change its addresses by providing notice of same in
         accordance herewith.

10.2.    TRANSFER. This Agreement, including, without limitation, each
         indemnification, will inure to and bind the successors and permitted
         assigns of the Parties; provided, neither Party will transfer this
         Agreement without the prior written approval of the other Party, which
         approval may not be unreasonably withheld or delayed. Any Party's
         transfer in violation of this Article 10.2 will be void.

10.3.    LIMITATION OF REMEDIES, LIABILITY AND DAMAGES AND MITIGATION. THE
         PARTIES DO HEREBY CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF
         DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES
         HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR
         MEASURE OF DAMAGES IS HEREIN PROVIDED, SUCH EXPRESS REMEDY OR MEASURE
         OF DAMAGES WILL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER, THE
         OBLIGOR'S LIABILITY WILL BE LIMITED AS SET FORTH IN SUCH PROVISION AND
         ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO
         REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY HEREIN PROVIDED, THE
         OBLIGOR'S LIABILITY WILL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH
         DIRECT ACTUAL DAMAGES WILL BE THE SOLE AND EXCLUSIVE REMEDY HEREUNDER
         AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED.
         UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY WILL BE LIABLE FOR
         CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES,
         LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, IN TORT, CONTRACT,
         UNDER ANY INDEMNITY PROVISION OR OTHERWISE. NOTWITHSTANDING ANY OTHER
         PROVISION IN THIS AGREEMENT, IN NO EVENT WILL EITHER PARTY BE LIABLE
         FOR ANY PENALTIES OR CHARGES ASSESSED BY ANY TRANSPORTER OR OTHER
         ENTITY FOR THE UNAUTHORIZED RECEIPT OF GAS BY THE OTHER PARTY (OTHER
         THAN EESI'S RESPONSIBILITY FOR SERVICE PENALTIES PURSUANT TO ARTICLE
         4.1 E). IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN
         IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE
         CAUSE OR CAUSES RELATED THERETO, INCLUDING,

                                      -12-
<PAGE>

         WITHOUT LIMITATION, THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH
         NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE
         EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE
         PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO
         DETERMINE, OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND
         THE LIQUIDATED DAMAGES CONSTITUTE A REASONABLE APPROXIMATION OF THE
         HARM OR LOSS. BUYER ACKNOWLEDGES THAT IT HAS ENTERED INTO THIS
         AGREEMENT AND IS CONTRACTING FOR THE GOODS TO BE SUPPLIED BY SELLER
         BASED SOLELY UPON THE EXPRESS REPRESENTATIONS AND WARRANTIES HEREIN
         SET FORTH AND SUBJECT TO SUCH REPRESENTATIONS AND WARRANTIES, ACCEPTS
         SUCH GOODS "AS-IS" AND "WITH ALL FAULTS." SELLER EXPRESSLY NEGATES ANY
         OTHER REPRESENTATION OR WARRANTY, WRITTEN OR ORAL, EXPRESS OR IMPLIED,
         INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY WITH
         RESPECT TO CONFORMITY TO MODELS OR SAMPLES, MERCHANTABILITY, OR
         FITNESS FOR ANY PARTICULAR PURPOSE. The Parties acknowledge the duty
         to mitigate damages hereunder. The Parties recognize that the ability
         to effectuate arrangements for the sale or purchase of Gas is
         conditioned upon the volatility of Gas markets, the creditworthiness
         and reliability of potential customers, the complexity and size of the
         portfolios of contracts managed by each Party and the need to conduct
         market business in an orderly manner. Therefore, the Parties agree
         that (i) three (3) Business Days is a commercially reasonable period
         to purchase or sell Gas in respect of an EESI Deficiency Default, EMW
         Deficiency Default, EESI Purchase Default or EMW Sales Default and
         (ii) three (3) Business Days after the end of the Month in which the
         Early Termination Date occurs is a commercially reasonable period
         after the establishment of an Early Termination Date to determine the
         Termination Payment; provided, notwithstanding the foregoing, if Gas
         volumes made the basis of an EESI Deficiency Default, EMW Deficiency
         Default, EMW Sales Default or EESI Purchase Default or a Party's
         determination of the Termination Payment are in excess of 20,000
         MMBtu/Gas Day, the Parties recognize that a longer period may
         ordinarily be required to effectuate cover or determine the
         Termination Payment in an orderly manner so as not to adversely affect
         the Gas market. Each Party may utilize its discretion, with
         commercially reasonable foresight, to adjust the timing and staggering
         of the purchases or sales of Gas volumes in its efforts to mitigate
         damages. No claim that a Party failed to mitigate damages will be
         grounded solely on the basis of counter Gas market movement.

10.4.    WINDING UP ARRANGEMENTS. Upon the expiration or termination of the
         Parties' sale and purchase obligations under this Agreement, any
         moneys, penalties or other charges due and owing Seller or Buyer, as
         applicable, will be paid, any corrections or adjustments to payments
         previously made will be determined, and any refunds due Buyer or
         Seller, as applicable, made, within 60 Days. Any Imbalances in receipts
         or deliveries will be corrected to zero balance within 60 Days. All
         indemnity, tax and confidentiality obligations and audit rights will
         survive the termination of this Agreement for a period of two (2)
         years. The Parties' obligations provided in this Agreement will remain
         in effect for the purpose of complying herewith.

10.5.    APPLICABLE LAW. THIS AGREEMENT AND EACH TRANSACTION AND THE RIGHTS AND
         DUTIES OF THE PARTIES ARISING OUT OF THIS AGREEMENT WILL BE GOVERNED BY
         AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF
         THE STATE OF DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
         LAW.

10.6.    DOCUMENT, RECORD RETENTION AND EVIDENCE. This Agreement, the Exhibits
         and Appendices hereto, if any, and each Transaction Agreement,
         constitute the entire agreement between the Parties relating to the
         subject matter contemplated by this Agreement. There are no prior or
         contemporaneous agreements or representations (whether oral or written)
         affecting the subject matter other than those herein expressed. No
         amendment or modification to this Agreement will be enforceable, unless
         reduced to writing and executed by both Parties. The provisions of this
         Agreement will not impart rights enforceable by any person, firm or
         organization not a Party or not bound as a Party, or not a successor or
         permitted assignee of a Party bound to this Agreement. No waiver by a
         Party of any default by the other Party will be construed as a waiver
         of any other default. Nothing in this Agreement will be construed to
         create a joint venture or partnership between the Parties. The term
         "including" when used in this Agreement will be by way of example only
         and will not be considered in any way to be in limitation. Except as
         otherwise herein

                                      -13-
<PAGE>

         stated, any provision, article or section declared or rendered
         unlawful by a court of law or regulatory agency with jurisdiction over
         the Parties or deemed unlawful because of a statutory change will not
         otherwise affect the lawful obligations that arise under this
         Agreement. The headings used for the Articles herein are for
         convenience and reference purposes only. All Exhibits and Appendices
         referenced in this Agreement, if any, are incorporated. Any original
         executed Agreement or Transaction Agreement may be photocopied and
         stored on computer tapes and disks (the "IMAGED AGREEMENT"). The
         Imaged Agreement, if introduced as evidence on paper, the Transaction
         Agreement, if introduced as evidence in automated facsimile form, and
         all computer records of the foregoing, if introduced as evidence in
         printed format, in any judicial, arbitration, mediation or
         administrative proceedings, will be admissible as between the Parties
         to the same extent and under the same conditions as other business
         records originated and maintained in documentary form. Neither Party
         will contest the admissibility of the Imaged Agreement under either
         the business records exception to the hearsay rule or the best
         evidence rule on the basis that such were not originated or maintained
         in documentary form.

10.7.    CONFIDENTIALITY & PUBLICITY. Each Party will not disclose the Contract
         Price or any Gas consumption data of Buyer's customers under any
         Transaction to a third party (other than the Party's and its Affiliates
         employees, prospective purchasers of either Party, lenders, counsel or
         accountants who have agreed to keep such terms confidential and use
         such information solely in connection with this Agreement and the
         Transaction Agreements) except in order to comply with any applicable
         law, order, regulation or exchange rule; provided (except with respect
         to tax matters) each Party will notify the other Party of any
         proceeding of which it is aware which may result in disclosure and use
         reasonable efforts to prevent or limit the disclosure. The provisions
         of this Agreement other than the terms of any Transaction are not
         subject to this confidentiality obligation and expressly include
         revealing that there is a business relationship between the Parties.
         The Parties will be entitled to all remedies available at law or in
         equity to enforce, or seek relief in connection with, this
         confidentiality obligation; provided, all monetary damages will be
         limited in accordance with Article 10.3. Notwithstanding the foregoing,
         from time to time as the Parties may mutually agree, in writing, each
         Party may authorize the other Party use its name and to disclose the
         existence and nature of this Agreement and any Transaction Agreement in
         customer lists and other promotional materials that either Party may
         develop from time to time.

10.8.    UCC. Except as otherwise provided for herein, the provisions of the
         Uniform Commercial Code ("UCC") of the state whose laws will govern
         this Agreement will be deemed to apply to all Transactions and Gas will
         be deemed to be a "good" for purposes of the UCC.

The Parties have executed this Agreement in multiple counterparts to be
construed as one effective as of the Effective Date.

ENRON ENERGY SERVICES, INC.               EMW ENERGY SERVICES CORP

By:    /s/ MARK S. MULLER                 By:    /s/ JIMMIE L. WILLIAMS
      ----------------------------              ----------------------------

Name: MARK S. MULLER                      Name:    Jimmie L. Williams
      ----------------------------              ----------------------------
                 Attorney-in-Fact         Title:   Vice President
                                                ----------------------------

                                      -14-
<PAGE>

                                  APPENDIX "1"

                               GENERAL PROVISIONS

-------------------------------------------------------------------------------
-    USAGE AND DEFINITIONS
-------------------------------------------------------------------------------

All references to Articles and Sections are to those set forth in this
Agreement. Reference to any document means such document as amended from time
to time and reference to any Party includes any successor or permitted
assignee thereof. The following definitions and any terms defined internally
in this Agreement will apply to this Agreement and all notices and
communications made pursuant to this Agreement.

"AFFILIATE" means, with respect to any person or entity, any other entity or
person that directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such person or
entity. For this purpose, "CONTROL" means the direct or indirect ownership of
10% or more of the outstanding capital stock or other equity interests having
ordinary voting power of the entity or person.

"BTU" means the amount of energy required to raise the temperature of one
pound of pure water one degree Fahrenheit from 59 degrees Fahrenheit
(59(Degree)F) to 60 degrees Fahrenheit (60(Degree)F).

"BUSINESS DAY" means a Day on which Federal Reserve member banks in New York
City are open for business and a Business Day will open at 8:00 a.m. and
close at 5:00 p.m. local time for each Party's principal place of business.

"BUYER" means, (a) EMW for Transactions providing for the sale of Gas by EESI
pursuant to Article 3.1 and (b) EESI for Transactions providing for the
purchase of Gas by EESI pursuant to Article 3.2.

"CLAIMS" means all claims or actions, threatened or filed and whether
groundless, false or fraudulent, that directly or indirectly relate to the
subject matters of the indemnity, and the resulting losses, damages,
reasonable expenses, reasonable attorneys' fees and court costs, whether
incurred by settlement or otherwise, and whether such claims or actions are
threatened or filed prior to or after the termination of this Agreement.

"CONTRACT PRICE" means the price in U.S. dollars per MMBtu, as established
pursuant to Article 5, payable by Buyer to Seller for the purchase of Gas
pursuant to a Transaction pursuant to Article 3.

"COSTS" means, with respect to a Party, brokerage fees, commissions and other
similar transaction costs and expenses reasonably incurred by such Party
either in terminating any arrangement pursuant to which it has hedged its
obligations or entering into new arrangements which replace a Transaction and
attorneys' and consultants fees, if any, reasonably incurred in connection
with enforcing its rights under a Transaction.

"C.T." means Central Time.

"DAY" means a period of twenty-four (24) consecutive hours, beginning at
midnight C.T. on any calendar Day.

"DELIVERY POINT(S)" means the agreed point(s) of delivery, generally into the
utility providing distribution service to EMW's customers, pursuant to a
Transaction and identified in Exhibit "C".

"FORCE MAJEURE" means an event not anticipated as of the Effective Date,
which is not within the reasonable control of the Party, or in the case of
third party obligations or facilities, the third party, claiming suspension,
and which by the exercise of due diligence such Party, or third party, is
unable to overcome or obtain or cause to be obtained a commercially
reasonable substitute performance therefor; provided, neither (i) the loss of
Buyer's markets nor Buyer's inability economically to use or resell Gas
purchased hereunder nor (ii) the loss of Seller's Gas supply nor Seller's
ability to sell Gas to a market at a more

<PAGE>

advantageous price, will constitute an event of Force Majeure. "Force
Majeure" will include an event of Force Majeure occurring with respect to the
facilities or services of Buyer's or Seller's Transporter.

