Document:

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                                                                  EXHIBIT 10.11

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                      CAPACITY SALE AND TOLLING AGREEMENT

                                 BY AND BETWEEN

                     CARR STREET GENERATING STATION, L.P.,

                                      AND

                        CONSTELLATION POWER SOURCE, INC.

                         DATED AS OF NOVEMBER 19, 1998

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                      CAPACITY SALE AND TOLLING AGREEMENT

      THIS CAPACITY SALE AND TOLLING AGREEMENT (this "AGREEMENT") dated as of
November 19, 1998, is executed and entered into by and between Carr Street
Generating Station, L.P., a Delaware limited partnership with offices located
at 111 Market Place, Suite 520, Baltimore, Maryland 21202 ("CARR"), and
Constellation Power Source, Inc., a Delaware corporation with offices at 111
Market Place, Suite 500, Baltimore, Maryland 21202 ("CPS") (Carr and CPS
sometimes hereinafter being referred to individually as a "PARTY" and
collectively as the "PARTIES"), with reference to the following:

                                    RECITALS

      A.    Carr is the owner of a 105 MW (gross) combined-cycle cogeneration
facility located at 64 Carr Street, East Syracuse, New York (the "FACILITY").
The Facility has the capability of operating on either natural gas or No. 2 low
sulfur fuel oil (collectively, "FUEL");

      B.    The Facility is connected to a substation owned by Niagara Mohawk
Power Corporation ("NIMO") located at the Facility site;

      C.    CPS is in the business of trading and marketing electricity, gas
and other energy-related commodities and services;

      D.    CPS wishes to provide, or cause to be provided, Fuel to the Facility
and, in turn, to receive from Carr all of the capacity, electric energy (other
than station service energy), Ancillary Services (as hereinafter defined) and
other products generated by the Facility (collectively, the Facility's "MARKET
OUTPUT"); and

      E.    Carr wishes to receive Fuel, provide Fuel Conversion Services (as
hereinafter defined) and deliver and make available to CPS the Facility's
Market Output, all in accordance with and subject to the terms and conditions
of this Agreement.

      NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, representations and warranties herein contained, the Parties,
intending to be legally bound, hereby agree as follows:

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                                  ARTICLE 1.0
                         DEFINITIONS AND INTERPRETATION

      1.1   DEFINED TERMS.  Capitalized terms used in this Agreement shall have
the following meanings, unless the context clearly requires otherwise:

            "ACCEPTED ELECTRICAL PRACTICES" means those practices, methods and
acts that are performed during the relevant time period at facilities of
similar size, location and technology to that of the Facility, or any of the
practices, methods and acts which, in the exercise of reasonable judgment in
light of the facts known at the time a decision is made, could have been
expected to accomplish a desired result at reasonable cost consistent with good
business practices, reliability, efficiency, safety, expedition and
environmental protection. Accepted Electrical Practices are not intended to be
limited to the optimum practices, methods or acts to the exclusion of others,
but rather to include those practices, methods and acts generally accepted or
approved by the industry during the relevant time period.

            "ADDITIONAL START-UP FEE" means the amount charged by Carr to CPS
pursuant to Section 11.1.3 for each additional Start-up in excess of a
permitted number of daily, weekly and annual Start-ups.

            "AFFILIATE" means, with respect to any person, any other entity
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such person. For purposes of the
foregoing, "control," "controlled by" and "under common control with," with
respect to any person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such person, whether through the ownership of voting securities or partnership
interests, by contract or otherwise.

            "AGREEMENT" means this Contract Document entitled "Capacity Sale
and Tolling Agreement," and all Exhibits, Schedules and Appendices attached
hereto.

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            "ANCILLARY SERVICES" means system control and dispatch service,
reactive supply and voltage support, regulation and frequency response service,
energy imbalance service, operating reserve service and related services
capable of being provided by the Facility for use or sale by CPS in accordance
with the practices, rules and guidelines in effect from time to time within the
New York State Power System.

            "ANNUAL HEAT RATE" has the meaning given in Section 7.3.1.

            "ANNUAL HEAT RATE GUARANTEE" has the meaning given in Section
7.3.1.

            "AVAILABILITY ADJUSTMENT" has the meaning given in Section 11.1.5.

            "BANKRUPTCY" means a situation in which (a) a Party files a
voluntary petition in bankruptcy or is adjudicated a bankrupt or insolvent, or
files any petition or answer or consent seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief for itself under any present or future applicable Law relating to
bankruptcy, insolvency, or other relief for debtors, or seeks or consents or
acquiesces in the appointment of any trustee, receiver, conservator or
liquidator of such Party or of all or any substantial part of its properties
(the term "acquiesce" as used in this definition, to include the failure to
file a petition or motion to vacate or discharge any order, judgment or decree
within fifteen (15) days after entry of such order, judgment or decree); (b) a
court of competent jurisdiction enters an order, judgment or decree approving a
petition filed against any Party seeking a reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
present or any future bankruptcy Law or Law relating to insolvency or other
relief for debtors, and such Party acquiesces in the entry of such order,
judgment or decree or such order, judgment or decree remains unvacated and
unstayed for an aggregate of sixty (60) days (whether or not consecutive) from
the date of entry thereof, or any trustee, receiver, conservator or liquidator
of such Party or of all or any substantial part of its property is appointed
without the consent or acquiescence of such Party and such appointment remains
unvacated and unstayed for an aggregate of sixty (60) days, whether or not
consecutive; (c) a Party evidences its inability to pay its debts as they
mature; (d) a Party gives notice to any governmental body of insolvency or
pending insolvency, or suspension or pending suspension of operations; or (e) a
Party makes an assignment for the benefit of creditors or takes any other
similar action for the protection or benefit of creditors.

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            "BRITISH THERMAL UNIT" or "BTU" means the amount of heat required
to raise the temperature of one avoirdupois pound of water from fifty-nine
degrees Fahrenheit (59 degrees F) to sixty degrees Fahrenheit (60 degrees F) at
an absolute pressure of fourteen decimal six nine six (14.696) pounds per
square inch. For purposes of this Agreement, Btu's will be calculated on a
Higher Heating Value (HHV) basis.

            "CAPACITY" means the total MW output level that the Facility is
capable of producing on a continuous basis.

            "CARR" means Carr Street Generating Station, L.P., a Delaware
limited partnership.

            "COLD START" means the Start-up of the Facility after its breakers
have been open for at least the number of hours defining a Cold Start, as set
forth in the Facility Operating Procedures.

            "CONSENT AND AGREEMENT" means the Consent and Agreement to be
entered into by and among Carr, CPS and the Facility Lender pursuant to the
provisions of Section 20.3.

            "CONTRACT DOCUMENT" has the meaning given in Section 2.1.

            "CONTRACT YEAR" means each calendar year during the Term, except
that the first Contract Year shall begin on the Effective Date and end on
December 31, 1998, and the final Contract Year shall begin on January 1st of
the last year of the Term and end on the Agreement termination date.

            "CPS" means Constellation Power Source, Inc., a Delaware
corporation.

            "DEFAULTING PARTY" has the meaning given in Section 15.1.1.

            "DELAYED PAYMENT RATE" means a per annum rate of interest (computed
on the basis of a 365-day year) equal to the lesser of (a) the prime commercial
lending rate as quoted from time to time by The Wall Street Journal as the
Prime Rate under the column known as "Money Rates", plus 2 percent (2%), and
(b) the maximum rate permitted by applicable New York Law.

            "DELIVERY POINT" means each of the physical points set forth on
Exhibit A, as the same may be amended or supplemented from time to time, at
which Net Electric Energy, Ancillary Services, Market Steam, Gas or Fuel Oil is
to be delivered, or provided and measured, pursuant to the provisions of this
Agreement.

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            "DEPENDABLE CAPACITY" means the net dependable capacity of the
Facility, which shall be ninety-nine (99) MW during the months of June through
September and one hundred two (102) MW during the months of October through May
for each Contract Year, as adjusted or corrected by not more than five (5)
megawatts in accordance with the provisions of the Facility Operating
Procedures for any period during which the Facility is producing Market Steam
pursuant to the provisions of Section 6.4.

            "DISPATCH" means the dispatch by CPS of Net Electric Energy or
Ancillary Services from the Facility in accordance with this Agreement and in
accordance with the procedures in effect from time to time within the NYPP/NY
ISO.

            "DISPATCH NOTICE" means a notice issued to Carr by or on behalf of
CPS, in substantially the form of Exhibit D attached hereto, to Dispatch the
Facility in accordance with the provisions of Article 6.0.

            "DISPATCH PERIOD" means a period of time during which CPS has
requested, by means of a Dispatch Notice, the delivery of Net Electric Energy
or the provision of Ancillary Services. A Dispatch Period may continue for more
than one calendar day.

            "DISPUTE" has the meaning given in Section 17.1.1.

            "DMWHRS" has the meaning given in Section 15.2.1.

            "DOLLARS" or "$" means United States dollars.

            "EFFECTIVE DATE" has the meaning given in Article 3.0.

            "ENVIRONMENT" means soil, surface waters, groundwaters, land,
stream sediments, surface or subsurface strata, ambient air, and any
environmental medium.

            "ENVIRONMENTAL CONDITION" means any condition involving or
resulting from the presence of, or which can reasonably be expected to result
in the Release of Hazardous Materials in the Environment, (whether or not yet
discovered), which is reasonably likely to or does result in any damage, loss,
cost, expense, claim, demand, order, or liability to or against Carr or CPS
(including claims by any third party or any Governmental Authority, and
including any condition resulting from any activity or operation formerly
conducted by any person or entity in connection with the Facility.)

            "ENVIRONMENTAL INDEMNITEES" has the meaning given in Section 12.4.

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            "ENVIRONMENTAL LAW" means any environmental or health and
safety-related Law whether existing as of the date hereof, previously enforced,
or subsequently enacted.

            "EVENT OF DEFAULT" has the meaning given in Section 15.1.1.

            "EVENT OF DEFAULT TRIGGER" has the meaning given in Section 17.1.2.

            "FACILITY" has the meaning given in Recital A to this Agreement,
and is more fully described in Exhibit A attached hereto.

            "FACILITY DEBT" means any loans or other amounts outstanding and
owed by Carr or any Affiliate of Carr under the Financing Documents.

            "FACILITY LENDER" means any entity or entities providing debt
financing or refinancing to Carr or any Affiliate of Carr under the Financing
Documents in connection with the acquisition of the Facility.

            "FACILITY OPERATING PROCEDURES" means the Facility Operating
Procedures and Operating Limitations attached hereto as Exhibit C.

            "FACILITY SITE" means all real property upon which the Facility is
located, including all easements, rights-of-way and other real property used in
connection with the operation of the Facility.

            "FACILITY UTILIZATION PLAN" has the meaning given in Section 6.5.

            "FERC" means the Federal Energy Regulatory Commission or any
successor agency thereto.

            "FINANCING DOCUMENT" means any loan or credit agreement and all
related collateral security documentation, if any, whether entered into
simultaneously with the acquisition of the Facility or thereafter, relating to
(a) any indebtedness of Carr, or (b) any indebtedness of any Affiliate of Carr,
secured by the assets of Carr or by which the assets of Carr may be encumbered,
in either case the proceeds of which, directly or indirectly, are used to
finance or refinance the acquisition of the Facility.

            "FIRST TRIGGER" has the meaning given in Section 17.1.1.

            "FIXED MARKET OUTPUT PAYMENT" means the payment to be made by CPS
to Carr pursuant to Section 11.1.1.

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            "FORCED OUTAGE" means the removal of the Facility from service
under circumstances which do not constitute Scheduled Maintenance.

            "FORCE MAJEURE" means any cause beyond the reasonable control of,
and not due to the fault or negligence of, the Party affected, and which could
not have been avoided by such Party's due diligence and use of reasonable
efforts, including drought, flood, earthquake, storm, fire, lightning,
epidemic, war, riot, civil disturbance, sabotage, strikes or labor disputes,
inability to obtain and maintain rights-of-way, permits, licenses and other
required authorizations or rights from any local, state or Federal Governmental
Authority or other person necessary to provide Market Output or other services
hereunder, actions or failures to act of Governmental Authorities, changes in
Law or regulations that affect performance under this Agreement.

            "FUEL" has the meaning given in Recital A to this Agreement.

            "FUEL CONVERSION SERVICES" means the operation of the Facility by
Carr to combust Gas and/or Fuel Oil delivered or caused to be delivered to the
Facility by CPS in order to generate and deliver at the applicable Delivery
Point Net Electric Energy and/or Market Steam, or to provide at the Delivery
Point Ancillary Services.

            "FUEL METERING EQUIPMENT" means (a) with respect to Gas, Gas meters
and associated equipment utilized in determining the amount of Gas delivered to
and consumed by the Facility, and (b) with respect to Fuel Oil, Fuel Oil meters
at the Facility (or, in the absence of such meters, the process of measurement
by manually gauging the contents of the Facility's Fuel Oil storage tanks).

            "FUEL OIL" means No. 2 low sulfur fuel oil meeting the
specifications set forth in Exhibit E attached hereto.

            "GAS" means merchantable natural gas meeting the specifications set
forth in Exhibit E attached hereto.

            "GAS TRANSPORTATION AGREEMENT" has the meaning given in Section
23.1(a).

            "GOVERNMENTAL AUTHORITY" means any federal, state, local or
municipal governmental body; any governmental, regulatory or administrative
agency, commission, body or other authority exercising or entitled to exercise
any administrative, executive, judicial, legislative, policy, regulatory or
taxing authority or power; or any court or governmental tribunal.

            "HAZARDOUS MATERIALS" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable,

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urea formaldehyde foam insulation, and transformers or other equipment that
contain dielectric fluid containing polychlorinated biphenyls ("PCBs"); (b) any
chemicals, materials or substances which are now or hereafter become defined as
or included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "pollution," "pollutants,"
"regulated substances," or words of similar import, under any Laws pertaining
to the environment, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et
seq.); the Hazardous Material Transportation Act, as amended (49 U.S.C. Section
1801 et seq.); the Resource Conservation and Recovery Act, as amended (42
U.S.C. Section 6901 et seq.); the Toxic Substances Control Act, as amended (42
U.S.C. Section 7401 et seq.); the Clean Air Act, as amended (42 U.S.C. Section
7401 et seq.); the Federal Water Pollution Control Act, as amended (33 U.S.C.
Section 1251 et seq.); the New York Environmental Conservation Law (McKinney's
1991); or in the regulations promulgated pursuant to said Laws; and (c) any
other chemical, material, substance or waste (i) which is declared to be
hazardous, toxic, or polluting material by any Governmental Authority, (ii)
exposure to which is now or hereafter prohibited, limited or regulated by any
Governmental Authority, (iii) the storage, use, handling, disposal or release
of which is restricted or regulated by any Governmental Authority, or (iv) for
which remediation or cleanup is required by any Governmental Authority

            "HEAT RATE" means the amount of energy consumed by the Facility
expressed in Btu's (HHV) per KWh of output, determined in accordance with the
provisions of Exhibit F attached hereto.

            "HOT START" means the Start-up of the Facility after its breakers
have been open for no more than the number of hours defining a Hot Start, as
set forth in the Facility Operating Procedures.

            "INCREMENTAL STATION ELECTRIC AND GAS COSTS" has the meaning given
in Exhibit C.

            "INDEMNITEE" has the meaning given in Section 12.5.

            "INDEMNITOR" has the meaning given in Section 12.5.

            "INSTALLED CAPACITY" means a generator or load facility complying
with the requirements of the Reliability Rules, that is accessible to the New
York State Transmission System and is capable of supplying and/or reducing
demand in the New York Control Area.

            "INTERCONNECTION FACILITIES" means all structures, facilities,
equipment, auxiliary equipment, devices and apparatus directly or indirectly
required and installed

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to interconnect and deliver Market Output (including Net Electric Energy and
Market Steam) to the Delivery Point therefor, including electric transmission
and/or distribution lines, transformation and switching equipment, Output
Metering Equipment, any other metering equipment, and communications and safety
equipment, including equipment required to protect (i) the electrical system to
which the Facility is connected and its customers from faults occurring at the
Facility, and (ii) the Facility from faults occurring on the electrical system
to which the Facility is connected or on other electrical systems to which such
electrical system is directly or indirectly connected.

            "KW" means kilowatt.

            "KWH" means kilowatt-hour.

            "LAW" means any applicable federal, state, local or other
constitution, charter, act, statute, law, ordinance, code, rule, regulation or
order, or specified standards or objective criteria or requirements contained
in any applicable permit or approval, or other legislative or administrative
action of any Governmental Authority, or final decree, judgment or order of a
court or arbitration panel, or mandatory engineering, construction, safety or
operating standard or code.

            "LOSS" has the meaning given in Section 12.1.

            "MARKET OUTPUT" has the meaning given in Recital D to this
Agreement and includes Net Electric Energy, Market Steam, Ancillary Services,
Installed Capacity and Operating Capacity.

            "MARKET STEAM" has the meaning given in Section 6.4.1.

            "MARKET STEAM REIMBURSABLE COSTS" has the meaning given in Section
11.1.4.

            "MINIMUM GENERATION CAPACITY" means the minimum net MW output level
that the Facility is capable of producing on a stable, continuous basis
consistent with equipment operating limits, as set forth in the Facility
Operating Procedures.

            "MINIMUM ON-PEAK DISPATCH AVAILABILITY" has the meaning given in
Section 5.3.

            "MMBTU" means one million British Thermal Units.

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            "MONTH" or "MONTH" means the period beginning at 12:01 a.m., local
time, on the first day of each calendar month and ending at the same hour on
the first day of the next succeeding calendar month.

            "MW" means megawatt.

            "MWH" means megawatt-hour.

            "NERC" means the North American Electric Reliability Council.

            "NET ELECTRIC ENERGY" means the amount of electric energy measured
in KWh, generated by the Facility and delivered to CPS at the applicable
Delivery Point.

            "NIMO" means Niagara Mohawk Power Corporation.

            "NEW YORK CONTROL AREA" means the control area located within New
York State which is under the control of the NY ISO.

            "NEW YORK INDEPENDENT SYSTEM OPERATOR" or "NY ISO" means the New
York Independent System Operator, Inc., a not-for-profit corporation.

            "NEW YORK POWER POOL" or "NYPP" means the organization established
pursuant to that certain New York Power Pool Agreement dated as of July 21,
1966, and amended as of July 16, 1991, by and among Central Hudson Gas &
Electric Corporation, Consolidated Edison Company of New York, Inc., Long
Island Lighting Company, New York State Electric & Gas Corporation, NiMo,
Orange and Rockland Utilities, Inc., Rochester Gas and Electric Corporation,
and the Power Authority of the State of New York or successor thereto.

            "NEW YORK STATE RELIABILITY COUNCIL" or "NYSRC" means an
organization established by agreement by and among NiMo, Central Hudson Gas &
Electric Corporation, Consolidated Edison Company of New York, Inc., Long
Island Lighting Company, New York State Electric & Gas Corporation, the Power
Authority of the State of New York and others to maintain the reliability of
the New York State Power System.

            "NEW YORK STATE POWER SYSTEM" means all facilities of the New York
State Transmission System and all those generators located within New York or
outside New York, which may from time-to-time be subject to operational control
by the NY ISO.

            "NEW YORK STATE TRANSMISSION SYSTEM" means the entire New York
State electric transmission system, which includes: (a) the transmission
facilities under

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operational control by the NY ISO, (b) the transmission facilities requiring NY
ISO notification, and (c) all remaining transmission facilities within the New
York Control Area.

            "OFF-PEAK" means, with respect to hours, each hour that is not an
On-Peak or Peak hour.

            "ON-PEAK" or "PEAK" means, with respect to hours, each hour between
7:00 a.m. Prevailing Eastern Time and 11:00 p.m. Prevailing Eastern Time each
Monday through Friday, except for NERC-defined holidays.

            "ON-PEAK DISPATCH AVAILABILITY" means, with respect to each month
during a Contract Year (excluding from such month any hours which are Scheduled
Maintenance Hours hereunder), the total number of On-Peak MWhrs delivered
during the month to CPS pursuant to the Agreement divided by the total number
of On-Peak MWhrs actually Dispatched by CPS during the month pursuant to
Section 6.1, expressed as a decimal.

            "OPERATING CAPACITY" means the capacity of the Facility that may be
readily converted to Net Electric Energy and is measured in MW.

            "OPERATION AND MAINTENANCE AGREEMENT" means the Operation and
Maintenance Agreement for the Facility, to be entered into on or about November
16, 1998, between Carr and COSI Carr St., Inc.

            "OPERATOR" shall mean COSI Carr St., Inc. or any other operator
engaged by Carr to operate the Facility.

            "OUTPUT METERING EQUIPMENT" means (a) with respect to Net Electric
Energy and Ancillary Services, electric meters and associated equipment,
metering transformers and meters for measuring kilowatts, kilowatt-hours and
reactive volt-ampere hours, utilized in determining the amount of Net Electric
Energy or Ancillary Services delivered or provided by Carr at the applicable
Delivery Point, and (b) with respect to Market Steam, the flow meters, pressure
compensators, temperature compensators, integrators and related equipment
utilized in determining the amount of Market Steam delivered by Carr at the
applicable Delivery Point.

            "PARTY" or "PARTIES" means each or both, as the case may be, of
Carr and CPS, and their respective successors and permitted assignees
hereunder.

            "PREVAILING EASTERN TIME" means the local time in East Syracuse,
New York.

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            "PROTECTIVE APPARATUS" means (a) equipment and apparatus, including
protective electrical relays, circuit breakers and the like, necessary and
appropriate to isolate the Facility from the electric transmission and
distribution system to which it is connected, (b) the safety valves and
pressure and temperature protective devices necessary and appropriate to
protect the Facility steam systems and (c) the purge valves, relief valves,
fuel/air interlocks, and protective relays necessary and appropriate to protect
the Facility Fuel supply systems, with (a), (b) and (c) in each case being
consistent with Accepted Electrical Practices.

            "RAMP RATE" means the rate at which the output of Net Electric
Energy or Market Steam from the Facility can be increased from minimum to
maximum, or decreased from maximum to minimum, as set forth in the Facility
Operating Procedures.

            "RELEASE" means any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, disposing, or
dumping into the Environment.

            "RELIABILITY RULES" means those rules, standards, procedures and
protocols developed and promulgated from time to time by the New York State
Reliability Council, the NY1SO or other regulatory body.

