Exhibit 4.10
                                 EXECUTION COPY



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                             PARTICIPATION AGREEMENT



                           Dated as of October 1, 1999


                                 by and between



                         NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY


                                       and


                             KEYSPAN GENERATION LLC



                                 - relating to -



              $41,125,000 Pollution Control Refunding Revenue Bonds
                (KeySpan Generation LLC Projects), 1999 Series A



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<PAGE>



                             PARTICIPATION AGREEMENT

          THIS PARTICIPATION AGREEMENT, dated as of October 1, 1999, 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 KEYSPAN  GENERATION  LLC  (formerly  known as  MarketSpan
     Generation  LLC), a limited  liability  company duly organized and existing
     under the laws of the State of New York (the "Company"),


                                   WITNESSETH:


          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 also  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 in connection  with,  any special  energy  project,
     including,  but 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  for  the  purpose  of
     refunding  outstanding  Authority  bonds and notes and the payment of costs
     related thereto; 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 Authority issued  Pollution  Control Revenue Bonds (Long
     Island  Lighting  Company  Projects),  Series A in the principal  amount of
     $28,375,000  (the "Series A Bonds"),  which where used, in part, to finance
     certain costs primarily associated with the acquisition,  construction, and
     installation of various systems to abate, control, and reduce pollution and
     to dispose of sewage and solid waste at Northport  Power Station,  Glenwood
     Landing Power Station and at the former Shoreham  Nuclear Power Station and
     miscellaneous facilities at the former Mitchell Gardens Power Station; and

          WHEREAS,   there  is  currently   outstanding   $26,375,000  aggregate
     principal amount of the Series A Bonds; and


                                       -1-


<PAGE>



          WHEREAS,  the Authority issued  Pollution  Control Revenue Bonds (Long
     Island  Lighting  Company  Projects),  Series B in the principal  amount of
     $19,100,000  (the  "Series B Bonds",  and  collectively  with the  Series A
     Bonds,  the "Prior  Bonds"),  which were used, in part, to finance  certain
     costs  primarily  associated  with  the  acquisition,   construction,   and
     installation of various systems to abate, control, and reduce pollution and
     to dispose of sewage and solid waste at the Glenwood Landing Power Station,
     Far Rockaway Power Station,  E.F.  Barrett Power Station,  Northport  Power
     Station, and Port Jefferson Power Station; and

          WHEREAS, all of the Series B Bonds are currently outstanding; and

          WHEREAS,  the Company is the current owner of all the assets  financed
     by the Prior Bonds other than the  facilities  at former  Shoreham  Nuclear
     Power Station and former Mitchell Gardens Power Station, having acquired on
     May 28, 1998,  pursuant to the  Agreement  and Plan of Merger,  dated as of
     June 26, 1997, by and among MarketSpan  Corporation d/b/a KeySpan (formerly
     known as BL  Holding  Corp.)  ("KeySpan"),  Long  Island  Lighting  Company
     ("LILCO"),  Long Island Power  Authority and LIPA  Acquisition  Corp.  (the
     "Merger Agreement"), all of the non-nuclear electric generation businesses,
     among other assets, of LILCO; and

          WHEREAS,  pursuant to the Merger  Agreement and in connection with the
     transferby  LILCO of its  generating  assets to the  Company,  the Company,
     KeySpan  and  other  Transferee  Subsidiaries  (as  defined  in the  Merger
     Agreement)  (collectively,  the "KeySpan Notes Obligors") have executed and
     delivered  to LILCO  promissory  notes  relating  to the  Prior  Bonds  and
     evidencing  the joint and several  obligation of the KeySpan Notes Obligors
     to pay to LILCO  amounts which would be sufficient to pay principal of, and
     premium,  if any, and  interest on, the Prior Bonds when due (the  "KeySpan
     Notes"); and

          WHEREAS,  the Company has requested that the Authority issue bonds for
     the purpose of refunding the Prior Bonds; and

          WHEREAS,  the Company  proposes to achieve the  refunding of the Prior
     Bonds by applying  the  proceeds of the Bonds  together  with other  moneys
     advanced from its own funds to the prepayment of the KeySpan Notes; and

          WHEREAS,  LILCO has agreed to direct redemption of the Prior Bonds and
     use the  proceeds  received  from the  prepayment  of the KeySpan  Notes to
     refund the Prior Bonds; and

          WHEREAS,  the  Authority  proposes  to  issue  $41,125,000   aggregate
     principal  amount of Pollution  Control  Refunding  Revenue Bonds  (KeySpan
     Generation  LLC  Projects),  1999 Series A (the "Bonds") for the purpose of
     applying the proceeds  thereof together with monies advanced by the Company
     to the  prepayment  of the  KeySpan  Notes  and  causing  LILCO  to use the
     proceeds  received from the prepayment of the KeySpan Notes to pay all or a
     portion of the  redemption  price of the Prior Bonds,  all such bonds to be
     issued under and secured by a Trust


                                       -2-


<PAGE>



Indenture  dated as of October  1, 1999,  between  the  Authority  and The Chase
Manhattan Bank, as trustee (the "Indenture"); and

          WHEREAS,  Ambac Assurance  Corporation has agreed to issue a municipal
     bond insurance policy in favor of the Trustee to provide for the payment of
     such amounts as are specified  therein with respect to regularly  scheduled
     payments of principal of, and interest on, the Bonds when due.

          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:



                                       -3-


<PAGE>



                                    ARTICLE I


                    DEFINITIONS; EFFECTIVE DATE AND DURATION
                           OF PARTICIPATION AGREEMENT


          SECTION  1.1.  Definitions.  The  terms  used  in  this  Participation
     Agreement which are defined in Section 1.01 of the Indenture shall have the
     meanings, respectively,  herein, which such terms are given in said Section
     1.01 of the Indenture.

          SECTION 1.2.  Effective Date and 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 the 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, it being intended that
     the Company's  obligations under Sections 3.3, 4.2(e),  5.16 and 7.4 hereof
     shall survive the termination of this Participation Agreement.



                                       -4-


<PAGE>



                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

          SECTION 2.1.  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 Indenture,
           the Tax Regulatory  Agreement,  the Bond Purchase Trust Agreement and
           the  Bond  Purchase  Agreement  and to  consummate  the  transactions
           contemplated hereby and thereby and perform its obligations hereunder
           and thereunder;

                     (c) The  Authority is not in violation or default under any
           of the provisions of the Constitution or the laws 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, as contemplated by this Participation  Agreement,  is in
               the public interest;

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

                     (f)  The  execution   and  delivery  of  the  Bonds,   this
           Participation  Agreement,  the Tax  Regulatory  Agreement,  the  Bond
           Purchase  Trust  Agreement,  the  Bond  Purchase  Agreement  and  the
           Indenture 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 2.2.  Representations and Warranties by the Company.  The
          Company represents and warrants as follows:

                     (a)  The  Company  is  a  limited  liability  company  duly
           organized  and  existing and in good  standing  under the laws of the
           State of New York, has power to enter into, execute


                                       -5-


<PAGE>



           and  deliver  this  Participation   Agreement,   the  Tax  Regulatory
           Agreement and the Company Note by proper  limited  liability  company
           action and has duly  authorized  the  execution and delivery by it of
           this Participation  Agreement,  the Tax Regulatory  Agreement and the
           Company Note;

                     (b) The  execution  and  delivery  by the  Company  of this
           Participation Agreement, the Tax Regulatory Agreement and the Company
           Note and the  consummation  of the  transactions  herein and  therein
           contemplated  do not  conflict  with or  constitute  a breach of or a
           default  under the  Company's  Articles  of  Organization,  operating
           agreement  or  any  indenture,  mortgage,  loan  agreement  or  other
           contract or instrument to which the Company is a party or by which it
           is bound or, to the best of the  Company's  knowledge,  any judgment,
           decree, order, statute, rule or regulation applicable to the Company;

                     (c)  This  Participation   Agreement,  the  Tax  Regulatory
           Agreement and the Company 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,  judicial  decisions or  principles of
           equity relating to or affecting the enforcement of creditors'  rights
           or contractual obligations generally;

                     (d) The issuance and delivery by the Company of the Company
           Note in the  manner and for the  purposes  herein set forth have been
           duly authorized by 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 Company Note need be
           obtained by the Company or if any such  authorization  or approval is
           necessary it has been obtained.



                                       -6-


<PAGE>



                                   ARTICLE III

                         THE PROJECT; ISSUANCE OF BONDS

               SECTION  3.1.  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 3.2.  Sale of Bonds and Deposit of Proceeds.  In order to
          provide funds for the prepayment of a portion of the KeySpan Notes and
          the  redemption of a part 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  4.1  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 paid by the initial purchasers of the Bonds in the Project Fund.

               SECTION 3.3.  Disbursements from Project Fund and Rebate 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  Prepayment  Price  and  costs  related
          thereto and the refunding of the Prior Bonds upon receipt from time to
          time of requisitions  signed by an Authorized Company  Representative,
          stating  with  respect  to each  payment  to be made  the  information
          required by Section 8.01 of the  Indenture.  Amounts on deposit in the
          Rebate Fund shall be  disbursed  in  accordance  with the terms of the
          Indenture and the Tax Regulatory Agreement.

               The Company will cause such  requisitions  to be submitted to the
          Trustee as may be necessary to effect payments out of the Project Fund
          in accordance with the provisions of the Indenture.

               Concurrently with the delivery by the Company of each requisition
          to the Trustee,  the Company  will deliver to the  Authority a copy of
          such  requisition and any attachments  thereto.  The Authority and the
          Trustee may rely as to the completeness and accuracy of all statements
          in such  requisition  and the Company will indemnify and save harmless
          the  Authority  and  the  Trustee  from  any  liability   incurred  in
          connection  with any requisition so delivered and any payments made in
          reliance thereon.

               2.  Except for  amounts  retained  by the  Trustee at the written
          direction of an Authorized Company Representative for payment of items
          not then due and  payable  or the  liability  for  payment of which is
          being  contested or disputed by the Company,  all monies  remaining in
          the Project Fund (but not the Rebate 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,


                                       -7-


<PAGE>



be applied in  accordance  with  Section  8.01.6 of the  Indenture.  Any balance
remaining of such  retained  amounts to the extent not  disbursed in  accordance
with  subsection  1 above,  shall,  at the written  direction  of an  Authorized
Company Representative, be similarly applied.

               SECTION 3.4.  Adequacy of Project Fund.  The monies which will be
          paid  into  the  Project  Fund  will  not be  sufficient  to  pay  the
          Prepayment  Price and costs  related  thereto and the refunding of the
          Prior  Bonds.  The Company  shall pay that  portion of the  Prepayment
          Price and costs  related  thereto and the refunding of the Prior Bonds
          in  excess of the  monies  available  therefor  in the  Project  Fund.
          Without  limiting the  generality  of the  foregoing,  the Company has
          agreed and hereby agrees to prepay the $4,557,681.25  principal amount
          of the KeySpan  Notes,  representing a portion of the principal of the
          Series A Bonds applied to the payment of costs of  facilities  located
          at the former  Shoreham  Nuclear Power Station and the former Mitchell
          Gardens  Power  Station.  The  Company  shall not be  entitled  to any
          reimbursement  therefor from the Authority,  the Trustee or the owners
          of any of the Bonds,  nor shall it be entitled to any diminution in or
          postponement  of the  payments  required  to be  paid  by the  Company
          pursuant to this Participation Agreement or the Note.

               SECTION 3.5. 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,  with  ownership,  or the  right  to
          possession,  of the  Project.  The  Company  is  entitled  to sole and
          exclusive ownership and possession of the Project.

               SECTION 3.6. Operation, Maintenance and Repair. The Authority and
          the Company recognize that the Project constitutes integrated portions
          of the electric energy  production  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 life of the Project and such
          facilities,  shall maintain and repair the Project in conformity  with
          the  Company's  normal   maintenance  and  repair  programs  for  such
          facilities   and  shall   proceed  in  good  faith  to  maintain   the
          availability of the Project for use as an authorized project under the
          Act; but 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  of the  operation of the portion of
          such  facilities  to which the  element  or item of the  Project is an
          adjunct.

               SECTION 3.7.  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.


                                       -8-


<PAGE>



                                   ARTICLE IV

                                NOTE AND PAYMENTS

               SECTION  4.1.   Execution   and  Delivery  of  Note  to  Trustee.
          Concurrently with the authentication by the Registrar and Paying Agent
          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 C 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 4.4 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  4.2.   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 4.2. The Company shall provide the Trustee with a written
          allocation  of amounts  paid under this  Section 4.2 among the various
          purposes set forth in this Section 4.2.

               (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.

               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,  if any, or
          the  interest on 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.

               (c) The Company shall make Note Payments by 12:00 noon,  New York
          City time, one Business Day (two Business Days during any Auction Rate
          Period or any Auction Rate- Inverse Rate Period) next  preceding  each
          Interest  Payment  Date to the Bond Fund for credit by the  Trustee to
          the Interest Account of the Bond Fund established  pursuant to Section
          9.01 of the


                                       -9-


<PAGE>



Indenture, in the aggregate amount required, together with other funds available
therefor in the Interest  Account in the Bond Fund, to pay the interest  payable
on each such Outstanding Bond on each such Interest Payment Date.

               In addition,  the Company shall pay an  additional  amount to the
          Trustee  for  deposit  in the Bond Fund and  credit  to the  Principal
          Account,  Interest Account,  Redemption  Account or to the Trustee for
          payment to, or directly to, the Registrar and Paying Agent for deposit
          in the Bond Purchase Fund and credit to the Company Account therein to
          be applied to the payment of the principal of and premium, if any, and
          interest  payable upon redemption of any Bond pursuant to Article V of
          the  Indenture  or  purchase  price of any Bond  pursuant  to the Bond
          Purchase  Trust  Agreement to the extent not provided from the sources
          described therein.

               (d) The Company agrees that, at all times prior to the Fixed Rate
          Conversion Date to the extent a Liquidity  Facility is in place and to
          the extent  necessary to maintain or obtain any short term rating with
          respect to the Bonds,  monies  provided  by the  Company  shall not be
          applied to the payment of the purchase  price,  until any such amounts
          have been on  deposit  in the  applicable  account  for a period of at
          least 124 days and the Company shall have delivered a Non-  Bankruptcy
          Certificate to the Trustee in accordance with the Indenture. If and to
          the extent such  monies are not  available  and there is no  Liquidity
          Facility in place, the Company shall pay or provide for the payment of
          principal of, premium, if any, and interest on, and the Purchase Price
          of, the Bonds from other sources.

               (e) The Company further covenants and agrees to pay, when due and
          payable,as  Additional Payments,  certain additional amounts and costs
          and  expenses,  exclusive  of  costs  and  expenses  payable  from the
          proceeds of the Bonds.  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,  the Market  Agent (and in the case of
           Auction Rate Bonds during an Auction Rate Period,  the Auction  Agent
           under the Auction Agency Agreement and any  Broker-Dealers  under the
           respective Broker- Dealer  Agreements),  and of any counsel or agents
           of any of the foregoing  except any fees or expenses  attributable to
           negligence, willful misconduct or bad faith;

                     (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,  the Market
           Agents (and in the case of Auction  Rate Bonds during an Auction Rate
           Period, the Auction Agent and any  Broker-Dealer),  the Registrar and
           Paying  Agent and the Trustee  with  respect  thereto,  to the extent
           monies are not otherwise available therefor;



                                      -10-


<PAGE>



                     (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 Bond Purchase Trust
           Agreement, and the Indenture; and

                     (iv) an  administration  fee of the Authority in the amount
           of  $102,812.50  paid to the Authority on the date of  authentication
           and delivery of the Bonds and an annual fee equal to $130 per million
           dollar  principal  amount  of the  Bonds on  October  1 of each  year
           commencing   October  1,  2000,   based  upon  the  amount  of  Bonds
           Outstanding as of such October 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 Market Agent  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 pay to the State of New York with respect to the Bonds
           a bond issuance  charge in the amount of  $143,937.50  on the date of
           authentication and delivery of the Bonds.

               (f) In the event that the Company  shall fail to make any Payment
          as required by Sections  4.2(a),  (b),  (c),  (d) and (e) hereof,  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 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  or an  Auction
          Rate-Inverse 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, in the case of an Auction Rate Period, the Maximum Auction
          Rate,  and in the case of an Auction  Rate-Inverse  Rate  Period,  the
          Overdue Rate, to the extent permitted by law, from the date of default
          until paid.  Nothing in this Section 4.2 shall  require the Company to
          pay costs and expenses  mentioned in clause  (e)(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  materially  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 Market Agent 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 materially jeopardized.



                                      -11-


<PAGE>



               (g) The  Company  agrees to give  notice to the  Credit  Facility
          Issuer not less than two days prior to any regularly scheduled payment
          date for  principal  or interest on the Bonds if the Company  does not
          intend  or will be  unable to make the  corresponding  payment  to the
          Trustee under the Note.

               SECTION  4.3.  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  obligation  of the Authority to pay the Bonds is  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 Market Agent Agreement.

               SECTION 4.4. Advance Payments.  The Company shall have the option
          from time to time in conjunction with the redemption of Bonds pursuant
          to  Section  5.01 or 5.04 of the  Indenture  to pay to the  Trustee in
          advance of the time required by this  Participation  Agreement and the
          Note for deposit in the Bond Fund for credit to the Redemption Account
          therein  such  amounts as the Company may elect in order to effect the
          prepayment  of the Note in whole or in part.  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  thirty-five (35) days prior to the
          date on which such  Payment 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.

               SECTION 4.5. 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 4.6. Absolute Obligation to Make Payments. The obligation
          of the Company to pay the Note Payments and the  Additional  Payments,
          as required by this Participation


                                      -12-


<PAGE>



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
                     Market Agent  Agreement,  the Bond Purchase Trust Agreement
                     or the Indenture;

               (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;



                                      -13-


<PAGE>



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 4.6.

               However,  the  obligation  of the  Company to make Note  Payments
          shall be deemed satisfied when made or to the extent the Trustee makes
          the deposits in the Bond Fund for credit to the Principal  Account and
          Interest   Account   from   the   sources    described   in   Sections
          9.02(a)(ii)(II) and 9.02(b)(ii)(I) and (III) of the Indenture.

               SECTION 4.7.  Assignment of Authority's  Rights.  As security for
          the  payment of the Bonds,  the  Authority  will assign to the Trustee
          certain of the Authority's rights under this  Participation  Agreement
          and the  Note,  including  the  right to  receive  payments  hereunder
          (except  the  right  to  receive  payments,  if  any,  under  Sections
          4.2(e)(ii)  and (iv),  5.16 and 7.4  hereof and 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
          4.2(e)(ii) and (iv),  5.16 and 7.4 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.

               SECTION  4.8.  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.  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   4.9.   Agreements   of  Company   relating  to  Support
          Facilities.  In order to secure the  payment of interest on the Bonds,
          the Company has obtained a Credit Facility.  The Company agrees not to
          request  that an  Adjustable  Rate other than an Auction Rate during a
          Auction  Rate Period or an Auction  Rate and an Inverse Rate during an
          Auction  Rate-Inverse  Rate Period become effective unless there shall
          be in effect,  prior to the  applicable  Change in the  Interest  Rate
          Mode, a Liquidity  Facility which meets the requirements of Article VI
          of the Indenture.

               The Company  further  agrees that it will  maintain at all times,
          except during any Auction Rate Period,  an Auction  Rate-Inverse  Rate
          Period or the Fixed Rate Period, a Liquidity


                                      -14-


<PAGE>



Facility meeting the requirements of Article VI of the Indenture. Such Liquidity
Facility shall expire no earlier than the earliest of (1) its stated  expiration
date,  which shall be not less than six months from its effective date and shall
be no earlier than the second  Business Day after the next  succeeding date when
Bonds are subject to optional or  mandatory  tender for  purchase,  (2) when all
available amounts have been drawn and not been timely reimbursed, (3) the second
business  day  following a Change in the  Interest  Rate Mode to an Auction Rate
during an Auction Rate Period or an Auction Rate during and Auction Rate-Inverse
Rate Period,  (4) the second  business day following  the Fixed Rate  Conversion
Date,  (5) on the  effective  date  of any  Alternate  Liquidity  Facility  that
replaces the then effective Liquidity  Facility,  (6) the earliest date on which
no Bonds are outstanding  and (7) twelve days after the Trustee  receives notice
from the Liquidity Facility Issuer that it is terminating the Liquidity Facility
and directing the Trustee to cause a mandatory tender and purchase of the Bonds.

               SECTION  4.10.  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.



                                      -15-


<PAGE>



                                    ARTICLE V

                      SPECIAL COVENANTS AND REPRESENTATIONS

               SECTION 5.1. No Warranty as to  Suitability  of the 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 5.2.  Authority's Rights to Inspect the Project and Plans
          and  Specifications.  The  Authority  shall  have  the  right  at  all
          reasonable  times to examine  and  inspect  the  Project to the extent
          practicable and, to the extent reasonably available,  the construction
          plans and specifications therefor.

               SECTION  5.3.  Company  Consent to Amendment  of  Indenture.  The
          Authority  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  5.4.  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 the Bonds,  including any amounts treated as proceeds
               of the Bonds for any  purpose  of  Section  103 of the Code,  the
               taking of which or any failure to so take will result in the loss
               of the  exclusion  of interest on the 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 as a  "substantial  user" of the Project or a
               "related  person" 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,  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 5.5.  Maintenance  of Office or Agency.  The Company
               will at all  times  keep,  in  Brooklyn,  New  York,  or  another
               location  in the  State of New York,  an  office or agency  where
               notices and demands to or upon the Company  with  respect to this
               Participation  Agreement  and the Note may be  served,  and will,
               from time to time,  give written  notice to the Authority and the
               Trustee of the  location of such  office or agency;  and, in case
               the  Company  shall  fail to do so,  notices  may be  served  and
               demands may be made at the  Principal  Corporate  Trust Office of
               the Trustee.



                                      -16-


<PAGE>



                    SECTION  5.6.  Further  Assurances.  Upon the request of the
               Trustee in writing,  the Company will make, execute,  acknowledge
               and  deliver,  or cause to be made,  executed,  acknowledged  and
               delivered,  to the Trustee any and all such further acts,  deeds,
               conveyances,  assignments  or  assurances  as may  be  reasonably
               required for  effectuating  the  intention of this  Participation
               Agreement and the Note.

                    SECTION 5.7. Payment of Taxes and Other Charges. The Company
               will  promptly  pay  and  discharge,  or  cause  to be  paid  and
               discharged,  as the  same  become  due and  payable,  any and all
               taxes, rates, levies, assessments, and governmental liens, claims
               and other charges at any time  lawfully  imposed or accruing upon
               or against the Company or upon or against its  properties  or any
               part thereof,  or upon the income  derived  therefrom or from the
               operations of the Company,  provided,  that the Company shall not
               be  required  to  pay  or  discharge,  or  cause  to be  paid  or
               discharged, any such tax, rate, levy, assessment,  lien, claim or
               other  charge so long as in good faith and by  appropriate  legal
               proceedings the validity thereof shall be contested.

                    SECTION 5.8. Maintenance of Properties.  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  this  Participation
               Agreement; provided, however, that nothing herein contained shall
               be  construed  to  prevent  the  Company  from  ceasing to own or
               operate  any of its  plants  or any  other  property,  if, in the
               judgment of the Company,  it is  advisable  not to own or operate
               the same and the  ownership  or  operation  thereof  shall not be
               essential to the maintenance and continued  operation of the rest
               of the operating  system or systems,  and the security  under the
               Indenture  afforded by the Company Note will not be substantially
               impaired by the termination of such operation.

                    SECTION 5.9. Insurance. The Company will keep or cause to be
               kept  such  parts of its  properties  as,  in the  opinion  of an
               Authorized  Company  Representative  (as defined in the Indenture
               and who shall be a  licensed  professional  engineer),  are of an
               insurable nature, insured against loss or damage by fire or other
               casualties,  the risk of which is customarily  insured against by
               companies  similarly  situated and operating like properties,  to
               the extent that  property  of similar  character  is  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,  provided that the plan of each such
               insurance  fund shall have been or shall be approved by the Board
               of Directors of the Company.

                    SECTION  5.10.  Proper  Books of  Record  and  Account.  The
               Company  will at all times keep or cause to be kept proper  books
               of record and account,  in which full,  true and correct  entries
               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


                                      -17-


<PAGE>



                    the rates of the Company  giving rise to at least a majority
               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 5.11. Compliance with Law. 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  under  this  Participation
               Agreement or under the Note, 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 5.12.  Consolidation,  Merger or Sale of Assets. The
               Company will not  consolidate  with or permit itself to be merged
               into  or be  acquired  or  purchased  by  any  other  company  or
               companies, or convey, transfer, lease or otherwise dispose of all
               or  substantially  all of its  properties  and  assets  (any such
               conveyance,  transfer,  lease or other  disposition  is hereafter
               called a "Transfer"), except in the manner and upon the terms and
               conditions set forth in this Section 5.12.

                    Nothing  contained  in this  Participation  Agreement  shall
               prevent (and this  Participation  Agreement 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, or acquisition or purchase by, any other company or
               companies   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
               Transfer  as an  entirety  to a company  lawfully  authorized  to
               acquire  and  operate  the  same;   provided,   that,   upon  any
               consolidation,  merger, acquisition or purchase, or Transfer, the
               company formed by such  consolidation,  or into which such merger
               may be made if other than the  Company,  or the company  which is
               acquiring or  purchasing  the Company,  or which is a transferee,
               shall execute and deliver to the Trustee and the Credit  Facility
               Issuer  an  instrument,  in  form  satisfactory  to the  Trustee,
               whereby  such  company  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  this
               Participation  Agreement  on  the  part  of  the  Company  to  be
               performed and observed and, thereupon, such company shall succeed
               to and be  substituted  for the Company  hereunder  and under the
               Note, with the same effect as if such successor  company had been
               named herein as obligor.

                    Each such successor company shall possess, and may exercise,
               from time to time,  each and every right and power  hereunder and
               under the Note of the Company, in its name or otherwise;  and any
               act,  proceeding,  resolution or  certificate by any of the terms
               hereof and the


                                      -18-


<PAGE>



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 Transfer is made as permitted by
               this  Section  5.12,  the  provisions  of this Section 5.12 shall
               continue  in full force and effect and no further  consolidation,
               merger or Transfer  shall be made except in  compliance  with the
               provisions of this Section 5.12.

                    SECTION 5.13.  Financial  Statements of Company. The Company
               agrees to have an annual  audit made by its  regular  independent
               public accountants and to furnish the Trustee,  the Authority and
               the Bond Insurer with a balance  sheet and  statements of income,
               retained earnings and changes in cash flows 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.

                    SECTION 5.14. 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.  The
               Authority  agrees to exercise its rights under  Article XV of the
               Indenture upon the request of the Company.

                    SECTION 5.15. Certificates as to Defaults. The Company shall
               file with the Trustee and the Bond Insurer,  on or before January
               1 of each year,  commencing  on January  1, 2000,  a  certificate
               signed by an Authorized Company  Representative  stating that, to
               the  best of  his/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/her  knowledge,  information  and
               belief,  there does not exist at the date of such certificate any
               Default by the Company under this Participation  Agreement or any
               Event of Default  hereunder or other event which,  with notice or
               the lapse of time specified in Section 7.1 hereof, or both, would
               become an Event of  Default  or, if any such  Default or Event of
               Default or other  event shall so exist,  specifying  the same and
               the nature and status thereof.

                    SECTION    5.16.    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.


                                      -19-


<PAGE>



                    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 Market Agent  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  may be  occasioned  by  any  cause
               whatsoever  arising out of the  construction  or operation of the
               Project, or (ii) judgments and liabilities in connection with any
               action, suit or proceeding instituted or threatened in connection
               with  the   transactions   contemplated  by  this   Participation
               Agreement 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, the Market Agent or
               the  Auction  Agent or bad  faith  or  wilful  misconduct  of the
               Authority,  the Trustee,  the  Registrar  and Paying  Agent,  the
               Market 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, the Market Agent or the
               Auction Agent). If any such claim is asserted, the Authority, any
               individual indemnified herein, the Trustee, the Registrar and


                                      -20-


<PAGE>



Paying Agent,  the Market 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.

                    SECTION 5.17. Financing  Statements.  On or before January 1
               of the fifth year which  follows the delivery of the Bonds and on
               or before  January 1 of every fifth year  thereafter,  so long as
               any of the Bonds are Outstanding, the Company shall file or cause
               to be filed all financing statements, continuation statements and
               other  instruments  or memoranda  referred to in Section 10.08 of
               the Indenture as is necessary to maintain the assignments, liens,
               pledges  and  charges of the  Indenture  or furnish an opinion of
               counsel (which may be counsel to the Company) stating that in the
               opinion of such  counsel no action is required  to maintain  such
               assignments, liens, pledges and charges.

                    SECTION 5.18.  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, III-A,
               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 5.19. Ratings. During any Auction Rate Period or any
               Auction Rate  Inverse  Rate Period,  the Company on behalf of the
               Authority 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  during an  Auction  Rate  Period or Auction
               Rate-Inverse  Rate  Bonds  during an  Auction  Rate-Inverse  Rate
               Period, as the case may be.

                    SECTION  5.20.  Notices.   The  Company  on  behalf  of  the
               Authority  shall provide the Trustee and the Bond Insurer 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.


                                      -21-


<PAGE>



                                   ARTICLE VI

                       OPTIONAL AND MANDATORY PREPAYMENTS;
                               REDEMPTION OF BONDS

                    SECTION 6.1.  Redemption of Bonds.  If the Company is not in
               default in making  installment  payments under  Sections  4.2(a),
               (b),  (c), (d) and (e) hereof and under the Note,  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.

                    SECTION 6.2.  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  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.



                                      -22-


<PAGE>



                                   ARTICLE VII

                         EVENTS OF DEFAULT AND REMEDIES

                    SECTION 7.1. Events of Default Defined.  The following shall
               be an "Event of Default" under this  Participation  Agreement and
               the terms  "Event of Default" or "Default"  shall mean,  whenever
               they are 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 three (3) Business Days.

                     (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 7.1 (and other than
           failure to pay the amounts due under Sections  4.2(e),  4.2(f),  5.16
           and 7.4 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 compromise  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 limited  liability  company
           existence  of  the  Company   resulting   either  from  a  merger  or
           consolidation  of  the  Company  into  or  with  another  company  or
           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 5.12 hereof.



                                      -23-


<PAGE>



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

                    Subsection  (b)  of  this  Section  7.1  is  subject  to the
               following limitations:  Except for the obligations of the Company
               contained  in Article IV and  Article VI 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 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  7.2.  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 7.1 hereof shall have happened and
               be existing, 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  Authority  or  the  Trustee  as  provided  in the
           Indenture may, at its option, with the consent of the Credit Facility
           Issuer,  or shall, to the extent  required by the Indenture,  declare
           all payments  payable  under  Section 4.2 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  Trustee,  with the  written  consent of the Credit
           Facility  Issuer,  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
               7.2 shall be paid into the Bond Fund and  applied  in  accordance
               with the provisions of the Indenture.


                                      -24-


<PAGE>



                         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  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  7.3.  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 4.2(a), (b) and (c) 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,


                                      -25-


<PAGE>



                         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  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  4.2,  5.16 and 7.4 hereof;  provided  that, in case the
               Company  shall have  failed to pay  amounts  required  to be paid
               under Sections  4.2(e),  4.2(f),  5.16 and 7.4 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  4.2(e),
               4.2(f), 5.16 and 7.4 hereof.

                         SECTION  7.4.  Agreement  to Pay  Attorneys'  Fees  and
                    Expenses.  In the event the Company should default under any
                    of the  provisions of this  Participation  Agreement and the
                    Authority or the Trustee  should  employ  attorneys or incur
                    other expenses for the  collection of  installment  payments
                    payable  pursuant to  Articles  IV, VI or VII hereof and the
                    Note or the  enforcement of performance or observance of any
                    obligation or agreement on the part of the Company contained
                    herein or in the Note,  the  Company  agrees that it will on
                    demand therefor pay


                                      -26-


<PAGE>



to the  Authority  or the  Trustee  the  reasonable  fees and  expenses  of such
attorneys and such other expenses so incurred by the Authority or the Trustee.

                         SECTION  7.5.  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.

                         SECTION  7.6.   Consent  of  Credit   Facility   Issuer
                    Required.  To the extent the consent,  approval or direction
                    of the Credit  Facility  Issuer is required by any provision
                    of this Participation  Agreement, the Credit Facility Issuer
                    shall  have  the  right  to  give,  and  the  discretion  to
                    withhold,  such consent,  approval or direction  only if (i)
                    the Credit  Facility  Issuer is not party to any  proceeding
                    for  the   rehabilitation,   liquidation,   conservation  or
                    dissolution of the Credit  Facility  Issuer  pursuant to the
                    U.S. Bankruptcy Code or similar provision of State law; (ii)
                    the Credit  Facility is in full force and effect;  (iii) the
                    Credit  Facility Issuer shall have made and be continuing to
                    make all payments and meet all of its obligations  under the
                    Credit  Facility;  and (iv) any Bonds  insured by the Credit
                    Facility Issuer remain outstanding;  provided, however, that
                    Bonds  held by or for the  account of the  Company  shall be
                    deemed outstanding for purposes of this section and provided
                    further that nothing  contained in this Section shall affect
                    any rights that the Initial Credit  Facility Issuer may have
                    as a bondholder by virtue of its rights of  subrogation.  So
                    long as those  conditions are met the Credit Facility Issuer
                    shall also be treated as a third party beneficiary hereunder
                    and as a party  entitled  to (i) notify  the  Trustee of the
                    occurrence  of an Event of  Default  and  (ii)  request  the
                    Trustee to intervene in judicial proceedings that affect the
                    Bonds,  the  payment  of which is  guaranteed  by the Credit
                    Facility Issuer,  and the security  therefor;  provided that
                    the Trustee  shall be entitled to indemnity  from the Credit
                    Facility  Issuer  satisfactory  to it; and the Trustee shall
                    accept  notice  of an  Event  of  Default  from  the  Credit
                    Facility Issuer.


                                      -27-


<PAGE>



                                  ARTICLE VIII

                                  MISCELLANEOUS

                         SECTION  8.1.  Notices.  All notices,  certificates  or
                    other communications required or permitted to be given under
                    this  Participation  Agreement  or the  Indenture  shall  be
                    sufficiently  given and shall be deemed given when delivered
                    or mailed by first class mail, postage prepaid, addressed as
                    follows:  if to the Authority,  at Corporate Plaza West, 286
                    Washington  Avenue Extension,  Albany,  New York 12203-6399,
                    Attention:  Chair;  if to  the  Company,  at  One  MetroTech
                    Center,  Brooklyn, New York 11201, Attention:  Treasurer; if
                    to the  Trustee,  at 450 West 33rd Street,  15th Floor,  New
                    York,   New   York   10001,   Attention:   Corporate   Trust
                    Administration;  if to the Bond Insurer, the Market Agent or
                    the  Registrar  and Paying Agent at such address as shall be
                    designated  by it pursuant to the  Indenture;  and if to any
                    other Support Facility issuer,  at the address stated in the
                    Support   Facility.   A  duplicate   copy  of  each  notice,
                    certificate,  request or other communication given hereunder
                    to the  Authority,  the  Company,  the  Trustee,  the Market
                    Agent,  the  Registrar  and the Paying  Agent or any Support
                    Facility  Issuer  shall  also be  given to the  others.  The
                    Authority,  the Company, any Support Facility Issuer and the
                    Trustee,  may,  by notice  given  hereunder,  designate  any
                    further or different  addresses to which subsequent notices,
                    certificates or other communications shall be sent.

                         SECTION  8.2.   Binding  Effect.   This   Participation
                    Agreement shall inure to the benefit of and shall be binding
                    upon the  Authority  and the  Company  and their  respective
                    successors  and  assigns,  except to the extent set forth in
                    Section 7.3.

                         SECTION 8.3. 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
                    contained in this  Participation  Agreement is 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  8.4.  Amounts  Remaining  in Bond Fund.  It is
                    agreed by the parties  hereto that any amounts  remaining in
                    the  Bond  Fund  upon   expiration  of  this   Participation
                    Agreement  after  payment in full of the Bonds (or provision
                    for payment  thereof having been made in accordance with the
                    provisions of Section 15.01 of the  Indenture)  and the fees
                    and expenses of the Trustee,  the Auction Agent,  the Market
                    Agent,  the  Registrar and Paying Agent and any other paying
                    agents in accordance with the Indenture, shall belong to and
                    be paid to the  Company  by the  Trustee as the return of an
                    overpayment of the amounts  payable  pursuant to Section 4.2
                    hereof and the Note.



                                      -28-


<PAGE>



                         SECTION  8.5.   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 out the
                    expressed  intention  of  this  Participation  Agreement  in
                    accordance with the provisions of the Indenture.

                         SECTION  8.6.  Amendments,  Changes and  Modifications.
                    Except as otherwise provided in this Participation Agreement
                    or in the Indenture, subsequent to the issuance of the Bonds
                    and prior to the payment in full of the Bonds (or  provision
                    for the payment  thereof having been made in accordance with
                    the  provisions  of  the  Indenture),   this   Participation
                    Agreement  and the Note may be amended,  changed,  modified,
                    altered or terminated only in accordance with the provisions
                    of the Indenture.

                         SECTION 8.7. Execution of Counterparts.  This Agreement
                    may be simultaneously executed in several counterparts, each
                    of  which  shall  be an  original  and  all of  which  shall
                    constitute but one and the same instrument.

                         SECTION 8.8.  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  8.9.   Applicable   Law.  THIS   PARTICIPATION
                    AGREEMENT  SHALL BE GOVERNED BY AND  CONSTRUED IN ACCORDANCE
                    WITH THE LAW OF THE STATE OF NEW YORK.

                         SECTION  8.10.  Captions.  The captions and headings in
                    this Participation Agreement are for convenience only and in
                    no way define,  limit or describe the scope or intent of any
                    provisions or sections of this Participation Agreement.



                                      -29-


<PAGE>



                         IN WITNESS WHEREOF,  the Authority and the Company have
                    caused this Participation  Agreement to be executed in their
                    respective  names and their  respective seals to be hereunto
                    affixed and attested by their duly authorized officers,  all
                    as of the date first above written.

                         NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY



                      By __________________________________
                                    President

(SEAL)

Attest:



-------------------------------
Secretary to the Board and
  Vice President for
    Governmental Relations
                             KEYSPAN GENERATION LLC



                      By __________________________________
                                     Title:
                                      Name:

(SEAL)

Attest:




Name:
Title:



                                      -30-


<PAGE>



                                    EXHIBIT A



                          (To Participation Agreement,
                          dated as of October 1, 1999,
                     between the Authority and the Company)


                             DESCRIPTION OF PROJECT
                                EXEMPT FACILITIES


1.         Glenwood (Glenwood Landing)


           An industrial wastewater treatment facility consisting primarily of a
batch  holding  tank,  air  sparging  system,  an  automatic  feed system for pH
neutralization,  analyzers,  pH controller,  pumps,  piping,  filtration device,
oil/water  separator,  flow elements,  monitoring  devices,  degritting  device,
storage  and  impoundment  facilities,  rooms for staff and  equipment,  and all
facilities functionally related and subordinate thereto.

           A sewage disposal  facility  consisting  primarily of piping,  pumps,
holding  tank and  sewage  treatment  plant to treat  sewage  effluent  prior to
discharge to harbor.

2.         Far Rockaway

           An  industrial  wastewater  treatment  facility  which  will  consist
primarily of a degritting device and storage and impoundment facilities, and all
facilities functionally related and subordinate thereto.

3.         E.F. Barrett (Island Park)


           An  industrial  wastewater  treatment  facility  which  will  consist
primarily  of pumps,  sumps,  piping  systems,  a surge  pond,  a holding  pond,
oil/water skimmer,  agitators,  pH neutralization system,  monitoring equipment,
granular  media  filters,  chemical  analyzer,  degritting  device,  impoundment
facilities,  reaction tank, reactor clarifier, sludge dewatering system, and all
facilities functionally related and subordinate thereto.

           In  addition  to the  foregoing,  miscellaneous  facilities  will  be
installed  which will  include a building  which  will house  certain  pollution
control facilities.

4.         Northport

           An  industrial  wastewater  treatment  facility  which  will  consist
primarily  of pumps,  sumps,  piping  systems,  a surge  pond,  a holding  pond,
oil/water skimmer, agitators, pH neutralization




                                       A-1

<PAGE>



system,  monitoring  equipment,   granular  media  filters,  chemical  analyzer,
degritting device,  impoundment facilities,  reaction tank, ferrous sulfate feed
system,  reactor  clarifier,   sludge  dewatering  system,  and  all  facilities
functionally related and subordinate thereto.

           An electrostatic  precipator and soot  reinjection  system to prevent
the discharge of soot and  particulates to the atmosphere  installed at Unit No.
1, Unit No. 2 and Unit No. 3.

           In  addition  to the  foregoing,  miscellaneous  facilities  will  be
installed  which will  include a building  which  will house  certain  pollution
control facilities.

5.         Port Jefferson

           An  industrial  wastewater  treatment  facility  which  will  consist
primarily  of pumps,  sumps,  piping  systems,  a surge  pond,  a holding  pond,
oil/water skimmer,  agitators,  pH neutralization system,  monitoring equipment,
granular  media  filters,  chemical  analyzer,  degritting  device,  impoundment
facilities,  reaction  tank,  ferrous  sulfate feed system,  reactor  clarifier,
sludge  dewatering   system,  and  all  facilities   functionally   related  and
subordinate thereto.

           In  addition  to the  foregoing,  miscellaneous  facilities  will  be
installed  which will  include a building  which  will house  certain  pollution
control facilities.

6. Such additional or substituted facilities for pollution control which because
of changes in  technology,  cost,  plant  processes  and the like,  the  Company
determines  shall be added to or  substituted  for the  equipment  and  property
described in paragraphs 1-5 above.







                                       A-2

<PAGE>



                                    EXHIBIT B


         (To Participation Agreement dated as of October 1, 1999 between
          New York State Energy Research and Development Authority and
                 KeySpan Generation LLC, relating to the Bonds)

                             KEYSPAN GENERATION LLC

                           $41,125,000 PROMISSORY NOTE

                                       FOR

                    POLLUTION CONTROL REFUNDING REVENUE BONDS
                (KEYSPAN GENERATION LLC PROJECTS), 1999 Series A


                               New York, New York
                                October 27, 1999


               FOR VALUE RECEIVED,  KeySpan  Generation LLC, a limited liability
               company duly  organized  under and validly  existing under and by
               virtue  of the laws of the  State of New  York  (the  "Company"),
               promises  to pay to the order of The  Chase  Manhattan  Bank,  as
               trustee  (the  "Trustee")  under  the  hereinafter   referred  to
               Indenture,  in lawful money of the United  States,  the principal
               sum of  $41,125,000  (the  "Loan  Amount"),  together  with:  (a)
               interest  thereon at such rate or rates as in the aggregate  will
               produce an amount equal to the total of all interest becoming due
               and payable on $41,125,000 principal amount of the New York State
               Energy Research and  Development  Authority's  Pollution  Control
               Refunding Revenue Bonds (KeySpan  Generation LLC Projects),  1999
               Series A,  dated as of October  27,  1999 (the  "Bonds"),  issued
               pursuant  to a Trust  Indenture  (the  "Indenture")  dated  as of
               October 1, 1999,  between the New York State Energy  Research and
               Development  Authority (the "Authority") and the Trustee; and (b)
               such redemption  premiums and other amounts allocable to the Loan
               Amount as are required to be paid by the Company to the Authority
               as part of the payments provided in the  Participation  Agreement
               dated  as of  October  1,  1999,  between  the  Company  and  the
               Authority  (the   "Participation   Agreement").   The  terms  and
               provisions of the Participation Agreement are incorporated herein
               by reference and made a part hereof.  The foregoing amounts shall
               be paid in installments and in the amounts which shall be due and
               payable as provided below.

                     The Company  shall make Note  Payments  by 12:00 noon,  New
York City time, one
Business  Day (two  Business  Days during any Auction Rate Period or any Auction
Rate-Inverse  Rate Period) next preceding each Interest Payment Date to the Bond
Fund for  credit  by the  Trustee  to the  Interest  Account  of the  Bond  Fund
established pursuant to Section 9.01 of the Indenture,




                                       B-1

<PAGE>



in the aggregate amount required,  together with other funds available  therefor
in the Interest  Account in the Bond Fund,  to pay the interest  payable on each
such Outstanding Bond on each such Interest Payment Date.

               In addition,  the Company shall pay an  additional  amount to the
               Trustee for deposit in the Bond Fund and credit to the  Principal
               Account, Interest Account, Redemption Account or to be applied to
               the payment of the principal of and premium, if any, and interest
               payable upon  redemption of any Bond pursuant to Article V of the
               Indenture.

               The payment  obligations  of the Company under this note shall be
               deemed to be  discharged  and this note shall be cancelled in the
               event  that the  Bonds  shall  have  been  accelerated  under the
               Indenture  and the  Company  shall have paid or caused to be paid
               all amounts required under the Participation Agreement to be paid
               upon the occurrence of such acceleration.

               In the event the Company  should fail to make any of the payments
               required by this note or the  Participation  Agreement to be made
               to the  Authority,  the item or  installment  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 at the rate of interest  borne by
               the Bonds,  to the extent,  but not  exceeding  the maximum rate,
               permitted by law,  until paid;  provided,  however,  that if such
               failure to pay results in a payment of principal  of, or premium,
               if any,  or  interest  on the Bonds  not being  made when due and
               payable,  the Company shall pay the same with  interest  thereon,
               which interest shall also constitute an obligation of the Company
               at the same rate of  interest  per annum as that  payable  on the
               Bonds;  provided,  further,  if during an Auction  Rate Period or
               Auction  Rate-Inverse Rate Period such failure results in payment
               of principal of, or premium, if any, or interest on Auction Bonds
               or the Auction Rate- Inverse Rate Bonds,  as the case may be, not
               being made when due and payable,  the Company  shall pay the same
               with interest  thereon,  which interest shall also  constitute an
               obligation of the Company, at the Overdue Rate.

               This note shall  finally  mature on October 1, 2028  unless  paid
               earlier  as  permittedby  the  Participation  Agreement  and  the
               Indenture.

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

               If the Company should  default in the payment of any  installment
               of  principal  of,  premium,  if any, and interest due under this
               note or if any one or more of the events of default  specified in
               the Participation Agreement should occur, and if any such default
               is not remedied as provided in the Participation  Agreement,  the
               Authority or the Trustee  then,  or at any time  thereafter,  may
               give notice to the Company  declaring all unpaid  amounts of this
               note then  outstanding,  together  with all other unpaid  amounts
               outstanding under the Participation  Agreement, to be immediately
               due and payable, and thereupon, without further notice or demand,
               all such amounts shall become and be immediately due and payable.
               Any failure to exercise this




                                       B-2

<PAGE>



option  shall not  constitute  a waiver of the right to exercise the same at any
time in the  event of any  continuing  or  subsequent  default.  In the event of
default in the payment of this note,  the  undersigned  hereby agrees to pay all
costs incurred in connection with the collection of the amounts then due hereon,
including reasonable attorneys' fees. The 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 and all instruments  securing the same are to
                    be construed according to the law of the State of New York.

                             KEYSPAN GENERATION LLC



(SEAL)                     By___________________________________
                                 Name:
                                 Title:

     ____________________
     Name:
     Title:




                                       B-3

<PAGE>
<TABLE>
<CAPTION>



                                                           TABLE OF CONTENTS

                                                                                                          Page

                                                               ARTICLE I

                                               DEFINITIONS; EFFECTIVE DATE AND DURATION
                                                      OF PARTICIPATION AGREEMENT

<S>                           <C>
SECTION 1.1.                   Definitions.........................................................................  3
SECTION 1.2.                   Effective Date and Duration of Participation
                                 Agreement.........................................................................  3


                                                              ARTICLE II

                                                    REPRESENTATIONS AND WARRANTIES

SECTION 2.1.                   Representations and Warranties by the Authority.....................................  4
SECTION 2.2.                   Representations and Warranties by the Company.......................................  4


                                                              ARTICLE III

                                                    THE PROJECT; ISSUANCE OF BONDS

SECTION 3.1.                   The Project.........................................................................  6
SECTION 3.2.                   Sale of Bonds and Deposit of Proceeds...............................................  6
SECTION 3.3.                   Disbursements from Project Fund and Rebate
                               Fund................................................................................  6
SECTION 3.4.                   Adequacy of Project Fund............................................................  7
SECTION 3.5.                   Ownership and Possession of the Project.............................................  7
SECTION 3.6.                   Operation, Maintenance and Repair...................................................  7
SECTION 3.7.                   Investment of Monies in Funds Under the
                                 Indenture.........................................................................  7


                                                              ARTICLE IV

                                                           NOTE AND PAYMENTS

SECTION 4.1.                   Execution and Delivery of Note to Trustee...........................................  8
SECTION 4.2.                   Payments Payable; Note Payments; Additional
                                 Payments..........................................................................  8
SECTION 4.3.                   Notice to Pay; Medium of Payment; Acceleration...................................... 11




                                                                 (i)

<PAGE>


                                                                                                                  Page


SECTION 4.4.                   Advance Payments.................................................................... 11
SECTION 4.5.                   Company's Payments as Trust Funds................................................... 11
SECTION 4.6.                   Absolute Obligation to Make Payments................................................ 12
SECTION 4.7.                   Assignment of Authority's Rights.................................................... 13
SECTION 4.8.                   Actions with Respect to or by or on behalf of the
                                 Authority under the Indenture..................................................... 13
SECTION 4.9.                   Agreements of Company relating to Support
                                 Facilities........................................................................ 13
SECTION 4.10.                  Project not Security for Bonds...................................................... 14

                                                               ARTICLE V

                                                 SPECIAL COVENANTS AND REPRESENTATIONS

SECTION 5.1.                   No Warranty as to Suitability of the Project........................................ 15
SECTION 5.2.                   Authority's Rights to Inspect the Project and Plans
                                 and Specifications................................................................ 15
SECTION 5.3.                   Company Consent to Amendment of Indenture........................................... 15
SECTION 5.4.                   Tax Covenant........................................................................ 15
SECTION 5.5.                   Maintenance of Office or Agency..................................................... 15
SECTION 5.6.                   Further Assurances.................................................................. 15
SECTION 5.7.                   Payment of Taxes and Other Charges.................................................. 16
SECTION 5.8.                   Maintenance of Properties........................................................... 16
SECTION 5.9.                   Insurance........................................................................... 16
SECTION 5.10.                  Proper Books of Record and Account.................................................. 16
SECTION 5.11.                  Compliance with Law................................................................. 17
SECTION 5.12.                  Consolidation, Merger or Sale of Assets............................................. 17
SECTION 5.13.                  Financial Statements of Company..................................................... 18
SECTION 5.14.                  Company Agrees to Perform Obligations Imposed
                                 by Indenture...................................................................... 18
SECTION 5.15.                  Certificates as to Defaults......................................................... 18
SECTION 5.16.                  Limited Obligation of Authority; Indemnification of
                                 Authority, Registrar and Paying Agent, Auction Agent and Trustee.................. 18
SECTION 5.17.                  Financing Statements................................................................ 20
SECTION 5.18.                  Provision of Information............................................................ 20
SECTION 5.19.                  Ratings............................................................................. 20
SECTION 5.20.                  Notices............................................................................. 20






                                                                 (ii)

<PAGE>


                                                                                                                  Page


                                                              ARTICLE VI

                                                  OPTIONAL AND MANDATORY PREPAYMENTS;
                                                          REDEMPTION OF BONDS

SECTION 6.1.                   Redemption of Bonds................................................................. 21
SECTION 6.2.                   Prepayment of Note Payments......................................................... 21
SECTION 6.3.                   Option to Prepay Payments for Redemption of
                                 Bonds............................................................................. 21
SECTION 6.4.                   Mandatory Prepayment of Payments for Redemption
                                 of Bonds.......................................................................... 22


                                                              ARTICLE VII

                                                    EVENTS OF DEFAULT AND REMEDIES

SECTION 7.1.                   Events of Default Defined........................................................... 23
SECTION 7.2.                   Remedies on Default................................................................. 24
SECTION 7.3.                   No Remedy Exclusive................................................................. 25
SECTION 7.4.                   Agreement to Pay Attorneys' Fees and Expenses....................................... 26
SECTION 7.5.                   No Additional Waiver Implied by One Waiver.......................................... 27
SECTION 7.6.                   Consent of Credit Facility Issuer Required.......................................... 27

                                                             ARTICLE VIII

                                                             MISCELLANEOUS

SECTION 8.1.                   Notices............................................................................. 28
SECTION 8.2.                   Binding Effect...................................................................... 28
SECTION 8.3.                   Severability........................................................................ 28
SECTION 8.4.                   Amounts Remaining in Bond Fund...................................................... 28
SECTION 8.5.                   Further Assurances and Corrective Instruments....................................... 29
SECTION 8.6.                   Amendments, Changes and Modifications............................................... 29
SECTION 8.7.                   Execution of Counterparts........................................................... 29
SECTION 8.8.                   Delegation of Duties by Authority................................................... 29
SECTION 8.9.                   Applicable Law...................................................................... 29
SECTION 8.10.                  Captions............................................................................ 29





                                                                (iii)

<PAGE>


                                                                                                                  Page

EXHIBIT A   -   Description of Project Exempt Facilities

EXHIBIT B       -    KeySpan Generation LLC $41,125,000 Promissory Note For Pollution Control
                     Refunding Revenue Bonds (KeySpan Generation LLC Projects), 1999 Series A





                                                                 (iv)

</TABLE>
EXECUTION COPY

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

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





                                 TRUST INDENTURE


                                     BETWEEN

                         NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY



                                       AND

                            THE CHASE MANHATTAN BANK,
                                   as Trustee

                           Dated as of October 1, 1999




                                  -relating to-


              $41,125,000 Pollution Control Refunding Revenue Bonds
                (KeySpan Generation LLC Projects), 1999 Series A

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


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




<PAGE>


                  THIS  TRUST  INDENTURE,  made and dated as of the first day of
October,  1999,  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 Chase Manhattan Bank, 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 the
State 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 also empowered
to extend  credit  and make  loans  from bond  proceeds  to any  person  for the
construction,  acquisition, and installation of, or for the reimbursement to any
person for costs in connection with, any special energy project,  including, but
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; 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, the Authority issued 7 1/2%Pollution  Control Revenue
Bonds (Long Island Lighting Company Projects),  Series A in the principal amount
of  $28,375,000  (the "Series A Bonds"),  which were used,  in part,  to finance
certain costs  primarily  associated  with the  acquisition,  construction,  and
installation of various systems to abate,  control,  and reduce pollution and to
dispose of sewage and solid waste at Northport Power Station,  Glenwood  Landing
Power Station and at the former Shoreham Nuclear Power Station and miscellaneous
facilities at the former Mitchell Gardens Power Station; and

     WHEREAS,  there is currently  outstanding  $26,375,000  aggregate principal
amount of the Series A Bonds; and

                  WHEREAS,  the Authority issued Pollution Control Revenue Bonds
(Long Island Lighting  Company  Projects),  Series B in the principal  amount of
$19,100,000 (the "Series B Bonds", and collectively with the Series A Bonds, the
"Prior  Bonds"),  which were used, in part, to finance  certain costs  primarily
associated with the acquisition, construction, and installation of various

                                                        -1-


<PAGE>



     systems to abate,  control,  and reduce  pollution and to dispose of sewage
and solid waste at the  Glenwood  Landing  Power  Station,  Far  Rockaway  Power
Station, E.F. Barrett Power Station, Northport Power Station, and Port Jefferson
Power Station; and

     WHEREAS, all of the Series B Bonds are currently outstanding; and

                  WHEREAS,  KeySpan Generation LLC (formerly known as MarketSpan
Generation  LLC) (the "Company") is the current owner of all the assets financed
by the Prior  Bonds other than the  facilities  at the former  Shoreham  Nuclear
Power Station and the former Mitchell Gardens Power Station,  having acquired on
May 28, 1998, pursuant to the Agreement and Plan of Merger, dated as of June 26,
1997, by and among MarketSpan  Corporation  d/b/a KeySpan  (formerly known as BL
Holding Corp.) ("KeySpan"),  Long Island Lighting Company ("LILCO"), Long Island
Power Authority and LIPA Acquisition Corp. (the "Merger Agreement"),  all of the
non-nuclear electric generation businesses, among other assets, of LILCO; and

                  WHEREAS,  pursuant to the Merger  Agreement  and in connection
with the transfer by LILCO of its generating assets to the Company, the Company,
KeySpan and other Transferee  Subsidiaries (as defined in the Merger  Agreement)
(collectively,  the "KeySpan  Notes  Obligors")  have  executed and delivered to
LILCO  promissory notes relating to the Prior Bonds and evidencing the joint and
several  obligation of the KeySpan Notes  Obligors to pay to LILCO amounts which
would be sufficient  to pay principal of, and premium,  if any, and interest on,
the Prior Bonds when due (the "KeySpan Notes"); and

     WHEREAS,  the Company has requested that the Authority  issue bonds for the
purpose of refunding the Prior Bonds; and

                  WHEREAS,  contemporaneously  with the  execution  hereof,  the
Company and the Authority  have entered into a  Participation  Agreement of even
date herewith (herein referred to as the "Participation Agreement"); and

                  WHEREAS,   the  Participation   Agreement  provides  that  the
Authority will issue its bonds and make the proceeds of such bonds  available to
the Company; and

                  WHEREAS,  the Company proposes to achieve the refunding of the
Prior Bonds by applying  the  proceeds of the Bonds  together  with other monies
advanced from its own funds to the prepayment of the KeySpan Notes; and

                  WHEREAS,  LILCO has agreed to direct  redemption  of the Prior
Bonds and use the proceeds  received from the prepayment of the KeySpan Notes 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

                                                        -2-


<PAGE>



"Note") as evidence of its obligation to make certain  payments  required by the
Participation Agreement; and

                  WHEREAS,  pursuant to Resolution No. 952 adopted September 27,
1999,  the Authority has  determined to issue  $41,125,000  aggregate  principal
amount of Pollution  Control  Refunding  Revenue Bonds  (KeySpan  Generation LLC
Projects),  1999 Series A (the "Bonds") for the purpose of applying the proceeds
thereof  together with other monies advanced by the Company to the prepayment of
the  KeySpan  Notes and  causing  LILCO to use the  proceeds  received  from the
prepayment of the KeySpan Notes to pay all or a portion of the redemption  price
of the Prior Bonds; and

                  WHEREAS,  Ambac  Assurance  Corporation  has agreed to issue a
municipal  bond  insurance  policy in favor of the  Trustee to  provide  for the
payment of such amounts as are  specified  therein with respect to the regularly
scheduled principal of and interest on the Bonds when due; 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 (as hereinafter defined)
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
Additional   Payments   and  the   Authority's   rights  with   respect  to  (a)
administrative  compensation,  attorneys'  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 4.2, 5.16 and 7.4 of the  Participation
Agreement, and (f) the right to

                                                        -3-


<PAGE>



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
Company thereunder  independently of the Trustee;  (4) all other monies,  rights
and properties held by the Trustee or other  depositary under this Indenture 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 or
amounts  under  any  Credit  Facility  issued  in the form of a  municipal  bond
insurance  policy or any amounts on deposit in the Rebate  Fund (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
and the Bond Insurer as their respective  interests appear , 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 and the
Bond Insurer, 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 and the Bond Insurer shall have the same rights,  privileges and lien under
and  by  virtue  of  this  Trust  Indenture,  except  as  hereinafter  otherwise
specifically provided;

                  AND CONDITIONED  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

                                                        -4-


<PAGE>



political subdivision thereof, but shall be payable solely out of the income and
Revenues  derived  under the  Participation  Agreement,  the Note and the Credit
Facility,  if any, and other monies, rights and properties of the Trust Estate),
that is to say:

                                                        -5-


<PAGE>



                                                     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.

