Consolidated Edison, Inc.

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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

/x/	Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For The Quarterly Period Ended June 30, 2001
or
/ /	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number	Exact name of registrant as specified in its charter and principal office address and telephone number	State of Incorporation	I.R.S. Employer ID. Number

1-14514	Consolidated Edison, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-3965100
1-1217	Consolidated Edison Company of New York, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-5009340
1-4315	Orange and Rockland Utilities, Inc. One Blue Hill Plaza, Pearl River, New York 10965 (914) 352-6000	New York	13-1727729

Indicate by check mark whether each Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /

As of the close of business on July 31, 2001, Consolidated Edison, Inc. (Con Edison) had outstanding 212,205,964 Common Shares ($.10 par value). Con Edison owns all of the outstanding common equity of Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R).

O&R meets the conditions specified in general instruction H(1)(a) and (b) of Form 10-Q
and is therefore filing this form with the reduced disclosure format.

TABLE OF CONTENTS



Filing Format
Forward-Looking Statements
Part I.	Financial Information
Item 1.	Financial Statements
	Con Edison	Consolidated Balance Sheet
		Consolidated Income Statement
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
	Con Edison	Consolidated Balance Sheet
	of New York	Consolidated Income Statement
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
	O&R	Consolidated Balance Sheet
		Consolidated Income Statement
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Con Edison
	Con Edison of New York
	O&R
O&R Management's Narrative Analysis of the Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk
	Con Edison
	Con Edison of New York
	O&R
Part II.	Other Information
Item 1.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Securities Holders
Item 6.	Exhibits and Reports on Form 8-K

* O&R is omitting this information pursuant to General Instruction H of Form 10-Q.

Filing Format

This Quarterly Report on Form 10-Q is a combined report being filed separately by three different registrants: Consolidated Edison, Inc. (Con Edison), Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Neither Con Edison of New York nor O&R makes any representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.

O&R, a wholly-owned subsidiary of Con Edison, meets the conditions specified in General Instruction H of Form 10-Q and is permitted to use the reduced disclosure format for wholly-owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, O&R has omitted from this report the information called for by Part 1, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and has included in this report its Management's Narrative Analysis of the Results of Operations. In accordance with general instruction H, O&R has also omitted from this report the information, if any, called for by Part 1, Item 3, Quantitative and Qualitative Disclosure About Market Risk; Part II, Item 2, Changes in Securities and Use of Proceeds; Part II, Item 3, Defaults Upon Senior Securities; and Part II, Item 4, Submission of Matters to a Vote of Security Holders.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements, which are statements of future expectation and not facts. Words such as "estimates," "expects," "anticipates," "intends," "plans" and similar expressions identify forward-looking statements. Actual results or developments might differ materially from those included in the forward-looking statements because of factors such as competition and industry restructuring, developments relating to Indian Point 2 (see Note C to the Con Edison financial statements in Part 1, Item 1 of this report), developments relating to Northeast Utilities (see Note D to the Con Edison financial statements in Part 1, Item 1 of this report), developments in wholesale energy markets, technological developments, changes in economic conditions, changes in historical weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, and other presently unknown or unforeseen factors.

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			June 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	11,894,294	$	11,808,102
	Gas			2,348,862		2,300,056
	Steam			751,035		740,189
	General			1,419,025		1,388,602

	TOTAL			16,413,216		16,236,949
	Less: Accumulated depreciation			5,211,509		5,186,058

	NET			11,201,707		11,050,891
	Construction work in progress			527,415		504,470
	Nuclear fuel assemblies and components, less accumulated amortization			96,890		107,641

NET UTILITY PLANT				11,826,012		11,663,002

NON-UTILITY PLANT
	Unregulated generating assets, less accumulated depreciation of $49,871 and $48,643			142,404		230,416
	Non-utility property, less accumulated depreciation of $7,135 and $5,516			74,836		41,752

NET PLANT				12,043,252		11,935,170

CURRENT ASSETS
	Cash and temporary cash investments			41,633		94,828
	Funds held for refunding of NYSERDA Notes			224,600		-
	Accounts receivable - customer, less allowance for uncollectible accounts of $31,762 and $33,714			749,536		910,344
	Other receivables			131,241		168,415
	Fuel, at average cost			23,827		29,148
	Gas in storage, at average cost			87,264		82,419
	Materials and supplies, at average cost			120,881		131,362
	Prepayments			628,654		524,377
	Other current assets			52,537		75,094

TOTAL CURRENT ASSETS				2,060,173		2,015,987

INVESTMENTS
	Nuclear decommissioning trust funds			344,134		328,969
	Other			210,534		197,120

TOTAL INVESTMENTS				554,668		526,089

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Goodwill and other intangible assets			565,913		488,702
	Regulatory assets
		Future federal income tax		670,112		676,527
		Recoverable energy costs		255,447		340,495
		Real estate sale costs - First Avenue properties		103,928		103,009
		Deferred special retirement program costs		85,385		88,633
		Divestiture - capacity replacement reconciliation		73,850		73,850
		Accrued unbilled revenues		69,210		72,619
		Workers' compensation reserve		58,944		47,097
		Deferred environmental remediation costs		54,723		49,056
		Deferred revenue taxes		44,416		43,879
		Other		199,112		112,604

	TOTAL REGULATORY ASSETS			1,615,127		1,607,769
	Other deferred charges and noncurrent assets			214,187		193,528

TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				2,395,227		2,289,999

TOTAL			$	17,053,320	$	16,767,245

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As At
			June 30, 2001			December 31, 2000
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock, authorized 500,000,000 shares; outstanding 212,182,481 shares and 212,027,131 shares		$	1,482,341		$	1,482,341
	Retained earnings			5,084,902			5,040,931
	Treasury stock, at cost; 23,305,613 shares and 23,460,963 shares			(1,005,728	)		(1,012,919	)
	Capital stock expense			(35,682	)		(35,817	)
	Accumulated other comprehensive income			(24,180	)		(2,147	)

	TOTAL COMMON SHAREHOLDERS' EQUITY			5,501,653			5,472,389

	Preferred stock subject to mandatory redemption			37,050			37,050
	Other preferred stock			212,563			212,563
	Long-term debt			5,507,885			5,415,409

TOTAL CAPITALIZATION				11,259,151			11,137,411

NONCURRENT LIABILITIES
	Obligations under capital leases			29,942			31,504
	Accumulated provision for injuries and damages			168,669			160,671
	Pension and benefits reserve			209,877			181,346
	Other noncurrent liabilities			32,232			30,118

TOTAL NONCURRENT LIABILITIES				440,720			403,639

CURRENT LIABILITIES
	Long-term debt due within one year			688,420			309,590
	Notes payable			222,266			255,042
	Accounts payable			812,662			1,020,401
	Customer deposits			206,536			202,888
	Accrued taxes			32,031			64,345
	Accrued interest			84,030			85,276
	Accrued wages			87,493			70,951
	Other current liabilities			335,105			328,686

TOTAL CURRENT LIABILITIES				2,468,543			2,337,179

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax			2,260,560			2,302,764
	Accumulated deferred investment tax credits			125,578			131,429
	Regulatory liabilities
		Gain on divestiture		84,186			60,338
		Deposit from sale of First Avenue properties		50,000			50,000
		Accrued electric rate reduction		38,018			38,018
		NY state tax law revisions		30,121			59,523
		NYPA revenue increase		27,507			35,021
		Other		252,428			211,706

	TOTAL REGULATORY LIABILITIES			482,260			454,606
	Other deferred credits			16,508			217

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				2,884,906			2,889,016

TOTAL			$	17,053,320		$	16,767,245

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	1,531,949		$	1,531,262
	Gas		305,394			247,016
	Steam		89,666			74,600
	Non-utility		185,206			189,016

TOTAL OPERATING REVENUES			2,112,215			2,041,894

OPERATING EXPENSES
	Purchased power		796,600			791,340
	Fuel		46,019			42,730
	Gas purchased for resale		177,982			164,538
	Other operations		279,382			289,865
	Maintenance		116,341			128,140
	Depreciation and amortization		136,868			145,618
	Taxes, other than income tax		256,484			275,160
	Income tax		86,724			33,174

TOTAL OPERATING EXPENSES			1,896,400			1,870,565

OPERATING INCOME			215,815			171,329
OTHER INCOME (DEDUCTIONS)
	Investment income		1,422			2,542
	Allowance for equity funds used during construction		258			486
	Other income less miscellaneous deductions		(8,772	)		(3,989	)
	Income tax		1,558			961

TOTAL OTHER INCOME (DEDUCTIONS)			(5,534	)		-

INCOME BEFORE INTEREST CHARGES			210,281			171,329
	Interest on long-term debt		98,355			87,658
	Other interest		9,536			12,559
	Allowance for borrowed funds used during construction		(1,684	)		(1,032	)

NET INTEREST CHARGES			106,207			99,185

PREFERRED STOCK DIVIDEND REQUIREMENTS			3,398			3,398

NET INCOME FOR COMMON STOCK		$	100,676		$	68,746

COMMON SHARES OUTSTANDING - AVERAGE BASIC (000)			212,115			211,966
COMMON SHARES OUTSTANDING - AVERAGE DILUTED (000)			212,555			212,074
BASIC EARNINGS PER SHARE		$	0.48		$	0.33

DILUTED EARNINGS PER SHARE		$	0.48		$	0.33

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	0.550		$	0.545

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	3,239,323		$	3,043,511
	Gas		1,007,213			716,489
	Steam		347,918			244,858
	Non-utility		404,024			355,627

TOTAL OPERATING REVENUES			4,998,478			4,360,485

OPERATING EXPENSES
	Purchased power		1,812,485			1,521,528
	Fuel		216,335			127,968
	Gas purchased for resale		641,466			430,836
	Other operations		540,987			601,963
	Maintenance		244,786			234,972
	Depreciation and amortization		271,866			288,340
	Taxes, other than income tax		564,469			564,332
	Income tax		203,787			136,508

TOTAL OPERATING EXPENSES			4,496,181			3,906,447

OPERATING INCOME			502,297			454,038
OTHER INCOME (DEDUCTIONS)
	Investment income		2,887			6,941
	Allowance for equity funds used during construction		501			(91	)
	Other income less miscellaneous deductions		(11,889	)		(4,251	)
	Income tax		7,154			(239	)

TOTAL OTHER INCOME (DEDUCTIONS)			(1,347	)		2,360

INCOME BEFORE INTEREST CHARGES			500,950			456,398
	Interest on long-term debt		197,563			170,971
	Other interest		20,023			24,537
	Allowance for borrowed funds used during construction		(3,222	)		(2,787	)

NET INTEREST CHARGES			214,364			192,721

PREFERRED STOCK DIVIDEND REQUIREMENTS			6,796			6,796

NET INCOME FOR COMMON STOCK		$	279,790		$	256,881

COMMON SHARES OUTSTANDING - AVERAGE BASIC (000)			212,078			212,352
COMMON SHARES OUTSTANDING - AVERAGE DILUTED (000)			212,440			212,425
BASIC EARNINGS PER SHARE		$	1.32		$	1.21

DILUTED EARNINGS PER SHARE		$	1.32		$	1.21

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	1.100		$	1.090

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

		As At
As At June 30, 2001 and December 31, 2000		June 30, 2001		December 31, 2000
(Unaudited)		(Thousands of Dollars)
BALANCE, JANUARY 1		$	5,040,931	$	4,921,089
	Less: Stock options exercised		2,540		1,026
	Orange & Rockland purchase accounting adjustment		48		(46	)
	Net income for common stock for the period		279,742		582,835

TOTAL			5,318,181		5,502,852

DIVIDENDS DECLARED ON COMMON, $1.10 AND $2.18 PER SHARE, RESPECTIVELY			233,279		461,921

ENDING BALANCE		$	5,084,902	$	5,040,931

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME		$	279,790		$	256,881
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Investment in marketable equity securities, net of $279 taxes		(189	)		-
	Minimum pension liability adjustments, net of $1,656 taxes		(2,055	)		-
	Unrealized gains (losses) on derivatives qualified as hedges arising during the period due to cumulative effect of a change in accounting principle, net of $5,587 taxes		(8,050	)		-
	Unrealized gains (losses) on derivatives qualified as hedges, net of $8,659 taxes		(12,452	)		-
	Less: Reclassification adjustment for losses included in net income, net of $378 taxes		(713	)		-

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(22,033	)		-

COMPREHENSIVE INCOME		$	257,757		$	256,881

The accompanying notes are an integral part of these financial statements.

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income for common stock			$	279,790		$	256,881
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization			271,753			288,340
		Income tax deferred (excluding taxes resulting from divestiture of plant)			(55,354	)		28,134
		Common equity component of allowance for funds used during construction			(501	)		91
		Prepayments - accrued pension credits			(161,285	)		(102,025	)
		Other non-cash charges			6,534			29,156
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable - customer, less allowance for uncollectibles			160,808			(38,245	)
		Materials and supplies, including fuel and gas in storage			3,305			3,153
		Prepayments (other than pensions), other receivables and other current assets			131,481			(26,965	)
		Deferred recoverable energy costs			85,048			(183,684	)
		Cost of removal less salvage			(44,570	)		(44,575	)
		Accounts payable			(207,739	)		259,921
		Other - net			(76,767	)		22,466

NET CASH FLOWS FROM OPERATING ACTIVITIES					392,503			492,648

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Utility construction expenditures			(448,215	)		(391,189	)
		Nuclear fuel expenditures			(6,229	)		(24,114	)
		Contributions to nuclear decommissioning trust			(10,650	)		(10,650	)
		Common equity component of allowance for funds used during construction			501			(91	)
		Divestiture of utility plant (net of federal income tax)			99,951			-
		Investments by unregulated subsidiaries			(12,435	)		(4,786	)
		Non-utility plant			(37,728	)		(258,987	)

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION					(414,805	)		(689,817	)

FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Repurchase of common stock			-			(68,531	)
		Net proceeds from short-term debt			(32,776	)		(291,091	)
		Additions to long-term debt			624,600			567,395
		Retirement of long-term debt			(150,000	)		(225,000	)
		Issuance and refunding costs			(14,846	)		(1,768	)
		Funds held for refunding of NYSERDA Notes			(224,600	)		-
		Common stock dividends			(233,271	)		(231,230	)

NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS					(30,893	)		(250,225	)

NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS					(53,195	)		(447,394	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1					94,828			485,050

CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30				$	41,633		$	37,656

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
		Cash paid during the period for:
			Interest	$	190,207		$	166,605
			Income taxes		227,735			74,245

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS - CON EDISON

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison, Inc. (Con Edison) and its subsidiaries, including the regulated utility Consolidated Edison Company of New York, Inc. (Con Edison of New York), the regulated utility Orange and Rockland Utilities, Inc. (O&R) and several non-utility subsidiaries. These financial statements are unaudited but, in the opinion of Con Edison's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2000 (the Form 10-K).

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison's utility subsidiaries and may be present in their facilities and equipment.

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liability, regardless of fault, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred.

At June 30, 2001, Con Edison had accrued $126.2 million as its best estimate of the utility subsidiaries' liability for sites as to which they have received process or notice alleging that hazardous substances generated by them (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, the amount of which is not presently determinable but may be material to Con Edison's financial position, results of operations or liquidity.

Con Edison's utility subsidiaries are permitted under current rate agreements to defer for subsequent recovery through rates certain site investigation and remediation costs with respect to hazardous waste. At June 30, 2001, $55.8 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison's utility subsidiaries and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the utility subsidiaries. Many of these suits have been disposed of without any payment by the utility subsidiaries, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but Con Edison believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to Con Edison at this time, it does not believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Nuclear Generation

The Indian Point 2 nuclear generating unit, which Con Edison of New York owns and has agreed to sell, was out of service from February 2000 to January 2001. The New York State Public Service Commission (PSC) is investigating the Indian Point 2 outage and its causes and the prudence of the company's actions regarding the operation and maintenance of Indian Point 2. An appeal is pending in the United States Court of Appeals for the Second Circuit of the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the court determined that the law that directed the PSC to prohibit the company from recovering Indian Point 2 replacement power costs from customers was unconstitutional and granted the company's motion for a permanent injunction to prevent its implementation. The staff of the Nuclear Regulatory Commission is monitoring Indian Point 2 with heightened oversight. The company is unable to predict whether or not any Indian Point 2-related proceedings, lawsuits, legislation or other actions will have a material adverse effect on its financial position, results of operations or liquidity. For additional information about Indian Point 2, its pending sale and the outage, see Note G to Con Edison's financial statements included in Item 8 of the Form 10-K.

Note D - Northeast Utilities

In May 2001, Con Edison amended its complaint against Northeast Utilities in the proceeding it commenced in March 2001 in the United States District Court for the Southern District of New York, entitled Consolidated Edison, Inc. v. Northeast Utilities, with respect to their agreement and plan of merger, dated as of October 13, 1999, as amended and restated as of January 11, 2000 (the merger agreement). As amended, Con Edison's complaint seeks, among other things, recovery of damages sustained by it as a result of the material breach of the merger agreement by Northeast Utilities.

In June 2001, Northeast Utilities withdrew the separate action it commenced in March 2001 in the same court and filed as a counter-claim to Con Edison's amended complaint its claim that Con Edison materially breached the merger agreement and that as a result Northeast Utilities and its shareholders have suffered substantial damages, including the difference between the consideration to be paid to Northeast Utilities shareholders pursuant to the merger agreement and the current market value of Northeast Utilities common stock, expenditures in connection with regulatory approvals and lost business opportunities. Pursuant to the merger agreement, Con Edison agreed to acquire Northeast Utilities for $26.00 per share (an estimated aggregate of not more than $3.9 billion) plus $0.0034 per share for each day after August 5, 2000 through the day prior to the completion of the transaction, payable 50 percent in cash and 50 percent in stock.

Con Edison believes that Northeast Utilities has materially breached the merger agreement and that Con Edison has not materially breached the merger agreement. Con Edison is unable to predict whether or not any Northeast Utilities-related lawsuits or other actions will have a material adverse effect on Con Edison's financial position, results of operations or liquidity.

Note E - Derivative Instruments and Hedging Activities

As of January 2001, Con Edison adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137,

"Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" (SFAS No. 133).

Energy Price Hedging

Con Edison's subsidiaries use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges).

Con Edison's utility subsidiaries, pursuant to Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), defer recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, Con Edison's utility subsidiaries credit or charge to their customers gains or losses on Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. To the extent SFAS No. 71 does not allow deferred recognition in income, Con Edison's utility subsidiaries have elected special hedge accounting pursuant to SFAS No. 133 (Cash Flow Hedge Accounting). For each Hedge that qualifies as a cash flow hedge under SFAS No. 133, the mark-to-market unrealized gain or loss on the Hedge is recorded in other comprehensive income and reclassified to income at the time the underlying transaction is completed, except that any gain or loss relating to any portion of the Hedge determined to be "ineffective" is recognized in income in the period in which such determination is made. Upon adoption of SFAS No. 133, Con Edison's utility subsidiaries had no transition adjustments relating to Hedges to recognize in other comprehensive income. In the quarter and six month period ended June 30, 2001, the company realized pre-tax losses relating to its utility subsidiaries' Hedges of $11.7 million, of which $10.9 million has been billed to customers. At June 30, 2001, the company had $58.0 million of mark-to-market unrealized pre-tax net losses relating to such Hedges deferred as regulatory assets and $2.1 million of mark-to-market unrealized after-tax net losses relating to such Hedges included in other comprehensive income. As of June 30, 2001, the utility subsidiaries' Hedges for which Cash Flow Hedge Accounting was used were for a term of less than 12 months and $2.1 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Consolidated Edison Solutions, Inc., a wholly-owned subsidiary of Con Edison (which provides competitive gas and electric supply and energy-related products and services), uses Cash Flow Hedge Accounting for each Hedge that qualifies as a cash flow hedge under SFAS No. 133. For Hedges which, although intended to hedge related underlying transactions, do not meet the criteria of SFAS No. 133 for Cash Flow Hedge Accounting, mark-to-market unrealized gains or losses on the Hedge are recognized in income in the period in which they occur. As a result, changes in value of a Hedge may be recognized in income in an earlier period than the period in which the underlying transaction is recognized in income. The company expects, however, that these changes in values will be offset, at least in part, when the underlying transactions are recognized in income. The company has recognized after-tax transition gains relating to Con Edison Solutions' Hedges of $1.6 million in other comprehensive income and $0.4 million in income in connection with its adoption of SFAS No. 133. For the quarter and six month

period ended June 30, 2001, with respect to such Hedges, the company reclassified to income from accumulated other comprehensive income after-tax net losses of $1.3 million and $0.1 million, respectively, recognized in income mark-to-market unrealized pre-tax net losses of $8.9 million and $9.9 million, respectively, and recorded in other comprehensive income mark-to-market unrealized after-tax net losses of $9.6 million and $9.8 million, respectively. As of June 30, 2001, all of Con Edison Solutions' Hedges for which Cash Flow Hedge Accounting was used were for a term of less than two years and $7.6 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Consolidated Edison Energy, Inc., a wholly-owned subsidiary of Con Edison (which markets specialized energy supply services to wholesale customers), enters into over-the-counter and exchange traded contracts for the purchase and sale of electricity, gas or oil (which may provide for either physical or financial settlement) and is considered an "energy trading organization" required to account for such trading activities in accordance with FASB Emerging Issues Task Force Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities". With respect to such contracts, the company recognized in income unrealized mark-to-market pre-tax net gains of $1.1 million and $1.6 million in the quarter and six month period ended June 30, 2001, respectively. Con Edison Energy has also entered into transactions for another subsidiary of Con Edison, as to which the company recognized in income unrealized mark-to-market pre-tax net gains of $0.3 million and $7.6 million in the quarter and six month period ended June 30, 2001, respectively.

Interest Rate Hedging

O&R and Consolidated Edison Development, Inc., a wholly-owned subsidiary of Con Edison (which invests in and manages energy infrastructure projects), use Cash Flow Hedge Accounting for their interest rate swap agreements.

In connection with its $55 million promissory note issued to the New York State Energy Research and Development Authority for the net proceeds of the Authority's variable rate Pollution Control Refunding Revenue Bonds (O&R Projects), 1994 Series A (the 1994 Bonds), O&R has a swap agreement pursuant to which it pays interest at a fixed rate of 6.09 percent and is paid interest at the same variable rate as is paid on the 1994 Bonds. Upon adoption of SFAS No. 133, the company recognized after-tax transition adjustment losses relating to the swap agreement of $8.1 million in other comprehensive income. In the quarter ended June 30, 2001, the company reclassified $0.9 million of such losses from accumulated other comprehensive income to income. As of June 30, 2001, $1.2 million of losses relating to the swap agreement were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If the swap agreement had been terminated on June 30, 2001, O&R would have been required to pay approximately $13.0 million.

In connection with $95 million of variable rate loans undertaken relating to the Lakewood electric generating plant, Con Edison Development has swap agreements pursuant to which it pays interest at a fixed rate of 6.68 percent and is paid interest at a variable rate equal to the three-month London Interbank Offered Rate. Upon adoption of SFAS No. 133, the company recognized after-tax transition adjustment losses relating to the swap agreements of $1.6 million in other comprehensive income. In the

quarter ended June 30, 2001, the company reclassified $0.4 million of such losses from accumulated other comprehensive income to income. As of June 30, 2001, $0.5 million of losses relating to the swap agreements were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If these swap agreements had been terminated on June 30, 2001, Con Edison Development would have been required to pay approximately $3.4 million.

Note F - Financial Information by Business Segment

Consolidated Edison, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the three months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001		2000
Operating revenues	$	1,531,949	$	1,531,262	$	305,394	$	247,016
Intersegment revenues		3,213		12,993		872		2,106
Depreciation and amortization		107,153		118,541		18,016		17,259
Operating income		183,986		151,187		30,240		29,067

	Regulated Steam						Unregulated Subsidiaries & Other
	2001			2000			2001		2000
Operating revenues	$	89,666		$	74,600		$	185,206	$	189,016
Intersegment revenues		485			517			2,830		323
Depreciation and amortization		4,431			4,618			7,268		5,200
Operating income		(5,422	)		(4,061	)		7,011		(4,864	)

	Consolidated
	2001		2000
Operating revenues	$	2,112,215	$	2,041,894
Intersegment revenues		7,400		15,939
Depreciation and amortization		136,868		145,618
Operating income		215,815		171,329

Consolidated Edison, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the six months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
For the six months ended June 30, 2001 and 2000 (Unaudited)	2001		2000		2001		2000
Operating revenues	$	3,239,323	$	3,043,511	$	1,007,213	$	716,489
Intersegment revenues		6,742		31,737		1,591		4,437
Depreciation and amortization		213,252		235,720		35,757		34,143
Operating income		333,117		304,629		128,170		129,685

	Regulated Steam				Unregulated Subsidiaries & Other
	2001		2000		2001		2000
Operating revenues	$	347,918	$	244,858	$	404,024	$	355,627
Intersegment revenues		951		934		5,166		691
Depreciation and amortization		8,836		9,210		14,021		9,267
Operating income		34,452		26,375		6,558		(6,651	)

	Consolidated
	2001		2000
Operating revenues	$	4,998,478	$	4,360,485
Intersegment revenues		14,450		37,799
Depreciation and amortization		271,866		288,340
Operating income		502,297		454,038

Note G - New Accounting Standards

In June 2001, the Financial Accounting Standards Board issued two new accounting standards: Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," and SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets."

SFAS No. 141 requires that all business combinations initiated after June 30, 2001 use the purchase method of accounting, which includes recognition of goodwill.

SFAS No. 142, which the company is required to adopt on January 1, 2002, provides that goodwill, including amounts previously recognized under the purchase method, will no longer be subject to amortization and instead will be subject to periodic reviews for impairment. If determined to be impaired, goodwill will be reduced to its fair value and an impairment charge will be recognized in income. Con Edison is required to determine whether or not its goodwill is impaired following its adoption of SFAS No. 142. In accordance with SFAS No. 142, Con Edison is also required to review its goodwill for impairment each year and whenever an event or series of events occurs indicating that goodwill might be impaired. The company has not yet determined the impact SFAS No. 142 will have on its financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			June 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	11,216,706	$	11,135,764
	Gas			2,064,496		2,020,395
	Steam			751,035		740,189
	General			1,311,496		1,282,254

	Total			15,343,733		15,178,602
	Less: Accumulated depreciation			4,834,185		4,819,626

	Net			10,509,548		10,358,976
	Construction work in progress			493,919		476,379
	Nuclear fuel assemblies and components, less accumulated amortization			96,890		107,641

NET UTILITY PLANT				11,100,357		10,942,996

NON-UTILITY PLANT
	Non-utility property			9,293		4,087

NET PLANT				11,109,650		10,947,083

CURRENT ASSETS
	Cash and temporary cash investments			37,850		70,273
	Funds held for refunding of NYSERDA Notes			224,600		-
	Accounts receivable - customer, less allowance for uncollectible accounts of $23,774 and $25,800			612,544		743,883
	Other receivables			139,222		155,656
	Fuel, at average cost			21,858		28,455
	Gas in storage, at average cost			64,926		64,144
	Materials and supplies, at average cost			112,160		118,344
	Prepayments			591,733		497,884
	Other current assets			54,170		50,977

TOTAL CURRENT ASSETS				1,859,063		1,729,616

INVESTMENTS
	Nuclear decommissioning trust funds			344,134		328,969
	Other			15,097		15,068

TOTAL INVESTMENTS				359,231		344,037

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Regulatory assets
		Future federal income tax		636,670		642,868
		Recoverable energy costs		192,546		274,288
		Real estate sale costs - First Avenue properties		103,928		103,009
		Divestiture - capacity replacement reconciliation		73,850		73,850
		Workers' compensation reserve		58,944		47,097
		Deferred special retirement program costs		44,468		46,743
		Accrued unbilled gas revenue		43,594		43,594
		Deferred revenue taxes		37,012		36,542
		Other		170,554		100,843

	Total regulatory assets			1,361,566		1,368,834
	Other deferred charges and noncurrent assets			154,917		158,371

TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				1,516,483		1,527,205

TOTAL			$	14,844,427	$	14,547,941

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET
(Unaudited)

				As at
				June 30, 2001			December 31, 2000
				(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock			$	1,482,341		$	1,482,341
	Repurchased Consolidated Edison, Inc. common stock				(962,092	)		(962,092	)
	Retained earnings				4,037,268			3,995,825
	Capital stock expense				(35,682	)		(35,817	)
	Accumulated other comprehensive income				(4,888	)		(673	)

	TOTAL COMMON SHAREHOLDER'S EQUITY				4,516,947			4,479,584

	Preferred stock
		Subject to mandatory redemption
			6¹/8% Series J		37,050			37,050

	TOTAL SUBJECT TO MANDATORY REDEMPTION				37,050			37,050

	Other preferred stock
		$5 Cumulative Preferred			175,000			175,000
		4.65% Series C			15,330			15,330
		4.65% Series D			22,233			22,233

	TOTAL OTHER PREFERRED STOCK				212,563			212,563

	TOTAL PREFERRED STOCK				249,613			249,613

	Long-term debt				5,012,661			4,915,108

TOTAL CAPITALIZATION					9,779,221			9,644,305

NONCURRENT LIABILITIES
	Obligations under capital leases				29,903			31,432
	Accumulated provision for injuries and damages				155,983			148,047
	Pension and benefits reserve				125,134			105,124
	Other noncurrent liabilities				14,822			14,822

TOTAL NONCURRENT LIABILITIES					325,842			299,425

CURRENT LIABILITIES
	Long-term debt due within one year				678,150			300,000
	Notes payable				103,197			139,969
	Accounts payable				679,286			879,602
	Customer deposits				199,617			195,762
	Accrued taxes				30,951			49,509
	Accrued interest				75,371			78,230
	Accrued wages				83,307			70,951
	Other current liabilities				255,337			237,634

TOTAL CURRENT LIABILITIES					2,105,216			1,951,657

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax				2,087,799			2,134,973
	Accumulated deferred investment tax credits				118,924			124,532
	Regulatory liabilities
		Gain on divestiture			75,705			50,000
		Deposit from sale of First Avenue properties			50,000			50,000
		Accrued electric rate reduction			38,018			38,018
		NY state tax law revisions			30,121			59,523
		NYPA revenue increase			27,507			35,021
		Other			206,074			160,487

	TOTAL REGULATORY LIABILITIES				427,425			393,049

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES					2,634,148			2,652,554

TOTAL				$	14,844,427		$	14,547,941

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING REVENUES
	Electric			$	1,396,411		$	1,429,502
	Gas				269,327			217,380
	Steam				89,666			74,600

TOTAL OPERATING REVENUES					1,755,404			1,721,482

OPERATING EXPENSES
	Purchased power				593,956			639,181
	Fuel				46,020			42,731
	Gas purchased for resale				133,476			90,628
	Other operations				228,890			239,195
	Maintenance				109,960			121,556
	Depreciation and amortization				121,526			132,959
	Taxes, other than income tax				238,736			257,116
	Income tax				83,692			32,160

TOTAL OPERATING EXPENSES					1,556,256			1,555,526

OPERATING INCOME					199,148			165,956
OTHER INCOME (DEDUCTIONS)
	Investment income				118			817
	Allowance for equity funds used during construction				258			400
	Other income less miscellaneous deductions				1,796			(2,315	)
	Income tax				(514	)		1,206

TOTAL OTHER INCOME (DEDUCTIONS)					1,658			108

INCOME BEFORE INTEREST CHARGES					200,806			166,064
	Interest on long-term debt				88,817			81,148
	Other interest				7,085			11,292
	Allowance for borrowed funds used during construction				(1,388	)		(905	)

NET INTEREST CHARGES					94,514			91,535

NET INCOME					106,292			74,529
PREFERRED STOCK DIVIDEND REQUIREMENTS					3,398			3,398

NET INCOME FOR COMMON STOCK				$	102,894		$	71,131

CON EDISON OF NEW YORK SALES
	Electric (thousands of kilowatthours)
		Con Edison of New York customers			7,319,177			7,402,219
		Delivery service for Retail Choice			2,401,091			2,120,980
		Delivery service to NYPA and others			2,432,752			2,336,904

	Total sales in service territory				12,153,020			11,860,103
	Gas (dekatherms)
		Firm sales and transportation			19,982,893			18,949,573
		Off-peak firm/interruptible			2,802,914			3,500,595

	Total sales to Con Edison of New York customers				22,785,807			22,450,168
		Transportation of customer-owned gas
			NYPA		1,546,204			5,756,826
			Other		18,866,764			24,811,439

	Total sales and transportation				43,198,775			53,018,433
	Steam (thousands of pounds)				4,707,156			4,666,444

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED INCOME STATEMENT

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING REVENUES
	Electric			$	2,979,610		$	2,852,663
	Gas				866,768			611,022
	Steam				347,918			244,858

TOTAL OPERATING REVENUES					4,194,296			3,708,543

OPERATING EXPENSES
	Purchased power				1,375,943			1,257,424
	Fuel				216,335			127,929
	Gas purchased for resale				498,504			250,180
	Other operations				444,187			496,294
	Maintenance				231,174			222,241
	Depreciation and amortization				241,527			264,498
	Taxes, other than income tax				526,931			527,419
	Income tax				192,927			128,117

TOTAL OPERATING EXPENSES					3,727,528			3,274,102

OPERATING INCOME					466,768			434,441
OTHER INCOME (DEDUCTIONS)
	Investment income				274			1,550
	Allowance for equity funds used during construction				501			(226	)
	Other income less miscellaneous deductions				624			(2,298	)
	Income tax				4,121			816

TOTAL OTHER INCOME (DEDUCTIONS)					5,520			(158	)

INCOME BEFORE INTEREST CHARGES					472,288			434,283
	Interest on long-term debt				178,494			157,898
	Other interest				14,979			22,762
	Allowance for borrowed funds used during construction				(2,695	)		(2,585	)

NET INTEREST CHARGES					190,778			178,075

NET INCOME					281,510			256,208
PREFERRED STOCK DIVIDEND REQUIREMENTS					6,796			6,796

NET INCOME FOR COMMON STOCK				$	274,714		$	249,412

CON EDISON OF NEW YORK SALES
	Electric (thousands of kilowatthours)
		Con Edison of New York customers			15,067,166			15,018,669
		Delivery service for Retail Choice			4,840,653			4,375,829
		Delivery service to NYPA and others			4,990,103			4,811,793

	Total sales in service territory				24,897,922			24,206,291
	Gas (dekatherms)
		Firm sales and transportation			65,439,756			60,647,576
		Off-peak firm/interruptible			8,629,977			8,355,644

	Total sales to Con Edison of New York customers				74,069,733			69,003,220
		Transportation of customer-owned gas
			NYPA		1,576,173			8,981,343
			Other		25,476,770			45,133,010

	Total sales and transportation				101,122,676			123,117,573
	Steam (thousands of pounds)				15,189,852			14,892,054

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

		As At
As At June 30, 2001 and December 31, 2000		June 30, 2001		December 31, 2000
(Unaudited)		(Thousands of Dollars)
BALANCE, JANUARY 1		$	3,995,825	$	3,887,993
	Net income for the period		281,510		583,715

TOTAL			4,277,335		4,471,708

DIVIDENDS DECLARED ON CAPITAL STOCK
	Cumulative Preferred, at required annual rates		6,796		13,593
	Common		233,271		462,290

TOTAL DIVIDENDS DECLARED			240,067		475,883

ENDING BALANCE		$	4,037,268	$	3,995,825

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME		$	274,714		$	249,412
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Minimum pension liability adjustments, net of $1,593 taxes		(2,118	)		-
	Unrealized gains (losses) on derivatives qualified as hedges, net of $1,757 taxes		(2,509	)		-
	Less: Reclassification adjustment for losses included in net income, net of $288 taxes		(412	)		-

TOTAL OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES			(4,215	)		-

COMPREHENSIVE INCOME		$	270,499		$	249,412

The accompanying notes are an integral part of these financial statements.

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income			$	281,510		$	256,208
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization			241,414			264,498
		Income tax deferred (excluding taxes resulting from divestiture of plant)			(71,248	)		21,235
		Common equity component of allowance for funds used during construction			(501	)		226
		Prepayments - accrued pension credits			(161,285	)		(102,025	)
		Other non-cash charges			24,423			4,976
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable - customer, less allowance for uncollectibles			131,339			7,547
		Materials and supplies, including fuel and gas in storage			4,348			(1,729	)
		Prepayments (other than pensions), other receivables and other current assets			80,674			(6,076	)
		Deferred recoverable energy costs			81,742			(166,479	)
		Cost of removal less salvage			(43,894	)		(44,575	)
		Accounts payable			(200,316	)		209,151
		Other - net			(16,904	)		69,731

NET CASH FLOWS FROM OPERATING ACTIVITIES					351,302			512,688

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Construction expenditures			(425,613	)		(370,878	)
		Nuclear fuel expenditures			(6,229	)		(24,114	)
		Contributions to nuclear decommissioning trust			(10,650	)		(10,650	)
		Divestiture of utility plant (net of federal income tax)			99,951			-
		Common equity component of allowance for funds used during construction			501			(226	)

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION					(342,040	)		(405,868	)

FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Repurchase of common stock			-			(29,454	)
		Net proceeds from short-term debt			(36,772	)		(385,441	)
		Additions to long-term debt			624,600			325,000
		Retirement of long-term debt			(150,000	)		(125,000	)
		Issuance and refunding costs			(14,846	)		(1,768	)
		Funds held for refunding of NYSERDA Notes			(224,600	)		-
		Common stock dividends			(233,271	)		(231,230	)
		Preferred stock dividends			(6,796	)		(6,796	)

NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS					(41,685	)		(454,689	)

NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS					(32,423	)		(347,869	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1					70,273			349,033

CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30				$	37,850		$	1,164

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
		Cash paid during the period for:
			Interest	$	171,414		$	151,794
			Income taxes		222,531			67,515

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS - CON EDISON OF NEW YORK

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison Company of New York, Inc. (Con Edison of New York) and its subsidiaries. Consolidated Edison, Inc. (Con Edison) owns all of the outstanding common stock of Con Edison of New York. These financial statements are unaudited but, in the opinion of Con Edison of New York's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison of New York financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. Annual Reports on Form 10-K for the year ended December 31, 2000 (the Form 10-K).

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison of New York and may be present in its facilities and equipment.

At June 30, 2001, Con Edison of New York had accrued $93.3 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by the company (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, the amount of which is not presently determinable but may be material to the company's financial position, results of operations or liquidity.

Under Con Edison of New York's current electric, gas and steam rate agreements, site investigation and remediation costs in excess of $5 million annually incurred with respect to hazardous waste for which it is responsible are to be deferred and subsequently reflected in rates. At June 30, 2001, $20.5 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison of New York and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the company. Many of these suits have been disposed of without any payment by the company, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but the company believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to the company at this time, it does not

believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Nuclear Generation

The Indian Point 2 nuclear generating unit, which Con Edison of New York owns and has agreed to sell, was out of service from February 2000 to January 2001. The New York State Public Service Commission (PSC) is investigating the Indian Point 2 outage and its causes and the prudence of the company's actions regarding the operation and maintenance of Indian Point 2. An appeal is pending in the United States Court of Appeals for the Second Circuit of the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the court determined that the law that directed the PSC to prohibit the company from recovering Indian Point 2 replacement power costs from customers was unconstitutional and granted the company's motion for a permanent injunction to prevent its implementation. The staff of the Nuclear Regulatory Commission is monitoring Indian Point 2 with heightened oversight. The company is unable to predict whether or not any Indian Point 2-related proceedings, lawsuits, legislation or other actions will have a material adverse effect on its financial position, results of operations or liquidity. For additional information about Indian Point 2, its pending sale and the outage, see Note G to Con Edison of New York's financial statements included in Item 8 of the Form 10-K.

Note D - Derivative Instruments and Hedging Activities

As of January 2001, Con Edison of New York adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" (SFAS No. 133).

Con Edison of New York uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges).

Pursuant to Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), the company defers recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, the company credits or charges to its customers gains or losses on Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. To the extent SFAS No. 71 does not allow deferred recognition in income, the company has elected special hedge accounting pursuant to SFAS No. 133 to defer recognition of unrealized gains and losses on Hedges in other comprehensive income. Upon adoption of SFAS No. 133, the company had no transition adjustments to recognize in other comprehensive income. In the quarter and six month period ended June 30, 2001, the company realized pre-tax losses on Hedges of $7.6 million, of which $6.8 million has been billed to customers. At June 30, 2001, the company had $36.4 million of mark-to-market unrealized pre-tax net losses on Hedges deferred as regulatory assets and $2.1 million of mark-to-market unrealized after-tax net losses on Hedges included in other comprehensive income. As of June 30, 2001, Hedges for which special hedge

accounting was used were for a term of less than 12 months and $2.1 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Note E - Financial Information by Business Segment

Consolidated Edison Company of New York, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the three months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001		2000
Operating revenues	$	1,396,411	$	1,429,502	$	269,327	$	217,380
Intersegment revenues		3,195		2,142		872		734
Depreciation and amortization		101,150		113,396		15,945		14,945
Operating income		173,358		140,036		31,212		29,981

	Regulated Steam						Total
	2001			2000			2001		2000
Operating revenues	$	89,666		$	74,600		$	1,755,404	$	1,721,482
Intersegment revenues		485			517			4,552		3,393
Depreciation and amortization		4,431			4,618			121,526		132,959
Operating income		(5,422	)		(4,061	)		199,148		165,956

Consolidated Edison Company of New York, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the six months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
For the six months ended June 30, 2001 and 2000 (Unaudited)	2001		2000		2001		2000
Operating revenues	$	2,979,610	$	2,852,663	$	866,768	$	611,022
Intersegment revenues		5,858		5,327		1,591		1,437
Depreciation and amortization		201,065		225,612		31,626		29,676
Operating income		313,606		286,760		118,710		121,306

	Regulated Steam				Total
	2001		2000		2001		2000
Operating revenues	$	347,918	$	244,858	$	4,194,296	$	3,708,543
Intersegment revenues		951		934		8,400		7,698
Depreciation and amortization		8,836		9,210		241,527		264,498
Operating income		34,452		26,375		466,768		434,441

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As At
			June 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	677,588	$	672,338
	Gas			284,366		279,661
	Common			107,529		106,348

	TOTAL			1,069,483		1,058,347
	Less: accumulated depreciation			377,324		366,432

	NET			692,159		691,915
	Construction work in progress			33,496		28,091

NET UTILITY PLANT				725,655		720,006

NON-UTILITY PLANT
	Non-utility property, less accumulated depreciation of $211 and $239			3,017		3,249

NET PLANT				728,672		723,255

CURRENT ASSETS
	Cash and cash equivalents			2,613		8,483
	Customer accounts receivable, less allowance for uncollectible accounts of $3,625 and $3,845			85,578		82,183
	Other accounts receivable, less allowance for uncollectible accounts of $915 and $818			8,813		7,551
	Accrued utility revenue			25,616		29,025
	Gas in storage, at average cost			15,886		16,567
	Materials and supplies, at average cost			5,437		4,815
	Prepayments			34,072		23,854
	Other current assets			17,655		20,735

TOTAL CURRENT ASSETS				195,670		193,213

INVESTMENTS
	Other			6		6

TOTAL INVESTMENTS				6		6

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Regulatory assets
		Deferred pension and other postretirement benefits		40,917		41,890
		Recoverable fuel costs		62,901		66,207
		Deferred environmental remediation costs		34,203		34,056
		Future federal income tax		33,442		33,659
		Other regulatory assets		27,477		26,761
		Hedges on energy trading		21,601		-
		Deferred revenue taxes		7,404		7,337

	TOTAL REGULATORY ASSETS			227,945		209,910
	Other deferred charges and noncurrent assets			11,675		12,273

TOTAL DEFERRED CHARGES REGULATORY ASSETS AND NONCURRENT ASSETS				239,620		222,183

TOTAL			$	1,163,968	$	1,138,657

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As At
			June 30, 2001			December 31, 2000
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock		$	5		$	5
	Additional paid In capital			194,499			194,498
	Retained earnings			142,537			139,610
	Accumulated comprehensive Income			(9,184	)		(1,473	)

	TOTAL COMMON SHAREHOLDERS' EQUITY			327,857			332,640
	Long term debt			335,714			335,656

TOTAL CAPITALIZATION				663,571			668,296

NON-CURRENT LIABILITIES
	Pension and Benefit Reserve			84,423			76,222
	Other noncurrent liabilities			16,224			16,636

TOTAL NON-CURRENT LIABILITIES				100,647			92,858

CURRENT LIABILITIES
	Long-term debt due within one year			-			-
	Notes payable			36,250			40,820
	Accounts payable			61,150			58,664
	Accounts payable to affiliated companies			28,412			9,169
	Accrued federal income and other taxes			7,930			4,863
	Customer deposits			6,919			7,126
	Accrued interest			8,700			7,087
	Accrued environmental costs			32,944			32,852
	Other current liabilities			29,228			27,756

TOTAL CURRENT LIABILITIES				211,533			188,337

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax			113,625			120,497
	Deferred investment tax credits			6,654			6,897
	Regulatory liabilities
		Pension and other benefits		10,210			15,587
		Gas recoveries and pipeline refunds		13,008			15,076
		Industry restructuring collections		15,267			14,198
		Gain on divestiture		8,481			10,338
		Other regulatory liabilities		7,869			6,358

	TOTAL REGULATORY LIABILITIES			54,835			61,557
	Deferred credits
		Termination cost of long-term debt		12,964			-
		Other deferred credits		138			215

	TOTAL DEFERRED CREDITS			13,102			215

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				188,216			189,166

TOTAL			$	1,163,968		$	1,138,657

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended June 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING REVENUES
	Electric		$	135,549		$	112,609
	Gas			36,067			31,009
	Non-utility			-			21

TOTAL OPERATING REVENUES				171,616			143,639

OPERATING EXPENSES
	Purchased power			70,965			54,390
	Gas purchased for resale			27,793			18,824
	Other operations			30,439			28,829
	Maintenance			6,380			6,584
	Depreciation and amortization			7,995			7,460
	Taxes, other than federal income tax			13,342			14,341
	State Income Taxes			1,411			189
	Federal income tax			3,868			2,935

TOTAL OPERATING EXPENSES				162,193			133,552

OPERATING INCOME				9,423			10,087
OTHER INCOME (DEDUCTIONS)
	Investment income			275			1,280
	Allowance for equity funds used during construction			-			85
	Other income and deductions			(18	)		105
	Federal income tax			43			(495	)

TOTAL OTHER INCOME				300			975

INCOME BEFORE INTEREST CHARGES				9,723			11,062
INTEREST CHARGES
	Interest on long-term debt			5,527			5,107
	Other interest			740			749
	Allowance for borrowed funds used during construction			(296	)		(128	)

TOTAL INTEREST CHARGES				5,971			5,728

NET INCOME				3,752			5,334
PREFERRED AND PREFERENCE STOCK REQUIREMENTS				- -			- -

NET INCOME FOR COMMON STOCK			$	3,752		$	5,334

ORANGE AND ROCKLAND SALES & DELIVERIES
	Electric – (thousands of killowatthours)
		Orange And Rockland customers		1,101,506			1,029,221
		Delivery service for Retail Choice		184,196			180,739

	Total sales in service territory			1,285,702			1,209,960
	Gas – (dekatherms)
		Firm sales and transportation		2,797,582			2,633,921
		Off-peak firm/interruptible		1,853,448			2,282,471

	Total sales to Orange And Rockland customers			4,651,030			4,916,392
		Transportation of customer-owned gas		2,479,767			4,614,357

	Total sales and transportation			7,130,797			9,530,749

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING REVENUES
	Electric		$	260,585		$	217,252
	Gas			140,445			108,467
	Non-utility			33			116

TOTAL OPERATING REVENUES				401,063			325,835

OPERATING EXPENSES
	Purchased power			140,626			108,946
	Fuel			-			39
	Gas purchased for resale			101,411			67,151
	Other operations			58,242			57,741
	Maintenance			13,613			12,732
	Depreciation and amortization			16,160			14,577
	Taxes, other than federal income tax			28,266			30,457
	State Income Taxes			2,948			534
	Federal income tax			11,219			7,800

TOTAL OPERATING EXPENSES				372,485			299,977

OPERATING INCOME				28,578			25,858
OTHER INCOME (DEDUCTIONS)
	Investment income			1,209			4,385
	Allowance for equity funds used during construction			-			135
	Other income and deductions			(340	)		(243	)
	Federal income tax			(133	)		(1,370	)

TOTAL OTHER INCOME				736			2,907

INCOME BEFORE INTEREST CHARGES				29,314			28,765
INTEREST CHARGES
	Interest on long-term debt			11,020			11,670
	Other interest			1,895			1,253
	Allowance for borrowed funds used during construction			(528	)		(202	)

TOTAL INTEREST CHARGES				12,387			12,721

NET INCOME				16,927			16,044
PREFERRED AND PREFERENCE STOCK REQUIREMENTS				-			-

NET INCOME FOR COMMON STOCK				16,927			16,044

ORANGE AND ROCKLAND SALES & DELIVERIES
	Electric - (thousands of killowatthours)
		Orange And Rockland customers		2,194,560			2,051,345
		Delivery service for Retail Choice		320,744			352,656

	Total sales in service territory			2,515,304			2,404,001
	Gas - (dekatherms)
		Firm sales and transportation		12,653,298			12,761,293
		Off-peak firm/interruptible		4,067,118			4,469,072

	Total sales to Orange And Rockland customers			16,720,416			17,230,365
		Transportation of Customer-Owned Gas		3,490,320			7,399,712

	Total sales and transportation			20,210,736			24,630,077

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

		As at
As at June 30, 2001 and December 31, 2000 (Unaudited)		June 30, 2001			December 31, 2000
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	139,610		$	137,536
	Net income for the period		16,927			16,044

TOTAL			156,537			153,580
	Dividends declared on Capital Stock		(14,000	)		(18,500	)

ENDING BALANCE		$	142,537		$	135,080

The accompanying notes are an integral part of these financial statements.

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME		$	16,927		$	16,044
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Investment in marketable securities, net of $279 taxes		(189	)		-
	Minimum pension liability adjustments, net of $63 taxes		63			-
	Unrealized (losses) gains on derivatives qualified as hedges due to cumulative effect of a change in accounting principle, net of $5,751 taxes		(8,107	)		-
	Unrealized gains (losses) on derivatives qualified as hedges during 2001, net of ($15) taxes		21			-
	Less: Reclassification adjustment for losses included in net income during 2001, net of $356 taxes		(502	)		-

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(7,710	)		-

COMPREHENSIVE INCOME		$	9,217		$	16,044

The accompanying notes are an integral part of these financial statements.

Orange And Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Six Months Ended June 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income		$	16,927		$	16,044
PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
	Depreciation and amortization			16,160			14,577
	Amortization of investment tax credit			(243	)		(227	)
	Federal and state income tax deferred			(6,655	)		(4,361	)
	Common equity component of allowance for funds used during construction			-			(135	)
	Other non-cash changes (debits)			879			1,351
CHANGES IN ASSETS AND LIABILITIES
	Accounts receivable - net, and accrued utility revenue			14			(3,503	)
	Materials and supplies, including fuel and gas in storage			59			6,138
	Prepayments, other receivables and other current assets			(8,398	)		(12,317	)
	Deferred recoverable fuel costs			6,236			2,697
	Accounts payable			21,730			1,451
	Refunds to customers			(2,332	)		800
	Other - net			(8,397	)		(5,544	)

NET CASH FLOWS FROM OPERATING ACTIVITIES				35,980			16,971

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
	Construction expenditures			(23,398	)		(20,312	)
	Proceeds from disposition of property			118			-
	Common equity component of allowance for funds used during construction			-			135

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION				(23,280	)		(20,177	)

FINANCING ACTIVITIES
	Issuance of long-term debt			-			55,000
	Retirement of long-term debt			-			(100,026	)
	Short-term debt arrangements			(4,570	)		19,650
	Dividend to parent			(14,000	)		(18,500	)

NET CASH FLOWS FROM FINANCING ACTIVITIES INCLUDING DIVIDENDS				(18,570	)		(43,876	)

NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS				(5,870	)		(47,082	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1				8,483			78,927

CASH AND TEMPORARY CASH INVESTMENTS AT JUNE 30			$	2,613		$	31,845

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
	Cash paid during the period for:
		Interest	$	11,336		$	14,811
		Income Taxes	$	14,503		$	27,819

The accompanying notes are an integral part of these financial statements.

NOTES TO FINANCIAL STATEMENTS - O&R

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Orange and Rockland Utilities, Inc. (O&R), a wholly-owned subsidiary of Consolidated Edison, Inc. (Con Edison). These financial statements are unaudited but, in the opinion of O&R's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited O&R financial statements (including the notes thereto) included in the combined Con Edison, Consolidated Edison Company of New York, Inc. (Con Edison of New York) and O&R Annual Reports on Form 10-K for the year ended December 31, 2000.

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of O&R and may be present in its facilities and equipment. The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liability, regardless of fault, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred.

At June 30, 2001, O&R had accrued $32.9 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by the company (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, including the costs of investigating and remediating sites where the company or its predecessors manufactured gas. The total amount of liability is not presently determinable but may be material to the company's financial position, results of operations or liquidity.

Under O&R's current gas rate agreement, O&R may defer for subsequent recovery through rates the cost of investigating and remediating manufactured gas sites. At June 30, 2001, $35.3 million of such costs had been deferred as a regulatory asset.

Suits have been brought in New York State and federal courts against O&R and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the company. Many of these suits have been disposed of without any payment by O&R, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but the company believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to the company at this time, it does not believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

In May 2000, the New York State Department of Environmental Conservation (DEC) issued notices of violation to O&R and four other companies that have operated coal -fired electric generating facilities in New York State. The notices allege violations of the federal Clean Air Act and the New York State

Environmental Conservation law resulting from the alleged failure of the companies to obtain DEC permits for physical modifications to their generating facilities and to install pollution control equipment that would have reduced harmful emissions. The notice of violation received by O&R relates to the Lovett Generating Station that it sold in June 1999. O&R is unable to predict whether or not the alleged violations will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Related Party Transactions

O&R is invoiced monthly by Con Edison and its affiliates for the cost of any services they render to the company. These services, provided primarily by Con Edison of New York, include substantially all administrative support operations such as corporate directorship and associated ministerial duties, accounting, treasury, investor relations, information resources, legal, human resources, fuel supply and energy management services. The cost of these services totaled $7.7 million during the first six months of 2001. In addition, O&R purchased $97.6 million of gas from Con Edison of New York during this period. See Note D for information about energy price hedging which Con Edison of New York entered into on behalf of O&R.

O&R provides certain recurring services to Con Edison of New York on a monthly basis, including cash receipts processing and certain other services. The cost of these services totaled $5.7 million during the first six months of 2001.

Note D - Derivative Instruments and Hedging Activities

As of January 2001, O&R adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an amendment of FASB Statement No. 133" (SFAS No. 133).

Energy Price Hedging

O&R uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity (Hedges).

Interest Rate Hedging

In connection with its $55 million promissory note issued to the New York State Energy Research and Development Authority for the net proceeds of the Authority's variable rate Pollution Control

Refunding Revenue Bonds (O&R Projects), 1994 Series A (the 1994 Bonds), O&R has a swap agreement pursuant to which it pays interest at a fixed rate of 6.09 percent and is paid interest at the same variable rate as is paid on the 1994 Bonds. Upon adoption of SFAS No. 133, O&R recognized after-tax transition adjustment losses of $8.1 million in other comprehensive income. In the quarter ended June 30, 2001, the company reclassified $0.9 million of losses from accumulated other comprehensive income to income. As of June 30, 2001, $1.2 million of losses relating to the swap agreement were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If the swap agreement had been terminated on June 30, 2001, O&R would have been required to pay approximately $13.0 million. Pursuant to SFAS No. 133, the swap agreement is accounted for as a cash flow hedge and changes in its fair value are recorded in other comprehensive income. The fair value of the swap agreement is calculated based upon current market conditions.

Note E - Financial Information by Business Segment

Orange And Rockland Utilities, Inc.
SEGMENT FINANCIAL INFORMATION
$000's

For the three months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001			2000
Sales revenues	$	135,542	$	112,607	$	36,067		$	31,009
Intersegment revenues		7		2		-			-
Depreciation and amortization		6,003		5,145		2,071			2,314
Operating income		10,628		11,151		(972	)		(914	)

	Unregulated Affiliates & Other						Consolidated
	2001			2000			2001		2000
Sales revenues	$	-		$	21		$	171,609	$	143,637
Intersegment revenues		-			-			7		2
Depreciation and amortization		-			1			8,074		7,460
Operating income		(233	)		(166	)		9,423		10,071

For the six months ended June 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
For the six months ended June 30, 2001 and 2000 (Unaudited)	2001		2000		2001		2000
Sales revenues	$	260,573	$	217,246	$	140,445	$	108,467
Intersegment revenues		12		6		-		-
Depreciation and amortization		12,187		10,108		4,131		4,467
Operating income		19,511		17,869		9,460		8,379

	Unregulated Affiliates & Other						Consolidated
	2001			2000			2001		2000
Sales revenues	$	34		$	116		$	401,051	$	325,829
Intersegment revenues		-			-			12		6
Depreciation and amortization		1			2			16,318		14,577
Operating income		(393	)		(390	)		28,578		25,858

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CON EDISON

Consolidated Edison, Inc. (Con Edison) is a holding company that operates only through its subsidiaries and has no material assets other than the stock of its subsidiaries. Con Edison's principal subsidiaries are regulated utilities: Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Con Edison also has several unregulated subsidiaries.

The following discussion and analysis, which relates to the interim consolidated financial statements of Con Edison and its subsidiaries (including Con Edison of New York and O&R) included in Part I, Item 1 of this report, should be read in conjunction with Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2001. Reference is also made to the notes to the Con Edison financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

Liquidity and Capital Resources

Cash and temporary cash investments and outstanding notes payable (principally commercial paper) at June 30, 2001 and December 31, 2000 were (amounts shown in millions):

		June 30, 2001			December 31, 2000
Cash and temporary cash investments		$	41.6		$	94.8
Notes payable		$	222.3		$	255.0

The decrease in cash and temporary cash investments at June 30, 2001 compared with December 31, 2000 reflects net cash flows from operating activities and net cash flows used in investing and financing activities.

Cash Flows from Operating Activities

Net cash flows from operating activities during the first six months of 2001 decreased $100.1 million compared with the first six months of 2000, reflecting principally decreased accounts payable and increased other regulatory assets and accrued pension credits, offset in part by decreased accounts receivable and recoverable energy costs.

Customer accounts receivable, less allowance for uncollectible accounts, was $160.8 million lower at June 30, 2001 than at year-end 2000, due primarily to lower customer billings by Con Edison's utility subsidiaries, reflecting reduced energy sales volume in June 2001 as compared to December 2000 and lower energy costs, offset in part by the timing of customer payments. Con Edison of New York's equivalent number of days of revenue outstanding (ENDRO) of customer accounts receivable was 30.6 days at June 30, 2001 compared with 29.7 days at December 31, 2000. For O&R, the ENDRO was 46.1 days at June 30, 2001 and 35.4 days at December 31, 2000. The changes in ENDRO reflect

increased use by customers of level billing and alternative payment arrangements and the timing of customer payments.

Prepayments include cumulative credits to pension expense for Con Edison of New York amounting to $528.0 million at June 30, 2001 compared with $366.7 million at December 31, 2000. Pension credits, which result primarily from favorable performance by the company's pension fund in past years, increase net income but do not provide cash for the company's operations. See Note D to the Con Edison financial statements included in Item 8 of the Form 10-K.

Deferred recoverable energy costs decreased $85.0 million at June 30, 2001 compared with December 31, 2000, due primarily to the ongoing recovery of previously deferred amounts, offset in part by the deferral for future recovery of additional purchased power and gas costs. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Other regulatory assets increased $86.5 million at June 30, 2001 compared with year-end 2000, in part reflecting unrealized mark-to-market losses on transactions entered into to hedge purchases of electricity and gas against adverse market price fluctuations. Con Edison of New York and O&R refund to or collect from customers their hedging gains or losses, as the case may be, pursuant to rate provisions that permit recovery of the cost of purchased power and gas. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K and "Energy Price Hedging" in Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Unfunded pension and other post-employment benefit (OPEB) obligations (shown as pension and benefit reserve on the balance sheet) increased $28.5 million at June 30, 2001 compared with year-end 2000. Con Edison of New York's policy is to fund its pension and OPEB costs to the extent deductible under current tax regulations. O&R's policy is to fund the amounts recovered in rates for its pension and OPEB costs to the extent those contributions are tax deductible. The reserve also includes a minimum liability for supplemental executive retirement programs, a portion of which liability has been included in other comprehensive income. See Note E to the Con Edison financial statements included in Item 8 of the Form 10-K.

The accumulated provision for injuries and damages increased $8.0 million at June 30, 2001 compared with year-end 2000, due primarily to increased workers' compensation claims.

Accounts payable decreased $207.7 million at June 30, 2001 compared with year-end 2000, due primarily to lower energy purchases in June 2001 as compared to December 2000, offset in part by the accrual of liabilities for unrealized losses on energy price hedging transactions for which, as discussed above, other regulatory assets were established by Con Edison of New York and O&R.

Accrued taxes decreased $32.3 million at June 30, 2001 compared with year-end 2000, due principally to timing differences.

Other regulatory liabilities increased $40.7 million at June 30, 2001 compared with year-end 2000, reflecting the deferral pending future disposition by the New York State Public Service Commission (PSC) of a $27.9 million refund from the New York Independent System Operator to Con Edison of New York resulting from a reconciliation of prior period payments for purchased power, and $10.0 million of Con Edison of New York gas earnings to be shared with customers pursuant to the company's

current gas rate agreement. See "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements in Item 8 of the Form 10-K.

Other deferred credits increased $16.3 million at June 30, 2001 compared with year-end 2000, reflecting $16.4 million of interest rate swap agreements related to O&R and Con Edison Development. If the swaps had been terminated on June 30, 2001, O&R and Con Edison Development would have been required to pay approximately $13.0 million and $3.4 million, respectively. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Cash Flows Used in Investing and Financing Activities

Cash flows used in investing activities during the first six months of 2001 decreased $275.0 million compared with the first six months of 2000, reflecting the completion of the sale of Con Edison of New York's 480 MW interest in the Roseton generating station in January 2001 (proceeds of $100.0 million, net of federal income tax), decreased nuclear fuel expenditures ($17.9 million) and decreased investment in non-utility plant ($221.3 million), offset in part by increased utility construction expenditures ($57.0 million). Nuclear fuel expenditures decreased because refueling was conducted in the 2000 period but not in the 2001 period. Construction expenditures increased principally to meet load growth on Con Edison of New York's electric distribution system. Non-utility plant investments decreased due primarily to the purchase of an 80 percent interest in the Lakewood generating unit by Con Edison Development in the 2000 period.

Cash flows used in financing activities during the first six months of 2001 decreased $219.3 million compared with the first six months of 2000, primarily because the company increased short-term debt in December 1999 in anticipation of its January 2000 cash requirements but financed its January 2001 cash requirements in January 2001. In addition, the company issued $474.6 million of long-term debt, net of retirements, in the 2001 period compared with $342.4 million in the 2000 period.

In June 2001 Con Edison of New York issued $400 million of 7.5 percent 40-year debentures. In addition Con Edison of New York issued $224.6 million of variable rate 35-year tax-exempt debt (with an initial weekly rate of 2.25 percent) through the New York State Energy Research and Development Authority (NYSERDA), the proceeds of which (along with other funds of the company) were used in July 2001 to redeem, in advance of maturity, $228.2 million of tax-exempt debt with a weighted average interest rate of 7.2 percent.

Capital Resources

Con Edison's ratio of earnings to fixed charges (for the 12 months ended on the date indicated) and common equity ratio (as of the date indicated) were:

		June 30, 2001		December 31, 2000
Earnings to fixed charges (SEC basis)		3.17		3.10
Common equity ratio*		48.9		49.1

*: Common shareholders' equity as a percentage of total capitalization

Con Edison's ratio of earnings to fixed charges increased for the 12-month period ending June 30, 2001 compared to the 12-month period ending December 31, 2000 as a result of increased earnings, offset in part by increased interest expense. Excluding non-recurring charges relating to Con Edison of New

York's Indian Point 2 nuclear plant (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K) and the $33.6 million charge for merger-related expenses (see Note P to the Con Edison financial statements included in Item 8 of the Form 10-K), Con Edison's ratio of earnings to fixed charges would have been 3.46 and 3.47 for the 12-month periods ended June 30, 2001 and December 31, 2000, respectively.

FERC RTO Order

In July 2001, the Federal Energy Regulatory Commission (FERC) concluded that the three independent system operators in the Northeastern United States, including the New York State Independent System Operator (NYISO), should combine to form one regional transmission organization (RTO) and initiated a mediation process with respect to issues associated with its formation. The company is participating in the mediation process. The terms and conditions pursuant to which an RTO for the Northeastern United States would be formed and operate have not been determined. FERC has, however, indicated that an RTO should have certain characteristics, including independence from market participants and operational authority for all transmission assets under its control, and perform certain functions, including tariff administration and design, congestion management, market monitoring, planning and expansion and interregional coordination. Con Edison of New York's transmission facilities, other than those located underground, and O&R's transmission facilities are controlled and operated by the NYISO. For a description of the transmission facilities, see Item 2 of the Form 10-K. The company is unable to predict the effect on its results of operations or financial condition which the formation of an RTO for the Northeastern United States or any related proceedings would have.

Market Risks

Reference is made to "Financial Market Risks" in the Con Edison Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Form 10-K and to Note E to the Con Edison financial statements included in Part I, Item 1 of this report. At June 30, 2001 neither the fair value of derivatives outstanding nor potential derivative losses from reasonably possible near-term changes in market prices were material to the financial position, results of operations or liquidity of the company.

Environmental Matters

For information concerning potential liabilities of the company arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see the notes to Con Edison's financial statements included in Part I, Item 1 of this report and also see Part II, Item 3 of this report.

Results of Operations

Second Quarter of 2001 Compared with Second Quarter of 2000

Con Edison's net income for common stock for the second quarter of 2001 was $100.7 million or $.48 a share (based upon an average of 212.1 million common shares outstanding) compared with $68.7 million or $.33 a share (based upon an average of 212.0 million common shares outstanding) for the second quarter of 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring

charges relating to Con Edison of New York's nuclear replacement power costs in the 2000 period (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K).

Earnings for the quarters ended June 30, 2001 and 2000 were as follows:

(Millions of dollars)		2001			2000
Con Edison of New York		$	102.9		$	71.1
O&R			3.7			5.3
Unregulated subsidiaries			(2.1	)		(4.0	)
Other*			(3.8	)		(3.7	)

	Con Edison	$	100.7		$	68.7

* Includes parent company expenses, goodwill amortization and inter-company eliminations.

A comparison of the results of operations of Con Edison for the second quarter of 2001 with the results for the second quarter of 2000 follows.

Three Months Ended June 30, 2001 Compared With Three Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	70.3		3.4	%
Purchased power - electric and steam		5.3		0.7
Fuel - electric and steam		3.3		7.7
Gas purchased for resale		13.4		8.2
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		48.3		4.6
Other operations and maintenance		(22.3	)	(5.3	)
Depreciation and amortization		(8.8	)	(6.0	)
Taxes, other than income tax		(18.7	)	(6.8	)
Income tax		53.6		(A	)
Operating income		44.5		26.0
Other income less deductions and related federal income tax		(5.5	)	(A	)
Net interest charges		7.0		7.1
Net income for common stock	$	32.0		46.4	%

(A) Amounts in excess of 100 percent

A discussion of Con Edison's operating revenues and operating income by business segment follows. Con Edison's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note F to the Con Edison financial statements included in Part I, Item 1 of this report.

Electric

Con Edison's electric operating revenues in the second quarter of 2001 increased $0.7 million compared with the second quarter of 2000, reflecting higher sales and regulatory incentive earnings, partially offset by lower recoverable purchased power costs and rate reductions of approximately $85 million in the 2001 period, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Electricity sales volumes for Con Edison's utility subsidiaries increased 2.8 percent in the second quarter of 2001 compared with the second quarter of 2000. The increase in sales volumes reflects the continued

strength of the economy in the service territory. Con Edison of New York and O&R electric sales volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, electricity sales volumes for Con Edison of New York and O&R increased 2.9 percent and 7.7 percent, respectively, in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $4.4 million in the second quarter of 2001 compared with the second quarter of 2000, due to an increase in the price of purchased power, offset in part by decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs decreased $10.9 million as a result of a decrease in the unit cost of fuel, offset in part by increased generation. In general, Con Edison's utility subsidiaries recover prudently incurred purchased power costs pursuant to rate provisions approved by the relevant state public utility commission. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison's electric operating income increased $32.8 million for the second quarter of 2001 compared with the second quarter of 2000. The principal components of this increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $41.1 million and decreased other operations and maintenance expenses ($20.4 million), offset in part by increased property taxes ($11.0 million) and Federal income tax ($14.7 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($24.1 million) and lower expenses relating to the Indian Point 2 plant ($20.8 million), offset in part by higher injuries and damages expenses ($14.1 million).

Gas

Con Edison's gas operating revenues increased $58.4 million and gas operating income increased $1.1 million in the second quarter of 2001 compared with the second quarter of 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by the accrual of a liability for $10.0 million of Con Edison of New York gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K. The increase in operating income of $1.1 million reflects primarily an increase in net revenues (operating revenues less gas purchased for resale) of $5.3 million, increased pension credits ($4.5 million) and decreased Federal income tax ($4.9 million), offset in part by increased state income tax and gross receipts taxes billed to customers ($13.6 million).

Firm gas sales and transportation volumes for Con Edison's utility subsidiaries increased 3.2 percent in the second quarter of 2001 compared with the second quarter of 2000. Con Edison of New York and O&R gas sales and transportation volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the 2001 period increased 3.7 percent for Con Edison of New York and decreased 5.6 percent for O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to the gas business of Con Edison's utility subsidiaries operating in New York moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam operating revenues increased $15.1 million and steam operating income decreased $1.4 million for the second quarter of 2001 compared with the second quarter of 2000. The higher revenues reflect an October 2000 rate increase, increased sales volumes and increased fuel and purchased power costs. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. The decrease in operating income of $1.4 million reflects primarily higher operations expenses ($2.9 million), offset in part by increased pension credits ($1.8 million).

Steam sales volume (see bottom of the Con Edison of New York consolidated income statement included in Part I, Item 1 of this report) increased 0.9 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 3.7 percent.

Other Income

Other income decreased $5.5 million in the 2001 period compared with the 2000 period, due primarily to $8.9 million of unrealized mark-to-market losses in the 2001 period relating to an unregulated subsidiary's commodity hedges entered into in connection with transactions for the sale of electricity and gas. In accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), the company has recognized in income a portion of the unrealized mark-to-market change in the value of these hedging instruments. The company expects that gains or losses on these instruments will be offset, at least in part, by the value of the related sales transactions. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Net Interest Charges

Net interest charges increased $7.0 million in the 2001 period compared with the 2000 period, reflecting $10.7 million of interest on increased long-term debt balances, offset in part by a $1.0 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

Six Months Ended June 30, 2001 Compared with Six Months Ended June 30, 2000

Con Edison's net income for common stock for the six months ended June 30, 2001 was $279.8 million or $1.32 a share (based upon an average of 212.1 million common shares outstanding) compared with $256.9 million or $1.21 a share (based upon an average of 212.4 million common shares outstanding) for the six months ended June 30, 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring charges relating to Con Edison of New York's nuclear replacement power costs in the 2000 period (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K).

Earnings for the six months ended June 30, 2001 and 2000 were as follows:

(Millions of dollars)		2001			2000
Con Edison of New York		$	274.7		$	249.4
O&R			16.9			16.0
Unregulated subsidiaries			(2.4	)		(1.7	)
Other*			(9.4	)		(6.8	)

	Con Edison	$	279.8		$	256.9

* Includes parent company expenses, goodwill amortization and inter-company eliminations.

A comparison of the results of operations of Con Edison for the six months ended June 30, 2001 with the results for the six months ended June 30, 2000 follows.

Six Months Ended June 30, 2001 Compared With Six Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	638.0		14.6	%
Purchased power - electric and steam		291.0		19.1
Fuel - electric and steam		88.4		69.1
Gas purchased for resale		210.6		48.9
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		48.0		2.1
Other operations and maintenance		(51.2	)	(6.1	)
Depreciation and amortization		(16.5	)	(5.7	)
Taxes, other than income tax		0.1		—
Income tax		67.3		49.3
Operating income		48.3		10.6
Other income less deductions and related federal income tax		(3.7	)	(A	)
Net interest charges		21.7		11.2
Net income for common stock	$	22.9		8.9	%

(A) Amounts in excess of 100 percent

Electric

Con Edison's electric operating revenues in the six months ended June 30, 2001 increased $195.8 million compared with the six months ended June 30, 2000. The increase reflects increased recoverable purchased power costs and higher sales, partially offset by rate reductions of approximately $131.1 million in 2001, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Electricity sales volumes for Con Edison's utility subsidiaries increased 3.0 percent in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The increase in sales volumes reflects the continued strength of the economy in the service territory. Con Edison of New York and O&R electric sales volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, electricity sales volumes for Con Edison of New York and O&R increased

2.8 percent and 4.6 percent, respectively, in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $270.3 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000, due to an increase in the price of purchased power, offset in part by decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs increased $29.4 million as a result of increased generation, offset in part by a decrease in the unit cost of fuel. In general, Con Edison's utility subsidiaries recover prudently incurred purchased power costs pursuant to rate provisions approved by the relevant state public utility commission. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison's electric operating income increased $28.5 million for the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The principal components of this increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $36.8 million and decreased other operations expenses ($51.9 million), offset in part by increased maintenance expenses ($6.3 million), property tax expense ($24.9 million) and state income tax and gross receipts taxes billed to customers ($14.1 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($48.9 million) and lower expenses relating to Indian Point 2 ($28.5 million), offset in part by increased transmission and distribution expenses resulting from the 2000-2001 winter weather conditions, relocation of company facilities to avoid interference with municipal infrastructure projects and preparations for summer 2001 ($12.0 million).

Gas

Con Edison's gas operating revenues increased $290.7 million and gas operating income decreased $1.5 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by a reduction in customer bills of $18.3 million, reflecting a refund of previously deferred credits and other provisions of the Con Edison of New York gas rate agreement approved by the PSC in November 2000, and the accrual of a liability for $10.0 million of Con Edison of New York gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K. The decrease in operating income of $1.5 million reflects primarily increased state income tax and gross receipts taxes billed to customers ($21.2 million) and increased transmission and distribution expenses ($0.7 million), offset in part by increased net revenues (operating revenues less gas purchased for resale) of $5.3 million, increased pension credits ($9.1 million) and lower property taxes ($4.5 million).

Firm gas sales and transportation volumes for Con Edison's utility subsidiaries increased 5.5 percent in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. Con Edison of New York and O&R gas sales and transportation volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the 2001 period increased 3.0 percent for Con Edison of New York and decreased 9.0 percent for

O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Steam

Con Edison of New York's steam operating revenues increased $103.1 million and steam operating income increased $8.1 million for the six months ended June 30, 2001 compared with the six months ended June 30, 2000, reflecting an October 2000 rate increase and increased sales volumes. The higher revenues also reflect increased fuel and purchased power costs. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K.

Steam sales volume (see bottom of the Con Edison of New York consolidated income statement included in Part I, Item 1 of this report) increased 2.0 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 1.9 percent.