"GAAP" means generally accepted accounting principles, consistently applied.

"GAINS" means, with respect to a Party, an amount equal to the present value
of the economic benefit (exclusive of Costs), if any, to such Party resulting
from the termination of its obligations with respect to a Transaction
determined in a commercially reasonable manner.

"GAS" means methane and other gaseous hydrocarbons meeting the quality
standards and specifications and pressure requirements of Seller's
Transporter for acceptance of Gas into its system at the applicable receipt
point.

"GAS DAY" means a period of 24 consecutive hours beginning at the time of the
applicable Transporter's gas day.

"INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" means the Party receiving and
providing an indemnity, respectively.

"INTEREST RATE" means, for any date, 2% over the per annum rate of interest
announced as the "Prime Rate" from time to time for commercial loans by
Citibank, N. A. as established by the administrative body of such bank
charged with the responsibility of establishing such rate, as same may change
from time to time; provided, the Interest Rate will never exceed the maximum
lawful rate permitted by applicable law.

"LOSSES" means, with respect to a Party, an amount equal to the present value
of the economic loss (exclusive of Costs), if any, to such Party resulting
from the termination of its obligations with respect to a Transaction
determined in a commercially reasonable manner.

"MMBTU" means one million (1,000,000) Btu's.

"MONTH" means a period of time beginning at midnight C.T. on the first Day of
any calendar Month and ending at midnight C.T. on the first Day of the
following calendar Month.

"PERIOD OF DELIVERY" means the period from the date Scheduling obligations
are to commence to the date Scheduling obligations are to terminate under a
Transaction.

"PIPELINE" means a company authorized to ship Gas on behalf of itself or
others on physical Gas transmission facilities.

"REPLACEMENT PRICE DIFFERENTIAL" means the following:

1.   In the event of (a) an EESI Deficiency Default, the positive difference, if
     any, obtained by subtracting the Contract Price FROM the GREATER of (i) the
     cost to EMW, including incremental transportation costs and other basis
     adjustments, to replace the EESI Deficiency Quantity for such Gas Day (but
     excluding penalties, other than commercially reasonable purchases from the
     applicable utility or provider of last resort which might otherwise be
     labeled a penalty, or charges for unauthorized receipts of Gas by EMW), in
     no event exceeding the sum of the Contract Price plus the emergency service
     tariff rate for imbalance or replacement Gas per MMBtu, or (ii) the Spot
     Price per MMBtu for the Gas Day in which the EESI Deficiency Default
     occurred, and (b) in the event of an EMW Deficiency Default, the positive
     difference, if any, obtained by subtracting the LESSER of (i) the price
     obtained by EESI in an incremental, arms-length sale(s) to a third party of
     a quantity equal to the EMW Deficiency Quantity for such Gas Day, less
     incremental transportation charges to EESI, and including other basis
     adjustments (but excluding penalties, other than commercially reasonable
     purchases from the applicable utility or provider of last resort which
     might otherwise be labeled a penalty), or (ii) the Spot Price per MMBtu for
     the Gas Day in which the EMW Deficiency Default occurred, FROM the Contract
     Price.

                                  Appendix 1 -- 2
<PAGE>

2.   In the event of (a) an EESI Purchase Default, the positive difference, if
     any, obtained by subtracting the LESSER of (i) the price obtained by EMW in
     an incremental, arms-length sale(s) to a third party of a quantity equal to
     the EESI Default Quantity for such Gas Day, less incremental transportation
     charges to EMW, and including other basis adjustments per MMBtu (but
     excluding penalties, other than commercially reasonable purchases from the
     applicable utility or provider of last resort which might otherwise be
     labeled a penalty), or (ii) the Spot Price per MMBtu for the Gas Day in
     which the EESI Purchase Default occurred, FROM the Contract Price and (b)
     in the event of an EMW Sales Default, the positive difference, if any,
     obtained by subtracting the Contract Price FROM the GREATER of (i) the cost
     to EESI, including incremental transportation costs and other basis
     adjustments, to replace the EMW Default Quantity for such Gas Day (but
     excluding penalties, other than commercially reasonable purchases from the
     applicable utility or provider of last resort which might otherwise be
     labeled a penalty, or charges for unauthorized receipts of Gas by EESI), in
     no event exceeding the sum of the Contract Price plus the emergency service
     tariff rate for imbalance or replacement Gas per MMBtu, or (ii) the Spot
     Price for the Gas Day in which the EMW Sales Default occurred.

"SERVICES COMMENCEMENT DATE" means the earlier of (i) the date, subsequent to
EMW obtaining all licenses and permits required to enter into a Transaction
under this Agreement, the Parties first Schedule Gas pursuant to first
Transaction Agreement entered into pursuant to this Agreement or (ii)
December 31, 2000.

"SCHEDULING" or "SCHEDULE," when used in reference to Seller, means to make Gas
available, or cause Gas to be made available, at the Delivery Point(s) for
delivery to or for the account of Buyer, including making all Pipeline
nominations, and when used in reference to Buyer, means to cause Buyer or
Buyer's Transporter to make available at the Delivery Point(s) transportation
capacity sufficient to permit Buyer or Buyer's Transporter to receive on a firm
or interruptible basis, as designated in the applicable Transaction Agreement,
the quantities Seller has available at such Delivery Point(s), including making
all Pipeline nominations. Gas will be deemed to have been Scheduled when
confirmed by Transporter.

"SELLER" means (a) EESI for Transactions providing for the sale of Gas by EESI
pursuant to Article 3.1 and (b) EMW for Transactions providing for the purchase
of Gas by EESI pursuant to Article 3.2.

"SPOT PRICE" means the sum of (a) the price set forth in
GAS DAILY-Registered Trademark- (Pasha Publications, Inc.), or successor
publication, in the column "Daily Price Survey" under the listing applicable
to the geographic location agreed pursuant to a Transaction for the relevant
Gas Day, PLUS (b) all incremental transportation costs and other basis
adjustments necessary to effect delivery of the Gas from the above specified
geographic location to the Delivery Point. If there is no single price
published for that particular Gas Day, but there is published a range of
prices under the above column and listing, then the Spot Price will be the
arithmetic average of such high and low prices. In the event that no price or
range of prices is published for that particular Gas Day, then the Spot Price
will be the arithmetic average of the following: the price (determined as
stated above) for each of the first Gas Day immediately preceding and
following the Gas Day in which the default occurred for which a Spot Price
can be determined.

"TAXES" means any or all government or quasi governmental taxes, assessments,
levies, duties, fees, charges and withholdings of any kind or nature whatsoever
and howsoever described, including gross receipts, franchise, sales, use,
excise, property, capital, value added, stamp, transfer, intangible, employment,
occupation, generation, privilege, utility, Btu, gathering, energy, consumption,
lease, permit, license, filing, custom and recording tax, together with any and
all penalties, fines, additions or interest thereon, other than taxes based on
net income or net worth.

"TRANSACTIONS" means an agreement and any amendment or modification thereof made
in accordance herewith for the purchase or sale of Gas to be performed
hereunder.

"TRANSACTION AGREEMENT" means a written paper-based agreement executed by the
Parties to form and effectuate a Transaction which may be substantially in the
form set forth in Exhibit "B."

                                  Appendix 1 -- 3
<PAGE>

"TRANSPORTER" means the Pipeline delivering Gas on behalf of Seller prior to
the Delivery Point in a Transaction or receiving Gas on behalf of Buyer at or
downstream of a Delivery Point in a Transaction.

-------------------------------------------------------------------------------
-    REPRESENTATIONS AND WARRANTIES
-------------------------------------------------------------------------------

As a material inducement to entering into this Agreement, including each
Transaction, each Party, with respect to itself, hereby represents and
warrants to the other Party continuing throughout the term of this Agreement
as follows: (i) there are no suits, proceedings, judgments, rulings or orders
by or before any court or any governmental authority that materially
adversely affect its ability to perform this Agreement or the rights of the
other Party under this Agreement, (ii) it is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its formation, and
it has the legal right, power and authority and is qualified to conduct its
business, and to execute and deliver this Agreement and perform its
obligations under the same and each Transaction Agreement, and all regulatory
authorizations have been maintained as necessary for it to legally perform
its obligations hereunder, (iii) the making and performance by it of this
Agreement is within its powers, has been duly authorized by all necessary
action on its part, and does not and will not violate any provision of law or
any rule, regulation, order, writ, judgment, decree or other determination
presently in effect applicable to it or its governing documents, (iv) each of
this Agreement and each Transaction when entered into constitutes a legal,
valid and binding act and obligation of it, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, reorganization
and other laws affecting creditor's rights generally, and with regard to
equitable remedies, to the discretion of the court before which proceedings
to obtain same may be pending, (v) there are no bankruptcy, insolvency,
reorganization, receivership or other arrangement proceedings pending or
being contemplated by it, or to its knowledge threatened against it, (vi)
BUYER WAIVES ITS RIGHTS, IF ANY, UNDER THE TEXAS DECEPTIVE TRADE PRACTICES -
CONSUMER PROTECTION ACT, SECTION 17.41 ET. SEQ., BUSINESS AND COMMERCE CODE,
A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION
WITH AN ATTORNEY OF ITS OWN SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS
WAIVER.

-------------------------------------------------------------------------------
-    OPERATIONS AND DELIVERY
-------------------------------------------------------------------------------

SCHEDULING REQUESTS.

     A.   REQUESTED QUANTITIES. EESI and EMW will Schedule the Requested
          Quantity for each Gas Day of each Month during a Period of Delivery.
          Scheduling requests to EESI will be accepted at the telephone number
          and will be confirmed by facsimile as set forth in Exhibit "A." Each
          Party will designate authorized representatives to effect the
          Scheduling of the Requested Quantity of Gas.

     B.   OFFERED QUANTITIES. EMW and EESI will Schedule the Offered Quantity
          for each Gas Day of each Month during a Period of Delivery. Scheduling
          requests to EMW will be accepted at the telephone number and will be
          confirmed by facsimile as set forth in Exhibit "A." Each Party will
          designate authorized representatives to effect the Scheduling of the
          Offered Quantity of Gas.

     C.   CHANGES. If the Parties have deemed a Forward Transaction to be firm,
          no later than ten (10) Days prior to the first Day of each Month of
          the Period of Delivery, Seller will provide to Buyer nominations of
          the Requested Quantity or Offered Quantity, as applicable, Seller
          expects to Schedule during each Month of the Period of Delivery and
          Buyer will confirm such quantities to Seller prior to the first Day of
          each Month of the Period of Delivery. If EMW has not elected to
          receive Full Management Services or Imbalance Management Services from
          EESI pursuant to Article 4 of this Agreement, then should either Party
          desire to change the Requested Quantity or Offered Quantity for a
          Forward Transaction, the Parties will promptly enter into an
          additional Transaction to reflect the desired change, either an
          IntraMonth Transaction for desired changes during a Month or a Forward
          Transaction for desired changes for an ensuing Month. In either case,
          the Party desiring such change will provide notice to the other Party
          not later than twelve (12) hours prior to the applicable Transporter's
          nomination deadline for the applicable Gas Day (the "NOMINATION DUE
          DATE") and the Parties will thereafter consummate such Transaction in
          a

                                  Appendix 1 -- 4

<PAGE>

          timely manner. If the nomination or Scheduling deadline of a
          Transporter conflicts with these notification dates, EMW and EESI
          agree to modify the notification dates accordingly. If the Parties
          have deemed a Transaction to be interruptible or otherwise non-firm
          in a Transaction Agreement, then either Party may, in its sole
          discretion and without liability, except as provided in Section 9.2
          of this Agreement, interrupt, in whole or in part, the Scheduling
          of Gas at any time for any reason upon prior notice by telephone
          and confirmed by facsimile to the other Party specifying the amount
          and duration of the interruption sufficient to allow the notified
          Party to make changes to its Transporter nominations in accordance
          with its Transporter's procedures. No notice of interruption may be
          retroactive to a prior time. Should an interruption occur without
          the notice herein required and such interruption is not otherwise
          excused by Force Majeure, the notifying Party shall be liable and
          pay for all associated penalties and cashout costs and losses
          charged by all Transporters, if any, as provided in Section 9.2 of
          this Agreement.

     D.   NO MAKE-UP RIGHTS. Buyer will have no rights to make up any Gas
          tendered hereunder by Seller but not taken by Buyer. In addition,
          Buyer shall have no recourse nor any right, title, or interest in any
          Gas paid for but not taken under this Agreement. Imbalances will be
          treated pursuant to Article 9.2 of this Agreement.

TRANSPORTATION. Seller will obtain, or cause to be obtained, and pay for
transportation to the Delivery Point, and Buyer will obtain, or cause to be
obtained, and pay for transportation from the Delivery Point.