            "SCHEDULED MAINTENANCE" means the planned removal of the Facility
from service to perform work on specific components that is scheduled in
advance and has a predetermined start date and duration (e.g. annual overhaul,
inspections, testing, major maintenance and routine maintenance).

            "SCHEDULED MAINTENANCE HOUR" means any hour allowed for Scheduled
Maintenance pursuant to the provisions of Section 5.1 and Exhibit B attached
hereto.

            "SECOND TRIGGER" has the meaning given in Section 17.1.1.

            "SHORTFALL" has the meaning given in Section 11.1.5(a).

            "STANDBY PERIOD" has the meaning given in Exhibit C.

            "START-UP" means the action of bringing the Facility from shutdown
to synchronization at its minimum load and the unconditional release of the
Facility for ramping to the requested scheduled Dispatch level.

            "START-UP NOTIFICATION LEAD TIME" means the time period required by
Carr to permit Start-up of the Facility as scheduled for a Dispatch Period
under normal

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equipment conditions. Such period of time is initially set forth in the
Facility Operating Procedures and may be revised by mutual agreement of the
Parties from time to time to reflect actual operating experience.

            "TAXES" means any or all federal, state and/or local, municipal, ad
valorem, property, occupation, severance, generation, first use, conversion,
Btu or power, transmission, utility, gross receipts, privilege, sales, use,
consumption, excise, lease, transaction, and other taxes, governmental charges,
license fees, permit fees, assessments, or increases in or interest on or
penalties relating to any of the foregoing, other than taxes based on net
income or net worth.

            "TERM" has the meaning given in Article 3.0.

            "TRANSMISSION PROVIDER" means any person providing transmission
services for Net Electric Energy or Market Steam from and after the Delivery
Point therefor.

            "TRANSPORTER" means any pipeline on which any Gas is transported
pursuant to this Agreement to the applicable Delivery Point and any contractor
or supplier delivering Fuel Oil to the Facility.

            "VARIABLE MARKET OUTPUT PAYMENT" means the payment to be made by
CPS to Carr pursuant to the provisions of Section 11.1.2.

            "WARM START" means the Start-up of the Facility after its breakers
have been open for the number of hours defining a Warm Start for the Facility,
as set forth in the Facility Operating Procedures.

      1.2   CONSTRUCTION OF TERMS. As used in this Agreement, the terms
"herein," "herewith" and "hereof" are references to this Agreement, taken as a
whole; the terms "include," "includes" and "including" shall mean "including,
but not limited to;" and references to a "Section," "subsection," "clause,"
"Article," "Exhibit," or "Schedule" shall mean a Section, subsection, clause,
Article, Exhibit, or Schedule of this Agreement (including all paragraphs and
provisions therein), as the case may be, unless in any such case the context
clearly requires otherwise. All references to a given agreement, instrument or
other document shall be a reference to that agreement, instrument or other
document as modified, amended, supplemented and restated through the date as of
which such reference is made, and reference to a Law includes any amendment of
modification thereof. A reference to a person includes its successors and
permitted assigns. The singular shall include the plural and the masculine
shall include the feminine, and vice versa. Words importing persons or parties
shall include firms, corporations, partnerships, limited liability companies,
and any other organization or entity having legal capacity.

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                                  ARTICLE 2.0
                               CONTRACT DOCUMENTS

      2.1   DOCUMENTS INCLUDED. This Agreement consists of this contract
document entitled "Capacity Sale and Tolling Agreement" (this "CONTRACT
Document") and each of the following Exhibits which are attached hereto and
which are specifically incorporated herein and made a part of this Agreement by
this reference:

                  Exhibit A -  Description of Facility and Designation of
                               Delivery Points

                  Exhibit B -  Allowances for Scheduled Maintenance

                  Exhibit C -  Facility Operating Procedures and Operating
                               Limitations

                  Exhibit D -  Form of Dispatch Notice

                  Exhibit E -  Fuel Specifications

                  Exhibit F -  Heat Rate Determination Procedures

                  Exhibit G -  Insurance Requirements

      2.2   CONFLICTING PROVISIONS. In the event of any conflict or
inconsistency between this Contract Document and any Exhibit hereto, the terms
and provisions of this Contract Document, as amended from time to time, shall
prevail and be given priority. Subject to the foregoing, the several documents
and instruments forming part of this Agreement are to be taken as mutually
explanatory of one another and in the case of ambiguities or discrepancies
within or between such parts the same shall be explained and interpreted, if
possible, in a manner which gives effect to each part and which avoids or
minimizes conflicts among such parts.

      2.3   ENTIRE AGREEMENT AND AMENDMENTS. This Agreement sets forth the full
and complete understanding of the Parties relating to the subject matter hereof
as of the date of this Agreement, and supersedes any and all negotiations,
agreements, understandings and representations made or dated prior thereto with
respect to such subject matter. No change, amendment or modification of this
Agreement shall be valid or binding upon the Parties unless such change,
amendment or modification shall be in writing and duly executed by both
Parties.

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                                  ARTICLE 3.0
                               TERM OF AGREEMENT

      Subject to earlier termination in accordance with the provisions of this
Agreement, the term of the Agreement (the "TERM") shall commence, and the
Agreement shall become effective, upon the date (the "EFFECTIVE DATE") Carr
gives CPS written notice that Carr has satisfied, or caused to be satisfied,
all of the conditions precedent set forth in Section 23.1, and shall end at
11:59 p.m., Prevailing Eastern Time on the fifth (5th) anniversary of the
Effective Date; provided, however, that any obligations of the Parties arising
prior to the date and time of termination shall survive such termination. The
Term shall be subject to renewal or extension by mutual written agreement of
the Parties.

                                  ARTICLE 4.0
                              PURCHASE AND SALE OF
                             CAPACITY AND SERVICES

      4.1   CAPACITY. Subject to the terms and conditions of this Agreement,
during the Term, Carr shall sell and make available to CPS on an exclusive
basis, and CPS shall purchase and pay for, the Dependable Capacity of the
Facility.

      4.2   SERVICES. Subject to the terms and conditions of this Agreement,
during the Term, Carr shall perform for CPS on an exclusive basis, and CPS
shall purchase and pay for, Fuel Conversion Services with respect to Fuel
supplied to the Facility by or on behalf of CPS.

      4.3   EXCLUSIVE NATURE OF AGREEMENT. The relationship between Carr and
CPS with respect to the Facility, its Capacity and the Fuel Conversion Services
is intended to be exclusive. Carr shall not offer, sell or make available the
Facility's Capacity, perform Fuel Conversion Services, or Dispatch the Facility
to or for any person other than CPS or its successors or permitted assigns;
provided, however, that the use of Capacity and associated electric energy by
Carr for the station service needs of the Facility shall be permitted.
Notwithstanding the foregoing, Carr shall have no obligation to (a) sell or
make available to CPS any Capacity of the Facility in excess of the Facility's
Dependable Capacity, or (b) sell, make available or provide to or for CPS

                                       15

<PAGE>   17

any Fuel Conversion Services or electric energy or other Market Output
associated with any Capacity of the Facility in excess of the Facility's
Dependable Capacity; provided, however, that Carr may not sell or otherwise
dispose of such excess to any third party.

                                  ARTICLE 5.0
                       DEPENDABLE CAPACITY; AVAILABILITY

      5.1   DEPENDABLE CAPACITY AND MAINTENANCE. Beginning on the Effective
Date, Carr shall make the Dependable Capacity of the Facility available to CPS,
subject to Scheduled Maintenance as set forth in Exhibit B attached hereto. The
Parties shall confer in advance, on a yearly basis, regarding Scheduled
Maintenance, following submission by CPS to Carr of its proposed Facility
Utilization Plan pursuant to Section 6.5, and the Parties shall agree on a
general Scheduled Maintenance program for the upcoming Contract Year. To the
extent practicable, Carr shall schedule and perform all Scheduled Maintenance
only during the months of April, May, October, November and December; provided,
however, that Carr, upon the written consent of CPS, not to be unreasonably
withheld, may reschedule and perform Scheduled Maintenance at any other time
if, in Carr's opinion, such maintenance is required by Accepted Electrical
Practices. CPS may also request that Carr reschedule its Scheduled Maintenance
to an earlier or later period, and Carr agrees to comply with such request if
such rescheduling, in Carr's opinion, will not adversely affect the operation
of the Facility or result in material additional cost to Carr. Additional
coordination and scheduling provisions with respect to Scheduled Maintenance
are set forth in the Facility Operating Procedures.

      5.2   NO REDUCTION IN DEPENDABLE CAPACITY.  Carr shall not permit the
Dependable Capacity of the Facility to be reduced during the Term.

      5.3   GUARANTEED ON-PEAK DISPATCH AVAILABILITY. Carr hereby guarantees to
CPS that, with respect to each full calendar month of each Contract Year during
the Term, the On-Peak Dispatch Availability of the Facility during such month
shall be as follows:

<TABLE>
<CAPTION>
                                   Guaranteed On-Peak
                   Month          Dispatch Availability
                   -----          ---------------------
<S>                              <C>
                  January                 .95
                  February                .95
                  March                   .95

</TABLE>

                                       16

<PAGE>   18

<TABLE>
<S>                              <C>
                  April                   .90
                  May                     .90
                  June                    .98
                  July                    .98
                  August                  .98
                  September               .98
                  October                 .90
                  November                .90
                  December                .90
</TABLE>

The Parties agree that, except in the case of Force Majeure as provided in
Article 14.0, any failure of the Facility to meet the guarantee set forth above
for any calendar month (in each case, the "MINIMUM ON-PEAK DISPATCH
AVAILABILITY" for such calendar month) shall result in an adjustment to the
Fixed Market Output Payment for such month as set forth in Section 11.1.5. Such
adjustment to the Fixed Market Output Payment shall be the sole and exclusive
remedy of CPS for any failure of Carr to provide and make available the
Dependable Capacity of the Facility pursuant to this Agreement.

      5.4   OFF-PEAK AVAILABILITY. Carr also agrees to use reasonable efforts
to Dispatch the Facility during Off-Peak periods in accordance with Section 6.1
upon receipt of a Dispatch Notice from CPS; provided, however, that Carr makes
no guarantees hereunder with respect to the availability, Heat Rate or any
other performance of the Facility during any such Off-Peak hours.

                                  ARTICLE 6.0
                                    DISPATCH

      6.1   DISPATCH OF THE FACILITY BY CPS. Consistent with the operational
limits of the Facility as set forth in Exhibit C, CPS shall at all times during
the Term have the exclusive right (a) to Dispatch the Facility in order to
market the Market Output, (b) to utilize the Net Electric Energy, Ancillary
Services, Installed Capacity and Operating Capacity associated with the
Dependable Capacity, and (c) to market the Dependable Capacity and the
associated Installed Capacity, Operating Capacity, Net Electric Energy and
Ancillary Services, in each case subject to the terms and conditions of this
Agreement. For avoidance of doubt, the Parties understand and agree that CPS
may Dispatch the Facility at any time during On-Peak periods, except for
periods of allowed Scheduled Maintenance as set forth in Section 5.1 above and
periods of Force Majeure as set forth in Article 14.0, regardless of whether
the Facility is actually available at

                                       17

<PAGE>   19

such time (including an unavailability due to Forced Outage). The operating
procedures relating to the Facility and the Dispatch and operation thereof are
set forth in Exhibit C, which may from time to time be amended in writing,
signed by the Parties, as necessary to ensure the efficient, safe and
competitive operation of the Facility. CPS shall Dispatch the Facility by means
of a Dispatch Notice issued to Carr by telefax in the form set forth in Exhibit
D attached hereto. A Dispatch Notice shall indicate (among other things) the
Capacity level(s) at which the Facility is to be Dispatched, which shall not
exceed the Dependable Capacity of the Facility, without the prior written
consent of Carr, and shall not be less than the Minimum Generation Capacity of
the Facility. Each such Dispatch Notice shall be effective upon receipt by Carr
and shall remain in effect until the delivery of a subsequent Dispatch Notice.

      6.2   DISPATCH PERIOD AND START-UP. Where a Dispatch Period will involve
a Cold Start, Warm Start or Hot Start, CPS shall provide Carr with a Dispatch
Notice allowing at least the Start-Up Notification Lead Time required pursuant
to Exhibit C. When a Dispatch Period (including revisions to or extensions of a
previously scheduled Dispatch Period) does not involve a Cold Start, Warm Start
or Hot Start, CPS shall provide Carr with a Dispatch Notice in accordance with
the applicable procedures and timing requirements set forth in Exhibit C. After
a Cold Start, CPS shall be required to run the Facility for a minimum Dispatch
Period of two (2) hours, and after a Hot Start CPS shall be required to run the
Facility for a minimum Dispatch Period of one (1) hour.

      6.3   ELECTRIC SPECIFICATIONS AND DELIVERY.

            6.3.1 SPECIFICATIONS. The Net Electric Energy to be delivered by
Carr under this Agreement shall be at 115,000 volts, 60 hertz and at a power
factor consistent with the Dispatch Notice, shall not adversely affect the
voltage, frequency, waveshape or power factor of power at the Delivery Point,
and shall be delivered at the Delivery Point in a manner acceptable to the
Transmission Provider. Carr shall install, own and operate at its expense, or
cause to be installed, owned and operated, all Interconnection Facilities on
its side of the applicable Delivery Point necessary for the delivery of Net
Electric Energy and other Market Output hereunder.

            6.3.2 RECEIPT. CPS shall receive all Net Electric Energy, Ancillary
Services and other Market Output provided under this Agreement at the
applicable Delivery Point and shall be solely responsible for all transmission
arrangements (including control area services), marketing arrangements, and
associated costs and losses from and after the Delivery Point.

                                       18

<PAGE>   20

      6.4.  STEAM PRODUCTION.

            6.4.1  FUEL CONVERSION TO STEAM. Subject to the applicable Start-Up
Notification Lead Time set forth in Exhibit C, CPS may also require Carr, from
time to time, to produce steam as part of the Market Output of the Facility in
an amount not to exceed 80,000 lbs. per hour (the "MARKET STEAM"). Operating
procedures relating to the production of Market Steam at the Facility and the
utilization thereof as part of the Market Output are set forth in Exhibit C.
Market Steam shall meet the specifications provided in Exhibit C and shall be
delivered by Carr at the applicable Delivery Point in a manner acceptable to
the Transmission Provider. Carr shall install, own and operate, at its expense,
or cause to be installed, owned and operated, all Interconnection Facilities on
its side of the applicable Delivery Point necessary for the delivery of Market
Steam hereunder.

            6.4.2. RECEIPT OF STEAM.  CPS shall receive all Market Steam at the
applicable Delivery Point and shall be solely responsible for all transmission
and delivery arrangements, marketing arrangements, and associated costs and
losses from and after the Delivery Point.

                                       19

<PAGE>   21

      6.5   FACILITY UTILIZATION PLAN. Prior to the Effective Date with respect
to the first Contract Year and at least one hundred twenty (120) days before
the start of each Contract Year thereafter, CPS shall prepare and submit to
Carr a proposed annual utilization plan for the Facility (the "FACILITY
UTILIZATION Plan") covering, on a monthly basis, the forecasted utilization and
Dispatch of the Facility by CPS during the upcoming Contract Year. Following
such submission, the Parties shall meet and confer with respect to the
operational requirements of the proposed Facility Utilization Plan, and Carr
shall prepare and submit its proposed Scheduled Maintenance program for the
upcoming Contract Year as set forth in Section 5.1 above. Thereafter, on a
monthly basis during each Contract Year, on or before the fifteenth (15th) day
of each calendar month, CPS shall provide a monthly update of the Facility
Utilization Plan for the Contract Year, covering the next succeeding calendar
month and any changes in the forecasted utilization and Dispatch of the
Facility over the balance of the Contract Year. During the winter months of
December through March, CPS shall also provide, at Carr's request, weekly
updates of the Facility Utilization Plan covering the next succeeding two
(2)-week period. It is understood and agreed, however, that the Facility
Utilization Plan shall be for general informational and forecasting purposes
only and that the Dispatch rights of CPS hereunder shall not be limited by the
forecasts set forth therein.

                                  ARTICLE 7.0
                               FUEL AND HEAT RATE

      7.1   GAS.

            7.1.1 DELIVERY. Except to the extent Fuel Oil is utilized to
operate the Facility as set forth in Section 7.2 below, CPS, at its expense,
shall deliver or cause to be delivered to Carr at the applicable Delivery
Point, beginning on the Effective Date, all quantities of Gas required by Carr
(a) to generate Net Electric Energy and Market Steam and provide Ancillary
Services and other Market Output during the Term, and (b) to perform Cold
Starts, Warm Starts, and Hot Starts in response to any Dispatch Notice issued
by CPS. CPS shall deliver, or cause to be delivered , Gas hereunder at the
applicable Delivery Point at the pressures in effect from time to time in the
pipeline of CPS's Transporter. CPS shall be responsible for and bear all costs
and expenses related to the scheduling of Gas deliveries hereunder and the
transportation of all Gas to the Delivery Point.

                                       20

<PAGE>   22

            7.1.2 SPECIFICATION AND QUALITY. All Gas delivered or caused to be
delivered by CPS pursuant to Section 7.1.1 shall be of merchantable quality and
shall meet the Fuel specification set forth in Exhibit E. Carr shall have the
right (to be exercised consistently with Accepted Electrical Practices) to
reject Gas that does not meet such Fuel specification at the Delivery Point.

            7.1.3 MEASUREMENT. Measurement of Gas quantities hereunder shall be
in accordance with the established procedures of the delivering Transporter at
the Delivery Point. The unit of Gas quantity measurement for purposes of this
Agreement shall be one million Btu (1 MM Btu).

      7.2   FUEL OIL.

            7.2.1 DELIVERY. Beginning on the Effective Date, CPS may, at its
election, procure at its own cost Fuel Oil for the Facility and may supply and
deliver, or caused to be supplied and delivered, Fuel Oil by truck to Carr at
the applicable Delivery Point for use by Carr as a secondary fuel for the
operation of the Facility. Carr shall have responsibility for the maintenance
and safe storage of the Fuel Oil after its receipt at the Delivery Point;
provided that, with respect to deterioration in the quality of Fuel Oil, Carr
shall take reasonable measures to mitigate such deterioration for the first
twelve (12) months after delivery of the Fuel Oil to the Facility and shall
only be responsible for deterioration to the extent caused by Carr's failure to
take such reasonable measures during such twelve (12)-month period (all
deterioration thereafter being the sole risk of CPS). CPS may direct Carr to
utilize Fuel Oil to operate the Facility to the extent permitted under Carr's
existing permits for the Facility. CPS shall also have the option to sell the
Fuel Oil to third parties and to remove the Fuel Oil from the Facility Site.
Carr shall provide CPS with a monthly Fuel Oil inventory report, and will
report daily use to CPS when directed by CPS to utilize Fuel Oil to operate the
Facility.

            7.2.2 SPECIFICATION AND QUALITY. All Fuel Oil delivered or caused
to be delivered by CPS pursuant to Section 7.2.1 shall be of merchantable
quality and shall meet the Fuel specification set forth in Exhibit E. Carr
shall have the right (to be exercised consistently with Accepted Electrical
Practices) to reject Fuel Oil that does not meet such Fuel specification at the
Delivery Point, and CPS, at its expense, shall remove or cause to be removed
such Fuel Oil from the Facility Site. Carr shall bear all costs related to its
wrongful rejection of Fuel Oil.

            7.2.3 MEASUREMENT.  Measurement of Fuel Oil quantities hereunder
shall be in accordance with the established procedures of the delivering
Transporter at the Delivery Point.  The unit of Fuel Oil measurement for
purposes of this Agreement shall be U.S. gallons.

                                       21

<PAGE>   23

      7.3   ANNUAL HEAT RATE GUARANTEE.

            7.3.1 ANNUAL AVERAGE HEAT RATE. Carr hereby guarantees to CPS that,
with respect to each Contract Year during the Term, the annual average Heat
Rate of the Facility during On-Peak hours utilizing Gas supplied by CPS
pursuant to Section 7.1 above (the "ANNUAL HEAT RATE") shall not exceed 250
Btu/KWh, measured and calculated in the manner set forth in Exhibit F attached
hereto, and subject to adjustment as provided in Exhibit F (the "ANNUAL HEAT
RATE GUARANTEE"). Within thirty (30) days following the close of each Contract
Year, Carr shall determine the Annual Heat Rate for the immediately preceding
Contract Year in accordance with Exhibit F and shall submit such determination
in writing to CPS, together with such back-up and supporting information as CPS
may reasonably request. Such annual determination by Carr shall be deemed to be
final and binding on the Parties for purposes of this Agreement, unless it is
disputed in writing by CPS within ten (10) days following the receipt thereof.

            7.3.2 REMEDY FOR FAILURE TO ACHIEVE ANNUAL HEAT RATE GUARANTEE. As
the sole and exclusive remedy of CPS for any failure of the Facility to meet or
better the Annual Heat Rate Guarantee with respect to any Contract Year, Carr
shall pay CPS (subject to the limitations set forth in Section 16.1(a) and
Section 16.2) a lumpsum amount for excess Gas or Fuel Oil utilized by the
Facility during the Contract Year as determined in accordance with the
provisions of Exhibit F. Such amount shall be payable by Carr within twenty
(20) days following the date the applicable determination of Annual Heat Rate
submitted by Carr pursuant to Section 7.3.1 becomes final and binding, or
within thirty (30) days following the date the Annual Heat Rate is otherwise
determined pursuant to Article 17.0, whichever is applicable, and may be offset
by CPS against any amounts due or to become due to Carr hereunder.

            7.3.3 ANNUAL HEAT RATE BONUS. As additional compensation to Carr
for Fuel Conversion Services performed under the Agreement in the event that
the Annual Heat Rate with respect to any Contract Year is better than the
Annual Heat Rate Guarantee, CPS shall pay to Carr an amount representing the
Fuel savings enjoyed by CPS during the Contract Year, as determined in
accordance with the provisions of Exhibit F. Such amount shall be payable by
CPS within twenty (20) days following the date the applicable determination of
Annual Heat Rate submitted by Carr pursuant to Section 7.3.1. becomes final and
binding, or within thirty (30) days following the date the Annual Heat Rate is
otherwise determined pursuant to Article 17.0, whichever is applicable.