                  "'AA'  Composite  Commercial  Paper  Rate,"  on  any  date  of
determination,  shall mean with  respect to Auction Rate Bonds during an Auction
Rate-Inverse  Rate  Period (i) the  interest  equivalent  of the 30-day  rate on
commercial  paper placed on behalf of issuers whose corporate bonds are rated AA
by S&P, or the equivalent of such rating by S&P, as made available on a discount
basis or otherwise by the Federal Reserve Board for the Business Day immediately
preceding such date of determination,  or (ii) if the Federal Reserve Board 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 "AA" Composite  Commercial  Paper Rate, the
"AA"  Composite  Commercial  Paper Rate shall be determined on the basis of such
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.

                  "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.

                                                        I-1

<PAGE>



                  "Act of  Bankruptcy"  shall  mean  the  filing  of a  petition
commencing  a case by or against the Company or an  Affiliate  of the Company or
the  Authority  under the  Bankruptcy  Code or the filing of a  petition  or the
seeking of relief by or against  the Company or an  Affiliate  of the Company or
the Authority under any state bankruptcy or insolvency law.

                  "Additional  Payments"  shall mean the Additional  Payments as
defined in Section 4.2(e) of the Participation Agreement.

                  "Adjustable  Rate"  shall mean any of the  following  types of
interest rates: a Commercial Paper Rate, an Auction Rate (during an Auction Rate
Period),  an  Auction  Rate  and a  related  Inverse  Rate  (during  an  Auction
Rate-Inverse  Rate  Period),  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  4.2(e)  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  4.2(e)  of the
Participation Agreement.

                  "Affiliate"  of any  specified  person  shall  mean any  other
person  directly or indirectly  controlling  or controlled by or under direct or
indirect  common  control  with such  specified  person.  For  purposes  of this
definition,  "control" when used with respect to any specified  person means the
power to  direct  the  management  and  policies  of such  person,  directly  or
indirectly,  whether through the ownership of voting securities,  by contract or
otherwise,   and  the  terms   "controlling"   and  "controlled"  have  meanings
correlative  to the  foregoing,  provided,  that,  when used in connection  with
Auction Rate Bonds and Auction  Rate-Inverse Rate Bonds,  "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 or manager of the
Company.

                  "After-Tax Equivalent Rate" on any date of determination shall
mean with  respect to Auction  Rate Bonds  during an Auction  Rate-Inverse  Rate
Period,  the interest rate per annum equal to the product of (x) "AA"  Composite
Commercial  Paper 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.

                  "Alternate   Liquidity  Facility"  shall  mean  any  Liquidity
Facility  obtained  pursuant to the provisions of Section 6.02 in replacement of
an existing Liquidity Facility,  including a letter of credit, committed line of
credit,  surety bond or standby bond purchase  agreement,  or any combination of
the  foregoing,  and  issued by a bank or  banks,  municipal  bond or  financial
guarantee

                                                        I-2

<PAGE>



insurance  company,   other  financial  institution  or  institutions,   or  any
combination of the foregoing which provides  payment of the purchase price equal
to the  principal  of and accrued  interest on Bonds  purchased  during the term
thereof upon any mandatory or optional tender for purchase  pursuant to Sections
5.02, 5.03 and 5.06.

                  "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 (i) for Auction  Rate Bonds  during an Auction Rate Period  pursuant to
Section 3.10 and (ii) for Auction Rate Bonds during an Auction Rate-Inverse Rate
Period  pursuant to Section 3A.09) based on the prevailing  long-term  rating of
the Auction  Rate Bonds  during an Auction Rate Period or the Auction Rate Bonds
during an Auction Rate-Inverse Rate Period, as the case may be, in effect at the
close of  business  on the  Business  Day  immediately  preceding  such  date of
determination:

                                                Auction Rate-Inverse

                               Rate Period                  Auction Rate Period
Prevailing Rating        Applicable Percentage            Applicable Percentage

  AAA/"Aaa"                   175%                                    65%
  AA/"Aa"                     175%                                    70%
  A/"A"                       175%                                    85%
  Below A/"A"                   -                                    100%
  BBB/"Baa"                   200%                                   -
  Below BBB/"Baa"             265%                                   -

                  For purposes of this  definition,  the "prevailing  rating" of
the Auction  Rate Bonds  during an Auction Rate Period or the Auction Rate Bonds
during an Auction  Rate-Inverse  Rate  Period,  as the case may be,  will be (a)
AAA/"Aaa,"  if the  Auction  Rate  Bonds  during an Auction  Rate  Period or the
Auction Rate Bonds during an Auction  Rate-Inverse  Rate Period, as the case may
be,  have a rating  of AAA 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
during an  Auction  Rate  Period or the  Auction  Rate  Bonds  during an Auction
Rate-Inverse  Rate Period, as the case may be, 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 during an
Auction  Rate Period or the Auction  Rate Bonds  during an Auction  Rate-Inverse
Rate  Period,  as the case may be,  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 (1) Below A/"A",  in the case of Auction Rate
Bonds during an Auction  Rate Period,  whether or not the Auction Rate Bonds are
rated by any  securities  rating  agency  or (2)  BBB/"Baa,"  if, in the case of
Auction

                                                        I-3

<PAGE>



Rate Bonds during an Auction  Rate-Inverse  Rate Period,  the Auction Rate Bonds
during an Auction  Rate-Inverse  Rate  Period 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, in the case of  Auction  Rate Bonds  during an Auction  Rate-Inverse
Rate Period, not AAA/"Aaa,"  AA/"Aa",  A/"A" or BBB/"Baa," then Below BBB/"Baa,"
whether or not the Auction Rate Bonds during an Auction Rate-Inverse Rate Period
are rated by any securities rating agency.

                  If (x) the Auction Rate Bonds during an Auction Rate Period or
the Auction Rate Bonds during any Auction  Rate-Inverse Rate Period, as the case
may be, 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 Market 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 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 during an Auction Rate Period or the
Auction Rate Bonds during any Auction Rate-Inverse Rate Period.

                  "Auction  Agency  Agreement"  shall  mean the  Auction  Agency
Agreement (A) dated  October 27, 1999,  entered into between the Company and The
Chase Manhattan  Bank, as Auction Agent,  with respect to the Auction Rate Bonds
during the  initial  Auction  Rate  Period,  or (B)  between the Trustee and the
Auction  Agent with  respect to the Auction  Rate-Inverse  Rate Bonds  during an
Auction Rate-Inverse Rate Period.

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

                  "Auction Date" shall mean:

                  (A) with respect to each  Auction  Period for the Auction Rate
Bonds  during an Auction  Rate  Period,  (i) if the Auction  Rate Bonds are in a
daily Auction Period,  each Business Day, and (ii) if the Auction Rate Bonds are
in any other  Auction  Period,  the last Thursday of the  immediately  preceding
Auction  Period (or such other day that the Market 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
other than for:

                                                        I-4

<PAGE>



                  (i) each Interest Period commencing after the ownership of the
         Auction Rate Bonds is no longer  maintained in  book-entry  form by the
         Securities Depository;

     (ii) each Interest  Period  commencing  after the occurrence and during the
continuance of a Payment Default; or

                  (iii) any Interest  Period  commencing  less than two Business
         Days after the cure of a Payment Default pursuant to Section 12.01;

provided  further that on the Business Day preceding the conversion from a daily
Auction Period to another  Auction Period,  there will be two Auctions,  one for
the last daily Auction Period and one for the first Auction Period following the
conversion.

                  (B) with respect to the Auction Rate-Inverse Rate Bonds during
an Auction Rate- Inverse Rate Period, the Business Day immediately preceding the
first day of each Interest Period, other than:

          (i) an  Interest  Period  which is  immediately  preceded by a Regular
     Record  Date at the  close  of  business  on  which  all of the  beneficial
     ownership of the Auction  Rate Bonds was Linked with all of the  beneficial
     ownership of the Inverse Rate Bonds;

                  (ii) each Interest  Period  commencing  after the ownership of
         the Auction Rate Bonds is no longer  maintained in  book-entry  form by
         the Securities Depository;

          (iii) each Interest Period  commencing after the occurrence and during
     the continuance of a Payment Default; or

                  (iv) any  Interest  Period  commencing  less than two Business
         Days after the cure of a Payment Default pursuant to Section 12.01.

                  "Auction Period" shall mean;
                   --------------

                  (A) in the event the Bonds are  issued  initially  as  Auction
Rate Bonds  during an Auction  Rate Period,  the period from and  including  the
Closing Date to and including the initial Auction Date; and

                  (B) thereafter, or after a Change in the Interest Rate Mode to
an Auction Rate,  during an Auction Rate Period,  until the effective  date of a
Change in the Interest Rate Mode or the maturity of the Bonds;

                  (i) with  respect  to Auction  Rate  Bonds in a daily  Auction
         Period,  a period  beginning on each  Business Day and extending to but
         not including the next succeeding Business Day; and

                                                        I-5

<PAGE>



                  (ii) with respect to Auction Rate Bonds not in a daily Auction
         Period,  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  (i)  with  respect  to the
Auction  Rate Bonds during an Auction  Rate Period the  procedures  set forth in
Sections  3.06  through  3.09,  and (ii) with  respect to the Auction Rate Bonds
during an Auction  Rate-Inverse  Rate Period the procedures set forth in Section
3A.03.

                  "Auction Rate" shall mean:

                           (A) With  respect  to  Auction  Rate  Bonds  and each
                  Auction  Period for such  Auction Rate Bonds during an Auction
                  Rate Period, the rate of interest per annum determined for the
                  Bonds pursuant to Article III; and

                  (B) With  respect  to  Auction  Rate  Bonds and each  Interest
         Period for such Auction Rate Bonds during an Auction  Rate-Inverse Rate
         Period (other than the Initial  Interest  Period after the Closing Date
         if the Bonds initially are offered as Auction  Rate-Inverse Rate Bonds,
         or an Initial  Interest Period after a Change in the Interest Rate Mode
         to an Auction  Rate-  Inverse  Rate),  the rate of  interest  per annum
         determined for the Bonds pursuant to Article IIIA.

                  "Auction Rate Bonds" shall mean:
                   ------------------

          (A) With respect to an Auction Rate Period,  any Bonds or subseries of
     Bonds which bear the Auction Rate determined pursuant to Article III;

                  (B) With respect to an Auction  Rate-Inverse Rate Period,  any
         Bonds or  subseries  of Bonds  which bear the Auction  Rate  determined
         pursuant to Article IIIA.

                  "Auction  Rate-Inverse  Rate Bonds" shall mean any Bonds which
bear an Auction Rate and a related  Inverse Rate during an Auction  Rate-Inverse
Rate Period.

                  "Auction  Rate-Inverse  Rate  Period"  shall  mean any  period
during  which the Auction  Rate-Inverse  Rate Bonds bear  interest at an Auction
Rate and a related Inverse Rate  determined  pursuant to the  implementation  of
Auction  Procedures  established under Article IIIA, which period shall commence
on the Closing Date if the Bonds  initially are offered as Auction  Rate-Inverse
Rate Bonds, or on the effective date of a Change in the Interest Rate Mode to an
Auction  Rate and a related  Inverse  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 Fixed Rate Conversion Date.

                                                        I-6

<PAGE>




                  "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 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 Fixed
Rate Conversion Date.

                  "Auction Rate Period Record Date" shall mean,  with respect to
each  Interest  Payment Date during an Auction Rate Period  (other than during a
daily Auction  Period),  the Business Day next preceding  such Interest  Payment
Date,  and with respect to each  Interest  Payment  Date during a daily  Auction
Period, the last Business Day of the month preceding such Interest Payment Date.

                  "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,  Treasurer,  Assistant  Treasurer  or Secretary to the Board and Vice
President for Governmental Relations.

                  "Available  Auction Rate Bonds" shall mean (i) with respect to
the Auction Rate Bonds during an Auction  Rate  Period,  Available  Auction Rate
Bonds as defined in Section  3.08,  and (ii) with  respect to Auction Rate Bonds
during an Auction  Rate-Inverse  Rate  Period,  Available  Auction Rate Bonds as
defined in Section 3A.03.

                  "Available  Moneys" shall mean (i) moneys which have been paid
to the  Trustee by the  Company or any  Affiliate  of the  Company and have been
continuously  on deposit with the Trustee for at least 123  consecutive  days in
any separate and segregated  account or accounts or sub-account or  sub-accounts
in which no other moneys which were not Available  Moneys were at any time held,
during  and  prior to which  period no Act of  Bankruptcy  shall  have  occurred
(unless  the  proceeding  arising  from such Act of  Bankruptcy  shall have been
dismissed and such dismissal shall be final and not subject to appeal), and have
not been commingled  with any other funds,  and the proceeds from the investment
of such moneys once such moneys  become  Available  Moneys,  provided  that such
investment  proceeds  shall be  considered  to be  Available  Moneys only to the
extent that the Trustee,  the Bond Insurer and any Rating  Agencies  then rating
the Bonds  shall have  received  an opinion  of counsel  acceptable  to any such
Rating Agencies to the effect that application of such investment  proceeds does
not  result in an  avoidable  preference  with  respect  to the  Company  or any
Affiliate of the Company or the Authority  pursuant to the provisions of Section
547 of the

                                                        I-7

<PAGE>



Bankruptcy  Code,  (ii) moneys drawn under the Credit Facility which were at all
times since their  deposit with the Trustee  held in a separate  and  segregated
account or accounts or sub-account or sub-accounts in which no moneys other than
those drawn under the Credit  Facility were at any time held,  and have not been
commingled  with any other  funds,  (iii)  moneys  drawn  under  any  Direct-Pay
Facility  which were at all times since their deposit with the Trustee held in a
separate and segregated  account or accounts or sub-account or  sub-accounts  in
which no moneys other than those drawn under such  Direct-Pay  Facility  were at
any time held, and have not been  commingled  with any other funds,  or (iv) the
proceeds of any obligations issued by the Authority to refund the Bonds, and the
proceeds of the  investment  of such moneys,  provided that (x) such proceeds of
such  obligations  shall be  deposited  by the Trustee  directly in a segregated
account  maintained by the Trustee over which the Company (or any  Affiliates of
the Company) or the Authority  shall have no right to withdraw moneys or control
the investment of moneys,  (y) such proceeds may not be used to pay the purchase
price of any Bonds  tendered or deemed  tendered for  purchase  pursuant to this
Indenture  and (z) at or prior to the  deposit  of such  proceeds  an opinion of
counsel  satisfactory  to the Rating  Agencies  then rating the Bonds shall have
been provided to the Trustee,  the Bond Insurer and such Rating  Agencies to the
effect that such  application  of such proceeds will not constitute an avoidable
preference  with  respect to the Company or any  Affiliate of the Company or the
Authority under Section 547 of the Bankruptcy Code.

                  "Bank Bond" or "Bank Bonds" means any Bond or Bonds  purchased
by the Liquidity  Facility Issuer pursuant to the initial Liquidity  Facility or
any Bond or Bonds purchased pursuant to any Alternate Liquidity Facility.

                  "Bank  Bond  Interest  Rate"  or "Bank  Rate",  at any date of
determination,  has the meaning ascribed thereto in the Liquidity Facility or an
agreement  providing  for the  issuance  thereof,  provided  that the Bank  Bond
Interest Rate shall in no event exceed 15% per annum.

                  "Bid" shall mean (i) with  respect to the  Auction  Rate Bonds
during an Auction Rate  Period,  Bid as defined in Section  3.06,  and (ii) with
respect to Auction Rate Bonds during an Auction Rate-Inverse Rate Period, Bid as
defined in Section 3A.03.

                  "Bidder" shall mean (i) with respect to the Auction Rate Bonds
during an Auction Rate Period,  Bidder as defined in Section 3.06, and (ii) with
respect to Auction Rate Bonds during an Auction Rate-Inverse Rate Period, Bidder
as defined in Section 3A.03.

                  "Bond  Counsel"  shall  mean an  attorney  or firm or firms of
attorneys, satisfactory to the Authority and the Trustee, 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 "KeySpan  Generation  LLC Project Bond Fund 1999 Series A" created
and  established  under,  and to be held  and  administered  by the  Trustee  as
provided in, Section 9.01 and, unless the context shall

                                                        I-8

<PAGE>



clearly indicate otherwise, shall include the "Interest Account," the "Principal
Account," and the "Redemption Account" created and established therein.

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

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

                  "Bond  Purchase   Agreement"  shall  mean  the  Bond  Purchase
Agreement,  dated  October 21, 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 Closing  Date  between the  Authority  and the
Registrar and Paying Agent, as from time to time amended or supplemented.

                  "Bonds" shall mean, the "Pollution  Control  Refunding Revenue
Bonds (KeySpan  Generation LLC Projects),  1999 Series A" presently to be issued
as authorized in Section 2.02 at any time Outstanding.

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

                  "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,  (iii) that has entered into a Broker-Dealer Agreement
with the Auction Agent and the Company that remains effective and (iv) after the
occurrence  and  during the  continuance  of a Company  Downgrade  Event that is
reasonably acceptable to the initial Bond Insurer.

                  "Broker-Dealer Agreement" shall mean each agreement applicable
to the Auction  Rate Bonds  during an Auction  Rate  Period or the Auction  Rate
Bonds during an Auction Rate-  Inverse Rate Period,  as the case may be, among 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 Liquidity  Facility at which demands for a draw on,
or borrowing or payment under,  the Liquidity  Facility will be made;  provided,
however, that with

                                                        I-9

<PAGE>



respect to Auction  Rate-Inverse Rate Bonds during an Auction  Rate-Inverse Rate
Period or Auction Rate Bonds during an Auction Rate Period,  the term  "Business
Day" shall further exclude April 14, April 15, December 30 and December 31.

                  "Calculation  Period"  shall mean (a)  during  any  Commercial
Paper Rate Period,  any period or periods  from and  including a Business Day to
and  including  any day  not  more  than  270  days  thereafter  which  is a day
immediately preceding a Business Day established by the Market Agent pursuant to
Section 3.02; (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
any Weekly Rate Period,  with respect to the period after the Closing Date,  the
period from and  including  the Closing Date and to and  including the following
Tuesday and,  thereafter,  the period from and  including  the Wednesday of each
week to and including the following  Tuesday and with respect to 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; provided,  however, in each case if such
Wednesday is not a Business Day, such next succeeding  Calculation  Period shall
begin on the Business Day next  succeeding  such Wednesday and such  Calculation
Period shall end on the day before such next succeeding  Calculation Period; (d)
during any Monthly  Rate Period,  with respect to 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,  with respect to 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; and (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 Market  Agent  pursuant  to
Section 4.01.1) not later than the day prior to the maturity date of the Bonds.

                  "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.

                  "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.

                                                       I-10

<PAGE>



                  "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 Dealer" means Goldman,  Sachs & Co. or, in lieu
          thereof, affiliates or successors,  provided that any such entity is a
          commercial paper dealer.

                  "Commercial Paper Index," on any date of determination,  shall
mean,  with respect to Auction Rate Bonds  during an Auction  Rate-Inverse  Rate
Period,  the  interest  index  published by the Market  Agent  representing  the
weighted  average of the yield on  tax-exempt  commercial  paper,  or tax-exempt
bonds  bearing  interest at a commercial  paper rate or pursuant to a commercial
paper mode, having a range of maturities or mandatory  purchase dates between 25
and 36 days traded during the immediately preceding five Business Days.

                  "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 the first
day of 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, the Credit Facility Issuer and the Company) by the Market Agent no
later than 12:00 noon (New York City time) on and as of such day as the  minimum
rate or rates of interest per annum which,  in the opinion of the Market  Agent,
taking into account the Calculation Period or Calculation Periods for the Bonds,
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 15% per annum.

                  "Commercial  Paper Rate Index"  shall mean with respect to the
first day 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

                                                       I-11

<PAGE>



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.  Upon the occurrence and during the continuance
of a Company  Downgrade  Event, the Bond Insurer shall have the right to consent
to any change to the  Component  Issuers and any change in the method of setting
the  Commercial  Paper  Rate  Index,  which  consent  shall not be  unreasonably
withheld.

                  "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, (b) the Fixed Rate  Conversion  Date or (c) the maturity
date of the Bonds.

                  "Commercial  Paper/Treasury Rate" on any date of determination
shall mean with  respect to Auction Rate Bonds during an Auction Rate Period (i)
in the case of any Auction Period of less than 180 days, the interest equivalent
of the  7-day  rate 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 or another  rating  agency,  as made  available  on a discount  basis or
otherwise  by the  Federal  Reserve  Board  for  the  Business  Day  immediately
preceding such date of  determination,  or in the event that the Federal Reserve
Board 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  or (ii) in the case of any
Auction Period of 180 days or more, the Treasury Rate for such Auction Period.

                                                       I-12

<PAGE>



                  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  (which  request  shall be  accompanied  by the consent of the Bond
Insurer after the occurrence and during the  continuance of a Company  Downgrade
Event; provided that such consent shall not be unreasonably withheld) 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.

                  "Company"   shall  mean  KeySpan   Generation   LLC,  and  any
surviving,  resulting or  transferee  company as provided in Section 5.12 of the
Participation Agreement.

                  "Company Downgrade Event" shall mean the unsecured senior debt
rating of the Company shall be withdrawn or reduced  either below "Baa3" (or its
equivalent) by Moody's if the Company is then rated by Moody's, below "BBB-" (or
its  equivalent) by S&P if the Company is then rated by S&P or below  investment
grade by another  rating  agency if the Company is then rated by another  rating
agency.

                  "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  initially the  municipal  bond
insurance  policy  issued by the Bond  Insurer  insuring the payment when due of
regularly  scheduled  principal and interest on the Bonds, as provided  therein,
and shall mean any other instrument  satisfactory to the Authority  entered into
or obtained in connection  with the Bonds in order to obtain a rating or ratings
on the Bonds, such as a letter of credit,  committed line of credit or insurance
policy, and issued by a bank or banks,

                                                       I-13

<PAGE>



insurance  company  or  other  financial  institution  or  institutions,   which
instrument  provides  for the payment of  principal of and interest on all Bonds
coming due and payable during the term thereof.

                  "Credit  Facility  Issuer"  shall  mean an  issuer of a 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 the first day of 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 Market
Agent no later than 12:00 noon (New York City time) on and as of such day as the
minimum rate of interest per annum  which,  in the opinion of the Market  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 15% per annum.

                  "Daily Rate Index" shall mean with respect to the first day 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 such day. If the Bonds are rated by a Rating  Agency or are subject to
the benefits of a Support  Facility and the issuer of such Support  Facility has
issued support  facilities to support other debt  obligations  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 or other debt  obligations  supported by
support  facilities  issued by the issuer of a Support  Facility 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 and the Bond  Insurer 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.
Upon the occurrence and during the continuance of a Company Downgrade Event, the
Bond  Insurer  shall have the right to  consent  to any change to the  Component
Issuers  and any change in the method of setting  the Daily Rate Index  provided
that such consent shall not be unreasonably withheld.

                                                       I-14

<PAGE>



                  "Daily Rate  Period"  shall mean any period  during  which the
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 extend  through
the day  immediately  preceding the earlier of (a) the effective date of another
Change in the Interest Rate Mode or (b) the Fixed Rate Conversion Date.

                  "description",  when used with respect to the  Project,  means
the  description  set  forth in  Exhibit B and  Exhibit  C to the  Participation
Agreement,  as such Exhibits may be amended in accordance with the Participation
Agreement.

                  "Determination  Date" shall mean, for any Calculation  Period,
the first Business Day occurring during such Calculation Period.

                  "Determination of Taxability" shall have the meaning set forth
in Section 5.06.1.

                  "Differential  Interest  Amount"  shall  mean  any  amount  of
interest  payable  by the  Company  under  any  agreement  with the  issuer of a
Liquidity Facility in excess of 15% per annum.

                  "Direct-Pay  Facility" shall mean any instrument  satisfactory
to the  Authority  (in addition to any Credit  Facility or  Liquidity  Facility)
delivered  or caused to be  delivered  to the  Trustee by the  Authority  or the
Company (i) pursuant to which a person,  other than the Company or any Affiliate
of the Company (such person, the "Issuer"),  is obligated, at the request of the
Trustee,  to pay any sum of money to the Trustee for  application to the payment
of the principal of (and premium, if any, on), purchase price, of and/or accrued
interest  on the  Bonds (as may be  specified  in such  instrument)  and (ii) in
respect  of which the  Authority  or the  Company  shall have  delivered  to the
Trustee,  the Bond  Insurer  and the Rating  Agencies  then  rating the Bonds an
Opinion of Bond  Counsel  (or an opinion of other  counsel  satisfactory  to the
Trustee  and the Rating  Agencies  then  rating the Bonds)  satisfactory  to the
Rating Agencies then rating the Bonds to the effect that payments  thereunder by
the Issuer to the Trustee would not constitute  "property of the estate" (within
the  meaning of the  Bankruptcy  Code) of the  Company or any  Affiliate  of the
Company  or the  Authority  and should not  constitute  a voidable  "preference"
(within the meaning of the  Bankruptcy  Code) with respect to the Company or any
Affiliate of the Company or the Authority.

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

                  "Existing  Holder"  shall mean with  respect  to Auction  Rate
Bonds  during an Auction  Rate Period and Auction  Rate Bonds  during an Auction
Rate-Inverse  Rate  Period a person who has signed a  Purchaser's  Letter and is
listed as the  beneficial  owner of  Auction  Rate  Bonds  (which in the case of
Auction  Rate Bonds  during an Auction  Rate-Inverse  Rate Period are not linked
with Inverse 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.

                                                       I-15

<PAGE>



                  "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 October 1 of each calendar year and ending on
September 30 of the next calendar year.

                  "Fixed  Rate"  shall  mean,  with  respect  to the Fixed  Rate
Conversion Date, the rate of interest per annum established and certified to the
Trustee (with a copy to the  Authority,  the  Registrar  and Paying  Agent,  the
Credit  Facility Issuer and the Company) by the Market 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 Market 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 each of (i) the
Fixed Rate  Conversion  Date,  or (ii) a Change in the Interest  Rate Mode to an
Auction  Rate-Inverse  Rate Period, as the case may be, 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,  or with respect to any Change in
the  Interest  Rate  Mode  to  an  Auction  Rate-Inverse  Rate  Period,  a  term
approximately  equal to a period commencing on the effective date of such Change
in the  Interest  Rate Mode and  ending on the  maturity  date of the  Bonds) 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 rating by a
Rating Agency in the same rating  category as the Bonds are rated at the time by
such Rating  Agency or, if the Bonds are not 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 applicable  date set
forth in (i) or (ii)  above.  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  Market  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  applicable  date set forth in (i) or (ii) above.  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 and the Bond  Insurer 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.  After the  occurrence  and
during the continuance of a Company Downgrade Event, the Bond Insurer shall

                                                       I-16

<PAGE>



have the right to consent to any change to the Component  Issuers and any change
in the  method of setting  the Fixed  Rate  Index,  which  consent  shall not be
unreasonably withheld.

                  "Fixed  Rate  Period"  shall mean the period,  if any,  during
which the Bonds bear interest at a Fixed Rate which period shall commence on the
Fixed Rate Conversion Date and extend through the maturity date of the Bonds.

                  "Fixed Rate Record  Date"  shall  mean,  with  respect to each
Interest  Payment Date during the 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 (a) direct 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  Corporation  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 (i) with respect to the Auction Rate
Bonds during an Auction Rate Period,  Hold Order as defined in Section 3.06, and
(ii) with respect to the Auction Rate Bonds during an Auction  Rate-Inverse Rate
Period, Hold Order as defined in Section 3A.03.

                  "Indenture"  shall  mean  this  Trust  Indenture  dated  as of
October  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.

                  "Ineligible  Moneys"  shall mean any moneys  from time to time
deposited with the Trustee by the Company for the specified  purpose of becoming
"Available Moneys" for purposes of this Indenture,  provided, that upon becoming
"Available  Moneys" such moneys shall cease to be considered  to be  "Ineligible
Moneys".

                  "Initial  Liquidity  Facility"  shall  mean an  instrument  or
instruments satisfactory to the Authority entered into or obtained in connection
with  the  Bonds  on or  prior  to a  Change  in the  Interest  Rate  Mode to an
Adjustable  Rate other than an Auction  Rate during an Auction Rate Period or an
Auction  Rate  during an Auction  Rate-Inverse  Rate Period in order to obtain a
rating or ratings on the Bonds, including a letter of credit,  committed line of
credit,  surety bond or standby bond purchase  agreement,  or any combination of
the  foregoing,  and  issued by a bank or  banks,  municipal  bond or  financial
guarantee insurance company, other financial institution or institutions, or any
combination of the foregoing which provides  payment of the purchase price equal
to the  principal  of and accrued  interest on Bonds  purchased  during the term
thereof upon any mandatory or optional tender for purchase  pursuant to Sections
5.02, 5.03 and 5.06.

                                                       I-17

<PAGE>



                  "Insurance  Agreement"  shall  mean the  Insurance  Agreement,
dated as of October 27, 1999, by and between the Company and the Bond Insurer.

                  "Interest Payment Date" shall mean:
                   ---------------------

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

                  (b) during an Auction  Rate  Period (i) for an Auction  Period
         that is a daily  Auction  Period,  the first  Business Day of the month
         immediately  succeeding such Auction Period, (ii) for an Auction Period
         of 91 days or less (other than a daily  Auction  Period),  the Business
         Day immediately succeeding such Auction Period and (iii) for an Auction
         Period of more than 91 days,  each 13th  Friday  after the first day of
         such Auction Period and the Business Day  immediately  succeeding  such
         Auction Period;

          (c) during any Auction  Rate-Inverse Rate Period,  the date determined
     pursuant to Section 3A.02;

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

          (e) during each Weekly Rate Period,  the first Wednesday of each month
     thereof;

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

                  (g)  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;

                  (h) 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;

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

                  (j)      the Fixed Rate Conversion Date;


                                                       I-18

<PAGE>



                  (k) any day on which Bonds are subject to mandatory tender for
         purchase  pursuant  to  Section  5.03 or 5.08 or  redemption  in  whole
         pursuant to Section 5.01, 5.04, 5.05, 5.06 or 5.07;

                  (l)      the final maturity date of the Bonds; and

          (m) with  respect to Bank Bonds,  the dates,  if any, set forth in the
     Liquidity Facility;

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.

                  "Interest  Period"  shall mean with  respect  to Auction  Rate
Bonds during an Auction Rate Period each period from and  including one Interest
Payment Date to but excluding the next succeeding Interest Payment Date.

                  "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 lower 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 lower  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

                                                       I-19

<PAGE>



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 lower 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.

                  "Linked Rate" shall mean, with respect to Auction Rate-Inverse
Rate Bonds  during an Auction  Rate-Inverse  Rate  Period,  the rate of interest
determined  and  certified  to the Trustee  (with a copy to the  Authority,  the
Registrar  and Paying  Agent and the  Company) by the Market Agent no later than
12:00 noon on and as of the  effective  date of such Change in the Interest Rate
Mode as the minimum rate of interest per annum  (calculated  on a 365-day basis)
which, in the opinion of the Market Agent,  would be necessary on and as of such
date to remarket the Auction Rate Bonds and

                                                       I-20

<PAGE>



the Inverse  Rate Bonds as Regular  Linked  Auction  Rate Bonds and Inverse Rate
Bonds at a price  equal to 100% of the  Outstanding  principal  amount  thereof;
provided that the Linked Rate on the Auction  Rate-Inverse Rate Bonds during any
Auction  Rate-Inverse  Rate  Period  shall not  exceed the lesser of 110% of the
Fixed Rate Index minus .28% per annum on and as of such date and 18% per annum.

                  "Liquidity Facility" shall mean the Initial Liquidity Facility
and each Alternate Liquidity Facility.

                  "Liquidity  Facility  Issuer"  shall  mean  each  issuer  of a
Liquidity Facility.

                  "Market Agent" or "Market  Agents" shall mean any  remarketing
agent or agents or any  market  agent or market  agents  appointed  pursuant  to
Section 11.14, its or their successors or assigns.

                  "Market  Agent  Agreement"  shall  mean (A) the  Market  Agent
Agreement, dated as of October 27, 1999, by and between the Company and Goldman,
Sachs & Co.  relating to Auction Rate Bonds,  and any similar  agreement  with a
successor  Market  Agent or  Market  Agents,  as from time to time  amended  and
supplemented,  (B) any market agent agreement between the Trustee and the Market
Agent or Market Agents with respect to Auction Rate-Inverse Rate Bonds during an
Auction Rate-Inverse Rate Period or (C) any market agent agreement,  remarketing
agreement,  or similar  agreement  between the  Company and the Market  Agent or
Market Agents with respect to Bonds bearing  interest at one or more  Adjustable
Rates.

                  "Maximum  Auction Rate" shall mean the maximum rate  permitted
by law or if there is no legal limit  applicable  to the interest  rate borne by
the Bonds, then 18%.

                  "Minimum Auction Rate" shall mean on any date of determination
with  respect to Auction  Rate Bonds  during an Auction Rate Period the rate per
annum equal to 55% (as such percentage may be adjusted pursuant to Section 3.10)
of the Commercial  Paper/Treasury Rate on such date, provided,  however, that in
no event  shall such  Minimum  Auction  Rate exceed the  maximum  rate,  if any,
permitted by applicable law.

                  "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 the first day of
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
Market Agent no later than 12:00 noon (New York City time) on and as of such day
as the minimum rate of interest  per annum  which,  in the opinion of the Market
Agent, would be necessary on and as of such day to remarket Bonds in a secondary
market transaction at a price equal

                                                       I-21

<PAGE>



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
15% per annum.

                  "Monthly  Rate Index" shall mean with respect to the first day
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
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. Upon the occurrence and during the continuance of a Company
Downgrade  Event, the Bond Insurer shall have the right to consent to any change
to the  Component  Issuers  and any change in the method of setting  the Monthly
Rate Index, which consent shall not be unreasonably withheld.

                  "Monthly  Rate Period"  shall mean any period during which the
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 Fixed Rate
Conversion Date.

                  "Moody's" shall mean Moody's Investors  Service, a division of
Dun &  Bradstreet  Corporation  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

                                                       I-22

<PAGE>



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.

                  "Municipal  Bond Insurance  Policy" or "Policy" shall mean the
municipal bond insurance  policy issued by the Bond Insurer insuring the payment
when due of regularly scheduled principal and interest on the Bonds, as provided
therein.

                  "No Auction Rate" shall mean on any date of determination with
respect to Auction Rate Bonds during an Auction Rate Period,  the interest  rate
per annum equal to the Applicable  Percentage of the  Commercial  Paper/Treasury
Rate  determined  on such date. In no event shall the No Auction Rate be greater
than the Maximum Auction Rate.

                  "Non-Bankruptcy  Certificate"  shall mean a certificate of the
Company to the effect that during the 124-day  period then ended the Company has
not filed in any court having jurisdiction a voluntary petition in bankruptcy or
any petition or other pleading  seeking a  readjustment,  liquidation or similar
relief for itself,  and the Company has not been served  notice of any  pleading
being filed against it seeking an  adjudication  of bankruptcy,  reorganization,
composition,  readjustment,  liquidation  or  similar  relief  under  any law or
regulation.

                  "Note"  shall mean the  promissory  note of the  Company to be
executed  by the  Company  and  assigned by the  Authority  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 and to make the  Additional
Payments.

                  "Note  Payments"  shall  mean  the  portion  of  the  Payments
required to be paid by the Company into the Bond Fund as provided in Section 4.2
of the Participation Agreement and the Note.

                  "Notice of Election to Tender"  shall mean the notice given by
a Holder of Bonds pursuant to Section 5.02.

                  "Notice of Fee Rate Change" shall mean a notice of a change in
the Auction Agent Fee Rate or the Broker-Dealer Fee Rate.

                  "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 the Fixed Rate as provided in Section 4.02.

                                                       I-23

<PAGE>



                  "Order"  shall mean (i) with  respect  to  Auction  Rate Bonds
during an Auction Rate Period,  Order as defined in Section 3.06,  and (ii) with
respect to Auction Rate Bonds during any Auction Rate-Inverse Rate Period, Order
as defined in Section 3A.03.

                  "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  canceled  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 5.09, 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  either  during an
Auction Rate Period or an Auction  Rate-Inverse Rate Period (i) for the purposes
of the Auction  Procedures  on any Auction  Date,  (x) 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  and,  with respect to Auction Rate
Bonds during an Auction Rate-Inverse Rate Period,  Auction Rate Bonds which were
Linked with  Inverse  Rate Bonds at the close of business on the Regular  Record
Date  immediately  preceding such Auction Date,  shall be disregarded and deemed
not to be  Outstanding  and (y)  Auction  Rate Bonds  which  have been  defeased
pursuant  to Section  15.01 shall be deemed to be  Outstanding  and (ii) for the
purposes of  selecting  Auction Rate Bonds and Inverse Rate Bonds to be redeemed
on any  Redemption  Date,  Auction  Rate Bonds and Inverse Rate Bonds which have
been defeased pursuant to Section 15.01 shall be deemed to be Outstanding.

                  "Overdue  Rate" shall mean on any date of  determination  with
respect to Auction Rate Bonds during an Auction  Rate-Inverse  Rate Period,  the
interest  rate per annum  equal to 265% of the  Commercial  Paper  Index on such
date;provided that in no event shall the Overdue Rate (x) as of the first day of
the Interest  Period  commencing on or immediately  prior to the date on which a
Payment Default  occurs,  exceed the lesser of (i) the excess of (A) the Maximum
Auction  Rate-Inverse  Rate over (2) the Service Charge Rate as of such date and
(ii) the excess of (A) the maximum rate on such date  permitted by New York law,
as the same may be modified by United  States law of general  application,  over
(B) the Service  Charge Rate on such date, and (y) on the first day of any other
Interest Period,  exceed the lesser of (i) the Maximum Auction Rate-Inverse Rate
and (ii) the maximum rate permitted by New York law, as the same may be modified
by United States law of general application.

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

                                                       I-24

<PAGE>



                  "Payment  Default"  shall  mean  the  default  in the  due and
punctual payment of (a) any installment of interest on the Auction Rate Bonds or
the Inverse  Rate Bonds  during an Auction  Rate-  Inverse Rate Period or on the
Auction  Rate  Bonds  during an Auction  Rate  Period or (b) any  principal  of,
premium,  if any, or interest  on, the  Auction  Rate Bonds or the Inverse  Rate
Bonds at their maturity  (whether at the Stated  Maturity,  prior  redemption or
otherwise)  during an Auction  Rate-  Inverse Rate Period or any  principal  of,
premium,  if any,  or  interest  on, the  Auction  Rate Bonds at their  maturity
(whether  at the Stated  Maturity,  prior  redemption  or  otherwise)  during an
Auction Rate Period,  which default shall  continue for a period of two Business
Days.

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

                  "Potential Holder" shall mean with respect to any Auction Rate
Bonds  during an Auction  Rate Period and Auction  Rate Bonds  during an Auction
Rate-Inverse  Rate Period,  any person,  including any Existing Holder,  (A) who
shall have  executed a  Purchaser's  Letter (or whose  Broker-Dealer  shall have
executed a Purchaser's  Letter),  and (B) who may be interested in acquiring the
beneficial ownership of Auction Rate Bonds or, in the case of an Existing Holder
thereof,  the beneficial  ownership 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  for The Chase
Manhattan Bank, as Trustee,  is located at 450 W. 33rd Street,  15th Floor,  New
York, New York 10001.

                  "Project"   shall  mean  the   facilities  so  identified  and
described in Exhibit A to the Participation Agreement.

                  "Project Fund" shall mean the special trust fund designated as
"KeySpan  Generation  LLC 1999 Series A Project  Fund"  created and  established
under,  and to be held and  administered  by the Trustee as provided in, Section
8.01.

                  "Purchaser's  Letter"  shall mean with  respect to any Auction
Rate Bonds  during an Auction  Rate Period and any Auction  Rate Bonds during an
Auction  Rate-Inverse  Rate  Period a  letter  (including  a Master  Purchaser's
Letter),  substantially in the form set forth in Exhibit D hereto, addressed to,
among others, the Authority, the Auction Agent and a Broker-Dealer.

                  "rate index"  shall mean 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"  shall  mean  Moody's,  if the Bonds are then
rated by Moody's, and S&P, if the Bonds are then rated by S&P.

                                                       I-25

<PAGE>



                  "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.

                  "Rebate  Fund"  shall mean the fund  established  pursuant  to
Section 9.01(a)(2).

                  "Record Date", at any time,  shall mean each Commercial  Paper
Period  Record Date during a  Commercial  Paper Rate  Period,  each Auction Rate
Period Record Date during an Auction Rate Period, each Auction Rate-Inverse Rate
Period Record Date during an Auction Rate-Inverse 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,
Term  Period  Record  Date  during a Term Rate Period and each Fixed Rate Record
Date during the Fixed Rate Period.

                  "Registrar  and Paying  Agent" shall mean The Chase  Manhattan
Bank in its separate  capacity as Registrar  and Paying agent for the Bonds,  or
its successors or assigns.

                  "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 (a) earnings on the investment of the proceeds of Bonds and (b) 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  or  amounts  payable  to or on  deposit  in the  Rebate  Fund or  amounts
representing Additional Payments in each case.

                  "S&P"  shall  mean  Standard  &  Poor's  Ratings  Services,  a
division of The McGraw Hill Companies, 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 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 Market Agent pursuant to Section 2.03.

                                                       I-26

<PAGE>



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

                  "Sell Order" shall mean (i) with respect to Auction Rate Bonds
during an Auction  Rate  Period,  Sell Order as defined in Section 3.06 and (ii)
with respect to Auction Rate Bonds during an Auction  Rate-Inverse  Rate Period,
Sell Order as defined in Section 3A.03.

                  "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 the first day of
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 Bond Insurer, the Registrar and Paying Agent
and the  Company)  by the  Market  Agent no later than 12:00 noon (New York City
time) on and as of such day as the minimum rate of interest per annum which,  in
the opinion of the Market  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 15%
per annum.

                  "Semi-annual  Rate Index" shall mean with respect to the first
day 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

                                                       I-27

<PAGE>



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.  Upon the occurrence and during the continuance
of a Company  Downgrade  Event, the Bond Insurer shall have the right to consent
to any change to the  Component  Issuers and any change in the method of setting
the Semi-annual Rate Index, which consent shall not be unreasonably withheld.

                  "Semi-annual  Rate Period"  shall mean any period during which
the 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 the earlier of (a) the
effective date of another Change in the Interest Rate Mode or (b) the Fixed Rate
Conversion Date.

                  "Standard  Auction  Period"  initially  shall  mean an Auction
Period of 7 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," shall mean October 1, 2028;  provided,  in
any case where the date of maturity of premium of, 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 October 1, 2028,  and the length of any Interest  Period
or Auction Period, as the case may be, 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 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.

                                                       I-28

<PAGE>



                  "Submitted  Bid" shall mean (i) with  respect to Auction  Rate
Bonds during an Auction Rate Period,  Submitted  Bid as defined in Section 3.08,
and (ii) with respect to Auction Rate Bonds during an Auction  Rate-Inverse Rate
Period, Submitted Bid as defined in Section 3A.03.

                  "Submitted  Hold Order" shall mean (i) with respect to Auction
Rate Bonds  during an Auction Rate  Period,  Submitted  Hold Order as defined in
Section  3.08,  and (ii) with  respect to Auction  Rate Bonds  during an Auction
Rate-Inverse Rate Period, Submitted Hold Order as defined in Section 3A.03.

                  "Submitted  Order" shall mean (i) with respect to Auction Rate
Bonds during an Auction Rate Period, Submitted Order as defined in Section 3.08,
and (ii) with respect to Auction Rate Bonds during an Auction  Rate-Inverse Rate
Period, Submitted Order as defined in Section 3A.03.

                  "Submitted  Sell Order" shall mean (i) with respect to Auction
Rate Bonds  during an Auction Rate  Period,  Submitted  Sell Order as defined in
Section  3.08,  and (ii) with  respect to Auction  Rate Bonds  during an Auction
Rate-Inverse Rate Period, Submitted Sell Order as defined in Section 3A.03.

                  "Substitute  Commercial  Paper Dealers" shall mean J.P. Morgan
Securities Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, or their
respective  affiliates  or  successors,  if such  person is a  commercial  paper
dealer,  provided  that  neither  such  person  nor  any  of its  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 the Change in the  Interest  Rate Mode
to an Auction Rate during an Auction Rate Period or an Auction Rate-Inverse Rate
during an Auction  Rate-Inverse Rate Period,  or their respective  affiliates or
successors,  if such person is a dealer in U.S. Government securities,  provided
that  neither  such person nor any of its  affiliates  or  successors  is a U.S.
Government Securities Dealer.

                  "Sufficient  Clearing  Bids"  shall  mean (i) with  respect to
Auction Rate Bonds during an Auction Rate Period,  Sufficient  Clearing  Bids as
defined in Section  3.08,  and (ii) with respect to Auction Rate Bonds during an
Auction Rate-Inverse Rate Period, Sufficient Clearing Bids as defined in Section
3A.03.

                  "Supplemental   Indenture"  shall  mean  any  other  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.

                                                       I-29

<PAGE>



                  "Support  Facility"  shall mean each Credit  Facility and each
Liquidity Facility in effect at the time of determination.

                  "Support  Facility  Issuer"  shall  mean  any  bank or  banks,
insurance company,  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.

                  "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  (provided  such  Support  Facility  is not a  municipal  bond
insurance  policy)  which  would cause the  termination  or  expiration  of such
Support Facility but would  specifically allow for the mandatory tender of Bonds
pursuant  to Section  5.08 with a draw on or  borrowing  or  payment  under such
Support Facility prior to such termination or expiration.

                  "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 the first day of 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 Market
Agent no later than 12:00 noon (New York City time) on and as of such day as the
minimum rate of interest per annum  which,  in the opinion of the Market  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 15% per annum.

                  "Term Rate Index"  shall mean with respect to the first day 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

                                                       I-30

<PAGE>



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.  Upon  the
occurrence and during the  continuance of a Company  Downgrade  Event,  the Bond
Insurer shall have the right to consent to any change to the  Component  Issuers
and any change in the method of setting the Term Rate Index, which consent shall
not be unreasonably withheld.

                  "Term Rate  Period"  shall mean any  period  during  which the
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, (b) the Fixed Rate  Conversion
Date or (c) the maturity date of the Bonds.

                  "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 six months,  as quoted in The Bond Buyer 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 Bond Buyer,  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 six months, 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.

                  "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.

                  "Trust Estate" shall mean the meaning assigned to such term in
the first paragraph following the recitals herein.

                                                       I-31

<PAGE>



          "U.S.  Government"  shall mean the  federal  government  of the United
     States of America.

                  "U.S.   Government   Securities   Dealers"   shall   mean  the
Broker-Dealers  for the 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 the first day of 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 Market
Agent no later than 12:00 noon (New York City time) on and as of such day as the
minimum rate of interest per annum  which,  in the opinion of the Market  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 110% of
the Weekly Rate Index on and as of such date and 15% per annum.

                  "Weekly  Rate Index"  shall mean with respect to the first day
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

                                                       I-32

<PAGE>



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.  Upon the  occurrence and during the  continuance of a Company  Downgrade
Event,  the Bond  Insurer  shall  have the right to consent to any change to the
Component Issuers and any change in the method of setting the Weekly Rate Index,
which consent shall not be unreasonably withheld.

                  "Weekly  Rate Period"  shall mean any period  during which the
Bonds bear interest at a Weekly Rate which period shall  commence on the Closing
Date 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 Fixed Rate
Conversion Date.

                  "Winning Bid Rate" shall mean (i) with respect to Auction Rate
Bonds  during an Auction  Rate  Period,  Winning  Bid Rate as defined in Section
3.08, and (ii) with respect to Auction Rate Bonds during an Auction Rate-Inverse
Rate Period, Winning Bid Rate as defined in Section 3A.03.

                  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 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-33

<PAGE>



                  Unless the context  shall  clearly  indicate  otherwise or may
otherwise require, all references to time shall be to New York City time.

                  SECTION  1.03.  Computations.  Unless the facts  shall then be
otherwise, all computations required for the purposes of this Indenture shall be
made on the  assumption  that the  principal  of and premium and interest on all
Bonds shall be paid as and when the same become due.

                  SECTION 1.04.  Certificates and Opinions.  Each certificate or
opinion with respect to compliance with a condition or covenant  provided for in
this  Indenture  shall  include:  (1) a  statement  that the person  making such
certificate  or  opinion  has  read  such  covenant  or  condition;  (2) a brief
statement as to the nature and scope of the  examination or  investigation  upon
which the  statements or opinions  contained in such  certificate or opinion are
based;  (3) a statement that, in the opinion of such person,  he or she has made
such  examination  or  investigation  as is  necessary  to enable  him or her to
express an informed  opinion as to whether or not such covenant or condition has
been complied  with; and (4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.

                  Any  certificate  required by or on behalf of the Authority or
the  Company  may be based,  insofar  as it  relates  to legal,  accounting,  or
engineering matters, upon an opinion or representation of counsel,  accountants,
auditors or engineers,  unless the person signing such certificate  knows or has
reason to know that such opinion or representation is erroneous.

                  Any opinion of counsel required by or for the purposes of this
Indenture may be based,  insofar as it relates to factual matters or information
in the possession of the Authority or the Company, upon a certificate or opinion
of, or representation by, the proper officer or officers of the Authority or the
Company unless such counsel knows or has reason to know that such certificate or
opinion or representation is erroneous.  Any such certificate or opinion may be,
but need not be, combined in a single  instrument with any other  certificate or
opinion.

                  SECTION  1.05.  Evidence  of  Action by  Authority.  Except as
otherwise  specifically  provided in this  Indenture,  any  request,  direction,
command,  order,  notice,  certificate  or other  instrument  of, by or from the
Authority  shall be  effective  and  binding  upon it for the  purposes  of this
Indenture  if the same  shall be signed by an  Authorized  Officer or such other
person or persons as may be designated and  authorized by an Authorized  Officer
to sign for or on behalf of the  Authority.  Any such  instrument and supporting
opinions or  representations,  if any, may, but need not be combined in a single
instrument with any other instrument, opinion or representation.

                                                       I-34

<PAGE>



                                                    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,  which shall be issued and designated as "Pollution Control Refunding
Revenue Bonds (KeySpan Generation LLC Projects), 1999 Series A" in the principal
amount of $41,125,000.  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  Market
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 or subseries A-2,  subseries A-3 or
may be redesignated as subseries A-1-1, A-2-1, 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  or
redesignated  from time to time 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.

                  2. The Bonds shall be secured by the assignments,  pledges and
charges made or created  herein for the payment and security of the Bonds and by
a lien on the Participation  Agreement (exclusive of the rights therein reserved
to the  Authority),  the proceeds of the Note, the Tax Regulatory  Agreement and
the other  monies,  rights,  properties  and  securities  from time to time held
hereunder,  subject only to the  provisions  of this  Indenture  permitting  the
application  of the  proceeds  of the  Bonds,  the Note and such  other  monies,
rights,  properties  and  securities  for  the  purposes  and on the  terms  and
conditions hereof, over and ahead of any claims,  encumbrances or obligations of
any nature hereafter arising or incurred.  The foregoing lien, pledges,  charges
and assignments 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, 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.

                                                       II-1

<PAGE>



          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 and the Bond Insurer.

                  5. Neither the Trustee, the Bond Insurer 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.

                  6. The Bonds  shall be issued  under  this  Indenture  for the
purpose of (i) paying certain expenses  incurred in connection with the issuance
of the Bonds and (ii) prepaying the KeySpan Notes.

                  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 during an Auction  Rate  Period or an Auction  Rate and an Inverse
Rate during an Auction  Rate-Inverse Rate Period 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.

                  8. The Bonds shall be numbered consecutively from AR-1 upwards
as issued,  or as otherwise  provided by the Registrar and Paying Agent.  If the
Bonds are  redesignated  to identify one or more  subseries,  the Bonds shall be
numbered in accordance with their subseries designation,  i.e. A-1-R-1,  A-2-R-1
or A-3-R-1, as the case may be. The Bonds shall mature on the Stated Maturity.

                  9. The Bonds  shall be  initially  issued in fully  registered
form,  without coupons,  and initially dated their date of first  authentication
and delivery. The Bonds shall initially be issued in the form of one global bond
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.

                  10.  Upon any Change in the  Interest  Rate Mode to an Auction
Rate for an Auction  Rate Period or an Auction  Rate and an Inverse  Rate for an
Auction  Rate-Inverse  Rate  Period,  there shall be  Outstanding  an  aggregate
principal  amount of not less than (i) $20,000,000 for Auction Rate Bonds during
an  Auction  Rate  Period,  and (ii) at all times an equal  aggregate  principal
amount of Auction Rate Bonds and Inverse Rate Bonds and  $20,000,000 for Auction
Rate Bonds and Inverse Rate Bonds, respectively,  during an Auction Rate-Inverse
Rate Period 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 Auction Rate Bonds during any
     Auction  Rate Period and the  Auction  Rate-Inverse  Rate Bonds  during any
     Auction Rate-Inverse Rate Period in the form of one

                                                       II-2

<PAGE>



separate global bond for such series or subseries,  as the case may be, 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. The Authority may elect to issue Bonds
bearing a Fixed Rate or an  Adjustable  Rate other than an Auction  Rate (during
any Auction Rate  Period) or an Auction Rate and a related  Inverse Rate (during
any Auction Rate-  Inverse Rate Period),  in the form of one global bond of such
series  or  subseries,  as the  case  may  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 Auction  Rate Bonds  during any  Auction  Rate Period and the Auction
Rate-Inverse  Rate Bonds  during any  Auction  Rate-Inverse  Rate  Period 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 and the  Market  Agent,  or to a  nominee  of such
successor  Securities  Depository.  Each global certificate for the Auction Rate
Bonds and the  Inverse  Rate  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,  any Support  Facility  Issuer and the Market
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;

                  (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) 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 Auction Rate Bonds during

                                                       II-3

<PAGE>



         an Auction  Rate Period or Auction  Rate-Inverse  Rate Bonds  during an
         Auction Rate-Inverse Rate Period,  except for the Trustee's obligations
         under Section 5.10.