Other Income

Other income decreased $4.7 million in the 2001 period compared with the 2000 period, reflecting the recognition in the 2001 period of approximately $4.0 million of deferred federal income tax credits relating to the Roseton generating plant sale and a $4.1 million decrease in investment income (due primarily to lower short-term investment balances in the 2001 period and a $2.3 million gain relating to O&R's supplemental employee retirement plan that was recognized in the 2000 period). In addition, other income less miscellaneous deductions decreased $7.6 million as a result of $9.3 million of unrealized mark-to-market losses in the 2001 period relating to an unregulated subsidiary's commodity hedges entered into in connection with transactions for the sale of electricity and gas. In accordance with SFAS 133, the company has recognized in income a portion of the unrealized mark-to-market change in the value of these hedging instruments. The company expects that gains or losses on these instruments will be offset, at least in part, by the value of the related sales transactions. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Net Interest Charges

Net interest charges increased $21.6 million in the 2001 period compared with the 2000 period, reflecting $26.6 million of interest on increased long-term debt balances, offset in part by a $3.4 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CON EDISON OF NEW YORK

Consolidated Edison Company of New York, Inc. (Con Edison of New York) is a regulated utility that provides electric service to over three million customers and gas service to over one million customers in New York City and Westchester County. It also provides steam service in parts of Manhattan. All of the common stock of Con Edison of New York is owned by Consolidated Edison, Inc. (Con Edison).

This discussion and analysis should be read in conjunction with Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. (O&R) Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2001. Reference is also made to the notes to the financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

Liquidity and Capital Resources

Cash and temporary cash investments and outstanding commercial paper (shown as notes payable on the balance sheet) at June 30, 2001 and December 31, 2000 were (amounts shown in millions):

			June 30, 2001			December 31, 2000
	Cash and temporary cash investments		$	37.9		$	70.3
	Commercial paper		$	103.2		$	140.0

Cash Flows from Operating Activities

Net cash flows from operating activities during the first six months of 2001 decreased $161.4 million compared with the first six months of 2000, reflecting principally decreased accounts payable and increased other regulatory assets and accrued pension credits, offset in part by decreased accounts receivable and recoverable energy costs.

Con Edison of New York's customer accounts receivable, less allowance for uncollectible accounts, was $131.3 million lower at June 30, 2001 than at year-end 2000, due primarily to lower customer billings, reflecting reduced energy sales volume in June 2001 as compared to December 2000 and lower energy costs, offset in part by the timing of customer payments. The company's equivalent number of days of revenue outstanding (ENDRO) of customer accounts receivable was 30.6 days at June 30, 2001 compared with 29.7 days at December 31, 2000. The change in ENDRO reflects increased use by customers of level billing and alternative payment arrangements and the timing of customer payments.

Prepayments include cumulative credits to pension expense amounting to $528.0 million at June 30, 2001 compared with $366.7 million at December 31, 2000. Pension credits, which result primarily from favorable performance by the company's pension fund in past years, increase net income but do not provide cash for the company's operations. See Note D to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Deferred recoverable energy costs decreased $81.7 million at June 30, 2001 compared with December 31, 2000, due primarily to the recovery of previously deferred amounts, offset in part by the deferral for future recovery of additional purchased power and gas costs. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Other regulatory assets increased $69.7 million at June 30, 2001 compared with year-end 2000, in part reflecting unrealized mark-to-market losses on transactions entered into to hedge purchases of electricity and gas against adverse market price fluctuations. The company refunds to or collects from its customers its hedging gains or losses, as the case may be, pursuant to rate provisions that permit recovery of the cost of purchased power and gas. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K and "Energy Price Hedging" in Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Unfunded pension and other post-employment benefit (OPEB) obligations (shown as pension and benefit reserve on the balance sheet) increased $20.0 million at June 30, 2001 compared with year-end 2000. The company's policy is to fund its pension and OPEB costs to the extent deductible under current tax regulations. The reserve also includes a minimum liability for the company's supplemental executive retirement program, a portion of which liability has been included in other comprehensive income. See Note E to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

The accumulated provision for injuries and damages increased $7.9 million at June 30, 2001 compared with year-end 2000, due primarily to increased workers' compensation claims.

Accounts payable decreased $200.3 million at June 30, 2001 compared with year-end 2000, due primarily to lower energy purchases in June 2001 as compared to December 2000, offset in part by the accrual of a liability for unrealized losses on energy price hedging transactions for which, as discussed above, an other regulatory asset was established.

Other regulatory liabilities increased $45.6 million at June 30, 2001 compared with year-end 2000, reflecting the deferral pending future disposition by the New York State Public Service Commission (PSC) of a $27.9 million refund from the New York Independent System Operator resulting from a reconciliation of prior period payments for purchased power, and $10.0 million of gas earnings to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements in Item 8 of the Form 10-K.

Cash Flows Used in Investing and Financing Activities

Cash flows used in investing activities during the first six months of 2001 decreased $63.8 million compared with the first six months of 2000, reflecting the completion of the sale of the company's 480

MW interest in the Roseton generating station in January 2001 (proceeds of $100.0 million, net of federal income tax) and decreased nuclear fuel expenditures ($17.9 million), offset in part by increased construction expenditures ($54.7 million). Nuclear fuel expenditures decreased because refueling was conducted in the 2000 period but not in the 2001 period. Construction expenditures increased principally to meet load growth on the company's electric distribution system.

Cash flows used in financing activities during the first six months of 2001 decreased $413.0 million compared with the first six months of 2000, primarily because the company increased short-term debt in December 1999 in anticipation of its January 2000 cash requirements but financed its January 2001 cash requirements in January 2001. In addition, the company issued $474.6 million of long-term debt, net of retirements, in the 2001 period compared with $200 million in the 2000 period.

In June 2001 the company issued $400 million of 7.5 percent 40-year debentures. In addition the company issued $224.6 million of variable rate 35-year tax-exempt debt (with an initial weekly rate of 2.25 percent) through the New York State Energy Research and Development Authority (NYSERDA), the proceeds of which (along with other funds of the company) were used in July 2001 to redeem, in advance of maturity, $228.2 million of tax-exempt debt with a weighted average interest rate of 7.2 percent.

Capital Resources

Con Edison of New York's ratio of earnings to fixed charges (for the 12 months ended on the date indicated) and common equity ratio (as of the date indicated) were:

			June 30, 2001		December 31, 2000
	Earnings to fixed charges (SEC basis)		3.37		3.23
	Common equity ratio*		46.2		46.4

* Common shareholder's equity as a percentage of total capitalization

Con Edison of New York's ratio of earnings to fixed charges increased for the 12-month period ending June 30, 2001 compared to the 12-month period ending December 31, 2000 as a result of increased earnings, offset in part by increased interest expense. Excluding non-recurring charges relating to the company's Indian Point 2 nuclear plant (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K), Con Edison of New York's ratio of earnings to fixed charges would have been 3.62 and 3.56 for the 12-month periods ended June 30, 2001 and December 31, 2000, respectively.

FERC RTO Order

that an RTO should have certain characteristics, including independence from market participants and operational authority for all transmission assets under its control, and perform certain functions, including tariff administration and design, congestion management, market monitoring, planning and expansion and interregional coordination. Con Edison of New York's transmission facilities, other than those located underground, are controlled and operated by the NYISO. For a description of the transmission facilities, see Item 2 of the Form 10-K. The company is unable to predict the effect on its results of operations or financial condition which the formation of an RTO for the Northeastern United States or any related proceedings would have.

Market Risks

Reference is made to "Financial Market Risks" in Con Edison of New York Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Form 10-K and to Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report. At June 30, 2001 neither the fair value of derivatives outstanding nor potential derivative losses from reasonably possible near-term changes in market prices were material to the financial position, results of operations or liquidity of the company.

Environmental Matters

For information concerning potential liabilities of Con Edison of New York arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see the notes to the Con Edison of New York financial statements included in Part I, Item 1 of this report and also see Part II, Item 3 of this report.

Results of Operations

Second Quarter of 2001 Compared with Second Quarter of 2000

Con Edison of New York's net income for common stock for the second quarter of 2001 was $102.9 million compared with $71.1 million for the second quarter of 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring charges relating to nuclear replacement power costs in the 2000 period (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K).

A comparison of the results of operations of Con Edison of New York for the second quarter of 2001 with the results for the second quarter of 2000 follows.

Three Months Ended June 30, 2001 Compared With Three Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	33.9		2.0	%
Purchased power - electric and steam		(45.2	)	(7.1	)
Fuel - electric and steam		3.3		7.7
Gas purchased for resale		42.8		47.3
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		33.0		3.5
Other operations and maintenance		(21.9	)	(6.1	)
Depreciation and amortization		(11.4	)	(8.6	)
Taxes, other than income tax		(18.4	)	(7.1	)
Income tax		51.5		(A	)
Operating income		33.2		20.0
Other income less deductions and related federal income tax		1.6		(A	)
Net interest charges		3.0		3.3
Net income for common stock	$	31.8		44.7	%

(A): Amounts in excess of 100 percent

A discussion of Con Edison of New York's operating revenues and operating income by business segment follows. Con Edison of New York's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note E to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Electric

Con Edison of New York's electric operating revenues in the second quarter of 2001 decreased $33.1 million compared with the second quarter of 2000. The decrease reflects rate reductions of approximately $84.3 million and lower recoverable purchased power costs, partially offset by higher sales volume in the 2001 period, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric sales, excluding off-system sales, for the second quarter of 2001 compared with the second quarter of 2000 were:

	Millions of Kwhrs.
Description	Three Months Ended June 30, 2001	Three Months Ended June 30, 2000	Variation		Percent Variation
Residential/Religious	2,596	2,610	(14	)	(0.5	)%
Commercial/Industrial	4,670	4,688	(18	)	(0.4	)
Other	53	104	(51	)	(49.0	)

TOTAL FULL SERVICE CUSTOMERS	7,319	7,402	(83	)	(1.1	)
Retail Choice Customers	2,401	2,121	280		13.2

SUB-TOTAL	9,720	9,523	197		2.1
NYPA, Municipal Agency and Other Sales	2,433	2,337	96		4.1

TOTAL SERVICE AREA	12,153	11,860	293		2.5	%

Electricity sales volume in Con Edison of New York's service territory increased 2.5 percent in the second quarter of 2001 compared with the second quarter of 2000. The increase in sales volume reflects the continued strength of the New York City economy. After adjusting for variations, principally weather and billing days, in each period, electricity sales volume in the service territory increased 2.9 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs decreased $46.1 million in the second quarter of 2001 compared with the second quarter of 2000, due to a decrease in the price of purchased power and decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs decreased $10.9 million as a result of a decrease in the unit cost of fuel, offset in part by increased generation. In general, Con Edison of New York recovers prudently incurred purchased power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income increased $33.3 million in the second quarter of 2001 compared with the second quarter of 2000. The principal components of the increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $23.9 million and decreased other operations and maintenance expenses ($23.8 million), offset in part by higher Federal income tax ($9.8 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($24.1 million) and lower expenses relating to the Indian Point 2 plant ($20.8 million), offset in part by higher injuries and damages expenses ($13.9 million).

Gas

Con Edison of New York's gas operating revenues increased $51.9 million and gas operating income increased $1.2 million in the second quarter of 2001 compared with the second quarter of 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by the accrual of a liability for $10.0 million of gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current gas rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K. The increase in operating income of $1.2 million reflects primarily an increase in net revenues (operating revenues less gas purchased for resale) of $9.2 million, increased pension credits ($4.5 million) and decreased Federal income tax ($1.5 million), offset in part by increased injuries and damages expenses ($2.5 million) and state income tax and gross receipts taxes billed to customers ($11.4 million).

Con Edison of New York's gas sales and transportation volumes for firm customers (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 5.5 percent in the second quarter of 2001 compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory increased 3.7 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam sales volume (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 0.9 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 3.7 percent.

Net Interest Charges

Net interest charges increased $3.0 million in the second quarter of 2001 compared to the 2000 period, reflecting principally $7.7 million of interest on increased long-term debt balances, offset in part by a $0.9 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

Six Months Ended June 30, 2001 Compared with Six Months Ended June 30, 2000

Con Edison of New York's net income for common stock for the six months ended June 30, 2001 was $274.7 million compared with $249.4 million for the six months ended June 30, 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring charges for nuclear replacement power costs in the 2000 period (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K).

A comparison of the results of operations of Con Edison of New York for the six months ended June 30, 2001 with the results for the six months ended June 30, 2000 follows.

Six Months Ended June 30, 2001 Compared With Six Months Ended June 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	485.7		13.1	%
Purchased power - electric and steam		118.5		9.4
Fuel - electric and steam		88.4		69.1
Gas purchased for resale		248.3		99.3
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		30.5		1.5
Other operations and maintenance		(43.2	)	(6.0	)
Depreciation and amortization		(22.9	)	(8.7	)
Taxes, other than income tax		(0.5	)	(0.1	)
Income tax		64.8		50.6
Operating income		32.3		7.4
Other income less deductions and related federal income tax		5.7		(A	)
Net interest charges		12.7		7.1
Net income for common stock	$	25.3		10.1	%

(A): Amounts in excess of 100 percent

Electric

Con Edison of New York's electric operating revenues in the six months ended June 30, 2001 increased $126.9 million compared with the six months ended June 30, 2000. The increase reflects increased recoverable purchased power costs and higher sales, partially offset by rate reductions of approximately $129.8 million in 2001, and the accrual of a $30 million liability relating to nuclear replacement power costs in the 2000 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric sales, excluding off-system sales, for the six months ended June 30, 2001 compared with the six months ended June 30, 2000 were:

	Millions of Kwhrs.
Description	Six Months Ended June 30, 2001	Six Months Ended June 30, 2000	Variation		Percent Variation
Residential/Religious	5,446	5,407	39		0.7	%
Commercial/Industrial	9,528	9,371	157		1.7
Other	93	240	(147	)	(61.3	)

TOTAL FULL SERVICE CUSTOMERS	15,067	15,018	49		0.3
Retail Choice Customers	4,841	4,376	465		10.6

SUB-TOTAL	19,908	19,394	514		2.7
NYPA, Municipal Agency and Other Sales	4,990	4,812	178		3.7

TOTAL SERVICE AREA	24,898	24,206	692		2.9	%

Electricity sales volume in Con Edison of New York's service territory increased 2.9 percent in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The increase in sales volume reflects the continued strength of the New York City economy. After adjusting for variations, principally weather and billing days, in each period, electricity sales volume in the service territory increased 2.8 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs increased $97.9 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000, due primarily to an increase in the price of purchased power, offset in part by decreased purchased volumes resulting from the availability of Indian Point 2 in the 2001 period. Fuel costs increased $29.5 million as a result of increased generation, offset in part by a decrease in the unit cost of fuel. In general, Con Edison of New York recovers prudently incurred purchased power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income increased $26.8 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The principal components of the increase were decreased other operations expenses ($51.8 million), offset in part by increased maintenance expenses ($5.9 million) and higher property taxes ($25.2 million). Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($48.9 million) and lower expenses relating to Indian Point 2 ($28.5 million), offset in part by increased transmission and distribution expenses resulting from the 2000-2001 winter weather conditions, relocation of company facilities to avoid interference with municipal infrastructure projects and preparations for summer 2001 ($12.0 million) and increased advertising expenses ($8.2 million).

Gas

Con Edison of New York's gas operating revenues increased $255.7 million and gas operating income decreased $2.6 million in the six months ended June 30, 2001 compared with the six months ended June 30, 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by a reduction in customer bills of $18.3 million, reflecting a refund of previously deferred credits and other provisions of the gas rate agreement approved by the PSC in November 2000, and the accrual of a liability for $10.0 million of gas earnings in excess of a stipulated equity return level to be shared with customers pursuant to the company's current rate agreement. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K. The decrease in operating income of $2.6 million reflects primarily increased state income tax and gross receipts taxes billed to customers ($19.6 million), offset in part by an increase in net revenues (operating revenues less gas purchased for resale) of $7.6 million and increased pension credits ($9.1 million).

principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory increased 3.0 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam sales volume (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 2.0 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 1.9 percent.

Net Interest Charges

Net interest charges increased $12.7 million in the six months ended June 30, 2001 compared to the 2000 period, reflecting principally $20.6 million of interest on increased long-term debt balances, offset by a $3.9 million decrease in interest related to short-term borrowings and a $4.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

O&R MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

Orange and Rockland Utilities, Inc. (O&R), a wholly-owned subsidiary of Consolidated Edison, Inc. (Con Edison), meets the conditions specified in General Instruction H to Form 10-Q and is permitted to use the reduced disclosure format for wholly-owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, this O&R Management's Narrative Analysis of the Results of Operations is included in this report, and O&R has omitted from this report the information called for by Part I, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations).

O&R's net income for common stock for the six-month period ended June 30, 2001 was $16.9 million, $0.9 million higher than the corresponding 2000 period. This increase was due primarily to a 4.6 percent increase in the volume of electric sales and the recognition in income in the 2001 period of $4.5 million of previously deferred credits pursuant to its New York gas rate agreement, offset in part by $1.3 million of electric rate reductions in the 2001 period pursuant to its New Jersey utility subsidiary's electric restructuring plan and $0.2 million of purchased power costs of its Pennsylvania subsidiary that are not recoverable from customers. See "Rate Regulation" in Note A to the O&R financial statements in Item 8 of the combined O&R, Con Edison and Consolidated Edison Company of New York, Inc. Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-4315, 1-14514 and 1-1217, the Form 10-K).

A comparison of the results of operations of O&R for the six months ended June 30, 2001 to the six months ended June 30, 2000, follows.

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	75.2		23.1	%
Purchased power - electric		31.6		29.0
Gas purchased for resale		34.3		51.0
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		9.3		6.2
Other operation and maintenance expenses		1.4		2.0
Depreciation and amortization		1.6		10.9
Taxes, other than income tax		(2.2	)	(7.2	)
Income tax		5.8		70.0
Operating income		2.7		10.5
Other income less deductions and related income tax		(2.1	)	(74.7	)
Net interest charges		0.3		2.6
Net income for common stock	$	0.9		5.5	%

A discussion of O&R's operating revenues by business segment follows. O&R's principal business segments are its electric and gas utility businesses. For additional information about O&R's business segments, see the notes to the O&R financial statements included in Part I, Item 1 of this report.

Electric operating revenues increased $43.3 million during the six months ended June 30, 2001 compared to the 2000 period. This increase was attributable primarily to an increase in sales volume and the billing to customers of higher purchased power costs in the 2001 period.

Electric sales volumes for the 2001 and 2000 periods are shown at the bottom of O&R's consolidated income statement for those periods included in Part I, Item 1 of this report. Electric sales volumes in the

six months ended June 30, 2001 increased 4.6 percent compared to the 2000 period. After adjusting for variations, principally weather and billing days, electricity sales volumes were 4.5 percent higher in the 2001 period, reflecting the continued strength of the economy in the company's service area. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $31.6 million for the six months ended June 30, 2001 compared to the 2000 period, reflecting to increases in the cost of purchased power and higher customer sales. O&R and its New Jersey utility subsidiary recover all of their prudently incurred purchased power costs in accordance with rate provisions approved by their state public utility commissions. For O&R's New York operations, the difference between the actual purchased power costs for a given month and the amount billed to customers for that month is deferred for recovery from, or refund to, customers during the next billing cycle (normally within one to two months). For O&R's New Jersey utility subsidiary, differences between actual and billed electricity costs (which amounted to a cumulative excess of actual over billed costs of $46.9 million at June 30, 2001) are deferred for future charge or refund to customers, as the case may be. For O&R's Pennsylvania utility subsidiary, recovery of purchased power costs is limited to a predetermined fixed price and, as a result, it incurred $0.5 million of purchased power costs in the 2001 period that are not subject to recovery from customers, an increase of $0.2 million from the 2000 period.

Gas operating revenues increased $32.0 million in the 2001 period, compared to the 2000 period. The increase was due primarily to recovery from customers of higher gas costs in the 2001 period.

Gas sales volumes for the 2001 and 2000 periods are shown at the bottom of O&R's consolidated income statement for those periods included in Part I, Item 1 of this report. Firm gas sales volumes in the six months ended June 30, 2001 decreased 0.8 percent compared to the 2000 period. O&R's revenues from gas sales in New York are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on gas operating income. After adjusting for variations, principally weather and billing days, in each period, gas sales and transportation volumes to firm customers were 8.0 percent lower for the 2001 period, compared to the 2000 period.

The cost of gas purchased for resale increased $34.3 million during the first six months of 2001 compared to the 2000 period, due primarily to higher unit costs.

Taxes other than income tax decreased by $2.2 million during the first six months of 2001 compared to the 2000 period and state income taxes increased by a like amount, reflecting a change in New York law that effectively transferred the tax liability from a revenue based tax to a net income tax.

Income tax increased $5.8 million in the 2001 period compared to the 2000 period due primarily to the change in New York law and to higher income from operations.

Other income decreased $2.1 million during the first six months of 2001 compared to the 2000 period. The 2000 period included a market gain of $2.3 million in relation to O&R's supplemental employee retirement plan. Excluding the impact of the gain, investment income decreased $0.9 million, due primarily to lower short-term investment balances, offset by a decrease in income tax.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Con Edison

For information about Con Edison's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Market Risks" in Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the combined Con Edison, Con Edison of New York and O&R Annual Report on Form 10-K for the year ended December 31, 2000 (the Form 10-K), which information is incorporated herein by reference.

Con Edison of New York

For information about Con Edison of New York's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Market Risks" in Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the Form 10-K, which information is incorporated herein by reference.

PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings

Con Edison

Northeast Utilities Litigation

For information about legal proceedings relating to Con Edison's October 1999 agreement to acquire Northeast Utilities, see Note D to the Con Edison financial statements included in Part 1, Item 1 of this report (which information is incorporated herein by reference).

Item 4.

Submission of Matters to a Vote of Security Holders

Con Edison

(a): At the Annual Meeting of Stockholders of Con Edison on May 21, 2001, the stockholders of Con Edison voted to elect management's nominees for the Board of Directors, to ratify and approve the appointment of Con Edison's independent accountants, and not to adopt a stockholder proposal. 167,961,576 shares of Common Stock of Con Edison, representing approximately 79.12% of the 212,292,190 shares of Common Stock outstanding and entitled to vote, were present at the meeting in person or by proxy.
(b): The name of each nominee for election as a member of Con Edison's Board of Directors and the number of shares voted for or with respect to which authority to vote for was withheld are as follows:

	Votes for	Votes Withheld
E. Virgil Conway	165,237,796	2,723,780
Peter W. Likins	165,569,501	2,392,075
Eugene R. McGrath	165,526,764	2,434,812
Gordon J. Davis	165,543,833	2,417,743
Ellen V. Futter	165,475,693	2,485,883
Richard A. Voell	165,512,372	2,449,204
Sally Hernandez-Piñero	165,413,578	2,547,998
Stephen R. Volk	164,902,096	3,059,480
Joan S. Freilich	165,558,316	2,403,260
Michael J. Del Giudice	165,539,238	2,422,338
George Campbell, Jr.	165,491,804	2,469,772
George W. Sarney	165,602,539	2,359,037

(c): The results of the vote on the appointment of PricewaterhouseCoopers LLP as independent accountants for Con Edison for 2001 were as follows: 164,988,377 shares were voted for this proposal; 1,395,248 shares were voted against the proposal; and 1,577,951 shares were abstentions.
(d): The following stockholder-proposed resolution was voted upon by the stockholders of Con Edison at the Annual Meeting:

"RESOLVED: That the shareholders recommend that the Board take the necessary step that Con Edison specifically identify by name and corporate title in all future proxy statements those executive officers, not otherwise so identified, who are contractually entitled to receive in excess of $250,000 annually as base salary, together with whatever other additional compensation bonuses and other cash payments were due them."

The results of the vote on this proposal were as follows: 15,384,595 shares were voted for this proposal; 110,517,880 shares were voted against the proposal; 4,760,742 shares were abstentions; and 37,298,359 shares were broker nonvotes.

Con Edison of New York

At the Annual Meeting of Stockholders of Con Edison of New York on May 21, 2001, all 235,488,094 outstanding shares of common stock of Con Edison of New York were voted to elect as members of Con Edison of New York's Board of Trustees management's nominees for the Board of Trustees (George Campbell, Jr., E. Virgil Conway, Gordon J. Davis, Joan S. Freilich, Ellen V. Futter, Sally Hernandez-Pinero, Peter W. Likins, Eugene R. McGrath, George W. Sarney, Richard A. Voell and Stephen R. Volk), and to ratify and approve the appointment of PricewaterhouseCoopers LLP as Con Edison of New York's independent accountants for 2001. All of the common stock of Con Edison of New York is owned by Con Edison.

Item 6.		Exhibits and Reports on Form 8-K
(a) Exhibits

Con Edison

Exhibit 12.1

Statement of computation of Con Edison's ratio of earnings to fixed charges for the twelve-month periods ended June 30, 2001 and 2000.

Con Edison of New York

Exhibit 10.2.1		Participation Agreement, dated as of June 1, 2001, between New York State Energy Research and Development Authority (NYSERDA) and Con Edison of New York.
Exhibit 10.2.2		Indenture of Trust, dated as of July 1, 1999 between NYSERDA and HSBC Bank USA, as trustee.
Exhibit 10.2.3		Supplemental Indenture of Trust, dated as of June 1, 2001, to Indenture of Trust, dated as of July 1, 1999 between NYSERDA and HSBC Bank USA, as trustee.
Exhibit 12.2		Statement of computation of Con Edison of New York's ratio of earnings to fixed charges for the twelve-month periods ended June 30, 2001 and 2000.

O&R

Exhibit 12.3

Statement of computation of O&R's ratio of earnings to fixed charges for the twelve-month periods ended June 30, 2001 and 2000.

(b) Reports on Form 8-K

Con Edison

Con Edison filed no Current Reports on Form 8-K during the quarter ended June 30, 2001.

Con Edison of New York

Con Edison of New York filed a Current Report on Form 8-K, dated June 14, 2001, reporting (under Item 5) the issuance and sale of $400 million aggregate principal amount of its Public Income NotES, 7.50% Debentures, Series 2001 A.

O&R

O&R filed no Current Reports on Form 8-K during the quarter ended June 30, 2001.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Consolidated Edison, Inc.
	Consolidated Edison Company of New York, Inc.
Date: August 13, 2001	By	/s/ JOAN S. FREILICH Joan S. Freilich Executive Vice President, Chief Financial Officer and Duly Authorized Officer
	Orange and Rockland Utilities, Inc.
Date: August 13, 2001	By	/s/ EDWARD J. RASMUSSEN Edward J. Rasmussen Vice President, Chief Financial Officer and Duly Authorized Officer



                                                                  Exhibit 10.2.1

Execution Copy

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

                         NEW YORK STATE ENERGY RESEARCH

                           AND DEVELOPMENT AUTHORITY

                                      and

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

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

                            PARTICIPATION AGREEMENT

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

                            Dated as of June 1, 2001

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

                                  relating to
              $224,600,000 Facilities Revenue Bonds, Series 2001A
            (Consolidated Edison Company of New York, Inc. Project)



                               TABLE OF CONTENTS

                            PARTICIPATION AGREEMENT
                                                                            Page
                                                                            ----

PARTIES .....................................................................  1
RECITALS ....................................................................  1

                                   ARTICLE I
                    DEFINITIONS; EFFECTIVE DATE AND DURATION
                           OF PARTICIPATION AGREEMENT

Section 1.01.   Definitions....................................................3
Section 1.02.   Effective Date of Participation Agreement; Duration of
                Participation Agreement........................................3

                                   ARTICLE II
                                REPRESENTATIONS

Section 2.01.   Representations and Warranties by the Authority................4
Section 2.02.   Representations and Warranties by the Company..................4

                                  ARTICLE III
                         THE PROJECT; ISSUANCE OF BONDS

Section 3.01.   The Project....................................................6
Section 3.02.   Sale of Bonds and Deposit of Proceeds..........................6
Section 3.03.   Disbursements from Project Fund................................6
Section 3.04.   Adequacy of Project Fund.......................................6
Section 3.05.   Ownership and Possession of the Project........................6
Section 3.06.   Operation, Maintenance and Repair..............................6
Section 3.07.   Investment of Monies in Funds Under the Indenture..............7

                                   ARTICLE IV
                               NOTE AND PAYMENTS

Section 4.01.   Execution and Delivery of Note to Trustee......................8
Section 4.02.   Payments Payable; Note Payments; Additional Payments...........8
Section 4.03    Notice to Pay; Medium of Payment; Acceleration................10
Section 4.04    Prepayment of Note Payments...................................10
Section 4.05    Company's Payments as Trust Funds.............................11
Section 4.06    Absolute Obligation to Make Payments..........................11
Section 4.07    Assignment of Authority's Rights..............................12


                                      -i-


Section 4.08    Actions with Respect to or by or on behalf of the Authority
                under the Indenture...........................................13
Section 4.09    Agreements of Company relating to Support Facilities..........13
Section 4.10    Compensation of Trustee and Paying Agents.....................13
Section 4.11    Project not Security for Bonds................................13
Section 4.12    Payment of Taxes and Assessments; No Liens or Charges.........13
Section 4.13    Company to Pay Attorneys' Fees and Disbursements..............14
Section 4.14    No Abatement of Administration Fees and Other Charges.........14

                                   ARTICLE V
                               SPECIAL COVENANTS

Section 5.01    No Warranty as to Suitability of Project......................15
Section 5.02    Authority's Right to Inspect Project..........................15
Section 5.03    Company Consent to Amendment of Indenture.....................15
Section 5.04    Tax Covenant..................................................15
Section 5.05    Company Agrees to Perform Obligations Imposed by Indenture....15
Section 5.06.   Authority Agrees to Take Certain Actions at Direction of
                Company.......................................................15
Section 5.07    Certificates as to Defaults...................................15
Section 5.08    Limited Obligation of Authority; Indemnification of
                Authority, Registrar and Paying Agent, Auction Agent and
                Trustee.......................................................16
Section 5.09    Provision of Information......................................17
Section 5.10.   Ratings.......................................................17
Section 5.11    Notices.......................................................17
Section 5.12    Maintenance of Office or Agency...............................17
Section 5.13    Maintenance of Properties.....................................18
Section 5.14    Insurance.....................................................18
Section 5.15    Proper Books of Record and Account............................18
Section 5.16    Compliance with Laws..........................................18
Section 5.17    Consolidation, Merger or Sale of Assets.......................18
Section 5.18    Financial Statements of Company...............................19

                                   ARTICLE VI

                              REDEMPTION OF BONDS
Section 6.01    Redemption of Bonds...........................................20

                                  ARTICLE VII
                         EVENTS OF DEFAULT AND REMEDIES

Section 7.01    Events of Default Defined.....................................21
Section 7.02    Remedies on Default...........................................22


                                      -ii-


Section 7.03    No Remedy Exclusive...........................................23
Section 7.04    No Additional Waiver Implied by One Waiver....................24

                                  ARTICLE VIII

                                 MISCELLANEOUS

Section 8.01    Disposition of Amounts after Payment of Bonds.................25
Section 8.02    Notices.......................................................25
Section 8.03    Successors and Assigns........................................25
Section 8.04    Amendment of Participation Agreement..........................25
Section 8.05    Participation Agreement Supersedes Any Prior Agreements.......25
Section 8.06    Further Assurances and Corrective Instruments.................25
Section 8.07    Counterparts..................................................26
Section 8.08    Severability..................................................26
Section 8.09    Delegation of Duties by Authority.............................26
Section 8.10    Survival of Representations, Warranties and Covenants.........26
SECTION 8.11    NEW YORK LAW TO GOVERN........................................26

TESTIMONIUM ................................................................  27

SIGNATURES AND SEALS .......................................................  27

ACKNOWLEDGMENTS ............................................................  27

EXHIBIT A               Description of Project Exempt Facilities...........  A-1

EXHIBIT B               Description of Other Project Facilities............  B-1

EXHIBIT C               Form of Note.......................................  C-1


                                     -iii-


            This PARTICIPATION AGREEMENT, dated as of June 1, 2001, between NEW
YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY, a body corporate and
politic, constituting a public benefit corporation, established and existing
under and by virtue of the laws of the State of New York (the "Authority") and
CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., a corporation duly organized and
existing and qualified to do business as a public utility under the laws of the
State of New York (the "Company"),

                             W I T N E S S E T H :

            WHEREAS, pursuant to a special act of the Legislature of the State
of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as
from time to time amended and supplemented, herein called the "Act"), the
Authority has been established, as a body corporate and politic, constituting a
public benefit corporation; and

            WHEREAS, pursuant to the Act, the Authority is empowered to contract
with any power company to participate in the construction of facilities for the
furnishing of electric energy and the furnishing of gas to the extent required
by the public interest in development, health, recreation, safety, conservation
of natural resources and aesthetics; and

            WHEREAS, pursuant to the Act, the Authority is also authorized to
extend credit and make loans from bond proceeds to any person for the
construction, acquisition, installation, reconstruction, improvement,
maintenance, equipping, furnishing or leasing of any special energy project (as
defined in the Act) including, but not limited to, facilities for the
distribution of steam or for the reimbursement to any person for costs incurred
in connection with a special energy project completed or not completed at the
time of such credit or loan, which credits or loans may, but need not, be
secured by mortgages, contracts, leases or other instruments, upon such terms
and conditions as the Authority shall determine reasonable in connection with
such credits or loans; and

            WHEREAS, the Authority is also authorized under the Act to borrow
money and issue its negotiable bonds and notes to provide sufficient monies for
achieving its corporate purposes, including the refunding of its outstanding
obligations; and

            WHEREAS, the Authority is also authorized under the Act to enter
into any contracts and to execute all instruments necessary or convenient for
the exercise of its corporate powers and the fulfillment of its corporate
purposes; and

            WHEREAS, the Company is a public utility corporation doing business
in the State of New York and provides electric energy and gas service in The
City of New York and the County of Westchester, New York and provides steam
service in the Borough of Manhattan; and

            WHEREAS, the Company has requested that the Authority issue bonds
for the purpose of refunding the Authority's 7 1/2% Electric Facilities Revenue
Bonds, Series 1991 A (Consolidated Edison Company of New York, Inc. Project), in
the aggregate principal amount of $128,150,000 and 6 3/4% Facilities Revenue
Bonds, Series 1992 A (Consolidated Edison Company of New York, Inc. Project), in



the aggregate principal amount of $100,000,000 (collectively, the "Prior Bonds")
issued to finance the acquisition, construction and installation of certain
additional facilities for the furnishing of electric energy within the Company's
service area; and

            WHEREAS, the Authority proposes to issue a series of such bonds in
the aggregate principal amount of $224,600,000 Facilities Revenue Bonds, Series
2001A (Consolidated Edison Company of New York, Inc. Project) (the "Bonds"), in
order to refund a portion of the Prior Bonds, such bonds to be issued under and
secured by a Trust Indenture dated as of June 1, 2001, between the Authority and
The Bank of New York, as Trustee (the "Indenture"); and

            WHEREAS, the Authority, by Resolution No. 979, adopted January 22,
2001, has determined to issue the Bonds, in an aggregate principal amount not to
exceed $228,150,000, for the purpose of refunding the Prior Bonds, all such
Bonds to be issued under and secured by the Indenture;

            NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, it is hereby agreed by
and between the parties as follows:


                                       2


                                   ARTICLE I

                    DEFINITIONS; EFFECTIVE DATE AND DURATION
                           OF PARTICIPATION AGREEMENT

            Section 1.01. Definitions. The terms used in this Participation
Agreement which are defined in the Indenture shall have the meanings,
respectively, herein which such terms are given in the Indenture.

            Section 1.02. Effective Date of Participation Agreement; Duration of
Participation Agreement. This Participation Agreement shall become effective
upon its execution and delivery, and shall continue in full force and effect
until the principal of and premium, if any, and interest on the Note and Bonds
have been fully paid (or provision for their payment has been made in accordance
with the provisions of the Indenture), and all sums to which the Authority or
the Trustee are entitled hereunder have been fully paid.


                                       3


                                   ARTICLE II

                                REPRESENTATIONS

            Section 2.01. Representations and Warranties by the Authority. The
Authority represents and warrants as follows:

            (a) The Authority is a body corporate and politic, constituting a
      public benefit corporation, established and existing under the laws of the
      State of New York;

            (b) The Authority has full power and authority to execute and
      deliver the Bonds, this Participation Agreement, the Tax Regulatory
      Agreement, the Indenture, the Bond Purchase Trust Agreement and to
      consummate the transactions contemplated hereby and thereby and perform
      its obligations hereunder and thereunder;

            (c) The Authority is not in violation of or in default under any of
      the provisions of the laws or the Constitution of the State of New York
      which would affect its existence or its powers referred to in the
      preceding paragraph (b);

            (d) The Authority has determined that its participation in the
      Project and the refunding of the Prior Bonds, as contemplated by this
      Participation Agreement, is in the public interest;

            (e) The Authority has duly authorized the execution and delivery of
      this Participation Agreement, the Indenture, the Tax Regulatory Agreement
      and the Bond Purchase Trust Agreement and the execution and delivery of
      the other documents incidental to this transaction and all necessary
      authorizations therefor or in connection with the performance by the
      Authority of its obligations hereunder or thereunder have been obtained
      and are in full force and effect; and

            (f) The execution and delivery by the Authority of the Bonds, this
      Participation Agreement, the Tax Regulatory Agreement, the Indenture, the
      Bond Purchase Trust Agreement and the other documents incidental to this
      transaction and the consummation of the transactions herein or therein
      contemplated will not violate or cause a default under any indenture,
      mortgage, loan agreement or other contract or instrument to which the
      Authority is a party or by which it is bound, or any judgment, decree,
      order, statute, rule or regulation applicable to the Authority.

            Section 2.02. Representations and Warranties by the Company. The
Company represents and warrants as follows:

            (a) The Company is a corporation duly incorporated and in good
      standing under the laws of the State of New York, is duly qualified and
      authorized to transact business as a public utility in the State of New
      York and is not in violation of any provision of its Certificate of
      Incorporation or its By-Laws, has power to enter into, execute and deliver
      this Participation Agreement, the Tax


                                       4


      Regulatory Agreement and the Note and by proper corporate action has duly
      authorized the execution and delivery of this Participation Agreement, the
      Tax Regulatory Agreement and the Note;

            (b) The execution and delivery by the Company of this Participation
      Agreement, the Tax Regulatory Agreement and the Note and the consummation
      of the transactions herein and therein contemplated will not conflict with
      or constitute a breach of or a default under the Company's Certificate of
      Incorporation or By-Laws or a default in any material respect under any
      indenture, mortgage, loan agreement or other contract or instrument to
      which the Company is a party or by which it is bound, or any judgment,
      decree, order, statute, rule or regulation applicable to the Company;

            (c) This Participation Agreement, the Tax Regulatory Agreement and
      the Note constitute valid and legally binding obligations of the Company,
      enforceable against the Company in accordance with their respective terms,
      except as enforcement may be limited by applicable bankruptcy, insolvency,
      moratorium, reorganization or other laws relating to or affecting the
      enforcement of creditors' rights or contractual obligations generally or
      principles of equity or judicial discretion;

            (d) The execution and delivery by the Company of this Participation
      Agreement and the Note in the manner and for the purposes herein set forth
      have been duly authorized by order of the Public Service Commission of the
      State of New York; and

            (e) No additional authorizations for or approvals of the execution
      and delivery by the Company of this Participation Agreement, the Tax
      Regulatory Agreement and the Note need be obtained by the Company or if
      any such authorization or approval is necessary it has been obtained.


                                       5


                                  ARTICLE III

                         THE PROJECT; ISSUANCE OF BONDS

            Section 3.01. The Project. Construction of the Project is complete.
The Project is the property of the Company. In order to effectuate the purposes
of this Participation Agreement, the Company, in its own name, will do or cause
to be done all things requisite or proper for the fulfillment of the obligations
of the Company under this Participation Agreement.

            Section 3.02. Sale of Bonds and Deposit of Proceeds. In order to
provide funds for the refunding of the Prior Bonds, the Authority, on the date
specified in the Bond Purchase Agreement or as soon thereafter as practicable,
and concurrently with the issuance and delivery to the Trustee of the Note as
provided in Section 4.01 hereof, will issue, sell and deliver the Bonds, all
pursuant to and as provided in the Bond Purchase Agreement and subject to the
conditions set forth in Section 2.06 of the Indenture, and will deposit the
proceeds of such sale including the accrued interest, if any, paid by the
initial purchasers of the Bonds in the Project Fund.

            Section 3.03. Disbursements From Project Fund. 1. The Authority has
in the Indenture authorized and directed the Trustee to make payments from the
Project Fund in accordance with Section 8.01 of the Indenture, to pay the
redemption price of the Prior Bonds and costs related thereto upon receipt from
time to time of letters signed by an Authorized Company Representative in
accordance with Section 8.01 of the Indenture. Concurrently with the delivery by
the Company of each such letter to the Trustee, the Company will deliver to the
Authority a copy thereof and any attachments thereto. The Company will indemnify
and save harmless the Authority and the Trustee from any liability incurred in
connection with any letter so delivered and any payments made in reliance
thereon.

            2. All monies remaining in the Project Fund after the redemption of
the Prior Bonds and payment of all costs related thereto shall, at the written
direction of an Authorized Company Representative, be paid to the Company.

            Section 3.04. Adequacy of Project Fund. The Company acknowledges
that the monies in the Project Fund are not sufficient to pay the redemption
price of the Prior Bonds and costs related thereto in full. The Company shall
pay that portion of the redemption price of the Prior Bonds and costs related
thereto in excess of the monies available therefor in the Project Fund with its
own funds.

            Section 3.05. Ownership and Possession of the Project. Issuance of
the Bonds will not vest in the owners thereof, the Trustee, the Authority or any
other person, ownership, or the right to possession, of the Project. The Company
is entitled to sole and exclusive ownership and possession of the Project.

            Section 3.06. Operation, Maintenance and Repair. The Company agrees
to proceed in good faith to maintain the availability of the Project for use as
an authorized project under the Act. Notwithstanding the foregoing, the
Authority and the Company recognize that the Project will constitute


                                       6


integrated portions of electric distribution facilities of the Company and that
it is not feasible to administer the Project separately from such facilities.
The Company shall operate the Project (with such changes, improvements or
additions as the Company may deem desirable) as part of such facilities for the
joint useful lives of the Project and such facilities and shall maintain and
repair the Project in conformity with the Company's normal maintenance and
repair programs for such facilities; provided that the Company shall have no
obligation to operate, maintain or repair any element or item of the Project the
operation, maintenance or repair of which becomes uneconomic to the Company
because of damage or destruction or obsolescence (including physical, functional
and economic obsolescence), or change in government standards and regulations,
or the termination by the Company of the operation of the facilities to which
the element or item of the Project is an adjunct.

            Section 3.07. Investment of Monies in Funds Under the Indenture. Any
monies held as a part of any fund created under the Indenture shall, at the
direction of an Authorized Company Representative, be invested or reinvested by
the Trustee as provided in Article IX of the Indenture.


                                       7


                                   ARTICLE IV

                               NOTE AND PAYMENTS

            Section 4.01. Execution and Delivery of Note to Trustee.
Concurrently with the authentication by the Trustee and delivery by the
Authority of the Bonds and in order to evidence the obligation of the Company to
the Authority to repay the Bonds, the Authority hereby directs the Company, and
the Company hereby agrees, to execute and deliver to the Trustee its Note, duly
and validly executed and delivered, relating to the Bonds. The Note shall be in
substantially the form attached hereto as Exhibit A with only such changes to
such form as may be approved by the Authority. Thereafter, the Company shall be
obligated to make the Note Payments, constituting payments of principal of, and
premium, if any, and interest on the Note, and the Additional Payments required
by this Participation Agreement. Such obligations shall terminate on the date
when the Note has been paid in full. The Note may be prepaid in accordance with
Section 4.04 hereof. Upon payment or provision for payment in full of all
amounts payable or to become payable under the Note, the Trustee shall cancel
the Note and deliver the same to the Company. Provision for payment in full of
all amounts payable or to become payable under the Note shall be deemed to have
occurred upon receipt by the Trustee of written notice from the Authority
acknowledging that the Company has satisfied its obligations to the Authority
under the Note. The Authority agrees to deliver such written notice to the
Trustee promptly when such provision for payment in full has been made.

            Section 4.02. Payments Payable; Note Payments; Additional Payments.
(a) The Company covenants and agrees to pay the Payments as and when the same
are due and payable in accordance with the Note and this Section 4.02. The
Company shall provide the Trustee with a written allocation of amounts paid
under this Section 4.02 among the various purposes set forth in this Section
4.02.

            (b) The Note Payments shall be in an aggregate amount sufficient
for, together with other amounts held by the Trustee and available under the
Indenture for application to, the payment in full of the Bonds consisting of (i)
the total interest becoming due and payable on the Bonds to the date of payment
thereof, and (ii) the total principal amount plus premium, if any, of the Bonds.

            (c) The Company shall make Note Payments as set forth in Section
4.02(b) at or prior to the time the corresponding payment is due on the Bonds.
Each installment of Note Payments paid by the Company shall be increased as may
be necessary to make up any previous deficiency of any of the required payments
and to make up any deficiency in the Bond Fund.

            (d) In addition, the Company shall pay to the Registrar and Paying
Agent for deposit in the Bond Purchase Fund and credit to the Company Account
therein an amount sufficient to provide for the payment of the Purchase Price
(as defined in the Bond Purchase Trust Agreement) of any Bond tendered for
purchase pursuant to the Bond Purchase Trust Agreement to the extent that
sufficient moneys are not available for the payment of such Purchase Price from
the other sources described therein.

            (e) The Company covenants that it shall deposit, or cause to be
deposited with the Trustee, sufficient funds to assure that no default shall
occur in the payment of the principal of or premium,


                                       8


if any, or the interest on, or the Purchase Price of, the Bonds as and when due,
and that no unreasonable delay shall occur in the payment of the costs and
expenses payable from Additional Payments.

            (f) The Company further covenants and agrees to pay, when due and
payable, as Additional Payments, certain additional amounts and costs and
expenses. Each installment of Additional Payments, if any, shall be equal to the
sum of the amounts set forth in clauses (i) to (iv), inclusive, below, and shall
be paid directly to the persons entitled to such payments. "Additional Payments"
is hereby defined to be the aggregate of the installments of the following:

            (i) the reasonable fees and expenses payable to the Trustee, any
      Indexing Agent, the Registrar and Paying Agent, any issuer of a Support
      Facility (and in the case of Auction Rate Bonds, the Auction Agent under
      the Auction Agency Agreement, any Broker-Dealers under the respective
      Broker-Dealer Agreements, and any Remarketing Agent under the Remarketing
      Agreement), and of any counsel or agents of any of the foregoing;

            (ii) all costs incurred in connection with the transfer, exchange,
      purchase or redemption of Bonds not otherwise paid by the holders thereof,
      including all charges of the Authority (and in the case of Auction Rate
      Bonds, the Auction Agent, any Broker-Dealer and any Remarketing Agent),
      the Registrar and Paying Agent and the Trustee with respect thereto, to
      the extent monies are not otherwise available therefor;

            (iii) the reasonable fees and other costs incurred for services of
      such attorneys and accountants as are employed to make examinations,
      provide services, render opinions and prepare reports required under this
      Participation Agreement, the Tax Regulatory Agreement, the Bond Purchase
      Trust Agreement, and the Indenture; and

            (iv) initial administration fees in the amount of $561,500 on the
      date of authentication and delivery of the Bonds to the initial purchasers
      thereof, an annual fee equal to $130 per million dollar principal amount
      of the Bonds on June 1, 2002 and on June 1 of each year thereafter, based
      upon the amount of Bonds Outstanding as of such June 1 and for purposes of
      the calculation of such fee, rounding up to the nearest whole million
      dollars, and all reasonable expenses, disbursements, advances, taxes,
      assessments or impositions, not otherwise paid under this Participation
      Agreement or the Indenture, incurred by or imposed upon the Authority in
      connection with its administration and enforcement of, and compliance
      with, this Participation Agreement, the Auction Agency Agreement, the Bond
      Purchase Trust Agreement, the Remarketing Agreement and the Indenture,
      which amounts the Company is obligated to pay, including, but not limited
      to, reasonable attorneys' fees. In addition, the Company shall deliver to
      the Authority a check payable to the State of New York with respect to a
      bond issuance charge applicable to the Bonds pursuant to Section 2976 of
      the Public Authorities Law of the State of New York in the amount
      specified by such section on the date of authentication and delivery of
      the Bonds.

            (g) In the event that the Company shall fail to make any Payment as
required by Sections 4.02(a) - (e) hereof, the Payment so in default shall
continue as an obligation of the Company until

                                       9



the amount in default shall have been fully paid, and the Company agrees to pay
the same with interest thereon, which interest shall also constitute an
obligation of the Company at the maximum rate of interest payable on the Bonds
pursuant to the Indenture, to the extent permitted by law, from the date of
default until paid; provided, that the Company agrees in the event the Company
shall fail to make any Payment during an Auction Rate Period, the Payment so in
default shall continue as an obligation of the Company until the amount in
default shall have been fully paid, and the Company agrees to pay the same with
interest thereon, which interest shall also constitute an obligation of the
Company at the Overdue Rate, to the extent permitted by law, from the date of
default until paid. Nothing in this Section 4.02 shall require the Company to
pay costs and expenses mentioned in clause (f)(iii) above so long as the
validity or the reasonableness thereof shall be contested in good faith unless
the Trustee shall receive an opinion of independent counsel that such contest
jeopardizes the respective interests of the Authority and the Trustee in this
Participation Agreement, the Auction Agency Agreement, the Bond Purchase Trust
Agreement, the Indenture or the Remarketing Agreement, in which event the
Company shall pay such costs and expenses (without prejudice to any rights of
the Company to recover such costs and expenses if not valid or reasonable) to
the end that the respective interests of the Authority and the Trustee, in the
opinion of independent counsel, are not jeopardized.

            Section 4.03 Notice to Pay; Medium of Payment; Acceleration. Failure
to receive any prior notice of the due date of any Payment will not relieve the
Company of its obligation to pay such Payment when it is due and payable. The
Company covenants and agrees that it will pay or cause to be paid when due and
payable hereunder the Payments, and every installment thereof, without notice or
demand therefor and without abatement, reduction or set-off of any kind or
nature whatsoever, in lawful money of the United States of America.

            If pursuant to the provisions of Section 12.03 of the Indenture, the
Bonds are accelerated or shall otherwise be declared due and payable
immediately, then the Company shall forthwith pay or cause to be paid to the
Trustee an amount sufficient with all other funds available therefor, to pay the
Bonds in full and, secondly an amount which shall be sufficient, with all other
funds available therefor, to pay all other obligations of the Authority or the
Company incurred or to be incurred under the Indenture, this Participation
Agreement, the Auction Agency Agreement, the Bond Purchase Trust Agreement or
the Remarketing Agreement.

            Section 4.04 Prepayment of Note Payments. The Note may be prepaid,
in whole or in part, at the option of the Company in connection with an optional
redemption of the Bonds pursuant to Article V of the Indenture and shall be
prepaid, in whole or in part, in connection with any mandatory redemption of the
Bonds pursuant to Article V of the Indenture other than a mandatory redemption
pursuant to Section 5.07 of the Indenture. Prepayment of the Note pursuant to
the preceding sentence shall be with or without premium, as required to provide
sufficient funds to redeem the Bonds being redeemed pursuant to Article V of the
Indenture. The Note also may be prepaid in whole or in part at any time, without
premium, at the option of the Company subsequent to the redemption of the Bonds
with moneys furnished by the State of New York pursuant to Section 5.07 of the
Indenture.

            The Company shall give notice to the Trustee and the Authority of
any intention to prepay the Note in whole or in part and of the principal amount
to be prepaid not more than sixty (60) nor less than


                                       10


thirty-five (35) days prior to the date on which such prepayment is to be made
on the Note. Such optional prepayment may be made not later than one (1)
Business Day prior to the date of prepayment of the Bonds.

                   The Company may also elect to provide for the defeasance of
the Bonds in accordance with Article XV of the Indenture and upon the defeasance
of the Bonds, the Note will be deemed paid, in whole or in applicable part.

            Section 4.05 Company's Payments as Trust Funds. All Note Payments
and Additional Payments required to be made by the Company under this
Participation Agreement and the Note to the Authority, the Trustee or the
Registrar and Paying Agent which under the Indenture are required to be applied
in payment of or as security for the Bonds, shall be and constitute and are
hereby declared to be trust funds, whether held by the Authority, the Trustee,
the Registrar and Paying Agent, or any bank or trust company, designated for
such purpose and shall continue to be impressed with a trust until such monies
are applied in the manner provided in the Indenture.

            Section 4.06 Absolute Obligation to Make Payments. The obligation of
the Company to pay the Note Payments and the Additional Payments, as required by
this Participation Agreement and the Note, and to satisfy any other financial
liabilities incurred hereunder and thereunder shall be an absolute, direct,
general obligation, and shall be unconditional and shall not be abated, rebated,
set off, reduced, abrogated, waived, diminished or otherwise modified in any
manner or to any extent whatsoever (other than for prior payment), regardless of
any rights of set- off, recoupment or counterclaim that the Company might
otherwise have against the Authority or the Trustee or any other party or
parties and regardless of any contingency, act of God, event or cause whatsoever
and notwithstanding any circumstance or occurrence that may arise or take place
including, but without limiting the generality of the foregoing, the following:

      (a)   any damage to or destruction of any part or all of the Project;

      (b)   the taking or damaging of any part or all of the Project by any
            public authority or agency in the exercise of the power of eminent
            domain or otherwise;

      (c)   any assignment, novation, merger, consolidation, transfer of assets,
            subleasing or other similar transaction of or affecting the Company
            whether with or without the approval of the Trustee, except as
            otherwise expressly provided in this Participation Agreement;

      (d)   with respect solely to the obligation of the Company to pay the
            Additional Payments, the termination of this Agreement and payment
            or provision for payment in full of the amount due under the Note
            pursuant to the provisions hereof;

      (e)   any failure of any party to perform or observe any agreement or
            covenant, whether express or implied, or any duty, liability or
            obligation arising out of or in connection with this Participation
            Agreement, the Note, the Auction Agency Agreement, any Broker-Dealer
            Agreement, the Remarketing Agreement, the Bond Purchase Trust
            Agreement or the Indenture;


                                       11


      (f)   any change or delay in the time of availability of the Project or
            any part thereof for use of the Project or any part thereof;

      (g)   any acts or circumstances that may constitute an eviction or
            constructive eviction from any part of the Project;

      (h)   failure of consideration, failure of title to any part of the
            Project or commercial frustration; and

      (i)   any change in the tax or other laws of the United States or of any
            state or other governmental authority;

provided, however, that the foregoing shall not be deemed to be a waiver of any
right of recourse the Company may have against the Authority, the holder of any
Bond or others, including but not limited to, the rights, causes of action or
claims which may arise out of the breach of their respective obligations or the
inaccuracy of their respective warranties, provided, however, that the Company
may pursue any such right, claim or cause of action only by a separate
proceeding or action and not by counterclaim or set-off hereunder and the
bringing of such separate proceeding or action shall not affect the Company's
absolute, irrevocable and unconditional obligation to make payments pursuant to
this Section 4.06.

            Section 4.07 Assignment of Authority's Rights. As security for the
payment of the Bonds, the Authority will assign to the Trustee the Participation
Agreement and the Note and all of the Authority's rights, remedies and interest
under this Participation Agreement and the Note, including the right to receive
payments under the Participation Agreement and the Note (except the Authority's
rights with respect to (a) administrative compensation, attorney's fees and
indemnification, (b) the receipt of notices, opinions, reports, copies of
instruments and other items of a similar nature required to be delivered to the
Authority under the Participation Agreement, (c) granting approvals and consents
and making determinations when required under the Participation Agreement, (d)
making requests for information and inspections in accordance with the
Participation Agreement, (e) Article III and Sections 4.02(f), 4.14 and 5.08 of
the Participation Agreement and, insofar as the obligations of the Company under
Section 4.12 relate to taxes and assessments imposed upon the Authority and not
the Trustee, Section 4.12 thereof and (f) the right to amend the Participation
Agreement) and hereby directs the Company to make said payments directly to the
Trustee or in the case of the Purchase Price to the Registrar and Paying Agent.
The Company herewith assents to such assignment and will make payments under
this Participation Agreement and the Note (except payments made pursuant to
Sections 4.02(f) and 5.08 hereof which shall be made directly to the Authority)
directly to the Trustee (or in the case of the Purchase Price, to the Registrar
and Paying Agent) without defense or set-off by reason of any dispute between
any of the Company, the Trustee or Registrar and Paying Agent. Except as
provided in the Indenture, the Authority will not sell, assign, transfer, convey
or otherwise dispose of its interest in this Participation Agreement during the
term of this Participation Agreement.

            Section 4.08 Actions With Respect to or by or On Behalf of the
Authority Under the Indenture. The Authority hereby grants the right to the
Company to request the Authority to take certain actions under the Indenture
and/or to perform or undertake certain actions as specified under the Indenture.


                                       12


The Company agrees to request the Authority to take action or undertake or
perform any action solely in compliance with or after complying with the
requirements and provisions of the Indenture.

            Section 4.09 Agreements of Company Relating to Support Facilities.
The Company agrees not to request that the interest rate mode applicable to the
Bonds be adjusted to an Adjustable Rate other than an Auction Rate unless there
shall be in effect, prior to the applicable Change in the Interest Rate Mode,
one or more Support Facilities which (i) meet the requirements of Article VI of
the Indenture and (ii) permit the Bonds to be rated at least "A" by S&P or "A"
by Moody's or its equivalent by any nationally recognized rating agency.

            The Company further agrees that it will maintain a Liquidity
Facility issued by a financial institution rated not less than "A" by at least
one nationally recognized rating agency in effect with respect to the Bonds at
all times, except with respect to Bonds bearing an Auction Rate or a Fixed Rate.

            Section 4.10 Compensation of Trustee and Paying Agents. The Company
agrees:

            (1) to pay to the Trustee from time to time such compensation for
      all services rendered by it in any capacity under the Indenture as shall
      from time to time be agreed in writing (which compensation shall not be
      limited by any provision of law in regard to the compensation of a trustee
      of an express trust);

            (2) except as otherwise expressly provided herein, to reimburse the
      Trustee upon its request for all reasonable expenses, disbursements and
      advances incurred by the Trustee under the Indenture (including the
      reasonable compensation and the expenses and disbursements of its agents
      and counsel), except any such expense, disbursement or advance as may be
      attributable to its negligence or bad faith; and

            (3) to pay to the Registrar and Paying Agent, if other than the
      Trustee, reasonable compensation for all services rendered by it as
      Registrar and Paying Agent under the Indenture and reimburse it for its
      reasonable expenses incurred under the Indenture, except any such expense
      as may be attributable to its negligence or bad faith.

            Section 4.11 Project Not Security for Bonds. It is expressly
recognized by the parties that the Project will not constitute any part of the
security for the Bonds. The principal security for the Bonds shall be the Note
and the absolute, irrevocable and unconditional obligation of the Company to
make the Note Payments.

            Section 4.12 Payment of Taxes and Assessments; No Liens or Charges.
The Company will (a) pay, when the same shall become due and payable, all taxes
and assessments, including income, profits, property or excise taxes, if any, or
other municipal or governmental charges, imposed, levied or assessed by the
Federal, state or any municipal government upon the Authority or the Trustee in
respect of any payments (other than payments made pursuant to Section 4.10) made
or to be made pursuant to this Participation Agreement or the Notes and (b) pay
or cause to be discharged, within sixty (60) days after


                                       13


the same shall accrue, any lien or charge upon any such payment (except as
aforesaid) made or to be made under this Participation Agreement; provided that
the Company shall not be required to pay any such tax, assessment or charge so
long as (i) the Company at its expense contests by appropriate legal proceedings
conducted in good faith and with due diligence the amount, validity or
application of any such tax, assessment or charge, (ii) such proceedings shall
have the effect of suspending the collection thereof from the Authority and the
Trustee, and (iii) the Company shall indemnify and hold the Authority and the
Trustee harmless from any losses, costs, charges, expenses (including reasonable
attorneys' fees and disbursements), judgments and liabilities arising in respect
of such tax, assessment or charge and the nonpayment thereof.

            Section 4.13 Company to Pay Attorneys' Fees and Disbursements. If
the Company shall default under any of the provisions of this Participation
Agreement and the Authority or the Trustee or both shall employ attorneys or
incur other expenses for the collection of payments due under this Participation
Agreement or the Note or for the enforcement of performance or observance of any
obligation or agreement on the part of the Company contained in this
Participation Agreement, the Company will on demand therefor reimburse the
reasonable fees of such attorneys and such other reasonable disbursements so
incurred.

            Section 4.14 No Abatement of Administration Fees and Other Charges.
It is understood and agreed that so long as any Bonds are outstanding under the
Indenture, the Administration Fees and other charges payable to the Authority
pursuant to this Participation Agreement or the Note shall continue to be
payable at the times and in the amount herein specified, whether or not the
Project, or any portion thereof, shall have been destroyed by fire or other
casualty, or title thereto or the use thereof shall have been taken by the
exercise of the power of eminent domain, and that there shall be no abatement of
any such Administration Fees and other charges by reason thereof.


                                       14


                                   ARTICLE V

                               SPECIAL COVENANTS

            Section 5.01 No Warranty as to Suitability of Project. The Authority
makes no warranty, either express or implied, with respect to actual or designed
capacity of the Project, as to the suitability of the Project for the purposes
specified in this Participation Agreement, as to the condition of the Project,
or that the Project will be suitable for the Company's purposes or needs.

            Section 5.02 Authority's Right to Inspect Project. The Authority
shall have the right at all reasonable times to examine and inspect the Project.

            Section 5.03 Company Consent to Amendment of Indenture. The
Authority and the Trustee shall not enter into any indenture supplemental to or
amendatory of the Indenture which affects the rights or obligations of the
Company without the prior consent of the Company as evidenced by a certificate
in writing signed by an Authorized Company Representative.

            Section 5.04 Tax Covenant. Notwithstanding any other provision
hereof, the Company covenants and agrees that it will not take or authorize any
action or permit any action within its reasonable control to be taken, or fail
to take any action within its reasonable control, with respect to the Project,
or the proceeds of any series of the Bonds, including any amounts treated as
proceeds of the Bonds for any purpose of Section 103 of the Code, which will
result in the loss of the exclusion of interest on any series of Bonds from
gross income for Federal income tax purposes under Section 103 of the Code
(except for any Bond during any period while any such Bond is held by a person
referred to in Section 147(a) of the Code). This provision shall control in case
of conflict or ambiguity with any other provision of this Participation
Agreement. In furtherance of such covenant and agreement as it relates to the
Bonds, the Authority and the Company have entered into the Tax Regulatory
Agreement and the Company hereby covenants and agrees to comply with the
provisions thereof.

            Section 5.05 Company Agrees to Perform Obligations Imposed by
Indenture. The Company agrees to perform such obligations as may be required of
it by the provisions of the Indenture.

            Section 5.06. Authority Agrees to Take Certain Actions At Direction
of Company. The Authority agrees to exercise any option to redeem the Bonds
pursuant to Section 5.01 of the Indenture at the direction of the Company. The
Authority agrees to exercise its rights under Article XV of the Indenture upon
the request of the Company.

            Section 5.07 Certificates as to Defaults. The Company shall file
with the Trustee, on or before June 1 of each year, commencing on June 1, 2002,
a certificate signed by an Authorized Company Representative stating that, to
the best of his or her knowledge, information and belief, the Company has kept,
observed, performed and fulfilled each and every one of its covenants and
obligations contained in this Participation Agreement, the Tax Regulatory
Agreement and in the Note and, to the best of his knowledge,


                                       15


information and belief, there does not exist at the date of such certificate any
Event of Default hereunder or other event which, with notice or the lapse of
time specified in Section 7.01 hereof, or both, would become an Event of Default
or, if any such Event of Default or other event shall so exist, specifying the
same and the nature and status thereof.

            Section 5.08 Limited Obligation of Authority; Indemnification of
Authority, Registrar and Paying Agent, Auction Agent and Trustee. The Bonds
shall not be general obligations of the Authority, and shall not constitute an
indebtedness of or a charge against the general credit of the Authority or give
rise to any pecuniary liability of the Authority. The liability of the Authority
under the Bonds shall be enforceable only to the extent provided in the
Indenture, and the Bonds shall be payable solely from the Note Payments and any
other funds held by the Trustee under the Indenture and available for such
payment. The Bonds shall not be a debt of the State of New York, and the State
of New York shall not be liable thereon.

            No member, officer, agent or employee of the Authority shall be
personally liable for the payment of the Bonds or any money or damages hereunder
or related hereto. Notwithstanding the fact that it is the intention of the
parties hereto that the Authority and all officers and employees thereof shall
not incur pecuniary liability by reason of the terms of this Participation
Agreement, or the undertakings required of the Authority hereunder or any
officer or employee thereof, by reason of the issuance of the Bonds, the
execution and delivery of any document, including, but not limited to, the
Indenture, the Tax Regulatory Agreement, this Participation Agreement, the Note,
the Auction Agency Agreement, the Remarketing Agreement, the Bond Purchase Trust
Agreement, any Broker-Dealer Agreement or any final official statement, or by
reason of the performance or non-performance of any act required of it by this
Participation Agreement or any such other agreement, or the performance or
non-performance of any act requested of it by the Company, including all claims,
liabilities or losses arising in connection with the violation of any statutes
or regulations pertaining to the foregoing; nevertheless, if the Authority
(including any person at any time serving as an officer or employee of the
Authority) should incur any such pecuniary liability, then in such event the
Company shall indemnify and hold harmless the Authority (including any person at
any time serving as an officer or employee of the Authority) against all claims
by or on behalf of any person, firm or corporation or other legal entity,
arising out of the same, and all costs and expenses incurred in connection with
any such claim or in connection with any action or proceeding brought thereon.

            The Company releases the Authority (including any person at any time
serving as an officer or employee of the Authority), the Registrar and Paying
Agent, the Auction Agent and the Trustee (including any person at any time
serving as an officer or employee of the Trustee, the Registrar and Paying Agent
or the Auction Agent) from, agrees that the Authority (including any person at
any time serving as an officer or employee of the Authority), the Registrar and
Paying Agent, the Auction Agent and the Trustee (including any person at any
time serving as an officer or employee of the Trustee, the Registrar and Paying
Agent or the Auction Agent) shall not be liable for, and agrees to indemnify and
hold the Authority (including any person at any time serving as an officer or
employee of the Authority) and the Trustee, the Auction Agent, the Registrar and
Paying Agent (including any person at any time serving as an officer or employee
of the Trustee, Auction Agent or the Registrar and Paying Agent) harmless, to
the fullest extent permitted by law from any losses, costs, charges, expenses
(including reasonable attorneys' and agents' fees and expenses), by reason of
(i) any liability for any loss or damage to property or any injury to, or death
of, any person that


                                       16


may be occasioned by any cause whatsoever arising out of the construction or
operation of the Project, or (ii) any action, suit or proceeding instituted or
threatened in connection with the transactions contemplated by this
Participation Agreement, the Indenture and the Note, provided, however, that the
Company shall not be liable as the result of the negligence of the Authority,
the Trustee, the Registrar and Paying Agent, any Remarketing Agent or the
Auction Agent or bad faith or wilful misconduct of the Authority, the Trustee,
the Registrar and Paying Agent, any Remarketing Agent or the Auction Agent
(including any person at any time serving as an officer or employee of the
Authority or the Trustee, the Registrar and Paying Agent, any Remarketing Agent
or the Auction Agent). If any such claim is asserted, the Authority, any
individual indemnified herein, the Trustee, the Registrar and Paying Agent, any
Remarketing Agent or the Auction Agent, as the case may be, shall give prompt
notice to the Company and permit the Company to participate in the defense
thereof at its own expense. The Company will reimburse the indemnified parties
for any legal or other expenses reasonably incurred by the indemnified parties
in investigating or defending against any such claim, provided that the Company
shall not be required to reimburse any of the indemnified parties for fees and
expenses of counsel other than one counsel selected by the Trustee in its sole
discretion for all indemnified parties in which proceedings are brought or
threatened to be brought unless and to the extent there are actual or potential
conflicts of interest between or among indemnified parties or defenses available
to some indemnified parties that are not available to other indemnified parties
in which case, the Company will reimburse the indemnified parties for any legal
or other expenses reasonably incurred by the indemnified parties in
investigating or defending against any such claim by each counsel of each of the
indemnified parties affected. The obligation of the parties hereto under this
Section shall survive the termination of this Participation Agreement and the
Indenture.

            Section 5.09 Provision of Information. The Company shall provide the
Trustee with the forms of any notices required to be sent to holders of Bonds in
connection with any redemption of Bonds, a change in the Auction Period, the
Interest Period or Change in the Interest Rate Mode pursuant to Articles III, IV
and V of the Indenture or the establishment of a Fixed Rate on the Bonds
pursuant to Section 4.02 of the Indenture.

            Section 5.10. Ratings. During any Auction Rate Period, the Company
shall take all reasonable action necessary to enable at least two nationally
recognized, statistical rating organizations (as that term is used in the rules
and regulations of the Commission under the Exchange Act) to provide ratings for
the Auction Rate Bonds.

            Section 5.11 Notices. During any Auction Rate Period, the Company on
behalf of the Authority shall provide the Trustee and, so long as no Event of
Default has occurred and is continuing and the ownership of any Auction Rate
Bonds is maintained in book-entry form by the Securities Depository, the Auction
Agent, with notice of any change in (a) the Statutory Corporate Tax Rate under
the Indenture, (b) the Applicable Percentage, or (c) the maximum rate permitted
by law on the Bonds. There is currently no such maximum rate.

            Section 5.12 Maintenance of Office or Agency. So long as the Note
remains outstanding and unpaid, the Company will at all times keep, in New York,
New York, or another location in the State of New York, an office or agency
where notices and demands with respect to the Note may be served, and


                                       17


will, from time to time, give written notice to the Trustee of the location of
such office or agency; and, in case the Company shall fail so to do, notices may
be served and demands may be made at the principal office of the Trustee.

            Section 5.13 Maintenance of Properties. So long as the Note remains
outstanding and unpaid, the Company will at all times make or cause to be made
such expenditures for repairs, maintenance and renewals, or otherwise, as shall
be necessary to maintain its properties in good repair, working order and
condition as an operating system or systems to the extent necessary to meet the
Company's obligations under the Public Service Law of the State of New York and
the Participation Agreement.

            Section 5.14 Insurance. So long as the Note remains outstanding and
unpaid, the Company will keep or cause to be kept its properties that are of an
insurable nature, insured against loss or damage by fire or other risks, the
risk of which in the opinion of an Authorized Company Representative (who shall
be an officer or employee of the Company responsible for the management of such
risks) is customarily insured against by companies similarly situated and
operating like properties, to the extent that property of similar character is,
in such Authorized Company Representative's opinion, customarily insured against
by such companies, either (a) by reputable insurers or (b) in whole or in part
in the form of reserves or of one or more insurance funds created by the
Company, whether alone or with other Corporations.

            Section 5.15 Proper Books of Record and Account. So long as the Note
remains outstanding and unpaid, the Company will at all times keep or cause to
be kept proper books of record and account, in which full, true and correct
entry will be made of all dealings, business and affairs of the Company,
including proper and complete entries to capital or property accounts covering
property worn out, obsolete, abandoned or sold, all in accordance with the
requirements of any system of accounting or keeping accounts or the rules,
regulations or orders prescribed by a regulatory commission with jurisdiction
over the rates of the Company giving rise to at least fifty-one percent (51%) of
the Company's gross revenues, or if there are no such requirements or rules,
regulations or orders, then in compliance with generally accepted accounting
principles.

            Section 5.16 Compliance With Laws. So long as the Note remains
outstanding and unpaid, the Company agrees to use its best efforts to comply in
all material respects with all applicable laws, rules and regulations and orders
of any governmental authority, non-compliance with which would have a material
adverse effect on its business, financial condition or results of operations (to
the extent the Company deems it can reasonably comply while maintaining its
public utility operations) or would materially adversely affect the Company's
ability to perform its obligations hereunder or under the Participation
Agreement, except laws, rules, regulations or orders being contested in good
faith or laws, rules, regulations or orders which the Company has applied for
variances from, or exceptions to.

            Section 5.17 Consolidation, Merger or Sale of Assets. So long as the
Note remains outstanding and unpaid, the Company will not consolidate with or
permit itself to be merged into any other corporation or corporations, or sell,
transfer or otherwise dispose of all or substantially all of its properties and
assets, except in the manner and upon the terms and conditions set forth in this
Section 5.17.


                                       18


            Nothing contained herein or in the Note shall prevent (and the Note
shall be construed as permitting and authorizing, without acceleration of the
maturity of the Note) any lawful consolidation or merger of the Company with or
into any other corporation or corporations lawfully authorized to acquire and
operate the properties of the Company, or a series of consolidations or mergers,
or successive consolidations or mergers, in which the Company or its successor
or successors shall be a party, or any sale of all or substantially all the
properties of the Company as an entirety to a corporation lawfully authorized to
acquire and operate the same; provided that, upon any consolidation, merger or
sale, the corporation formed by such consolidation, or into which such merger
may be made if other than the Company, or making such purchase shall execute and
deliver to the Trustee an instrument, in form reasonably satisfactory to the
Trustee, whereby such corporation shall effectually assume the due and punctual
payment of the principal of and premium, if any, and interest on the Note
according to its tenor and the due and punctual performance and observance of
all covenants and agreements to be performed by the Company pursuant to the Note
and the Participation Agreement on the part of the Company to be performed and
observed; and, thereupon, such corporation shall succeed to and be substituted
for the Company hereunder, with the same effect as if such successor corporation
had been named herein as obligor.

            Every such successor corporation shall possess, and may exercise,
from time to time, each and every right and power hereunder of the Company, in
its name or otherwise; and any act, proceeding, resolution or certificate by any
of the terms of the Note required or provided to be done, taken and performed or
made, executed or verified by any board or officer of the Company shall and may
be done, taken and performed or made, executed and verified with like force and
effect by the corresponding board or officer of any such successor Company.

            If consolidation, merger or sale or other transfer is made as
permitted by this Section, the provisions of this Section shall continue in full
force and effect and no further consolidation, merger or sale or other transfer
shall be made except in compliance with the provisions of this Section.

            Section 5.18 Financial Statements of Company. The Company agrees to
have an annual audit made by independent accountants and to furnish the Trustee
with a balance sheet and statements of income, retained earnings and cash flow
showing the financial condition of the Company and its consolidated
subsidiaries, if any, at the close of each fiscal year, and the results of
operations of the Company and its consolidated subsidiaries, if any, for each
fiscal year, as audited by said accountants, on or before the last day of the
third month following the close of the fiscal year or as soon thereafter as they
are reasonably available. The Company further agrees to furnish to the Trustee,
the Authority and to any owner of Bonds if requested in writing by such owner
all financial statements which it sends to its shareholders. The delivery of
such financial statements to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Company's compliance with any of
its covenants hereunder.


                                       19


                                   ARTICLE VI

                              REDEMPTION OF BONDS

            Section 6.01 Redemption of Bonds. If the Company is not in default
in making Note Payments, the Authority and the Trustee, at the request of the
Company, at any time the aggregate monies in the Bond Fund are sufficient to
effect a redemption of Bonds and if the same are then redeemable under the
provisions of the Indenture and the Bonds, shall forthwith take all steps that
may be necessary under the applicable redemption provisions of Article V of the
Indenture to effect redemption of all or part of the then Outstanding Bonds as
may be specified by the Company on such redemption date.


                                       20


                                  ARTICLE VII

                         EVENTS OF DEFAULT AND REMEDIES

            Section 7.01 Events of Default Defined. The following shall be an
"Event of Default" under this Participation Agreement and the term "Event of
Default" shall mean, whenever it is used in this Participation Agreement, any
one or more of the following events:

            (a) Failure by the Company to pay or cause to be paid, when due and
      payable, any installment of Note Payments and, in the case of failure to
      pay any installment of interest on the Note, continuance of such failure
      for one (1) Business Day.