                                       22

<PAGE>   24

                                  ARTICLE 8.0
                             TITLE AND RISK OF LOSS

      8.1   TITLE TO FUEL. CPS at all times shall retain title to all
quantities of Fuel delivered to the Facility pursuant to Section 7.1 and
Section 7.2; provided, however, that title to any unused Fuel Oil remaining in
storage at the Facility Site upon the expiration or other termination of the
Agreement shall automatically pass to and vest in Carr, without cost or expense
to Carr, if CPS has not sold or otherwise disposed of and removed the Fuel Oil
from the Facility Site within sixty (60) days following such expiration or
other termination.

      8.2   RISK OF LOSS AND INDEMNITY.

            8.2.1 GENERAL. Without regard to title as provided in Section 8.1
above, as between the Parties, CPS shall be deemed to be in exclusive
possession and control (and be responsible for any damage or injury resulting
therefrom or caused thereby) of Fuel prior to the Delivery Point therefor and
of Net Electric Energy, Market Steam and other Market Output at and after the
Delivery Point therefor, and Carr shall be deemed to be in exclusive possession
and control (and be responsible for any damage or injury resulting therefrom or
caused thereby) of Fuel at and from the Delivery Point therefor and of Net
Electric Energy, Market Steam and other Market Output prior to the Delivery
Point therefor. Risk of loss related to Fuel shall transfer from CPS to Carr at
the Delivery Point therefor and risk of loss related to Net Electric Energy,
Market Steam and other Market Output shall transfer from Carr to CPS at the
Delivery Point therefor. CPS shall indemnify, defend and hold harmless Carr
from and against any liability arising out of or in any way relating to CPS's
possession or control of Fuel up to the Delivery Point therefor or its
possession and control of Net Electric Energy, Market Steam and other Market
Output at and after the Delivery Point therefor, and Carr shall indemnify,
defend and hold harmless CPS from and against any liability arising out of or
in any way relating to Carr's possession or control of Fuel at and from the
Delivery Point therefor or its possession and control of Net Electric Energy,
Market Steam and other Market Output prior to the Delivery Point therefor.

            8.2.2 RISK OF NON-CONFORMING FUEL. Notwithstanding the provisions
of Section 8.2.1 above or any other provision of this Agreement to the
contrary, CPS shall remain responsible for, and shall indemnify, defend and
hold harmless Carr with respect to, any and all injury or damage, including
damage to the Facility, caused by the failure of any Gas delivered to the
Facility pursuant to Section 7.1 to conform to the specifications set forth in
Section 7.1.2 and in Exhibit E or by the failure of any Fuel

                                       23

<PAGE>   25

Oil delivered to the Facility pursuant to Section 7.2 to conform to the
specifications set forth in Section 7.2.2 and in Exhibit E.

                                  ARTICLE 9.0
                                    METERING

      9.1   OUTPUT METERING EQUIPMENT.

            9.1.1 INSTALLATION AND OWNERSHIP. Net Electric Energy, Market Steam
and other Market Output of the Facility shall be metered at the Delivery Point
therefor by Output Metering Equipment installed, owned, operated and maintained
by Carr. The Output Metering Equipment shall be used to determine conclusively,
subject to Section 9.5, the amount of Market Output delivered by Carr at the
Delivery Point.

            9.1.2 MAINTENANCE ETC. Carr shall be responsible for the
maintenance, testing and calibration in accordance with Accepted Electrical
Practices of the Output Metering Equipment and the maintenance and testing of
electrical facilities and Protective Apparatus necessary to interconnect the
Facility at the relevant Delivery Points. CPS shall have the right to receive
data in electronic form in real time on a continuous basis from the Facility,
and Carr shall install at the Facility Output Metering Equipment which is
capable of providing such data to CPS. Such installation shall be completed and
the delivery of such data shall be commenced as promptly as possible after the
Effective Date, but in no event later than four (4) months after the Effective
Date. Carr shall bear all costs and expenses of installing, maintaining and
testing all Output Metering Equipment, and CPS shall bear the costs of the
delivery and communication to CPS of data from such meters.

                                       24

<PAGE>   26

      9.2   FUEL METERING EQUIPMENT.

            9.2.1 INSTALLATION AND OWNERSHIP. Gas delivered by CPS to the
Facility shall be metered at the Delivery Point therefor by Fuel Metering
Equipment installed, owned, operated and maintained by NiMo. Except as
otherwise provided herein, such Fuel Metering Equipment shall be used to
determine conclusively the quantity of Gas delivered at the Delivery Point. The
Btu content of the Gas delivered by CPS shall be determined by NiMo by use of a
gas chromatograph located in NiMo's Zone 5. If either Party is not satisfied
for any reason with the Btu content measurements made by NiMo, Carr shall
install, or cause to be installed, a gas chromatograph at the Delivery Point,
and the costs thereof shall be shared equally by the Parties. The quantity of
Fuel Oil delivered by CPS to the Facility shall be determined by the Facility's
operating personnel by gauging the Facility's Fuel Oil storage tanks after
delivery. The quality of Fuel Oil deliveries shall be determined from a sample
taken from the Fuel Oil delivery truck and analyzed, at CPS's expense, by an
independent laboratory.

            9.2.2 MAINTENANCE ETC. Carr shall be responsible for the
maintenance, testing and calibration, in accordance with applicable industry
standards, of the Fuel Metering Equipment (to the extent not otherwise
installed, maintained, tested and calibrated by the Transporter thereof). CPS
shall have the right to receive data in electronic form in real time on a
continuous basis from the Delivery Point for Gas, and Carr shall install at the
Facility Fuel Metering Equipment which is capable of providing such data to
CPS. Such installation shall be completed and the delivery of such data shall
be commenced as promptly as possible after the Effective Date, but in no event
later than four (4) months after the Effective Date. Carr shall bear all costs
and expenses of installing, maintaining and testing all Fuel Metering Equipment
(except to the extent such costs and expenses are borne by the Transporter(s)
of Fuel and except as otherwise expressly provided in Section 9.2.1), and CPS
shall bear the costs of the delivery and communication to CPS of data from such
meters.

      9.3   CHECK METERS. CPS, at its option and expense, may install and
operate one or more check meters to check Carr's meters. Such check meters
shall be for check purposes only and shall not be used for the measurement of
Fuel or Market Output for purposes of this Agreement, except as provided in
Section 9.5 below. The check meters shall be subject at all reasonable times to
inspection and examination by Carr or its designee. The installation, operation
and maintenance thereof, however, shall be performed entirely by CPS in
accordance with applicable industry standards. Carr shall grant to CPS, at no
cost or expense, the right to install such check meters at each Delivery Point
and the right to access such check meters at reasonable times as requested by
CPS, if such check meters are located on Carr's premises.

                                       25

<PAGE>   27

      9.4   ACCESS. To the extent such metering equipment is owned and
maintained by Carr, CPS shall have the right to receive reasonable advance
notice with respect to, and to be present at the time of, any installation,
repairing, inspection, testing, calibrating or adjusting of the Output Metering
Equipment or Fuel Metering Equipment. All records from such Output Metering
Equipment and Fuel Metering Equipment shall be the property of Carr, but upon
reasonable advance notice and during normal business hours, Carr shall make
available to CPS all data, records and charts relating to the Output Metering
Equipment and Fuel Metering Equipment for inspection and verification. Carr
shall also keep and maintain, for a period of two (2) years or longer (if
required by Law), accurate and detailed records relating to the Facility's
hourly deliveries of Market Output and Fuel consumption, which records shall be
available for inspection by CPS and its designees during normal business hours
upon reasonable notice.

      9.5   TESTING AND ADJUSTMENT. At its sole cost and expense, Carr shall
inspect and calibrate, or cause to be inspected and calibrated, all Output
Metering Equipment and Fuel Metering Equipment periodically, but not less
frequently than annually. If any such test shows a measurement error of more
than (a) two percent (2%) or such lower percentage as may be established by
applicable tariff, in the case of Fuel Metering Equipment or Output Metering
Equipment measuring Market Steam, or (b) one-quarter percent (1/4%) in the case
of other Output Metering Equipment, a retroactive correction shall be made for
the period during which the measurement instruments were in error, by using
CPS's check meter(s) if installed and registering accurately. If no such check
meters are installed and registering accurately, or if the period of error
cannot be reasonably ascertained, correction shall be made for one-half (1/2)
of the period elapsed since the last test date, and, in any such case, the
measuring instruments shall be adjusted immediately at Carr's expense so as to
measure accurately.

                                  ARTICLE 10.0
                           OPERATION AND MAINTENANCE

      10.1  OPERATION AND MAINTENANCE OBLIGATION. At all times during the Term,
Carr shall be responsible for the testing, operation and maintenance of the
Facility and (except as otherwise expressly provided in Section 11.1.4) shall
bear all costs and expenses incurred in connection therewith, including the
cost of labor, parts, supplies, insurance and applicable taxes. The cost of
testing to be borne by Carr shall include any net cost of Fuel consumed during
testing, after crediting to CPS any revenues received from operation of the
Facility during the test period. Such testing, operation

                                       26

<PAGE>   28

and maintenance shall be performed in accordance with Accepted Electrical
Practices, applicable Law, and the regulations, standards and guidelines
adopted from time to time by the NYPP and/or NY ISO. Carr shall have full and
complete control over the Facility at all times, subject to the rights and
remedies of CPS under this Agreement, and Carr shall be entitled at any time
and from time to time to suspend operation of the Facility or temporarily
disconnect the Facility from the Interconnection Facilities whenever and for
such periods of time as, in accordance with Accepted Electrical Practices, may
be necessary for emergency, reliability, environmental, or safety reasons.

      10.2  OUTAGES. Notice, coordination, reporting and related requirements
with respect to Forced Outages and Scheduled Maintenance Outages occurring at
the Facility are set forth in the Facility Operating Procedures attached hereto
as Exhibit C.

      10.3  ACCESS. During the Term, CPS and its representatives shall have
accompanied access to the Facility at all reasonable times in order (a) to
verify, review and/or monitor the operation of the Facility and all appurtenant
electrical and steam equipment for the purpose of determining Carr's compliance
with this Agreement, and (b) to inspect, examine and test equipment and
facilities as authorized under this Agreement. Such access shall be subject to
compliance by CPS and its representatives with Carr's safety and security
requirements, and CPS and its representatives shall at all times conduct
themselves so as not to hamper or impede the Facility's operations.

      10.4  MAINTENANCE OF RECORDS. Carr shall keep and maintain at the
Facility (and shall retain for a minimum of five (5) years) accurate and
complete operating records and logs in a manner consistent with Accepted
Electrical Practices and as required by applicable Law and the regulations,
standards and guidelines adopted from time to time by the NYPP, NYSRC and/or NY
ISO. Such records shall include Market Output, Heat Rate, and Dispatch
information. Carr shall make such records and logs available to CPS on a
real-time basis as specified in the Facility Operating Procedures, and also for
inspection and copying at the Facility, during normal business hours upon
reasonable notice. Carr shall give notice to CPS prior to discarding any
records and logs and CPS may, within thirty (30) days of such notice, elect to
take possession of such records and logs, in which event Carr shall deliver
such records and logs to CPS, at the expense of CPS. If CPS does not respond to
such notice within thirty (30) days, Carr may discard such records and logs.

                                       27

<PAGE>   29

                                  ARTICLE 11.0
                               PRICE AND PAYMENT

      11.1  CONTRACT PRICE. As compensation in full to Carr for the Dependable
Capacity made available to CPS hereunder and for the Fuel Conversion Services
performed by Carr, CPS shall pay Carr (in addition to any applicable annual
Heat Rate bonus earned by Carr pursuant to Section 7.3.3 above) for the Term of
the Agreement the Fixed Market Output Payment, the Variable Market Output
Payment, the Additional Start-up Fee, and the Market Steam Reimbursable Costs
as set forth below. Such amounts shall be invoiced by Carr and paid by CPS on a
monthly and semi-annual basis as provided in Section 11.2.

            11.1.1 FIXED MARKET OUTPUT PAYMENT. The Fixed Market Output Payment
with respect to each calendar month of the Contract Year (prorated on a daily
basis for any portion of a calendar month for the first calendar month of the
first Contract Year and for the last calendar month of the last Contract Year)
shall be Two Hundred Ninety One Thousand Six Hundred Sixty-Seven Dollars
($291,667), subject to adjustment at the end of the 1999 Contract Year and at
the end of each subsequent Contract Year as follows:

            Adjusted Fixed Market Output Payment     =      Current Fixed Market
            Output Payment (at the end of the Contract Year) x 1.025

            11.1.2 VARIABLE MARKET OUTPUT PAYMENT. The Variable Market Output
Payment with respect to each calendar month of the Contract Year shall be Three
Dollars ($3) per MWh of Net Electric Energy generated by the Facility during
such month, subject to adjustment at the end of the 1999 Contract Year and at
the end of each subsequent Contract Year as follows:

            Adjusted Variable Market Output Payment  =      Current Variable
            Market Output Payment (at the end of the Contract Year) x 1.025

                                       28

<PAGE>   30

            11.1.3 ADDITIONAL START-UP FEE. For each twelve (12) month period
during the Term, CPS shall be allowed, without additional charge, one (1)
Start-up per day, five (5) Start-ups per week, and one hundred twenty (120)
Start-ups annually (prorated on a daily basis for any period of less than
twelve (12) months at the start and end of the Term). The Additional Start-up
Fee with respect to daily, weekly or annual Start-ups occurring for any reason
in excess of such allowed amounts shall be Two Thousand Five Hundred Dollars
($2,500) per Start-up, subject to adjustment at the end of the 1999 Contract
Year and at the end of each subsequent Contract Year as follows:

            Adjusted Additional Start-up Fee  =  Current Additional Start-up Fee
            (at the end of the Contract Year) x 1.025

            11.1.4 MARKET STEAM REIMBURSABLE COSTS. In the event the Facility
is utilized by CPS to produce Market Steam as provided in Section 6.4, CPS
shall reimburse Carr, on a direct cost basis, for all reasonable additional
expenses incurred by Carr in producing such Market Steam, including the cost of
make-up water, water treatment and purification, boiler and reboiler chemicals,
steam delivery, and incremental steam pipe, valve and reboiler maintenance (the
"MARKET STEAM REIMBURSABLE COSTS"). The Market Steam Reimbursable Costs shall
be incurred by Carr in accordance with Accepted Electrical Practices, shall be
calculated in accordance with the cost accounting provisions of Carr's
Operation and Maintenance Agreement, and shall be determined by Carr on a
monthly basis during the Contract Year.

            11.1.5 AVAILABILITY ADJUSTMENT TO FIXED MARKET OUTPUT PAYMENT.
Notwithstanding the provisions of Section 11.1.1 above, the Fixed Market Output
Payment shall be subject to reduction each month during the Term on the basis
of the actual On-Peak Dispatch Availability of the Facility during such month
(the "AVAILABILITY ADJUSTMENT"). Except as otherwise expressly provided in
Section 15.2 below, the Availability Adjustment, if any, for each month of the
Contract Year shall be computed as follows:

                                       29

<PAGE>   31

                  (a)   For Months Other Than July and August:  If the actual
                        On-Peak Dispatch Availability of the Facility during
                        any month other than July and August is less than the
                        Minimum On-Peak Dispatch Availability for such month as
                        set forth in Section 5.3 above (the difference being
                        expressed as a decimal and referred to herein as a
                        "SHORTFALL"), then the Fixed Market Output Payment for
                        such month shall be reduced as follows:

                        R = FMO - (FMO x (S x AF))

                        Where:

                        R     =     The reduced monthly Fixed Market Output
                                    Payment
                        FMO   =     Current monthly Fixed Market Output Payment
                        S     =     The monthly Shortfall
                        AF    =     An Adjustment Factor as set out in the
                                    table below; provided that if the Shortfall
                                    exceeds 0.50, the Shortfall multiplied by
                                    the Adjustment Factor (i.e. (S x AF)) shall
                                    be deemed to equal 1.00.

<TABLE>
<CAPTION>
                                                               Adjustment
                               Shortfall                         Factor
                               ---------                       ----------
                             <S>                               <C>
                                 0 - .05                           0.5
                              >.05 - .10                           0.8

<CAPTION>

                                                               Adjustment
                               Shortfall                         Factor
                               ---------                       ----------
                             <S>                               <C>
                              >.10 - .15                           1.0
                              >.15 - .20                           1.2
                              >.20 - .25                           1.5
                              >.25 - .30                           1.6
                              >.30 - .35                           1.7
                              >.35 - .40                           1.8
                              >.40 - .45                           1.9
                              >.45 - .50                           2.0
</TABLE>

                  (b)   For the Months of July and August: If the actual
                        On-Peak Dispatch Availability of the Facility during
                        July or August

                                       30

<PAGE>   32

                        is less than the Minimum On-Peak Dispatch Availability
                        for such month as set forth in Section 5.3 above, then
                        the Fixed Monthly Output Payment for such month shall
                        be reduced as follows:

                        R = FMO - (S x (DMWhrs x $37.88/MWhr))

                        Where:

                        DMWhrs      =     The total On-Peak MWhrs actually
                                          sought to be Dispatched by CPS during
                                          the month as documented by duly
                                          issued Dispatch Notices

Notwithstanding the foregoing or any other provision in this Agreement to the
contrary, the Availability Adjustment provided herein shall not apply with
respect to any Shortfall caused by an event of Force Majeure as set forth in
Article 14.0.

      11.2  INVOICING AND PAYMENT.

            11.2.1 MONTHLY AND SEMI-ANNUAL STATEMENTS. The Variable Market
Output Payment, the Additional Start-Up Fee, the Market Steam Reimbursable
Costs and Incremental Station Electric and Gas Costs shall be payable on a
monthly basis in arrears during the Term, and the Fixed Market Output Payment
shall be payable semi-annually in advance on or before January 1st and July 1st
of each year (except for the first payment of Fixed Market Output Payment as
set forth below). The Availability Adjustment, if any, to the Fixed Market
Output Payment shall be determined at the end of each month and either refunded
by Carr after the end of the month or offset by CPS against the next or
succeeding months' payments becoming due hereunder. On or before the tenth
(10th) day of each month, Carr shall provide CPS a monthly statement
(electronically, or by regular mail, facsimile or other acceptable means) in
respect of the immediately preceding month, which statement shall include a
designation of the amount of Net Electric Energy delivered by Carr to CPS in
each hour of the month, the quantities of Gas consumed in each hour, the number
of Start-ups requested and accomplished, the Market Steam Reimbursable Costs
incurred by Carr during the month, the Availability Adjustment, if any, for the
month, and such other data and information as may be necessary to determine the
amounts payable by CPS hereunder. Such statement shall be accompanied by any
supporting documentation and other information reasonably requested by CPS to
determine the accuracy of the statement. In addition, on or before June 15th
and December 16th of each year, Carr shall provide CPS a semi-annual statement
of Fixed Market Output Payments payable in respect of the next six (6)-month
period beginning on the start of the following month; provided, however, that
the first such semi-annual statement shall be submitted by Carr on or

                                       31

<PAGE>   33

before the Effective Date and apply only to the period beginning on the
Effective Date and ending on December 31, 1998, and the final such semi-annual
statement shall be submitted by Carr on or before June 15th or December 16th,
as the case may be, of the last Contract Year hereunder and apply only to the
period beginning on the start of the following month and ending on the
expiration or other termination date.

            11.2.2 PAYMENT. Subject to the last two sentences of this Section
11.2.2, within thirty (30) days following the date CPS receives each statement
under Section 11.2.1, CPS shall pay or cause to be paid to Carr the full
undisputed amount specified therein. Notwithstanding the foregoing, the first
semi-annual installment of Fixed Market Output Payments shall be payable by CPS
on or before the Effective Date. All such payments shall be made by wire
transfer of immediately available funds to the account of Carr at such
depository as Carr shall designate by written notice to CPS. If requested by
Carr in its monthly or semi-annual statement, CPS shall confirm to Carr the
amount of payment, the paying bank and the account to be credited not later
than two (2) days before payment. If the payment due date falls on a Saturday
or a local bank holiday in [New York City] other than a Monday, payment shall
be due on the preceding local banking date. If the payment due date falls on a
Sunday or a Monday local banking holiday, payment shall be due on the next
succeeding local banking day.

            11.2.3 LATE PAYMENTS AND DISPUTED INVOICES. If there is a dispute
about any amount invoiced by Carr, the amount not in dispute shall be promptly
paid by CPS as provided in Section 11.2.2 above, and any disputed amount which
is ultimately determined to have been payable shall be paid within ten (10)
days following such determination, together with interest from the date the
amount was originally payable to and including the date of payment in
accordance with the provisions of Section 11.2.4. Any dispute which is not
promptly resolved by mutual agreement of the Parties shall be resolved in
accordance with the provisions of Article 17.0.

            11.2.4 INTEREST. Amounts not paid by either Party to the other when
due under any provision of this Agreement, including the provisions of this
Section 11.2, shall bear interest, from the date payment was due to and
including the date of payment, at the Delayed Payment Rate.

                                       32

<PAGE>   34

      11.3  ADJUSTMENTS AND AUDIT.

            11.3.1 ADJUSTMENT. In the event adjustments or corrections to
monthly or semi-annual statements are required as a result of inaccurate Output
Metering Equipment or Fuel Metering Equipment or other errors in computation or
billing, the Parties shall promptly recompute amounts due from or to each other
hereunder during the period of inaccuracy and otherwise correct any errors in
such statement(s). If the total amount, as recomputed, due from a Party for the
period of inaccuracy varies from the total amount due as previously computed,
and payment of such previously computed amount has been made, the difference
shall be promptly paid to the Party entitled to it, or offset by the Party
entitled to it against subsequent payments due or to become due to the other
Party.

            11.3.2 AUDIT. Each Party and its representatives shall have the
right, at its sole expense, upon reasonable notice and during normal working
hours, to examine the records of the other Party to the extent reasonably
necessary to verify the accuracy of any statement, charge or computation made
pursuant to this Agreement. If requested, a Party shall provide to the other
Party statements evidencing the amounts of Net Electric Energy and/or Market
Steam, or the quantities of Gas or Fuel Oil delivered at the applicable
Delivery Point, and Carr shall provide CPS statements and accounts of all
Market Steam Reimbursable Costs incurred hereunder. If any such examination
reveals any inaccuracy in any statement, the necessary adjustments in such
statement and the payments thereof shall be promptly made and shall bear
interest calculated at the Delayed Payment Rate from the date the overpayment
or underpayment was made until paid; provided, however, that no adjustment of
any statement or payment shall be made unless objection to the accuracy thereof
is made prior to the lapse of two (2) years from the date of the statement; and
provided further that this Section 11.3.2 shall survive any expiration or other
termination of the Agreement for a period of two (2) years from the date of
such termination for the purpose of such statement and payment objections.

