PECO ENERGY CO
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>0003.txt
<TEXT>



                            STOCK PURCHASE AGREEMENT


                          dated as of August 11, 2000


                                     Among


                        EXELON (FOSSIL) HOLDINGS, INC.,

                                    as Buyer


                                      and


                              THE STOCKHOLDERS OF

                              SITHE ENERGIES, INC.

                                 NAMED HEREIN,

                                   as Sellers

                                      and

                              SITHE ENERGIES, INC.



<PAGE>

<TABLE>
<CAPTION>
<S>     <C>                                                                                                     <C>
                               TABLE OF CONTENTS
                                                                                                                PAGE
ARTICLE 1.        CERTAIN DEFINITIONS.............................................................................2
ARTICLE 2.        PURCHASE AND SALE OF STOCK.....................................................................15
         Section 2.1     Purchase and Sale of Stock..............................................................15
         Section 2.2     Initial Purchase Price Adjustment.......................................................17
         Section 2.3     Additional Purchase Price Adjustments Related to International Sales....................20
         Section 2.4     Distribution of International Entities on the Put/Call Date.............................26
         Section 2.5     Payment of Amounts Due Pursuant to Section 2.3 and Section 2.4..........................27
         Section 2.6     Certain Preliminary Transactions........................................................28
ARTICLE 3.        REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................30
         Section 3.1     Organization, Qualification and Corporate Power.........................................30
         Section 3.2     Authorization; Validity.................................................................31
         Section 3.3     No Conflict.............................................................................32
         Section 3.4     Capital Stock...........................................................................32
         Section 3.5     Financial Statements....................................................................33
         Section 3.6     Litigation; Compliance with Law.........................................................35
         Section 3.7     Tax Matters.............................................................................36
         Section 3.8     Material Contracts......................................................................39
         Section 3.9     Consents and Approvals..................................................................40
         Section 3.10    Brokers.................................................................................40
         Section 3.11    Labor Matters...........................................................................40
         Section 3.12    ERISA...................................................................................41
         Section 3.13    Events Subsequent to March 31, 2000.....................................................44
         Section 3.14    Title to Properties.....................................................................46
         Section 3.15    Insurance...............................................................................47
         Section 3.16    Transactions with Certain Persons.......................................................48
         Section 3.17    Compliance With Environmental Laws......................................................48
         Section 3.18    Real Property...........................................................................49
         Section 3.19    Patents, Copyrights and Trademarks......................................................50
         Section 3.20    Corporate Records.......................................................................50
         Section 3.21    Qualifying Facilities...................................................................51
         Section 3.22    Exempt Wholesale Generators and Foreign Utility Companies...............................51
ARTICLE 4.        REPRESENTATIONS AND WARRANTIES OF EACH SELLER..................................................51
         Section 4.1     Organization and Corporate Power........................................................52
         Section 4.2     Authorization; Validity.................................................................52
         Section 4.3     No Conflict.............................................................................53
         Section 4.4     Ownership of Stock......................................................................53
         Section 4.5     Public Utility..........................................................................54
ARTICLE 5.        REPRESENTATIONS AND WARRANTIES OF BUYER........................................................54
         Section 5.1     Organization and Corporate Power........................................................54
         Section 5.2     Authorization of Agreement; Validity....................................................54
         Section 5.3     No Conflict.............................................................................54
         Section 5.4     Consents and Approvals..................................................................55


                                                           i
<PAGE>

         Section 5.5     Brokers.................................................................................55
         Section 5.6     Availability of Funds...................................................................55
         Section 5.7     Investment Purpose; Restricted Securities...............................................55
         Section 5.8     No Public Market........................................................................56
         Section 5.9     Legends.................................................................................56
ARTICLE 6.        ACCESS; ADDITIONAL AGREEMENTS..................................................................57
         Section 6.1     Access to Information; Continuing Disclosure............................................57
         Section 6.2     Regulatory Approvals....................................................................58
         Section 6.3     Further Assurances......................................................................59
         Section 6.4     Certain Tax Matters.....................................................................59
         Section 6.5     Regular Course of Business..............................................................60
         Section 6.6     Notice of Changes.......................................................................65
         Section 6.7     Director and Officer Indemnification and Insurance......................................66
         Section 6.8     Credit Facilities.......................................................................67
         Section 6.9     No Solicitation.........................................................................67
         Section 6.10    Interim Financial Statements............................................................69
         Section 6.11    No Adverse Action.......................................................................69
         Section 6.12    PUHCA Compliance........................................................................69
         Section 6.13    Option Plans............................................................................70
         Section 6.14    Development and Fuel Services Agreement and Power Purchase Agreement....................70
ARTICLE 7.        CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS....................................................70
         Section 7.1     No Injunction...........................................................................70
         Section 7.2     Representations and Warranties..........................................................71
         Section 7.3     Performance.............................................................................72
         Section 7.4     Approvals and Filings...................................................................72
         Section 7.5     Amended and Restated Stockholders' Agreement............................................72
         Section 7.6     Opinion of Counsel......................................................................72
         Section 7.7     No Material Adverse Effect..............................................................72
         Section 7.8     Ownership Percentage....................................................................73
         Section 7.9     Niagara Mohawk Shares...................................................................73
ARTICLE 8.        CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERs and the company.........................73
         Section 8.1     No Injunction...........................................................................73
         Section 8.2     Representations and Warranties..........................................................74
         Section 8.3     Performance.............................................................................74
         Section 8.4     Approvals and Filings...................................................................74
         Section 8.5     Amended and Restated Stockholders' Agreement............................................75
         Section 8.6     Opinion of Counsel......................................................................75
         Section 8.7     No Material Adverse Effect..............................................................75
         Section 8.8     Credit Support Letter...................................................................75
         Section 8.9     Dividend................................................................................76
ARTICLE 9.        CLOSING........................................................................................76
         Section 9.1     Time and Place..........................................................................76
         Section 9.2     Payment for Stock.......................................................................77
         Section 9.3     Deliveries..............................................................................77



                                                          ii
<PAGE>

ARTICLE 10.       TERMINATION AND ABANDONMENT....................................................................78
         Section 10.1    Methods of Termination..................................................................78
         Section 10.2    Procedure Upon Termination and Consequences.............................................79
ARTICLE 11.       SURVIVAL.......................................................................................80
         Section 11.1    Seller Representations and Warranties; Buyer Representations and Warranties.............80
         Section 11.2    Covenants...............................................................................80
         Section 11.3    Company Representations and Warranties..................................................80
         Section 11.4    Survival Periods........................................................................81
ARTICLE 12.       INDEMNIFICATION................................................................................81
         Section 12.1    Seller Indemnification..................................................................81
         Section 12.2    Buyer Indemnification...................................................................84
         Section 12.3    Timing of Notice of Claim...............................................................84
         Section 12.4    Limitations on Indemnification..........................................................85
         Section 12.5    Procedure...............................................................................87
         Section 12.6    Calculation.............................................................................88
         Section 12.7    Characterization........................................................................90
ARTICLE 13.       MISCELLANEOUS..................................................................................90
         Section 13.1    Amendment and Modification..............................................................90
         Section 13.2    Waiver of Compliance....................................................................91
         Section 13.3    Notices.................................................................................91
         Section 13.4    Binding Nature; Assignment..............................................................93
         Section 13.5    Entire Agreement........................................................................95
         Section 13.6    Expenses................................................................................96
         Section 13.7    Press Releases and Announcements; Disclosure............................................96
         Section 13.8    Acknowledgment..........................................................................96
         Section 13.9    Disclaimer Regarding Assets.............................................................98
         Section 13.10   Governing Law...........................................................................98
         Section 13.11   Nonforeign Affidavit....................................................................99
         Section 13.12   Counterparts............................................................................99
         Section 13.13   Interpretation.........................................................................100
         Section 13.14   Waiver of Right of First Refusal.......................................................100
         Section 13.15   Matters Related to NEDC................................................................100

</TABLE>




                                                         iii
<PAGE>

                                   SCHEDULES
Schedule 1        -    Sellers
Schedule 1A       -    Executive Officers
Schedule 1B       -    International Entities
Schedule 3.1.2    -    Significant Subsidiaries
Schedule 3.3      -    Conflicts
Schedule 3.4      -    Capital Stock
Schedule 3.5      -    Financial Statements
Schedule 3.6      -    Litigation; Compliance with Law
Schedule 3.7      -    Tax Matters
Schedule 3.8      -    Contracts
Schedule 3.9      -    Company Consents and Approvals
Schedule 3.11     -    Labor Matters
Schedule 3.12     -    Employee Benefits
Schedule 3.13     -    Events Subsequent to March 31, 2000
Schedule 3.14     -    Certain Dispositions and Transactions
Schedule 3.15     -    Insurance
Schedule 3.16     -    Transactions with Certain Persons
Schedule 3.17     -    Environmental Matters
Schedule 3.18     -    Real Property
Schedule 5.4      -    Buyer Consents and Approvals
Schedule 6.5      -    Exceptions to Ordinary Course of Business
Schedule 7.4      -    Consents and Approvals (Buyer's Condition)
Schedule 7.6      -    Opinion of Company's and Sellers' Counsel
Schedule 8.4      -    Consents and Approvals (Company's and Sellers' Condition)
Schedule 8.6      -    Opinion of Buyer's Counsel




                                       iv
<PAGE>


                                    EXHIBITS
Exhibit A         -    Form of Amended and Restated Stockholders' Agreement
Exhibit B         -    Terms of Development and Fuel Services Agreement

























                                       2
<PAGE>


                            STOCK PURCHASE AGREEMENT

         This  Stock  Purchase  Agreement,  dated as of August  11,  2000  (this
"Agreement")  among  Exelon  (Fossil)  Holdings,  Inc.,  a Delaware  corporation
("Buyer"), the stockholders of Sithe Energies, Inc., a Delaware corporation (the
"Company"), listed on Schedule 1 (each individually a "Seller" and collectively,
the "Sellers") and the Company.

                                 R E C I T A L S

         A. The Sellers own shares of Common Stock (as defined herein).

         B. Buyer desires to purchase from each Seller,  and each Seller desires
to sell to Buyer,  subject to the terms and conditions of this  Agreement,  that
number of shares of Common  Stock set forth  beside  the name of such  Seller on
Schedule 1 (the "Sithe Stock").

         C. The  Board of  Directors  of the  Company  has  determined  that the
consummation of the transactions  contemplated by this Agreement, upon the terms
and  conditions  set forth in this  Agreement,  is in the best  interests of the
Company and its stockholders.

         NOW  THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereby  agree as
follows:



                                       1
<PAGE>

ARTICLE 1.        CERTAIN DEFINITIONS

         For the purposes of this  Agreement,  the  following  words and phrases
shall have the following meanings:

         "1998 Plan" means the  Company's  Amended and  Restated  1998  Employee
Restricted Stock Ownership Plan, as amended, modified or supplemented.

         "1999 Stock Plan" means the  Company's  Amended and Restated 1999 Stock
Retention Plan, as amended, modified or supplemented.

         "Act" has the meaning as set forth in Section 5.7.

         "Adjusted Seller" has the meaning as set forth in Section 2.3.

         "Adjustment Amount" means an amount (which may be positive or negative)
equal to: (a) the result obtained by subtracting Reference  Stockholders' Equity
from Closing  Stockholders'  Equity;  less (b) the amount of the after-tax  gain
(determined  in  accordance  with  GAAP)  resulting  from  the  closing  of  the
transactions  consummated  pursuant to the Reliant Purchase Agreement;  plus (c)
$90.0 million  related to dividends if declared and accrued prior to the Closing
Date (whether or not paid prior to the Closing Date); plus (d) the amount of any
payment by the Company pursuant to Section 2.1.2.2,  to the extent such payment,
or any accrual  therefor,  is reflected  on the Closing  Balance  Sheet;  as the
amount  determined  pursuant  to clauses  (a)  through  (c) shall be adjusted to
eliminate (i) any after-tax credits (but not charges) resulting from or relating
to any  restructuring,  renegotiation,  refinancing,  buy-out or buy-down of the
contractual  rights and  obligations of the Qualifying  Facilities  owned by the
Company or any of its  Subsidiaries  or (ii) any after-tax  non-cash  charges or
credits  recorded  prior  to the  Closing  Date  due to  changes  in  accounting
principles  from the accounting  principles  utilized in preparing the Company's
1999 audited financial statements.


                                       2
<PAGE>

         "Advisors" has the meaning as set forth in Section 13.8.

         "Affiliate"  means any Person in control or under  control of, or under
common control with, another Person.  For purposes of the foregoing,  "control",
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the  direction of the  management  and policies of such
Person,  whether  through  ownership  of voting  securities  or by  contract  or
otherwise.

         "After-Tax Gain or Loss" has the meaning as set forth in Section 2.3.

         "Agreement" has the meaning as set forth in the first paragraph of this
Agreement.

         "Allegheny Entities" has the meaning as set forth in Section 12.1.

         "Amended and Restated  Stockholders'  Agreement"  means the Amended and
Restated Stockholders' Agreement, substantially in the form of Exhibit A hereto,
to be entered into among Buyer, the Sellers and the Company upon the Closing.

         "Asian Assets" means the Company's  common stock of, stock  investments
in and loans and advances to, in each case, Sithe Asia Holdings, Limited and its
Affiliates.

         "Base Purchase Price" means $682.0 million.

         "BECO  Facility" means that certain Credit  Agreement,  dated as of May
15, 1998, among Sithe New England Holdings, LLC, Bank of Montreal, as agent, and
the financial institutions party thereto, as amended, modified and supplemented.

         "Benefit   Arrangement"  means  any  executive  incentive   arrangement
consisting  of (i) any  employment  or individual  personal  services  agreement
involving  annual base  salary of at least  $250,000  (with  respect to any such
agreement that is an employment  agreement) or annual  compensation  of at least
$250,000 (with respect to any other such agreement), but excluding any agreement


                                       3
<PAGE>

of at-will  employment,  (ii) any equity  compensation  plan, (iii) any deferred
compensation plan, and (iv) any other material employee benefit plans.

         "Benefit Plan" has the meaning as set forth in Section 3.12.

         "Book  Value" means the net book value of any equity  interests  and/or
assets sold (together with any liabilities  assumed by the transferee)  pursuant
to an International  Sale or a disposition of assets pursuant to Section 2.4, as
determined in accordance  with GAAP and reflected on the general  ledgers of the
Company and its consolidated subsidiaries,  as of the date of such International
Sale or disposition of assets pursuant to Section 2.4 .

         "Business  Day" means any day other than a Saturday,  a Sunday or a day
on which commercial banking institutions in New York, New York are authorized or
obligated by law or executive order to be closed.

         "Buyer"  has the  meaning as set forth in the first  paragraph  of this
Agreement.

         "Buyer Indemnified Group" has the meaning as set forth in Section 12.1.

         "Buyer Representatives" has the meaning as set forth in Section 12.1.

         "Charter Documents" has the meaning as set forth in Section 3.3.

         "Claim" has the meaning as set forth in Section 12.3.

         "Closing"  has the meaning as set forth in Section 9.1.

         "Closing Book Value" means the net book value as of the Closing Date of
any equity interest and/or assets sold (together with any liabilities assumed by
the transferee)  after the Closing Date pursuant to an  International  Sale or a
disposition of assets  pursuant to Section 2.4, as determined in accordance with
GAAP and  reflected on the general  ledgers of the Company and its  consolidated
subsidiaries, except that such net book value shall be adjusted to eliminate the


                                       4
<PAGE>

effect of non-cash  write-ups or  write-downs in the value of such assets during
the period beginning March 31, 2000 and ending on the Closing Date.

         "Closing Date" has the meaning as set forth in Section 9.1.

         "Closing  Balance  Sheet"  means a  consolidated  balance  sheet at the
Closing Date of the Company and its  subsidiaries  (including any  International
Entities) to be audited by the  Company's  auditors  and prepared in  accordance
with GAAP.

         "Closing Statement" has the meaning as set forth in Section 2.2.

         "Closing   Stockholders'  Equity"  means  "Stockholders'   Equity",  as
reflected on the Closing Balance Sheet.

         "Code"  means  the  Internal  Revenue  Code of 1986,  as  amended.  All
citations to the Code or to the regulations promulgated thereunder shall include
any amendments or any substitute or successor provisions thereto.

         "Collective  Bargaining  Agreements"  has the  meaning  as set forth in
Section 3.11.

         "Common  Stock" means the common stock,  par value $0.01 per share,  of
the Company.

         "Company"  has the meaning as set forth in the first  paragraph of this
Agreement.

         "Confidentiality  Agreement"  has the  meaning  as set forth in Section
6.1.

         "Contract" means a contract,  lease,  license,  note,  bond,  mortgage,
indenture, instrument or other similar obligation.

         "Corporate Sellers" means the Sellers identified as "Corporate Sellers"
on Schedule 1.

         "Credit  Support  Letter"  means that  certain  letter,  dated the date
hereof, from PECO Energy Company.

         "Damages" has the meaning as set forth in Section 12.1.

         "D&O Claim" has the meaning as set forth in Section 6.7.





                                       5
<PAGE>

         "Development and Fuel Services  Agreement" shall mean a Development and
Fuel Services  Agreement,  substantially  in accordance  with the terms attached
hereto as Exhibit B.

         "Director  Indemnified  Party" has the  meaning as set forth in Section
6.7.

         "Director  Termination  Date" means the last date on which any director
nominated by any Seller shall serve on the board of directors of the Company.

         "Divestiture  Committee"  has the meaning as defined in the Amended and
Restated Stockholders' Agreement.

         "Dividend" has the meaning as set forth in Section 2.6.

         "DOJ" has the meaning as set forth in Section 6.2.

         "Employee  Benefit Plan" means any employee benefit plan, as defined in
Section 3(3) of ERISA.

         "Environmental Laws" means all applicable Federal, state and local laws
and  regulations,  relating to pollution or  protection  of the  environment  or
natural resources, including laws relating to releases or threatened releases of
hazardous substances  (including,  without limitation,  releases to ambient air,
surface water, groundwater, land and surface and subsurface strata) or otherwise
relating to the manufacture,  processing, distribution, use, treatment, storage,
release, transport, disposal or handling of hazardous substances.

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

         "ERISA Affiliate" of the Company means any other person that,  together
with the Company as of the relevant  measuring date under ERISA,  is required to
be treated as a single employer under Section 414 of the Code.

         "Estimated  Adjustment  Amount" has the meaning as set forth in Section
2.2.

         "Estimated  Closing  Statement" has the meaning as set forth in Section
2.2.



                                       6
<PAGE>

         "EWG" has the meaning as set forth in Section 3.22.

         "Federal  Power Act" means the Federal  Power Act of 1920,  as amended,
and rules promulgated thereunder.

         "FERC" has the meaning as set forth in Section 6.2.

         "Financial Statements" has the meaning as set forth in Section 3.5.

         "FTC" has the meaning as set forth in Section 6.2.

         "FUCO" has the meaning as set forth in Section 3.22.

         "GAAP" means  generally  accepted  accounting  principles in the United
States.

         "GPU Purchase Agreement" means the Purchase and Sale Agreement dated as
of October 29, 1998, as amended by Amendments 1 through 9, among Jersey  Central
Power & Light Company, Metropolitan Edison Company, GPU, Inc. and the Company.

         "HSR Act" means the  Hart-Scott-Rodino  Antitrust  Improvements  Act of
1976, as amended, and the rules and regulations promulgated thereunder.

         "Indemnified Party" has the meaning as set forth in Section 12.3.

         "Indemnifying Party" has the meaning as set forth in Section 12.3.

         "Independent  Accounting Firm" means Ernst & Young, LLP; provided, that
if Ernst & Young,  LLP is not  available  (because of a conflict or  otherwise),
then  "Independent  Accounting Firm" shall mean KPMG LLP; and provided  further,
that if  neither  Ernst & Young,  LLP nor KPMG LLP is  available  (because  of a
conflict or otherwise),  then  "Independent  Accounting Firm" shall mean another
independent  accounting firm of national  recognition that is mutually appointed
by the Company  (at the  direction  of the  Sellers)  and Buyer  (other than the
regular independent accounting firm of Buyer, the Company or any Seller).



                                       7
<PAGE>

         "Interest  Rate"  means the  published  annual  yield to  maturity  for
two-year United States Government Treasury obligations on the Closing Date.

         "International Entities" shall mean the entities listed on Schedule 1B.

         "International  Sale" means the sale of any assets (net of any retained
liabilities) held, directly or indirectly,  by any of the International Entities
on the date hereof,  whether by a sale of equity interests of any  International
Entities or otherwise,  which results in the  recognition  of After-Tax  Gain or
Loss by the Company or any of its Subsidiaries.  Without limiting the foregoing,
the distribution to Marubeni of any net assets held by any of the  International
Entities  pursuant  to  any  Marubeni  Transaction  shall  be  deemed  to  be an
International Sale.

         "International  Survival  Period"  means the period  commencing  on the
Closing  Date and  ending on the  earlier  of (a) the third  anniversary  of the
occurrence of the first Put/Call Date that,  together with any previous sales of
Common Stock pursuant to the Put and Call Agreement, results in the sale of more
than 662/3  percent of the  shares of Common  Stock  subject to the Put and Call
Agreement and (b) the fifth  anniversary of the Closing Date;  provided however,
that with  respect to any Claim  arising out of any  guarantee by the Company or
any of its Subsidiaries of any obligations of any of the International Entities,
or any  indemnification  obligation  of the  Company or any of its  Subsidiaries
pursuant  to any  purchase  agreement,  merger  agreement  or similar  agreement
pursuant  to  which  any   International   Sale  have  been   consummated,   the
"International  Survival  Period" with respect to any such Claim shall terminate
on the date on which such guarantee or indemnification obligation terminates.

         "knowledge"  or words to such  effect  means,  (i) with  respect to any
Person that is an individual,  the actual knowledge of such Person,  (ii) in the
case of any Person other than the Company that is not an individual,  the actual
knowledge of the executive  officers of such Person,



                                       8
<PAGE>

or (iii) in the case of the  Company,  the  actual  knowledge  of the  executive
officers of the Company listed on Part A of Schedule 1A after reasonable inquiry
by one or more of such executive  officers of the employees  listed on Part B of
Schedule 1A.