            (b) Failure by the Company to observe and perform any covenant,
      condition or agreement in this Participation Agreement or the Note on its
      part to be observed or performed, other than as referred to in subsection
      (a) of this Section 7.01 (and other than failure to pay the amounts due
      under Sections 4.02(f), 4.13 and 5.08 of this Participation Agreement),
      for a period of ninety (90) days after written notice, specifying such
      failure and requesting that it be remedied, has been given to the Company
      unless the Trustee (with any required consent of Bondholders under the
      provisions of the Indenture) shall agree in writing to an extension of
      such time prior to its expiration, provided that if any such failure shall
      be such that it cannot be cured or corrected within such ninety-day
      period, it shall not constitute an Event of Default hereunder if curative
      or corrective action is instituted within such period and diligently
      pursued until the failure of performance is cured or corrected.

            (c) The dissolution or liquidation of the Company or the filing by
      the Company of a voluntary petition in bankruptcy, or failure by the
      Company promptly to discharge or cause to be discharged any execution,
      garnishment or attachment of such consequence as will impair its ability
      to carry on its operations generally or the commission by the Company of
      any act of bankruptcy, or adjudication of the Company as a bankrupt, or
      assignment by the Company for the benefit of its creditors, or the entry
      by the Company into an agreement of composition with its creditors, or the
      approval by a court of competent jurisdiction of a petition applicable to
      the Company in any proceeding for its reorganization instituted under the
      provisions of the federal bankruptcy laws. The term "dissolution or
      liquidation of the Company", as used in this subsection, shall not be
      construed to include the cessation of the corporate existence of the
      Company resulting either from a merger or consolidation of the Company
      into or with another corporation or a dissolution or liquidation of the
      Company following a transfer of all or substantially all of its assets as
      an entirety, under the conditions permitting such action with respect to
      the Company contained in Section 5.17 hereof.

            (d) The occurrence of an event of default as defined in Section
      12.01 of the Indenture.

            Subsection (b) of this Section 7.01 is subject to the following
limitations: Except for the obligations of the Company contained in Article IV
hereof, if by reason of force majeure the Company is unable in whole or in part
to carry out the agreements on its part herein contained, the Company shall not


                                       21


be deemed in default during the continuance of such inability. The term "force
majeure" as used herein shall include the following: acts of God; strikes,
lockouts or other industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or of the State of New York or any
of their departments, agencies, or officials, or any civil or military
authority; insurrections; riots; epidemics; landslides; lightning; earthquake;
fire; typhoons; storms; floods; washouts; droughts; arrests; civil disturbances;
explosions; breakage or accident to machinery, transmission pipes or canals;
partial or entire failure of utilities; or any other cause or event not
reasonably within the control of the Company. The Company agrees, however, to
remedy with all reasonable dispatch the cause or causes preventing the Company
from carrying out its agreements; provided, that the settlement of strikes,
lockouts and other industrial disturbances shall be entirely within the
discretion of the Company, and the Company shall not be required to make
settlement of strikes, lockouts and other industrial disturbances by acceding to
the demands of the opposing party or parties when such course is in the judgment
of the Company unfavorable to the Company.

            Section 7.02 Remedies On Default. In the event any of the Bonds
shall at the time be Outstanding and unpaid and provision for the payment
thereof shall not have been made in accordance with the provisions of the
Indenture, whenever any Event of Default referred to in Section 7.01 hereof
shall have happened and be subsisting, the Authority or the Trustee, following
acceleration of the Bonds in accordance with provisions of Section 12.03 of the
Indenture where so provided, may take any one or more of the following remedial
steps:

            (a) The Trustee as provided in the Indenture may, at its option, or
      shall, to the extent required by the Indenture, declare all payments
      payable under clauses (a) - (e) of Section 4.02 hereof and the Note for
      the remainder of the term of this Participation Agreement to be
      immediately due and payable, whereupon the same shall become immediately
      due and payable.

            (b) The Authority or the Trustee may take whatever action at law or
      in equity that may appear necessary or desirable to collect the amounts
      then due and thereafter to become due, or to enforce performance and
      observance of any obligation, agreement or covenant of the Company under
      this Participation Agreement or the Note whether for specific performance
      of any covenant or agreement contained herein or therein or in aid of the
      execution of any power herein granted.

            Any amounts collected pursuant to action taken under this Section
7.02 shall be paid into the Bond Fund and applied in accordance with the
provisions of the Indenture.

            If any such declaration of acceleration of the Bonds shall have been
annulled pursuant to the terms of the Indenture and if, at any time after such
declaration, but before all the Bonds shall have matured by their terms, all
arrears of interest upon the Note, and interest on overdue installments of
interest (to the extent enforceable under applicable law) at the rate or rates
per annum specified for the Note and the principal of and premium, if any, on
the Note which shall have become due and payable otherwise than by acceleration,
and all other sums payable hereunder, except the principal of, and interest on,
the Note which pursuant to such declaration shall have become due and payable,
shall have been paid by or on behalf of the Company or provision satisfactory to
the Trustee shall have been made for such payment, then such acceleration of the
Note shall ipso facto be deemed to be rescinded and any such Default and its


                                       22


consequences shall ipso facto be deemed to be annulled, but no such annulment
shall extend to or affect any subsequent Default or impair or exhaust any right
or remedy consequent thereon.

            Section 7.03 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Authority or to the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Participation Agreement or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power accruing upon any
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Authority or
the Trustee to exercise any remedy reserved to it in this Article, it shall not
be necessary to give any notice, other than such notice as may be herein
expressly required. Such rights and remedies as are given the Authority
hereunder shall also extend to the Trustee and the Trustee and the Holders of
the Bonds issued under the Indenture shall be deemed third party beneficiaries
of all covenants and agreements herein contained.

            In case the Trustee (as assignee of the Authority under the
Indenture) or the Authority shall have proceeded to enforce its rights under
this Participation Agreement and such proceedings shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Trustee or the Authority, then and in every such case, the Company, the
Authority and the Trustee shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Company, the Authority and the Trustee shall continue as though no such
proceeding had been taken.

            The Company covenants that, in case an Event of Default shall occur
with respect to any Note Payments payable under Sections 4.02(a) - (e) hereof
and the Note, then, upon demand of the Trustee (as assignee of the Authority
under the Indenture) the Company will pay to the Trustee the whole amount that
then shall have become due and payable under said Sections, with interest (to
the extent permitted by law) on said amount at the rate of interest then borne
by the Bonds pursuant to the Indenture, but not exceeding the maximum rate
permitted by law, until paid, and in addition thereto, such further amounts as
shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys, and counsel, and
any other expenses or liabilities incurred by the Trustee other than those
incurred through bad faith or negligence.

            In case the Company shall fail forthwith to pay such amounts upon
such demand, the Authority or the Trustee (as assignee of the Authority under
the Indenture) shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and unpaid,
and may prosecute any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the Company and collect,
in the manner provided by law out of the property of the Company, the monies
adjudged or decreed to be payable.

            In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company under the Federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the property of the Company or in the case of any other similar judicial
proceedings relative to the Company or to the creditors or property of the
Company, the Trustee shall be


                                       23


entitled and empowered, by intervention in such proceedings or otherwise, to
file and provide a claim or claims for the whole amount owing and unpaid
pursuant to this Participation Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Holders and the
Trustee allowed in such judicial proceedings relative to the Company, its
creditors, or its property, and to collect and receive any monies or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses; and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized to make such
payments to the Trustee, and to pay to the Trustee any amount due it for
compensation and expenses, including reasonable counsel fees and expenses
incurred by it up to the date of such distribution.

            Nothing herein contained shall be construed to prevent the Authority
from enforcing directly any of its rights under Sections 4.02, 4.13 and 5.08
hereof; provided that, in case the Company shall have failed to pay amounts
required to be paid under Sections 4.02(f), 4.13 and 5.08 hereof which event
shall have continued for a period of thirty (30) days after the date on which
written notice of such failure, requiring the Company to remedy the same, shall
have been given to the Company by the Authority or the Trustee, the Authority or
the Trustee may take whatever action at law or in equity as may appear necessary
or desirable to enforce performance or observance of any obligations or
agreements of the Company under Sections 4.02(f), 4.13 and 5.08 hereof.

            Section 7.04 No Additional Waiver Implied by One Waiver. In the
event any agreement contained herein or in the Note should be breached by any
party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.


                                       24


                                  ARTICLE VIII

                                 MISCELLANEOUS

            Section 8.01 Disposition of Amounts After Payment of Bonds. Any
amounts remaining in the funds created under the Indenture after payment in full
of principal of and premium, if any, and interest on all the Bonds, or provision
for payment thereof having been made in accordance with the provisions of the
Indenture, and payment of all the fees, charges and expenses of the Authority,
the Trustee, the Auction Agent, any Remarketing Agent, and the Registrar and
Paying Agent and any other paying agent in accordance with the Indenture and
this Participation Agreement, shall belong to and be promptly paid to the
Company by the Trustee in accordance with the provisions of the Indenture.

            Section 8.02 Notices. All notices, certificates, requests or other
communications between the Authority, the Company and the Trustee required to be
given under this Participation Agreement or under the Indenture shall be
sufficiently given and shall be deemed given when delivered by hand or first
class mail, postage prepaid, addressed as follows: if to the Authority, at
Corporate Plaza West, 286 Washington Avenue Extension, Albany, New York 12203,
Attention: President; if to the Company, at 4 Irving Place, New York, New York
10003, Attention: Secretary; and if to the Trustee or the Registrar and Paying
Agent, at The Bank of New York, 101 Barclay Street - 8W, New York, New York
10286, Attention: Corporate Trust Trustee Administration. A duplicate copy of
each notice, certificate, request or other communication given hereunder to the
Authority, the Company or the Trustee shall also be given to the others. The
Company, the Authority and the Trustee may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates,
requests or other communications shall be sent.

            Section 8.03 Successors and Assigns. This Participation Agreement
shall inure to the benefit of and shall be binding upon the Authority, the
Company, the Trustee and their respective successors and assigns.

            Section 8.04 Amendment of Participation Agreement. This
Participation Agreement may not be amended except by an instrument in writing
signed by the parties and upon compliance with the provisions of Sections 14.06
and 14.07 of the Indenture.

            Section 8.05 Participation Agreement Supersedes Any Prior
Agreements. This Participation Agreement and the Bond Purchase Agreement
supersede any other prior agreements or understandings, written or oral, between
the parties with respect to the transactions contemplated hereby and thereby.

            Section 8.06 Further Assurances and Corrective Instruments. The
Authority and the Company agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as may reasonably be
required for correcting any inadequate or incorrect description of the Project
or for carrying


                                       25


out the expressed intention of this Participation Agreement in accordance with
the provisions of the Indenture.

            Section 8.07 Counterparts. This Participation Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be an original; but such counterparts shall together constitute
but one and the same Participation Agreement.

            Section 8.08 Severability. If any clause, provision or section of
this Participation Agreement is held illegal, invalid or unenforceable by any
court or administrative body, this Participation Agreement shall be construed
and enforced as if such illegal or invalid or unenforceable clause, provision or
section had not been contained in this Participation Agreement. In case any
agreement or obligation in this Participation Agreement be held to be in
violation of law, then such agreement or obligation shall be deemed to be the
agreement or obligation of the Authority or the Company, as the case may be, to
the full extent permitted by law.

            Section 8.09 Delegation of Duties by Authority. It is agreed that
under the terms of this Participation Agreement and also under the terms of the
Indenture the Authority has delegated certain of its duties hereunder to the
Company. The fact of such delegation shall be deemed a sufficient compliance by
the Authority to satisfy the duties so delegated and the Authority shall not be
liable in any way by reason of acts done or omitted by the Company or any
Authorized Company Representative. The Authority shall have the right at all
times to act in reliance upon the authorization, representation or certification
of an Authorized Company Representative unless such reliance is in bad faith.

            Section 8.10 Survival of Representations, Warranties and Covenants.
The respective agreements, representations, warranties and covenants set forth
herein will remain in full force and will survive the execution and delivery of
this Participation Agreement.

            SECTION 8.11 NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW
YORK SHALL GOVERN THE CONSTRUCTION OF THIS PARTICIPATION AGREEMENT.

                   [Signature Page of this Agreement Follows]


                                       26


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

                                         NEW YORK STATE ENERGY RESEARCH
                                           AND DEVELOPMENT AUTHORITY


(SEAL)                                   By
                                           -------------------------------------
                                                           President

Attest:


- -------------------------------------
           Acting Secretary

                                         CONSOLIDATED EDISON COMPANY OF
                                           NEW YORK, INC.


(SEAL)                                   By
                                           -------------------------------------
                                                  Executive Vice President and
                                                    Chief Financial Officer

Attest:


- -------------------------------------
          Assistant Secretary



                  [Signature Page of Participation Agreement]


                                       28


                                   EXHIBIT A

                          (To Participation Agreement,
                           dated as of June 1, 2001,
        between New York State Energy Research and Development Authority
               and Consolidated Edison Company of New York, Inc.)

                             DESCRIPTION OF PROJECT
                               EXEMPT FACILITIES

          [A copy of Exhibit A to each of the Participation Agreements
entered into in connection with the Prior Bonds will be inserted at this place]


                                      A-1


                                   EXHIBIT B

                          (To Participation Agreement
                           dated as of June 1, 2001,
        between New York State Energy Research and Development Authority
               and Consolidated Edison Company of New York, Inc.)

                    DESCRIPTION OF OTHER PROJECT FACILITIES

          [A copy of Exhibit B to each of the Participation Agreements
entered into in connection with the Prior Bonds will be inserted at this place]


                                      B-1


                                   EXHIBIT C

          (To Participation Agreement dated as of June 1, 2001 between
          New York State Energy Research and Development Authority and
                 Consolidated Edison Company of New York, Inc.,
                        relating to Series 2001A Bonds)

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

                          $224,600,000 PROMISSORY NOTE

                                      FOR

                     FACILITIES REVENUE BONDS, SERIES 2001A
            (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)

                               New York, New York
                                  June 6, 2001

            FOR VALUE RECEIVED, Consolidated Edison Company of New York, Inc., a
New York corporation (the "Company"), promises to pay to the order of The Bank
of New York, as trustee (the "Trustee") under the hereinafter referred to
Indenture, in lawful money of the United States, moneys that are in the
aggregate sufficient for, together with other amounts held by the Trustee and
available under the Indenture (as defined below) for application to, the payment
of the principal sum of $224,600,000, together with interest thereon at such
rate or rates and with such redemption premiums, if any, becoming due and
payable on the Facilities Revenue Bonds, Series 2001A (Consolidated Edison
Company of New York, Inc. Project) (the "Bonds"), issued by New York State
Energy Research and Development Authority (the "Authority") in the aggregate
principal amount of $224,600,000 pursuant to a Trust Indenture (the "Indenture")
dated as of June 1, 2001, between the Authority and the Trustee, and at such
times as provided in the Indenture. This Note is being delivered pursuant to and
in accordance with the Participation Agreement dated as of June 1, 2001, between
the Company and the Authority (the "Participation Agreement"), the terms and
provisions of which are incorporated herein by reference and made a part hereof.
All terms used and not otherwise defined herein are used as defined in the
Indenture.

            In the event the Company should fail to make any payment required by
this Note, the Company's obligation to make such payment shall continue as an
obligation of the Company until the amount in default shall have been fully
paid, and the Company agrees to pay the same with interest thereon at the rate
of interest borne by the Bonds, to the extent, but not exceeding the maximum
rate, permitted by law, until paid.


                                      C-1


            This Note, unless paid earlier as permitted by the Participation
Agreement, shall mature on June 1, 2036.

            This Note is subject to optional and mandatory prepayment and to
acceleration as provided in the Participation Agreement.

            All payments hereunder shall be payable at the principal office of
the Trustee in New York, New York.

            The obligation of the Company to make payments under this Note shall
be an absolute, direct, general obligation, and shall be unconditional and shall
not be abated, rebated, set off, reduced, abrogated, waived, diminished or
otherwise modified in any manner or to any extent whatsoever (other than for
prior payment).

            The Company hereby waives presentment for payment, demand, demand
and protest and notice of protest, demand and dishonor and nonpayment of this
Note.

            THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK.

                                         CONSOLIDATED EDISON COMPANY OF
                                           NEW YORK, INC.


                                         By:
                                            ------------------------------------
                                                  Executive Vice President and
                                                    Chief Financial Officer
(SEAL)

ATTEST:


- -------------------------------------
          Assistant Secretary


                                      C-2



                                                                  Exhibit 10.2.2

Execution Copy

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

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

                         NEW YORK STATE ENERGY RESEARCH
                           AND DEVELOPMENT AUTHORITY

                                      AND

                                 HSBC BANK USA,
                                   as Trustee

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

                       FIRST SUPPLEMENTAL TRUST INDENTURE

                            Dated as of July 1, 2001

                                       to

                                TRUST INDENTURE

                            Dated as of July 1, 1999

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

                                  relating to

              $292,700,000 Facilities Revenue Bonds, 1999 Series A
            (Consolidated Edison Company of New York, Inc. Project)

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

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



                               TABLE OF CONTENTS
                                                                            Page

Parties........................................................................1
Recitals.......................................................................1

                                   ARTICLE I

                           AUTHORIZATION; DEFINITIONS

SECTION 1.01.   Supplemental Indenture.........................................2

                                   ARTICLE II

                          AMENDMENTS TO THE INDENTURE

SECTION 2.01.   Amendment to Section 1.01 of the Indenture.....................2
SECTION 2.02.   Amendment to Paragraph 7 of Section 2.02 of the
                Indenture.....................................................32
SECTION 2.03.   Amendment to Section 3.01 of the Indenture....................32
SECTION 2.04.   Amendment to Sections 3.03 through 3.10 of the
                Indenture.....................................................36
SECTION 2.05.   Amendment to Paragraph 3 of Section 4.01 of the
                Indenture.....................................................51
SECTION 2.06.   Amendment to Paragraph 3 of Section 4.02 of the
                Indenture.....................................................53
SECTION 2.07.   Amendment to Paragraph 3 of Section 4.03 of the
                Indenture.....................................................55
SECTION 2.08.   Amendment to Subsection (b) of Section 5.01 of the
                Indenture.....................................................56
SECTION 2.09.   Amendment to Section 5.11 of the Indenture....................56
SECTION 2.10.   Amendment to Paragraph 1 of Section 5.12 of the
                Indenture.....................................................57
SECTION 2.11.   Amendment to Section 6.01 of the Indenture....................58
SECTION 2.12.   Section 6.04 of the Indenture.................................58
SECTION 2.13.   Section 6.05 of the Indenture.................................60
SECTION 2.14.   Amendment to Section 9.02 of the Indenture....................61
SECTION 2.15.   Amendment to Section 11.21 of the Indenture...................63


                                      (i)


SECTION 2.16.   Amendment to Subsection (d) of Section 12.01 of
                the Indenture.................................................63
SECTION 2.17.   Amendment to Section 12.02 of the Indenture...................64
SECTION 2.18.   Amendment to Section 12.03 of the Indenture...................64
SECTION 2.19.   Amendment to Section 14.02 of the Indenture...................65
SECTION 2.20.   Amendment to Section 14.05 of the Indenture...................66
SECTION 2.21.   Amendment to Section 14.10 of the Indenture...................66
SECTION 2.22.   Amendment to Section 17.01 of the Indenture...................66
SECTION 2.23.   Amendment to Appendix A to the Indenture......................67
SECTION 2.24.   Amendment to Appendix A to the Indenture......................67
SECTION 2.25.   Amendment to Exhibit B to the Indenture.......................67

                                  ARTICLE III

                                 MISCELLANEOUS

SECTION 3.01.   Effective Date; Counterparts..................................68
SECTION 3.02.   Acceptance....................................................68


                                      (ii)


            THIS FIRST SUPPLEMENTAL TRUST INDENTURE, made and dated as of July
1, 2001 (the "First Supplemental Indenture") to the TRUST INDENTURE made and
dated as of July 1, 1999 (the "Indenture") by and between NEW YORK STATE ENERGY
RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and
politic, constituting a public benefit corporation, and HSBC BANK USA, as
trustee (together with any successor trustee appointed in accordance with the
terms of such Indenture, hereinafter referred to as the "Trustee"), a banking
corporation organized and existing under and by virtue of the laws of the State
of New York, with its corporate trust office located in New York, New York,

                         W I T N E S S E T H  T H A T:

            WHEREAS, pursuant to special act of the Legislature of the State of
New York (Title 9 of Article 8 of the Public Authorities Law of New York, as
from time to time amended and supplemented, herein called the "Act"), the
Authority has been established as a body corporate and politic, constituting a
public benefit corporation; and

            WHEREAS, pursuant to the Act, the Authority is empowered to contract
with any power company to participate in the construction of facilities to be
used for the furnishing of electric energy to the extent required by the public
interest in development, health, recreation, safety, conservation of natural
resources and aesthetics; and

            WHEREAS, the Authority and the Consolidated Edison Company of New
York, Inc. (the "Company") have entered into a Participation Agreement, dated as
of July 1, 1999, providing for the refunding of Electric Facilities Revenue
Bonds, Series 1989 C (Consolidated Edison Company of New York, Inc. Project) and
Electric Facilities Revenue Bonds, Series 1990 A (Consolidated Edison Company of
New York, Inc. Project) (collectively, the "Prior Bonds") of the Authority which
were issued to finance the acquisition, construction and installation of certain
facilities for the furnishing of electric energy within the Company's service
area and as part of such participation, that the Authority issue bonds pursuant
to the Act to provide funds to refund the Prior Bonds; and

            WHEREAS, on July 29, 1999, the Authority issued its Facilities
Revenue Bonds, Series 1999A (Consolidated Edison Company of New York, Inc.
Project) in an aggregate amount not exceeding $292,700,000 (the "Bonds") under
and pursuant to Resolution No. 934 of the Authority, adopted April 19, 1999, for
the purpose of paying a portion of the redemption price of the Prior Bonds; and

            WHEREAS, on June 25, 2001, the Authority, at the request of the
Company, delivered a written notice pursuant to Section 4.01.1 of the Indenture
to the Trustee and certain other parties specifying an Auction Rate as the new
interest rate mode applicable to the Bonds effective on July 24, 2001; and



            WHEREAS, Section 14.02 of the Indenture provides that the Authority
and the Trustee may, in accordance with the terms thereof, modify, amend or
supplement the Indenture; and

            WHEREAS, the Company has requested that the Indenture be amended to
(i) clarify certain terms of the Indenture, (ii) conform certain terms of the
Indenture relating to the Bonds while they bear interest at an Auction Rate with
the current market standards for such Bonds and (iii) provide for new provisions
made necessary or desirable by the issuance of a financial guaranty insurance
policy; and

            WHEREAS, all acts, conditions and things necessary or required by
the Constitution and statutes of the State of New York or otherwise, to exist,
happen, and be performed as prerequisites to the execution of this First
Supplemental Indenture, do exist, have happened, and have been performed;

            NOW, THEREFORE, for and in consideration of the premises and of the
mutual covenants and agreements hereinafter set forth, the Authority agrees with
the Trustee and with the respective owners, from time to time, of the Bonds or
any part thereof as follows:

                                   ARTICLE I

                           AUTHORIZATION; DEFINITIONS

            SECTION 1.01. Supplemental Indenture. This First Supplemental
Indenture is supplemental to, and is entered into in accordance with Article XIV
of the Indenture; and except as modified, amended and supplemented by this First
Supplemental Indenture, the provisions of the Indenture are in all respects
ratified and confirmed and shall remain in full force and effect.

                                   ARTICLE II

                         AMENDMENTS TO THE INDENTURE(1)

            SECTION 2.01. Amendment to Section 1.01 of the Indenture. Section
1.01 is hereby amended to read in its entirety as follows:

                  Definitions of Specific Terms. Unless the context shall
      clearly indicate some other meaning or may otherwise require, the terms
      defined in this Section shall, for all purposes of this Indenture and of
      any indenture, resolution or other instrument amendatory hereof or
      supplemental

- ----------

      (1) Striked-out language reflects language deleted by this First
Supplemental Indenture from the Indenture and underscored language reflects
language added by this First Supplemental Indenture to the Indenture.


                                       2


      hereto and of any certificate, opinion, instrument or document herein or
      therein mentioned, have the meanings herein specified, with the following
      definitions to be equally applicable to both the singular and plural forms
      of any terms herein defined and vice versa.

                  "Act" shall mean the New York State Energy Research and
      Development Authority Act, Title 9 of Article 8 of the Public Authorities
      Law of the State of New York, as from time to time amended and
      supplemented.

                  "Additional Payments" shall mean the Additional Payments as
      defined in Section 4.02(f) of the Participation Agreement.

                  "Adjustable Rate" shall mean any of the following types of
      interest rates: a Commercial Paper Rate, an Auction Rate, a Daily Rate, a
      Weekly Rate, a Monthly Rate, a Semi-annual Rate and a Term Rate.

                  "Administration Fees" shall mean the amounts payable by the
      Company to the Authority pursuant to Section 4.02(f) of the Participation
      Agreement to defray a portion of the expenses incurred by the Authority in
      conducting and administering its special energy project programs and the
      amount payable as state bond issuance charge pursuant to Section 4.02(f)
      of the Participation Agreement.

                  "Affiliate" shall mean any person known to the Auction Agent
      to be controlled by, in control of or under common control with the
      Company; provided that no Broker-Dealer controlled by, in control of or
      under common control with the Company shall be an Affiliate nor shall any
      corporation or any person controlled by, in control of or in common
      control with such corporation be an Affiliate solely because a director or
      executive officer of such Broker-Dealer is also a director of the Company.

                  "After-Tax Equivalent Rate" on any date of determination shall
      mean with respect to Auction Rate Bonds, the interest rate per annum equal
      to the product of (x) Commercial Paper/Treasury Rate on such date and (y)
      (1.00 minus the Statutory Corporate Tax Rate on such date).

                  "Agent Member" shall mean a member of, or participant in, the
      Securities Depository.

                  "All Hold Rate" shall mean on any date of determination with
      respect to Auction Rate Bonds the rate per annum equal to 85% (as such
      percentage may be adjusted pursuant to Section 3.10) of the lesser of (i)
      the BMA Index on such date and (ii) the After-Tax Equivalent Rate on such
      date; provided, however, that in no event shall such All Hold Rate exceed
      the Maximum Allowed Rate.


                                       3


                  "Alternate Support Facility" shall mean any Support Facility
      obtained pursuant to the provisions of Section 6.02 in replacement of an
      existing Support Facility.

                  "Applicable Percentage" on any date of determination shall
      mean the percentage determined as set forth below (as such percentage may
      be adjusted for Auction Rate Bonds pursuant to Section 3.10) based on the
      prevailing long-term rating of the Auction Rate Bonds in effect at the
      close of business on the Business Day immediately preceding such date of
      determination:

                Applicable
                Prevailing Rating                       Percentage
                -----------------                       ----------

                AAA/"Aaa"                                  175%
                AA/"Aa"                                    175%
                A/"A"                                      175%
                BBB/"Baa"                                  200%
                Below BBB/"Baa"                            265%

                  For purposes of this definition, the "prevailing rating" of
      the Auction Rate Bonds will be (a) AAA/"Aaa," if the Auction Rate Bonds
      have a rating of AAA or better by S&P and a rating of "Aaa" Or better by
      Moody's, or the equivalent of such ratings by a substitute rating agency
      or agencies selected as provided below, (b) if not AAA/"Aaa," then AA/"Aa"
      if the Auction Rate Bonds have a rating of AA- or better by S&P and a
      rating of "Aa3" or better by Moody's, or the equivalent of such ratings by
      a substitute rating agency or agencies selected as provided below, (c) if
      not AAA/"Aaa" or AA/"Aa," then A/"A" if the Auction Rate Bonds have a
      rating of A- or better by S&P and a rating of "A3" or better by Moody's,
      or the equivalent of such ratings by a substitute rating agency or
      agencies selected as provided below, (d) if not AAA/"Aaa," AA/"Aa" or
      A/"A," then BBB/"Baa," if the Auction Rate Bonds have a rating of BBB- or
      better by S&P and a rating of "Baa3" or better by Moody's, or the
      equivalent of such ratings by a substitute rating agency or agencies
      selected as provided below, and (e) if not AAA/"Aaa," AA/"Aa", A/"A" or
      BBB/"Baa," then below BBB/"Baa," whether or not the Auction Rate Bonds are
      rated by any securities rating agency.

                  If (x) the Auction Rate Bonds, are rated by a rating agency or
      agencies other than Moody's or S&P and (y) the Company has delivered on
      behalf of the Authority to the Trustee and the Auction Agent an instrument
      designating one or two of such rating agencies to replace Moody's or S&P,
      or both, then for purposes of the definition of "prevailing rating"
      Moody's or S&P, or both, will be deemed to have been replaced in
      accordance with such instrument; provided, however, that such instrument
      must be accompanied by the consent of the Remarketing Agent. For purposes
      of this definition, S&P's rating categories of AAA, AA-, A- and BBB-, and
      Moody's


                                       4


      rating categories of "Aaa," "Aa3," "A3" and "Baa3," refer to and include
      the respective rating categories correlative thereto in the event that
      either or both of such rating agencies have changed or modified their
      generic rating categories. If the prevailing ratings for the Bonds are
      split between the categories set forth above, the lower rating will
      determine the prevailing rating.

                  "Auction" shall mean each periodic implementation of the
      Auction Procedures for Auction Rate Bonds.

                  "Auction Agency Agreement" shall mean the Auction Agency
      Agreement to be entered into between the Company and the Auction Agent
      with respect to the Auction Rate Bonds, as from time to time amended and
      supplemented.

                  "Auction Agent" shall mean any entity appointed as such
      pursuant to Section 11.21 and its successors and assigns.

                  "Auction Date" shall mean with respect to each Auction Period,
      the last Tuesday of the immediately preceding Auction Period (or such
      other day that the Remarketing Agent shall establish as the Auction Date
      therefor pursuant to Section 3.05); provided, that if such day is not a
      Business Day, the Auction Date shall be the next succeeding Business Day.

                  "Auction Period" shall mean, after a Change in the Interest
      Rate Mode to an Auction Rate, until the effective date of a subsequent
      Change in the Interest Rate Mode or the Stated Maturity, each period from
      and including the last Interest Payment Date for the immediately preceding
      Auction Period or Calculation Period, as the case may be, to and including
      the next succeeding Auction Date or, in the event of a Change in the
      Interest Rate Mode, to but excluding the effective date of such change,
      provided, if any day that would be the last day of any such period does
      not immediately precede a Business Day, such period shall end on the next
      day which immediately precedes a Business Day.

                  "Auction Procedures" shall mean with respect to the Auction
      Rate Bonds the procedures set forth in Sections 3.06 through 3.09.

                  "Auction Rate" shall mean with respect to Auction Rate Bonds
      and each Auction Period for such Auction Rate Bonds, the rate of interest
      per annum determined for the Bonds pursuant to Article III.

                  "Auction Rate Bonds" shall mean with respect to an Auction
      Rate Period, any Bonds or subseries of Bonds which bear interest at the
      Auction Rate.


                                       5


                  "Auction Rate Bonds Period Record Date" shall mean, with
      respect to each Interest Payment Date during an Auction Rate Period, the
      Business Day immediately preceding such Interest Payment Date.

                  "Auction Rate Period" shall mean any period during which the
      Auction Rate Bonds bear interest at an Auction Rate determined pursuant to
      the implementation of Auction Procedures established under Article III,
      which period shall commence on the effective date of a Change in the
      Interest Rate Mode to an Auction Rate and shall extend through the day
      immediately preceding the earlier of (a) the effective date of a Change in
      the Interest Rate Mode or (b) the Stated Maturity.

                  "Authority" shall mean New York State Energy Research and
      Development Authority, the public benefit corporation created by the Act,
      and its successors and assigns.

                  "Authorized Company Representative" shall mean any officer or
      other employee of the Company at the time designated to act on behalf of
      the Company by written certificate furnished to the Authority and the
      Trustee containing the specimen signature of such person and signed on
      behalf of the Company by its Chairman, President or a Vice President and
      its Secretary or an Assistant Secretary.

                  "Authorized Officer" shall mean the Chair, Vice-Chair,
      President, Vice President, Treasurer, Assistant Treasurer or Secretary of
      the Authority.

                  "Available Auction Rate Bonds" shall mean with respect to the
      Auction Rate Bonds, Available Auction Rate Bonds as defined in Section
      3.08.

                  "Bid" shall mean with respect to the Auction Rate Bonds, Bid
      as defined in Section 3.06.

                  "Bidder" shall mean with respect to the Auction Rate Bonds,
      Bidder as defined in Section 3.06.

                  "BMA Index" shall mean, as of any date of determination, the
      Bond Market Association Municipal Swap Index that is most recently
      released by Municipal Market Data to its subscribers prior to such date of
      determination; provided, however, that if the BMA Index is unavailable for
      a period of over 21 days preceding such date of determination, references
      to the BMA Index shall be replaced by the After-Tax Equivalent Rate.


                                       6


                  "Bond Counsel" shall mean an attorney or firm or firms of
      attorneys, satisfactory to the Authority and the Trustee, nationally
      recognized and experienced in matters relating to tax exemption of
      interest on bonds issued by states and their political subdivisions.

                  "Bond Fund" shall mean the special trust fund of the Authority
      designated as "Consolidated Edison Company of New York, Inc. Project Bond
      Fund" created and established under, and to be held and administered by
      the Trustee as provided in, Section 9.01 and, unless the context shall
      clearly indicate otherwise, shall include the "Interest Account," the
      "Principal Account," and the "Redemption Account" created and established
      therein.

                  "Bond Insurer" shall mean Ambac Assurance Corporation, or any
      successor thereto.

                  "Bond Purchase Agreement" shall mean the Bond Purchase
      Agreement, dated July 28, 1999, among the Authority, the Company and the
      underwriters for the Bonds.

                  "Bond Purchase Fund" shall mean the Bond Purchase Fund
      established pursuant to the Bond Purchase Trust Agreement.

                  "Bond Purchase Trust Agreement" shall mean the Bond Purchase
      Trust Agreement dated as of the date hereof between the Authority and the
      Registrar and Paying Agent, as from time to time amended or supplemented.

                  "Bond Year" shall have the meaning set forth in the Tax
      Regulatory Agreement.

                  "Bondholder", "Holder of a Bond" or "Holder" shall mean any
      registered owner of a Bond.

                  "Bonds" shall mean $292,700,000 aggregate principal amount of
      the "Facilities Revenue Bonds, Series 1999A (Consolidated Edison Company
      of New York, Inc. Project)" issued as authorized in Section 2.02 at any
      time Outstanding.

                  "Broker-Dealer" shall mean any broker-dealer (as defined in
      the Securities Exchange Act), commercial bank or other entity permitted by
      law to perform the functions required of a Broker-Dealer set forth in the
      Auction Procedures (i) that is an Agent Member (or an affiliate of an
      Agent Member), (ii) that has been selected by the Auction Agent and the
      Company with the consent of the Authority, and (iii) that has entered into
      a Broker-Dealer Agreement with the Auction Agent and the Company that
      remains effective.


                                       7


                  "Broker-Dealer Agreement" shall mean each agreement applicable
      to the Auction Rate Bonds, between a Broker-Dealer, the Company and the
      Auction Agent pursuant to which the Broker-Dealer, among other things,
      agrees to participate in Auctions as set forth in the Auction Procedures,
      as from time to time amended and supplemented.

                  "Business Day" shall mean any day other than a Saturday,
      Sunday or other day on which the New York Stock Exchange or banks are
      authorized or obligated by law or executive order to close in New York,
      New York, or any city in which is located the principal corporate trust
      office of the Trustee or the office of an issuer of a Support Facility at
      which demands for a draw on, or borrowing or payment under, the Support
      Facility will be made.

                  "Calculation Period" shall mean (a) during any Commercial
      Paper Rate Period following a Change in the Interest Rate Mode to a
      Commercial Paper Rate Period, the period from and including the effective
      date of the Change in the Interest Rate Mode to a Commercial Paper Rate
      Period to but not including any day not more than 270 days thereafter
      which is a day immediately preceding a Business Day established by the
      Remarketing Agent pursuant to Section 3.02 and, thereafter, any
      Calculation Period established by the Remarketing Agent pursuant to
      Section 3.02 which shall end on a day not later than 270 days from the
      commencement thereof; (b) during any Daily Rate Period, the period from
      and including a Business Day to but not including the next succeeding
      Business Day; (c) during the first Weekly Rate Period, the period from and
      including the date of issuance of the Bonds to and including the following
      Tuesday, and thereafter the period from and including Wednesday of each
      week to and including the following Tuesday and during any other Weekly
      Rate Period following a Change in the Interest Rate Mode to a Weekly Rate,
      the period from and including the effective date of the Change in the
      Interest Rate Mode to and including the following Tuesday, and,
      thereafter, the period from and including Wednesday of each week to and
      including the following Tuesday; (d) during any Monthly Rate Period
      following a Change in the Interest Rate Mode to a Monthly Rate, the period
      from and including the effective date of the Change in the Interest Rate
      Mode to but excluding the first Business Day of the following month, and,
      thereafter each period from and including the first Business Day of the
      month to but excluding the first Business Day of the following month; (e)
      during any Semi-annual Rate Period following a Change in the Interest Rate
      Mode to a Semi-annual Rate, the period from and including the effective
      date of the Change in the Interest Rate Mode to but excluding the next
      succeeding Interest Payment Date and, thereafter, each period from and
      including the day following the end of the last Calculation Period to but
      excluding the next succeeding Interest Payment Date; (f) during any Term
      Rate Period, any period of not less than 365 days from and including a
      Business Day to and including any day (established by the Remarketing
      Agent pursuant to Section 4.01.1) not later than the day prior to the
      Stated Maturity; and (g) during any Fixed Rate Period following a Change
      in the Interest Rate Mode to a Fixed Rate, the period from and including
      the effective date of the Change in the Interest Rate Mode through the day
      immediately preceding the earlier of (x) the effective date of another
      Change in the Interest Rate Mode, or (y) the Stated Maturity.


                                       8


                  "Change in the Interest Rate Mode" shall mean any change in
      the type of interest rate borne by the Bonds pursuant to Section 4.01 or
      Section 4.02.

                  "Change of Preference Law" shall mean any amendment to the
      Code or other statute enacted by the Congress of the United States or any
      temporary, proposed or final regulation promulgated by the United States
      Treasury, after the date hereof which (a) changes or would change any
      deduction, credit or other allowance allowable in computing liability for
      any federal tax with respect to, or (b) imposes, or would impose, or
      increases or would increase any federal tax (including, but not limited
      to, preference or excise taxes) upon, any interest earned by any holder of
      bonds the interest on which is excluded from federal gross income under
      Section 103 of the Code.

                  "Closing Date" shall mean the date on which the Note became
      legally effective, the same being the date on which the Bonds were paid
      for by and delivered to the original purchasers thereof.

                  "Code" shall mean the Internal Revenue Code of 1986, as
      amended from time to time. Each reference to a section of the Code herein
      shall be deemed to include the United States Treasury Regulations proposed
      or in effect thereunder and applied to the Bonds or the use of proceeds
      thereof, and also includes all amendments and successor provisions unless
      the context clearly requires otherwise.

                  "Commercial Paper Dealers" shall mean Lehman Commercial Paper
      Inc. and CS First Boston Corporation or any other commercial paper dealers
      THAT MAY BE specified by the Authority at the request of the Company at
      the time of any Change in the Interest Rate Mode to an Auction Rate, or in
      lieu of any thereof, their respective affiliates or successors, provided
      that any such entity is a commercial paper dealer and, if not, as replaced
      by the Substitute Commercial Paper Dealer.

                  "Commercial Paper Period Record Date" shall mean, with respect
      to each Interest Payment Date during a Commercial Paper Rate Period, the
      Business Day next preceding such Interest Payment Date.


                                       9


                  "Commercial Paper Rate" shall mean with respect to each
      Calculation Period during a Commercial Paper Rate Period, a rate or rates
      of interest equal to the rate or rates of interest per annum established
      and certified to the Trustee (with a copy to the Authority, the Registrar
      and Paying Agent and the Company) by the Remarketing Agent no later than
      12:00 noon (New York City time) on and as of the Determination Date as the
      minimum rate or rates of interest per annum which, in the opinion of the
      Remarketing Agent, would be necessary on and as of such day to remarket
      Bonds in a secondary market transaction at a price equal to the principal
      amount thereof; provided that such rate or rates of interest shall not
      exceed the lesser of 110% of the Commercial Paper Rate Index on and as of
      such date and the Maximum Allowed Rate.

                  "Commercial Paper Rate Index" shall mean with respect to the
      Determination Date of each Calculation Period during a Commercial Paper
      Rate Period, the average of yield evaluations at par, determined by the
      Indexing Agent, of securities (whether or not actually issued) all of
      which shall have a term as near as practicable to such Calculation Period
      or which are subject to optional or mandatory tender by the owner thereof
      at the end of a term as near as practicable to such Calculation Period,
      the interest on which is not included in gross income for federal income
      tax purposes, of no fewer than ten Component Issuers selected by the
      Indexing Agent, including issuers of commercial paper, project notes, bond
      anticipation notes and tax anticipation notes, computed by the Indexing
      Agent on and as of such day. If the Bonds are rated by a Rating Agency in
      its highest note or commercial paper rating category or one of its two
      highest long-term debt rating categories, each Component Issuer must (a)
      have outstanding securities rated by a Rating Agency in its highest note
      or commercial paper rating category or (b) not have outstanding notes or
      commercial paper rated by a Rating Agency but have outstanding securities
      rated by a Rating Agency in one of its two highest long-term debt rating
      categories. If the Bonds are rated by a Rating Agency in a rating category
      that is lower than its highest note or commercial paper rating category or
      its two highest long-term debt rating categories (and the Bonds are not
      rated in one of such categories by the other Rating Agency), each
      Component Issuer must (a) have outstanding securities rated by a Rating
      Agency in its note or commercial paper rating category which is the same
      or correlative, in the Indexing Agent's judgment, to the note or
      commercial paper rating category or the long-term debt rating category of
      the Bonds or (b) have outstanding securities rated by a Rating Agency in
      the same long-term debt rating category as the Bonds are rated by that
      Rating Agency and not have any outstanding notes or commercial paper rated
      by such Rating Agency. The Indexing Agent may change the Component Issuers
      from time to time in its discretion, subject to the foregoing
      requirements. In addition, at the request of the Company and upon delivery
      to the Trustee of an Opinion of Bond Counsel that such action will not
      adversely affect the exclusion of interest on the Bonds from gross income
      of the owners thereof for federal income tax purposes, the Authority, with
      the consent of the Company, may designate a new method of setting the
      Commercial Paper Rate Index in the event any of the above-described
      methods are determined by the Authority to be unavailable, impracticable
      or unrealistic in the market place.


                                       10


                  "Commercial Paper Rate Period" shall mean any period during
      which the Bonds bear interest at a Commercial Paper Rate or Rates, which
      period shall commence on the effective date of a Change in the Interest
      Rate Mode to a Commercial Paper Rate or Rates, as the case may be, and
      extend through the day immediately preceding the earlier of (a) the
      effective date of another Change in the Interest Rate Mode or (b) the
      Stated Maturity.

                  "Commercial Paper/Treasury Rate" on any date of determination
      shall mean with respect to Auction Rate Bonds (i) in the case of any
      Auction Period of less than 49 days, the interest equivalent of the 30-day
      rate, (ii) in the case of any Auction Period of 49 days or more and but
      less than 70 days, the interest equivalent of the 60-day rate, (iii) in
      the case of any Auction Period of 70 days or more but less than 85 days,
      the arithmetic average of the interest equivalent of the 60-day and 90-day
      rates, (iv) in the case of any Auction Period of 85 days or more but less
      than 99 days, the interest equivalent of the 90-day rate; (v) in the case
      of any Auction Period of 99 days or more but less than 120 days, the
      arithmetic average of the interest equivalent of the 90-day and 120-day
      rates, (vi) in the case of any Auction Period of 120 days or more but
      less than 141 days, the interest equivalent of the 120-day rate, (vii) in
      the case of any Auction Period of 141 days or more but less than 162 days,
      the arithmetic average of the interest equivalent of the 120-day and
      180-day rates, (viii) in the case of any Auction Period of 162 days or
      more but less than 183 days, the interest equivalent of the 180-day rate,
      and (ix) in the case of any Auction Period of 183 days or more, the
      Treasury Rate for such Auction Period. The foregoing rates shall in all
      cases, except with respect to the Treasury Rate, be rates on commercial
      paper placed on behalf of issuers whose corporate bonds are rated "AA" by
      S&P, or the equivalent of such rating by Moody's, as made available on a
      discount basis or otherwise by the Federal Reserve Bank of New York for
      the Business Day immediately preceding such date of determination, or in
      the event that the Federal Reserve Bank of New York does not make
      available any such rate, then the arithmetic average of such rates, as
      quoted on a discount basis or otherwise, by the Commercial Paper Dealers,
      to the Auction Agent for the close of business on the Business Day
      immediately preceding such date of determination.

      If any Commercial Paper Dealer does not quote a commercial paper rate
      required to determine the Commercial Paper/Treasury Rate, the Commercial
      Paper/Treasury Rate shall be determined on the basis of a commercial paper
      quotation or quotations furnished by the remaining Commercial Paper Dealer
      or Commercial Paper Dealers and any Substitute Commercial Paper Dealer or
      Substitute Commercial Paper Dealers selected by the Authority at the
      request of the Company to provide such quotation or quotations not being
      supplied by any Commercial Paper Dealer or Commercial Paper Dealers, as
      the case may be, or if the Authority does not select any such Substitute
      Commercial Paper Dealer or Substitute Commercial Paper Dealers, by the
      remaining Commercial Paper Dealer or Commercial Paper Dealers. For
      purposes of this definition, the "interest equivalent" of a rate stated on
      a discount basis (a "discount rate") for commercial paper of a given day's
      maturity shall be equal to the product of (A) 100 times (B) the quotient
      (rounded upwards to the next higher one-thousandth (.001) of 1%) of (x)
      the discount rate (expressed in decimals) divided by (y) the difference
      between (1) 1.00 and (2) a fraction the numerator of which shall be the
      product of the discount rate (expressed in


                                       11


      decimals) times the number of days in which such commercial paper matures
      and the denominator of which shall be 360. In no event shall the
      Commercial Paper/Treasury Rate be greater than the lesser of 15% or the
      maximum rate permitted by applicable law.

                  "Commission" shall mean the Securities and Exchange
      Commission.

                  "Company" shall mean Consolidated Edison Company of New York,
      Inc., and any surviving, resulting or transferee corporation as provided
      in Section 5.17 of the Participation Agreement.

                  "Component Issuers" shall mean issuers of securities, the
      interest on which is excluded from gross income for federal income tax
      purposes, selected by the Indexing Agent.

                  "Computation Date" shall mean each date which is one (1)
      Business Day prior to any Determination Date.

                  "Computation Period" shall have the meaning set forth in the
      Tax Regulatory Agreement.

                  "Credit Facility" shall mean any Support Facility which
      provides for the payments referred to in clause (ii) of the definition
      thereof.

                  "Credit Facility Issuer" shall mean any bank or banks or other
      financial institution or institutions, having issued any Credit Facility.

                  "Current Adjustable Rate" shall mean the interest rate borne
      by Bonds immediately prior to a Change in the Interest Rate Mode or the
      establishment of a Fixed Rate.

                  "Daily Period Record Date" shall mean, with respect to each
      Interest Payment Date during a Daily Rate Period, the Business Day next
      preceding such Interest Payment Date.

                  "Daily Rate" shall mean with respect to each Calculation
      Period during a Daily Rate Period, a rate of interest equal to the rate of
      interest per annum established and certified to the Trustee (with a copy
      to the Authority, the Registrar and Paying Agent and the Company) by the
      Remarketing Agent no later than 12:00 noon (New York City time) on and as
      of the Determination Date as the minimum rate of interest per annum which,
      in the opinion of the Remarketing Agent, would be necessary on and as of
      such day to remarket Bonds in a secondary market transaction at a price
      equal to the principal amount thereof plus accrued interest thereon;
      provided that such


                                       12


      rate of interest shall not exceed the lesser of 110% of the Daily Rate
      Index on and as of such day and the Maximum Allowed Rate.

                  "Daily Rate Index" shall mean with respect to the
      Determination Date of each Calculation Period during a Daily Rate Period,
      the average of one-day yield evaluations at par, determined by the
      Indexing Agent, of securities (whether or not actually issued), the
      interest on which is not included in gross income for federal income tax
      purposes, of no fewer than ten Component Issuers selected by the Indexing
      Agent and which have redemption or tender provisions comparable to the
      then applicable provisions of the Bonds, computed by the Indexing Agent on
      and as of the Determination Date. If the Bonds are rated by a Rating
      Agency, each Component Issuer must have outstanding securities rated by a
      Rating Agency in a short-term debt rating category which is the same as
      the short-term debt rating category in which the Bonds are rated. The
      specific issuers included in the Component Issuers may be changed from
      time to time by the Indexing Agent in its discretion and shall be issuers
      whose securities, in the judgment of the Indexing Agent, have
      characteristics similar to the Bonds. In addition, at the request of the
      Company and upon delivery to the Trustee of an Opinion of Bond Counsel
      that such action will not adversely affect the exclusion of interest on
      the Bonds from gross income of the owners thereof for federal income tax
      purposes, the Authority, with the consent of the Company, may designate a
      new method of setting the Daily Rate Index in the event any of the
      above-described methods are determined by the Authority to be unavailable,
      impracticable or unrealistic in the market place.

                  "Daily Rate Period" shall mean any period during which Bonds
      bear interest at a Daily Rate which period shall commence on the effective
      date of the Change in the Interest Rate Mode to a Daily Rate and shall
      extend through the day immediately preceding the earlier of (a) the
      effective date of a Change in the Interest Rate Mode or (b) the Stated
      Maturity.

                  "Determination Date" shall mean, for any Calculation Period,
      the first Business Day occurring during such Calculation Period; provided,
      however, with respect to Bonds which bear interest at the Weekly Rate, for
      the Calculation Period commencing on the Closing Date, the Determination
      Date shall mean the Business Day immediately preceding such Closing Date,
      and thereafter, each Wednesday or, if such Wednesday is not a Business
      Day, the Business Day next preceding such Wednesday.

                  "Direct-Pay Credit Facility" shall mean any Credit Facility
      which by its terms permits the Trustee to draw moneys thereunder for
      deposit in the Bond Fund.

                  "Event of Default" shall mean Event of Default as defined in
      Section 12.01.

                  "Existing Holder" shall mean with respect to Auction Rate
      Bonds a person that is listed as the beneficial owner of Auction Rate
      Bonds in the records of the Auction Agent.


                                       13


                  "Fiscal Year" shall mean the fiscal year of the Company as
      established from time to time by the Company which as of the Closing Date
      is the twelve-month period commencing on January 1 of each calendar year
      and ending on December 31 of the next calendar year.

                  "Fitch" shall mean Fitch, Inc. and its successor or
      successors, and if such corporation shall for any reason no longer perform
      the functions of a securities rating agency or shall be replaced by some
      other nationally recognized rating agency by the Authority at the request
      of the Company, "Fitch" shall be deemed to refer to such other nationally
      recognized rating agency designated by the Authority at the request of the
      Company.

                  "Fixed Rate" shall mean, with respect to a Fixed Rate Period,
      the rate of interest per annum established and certified to the Trustee
      (with a copy to the Authority, the Registrar and Paying Agent and the
      Company) by the Remarketing Agent no later than 12:00 noon (New York City
      time) on and as of such date as the minimum rate of interest per annum
      which, in the opinion of the Remarketing Agent, would be necessary on and
      as of such date to remarket the Bonds in a secondary market transaction at
      a price equal to 100% of the Outstanding principal amount thereof;
      provided that such rate of interest shall not exceed the lesser of 110% of
      the Fixed Rate Index on and as of such date and 18% per annum;

                  "Fixed Rate Conversion Date" shall have the meaning set forth
      in Section 4.02.

                  "Fixed Rate Index" shall mean with respect to a Fixed Rate
      Conversion Date, the average of the yield evaluations (on the basis of
      full coupon securities trading at par with a term approximately equal to
      the Fixed Rate Period) of securities (whether or not actually issued), the
      interest on which is not included in gross income for federal income tax
      purposes, of no fewer than ten Component Issuers selected by the Indexing
      Agent and which have a long-term rating by a Rating Agency in the same
      rating category as the Bonds are rated at the time by such Rating Agency
      or, if no such bonds are so rated, shall be debt which, in the judgment of
      the Indexing Agent, is of credit quality comparable to that of the Bonds,
      computed by the Indexing Agent on and as of the Fixed Rate Conversion
      Date. In the event that the Indexing Agent fails to compute the Fixed Rate
      Index and no other qualified municipal securities evaluation service can
      be appointed Indexing Agent by the Authority, the Fixed Rate Index shall
      be determined by the Remarketing Agent and shall be 90% of the average
      yield shown for the most recent calendar month for United States Treasury
      notes or bonds having the same number of years to maturity as the number
      of 12-month periods (or months if the Fixed Rate Period is less than one
      year) in the Fixed Rate Period, as published in the Federal Reserve
      Bulletin in the last issue before the Fixed Rate Conversion Date. If that
      issue does not contain such a yield, the Fixed Rate Index will be
      determined by linear interpolation between the yields shown in that issue
      for United States Treasury

                                       14


      notes and bonds having the next shorter and next longer number of years
      (or months) to maturity. In addition, at the request of the Company and
      upon delivery to the Trustee of an Opinion of Bond Counsel that such
      action will not adversely affect the exclusion of interest on the Bonds
      from gross income of the owners thereof for federal income tax purposes,
      the Authority, with the consent of the Company, may designate a new method
      of setting the Fixed Rate Index in the event any of the above-described
      methods are determined by the Authority to be unavailable, impracticable
      or unrealistic in the market place.

                  "Fixed Rate Period" shall mean any period during which Bonds
      bear interest at a Fixed Rate, which period shall commence on the
      effective date of a Change in the Interest Rate Mode to a Fixed Rate, and
      shall extend through the day immediately preceding the earlier of (a) the
      effective date of another Change in the Interest Rate Mode, or (b) the
      Stated Maturity.

                  "Fixed Rate Record Date" shall mean, with respect to each
      Interest Payment Date during a Fixed Rate Period, the fifteenth day of the
      month next preceding such Interest Payment Date, or, if such day shall not
      be a Business Day, the next preceding Business Day.

                  "Governmental Obligations" shall mean any of the following
      which are non-callable:

                  (a) direct general obligations of, or obligations the payment
            of the principal of and interest on which is unconditionally
            guaranteed by, the United States of America; and

                  (b) bonds, debentures or notes issued by Government National
            Mortgage Association, Federal Financing Bank, Federal Farm Credit
            Bank, Federal Land Bank, Federal Home Loan Bank, Farmers Home
            Administration, Federal Home Mortgage Association or any other
            comparable federal agency hereafter created to the extent that said
            obligations are unconditionally guaranteed by the United States of
            America.

                  "Hold Order" shall mean with respect to the Auction Rate
      Bonds, Hold Order as defined in Section 3.06.

                  "Indenture" shall mean this Trust Indenture dated as of July
      1, 1999 between the Authority and the Trustee, as the same may be amended
      or supplemented.

                  "Indexing Agent" shall mean the Indexing Agent appointed in
      accordance with Section 11.24.

                  "Initial Liquidity Facility" shall mean the Letter of Credit
      dated July 29, 1999 issued by Morgan Guaranty Trust Company of New York.


                                       15


                  "Initial Liquidity Facility Issuer" shall mean Morgan Guaranty
      Trust Company of New York.

                  "Interest Payment Date" shall mean:

                  (a) during each Commercial Paper Rate Period, the Business Day
            immediately succeeding the last day of any Calculation Period;

                  (b) during an Auction Rate Period (i) for an Auction Period of
            91 days or less, the Business Day immediately succeeding such
            Auction Period and (ii) for an Auction Period of more than 91 days,
            each 13th Wednesday after the first day of such Auction Period or
            the next Business Day if such Wednesday is not a Business Day, and
            the Business Day immediately succeeding the last day of each such
            Auction Period;

                  (c) during each Daily Rate Period, the first Business Day of
            each month thereof;

                  (d) during each Weekly Rate Period, the first Business Day of
            each month thereof;

                  (e) during each Monthly Rate Period, the first Business Day of
            each month thereof;

                  (f) during each Semi-annual Rate Period, (i) the first
            Business Day of the sixth calendar month following the month in
            which the first day of such Semi-annual Rate Period occurred, (ii)
            each anniversary of the date so determined, and (iii) each
            anniversary of the first day of the first month of such Semi-annual
            Rate Period;

                  (g) during each Term Rate Period, (i) the first Business Day
            of the sixth calendar month following the month in which the first
            day of such Term Rate Period occurred, (ii) each anniversary of the
            date so determined, (iii) each anniversary of the first day of the
            first month of such Term Rate Period, and (iv) the Business Day
            immediately succeeding such Term Rate Period;

                  (h) the May 1 or November 1 next succeeding a Fixed Rate
            Conversion Date and each May 1 and November 1 thereafter; provided,
            however, that if the May 1 or November 1 next succeeding a Fixed
            Rate Conversion Date occurs less than twenty-one (21) days after
            such Fixed Rate Conversion Date, the first Interest Payment Date
            shall be the second such date following such Fixed Rate Conversion
            Date;

                  (i) a Fixed Rate Conversion Date;


                                       16


                  (j) any day on which Bonds are subject to mandatory tender for
            purchase pursuant to Section 5.04, 5.08 or 5.09 or redemption in
            whole pursuant to Section 5.01, 5.05, 5.06 or 5.07; and

                  (k) the Stated Maturity;

         provided, however, that if any such date determined in any of the
         foregoing clauses is not a Business Day, the Interest Payment Date
         shall be the next succeeding day which is a Business Day.

                  "Investment Securities" shall mean any of the following which
      at the time are legal investments under the laws of the State of New York
      for the monies held hereunder:

                  (a) any obligation issued or guaranteed by, or backed by the
            full faith and credit of, the United States of America (including
            any certificates or any other evidence of an ownership interest in
            any such obligation or in specified portions thereof, which may
            consist of specified portions of the principal thereof or the
            interest thereon);

                  (b) deposit accounts in, or certificates of deposit issued by,
            and bankers acceptance of, any bank, trust company or national
            banking association which is a member of the Federal Reserve System
            (which may include the Trustee), having capital stock and surplus
            aggregating not less than $50,000,000;

                  (c) deposit accounts in, or certificates of deposit issued by
            and bankers acceptances of, any bank or trust company having capital
            stock and surplus aggregating not less than $50,000,000 and whose
            obligations are rated not less than "A" or equivalent by Moody's or
            S&P;

                  (d) obligations issued or guaranteed by any person controlled
            or supervised by and acting as an instrumentality of the United
            States of America pursuant to the authority granted by the Congress
            of the United States;

                  (e) commercial paper rated in the highest investment grade or
            next highest investment grade by Moody's or S&P;

                  (f) obligations rated not less than "A" or equivalent by
            Moody's or S&P issued or guaranteed by any state of the United
            States or the District of Columbia, or any political subdivision,
            agency or instrumentality of any such state or District, or issued
            by any corporation;

                  (g) obligations of a public housing authority fully secured by
            contracts with the United States;


                                       17


                  (h) repurchase agreements with any bank or trust company
            organized under the laws of any state of the United States of
            America or any national banking association (including the Trustee)
            or any government bond dealer reporting to, trading with and
            recognized as a primary dealer by, the Federal Reserve Bank of New
            York with respect to any of the foregoing obligations or securities.
            Any repurchase agreement entered into pursuant to this Indenture
            shall, by its terms, permit the Trustee to sell the related
            obligations or securities if the other party to such repurchase
            agreement shall fail to repurchase promptly such obligation or
            security on the day required by the repurchase agreement. All such
            repurchase agreements shall also provide for the delivery of the
            related obligations or securities to the Trustee or a depositary of
            the Trustee;

                  (i) money market or bond mutual funds, which funds have a
            composite investment grade rated not less than "A" or equivalent by
            Moody's or S&P; or

                  (j) investment agreements with any bank or trust company
            organized under the laws of any state of the United States of
            America or any national banking association (including the Trustee)
            or any governmental bond dealer reporting to, trading with and
            recognized as a primary dealer by, the Federal Reserve Bank of New
            York, which has, or the parent company of which has, long-term debt
            rated at least "A" or its equivalent by S&P or Moody's, with respect
            to any of the obligations or securities specified in (a), (d), (e),
            (f) and (g) above. Any investment agreement entered into pursuant to
            this Indenture shall, by its terms provide that (i) the invested
            funds are available for withdrawal without penalty or premium, at
            any time upon not more than seven days' prior notice (which notice
            may be amended or withdrawn at any time prior to the specified
            withdrawal date), and (ii) the investment agreement is the
            unconditional and general obligation of, and is not subordinated to
            any other obligation of, the provider thereof.

      Any such Investment Securities may be held by the Trustee in book entry
      form, whereby certificated securities are held by an independent custodian
      and the Trustee is the beneficial owner of all or a portion of such
      certificated securities.

                  "Liquidity Facility" shall mean a Support Facility which
      provides for the payments referred to in clause (i) of the definition
      thereof.

                  "Liquidity Facility Issuer" shall mean any bank or banks or
      other financial institution or institutions, having issued any Liquidity
      Facility.

                  "Maximum Allowed Rate" shall mean as of any date 15% per
      annum, or if lower, the rate specified as such in any Support Facility
      then in effect; provided, however, that such maximum allowed rate shall
      not exceed the Maximum Rate, if any, permitted by applicable law.


                                       18


                  "Maximum Auction Rate" shall mean on any date of determination
      with respect to Auction Rate Bonds, the lesser of the Maximum Allowed Rate
      and the following (i) in all cases other than as provided in (ii) or (iii)
      below, the interest rate per annum equal to the Applicable Percentage of
      the higher of the After-Tax Equivalent Rate determined on such date with
      respect to a Standard Auction Period and the BMA Index, (ii) with respect
      to any change in an Auction Period and/or the Standard Auction Period
      pursuant to Section 3.04, including any automatic reversion to a Standard
      Auction Period pursuant to Section 3.03, the interest rate per annum equal
      to the highest of (a) the Applicable Percentage of the higher of the
      After-Tax Equivalent Rate determined on such date with respect to a
      Standard Auction Period, and the BMA Index, and (b) the Applicable
      Percentage of the higher of the After-Tax Equivalent Rate determined on
      such date with respect to the Auction Period which is proposed to be
      established and the BMA Index, and (c) the Applicable Percentage of the
      higher of the After-Tax Equivalent Rate determined on such date with
      respect to the Auction Period in effect immediately prior to such proposed
      change in the Auction Period and the BMA Index, or (iii) with respect to
      any Change in the Interest Rate Mode from an Auction Rate pursuant to
      Section 4.01 or any change from an Auction Rate to a Fixed Rate pursuant
      to Section 4.02, the interest rate per annum equal to the higher of (a)
      the Applicable Percentage of the higher of the After-Tax Equivalent Rate
      determined on such date with respect to a Standard Auction Period and the
      BMA Index, and (b) the Applicable Percentage of the higher of the
      After-Tax Equivalent Rate determined on such date with respect to the
      Auction Period in effect immediately prior to such proposed change and the
      BMA Index.

                  "Monthly Period Record Date" shall mean, with respect to each
      Interest Payment Date during a Monthly Period, the Business Day next
      preceding such Interest Payment Date.

                  "Monthly Rate" shall mean with respect to each Calculation
      Period during a Monthly Rate Period, a rate of interest equal to the rate
      of interest per annum established and certified to the Trustee (with a
      copy to the Authority, the Registrar and Paying Agent, and the Company) by
      the Remarketing Agent no later than 12:00 noon (New York City time) on and
      as of the Determination Date as the minimum rate of interest per annum
      which, in the opinion of the Remarketing Agent, would be necessary on and
      as of such day to remarket Bonds in a secondary market transaction at a
      price equal to the principal amount thereof; provided that such rate of
      interest shall not exceed the lesser of 110% of the Monthly Rate Index on
      and as of such date and the Maximum Allowed Rate.

                  "Monthly Rate Index" shall mean with respect to the
      Determination Date of each Calculation Period during a Monthly Rate
      Period, the average of 30-day yield evaluations at par, determined by the
      Indexing Agent, of securities (whether or not actually issued), the
      interest on which is not included in gross income for federal income tax
      purposes, of no fewer than ten Component Issuers selected by the Indexing
      Agent, including issuers of commercial paper, project


                                       19


      notes, bond anticipation notes and tax anticipation notes, computed by the
      Indexing Agent on and as of such day. If the Bonds are rated by a Rating
      Agency in its highest note or commercial paper rating category or one of
      its two highest long-term debt rating categories, each Component Issuer
      must (a) have outstanding securities rated by a Rating Agency in its
      highest note or commercial paper rating category or (b) not have
      outstanding notes or commercial paper rated by a Rating Agency but have
      outstanding securities rated by a Rating Agency in one of its two highest
      long-term debt rating categories. If the Bonds are rated by a Rating
      Agency in a rating category that is lower than its highest note or
      commercial paper rating category or its two highest long-term debt rating
      categories (and the Bonds are not rated in one of such categories by the
      other Rating Agency), each Component Issuer must (a) have outstanding
      securities rated by a Rating Agency in its note or commercial paper rating
      category which is the same or correlative, in the Indexing Agent's
      judgment, to the note or commercial paper rating category or the long-term
      debt rating category of the Bonds or (b) have outstanding securities rated
      by a Rating Agency in the same long-term debt rating category as the Bonds
      are rated by that Rating Agency and not have any outstanding notes or
      commercial paper rated by such Rating Agency. The Indexing Agent may
      change the Component Issuers from time to time in its discretion, subject
      to the foregoing requirements. In addition, at the request of the Company
      and upon delivery to the Trustee of an Opinion of Bond Counsel that such
      action will not adversely affect the exclusion of interest on the Bonds
      from gross income of the owners thereof for federal income tax purposes,
      the Authority, with the consent of the Company, may designate a new method
      of setting the Monthly Rate Index in the event any of the above-described
      methods are determined by the Authority to be unavailable, impracticable
      or unrealistic in the market place.

                  "Monthly Rate Period" shall mean any period during which Bonds
      bear interest at a Monthly Rate which period shall commence with the
      effective date of the Change in the Interest Rate Mode to a Monthly Rate
      and shall extend through the day immediately preceding the earlier of (a)
      the effective date of another Change in the Interest Rate Mode or (b) the
      Stated Maturity.

                  "Moody's" shall mean Moody's Investors Service, Inc., a
      corporation organized and existing under the laws of the State of Delaware
      and its successor or successors, and if such corporation shall for any
      reason no longer perform the functions of a securities rating agency or if
      Moody's shall be replaced, subject to the definition of "prevailing
      rating" in the definition of Applicable Percentage, by some other
      nationally recognized rating agency by the Authority at the request of the
      Company, "Moody's" shall be deemed to refer to such other nationally
      recognized rating agency designated by the Authority at the request of the
      Company.

                  "Note" shall mean the promissory note of the Company executed
      by the Company and delivered to the Trustee, to evidence the obligations
      of the Company to repay the loan made by the Authority pursuant to the
      Participation Agreement.


                                       20


                  "Note Payments" shall mean the portion of the Payments
      required to be made pursuant to Section 4.02 of the Participation
      Agreement and the Note to be applied to the payment of principal of,
      premium, if any, and interest on the Bonds.

                  "Notice of Election to Tender" shall mean the notice given by
      a Holder of Bonds pursuant to Section 5.03.

                  "Opinion of Bond Counsel" shall mean a written opinion of Bond
      Counsel.

                  "Option to Convert" shall mean the Authority's right and
      option to convert the rate of interest payable on the Bonds from an
      Adjustable Rate to a Fixed Rate as provided in Section 4.02.

                  "Order" shall mean with respect to Auction Rate Bonds, an
      Order as defined in Section 3.06.

                  "Outstanding", whether appearing in upper or lower case, when
      used with respect to any Bond shall mean, as of any date, any Bond
      theretofore or thereupon being authenticated and delivered pursuant to
      this Indenture, except:

                  (A) a Bond cancelled by the Trustee or delivered to the
            Trustee for cancellation at or prior to such date;

                  (B) a Bond in lieu of or in substitution for which another
            Bond shall have been issued under Sections 5.10, 5.11, 7.03 , 7.04
            or 7.05; and

                  (C) a Bond or portion thereof deemed to have been paid in
            accordance with Section 15.01;

      provided, however, that with respect to Auction Rate Bonds for the
      purposes of the Auction Procedures on any Auction Date, Auction Rate Bonds
      as to which the Company or any person known to the Auction Agent to be an
      Affiliate of the Company is the Existing Holder thereof shall be
      disregarded and deemed not to be Outstanding.

                  "Overdue Rate" shall mean on any date of determination 265% of
      The higher of the After-Tax Equivalent Rate determined on such date with
      respect to a Standard Auction Period and the BMA Index on such date of
      determination; provided that in no event shall the overdue rate exceed the
      Maximum Allowed Rate.


                                       21


                  "Participation Agreement" shall mean the Participation
      Agreement dated as of July 1, 1999, between the Authority and the Company,
      as amended and supplemented by Supplemental Participation Agreements from
      time to time.

                  "Payments" shall mean collectively the Note Payments and the
      Additional Payments.

                  "Payment Default" shall mean the receipt by the Auction Agent
      of a notice from the Trustee of (i) failure to make payments of principal
      of and premium, if any, or interest on any Bond when the same shall become
      due and payable and (ii) the occurrence of a default by the Bond Insurer
      under the Policy.

                  "Policy" shall mean a Credit Facility issued by the Bond
      Insurer on July 24, 2001 in the form of a financial guaranty insurance
      policy guaranteeing the regularly scheduled payments of principal of and
      interest on the Bonds.

                  "Potential Holder" shall mean A person, including any existing
      holder, who may be interested in acquiring a beneficial interest in
      Auction Rate Bonds in addition to Auction Rate Bonds currently owned by
      such person, if any.

                  "Principal Corporate Trust Office" shall mean the office of
      the Trustee at which at any particular time its corporate trust business
      shall be principally administered, which office at the date hereof is
      located at 452 Fifth Avenue, New York, New York 10018.

                  "Project" shall mean any acquisition, purchase, construction,
      reconstruction, improvement, betterment, extension and equipping, as
      described in Exhibit A and Exhibit B to the Participation Agreement as the
      same may be revised from time to time to reflect any changes or
      substitutions therein, additions thereto, or deletions therefrom permitted
      by the Participation Agreement.

                  "Project Fund" shall mean the special trust fund designated as
      "Consolidated Edison Company of New York, Inc. Series 1999A Project Fund"
      created and established under, and to be held and administered by the
      Trustee as provided in, Section 8.01.


                                       22


                  "Purchase Price" shall mean the purchase price of Bonds
      tendered or deemed tendered for purchase pursuant to Section 5.03, 5.04,
      5.08 or 5.09, consisting of the principal amount of such Bonds together
      with any accrued and unpaid interest plus, in the event Bonds bearing
      interest at a Term Rate or a Fixed Rate are subject to tender for purchase
      pursuant to Section 5.04, any premium which would have been required to be
      paid as part of redemption price on any date on which such Bonds are
      subject to tender for purchase if such Bonds were subject to optional
      redemption pursuant to Section 5.01 on such date. With respect to Bonds
      tendered for purchase on an Interest Payment Date, Purchase Price shall
      include any accrued interest on such Bonds which is not otherwise being
      paid pursuant to Section 9.03(a).

                  "Purchaser's Letter" shall mean a letter substantially in the
      form required by the Auction Agency Agreement, addressed to, among others,
      the Authority, the Auction Agent and a Broker-Dealer.

                  "Rate Index" means the Daily Rate Index, the Fixed Rate Index,
      the Commercial Paper Rate Index, the Monthly Rate Index, the Semi-annual
      Rate Index, the Term Rate Index, or the Weekly Rate Index.

                  "Rating Agency" means Moody's, if the Bonds are then rated by
      Moody's, S&P, if the Bonds are then rated by S&P, and Fitch, if the Bonds
      are then rated by Fitch.

                  "rating category" shall mean one of the generic rating
      categories of a Rating Agency, without regard to any refinement or
      gradation of such rating category by a numerical modifier, plus or minus
      sign, or otherwise.

                  "Record Date", at any time, shall mean each Commercial Paper
      Period Record Date during a Commercial Paper Rate Period, each Auction
      Rate Bonds Period Record Date during an Auction Rate Period, each Daily
      Period Record Date during a Daily Rate Period, each Weekly Period Record
      Date during a Weekly Rate Period, each Monthly Period Record Date during a
      Monthly Rate Period, each Semi-annual Period Record Date during a
      Semi-annual Rate Period, each Term Period Record Date during a Term Rate
      Period and each Fixed Rate Record Date during a Fixed Rate Period.

                  "Registrar and Paying Agent" shall mean HSBC Bank USA in its
      separate capacity as Registrar and Paying Agent for the Bonds, or its
      successors or assigns.

                  "Remarketing Agent" shall mean the Remarketing Agent or
      Remarketing Agents appointed pursuant to Section 11.14, its or their
      successors or assigns, including without limitation any "market agent"
      appointed in connection with Auction Rate Bonds.


                                       23


                  "Remarketing Agreement" shall mean the Remarketing Agreement
      among the Company and the Remarketing Agents dated as of July 29, 1999 and
      any similar agreement or agreements between the Company and one or more
      successor Remarketing Agents, as from time to time amended.

                  "Revenues" shall mean and include all income, revenues and
      monies derived by the Authority under the Participation Agreement and the
      Note (except administrative compensation and indemnification payable under
      the Participation Agreement), and, without limiting the generality of the
      foregoing, shall include to the extent provided in this Indenture,
      earnings on the investment of monies held under this Indenture and the
      proceeds of the sale of any such investments. The term "Revenues" shall
      not include monies received as proceeds from the sale of the Bonds or any
      other bonds, notes or evidences of indebtedness or as grants or gifts.

                  "S&P" shall mean Standard & Poor's Ratings Services, a
      division of The McGraw-Hill Companies and its successor or successors, and
      if such corporation shall for any reason no longer perform the functions
      of a securities rating agency or if S&P shall be replaced, subject to the
      definition of "prevailing rating" in the definition of Applicable
      Percentage, by some other nationally recognized rating agency by the
      Authority at the request of the Company, "S&P" shall be deemed to refer to
      such other nationally recognized rating agency designated by the Authority
      at the request of the Company.

                  "Securities Depository" shall mean The Depository Trust
      Company and its successors and assigns or if (i) the then Securities
      Depository resigns from its functions as depository of the Bonds or (ii)
      the Authority discontinues use of the then Securities Depository pursuant
      to Section 2.03, any other securities depository, which agrees to follow
      the procedures required to be followed by a Securities Depository in
      connection with the Bonds and which is selected by the Authority, with the
      consent of the Company, the Trustee, the Auction Agent and the Remarketing
      Agent pursuant to Section 2.03.

                  "Securities Exchange Act" shall mean the Securities Exchange
      Act of 1934, as amended.

                  "Sell Order" shall mean with respect to Auction Rate Bonds,
      Sell Order as defined in Section 3.06.

                  "Semi-annual Period Record Date" shall mean, with respect to
      each Interest Payment Date during a Semi-annual Rate Period, the fifteenth
      day of the calendar month next preceding such Interest Payment Date.

                  "Semi-annual Rate" shall mean with respect to each Calculation
      Period during a Semi-annual Rate Period, a rate of interest equal to the
      rate of interest per annum established and


                                       24


      certified to the Trustee (with a copy to the Authority, the Registrar and
      Paying Agent and the Company) by the Remarketing Agent no later than 12:00
      noon (New York City time) on and as of the Determination Date as the
      minimum rate of interest per annum which, in the opinion of the
      Remarketing Agent, would be necessary on and as of such day to remarket
      Bonds in a secondary market transaction at a price equal to the principal
      amount thereof; provided that such rate of interest shall not exceed the
      lesser of 110% of the Semi-annual Rate Index on and as of such date and
      the Maximum Allowed Rate.