                                       33

<PAGE>   35

                                  ARTICLE 12.0
                                  INDEMNITIES

      12.1  GENERAL INDEMNITY. To the fullest extent permitted by Law, each
Party shall defend, indemnify and hold harmless the other Party, its
Affiliates, partners, shareholders, directors, officers, agents and employees
from and against all loss, liability, damage, cost and expense, including
damage and liability for bodily injury to or death of third persons or damage
to property of third persons, and including court costs and reasonable
attorneys' fees (collectively, "LOSS"), to the extent arising out of, in
connection with or resulting from (a) the indemnifying Party's breach of any of
the representations or warranties made in, or the indemnifying Party's failure
to perform any of its obligations under, this Agreement, (b) the indemnifying
Party's violation of any applicable Law in connection with its performance
hereunder, or (c) the indemnifying Party's design, installation, construction,
ownership, operation, repair, relocation, replacement, removal or maintenance
of, or the failure of, any of such Party's equipment and/or facilities,
including the Facility, and any Gas or Fuel Oil facilities, and/or any
appurtenances thereto, and any electric transmission or steam facilities used
in connection with this Agreement; provided, however, that neither Party shall
have any indemnification obligations hereunder or under Section 12.4 below in
respect of any Loss to the extent caused by an indemnified person's fault or
negligence. Each Party's indemnification obligation hereunder shall include
full indemnification from any of the foregoing to the extent the Loss arises
from the acts or omissions of, or installation, ownership, operation or
maintenance of facilities or equipment by, a contractor, supplier, Transporter
or customer of the indemnifying Party, or any of their contractors, suppliers,
Transporters or customers.

      12.2  EMPLOYEE CLAIMS. With respect to any and all claims against an
indemnified Party by an employee of the indemnifying Party or of anyone for
whom the indemnifying Party is responsible hereunder, the indemnification
obligation stated in Section 12.1 shall not be limited in any way by any
limitation on the amount or type of damages, compensation or benefits payable
by or for such person under any applicable worker's compensation Law,
disability Law, or other employee benefit Law.

                                       34

<PAGE>   36

      12.3  TAXES.

            12.3.1 CPS TAXES. The compensation paid by CPS to Carr pursuant to
Article 11.0 does not include reimbursement for, and CPS shall be solely liable
for and shall pay, cause to be paid, or reimburse Carr if Carr is required to
pay, any and all Taxes relating to or arising out of:

                   (a)  the transportation or delivery of Fuel hereunder
                        (whether at, prior to or after the Delivery Point
                        therefor); and

                   (b)  the delivery, transmission, sale or consumption of
                        Market Output hereunder (whether at or after the
                        Delivery Point therefor).

CPS shall indemnify, defend and hold harmless Carr from and with respect to
liability for any such Taxes.

            12.3.2 CARR TAXES. Carr shall be liable for and shall pay, cause to
be paid, or reimburse CPS if CPS is required to pay any and all Taxes imposed
on or with respect to the Facility or any other tangible property owned by
Carr, as well as Taxes imposed on or with respect to the performance by Carr of
Fuel Conversion Services hereunder, and Carr shall indemnify, defend and hold
harmless CPS from and with respect to liability for any such Taxes. As between
Carr and CPS, Carr shall also be liable for any net income taxes imposed upon
Carr or its partners with respect to the transactions contemplated hereunder.

            12.3.3 EXEMPTIONS. Either Party, upon written request of the other,
shall provide a certificate of exemption or other reasonably satisfactory
evidence of exemption if either Party is exempt from any Taxes, and shall use
all reasonable efforts to obtain or maintain for, or to enable the other Party
to obtain or maintain, any exemption from or reduction of any Tax, whether
currently available or becoming available in the future. Without limiting the
generality of the foregoing, the Parties agree that, if it is beneficial to the
efforts of either Party to obtain or maintain any exemption from or reduction
of any Tax, whether currently available or becoming available in the future,
the Parties shall cooperate to restructure the transactions contemplated by
this Agreement so as to enable either Party to obtain or maintain such
exemption or reduction, as the case may be; provided, however, that any such
restructuring shall not adversely affect the economic consequences hereunder to
either Party.

                                       35

<PAGE>   37

      12.4  ENVIRONMENTAL INDEMNITY. Carr shall protect, defend, indemnify and
save harmless CPS, its officers, directors, shareholders, agents, employees,
successors and assigns (collectively, the "ENVIRONMENTAL INDEMNITEES") from,
against and in respect of, any and all losses, costs, damages, liabilities,
obligations, claims, causes of action, fines, penalties or expenses (including
reasonable attorney's fees, expenses and litigation costs and sums paid in
settlements of claims and any such fees and expenses incurred in enforcing this
indemnity or collecting any sums due hereunder) and reasonable expenses for
accounting, consulting, engineering, investigation, cleanup, response, removal
and/or disposal and other remedial costs, directly or indirectly imposed upon,
incurred by or asserted against any Environmental Indemnitee, arising out of or
in connection with (a) the use, generation, refining, manufacture,
transportation, transfer, production, processing, storage, handling, or
treatment of any Hazardous Materials on, under or from the Facility; (b) a
Release, or threatened Release, of any Hazardous Materials on, under or from
the Facility; (c) the cleanup, removal, and/or disposal of any Hazardous
Materials on, under or from the Facility required by any Environmental Law or
any Governmental Authority; (d) any personal exposure or injury (including
wrongful death) or property damage (real or personal) arising out of or related
to such Hazardous Materials, including, without limitation, any damage arising
out of any cleanup required by Governmental Authorities or Environmental Laws;
(e) any lawsuit brought or threatened, settlement reached, or government order
relating to such Hazardous Materials; or (f) any violation of Laws, orders,
rules, regulations, requirements, guidelines, or demands of Governmental
Authorities, including permits and licenses under Environmental Laws, which are
based upon or in any way related to such Hazardous Materials including the
costs and expenses of any remedial action, reasonable attorney and consultant
fees, investigation and laboratory fees, court costs and litigation expenses;
provided, however, that the foregoing indemnity shall not apply to any
liability, Loss, fines, penalties or other amounts arising from the possession,
control or handling of Fuel prior to the Delivery Point therefor (which shall
be governed by the provisions of Section 8.2.1 above) and shall not apply to
any liability, Loss, fines, penalties or other amounts arising from the failure
of Fuel to conform to the specifications set forth in this Agreement (which
shall be governed by the provisions of Section 8.2.2 above).

      12.5  NOTICE OF CLAIM. An indemnified person (an "INDEMNITEE") shall
reasonably promptly after the receipt of notice of the commencement of any
legal action or of any claims against such Indemnitee in respect of which
indemnification may be sought pursuant to the foregoing provisions of this
Article 12.0, notify the indemnifying Party (the "INDEMNITOR") in writing
thereof; provided, that the failure of an Indemnitee reasonably promptly to
provide any such notice shall only reduce the Indemnitor's liability by the
amount of any damages attributable to the failure of the Indemnitee to give
such notice in such manner. In case any such claim or legal action shall be
made or brought against an Indemnitee and such Indemnitee shall notify the

                                       36

<PAGE>   38

Indemnitor thereof, the Indemnitor may, or if so requested by such Indemnitee
shall, assume the defense thereof, without any reservation of rights, with
counsel reasonably satisfactory to such Indemnitee, and after notice from the
Indemnitor to such Indemnitee of an election to assume the defense thereof and
approval by the Indemnitee of such counsel, the Indemnitor will not be liable
to such Indemnitee under this Article 12.0 for any legal fees and expenses
subsequently incurred by such Indemnitee in connection with the defense
thereof. No Indemnitee shall settle any indemnified claim over which the
Indemnitor has not been afforded the opportunity to assume the defense without
the Indemnitor's approval, which approval shall not be unreasonably withheld.
The Indemnitor shall control the settlement of all claims over which it has
assumed the defense; provided, however, that the Indemnitor shall not conclude
any settlement which requires any action or forbearance from action by an
Indemnitee or any of its Affiliates or payment by an Indemnitee or any of its
affiliates, without the prior approval of the Indemnitee. The Indemnitee shall
provide reasonable assistance to the Indemnitor when the Indemnitor so
requests, at the Indemnitor's expense, in connection with such legal action or
claim. In all cases the Indemnitee shall have the right to participate in and
be represented by counsel of its own choice and at its own expense in any such
legal action or with respect to any claim.

      12.6  PAYMENT. In the event either Party is required to make an indemnity
payment under this Article 12.0, such Party shall promptly pay the Indemnitee
the amount so determined. The amount owing to the Indemnitee shall be the
amount of such Indemnitee's actual out-of-pocket loss or expense, net of any
insurance or other recovery paid to such Indemnitee. If there should be a
dispute as to the amount or manner of determination of any indemnity
obligation, the Indemnitor shall nevertheless pay when due such portion, if
any, of the obligation as is not subject to dispute, and the matter shall be
referred to dispute resolution in accordance with the provisions of Article
17.0. Upon the payment in full of any claim, the Indemnitor making payment
shall be subrogated to the rights of the Indemnitee against any person with
respect to the subject matter of such claim.

      12.7  SURVIVAL. The Parties expressly acknowledge and agree that the
provisions of this Article 12.0 shall survive the expiration or other
termination of this Agreement with respect to events, occurrences and claims
arising on or before such expiration or other termination.

                                       37

<PAGE>   39

                                  ARTICLE 13.0
                                   INSURANCE

      13.1  CARR INSURANCE. From and after the Effective Date for the Term of
the Agreement, Carr shall obtain and maintain at its expense the minimum
insurance coverage for the Facility set forth in Exhibit G attached hereto
under individual or blanket insurance policies, with insurance companies rated
"A" or better by Best's Insurance Guide and Key Ratings, or otherwise
reasonably acceptable to CPS.

      13.2  REQUIREMENTS OF CARR INSURANCE. The insurance obtained by Carr
pursuant to Section 13.1 (other than workers' compensation coverage) shall name
CPS as an additional insured (to the extent of Carr's indemnity obligations
under this Agreement) and shall include provisions or endorsements stating that
such insurance is primary insurance with respect to the interests of CPS and
that any insurance maintained by CPS is excess and not contributory insurance
with the insurance required hereunder. In addition, such insurance shall:

            (a)   provide a severability of interests or cross liability clause
                  for general liability and excess liability coverage, to the
                  extent available on commercially reasonable terms;

            (b)   provide that CPS shall have the right, but not any
                  obligation, to pay the premiums thereon if Carr shall fail to
                  do so;

            (c)   waive any right of subrogation against CPS, and waive any
                  other right of the insurers to any offset or counterclaim or
                  any other deduction, whether by attachment or otherwise, in
                  respect of any liability of CPS;

            (d)   provide that such insurance may not be canceled or materially
                  changed without at least thirty (30) days' (ten (10) days' in
                  the case of non-payment of premiums) prior written notice
                  sent by registered mail or courier to CPS; and

            (e)   to the extent available on commercially reasonable terms, be
                  endorsed as follows, or with substantially similar language:
                  "The breach of any of the warranties or conditions of this
                  policy by Carr shall not prejudice the rights of any
                  additional insured under this policy."

                                       38

<PAGE>   40

      13.3  PAYMENT OF DEDUCTIBLES. Carr's insurance shall have reasonable
deductibles and Carr shall be solely responsible for the payment of all such
deductible amounts, unless the loss or damage is caused in whole or in part by
the fault or negligence of CPS or any of its contractors, in which case the
deductible shall be shared or apportioned as between Carr and CPS in proportion
to the degree of fault of each Party. Losses under Carr's insurance shall be
adjusted by Carr, with assistance from CPS as necessary to document the loss,
and Carr and/or the Facility Lender shall be designated as loss payee with
respect to any property insurance covering the Facility.

      13.4  CERTIFICATES OF INSURANCE. On or before the Effective Date and from
time to time thereafter upon the reasonable request of CPS, Carr shall deliver
to CPS certificates of insurance evidencing that the insurance required under
Section 13.1 is in effect, which certificates shall adequately show that such
insurance complies with the requirements of Section 13.2.

      13.5  NONWAIVER. The failure of Carr to comply with the foregoing
insurance requirements of this Article 13.0 shall in no way affect its
obligations or liabilities under this Agreement, nor shall the failure of any
insurance company for any reason to pay claims accruing with respect to such
insurance affect, negate or release Carr from any of the provisions of this
Agreement, including the indemnity obligations set forth in Article 12.0. The
insurance coverages to be provided by Carr hereunder are not intended to and
shall not in any manner limit or qualify the obligations of Carr under this
Agreement, except to the extent any proceeds of such insurance are applied in
satisfaction of Carr's obligations.

                                       39

<PAGE>   41

                                  ARTICLE 14.0
                                 FORCE MAJEURE

      14.1  EXCUSED PERFORMANCE. Each Party shall be excused from performance
and shall not be considered to be in default, or be liable to the other Party
for damages, with respect to any obligation under this Agreement, except the
obligation to make payment as specified herein with respect to amounts which
are due and payable under this Agreement, if and to the extent that its failure
of, or delay in, performance is due to an event of Force Majeure; provided,
that:

            (a)   Such Party gives the other Party written notice describing
                  the particulars of the Force Majeure as soon as is reasonably
                  practicable but in no event later than five (5) days after
                  the Party first becomes aware of the occurrence or
                  commencement of such event;

            (b)   The suspension or delay of performance is of no greater scope
                  and of no longer duration than is reasonably required by the
                  event of Force Majeure;

            (c)   No default by the affected Party which occurred before the
                  occurrence causing the suspension of performance is excused
                  as a result of the occurrence;

            (d)   The Party uses its reasonable efforts to overcome or mitigate
                  the effects of such occurrence; and

            (e)   When the Party is able to resume performance of its
                  obligations under this Agreement, such Party shall give the
                  other Party written notice to that effect and shall promptly
                  resume performance hereunder.

For avoidance of doubt, interruption of firm gas supply or transportation due
to an event of Force Majeure shall excuse performance by CPS as provided in
this section; and failure of Carr to perform its obligations hereunder caused
by CPS' failure to deliver Fuel shall excuse performance by Carr.

      14.2  EXCLUSIONS.  Notwithstanding the provisions of Section 14.1 above
or any other provision of this Agreement to the contrary:

                                       40

<PAGE>   42

            (a)   The term "Force Majeure" shall not include or excuse the loss
                  by CPS of FERC-approved marketer status or the loss by Carr
                  of FERC-approved electric wholesale generator or market-based
                  rate authority status, unless such loss is itself caused by
                  an event of Force Majeure;

            (b)   The provisions of Section 14.1(d) above shall not require
                  either Party to settle any strike, walkout, lockout or other
                  labor dispute on terms which, in the sole judgment of the
                  Party involved in the dispute, are contrary to its interest,
                  it being understood and agreed that the settlement of
                  strikes, walkouts, lockouts or other labor disputes shall be
                  entirely within the discretion of the Party having such
                  dispute; and

            (c)   CPS shall have no obligation to make payment of the Fixed
                  Market Output Payment with respect to any period during which
                  either Party is excused from performance due to an event of
                  Force Majeure.

      14.3  BURDEN OF PROOF. In the event the Parties are unable in good faith
to agree that an event of Force Majeure has occurred, the Parties shall submit
the dispute for resolution pursuant to Article 17.0 and the Party claiming a
Force Majeure shall have the burden of proof as to whether such Force Majeure
(a) has occurred, (b) was not a result of such Party's fault or negligence and
(c) could not have been avoided by due diligence or the use of reasonable
efforts by such Party.

      14.4  EXTENDED FORCE MAJEURE. Notwithstanding any provision in this
Agreement to the contrary, in the event either Party is rendered substantially
unable to perform its material obligations hereunder due to Force Majeure and
the continuing effect of such Force Majeure has not been fully removed or
alleviated within six (6) months after the date such Force Majeure was
initially declared, then either Party shall have the right, so long as such
Force Majeure (or the effect thereof) continues, to terminate the Agreement,
without further liability or responsibility hereunder (except for any liability
which expressly survives the termination of the Agreement), upon thirty (30)
days written notice to the other Party.

                                       41

<PAGE>   43

                                  ARTICLE 15.0
                                  DEFAULT AND
                               EARLY TERMINATION

      15.1  TERMINATION FOR DEFAULT.

            15.1.1 EVENT OF DEFAULT. An event of default under the Agreement
(an "EVENT OF DEFAULT") shall be deemed to exist with respect to a Party (the
"DEFAULTING PARTY") upon the occurrence of any one or more of the following:

            (a)   the Bankruptcy of the Defaulting Party;

            (b)   a failure by the Defaulting Party to make, when due, any
                  undisputed payment required pursuant to this Agreement, if
                  the Defaulting Party does not cure such failure within thirty
                  (30) days following receipt of notice from the other Party
                  demanding payment;

            (c)   a failure by the Defaulting Party to perform any other of its
                  material obligations under this Agreement in accordance with
                  the requirements of the Agreement, if the Defaulting Party
                  does not cure such failure within thirty (30) days following
                  receipt of notice from the other Party demanding such cure
                  (or, if such failure is curable, within such longer period of
                  time, not to exceed a maximum cure period of ninety (90)
                  days, as is reasonably necessary to accomplish such cure
                  without material adverse effect on the other Party, if the
                  cure cannot be reasonably accomplished within such thirty
                  (30)-day period and the Defaulting Party diligently commences
                  and completes such cure in such longer period); provided,
                  however, that, for avoidance of doubt, no Event of Default
                  shall be deemed to exist hereunder as a result of a failure
                  of the Facility to meet the Annual Heat Rate Guarantee set
                  forth in Section 7.3 above (which failure shall be governed
                  by the provisions of Section 7.3.2) or as a result of a
                  failure of the Facility to achieve the Minimum On-Peak
                  Dispatch Availability set forth in Section 5.3 above (which
                  failure shall be governed by the provisions of Section
                  11.1.5;

            (d)   a breach by the Defaulting Party of any material
                  representation or warranty of such Party set forth in this
                  Agreement, if within thirty

                                       42

<PAGE>   44

                   (30) days following receipt of notice from the other Party
                   demanding such cure, the Defaulting Party does not cure such
                   breach by curing the facts underlying such incorrect
                   representation or warranty so as to make such incorrect
                   representation or warranty correct (or, if such breach is
                   curable, within such longer period of time, not to exceed a
                   maximum cure period of ninety (90) days, as is reasonably
                   necessary to accomplish such cure without material adverse
                   effect on the other Party, if the cure cannot be reasonably
                   accomplished within such thirty (30)-day period and the
                   Defaulting Party diligently commences and completes such
                   cure in such longer period); or

            (e)    a failure by the Defaulting Party to comply with the terms
                   of any final resolution of a dispute pursuant to Article
                   17.0 below, if the Defaulting Party does not cure such
                   failure within thirty (30) days following receipt of notice
                   from the other Party demanding such cure (or, if such
                   failure is curable and does not constitute a failure to pay
                   money, within such longer period of time, not to exceed a
                   maximum cure period of ninety (90) days, as is reasonably
                   necessary to accomplish such cure without material adverse
                   effect on the other Party, if the cure cannot be reasonably
                   accomplished within such thirty (30)-day period and the
                   Defaulting Party diligently commences and completes such
                   cure in such longer period).

            15.1.2 REMEDIES. Subject to the limitations set forth in Articles
16.0 and 17.0 below, upon the occurrence and during the continuation of an
Event of Default, the Party not in default shall have the right to pursue any
remedy under this Agreement or now or hereafter existing under applicable Law
or in equity, including an action for direct damages and/or specific
performance and including termination of the Agreement upon twenty (20) days
written notice to the Defaulting Party; provided, however, that in the case of
an Event of Default by Carr, CPS shall provide the Facility Lender with notice
of such Event of Default and the Facility Lender shall have the rights set
forth in the Consent and Agreement to be entered into among Carr, CPS and the
Facility Lender pursuant to the provisions of Section 20.3 below.
Notwithstanding the foregoing and notwithstanding any other provision in this
Agreement to the contrary, Carr shall have the right, in addition to all other
rights and remedies hereunder, after five (5) days prior notice to CPS, to
suspend or curtail the performance of Fuel Conversion Services hereunder upon
and during an Event of Default as to CPS involving a failure of CPS to comply
with the payment provisions of the Agreement.

            15.1.3 REMEDIES CUMULATIVE. Except as otherwise expressly provided
herein, all rights and remedies of the Parties set forth in this Agreement
shall be

                                       43

<PAGE>   45

cumulative and no remedy available to a Party not in default hereunder shall be
exclusive of any other remedy.

      15.2  OPTIONAL TERMINATION BY CPS. Notwithstanding any provision in this
Agreement to the contrary, CPS, at its sole election, may terminate the
Agreement at any time for its convenience upon thirty (30) days prior written
notice to Carr. Upon a termination pursuant to this Section 15.2, CPS shall
have no further liability or obligation to Carr (except as provided in this
Section and except for any other liability which expressly survives termination
of the Agreement), and Carr shall accept in full satisfaction and discharge of
all obligations owed to Carr with respect to the Agreement, an amount equal to
the sum of the following:

            (a)   all amounts due or becoming due pursuant to this Agreement
                  for Fuel Conversion Services rendered and Dependable Capacity
                  made available up to the Agreement termination date; plus

            (b)   an amount equal to the amount required to repay in full the
                  principal amount of all Facility Debt outstanding under the
                  Financing Documents at the Agreement termination date;
                  provided, however, that, regardless of any refinancing of
                  Facility Debt following the Effective Date, CPS shall not be
                  obligated hereunder to pay Carr a principal amount that
                  exceeds the principal amount of Facility Debt outstanding
                  under the Financing Documents on the Effective Date (reduced
                  up to the termination date in accordance with the original
                  repayment schedule set forth in such Financing Documents as
                  of the Effective Date); plus

            (c)   an amount equal to the amount required to pay all interest
                  period breakage costs, prepayment premiums and penalty,
                  interest rate swap breakage costs and other similar
                  termination payments payable under the Financing Documents or
                  under other agreements entered into by Carr in connection
                  with the Financing Documents with respect to the Facility
                  Debt payable pursuant to clause (b) above.