So long as the certificates for the Bonds of this series or 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,  the Market
Agent,  the Bond  Insurer  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;

          (c) registering  transfers with respect to such series or subseries of
     the Bonds; and

                  (d) obtaining consents under the Indenture.

                  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 Auction Rate Bonds during an Auction Rate Period or
         the Auction  Rate-Inverse  Rate Bonds  during any Auction  Rate-Inverse
         Rate Period at the time of a Change in the Interest  Rate Mode or on or
         after the Fixed Rate Conversion Date.

                  (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
         section,  or (C) upon  any  Change  in the  Interest  Rate  Mode to any
         Adjustable  Rate  other  than an Auction  Rate  during an Auction  Rate
         Period  or an  Auction  Rate and an  Inverse  Rate  during  an  Auction
         Rate-Inverse Rate Period or on the Fixed Rate Conversion Date.

                  (c) Upon any  Change in the  Interest  Rate Mode to an Auction
         Rate during an Auction  Rate  Period or an Auction  Rate and an Inverse
         Rate during an Auction  Rate-Inverse  Rate Period,  the  Registrar  and
         Paying  Agent shall  register  the Auction Rate Bonds during an Auction
         Rate Period or the Auction  Rate-Inverse  Rate Bonds  during an Auction
         Rate-Inverse

                                                       II-4

<PAGE>



         Rate  Period,  as the  case  may  be,  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  during  an  Auction  Rate  Period  or  during  an  Auction
         Rate-Inverse Rate Period, as the case may be.

                  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 and the Market  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 Registrar and Paying Agent
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 Market 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 Registrar and Paying Agent 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  Registrar  and Paying Agent.  The Registrar and
Paying Agent 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),  Interest
Period  (with  respect to  Auction  Rate-Inverse  Rate  Bonds  during an Auction
Rate-Inverse  Rate Period),  the effective date of a Change in the Interest Rate
Mode (with  respect to any other  Change in the Interest  Rate Mode),  or on the
Fixed Rate  Conversion  Date (with respect to a conversion to a Fixed Rate),  as
the case may be.

                  5. The  Authority,  the Trustee and the  Registrar  and Paying
Agent 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.  (a) So long as the
ownership of the Auction Rate Bonds during any Auction  Rate-Inverse Rate Period
is maintained  in  book-entry  form by the  Securities  Depository,  an Existing
Holder may sell,  transfer or otherwise  dispose of Auction Rate Bonds during an
Auction  Rate-Inverse Rate Period only pursuant to a Bid or Sell Order placed in
an Auction or to or through a  Broker-Dealer  or to a person that has signed and
delivered a Purchaser's  Letter to the Auction Agent,  provided that in the case
of all transfers other than pursuant

                                                       II-5

<PAGE>



to Auctions such Existing Holder,  its Broker-Dealer or its Agent Member advises
the Auction Agent of such transfer.

                  (b) So long as the  ownership of the Auction Rate Bonds during
an Auction  Rate  Period is  maintained  in  book-entry  form by the  Securities
Depository,  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  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 Registrar and
Paying  Agent 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)      two fully executed counterparts of this Indenture;

          (c) two fully executed counterparts of the Participation Agreement;

          (d) two fully executed counterparts of the Market Agent Agreement;

                  (e)      the fully executed initial Credit Facility;

          (f)  two  fully  executed  counterparts  of the  Bond  Purchase  Trust
     Agreement;

                  (g)      the fully executed Note;

          (h) two fully executed counterparts of the Tax Regulatory Agreement;

          (i) two fully executed counterparts of the Auction Agency Agreement;

                                                       II-6

<PAGE>



          (j) opinion of Counsel to the Company, addressed to the Authority, the
     Bond Insurer and the Trustee,  substantially  to the effect,  and dated as,
     required by Section 8(d)(7)(iii) of the Bond Purchase Agreement;

               (k) opinion of counsel to the Bond Insurer,  substantially to the
          effect,  addressed to, and dated as required by Section 8(d)(7)(vi) of
          the Bond Purchase Agreement;

                  (l)  opinion of Bond  Counsel  (i) as to the  validity  of the
         Bonds,  (ii) as to the  exclusion  of interest on the Bonds for federal
         and New York State income tax  purposes  and (iii) that all  conditions
         precedent to the issuance of the Bonds have been met.

                  When the documents mentioned in clauses (a) to (l), 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-7

<PAGE>



                                                    ARTICLE III

                                                 INTEREST ON BONDS

                  SECTION 3.01.  Interest on  Bonds-General.  1. While the Bonds
bear interest at a Commercial Paper Rate, a Daily Rate, a Weekly Rate, a Monthly
Rate or a Semi-annual Rate,  interest accrued on such Bonds shall be computed on
the  basis of a 365 or  366-day  year,  as  applicable,  for the  number of days
actually elapsed.  While the Bonds bear interest at a Term Rate or a Fixed Rate,
interest accrued on such Bonds shall be computed on the basis of a 360-day year,
consisting of twelve (12) thirty (30) day months.  While the Bonds bear interest
at an Auction Rate during an Auction Rate Period, interest accrued on such Bonds
shall be computed on the basis of a 360-day year for the number of days actually
elapsed.  Interest on the  Auction  Rate-Inverse  Rate Bonds  during any Auction
Rate-Inverse Rate Period shall be computed in accordance with Section 3A.07. The
Bonds as initially  issued shall bear interest from the date of issuance thereof
payable 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 an Auction Rate
during an Auction  Rate Period.  From and after any Change in the Interest  Rate
Mode pursuant to Section 4.01,  the Bonds of any series or subseries  shall bear
interest  determined  in  accordance  with  the  provisions  of  this  Indenture
pertaining to the new  Adjustable  Rate.  The Bonds shall bear interest for each
Calculation  Period,  Auction Period or Interest Period,  as the case may be, at
the rate of interest per annum for such  Calculation  Period,  Auction Period or
Interest Period established in accordance with this Indenture.  From and after a
Fixed Rate Conversion  Date, the affected Bonds shall bear interest at the Fixed
Rate until maturity.  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 any Bonds,  all
payments of principal of,  premium,  if any, and interest on such Bonds shall be
paid to the Securities Depository or its nominee by wire transfer, (ii) prior to
and including  the 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 5.02 and if such  presentation and surrender is made by 2:00
p.m. (New York City time)

                                                       III-1

<PAGE>



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 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.  Each  holder of
Auction Rate Bonds during an Auction  Rate-Inverse Rate Period, by such holder's
purchase  of Auction  Rate  Bonds  during an Auction  Rate-Inverse  Rate  Period
appoints  the  Registrar  and Paying Agent as its agent in  connection  with the
payment  by such  holder of its share,  if any,  of the  amounts  payable to the
Auction  Agent and the  Broker-Dealers  pursuant to  subsections  (c) and (d) of
Section 3A.05.

                  3. Not less than one  Business  Day prior to each  Computation
Date and two Business Days prior to the Fixed Rate Conversion Date, the Indexing
Agent shall  establish  and provide to the  applicable  Market 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
applicable Market 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  applicable  Market
Agent  not  less  than  two  Business  Days  prior  to  each  Computation  Date.
Notwithstanding  the foregoing,  in the event that the Market Agent, in its sole
judgment,  shall determine on a  Determination  Date that any Weekly Rate 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
Market  Agent  may  establish  a new  rate  index  on a  Determination  Date  in
accordance with the procedures and standards set forth in this paragraph and for
purposes of such rate index so established,  all references to Indexing Agent in
this  Indenture  shall be deemed to refer to the Market Agent.  On any date when
any Weekly Rate or any Commercial  Paper Rate Index is established by the Market
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 Market 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. Upon the occurrence and during the
continuance of a Company  Downgrade Event, the Bond Insurer shall have the right
to consent to any new rate index  proposed by the Market Agent  pursuant to this
paragraph, which consent shall not be unreasonably withheld.

               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 applicable Market Agent

                                                       III-2

<PAGE>



or the Auction Agent, as the case may be, shall determine in accordance with the
terms hereof and make available to the Authority, the Trustee, the Registrar and
Paying Agent, any Support Facility Issuer, 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  or a  Calculation  Period  and  related  Commercial  Paper Rate is not
determined by the  applicable  Market  Agent,  (B) no Market 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  Market  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 Market 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 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 Market 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 Market Agent
          in  accordance  with  this  Indenture  or  by  the  Auction  Agent  in
          accordance with the Auction Procedures applicable

                                                       III-3

<PAGE>



to Auction  Rate Bonds  during an Auction  Rate Period and Auction  Rate-Inverse
Rate Bonds during an Auction  Rate-Inverse  Rate Period,  as the case may be, or
the establishment of Calculation Periods, Auction Periods or Interest Periods by
the Market Agent as provided in this  Indenture  shall be conclusive and binding
upon the Authority,  the Company,  the Trustee,  the Registrar and Paying Agent,
the Market  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 Market 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,  Auction Period or Interest 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. In
preparing  such  calculation  the  Trustee  may  rely on  calculations  or other
services  provided by the Auction  Agent,  the Market Agent,  the Company or any
person or persons selected by the Trustee in its discretion. During a Commercial
Paper Rate Period, the Market 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 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 lesser of (i) the
maximum rate  allowable by  applicable  law or (ii) the maximum rate of interest
provided for by any Liquidity Facility in effect at any time.

                  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 Market Agent shall  establish  Calculation  Periods and
related Commercial Paper Rates. In determining  Calculation  Periods, the Market
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 Market Agent  pertaining  to the Company
regarding any events or anticipated events

                                                       III-4

<PAGE>



which could have a direct impact on the  marketability  of or interest  rates on
the Bonds.  The  Market  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 Market
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 Fixed Rate  Conversion  Date, the  expiration  date of the
Support Facility, if any, or the day prior to the maturity date of the Bonds. To
the extent a Liquidity  Facility provides for the payment of accrued interest on
the  Bonds  for a term  less  than  the  established  Calculation  Period,  such
Calculation Period will not extend beyond the coverage provided by the Liquidity
Facility.

                  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 Market 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.  The Bonds shall be issued  initially as Auction Rate Bonds
during an Auction Rate Period.  During any Auction Rate Period,  the Bonds shall
bear  interest at the Auction Rate  determined as set forth in this Section 3.03
and through  implementation of the Auction Procedures.  The Auction Rate for the
initial  Auction  Period shall be 3.95% per annum.  The initial  Auction  Period
shall  commence from and include the date of original  issuance of the Bonds and
shall expire on and include  January 13, 2000. The initial  Auction Date will be
on January 13, 2000. After the initial Auction Period, each Auction Period shall
be a Standard  Auction  Period.  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, the Bond Insurer and the Company) by the Market 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 Market 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  lesser of 110% of the sum of the  Commercial  Paper
Index and .50% per annum.  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 No Auction
Rate on and as of such Auction Date. If a Payment  Default shall have  occurred,
the rate of interest for (1) the Auction  Period  commencing  on or  immediately
prior to the date on which such Payment  Default  occurs shall equal the Maximum
Auction Rate, and (2) for each

                                                       III-5

<PAGE>



Auction Period  commencing  thereafter to and including the Auction  Period,  if
any, during which, or commencing less than two Business Days after,  all Payment
Defaults are cured, shall equal the Maximum Auction Rate.

                  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
Market Agent,  the Auction Agent,  the Company and the Securities  Depository in
substantially  the form  attached  hereto as, or  containing  substantially  the
information  contained in,  Exhibit E. 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 Market 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,  the Bond Insurer 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 Company, on behalf of the Authority, by telecopy or similar
means in substantially the form attached hereto as, or containing  substantially
the  information  contained in, Exhibit G 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 the
Opinion of Bond Counsel on the first day of such Auction  Period  referred to in
(D) below,  (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,  the Bond Insurer 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.

                                                       III-6

<PAGE>



                  SECTION 3.05. Auction Rate Period - Auction Rate Bonds: Change
of Auction Date by Market Agent. During an Auction Rate Period the Market 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  Market  Agent  shall  deliver  a  written  notice  of  its
determination  to change an Auction  Date at least 10 days prior to the  Auction
Date immediately preceding such Auction Date to the Authority,  the Trustee, the
Auction Agent, the Company, the Bond Insurer and the Securities Depository which
shall  state (i) the  determination  of the Market  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, the Trustee, the Market Agent and the Securities
Depository  to the effect  that they are  capable  of  performing  their  duties
hereunder and under the Market Agent Agreement and Auction Agency Agreement with
respect to any such Auction  Period.  Notice of a change in the Auction Date may
be in substantially the form attached hereto as, or containing substantially the
information contained in, Exhibit S.

               SECTION 3.06. 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 Outstanding  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 Outstanding  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

                                                       III-7

<PAGE>



                           (C) the principal amount of Outstanding  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) for the  purpose  of  implementing  the
                           Auctions,  the  Broker-Dealers  may contact Potential
                           Holders by telephone  or  otherwise to determine  the
                           principal  amount of Auction  Rate  Bonds  which each
                           such Potential Holder  irrevocably 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  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"  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."

                  (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
                                    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 of Outstanding Auction Rate
                  Bonds if the interest rate per annum  specified  therein shall
                  be higher than the Maximum  Auction  Rate,  or 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.

                                                       III-8

<PAGE>



                                    (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  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 Holder shall constitute an irrevocable offer to purchase:

                           (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 during the Auction Rate
Period, 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 (which shall be the
          Broker-Dealer (unless otherwise permitted in writing 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

                                                       III-9

<PAGE>



               (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 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 or a  portion  of
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 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  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

                                                      III-10

<PAGE>



                           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  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
$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.

                  (h) Any Bid  submitted  by an  Existing  Holder or a Potential
Holder  specifying a rate lower than the Minimum  Auction Rate, if any, shall be
treated as a Bid specifying the Minimum Auction Rate.

                  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  during the Auction  Rate  Period,  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

                                                      III-11

<PAGE>



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

               (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

                                                      III-12

<PAGE>



                  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,  the Trustee
and the  Broker-Dealers  of 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 Auction Rate Bonds are subject to
                  Submitted   Hold  Orders,   the  Auction  Rate  for  the  next
                  succeeding  Auction  Period  therefor  shall  be  equal to the
                  Minimum Auction Rate.

                  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:

                           (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-13

<PAGE>



                           (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;

                           (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 of Auction
                  Rate Bonds obtained by multiplying the excess of the 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,  and the remainder of such  Submitted  Bids shall be
                  rejected; and

                           (vi) each Potential Holder's Submitted Bid specifying
                  a rate  that is  higher  than the  Winning  Bid Rate  shall be
                  rejected.

                  (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:

                                                      III-14

<PAGE>



                                    (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;

                           (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; and

                           (iv) each Potential Holder's Submitted Bid specifying
                  a rate that is higher than the Maximum  Auction  Rate shall be
                  rejected.

               (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  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
         $25,000 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

                                                      III-15

<PAGE>



         that the principal  amount purchased or sold by each Existing Holder or
         Potential  Holder  shall be equal to  $25,000 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 $25,000 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  $25,000  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) The  purchase  price of each Auction Rate Bond sold in any
         Auction  shall be  equal to  $25,000,  except  that if the then  ending
         Auction  Period is a daily Auction  Period,  the purchase price of each
         Auction Rate Bond shall be $25,000,  plus  accrued and unpaid  interest
         thereon,  unless the purchase date is also an Interest Payment Date, in
         which  case the  purchase  price of such  Auction  Rate  Bond  shall be
         $25,000.

                  (i)  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 not submit  Bids to purchase  Auction  Rate Bonds in an Auction for
         its own account,  provided that  affiliated  Broker-Dealers  may submit
         Hold Orders and Sell Orders in Auctions  with  respect to Auction  Rate
         Bonds otherwise acquired for its own account.

                  SECTION  3.10.  Auction  Rate  Period -  Auction  Rate  Bonds:
Adjustment in Percentage.  1. During an Auction Rate Period the Market Agent may
adjust the  percentage  used in  determining  the Minimum  Auction  Rate and the
Applicable  Percentages  used in  determining  the No  Auction  Rate if any such
adjustment  is necessary,  in the judgment of the Market  Agent,  to reflect any
Change of Preference Law or to conform to market  practice such that the Minimum
Auction Rate and No Auction Rate shall have  substantially  equal market  values
before and after such Change of Preference Law or change in market practice.  In
making any such adjustment as a result of a Change of Preference Law, the Market
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

                                                      III-16

<PAGE>



rates and indices of such  short-term  rates,  (ii) the market supply and demand
for  short-term  tax- exempt  securities,  (iii) 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 and (v) economic and
financial factors present in the securities industry that may affect or that may
be relevant  to the Bonds.  In making any such  adjustment  to conform to market
practice,  the Market  Agent shall take into  account such factors as the Market
Agent  deems  relevant,  including  the  terms of  auction  rate  bonds of other
issuers.  Upon the occurrence and continuance of a Company  Downgrade Event, the
Bond  Insurer  shall have the right to  consent to any change to the  percentage
used in  determining  the Minimum  Auction Rate and the  Applicable  Percentages
using  in  determining  the  No  Auction  Rate,   which  consent  shall  not  be
unreasonably withheld.

                  2. The Market Agent shall  communicate  its  determination  to
adjust the  percentage  used in  determining  the Minimum  Auction  Rate and the
Applicable  Percentages  used in  determining  the No Auction  Rate  pursuant to
subsection 1 hereof by means of a written notice delivered at least 5 days prior
to the Auction  Date on which the Market  Agent  desires to effect the change to
the Authority,  the Trustee,  the Auction Agent and the Company in substantially
the form  attached  hereto  as,  or  containing  substantially  the  information
contained  in,  Exhibit  F.  Such  notice  shall  be  effective  only  if  it is
accompanied  by the form of opinion  that Bond  Counsel  has  advised the Market
Agent that it 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
Minimum Auction Rate and the Applicable  Percentages  used in determining the No
Auction Rate shall take effect on an Auction  Date only if (A) the Trustee,  the
Bond Insurer 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  Market  Agent by  telecopy  or similar  means,  in  substantially  the form
attached hereto as, or containing  substantially  the information  contained in,
Exhibit H, (i)  authorizing the adjustment of the percentage used in determining
the Minimum Auction Rate and the Applicable  Percentages used in determining the
No  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 Minimum  Auction Rate and the  Applicable  Percentages  used in
determining  the No 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,  the Bond Insurer 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 Minimum
Auction Rate and the Applicable  Percentages  used in determining the No 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

                                                      III-17

<PAGE>



determining  the Minimum  Auction Rate and the  Applicable  Percentages  used in
determining  the No 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 Minimum  Auction  Rate and the  Applicable
Percentages  used in determining  the No Auction Rate shall remain in effect and
the Auction Rate for the next succeeding  Auction Period shall equal the Maximum
Auction Rate.

                                                      III-18

<PAGE>



                                                   ARTICLE IIIA

                                          AUCTION RATE-INVERSE RATE BONDS

                  SECTION 3A.01. Auction Rate-Inverse Rate Bonds: 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 (i) this  Article  III-A,  and (ii) this  Indenture  as such  terms  apply to
Auction  Rate-Inverse  Rate Bonds,  have the meanings herein  specified.  Unless
otherwise  defined herein,  words are used as defined in Section 1.01;  provided
however,  with respect to a conflict between Section 1.01 and Section 3A.01 with
respect to meanings pertaining to Auction Rate-Inverse Rate Bonds, Section 3A.01
shall prevail.

                  "Applicable  Auction Rate" shall have the meaning set forth in
Section 3A.02.

                  "Applicable Factor" shall mean:

                  (i) with  respect  to  Regular  Auction  Rate  Bonds  and each
         Interest  Period  commencing on the effective date of any Change in the
         Interest  Rate  Mode  to  an  Auction   Rate-Inverse  Rate  Period,  or
         immediately  preceded  by an  Auction  Date,  the  excess  of  (A)  the
         Applicable  Auction Rate for such Interest  Period over (B) the Service
         Charge Rate on such date;

                  (ii) with  respect  to  Regular  Auction  Rate  Bonds and each
         Interest  Period not  commencing on the effective date of any Change in
         the  Interest  Rate Mode to an Auction  Rate-Inverse  Rate  Period,  or
         immediately  preceded by an Auction Date, the  Applicable  Auction Rate
         for such Interest Period;

               (iii)  with  respect  to  Special  Auction  Rate  Bonds  and each
          Interest Period, the Applicable Auction Rate for such Interest Period;

               (iv) with respect to Regular Inverse Rate Bonds and each Interest
          Period, the Applicable Inverse Rate for such Interest Period;

                  (v) with  respect to  Special  Linked  Auction  Rate Bonds and
         Inverse Rate Bonds and each Interest Period commencing on the effective
         date of any Change in the Interest Rate Mode to an Auction Rate-Inverse
         Rate Period, or an Auction Date, the excess of (A) the Linked Rate over
         (B) the product of (x) the  Service  Charge Rate on such date times (y)
         1/2 times  (z)  365/360,  rounding  the  resultant  rate up to the next
         highest one-thousandth (.001) of 1%;

                  (vi) with  respect to Special  Linked  Auction  Rate Bonds and
         Inverse Rate Bonds and each Interest Period not immediately preceded by
         the effective date of any Change in the

                                                      IIIA-1

<PAGE>



               Interest Rate Mode to an Auction  Rate-Inverse Rate Period, or an
          Auction Date, the Linked
         Rate; and

               (vii)  with  respect  to Regular  Linked  Auction  Rate Bonds and
          Inverse Rate Bonds,
         the Linked Rate.

                  "Applicable  Inverse Rate" shall have the meaning set forth in
Section 3A.02.

                  "Auction Agent Fee Rate", on any Auction Date,  shall mean the
rate per annum at which the fee to be paid to the Auction Agent for the services
rendered  by it  under  the  Auction  Agency  Agreement  and  the  Broker-Dealer
Agreements  with respect to such Auction Date accrues,  which shall equal .03 of
1% per annum  until  changed by the Auction  Agent and the  Trustee  (or, if the
Trustee is also  serving as Auction  Agent,  the Market  Agent)  pursuant to the
Auction  Agency  Agreement (or, if the Trustee is also serving as Auction Agent,
the Market Agent Agreement) and, thereafter, shall equal the rate per annum most
recently agreed to by the Auction Agent and the Trustee (or the Market Agent, as
the case may be) pursuant to the Auction  Agency  Agreement (or the Market Agent
Agreement,  as the case may be). Upon the occurrence and during the  continuance
of a Company  Downgrade  Event, the Bond Insurer shall have the right to consent
to any  increase  of the  Auction  Agent Fee Rate,  which  consent  shall not be
unreasonably withheld.

                  "Auction  Rate"  shall have the  meaning  set forth in Section
3A.02.

                  "Auction  Rate-Inverse Rate Period Record Date" shall mean any
Regular Record Date or Redemption Record Date for the Auction  Rate-Inverse Rate
Bonds  during an Auction  Rate-  Inverse Rate Period as  determined  pursuant to
Article IIIA.

                  "Broker-Dealer  Fee Rate," on any Auction Date with respect to
Auction  Rate-Inverse  Rate  Bonds,  shall  mean the rate per annum at which the
service  charge to be paid to the Broker-  Dealers for the services  rendered by
them with respect to such Auction Date accrues,  which shall equal .25 of 1% per
annum until changed by the Trustee pursuant to the Auction Agency Agreement and,
thereafter,  shall  equal the rate per annum  most  recently  determined  by the
Trustee pursuant to the Auction Agency Agreement. Upon the occurrence and during
the continuance of a Company  Downgrade  Event,  the Bond Insurer shall have the
right to consent to any increase of the  Broker-Dealer  Fee Rate,  which consent
shall not be unreasonably withheld.

                  "Initial  Interest Payment Date" shall mean the date certified
on the  effective  date of a Change  in the  Interest  Rate  Mode to an  Auction
Rate-Inverse Rate Period as the first Interest Payment Date for the Auction Rate
Bonds to the Trustee  (with a copy to the  Authority,  the  Registrar and Paying
Agent, the Company and the Auction Agent) by the Market Agent.

                  "Initial  Interest Period" shall mean the period commencing on
and  including  the date of any Change in the  Interest  Rate Mode to an Auction
Rate-Inverse  Rate  Period  and ending on but  excluding  the  Initial  Interest
Payment Date therefor.

                                                      IIIA-2

<PAGE>



                  "Interest Amount" means, with respect to each Interest Period,
the amount of  interest  distributable  in respect of each  $1,000 in  principal
amount  (taken,  without  rounding,  to six  figures to the right of the decimal
point) of Regular  Auction  Rate Bonds,  Special  Auction  Rate  Bonds,  Regular
Inverse Rate Bonds, Regular Linked Auction Rate Bonds and Inverse Rate Bonds and
Special  Linked  Auction  Rate Bonds and  Inverse  Rate Bonds for such  Interest
Period.

                  "Interest  Period" shall have the meaning set forth in Section
3A.02.

                  "Inverse  Rate" with  respect  to Inverse  Rate Bonds and each
Interest Period for such Inverse Rate Bonds during any Auction Rate-Inverse Rate
Period,  the rate of interest  per annum  determined  for the Inverse Rate Bonds
pursuant to Section 3A.02(c).

                  "Inverse Rate Bonds" shall mean during an Auction Rate-Inverse
Rate  Period,  any  Bonds or  subseries  of Bonds  which  bear an  Inverse  Rate
determined pursuant to Article IIIA.

                  "Linked," as applied to Auction  Rate-Inverse Rate Bonds, when
used with respect to:

                  (i) Auction  Rate Bonds,  shall mean (A) Regular  Auction Rate
         Bonds  the  beneficial  ownership  of which  has been  linked  with the
         beneficial  ownership of an equal aggregate principal amount of Inverse
         Rate  Bonds and  recorded  as such under a unique  CUSIP  number at the
         Securities Depository, or (B) Special Auction Rate Bonds the beneficial
         ownership of which has been linked with the beneficial  ownership of an
         equal aggregate  principal amount of Inverse Rate Bonds and recorded as
         such under a unique CUSIP number at the Securities Depository; and

                  (ii)  Inverse  Rate Bonds,  shall mean  Inverse Rate Bonds the
         beneficial  ownership  of which  has been  linked  with the  beneficial
         ownership of an equal aggregate principal amount of (A) Regular Auction
         Rate Bonds and  recorded as such under a unique  CUSIP  number,  or (B)
         Special  Auction  Rate Bonds and  recorded as such under a unique CUSIP
         number at the Securities Depository.

                  "Linked  Percentage,"  as of any  Redemption  Record Date with
respect to Auction  Rate-Inverse Rate Bonds, shall mean the percentage  obtained
by dividing the aggregate  principal amount of Outstanding  Bonds of each series
which are  Linked on such  Redemption  Record  Date by the  aggregate  principal
amount of Outstanding Bonds of each series on such Redemption Record Date.

                  "Maximum  Auction  Rate-Inverse  Rate"  shall  mean  during an
Auction  Rate-Inverse  Rate  Period,  the  interest  rate per annum equal to the
Linked  Rate times two times  360/365,  rounded to the  nearest  one  thousandth
(.001) of 1%.

                                                      IIIA-3

<PAGE>



                  "Maximum  Rate" shall mean on any date of  determination  with
respect to Auction Rate Bonds during an Auction  Rate-Inverse  Rate Period,  the
interest rate per annum equal to the lowest of:

                  (i)  the  Applicable  Percentage  of the  higher  of  (A)  the
         After-Tax  Equivalent  Rate on such date, and (B) the Commercial  Paper
         Index on such date;

                  (ii) the excess of (A) the Maximum Auction  Rate-Inverse  Rate
         over (B) the Service Charge Rate on such date; and

                  (iii)  the  excess  of (A)  the  maximum  rate  on  such  date
         permitted by New York law, as the same may be modified by United States
         law of general  application,  over (B) the Service  Charge Rate on such
         date.

provided,  that  if the  ownership  of  the  Auction  Rate  Bonds  is no  longer
maintained in book-entry form by the Securities Depository, the Maximum Rate, on
any  date of  determination,  shall  equal  the  lowest  of (x)  the  Applicable
Percentage multiplied by the higher of (1) the After-Tax Equivalent Rate on such
date and (2) the Commercial  Paper Index on such date,  (y) the Maximum  Auction
Rate-  Inverse Rate and (z) the maximum rate on such date  permitted by New York
law, as the same may be modified by United States law of general application.

                  "Minimum  Rate" shall mean on any date of  determination  with
respect to Auction  Rate Bonds  during an Auction  Rate-Inverse  Rate Period the
rate per annum  equal to the lower of 70% (as such  percentage  may be  adjusted
pursuant to Section 3A.09) of:

                  (i) the Commercial Paper Index on such date; and

                  (ii) the After-Tax Equivalent Rate on such date;

provided,  however,  that (x) if the Minimum Rate is  applicable to Auction Rate
Bonds during an Auction  Rate-Inverse Rate Period as determined  pursuant to the
Auction Procedures, in no event shall such Minimum Rate exceed the excess of (A)
the lesser of (1) the Maximum  Auction  Rate-  Inverse  Rate and (2) the maximum
rate on such date  permitted  by New York law,  as the same may be  modified  by
United States law of general  application,  over (B) the Service  Charge Rate on
such date, or (y) if the Minimum Rate is applicable to Auction Rate Bonds during
an Auction  Rate-Inverse Rate Period due to the linkage of all of the beneficial
ownership of Auction Rate Bonds during an Auction  Rate-Inverse Rate Period with
all of the  beneficial  ownership  of the Inverse  Rate Bonds  during an Auction
Rate-Inverse  Rate Period, in no event shall such Minimum Rate exceed the lesser
of (A) the Maximum  Auction  Rate-Inverse  Rate and (B) such maximum rate, as so
modified.

                  "Redemption  Date," when used  during an Auction  Rate-Inverse
Rate Period with respect to any Auction  Rate-Inverse  Rate Bond to be redeemed,
shall mean the date fixed for such  redemption as to which notice has been given
to the Trustee as contemplated by Article V.

                                                      IIIA-4

<PAGE>



                  "Redemption  Record Date" during an Auction  Rate-Inverse Rate
Period shall have the meaning set forth in Section 5.10.2.

                  "Regular  Auction Rate Bonds," on any Record Date,  shall mean
Auction Rate Bonds the beneficial  ownership of which is not Linked with Inverse
Rate  Bonds and which are not  Special  Auction  Rate  Bonds and the  beneficial
ownership of which is recorded  under a unique  CUSIP  number at the  Securities
Depository.

                  "Regular  Interest  Payment  Date"  shall have the meaning set
forth in Section 3A.02.

                  "Regular  Inverse  Rate  Bonds," on any Record  Date during an
Auction  Rate-Inverse Rate Period,  shall mean Inverse Rate Bonds the beneficial
ownership  of which is not Linked  with  Auction  Rate Bonds and the  beneficial
ownership of which is recorded  under a unique  CUSIP  number at the  Securities
Depository.

                  "Regular Linked Auction Rate Bonds and Inverse Rate Bonds," on
any Record Date during an Auction  Rate-Inverse  Rate Period  shall mean Auction
Rate Bonds and Inverse  Rate Bonds the  beneficial  ownership of which is Linked
and which  was  Linked at the close of  business  on the  immediately  preceding
Regular  Record Date and the  beneficial  ownership of which is recorded under a
unique CUSIP number at the Securities Depository.

                  "Regular  Record Date," with respect to each Regular  Interest
Payment Date or the Stated Maturity during an Auction  Rate-Inverse Rate Period,
shall mean the second Business Day next preceding such Regular  Interest Payment
Date or the Stated Maturity, as the case may be.

                  "Service Charge Rate" shall mean on any Auction Date or on any
effective date of a Change in the Interest Rate Mode to an Auction  Rate-Inverse
Rate Period with respect to Auction Rate-Inverse Rate Bonds, the sum of:

                  (a)      the Broker-Dealer Fee Rate on such date; and

                  (b)      the Auction Agent Fee Rate on such date.

                  "Special  Auction  Rate  Bonds," on any Record  Date during an
Auction  Rate-Inverse Rate Period,  shall mean Auction Rate Bonds the beneficial
ownership of which is not Linked, but which was Linked,  with Inverse Rate Bonds
at the close of business on the  immediately  preceding  Regular Record Date and
the beneficial ownership of which is recorded under a unique CUSIP number at the
Securities Depository.

                  "Special Linked Auction Rate Bonds and Inverse Rate Bonds," on
any Record Date during an Auction  Rate-Inverse Rate Period,  shall mean Auction
Rate Bonds and Inverse Rate Bonds the  beneficial  ownership of which is Linked,
but which was not Linked at the close of business on

                                                      IIIA-5

<PAGE>



the immediately  preceding Regular Record Date, and the beneficial  ownership of
which is recorded under a unique CUSIP number at the Securities Depository.

                  "Subsequent  Interest  Period" during an Auction  Rate-Inverse
Rate Period, shall have the meaning set forth in Section 3A.02.

                  "Tender  Date"  shall  have the  meaning  set forth in Section
3A.10.

                  "Tender  Demand"  shall have the  meaning set forth in Section
3A.10.

                  "Tender  Price"  shall have the  meaning  set forth in Section
3A.10.

                  SECTION 3A.02.  Auction  Rate-Inverse Rate: Interest on Bonds.
(a) During any  Auction  Rate-Inverse  Rate  Period  interest on the Bonds shall
accrue for each Interest Period and shall be payable in arrears,  on the Initial
Interest  Payment Date and on each succeeding  fifth Wednesday after the Initial
Interest Payment Date (each a "Regular  Interest  Payment Date"),  provided that
if:

                  (i) (A) the Securities  Depository shall make available to its
         participants  and  members,  in  next-day  funds  in New  York  City on
         Interest  Payment Dates,  the amount then due as interest or shall make
         available  to  its  participants  and  members,  in  funds  immediately
         available in New York City, on Interest Payment Dates,  such amount but
         shall not have so advised  the  Auction  Agent and the  Trustee of such
         availability  and (B) (1) such  Wednesday  is not a Business Day or (2)
         the Thursday  following  such Wednesday is not a Business Day, then the
         Regular  Interest  Payment Date shall be the first Business Day that is
         immediately  preceded by a Business Day that falls after such Wednesday
         and is immediately followed by a Business Day; or

                  (ii) (A) the Securities Depository shall make available to its
         participants and members,  in funds  immediately  available in New York
         City on Interest  Payment  Dates,  the amount then due as interest  and
         shall  have so  advised  the  Auction  Agent  and the  Trustee  of such
         availability  and (B) such  Wednesday is not a Business  Day,  then the
         Regular  Interest  Payment Date shall be the first Business Day that is
         immediately preceded by a Business Day that falls after such Wednesday;
         and

at maturity,  whether on the Stated  Maturity  Date,  upon prior  redemption  or
otherwise  and  whether or not a Regular  Interest  Payment  Date (each  Regular
Interest  Payment  Date and other  date of  payment  of  interest  being  herein
referred to as an "Interest Payment Date").

                  (b) During any Auction  Rate-Inverse  Rate  Period,  the Bonds
shall bear interest at an Auction Rate and a related  Inverse Rate determined as
set forth in this Article  IIIA.  The Auction  Rate on the Auction  Rate-Inverse
Rate Bonds  during the Initial  Interest  Period  shall be equal to the rate per
annum determined  pursuant to a certificate of the Market Agent delivered to the
Trustee

                                                      IIIA-6

<PAGE>



(with a copy to the  Authority,  the Registrar and Paying Agent and the Company)
on a date not later than the  effective  date of the Change in the Interest Rate
Mode as the minimum rate of interest  which, in the opinion of the Market Agent,
would be  necessary as of such date to market the Auction Rate Bonds during such
Initial  Interest Period in a secondary  market  transaction at a price equal to
the principal amount thereof;  provided, however that the Auction Rate shall not
exceed the excess of the  Maximum  Auction  Rate-Inverse  Rate over the  Service
Charge Rate.  Commencing on and including each Initial Interest Payment Date the
rate of interest on the Auction Rate Bonds during any Auction  Rate-Inverse Rate
Period for each subsequent interest period therefor  (hereinafter referred to as
a  "Subsequent  Interest  Period";  and  the  Initial  Interest  Period  or  any
Subsequent  Interest  Period  being  hereinafter  referred  to as  an  "Interest
Period"),  which  Subsequent  Interest  Period  shall  commence  on the  Regular
Interest  Payment Date for the  preceding  Interest  Period and shall end on but
exclude the next succeeding  Interest Payment Date, shall be equal to the sum of
the rate of interest per annum that results from  implementation  of the Auction
Procedures (the "Auction Rate") and the Service Charge Rate; provided that

                  (i)(A) if a notice of an adjustment in the percentage  used to
         determine  the  Minimum  Rate  and the  Applicable  Percentage  used in
         determining  the Maximum Rate shall have been given by the Market Agent
         in accordance with Section 3A.09.3 and, because of a failure to satisfy
         the  condition  set  forth  in  clause  (B)  of  Section  3A.09.3  such
         adjustment shall not have taken effect, an Auction shall not be held on
         the Auction Date immediately  preceding the next succeeding  Subsequent
         Interest Period and the rate of interest for such  Subsequent  Interest
         Period shall equal the sum of the Maximum Rate on such Auction Date and
         the Service Charge Rate on such Auction Date;

                  (ii)  [reserved];

                  (iii) if at the close of business  on the Regular  Record Date
         immediately  preceding any Subsequent  Interest Period all Auction Rate
         Bonds are Linked with Inverse Rate Bonds,  an Auction shall not be held
         with  respect  to such  Subsequent  Interest  Period  and  the  rate of
         interest for such  Subsequent  Interest  Period shall equal the Minimum
         Rate on the Business Day  immediately  preceding  the first day of such
         Subsequent Interest Period;

                  (iv)(A)  if  any  of  the  conditions  set  forth  in  Section
         4.01.3(A)(i)  or (ii) with respect to any Change in the  Interest  Rate
         Mode  from  an  Auction  Rate-Inverse  Rate  Period,  or if  any of the
         conditions set forth in Section  4.02.3(A) with respect to a conversion
         to a  Fixed  Rate is not  met,  the  Auction  Rate  for the  Subsequent
         Interest  Period  shall be  determined  pursuant to Auction  Procedures
         applicable to the Auction  Rate-Inverse  Rate Bonds,  and (B) if any of
         the  conditions  set forth in Section  4.01.3(A)(iii),  (C) or (D) with
         respect  to any  Change  in the  Interest  Rate  Mode  from an  Auction
         Rate-Inverse  Rate  Period,  or if any of the  conditions  set forth in
         Section  4.02.3(B) with respect to a conversion to a Fixed Rate from an
         Auction  Rate-  Inverse Rate Period is not met, an Auction shall not be
         held with  respect to the  Subsequent  Interest  Period and the Auction
         Rate for such  Subsequent  Interest  Period  shall equal the sum of the
         Maximum Rate and the Service Charge Rate on such Auction Date; and

                                                      IIIA-7

<PAGE>



                  (v) if on any  Auction  Date,  an  Auction is not held for any
         other reason,  the rate of interest for the next succeeding  Subsequent
         Interest Period shall equal the sum of the Maximum Rate on such Auction
         Date and the Service Charge Rate on such Auction Date.

Notwithstanding the foregoing, if:

                  (A) the  ownership  of the  Auction  Rate  Bonds is no  longer
         maintained in book-entry form by the Securities Depository, the rate of
         interest  for any  Subsequent  Interest  Period  commencing  after  the
         delivery of  certificates  representing  Auction Rate Bonds pursuant to
         Section  2.03 hereof  shall equal the Maximum  Rate on the Business Day
         immediately preceding the first day of such Subsequent Interest Period;
         or

                  (B) a  Payment  Default  shall  have  occurred,  the  rate  of
         interest  for (1)  the  Subsequent  Interest  Period  commencing  on or
         immediately  prior to the date on which  such  Payment  Default  occurs
         shall  equal  the sum of the  Overdue  Rate as of the first day of such
         Subsequent   Interest  Period  and  the  Service  Charge  Rate  on  the
         immediately  preceding  Auction  Date,  and  (2)  for  each  Subsequent
         Interest Period  commencing  thereafter to and including the Subsequent
         Interest  Period,  if any,  during which,  or commencing  less than two
         Business  Days  after,  such  Payment  Default is cured shall equal the
         Overdue Rate on the first day of each such Subsequent Interest Period

(the rate per annum at which  interest is payable on the Auction  Rate Bonds for
any Interest Period being  hereinafter  referred to as the  "Applicable  Auction
Rate").

The rate of  interest  on the Inverse  Rate Bonds  during the  Initial  Interest
Period and for each Subsequent Interest Period, shall be equal to the excess, if
any, taken (without rounding) to one thousandth (.001) of 1%, of:

                  (i)  two times the Linked Rate over

               (ii) the product of the Applicable Auction Rate for such Interest
          Period and 365/360,

provided that in no event shall such rate exceed the maximum rate on the date of
determination  permitted  by New York law, as the same may be modified by United
States  law of  general  application  (the rate per annum at which  interest  is
payable on the Inverse  Rate Bonds for any  Interest  Period  being  hereinafter
referred to as the "Applicable Inverse Rate").

               SECTION  3A.03.   Auction   Rate-Inverse   Rate  Bonds:   Auction
          Procedures.  Subject to the  provisions of  subsection  (b) of Section
          3A.02,  Auctions  shall  be  conducted  on  each  Auction  Date in the
          following manner:

                  (a)(i) Prior to the Submission Deadline on each Auction Date:

                                                      IIIA-8

<PAGE>



                                                     (A) each Existing Holder of
                                            Auction  Rate  Bonds may submit to a
                                            Broker-Dealer information as to:

                                    (I)  the  principal  amount  of  Outstanding
                           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 Interest Period;

                                    (II) the  principal  amount  of  Outstanding
                           Auction  Rate  Bonds,  if any,  which  such  Existing
                           Holder  offers  to sell if the  Auction  Rate for the
                           next  succeeding  Interest  Period shall be less than
                           the rate per annum specified by such Existing Holder;
                           and/or

                                    (III) the  principal  amount of  Outstanding
                           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 Interest Period; and

                           (B) for the purposes of  implementing  the  Auctions,
                  the  Broker-Dealers may contact Potential Holders 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 Interest Period shall not be less than the
                  rate per annum specified by such Potential Holder.

                  For the purposes hereof,  the communication to a Broker-Dealer
         of information referred to in clause (A)(I),  (A)(II),  (A)(III) or (B)
         of this  paragraph  (i) is  hereinafter  referred  to as an "Order" and
         collectively  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 (x) clause (A)(I) of this paragraph (i) is  hereinafter  referred
         to as a "Hold  Order" and  collectively  as "Hold  Orders,"  (y) clause
         (A)(II) or (B) of this  paragraph (i) is  hereinafter  referred to as a
         "Bid"  and  collectively  as "Bids"  and (z)  clause  (A)(III)  of this
         paragraph  (i)  is  hereinafter  referred  to  as a  "Sell  Order"  and
         collectively as "Sell Orders."

               (ii) (A) Subject to the provisions of subsection (b) of this
         Section  3A.03,  a Bid  by  an  Existing  Holder  shall  constitute  an
irrevocable offer to sell:

                                    (I)  the  principal  amount  of  Outstanding
                           Auction  Rate  Bonds  specified  in  such  Bid if the
                           Auction Rate  determined  as provided in this Section
                           3A.03 shall be less than the rate specified  therein;
                           or

                                    (II)  such  principal  amount  or  a  lesser
                           principal amount of Outstanding Auction Rate Bonds to
                           be determined as set forth in clause (D) of paragraph

                                                      IIIA-9

<PAGE>



                           (i) of  subsection  (d) of this Section  3A.03 if the
                           Auction Rate  determined  as provided in this Section
                           3A.03 shall be equal to the rate  specified  therein;
                           or

                                    (III)  such  principal  amount  or a  lesser
                           principal amount of Outstanding Auction Rate Bonds to
                           be determined as set forth in clause (C) of paragraph
                           (ii) of  subsection  (d) of this Section 3A.03 if the
                           rate  specified  therein  shall  be  higher  than the
                           Maximum  Rate  and  Sufficient  Clearing  Bids do not
                           exist.

                           (B) Subject to the  provisions of  subsection  (b) of
                  this Section 3A.03,  a Sell Order by an Existing  Holder shall
                  constitute an irrevocable offer to sell:

               (I) the  principal  amount  of  Outstanding  Auction  Rate  Bonds
          specified in such Sell Order; or

                                    (II)  such  principal  amount  or  a  lesser
                           principal amount of Outstanding Auction Rate Bonds as
                           set  forth  in  clause  (C)  of  paragraph   (ii)  of
                           subsection  (d) of this Section  3A.03 if  Sufficient
                           Clearing Bids do not exist.

                           (C) Subject to the  provisions of  subsection  (b) of
                  this  Section  3A.03,  a  Bid  by  a  Potential  Holder  shall
                  constitute an irrevocable offer to purchase:

                                    (I)  the  principal  amount  of  Outstanding
                           Auction  Rate  Bonds  specified  in  such  Bid if the
                           Auction Rate  determined  as provided in this Section
                           3A.03  shall  be  higher  than  the  rate   specified
                           therein; or

                                    (II)  such  principal  amount  or  a  lesser
                           principal amount of Outstanding Auction Rate Bonds as
                           set  forth  in  clause  (E)  of   paragraph   (i)  of
                           subsection  (d) of this Section  3A.03 if the Auction
                           Rate  determined  as provided in this  Section  3A.03
                           shall be equal to the rate specified therein.

               (b)(i) 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:

                           (A) the name of the Bidder placing such Order;

               (B) the aggregate principal amount of Auction Rate Bonds that are
          the subject
                  of such Order;

                           (C) to the  extent  that such  Bidder is an  Existing
Holder:

                                                      IIIA-10

<PAGE>



                                    (I) the  principal  amount of  Auction  Rate
                           Bonds,  if any,  subject to any Hold Order  placed by
                           such Existing Holder;

                                    (II) 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

                                    (III) the  principal  amount of Auction Rate
                           Bonds,  if any,  subject to any Sell Order  placed by
                           such Existing Holder; and

                           (D) to the extent such Bidder is a Potential  Holder,
                  the rate specified in such Potential Holder's Bid.

                  (ii) 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%.

                  (iii) If an Order or Orders covering all  Outstanding  Auction
         Rate Bonds held by any 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 an Order  submitted  to the
         Auction Agent.

                  (iv) None of the  Authority,  the Company,  the Trustee or 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.

                  (v) 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  Outstanding  Auction Rate Bonds held by
         such Existing Holder,  such Orders shall be considered valid as follows
         and in the following order of priority:

                                                     (A) all Hold  Orders  shall
                                            be considered  valid, but only up to
                                            and  including in the  aggregate 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;

                                                      IIIA-11

<PAGE>



                           (B)(I)  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 clause (A) of this  paragraph
                  (v);

                                    (II) subject to subclause (I) of this clause
                           (B),  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;

                                    (III) subject to subclauses  (I) and (II) of
                           this clause (B), if more than one Bid with  different
                           rates is submitted on behalf of such Existing Holder,
                           such  Bids  shall be  considered  valid  first 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

                                    (IV)  in  any  such  event,   the  aggregate
                           principal  amount of Outstanding  Auction Rate Bonds,
                           if any,  subject to Bids not valid  under this clause
                           (B) shall be  treated  as the  subject  of a Bid by a
                           Potential Holder at the rate therein specified; and

                           (C) 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 Hold  Orders  referred  to in  clause  (A) of this
                  paragraph (v) and valid Bids referred to in clause (B) of this
                  paragraph (v).

                  (vi) 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 with the rate and principal amount therein specified.

                  (vii) 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.

                  (viii) Any Bid submitted by an Existing  Holder or a Potential
         Holder  specifying  a rate lower than the Minimum Rate shall be treated
         as a Bid specifying the Minimum Rate.

                                                      IIIA-12

<PAGE>



                  (c)(i)  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 individually
as a "Submitted  Hold Order," a "Submitted  Bid" or a "Submitted Sell Order," as
the case may be, or as a "Submitted  Order" and  collectively as "Submitted Hold
Orders,"  "Submitted Bids" or "Submitted Sell Orders," as the case may be, or as
"Submitted Orders") and shall determine:

                           (A) the  excess  of the  total  principal  amount  of
                  Outstanding  Auction Rate Bonds over the sum of 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

                           (B) from the Submitted Orders whether:

                                    (I)  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 Rate;

                  exceeds or is equal to the sum of:

                                    (II)  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 Rate; and

                                    (III)  the  aggregate  principal  amount  of
                           Outstanding  Auction Rate Bonds  subject to Submitted
                           Sell Orders

                  (in the event such excess or such equality  exists (other than
                  because the sum of the principal amounts of Auction Rate Bonds
                  in subclauses  (II) and (III) above is zero because all of the
                  Outstanding  Auction Rate Bonds are subject to Submitted  Hold
                  Orders),  such  Submitted  Bids in  subclause  (I) above being
                  hereinafter  referred to collectively as "Sufficient  Clearing
                  Bids"); and

                           (C) if  Sufficient  Clearing  Bids exist,  the lowest
                  rate specified in such Submitted Bids (the "Winning Bid Rate")
                  which if:

                                    (I)  (aa)  each  such   Submitted  Bid  from
                           Existing Holders specifying such lowest rate and (bb)
                           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  subject to
                           such Submitted Bids; and

                                                      IIIA-13

<PAGE>



                                    (II)  (aa)  each  such  Submitted  Bid  from
                           Potential  Holders  specifying  such  lowest rate and
                           (bb) all other Submitted Bids from Potential  Holders
                           specifying lower rates were accepted,

                  would result in such Existing  Holders  described in subclause
                  (I) 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
                  subclause (II) above,  would equal not less than the Available
                  Auction Rate Bonds.

                  (ii)   Promptly   after  the   Auction   Agent  has  made  the
         determinations  pursuant to paragraph (i) of this  subsection  (c), the
         Auction  Agent,  by telecopy  confirmed  in writing,  shall  advise the
         Authority,  the Company  and the  Trustee of the  Maximum  Rate and the
         Minimum Rate and the components  thereof on the Auction Date and, based
         on such  determinations,  the  Auction  Rate  for the  next  succeeding
         Interest Period as follows:

                                                     (A) if Sufficient  Clearing
                                            Bids exist,  that the  Auction  Rate
                                            for  the  next  succeeding  Interest
                                            Period shall be equal to the Winning
                                            Bid Rate so determined;

                           (B) if  Sufficient  Clearing Bids do not exist (other
                  than  because all of the  Outstanding  Auction  Rate Bonds are
                  subject to Submitted  Hold Orders),  that the Auction Rate for
                  the  next  succeeding  Interest  Period  shall be equal to the
                  Maximum Rate; or

                           (C) if all Outstanding Auction Rate Bonds are subject
                  to Submitted  Hold Orders,  that the Auction Rate for the next
                  succeeding Interest Period shall be equal to the Minimum Rate.

                    (d) Existing  Holders  shall  continue to hold the principal
               amount of Auction Rate Bonds that are subject to  Submitted  Hold
               Orders,  and,  based  on  the  determinations  made  pursuant  to
               paragraph (i) of subsection (c) of this Section 3A.03,  Submitted
               Bids and Submitted  Sell Orders shall be accepted or rejected and
               the  Auction  Agent  shall  take such  other  action as set forth
               below:

                  (i) If Sufficient  Clearing Bids have been made, all Submitted
         Sell  Orders  shall be  accepted  and,  subject  to the  provisions  of
         paragraphs (iv) and (v) of this subsection (d), Submitted Bids shall be
         accepted or rejected as follows in the following  order of priority and
         all other Submitted Bids shall be rejected:

                           (A) 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;

                                                      IIIA-14

<PAGE>



                           (B) 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;

                           (C) 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;

                           (D) 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 the Available  Auction Rate Bonds over the aggregate
                  principal  amount of Auction  Rate Bonds  subject to Submitted
                  Bids  described in clauses (B) and (C) of this  paragraph (i),
                  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 aggregate 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  amount of Outstanding
                  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

                           (E) 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 of Auction
                  Rate Bonds obtained by multiplying the excess of the aggregate
                  principal  amount of  Available  Auction  Rate  Bonds over the
                  aggregate  principal  amount of Auction Rate Bonds  subject to
                  Submitted  Bids  described in clauses (B), (C) and (D) of this
                  paragraph  (i) by a fraction  the  numerator of which shall be
                  the aggregate  principal  amount of  Outstanding  Auction Rate
                  Bonds  subject to such  Submitted Bid and the  denominator  of
                  which shall be the sum of the principal amounts 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.

                  (ii) If  Sufficient  Clearing  Bids have not been made  (other
         than because all of the  Outstanding  Auction Rate Bonds are subject to
         Submitted Hold Orders),  subject to the provisions of paragraph (iv) of
         this subsection (d), Submitted Orders shall be accepted or

                                                      IIIA-15

<PAGE>



         rejected as follows in the  following  order of priority  and all other
         Submitted Bids shall be rejected:

                                                     (A)    Existing    Holders'
                                            Submitted  Bids  specifying any rate
                                            that is equal  to or lower  than the
                                            Maximum Rate shall be rejected, thus
                                            entitling  such Existing  Holders to
                                            continue   to  hold  the   aggregate
                                            principal  amount  of  Auction  Rate
                                            Bonds  subject  to  such   Submitted
                                            Bids;

                           (B) Potential  Holders' Submitted Bids specifying any
                  rate that is equal to or lower than the Maximum  Rate shall be
                  accepted,  thus requiring  such Potential  Holders to purchase
                  the aggregate  principal  amount of Auction Rate Bonds subject
                  to such Submitted Bids; and

                           (C) each Existing  Holder's  Submitted Bid specifying
                  any  rate  that  is  higher  than  the  Maximum  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 clause (B) of
                  this paragraph (ii) 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.

                    (iii) If all  Outstanding  Auction Rate Bonds are subject to
               Submitted Hold Orders, all Submitted Bids shall be rejected.

                  (iv) If, as a result of the procedures  described in paragraph
         (i) or (ii) of this  subsection  (d),  any  Existing  Holder  would  be
         entitled or required to sell, or any Potential Holder would be entitled
         or required to purchase,  a principal amount of Auction Rate Bonds that
         is not equal to $25,000 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 Auction Rate Bonds
         to be purchased or sold by any Existing  Holder or Potential  Holder so
         that the  principal  amount of Auction Rate Bonds  purchased or sold by
         each Existing  Holder or Potential  Holder shall be equal to $25,000 or
         an integral multiple thereof.

                  (v) If, as a result of the  procedures  described in paragraph
         (i) of this subsection  (d), any Potential  Holder would be entitled or
         required to purchase less than $25,000 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 $25,000 or an integral

                                                      IIIA-16

<PAGE>



         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.

                  (e) Based on the results of each  Auction,  the Auction  Agent
shall  determine  the  aggregate  principal  amount of Auction  Rate Bonds to be
purchased and the aggregate principal amount of Auction Rate Bonds to be sold by
Potential  Holders  and  Existing  Holders on whose  behalf  each  Broker-Dealer
submitted  Bids or Sell Orders and, with respect to each  Broker-Dealer,  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 Broker-Dealer or Broker-Dealers  acting for
one or more purchasers  such  Broker-Dealer  shall deliver,  or from which other
Broker-Dealer  or  Broker-Dealers  acting for one or more  sellers  such Broker-
Dealer shall receive, as the case may be, Auction Rate Bonds.

                  SECTION 3A.04. Auction Rate-Inverse Rate Bonds: Certain Orders
Not Permitted;  Purchases and  Cancellations.  (a) None of the Authority nor the
Company nor 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 not submit Bids to purchase Auction Rate Bonds in an Auction for its
own account,  provided that affiliated Broker-Dealers may submit Hold Orders and
Sell Orders in Auctions  with respect to Auction Rate Bonds  otherwise  acquired
during any Auction Rate-Inverse Rate Period for its own account.

                  (b) While the Bonds bear  interest  at an  Auction  Rate and a
related  Inverse Rate during an Auction  Rate-Inverse  Rate Period,  neither the
Authority  nor the  Company,  nor the Trustee on behalf of the  Authority or the
Company,  shall purchase or otherwise  acquire Auction Rate Bonds unless, on the
date of any such  purchase or  acquisition,  the  Authority,  the Company or the
Trustee,  as the case may be,  purchases or acquires Regular Linked Auction Rate
Bonds and Inverse  Rate Bonds or Special  Linked  Auction Rate Bonds and Inverse
Rate Bonds or an equal  aggregate  principal  amount of  Auction  Rate Bonds and
Inverse Rate Bonds.