GAS SPECIFICATIONS. Seller represents that all Gas delivered hereunder will
meet or exceed the quality specifications and pressure requirements of EMW's
Transporter for acceptance of Gas into its pipeline system at the applicable
receipt point. In the event Gas tendered by Seller to its Transporter does
not meet or exceed the Transporter's quality specifications, Buyer, in
addition to all other remedies allowed hereunder, shall have the right to
refuse to accept Gas until such time as Seller is again able to tender Gas
complying with such Transporter's quality specifications.

OPERATIONAL FLOW ORDERS. Should either Party receive an operational flow
order or other order or notice from a Transporter requiring action to be
taken in connection with this Agreement or Gas flowing under this Agreement
("OFO"), such Party will immediately notify the other Party of the OFO and
provide the other Party a copy of same by facsimile. The Parties will take
all actions required by the OFO within the time prescribed. Each Party will
indemnify, defend and hold harmless the other Party from any Claims,
including, without limitation, all non-compliance penalties and reasonable
attorneys' fees, associated with an OFO (i) of which the Indemnifying Party
failed to give the Indemnified Party the notice required hereunder or (ii)
under which the Indemnifying Party failed to take the action required by the
OFO within the time prescribed.

-------------------------------------------------------------------------------
-    FINANCIAL MATTERS
-------------------------------------------------------------------------------

BILLING, INVOICE DATE, CHARGES AND PAYMENT. By the tenth Day of each calendar
Month following the Month in which Gas was Scheduled under a Transaction,
Seller will provide Buyer with a written statement setting forth Gas
Scheduled during the preceding Month, and other charges due Seller,
including, without limitation, deficiency or default charges under Article 3.
Billing and payment will be based on actual quantities of Gas delivered
hereunder, provided, that if actual quantities of Gas are not known at the
time Seller issues its invoice, Seller will base its invoice on Scheduled
quantities of Gas and differences between Scheduled quantities and actual
quantities of Gas delivered hereunder will be corrected or settled in cash by
reflecting such settlement or correction in the invoice for the following
Month; provided further, however, that in the event EESI is providing the
Full Management Services or the Imbalance Management Services, billing and
payment may, upon mutual agreement of the Parties, be based on the actual
consumption quantities of EMW's customers, adjusted for applicable fuel and
shrinkage of the applicable utility. Within 5 Business Days of the request of
either Party, the other Party will provide, to the extent it has a legal
right of access thereto and/or such statement is then available, a copy of
the Transporter's allocation or imbalance statement applicable to Gas sold
hereunder for the requested period. The difference, if any, between Scheduled
and actual quantities delivered or accepted will be treated as

                                      Appendix 1 -- 5
<PAGE>

Imbalances under Article 9. Buyer will remit any amounts due on the
twenty-fifth Day of the Month in which Seller's statement was received. If
the due date for any payment to made under this Agreement is not a Business
Day, the due date for such payment will be the next Business Day following
the due date. Payment of all funds will be made by wire transfer on the due
date in U. S. currency. Each Party will take all actions necessary to effect
payments in accordance with the process stated in Exhibit "A". If EMW or EESI
should fail to remit any amounts in full when due hereunder, interest on the
unpaid portion will accrue from the date due at a rate equal to the Interest
Rate. Billings, payments and statements will be made to the accounts or the
addresses/facsimiles specified in Exhibit "A."

DISPUTES. If either Party fails to make a timely payment and such failure is
not remedied within five (5) Business Days after such Party receives written
notice of default, the non defaulting Party, in addition to other remedies,
may suspend the Scheduling of Gas until such amount, including interest at a
rate equal to the Interest Rate, is paid; provided, if the defaulting Party,
in good faith, will dispute the amount of any such billing or part thereof
and will pay such amounts as it concedes to be correct, no suspension will be
permitted. In the event any invoice is disputed by the Party receiving such
invoice, the receiving Party will pay the undisputed amounts and will, within
twenty (20) Days from the date of receipt of such invoice, give the invoicing
Party written notification setting forth the disputed amount and the basis
therefor. Buyer and Seller will use reasonable diligence to resolve disputed
amounts within thirty (30) Days following written notification. If the
undisputed amount is not paid when due, the undisputed amount will bear
interest at a rate equal to the Interest Rate. Any disputed amount which
later is determined to be due to the invoicing Party will bear interest at a
rate equal to the Interest Rate from the original due date.

AUDIT RIGHTS. During the term of this Agreement and for a period of two (2)
years from the date of termination of a Transaction, EMW or EESI or any third
party representative thereof will have the right, at is expense and upon
reasonable notice and at reasonable times, to examine the books and records
of the other Party to the extent reasonably necessary to verify the accuracy
of any billing statement, payment demand, charge, payment or computation made
under this Agreement. No adjustment or correction will be made and all
records and payments will be conclusively presumed to be final unless notice
specifying the error or inaccuracy is given within two (2) calendar years
from the end of the calendar year during which such error or inaccuracy
occurred. The records of the Parties will be retained in accordance with
Article 10.6 for a like period to facilitate the audit rights of the Parties.

FINANCIAL INFORMATION. If requested by EMW, EESI will deliver as soon as
available, but in any case (i) within 120 Days following the end of each
fiscal year, a copy of the annual report of Enron Corp. containing audited
consolidated financial statements for such fiscal year certified by
independent certified public accountants and (ii) within 60 Days after the
end of each of its first three fiscal quarters of each fiscal year, a copy of
the quarterly report of Enron Corp. containing unaudited consolidated
financial statements for such fiscal quarter. If requested by EESI, EMW will
deliver as soon as available, but in any case (i) within 120 Days following
the end of each fiscal year, a copy of its annual report containing
consolidated financial statements for such fiscal year certified by
independent certified public accountants and (ii) within 60 Days after the
end of each of its first three fiscal quarters of each fiscal year, a copy of
its quarterly report containing unaudited consolidated financial statements
for such fiscal quarter. In all cases the statements will be for the most
recent accounting period and prepared in accordance with GAAP; provided,
should any such statements not be timely due to a delay in preparation or
certification, such delay will not be considered a default so long as such
Party diligently pursues the preparation, certification and delivery of the
statements.

-------------------------------------------------------------------------------
-    WARRANTY OF TITLE TO GAS
-------------------------------------------------------------------------------

Seller in any Transaction warrants that title to Gas to be Scheduled by
Seller is free from all production burdens, liens and adverse Claims (other
than Taxes not yet due and payable) and warrants its right to sell the same.
Seller agrees to indemnify, defend and hold harmless Buyer against all Claims
to or against the title of said Gas. In the event any Claim is asserted to
said Gas, Buyer, in addition to other remedies, may suspend its obligation to
pay for said Gas up to the amount of such Claim, without interest.

                                      Appendix 1 -- 6
<PAGE>
-------------------------------------------------------------------------------
-    ALTERNATE PRICE REDETERMINATION
-------------------------------------------------------------------------------

If any or all of the indices used to determine the Spot Price or the Contract
Price are not available in the future, the Parties agree to promptly
negotiate a mutually satisfactory alternate index for the Spot Price or
Contract Price (each an "ALTERNATE PRICE"). If the Parties cannot agree by
the end of the first Month for which the Spot Price or Contract Price could
not be determined, then EESI and EMW will each prepare a prioritized list of
up to three (3) alternative published reference postings or prices
representative of spot prices for Gas delivered in the same geographic area.
Each Party will submit its list to the other within ten (10) Days after the
end of the first Month for which the price could not be determined. The first
listed index appearing in EESI's list that also appears in EMW's list will
constitute the replacement index. If no common indices appear on the lists,
each Party will submit a new list adding two indices within 10 Days. If
either Party fails to provide timely a list, such Party's list will not be
considered. From and after the "RENEGOTIATION DATE," which will be the date
the Spot Price or Contract Price, as applicable, calculated on the referenced
index is no longer available, until the Alternate Price is determined, the
Alternate Price will be the average of the Spot Price(s) or Contract Price(s)
in effect during the three (3) Months preceding the Month in which the
Renegotiation Date occurred, which price will be effective until the
Alternate Price is determined. Upon determination of a new Alternate Price,
the Spot Price or Contract Price, as applicable, will be adjusted
retroactively to the Renegotiation Date.

-------------------------------------------------------------------------------
-    EFFECT OF WAIVER OR CONSENT
-------------------------------------------------------------------------------

No waiver or consent by either Party, express or implied, of any one or more
defaults by the other Party in the performance of any provision of this
Agreement will operate or be construed as a waiver or consent of any other
default or defaults whether of a like or different nature. Failure by a Party
to complain of any act of the other Party or to declare the other Party in
default with respect to this Agreement, regardless of how long that failure
continues (except as limited pursuant to Article 7 of this Agreement), will
not constitute a waiver by that Party of its rights with respect to that
default until the applicable statute of limitations period has run.

-------------------------------------------------------------------------------
-    INDEMNIFICATION
-------------------------------------------------------------------------------

With respect to each indemnification included in this Agreement the indemnity
is given to the fullest extent authorized by applicable law and the following
provisions will be considered applicable. The Indemnified Party will promptly
notify the Indemnifying Party in writing of any Claim and the Indemnifying
Party will have the right to assume the investigation and defense thereof,
including the employment of counsel, and will be obligated to pay the related
reasonable attorneys' fees; provided, however, the Indemnified Party will
have the right to employ separate counsel at its expense and participate in
the defense of any Claim, however, the reasonable attorneys' fees of such
counsel will be paid by the Indemnified Party unless the Indemnifying Party
has failed to assume the defense and employ counsel in a timely manner;
provided further, if the named parties to any Claim include both Parties, and
the Indemnified Party will have been advised by counsel that there may be a
legal defense available to it which is different from those available to the
Indemnifying Party, the Indemnified Party may elect to employ separate
counsel at the expense of the Indemnifying Party, in which case the
Indemnifying Party will pay all reasonable attorneys' fees of such counsel
and will not have the right to assume the defense of the Claim on behalf of
the Indemnified Party. The Parties will use reasonable efforts to cooperate
in the defense of any Claim. The Indemnifying Party will not be liable for
any settlement of a Claim without its express written consent thereto. The
Indemnified Party will reimburse the Indemnifying Party for payments made or
costs incurred in respect of an indemnity with the proceeds of any judgment,
insurance, bond, surety or other recovery made with respect to a covered
event.

-------------------------------------------------------------------------------
-    ARBITRATION
-------------------------------------------------------------------------------

DISPUTES TO BE ARBITRATED. Any and all Claims, counterclaims, demands, cause
of action, disputes, controversies, and other matters in question arising
under this Agreement or the alleged breach of any

                                      Appendix 1 -- 7
<PAGE>

provision hereof (all of which are referred to herein as "DISPUTED CLAIMS"),
whether such Disputed Claims arise at law or in equity, under state or
federal law, for damages or any other relief, shall be resolved by binding
arbitration in the manner set forth below.

ARBITRATION PROCEDURES.

     A.   THE PARTIES TO THIS AGREEMENT AGREE THAT ANY DISPUTE, CONTROVERSY
          OR CLAIM THAT MAY ARISE BETWEEN OR AMONG THEM IN CONNECTION WITH OR
          OTHERWISE RELATING TO THIS AGREEMENT OR THE APPLICATION,
          IMPLEMENTATION, VALIDITY OR BREACH OF THIS AGREEMENT OR ANY
          PROVISION OF THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, CLAIMS
          BASED ON CONTRACT, TORT OR STATUTE), SHALL BE FINALLY, CONCLUSIVELY
          AND EXCLUSIVELY SETTLED BY BINDING ARBITRATION IN WILMINGTON,
          DELAWARE IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES (THE
          "RULES") OF THE AMERICAN ARBITRATION ASSOCIATION OR ANY SUCCESSOR
          THERETO ("AAA") THEN IN EFFECT. THE PARTIES TO THIS AGREEMENT
          HEREBY EXPRESSLY WAIVE THEIR RIGHT TO SEEK REMEDIES IN COURT,
          INCLUDING THE RIGHT TO TRIAL BY JURY, WITH RESPECT TO ANY MATTER
          SUBJECT TO ARBITRATION PURSUANT TO THIS AGREEMENT. ANY PARTY TO
          THIS AGREEMENT MAY BRING AN ACTION, INCLUDING, WITHOUT LIMITATION,
          A SUMMARY OR EXPEDITED PROCEEDING IN ANY COURT HAVING JURISDICTION,
          TO COMPEL ARBITRATION OF ANY DISPUTE, CONTROVERSY OR CLAIM TO WHICH
          THE PROVISIONS HEREOF APPLY. EXCEPT WITH RESPECT TO THE FOLLOWING
          PROVISIONS (THE "SPECIAL PROVISIONS") WHICH SHALL APPLY WITH
          RESPECT TO ANY ARBITRATION PURSUANT HERETO, THE INITIATION AND
          CONDUCT OF ARBITRATION SHALL BE AS SET FORTH IN THE RULES, WHICH
          RULES ARE INCORPORATED IN THIS AGREEMENT BY REFERENCE WITH THE SAME
          EFFECT AS IF THEY WERE SET FORTH IN THIS AGREEMENT.