                                       44

<PAGE>   46

CPS shall pay such amounts to Carr, in accordance with the payment provisions
set forth in Section 11.2.2 above, within five (5) days following the
termination date, or within fifteen (15) days following CPS's receipt of Carr's
invoice therefor (together with such supporting documentation as CPS may
reasonably request), whichever is later. The determination of all amounts
payable pursuant to the foregoing with respect to the Financing Documents shall
be certified in writing by the Facility Lender, which certification shall be
included with Carr's invoice therefor.

      15.3  TERMINATION FOR FAILURE OF EFFECTIVE DATE TO OCCUR. Upon the
written notice of either Party, this Agreement shall terminate and be of no
force or effect, without liability or obligation on the part of either Party,
in the event the Effective Date does not occur on or before December 31, 1998.

      15.4  TERMINATION RIGHTS OF CPS FOR SUMMER UNAVAILABILITY.
Not-withstanding anything else contained herein to the contrary, in the event
that for any Contract Year, the total of: (1) any liability of Carr pursuant to
Section 7.3.2 in the preceding Contract Year, (2) any Availability Adjustment
to Fixed Market Output Payment pursuant to Section 11.1.5(a) for such Contract
Year, and (3) any Availability Adjustment to Fixed Market Output Payment
pursuant to Section 11.1.5(b) for such Contract Year exceeds ten percent (10%)
of the Fixed Market Output Payment payable by CPS with respect to such Contract
Year, CPS shall have the right to terminate this Agreement at any time during
such Contract Year upon twenty (20) days written notice to Carr. Provided
however that CPS shall not have the right to terminate as set forth in this
Section 15.4, unless Carr's performance shall have triggered an Availability
Adjustment to Fixed Market Output Payment pursuant to Section 11.1.5(b) for
such Contract Year. With respect to the calculation of liability of Carr
pursuant to Section 7.3.2 for the 1999 Contract Year, the liability of Carr
under (1) above shall be that incurred in the 1999 Contract Year and CPS's
right to terminate shall extend until January 31, 2000.

                                       45

<PAGE>   47

                                  ARTICLE 16.0
                                   LIABILITY

      16.1  LIMITATION OF AVAILABILITY ADJUSTMENT AND HEAT RATE DAMAGES.
Subject to the overall limitation on Carr's liability under this Agreement as
set forth in Section 16.2 below, the Parties agree that the aggregate
cumulative liability of Carr hereunder with respect to operating guarantees or
performance for any Contract Year during the Term, including liability pursuant
to Section 7.3.2 for excess Gas or Fuel Oil utilized by the Facility during any
Contract Year and including Availability Adjustments to the Fixed Market Output
Payment pursuant to Section 11.1.5 with respect to any Contract Year, shall not
exceed an amount equal to ten percent (10%) of the Fixed Market Output Payment
payable by CPS with respect to such Contract Year.

      16.2  AGGREGATE YEARLY LIMIT OF LIABILITY. Notwithstanding any other
provision in this Agreement to the contrary, the Parties agree that Carr's
aggregate cumulative liability to CPS in any Contract Year arising out of or
relating to this Agreement from any and all causes, including liability for
Availability Adjustments to the Fixed Market Output Payment and liability for
excess Fuel utilization, shall not exceed an amount equal to the Fixed Market
Output Payment for such Contract Year.

      16.3  WAIVER OF CONSEQUENTIAL DAMAGES. In no event shall either Carr or
CPS, or their respective officers, directors, partners, shareholders,
Affiliates, agents, employees, successors, assigns, suppliers or contractors be
liable to the other Party hereunder or to its officers, directors, partners,
shareholders, Affiliates, agents, employees, successors, assigns, suppliers or
contractors for special, indirect, consequential, punitive or exemplary damages
of any nature or kind whatsoever, including loss of profits or revenue (except
with respect to payments and amounts expressly provided for in the Agreement),
outages or service interruptions of the Facility (except with respect to
Availability Adjustments expressly provided for in the Agreement), loss of
contracts, cost of capital or claims of customers, and Carr hereby releases CPS
therefrom, and CPS hereby releases Carr therefrom.

      16.4  INTENT. The Parties intend that the waivers and disclaimers of
liability, releases from liability, limitations and apportionments of
liability, and exclusive remedy provisions expressed throughout this Agreement
shall apply, whether in contract, tort or otherwise, even in the event of the
fault, negligence (in whole or in part), strict liability or breach of contract
of the Party released or whose liability is waived, disclaimed, limited,
apportioned or fixed by such exclusive remedy provision, and shall extend to
such Party's Affiliates, contractors and suppliers, and to its and

                                       46

<PAGE>   48

their partners, shareholders, directors, officers, employees and agents. The
Parties also intend and agree that such provisions shall continue in full force
and effect notwithstanding the expiration or earlier termination of the
Agreement. The Parties confirm that (a) the exclusive remedies and measures of
damages provided in this Agreement satisfy the essential purposes hereof, (b)
for breach of any provision for which an exclusive remedy or measure of damages
is provided, such exclusive remedy or measure of damages shall be the sole and
exclusive remedy, (c) the obligor's liability shall be limited as set forth in
such provisions, and (d) with respect to such provisions, all other remedies or
damages at law or in equity are waived.

      16.5  DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED HEREIN, CARR MAKES NO
WARRANTIES OR GUARANTEES, EXPRESS OR IMPLIED, CONCERNING THE FACILITY, THE
DEPENDABLE CAPACITY, MARKET OUTPUT, HEAT RATE, AVAILABILITY OR ANY OTHER MATTER
UNDER THIS AGREEMENT, AND CARR DISCLAIMS ANY WARRANTY OR GUARANTY IMPLIED BY
LAW, AS WELL AS WARRANTIES OF CUSTOM OR USAGE.

                                       47

<PAGE>   49

                                  ARTICLE 17.0
                               DISPUTE RESOLUTION

      17.1  NEGOTIATION OF DISPUTES.

            17.1.1 DISPUTES NOT INVOLVING AN EVENT OF DEFAULT. In the event of
any claim, dispute or disagreement (a "DISPUTE") arising out of or relating to
the implementation or performance of this Agreement which the Parties have been
unable to settle or agree upon within a period of thirty (30) days after the
Dispute arises and which is not a Dispute involving an alleged Event of Default
by either Party, the Chief Executive Officers of each Party shall meet, upon
the request of either Party (the "FIRST TRIGGER"), in a good faith effort to
reasonably resolve the Dispute. If such Chief Executive Officers are unable to
resolve the Dispute within fifteen (15) days of the First Trigger, or if either
Chief Executive Officer earlier requests such a meeting (in either case, the
"SECOND TRIGGER"), the respective Chairmen of the Board of each Party, or an
equivalent director or officer, shall meet in a good faith effort to reasonably
resolve the Dispute, and if such individuals are unable to reach a resolution
within fifteen (15) days following the Second Trigger, then either Party may by
notice to the other submit the Dispute to arbitration in accordance with the
provisions of Section 17.2 below. The Parties agree, however, in the case of
technical Disputes, that prior to submission of the Dispute to arbitration by
either Party, the Parties shall consider attempting to resolve the Dispute by
referring the matter to the Independent Engineer for resolution in accordance
with procedures to be mutually agreed upon.

            17.1.2 DISPUTES INVOLVING AN EVENT OF DEFAULT. In the event of any
Dispute arising out of or relating to the implementation or performance of this
Agreement which involves an alleged Event of Default by either Party and with
respect to which any applicable notice requirement and cure period set forth in
Section 15.1.1 have been met, the Chief Executive Officers of each Party shall
meet, upon the request of either Party (the "EVENT OF DEFAULT TRIGGER"), in a
good faith effort to reasonably resolve the Dispute. If such Chief Executive
Officers are unable to resolve the Dispute within fifteen (15) days of the
Event of Default Trigger, or if either Chief Executive Officer earlier requests
such a meeting, the respective Chairmen of the Board of each Party, or an
equivalent director or officer, shall meet in a good faith effort to reasonably
resolve the Dispute, and if such individuals are unable to reach a resolution
within thirty (30) days following the Event of Default Trigger, then either
Party may by notice to the other submit the Dispute to arbitration in
accordance with the provisions of Section 17.2 below. The Parties agree,
however, in the case of technical Disputes, that prior to submission of the
Dispute to arbitration by either Party, the Parties shall

                                       48

<PAGE>   50

consider attempting to resolve the Dispute by referring the matter to the
Independent Engineer for resolution in accordance with procedures to be
mutually agreed upon.

      17.2  ARBITRATION.

            17.2.1 PROCEDURES. Any Dispute arising out of or relating to this
Agreement or the breach or termination thereof which is not settled in
accordance with the provisions of Section 17.1 above shall be submitted to
binding arbitration to be conducted in accordance with the following procedure:

                   (a)  The Party seeking arbitration hereunder may request
                        such arbitration in writing, which writing shall
                        include a clear statement of the matter(s) in dispute
                        and shall name one arbitrator appointed by such Party.
                        Within twenty (20) days after receipt of such request,
                        the other Party shall appoint one arbitrator, or in
                        default thereof, such arbitrator shall be named as soon
                        as practicable by the Arbitration Committee of the
                        American Arbitration Association, and the two
                        arbitrators so appointed shall name a third arbitrator
                        within ten (10) days, or failing such agreement on a
                        third arbitrator by the two arbitrators so appointed, a
                        third arbitrator shall be appointed by the Arbitration
                        Committee of the American Arbitration Association.

                   (b)  The arbitration hearing shall be held in New York City,
                        New York, on at least thirty (30) days prior written
                        notice to the Parties.  Except as otherwise provided
                        herein, the proceedings shall be conducted in
                        accordance with the Expedited Procedures of the
                        Commercial Arbitration Rules and procedures of the
                        American Arbitration Association; provided, that
                        depositions may be taken and discovery may be made in
                        accordance with the Federal Rules of Civil Procedure.
                        Any decision of the arbitrators, including a decision
                        regarding an allocation of costs consistent with this
                        Section 17.2.1, shall be joined in by at least two of
                        the arbitrators and shall be set forth in a written
                        award which shall state the basis of the award and
                        shall include both findings of fact and conclusions of
                        law.  Any award rendered pursuant to the foregoing,
                        which may include an award or decree of specific
                        performance hereunder, shall, subject to clause (c)
                        below, be final and binding on the Parties, and
                        judgment thereon may be

                                       49

<PAGE>   51

                        entered or enforcement thereof sought by either Party
                        in a court of competent jurisdiction.

                   (c)  Either Party may appeal an arbitration award to a court
                        of competent jurisdiction to the extent such Party is
                        aggrieved by the arbitrators' conclusion(s) of law.
                        Additionally, the Parties may appeal a finding of fact
                        to the extent a court of competent jurisdiction
                        determines that such finding was clearly erroneous.

                   (d)  Notwithstanding the foregoing, nothing contained herein
                        shall be deemed to give the arbitrators appointed
                        pursuant to the foregoing any authority, power or right
                        to alter, change, amend, modify, waive, add to or
                        delete from any of the provisions of this Agreement.

                   (e)  Each Party shall bear the costs of its appointed
                        arbitrator and its own attorneys' fees, and the costs
                        of the third arbitrator incurred in accordance with the
                        foregoing shall be shared equally by the Parties.
                        Additional incidental costs of arbitration shall be
                        paid for by the non-prevailing Party in the
                        arbitration; provided, that where the final decision of
                        the arbitrators is not clearly in favor of either
                        Party, such incidental costs shall be shared equally by
                        the Parties.

                   (f)  The Parties agree that compliance by a Party with the
                        provisions of subparagraphs (a) through (e) of this
                        Section 17.2.1 shall be a complete defense to any suit,
                        action or proceeding instituted in any federal or state
                        court, or before any administrative tribunal by the
                        other Party with respect to any controversy or dispute
                        arising under or pursuant to this Agreement and which
                        is subject to arbitration as set forth herein, other
                        than a suit or action alleging non-compliance with a
                        final and binding arbitration award rendered hereunder.

                   (g)  The Parties further agree that all aspects of the
                        arbitration, and any award made by the arbitrators,
                        shall be held confidential by the Parties and the
                        arbitrators.

            17.2.2 APPLICABLE LAW AND ARBITRATION ACT. The agreement to
arbitrate set forth in this Section 17.2 shall be enforceable in either federal
or state

                                       50

<PAGE>   52

court. The enforcement of such agreement and all procedural aspects thereof,
including the construction and interpretation of this agreement to arbitrate,
the scope of the arbitrable issues, allegations of waiver, delay or defenses as
to arbitrability, and the rules (except as otherwise expressly provided herein)
governing the conduct of the arbitration, shall be governed by and construed
pursuant to the United States Arbitration Act, 9 U.S.C. Sections 1-16. In
deciding the substance of any such claim, dispute or disagreement, the
arbitrators shall apply the substantive Laws of the State of New York;
provided, however, that the arbitrators shall have no authority to award
punitive damages under any circumstances (whether it be exemplary damages,
treble damages, or any other penalty or punitive type of damages) regardless of
whether such damages may be available under New York Law, the Parties hereby
waiving their right, if any, to recover punitive damages in connection with any
such claims, disputes or disagreements.

      17.3  PENDENCY OF DISPUTE. The existence of any Dispute under this
Agreement or the pendency of the Dispute settlement or resolution procedures
set forth herein shall not in and of themselves relieve or excuse either Party
from its ongoing duties and obligations under this Agreement.

                                  ARTICLE 18.0
                              CARR REPRESENTATIONS
                                 AND COVENANTS

      Carr hereby represents, warrants and covenants to CPS as follows:

      18.1  STANDING. It is a limited partnership duly organized, validly
existing and in good standing under the Laws of the State of Delaware and is
qualified to do business in New York and in all other jurisdictions in which
the nature of the business conducted by it makes such qualification necessary
and where failure so to qualify would have a material adverse effect on its
financial condition, operations, prospects or business or its ability to
perform its obligations under this Agreement.

      18.2  NO VIOLATION OF LAW; LITIGATION. It is not in violation of any
applicable Law promulgated or judgment entered by any national, state, or local
Governmental Authority which violations, individually or in the aggregate,
would affect its performance of any obligations under this Agreement. There are
no legal or arbitration proceedings or any proceeding by or before any
governmental or regulatory authority or agency, now pending or (to the best
knowledge of Carr) threatened against it which, if adversely determined, could
reasonably be expected to have a material adverse effect

                                       51

<PAGE>   53

on its financial condition, operations, prospects or business, as a whole, or
its ability to perform under this Agreement.

      18.3  LICENSES. It has made all filings with, and, except as set forth in
Article 3.0, obtained all consents, licenses, permits, and other approvals
from, all applicable Governmental Authorities which are required or appropriate
to be made or obtained to permit it to lawfully conduct its business now and as
contemplated by this Agreement.

      18.4  NO BREACH. None of the execution and delivery of this Agreement,
the consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent (except such consents as have been obtained or are
reasonably expected to be obtained in due course) under, the limited
partnership agreement or other organizational documents of Carr, or any
applicable Law or regulation, or any order, writ, injunction or decree of any
court, or any agreement or instrument to which it is a party or by which it is
bound or to which it or its property is subject, or constitute a default under
any such agreement or instrument.

      18.5  AUTHORITY, ETC. It has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by it of this Agreement have been duly
authorized by all necessary partnership action on its part; and this Agreement
has been duly and validly executed and delivered by it and constitutes the
legal, valid and binding obligation of Carr enforceable against it in
accordance with the terms hereof, except as such enforceability may be limited
by Bankruptcy, insolvency, reorganization or moratorium or other similar Laws
relating to the enforcement of creditors' rights generally and by general
equitable principles.

      18.6  ASSETS AND BUSINESS. Carr's assets consist, and at all times during
the Term will consist, solely of its interests in the Facility and assets
reasonably related thereto, and, during the Term, Carr will engage only in
activities and transactions contemplated by, or reasonably related to the
performance of its obligations under, this Agreement. As of the Effective Date,
Carr shall possess all rights and interests in the Facility and other assets
necessary to perform its obligations under this Agreement.

      18.7  COMPLIANCE WITH LAW. Carr's performance of its obligations under
this Agreement, including the performance of all Fuel Conversion Services, will
be in compliance in all material respects with all applicable federal, state
and local Laws, including Environmental Laws.

                                       52

<PAGE>   54

                                  ARTICLE 19.0
                              CPS REPRESENTATIONS
                                 AND COVENANTS

      CPS hereby represents, warrants and covenants to Carr as follows:

      19.1  STANDING. It is a corporation duly organized, validly existing and
in good standing under the Laws of the State of Delaware and is qualified to do
business in all other jurisdictions in which the nature of the business
conducted by it makes such qualification necessary and where failure so to
qualify would have a material adverse effect on its financial condition,
operations, prospects or business or its ability to perform its obligations
under this Agreement.

      19.2  NO VIOLATION OF LAW; LITIGATION. It is not in violation of any
applicable Law promulgated or judgment entered by any national or local
Governmental Authority which violations, individually or in the aggregate,
would affect its performance of any obligations under this Agreement. There are
no legal or arbitration proceedings or any proceeding by or before any
governmental or regulatory authority or agency, now pending or (to the best
knowledge of CPS) threatened against CPS which, if adversely determined, could
reasonably be expected to have a material adverse effect on the financial
condition, operations, prospects or business, as a whole, of CPS, or its
ability to perform under this Agreement.

      19.3  LICENSES. It has made all filings with, and obtained all consents,
licenses, permits, and other approvals from, all applicable Governmental
Authorities which are required or appropriate to be made or obtained to permit
it to lawfully conduct its business now and as contemplated by this Agreement.

      19.4  NO BREACH. None of the execution and delivery of this Agreement,
the consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent (except such consents as have been obtained or are
reasonably expected to be obtained in due course) under, the articles, bylaws
or other organizational documents of CPS, or any applicable Law or regulation,
or any order, writ, injunction or decree of any court, or any agreement or
instrument to which CPS is a party or by which it is bound or to which it or
its property is subject, or constitute a default under any such agreement or
instrument.

                                       53

<PAGE>   55

      19.5  AUTHORITY, ETC. It has all necessary power and authority to
execute, deliver and perform its obligations under this Agreement; the
execution, delivery and performance by CPS of this Agreement have been duly
authorized by all necessary corporate action on its part; and this Agreement
has been duly and validly executed and delivered by CPS and constitutes the
legal, valid and binding obligation of CPS enforceable against CPS in
accordance with the terms hereof, except as such enforceability may be limited
by Bankruptcy, insolvency, reorganization or moratorium or other similar Laws
relating to the enforcement of creditors' rights generally and by general
equitable principles.

      19.6  COMPLIANCE WITH LAW. CPS's performance of its obligations under
this Agreement, including all delivery of Fuel hereunder, will be in compliance
in all material respects with all applicable federal, state and local Laws,
including Environmental Laws.

                                  ARTICLE 20.0
                                   ASSIGNMENT

      20.1  AGREEMENT  BINDING.  This Agreement shall be binding upon, and
shall inure to the benefit of, the Parties hereto and their respective
successors and permitted assigns.

      20.2  ASSIGNMENT. This Agreement shall not be assignable by either Party
in whole or in part without the prior written consent of the other Party, which
consent shall be within the sole discretion of such other Party, except that:
(a) this Agreement may be collaterally assigned in whole by Carr without such
consent to the Facility Lender; and (b) this Agreement may be assigned without
such consent to the successor (by merger, consolidation, or acquisition) of
either Party, or, in the case of CPS, to any direct or indirect wholly-owned
subsidiary of Baltimore Gas and Electric Company, or successor, but such
assignment shall not relieve the assigning Party of any of its obligations
under this Agreement. Except for an assignment to the Facility Lender, no
assignment by either Party of this Agreement for any purpose whatsoever shall
be valid until all obligations of the assignor hereunder shall have been
assumed by the assignee by written agreement delivered to the other Party. Any
assignment which does not comply with the provisions of this Section 20.2 shall
be null and void.

      20.3  FACILITY LENDER REQUESTED DOCUMENTS. In connection with any
collateral assignment by Carr of this Agreement to the Facility Lender as set
forth in Section 20.2 above, CPS agrees to execute and deliver a Consent and
Agreement to

                                       54

<PAGE>   56

such assignment in the form reasonably requested by the Facility Lender and
reasonably acceptable to CPS; provided that such Consent and Agreement, or any
substitute Consent and Agreement reasonably requested by the Facility Lender,
shall not result in, or purport to constitute, an amendment or modification of
this Agreement. CPS further agrees to furnish the Facility Lender with such
other documents as may reasonably be requested by the Facility Lender,
including (as applicable) an opinion of counsel to CPS, certificates of good
standing, organizational certificates and resolutions of CPS's board of
directors authorizing the execution and delivery of this Agreement and the
Consent and Agreement.

                                  ARTICLE 21.0
                                 PROPRIETARY &
                            CONFIDENTIAL INFORMATION

      21.1  NON-DISCLOSURE OBLIGATION. Neither Party shall disclose to third
parties any confidential or proprietary information regarding the other Party's
business affairs, finances, technology, processes, plans or installations,
product information, know-how, or other information that is received from the
other Party pursuant to this Agreement or the Parties' relationship prior
thereto and that is clearly marked "confidential", without the express written
consent of the other Party, which consent shall not be unreasonably withheld.
In addition, except as reasonably required by Carr for financing the
acquisition of the Facility or as reasonably required by either Party for
performing its obligations hereunder, both Parties shall at all times use their
reasonable efforts to keep all information regarding the terms and conditions
of this Agreement confidential. This Section 21.1 shall not apply to
information that was already in the possession of one Party prior to receipt
from the other, that is now or hereafter becomes a part of the public domain
through no fault of the Party wishing to disclose, or that corresponds in
substance to information heretofore or hereafter furnished by third parties
without restriction on disclosure.