         "Liens" means liens, charges,  restrictions,  claims or encumbrances of
any nature.

         "Marubeni" has the meaning as set forth in Section 2.6.

         "Marubeni America" has the meaning as set forth in Section 2.6.

         "Marubeni American Power" has the meaning as set forth in Section 2.6.

         "Marubeni MS Power" has the meaning as set forth in Section 2.6.

         "Marubeni Transaction" has the meaning as set forth in Section 2.6.

         "material" or "materially" means, when used with respect to the Company
or any of its Subsidiaries,  material to the Company and its Subsidiaries, taken
as a whole.

         "Material  Adverse Effect" means an effect that either  individually or
in the aggregate is materially adverse to the condition (financial or otherwise)
or results of operations of the Company and its Subsidiaries,  taken as a whole,
excluding, in any case, (i) any changes, circumstances or effects resulting from
or relating to changes in the economy,  financial  markets,  commodity  markets,
laws,  regulations or rules in the applicable  electric power markets  generally
(including,  without limitation, changes in laws or regulations affecting owners
or providers of electric generation, transmission or distribution as a group and
not the  Company  exclusively)  and (ii) any  changes  in  conditions  generally
applicable to the industries in which the Company or any of its  Subsidiaries is
involved,  and, in the case of clause (i) or (ii),  not affecting the Company or
its  Subsidiaries  in any  manner or  degree  significantly  different  from the
industry as a whole.

         "Material Contracts" means each Contract to which any of the Company or
any Subsidiary of the Company is a party or by which any of them or any of their
respective  property



                                       9
<PAGE>

may be bound and  which,  in each  case,  is  material  to the  Company  and its
Subsidiaries  taken as a whole,  other than any Contract which relates primarily
to (i) any assets or entities sold pursuant to the Reliant  Purchase  Agreement,
or (ii) any  assets or  entities  that  constitute  a part of the  International
Entities.

         "Material Encumbrances" means any liens, charges, restrictions,  claims
or  encumbrances  of any nature,  material  to the Company and its  Subsidiaries
taken as a whole,  other  than  any  liens,  charges,  restrictions,  claims  or
encumbrances  which relate primarily to (i) any assets or entities sold pursuant
to the  Reliant  Purchase  Agreement,  or  (ii)  any  assets  or  entities  that
constitute a part of the International Entities.

         "Multiemployer Plan" means a multiemployer plan, as defined in Sections
3(37) and 4001(a)(3) of ERISA.

         "NEDC" means National Energy Development  Corporation.

         "NYSEG" has the meaning as set forth in Section 12.1.

         "Opening Balance Sheet" means the audited consolidated balance sheet of
the Company and its  subsidiaries at December 31, 1999 included in the Financial
Statements.

         "Outstanding  Stock"  means all of the  issued and  outstanding  Common
Stock of the Company.

         "Permitted Assignees" has the meaning as set forth in Section 13.4.

         "Permitted Liens" has the meaning as set forth in Section 3.14.

         "Person"  means and  includes an  individual,  a  partnership,  a joint
venture, a corporation,  a limited liability company, a trust, an unincorporated
organization or a government or any department or agency thereof.

         "Plan Restructuring" has the meaning as set forth in Section 2.6.



                                       10
<PAGE>

         "Power Purchase  Agreement" means the proposed Power Purchase Agreement
between  the  Company and Buyer  related to the  purchase of electric  output by
Buyer or its Affiliate from the Company or any of its Subsidiaries.

         "Principal  Sellers"  means those Sellers  identified  with an asterisk
("*") on Schedule 1.

         "PUHCA"  means the  Public  Utility  Holding  Company  Act of 1935,  as
amended, and rules promulgated thereunder.

         "PURPA" means the Public  Utility  Regulatory  Policies Act of 1978 and
rules promulgated thereunder.

         "Put and Call  Agreement"  means that  certain Put and Call  Agreement,
dated the date hereof among the Company, the Sellers and Buyer.

         "Put/Call Closing Date" means, with respect to any Seller,  the earlier
of (i) the date of the  closing,  if any, of the sale of shares of Common  Stock
held by such Seller  immediately  after the Closing,  as contemplated by the Put
and  Call  Agreement  or (ii)  the date of a  payment  by  Buyer to such  Seller
pursuant to Section 6.10 of the Put and Call Agreement.

         "Put/Call  Date"  means,  with  respect to any  Seller,  either (i) the
Put/Call Closing Date applicable to such Seller or (ii) if neither the Put Right
nor the Call Right (each as defined in the Put and Call  Agreement) is exercised
pursuant to the Put and Call  Agreement,  the tenth  Business Day  following the
date of the  termination of the Exercise  Period (as defined in the Put and Call
Agreement).

         "Qualifying  Facilities"  means generation  facilities that satisfy the
requirements  of Section 210 of PURPA and the rules set forth in 18 C.F.R.  Part
292.

         "Rades Project" means the 471 megawatt gas-fueled project in Tunisia in
which the Company has a 32.5% interest.




                                       11
<PAGE>

         "Real Property" has the meaning as set forth in Section 3.18.

         "reasonable efforts" means commercially reasonable efforts.

         "Reference  Stockholders'  Equity"  means  "Stockholders'  Equity",  as
reflected on the Opening Balance Sheet.

         "Reliant Purchase Agreement" means the Purchase Agreement,  dated as of
February 19, 2000, among Reliant Energy Power Generation,  Inc., Reliant Energy,
Incorporated,  the Company and Sithe  Northeast  Generating  Company,  Inc.,  as
amended, modified and supplemented.

         "Reliant  Survival  Period" means the period  commencing on the Closing
Date and ending on the earlier of (a) the first anniversary of the occurrence of
the first  Put/Call Date that,  together with any previous sales of Common Stock
pursuant to the Put and Call  Agreement,  results in the sale of more than 662/3
percent of the shares of Common Stock subject to the Put and Call Agreement, and
(b) the third anniversary of the Closing Date.

         "Sale Adjustment Period" has the meaning as set forth in Section 2.3.

         "Sale Notice" has the meaning as set forth in Section 2.3.

         "SEC" has the meaning as set forth in Section 5.7.

         "Seller"  has the meaning as set forth in the first  paragraph  of this
Agreement.

         "Sellers'  Indemnified  Group" has the  meaning as set forth in Section
12.2.

         "Sellers'  Representatives"  has the  meaning  as set forth in  Section
12.2.

         "Senior Credit Facility" means that certain Amended and Restated Senior
Secured  Revolving Credit  Agreement,  dated as of December 19, 1997, as amended
and restated,  among the Company,  certain Subsidiaries of the Company,  Bank of
Montreal,  as agent, and the financial  institutions party thereto,  as amended,
modified and supplemented.




                                       12
<PAGE>

         "Significant  Subsidiary" shall mean a Subsidiary of the Company having
total  consolidated  assets with a value  equal to at least five  percent of the
total  consolidated  assets of the Company and its  subsidiaries as reflected on
the consolidated  unaudited balance sheet of the Company and its subsidiaries at
March 31,  2000,  determined  on a pro forma  basis after  giving  effect to the
disposition  of the assets sold pursuant to the Reliant  Purchase  Agreement and
the assets owned by any International Entities.

         "Sithe Stock" has the meaning as set forth in the Recitals.

         "Smithfield  Project"  means  the  Company's  162  megawatt  gas-fueled
project in Sydney, Australia.

         "Subsidiary"  of a Person  means (i) any  corporation,  association  or
other business entity of which more than 50 percent of the total voting power of
shares or other voting  securities  outstanding  thereof is at the time owned or
controlled,  directly or indirectly,  by that Person or one or more of the other
Subsidiaries of that Person (or a combination  thereof) and (ii) any partnership
or limited  liability  company  (a) the sole  general  partner  or the  managing
general partner or managing member of which is such Person or one or more of the
other  Subsidiaries of such Person (or any combination  thereof) or (b) the only
general partners or members of which are such Person or one or more of the other
Subsidiaries of such Person (or any combination  thereof).  Without limiting the
generality of the foregoing and for avoidance of ambiguity,  except as otherwise
expressly provided herein, none of the International Entities shall be deemed to
be a Subsidiary of the Company.

         "Survival Period" has the meaning as set forth in Section 11.4.

         "Target Date" means September 30, 2000.



                                       13
<PAGE>

         "Tax Returns"  means all returns,  declarations,  reports,  statements,
estimates,  declarations of estimated Tax, claims for refund, information return
or other  document  required  to be filed in  respect  of Taxes,  including  any
schedule or attachment  thereto,  and the term "Tax Return" means any one of the
foregoing Tax Returns,  including any amendments  thereof made or required to be
made.

         "Taxes" mean all federal,  state, local,  foreign and other net income,
gross income,  gross  receipts,  sales,  use, ad valorem,  transfer,  franchise,
capital stock,  profits,  license,  lease,  service,  service use,  withholding,
payroll,  employment,  social security (or similar),  unemployment,  disability,
workmen's compensation,  excise,  severance,  stamp,  occupation,  premium, real
property,  personal  property,  realty transfer and realty transfer gains taxes,
registration,  alternative or add-on minimum,  windfall  profits,  environmental
(including taxes under Code Section 59A), fuel, gas import,  customs,  duties or
other taxes, fees,  assessments or charges of any kind whatsoever imposed by any
governmental entity, together with any interest and any penalties,  additions to
tax or additional amounts with respect thereto, whether disputed or not, and the
term "Tax" means any one of the foregoing Taxes.

         "Transfer  Taxes"  shall have the meaning as set forth in Section  6.4.

         "Vivendi" means Vivendi, S.A.

         "Vivendi Loan Agreement" means that certain Loan Agreement, dated as of
November 9, 1999, between the Company and Vivendi.

ARTICLE 2. PURCHASE AND SALE OF STOCK

Section 2.1 Purchase and Sale of Stock.

     2.1.1 Transfer of Sithe Stock. Upon the terms and subject to the conditions
set forth in  Articles 7 and 8, on the  Closing  Date each  Seller  shall  sell,
convey,  transfer,  assign,  and



                                       14
<PAGE>

deliver to Buyer,  free and clear of all Liens,  other than Liens  created by or
through  Buyer,  and Buyer shall  purchase  from each Seller,  in the manner set
forth in Article 9, the Sithe Stock owned by such Seller and set forth  opposite
such Seller's name on Schedule 1.

     2.1.2  Purchase  Price.  Upon the terms and subject to the  conditions  set
forth in Articles 7 and 8, on the Closing  Date,  the payments set forth in this
Section 2.1.2 shall be made.

         2.1.2.1  Buyer  shall pay to the  Sellers,  in the  manner set forth in
Article 9, an amount equal to the Base Purchase Price.

         2.1.2.2 If the Estimated  Adjusted Amount is positive,  Buyer shall pay
to the  Sellers,  in the manner set forth in Article 9, an amount  equal to 49.9
percent of the Estimated Adjustment Amount;  provided that, at Buyer's election,
in lieu of such payment, the Company shall pay to the Sellers, in the manner set
forth in  Article  9, an  amount  equal to the  Estimated  Adjustment  Amount by
delivery of written notice of such election not more than ten (10) Business Days
prior to the Closing;  provided further, however, that Buyer shall have no right
to  make  such an  election  if (a)  the  payment  from  the  Company  described
immediately  above would have any cost or other adverse  financial impact to any
Seller  (other than as a result of any change in the tax liability of any Seller
resulting from the transactions  contemplated hereby), or (b) such payment would
result in a violation of applicable law or a breach of the terms of any Contract
to which the Company or any of its  subsidiaries  (including  any  International
Entities) is a party. Each Seller agrees to use reasonable efforts to cause each
director  of the Company  nominated  by such Seller to approve any action of the
Company  taken in  accordance  with this  Section  2.1.2.2,  including,  without
limitation,  the  execution  of any  resolution  in



                                       15
<PAGE>

connection  with  any  such  election,  subject  to the  second  proviso  of the
immediately  preceding  sentence.  The Company shall use  reasonable  efforts to
obtain any third-party consents needed to satisfy the requirements of clause (b)
of this Section 2.1.2.2.

         2.1.2.3 If the  Estimated  Adjustment  Amount is negative,  the Sellers
shall pay to Buyer,  as an offset to the  payment by Buyer of the Base  Purchase
Price  pursuant  to  Section  2.1.2.1,  an amount  equal to 49.9  percent of the
Estimated Adjustment Amount.

         2.1.2.4 The net amounts payable to the Sellers pursuant to this Section
2.1.2 shall be  allocated  and paid to each of the Sellers  based on a fraction,
the  numerator  of which is the number of shares of Sithe Stock set forth beside
such  Seller's  name on  Schedule  1 and the  denominator  of which is the total
number of shares of Sithe Stock set forth on Schedule 1.

Section 2.2 Initial Purchase Price Adjustment.

     2.2.1 At least fifteen (15)  Business  Days prior to the Closing Date,  the
Company shall prepare and deliver to Buyer an estimated  closing  statement (the
"Estimated  Closing  Statement") that shall set forth the Sellers' best estimate
of the Adjustment Amount (the "Estimated  Adjustment Amount"), if any, including
a calculation of such Estimated Adjustment Amount in reasonable detail.

     2.2.2 Within ninety (90) days following the Closing Date, the Sellers shall
direct the Company in the  preparation  and delivery to Buyer of a final closing
statement (the "Closing Statement") that shall include the Closing Balance Sheet
and set forth the amount of the



                                       16
<PAGE>

Adjustment Amount. Buyer and Buyer's independent auditors shall be provided with
copies of, or access to, records and other information that Buyer may reasonably
request with respect to the information set forth on the Closing Statement.

     2.2.3  Within  thirty  (30) days  following  the  delivery  of the  Closing
Statement by the Company to Buyer,  Buyer may object to the Adjustment Amount in
writing.  If Buyer does not so object to the Adjustment  Amount,  the Adjustment
Amount as set forth in the  Closing  Statement  shall be binding on the  parties
hereto. If Buyer so objects to the Adjustment  Amount, the parties shall attempt
to resolve  such  dispute by  negotiation.  If the parties are unable to resolve
such dispute  within  thirty (30) days of any  objection  by Buyer,  the parties
shall appoint the Independent  Accounting Firm, and shall instruct such firm, at
the Company's  expense,  to review the calculation of the Adjustment  Amount and
determine the appropriate  amount of the Adjustment  Amount,  in accordance with
this Agreement,  within thirty (30) days of such appointment.  The parties agree
to  cooperate  with the  Independent  Accounting  Firm and  provide it with such
information as it reasonably  requests to enable it to make such  determination.
The finding of such Independent  Accounting Firm shall be binding on the parties
hereto.

     2.2.4 Upon final  determination  of the Adjustment  Amount pursuant to this
Section 2.2, whether by agreement of the parties or as otherwise provided above:
(a) if the  Adjustment  Amount is higher than the Estimated  Adjustment  Amount,
Buyer shall pay to each Seller,  no later than five (5) Business Days after such
determination,  by wire transfer of  immediately  available  funds to an account
designated by the payee,  an amount equal to (i) 49.9 percent of the  difference
between the Adjustment Amount and the Estimated  Adjustment Amount multiplied by
(ii) a fraction,  the  numerator of which is the number of shares of Sithe



                                       17
<PAGE>

Stock sold by such Seller and the  denominator  of which is the total  number of
shares of Sithe  Stock  sold by all of the  Sellers;  and (b) if the  Adjustment
Amount is less than the Estimated  Adjustment  Amount,  each Seller shall pay to
Buyer,  no later than five (5) Business days after such  determination,  by wire
transfer of immediately  available  funds to an account  designated by Buyer, an
amount equal to (i) 49.9 percent of the difference between the Adjustment Amount
and the Estimated Adjustment Amount multiplied by (ii) a fraction, the numerator
of which is the  number of shares of Sithe  Stock  sold by such  Seller  and the
denominator of which is the total number of shares of Sithe Stock sold by all of
the Sellers.  Notwithstanding the foregoing, if on the Closing Date, the Company
made the payment  referred  to in Section  2.1.2.2,  then:  (1) except as may be
prohibited  by  applicable  law or by the  terms of any  Contract  to which  the
Company or any of its subsidiaries  (including the International  Entities) is a
party, in lieu of any payment from Buyer required  pursuant to clause (a) of the
immediately  preceding sentence,  at Buyer's election,  the Company shall pay to
each  Seller,  at the time and in the  manner  set  forth in  clause  (a) of the
immediately  preceding sentence,  an amount equal to: (y) the difference between
the Adjustment Amount and the Estimated  Adjustment Amount;  multiplied by (z) a
fraction,  the numerator of which is the number of shares of Sithe Stock sold by
such Seller and the  denominator of which is the total number of shares of Sithe
Stock  sold by all of the  Sellers;  and (2) in lieu  of any  payment  to  Buyer
pursuant to clause (b) of the immediately preceding sentence,  each Seller shall
pay to the Company, at the time and in the manner set forth in clause (b) of the
immediately preceding sentence, an amount equal to (y)(i) the difference between
the Estimated  Adjustment Amount and the Adjustment Amount;  multiplied by (z) a
fraction,  the numerator of which is the number of shares of Sithe Stock sold by
such Seller and the  denominator of which is the total number of shares of Sithe
Stock sold by all the Sellers.  Each Seller agrees to use reasonable  efforts to
cause  each  director  nominated  by such  Seller to  approve  any action of the
Company  taken  in



                                       18
<PAGE>

accordance with clause (1) of the  immediately  preceding  sentence,  including,
without limitation,  the execution of any resolution in connection with any such
payment,  subject to the  exception  set forth in such clause  (1).  The Company
shall use  reasonable  efforts  to obtain  any  third-party  consents  needed to
satisfy the requirements of such clause (1). For purposes of determining whether
the Adjustment  Amount is "higher" than or "less" than the Estimated  Adjustment
Amount  pursuant to this Section 2.2.4, a positive  amount shall be deemed to be
"higher"  than a negative  amount,  and a negative  amount shall be deemed to be
"higher" than a larger negative amount.

     2.2.5 The Company  shall,  and Buyer and the Sellers  shall use  reasonable
efforts to cause the Company to,  reasonably  cooperate  with the Sellers in the
preparation of the Closing Statement.

Section 2.3  Additional  Purchase  Price  Adjustments  Related to  International
Sales.

     2.3.1 In the event of the occurrence of any International Sale which occurs
during the period  starting on the Closing Date and ending on the Put/Call  Date
applicable  to any Seller (the "Sale  Adjustment  Period"),  the  Company  shall
provide  written  notice (a "Sale  Notice") to each Seller with respect to which
the Put/Call Date shall not have  occurred as of the date of such  International
Sale (each an "Adjusted  Seller," and together,  the "Adjusted  Sellers") and to
Buyer within thirty Business Days after such International Sale, which shall set
forth the amount and calculation of any after-Tax gain or loss recognized by the
Company  as a result  of any such  International  Sale (the  "After-Tax  Gain or
Loss").  The After-Tax Gain or Loss shall be equal to: (a) the gross sales price
of such  International  Sale  (including  the fair market  value of any non-cash
consideration received,  which shall be equal to the "fair market value" of such
non-cash   consideration   for  purposes  of  determining   the  amount  of  the
consideration  payable by each



                                       19
<PAGE>

Adjusted  Seller  pursuant  to  Section  2.3.3(ii));  less (b) the amount of any
retained  liabilities  related to such  assets,  as  reflected  on the books and
records of the  Company  and its  consolidated  subsidiaries;  less (c) the Book
Value of the assets sold; less (d) Tax effects  applicable to such International
Sale,  determined in accordance with GAAP; and the amount determined pursuant to
clauses (a) through (d) shall be adjusted to eliminate changes in the book value
of the assets sold pursuant to such International Sale from March 31, 2000 (when
the book value of the Asian  Assets and the  Company's  investment  in the Rades
Project and the Smithfield Project was $277,202,000, $8,714,000 and $19,128,000,
respectively)  through the date of such International Sale that are attributable
to (y) the  results of  operations  of such  assets  during  such  period or (z)
non-cash  write-ups or  write-downs  in the value of any such assets during such
period in accordance with GAAP.

     2.3.2 Within thirty (30) days following delivery of a Sale Notice, Buyer or
the  Adjusted  Sellers  may object to the amount of  After-Tax  Gain or Loss set
forth in the Sale  Notice  in  writing.  If a party  objects  to the  amount  of
After-Tax Gain or Loss included in the Sale Notice, the parties shall attempt to
resolve such dispute by  negotiation.  If the parties are unable to resolve such
dispute within thirty (30) days of any objection,  the parties shall appoint the
Independent  Accounting  Firm,  and shall  instruct  such firm, at the Company's
expense,  to  determine  the amount of After-Tax  Gain or Loss  pursuant to this
Section 2.3, in accordance with this Agreement,  within thirty (30) days of such
appointment. The parties agree to cooperate with the Independent Accounting Firm
and provide it with such  information as it reasonably  requests to enable it to
make such determination.  The finding of such Independent  Accounting Firm shall
be binding on the parties hereto.