                  (c) Neither the Authority nor the Company shall deliver to the
Trustee  for  cancellation,  and the  Trustee,  at the  request  of  either  the
Authority or the Company,  shall not cancel,  Auction Rate Bonds or Inverse Rate
Bonds  unless (i) the  Authority  or the  Company  delivers  to the  Trustee for
cancellation  or the Trustee  cancels,  as the case may be, (A)  Regular  Linked
Auction Rate Bonds and Inverse Rate Bonds or Special  Linked  Auction Rate Bonds
and Inverse  Rate Bonds or (B) an equal  aggregate  principal  amount of Auction
Rate Bonds and Inverse Rate Bonds or (ii) the Authority or the Company  delivers
to the Trustee for  cancellation  on a Redemption  Date or the  Trustee,  at the
request of the  Authority  or the  Company,  cancels on a  Redemption  Date,  an
aggregate  principal  amount  of  Inverse  Rate  Bonds  equal  to the  aggregate
principal amount of Auction Rate Bonds being redeemed pursuant to subsection (c)
of Section 5.01(c)(ii) on such Redemption Date.

                    SECTION 3A.05.  Auction Rate-Inverse Rate Bonds: Deposit and
               Application  of  Interest  Payments.   (a)  Pursuant  to  Section
               9.02(a)(i),   the  Company   shall  pay  to  the   Registrar  and
               -----------------  Paying  Agent not later than 12:00  Noon,  New
               York City time, on the second Business Day next

                                                      IIIA-17

<PAGE>



preceding  each  Regular  Interest  Payment  Date an  aggregate  amount of funds
available  on the  next  Business  Day in The  City  of New  York  equal  to the
aggregate amount of interest payable on the Bonds of each series on such Regular
Interest  Payment Date. The aggregate amount of interest payable on the Bonds of
each series on each  Interest  Payment  Date  therefor  shall be  calculated  by
applying the Linked Rate to the aggregate  principal  amount of the  Outstanding
Bonds of each series for which interest is to be paid and  multiplying  such sum
by the actual number of days in the Interest Period concerned divided by 365 and
rounding the  resultant  figure to the nearest  cent (half a cent being  rounded
upwards).

                  (b) So long as no Payment Default has previously  occurred and
is continuing and the ownership of the Auction Rate Bonds and Inverse Rate Bonds
is maintained in book-entry form by the Securities Depository, the Trustee shall
send by 12:15 P.M.,  New York City time, on the Business Day next preceding each
Regular Interest  Payment Date a notice in  substantially  the form of Exhibit J
hereto  to the  Auction  Agent  and to the  registered  owners  of the  Bonds by
telecopy or similar means if the aggregate amount of funds available as provided
in  subsection  (a) of this Section 3A.05 is  insufficient  to pay the aggregate
amount of interest  payable on the Bonds of each series on such Regular Interest
Payment  Date  pursuant  to  subsection  (a) of  this  Section  3A.05.  If  such
insufficiency  is cured within three  Business Days after such Regular  Interest
Payment  Date,  the  Trustee  shall   immediately   send  a  notice  thereof  in
substantially  the form of  Exhibit  K hereto  to the  Auction  Agent and to the
registered owners of the Bonds by telecopy or similar means.

                  (c) On any Initial  Interest  Payment Date after the effective
date of a Change in the  Interest  Rate  Mode to an  Auction  Rate-Inverse  Rate
Period, the Registrar and Paying Agent shall pay to the Auction Agent, on behalf
of the  holders of Auction  Rate  Bonds,  out of amounts  made  available  to it
pursuant  to  subsection  (a) of  Section  3A.05  on the  immediately  preceding
Business Day on account of interest on the Auction  Rate Bonds,  an amount equal
to the product of (i) a fraction,  the  numerator of which is the number of days
in the Initial  Interest  Period and the denominator of which is 360, times (ii)
the Service  Charge Rate on the effective  date of a Change in the Interest Rate
Mode to an Auction  Rate-Inverse Rate Period times (iii) the aggregate principal
amount of the  Outstanding  Auction Rate Bonds on the effective date of a Change
in the Interest Rate Mode to an Auction Rate-Inverse Rate Period.

                  (d) On the Interest Payment Date for each Subsequent  Interest
Period  immediately  following an Auction  Date,  the Registrar and Paying Agent
shall pay to the Auction  Agent,  on behalf of the holders of Auction Rate Bonds
in respect of which interest is to be paid on such Interest Payment Date, out of
amounts made  available to it pursuant to subsection (a) of Section 3A.05 on the
immediately  preceding  Business Day on account of interest on such Auction Rate
Bonds, an amount equal to the product of (i) a fraction,  the numerator of which
is the number of days in such Interest  Period and the  denominator  of which is
360,  times (ii) the amount of the Service Charge Rate times (iii) the aggregate
principal  amount of such  Auction Rate Bonds which were not Linked with Inverse
Rate Bonds at the close of  business  on the  Regular  Record  Date  immediately
preceding such Auction Date.

                                                      IIIA-18

<PAGE>



                  SECTION 3A.06. Auction Rate-Inverse Rate Bonds: Calculation of
Maximum Rate,  Minimum Rate and Overdue Rate. The Auction Agent shall  calculate
the Maximum Rate and the Minimum Rate on each Auction  Date. If all Auction Rate
Bonds are Linked with Inverse Rate Bonds at the close of business on any Regular
Record Date, the Auction Agent shall  calculate the Minimum Rate on the Business
Day  immediately  preceding  the  first  day of the next  succeeding  Subsequent
Interest  Period.  If the  ownership  of the  Auction  Rate  Bonds is no  longer
maintained in book-entry  form by the Securities  Depository,  the Trustee shall
calculate the Maximum Rate on the Business Day  immediately  preceding the first
day of  each  Subsequent  Interest  Period  commencing  after  the  delivery  of
certificates  representing the Auction Rate Bonds pursuant to Section 2.03. If a
Payment  Default shall have  occurred,  the Trustee shall  calculate the Overdue
Rate (i) as of the first day of the Subsequent  Interest Period commencing on or
immediately  prior to the date on which such Payment Default shall have occurred
and (ii) on the first day of any Subsequent Interest Period commencing after the
occurrence  of such Payment  Default to and including  the  Subsequent  Interest
Period,  if any,  commencing  less than two Business Days after the cure of such
Payment  Default.  The Trustee shall  calculate the Applicable  Factors for each
Subsequent Interest Period. The determination of the Applicable Factors shall in
the absence of manifest error be final and binding upon all parties.

                  SECTION 3A.07. Auction Rate-Inverse Rate Bonds: Computation of
Interest.  (a) From and after the time that  ownership of the Auction Rate Bonds
and  Inverse  Rate  Bonds is no  longer  maintained  in  book-entry  form by the
Securities  Depository,  the  Trustee  shall  calculate  the amount of  interest
distributable  to (i)  holders of Regular  Auction  Rate Bonds for any  Interest
Period by applying the Applicable Factor for Regular Auction Rate Bonds for such
Interest Period to the aggregate  principal amount of Regular Auction Rate Bonds
multiplying  such  sum by the  actual  number  of  days in the  Interest  Period
concerned  divided by 360 and rounding the resultant  figure to the nearest cent
(half a cent being  rounded  upwards) and (ii)  holders of Regular  Inverse Rate
Bonds for any  Interest  Period by applying  the  Applicable  Factor for Regular
Inverse Rate Bonds for such Interest Period to the aggregate principal amount of
Regular Inverse Rate Bonds  multiplying such sum by the actual number of days in
the Interest Period  concerned  divided by 365 and rounding the resultant figure
to the nearest cent (half a cent being rounded upwards).

                  (b) So long as the  ownership  of the  Auction  Rate Bonds and
Inverse  Rate  Bonds  is  maintained  in  book-entry   form  by  the  Securities
Depository,  the Trustee shall calculate the Interest Amount with respect to (i)
Regular  Auction  Rate Bonds and Special  Auction  Rate Bonds for each  Interest
Period by applying  the  Applicable  Factor for Regular  Auction  Rate Bonds and
Special  Auction  Rate  Bonds,  respectively,  for such  Interest  Period to the
principal amount of $1,000, multiplying such sum by the actual number of days in
the Interest Period concerned divided by 360 and truncating the resultant figure
to six figures to the right of the decimal  point and (ii) Regular  Inverse Rate
Bonds,  Regular  Linked  Auction  Rate Bonds and Inverse  Rate Bonds and Special
Linked  Auction  Rate  Bonds and  Inverse  Rate  Bonds,  respectively,  for each
Interest  Period by applying  the  Applicable  Factor for Regular  Inverse  Rate
Bonds,  Regular  Linked  Auction  Rate Bonds and Inverse  Rate Bonds and Special
Linked  Auction  Rate  Bonds and  Inverse  Rate  Bonds,  respectively,  for such
Interest Period to the principal  amount of $1,000,  multiplying such sum by the
actual number of days

                                                      IIIA-19

<PAGE>



in the Interest  Period  concerned  divided by 365 and  truncating the resultant
figure to six figures to the right of the decimal point.

                  SECTION 3A.08. Auction  Rate-Inverse Rate Bonds:  Notification
of Rates, Amounts and Payment Dates. (a) So long as the ownership of the Auction
Rate Bonds and the Inverse Rate Bonds is maintained  in  book-entry  form by the
Securities  Depository,  the Trustee shall advise the  Securities  Depository of
each  Regular  Record  Date at least two  Business  Days prior  thereto  and the
Registrar and Paying Agent shall request the Securities Depository to provide it
with a position  listing  showing at the close of business on each such  Regular
Record Date the  aggregate  principal  amounts of:  Regular  Auction Rate Bonds,
Special Auction Rate Bonds,  Regular Inverse Rate Bonds,  Regular Linked Auction
Rate Bonds and Inverse  Rate Bonds and  Special  Linked  Auction  Rate Bonds and
Inverse Rate Bonds,  respectively,  and, in the case of the Stated Maturity,  of
the aggregate principal amounts payable on the Stated Maturity to the holders of
Regular  Auction Rate Bonds,  Special  Auction Rate Bonds,  Regular Inverse Rate
Bonds,  Regular  Linked  Auction  Rate Bonds and Inverse  Rate Bonds and Special
Linked Auction Rate Bonds and Inverse Rate Bonds, respectively.  On the basis of
such  position  listing,  the  Registrar  and Paying Agent shall  determine  the
aggregate  amounts of interest  distributable  on the next  succeeding  Interest
Payment Date to the holders of Regular Auction Rate Bonds,  Special Auction Rate
Bonds, Regular Inverse Rate Bonds, Regular Linked Auction Rate Bonds and Inverse
Rate Bonds and  Special  Linked  Auction  Rate  Bonds and  Inverse  Rate  Bonds,
respectively.  In the event the  Credit  Facility  Issuer is  obligated  to make
payments  pursuant to the Credit  Facility with respect to any Interest  Period,
the Trustee shall make available to the Credit  Facility  Issuer any information
obtained  or  determined  by it  pursuant  to this  subsection  (a) in  order to
facilitate  the payment of any amounts due under this  Indenture  in  accordance
with the terms of the Credit Facility.

                  (b) Promptly  after a Change in the  Interest  Rate Mode to an
Auction  Rate-Inverse  Rate Period and each Regular Interest Payment Date during
an Auction  Rate-Inverse Rate Period, and in any event at least 10 days prior to
the next Interest  Payment Date  following a Change in the Interest Rate Mode to
an Auction Rate-Inverse Rate Period or each Regular Interest Payment Date during
an Auction  Rate-Inverse  Rate  Period,  as the case may be, the  Trustee  shall
advise:

                           (i) the Auction Agent,  so long as no Payment Default
                  has  occurred  and is  continuing  and  the  ownership  of the
                  Auction Rate Bonds is  maintained  in  book-entry  form by the
                  Securities  Depository,  and any Registrar and Paying Agent of
                  such next succeeding  Interest  Payment Date and, if such next
                  succeeding  Interest  Payment  Date  is  not  also  a  Regular
                  Interest Payment Date, of the next succeeding Regular Interest
                  Payment Date;

                           (ii)  any   Registrar   and  Paying   Agent  and  the
                  Securities Depository, so long as the ownership of the Auction
                  Rate  Bonds  or  the  Inverse  Rate  Bonds  is  maintained  in
                  book-entry   form  by  the  Securities   Depository,   of  the
                  Applicable  Factors and the  Interest  Amounts with respect to
                  each Interest Period commencing on such Change

                                                      IIIA-20

<PAGE>



                    in the Interest Rate Mode or such Regular  Interest  Payment
               Date, as the case may be; and

                           (iii)  the  Auction  Agent,  so  long  as no  Payment
                  Default has occurred and is  continuing  and the  ownership of
                  the Auction Rate Bonds is maintained in book-entry form by the
                  Securities  Depository,  and any Registrar and Paying Agent of
                  the amount payable to the Auction Agent pursuant to subsection
                  (c) or (d) of Section 3A.05 on such next  succeeding  Interest
                  Payment  Date and, if such next  succeeding  Interest  Payment
                  Date is not  also a  Regular  Interest  Payment  Date,  of the
                  amount so  payable  on the next  succeeding  Regular  Interest
                  Payment Date.

In the event that any day that is scheduled to be an Interest Payment Date shall
be changed after the Trustee  shall have given the notice  referred to in clause
(i) of the preceding sentence,  not later than 9:15 A.M., New York City time, on
the Business Day next preceding the earlier of the new Interest  Payment Date or
the old Interest  Payment  Date,  the Trustee will, by such means as the Trustee
deems  practicable,  give notice of such change to the Auction Agent, so long as
no Payment  Default has  occurred  and is  continuing  and the  ownership of the
Auction  Rate  Bonds  is  maintained  in  book-entry   form  by  the  Securities
Depository, and to any Registrar and Paying Agent.

                  (c) By  10:00  A.M.,  New  York  City  time,  on each  Regular
Interest  Payment  Date,  the  Trustee  shall  advise the  Auction  Agent of the
Applicable  Factor with respect to Regular Auction Rate Bonds and the Applicable
Inverse Rate for the Interest Period commencing on such Regular Interest Payment
Date.

                  SECTION 3A.09. Auction Rate-Inverse Rate Bonds:  Adjustment in
Percentage.  1. The Market Agent may adjust the  percentage  used in determining
the Minimum Rate and the Applicable  Percentage  used in determining the Maximum
Rate if any such adjustment is necessary, in the judgment of the Market Agent to
reflect any Change of Preference Law or to conform to market  practice such that
the Maximum Rate and Minimum Rate shall have  substantially  equal market values
before and after such Change of Preference Law or change in market practice.  In
making any such adjustment as a result of a Change of Preference Law, the Market
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 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.  In making any such  adjustment  to
conform to market  practice,  the Market  Agent  shall  take into  account  such
factors as the Market Agent deems relevant,  including the terms of auction rate
bonds of other  issuers.  Upon the  occurrence  and during the  continuance of a
Company Downgrade Event, the Bond Insurer shall have the right to consent to any
adjustment  to the  percentage  used  to  determine  the  Minimum  Rate  and the
Applicable  Percentages  used to determine the Maximum Rate, which consent shall
not be unreasonably withheld.

                                                      IIIA-21

<PAGE>



                  2. The Market Agent shall  communicate  its  determination  to
adjust the percentage  used in  determining  the Minimum Rate and the Applicable
Percentage  used in determining the Maximum Rate pursuant to subsection 1 hereof
by means of a written  notice  delivered  at least 10 days prior to the  Auction
Date on which the Market  Agent  desires to effect the change to the  Authority,
the  Trustee,   the  Auction  Agent,   the  Bond  Insurer  and  the  Company  in
substantially  the form  attached  hereto as, or  containing  substantially  the
information  contained in,  Exhibit F. Such notice shall be effective only if it
is  accompanied  by the form of opinion that Bond Counsel has advised the Market
Agent that it 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 Bonds of
each series 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
Minimum Rate and the Applicable  Percentage used in determining the Maximum Rate
shall take effect on an Auction Date only if (A) the  Trustee,  the Bond Insurer
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
Market Agent by telecopy or similar means,  in  substantially  the form attached
hereto as, or containing  substantially the information contained in, Exhibit H,
(i) authorizing the adjustment of the percentage used in determining the Minimum
Rate and the Applicable  Percentage  used in determining  the Maximum 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 Minimum Rate and the
Applicable Percentage used in determining the Maximum Rate is authorized by this
Section 3A.09, is permitted under the Act and will not have an adverse effect on
the  exclusion  of interest  on the Bonds of each  series from gross  income for
federal  income tax  purposes  and (B) the  Trustee,  the Bond  Insurer  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  Minimum  Rate  and  the  Applicable   Percentage  used  in
determining the Maximum 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 of each series from gross income for federal income tax purposes.

                  SECTION  3A.10.   Mandatory  Auction  Rate  Bonds  Tender  for
Purchase.  So long as the  ownership of the Auction Rate Bonds is  maintained in
book-entry  form  by  the  Securities  Depository,  at  any  time  prior  to the
Submission Deadline on any Auction Date, any holder of Inverse Rate Bonds (other
than the  Authority,  the  Company or any  Affiliate  thereof)  (i) may notify a
Broker-  Dealer that such holder intends to submit a Bid at the Minimum Rate for
a  specified  principal  amount of  Auction  Rate  Bonds in the  Auction on such
Auction Date in order to link the same with all or a portion of its Inverse Rate
Bonds and (ii) if such Bid is  unsuccessful,  in whole or in part,  may elect no
later than the second  Business Day succeeding such Auction Date to require that
Regular  Auction  Rate  Bonds  in an  aggregate  principal  amount  equal to the
unsuccessful  portion of such Bid be  tendered  to such  holder for  purchase (a
"Tender  Demand") on the seventh  Business  Day  preceding  the next  succeeding
Auction Date (a "Tender Date"). The purchase price shall equal the principal

                                                      IIIA-22

<PAGE>



amount of Regular  Auction  Rate Bonds being  purchased  plus accrued and unpaid
interest  thereon to the Tender  Date at the  Applicable  Auction  Rate less the
Service Charge Rate (the "Tender Price"). A holder of Regular Auction Rate Bonds
who  receives  notice that all or any portion of its Regular  Auction Rate Bonds
has been  selected for purchase by a holder of Inverse Rate Bonds who has made a
Tender Demand,  shall tender such Auction Rate Bonds for purchase by such holder
of Inverse Rate Bonds at the Tender Price on the Tender Date therefor.  A holder
of Inverse Rate Bonds who has made a Tender  Demand  shall  purchase the Regular
Auction  Rate  Bonds  tendered  to it on the Tender  Date for the  Tender  Price
therefor. Notice of a Tender Demand shall be given, and the Regular Auction Rate
Bonds to be so purchased  shall be selected,  by the Auction Agent in accordance
with the Auction Agency Agreement.

                                                      IIIA-23

<PAGE>



                                                    ARTICLE IV

                                          CHANGES IN THE ADJUSTABLE RATE

                  SECTION 4.01.  Optional  Conversion by Authority.  1. Prior to
the Fixed Rate  Conversion  Date, at the times  specified  below,  the Bonds, in
whole or in part, shall cease to bear interest at the Adjustable Rate then borne
by the Bonds and shall bear interest at such different  Adjustable Rate as shall
be  specified  by the  Authority,  at the request of the  Company,  in a written
notice  delivered at least 15 days prior to the proposed  effective  date of the
Change in the Interest Rate Mode to the Trustee, the Market Agent, the Registrar
and Paying Agent,  any Support Facility Issuer and any Rating Agency then rating
the Bonds (and to the Auction Agent and the Securities Depository if such Change
in the  Interest  Rate Mode is to or from an Auction Rate during an Auction Rate
Period  or  an  Auction  Rate  and  related   Inverse  Rate  during  an  Auction
Rate-Inverse  Rate  Period) in  substantially  the form  attached  hereto as, or
containing  substantially the information contained in, Exhibit A; provided that
during any Auction  Rate-Inverse Rate Period the rate of interest on the Auction
Rate-Inverse  Rate Bonds  subject to such  proposed  Change in the Interest Rate
Mode shall not be  adjusted  to a  different  Adjustable  Rate  until  after the
expiration of a ten (10) year no-call  period which period shall commence on the
effective  date  of  a  Change  in  the  Interest  Rate  Mode  to  such  Auction
Rate-Inverse  Rate Period;  provided,  further,  that any Change in the Interest
Rate Mode from an Auction  Rate-Inverse  Rate Period may be  effected  only upon
purchase of Auction Rate Bonds and Inverse Rate Bonds  subject to such  proposed
Change  in the  Interest  Rate  Mode at a price  equal to the  principal  amount
thereof  plus the  premium  on the  Inverse  Rate Bonds  referred  to in Section
5.01(d),  if any. A Change in the Interest Rate Mode may only be effected on the
last Interest Payment Date for a Calculation Period,  Auction Period or Interest
Period,  as the case may be;  provided  that a Change in the Interest  Rate Mode
during a  Commercial  Paper Rate Period may only be effected on any Business Day
upon  purchase of the Bonds  pursuant to subsection 1 of Section 5.02 at a price
equal to the principal  amount thereof.  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.  Upon the  occurrence  and during the
continuance of a Company  Downgrade Event, the Bond Insurer shall have the right
to consent to any  conversion of the Bonds to the  Commercial  Paper Rate or any
interest rate mode with an interest  period  longer than 30 days,  which consent
shall not be unreasonably  withheld.  It also shall be a condition to any change
in the  Interest  Rate of Mode from any Term  Rate at a time  when the  purchase
price  payable  includes an amount  representing  premium that (i) the Liquidity
Facility then in effect shall permit amounts to be drawn  thereunder to pay such
premium or (ii) Available  Moneys have been provided to the Registrar and Paying
Agent in an amount sufficient to pay such purchase price in full, including such
premium.

                                                       IV-1

<PAGE>



                  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 the earliest to occur of (i) the Fixed
Rate  Conversion Date pursuant to Section 4.02, or (ii) a Change in the Interest
Rate Mode effected  pursuant to this Section 4.01. 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 during an Auction  Rate Period or an Auction Rate and a related
Inverse  Rate during an Auction  Rate-  Inverse Rate  Period,  the Trustee,  any
Credit Facility Issuer (if any) and the Auction Agent 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  (x) that a
         written agreement between the Company and a firm or firms of investment
         bankers to  remarket  the  Auction  Rate Bonds  during an Auction  Rate
         Period  or the  Auction  Rate-Inverse  Rate  Bonds  during  an  Auction
         Rate-Inverse  Rate Period on such  effective date at a price of 100% of
         the principal amount thereof has been entered into, which agreement (A)
         may be subject to such  reasonable  terms and  conditions  which in the
         judgment of the Company reflect the current market standards  regarding
         investment  banking  risk and (B) must  include a  provision  requiring
         payment of the  purchase  price in same-day  funds for any Auction Rate
         Bond during an Auction Rate Period or Auction  Rate-Inverse  Rate Bonds
         during  an  Auction  Rate-Inverse  Rate  Period,  as the  case  may be,
         tendered or deemed  tendered (a "Remarketing  Commitment");  (y) that 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;  and (z) a  remarketing  agreement  is or will be in effect on or
         prior to such Change in the Interest Rate Mode; and

                           (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 L, from the Company on behalf of
         the Authority (x) authorizing the  establishment  of the new Adjustable
         Rate and (y)  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

                                                       IV-2

<PAGE>



         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 Auction Rate Bonds during an Auction Rate Period or the
         Auction  Rate-Inverse  Rate Bonds during an Auction  Rate-Inverse  Rate
         Period  from gross  income for  federal  income  tax  purposes  and (z)
         confirming  that any  necessary  amendment to the Bond  Purchase  Trust
         Agreement  necessary to provide for the application of moneys available
         under the Liquidity  Facility have been agreed to by the parties hereto
         and will be in effect prior to the Change in the Interest Rate Mode;

                  (B) with respect to any Change in the Interest Rate Mode,  the
Trustee,  the Bond  Insurer  (and the Auction  Agent and the Market Agent in the
case of any  Change in the  Interest  Rate  Mode to an  Auction  Rate  during an
Auction  Rate Period,  or an Auction  Rate and a related  Inverse Rate during an
Auction  Rate-Inverse  Rate Period),  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  O, 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 accrued and
unpaid interest, if any, with funds provided from the remarketing of such Bonds,
from the  proceeds of a Liquidity  Facility,  or from funds  deposited  with the
Trustee,  and any premium,  if any, has been paid from monies deposited with the
Trustee;

                  (C) with respect to any Change in the Interest Rate Mode,  the
Trustee,  any Credit Facility Issuer (and the Auction Agent and the Market Agent
in the case of any Change in the  Interest  Rate Mode to or from an Auction Rate
during an Auction  Rate Period,  or an Auction  Rate and a related  Inverse Rate
during an Auction  Rate-Inverse  Rate Period) 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 during an Auction Rate Period, or
an Auction Rate and a related Inverse Rate during an Auction  Rate-Inverse  Rate
Period),  a  Liquidity  Facility  and  a  Market  Agent  Agreement  meeting  the
requirements  of  this  Indenture  and the  Participation  Agreement  have  been
delivered to the Trustee not less than one  Business Day prior to the  effective
date of such  Change  in the  Interest  Rate Mode and are,  by their  respective
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 during an Auction  Rate Period,  or an Auction  Rate and a related  Inverse
Rate during an Auction  Rate-Inverse  Rate  Period,  the Auction  Rate during an
Auction Rate Period,  or the Auction Rate and the related Inverse Rate during an
Auction  Rate-Inverse  Rate  Period for the next  succeeding  Auction  Period or
Interest  Period  shall  be  determined   pursuant  to  the  Auction  Procedures
applicable  to the Auction  Rate Bonds  during an Auction  Rate  Period,  or the
Auction Procedures applicable to the Auction Rate Bonds and related

                                                       IV-3

<PAGE>



Inverse Rate Bonds during an Auction  Rate-Inverse  Rate Period, as the case may
be. 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 during the Auction Rate
Period,  the Auction Rate for the next succeeding  Auction Period shall be equal
to the Maximum  Auction Rate,  and 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 and a related Inverse Rate during an Auction  Rate-Inverse Rate Period, the
Auction Rate for the next  succeeding  Interest Period shall be equal to the sum
of the Maximum Rate and the Service  Charge Rate as determined on the applicable
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
during an Auction Rate Period,  the Auction Rate for the next succeeding Auction
Period  shall  equal the  Maximum  Auction  Rate,  and if any of the  conditions
referred  to in (C) or (D)  above is not met  with  respect  to a Change  in the
Interest  Rate Mode from an Auction  Rate and a related  Inverse  Rate during an
Auction  Rate-Inverse  Rate  Period,  the Auction  Rate for the next  succeeding
Interest  Period  shall be equal to the sum of the Maximum  Rate and the Service
Charge  Rate  as  determined  on  the  applicable  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 and be subject to the provisions of this
Indenture  applicable  thereto  while the Bonds bear  interest  at such  Current
Adjustable Rate. 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  during an Auction  Rate  Period or an Auction  Rate and a related
Inverse Rate during an Auction  Rate-Inverse Rate Period 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 Q
within 3 Business Days after the failure to meet any of such conditions.

                  SECTION  4.02.  Optional  Conversion  to  Fixed  Rate.  1. The
Authority reserves the right, at the request of the Company,  to fix the rate of
interest  per annum  which the Bonds  will  bear,  in whole or in part,  for the
balance of the term thereof; provided however, that if the Bonds subject to such
proposed  conversion  to a Fixed Rate bear  interest  at an  Auction  Rate and a
related Inverse Rate during an Auction  Rate-Inverse Rate Period,  the Authority
shall not exercise such right and the Company shall not request the Authority to
exercise such right prior to the  expiration  of a ten (10) year no-call  period
which period shall  commence on the  effective  date of a Change in the Interest
Rate Mode to such Auction Rate-Inverse Rate Period; provided,  further, that any
conversion  to a Fixed Rate, in whole or in part,  from an Auction  Rate-Inverse
Rate Period may only be  effective  upon  purchase of the Auction Rate Bonds and
the Inverse Rate Bonds at a price equal to the principal amount thereof plus the
premium on the Inverse Rate Bonds referred to in Section 5.01(d), if any. In the
event  the  Authority,  at the  request  of the  Company,  as  herein  provided,
exercises  its Option to Convert,  the Bonds shall cease to bear interest at the
Adjustable  Rate then  borne by the Bonds and shall bear  interest  at the Fixed
Rate until  maturity,  subject to the terms and  conditions  hereof (the date on
which the Fixed Rate shall  take  effect  being  herein  called the "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 15 nor more than 45 days prior to the proposed Fixed Rate  Conversion  Date
to the Trustee, the Registrar and Paying Agent, any Support Facility Issuer,

                                                       IV-4

<PAGE>



the Market  Agent and any Rating  Agency then rating the Bonds at the request of
the Company (and the Auction Agent, and the Securities Depository in the case of
any change to a Fixed Rate from an Auction Rate during an Auction Rate Period or
an Auction Rate and a related Inverse Rate during an Auction  Rate-Inverse  Rate
Period),   in   substantially   the  form  attached  hereto  as,  or  containing
substantially the information contained in, Exhibit A. The Fixed Rate Conversion
Date may only be the  last  Interest  Payment  Date  for a  Calculation  Period,
Auction  Period or Interest  Period,  as the case may be;  provided that a Fixed
Rate Conversion Date that immediately follows a Commercial Paper Rate Period may
be on any Business Day upon  purchase of the Bonds  pursuant to  subsection 3 of
Section  5.03 at a price  equal to the  principal  amount  thereof.  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 the Fixed Rate  Conversion
Date to the effect that the  establishment  of the 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.  Upon the  occurrence and the  continuance of a Company  Downgrade
Event, the Bond Insurer shall have the right to consent to any conversion of the
Bonds to the Fixed Rate, which consent shall not be unreasonably withheld.

                  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.       The Fixed Rate shall take effect only if

                  (A) with respect to a change to the Fixed Rate from an Auction
Rate during an Auction Rate Period or an Auction Rate and a related Inverse Rate
during an Auction  Rate-Inverse Rate Period,  the Trustee,  the Bond Insurer and
the Auction Agent shall receive:

                  (i) a certificate of an Authorized  Company  Representative by
         no later  than the tenth day prior to the Fixed  Rate  Conversion  Date
         stating that a written  agreement  has been entered into by the Company
         and a firm or firms of investment  bankers to remarket the Bonds on the
         Fixed  Rate  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  which in the judgment of the Company
         reflect current market standards regarding  investment banking risk and
         (ii) must include a provision  requiring  payment of the purchase price
         in  same-day  funds for any Auction  Rate Bond  during an Auction  Rate
         Period or Auction Rate Bond and related  Inverse Rate Bonds Bond during
         any Auction  Rate-Inverse Rate Period tendered or deemed tendered and a
         determination  of the Fixed Rate no later than 11:00 A.M. on the second
         Business Day prior to the Fixed Rate  Conversion  Date (the "Fixed Rate
         Commitment); and

                  (ii) by 11:00 a.m. (New York City time) on the second Business
         Day prior to the 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,

                                                       IV-5

<PAGE>



         Exhibit N, from the Authority (x) authorizing the  establishment of the
         Fixed Rate,  (y) setting forth the Fixed Rate and (z)  confirming  that
         Bond  Counsel  expects  to be able to give an opinion on the Fixed Rate
         Conversion  Date to the  effect  that the  change to the 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,
the Bond Insurer (and the Auction  Agent and the Market Agent in the case of any
change to the Fixed Rate from an Auction  Rate during an Auction  Rate Period or
an Auction Rate and related  Inverse Rate during any Auction  Rate-Inverse  Rate
Period) receives on the 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 the  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 P, 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 with
         funds provided from the  remarketing  of such Bonds in accordance  with
         the Fixed Rate  Commitment,  and that accrued and unpaid  interest,  if
         any, has been or shall be paid in accordance  with the  Indenture  from
         funds  deposited  with the Trustee,  and that the premium,  if any, has
         been paid from monies deposited with the Trustee.

                  If any of the  conditions  referred to in (A) above is not met
with  respect to any change to the Fixed  Rate from an  Auction  Rate  during an
Auction  Rate  Period or an Auction  Rate and  related  Inverse  Rate during any
Auction Rate-Inverse Rate Period, the Auction Rate during an Auction Rate Period
or the Auction  Rate and related  Inverse  Rate during any Auction  Rate-Inverse
Rate Period, as the case may be, for the next succeeding Auction Period shall be
determined  pursuant to the Auction  Procedures  applicable  to the Auction Rate
Bonds during an Auction Rate Period or the Auction Procedures  applicable to the
Auction  Rate-Inverse Rate Bonds during an Auction Rate- Inverse Rate Period, as
the case may be. If any of the  conditions  referred to in (B) above are not met
with  respect to any change to the Fixed  Rate from an  Auction  Rate  during an
Auction Rate Period, the Auction Rate during an Auction Rate Period for the next
succeeding Auction Period shall be equal to the Maximum Auction Rate, and if any
of the condition referred to in (B) above are not met with respect to any change
to the Fixed Rate from an  Auction  Rate and  related  Inverse  Rate  during any
Auction  Rate-Inverse  Rate  Period,  the Auction  Rate for the next  succeeding
Interest  Period  shall be equal to the sum of the Maximum  Rate and the Service
Charge  Rate  as  determined  on  the  applicable  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

                                                       IV-6

<PAGE>



Indenture  applicable  thereto while the Bonds bear interest at such  Adjustable
Rate. If any of the foregoing  conditions to the establishment of the Fixed Rate
(other than with respect to any attempted  change from an Auction Rate during an
Auction  Rate  Period or an Auction  Rate and  related  Inverse  Rate during any
Auction Rate-Inverse Rate Period 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 containing  substantially the information  contained in, Exhibit R
within 3 Business Days after the failure to meet any of said conditions.

                  4. If the Bonds commence to bear interest at the Fixed Rate as
provided  in  this  Section  4.02,  the  interest  rate on  such  Bonds  may not
thereafter be changed to an Adjustable Rate.

                  SECTION 4.03. Conversion  Generally.  1. (A) 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 and an  Inverse  Rate  during an Auction
Rate-Inverse  Rate Period or to or from an Auction  Rate during an Auction  Rate
Period,  or (B) in the event of a conversion  of the interest  rate on less than
all the Bonds of a series or  subseries to a Fixed Rate from an Auction Rate and
an Inverse  Rate during an Auction  Rate-Inverse  Rate Period or from an Auction
Rate during an Auction Rate Period,  the minimum  aggregate  principal amount of
Bonds that continue to bear, or are adjusted to bear interest at an Auction Rate
and an Inverse Rate for an Auction  Rate-Inverse Rate Period,  shall not be less
than  $20,000,000  for such  Auction  Rate Bonds and such  Inverse  Rate  Bonds,
respectively,  and 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 and an Inverse  Rate  during an Auction  Rate-Inverse  Rate Period or to an
Auction Rate during an Auction Rate Period,  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. Except as otherwise  provided in Section 4.03(4) below with
respect to Auction  Rate-Inverse Rate Bonds during an Auction  Rate-Inverse Rate
Period,  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 some  integral  multiple of $5,000 in
excess of such  amount  during a  Commercial  Paper  Rate  Period,  a Daily Rate
Period, a Weekly Rate Period or a Monthly Rate Period,  $25,000 or some integral
multiple  thereof  during an Auction  Rate  Period,  or $5,000 or some  integral
multiple thereof at any other time and that, in

                                                       IV-7

<PAGE>



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
$5,000 during a Commercial Paper Rate Period, a Daily Rate Period, a Weekly Rate
Period or a Monthly Rate  Period,  $25,000  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,  $25,000  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,  $25,000 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,  $25,000 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, $25,000 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,  $25,000 or $5,000  unit or units of
principal amount subject to such conversion (and to that extent only).

                  4. The  interest  rate on Auction  Rate Bonds and Inverse Rate
Bonds during any Auction  Rate-Inverse Rate Period shall be converted in minimum
denominations of $25,000 or integral multiples thereof. So long as the ownership
of the  Auction  Rate  Bonds and the  Inverse  Rate  Bonds  during  any  Auction
Rate-Inverse  Rate Period is  maintained in  book-entry  form by the  Securities
Depository,  the Auction Rate Bonds and Inverse Rate Bonds, the interest rate on
which is  subject  to  conversion  in part,  shall be  selected  by lot from the
Outstanding  Bonds of each series as described  in the  following  sentence.  An
amount  equal to the  percentage  obtained by dividing the  aggregate  principal
amount of  Outstanding  Bonds of each series which are Linked on the record date
selected for the purposes of such conversion,  by the aggregate principal amount
of Outstanding  Bonds of each series on such record date, shall be selected from
Regular  Linked  Auction  Rate Bonds and Inverse  Rate Bonds and Special  Linked
Auction  Rate Bonds and  Inverse  Rate Bonds (on a pro rata basis in  accordance
with the relative  principal amounts  thereof),  the remaining amount of Inverse
Rate Bonds to be converted shall be selected from Regular Inverse Rate Bonds and
the  remaining  amount of Auction Rate Bonds to be  converted  shall be selected
from Regular  Auction  Rate Bonds and Special  Auction Rate Bonds (on a pro rata
basis in accordance with the relative principal amounts thereof); provided, that
if any principal  amount of the Auction Rate Bonds and of the Inverse Rate Bonds
selected as provided  above from Regular  Linked  Auction Rate Bonds and Inverse
Rate Bonds,  Special Linked  Auction Rate Bonds and Inverse Rate Bonds,  Regular
Inverse Rate Bonds, Regular Auction Rate Bonds and Special Auction Rate Bonds is
not equal to $25,000 or an integral multiple thereof, the Trustee shall, in such
manner  as, in its sole  discretion,  it shall  determine,  round up or down the
principal  amounts  so  determined.   The  Trustee  shall  give  the  Securities
Depository  at least two Business  Days notice of the record date selected by it
for the purpose of a  conversion  and obtain from the  Securities  Depository  a
position  listing  showing at the close of  business  as of such record date the
aggregate principal amounts of: Regular Auction Rate

                                                       IV-8

<PAGE>



Bonds,  Special Auction Rate Bonds,  Regular Inverse Rate Bonds,  Regular Linked
Auction Rate Bonds and Inverse Rate Bonds and Special  Linked Auction Rate Bonds
and Inverse Rate Bonds, respectively. On the basis of such position listing, the
Trustee  shall  calculate  the  percentage  obtained by dividing  the  aggregate
principal  amount of  Outstanding  Bonds of each series which are Linked on such
record  date by the  aggregate  principal  amount of  Outstanding  Bonds of each
series on such record date,  and determine  therefrom  the  aggregate  principal
amounts to be converted and purchase  prices per $1,000 (plus accrued and unpaid
interest  thereon to the date fixed for  conversion)  of  Regular  Auction  Rate
Bonds,  Special Auction Rate Bonds,  Regular Inverse Rate Bonds,  Regular Linked
Auction Rate Bonds and Inverse Rate Bonds and Special  Linked Auction Rate Bonds
and Inverse Rate Bonds, respectively.

                  5.  Notwithstanding   anything  in  this  Article  IV  to  the
contrary,  during a Term Rate Period,  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  5.02  unless  there shall have been  deposited  the full amount of such
premium in trust with the Trustee prior to any notification of a change pursuant
to  Section  4.01 or 4.02.  Payments  from such  trust  fund for the  payment of
premium  may be made  only  upon  receipt  by the  Trustee  of a  Non-Bankruptcy
Certificate from the Company.

                  6. It shall be a condition to any Change in the Interest  Rate
Mode on any Bonds of from one mode to another  mode that the Trustee  shall have
received written confirmation from each Rating Agency then rating the Bonds that
the ratings then assigned by such Rating Agency to the Bonds will not be reduced
or withdrawn by reason of such change in the Interest Rate Mode; provided that a
withdrawal of a short-term rating from any Bonds being converted to a Fixed Rate
shall not be  considered  to be a withdrawal  of a rating for such purpose if no
other  ratings  applicable  to  any  or all of the  Bonds  will  be  reduced  or
withdrawn.

                                                       IV-9

<PAGE>



                                                     ARTICLE V

                                         REDEMPTION AND PURCHASE OF BONDS

                  SECTION 5.01. Optional  Redemption.  The Adjustable Rate Bonds
shall be  subject  to  redemption,  in whole or in part,  at the  option  of the
Authority  upon the request of the Company,  from  payments  made by the Company
pursuant to Section 6.2 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:

                    (a) During any  Commercial  Paper  Rate  Period,  such Bonds
               shall be subject to redemption (i) on each Interest Payment Date,
               as a whole or in part, at the principal  amount thereof,  or (ii)
               on any  Business  Day,  as a whole or in part,  at the  principal
               amount  thereof  plus  accrued  interest  to the date  fixed  for
               redemption.

                  (b) During any Auction Rate  Period,  Auction Rate Bonds shall
be subject to redemption  on each Interest  Payment Date, as a whole or in part,
at the  principal  amount  thereof plus  accrued  interest to the date fixed for
redemption.

                  (c) (i)  During any  Auction  Rate-Inverse  Rate  Period on or
after the  expiration  of a ten (10) year  no-call  period  which  period  shall
commence  on the  effective  date of a Change  in the  Interest  Rate Mode to an
Auction  Rate-Inverse  Rate Period,  the  Authority  may, at its option upon the
request of the Company,  at any time prior to the Stated Maturity of the Auction
Rate Bonds,  redeem the Auction  Rate Bonds,  as a whole or from time to time in
part, on the second Business Day preceding any Regular  Interest Payment Date at
100% of the principal amount thereof,  together with interest accrued and unpaid
thereon to the Redemption  Date;  provided that at the time of such  redemption,
the Authority shall simultaneously redeem an equal aggregate principal amount of
Inverse Rate Bonds.

                  (ii)  During  any  Auction   Rate-Inverse  Rate  Period,   the
Authority may, at its option upon the request of the Company,  at any time prior
to the Stated Maturity of the Auction Rate Bonds, redeem the Auction Rate Bonds,
as a whole or from time to time in part,  without  redeeming  any of the Inverse
Rate Bonds,  on the second Business Day preceding any Regular  Interest  Payment
Date at 100% of the principal amount thereof, together with interest accrued and
unpaid  thereon to the  Redemption  Date;  provided that prior to requesting the
Trustee to give  notice of any such  redemption,  the  Authority  or the Company
shall have  delivered to the Trustee for  cancellation  on the  Redemption  Date
pursuant to Section 3A.04 an equal  aggregate  principal  amount of Inverse Rate
Bonds.

                  (d) During any  Auction  Rate-Inverse  Rate Period on or after
the  expiration of a no-call  period which shall commence on the expiration of a
ten (10) year no-call  period which period shall  commence on the effective date
of a Change in the Interest  Rate Mode to an Auction  Rate- Inverse Rate Period,
the Authority may, at its option upon the request of the Company, at any time

                                                        V-1

<PAGE>



prior to the Stated Maturity of the Inverse Rate Bonds,  redeem the Inverse Rate
Bonds,  as a whole or from  time to time in part,  on the  second  Business  Day
preceding any Regular Interest Payment Date at a redemption price of:

                           (i) 104% of the principal  amount thereof if redeemed
         during the twelve month period ending one year after the  expiration of
         the no-call period;

                           (ii) 102% of the principal amount thereof if redeemed
         during the twelve month period ending two years after the expiration of
         the no-call period; and

                    (iii)  100% of the  principal  amount  thereof  if  redeemed
               thereafter,

together  with,  in each  case,  interest  accrued  and  unpaid  thereon  to the
Redemption  Date;  provided that at the time of such  redemption,  the Authority
shall simultaneously  redeem an equal aggregate principal amount of Auction Rate
Bonds.

                  (e) 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 interest to the date fixed for redemption, if any.

                  (f) 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 interest to the date fixed for redemption, if any.

                  (g) 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.

                  (h) 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.

                  (i)  During  any Term Rate  Period  and  after the Fixed  Rate
Conversion  Date, 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 the 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. 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 maturity after the Fixed Rate
Conversion  Date is equal to or greater  than five years,  and on each  Interest
Payment Date if the Calculation Period or period remaining to maturity after the
Fixed Rate  Conversion  Date is less than five  years,  until the Bonds shall be
redeemable without premium.

                                                        V-2

<PAGE>



     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             1 %         1/2%
  12 years          18 Years        8 Years             1           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              1/8
   0 Years           3 Years        Not callable

If upon  establishment  of a Term Rate Period,  or on the Fixed Rate  Conversion
Date,  as the case may be,  the  Market  Agent or, in the case of the Fixed Rate
Conversion  Date, the other investment bank or investment banks (selected by the
Company  and  approved  by the  Authority)  party to the Fixed  Rate  Commitment
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 the 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.

                  Any  optional   redemption   shall  be  conditioned  upon  the
Trustee's receipt of funds (or, in the case of any optional redemption occurring
while the Bonds bear  interest  at a Daily  Rate,  Weekly  Rate,  Monthly  Rate,
Semi-Annual Rate or Commercial Paper Rate,  Available Moneys)  sufficient to pay
the  redemption  price of the Bonds to be redeemed on or prior to the redemption
date.

                  SECTION 5.02. 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 interest, if any, to the date
of  purchase,  upon  delivery to the  Registrar  and Paying Agent and the Market
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 B; provided,  however,  that the substance of such Notice of Election to
Tender  must  also be  given  telephonically  to the  Market  Agent  prior to or
simultaneously with delivery of such written Notice of Election to Tender to the
Market Agent. The date on which such Bond shall be purchased shall,

                                                        V-3

<PAGE>



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 Market  Agent by 10:00  a.m.(New  York City time) on such date or may be any
Business  Day  thereafter,  or (ii) if the Bond then bears  interest at a Weekly
Rate,  a Business Day at least seven days after the date of the delivery of such
Notice of Election to Tender to the  Registrar  and Paying  Agent and the Market
Agent.

                  2. During any Monthly Rate Period or  Semi-annual  Rate Period
on or prior to the Fixed Rate Conversion  Date, 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 Market  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 B 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 seven
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 Market  Agent
prior to or  simultaneously  with delivery of such written Notice of Election to
Tender to the Market Agent.

                  3.  Immediately upon receipt of a Notice of Election to Tender
delivered in accordance  with the provisions of this Section 5.02, the Registrar
and Paying  Agent  shall  notify,  or cause to be  notified,  the  Trustee,  the
Company,  the Market Agent, the Liquidity Facility Issuer and, upon request, the
Authority  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,  and, to the extent that there
shall be on deposit in the Bond Purchase Fund on such date an amount  sufficient
to pay the principal amount thereof,  plus accrued interest, if any, 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. The right of a Holder  to tender a Bond to the  Registrar
               and Paying Agent shall  terminate after the Fixed Rate Conversion
               Date.

                  SECTION 5.03. Mandatory Tender for Purchase upon Change in the
Interest  Rate Mode on Business Day  Following  Certain  Calculation  Periods or
Occurrence of Fixed Rate Conversion  Date. 1. Upon a Change in the Interest Rate
Mode,  the Bonds bearing a Daily Rate,  Weekly Rate,  Monthly Rate,  Semi-annual
Rate,  Term Rate,  Commercial  Paper Rate,  Auction  Rate during an Auction Rate
Period, or Auction Rate and related Inverse Rate during an Auction Rate- Inverse
Rate Period 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 a price equal to the  principal  amount  thereof  plus  accrued  interest and
premium, if any, in accordance with Section 4.01.

                  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 principal amount thereof plus
accrued interest and premium, if any.

                  3. The Bonds  shall also be subject  to  mandatory  tender for
purchase in accordance  with the terms hereof on the Fixed Rate  Conversion Date
at a price equal to the  principal  amount  thereof  plus  accrued  interest and
premium, if any.

                  4. Notice of mandatory  tender for  purchase  upon a Change in
the  Interest  Rate  Mode  or upon a  conversion  to a Fixed  Rate  shall  be in
substantially  the  form  attached  hereto  as,  or  contain  substantially  the
information contained in, Exhibit A.

                  5. Any such notice of mandatory  tender for purchase  required
by  this  Section  5.03  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 Market Agent,  the Registrar
and Paying Agent, the Bond Insurer,  the Company,  the Liquidity Facility Issuer
and any Rating  Agency  then  rating  the Bonds and in the case of Auction  Rate
Bonds during an Auction Rate Period,  or Auction  Rate-Inverse Rate Bonds during
an Auction  Rate-Inverse Rate Period, the Auction Agent, and, upon request,  the
Authority) by  first-class  mail to the Holders of the Bonds subject to purchase
at their addresses shown on the books of registry.

                    6. Bank  Bonds  are not  subject  to  mandatory  tender  for
               purchase pursuant to this
Section 5.03.

                  7.  Purchase  price of tendered  Bonds shall  include  premium
solely to the extent that (i) such Bonds bear interest at a Term Rate or Inverse
Rate and (ii) the applicable redemption price therefor would include the premium
specified  in Section 5.01 if such Bonds were to be  optionally  redeemed on the
date such Bonds are to be purchased.

                  SECTION 5.04.  Extraordinary  Optional Redemption.  During any
Term Rate Period,  Fixed Rate Period or Auction  Rate-Inverse  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,  except in the case of a redemption
pursuant to clause (iii) below,  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:

                                                        V-4

<PAGE>



                           (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, as well as any statute or
                  regulation  enacted or promulgated after the Closing Date that
                  prevents  the Company from  deducting  interest on the Company
                  Note for federal income tax purposes;

                           (iii) All or  substantially  all of the Project shall
                  be  transferred  or sold to any entity other than an affiliate
                  of the Company;  in the case of  redemption  under this clause
                  (iii) of Section 5.04, the redemption  price shall be equal to
                  101% of the  principal  amount  of the  Bonds,  together  with
                  unpaid  interest   accrued  thereon  to  the  date  fixed  for
                  redemption,  unless a smaller or no premium  would be due upon
                  optional  redemption of the Bonds pursuant to another  section
                  of the Indenture; or

                           (iv) 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 5.05.  Redemption if  Participation  Agreement or Note
Void,  Unenforceable  or  Impossible  to Perform.  The Bonds shall be subject to
redemption  prior to their  Stated  Maturity  at any time on a Business  Day, in
whole but not in part, upon the receipt by the Trustee of a written  certificate
from the Company  given in  accordance  with  Section  6.3 of the  Participation
Agreement  stating that the Company  intends to prepay the amounts payable under
the  Participation  Agreement  and the  Note and  certifying  that,  within  the
preceding 120 days, a change in the Constitution of the State of New York or the
Constitution  of the United States of America or legislative  or  administrative
action  (whether  state or  federal) or final  decree,  judgment or order of any
court or  administrative  body  (whether  state or federal) has  occurred  which
results in the Participation Agreement or the Note or both of them becoming void
or  unenforceable  or impossible  to perform in  accordance  with the intent and
purpose of the parties as expressed in the Participation Agreement and the Note,
at a redemption  price equal to the  principal  amount  thereof plus accrued and
unpaid interest to the date fixed for redemption.

                                                        V-5

<PAGE>



                  Any  redemption  under this Section 5.05 shall be  conditioned
upon the  Trustee's  receipt  of funds (or,  in the case of any such  redemption
occurring  while the Bonds bear interest at a Daily Rate,  Weekly Rate,  Monthly
Rate, Semi-Annual Rate or Commercial Paper Rate, Available Moneys) sufficient to
pay the  redemption  price  of the  Bonds  to be  redeemed  on or  prior  to the
redemption date.

                  SECTION 5.06. Special Tax Redemption Provisions.  1. The Bonds
shall be subject to mandatory  redemption  prior to their stated maturity (i) in
part,  at a redemption  price equal to the  principal  amount of the Bonds to be
redeemed,  plus accrued interest,  if any, to the date fixed for redemption,  if
such  partial  redemption  will  preserve  the  exclusion  from gross income for
federal  income tax  purposes  of interest on the  remaining  Bonds  outstanding
(provided,  however,  in the case of Auction  Rate-Inverse  Rate Bonds during an
Auction  Rate-Inverse Rate Period, the Authority shall redeem an equal aggregate
principal  amount of Auction  Rate Bonds and  Inverse  Rate  Bonds),  or (ii) in
whole, at a redemption price equal to the principal amount thereof, plus accrued
interest,  if any,  to the date  fixed for  redemption,  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 Tax
Regulatory Agreement,  interest on any Bond is includable for federal income tax
purposes in the gross income of the Holders  thereof  (other than a "substantial
user" of the Project or a "related  person" as provided in Section 147(a) of the
Code) (any such event constituting a "Determination of Taxability") and, in such
event, the Bonds shall be subject to such mandatory redemption on a Business Day
not more than 180 days after the giving of notice by the Trustee or a Bondholder
to the Authority and the Company of such published or private ruling or judicial
decision and  demanding  redemption  of the Bonds.  Either the  Authority or the
Company  shall  immediately  notify  the  Trustee  upon  learning  of  any  such
Determination  of Taxability.  The Trustee shall not be deemed to have knowledge
of such an event unless it has actual knowledge thereof.

                  2. 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 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 Company  Note for  purposes of  determining  the  Company's
Federal taxable income,  for a period of not less than sixty (60) consecutive or
nonconsecutive  days during a twenty-four  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 Directors of the Company authorizing such certificate
and a copy of such advice of Bond Counsel. In the event

                                                        V-6

<PAGE>



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  Company  Note for 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  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 5.06-A.  Redemption of Bank Bonds. Any Bank Bonds held
by the  Liquidity  Facility  Issuer  shall be  redeemed  at the times and in the
principal amounts specified in the Liquidity  Facility.  Any redemption pursuant
to this Section  5.06-A shall be at a price equal to one hundred  percent (100%)
of the principal  amount of the Bonds so redeemed,  plus accrued interest at the
Bank Bond Interest Rate to the redemption date.

                  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. The Authority  shall deposit any such funds
received by it with the Trustee. 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,  at a redemption
price equal to lesser of (i) the optional  redemption price, if any,  applicable
on such date set forth in  Section  5.01 and (ii) 105% of the  principal  amount
thereof,  together, in either case, with accrued and unpaid interest, if any, to
the date fixed for  redemption,  all in the manner  provided in this  Article V.
Upon such redemption and notwithstanding anything to the contrary in Article XV,
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 or
Termination of any Liquidity  Facility.  1. Except as otherwise set forth in the
last sentence of this  subsection  1, on the date of  expiration or  termination
(including  a date of  termination  evidenced  by receipt by the Trustee and the
Registrar  and Paying  Agent of a written  notice  from the  Liquidity  Facility
Issuer or any other person authorized to deliver a notice in accordance with the
Liquidity  Facility of an event which permits or mandates the termination of the
Liquidity  Facility  under the terms  thereof  and any  termination  arising  in
connection with the delivery of an Alternate Liquidity Facility which results in
the  withdrawal  or  reduction  of any  rating  applicable  to the Bonds) of any
Liquidity  Facility  (or on the next  preceding  Business  Day,  if such date of
expiration or  termination is not a Business Day), the Bonds shall be subject to
mandatory purchase at a price equal to the principal amount thereof unless on or
prior to the 35th  day  prior to such  date of  expiration  or  termination  the
Company on behalf of the Authority has furnished to the Trustee (a) an extension
of such Liquidity Facility, or

                                                        V-7

<PAGE>



(b) an Alternate  Liquidity Facility with another bank or financial  institution
providing  an  Alternate  Liquidity  Facility  in  replacement  of the  expiring
Liquidity  Facility  together with the  confirmation  of ratings  referred to in
Section 6.02(1).  No tender for purchase of any Bonds shall be required pursuant
to this Section 5.08 during an Auction Rate Period,  or an Auction  Rate-Inverse
Rate Period or if the Fixed Rate  Conversion  Date shall have occurred on a date
prior to such date of expiration.

                  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 or termination  date  (including a date of  termination  evidenced by
receipt by the Trustee and the Registrar and Paying Agent of a written notice of
an event of default under a Liquidity  Facility) of a Liquidity  Facility by the
Trustee  in  the  name  of the  Authority  (with  copies  thereof  given  to the
Authority,  the Market Agent, the issuer of the expiring Liquidity Facility, the
Company,  the Bond  Insurer,  any Rating  Agency  then  rating the Bonds 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 C.

                    3. Bank  Bonds or Bonds  held by or for the  account  of the
               Company are not subject to mandatory tender for purchase pursuant
               to this Section 5.08.

                  SECTION 5.09. 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 equal to the principal  of, and premium,  if
any, on the Bonds shall be available in the Bond  Purchase  Fund for purchase of
Bonds subject to tender for purchase pursuant to Section 5.02, 5.03 or 5.08, 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 Market Agent, or any Support  Facility  Issuer,  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.  If the  ownership of the Bonds is no longer
maintained in book-entry form by the Securities  Depository the payment of Bonds
pursuant  to  Section  5.02  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

                                                        V-8

<PAGE>



time),  on a specified  purchase date. The Registrar and Paying Agent may refuse
to make  payment with  respect to any Bonds  tendered  for purchase  pursuant to
Sections 5.02,  5.03 or 5.08 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 5.02,  5.03 or 5.08 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. To the extent that a  Liquidity  Facility is required to be
in effect,  Bonds  tendered for purchase may not be purchased by the  Authority,
the Company or any Affiliate  from the Market Agent upon a remarketing  of Bonds
pursuant to the Market Agent Agreement.