      21.2  REQUIRED DISCLOSURE. If a Party is compelled by Law to disclose
information that is otherwise required to be maintained in confidence pursuant
to Section 21.1 above, or if disclosure is required in connection with the
assertion of any claim or defense in judicial or administrative proceedings
involving a Party, the Party may make disclosure notwithstanding the provisions
of Section 21.1; provided, however, that the Party making the disclosure shall
immediately notify the other Party of the requirement and the terms thereof
prior to the submission and shall cooperate to the maximum extent practicable
to minimize the disclosure of the information. The Party disclosing such
information shall use its reasonable efforts, at the cost of the

                                       55

<PAGE>   57

other Party, to obtain proprietary or confidential treatment of such
information by the third party to whom the information is disclosed, and shall,
to the extent such remedies are available, seek protective orders limiting
dissemination and use of the information. This Agreement does not alter the
rights of either Party to challenge any Law requiring the disclosure.

      21.3  TERM OF OBLIGATION. The confidentiality obligations of the Parties
pursuant to this Article 21.0 shall survive the expiration or other termination
of this Agreement for a period of two (2) years. Upon such expiration or other
termination, each Party shall promptly return to the other Party, upon request,
any confidential information of the other Party supplied in documentary form.

                                  ARTICLE 22.0
                                    NOTICES

      22.1  WRITING. Any notice, invoice, demand, offer or other written
instrument required or permitted to be given pursuant to this Agreement (unless
expressly permitted to be sent electronically) shall be in writing signed by
the Party giving such notice and shall, to the extent reasonably practicable,
be sent by telefax, and if not reasonably practicable to send by telefax, then
by hand delivery, overnight courier, or registered mail, to the other Party at
the address set forth below:

                                       56

<PAGE>   58

            If delivered to Carr:

            c/o Orion Power Holdings, Inc.
            111 Market Place
            Baltimore, MD  21202
            FAX:  410-468-3699
            Attention: Jack Fusco, COO

            with a copy to:

            c/o Orion Power Holdings, Inc.
            111 Market Place
            Baltimore, MD  21202
            FAX:  410-468-3699
            Attention:  Scott Helm, CFO

            If delivered to CPS:

            111 Market Place
            Baltimore, MD 21202
            FAX: 410-468-3496
            Attention: Dale Meyer, Vice President

            with a copy to:

            111 Market Place
            Baltimore, MD 21202
            FAX: 410-468-3496
            Attention:  Dave Perlman, General Counsel

Each Party shall have the right to change the place to which notice shall be
sent or delivered or to specify one additional address to which copies of
notices may be sent, in either case by similar notice sent or delivered in like
manner to the other Party.

                                       57

<PAGE>   59

      22.2  TIMING OF RECEIPT. Without limiting any other means by which a
Party may be able to prove that a notice has been received by the other Party,
a notice shall be deemed to be duly received:

            (a)   If delivered by hand, overnight courier or telegram, the date
                  when left at the address of the recipient;

            (b)   If sent by registered mail, the date of the return receipt;
                  or

            (c)   If sent by telefax, upon receipt by the sender of an
                  acknowledgment or transmission report generated by the
                  machine from which the telefax was sent indicating that the
                  telefax was sent in its entirety to the recipient's telefax
                  number.

In any case hereunder in which a Party is required or permitted to respond to a
notice from the other Party within a specified period, such period shall run
from the date on which the notice was deemed received as above provided, and
the response shall be considered to be timely given if given as above provided
by the last day of such period.

                                  ARTICLE 23.0
                            MISCELLANEOUS PROVISIONS

      23.1  CONDITIONS PRECEDENT. The obligations of Carr and CPS to proceed
with the transactions contemplated by this Agreement shall be expressly subject
to fulfillment, on or prior to the Effective Date, of the following conditions
precedent, unless waived in writing by both parties:

            (a)   Carr shall have assigned, or caused to be assigned, to CPS
                  that certain NiMo Gas Transportation Agreement dated June 26,
                  1998 (the "GAS TRANSPORTATION AGREEMENT"), and CPS shall have
                  duly accepted such assignment and assumed, as of the
                  Effective Date, all of the obligations of the assignor
                  thereunder;

            (b)   Such assignment of the Gas Transportation Agreement shall be
                  effective as to NiMo;

            (c)   All required regulatory approvals for Carr to sell the
                  Facility's Dependable Capacity and provide Fuel Conversion
                  Services in

                                       58

<PAGE>   60

                  accordance with this Agreement and otherwise perform its
                  obligations hereunder shall have been obtained; and

            (d)   Carr shall have completed the purchase of the Facility and
                  the Facility Site, and shall have executed all agreements
                  (whether by assignment of existing agreements or by execution
                  of new agreements) required for the operation of the Facility
                  in accordance with this Agreement, including an
                  interconnection agreement with NiMo and the Operation and
                  Maintenance Agreement, and all such agreements shall be in
                  full force and effect.

      23.2  SCHEDULING COORDINATOR. CPS shall perform the function of
scheduling coordinator for the Facility, as contemplated under the rules and
procedures of the NYPP/NY ISO. Notwithstanding any provision in this Agreement
to the contrary, CPS may subcontract its duties pursuant to this Section 23.2,
without the consent of Carr, to any person permitted by the NYPP/NY ISO;
provided, however, that if CPS proposes to subcontract such duties to any
person who is not an Affiliate of CPS, it shall first offer such subcontract to
Carr.

      23.3  JOINT EFFORT. Preparation of this Agreement has been a joint effort
of the Parties and the resulting document shall not be construed more severely
against one of the Parties than against the other.

      23.4  CAPTIONS. The captions contained in this Agreement are for
convenience and reference only and in no way define, describe, extend or limit
the scope or intent of this Agreement or the intent of any provision contained
herein.

      23.5  SEVERABILITY. The invalidity of one or more phrases, sentences,
clauses, Sections or Articles contained in this Agreement shall not affect the
validity of the remaining portions of the Agreement so long as the material
purposes of this Agreement can be determined and effectuated.

      23.6  NO WAIVER. Any failure of either Party to enforce any of the
provisions of this Agreement or to require compliance with any of its terms at
any time during the pendency of this Agreement shall in no way affect the
validity of this Agreement, or any part hereof, and shall not be deemed a
waiver of the right of such Party thereafter to enforce any and each of such
provisions.

      23.7  APPLICABLE LAW.  This Agreement shall be governed by, construed and
enforced in accordance with the Laws of the State of New York, exclusive of
conflicts of laws provisions.

                                       59

<PAGE>   61

      23.8  COUNTERPARTS. This Agreement may be signed in any number of
counterparts and each counterpart shall represent a fully executed original as
if signed by both Parties.

      23.9  SURVIVAL. The provisions of Articles 12.0, 18.0 and 19.0 and
Section 8.2 of this Agreement shall survive the expiration or earlier
termination of this Agreement for the terms specified therein, if any, and
otherwise indefinitely.

      23.10 FURTHER ASSURANCES. Each Party agrees to execute and deliver all
further instruments and documents, and take all further action not inconsistent
with the provisions of this Agreement that may be reasonably necessary to
complete performance of the Parties' obligations hereunder and to effectuate
the purposes and intent of this Agreement.

      23.11 INDEPENDENT CONTRACTOR, ETC. The Parties shall each be independent
contractors with respect to the performance of this Agreement, and neither
Party, nor its employees, contractors, agents or representatives shall be
deemed to be the servants, employees, agents or representatives of the other
Party in any respect. Nothing contained in this Agreement shall be construed as
constituting a joint venture, partnership or other association between Carr and
CPS, and neither Party shall be authorized to act on behalf of or to bind the
other Party or to make any representation about or on behalf of such other
Party.

      23.12 THIRD PARTIES. Except as otherwise expressly provided in this
Agreement with respect to indemnified persons, nothing in this Agreement shall
be construed to create any duty to, standard of care with respect to, or any
liability to any person who is not a party to this Agreement.

      23.13 ANNOUNCEMENTS. Except as otherwise required by Law or the rules of
the New York Stock Exchange, for so long as this Agreement is in effect,
neither Party shall, nor shall either Party permit its Affiliates to, issue or
cause the publication of any press release or other public announcement with
respect to the transactions contemplated by this Agreement without the prior
review of the other Party.

      23.14 EXPENSES. Whether or not the transactions contemplated by this
Agreement are consummated, each Party shall pay all of its own costs and
expenses incurred in connection with the negotiation and execution of this
Agreement.

      23.15 NO PRECEDENTIAL VALUE.  The Parties agree that this Agreement shall
not have any precedential value for any other future dealings or arrangements
between the Parties.

                                       60

<PAGE>   62

                              AGREEMENT EXECUTION

      IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
as of the date set forth in the preamble to this Agreement by their duly
authorized representatives as follows:

CARR:

CARR STREET GENERATING STATION, L.P.

by                      , its General Partner
  ----------------------

By:
    --------------------------
Name:
      ------------------------
Title:
       -----------------------

CPS:

CONSTELLATION POWER SERVICES, INC.

By:
    --------------------------
Name:
      ------------------------
Title:
       -----------------------

                                       61

<PAGE>   63

                                   EXHIBIT A

                          DESCRIPTION OF FACILITY AND
                         DESIGNATION OF DELIVERY POINTS

The Facility is a natural gas fired dual combustion turbine, single steam
turbine combined cycle electric generation facility that produces up to 105
gross megawatts of power. The Facility also has the capability to fire No. 2
low sulfur fuel oil, and may produce up to 80,000 pounds per hour of process
steam with a proportionate reduction in electrical power output up to
approximately 5 MW.

Natural gas is delivered to the Facility via pipeline and No. 2 low sulfur fuel
oil is delivered by truck. No. 2 fuel oil is stored in a tank on site prior to
burning in the combustion turbines. The combined cycle heat rate without steam
generation is approximately 8,000 Btu/kwh.

Electricity is delivered to the NiMo transmission system via a NiMo substation
located on the Facility Site. The electric power is generated at 13,800 volts
and transformed to 115,000 volts at 60 hertz with a power factor as dispatched
to meet market conditions.

Steam is produced by a reboiler system that isolates the process steam from the
steam turbine condensate cycle. Steam is delivered to the Facility gate via
pipeline at a flow of 20,000 to 80,000 pounds per hour at a temperature of 358
degrees F to 378 degrees F, and a pressure of 135 to 155 psig.

The designated Delivery Points at the Facility are as follows:

1. For Gas delivered by CPS, the delivery point to Carr shall be the metered
   interconnection owned and maintained by NiMo between NiMo's facilities and
   the Facility.

2. For Fuel Oil delivered by CPS, the delivery point to Carr shall be the
   suction valve on the Fuel Oil unloading pumps for storage in the on-site
   Fuel Oil storage tank. The Fuel Oil meters located in the fuel supply lines
   to each combustion turbine shall measure the Fuel Oil volumes converted to
   electrical power.

3. For Ancillary Services and Net Electric Energy delivered by Carr, the
   delivery point to CPS shall be the switch at the 115,000 volt ring bus owned
   and maintained by NiMo designated as the receiving point in the
   Interconnection Agreement between NiMo and East Syracuse Generating Company,
   as assigned to Carr.

                                      A-1

<PAGE>   64

4. For Market Steam delivered by Carr, the delivery point to Bristol - Myers
   shall be at the Bristol - Myers steam valve, as built and as the pipeline is
   in place as of the Effective Date of the Agreement. Any other Market Steam
   customer delivery point shall be either the Facility fence line, or as may
   be otherwise agreed by Carr and CPS.

                                      A-2

<PAGE>   65

                                   EXHIBIT B

                      ALLOWANCES FOR SCHEDULED MAINTENANCE

Scheduled Maintenance is the annually planned outage time required to perform
work on specific components of the Facility. This includes the annual tune-up
outages scheduled in April or May, heat recovery steam generator (HRSG) outages
for inspection and permits, the hot section inspection of the combustion
turbine and major overhauls of the combustion turbines. A Scheduled Maintenance
plan shall be presented and agreed to between CPS and Carr sixty (60) days
before the start of each Contract Year.

Scheduled Maintenance hours shall be excluded from the calculation of monthly
On-Peak Dispatch Availability and the application of any Availability
Adjustment to the Fixed Market Output Payment.

For example: In any given month of May there are 336 to 368 On-Peak hours. A
two (2) week Scheduled Maintenance tune-up outage occurs in May. CPS shall not
request Dispatch of the Facility during those two weeks that include one
hundred and sixty (160) On-Peak hours. The calculation of the On-Peak Dispatch
Availability for that month of May shall include only the Dispatched MWH
requested during the 176 to 208 On-Peak hours outside of the two week Scheduled
Maintenance period.

For purposes of developing the Scheduled Maintenance plan for any Contract
Year, the following rules will apply:

1. Tune-up outages are required in the months of April or May, and shall be
   limited to eighty (80) On-Peak hours.

2. HRSG outages may be scheduled in April, May, October, November or December.
   If the HRSG outage is scheduled in April or May, the outage shall be limited
   to one hundred and sixty (160) On-Peak hours and performed with the tune-up
   outage included within the one hundred and sixty (160) hours. If the HRSG
   outage is scheduled for the months of October, November or December, the
   outage shall be limited to one hundred and sixty (160) On-Peak hours in
   addition to the required eighty (80) hour tune-up outage.

3. Combustion turbine hot section inspection outages may be scheduled in April,
   May, October, November or December. If the combustion turbine hot section
   inspection outage is scheduled in April or May, the outage shall be limited
   to two hundred and forty (240) On-Peak hours and performed with the tune-up
   outage included within the two hundred and forty (240) hours. If the
   combustion turbine hot section inspection outage is scheduled for the months

                                      B-1

<PAGE>   66

   of October, November or December, the outage shall be limited to two hundred
   and forty (240) On-Peak hours in addition to the required eighty (80) hour
   tune-up outage.

4. Major combustion turbine overhaul outages may be scheduled in April, May,
   October, November or December. If the major combustion turbine overhaul
   outage is scheduled in April or May, the outage shall be limited to three
   hundred and twenty (320) On-Peak hours and performed with the tune-up outage
   included within the three hundred and twenty (320) hours. If the major
   combustion turbine outage is scheduled for the months of October, November
   or December, the outage shall be limited to three hundred and twenty (320)
   On-Peak hours in addition to the required eighty (80) hour tune-up outage

                                      B-2

<PAGE>   67

                                   EXHIBIT C

                         FACILITY OPERATING PROCEDURES
                           AND OPERATING LIMITATIONS

                   Operating Procedures and Operating Limits

The operation of the Facility shall be governed by Operating Procedures and
Operating Limits developed in accordance with original equipment manufacturer
and plant design specifications. The Facility shall be operated in strict
conformance to these procedures and limits. Copies of the individual plant
systems procedures are maintained at the Facility.

Attached are the Dispatch and Outage Notification Procedures, the Start-up
Loading Profiles for cold, warm and hot start-ups, and a listing of the
Operating Limits for the Facility. This list may be up-dated periodically with
new information from either original equipment manufacturers or as the result
of an engineering re-evaluation of Facility equipment.

                   Operating Characteristics of the Facility

      Maximum Continuous Loading Limits

      The maximum continuous loading limit for the Facility is one hundred and
      five (105) gross megawatts (MW) in the winter months (October to May) and
      one hundred and two (102) gross MW in the summer months (June to
      September). The auxiliary equipment loading, or station use, is
      approximately three (3) MW.

      Minimum Continuous Loading Limit

      The minimum stable load for the continuous operation of the Facility is
      20 MW, with both combustion turbines and the steam turbine connected to
      the electric transmission system.

      Rate of Load Change (Ramp Rate)

      The minimum rate of load change, either increasing or decreasing, is one
      and one half (1 1/2) MW per minute.

                                      C-1

<PAGE>   68

      Black Start Capability

      None.

      Combustion Turbine Generator Rating

      53.66 MVA @ 15 C, 48.83 MW, 0.85 Power Factor.

      Steam Turbine Generator Rating

      27.778 MVA @ 15 C, 25 MW, 0.9 Power Factor.

           Procedure for Dispatch Notice and Confirmation of Receipt

1. CPS shall prepare a Dispatch Notice (form attached in Exhibit D) for each
   day of dispatch requested including all of the information required on the
   form. If specific dispatch information provided for on the form is not
   required for the Dispatch Notice, then those spaces shall be marked "n/a".
   The person originating the form shall sign and date the form, and fax the
   form to the Facility at Carr's telephone fax number (___.___.____).

2. The operator at the Facility shall, upon receipt of the faxed Dispatch
   Notice, sign and date the form in the spaces indicated. The operator shall
   then confirm receipt by sending a fax of the form with the operator's
   signature to CPS at CPS's telephone fax number (410-468-3496).

3. The operator will initiate the actions necessary to implement the dispatch
   requirements given on the Dispatch Notice .

4. The minimum Dispatch Notification lead times for the Facility for the period
   April through November and Standby Periods are:

      (a)   Continued operation with both combustion turbines and the steam
      turbine already         paralleled and released for loading requires one
      (1) hour.

      (b)   A Hot Start with one combustion turbine and the steam turbine
      already paralleled        and the second combustion turbine shut down
      requires one (1) hour advance notice and an additional one and one half
      (1 1/2) hour to load to the Dependable Capacity     of the Facility. The
      minimum run time for a Hot Start is one (1) hour.

      (c)   A Warm Start with all turbines shut down less than eight (8) hours
      requires four (4)       hours advance notice and an additional two (2)
      hours and

                                      C-2

<PAGE>   69

      thirty (30) minutes to load   to the Dependable Capacity of the Facility.
      The minimum run time for a Warm     Start is two (2) hours.

      (d)   A Cold Start with all turbines shut down for more than eight (8)
      hours requires    eight (8) hours advance notice and an additional five
      (5) hours to load to the    Dependable Capacity of the Facility. The
      minimum run time for a Cold Start is two (2) hours.

5.  The minimum Dispatch Notification lead times for the Facility for the
    period December through March:

(a) For a Cold Start of the Facility, seventy-two (72) hours.

(b) As soon as reasonably practicable, but not later than 12:00 P.M. of the day
    prior to the first day of the Dispatch period, Carr shall provide CPS its
    anticipated hourly Incremental Station Electric and Gas Costs, which shall
    be defined as the actual costs of electric energy and natural gas incurred
    by Carr to maintain the Facility's readiness to operate in cold
    temperatures in conformance with Exhibit C, Section 4 ("Incremental Station
    Electric and Gas Costs").

(c) Prior to the end of a Dispatch Period, CPS shall notify Carr of the amount
    of consecutive hours, beginning with the first hour following the Dispatch
    Period, for which it agrees to reimburse Carr for its Incremental Station
    Electric and Gas Costs ("Standby Period").

(d) During such Standby Period, CPS shall have the right to Dispatch the
    Facility in accordance with Exhibit C, Section 4.

(e) In the event, that CPS, either (1) elects not to reimburse Carr for its
    Incremental Station Electric and Gas Costs or (2) a Standby Period
    terminates, the subsequent Cold Start of the Facility Start-Up Notification
    Lead Time shall be seventy-two (72) hours.

            Procedure for Outage Notice and Confirmation of Receipt

1.  The Facility operator will complete the Outage Notice (form attached in
    Exhibit D) including all of the information required on the form for any
    outage of the Facility. If information provided for on the form is not
    required for the Outage Notification, then those information spaces shall
    be marked "n/a". The person originating the Outage Notice shall sign and
    date the form and fax the Outage Notice to CPS at CPS' telephone fax number
    (410-468-3496).

                                      C-3

<PAGE>   70

2.  The dispatcher at CPS shall, upon receipt of the faxed Outage Notice, sign
    and date the form in the spaces indicated. The dispatcher shall then
    confirm receipt by sending a fax of the signed form to Carr Street
    Generating Station at Carr's telephone fax number (___.___.____).

                                      C-4

<PAGE>   71

                                   EXHIBIT D

                            FORM OF DISPATCH NOTICE

Complete one form for each dispatch day

Date:                         Fax to:           Carr Street Generating Station
      ------------                              64 Carr Street
Time:                                           East Syracuse, NY  13057
      ------------                              Fax No.______________
Page:       of
      ------------

Date of Dispatch:
                  ------------------

Type of Dispatch (See Exhibit C, Operating Procedures and Operating Limits)

      Cold Startup (8 hours advance notice required and 2 hour minimum run time)
------
      Warm Startup (4 hours advance notice required and 2 hour minimum run time)
------
      Hot Startup (1 hour advance notice required and 1 hour minimum run time)
------
      Continuation of current operations (1 1/2 hour advance notice required)
------

<TABLE>
<CAPTION>
      Hour      Fuel      Load    MVA    Power Factor   Steam Flow
    ---------------------------------------------------------------
<S>            <C>       <C>     <C>     <C>           <C>
      0:00

              -----------------------------------------------------
      1:00

              -----------------------------------------------------
      2:00

              -----------------------------------------------------
      3:00

              -----------------------------------------------------
      4:00

              -----------------------------------------------------
      5:00

              -----------------------------------------------------
      6:00

              -----------------------------------------------------
      7:00

              -----------------------------------------------------
      8:00

              -----------------------------------------------------
      9:00

              -----------------------------------------------------
      10:00

              -----------------------------------------------------
      11:00

              -----------------------------------------------------
      12:00

              -----------------------------------------------------
      13:00

              -----------------------------------------------------
      14:00

              -----------------------------------------------------
      15:00

              -----------------------------------------------------
      16:00

              -----------------------------------------------------
      17:00

              -----------------------------------------------------
      18:00

              -----------------------------------------------------
      19:00

              -----------------------------------------------------
      20:00

              -----------------------------------------------------
      21:00

              -----------------------------------------------------
      22:00

              -----------------------------------------------------
      23:00

              -----------------------------------------------------
</TABLE>

      Signed:                                   Date:
              -----------------------                 ------------------
              Constellation Power Source

                                      D-1

<PAGE>   72

      Signed:                                   Date:
              ---------------------------             ------------------
              Carr Street Generating Station

Form of Outage Notice

Date:                         Fax to:  Constellation Power Source
      ------------                     111 Market Place, Suite 500
Time:                                  Baltimore, MD  21202
      ------------                     Fax No. 410.458.3540
Page:       of
      ------------

Date of Outage:
                     ---------------

Type of Outage

      Scheduled Maintenance (Tune-up, HRSG, Hot Section, Major)
------
      Maintenance Outage
------
      Forced Outage
------
      Test (on-line)
------

Description of Outage:
                        ------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------

Estimated Duration:
                     ---------------------------------------------------------

Special Requirements:
                       -------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------

      Signed:                                   Date:
              -----------------------                 ------------------
              Constellation Power Source

      Signed:                                   Date:
              ---------------------------             ------------------
              Carr Street Generating Station

                                      D-2

<PAGE>   73

                                   EXHIBIT D

                              FUEL SPECIFICATIONS

                                    FUEL OIL

<TABLE>
<CAPTION>
                                            Typical      Range
                                            -------      -----
<S>                                        <C>          <C>
Heating Value, Btu/gal. HHV                 139,000      137,000-140,000
API Gravity                                 30
Pour Point, Degrees F                       0            0 to 10
Flash Point, Degrees F, min.                100          100 to 130
Distillation temperature, Degrees F
      at 50% vol. recovery                  540
      at 90% vol. recovery                  640
      at end point                          680
Carbon residue on 10% bottoms,
      wt % max.                             0.35         below 0.35
Nitrogen, wt % max.                         0.025        below 0.030
Sulfur, wt % max.                           0.3
Corrosion, 3 hr @ 122 degrees F             1            below 1
Vanadium, ppw, max.                         0.5          below 0.5
Sodium + potassium + lithium
      ppmw, max.                            0.2          below 0.2
Calcium, ppmw, max.                         2.0          below 2.0
Lead, ppmw, max.                            1.0          below 1.0
Ash, ppmw, max.                             50           below 100
Water & sediment, vol % max.                0.05         below 0.05
Filterable dirt, mg/100ml, max.             10           below 10
</TABLE>

                                      E-1

<PAGE>   74

                                  NATURAL GAS

<TABLE>
<S>                                            <C>
--------------------------------------------------------
Btu/scf, HHV +/- 5%                               1,047*
Btu/Pound, HHV +/- 5%                            20,996
--------------------------------------------------------
</TABLE>

* Subject to normal variations of merchantable pipeline quality gas as defined
in the New York ____________ .