                                       20
<PAGE>

     2.3.3 No later than five (5) Business Days after the later of (a) the final
determination  of the  amount  of  After-Tax  Gain or Loss with  respect  to any
International Sale, whether by agreement of the parties or as otherwise provided
above or (b) the Put/Call  Date  applicable  to each  Adjusted  Seller:  (i) the
Company shall transfer to each Adjusted Seller such Adjusted  Seller's  pro-rata
share (based on the number of shares of Common Stock held by each such  Adjusted
Seller  immediately prior to the Closing as a percentage of the number of shares
of Common Stock held by all Adjusted Sellers  immediately  prior to the Closing)
of any non-cash  consideration  received by the Company in connection  with such
International  Sale;  (ii) as  consideration  for such  transfer,  each Adjusted
Seller shall pay to the Company,  in the manner  contemplated  by and subject to
the  provisions  of  Section  2.5,  an amount  equal to such  Adjusted  Seller's
pro-rata  share (based on the number of shares of Common Stock held by each such
Adjusted Seller  immediately  prior to the Closing as a percentage of the number
of shares of Common Stock held by all Adjusted Sellers  immediately prior to the
Closing) of the fair market value of such non-cash consideration,  plus interest
on such pro-rata amount accrued from the date of such International Sale through
the payment date at an annual rate equal to the Interest Rate;  (iii) (A) if the
After-Tax  Gain or Loss with  respect to such  International  Sale is a negative
number, each Adjusted Seller shall pay to Buyer an amount equal to such Adjusted
Seller's  pro-rata  share (based on the number of shares of Common Stock held by
such  Adjusted  Seller  immediately  prior to the Closing as a percentage of the
number of shares of Common Stock held by all Adjusted Sellers  immediately prior
to the Closing) of such After-Tax  Gain or Loss,  plus interest on such pro-rata
amount accrued from the date of such International Sale through the payment date
at an annual rate equal to the Interest  Rate and (B) if the  After-Tax  Gain or
Loss with respect to such International  Sale is a positive number,  Buyer shall
pay to each  Adjusted



                                       21
<PAGE>

Seller an amount equal to: (1) such Adjusted  Seller's  pro-rata share (based on
the number of shares of Common Stock held by such  Adjusted  Seller  immediately
prior to the  Closing as a  percentage  of the number of shares of Common  Stock
held by all Adjusted Sellers immediately prior to the Closing) of such After-Tax
Gain or Loss,  plus  interest on such pro-rata  amount  accrued from the date of
such  International Sale through the payment date at an annual rate equal to the
Interest  Rate;  multiplied  by (2) a fraction,  the  numerator  of which is the
number  of  shares of  Common  Stock  held by Buyer on the date of such  payment
(after  giving  effect to any one or more  purchases  of  Common  Stock by Buyer
pursuant to the Put and Call  Agreement  through and including the Put/Call Date
on which such payment is being made) and the  denominator  of which is the total
number  of  shares  of  Common  Stock  held  by  Buyer  and  all of the  Sellers
immediately  following the Closing;  and (iv) each Adjusted  Seller shall pay to
Buyer an amount equal to such  Adjusted  Seller's  pro-rata  share (based on the
number of shares of Common Stock held by such Adjusted Seller  immediately prior
to the Closing as a  percentage  of the number of shares of Common Stock held by
all Adjusted  Sellers  immediately  prior to the Closing) of (A) the interest on
the Closing Book Value of the assets sold  pursuant to such  International  Sale
(as such Closing Book Value may be adjusted  from time to time after the Closing
Date,  but only to reflect  additional  investment  by the Company or any of its
Subsidiaries in such assets, or cash  distributions to the Company or any of its
Subsidiaries  related to such  assets),  accrued from the Closing Date until the
date on which such  International  Sale is  completed at an annual rate equal to
(x) the  Interest  Rate  multiplied  by (y) (1) one minus (2) the average of the
annual United States combined federal, state and local effective income tax rate
(expressed as a decimal) of the Company and its  Subsidiaries  for all completed
tax  years  between  the  Closing  Date and the date of such  payment,  plus (B)
interest  on the amount of accrued  interest  determined  pursuant to
                                       22
<PAGE>

clause (A) above,  accrued at an annual rate equal to the Interest Rate from the
date of such  International  Sale through the payment date. Each Adjusted Seller
shall also pay to Buyer an amount equal to such Adjusted Seller's pro-rata share
(based on the  number of shares of Common  Stock  held by such  Adjusted  Seller
immediately  prior to the  Closing  as a  percentage  of the number of shares of
Common Stock held by all Adjusted Sellers  immediately  prior to the Closing) of
any  Taxes  of  the  Company  or  any of its  Subsidiaries  resulting  from  any
International  Sale  (except  for  Taxes  reflected  in the  calculation  of the
After-Tax  Gain or Loss  resulting  from  such  International  Sale) or from the
purchase by such Adjusted Seller of any non-cash  consideration  received by the
Company in connection with any International Sale.

     2.3.4 In the event any International  Sale occurs after the date hereof and
prior to the termination of the Sale Adjustment  Period, and any payment is made
by or to the  Company  or any of its  Subsidiaries  after  the  later of (x) the
closing date with respect to such  International  Sale and (y) the Closing Date,
pursuant to any purchase price adjustment or similar provisions set forth in any
purchase agreement,  merger agreement or similar agreement pursuant to which any
International  Sale shall have been  consummated,  then, on the later of (i) the
final  determination of the After-Tax Gain or Loss pursuant to this Section 2.3,
whether by agreement of the parties or as otherwise  provided  above or (ii) the
Put/Call Date  applicable to each Adjusted  Seller:  (a) in the case of any such
payment  to the  Company  or any of its  Subsidiaries,  Buyer  shall pay to each
Adjusted Seller, in the manner contemplated by, and subject to the provisions of
Section 2.5: (1) (A) such Adjusted  Seller's pro-rata share (based on the number
of shares of



                                       23
<PAGE>

Common Stock held by such Adjusted Seller  immediately prior to the Closing as a
percentage  of the number of shares of Common  Stock held by all of the  Sellers
immediately  prior to the Closing) of the amount of such payment;  multiplied by
(B) a fraction,  the  numerator of which is the number of shares of Common Stock
held by Buyer on the date of such  payment  (after  giving  effect to any one or
more  purchases of Common Stock by Buyer  pursuant to the Put and Call Agreement
through and including the Put/Call Date on which such payment is being made) and
the  denominator  of which is the total number of shares of Common Stock held by
Buyer  and all of the  Sellers  immediately  following  the  Closing,  plus  (2)
interest on such  pro-rata  amount  accrued from the date of such  International
Sale through the payment date at an annual rate equal to the Interest  Rate; and
(b) in the case of any such  payment by the Company or any of its  Subsidiaries,
each  Adjusted  Seller shall make a payment of an amount equal to such  Adjusted
Seller's  pro-rata  share (based on the number of shares of Common Stock held by
such  Adjusted  Seller  immediately  prior to the Closing as a percentage of the
number of shares of Common Stock held by all of the Sellers immediately prior to
the  Closing) of the amount of such  payment,  plus  interest  on such  pro-rata
amount accrued from the date of such International Sale through the payment date
at an annual rate equal to the Interest Rate. The procedures with respect to the
resolution  of  disputes  set  forth  elsewhere  in this  Section  2.3,  mutatis
mutandis,  shall apply to the  resolution  of disputes  pursuant to this Section
2.3.4.

     2.3.5 In the event that after the date of any  payment  pursuant to Section
2.3.3(iii), Section 2.3.3(iv), the last sentence of Section 2.3.3, Section 2.3.4
or the last  sentence of Section 2.4,  the Put/Call  Date occurs with respect to
any other Adjusted  Seller,  then on such subsequent  Put/Call Date, Buyer shall
pay to each Adjusted Seller:  (a) the difference  between (1) the amount of each
prior payment by Buyer to such Adjusted Seller pursuant to Section 2.3.3(iii)(B)
or 2.3.4(a) (including all prior adjustments pursuant to this Section 2.3.5) and
(2) the amount that Buyer would have paid to such  Adjusted  Seller  pursuant to
Section  2.3.3(iii)(B)  or  2.3.4(a),  as the case may be, had Buyer held on the
date of such prior payment the number of



                                       24
<PAGE>

shares of Common  Stock  held by Buyer on such  subsequent  Put/Call  Date after
giving  effect to any  purchases  of Common  Stock  pursuant to the Put and Call
Agreement; and (b) the difference,  if any, between (1) the amount of each prior
payment by such  Adjusted  Seller to Buyer  pursuant  to Section  2.3.3(iii)(A),
Section 2.3.3(iv),  the last sentence of Section 2.3.3,  Section 2.3.4(b) or the
last sentence of Section 2.4 and (2) the amount represented by the percentage of
each such payment  referred to in the immediately  preceding clause 2.3.5(b) (1)
which equals the percentage of the outstanding Common Stock held by Buyer on the
date of such payment  pursuant to this Section 2.3.5 (after giving effect to any
one or more  purchases  of Common  Stock by Buyer  pursuant  to the Put and Call
Agreement through and including the Put/Call Date on which such payment pursuant
to this Section  2.3.5 is being made);  provided  that no payment  shall be made
pursuant to this clause (b) until the final  Put/Call  Date  pursuant to the Put
and Call Agreement. In addition to any payment by Buyer pursuant to this Section
2.3.5,  Buyer shall also pay interest on the amount of such payment,  accrued at
an annual  rate equal to the  Interest  Rate from the date of the  corresponding
payment pursuant to Section 2.3.3(iii),  Section 2.3.3(iv), the last sentence of
Section 2.3.3, Section 2.3.4 or the last sentence of Section 2.4, as applicable,
through the date of the payment pursuant to this Section 2.3.5.

Section 2.4 Distribution of International  Entities on the Put/Call Date. In the
event that on the  Put/Call  Date with respect to any Seller,  an  International
Sale shall not have  occurred  with  respect  to any of the  assets  held by the
International  Entities on the date hereof, the Company shall distribute to such
Seller on such Put/Call Date a pro-rata  portion  (based on the number of shares
of Common  Stock  held by such  Seller  immediately  prior to the  Closing  as a
percentage  of the total  number of shares of Common  Stock held by all  Sellers
immediately  prior  to  the  Closing)  of  the  remaining  assets  held  by  the
International  Entities  (whether  through a



                                       25
<PAGE>

distribution  of equity  interests  in the  entity or  entities  which hold such
assets or otherwise)  and as  consideration  for such  distribution  such Seller
shall  make a  payment,  in  the  manner  contemplated  by  and  subject  to the
provisions  of  Section  2.5,  of an amount  equal to (a) the Book  Value of the
assets so  distributed  plus (b) an amount  equal to the interest on the Closing
Book  Value of the  assets so  distributed  (as such  Closing  Book Value may be
adjusted  from  time to  time  after  the  Closing  Date,  but  only to  reflect
additional  investment by the Company or any of its Subsidiaries in such assets,
or cash distributions to the Company or any of its Subsidiaries  related to such
assets),  accrued from the Closing Date through the date of such distribution at
an annual rate equal to (x) the Interest  Rate  multiplied  by (y) (1) one minus
(2) the average of the annual United States  combined  federal,  state and local
effective  income tax rate  (expressed  as a  decimal)  of the  Company  and its
Subsidiaries  for all  completed tax years between the Closing Date and the date
of such  payment.  Each  acquiring  Seller shall pay to Buyer an amount equal to
such Seller's pro-rata share (based on the number of shares of Common Stock held
by such Seller immediately prior to the Closing as a percentage of the number of
shares of Common Stock held by all Sellers  immediately prior to the Closing) of
any Taxes of the Company or any  Subsidiary  of the Company  resulting  from the
distribution  of  assets  held by the  International  Entities  to  such  Seller
pursuant to this Section 2.4.

Section 2.5 Payment of Amounts Due Pursuant to Section 2.3 and Section 2.4. With
respect to payments  required to be made pursuant to Section 2.3 or Section 2.4:

     2.5.1 The parties  shall use  reasonable  efforts to permit  offsetting  of
payments where applicable,  and otherwise provide for an efficient settlement of
funds on the date of any such payments.


                                       26
<PAGE>

     2.5.2 With respect to any amount payable by Buyer to any Seller, Buyer may,
in lieu of making such payment,  elect to cause the Company to make such payment
to such Seller in the manner  provided  by, and subject to the  limitations  set
forth in, Section 2.1.2.2.

     2.5.3 Any amounts  payable by Buyer or the Company to any Seller  following
the  application  of Section  2.5.1 and 2.5.2 shall be paid by wire  transfer of
immediately available funds to an account specified by such Seller.

     2.5.4 Any amounts  payable by any Seller shall be paid by wire  transfer of
immediately  available funds to an account specified by the Company or Buyer, as
applicable;  provided,  that, after the second  anniversary of the Closing Date,
such Seller may elect to make such payment in the form of shares of Common Stock
by so  notifying  the  Company  or Buyer,  as  applicable,  not later  than five
Business  Days prior to the date on which such  payment is due.  For purposes of
any such election, the Common Stock shall be valued at the price that would have
been  applicable  had such Seller  sold such Common  Stock to Buyer on such date
pursuant to a "put" exercise under the terms of the Put and Call Agreement.

Section 2.6 Certain Preliminary Transactions.

     2.6.1 The Company has declared a dividend  payable to its  stockholders  in
the aggregate amount of $90.0 million (the "Dividend")  pursuant to a resolution
of the Board of  Directors of the Company  dated  August 11,  2000.  The Company
expects to pay the Dividend on or prior to the Closing Date.

     2.6.2 The parties  anticipate  that prior to the  Closing,  the Company may
restructure,  amend or  otherwise  modify  the 1998 Plan and the 1999 Stock Plan
(the "Plan Restructuring").  In connection with such restructuring,  the Company
may take actions  related to the Trust under the 1998 Plan and/or Sithe Employee
Stock Ownership, L.P., which may cause



                                       27
<PAGE>

the shares of Common Stock held by either or both of such entities to be held by
another Seller or by the Company.  The parties agree that in any such event and,
provided that the Company and each Seller has complied with Section  6.5.3(b) in
all  respects:  if the Trust under the 1998 Plan  and/or  Sithe  Employee  Stock
Ownership, L.P. ceases to hold shares of Common Stock, then (a) such entity will
cease to be a party to this Agreement,  (b) the Seller transferee of such shares
of Common  Stock will be bound by the terms  hereof with  respect to such shares
and (c) the Schedules to this Agreement will be updated to the extent  necessary
to reflect the foregoing.

     2.6.3 The parties anticipate that Marubeni America  Corporation  ("Marubeni
America"),  Marubeni  MS Power,  Inc.  ("Marubeni  MS Power")  and/or S Marubeni
American Power, Inc. ("Marubeni  American Power," and collectively,  "Marubeni")
may enter into  arrangements with the Company and/or Vivendi which may involve a
change in ownership  with respect to the shares of Common Stock held by Marubeni
on the date hereof (any such transaction, a "Marubeni Transaction"). The parties
agree that in any such event,  and provided that the Company and each Seller has
complied with Section 6.5.3(b) in all respects: if Marubeni America, Marubeni MS
Power or Marubeni American Power ceases to hold shares of Common Stock, then (a)
such  entity  will  cease  to be a party  to  this  Agreement,  (b)  any  Seller
transferee of such shares of Common Stock will be bound by the terms hereof with
respect to such shares and (c) the Schedules to this  Agreement  will be updated
to  the  extent  necessary  to  reflect  the  foregoing.   Notwithstanding   the
immediately  preceding sentence,  but subject to Section 6.5.3(b),  in the event
that the  Company  acquires  shares of Sithe  Stock held by Marubeni on the date
hereof in  connection  with a Marubeni  Transaction,  such shares of Sithe Stock
shall be  considered  outstanding  for all  purposes of this  Agreement  and the
Company  shall be bound as a Seller with respect to the  obligation to sell such
shares of Sithe Stock and the right to receive payment in


                                       28
<PAGE>

consideration  for the sale of such  shares of Sithe Stock at the  Closing,  and
Schedule  1 shall be  deemed  to have  been  amended  solely  for such  purpose;
provided that for purposes of each other provision of this Agreement  (including
without  limitation  the  provisions  of Article 2 as applicable to any payments
required  to  be  made  by  or  paid  to  any  Seller  after  the  Closing,  the
representations  and  warranties  relating to  ownership of such shares of Sithe
Stock set forth in Article 3 and Article 4 relating  to the period  prior to the
transfer of such shares of Sithe Stock to the Company,  and the  indemnification
provisions  set forth in Article 12),  Marubeni shall be deemed to be the Seller
with respect to all such shares of Sithe Stock.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as otherwise  disclosed in this Agreement,  or in any Schedule,  the
Company hereby  represents and warrants to Buyer,  as of the date hereof (except
where such  representation  or warranty is expressly made as of another specific
date), as follows:

Section 3.1 Organization, Qualification and Corporate Power.

     3.1.1 The Company is a corporation duly organized,  validly existing and in
good standing  under the laws of the State of Delaware,  and is duly licensed or
qualified to transact business as a foreign  corporation in each jurisdiction in
which the  nature  of the  business  transacted  by it or the  character  of the
properties  owned or leased by it  requires  such  licensing  or  qualification,
except  where  the  failure  to be so  licensed  or  qualified  would not have a
Material  Adverse Effect.  The Company has full corporate power and authority to
own,  lease or  otherwise  hold its  properties  and  assets and to carry on its
business as now conducted and to execute, deliver and perform this Agreement.

     3.1.2 Each  Significant  Subsidiary  of the  Company is listed on  Schedule
3.1.2.  Each  Significant  Subsidiary  which is a corporation is duly organized,
validly existing and in good



                                       29
<PAGE>

standing  under  the laws of the  jurisdiction  of its  incorporation,  and each
Significant  Subsidiary which is a partnership or limited  liability  company is
duly  formed,  validly  existing  and in good  standing  under  the  laws of the
jurisdiction of its organization.  Each Significant  Subsidiary is duly licensed
or qualified to transact  business as a foreign  corporation,  limited liability
company or partnership,  as applicable, in each jurisdiction in which the nature
of the business  transacted  by it or the character of the  properties  owned or
leased by it requires such licensing or qualification,  except where the failure
to be so licensed or qualified would not have a Material  Adverse  Effect.  Each
Significant  Subsidiary has the requisite corporate or organizational  power and
authority to own, lease or otherwise hold its properties and assets and to carry
on its business as now conducted.

Section 3.2 Authorization; Validity.

     3.2.1 The  execution,  delivery  and  performance  by the  Company  of this
Agreement  have been duly  authorized by all requisite  corporate  action on the
part of the Company.

     3.2.2 This  Agreement  has been duly  executed and delivered by the Company
and  constitutes  the valid and binding  obligation of the Company,  enforceable
against the Company in accordance with its terms,  except as enforceability  may
be  limited  by  bankruptcy,  insolvency,  reorganization,  moratorium  or other
similar  laws  now or  hereinafter  in  effect  relating  to  creditors'  rights
generally,  and general equitable principles (whether considered in a proceeding
in equity or at law).

Section 3.3 No Conflict.  Except as set forth in Schedule  3.3,  the  execution,
delivery and  performance by the Company of this Agreement and the  consummation
by the Company of the  transactions  contemplated  hereby will not (i)  violate,
conflict  with or result in a breach of any



                                       30
<PAGE>

provisions  of  the   certificate  of   incorporation,   by-laws,   articles  of
organization,   partnership  agreement,  limited  liability  company  agreement,
formation  agreement or other  similar  organizational  documents  (the "Charter
Documents") of the Company or any Significant  Subsidiary,  (ii) violate any law
or regulation applicable to the Company or any Subsidiary of the Company, or any
order of any court or governmental  agency or authority having jurisdiction over
the Company or any Subsidiary of the Company, (iii) violate or conflict with, or
constitute  (with  due  notice  or lapse of time or both) a  default  under,  or
require the consent or approval of any party to, any  Material  Contract or (iv)
result in the creation or imposition of any Material Encumbrance, except, in the
case of  clauses  (ii),  (iii) and (iv),  as would not have a  Material  Adverse
Effect.

Section 3.4 Capital Stock.

     3.4.1 The authorized,  issued and outstanding  capital stock of the Company
and  each  Significant  Subsidiary  are  as  set  forth  in  Schedule  3.4.  The
stockholders of record of the Company and each Significant Subsidiary are as set
forth in  Schedule  3.4.  Except as set forth in Schedule  3.4,  (i) there is no
authorized or outstanding subscription, warrant, option, convertible security or
other right  (contingent  or other) to purchase or  otherwise  acquire  from the
Company or from any Significant  Subsidiary  equity  interests of the Company or
any  Significant  Subsidiary,  (ii)  there is no  commitment  on the part of the
Company  or  on  the  part  of  any  Significant  Subsidiary  to  issue  shares,
subscriptions,  warrants, options, convertible securities, partnership interests
or other similar rights, and (iii) no equity securities or partnership interests
of the Company or of any  Significant  Subsidiary  are reserved for issuance for
any such purpose.  Except as set forth in Schedule 3.4, neither the Company, nor
any  Significant  Subsidiary,  has  any  obligation  (contingent  or  other)  to
purchase,  redeem or otherwise acquire any of its equity



                                       31
<PAGE>

securities.  Except  for  the  Charter  Documents  of the  Company  and  certain
Significant  Subsidiaries,  and  except  as set  forth  in  Schedule  3.4,  this
Agreement, the Put and Call Agreement and the Amended and Restated Stockholders'
Agreement, there is no voting trust or agreement, stockholders agreement, pledge
agreement, buy-sell agreement, right of first refusal, preemptive right or proxy
relating to any equity  securities of the Company or to any equity securities of
any Significant Subsidiary.

     3.4.2 Except as set forth in Schedule 3.4, all shares of Outstanding  Stock
have been or at the Closing will be duly authorized,  validly issued, fully paid
and  nonassessable  and free and clear of all  Liens,  other than Liens on Sithe
Stock created by or through Buyer.