                  "Semi-annual Rate Index" shall mean with respect to the
      Determination Date of each Calculation Period during a Semi-annual Rate
      Period, the average of six-month yield evaluations at par, determined by
      the Indexing Agent, of securities (whether or not actually issued), the
      interest on which is not included in gross income for federal income tax
      purposes, of no fewer than ten Component Issuers selected by the Indexing
      Agent, including issuers of commercial paper, project notes, bond
      anticipation notes and tax anticipation notes, computed by the Indexing
      Agent on and as of such day. If the Bonds are rated by a Rating Agency in
      its highest note or commercial paper rating category or one of its two
      highest long-term debt rating categories, each Component Issuer must (a)
      have outstanding securities rated by a Rating Agency in its highest note
      or commercial paper rating category or (b) not have outstanding notes or
      commercial paper rated by a Rating Agency but have outstanding securities
      rated by a Rating Agency in one of its two highest long-term debt rating
      categories. If the Bonds are rated by a Rating Agency in a rating category
      that is lower than its highest note or commercial paper rating category or
      its two highest long-term debt rating categories (and the Bonds are not
      rated in one of such categories by the other Rating Agency), each
      Component Issuer must (a) have outstanding securities rated by a Rating
      Agency in its note or commercial paper rating category which is the same
      or correlative, in the Indexing Agent's judgment, to the note or
      commercial paper rating category or the long-term debt rating category of
      the Bonds or the other debt obligations supported by support facilities
      issued by the issuer of a Support Facility or (b) have outstanding
      securities rated by a Rating Agency in the same long-term debt rating
      category as the Bonds are rated by that Rating Agency and not have any
      outstanding notes or commercial paper rated by such Rating Agency. The
      Indexing Agent may change the Component Issuers from time to time in its
      discretion, subject to the foregoing requirements. In addition, at the
      request of the Company and upon delivery to the Trustee of an Opinion of
      Bond Counsel that such action will not adversely affect the exclusion of
      interest on the Bonds from gross income of the owners thereof for federal
      income tax purposes, the Authority, with the consent of the Company, may
      designate a new method of setting the Semi-annual Rate Index in the event
      any of the above-described methods are determined by the Authority to be
      unavailable, impracticable or unrealistic in the market place.

                  "Semi-annual Rate Period" shall mean any period during which
      Bonds bear interest at a Semi-annual Rate, which period shall commence on
      the effective date of a Change in the Interest Rate Mode to a Semi-annual
      Rate, and shall extend through the day immediately preceding


                                       25


      the earlier of (a) the effective date of another Change in the Interest
      Rate Mode, or (b) the Stated Maturity.

                  "Standard Auction Period" initially shall mean an auction
      period of 35 days, and after the establishment of a different Standard
      Auction Period pursuant to Section 3.04, shall mean such different
      Standard Auction Period.

                  "Stated Maturity," with respect to each series of Bonds shall
      mean May 1, 2034, provided that, subject to the next sentence, in any case
      where the date of maturity of, or payment of premium on, interest on, or
      principal of, the Bonds or the date fixed for redemption of any Bonds
      shall be on a day other than a Business Day, then payment of interest,
      principal and premium, if any, need not be made on such date but may be
      made (without additional interest) on the next succeeding Business Day,
      with the same force and effect as if made on the date of maturity or the
      date fixed for redemption. Notwithstanding anything in this Indenture to
      the contrary, in no event shall the final maturity date of the Bonds
      extend beyond 35 years from the Closing Date, and the length of any
      Auction Period shall be reduced at the discretion of the Authority to the
      extent necessary to ensure compliance with the provisions of this
      sentence.

                  "Statutory Corporate Tax Rate" shall mean as of any date of
      determination the highest tax rate bracket (expressed in decimals) now or
      hereafter applicable in each taxable year on the taxable income of every
      corporation as set forth in Section 11 of the Code or any successor
      section without regard to any minimum additional tax provision or
      provisions regarding changes in rates during a taxable year, which on the
      date hereof is .35. Any change in the Statutory Corporate Tax Rate shall
      be evidenced by a certificate of the Company.

                  "Submission Deadline" shall mean 1:00 p.m., New York City
      time, on any Auction Date or such other time on any such Auction Date by
      which Broker-Dealers are required to submit Orders to the Auction Agent as
      specified by the Auction Agent from time to time.

                  "Submitted Bid" shall mean with respect to Auction Rate Bonds,
      Submitted Bid as defined in Section 3.08.

                  "Submitted Hold Order" shall mean with respect to Auction Rate
      Bonds, Submitted Hold Order as defined in Section 3.08.

                  "Submitted Order" shall mean with respect to Auction Rate
      Bonds, Submitted Order as defined in Section 3.08.

                  "Submitted Sell Order" shall mean with respect to Auction Rate
      Bonds, Submitted Sell Order as defined in Section 3.08.


                                       26


                  "Substitute Commercial Paper Dealers" shall mean Merrill
      Lynch, Pierce, Fenner & Smith Incorporated or any other commercial paper
      dealers specified by the Authority at the request of the Company at the
      time of any Change in the Interest Rate Mode to an Auction Rate or their
      respective affiliates or successors, if any such person is a commercial
      paper dealer, provided that none of such persons nor any of their
      affiliates or successors shall be a Commercial Paper Dealer.

                  "Substitute U.S. Government Securities Dealer" shall mean CS
      First Boston Corporation or Merrill Lynch, Pierce, Fenner & Smith
      Incorporated or any other dealer or dealers in U.S. government securities
      that may be specified by the Authority at the request of the Company at
      the time of a Change in the Interest Rate Mode to an Auction Rate, or
      their respective affiliates or successors, if any such person is a dealer
      in U.S. government securities, provided that none of such persons nor any
      of their affiliates or successors shall be a U.S. Government Securities
      Dealer.

                  "Sufficient Clearing Bids" shall mean with respect to Auction
      Rate Bonds, Sufficient Clearing Bids as defined in Section 3.08.

                  "Supplemental Indenture" shall mean any indenture between the
      Trustee and the Authority entered into pursuant to and in compliance with
      the provisions of Article XIV hereof amending or supplementing the
      provisions of this Indenture as originally executed or as theretofore
      amended or supplemented.

                  "Supplemental Participation Agreement" shall mean an agreement
      supplementing or amending the Participation Agreement.

                  "Support Facility" shall mean any instrument satisfactory to
      the Authority entered into or obtained in connection with the Bonds, such
      as a letter of credit, committed line of credit, insurance policy, surety
      bond or standby bond purchase agreement, or any combination of the
      foregoing, and issued by a bank or banks, other financial institution or
      institutions, or any combination of the foregoing which provides for the
      payment of (i) the Purchase Price on Bonds tendered for purchase pursuant
      to the provisions hereof and the Bond Purchase Trust Agreement and/or (ii)
      principal of and interest on all Bonds coming due and payable during the
      term thereof. The Letter of Credit dated July 29, 1999 issued by Morgan
      Guaranty Trust Company of New York shall constitute a Support Facility
      within the meaning of this Indenture.

                  "Support Facility Issuer" shall mean any bank or banks, or
      other financial institution or institutions which is the issuer of any
      Support Facility.


                                       27


                  "Tax Regulatory Agreement" shall mean the Tax Regulatory
      Agreement, dated the Closing Date, between the Authority and the Company,
      and any and all modifications, alterations, amendments and supplements
      thereto.

                  "Term Period Record Date" shall mean, with respect to each
      Interest Payment Date during a Term Rate Period, the fifteenth day of the
      month next preceding such Interest Payment Date.

                  "Term Rate" shall mean with respect to each Calculation Period
      during a Term Rate Period, a rate of interest equal to the rate of
      interest per annum established and certified to the Trustee (with a copy
      to the Authority, the Registrar and Paying Agent and the Company) by the
      Remarketing Agent no later than 12:00 noon (New York City time) on and as
      of the Determination Date as the minimum rate of interest per annum which,
      in the opinion of the Remarketing Agent, would be necessary on and as of
      such day to remarket such Bonds in a secondary market transaction at a
      price equal to the principal amount thereof; provided that such rate of
      interest shall not exceed the lesser of 110% of the Term Rate Index on and
      as of such date and the Maximum Allowed Rate.

                  "Term Rate Index" shall mean with respect to the Determination
      Date of each Calculation Period during a Term Rate Period, the average of
      the yield evaluations at par, determined by the Indexing Agent, of
      securities (whether or not actually issued), having a term approximately
      equal to the Term Rate Period or which are subject to optional or
      mandatory tender by the owner thereof at the end of a term approximately
      equal to the Term Rate Period, the interest on which is not included in
      gross income for federal income tax purposes, of no fewer than ten
      Component Issuers selected by the Indexing Agent, computed by the Indexing
      Agent on and as of such day. If the Bonds are rated by a Rating Agency in
      one of its two highest long-term debt rating categories, each Component
      Issuer must have outstanding securities rated by a Rating Agency in one of
      its two highest long-term debt rating categories. If the Bonds are rated
      by a Rating Agency in a rating category that is lower than its two highest
      long-term debt rating categories (and the Bonds are not rated in one of
      the two highest such categories by the other Rating Agency), each
      Component Issuer must have outstanding securities rated by a Rating Agency
      in the same long-term debt rating category as the Bonds are rated by that
      Rating Agency. The Indexing Agent may change the Component Issuers from
      time to time in its discretion, subject to the foregoing requirements. In
      addition, at the request of the Company and upon delivery to the Trustee
      of an Opinion of Bond Counsel that such action will not adversely affect
      the exclusion of interest on the Bonds from gross income of the owners
      thereof for federal income tax purposes, the Authority, with the consent
      of the Company, may designate a new method of setting the Term Rate Index
      in the event any of the above-described methods are determined by the
      Authority to be unavailable, impracticable or unrealistic in the market
      place.


                                       28


                  "Term Rate Period" shall mean any period during which Bonds
      bear interest at a Term Rate which period shall commence with the
      effective date of the Change in the Interest Rate Mode to a Term Rate and
      shall extend through the day immediately preceding the earlier of (a) the
      effective date of another Change in the Interest Rate Mode or (b) the
      Stated Maturity.

                  "Terminating Event" shall mean any event or events under the
      terms of a Support Facility or any agreement providing for the issuance of
      such Support Facility which would cause the termination or expiration of
      such Support Facility but would specifically allow for the mandatory
      tender of Bonds pursuant to Section 5.09 with a draw on or borrowing or
      payment under such Support Facility prior to such termination or
      expiration. Specifically with respect to the Initial Liquidity Facility,
      the occurrence of an event of default under, and as defined in, the
      related Reimbursement Agreement shall constitute a Terminating Event
      within the meaning of this Indenture.

                  "Treasury Rate" on any date, shall mean (i) the yield,
      calculated in accordance with prevailing industry convention, of the rate
      on the most recently auctioned direct obligations of the U.S. Government
      having a maturity at the time of issuance of 364 days or less with a
      remaining maturity closest to the length of such Auction Period, as quoted
      in The Wall Street Journal on such date for the Business Day next
      preceding such date; or (ii) in the event that any such rate is not
      published in The Wall Street Journal, then the bond equivalent yield,
      calculated in accordance with prevailing industry convention, as
      calculated by reference to the arithmetic average of the bid price
      quotations of the most recently auctioned direct obligation of the U.S.
      Government having a maturity at the time of issuance of 364 days or less
      with a remaining maturity closest to the length of such Auction Period,
      based on bid price quotations on such date obtained by the Auction Agent
      from a U.S. Government Securities Dealer. If any U.S. Government
      Securities Dealer does not quote a rate required to determine the Treasury
      Rate, the Treasury Rate shall be determined on the basis of the quotation
      or quotations furnished by the remaining U.S. Government Securities Dealer
      or Dealers and any Substitute U.S. Government Securities Dealer or Dealers
      selected by the Authority at the request of the Company to provide such
      rate or rates not being supplied by any U.S. Government Securities Dealer
      or U.S. Government Securities Dealers, as the case may be, or, if the
      Authority does not select any such Substitute U.S. Government Securities
      Dealer or Substitute U.S. Government Securities Dealers, by the remaining
      U.S. Government Securities Dealer or U.S. Government Securities Dealers.

                  "Trust Estate" shall mean the meaning assigned to such term in
      the first paragraph following the recitals herein.

                  "Trustee" shall mean the banking corporation having trust
      powers appointed by the Authority as Trustee hereunder and serving as such
      hereunder, and any surviving, resulting or transferee corporation as
      provided in Section 11.13. References to principal office of the Trustee
      shall mean the Principal Corporate Trust Office of the Trustee.


                                       29


                  "U.S. Government" shall mean the federal government of the
      United States of America.

                  "U.S. Government Securities Dealers" shall mean the
      Remarketing Agents for any Auction Rate Bonds, or, in lieu of any thereof,
      their respective affiliates or successors, provided that any such entity
      is a U.S. Government securities dealer.

                  "Weekly Period Record Date" shall mean, with respect to each
      Interest Payment Date during a Weekly Rate Period, the Business Day next
      preceding such Interest Payment Date.

                  "Weekly Rate" shall mean with respect to each Calculation
      Period during a Weekly Rate Period, a rate of interest equal to the rate
      of interest per annum established and certified to the Trustee (with a
      copy to the Authority, the Registrar and Paying Agent and the Company) by
      the Remarketing Agent no later than 12:00 noon (New York City time) on and
      as of the Determination Date as the minimum rate of interest per annum
      which, in the opinion of the Remarketing Agent, would be necessary on and
      as of such day to remarket Bonds in a secondary market transaction at a
      price equal to the principal amount thereof plus accrued interest thereon;
      provided that such rate of interest shall not exceed the lesser of 110% of
      the Weekly Rate Index on and as of such date and the Maximum Allowed Rate.

                  "Weekly Rate Index" shall mean with respect to the
      Determination Date of each Calculation Period during a Weekly Rate Period,
      the average of 30-day yield evaluations at par, determined by the Indexing
      Agent, of securities (whether or not actually issued), the interest on
      which is not included in gross income for federal income tax purposes, of
      no fewer than ten Component Issuers selected by the Indexing Agent,
      including issuers of commercial paper, project notes, bond anticipation
      notes and tax anticipation notes, computed by the Indexing Agent on and as
      of such day. If the Bonds are rated by a Rating Agency in its highest note
      or commercial paper rating category or one of its two highest long-term
      debt rating categories, each Component Issuer must (a) have outstanding
      securities rated by a Rating Agency in its highest note or commercial
      paper rating category or (b) not have outstanding notes or commercial
      paper rated by a Rating Agency but have outstanding securities rated by a
      Rating Agency in one of its two highest long-term debt rating categories.
      If the Bonds are rated by a Rating Agency in a rating category that is
      lower than its highest note or commercial paper rating category or its two
      highest long-term debt rating categories (and the Bonds are not rated in
      one of such categories by the other Rating Agency), each Component Issuer
      must (a) have outstanding securities rated by a Rating Agency in its note
      or commercial paper rating category which is the same or correlative, in
      the Indexing Agent's judgment, to the note or commercial paper rating
      category or the long-term debt rating category of the Bonds or (b) have
      outstanding securities rated by a Rating Agency in the same long-term debt
      rating category as the Bonds are rated by that Rating Agency and not have
      any outstanding notes or commercial paper rated by such Rating Agency. The
      Indexing Agent may change the Component Issuers from time to time in its
      discretion, subject to the foregoing requirements. In


                                       30


      addition, at the request of the Company and upon delivery to the Trustee
      of an Opinion of Bond Counsel that such action will not adversely affect
      the exclusion of interest on the Bonds from gross income of the owners
      thereof for federal income tax purposes, the Authority, with the consent
      of the Company, may designate a new method of setting the Weekly Rate
      Index in the event any of the above-described methods are determined by
      the Authority to be unavailable, impracticable or unrealistic in the
      market place.

                  "Weekly Rate Period" shall mean any period during which the
      Bonds bear interest at a Weekly Rate; the first such period shall commence
      on the date of initial issuance of the Bonds and shall extend through the
      day immediately preceding the earlier of (a) the effective date of a
      Change in the Interest Rate Mode or (b) the Stated Maturity.

                  "Winning Bid Rate" shall mean with respect to Auction Rate
      Bonds, Winning Bid Rate as defined in Section 3.08.

            SECTION 2.02. Amendment to Paragraph 7 of Section 2.02 of the
Indenture. Paragraph 7 of Section 2.02 of the Indenture is hereby amended to
read as follows:

                  The Bonds bearing a Commercial Paper Rate, a Daily Rate, a
      Weekly Rate or a Monthly Rate shall be fully registered Bonds in the
      denomination of $100,000 or any integral multiple thereof. The Bonds
      bearing an Auction Rate shall be fully registered Bonds in the
      denomination of $25,000 or any integral multiple thereof. The Bonds
      bearing a Semi-annual Rate, a Term Rate or a Fixed Rate shall be fully
      registered Bonds in the denomination of $5,000 or any integral multiple
      thereof.

            SECTION 2.03. Amendment to Section 3.01 of the Indenture. Section
3.01 of the Indenture is hereby amended to read as follows:

                  1. Interest accruing on Bonds bearing interest at a Commercial
      Paper Rate, a Daily Rate, a Weekly Rate, a Monthly Rate or a Semi-annual
      Rate, shall be computed on the basis of a 365 or 366-day year, as
      applicable, for the number of days actually elapsed. Interest accruing on
      Bonds bearing interest at a Term Rate or a Fixed Rate shall be computed on
      the basis of a 360-day year, consisting of twelve (12) thirty (30) day
      months. Interest accruing on Bonds bearing interest at an Auction Rate
      during an Auction Period of 180 days or less shall be computed on the
      basis of a 360-day year for the number of days actually elapsed. Interest
      accruing on Bonds bearing interest at an Auction Rate during an Auction
      Period of over 180 days shall be computed on the basis of a 360-day year,
      consisting of twelve (12) thirty (30) day months. Bonds shall bear
      interest from the date of issuance thereof payable in arrears on each
      Interest Payment Date. The Bonds issued upon registration of transfers or
      exchanges of Bonds shall bear interest from the Interest Payment Date next
      preceding their date of authentication, unless the date of authentication
      is an Interest Payment Date in which case such Bonds shall bear interest
      from such date, or unless


                                       31


      the date of authentication is after the Record Date next preceding the
      next succeeding Interest Payment Date, in which case such Bonds shall bear
      interest from such next succeeding Interest Payment Date.

                  2. The Bonds shall be initially issued as Weekly Rate Bonds
      during a Weekly Rate Period. Each of the Series of Bonds shall bear
      interest at 3.10% for the period from and including the date of issuance
      of the Bonds to and including the following Tuesday. From and after any
      Change in the Interest Rate Mode pursuant to Section 4.01 or 4.02, the
      Bonds with respect to which such change is effective shall bear interest
      determined in accordance with the provisions of this Indenture pertaining
      to the new Adjustable Rate or the Fixed Rate, as the case may be. Bonds
      shall bear interest for each Calculation Period, Auction Period or Fixed
      Rate Period, as the case may be, at the rate of interest per annum for
      such Calculation Period, Auction Period or Fixed Rate Period established
      in accordance with this Indenture. Interest shall be payable on each
      Interest Payment Date by check mailed to the registered owner at his or
      her address as it appears on the registration books kept by the Registrar
      and Paying Agent pursuant to the Indenture at the close of business on the
      applicable Record Date; provided, that (i) while the Securities Depository
      is the registered owner of the Bonds, all payments of principal of,
      premium, if any, and interest on the Bonds shall be paid to the Securities
      Depository or its nominee by wire transfer, (ii) prior to and including a
      Fixed Rate Conversion Date, interest on the Bonds shall be payable to any
      registered owner of at least one million dollars ($1,000,000) in aggregate
      principal amount of Bonds by wire transfer, upon written notice received
      by the Registrar and Paying Agent at least five days prior to the
      applicable Record Date, from such registered owner containing the wire
      transfer address (which shall be in the continental United States) to
      which such registered owner wishes to have such wire directed and (iii)
      during a Commercial Paper Rate Period, interest shall be payable on the
      Bonds only upon presentation and surrender thereof to the Registrar and
      Paying Agent upon purchase thereof pursuant to Section 5.03 and if such
      presentation and surrender is made by 2:00 p.m. (New York City time) such
      payment shall be by wire transfer. If and to the extent that there shall
      be a default in the payment of the interest due on any Interest Payment
      Date, such interest shall cease to be payableto the person in whose name
      each Bond of such series was registered on such applicable Record Date and
      shall be payable, when and if paid to the person in whose name each Bond
      of such series is registered at the close of business on the record date
      fixed therefor by the Trustee, which shall be the fifth Business Day next
      preceding the date of the proposed payment. Except as provided above,
      payment of the principal of and premium, if any, on all Bonds shall be
      made upon the presentation and surrender of such Bonds at the principal
      office of the Registrar and Paying Agent as the same shall become due and
      payable. The principal of and premium, if any, and interest on the Bonds
      shall be payable in lawful money of the United States of America.

                  3. Not less than one Business Day prior to each Computation
      Date and two Business Days prior to a Fixed Rate Conversion Date, the
      Indexing Agent shall establish and provide to the Remarketing Agent the
      related rate index as set forth in the definition of such rate index in
      Section 1.01; provided that, for each Calculation Period during a Daily
      Rate Period, the Indexing Agent shall establish


                                       32


      and provide the related rate index to the Remarketing Agent on each
      Determination Date; and provided further that, for each Calculation Period
      during a Monthly Rate Period, the Indexing Agent shall establish and
      provide the related rate index to the Remarketing Agent not later than
      each Computation Date. Notwithstanding the foregoing, in the event that
      the Remarketing Agent, in its sole judgment, shall determine on a
      Determination Date that any Daily Rate Index Weekly Rate Index or any
      Commercial Paper Rate Index so established is sufficiently
      non-representative of current market conditions that the Bonds may not be
      remarketed at par if such rate is set at a rate not greater than 110% of
      the applicable rate index, the Remarketing Agent may establish a new rate
      index on a Determination Date in accordance with the procedures and
      standards described in the definition of such rate index and for purposes
      of such rate index so established, all references to Indexing Agent in
      this Indenture shall be deemed to refer to the Remarketing Agent. On any
      date when any Weekly Rate Index or any Commercial Paper Rate Index is
      established by the Remarketing Agent pursuant to this paragraph, such rate
      index shall have the respective meaning set forth in Section 1.01 (except
      as otherwise provided in the preceding sentence); provided that for any
      Commercial Paper Rate Index, the Remarketing Agent shall select securities
      (whether or not actually issued) having a term approximately equal to the
      applicable Commercial Paper Rate Period or which are subject to optional
      or mandatory tender by the owner thereof at the end of a term
      approximately equal to (or as close thereto as is practicably available)
      the applicable Commercial Paper Rate Period.

                  4. By 12:00 noon (New York City time) on each Determination
      Date or by 3:00 p.m. (New York City time) on each Auction Date, as the
      case may be, the Remarketing Agent or the Auction Agent, as the case may
      be, shall make available to the Authority, the Trustee, the Registrar and
      Paying Agent, any issuer of a Support Facility, the Company, any
      Broker-Dealer or any registered owner of a Bond the interest rate or rates
      determined on such Determination Date or Auction Date.

                  5. If for any reason on any Determination Date (A) any rate of
      interest for a Calculation Period is not determined by the Remarketing
      Agent, (B) no Remarketing Agent is serving as such hereunder or (C) the
      rate so determined is held to be invalid or unenforceable by a final
      judgment of a court of competent jurisdiction, (i) during any Daily Rate
      Period, the interest rate for the next succeeding Calculation Period shall
      be the last interest rate in effect, or, if a Daily Rate is not determined
      by the Remarketing Agent hereunder for five or more consecutive Business
      Days on the next and each succeeding Determination Date, the Daily Rate
      shall be a rate per annum equal to 80% of the latest 30-day dealer taxable
      commercial paper rate published by the Federal Reserve Bank of New York on
      or immediately before such Determination Date, (ii) during any Weekly Rate
      Period, the interest rate for the next succeeding Calculation Period shall
      be the last interest rate in effect, or, if a Weekly Rate is not
      determined by the Remarketing Agent for two or more consecutive
      Calculation Periods, the Weekly Rate shall be equal to 85% of the latest
      30-day dealer taxable commercial paper rate published by the Federal
      Reserve Bank of New York on or before the day next preceding such
      Determination Date, (iii) during any Monthly Rate, Semi-annual Rate or
      Term Rate Period, the interest rate per annum for the next succeeding
      Calculation Period shall be equal to 85% of the rate listed in the table
      most recently circulated by the United States Treasury Department known as
      "Table [applicable dates shown on the most recent Table], Maximum Interest
      Rate Payable on United States Treasury Certificates of Indebtedness, Notes
      and


                                       33


      Bonds-State and Local Government Series Subscribed for During Period
      [applicable dates shown on the most recent Table]" or any substantially
      equivalent table circulated by the United States Treasury Department for
      the maturity most closely approximating the Calculation Period, and (iv)
      during any Commercial Paper Rate Period, the next succeeding Calculation
      Period shall be a Calculation Period which shall consist of the period
      from and including the prior Interest Payment Date to but excluding the
      first Business Day of the following calendar month and the Commercial
      Paper Rate shall be equal to 85% of the interest rate applicable to 90-day
      United States Treasury Bills determined on the basis of the average per
      annum discount rate at which such 90-day Treasury Bills shall have been
      sold at the most recent Treasury auction within the 30 days next preceding
      such Calculation Period, or if there shall have been no such auction
      within the 30 days next preceding such Calculation Period, the Commercial
      Paper Rate shall be equal to the rate of interest borne by such Bond
      during the next preceding Calculation Period for such Bond. The rate of
      interest or Calculation Period and related Commercial Paper Rate shall be
      established pursuant to this subsection 5 until the Remarketing Agent
      again determines the rates of interest or Calculation Periods and related
      Commercial Paper Rates in accordance with this Indenture. The Trustee
      shall, upon the direction of the Company, select any person otherwise
      meeting the qualifications of Section 11.14 to obtain, calculate and
      prepare any of the information required by this subsection 5.

                  6. The determination of any rate of interest by the
      Remarketing Agent in accordance with this Indenture or by the Auction
      Agent in accordance with the Auction Procedures applicable to Auction Rate
      Bonds, or the establishment of Calculation Periods or Auction Periods by
      the Remarketing Agent as provided in this Indenture shall be conclusive
      and binding upon the Authority, the Company, the Trustee, the Registrar
      and Paying Agent, the Remarketing Agent, the Auction Agent, any issuer of
      a Support Facility, all Broker-Dealers and the registered or beneficial
      owners of the Bonds. Failure of the Remarketing Agent, the Trustee, the
      Registrar and Paying Agent, the Auction Agent or the Securities Depository
      or any Securities Depository participant to give any of the notices
      described in this Indenture, or any defect therein, shall not affect the
      interest rate to be borne by any of the Bonds nor the applicable
      Calculation Period or Auction Period nor in any way change the rights of
      the registered owners of the Bonds to tender their Bonds for purchase or
      to have them redeemed in accordance with this Indenture.

                  7. No transfer or exchange of Bonds shall be required to be
      made by the Registrar and Paying Agent after a Record Date until the next
      succeeding Interest Payment Date.

                  8. Except as otherwise provided in this subsection 8, the
      Trustee shall calculate and notify the Registrar and Paying Agent of the
      amount of interest due and payable on each Interest Payment Date or date
      on which a Bond is subject to purchase by 10:00 a.m. on the Business Day
      next preceding such Interest Payment Date or date set for purchase, as the
      case may be, unless such date is a date on which the interest rate is
      determined, in which case the amount of interest due and payable shall be
      calculated by 12:15 p.m. on such date. In preparing such calculation the
      Trustee may rely on calculations or other services provided by the Auction
      Agent, the Remarketing Agent, the Company or any person or persons
      selected by the Trustee in its discretion. During a Commercial Paper Rate
      Period, the Remarketing Agent shall notify the Trustee, the Registrar and
      Paying Agent and the Company of the amount of interest


                                       34


      due and payable on each Interest Payment Date by 10:00 a.m. on the
      Business Day next preceding such Interest Payment Date.

                  9. Anything herein to the contrary notwithstanding, in no
      event shall the interest rate borne by any Bond exceed the maximum rate
      allowable by applicable law.

                  SECTION 2.04. Amendment to Sections 3.03 through 3.10 of the
Indenture. Sections 3.03 through 3.10 of the Indenture are hereby amended to
read as follows:

                  SECTION 3.03. Auction Rate Period - Auction Rate: Auction
      Period - General. 1. During any Auction Rate Period, the Auction Rate
      Bonds shall bear interest at the Auction Rate determined as set forth in
      this Section 3.03 and Sections 3.04 through 3.10. The initial Auction
      Period for each subseries of the Bonds immediately after any Change in the
      Interest Rate Mode to an Auction Rate, shall be a period from and
      including the effective date of such Change in the Interest Rate Mode to
      and including the initial Auction Date which shall be determined by the
      Authority, with notice to the Trustee, on or prior to the effective date
      of the Change in the Interest Rate Mode. The Auction Rate for any initial
      Auction Period immediately after any Change in the Interest Rate Mode to
      an Auction Rate for an Auction Rate Period, shall be the rate of interest
      per annum determined by the Remarketing Agent, with notice to the Trustee,
      the Authority, the Registrar and Paying Agent and the Company, on a date
      not later than the effective date of such Change in the Interest Rate Mode
      as the minimum rate of interest which, in the opinion of the Remarketing
      Agent, would be necessary as of such date to market Auction Rate Bonds in
      a secondary market transaction at a price equal to the principal amount
      thereof; provided that such interest rate shall not exceed the Maximum
      Allowed Rate. For any other Auction Period, the Auction Rate shall be the
      rate of interest per annum that results from implementation of the Auction
      Procedures. If on any Auction Date the Auction Agent shall fail to take
      any action necessary to determine, or take any action which effectively
      prevents the determination of, a rate of interest pursuant to the Auction
      Procedures, the Auction Rate for the next succeeding Auction Period shall
      be equal to the Maximum Auction Rate as provided in clause (i) of the
      definition thereof on and as of such Auction Date. Determination of an
      Auction Rate pursuant to the Auction Procedures shall be suspended upon a
      Change in the Interest Rate Mode or the occurrence of a Payment Default.
      The Auction Rate for any Auction Period Or remaining portion thereof
      following the occurrence of a Payment Default shall be equal to the
      Overdue Rate as determined on and as of the immediately preceding Auction
      Date. Upon the occurrence of a Payment Default that has not been waived or
      cured on or prior to any Auction Date, no Auction will be held,


                                       35


      all Submitted Bids and Submitted Sell Orders shall be rejected, the
      existence of Sufficient Clearing Bids shall be of no effect and the
      Auction Rate for the next succeeding Auction Period shall equal the
      Overdue Rate On and as of such Auction Date. In the event of the
      suspension of the auction procedures due to a payment default, the Auction
      Procedures shall resume two Business Days after the date on which the
      Auction Agent receives notice from the Trustee that the Bond Insurer has
      cured the default under the Policy by making all scheduled payments
      thereunder, with the next Auction to occur on the next regularly scheduled
      Auction Date occurring thereafter. The Overdue Rate shall be determined by
      the Remarketing Agent on each succeeding Auction Date.

                  2. Auction Periods may be established pursuant to Section 3.04
      at any time unless a Payment Default has occurred and has not been cured.
      Each Auction Period shall be a Standard Auction Period unless a different
      Auction Period is established pursuant to Section 3.04 and each Auction
      Period which immediately succeeds a non-Standard Auction Period shall be a
      Standard Auction Period unless a different Auction Period is established
      pursuant to Section 3.04.

                  SECTION 3.04. Auction Rate Period - Auction Rate Bonds: Change
      of Auction Period by Authority. 1. During an Auction Rate Period the
      Authority, at the request of the Company, may change the length of a
      single Auction Period or the Standard Auction Period by means of a written
      notice delivered at least 10 days prior to the Auction Date for such
      Auction Period to the Trustee, the Remarketing Agent, the Auction Agent
      and the Company in substantially the form furnished to the Trustee and the
      Auction Agent at the time of a Change in the Interest Rate Mode to an
      Auction Rate. Any Auction Period or Standard Auction Period established by
      the Authority pursuant to this Section 3.04 may not exceed 365 days in
      duration. If such Auction Period will be of less than 28 days, such notice
      shall be effective only if it is accompanied by a written statement of the
      Registrar and Paying Agent, the Trustee, the Remarketing Agent and the
      Auction Agent to the effect that they are capable of performing their
      duties hereunder and under the Remarketing Agreement and the Auction
      Agency Agreement with respect to such Auction Period. If such notice
      specifies a change in the length of the Standard Auction Period, such
      notice shall be effective only if it is accompanied by the written consent
      of the Remarketing Agent to such change. The length of an Auction Period
      or the Standard Auction Period may not be changed pursuant to this Section
      3.04 unless Sufficient Clearing Bids existed at both the Auction
      immediately preceding the date the notice of such change was given and the
      Auction immediately preceding such changed Auction Period or if a Payment
      Default has occurred and has not been cured.

                  2. The change in length of an Auction Period or the Standard
      Auction Period by the Authority at the request of the Company shall take
      effect only if (A) the Trustee, the Credit


                                       36


      Facility Issuer and the Auction Agent receive, by 11:00 a.m. (New York
      City time) on the Business Day immediately preceding the Auction Date for
      such Auction Period, a certificate from the Authority, on behalf of the
      Company, by telecopy or similar means in substantially the form furnished
      to the Trustee and the Auction Agent at the time of a Change in the
      Interest Rate Mode to an Auction Rate authorizing establishment of and
      specifying the length of the new Auction Period or the Standard Auction
      Period, which shall be specified in such certificate, and confirming that
      Bond Counsel expects to be able to give an Opinion of Bond Counsel on the
      first day of such Auction Period, (B) the Trustee shall not have delivered
      to the Auction Agent by 12:00 noon (New York City time) on the Auction
      Date for such Auction Period notice that a Payment Default has occurred,
      (C) Sufficient Clearing Bids exist at the Auction on the Auction Date for
      such Auction Period, and (C) the Trustee, the Credit Facility Issuer and
      the Auction Agent receive by 9:30 a.m. (New York City time) on the first
      day of such Auction Period, an opinion of Bond Counsel to the effect that
      the change in the Auction Period or the Standard Auction Period is
      authorized by this Indenture, is permitted under the Act and will not have
      an adverse effect on the exclusion of interest on such Bonds from gross
      income for federal income tax purposes. If the condition referred to in
      (A) above is not met, the Auction Rate for the next succeeding Auction
      Period shall be determined pursuant to the Auction Procedures and the next
      succeeding Auction Period shall be a Standard Auction Period. If any of
      the conditions referred to in (B) OR (C) above is not met, the Auction
      Rate for the next succeeding Auction Period shall equal the Maximum
      Auction Rate as determined as of such Auction Date.

                  3. On the Auction Date immediately preceding the effective
      date of any change in the length of an Auction Period or the Standard
      Auction Period, any bonds which are not the subject of a specific Order
      shall be deemed to be subject to a Sell Order.

                  SECTION 3.01. Auction Rate Period - Auction Rate Bonds: Change
      of Auction Date by Remarketing Agent. During an Auction Rate Period the
      Remarketing Agent, with the written consent of the Company, may change, in
      order to conform with then-current market practice with respect to similar
      securities or to accommodate economic and financial factors that may
      affect or be relevant to the day of the week constituting an Auction Date,
      the Auction Date for all future Auction Periods to a different day, so
      long as the first such Auction Date will be a Business Day in the calendar
      week in which the next succeeding Auction Date is then scheduled to occur.
      If a change in an Auction Date is undertaken in conjunction with a change
      in an Auction Period and the conditions for the establishment of such
      change in Auction Period are not met, the Auction Date may be, and the
      next succeeding Auction Period may be adjusted to end on a Business Day in
      the calendar week in which such Auction Date was scheduled to occur and
      such Auction Period was scheduled to end to accommodate the change in the
      Auction Date. The Remarketing Agent shall communicate its determination to
      change an Auction Date by means of a written notice delivered at least 10
      days prior to the Auction Date immediately preceding such Auction Date to
      the Authority, the Trustee, the Auction Agent and the


                                       37


      Company which shall state (i) the determination of the Remarketing Agent
      to change the Auction Date, (ii) the new Auction Date and (iii) the date
      on which such Auction Date shall be changed. If as a result of any
      proposed change in the Auction Date any Auction Period would be less than
      28 days in duration, such notice shall be effective only if it is
      accompanied by a written statement of the Auction Agent, the Registrar and
      Paying Agent, and the Trustee to the effect that they are capable of
      performing their duties hereunder and under the Remarketing Agreement and
      Auction Agency Agreement with respect to any such Auction Period.

                  SECTION 3.02. Auction Rate Period - Auction Rate Bonds: Orders
      by Existing Holders and Potential Holders. (a) Prior to the Submission
      Deadline on each Auction Date during the Auction Rate Period, the
      following orders may be submitted:

                  (i) each Existing Holder may submit to the Broker- Dealer by
            telephone or otherwise information as to:

                        (A) the principal amount of Auction Rate Bonds, if any,
                  held by such Existing Holder which such Existing Holder
                  desires to continue to hold without regard to the Auction Rate
                  for the next succeeding Auction Period;

                        (B) the principal amount of Auction Rate Bonds, if any,
                  held by such Existing Holder which such Existing Holder offers
                  to sell if the Auction Rate for the next succeeding Auction
                  Period shall be less than the rate per annum specified by such
                  Existing Holder and/or

                        (C) the principal amount of Auction Rate Bonds, if any,
                  held by such Existing Holder which such Existing Holder offers
                  to sell without regard to the Auction Rate for the next
                  succeeding Auction Period;

                  (ii) one or more Broker-Dealers may contact Potential Holders
            by telephone or otherwise to determine the principal amount of
            Auction Rate Bonds which each such Potential Holder offers to
            purchase if the Auction Rate for the next succeeding Auction Period
            shall not be less than the interest rate per annum specified by such
            Potential Holder.

      For the purposes hereof, the communication to a Broker-Dealer of
      information referred to in clause (i)(A), (i)(B) or (i)(C) or clause (ii)
      above is hereinafter referred to as an "Order" and collectively


                                       38


      as "Orders" and each Existing Holder and each Potential Holder placing an
      Order is hereinafter referred to as a "Bidder" and collectively as
      "Bidders"; an Order containing the information referred to in clause
      (i)(A) above is hereinafter referred to as a "Hold Order" and collectively
      as "Hold Orders"; an Order containing the information referred to in
      clause (i)(B) or clause (ii) above is hereinafter referred to as a "Bid"
      and collectively as "Bids"; and an Order containing the information
      referred to in clause (i)(C) above is hereinafter referred to as a "Sell
      Order" and collectively as "Sell Orders". The submission by a
      Broker-Dealer of an Order to the Auction Agent shall likewise be referred
      to herein as an "Order" and collectively as "Orders".

                  Orders may be submitted only in principal amounts of $25,000
      or any integral multiple thereof.

                  (b)(i) Subject to the provisions of Section 3.07, a Bid by an
            Existing Holder shall constitute an irrevocable offer to sell:

                        (A) the principal amount of Auction Rate Bonds specified
                  in such Bid if the Auction Rate determined on such Auction
                  Date shall be less than the interest rate per annum specified
                  therein; or

                        (B) such principal amount or a lesser principal amount
                  of Auction Rate Bonds to be determined as set forth in
                  subsection (a)(iv) of Section 3.09 if the Auction Rate
                  determined on such Auction Date shall be equal to the interest
                  rate per annum specified therein; or

                        (C) such principal amount of Auction Rate Bonds or a
                  lesser principal amount of Auction Rate Bonds to be determined
                  as set forth in subsection (b)(iii) of Section 3.09 if such
                  specified rate shall be higher than the Maximum Auction Rate
                  and Sufficient Clearing Bids do not exist.

                  (ii) Subject to the provisions of Section 3.07, a Sell Order
            by an Existing Holder shall constitute an irrevocable offer to sell:

                        (A) the principal amount of Auction Rate Bonds specified
                  in such Sell Order; or


                                       39


                        (B) such principal amount or a lesser principal amount
                  of Auction Rate Bonds as set forth in subsection (b)(iii) of
                  Section 3.09 if Sufficient Clearing Bids do not exist.

                  (iii) Subject to the provisions of Section 3.07, a Bid by a
            Potential Holder shall constitute an irrevocable offer to purchase:

                        (A) the principal amount of Auction Rate Bonds specified
                  in such Bid if the Auction Rate determined on such Auction
                  Date shall be higher than the rate specified therein; or

                        (B) such principal amount or a lesser principal amount
                  of Auction Rate Bonds as set forth in subsection (a)(v) of
                  Section 3.09 if the Auction Rate determined on such Auction
                  Date shall be equal to such specified rate.

                  SECTION 3.07. Auction Rate Period - Auction Rate Bonds:
      Submission of Orders by Broker-Dealers to Auction Agent. (a) During an
      Auction Rate Period each Broker-Dealer shall submit in writing to the
      Auction Agent prior to the Submission Deadline on each Auction Date, all
      Orders obtained by such Broker-Dealer and shall specify with respect to
      each such Order:

                  (i) the name of the Bidder placing such Order ;

                  (ii) the aggregate principal amount of Auction Rate Bonds that
            are subject to such Order;

                  (iii) to the extent that such Bidder is an Existing Holder:

                        (A) the principal amount of Auction Rate Bonds, if any,
                  subject to any Hold Order placed by such Existing Holder;

                        (B) the principal amount of Auction Rate Bonds, if any,
                  subject to any Bid placed by such Existing Holder and the rate
                  specified in such Bid; and

                        (C) the principal amount of Auction Rate Bonds, if any,
                  subject to any Sell Order placed by such Existing Holder; and


                                       40


                  (iv) to the extent such Bidder is a Potential Holder, the
            principal amount of Auction Rate Bonds subject to any Bid placed by
            such Potential Holder and the rate specified in such Bid.

                  (b) If any rate specified in any Bid contains more than three
      figures to the right of the decimal point, the Auction Agent shall round
      such rate up to the next highest one thousandth (.001) of 1%.

                  (c) If an Order or Orders covering all Auction Rate Bonds held
      by an Existing Holder is not submitted to the Auction Agent prior to the
      Submission Deadline, the Auction Agent shall deem a Hold Order to have
      been submitted on behalf of such Existing Holder covering the principal
      amount of Auction Rate Bonds held by such Existing Holder and not subject
      to Orders submitted to the Auction Agent; provided, however, that if there
      is a change in the length of an Auction Period or the Standard Auction
      Period in accordance with Section 3.04 hereof or an amendment or
      modification to the Auction Procedures or any other provision of the
      Indenture relating to the method of determining the Auction Rate for the
      Auction Rate Bonds in accordance with Section 14.02 hereof and Orders have
      not been submitted to the Auction Agent prior to the Submission Deadline
      covering the aggregate principal amount of Auction Rate Bonds that are
      subject to such change in the length of an Auction Period or the Standard
      Auction Period or amendment or modification, as the case may be, the
      Auction Agent shall deem a sell order to have been submitted on behalf of
      such Existing Holder covering the principal amount of Auction Rate Bonds
      subject to such change or modification or amendment and not subject to
      Orders submitted to the Auction Agent.

                  (d) Neither the Authority, the Company, the Trustee nor the
      Auction Agent shall be responsible for any failure of a Broker-Dealer to
      submit an Order to the Auction Agent on behalf of any Existing Holder OR
      Potential Holder.

                  (e) If any Existing Holder submits through a Broker-Dealer to
      the Auction Agent one or more Orders covering in the aggregate more than
      the principal amount of Auction Rate Bonds held by such Existing Holder,
      such Orders shall be considered valid as follows and in the following
      order of priority:

                  (i) all Hold Orders shall be considered valid, but only up to
            and including the principal amount of Auction Rate Bonds held by
            such Existing Holder, and, if the aggregate principal amount of
            Auction Rate Bonds subject to such Hold Orders exceeds the aggregate
            principal amount of Auction Rate Bonds held by such Existing Holder,
            the aggregate principal amount of Auction Rate Bonds subject to each
            such Hold Order shall be reduced pro rata to cover the aggregate
            principal amount of Auction Rate Bonds held by such Existing Holder;


                                       41


                  (ii) (A) any Bid shall be considered valid up to and including
            the excess of the principal amount of Auction Rate Bonds held by
            such Existing Holder over the aggregate principal amount of Auction
            Rate Bonds subject to any Hold Orders referred to in paragraph (i)
            above;

                        (B) subject to clause (A) above, if more than one Bid
                  with the same rate is submitted on behalf of such Existing
                  Holder and the aggregate principal amount of Auction Rate
                  Bonds subject to such Bids is greater than such excess, such
                  Bids shall be considered valid up to and including the amount
                  of such excess, and, the principal amount of Auction Rate
                  Bonds subject to each Bid with the same rate shall be reduced
                  pro rata to cover the principal amount of Auction Rate Bonds
                  equal to such excess;

                        (C) subject to clauses (A) and (B) above, if more than
                  one Bid with different rates is submitted on behalf of such
                  Existing Holder, such Bids shall be considered valid in the
                  ascending order of their respective rates until the highest
                  rate is reached at which such excess exists and then at such
                  rate up to and including the amount of such excess; and

                        (D) in any such event, the aggregate principal amount of
                  Auction Rate Bonds, if any, subject to any portion of Bids not
                  valid under this paragraph (ii) shall be treated as the
                  subject of a Bid by a Potential Holder at the rate therein
                  specified; and

                  (iii) all Sell Orders shall be considered valid up to and
            including the excess of the principal amount of Auction Rate Bonds
            held by such Existing Holder over the aggregate principal amount of
            Auction Rate Bonds subject to valid Hold Orders referred to in
            paragraph (i) of this subsection (e) and valid Bids referred to in
            paragraph (ii) of this subsection (e).

                  (f) If more than one Bid for Auction Rate Bonds is submitted
      on behalf of any Potential Holder, each Bid submitted shall be a separate
      Bid for Auction Rate Bonds with the rate and principal amount therein
      specified.

                  (g) Any Bid or Sell Order submitted by an Existing Holder
      covering an aggregate principal amount of Auction Rate Bonds not equal to
      $25,000 or an integral multiple thereof shall be rejected and shall be
      deemed a Hold Order. Any Bid submitted by a Potential Holder covering an
      aggregate principal amount of Auction Rate Bonds not equal to $25,000 or
      an integral multiple thereof shall be rejected.


                                       42



                                                                  Exhibit 10.2.3

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

                                                          Execution Copy

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

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

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

                                 TRUST INDENTURE

                                     BETWEEN

                         NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY

                                       AND

                              THE BANK OF NEW YORK,
                                   as Trustee

                            Dated as of June 1, 2001

                                  -relating to-

               $224,600,000 Facilities Revenue Bonds, Series 2001A
             (Consolidated Edison Company of New York, Inc. Project)

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

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



                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

                                    ARTICLE I

                     DEFINITIONS; COMPUTATIONS; CERTIFICATES
                  AND OPINIONS; EVIDENCE OF ACTION BY AUTHORITY

SECTION 1.01.     Definitions of Specific Terms ............................ I-1
SECTION 1.02.     Definitions of General Terms ............................ I-26

                                   ARTICLE II

                             AUTHORIZATION OF BONDS

SECTION 2.01.     Limitation on Issuance of Bonds ......................... II-1
SECTION 2.02.     Authorization of Bonds .................................. II-1
SECTION 2.03.     Global Form; Securities Depository ...................... II-2
SECTION 2.04.     Limitations on Transfer ................................. II-4
SECTION 2.05.     Application of Bond Proceeds ............................ II-5
SECTION 2.06.     Delivery of the Bonds ................................... II-5

                                   ARTICLE III

                                INTEREST ON BONDS

SECTION 3.01.     Interest on Bonds-General .............................. III-1
SECTION 3.02.     Commercial Paper Rate .................................. III-4
SECTION 3.03.     Auction Rate Period - Auction Rate: Auction Period -
                    General .............................................. III-5
SECTION 3.04.     Auction Rate Period - Auction Rate Bonds: Change of
                    Auction Period by Authority .......................... III-5
SECTION 3.05.     Auction Rate Period - Auction Rate Bonds: Change of
                    Auction Date by Remarketing Agent .................... III-7
SECTION 3.06.     Auction Rate Period - Auction Rate Bonds: Orders by
                    Beneficial Owners and Potential Beneficial Owners .... III-7
SECTION 3.07.     Auction Rate Period - Auction Rate Bonds: Submission of
                    Orders by Broker-Dealers to Auction Agent ............ III-9
SECTION 3.08.     Auction Rate Period - Auction Rate Bonds: Determination
                    of Sufficient Clearing Bids, Winning Bid Rate and
                    Auction Rate ........................................ III-12
SECTION 3.09.     Auction Rate Period - Auction Rate Bonds: Acceptance
                    and Rejection of Submitted Bids and Submitted Sell
                    Orders and Allocation of Auction Rate Bonds ......... III-13


                                       (i)


SECTION 3.10.     Auction Rate Period - Auction Rate Bonds: Adjustment
                    in Percentage ....................................... III-16

                                   ARTICLE IV

                        CHANGES IN THE INTEREST RATE MODE

SECTION 4.01.     Optional Conversion to an Adjustable Rate by Authority .. IV-1
SECTION 4.02.     Optional Conversion to a Fixed Rate ..................... IV-3
SECTION 4.03.     Conversion Generally .................................... IV-5

                                    ARTICLE V

                        REDEMPTION AND PURCHASE OF BONDS

SECTION 5.01.     Optional Redemption ...................................... V-1
SECTION 5.02.     [Reserved] ............................................... V-2
SECTION 5.03.     Tender for and Purchase upon Election of Holder .......... V-2
SECTION 5.04.     Mandatory Tender for Purchase upon Change in the
                    Interest Rate Mode or on Business Day Following Certain
                    Calculation Periods .................................... V-3
SECTION 5.05.     Extraordinary Optional Redemption ........................ V-4
SECTION 5.06.     Special Tax Redemption Provisions ........................ V-4
SECTION 5.07.     Redemption at Demand of the State ........................ V-6
SECTION 5.08.     Mandatory Tender for Purchase Upon Expiration of any
                    Support  Facility or Upon Delivery of an Alternate
                    Support Facility ....................................... V-6
SECTION 5.09.     Mandatory Tender Upon Occurrence of any Terminating
                  Event .................................................... V-7
SECTION 5.10.     General Provisions Applicable to Mandatory and Optional
                    Tenders for Purchase of Bonds .......................... V-7
SECTION 5.11.     Selection of Bonds to be Redeemed ........................ V-8
SECTION 5.12.     Notice of Redemption ..................................... V-9
SECTION 5.13.     Bonds purchased for account of Liquidity Facility
                    Issuer ................................................ V-10
SECTION 5.14.     Effect of Redemption .................................... V-10
SECTION 5.15.     Cancellation of Redeemed Bonds .......................... V-11

                                   ARTICLE VI

                                SUPPORT FACILITY

SECTION 6.01.     Support Facility - General .............................. VI-1
SECTION 6.02.     Alternate Support Facility .............................. VI-1
SECTION 6.03.     Trustee not Responsible for Enforcement of Support
                    Facility .............................................. VI-2


                                      (ii)


                                   ARTICLE VII

                      GENERAL TERMS AND PROVISIONS OF BONDS

SECTION 7.01.     Execution and Authentication of Bonds .................. VII-1
SECTION 7.02.     Books of Registry ...................................... VII-1
SECTION 7.03.     Transfer, Registration and Exchange of Bonds ........... VII-1
SECTION 7.04.     Mutilated, Lost, Stolen, or Destroyed Bonds ............ VII-2
SECTION 7.05.     Temporary Bonds ........................................ VII-3
SECTION 7.06.     Disposition of Bonds ................................... VII-4

                                  ARTICLE VIII

                        ESTABLISHMENT OF THE PROJECT FUND

SECTION 8.01.     Project Fund .......................................... VIII-1

                                   ARTICLE IX

                     CREATION OF SPECIAL FUNDS AND ACCOUNTS;
                     APPLICATION AND INVESTMENT OF REVENUES

SECTION 9.01.     Creation of Funds and Accounts .......................... IX-1
SECTION 9.02.     Deposit of Note Payments ................................ IX-1
SECTION 9.03.     Application of Monies in the Bond Fund .................. IX-3
SECTION 9.04      Investment of Funds ..................................... IX-5

                                    ARTICLE X

                      PARTICULAR COVENANTS OF THE AUTHORITY

SECTION 10.01.    Payment of Principal of and Interest and Redemption
                    Premium on Bonds ....................................... X-1
SECTION 10.02.    Performance of Covenants ................................. X-1
SECTION 10.03.    Further Instruments ...................................... X-1
SECTION 10.04.    Inspection of Project Books .............................. X-1
SECTION 10.05.    No Extension of Time of Payment of Interest .............. X-1
SECTION 10.06.    Trustee's, Auction Agent's, Remarketing Agent's,
                    Broker-Dealers' Registrar and Paying Agent's and
                    Indexing Agent's Fees, Charges and Expenses ............ X-1
SECTION 10.07.    Agreement of the State of New York ....................... X-2


                                      (iii)


SECTION 10.08.    Recording and Filing ..................................... X-2
SECTION 10.09.    Rights Under the Participation Agreement and the Note .... X-2

                                   ARTICLE XI

                     CONCERNING THE TRUSTEE; APPOINTMENT OF
                 REGISTRAR AND PAYING AGENT, REMARKETING AGENT,
                        AUCTION AGENT AND INDEXING AGENT

SECTION 11.01.    Appointment of Trustee .................................. XI-1
SECTION 11.02.    Indemnification of Trustee as Condition for Remedial
                    Action ................................................ XI-1
SECTION 11.03.    Trustee Not Liable for Failure of the Authority or
                    Company to Act ........................................ XI-1
SECTION 11.04.    Certain Duties and Responsibilities of the Trustee ...... XI-2
SECTION 11.05.    Limitations on Obligations and Responsibilities of
                    Trustee ............................................... XI-4
SECTION 11.06.    Compensation and Indemnification of Trustee ............. XI-4
SECTION 11.07.    Statements from Trustee ................................. XI-4
SECTION 11.08.    Notice of Default ....................................... XI-5
SECTION 11.09.    Trustee May Deal in Bonds ............................... XI-5
SECTION 11.10.    Trustee Not Responsible For Recitals .................... XI-5
SECTION 11.11.    Qualification of the Trustee ............................ XI-5
SECTION 11.12.    Resignation and Removal of Trustee ...................... XI-6
SECTION 11.13.    Successor Trustee ....................................... XI-7
SECTION 11.14.    Appointment of Remarketing Agent ........................ XI-7
SECTION 11.15.    Appointment of Registrar and Paying Agent ............... XI-8
SECTION 11.16.    General Provisions Regarding Registrar and Paying
                    Agent ................................................. XI-8
SECTION 11.17.    Payment of Registrar and Paying Agent;
                    Indemnification ....................................... XI-9
SECTION 11.18.    Registrar and Paying Agent's Performance; Duty of
                    Care .................................................. XI-9
SECTION 11.19.    Qualifications of Registrar and Paying Agent ........... XI-10
SECTION 11.20.    Resignation or Removal of Registrar and Paying Agent
                    and Successor to Registrar and Paying Agent;
                    Termination of Registrar and Paying Agent's
                    Obligations .......................................... XI-10
SECTION 11.21.    Appointment of Auction Agent; Qualifications of Auction
                    Agent, Resignation; Removal .......................... XI-11
SECTION 11.22.    Appointment of Broker-Dealers .......................... XI-11
SECTION 11.23.    Appointment of Additional Paying Agents; Each Paying
                    Agent to Hold Money in Trust ......................... XI-11
SECTION 11.24.    Appointment and Duties of Indexing Agents .............. XI-11
SECTION 11.25.    Qualifications of Indexing Agents ...................... XI-12

                                   ARTICLE XII

                        EVENTS OF DEFAULT; REMEDIES UPON
                               OCCURRENCE THEREOF


                                      (iv)


SECTION 12.01.    Events of Default ...................................... XII-1
SECTION 12.02.    Notice to Holders and Others Upon Occurrence of an
                    Event of Default or a Failure to Deposit ............. XII-2
SECTION 12.03.    Declaration of Principal and Interest As Due ........... XII-2
SECTION 12.04.    Action by Trustee Upon Occurrence of Event of
                    Default .............................................. XII-3
SECTION 12.05.    Powers of Trustee With Respect to Participation
                    Agreement and Other Agreements ....................... XII-4
SECTION 12.06.    Disposition of Monies in Event of Insufficiencies
                    in Funds and Accounts ................................ XII-5
SECTION 12.07.    Effect of Delay or Omission; Waiver of Default;
                    Direction of Remedial Proceedings by the Holders ..... XII-7
SECTION 12.08.    Suits or Actions by Holders; Any Holder May Enforce
                    Overdue Payment of His or Her Bond or Interest
                    Thereon .............................................. XII-7
SECTION 12.09.    Remedies Not Exclusive ................................. XII-8
SECTION 12.10.    Effect of Abandonment of Proceedings on Default ........ XII-8
SECTION 12.11.    Interest on Overdue Amounts ............................ XII-8

                                  ARTICLE XIII

                   EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
                     OWNERSHIP OF BONDS; EXCLUSION OF BONDS
                      OWNED BY THE AUTHORITY OR THE COMPANY

SECTION 13.01.    Execution of Requests, Directions and Consents and
                    Other Instruments and Proof of Same; Ownership of
                    Bonds and Proof of Same ............................. XIII-1
SECTION 13.02.    Meetings of Holders ................................... XIII-2
SECTION 13.03.    Exclusion of Bonds Held by or for the Authority, the
                    Company and of Bonds No Longer Deemed Outstanding
                    Hereunder ........................................... XIII-3

                                   ARTICLE XIV

                    AMENDING AND SUPPLEMENTING THE INDENTURE,
             THE PARTICIPATION AGREEMENT, THE REMARKETING AGREEMENT,
               AUCTION AGENCY AGREEMENT, BROKER-DEALER AGREEMENTS,
                          BOND PURCHASE TRUST AGREEMENT

SECTION 14.01.    Amending and Supplementing Indenture Without Consent
                    of Holders ........................................... XIV-1
SECTION 14.02.    Amending and Supplementing Indenture with Consent of
                    Holders .............................................. XIV-2
SECTION 14.03.    Notation upon Bonds; New Bonds Issued upon
                    Amendments ........................................... XIV-3
SECTION 14.04.    Effectiveness of Supplemental Indentures ............... XIV-3
SECTION 14.05.    Supplemental Indenture Affecting Support Facility
                    Provider ............................................. XIV-4


                                       (v)


SECTION 14.06.    Supplemental Participation Agreements Not Requiring
                    the Consent of the Holders ........................... XIV-4
SECTION 14.07.    Notice and Consent for Supplemental Participation
                    Agreements Requiring the Consent of the Holders ...... XIV-4
SECTION 14.08.    Effectiveness of Supplemental Participation
                    Agreement ............................................ XIV-5
SECTION 14.09.    Amending and Supplementing the Remarketing Agreement,
                    Auction Agency Agreement, Broker-Dealer Agreements
                    or Bond Purchase Trust Agreement ..................... XIV-6

                                   ARTICLE XV

                     DEFEASANCE; MONEYS HELD FOR PAYMENT OF
                                 DEFEASED BONDS

SECTION 15.01.    Discharge of Liens and Pledges; Bonds No Longer Deemed
                    to be Outstanding Hereunder ........................... XV-1
SECTION 15.02.    Release of Indenture, Termination of Right, Title and
                    Interest of Trustee ................................... XV-2
SECTION 15.03.    Bonds Not Presented for Payment When Due; Monies Held
                    for the Bonds after Due Date of Bonds ................. XV-2

                                   ARTICLE XVI

                                  FORM OF BONDS
                    AND ENDORSEMENT AND ASSIGNMENT PROVISIONS

SECTION 16.01.    Form of Bonds and Endorsement and Assignment
                    Provisions ........................................... XVI-1

                                  ARTICLE XVII

                                  MISCELLANEOUS

SECTION 17.01.    Benefits of Indenture Limited to Authority, Company,
                    Trustee, Registrar and Paying Agent and Auction Agent
                    and Holders of the Bonds ............................ XVII-1
SECTION 17.02.    Indenture a Contract; Indenture Binding Upon Successors
                    or Assigns of the Authority ......................... XVII-1
SECTION 17.03.    Notice to Holders of Bonds ............................ XVII-1
SECTION 17.04.    Waiver of Notice ...................................... XVII-1
SECTION 17.05.    Effect of Saturdays, Sundays and Non-Business Days .... XVII-2
SECTION 17.06.    Partial Invalidity .................................... XVII-2
SECTION 17.07.    Law and Place of Enforcement of Indenture ............. XVII-2
SECTION 17.08.    Requests, Approvals and Directions of Authority ....... XVII-2


                                      (vi)



SECTION 17.09.    Notices, Demands; Requests ............................ XVII-2
SECTION 17.10.    Effect of Article and Section Headings and Table of
                    Contents ............................................ XVII-4
SECTION 17.11.    Indenture May be Executed in Counterparts;
                    Effectiveness of Indenture .......................... XVII-4
SECTION 17.12.    Liability of Authority Limited to Revenues ............ XVII-4
SECTION 17.13     Waiver of Personal Liability .......................... XVII-4

APPENDIX A        Form of Bonds ............................................ A-1

EXHIBIT A         Notice of Change in the Interest Rate Mode ............. A-1-1
EXHIBIT B         Certificate Pursuant to Section 4.01.3(a)(ii) or
                    4.02.3(a)(ii) of the Indenture ......................... B-1
EXHIBIT C         Certificate Pursuant to Section 4.01.3(b) or
                    4.02.3(b)(ii) of the Indenture ......................... C-1
EXHIBIT D         Notice of Failure of Conditions .......................... D-1
EXHIBIT E         Notice of Election to Tender ............................. E-1
EXHIBIT F         Notice of Mandatory Tender upon Expiration, Termination,
                    or Substitution of Support Facility .................... F-1


                                      (vii)


            THIS TRUST INDENTURE, made and dated as of the first day of June 1,
2001, by and between New York State Energy Research and Development Authority
(the "Authority"), a body corporate and politic, constituting a public benefit
corporation, and The Bank of New York, as trustee (the "Trustee"), a corporation
organized and existing under and by virtue of the laws of the State of New York
with its principal corporate trust office located in The City of New York.

                          W I T N E S S E T H T H A T:

            WHEREAS, pursuant to special act of the Legislature of the State of
New York (Title 9 of Article 8 of the Public Authorities Law of New York, as
from time to time amended and supplemented, herein called the "Act"), the
Authority has been established as a body corporate and politic, constituting a
public benefit corporation; and

            WHEREAS, pursuant to the Act, the Authority is empowered to contract
with any power company to participate in the construction of facilities to be
used for the furnishing of electric energy to the extent required by the public
interest in development, health, recreation, safety, conservation of natural
resources and aesthetics; and

            WHEREAS, pursuant to the Act, the Authority has also been empowered
to extend credit and make loans from bond and note proceeds to any person for
the construction, acquisition and installation of, or for the reimbursement to
any person for costs not limited to, any land, works, system, building or other
improvement, and all real and personal properties of any nature or any interest
in any of them which are suitable for or related to the furnishing, generation
or production of energy or the conversion of oil-burning facilities to alternate
fuel; and

            WHEREAS, the Authority is also authorized under the Act to borrow
money and issue its negotiable bonds and notes to provide sufficient monies for
achieving its corporate purposes including the refunding of outstanding
obligations of the Authority; and

            WHEREAS, the Authority is also authorized under the Act to enter
into any contracts and to execute all instruments necessary or convenient for
the exercise of its corporate powers and the fulfillment of its corporate
purposes; and

            WHEREAS, contemporaneously with the execution hereof, Consolidated
Edison Company of New York, Inc. (the "Company") and the Authority have entered
into a Participation Agreement of even date herewith (herein referred to as the
"Participation Agreement"), providing for the refunding of 7 1/2% Electric
Facilities Revenue Bonds, Series 1991 A (Consolidated Edison Company of New
York, Inc. Project) and 6 3/4% Facilities Revenue Bonds, Series 1992 A
(Consolidated Edison Company of New York, Inc. Project) (collectively, the
"Prior Bonds") of the Authority which were issued to finance the acquisition,
construction and installation of certain additional facilities for the
furnishing of electric energy within the Company's service area and as part of
such participation, that the Authority issue bonds pursuant to the Act to
provide funds to refund the Prior Bonds; and


            WHEREAS, the Participation Agreement provides that the Authority
will issue its bonds and make the proceeds of such bonds available to the
Company to refund the Prior Bonds; and

            WHEREAS, simultaneously with the issuance and delivery of such
bonds, the Company will execute and deliver a promissory note dated the date of
issuance of such bonds (the "Note") as evidence of its obligation to make
payments required by the Participation Agreement; and

            WHEREAS, pursuant to Resolution No. 979 adopted January 22, 2001,
the Authority has determined to issue its Facilities Revenue Bonds, Series 2001A
(Consolidated Edison Company of New York, Inc. Project) in an aggregate amount
not exceeding $228,150,000 (the "Bonds") for the purpose of paying a portion of
the redemption price of the Prior Bonds; and

            WHEREAS, all acts, conditions and things necessary or required by
the Constitution and statutes of the State of New York, or otherwise, to exist,
happen, and be performed as prerequisites to the passage of this Indenture, do
exist, have happened, and have been performed; and

            WHEREAS, the Trustee has accepted the trusts created by this Trust
Indenture and in evidence thereof has joined in the execution hereof;

            NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:

            That in order to declare the terms and conditions upon which the
Bonds are authenticated, issued and delivered, and in consideration of the
premises and the acceptance by the Trustee of the trusts hereby created and of
the purchase and acceptance of the Bonds by the Holders thereof, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
and in order to secure payment of the principal of and premium, if any, and
interest on the Bonds according to their tenor and effect and the performance
and observance by the Authority of all covenants, agreements and conditions
herein and in the Bonds contained, the Authority has acknowledged, executed,
signed and delivered this Indenture and hereby assigns, confirms, pledges with
and sets over and entrusts to the Trustee hereunder, its successors in trust and
assigns, subject to the provisions of this Indenture (the following being called
the "Trust Estate"): (1) the Revenues (as hereinafter defined); (2) the
Participation Agreement and the Note and all rights, remedies and interest of
the Authority under the Participation Agreement and the Note, and any other
agreement relating to the Project (exclusive of the Authority's rights with
respect to (a) administrative compensation, attorney's fees and indemnification,
(b) the receipt of notices, opinions, reports, copies of instruments and other
items of a similar nature required to be delivered to the Authority under the
Participation Agreement, (c) granting approvals and consents and making
determinations when required under the Participation Agreement, (d) making
requests for information and inspections in accordance with the Participation
Agreement, (e) Article III and Sections 4.02(f), 4.14 and 5.08 of the
Participation Agreement and, insofar as the obligations of the Company under
Section 4.12 relate to taxes and assessments imposed upon the Authority and not
the Trustee, Section 4.12 thereof, and (f) the right to amend the Participation
Agreement); (3) the Tax Regulatory Agreement, and all rights, remedies and
interest of the Authority thereunder, subject to the provisions of the Tax
Regulatory Agreement relating to the amendment thereof and to a reservation by
the Authority of the right to enforce the obligations of the


                                      -2-


Company thereunder independently of the Trustee; (4) all other monies, rights
and properties held by the Trustee or other depositary under this Indenture
including, but only for the benefit of the persons specified herein, the
proceeds of any draw, borrowing or payment under any Credit Facility (as
hereinafter defined), and the securities (and the interest, income and profits
therefrom) in which such monies may from time to time be invested (exclusive of
the proceeds of a Liquidity Facility (as hereinafter defined) or the Project
Fund (as hereinafter defined)); and (5) any and all other real or personal
property of every nature from time to time hereafter by delivery or by writing
of any kind specially mortgaged, pledged, or hypothecated, as and for additional
security hereunder, by the Company in favor of the Trustee or the Authority
which are hereby authorized to receive any and all such property at any and all
times and to hold and apply the same subject to the terms hereof.

            TO HAVE AND TO HOLD, all and singular of said Trust Estate unto the
Trustee, its successors in trust and assigns, forever, in trust, nevertheless,
to inure to the use and benefit of the Holders of all the Bonds, for the
securing of the observance or performance of all the terms, provisions and
conditions therein and herein contained and for the equal and proportionate
benefit and security of all and singular the present and future Holders of the
Bonds, without preference, priority, prejudice or distinction as to lien or
otherwise of any Bond over any other Bond, to the end that each Holder of a Bond
shall have the same rights, privileges and lien under and by virtue of this
Trust Indenture, except as hereinafter otherwise specifically provided;

            AND UPON THE CONDITION THAT, if the Authority shall cause to be paid
fully and promptly and indefeasibly when due all of its indebtedness,
liabilities, obligations and sums at any time secured hereby, including
interest, its Trustee's fees and reasonable expenses (including its reasonable
attorneys' fees and expenses), and shall promptly, faithfully and strictly keep,
perform and observe, or cause to be kept, performed and observed, all of its
covenants, obligations, warranties and agreements contained herein, then and in
such event, this Trust Indenture shall be and become void and of no further
force and effect, otherwise the same shall remain in full force and effect.

            THIS TRUST INDENTURE FURTHER WITNESSETH, and it is expressly
declared, that all Bonds issued and secured hereunder are to be issued,
authenticated and delivered and all said income and Revenues hereby pledged are
to be dealt with and disposed of under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the Authority has agreed and covenanted, and does
hereby agree and covenant, with the Trustee and with the respective Holders,
from time to time, of the said Bonds, or any part thereof, as follows (provided
that in the performance of the agreements of the Authority herein contained any
obligation it may thereby incur for the payment of money shall never constitute
a general or moral obligation of the State of New York or any political
subdivision thereof within the meaning of any state constitutional provision or
statutory limitation, and shall not be secured directly or indirectly by the
full faith and credit, the general credit or any revenue or taxes of the State
of New York or any political subdivision thereof, but shall be payable solely
out of the income and Revenues derived under the Participation Agreement and the
Note and from drawings under the Credit Facility, if any, and other monies,
rights and properties of the Trust Estate), that is to say:


                                      -3-


                                    ARTICLE I

                     DEFINITIONS; COMPUTATIONS; CERTIFICATES
                  AND OPINIONS; EVIDENCE OF ACTION BY AUTHORITY

            SECTION 1.01. Definitions of Specific Terms. Unless the context
shall clearly indicate some other meaning or may otherwise require, the terms
defined in this Section shall, for all purposes of this Indenture and of any
indenture, resolution or other instrument amendatory hereof or supplemental
hereto and of any certificate, opinion, instrument or document herein or therein
mentioned, have the meanings herein specified, with the following definitions to
be equally applicable to both the singular and plural forms of any terms herein
defined and vice versa.

            "Act" shall mean the New York State Energy Research and Development
Authority Act, Title 9 of Article 8 of the Public Authorities Law of the State
of New York, as from time to time amended and supplemented.

            "Additional Payments" shall mean the Additional Payments as defined
in Section 4.02(f) of the Participation Agreement.

            "Adjustable Rate" shall mean any of the following types of interest
rates: a Commercial Paper Rate, an Auction Rate, a Daily Rate, a Weekly Rate, a
Monthly Rate, a Semi-annual Rate and a Term Rate.

            "Administration Fees" shall mean the amounts payable by the Company
to the Authority pursuant to Section 4.02(f) of the Participation Agreement to
defray a portion of the expenses incurred by the Authority in conducting and
administering its special energy project programs and the amount payable as
state bond issuance charge pursuant to Section 4.02(f) of the Participation
Agreement.

            "Affiliate" shall mean any person known to the Auction Agent to be
controlled by, in control of or under common control with the Company; provided
that no Broker-Dealer controlled by, in control of or under common control with
the Company shall be an Affiliate nor shall any corporation or any person
controlled by, in control of or in common control with such corporation be an
Affiliate solely because a director or executive officer of such Broker-Dealer
is also a director of the Company.

            "After-Tax Equivalent Rate" on any date of determination shall mean
with respect to Auction Rate Bonds, the interest rate per annum equal to the
product of (x) Commercial Paper/Treasury Rate on such date and (y) (1.00 minus
the Statutory Corporate Tax Rate on such date).

            "Agent Member" shall mean a member of, or participant in, the
Securities Depository.

            "All Hold Rate" shall mean on any date of determination with respect
to Auction Rate Bonds the rate per annum equal to 85% (as such percentage may be
adjusted pursuant to Section 3.10)


                                      I-1


of the lesser of (i) the BMA Index on such date and (ii) the After-Tax
Equivalent Rate on such date provided, however, that in no event shall such All
Hold Rate exceed the Maximum Allowed Rate.

            "Alternate Support Facility" shall mean any Support Facility
obtained pursuant to the provisions of Section 6.02 in replacement of an
existing Support Facility.

            "Applicable Percentage" on any date of determination shall mean the
percentage determined as set forth below (as such percentage may be adjusted for
Auction Rate Bonds pursuant to Section 3.10) based on the prevailing long-term
rating of the Auction Rate Bonds in effect at the close of business on the
Business Day immediately preceding such date of determination:

                                                     Applicable
            Prevailing Rating                        Percentage
            -----------------                        ----------

            AAA/"Aaa"                                   175%
            AA/"Aa"                                     175%
            A/"A"                                       175%
            BBB/"Baa"                                   200%
            Below BBB/"Baa"                             265%

            For purposes of this definition, the "prevailing rating" of the
Auction Rate Bonds will be (a) AAA/"Aaa," if the Auction Rate Bonds, have a
rating of AAA or better by S&P and a rating of "Aaa" by Moody's, or the
equivalent of such ratings by a substitute rating agency or agencies selected as
provided below, (b) if not AAA/"Aaa," then AA/"Aa" if the Auction Rate Bonds
have a rating of AA- or better by S&P and a rating of "Aa3" or better by
Moody's, or the equivalent of such ratings by a substitute rating agency or
agencies selected as provided below, (c) if not AAA/"Aaa" or AA/"Aa," then A/"A"
if the Auction Rate Bonds have a rating of A- or better by S&P and a rating of
"A3" or better by Moody's, or the equivalent of such ratings by a substitute
rating agency or agencies selected as provided below, (d) if not AAA/"Aaa,"
AA/"Aa" or A/"A," then BBB/"Baa," if the Auction Rate Bonds have a rating of
BBB- or better by S&P and a rating of "Baa3" or better by Moody's, or the
equivalent of such ratings by a substitute rating agency or agencies selected as
provided below, and (e) if not AAA/"Aaa," AA/"Aa", A/"A" or BBB/"Baa," then
below BBB/"Baa," whether or not the Auction Rate Bonds are rated by any
securities rating agency.

            If (x) the Auction Rate Bonds, are rated by a rating agency or
agencies other than Moody's or S&P and (y) the Company has delivered on behalf
of the Authority to the Trustee and the Auction Agent an instrument designating
one or two of such rating agencies to replace Moody's or S&P, or both, then for
purposes of the definition of "prevailing rating" Moody's or S&P, or both, will
be deemed to have been replaced in accordance with such instrument; provided,
however, that such instrument must be accompanied by the consent of the
Remarketing Agent. For purposes of this definition, S&P's rating categories of
AAA, AA-, A- and BBB-, and Moody's rating categories of "Aaa," "Aa3," "A3" and
"Baa3," refer to and include the respective rating categories correlative
thereto in the event that either or both of such rating agencies have changed or
modified their generic rating categories. If the prevailing ratings for


                                      I-2


the Bonds are split between the categories set forth above, the lower rating
will determine the prevailing rating.