                  SECTION 5.10. Selection of Bonds to be Redeemed.  1. Except as
provided  otherwise in  subsections  2, 3, 4 and 5 below with respect to Auction
Rate-Inverse Rate Bonds during an Auction Rate-Inverse Rate Period, 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 any Support Facility Issuer 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 some integral multiple thereof during a Commercial Paper Rate Period, a Daily
Rate  Period,  a Weekly Rate Period or a Monthly  Rate  Period,  $25,000 or some
integral  multiple  thereof  during an Auction  Rate  Period,  or $5,000 or some
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,  $25,000  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,  $25,000 or $5,000 units of principal  amount  represented by any such
Bond is to be called for redemption,

                                                        V-9

<PAGE>



then upon notice of intention to redeem such $100,000, $25,000 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 and unpaid  interest to the date
fixed for  redemption)  of the  $100,000,  $25,000  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, $25,000 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,  $25,000 or $5,000  unit or units of  principal  amount
called for redemption (and to that extent only).

                  2.  Auction  Rate  Bonds and  Inverse  Rate  Bonds  during any
Auction  Rate-Inverse Rate Period shall be redeemed in minimum  denominations of
$25,000 or integral multiples  thereof.  So long as the ownership of the Auction
Rate Bonds and  Inverse  Rate  Bonds is  maintained  in book-  entry form by the
Securities Depository, the Trustee shall give the Securities Depository at least
two Business  Days notice of the record date selected by it for the purpose of a
redemption  (each  a  "Redemption  Record  Date")  and  request  the  Securities
Depository  to  provide  it with a  position  listing  showing  at the  close of
business as of such Redemption  Record Date the aggregate  principal amounts of:
Regular  Auction Rate Bonds,  Special  Auction Rate Bonds,  Regular Inverse Rate
Bonds,  Regular  Linked  Auction  Rate Bonds and Inverse  Rate Bonds and Special
Linked Auction Rate Bonds and Inverse Rate Bonds, respectively.

                  3. So long as the  ownership of the Auction Rate Bonds and the
Inverse Rate Bonds during any Auction  Rate-Inverse Rate Period is maintained in
book-entry form by the Securities Depository, the Auction Rate Bonds and Inverse
Rate Bonds to be  redeemed in part on any  Redemption  Date shall be selected by
lot from the  Outstanding  Bonds of each series as  described  in the  following
sentence.  An amount equal to the Linked  Percentage of the aggregate  principal
amount of the Auction  Rate Bonds and Inverse  Rate Bonds to be redeemed on such
Redemption  Date shall be selected  from Regular  Linked  Auction Rate Bonds and
Inverse Rate Bonds and Special  Linked Auction Rate Bonds and Inverse Rate Bonds
(on a pro rata basis in accordance with the relative principal amounts thereof),
the remaining amount of Inverse Rate Bonds to be redeemed shall be selected from
Regular Inverse Rate Bonds and the remaining  amount of Auction Rate Bonds to be
redeemed shall be selected from Regular  Auction Rate Bonds and Special  Auction
Rate  Bonds  (on a pro rata  basis in  accordance  with the  relative  principal
amounts  thereof);  provided,  that if any principal  amount of the Auction Rate
Bonds and of the Inverse  Rate Bonds  selected as  provided  above from  Regular
Linked  Auction Rate Bonds and Inverse Rate Bonds,  Special  Linked Auction Rate
Bonds and Inverse Rate Bonds,  Regular Inverse Rate Bonds,  Regular Auction Rate
Bonds and  Special  Auction  Rate Bonds is not equal to  $25,000 or an  integral
multiple thereof,  the Trustee shall, in such manner as, in its sole discretion,
it shall determine, round up or down the principal amounts so determined. On the
basis of the position  listing  obtained by the Trustee pursuant to subsection 2
above,  the Trustee shall  calculate the Linked  Percentage as of the Redemption
Record  Date and  determine  therefrom  the  aggregate  principal  amounts to be
redeemed  and  redemption  prices per $1,000 (plus  accrued and unpaid  interest
thereon to the Redemption Date) of Regular Auction Rate

                                                       V-10

<PAGE>



Bonds,  Special Auction Rate Bonds,  Regular Inverse Rate Bonds,  Regular Linked
Auction Rate Bonds and Inverse Rate Bonds and Special  Linked Auction Rate Bonds
and Inverse Rate Bonds, respectively.

                  4. So long as the  ownership of the Auction Rate Bonds and the
Inverse  Rate  Bonds  is  maintained  in  book-entry   form  by  the  Securities
Depository,  Auction  Rate Bonds to be redeemed in part on any  Redemption  Date
pursuant  to  subsection  (c)(ii) of Section  5.01 shall be selected by lot from
Special Auction Rate Bonds and Regular Auction Rate Bonds on a pro rata basis in
accordance  with the relative  principal  amounts  thereof as of the  Redemption
Record Date;  provided,  that if any principal  amount of the Auction Rate Bonds
selected as provided above from Regular  Auction Rate Bonds and Special  Auction
Rate Bonds is not equal to $25,000 or an integral multiple thereof,  the Trustee
shall, in such manner as, in its sole discretion,  it shall determine,  round up
or down the  principal  amounts  so  determined.  On the  basis of the  position
listing  obtained by the Trustee  pursuant to  subsection  2 above,  the Trustee
shall  determine  therefrom the aggregate  principal  amounts to be redeemed and
aggregate  redemption  prices (plus accrued and unpaid  interest  thereon to the
Redemption  Date) of Regular  Auction Rate Bonds and Special Auction Rate Bonds,
respectively.

                  5. Except as otherwise  provided by subsections 3 and 4 above,
redemption  of Auction  Rate Bonds and  Inverse  Rate Bonds  during any  Auction
Rate-Inverse Rate Period shall be in the manner specified in 1 above;  provided,
however,  that the portion of any Auction Rate Bonds or Inverse Rate Bonds to be
redeemed shall be in the principal  amount of $25,000 or some integral  multiple
of $25,000.

                  SECTION 5.11.  Notice of  Redemption.  1. Notice of redemption
shall be given by the  Trustee or the  Registrar  and Paying  Agent 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 Bond Insurer and the Holders of the Bonds to be
redeemed at the  addresses  shown on the  registration  books  maintained by the
Registrar  and  Paying  Agent;  provided,   however,  with  respect  to  Auction
Rate-Inverse  Rate Bonds during an Auction  Rate-Inverse Rate Period such notice
shall be given  after the  Regular  Interest  Payment  Date next  preceding  the
Redemption Date but not less than thirty (30) days prior to the Redemption Date.

                  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,  an Auction  Rate Period or an
Auction Rate- Inverse Rate Period.

                    3.  Except as  otherwise  provided  with  respect to Auction
               Rate-Inverse  Rate Bonds in  subsection  4 below,  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;

                                                       V-11

<PAGE>



(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 Registrar and Paying Agent in exchange for the payment of
the  principal  amount  thereof to be  redeemed  and the  issuance of a new Bond
equalling  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 given.

                  4. With  respect  to Auction  Rate-Inverse  Rate  Bonds,  each
notice of redemption  shall (i) specify (A) in the case of a partial  redemption
of Inverse Rate Bonds and Auction Rate Bonds, the aggregate principal amounts of
Regular  Auction Rate Bonds,  Special  Auction Rate Bonds,  Regular Inverse Rate
Bonds,  Regular  Linked  Auction  Rate Bonds and Inverse  Rate Bonds and Special
Linked Auction Rate Bonds and Inverse Rate Bonds to be redeemed, (B) in the case
of a partial  redemption of Auction Rate Bonds, the aggregate  principal amounts
of Regular Auction Rate Bonds and Special Auction Rate Bonds to be redeemed, (C)
the Redemption  Date, (D) the redemption price per $1,000 principal amount (plus
accrued and unpaid interest  thereon to the Redemption  Date) of Regular Auction
Rate Bonds,  Special  Auction Rate Bonds,  Regular  Inverse Rate Bonds,  Regular
Linked Auction Rate Bonds and Inverse Rate Bonds and Special Linked Auction Rate
Bonds and Inverse  Rate Bonds,  respectively,  and (E) the place or places where
amounts  due upon such  redemption  will be  payable  and (ii) state that on the
Redemption  Date, if sufficient  moneys are available for such  redemption,  the
Bonds or the  portions  thereof  which are to be  redeemed  shall  cease to bear
interest.

                  5. In the case of any optional  redemption  or any  redemption
pursuant  to Section  5.05,  such notice  shall also state that such  redemption
shall be conditioned upon the Trustee's receipt of funds (or, in the case of any
optional  redemption  occurring  while the Bonds bear  interest at a Daily Rate,
Weekly Rate, Monthly Rate,  Semi-annual Rate or Commercial Paper Rate, Available
Moneys) sufficient to pay the redemption price of the Bonds to be redeemed on or
prior to the redemption date.

                  6. Failure to give any required notice of redemption as to any
particular  Bonds will not affect the validity of the call for redemption of any
Bonds in respect to which no such failure  occurs.  Notice of  redemption  shall
also be mailed by  first-class  mail to the Credit  Facility  Issuer and to each
Rating  Agency then rating the Bonds,  which notice shall  include the principal
amounts, maturities and CUSIP numbers of Bonds to be redeemed. Any notice mailed
as provided in this  Section  shall be  conclusively  presumed to have been duly
given,  whether or not the Registered  Owner,  the Credit  Facility  Issuer or a
Rating Agency actually receives the notice.

                                                       V-12

<PAGE>



                  SECTION 5.12.  Bonds Purchased by Liquidity  Facility  Issuer.
Bonds  subject to purchase  pursuant to  Sections  5.02,  5.03 and 5.08 shall be
deemed purchased by the Liquidity Facility Issuer in a principal amount equal to
the amount of a draw on, or borrowing or payment under,  the Liquidity  Facility
for the payment of Bonds subject to purchase,  upon the deposit with the Trustee
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 and
unpaid  interest  thereon to the  redemption  date,  and such Bonds shall not be
deemed paid and shall remain outstanding  hereunder until the Liquidity Facility
Issuer has been  reimbursed for such draws on, or borrowings or payments  under,
the Liquidity  Facility to pay such principal and interest.  Any Bonds purchased
by the Liquidity Facility Issuer shall become Bank Bonds, shall bear interest at
the Bank Bond Interest Rate and shall be subject to the terms and provisions of,
and have all rights with respect to Bank Bonds under,  the applicable  Liquidity
Facility.  In the event that the  Liquidity  Facility  is in a form other than a
standby bond  purchase  agreement,  unless the Liquidity  Facility  Issuer shall
otherwise direct,  any Bonds purchased by the Liquidity Facility Issuer shall be
immediately  registered in the name of the Liquidity Facility Issuer as a Holder
and the  Liquidity  Facility  Issuer  shall have all rights of a Holder of Bonds
except that such Bonds will bear interest at the Bank Rate under this Indenture.

                  SECTION  5.13.  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  5.14.  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-13

<PAGE>



                                                    ARTICLE VI

                                            SUPPORT FACILITY PROVISIONS

                  SECTION  6.01.  Support  Facility - General.  Pursuant  to the
Participation  Agreement,  the Company has obtained a Credit Facility and agrees
to maintain a Liquidity  Facility meeting the requirements of the  Participation
Agreement  with respect to the Bonds at all times except during any Auction Rate
Period,  an  Auction  Rate-Inverse  Rate  Period or the  Fixed  Rate  Period.  A
Liquidity Facility relating to the affected Bonds must be in effect prior to any
Change in the Interest Rate Mode from an Auction Rate and a related Inverse Rate
during an Auction  Rate-Inverse  Rate Period,  or from an Auction Rate during an
Auction  Rate  Period to another  Adjustable  Rate  (other  than a Change in the
Interest  Rate Mode to an Auction  Rate Period or an Auction  Rate-Inverse  Rate
Period or a conversion  to a Fixed Rate).  If at any time the Company  obtains a
Liquidity  Facility with respect to the Bonds which were previously not entitled
to the benefit  thereof,  the Company  shall submit such  Liquidity  Facility to
Moody's,  S&P or such  other  Rating  Agency as the  Company  may select for the
purposes of obtaining a rating on such Bonds. Upon obtaining a rating or ratings
on the basis of such Liquidity Facility the provisions of Sections 5.08 and 6.02
shall become  applicable to such Bonds.  The Trustee  shall be furnished  with a
certified copy of any Liquidity  Facility obtained pursuant to this Section 6.01
together  with  evidence  of any  rating  or  ratings  obtained  on the Bonds in
connection therewith.

                  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.

                  SECTION 6.02. Liquidity Facility. 1. At any time following the
Closing Date, the Company with the consent of the Bond Insurer,  may provide for
the  delivery  to the  Trustee  of a  Liquidity  Facility  that is  issued  by a
financial institution with a long term debt rating of at least A from S&P and A2
from Moody's and that supports  ratings at least the  equivalent of A-1 from S&P
and P-1 from Moody's.  The expiration date of such Liquidity Facility shall be a
date not  earlier  than 364 days from its date of  issuance,  subject to earlier
termination  upon the occurrence of (a) a Terminating  Event or another event of
default  under  the  related  reimbursement  agreement  or  other  corresponding
agreement  pursuant to which such Liquidity Facility is issued, (b) the issuance
of an Alternate Liquidity Facility, (c) payment in full of the Outstanding Bonds
or (d) a Change in the  Interest  Rate Mode to an Auction Rate during an Auction
Rate  Period,  an  Auction  Rate and a related  Inverse  Rate  during an Auction
Rate-Inverse  Rate Period,  or a Fixed Rate. If, between the effective date of a
Liquidity  Facility and the effective date of an Alternate  Liquidity  Facility,
there  occurs a Change in the  Interest  Rate  Mode,  such  Alternate  Liquidity
Facility shall comply with the requirements  applicable to a Liquidity  Facility
in effect with respect to the new Interest Rate Mode. On or prior to the date of
the delivery of a Liquidity  Facility or an  amendment  to a Liquidity  Facility
(other than an amendment  which only extends the expiration  date of an existing
Liquidity  Facility) (a  "Liquidity  Facility  Amendment")  to the Trustee,  the
Company shall furnish to the Trustee and the

                                                       VI-1

<PAGE>



Bond Insurer on behalf of the Authority  (a) an opinion of Bond Counsel  stating
that the delivery of such Liquidity  Facility or Liquidity Facility Amendment to
the Trustee is  authorized  under this  Indenture  and  complies  with the terms
hereof,  (b) written  confirmation from S&P, if the Bonds are then rated by S&P,
and from  Moody's,  if the Bonds are then  rated by  Moody's,  and from  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  Liquidity Facility
or  Liquidity  Facility  Amendment  and that the  substitution  of the  proposed
Alternate Liquidity Facility for the existing Liquidity Facility or the delivery
of the Liquidity Facility  Amendment will not, by itself,  result in a reduction
or withdrawal of its long- or short-term rating of the Bonds below the rating of
S&P or Moody's or such other rating  agency,  as the case may be, then in effect
with respect to the Bonds,  and (c) written  consent of the Bond Insurer to such
Liquidity Facility or Liquidity Facility Amendment.

                  2. In the  event  that  the  Company,  delivers  an  Alternate
Liquidity  Facility  in  substitution  for a  Liquidity  Facility or a Liquidity
Facility  Amendment  which will result in a reduction  in or  withdrawal  of the
short-term or long-term  rating or both assigned to such Bonds by Moody's or S&P
or such other rating agency as a result of the Alternate  Liquidity  Facility or
Liquidity  Facility  Amendment,  all Outstanding Bonds (unless the Bonds bear an
Auction  Rate  during an Auction  Rate  Period,  Auction  Rate during an Auction
Rate-Inverse Rate Period or Fixed Rate) shall be subject to mandatory tender for
purchase  pursuant to Section  5.08.  It shall be a condition to the delivery of
such an Alternate  Liquidity  Facility or Liquidity  Facility Amendment that (i)
the Opinion of Bond Counsel  referred to in the preceding  paragraph be obtained
and (ii)  the  prior  written  consent  of the Bond  Insurer  be  obtained.  The
Authority,  or the Company on behalf of the  Authority,  shall deliver notice to
the  Trustee of the  substitution  of an  Alternate  Liquidity  Facility  or the
delivery of a Liquidity  Facility  Amendment which will result in a reduction or
withdrawal in the short-term or long-term ratings assigned to the Bonds pursuant
to this  Section  6.02 at  least 45 days  before  the  date of  substitution  or
amendment.

                  3. In the event that any Liquidity Facility Issuer (other than
a  municipal  bond or  financial  guarantee  insurance  company)  should fail to
maintain short-term ratings equivalent to A-1 from S&P and P-1 from Moody's, and
such Liquidity  Facility Issuer is not replaced within 4 months, all Bonds shall
be subject to mandatory tender for purchase pursuant to Section 5.08. No Bond so
tendered shall be remarketed unless and until an Alternate Liquidity Facility is
delivered  to the Trustee  and a prior  written  consent of the Bond  Insurer is
obtained.

                  SECTION  6.03.  Trustee not  Responsible  for  Enforcement  of
Support  Facility.  Except as may otherwise be expressly  agreed by the Trustee,
the Trustee shall have no responsibility  with respect to the enforcement of any
Support Facility obtained hereunder.

                    SECTION  6.04.  Payments  Pursuant  to  the  Municipal  Bond
               Insurance Policy. 1. As long as a Policy shall be in effect,  the
               Trustee  shall,  at least one day prior to each Interest  Payment
               Date,  determine  whether there will be  sufficient  funds in the
               Bond Fund to pay the  principal  of or  interest  on the Bonds on
               such Interest  Payment Date or on the date on which the Bonds are
               subject to redemption  pursuant to Section 5.06.1. If the Trustee
               determines that there will be insufficient

                                                       VI-2

<PAGE>



funds in the Bond  Fund,  the  Trustee  shall so notify the Bond  Insurer.  Such
notice  shall  specify the amount of the  anticipated  deficiency,  the Bonds to
which such  deficiency is applicable and whether such Bonds will be deficient as
to principal or interest,  or both.  If the Trustee has not so notified the Bond
Insurer at least one day prior to an Interest  Payment  Date,  the Bond  Insurer
will make  payments of  principal  or interest due on the Bonds on or before the
first  Business Day next following the date on which the Bond Insurer shall have
received notice of nonpayment from the Trustee.

                  2. The Trustee  shall after giving  notice to the Bond Insurer
as provided in  paragraph 1 of this  Section  6.04,  make  available to the Bond
Insurer and, at the Bond Insurers direction,  to the United States Trust Company
of New  York,  as  insurance  trustee  for the  Bond  Insurer  or any  successor
insurance  trustee (the  "Insurance  Trustee"),  the  registration  books of the
Authority maintained by the Trustee and all records relating to the Bond Fund.

                  3. The  Trustee  shall  provide  to the Bond  Insurer  and the
Insurance  Trustee a list of registered  owners of the Bonds entitled to receive
principal  or interest  payments  from the Bond  Insurer  under the terms of the
Policy,  and shall make  arrangements  with the  Insurance  Trustee  (i) to mail
checks or drafts to the registered  owners of the Bonds entitled to receive full
or partial  interest  payments  from the Bond Insurer and (ii) to pay  principal
upon Bonds  surrendered  to the Insurance  Trustee by the  registered  owners of
Bonds  entitled  to receive  full or partial  principal  payments  from the Bond
Insurer.

                  4. The Trustee  shall,  at the time it provides  notice to the
Bond Insurer  pursuant to paragraph 1 of this Section  6.04,  notify  registered
owners of Bonds entitled to receive the payment of principal or interest thereon
from the Bond Insurer (i) as to the fact of such entitlement, (ii) that the Bond
Insurer  will remit to them all or a part of the interest  payments  next coming
due upon proof of the Bondholders  entitlement to interest payments and delivery
to the Insurance Trustee,  in form satisfactory to the Insurance Trustee,  of an
appropriate  assignment of the registered  owner's right to payment,  (iii) that
should they be  entitled  to receive  full  payment of  principal  from the Bond
Insurer,  they must surrender their Bonds (along with appropriate  instrument of
assignment in form  satisfactory to the Insurance Trustee to permit ownership of
such Bonds to be  registered in the name of the Bond Insurer) for payment to the
Insurance Trustee, and not the Trustee, and (iv) that should they be entitled to
receive partial payment of principal from the Bond Insurer,  they must surrender
their Bonds for payment  thereon  first to the  Trustee,  who shall note on such
Bonds the portion of the principal  paid by the Trustee and then,  along with an
appropriate  instrument  of  assignment  in form  satisfactory  to the insurance
trustee,  to the Insurance  Trustee,  which will then pay the unpaid  portion of
principal.

                  5. In the event that the  Trustee  has notice that any payment
of  principal  of or  interest  on a Bond which has become Due for  Payment  (as
defined in the  Policy)  and which is made to a Holder of a Bond by or on behalf
of the  Authority  has  been  deemed a  preferential  transfer  and  theretofore
recovered  from its registered  owner  pursuant to the United States  Bankruptcy
Code by a trustee in  bankruptcy  in  accordance  with the final,  nonappealable
order of a court having competent  jurisdiction,  the Trustee shall, at the time
the Bond insurer is notified pursuant to paragraph 1 of this

                                                       VI-3

<PAGE>



Section 6.04,  notify all registered  owners of the Bonds that in the event that
any registered  owner's payment is so recovered,  such registered  owner will be
entitled  to payment  from the Bond  Insurer to the extent of such  recovery  if
sufficient funds are not otherwise  available,  and the Trustee shall furnish to
the Bond  Insurer its  records  evidencing  the  payments  of  principal  of and
interest  on the Bonds  which  have been made by the  Trustee  and  subsequently
recovered  from  registered  owners of the  Bonds  and the  dates on which  such
payments were made.

                  6. In addition  to those  rights  granted to the Bond  Insurer
under this Indenture,  the Bond Insurer shall, to the extent it makes payment of
principal  of or  interest  on Bonds,  become  subrogated  to the  rights of the
recipients of such payments in accordance  with the terms of the Policy,  and to
evidence such  subrogation  (i) in the case of subrogation as to claims for past
due interest,  the Trustee shall note the Bond  Insurer's  rights as subrogee on
the  registration  books  upon  receipt  from the Bond  Insurer  of proof of the
payment of interest  thereon to the registered  owners of the Bonds, and (ii) in
the case of subrogation  as to claims for past due principal,  the Trustee shall
note the Bond  Insurer's  rights as  subrogee  on the  registration  books  upon
surrender of the Bonds by the registered  owners thereof  together with proof of
the payment of principal thereof.

                  SECTION 6.05 Provisions with Respect to the Bond Insurer. With
respect to any  Bonds,  the  payment of which is insured by the Bond  Insurer in
accordance  with the terms of the Policy,  notwithstanding  anything else to the
contrary herein, the following additional provisions shall apply:

                  (a) A copy of any notice given by the Authority or the Company
under this Indenture to the Holders of the Bonds shall also be given to the Bond
Insurer.

                  (b) The Trustee  shall  notify the Bond Insurer of any failure
of the Authority or the Company to provide a notice to the Bond Insurer pursuant
to any provision of this Indenture.

                  (c) Notwithstanding any other provision of this Indenture, the
Trustee  shall  immediately  notify the Bond Insurer upon the  occurrence  of an
Event of Default.

                  (d) Any  action  under this  Indenture  that is subject to the
prior  consent of the  Holders  of the Bonds  shall also be subject to the prior
written consent of the Bond Insurer.

                  (e) Notwithstanding any other provision of this Indenture,  in
determining  whether  the rights of the  Holders of the Bonds will be  adversely
affected  by any  action  taken  pursuant  to the terms and  provisions  of this
Indenture,  the Trustee shall consider the effect on the Holders of the Bonds as
if there were no Municipal Bond Insurance Policy.

                  (f) To the  extent  this  Indenture  confers  upon or gives or
grants to the Bond Insurer any right, remedy or claim under or by reason of this
Indenture,  the  Bond  Insurer  is  hereby  explicitly  recognized  as  being  a
third-party beneficiary hereunder, and notwithstanding anything to the contrary

                                                       VI-4

<PAGE>



contained  in this  Indenture  may  enforce  any  such  right  remedy  or  claim
conferred, given or granted hereunder.

                  (g)  Notwithstanding  any other  provision in this  Indenture,
upon the  occurrence and  continuance  of an Event of Default,  the Bond Insurer
shall be  entitled  to  control  and direct  the  enforcement  of all rights and
remedies  granted to the  Holders of the Bonds or the Trustee for the benefit of
the Holders of the Bonds under this Indenture, including without the limitation:
(i) the right to control  and direct the  declaration  of the  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; provided, however, that the Bond Insurer shall not be
entitled to control and direct the  enforcement  of any such rights and remedies
if the Bond  Insurer is in default  under the Policy or if the Bond Insurer is a
party to any proceeding for the  rehabilitation,  liquidation,  conservation  or
dissolution of the Bond Insurer pursuant to the U.S.  Bankruptcy Code or similar
provision of law.

                  (h) The Trustee  shall  permit the Bond Insurer to have access
to and to make  copies  of all books and  records  relating  to the Bonds at any
reasonable time.

                  (i) Any reorganization or liquidation plan with respect to the
Company  must  be  acceptable  to  the  Bond  Insurer.   In  the  event  of  any
reorganization or liquidation,  the Bond Insurer shall have the right to vote on
behalf of all Holders of the Bonds  absent a default by the Bond  Insurer  under
the Policy.

                  SECTION  6.06.  Payments  Pursuant to any Direct Pay Facility;
Condition to Delivery of Direct Pay  Facility.  The Trustee  shall draw upon any
Direct-Pay  Facility,  from time to time,  to the extent that it may do so under
the  terms  of  such  Direct-Pay  Facility.   The  Trustee  shall  apply  moneys
constituting  Available  Moneys  pursuant  to clause  (i),  (iii) or (iv) of the
definition  thereof as and to the extent  necessary to pay the  principal of (or
premium,  if any), and accrued  interest on, the Bonds, as the same shall become
due and payable either at maturity, upon redemption, by declaration or otherwise
(provided that moneys paid to the Trustee under any Direct-Pay  Facility  shall,
to the extent so specified in such Direct-Pay  Facility,  be applied only to the
payment of  particular  payments of  principal  of (or  premium,  if any on), or
accrued  interest on, the Bonds).  The Trustee  shall apply moneys  constituting
Available Moneys pursuant to clause (i) or (to the extent permitted by the terms
of any  Direct-Pay  Facility  then in effect) or clause (iii) of the  definition
thereof  as and to the  extent  necessary  to pay the  purchase  price  of Bonds
tendered or deemed  tendered to the Registrar  and Paying Agent  pursuant to the
Bond  Purchase  Trust  Agreement  (but only after  application  of  proceeds  of
remarketing  as provided in Section  2.03  thereof) as the same shall become due
and payable in accordance with this Indenture.  Notwithstanding anything in this
Indenture to the contrary, it shall be a condition to the delivery of any Direct
Pay Facility to the Trustee that (i) the Trustee and the Bond Insurer shall have
received from each Rating Agency then rating the Bonds written  confirmation  to
the effect that such Rating  Agency has  reviewed  such Direct Pay  Facility and
that  delivery of such  Direct Pay  Facility  will not result in a reduction  or
withdrawal

                                                       VI-5

<PAGE>



of any rating then  assigned to the Bonds and (ii) the Bond  Insurer  shall have
consented to the delivery of such Direct Pay Facility.

                                                       VI-6

<PAGE>



                                                    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 or Treasurer 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 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  Registrar  and Paying  Agent,  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  Registrar  and  Paying  Agent,  and  such  certificate  of the
Registrar  and Paying Agent 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 Registrar and
Paying Agent's certificate of authentication on any Bond shall be deemed to have
been duly  executed  if signed by an  authorized  officer of the  Registrar  and
Paying Agent.

                  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,  the Bond Insurer 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 Registrar and Paying Agent shall

                                                       VII-1

<PAGE>



authenticate  and deliver in exchange  for such Bonds a new Bond or Bonds of the
same subseries,  if any, 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.

                  Any Bond  surrendered  in any such  registration  of  transfer
shall  forthwith be  cancelled  by the  Registrar  and Paying  Agent.  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  the  same
subseries,  if any, 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 Registrar and
Paying Agent.

                  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  Registrar  and Paying  Agent
shall, upon compliance with the terms provided by law,  authenticate and deliver
a new Bond of like series or  subseries,  if any,  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 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, the
Bond Insurer and the Authority such security and indemnity as is satisfactory to
them which shall name the  Authority as an  additional  secured and  indemnified
party.  Any  replacement  Bond issued  under the  provisions  of this Section in
exchange or substitution for the defaced,

                                                       VII-2

<PAGE>



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 Registrar and Paying Agent,  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 expenses and the  surrender  for
cancellation of the defaced or mutilated or partly  destroyed Bond and upon such
other conditions as the Registrar and Paying Agent 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  authentication  and bear such number as
shall be assigned thereto by the Registrar and Paying Agent,  which number shall
have the  letters  "AR"  prefixed  thereto  together  with such other  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  Registrar and Paying Agent may require a deposit by the
Holder to secure 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 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 Registrar and Paying Agent.

                  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

                                                       VII-3

<PAGE>



be surrendered  for  cancellation  at the principal  office of the Registrar and
Paying  Agent 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  during an Auction  Rate  Period or Auction  Rate-Inverse  Rate Bonds
during an Auction Rate-Inverse Rate Period in typewritten form to the Securities
Depository as registered owner thereof.

                  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 Registrar and Paying Agent.  The Registrar and Paying Agent shall destroy
any  cancelled  Bond which has been paid and which  bears any date two (2) years
prior to the date of  destruction.  The Bonds  shall be  destroyed  by  burning,
machine shredding,  chemical  disintegration or such other method as is approved
by the Authority. The Authority may require that such destruction be done in the
presence of its appointee. When the Registrar and Paying Agent shall destroy any
Bond, it shall deliver a certificate of such  destruction to the Authority,  the
Bond Insurer and the Company.

                                                       VII-4

<PAGE>



                                                   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  "KeySpan  Generation LLC 1999
Series A 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,  net of  underwriter's  discount  and  accrued
interest, if any, which, pursuant to Section 2.02.6 of this Indenture,  is to be
used and  applied  together  with other  moneys  advanced  by the Company to the
prepayment of the KeySpan Notes, the proceeds of which prepayment are to be used
to pay the redemption price of the Prior Bonds. The accrued interest, if any, on
the Bonds shall be deposited in the Interest Account of the Bond Fund.

                  3. The monies on deposit from time to time in the Project Fund
shall be held  under  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 financing  the  prepayment of the KeySpan Notes and in
accordance with the remaining provisions of this Section and any excess shall be
used for the cost of issuance of the Bonds.

                  4. The Trustee is  authorized  and  directed to make  payments
from the Project Fund which together with moneys advanced by the Company will be
sufficient  to pay the  principal  amount  and  interest  payment  due under the
KeySpan Notes (the "Prepayment Price") or costs incurred in connection therewith
and the  refunding of the Prior Bonds,  upon the order of the Company,  but only
upon receipt from time to time of requisitions  signed by an Authorized  Company
Representative, stating with respect to each payment to be made from the Project
Fund:

                           (a) the requisition number;

                           (b) the nature of the disbursement;

                    (c) the payee, with address, which may be the Company in the
               case of  reimbursements  for advances  and  payments  made by the
               Company;

                           (d) the amount of such payment;

                           (e) that  the  disbursement  will be used to pay,  or
                  reimburse  the Company for,  part of the  Prepayment  Price or
                  costs  incurred  in  connection  with  the  prepayment  of the
                  KeySpan Notes and the redemption of the Prior Bonds; and

                                                      VIII-1

<PAGE>



                           (f)  that  the  disbursement  will  not be  used in a
                  manner that would result in a violation of any  representation
                  or any covenant  contained in Section 5.4 of the Participation
                  Agreement  or be contrary to any  material  representation  or
                  warranty contained in the Tax Regulatory Agreement.

                  5. For seven years from the dates  thereof,  the Trustee shall
retain in its possession  all  requisitions  received by it as herein  required,
subject to the inspection of the Authority, its agents and representatives,  the
Company,  the Bond  Insurer  and the Holders  and their  representatives  at all
reasonable times at the Principal Corporate Trust Office.

                  6. All monies  remaining in the Project Fund after the payment
or provision for payment of the Prepayment  Price and all other costs to be paid
from such  Project  Fund shall,  at the written  direction  of the  Company,  be
deposited  in the Bond Fund for credit to the  Redemption  Account to be applied
solely in accordance with and subject to the restrictions contained in Article V
and Article IX hereof to the payment of principal  of and  premium,  if any, and
interest on the Bonds;  except for amounts  retained in the Project  Fund by the
Trustee with the approval of the appropriate  Authorized Company  Representative
for payment of items  permitted  to be financed  from such Fund but not then due
and payable,  any balance  remaining of such retained  funds in the Project Fund
after full payment or provision of payment of part of the Prepayment Price shall
be paid to the Trustee for deposit in the Bond Fund for credit to the Redemption
Account  and  applied by the  Trustee as  described  above.  At such time as all
monies have been paid from the Project Fund, the Trustee shall close the Project
Fund and thereupon all of its right,  title and interest  hereunder shall cease,
determine  and become void and the  Trustee  shall  execute  such  documents  to
evidence such release as may reasonably be required.

                                                      VIII-2

<PAGE>



                                                    ARTICLE IX

                                      CREATION OF SPECIAL FUNDS AND ACCOUNTS;
                                      APPLICATION AND INVESTMENT OF REVENUES

                  SECTION  9.01.  Creation  of  Funds  and  Accounts.   (a)  The
following  funds and  accounts,  which shall be special  funds or accounts to be
held by the Trustee, are hereby created and designated as set forth below:

                  (1)      Bond Fund

                           (a)      Interest Account
                           (b)      Principal Account
                           (c)      Redemption Account

                  (2)      Rebate Fund

                  The designation of each fund set forth above shall include the
term  "KeySpan  Generation  LLC 1999  Series A," which term  shall  precede  the
designation  as set  forth  above.  Each  such  fund and  account  is,  however,
sometimes referred to as set forth above.

                  (b) The funds and accounts 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 of 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  deposit,  or cause to be  deposited,  the
following in immediately  available  funds with the Trustee as the Note Payments
become due 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 or Auction  Rate-Inverse
Rate  Period,  no later  than  12:00  noon (New York  City  time) on the  second
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
during an Auction Rate Period,  or the  Outstanding  Auction  Rate-Inverse  Rate
Bonds during an Auction  Rate-Inverse  Rate Period,  as the case may be, on such
Interest Payment Date. In the event such deposit is not

                                                       IX-1

<PAGE>



made in accordance with this paragraph (i), the Trustee shall immediately send a
notice of such event to the Auction  Agent and to the  registered  owners of the
Bonds by telex,  telecopy  or  similar  means.  If such  deposit  is made by the
Company  within 3 Business  Days of the Business Day  immediately  preceding the
Interest  Payment  Date,  the Trustee  shall  immediately  send a notice of such
deposit to the Auction Agent and to the registered owners of the Bonds by telex,
telecopy or similar means.

                  (ii) By 12:00 noon,  on the Business Day next  preceding  each
Interest  Payment  Date other than  during an Auction  Rate Period or an Auction
Rate-Inverse 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.

                  At such time as the Company elects to obtain,  and there is in
effect,  a Credit Facility in the form of a letter of credit,  and to the extent
necessary  to obtain or  maintain  the rating or ratings on the Bonds  resulting
from such Credit Facility, 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) On the date such monies are received, amounts, if
         any, paid by the Company  pursuant to Section 4.3 of the  Participation
         Agreement or otherwise paid to the Trustee for such purpose;  provided,
         that prior to withdrawal  for the payment of interest,  such money must
         be on deposit under the Indenture for at least 124 days and that on the
         date such money is to be  applied to such  payment,  the  Company  must
         deliver a Non-Bankruptcy Certificate to the Trustee;

                           (II) On each Interest Payment Date, the proceeds of a
         draw, borrowing or payment under the Credit Facility; and

                           (III) On each Interest Payment Date, any other monies
         provided by the Company for such purpose.

Such  amounts  shall  otherwise  be  provided  solely  from the sources of funds
referred to in (III) above.

                  (iii) After the Fixed Rate Conversion Date, by 12:00 noon (New
York City time) on the Business Day next preceding each Interest Payment Date to
the Bond Fund for credit to the Interest Account the amount  required,  together
with other funds available therefor in the Interest Account, to pay the interest
payable on the Outstanding Bonds on such Interest Payment Date.

                  (b)(i)   During  an   Auction   Rate   Period  or  an  Auction
Rate-Inverse  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 during an Auction Rate Period, or any Auction Rate-Inverse Rate Bonds
during an Auction  Rate-  Inverse  Rate Period,  as the case may be,  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 immediately send a notice of such event to
the Auction Agent by telex,  telecopy or similar means.  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  immediately  send a notice of such
deposit to the Auction Agent by telex, telecopy or similar means.

                  (ii) Prior to the Fixed Rate Conversion Date other than during
an Auction Rate Period or an Auction  Rate-Inverse  Rate  Period,  into the Bond
Fund for credit to the Redemption  Account the amount  required to pay principal
of and premium,  if any, and accrued and unpaid interest on any Bonds called for
redemption.

                  At such time as the Company elects to obtain,  and there is in
effect,  a Credit  Facility  in the form of a letter of credit and to the extent
necessary  to obtain or  maintain  the rating or ratings on the Bonds  resulting
from such Credit Facility, amounts required to be deposited in the Bond Fund for
credit to the  Redemption  Account  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 on the date indicated:

                           (I) On the date any redemption is scheduled to occur,
         Available Moneys, if any, on deposit in the Bond Fund;

                           (II) On the  date  any  redemption  is  scheduled  to
         occur,  the proceeds of a draw,  borrowing or payment  under the Credit
         Facility; and

                           (III) On the  date any  redemption  is  scheduled  to
         occur, any other monies provided by the Company for such purpose.

Such  amounts  shall  otherwise  be  provided  solely  from the sources of funds
referred to in (III) above.

                  (iii)  After  the  Fixed  Rate  Conversion  Date,  on the last
Business Day prior to the day on which any redemption is to occur, into the Bond
Fund for credit to the Redemption Account the amount required,  with other funds
available  therefor in said Redemption  Account,  to pay the redemption price of
the Bonds then being redeemed.

                    (c) On the date such  funds are  received,  into the  Rebate
               Fund,  the  amounts,  if any,  paid by the  Company  pursuant  to
               Section 7.3(H) of the Tax Regulatory Agreement in order to ensure
               compliance with Section 7.4 thereof.

                  Each installment of Note Payments shall be increased as may be
necessary to make up any previous deficiency in any of the required payments.

                                                       IX-2

<PAGE>



                  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.

                  SECTION 9.03. Application of Monies in the Bond Fund. The Bond
Fund shall be used for the purpose of making scheduled  payments of principal of
and premium,  if any,  and  interest on the Bonds and of making  payments of the
redemption  price of Bonds then  subject  to  redemption  in the  manner  herein
provided. The monies in the Bond Fund shall be applied as follows:

                    (a)  Interest  Account.  On  or  prior  to  the  Fixed  Rate
               Conversion Date, 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 from funds described
               under Section 9.02(a)(ii),  or, in the case of Auction Rate Bonds
               during an Auction Rate Period or Auction  Rate-Inverse Rate Bonds
               during an Auction Rate- Inverse Rate Period,  as the case may be,
               from funds  described  under Section  9.02(a)(i).  In the event a
               Credit Facility in the form of a letter of credit is in place and
               payments  are  required  to be made  in the  order  specified  in
               Section 9.02  (a)(ii)(I),  (II) and (III) and if sufficient funds
               are  not  available  under  Section  9.02(a)(ii)(I)  to pay  such
               interest,  the Trustee shall request a draw, borrowing or payment
               under such Credit  Facility in accordance  with the terms thereof
               in an amount  equal to the  amount  required,  together  with the
               amounts, if any, available under Section  9.02(a)(ii)(I),  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) and (II) to pay such interest, the Trustee
               shall  apply  funds,  if  any,   available  pursuant  to  Section
               9.02(a)(ii)(III),  to the extent  necessary,  to such  payment of
               interest.

                  (b)  Principal  Account.  If  the  Fixed  Rate  has  not  been
established prior to such date, 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 Credit  Facility  in the form of a letter of credit is in
place and  payments  are  required to be made in the order  specified in Section
9.02(b) (ii) (I), (II) and (III) and if sufficient funds are not available under
Section 9.02(b)(ii)(I) to pay such principal,  the Trustee shall request a draw,
borrowing or payment  under such Credit  Facility in  accordance  with the terms
thereof in the amount  required,  together with the amounts,  if any,  available
under Section  9.02(b)(ii)(I)  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)  or (II) to pay  such  principal,  the
Trustee   shall   apply   funds,   if  any,   available   pursuant   to  Section
9.02(b)(ii)(III), to the extent necessary, to such payment.

                  (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. 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-3

<PAGE>



                  All monies in the Redemption  Account on the last Business Day
prior to the Stated Maturity shall be transferred to the Principal Account.

                  On or prior to the Fixed Rate Conversion  Date, in the event a
Credit  Facility in the form of a letter of credit is in place and  payments are
required to be made in the order  specified in Section  9.02(b)(ii)  (I),(II) or
(III),  if  sufficient  amounts to make such  payment  are not  available  under
Sections  9.02(b)(ii)(I),  the  Trustee  shall  request a draw under such Credit
Facility in accordance with the terms thereof,  in an amount equal to the amount
required,   together   with   amounts,   if  any,   available   under   Sections
9.02(b)(ii)(I),  to pay the  principal  amount  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) or (II), the
Trustee  shall  apply  amounts,  if any,  available  pursuant  to  Section  9.02
(b)(ii)(III), to the extent necessary, to such payment. Such redemption shall be
made pursuant to the provisions of Article V.

                  After the Fixed Rate  Conversion  Date, the Trustee shall make
all such redemption payments to the Holders in accordance with the terms of this
Indenture from funds described in Section 9.02(b)(iii).

                  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,  the Bond Insurer 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.

                  SECTION 9.04. Application of Monies in the Rebate Fund. 1. The
Rebate Fund and the amounts  deposited  therein  shall not be subject to a claim
and  charge in favor of the  Trustee  or any  Bondholders  and shall be  applied
solely in accordance  with the  provisions of the Tax  Regulatory  Agreement and
shall not be  available  for the  payment of Bonds  within  the  meaning of this
Indenture.  Amounts  deposited in the Rebate Fund shall be applied solely to pay
amounts  payable  to the  United  States  pursuant  to  Section  7.4 of the  Tax
Regulatory  Agreement in  accordance  with  subsection  (2) of this Section 9.04
except to the extent otherwise permitted by this Section 9.04.

                  2. In the  event  that on the  first  day of any Bond Year the
amount on deposit in the Rebate Fund  exceeds  the Rebate  Amount (as defined in
the Tax  Regulatory  Agreement),  the  Trustee,  upon  the  receipt  of  written
instructions from an Authorized Company Representative  specifying the amount of
such excess, shall withdraw such excess amount and deposit it in the Bond Fund.

                  Pending such  application,  such monies may be invested at the
direction  of an  Authorized  Company  Representative  in  accordance  with  the
provisions  of  Section  9.05;  provided  that  such  investment  will not be in
violation  of the  covenants  made to the  Authority  by the  Company in the Tax
Regulatory Agreement.

                                                       IX-4

<PAGE>



                  SECTION 9.05. Investment of Funds. Monies in the Bond Fund and
the  accounts  in such Bond Fund and in the Rebate  Fund shall be  invested  and
reinvested by the Trustee,  at the direction of the Company,  promptly confirmed
in  writing,  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  invest  and  reinvest  monies  in the Bond  Fund and the  Rebate  Fund in
Investment  Securities maturing in such amounts and at such times as the Trustee
determines so that payment  required to be made from such funds may be made when
due.  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,  Available  Moneys  or moneys
provided by the State of New York in accordance with Section 5.07 hereof held by
the Trustee or the  Registrar and Paying  Agent,  to the extent  permitted to be
invested,  shall be invested solely in direct  obligations  issued by the United
States of America  maturing  in such  amounts  and at such times as the  Trustee
determines so that payments  required to be made from such  Available  Moneys or
such moneys provided by the State of New York may be made when due.

                  Monies on deposit in the Project Fund and the accounts in such
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  together  with monies
advanced by the Company  will be  required  to pay the  redemption  price of the
Prior Bonds.

                  The  Company  may at any time and  from  time to time  deposit
Ineligible Moneys with the Trustee. Ineligible Moneys shall at all times be held
by the Trustee in the manner contemplated by clause (i) of the definition of the
term  "Available  Moneys" and  Available  Moneys shall at all times prior to the
application  thereof in accordance  with the terms hereof be held by the Trustee
in the manner contemplated by clause (i), (ii), (iii) or (iv) (as appropriate to
the source of such Available  Moneys) of the  definition of the term  "Available
Moneys".

                  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 and the  Rebate  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

                                                       IX-5

<PAGE>



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 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-6

<PAGE>



                                                     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 this  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
this 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  Bonds,  this
Indenture  or  the  Participation  Agreement  shall  at all  times  be  open  to
inspection  by the Bond  Insurer and the Trustee and 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 this 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,  Market Agent's,
Broker-Dealers', Registrar and Paying Agent's and Indexing Agent's Fees, Charges
and Expenses.  Pursuant to the  provisions  of Section 4.2 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 Market Agent,
the reasonable fees and expenses of counsel and accountants) of the Trustee, the

                                                        X-1

<PAGE>



Registrar  and Paying  Agent,  Indexing  Agent,  and in the case of Auction Rate
Bonds  during an Auction Rate  Period,  the Auction  Agent,  Market  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  during an Auction Rate  Period,  the Auction  Agent,  Market  Agent,  and
Broker-Dealers.  In the case of Auction Rate Bonds and Inverse Rate Bonds during
an Auction  Rate-Inverse Rate Period,  the Authority shall have no liability for
the payment of fees and  expenses of the  Auction  Agent and the  Broker-Dealers
except as, and from the sources,  provided in Section 3A.05 of the Indenture and
any applicable sections of the Auction Agency Agreement.

                  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,  if any,  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  5.17 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
(exclusive of the rights therein reserved to the Authority) and the Note for and
on behalf of the Holders and the Bond Insurer as their respective rights appear,
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

                                                        X-2

<PAGE>



the  Participation  Agreement.  Nothing herein  contained  shall be construed to
prevent  the  Authority  from  enforcing  directly  any or all of its  rights to
notices,  administrative compensation or indemnification under the Participation
Agreement.



                                                        X-3

<PAGE>



                                                    ARTICLE XI

                                      CONCERNING THE TRUSTEE; APPOINTMENT OF
                                     REGISTRAR AND PAYING AGENT, MARKET AGENT,

                                         AUCTION AGENT AND INDEXING AGENT

                  SECTION  11.01.  Appointment of Trustee.  The Chase  Manhattan
Bank 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  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  any other  provision of this Indenture or the
Bond  Purchase  Trust  Agreement,  no right of the Trustee or the  Registrar and
Paying Agent to  indemnification  shall relieve the Trustee or the Registrar and
Paying Agent from  responsibility  for (a) making payments on the Bonds when due
from moneys available to it, (b) accelerating the Bonds as required  pursuant to
Article XII, (c) drawing on the Liquidity  Facility in accordance  with the Bond
Purchase Trust Agreement,  (d) making any claim under the Credit Facility or (e)
sending notices of mandatory tenders of 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

                                                       XI-1

<PAGE>



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.

                    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.

                  (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 man would  exercise or use under
the circumstances in the conduct of his 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

                                                       XI-2

<PAGE>



         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  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
the Trustee  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 the Trustee 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, rely upon a certificate of an Authorized Company  Representative or an
Authorized Officer.

                                                       XI-3

<PAGE>



                    (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.

                  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 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 Market
Agent Agreement,  the Auction Agency Agreement,  the Broker-Dealer  Agreement or
any Support  Facility  imposed  upon the  Authority,  the  Company,  any Support
Facility Issuer,  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  reasonable  compensation  for all  services  rendered  by it
hereunder  (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.  The
Trustee  acknowledges  that it has no claim for  compensation,  reimbursement or
indemnity  from the proceeds of  remarketing of Bonds or from moneys drawn under
any Support Facility.

                  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

                                                       XI-4

<PAGE>



thereof,  the Bond Insurer 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

               (e) any other information  which the Authority,  the Bond Insurer
          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 to the
inspection of the Authority,  the Company, the Bond Insurer 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) 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 any Support Facility  Issuer,  the Market 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

                                                       XI-5

<PAGE>



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  $75,000,000,  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  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.

                  (b) The  Trustee  may  resign  at any time by  giving  written
notice  thereof  to the  Authority,  the Bond  Insurer  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
Bond Insurer or the Holders of a majority in aggregate  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,
the Bond Insurer and the Company (such demand to be effective only when received
by the Trustee, the Authority, the Bond Insurer 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,  the Bond  Insurer 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,

                                                       XI-6

<PAGE>



then, in either such case, (i) the Authority may remove,  and the Company or the
Bond  Insurer 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 Company, the Market
Agent, the Registrar and Paying Agent, the Auction Agent, any Rating Agency then
rating the Bonds,  the Bondholders  and the issuer of any Support  Facilities 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,
the Market Agent and any Rating Agency then rating the Bonds.  Each notice shall
include  the name and address of the  Principal  Corporate  Trust  Office of the
successor Trustee.

                  (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 of the  Authority,  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.

                                                       XI-7

<PAGE>



                  Upon the  occurrence  and during the  continuance of a Company
Downgrade  Event, the consent of the initial Bond Insurer shall be required with
respect to the  appointment of a successor  Trustee,  which consent shall not be
unreasonably withheld.

                  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 Market Agent. Goldman,  Sachs &
Co. is hereby appointed as the Market Agent for the Bonds to serve as such under
the terms and provisions  hereof and of the Market Agent  Agreement.  The Market
Agent, including any successor or successors 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  and the  related  Market  Agent
Agreement.  During the Auction  Rate-Inverse Rate Period,  any one of the Market
Agents may be removed at any time by the Trustee, acting at the direction of the
beneficial  owners of at least 66-2/3% of the aggregate  principal amount of the
Bonds, provided that such removal shall not take effect until the appointment of
a successor Market Agent or Agents. Any one of the Market Agents may resign upon
30 days',  written notice delivered to the Company,  the Authority,  the Trustee
and the  Registrar  and Paying  Agent or such lesser  period of notice as may be
provided  in  the  respective   Market  Agent  Agreement.   During  the  Auction
Rate-Inverse  Rate Period,  the Trustee  shall use its best efforts to appoint a
successor Market Agent effective as of the effectiveness of any such resignation
or removal.  Other than during the Auction  Rate-Inverse Rate Period, any one of
the Market Agents may be removed at any time upon 30 days' written notice by the
Authority  acting at the request of the Company by an  instrument  signed by the
Authority and filed with the Trustee, the Registrar and Paying Agent, the Market
Agent and the Company,  provided,  that,  during an Auction  Rate  Period,  such
removal shall not take effect until the appointment of a successor  Market Agent
or Agents. Other than during the Auction Rate-Inverse Rate Period, the Authority
shall use its best efforts to appoint a successor Market Agent or Agents that is
a  qualified  institution,  effective  as  of  the  effectiveness  of  any  such
resignation  or  removal.  Each  successor  Market  Agent or  Agents  shall be a
qualified  institution  selected and appointed by the Trustee or the Company, as
the case may be,  subject to approval by the  Authority.  The Company shall give
notice to  Moody's  (if the Bonds are then  rated by  Moody's)  as  provided  in
Section 17.09, of the appointment of any successor Market Agent.

                  SECTION 11.15.  Appointment of Registrar and Paying Agent. The
Chase  Manhattan Bank in New York, New York is hereby  appointed to serve as the
Registrar  and  Paying  Agent  hereunder.  The  Company  shall have the right to
request  the  appointment  of a  particular  qualified  institution  to serve as
successor  thereto in the event of the removal or  resignation of such Registrar
and Paying Agent.

                                                       XI-8

<PAGE>



                  The Trustee  hereby  appoints any  Registrar  and Paying Agent
appointed hereunder as authenticating agent.

                  Upon the  occurrence and  continuance  of a Company  Downgrade
Event, the consent of the initial Bond Insurer shall be required with respect to
the appointment of a successor  Registrar and Paying Agent,  which consent shall
not be unreasonably withheld.

     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 to among
         other  things,  enable the  Registrar and Paying Agent to ascertain the
         source  and date of deposit of moneys  deposited  in the Bond  Purchase
         Fund and make such books and records  available  for  inspection by the
         Trustee,  the Market  Agent,  the  Authority,  the Bond Insurer and the
         Company at all reasonable times; and

     (iv) perform the duties and undertake the obligations  provided 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

     (d) The Registrar and Paying Agent agrees to cooperate with the Trustee and
the Company in preparing and conveying  information  necessary in order to allow
the Registrar and

                                                       XI-9

<PAGE>



Paying  Agent to draw under any Support  Facility.  To the extent that any other
certificate  to be  submitted  by the  Trustee to a Support  Facility  Issuer 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  and the Bond Purchase
Trust  Agreement.  None of the provisions of this Indenture or the Bond Purchase
Trust  Agreement  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 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 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.

                  Notwithstanding  any other  provision of this Indenture or the
Bond  Purchase  Trust  Agreement,  no right of the Trustee or the  Registrar and
Paying Agent to  indemnification  shall relieve the Trustee or the Registrar and
Paying Agent from  responsibility  for (a) making payments on the Bonds when due
from moneys available to it, (b) accelerating the Bonds as required pursuant to

                                                       XI-10

<PAGE>



Article XII, (c) drawing on the Liquidity  Facility in accordance  with the Bond
Purchase Trust Agreement,  (d) making any claim under the Credit Facility or (e)
sending notices of mandatory tenders of Bonds in accordance with this Indenture.

                  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 constituting a bank with trust powers or
a trust company 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  during an
Auction Rate Period, an Auction Rate or a related Inverse Rate during an Auction
Rate-Inverse  Rate Period or a Fixed Rate,  the 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,  issuers of any Support Facilities and
the Market 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 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  with,  so long as any Support
Facilities  are in effect,  the consent of the issuer of the Support  Facilities
which consent shall not be unreasonably  withheld, and approved and appointed by
the  Authority.  Such  successor  Registrar and Paying Agent,  once approved and
appointed  by the  Authority,  shall  assume  the  responsibilities  and  duties
relating  to the  Liquidity  Facility  as set forth in the Bond  Purchase  Trust
Agreement and the Indenture. The Company shall give notice to any Rating Agency,
if the Bonds are then  rated by any Rating  Agency  then  rating  the Bonds,  as
provided in Section 17.09,  of the  appointment  of any successor  Registrar and
Paying Agent.

                  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) The Chase Manhattan Bank is hereby appointed as
the Auction Agent


                                                       XI-11

<PAGE>



for the initial  Auction Rate Period.  Prior to any Change in the Interest  Rate
Mode to an Auction Rate Period or to an Auction  Rate-Inverse  Rate Period,  the
Company, with the approval of the Authority, shall appoint the Auction Agent for
the Bonds. 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  $15,000,000  or  (b) a  member  of  the  National  Association  of
Securities  Dealers,  Inc., having a capitalization of at least $15,000,000 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 Market Agent.  During
an Auction  Rate-Inverse  Rate Period,  the Auction  Agent may be removed at any
time by an  instrument  signed by the  Trustee  acting at the  direction  of the
holders of at least 66-2/3% of the aggregate  principal amount of the Bonds then
Outstanding and filed with the Auction Agent, the Market Agent, the Company, the
Authority  and the  Registrar  and Paying  Agent upon at least 90 days'  notice;
provided that, the Trustee shall have entered into an agreement in substantially
the form of the Auction Agency Agreement with a successor Auction 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 Market Agent and
the Registrar  and Paying Agent upon at least 90 days' notice;  provided that if
required by the Market  Agent,  an  agreement in  substantially  the form of the
Auction Agency  Agreement shall be entered into with a successor  Auction Agent.
Upon the occurrence and during the continuance of a Company Downgrade Event, the
Bond Insurer shall have the right to consent to the appointment of any successor
Auction Agent, which consent shall not be unreasonably withheld.