Section  3.5  Financial   Statements.   Attached  as  Schedule  3.5  are  (i)  a
consolidated   audited  balance  sheet  of  the  Company  and  its  subsidiaries
(including the International Entities) at December 31, 1998 and 1999 and related
audited consolidated  statements of income and cash flows of the Company and its
subsidiaries for the years then ended and (ii) a consolidated  unaudited balance
sheet of the  Company  and its  subsidiaries  at  March  31,  2000  and  related
consolidated  statements  of  income  and  cash  flows  of the  Company  and its
subsidiaries for the three month period then ended (such statements specified in
clauses (i) and (ii), together with the related notes thereto, collectively, the
"Financial  Statements").   The  Financial  Statements  have  been  prepared  in
accordance with GAAP  consistently  applied,  and fairly present in all material
respects  the   financial   condition  of  the  Company  and  its   consolidated
subsidiaries  as of the dates  thereof  and the  results  of their  consolidated
operations for the periods covered thereby except, that the financial statements
at and for the three months ended March 31, 2000 are delivered without notes and
are subject to normal recurring  year-end  adjustments.  Neither the Company nor
any Subsidiary thereof has any liability or obligation of the type that would be
required by



                                       32
<PAGE>

GAAP  to be  disclosed  in the  Financial  Statements  of the  Company  and  its
subsidiaries  (whether  accrued,  absolute,   contingent  or  otherwise)  which,
individually  or  in  the  aggregate,   is  material  to  the  Company  and  its
consolidated  subsidiaries,  taken  as  a  whole,  other  than  (i)  liabilities
reflected  (but only to the  extent so  reflected)  or  reserved  against in the
Financial  Statements,  (ii)  liabilities or obligations  that have arisen since
March 31, 2000 in the ordinary course of business consistent with past practice,
none of which,  individually or in the aggregate,  would have a Material Adverse
Effect,  (iii)  liabilities  or  obligations  disclosed in Schedule 3.5, or (iv)
liabilities  or  obligations  incurred  in  accordance  with  the  terms of this
Agreement  or any  Material  Contract.  The books of account of the  Company and
subsidiaries  of  the  Company  fairly  reflect  in  all  material  respects  in
accordance with GAAP consistently applied (a) all material transactions relating
to the Company and  subsidiaries  of the Company and (b) all  material  items of
income and expense,  assets and liabilities and accruals relating to the Company
and  subsidiaries of the Company.  Neither the Company nor any subsidiary of the
Company has engaged in any material  transaction,  maintained  any material bank
account or used any  material  corporate  funds  except for  transactions,  bank
accounts and funds that have been and are  reflected in the normally  maintained
books and records of the Company and subsidiaries of the Company.

Section 3.6 Litigation; Compliance with Law.

     3.6.1  Schedule  3.6  lists  (a)  each  material  action,  suit,  claim  or
proceeding (including,  but not limited to, any arbitration  proceeding) pending
or, to the Company's  knowledge,  threatened,  (b) each  material  investigation
which, to the Company's knowledge, is pending or threatened,  against any of the
Company or any Subsidiary of the Company,  at law or in equity,  or before or by
any Federal,  state,  municipal or other  governmental  department,  commission,
board,  bureau,  agency or instrumentality,  domestic or foreign and (c) certain
other



                                       33
<PAGE>

actions,  suits,  claims,  proceedings or investigations that are listed for the
information of Buyer. For purposes of the preceding sentence,  no representation
is made with  respect  to (i) any  proceeding  before any  regulatory  authority
initiated by the Company or any  Subsidiary  of the Company in which the Company
or such Subsidiary of the Company is an applicant for any  governmental  permit,
approval,  certificate,  authorization  or  license,  to the extent the  matters
considered in such proceeding are limited to the approval or authority requested
in such application, or (ii) proceedings initiated by a third party in which the
Company or any  Subsidiary  of the  Company is an  intervener,  and the  subject
matter of such  intervention is of general  applicability to  similarly-situated
parties.  Neither the Company  nor any  Subsidiary  of the Company is in default
with  respect to any  material  order,  writ,  injunction  or decree known to or
served  upon such entity of any court or of any  Federal,  state,  municipal  or
other   governmental   department,   commission,   board,   bureau,   agency  or
instrumentality, domestic or foreign.

     3.6.2 Except as set forth on Schedule 3.6, the Company and each  Subsidiary
of the Company is in compliance  with all laws,  rules,  regulations  and orders
applicable  to its  business  (other than labor  laws,  which are  addressed  in
Section 3.11, and other than Environmental  Laws, which are addressed in Section
3.17), except where the failure to so comply would not have,  individually or in
the aggregate,  a Material Adverse Effect.  Except as set forth on Schedule 3.6,
the Company and each Significant Subsidiary has all permits,  licenses and other
governmental  authorizations  necessary  to own,  lease  or  otherwise  hold its
properties and assets and to conduct its business as currently conducted, except
where the  failure  to obtain the same  would not have,  individually  or in the
aggregate, a Material Adverse Effect.



                                       34
<PAGE>

Section 3.7 Tax Matters.

     3.7.1  Each of the  Company  and its  Subsidiaries  (for  purposes  of this
Section 3.7 "Subsidiaries"  shall include all International  Entities) has filed
on a timely  basis all material Tax Returns that it was required to file and all
such Tax Returns were correct and complete in all material  respects.  Except as
set  forth in  Schedule  3.7,  all  Taxes of the  Company  and its  Subsidiaries
(whether  or not shown on any Tax  Return)  have  been  paid or, if not paid,  a
liability  for such Taxes has been accrued on the  financial  statements  of the
Company in accordance  with GAAP.  Except as set forth in Schedule 3.7, no claim
has been made by an authority in a jurisdiction where any of the Company and its
Subsidiaries  does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. Except as set forth in Schedule 3.7, there are no Liens on
any of the  assets of any of the  Company  and its  Subsidiaries  that  arose in
connection  with any  failure  (or  alleged  failure) to pay any Tax (other than
Taxes not yet due).

     3.7.2 Each of the Company and its  Subsidiaries  has  withheld and paid all
material  Taxes  required  to have been  withheld  and paid in  connection  with
amounts  paid  or  owing  to any  employee,  independent  contractor,  creditor,
stockholder, or other third party.

     3.7.3 Except as set forth in Schedule 3.7, there is no outstanding  dispute
or claim  concerning  any material  Tax  liability of any of the Company and its
Subsidiaries, either (A) claimed or raised by any taxing authority in writing or
(B) as to which the Company or any of its Subsidiaries has knowledge.

     3.7.4  Except as set forth in  Schedule  3.7,  none of the  Company and its
Subsidiaries has waived any statute of limitations in respect of Taxes or agreed
to any  extension  of time  with  respect  to a Tax  assessment  or  deficiency,
including those deficiencies proposed but not yet assessed,  except with respect
to waivers or extensions of time which have since expired.





                                       35
<PAGE>

     3.7.5 Except as set forth in Schedule 3.7, there are no outstanding rulings
of, or requests for rulings with, any Tax authority  addressed to the Company or
its Subsidiaries that are, or if issued would be, binding on the Company and any
of its Subsidiaries.

     3.7.6 None of the Company and its  Subsidiaries  has filed a consent  under
Section  341(f) of the Code  concerning  collapsible  corporations.  None of the
Company and its  Subsidiaries  has made any  payments,  is obligated to make any
payments,  or is a party to any  agreement  that would  obligate  it to make any
payments  that will not be deductible  under Section 280G of the Code  (assuming
the  shareholder  approval   requirements  of  Code  Section  280G(b)(5)(B)  are
satisfied).  None of the Company and its  Subsidiaries  has agreed to, nor is it
required to make, any adjustment under Section 481(a) of the Code by reason of a
change  of  accounting  method  or  otherwise.  None  of  the  Company  and  its
Subsidiaries has been a United States real property holding  corporation  within
the  meaning of Section  897(c)(2)  of the Code  during  the  applicable  period
specified  in Section  897(c)(1)(A)(ii)  of the Code.  None of the assets of the
Company or its Subsidiaries directly or indirectly secures any debt the interest
on which is tax exempt  under  Section 103 of the Code nor are they  "tax-exempt
use  property"  within the  meaning of Section  168(h) of the Code.  Each of the
Company and its Subsidiaries has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial  understatement of
federal  income Tax within the meaning of Section 6662 of the Code.  None of the
Company or its  Subsidiaries  has participated in, or cooperated in (or has been
asked to cooperate in) an international boycott as defined in Section 999 of the
Code.

     3.7.7  Except  as set forth on  Schedule  3.7,  and  except  for  "intertie
gross-up  provisions" in the Company's and Subsidiaries'  electricity supply and
interconnection  agreements, none of the Company and its Subsidiaries is a party
to any Tax indemnity,  allocation



                                       36
<PAGE>

or sharing agreement.  None of the Company and its Subsidiaries (A) was a member
of an affiliated  group within the meaning of Section 1504(a) of the Code filing
a  consolidated  federal income Tax Return (other than a group the common parent
of which was the Company)  during any tax year for which the federal  income tax
statute of limitations has not expired or (B) has any liability for the Taxes of
any Person (other than any of the Company and its  Subsidiaries)  under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), as a transferee or successor,  by contract,  or otherwise for any tax year
for which the federal income tax statute of limitations has not expired.

     3.7.8 The  Company  and its  Subsidiaries  have filed all  reports and have
created  and/or  retained all records  required  under Section 6038A of the Code
with respect to its ownership by and  transactions  with related  parties.  Each
related foreign person that is controlled by the Company and that is required to
maintain  records under  Section 6038A of the Code with respect to  transactions
between the Company or any of its  Subsidiaries  and the related  foreign person
has  maintained  such  records.  All  documents  that are required to be created
and/or  preserved by such related  foreign  person with respect to  transactions
with the Company or any of its Subsidiaries are either  maintained in the United
States  or  the  Company  and  its  Subsidiaries  are  exempt  from  the  record
maintenance  requirements  of  Section  6038A of the Code with  respect  to such
transactions under Treasury  Regulation  Section 1.6038A-1.  The Company and its
Subsidiaries  are not a party  to any  record  maintenance  agreement  with  the
Internal Revenue Service with respect to Section 6038A of the Code.

Section 3.8 Material Contracts. The Contracts listed in Schedule 3.8 include all
of the Material  Contracts and certain other  Contracts  that are listed for the
information  of Buyer,  provided,  however,  that no Contract  shall be deemed a
Material  Contract  solely by  reason of the



                                       37
<PAGE>

fact  that it is listed  on  Schedule  3.8.  Except  as  otherwise  set forth in
Schedule 3.8: (i) each Material Contract is valid, binding and in full force and
effect in all material respects,  and is enforceable in all material respects by
the Company or its  Subsidiary,  as  applicable,  in accordance  with its terms,
except  as   enforceability   may  be   limited   by   bankruptcy,   insolvency,
reorganization,  moratorium or other similar laws now or  hereinafter  in effect
relating  to  creditors'  rights  generally,  and general  equitable  principles
(whether  considered in a proceeding in equity or at law),  (ii) the Company and
each Subsidiary  thereof that is a party to a Material Contract has performed in
all  material  respects the  obligations  required to be performed by it to date
under such Material  Contract,  and (iii) neither the Company nor any Subsidiary
thereof has received any notice of default under any Material  Contract to which
it is a party,  except  as would  not have a  Material  Adverse  Effect.  To the
knowledge of the Company,  neither the Company nor any Subsidiary of the Company
has given or received any notice of  cancellation or termination of any Material
Contract.  To the knowledge of the Company, no party to any Material Contract is
in material  default  under any such Material  Contract.  Except as set forth in
Schedule 3.8, there are no existing Material  Contracts with, or material rights
in,  any  third  party  to  acquire  any of the  assets  of the  Company  or any
Subsidiaries  of the  Company,  other than in the  ordinary  course of  business
consistent with past practice.

Section 3.9  Consents  and  Approvals.  Except as set forth in Schedule  3.9, no
material  registration  or filing  with,  or material  consent or approval of or
other  action  by,  any  Federal,   state  or  other   governmental   agency  or
instrumentality  or any  other  Person  is or will be  necessary  for the  valid
execution,  delivery  and  performance  by the Company of this  Agreement or the
consummation  of  the  transactions  contemplated  hereby,  other  than  filings
required pursuant to the HSR Act.

                                       38
<PAGE>

Section  3.10  Brokers.  Neither  the Company nor any  Subsidiary  or  Affiliate
thereof has any  contract,  arrangement  or  understanding  with any  investment
banking firm, broker or finder with respect to the transactions  contemplated by
this  Agreement,  except for Goldman,  Sachs & Co., whose fees shall be borne by
the Company and paid in full as of the Closing Date (or, to the extent unpaid at
Closing, shall be reflected as a liability on the Closing Balance Sheet).

Section 3.11 Labor Matters.  The Company has delivered to Buyer true and correct
copies of the  collective  bargaining  agreements  listed on Schedule  3.11 (the
"Collective  Bargaining  Agreements").   The  Collective  Bargaining  Agreements
constitute  all  collective  bargaining  agreements  to which the Company or any
Subsidiary  of the  Company  is a party or is  subject  and which  relate to the
business and operations of the Company or any  Subsidiary of the Company.  Other
than as set forth in Schedule 3.11, to the Company's  knowledge,  the Company or
the  applicable  Subsidiary  of  the  Company  (a)  is in  compliance  with  all
applicable  laws  regarding  employment  and  employment  practices,  terms  and
conditions  of  employment,  and wages and hours;  (b) has not received  written
notice of any unfair  labor  practice  complaint  against it pending  before the
National  Labor  Relations  Board;  (c) has no  arbitration  proceeding  pending
against it that arises out of or under any collective bargaining agreement which
relates to the business or operations  of the Company,  and (d) is not currently
experiencing,  and has received no current threat of, any work stoppage, in each
case, except as would not have a Material Adverse Effect.

Section 3.12      ERISA.

     3.12.1  Schedule  3.12  lists  all  Employee   Benefit  Plans  and  Benefit
Arrangements  that are sponsored or  contributed to by the Company or any of its
ERISA  Affiliates or to which



                                       39
<PAGE>

the  Company or any of its ERISA  Affiliates  has an  obligation  to  contribute
covering the employees or former  employees of the Company and its  Subsidiaries
("Benefit Plans").

     3.12.2 All Benefit Plans subject to ERISA or the Code covering employees or
former  employees  of the Company and its  Subsidiaries  comply in all  material
respects with their respective terms and the applicable  provisions of ERISA and
the Code.

     3.12.3  Except as set forth in Schedule  3.12,  all Employee  Benefit Plans
intended to be qualified  under Code Section 401  maintained  by the Company and
its Subsidiaries  have received  favorable  determinations  with respect to such
qualified  status  from the  Internal  Revenue  Service  or will be  amended  as
requested by the Internal  Revenue  Service  covering all  currently  applicable
requirements of Code Section 401 within the remedial amendment period prescribed
under Section 401(b) of the Code so as to obtain such favorable determination.

     3.12.4 No Employee Benefit Plan that is subject to Title IV of ERISA and is
sponsored  by the Company or an ERISA  Affiliate of the Company has (i) incurred
an accumulated funding deficiency,  whether or nor waived, within the meaning of
Section 412 of the Code or Section 302 of ERISA,  (ii) been  terminated or (iii)
been a plan with respect to which a reportable event, as defined in Section 4043
of ERISA,  to the extent that the reporting of such event to the Pension Benefit
Guaranty Corporation has not been waived, has occurred and is continuing.

     3.12.5 Except as set forth in Schedule 3.12, neither the Company nor any of
its  ERISA  Affiliates  sponsors  or  has  previously   sponsored,   maintained,
contributed  to or incurred an obligation  to  contribute  to any  Multiemployer
Plan.

     3.12.6 Except as set forth in Schedule 3.12, to the Company's knowledge, no
fiduciary or party in interest with respect to any of the Employee Benefit Plans
covering



                                       40
<PAGE>

employees or former employees of the Company and its Subsidiaries has engaged in
or been a party to a transaction  that is  prohibited  under Section 4975 of the
Code or Section 406 of ERISA and not exempt  under  Section  4975 of the Code or
Section 408 of ERISA, respectively.

     3.12.7 Except as set forth in Schedule 3.12, no employee or former employee
of the  Company  or any  Subsidiary  of the  Company  shall  accrue  or  receive
additional benefits,  service or accelerated rights to payment of benefits under
any Employee Benefit Plan or Benefit  Arrangement  covering  employees or former
employees of the Company or any Subsidiary of the Company or become  entitled to
severance,  termination  allowance  or  similar  payments  as a  result  of  the
transactions contemplated by this Agreement.

     3.12.8  Except as set forth in  Schedule  3.12 and other  than  claims  for
benefits in the ordinary course,  there is no material claim pending, or, to the
Company's knowledge,  threatened, involving any Employee Benefit Plan or Benefit
Arrangement  covering  employees  or  former  employees  of the  Company  or any
Subsidiary  of the Company by any person  against such  Employee  Benefit  Plan,
Benefit Arrangement, the Company or any ERISA Affiliate.

     3.12.9  Except as set forth in  Schedule  3.12,  the  Company and its ERISA
Affiliates  have made full and timely  payment  of all  amounts  required  to be
contributed under applicable law and the terms of each Employee Benefit Plan and
Benefit  Arrangement  covering  employees or former employees of the Company and
its Subsidiaries.

     3.12.10  Except as set forth in Schedule  3.12,  no Benefit  Plan  provides
material  health  care  coverage  beyond  termination  of  employment  except as
required  by  Sections  601-608 of ERISA or  Section  4980B of the Code or death
benefits coverage beyond termination of employment.




                                       41
<PAGE>

     3.12.11 Neither the execution and delivery of this  Agreement,  the Put and
Call  Agreement  or the  Amended and  Restated  Stockholders'  Agreement  by the
trustees under any Benefit Plan, acting as a stockholder of the Company, nor the
performance  and  consummation  by any  such  Benefit  Plan  of the  transaction
contemplated  hereby and thereby  violates or will  violate any of the terms and
conditions of such Benefit Plan, ERISA or the Code.

Section 3.13 Events  Subsequent  to March 31,  2000.  Except (a) as set forth in
Schedule 3.13, (b) as  specifically  provided for by this Agreement or consented
to or approved by Buyer or (c) for transactions between or among the Company and
one or more  of its  Subsidiaries,  or  between  or  among  Subsidiaries  of the
Company, or involving the International  Entities, from March 31, 2000 until the
date hereof, neither the Company nor any Significant Subsidiary, has:

     3.13.1  incurred or guaranteed  any  indebtedness  for borrowed  money (not
including accounts payable and trade payables incurred in the ordinary course of
business consistent with past practice), other than (i) indebtedness incurred in
accordance  with any  Material  Contract  or (ii)  indebtedness  incurred in the
ordinary  course  of  business  consistent  with past  practice,  none of which,
individually or in the aggregate, has a Material Adverse Effect;

     3.13.2 acquired or disposed of, in either case in any manner,  any material
assets or  properties,  other  than (i)  acquisitions  and  dispositions  in the
ordinary course of business consistent with past practice,  (ii) dispositions of
obsolete or surplus assets,  (iii)  acquisitions  and dispositions in connection
with the normal repair and/or  replacement of assets or properties,  or property
losses covered by insurance,  (iv)  acquisitions  or  dispositions in accordance
with any Material  Contract or (v)  dispositions  of equity  interests or assets
pursuant  to  the  Reliant   Purchase   Agreement  or  related  to  any  of  the
International Entities;



                                       42
<PAGE>

     3.13.3  amended its  Certificate  of  Incorporation,  By-Laws or  governing
documents,  other  than  amendments  which do not have,  individually  or in the
aggregate, a Material Adverse Effect;

     3.13.4 failed to pay and discharge on a timely basis  consistent  with past
practices any liabilities which constitute  current  liabilities under generally
accepted  accounting  principles,  except for (i)  liabilities not yet due, (ii)
liabilities  which are  subject  to good  faith  contest  for which  appropriate
reserves have been established or (iii) liabilities for which the failure to pay
would not, individually or in the aggregate, have a Material Adverse Effect;

     3.13.5  cancelled  any  material  indebtedness  owed to the  Company or any
Subsidiary  thereof or waived in an enforceable manner any rights of substantial
value  to  the  Company  or  any  Subsidiary   thereof,   except  for  any  such
cancellations or waivers of intercompany  indebtedness or which, individually or
in the aggregate, do not have a Material Adverse Effect;

     3.13.6  declared  or paid any  dividend  or  distribution,  except  for any
dividend  or  distribution  paid or payable by a  Subsidiary  of the  Company to
another Subsidiary of the Company or to the Company;

     3.13.7 made or agreed to make any advance (excluding  advances for ordinary
and  necessary  business  expenses and for tax payments  under the Company's tax
equalization  program) or loan to any of its directors or officers or employees,
or to the Sellers,  or made any increase in, or any addition to, other  benefits
to which any of its directors or officers, or any Seller may be entitled, except
in the ordinary course of business  consistent with past practice and except for
such additional benefits which, in the judgment of the board of directors or the
senior



                                       43
<PAGE>

management of the Company, are reasonably necessary or appropriate to retain the
services of directors, officers or employees;

     3.13.8 suffered any Material Adverse Effect; or

     3.13.9  entered into any agreement or commitment to take any of the actions
described in Sections 3.13.1 to 3.13.7.

Section 3.14 Title to Properties.  The Company and the Significant  Subsidiaries
have good and valid title to the material properties and assets (other than Real
Property) reflected on the March 31, 2000 consolidated balance sheet included in
the Financial  Statements or thereafter acquired (other than material properties
and assets  disposed of in the ordinary  course of business  since such date and
dispositions that would not result in a breach of the  representations set forth
in Section 3.13), free and clear of any Material  Encumbrances,  except for: (i)
Liens and  encumbrances set forth in Schedule 3.14; (ii) Liens for current taxes
not yet due and payable or being  contested  in good faith  through  appropriate
proceedings,  Liens to lenders  incurred on deposits made in the ordinary course
of business  consistent with past practice in connection with  maintaining  bank
accounts,  Liens in the ordinary  course of business in connection with workers'
compensation,  unemployment  insurance and other types of social security, or to
secure the  performance  of tenders,  statutory  obligations,  surety and appeal
bonds, bids, leases,  government contracts,  governmental permits,  licenses and
approvals,  performance and return-of-money bonds and other similar obligations,
and (iii)  materialmen's,  warehousemen's  and  mechanics  Liens and other Liens
arising by operation of law in the ordinary  course of business for sums not yet
due, none of which, individually or in the aggregate, materially interferes with
or otherwise  materially impairs the present use or operation of such properties
or assets.  The Liens described in the foregoing clauses (i), (ii) and (iii) are
collectively referred to as "Permitted Liens". The



                                       44
<PAGE>

Company and the Significant  Subsidiaries currently own, lease or otherwise have
a right to use all of the property necessary for the conduct of their respective
businesses as currently conducted in all material respects.