     B.   In the event of any inconsistency between the Rules and the Special
          Provisions, the Special Provisions shall control. Any references in
          the Rules to a sole arbitrator shall be deemed to refer to the
          tribunal of arbitrators provided for under paragraph (D) hereof.

     C.   The arbitration shall be administered by the AAA. If the AAA is
          unable or legally precluded from administering the arbitration,
          then the Parties shall agree upon an alternative arbitration
          organization, provided that, if the Parties cannot agree, such
          organization shall be selected by the Chief Judge of the United
          States District Court for the District which includes Wilmington,
          Delaware.

     D.   The arbitration shall be conducted by a tribunal of three (3)
          arbitrators. Within ten (10) Days after arbitration is initiated
          pursuant to the Rules, the initiating Party or Parties (the
          "CLAIMANT") shall send written notice to the other Party or Parties
          (the "RESPONDENT"), with a copy to the office of the AAA having
          responsibility for Wilmington, Delaware, designating the first
          arbitrator (who shall not be a representative or agent of any Party
          but may or may not be an AAA panel member and, in any case, shall
          be reasonably believed by the Claimant to possess the requisite
          experience, education and expertise in respect of the matters to
          which the Claim relates to enable such person to competently
          perform arbitral duties). Within ten (10) Days after receipt of
          such notice, the Respondent shall send written notice to the
          Claimant, with a copy to the office of the AAA having
          responsibility for Wilmington, Delaware and to the first
          arbitrator, designating the second arbitrator (who shall not be a
          representative or agent of any Party but may or may not be an AAA
          panel member and, in any case, shall be reasonably believed by the
          Respondent to possess the requisite experience, education and
          expertise in respect of the matters to which the Claim relates to
          enable such person to competently perform arbitral duties). Within
          ten (10) Days after such notice from the Respondent is received by
          the Claimant, the Respondent and the Claimant shall cause their
          respective designated arbitrators to select any mutually agreeable
          AAA panel member as the third arbitrator. If the respective
          designated arbitrators of the Respondent and

                                      Appendix 1 -- 8
<PAGE>

          the Claimant cannot so agree within said ten (10) Day period, then
          the third arbitrator will be determined pursuant to the Rules.
          Prior to commencement of the arbitration proceeding, each
          arbitrator shall have provided the Parties with a resume outlining
          such arbitrator's background and qualifications and shall certify
          that such arbitrator is not and has not been a representative or
          agent of any of the Parties. If any arbitrator shall die, fail to
          act, resign, become disqualified or otherwise cease to act, then
          the arbitration proceeding shall be delayed for fifteen (15) Days
          and the Party by or on behalf of whom such arbitrator was appointed
          shall be entitled to appoint a substitute arbitrator (meeting the
          qualifications set forth in this paragraph (D) within such fifteen
          (15) Day period; PROVIDED, HOWEVER, that if the Party by or on
          behalf of whom such arbitrator was appointed shall fail to appoint
          a substitute arbitrator within such fifteen (15) Day period, the
          substitute arbitrator shall be a neutral arbitrator appointed by
          the AAA arbitrator within fifteen (15) Days thereafter.

     E.   All arbitration hearings shall be commenced within ninety (90) Days
          after arbitration is initiated pursuant to the Rules, unless, upon
          a showing of good cause by a Party to the arbitration, the tribunal
          of arbitrators permits the extension of the commencement of such
          hearing; PROVIDED, HOWEVER, that any such extension shall not be
          longer than sixty (60) Days.

     F.   All Claims presented for arbitration shall be particularly
          identified and the Parties to the arbitration shall each prepare a
          statement of their position with recommended courses of action.
          These statements of position and recommended courses of action
          shall be submitted to the tribunal of arbitrators chosen as
          provided hereinabove for binding decision. The tribunal of
          arbitrators shall not be empowered to make decisions beyond the
          scope of the position papers.

     G.   The arbitration proceeding will be governed by the substantive laws
          of the State of Delaware and will be conducted in accordance with
          such procedures as shall be fixed for such purpose by the tribunal
          of arbitrators, except that (i) discovery in connection with any
          arbitration proceeding shall be conducted in accordance with the
          Federal Rules of Civil Procedure and applicable case law, (ii) the
          tribunal of arbitrators shall have the power to compel discovery,
          and (iii) unless the Parties otherwise agree and except as may be
          provided herein, the arbitration shall be governed by the Federal
          Arbitration Act, 9 U.S. Section 1-16, to the exclusion of any
          provision of state law or other applicable law or procedure
          inconsistent therewith or which would produce a different result.
          The Parties shall preserve their right to assert and to avail
          themselves of the attorney-client and attorney-work product
          privileges, and any other privileges to which they may be entitled
          pursuant to applicable law. No Party to the arbitration or any
          arbitrator may compel or require mediation and/or settlement
          conferences without the prior written consent of all such Parties
          and the tribunal of arbitrators.

     H.   The tribunal of arbitrators shall make an arbitration award as soon as
          possible after the later of the close of evidence or the submission of
          final briefs, and in all cases the award shall be made not later than
          thirty (30) Days following submission of the matter. The finding and
          decision of a majority of the arbitrators shall be final and shall be
          binding upon the Parties. Judgment upon the arbitration award or
          decision may be entered in any court having jurisdiction thereof or
          application may be made to any such court for a judicial acceptance of
          the award and an order of enforcement, as the case may be. The
          tribunal of arbitrators shall have the authority to assess liability
          for pre-award and post-award interest on the Claims, attorneys' fees,
          expert witness fees and all other expenses of arbitration as
          reasonably incurred by any Party as such arbitrators shall deem
          appropriate based on the outcome of the Claims arbitrated. Unless
          otherwise agreed by the Parties to the arbitration in writing, the
          arbitration award shall include findings of fact and conclusions of
          law. IT IS EXPRESSLY AGREED THAT NOTWITHSTANDING ANY OTHER PROVISION
          HEREIN TO THE CONTRARY, THE ARBITRATORS SHALL HAVE ABSOLUTELY NO
          AUTHORITY TO AWARD CONSEQUENTIAL DAMAGES (SUCH AS LOSS OF PROFIT),
          TREBLE, EXEMPLARY OR PUNITIVE DAMAGES OF ANY TYPE UNDER ANY
          CIRCUMSTANCES REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE

                                      Appendix 1 -- 9

          UNDER DELAWARE LAW, THE LAW OF ANY OTHER STATE, OR FEDERAL LAW OR
          UNDER ANY RULES OF ARBITRATION.

     I.   Notwithstanding any provision herein to the contrary, nothing
          herein shall be construed to require arbitration of a Claim or
          dispute brought by a person who is not a Party to this Agreement,
          or affect the ability of any Party to interplead or otherwise join
          another Party in a proceeding brought by a person who is not a
          Party to this Agreement.

     J.   EACH PARTY UNDERSTANDS THAT THIS AGREEMENT CONTAINS AN AGREEMENT TO
          ARBITRATE WITH RESPECT TO ANY DISPUTE OR NEED OF INTERPRETATION OF
          THIS AGREEMENT. AFTER SIGNING THIS AGREEMENT, EACH PARTY
          UNDERSTANDS THAT IT WILL NOT BE ABLE TO BRING A LAWSUIT GOVERNING
          ANY DISPUTE THAT MAY ARISE WHICH IS COVERED BY THE ARBITRATION
          PROVISION, EXCEPT TO COMPEL ARBITRATION OR SEEK INJUNCTIVE RELIEF.
          INSTEAD, EACH PARTY AGREES TO SUBMIT ANY SUCH DISPUTE TO
          ARBITRATION.

                                      Appendix  1 -- 10
<PAGE>

                                   EXHIBIT "A"

                        MASTER PURCHASE & SALES AGREEMENT
                             DATED DECEMBER 23, 1999
                                 BY AND BETWEEN
                           ENRON ENERGY SERVICES, INC.
                                       AND
                            EMW ENERGY SERVICES CORP.

                        NOTICE, COMMUNICATION AND PAYMENT

<TABLE>
<CAPTION>
<S>                                         <C>
NOTICE TO EESI:                             NOTICE TO EMW:

Enron Energy Services, Inc.                 EMW Energy Services Corp.
400 Metro Place North
Dublin, Ohio  43017-3375
Attn: Vice President, Operations            Attn:
Facsimile No:  (614) 792-6049               Facsimile No:  (713) _________

PAYMENTS TO EESI:                           PAYMENTS TO EMW:

If by mail:                                 If by mail:

Enron Energy Services, Inc.                 EMW Energy Services Corp.
P. O. Box 74489
Main Post Office
Cleveland, OH  44194                        Attn:

If by wire transfer:                        If by wire transfer:

Enron Energy Services, Inc.
Wire Transfer to Citibank New York, N.A.    Wire Transfer to:
021-000-089 ABA Routing                     ________________ ABA Routing
4074-1022 Account Number                    ________________ Account Number

BILLING & ACCOUNTING MATTERS TO EESI        BILLING & ACCOUNTING MATTERS TO EMW:

Enron Energy Services, Inc.                 EMW Energy Services Corp.
400 Metro Place North
Dublin, Ohio  43017-3375
Attn:  Manager, Industrial Services         Attn:
Facsimile No:  (614) 761-7177               Facsimile No:  (713) __________

NOMINATIONS TO EESI:                        NOMINATIONS TO EMW:

Attn:  Manager, Logistics                   Attn:
Facsimile No:  (713) 646-3284               Facsimile No:  (713) _________

CONFIRMATIONS TO EESI:                      CONFIRMATIONS TO EMW:

Attn:  Industrial Sales                     Attn:
Facsimile No:  (614) 792-6049               Facsimile No:  (713) ____________
</TABLE>

           OR TO SUCH OTHER ADDRESS AS EMW OR EESI WILL FROM TIME TO TIME
DESIGNATE BY LETTER PROPERLY ADDRESSED

                                      A-1
<PAGE>

                                   EXHIBIT "B"

                        MASTER PURCHASE & SALES AGREEMENT
                             DATED DECEMBER 23, 1999
                                 BY AND BETWEEN
                           ENRON ENERGY SERVICES, INC.
                                       AND
                            EMW ENERGY SERVICES CORP.

                     SUGGESTED FORM OF TRANSACTION AGREEMENT

This Transaction Agreement (the "AGREEMENT") will form and effectuate the
current proposal between EMW Energy Services Corp., as "EMW", and Enron
Energy Services, Inc., as "EESI", regarding the purchase and sale of Gas
under the following terms and conditions. _________ to purchase and receive
and _______ to sell and deliver. Transaction No.______________.

     REQUESTED [OFFERED] QUANTITY:                      ______________________

     QUALITY OF SERVICE:
     (FIRM OR INTERRUPTIBLE)

     TRANSPORTATION SERVICE:

     DELIVERY POINT(S):                                 ______________________

     CONTRACT PRICE (PER MMBtu):                        ______________________

     PERIOD OF DELIVERY:                                ______________________

     SPOT PRICE LOCATION:                               ______________________

     SPECIAL CONDITIONS:

This Transaction Agreement is being provided pursuant to and in accordance
with the Master Purchase & Sales Agreement dated December 23, 1999 (the
"Agreement") between EMW and EESI, and constitutes part of and is subject to
all of the terms and provisions of such Agreement. Terms used but not defined
herein will have the meanings ascribed to them in this Agreement. Please
execute this Transaction Agreement and return an executed copy to EESI no
later than ____ a.m. on _____________, 19__ ("Notification Time"). Your
execution should reflect the appropriate party in your organization who has
the authority to cause EMW to enter into this Transaction. In the event EMW
fails to execute and deliver this Transaction Agreement by the Notification
Time or alters the terms of this Transaction Agreement in any manner, there
will be no Transaction pursuant to this Transaction Agreement.

ENRON ENERGY SERVICES, INC.                    EMW ENERGY SERVICES CORP.

By:      NOT FOR EXECUTION                     By:      NOT FOR EXECUTION
   ----------------------------                   ----------------------------
Name: _________________________                Name: _________________________
              Attorney-in-Fact                 Title:_________________________

                                      B-1
<PAGE>

                                   EXHIBIT "C"

                        MASTER PURCHASE & SALES AGREEMENT
                             DATED DECEMBER 23, 1999
                                 BY AND BETWEEN
                           ENRON ENERGY SERVICES, INC.
                                       AND
                            EMW ENERGY SERVICES CORP.