            "Auction" shall mean each periodic implementation of the Auction
Procedures for Auction Rate Bonds.

            "Auction Agency Agreement" shall mean the Auction Agency Agreement
to be entered into between the Company and the Auction Agent with respect to the
Auction Rate Bonds, as from time to time amended and supplemented.

            "Auction Agent" shall mean any entity appointed as such pursuant to
Section 11.21 and its successors and assigns.

            "Auction Date" shall mean with respect to each Auction Period, the
last Thursday of the immediately preceding Auction Period (or such other day
that the Remarketing Agent shall establish as the Auction Date therefor pursuant
to Section 3.05); provided, that if such day is not a Business Day, the Auction
Date shall be the next succeeding Business Day.

            "Auction Period" shall mean, after a Change in the Interest Rate
Mode to an Auction Rate, until the effective date of a Change in the Interest
Rate Mode or the Stated Maturity, each period from and including the last
Interest Payment Date for the immediately preceding Auction Period or
Calculation Period, as the case may be, to and including the next succeeding
Auction Date or, in the event of a Change in the Interest Rate Mode, to but
excluding the effective date of such change, provided, if any day that would be
the last day of any such period does not immediately precede a Business Day,
such period shall end on the next day which immediately precedes a Business Day.

            "Auction Procedures" shall mean with respect to the Auction Rate
Bonds the procedures set forth in Sections 3.06 through 3.09.

            "Auction Rate" shall mean with respect to Auction Rate Bonds and
each Auction Period for such Auction Rate Bonds (other than an initial Auction
Period after a Change in the Interest Rate Mode to an Auction Rate Period), the
rate of interest per annum determined for the Bonds pursuant to Article III.

            "Auction Rate Bonds" shall mean with respect to an Auction Rate
Period, any Bonds or subseries of Bonds which bear the Auction Rate determined
pursuant to Article III.

            "Auction Rate Bonds Period Record Date" shall mean, with respect to
each Interest Payment Date during an Auction Rate Period, the Business Day next
preceding such Interest Payment Date.

            "Auction Rate Period" shall mean any period during which the Auction
Rate Bonds bear interest at an Auction Rate determined pursuant to the
implementation of Auction Procedures established under Article III, which period
shall commence on the Closing Date if the Bonds initially are offered as


                                      I-3


Auction Rate Bonds or on the effective date of a Change in the Interest Rate
Mode to an Auction Rate and shall extend through the day immediately preceding
the earlier of (a) the effective date of a Change in the Interest Rate Mode or
(b) the Stated Maturity.

            "Authority" shall mean New York State Energy Research and
Development Authority, the public benefit corporation created by the Act, and
its successors and assigns.

            "Authorized Company Representative" shall mean any officer or other
employee of the Company at the time designated to act on behalf of the Company
by written certificate furnished to the Authority and the Trustee containing the
specimen signature of such person and signed on behalf of the Company by its
Chairman, President or a Vice President and its Secretary or an Assistant
Secretary.

            "Authorized Officer" shall mean the Chair, Vice-Chair, President,
Vice President, Treasurer, Assistant Treasurer or Secretary of the Authority.

            "Available Auction Rate Bonds" shall mean with respect to the
Auction Rate Bonds, Available Auction Rate Bonds as defined in Section 3.08.

            "Beneficial Owner" shall mean with respect to the Auction Rate
Bonds, a customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer (or, if applicable, the Auction Agent) as a holder of the Auction
Rate Bonds.

            "Bid" shall mean with respect to the Auction Rate Bonds, Bid as
defined in Section 3.06.

            "Bidder" shall mean with respect to the Auction Rate Bonds, Bidder
as defined in Section 3.06.

            "BMA Index" shall mean The Bond Market Association Municipal Swap
Index released by Municipal Market Data to its subscribers; provided, however,
that if the BMA Index is unavailable, references to the BMA Index shall be
replaced by the After-Tax Equivalent Rate.

            "Bond Counsel" shall mean an attorney or firm or firms of attorneys,
satisfactory to the Authority and the Trustee, nationally recognized and
experienced in matters relating to tax exemption of interest on bonds issued by
states and their political subdivisions.

            "Bond Fund" shall mean the special trust fund of the Authority
designated as "Consolidated Edison Company of New York, Inc. Project Bond Fund"
created and established under, and to be held and administered by the Trustee as
provided in, Section 9.01 and, unless the context shall clearly indicate
otherwise, shall include the "Interest Account," the "Principal Account," and
the "Redemption Account" created and established therein.

            "Bond Purchase Agreement" shall mean the Bond Purchase Agreement,
dated June 5, 2001, among the Authority, the Company and the underwriters named
therein.


                                      I-4


            "Bond Purchase Fund" shall mean the Bond Purchase Fund established
pursuant to the Bond Purchase Trust Agreement.

            "Bond Purchase Trust Agreement" shall mean the Bond Purchase Trust
Agreement dated as of the date hereof between the Authority and the Registrar
and Paying Agent, as from time to time amended or supplemented.

            "Bond Year" shall have the meaning set forth in the Tax Regulatory
Agreement.

            "Bondholder", "Holder of a Bond" or "Holder" shall mean any
registered owner of a Bond.

            "Bonds" shall mean, the "Facilities Revenue Bonds, Series 2001A
(Consolidated Edison Company of New York, Inc. Project)" presently to be issued
as authorized in Section 2.02 at any time Outstanding.

            "Broker-Dealer" shall mean any broker-dealer (as defined in the
Securities Exchange Act), commercial bank or other entity permitted by law to
perform the functions required of a Broker-Dealer set forth in the Auction
Procedures (i) that is an Agent Member (or an affiliate of an Agent Member),
(ii) that has been selected by the Auction Agent and the Company with the
consent of the Authority, and (iii) that has entered into a Broker-Dealer
Agreement with the Auction Agent and the Company that remains effective.

            "Broker-Dealer Agreement" shall mean each agreement applicable to
the Auction Rate Bonds, between a Broker-Dealer, the Company and the Auction
Agent pursuant to which the Broker-Dealer, among other things, agrees to
participate in Auctions as set forth in the Auction Procedures, as from time to
time amended and supplemented.

            "Business Day" shall mean any day other than a Saturday, Sunday or
other day on which the New York Stock Exchange or banks are authorized or
obligated by law or executive order to close in New York, New York, or any city
in which is located the principal corporate trust office of the Trustee or the
office of an issuer of a Support Facility at which demands for a draw on, or
borrowing or payment under, the Support Facility will be made.

            "Calculation Period" shall mean (a) during any Commercial Paper Rate
Period following a Change in the Interest Rate Mode to a Commercial Paper Rate
Period, the period from and including the effective date of the Change in the
Interest Rate Mode to a Commercial Paper Rate Period to but not including any
day not more than 270 days thereafter which is a day immediately preceding a
Business Day established by the Remarketing Agent pursuant to Section 3.02 and,
thereafter, any Calculation Period established by the Remarketing Agent pursuant
to Section 3.02 which shall end on a day not later than 270 days from the
commencement thereof; (b) during any Daily Rate Period, the period from and
including a Business Day to but not including the next succeeding Business Day;
(c) during the first Weekly Rate Period, the period from and including the date
of issuance of the Bonds to and including the following Tuesday, and thereafter
the period from and including Wednesday of each week to and including the


                                      I-5


following Tuesday and during any other Weekly Rate Period following a Change in
the Interest Rate Mode to a Weekly Rate, the period from and including the
effective date of the Change in the Interest Rate Mode to and including the
following Tuesday, and, thereafter, the period from and including Wednesday of
each week to and including the following Tuesday; (d) during any Monthly Rate
Period following a Change in the Interest Rate Mode to a Monthly Rate, the
period from and including the effective date of the Change in the Interest Rate
Mode to but excluding the first Business Day of the following month, and,
thereafter each period from and including the first Business Day of the month to
but excluding the first Business Day of the following month; (e) during any
Semi-annual Rate Period following a Change in the Interest Rate Mode to a
Semi-annual Rate, the period from and including the effective date of the Change
in the Interest Rate Mode to but excluding the next succeeding Interest Payment
Date and, thereafter, each period from and including the day following the end
of the last Calculation Period to but excluding the next succeeding Interest
Payment Date; (f) during any Term Rate Period, any period of not less than 365
days from and including a Business Day to and including any day (established by
the Remarketing Agent pursuant to Section 4.01.1) not later than the day prior
to the Stated Maturity; and (g) during any Fixed Rate Period following a Change
in the Interest Rate Mode to a Fixed Rate, the period from and including the
effective date of the Change in the Interest Rate Mode through the day
immediately preceding the earlier of (x) the effective date of another Change in
the Interest Rate Mode, or (y) the Stated Maturity.

            "Change in the Interest Rate Mode" shall mean any change in the type
of interest rate borne by the Bonds pursuant to Section 4.01 or Section 4.02.

            "Change of Preference Law" shall mean any amendment to the Code or
other statute enacted by the Congress of the United States or any temporary,
proposed or final regulation promulgated by the United States Treasury, after
the date hereof which (a) changes or would change any deduction, credit or other
allowance allowable in computing liability for any federal tax with respect to,
or (b) imposes, or would impose, reduces or would reduce, or increases or would
increase any federal tax (including, but not limited to, preference or excise
taxes) upon, any interest earned by any holder of bonds the interest on which is
excluded from federal gross income under Section 103 of the Code.

            "Closing Date" shall mean the date on which the Note becomes legally
effective, the same being the date on which the Bonds are paid for by and
delivered to the original purchasers thereof.

            "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time. Each reference to a section of the Code herein shall be deemed to
include the United States Treasury Regulations proposed or in effect thereunder
and applied to the Bonds or the use of proceeds thereof, and also includes all
amendments and successor provisions unless the context clearly requires
otherwise.

            "Commercial Paper Dealers" means the commercial paper dealers
specified by the Authority at the request of the Company at the time of any
Change in the Interest Rate Mode to an Auction Rate, or in lieu of any thereof,
their respective affiliates or successors, provided that any such entity is a
commercial paper dealer.


                                      I-6


            "Commercial Paper Period Record Date" shall mean, with respect to
each Interest Payment Date during a Commercial Paper Rate Period, the Business
Day next preceding such Interest Payment Date.

            "Commercial Paper Rate" shall mean with respect to each Calculation
Period during a Commercial Paper Rate Period, a rate or rates of interest equal
to the rate or rates of interest per annum established and certified to the
Trustee (with a copy to the Authority, the Registrar and Paying Agent and the
Company) by the Remarketing Agent no later than 12:00 noon (New York City time)
on and as of the Determination Date as the minimum rate or rates of interest per
annum which, in the opinion of the Remarketing Agent, would be necessary on and
as of such day to remarket Bonds in a secondary market transaction at a price
equal to the principal amount thereof; provided that such rate or rates of
interest shall not exceed the lesser of 110% of the Commercial Paper Rate Index
on and as of such date and the Maximum Allowed Rate.

            "Commercial Paper Rate Index" shall mean with respect to the
Determination Date of each Calculation Period during a Commercial Paper Rate
Period, the average of yield evaluations at par, determined by the Indexing
Agent, of securities (whether or not actually issued) all of which shall have a
term as near as practicable to such Calculation Period or which are subject to
optional or mandatory tender by the owner thereof at the end of a term as near
as practicable to such Calculation Period, the interest on which is not included
in gross income for federal income tax purposes, of no fewer than ten Component
Issuers selected by the Indexing Agent, including issuers of commercial paper,
project notes, bond anticipation notes and tax anticipation notes, computed by
the Indexing Agent on and as of such day. If the Bonds are rated by a Rating
Agency in its highest note or commercial paper rating category or one of its two
highest long-term debt rating categories, each Component Issuer must (a) have
outstanding securities rated by a Rating Agency in its highest note or
commercial paper rating category or (b) not have outstanding notes or commercial
paper rated by a Rating Agency but have outstanding securities rated by a Rating
Agency in one of its two highest long-term debt rating categories. If the Bonds
are rated by a Rating Agency in a rating category that is lower than its highest
note or commercial paper rating category or its two highest long-term debt
rating categories (and the Bonds are not rated in one of such categories by the
other Rating Agency), each Component Issuer must (a) have outstanding securities
rated by a Rating Agency in its note or commercial paper rating category which
is the same or correlative, in the Indexing Agent's judgment, to the note or
commercial paper rating category or the long-term debt rating category of the
Bonds or (b) have outstanding securities rated by a Rating Agency in the same
long-term debt rating category as the Bonds are rated by that Rating Agency and
not have any outstanding notes or commercial paper rated by such Rating Agency.
The Indexing Agent may change the Component Issuers from time to time in its
discretion, subject to the foregoing requirements. In addition, at the request
of the Company and upon delivery to the Trustee of an Opinion of Bond Counsel
that such action will not adversely affect the exclusion of interest on the
Bonds from gross income of the owners thereof for federal income tax purposes,
the Authority, with the consent of the Company, may designate a new method of
setting the Commercial Paper Rate Index in the event any of the above-described
methods are determined by the Authority to be unavailable, impracticable or
unrealistic in the market place.


                                      I-7


            "Commercial Paper Rate Period" shall mean any period during which
the Bonds bear interest at a Commercial Paper Rate or Rates, which period shall
commence on the effective date of a Change in the Interest Rate Mode to a
Commercial Paper Rate or Rates, as the case may be, and extend through the day
immediately preceding the earlier of (a) the effective date of another Change in
the Interest Rate Mode or (b) the Stated Maturity.

            "Commercial Paper/Treasury Rate" on any date of determination shall
mean with respect to Auction Rate Bonds (i) in the case of any Auction Period of
less than 49 days, the interest equivalent of the 30-day rate, (ii) in the case
of any Auction Period of 49 days or more and but less than 70 days, the interest
equivalent of the 60-day rate, (iii) in the case of any Auction Period of 70
days or more but less than 85 days, the arithmetic average of the interest
equivalent of the 60-day and 90-day rates, (iv) in the case of any Auction
Period of 85 days or more but less than 99 days, the interest equivalent of the
90-day rate; (v) in the case of any Auction Period of 99 days or more but less
than 120 days, the arithmetic average of the interest equivalent of the 90-day
and 120-day rates, (vi) in the case of any Auction Period of 120 days or more
but less than 141 days, the interest equivalent of the 120-day rate, (vii) in
the case of any Auction Period of 141 days or more but less than 162 days, the
arithmetic average of the interest equivalent of the 120-day and 180-day rates,
(viii) in the case of any Auction Period of 162 days or more but less than 183
days, the interest equivalent of the 180-day rate, and (ix) in the case of any
Auction Period of 183 days or more, the Treasury Rate for such Auction Period.
The foregoing rates shall in all cases, except with respect to the Treasury
Rate, be rates on commercial paper placed on behalf of issuers whose corporate
bonds are rated "AA" by S&P, or the equivalent of such rating by Moody's, as
made available on a discount basis or otherwise by the Federal Reserve Bank of
New York for the Business Day immediately preceding such date of determination,
or in the event that the Federal Reserve Bank of New York does not make
available any such rate, then the arithmetic average of such rates, as quoted on
a discount basis or otherwise, by the Commercial Paper Dealers, to the Auction
Agent for the close of business on the Business Day immediately preceding such
date of determination.

If any Commercial Paper Dealer does not quote a commercial paper rate required
to determine the Commercial Paper/Treasury Rate, the Commercial Paper/Treasury
Rate shall be determined on the basis of a commercial paper quotation or
quotations furnished by the remaining Commercial Paper Dealer or Commercial
Paper Dealers and any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Authority at the request of the Company
to provide such quotation or quotations not being supplied by any Commercial
Paper Dealer or Commercial Paper Dealers, as the case may be, or if the
Authority does not select any such Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or
Commercial Paper Dealers. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis (a "discount rate") for
commercial paper of a given day's maturity shall be equal to the product of (A)
100 times (B) the quotient (rounded upwards to the next higher one-thousandth
(.001) of 1%) of (x) the discount rate (expressed in decimals) divided by (y)
the difference between (1) 1.00 and (2) a fraction the numerator of which shall
be the product of the discount rate (expressed in decimals) times the number of
days in which such commercial paper matures and the denominator of which shall
be 360.

            "Commission" shall mean the Securities and Exchange Commission.


                                      I-8


            "Company" shall mean Consolidated Edison Company of New York, Inc.,
and any surviving, resulting or transferee corporation as provided in Section
5.17 of the Participation Agreement.

            "Component Issuers" shall mean issuers of securities, the interest
on which is excluded from gross income for federal income tax purposes, selected
by the Indexing Agent.

            "Computation Date" shall mean each date which is one (1) Business
Day prior to any Determination Date.

            "Computation Period" shall have the meaning set forth in the Tax
Regulatory Agreement.

            "Credit Facility" shall mean any Support Facility which provides for
the payments referred to in clause (ii) of the definition thereof.

            "Credit Facility Issuer" shall mean any bank or banks or other
financial institution or institutions, having issued any Credit Facility.

            "Current Adjustable Rate" shall mean the interest rate borne by
Bonds immediately prior to a Change in the Interest Rate Mode or the
establishment of a Fixed Rate.

            "Daily Period Record Date" shall mean, with respect to each Interest
Payment Date during a Daily Rate Period, the Business Day next preceding such
Interest Payment Date.

            "Daily Rate" shall mean with respect to each Calculation Period
during a Daily Rate Period, a rate of interest equal to the rate of interest per
annum established and certified to the Trustee (with a copy to the Authority,
the Registrar and Paying Agent and the Company) by the Remarketing Agent no
later than 12:00 noon (New York City time) on and as of the Determination Date
as the minimum rate of interest per annum which, in the opinion of the
Remarketing Agent, would be necessary on and as of such day to remarket Bonds in
a secondary market transaction at a price equal to the principal amount thereof
plus accrued interest thereon; provided that such rate of interest shall not
exceed the lesser of 110% of the Daily Rate Index on and as of such day and the
Maximum Allowed Rate.

            "Daily Rate Index" shall mean with respect to the Determination Date
of each Calculation Period during a Daily Rate Period, the average of one-day
yield evaluations at par, determined by the Indexing Agent, of securities
(whether or not actually issued), the interest on which is not included in gross
income for federal income tax purposes, of no fewer than ten Component Issuers
selected by the Indexing Agent and which have redemption or tender provisions
comparable to the then applicable provisions of the Bonds, computed by the
Indexing Agent on and as of the Determination Date. If the Bonds are rated by a
Rating Agency, each Component Issuer must have outstanding securities rated by a
Rating Agency in a short-term debt rating category which is the same as the
short-term debt rating category in which the Bonds are rated. The specific
issuers included in the Component Issuers may be changed from time to time by
the Indexing Agent in its discretion and shall be issuers whose securities, in
the judgment of the Indexing Agent, have characteristics similar to the Bonds.
In addition, at the request of the Company and upon


                                      I-9


delivery to the Trustee of an Opinion of Bond Counsel that such action will not
adversely affect the exclusion of interest on the Bonds from gross income of the
owners thereof for federal income tax purposes, the Authority, with the consent
of the Company, may designate a new method of setting the Daily Rate Index in
the event any of the above-described methods are determined by the Authority to
be unavailable, impracticable or unrealistic in the market place.

            "Daily Rate Period" shall mean any period during which Bonds bear
interest at a Daily Rate which period shall commence on the effective date of
the Change in the Interest Rate Mode to a Daily Rate and shall extend through
the day immediately preceding the earlier of (a) the effective date of a Change
in the Interest Rate Mode or (b) the Stated Maturity.

            "Determination Date" shall mean, for any Calculation Period, the
first Business Day occurring during such Calculation Period; provided, however,
with respect to Bonds which bear interest at the Weekly Rate, for the
Calculation Period commencing on the Closing Date, the Determination Date shall
mean the Business Day immediately preceding such Closing Date, and thereafter,
each Wednesday or, if such Wednesday is not a Business Day, the Business Day
next preceding such Wednesday.

            "Direct-Pay Credit Facility" shall mean any Credit Facility which by
its terms permits the Trustee to draw moneys thereunder for deposit in the Bond
Fund.

            "Event of Default" shall mean Event of Default as defined in Section
12.01.

            "Existing Holder" shall mean with respect to Auction Rate Bonds a
Broker-Dealer that is listed as the holder of Auction Rate Bonds in the records
of the Auction Agent.

            "Failure to Deposit" shall mean any failure to make the deposit
required by Section 9.02(a)(i) or 9.02(b)(i) by the time specified therein.

            "Fiscal Year" shall mean the fiscal year of the Company as
established from time to time by the Company which as of the Closing Date is the
twelve-month period commencing on January 1 of each calendar year and ending on
December 31 of the next calendar year.

            "Fitch" shall mean Fitch, Inc. and its successor or successors, and
if such corporation shall for any reason no longer perform the functions of a
securities rating agency or shall be replaced by some other nationally
recognized rating agency by the Authority at the request of the Company, "Fitch"
shall be deemed to refer to such other nationally recognized rating agency
designated by the Authority at the request of the Company.

            "Fixed Rate" shall mean, with respect to a Fixed Rate Period, the
rate of interest per annum established and certified to the Trustee (with a copy
to the Authority, the Registrar and Paying Agent and the Company) by the
Remarketing Agent no later than 12:00 noon (New York City time) on and as of
such date as the minimum rate of interest per annum which, in the opinion of the
Remarketing Agent, would be necessary on and as of such date to remarket the
Bonds in a secondary market transaction at a price equal


                                      I-10


to 100% of the Outstanding principal amount thereof; provided that such rate of
interest shall not exceed the lesser of 110% of the Fixed Rate Index on and as
of such date and 18% per annum;

            "Fixed Rate Conversion Date" shall have the meaning set forth in
Section 4.02.

            "Fixed Rate Index" shall mean with respect to a Fixed Rate
Conversion Date, the average of the yield evaluations (on the basis of full
coupon securities trading at par with a term approximately equal to the Fixed
Rate Period) of securities (whether or not actually issued), the interest on
which is not included in gross income for federal income tax purposes, of no
fewer than ten Component Issuers selected by the Indexing Agent and which have a
long-term rating by a Rating Agency in the same rating category as the Bonds are
rated at the time by such Rating Agency or, if no such bonds are so rated, shall
be debt which, in the judgment of the Indexing Agent, is of credit quality
comparable to that of the Bonds, computed by the Indexing Agent on and as of the
Fixed Rate Conversion Date. In the event that the Indexing Agent fails to
compute the Fixed Rate Index and no other qualified municipal securities
evaluation service can be appointed Indexing Agent by the Authority, the Fixed
Rate Index shall be determined by the Remarketing Agent and shall be 90% of the
average yield shown for the most recent calendar month for United States
Treasury notes or bonds having the same number of years to maturity as the
number of 12-month periods (or months if the Fixed Rate Period is less than one
year) in the Fixed Rate Period, as published in the Federal Reserve Bulletin in
the last issue before the Fixed Rate Conversion Date. If that issue does not
contain such a yield, the Fixed Rate Index will be determined by linear
interpolation between the yields shown in that issue for United States Treasury
notes and bonds having the next shorter and next longer number of years (or
months) to maturity. In addition, at the request of the Company and upon
delivery to the Trustee of an Opinion of Bond Counsel that such action will not
adversely affect the exclusion of interest on the Bonds from gross income of the
owners thereof for federal income tax purposes, the Authority, with the consent
of the Company, may designate a new method of setting the Fixed Rate Index in
the event any of the above-described methods are determined by the Authority to
be unavailable, impracticable or unrealistic in the market place.

            "Fixed Rate Period" shall mean any period during which Bonds bear
interest at a Fixed Rate, which period shall commence on the effective date of a
Change in the Interest Rate Mode to a Fixed Rate, and shall extend through the
day immediately preceding the earlier of (a) the effective date of another
Change in the Interest Rate Mode, or (b) the Stated Maturity.

            "Fixed Rate Record Date" shall mean, with respect to each Interest
Payment Date during a Fixed Rate Period, the fifteenth day of the month next
preceding such Interest Payment Date, or, if such day shall not be a Business
Day, the next preceding Business Day.

            "Governmental Obligations" shall mean any of the following which are
non-callable:

            (a) direct general obligations of, or obligations the payment of the
      principal of and interest on which is unconditionally guaranteed by, the
      United States of America; and


                                      I-11


            (b) bonds, debentures or notes issued by Government National
      Mortgage Association, Federal Financing Bank, Federal Farm Credit Bank,
      Federal Land Bank, Federal Home Loan Bank, Farmers Home Administration,
      Federal Home Mortgage Association or any other comparable federal agency
      hereafter created to the extent that said obligations are unconditionally
      guaranteed by the United States of America.

            "Hold Order" shall mean with respect to the Auction Rate Bonds, Hold
Order as defined in Section 3.06.

            "Indenture" shall mean this Trust Indenture dated as of June 1, 2001
between the Authority and the Trustee, as the same may be amended or
supplemented.

            "Indexing Agent" shall mean the Indexing Agent appointed in
accordance with Section 11.24.

            "Initial Support Facility" shall mean the Letter of Credit dated
June 6, 2001 issued by the Initial Support Facility Issuer. The Initial Support
Facility shall constitute a Liquidity Facility, a Credit Facility and a
Direct-Pay Credit Facility within the meaning of this Indenture.

            "Initial Support Facility Issuer" shall mean Barclays Bank PLC.

            "Interest Payment Date" shall mean:

            (a) during each Commercial Paper Rate Period, the Business Day
      immediately succeeding the last day of any Calculation Period;

            (b) during an Auction Rate Period (i) for an Auction Period of 91
      days or less, the Business Day immediately succeeding such Auction Period
      and (ii) for an Auction Period of more than 91 days, each succeeding 91st
      day after the first day of such Auction Period and the Business Day
      immediately succeeding the last day of such Auction Period;

            (c) during each Daily Rate Period, the first Business Day of each
      month thereof;

            (d) (i) during the initial Weekly Rate Period, on July 2, 2001 and
      on the first Business Day of each month thereafter, and (ii) during each
      Weekly Rate Period other than the initial Weekly Rate Period, the first
      Business Day of each month thereof;

            (e) during each Monthly Rate Period, the first Business Day of each
      month thereof;

            (f) during each Semi-annual Rate Period, (i) the first Business Day
      of the sixth calendar month following the month in which the first day of
      such Semi-annual Rate Period occurred, (ii) each anniversary of the date
      so determined, and (iii) each anniversary of the first day of the first
      month of such Semi-annual Rate Period;


                                      I-12


            (g) during each Term Rate Period, (i) the first Business Day of the
      sixth calendar month following the month in which the first day of such
      Term Rate Period occurred, (ii) each anniversary of the date so
      determined, (iii) each anniversary of the first day of the first month of
      such Term Rate Period, and (iv) the Business Day immediately succeeding
      such Term Rate Period;

            (h) the June 1 or December 1 next succeeding a Fixed Rate Conversion
      Date and each June 1 and December 1 thereafter; provided, however, that if
      the June 1 or December 1 next succeeding a Fixed Rate Conversion Date
      occurs less than twenty-one (21) days after such Fixed Rate Conversion
      Date, the first Interest Payment Date shall be the second such date
      following such Fixed Rate Conversion Date;

            (i) a Fixed Rate Conversion Date;

            (j) any day on which Bonds are subject to mandatory tender for
      purchase pursuant to Section 5.04, 5.08 or 5.09 or redemption in whole
      pursuant to Section 5.01, 5.05, 5.06 or 5.07; and

            (k) the Stated Maturity;

provided, however, that if any such date determined in any of the foregoing
clauses is not a Business Day, the Interest Payment Date shall be the next
succeeding day which is a Business Day.

            "Investment Securities" shall mean any of the following which at the
time are legal investments under the laws of the State of New York for the
monies held hereunder:

            (a) any obligation issued or guaranteed by, or backed by the full
      faith and credit of, the United States of America (including any
      certificates or any other evidence of an ownership interest in any such
      obligation or in specified portions thereof, which may consist of
      specified portions of the principal thereof or the interest thereon);

            (b) deposit accounts in, or certificates of deposit issued by, and
      bankers acceptance of, any bank, trust company or national banking
      association which is a member of the Federal Reserve System (which may
      include the Trustee), having capital stock and surplus aggregating not
      less than $50,000,000;

            (c) deposit accounts in, or certificates of deposit issued by and
      bankers acceptances of, any bank or trust company having capital stock and
      surplus aggregating not less than $50,000,000 and whose obligations are
      rated not less than "A" or equivalent by Moody's or S&P;

            (d) obligations issued or guaranteed by any person controlled or
      supervised by and acting as an instrumentality of the United States of
      America pursuant to the authority granted by the Congress of the United
      States;


                                      I-13


            (e) commercial paper rated in the highest investment grade or next
      highest investment grade by Moody's or S&P;

            (f) obligations rated not less than "A" or equivalent by Moody's or
      S&P issued or guaranteed by any state of the United States or the District
      of Columbia, or any political subdivision, agency or instrumentality of
      any such state or District, or issued by any corporation;

            (g) obligations of a public housing authority fully secured by
      contracts with the United States;

            (h) repurchase agreements with any bank or trust company organized
      under the laws of any state of the United States of America or any
      national banking association (including the Trustee) or any government
      bond dealer reporting to, trading with and recognized as a primary dealer
      by, the Federal Reserve Bank of New York with respect to any of the
      foregoing obligations or securities. Any repurchase agreement entered into
      pursuant to this Indenture shall, by its terms, permit the Trustee to sell
      the related obligations or securities if the other party to such
      repurchase agreement shall fail to repurchase promptly such obligation or
      security on the day required by the repurchase agreement. All such
      repurchase agreements shall also provide for the delivery of the related
      obligations or securities to the Trustee or a depositary of the Trustee;

            (i) money market or bond mutual funds, which funds have a composite
      investment grade rated not less than "A" or equivalent by Moody's or S&P;
      or

            (j) investment agreements with any bank or trust company organized
      under the laws of any state of the United States of America or any
      national banking association (including the Trustee) or any governmental
      bond dealer reporting to, trading with and recognized as a primary dealer
      by, the Federal Reserve Bank of New York, which has, or the parent company
      of which has, long-term debt rated at least "A" or its equivalent by S&P
      or Moody's, with respect to any of the obligations or securities specified
      in (a), (d), (e), (f) and (g) above. Any investment agreement entered into
      pursuant to this Indenture shall, by its terms provide that (i) the
      invested funds are available for withdrawal without penalty or premium, at
      any time upon not more than seven days' prior notice (which notice may be
      amended or withdrawn at any time prior to the specified withdrawal date),
      and (ii) the investment agreement is the unconditional and general
      obligation of, and is not subordinated to any other obligation of, the
      provider thereof.

Any such Investment Securities may be held by the Trustee in book entry form,
whereby certificated securities are held by an independent custodian and the
Trustee is the beneficial owner of all or a portion of such certificated
securities.

            "Liquidity Facility" shall mean a Support Facility which provides
for the payments referred to in clause (i) of the definition thereof.


                                      I-14


            "Liquidity Facility Issuer" shall mean any bank or banks or other
financial institution or institutions, having issued any Liquidity Facility.

            "Maximum Allowed Rate" shall mean as of any date 15% per annum, or
if lower, the rate specified as such in any Support Facility then in effect,
provided, however, that such Maximum Allowed Rate shall not exceed the maximum
rate, if any, permitted by applicable law.

            "Maximum Auction Rate" shall mean on any date of determination with
respect to Auction Rate Bonds the lesser of the Maximum Allowed Rate or the
following: (i) in all cases other than as provided in (ii) or (iii) below, the
interest rate per annum equal to Applicable Percentage of the higher of the
After-Tax Equivalent Rate determined on such date with respect to a Standard
Auction Period and the BMA Index, (ii) with respect to any change in an Auction
Period and/or the Standard Auction Period pursuant to Section 3.04, including
any automatic reversion to a Standard Auction Period pursuant to Section 3.03,
the interest rate per annum equal to the highest of (a) the Applicable
Percentage of the higher of the After-Tax Equivalent Rate determined on such
date with respect to a Standard Auction Period, and the BMA Index, (b) the
Applicable Percentage of the higher of the After-Tax Equivalent Rate determined
on such date with respect to the Auction Period which is proposed to be
established and the BMA Index, and (c) the Applicable Percentage of the higher
of the After-Tax Equivalent Rate determined on such date with respect to the
Auction Period in effect immediately prior to such proposed change in the
Auction Period and the BMA Index, or (iii) with respect to any Change in the
Interest Rate Mode from an Auction Rate pursuant to Section 4.01 or any change
from an Auction Rate to a Fixed Rate pursuant to Section 4.02, the interest rate
per annum equal to the higher of (a) the Applicable Percentage of the higher of
the After-Tax Equivalent Rate determined on such date with respect to a Standard
Auction Period and the BMA Index, and (b) the Applicable Percentage of the
higher of the After-Tax Equivalent Rate determined on such date with respect to
the Auction Period in effect immediately prior to such proposed change and the
BMA Index.

            "Monthly Period Record Date" shall mean, with respect to each
Interest Payment Date during a Monthly Period, the Business Day next preceding
such Interest Payment Date.

            "Monthly Rate" shall mean with respect to each Calculation Period
during a Monthly Rate Period, a rate of interest equal to the rate of interest
per annum established and certified to the Trustee (with a copy to the
Authority, the Registrar and Paying Agent, and the Company) by the Remarketing
Agent no later than 12:00 noon (New York City time) on and as of the
Determination Date as the minimum rate of interest per annum which, in the
opinion of the Remarketing Agent, would be necessary on and as of such day to
remarket Bonds in a secondary market transaction at a price equal to the
principal amount thereof; provided that such rate of interest shall not exceed
the lesser of 110% of the Monthly Rate Index on and as of such date and the
Maximum Allowed Rate.

            "Monthly Rate Index" shall mean with respect to the Determination
Date of each Calculation Period during a Monthly Rate Period, the average of
30-day yield evaluations at par, determined by the Indexing Agent, of securities
(whether or not actually issued), the interest on which is not included in gross
income for federal income tax purposes, of no fewer than ten Component Issuers


                                      I-15


selected by the Indexing Agent, including issuers of commercial paper, project
notes, bond anticipation notes and tax anticipation notes, computed by the
Indexing Agent on and as of such day. If the Bonds are rated by a Rating Agency
in its highest note or commercial paper rating category or one of its two
highest long-term debt rating categories, each Component Issuer must (a) have
outstanding securities rated by a Rating Agency in its highest note or
commercial paper rating category or (b) not have outstanding notes or commercial
paper rated by a Rating Agency but have outstanding securities rated by a Rating
Agency in one of its two highest long-term debt rating categories. If the Bonds
are rated by a Rating Agency in a rating category that is lower than its highest
note or commercial paper rating category or its two highest long-term debt
rating categories (and the Bonds are not rated in one of such categories by the
other Rating Agency), each Component Issuer must (a) have outstanding securities
rated by a Rating Agency in its note or commercial paper rating category which
is the same or correlative, in the Indexing Agent's judgment, to the note or
commercial paper rating category or the long-term debt rating category of the
Bonds or (b) have outstanding securities rated by a Rating Agency in the same
long-term debt rating category as the Bonds are rated by that Rating Agency and
not have any outstanding notes or commercial paper rated by such Rating Agency.
The Indexing Agent may change the Component Issuers from time to time in its
discretion, subject to the foregoing requirements. In addition, at the request
of the Company and upon delivery to the Trustee of an Opinion of Bond Counsel
that such action will not adversely affect the exclusion of interest on the
Bonds from gross income of the owners thereof for federal income tax purposes,
the Authority, with the consent of the Company, may designate a new method of
setting the Monthly Rate Index in the event any of the above-described methods
are determined by the Authority to be unavailable, impracticable or unrealistic
in the market place.

            "Monthly Rate Period" shall mean any period during which Bonds bear
interest at a Monthly Rate which period shall commence with the effective date
of the Change in the Interest Rate Mode to a Monthly Rate and shall extend
through the day immediately preceding the earlier of (a) the effective date of
another Change in the Interest Rate Mode or (b) the Stated Maturity.

            "Moody's" shall mean Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware and its successor
or successors, and if such corporation shall for any reason no longer perform
the functions of a securities rating agency or if Moody's shall be replaced,
subject to the definition of "prevailing rating" in the definition of Applicable
Percentage, by some other nationally recognized rating agency by the Authority
at the request of the Company, "Moody's" shall be deemed to refer to such other
nationally recognized rating agency designated by the Authority at the request
of the Company.

            "Note" shall mean the promissory note of the Company executed by the
Company and delivered to the Trustee, to evidence the obligations of the Company
to repay the loan to be made by the Authority pursuant to the Participation
Agreement.

            "Note Payments" shall mean the portion of the Payments required to
be made pursuant to Section 4.02 of the Participation Agreement and the Note to
be applied to the payment of principal of, premium, if any, and interest on the
Bonds.


                                      I-16


            "Notice of Election to Tender" shall mean the notice given by a
Holder of Bonds pursuant to Section 5.03.

            "Opinion of Bond Counsel" shall mean a written opinion of Bond
Counsel.

            "Option to Convert" shall mean the Authority's right and option to
convert the rate of interest payable on the Bonds from an Adjustable Rate to a
Fixed Rate as provided in Section 4.02.

            "Order" shall mean with respect to Auction Rate Bonds, an Order as
defined in Section 3.06.

            "Outstanding", whether appearing in upper or lower case, when used
with respect to any Bond shall mean, as of any date, any Bond theretofore or
thereupon being authenticated and delivered pursuant to this Indenture, except:

            1. a Bond cancelled by the Trustee or delivered to the Trustee for
      cancellation at or prior to such date;

            2. a Bond in lieu of or in substitution for which another Bond shall
      have been issued under Sections 5.10, 5.11, 7.03 , 7.04 or 7.05; and

            3. a Bond or portion thereof deemed to have been paid in accordance
      with Section 15.01;

provided, however, that with respect to Auction Rate Bonds for the purposes of
the Auction Procedures on any Auction Date, Auction Rate Bonds as to which the
Company or any person known to the Auction Agent to be an Affiliate of the
Company is the Existing Holder thereof shall be disregarded and deemed not to be
Outstanding.

            "Overdue Rate" shall mean on any date of determination 265% of the
BMA Index on such date of determination; provided that in no event shall the
Overdue Rate exceed the Maximum Allowed Rate.

            "Participation Agreement" shall mean the Participation Agreement
dated as of the date hereof, between the Authority and the Company, as amended
and supplemented by Supplemental Participation Agreements from time to time.

            "Payments" shall mean collectively the Note Payments and the
Additional Payments.

            "Potential Beneficial Owner" shall mean with respect to any Auction
Rate Bonds, a customer of a Broker-Dealer that is not a Beneficial Owner but
that wishes to purchase Auction Rate Bonds, or that is a Beneficial Owner that
wishes to purchase an additional principal amount of Auction Rate Bonds.


                                      I-17


            "Potential Holder" shall mean a Broker-Dealer that is not an
Existing Holder or that is an Existing Holder that wishes to become an Existing
Holder of an additional principal amount of Auction Rate Bonds.

            "Principal Corporate Trust Office" shall mean the office of the
Trustee at which at any particular time its corporate trust business shall be
principally administered, which office at the date hereof is located at 101
Barclay Street - 8W, New York, New York 10286

            "Project" shall mean any acquisition, purchase, construction,
reconstruction, improvement, betterment, extension and equipping, as described
in Exhibit A and Exhibit B to the Participation Agreement as the same may be
revised from time to time to reflect any changes or substitutions therein,
additions thereto, or deletions therefrom permitted by the Participation
Agreement.

            "Project Fund" shall mean the special trust fund designated as
"Consolidated Edison Company of New York, Inc. Series 2001A Project Fund"
created and established under, and to be held and administered by the Trustee as
provided in, Section 8.01.

            "Purchase Price" shall mean the purchase price of Bonds tendered or
deemed tendered for purchase pursuant to Section 5.03, 5.04, 5.08 or 5.09,
consisting of the principal amount of such Bonds together with any accrued and
unpaid interest plus, in the event Bonds bearing interest at a Term Rate or a
Fixed Rate are subject to tender for purchase pursuant to Section 5.04, any
premium which would have been required to be paid as part of redemption price on
any date on which such Bonds are subject to tender for purchase if such Bonds
were subject to optional redemption pursuant to Section 5.01 on such date. With
respect to Bonds tendered for purchase on an Interest Payment Date, Purchase
Price shall include any accrued interest on such Bonds which is not otherwise
being paid pursuant to Section 9.03(a).

            "Purchaser's Letter" shall mean a letter substantially in the form
required by the Auction Agency Agreement, addressed to, among others, the
Authority, the Auction Agent and a Broker-Dealer.

            "rate index" means the Daily Rate Index, the Fixed Rate Index, the
Commercial Paper Rate Index, the Monthly Rate Index, the Semi-annual Rate Index,
the Term Rate Index, or the Weekly Rate Index.

            "Rating Agency" means Moody's, if the Bonds are then rated by
Moody's, S&P, if the Bonds are then rated by S&P, and Fitch, if the Bonds are
then rated by Fitch.

            "rating category" shall mean one of the generic rating categories of
a Rating Agency, without regard to any refinement or gradation of such rating
category by a numerical modifier, plus or minus sign, or otherwise.

            "Record Date", at any time, shall mean each Commercial Paper Period
Record Date during a Commercial Paper Rate Period, each Auction Rate Bonds
Period Record Date during an Auction Rate Period, each Daily Period Record Date
during a Daily Rate Period, each Weekly Period Record Date


                                      I-18


during a Weekly Rate Period, each Monthly Period Record Date during a Monthly
Rate Period, each Semi-annual Period Record Date during a Semi-annual Rate
Period, each Term Period Record Date during a Term Rate Period and each Fixed
Rate Record Date during a Fixed Rate Period.

            "Registrar and Paying Agent" shall mean The Bank of New York in its
separate capacity as Registrar and Paying Agent for the Bonds, or its successors
or assigns.

            "Remarketing Agent" shall mean the Remarketing Agent or Remarketing
Agents appointed pursuant to Section 11.14, its or their successors or assigns,
including without limitation any "market agent" appointed in connection with
Auction Rate Bonds.

            "Remarketing Agreement" shall mean the Remarketing Agreement among
the Company and the Remarketing Agents dated the Closing Date and any similar
agreement or agreements between the Company and one or more successor
Remarketing Agents, as from time to time amended.

            "Revenues" shall mean and include all income, revenues and monies
derived by the Authority under the Participation Agreement and the Note (except
administrative compensation and indemnification payable under the Participation
Agreement), and, without limiting the generality of the foregoing, shall include
to the extent provided in this Indenture, earnings on the investment of monies
held under this Indenture and the proceeds of the sale of any such investments.
The term "Revenues" shall not include monies received as proceeds from the sale
of the Bonds or any other bonds, notes or evidences of indebtedness or as grants
or gifts.

            "S&P" shall mean Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies and its successor or successors, and if such
corporation shall for any reason no longer perform the functions of a securities
rating agency or if S&P shall be replaced, subject to the definition of
"prevailing rating" in the definition of Applicable Percentage, by some other
nationally recognized rating agency by the Authority at the request of the
Company, "S&P" shall be deemed to refer to such other nationally recognized
rating agency designated by the Authority at the request of the Company.

            "Securities Depository" shall mean The Depository Trust Company and
its successors and assigns or if (i) the then Securities Depository resigns from
its functions as depository of the Bonds or (ii) the Authority discontinues use
of the then Securities Depository pursuant to Section 2.03, any other securities
depository, which agrees to follow the procedures required to be followed by a
Securities Depository in connection with the Bonds and which is selected by the
Authority, with the consent of the Company, the Trustee, the Auction Agent and
the Remarketing Agent pursuant to Section 2.03.

            "Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

            "Sell Order" shall mean with respect to Auction Rate Bonds, Sell
Order as defined in Section 3.06.


                                      I-19


            "Semi-annual Period Record Date" shall mean, with respect to each
Interest Payment Date during a Semi-annual Rate Period, the fifteenth day of the
calendar month next preceding such Interest Payment Date.

            "Semi-annual Rate" shall mean with respect to each Calculation
Period during a Semi-annual Rate Period, a rate of interest equal to the rate of
interest per annum established and certified to the Trustee (with a copy to the
Authority, the Registrar and Paying Agent and the Company) by the Remarketing
Agent no later than 12:00 noon (New York City time) on and as of the
Determination Date as the minimum rate of interest per annum which, in the
opinion of the Remarketing Agent, would be necessary on and as of such day to
remarket Bonds in a secondary market transaction at a price equal to the
principal amount thereof; provided that such rate of interest shall not exceed
the lesser of 110% of the Semi-annual Rate Index on and as of such date and the
Maximum Allowed Rate.

            "Semi-annual Rate Index" shall mean with respect to the
Determination Date of each Calculation Period during a Semi-annual Rate Period,
the average of six-month yield evaluations at par, determined by the Indexing
Agent, of securities (whether or not actually issued), the interest on which is
not included in gross income for federal income tax purposes, of no fewer than
ten Component Issuers selected by the Indexing Agent, including issuers of
commercial paper, project notes, bond anticipation notes and tax anticipation
notes, computed by the Indexing Agent on and as of such day. If the Bonds are
rated by a Rating Agency in its highest note or commercial paper rating category
or one of its two highest long-term debt rating categories, each Component
Issuer must (a) have outstanding securities rated by a Rating Agency in its
highest note or commercial paper rating category or (b) not have outstanding
notes or commercial paper rated by a Rating Agency but have outstanding
securities rated by a Rating Agency in one of its two highest long-term debt
rating categories. If the Bonds are rated by a Rating Agency in a rating
category that is lower than its highest note or commercial paper rating category
or its two highest long-term debt rating categories (and the Bonds are not rated
in one of such categories by the other Rating Agency), each Component Issuer
must (a) have outstanding securities rated by a Rating Agency in its note or
commercial paper rating category which is the same or correlative, in the
Indexing Agent's judgment, to the note or commercial paper rating category or
the long-term debt rating category of the Bonds or the other debt obligations
supported by support facilities issued by the issuer of a Support Facility or
(b) have outstanding securities rated by a Rating Agency in the same long-term
debt rating category as the Bonds are rated by that Rating Agency and not have
any outstanding notes or commercial paper rated by such Rating Agency. The
Indexing Agent may change the Component Issuers from time to time in its
discretion, subject to the foregoing requirements. In addition, at the request
of the Company and upon delivery to the Trustee of an Opinion of Bond Counsel
that such action will not adversely affect the exclusion of interest on the
Bonds from gross income of the owners thereof for federal income tax purposes,
the Authority, with the consent of the Company, may designate a new method of
setting the Semi-annual Rate Index in the event any of the above-described
methods are determined by the Authority to be unavailable, impracticable or
unrealistic in the market place.

            "Semi-annual Rate Period" shall mean any period during which Bonds
bear interest at a Semi-annual Rate, which period shall commence on the
effective date of a Change in the Interest Rate


                                      I-20


Mode to a Semi-annual Rate, and shall extend through the day immediately
preceding the earlier of (a) the effective date of another Change in the
Interest Rate Mode, or (b) the Stated Maturity.

            "Standard Auction Period" shall mean an Auction Period of 35 days
unless a different Standard Auction Period is established pursuant to Section
3.04.

            "Stated Maturity," with respect to each series of Bonds shall mean
June 1, 2036, provided that, subject to the next sentence, in any case where the
date of maturity of, or payment of premium on, interest on, or principal of, the
Bonds or the date fixed for redemption of any Bonds shall be on a day other than
a Business Day, then payment of interest, principal and premium, if any, need
not be made on such date but may be made (without additional interest) on the
next succeeding Business Day, with the same force and effect as if made on the
date of maturity or the date fixed for redemption. Notwithstanding anything in
this Indenture to the contrary, in no event shall the final maturity date of the
Bonds extend beyond 35 years from the Closing Date, and the length of any
Auction Period shall be reduced at the discretion of the Authority to the extent
necessary to ensure compliance with the provisions of this sentence.

            "Statutory Corporate Tax Rate" shall mean as of any date of
determination the highest tax rate bracket (expressed in decimals) now or
hereafter applicable in each taxable year on the taxable income of every
corporation as set forth in Section 11 of the Code or any successor section
without regard to any minimum additional tax provision or provisions regarding
changes in rates during a taxable year, which on the date hereof is .35. Any
change in the Statutory Corporate Tax Rate shall be evidenced by a certificate
of the Company.

            "Submission Deadline" shall mean 3:00 p.m., New York City time, on
the Business Day preceding any Auction Date or such other time on the Business
Day preceding any Auction Date by which Broker-Dealers are required to submit
Orders to the Auction Agent as specified by the Auction Agent from time to time.

            "Submitted Bid" shall mean with respect to Auction Rate Bonds,
Submitted Bid as defined in Section 3.08.

            "Submitted Hold Order" shall mean with respect to Auction Rate
Bonds, Submitted Hold Order as defined in Section 3.08.

            "Submitted Order" shall mean with respect to Auction Rate Bonds,
Submitted Order as defined in Section 3.08.

            "Submitted Sell Order" shall mean with respect to Auction Rate
Bonds, Submitted Sell Order as defined in Section 3.08.

            "Substitute Commercial Paper Dealers" shall mean the commercial
paper dealers specified by the Authority at the request of the Company at the
time of any Change in the Interest Rate Mode to an Auction Rate or their
respective affiliates or successors, if any such person is a commercial paper
dealer,


                                      I-21


provided that none of such persons nor any of their affiliates or successors
shall be a Commercial Paper Dealer.

            "Substitute U.S. Government Securities Dealer" shall mean the dealer
or dealers in U.S. government securities specified by the Authority at the
request of the Company at the time of a Change in the Interest Rate Mode to an
Auction Rate, or their respective affiliates or successors, if any such person
is a dealer in U.S. government securities, provided that none of such persons
nor any of their affiliates or successors shall be a U.S. Government Securities
Dealer.

            "Sufficient Clearing Bids" shall mean with respect to Auction Rate
Bonds, Sufficient Clearing Bids as defined in Section 3.08.

            "Supplemental Indenture" shall mean any indenture between the
Trustee and the Authority entered into pursuant to and in compliance with the
provisions of Article XIV hereof amending or supplementing the provisions of
this Indenture as originally executed or as theretofore amended or supplemented.

            "Supplemental Participation Agreement" shall mean an agreement
supplementing or amending the Participation Agreement.

            "Support Facility" shall mean any instrument satisfactory to the
Authority entered into or obtained in connection with the Bonds, such as a
letter of credit, committed line of credit, insurance policy, surety bond or
standby bond purchase agreement, or any combination of the foregoing, and issued
by a bank or banks, other financial institution or institutions, or any
combination of the foregoing which provides for the payment of (i) the Purchase
Price on Bonds tendered for purchase pursuant to the provisions hereof and the
Bond Purchase Trust Agreement and/or (ii) principal of and interest on all Bonds
coming due and payable during the term thereof.

            "Support Facility Issuer" shall mean any bank or banks, or other
financial institution or institutions which is the issuer of any Support
Facility.

            "Tax Regulatory Agreement" shall mean the Tax Regulatory Agreement,
dated the Closing Date, between the Authority and the Company, and any and all
modifications, alterations, amendments and supplements thereto.

            "Term Period Record Date" shall mean, with respect to each Interest
Payment Date during a Term Rate Period, the fifteenth day of the month next
preceding such Interest Payment Date.

            "Term Rate" shall mean with respect to each Calculation Period
during a Term Rate Period, a rate of interest equal to the rate of interest per
annum established and certified to the Trustee (with a copy to the Authority,
the Registrar and Paying Agent and the Company) by the Remarketing Agent no
later than 12:00 noon (New York City time) on and as of the Determination Date
as the minimum rate of interest per annum which, in the opinion of the
Remarketing Agent, would be necessary on and as of such day to remarket such
Bonds in a secondary market transaction at a price equal to the principal amount
thereof;


                                      I-22


provided that such rate of interest shall not exceed the lesser of 110% of the
Term Rate Index on and as of such date and the Maximum Allowed Rate.

            "Term Rate Index" shall mean with respect to the Determination Date
of each Calculation Period during a Term Rate Period, the average of the yield
evaluations at par, determined by the Indexing Agent, of securities (whether or
not actually issued), having a term approximately equal to the Term Rate Period
or which are subject to optional or mandatory tender by the owner thereof at the
end of a term approximately equal to the Term Rate Period, the interest on which
is not included in gross income for federal income tax purposes, of no fewer
than ten Component Issuers selected by the Indexing Agent, computed by the
Indexing Agent on and as of such day. If the Bonds are rated by a Rating Agency
in one of its two highest long-term debt rating categories, each Component
Issuer must have outstanding securities rated by a Rating Agency in one of its
two highest long-term debt rating categories. If the Bonds are rated by a Rating
Agency in a rating category that is lower than its two highest long-term debt
rating categories (and the Bonds are not rated in one of the two highest such
categories by the other Rating Agency), each Component Issuer must have
outstanding securities rated by a Rating Agency in the same long-term debt
rating category as the Bonds are rated by that Rating Agency. The Indexing Agent
may change the Component Issuers from time to time in its discretion, subject to
the foregoing requirements. In addition, at the request of the Company and upon
delivery to the Trustee of an Opinion of Bond Counsel that such action will not
adversely affect the exclusion of interest on the Bonds from gross income of the
owners thereof for federal income tax purposes, the Authority, with the consent
of the Company, may designate a new method of setting the Term Rate Index in the
event any of the above-described methods are determined by the Authority to be
unavailable, impracticable or unrealistic in the market place.

            "Term Rate Period" shall mean any period during which Bonds bear
interest at a Term Rate which period shall commence with the effective date of
the Change in the Interest Rate Mode to a Term Rate and shall extend through the
day immediately preceding the earlier of (a) the effective date of another
Change in the Interest Rate Mode or (b) the Stated Maturity.

            "Terminating Event" shall mean:

            (a) Any event or events under the terms of a Support Facility or any
      agreement providing for the issuance of such Support Facility which would
      cause the termination of such Support Facility but would specifically
      allow for the mandatory tender of Bonds pursuant to Section 5.09 with a
      draw on or borrowing or payment under such Support Facility prior to such
      termination; or

            (b) Receipt by the Trustee of written notice from the financial
      institution providing any Credit Facility following a draw on or borrowing
      or payment under such Credit Facility for payment of interest on the Bonds
      that the amount so drawn, borrowed or paid has not been reinstated in the
      amount of such drawing.

            "Treasury Rate" on any date, shall mean (i) the yield, calculated in
accordance with prevailing industry convention, of the rate on the most recently
auctioned direct obligations of the U.S.


                                      I-23


Government having a maturity at the time of issuance of 364 days or less with a
remaining maturity closest to the length of such Auction Period, as quoted in
The Wall Street Journal on such date for the Business Day next preceding such
date; or (ii) in the event that any such rate is not published in The Wall
Street Journal, then the bond equivalent yield, calculated in accordance with
prevailing industry convention, as calculated by reference to the arithmetic
average of the bid price quotations of the most recently auctioned direct
obligation of the U.S. Government having a maturity at the time of issuance of
364 days or less with a remaining maturity closest to the length of such Auction
Period, based on bid price quotations on such date obtained by the Auction Agent
from a U.S. Government Securities Dealer. If any U.S. Government Securities
Dealer does not quote a rate required to determine the Treasury Rate, the
Treasury Rate shall be determined on the basis of the quotation or quotations
furnished by the remaining U.S. Government Securities Dealer or Dealers and any
Substitute U.S. Government Securities Dealer or Dealers selected by the
Authority at the request of the Company to provide such rate or rates not being
supplied by any U.S. Government Securities Dealer or U.S. Government Securities
Dealers, as the case may be, or, if the Authority does not select any such
Substitute U.S. Government Securities Dealer or Substitute U.S. Government
Securities Dealers, by the remaining U.S. Government Securities Dealer or U.S.
Government Securities Dealers.

            "Trust Estate" shall mean the meaning assigned to such term in the
first paragraph following the recitals herein.

            "Trustee" shall mean the corporation having trust powers appointed
by the Authority as Trustee hereunder and serving as such hereunder, and any
surviving, resulting or transferee corporation as provided in Section 11.13.
References to principal office of the Trustee shall mean the Principal Corporate
Trust Office of the Trustee.

            "U.S. Government" shall mean the federal government of the United
States of America.

            "U.S. Government Securities Dealers" shall mean the Remarketing
Agents for any Auction Rate Bonds, or, in lieu of any thereof, their respective
affiliates or successors, provided that any such entity is a U.S. Government
securities dealer.

            "Weekly Period Record Date" shall mean, with respect to each
Interest Payment Date during a Weekly Rate Period, the Business Day next
preceding such Interest Payment Date.

            "Weekly Rate" shall mean with respect to each Calculation Period
during a Weekly Rate Period, a rate of interest equal to the rate of interest
per annum established and certified to the Trustee (with a copy to the
Authority, the Registrar and Paying Agent and the Company) by the Remarketing
Agent no later than 12:00 noon (New York City time) on and as of the
Determination Date as the minimum rate of interest per annum which, in the
opinion of the Remarketing Agent, would be necessary on and as of such day to
remarket Bonds in a secondary market transaction at a price equal to the
principal amount thereof plus accrued interest thereon; provided that such rate
of interest shall not exceed the lesser of 110% of the Weekly Rate Index on and
as of such date and the Maximum Allowed Rate.


                                      I-24


            "Weekly Rate Index" shall mean with respect to the Determination
Date of each Calculation Period during a Weekly Rate Period, the average of
30-day yield evaluations at par, determined by the Indexing Agent, of securities
(whether or not actually issued), the interest on which is not included in gross
income for federal income tax purposes, of no fewer than ten Component Issuers
selected by the Indexing Agent, including issuers of commercial paper, project
notes, bond anticipation notes and tax anticipation notes, computed by the
Indexing Agent on and as of such day. If the Bonds are rated by a Rating Agency
in its highest note or commercial paper rating category or one of its two
highest long-term debt rating categories, each Component Issuer must (a) have
outstanding securities rated by a Rating Agency in its highest note or
commercial paper rating category or (b) not have outstanding notes or commercial
paper rated by a Rating Agency but have outstanding securities rated by a Rating
Agency in one of its two highest long-term debt rating categories. If the Bonds
are rated by a Rating Agency in a rating category that is lower than its highest
note or commercial paper rating category or its two highest long-term debt
rating categories (and the Bonds are not rated in one of such categories by the
other Rating Agency), each Component Issuer must (a) have outstanding securities
rated by a Rating Agency in its note or commercial paper rating category which
is the same or correlative, in the Indexing Agent's judgment, to the note or
commercial paper rating category or the long-term debt rating category of the
Bonds or (b) have outstanding securities rated by a Rating Agency in the same
long-term debt rating category as the Bonds are rated by that Rating Agency and
not have any outstanding notes or commercial paper rated by such Rating Agency.
The Indexing Agent may change the Component Issuers from time to time in its
discretion, subject to the foregoing requirements. In addition, at the request
of the Company and upon delivery to the Trustee of an Opinion of Bond Counsel
that such action will not adversely affect the exclusion of interest on the
Bonds from gross income of the owners thereof for federal income tax purposes,
the Authority, with the consent of the Company, may designate a new method of
setting the Weekly Rate Index in the event any of the above-described methods
are determined by the Authority to be unavailable, impracticable or unrealistic
in the market place.

            "Weekly Rate Period" shall mean any period during which the Bonds
bear interest at a Weekly Rate; the first such period shall commence on the date
of initial issuance of the Bonds and shall extend through the day immediately
preceding the earlier of (a) the effective date of a Change in the Interest Rate
Mode or (b) the Stated Maturity.

            "Winning Bid Rate" shall mean with respect to Auction Rate Bonds,
Winning Bid Rate as defined in Section 3.08.

            SECTION 1.02. Definitions of General Terms. Whenever in this
Indenture any governmental unit including the Authority or any official,
officer, director or department of a governmental unit, is defined or referred
to, such definition or reference shall be deemed to include the governmental
unit or official, officer, board, agency, commission, body or department
succeeding to or in whom or which is vested, the functions, rights, powers,
duties and obligations of such governmental unit, official, officer, director or
department, as the case may be, encompassed by this Indenture.

            Unless the context shall clearly indicate otherwise or may otherwise
require, in this Indenture words importing persons include firms, partnerships,
associations, corporations (public and


                                      I-25


private), public bodies and natural persons, and also include executors,
administrators, trustees, receivers or other representatives.

            Unless the context shall clearly indicate otherwise or may otherwise
require computation on other than an annual basis, in this Indenture whenever
any interest rate or rate of interest is defined or referred to, such rate shall
be a rate per annum.

            Unless the context shall clearly indicate otherwise or may otherwise
require, in this Indenture (not including in such term wherever used in this
paragraph any Supplemental Indenture): (i) references to articles, sections and
other subdivisions, whether by number or letter or otherwise, are to the
respective or corresponding articles, sections and subdivisions of this
Indenture, as such articles, sections or subdivisions may be amended from time
to time; (ii) the terms "herein," "hereunder," "hereby," "hereto," "hereof," and
any similar terms, refer to this Indenture and to this Indenture as a whole and
not to any particular article, section or subdivision hereof; and (iii) the word
"heretofore" means before the time of effectiveness of this Indenture; and the
word "hereafter" means after the time of effectiveness of this Indenture.


                                      I-26


                                   ARTICLE II

                             AUTHORIZATION OF BONDS

            SECTION 2.01. Limitation on Issuance of Bonds. No Bonds may be
issued under the provisions of this Indenture except in accordance with the
provisions of this Article.

            SECTION 2.02. Authorization of Bonds. 1. There is hereby created and
established under this Indenture one issue of revenue bonds of the Authority,
limited to $224,600,000 in aggregate principal amount, of "Facilities Revenue
Bonds, Series 2001A (Consolidated Edison Company of New York, Inc. Project)". In
order to distinguish between Bonds which are subject to different interest rate
determination methods and other features and to distinguish the portion of the
Bonds to be remarketed by any particular Remarketing Agent, the Bonds may be
designated and redesignated from time to time by the Authority in such a way as
to identify one or more subseries of the Bonds. Such subseries may be designated
as subseries A-1, subseries A-2, or subseries A-3, as the case may be, or may be
further redesignated as subseries A-1-1, subseries A-2-1, or subseries A-3-1, as
the case may be, and so forth. Each Bond shall bear upon the face thereof such
designation or redesignation, if any. In the event any series of Bonds is
designated as one or more subseries, all references to a series of the Bonds in
this Indenture shall refer to each such subseries unless the context otherwise
requires. The Bonds, upon original issuance, shall be issued in three separate
subseries designated as "2001A-1" in the principal amount of $74,900,000 (the
"Series 2001A-1 Bonds"), "2001A-2" in the principal amount of $74,900,000 (the
"Series 2001A-2 Bonds") and "2001A-3" in the principal amount of $74,800,000
(the "Series 2001A-3 Bonds").

            2. The Bonds shall be secured by the Trust Estate. The lien, pledge,
charge and assignment of the Trust Estate created hereby shall be valid and
binding from the time of the effectiveness of this Indenture, as set forth in
Section 17.11, and the Note Payments made under the Note and the Participation
Agreement shall be immediately subject thereto upon receipt by the Trustee.

            3. The Bonds are limited obligations of the Authority payable solely
from payments to be made by the Company pursuant to the Note and the
Participation Agreement and the other monies, rights and properties pledged
hereunder including the proceeds of the Support Facility, if any, hereafter
obtained with respect thereto and secured by a pledge from the Authority to the
Trustee of the Participation Agreement and the Note. The Bonds shall not be a
debt of the State of New York, and the State of New York shall not be liable
thereon.

            4. The covenants and agreements herein set forth to be performed by
the Authority shall be for the benefit, security and protection of any Holder of
the Bonds.

            5. Neither the Trustee nor any Holder of the Bonds shall be required
to see that the monies derived from such Bonds are applied to the purpose or
purposes for which such Bonds are issued.


                                      II-1


            6. The Bonds shall be issued under this Indenture for the purpose of
paying a portion of the redemption price of the Prior Bonds.

            7. The Bonds bearing a Commercial Paper Rate, a Daily Rate, a Weekly
Rate or a Monthly Rate shall be fully registered Bonds in the denomination of
$100,000 or any integral multiple thereof. The Bonds bearing an Auction Rate
shall be fully registered Bonds in the denomination of $50,000 or any integral
multiple thereof. The Bonds bearing a Semi-annual Rate, a Term Rate or a Fixed
Rate shall be fully registered Bonds in the denomination of $5,000 or any
integral multiple thereof.

            8. The Bonds shall be numbered consecutively from "2001 A- [insert
"1, 2 or 3", as appropriate]-1" upwards as issued, or as otherwise provided by
the Registrar and Paying Agent. If the Bonds are redesignated to identify one or
more additional subseries, the Bonds shall be numbered in accordance with their
subseries designation. The Bonds shall mature on the Stated Maturity.

            9. The Bonds shall be initially issued in fully registered form,
without coupons, and dated their date of first authentication and delivery.

            10. Upon any Change in the Interest Rate Mode to an Auction Rate for
an Auction Rate Period, there shall be Outstanding an aggregate principal amount
of not less than $20,000,000 of Auction Rate Bonds and in the applicable
denominations set forth in Section 2.02.7.

            SECTION 2.03. Global Form; Securities Depository. 1. Except as
otherwise provided in this Section 2.03, the Bonds in the form of one separate
global bond for each subseries shall be registered in the name of the Securities
Depository or its nominee and ownership thereof shall be maintained in book
entry form by the Securities Depository for the account of the Agent Members
thereof.

            Except as provided in subsections (3) and (4) of this Section 2.03,
the Bonds of any subseries may be transferred, in whole but not in part, only to
the Securities Depository or a nominee of the Securities Depository, or to a
successor Securities Depository selected or approved by the Authority, with the
consent of the Company, the Trustee, the Auction Agent (if any) and the
Remarketing Agent for such subseries, or to a nominee of such successor
Securities Depository. Each global certificate for the Bonds shall bear a legend
substantially to the following effect: "Except as otherwise provided in Section
2.03 of the Indenture, this global bond may be transferred, in whole but not in
part, only to the Securities Depository as defined in the Indenture or a nominee
of the Securities Depository or to a successor Securities Depository or to a
nominee of a successor Securities Depository."

            2. The Authority, the Company, the Trustee, the Registrar and Paying
Agent, the Auction Agent (if any) and the Remarketing Agent shall have no
responsibility or obligation with respect to:

            (a) the accuracy of the records of the Securities Depository or any
      Agent Member with respect to any beneficial ownership interest in the
      Bonds;


                                      II-2


            (b) the delivery to any Agent Member, beneficial owner of the Bonds
      or other person, other than the Securities Depository or its nominee as
      registered owner, of any notice with respect to the Bonds;

            (c) the payment to any Agent Member, beneficial owner of the Bonds
      or other person, other than the Securities Depository or its nominee as
      registered owner, of any amount with respect to the principal or premium,
      if any, or interest on the Bonds;

            (d) its acceptance of any consent given by the Securities Depository
      or other action taken by the Securities Depository as registered owner; or

            (e) the selection by the Securities Depository or any Agent Members
      of any beneficial owners to receive payment in the event of a partial
      redemption of Bonds, except for the Trustee's obligations under Section
      5.12.

So long as the certificates for the Bonds of any subseries issued under the
Indenture are not issued pursuant to subsection (4) of this Section 2.03, the
Authority, the Company, the Trustee, the Auction Agent (if any), the Remarketing
Agent and the Registrar and Paying Agent may treat the Securities Depository as,
and deem the Securities Depository to be, the absolute owner of such series or
subseries of Bonds for all purposes whatsoever, including without limitation:

            (a) the payment of principal and premium, if any, and interest on
      such series or subseries of the Bonds;

            (b) giving notices of redemption and other matters with respect to
      such series or subseries of the Bonds; and

            (c) registering transfers with respect to such series or subseries
      of the Bonds.

            Payment by the Trustee of principal or redemption price, if any, of
and premium, if any, and interest on such Bonds to or upon the order of the
Securities Depository or its nominee during any period when it is the registered
owner of such Bonds shall be valid and effective to satisfy and discharge fully
the Authority's obligation with respect to the amounts so paid.

            3. (a) The Authority may discontinue the use of a Securities
      Depository for the Bonds at the time of a Change in the Interest Rate
      Mode.

            (b) Registered ownership of the Bonds may be transferred on the
      registration books of the Authority maintained by the Registrar and Paying
      Agent and the Bonds may be delivered in physical form to the following:
      (i) any successor Securities Depository or its nominee; or (ii) any
      person, upon (A) the resignation of the Securities Depository or (B) the
      termination by the Authority of the use of the Securities Depository from
      its functions as depository as set forth in this


                                      II-3


      section, or (C) upon any Change in the Interest Rate Mode to any
      Adjustable Rate other than an Auction Rate.

            (c) Upon any Change in the Interest Rate Mode to an Auction Rate,
      the Registrar and Paying Agent shall register the Auction Rate Bonds in
      the name of the Securities Depository or its nominee and on the effective
      date of such change provide the Company with a list of the Existing
      Holders of the Auction Rate Bonds.

            4. If at any time the Securities Depository notifies the Authority
and the Company that it is unwilling or unable to continue as Securities
Depository with respect to the Bonds or if at any time the Securities Depository
shall no longer be registered or in good standing under the Securities Exchange
Act or other applicable statute or regulation and a successor Securities
Depository is not appointed by the Authority with the consent of the Company,
the Trustee, the Auction Agent (if any) and the Remarketing Agent, within 90
days after the Authority and the Company receive notice or become aware of such
condition, as the case may be, this Section shall no longer be applicable and
the Authority shall execute and the Trustee shall authenticate and deliver
certificates representing the Bonds of such series or subseries as provided
below. In addition, the Authority may determine at any time, at the request of
the Remarketing Agent, that the Bonds shall no longer be represented by global
bonds and that the provisions of subsections (1) and (2) above shall no longer
apply to such series or subseries of Bonds. In any such event the Authority
shall execute and the Trustee shall authenticate and deliver certificates
representing the Bonds of such series or subseries as provided below.
Certificates for the Bonds of any series or subseries issued in exchange for a
global bond pursuant to this subsection shall be registered in such names in
authorized denominations as the Securities Depository, pursuant to instructions
from the Agent Members or otherwise, shall instruct the Authority and the
Trustee. The Trustee shall deliver such certificates representing the Bonds of
such series or subseries to the persons in whose names such Bonds are so
registered on the Business Day immediately preceding the first day of an Auction
Period (with respect to Auction Rate Bonds during any Auction Rate Period), or
the effective date of a Change in the Interest Rate Mode (with respect to any
other Change in the Interest Rate Mode), as the case may be.

            5. The Authority and the Trustee are hereby authorized to enter into
any arrangements determined necessary or desirable with any Securities
Depository in order to effectuate this Section and both of them shall act in
accordance with this Indenture and any such agreement. Without limiting the
generality of the foregoing, any such arrangements may alter the manner of
effecting delivery of Bonds and the transfer of funds for the payment of Bonds
to the Securities Depository.

            SECTION 2.04. Limitations on Transfer. So long as the ownership of
the Auction Rate Bonds is maintained in book-entry form by the Securities
Depository, a beneficial owner or an Existing Holder may sell, transfer or
otherwise dispose of Auction Rate Bonds only pursuant to a Bid or Sell Order
placed in an Auction or to a Broker-Dealer, provided, however, that (a) sale,
transfer or other disposition of Auction Rate Bonds from a customer of a
Broker-Dealer who is listed on the records of that Broker-Dealer as the holder
of such Auction Rate Bonds to that Broker-Dealer or another customer of that
Broker-Dealer shall not be deemed to be a sale, transfer or other disposition
for purposes of this Section 2.04 if such Broker-Dealer remains the Existing
Holder of the Auction Rate Bonds so sold, transferred or


                                      II-4


disposed of immediately after such sale, transfer or disposition and (b) in the
case of all transfers other than pursuant to Auctions such Broker-Dealer to whom
such transfer is made shall advise the Auction Agent of such transfer.

            SECTION 2.05. Application of Bond Proceeds. The proceeds of sale of
the Bonds shall be deposited with the Trustee for deposit in the Project Fund to
be paid out in accordance with Section 8.01.

            SECTION 2.06. Delivery of the Bonds. The Bonds shall be executed by
the Authority substantially in the form prescribed by Section 16.01 and in the
manner herein set forth and shall be deposited with the Trustee for
authentication, but before the Bonds shall initially be delivered by the
Trustee, there shall be filed with the Trustee the following:

            (a) an order executed by an Authorized Officer directing the
      authentication and delivery of the Bonds to or upon the order of the
      Securities Depository or its nominee, upon payment to the Trustee of the
      purchase price therein set forth;

            (b) a fully executed counterpart of this Indenture;

            (c) a fully executed counterpart of the Participation Agreement;

            (d) a fully executed counterpart of the Remarketing Agreement;

            (e) the fully executed Initial Support Facility;

            (f) a fully executed counterpart of the Bond Purchase Trust
      Agreement;

            (g) the fully executed Note;

            (h) a fully executed counterpart of the Tax Regulatory Agreement;

            (i) an opinion of Counsel to the Company, addressed to the
      Underwriters (as defined in the Bond Purchase Agreement), with reliance
      letter addressed to the Authority, the Trustee and the Initial Support
      Facility Issuer, substantially to the effect, and dated as, required by
      Section 7(d)(6)(ii) of the Bond Purchase Agreement;

            (j) opinion of counsel to the Initial Support Facility Issuer,
      addressed to the Initial Support Facility Issuer and the Company, which
      opinion authorizes the Underwriters (as defined in the Bond Purchase
      Agreement), the Authority, the Trustee, the Registrar and Paying Agent and
      the Rating Agencies to rely thereon as though such opinion were addressed
      to them, substantially to the effect required by Section 7(d)(6)(iv) of
      the Bond Purchase Agreement;


                                      II-5


            (k) Opinion of Bond Counsel to the Authority and the Trustee (i) as
      to the validity of the Bonds and (ii) that all conditions precedent to the
      issuance of the Bonds have been met.

            When the documents mentioned in clauses (a) to (k), inclusive, of
this Section shall have been filed with the Trustee, and when the Bonds shall
have been executed and authenticated as required by this Indenture, the Trustee
shall deliver the Bonds to the Securities Depository, but only upon payment to
the Trustee of the purchase price of the Bonds specified in said order.


                                      II-6


                                   ARTICLE III

                                INTEREST ON BONDS

      SECTION 3.01. Interest on Bonds-General. 1. Interest accruing on Bonds
bearing interest at a Commercial Paper Rate, a Daily Rate, a Weekly Rate, a
Monthly Rate or a Semi-annual Rate, shall be computed on the basis of a 365 or
366-day year, as applicable, for the number of days actually elapsed. Interest
accruing on Bonds bearing interest at a Term Rate or a Fixed Rate shall be
computed on the basis of a 360-day year, consisting of twelve (12) thirty (30)
day months. Interest accruing on Bonds bearing interest at an Auction Rate shall
be computed on the basis of a 360-day year for the number of days actually
elapsed. Bonds shall bear interest from the date of issuance thereof payable in
arrears on each Interest Payment Date. The Bonds issued upon transfers or
exchanges of Bonds shall bear interest from the Interest Payment Date next
preceding their date of authentication, unless the date of authentication is an
Interest Payment Date in which case such Bonds shall bear interest from such
date, or unless the date of authentication is after the Record Date next
preceding the next succeeding Interest Payment Date, in which case such Bonds
shall bear interest from such next succeeding Interest Payment Date.