Section 3.15 Insurance.  Schedule 3.15 contains a list of the material insurance
coverage  applicable  to the Company and  Significant  Subsidiaries  and certain
other  insurance  coverage that is listed for the  information of Buyer.  To the
Company's  knowledge,  the insurance coverage listed on Schedule 3.15 is in full
force and effect, is valid, binding and enforceable in accordance with its terms
against the respective  insurers,  except that policies relating to director and
officer  insurance will terminate in accordance  with their terms on the Closing
Date. There is no material default by the Company or any Significant  Subsidiary
(or to the Company's knowledge by any insurer) under any such coverage and there
has been no material  failure by the Company or any  Significant  Subsidiary  to
give notice or present any material  claim under any such  coverage in a due and
timely  fashion.  No notice of  cancellation  or nonrenewal of any such material
coverage has been  received  except as is customary  during the  expiration  and
renewal  process for those policies  listed on Schedule 3.15 which expire within
30 days.  During the one-year  period ending on the date of the Opening  Balance
Sheet, there have been no retroactive or retrospective  premium adjustments that
have not been  reflected on the Opening  Balance  Sheet.  Except as set forth in
Schedule 3.15, there are no material  outstanding  performance bonds covering or
issued for the benefit of the Company.

Section 3.16 Transactions  with Certain Persons.  Except (i) for liabilities and
obligations arising out of employment relationships of any officer,  director or
employee of the Company or any Significant  Subsidiary  thereof with the Company
and its Affiliates, (ii) for



                                       45
<PAGE>

liabilities  or  obligations  relating to, or arising out of, any  International
Entities and (iii) as set forth in Schedules  3.8, 3.12 or 3.16; the Company has
no outstanding  liabilities or obligations owing to or from any Seller, officer,
director or employee of the Company or any  Significant  Subsidiary  thereof nor
any member of any such person's immediate family.

Section 3.17 Compliance With Environmental Laws. Except as set forth in Schedule
3.17, (i) the Company and its Subsidiaries are in compliance with the applicable
Environmental Laws in all material respects and (ii) neither the Company nor any
of  its   Subsidiaries   has  any  material   liability   under  the  applicable
Environmental  Laws. Except as set forth in Schedule 3.17, (i) no written notice
of any  material  violation  of the  applicable  Environmental  Laws or material
claims or demands by third parties  relating to the  operations or properties of
the  Company or any  Subsidiary  thereof  has been  received  by, and is pending
against,  the  Company or any  Subsidiary  thereof  and (ii) there are no writs,
injunctions,  decrees,  orders or judgments outstanding,  or any actions, suits,
claims,  proceedings  or  investigations  pending  or, to the  knowledge  of the
Company,  threatened,  relating  to  compliance  by  the  Company  or any of its
Subsidiaries with or liability of any of them under the applicable Environmental
Laws,  except where any such instance of  non-compliance or liability would not,
individually or in the aggregate, have a Material Adverse Effect.

Section 3.18 Real Property. Except as set forth in Schedule 3.18:

     3.18.1 The Company or a Subsidiary of the Company, as applicable, has valid
and  insurable  title  to all  material  real  property  owned  by it and  valid
leasehold  interests in all material real property  leased by it  (collectively,
the "Real Property").

     3.18.2 To the Company's knowledge,  the current use of the Real Property is
in material  compliance with all applicable zoning regulations or permitted as a
grandfathered  non-

                                       46
<PAGE>
conforming use. To the Company's  knowledge,  the completion of the transactions
contemplated  hereby  will not  prevent  the  Company or any  Subsidiary  of the
Company  from  utilizing,   in  accordance  with  such  zoning   ordinances  and
regulations,  any or all of the Real Property  following the Closing in the same
manner in all material  respects as the Company or Subsidiary of the Company has
utilized such Real Property prior to the Closing.

     3.18.3 The electric, gas and sewer utility services and the septic tank and
storm drainage facilities  currently available to the Real Property are adequate
in all material respects for the present use of the Real Property by the Company
and  Subsidiaries  of the  Company,  and the  Company  has no  knowledge  of any
condition  that will result in the  termination  of the present  access from the
Real Property to any such material utility services and other facilities.

     3.18.4 The  Company or  Subsidiaries  of the  Company  have all  materially
necessary  vehicular  and  pedestrian  ingress and egress rights to and from the
Real Property.  There are no  restrictions  on entrance to or exit from the Real
Property that materially interfere with the current use of the Real Property and
the Company has no knowledge of any condition that might  reasonably be expected
to  result in the  termination  of any  material  present  access  from the Real
Property to existing highways and roads.

     3.18.5 The Company has received no written notices, and has no knowledge of
facts or  circumstances  that should  reasonably  cause it to believe,  that any
governmental body having jurisdiction over the Real Property intends to exercise
the power of eminent  domain or a similar  power with respect to all or any part
of the Real  Property  except for any such  exercise  that would not  materially
adversely  affect the present use of any Real  Property by the Company or any of
its Subsidiaries.




                                       47
<PAGE>

     3.18.6 The Company has not received  written notice of any proposed  public
improvements  that might result in any material  charge being levied or assessed
against any of the Real Property or of any proposed regulation  (including,  but
not limited to, zoning  regulations)  that might reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

Section  3.19  Patents,  Copyrights  and  Trademarks.  To the  knowledge  of the
Company,  the  business as formerly and  presently  conducted by the Company and
Subsidiaries of the Company does not conflict with or infringe upon any patents,
copyrights,  trademarks, service marks or applications that are owned or claimed
by any third party,  except for such conflicts or infringements  that would not,
individually or in the aggregate, have a Material Adverse Effect.

Section 3.20 Corporate  Records.  The corporate  record books of the Company and
Significant  Subsidiaries  are current and contain correct and complete,  in all
material respects, copies of minutes of meetings,  resolutions and other actions
and  proceedings  of its  stockholders  and  board of  directors,  and the stock
records of the Company and Significant  Subsidiaries  are also current,  correct
and  complete  and reflect the  issuance of all shares of capital  stock of such
entities.

Section 3.21 Qualifying  Facilities.  All of the Company's Qualifying Facilities
are in  compliance  in all material  respects  with Section 210 of PURPA and the
regulations promulgated thereunder. The Company has not received any notice from
FERC  or  other  regulatory  authority  that  any  of the  Company's  Qualifying
Facilities  are in material  violation of PURPA or the  regulations  promulgated
thereunder  or  otherwise  fail  to  satisfy  any  material  legal  requirements
applicable to Qualifying Facilities.




                                       48
<PAGE>

Section 3.22 Exempt Wholesale  Generators and Foreign Utility Companies.  All of
the Company's  Subsidiaries  and Affiliates that have received Exempt  Wholesale
Generator  ("EWG")  determination  from FERC or provided Foreign Utility Company
("FUCO")  notices with the SEC are in compliance  in all material  respects with
the  requirements  imposed  under PUHCA with  respect to EWG's and  FUCO's.  The
Company  and its  respective  EWG/FUCO  Subsidiaries  and  Affiliates  have  not
received any notice from FERC,  SEC or any other  regulatory  authority that any
EWG/FUCO is in material  violation  of PUHCA or  otherwise  fails to satisfy any
material legal requirement applicable EWGs or FUCOs.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF EACH SELLER.
Except as otherwise disclosed in this Agreement or in any Schedule, each Seller,
severally and not jointly, represents and warrants, only with respect to itself,
to Buyer, as of the date hereof (except where such representation or warranty is
expressly made as of another specific date), as follows:

Section 4.1  Organization  and  Corporate  Power.  If such Seller is a Corporate
Seller, it is a corporation,  a partnership or a trust, as indicated on Schedule
1, and if it is a corporation it is duly organized, validly existing and in good
standing  under  the  laws of its  jurisdiction  of  incorporation  and has full
corporate  power and authority to own the Sithe Stock it is agreeing to transfer
pursuant to this Agreement and to execute,  deliver and perform this  Agreement.
If such  Corporate  Seller is a  partnership  or a trust,  it has full power and
authority  to own the Sithe Stock it is  agreeing  to transfer  pursuant to this
Agreement and to execute,  deliver and perform this Agreement. If such Seller is
an individual,  he has the legal  capacity to execute,  deliver and perform this
Agreement.



                                       49
<PAGE>

Section 4.2 Authorization;  Validity. The execution, delivery and performance of
this  Agreement  by such  Seller,  if it is a Corporate  Seller,  have been duly
authorized by all requisite action on the part of such Seller. If such Seller is
a Corporate Seller,  this Agreement has been duly executed and delivered by such
Seller  and  constitutes  the  valid  and  binding  obligation  of such  Seller,
enforceable  against  such  Seller  in  accordance  with its  terms,  except  as
enforceability  may  be  limited  by  bankruptcy,  insolvency,   reorganization,
moratorium  or other  similar  laws now or  hereinafter  in effect  relating  to
creditors'  rights  generally,   and  general  equitable   principles   (whether
considered  in a  proceeding  in  equity  or  at  law).  If  such  Seller  is an
individual,  this Agreement constitutes the valid and binding obligation of such
Seller,  enforceable  against  such Seller in  accordance  its terms,  except as
enforceability  may  be  limited  by  bankruptcy,  insolvency,   reorganization,
moratorium  or other  similar  laws now or  hereinafter  in effect  relating  to
creditors'  rights  generally,   and  general  equitable   principles   (whether
considered in a proceeding in equity or at law).

Section 4.3 No Conflict.  If such Seller is a Corporate Seller,  except as would
not  materially  adversely  affect  such  Seller's  ability  to  consummate  the
transactions  contemplated  hereby,  the execution,  delivery and performance by
such  Seller  of this  Agreement  and the  consummation  by such  Seller  of the
transactions  contemplated  hereby will not (i) violate the Charter Documents of
such Seller,  (ii) violate any law or regulation  applicable to such Seller,  or
(iii) violate or conflict with, or constitute  (with due notice or lapse of time
or both) a default under, any material note, bond, mortgage, indenture, license,
lease,  contract,  agreement or other  instrument  or  obligation  by which such
Seller or any of its assets its bound.

Section 4.4 Ownership of Stock.  Such Seller owns,  of record and  beneficially,
the number of shares of Sithe Stock set forth  opposite  such  Seller's  name on
Schedule 3.4, free and



                                       50
<PAGE>

clear of any Liens,  except as set forth in Schedule 3.4. Except as set forth in
Schedule  3.4 and except as  contemplated  hereby,  there is no voting  trust or
agreement,  stockholders' agreement, pledge agreement, buy-sell agreement, right
of first  refusal,  preemptive  right,  proxy or agreement or commitment to sell
relating to such Seller's  shares of Sithe Stock.  On the Closing Date, upon the
consummation of the transactions contemplated by this Agreement,  Buyer will own
the Sithe  Stock to be sold by such Seller to Buyer  pursuant to this  Agreement
free and clear of any Liens, except for any Liens created by or through Buyer.

Section 4.5 Public Utility.  No Seller is a "holding company," a "public-utility
company,"  an  "electric  utility  company,"  or  a  "subsidiary   company,"  an
"associate  company," or an "affiliate" of a holding  company within the meaning
of PUHCA, a "public  utility" within the meaning of Part II of the Federal Power
Act, or otherwise  subject to regulation as a public  utility or public  service
company (or similar designation) by the United States or any state of the United
States.

ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer  represents  and warrants to the Company and the Sellers  that,  as of the
date hereof (except where such representation or warranty is expressly made only
as of a specific date) as follows:

Section 5.1  Organization  and  Corporate  Power.  Buyer is a  corporation  duly
organized,  validly  existing and in good  standing  under the laws of Delaware.
Buyer has full  corporate  power and  authority to execute,  deliver and perform
this Agreement.

Section 5.2 Authorization of Agreement;  Validity.  The execution,  delivery and
performance  by  Buyer  of this  Agreement  have  been  duly  authorized  by all
requisite  corporate  action on the part of Buyer.  This Agreement has been duly
executed and delivered by Buyer and



                                       51
<PAGE>

constitutes the valid and binding obligation of Buyer, enforceable against Buyer
in  accordance  with its  terms,  except as  enforceability  may be  limited  by
bankruptcy, insolvency, reorganization,  moratorium or other similar laws now or
hereafter  in  effect  relating  to  creditors  rights  generally,  and  general
equitable principles (whether considered in a proceeding in equity or at law).

Section 5.3 No Conflict.  The  execution,  delivery and  performance by Buyer of
this Agreement and the consummation of the transactions contemplated hereby will
not (i)  violate  the  Charter  Documents  of  Buyer;  (ii)  violate  any law or
regulation applicable to Buyer, or any order of any court or governmental agency
or authority having  jurisdiction over Buyer, or (iii) violate or conflict with,
or constitute  (with due notice or lapse of time or both) a default  under,  any
material note, bond, mortgage, indenture, license, lease, contract, agreement or
other instrument or obligation by which Buyer or any of its assets is bound.

Section 5.4  Consents  and  Approvals.  Except as set forth in Schedule  5.4, no
registration  or filing with,  or consent or approval of or other action by, any
Federal,  state or other  governmental  agency or  instrumentality  or any other
Person is or will be necessary for the valid execution, delivery and performance
by Buyer of this Agreement and the consummation of the transactions contemplated
hereby, other than filings required pursuant to the HSR Act.

Section 5.5 Brokers.  Neither Buyer nor any Subsidiary or Affiliate of Buyer has
any contract,  arrangement or  understanding  with any investment  banking firm,
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement, except for Credit Suisse First Boston, whose fees shall be borne
by Buyer.

Section 5.6  Availability of Funds.  At the Closing,  Buyer will have sufficient
funds to pay the  Estimated  Aggregate  Purchase  Price  and to  consummate  the
transactions contemplated hereby.


                                       52
<PAGE>

Section 5.7 Investment Purpose;  Restricted Securities.  Buyer is purchasing the
Sithe Stock for Buyer's own account, for investment purposes only and not with a
view towards public sale or distribution  thereof.  Buyer  understands  that the
Sithe  Stock has not been,  will not be, and is not  required  to be  registered
under the Securities Act of 1933 as amended (the "Act"), by reason of a specific
exemption from the registration provisions of the Act, which depends upon, among
other things,  the bona fide nature of the investment intent and the accuracy of
Buyer's  representations as expressed herein.  Buyer understands that the shares
of Sithe Stock are "restricted  securities"  under  applicable U.S.  federal and
state securities laws and that, pursuant to these laws, Buyer may be required to
hold the Sithe Stock indefinitely unless the sale of the Sithe Stock by Buyer is
registered with the Securities and Exchange  Commission ("SEC") and qualified by
state  authorities,  or an exemption from such  registration  and  qualification
requirements is available.  Buyer further acknowledges that if an exemption from
registration  or  qualification  is available,  it may be conditioned on various
requirements  including,  but not limited  to, the time and manner of sale,  the
holding period for the Sithe Stock, and on requirements  relating to the Company
which  are  outside  of  Buyer's  control,  and which  the  Company  is under no
obligation to, and may not be able to, satisfy.

Section 5.8 No Public Market. Buyer understands that no public market now exists
for any of the securities issued by the Company and that the Company has made no
assurances that a public market will ever exist for the Sithe Stock.

Section 5.9 Legends.  Buyer understands that the Sithe Stock, and any securities
issued in respect of or in exchange for the Sithe Stock, may bear legends as may
be set forth in the Amended and Restated Stockholders' Agreement.


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<PAGE>

ARTICLE 6. ACCESS; ADDITIONAL AGREEMENTS

Section 6.1 Access to  Information;  Continuing  Disclosure.  The Company agrees
that from the date hereof  until the Closing  Date,  and subject to the terms of
the  Confidentiality  Agreement  and  for  purposes  of  transition,   (i)  upon
reasonable  notice from Buyer,  the Company  shall  provide to Buyer  reasonable
access,  at reasonable  times during normal  business  hours,  to the employees,
properties,  books and records of the Company  and each  Subsidiary  thereof and
shall promptly  furnish to Buyer  information  as Buyer may reasonably  request;
provided,  that such  access  shall be  afforded to Buyer after no less than two
Business Days' prior notice,  and only in such manner so as not to  unreasonably
disturb  or  interfere  with  the  normal  operations  of the  Company  or  such
Subsidiary; and provided further, that the Company shall not be required to take
any action that would constitute a waiver of the  attorney-client  privilege and
the Company need not supply to Buyer any information that the Company is under a
legal  obligation  not to  supply,  and (ii) at regular  intervals  prior to the
Closing  Date,  or at such  other  times as Buyer or its  representatives  shall
reasonably  request,  the Company shall consult with Buyer regarding the conduct
of the business of the Company and its Subsidiaries.  All information  furnished
by or on behalf of the  Company  hereunder  shall be subject to the terms of the
Confidentiality  Agreement dated as of November 11, 1999 between the Company and
Buyer (the "Confidentiality Agreement").

Section 6.2 Regulatory Approvals.

     6.2.1 Antitrust Notification.  Buyer shall cause its ultimate parent entity
to, and the Company and Vivendi, S.A. will, as promptly as practical,  but in no
event later than thirty (30) days  following  the execution and delivery of this
Agreement, each file with the United States Federal Trade Commission (the "FTC")
and the United  States  Department of Justice (the



                                       54
<PAGE>

"DOJ") the Notification  and Report Form under the HSR Act, if any,  required in
connection  with  the  transactions  contemplated  hereby  and  as  promptly  as
practicable supply any additional  information,  if any, requested in connection
herewith  pursuant  to the HSR Act.  Any such  Notification  and Report Form and
additional  information,  if any,  submitted  to the FTC or the DOJ  shall be in
substantial  compliance with the  requirements of the HSR Act. Each of Buyer and
the Company shall furnish to the other such  information  and  assistance as the
other may reasonably request in connection with its preparation of any filing or
submission  which is necessary  under the HSR Act. Each of Buyer and the Company
shall keep the other  apprised in a prompt manner of the status and substance of
any  communications  with, and inquiries or requests for additional  information
from,  the FTC and the DOJ and shall  comply  promptly  with any such inquiry or
request. Each of Buyer and the Company will use its reasonable efforts to obtain
the  termination or expiration of any applicable  waiting period  required under
the HSR Act for the consummation of the transactions contemplated hereby.

     6.2.2 Regulatory  Approval  Process.  Buyer, the Company and, to the extent
required,  the Sellers,  shall as promptly as  practical,  but in no event later
than thirty days following the execution and delivery of this Agreement,  submit
to the appropriate  agency/ies or third party/ies all declarations,  filings and
registrations  listed on Schedules 7.4 and 8.4. With respect to any such filings
and registrations, including, without limitation, filings that will be submitted
to the Federal Energy Regulatory  Commission  ("FERC") and or the SEC, Buyer and
the Company shall cooperate to share and develop information  necessary for such
filing(s) and drafts of such filing(s)  within fifteen days following  execution
and delivery of this Agreement and shall give each other reasonable  opportunity
to comment on and to revise  such draft  filings(s)  before such  filing(s)  are
submitted  to the  appropriate  governmental  or  regulatory  agency.  Buyer and



                                       55
<PAGE>

Sellers agree to the retention of the Company's  choice of expert to support any
such filing(s) submitted to FERC.

Section 6.3 Further Assurances. From time to time from the date hereof until the
Closing Date, as and when  requested by any party  hereto,  the requested  party
shall use reasonable efforts to execute and deliver, or cause to be executed and
delivered,  all such  documents and  instruments  and shall take, or cause to be
taken, all such further or other actions as such other party may reasonably deem
necessary  to  consummate  the  transactions  contemplated  by  this  Agreement,
including,  without  limitation,  such  actions as are  reasonably  necessary in
connection with obtaining any third party consent identified on Schedules 7.4 or
8.4 or any regulatory filings as any party may undertake in connection herewith.

Section 6.4 Certain Tax Matters.

     6.4.1  Transfer  Taxes.  Payments  for all stamp,  documentary,  recording,
transfer and sales and use taxes ("Transfer  Taxes") incurred in connection with
this Agreement and the transactions  contemplated  hereby (which for purposes of
this Section  expressly  exclude any sale  contemplated by the Reliant  Purchase
Agreement or any  International  Sale,  as to which all Transfer  Taxes shall be
borne by the Sellers) shall be shared equally between Buyer and the Sellers, and
Buyer at its own expense shall file, to the extent  required by applicable  law,
all  necessary  Tax Returns  and other  documentation  with  respect to all such
transfer or sales and use taxes, and, if required by applicable law, the Company
shall join the execution of any such Tax Returns or other documentation.

Section 6.5 Regular Course of Business.



                                       56
<PAGE>

     6.5.1 Prior to the  Closing,  except (a) as set forth on Schedule  6.5, and
(b) as otherwise  contemplated  by this  Agreement or consented to in writing by
Buyer the Company shall, and shall cause its Subsidiaries to:

         6.5.1.1 operate in the ordinary course of business consistent with past
practices;

         6.5.1.2 use reasonable efforts to preserve  substantially  intact their
business  organization,  retain the services of their key employees  (subject to
work force  requirements) and maintain their  relationships  with their material
customers and suppliers;

         6.5.1.3 use  reasonable  efforts to maintain and to keep their material
properties and assets in good repair and  condition,  ordinary wear and tear and
insured casualty excepted;

         6.5.1.4  use  reasonable  efforts  to  keep in full  force  and  effect
material  insurance  and bonds  substantially  comparable in amount and scope of
coverage to that currently maintained; and

         6.5.1.5 comply in all material respects with the covenants set forth in
any loan, debt or other  agreements with its lenders;  in each case,  except for
any matters that,  individually  or in the aggregate,  would not have a Material
Adverse Effect.

     6.5.2 Prior to the Closing, except as set forth in Schedule 6.5, and except
as otherwise  contemplated  by this  Agreement  or as otherwise  consented to in
writing  by Buyer,  which  consent  shall  not to be  unreasonably  withheld  or
delayed, the Company shall not, and shall cause its Subsidiaries not to:


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<PAGE>

         6.5.2.1 (a) increase  significantly  the compensation  payable to or to
become  payable to any  director or  executive  officer,  (b) grant any material
severance  or  termination  pay award that  would  become due as a result of the
transactions  contemplated  hereby,  (c)  amend or take  any  other  actions  to
increase  materially the amount of, or accelerate the payment or vesting of, any
benefit under any Benefit Plan or (d) contribute,  transfer or otherwise provide
any material amount of cash, securities or other property to any grantee, trust,
escrow or other  arrangement  that has the effect of providing or setting  aside
assets for  benefits  payable  pursuant to any  termination,  severance or other
change in control  agreement;  except, in the case of each of clause (a) through
(d),  (x)  pursuant to any  Contract  of the Company or any of its  Subsidiaries
existing  on the date  hereof or (y) in the case of  severance,  termination  or
retention  payments,  pursuant  to a  policy  of  the  Company  or  any  of  its
Subsidiaries existing on the date hereof.