                     APPLICABLE INDICES FOR EXISTING MARKETS

<TABLE>
<CAPTION>
   --------------------------- ----------------------------------- -------------------------------------------------------

        MARKET LOCATION                  DELIVERY POINT                                    INDEX

   --------------------------- ----------------------------------- -------------------------------------------------------
   <S>                         <C>                                 <C>

          Columbia Gas           The  point of  interconnection      The "Index Price"  appearing in Inside  F.E.R.C.'s
                                 between     the     interstate      Gas Market Report or successor  publication in the
          of Ohio Inc            natural    gas    transmission      table  identified as "Prices of Spot Gas Delivered
                                 system   of    Columbia    Gas      to Pipelines" for Columbia Gas Transmission  Corp,
                                 Transmission   Corp.  and  the      Appa.(VWA,   Ohio,   Pa),  plus  all   incremental
                                 natural    gas    distribution      transportation  costs and other basis  adjustments
                                 system  of  Columbia   Gas  of      necessary  to effect  delivery of the Gas from the
                                 Ohio Inc.                           above   specified   geographic   location  to  the
                                                                     Delivery Point
   --------------------------- ----------------------------------- -------------------------------------------------------

    Cincinnati Gas & Electric    The  point of  interconnection      The "Index Price"  appearing in Inside  F.E.R.C.'s
               Co                between     the     interstate      Gas Market Report or successor  publication in the
                                 natural    gas    transmission      table  identified as "Prices of Spot Gas Delivered
                                 system     of    Texas     Gas      to  Pipelines"  for Texas Gas  Transmission  Corp,
                                 Transmission   Corp.  and  the      Zone  SL,  plus  all  incremental   transportation
                                 natural    gas    distribution      costs and other  basis  adjustments  necessary  to
                                 system  of  Cincinnati  Gas  &      effect   delivery   of  the  Gas  from  the  above
                                 Electric Co.                        specified  geographic  location  to  the  Delivery
                                                                     Point
   --------------------------- ----------------------------------- -------------------------------------------------------
</TABLE>

                       APPLICABLE INDICES FOR NEW MARKETS

<TABLE>
<CAPTION>

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

               MARKET LOCATION                                                     INDEX

----------------------------------------------- ----------------------------------------------------------------------------
<S>                                             <C>
    TO BE DETERMINED PURSUANT TO ARTICLE 5                        TO BE DETERMINED PURSUANT TO ARTICLE 5
----------------------------------------------- ----------------------------------------------------------------------------
</TABLE>
                                      C-1<PAGE>

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

                             SUBSCRIPTION AGREEMENT
                                  BY AND AMONG

                                   TNPC, INC.

                             DLJMB FUNDING II, INC.
                     DLJ MERCHANT BANKING PARTNERS II, L.P.
                    DLJ MERCHANT BANKING PARTNERS II-A, L.P.
                         DLJ DIVERSIFIED PARTNERS, L.P.
                        DLJ DIVERSIFIED PARTNERS-A, L.P.
                          DLJ MILLENNIUM PARTNERS. L.P.
                         DLJ MILLENNIUM PARTNERS-A, L.P.
                               DLJ FIRST ESC L.P.
                         DLJ OFFSHORE PARTNERS II, C.V.
                             DLJ EAB PARTNERS, L.P.
                                DLJ ESC II, L.P.

                 CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM

                      ONTARIO TEACHERS' PENSION PLAN BOARD

                                       AND

                                 LJM2-TNPC, LLC

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

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
ARTICLE I DEFINITIONS AND GENERAL INTERPRETATION............................  1
   1.1   DEFINITIONS........................................................  1
   1.2   RULES OF CONSTRUCTION..............................................  3
   1.3   HEADINGS...........................................................  3

ARTICLE II SUBSCRIPTION.....................................................  3

   2.1   SUBSCRIPTION BY THE INVESTORS......................................  3
   2.2   STOCKHOLDERS AGREEMENT.............................................  4

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................  4

   3.1   ORGANIZATION; GOOD STANDING OF THE COMPANY; CAPITALIZATION.........  4
   3.2   AUTHORITY..........................................................  5
   3.3   DUE EXECUTION AND ENFORCEABILITY...................................  5
   3.4   NO RESTRICTIONS AGAINST PERFORMANCE................................  5
   3.5   THIRD-PARTY AND GOVERNMENTAL CONSENTS..............................  5
   3.6   LITIGATION.........................................................  6
   3.7   NO BROKER'S FEES...................................................  6
   3.8   BOOKS AND RECORDS..................................................  6
   3.9   DISCLOSURE.........................................................  6
   3.10  COMPLIANCE WITH LAWS...............................................  6

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE INVESTORS..................  7

   4.1   ORGANIZATION; GOOD STANDING........................................  7
   4.2   AUTHORITY..........................................................  7
   4.3   DUE EXECUTION AND ENFORCEABILITY...................................  7
   4.4   NO RESTRICTIONS AGAINST PERFORMANCE................................  7
   4.5   THIRD-PARTY AND GOVERNMENTAL CONSENTS..............................  8
   4.6   ACCREDITED INVESTORS...............................................  8

ARTICLE V ADDITIONAL AGREEMENTS.............................................  9

   5.1   CONFIDENTIALITY....................................................  9
   5.2   FURTHER ASSURANCES.................................................  9
   5.3   EXPENSES...........................................................  9

ARTICLE VI CLOSING; CONDITIONS TO CLOSING................................... 10

   6.1   LOCATION AND TIME OF CLOSING....................................... 10
   6.2   CONDITIONS TO OBLIGATIONS OF THE COMPANY........................... 10
   6.3   CONDITIONS TO OBLIGATIONS OF THE INVESTORS......................... 10

ARTICLE VII INDEMNIFICATION................................................. 11

   7.1   SURVIVAL........................................................... 11
   7.2   THE COMPANY'S AGREEMENT TO INDEMNIFY............................... 11
   7.3   INVESTORS'AGREEMENT TO INDEMNIFY................................... 11
   7.4   MATTERS INVOLVING THIRD PARTIES.................................... 11
   7.5   EXCLUSIVE REMEDY; LIMITATION ON DAMAGES............................ 12
   7.6   EXPRESS NEGLIGENCE CLAUSE.......................................... 13

ARTICLE VIII GENERAL PROVISIONS............................................. 13

   8.1   ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENT................... 13

<PAGE>

   8.2   WAIVERS AND AMENDMENTS............................................. 13
   8.3   NOTICES............................................................ 14
   8.4   GOVERNING LAW; VENUE; SUBMISSION TO SERVICE OF PROCESS............. 16
   8.5   BINDING EFFECT; ASSIGNMENT......................................... 16
   8.6   SEVERABILITY....................................................... 16
   8.7   COUNTERPARTS....................................................... 17
   8.8   SPECIFIC PERFORMANCE............................................... 17

</TABLE>

EXHIBITS:
---------
EXHIBIT 1.1(a)  - Form of Special Warrant
EXHIBIT 1.1(b)  - Amendment No. 2 to the Stockholders Agreement
EXHIBITS 1.1(c)  - Opinion to be delivered on behalf of the Company

SCHEDULES:
----------
SCHEDULE 3.1  - Agreements to Acquire Securities

<PAGE>

                             SUBSCRIPTION AGREEMENT

         THIS SUBSCRIPTION AGREEMENT, dated as of July 10, 2000 (this
"Agreement") is by and among DLJMB Funding II, Inc., DLJ Merchant Banking
Partners II, L.P., DLJ Merchant Banking Partners II-A, L.P., DLJ Diversified
Partners, L.P., DLJ Diversified Partners-A, L.P., DLJ Millennium Partners, L.P.,
DLJ Millennium Partners-A, L.P., DLJ First ESC L.P., DLJ Offshore Partners II,
C.V, DLJ EAB Partners, L.P., DLJ ESC II, L.P. (together, the "DLJMB Investors"),
the California Public Employees' Retirement System ("CalPERS"), the Ontario
Teachers' Pension Plan Board ("OTP"), LJM2-TNPC, LLC, a Delaware limited
liability company ("LJM2") (together, the "Investors") and TNPC, Inc. (formerly
EMW Energy Services Corp.), a Delaware corporation (the "Company").

         WHEREAS, the Investors have agreed to contribute to the Company an
aggregate of $97,500,000 cash in exchange for Special Warrants on the terms set
forth herein;

         WHEREAS, the DLJMB Investors intend to purchase the Special Warrants in
satisfaction of their stock purchase rights set forth in Section 2.4 of the
Stockholders Agreement; and

         WHEREAS, the purpose of the Company shall be to engage in the retail
marketing and retail sale of natural gas, electricity and other commodities,
products and services to residential and small commercial customers in the
United States;

         NOW, THEREFORE, for and in consideration of the foregoing premises,
mutual covenants, rights and obligations set forth herein, the benefits to be
derived therefrom and for other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged by the parties hereto,
the parties hereto agree as follows:

                                    ARTICLE I
                     DEFINITIONS AND GENERAL INTERPRETATION

         1.1 DEFINITIONS. The following terms shall be used in this Agreement
with the meanings set forth in this Section 1.1:

         "AMENDED CHARTER" means the Amended and Restated Certificate of
Incorporation of the Company, as amended to date.

         "AMENDMENT NO. 2 TO THE STOCKHOLDERS AGREEMENT" means Amendment No. 2
to the Stockholders Agreement entered into among the Company, the Investors and
certain other stockholders of the Company in the form attached as EXHIBIT 1.1(b)
hereto.

         "BUSINESS" means the business of selling natural gas and electricity to
residential customers.

         "CLOSING" has the meaning set forth in Section 6.1.

                                       1
<PAGE>

         "COMMON STOCK" means shares of the Company's voting common stock, par
value $.01 per share, and the Non-Voting Common Stock, having the terms set
forth in the Amended Charter.

         "DAMAGES" has the meaning set forth in Section 7.2.

         "GOVERNMENTAL AUTHORITY" means any court, judicial or quasi-judicial or
administrative agency or body or commission or other governmental or other
regulatory authority or agency.

         "INDEMNIFIED PARTY" has the meaning set forth in Section 7.4.

         "INDEMNIFYING PARTY" has the meaning set forth in Section 7.4.

         "LAWS" means all (a) federal, state, local or foreign laws, statutes,
ordinances, judgments, decrees, rules and regulations, (b) orders, (c) permits
and (d) agreements with federal, state, local or foreign regulatory authorities
or agencies to which the Company or an Investor, as the case may be, is a party
or by which it is bound.

         "LIEN" means, with respect to any asset, any mortgage, lien (including
mechanics, warehousemen, laborers and landlords liens), claim, pledge, charge,
security interest, preemptive right, right of first refusal, option, judgment or
encumbrance of any kind in respect of or affecting such asset.

         "MATERIAL ADVERSE EFFECT" means any event, condition, effect or change
(or series of such occurrences, as a whole or individually) that is or would be
materially adverse to the business, results of operations, condition (financial
or otherwise), business, assets, liabilities or prospects of the person or
entity to which reference is made.

         "NON-VOTING COMMON STOCK" means the non-voting common stock, par value
$.01 per share, of the Company, having the terms set forth in the Amended
Charter.

         "REGISTRATION STATEMENT" means the draft registration statement of
TNPC, Inc. on Form S-1 dated July 7, 2000.

          "SECURITIES" has the meaning set forth in Section 4.6(a).

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

         "SPECIAL WARRANTS" means the warrants to purchase shares of Non-Voting
Common Stock having the terms set forth in the form of warrant attached as
EXHIBIT 1.1(a) hereto.

         "STOCKHOLDERS AGREEMENT" means the Stockholders Agreement entered into
among the Company, the DLJMB Investors, G.E. Capital Equity Investments, Inc.,
CalPERS, OTP, Enron

                                       2
<PAGE>

Energy Services, LLC and Cortez Energy Services, LLC on January 6, 2000, as
amended by Amendment No. 1 to the Stockholders Agreement dated June 30, 2000,
and Amendment No. 2 to the Stockholders Agreement.

         1.2     RULES OF CONSTRUCTION. The definitions in Section 1.1 herein
and elsewhere in this Agreement shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include," "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The words "herein," "hereof," "hereto" and
"hereunder" and words of similar import refer to this Agreement in its entirety
and not to any part hereof unless the context shall otherwise require. All
references herein to "Sections" and "Articles" shall be deemed references to
sections and articles of this Agreement unless the context shall otherwise
require. Unless the context shall otherwise require, any references to any
agreement or other instrument or statute or regulation are to it as amended and
supplemented from time to time (and, in the case of a statute or regulation, to
any corresponding provisions of successor statutes or regulations).

         1.3     HEADINGS. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.

                                   ARTICLE II
                                  SUBSCRIPTION

         2.1     SUBSCRIPTION BY THE INVESTORS.

         (a)     CASH CONTRIBUTIONS. Subject to the terms and conditions of
this Agreement, at the Closing, the Investors shall contribute as a capital
contribution to the Company, and the Company shall accept from the Investors,
the following cash contributions:

<TABLE>
<CAPTION>

                  INVESTOR                      CASH CONTRIBUTION
                  --------                      -----------------
                  <S>                           <C>
                  DLJMB Investors               $ 7,500,000
                  CalPERS                       $25,000,000
                  OTP                           $15,000,000
                  LJM2                          $50,000,000
</TABLE>

Such contributions shall be made by wire transfer of immediately available funds
to an account or accounts designated by the Company at least two (2) Delaware
business days prior to Closing.