                  (2) With  respect to Auction Rate Bonds and Inverse Rate Bonds
during an Auction  Rate-Inverse  Rate Period in the event that the Auction Agent
and the Trustee (or, if the Trustee is also serving as Auction Agent, the Market
Agent) agree to a change in the Auction  Agent Fee Rate  pursuant to the Auction
Agency  Agreement (or Section 4 of the Market Agent  Agreement,  as the case may
be),  the Auction  Agent shall give a Notice of Fee Rate Change to the  Existing
Holders in accordance  with the Auction  Agency  Agreement and the Trustee shall
mail a Notice of Fee Rate Change to all Bondholders  within two Business Days of
such change.

                  SECTION  11.22.  Appointment of  Broker-Dealers.  (1) Goldman,
Sachs & Co. and Merrill Lynch,  Pierce,  Fenner & Smith  Incorporated are hereby
appointed  as the initial  Broker-  Dealers.  The  Company may select,  with the
approval of the initial lead  Broker-Dealer or any successor,  from time to time
one  or  more  additional   persons  to  serve  as   Broker-Dealers   under  the
Broker-Dealer  Agreements.  Upon the occurrence and during the  continuance of a
Company Downgrade Event, the Bond Insurer shall have the right to consent to the
appointment  of any  Broker-Dealer,  which  consent  shall  not be  unreasonably
withheld.

                                                       XI-12

<PAGE>



                  (2) Prior to any Change in the Rate Period to an Auction  Rate
Period or to an Auction  Rate-Inverse Rate Period, the Company with the approval
of the  Authority  shall  appoint an initial  Broker-Dealer  and any  additional
initial Broker-Dealers. Thereafter, the Company may select, with the approval of
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.
Upon the occurrence and during the continuance of a Company Downgrade Event, the
Bond  Insurer  shall  have  the  right  to  consent  to the  appointment  of any
Broker-Dealer, which consent shall not be unreasonably withheld.

                  (3) In the event  that the  Trustee  determines  to change the
Broker-Dealer Fee Rate established pursuant to the Auction Agency Agreement, the
Auction Agent shall give a Notice of Fee Rate Change to the Existing  Holders in
accordance with the Auction Agency Agreement and the Trustee shall mail a Notice
of Fee Rate Change to the  registered  owners of Auction  Rate Bonds and Inverse
Rate Bonds during an Auction  Rate-Inverse  Rate Period within two Business Days
of such change.  Upon the  occurrence  and during the  continuance  of a Company
Downgrade  Event,  the Bond  Insurer  shall  have the  right to  consent  to any
increase of the  Broker-Dealer Fee Rate, which consent shall not be unreasonably
withheld.

                  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 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. The
Authority  shall,  with the approval of the Company,  appoint an Indexing Agent,
subject  to the  conditions  set forth in this  Section.  There may be  separate
Indexing Agents for the purpose of calculating  each of the interest indices set
forth 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, the Bond Insurer and the Market 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 Market Agent and the Company of such 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 Market Agent,  the
         Bond Insurer and the Company at all reasonable times.

                                                       XI-13

<PAGE>



                  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 Authority,  the Market Agent
(and during any Auction Rate Period or Auction  Rate-Inverse  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, the Authority,  the Market Agent, the Bond Insurer
and the Company (and, if appropriate,  the Auction Agent) to inspect the records
at reasonable times.

                  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 Market  Agent,  the Bond
Insurer 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 Market Agent,  the Trustee and
the issuer of a Support  Facility,  if any. Upon the  occurrence  and during the
continuance of a Company  Downgrade Event, the Bond Insurer shall have the right
to direct the Company to direct the  Authority to remove the  Indexing  Agent as
provided  in this  paragraph  by  delivery  of an  instrument  in writing to the
Company.

                                                       XI-14

<PAGE>



                                                    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 Market Agent Agreement,  or otherwise) shall not be
made when the same shall  become due and payable and with respect to any payment
of  principal  of,  premium or  accrued  interest  payable  on Bonds  called for
redemption,  such  non-payment  shall  continue  for  three (3)  Business  Days;
provided  that in the case of any  payment  of  principal  or  accrued  interest
payable on Bonds called for redemption upon Determination of Taxability pursuant
to  Section  5.06.1 an Event of Default  shall  occur if such  nonpayment  shall
continue for one (1) Business Day; 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 three (3) Business Days; or

                  (c) The Trustee  shall  receive  written  notice from the Bond
Insurer of the  occurrence of an event of default under the Insurance  Agreement
directing that the Trustee declare an Event of Default; or

                  (d)  Receipt  by  the  Trustee  of  written  notice  from  the
financial institution providing any Credit Facility (other than a municipal bond
insurance  policy) following a draw on or borrowing or payment under such Credit
Facility  for the  payment of interest on the Bonds that the amount so drawn has
not been reimbursed to the financial  institution providing such Credit Facility
within the period  specified in the agreement  providing for the issuance of the
Credit Facility,  together with interest thereon,  if any, owing pursuant to the
agreement providing for the issuance of such Credit Facility; 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 Bond Insurer,
the Governor, the Comptroller and the Attorney General of the State of New York,
by the Trustee or to the  Trustee,  the  Authority,  the Bond  Insurer,  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 13.03;
provided that if any such failure

                                                       XII-1

<PAGE>



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 7.1 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 deemed  to 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  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  Bondholders.  The  Trustee  shall  immediately  give  notice to the Bond
Insurer of the occurrence of any Event of Default of which it has notice.

                  2. So long as  ownership  of the Auction  Rate Bonds during an
Auction  Rate Period or the Auction  Rate-Inverse  Rate Bonds  during an Auction
Rate-Inverse  Rate Period is  maintained in  book-entry  form by the  Securities
Depository,  upon  the  occurrence  of a  Payment  Default,  the  Trustee  shall
immediately send a notice thereof in substantially  the form of Exhibit I to the
Auction Agent and to the registered  holders of the Bonds by telecopy or similar
means.

                  3. So long as the  ownership  of the Auction Rate Bonds during
an Auction Rate Period or the Auction  Rate-Inverse Rate Bonds during an Auction
Rate-Inverse  Rate Period is  maintained in  book-entry  form by the  Securities
Depository,  the Trustee shall  immediately send a notice in  substantially  the
form of  Exhibit M to the  Auction  Agent and to the  registered  holders of the
Bonds by telecopy or similar means if a Payment Default has been cured.

                  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), as the case may be.

                  SECTION  12.03.  Declaration of Principal and Interest As Due.
Upon the  occurrence  and  continuation  of any  Event of  Default  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 Bond Insurer,  and upon the written  request or
direction  of the Bond  Insurer or 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) and the written consent of the Bond Insurer 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

                                                       XII-2

<PAGE>



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 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,  the Note and the Insurance  Agreement 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 and the Bond Insurer or, the Company
shall be taking,  or shall be causing  to be taken,  appropriate  action in good
faith to effect its cure,  then and in every such case the Trustee may, with the
written consent of the Bond Insurer and upon the written request or direction of
the Bond Insurer or upon the written  request or direction of the Holders of not
less than a majority in aggregate principal amount of the Bonds then Outstanding
(determined in accordance  with the provisions of Section 13.03) and the written
consent of the Bond Insurer 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 Maximum Auction Rate and during
an Auction  Rate-Inverse Rate Period,  the Bonds shall continue to bear interest
at the Overdue Rate for the  applicable  period of time  determined  pursuant to
Article IIIA. 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 and the Bond  Insurer,  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  and of the Bond Insurer allowed in any judicial
proceedings relative to the Company,  its creditors,  its property or the Bonds;
and (v) may with the written  consent of the Bond Insurer,  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)  and with the  written  consent of the Bond
Insurer,  shall  proceed to protect and enforce all rights of the  Holders,  the
Bond Insurer and the Trustee under

                                                       XII-3

<PAGE>



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 and the Bond Insurer 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 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 of the Bond Insurer  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 or the Bond Insurer,  and any recovery or judgment  shall be for the equal
benefit of the Holders of the  Outstanding  Bonds and the Bond  Insurer as their
respective interests appear.

                  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, of the Bond Insurer 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.

                                                       XII-4

<PAGE>



                  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 liabilities  incurred,  and all advances made,
by the Trustee except as a result of its  negligence,  wilful  misconduct 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 the Bond
Insurer or any Holders any plan of  reorganization,  arrangement,  adjustment or
composition  affecting the Bonds or the rights of the Bond Insurer or any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of the Bond
Insurer or 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
Credit  Facility and amounts held in or payable to the Rebate Fund)  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

                                                       XII-5

<PAGE>



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

     Second:  to the payment of the  interest  and  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  ratably 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.

                                                       XII-6

<PAGE>



                  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, the Bond Insurer 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.

                  Anything in this  Indenture to the  contrary  notwithstanding,
the Bond Insurer or 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 consent of the Bond Insurer 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 Bond Insurer or
the Holders of the Bonds then Outstanding and the Bond Insurer 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 Bond
Insurer  or the  Holders  of such  majority  with the prior  consent of the Bond
Insurer;  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 during an Auction Rate Period shall be the Maximum Auction
Rate and in the case of  Auction  Rate-Inverse  Rate  Bonds  during  an  Auction
Rate-Inverse  Rate Period 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 during an Auction Rate
Period  shall  continue to bear  interest at the  Maximum  Auction  Rate and any
Auction Rate-Inverse Rate Bonds during an Auction Rate-Inverse Rate Period shall
continue to bear  interest at the  Overdue  Rate until cured or waived.  No such
waiver shall extend to or affect any other

                                                       XII-7

<PAGE>



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 Bond Insurer or the Holders of not less than  twenty-five  percent  (25%) in
aggregate  principal amount of the Bonds at the time Outstanding  (determined in
accordance  with the  provisions of Section 13.03) with the prior consent of the
Bond  Insurer,  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 Bond
Insurer or 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 Bond or  Interest  Thereon.  Neither  the Bond
Insurer nor the 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 the Bond  Insurer  or 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,  shall have  obtained  the prior  written
consent of the Bond  Insurer  to the  institution  of any such  suit,  action or
proceeding  in equity or at law, 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  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,  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 the Bond Insurer or any of the Holders,
unless  the Bond  Insurer or such  Holders  shall  have  offered to the  Trustee
reasonable security or indemnity against

                                                       XII-8

<PAGE>



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, the Bond Insurer 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,  the Bond Insurer 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,  the Bond Insurer 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 Maximum  Auction Rate and during any Auction  Rate-Inverse  Rate
Period  all  amounts  which are due and owing but  unpaid  hereunder  shall bear
interest at the Overdue Rate until paid.

                                                       XII-9

<PAGE>



                                                   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 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.

                                                      XIII-1

<PAGE>



                  The  Authority  at the request of the Company may  establish a
record date for the taking of any action by the Holders.

                  SECTION 13.02. Meetings of Holders. The Trustee or the Holders
of not less than twenty percent (20%) in aggregate 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 aggregate 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 aggregate 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.

                                                      XIII-2

<PAGE>



                  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.

                  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

<PAGE>



                                   ARTICLE XIV

                    AMENDING AND SUPPLEMENTING THE INDENTURE,
            THE PARTICIPATION AGREEMENT, THE MARKET AGENT 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 but with the written
consent (which consent shall not be unreasonably  withheld) of the Bond Insurer,
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 Bond
                           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;


                                                       XIV-1

<PAGE>



                  (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,  liquidity or
         support  facility,   including,  but  not  limited  to,  any  amendment
         necessary to obtain a rating on the Bonds based upon such facility;

                  (i) to make any changes in this  Indenture  to any  provisions
         relating  to  any  Adjustable  Rate  so  long  as  no  Bonds  are  then
         outstanding bearing such Adjustable Rate; and

                  (j) 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 and the Bond
Insurer  (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 not less than  fifty-one
percent (51%) in aggregate  principal amount of the Bonds then Outstanding,  the
Authority and the Trustee,  with the prior  written  consent of the Bond Insurer
and prior  written  notice to each  Rating  Agency  then rating the Bonds at the
request  of the  Company,  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 Bond  Insurer and 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 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

                                                       XIV-2

<PAGE>



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 Bond  Insurer  and 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  Indenture effecting such 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
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.

                  Copies  of  any  Supplemental   Indenture  authorized  by  the
provisions of Section 14.02 shall be given to the Rating Agency or Agencies then
rating the Bonds.

                  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.

                  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 and the Bond Insurer of an opinion of
Bond Counsel  that such  Supplemental  Indenture  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  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

                                                       XIV-3

<PAGE>



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 in any way materially and adversely
affecting any Support  Facility  Issuer (so long as such 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 such 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 or the amendment to
the Note which materially and adversely  affects any Support Facility Issuer (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.

                  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
Bond Insurer and the Holders shall have

                                                       XIV-4

<PAGE>



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  Support  Facility  Issuer (so long as the  issuer of such  Support
Facility is in effect)  shall be effective  prior to the receipt by such parties
of the written consent of such Support Facility Issuer.

                  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  Supplemental  Participation  Agreement
amending or supplementing the provisions of the Participation  Agreement and the
delivery to the Trustee and the Bond  Insurer 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 Market Agent
Agreement,  Auction Agency Agreement,  Broker-Dealer Agreements or Bond Purchase
Trust Agreement. Amendments of or supplements to the Market Agent 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.

                  SECTION  14.10.   Notice  of  Certain   Amendments  to  Rating
Agencies. No amendment to the Indenture, the Participation Agreement, the Credit
Facility or a Liquidity Facility  (including any related  Confirming  Agreement)
shall take effect  unless  prior  written  notice  shall have been given to each
Rating Agency then rating the Bonds.

                                                       XIV-5

<PAGE>



                                                    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 on or before the Fixed Rate
Conversion  Date  pursuant to Section  5.02,  5.03 or 5.08 shall  continue to be
Outstanding  hereunder  until such Bonds shall be cancelled in  accordance  with
Section 5.14 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 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)  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 (1)
monies  sufficient to make such payment without  investment or reinvestment,  or
(2)  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 (3) a combination  of both such
monies and Governmental Obligations,  whichever the Authority deems to be in its
best interest,  and 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.  Notwithstanding the foregoing, Bonds shall not
be deemed defeased  hereunder unless the Trustee and the Bond Insurer shall have
received a verification  report of an independent  certified  public  accountant
relating to the  sufficiency  of the escrowed funds to be used for defeasance in
form and substance  reasonably  satisfactory to them, written evidence from each
Rating  Agency then  rating the Bonds that the current  rating on the Bonds will
not be lowered or withdrawn,  and an opinion of Bond Counsel,  which may rely on
such  verification  report  substantially  to the  effect  that the Bonds are no
longer outstanding under the Indenture.  Any escrow agreement entered into under
this  Section  15.01  shall not permit the use of any  forward  supply  contract
providing for the delivery and purchase of Government  Obligations  in an escrow
fund without the approval of the Authority and the Bond Insurer.

                                                       XV-1

<PAGE>



                  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 Auction Rate Bonds and Inverse 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  direction  of  the  Company  also  be  invested  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 XIV to the contrary  not-withstanding,  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.

                  Notwithstanding  anything in this  Indenture to the  contrary,
unless  payment of such Bonds (or provision  for such  payment)  shall have been
made with Available  Moneys, no Bonds bearing interest at a Daily Rate, a Weekly
Rate, a Monthly  Rate, a  Semi-annual  Rate or a Commercial  Paper Rate shall be
deemed to be paid within the meaning of this  Section  unless and until at least
123 days shall have elapsed  subsequent  to payment or provision  for payment of
such Bonds shall have been made in  accordance  with this  Section  15.01 during
which no Act of Bankruptcy shall have occurred or be continuing.  The occurrence
or  continuance  of an Act of  Bankruptcy  shall be  evidenced  by delivery of a
certificate of the Company.

                  Notwithstanding  anything to the  contrary,  in the event that
the principal and/or interest due on the Bonds shall be paid by the Bond Insurer
pursuant  to the  Municipal  Bond  Insurance  Policy,  the  Bonds  shall  remain
Outstanding for all purposes,  not be defeased or otherwise satisfied and not be
considered  paid by the Company,  and  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 continue to exist and shall run
to the benefit of the Bond Insurer,  and the Bond Insurer shall be subrogated to
the rights of the Holders of the Bonds.

                  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.

                                                       XV-2

<PAGE>



                  SECTION  15.02.  Release of Indenture,  Termination  of Right,
Title and  Interest  of  Trustee.  When all 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,
terminate  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 and, except to the extent provided in the Tax Regulatory Agreement, monies
held in the Investment Proceeds Account and in the Rebate Fund; 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 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. Any such monies or Governmental
Obligations held by the Trustee for the Holders after the principal of 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 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.

                  SECTION 15.04.  Special Defeasance  Provisions.  The following
provisions  shall be  applicable  to the extent  that a Support  Facility  is in
effect with respect to the Bonds and  compliance  with the following  provisions
are  necessary  to  maintain  the  rating  assigned  to the Bonds as a result of
obtaining such Support Facility.

                                                       XV-3

<PAGE>



                  In the event (a) any Bonds are  defeased  pursuant  to Section
15.01 other than during an Auction Rate Period or an Auction  Rate-Inverse  Rate
Period or (b) the purchase  price of Bonds  tendered  for  purchase  pursuant to
Section 5.02 or 5.03 is paid with money supplied by the Company,  the Company on
behalf of the Authority  shall provide (i) an opinion of counsel  experienced in
bankruptcy  matters  acceptable to the Trustee that such deposit will not result
in avoidable  preferential  payments to Bondholders under the Bankruptcy Code as
then in existence or (ii) a Non- Bankruptcy  Certificate with respect to amounts
to be applied to the payment of the Bonds.

                                                       XV-4

<PAGE>



                                                    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 as set forth in Appendix A hereto.

                                                       XVI-1

<PAGE>



                                                   ARTICLE XVII

                                                   MISCELLANEOUS

                  SECTION  17.01.  Benefits of Indenture  Limited to  Authority,
Company, Trustee,  Registrar,  Paying Agent, Auction Agent, any Support Facility
Issuer 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 Market Agent,  the Auction  Agent,  any Support
Facility  Issuer  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 Market Agent, the Auction Agent, any Support Facility Issuer 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

                                                      XVII-1

<PAGE>



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 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 Market Agent,
the Auction Agent, any Support  Facility Issuer,  the Registrar and Paying Agent
shall be given or made in writing and shall be deemed to be

                                                      XVII-2

<PAGE>



properly  given or made if sent by  first  class  United  States  mail,  postage
prepaid, addressed as follows:

(a)        As to the Company               One MetroTech Center
                                           Brooklyn, New York 11201-3851
                                           Attention: Treasurer

(b)        As to the Authority             286 Washington Avenue Extension
                                           Albany, New York 12203
                                           Attention: President

(c)        As to the Trustee               450 W. 33rd Street
                                           15th Floor
                                           New York, New York 10001

(d)        As to the Auction Agent         As shall be specified in the
                                           Auction Agent Agreement

(e)        As to the Market Agent(s)  As shall be specified in the Market Agent
                                           Agreement.

(f)        As to the Registrar             450 W. 33rd Street
             and Paying Agent              15th Floor
                                           New York, New York 10001


(g)        As to the Credit Facility    As shall be specified in the
                                        Insurance Agreement



(h)        As to Moody's                   Moody's Investors Service
                                           99 Church Street
                                           New York, New York 10007
                                           Attention:  Structured Finance

(i)        As to S&P                       Standard & Poor's Ratings Service
                                           25 Broadway, 13th Floor
                                           New York, New York 10004
                                 Attention:  Letter of Credit Surveillance Group

                  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

                                                      XVII-3

<PAGE>



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 and
in the case of a Non-Bankruptcy  Certificate by telex, telecopy or other form of
electronic  transmission for receipt by the Trustee by 11:00 a.m. (New York City
time) on the date specified for receipt of such Non-Bankruptcy Certificate.

                  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.

                  Failure of the Credit Facility Issuer to receive any notice or
give any consent contemplated by this Indenture shall not affect the validity of
any notice given or action taken in accordance with this Indenture.

                  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 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 effective date hereof,  for convenience and
purposes of reference  this  Indenture  shall be dated as of October 1, 1999 and
may be cited and referred to as the "Indenture dated as of October 1, 1999".

                  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  5.16  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

                                                      XVII-4

<PAGE>



member,  officer,  agent or employee from the  performance  of any official duty
provided by law or by this Indenture.

                                                      XVII-5

<PAGE>



                  IN WITNESS WHEREOF, the Authority has caused this Indenture to
be executed by its Chair,  Vice-Chair,  President or Treasurer and its corporate
seal to be hereunto affixed and attested by its duly authorized officer, and the
Trustee has caused this Indenture to be executed by its  authorized  officer and
its corporate  seal to be hereunto  affixed and attested by one of its Assistant
Secretaries, all as of the date first above written.

                          NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY

                          By___________________________________
                                             President
(SEAL)

Attest:



-------------------------------
Secretary to the Board
   and Vice President for

     Governmental Relations

(SEAL)
                                        THE CHASE MANHATTAN BANK
                                           as Trustee,
Attest:


_______________________________         By_____________________________
Name:                                            Name:
Title:                                           Title:


                                                      XVII-6

<PAGE>

<TABLE>
<CAPTION>


                                                 TABLE OF CONTENTS

                                                                                                               Page

                                                     ARTICLE I

                                      DEFINITIONS; COMPUTATIONS; CERTIFICATES
                                   AND OPINIONS; EVIDENCE OF ACTION BY AUTHORITY
<S>                                                 <C>                                                       <C>

SECTION 1.01.  Definitions of Specific Terms.........I-1
SECTION 1.02.  Definitions of General Terms.........I-34
SECTION 1.03.  Computations.........................I-34
SECTION 1.04.  Certificates and Opinions............I-35
SECTION 1.05.  Evidence of Action by Authority......I-35


                                                    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-5
SECTION 2.05.  Application of Bond Proceeds...................II-6
SECTION 2.06.  Delivery of the Bonds..........................II-6


                                                    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-6
SECTION 3.05.  Auction Rate Period - Auction Rate Bonds: Change of
                           Auction Date by Market Agent.......................................................III-7
SECTION 3.06.  Auction Rate Period - Auction Rate Bonds: Orders by Existing
                           Holders and Potential Holders......................................................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-11


                                                      (i)

<PAGE>


                                                                                                               Page

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
SECTION 3.10.  Auction Rate Period - Auction Rate Bonds: Adjustment in
                           Percentage........................................................................III-16


                                                   ARTICLE IIIA

                                          AUCTION RATE-INVERSE RATE BONDS

SECTION 3A.01.  Auction Rate-Inverse Rate Bonds: Definitions of Specific Terms...............................IIIA-1
SECTION 3A.02.  Auction Rate-Inverse Rate: Interest on Bonds.................................................IIIA-6
SECTION 3A.03.  Auction Rate-Inverse Rate Bonds: Auction Procedures..........................................IIIA-9
SECTION 3A.04.  Auction Rate-Inverse Rate Bonds: Certain Orders
                           Not Permitted; Purchases and Cancellations.......................................IIIA-17
SECTION 3A.05.  Auction Rate-Inverse Rate Bonds: Deposit and Application
                           of Interest Payments.............................................................IIIA-18
SECTION 3A.06.  Auction Rate-Inverse Rate Bonds: Calculation of Maximum
                           Rate, Minimum Rate and Overdue Rate..............................................IIIA-19
SECTION 3A.07.  Auction Rate-Inverse Rate Bonds: Computation of Interest....................................IIIA-19
SECTION 3A.08.  Auction Rate-Inverse Rate Bonds: Notification of Rates,
                           Amounts and Payment Dates........................................................IIIA-20
SECTION 3A.09.  Auction Rate-Inverse Rate Bonds: Adjustment in Percentage...................................IIIA-22
SECTION 3A.10.  Mandatory Auction Rate Bonds Tender for Purchase............................................IIIA-23


                                                    ARTICLE IV

                                          CHANGES IN THE ADJUSTABLE RATE

SECTION 4.01.  Optional Conversion by Authority................................................................IV-1
SECTION 4.02.  Optional Conversion to Fixed Rate...............................................................IV-4
SECTION 4.03.  Conversion Generally............................................................................IV-7


                                                     ARTICLE V

                                         REDEMPTION AND PURCHASE OF BONDS

SECTION 5.01.  Optional Redemption..............................................................................V-1
SECTION 5.02.  Tender for and Purchase upon Election of Holder..................................................V-3
SECTION 5.03.  Mandatory Tender for Purchase upon Change in the Interest
                           Rate Mode on Business Day Following Certain Calculation

                           Periods or Occurrence of Fixed Rate Conversion Date..................................V-4
SECTION  5.04.    Extraordinary Optional Redemption.............................................................V-5


<PAGE>


                                                                                                               Page

SECTION 5.05.  Redemption if Participation  Agreement or Note Void,
                           Unenforceable or Impossible to Perform...............................................V-6
SECTION 5.06.  Special Tax Redemption Provisions................................................................V-7
SECTION 5.06-A.  Redemption of Bank Bonds.......................................................................V-8
SECTION 5.07.  Redemption at Demand of the State................................................................V-8
SECTION 5.08.  Mandatory Tender for Purchase Upon Expiration or
                           Termination of any Liquidity Facility................................................V-8
SECTION 5.09.  General Provisions Applicable to Mandatory and Optional
                           Tenders for Purchase of Bonds........................................................V-9
SECTION 5.10.  Selection of Bonds to be Redeemed...............................................................V-10
SECTION 5.11.  Notice of Redemption............................................................................V-12
SECTION 5.12.  Bonds Purchased by Liquidity Facility Issuer....................................................V-14
SECTION 5.13.  Effect of Redemption............................................................................V-14
SECTION 5.14.  Cancellation of Redeemed Bonds..................................................................V-14


                                                    ARTICLE VI

                                            SUPPORT FACILITY PROVISIONS

SECTION 6.01.  Support Facility - General......................................................................VI-1
SECTION 6.02.  Liquidity Facility..............................................................................VI-1
SECTION 6.03.  Trustee not Responsible for Enforcement of Support Facility.....................................VI-2
SECTION 6.04.  [Reserved]......................................................................................VI-2
SECTION 6.05.  Payments Pursuant to any Direct Pay Facility; Condition
                           to Delivery of Direct Pay Facility..................................................VI-3


                                                    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




<PAGE>


                                                                                                               Page

                                                    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-4
SECTION 9.04. Application of Monies in the Rebate Fund.........................................................IX-5
SECTION 9.05. Investment of Funds..............................................................................IX-6


                                                     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, Market 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
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, MARKET 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-2
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-5
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-6


<PAGE>


                                                                                                               Page

SECTION 11.11. Qualification of the Trustee....................................................................XI-6
SECTION 11.12. Resignation and Removal of Trustee..............................................................XI-6
SECTION 11.13. Successor Trustee...............................................................................XI-7
SECTION 11.14. Appointment of Market Agent.....................................................................XI-8
SECTION 11.15. Appointment of Registrar and Paying Agent.......................................................XI-9
SECTION 11.16. General Provisions Regarding Registrar and Paying Agent.........................................XI-9
SECTION 11.17. Payment of Registrar and Paying Agent; Indemnification.........................................XI-10
SECTION 11.18. Registrar and Paying Agent's Performance; Duty of Care.........................................XI-10
SECTION 11.19. Qualifications of Registrar and Paying Agent...................................................XI-11
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-11
SECTION 11.21. Appointment of Auction Agent; Qualifications of Auction Agent,
                            Resignation; Removal..............................................................XI-12
SECTION 11.22. Appointment of Broker-Dealers..................................................................XI-13
SECTION 11.23. Appointment of Additional Paying Agents; Each Paying Agent
                           to Hold Money in Trust.............................................................XI-13
SECTION 11.24.  Appointment and Duties of Indexing Agents.....................................................XI-13
SECTION 11.25.  Qualifications of Indexing Agents.............................................................XI-14


                                                    ARTICLE XII

                                         EVENTS OF DEFAULT; REMEDIES UPON
                                                OCCURRENCE THEREOF

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 Bond or Interest Thereon....................................XII-8
SECTION 12.09.  Remedies Not Exclusive........................................................................XII-9
SECTION 12.10.  Effect of Abandonment of Proceedings on Default...............................................XII-9
SECTION 12.11.  Interest on Overdue Amounts...................................................................XII-9




<PAGE>


                                                                                                               Page

                                                   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 MARKET AGENT 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
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 Market Agent Agreement,
                           Auction Agency Agreement, Broker-Dealer Agreements

                           or Bond Purchase Trust Agreement...................................................XIV-5
SECTION 14.10.  Notice of Certain Amendments to Rating Agencies...............................................XIV-5


                                                    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


<PAGE>


                                                                                                               Page

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-3
SECTION 15.04.  Special Defeasance Provisions..................................................................XV-3


                                                    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, Paying Agent, Auction Agent, any Support Facility
                           Issuer 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
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
</TABLE>

Exhibit 4.11
                                                                 EXECUTION COPY






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


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



                         NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY

                                       AND

                            THE CHASE MANHATTAN BANK,
                                   as Trustee


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



                       FIRST SUPPLEMENTAL TRUST INDENTURE

                           Dated as of January 1, 2000

                                       to

                                 TRUST INDENTURE

                           Dated as of January 1, 1997


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


                                   relating to

            $125,000,000 Gas Facilities Revenue Bonds, 1997 Series A
                    (The Brooklyn Union Gas Company Project)




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


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





<PAGE>



                                TABLE OF CONTENTS
                                                                           Page

Parties1
Recitals1


                                    ARTICLE I

                           AUTHORIZATION; DEFINITIONS


SECTION 1.01.                  Supplemental Indenture........................2
SECTION 1.02.                  Definitions...................................2


                                   ARTICLE II

                           AMENDMENTS TO THE INDENTURE

SECTION 2.01. Amendment to Section 1.01 of the Indenture......................2
SECTION 2.02. Amendment to Section 1.01 of the Indenture......................3
SECTION 2.03. Amendment to the definition of "Auction Period" in
              Section 1.01 of the Indenture...................................3
SECTION 2.04. Amendment to the definition of "Broker-Dealer" in
              Section 1.01 of the Indenture...................................3
SECTION 2.05. Amendment to the definition of "Broker-Dealer Agreement"
              in Section 1.01 of the Indenture................................3
SECTION 2.06. Amendment to the definition of "Commercial
              Paper/Treasury Rate" in Section 1.01 of the Indenture.....      4
SECTION 2.07. Amendment to the definition of "Interest Payment Date" in
              Section 1.01 of the Indenture...................................4
SECTION 2.08. Replacement of the definition of "Lehman Brothers Money
              Market Municipal Index" with the definition of "Short Term
              Tax-Exempt Rate Index" in Section 1.01 of the Indenture.........4
SECTION 2.09. Replacement of the term "Lehman Brothers Money Market
              Municipal Index" with the term "Short-Term Tax-Exempt
              Rate Index" throughout the Indenture............................5
SECTION 2.10. Amendment to the definition of "Potential Holder" in
              Section 1.01 of the Indenture...................................5
SECTION 2.11. Amendment to the definition of "SAVRS Rate Period" in
              Section 1.01 of the Indenture...................................6


                                       (i)

<PAGE>



SECTION 2.12. Amendment to the definition of "Support Facility" in
              Section 1.01 of the Indenture...................................6
SECTION 2.13. Amendment to Section 3.04 of the Indenture......................6
SECTION 2.14. Amendment to Section 3.05 of the Indenture......................7
SECTION 2.15. Amendment to Section 3.06 of the Indenture......................8
SECTION 2.15. Amendment to paragraph (a) of Section 3.07
              of the Indenture................................................9
SECTION 2.16. Amendment to paragraph (a) of Section 3.08
              of the Indenture...............................................10
SECTION 2.17. Amendment to paragraph (b) of Section 3.08
              of the Indenture...............................................11
SECTION 2.18. Amendment to Section 3.09 of the Indenture.................... 11
SECTION 2.19. Amendment to Section 4.01 of the Indenture.....................12


                                   ARTICLE III

                                  MISCELLANEOUS

SECTION 3.01. Effective Date; counterparts...................................12
SECTION 3.02. Acceptance.....................................................12




                                      (ii)

<PAGE>



     THIS FIRST  SUPPLEMENTAL  TRUST INDENTURE,  made and dated as of January 1,
2000 (the "First Supplemental  Indenture") to the TRUST INDENTURE made and dated
as of January 1, 1997 (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 THE CHASE MANHATTAN BANK
(together with any successor  trustee  appointed in accordance with the terms of
such  Indenture  of  Trust,   hereinafter  referred  to  as  the  "Trustee"),  a
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, as
trustee,

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

     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 gas company to participate in the  construction of facilities to be used for
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,  the Authority and The Brooklyn Union Gas Company (the  "Company")
have entered into a Participation Agreement, dated as of January 1, 1997 (herein
raftered to as the  "Participation  Agreement"),  providing for the refunding of
Gas  Facilities  Revenue Bonds (The Brooklyn Union Gas Company  Project)  Series
1985  I in the  principal  amount  of  $62,500,000  and  Series  1985  II in the
principal  amount of $62,500,000 (the "Prior Bonds") of the Authority which were
issued to finance the  acquisition,  construction  and  installation  of certain
facilities  for the  furnishing of gas 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 Authority issued its Gas Facilities Revenue Bonds, 1997 Series
A (The  Brooklyn  Union Gas Company  Project)  (the  "Bonds"),  in an  aggregate
principal amount of $125,000,000  (the "Bonds") under and pursuant to Resolution
No. 886 of the Authority,  adopted December 2, 1996 (the "Resolution"),  for the
purpose of paying all or portion of the redemption price of the Prior Bonds; 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 clarify
certain  terms of the  Indenture  and  conform  certain  terms of the  Indenture
relating to SAVRS


                                        1

<PAGE>



Bonds  during a SAVRS Rate  Period with the current  market  standards  for such
SAVRS 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  execution  of this  First
Supplemental Indenture, do exist, have happened, and have been performed; and

     WHEREAS,  all  consents  and notices  required to be obtained  and given as
conditions to the passage of this First  Supplemental  Indenture pursuant to the
Indenture and all other  documents  relating to the Bonds have been obtained and
given;

     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.

     SECTION 1.02. Definitions.  Unless the context shall otherwise require, all
terms which are defined in Section 1.01 of the Indenture shall have
the same meanings,  respectively,  in this First Supplemental  Indenture as such
terms are given in said Section 1.01 of the Indenture.

                                   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  add  the
following definition:


           (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

<PAGE>



  ""Beneficial Owner" shall mean with respect to the SAVRS Bonds during a SAVRS
  ------------------
Rate Period, 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 SAVRS
Bonds."

SECTION 2.02. Amendment to Section 1.01 of the Indenture.  Section 1.01is hereby
amended to add the following definition:

          ""BMA Index"  shall mean The Bond Market  Association  Municipal  Swap
          Index  released  by  Municipal   Market  Data  to  its   subscribers."

SECTION 2.03. Amendment to the definition of "Auction Period" in Section 1.01 of
the  Indenture.  The  definition  of  "Auction  Period" in  Section  1.01 of the
Indenture is hereby amended to read as follows:

""Auction  Period" shall mean (i) in the event the Bonds are issued initially as
SAVRS  Bonds  during a SAVRS Rate  Period,  the period  from and  including  the
Closing Date to and including the initial Auction Date and (ii)  thereafter,  or
after a Change in the  Interest  Rate Mode to a SAVRS Rate,  during a SAVRS Rate
Period,  until the  effective  date of a Change in the Interest  Rate Mode,  the
effective  date of a conversion  to the Fixed Rate or the maturity of the Bonds,
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 or a conversion to a Fixed Rate, to but excluding the
effective date of such change or conversion,  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."

     SECTION 2.04.  Amendment to the  definition of  "Broker-Dealer"  in Section
     1.01 of the Indenture. The definition of "Broker-Dealer" in Section 1.01 of
     the Indenture is hereby amended to read as follows:

     ""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,  (iii) that has entered  into a Broker-
     Dealer  Agreement  with the  Auction  Agent and the  Company  that  remains
     effective and (iv) after the  occurrence  and during the  continuance  of a
     Company Downgrade Event that is reasonably acceptable to the Bond Insurer."

     SECTION 2.05.  Amendment to the definition of "Broker-Dealer  Agreement" in
     Section 1.01 of the Indenture. The definition of "Broker-Dealer  Agreement"
     in Section 1.01 of the Indenture is hereby amended to read as follows:



                                                                  3

<PAGE>



     ""Broker-Dealer  Agreement"  shall mean each  agreement  applicable  to the
     SAVRS  Bonds during a SAVRS Rate Period or the SAVRS
     Bonds  during a  SAVRS-RIBS  Rates  Period,  as the  case  may be,  among 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."

     SECTION 2.06.  Amendment to the  definition of  "Commercial  Paper/Treasury
     Rate" in Section 1.01 of the  Indenture.  The second  sentence in the first
     paragraph of the definition of "Commercial  Paper/Treasury Rate" in Section
     1.01 of the Indenture is hereby amended to read as follows:

     " 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."

     SECTION 2.07.  Amendment to the  definition  of "Interest  Payment Date" in
     Section 1.01 of the Indenture. Paragraph (b) of the definition of "Interest
     Payment Date" in Section 1.01 of the Indenture is hereby amended to read as
     follows:

     "(b)  during a SAVRS 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 91st day after the first
     day of such Auction Period and the Business Day immediately succeeding such
     Auction Period"

     SECTION  2.08.  Replacement  of the  definition of "Lehman  Brothers  Money
     Market  Municipal Index" with the definition of "Short Term Tax-Exempt Rate
     Index" in Section 1.01 of the  Indenture.  Section 1.01 of the Indenture is
     hereby amended to replace the  definition of "Lehman  Brothers Money Market
     Municipal Index" with the following definition:

                     "Short Term Tax-Exempt Rate Index" shall mean:
                      ---------------------------------------------

     (i) with  respect  to a SAVRS Rate  during a SAVRS Rate  Period and a 7-day
     Auction Period, on the date of the calculation of the Maximum Auction Rate,
     the Minimum  Auction Rate or the Overdue  Rate,  the most recent BMA Index;
     and

     (ii) with respect to a SAVRS Rate during a SAVRS Rate Period and an Auction
     Period that exceeds 7 days, and with respect to a SAVRS Rate during a SAVRS
     Rate-RIBS Rate Period, the average of yield evaluations at par,  determined
     by the Indexing Agent on the date of

                                                                             4
<PAGE>



the  calculation  of the Maximum Rate, the Minimum Rate, the Maximum SAVRS Rate,
the Minimum SAVRS Rate or Overdue  Rate, of securities  (whether or not actually
issued) all of which shall have a term as near as  practicable to then effective
Auction Period or Interest  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
Auction  Period or Interest  Period,  the  interest on which is not  included in
gross income for federal income tax purposes,  of no fewer than twenty 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  and the Bond  Insurer 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 Short Term  Tax-Exempt  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.  Upon  the
occurrence and during the  continuance of a Company  Downgrade  Event,  the Bond
Insurer shall have the right to consent to any change to the  Component  Issuers
and any change in the method of setting  the Short Term  Tax-Exempt  Rate Index,
which consent shall not be unreasonably withheld."

     SECTION  2.09.  Replacement  of the  term  "Lehman  Brothers  Money  Market
     Municipal  Index"  with  the  term   "Short-Term   Tax-Exempt  Rate  Index"
     throughout  the  Indenture.  The Indenture is hereby amended to replace the
     term "Lehman  Brothers Money Market  Municipal  Index" with the term "Short
     Term Tax-Exempt Rate Index" throughout the Indenture.

     SECTION 2.10.  Amendment to the definition of "Potential Holder" in Section
     1.01 of the Indenture. The definition of "Potential Holder" in Section 1.01
     of the  Indenture  is    hereby  amended  to  read  as
     follows:



                                                                  5

<PAGE>



     ""Potential Holder" shall mean (i) with respect to any SAVRS Bonds during a
      SAVRS and related RIBS Rate Period, any person,  including
     any Existing Holder,  (A) who shall have executed a Purchaser's  Letter (or
     whose Broker-Dealer shall have executed a Purchaser's  Letter), and (B) who
     may be interested in acquiring the beneficial  ownership of SAVRS Bonds or,
     in the case of an Existing Holder thereof,  the beneficial  ownership of an
     additional  principal  amount of SAVRS  Bonds and (ii) with  respect to any
     SAVRS Bonds  during a SAVRS Rate  Period,  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 SAVRS Bonds."

     SECTION 2.11. Amendment to the definition of "SAVRS Rate Period" in Section
     1.01 of the  Indenture.  The  definition  of "SAVRS Rate Period" in Section
     1.01 of the Indenture is hereby amended to read as follows:

""SAVRS Rate Period" shall mean any period during which the SAVRS Bonds
                       -----------------
bear  interest  at a SAVRS 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 SAVRS Bonds,  or on the
effective  date of a Change in the  Interest  Rate Mode to a SAVRS Rate,  as the
case may be, and shall extend through the day immediately  preceding the earlier
of (a) the effective  date of a Change in the Interest Rate Mode,  (b) the Fixed
Rate Conversion Date, or (c) the Stated Maturity."

     SECTION 2.12.  Amendment to the definition of "Support Facility" in Section
     1.01 of the Indenture. The definition of "Support Facility" in Section 1.01
     of the  Indenture  is    hereby  amended  to  read  as
     follows:

     ""Support Facility" shall mean any instrument satisfactory to the Authority
     entered into or obtained in connection  with the Bonds in order to obtain a
     rating or ratings on 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, insurance company,  other financial institution or institutions,  or
     any  combination of the foregoing which Support  Facility  provides for the
     payment of (i) the  purchase  price equal to the  principal  of and accrued
     interest on Bonds  delivered to the  Registrar and Paying Agent and/or (ii)
     principal of and  interest on all Bonds  coming due and payable  during the
     term thereof."


     SECTION  2.13.  Amendment to Section 3.04 of the  Indenture.  Clause (A) in
     Paragraph 2 of Section 3.04 of the  Indenture is hereby  amended to read as
     follows:

                     "(A) the Trustee,  the Bond  Insurer 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 attached hereto
as, or containing


                                                                  6

<PAGE>



substantially the information  contained in, Exhibit J 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,"; and

     Section 3.04 of the Indenture is hereby amended to add a new paragraph 3 to
     read as follows:

     "3.  In the  event of a Change in the  Interest  Rate Mode to a SAVRS  Rate
     during a SAVRS 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 Auction  Period 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 a SAVRS Rate during a SAVRS Rate Period
     to the Trustee,  the Market Agent,  the Auction Agent, the Bond Insurer and
     the  Securities  Depository.  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 a SAVRS  Rate  during  a  SAVRS  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 Bond
     Insurer and the Auction Agent receive on the effective  date of such Change
     in the Interest  Rate Mode to a SAVRS Rate during a SAVRS 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  2.14.  Amendment to Section 3.05 of the  Indenture.  The third and
     fourth sentence in Section 3.05 of the Indenture are hereby amended to read
     as follows:

          "The Market 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, or
          with  respect  to a Change in the  Interest  Rate Mode to a SAVRS Rate
          during a SAVRS Rate Period 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,  the Bond  Insurer  and the  Securities
          Depository which shall state (i) the determination of the Market Agent
          to change the Auction  Date,  (ii) the new Auction  Date and (iii) the
          date on which  such  Auction  Date  shall  be  changed.  If after  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."




<PAGE>



          SECTION 2.15. Amendment to Section 3.06 of the Indenture. Section 3.06
          of the Indenture is hereby amended to read as follows:

          "(a) Prior to the Submission  Deadline on each Auction Date during the
          SAVRS Rate Period, the following orders may be submitted:

          (i) each Beneficial Owner may submit to the Broker-Dealer  information
          as to:

                               (A) the principal  amount of SAVRS Bonds, if any,
                     held by such Beneficial  Owner which such Beneficial  Owner
                     desires to  continue  to hold  without  regard to the SAVRS
                     Rate for the next succeeding Auction Period;

                               (B) the principal  amount of SAVRS Bonds, if any,
                     held by such Beneficial  Owner which such Beneficial  Owner
                     offers  to sell if the SAVRS  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 SAVRS Bonds, if any,
                     held by such Beneficial  Owner which such Beneficial  Owner
                     offers to sell  without  regard  to the SAVRS  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 SAVRS Bonds which each such Potential  Beneficial
           Owner  offers to purchase  if the SAVRS 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 each  Beneficial  Owner and Potential
Beneficial Owner placing an Order is hereinafter  referred to as a "Bidder";  an
Order  containing  the  information  referred  to  in  clause  (i)(A)  above  is
hereinafter  referred to as a "Hold Order";  an Order containing the information
referred to in clause (i)(B) or clause (ii) above is hereinafter  referred to as
a "Bid";  and an Order  containing the information  referred to in clause (i)(C)
above  is  hereinafter  referred  to as a  "Sell  Order".  The  submission  by a
Broker-Dealer  of an Order to the Auction  Agent  shall  likewise be referred to
herein as an "Order" and an Existing  Holder or  Potential  Holder who places an
Order with the Auction Agent shall likewise be referred to herein as a "Bidder."

          Orders  may be  submitted  in  principal  amounts  of  $50,000  or any
          integral multiple thereof.




<PAGE>



                     (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  SAVRS
                     Bonds specified in such Bid if the SAVRS 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  SAVRS Bonds to be determined as set
                     forth in  subsection  (a)(iv) of Section  3.09 if the SAVRS
                     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  SAVRS 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 SAVRS 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 SAVRS Bonds  specified in such Sell
               Order; or

                               (B) such principal  amount or a lesser  principal
                     amount of SAVRS 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:

                               (A) the principal amount of SAVRS Bonds specified
                     in such Bid if the SAVRS 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 SAVRS Bonds as set forth in subsection  (a)(v) of
                     Section 3.09 if the SAVRS Rate  determined  on such Auction
                     Date shall be equal to such specified rate."

                    SECTION 2.15.  Amendment to paragraph (a) of Section 3.07 of
                    the  Indenture.   Paragraph  (a)  of  Section  3.08  of  the
                    Indenture is hereby amended to read as follows:


                                        9

<PAGE>



                    "(a)  During a SAVRS Rate Period  each  Broker-Dealer  shall
                    submit  in  writing  to  the  Auction  Agent  prior  to  the
                    Submission  Deadline on each  Auction  Date during the SAVRS
                    Rate  Period,  all Orders  obtained  by such  Broker-Dealer,
                    designating  itself as (a) an Existing  Holder in respect of
                    the  principal  amount  of SAVRS  Bonds  subject  to  Orders
                    submitted or deemed submitted to it by Beneficial  Owners or
                    (b) a Potential Holder in respect of the principal amount of
                    the  SAVRS  Bonds  subject  to  Orders  submitted  or deemed
                    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;

                    (ii) the aggregate  principal amount of SAVRS Bonds that are
                    subject to such Order;

                    (iii)  to the extent that such Bidder is a Beneficial Owner:


                    (A) the principal  amount of SAVRS Bonds, if any, subject to
                    any Hold Order placed by such Existing Holder;

                    (B) the principal  amount of SAVRS 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 SAVRS Bonds, if any, subject to
                    any Sell Order placed by such Existing Holder; and

                               (iv) to the  extent  such  Bidder is a  Potential
                     Beneficial  Owner,  the rate  specified  in such  Potential
                     Holder's Bid."

SECTION  2.16.  Amendment  to paragraph  (a) of Section  3.08 of the  Indenture.
Clauses  (i) and (ii) of  paragraph  (a) of Section  3.08 of the  Indenture  are
hereby amended to read as follows:

                     "(v)  the   excess  of  the  total   principal   amount  of
           Outstanding  SAVRS  Bonds  over the  aggregate  principal  amount  of
           Outstanding SAVRS Bonds subject to Submitted Hold Orders (such excess
           being hereinafter referred to as the "Available SAVRS Bonds"); and

                     (ii)  from  the  Submitted  Orders  whether  the  aggregate
           principal  amount  of  SAVRS  Bonds  subject  to  Submitted  Bids  by
           Potential Holders specifying one or more rates equal to or lower than
           the Maximum SAVRS Rate exceeds or is equal to the sum of:

                     (D) the aggregate  principal  amount of SAVRS Bonds subject
                     to Submitted  Bids by Existing  Holders  specifying  one or
                     more rates higher than the Maximum SAVRS Rate; and



                                       10

<PAGE>



               (E)  the  aggregate  principal  amount of SAVRS 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 SAVRS  Bonds in clauses (A) and (B)
           above is zero because all of the Outstanding  SAVRS Bonds are subject
           to Submitted Hold Orders),  such Submitted Bids by Potential  Holders
           are  hereinafter  referred to  collectively  as "Sufficient  Clearing
           Bids");"

     SECTION 2.17  Amendment to paragraph (b) of Section 3.08 of the  Indenture.
     Clauses (ii)and (iii) of paragraph (b) of Section 3.08 of the Indenture are
     hereby amended to read as follows:

                     "(ii) if Sufficient  Clearing Bids do not exist (other than
           because  all of the  Outstanding  SAVRS  Bonds  are  the  subject  of
           Submitted  Hold  Orders),  the  SAVRS  Rate for the  next  succeeding
           Auction Period therefor shall be equal to the Maximum SAVRS Rate; and

                     (iii) if all of the Outstanding  SAVRS Bonds are subject to
           Submitted Hold Orders, the SAVRS Rate for the next succeeding Auction
           Period therefor shall be equal to the Minimum SAVRS Rate."

          SECTION 2.18.  Amendment to Section 3.09 of the Indenture.  Paragraphs
     (b) and (c) of Section 3.09 of the Indenture are hereby  amended to read as
     follows:

          "(b) If  Sufficient  Clearing  Bids  have not been  made  (other  than
     because all of the  Outstanding  SAVRS 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  SAVRS
                     Rate shall be rejected,  thus  entitling each such Existing
                     Holder to continue to hold the aggregate  principal  amount
                     of SAVRS Bonds subject to such Submitted Bids;

                               (ii) Potential Holders' Submitted Bids specifying
                     any rate that is equal to or lower than the  Maximum  SAVRS
                     Rate shall be accepted,  thus requiring each such Potential
                     Holder to purchase the aggregate  principal amount of SAVRS
                     Bonds subject to such Submitted Bids; and

                               (iii)  each  Existing   Holder's   Submitted  Bid
                     specifying  any rate that is higher than the Maximum  SAVRS
                     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 SAVRS Bonds subject to


                                       11

<PAGE>



                     such  Submitted  Bid or Submitted  Sell Order,  but in both
                     cases only in an amount  equal to the  aggregate  principal
                     amount of SAVRS Bonds obtained by multiplying the aggregate
                     principal  amount of SAVRS 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  SAVRS  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  SAVRS Bonds subject to all
                     such Submitted Bids and Submitted Sell Orders.

               (c)  If all Outstanding SAVRS Bonds are subject to Submitted Hold
                    Orders, all Submitted Bids shall be rejected."

          SECTION 2.19. Amendment to Section 4.01 of the Indenture. Subparagraph
          (ii) of Section  4.01.3(A) of the Indenture are hereby amended to read
          as follows:

          "(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 Q, 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 SAVRS Bonds during a SAVRS Rate Period
     or the SAVRS-RIBS  Bonds during a SAVRS-RIBS Rates Period from gross income
     for federal income tax purposes;"


                                   ARTICLE III

                                  MISCELLANEOUS

          SECTION 3.01.  Effective Date;  counterparts.  This First Supplemental
     Indenture  shall become  effective  upon  execution and delivery and may be
     executed in several  counterparts,  each of which shall be an original  and
     all of which shall constitute but one and the same instrument.

          SECTION 3.02.  Acceptance.  The Trustee  accepts the trusts created by
     the Indenture,  as supplemented by this First Supplemental  Indenture,  and
     agrees to perform the same upon the terms and  conditions in the Indenture,
     as so  supplemented.  The Trustee  shall not be  responsible  in any manner
     whatsoever  for or in respect of the validity or  sufficiency of this First
     Supplemental  Indenture or the due execution hereof by the Authority or for
     or in respect of the recitals  contained  herein,  all of which are made by
     the Authority solely.



                                       12

<PAGE>


          IN WITNESS WHEREOF,  the Authority has caused this First  Supplemental
     Indenture  to be executed by its  President  and its  corporate  seal to be
     hereunto affixed and attested by its Secretary,  and the Trustee has caused
     this First  Supplemental  Indenture to be executed and attested by its duly
     Authorized officers, all as of the date first above written.


                                        NEW YORK STATE ENERGY RESEARCH
                                        AND DEVELOPMENT AUTHORITY



                                       By
                                             President

(SEAL)

Attest:



Secretary to the Board and
  Vice President for
  Governmental Relations

                                        THE CHASE MANHATTAN BANK,
                                        as Trustee



                                        By
                                        Name:
                                        Title:



Attest:


Name:
Title:


                                       A-1
Exhibit 4.12

                                                       EXECUTION COPY










                                         $700,000,000

                                       CREDIT AGREEMENT

                                            among


                                     KEYSPAN CORPORATION,
                                         as Borrower,


                                     The Several Lenders
                              from Time to Time Parties Hereto,


                                       CITIBANK, N.A.,
                                    as Syndication Agent,


                                   EUROPEAN AMERICAN BANK,
                                   as Documentation Agent,


                                             and


                                  THE CHASE MANHATTAN BANK,
                                   as Administrative Agent


                                 Dated as of November 8, 1999






                     CHASE SECURITIES INC., Lead Arranger and Book Manager

509253-0191-02261-99A5F10H-CRA

<PAGE>


                                        i
<TABLE>
<CAPTION>
                                                                                          Page


                                       TABLE OF CONTENTS

                                                                                          Page


<S>                                                                                       <C>
SECTION 1.  DEFINITIONS......................................................................1
        1.1  Defined Terms...................................................................1
        1.2  Other Definitional Provisions..................................................13

SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS.................................................14
        2.1  Commitments....................................................................14
        2.2  Competitive Bid Procedure......................................................14
        2.3  Procedure for Loan Borrowing...................................................16
        2.4  Facility Fees, etc. ...........................................................16
        2.5  Termination or Reduction of Commitments........................................17
        2.6  Optional Prepayments...........................................................17
        2.7  Conversion and Continuation Options............................................17
        2.8  Limitations on Eurodollar Tranches.............................................18
        2.9  Interest Rates and Payment Dates...............................................18
        2.10  Computation of Interest and Fees..............................................18
        2.11  Inability to Determine Interest Rate..........................................19
        2.12  Pro Rata Treatment and Payments...............................................19
        2.13  Requirements of Law...........................................................20
        2.14  Taxes.........................................................................21
        2.15  Indemnity.....................................................................23
        2.16  Change of Lending Office......................................................23
        2.17  Replacement of Lenders........................................................24

SECTION 3.  REPRESENTATIONS AND WARRANTIES..................................................24
        3.1  Financial Condition............................................................24
        3.2  No Change......................................................................25
        3.3  Corporate Existence; Compliance with Law.......................................25
        3.4  Corporate Power; Authorization; Enforceable Obligations........................25
        3.5  No Legal Bar...................................................................25
        3.6  Litigation.....................................................................25
        3.7  No Default.....................................................................26
        3.8  Ownership of Property; Liens...................................................26
        3.9  Intellectual Property..........................................................26
        3.10  Taxes.........................................................................26
        3.11  Federal Regulations...........................................................26
        3.12  Labor Matters.................................................................26
        3.13  ERISA.........................................................................26
        3.14  Investment Company Act; Other Regulations.....................................27
        3.15  Subsidiaries..................................................................27
        3.16  Use of Proceeds...............................................................27
        3.17  Environmental Matters.........................................................27
        3.18  Accuracy of Information, etc..................................................28
        3.19  Year 2000 Matters.............................................................28

SECTION 4.  CONDITIONS PRECEDENT............................................................29

                                           - i -
509253-0191-02261-99A5F10H-CRA

<PAGE>


                                                                                            ii
                                                                                          Page

        4.1  Conditions to Initial Extension of Credit......................................29
        4.2  Conditions to
Each Extension of Credit....................................................................30

SECTION 5.  AFFIRMATIVE COVENANTS...........................................................30
        5.1  Financial Statements...........................................................30
        5.2  Certificates; Other Information................................................31
        5.3  Payment of Obligations.........................................................31
        5.5  Maintenance of Property; Insurance.............................................32
        5.6  Inspection of Property; Books and Records; Discussions.........................32
        5.7  Notices........................................................................32
        5.8  Environmental Laws.............................................................33
        5.9  Transaction with Affiliates.  .................................................33

SECTION 6.  NEGATIVE COVENANTS..............................................................33
        6.1  Financial Condition Covenant...................................................33
        6.2  Liens..........................................................................33
        6.3  Fundamental Changes............................................................34
        6.4  Disposition of Property........................................................34
        6.5  Negative Pledge Clauses........................................................35
        6.6  Limitation on Restrictions on Distributions from Subsidiaries. ................35

SECTION 7.  EVENTS OF DEFAULT...............................................................35

SECTION 8.  THE ADMINISTRATIVE AGENT........................................................37
        8.1  Appointment....................................................................37
        8.2  Delegation of Duties...........................................................38
        8.3  Exculpatory Provisions.........................................................38
        8.4  Reliance by Administrative Agent...............................................38
        8.5  Notice of Default..............................................................38
        8.6  Non-Reliance on Administrative Agent and Other Lenders.........................39
        8.7  Indemnification................................................................39
        8.8  Administrative Agent in Its Individual Capacity................................40
        8.9  Successor Administrative Agent.................................................40

SECTION 9.  MISCELLANEOUS...................................................................40
        9.1  Amendments and Waivers.........................................................40
        9.2  Notices........................................................................41
        9.3  No Waiver; Cumulative Remedies.................................................41
        9.4  Survival of Representations and Warranties.....................................42
        9.5  Payment of Expenses and Taxes..................................................42
        9.6  Successors and Assigns; Participations and Assignments.........................43
        9.7  Adjustments; Set-off...........................................................45
        9.8  Counterparts...................................................................45
        9.9  Severability...................................................................45
        9.10  Integration...................................................................45
        9.11  GOVERNING LAW.................................................................45
        9.12  Submission To Jurisdiction; Waivers...........................................46

                                           - ii -
509253-0191-02261-99A5F10H-CRA

<PAGE>


                                                                                           iii
                                                                                          Page

        9.13  Acknowledgements..............................................................46
        9.14  Confidentiality...............................................................46
        9.15  WAIVERS OF JURY TRIAL.........................................................47



SCHEDULES:

1.1A    Commitments
3.4     Consents, Authorizations, Filings and Notices
3.15    Subsidiaries
6.2(f)  Existing Liens
6.5     Existing Negative Pledge Clauses
6.6     Existing Limitations on Restrictions on Distributions from Subsidiaries


EXHIBITS:

A       Form of Closing Certificate
B       Form of Assignment and Acceptance
C       Form of Legal Opinion of Steven L. Zelkowitz
D       Form of Exemption Certificate
</TABLE>

                                           - iii -
509253-0191-02261-99A5F10H-CRA

<PAGE>


                                        1











               CREDIT  AGREEMENT,  dated as of November 8, 1999,  among  KEYSPAN
CORPORATION,  a New York  corporation  (the  "Borrower"),  the several banks and
other  financial  institutions  or  entities  from time to time  parties to this
Agreement  (the  "Lenders"),  CITIBANK,  N.A., as  syndication  agent,  EUROPEAN
AMERICAN  BANK,  as  Documentation  Agent,  and THE  CHASE  MANHATTAN  BANK,  as
administrative agent.