         6.5.2.2 (a) enter into any material  employment or severance  agreement
with any director or executive  officer,  either,  individually  or as part of a
class of similarly situated persons,  or (b) establish,  adopt or enter into any
material new Benefit Plan, except, in the case of (a) or (b), (w) for employment
and severance agreements and Benefit Plans for the benefit of any newly employed
or promoted  officers or employees,  in which case the terms of such  agreements
and Benefit Plans shall be reasonably consistent with those existing on the date
hereof, (x) for Benefit Plans relating to welfare insurance benefits established
or adopted in the ordinary  course of business  consistent with past practice or
(y) for  Benefit  Plans as required  by the terms of any  Collective  Bargaining
Agreement;




                                       58
<PAGE>

         6.5.2.3 (a) offer,  sell,  issue or grant,  or authorize  the offering,
sale,  issuance or grant,  of any material  amount of equity  securities  of the
Company  or any of its  Subsidiaries  or (b) grant any Lien with  respect to any
equity  securities of the Company or any Subsidiary,  other than with respect to
shares of Common Stock held by William  Kriegel in accordance with the terms and
conditions set forth in the form of Amended and Restated Stockholders' Agreement
attached as Exhibit A hereto;

         6.5.2.4 acquire, whether by merger or consolidation,  by purchasing any
equity  interest or  otherwise,  any business or any  corporation,  partnership,
association or other business  organization  or division  thereof except for any
such acquisition transaction that is not material;

         6.5.2.5  acquire or construct any material  assets or properties  other
than the  acquisition of assets from suppliers or vendors in the ordinary course
of business and consistent with past practice;

         6.5.2.6  sell,  lease,  exchange or otherwise  dispose of, or grant any
Lien  with  respect  to,  any  material  assets  of  the  Company  or any of its
Subsidiaries,  except for dispositions of assets and inventories in the ordinary
course of  business  consistent  with past  practice  and  purchase  money Liens
incurred in connection with the acquisition of assets secured by such assets;

         6.5.2.7  adopt  any  amendments  to its  Charter  Documents,  except as
contemplated  by the  form  of  Amended  and  Restated  Stockholders'  Agreement
attached as Exhibit A hereto;

         6.5.2.8  (A) make any  change in any of its  methods of  accounting  in
effect at December 31, 1999,  except as may be required to comply with



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<PAGE>

GAAP,  (B) make or rescind any  election  relating to any Taxes  (other than any
election that must be made  periodically  and that is made  consistent with past
practice or that the Company is  contractually  required to make pursuant to the
Reliant  Purchase  Agreement or the GPU  Purchase  Agreement in effect as of the
date hereof or that is an entity  classification  election  made in the ordinary
course of  business)  or (C)  settle or  compromise  any  claim,  action,  suit,
litigation,  proceeding,   arbitration,   investigation,  audit  or  controversy
relating to Taxes, except, in each case, as may be required by applicable law or
as would not have a Material Adverse Effect;

         6.5.2.9 enter into any Contracts, or make any commitments, for the sale
of energy or capacity to any third party  relating to any period after the third
anniversary of the Closing Date;

         6.5.2.10  incur any  obligations  for borrowed  money or purchase money
indebtedness  that are  material,  whether  or not  evidenced  by a note,  bond,
debenture or similar instrument,  except purchase money indebtedness as to which
Liens may be granted pursuant to Section 6.5.2.6,  drawings or other incurrences
of indebtedness under credit lines or other financing agreements existing at the
date of this Agreement and borrowings  evidenced by obligations having a term of
up to five years issued in the ordinary course of business  consistent with past
practice; or

         6.5.2.11 agree in writing or otherwise to do any of the foregoing.

     6.5.3 Notwithstanding anything herein to the contrary, the Company shall be
permitted to: (a) declare and pay dividends in an aggregate amount not to exceed
$90.0 million  (plus any dividends to be paid at the election of Buyer  pursuant
to Article 2); (b)  consummate  any one or more of (i) any Marubeni  Transaction
and (ii) the Plan Restructuring, provided, in the



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<PAGE>

case of any action  described in this clause (b), that the  consummation of such
action would have no cost or other adverse  financial impact to the Company that
is not fully reflected in the Adjustment Amount or to Buyer; (c) take any action
in  connection  with the  International  Entities to the extent  permitted to be
taken  by the  Divestiture  Committee  in  the  form  of  Amended  and  Restated
Stockholders'  Agreement  attached  hereto  as  Exhibit  A; (d)  consummate  any
International  Sale; and (e) consummate the  transactions  contemplated  by, and
subject to the terms and  conditions  of,  the Letter of Intent,  dated the date
hereof, between the Company and William V. Kriegel.

     6.5.4 Notwithstanding anything herein to the contrary, the Company shall be
permitted  to take any  action  which in the good  faith  belief of the Board of
Directors  of the  Company or its  Chairman  is in, or not  opposed to, the best
interests of the Company,  in  connection  with (i) the  litigation  matters set
forth in item 1 of Schedule 3.6 and item 4 of Schedule 3.6,  including,  without
limitation,  entering  into any  settlement  of,  and  otherwise  managing  such
litigation and (ii) any of the Allegheny Entities (as hereinafter defined).  Any
action or inaction taken by the Company in connection with any matters described
in the foregoing  sentence  shall not be deemed to cause a breach by the Company
or any Seller of this  Agreement  or the failure of any  condition  set forth in
Article 7 to be satisfied.

Section  6.6 Notice of  Changes.  Prior to the  Closing,  Buyer and each  Seller
shall,  and the Sellers  shall cause the Company to,  promptly  disclose to each
other party in writing any information  set forth in the Schedules  hereto which
no longer  obtains  and any  information  of the nature of that set forth in the
Schedules  which arises after the date hereof and which would have been required
to be included in the  Schedules  if such  information  had obtained on the date
hereof.  Such disclosure  shall not limit or affect any party's rights hereunder
for or with respect



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<PAGE>

to any misrepresentation or breach of warranty by any other party or the failure
of any other party to fulfill any covenant,  agreement or condition contained in
this  Agreement  and shall not  limit or affect  any of the  rights of any party
hereunder to require any other party to consummate the transactions contemplated
by this Agreement.

Section 6.7 Director and Officer Indemnification and Insurance.

     6.7.1 From and after the Closing  Date until the sixth  anniversary  of the
Director  Termination  Date,  the  Company  shall  indemnify,  defend,  and hold
harmless to the fullest extent  permitted under applicable law and the Company's
certificate of incorporation  and by-laws each person who is now, or has been at
any time  prior to the date  hereof,  an  officer  or  director  of the  Company
(individually,  a "Director Indemnified Party," and collectively,  the "Director
Indemnified Parties"), against all losses, claims, damages,  liabilities,  costs
or expenses  (including  attorney's  fees),  judgments,  fines,  penalties,  and
amounts paid in settlement of or otherwise in connection with any claim, action,
suit,  proceeding,  or  investigation  arising out of or  pertaining  to acts or
omissions,  or alleged acts or  omissions,  by them in their  capacities as such
occurring  at or  prior  to the  Closing  (including,  without  limitation,  the
transactions  contemplated by this  Agreement) (a "D&O Claim").  In the event of
any such D&O  Claim,  the  Company  shall pay  expenses  in advance of the final
disposition of any such action or proceeding to each Director  Indemnified Party
to the fullest extent permitted under applicable law.

     6.7.2 The Company  shall keep in effect  provisions in its  certificate  of
incorporation  and bylaws  with  respect to  indemnification  and  director  and
officer exculpation from liability identical to, or at least as favorable to the
Director  Indemnified  Parties as, such provisions  contained in the articles of
incorporation  and bylaws of the Company on the date  hereof,  which  provisions
shall not be amended, repealed, or otherwise modified for a period of



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<PAGE>

six years from the Director  Termination Date in any manner that would adversely
affect  the  rights  thereunder  of  individuals  who at any  time  prior to the
Director  Termination  Date were directors or officers of the Company in respect
of actions or omissions at or prior to the Director Termination Date (including,
without limitation, the transactions contemplated by this Agreement),  except as
required by applicable law or except to make changes permitted by law that would
not   materially   diminish  the   Director   Indemnified   Parties'   right  of
indemnification.

     6.7.3 For a period of six years after the Director  Termination  Date,  the
Company shall maintain in effect  officers' and directors'  liability  insurance
policies  covering  the Director  Indemnified  Parties that are on terms no less
advantageous to the Director  Indemnified Parties than the insurance  maintained
by the Company on the date hereof  (without regard to excess  liability  layers)
with respect to D&O Claims  arising from facts or events that occurred  prior to
the Director Termination Date.

     6.7.4 This Section 6.7 shall  survive the  Closing,  is intended to benefit
each of the Director Indemnified Parties and their respective heirs and personal
representatives  (each of which shall be entitled  to enforce  this  Section 6.7
against the Company, as a third party beneficiary of this Agreement),  and shall
be binding on all successors and assigns of the Company.

Section 6.8 Credit  Facilities.  The  Company  shall use  reasonable  efforts to
repay, or cause its  Subsidiaries to repay,  the amounts  outstanding  under the
BECO Facility and the Vivendi Loan Agreement prior to, or  simultaneously  with,
the Closing.  On or prior to the Closing Date,  the Company shall obtain consent
of the  lenders  under the BECO  Facility  (to the extent  such  facility is not
repaid)  and  under  the  Senior  Credit  Facility  to the  consummation  of the
transactions contemplated by this Agreement.



                                       63
<PAGE>

Section 6.9 No  Solicitation.  Prior to Closing,  other than with respect to any
International  Sale,  and other  than with  respect to  non-binding  discussions
regarding  Qualifying  Facilities,  the Sellers and Company shall not, and shall
not permit any  Subsidiary  of the Company to,  directly  or  indirectly,  make,
solicit, initiate or encourage submission of proposals or offers from any Person
relating   to   any   liquidation,   dissolution,    recapitalization,   merger,
consolidation  or  acquisition  or purchase of all or  substantially  all of the
assets of, or equity interest in, the Company or any  Significant  Subsidiary or
any other similar transaction or business  combination.  Other than with respect
to any  International  Sale,  and other  than with  respect  to any  non-binding
discussions regarding Qualifying  Facilities,  prior to the Closing, the Sellers
and Company shall, and shall cause its Subsidiaries  to,  immediately  cease and
cause to be terminated all contracts, negotiations and communications with third
parties  with  respect to the  foregoing,  if any,  existing on the date hereof.
Should the  Sellers,  the  Company or any  Company  Subsidiary  receive any such
proposal,  inquiry or contact  prior to Closing,  the Sellers and Company  shall
within three (3) Business  Days give  written  notice  thereof to Buyer and also
shall  promptly  provide Buyer with such  information  regarding  such proposal,
inquiry  or  contact  as  Buyer  may  reasonably  request.  Notwithstanding  the
provisions of this Section 6.9, any Seller, the Company or any Subsidiary of the
Company may conduct non-binding  discussions or any of the activities  described
in this Section 6.9 that relate to the  disposition or  restructuring  of all or
any part of any  individual  Qualifying  Facilities,  provided  that neither any
Seller, the Company nor any Subsidiary of the Company shall enter into a binding
agreement to consummate any such disposition or restructuring.  For avoidance of
ambiguity,  a  confidentiality   agreement,   standstill  agreement  or  similar
arrangement  which  does not  include a binding  commitment  to  consummate  the
disposition or restructuring of an individual  Qualifying  Facility shall not be
deemed a



                                       64
<PAGE>

"binding agreement to consummate" such disposition or restructuring for purposes
of the immediately preceding sentence.

Section 6.10 Interim Financial Statements.  Within 30 days after the end of each
month prior to the Closing,  the Company shall  deliver to Buyer a  consolidated
balance  sheet of the Company and  subsidiaries  of the Company as at the end of
such month and the related consolidated  statements of income and cash flows for
the period then  ended,  together  with a  certificate  of the chief  accounting
officer of the Company to the effect  that all such  financial  statements  have
been  prepared in  accordance  with GAAP  consistently  applied,  except for the
omission of footnote  information,  and fairly present in all material  respects
the financial  condition of the Company and its consolidated  subsidiaries as of
the dates  thereof  and the  results of their  consolidated  operations  for the
periods covered thereby.

Section 6.11 No Adverse Action.  Prior to the Closing Date,  neither the Company
nor any of the  Sellers  shall  take any  action  which  results  in the loss of
Qualifying  Facility  status under PURPA,  or EWG or FUCO status under PUHCA, of
any project, Subsidiary or Affiliate of the Company that holds such status as of
the effective date of this Agreement.

Section  6.12  PUHCA  Compliance.  Neither  the Buyer  nor any of its  associate
companies  shall  directly or indirectly  provide  guarantees and other forms of
credit support for and/or acquire any  securities,  or interest in the business,
of any  entity,  including,  but not limited to,  exempt  wholesale  generators,
foreign   utility    companies,    energy-related    companies   and/or   exempt
telecommunications  companies,  prior to the Closing Date that would  materially
impair the ability of the Buyer to consummate the  transactions  contemplated by
this Agreement and the Put and Call Agreement under PUHCA.  For purposes of this
Section 6.12, the terms "associate



                                       65
<PAGE>

companies,"  "exempt  wholesale  generators,"   "energy-related  companies"  and
"exempt  telecommunications  companies"  shall  have the  meanings  set forth in
PUHCA.

Section 6.13 Option Plans. The Company shall use good-faith  efforts to complete
the Plan Restructuring.

Section  6.14  Development  and  Fuel  Services  Agreement  and  Power  Purchase
Agreement.  The Company and Buyer shall use reasonable  efforts to negotiate and
enter into, or to cause their respective Affiliates to negotiate and enter into,
the Development and Fuel Services  Agreement and the Power Purchase Agreement on
or prior to the Closing Date.

ARTICLE 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS

The  obligations  of  Buyer  under  this  Agreement  shall  be  subject  to  the
satisfaction  (or waiver by Buyer),  at or before  the  Closing,  of each of the
following  conditions,  and each  Seller and the  Company  shall use  reasonable
efforts to cause each of such conditions to be satisfied on or before the Target
Date and, in any event, as promptly as practicable:

Section 7.1 No Injunction.  No Federal or state governmental agency or authority
or  political  subdivision  thereof  or  Federal  or state  court  of  competent
jurisdiction shall have issued any injunction or other order (whether temporary,
preliminary or permanent)  which prohibits the  consummation of the transactions
contemplated  hereby;  provided,  that if there is an  injunction  or such other
order,  the applicable  parties shall use their  reasonable  efforts to litigate
against, and obtain the lifting of, any such injunction or order.

Section 7.2 Representations  and Warranties.  The representations and warranties
of the Company  contained in Article 3 and of each Seller contained in Article 4
that are  qualified  by  materiality  shall be true and  correct  as of the date
hereof and as of the Closing Date (in each case except where such representation
or warranty is expressly  made only as of another  specific  date)



                                       66
<PAGE>

and all other  representations  and warranties  shall be true and correct in all
material respects,  in each case as though such  representations  and warranties
were made at and as of the Closing  Date,  except as otherwise  contemplated  by
this  Agreement  or as may be specified in  amendments  to any of the  Schedules
provided  at the Closing to reflect  changes  occurring  after the date  hereof,
other than changes that result from the breach of any covenant of the Company or
any Seller set forth in Article 6; and Buyer shall have  received at the Closing
(i) a certificate  of the Company dated the Closing Date and signed on behalf of
the  Company by an  executive  officer of the Company to such  effect,  but only
insofar as it is  applicable to the Company,  (ii) a certificate  of each Seller
with  respect to the  matters set forth in Article 4 (other  than  Section  4.5)
dated the Closing Date and signed,  in the case of an individual by such Seller,
and in the case of a Corporate Seller by an executive officer of such Seller, to
such  effect,  but only insofar as it is  applicable  to such Seller and (iii) a
certificate  of each Seller with respect to the matters set forth in Section 4.5
dated the Closing Date and signed,  in the case of an individual by such Seller,
and in the case of a Corporate Seller by an executive officer of such Seller, to
such effect, but only insofar as it is applicable to such Seller.

Section 7.3  Performance.  Each Seller and the Company shall have  performed and
complied  with all  agreements  and covenants  required by this  Agreement to be
performed  or complied  with by them at or prior to the Closing in all  material
respects;  and Buyer shall have received at the Closing (i) a certificate of the
Company  dated the  Closing  Date and  signed on  behalf  of the  Company  by an
executive  officer of the  Company  to such  effect,  but only  insofar as it is
applicable  to the Company,  and (ii) a  certificate  of each Seller,  dated the
Closing Date and signed, in the case of an individual by such Seller, and in the
case of a  Corporate  Seller by an  executive  officer of such  Seller,  to such
effect, but only insofar as it is applicable to such Seller.

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<PAGE>

Section 7.4 Approvals and Filings.  All consents,  authorizations  and approvals
from,  and  all  declarations,  filings  and  registrations  with,  governmental
agencies  or third  parties  that are  listed on  Schedule  7.4 shall  have been
obtained  or made unless the failure to obtain or make the same is the result of
a breach of this Agreement by Buyer. All waiting periods under the HSR Act shall
have expired or been properly terminated.

Section 7.5 Amended and Restated  Stockholders'  Agreement.  The Sellers and the
Company shall have executed and delivered the Amended and Restated Stockholders'
Agreement.

Section 7.6 Opinion of Counsel. Buyer shall have received an opinion or opinions
dated the Closing  Date of counsel to the  Company  and/or the  Sellers,  to the
effect set forth on Schedule 7.6.

Section 7.7 No Material  Adverse Effect.  No Material  Adverse Effect shall have
occurred and be continuing  and Buyer shall have  received a certificate  of the
Company dated as of the Closing Date as to such effect.

Section 7.8 Ownership Percentage.  Consummation of the transactions contemplated
hereby  shall not result in Buyer owning more than 49.9 percent of the shares of
Common Stock outstanding as of the Closing Date.

Section 7.9 Niagara  Mohawk  Shares.  The Company  shall have sold or  otherwise
disposed of its equity interests in Niagara Mohawk Power Corporation.

ARTICLE 8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS AND THE
COMPANY

The  obligations of each of the Sellers under this Agreement shall be subject to
the satisfaction (or waiver by each of the Principal Sellers and the Company) on
or before the


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Closing of each of the  following  conditions,  and Buyer  shall use  reasonable
efforts to cause each of such conditions to be satisfied on or before the Target
Date and, in any event, as promptly as practicable:

Section 8.1 No Injunction.  No Federal or state governmental agency or authority
or  political  subdivision  thereof  or  Federal  or state  court  of  competent
jurisdiction shall have issued any injunction or other order (whether temporary,
preliminary or permanent)  which prohibits the  consummation of the transactions
contemplated  hereby;  provided,  that if there is an  injunction  or such other
order,  the applicable  parties shall use their  reasonable  efforts to litigate
against, and obtain the lifting of, any such injunction or order.

Section 8.2 Representations  and Warranties.  The representations and warranties
of Buyer  contained  herein that are qualified by materiality  shall be true and
correct as of the date  hereof and as of the  Closing  Date (in each case except
where such  representation  or  warranty  is  expressly  made only as of another
specific date) and all other representations and warranties shall be true and in
all  material  respects,  in each  case,  as  though  such  representations  and
warranties  were  made  at and as of  the  Closing  Date,  except  as  otherwise
contemplated  by this  Agreement;  and the Sellers  and the  Company  shall have
received at the Closing a certificate,  dated the Closing Date, signed on behalf
of Buyer by an executive officer of Buyer to such effect.

Section 8.3  Performance.  Buyer shall have  performed and complied with, in all
material respects, all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing; and the Sellers and
the Company shall have received at the Closing a certificate,  dated the Closing
Date, signed on behalf of Buyer by an executive officer of Buyer to such effect.



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<PAGE>

Section 8.4 Approvals and Filings.  All consents,  authorizations  and approvals
from,  and  all  declarations,  filings  and  registrations  with,  governmental
agencies or third parties that are listed on Schedule 8.4 and any other material
consents, authorizations,  approvals, declarations and filings that are required
to consummate the transactions  contemplated  hereby shall have been obtained or
made  unless the failure to obtain or make the same is the result of a breach of
this Agreement the Company or any Seller.  All waiting periods under the HSR Act
shall have expired or been properly terminated.

Section 8.5  Amended  and  Restated  Stockholders'  Agreement.  Buyer shall have
executed and delivered the Amended and Restated Stockholders' Agreement.

Section 8.6 Opinion of Counsel.  The Sellers and the Company shall have received
an opinion or opinions  dated the  Closing  Date from  counsel to Buyer,  to the
effect set forth in Schedule 8.6.

Section 8.7 No Material  Adverse  Effect.  No effect shall have  occurred and be
continuing that either individually or in the aggregate is materially adverse to
the condition (financial or otherwise) or results of operations of Buyer and its
Subsidiaries,  taken  as a  whole,  excluding,  in any  case,  (i) any  changes,
circumstances  or effects  resulting from or relating to changes in the economy,
financial  markets,  commodity  markets,  laws,  regulations  or  rules  in  the
applicable  electric power markets  generally  (including,  without  limitation,
changes  in laws or  regulations  affecting  owners  or  providers  of  electric
generation,  transmission or distribution as a group and not Buyer  exclusively)
and (ii) any changes in conditions  generally  applicable  to the  industries in
which Buyer or any of its  Subsidiaries is involved,  and, in the case of clause
(i) or (ii),  not affecting  Buyer or its  Subsidiaries  in any manner or degree
significantly  different  from



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the industry as a whole; and Principal Sellers shall have received a certificate
of the Buyer dated as of the Closing Date as to such effect.

Section 8.8 Credit Support Letter. The Credit Support Letter shall not have been
amended,  modified or rescinded,  in whole or in part.