         (b)     ISSUANCE OF WARRANTS TO THE INVESTORS. In consideration for
the foregoing, at the Closing, subject to the terms and conditions of this
Agreement, the Company will issue to the Investors the number of Special
Warrants set forth below:

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                 SPECIAL
                                                 -------
                  INVESTOR                       WARRANTS
                  --------                       --------
                  <S>                            <C>
                  DLJMB Investors                  3,489
                  CalPERS                         11,629
                  OTP                              6,978
                  LJM2                            23,258
</TABLE>

         (c)     ALLOCATION AMONG DLJMB INVESTORS. The DLJMB Investors jointly
agree that the cash contributions to be made by the DLJMB Investors pursuant to
Section 2.1(a) above and the Securities to be issued to the DLJMB Investors
pursuant to Section 2.1(b) above shall be allocated among the DLJMB Investors
in such manner as the DLJMB Investors shall advise the Company in writing at
least two (2) Delaware business days prior to Closing.

         (d)     DELIVERY OF OPINION. In connection with the issuance of such
Special Warrants, the Investors shall receive an opinion of Vinson & Elkins
L.L.P. in the form of Exhibit 1.1(c).

         2.2     AMENDMENT NO. 2 TO THE STOCKHOLDERS AGREEMENT. At the Closing,
subject to the terms and conditions of this Agreement, the Company, each of the
Investors and certain other stockholders of the Company will execute and
deliver Amendment No. 2 to the Stockholders Agreement.

                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

         The Company represents and warrants to each of the Investors as of the
date hereof that:

         3.1     ORGANIZATION; GOOD STANDING OF THE COMPANY; CAPITALIZATION.

         (a)     The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, and has the
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted. The Company is duly
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business makes
such qualification necessary, except where the failure so to qualify and be in
good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.

         (b)     The authorized capital stock of the Company consists of
2,000,000 shares of Common Stock of which 1,000,000 shares are designated as
Non-Voting Common Stock, and 50,000 shares of preferred stock, par value $.01
per share. The number of issued and outstanding shares of capital stock of the
Company is as follows: (i) voting Common Stock, 105,502 shares; (ii) Non-Voting
Common Stock, 10,322 shares; and (iii) preferred stock, no shares. There are no
outstanding options, warrants, commitments, agreements or any other rights of
any character entitling any person or entity to acquire shares of capital stock
or securities convertible or

                                       4
<PAGE>

exchangeable for capital stock in the Company except as set forth on SCHEDULE
3.1 hereto. The Company does not own any equity interest in any other entity
except for its subsidiaries TNPC Holdings, Inc. and The New Power Company.

         (c)     The Special Warrants when issued will be duly authorized and
validly issued. The Common Stock to be issued upon valid exercise of the
Special Warrants in accordance with their terms, will be duly authorized and
adequately reserved in contemplation of the exercise of the Special Warrants
and, when issued and delivered in accordance with the terms of the Special
Warrants, will be validly issued, fully paid, non-assessable and free and clear
of all Liens (other than those arising under the Stockholders Agreement), and
the issuance thereof will not have been subject to any preemptive rights or
made in violation of any applicable Law.

         3.2     AUTHORITY. The Company has the requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and Amendment No. 2 to the Stockholders Agreement and to consummate the
transactions contemplated hereby and thereby. The Company has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Agreement.

         3.3     DUE EXECUTION AND ENFORCEABILITY. This Agreement and Amendment
No. 2 to the Stockholders Agreement constitute legal, valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application referring to or affecting enforcement of creditors' rights and
general principles of equity.

         3.4     NO RESTRICTIONS AGAINST PERFORMANCE. Neither the execution,
delivery nor performance of this Agreement or Amendment No. 2 to the
Stockholders Agreement by the Company nor the consummation by the Company of
the transactions contemplated by this Agreement or Amendment No. 2 to the
Stockholders Agreement will, with or without the giving of notice or the
passage of time, or both, violate any provisions of, conflict with, result in a
breach of, constitute a default under (or give rise to any right of
termination, cancellation or acceleration), or result in the creation or
imposition of any Lien under: (a) the organizational documents of the Company;
(b) any Law that is applicable to the Company or any of its subsidiaries or any
of their respective properties or assets; (c) any contract, indenture,
instrument, agreement, mortgage, lease, right or other obligation or
restriction to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties or assets is or may be bound; or (d) any order, judgment, writ,
injunction, decree, license, franchise, permit or other authorization of any
Governmental Authority by which the Company or any of its subsidiaries or any
of their respective properties or assets are or may be bound, except in the
case of clauses (b) and (c), as would not individually or in the aggregate have
a Material Adverse Effect on the Company and its subsidiaries taken as a whole.

         3.5     THIRD-PARTY AND GOVERNMENTAL CONSENTS. Except for the
stockholder consent required as provided in Amendment No. 2 to the Stockholders
Agreement, no approval, consent,

                                       5
<PAGE>

waiver, order or authorization of, or registration, qualification, declaration,
or filing with, or notice to, any Governmental Authority or other third party
is required to be made or obtained on the part of the Company or its
subsidiaries in connection with the execution and delivery of this Agreement
and Amendment No. 2 to the Stockholders Agreement or the issuance of the
Special Warrants as contemplated hereby.

         3.6     LITIGATION. There is no judicial or administrative action,
suit, proceeding (whether adjudicatory, rule-making, licensing or otherwise) or
investigation pending or, to the knowledge of the Company, threatened in law or
equity against the Company or its subsidiaries, relating to the Company or its
subsidiaries or the transactions contemplated by this Agreement before any
Governmental Authority, that would have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole, or on the ability of the Company
to consummate the transactions contemplated hereby or to carry on the Business
as currently contemplated.

         3.7     NO BROKER'S FEES. No agent, broker or other person is or may
be entitled to a commission or finder's fee from the Company in connection with
the transactions contemplated by this Agreement.

         3.8     BOOKS AND RECORDS. The books of account, minute books, stock
record books and other records of the Company are complete and correct in all
material respects and have been maintained in accordance with sound business
practices, including the maintenance of adequate systems of internal controls.
The minute books of the Company contain accurate and complete records of all
meetings held of, and material corporate action taken by, the stockholders, the
Board of Directors and any committees of the Board of Directors of the Company.

         3.9     DISCLOSURE. To the knowledge of the Company, the
representations and warranties made by the Company contained in this Agreement,
together with all written and oral information provided to the Investors in
connection with the transactions contemplated hereby, including, without
limitation, the Registration Statement, do not contain an untrue statement of a
material fact or omit to state a material fact necessary to make the statements
and facts contained herein or therein, in light of the circumstances in which
they were or are made, not false or misleading.

         3.10    COMPLIANCE WITH LAWS. The Business is being conducted by the
Company in compliance with all applicable Laws other than such Laws as the
violation of which would not have a Material Adverse Effect on the Company and
its subsidiaries taken as a whole. The Company is currently not conducting the
Business in violation of any applicable Laws the violation of which would have
a Material Adverse Effect on the ability of the Company to conduct the Business
in the future. The Company or one of its subsidiaries holds or has applied for
all permits from all Governmental Authorities and third parties necessary for
the lawful conduct of the Business to the extent conducted by the Company and
its subsidiaries as of the date hereof other than those permits that would not
have a Material Adverse Effect on the Company and its subsidiaries taken as a
whole. The Company is and has been in compliance with, and, to the knowledge of
the Company,

                                       6
<PAGE>

is not under investigation with respect to or been given notice of any
violation of, any such permit as would have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole.

                                   ARTICLE IV
                 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS

         Each Investor severally, and not jointly, represents and warrants to
the Company as of the date hereof that:

         4.1     ORGANIZATION; GOOD STANDING. Such Investor is duly organized
or formed (as the case may be), validly existing and, in the case of the
Investors other than CalPERS, in good standing under the laws of the
jurisdiction in which it is organized or formed, with full corporate or similar
power and authority to own, lease and operate its properties and assets and to
carry on its business as presently conducted.

         4.2     AUTHORITY. Such Investor has the corporate or similar power
and authority to execute, deliver and perform its obligations under this
Agreement and Amendment No. 2 to the Stockholders Agreement and to consummate
the transactions contemplated hereby and thereby. Such Investor has taken all
necessary corporate or similar action to authorize its execution, delivery and
performance of this Agreement and Amendment No. 2 to the Stockholders Agreement.

         4.3     DUE EXECUTION AND ENFORCEABILITY. This Agreement and Amendment
No. 2 to the Stockholders Agreement constitute legal, valid and binding
obligations of such Investor, enforceable against such Investor in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application referring to or affecting enforcement of creditors' rights and
general principles of equity.

         4.4     NO RESTRICTIONS AGAINST PERFORMANCE. Neither the execution,
delivery nor performance by such Investor of this Agreement or Amendment No. 2
to the Stockholders Agreement, nor the consummation by such Investor of the
transactions contemplated by this Agreement or Amendment No. 2 to the
Stockholders Agreement will, with or without the giving of notice or the
passage of time, or both, violate any provisions of, conflict with, result in a
breach of, constitute a default under, or result in the creation or imposition
of any Lien under: (a) the organizational or governing documents of such
Investor; (b) any Law that is applicable to such Investor or any of its
properties or assets; (c) any contract, indenture, instrument, agreement,
mortgage, lease, right or other obligation or restriction to which such
Investor is a party or by which it or any of its properties or assets are or
may be bound; or (d) any order, judgment, writ, injunction, decree, license,
franchise, permit or other authorization of any Governmental Authority by which
such Investor or any of its properties or assets are or may be bound, except in
each of the foregoing cases as would not individually or in the aggregate have
a Material Adverse Effect on such Investor or materially impair the ability of
such Investor to consummate the transactions contemplated hereby.

                                       7
<PAGE>

         4.5     THIRD-PARTY AND GOVERNMENTAL CONSENTS. Except as previously
obtained, no approval, consent, waiver, order or authorization of, or
registration, qualification, declaration, or filing with, or notice to, any
Governmental Authority or other third party is required on the part of such
Investor in connection with the execution and delivery of this Agreement by
such Investor or the consummation of the transactions contemplated hereby or
thereby.

         4.6     ACCREDITED INVESTORS.

         (a)     Such Investor is acquiring the Special Warrants to be acquired
by it under this Agreement (including, for purposes of this representation and
warranty, the shares of Common Stock underlying such Special Warrants)
(collectively, the "Securities") for its own account, for investment purposes,
and not with a view to, or for resale in connection with, any public
distribution of the Securities in violation of the federal securities laws.

         (b)     Such Investor understands that the Securities have not been
registered under the Securities Act or any federal or state law by reason of
specific exemptions under the provisions thereof, the availability of which
depend in part upon the accuracy of its representations made in this Section
4.6.

         (c)     Such Investor understands that the Company is relying upon the
representations and agreements contained in this Section 4.6 for the purpose of
determining whether this transaction meets the requirements for such exemptions.

         (d)     Such Investor is an "accredited investor" as defined in Rule
01(a) of Regulation D under the Securities Act.

         (e)     Such Investor has such knowledge, skill and experience in
business, financial and investment matters that it is capable of evaluating the
merits and risks of an investment in the Securities. The undersigned recognizes
that an investment in the Securities is a speculative investment involving a
high degree of risk.

         (f)     Such Investor understands that the Securities are "restricted
securities" under applicable federal securities laws and that the Securities
Act and the rules of the Securities and Exchange Commission thereunder provide
in substance that it may dispose of the Securities only pursuant to an
effective registration statement under the Securities Act or an exemption
therefrom, and it understands that, notwithstanding the Registration Statement
provided to such Investor by the Company, the Company has no obligation to
register any of the Securities or securities issuable upon conversion or
exercise thereof, thereunder, except as contemplated by the Stockholders
Agreement and Amendment No. 2 to the Stockholders Agreement.

         (g)     Such Investor has been furnished by the Company all
information (or provided access to all information) regarding the business and
financial condition of the Company, its expected plans for future business
activities, the attributes of the Securities and the merits and risks of an

                                       8
<PAGE>

investment in the Securities that it has requested or otherwise needs to
evaluate the investment in the Securities.

         (h)     Such Investor is not purchasing the Securities as a result of
any form of general solicitation or general advertising.

                                   ARTICLE V
                             ADDITIONAL AGREEMENTS

         5.1     CONFIDENTIALITY. Each party hereto shall hold and shall cause
its employees, auditors, attorneys, financial advisors, bankers and other
consultants to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of Law, all
confidential or proprietary documents and information concerning any other
party furnished to it by such other party or its representatives in connection
with the transactions contemplated by this Agreement (except to the extent that
such information can be shown to have been (a) previously known by the party to
which it was furnished other than as a result of the evaluation or negotiation
of the transactions contemplated by this Agreement, or (b) in the public domain
through no fault of such party), and each party shall treat such information as
the sole property of the party furnishing the information and it shall not
release or disclose such information to any other person, except its employees,
auditors, attorneys, financial advisors, bankers and other consultants and
advisors in connection with this Agreement who agree to be bound by the
forgoing. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information comes into the public domain through no fault of the party required
to hold it in confidence, and such information shall not be used to the
detriment of, or in relation to any investment in, the other party, and all
such documents (including copies thereof) shall be destroyed or returned to the
other party. Each party shall be deemed to have satisfied its obligation to
hold confidential, proprietary or other information concerning or supplied by
the other parties if it exercises the same care as it takes to preserve
confidentiality for its own similar information.