            2. The Bonds shall initially bear interest at a Weekly Rate during a
Weekly Rate Period. Each of the Series of Bonds shall bear interest at 2.25% for
the period from and including the Closing Date to and including the following
Tuesday. From and after any Change in the Interest Rate Mode pursuant to Section
4.01 or 4.02, the Bonds with respect to which such change is effective shall
bear interest determined in accordance with the provisions of this Indenture
pertaining to the new Adjustable Rate or the Fixed Rate, as the case may be.
Bonds shall bear interest for each Calculation Period, Auction Period or Fixed
Rate Period, as the case may be, at the rate of interest per annum for such
Calculation Period, Auction Period or Fixed Rate Period established in
accordance with this Indenture. Interest shall be payable on each Interest
Payment Date by check mailed to the registered owner at his or her address as it
appears on the registration books kept by the Registrar and Paying Agent
pursuant to the Indenture at the close of business on the applicable Record
Date; provided, that (i) while the Securities Depository is the registered owner
of the Bonds, all payments of principal of, premium, if any, and interest on the
Bonds shall be paid to the Securities Depository or its nominee by wire
transfer, (ii) prior to and including a Fixed Rate Conversion Date, interest on
the Bonds shall be payable to any registered owner of at least one million
dollars ($1,000,000) in aggregate principal amount of Bonds by wire transfer,
upon written notice received by the Registrar and Paying Agent at least five
days prior to the applicable Record Date, from such registered owner containing
the wire transfer address (which shall be in the continental United States) to
which such registered owner wishes to have such wire directed and (iii) during a
Commercial Paper Rate Period, interest shall be payable on the Bonds only upon
presentation and surrender thereof to the Registrar and Paying Agent upon
purchase thereof pursuant to Section 5.03 and if such presentation and surrender
is made by 2:00 p.m. (New York City time) such payment shall be by wire
transfer. If and to the extent that there shall be a default in the payment of
the interest due on any Interest Payment Date, such interest shall cease to be
payable to the person in whose name each Bond of such series was registered on
such applicable Record Date and shall be payable, when and if paid to the person
in whose name each Bond of such series is registered at the close of business on
the record date fixed therefor by the Trustee, which shall be the fifth Business
Day next preceding the date of the proposed payment. Except as provided above,
payment of the principal of and premium, if any, on all Bonds shall be made upon
the


                                     III-1


presentation and surrender of such Bonds at the principal office of the
Registrar and Paying Agent as the same shall become due and payable. The
principal of and premium, if any, and interest on the Bonds shall be payable in
lawful money of the United States of America.

            3. Not less than one Business Day prior to each Computation Date and
two Business Days prior to a Fixed Rate Conversion Date, the Indexing Agent
shall establish and provide to the Remarketing Agent the related rate index as
set forth in the definition of such rate index in Section 1.01; provided that,
for each Calculation Period during a Daily Rate Period, the Indexing Agent shall
establish and provide the related rate index to the Remarketing Agent on each
Determination Date; and provided further that, for each Calculation Period
during a Monthly Rate Period, the Indexing Agent shall establish and provide the
related rate index to the Remarketing Agent not later than each Computation
Date. Notwithstanding the foregoing, in the event that the Remarketing Agent, in
its sole judgment, shall determine on a Determination Date that any Daily Rate
Index, Weekly Rate Index or any Commercial Paper Rate Index so established is
sufficiently non-representative of current market conditions that the Bonds may
not be remarketed at par if such rate is set at a rate not greater than 110% of
the applicable rate index, the Remarketing Agent may establish a new rate index
on a Determination Date in accordance with the procedures and standards
described in the definition of such rate index and for purposes of such rate
index so established, all references to Indexing Agent in this Indenture shall
be deemed to refer to the Remarketing Agent. On any date when any Weekly Rate
Index or any Commercial Paper Rate Index is established by the Remarketing Agent
pursuant to this paragraph, such rate index shall have the respective meaning
set forth in Section 1.01 (except as otherwise provided in the preceding
sentence); provided that for any Commercial Paper Rate Index, the Remarketing
Agent shall select securities (whether or not actually issued) having a term
approximately equal to the applicable Commercial Paper Rate Period or which are
subject to optional or mandatory tender by the owner thereof at the end of a
term approximately equal to (or as close thereto as is practicably available)
the applicable Commercial Paper Rate Period.

            4. By 12:00 noon (New York City time) on each Determination Date or
by 3:00 p.m. (New York City time) on each Auction Date, as the case may be, the
Remarketing Agent or the Auction Agent, as the case may be, shall make available
to the Authority, the Trustee, the Registrar and Paying Agent, any issuer of a
Support Facility, the Company, any Broker-Dealer or any registered owner of a
Bond the interest rate or rates determined on such Determination Date or Auction
Date.

            5. If for any reason on any Determination Date (A) any rate of
interest for a Calculation Period is not determined by the Remarketing Agent,
(B) no Remarketing Agent is serving as such hereunder or (C) the rate so
determined is held to be invalid or unenforceable by a final judgment of a court
of competent jurisdiction, (i) during any Daily Rate Period, the interest rate
for the next succeeding Calculation Period shall be the last interest rate in
effect, or, if a Daily Rate is not determined by the Remarketing Agent hereunder
for five or more consecutive Business Days on the next and each succeeding
Determination Date, the Daily Rate shall be a rate per annum equal to 80% of the
latest 30-day dealer taxable commercial paper rate published by the Federal
Reserve Bank of New York on or immediately before such Determination Date, (ii)
during any Weekly Rate Period, the interest rate for the next succeeding
Calculation Period shall be the last interest rate in effect, or, if a Weekly
Rate is not determined by the Remarketing Agent for two or more consecutive
Calculation Periods, the Weekly Rate shall be equal to 85% of the latest 30-day
dealer taxable commercial paper rate published by the Federal Reserve


                                     III-2


Bank of New York on or before the day next preceding such Determination Date,
(iii) during any Monthly Rate, Semi-annual Rate or Term Rate Period, the
interest rate per annum for the next succeeding Calculation Period shall be
equal to 85% of the rate listed in the table most recently circulated by the
United States Treasury Department known as "Table [applicable dates shown on the
most recent Table], Maximum Interest Rate Payable on United States Treasury
Certificates of Indebtedness, Notes and Bonds-State and Local Government Series
Subscribed for During Period [applicable dates shown on the most recent Table]"
or any substantially equivalent table circulated by the United States Treasury
Department for the maturity most closely approximating the Calculation Period,
and (iv) during any Commercial Paper Rate Period, the next succeeding
Calculation Period shall be a Calculation Period which shall consist of the
period from and including the prior Interest Payment Date to but excluding the
first Business Day of the following calendar month and the Commercial Paper Rate
shall be equal to 85% of the interest rate applicable to 90-day United States
Treasury Bills determined on the basis of the average per annum discount rate at
which such 90-day Treasury Bills shall have been sold at the most recent
Treasury auction within the 30 days next preceding such Calculation Period, or
if there shall have been no such auction within the 30 days next preceding such
Calculation Period, the Commercial Paper Rate shall be equal to the rate of
interest borne by such Bond during the next preceding Calculation Period for
such Bond. The rate of interest or Calculation Period and related Commercial
Paper Rate shall be established pursuant to this subsection 5 until the
Remarketing Agent again determines the rates of interest or Calculation Periods
and related Commercial Paper Rates in accordance with this Indenture. The
Trustee shall, upon the direction of the Company, select any person otherwise
meeting the qualifications of Section 11.14 to obtain, calculate and prepare any
of the information required by this subsection 5.

            6. The determination of any rate of interest by the Remarketing
Agent in accordance with this Indenture or by the Auction Agent in accordance
with the Auction Procedures applicable to Auction Rate Bonds, or the
establishment of Calculation Periods or Auction Periods by the Remarketing Agent
as provided in this Indenture shall be conclusive and binding upon the
Authority, the Company, the Trustee, the Registrar and Paying Agent, the
Remarketing Agent, the Auction Agent, any issuer of a Support Facility, all
Broker-Dealers and the registered or beneficial owners of the Bonds. Failure of
the Remarketing Agent, the Trustee, the Registrar and Paying Agent, the Auction
Agent or the Securities Depository or any Securities Depository participant to
give any of the notices described in this Indenture, or any defect therein,
shall not affect the interest rate to be borne by any of the Bonds nor the
applicable Calculation Period or Auction Period nor in any way change the rights
of the registered owners of the Bonds to tender their Bonds for purchase or to
have them redeemed in accordance with this Indenture.

            7. No transfer or exchange of Bonds shall be required to be made by
the Registrar and Paying Agent after a Record Date until the next succeeding
Interest Payment Date.

            8. Except as otherwise provided in this subsection 8, the Trustee
shall calculate and notify the Registrar and Paying Agent of the amount of
interest due and payable on each Interest Payment Date or date on which a Bond
is subject to purchase by 10:00 a.m. on the Business Day next preceding such
Interest Payment Date or date set for purchase, as the case may be, unless such
date is a date on which the interest rate is determined, in which case the
amount of interest due and payable shall be calculated by 12:15 p.m. on such
date. In preparing such calculation the Trustee may conclusively rely on
calculations or other services provided by the Auction Agent, the Remarketing
Agent, the Company or any


                                     III-3


person or persons selected by the Trustee in its discretion. During a Commercial
Paper Rate Period, the Remarketing Agent shall notify the Trustee, the Registrar
and Paying Agent and the Company of the amount of interest due and payable on
each Interest Payment Date by 10:00 a.m. on the Business Day next preceding such
Interest Payment Date. During an Auction Rate Period, the Auction Agent shall
notify the Trustee and the Registrar and Paying Agent at least seven days prior
to each Interest Payment Date of the Auction Rate and the aggregate amount of
interest payable on such Interest Payment Date.

            9. Anything herein to the contrary notwithstanding, in no event
shall the interest rate borne by any Bond exceed the maximum rate allowable by
applicable law.

            SECTION 3.02. Commercial Paper Rate. 1. During any Commercial Paper
Rate Period, at or prior to 12:00 noon (New York City time) on each
Determination Date, the Remarketing Agent shall establish Calculation Periods
and related Commercial Paper Rates. In determining Calculation Periods, the
Remarketing Agent shall take the following factors into account: (i) existing
short-term taxable and tax-exempt market rates and indices of such short-term
rates, (ii) the existing market supply and demand for short-term tax-exempt
securities, (iii) existing yield curves for short-term and long-term tax-exempt
securities or obligations having a credit rating that is comparable to the
Bonds, (iv) general economic conditions, (v) economic and financial factors
present in the securities industry that may affect or that may be relevant to
the Bonds and (vi) any information available to the Remarketing Agent pertaining
to the Company regarding any events or anticipated events which could have a
direct impact on the marketability of or interest rates on the Bonds. The
Remarketing Agent shall select the Calculation Periods and the applicable
Commercial Paper Rates that, together with all other Calculation Periods and
related Commercial Paper Rates, in the sole judgment of the Remarketing Agent,
will result in the lowest overall borrowing cost on the Bonds or are otherwise
in the best financial interests of the Company, as determined in consultation
with the Company. Any Calculation Period established hereunder may not extend
beyond the second Business Day next preceding the expiration date of the Support
Facility or the day prior to the Stated Maturity.

            2. The Authority, at the request of the Company, may place such
limitations upon the establishment of Calculation Periods pursuant to subsection
1 hereof as may be set forth in a written direction from the Authority, which
direction must be received by the Trustee and the Remarketing Agent prior to
10:00 a.m. (New York City time) on the day prior to any Determination Date to be
effective on such date, but only if the Trustee receives an Opinion of Bond
Counsel to the effect that such action is authorized by this Indenture, is
permitted under the Act and will not have an adverse effect on the exclusion of
interest on the Bonds from gross income for federal income tax purposes.

            SECTION 3.03. Auction Rate Period - Auction Rate: Auction Period -
General. 1. During any Auction Rate Period, the Auction Rate Bonds shall bear
interest at the Auction Rate determined as set forth in this Section 3.03 and
Sections 3.04 through 3.10. The Auction Rate for any initial Auction Period
immediately after any Change in the Interest Rate Mode to an Auction Rate for an
Auction Rate Period, shall be the rate of interest per annum determined and
certified to the Trustee (with a copy to the Authority, the Registrar and Paying
Agent and the Company) by the Remarketing Agent on a date not later than the
effective date of such Change in the Interest Rate Mode as the minimum rate of
interest which, in the opinion of the Remarketing Agent, would be necessary as
of such date to market


                                     III-4


Auction Rate Bonds in a secondary market transaction at a price equal to the
principal amount thereof; provided that such interest rate shall not exceed the
Maximum Allowed Rate. For any other Auction Period, the Auction Rate shall be
the rate of interest per annum that results from implementation of the Auction
Procedures. If on any Auction Date the Auction Agent shall fail to take any
action necessary to determine, or take any action which effectively prevents the
determination of, a rate of interest pursuant to the Auction Procedures, the
Auction Rate for the next succeeding Auction Period shall equal the Maximum
Auction Rate as provided in clause (i) of the definition thereof on and as of
such Auction Date. Determination of the Auction Rate pursuant to the Auction
Procedures shall be suspended upon a Change in the Interest Rate Mode, the
occurrence of a Failure to Deposit or the occurrence of an Event of Default.
Upon the occurrence of a Failure to Deposit on any Auction Date, no Auction will
be held, all Submitted Bids and Submitted Sell Orders shall be rejected, the
existence of Sufficient Clearing Bids shall be of no effect and the Auction Rate
for the next succeeding Auction Period shall equal the Maximum Auction Rate on
and as of such Auction Date. The Auction Rate for any Auction Period or
remaining portion thereof following the occurrence of an Event of Default shall
be equal to the Overdue Rate as determined on and as of the immediately
preceding Auction Date. The Overdue Rate shall be redetermined by the
Remarketing Agent on each Auction Date.

            2. Auction Periods may be established pursuant to Section 3.04 at
any time unless a Failure to Deposit or an Event of Default has occurred and has
not been cured or waived. Each Auction Period shall be a Standard Auction Period
unless a different Auction Period is established pursuant to Section 3.04 and
each Auction Period which immediately succeeds a non-Standard Auction Period
shall be a Standard Auction Period unless a different Auction Period is
established pursuant to Section 3.04.

            SECTION 3.04. Auction Rate Period - Auction Rate Bonds: Change of
Auction Period by Authority. 1. During an Auction Rate Period the Authority, at
the request of the Company, may change the length of a single Auction Period or
the Standard Auction Period by means of a written notice delivered at least 10
days prior to the Auction Date for such Auction Period to the Trustee, the
Remarketing Agent, the Auction Agent, the Company and the Securities Depository
in substantially the form furnished to the Trustee and the Auction Agent at the
time of a Change in the Interest Rate Mode to an Auction Rate. Any Auction
Period or Standard Auction Period established by the Authority pursuant to this
Section 3.04 may not exceed 365 days in duration. If such Auction Period will be
of less than 28 days, such notice shall be effective only if it is accompanied
by a written statement of the Registrar and Paying Agent, the Trustee, the
Remarketing Agent and the Auction Agent to the effect that they are capable of
performing their duties hereunder and under the Remarketing Agreement and the
Auction Agency Agreement with respect to such Auction Period. If such notice
specifies a change in the length of the Standard Auction Period, such notice
shall be effective only if it is accompanied by the written consent of the
Remarketing Agent to such change. The length of an Auction Period or the
Standard Auction Period may not be changed pursuant to this Section 3.04 unless
Sufficient Clearing Bids existed at both the Auction immediately preceding the
date the notice of such change was given and the Auction immediately preceding
such changed Auction Period.

            2. The change in length of an Auction Period or the Standard Auction
Period shall take effect only if (A) the Trustee and the Auction Agent receive,
by 11:00 a.m. (New York City time) on the Business Day immediately preceding the
Auction Date for such Auction Period, a certificate from the


                                     III-5


Authority, on behalf of the Company, by telecopy or similar means in
substantially the form furnished to the Trustee and the Auction Agent at the
time of a Change in the Interest Rate Mode to an Auction Rate authorizing the
change in the Auction Period or the Standard Auction Period, which shall be
specified in such certificate, and confirming that Bond Counsel expects to be
able to give an Opinion of Bond Counsel on the first day of such Auction Period,
(B) the Trustee shall not have delivered to the Auction Agent by 12:00 noon (New
York City time) on the Auction Date for such Auction Period notice that a
Failure to Deposit has occurred, (C) Sufficient Clearing Bids exist at the
Auction on the Auction Date for such Auction Period, and (D) the Trustee and the
Auction Agent receive by 9:30 a.m. (New York City time) on the first day of such
Auction Period, an opinion of Bond Counsel to the effect that the change in the
Auction Period or the Standard Auction Period is authorized by this Indenture,
is permitted under the Act and will not have an adverse effect on the exclusion
of interest on such Bonds from gross income for federal income tax purposes. If
the condition referred to in (A) above is not met, the Auction Rate for the next
succeeding Auction Period shall be determined pursuant to the Auction Procedures
and the next succeeding Auction Period shall be a Standard Auction Period. If
any of the conditions referred to in (B), (C) or (D) above is not met, the
Auction Rate for the next succeeding Auction Period shall equal the Maximum
Auction Rate as determined as of such Auction Date.

            3. On the effective date of any change in the length of the Auction
Period or Standard Auction Period, any Auction Rate Bonds which are not the
subject of a specific Order shall be deemed to be subject to a Sell Order.

            4. In the event of a Change in the Interest Rate Mode to an Auction
Rate during an Auction Rate Period, the Authority, at the request of the
Company, shall determine the length of the initial Auction Period and may change
the length of a single or the Standard Auction Period by means of a written
notice delivered on or prior to the effective date of such Change in the
Interest Rate Mode to an Auction Rate during an Auction Rate Period to the
Trustee, the Remarketing Agent, the Auction Agent and the Credit Facility
Issuer. Notwithstanding anything to the contrary in paragraphs 1 and 2 of this
Section 3.04, the determination of the initial Auction Period shall take effect
on the effective date of such Change in the Interest Rate Mode to an Auction
Rate during an Auction Rate Period. Notwithstanding anything to the contrary in
paragraphs 1 and 2 of this Section 3.04, the change in the length of a single
Auction Period or the Standard Auction Period shall take effect only if the
Trustee, the Credit Facility Issuer and the Auction Agent receive on the
effective date of such Change in the Interest Rate Mode to an Auction Rate
during an Auction Rate Period, an opinion of Bond Counsel to the effect that the
change in the Auction Period or the Standard Auction Period is authorized by
this Indenture, is permitted under the Act and will not have an adverse effect
on the exclusion of interest on such Bonds from gross income for federal income
tax purposes.

            SECTION 3.05. Auction Rate Period - Auction Rate Bonds: Change of
Auction Date by Remarketing Agent. During an Auction Rate Period the Remarketing
Agent, with the written consent of the Company, may change, in order to conform
with then-current market practice with respect to similar securities or to
accommodate economic and financial factors that may affect or be relevant to the
day of the week constituting an Auction Date, the Auction Date for all future
Auction Periods to a different day, so long as the first such Auction Date will
be a Business Day in the calendar week in which the next succeeding Auction Date
is then scheduled to occur. If a change in an Auction Date is undertaken in


                                     III-6


conjunction with a change in an Auction Period and the conditions for the
establishment of such change in Auction Period are not met, the Auction Date may
be, and the next succeeding Auction Period may be adjusted to end on, a Business
Day in the calendar week in which such Auction Date was scheduled to occur and
such Auction Period was scheduled to end to accommodate the change in the
Auction Date. The Remarketing Agent shall deliver a written notice of its
determination to change an Auction Date by means of a written notice delivered
at least 10 days prior to the Auction Date immediately preceding such Auction
Date, or with respect to a Change in the Interest Rate Mode to an Auction Rate
on or prior to the effective date of such Change in the Interest Rate Mode, to
the Authority, the Trustee, the Auction Agent, the Company and the Securities
Depository which shall state (i) the determination of the Remarketing Agent to
change the Auction Date, (ii) the new Auction Date and (iii) the date on which
such Auction Date shall be changed. If as a result of any proposed change in the
Auction Date any Auction Period would be less than 28 days in duration, such
notice shall be effective only if it is accompanied by a written statement of
the Auction Agent, the Registrar and Paying Agent and the Trustee to the effect
that they are capable of performing their duties hereunder and under the Auction
Agency Agreement with respect to any such Auction Period.

            SECTION 3.06. Auction Rate Period - Auction Rate Bonds: Orders by
Beneficial Owners and Potential Beneficial Owners. (a) Prior to the Submission
Deadline on each Auction Date during the Auction Rate Period, the following
orders may be submitted:

            (i) each Beneficial Owner may submit to the Broker-Dealer by
      telephone or otherwise information as to:

                  (A) the principal amount of Outstanding Auction Rate Bonds, if
            any, held by such Beneficial Owner which such Beneficial Owner
            desires to continue to hold without regard to the Auction Rate for
            the next succeeding Auction Period;

                  (B) the principal amount of Outstanding Auction Rate Bonds, if
            any, held by such Beneficial Owner which such Beneficial Owner
            offers to sell if the Auction Rate for the next succeeding Auction
            Period shall be less than the rate per annum specified by such
            Beneficial Owner and/or

                  (C) the principal amount of Outstanding Auction Rate Bonds, if
            any, held by such Beneficial Owner which such Beneficial Owner
            offers to sell without regard to the Auction Rate for the next
            succeeding Auction Period;

            (ii) one or more Broker-Dealers may contact Potential Beneficial
      Owners by telephone or otherwise to determine the principal amount of
      Auction Rate Bonds which each such Potential Beneficial Owner offers to
      purchase if the Auction Rate for the next succeeding Auction Period shall
      not be less than the interest rate per annum specified by such Potential
      Beneficial Owner.

For the purposes hereof, the communication to a Broker-Dealer of information
referred to in clause (i)(A), (i)(B) or (i)(C) or clause (ii) above is
hereinafter referred to as an "Order" and collectively as "Orders" and


                                     III-7


each Beneficial Owner and each Potential Beneficial Owner placing an Order is
hereinafter referred to as a "Bidder" collectively as "Bidders"; an Order
containing the information referred to in clause (i)(A) above is hereinafter
referred to as a "Hold Order" and collectively as "Hold Orders"; an Order
containing the information referred to in clause (i)(B) or clause (ii) above is
hereinafter referred to as a "Bid" and collectively as "Bids"; and an Order
containing the information referred to in clause (i)(C) above is hereinafter
referred to as a "Sell Order" and collectively as "Sell Orders". The submission
by a Broker-Dealer of an Order to the Auction Agent shall likewise be referred
to herein as an "Order" and collectively as "Orders" and an Existing Holder or
Potential Holder who places an Order with the Auction Agent or on whose behalf
an Order is placed with the Auction Agent shall likewise be referred to herein
as a "Bidder" and collectively as "Bidders".

            Orders may be submitted in principal amounts of $50,000 or any
integral multiple thereof.

            (b)(i)Subject to the provisions of Section 3.07, a Bid by a
      Beneficial Owner or an Existing Holder shall constitute an irrevocable
      offer to sell:

                  (A) the principal amount of Outstanding Auction Rate Bonds
            specified in such Bid if the Auction Rate determined on such Auction
            Date shall be less than the interest rate per annum specified
            therein; or

                  (B) such principal amount or a lesser principal amount of
            Outstanding Auction Rate Bonds to be determined as set forth in
            subsection (a)(iv) of Section 3.09 if the Auction Rate determined on
            such Auction Date shall be equal to the interest rate per annum
            specified therein; or

                  (C) such principal amount or a lesser principal amount of
            Outstanding Auction Rate Bonds to be determined as set forth in
            subsection (b)(iii) of Section 3.09 if such specified rate shall be
            higher than the Maximum Auction Rate and Sufficient Clearing Bids do
            not exist.

            (ii) Subject to the provisions of Section 3.07, a Sell Order by a
      Beneficial Owner or an Existing Holder shall constitute an irrevocable
      offer to sell:

                  (A) the principal amount of Outstanding Auction Rate Bonds
            specified in such Sell Order; or

                  (B) such principal amount or a lesser principal amount of
            Outstanding Auction Rate Bonds as set forth in subsection (b)(iii)
            of Section 3.09 if Sufficient Clearing Bids do not exist.

            (iii) Subject to the provisions of Section 3.07, a Bid by a
      Potential Beneficial Owner or a Potential Holder shall constitute an
      irrevocable offer to purchase:


                                     III-8


                  (A) the principal amount of Outstanding Auction Rate Bonds
            specified in such Bid if the Auction Rate determined on such Auction
            Date shall be higher than the rate specified therein; or

                  (B) such principal amount or a lesser principal amount of
            Outstanding Auction Rate Bonds as set forth in subsection (a)(v) of
            Section 3.09 if the Auction Rate determined on such Auction Date
            shall be equal to such specified rate.

            SECTION 3.07. Auction Rate Period - Auction Rate Bonds: Submission
of Orders by Broker-Dealers to Auction Agent. (a) During an Auction Rate Period
each Broker-Dealer shall submit in writing to the Auction Agent prior to the
Submission Deadline on each Auction Date, all Orders obtained by such
Broker-Dealer, designating itself (unless otherwise permitted by the Company) as
(x) an Existing Holder in respect of the principal amount of Auction Rate Bonds
subject to Orders submitted or deemed submitted to it by Beneficial Owners or
(y) a Potential Holder in respect of the principal amount of the Auction Rate
Bonds subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each such Order:

            (i) the name of the Bidder placing such Order (which shall be the
      Broker-Dealer unless otherwise permitted by the Company);

            (ii) the aggregate principal amount of Auction Rate Bonds that are
      subject to such Order;

            (iii) to the extent that such Bidder is an Existing Holder:

                  (A) the principal amount of Auction Rate Bonds, if any,
            subject to any Hold Order placed by such Existing Holder;

                  (B) the principal amount of Auction Rate Bonds, if any,
            subject to any Bid placed by such Existing Holder and the rate
            specified in such Bid; and

                  (C) the principal amount of Auction Rate Bonds, if any,
            subject to any Sell Order placed by such Existing Holder; and

            (iv) to the extent such Bidder is a Potential Holder, the principal
      amount of Auction Rate Bonds subject to any Bid placed by such Potential
      Holder and the rate specified in such Bid.

            (b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one thousandth (.001) of 1%.

            (c) If an Order or Orders covering all Outstanding Auction Rate
Bonds held by an Existing Holder is not submitted to the Auction Agent prior to
the Submission Deadline, the Auction Agent shall deem a Hold Order to have been
submitted on behalf of such Existing Holder covering the principal amount of
Outstanding Auction Rate Bonds held by such Existing Holder and not subject to
Orders


                                     III-9


submitted to the Auction Agent; provided, however, that if there is a change in
the length of the Auction Period or Standard Auction Period and Orders have not
been submitted to the Auction Agent prior to the Submission Deadline covering
the aggregate principal amount of Auction Rate Bonds that are subject to such
change in the length of the Auction Period or Standard Auction Period, the
Auction Agent shall deem a Sell Order to have been submitted on behalf of such
Existing Holder covering the principal amount of Auction Rate Bonds subject to
such change and not subject to Orders submitted to the Auction Agent.

            (d) Neither the Authority, the Company, the Trustee nor the Auction
Agent shall be responsible for any failure of a Broker-Dealer to submit an Order
to the Auction Agent on behalf of any Existing Holder, Beneficial Owner,
Potential Holder or Potential Beneficial Owner.

            (e) If any Existing Holder submits through a Broker-Dealer to the
Auction Agent one or more Orders covering in the aggregate more than the
principal amount of Auction Rate Bonds held by such Existing Holder, such Orders
shall be considered valid as follows and in the following order of priority:

                  (i) all Hold Orders shall be considered valid, but only up to
      and including the principal amount of Auction Rate Bonds held by such
      Existing Holder, and, if the aggregate principal amount of Auction Rate
      Bonds subject to such Hold Orders exceeds the aggregate principal amount
      of Outstanding Auction Rate Bonds held by such Existing Holder, the
      aggregate principal amount of Auction Rate Bonds subject to each such Hold
      Order shall be reduced pro rata to cover the aggregate principal amount of
      Outstanding Auction Rate Bonds held by such Existing Holder;

                  (ii) (A) any Bid shall be considered valid up to and including
            the excess of the principal amount of Outstanding Auction Rate Bonds
            held by such Existing Holder over the aggregate principal amount of
            Auction Rate Bonds subject to any Hold Orders referred to in
            paragraph (i) above;

                        (B) subject to clause (A) above, if more than one Bid
                  with the same rate is submitted on behalf of such Existing
                  Holder and the aggregate principal amount of Outstanding
                  Auction Rate Bonds subject to such Bids is greater than such
                  excess, such Bids shall be considered valid up to and
                  including the amount of such excess, and, the principal amount
                  of Auction Rate Bonds subject to each Bid with the same rate
                  shall be reduced pro rata to cover the principal amount of
                  Auction Rate Bonds equal to such excess;

                        (C) subject to clauses (A) and (B) above, if more than
                  one Bid with different rates is submitted on behalf of such
                  Existing Holder, such Bids shall be considered valid in the
                  ascending order of their respective rates until the highest
                  rate is reached at which such excess exists and then at such
                  rate up to and including the amount of such excess; and

                        (D) in any such event, the aggregate principal amount of
                  Outstanding Auction Rate Bonds, if any, subject to any portion
                  of Bids not valid under this


                                     III-10


                  paragraph (ii) shall be treated as the subject of a Bid by a
                  Potential Holder at the rate therein specified; and

                  (iii) all Sell Orders shall be considered valid up to and
            including the excess of the principal amount of Outstanding Auction
            Rate Bonds held by such Existing Holder over the aggregate principal
            amount of Auction Rate Bonds subject to valid Hold Orders referred
            to in paragraph (i) of this subsection (e) and valid Bids referred
            to in paragraph (ii) of this subsection (e).

            (f) If more than one Bid for Auction Rate Bonds is submitted on
behalf of any Potential Holder, each Bid submitted shall be a separate Bid for
Auction Rate Bonds with the rate and principal amount therein specified.

            (g) Any Bid or Sell Order submitted by an Existing Holder covering
an aggregate principal amount of Auction Rate Bonds not equal to $50,000 or an
integral multiple thereof shall be rejected and shall be deemed a Hold Order.
Any Bid submitted by a Potential Holder covering an aggregate principal amount
of Auction Rate Bonds not equal to $50,000 or an integral multiple thereof shall
be rejected.

            (h) Any Bid submitted by an Existing Holder or a Beneficial Owner
specifying a rate lower than the All Hold Rate, if any, shall be treated as a
Bid specifying the All Hold Rate, if any, and will not be accepted if submitted
by a Potential Beneficial Owner or a Potential Holder.

            SECTION 3.08. Auction Rate Period - Auction Rate Bonds:
Determination of Sufficient Clearing Bids, Winning Bid Rate and Auction Rate.
(a) During an Auction Rate Period not earlier than the Submission Deadline on
each Auction Date, the Auction Agent shall assemble all valid Orders submitted
or deemed submitted to it by the Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to as a
"Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell Order," as the
case may be, or as a "Submitted Order") and shall determine:

                  (i) the excess of the total principal amount of Outstanding
            Auction Rate Bonds over the aggregate principal amount of
            Outstanding Auction Rate Bonds subject to Submitted Hold Orders
            (such excess being hereinafter referred to as the "Available Auction
            Rate Bonds"); and

                  (ii) from the Submitted Orders whether the aggregate principal
            amount of Outstanding Auction Rate Bonds subject to Submitted Bids
            by Potential Holders specifying one or more rates equal to or lower
            than the Maximum Auction Rate exceeds or is equal to the sum of:

                        (A) the aggregate principal amount of Outstanding
                  Auction Rate Bonds subject to Submitted Bids by Existing
                  Holders specifying one or more rates higher than the Maximum
                  Auction Rate; and


                                     III-11


                        (B) the aggregate principal amount of Outstanding
                  Auction Rate Bonds subject to Submitted Sell Orders

            (in the event of such excess or such equality (other than because
            the sum of the principal amounts of Auction Rate Bonds in clauses
            (A) and (B) above is zero because all of the Outstanding Auction
            Rate Bonds are subject to Submitted Hold Orders), such Submitted
            Bids by Potential Holders are hereinafter referred to collectively
            as "Sufficient Clearing Bids"); and

                  (iii) if Sufficient Clearing Bids exist, the lowest rate
            specified in the Submitted Bids (the "Winning Bid Rate") which if:

                        (A)(I) each Submitted Bid from Existing Holders
                  specifying such lowest rate and (II) all other Submitted Bids
                  from Existing Holders specifying lower rates were rejected,
                  thus entitling such Existing Holders to continue to hold the
                  principal amount of Auction Rate Bonds that are the subject of
                  such Submitted Bids; and

                        (B)(I) each Submitted Bid from Potential Holders
                  specifying such lowest rate and (II) all other Submitted Bids
                  from Potential Holders specifying lower rates were accepted,
                  would result in such Existing Holders described in clause (A)
                  above continuing to hold an aggregate principal amount of
                  Outstanding Auction Rate Bonds which, when added to the
                  aggregate principal amount of Outstanding Auction Rate Bonds
                  to be purchased by such Potential Holders described in clause
                  (B) above, would equal not less than the Available Auction
                  Rate Bonds.

            (b) Promptly after the Auction Agent has made the determinations
      pursuant to subsection (a) of this Section 3.08, the Auction Agent, by
      telecopy confirmed in writing, shall advise the Company and the Trustee
      and the Broker-Dealers of the Maximum Auction Rate and the components
      thereof on the Auction Date and, based on such determinations, the Auction
      Rate for the next succeeding Auction Period as follows:

                  (i) if Sufficient Clearing Bids exist, the Auction Rate for
            the next succeeding Auction Period therefor shall be equal to the
            Winning Bid Rate so determined;

                  (ii) if Sufficient Clearing Bids do not exist (other than
            because all of the Outstanding Auction Rate Bonds are the subject of
            Submitted Hold Orders), the Auction Rate for the next succeeding
            Auction Period therefor shall be equal to the Maximum Auction Rate;
            and

                  (iii) if all of the Outstanding Auction Rate Bonds are subject
            to Submitted Hold Orders, the Auction Rate for the next succeeding
            Auction Period therefor shall be equal to the All Hold Rate.


                                     III-12


            SECTION 3.09. Auction Rate Period - Auction Rate Bonds: Acceptance
and Rejection of Submitted Bids and Submitted Sell Orders and Allocation of
Auction Rate Bonds. During an Auction Rate Period Existing Holders shall
continue to hold the principal amounts of Auction Rate Bonds that are subject to
Submitted Hold Orders, and, based on the determinations made pursuant to
subsection (a) of this Section 3.09, the Submitted Bids and Submitted Sell
Orders shall be accepted or rejected, and the Auction Agent shall take such
other actions as are set forth below:

            (a) If Sufficient Clearing Bids exist, all Submitted Sell Orders
      shall be accepted and, subject to the provisions of paragraphs (e) and (f)
      of this Section 3.09, Submitted Bids shall be accepted or rejected as
      follows in the following order of priority and all other Submitted Bids
      shall be rejected:

                  (i) Existing Holders' Submitted Bids specifying any rate that
            is higher than the Winning Bid Rate shall be accepted, thus
            requiring each such Existing Holder to sell the aggregate principal
            amount of Auction Rate Bonds subject to such Submitted Bids;

                  (ii) Existing Holders' Submitted Bids specifying any rate that
            is lower than the Winning Bid Rate shall be rejected, thus entitling
            each such Existing Holder to continue to hold the aggregate
            principal amount of Auction Rate Bonds subject to such Submitted
            Bids;

                  (iii) Potential Holders' Submitted Bids specifying any rate
            that is lower than the Winning Bid Rate shall be accepted, thus
            requiring each such Potential Holder to purchase the aggregate
            principal amount of Auction Rate Bonds subject to such Submitted
            Bids;

                  (iv) each Existing Holder's Submitted Bid specifying a rate
            that is equal to the Winning Bid Rate shall be rejected, thus
            entitling such Existing Holder to continue to hold the aggregate
            principal amount of Auction Rate Bonds subject to such Submitted
            Bid, unless the aggregate principal amount of Outstanding Auction
            Rate Bonds subject to all such Submitted Bids shall be greater than
            the principal amount of Auction Rate Bonds (the "remaining principal
            amount") equal to the excess of Available Auction Rate Bonds over
            the aggregate principal amount of the Auction Rate Bonds subject to
            Submitted Bids described in paragraphs (ii) and (iii) of this
            subsection (a), in which event such Submitted Bid of such Existing
            Holder shall be rejected in part, and such Existing Holder shall be
            entitled to continue to hold the principal amount of Auction Rate
            Bonds subject to such Submitted Bid, but only in an amount equal to
            the principal amount of Auction Rate Bonds obtained by multiplying
            the remaining principal amount by a fraction, the numerator of which
            shall be the principal amount of Outstanding Auction Rate Bonds held
            by such Existing Holder subject to such Submitted Bid and the
            denominator of which shall be the sum of the principal amounts of
            Auction Rate Bonds subject to such Submitted Bids made by all such
            Existing Holders that specified a rate equal to the Winning Bid
            Rate; and

                  (v) each Potential Holder's Submitted Bid specifying a rate
            that is equal to the Winning Bid Rate shall be accepted but only in
            an amount equal to the principal amount


                                     III-13


            of Auction Rate Bonds obtained by multiplying the excess of the
            Outstanding Available Auction Rate Bonds over the aggregate
            principal amount of Auction Rate Bonds subject to Submitted Bids
            described in paragraphs (ii), (iii) and (iv) of this subsection (a)
            by a fraction the numerator of which shall be the aggregate
            principal amount of Auction Rate Bonds subject to such Submitted Bid
            of such Potential Holder and the denominator of which shall be the
            sum of the principal amount of Outstanding Auction Rate Bonds
            subject to Submitted Bids made by all such Potential Holders that
            specified a rate equal to the Winning Bid Rate.

            (b) If Sufficient Clearing Bids do not exist (other than because all
      of the Outstanding Auction Rate Bonds are subject to Submitted Hold
      Orders), subject to the provisions of subsection (e) of this Section 3.09,
      Submitted Orders shall be accepted or rejected as follows in the following
      order of priority and all other Submitted Bids shall be rejected:

                  (i) Existing Holders' Submitted Bids specifying any rate that
            is equal to or lower than the Maximum Auction Rate shall be
            rejected, thus entitling each such Existing Holder to continue to
            hold the aggregate principal amount of Auction Rate Bonds subject to
            such Submitted Bids;

                  (ii) Potential Holders' Submitted Bids specifying any rate
            that is equal to or lower than the Maximum Auction Rate shall be
            accepted, thus requiring each such Potential Holder to purchase the
            aggregate principal amount of Auction Rate Bonds subject to such
            Submitted Bids; and

                  (iii) each Existing Holder's Submitted Bid specifying any rate
            that is higher than the Maximum Auction Rate and the Submitted Sell
            Order of each Existing Holder shall be accepted, thus entitling each
            Existing Holder that submitted any such Submitted Bid or Submitted
            Sell Order to sell the Auction Rate Bonds subject to such Submitted
            Bid or Submitted Sell Order, but in both cases only in an amount
            equal to the aggregate principal amount of Auction Rate Bonds
            obtained by multiplying the aggregate principal amount of Auction
            Rate Bonds subject to Submitted Bids described in paragraph (ii) of
            this subsection (b) by a fraction, the numerator of which shall be
            the aggregate principal amount of Outstanding Auction Rate Bonds
            held by such Existing Holder subject to such Submitted Bid or
            Submitted Sell Order and the denominator of which shall be the
            aggregate principal amount of Outstanding Auction Rate Bonds subject
            to all such Submitted Bids and Submitted Sell Orders.

            (c) If all Outstanding Auction Rate Bonds are subject to Submitted
      Hold Orders, all Submitted Bids shall be rejected.

            (d) If (i) the Auction Agent shall fail to take any action necessary
      to determine, or take any action which effectively prevents the
      determination of, an interest rate pursuant to the Auction Procedures or
      (ii) the conditions set forth in subsection 2 of Section 3.04 to effect a
      change in the


                                     III-14


      Auction Period are not met, all Submitted Bids and Submitted Sell Orders
      shall be rejected and the existence of Sufficient Clearing Bids shall be
      of no effect.

            (e) If, as a result of the procedures described in subsection (a) or
      (b) of this Section 3.09, any Existing Holder would be entitled or
      required to sell, or any Potential Holder would be required to purchase, a
      principal amount of Auction Rate Bonds that is not equal to $50,000 or an
      integral multiple thereof, the Auction Agent shall, in such manner as, in
      its sole discretion, it shall determine, round up or down the principal
      amount of such Auction Rate Bonds to be purchased or sold by any Existing
      Holder or Potential Holder so that the principal amount purchased or sold
      by each Existing Holder or Potential Holder shall be equal to $50,000 or
      an integral multiple thereof.

            (f) If, as a result of the procedures described in subsection (a) of
      this Section 3.09, any Potential Holder would be entitled or required to
      purchase less than $50,000 in aggregate principal amount of Auction Rate
      Bonds, the Auction Agent shall, in such manner as, in its sole discretion,
      it shall determine, allocate Auction Rate Bonds for purchase among
      Potential Holders so that only Auction Rate Bonds in principal amounts of
      $50,000 or an integral multiple thereof are purchased by any Potential
      Holder, even if such allocation results in one or more of such Potential
      Holders not purchasing any Auction Rate Bonds.

            (g) Based on the results of each Auction, the Auction Agent shall
      determine the aggregate principal amounts of Auction Rate Bonds to be
      purchased and the aggregate principal amounts of Auction Rate Bonds to be
      sold by Potential Holders and Existing Holders and, with respect to each
      Potential Holder and Existing Holder, to the extent that such aggregate
      principal amount of Auction Rate Bonds to be sold differs from such
      aggregate principal amount of Auction Rate Bonds to be purchased,
      determine to which other Potential Holder(s) or Existing Holder(s) they
      shall deliver, or from which other Potential Holder(s) or Existing
      Holder(s) they shall receive, as the case may be, Auction Rate Bonds.

            (h) None of the Authority, the Company or any Affiliate thereof may
      submit an Order in any Auction except as set forth in the next sentence.
      Any Broker-Dealer that is an Affiliate of the Company may submit Orders in
      an Auction but only if such Orders are not for its own account, except
      that if such affiliated Broker-Dealer holds Auction Rate Bonds for its own
      account, it must submit a Sell Order on the next Auction Date with respect
      to such Auction Rate Bonds.

            SECTION 3.10. Auction Rate Period - Auction Rate Bonds: Adjustment
in Percentage. 1. During an Auction Rate Period the Remarketing Agent may adjust
the percentage used in determining the All Hold Rate and the Applicable
Percentages used in determining the Maximum Auction Rate if any such adjustment
is necessary, in the judgment of the Remarketing Agent, to reflect any Change of
Preference Law such that the All Hold Rate and Maximum Auction Rate shall have
substantially equal market values before and after such Change of Preference
Law. In making any such adjustment, the Remarketing Agent shall take the
following factors, as in existence both before and after such Change of
Preference Law, into account: (i) short-term taxable and tax-exempt market rates
and indices of such short-term rates, (ii) the market supply and demand for
short-term tax-exempt securities, (iii) yield curves


                                     III-15


for short-term and long-term tax-exempt securities or obligations having a
credit rating that is comparable to the Bonds, (iv) general economic conditions
and (v) economic and financial factors present in the securities industry that
may affect or that may be relevant to the Bonds.

            2. The Remarketing Agent shall communicate its determination to
adjust the percentage used in determining the All Hold Rate and the Applicable
Percentages used in determining the Maximum Auction Rate pursuant to subsection
1 hereof by means of a written notice delivered at least five days prior to the
Auction Date on which the Remarketing Agent desires to effect the change to the
Authority, the Trustee, the Auction Agent and the Company in substantially the
form attached to the Auction Agency Agreement. Such notice is required to state
the determination of the Remarketing Agent to change such percentage and the
date such adjustment is proposed to take effect (which date shall be an Auction
Date). Upon receiving approval of the Company (which approval shall not be
unreasonably withheld), by means of a written notice delivered at least 10 days
prior to the Auction Date on which the Remarketing Agent desires to effect the
change to the Trustee, the Authority and the Auction Agent in substantially the
form attached hereto as, or containing substantially the information contained
in, Exhibit E. Such notice is required to state the determination of the
Remarketing Agent to change such percentages and the date such adjustment is
proposed to take effect (which date shall be an Auction Date). Such notice shall
be effective only if it is accompanied by the form of opinion that Bond Counsel
expects to be able to give on such Auction Date to the effect that such
adjustment is authorized by this Indenture, is permitted under the Act and will
not have an adverse effect on the exclusion of interest on the Auction Rate
Bonds from gross income for federal income tax purposes. The Auction Agent is
required to mail notice thereof to the Existing Holders within two Business Days
of receipt thereof.

            3. An adjustment in the percentage used in determining the All Hold
Rate and the Applicable Percentages used in determining the Maximum Auction Rate
shall take effect on an Auction Date only if (A) the Trustee and the Auction
Agent receive, by 11:00 a.m. (New York City time) on the Business Day
immediately preceding such Auction Date, a certificate from the Remarketing
Agent by telecopy or similar means, (i) authorizing the adjustment of the
percentage used in determining the All Hold Rate and the Applicable Percentages
used in determining the Maximum Auction Rate which shall be specified in such
authorization, and (ii) confirming that Bond Counsel expects to be able to give
an opinion on such Auction Date to the effect that the adjustment in the
percentage used in determining the All Hold Rate and the Applicable Percentages
used in determining the Maximum Auction Rate is authorized by this Indenture, is
permitted under the Act and will not have an adverse effect on the exclusion of
interest on the Auction Rate Bonds from gross income for federal income tax
purposes, and (B) the Trustee and the Auction Agent receive by 9:30 a.m. (New
York City time) on such Auction Date, an opinion of Bond Counsel to the effect
that the adjustment in the percentage used in determining the All Hold Rate and
the Applicable Percentages used in determining the Maximum Auction Rate is
authorized by this Indenture, is permitted under the Act and will not have an
adverse effect on the exclusion of interest on the Auction Rate Bonds from gross
income for federal income tax purposes. If the condition referred to in (A)
above is not met, the existing percentage used in determining the All Hold Rate
and the Applicable Percentages used in determining the Maximum Auction Rate
shall remain in effect and the Auction Rate for the next succeeding Auction
Period shall be determined pursuant to the Auction Procedures. If the condition
referred to in (B) above is not met, the existing percentage used in determining
the All Hold Rate and the Applicable Percentages used in determining the Maximum
Auction Rate shall remain in effect and the


                                     III-16


Auction Rate for the next succeeding Auction Period shall equal the Maximum
Auction Rate as determined on such Auction Date.


                                     III-17


                                   ARTICLE IV

                        CHANGES IN THE INTEREST RATE MODE

            SECTION 4.01. Optional Conversion to an Adjustable Rate by
Authority. 1. At the times specified below, the Bonds, in whole or in part,
shall cease to bear interest at the Adjustable Rate or the Fixed Rate then borne
by the Bonds and shall bear interest at such Adjustable Rate as shall be
specified by the Authority, at the request of the Company, in a written notice
delivered at least 30 days prior to the proposed effective date of the Change in
the Interest Rate Mode to the Trustee, the Remarketing Agent, the Registrar and
Paying Agent and the Company (and to the Auction Agent and the Securities
Depository if such Change in the Interest Rate Mode is to or from an Auction
Rate) in substantially the form attached hereto as, or containing substantially
the information contained in Exhibit A hereto. A Change in the Interest Rate
Mode may only be effected on a day on which the affected Bonds may be redeemed
at the option of the Authority. A notice of Change in the Interest Rate Mode
shall be effective only if it is accompanied by the form of opinion that Bond
Counsel expects to be able to give on the proposed effective date of such Change
in the Interest Rate Mode to the effect that such Change in the Interest Rate
Mode is authorized by this Indenture, is permitted under the Act and will not
have an adverse effect on the exclusion of interest on such Bonds from gross
income for federal income tax purposes.

            In the case of any Change in the Interest Rate Mode to a Term Rate,
the notice required by this section shall specify the length of the Calculation
Period and, unless otherwise specified, such Calculation Period shall thereafter
apply to the Bonds until a Change in the Interest Rate Mode effected pursuant to
Section 4.01 or Section 4.02. Any change in the Calculation Period during a Term
Rate Period shall be deemed an optional conversion pursuant to this Section 4.01
and may not be made unless all the requirements of a conversion pursuant to this
Section 4.01 are met.

            2. The Trustee shall mail, or cause the Registrar and Paying Agent
to mail, the notice received pursuant to subsection 1 of this Section 4.01 on or
before the third Business Day after receipt thereof to the Bondholders.

            3. A Change in the Interest Rate Mode to an Adjustable Rate shall be
effective pursuant to Subsection 1 of this Section 4.01 only if

            (A) with respect to any Change in the Interest Rate Mode from an
Auction Rate or from a Fixed Rate to an Adjustable Rate, the Trustee and the
Auction Agent (if any) shall receive:

                  (i) a certificate of an Authorized Company Representative by
      no later than the tenth day prior to the effective date of such Change in
      the Interest Rate Mode stating that a written agreement between the
      Company and the Remarketing Agent to remarket the Bonds on such effective
      date at a price of 100% of the principal amount thereof has been entered
      into, which agreement (i) may be subject to such reasonable terms and
      conditions agreed to by the Remarketing Agent which in the judgment of the
      Remarketing Agent reflect the current market standards regarding
      investment banking risk and (ii) must include a provision requiring
      payment by the Remarketing Agent in same-day funds for any Bond tendered
      or deemed tendered; and that


                                      IV-1


      a Liquidity Facility is in effect or has been obtained by the Company with
      respect to the Bonds and shall be in effect prior to such Change in the
      Interest Rate Mode and thereafter for a period of at least 364 days;

                  (ii) by 11:00 a.m. (New York City time) on the second Business
      Day prior to the effective date of such Change in the Interest Rate Mode
      by telecopy or other similar means, a certificate in substantially the
      form attached hereto as, or containing substantially the information
      contained in, Exhibit B hereto, from the Authority on behalf of the
      Company (y) authorizing the establishment of the new Adjustable Rate and
      (z) confirming that Bond Counsel has advised the Authority that it expects
      to be able to give an opinion on the effective date of such Change in the
      Interest Rate Mode to the effect that such Change in the Interest Rate
      Mode is authorized by this Indenture, is permitted under the Act and will
      not have an adverse effect on the exclusion of interest on the affected
      Bonds from gross income for federal income tax purposes; and

            (B) with respect to any Change in the Interest Rate Mode, the
Trustee (and the Auction Agent in the case of any Change in the Interest Rate
Mode to an Auction Rate), shall receive by 4:00 p.m., New York City time, on the
effective date of such Change in the Interest Rate Mode, a certificate in
substantially the form attached hereto as, or containing substantially the
information contained in, Exhibit C hereto, from an Authorized Company
Representative that all of the Bonds tendered or deemed tendered have been
purchased at a price equal to the principal amount thereof plus premium, if any,
plus any accrued and unpaid interest with funds provided from the remarketing of
such Bonds in accordance with the Remarketing Agreement, from the proceeds of a
Support Facility, or from funds deposited with the Trustee or the Registrar and
Paying Agent;

            (C) with respect to any Change in the Interest Rate Mode, the
Trustee (and the Auction Agent in the case of any Change in the Interest Rate
Mode to or from an Auction Rate) shall receive, by 9:30 a.m. (New York City
time) on the effective date of such Change in the Interest Rate Mode, an Opinion
of Bond Counsel to the effect that such Change in the Interest Rate Mode is
authorized by this Indenture, is permitted under the Act and will not have an
adverse effect on the exclusion of interest on such Bonds from gross income for
federal income tax purposes; and

            (D) with respect to any Change in the Interest Rate Mode to an
Adjustable Rate (other than to an Auction Rate), the Trustee shall receive a
Liquidity Facility meeting the requirements of this Indenture and the
Participation Agreement not less than one Business Day prior to the effective
date of such Change in the Interest Rate Mode which is, by its terms, in effect
prior to such effective date.

            If any of the conditions referred to in (A)(i) or (ii) above is not
met with respect to any Change in the Interest Rate Mode from an Auction Rate,
the Auction Rate for the next succeeding Auction Period shall be determined
pursuant to the Auction Procedures applicable to the Auction Rate Bonds. If the
condition referred to in (B) above is not met with respect to any Change in the
Interest Rate Mode from an Auction Rate, the Auction Rate for the next
succeeding Auction Period shall be equal to the Maximum Auction Rate as
determined on such Auction Date. If any of the conditions referred to in (C) or
(D) above is not met with respect to any Change in the Interest Rate Mode from
an Auction Rate, the Auction Rate for the next succeeding Auction Period shall
equal the Maximum Auction Rate as determined on such


                                      IV-2


Auction Date. If any of the conditions referred to in (B), (C) or (D) above is
not met with respect to any other Change in the Interest Rate Mode, the Bonds
shall continue to bear interest at the Current Adjustable Rate or the current
Fixed Rate, as the case may be, and be subject to the provisions of this
Indenture applicable thereto while the Bonds bear interest at such Current
Adjustable Rate or the current Fixed Rate, as the case may be; provided,
however, that notwithstanding the failure to meet such conditions, the Bonds
shall remain subject to mandatory tender for purchase in accordance with Section
5.04. If any of the foregoing conditions for a Change in the Interest Rate Mode
other than with respect to a Change in the Interest Rate Mode from an Auction
Rate is not met, the Trustee shall mail, or cause the Registrar and Paying Agent
to mail to the Authority, the Company and the Holders notice thereof in
substantially the form attached hereto as, or containing substantially the
information contained in, Exhibit D hereto within 3 Business Days after the
failure to meet any of such conditions.

            SECTION 4.02. Optional Conversion to a Fixed Rate. 1. The Authority
reserves the right, at the request of the Company, to fix the rate of interest
per annum which Bonds will bear, in whole or in part, for the balance of the
term thereof or until the effective date of a Change in the Interest Rate Mode;
provided however, that the Authority shall not exercise such right and the
Company shall not request the Authority to exercise such right except on a day
on which the affected Bonds may be redeemed at the option of the Authority. In
the event the Authority, at the request of the Company, as herein provided,
exercises its Option to Convert, the Bonds so converted shall cease to bear
interest at the Adjustable Rate then borne by the Bonds and shall bear interest
at a Fixed Rate until maturity or until the effective date of a Change in the
Interest Rate Mode, subject to the terms and conditions hereof (the date on
which a Fixed Rate shall take effect being herein called a "Fixed Rate
Conversion Date"). The Option to Convert may be exercised at any time through a
written notice given by the Authority, at the direction of the Company, not less
than 30 nor more than 45 days prior to the proposed Fixed Rate Conversion Date
to the Trustee, the Registrar and Paying Agent, the Remarketing Agent (and the
Auction Agent and the Securities Depository in the case of any change to a Fixed
Rate from an Auction Rate), in substantially the form attached hereto as, or
containing substantially the information contained in, Exhibit A hereto. A
notice of conversion to a Fixed Rate shall be effective only if it is
accompanied by the form of opinion that Bond Counsel expects to give on a Fixed
Rate Conversion Date to the effect that the establishment of a Fixed Rate is
authorized by this Indenture, is permitted under the Act and will not have an
adverse effect on the exclusion of interest on such Bonds from gross income for
federal income tax purposes.

            2. The Trustee shall mail, or cause the Registrar and Paying Agent
to mail, the notice received pursuant to subsection 1 of this Section 4.02 on or
before the third Business Day after receipt thereof to the Holders.

      3. A Fixed Rate shall take effect only if

      (A) with respect to a change to a Fixed Rate from an Auction Rate, the
Trustee and the Auction Agent shall receive:

            (i) a certificate of an Authorized Company Representative by no
      later than the tenth day prior to a Fixed Rate Conversion Date stating
      that a written agreement has been entered into by the Company and the
      Remarketing Agent to remarket the Bonds affected on a Fixed Rate


                                      IV-3


      Conversion Date at a price of not less than 100% of the principal amount
      thereof, which written agreement (i) may be subject to reasonable terms
      and conditions imposed by the Remarketing Agent which in the judgment of
      the Remarketing Agent reflect current market standards regarding
      investment banking risk and (ii) must include a provision requiring
      payment by the Remarketing Agent in same-day funds for any Auction Rate
      Bonds tendered or deemed tendered; and

            (ii) by 11:00 a.m. (New York City time) on the second Business Day
      prior to a Fixed Rate Conversion Date, by telecopy or other similar means,
      a certificate in substantially the form attached hereto as, or containing
      substantially the information contained in, Exhibit B hereto, from the
      Authority (y) authorizing the establishment of a Fixed Rate and (z)
      confirming that Bond Counsel expects to be able to give an opinion on a
      Fixed Rate Conversion Date to the effect that the change to a Fixed Rate
      is authorized by this Indenture, is permitted under the Act and will not
      have an adverse effect on the exclusion of interest on the Bonds from
      gross income for federal income tax purposes; and

            (B) with respect to any change to a Fixed Rate the Trustee (and the
Auction Agent in the case of any change to a Fixed Rate from an Auction Rate)
receives on a Fixed Rate Conversion Date:

            (i) by 9:30 a.m. (New York City time) an Opinion of Bond Counsel to
      the effect that the conversion to a Fixed Rate is authorized by this
      Indenture, is permitted under the Act and will not have an adverse effect
      on the exclusion of interest on such Bonds from gross income for federal
      income tax purposes; and

            (ii) by 4:00 p.m. (New York City time) a certificate in
      substantially the form attached hereto as, or containing substantially the
      information contained in, Exhibit C hereto, from an Authorized Company
      Representative that all of the Bonds tendered or deemed tendered have been
      purchased at a price equal to the principal amount thereof plus premium,
      if any, plus any accrued and unpaid interest with funds provided from the
      remarketing of such Bonds in accordance with the Remarketing Agreement,
      from the proceeds of a Support Facility, or from funds deposited with the
      Trustee or the Registrar and Paying Agent;

            If any of the conditions referred to in (A) above are not met with
respect to any change to a Fixed Rate from an Auction Rate, the Auction Rate for
the next succeeding Auction Period shall be determined pursuant to the Auction
Procedures applicable to the Auction Rate Bonds. If the condition referred to in
(B) above is not met with respect to any change to a Fixed Rate from an Auction
Rate, the Auction Rate for the next succeeding Auction Period shall be equal to
the Maximum Auction Rate as determined as of such Auction Date. If any of the
conditions referred to in (B) above are not met with respect to any change from
any other Adjustable Rate to a Fixed Rate, the Bonds shall continue to bear
interest at the Adjustable Rate then borne by the Bonds and be subject to the
provisions of this Indenture applicable thereto while the Bonds bear interest at
such Adjustable Rate. If any of the foregoing conditions to the establishment of
a Fixed Rate (other than with respect to any attempted change from an Auction
Rate to a Fixed Rate) are not met, the Trustee shall mail, or cause the
Registrar and Paying Agent to mail to the Authority, the Holders and the
Company, notice thereof in substantially the form attached hereto as, or


                                      IV-4


containing substantially the information contained in, Exhibit D hereto within 3
Business Days after the failure to meet any of said conditions.

            SECTION 4.03. Conversion Generally. 1. In the event of a Change in
the Interest Rate Mode on less than all the Bonds of a series or subseries to or
from an Auction Rate, the minimum aggregate principal amount of Bonds that
continue to bear, or are adjusted to bear interest at an Auction Rate for an
Auction Rate Period, shall not be less than $20,000,000 for such Auction Rate
Bonds.

            2. Upon any Change in the Interest Rate Mode to an Auction Rate, the
Authority and the Trustee, shall take all steps necessary to comply with any
agreement entered into with a Securities Depository or its nominee pursuant to
Section 2.03(5) with respect to such Change in the Interest Rate Mode,
including, without limitation, the purchase and designation of sufficient CUSIP
numbers to comply with the requirements of such Securities Depository following
any such Change in the Interest Rate Mode.

            3. If the interest rate on less than all Bonds is to be converted to
a new Adjustable Rate pursuant to Section 4.01 or to a Fixed Rate pursuant to
Section 4.02, the particular Bonds to be converted shall be chosen by the
Trustee, or the Trustee shall direct the Registrar and Paying Agent to so
choose, in such manner as the Trustee or Registrar and Paying Agent in its
discretion may deem proper; provided, however, that the portion of any Bond to
be converted shall be in the principal amount of $100,000 or any integral
multiple of such amount during a Commercial Paper Rate Period, a Daily Rate
Period, a Weekly Rate Period or a Monthly Rate Period, $50,000 or any integral
multiple thereof during an Auction Rate Period, or $5,000 or any integral
multiple thereof at any other time and that, in selecting Bonds for conversion,
the Trustee or Registrar and Paying Agent shall treat each Bond as representing
that number of Bonds which is obtained by dividing the principal amount of such
registered Bond in excess of $100,000 by $100,000 during a Commercial Paper Rate
Period, a Daily Rate Period, a Weekly Rate Period or a Monthly Rate Period,
$50,000 during an Auction Rate Period, and $5,000 at any other time (such
amounts being hereinafter referred to as the "applicable units of principal
amount"). If it is determined that one or more, but not all of the $100,000,
$50,000 or $5,000 units of principal amount represented by any such Bond is to
be converted, then upon notice of intention to convert such $100,000, $50,000 or
$5,000 unit or units pursuant to Sections 4.01 or 4.02, as the case may be, the
Holders of such Bonds shall forthwith surrender such Bonds to the Registrar and
Paying Agent for (1) payment of the purchase price (including the premium, if
any, and accrued and unpaid interest to the date fixed for conversion) of the
$100,000, $50,000 or $5,000 unit or units of principal amount called for
conversion and (2) exchange for a new Bond or Bonds in the aggregate principal
amount of the balance of the principal of such Bonds not subject to conversion.
If the Holders of any such Bond of a denomination greater than $100,000, $50,000
or $5,000 shall fail to present such Bond to the Registrar and Paying Agent, for
payment and exchange as aforesaid, such Bond shall, nevertheless, become due and
payable on the date fixed for conversion to the extent of the $100,000, $50,000
or $5,000 unit or units of principal amount subject to such conversion (and to
that extent only).

            4. Notwithstanding anything in this Article IV to the contrary, the
Authority may not effect a Change in the Interest Rate Mode pursuant to Section
4.01 and the Authority may not exercise its option to convert to a Fixed Rate
pursuant to Section 4.02 if such action would require the payment of a premium
upon purchase of Bonds pursuant to Section 5.04 unless there shall have been
deposited the full


                                      IV-5


amount of such premium in trust with the Trustee prior to any notification of a
change pursuant to Section 4.01 or 4.02.


                                      IV-6


                                    ARTICLE V

                        REDEMPTION AND PURCHASE OF BONDS

            SECTION 5.01. Optional Redemption. The Bonds shall be subject to
redemption, in whole or in part, at the option of the Authority upon the request
of the Company, from related payments made by the Company pursuant to Section
6.02 of the Participation Agreement and any other monies held by the Trustee and
available to be applied to the redemption of Bonds as provided in this Section
5.01 and Section 9.03 hereof:

            (a) During any Commercial Paper Rate Period, such Bonds shall be
subject to redemption on each Interest Payment Date, as a whole or in part, at
the principal amount thereof, at a redemption price equal to 100% of the
principal amount.

            (b) During any Auction Rate Period, Auction Rate Bonds shall be
subject to redemption on the Business Day immediately preceding each Auction
Date, as a whole or in part, at a redemption price equal to 100% of the
principal amount thereof plus accrued and unpaid interest to the date fixed for
redemption.

            (c) During any Daily Rate Period, such Bonds shall be subject to
redemption on any Business Day, as a whole or in part, at the principal amount
thereof, plus accrued and unpaid interest to the date fixed for redemption, if
any.

            (d) During any Weekly Rate Period, such Bonds shall be subject to
redemption on any Business Day, as a whole or in part, at the principal amount
thereof, plus accrued and unpaid interest to the date fixed for redemption, if
any.

            (e) During any Monthly Rate Period, such Bonds shall be subject to
redemption on each Interest Payment Date, as a whole or in part, at the
principal amount thereof.

            (f) During any Semi-annual Rate Period, such Bonds shall be subject
to redemption on each Interest Payment Date, as a whole or in part, at the
principal amount thereof.

            (g) During any Term Rate or Fixed Rate Period, such Bonds shall be
subject to redemption in whole at any time on any Business Day or in part on any
Interest Payment Date as follows: after the No-Call Period shown below, which
shall begin on the first day of the Calculation Period applicable to such Bonds
or on a Fixed Rate Conversion Date, as the case may be, at a redemption price
equal, initially, to the principal amount thereof, plus a premium equal to the
percentage of the principal amount to be redeemed shown in the Initial Premium
column, plus accrued and unpaid interest if paid on a Business Day other than an
Interest Payment Date. The premium percentage shall decline by the percentage
shown in the Reduction in Premium column on each anniversary of the date on
which such Bonds are first redeemable, if the Calculation Period or period
remaining to the Stated Maturity after a Fixed Rate Conversion Date is equal to
or greater than five years, and on each Interest Payment Date if the


                                      V-1


Calculation Period or period remaining to the Stated Maturity after a Fixed Rate
Conversion Date is less than five years, until the Bonds shall be redeemable
without premium.

Calculation Period or Period to Maturity
- -----------------------------------------
 Equal to or        But Less      No-Call       Initial       Reduction
Greater Than          Than         Period       Premium       in Premium
- ------------          ----         ------       -------       ----------

  18 years           N/A          10 Years         2 %           1/2%
  12 years          18 Years       8 Years         1 1/2         1/2
   7 Years          12 Years       6 Years         1             1/2
   5 Years           7 Years       4 Years         1/2           1/2
   4 Years           5 Years       3 Years         1/2           1/2
   3 Years           4 Years       2 Years         1/2           1/2
   0 Years           3 Years       Not callable

If upon establishment of a Term Rate Period or a Fixed Rate Period, as the case
may be, the Remarketing Agent certifies to the Trustee, Bond Counsel and the
Authority in writing that the foregoing schedule is not consistent with
then-prevailing market conditions, the Authority at the request of the Company
may revise the foregoing Initial Premium, Reductions in Premium and No-Call
Periods without the approval of the Holders to reflect then-prevailing market
conditions, upon receipt of an opinion of Bond Counsel to the effect that any
revisions pursuant to this paragraph, either by itself or in conjunction with
the establishment of a Calculation Period or a Fixed Rate, as the case may be,
are made in accordance with this Indenture, is permitted under the Act and will
not adversely affect the exclusion of interest on the Bonds from gross income
for federal income tax purposes.

            SECTION 5.02. [Reserved]

            SECTION 5.03. Tender for and Purchase upon Election of Holder. 1.
During any Daily Rate Period or Weekly Rate Period, any Bond or portion thereof
in a principal amount equal to an authorized denomination (so long as the
principal amount not purchased is an authorized denomination) shall be purchased
on the demand of the Holder thereof on any Business Day at a price equal to the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase, upon delivery to the Registrar and Paying Agent and the Remarketing
Agent at their respective principal offices, by the close of business on any
Business Day of a Notice of Election to Tender in substantially the form
attached hereto as, or containing substantially the information contained in,
Exhibit E hereto; provided, however, that the substance of such Notice of
Election to Tender must also be given telephonically to the Remarketing Agent
prior to or simultaneously with delivery of such written Notice of Election to
Tender to the Remarketing Agent. The date on which such Bond shall be purchased
shall, at the request of the Holder thereof (i) if the Bond then bears interest
at a Daily Rate, be the date of delivery of such Notice of Election to Tender if
such Notice of Election to Tender is delivered to the Registrar and Paying Agent
and the Remarketing Agent by 10:00 a.m.(New York City time) on such date or may
be any Business Day thereafter, and (ii) if the Bond then bears interest at a
Weekly Rate, shall be a Business Day not prior to the 7th day next succeeding
the date of the delivery of such Notice of Election to Tender to the Registrar
and Paying Agent and the Remarketing Agent.


                                      V-2


            2. During any Monthly Rate Period or Semi-annual Rate Period, any
Bond or portion thereof in a principal amount equal to an authorized
denomination (so long as the principal amount not purchased is an authorized
denomination) shall be purchased on the demand of the Holder thereof on the
first Business Day following each Calculation Period at a price equal to the
principal amount thereof, upon delivery to the Registrar and Paying Agent and
the Remarketing Agent, at their respective principal offices of a Notice of
Election to Tender in substantially the form attached hereto as or containing
substantially the information contained in Exhibit E on or prior to a Business
Day which is not less than 10 days, in the case of Bonds bearing interest at a
Semi-annual Rate, or 7 days, in the case of Bonds bearing interest at a Monthly
Rate, prior to the proposed date of purchase; provided, however, that the
substance of such Notice of Election to Tender must also be given telephonically
to the Remarketing Agent prior to or simultaneously with delivery of such
written Notice of Election to Tender to the Remarketing Agent.

            3. Immediately upon receipt of a Notice of Election to Tender
delivered pursuant to the provisions of this Section 5.03, the Registrar and
Paying Agent shall notify, or cause to be notified, the Trustee, the Company,
the Authority and the Remarketing Agent, by telephone, promptly confirmed in
writing, of such receipt, specifying the contents thereof.

            4. Any Notice of Election to Tender shall be irrevocable. If a
Holder fails to deliver the Bonds referred to in such notice to the Registrar
and Paying Agent, such Bonds shall nevertheless be deemed to have been purchased
on the date established for the purchase thereof, no interest shall accrue on
such Bonds from and after the date of purchase and such Holder shall have no
rights hereunder thereafter as the owner of such Bonds except the right to
receive the purchase price of such Bonds.

            5. A Holder may not tender a Bond to the Registrar and Paying Agent
pursuant to this Section while such Bond bears interest at an Auction Rate,
Commercial Paper Rate, Term Rate or Fixed Rate.

            SECTION 5.04. Mandatory Tender for Purchase upon Change in the
Interest Rate Mode or on Business Day Following Certain Calculation Periods. 1.
Upon a Change in the Interest Rate Mode, the Bonds shall be subject to mandatory
tender for purchase in accordance with the terms hereof, on the effective date
of such Change in the Interest Rate Mode at the Purchase Price.

            2. During any Term Rate Period or Commercial Paper Rate Period, the
Bonds shall be subject to mandatory tender for purchase in accordance with the
terms hereof on the Business Day immediately following each Calculation Period,
each at a price equal to the Purchase Price.

            3. Notice of mandatory tender for purchase upon a Change in the
Interest Rate Mode shall be in substantially the form attached hereto as, or
contain substantially the information contained in, Exhibit A hereto.

            4. Any such notice of mandatory tender for purchase required by this
Section 5.04 shall be given by the Trustee, in the name of the Authority, or the
Trustee shall cause the Registrar and Paying Agent to give such notice (with
copies thereof to be given to the Remarketing Agent, the Registrar and Paying
Agent, the Company, and in the case of Auction Rate Bonds, the Auction Agent and
the

                                      V-3


Authority) by first-class mail to the Holders of the Bonds subject to purchase
at their addresses shown on the books of registry.

            5. Bonds held by or for the account of the Company or the issuer of
a Support Facility are not subject to mandatory tender for purchase pursuant to
this Section 5.04.

            SECTION 5.05. Extraordinary Optional Redemption. During any Term
Rate Period or Fixed Rate Period, the Bonds are also subject to redemption prior
to maturity in whole at any time at the option of the Authority, exercised at
the direction of the Company, upon notice given as provided in the Indenture, at
a redemption price equal to the principal amount thereof, together with unpaid
interest accrued thereon to the date fixed for redemption, in any of the
following events:

                  (i) All or substantially all of the Project shall have been
            damaged or destroyed or title to, or the temporary use of, all or a
            substantial portion of the Project shall have been taken under the
            exercise of the power of eminent domain by any governmental
            authority, or person, firm or corporation acting under governmental
            authority, as in each case renders the Project unsatisfactory to the
            Company for its intended use;

                  (ii) Unreasonable burdens or excessive liabilities shall have
            been imposed upon the Authority or the Company with respect to all
            or substantially all of the Project, including without limitation
            the imposition of federal, state or other ad valorem property,
            income or other taxes other than ad valorem taxes in effect on the
            date of original issuance of the Bonds levied upon privately owned
            property used for the same general purpose as the Project; or

                  (iii) Any court or regulatory or administrative body shall
            enter or adopt, or fail to enter or adopt, a judgment, order,
            approval, decree, rule or regulation, as a result of which the
            Company elects to cease operation of all or substantially all of the
            Project.

            SECTION 5.06. Special Tax Redemption Provisions. 1. During any
Semi-annual Rate Period, Term Rate Period or Fixed Rate Period, the Bonds shall
be subject to mandatory redemption as a whole (provided, however, that the Bonds
shall be redeemed in part if the Company obtains an opinion of Bond Counsel to
the effect that, by redeeming such portion of the Bonds, the interest on the
remaining Bonds will not be included for Federal income tax purposes in the
gross income of any owner of the Bonds (other than an owner who is a
"substantial user" of the Project or a "related person" within the meaning of
Section 147(a)(1) of the Code)) at any time at a redemption price equal to 100%
of the principal amount thereof, together with unpaid interest accrued thereon
to the redemption date, if, in a published or private ruling of the Internal
Revenue Service or in a final, nonappealable judicial decision by a court of
competent jurisdiction (provided that the Company has been afforded the
opportunity to participate at its own expense in the proceeding resulting in
such ruling or in the litigation resulting in such decision, as the case may
be), it is determined that, as a result of a failure by the Company to observe
any covenant, agreement or representation in the Participation Agreement or the
Tax Regulatory Agreement, interest on the Bonds is included for Federal income
tax purposes in the gross income (as defined in Section 61 of the Code) of any
owner of a Bond (other than a "substantial user" of the Project or a "related
person" within the meaning


                                      V-4


of Section 147(a)(1) of the Code), and, in such event, the Bonds shall be
subject to such mandatory redemption not more than one hundred eighty (180) days
after receipt by the Trustee of notice of such published or private ruling or
judicial decision and a demand for redemption of the Bonds. The occurrence of an
event requiring the redemption of the Bonds under this paragraph does not
constitute an event of default under any Note or under the Indenture and the
sole obligation in such event shall be for the Company to prepay the Note in an
amount sufficient to redeem the Bonds to the extent required by this paragraph.

            2. During any Semi-annual Rate Period, Term Rate Period or Fixed
Rate Period, the Bonds may be redeemed in whole or in part at any time at a
redemption price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest thereon to the redemption date, if the Company has
determined, on the basis of the advice of Bond Counsel that, as a result of any
action taken or expected to be taken, or failure to take action, a reasonable
risk exists that interest on the bonds will not be excludable from gross income
for federal tax purposes. Such conclusion and certification shall be evidenced
by delivery to the Trustee of a written certificate of an Authorized Company
Representative to the effect that the Company has reached such conclusion,
together with a copy of such advice of Bond Counsel. The occurrence of an event
permitting the redemption of the Bonds under this paragraph does not constitute
an event of default under any Note or under the Indenture and the sole
obligation in such event shall be for the Company to prepay the Note in an
amount sufficient to redeem the Bonds to the extent required by this paragraph.

            3. During any Semi-annual Rate Period, Term Rate Period or Fixed
Rate Period, the Bonds will also be subject to mandatory redemption at a
redemption price equal to one hundred three percent (103%) of the principal
amount thereof plus unpaid interest accrued thereon to the redemption date if
the Company reasonably concludes and certifies to the Trustee that the business,
properties, condition (financial or otherwise), operations or business prospects
of the Company will be materially and adversely affected unless the Company
takes or omits to take a specified action and that the Company has been advised
in writing by Bond Counsel that the specified action or omission would cause the
use of the Project to be such that, pursuant to Section 150 of the Code, the
Company would not be entitled to deduct the interest on the Bonds for purposes
of determining the Company's Federal taxable income, for a period of not less
than ninety (90) consecutive or nonconsecutive days during a twelve-month
period. Such conclusion and certification shall be evidenced by delivery to the
Trustee of a written certificate of an Authorized Company Representative to the
effect that the Company has reached such conclusion, together with a certified
copy of a resolution of the Board of Trustees of the Company authorizing such
certificate and a copy of such advice of Bond Counsel. In the event that the
Bonds become subject to redemption as provided in this paragraph, the Bonds will
be redeemed in whole unless redemption of a portion of the Bonds outstanding
would, in the opinion of Bond Counsel, have the result that interest payable on
the Bonds remaining outstanding after such redemption would be deductible for
purposes of determining the Federal taxable income of the Company, and, in such
event, the Bonds to be redeemed shall be selected (in the principal amount of
$5,000 or any integral multiple thereof) from time to time at random in such
manner as the Trustee shall determine in accordance with the Indenture, in such
amount as is necessary to accomplish that result. The occurrence of an event
requiring the redemption of the Bonds under this paragraph does not constitute
an event of default under any Note or under the Indenture and the sole


                                      V-5


obligation in such event shall be for the Company to prepay the Note in an
amount sufficient to redeem the Bonds to the extent required by this paragraph.