Section  8.9  Dividend.  The  Dividend  shall have been paid by the  Company and
received by the Sellers in  accordance  with the terms of the  resolution of the
Board of Directors of the Company declaring the Dividend.

ARTICLE 9. CLOSING

Section 9.1 Time and Place.  Subject to the  provisions of Articles 7 and 8, the
closing of the sale by the Sellers and the  purchase by Buyer of the Sithe Stock
and  the  consummation  of  the  transactions  contemplated  by  Article  2 (the
"Closing")  shall  take  place at the  offices  of Latham &  Watkins,  885 Third
Avenue, New York, New York 10022 on the Target Date; provided,  however, that if
all of the  conditions  contained  in Articles 7 and 8 are  satisfied  or waived
prior to the Target Date then the Closing shall take place on the fifth Business
Day after the date on which such  conditions  are  satisfied  (other  than those
conditions that by their nature are to be satisfied at the Closing,  but subject
to the fulfillment or waiver of those conditions);  and provided,  further that,
if all of the  conditions  in Articles 7 and 8 are not  satisfied  by the Target
Date,  then,  subject to Article 10, the  Closing  shall take place on the fifth
Business Day after the date on which such  conditions are satisfied  (other than
those  conditions  that by their nature are to be satisfied at the Closing,  but
subject to the fulfillment or waiver of those conditions); and provided, further
that,  notwithstanding  the foregoing,  the Closing may take place at such other



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place,  at such other  time,  or on such other  date as the  parties  hereto may
mutually agree (the date on which the Closing occurs being herein referred to as
the "Closing  Date").

Section 9.2 Payment for Stock. At the Closing, upon the terms and subject to the
conditions  set forth  herein,  (a)  Buyer  shall  pay to each  Seller,  by wire
transfer of immediately  available funds to an account designated by such Seller
the  amount  determined  pursuant  to  Section  2.1.2.1  (as such  amount may be
adjusted  pursuant  to  Section  2.1.2.3)  and  (b)  Buyer  or the  Company,  as
applicable,  shall pay to each Seller, by wire transfer of immediately available
funds to an account designated by such Seller, the amount determined pursuant to
Section 2.1.2.2.

Section 9.3 Deliveries.

     9.3.1  Stock  Certificates.  Each  Seller  shall  deliver  to  the  Company
certificate(s) evidencing the number of shares of Sithe Stock set forth opposite
such  Seller's  name on  Schedule  1, duly  endorsed  in blank for  transfer  or
accompanied by stock power duly executed in blank.  The Company shall deliver to
Buyer  certificate(s)  evidencing the aggregate number of shares of Sithe Stock,
in such  denominations  as  reasonably  requested  by Buyer not later  than five
Business Days prior to the Closing.

     9.3.2  Certificates;  Opinions.  Buyer,  the Company and the Sellers  shall
deliver to each other the  certificates,  opinions  of counsel  and other  items
described in Articles 7 and 8.

     9.3.3 Other Closing Transactions. Each of the parties shall take such other
actions  required  hereby to be performed by it prior to or on the Closing Date,
including, without limitation, satisfying the conditions set forth in Articles 7
and 8.

     9.3.4  Additional  Documents.  Each party shall  execute and deliver to the
other parties all documents which the other reasonably  determines are necessary
to consummate the



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transactions  contemplated  hereby or to demonstrate or evidence compliance with
the terms or the accuracy of any representation and warranty set forth herein.

ARTICLE 10. TERMINATION AND ABANDONMENT

Section 10.1 Methods of  Termination.  This  Agreement may be terminated and the
transactions  herein  contemplated  may be  abandoned  at any time  prior to the
Closing Date:

     10.1.1 by mutual consent of the Company,  the Principal  Sellers and Buyer;
or

     10.1.2  by  Buyer  at  any  time  after  December  31,  2000  if any of the
conditions  provided  for in  Article  7 of this  Agreement  shall not have been
satisfied  or waived in writing by Buyer prior to such date;  provided,  that if
any  approval,  authorization  or consent of any  governmental  agency listed on
Schedule 7.4 has not been obtained and diligent  efforts are being undertaken to
obtain such approval,  authorization or consent, then the references to December
31, 2000 in this  Section  10.1.2  shall be extended for up to 90 days and Buyer
may not terminate  this  Agreement  during that extended  period so long as such
diligent efforts continue; or

     10.1.3 by the Principal  Sellers or the Company at any time after  December
31, 2000 if any of the  conditions  provided for in Article 8 of this  Agreement
shall not have been  satisfied or waived in writing by the Principal  Sellers or
the Company prior to such date; provided, that if any approval, authorization or
consent of any governmental  agency listed on Schedule 8.4 has not been obtained
and diligent efforts are being undertaken to obtain such approval, authorization
or consent,  then the  references  to December 31, 2000 in this  Section  10.1.3
shall be extended for up to 90 days and the Principal  Sellers may not terminate
this  Agreement  during that extended  period so long as such  diligent  efforts
continue; or

     10.1.4 (a) by Buyer,  upon not less than 30 days prior written  notice,  if
there has been a  violation  or breach by the  Company  or the  Sellers of their
agreements,  representations  or



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warranties  contained  in this  Agreement  which  would have a Material  Adverse
Effect and which is not  susceptible  to cure (or if so  susceptible  is not the
subject  of  diligent  efforts  on the part of the  breaching  party  to  cure),
provided,  that Buyer is not in material  violation or breach of its agreements,
representations  or  warranties  contained  in  this  Agreement,  or  (b) by the
Principal Sellers, upon not less than 30 days prior written notice, if there has
been a material violation or breach by Buyer of its agreements,  representations
or warranties  contained in this Agreement and which is not  susceptible to cure
(or if so susceptible is not the subject of diligent  efforts on the part of the
breaching  party to cure),  provided,  that  such  Sellers  are not in  material
violation or breach of their agreements, representations or warranties contained
in this Agreement.

Section 10.2 Procedure Upon Termination and Consequences.  Buyer, the Company or
the Principal  Sellers,  as the case may be, may terminate  this  Agreement when
permitted  pursuant  to  Section  10.1  by  delivering  written  notice  of such
termination,  and such  termination  shall be effective on the date specified in
such notice in accordance  with Section 13.3. If this Agreement is terminated as
provided herein:

     10.2.1  each party will  redeliver  all  documents,  work  papers and other
material of any other party relating to the  transactions  contemplated  hereby,
whether obtained before or after the execution hereof, to the parties furnishing
the same; and

     10.2.2 no party hereto shall have any  liability or further  obligation  to
any other party to this Agreement (i) except with respect to the Confidentiality
Agreement, which shall survive the termination of this Agreement, including with
respect to information that is subject to the Confidentiality Agreement pursuant
to Section 6.1, and (ii) except for such legal and equitable rights and remedies
which any party may have by reason of any breach or violation of this  Agreement
by any other party prior to such termination.



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<PAGE>

ARTICLE 11. SURVIVAL

Section 11.1 Seller  Representations and Warranties;  Buyer  Representations and
Warranties.  The several representations and warranties of each Seller contained
in Sections 4.1, 4.2, 4.3 and 4.4 (and in the certificates delivered pursuant to
Section  7.2(ii)) and the  representations  and warranties of Buyer contained in
Article 5 (and the certificate  delivered pursuant to Section 8.2) shall survive
the Closing. The several representations and warranties of each Seller contained
in Section 4.5 (and the  certificates  delivered  pursuant to Section  7.2(iii))
shall survive the Closing for a period of one (1) year.

Section 11.2  Covenants.  The  covenants  and  agreements of the parties that by
their  terms  are  to  be  performed  after  the  Closing  (including,   without
limitation,  all such  covenants  contained in Sections 2.2, 2.3, 2.4, 2.5, 6.7,
6.11 and 6.12 and in Article 12) shall survive the Closing indefinitely unless a
specific termination date is set forth therein.

Section 11.3 Company  Representations  and Warranties.  The  representations and
warranties of the Company contained in Article 3 (other than the representations
and warranties contained in Sections 3.7 and 3.17) shall survive the Closing for
a period of one (1) year.  The  representations  and  warranties  of the Company
contained in Section 3.7 shall survive the Closing until the  termination of the
applicable  statutes of limitations.  The  representations and warranties of the
Company contained in Sections 3.17 shall survive the Closing for a period of two
(2) years.

Section 11.4 Survival Periods. Each such survival period referred to in Sections
11.1  through  11.3  shall  be  referred  to,  with  respect  to the  applicable
representations, warranties or covenants, as a "Survival Period".



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ARTICLE 12. INDEMNIFICATION

Section 12.1 Seller Indemnification

     12.1.1 Subject to the limitations,  qualifications  and other provisions of
this  Article  12,  from and after the  Closing,  each  Corporate  Seller  shall
indemnify  and hold harmless the Company,  Buyer and each of Buyer's  directors,
officers and employees ("Buyer  Representatives",  and together with the Company
and  Buyer,  the  "Buyer  Indemnified  Group"),  from and  against  any costs or
expenses  (including  reasonable  attorneys' fees),  judgments,  fines,  losses,
claims and  damages  (collectively,  "Damages"),  incurred  by any member of the
Buyer Indemnified  Group which result from (i) any breach of any  representation
or  warranty of the  Company  contained  in Article 3 or (ii) the failure of the
Company to perform any covenant or agreement made by or on behalf of the Company
under this Agreement that is required to be performed prior to the Closing.

     12.1.2 Subject to the limitations,  qualifications  and other provisions of
this Article 12, from and after the Closing,  each Seller  shall,  severally and
not jointly,  indemnify and hold  harmless each member of the Buyer  Indemnified
Group  from  and  against  any  Damages  incurred  by any  member  of the  Buyer
Indemnified  Group  which  result from (i) any breach of any  representation  or
warranty  of such  Seller  contained  in  Article 4 or (ii) the  failure of such
Seller to perform any  covenant  or  agreement  made by such  Seller  under this
Agreement.

     12.1.3 Subject to the limitations,  qualifications  and other provisions of
this  Article  12,  from and after the  Closing,  each  Corporate  Seller  shall
indemnify and hold harmless each member of the Buyer  Indemnified Group from and
against  Damages  incurred by such member of the Buyer  Indemnified  Group which
result from the ownership or operation of any assets or any entities sold by the
Company pursuant to the Reliant Purchase Agreement.

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<PAGE>

     12.1.4 Subject to the limitations,  qualifications  and other provisions of
this  Article  12,  from and after the  Closing,  each  Corporate  Seller  shall
indemnify and hold harmless the Buyer Indemnified Group from and against Damages
incurred  by any member of the Buyer  Indemnified  Group  which  result from the
ownership or operation of any assets or any entities  that  constitute a part of
any International  Entity (excluding (i) any retained liabilities related to any
assets or entities that constitute a part of any  International  Entity,  to the
extent  such  retained  liabilities  are  reflected  in the  calculation  of the
After-Tax  Gain  or  Loss  resulting  from  any  International   Sale  and  (ii)
discrepancies  between the Closing  Book Value of such assets and the Book Value
of such assets); including,  without limitation, any payment made by the Company
or any Subsidiary of the Company pursuant to any indemnification  provisions set
forth in any purchase agreement,  merger agreement or similar agreement pursuant
to which any  International  Sale  shall have been  consummated,  other than the
payment obligations described in Section 2.3.4.

     12.1.5 Subject to the limitations,  qualifications  and other provisions of
this  Article  12,  from and after the  Closing,  each  Corporate  Seller  shall
indemnify and hold harmless  each member of the Buyer  Indemnified  Group (other
than  Penn  Hydroelectric,  Inc.  and  its  direct  and  indirect  Subsidiaries,
Allegheny Hydro No. 8, Inc., Allegheny Hydroelectric,  Inc., Allegheny Hydro No.
9,  Inc.,  Allegheny  Hydro  No.  8,  L.P.  and  Allegheny  Hydro  No.  9,  L.P.
(collectively,  the "Allegheny  Entities")) from and against Damages incurred by
such member of the Buyer  Indemnified  Group  resulting  from claims by New York
State Electric and Gas Corporation  ("NYSEG")  against the Company or any of its
Subsidiaries (other than the Allegheny Entities) with respect to the obligations
of the Allegheny Entities under the Power Purchase  Agreements



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<PAGE>

between  Allegheny and NYSEG, but excluding any litigation costs incurred by the
Company or any of its  Subsidiaries  in connection with the matters set forth in
item 1 of Schedule 3.6.

     12.1.6 Subject to the limitations,  qualifications  and other provisions of
this Article 12, each  Corporate  Seller shall  indemnify and hold harmless each
member of the Buyer  Indemnified Group from and against Damages incurred by such
member of the Buyer  Indemnified Group which result from the consummation of one
or more transactions described in Section 2.6.2 and 2.6.3.

     12.1.7 Subject to the limitations,  qualifications  and other provisions of
this Article 12,  Vivendi  shall  indemnify and hold harmless each member of the
Buyer  Indemnified Group from and against Damages incurred by such member of the
Buyer  Indemnified  Group which result from the consummation of the transactions
described in Section 2.6.1.

     12.1.8 Subject to the limitations,  qualifications  and other provisions of
this Article 12, each  Corporate  Seller shall  indemnify and hold harmless each
member of the Buyer Indemnified Group any Damages incurred by such member of the
Buyer Indemnified Group in any year that are directly related to the matters set
forth in item 4 of  Schedule  3.6,  including,  without  limitation,  any  other
investigation,  action or  proceeding  initiated  by any Person  relating to the
conduct referred to in such item 4 of the Company or any of its Subsidiaries, if
and to the extent that such Damages exceed $1,000,000 in such year. For purposes
of this Section 12.1.8, a "year" shall mean any period commencing on the Closing
Date or any anniversary  thereof and ending on the date immediately prior to the
next succeeding anniversary of the Closing Date.

Section 12.2 Buyer  Indemnification.  Subject to the limitation,  qualifications
and other provisions of this Article 12, Buyer shall indemnify and hold harmless
the Sellers and each of the  directors,  officers  and  employees of each Seller
("Sellers'  Representatives",  and,  together  with



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<PAGE>

the Sellers,  the "Sellers'  Indemnified  Group"),  from and against any Damages
incurred by any member of the Seller Indemnified Group which result from (i) any
breach of any  representation or warranty of the Buyer contained in Article 5 or
(ii) failure to perform any covenant or agreement  made by or on behalf of Buyer
under this Agreement.

Section 12.3 Timing of Notice of Claim.  Notwithstanding  anything herein to the
contrary,  no person  shall be  entitled  to  indemnification  pursuant  to this
Article 12 unless the person seeking indemnification shall have delivered notice
of a claim for  Damages (a "Claim") in writing to Buyer (in the case of any such
Claim by the Seller  Indemnified  Group),  the Corporate Sellers (in the case of
any such Claim by the Buyer Indemnified Group) or any Seller (in the case of any
such Claim  against  the Seller  pursuant  to  Section  12.1.2),  (a) during the
applicable Survival Period, in the case of any Claim pursuant to Section 12.1.1,
12.1.2 or 12.2, (b) during the Reliant Survival Period, in the case of any Claim
pursuant to Section 12.1.3, (c) during the International Survival Period, in the
case of  Section  12.1.4,  or (d) at any time,  in the case of  Section  12.1.5,
12.1.6,  12.1.7 or 12.1.8.  The termination of any applicable  Survival  Period,
Reliant  Survival Period or International  Survival Period,  as the case may be,
shall not affect the rights of any member of the Buyer  Indemnified Group or the
Seller Indemnified Group (in either case, an "Indemnified  Party") in respect of
any Claim made by such person in writing received by the indemnifying  person or
persons  (the  "Indemnifying  Party")  during the  applicable  Survival  Period,
Reliant Survival Period or International Survival Period, as the case may be.

Section 12.4 Limitations on Indemnification

     12.4.1 Notwithstanding  anything herein to the contrary, but subject to the
other  provisions of this Section  12.4,  (a) no Seller other than the Corporate
Sellers shall have any obligation to indemnify any other Person pursuant to this
Article  12,  except as  provided  pursuant



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to Section  12.1.2,  (b)  subject  to  Section  12.4.2,  the  obligation  of any
Corporate  Seller to indemnify any  Indemnified  Party with respect to any Claim
pursuant to Section 12.1.1,  12.1.3,  12.1.4,  12.1.5, 12.1.6 or 12.1.8 shall be
limited  (x) with  respect  to  Vivendi  to an  amount  equal to  70.33%  of the
aggregate  amount of Damages that are the subject of such Claim  incurred by all
members of the Buyer  Indemnified  Group and (y) with  respect to Marubeni to an
amount equal to 29.67% of the  aggregate  amount of Damages that are the subject
of such Claim incurred by all members of the Buyer Indemnified Group and (c) the
obligation  of any  Seller  other  than a  Corporate  Seller  to  indemnify  any
Indemnified  Party  pursuant to Section 12.1.2 shall be limited to the aggregate
consideration  received by such Seller under this Agreement and the Put and Call
Agreement

     12.4.2 Notwithstanding  anything herein to the contrary, but subject to the
other  provisions  of this Section  12.4,  the  Corporate  Sellers shall have no
liability to indemnify  any member of the Buyer  Indemnified  Group  pursuant to
Section 12.1.1 and 12.1.8 for any Damages which directly or indirectly arise out
of or are a result of or relate to any breach of  representations  or warranties
of the Company  contained in Article 3 to the extent such Damages  would exceed,
in the aggregate for all Corporate Sellers, $682.0 million.

     12.4.3 Notwithstanding  anything herein to the contrary, but subject to the
other  provisions  of this Section 12.4,  no  Indemnifying  Party shall have any
liability  to  indemnify  any  Indemnified  Party for Damages  pursuant  to: (i)
Section  12.1.1(i);  (ii)  Section  12.1.2(i)  insofar  as  it  relates  to  the
representation  and  warranties  contained in Sections 4.1, 4.2, 4.3 and 4.5; or
(iii)  Section  12.1.5;  unless and until,  in the case of clauses  (i)  through
(iii), the amount of all such Damages in the aggregate exceeds $15.0 million, in
which case the  Indemnifying  Parties shall be liable in the aggregate  only for
the amount of such excess.




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     12.4.4   This   Article  12  shall  be   effective   as  of  the   Closing.
Notwithstanding  anything  herein  to the  contrary,  but  subject  to the other
provisions  of this  Section  12.4,  after the Closing no person  shall have any
right  to  indemnification  or other  right to  recovery  with  respect  to this
Agreement  and the  transactions  contemplated  hereby  except  pursuant to this
Article 12.

     12.4.5 Notwithstanding  anything herein to the contrary, but subject to the
other  provisions of this Section 12.4, no party shall have any  indemnification
obligation  to any other  Person  with  respect to any Damages (a) to the extent
that a reserve or allowance for such Damages is recorded on the Closing  Balance
Sheet or (b)  consisting  of  incidental,  indirect,  consequential  or punitive
damages,  or  damages  for  lost  profits,  other  than  Damages  consisting  of
incidental,  indirect,  consequential or punitive  damages,  or damages for lost
profits,  payable  by an  Indemnified  Party  to a  third  party  that is not an
Indemnified Party. Section

12.5 Procedure.

12.5.1 If any Indemnified Party intends to seek indemnification pursuant to this
Article 12, such Indemnified Party shall promptly notify the Indemnifying  Party
in writing of such Claim describing such Claim in reasonable  detail;  provided,
that the failure to provide such notice shall not affect the  obligation  of the
Indemnifying Party unless it is actually  prejudiced  thereby. In the event that
such Claim involves a Claim by a third party against any Indemnified  Party, the
Indemnifying  Party may elect to assume the defense of such third-party Claim by
delivering  a written  notice to the  Indemnified  Party,  not more than 30 days
after the receipt by the  Indemnifying  Party of the notice of such  third-party
Claim, stating that the Indemnifying Party will undertake,  conduct and control,
through counsel of its own choosing  (which shall be reasonably  satisfactory to
the  Indemnified  Party)  and at its own  expense,  the  settlement  or  defense
thereof,  and if it so  decides,  the  Indemnified  Party may  consult  with the
Indemnifying



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Party in such  settlement or defense at such  Indemnified  Party's sole cost and
expense  through  counsel  chosen  by  the  Indemnified  Party.  Notwithstanding
anything in this Article 12 to the contrary, the Indemnifying Party may, without
the consent of the Indemnified Party, settle or compromise any action or consent
to the entry of any judgment which includes as an unconditional term thereof the
delivery  by the  claimant  or  plaintiff  to the  Indemnified  Party  of a duly
executed and legally effective written release of the Indemnified Group from all
liability in respect of such action without imposing any covenants or agreements
on any  Indemnified  Party  other  than  to  grant  a  reciprocal  release.  The
Indemnifying  Party shall not be liable for any settlement of any such action or
proceeding effected without its written consent, but if settled with its written
consent  (which  shall  not be  unreasonably  withheld)  or if  there be a final
judgment for the plaintiff in any such action or  proceeding,  the  Indemnifying
Party agrees to indemnify  and hold  harmless  such  Indemnified  Party from and
against any loss or liability by reason of such settlement or judgment.

     12.5.2 The  Indemnified  Party and the  Indemnifying  Party shall cooperate
fully in all aspects of any investigation, defense, pre-trial activities, trial,
compromise,  settlement or discharge of any Claim in respect of which  indemnity
is sought  pursuant  to this  Article  12,  including,  but not  limited  to, by
providing  the other party with  reasonable  access to  employees  and  officers
(including as witnesses) and other information.  Except as otherwise provided in
Section 12.5.1, the Indemnifying Party shall reimburse the Indemnified Party for
any   out-of-pocket   costs  of  the  Indemnified   Party  resulting  from  such
cooperation.

Section 12.6 Calculation.