         5.2     FURTHER ASSURANCES. Each party hereto, upon the request of any
other party hereto, shall do all such further acts and execute, acknowledge and
deliver all such further instruments and documents as may be necessary or
desirable to carry out the transactions contemplated by this Agreement.

         5.3     EXPENSES. All costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such cost or expense, provided that, within 60 days after the
Closing, the Company shall reimburse each of (i) the DLJMB Investors, (ii)
CalPERS, (iii) OTP and (iv) LJM2 for all reasonable documented out of pocket
expenses (including legal fees and expenses) incurred in connection with the
transactions contemplated by this Agreement, up to a maximum of $20,000 for
each of (i) the DLJMB Investors, (ii) CalPERS, (iii) OTP and (iv) LJM2.

                                       9
<PAGE>

                              ARTICLE VI CLOSING;
                             CONDITIONS TO CLOSING

         6.1     LOCATION AND TIME OF CLOSING. The closing (the "Closing") of
the transactions contemplated hereby shall take place on the later of July 12,
2000 or the second business day following satisfaction of the conditions to
Closing set forth in Sections 6.2 and 6.3 (other than conditions that by their
nature are to be satisfied at Closing) at the offices of Vinson & Elkins
L.L.P., First City Tower, 1001 Fannin Street, Houston, Texas 77002, at 10:00
a.m., local time, or, at such other time or place as the parties hereto shall
agree. The date of the Closing is herein referred to as the "Closing Date."

         6.2     CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to be performed at the Closing are subject to the satisfaction of
the conditions set forth in this Section 6.2.

         (a)     No action or proceeding before any court or Governmental
Authority shall have been instituted seeking to restrain, prohibit, or
otherwise interfere with the transactions contemplated hereby.

         (b)     The Investors shall have performed in all material respects
all of their obligations under this Agreement required to be performed by them
on or prior to the Closing Date.

         (c)     The representations and warranties of each Investor contained
in this Agreement that are qualified by reference to materiality or Material
Adverse Effect shall be true and correct, and any such representations and
warranties that are not so qualified shall be true and correct in all material
respects, at and as of the Closing Date, as if made at and as of such date,
except that representations and warranties made as of a specific date need be
true only as of that date.

         6.3     CONDITIONS TO OBLIGATIONS OF THE INVESTORS. The respective
obligations of each Investor to be performed at Closing are subject to the
satisfaction of the conditions set forth in this Section 6.3.

         (a)     No action or proceeding before any court or Governmental
Authority shall have been instituted seeking to restrain, prohibit, or
otherwise interfere with the transactions contemplated hereby.

         (b)     The Company shall have performed in all material respects all
of its obligations under this Agreement required to be performed by it on or
prior to the Closing Date.

         (c)     The representations and warranties of the Company contained in
this Agreement that are qualified by reference to materiality or Material
Adverse Effect shall be true and correct, and any such representations and
warranties that are not so qualified shall be true and correct in all

                                      10
<PAGE>

material respects at and as of the Closing Date, as if made at and as of such
date, except that representations and warranties made as of a specific date
need be true only as of that date.

         (d)     The Investors shall have received an opinion of Vinson &
Elkins L.L.P. or other counsel to the Company reasonably acceptable to the
Investors covering the matters described on EXHIBIT 1.1(c) hereto.

                                  ARTICLE VII
                                INDEMNIFICATION

         7.1     SURVIVAL

         (a)     All of the representations and warranties of the Company and
the Investors shall survive the date hereof and continue in full force and
effect for a period of two (2) years thereafter, after which they shall
terminate and be of no further force or effect; provided that the
representations set forth in Sections 3.1 and 4.1 shall survive the date hereof
for the applicable statute of limitations.

         (b)     All of the covenants of the parties hereto that are intended
to be performed after the date hereof shall survive the date hereof.

         7.2     THE COMPANY'S AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions of this Article VII, the Company hereby agrees to indemnify, defend
and hold harmless the Investors, from and against all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities, costs and
expenses, including, without limitation, interest, penalties and attorney's
fees and expenses (collectively, "Damages"), asserted against, resulting to,
imposed upon or incurred by the Investors, directly or indirectly, by reason of
or resulting from any breach of any representation, warranty or agreement of
the Company contained in or made pursuant to this Agreement, provided that, in
the case of a breach of a representation or warranty, a written claim for
indemnification against the Company is given pursuant to Section 8.3 below
within the survival period set forth in Section 7.1(a).

         7.3     INVESTORS' AGREEMENT TO INDEMNIFY. Subject to the terms and
conditions of this Article VII, each Investor, severally and not jointly,
hereby agrees to indemnify, defend and hold harmless the Company from and
against any and all Damages asserted against, resulting to, imposed upon or
incurred by the Company, directly or indirectly, by reason of or resulting from
a breach of any representation, warranty or agreement of such Investor
contained in or made pursuant to this Agreement, provided that, in the case of
a breach of a representation or warranty, a written claim for indemnification
against the Investors is given pursuant to Section 8.3 below within the
survival period set forth in Section 7.1(a).

         7.4     MATTERS INVOLVING THIRD PARTIES. If any third party shall
notify any party hereto (the "Indemnified Party") with respect to any matter
which may give rise to a claim for

                                      11
<PAGE>

indemnification against any other party hereto (the "Indemnifying Party") under
this Article VII, then the Indemnified Party shall notify each Indemnifying
Party thereof promptly; PROVIDED, HOWEVER, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any liability or obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced as a result
of such delay. In the event any Indemnifying Party notifies the Indemnified
Party within thirty (30) days after the Indemnified Party has given notice of
the matter that the Indemnifying Party is assuming the defense thereof, (A) the
Indemnifying Party will defend the Indemnified Party against the matter with
counsel of its choice reasonably satisfactory to the Indemnified Party, (B) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
(except that the Indemnifying Party will be responsible for the fees and
expenses of the separate co-counsel to the extent the Indemnified Party has
been advised by counsel that (i) the counsel the Indemnifying Party has
selected has a conflict of interest or (ii) there may be one or more legal
defenses available to the Indemnified Party that are different from or
additional to those available to the Indemnifying Party), (C) the Indemnified
Party will not consent to the entry of any judgment or enter into any
settlement with respect to the matter without the written consent of the
Indemnifying Party (not to be withheld unreasonably), and (D) the Indemnifying
Party will not consent to the entry of any judgment with respect to the matter,
or enter into any settlement which does not include a provision whereby the
plaintiff or claimant in the matter releases the Indemnified Party from all
liability with respect thereto, without the written consent of the Indemnified
Party (not to be withheld unreasonably). In the event no Indemnifying Party
notifies the Indemnified Party within thirty (30) days after the Indemnified
Party has given notice of the matter that the Indemnifying Party is assuming
the defense thereof, however, the Indemnified Party may defend against, or
enter into any settlement with respect to, the matter in any manner it
reasonably may deem appropriate. At any time after commencement of any such
action, any Indemnifying Party may request an Indemnified Party to accept a
bona fide offer from the other parties to the action for a monetary settlement
payable solely by such Indemnifying Party (which does not burden or restrict
the Indemnified Party nor otherwise prejudice it) whereupon such action shall
be taken unless the Indemnified Party determines that the dispute should be
continued, in which case the Indemnifying Party shall be liable for indemnity
hereunder only to the extent of the lesser of (i) the amount of the settlement
offer or (ii) the amount for which the Indemnified Party may be liable with
respect to such action. In addition, the party controlling the defense of any
third party claim shall deliver, or cause to be delivered, to the other party
copies of all correspondence, pleadings, motions, briefs, appeals or other
written statements relating to or submitted in connection with the defense of
the third party claim, and timely notices of, and the right to participate in
(as an observer) any hearing or other court proceeding relating to the third
party claim.

         7.5     EXCLUSIVE REMEDY; LIMITATION ON DAMAGES

         (a)     NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY AND EXCEPT AS
PROVIDED IN THE PROVISO CLAUSE TO THIS SENTENCE AND IN SECTION 8.8, IN
CONNECTION WITH ANY CLAIM MADE BY A PARTY AGAINST ANOTHER PARTY HEREUNDER, THE
CLAIMING PARTY SHALL NOT BE ENTITLED TO RECOVER

                                      12
<PAGE>

ANY PUNITIVE, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR INDIRECT DAMAGES
(INCLUDING, WITHOUT LIMITATION, ANY EXEMPLARY DAMAGES, TREBLE DAMAGES,
PENALTIES, OR LOSS OF PROFITS OR INCOME), WHETHER BASED ON STATUTE, IN TORT,
CONTRACT OR OTHERWISE, REGARDLESS OF WHETHER SUCH DAMAGES MAY BE AVAILABLE
UNDER APPLICABLE LAW OR OTHERWISE, AND WHETHER OR NOT ARISING FROM A PARTY'S
SOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT, THE
PARTIES HERETO HEREBY WAIVING THEIR RIGHT, IF ANY, TO RECOVER SUCH DAMAGES IN
CONNECTION WITH ANY CLAIMS HEREUNDER; PROVIDED, HOWEVER, THAT (A) IN NO EVENT
SHALL SUCH LIMITATIONS OR RESTRICTIONS PREVENT A PARTY FROM RECOVERING ITS
ACTUAL DAMAGES AND (B) THE FOREGOING LIMITATIONS AND RESTRICTIONS SHALL NOT
APPLY TO ANY SUCH DAMAGES THAT ARE ATTRIBUTABLE TO THE GROSS NEGLIGENCE,
WILLFUL MISCONDUCT OR FRAUD OF THE PARTY AGAINST WHOM SUCH CLAIM IS MADE.

         (b)     THE COMPANY AND THE INVESTORS AGREE THAT THEIR SOLE RESPECTIVE
RIGHTS FOR ANY RECOURSE OF ANY KIND WITH RESPECT TO ANY BREACHES OF ANY
REPRESENTATIONS, WARRANTIES OR COVENANTS UNDER THIS AGREEMENT SHALL BE THEIR
RESPECTIVE RIGHTS TO INDEMNIFICATION AS EXPRESSLY SET FORTH IN THIS ARTICLE VII.

         7.6     EXPRESS NEGLIGENCE CLAUSE. THE PARTIES HERETO INTEND THAT THE
INDEMNITIES SET FORTH IN THIS ARTICLE VII BE CONSTRUED AND APPLIED AS WRITTEN
ABOVE NOTWITHSTANDING ANY RULE OF CONSTRUCTION TO THE CONTRARY. WITHOUT
LIMITING THE FOREGOING, THE INDEMNITIES SHALL APPLY NOTWITHSTANDING ANY STATE'S
"EXPRESS NEGLIGENCE RULE" OR SIMILAR RULE THAT WOULD DENY COVERAGE BASED ON AN
INDEMNITEE'S SOLE, CONCURRENT OR CONTRIBUTORY ACTIVE OR PASSIVE NEGLIGENCE OR
GROSS NEGLIGENCE OR STRICT LIABILITY. IT IS THE INTENT OF THE PARTIES THAT, TO
THE EXTENT PROVIDED IN THIS ARTICLE VI, THE INDEMNITIES SET FORTH HEREIN SHALL
APPLY TO AN INDEMNITEE'S SOLE, CONCURRENT OR CONTRIBUTORY ACTIVE OR PASSIVE
NEGLIGENCE, GROSS NEGLIGENCE OR STRICT LIABILITY. THE PARTIES AGREE THAT THIS
PROVISION IS "CONSPICUOUS" FOR PURPOSES OF ALL STATE LAWS.

                                  ARTICLE VIII
                               GENERAL PROVISIONS

         8.1     ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENT. This
Agreement (including the exhibits and schedules) contains the entire agreement
among the parties with respect to the subject matter hereof and the related
transactions and supersedes all prior agreements, written or oral, with respect
thereto.

         8.2     WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended only by a written instrument signed
by the parties hereto. The

                                      13
<PAGE>

provisions hereof may be waived in writing by the parties hereto. No delay on
the part of any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of any
party of any such right, power or privilege, nor any single or partial exercise
of any such right, power or privilege, preclude any further exercise thereof or
the exercise of any other such right, power or privilege.