            SECTION 5.07. Redemption at Demand of the State. In accordance with
the provisions of Section 1864 of the Act, the State of New York may, upon
furnishing sufficient funds therefor, require the Authority to redeem prior to
maturity, as a whole, the Bonds on any Interest Payment Date not less than
twenty years after the Closing Date. Any such redemption shall be at a
redemption price equal to the optional redemption price, if any, applicable on
such date set forth in Section 5.01 or if no such optional redemption price is
applicable at a redemption price of 105% of the principal amount thereof, in
either case, together with accrued and unpaid interest, if any, to the date
fixed for redemption, all in the manner provided in this Article V. The
Authority shall deposit any such funds received by it with the Trustee. During
any period during which no Direct-Pay Credit Facility is in effect, the Trustee
shall deposit any such funds in the Bond Fund and, upon notice published in the
manner provided in Section 1864 of the Act, shall apply such funds to the
redemption of the Bonds. During any period in which a Direct-Pay Credit Facility
is in effect, the Trustee shall deposit any such funds received by it in a
segregated sub-account in the Bond Fund, and upon notice published in the manner
provided in Section 1864 of the Act, shall draw monies under the related Credit
Facility pursuant to Article IX and apply such payment to the redemption of the
Bonds at the price and in the manner specified in the preceding sentence. Upon
the application of such Credit Facility payments, the Trustee shall pay the
funds furnished by the State to the issuer of the Credit Facility with
instructions to apply such funds to the reimbursement of the issuer of the
Credit Facility for such Credit Facility payment. Upon such redemption and
notwithstanding anything to the contrary in this Indenture, the Trustee shall
assign the Note relating to the Bonds to or as directed by the Authority.

            SECTION 5.08. Mandatory Tender for Purchase Upon Expiration of any
Support Facility or Upon Delivery of an Alternate Support Facility. 1. Except as
otherwise set forth in the last sentence of this subsection 1, on the second
Business Day next preceding the date of expiration of any Support Facility, the
Bonds shall be subject to mandatory purchase at the Purchase Price, unless on or
prior to the 35th day prior to such date of expiration the Company on behalf of
the Authority has furnished to the Trustee an extension of such Support
Facility. The Bonds shall also be subject to mandatory purchase at the Purchase
Price, on the date there is delivered an Alternate Support Facility meeting the
requirements of Section 6.02. No tender for purchase of any Bonds shall be
required pursuant to this Section 5.08 during an Auction Rate Period or a Fixed
Rate Period.

            2. Notice of the mandatory tender for purchase pursuant to this
Section 5.08 shall be given on or prior to the 30th day before the expiration
date of the expiring Support Facility or on or prior to the 30th day before the
delivery of any Alternate Support Facility, as the case may be, by the Trustee
in the name of the Authority (with copies thereof given to the Authority, the
Remarketing Agent, the issuer of a Support Facility, the Company and the
Registrar and Paying Agent) by first-class mail to the Holders of the Bonds
subject to mandatory tender for purchase at their addresses shown on the books
of registry. Such notice shall be in substantially the form attached hereto as,
or contain substantially the information contained in, Exhibit F hereto.


                                      V-6


            3. Bonds held by or for the account of the Company or the issuer of
a Liquidity Facility are not subject to mandatory tender for purchase pursuant
to this Section 5.08.

            SECTION 5.09. Mandatory Tender Upon Occurrence of any Terminating
Event. 1. Except as otherwise set forth in the last sentence of this subsection
1, upon the occurrence of any Terminating Event, the Bonds shall be subject to
mandatory tender for purchase at the Purchase Price on a Business Day selected
by the Trustee; provided, however, that (i) such mandatory tender shall not
occur later than the 5th day after receipt of notice of the Terminating Event by
the Trustee and (ii) such mandatory tender date shall be a Business Day. The
Bonds will not be subject to mandatory tender for purchase pursuant to this
Section 5.09 during any Auction Rate Period or any Fixed Rate Period.

            2. Notice of the mandatory tender for purchase required by this
Section 5.09 shall be in substantially the form attached hereto as, or contain
substantially the information contained in, Exhibit F hereto and shall be given
to the Holders of the Bonds subject to mandatory tender for purchase at their
addresses shown on the books of registry on or before the first Business Day
after receipt of notice of a Terminating Event from the issuer of the Support
Facility by the Trustee, in the name of the Authority, or the Trustee shall
cause the Registrar and Paying Agent to give such notice, by first-class mail to
the Holders of the Bonds subject to purchase at their address shown on the books
of registry (with copies thereof given to the Authority, the Remarketing Agent,
the Company and the Registrar and Paying Agent).

            3. Bonds held by or for the account of the Company or the issuer of
a Liquidity Facility are not subject to mandatory tender for purchase pursuant
to this Section 5.09.

            SECTION 5.10. General Provisions Applicable to Mandatory and
Optional Tenders for Purchase of Bonds. 1. If interest has been paid on the
Bonds, or an amount sufficient to pay interest thereon has been deposited in the
Bond Fund, or an amount sufficient to pay accrued interest thereon, if any, has
been set aside in the Bond Purchase Fund held under the Bond Purchase Trust
Agreement, and the Purchase Price shall be available in the Bond Purchase Fund
for payment of Bonds subject to tender for purchase pursuant to Section 5.03,
5.04, 5.08 or 5.09, and if any Holder fails to deliver or does not properly
deliver the Bonds to the Registrar and Paying Agent for which a Notice of
Election to Tender has been properly filed or which are subject to mandatory
tender for purchase on the purchase date therefor, such Bonds shall nevertheless
be deemed tendered and purchased on the date established for the purchase
thereof, no interest shall accrue on such Bonds from and after the date of
purchase and such former Holders shall have no rights hereunder as the
registered owners of such Bonds, except the right to receive the Purchase Price
of and interest to the purchase date, if any, on such Bonds upon delivery
thereof to the Registrar and Paying Agent in accordance with the provisions
hereof. The purchaser of any such Bonds remarketed by the Remarketing Agent, or
the issuer of any Support Facility, to the extent Bonds are purchased with the
proceeds of a draw on, or borrowing or payment under, the Support Facility,
shall be treated as the registered owner thereof for all purposes of the
Indenture. The payment of Bonds pursuant to Section 5.03 shall be subject to
delivery of such Bonds duly endorsed in blank for transfer or accompanied by an
instrument of transfer thereof in form satisfactory to the Registrar and Paying
Agent executed in blank for transfer at the principal office of the Registrar
and Paying Agent at or prior to 10:00 a.m. (11:30 a.m. for Bonds bearing
interest at the Weekly Rate and 12:00 noon, for Bonds bearing interest at the
Daily Rate) (New York City time), on a specified purchase date. The Registrar
and Paying Agent


                                      V-7


may refuse to make payment with respect to any Bonds tendered for purchase
pursuant to Sections 5.03, 5.04, 5.08 or 5.09 not endorsed in blank or for which
an instrument of transfer satisfactory to the Registrar and Paying Agent has not
been provided.

            2. The Purchase Price of Bonds subject to tender for purchase
pursuant to Section 5.03, 5.04, 5.08 or 5.09 in an aggregate principal amount of
at least one million dollars ($1,000,000) shall be payable in immediately
available funds or by wire transfer upon written notice from the Holder thereof
containing the wire transfer address (which shall be in the continental United
States) to which such Holder wishes to have such wire directed, if such written
notice is received by the Registrar and Paying Agent not less than five days
prior to the related purchase date.

            3. Bonds subject to mandatory tender for purchase pursuant to
Sections 5.08 or 5.09 shall not be remarketed unless and until an Alternate
Support Facility meeting the requirements of Section 6.02 of the Indenture is in
full force and effect; provided, however, that Bonds may be remarketed and no
such Alternate Support Facility is required to be in effect if, at the time the
Bonds are sought to be remarketed, the Bonds bear interest at an Auction Rate or
a Fixed Rate.

            4. In the event Bonds tendered for purchase pursuant to Section 5.03
or 5.04 shall be paid from a drawing under a Liquidity Facility, such Bonds
shall not be remarketed unless and until the Trustee or the Registrar and Paying
Agent has been notified by the Liquidity Facility Issuer and, upon receipt of
such notice, the Trustee or the Registrar and Paying Agent has notified the
Remarketing Agent that the amount available for a drawing under such Liquidity
Facility has been restored.

            SECTION 5.11. Selection of Bonds to be Redeemed. A redemption of
Bonds shall be a redemption of the whole or of any part of the Bonds from any
funds available for that purpose in a principal amount equal to an authorized
denomination (so long as the principal amount not redeemed is an authorized
denomination). If less than all Bonds shall be redeemed, the particular Bonds to
be redeemed shall be chosen by the Trustee, or the Trustee shall direct the
Registrar and Paying Agent to so choose, as hereinafter provided. If less than
all the Bonds shall be called for redemption under any provision of this
Indenture permitting such partial redemption, the particular Bonds or portions
of Bonds to be redeemed shall be selected (a) first, from Bonds held or owned by
or for the issuer of a Support Facility pursuant to any Support Facility, (b)
second, from Bonds for which the Registrar and Paying Agent has received, prior
to such selection, a Notice of Election to Tender requiring the Registrar and
Paying Agent to purchase such Bonds on the date on which the Bonds being
selected are to be redeemed and (c) third, from all other Bonds then
Outstanding, by lot or on a pro rata basis by the Trustee or, upon direction of
the Trustee, the Registrar and Paying Agent, in such manner as the Trustee or
Registrar and Paying Agent in its discretion may deem proper; provided, however,
that the portion of any Bond to be redeemed shall be in the principal amount of
$100,000 or any integral multiple thereof during a Commercial Paper Rate Period,
a Daily Rate Period, a Weekly Rate Period or a Monthly Rate Period, $50,000 or
any integral multiple thereof during an Auction Rate Period, or $5,000 or any
integral multiple thereof at any other time and that, in selecting Bonds for
redemption, the Trustee or Registrar and Paying Agent shall treat each Bond as
representing that number of Bonds which is obtained by dividing the principal
amount of such registered Bond in excess of $100,000 by $100,000 during a
Commercial Paper Rate Period, a Daily Rate Period, a Weekly Rate Period or a
Monthly Rate Period, $50,000 during an Auction Rate Period, and $5,000 at any
other time


                                      V-8


(such amounts being hereinafter referred to as the "applicable units of
principal amount"). If it is determined that one or more, but not all of the
$100,000, $50,000 or $5,000 units of principal amount represented by any such
Bond is to be called for redemption, then upon notice of intention to redeem
such $100,000, $50,000 or $5,000 unit or units, the Holders of such Bonds shall
forthwith surrender such Bonds to the Registrar and Paying Agent for (1) payment
of the redemption price (including the redemption premium, if any, and accrued
interest to the date fixed for redemption) of the $100,000, $50,000 or $5,000
unit or units of principal amount called for redemption and (2) exchange for a
new Bond or Bonds of the aggregate principal amount of the unredeemed balance of
the principal of such Bonds. If the Holders of any such Bond of a denomination
greater than $100,000, $50,000 or $5,000 shall fail to present such Bond to the
Registrar and Paying Agent, for payment and exchange as aforesaid, such Bond
shall, nevertheless, become due and payable on the date fixed for redemption to
the extent of the $100,000, $50,000 or $5,000 unit or units of principal amount
called for redemption (and to that extent only).

            SECTION 5.12. Notice of Redemption. 1. Notice of redemption shall be
given by the Trustee by mailing a copy of the redemption notice by first-class
mail at least 30 days prior to the date fixed for redemption to the Holders of
the Bonds to be redeemed at the addresses shown on the registration books
maintained by the Registrar and Paying Agent. Any redemption may be conditioned
on the receipt of moneys by the Registrar and Paying Agent sufficient to pay the
redemption price on the Redemption Date of Bonds called for redemption, if the
notice of redemption so states.

            2. The Registrar and Paying Agent shall not be required to transfer
or exchange Bonds during any period beginning at the opening of business fifteen
(15) days before the day of mailing of a notice of redemption and ending at the
close of business on the day fixed for redemption; provided, however, that the
foregoing shall not apply during a Daily Rate Period, a Weekly Rate Period, a
Commercial Paper Rate Period or an Auction Rate Period.

            3. Each notice of redemption shall state: (i) the full title of the
Bonds, the redemption date, the place of redemption and the redemption price
payable upon such redemption; (ii) that the interest on the Bonds, or on the
principal amount thereof to be redeemed, shall cease to accrue from and after
such redemption date and (iii) that on said date there will become due and
payable on the Bonds the principal amount thereof to be redeemed and the
interest accrued on such principal amount to the redemption date, if any, and
the premium, if any, thereon. Each notice of redemption mailed to the Holder of
the Bonds shall, if less than the entire principal sum thereof is to be
redeemed, also state the principal amount thereof and the distinctive numbers of
the Bonds to be redeemed and that such Bonds must be surrendered to the Trustee
in exchange for the payment of the principal amount thereof to be redeemed and
the issuance of a new Bond equaling in principal amount that portion of the
principal sum not to be redeemed of the Bonds to be surrendered. The failure to
give notice to any Holder of a Bond or any defects in such notice shall not
affect the proceedings for the redemption of the Bonds for which notice has been
properly given.

            SECTION 5.13. Bonds purchased for account of Liquidity Facility
Issuer. Bonds subject to mandatory purchase pursuant to Section 5.03, 5.04, 5.08
or 5.09 shall be deemed to be purchased by the Company except to the extent the
Liquidity Facility expressly provides that the Bonds are to be purchased by the
issuer of the Liquidity Facility in which event such Bonds shall be deemed to be
purchased by the issuer of the Liquidity Facility in a principal amount equal to
the amount of a draw on,


                                      V-9


or borrowing or payment under, the Liquidity Facility for the payment of Bonds
subject to purchase, upon the deposit with the Registrar and Paying Agent of the
proceeds of such draw on, or borrowing or payment under, the Liquidity Facility
in an amount equal to the principal of such Bonds plus accrued interest thereon
to the purchase date, and such Bonds shall not be deemed paid and shall remain
outstanding hereunder until the issuer of the Liquidity Facility has been
reimbursed for such draws on, or borrowings or payments under, the Liquidity
Facility to pay such principal and interest. Unless the issuer of any Liquidity
Facility shall otherwise direct, any Bonds purchased by the issuer of the
Liquidity Facility shall be immediately registered in the name of the Company
except to the extent the Liquidity Facility expressly provides that the Bonds
are to be purchased by the issuer of the Liquidity Facility in which event such
Bonds shall be registered in the name of the issuer of the Liquidity Facility as
a Holder and the issuer of the Liquidity Facility shall have all rights of a
Holder of Bonds under this Indenture.

            SECTION 5.14. Effect of Redemption. If the Bonds have been duly
called for redemption and notice of the redemption thereof has been duly given
or provided for as hereinbefore provided and if monies for the payment of the
Bonds (or of the principal amount thereof to be redeemed) and the interest to
accrue to the redemption date on the Bonds (or of the principal amount thereof
to be redeemed), if any, and the premium, if any, thereon are held for the
purpose of such payment by the Trustee, then the Bonds (or the principal amount
thereof to be redeemed) shall on the redemption date designated in such notice,
become due and payable and interest on the Bonds (or the principal amount
thereof to be redeemed) so called for redemption shall cease to accrue from such
date and the Holder thereof shall thereafter have no rights hereunder as the
Holder of such Bonds (or the principal amount thereof to be redeemed) except to
receive the principal amount thereof and premium (if any) thereon and interest
to the redemption date.

            SECTION 5.15. Cancellation of Redeemed Bonds. Any Bonds surrendered
or redeemed pursuant to the provisions of this Article shall be cancelled by the
Registrar and Paying Agent.


                                      V-10


                                   ARTICLE VI

                                SUPPORT FACILITY

            SECTION 6.01. Support Facility - General. (1) The Company has
obtained the Initial Support Facility. Pursuant to the Participation Agreement,
the Company has agreed not to request that the interest rate mode applicable to
the Bonds be adjusted to an Adjustable Rate other than an Auction Rate unless
there shall be in effect, prior to the applicable Change in the Interest Rate
Mode, one or more Support Facilities which (i) meet the requirements of this
Article VI and (ii) permit the Bonds to be rated at least "A" by S&P, "A" by
Moody's or "A" by Fitch or its equivalent by any nationally recognized rating
agency. The Company has further agreed to maintain a Liquidity Facility meeting
the requirements of the Participation Agreement with respect to the Bonds at all
times, except with respect to Bonds bearing interest at an Auction Rate or a
Fixed Rate. A Liquidity Facility also must be in effect prior to (i) any Change
in the Interest Rate Mode from an Auction Rate to another Adjustable Rate, and
(ii) any Change in the Interest Rate Mode from a Fixed Rate to an Adjustable
Rate (other than a Change in the Interest Rate Mode to an Auction Rate Period).
The Trustee shall be furnished with a certified copy of any Support Facility
obtained pursuant to this Section 6.01.

            Any Support Facility Issuer not located in New York State shall
provide the Trustee with a list of holidays on which it is closed through the
next succeeding January 1 at the beginning of the term of such Support Facility
and by January 1 of each year thereafter.

            (2) Notwithstanding any other provision in this Indenture, upon the
occurrence of an Event of Default and so long as a Credit Facility is in full
force and effect and the Credit Facility Issuer is not in default under the
Credit Facility, then, in all such events, the Credit Facility Issuer shall be
deemed to be the sole Holder of the Bonds the payment of which such Credit
Facility supports when the approval, consent, direction or any other action of
the Holders of such Bonds is required or may be exercised under this Indenture,
including, without limitation, (i) the right to control and direct the
declaration of principal of and accrued interest on all the Bonds then
Outstanding to be due and payable immediately pursuant to Section 12.03, and
(ii) the right to rescind and annul any such declaration in clause (i) of this
paragraph and its consequences pursuant to Section 12.03.

            (3) The Trustee shall not make a draw or borrowing under the Initial
Support Facility to pay principal of, premium, if any, or interest on Bonds or
to pay the Purchase Price of Bonds that bear interest at an Auction Rate with a
Standard Auction Period that exceeds one month in duration, a Commercial Paper
Rate, a Semi-annual Rate, a Term Rate or a Fixed Rate. The Trustee shall not
make a draw or borrowing under a Support Facility to pay the principal of,
premium, if any, or interest on Bonds that are held by or on behalf of the
Liquidity Facility Issuer or to pay the Purchase Price of Bonds that are held by
or on behalf of the Liquidity Facility Issuer.

            SECTION 6.02. Alternate Support Facility. (1) At any time, the
Authority may, at the request of the Company, provide for the delivery to the
Trustee of an Alternate Support Facility. The


                                      VI-1


termination date of such Alternate Support Facility shall be a date not earlier
than 364 days from its date of issuance, subject to earlier termination upon the
occurrence of (i) a Terminating Event or another event of default under the
related reimbursement agreement or other corresponding agreement relating to
such Alternate Support Facility, (ii) the issuance of a subsequent Alternate
Support Facility, (iii) payment in full of the Outstanding Bonds or (iv) a
Change in the Interest Rate Mode to an Auction Rate or a Fixed Rate. Any such
Alternate Support Facility shall specifically allow, in the case of the
occurrence of any event or events which under the terms of such Alternate
Support Facility or any agreement providing for the issuance thereof would cause
the termination or expiration of such Alternate Support Facility, for the
mandatory tender of Bonds pursuant to Section 5.09 with a draw on or borrowing
or payment under such Alternate Support Facility prior to such termination or
expiration. On or prior to the date of the delivery of an Alternate Support
Facility to the Trustee, the Company shall furnish to the Trustee on behalf of
the Authority (a) an opinion of Bond Counsel stating that the delivery of such
Alternate Support Facility to the Trustee is authorized under this Indenture and
complies with the terms hereof and (b) confirmation from S&P, if the Bonds are
then rated by S&P, from Moody's, if the Bonds are then rated by Moody's, from
Fitch, if the Bonds are then rated by Fitch, or another rating agency, if the
Bonds are then rated by such rating agency, to the effect that such rating
agency has reviewed the proposed Alternate Support Facility and that the
substitution of the proposed Alternate Support Facility for the Support Facility
will not, by itself, result in a reduction or withdrawal of its long or
short-term rating of the Bonds below the rating category of S&P, Moody's or
Fitch or such other rating agency, as the case may be, then in effect with
respect to the Bonds.

            (2) Nothing contained herein shall prevent the Authority, at the
request of the Company, from delivering an Alternate Support Facility in
substitution for a Support Facility which will result in a decline in the
short-term or long-term rating or both assigned to such Bonds by Moody's, S&P or
Fitch or such other rating agency as a result of the Alternate Support Facility;
provided, that (i) the opinion of Bond Counsel referred to in the preceding
paragraph is obtained; provided that such opinion shall also be to the effect
that delivery of such Alternate Support Facility will not adversely affect the
exclusion from gross income of interest on the Bonds for federal income tax
purposes and (ii) all Outstanding Bonds are subject to mandatory tender for
purchase pursuant to Section 5.08 (unless the Bonds bear an Auction Rate or a
Fixed Rate). The Authority, or the Company on behalf of the Authority, shall
deliver notice to the Trustee of the substitution of an Alternate Support
Facility which will result in a decline in the short-term or long-term ratings
assigned to the Bonds pursuant to this subsection 2 of Section 6.02 at least
forty-five (45) days before the date of substitution.

            SECTION 6.03. Trustee not Responsible for Enforcement of Support
Facility. The Trustee shall have no responsibility with respect to the
enforcement of any Support Facility obtained hereunder.


                                      VI-2


                                   ARTICLE VII

                      GENERAL TERMS AND PROVISIONS OF BONDS

            SECTION 7.01. Execution and Authentication of Bonds. The Bonds shall
be executed on behalf of the Authority by the manual or facsimile signature of
its Chair, Vice-Chair, President, Treasurer or any Vice President and shall be
sealed with the seal of the Authority, or in lieu thereof shall bear a
lithographed, engraved or otherwise reproduced facsimile of such seal attested
by the manual or facsimile signature of its Vice President, Treasurer, Secretary
or an Assistant Secretary.

            Bonds bearing the manual signature of the officer of the Authority
authorized to execute such Bonds in office on the date of such manual signing
thereof and Bonds bearing the facsimile signature of the officer of the
Authority authorized to execute such Bonds in office on the date of the
reproducing of such facsimile signature on such Bonds, shall be valid and
binding obligations in accordance with their terms, notwithstanding that before
the delivery thereof and payment therefor the person whose signature appears
thereon shall have ceased to be such officer.

            Only Bonds having endorsed thereon a certificate of authentication
substantially in the form set forth in Article XVI, duly executed by the Trustee
shall be entitled to any right or benefit under this Indenture. No Bonds shall
be valid or obligatory for any purpose unless and until such certificate of
authentication shall have been duly executed by the Trustee, and such
certificate of the Trustee upon a Bond shall be conclusive evidence that such
Bond has been duly authenticated and delivered under this Indenture and that the
Holder thereof is entitled to the benefits of this Indenture. The Trustee's
certificate of authentication on any Bond shall be deemed to have been duly
executed if signed by an authorized officer of the Trustee.

            SECTION 7.02. Books of Registry. The Registrar and Paying Agent
shall keep or cause to be kept at its principal office books (herein referred to
as the "books of registry" or "registration books") for the registration and
transfer of the Bonds. Upon presentation at its principal office for such
purpose the Registrar and Paying Agent, under such reasonable regulations as it
may prescribe, shall register or transfer, or cause to be registered or
transferred, on said books of registry, the Bonds as hereinafter set forth. The
books of registry shall at all times during business hours be open for
inspection by the Authority, the Company and the Trustee or their duly
authorized agents or representatives.

            SECTION 7.03. Transfer, Registration and Exchange of Bonds. The
transfer of the Bonds may be registered only upon the books of registry required
to be kept pursuant to Section 7.02 upon surrender thereof to the Registrar and
Paying Agent, together with an assignment duly executed by the Holder thereof or
his or her duly authorized agent and accompanied by a guarantee of signature,
each in such form as shall be satisfactory to the Registrar and Paying Agent.
Upon any such registration of transfer the Authority shall execute and the
Trustee shall authenticate and deliver in exchange for such Bonds a new Bond or
Bonds registered in the name of the transferee or transferees for a like
aggregate principal amount, of any denomination or denominations authorized by
this Indenture. No transfer of any Bond shall be effective until entered on the
books of registry.


                                     VII-1


            Any Bond surrendered in any such registration of transfer shall
forthwith be cancelled by the Trustee. Any Bonds registered and transferred to a
new Holder pursuant to this Section shall be delivered to the Holder at the
principal office of the Registrar and Paying Agent or sent by first-class mail
to the Holder at his or her request, risk and expense.

            Bonds, upon surrender thereof at the principal corporate trust
office of the Registrar and Paying Agent, together with an assignment duly
executed by the Holder or his or her authorized agent and accompanied by a
guarantee of signature, each in such form as shall be satisfactory to the
Registrar and Paying Agent, may, at the option of the Holder thereof, be
exchanged for an equal aggregate principal amount of Bonds of any denomination
or denominations authorized by this Indenture and in the same form as the Bonds
surrendered for exchange. All Bonds so surrendered pursuant to this Section
shall be cancelled by the Trustee.

            Any Bonds to be delivered to the Holder upon any such exchange shall
be delivered to the Holder at the principal office of the Registrar and Paying
Agent or sent by first-class mail to the Holder thereof at his or her request,
risk and expense.

            Any taxes or other governmental charges required to be paid with
respect to the registration of transfer or exchange of the Bonds shall be paid
by the Holder requesting registration of such transfer or exchange, as a
condition precedent to the exercise of such privilege. The Authority or the
Registrar and Paying Agent, or both, may charge the Company for every
registration of transfer or exchange sufficient to reimburse it for any and all
costs required to be paid in respect thereof.

            SECTION 7.04. Mutilated, Lost, Stolen, or Destroyed Bonds. In the
event any Bond shall be lost, stolen, destroyed, wholly or in part, or so
defaced as to impair its value to the Holder, the Trustee shall, upon compliance
with the terms provided by law, authenticate and deliver a new Bond of like date
and tenor in exchange or replacement therefor against delivery for cancellation
of such mutilated Bond, or in lieu of and in replacement of a destroyed, stolen
or lost Bond, and upon payment by the Holder of the reasonable expenses of the
Registrar and Paying Agent and the Authority and the reasonable charges of the
Trustee and Registrar and Paying Agent in connection therewith and, in the event
that the Bond is destroyed, stolen or lost, the Holder's filing with the
Registrar and Paying Agent of evidence satisfactory to it that the Bond was
destroyed, stolen or lost, of the Holder's ownership thereof, and furnishing the
Registrar and Paying Agent and the Authority such security and indemnity as is
satisfactory to them. Any replacement Bond issued under the provisions of this
Section in exchange or substitution for the defaced, mutilated or partly
destroyed Bond or in substitution for the allegedly lost, stolen or wholly
destroyed Bond shall be entitled to the identical benefits under this Indenture
as was the original Bond in lieu of which such replacement Bond is issued. Each
such replacement Bond shall be prepared in substantially the same manner as the
original.

            Notwithstanding the foregoing provisions of this Section, if the
lost, stolen, destroyed, defaced or mutilated Bond has matured or been called
for redemption and the date fixed for redemption thereof has arrived, at the
option of the Authority, payment of the amount due thereon may be made without
the issuance of any replacement Bond upon receipt of like evidence, indemnity,
security and payment of


                                     VII-2


expenses and the surrender for cancellation of the defaced or mutilated or
partly destroyed Bond and upon such other conditions as the Trustee may
prescribe.

            Except as provided in this sentence and as permitted in the
following paragraph, any replacement Bond shall be in the form of the Bond being
replaced, and be dated the date of its issuance and bear such number as shall be
assigned thereto by the Registrar and Paying Agent, with such subseries
designation, if any, as may be deemed appropriate by the Registrar and Paying
Agent. The Registrar and Paying Agent shall make an appropriate notation in the
books of registry that a replacement Bond has been issued in exchange or
substitution for the defaced, mutilated, lost, stolen, or wholly or partly
destroyed Bond.

            There may be imprinted or affixed on the face and the panel portion
of any duplicate Bond a mark to identify such Bond as a replacement Bond.

            Prior to arranging for the preparation or printing of a replacement
Bond, the Trustee and the Registrar and Paying Agent may require a deposit by
the Holder to secure the Trustee, the Registrar and Paying Agent and the
Authority for costs and expenses incurred by them in the preparation, printing,
execution and issuance of such replacement Bond.

            Any amount of such deposit received by the Registrar and Paying
Agent in excess of the amount required to reimburse the Registrar and Paying
Agent, the Trustee or the Authority for costs and expenses shall be returned to
the party which made the deposit.

            Any defaced, mutilated or partly destroyed Bond surrendered to the
Registrar and Paying Agent in substitution for a new Bond pursuant to this
Section shall be cancelled by the Trustee.

            SECTION 7.05. Temporary Bonds. Pending the preparation of definitive
Bonds, interim receipts or certificates (herein referred to as "temporary
Bonds") may initially be issued, exchangeable for definitive Bonds when the
latter are ready for delivery. Such temporary Bonds may be printed, lithographed
or typewritten, shall be of such denomination or denominations as may be
determined by the Authority and may contain such references to any of the
provisions of this Indenture as may be appropriate. If temporary Bonds are
issued, the Authority will cause to be furnished duly executed definitive Bonds
without delay, and thereupon the temporary Bonds may be surrendered for
cancellation at the principal office of the Trustee in exchange for definitive
Bonds and without charge for such exchange, and the Registrar and Paying Agent
shall deliver in exchange for such temporary Bonds so surrendered an equal
aggregate principal amount of definitive duly executed Bonds, of authorized
denominations. Until so exchanged, the temporary Bonds shall be entitled to the
same benefits under this Indenture as definitive Bonds.

            Nothing in this Indenture shall prevent the Authority from
delivering, and the Authority is hereby expressly permitted to deliver, Auction
Rate Bonds in typewritten form to the Securities Depository as registered owner
thereof.


                                     VII-3


            SECTION 7.06. Disposition of Bonds. Any Bond surrendered to the
Registrar and Paying Agent for payment shall be cancelled upon such payment by
the Trustee. The Trustee shall dispose of any cancelled Bond which has been paid
and which bears any date two (2) years prior to the date of disposition in
accordance with the Trustee's procedures in effect for the disposition of
cancelled securities as of the date of such disposition. When the Trustee shall
dispose of any Bond, it shall deliver a certificate of such disposition to the
Authority and the Company.


                                     VII-4


                                  ARTICLE VIII

                        ESTABLISHMENT OF THE PROJECT FUND

            SECTION 8.01. Project Fund. 1. There is hereby created and
established a special trust fund to be designated "Consolidated Edison Company
of New York, Inc. Series 2001A Project Fund" (hereinafter referred to as the
"Project Fund") to be held by the Trustee. All income or gain on monies
deposited in the Project Fund shall be retained therein.

            2. There shall be deposited into the Project Fund the proceeds of
the Bonds issued hereunder.

            3. The monies on deposit from time to time in the Project Fund shall
be held under and subject to this Indenture, but shall not be subject to the
liens, pledges, charges, assignments and trusts created hereby for the security
and benefit of the Holders of the Bonds and shall not be available for the
payment of Bonds within the meaning of the Indenture, and shall be used and
applied solely for the purpose of refunding the Prior Bonds in accordance with
the remaining provisions of this Section.

            4. The Trustee is authorized and directed to make payments from the
Project Fund to pay the redemption price of the Prior Bonds or costs incurred in
connection therewith, upon receipt of a letter or letters signed by an
Authorized Company Representative so directing.


                                     VIII-1


                                   ARTICLE IX

                     CREATION OF SPECIAL FUNDS AND ACCOUNTS;
                     APPLICATION AND INVESTMENT OF REVENUES

            SECTION 9.01. Creation of Funds and Accounts. (a) The following fund
and the following accounts therein, which shall be a special fund and accounts
to be held by the Trustee, are hereby created and designated as set forth below:

            Bond Fund

                  (a)   Interest Account
                  (b)   Principal Account
                  (c)   Redemption Account
                  (d)   Acceleration Account

            The designation of each fund and account set forth above shall
include the term "Consolidated Edison Company of New York, Inc. Series 2001A,"
which term shall precede the designation as set forth above. Such fund and each
such account is, however, sometimes referred to herein as set forth above.

            (b) The Bond Fund and the accounts therein shall be held in the
custody of the Trustee. All monies required to be deposited with or paid to the
Trustee under any provision of this Indenture shall be held by the Trustee in
trust and applied only in accordance with the provisions of this Indenture and
shall be trust funds for the purposes specified in this Indenture.

            SECTION 9.02. Deposit of Note Payments. The Trustee shall deposit
the Note Payments or other money set forth below in the Bond Fund and credit the
Accounts set forth below in the order set forth below:

            The Company shall pursuant to Sections 4.02, 4.03 and 4.04 of the
Participation Agreement deposit, or cause to be deposited, the following in
immediately available funds with the Trustee as the Note Payments become due or
are declared to be immediately due and payable under the Participation Agreement
and the Note unless sufficient amounts are then available in such Accounts to
make the required payments therefrom:

            (a)(i) During an Auction Rate Period, no later than 12:00 noon (New
York City time) on the Business Day next preceding each Interest Payment Date,
into the Bond Fund for credit to the Interest Account an aggregate amount of
funds available on the next Business Day in The City of New York equal to the
aggregate amount required for the payment of the interest payable on the
Outstanding Auction Rate Bonds, on such Interest Payment Date. In the event such
deposit is not made in accordance with this paragraph (i), the Trustee shall
promptly send a certificate to the Auction Agent and to the registered owners of
each series of Bonds by telex, telecopy or similar means, in substantially the
form prescribed by the Auction Agency Agreement. If such deposit is made by the
Company within 3 Business


                                      IX-1


Days of the Business Day immediately preceding the Interest Payment Date, the
Trustee shall promptly send a certificate to the Auction Agent and to the
registered owners of each series of Bonds by telex, telecopy or similar means in
substantially the form prescribed by the Auction Agency Agreement.

            (ii) No later than 12:00 noon (New York City time) on each Interest
Payment Date, other than during an Auction Rate Period, into the Bond Fund for
credit to the Interest Account the amount required for the payment of the
interest payable on the Outstanding Bonds on such Interest Payment Date.

            In the event a Direct-Pay Credit Facility is in place, amounts
required to be deposited in the Bond Fund for credit to the Interest Account
shall be derived solely from the following sources of funds in the priority
indicated and shall be so deposited and credited to the Interest Account on the
date indicated:

                  (I) First, on each Interest Payment Date, the proceeds of a
      draw, borrowing or payment under the Direct-Pay Credit Facility in respect
      of interest payable on such Interest Payment Date; and

                  (II) Second, on each Interest Payment Date, any other monies
      provided by the Company pursuant to the preceding paragraph for such
      purpose.

            The Trustee shall deposit the proceeds of a draw, borrowing or
payment under a Direct-Pay Credit Facility in a segregated sub-account of the
Interest Account in the Bond Fund and such proceeds shall not be commingled with
moneys in any other Account or sub-account or derived from any other source.

            (b)(i) During an Auction Rate Period, no later than 12:00 noon (New
York City time) on the second Business Day next preceding each Auction Date,
into the Bond Fund for credit to the Redemption Account an aggregate amount of
funds available on the next Business Day in The City of New York equal to the
aggregate amount required to pay the principal of and premium, if any, and
accrued interest on any Auction Rate Bonds, called for redemption; provided,
however if the scheduled date of such deposit to the Redemption Account by the
Company is not a Business Day then the date for such deposit to the Redemption
Account by the Company shall be the first Business Day immediately preceding the
scheduled date of such deposit to the Redemption Account by the Company. In the
event such deposit is not made in accordance with this paragraph (i), the
Trustee shall promptly send a certificate to the Auction Agent by telex,
telecopy or similar means, substantially in the form required by the Auction
Agency Agreement. If such deposit is made by the Company within 3 Business Days
of the second Business Day immediately preceding the Auction Date the Trustee
shall promptly send a certificate to the Auction Agent by telex, telecopy or
similar means, substantially in the form required by the Auction Agency
Agreement.

            (ii) Other than during an Auction Rate Period, on the last Business
Day prior to the day on which any redemption is to occur or on the last Business
Day prior to the Stated Maturity, into the Bond Fund for credit to the
Redemption Account or the Principal Account, as appropriate, the amount required
to pay principal of and premium, if any, and accrued interest on any Bonds
called for redemption or at the Stated Maturity, the amount required to pay the
principal of the Bonds.


                                      IX-2


            In the event a Direct-Pay Credit Facility is in place, amounts
required to be deposited in the Bond Fund for credit to the Redemption Account
or the Principal Account, as appropriate, shall be derived solely from the
following sources of funds in the priority indicated and shall be so deposited
and credited in the Redemption Account or the Principal Account, as appropriate,
on the date indicated:

                  (I) First, on the date any redemption is scheduled to occur
      and on the Stated Maturity, the proceeds of a draw, borrowing or payment
      under the Direct-Pay Credit Facility in respect of the amounts described
      in the preceding paragraph; and

                  (II) Second, on the date any redemption is scheduled to occur
      and on the Stated Maturity, any other monies provided by the Company
      pursuant to the preceding paragraph for such purpose.

            The Trustee shall deposit the proceeds of a draw, borrowing or
payment under a Direct-Pay Credit Facility in a segregated sub-account of the
Redemption Account or Principal Account, as the case may be, in the Bond Fund
and such proceeds shall not be commingled with moneys in any other Account or
sub-account or derived from any other source.

            If other monies are received by the Trustee as advance payments of
Note Payments to be applied to the redemption of all or a portion of the Bonds,
such monies shall be deposited in the Bond Fund for credit to the Redemption
Account therein.

            (c) Immediately following the declaration of principal of and
accrued interest on the Bonds then Outstanding to be immediately due and payable
pursuant to Section 12.03, into the Bond Fund for credit to the Acceleration
Account, the amount required to pay principal of and accrued interest on such
Bonds.

            In the event a Direct-Pay Credit Facility is in place, amounts
required to be deposited in the Bond Fund for credit to the Acceleration Account
shall be derived solely from the following sources of funds in the priority
indicated and shall immediately be so deposited and credited in the Acceleration
Account:

                  (I) First, the proceeds of a draw, borrowing or payment under
      the Direct-Pay Credit Facility in respect of principal of and accrued
      interest on the Bonds; and

                  (II) Second, any other monies provided by the Company pursuant
      to the preceding paragraph for such purpose.

            The Trustee shall deposit the proceeds of a draw, borrowing or
payment under a Direct-Pay Credit Facility in a segregated sub-account of the
Acceleration Account in the Bond Fund and such proceeds shall not be commingled
with moneys in any other Account or sub-account or derived from any other
source.


                                      IX-3


            SECTION 9.03. Application of Monies in the Bond Fund and the Bond
Purchase Fund. 1. The Bond Fund shall be used for the purpose of making
scheduled payments of principal of and interest on the Bonds, of making payments
of principal of and premium, if any, and accrued interest on Bonds then subject
to redemption in the manner herein provided and of making payments of principal
of and accrued interest on the Bonds then Outstanding that have been declared to
be immediately due and payable pursuant to Section 12.03. The monies in the Bond
Fund shall be applied as follows:

            (a) Interest Account. Subject to the succeeding sentence, on each
Interest Payment Date, the Trustee shall apply the amount of monies then
credited to the Interest Account equal to the interest then payable on the Bonds
to the payment of such interest on such Interest Payment Date. In the event a
Direct-Pay Credit Facility is in place and payments are required to be made in
the order specified in Section 9.02 (a)(ii), the Trustee shall request a draw,
borrowing or payment under the Direct-Pay Credit Facility in accordance with the
terms thereof in an amount equal to the amount required to pay the interest
payable on the Outstanding Bonds on such Interest Payment Date and shall notify
the Company of the amount and date of such request. If sufficient funds are not
available under Section 9.02(a)(ii)(I) to pay such interest, the Trustee shall
apply funds, if any, available pursuant to Section 9.02(a)(ii)(II), to the
extent necessary, to such payment of interest. If the interest on the Bonds has
been paid in full when due and all payments required under the Direct-Pay Credit
Facility have been made, the Trustee shall apply remaining funds, if any,
available pursuant to Section 9.02(a)(ii)(II) in an amount not to exceed the
amount of the draw or borrowing under the Direct-Pay Credit Facility to
reimburse the Credit Facility Issuer for such draw or borrowing after such draw
or borrowing has been honored by the Credit Facility Issuer.

            (b) Principal Account. Subject to the succeeding sentence, on the
Stated Maturity, the Trustee shall apply the amount of monies then credited to
the Principal Account equal to the principal amount of Bonds then payable to the
payment of such principal on such date. In the event a Direct-Pay Credit
Facility is in place, the Trustee shall request a draw, borrowing or payment
under the Direct-Pay Credit Facility in accordance with the terms thereof in the
amount required, to pay such principal amount and shall notify the Company of
the amount and date of such request. If sufficient funds are not available under
Section 9.02(b)(ii)(I) to pay such principal, the Trustee shall apply funds, if
any, available pursuant to Section 9.02(b)(ii)(II), to the extent necessary, to
such payment. If the principal of the Bonds has been paid in full when due and
all payments required under the Direct-Pay Credit Facility have been made, the
Trustee shall apply remaining funds, if any, available pursuant to Section
9.02(b)(ii)(II) in an amount not to exceed the amount of the draw or borrowing
under the Direct-Pay Credit Facility to reimburse the Credit Facility Issuer for
such draw or borrowing after such draw or borrowing has been honored by the
Credit Facility Issuer.

            (c) Redemption Account. The Trustee shall redeem on the date set for
the redemption thereof, as provided in Article V of this Indenture, a principal
amount of Bonds then subject to redemption. Subject to the following sentence,
the Trustee shall apply an amount credited to the Redemption Account equal to
the principal amount and premium, if any, of Bonds then subject to redemption,
together with accrued interest thereon to the redemption date, to the payment of
such Bonds on the redemption date from funds described in Section 9.02(b).


                                      IX-4


            In the event a Direct-Pay Credit Facility is in place, the Trustee
shall request a draw under the Direct-Pay Credit Facility in accordance with the
terms thereof, in an amount equal to the amount required to pay the principal
amount and premium, if any, of Bonds then to be redeemed, together with accrued
interest thereon to the date set for redemption and shall notify the Company of
the date and amount of such request. If sufficient amounts to make such payment
are not available under Section 9.02(b)(ii)(I), the Trustee shall apply amounts,
if any, available pursuant to Section 9.02 (b)(ii)(II), to the extent necessary,
to such payment. Such redemption shall be made pursuant to the provisions of
Article V. If the redemption price of the Bonds equal to the principal amount of
Bonds then to be redeemed, together with premium, if any, and accrued interest
thereon has been paid in full on the redemption date and all payments required
under the Direct-Pay Credit Facility have been made, the Trustee shall apply
remaining funds, if any, available pursuant to Section 9.02(b)(ii)(II) in an
amount not to exceed the amount of the draw or borrowing under the Direct-Pay
Credit Facility to reimburse the Credit Facility Issuer for such draw or
borrowing after such draw or borrowing has been honored by the Credit Facility
Issuer.

            Upon the retirement of any portion of the Bonds by redemption
pursuant to the provisions of this Section 9.03, the Trustee shall file with the
Authority and the Company a statement stating the amounts of the Bonds so
redeemed and setting forth the date of their redemption and the amount paid as
principal, premium and interest thereon. The expenses in connection with the
redemption of the Bonds shall be paid by the Company as Additional Payments.

            All monies in the Redemption Account on the last Business Day prior
to the Stated Maturity shall be transferred to the Principal Account.

            (d) Acceleration Account. The Trustee shall immediately apply an
amount credited to the Acceleration Account equal to the principal amount of and
accrued interest on the Bonds then Outstanding that have been declared to be
immediately due and payable pursuant to Section 12.03 from funds described in
Section 9.02(c).

            In the event a Direct-Pay Credit Facility is in place, the Trustee
shall request a draw under the Direct-Pay Credit Facility in accordance with the
terms thereof, in an amount equal to the amount required to pay the principal
amount of and accrued interest of the Bonds then Outstanding that have been
declared to be immediately due and payable pursuant to Section 12.03 and shall
notify the Company of the date and amount of such request. If sufficient amounts
to make such payment are not available under Section 9.02(c)(I), the Trustee
shall apply amounts, if any, available pursuant to Section 9.02(c)(II), to the
extent necessary, to such payment. If the principal of and interest on the Bonds
has been paid in full after such Bonds have been declared to be immediately due
and payable and all payments required under the Direct-Pay Credit Facility have
been made, the Trustee shall apply remaining funds, if any, available pursuant
to Section 9.02(c)(II) in an amount not to exceed the amount of the draw or
borrowing under the Direct-Pay Credit Facility to reimburse the Credit Facility
Issuer for such draw or borrowing after such draw or borrowing has been honored
by the Credit Facility Issuer.

            2. Bond Purchase Fund. Pursuant to Section 4.02(d) of the
Participation Agreement, the Company has agreed that the Company shall, to the
extent not paid from a draw or payment under a Liquidity Facility, pay an amount
to the Trustee for payment to, or directly to, the Registrar and Paying


                                      IX-5


Agent for deposit in the Bond Purchase Fund and credit to the Company Account
therein established under the Bond Purchase Trust Agreement to be applied to the
payment of the Purchase Price of any Bond pursuant to the Bond Purchase Trust
Agreement to the extent not otherwise provided from the sources described in the
Bond Purchase Trust Agreement.

            In the event sufficient funds are not available under Section
2.03(a)(i) of the Bond Purchase Trust Agreement to pay such Purchase Price on
the date of purchase of any Bonds pursuant to Section 5.03, 5.04, 5.08 or 5.09
hereof, the Registrar and Paying Agent on or prior to the time specified in the
Bond Purchase Trust Agreement direct the Trustee to request a draw or payment
under the Liquidity Facility in accordance with the terms thereof in the amount
required, together with amounts, if any, available under Section 2.03(a)(i) of
the Bond Purchase Trust Agreement, to pay the Purchase Price of such Bonds on
such date of purchase. The Trustee shall on or prior to the time specified in
the Bond Purchase Trust Agreement request such draw or payment under the
Liquidity Facility in accordance with the terms thereof and shall on or prior to
the time specified in the Bond Purchase Trust Agreement transfer the proceeds of
such draw or payment to the Registrar and Paying Agent, who shall cause the
proceeds of such draw or payment to be deposited in the Bond Purchase Fund under
the Bond Purchase Trust Agreement and credited to the Liquidity Facility
Proceeds Account therein. The Registrar and Paying Agent shall notify the
Company of the amount and date of such request.

            The Remarketing Agent shall notify the Registrar and Paying Agent
and the Trustee, at or prior to 11:15 a.m. (New York City time) on a specified
purchase date, of the amount of the proceeds of the related remarketing, and
shall specify whether remarketing proceeds (excluding any such proceeds from the
Company, the Authority or an affiliate of either) equal to the full amount of
the Purchase Price payable on such purchase date are held by the Remarketing
Agent and will be available on such purchase date for the payment of such
Purchase Price, and, if the amount of such remarketing proceeds that will be
available on such purchase date for the payment of such Purchase Price shall not
be equal to the full amount of the Purchase Price payable on such purchase date,
such notice shall specify the amount of the deficiency. By 11:45 a.m. (New York
City time) on such purchase date, the Remarketing Agent shall pay to the
Registrar and Paying Agent, for deposit in the Bond Purchase Fund and credit to
the Remarketing Proceeds Account, an aggregate amount of such remarketing
proceeds equal to the amount stated in such notice to be available on such
purchase date for the payment of such Purchase Price.

            SECTION 9.04. Investment of Funds. Monies in the Bond Fund and the
accounts in such fund shall be invested and reinvested by the Trustee, at the
written direction of the Company, so long as the Company is not in default
hereunder or under the Participation Agreement, to the extent reasonable and
practicable in Investment Securities selected by the Company and maturing in the
amounts and at the times as determined by the Company so that the payments
required to be made from such funds and accounts may be made when due and
subsequent to the occurrence of an Event of Default hereunder or under the
Participation Agreement, the Trustee shall hold monies in the Bond Fund
uninvested. Investment earnings shall be considered on deposit in any Fund or
Account as of the date they are actually received by the Trustee.
Notwithstanding the foregoing, so long as a Direct-Pay Credit Facility is in
effect, monies in the Bond Fund, except for proceeds of refunding bonds, shall
be held uninvested.


                                      IX-6


            Monies on deposit in the Project Fund shall be invested and
reinvested by the Trustee at the express direction of the Company, promptly
confirmed in writing, so long as the Company is not in default under the
Participation Agreement, to the extent reasonable and practicable, in Investment
Securities maturing in such amounts and at such times as it is anticipated by
the Company that such monies will be required to pay the redemption price of the
Prior Bonds.

            The Trustee, with the consent of the Company, shall be authorized to
sell any investment when necessary to make the payments to be made from the
funds and accounts therein. All earnings on and income from monies in said funds
and accounts (other than the Project Fund) created hereby shall be considered to
be Revenues and shall be held in the respective account in the Bond Fund for use
and application as are all other monies deposited in such accounts. The Trustee
shall, in the statement required by Section 11.07, set forth the Investment
Securities held separately in, and the earnings realized on investment for, each
fund and account hereunder. The Trustee shall not be liable for any depreciation
in the value of the Investment Securities acquired hereunder or any loss
suffered in connection with any investment of funds made by it in accordance
herewith, including, without limitation, any loss suffered in connection with
the sale of any investment pursuant hereto.

            The Trustee may make any such investments through its own investment
department upon written direction of the Company.

            All Investment Securities shall constitute a part of the respective
fund and accounts therein from which the investment in Investment Securities was
made.


                                      IX-7


                                    ARTICLE X

                      PARTICULAR COVENANTS OF THE AUTHORITY

            SECTION 10.01. Payment of Principal of and Interest and Redemption
Premium on Bonds. The Authority will promptly pay solely from the Note Payments
and other monies held by the Trustee and available therefor, the principal of,
and the interest on, every Bond issued under and secured by the Indenture and
any premium required to be paid for the retirement of said Bonds by redemption,
at the places, on the dates and in the manner specified in this Indenture and in
said Bonds according to the true intent and meaning thereof, subject, however,
to the provisions of Section 2.02.3.

            SECTION 10.02. Performance of Covenants. The Authority will
faithfully perform at all times all covenants, undertakings, stipulations and
provisions contained in the Indenture, in any and every Bond and in all
proceedings of the Authority pertaining thereto.

            SECTION 10.03. Further Instruments. The Authority will from time to
time execute and deliver such further instruments and take such further action
as may be reasonable and as may be required to carry out the purpose of the
Indenture; provided, however, that no such instruments or actions shall pledge
the credit of the Authority or the State of New York or the taxing power of the
State of New York or otherwise be inconsistent with the provisions of Section
2.02.3.

            SECTION 10.04. Inspection of Project Books. All books and documents
in the possession of the Authority relating to the Project or the Participation
Agreement shall at all times be open to inspection by such accountants or other
agents as the Trustee may from time to time designate.

            SECTION 10.05. No Extension of Time of Payment of Interest. In order
to prevent any accumulation of claims for interest after maturity, the Authority
will not directly or indirectly extend or assent to the extension of the time of
payment of any claims for interest on, any of the Bonds and will not directly or
indirectly be a party to or approve any such arrangement by purchasing such
claims for interest or in any other manner. In case any such claim for interest
shall be extended in violation hereof, such claim for interest shall not be
entitled, in case of any default hereunder, to the benefit or security of the
Indenture except subject to the prior payment in full of the principal of, and
premium, if any, on, all Bonds issued and outstanding hereunder, and of all
claims for interest which shall not have been so extended or funded.

            SECTION 10.06. Trustee's, Auction Agent's, Remarketing Agent's,
Broker-Dealers' Registrar and Paying Agent's and Indexing Agent's Fees, Charges
and Expenses. Pursuant to the provisions of Section 4.02 of the Participation
Agreement, the Company has agreed to pay the fees and the expenses (including,
in the case of the Trustee, the Registrar and Paying Agent and the Remarketing
Agent, the reasonable fees and expenses of counsel and accountants) of the
Trustee, the Registrar and Paying Agent, Indexing Agent, and in the case of
Auction Rate Bonds, the Auction Agent, Remarketing Agent, and Broker-Dealers, in
the amounts set forth more fully therein, and the Authority shall have no
liability for the payment of any fees or expenses of the Trustee, the Registrar
and Paying Agent, Indexing Agent and in the case of Auction Rate Bonds, the
Auction Agent, Remarketing Agent, and Broker-Dealers.


                                      X-1


            SECTION 10.07. Agreement of the State of New York. In accordance
with the provisions of subdivision 11 of Section 1860 of the Act, the Authority,
on behalf of the State of New York, does hereby pledge to and agree with the
Bondholders that the State of New York will not limit or alter the rights and
powers vested by the Act in the Authority to fulfill the terms of any contract
made with Bondholders, or in any way impair the rights and remedies of such
Bondholders, until the Bonds, together with the premium and interest thereon,
with (to the extent permitted by law) interest on any unpaid installments of
interest, and all costs and expenses in connection with any action or proceeding
by or on behalf of such Bondholders, are fully met and discharged.

            SECTION 10.08. Recording and Filing. Pursuant to the Participation
Agreement, the Company covenants that it will cause all financing statements
related to this Indenture and all supplements thereto and the Participation
Agreement and all supplements thereto, as well as such other security
agreements, financing statements and all supplements thereto and other
instruments as may be required from time to time to be kept, to be recorded and
filed in such manner and in such places as may from time to time be required by
law in order to preserve and protect fully the security of Holders and the
rights of the Trustee hereunder, and to take or cause to be taken any and all
other action necessary to perfect the security interest created by this
Indenture. The Company is obligated under Section 5.18 of the Participation
Agreement to file all such financing statements and other security agreements.

            SECTION 10.09. Rights Under the Participation Agreement and the
Note. The Participation Agreement, a duly executed counterpart of which has been
filed with the Trustee, sets forth the covenants and obligations of the
Authority and the Company and reference is hereby made to the same for a
detailed statement of said covenants and obligations of the Company thereunder.
Subsequent to the issuance of Bonds and prior to their payment in full or
provision for payment thereof in accordance with the provisions hereof, neither
the Participation Agreement nor the Note may be effectively amended, changed,
modified, altered or terminated except in accordance with the provisions of
Article XIV hereof. The Authority agrees that the Trustee, in its name or in the
name of the Authority, may enforce all rights of the Authority and all
obligations of the Company under and pursuant to the Participation Agreement and
the Note for and on behalf of the Holders, whether or not the Authority is in
default hereunder. The Note heretofore delivered to the Trustee evidences the
obligations of the Company to make certain specified payments under the
Participation Agreement. Nothing herein contained shall be construed to prevent
the Authority from enforcing directly any or all of its rights to administrative
compensation or indemnification under the Participation Agreement.


                                      X-2


                                   ARTICLE XI

                     CONCERNING THE TRUSTEE; APPOINTMENT OF
                 REGISTRAR AND PAYING AGENT, REMARKETING AGENT,
                        AUCTION AGENT AND INDEXING AGENT

            SECTION 11.01. Appointment of Trustee. The Bank of New York is
hereby appointed the Trustee hereunder and by the execution of this Indenture
accepts such appointment and without further act, deed or conveyance, shall be
fully vested with all the estate, properties, rights, powers, trusts, duties and
obligations of the Trustee hereunder.

            The Trustee shall set up suitable accounts for the deposit of the
Note Payments and for the payment of the Bonds and the interest thereon and for
all other payments provided or required by this Indenture, including, without
limiting the generality of any of the foregoing, setting up of the Funds created
by Articles VIII and IX.

            SECTION 11.02. Indemnification of Trustee as Condition for Remedial
Action. The Trustee shall be under no obligation to institute any suit, or to
take any remedial proceeding under this Indenture, or to enter any appearance or
in any way defend in any suit in which it may be made defendant, or to take any
steps in the execution of the trusts hereby created or in the enforcement of any
rights and powers hereunder, until it shall be indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees and other
reasonable disbursements, and against all liability; the Trustee may,
nevertheless, begin suit, or appear in and defend suit, or do anything else in
its judgment proper to be done by it as such Trustee, without indemnity, and in
such case the Trustee shall be reimbursed from the Additional Payments required
to be made pursuant to the Participation Agreement for all costs and expenses,
outlays and counsel fees and other reasonable disbursements incurred in
connection therewith. If the Company shall fail to make such reimbursement, the
Trustee may reimburse itself from any monies in its possession under the
provisions of this Indenture and shall be entitled to a preference over the
Bonds; provided, however, that the proceeds of a Support Facility or of
remarketing of Bonds shall be applied solely as set forth elsewhere herein and
in such Support Facility and shall not be applied to the reimbursement set forth
in this Section 11.02. Notwithstanding the foregoing, the Trustee shall make all
payments of principal of and premium, if any, and interest on the Bonds then
Outstanding when due, when called for redemption or when declared to be
immediately due and payable pursuant to this Indenture and of the Purchase Price
of the Bonds in accordance with this Indenture.

            SECTION 11.03. Trustee Not Liable for Failure of the Authority or
Company to Act. The Trustee shall not be liable or responsible because of the
failure of the Authority or the Company or any of their employees or agents to
make any collections or deposits or to perform any act herein required of the
Authority or the Company. The Trustee shall not be responsible for the
application of any of the proceeds of the Bonds or any other monies deposited
with it and paid out, withdrawn or transferred hereunder if such application,
payment, withdrawal or transfer shall be made in accordance with the provisions
of this Indenture. The immunities and exemptions from liability of the Trustee
hereunder shall extend to its directors, officers, employees and agents.


                                      XI-1


            SECTION 11.04. Certain Duties and Responsibilities of the Trustee.
(a) Except during the continuance of an Event of Default specified in Section
12.01 of which the Trustee has been notified or is deemed to have notice as
provided in Section 11.08,

            (1) the Trustee shall undertake to perform such duties and only such
      duties as are specifically set forth in this Indenture, and no implied
      covenants or obligations shall be read into this Indenture against the
      Trustee; and

            (2) in the absence of bad faith on its part, the Trustee may
      conclusively rely, as to the truth of the statements and the correctness
      of the opinions expressed therein, upon certificates or opinions furnished
      to the Trustee and conforming to the requirements of this Indenture; but
      in the case of any such certificates or opinions which by any provision
      hereof are specifically required to be furnished to the Trustee, the
      Trustee shall be under a duty to examine the same to determine whether or
      not they conform to the requirements of this Indenture (but need not
      confirm or investigate the accuracy of mathematical calculations or other
      facts stated therein).

            (b) In case an Event of Default specified in Section 12.01 has
occurred and is continuing of which the Trustee has been notified or is deemed
to have notice as provided in Section 11.08, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in such exercise, as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs.

            (c) None of the provisions of this Indenture shall be construed to
relieve the Trustee from liability for negligent action, negligent failure to
act, or willful misconduct, except that

            (1) this subsection (c) shall not be construed to limit the effect
      of subsection (a) of this Section;

            (2) the Trustee shall not be liable for any error of judgment made
      in good faith by any one of its officers, unless it shall be proved that
      the Trustee was negligent;

            (3) in the absence of bad faith on its part, the Trustee shall be
      protected and shall incur no liability in acting or proceeding or in not
      acting or not proceeding upon any resolution, order, notice, telegram,
      request, consent, waiver, certificate, statement, affidavit, voucher
      requisition, bond or other paper or document which the Trustee shall
      believe to be genuine and to have been adopted or signed by the proper
      board or person or to have been prepared and furnished pursuant to any of
      the provisions of this Indenture, or upon the written opinion of any
      attorney, engineer, accountant or other expert believed by the Trustee to
      be qualified in relation to the subject matter, and the Trustee shall be
      under no duty to make any investigation or inquiry as to any statements
      contained or matters referred to in any such instrument but may accept and
      rely upon the same as conclusive evidence of the truth and accuracy of
      such statements;

            (4) the Trustee shall not be liable with respect to any action taken
      or omitted to be taken by it in good faith in accordance with the
      direction of the Holders of not less than a majority


                                      XI-2


      in aggregate principal amount of the Outstanding Bonds relating to the
      time, method and place of conducting any proceeding for any remedy
      available to the Trustee, or exercising any trust or power conferred upon
      the Trustee, under the provisions of this Indenture; and

            (5) no provision of this Indenture shall require the Trustee to
      expend or risk its own funds or otherwise incur any financial liability in
      the performance of its duties hereunder, or in the exercise of any of its
      rights or powers, if it shall have reasonable grounds for believing that
      repayment of such funds or adequate indemnity against such risk or
      liability is not reasonably assured to it.

            (d) Notwithstanding anything contained elsewhere in this Indenture,
the Trustee shall have the right to reasonably require, in respect of the
payment or withdrawal of any monies or the taking of any action whatsoever
within the purview of this Indenture, any showings, certificates, opinions,
appraisals or other information, or corporate action or evidence thereof, in
addition to that required by the terms hereof as a condition of such action by
the Trustee.

            (e) The Trustee may execute any of the trusts or powers hereof and
perform any of its duties by or through attorneys, agents or receivers, and
shall not be responsible for any negligence or misconduct on the part of any
such attorney, agent or receiver appointed by it if the Trustee shall have
exercised due care and diligence in appointing or selecting such person, and
shall be entitled to advice of counsel concerning all matters of the trusts
hereof and the duties hereunder, and may in all cases pay such reasonable
compensation to all such attorneys, agents and receivers as may reasonably be
employed in connection with the trusts hereof. The Trustee may act upon the
opinion or advice of any attorney or attorneys (who may be the attorney or
attorneys for the Authority or the Company), approved by the Trustee in the
exercise of reasonable care, and the Trustee shall not be responsible for any
loss or damage resulting from any action or nonaction in good faith in reliance
upon such opinion or advice.

            (f) Whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be herein specifically prescribed) may, in the absence of bad faith on its part,
conclusively rely upon a certificate of an Authorized Company Representative or
an Authorized Officer.

            (g) The Trustee shall not be accountable for the use by the Company
of any proceeds of the Bonds authenticated or delivered hereunder.

            (h) The Trustee shall not be required to give any bonds or surety in
respect of the execution of its trusts and powers hereunder.

            (i) The Trustee may treat and deem the Holder of any Bonds as set
forth in the books of the registry hereunder as the absolute owner thereof.

            SECTION 11.05. Limitations on Obligations and Responsibilities of
Trustee. The Trustee shall be under no obligation to effect or maintain
insurance or to renew any policies of insurance or to inquire as to the
sufficiency of any policies of insurance carried by the Company, or to report,
or make


                                      XI-3


or file claims or proof of loss for, any loss or damage insured against or which
may occur, or to keep itself informed or advised as to the payment of any taxes
or assessments, or to require any such payment to be made. The Trustee, except
as to the acceptance of the trusts by its execution of this Indenture and the
performance of its responsibilities hereunder, shall have no responsibility in
respect of the validity, sufficiency, due execution or acknowledgment of this
Indenture, or in respect of the validity of the Bonds or the due execution or
issuance thereof. The Trustee shall be under no obligation to see that any
duties herein or in the Participation Agreement, the Remarketing Agreement, the
Auction Agency Agreement, the Broker-Dealer Agreement or any Support Facility
imposed upon the Authority, the Company, the issuer of any Support Facility, or
any party other than itself in its capacity as Trustee, or any covenants herein
contained on the part of any party other than itself in its capacity as Trustee
to be performed, shall be done or performed, and the Trustee shall be under no
obligation for failure to see that any such duties or covenants are so done or
performed.

            SECTION 11.06. Compensation and Indemnification of Trustee. The
Company has agreed in the Participation Agreement (1) to pay to the Trustee from
time to time such compensation for all services rendered by it hereunder or
shall from time to time be agreed in writing (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust); (2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and (3) to
indemnify the Trustee for, and to hold it harmless against, any loss, liability
or expense incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.

            SECTION 11.07. Statements from Trustee. It shall be the duty of the
Trustee, on or about the fifteenth (15th) day of each month, and at such other
reasonable time or times as may be determined by the Authority or the Company,
to file with the Authority, upon the written request thereof, and the Company a
statement setting forth in respect of the preceding calendar month:

            (a) the amount withdrawn or transferred by it and the amount
      received by it and held on account of each Fund under the provisions of
      this Indenture;

            (b) the amount on deposit with it at the end of such calendar month
      to the credit of each such Fund or Account;

            (c) a monthly account of reconciliation and income which includes a
      brief description of all obligations held by it as an investment of monies
      in each such Fund or Account;

            (d) the amount applied to the redemption of the Bonds under the
      provisions of Article V and Section 9.03 and the amount of the Bonds
      remaining Outstanding; and


                                      XI-4


            (e) any other information which the Authority or the Company may
      reasonably request.

            All records and files pertaining to the Bonds and the Company in the
custody of the Trustee shall be open at all reasonable times upon prior notice
to the inspection of the Authority, the Company and their agents and
representatives.

            SECTION 11.08. Notice of Default. Except upon the happening of any
Event of Default specified in clauses (a) through (d), inclusive, of Section
12.01, the Trustee shall not be obliged to take notice or be deemed to have
notice of any Event of Default hereunder, unless specifically notified in
writing of such Event of Default by the issuer of any Support Facility, the
Remarketing Agent, the Auction Agent or the Holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Bonds Outstanding and such
written notice shall state that it is a "notice of default."

            SECTION 11.09. Trustee May Deal in Bonds. The bank or trust company
acting as Trustee under this Indenture, and its directors, officers, employees
or agents, may in good faith buy, sell, own, hold and deal in the Bonds issued
under and secured by this Indenture, and may join in the capacity of a Holder of
a Bond in any action which any Holder of a Bond may be entitled to take with
like effect as if such bank or trust company were not the Trustee under this
Indenture.

            SECTION 11.10. Trustee Not Responsible For Recitals. The recitals,
statements and representations contained herein and in the Bonds shall be taken
and construed as made by and on the part of the Authority, and not by the
Trustee, and the Trustee assumes, and shall be under, no responsibility for the
correctness of the same or for the recording or re-recording or filing or
refiling of the Indenture or any supplements thereto or any instruments of
further assurance (including financing statements) except as otherwise provided
herein. The Trustee makes no representations as to the value of any property
pledged hereunder to the payment of Bonds or as to the title of the Authority or
the Company thereto or as to the validity, sufficiency or adequacy of the
security afforded thereby or hereby or as to the validity of this Indenture, the
Note, the Participation Agreement, any Support Facility or of the Bonds.

            SECTION 11.11. Qualification of the Trustee. There shall at all
times be a Trustee hereunder which shall be a bank and/or trust company, having
combined capital and unimpaired surplus of at least $50,000,000, duly authorized
to exercise corporate trust powers and subject to examination by federal or
state authority. The Trustee hereunder shall not be required to maintain, and
any successor Trustee shall not be required to have, an office in the city in
which the principal corporate trust office of the initial Trustee hereunder is
located.

            If at any time the Trustee shall cease to be eligible in accordance
with the provisions of this Section 11.11, it shall resign immediately in the
manner and with the effect specified in Section 11.12.

            SECTION 11.12. Resignation and Removal of Trustee. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 11.13.


                                      XI-5


            (b) The Trustee may resign at any time by giving written notice
thereof to the Authority and the Company. If an instrument of acceptance by a
successor Trustee shall not have been delivered to the Trustee within thirty
(30) days after the giving of such notice of resignation, the retiring Trustee
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.

            (c) The Trustee may be removed at any time by demand of the Holders
of a majority in principal amount of the Bonds then Outstanding, signed in
person by such Holders or by their attorneys, legal representatives or agents
and delivered to such Trustee, the Authority and the Company (such demand to be
effective only when received by the Trustee, the Authority and the Company).

            (d) If at any time:

                  (1) the Trustee shall cease to be eligible under Section 11.11
      and shall fail to resign after written request by the Authority or by a
      Holder who shall have been a bona fide Holder for at least six months, or

                  (2) the Trustee shall become incapable of acting or shall be
      adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
      property shall be appointed, or any public officer shall take charge or
      control of the Trustee or of its property or affairs for the purpose of
      rehabilitation, conservation or liquidation,

then, in either such case, (i) the Authority may remove, and the Company may
request the Authority to remove, the Trustee, or (ii) any Holder who has been a
bona fide Holder for at least six months may, on behalf of herself and all other
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor.

            (e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of the Trustee for any cause,
the Authority shall promptly appoint a successor; the Company or the issuer of
any Support Facility or both of them, having the right to request the
appointment of a particular qualified institution as such successor. Within one
year after such resignation, removal or incapability, or the occurrence of such
vacancy, a successor Trustee may be appointed by an instrument or concurrent
instruments in writing executed by the Holders of a majority in principal amount
of the Bonds then Outstanding delivered to the Authority and the retiring
Trustee, and, upon such delivery, the successor Trustee so appointed shall,
forthwith upon its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Authority.

            (f) The Authority shall give notice to the Trustee, the Company, the
Remarketing Agent, the Registrar and Paying Agent, the Auction Agent and the
Bondholders of each resignation and each removal of a Trustee and each
appointment of a successor Trustee in the manner set forth in Section 17.03 with
respect to Bondholders and Section 17.09 with respect to the Company, the
Auction Agent and the Remarketing Agent. Each notice shall include the name and
address of the Principal Corporate Trust Office of the successor Trustee.


                                      XI-6


            (g) The Trustee at any time other than during the continuance of an
Event of Default and for any reason may be removed by an instrument in writing,
executed by an Authorized Officer, appointing a successor, filed with the
Trustee so removed.

            SECTION 11.13. Successor Trustee. Every successor Trustee appointed
hereunder shall execute, acknowledge and deliver to its predecessor, and also to
the Authority and the Company, an instrument in writing accepting such
appointment hereunder, and thereupon such successor Trustee, without any further
act, shall become fully vested with all the rights, immunities, powers and
trusts and subject to all the duties and obligations, of its predecessor; but
such predecessor shall, nevertheless, on written request of its successor or of
the Authority and upon payment of expenses, charges and other disbursements of
such predecessor which are payable pursuant to the provisions of Sections 11.02
and 11.06, execute and deliver an instrument transferring to such successor
Trustee all the rights, immunities, powers and trusts of such predecessor
hereunder; and every predecessor Trustee shall deliver all property and monies
held by it hereunder to its successor, subject, nevertheless, to its first lien
and preference provided for in Sections 11.02 and 11.06. Should any instrument
in writing from the Authority be required by any successor Trustee for more
fully vesting in such Trustee the rights, immunities, powers and trusts hereby
vested or intended to be vested in the predecessor Trustee, any such instrument
in writing shall and will, on request, be executed, acknowledged and delivered
by the Authority.

            Notwithstanding any of the foregoing provisions of this Article, any
bank or trust company having power to perform the duties and execute the trusts
of this Indenture and otherwise qualified to act as Trustee hereunder with or
into which the bank or trust company acting as Trustee may be converted, merged
or consolidated, or to which the corporate trust business assets as a whole or
substantially as a whole of such bank or trust company may be sold, shall be
deemed the successor of the Trustee.

            SECTION 11.14. Appointment of Remarketing Agent. Salomon Smith
Barney Inc., Morgan Stanley & Co. Incorporated and J.P. Morgan Securities Inc.
are hereby appointed by the Authority as the initial Remarketing Agents to serve
as such under the terms and provisions hereof and of the Remarketing Agreement
for the Series 2001A-1 Bonds, the Series 2001A-2 Bonds and the Series 2001A-3
Bonds, respectively. The Remarketing Agent for any subseries, including any
successor appointed pursuant hereto, shall be a member of the National
Association of Securities Dealers, Inc. having capitalization of at least
$25,000,000, and be authorized by law to perform all the duties imposed upon it
by this Indenture, the Bond Purchase Trust Agreement and the Remarketing
Agreement. The Remarketing Agent for any subseries of Bonds may be removed at
any time by the Authority, upon thirty (30) days' notice, acting at the written
direction of the Company by an instrument signed by the Authority and filed with
the Trustee, the Registrar and Paying Agent, the Remarketing Agent and the
Company. If there shall not be at least one Remarketing Agent serving as such
for any subseries of Bonds following the effective date of a proposed removal of
a Remarketing Agent for such subseries, no such removal shall take effect until
the appointment of a successor Remarketing Agent for such subseries of Bonds.
The Remarketing Agent for any subseries of Bonds may resign upon 30 days written
notice delivered to the Company, the Authority, the Trustee, the Registrar and
Paying Agent and the issuer of any Support Facility. The Company shall use its
best efforts to cause the Authority to appoint a successor Remarketing Agent
that is a qualified institution, effective as of the effectiveness of any such
resignation or removal. Each successor Remarketing Agent shall be a qualified
institution selected and appointed by the Authority, upon the written


                                      XI-7


request and with the approval of the Company. If there shall be more than one
Remarketing Agent serving as such for a subseries of Bonds, the Authority, at
the request of the Company, shall designate one such Remarketing Agent as
"Remarketing Representative" to act on behalf of all Remarketing Agents for such
subseries, and each other Remarketing Agent shall agree in writing to accept the
determinations of such Remarketing Representative.

            SECTION 11.15. Appointment of Registrar and Paying Agent. The Bank
of New York in New York, New York is hereby appointed by the Authority to serve
as the Registrar and Paying Agent hereunder. The Company shall have the right to
request the appointment of an institution meeting the requirements of Section
11.19 to serve as successor thereto in the event of the removal or resignation
of such Registrar and Paying Agent.

            The Trustee hereby appoints any Registrar and Paying Agent appointed
hereunder as authenticating agent.

            SECTION 11.16. General Provisions Regarding Registrar and Paying
Agent.

            (a) The Registrar and Paying Agent shall:

            (i) hold all Bonds delivered to it for purchase hereunder in trust
      for the benefit of the respective Bondholders which shall have so
      delivered such Bonds until monies representing the purchase price of such
      Bonds shall have been delivered to or for the account of or to the order
      of such Holders and deliver said Bonds in accordance with the provisions
      of this Indenture;

            (ii) hold all monies delivered to it for the purchase of Bonds, in
      trust for the benefit of the person or entity who has delivered such
      monies until the Bonds purchased with such monies have been delivered to
      or for the account of such person or entity as provided in this Indenture;

            (iii) maintain the books of registry and keep such books and records
      as shall be consistent with prudent industry practice and make such books
      and records available for inspection by the Trustee, the Remarketing
      Agent, the Authority and the Company at all reasonable times;

            (iv) perform the duties and undertake the obligations assigned to
      them in Sections 7.02 through 7.06;

            (b) The Registrar and Paying Agent may deem and treat the Holder of
any Bonds as set forth in the books of registry hereunder as the absolute owner
thereof;

            (c) The Registrar and Paying Agent may in good faith hold any other
form of indebtedness issued by the Authority or any security issued by the
Company, or any affiliate of the Company; own, accept or negotiate any drafts,
bills of exchange, acceptances or obligations thereof; and make disbursements
therefor and enter into any commercial or business arrangement therewith; all
without any liability on the part of such Registrar and Paying Agent for any
real or apparent conflict of interest by reason of any such actions; and


                                      XI-8


            (d) The Registrar and Paying Agent agrees to cooperate with the
Trustee and the Company in preparing and conveying information necessary for
drawings under any Support Facility. To the extent that any other certificate to
be submitted by the Trustee to an issuer of a Support Facility in connection
with a drawing under the Support Facility requires the Trustee to state that the
Registrar and Paying Agent has certified certain information to the Trustee, the
Registrar and Paying Agent agrees to provide such certification to the Trustee
to the extent such information is known to it.