                                      E-1

<PAGE>   75

                                   EXHIBIT F

                       HEAT RATE DETERMINATION PROCEDURES

The determination of Heat Rate for purposes of the Annual Heat Rate Guarantee
shall be based on the metered Facility Fuel input and metered delivered
electric output, during On-Peak Hours when the Facility is operating at eighty
(80) percent or greater of full-load operation. Heat Rate shall be expressed as
Btu/kwh.

Heat Rate shall be calculated on a daily basis and reported monthly. Fuel used
in the calculation of the Facility Heat Rate shall not include Start-up Fuel.
Electricity output shall be corrected for a minimum of eighty (80) percent of
full-load operation and reduced for delivered kilowatt-hours associated with
the production and delivery of Market Steam.

The Annual Heat Rate for purposes of the Annual Heat Rate Guarantee shall be
the average of all of the daily Heat Rate calculations. There shall be no bonus
pursuant to Section 7.3.3 for an Annual Heat Rate which is equal to or greater
than 7,750 Btu/kwh and no damages pursuant to Section 7.3.2 for an Annual Heat
Rate which is equal to or less than 8,250 Btu/kwh.

Bonus for an Annual Heat Rate of less than 7,750 Btu/kwh shall be equal to the
following (determined on a monthly basis): (7,750 Btu/kwh - Annual Heat Rate) X
kwhs generated for the month X average monthly Fuel cost in $/mmBtu. Total
yearly bonus shall be the sum of the foregoing monthly calculations for each
month of the Contract Year.

Damages for an Annual Heat Rate of greater than 8,250 Btu/kwh shall be equal to
the following (determined on a monthly basis): (Annual Heat Rate - 8,250
Btu/kwh) X kwhs generated for the month X average monthly Fuel cost in $/mmBtu.
Subject to the limitations set forth in Section 16.1, total annual damages
shall be the sum of the foregoing monthly calculations for each month of the
Contract Year.

Fuel cost used to determine Bonus or Damages shall be that actually incurred by
CPS during the period.

                                      F-1

<PAGE>   76

                                   EXHIBIT G

                             INSURANCE REQUIREMENTS

Carr shall maintain the following insurance coverage with appropriate
deductibles:

(a) Workers compensation insurance covering Operator's employees as required by
    Law and employer's liability insurance with a limit of $1,000,000;

(b) Automobile bodily injury and property damage liability insurance covering
    automobiles owned, non-owned or hired by Operator of $1,000,000 combined
    single limit per occurrence; and

(c) Physical damage insurance for Operator's automobiles, whether leased, owned
    or hired by Operator and/or its employees.

(d) Commercial general liability insurance covering personal injury and damage
    to property of third parties, including blanket contractual, broad-form
    property damage, cross-liability for named or additional insured,
    independent contractor coverage and XCU hazards, with reasonable
    deductibles and a limit of not less than $1,000,000 per occurrence and
    $2,000,000 in the aggregate per location;

(e) Umbrella liability insurance in excess of the insurance described in
    Section (d) will be carried in an aggregate amount of $11,000,000; and

(f) Permanent property insurance for the full replacement value of the
    Facility, including boiler and machinery, business interruption and other
    first party property-related coverages in amounts deemed necessary and
    appropriate by Owner.

                                      G-1

<PAGE>   77

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                         <C>
ARTICLE 1.0  DEFINITIONS AND INTERPRETATION...................................2

1.1 Defined Terms.............................................................2
1.2 Construction of Terms....................................................13

ARTICLE 2.0 CONTRACT DOCUMENTS...............................................14

2.1 Documents Included.......................................................14
2.3 Entire Agreement and Amendments..........................................14

ARTICLE 3.0 TERM OF AGREEMENT................................................15

ARTICLE 4.0 PURCHASE AND SALE OF CAPACITY AND SERVICES.......................15

4.1 Capacity.................................................................15
4.2 Services.................................................................15
4.3 Exclusive Nature of Agreement............................................15

ARTICLE 5.0 DEPENDABLE CAPACITY; AVAILABILITY................................16

5.1 Dependable Capacity and Maintenance......................................16
5.2 No Reduction in Dependable Capacity......................................16
5.3 Guaranteed On-Peak Dispatch Availability.................................16
5.4 Off-Peak Ability.........................................................17

ARTICLE 6.0 DISPATCH.........................................................18

6.1 Dispatch of the Facility by CPS..........................................17
6.2 Dispatch Period and Start-Up.............................................18
6.3 Electric Specifications and Delivery.....................................18
     6.3.1 Specifications....................................................18
     6.3.2 Receipt...........................................................18
6.4. Steam Production........................................................19
     6.4.1 Fuel Conversion to Steam..........................................19
     6.4.2. Receipt of Steam.................................................19
6.5 Facility Utilization Plan................................................20

FUEL AND HEAT RATE...........................................................20

7.1 Gas......................................................................20
     7.1.1 Delivery..........................................................20
     7.1.2 Specification and Quality.........................................21
     7.1.3 Measurement.......................................................21
7.2 Fuel Oil.................................................................21
     7.2.1 Delivery..........................................................21
     7.2.2 Specification and Quality.........................................21
     7.2.3 Measurement.......................................................21
7.3 Annual Heat Rate Guarantee...............................................22
     7.3.1 Annual Average Heat Rate..........................................22
     7.3.2 Remedy for Failure to Achieve Annual Heat Rate Guarantee..........22
</TABLE>

                                       i

<PAGE>   78

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
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     7.3.3 Annual Heat Rate Bonus............................................22

ARTICLE 8.0 TITLE AND RISK OF LOSS...........................................23

8.1 Title to Fuel............................................................23
8.2 Risk of Loss and Indemnity...............................................23
     8.2.1 General...........................................................23
     8.2.2 Risk of Non-Conforming Fuel.......................................23

ARTICLE 9.0 METERING.........................................................24

9.1 Output Metering Equipment................................................24
     9.1.1 Installation and Ownership........................................24
     9.1.2 Maintenance etc...................................................24
9.2 Fuel Metering Equipment..................................................25
     9.2.1 Installation and Ownership........................................25
     9.2.2 Maintenance etc...................................................25
9.3 Check Meters.............................................................25
9.4 Access...................................................................26
9.5 Testing and Adjustment...................................................26

ARTICLE 10.0 OPERATION AND MAINTENANCE.......................................26

10.1 Operation and Maintenance Obligation....................................26
10.2 Outages.................................................................27
10.3 Access..................................................................27
10.4 Maintenance of Records..................................................27

ARTICLE 11.0 PRICE AND PAYMENT...............................................28

11.1 Contract Price..........................................................28
     11.1.1 Fixed Market Output Payment......................................28
     11.1.2 Variable Market Output Payment...................................28
     11.1.3 Additional Start-Up Fee..........................................29
     11.1.4 Market Steam Reimbursable Costs..................................29
     11.1.5 Availability Adjustment to Fixed Market Output Payment...........29
11.2 Invoicing and Payment...................................................31
     11.2.1 Monthly and Semi-annual Statements...............................31
     11.2.2 Payment..........................................................32
     11.2.3 Late Payments and Disputed Invoices..............................32
     11.2.4 Interest.........................................................32
11.3 Adjustments and Audit...................................................33
     11.3.1 Adjustment.......................................................33
     11.3.2 Audit............................................................33

ARTICLE 12.0 INDEMNITIES.....................................................34

12.1 General Indemnity.......................................................34
12.2 Employee Claims.........................................................34
12.3 Taxes...................................................................35
</TABLE>

                                       ii

<PAGE>   79

                               TABLE OF CONTENTS

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     12.3.1 CPS Taxes........................................................35
     12.3.2 Carr Taxes.......................................................35
     12.3.3 Exemptions.......................................................35
12.4 Environmental Indemnity.................................................36
12.5 Notice of Claim.........................................................36
12.6 Payment.................................................................37
12.7 Survival................................................................37

ARTICLE 13.0 INSURANCE.......................................................38

13.1 Carr Insurance..........................................................38
13.2 Requirements of Carr Insurance..........................................38
13.3 Payment of Deductibles..................................................39
13.4 Certificates of Insurance...............................................39
13.5 Nonwaiver...............................................................39

ARTICLE 14.0 FORCE MAJEURE...................................................40

14.1 Excused Performance.....................................................40
14.2 Exclusions..............................................................40
14.3 Burden of Proof.........................................................41
14.4 Extended Force Majeure..................................................41

ARTICLE 15.0 DEFAULT AND EARLY TERMINATION...................................42

15.1 Termination for Default.................................................42
     15.1.1 Event of Default.................................................42
     15.1.2 Remedies.........................................................43
     15.1.3 Remedies Cumulative..............................................43
15.2 Special Termination for  Cause by CPS.........ERROR! BOOKMARK NOT DEFINED.
     15.2.1 In General.............................ERROR! BOOKMARK NOT DEFINED.
     15.2.2 Right to Void Termination Election.....ERROR! BOOKMARK NOT DEFINED.
     15.2.3 Liquidated Damages on Termination......ERROR! BOOKMARK NOT DEFINED.
15.3 Optional Termination by CPS.............................................44
15.4 Termination for Failure of Effective Date to Occur......................45

ARTICLE 16.0 LIABILITY.......................................................46

16.1 Limitation of Availability Adjustment and Heat Rate Damages.............46
16.2 Aggregate Yearly Limit of Liability.....................................46
16.3 Waiver of Consequential Damages.........................................46
16.4 Intent..................................................................46
16.5 Disclaimer..............................................................47

ARTICLE 17.0 DISPUTE RESOLUTION..............................................48

17.1 Negotiation of Disputes.................................................48
     17.1.1 Disputes Not Involving An Event of Default.......................48
     17.1.2 Disputes Involving an Event of Default...........................48
17.2 Arbitration.............................................................49
</TABLE>

                                      iii

<PAGE>   80

                               TABLE OF CONTENTS

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     17.2.1 Procedures.......................................................49
     17.2.2 Applicable Law and Arbitration Act...............................50
17.3 Pendency of Dispute.....................................................51

ARTICLE 18.0 CARR REPRESENTATIONS AND COVENANTS..............................51

18.1 Standing................................................................51
18.2 No Violation of Law; Litigation.........................................51
18.3 Licenses................................................................52
18.4 No Breach...............................................................52
18.5 Authority, etc..........................................................52
18.6 Assets and Business.....................................................52
18.7 Compliance with Law.....................................................52

ARTICLE 19.0 CPS REPRESENTATIONS AND COVENANTS...............................53

19.1 Standing................................................................53
19.2 No Violation of Law; Litigation.........................................53
19.3 Licenses................................................................53
19.4 No Breach...............................................................53
19.5 Authority, etc..........................................................54
19.6 Compliance with Law.....................................................54

ARTICLE 20.0 ASSIGNMENT......................................................54

20.1 Agreement  Binding......................................................54
20.2 Assignment..............................................................54
20.3 Facility Lender Requested Documents.....................................54

ARTICLE 21.0 PROPRIETARY & CONFIDENTIAL INFORMATION..........................55

21.1 Non-Disclosure Obligation...............................................55
21.2 Required Disclosure.....................................................55
21.3 Term of Obligation......................................................56

ARTICLE 22.0 NOTICES.........................................................56

22.1 Writing.................................................................56
22.2 Timing of Receipt.......................................................58

ARTICLE 23.0 MISCELLANEOUS PROVISIONS........................................58

23.1 Conditions Precedent....................................................58
23.2 Scheduling Coordinator..................................................59
23.3 Joint Effort............................................................59
23.4 Captions................................................................59
23.5 Severability............................................................59
23.6 No Waiver...............................................................59
23.7 Applicable Law..........................................................59
23.8 Counterparts............................................................60
23.9 Survival................................................................60
</TABLE>

                                       iv

<PAGE>   81

                               TABLE OF CONTENTS

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23.10 Further Assurances.....................................................60
23.11 Independent Contractor, etc............................................60
23.12 Third Parties..........................................................60
23.13 Announcements..........................................................60
23.14 Expenses...............................................................60
23.15 No Precedential Value..................................................60
</TABLE>

                                    EXHIBITS

               Exhibit A    -    Description of Facility and Designation of
                                 Delivery Points

               Exhibit B    -    Allowances for Scheduled Maintenance

               Exhibit C    -    Facility Operating Procedures and Operating
                                 Limitations

               Exhibit D    -    Form of Dispatch Notice

               Exhibit E    -    Fuel Specifications

               Exhibit F    -    Heat Rate Determination Procedures

               Exhibit G    -    Insurance Requirements

                                       v<PAGE>   1

                                                                   Exhibit 10.12

                          STRATEGIC ALLIANCE AGREEMENT

STRATEGIC ALLIANCE AGREEMENT, dated as of March 10, 1998, between ORION POWER
HOLDINGS, INC., a Delaware corporation (the "Company"), and CONSTELLATION POWER
SOURCE, INC., a Delaware corporation ("Constellation").

                                   WITNESSETH

       WHEREAS, GS CAPITAL PARTNERS II, L.P., a Delaware limited partnership
("GSCP"), and Constellation, on March 10, 1998, caused the formation of the
Company and entered into a Stockholders' Agreement relating thereto;

       WHEREAS, the Company has been formed for the purpose of investing in and
managing the operations of electric generating assets in the United States and
Canada (the "Portfolio Assets");

       WHEREAS, Constellation and the Company intend to establish a Strategic
Alliance (as defined herein) whereby Constellation will be the exclusive
provider of power marketing and risk management services for the Portfolio
Assets subject to the terms of this Agreement;

       WHEREAS, to carry out the Strategic Alliance, Constellation and the
Company intend to enter into Power Sales and Brokering Agreements (as defined
herein) with respect to each Facility, each such Power Sales and Brokering
Agreement to be established in accordance with the terms of this Agreement; and

       WHEREAS, the parties hereto desire to set forth the terms and conditions
of the Strategic Alliance between the Company and Constellation.

       NOW, THEREFORE, in consideration of the promises and of the mutual
commitments and obligations hereinafter set forth, the parties hereto hereby
agree as follows:

<PAGE>   2

       SECTION 1.    Definitions.  As used herein, the following terms shall
have the following meanings:

       Brokering Services" means services pursuant to which Constellation, at
the Company's request, shall arrange with third parties (i) for the purchase of
the electrical output of a Facility or (ii) for Hedging Transactions, in each
case for the portion of a Facility's output or risk management needs for which
Constellation and the Company have not entered into Principal Transactions.

       Facility" means each electric generating facility owned or controlled by
the Company.

       Facility Event" means an event in which a Facility is (i) retired from
service or (ii) directly or indirectly sold, whether by means of a sale of stock
of the entity that owns the Facility or the sale or lease of all or
substantially all of the assets comprising the Facility, or by means of a
merger, consolidation, share exchange or otherwise with respect to the entity
that owns the Facility; provided, however, that a Facility Event shall not
include a sale-leaseback (or similar transaction) with respect to such Facility
for the purpose of financing such Facility. For purposes hereof, the term sale
or sold shall each mean the transfer of control of a Facility (i.e. the ultimate
decision-making authority with respect to a Facility or the entity that owns
such Facility) to an entity, including any affiliates of such entity, other than
GSCP, Constellation or an affiliate of either such person.

       Hedging Transaction" means a Transaction entered into by the Company for
the purpose of managing price risk associated with a Facility's electrical
output and capacity value.

       Inadequate Performance" means a circumstance in which, after notice (such
notice only to be delivered after the Company has made reasonable efforts to
communicate its dissatisfaction with Constellation's performance) and an
opportunity to

<PAGE>   3

cure as set forth herein, Constellation fails to perform services in a manner
that meets reasonable, professional power marketing and risk management
standards with respect to (i) a Facility, pursuant to a Power Sales and
Brokering Agreement (it being understood that if more specific standards are
applicable with respect to such Facility, such standards will be specified in
each Power Sales and Brokering Agreement) or (ii) a Particular Market Segment;
provided, however, that in either case Constellation shall have 30 days after
written notice (an "Inadequate Performance Notice") from the Company to cure the
Inadequate Performance set forth in such notice. In no event shall Inadequate
Performance apply to any Principal Transactions.

       IPO" means an underwritten offering or series of underwritten offerings
pursuant to which the common stock, par value $.01 per share, of the Company
("Common Stock") becomes registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (a) in which either (i) the Common
Stock issued in such IPO constitutes at least 20% of the Common Stock or (ii)
the gross proceeds to the Company and any selling stockholders, in the
aggregate, is at least $75 million before deducting underwriting discounts,
commissions and offering expenses and (b) which results in the Common Stock
being held by at least 500 holders of record within the meaning of Rule 12g5-1
under the Exchange Act.

       Market Analysis" means Constellation's proposed risk management strategy
for a potential Facility acquisition by the Company for a period agreed upon by
Constellation and the Company, together with forecasted market views thereafter,
based upon Constellation's analysis of current and future market conditions.

       Market Based Terms" means pricing, terms, conditions and standards for
similar services which are based upon the marketplace, in the context of an
arm's length negotiation with unaffiliated parties, at the time such pricing,
terms, conditions and standards are to be determined, as they may be modified or
supplemented by a specific

<PAGE>   4

provision of this Agreement, it being understood that the level of Market Based
Terms may vary from Facility to Facility to reflect, among other things,
Facility and market specific characteristics.

       Particular Market Segment" means a specific relevant market or
environment (which may be defined by geographic area, type of activity or
service, or otherwise) in which Constellation may provide Power Marketing and
Risk Management Services and all other related services provided under this
Agreement.

       Power Marketing and Risk Management Services" means Principal
Transactions, Brokering Services and Scheduling Services (each as defined in
this Agreement) and all other related services provided by Constellation to the
Company with respect to a Facility.

       Power Sales and Brokering Agreement" means the agreement by which
Constellation will provide exclusive Power Marketing and Risk Management
Services associated with the energy output and capacity of a Facility.

       Principal Transaction" means:

                     (i)    A transaction pursuant to which Constellation, at
              the Company's request, purchases electrical output of a Facility
              at market-based, negotiated prices, terms and conditions; or

                     (ii)   A Hedging Transaction between Constellation and the
              Company, at the Company's request, to provide risk management for
              a Facility at market-based, negotiated prices, terms and
              conditions.

       Scheduling Services" means the scheduling by Constellation of the
electrical generation output and associated transmission services for a
Facility.

       Strategic Alliance" means the exclusive provision of Power Marketing and
Risk Management Services by Constellation to the Company, as provided for in,
and subject to the terms of, this Agreement.

<PAGE>   5

       Termination Event" means an event in which the Company (i) consummates an
IPO or (ii) is directly or indirectly sold, whether by means of a sale of its
stock or the sale or lease of all or substantially all of its assets, or by
means of a merger, consolidation, share exchange or otherwise. For purposes
hereof, the term sale or sold shall each mean the transfer of a greater than 50%
interest to an entity (including a group acting in concert) other than GSCP,
Constellation or an affiliate of either such person.

       SECTION 2.    Strategic Alliance.
                     Pursuant to the Strategic Alliance:

                     (a)    Unless otherwise agreed by Constellation and the
Company with respect to a specific Facility, and subject to the other provisions
of this Agreement, Constellation shall be the exclusive provider of Power
Marketing and Risk Management Services for each Facility acquired by the
Company.

                     (b)    Unless otherwise agreed by Constellation and the
Company with respect to a specific Facility, and subject to the other provisions
of this Agreement, the Company shall not procure Power Marketing and Risk
Management Services for any Facility from any entity other than from
Constellation.

                     (c)    Unless otherwise agreed by Constellation and the
Company, and subject to the other provisions of this Agreement, all Power Sales
and Brokering Agreements and other arrangements to be negotiated and entered
into between Constellation and the Company shall be upon and conform to Market
Based Terms.

                     (d)    Unless otherwise agreed by Constellation and the
Company, Constellation will not provide assistance to any entity in connection
with such entity's bidding for, or acquisition of, an ownership or controlling
position in any electric generating facility with respect to which the Company
notifies Constellation that the Company is bidding, or intending to bid, to
acquire, in whole or in part. Constellation shall not be precluded from
providing assistance to an entity seeking ownership or control

<PAGE>   6

of a facility at such time as (i) the Company ceases pursuing the acquisition,
in whole or in part, of such facility or (ii) such third party entity enters
into a definitive written purchase agreement to acquire control of such
facility.

       SECTION 3.    Power Sales and Brokering Agreements.

                     (a)    In connection with the acquisition of each Facility
by the Company, Constellation and the Company shall negotiate in good faith to
enter into, on Market Based Terms, and subject to Section 3(c) hereof, a Power
Sales and Brokering Agreement pursuant to which Constellation shall have the
exclusive right to provide Power Marketing and Risk Management Services for such
Facility.