               The parties hereto hereby agree as follows:

                                    SECTION 1.  DEFINITIONS

                         1.1 Defined Terms. As used in this Agreement, the terms
                    listed  in  this  Section  1.1  shall  have  the  respective
                    meanings set forth in this Section 1.1.

               "ABR":  for any  day,  a rate  per  annum  (rounded  upwards,  if
necessary,  to the next 1/16 of 1%) equal to the  greatest of (a) the Prime Rate
in effect  on such  day,  (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds  Effective  Rate in effect on such day plus 1/2 of 1%. For
purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Reference  Lender as its prime rate in effect
at its principal  office in New York City (the Prime Rate not being  intended to
be the lowest rate of interest  charged by the  Reference  Lender in  connection
with extensions of credit to debtors);  "Base CD Rate" shall mean the sum of (a)
the product of (i) the  Three-Month  Secondary CD Rate and (ii) a fraction,  the
numerator  of which is one and the  denominator  of which is one  minus  the C/D
Reserve  Percentage and (b) the C/D Assessment Rate; and "Three-Month  Secondary
CD Rate" shall mean,  for any day,  the  secondary  market rate for  three-month
certificates of deposit reported as being in effect on such day (or, if such day
shall not be a  Business  Day,  the next  preceding  Business  Day) by the Board
through the public information telephone line of the Federal Reserve Bank of New
York (which rate will, under the current practices of the Board, be published in
Federal Reserve  Statistical  Release  H.15(519)  during the week following such
day),  or,  if such  rate  shall  not be so  reported  on such day or such  next
preceding  Business  Day, the average of the  secondary  market  quotations  for
three-month certificates of deposit of major money center banks in New York City
received at  approximately  10:00 A.M.,  New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding Business Day) by the
Reference  Lender  from three New York City  negotiable  certificate  of deposit
dealers of  recognized  standing  selected by it. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective Rate shall be effective as of the opening of business on the effective
day of such change in the Prime Rate, the  Three-Month  Secondary CD Rate or the
Federal Funds Effective Rate, respectively.

               "ABR Loans":  Loans the rate of interest  applicable  to which is
based upon the ABR.

               "Administrative  Agent": The Chase Manhattan Bank,  together with
its affiliates, as the administrative agent for the Lenders under this Agreement
and the other Loan Documents, together with any of its successors.

               "Affiliate": as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person.  For purposes of this  definition,  "control" of a Person means the
power, directly or indirectly,  either to (a) vote 10% or more of the securities
having  ordinary  voting  power  for  the  election  of  directors  (or  persons
performing  similar  functions)  of such  Person  or (b)  direct  or  cause  the
direction of the management and policies of such Person,  whether by contract or
otherwise.


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                                        2




               "Aggregate Exposure":  with respect to any Lender at any time, an
amount equal to the amount of such Lender's Commitment then in effect or, if the
Commitments  have been  terminated,  the  amount  of such  Lender's  Loans  then
outstanding.

                         "Aggregate  Exposure  Percentage":  with respect to any
                    Lender at any time, the ratio (expressed as a percentage) of
                    such  Lender's  Aggregate  Exposure  at  such  time  to  the
                    Aggregate Exposure of all Lenders at such time.

                         "Agreement":   this  Credit   Agreement,   as  amended,
                    supplemented or otherwise modified from time to time.

               "Applicable  Margin":  for each Type of Loan,  the rate per annum
set forth under the relevant  column  heading below which  corresponds  with the
most current rating of the Borrower's senior unsecured  long-term debt issued by
S&P and Moody's respectively; provided that for each day the aggregate principal
amount of Loans outstanding is greater than the amount equal to 33% of the Total
Commitments,  the  Applicable  Margin then in effect will be increased by 0.125%
per annum.


                       Applicable Margin        Applicable Margin
     Ratings         For Eurodollar Loans         for ABR Loans

==================  =======================  ========================
A/A2                        0.305%                    0.000%

A-/A3                       0.425%                    0.000%

BBB+/Baa1                   0.525%                    0.000%

BBB/Baa2                    0.625%                    0.000%

<BBB-/Baa3                  0.975%                    0.000%
-

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

               Changes in the  Applicable  Margin shall become  effective on the
date on which S&P  and/or  Moody's  changes  the  rating it has  issued  for the
Borrower's senior unsecured  long-term debt. In the event of split ratings,  the
lower of such ratings shall apply;  if only one S&P and Moody's  issues a rating
of the Borrower's senior unsecured long-term debt, such rating shall apply.

               "Approved  Fund":  with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised  by the same  investment  advisor as such  Lender or by an
Affiliate of such investment advisor.

               "Assignee":  as defined in Section 9.6(c).
                --------


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                                        3




                         "Assignment   and   Acceptance":   an  Assignment   and
                    Acceptance, substantially in the form of Exhibit B.

               "Assignor":  as defined in Section 9.6(c).
                --------

                         "Available  Commitment":  as to any Lender at any time,
                    an amount equal to the excess,  if any, of (a) such Lender's
                    Commitment  then in effect over (b) such Lender's Loans then
                    outstanding.

               "Benefitted Lender":  as defined in Section 9.7(a).
                -----------------

                         "Board":  the Board of Governors of the Federal Reserve
                    System of the United States (or any successor).

               "Borrower":  as defined in the preamble hereto.
                --------

                         "Borrowing  Date":  any Business  Day  specified by the
                    Borrower  as a date  on  which  the  Borrower  requests  the
                    relevant Lenders to make Loans hereunder.

               "Business":  as defined in Section 3.17(b).
                --------

               "Business Day": a day other than a Saturday,  Sunday or other day
on which  commercial banks in New York City are authorized or required by law to
close,  provided,  that with respect to notices and determinations in connection
with, and payments of principal and interest on,  Eurodollar  Loans, such day is
also a day for trading by and between banks in Dollar  deposits in the interbank
eurodollar market.

               "Capital Lease Obligations": as to any Person, the obligations of
such  Person  to pay  rent  or  other  amounts  under  any  lease  of (or  other
arrangement  conveying  the  right  to use)  real  or  personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such Person  under GAAP
and, for the purposes of this Agreement,  the amount of such  obligations at any
time  shall  be the  capitalized  amount  thereof  at such  time  determined  in
accordance with GAAP.

               "Capital Stock": any and all shares, interests, participations or
other equivalents  (however  designated) of capital stock of a corporation,  any
and all  equivalent  ownership  interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.

               "Cash Equivalents":  (a) marketable direct obligations issued by,
or unconditionally  guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,  in
each  case  maturing  within  one  year  from  the  date  of  acquisition;   (b)
certificates  of deposit,  time deposits,  eurodollar time deposits or overnight
bank  deposits  having  maturities  of six  months  or  less  from  the  date of
acquisition  issued by any Lender or by any commercial  bank organized under the
laws of the United  States or any state  thereof  having  combined  capital  and
surplus of not less than  $500,000,000;  (c) commercial paper of an issuer rated
at least A-1 by  Standard & Poor's  Ratings  Services  ("S&P") or P-1 by Moody's
Investors  Service,  Inc.  ("Moody's"),  or carrying an  equivalent  rating by a
nationally  recognized  rating agency,  if both of the two named rating agencies
cease  publishing  ratings of commercial paper issuers  generally,  and maturing
within six months from the date

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<PAGE>


                                        4




of  acquisition;  (d) repurchase  obligations of any Lender or of any commercial
bank satisfying the requirements of clause (b) of this definition, having a term
of not more than 30 days, with respect to securities  issued or fully guaranteed
or insured by the United States  government;  (e) securities  with maturities of
one year or less from the date of acquisition  issued or fully guaranteed by any
state,  commonwealth  or  territory  of the  United  States,  by  any  political
subdivision or taxing authority of any such state,  commonwealth or territory or
by  any  foreign  government,  the  securities  of  which  state,  commonwealth,
territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A2 by Moody's;  (f) securities  with
maturities of six months or less from the date of acquisition  backed by standby
letters of credit issued by any Lender or any  commercial  bank  satisfying  the
requirements  of clause (b) of this  definition;  or (g) shares of money  market
mutual or similar  funds  which  invest  exclusively  in assets  satisfying  the
requirements of clauses (a) through (f) of this definition.

               "C/D  Assessment  Rate":  for any day as applied to any ABR Loan,
the annual  assessment rate in effect on such day that is payable by a member of
the Bank Insurance Fund maintained by the Federal Deposit Insurance  Corporation
(the "FDIC") classified as well-capitalized  and within supervisory subgroup "B"
(or a comparable successor assessment risk classification) within the meaning of
12 C.F.R. ss. 327.4 (or any successor  provision) to the FDIC (or any successor)
for the FDIC's (or such  successor's)  insuring time deposits at offices of such
institution in the United States.

               "C/D Reserve Percentage": for any day as applied to any ABR Loan,
that  percentage  (expressed  as a decimal)  which is in effect on such day,  as
prescribed by the Board,  for determining the maximum reserve  requirement for a
Depositary  Institution  (as defined in  Regulation  D of the Board as in effect
from time to time) in  respect  of new  non-personal  time  deposits  in Dollars
having a maturity of 30 days or more.

                         "Closing  Date":  the  date  on  which  the  conditions
                    precedent   set  forth  in  Section   4.1  shall  have  been
                    satisfied, which date is November 18, 1999.

                         "Code":  the Internal  Revenue Code of 1986, as amended
                    from time to time.

               "Commitment": as to any Lender, the obligation of such Lender, if
any, to make Loans in an aggregate principal amount not to exceed the amount set
forth under the heading  "Commitment"  opposite  such  Lender's name on Schedule
1.1A or in the Assignment and Acceptance  pursuant to which such Lender became a
party hereto, as the same may be changed from time to time pursuant to the terms
hereof.

                         "Commitment  Period": the period from and including the
                    Closing Date to the Revolving Termination Date.

               "Commonly   Controlled  Entity":   an  entity,   whether  or  not
incorporated,  that is under common control with the Borrower within the meaning
of Section  4001 of ERISA or is part of a group that  includes  the Borrower and
that is treated as a single employer under Section 414 of the Code.

               "Competitive Loans":  a loan made pursuant to Section 2.2.
                -----------------


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<PAGE>


                                        5




                         "Competitive Bid": means an offer by a Lender to make a
                    Competitive Loan in accordance with Section 2.2.

     "Competitive  Bid Rate":  means,  with respect to any Competitive  Bid, the
Margin  or  Fixed  Rate,  as  applicable,  offered  by the  Lender  making  such
Competitive Bid.

     "Competitive Bid Request":  means a request by the Borrower for Competitive
Bids in accordance with Section 2.2.

     "Confidential   Information   Memorandum":   the  Confidential  Information
Memorandum dated October 1999 and furnished to the Lenders.

     "Consolidated  Capitalization":  at any date, the sum of  Consolidated  Net
Worth and Consolidated Total Debt.

     "Consolidated  Net  Worth":  at  any  date,  all  amounts  that  would,  in
conformity  with  GAAP,  be  included  on a  consolidated  balance  sheet of the
Borrower and its Subsidiaries under stockholders' equity at such date.

     "Consolidated  Total Debt": at any date, the aggregate  principal amount of
all liabilities of the Borrower and its Subsidiaries at such date, determined on
a consolidated basis in accordance with GAAP, as reflected on the balance sheet.

     "Contractual  Obligation":  as to any Person, any provision of any security
issued by such Person or of any  agreement,  instrument or other  undertaking to
which such Person is a party or by which it or any of its property is bound.

               "Core Gas  Distribution  Business":  the distribution and sale at
retail to  customers  of natural gas in the New York City  boroughs of Brooklyn,
Queens and Staten Island and the Long Island counties of Nassau and Suffolk,  as
such business is conducted by Brooklyn  Union Gas and Brooklyn Union East on the
date hereof.


     "Default":  any of the events  specified  in Section 7,  whether or not any
requirement  for the  giving of  notice,  the lapse of time,  or both,  has been
satisfied.

     "Disposition":  with respect to any  property,  any sale,  lease,  sale and
leaseback,  assignment,  conveyance,  transfer or other disposition thereof. The
terms "Dispose" and "Disposed of" shall have correlative meanings.

               "Dollars"  and "$":  dollars  in lawful  currency  of the  United
States.

               "Environmental Laws": any and all foreign,  Federal, state, local
or municipal laws, rules,  orders,  regulations,  statutes,  ordinances,  codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including  common  law)  regulating,  relating  to  or  imposing  liability  or
standards of conduct  concerning  protection of human health or the environment,
as now or may at any time hereafter be in effect.

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<PAGE>


                                        6




     "ERISA":  the Employee  Retirement  Income Security Act of 1974, as amended
from time to time.

               "Eurocurrency Reserve Requirements":  for any day as applied to a
Eurodollar  Loan,  the  aggregate  (without  duplication)  of the maximum  rates
(expressed as a decimal fraction) of reserve  requirements in effect on such day
(including  basic,  supplemental,  marginal  and  emergency  reserves  under any
regulations of the Board or other  Governmental  Authority  having  jurisdiction
with  respect  thereto)  dealing  with  reserve   requirements   prescribed  for
eurocurrency  funding  (currently  referred to as "Eurocurrency  Liabilities" in
Regulation D of the Board)  maintained  by a member bank of the Federal  Reserve
System.

               "Eurodollar  Base  Rate":  with  respect to each day during  each
Interest Period  pertaining to a Eurodollar  Loan, the rate per annum determined
on the basis of the rate for  deposits  in  Dollars  for a period  equal to such
Interest Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Dow Jones  Markets  screen as of 11:00 A.M.,  London time,  two
Business Days prior to the beginning of such Interest Period.  In the event that
such rate does not  appear on Page  3750 of the Dow  Jones  Markets  screen  (or
otherwise on such  screen),  the  "Eurodollar  Base Rate" shall be determined by
reference to such other  comparable  publicly  available  service for displaying
eurodollar  rates as may be  selected  by the  Administrative  Agent  or, in the
absence  of  such   availability,   by  reference  to  the  rate  at  which  the
Administrative Agent is offered Dollar deposits at or about 11:00 A.M., New York
City time,  two Business Days prior to the beginning of such Interest  Period in
the interbank  eurodollar  market where its eurodollar and foreign  currency and
exchange  operations  are then being  conducted for delivery on the first day of
such Interest Period for the number of days comprised therein.

     "Eurodollar  Competitive  Loan":  a Competitive  Loan which bears  interest
based upon the Eurodollar Rate.

     "Eurodollar Loans": Loans the rate of interest applicable to which is based
upon the Eurodollar Rate.

               "Eurodollar  Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following  formula (rounded upward to the nearest 1/100th
of 1%):

                                     Eurodollar Base Rate
                           1.00 - Eurocurrency Reserve Requirements

               "Eurodollar  Tranche":  the  collective  reference to  Eurodollar
Loans the then  current  Interest  Periods with respect to all of which begin on
the same date and end on the same later date  (whether  or not such Loans  shall
originally have been made on the same day).

     "Event of Default": any of the events specified in Section 7, provided that
any requirement  for the giving of notice,  the lapse of time, or both, has been
satisfied.

               "Facility":  the Commitments and the Loans made thereunder.



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<PAGE>


                                        7




     "Facility Fee Rate":  the rate per annum set forth below which  corresponds
with the most current rating of the Borrower's  senior unsecured  long-term debt
issued by S&P and Moody's respectively.


     Ratings              Facility Fee

==================  ========================
A/A2                         0.070%

A-/A3                        0.075%

BBB+/Baa1                    0.100%

BBB/Baa2                     0.125%

<BBB-/Baa3                   0.150%
-

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

               Changes in the Facility Fee shall become effective on the date on
which S&P and/or  Moody's  changes  the rating it has issued for the  Borrower's
senior  unsecured  long-term  debt. In the event of split ratings,  the lower of
such  ratings  shall apply;  if only one S&P and Moody's  issues a rating of the
Borrower's senior unsecured long-term debt, such rating shall apply.

               "Federal Funds Effective Rate": for any day, the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve  System  arranged by federal  funds  brokers,  as  published on the next
succeeding  Business Day by the Federal  Reserve  Bank of New York,  or, if such
rate is not so published  for any day that is a Business Day, the average of the
quotations  for the day of such  transactions  received by the Reference  Lender
from three federal funds brokers of recognized standing selected by it.

     "Final  Maturity  Date":  the date that is the one year  anniversary of the
Revolving Termination Date.

               "Fixed Rate" means, with respect to a Competitive Loan, the fixed
rate of interest per annum specified by the Lender making such  Competitive Loan
in its related Competitive Bid.

     "Funding  Office":  the office of the  Administrative  Agent  specified  in
Section 9.2 or such other  office as may be  specified  from time to time by the
Administrative Agent as its funding office by written notice to the Borrower and
the Lenders.

               "GAAP":  generally accepted  accounting  principles in the United
States as in effect from time to time,  except that for purposes of Section 6.1,
GAAP shall be determined  on the basis of such  principles in effect on the date
hereof and  consistent  with those used in the  preparation  of the most  recent
audited financial  statements delivered pursuant to Section 5.1(a). In the event
that any "Accounting

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<PAGE>


                                        8




Change" (as defined  below)  shall occur and such change  results in a change in
the method of  calculation  of financial  covenants,  standards or terms in this
Agreement,  then the Borrower and the  Administrative  Agent agree to enter into
negotiations  in order to  amend  such  provisions  of this  Agreement  so as to
equitably  reflect  such  Accounting  Changes  with the desired  result that the
criteria for  evaluating the Borrower's  financial  condition  shall be the same
after such Accounting  Changes as if such Accounting  Changes had not been made.
Until such time as such an amendment  shall have been  executed and delivered by
the Borrower,  the Administrative  Agent and the Required Lenders, all financial
covenants, standards and terms in this Agreement shall continue to be calculated
or  construed  as if  such  Accounting  Changes  had not  occurred.  "Accounting
Changes" refers to changes in accounting principles required by the promulgation
of any rule,  regulation,  pronouncement or opinion by the Financial  Accounting
Standards Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC.

               "Governmental Authority":  any nation or government, any state or
other political  subdivision  thereof, any agency,  authority,  instrumentality,
regulatory  body,  court,  central  bank or other entity  exercising  executive,
legislative,  judicial,  taxing,  regulatory or  administrative  functions of or
pertaining  to  government,  any  securities  exchange  and any  self-regulatory
organization (including the National Association of Insurance Commissioners).

               "Guarantee  Obligation":  as to  any  Person  (the  "guaranteeing
person"),  any obligation of (a) the  guaranteeing  person or (b) another Person
(including  any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement,  counterindemnity or similar
obligation,   in  either  case  guaranteeing  or  in  effect   guaranteeing  any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other  third  Person  (the  "primary  obligor")  in any  manner,  whether
directly or  indirectly,  including any obligation of the  guaranteeing  person,
whether or not  contingent,  (i) to purchase any such primary  obligation or any
property  constituting direct or indirect security therefor,  (ii) to advance or
supply funds (1) for the purchase or payment of any such primary  obligation  or
(2) to maintain  working  capital or equity  capital of the  primary  obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property,  securities or services primarily for the purpose of assuring
the owner of any such primary  obligation of the ability of the primary  obligor
to make payment of such primary  obligation or (iv)  otherwise to assure or hold
harmless  the  owner of any such  primary  obligation  against  loss in  respect
thereof; provided, however, that the term Guarantee Obligation shall not include
endorsements  of instruments for deposit or collection in the ordinary course of
business.  The amount of any  Guarantee  Obligation of any  guaranteeing  person
shall  be  deemed  to be the  lower of (a) an  amount  equal  to the  stated  or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable  pursuant to the terms of the instrument  embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable,  in which case
the amount of such  Guarantee  Obligation  shall be such  guaranteeing  person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.

               "Hedge  Agreements":  all  interest  rate  swaps,  caps or collar
agreements  or similar  arrangements  dealing  with  interest  rates or currency
exchange rates or the exchange of nominal interest obligations, either generally
or under specific contingencies.

     "Indebtedness":  of any Person at any date,  without  duplication,  (a) all
indebtedness  of such Person for borrowed  money,  (b) all  obligations  of such
Person for the deferred purchase price of

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<PAGE>


                                        9




property or services (other than current trade payables incurred in the ordinary
course of such Person's business),  (c) all obligations of such Person evidenced
by notes, bonds,  debentures or other similar instruments,  (d) all indebtedness
created or arising under any conditional sale or other title retention agreement
with  respect to property  acquired by such Person  (even  though the rights and
remedies of the seller or lender  under such  agreement  in the event of default
are limited to  repossession  or sale of such  property),  (e) all Capital Lease
Obligations of such Person,  (f) all  obligations of such Person,  contingent or
otherwise,  as an account  party under  acceptances,  letters of credit,  surety
bonds or  similar  arrangements,  (g) the  liquidation  value  of all  preferred
Capital  Stock of such  Person  that is  redeemable  at the option of the holder
thereof or that has any mandatory dividend, redemption or other required payment
that could be required  thereunder  prior to the date that is one year after the
Final Maturity Date, (h) all Guarantee  Obligations of such Person in respect of
obligations  of the kind  referred to in clauses (a) through (g) above,  (i) all
obligations  of the kind referred to in clauses (a) through (h) above secured by
(or for which the holder of such obligation has an existing right, contingent or
otherwise,  to be  secured  by) any Lien on  property  (including  accounts  and
contract rights) owned by such Person, whether or not such Person has assumed or
become  liable for the payment of such  obligation,  and (j) for the purposes of
Sections  7(e)  only,  all  obligations  of such  Person  in  respect  of  Hedge
Agreements. The Indebtedness of any Person shall include the Indebtedness of any
other  entity  (including  any  partnership  in which  such  Person is a general
partner)  to the  extent  such  Person  is liable  therefor  as a result of such
Person's ownership interest in or other relationship with such entity, except to
the extent the terms of such Indebtedness  expressly provide that such Person is
not liable therefor.

     "Insolvency":  with respect to any  Multiemployer  Plan, the condition that
such Plan is insolvent within the meaning of Section 4245 of ERISA.

               "Insolvent":  pertaining to a condition of Insolvency.

               "Intellectual  Property": the collective reference to all rights,
priorities and privileges  relating to  intellectual  property,  whether arising
under  United  States,  multinational  or foreign laws or  otherwise,  including
copyrights,  copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof,  including the right to
receive all proceeds and damages therefrom.

               "Interest  Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December to occur while such Loan is outstanding
and the final maturity date of such Loan,  (b) as to any Eurodollar  Loan having
an  Interest  Period  of three  months  or less,  the last day of such  Interest
Period,  (c) as to any  Eurodollar  Loan having an Interest  Period  longer than
three months, each day that is three months, or a whole multiple thereof,  after
the first day of such Interest  Period and the last day of such Interest  Period
and (d) as to any Eurodollar  Loan, the date of any repayment or prepayment made
in respect thereof.

               "Interest Period": as to any Eurodollar Loan, (a) initially,  the
period  commencing on the borrowing or conversion date, as the case may be, with
respect  to such  Eurodollar  Loan and  ending  one,  two,  three or six  months
thereafter,  as selected by the Borrower in its notice of borrowing or notice of
conversion,  as the case may be, given with respect thereto; and (b) thereafter,
each period  commencing on the last day of the next  preceding  Interest  Period
applicable  to such  Eurodollar  Loan and ending one,  two,  three or six months
thereafter, as selected by the Borrower by irrevocable notice to the

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<PAGE>


                                       10




Administrative  Agent not less than three Business Days prior to the last day of
the then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:

                  (i) if any Interest  Period would  otherwise end on a day that
        is not a Business  Day,  such  Interest  Period shall be extended to the
        next  succeeding  Business Day unless the result of such extension would
        be to carry such Interest  Period into another  calendar  month in which
        event  such  Interest  Period  shall  end on the  immediately  preceding
        Business Day;

     (ii) the  Borrower  may not select an  Interest  Period  that would  extend
beyond the Revolving Termination Date;

                  (iii) any Interest Period that begins on the last Business Day
        of a  calendar  month  (or on a day for  which  there is no  numerically
        corresponding  day in the  calendar  month  at the end of such  Interest
        Period) shall end on the last Business Day of a calendar month; and

                  (iv) the Borrower shall select  Interest  Periods so as not to
        require  a  payment  or  prepayment  of any  Eurodollar  Loan  during an
        Interest Period for such Loan.

               "Lender Percentage": as to any Lender at any time, the percentage
which such Lender's  Commitments then constitutes of the Total  Commitments (or,
at any time after the  Commitments  have expired or  terminated,  the percentage
which the aggregate  principal  amount of such Lender's  Loans then  outstanding
constitutes of the aggregate principal amount of the Loans then outstanding).

               "Lenders":  as defined in the preamble hereto.
                -------

               "Lien": any mortgage, pledge, hypothecation,  assignment, deposit
arrangement,  encumbrance,  lien (statutory or other),  charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever  (including any conditional sale or
other title retention  agreement and any capital lease having  substantially the
same economic effect as any of the foregoing).

               "Loans":  as defined in Section 2.1(a).
                -----

               "Loan Documents":  this Agreement and the Notes.
                --------------

               "Margin"  means,  with  respect to any  Competitive  Loan bearing
interest at a rate based on the Eurodollar  Rate, the marginal rate of interest,
if any, to be added to or subtracted  from the Eurodollar  Rate to determine the
rate of interest applicable to such Loan, as specified by the Lender making such
Loan in its related Competitive Bid.

               "Material  Adverse  Effect":  a  material  adverse  effect on the
business, property, operations,  condition (financial or otherwise) or prospects
of the  Borrower  and its  Subsidiaries  taken  as a whole  or the  validity  or
enforceability  of this  Agreement  or any of the other  Loan  Documents  or the
rights or  remedies of the  Administrative  Agent or the  Lenders  hereunder  or
thereunder.


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                                       11




               "Materials of Environmental  Concern":  any gasoline or petroleum
(including  crude oil or any  fraction  thereof)  or  petroleum  products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.

     "Multiemployer  Plan":  a Plan that is a  multiemployer  plan as defined in
Section 4001(a)(3) of ERISA.

     "Moody's": Moody's Investors Service, Inc. and any successor thereto.

               "Non-Excluded Taxes":  as defined in Section 2.14(a).


               "Non-U.S. Lender":  as defined in Section 2.14(d).


     "Notes":  the collective reference to any promissory note evidencing Loans.


               "Obligations": the unpaid principal of and interest on (including
interest  accruing  after the maturity of the Loans and interest  accruing after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization  or like proceeding,  relating to the Borrower,  whether or not a
claim for post-filing or  post-petition  interest is allowed in such proceeding)
the Loans and all other  obligations  and  liabilities  of the  Borrower  to the
Administrative Agent or to any Lender,  whether direct or indirect,  absolute or
contingent,  due or to become due, or now existing or hereafter incurred,  which
may arise under, out of, or in connection  with, this Agreement,  any other Loan
Document or any other document made,  delivered or given in connection  herewith
or  therewith,  whether  on  account  of  principal,   interest,   reimbursement
obligations, fees, indemnities, costs, expenses (including all fees, charges and
disbursements of counsel to the  Administrative  Agent or to any Lender that are
required to be paid by the Borrower pursuant hereto) or otherwise.

               "Other Taxes": any and all present or future stamp or documentary
taxes or any other excise or property  taxes,  charges or similar levies arising
from any payment made hereunder or from the  execution,  delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

               "Participant":  as defined in Section 9.6(b).
                -----------

     "PBGC": the Pension Benefit Guaranty  Corporation  established  pursuant to
Subtitle A of Title IV of ERISA (or any successor).

     "Person":  an  individual,  partnership,   corporation,  limited  liability
company,  business  trust,  joint stock  company,  trust,  unincorporated
association,  joint venture,  Governmental Authority or other entity of whatever
nature.

               "Plan":  at a particular  time, any employee benefit plan that is
covered by ERISA and in respect of which the  Borrower or a Commonly  Controlled
Entity is (or, if such plan were  terminated  at such time,  would under Section
4069 of ERISA be deemed to be) an  "employer"  as  defined  in  Section  3(5) of
ERISA.


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                                       12




               "Properties":  as defined in Section 3.17(a).
                ----------

               "Reference Lender":  The Chase Manhattan Bank.
                ----------------

               "Register":  as defined in Section 9.6(d).
                --------

               "Regulation U":  Regulation U of the Board as in effect from time
to time.

     "Reorganization":  with respect to any  Multiemployer  Plan,  the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.

     "Reportable  Event":  any of the  events  set forth in  Section  4043(b) of
ERISA,  other  than those  events as to which the  thirty  day notice  period is
waived under  subsections  .27,  .28,  .29,  .30,  .31,  .32, .34 or .35 of PBGC
Reg.ss. 4043.

               "Required Lenders":  at any time, the holders of more than 50% of
the Commitments then in effect;  provided that (i) for purposes of declaring the
Loans to be due and payable, and/or the Commitments to be terminated pursuant to
Section 7, and (ii) for all purposes after the Commitments have been terminated,
such term shall mean the holders of more than 50% of the Loans outstanding.

               "Requirement  of  Law":  as to any  Person,  the  Certificate  of
Incorporation and By-Laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule  or  regulation  or  determination  of an
arbitrator or a court or other Governmental  Authority,  in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

     "Responsible Officer": the chief executive officer,  president,  treasurer,
secretary or chief  financial  officer of the Borrower,  but in any event,  with
respect to financial  matters,  the treasurer or chief financial  officer of the
Borrower.

               "Revolving Termination Date":  November 6, 2000.
                --------------------------

     "S&P": Standard & Poor's Rating Services, a division of McGraw-Hill, Inc.

     "SEC": the Securities and Exchange  Commission,  any successor  thereto and
any analogous Governmental Authority.

     "Significant  Subsidiary":  at any particular  time, each of Brooklyn Union
Gas and Brooklyn  Union East,  and any other  Affiliate of the Borrower which is
engaged in the Core Gas Distribution Business.

     "Single  Employer Plan": any Plan that is covered by Title IV of ERISA, but
that is not a Multiemployer Plan.

               "Solvent":  when used with respect to any Person,  means that, as
of any date of  determination,  (a) the  amount of the  "present  fair  saleable
value" of the assets of such Person will, as of such date,  exceed the amount of
all "liabilities of such Person,  contingent or otherwise",  as of such date, as
such quoted terms are determined in accordance with applicable federal and state
laws governing

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                                       13




determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will,  as of such date,  be greater than the amount
that will be required to pay the  liability  of such Person on its debts as such
debts become  absolute and  matured,  (c) such Person will not have,  as of such
date,  an  unreasonably  small  amount of  capital  with  which to  conduct  its
business,  and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition,  (i) "debt" means liability on a "claim",  and (ii)
"claim"  means any (x) right to payment,  whether or not such a right is reduced
to judgment, liquidated,  unliquidated,  fixed, contingent,  matured, unmatured,
disputed,  undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable  remedy for breach of performance if such breach gives rise to a right
to  payment,  whether  or not such  right to an  equitable  remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.

               "Subsidiary":  as to  any  Person,  a  corporation,  partnership,
limited  liability  company  or other  entity of which  shares of stock or other
ownership interests having ordinary voting power (other than stock or such other
ownership  interests  having  such  power only by reason of the  happening  of a
contingency)  to elect a majority of the board of directors or other managers of
such  corporation,  partnership  or other  entity are at the time owned,  or the
management of which is otherwise controlled,  directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or to  "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Borrower.

     "Total  Commitments":  at any time, the aggregate amount of the Commitments
then in effect.

               "Transferee":  any Assignee or Participant.
                ----------

     "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan.

               "United States":  the United States of America.
                -------------

               1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein,  all terms defined in this  Agreement  shall have the defined  meanings
when used in the other Loan Documents or any  certificate or other document made
or delivered pursuant hereto or thereto.

               (b) As used  herein  and in the  other  Loan  Documents,  and any
certificate or other document made or delivered pursuant hereto or thereto,  (i)
accounting  terms relating to the Borrower and its  Subsidiaries  not defined in
Section 1.1 and  accounting  terms partly  defined in Section 1.1, to the extent
not defined,  shall have the respective  meanings given to them under GAAP, (ii)
the words "include",  "includes" and "including"  shall be deemed to be followed
by the phrase "without limitation", (iii) the word "incur" shall be construed to
mean incur,  create,  issue,  assume,  become  liable in respect of or suffer to
exist  (and  the  words  "incurred"  and  "incurrence"  shall  have  correlative
meanings),  and (iv) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and  intangible
assets and properties,  including  cash,  Capital Stock,  securities,  revenues,
accounts, leasehold interests and contract rights.

               (c) The words  "hereof",  "herein" and  "hereunder"  and words of
similar  import when used in this  Agreement  shall refer to this Agreement as a
whole and not to any particular provision of this

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                                       14




Agreement,  and Section,  Schedule and Exhibit  references are to this Agreement
unless otherwise specified.

               (d) The meanings  given to terms defined  herein shall be equally
applicable to both the singular and plural forms of such terms.

                          SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS

               2.1 Commitments.  (a) Subject to the terms and conditions hereof,
each Lender  severally  agrees to make revolving  credit loans  ("Loans") to the
Borrower  from  time  to time  during  the  Commitment  Period  in an  aggregate
principal amount at any one time outstanding which does not exceed the amount of
such Lender's Commitment.  During the Commitment Period the Borrower may use the
Commitments  by  borrowing,  prepaying  the  Loans  in  whole  or in  part,  and
reborrowing,  all in accordance with the terms and conditions  hereof. The Loans
may from time to time be Eurodollar  Loans,  ABR Loans or Competitive  Loans, as
determined  by  the  Borrower  and  notified  to  the  Administrative  Agent  in
accordance with Sections 2.3 and 2.7.

               (b) Any Loans outstanding on the Revolving  Termination Date will
mature and be payable on the Final Maturity Date.

               2.2  Competitive  Bid  Procedure.  (a)  Subject  to the terms and
conditions  set  forth  herein,  from  time to time  the  Borrower  may  request
Competitive  Bids  and may  (but  shall  not  have  any  obligation  to)  accept
Competitive Bids and borrow Competitive  Loans;  provided that while Competitive
Loans  are  outstanding,  the  Available  Commitments  shall be  reduced  by the
aggregate amount of such  Competitive  Loans. To request  Competitive  Bids, the
Borrower shall notify the Administrative Agent of such request by telephone,  in
the case of a Eurodollar  Loan,  not later than 11:00 a.m.,  New York City time,
four Business Days before the date of the proposed Borrowing and, in the case of
an ABR Loan,  not later than 10:00 a.m.,  New York City time,  one  Business Day
before the date of the proposed Borrowing; provided that the Borrower may submit
up to (but not more than) three  Competitive Bid Requests on the same day, but a
Competitive  Bid Request  shall not be made within five  Business Days after the
date of any previous  Competitive Bid Request,  unless any and all such previous
Competitive  Bid  Requests  shall have been  withdrawn or all  Competitive  Bids
received in response  thereto  rejected.  Each such  telephonic  Competitive Bid
Request  shall  be  confirmed  promptly  by hand  delivery  or  telecopy  to the
Administrative  Agent of a written Competitive Bid Request in a form approved by
the  Administrative  Agent and signed by the Borrower.  Each such telephonic and
written Competitive Bid Request shall specify the following information:

               (i)    the aggregate amount of the requested Loan;

               (ii)   the date of such Loan, which shall be a Business Day;

     iii) whether such Loan is to be a Eurodollar Loan or a Fixed Rate Loan;

                iv) the maturity for such Loan,  which shall range from 7 to 360
        days (but not to extend past the Revolving Termination Date; and


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                                       15




               (v) the Interest  Period,  if  applicable,  for such Loan,  which
        shall be a period  contemplated  by the definition of the term "Interest
        Period".

Promptly  following receipt of a Competitive Bid Request in accordance with this
Section,  the  Administrative  Agent  shall  notify the  Lenders of the  details
thereof by telecopy, inviting the Lenders to submit Competitive Bids.

               (b) Each Lender may (but shall not have any  obligation  to) make
one or more  Competitive  Bids to the Borrower in response to a Competitive  Bid
Request.  Each  Competitive  Bid by a Lender  must be in a form  approved by the
Administrative  Agent  and  must be  received  by the  Administrative  Agent  by
telecopy,  in the case of a Eurodollar  Loan, not later than 9:30 a.m., New York
City time,  three  Business  Days before the proposed  date of such  Competitive
Loan,  and in the case of an ABR Loan,  not later than 9:30 a.m.,  New York City
time, on the proposed date of such  Competitive  Loan.  Competitive Bids that do
not conform  substantially to the form approved by the Administrative  Agent may
be rejected by the  Administrative  Agent,  and the  Administrative  Agent shall
notify the applicable  Lender as promptly as practicable.  Each  Competitive Bid
shall specify (i) the  principal  amount (which shall be a minimum of $5,000,000
and an integral  multiple of $1,000,000 and which may equal the entire principal
amount of the  Competitive  Loan  requested by the Borrower) of the  Competitive
Loan or Loans that the Lender is willing to make,  (ii) the Competitive Bid Rate
or Rates at which the Lender is prepared  to make such Loan or Loans  (expressed
as a  percentage  rate per annum in the form of a  decimal  to no more than four
decimal places) and (iii) the Interest  Period  applicable to each such Loan and
the last day thereof.

               (c) The  Administrative  Agent shall promptly notify the Borrower
by telecopy of the  Competitive Bid Rate and the principal  amount  specified in
each  Competitive  Bid and the  identity of the Lender that shall have made such
Competitive Bid.

               (d)  Subject  only  to the  provisions  of  this  paragraph,  the
Borrower may accept or reject any Competitive Bid. The Borrower shall notify the
Administrative  Agent by telephone,  confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has decided to accept or
reject each  Competitive  Bid, in the case of a Eurodollar  Loan, not later than
10:30  a.m.,  New York City time,  three  Business  Days  before the date of the
proposed Competitive  Borrowing,  and in the case of an ABR Loan, not later than
10:30 a.m.,  New York City time, on the proposed date of the  Competitive  Loan;
provided  that (i) the  failure of the  Borrower  to give such  notice  shall be
deemed to be a rejection of each  Competitive  Bid, (ii) the Borrower  shall not
accept  a  Competitive  Bid  made at a  particular  Competitive  Bid Rate if the
Borrower  rejects a Competitive Bid made at a lower  Competitive Bid Rate, (iii)
the aggregate  amount of the Competitive Bids accepted by the Borrower shall not
exceed the aggregate  amount of the requested  Competitive Loan specified in the
related  Competitive  Bid Request,  (iv) to the extent  necessary to comply with
clause  (iii)  above,  the  Borrower  may  accept  Competitive  Bids at the same
Competitive  Bid  Rate in  part,  which  acceptance,  in the  case  of  multiple
Competitive  Bids at such  Competitive  Bid  Rate,  shall  be made  pro  rata in
accordance with the amount of each such Competitive Bid, and (v) except pursuant
to clause (iv) above,  no  Competitive  Bid shall be accepted for a  Competitive
Loan unless such Competitive Loan is in a minimum principal amount of $5,000,000
and an integral  multiple of $1,000,000;  provided further that if a Competitive
Loan must be in an amount  less than  $5,000,000  because of the  provisions  of
clause (iv) above,  such  Competitive Loan may be for a minimum of $1,000,000 or
any integral  multiple  thereof,  and in calculating  the pro rata allocation of
acceptances of portions of multiple Competitive Bids at a

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                                       16




particular  Competitive  Bid Rate  pursuant to clause (iv) the amounts  shall be
rounded to  integral  multiples  of  $1,000,000  in a manner  determined  by the
Borrower.  A notice given by the Borrower  pursuant to this  paragraph  shall be
irrevocable.

               (e) The  Administrative  Agent shall promptly notify each bidding
Lender by telecopy whether or not its Competitive Bid has been accepted (and, if
so, the amount and Competitive Bid Rate so accepted), and each successful bidder
will thereupon become bound, subject to the terms and conditions hereof, to make
the Competitive Loan in respect of which its Competitive Bid has been accepted.

               (f)  If  the  Administrative   Agent  shall  elect  to  submit  a
Competitive  Bid in its capacity as a Lender,  it shall submit such  Competitive
Bid  directly to the  Borrower at least one quarter of an hour  earlier than the
time by which the other Lenders are required to submit their Competitive Bids to
the Administrative Agent pursuant to paragraph (b) of this Section.

               2.3 Procedure for Loan  Borrowing.  The Borrower may borrow under
the Commitments  during the Commitment Period on any Business Day, provided that
the Borrower  shall give the  Administrative  Agent  irrevocable  notice  (which
notice  must be received by the  Administrative  Agent prior to 12:00 Noon,  New
York City time, (a) three Business Days prior to the requested  Borrowing  Date,
in the case of Eurodollar  Loans, or (b) one Business Day prior to the requested
Borrowing Date, in the case of ABR Loans), specifying (i) the amount and Type of
Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of
Eurodollar  Loans,  the  respective  amounts  of each  such Type of Loan and the
respective  lengths of the initial Interest Period  therefor.  Any Loans made on
the  Closing  Date  shall  initially  be ABR  Loans.  Each  borrowing  under the
Commitments  shall  be in an  amount  equal  to (x) in the  case  of ABR  Loans,
$1,000,000  or a whole  multiple  thereof (or, if the then  aggregate  Available
Commitments are less than $1,000,000, such lesser amount) and (y) in the case of
Eurodollar  Loans,  $10,000,000  or a whole  multiple  of  $1,000,000  in excess
thereof.  Upon receipt of any such notice from the Borrower,  the Administrative
Agent  shall  promptly  notify each  Lender  thereof.  Each Lender will make the
amount of its pro rata share of each borrowing  available to the  Administrative
Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon,
New York City time,  on the  Borrowing  Date  requested by the Borrower in funds
immediately  available to the Administrative  Agent. Such borrowing will then be
made available to the Borrower by the Administrative Agent crediting the account
of the  Borrower on the books of such office with the  aggregate  of the amounts
made available to the  Administrative  Agent by the Lenders and in like funds as
received by the Administrative Agent.

               2.4 Facility  Fees,  etc.  (a) The Borrower  agrees to pay to the
Administrative  Agent for the  account  of each  Lender a  facility  fee for the
period from and  including  the Closing Date until all of the  Obligations  have
been repaid and the Commitments have been  terminated,  computed at the Facility
Fee Rate on the  Lender  Percentage  of such  Lender of the total  amount of the
Facility  (drawn or  undrawn),  payable  quarterly in arrears on the last day of
each  March,  June,  September  and  December  and on the Final  Maturity  Date,
commencing on the first of such dates to occur after the date hereof.

               (b) The Borrower  agrees to pay to the  Administrative  Agent the
fees in the  amounts  and on the dates  previously  agreed to in  writing by the
Borrower and the Administrative Agent.

     2.5  Termination or Reduction of  Commitments.  The Borrower shall have the
right,  upon not less than three  Business  Days'  notice to the  Administrative
Agent, to terminate the

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                                       17




Commitments  or,  from time to time,  to reduce the  amount of the  Commitments;
provided that no such termination or reduction of Commitments shall be permitted
if, after giving effect thereto and to any  prepayments of the Loans made on the
effective  date  thereof,  the  aggregate  principal  amount  of (i)  the  Loans
outstanding and (ii) any Competitive Loans  outstanding,  would exceed the Total
Commitments.  Any such reduction shall be in an amount equal to $1,000,000, or a
whole multiple  thereof,  and shall reduce  permanently the Commitments  then in
effect.

               2.6 Optional  Prepayments.  The Borrower may at any time and from
time to time prepay the Loans, in whole or in part,  without premium or penalty,
upon  irrevocable  notice delivered to the  Administrative  Agent at least three
Business  Days prior  thereto in the case of  Eurodollar  Loans and at least one
Business Day prior thereto in the case of ABR Loans,  which notice shall specify
the date and amount of  prepayment  and whether the  prepayment is of Eurodollar
Loans or ABR Loans;  provided,  that if a Eurodollar  Loan is prepaid on any day
other than the last day of the Interest Period applicable thereto,  the Borrower
shall also pay any amounts owing  pursuant to Section 2.15.  Upon receipt of any
such notice, the Administrative Agent shall promptly notify each Lender thereof.
If any such notice is given,  the amount  specified  in such notice shall be due
and payable on the date specified therein,  together with (except in the case of
Loans that are ABR Loans) accrued  interest to such date on the amount  prepaid.
Partial  prepayments  of Loans  shall be in an  aggregate  principal  amount  of
$1,000,000 or a whole  multiple  thereof.  Competitive  Loans may not be prepaid
without the consent of the Relevant Lender.

               2.7 Conversion  and  Continuation  Options.  (a) The Borrower may
elect from time to time to convert  Eurodollar  Loans to ABR Loans by giving the
Administrative  Agent at least two Business  Days' prior  irrevocable  notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest  Period with respect  thereto.  The Borrower
may elect from time to time to convert ABR Loans to  Eurodollar  Loans by giving
the Administrative  Agent at least three Business Days' prior irrevocable notice
of such election (which notice shall specify the length of the initial  Interest
Period  therefor),  provided that no ABR Loan may be converted into a Eurodollar
Loan  when  any  Event  of  Default  has  occurred  and is  continuing  and  the
Administrative  Agent or the Required  Lenders have  determined  in its or their
sole discretion not to permit such conversions.  Upon receipt of any such notice
the Administrative Agent shall promptly notify each relevant Lender thereof.

               (b)  Any  Eurodollar  Loan  may be  continued  as such  upon  the
expiration  of the then  current  Interest  Period with  respect  thereto by the
Borrower giving irrevocable  notice to the  Administrative  Agent, in accordance
with the  applicable  provisions  of the term  "Interest  Period"  set  forth in
Section 1.1, of the length of the next Interest  Period to be applicable to such
Loans,  provided that no Eurodollar Loan may be continued as such when any Event
of Default has occurred and is continuing  and the  Administrative  Agent has or
the Required  Lenders have  determined  in its or their sole  discretion  not to
permit such  continuations,  and provided,  further,  that if the Borrower shall
fail to give any required notice as described above in this paragraph or if such
continuation is not permitted pursuant to the preceding proviso such Loans shall
be  automatically  converted to ABR Loans on the last day of such then  expiring
Interest Period. Upon receipt of any such notice the Administrative  Agent shall
promptly notify each relevant Lender thereof.

     2.8  Limitations on Eurodollar  Tranches.  Notwithstanding  anything to the
contrary in this Agreement,  all borrowings,  conversions and  continuations  of
Eurodollar  Loans  hereunder and all  selections of Interest  Periods  hereunder
shall be in such amounts and be made pursuant to such elections

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                                       18




so that, (a) after giving effect thereto,  the aggregate principal amount of the
Eurodollar Loans comprising each Eurodollar Tranche shall be equal to $5,000,000
or a whole  multiple of  $1,000,000  in excess  thereof and (b) no more than ten
Eurodollar Tranches shall be outstanding at any one time.

               2.9 Interest Rates and Payment Dates.  (a) Each  Eurodollar  Loan
shall bear  interest  for each day during  each  Interest  Period  with  respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.

               (b) Each ABR Loan shall bear  interest  at a rate per annum equal
to the ABR plus the Applicable Margin.

               (c) Each  Competitive Loan shall bear interest in accordance with
the applicable Competitive Bid Rate.

               (d) (i) If all or a portion of the  principal  amount of any Loan
shall not be paid when due (whether at the stated  maturity,  by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum equal to
the rate that would  otherwise be applicable  thereto  pursuant to the foregoing
provisions of this Section plus 2%, and (ii) if all or a portion of any interest
payable on any Loan or any facility fee or other amount payable  hereunder shall
not be paid  when due  (whether  at the  stated  maturity,  by  acceleration  or
otherwise), such overdue amount shall bear interest at a rate per annum equal to
the rate then  applicable  to ABR Loans plus 2%, in each case,  with  respect to
clauses (i) and (ii) above,  from the date of such non-payment until such amount
is paid in full.

               (e) Interest shall be payable in arrears on each Interest Payment
Date,  provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.

               2.10  Computation  of Interest  and Fees.  (a)  Interest and fees
payable  pursuant  hereto shall be calculated on the basis of a 360-day year for
the actual days  elapsed,  except  that,  with  respect to ABR Loans the rate of
interest on which is  calculated  on the basis of the Prime Rate,  the  interest
thereon shall be calculated on the basis of a 365- (or 366-, as the case may be)
day year for the actual days elapsed.  The Administrative Agent shall as soon as
practicable  notify the Borrower and the relevant Lenders of each  determination
of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change  in  the  ABR or  the  Eurocurrency  Reserve  Requirements  shall  become
effective as of the opening of business on the day on which such change  becomes
effective.  The  Administrative  Agent shall as soon as  practicable  notify the
Borrower and the relevant  Lenders of the effective  date and the amount of each
such change in interest rate.

               (b) Each  determination of an interest rate by the Administrative
Agent  pursuant to any  provision  of this  Agreement  shall be  conclusive  and
binding on the  Borrower and the Lenders in the absence of manifest  error.  The
Administrative  Agent  shall,  at the  request of the  Borrower,  deliver to the
Borrower a statement showing the quotations used by the Administrative  Agent in
determining any interest rate pursuant to Section 2.9(a).

     2.11 Inability to Determine Interest Rate. If prior to the first day of any
Interest Period:

               (a)  the  Administrative   Agent  shall  have  determined  (which
        determination  shall be conclusive and binding upon the Borrower)  that,
        by reason of circumstances affecting the

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                                       19




        relevant  market,  adequate  and  reasonable  means  do  not  exist  for
        ascertaining the Eurodollar Rate for such Interest Period,  or that such
        Eurodollar rate is not available; or

               (b) the Administrative  Agent shall have received notice from the
        Required Lenders (or, in the case of a Eurodollar  Competitive Loan, the
        Lender  that is  required  to make such Loan) that the  Eurodollar  Rate
        determined  or to be  determined  for  such  Interest  Period  will  not
        adequately and fairly reflect the cost to such Lenders or Lender, as the
        case may be (as conclusively certified by such Lenders, or Lender as the
        case may be) of making or  maintaining  their affected Loans during such
        Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant  Lenders as soon as  practicable  thereafter.  If such
notice is given (w) any Eurodollar  Loans  requested to be made on the first day
of such Interest  Period shall be made as ABR Loans,  (x) any Loans that were to
have been converted on the first day of such Interest Period to Eurodollar Loans
shall be continued as ABR Loans,  (y) any outstanding  Eurodollar Loans shall be
converted, on the last day of the then-current Interest Period, to ABR Loans and
(z) any  request by the  Borrower  for a  Eurodollar  Competitive  Loan shall be
ineffective.  Until such notice has been withdrawn by the Administrative  Agent,
no further  Eurodollar  Loans shall be made or continued as such,  nor shall the
Borrower have the right to convert Loans to Eurodollar Loans.

               2.12 Pro Rata  Treatment and Payments.  (a) Each borrowing by the
Borrower from the Lenders hereunder,  each payment by the Borrower on account of
any facility fee and any  reduction of the  Commitments  of the Lenders shall be
made pro rata according to the respective Lender Percentage of the Lenders.

               (b) Each payment  (including each  prepayment) by the Borrower on
account  of  principal  of and  interest  on the  Loans  shall  be made pro rata
according to the respective outstanding principal amounts of the Loans then held
by the Lenders.

               (c)  All  payments  (including  prepayments)  to be  made  by the
Borrower  hereunder,  whether  on  account  of  principal,   interest,  fees  or
otherwise,  shall be made without setoff or counterclaim and shall be made prior
to 12:00 Noon, New York City time, on the due date thereof to the Administrative
Agent, for the account of the Lenders,  at the Funding Office, in Dollars and in
immediately  available  funds.  The  Administrative  Agent shall distribute such
payments to the Lenders promptly upon receipt in like funds as received.  If any
payment  hereunder (other than payments on the Eurodollar Loans) becomes due and
payable on a day other than a Business  Day,  such payment  shall be extended to
the next  succeeding  Business Day. If any payment on a Eurodollar  Loan becomes
due and payable on a day other than a Business  Day, the maturity  thereof shall
be  extended  to the next  succeeding  Business  Day  unless  the result of such
extension would be to extend such payment into another  calendar month, in which
event such payment shall be made on the immediately  preceding  Business Day. In
the case of any extension of any payment of principal  pursuant to the preceding
two sentences,  interest  thereon shall be payable at the then  applicable  rate
during such extension.

               (d) Unless the  Administrative  Agent shall have been notified in
writing by any Lender  prior to a  borrowing  that such Lender will not make the
amount  that  would  constitute  its share of such  borrowing  available  to the
Administrative  Agent, the  Administrative  Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in

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                                       20




reliance upon such  assumption,  make available to the Borrower a  corresponding
amount. If such amount is not made available to the Administrative  Agent by the
required  time on the  Borrowing  Date  therefor,  such Lender  shall pay to the
Administrative  Agent,  on demand,  such amount with interest  thereon at a rate
equal to the daily  average  Federal Funds  Effective  Rate for the period until
such Lender makes such amount immediately available to the Administrative Agent.
A certificate of the  Administrative  Agent submitted to any Lender with respect
to any amounts owing under this paragraph  shall be conclusive in the absence of
manifest  error.  If such Lender's share of such borrowing is not made available
to the  Administrative  Agent by such Lender within three  Business Days of such
Borrowing Date, the Administrative  Agent shall also be entitled to recover such
amount with interest  thereon at the rate per annum  applicable to ABR Loans, on
demand, from the Borrower.

               (e) Unless the  Administrative  Agent shall have been notified in
writing by the Borrower  prior to the date of any payment  being made  hereunder
that the Borrower will not make such payment to the  Administrative  Agent,  the
Administrative  Agent may assume that the Borrower is making such  payment,  and
the  Administrative  Agent may, but shall not be required  to, in reliance  upon
such assumption,  make available to the Lenders their respective pro rata shares
of a  corresponding  amount.  If such payment is not made to the  Administrative
Agent by the Borrower  within three  Business  Days of such required  date,  the
Administrative  Agent shall be entitled to recover,  on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such  amount  with  interest  thereon  at the rate per annum  equal to the daily
average Federal Funds  Effective  Rate.  Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.