            SECTION 11.17. Payment of Registrar and Paying Agent;
Indemnification. The Authority will cause the Company to agree in the
Participation Agreement to pay all reasonable fees, charges and expenses of the
Registrar and Paying Agent for acting under and pursuant to this Indenture. In
addition, the Authority will cause the Company to agree in the Participation
Agreement to indemnify the Registrar and Paying Agent and its directors,
officers and employees against and save them harmless from any and all losses,
costs, charges, expenses, judgments and liabilities incurred while carrying out
the transactions contemplated by this Indenture, except that said indemnity does
not apply to the extent that they are caused by the negligent action, negligent
failure to act or willful misconduct of the Registrar and Paying Agent or its
directors, officers, employees or agents.

            SECTION 11.18. Registrar and Paying Agent's Performance; Duty of
Care. The duties and obligations of the Registrar and Paying Agent shall be
determined solely by the provisions of this Indenture. None of the provisions of
this Indenture shall be construed to relieve the Registrar and Paying Agent from
liability for negligent action, negligent failure to act or willful misconduct,
except that (a) the Registrar and Paying Agent shall not be liable except for
the performance of such duties and obligations as are specifically set forth in
this Indenture, and, in the absence of bad faith on the part of the Registrar
and Paying Agent, the Registrar and Paying Agent may conclusively rely, as to
the truth of the statements expressed therein, upon any document furnished to
the Registrar and Paying Agent and conforming to the requirements of this
Indenture and the Registrar and Paying Agent may conclusively rely and shall be
protected in acting upon any document believed by it to be genuine and to have
been signed or presented by the proper party or parties, provided that, in the
case of any such document which by any provision of this Indenture is
specifically required to be furnished to the Registrar and Paying Agent, the
Registrar and Paying Agent shall be under a duty to examine the same to
determine whether or not it conforms to the requirements of this Indenture, and
(b) no provisions of this Indenture shall require the Registrar and Paying Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder. The Registrar and Paying Agent
may act upon the opinion or advice of any attorney or attorneys (who may be the
attorney or attorneys for the Authority or the Company), approved by the Trustee
in the exercise of reasonable care, and the Registrar and Paying Agent shall not
be responsible for any loss or damage resulting from any action or nonaction in
good faith in reliance upon such opinion or advice.

            SECTION 11.19. Qualifications of Registrar and Paying Agent. The
Registrar and Paying Agent, including any successor appointed pursuant to this
Indenture, shall be a corporation duly organized under the laws of the United
States of America or any state or territory thereof, having a combined capital
and unimpaired surplus of at least $50,000,000 and authorized by law to perform
all the duties imposed upon it by this Indenture. Unless the Bonds bear an
Auction Rate, or a Fixed Rate, the


                                      XI-9


Registrar and Paying Agent shall have an office or agency in New York, New York
capable of performing its obligations hereunder.

            SECTION 11.20. Resignation or Removal of Registrar and Paying Agent
and Successor to Registrar and Paying Agent; Termination of Registrar and Paying
Agent's Obligations. The Registrar and Paying Agent may at any time resign and
be discharged of the duties and obligations created hereunder and under the Bond
Purchase Trust Agreement by giving at least sixty days' notice to the Authority,
the Company, the Trustee and the Remarketing Agent. The Registrar and Paying
Agent may be removed at any time upon and pursuant to the request of the Company
by an instrument, signed by the Authority and filed with the Trustee and the
Registrar and Paying Agent and the Company, provided that such removal shall not
take effect until the appointment of a successor Registrar and Paying Agent. The
Authority at the request of the Company shall appoint a successor Registrar and
Paying Agent effective as of the effectiveness of any such resignation or
removal. Each successor Registrar and Paying Agent shall be a qualified
institution selected by the Company and, so long as a Support Facility is in
effect, the issuer of a Support Facility, and approved and appointed by the
Authority.

            In the event of the resignation or removal of the Registrar and
Paying Agent, the Registrar and Paying Agent shall pay over and deliver any
monies and Bonds held by it in such capacity to its successor or, if there is no
successor, to the Trustee. In the event that there is no successor to the
Registrar and Paying Agent on the effective date of its resignation, the entity
acting as Trustee shall perform the functions of the Registrar and Paying Agent;
provided that monies held by the Trustee pursuant to this paragraph shall not be
deemed to be held by the Trustee in its capacity as Trustee.

            SECTION 11.21. Appointment of Auction Agent; Qualifications of
Auction Agent, Resignation; Removal. (1) On or before the effective date of a
Change in the Interest Rate Mode to an Auction Rate, an Authorized Officer of
the Authority upon the written direction of an Authorized Company Representative
shall appoint an Auction Agent for the Bonds. The Auction Agent shall evidence
its acceptance of such appointment by entering into an Auction Agency Agreement
with the Company. The Auction Agent shall be (a) a bank or trust company duly
organized under the laws of the United States of America or any state or
territory thereof having its principal place of business in the Borough of
Manhattan, in The City of New York and having a combined capital stock, surplus
and undivided profits of at least $25,000,000 or (b) a member of the National
Association of Securities Dealers, Inc., having a capitalization of at least
$25,000,000 and, in either case, authorized by law to perform all the duties
imposed upon it under the Auction Agency Agreement. The Auction Agent may at any
time resign and be discharged of the duties and obligations created by this
Indenture by giving at least 90 days' notice to the Trustee, the Company, the
Authority, and in the case the Auction Agent is also serving as Trustee, to the
Remarketing Agent. During the Auction Rate Period, the Auction Agent may be
removed at any time by the Authority acting at the request of the Company by an
instrument signed by the Authority and filed with the Company, the Auction
Agent, the Remarketing Agent and the Registrar and Paying Agent upon at least 90
days' notice; provided that if required by the Remarketing Agent, an agreement
in substantially the form of the Auction Agency Agreement shall be entered into
with a successor Auction Agent.

            SECTION 11.22. Appointment of Broker-Dealers. Prior to any change in
the Interest Rate Mode to an Auction Rate Period, the Company with the approval
of the Authority shall


                                     XI-10


appoint an initial Broker-Dealer and any additional initial Broker-Dealers.
Thereafter, the Company may select, with the approval of the Authority and the
initial lead Broker-Dealer or any successor, from time to time one or more
additional persons to serve as Broker-Dealers under Broker-Dealer Agreements.

            SECTION 11.23. Appointment of Additional Paying Agents; Each Paying
Agent to Hold Money in Trust. The Authority may at the request of the Company
appoint an additional Paying Agent or Paying Agents for the Bonds. Each such
Paying Agent shall hold in trust subject to the provisions of the Indenture for
the benefit of the Holders all sums held by such Paying Agent for the payment of
the principal of, premium, if any, and interest on the Bonds. Any such Paying
Agent may be any person or corporation authorized to perform such functions,
including to the extent permitted by law, the Company.

            SECTION 11.24. Appointment and Duties of Indexing Agents. Standard &
Poor's J.J. Kenny is hereby appointed as Indexing Agent for the Bonds for the
purpose of calculating each rate index defined in Section 1.01. The Authority
may, with the approval of the Company, appoint additional or successor Indexing
Agents, subject to the conditions set forth in this Section. There may be
separate Indexing Agents for the purpose of calculating each rate index defined
in Section 1.01. The Indexing Agent shall designate to the Trustee its principal
office and signify its acceptance of the duties and obligations imposed upon it
hereunder by a written instrument of acceptance delivered to the Authority, the
Trustee, the Company and the Remarketing Agent under which the Indexing Agent
will agree, particularly:

            (a) to compute the Daily Rate Index, the Commercial Paper Rate
      Index, the Weekly Rate Index, the Monthly Rate Index, the Semi-annual Rate
      Index, the Term Rate Index or the Fixed Rate Index, as the case may be,
      pursuant to and in accordance with Section 3.01, and to give notice to the
      Trustee, the Registrar and Paying Agent, the Remarketing Agent and the
      Company of such rate index on the date of the computation thereof in
      accordance with Section 3.01; and

            (b) to keep such books and records as shall be consistent with
      prudent industry practice and to make such books and records available for
      inspection by the Authority, the Trustee, the Registrar and Paying Agent,
      the Remarketing Agent and the Company at all reasonable times.

            The Indexing Agent will perform the duties provided for in Section
3.01. Whenever the Indexing Agent makes a computation under that Section, it
will promptly notify the Trustee, the Registrar and Paying Agent, the Authority,
the Remarketing Agent (and during any Auction Rate Period, the Auction Agent),
and the Company of the results and date of computation. The Indexing Agent will
keep adequate records pertaining to the performance of its duties and allow the
Trustee, Registrar and Paying Agent, the Authority, the Remarketing Agent and
the Company (and, if appropriate, the Auction Agent) to inspect the records at
reasonable times.


                                     XI-11


            SECTION 11.25. Qualifications of Indexing Agents. Each Indexing
Agent shall be a commercial bank, a member of the National Association of
Securities Dealers, Inc. or a nationally recognized municipal securities
evaluation service authorized by law to perform all the duties imposed upon it
by the Indenture. Any Indexing Agent may at any time resign and be discharged of
the duties and obligations created by the Indenture by giving at least sixty
(60) days' notice to the Authority, the Company, the Remarketing Agent and the
Trustee. The Indexing Agent may be removed at any time, at the written direction
of the Company, by an instrument, signed by the Authority, filed with the
Company, the Indexing Agent, the Remarketing Agent, the Trustee, the Registrar
and Paying Agent and the issuer of a Support Facility, if any.


                                     XI-12


                                   ARTICLE XII

                        EVENTS OF DEFAULT; REMEDIES UPON
                               OCCURRENCE THEREOF

            SECTION 12.01. Events of Default. Each of the following is hereby
defined as and declared to be and shall constitute an "Event of Default":

            (a) Payment of the principal of and premium, if any, on any Bond
(whether by maturity, proceedings for redemption, purchase in accordance with
Article V hereof or the Remarketing Agreement, or otherwise) shall not be made
when the same shall become due and payable; or

            (b) Payment of any installment of interest on any Bond shall not be
made when the same shall become due and payable and such nonpayment shall
continue for one (1) Business Day; or

            (c) The Trustee shall receive written notice from the issuer of the
Support Facility of the occurrence of a Terminating Event under the Support
Facility, if applicable, or the agreement providing for the issuance thereof; or

            (d) Receipt by the Trustee of written notice from the financial
institution providing any Credit Facility following a draw on or borrowing or
payment under such Credit Facility for the payment of interest on the Bonds that
the Credit Facility has not been reinstated in the amount so drawn, borrowed or
paid; or

            (e) The Authority shall fail in the due and punctual performance of
any of the covenants, conditions, agreements, provisions or obligations, other
than as set forth in (a) and (b) above, contained in the Bonds or in this
Indenture or in any Supplemental Indenture on the part of the Authority to be
performed, and such failure shall continue for ninety (90) days after written
notice specifying such failure and requiring the same to be remedied shall have
been given to the Authority, the Company, the Governor, the Comptroller and the
Attorney General of the State of New York, by the Trustee or to the Trustee, the
Authority and the Company by the Holders of not less than twenty-five percent
(25%) in aggregate principal amount of the Bonds then Outstanding as provided
for in Section 12.08; provided that if any such failure shall be such that it
cannot be cured or corrected within such ninety (90) day period, it shall not
constitute an Event of Default hereunder if curative or corrective action is
instituted within such period and diligently pursued until the failure of
performance is cured or corrected; or

            (f) The occurrence of an event of default as defined in Section 7.01
of the Participation Agreement.

            SECTION 12.02. Notice to Holders and Others Upon Occurrence of an
Event of Default or a Failure to Deposit. 1. The Trustee shall give notice to
the Bondholders of all Events of Default within sixty (60) days after the
Trustee has been notified thereof or is deemedto have notice thereof as provided
in Section 11.08, unless the Event of Default shall have been cured before the
giving of such notice or unless the Trustee shall deem it in the best interest
of the Holders to defer or withhold notice under


                                    XII-1


this Section; provided, however, that if a notice of an Event of Default is
given to any Bondholder, the Trustee shall concurrently therewith cause a copy
to be provided to all beneficial owners.

            2. So long as ownership of the Auction Rate Bonds is maintained in
book-entry form by the Securities Depository, upon the occurrence of an Event of
Default, the Trustee shall immediately send a notice thereof in substantially
the form required by the Auction Agency Agreement to the Auction Agent and to
the registered Holders of each series of Bonds by telecopy or similar means.

            3. So long as the ownership of the Auction Rate Bonds is maintained
in book- entry form by the Securities Depository, the Trustee shall immediately
send a notice in substantially the form required by the Auction Agency Agreement
to the Auction Agent and to the registered Holders of each series of Bonds by
telecopy or similar means if an Event of Default has been cured or waived in
accordance with this Article XII.

            4. Upon the occurrence of a Failure to Deposit, or in the event such
failure to deposit is cured, the Trustee shall give the Auction Agent the
notices referred to in Section 9.02(a)(i) or (b)(i) hereof, as the case may be.

            SECTION 12.03. Declaration of Principal and Interest As Due.
Notwithstanding the pendency of a mandatory tender under Section 5.09, upon the
occurrence of an Event of Default specified in clause (c) or (d) of Section
12.01 of which the Trustee has been notified by the issuer of the Support
Facility or the Credit Facility, as the case may be, then the Trustee shall upon
the written request or direction of such issuer of the Support Facility or the
Credit Facility, as the case may be, declare the principal of and accrued
interest on all the Bonds then Outstanding (if not then due and payable) to be
due and payable immediately, and upon such declaration the same shall become due
and be immediately due and payable and interest shall immediately cease to
accrue on such Bonds, anything contained in the Bonds or in this Indenture to
the contrary notwithstanding. Upon the occurrence and continuation of any Event
of Default, except for an Event of Default specified in clause (c) or (d) of
Section 12.01, of which the Trustee has been notified or is deemed to have
notice as provided in Section 11.08, then and in every case the Trustee by a
notice in writing to the Authority, the Company and (to addresses then specified
by the Authority) the Governor, the Comptroller and the Attorney General of the
State of New York may with the written consent of the issuer of the Credit
Facility, if any, and upon the written request or direction of the issuer of the
Credit Facility, if any, or, if a Credit Facility is not in effect or the issuer
of the Credit Facility is in default under the Credit Facility, upon the written
request or direction of the Holders of not less then twenty-five percent (25%)
in principal amount of the Bonds then Outstanding (determined in accordance with
the provisions of Section 13.03) shall, declare the principal of and accrued
interest on all the Bonds then Outstanding (if not then due and payable) to be
due and payable immediately, and upon such declaration the same shall become due
and be immediately due and payable, anything contained in the Bonds or in this
Indenture to the contrary notwithstanding. If, however, at any time after the
principal of the Bonds shall have been so declared to be due and payable, and
before the entry of final judgment or decree in any suit, action or proceeding
instituted on account of such Event of Default, or before the completion of the
enforcement of any other remedy under this Indenture, monies shall have
accumulated in the Bond Fund sufficient to pay the principal of and any premium
(or redemption price) on all Bonds (or portions of the principal amount thereof)
then or theretofore required to be redeemed pursuant to any


                                     XII-2


provisions of this Indenture (excluding principal not then due except by reason
of the aforesaid declaration) and all arrears of interest and interest then due,
if any, upon Bonds then Outstanding and if the fees, compensation, expenses,
disbursements, advances and liabilities of the Trustee and all other amounts
then payable by the Company under the Participation Agreement and the Note shall
have been paid or a sum sufficient to pay the same shall have been deposited
with the Trustee, and every other Event of Default known to the Trustee in the
observance or performance of any covenant, condition or agreement contained in
the Bonds or in this Indenture (other than default in the payment of the
principal of such Bonds then due only because of a declaration under this
Section) shall have been remedied to the satisfaction of the Trustee or the
Company shall be taking, or shall be causing to be taken, appropriate action in
good faith to effect its cure, and all Events of Default have been rescinded and
annulled by the Trustee (or in the case of an Event of Default specified in
clause (c) or (d) of Section 12.01, by the issuer of the Credit Facility), and
to the extent a Credit Facility is in effect, the issuer of such Credit Facility
has delivered to the Trustee a notice to the effect that any amounts drawn,
borrowed or paid under such Credit Facility to pay accrued interest on the Bonds
have been reinstated in the amount of such draw, borrowing or payment, then and
in every such case the Trustee may with the written consent of the issuer of the
Credit Facility, if any, and upon the written request or direction of the issuer
of the Credit Facility, if any, or, if a Credit Facility is not in effect or the
issuer of the Credit Facility is in default under the Credit Facility, upon the
written request or direction of the Holders of not less than a majority in
principal amount of the Bonds (determined in accordance with the provisions of
Section 13.03) then Outstanding shall, by written notice to the Authority,
rescind and annul such declaration and its consequences; provided, however, that
notwithstanding any such rescission and annulment during an Auction Rate Period,
the Bonds shall continue to bear interest at the Overdue Rate for the applicable
period of time determined pursuant to Article III. No such rescission or
annulment pursuant to the next preceding sentence shall extend to or affect any
subsequent default or impair any right consequent thereto.

            SECTION 12.04. Action by Trustee Upon Occurrence of Event of
Default. Upon the occurrence and continuation of an Event of Default the Trustee
(i) for and on behalf of the Holders of the Bonds, shall have the same rights
hereunder which are possessed by any Holders of the Bonds; (ii) shall be
authorized to proceed, in its own name and as trustee of an express trust; (iii)
may pursue any available remedy by action at law or suit in equity to enforce
the payment of the principal of and interest and premium, if any, on the Bonds;
(iv) may file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of such Trustee and of the
Bondholders allowed in any judicial proceedings relative to the Company, its
creditors, its property or the Bonds; and (v) may, and upon the written request
or direction of the Holders of not less than twenty-five percent (25%) in
principal amount of the Bonds then Outstanding (determined in accordance with
the provisions of Section 13.03), with the prior written consent of the Credit
Facility Issuer, shall proceed to protect and enforce all rights of the Holders
and the Trustee under and as permitted by this Indenture and the laws of the
State of New York, by such means or appropriate judicial proceedings as shall be
suitable or deemed by it most effective in the premises, including the
appointment of temporary trustees and any actions, suits or special proceedings
at law or in equity or in bankruptcy or by proceedings in the office of any
board or officer having jurisdiction, or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this Indenture, or in aid
of execution of any power granted in this Indenture or to enforce any other
legal or equitable right or remedy vested in the Holders of the Bonds or the
Trustee by this Indenture or by such laws, or for the appointment of a receiver.
All rights of action (including the right to file proofs


                                     XII-3


of claim) under this Indenture or under any of the Bonds may be enforced by the
Trustee without the possession of any of the Bonds or the production thereof in
any trial or other proceedings relating thereto. Any such suit or proceeding
instituted by the Trustee shall be brought in its name and as trustee of an
express trust without the necessity of joining as plaintiffs or defendants any
Holders of the Bonds, and any recovery or judgment shall be for the equal
benefit of the Holders of the Outstanding Bonds.

            In the enforcement of any remedy under this Indenture the Trustee
shall be entitled to sue for, enforce payment of and receive any and all
amounts, then or during any Event of Default becoming, and at any time
remaining, due from the Company and unpaid under the Participation Agreement and
the Note for principal, premium, interest or otherwise under any of the
provisions of this Indenture or of the Bonds, with interest on overdue payments
if such interest then is permitted by the laws of the State of New York,
together with any and all costs and expenses of collection and of all
proceedings hereunder and under such Bonds, without prejudice to any other right
or remedy of the Trustee or of the Holders, and to recover and enforce judgment
or decree against the Company which is in default of its respective obligations
under the Participation Agreement and the Note, but solely as provided herein
and in such Bonds, for any portion of such amounts remaining unpaid, with
interest, costs and expenses, and to collect in any manner provided by law, the
monies adjudged or decreed to be payable. Any such judgment shall be recovered
by the Trustee, in its own name and as trustee of an express trust.

            SECTION 12.05. Powers of Trustee With Respect to Participation
Agreement and Other Agreements. If the payments required to be paid to the
Trustee under the Participation Agreement and the Note or other agreement
pledged and assigned hereunder, as the case may be, are not paid when due or
upon the happening and continuance of an Event of Default set forth in clause
(a) or (b) of Section 12.01, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of all payments due and
unpaid under the Participation Agreement and the Note or other agreement, as the
case may be, and required to be paid to the Trustee and may prosecute any such
action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Company or the obligor under any other
agreement, as the case may be, and collect in the manner provided by law out of
the property of the Company or such obligor wherever situated, the monies
adjudged or decreed to be payable.

            In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company under the Participation Agreement or an
obligor under any other agreement pledged and assigned hereunder, as the case
may be, under the Federal Bankruptcy Act or any other applicable law, or in case
a receiver or trustee shall have been appointed for the property of the Company
under the Participation Agreement and the Note or an obligor under any other
agreement pledged and assigned hereunder, as the case may be, the Trustee,
regardless of whether the principal of the Bonds shall then be due and payable
as therein expressed or by declaration or otherwise and regardless of whether
the Trustee shall have made any demand pursuant to the power vested in it by
this Indenture, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid under the Participation Agreement and the Note by the
Company or under such other agreement by such obligor, as the case may be, and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for reasonable
compensation to the Trustee, its agents, attorneys and counsel, and for
reimbursement of all expenses and


                                     XII-4


liabilities incurred, and all advances made, by the Trustee except as a result
of its negligence or bad faith) and of the Holders allowed in any such judicial
proceedings relative to the Company or other obligor, as the case may be, or to
the creditors or property of the Company or other obligor, as the case may be,
and to collect and receive any monies or other property payable or deliverable
on such claims, and to distribute in accordance with the provisions hereof all
amounts received with respect to the claims of the Holders and of the Trustee on
their behalf, and any receiver, assignee or trustee in bankruptcy or
reorganization is hereby authorized to make such payments to the Trustee.

            Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holders any plan of
reorganization, arrangement, adjustment or composition affecting the Bonds or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holders in any such proceeding.

            The provisions of this Section shall not be construed as in any way
limiting the powers of the Trustee, with respect to defaults by the Authority or
by the Company under the Participation Agreement and the Note, or an obligor
under any other agreement pledged and assigned hereunder, as the case may be,
whether such powers be expressly or implicitly granted to the Trustee elsewhere
in this Indenture or in the Participation Agreement or the Note or other
agreement, as the case may be, or as a denial that the Trustee has any such
other powers, but the powers granted to the Trustee by this Section shall be
supplemental, additional and cumulative to all other powers possessed by the
Trustee with respect to defaults under this Indenture or under the Participation
Agreement, the Note or other agreement pledged and assigned hereunder, as the
case may be.

            SECTION 12.06. Disposition of Monies in Event of Insufficiencies in
Funds and Accounts. All monies (other than proceeds of any Support Facility)
received by the Trustee pursuant to any right given or action taken under the
provisions of this Article, after payment of the costs and expenses of the
proceedings resulting in the collection of such monies and of the expenses, fees
and advances incurred or made by the Trustee hereunder, shall be deposited in
the Bond Fund. If at any time the monies in the Bond Fund shall not be
sufficient to pay the interest or principal or premium, if any (or the
redemption price), of the Bonds as the same become due and payable (whether at
maturity or upon proceedings for the redemption thereof or by acceleration or
otherwise), the monies in such fund, together with any other monies then
available or thereafter becoming available for such purpose, whether through the
exercise of the remedies provided for in this Article XII or otherwise, shall be
applied as follows:

            (a) Unless the principal of all the Bonds shall have become due and
payable or shall have been declared due and payable pursuant to the provisions
of Section 12.03, all such monies shall be applied:

            First: to the payment to the persons entitled thereto of all
      installments of interest then due, in the order of the maturity of the
      installments of such interest, and if the amount available shall not be
      sufficient to pay in full any particular installment, then to the payment
      ratably, according to the amounts due on such installment, to the persons
      entitled thereto, without any discrimination or preference; and


                                     XII-5


            Second: to the payment of the premium, if any, on and the principal
      of the Bonds, to the purchase and retirement of Bonds and to the
      redemption of Bonds, all in accordance with the provisions of this
      Indenture.

            (b) If the principal of all the Bonds shall have become due and
payable or shall have been declared due and payable pursuant to the provisions
of Section 12.03, all such monies shall be applied to the payment of the
principal and interest then due and unpaid, with interest on such principal as
aforesaid, without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, according to the
amounts due respectively for principal and interest, to the persons entitled
thereto without any discrimination or preference except as to any difference in
the respective rates of interest specified in the Bonds.

            (c) If the principal of all the Bonds shall have been declared due
and payable pursuant to the provisions of Section 12.03, and if such declaration
shall thereafter have been rescinded and annulled pursuant to the provisions of
such Section 12.03, then, subject to the provisions of subparagraph (b) above of
this paragraph in the event that the principal of all the Bonds shall later
become due and payable or be declared due and payable pursuant to the provisions
of Section 12.03, the monies then held in the Bond Fund shall be applied to the
payment of the principal of and premium (or redemption price) on all matured
Bonds and all Bonds (or portions of the principal amount thereof) then or
theretofore required to be redeemed pursuant to any provisions of this Indenture
(excluding principal not then due except by reason of such declaration) and all
arrears of interest and interest then due, if any, upon all Bonds then
Outstanding, and any monies thereafter deposited in the Bond Fund shall be
applied in accordance with the provisions of Article IX.

            Whenever monies are to be applied by the Trustee pursuant to the
provisions of subparagraphs (a) and (b) of this Section, (i) such monies shall
be applied by the Trustee at such times, and from time to time, as the Trustee
in its sole discretion shall determine, having due regard to the amount of such
monies available for application and the likelihood of additional monies
becoming available for such application in the future; (ii) the deposit of such
monies, in trust for the proper purpose, shall constitute proper application by
the Trustee; and (iii) the Trustee shall incur no liability whatsoever to the
Authority, to any Holder or to any other person for any delay in applying any
such monies, so long as the Trustee acts with reasonable diligence, having due
regard to the circumstances, and ultimately applies the same in accordance with
such provisions of this Indenture as may be applicable at the time of
application by the Trustee. Whenever the Trustee shall exercise such discretion
in applying such monies, it shall fix the date (which shall be an Interest
Payment Date unless the Trustee shall deem another date more suitable) upon
which such application is to be made and upon such date interest on the amounts
of principal to be paid on such date shall cease to accrue. The Trustee shall
give such notice as it may deem appropriate of the fixing of any such date, and
shall not be required to make payment to the Holder of any unpaid Bond until
such Bond shall be surrendered to the Trustee for appropriate endorsement, or
for cancellation if fully paid.

            SECTION 12.07. Effect of Delay or Omission; Waiver of Default;
Direction of Remedial Proceedings by the Holders. No delay or omission of the
Trustee or of any Holder of the Bonds to exercise any right or power accruing
upon any default or Event of Default shall impair any such right or power or
shall be construed to be a waiver of any such default or acquiescence therein.


                                     XII-6


            Anything in this Indenture to the contrary notwithstanding, the
Holders of not less than a majority in principal amount of the Bonds at the time
Outstanding (determined in accordance with the provisions of Section 13.03) with
the prior written consent of the Credit Facility Issuer shall be authorized and
empowered and have the right, by an instrument or concurrent instruments in
writing delivered to the Trustee on behalf of the Holders of the Bonds then
Outstanding to consent to the waiver of any Event of Default or its
consequences, and the Trustee shall waive any Event of Default and its
consequences upon the written request of the Holders of such majority; provided,
however, that there shall not be waived (i) any default in payment of principal
or premium when due or (ii) any default in payment when due of interest unless,
in either case, prior to such waiver all arrears in principal, premium, if any,
and interest, with additional interest, to the extent permitted by law, at the
rate then borne by the Bonds (which, in the case of Auction Rate Bonds shall be
the Overdue Rate), and all fees and expenses of the Trustee shall have been paid
or provided for; provided, however, that notwithstanding any such waiver, any
Auction Rate Bonds shall continue to bear interest at the Overdue Rate until
such Event of Default is cured. No such waiver shall extend to or affect any
other existing or subsequent default or Event of Default or impair any rights or
remedies consequent thereon.

            Anything in this Indenture to the contrary notwithstanding, the
Holders of not less than twenty-five percent (25%) in principal amount of the
Bonds at the time Outstanding (determined in accordance with the provisions of
Section 13.03) with the prior written consent of the Credit Facility Issuer
shall be authorized and empowered and have the right, by an instrument or
concurrent instruments in writing delivered to the Trustee to direct the time
and method of conducting any proceeding for any remedy to be taken by the
Trustee or available to the Trustee or available to the Holders of the Bonds, or
exercising any trust or power conferred upon the Trustee hereunder provided: (1)
such direction shall not be in conflict with any rule of law or with this
Indenture or expose the Trustee to personal liability, or be unduly prejudicial
to Holders not joining therein, and (2) the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such direction.

            SECTION 12.08. Suits or Actions by Holders; Any Holder May Enforce
Overdue Payment of His or Her Bond or Interest Thereon. No Holder of any of the
Bonds shall have any right to institute any suit, action or proceeding in equity
or at law for the execution of any trust hereunder or for any other remedy
hereunder unless there shall have occurred an Event of Default of which the
Trustee has been notified or is deemed to have notice as provided in Section
11.08, and such Holder previously shall have given to the Trustee written notice
of the Event of Default on account of which such suit, action or proceeding is
to be instituted, and unless also the Holders of not less than twenty-five
percent (25%) in principal amount of the Bonds then Outstanding shall have made
written request of the Trustee after the right to exercise such powers or right
of action, as the case may be, shall have accrued, and shall have afforded the
Trustee a period of 60 days either to proceed to exercise the powers hereinabove
granted or to institute such action, suit or proceeding in its or their name,
the Trustee shall have been indemnified by Holders against the costs, expenses
and liabilities to be incurred in compliance with such request, and shall not
have received an inconsistent direction from the Holders of not less than
twenty-five percent (25%) in principal amount of the Bonds and the Trustee shall
have refused or neglected to comply with such request within a reasonable time.
It is understood and intended that no one or more Holders of the Bonds hereby
secured shall have any right in any manner whatever by the action of such Holder
or Holders to affect, disturb or prejudice the security of this Indenture, or to
enforce any right hereunder except in the manner


                                     XII-7


herein provided; that all proceedings at law or in equity shall be instituted,
had and maintained in the manner herein provided and for the benefit of all
Holders of such Outstanding Bonds; and that any individual rights of action or
other right given to one or more of such Holders by law are restricted by this
Indenture to the rights and remedies herein provided. Notwithstanding the
foregoing and subject to Section 11.02, the Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.

            Notwithstanding any other provision of this Indenture, the right of
any Holder of a Bond to receive payment of the principal of, premium, if any,
and interest on such Bond, on or after the respective due dates expressed in
such Bond, or to institute suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of such Holder, except that no Holder of any such Bond shall have the
right to institute any such suit, if and to the extent that the institution or
prosecution thereof or the entry of judgment therein would, under applicable
law, result in the surrender, impairment, waiver, or loss of the lien of this
Indenture.

            SECTION 12.09. Remedies Not Exclusive. No remedy by the terms of
this Indenture conferred upon or reserved to the Trustee or the Holders of the
Bonds is intended to be exclusive of any other remedy so conferred or reserved
or to be exclusive of other remedies now or hereafter existing at law or in
equity or by statute, and each and every such remedy shall be cumulative and
shall be in addition to any other remedy given hereunder to the Trustee or to
the Holders of the Bonds or now or hereafter existing at law or in equity or by
statute. Every such right, power and remedy given hereunder or by law or in
equity or by statute may be exercised from time to time and as often as may be
deemed expedient.

            SECTION 12.10. Effect of Abandonment of Proceedings on Default. In
case any proceeding taken by the Trustee or the Holders of the Bonds on account
of any Event of Default shall have been discontinued or abandoned for any
reason, then and in every such case the Authority, the Trustee and the Holders
shall be restored to their former positions and rights hereunder, respectively,
and all rights, remedies, powers and duties of the Trustee shall continue as
though no such proceeding had been taken.

            SECTION 12.11. Interest on Overdue Amounts. To the extent permitted
by law all amounts which are due and payable but which have not been so paid
under this Indenture shall bear interest at the then current rate of interest on
the Bonds until paid; provided, however, that during any Auction Rate Period all
amounts which are due and owing but unpaid hereunder shall bear interest at the
Overdue Rate until paid.


                                     XII-8


                                  ARTICLE XIII

                  EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
                     OWNERSHIP OF BONDS; EXCLUSION OF BONDS
                     OWNED BY THE AUTHORITY OR THE COMPANY

            SECTION 13.01. Execution of Requests, Directions and Consents and
Other Instruments and Proof of Same; Ownership of Bonds and Proof of Same. Any
request, direction, consent or other instrument required by this Indenture to be
signed or executed by Holders of Bonds may be signed or executed by such Holders
in person or by agent or agents duly appointed in writing, and may be in any
number of concurrent writings of substantially similar tenor. Proof of the
execution of any such request, direction, consent or other instrument or of a
writing appointing any such agent, and of the holding or ownership of Bonds,
shall be sufficient for any purpose of this Indenture and shall be conclusive in
favor of the Trustee hereunder with regard to any action taken by it under such
request, direction, consent or other instrument or of a writing appointing any
such agent, if made in the following manner:

            (a) the fact and date of the execution by any person of any such
      request, direction, consent or other instrument in writing may be proved
      in any reasonable manner which the Trustee deems sufficient;

            (b) the ownership of Bonds shall be proved by the books of registry
      kept under the provisions of this Indenture.

            Any request, direction, consent or vote of the Holder of any Bond
shall bind and be conclusive upon the Holder of such Bond giving such request,
direction or consent or casting such vote and upon every future Holder of the
same Bond in respect of anything done or suffered to be done by the Trustee or
otherwise, or by the Holders of other Bonds, in pursuance of such request,
direction, consent or vote, and whether or not such future Holder has knowledge
of or information as to such request, direction, consent or vote; provided that
any request, direction, consent or vote of the Holder of a Bond required by any
of the provisions hereof may be revoked by the Holder giving such request,
direction, consent or vote or by a subsequent Holder if such revocation in
writing is filed with the Trustee, prior to the time when the request,
direction, consent or vote of the percentage of the Holders of the Bonds
required by such provision shall have been given and action taken by the Trustee
or otherwise, or by the Holders of other Bonds, under authority of such request,
direction, consent or vote.

            The payment of or on account of principal to or upon the order of
the person in whose name the Bonds shall at the time be registered on said books
of registry and the payment of interest to or upon the order of any person in
whose name the Bonds shall at the time be registered on said books of registry,
shall be valid and effectual fully to satisfy and discharge all liability
hereunder or upon the Bonds to the extent of the sum or sums so paid.

            The Authority at the request of the Company may establish a record
date for the taking of any action by the Holders.


                                     XIII-1


            SECTION 13.02. Meetings of Holders. The Trustee or the Holders of
not less than twenty percent (20%) in principal amount of the Bonds then
Outstanding may at any time call a meeting of the Holders of the Bonds for the
purpose of the consenting to, the approving, the requesting, or the directing by
the Holders of the Bonds of any action required to be consented to or approved
by them hereunder or which they may request or direct hereunder to be taken, or
for the making by the Holders of any appointments they may make hereunder, or
for the purpose of taking any other action which the Holders may take hereunder,
or for any other purpose concerning the payment and security of the Bonds
hereunder. Every such meeting shall be held at such place in The City of New
York, State of New York, as may be specified in the notice calling such meeting.
Written notice of such meeting, stating the place and time of the meeting and in
general terms the business to be submitted, shall be mailed to the Holders whose
names and addresses then appear upon the books of registry by the Registrar and
Paying Agent or the Holders calling such meeting, not less than 20 days nor more
than 60 days before such meeting. Any meeting of Holders shall, however, be
valid without notice if the Holders of all Bonds then Outstanding are present in
person or by proxy or if notice is waived before or within 30 days after the
meeting by those not so present.

            Attendance and voting by Holders at meetings thereof may be in
person or by proxy. Holders of Bonds may, by an instrument in writing under
their hands, appoint any person or persons, with full power of substitution, as
their proxy to attend and vote at any meeting for them.

            Persons named by the Trustee, or elected by the Holders of a
majority in principal amount of the Bonds represented at the meeting in person
or by proxy in the event the Trustee is not represented at such meeting, shall
act as temporary chairman and temporary secretary of any meeting of Holders. A
permanent chairman and a permanent secretary of such meeting shall be elected by
the Holders of a majority in principal amount of the Bonds represented at such
meeting in person or by proxy. The permanent chairman of the meeting shall
appoint two (2) inspectors of votes who shall count all votes cast at such
meeting, except votes on the election of chairman and secretary as aforesaid,
and who shall make and file with the secretary of the meeting and the Trustee
their verified report of all such votes cast at the meeting.

            The Holders of not less than the principal amount of the Bonds
required by the provisions hereof to consent to, approve, request or direct any
action to be taken at a meeting of Holders, or required by the provisions hereof
to make any appointments to be made at such meeting, or required by the
provisions hereof to take any other action to be taken at such meeting, must be
present at such meeting in person or by proxy in order to constitute a quorum
for the transaction of such business. Less than a quorum, however, shall have
power to adjourn the meeting from time to time without notice of such
adjournment other than the announcement thereof at the meeting; provided,
however, that if such meeting is adjourned by less than a quorum for more than
ten (10) days, notice of such adjournment shall be given by the Trustee at least
five (5) days prior to the adjourned date of the meeting.

            Any Holder of a Bond shall be entitled in person or by proxy to
attend and vote at such meeting as Holder of the Bond or Bonds registered in his
or her name without producing such Bond or Bonds. Such persons and their proxies
shall, if required, produce such proof of personal identity as shall be
satisfactory to the Secretary of the meeting.


                                     XIII-2


            All proxies presented at such meeting shall be delivered to the
Inspector of Votes and filed with the Secretary of the meeting. The right of a
proxy for a Holder to attend the meeting and act and vote thereat may be proved
(subject to the Trustee's right to require additional proof) by a written proxy
executed by such Holder as aforesaid.

            The officers or nominees of the Trustee may be present or
represented at such meeting and take part therein, but shall not be entitled to
vote thereat, except for such officers or nominees who are Holders or proxies
for Holders (including the Trustee).

            The vote at any such meeting of the Holder of any Bond, or his or
her proxy, entitled to vote thereat shall be binding upon such Holder and upon
every subsequent Holder of such Bond (whether or not such subsequent Holder has
notice thereof).

            SECTION 13.03. Exclusion of Bonds Held by or for the Authority, the
Company and of Bonds No Longer Deemed Outstanding Hereunder. In determining
whether the Holders of the requisite aggregate principal amount of Bonds have
concurred in any demand, request, direction, consent, vote or waiver under this
Indenture, any Bonds which are owned by or on behalf of or for the account of
the Authority, the Company and, except for the purposes of Section 15.01, any
Bonds which are deemed no longer Outstanding hereunder shall be disregarded and
not included for the purpose of any such determination, and such Bonds shall not
be entitled to vote upon, consent to or concur in any action provided in this
Indenture, except that for the purposes of determining whether the Trustee shall
be protected in relying on any such demand, request, direction, consent, vote or
waiver only Bonds which the Trustee knows are owned as aforesaid shall be
disregarded. The Trustee may require each Holder of a Bond or Bonds, before such
Holder's demand, request, direction, consent, vote or waiver shall be deemed
effective, to reveal if the Bonds as to which such demand, request, direction,
consent, vote or waiver is made, granted, cast or given are disqualified as
provided in this Section.


                                     XIII-3


                                  ARTICLE XIV

                   AMENDING AND SUPPLEMENTING THE INDENTURE,
            THE PARTICIPATION AGREEMENT, THE REMARKETING AGREEMENT,
              AUCTION AGENCY AGREEMENT, BROKER-DEALER AGREEMENTS,
                         BOND PURCHASE TRUST AGREEMENT

            SECTION 14.01. Amending and Supplementing Indenture Without Consent
of Holders. The Authority and the Trustee, from time to time and at any time and
without the consent or concurrence of any Holder, may enter into a Supplemental
Indenture, (i) to make any changes, modifications, amendments or deletions to
this Indenture that may be required to permit the Indenture to be qualified
under the Trust Indenture Act of 1939 of the United States of America or (ii)
for any one or more of the following purposes:

            (a) (x) to make any changes or corrections in this Indenture or any
      Supplemental Indenture as to which the Authority shall have been advised
      by counsel that the same are required for the purpose of curing or
      correcting any ambiguity or defective or inconsistent provision or
      omission or mistake or manifest error contained in this Indenture or
      Supplemental Indenture, or (y) to insert in this Indenture such provisions
      clarifying matters or questions arising under this Indenture as are
      necessary or desirable if such provisions shall not materially and
      adversely affect the rights of the Holders;

            (b) to add additional covenants and agreements of the Authority for
      the purpose of further securing the payment of the Bonds;

            (c) to surrender any right, power or privilege reserved to or
      conferred upon the Authority by the terms of this Indenture;

            (d) to confirm as further assurance any lien, pledge or charge, or
      the subjection to any lien, pledge or charge, created or to be created by
      the provisions of this Indenture or any Supplemental Indenture;

            (e) to grant to or confer upon the Holders any additional rights,
      remedies, powers, authority or security that lawfully may be granted to or
      conferred upon them, or to grant to or to confer upon the Trustee for the
      benefit of the Holders any additional rights, duties, remedies, power or
      authority;

            (f) to provide for the issuance of Bonds in book entry or coupon
      form, if at the time permitted by applicable law;

            (g) to provide for the substitution of rating agencies;

            (h) to provide for any new administrative or procedural provisions
      made necessary or desirable by the issuance of a Support Facility or an
      Alternate Support Facility, other credit,


                                     XIV-1


      liquidity or support facility, including, but not limited to, any
      amendment necessary to obtain a rating on the Bonds based upon such
      facility; and

            (i) to modify, amend or supplement the Indenture in such manner as
      to permit the qualification of the Bonds for deposit with a Securities
      Depository, and, in connection therewith, if they so determine, to add to
      the Indenture, such other terms, conditions and provisions as may be
      required to permit such qualification.

            No Supplemental Indenture shall be entered into unless in the
opinion of Bond Counsel which shall be delivered to the Trustee (which opinion
may be combined with the opinion required by Section 14.04) the execution of
such Supplemental Indenture is permitted by the foregoing provisions of this
Section and the provisions of such Supplemental Indenture do not materially and
adversely affect the rights of the Holders of the Bonds and the Trustee may rely
on any such opinion.

            SECTION 14.02. Amending and Supplementing Indenture with Consent of
Holders. With the consent of the Holders of a majority in principal amount of
the Bonds then Outstanding, the Authority and the Trustee from time to time and
at any time may enter into a Supplemental Indenture for the purpose of adding
any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture, or modifying or amending the rights and
obligations of the Authority hereunder, or modifying or amending in any manner
the rights of the Holders; provided that, without the specific consent of the
Holders of all Bonds Outstanding which would be affected thereby no Supplemental
Indenture amending or supplementing the provisions hereof shall: (a) change the
fixed maturity date for the payment of the principal of any Bond, or the dates
for the payment of interest thereon or the terms of the purchase or redemption
thereof, or reduce the principal amount of any Bond or the rate of interest
thereon or the method of calculating the same except as otherwise provided in
this Indenture; or (b) reduce the aforesaid percentage of Bonds, the Holders of
which are required to consent to any Supplemental Indenture amending or
supplementing the provisions of this Indenture; or (c) give to any Bond any
preference over any other Bond secured hereby; or (d) authorize the creation of
any pledge of payments under the Participation Agreement or Note Payments prior
or superior to the pledge of a lien and charge thereon assigned herein for the
payment of the Bonds; or (e) effect any change in the purchase or redemption
provisions relating to the Bonds; or (f) deprive any Holders in any material
respect of the security afforded by this Indenture. A modification or amendment
of the provisions of Article IX hereof with respect to the Bond Fund or any
other Funds or Accounts established thereby shall not be deemed a change in the
terms of payment; provided that no such modification or amendment shall, except
upon the consent of the Holders of all Bonds Outstanding affected thereby,
reduce the amount or amounts required to be deposited in the Bond Fund. Nothing
in this paragraph contained, however, shall be construed as making necessary the
approval of the Holders of the execution of any Supplemental Indenture
authorized by the provisions of Section 14.01.

            The proof of the giving of any consent by any Holder required by
this Section and of the holding of the Bonds for the purpose of giving consents
shall be made in accordance with the provisions of Article XIII. It shall not be
necessary that the consent of the Holders approve the particular form of wording
of the proposed supplemental amendment or supplement, but it shall be sufficient
if such consent approves the substance of the proposed amendment or supplement.
After the Holders of the required


                                     XIV-2


percentage of Bonds shall have filed their consents to the amending or
supplementing hereof pursuant to this Section, the Authority shall mail a copy
of notice of such consent, postage prepaid, to each Holder at his or her address
as it appears upon the books of registry and to the Trustee. Nothing in this
paragraph contained, however, shall be construed as requiring the giving of
notice of any amending or supplementing of this Indenture authorized by this
Section. A record of the consents shall be filed with the Trustee, and shall be
proof of the matters therein stated until the contrary is proved. No action or
proceeding to set aside or invalidate such Supplemental Indenture or any of the
proceedings for its adoption shall be instituted or maintained unless such
action or proceeding is commenced within sixty (60) days after the mailing of
the notice required by this paragraph.

            Notwithstanding anything in this Indenture to the contrary, the
consent of the Holders of the required amount of Bonds shall be deemed given
with respect to a Supplemental Indenture if:

            (a) (i) the Supplemental Indenture takes effect on a date on which
      all of the Bonds that are affected by such Supplemental Indenture are
      subject to mandatory tender for purchase in accordance with this
      Indenture, (ii) any modification or amendment effected thereby is
      consented to in writing by the Remarketing Agent for such Bonds on or
      prior to such effective date and is disclosed in the official statement or
      other disclosure document pursuant to which such Bonds are remarketed and
      (iii) the Bonds so tendered are purchased;

            (b) (i) not less than 30 days before the effective date of the
      Supplemental Indenture, the Trustee sends a notice of the proposed
      modification or amendment to the Holders of the Bonds that are affected by
      such Supplemental Indenture and the Holders of such Bonds have the right
      to tender their Bonds for purchase pursuant to Section 5.03 hereof before
      such effective date, (ii) the Remarketing Agent for such Bonds consents in
      writing to the proposed modification or amendment on or prior to such
      effective date and (iii) the Bonds so tendered are purchased; or

            (c) (i) not less than 30 days before the effective date of the
      Supplemental Indenture, the Trustee sends a notice of the proposed
      modification or amendment to the Holders of the Auction Rate Bonds that
      are affected by such Supplemental Indenture and the Auction Rate
      determined for such Auction Rate Bonds at the Auction immediately
      preceding such effective date is a Winning Bid Rate, and (ii) the
      Broker-Dealer(s) for such Auction Rate Bonds consent in writing to the
      proposed modification or amendment on or prior to such effective date;
      provided, however, that, notwithstanding anything to the contrary in this
      Indenture, any Auction Rate Bonds that are not the subject of a specific
      Hold Order or Bid shall be deemed to be subject to a Sell Order at the
      Auction immediately preceding such effective date.

            SECTION 14.03. Notation upon Bonds; New Bonds Issued upon
Amendments. The Bonds delivered after the effective date of any action taken as
provided in this Article, if any, may and shall if required by the Trustee bear
a notation as to such action, by endorsement or otherwise and in form approved
by the Authority. In that case, upon demand of any Holder at such effective date
and upon presentation of Bonds at the principal office of the Trustee or other
transfer agent or registrar hereunder for such Bonds, and at such additional
offices, if any, as the Authority may select and designate for that purpose, a
suitable notation shall be made on the Bonds.


                                     XIV-3


            SECTION 14.04. Effectiveness of Supplemental Indentures. Upon the
execution pursuant to this Article by the Authority and the Trustee of any
Supplemental Indenture amending or supplementing the provisions of this
Indenture and the delivery to the Trustee of an opinion of Bond Counsel that
such Supplemental Indenture is permitted by the provisions of this Article XIV
and has been duly executed in accordance with the provisions hereof and
applicable law and that the provisions thereof are valid (upon which opinion the
Trustee, subject to the provisions of Section 11.04, shall be fully protected in
relying), or upon such later date as may be specified in such Supplemental
Indenture, (i) this Indenture and the Bonds shall be modified and amended in
accordance with such Supplemental Indenture; (ii) the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Authority, the Trustee, and the Holders shall thereafter be determined,
exercised and enforced under this Indenture subject in all respects to such
modifications and amendments; and (iii) all of the terms and conditions of any
such Supplemental Indenture shall be a part of the terms and conditions of the
Bonds and of this Indenture for any and all purposes.

            SECTION 14.05. Supplemental Indenture Affecting Support Facility
Provider. No Supplemental Indenture which takes effect while any Support
Facility is in effect may be entered into by the Authority and the Trustee or be
consented to by the Holders without written consent of the issuer of each
Support Facility Issuer.

            SECTION 14.06. Supplemental Participation Agreements Not Requiring
the Consent of the Holders. The Authority and the Company may, with the written
consent of the Trustee but without notice to or consent of any Holder, from time
to time and at any time, agree to such supplemental agreements supplementing the
Participation Agreement or amendments to the Participation Agreement as shall
not be inconsistent with the terms and provisions of the Participation Agreement
or this Indenture and, in the opinion of the Authority, shall not be detrimental
to the interests of the Holders (which Supplemental Participation Agreements
shall thereafter form a part of the Participation Agreement):

            (a) to cure any ambiguity or formal defect or omission in the
      Participation Agreement or in any supplemental agreement;

            (b) to grant to or confer upon the Trustee for the benefit of the
      Holders any additional rights, remedies, powers, authority or security
      that may lawfully be granted to or conferred upon the Holders or the
      Trustee;

            (c) to provide for any new administrative, security or procedural
      provisions necessitated by the issuance of an Alternate Support Facility;
      or

            (d) to provide for or add any further changes or corrections that
      are necessary or desirable to comply with any Supplemental Indenture
      entered into pursuant to Section 14.01;

provided that no such Supplemental Participation Agreement which takes effect
while a Support Facility is in effect shall be effective prior to the receipt by
such parties of the written consent of each Support Facility Issuer.


                                     XIV-4


            SECTION 14.07. Notice and Consent for Supplemental Participation
Agreements Requiring the Consent of the Holders. Except for Supplemental
Participation Agreements or amendments provided for in Section 14.06, neither
the Authority nor the Trustee shall agree or consent, as the case may be, to any
Supplemental Participation Agreement or amendment to the Participation Agreement
unless notice of the proposed execution of such Supplemental Participation
Agreement or amendment shall have been given and the Holders shall have
consented to and approved the execution thereof in the same manner and form as
provided for in Section 14.02 in the case of Supplemental Indentures; provided
that no such Supplemental Participation Agreement which materially and adversely
affects any issuer of a Support Facility (so long as such Support Facility is in
effect) shall be effective prior to the receipt by such parties of the written
consent of the issuer of such Support Facility.

            Notwithstanding anything in this Indenture to the contrary, the
consent of the Holders of the required amount of Bonds shall be deemed given
with respect to any Supplemental Participation Agreement or amendment to the
Participation Agreement if:

            (a) (i) the Supplemental Participation Agreement or amendment to the
      Participation Agreement takes effect on a date on which all of the Bonds
      that are affected by such Supplemental Participation Agreement or
      amendment to the Participation Agreement are subject to mandatory tender
      for purchase in accordance with this Indenture, (ii) any modification or
      amendment effected thereby is consented to in writing by the Remarketing
      Agent for such Bonds on or prior to such effective date and disclosed in
      the official statement or other disclosure document pursuant to which such
      Bonds are remarketed and (iii) the Bonds so tendered are purchased;

            (b) (i) not less than 30 days before the effective date of the
      Supplemental Participation Agreement or amendment to the Participation
      Agreement, the Trustee sends a notice of the proposed modification or
      amendment to the Holders of the Bonds that are affected by such
      modification or amendment and the Holders of such Bonds have the right to
      tender their Bonds for purchase pursuant to Section 5.03 hereof before
      such effective date, (ii) the Remarketing Agent for such Bonds consents in
      writing to the proposed modification or amendment on or prior to such
      effective date and (iii) the Bonds so tendered are purchased; or

            (c) (i) not less than 30 days before the effective date of the
      Supplemental Participation Agreement or amendment to the Participation
      Agreement, the Trustee sends a notice of the proposed modification or
      amendment to the Holders of the Auction Rate Bonds that are affected by
      such Supplemental Participation Agreement or amendment to the
      Participation Agreement and the Auction Rate determined for such Auction
      Rate Bonds at the Auction immediately preceding such effective date is a
      Winning Bid Rate, and (ii) the Broker-Dealer(s) for such Auction Rate
      Bonds consent in writing to the proposed modification or amendment on or
      prior to such effective date; provided, however, that, notwithstanding
      anything to the contrary in this Indenture, any Auction Rate Bonds that
      are not the subject of a specific Hold Order or Bid shall be deemed to be
      subject to a Sell Order at the Auction immediately preceding such
      effective date.

            SECTION 14.08. Effectiveness of Supplemental Participation
Agreement. Upon the execution pursuant to this Article and of applicable law by
the Authority and the Company of any


                                     XIV-5


Supplemental Participation Agreement amending or supplementing the provisions of
the Participation Agreement and the delivery to the Trustee of an Opinion of
Bond Counsel that such Supplemental Participation Agreement is in due form, has
been duly executed in accordance with the provisions hereof and applicable law
and that the provisions thereof are valid (upon which opinion the Trustee,
subject to the provisions of Section 11.04, shall be fully protected in
relying), or upon such later date as may be specified in such Supplemental
Participation Agreement, (i) the Participation Agreement shall be modified and
amended in accordance with such Supplemental Participation Agreement; (ii) the
respective rights, limitations of rights, obligations, duties and immunities
thereunder of the Authority and the Company shall thereafter be determined,
exercised and enforced thereunder subject in all respects to such modifications
and amendments; and (iii) all of the terms and conditions of any such
Supplemental Participation Agreement shall be a part of the terms and conditions
thereof for any and all purposes.

            SECTION 14.09. Amending and Supplementing the Remarketing Agreement,
Auction Agency Agreement, Broker-Dealer Agreements or Bond Purchase Trust
Agreement. Amendments of or supplements to the Remarketing Agreement, the
Auction Agency Agreement, any Broker-Dealer Agreement or the Bond Purchase Trust
Agreement shall be made only in accordance with the terms thereof.


                                     XIV-6


                                   ARTICLE XV

                     DEFEASANCE; MONEYS HELD FOR PAYMENT OF
                                 DEFEASED BONDS

            SECTION 15.01. Discharge of Liens and Pledges; Bonds No Longer
Deemed to be Outstanding Hereunder. Bonds purchased pursuant to Section 5.03,
5.04, 5.08 or 5.09 shall continue to be Outstanding hereunder until such Bonds
shall be cancelled in accordance with Section 5.15 or paid at maturity or
redeemed pursuant to Article V or otherwise defeased. The obligations of the
Authority under this Indenture and the liens, pledges, charges, trusts,
covenants and agreements of the Authority, herein made or provided for, shall
be, subject to the terms of Section 15.02, fully discharged and satisfied as to
the Bonds or portion thereof and the Bonds shall no longer be deemed to be
Outstanding hereunder:

            (a) when the Bonds shall have been cancelled, or shall have been
surrendered for cancellation and are subject to cancellation, or shall have been
redeemed by the Trustee from monies held by it under this Indenture; or

            (b) if the Bonds have not been cancelled or so surrendered for
cancellation or subject to cancellation, or so redeemed, when (1) payment of the
principal of and premium, if any, on the Bonds, plus interest on such principal
to the due date thereof (whether such due date be by reason of maturity or upon
redemption or prepayment, or otherwise) and of any Purchase Price which is or
may become due on such Bonds either (i) shall have been made or caused to be
made in accordance with the terms thereof, or (ii) shall have been provided for
by irrevocably depositing with the Trustee in trust, and irrevocably
appropriating and setting aside exclusively for such payments (A) monies
sufficient to make such payment, or (B) Governmental Obligations maturing as to
principal and interest in such amounts and at such times as will insure the
availability of sufficient and timely monies to make such payments when due, or
(C) a combination of both such monies and Governmental Obligations, whichever
the Authority deems to be in its best interest, (2) there shall have been
delivered to the Trustee (x) a letter addressed to the Trustee from a nationally
recognized firm of independent public accountants verifying the mathematical
accuracy of the sufficiency of the deposit made pursuant to (1)(ii) above, (y)
an opinion of Bond Counsel to the effect that upon the provision of payment on
the Bonds as described in (1)(ii) above, the Bonds are no longer deemed to be
Outstanding under the Indenture and (z) in the case of Bonds bearing interest at
a Daily Rate, a Weekly Rate, an Auction Rate, a Monthly Rate and a Semi-annual
Rate, written confirmation from S&P, if the Bonds are then rated by S&P, to the
effect that the deposit made pursuant to (1)(ii) above will not, by itself,
result in a reduction or withdrawal of its short-term or long-term rating of the
Bonds below the rating category of S&P then in effect with respect to the Bonds,
and (3) all necessary and proper fees, compensation and expenses of the Trustee
pertaining to the Bonds or portion thereof with respect to which such deposit is
made, shall have been paid or the payment thereof provided to the satisfaction
of the Trustee.

            At such time as the Bonds shall be deemed to be no longer
Outstanding hereunder, as aforesaid, such Bonds shall cease to accrue interest
from the due date thereof (whether such due date occurs by reason of maturity,
or upon redemption or prepayment or otherwise) and, except for the purposes of
any such payment from such monies or Governmental Obligations and except, in the
case of


                                      XV-1


Auction Rate Bonds, to the extent provided in the definition of Outstanding in
Article I shall no longer be secured by or entitled to the benefits of this
Indenture.

            Any such monies so deposited with the Trustee as provided in this
Section may at the written direction of the Company also be invested and
reinvested in Governmental Obligations, maturing in the amounts and times as
hereinbefore set forth, and all income from all Governmental Obligations in the
hands of the Trustee pursuant to this Section which is not required for the
payment of the Bonds and interest thereon with respect to which such monies
shall have been so deposited shall be paid to the Company or if any Bonds are
then Outstanding, be deposited in the Bond Fund and credited to the Principal
Account as and when realized and collected, for use and application as are other
monies credited to such Account.

            Anything in Article XV to the contrary notwithstanding, if monies or
Governmental Obligations have been deposited or set aside with the Trustee
pursuant to this Section for the payment of the Bonds, the Bonds shall be deemed
to have been paid in full. No amendment to the provisions of this Article shall
be made without the consent of the Holders of the Bonds affected thereby.

            The Trustee shall promptly surrender any Support Facility (if
appropriate for the type of instrument or instruments then serving as Support
Facility) to the issuer of such Support Facility for cancellation or shall
otherwise take appropriate action to terminate the Support Facility following
any such defeasance.

            SECTION 15.02. Release of Indenture, Termination of Right, Title and
Interest of Trustee. When the Bonds shall be deemed to be paid in accordance
with the provisions of Section 15.01, then and in the case all right, title and
interest of the Trustee under this Indenture shall thereupon cease, determine
and become void, and the Trustee in such case shall release this Indenture,
shall execute such documents to evidence such release as may be reasonably
required by the Authority and furnish the Authority with the same, and shall
turn over to the Company any surplus monies and balances remaining in any of the
Funds and Accounts created in or held under this Indenture, other than monies
and Governmental Obligations held by it pursuant to Section 15.01 or the
provisions of Section 15.03 for the redemption, payment or prepayment of the
Bonds; otherwise, this Indenture shall be, continue and remain in full force and
effect.

            Notwithstanding the satisfaction and discharge of this Indenture,
the rights of the Trustee and the Registrar and Paying Agent under Sections
11.02, 11.06 and 11.17 shall survive defeasance of the Bonds hereunder.

            SECTION 15.03. Bonds Not Presented for Payment When Due; Monies Held
for the Bonds after Due Date of Bonds. Subject to the provisions of the next
sentence of this paragraph, if the Bonds shall not be presented for payment when
the principal thereof shall become due, whether at maturity or at the date fixed
for the redemption thereof, or otherwise, and if monies or Governmental
Obligations shall at such due date be held by the Trustee in trust for that
purpose sufficient and available to pay the principal of and premium, if any, on
the Bonds, together with all interest due on such principal to the due date
thereof or to the date fixed for redemption thereof, all liability of the
Authority and the Company for


                                      XV-2


such payment shall forthwith cease, determine and be completely discharged, and
thereupon it shall be the duty of the Trustee to hold said monies or
Governmental Obligations without liability to the Holders for interest thereon,
in trust for the benefit of the Holders, which thereafter shall be restricted
exclusively to said monies or Governmental Obligations for any claim of whatever
nature on its part on or with respect to the Bonds, including for any claim for
the payment thereof. Notwithstanding anything to the contrary in Section 9.04,
any monies or Governmental Obligations held by the Trustee for the Holders after
the principal of and premium, if any, and interest on the Bond or any portion
thereof with respect to which such monies or Governmental Obligations have been
so set aside has become due and payable (whether at maturity or upon redemption
or prepayment or otherwise) shall be either held uninvested as cash or at the
written direction of the Company invested and reinvested in Governmental
Obligations which mature on the next Business Day. Any such monies or
Governmental Obligations held by the Trustee for the Holders after the principal
of and premium, if any, and interest on the Bonds or any portion thereof with
respect to which such monies or Governmental Obligations have been so set aside
has become due and payable (whether at maturity or upon redemption or prepayment
or otherwise) shall be deemed abandoned property when such monies or
Governmental Obligations shall have remained unpaid or undelivered to the Holder
or Holders entitled thereto for three years from the date the principal of and
premium, if any, and interest on the Bonds or any portion thereof has become due
and payable and shall be subject to the laws of the State of New York relating
to disposition of unclaimed property.


                                      XV-3


                                  ARTICLE XVI

                                 FORM OF BONDS
                   AND ENDORSEMENT AND ASSIGNMENT PROVISIONS

            SECTION 16.01. Form of Bonds and Endorsement and Assignment
Provisions. The form of Bond, the form of the certificate of authentication
thereof, the form of endorsement to appear thereon and the form of assignment
thereof shall be substantially in the form set forth in Appendix A hereto.


                                     XVI-1


                                  ARTICLE XVII

                                 MISCELLANEOUS

            SECTION 17.01. Benefits of Indenture Limited to Authority, Company,
Trustee, Registrar and Paying Agent and Auction Agent and Holders of the Bonds.
With the exception of rights or benefits herein expressly conferred, nothing
expressed or mentioned in or to be implied from this Indenture or the Bonds is
intended or should be construed to confer upon or give to any person other than
the Authority, the Company, the Trustee, the Registrar and Paying Agent, the
Auction Agent and the Holders of the Bonds any legal or equitable right, remedy
or claim under or by reason of or in respect to this Indenture or any covenant,
condition, stipulation, promise, agreement or provision herein contained. Unless
otherwise expressly set forth herein, this Indenture and all of the covenants,
conditions, stipulations, promises, agreements and provisions hereof are
intended to be and shall be for and inure to the sole and exclusive benefit of
the Authority, the Company, the Trustee, the Registrar and Paying Agent, the
Auction Agent and the Holders of the Bonds as herein and therein provided.

            SECTION 17.02. Indenture a Contract; Indenture Binding Upon
Successors or Assigns of the Authority. In consideration of the acceptance of
the Bonds by any person who shall hold the same from time to time, each of the
obligations, duties, limitations and restraints imposed by this Indenture upon
the Authority or any employee thereof shall be deemed to be a covenant between
the Authority and every Holder and this Indenture and every provision and
covenant hereof shall be a contract by the Authority with the Holders of the
Bonds issued hereunder to secure the full and final payment of the principal of,
premium, if any, of and the interest on the Bonds executed and delivered
hereunder. The provisions of the Act shall be a contract by the Authority with
the Holders and the duties of the Authority and any employee thereof under the
Act shall be enforceable by the Holders. This Indenture shall be enforceable by
the Holders, by mandamus or other appropriate suit, action or proceeding in any
court of competent jurisdiction. The covenants and agreements herein set forth
to be performed by the Authority and any employee thereof, shall be for the
benefit, security and protection of the Holders. All the terms, provisions,
conditions, covenants, warranties and agreements contained in this Indenture
shall be binding upon the assigns of the Authority, and shall inure to the
benefit of the Trustee, its successors or substitutes in trust and assigns, and
the Holders.

            SECTION 17.03. Notice to Holders of Bonds. Except as is otherwise
provided in this Indenture, any provision for the mailing of a notice or other
paper to the Holders shall be fully complied with if it is mailed postage
prepaid, to the Holder of the Bonds at such Holder's address appearing upon the
books of registry kept pursuant to Article VII.

            SECTION 17.04. Waiver of Notice. Whenever in this Indenture the
giving of notice by mail, publication, or otherwise is required, the giving of
such notice may be waived by the person entitled to receive such notice, and in
any case the giving or receipt of such notice shall not be a condition precedent
to the validity of any action taken in reliance upon such waiver.

            SECTION 17.05. Effect of Saturdays, Sundays and Non-Business Days.
Except as otherwise specifically provided herein, whenever this Indenture
requires any action to be taken on a


                                     XVII-1


Saturday, Sunday or other day which is not a Business Day, such action shall be
taken on the first Business Day occurring thereafter. Except as otherwise
specifically provided herein, whenever in this Indenture the time within which
any action is required to be taken or within which any right will lapse or
expire shall terminate on a Saturday, Sunday or other day which is not a
Business Day, such time shall continue to run until midnight on the next
succeeding Business Day.

            SECTION 17.06. Partial Invalidity. If any one or more of the
covenants or agreements or portions thereof provided in this Indenture on the
part of the Authority or the Trustee to be performed should be determined by a
court of competent jurisdiction to be contrary to law, then such covenant or
covenants, or such agreement or agreements, or such portions thereof, shall be
deemed severable from the remaining covenants and agreements or portions thereof
provided in this Indenture and the invalidity thereof shall in no way affect the
validity of the other provisions of this Indenture or of the Bonds, but the
Holders shall retain all the rights and benefits accorded to them hereunder and
under any applicable provisions of law.

            If any provisions of this Indenture shall be held or deemed to be or
shall, in fact, be inoperative or unenforceable or invalid in any particular
case in any jurisdiction or jurisdictions or in all jurisdictions, or in all
cases because it conflicts with any constitution or statute or rule of public
policy, or for any other reason, such circumstances shall not have the effect of
rendering the provision in question inoperative or unenforceable or invalid in
any other case or circumstance, or of rendering any other provision or
provisions herein contained inoperative or unenforceable or invalid to any
extent whatsoever.

            SECTION 17.07. Law and Place of Enforcement of Indenture. This
Indenture shall be construed and interpreted in accordance with the laws of the
State of New York and all suits and actions arising out of this Indenture shall
be instituted in a court of competent jurisdiction in the State of New York.

            SECTION 17.08. Requests, Approvals and Directions of Authority.
Whenever in this Indenture a request, approval, direction or other action is
required of the Authority, such request, approval, direction or other action
shall be in the form of and evidenced by a certificate of an Authorized Officer
of the Authority unless otherwise provided herein.

            SECTION 17.09. Notices, Demands; Requests. Except as otherwise set
forth herein, all notices, demands, directions and requests to be given to or
made hereunder by the Company, the Authority, the Trustee, the Remarketing
Agent, the Auction Agent and the Registrar and Paying Agent shall be given or
made in writing and shall be deemed to be properly given or made if sent by
first class United States mail, postage prepaid, addressed as follows:

(a)   As to the Company               4 Irving Place
                                      New York, New York 10003
                                      Attention: Secretary

(b)   As to the Authority             Corporate Plaza West
                                      286 Washington Avenue Extension


                                     XVII-2


                                      Albany, New York 12203
                                      Attention: President

(c)   As to the Trustee               101 Barclay Street - 8W
                                      New York, New York 10286
                                      Attention: Corporate Trust Trustee
                                      Administration

(d)   As to the Auction Agent         at the address specified in the
                                      Auction Agency Agreement

(e)   As to the Remarketing Agents    at the address specified in the applicable
                                      Remarketing Agreement

(f)   As to the Registrar             101 Barclay Street - 8W
        and Paying Agent              New York, New York 10286
                                      Attention: Corporate Trust Trustee
                                      Administration

            Any such notice, demand, direction or request may also be
transmitted to the appropriate above-mentioned party by telegram, telecopy,
telex or similar means and shall be deemed to be properly given or made at the
time of such transmission if, and only if, such transmission of notice shall be
in writing and sent as specified above.

            Any notice, demand, direction or request given or transmitted to the
Trustee or the Authority shall be effective only upon receipt.

            Any of such addresses may be changed at any time upon written notice
of such change sent by first-class United States mail, postage prepaid, to the
other parties by the party affecting the change.

            If the Bonds shall be rated by Moody's, the Trustee shall furnish to
Moody's at 99 Church Street, New York, New York, Attention: Corporate Department
Structured Finance Group or such other office as Moody's may designate to the
Trustee, if the Bonds shall be rated by S&P, the Trustee shall furnish to S&P at
55 Water Street, New York, New York 10041, Attention: Letter of Credit
Surveillance Group, and if the Bonds shall be rated by Fitch, the Trustee shall
furnish to Fitch, Inc. at One State Street Plaza, New York, New York 10004,
Attention: Municipal Structured Finance Group (i) a copy of each amendment to
the Indenture, Participation Agreement, Bond Purchase Trust Agreement, and each
Support Facility of which it has knowledge, (ii) notice of the termination,
extension or expiration of any Support Facility, (iii) notice of the payment of
all the Bonds (iv) notice of a Change in the Interest Rate Mode, and (v) notice
of any successor Trustee, Registrar and Paying Agent or Remarketing Agent;
provided, however, that failure by the Trustee to so notify Moody's, S&P or
Fitch shall not result in any liability on the part of the Trustee or affect the
validity of such documents or actions.

            SECTION 17.10. Effect of Article and Section Headings and Table of
Contents. The heading or titles of the several Articles and Sections hereof, and
any table of contents appended hereto or


                                     XVII-3


to copies hereof, shall be solely for convenience of reference and shall not
affect the meaning, construction, interpretation or effect of this Indenture.

            SECTION 17.11. Indenture May be Executed in Counterparts;
Effectiveness of Indenture. This Indenture may be simultaneously executed in
counterparts. Each such counterpart so executed shall be deemed to be an
original, and all together shall constitute but one and the same instrument.
This Indenture shall take effect immediately upon the execution and delivery
hereof. Notwithstanding the actual date hereof, for convenience and purposes of
reference this Indenture shall be dated as of June 1, 2001 and may be cited and
referred to as the "Indenture dated as of June 1, 2001".

            SECTION 17.12. Liability of Authority Limited to Revenues.
Notwithstanding anything in this Indenture or in the Bonds contained, the
Authority shall not be required to advance any monies derived from any source
other than the Revenues and other assets pledged under this Indenture for any of
the purposes in this Indenture mentioned, whether for the payment of the
principal or redemption price of or interest on the Bonds or for any other
purpose of this Indenture. Pursuant to Section 5.08 of the Participation
Agreement, the Company has agreed to indemnify and hold harmless the Authority
and the Trustee from all liability arising hereunder.

            SECTION 17.13 Waiver of Personal Liability. No member, officer,
agent or employee of the Authority shall be individually or personally liable
for the payment of the principal of or premium, if any, or interest on the Bonds
or be subject to any personal liability or accountability by reason of the
issuance thereof; but nothing herein contained shall relieve any such member,
officer, agent or employee from the performance of any official duty provided by
law or by this Indenture.

                   [Signature Page of this Indenture Follows]


                                     XVII-4


            IN WITNESS WHEREOF, the Authority has caused this Indenture to be
executed by its President, Vice President or Treasurer and its corporate seal to
be hereunto affixed and attested by its Acting Secretary, and the Trustee has
caused this Indenture to be executed by its authorized officer, all as of the
date first above written.

                                          NEW YORK STATE ENERGY RESEARCH
                                            AND DEVELOPMENT AUTHORITY


                                          By
                                            -------------------------------
                                                   President
(SEAL)

Attest:

- ---------------------------------------
          Acting Secretary

                                                   THE BANK OF NEW YORK
                                                      as Trustee,


                                                   By
                                                     ----------------------



                         [Signature Page of Indenture]


                                     XVII-6



                                                                    Exhibit 12.1


                            CONSOLIDATED EDISON, INC.

                       RATIO OF EARNINGS TO FIXED CHARGES
                       ----------------------------------
                               TWELVE MONTHS ENDED
                               -------------------
                             (Thousands of Dollars)




                                                                  JUNE        DECEMBER
                                                                  2001         2000
                                                               ----------   ----------
                                                                      
EARNINGS
        Net Income for Common Stock                            $  605,744   $  582,835
        Preferred Dividends                                        13,593       13,593
        Income Tax                                                368,618      307,168
                                                               ----------   ----------

                    Total Earnings Before Federal Income Tax      987,955      903,596

FIXED CHARGES*                                                    455,927      431,217
                                                               ----------   ----------
                    Total Earnings Before Federal Income Tax
                       and Fixed Charges                       $1,443,882   $1,334,813
                                                               ==========   ==========



        * Fixed Charges

        Interest on Long-Term Debt                             $  378,262   $  351,410
        Amortization of Debt Discount, Premium and Expense         12,324       12,584
        Interest on Component of Rentals                           20,319       17,697
        Other Interest                                             45,022       49,526
                                                               ----------   ----------

                    Total Fixed Charges                        $  455,927   $  431,217
                                                               ==========   ==========



        Ratio of Earnings to Fixed Charges                           3.17         3.10



                                                                    Exhibit 12.2



                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

                       RATIO OF EARNINGS TO FIXED CHARGES
                       ----------------------------------
                               TWELVE MONTHS ENDED
                               -------------------
                             (Thousands of Dollars)




                                                                  JUNE       DECEMBER
                                                                  2001         2000
                                                               ----------   ----------
                                                                      
EARNINGS
          Net Income                                           $  609,016   $  583,715
          Income Tax                                              351,430      289,926
                                                               ----------   ----------

                      Total Earnings Before Income Tax            960,446      873,641

FIXED CHARGES*                                                    405,171      392,347
                                                               ----------   ----------
                      Total Earnings Before Income Tax
                         and Fixed Charges                     $1,365,617   $1,265,988
                                                               ==========   ==========



          * Fixed Charges

          Interest on Long-Term Debt                           $  339,697   $  318,842
          Amortization of Debt Discount, Premium and Expense       12,324       12,584
          Interest on Component of Rentals                         17,708       17,697
          Other Interest                                           35,442       43,224
                                                               ----------   ----------

                      Total Fixed Charges                      $  405,171   $  392,347
                                                               ==========   ==========



          Ratio of Earnings to Fixed Charges                         3.37         3.23



                                                                    Exhibit 12.3


              ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES

                       RATIO OF EARNINGS TO FIXED CHARGES
                       ----------------------------------
                               TWELVE MONTHS ENDED
                               -------------------
                             (Thousands of Dollars)




                                                                June
                                                                2001
                                                              -------
                                                           
EARNINGS
        Net Income                                            $39,953
        Federal Income & State Tax                             26,661

        Total Earnings Before Federal and State Income Tax     66,614

FIXED CHARGES*                                                 28,487
                                                              -------
                    Total Earnings Before Federal and State
                       Income Tax and Fixed Charges           $95,100
                                                              =======



        * Fixed Charges

        Interest on Long-Term Debt                            $22,283
        Interest Component on lease Payment                     2,611
        Other Interest                                          3,593
                                                              -------

                    Total Fixed Charges                       $28,487
                                                              =======



        Ratio of Earnings to Fixed Charges                       3.34
                                                              =======