                     (b)    In the event that the Company (i) acquires a
Facility that has a pre-existing power sales or risk management agreement (a
"Pre-Existing Agreement") which will remain an obligation of the Company upon
acquisition of such Facility and such Pre-Existing Agreement is not terminable
without monetary loss to the Company or (ii) must enter into or accept any
agreement relating to power sales or risk management imposed by the seller of
such Facility as a condition to consummating an acquisition of a Facility (an
"Obligatory Agreement"), in lieu of the Power Sales and Brokering Agreement
contemplated by Section 3(a) hereof, Constellation and the Company shall, to the
extent applicable, negotiate, on Market Based Terms, and subject to Section 3(c)
hereof, a Power Sales and Brokering Agreement, pursuant to which Constellation
shall provide Power Marketing and Risk Management Services with respect to such
Facility (i) in accordance with Section 3(a) hereof, except that such Power
Sales and Brokering Agreement shall be effective only upon termination of such
Pre-Existing Agreement or Obligatory Agreement, as the case may be, or (ii) to
the degree, if any, that such Pre-Existing Agreement or Obligatory Agreement, as
the case may be, does not satisfy all of the Power Marketing and Risk Management
Services required by the Facility; provided, that, any Power Sales and Brokering
Agreement entered into pursuant to this Section 3(b)

<PAGE>   7

shall in no case violate such Pre-Existing Agreement or Obligatory Agreement, as
the case may be.

                     (c)    All Power Sales and Brokering Agreements to be
negotiated pursuant to this Agreement shall set forth the specific Power
Marketing and Risk Management Services, and any other services agreed to by
Constellation and the Company as contemplated by Section 7 hereof, to be
provided by Constellation together with the associated fees, terms and
conditions. Unless otherwise agreed by Constellation and the Company with
respect to a specific Facility, negotiations to enter into any Power Sales and
Brokering Agreement pursuant to this Agreement shall commence prior to the date
on which the Company formally enters a binding bid to acquire a Facility (the
date on which negotiations are to commence hereunder is referred to as the
"Commencement Date"). If the parties are unable to agree upon the Market Based
Terms, or any of them, to be contained in any Power Sales and Brokering
Agreement, then the provisions of Section 4 hereof shall apply.

                     SECTION 4.    Dispute Resolution.

                     (a)    Unless otherwise provided in a Power Sales and
Brokering Agreement, the resolution of any controversy, claim or dispute, other
than an Inadequate Performance Dispute, as defined in Section 4(b) hereof, or a
Material Breach Dispute, as defined in Section 4(c) hereof, (a "Dispute")
arising out of or relating to this Agreement or any Power Sales and Brokering
Agreement (including, without limitation, (i) the parties' inability to
negotiate and agree upon the Market Based Terms of a Power Sales and Brokering
Agreement in accordance with Section 3 hereof (a "Market Based Terms Dispute"),
(ii) whether an event permitting termination under Section 5 hereof has occurred
or (iii) any questions of interpretation of this Agreement or any Power Sales
and Brokering Agreement) shall be determined in the following manner: (A) to the
extent the Dispute is not a Market Based Terms Dispute (the initial negotiations
of which shall be

<PAGE>   8

governed by Section 3 hereof), the parties shall immediately commence
negotiations to settle any Dispute, (B) if the parties are unable to resolve the
Dispute within 30 days from the Commencement Date, or in the case of a Dispute
other than a Market Based Terms Dispute, the date on which the parties initially
commence negotiations with respect to such Dispute, upon the request (the "First
Trigger") of either the Company or Constellation at any time after such 30 day
period, the Chief Executive Officer of each of the Company and Constellation
shall meet in a good faith effort to reasonably resolve any such Dispute, (C) if
such Chief Executive Officers are unable to resolve the Dispute within 15 days
of the First Trigger (the "CEO Period"), or upon the request (such request or
the expiration of the CEO Period is referred to as the "Second Trigger") of
either Chief Executive Officer, the Chairman of the Board of each of the Company
and Constellation Energy Solutions, Inc., or an equivalent director or officer,
shall meet in a good faith effort to reasonably resolve any such Dispute, and
(D) if such Chairmen of the Board are unable to reach a resolution within 15
days of the Second Trigger, or upon the request of either Chairman of the Board,
the conflict shall be referred to and then settled by binding arbitration in
Delaware, administered by the American Arbitration Association in accordance
with the Expedited Procedures of its Commercial Arbitration Rules, and judgment
on the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction.

                     (b)    The resolution of any controversy, claim or dispute
as to whether there has been Inadequate Performance, or any cure thereof (an
"Inadequate Performance Dispute"), shall be determined in the following manner:
(A)(i) following the delivery of the Inadequate Performance Notice of
termination as a result of Inadequate Performance of a Power Sales and Brokering
Agreement or of this Agreement with respect to a Particular Market Segment in
accordance with Section 5 hereof, the Chief Executive Officer of each of the
Company and Constellation shall meet in a good

<PAGE>   9

faith effort to reasonably resolve any such Inadequate Performance Dispute, (ii)
if such Chief Executive Officers are unable to resolve the Inadequate
Performance Dispute within 15 days of the Inadequate Performance Notice, or upon
the request of either Chief Executive Officer, the Chairman of the Board of each
of the Company and Constellation Energy Solutions, Inc., or an equivalent
director or officer, shall meet in a good faith effort to reasonably resolve any
such Inadequate Performance Dispute, and (iii) if such Chairmen of the Board are
unable to reach a resolution of the Inadequate Performance Dispute within 30
days after the Inadequate Performance Notice (or within 40 days after the
Inadequate Performance Notice if Constellation has taken reasonable steps to
attempt to cure the Inadequate Performance set forth in the Inadequate
Performance Notice within such 30 day period and there is a dispute as to
whether, within such 30 day period, a cure has been accomplished) (the 30 day or
40 day period (as the case may be) referred to in this Section 4(b)(iii) is
hereinafter referred to as the "Initial Resolution Period"), upon the request of
either Chairman of the Board, the conflict shall be referred to and then settled
by binding arbitration in Delaware, administered by the American Arbitration
Association in accordance with the Expedited Procedures of its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction. Following the Initial Resolution
Period, nothing in this Section 4 shall require the Company to delay or forbear
from exercising, during the pendency of any Inadequate Performance Dispute
resolution process, its rights under Section 5 to terminate this Agreement with
respect to a Particular Market Segment or any Power Sales and Brokering
Agreement as a result of Inadequate Performance.

                     (c)    The resolution of any controversy, claim or dispute
(a "Material Breach Dispute") as to whether a Material Breach (as defined in
Section 17 of the Agreement, dated March 10, 1998 (the "BGE/CPI Agreement"), by
and among the Company, Baltimore Gas and Electric Company ("BGE") and
Constellation Power, Inc.

<PAGE>   10

("CPI")) has occurred shall be resolved in accordance with Section 20(a) of the
BGE/CPI Agreement.

       SECTION 5.    Term and Termination.

                     (a)    Strategic Alliance.

                            (i)    This Agreement shall remain in force unless
terminated in accordance with its terms.

                            (ii)   This Agreement shall be terminable by the
Company or Constellation upon at least thirty (30) days' prior written notice
due to a Termination Event, subject to the provisions of Section 5(a)(iv);
provided, however, that, unless otherwise specified in a specific Power Sales
and Brokering Agreement, no Principal Transaction may be terminated by the
Company or Constellation prior to the termination date for such transaction
previously agreed upon in such Power Sales and Brokering Agreement.

                            (iii)  With respect to a Particular Market Segment,
this Agreement, and any Power Sales and Brokering Agreement with respect to a
Facility in such Particular Market Segment, shall be terminable by the Company
due to Inadequate Performance with respect to such Particular Market Segment;
provided, however, no Principal Transaction may be terminated by the Company
prior to the termination date for such transaction previously agreed upon in a
Power Sales and Brokering Agreement due to Inadequate Performance.

                     (iv)   The period during which this Agreement may be
terminable by the Company or Constellation in accordance with Section 5(a)(ii)
hereof shall be the six (6) month period beginning from the closing date of the
transaction giving rise to such Termination Event; provided, however, notice of
any termination may be given prior to or after the closing date of such
Termination Event so long as such termination is not effective prior to the
closing date of such Termination Event.

<PAGE>   11

                     (b)    Power Sales and Brokering Agreements.

                            (i)    Each Power Sales and Brokering Agreement
shall remain in force unless terminated in accordance with its own terms or by
the terms of this Agreement.

                            (ii)   A Power Sales and Brokering Agreement shall
be terminable by the Company due to: (a) Inadequate Performance or (b) upon
thirty (30) days' prior written notice, subject to the provisions of Section
5(b)(iv), due to the occurrence of either a Termination Event or a Facility
Event; provided, however, that, unless otherwise specified in a specific Power
Sales and Brokering Agreement, no Principal Transaction may be terminated by the
Company or Constellation prior to the termination date for such transaction
previously agreed upon in such Power Sales and Brokering Agreement.

                            (iii)  A Power Sales and Brokering Agreement shall
become terminable by Constellation upon thirty (30) days' prior written notice,
subject to the provisions of Section 5(b)(iv), due to: (a) a Termination Event
or (b) a Facility Event; provided, however, that, unless otherwise specified in
a specific Power Sales and Brokering Agreement, no Principal Transaction may be
terminated by the Company or Constellation prior to the termination date for
such transaction previously agreed upon in such Power Sales and Brokering
Agreement.

                     (iv)   The period during which a Power Sales and Brokering
Agreement may be terminable by the Company or Constellation due to the
occurrence of a Termination Event or Facility Event as provided in Section
5(b)(ii) or (iii) shall be the six (6) month period beginning from the closing
date of the transaction giving rise to such Termination Event or Facility Event;
provided, however, notice of any termination may be given prior to or after the
closing date of such Termination Event or Facility Event so

<PAGE>   12

long as such termination is not effective prior to the closing date of such
Termination Event or Facility Event.

                     (c)    Other Termination.

                            (i)    This Agreement and any Power Sales and
Brokering Agreement shall be terminable by the Company within six months of the
occurrence of any of the following events, upon thirty (30) days' prior written
notice: (A) at any time, Constellation has sold or otherwise transferred in a
transaction or series of transactions to any person other than an affiliate of
Constellation, 50% or more, in the aggregate, of the shares of Common Stock
which Constellation, in the aggregate, had acquired prior to the date on which
termination shall be permitted hereby (a "Constellation Disposition"); (B) that
certain Power Business Services Agreement, dated February 24, 1997, (the
"Advisory Agreement"), by and among Constellation, Goldman Sachs Power LLC
("GSP"), BGE, Goldman, Sachs & Co. ("Goldman") and J. Aron & Company ("J.
Aron"), is terminated; (C) voting control of Constellation or Constellation
Energy Solutions, Inc. is acquired by a third party (including any affiliates of
such third party) which is not an affiliate of BGE or a transaction or series of
related transactions is consummated (including, without limitation, any tender
offer or merger transaction) pursuant to which BGE stockholders immediately
prior to the first of any such transactions, hold, immediately following such
transaction or series of related transactions, less than 50% of the voting stock
of BGE (or a holding company for BGE) or the surviving or resulting corporation
of such transaction or series of related transactions (a "BGE Change of
Control") and the Company, in its sole judgment to be reasonably exercised,
believes that it is no longer in the interest of the Company to continue the
Strategic Alliance as a result of such change of control; or (D) a Material
Breach, as defined in Section 17 of the BGE/CPI Agreement, shall have occurred
(a "CPI Group Breach Event"); provided, however, unless otherwise specified in a
specific Power Sales and Brokering Agreement,

<PAGE>   13

no Principal Transaction may be terminated by the Company or Constellation prior
to the termination date for such transaction previously agreed upon in such
Power Sales and Brokering Agreement; provided further that notice of any
termination may be given prior to or after the closing or effective date of any
of the events specified in this Section 5(c)(i) so long as such termination is
not effective prior to the closing or effective date of any such event.

                            (ii)   This Agreement and any Power Sales and
Brokering Agreement shall be terminable by Constellation within six months of
the occurrence of any of the following events, upon thirty (30) days' prior
written notice: (A) at any time, GSCP has sold or otherwise transferred in a
transaction or series of transactions to any person other than an affiliate of
GSCP, 50% or more, in the aggregate, of the shares of Common Stock which GSCP,
in the aggregate, had acquired prior to the date on which termination shall be
permitted hereby (a "Goldman Disposition") or (B) 50% of the voting interest of
the General Partner of GSCP is acquired by a third party (including any
affiliates of such third party) which is not an affiliate of Goldman or a
transaction or series of related transactions is consummated pursuant to which
owners of the voting interests in the ultimate parent company of Goldman
immediately prior to the first of any such transactions, hold, immediately
following such transaction or series of related transactions, less than 50% of
the voting interest of such company (a "Goldman Change of Control") and
Constellation, in its sole judgment to be reasonably exercised, believes that it
is no longer in the interest of Constellation to continue the Strategic Alliance
as a result of such change of control; provided, however, unless otherwise
specified in a specific Power Sales and Brokering Agreement, no Principal
Transaction may be terminated by Constellation prior to the termination date for
such transaction previously agreed upon in such Power Sales and Brokering
Agreement; provided further that notice of any termination may be given prior to
or after the closing or effective date of any of the

<PAGE>   14

events specified in this Section 5(c)(ii) so long as such termination is not
effective prior to the closing or effective date of any such event.

                     (d)    Termination Fees. In the event that this Agreement
or any Power Sales and Brokering Agreement is terminated by the Company pursuant
to this Section 5 due to (i) a Termination Event, (ii) a Facility Event, (iii) a
Goldman Disposition, (iv) a Goldman Change of Control, or (v) the cancellation
of the Advisory Agreement, the Company shall pay Constellation a termination fee
to reimburse Constellation for its demonstrable and actual out of pocket
expenses as a result of such termination.

       SECTION 6.    Market Analysis.

                     (a)    From time to time, the Company may request
Constellation to conduct a Market Analysis with respect to a potential Facility
acquisition. Constellation shall provide such requested Market Analysis to the
Company within a reasonable period of time consistent with the Company's
obligations to meet the schedule required by the process, if any, by which the
potential Facility acquisition is being offered for sale. The Company and
Constellation shall treat the Market Analysis with the same confidential
treatment it treats its own confidential business materials. The parties
recognize and agree that the acquisition of any Facility will be the sole
decision of the Company based on its independent evaluation of all relevant
factors associated with such acquisition.

                     (b)    A Market Analysis may become the basis for a Power
Sales and Brokering Agreement upon acquisition of the Facility by the Company.
Since the validity of a Market Analysis is dependent upon prevailing market
conditions at the time of the conduct of such analysis, the parties recognize
that, as a result of the anticipated time delay between the conduct of a Market
Analysis for a potential Facility acquisition and the closing of the acquisition
of such Facility, market movements may require a Market Analysis to be revised
in order for it to be the basis for a Power Sales and

<PAGE>   15

Brokering Agreement. Upon the request of the Company, Constellation shall
provide the Company, together with each Market Analysis, a proposal which will
permit the Company, upon an appropriate payment, to fix the prices for the risk
management strategy contained in the Market Analysis.

       SECTION 7.    Expenses. Unless otherwise agreed in writing, (i) in
connection with a potential Facility acquisition by the Company, Constellation
shall be responsible for all expenses relating to Constellation's preparation,
in accordance with normal business development practices, of any Market
Analysis, including the preparation of any proposal contemplated by Section 6,
and (ii) the Company shall not be subject to charges by Constellation that are
not provided for in a Power Sales and Brokering Agreement; provided, however,
that any additional services and charges may be agreed upon by Constellation
and the Company in writing prior to incurring the expense and shall be
established on an arms' length basis at market reflective levels.

       SECTION 8.    Invoices. Constellation will invoice the Company on a
monthly basis for all fees associated with Power Marketing and Risk Management
Services due under any Power Sales and Brokering Agreement. Constellation will
also reflect on such invoices any payments to be made to the Company by
Constellation or payments due from the Company to Constellation resulting from
Principal Transactions undertaken with respect to a Facility in accordance with
a Power Sales and Brokering Agreement as well as any other fees that may be due
to the Company or Constellation, as the case may be.

       SECTION 9.    Reports and Audit Rights.

                     (a)    With respect to each Facility, Constellation shall
provide to the Company (i) on a daily basis, if applicable, reports and summary
updates of the power positions and respective transactions for such Facility
(the "Trading Book Reports") and (ii) within 90 days after the end of each
fiscal year, commencing with the first fiscal year ending after the date of the
applicable Power Sales and Brokering Agreement, annual

<PAGE>   16

Trading Book Reports, together with a statement certified by an appropriate
officer of Constellation, certifying that such Trading Book Reports are accurate
and fairly presented. No Trading Book Reports shall be provided for Principal
Transactions.

                     (b)    Constellation and the Company shall provide each
other with their respective annual audited financial statements within 90 days
after the end of each fiscal year.

                     (c)    From and after the date of this Agreement, each
party shall afford the other party, its employees, counsel and other authorized
representatives reasonable access, during normal business hours, upon reasonable
advance notice, with due regard to such party's ongoing operations, to all of
the books, records and accounts of such party, or its affiliates, to the extent
such books, records and accounts (i) relate to the operations of any Facility
and/or (ii) evidence the amount billed to the Company or to Constellation under
any Power Sales and Brokering Agreement or otherwise. Additionally, such party
shall furnish on a timely basis any other financial or other information
relating to a Facility reasonably available to management of such party as the
other party shall reasonably request.

       SECTION 10.   Limitation of Liability.

                     (a)    Unless otherwise provided in a Power Sales and
Brokering Agreement, neither the Company or its affiliates, nor Constellation or
its affiliates, shall be liable to the other with respect to the performance of
its obligations hereunder or under any Power Sales and Brokering Agreement
unless due to gross negligence or willful misconduct of employees or other
agents of the Company or Constellation, as the case may be.

                     (b)    Unless otherwise provided in a Power Sales and
Brokering Agreement, neither the Company or its affiliates, nor Constellation or
its affiliates, shall be liable to the other with respect to the performance of
its obligations hereunder or under

<PAGE>   17

any Power Sales and Brokering Agreement for consequential, indirect, punitive or
special damages.

       SECTION 11.   Representations and Warranties. Each party represents and
warrants to the other parties that: (i) it is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its formation, (ii)
it has all regulatory authorizations necessary for it to legally perform its
obligations under this Agreement and any other documentation relating to this
Agreement, (iii) the execution, delivery and performance of this Agreement and
any other documentation relating to this Agreement are within its powers, have
been duly authorized by all necessary action and do not violate any of the
terms and conditions in its governing documents, any material contracts to
which it is a party or any law, rule or regulation material to it or order or
the like applicable to it, (iv) this Agreement and each other document executed
and delivered in accordance with this Agreement constitutes its legally valid
and binding obligation enforceable against it in accordance with its terms, (v)
there are no bankruptcy proceedings pending or being contemplated by it or, to
its knowledge, threatened against it, and (vi) there is not pending or, to its
knowledge, threatened against it or any of its affiliates, any legal
proceedings that could materially adversely affect its ability to perform its
obligations under this Agreement or any other document relating to this
Agreement to which it is a party.

       SECTION 12.   Assignment. No party shall assign this Agreement or its
rights or obligations hereunder to any party without the prior written consent
of the other party. This Section 12 shall not preclude the parties from
entering into Power Sales and Marketing Agreements and carrying out their
obligations thereunder through wholly-owned subsidiaries.

       SECTION 13.   Amendment and Waiver. No modification, amendment or waiver
of any provision of this Agreement shall be effective against the Company or

<PAGE>   18

Constellation unless such modification, amendment or waiver is approved in
writing by the Company and Constellation. The failure of any party to enforce
any of the provisions of this Agreement shall in no way be construed as a
waiver of such provisions and shall not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.

       SECTION 14.   Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.

       SECTION 15.   Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto which form a part hereof
contain the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.

       SECTION 16.   Counterparts.  This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.

       SECTION 17.   Notices. Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered or sent by facsimile or
reputable overnight courier service (charges prepaid) to the Company and
Constellation at the addresses set forth below, or at such address or to the
attention of such other person as the recipient

<PAGE>   19

party has specified by prior written notice to the sending party. Notices will
be deemed to have been given hereunder when delivered personally or on receipt.

         The Company's address is:     c/o John Bu

                                       GS Capital Partners II, L.P.

                                       85 Broad Street, 19th Floor

                                       New York, New York  10004

                                       Facsimile:  (212) 357-5505

                                       Attention:  Jack Fusco

                                       with a copy to:

                                       Fried, Frank, Harris, Shriver & Jacobson

         One New York Plaza

         New York, New York  10004

         Facsimile:  (212) 859-8000

         Attention:  Paul M. Reinstein, Esq.

         and a copy to:

         GS Capital Partners II, L.P.

         85 Broad Street

         New York, New York  10004

         Facsimile:  (212) 902-3000

         Attention:  David J. Greenwald, Esq.

         Constellation's address is:   39 W. Lexington Street

                                       Baltimore, Maryland 21201

                                       Facsimile:  (410) 234-7866

<PAGE>   20

                                       Attention:  David M. Perlman, Esq.

       SECTION 18.   Governing Law and Jurisdiction. THIS AGREEMENT AND THE
RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL 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.

       SECTION 19.   Descriptive Headings.  The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.

       SECTION 20.   Construction. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall not
be deemed to modify, limit or restrict in any manner the construction of the
general statement to which it relates. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express
their mutual intent, and no rule of strict construction shall be applied
against any party.

       SECTION 21.   Advisor. GSP is the exclusive advisor to Constellation and
not a principal of Constellation. From time to time, Constellation may
designate one or more employees of GSP as Constellation's agent for purposes of
entering into transactions with regard to a Power Sales and Brokering
Agreement. Constellation shall be solely responsible for any and all
obligations and liabilities associated with such transactions. Neither GSP,
Goldman nor J. Aron, nor any of their affiliates, has any responsibility for,
or liability to any person with respect to any such transactions or liabilities
of Constellation under this Agreement.

                           [INTENTIONALLY LEFT BLANK]

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

                                 ORION POWER HOLDINGS, INC.

<PAGE>   21

                                 By:
                                    --------------------------------------
                                    Name:  Jack Fusco
                                    Title: Chief Operating Officer

                                 CONSTELLATION POWER SOURCE, INC.

                                 By:
                                    --------------------------------------
                                    Name:  C. W. Shivery
                                    Title: President and Chief Executive Officer

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