         8.3     NOTICES.

         (a)     Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally by hand or by
recognized overnight courier, telecopied or mailed (by registered or certified
mail, postage prepaid) as follows:

                 (i)      If to DLJMB Investors, then to:

                          277 Park Avenue
                          New York, New York
                          Attention: Ivy Dodes
                          Telephone:   (212) 892-3000
                          Facsimile:   (212) 892-7272

                 (ii)     If to CalPERS, then to:

                          California Public Employees' Retirement System
                          Lincoln Plaza
                          400 "P" Street
                          Investment Office, Suite 3492
                          Sacramento, California  92812-2749
                          Attention:   Senior Investment Officer
                          Telephone:   (916) 558-4108
                          Facsimile:   (916) 558-4058

                          With a copy to:

                          Jones, Day, Reavis & Pogue
                          555 West Fifth Street, Suite 4600
                          Los Angeles, California 90013-1025
                          Attention:   Dulcie D. Brand, Esq.
                          Telephone:   (213) 243-2390
                          Facsimile:   (213) 243-2539

                                      14
<PAGE>

                          With a copy to:

                          Pacific Corporate Group, Inc.
                          1200 Prospect Street
                          LaJolla, California 92037
                          Attention:   Scott Stedman, Vice President
                          Telephone:   (858) 456-6000
                          Facsimile:   (858) 456-6018

                 (iii)    If to OTP, then to:

                          Ontario Teachers' Pension Plan Board
                          5650 Yonge Street, 5th Floor
                          Toronto, Ontario, Canada  M2M 4H5
                          Attention:   Shael Dolman
                          Telephone:   (416) 730-6335
                          Facsimile:   (416) 730-5082

                 (iv)     If to LJM2, then to:

                          LJM2-TNPC, LLC
                          333 Clay Street, Suite 1203
                          Houston, Texas  77002
                          Attention:   General Partner, LJM2
                          Telephone:   (713) 345-5867
                          Facsimile:   (713) 646-8656

                          With a copy to:

                          Kirkland & Ellis
                          655 Fifteenth Street, NW, Suite 1200
                          Washington, DC 20005
                          Attention:   Michael T. Edsall, Esq.
                          Telephone:   (202) 879-5028
                          Facsimile:   (202) 879-5200

                 (v)      If to the Company, then to:

                          TNPC, Inc.
                          10 Glenville Street
                          Greenwich, Connecticut 06831
                          Attention:   Managing Director, Law and
                                       Government Affairs
                          Telephone:   (203) 531-0400

                                      15
<PAGE>

                          Facsimile:   (203) 531-0404

         (b)     Each such notice or other communication shall be effective (i)
if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in Section 8.3(a) (with confirmation of transmission), or (ii)
if given by any other means, when delivered at the address specified in Section
8.3(a). Any party by notice given in accordance with this Section 8.3 to the
other party may designate another address (or telecopier number) or person for
receipt of notices hereunder. Notices by a party may be given by counsel to
such party.

         8.4     GOVERNING LAW; VENUE; SUBMISSION TO SERVICE OF PROCESS.

         (a)     THIS AGREEMENT (INCLUDING, BUT NOT LIMITED TO, THE VALIDITY
AND ENFORCEABILITY HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE, OTHER THAN THE CONFLICT OF LAWS RULES
THEREOF.

         (b)     THE PARTIES AGREE THAT THE STATE OF DELAWARE SHALL HAVE SOLE
AND EXCLUSIVE JURISDICTION OVER ANY ACTION BROUGHT TO ENFORCE THE TERMS OF THIS
AGREEMENT AND THAT THE PARTIES HEREBY CONSENT TO SUITS IN THE COURTS OF THE
STATE OF DELAWARE AND WAIVE THE DEFENSES OF PERSONAL JURISDICTION, SERVICE AND
VENUE.

         8.5     BINDING EFFECT; ASSIGNMENT. This Agreement and all of its
provisions, rights and obligations shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement may not be assigned (including by operation of Law) by
a party without the express written consent of the Company (in the case of
assignment by the Investors) or the Investors (in the case of assignment by the
Company) and any purported assignment, unless so consented to, shall be void
and without effect. Nothing herein express or implied is intended or shall be
construed to confer upon or to give anyone other than the parties hereto and
their respective successors and permitted assigns any rights or benefits under
or by reason of this Agreement and no other party shall have any right to
enforce any of the provisions of this Agreement.

         8.6     SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall continue in full force and effect and
shall in no way be affected, impaired or invalidated so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term,
provision, covenant or restriction is invalid, void or unenforceable, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the fullest extent possible.

                                      16
<PAGE>

         8.7     COUNTERPARTS. The Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding
when one or more counterparts hereof, individually or taken together, shall
bear the signatures of all of the parties reflected hereon as the signatories.

         8.8     SPECIFIC PERFORMANCE. The parties hereto agree that, to the
extent permitted by law, the terms of this agreement may be specifically
enforced by a decree for the specific performance of any agreement contained
herein or by an injunction against a violation of any of the terms hereof or
otherwise.

                           (SIGNATURE PAGES FOLLOW)
                                  * * * * *

                                      17
<PAGE>

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

                             TNPC, INC.

                             By:      /s/ H. EUGENE LOCKHART
                                ----------------------------
                             Name:    H. Eugene Lockhart
                                  --------------------------
                             Title:   CEO
                                   -------------------------

                             DLJ MERCHANT BANKING PARTNERS II, L.P.

                             By:  DLJ Merchant Banking II, Inc.
                                  Managing General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                             DLJ MERCHANT BANKING PARTNERS II-A, L.P.

                             By:  DLJ Merchant Banking II, Inc.
                                  Managing General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

<PAGE>

                             DLJ DIVERSIFIED PARTNERS, L.P.

                             By:  DLJ Diversified Partners, Inc.
                                  Managing General Partners

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                             DLJ DIVERSIFIED PARTNERS-A, L.P.

                             By:  DLJ Diversified Partners, Inc.
                                  Managing General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                             DLJ MILLENNIUM PARTNERS, L.P.

                             By:  DLJ Merchant Banking II, Inc.
                                  Managing General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

<PAGE>

                             DLJ MILLENNIUM PARTNERS-A, L.P.

                             By:  DLJ Merchant Banking II, Inc.
                                  Managing General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                               DLJ FIRST ESC L.P.

                             By:  DLJ LBO Plans Management Corporation
                                  General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                             DLJ OFFSHORE PARTNERS II, C.V.

                             By:  DLJ Merchant Banking II, Inc.
                                  Managing General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

<PAGE>

                             DLJ EAB PARTNERS, L.P.

                             By:  DLJ LBO Plans Management Corporation
                                  General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                             DLJ ESC II, L.P.

                             By: DLJ LBO Plans Management Corporation
                                 General Partner

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                             DLJMB FUNDING II, INC.

                             By:      /s/ IVY DODES
                                ----------------------------
                             Name:    Ivy Dodes
                                  --------------------------
                             Title:   Vice President
                                   -------------------------

                             CALIFORNIA PUBLIC EMPLOYEES'
                             RETIREMENT SYSTEM

                             By:      /s/ LEON G. SHAHINIAN
                                ----------------------------
                             Name:    Leon G. Shahinian
                                  --------------------------
                             Title:   Investment Officer II
                                   -------------------------

<PAGE>

                                 ONTARIO TEACHERS' PENSION PLAN BOARD

                                 By:      /s/ SHAEL DOLMAN
                                    ----------------------------------
                                 Name:    Shael Dolman
                                      --------------------------------
                                 Title:   Assistant Portfolio Manager
                                       -------------------------------

                                 LJM2-TNPC, LLC

                                 By:      LJM2 Co-Investment, L.P.,
                                          its Class A Member

                                 By:      LJM2 Capital Management, L.P.,
                                          its general partner

                                 By:      LJM2 Capital Management, L.L.C.,
                                          its general partner

                                 By:      /s/ KATHY LYNN
                                    ----------------------------------
                                 Name:    Kathy Lynn
                                      --------------------------------
                                 Title:   Authorized Person
                                       -------------------------------

<PAGE>

                                                                  EXHIBIT 1.1(a)

                             FORM OF SPECIAL WARRANT

<PAGE>

                                                                  EXHIBIT 1.1(b)

                  AMENDMENT NO. 2 TO THE STOCKHOLDERS AGREEMENT

<PAGE>

                                                                  EXHIBIT 1.1(c)

                   OPINIONS DELIVERED ON BEHALF OF THE COMPANY

         1. The Company is duly incorporated, validly existing and in good
 standing in the jurisdiction of its incorporation. The Company has the
 requisite corporate power and authority to execute, deliver and perform its
 obligations under the Agreement and Amendment No. 2 to the Stockholders
 Agreement and to consummate the transactions contemplated thereby. The Company
 has taken all necessary corporate action to authorize the execution, delivery
 and performance of the Agreement and Amendment No. 2 to the Stockholders
 Agreement. The Agreement and Amendment No. 2 to the Stockholders Agreement have
 been duly executed and delivered by the Company.

         2. Neither the execution, delivery nor performance of the Agreement and
 Amendment No. 2 to the Stockholders Agreement by the Company nor the
 consummation by the Company of the transactions contemplated by the Agreement
 and Amendment No. 2 to the Stockholders Agreement will violate any provisions
 of or conflict with, result in a breach of, constitute a default under: (a) the
 organizational documents of the Company; (b) any judgment, injunction, order or
 decree known to such counsel, after reasonable inquiry, to be binding upon the
 Company, or (c) any contractual or legal restriction contained in any
 agreement, indenture, loan or credit agreement, bond or note or guaranties of
 any such obligations which is identified as a material contract on an annex to
 the legal opinion.

         3. The Common Stock or Non-Voting Common Stock, as the case may be, to
be issued, upon valid exercise of the Special Warrants in accordance with their
terms, will be duly authorized and, when issued and delivered in accordance with
the terms of the Special Warrants, will be validly issued, fully paid,
non-assessable.

         4. Assuming the accuracy of the representations of the Investors set
 forth in Section 4.6 as of the date hereof, the issuance of the Special
 Warrants to be issued will not require registration under the Securities Act.

<PAGE>

                                                                    SCHEDULE 3.1

                        AGREEMENTS TO ACQUIRE SECURITIES

1. Warrants: As of the date hereof, the Company has issued Special Warrants to
acquire shares of Common Stock at an exercise price of $10.00 per share and
Investor Warrants to acquire shares of Common Stock at an exercise price of
$968.75 per share which are held as follows:

<TABLE>
<CAPTION>
Holder                                              Special Warrants                      Investor Warrants
------                                              ----------------                      -----------------

<S>                                                 <C>                                   <C>
Enron Energy Services, LLC                                  176,839                                  -0-
GE Capital Equity, Inc.                                      26,250                               18,065
DLJMB Investors                                              26,250                               18,065
CalPERS                                                      15,395                                7,742
OTP                                                          21,434                                7,742
</TABLE>

2. AOL Agreement: Pursuant to the terms of the subscription agreement dated
January 6, 2000, by and among the Company, Enron Energy Services, LLC ("EES")
and America Online, Inc. ("AOL"), the Company agreed to issue up to 12,903
shares of Common Stock to AOL in increments of 1,290.3 shares for every 100,000
customers that subscribe to the Company's service through AOL, up to 1 million
customers.

3. IBM Agreement: Pursuant to the terms of the subscription agreement dated May
15, 2000, by and among the Company, EES and International Business Machines
Corporation ("IBM"), the Company has agreed to issue shares of Common Stock to
IBM in exchange for a cash contribution of $20 million over time. First, the
Company issued 5,502 shares of Common Stock in exchange for $10 million payable
on May 31, 2000 and September 29, 2000. Second, provided a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act is consummated on or before May 15, 2001 (a "Qualified IPO"),
then on the later to occur of December 29, 2000 or the consummation of the
Qualified IPO, IBM agreed to purchase $5 million worth of Common Stock at
one-half the initial public offering price in the Qualified IPO. Finally, on the
later to occur of the business day following the first anniversary of a
Qualified IPO or December 31, 2001, provided that the Company consummated a
Qualified IPO and subject to certain exceptions, the Company agreed to issue and
IBM agreed to purchase $5 million worth of Common Stock at the average of the
last reported daily sales price of the Common Stock on the principal national
securities exchange or market on which the Common Stock is listed or admitted to
trading for each day such exchange or market is open for trading (a "Trading
Day") during the twenty (20) Trading Days prior to such date.

4. Columbia Agreement: Pursuant to the terms of the subscription agreement to be
entered into among Columbia Energy Services Corporation ("Columbia"), the
Company and EES as provided by that certain Asset Purchase Agreement dated June
29, 2000 by and among Columbia, Columbia Energy Retail Corporation, Columbia
Energy Power Marketing Corporation, the New Power Company and the Company (the
"Asset Purchase Agreement"), the Company agreed to issue to Columbia on the date
of closing of the Asset Purchase Agreement, 3,011 shares of Common Stock

<PAGE>

as partial consideration for the assets purchased by the Company under the
Asset Purchase Agreement.

5. Stock Options: Pursuant to the terms of the TNPC, Inc. 2000 Stock Plan, the
Company has issued or has available for issuance to certain of its officers,
directors, employees and service providers options to acquire shares of Common
Stock at a predetermined exercise price and/or restricted stock covering an
aggregate of 67,097 shares of Common Stock.

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