     12.6.1  Insurance  and  Indemnity  Proceeds.  To the extent that any of the
indemnification  obligations of any Indemnifying  Party pursuant to this Article
12 are covered by



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<PAGE>

insurance or any right to  indemnification  (other than pursuant to this Article
12) held by any Indemnified  Party,  such Indemnified Party shall be entitled to
indemnification  pursuant to this  Article 12 only with respect to the amount of
Damages  that is in  excess  of the  cash  proceeds  actually  received  by such
Indemnified Party pursuant to such insurance or right to  indemnification.  Such
Indemnified  Party  shall use  reasonable  efforts to collect all amounts due to
such   Indemnified   Party   pursuant  to  any  such   insurance   or  right  to
indemnification.  If such  Indemnified  Party  receives  such cash  insurance or
indemnification  proceeds  prior to the time a Claim  is paid,  then the  amount
payable by the Indemnifying Party pursuant to such Claim shall be reduced by the
amount of such proceeds.  If such Indemnified Party receives such cash insurance
or  indemnification  proceeds  after  such  Claim has been  paid,  then upon the
receipt by the Indemnified Party of any such cash proceeds,  up to the amount of
Damages  incurred by such  Indemnified  Party with  respect to such Claim,  such
Indemnified  Party shall remit to the Indemnifying  Party an amount equal to the
lesser of (a) the  amount  of such cash  proceeds  or (b) the  amount  which was
previously  paid  by  the  Indemnifying  Party  to  such  Indemnified  Party  in
satisfaction of such Claim.

     12.6.2  Effect of Taxes.  The amount of any Damages  under this  Article 12
shall be  calculated  giving  effect  to  actual  Tax  savings,  if any,  to the
Indemnified  Party resulting from the payments (or  adjustments)  giving rise to
the payment of such Damages,  after giving effect to the  additional  Taxes,  if
any,  incurred  by reason of such  indemnification  payments  (other  than Taxes
incurred by Buyer as a result of a reduction in Buyer's tax basis in Sithe Stock
or  otherwise  incurred as a result of Buyer's  treatment  of such  payment as a
purchase price  adjustment in accordance with Section 12.7). The amount shall be
reasonably  determined by the  Indemnified  Party taking into account actual Tax
savings and actual additional Taxes realized or



                                       83
<PAGE>

incurred or to be realized or incurred  during the taxable  period in which such
payment of Damages accrues and during prior periods. All such calculations shall
be subject to the reasonable  review of the Indemnifying  Party. Upon request by
the  Indemnifying  Party,  the  Indemnified  Party shall  provide a  certificate
prepared by an Independent  Accounting Firm regarding  actual Tax savings and/or
actual  additional Taxes incurred or realized in any given year. If a payment of
Damages is made prior to the filing of relevant Tax Returns, the amount shall be
determined on an estimated basis. Proper adjustments shall be made if the actual
Tax savings or actual additional Taxes differ from the estimated amount. Section

12.7 Characterization.  The parties agree to report any payment made pursuant to
this Article 12 as an adjustment  to the purchase  price for the Sithe Stock for
federal income tax reporting  purposes,  unless otherwise required by applicable
law.

ARTICLE 13. MISCELLANEOUS

Section 13.1 Amendment and Modification. Subject to Section 2.4 and Section 7.2,
this  Agreement  may be  amended,  modified  and  supplemented  only by  written
agreement of Buyer,  the Company and each of the  Principal  Sellers;  provided,
however,  that the  number  of shares of Sithe  Stock  set forth  opposite  each
Seller's name on Schedule 1 hereto may be amended in writing by William Kriegel,
so long as the total  number of shares of Sithe Stock sold by all Sellers is not
changed solely as a result of such amendment;  provided,  further, however, that
any  change in the  number  of  shares  of Sithe  Stock to be sold by any of the
Corporate  Sellers  shall also  require  the written  consent of such  Corporate
Seller.  Notwithstanding  the foregoing or any other provision of this Agreement
or the Put and Call Agreement,  the aggregate percentage interest represented by
the  shares of Sithe  Stock to be sold by  Marubeni  as set forth on  Schedule 1
shall not be reduced in any manner  that  would  cause the  percentage  interest
represented by the



                                       84
<PAGE>

shares set forth beside the names of Marubeni America  Corporation,  Marubeni MS
Power and Marubeni  American Power,  collectively,  on Schedule A to the Put and
Call Agreement as in effect on the date hereof to be increased.

Section 13.2 Waiver of Compliance. Any failure of Buyer, on the one hand, or the
Company  or any  Seller,  on the  other  hand,  to comply  with any  obligation,
covenant,  agreement or condition  contained  herein may be expressly  waived in
writing  by the  Company  and the  Principal  Sellers,  in the event of any such
failure by Buyer,  or by Buyer,  in the event of any such failure by the Company
or any Seller, but such waiver or failure to insist upon strict compliance shall
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.

Section  13.3  Notices.  All  notices,  requests,  demands,  waivers  and  other
communications  required or permitted to be given under this Agreement  shall be
in  writing  and may be  given by any of the  following  methods:  (a)  personal
delivery, (b) facsimile transmission,  (c) registered or certified mail, postage
prepaid, return receipt requested, or (d) air courier service.  Notices shall be
sent to the appropriate party at its address or facsimile number given below (or
at such other  address or facsimile  number for such party as shall be specified
by notice given hereunder).

         If to a Seller, to:
                  such Seller
                  c/o Sithe Energies, Inc.
                  335 Madison Avenue, 28th Floor
                  New York, New York  10017
                  Attn:  Chief Executive Officer
                           Telecopy:  (212) 351-0015
                           General Counsel
                           Telecopy:  (212) 351-0019


                                       85
<PAGE>

         with copies to:

                  Latham & Watkins
                  885 Third Avenue, Suite 1000
                  New York, New York 10022-4802
                  Attn:    Roger H. Kimmel, Esq.
                           Samuel A. Fishman, Esq.
                           Telecopy:  (212) 751-4864

         with copies to:

                  Harsha Murthy
                  301 East 45th Street, 6-C
                  New York, New York 10017
                  Attn:    Harsha Murthy, Esq.
                           Telecopy:  509-691-5659

         If to the Company, to:

                  Sithe Energies, Inc.
                  335 Madison Avenue, 28th Floor
                  New York, New York  10017
                  Attn:    Chief Executive Officer
                           Telecopy:  (212) 351-0015
                           General Counsel
                           Telecopy:  (212) 351-0019

         with copies to:

                  Latham & Watkins
                  885 Third Avenue, Suite 1000
                  New York, New York 10022-4802
                  Attn:   Roger H. Kimmel, Esq.
                          Samuel A. Fishman, Esq.
                          Telecopy:  (212) 751-4864

         or to such other Person or address as the Company shall
         designate in writing.

         If to Buyer to:
                  Exelon (Fossil) Holdings, Inc.
                  c/o PECO Energy Company


                                       86
<PAGE>

                  2301 Market Street
                  Philadelphia, PA  19103
                  Attn:    Corbin A. McNeill, Jr., Chief Executive Officer
                           Telecopy:  (215) 841-4513

         with copies to:
                  Morgan, Lewis and Bockius LLP
                  1701 Market Street
                  Philadelphia, PA 19103
                  Attn:    Howard L. Meyers, Esq.
                           Telecopy:  (215) 963-5299

         or to such other Person or address as Buyer shall designate in writing.

         All such notices,  requests,  demands, waivers and communications shall
be deemed received upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate  address or (iii) in the case of a facsimile
transmission,   transmission   thereof  by  the  sender  and   issuance  by  the
transmitting   machine  of  a  confirmation   slip  that  the  number  of  pages
constituting  the notice have been  transmitted  without  error.  In the case of
notices sent by facsimile transmission,  the sender shall contemporaneously mail
a copy of the notice to the addressee at the address provided for above by first
class mail or by an air courier service, postage prepaid.  However, such mailing
shall in no way alter the time at which the facsimile notice is deemed received.

Section 13.4 Binding  Nature;  Assignment.  This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their  respective  successors
and  permitted  assigns,  but  neither  this  Agreement  nor any of the  rights,
interests  or  obligations  hereunder  shall be  assigned  by any of the parties
hereto  without  prior  written  consent of (i) in the case of an  assignment by
Buyer, the Principal  Sellers or (ii) in the case of an assignment by any Seller
or the Company, Buyer and the Principal Sellers;  provided,  that (x) any Seller
may assign  (including an



                                       87
<PAGE>

assignment by operation of law) such Seller's rights,  interests and obligations
hereunder  with respect to any shares of Sithe Stock held by such Seller without
the consent of Buyer or the  Principal  Sellers as provided in clause (ii) above
to any transferee of such shares in a transfer made in accordance  with the form
of the Amended and Restated Stockholders' Agreement attached hereto as Exhibit A
(including an assignment  by operation of law) where such  transferee  agrees in
writing to be bound by the terms  hereof (in which  case (1) such  Seller  shall
remain liable for all of its  obligations  under this  Agreement  (including any
breach of the  obligations  of the assignee to deliver at the Closing the shares
of Sithe Stock so assigned) and the assignee  shall,  together with such Seller,
be jointly  and  severally  liable for such  obligations  and (2) the  Schedules
hereto  shall  automatically  be deemed to be updated to reflect the addition of
the  assignee as a "Seller" as  applicable,  with respect to the shares of Sithe
Stock held by such assignee and all resulting changes in ownership of the shares
of Sithe Stock) and (y) Buyer may assign and delegate its rights,  interests and
obligations   hereunder  to  one  or  more   wholly-owned   direct  or  indirect
Subsidiaries of (a) PECO Energy Company, at any time prior to the merger of PECO
Energy Company and Unicom  Corporation  with or into Exelon  Corporation and (b)
Exelon Corporation,  at any time thereafter (the entities in clauses (a) and (b)
collectively  the  "Permitted  Assignees"),  upon written  notice to the Sellers
(which shall contain a representation that the assignee is a Permitted Assignee)
at or before the Closing  Date, in which event Buyer shall remain liable for all
of its  obligations  under this  Agreement and such  Permitted  Assignee  shall,
together  with Buyer,  be jointly  and  severally  liable for such  obligations.
Notwithstanding  the  foregoing,  no party  hereto  may assign or  delegate  its
rights,  interests and  obligations  hereunder if such  assignment or delegation
could  reasonably be expected to result in a delay or impediment to consummating
the transactions contemplated hereby, including, without



                                       88
<PAGE>

limitation,  due to the need to obtain the consent of any third party, including
any Governmental Authority,  not otherwise required for such party to consummate
the  transactions  contemplated  hereby.  Except as set forth in Section  6.7.4,
nothing  contained  herein,  express or  implied,  is  intended to confer on any
Person  other than the  parties  hereto or their  successors  and  assigns,  any
rights,  remedies,  obligations  or  liabilities  under  or by  reason  of  this
Agreement.

Section 13.5 Entire  Agreement.  This  Agreement,  including the  Exhibits,  the
Schedules and the Confidentiality  Agreement,  embodies the entire agreement and
understanding  of the parties hereto in respect of the subject matter  contained
herein.  This Agreement and the  Confidentiality  Agreement  supersede all prior
agreements  and  understandings  among the parties  with respect to such subject
matter  and   supersede   any   letters,   memoranda   or  other   documents  or
communications,  whether oral,  written or electronic,  submitted or made by (i)
Buyer or its agents or  representatives  to the Sellers,  the Company,  Goldman,
Sachs & Co. or any of their respective  agents or  representatives,  or (ii) the
Sellers,  the  Company,  Goldman,  Sachs & Co.  or their  respective  agents  or
representatives to Buyer or any of its agents or representatives,  in connection
with the bidding process which occurred prior to the execution of this Agreement
or otherwise in connection with the negotiation and execution of this Agreement.
No  communications  by or on behalf of the Company,  including  responses to any
questions or inquiries,  whether orally,  in writing or  electronically,  and no
information  provided in any data room or any copies of any information from any
data  room  provided  to Buyer or any other  information  shall be deemed to (i)
constitute a representation, warranty or an agreement of the Company, or (ii) be
part of this Agreement.
                                       89
<PAGE>

Section 13.6 Expenses. Each party to this Agreement will pay its own expenses in
connection  with the  negotiation  of this  Agreement,  the  performance  of its
obligations  hereunder,  and the consummation of the  transactions  contemplated
herein.

Section 13.7 Press Releases and Announcements;  Disclosure.  No press release or
other  public  announcement  or  disclosure  related  to this  Agreement  or the
transactions  contemplated  herein  (including  but not limited to the terms and
conditions of this Agreement) shall be issued or made without the prior approval
of Buyer,  on the one hand,  and the Company and the Principal  Sellers,  on the
other hand.  The foregoing  shall not prohibit any  disclosure  required by law,
provided such disclosure is made pursuant to the  Confidentiality  Agreement and
that the  disclosing  party shall  consult with the other  parties in advance of
such disclosure.

Section 13.8 Acknowledgment.

     13.8.1 Buyer acknowledges that neither any of the Sellers,  the Company nor
any other Person has made any representation or warranty,  expressed or implied,
as to the accuracy or completeness of any information regarding the Sellers, the
Company or any of their  respective  Subsidiaries not included in this Agreement
and  the  Schedules.  Without  limiting  the  generality  of the  foregoing,  no
representation  or  warranty  is made with  respect  to any  information  in the
Confidential  Offering  Memorandum  dated  November  1999 or any  supplement  or
amendment  thereto  provided in connection with the solicitation of proposals to
enter into the  transactions  contemplated by this Agreement,  such  information
having been  provided for the  convenience  of Buyer in order to assist Buyer in
framing its due diligence  efforts.  Buyer further  acknowledges that, except as
otherwise expressly provided in Article 3, no Person makes any representation or
warranty  with  respect to any of the  International  Entities or any  Contract,
arrangement,  encumbrance, liability or other obligation which relates to any of
the International Entities.


                                       90
<PAGE>



     13.8.2 Buyer further  acknowledges that (i) Buyer, either alone or together
with  any  Persons  Buyer  has  retained  to  advise  it  with  respect  to  the
transactions  contemplated hereby ("Advisors"),  has knowledge and experience in
transactions  of this type and in the business of the Company,  and is therefore
capable of evaluating the risks and merits of acquiring the Sithe Stock, (ii) in
determining to enter into this  Agreement,  it has relied on its own independent
investigation,  and  has  not  relied  on  any  information  or  representations
furnished  by any of the  Sellers,  the Company or any  representative  or agent
thereof  or any  other  Person,  except as set  forth in this  Agreement,  (iii)
neither any of the Sellers,  the Company nor any representative or agent thereof
or any other  Person  (other than  Advisors of Buyer) has given any  investment,
legal or other  advice or rendered any opinion as to whether the purchase of the
Sithe  Stock is  prudent,  and Buyer is not  relying  on any  representation  or
warranty  by any of the Sellers or the  Company or any  representative  or agent
thereof  except  as set  forth  in this  Agreement,  (iv)  Buyer  has  conducted
extensive due diligence, including a review of the documents contained in a data
room prepared by or on behalf of the Sellers and the Company,  and (v) Buyer has
had the  opportunity  to visit the Company and its  Subsidiaries  and certain of
their facilities,  plants,  development sites, offices and other properties, and
to ask questions and receive answers  concerning the Company,  its  Subsidiaries
and the terms and conditions of this Agreement.

Section 13.9 Disclaimer Regarding Assets. Except as otherwise expressly provided
herein,   each  of  the  Sellers  and  the  Company   expressly   disclaim   any
representations or warranties of any kind or nature,  express or implied,  as to
the  condition,  value or quality of the assets or  operations of the Company or
its  Subsidiaries or the prospects  (financial and  otherwise),  risks and other
incidents of the Company or its  Subsidiaries  and,  except as set forth herein,
each of the Sellers and the Company specifically  disclaim any representation or
warranty of  merchantability,



                                       91
<PAGE>

usage,  suitability or fitness for any  particular  purpose with respect to such
assets, or any part thereof, or as to the workmanship thereof, or the absence of
any defects therein,  whether latent or patent, or compliance with environmental
requirements,  or as to the condition of, or the rights of the Company or any of
its  Subsidiaries  in,  or their  title  to,  any of their  assets,  or any part
thereof,  or whether the Company or any of its Subsidiaries  possess  sufficient
real  property or personal  property  interests  to own or operate  such assets.
Except as expressly  provided herein,  no Schedule or exhibit to this Agreement,
nor any other material or information  provided by or communications made by any
of the Sellers or the Company or any of their  respective  representatives  will
cause or create any warranty,  express or implied, as to the condition, value or
quality of such assets.  Without  limiting the generality of the  foregoing,  no
representation  or  warranty  is  made  with  respect  to  the  accuracy  of any
information  provided in any site tours or on any web site,  or in any  meetings
with  management or other  personnel of the Company,  its  Subsidiaries or their
respective representatives, except as expressly set forth herein.

Section 13.10  Governing Law. This Agreement  shall be construed and enforced in
accordance  with the laws of the State of New York without  giving effect to the
choice of law principles thereof which would require the application of the laws
of a  jurisdiction  other  than  New  York.  Each  party  consents  to  personal
jurisdiction in any action arising out of or relating to this Agreement  brought
in the U.S.  District  Court for the Southern  District of New York,  or any New
York  court  within  the  County  and State of New York  having  subject  matter
jurisdiction  as to a matter  arising out of or relating to this  Agreement (and
the appropriate  appellate  courts),  and each of the parties hereto agrees that
any action  instituted  by either of them against the other with respect to this
Agreement will be instituted  exclusively in one of the above-specified  courts.




                                       92
<PAGE>

Section  13.11  Nonforeign  Affidavit.  At or prior to the Closing,  the Company
shall furnish Buyer an affidavit,  stating,  under penalty of perjury,  that the
Company  is not  and  has  not  been  a  United  States  real  property  holding
corporation  during the applicable  period  specified in accordance with Section
897(c)(1)(A)(ii)  of the Code, as required by Section 1445(b)(3) of the Code. In
the event that the Company fails to furnish such affidavit to Buyer, Buyer shall
be entitled to deduct and withhold from the Estimated  Aggregate  Purchase Price
federal income taxes to the extent  required to be withheld  pursuant to Section
1445(a) of the Code.

Section  13.12  Counterparts.  This  Agreement  may be  executed  in two or more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same  instrument.  Delivery of an executed
counterpart  of a signature  page of this  Agreement by  facsimile  transmission
shall be  effective  as  delivery  of a manually  executed  counterpart  of this
Agreement.

Section 13.13 Interpretation. The article and section headings contained in this
Agreement  are inserted  for  convenience  only and shall not  constitute a part
hereof.

Section 13.14 Waiver of Right of First Refusal. With respect to the transactions
contemplated by this Agreement and the Put and Call  Agreement,  the Company and
each Seller hereby waives all of their  respective  rights  pursuant to Sections
4.3 and 4.4 of the  Stockholders'  Agreement,  dated as of April 3, 1996,  among
William  Kriegel,  Compagnie  Generale  des Eaux,  National  Energy  Development
Corporation,  Marubeni Corporation, Paris Mouratoglou, IES Acquisition, Inc. and
the Company, as amended.

Section 13.15 Matters Related to NEDC.  Buyer shall negotiate in good faith with
Vivendi to enter into an agreement for the purchase from Energies USA,  S.A., of
an interest in NEDC in lieu of the  purchase of the shares of Common Stock owned
by NEDC prior to the



                                       93
<PAGE>

Closing Date, such sale to be effected on comparable terms to those provided for
hereunder.  However,  nothing in this Section  13.15 shall require Buyer to take
any action or agree to any proposal that would adversely affect Buyer in Buyer's
reasonable  judgment.  Vivendi  agrees to  reimburse  Buyer  for its  reasonable
out-of-pocket costs and expenses (including attorneys' and accountants' fees) in
connection with the foregoing negotiation, regardless of whether an agreement is
entered into pursuant to the preceding sentence. Each Seller agrees to cooperate
in good  faith with  Vivendi  and Buyer to the  extent  necessary  to permit the
purchase  by Buyer of an  interest  in NEDC;  provided  that no Seller  shall be
required to take any action or agree to any proposal that would adversely affect
such Seller in such Seller's reasonable judgment.














                                       94
<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.

                            SITHE ENERGIES, INC


                            By:   /s/ William Kriegel
                                  -----------------------------------------
                                  Name:  William Kriegel
                                  Title: Chairman and Chief Executive Officer


                            VIVENDI, S.A.


                            By:   /s/ Jean-Marie Messier
                                  -----------------------------------------
                                  Name:  Jean-Marie Messier
                                  Title: Chairman and Chief Executive Officer


                            NATIONAL ENERGY DEVELOPMENT CORPORATION


                            By:   /s/ Michael Avenas
                                  -----------------------------------------
                                  Name:  Michael Avenas
                                  Title:




                                       95
<PAGE>



                            MARUBENI AMERICA CORPORATION

                            By:   /s/ Yoshiya Toyoda
                                  -----------------------------------------
                                  Name:  Yoshiya Toyoda
                                  Title: President and Chief Executive Officer


                            MARUBENI MS POWER, INC.


                            By:   /s/ Kiyoshi Yoshimitsu
                                  -----------------------------------------
                                  Name:  Kiyoshi Yoshimitsu
                                  Title: Director


                            S MARUBENI AMERICAN POWER, INC.


                            By:   /s/ Kiyoshi Yoshimitsu
                                  ------------------------------------------
                                  Name:  Kiyoshi Yoshimitsu
                                  Title: Director





                                       96
<PAGE>




                            WILLIAM V. KRIEGEL
                            an individual


                            By:   /s/ William V. Kriegel
                                  -----------------------------------------


                            BARRY F. SULLIVAN
                            an individual


                            By:   /s/ Barry F. Sullivan
                                  -----------------------------------------





                                       97
<PAGE>



                            SITHE EMPLOYEE STOCK OWNERSHIP, L.P.
                            By:   Sithe Energies, Inc.
                            its General Partner


                            By:   /s/ William Kriegel
                                  -----------------------------------------
                                  Name:  William Kriegel
                                  Title: Chairman and Chief Executive Officer


                            TRUST UNDER THE 1998 PLAN
                            By:   /s/ Gregory M. Thomson
                                  -----------------------------------------
                                  Name:  Gregory M. Thomson
                                  Title: Trustee


                            EXELON (FOSSIL) HOLDINGS, INC.


                            By:   /s/ Corbin A. McNeill, Jr.
                                  -----------------------------------------
                                  Name:  Corbin A. McNeill, Jr.
                                  Title: President



                                       98

</TEXT>
</DOCUMENT>