               2.13 Requirements of Law. (a) If the adoption of or any change in
any  Requirement  of Law or in the  interpretation  or  application  thereof  or
compliance  by any Lender with any request or  directive  (whether or not having
the force of law) from any central  bank or other  Governmental  Authority  made
subsequent to the date hereof:

                    (i  shall  subject  any  Lender  to  any  tax  of  any  kind
        whatsoever with respect to this Agreement or any Eurodollar Loan made by
        it, or change  the  basis of  taxation  of  payments  to such  Lender in
        respect thereof (except for  Non-Excluded  Taxes covered by Section 2.14
        and  changes  in the  rate  of tax on the  overall  net  income  of such
        Lender);

                   (ii shall  impose,  modify or hold  applicable  any  reserve,
        special deposit,  compulsory loan or similar  requirement against assets
        held  by,  deposits  or  other  liabilities  in or for the  account  of,
        advances,  loans  or  other  extensions  of  credit  by,  or  any  other
        acquisition of funds by, any office of such Lender that is not otherwise
        included in the determination of the Eurodollar Rate hereunder; or

                  (iii  shall impose on such Lender any other condition;

and the result of any of the  foregoing  is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making,  converting into,
continuing or maintaining  Eurodollar  Loans, or to reduce any amount receivable
hereunder  in respect  thereof,  then,  in any such  case,  the  Borrower  shall
promptly pay such Lender,  upon its demand,  any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable.  If
any Lender becomes entitled to claim

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                                       21




any additional amounts pursuant to this paragraph,  it shall promptly notify the
Borrower  (with a copy to the  Administrative  Agent)  of the event by reason of
which it has become so entitled.

               (b) If any Lender shall have  determined  that the adoption of or
any  change in any  Requirement  of Law  regarding  capital  adequacy  or in the
interpretation  or  application  thereof  or  compliance  by such  Lender or any
corporation  controlling  such Lender with any  request or  directive  regarding
capital adequacy  (whether or not having the force of law) from any Governmental
Authority  made  subsequent to the date hereof shall have the effect of reducing
the  rate  of  return  on  such  Lender's  or such  corporation's  capital  as a
consequence of its obligations hereunder to a level below that which such Lender
or such  corporation  could  have  achieved  but for such  adoption,  change  or
compliance  (taking  into  consideration  such  Lender's  or such  corporation's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be  material,  then from time to time,  after  submission  by such Lender to the
Borrower  (with  a copy  to  the  Administrative  Agent)  of a  written  request
therefor,  the  Borrower  shall pay to such  Lender  such  additional  amount or
amounts as will  compensate  such Lender for such  reduction;  provided that the
Borrower shall not be required to compensate a Lender pursuant to this paragraph
for any amounts incurred more than six months prior to the date that such Lender
notifies the Borrower of such Lender's intention to claim compensation therefor;
and provided further that, if the circumstances giving rise to such claim have a
retroactive  effect, then such six-month period shall be extended to include the
period of such retroactive effect.

               (c) Notwithstanding  the foregoing  provisions of this Section, a
Lender shall not be entitled to compensation pursuant to this Section in respect
of any Competitive  Loan if the Requirement of Law that would otherwise  entitle
it to such compensation  shall have been publicly  announced prior to submission
of the Competitive Bid pursuant to which such Loan was made.

               (d) A certificate as to any additional  amounts payable  pursuant
to this  Section  submitted  by any Lender to the  Borrower  (with a copy to the
Administrative  Agent) shall be conclusive in the absence of manifest error. The
obligations  of  the  Borrower  pursuant  to  this  Section  shall  survive  the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

               2.14 Taxes.  (a) All  payments  made by the  Borrower  under this
Agreement shall be made free and clear of, and without  deduction or withholding
for or on  account  of,  any  present or future  income,  stamp or other  taxes,
levies,  imposts,  duties,  charges,  fees,  deductions or withholdings,  now or
hereafter imposed, levied,  collected,  withheld or assessed by any Governmental
Authority,  excluding net income taxes and franchise  taxes  (imposed in lieu of
net income taxes) imposed on the Administrative  Agent or any Lender as a result
of a present  or former  connection  between  the  Administrative  Agent or such
Lender and the jurisdiction of the Governmental  Authority  imposing such tax or
any political subdivision or taxing authority thereof or therein (other than any
such  connection  arising  solely from the  Administrative  Agent or such Lender
having  executed,  delivered or performed its  obligations or received a payment
under,  or enforced,  this  Agreement or any other Loan  Document).  If any such
non-excluded  taxes,  levies,  imposts,  duties,  charges,  fees,  deductions or
withholdings  ("Non-Excluded  Taxes") or Other Taxes are required to be withheld
from any amounts payable to the  Administrative  Agent or any Lender  hereunder,
the  amounts so  payable to the  Administrative  Agent or such  Lender  shall be
increased to the extent necessary to yield to the  Administrative  Agent or such
Lender (after  payment of all Non- Excluded  Taxes and Other Taxes)  interest or
any  such  other  amounts  payable  hereunder  at the  rates  or in the  amounts
specified in this Agreement,  provided,  however, that the Borrower shall not be
required to increase any such amounts  payable to any Lender with respect to any
Non-Excluded Taxes (i) that are

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<PAGE>


                                       22




attributable  to such  Lender's  failure  to  comply  with the  requirements  of
paragraph (d) or (e) of this Section or (ii) that are United States  withholding
taxes imposed on amounts payable to such Lender at the time the Lender becomes a
party to this  Agreement,  except to the extent that such Lender's  assignor (if
any) was entitled, at the time of assignment, to receive additional amounts from
the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.

               (b) In addition,  the  Borrower  shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

               (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by
the Borrower,  as promptly as possible thereafter the Borrower shall send to the
Administrative  Agent for its own  account or for the  account  of the  relevant
Lender,  as the case may be, a certified  copy of an original  official  receipt
received by the Borrower showing payment  thereof.  If the Borrower fails to pay
any Non-  Excluded  Taxes  or Other  Taxes  when due to the  appropriate  taxing
authority or fails to remit to the Administrative Agent the required receipts or
other  required   documentary   evidence,   the  Borrower  shall  indemnify  the
Administrative  Agent and the Lenders  for any  incremental  taxes,  interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure.

               (d) Each Lender (or Transferee) that is not a citizen or resident
of the United  States of America,  a  corporation,  partnership  or other entity
created or  organized  in or under the laws of the United  States of America (or
any  jurisdiction  thereof),  or any  estate or trust that is subject to federal
income  taxation  regardless  of the source of its income (a "Non-U.S.  Lender")
shall deliver to the Borrower and the Administrative Agent (or, in the case of a
Participant,  to the Lender from which the related participation shall have been
purchased) two copies of either U.S.  Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S.  Lender claiming exemption from U.S. federal
withholding  tax under  Section  871(h) or  881(c) of the Code with  respect  to
payments  of  "portfolio  interest",  a statement  substantially  in the form of
Exhibit D and a Form W-8,  or any  subsequent  versions  thereof  or  successors
thereto,  properly completed and duly executed by such Non-U.S.  Lender claiming
complete  exemption from, or a reduced rate of, U.S. federal  withholding tax on
all payments by the Borrower under this Agreement and the other Loan  Documents.
Such forms shall be delivered by each  Non-U.S.  Lender on or before the date it
becomes a party to this  Agreement  (or, in the case of any  Participant,  on or
before  the date such  Participant  purchases  the  related  participation).  In
addition,  each  Non-U.S.  Lender  shall  deliver such forms  promptly  upon the
obsolescence  or  invalidity of any form  previously  delivered by such Non-U.S.
Lender.  Each Non-U.S.  Lender shall promptly notify the Borrower at any time it
determines  that  it is no  longer  in a  position  to  provide  any  previously
delivered  certificate  to the  Borrower  (or any  other  form of  certification
adopted by the U.S. taxing  authorities for such purpose).  Notwithstanding  any
other  provision of this paragraph,  a Non-U.S.  Lender shall not be required to
deliver any form pursuant to this  paragraph  that such  Non-U.S.  Lender is not
legally able to deliver.

               (e) A Lender that is entitled to an  exemption  from or reduction
of  non-U.S.  withholding  tax  under the law of the  jurisdiction  in which the
Borrower is located,  or any treaty to which such  jurisdiction is a party, with
respect to payments under this  Agreement  shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times prescribed by applicable
law or  reasonably  requested  by the  Borrower,  such  properly  completed  and
executed documentation prescribed by applicable law as will permit such payments
to be made without  withholding or at a reduced rate,  provided that such Lender
is legally entitled to complete, execute and deliver such documentation and in

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                                       23




such  Lender's  judgment  such  completion,  execution or  submission  would not
materially prejudice the legal position of such Lender.

               (f) The agreements in this Section shall survive the  termination
of this  Agreement  and the payment of the Loans and all other  amounts  payable
hereunder.

               2.15 Indemnity.  The Borrower agrees to indemnify each Lender and
to hold each  Lender  harmless  from any loss or  expense  that such  Lender may
sustain or incur as a  consequence  of (a)  default by the  Borrower in making a
borrowing of,  conversion  into or  continuation  of Eurodollar  Loans after the
Borrower  has  given a  notice  requesting  the  same  in  accordance  with  the
provisions  of this  Agreement,  (b)  default  by the  Borrower  in  making  any
prepayment of or conversion from Eurodollar Loans after the Borrower has given a
notice  thereof in accordance  with the  provisions of this  Agreement,  (c) the
making of a prepayment of Eurodollar  Loans on a day that is not the last day of
an Interest  Period with respect  thereto or (d) the making of a prepayment of a
Competitive  Loan.  Such  indemnification  may  include  an amount  equal to the
excess,  if any,  of (i) the amount of interest  that would have  accrued on the
amount so prepaid,  or not so borrowed,  converted or continued,  for the period
from the date of such  prepayment  or of such  failure  to  borrow,  convert  or
continue to the last day of such  Interest  Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such  failure) in each case at the  applicable  rate of interest for
such Loans  provided  for herein  (excluding,  however,  the  Applicable  Margin
included  therein,  if any) over  (ii) the  amount of  interest  (as  reasonably
determined by such Lender) that would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable  period with leading banks in
the  interbank  eurodollar  market.  A  certificate  as to any  amounts  payable
pursuant  to this  Section  submitted  to the  Borrower  by any Lender  shall be
conclusive in the absence of manifest  error.  This  covenant  shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

               2.16 Change of Lending Office.  Each Lender agrees that, upon the
occurrence  of any event giving rise to the operation of Section 2.13 or 2.14(a)
with  respect  to such  Lender,  it will,  if  requested  by the  Borrower,  use
reasonable efforts (subject to overall policy  considerations of such Lender) to
designate  another  lending office for any Loans affected by such event with the
object  of  avoiding  the  consequences  of  such  event;  provided,  that  such
designation  is made on terms that, in the sole  judgment of such Lender,  cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage,  and provided,  further, that nothing in this Section shall affect
or postpone any of the  obligations  of any Borrower or the rights of any Lender
pursuant to Section 2.13 or 2.14(a).

               2.17  Replacement of Lenders.  The Borrower shall be permitted to
replace any Lender that (a) requests reimbursement for amounts owing pursuant to
Section  2.13 or  2.14(a)  or (b)  defaults  in its  obligation  to  make  Loans
hereunder,  with a  replacement  financial  institution;  provided that (i) such
replacement  does not conflict  with any  Requirement  of Law,  (ii) no Event of
Default shall have  occurred and be continuing at the time of such  replacement,
(iii)  prior to any such  replacement,  such  Lender  shall have taken no action
under Section 2.16 so as to eliminate the continued  need for payment of amounts
owing  pursuant  to Section  2.13 or  2.14(a),  (iv) the  replacement  financial
institution  shall  purchase,  at par, all Loans and other amounts owing to such
replaced Lender on or prior to the date of  replacement,  (v) the Borrower shall
be liable to such replaced  Lender under Section 2.15 if any Eurodollar  Loan or
Eurodollar  Competitive  Loan owing to such  replaced  Lender shall be purchased
other than on the last day of the Interest  Period  relating  thereto,  (vi) the
replacement financial institution, if not already a Lender, shall be

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                                       24




reasonably  satisfactory to the Administrative  Agent, (vii) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
Section  9.6  (provided  that  the  Borrower  shall  be  obligated  to  pay  the
registration and processing fee referred to therein),  (viii) until such time as
such  replacement  shall be  consummated,  the Borrower shall pay all additional
amounts (if any) required  pursuant to Section 2.13 or 2.14(a),  as the case may
be,  and (ix) any such  replacement  shall  not be  deemed to be a waiver of any
rights that the  Borrower,  the  Administrative  Agent or any other Lender shall
have against the replaced Lender.

                          SECTION 3.  REPRESENTATIONS AND WARRANTIES

               To induce the Administrative  Agent and the Lenders to enter into
this  Agreement  and to make the  Loans,  the  Borrower  hereby  represents  and
warrants to the Administrative Agent and each Lender that:

               3.1   Financial   Condition.   The   audited   consolidated   and
unconsolidated  balance sheets of the Borrower as at March 31, 1998 and December
31, 1998, and the related  consolidated and unconsolidated  statements of income
and of cash flows for the fiscal  years ended on such dates,  reported on by and
accompanied  by an  unqualified  report from Ernst & Young and Arthur  Andersen,
respectively,  present  fairly the  consolidated  and  unconsolidated  financial
condition  of  the  Borrower  as  at  such  date,  and  the   consolidated   and
unconsolidated results of its operations and its consolidated and unconsolidated
cash  flows  for  the  respective   fiscal  years  then  ended.   The  unaudited
consolidated  and  unconsolidated  balance  sheet of the Borrower as at June 30,
1999, and the related unaudited  consolidated and  unconsolidated  statements of
income  and cash flows for the  six-month  period  ended on such  date,  present
fairly the consolidated and unconsolidated  financial  condition of the Borrower
as at  such  date,  and  the  consolidated  and  unconsolidated  results  of its
operations and its consolidated  cash flows for the six- month period then ended
(subject to normal year-end audit adjustments).  All such financial  statements,
including  the  related  schedules  and notes  thereto,  have been  prepared  in
accordance  with GAAP  applied  consistently  throughout  the  periods  involved
(except as approved by the  aforementioned  firm of  accountants  and  disclosed
therein).  The Borrower and its Subsidiaries do not have any material  Guarantee
Obligations,  contingent liabilities and liabilities for taxes, or any long-term
leases or unusual forward or long-term commitments,  including any interest rate
or foreign currency swap or exchange  transaction or other obligation in respect
of derivatives,  that are not reflected in the most recent financial  statements
referred to in this paragraph,  except Guarantee  Obligations of Indebtedness of
the  Borrower  and/or any of its  Subsidiaries  so long as the  Indebtedness  in
respect of which such Guarantee Obligations arise is reflected in such financial
statements.  During  the period  from June 30,  1999 to and  including  the date
hereof there has been no Disposition by the Borrower of any material part of its
business or property.

     3.2 No Change.  Since  December 31, 1998 there has been no  development  or
event that has had or could  reasonably  be expected to have a Material  Adverse
Effect.

               3.3  Corporate  Existence;  Compliance  with  Law.  Each  of  the
Borrower  and  its  Significant  Subsidiaries  (a) is  duly  organized,  validly
existing  and in  good  standing  under  the  laws  of the  jurisdiction  of its
organization, (b) has the corporate power and authority, and the legal right, to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged,  (c) is duly qualified as
a foreign  corporation and in good standing under the laws of each  jurisdiction
where its  ownership,  lease or  operation  of  property  or the  conduct of its
business

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<PAGE>


                                       25




requires such  qualification  and (d) is in compliance with all  Requirements of
Law except to the extent that the failure to comply  therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

               3.4 Corporate Power; Authorization;  Enforceable Obligations. The
Borrower has the corporate  power and authority,  and the legal right,  to make,
deliver and perform the Loan Documents and to borrow hereunder. The Borrower has
taken all necessary  corporate  action to authorize the execution,  delivery and
performance  of the Loan  Documents and to authorize the borrowings on the terms
and conditions of this Agreement.  No consent or authorization  of, filing with,
notice to or other act by or in respect of, any  Governmental  Authority  or any
other Person is required in connection with the borrowings hereunder or with the
execution, delivery,  performance,  validity or enforceability of this Agreement
or any of the Loan  Documents,  except  consents,  authorizations,  filings  and
notices described in Schedule 3.4, which consents,  authorizations,  filings and
notices have been  obtained or made and are in full force and effect.  Each Loan
Document has been duly executed and  delivered on behalf of the  Borrower.  This
Agreement  constitutes,  and  each  other  Loan  Document  upon  execution  will
constitute,  a legal, valid and binding obligation of the Borrower,  enforceable
against the Borrower in accordance with its terms,  except as enforceability may
be limited by applicable bankruptcy, insolvency,  reorganization,  moratorium or
similar laws  affecting the  enforcement of creditors'  rights  generally and by
general equitable  principles  (whether  enforcement is sought by proceedings in
equity or at law).

               3.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents,  the borrowings hereunder and the use of
the proceeds  thereof will not violate any Requirement of Law or any Contractual
Obligation of the Borrower or any of its Subsidiaries and will not result in, or
require,  the  creation  or  imposition  of any Lien on any of their  respective
properties  or  revenues  pursuant  to  any  Requirement  of  Law  or  any  such
Contractual  Obligation.   No  Requirement  of  Law  or  Contractual  Obligation
applicable  to the  Borrower  or any of its  Subsidiaries  could  reasonably  be
expected to have a Material Adverse Effect.

               3.6 Litigation. No litigation,  investigation or proceeding of or
before any arbitrator or Governmental  Authority is pending or, to the knowledge
of  the  Borrower,  threatened  by  or  against  the  Borrower  or  any  of  its
Subsidiaries or against any of their respective  properties or revenues (a) with
respect to any of the Loan  Documents  or any of the  transactions  contemplated
hereby or thereby,  or (b) that could  reasonably be expected to have a Material
Adverse Effect.

               3.7 No Default.  Neither the Borrower nor any of its Subsidiaries
is in default under or with respect to any of its Contractual Obligations in any
respect that could reasonably be expected to have a Material Adverse Effect.  No
Default or Event of Default has occurred and is continuing.

               3.8  Ownership of Property;  Liens.  Each of the Borrower and its
Subsidiaries  has title in fee simple to, or a valid leasehold  interest in, all
its real property,  and good title to, or a valid leasehold interest in, all its
other  property,  except to the  extent  failure  to have such  title  could not
reasonably  be  expected  to have a Material  Adverse  Effect,  and none of such
property is subject to any Lien except as permitted by Section 6.2.

               3.9  Intellectual   Property.   The  Borrower  and  each  of  its
Subsidiaries  owns, or is licensed to use, all Intellectual  Property  necessary
for the conduct of its  business as  currently  conducted,  except to the extent
failure to have such  ownership or license  could not  reasonably be expected to
have a Material

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                                       26




Adverse Effect. No material claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual  Property or the validity
or  effectiveness of any  Intellectual  Property,  except to the extent any such
claim could not reasonably be expected to have a Material  Adverse  Effect,  nor
does  the  Borrower  know of any  valid  basis  for any such  claim.  The use of
Intellectual  Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person in any material respect,  except to the extent any such
infringement could not reasonably be expected to have a Material Adverse Effect.

               3.10 Taxes. Each of the Borrower and each of its Subsidiaries has
filed or caused to be filed all  Federal,  state and other  material tax returns
that are required to be filed and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it or any of its property and
all other taxes,  fees or other charges  imposed on it or any of its property by
any  Governmental  Authority  (other than any the amount or validity of that are
currently  being  contested in good faith by  appropriate  proceedings  and with
respect to which  reserves  in  conformity  with GAAP have been  provided on the
books of the Borrower or its Subsidiaries,  as the case may be); no material tax
Lien has been filed, and, to the knowledge of the Borrower, no material claim is
being asserted, with respect to any such tax, fee or other charge.

               3.11  Federal  Regulations.  No part of the proceeds of any Loans
will be used for "buying" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under  Regulation U as now and from time to
time  hereafter in effect or for any purpose that violates the provisions of the
Regulations of the Board.

               3.12  Labor  Matters.  Except  as,  in the  aggregate,  could not
reasonably  be  expected  to have a Material  Adverse  Effect:  (a) there are no
strikes or other labor disputes  against the Borrower or any of its Subsidiaries
pending or, to the  knowledge of the Borrower,  threatened;  (b) hours worked by
and payment made to employees of the Borrower and its Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable Requirement
of Law dealing with such matters;  and (c) all payments due from the Borrower or
any of its Subsidiaries on account of employee health and welfare insurance have
been paid or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.

               3.13  ERISA.  Neither  a  Reportable  Event  nor an  "accumulated
funding  deficiency"  (within  the meaning of Section 412 of the Code or Section
302 of ERISA) has  occurred  during the  five-year  period  prior to the date on
which this  representation  is made or deemed made with respect to any Plan, and
each Plan has complied in all material  respects with the applicable  provisions
of ERISA and the Code. No  termination  of a Single  Employer Plan has occurred,
and no Lien in favor of the PBGC or a Plan has  arisen,  during  such  five-year
period.  The present value of all accrued  benefits  under each Single  Employer
Plan  (based on those  assumptions  used to fund such  Plans) did not, as of the
last annual  valuation  date prior to the date on which this  representation  is
made or deemed  made,  exceed the value of the assets of such Plan  allocable to
such  accrued  benefits  by a material  amount.  Neither  the  Borrower  nor any
Commonly  Controlled  Entity has had a complete or partial  withdrawal  from any
Multiemployer  Plan that has resulted or could  reasonably be expected to result
in a material  liability under ERISA,  and neither the Borrower nor any Commonly
Controlled Entity would become subject to any material  liability under ERISA if
the Borrower or any such Commonly  Controlled Entity were to withdraw completely
from all Multiemployer Plans as of the valuation date most closely preceding the
date on

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                                       27




     which this  representation  is made or deemed made.  No such  Multiemployer
Plan is in Reorganization or Insolvent.

               3.14  Investment  Company  Act;  Other  Regulations.  Neither the
Borrower  nor  any of its  Subsidiaries  is (i) an  "investment  company",  or a
company  "controlled"  by an  "investment  company",  within the  meaning of the
Investment  Company Act of 1940. The Borrower and each of its  Subsidiaries  are
exempt from registration as a "holding company" under the Public Utility Holding
Company  Act  of  1935,  as  amended.  Neither  the  Borrower  nor  any  of  its
Subsidiaries  is subject to regulation  under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.

               3.15  Subsidiaries.  Except as  disclosed  to the  Administrative
Agent by the Borrower in writing from time to time after the Closing  Date,  (a)
Schedule  3.15 sets forth the name and  jurisdiction  of  incorporation  of each
Significant  Subsidiary and, as to each such Subsidiary,  the percentage of each
class of Capital  Stock owned by the Borrower  and (b) there are no  outstanding
subscriptions,   options,   warrants,  calls,  rights  or  other  agreements  or
commitments  (other than stock  options  granted to employees  or directors  and
directors' qualifying shares) of any nature relating to any Capital Stock of the
Borrower or any Significant Subsidiary, except as created by the Loan Documents.

               3.16 Use of Proceeds. The proceeds of the Loans shall be used for
general corporate purposes (including commercial paper back-up liquidity) of the
Borrower and its Subsidiaries in the ordinary course of business.

     3.17  Environmental  Matters.  Except  as,  in  the  aggregate,  could  not
reasonably be expected to have a Material Adverse Effect:

               (a) the facilities and  properties  owned,  leased or operated by
        the  Borrower  or any  of its  Subsidiaries  (the  "Properties")  do not
        contain,   and  have  not   previously   contained,   any  Materials  of
        Environmental   Concern   in   amounts   or   concentrations   or  under
        circumstances  that  constitute or  constituted a violation of, or could
        give rise to liability under, any Environmental Law;

               (b) neither the Borrower nor any of its Subsidiaries has received
        or  is  aware  of  any   notice   of   violation,   alleged   violation,
        non-compliance, liability or potential liability regarding environmental
        matters or compliance with  Environmental Laws with regard to any of the
        Properties  or  the  business  operated  by the  Borrower  or any of its
        Subsidiaries (the  "Business"),  nor does the Borrower have knowledge or
        reason to believe  that any such  notice  will be  received  or is being
        threatened;

               (c) Materials of Environmental  Concern have not been transported
        or disposed of from the Properties in violation of, or in a manner or to
        a location that could give rise to liability  under,  any  Environmental
        Law, nor have any  Materials of  Environmental  Concern been  generated,
        treated,  stored or disposed of at, on or under any of the Properties in
        violation  of, or in a manner that could give rise to  liability  under,
        any applicable Environmental Law;

               (d) no judicial  proceeding  or  governmental  or  administrative
        action is pending  or, to the  knowledge  of the  Borrower,  threatened,
        under any  Environmental  Law to which the Borrower or any Subsidiary is
        or will be  named  as a party  with  respect  to the  Properties  or the
        Business,  nor are there any consent  decrees or other decrees,  consent
        orders, administrative orders or other

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                                       28




     orders, or other administrative or judicial requirements  outstanding under
any Environmental Law with respect to the Properties or the Business;

               (e) there has been no release  or threat of release of  Materials
        of Environmental  Concern at or from the Properties,  or arising from or
        related  to  the  operations  of  the  Borrower  or  any  Subsidiary  in
        connection  with the  Properties  or  otherwise in  connection  with the
        Business,  in  violation of or in amounts or in a manner that could give
        rise to liability under Environmental Laws;

               (f) the  Properties  and all  operations at the Properties are in
        compliance, and have in the last five years been in compliance, with all
        applicable  Environmental  Laws, and there is no contamination at, under
        or about the  Properties  or  violation  of any  Environmental  Law with
        respect to the Properties or the Business; and

               (g) neither the Borrower nor any of its  Subsidiaries has assumed
        any liability of any other Person under Environmental Laws.

               3.18 Accuracy of  Information,  etc. No statement or  information
contained in this Agreement,  the Notes, the Confidential Information Memorandum
or any other document, certificate or statement furnished by or on behalf of the
Borrower to the Administrative  Agent or the Lenders, or any of them, for use in
connection with the transactions contemplated by this Agreement, contained as of
the date such statement,  information,  document or certificate was so furnished
(or, in the case of the Confidential  Information Memorandum,  as of the date of
this  Agreement),  any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements  contained  herein or therein not
misleading.  There is no fact known to the  Borrower  that could  reasonably  be
expected to have a Material Adverse Effect that has not been expressly disclosed
herein,  in the Confidential  Information  Memorandum or in any other documents,
certificates  and  statements  furnished  to the  Administrative  Agent  and the
Lenders for use in connection with the transactions contemplated hereby.

               3.19 Year 2000 Matters. Any reprogramming  required to permit the
proper  functioning (but only to the extent that such proper  functioning  would
otherwise be impaired by the  occurrence  of the year 2000) in and following the
year  2000  of  computer  systems  and  other  equipment   containing   embedded
microchips,  in either  case owned or  operated  by the  Borrower  or any of its
Subsidiaries or used or relied upon in the conduct of their business  (including
any such  systems  and other  equipment  supplied  by  others or with  which the
computer systems of the Borrower or any of its Subsidiaries interface),  and the
testing of all such  systems and other  equipment as so  reprogrammed,  has been
completed.  The costs to the  Borrower and its  Subsidiaries  that have not been
incurred as of the date hereof for reasonably  foreseeable  consequences to them
of any improper  functioning of other computer systems and equipment  containing
embedded  microchips due to the occurrence of the year 2000 could not reasonably
be  expected  to result in a Default  or Event of  Default or to have a Material
Adverse Effect.  Except for any  reprogramming  referred to above,  the computer
systems of the Borrower  and its  Subsidiaries  are and,  with  ordinary  course
upgrading and  maintenance,  will continue for the term of this Agreement to be,
sufficient for the conduct of their business as currently conducted.


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                                       29




                               SECTION 4.  CONDITIONS PRECEDENT

               4.1 Conditions to Initial  Extension of Credit.  The agreement of
each Lender to make the initial  extension of credit  requested to be made by it
is subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Closing Date (but in any event no later than November
19, 1999), of the following conditions precedent:

     (a) Credit  Agreement.  The  Administrative  Agent shall have received this
Agreement,  executed and delivered by the Administrative Agent, the Borrower and
each Person listed on Schedule 1.1A.

               (b) Existing Credit Facilities.  The  Administrative  Agent shall
        have  received   satisfactory  evidence  that  the  Borrower's  existing
        bilateral  credit  facilities  shall have been  terminated  and that all
        amounts thereunder shall have been paid in full.

               (c)  Financial  Statements.  The Lenders  shall have received (i)
        audited  consolidated  and  unconsolidated  financial  statements of the
        Borrower for the 1997 and 1998 fiscal years and (ii)  unaudited  interim
        consolidated and unconsolidated financial statements of the Borrower for
        each  quarterly  period  ended  subsequent  to the  date  of the  latest
        applicable financial statements delivered pursuant to clause (i) of this
        paragraph as to which such financial statements are available,  and such
        financial  statements  shall  not,  in the  reasonable  judgment  of the
        Lenders,  reflect  any  material  adverse  change  in  the  consolidated
        financial  condition of the  Borrower,  as  reflected  in the  financial
        statements  or  projections  contained in the  Confidential  Information
        Memorandum.

               (d)  Approvals.   All  governmental  and  third  party  approvals
        necessary in connection  with the continuing  operations of the Borrower
        and its Subsidiaries and the transactions contemplated hereby shall have
        been obtained and be in full force and effect.

               (e) Fees.  The  Lenders and the  Administrative  Agent shall have
        received  all fees  required  to be paid,  and all  expenses  for  which
        invoices have been presented (including the reasonable fees and expenses
        of legal counsel), on or before the Closing Date.

               (f)  Closing  Certificate.  The  Administrative  Agent shall have
        received,  with a  counterpart  for each Lender,  a  certificate  of the
        Borrower,  dated the Closing Date,  substantially in the form of Exhibit
        A, with appropriate insertions and attachments.

               (g) Legal Opinions.  The Administrative Agent shall have received
        the  executed  legal  opinion  of Steven L.  Zelkowitz,  deputy  general
        counsel of the Borrower and its Subsidiaries,  substantially in the form
        of Exhibit C. Such legal opinion shall cover such other matters incident
        to the transactions contemplated by this Agreement as the Administrative
        Agent may reasonably require.

               (h) The Borrower  shall have received a rating of its  commercial
        paper of at least A2 from S&P and P2 from Moody's.


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               4.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any  extension  of credit  requested to be made by it on any date
(including its initial  extension of credit) is subject to the  satisfaction  of
the following conditions precedent:

               (a) Representations  and Warranties.  Each of the representations
        and  warranties  made by the  Borrower in or pursuant to this  Agreement
        shall be true and correct on and as of such date as if made on and as of
        such date.

               (b) No  Default.  No  Default  or Event  of  Default  shall  have
        occurred and be  continuing  on such date or after giving  effect to the
        extensions of credit requested to be made on such date.

Each borrowing by the Borrower  hereunder shall constitute a representation  and
warranty  by the  Borrower as of the date of such  extension  of credit that the
conditions contained in this Section 4.2 have been satisfied.

                               SECTION 5.  AFFIRMATIVE COVENANTS

               The  Borrower  hereby  agrees  that,  so long as the  Commitments
remain  in  effect  or any Loan or other  amount  is owing to any  Lender or the
Administrative  Agent hereunder,  the Borrower shall and shall cause each of its
Subsidiaries to:

     5.1  Financial  Statements.  Furnish to the  Administrative  Agent and each
Lender:

               (a) as soon as available,  but in any event within 120 days after
        the  end of each  fiscal  year of the  Borrower,  a copy of the  audited
        consolidated   balance  sheet  of  the  Borrower  and  its  consolidated
        Subsidiaries  as at the end of such fiscal year and the related  audited
        consolidated  statements  of income  and of cash  flows for such  fiscal
        year, setting forth in each case in comparative form the figures for the
        previous  fiscal  year,  reported  on without a "going  concern" or like
        qualification or exception, or qualification arising out of the scope of
        the audit,  by Arthur  Andersen or other  independent  certified  public
        accountants of nationally recognized standing; and

               (b) as soon as available, but in any event not later than 60 days
        after  the end of each of the  first  three  quarterly  periods  of each
        fiscal year of the Borrower, the unaudited consolidated balance sheet of
        the Borrower  and its  consolidated  Subsidiaries  as at the end of such
        quarter and the related unaudited consolidated  statements of income and
        of cash  flows for such  quarter  and the  portion  of the  fiscal  year
        through  the  end of  such  quarter,  setting  forth  in  each  case  in
        comparative  form the  figures for the  previous  year,  certified  by a
        Responsible  Officer as being  fairly  stated in all  material  respects
        (subject to normal year-end audit adjustments).

All such  financial  statements  shall be complete  and correct in all  material
respects and shall be prepared in reasonable  detail and in accordance with GAAP
applied  consistently  throughout the periods  reflected  therein and with prior
periods (except as approved by such accountants or officer,  as the case may be,
and disclosed therein).


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     5.2 Certificates;  Other Information.  Furnish to the Administrative  Agent
and each Lender (or, in the case of clause (c), to the relevant Lender):

               (a)  concurrently  with the delivery of any financial  statements
        pursuant to Section  5.1, (i) a  certificate  of a  Responsible  Officer
        stating that, to the best of each such Responsible  Officer's knowledge,
        the Borrower  during such period has  observed or  performed  all of its
        covenants and other agreements, and satisfied every condition, contained
        in this Agreement to be observed, performed or satisfied by it, and that
        such  Responsible  Officer has  obtained no  knowledge of any Default or
        Event of Default except as specified in such certificate and (ii) in the
        case  of  quarterly  or  annual  financial   statements,   a  compliance
        certificate  containing all information and  calculations  necessary for
        determining  compliance  with  the  provisions  of  Section  6.1 of this
        Agreement  referred to therein as of the last day of the fiscal  quarter
        or fiscal year of the Borrower, as the case may be;

               (b)  within  five days  after  the same are  sent,  copies of all
        financial  statements and reports that the Borrower sends to the holders
        of any class of its debt  securities  or public equity  securities  and,
        within  five days  after  the same are  filed,  copies of all  financial
        statements  and reports that the Borrower may make to, or file with, the
        SEC; and

               (c) promptly,  such additional financial and other information as
        any Lender may from time to time reasonably request.

               5.3 Payment of Obligations.  Pay,  discharge or otherwise satisfy
at or before maturity or before they become delinquent,  as the case may be, all
its  material  obligations  of whatever  nature,  except where (i) the amount or
validity  thereof is  currently  being  contested  in good faith by  appropriate
proceedings  and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower or its Subsidiaries, as the case may be or
(ii) the  failure to do so could not  reasonably  be expected to have a Material
Adverse Effect.

               5.4 Maintenance of Existence;  Compliance. (a) In the case of the
Borrower and each of its Significant Subsidiaries,  (i) preserve, renew and keep
in full force and effect its corporate  existence  and (ii) take all  reasonable
action to maintain all rights,  privileges and franchises necessary or desirable
in the normal  conduct of its  business,  except,  in each  case,  as  otherwise
permitted  by Section 6.3 and except,  in the case of clause (ii) above,  to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect; and (b) comply with all Contractual Obligations and Requirements
of Law except to the extent that failure to comply  therewith  could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.

               5.5  Maintenance  of Property;  Insurance.  (a) Keep all property
useful and  necessary  in its  business  in good  working  order and  condition,
ordinary  wear and tear  excepted and (b) maintain  with  financially  sound and
reputable  insurance  companies  insurance  on all its property in at least such
amounts and  against at least such risks (but  including,  in any event,  public
liability,  product liability and business  interruption) as are usually insured
against in the same general  area by companies  engaged in the same or a similar
business.

     5.6 Inspection of Property; Books and Records; Discussions. (a) Keep proper
books of  records  and  account  in which  full,  true and  correct  entries  in
conformity with GAAP and all

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Requirements  of Law shall be made of all dealings and  transactions in relation
to its business and activities and (b) permit  representatives  of any Lender to
visit and inspect any of its  properties and examine and make abstracts from any
of its books and records at any  reasonable  time and as often as may reasonably
be desired and to discuss the business, operations, properties and financial and
other condition of the Borrower and its Subsidiaries with officers and employees
of the Borrower and its Subsidiaries  and with its independent  certified public
accountants.

     5.7  Notices.  Promptly  give notice to the  Administrative  Agent and each
Lender of:

               (a)  the occurrence of any Default or Event of Default;

               (b) any (i)  default  or event of default  under any  Contractual
        Obligation  of  the  Borrower  or  any  of  its   Subsidiaries  or  (ii)
        litigation,  investigation  or  proceeding  that  may  exist at any time
        between the  Borrower or any of its  Subsidiaries  and any  Governmental
        Authority,   that,  in  either  case,  if  not  cured  or  if  adversely
        determined,  as the case may be, could  reasonably be expected to have a
        Material Adverse Effect;

               (c) any litigation or proceeding affecting the Borrower or any of
        its Subsidiaries in which the amount involved is $25,000,000 or more and
        not covered by insurance  or in which  injunctive  or similar  relief is
        sought;

               (d) the  following  events,  as soon as possible and in any event
        within 30 days after the Borrower  knows or has reason to know  thereof:
        (i) the occurrence of any  Reportable  Event with respect to any Plan, a
        failure to make any required contribution to a Plan, the creation of any
        Lien in  favor  of the  PBGC or a Plan or any  withdrawal  from,  or the
        termination,  Reorganization or Insolvency of, any Multiemployer Plan or
        (ii) the institution of proceedings or the taking of any other action by
        the  PBGC or the  Borrower  or any  Commonly  Controlled  Entity  or any
        Multiemployer   Plan  with  respect  to  the  withdrawal  from,  or  the
        termination, Reorganization or Insolvency of, any Plan; and

               (e) any development or event that has had or could  reasonably be
        expected to have a Material Adverse Effect.

Each notice  pursuant to this Section 5.7 shall be accompanied by a statement of
a  Responsible  Officer  setting  forth  details of the  occurrence  referred to
therein and stating what action the Borrower or the relevant Subsidiary proposes
to take with respect thereto.

               5.8 Environmental Laws. (a) Comply in all material respects with,
and ensure compliance in all material respects by all tenants and subtenants, if
any,  with,  all  applicable  Environmental  Laws,  and obtain and comply in all
material respects with and maintain,  and ensure that all tenants and subtenants
obtain  and  comply in all  material  respects  with and  maintain,  any and all
licenses,  approvals,  notifications,   registrations  or  permits  required  by
applicable Environmental Laws.

               (b) Conduct and complete all  investigations,  studies,  sampling
and  testing,  and all  remedial,  removal  and  other  actions  required  under
Environmental  Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental  Authorities  regarding  Environmental
Laws.

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               5.9  Transaction  with  Affiliates.  Enter into any  transaction,
including any purchase,  sale,  lease or exchange of property,  the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliates  (other than the  Borrower)  upon fair and  reasonable  terms no less
favorable to the Borrower or such Subsidiary,  as the case may be, than it would
obtain in a  comparable  arm's length  transaction  with a Person that is not an
Affiliate.

                                SECTION 6.  NEGATIVE COVENANTS

               The  Borrower  hereby  agrees  that,  so long as the  Commitments
remain  in  effect  or any Loan or other  amount  is owing to any  Lender or the
Administrative Agent hereunder, the Borrower shall not, and shall not permit any
of its Subsidiaries to, directly or indirectly:

     6.1 Financial  Condition  Covenant.  Permit the ratio of Consolidated Total
Debt to Consolidated  Capitalization as at the last day of any fiscal quarter to
exceed 0.65:1.0.

               6.2 Liens. Create, incur, assume or suffer to exist any Lien upon
any of its property, whether now owned or hereafter acquired, except for:

               (a) Liens for  taxes not yet due or that are being  contested  in
        good faith by appropriate  proceedings,  provided that adequate reserves
        with respect  thereto are maintained on the books of the Borrower or its
        Subsidiaries, as the case may be, in conformity with GAAP;

               (b)   carriers',   warehousemen's,   mechanics',   materialmen's,
        repairmen's  or other  like  Liens  arising  in the  ordinary  course of
        business  that are not overdue for a period of more than 30 days or that
        are being contested in good faith by appropriate proceedings;

     (c)  pledges  or  deposits  in  connection   with  workers'   compensation,
unemployment insurance and other social security legislation;

               (d) deposits to secure the  performance of bids,  trade contracts
        (other than for borrowed money), leases,  statutory obligations,  surety
        and appeal  bonds,  performance  bonds and other  obligations  of a like
        nature incurred in the ordinary course of business;

               (e)  easements,  rights-of-way,  restrictions  and other  similar
        encumbrances  incurred in the ordinary  course of business  that, in the
        aggregate,  are not  substantial  in amount  and that do not in any case
        materially  detract  from the value of the property  subject  thereto or
        materially  interfere  with the ordinary  conduct of the business of the
        Borrower or any of its Subsidiaries;

               (f) Liens in  existence  on the date  hereof  listed on  Schedule
        6.2(f),  securing Indebtedness  outstanding on the date hereof, provided
        that no such Lien is spread to cover any  additional  property after the
        Closing Date and that the amount of Indebtedness  secured thereby is not
        increased;

               (g) Liens  securing  Indebtedness  of the  Borrower  or any other
        Subsidiary  incurred  to  finance  the  acquisition  of fixed or capital
        assets  (including,  without  limitation,  Capital  Lease  Obligations),
        provided   that  (i)  such   Liens   shall  be   created   substantially
        simultaneously with the

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        acquisition  of such fixed or capital  assets and (ii) such Liens do not
        at any time  encumber any property  other than the property  financed by
        such Indebtedness;

               (h) any  interest  or title of a lessor  under any lease  entered
        into by the Borrower or any other  Subsidiary in the ordinary  course of
        its business and covering only the assets so leased; and

               (i) Liens not  otherwise  permitted  by this  Section  so long as
        neither  (i)  the  aggregate   outstanding   principal   amount  of  the
        obligations  secured  thereby nor (ii) the  aggregate  fair market value
        (determined  as of the date such Lien is incurred) of the assets subject
        thereto exceeds (as to the Borrower and all Subsidiaries) $25,000,000 at
        any one time.

               6.3  Fundamental  Changes.  In the case of the  Borrower  and any
Significant Subsidiary, enter into any merger, consolidation or amalgamation, or
liquidate,   wind  up  or  dissolve   itself  (or  suffer  any   liquidation  or
dissolution),  or  Dispose  of,  all or  substantially  all of its  property  or
business, except that:

               (a) any Subsidiary of the Borrower may be merged or  consolidated
        with or into  the  Borrower  (provided  that the  Borrower  shall be the
        continuing or surviving corporation);

     (b) any  Subsidiary of the Borrower may Dispose of any or all of its assets
(upon voluntary liquidation or otherwise) to the Borrower; and

               (c)  any Disposition permitted under Section 6.4.

               6.4 Disposition of Property.  Dispose of any of the Borrower's or
any Significant Subsidiaries' property, whether now owned or hereafter acquired,
or, in the case of any Significant Subsidiary,  issue or sell any shares of such
Significant Subsidiary's Capital Stock to any Person, except:

     (a) the Disposition of obsolete or worn out property in the ordinary course
of business;

               (b)  the sale of inventory in the ordinary course of business;

               (c)  Dispositions permitted by Section 6.3(b); and

               (d) the sale or issuance of any Significant  Subsidiary's Capital
        Stock to the Borrower or any other Significant Subsidiary.

               6.5  Negative  Pledge  Clauses.  Enter into or suffer to exist or
become  effective  any  agreement  that  prohibits  or limits the ability of the
Borrower or any of its Subsidiaries to create,  incur, assume or suffer to exist
any Lien upon any of its  property or  revenues,  whether now owned or hereafter
acquired,  other  than (a) this  Agreement,  (b) any  agreements  governing  any
purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in
which case, any  prohibition or limitation  shall only be effective  against the
assets financed  thereby) and (c) any agreements  listed on Schedule 6.5 and any
extensions,  renewals  or  replacements  thereof  having  substantially  similar
provisions with respect thereto.


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               6.6   Limitation   on   Restrictions   on   Distributions    from
Subsidiaries.  Create or otherwise cause or permit to exist or become  effective
any  consensual  encumbrance  or  consensual  restriction  on the ability of any
Subsidiary to pay dividends or make any other distribution on its Capital Stock,
other than any encumbrance or restriction  pursuant to an agreement in effect on
the Closing Date as set forth on Schedule 6.6.

                                 SECTION 7.  EVENTS OF DEFAULT

               If any of the following events shall occur and be continuing:

               (a) the Borrower shall fail to pay any principal of any Loan when
        due in accordance  with the terms hereof;  or the Borrower shall fail to
        pay any interest on any Loan, or any other amount  payable  hereunder or
        under any other Loan Document,  within five days after any such interest
        or other amount becomes due in accordance with the terms hereof; or

               (b) any  representation  or  warranty  made or deemed made by the
        Borrower  herein or that is  contained in any  certificate,  document or
        financial  or other  statement  furnished  by it at any time under or in
        connection  with this Agreement  shall prove to have been  inaccurate in
        any material respect on or as of the date made or deemed made; or

               (c) the Borrower  shall default in the  observance or performance
        of any  agreement  contained  in clause (i) or (ii) of  Section  5.4(a),
        Section 5.7(a) or Section 6 of this Agreement; or

               (d) the Borrower  shall default in the  observance or performance
        of any other  agreement  contained  in this  Agreement or any other Loan
        Document  (other than as provided in paragraphs  (a) through (c) of this
        Section),  and such default shall continue unremedied for a period of 30
        days after notice to the Borrower from the  Administrative  Agent or any
        Lender; or

               (e) the Borrower or any of its Subsidiaries  shall (i) default in
        making any payment of any principal of any  Indebtedness  (including any
        Guarantee  Obligation,  but  excluding  the Loans) on the  scheduled  or
        original  due date with respect  thereto;  or (ii) default in making any
        payment of any  interest on any such  Indebtedness  beyond the period of
        grace, if any,  provided in the instrument or agreement under which such
        Indebtedness  was  created;  or  (iii)  default  in  the  observance  or
        performance  of any other  agreement or  condition  relating to any such
        Indebtedness  or contained in any  instrument  or agreement  evidencing,
        securing  or  relating  thereto,  or any  other  event  shall  occur  or
        condition  exist, the effect of such default or other event or condition
        is to cause, or to permit the holder or beneficiary of such Indebtedness
        (or a  trustee  or agent on behalf of such  holder  or  beneficiary)  to
        cause,  with the  giving of notice if  required,  such  Indebtedness  to
        become  due  prior to its  stated  maturity  or (in the case of any such
        Indebtedness  constituting a Guarantee  Obligation)  to become  payable;
        provided,  that a default,  event or condition  described in clause (i),
        (ii) or (iii) of this paragraph (e) shall not at any time  constitute an
        Event of Default unless,  at such time, one or more defaults,  events or
        conditions of the type  described in clauses (i), (ii) and (iii) of this
        paragraph  (e) shall have  occurred  and be  continuing  with respect to
        Indebtedness  the outstanding  principal  amount of which exceeds in the
        aggregate $25,000,000; or


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               (f) (i) the Borrower or any of its  Subsidiaries  shall  commence
        any case,  proceeding  or other  action (A) under any existing or future
        law of any  jurisdiction,  domestic or foreign,  relating to bankruptcy,
        insolvency,  reorganization  or relief of  debtors,  seeking  to have an
        order for relief entered with respect to it, or seeking to adjudicate it
        bankrupt  or   insolvent,   or  seeking   reorganization,   arrangement,
        adjustment, winding-up, liquidation,  dissolution,  composition or other
        relief with respect to it or its debts, or (B) seeking  appointment of a
        receiver, trustee, custodian,  conservator or other similar official for
        it or for all or any substantial part of its assets,  or the Borrower or
        any of its Subsidiaries  shall make a general assignment for the benefit
        of its creditors;  or (ii) there shall be commenced against the Borrower
        or any of its  Subsidiaries  any case,  proceeding  or other action of a
        nature  referred to in clause (i) above that (A) results in the entry of
        an order  for  relief or any such  adjudication  or  appointment  or (B)
        remains  undismissed,  undischarged or unbonded for a period of 60 days;
        or (iii) there  shall be  commenced  against the  Borrower or any of its
        Subsidiaries any case,  proceeding or other action seeking issuance of a
        warrant of attachment,  execution,  distraint or similar process against
        all or any  substantial  part of its assets that results in the entry of
        an  order  for any  such  relief  that  shall  not  have  been  vacated,
        discharged,  or stayed or bonded  pending appeal within 60 days from the
        entry  thereof;  or (iv) the Borrower or any of its  Subsidiaries  shall
        take any  action  in  furtherance  of, or  indicating  its  consent  to,
        approval  of, or  acquiescence  in,  any of the acts set forth in clause
        (i),  (ii),  or  (iii)  above;  or  (v)  the  Borrower  or  any  of  its
        Subsidiaries  shall generally not, or shall be unable to, or shall admit
        in writing its inability to, pay its debts as they become due; or

               (g) (i) any Person shall engage in any  "prohibited  transaction"
        (as  defined  in  Section  406 of ERISA  or  Section  4975 of the  Code)
        involving  any  Plan,  (ii) any  "accumulated  funding  deficiency"  (as
        defined in Section  302 of ERISA),  whether or not  waived,  shall exist
        with  respect  to any  Plan or any  Lien in  favor of the PBGC or a Plan
        shall  arise on the assets of the  Borrower or any  Commonly  Controlled
        Entity,  (iii) a  Reportable  Event  shall  occur  with  respect  to, or
        proceedings  shall  commence to have a trustee  appointed,  or a trustee
        shall be appointed,  to administer or to terminate,  any Single Employer
        Plan,   which   Reportable  Event  or  commencement  of  proceedings  or
        appointment of a trustee is, in the  reasonable  opinion of the Required
        Lenders,  likely to result in the  termination of such Plan for purposes
        of Title IV of ERISA,  (iv) any Single Employer Plan shall terminate for
        purposes  of  Title  IV of  ERISA,  (v)  the  Borrower  or any  Commonly
        Controlled  Entity shall,  or in the reasonable  opinion of the Required
        Lenders  is  likely  to,  incur  any  liability  in  connection  with  a
        withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
        Plan or (vi) any other  event or  condition  shall  occur or exist  with
        respect to a Plan;  and in each case in clauses (i) through  (vi) above,
        such  event  or  condition,  together  with all  other  such  events  or
        conditions, if any, could, in the sole judgment of the Required Lenders,
        reasonably be expected to have a Material Adverse Effect; or

               (h) one or more judgments or decrees shall be entered against the
        Borrower  or any of  its  Subsidiaries  involving  in  the  aggregate  a
        liability  (not  paid or fully  covered  by  insurance  as to which  the
        relevant insurance company has acknowledged  coverage) of $25,000,000 or
        more,  and all such  judgments or decrees  shall not have been  vacated,
        discharged,  stayed or  bonded  pending  appeal  within 30 days from the
        entry thereof; or

               (i) any  "person"  or "group" (as such terms are used in Sections
        13(d) and 14(d) of the Securities  Exchange Act of 1934, as amended (the
        "Exchange  Act")) shall become,  or obtain  rights  (whether by means or
        warrants, options or otherwise) to become, the "beneficial owner"

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        (as  defined in Rules  13(d)-3  and  13(d)-5  under the  Exchange  Act),
        directly or indirectly, of more than 20% of the outstanding common stock
        of the Borrower;

then, and in any such event, (A) if such event is an Event of Default  specified
in clause  (i) or (ii) of  paragraph  (f) above with  respect  to the  Borrower,
automatically  the  Commitments  shall  immediately   terminate  and  the  Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents shall immediately become due and payable,
and (B) if such  event is any  other  Event of  Default,  either  or both of the
following  actions may be taken:  (i) with the consent of the Required  Lenders,
the Administrative  Agent may, or upon the request of the Required Lenders,  the
Administrative Agent shall, by notice to the Borrower declare the Commitments to
be terminated forthwith,  whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Administrative Agent may,
or upon the request of the Required Lenders,  the Administrative Agent shall, by
notice to the  Borrower,  declare the Loans  hereunder  (with  accrued  interest
thereon) and all other  amounts  owing under this  Agreement  and the other Loan
Documents to be due and payable forthwith,  whereupon the same shall immediately
become due and payable.  Except as  expressly  provided  above in this  Section,
presentment,  demand,  protest  and all  other  notices  of any kind are  hereby
expressly waived by the Borrower.

                             SECTION 8.  THE ADMINISTRATIVE AGENT

               8.1 Appointment.  Each Lender hereby  irrevocably  designates and
appoints  the  Administrative  Agent as the  agent  of such  Lender  under  this
Agreement  and the  other  Loan  Documents,  and each  such  Lender  irrevocably
authorizes the  Administrative  Agent, in such capacity,  to take such action on
its behalf under the  provisions of this  Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are  expressly  delegated
to the  Administrative  Agent by the terms of this  Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding  any provision to the contrary elsewhere in this Agreement,  the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary  relationship with any Lender,  and
no  implied  covenants,  functions,  responsibilities,  duties,  obligations  or
liabilities  shall be read into this  Agreement  or any other Loan  Document  or
otherwise exist against the Administrative Agent.

               8.2 Delegation of Duties.  The  Administrative  Agent may execute
any of its  duties  under this  Agreement  and the other  Loan  Documents  by or
through agents or  attorneys-in-fact  and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be  responsible  for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.

               8.3 Exculpatory Provisions.  Neither the Administrative Agent nor
any  of  its  officers,  directors,  employees,  agents,   attorneys-in-fact  or
affiliates  shall be (i) liable for any action  lawfully  taken or omitted to be
taken by it or such Person  under or in  connection  with this  Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable  decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross  negligence or willful  misconduct)
or (ii)  responsible  in any  manner  to any of the  Lenders  for any  recitals,
statements,  representations  or warranties  made by the Borrower or any officer
thereof  contained  in this  Agreement  or any  other  Loan  Document  or in any
certificate, report, statement or other document referred to or provided for in,
or  received  by the  Administrative  Agent under or in  connection  with,  this
Agreement or

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any other Loan Document or for the value, validity, effectiveness,  genuineness,
enforceability  or  sufficiency  of this Agreement or any other Loan Document or
for any  failure  of the  Borrower  to  perform  its  obligations  hereunder  or
thereunder.  The  Administrative  Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the  observance or performance of any of
the agreements  contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.

               8.4 Reliance by Administrative  Agent. The  Administrative  Agent
shall be entitled to rely,  and shall be fully  protected  in relying,  upon any
instrument,  writing,  resolution,  notice,  consent,  certificate,   affidavit,
letter, telecopy, telex or teletype message,  statement, order or other document
or  conversation  believed  by it to be  genuine  and  correct  and to have been
signed,  sent or made by the  proper  Person  or  Persons  and upon  advice  and
statements of legal counsel  (including  counsel to the  Borrower),  independent
accountants  and  other  experts  selected  by  the  Administrative  Agent.  The
Administrative  Agent  may deem and  treat  the  payee of any Note as the  owner
thereof for all purposes  unless a written notice of assignment,  negotiation or
transfer  thereof  shall  have been  filed with the  Administrative  Agent.  The
Administrative Agent shall be fully justified in failing or refusing to take any
action  under this  Agreement or any other Loan  Document  unless it shall first
receive such advice or concurrence of the Required  Lenders (or, if so specified
by this  Agreement,  all Lenders) as it deems  appropriate  or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The  Administrative  Agent shall in all cases be fully protected in
acting,  or in refraining  from acting,  under this Agreement and the other Loan
Documents  in  accordance  with a request of the  Required  Lenders  (or,  if so
specified by this Agreement, all Lenders), and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.

               8.5 Notice of  Default.  The  Administrative  Agent  shall not be
deemed to have  knowledge or notice of the occurrence of any Default or Event of
Default  hereunder  unless the  Administrative  Agent has received notice from a
Lender or the Borrower  referring to this Agreement,  describing such Default or
Event of Default and stating that such notice is a "notice of  default".  In the
event that the  Administrative  Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders.  The Administrative  Agent shall
take such  action with  respect to such  Default or Event of Default as shall be
reasonably  directed  by the  Required  Lenders  (or,  if so  specified  by this
Agreement, all Lenders); provided that unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall not
be  obligated  to) take such action,  or refrain  from taking such action,  with
respect to such  Default or Event of Default as it shall deem  advisable  in the
best interests of the Lenders.

               8.6 Non-Reliance on Administrative Agent and Other Lenders.  Each
Lender expressly  acknowledges that neither the Administrative  Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates have
made  any   representations  or  warranties  to  it  and  that  no  act  by  the
Administrative  Agent hereinafter taken,  including any review of the affairs of
the Borrower or any affiliate of the Borrower, shall be deemed to constitute any
representation  or warranty  by the  Administrative  Agent to any  Lender.  Each
Lender  represents to the  Administrative  Agent that it has,  independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such  documents  and  information  as it has  deemed  appropriate,  made its own
appraisal  of  and  investigation  into  the  business,  operations,   property,
financial  and other  condition  and  creditworthiness  of the  Borrower and its
affiliates and made its own decision to make its Loans hereunder and enter into

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                                       39




this  Agreement.  Each Lender also represents  that it will,  independently  and
without reliance upon the Administrative Agent or any other Lender, and based on
such  documents  and  information  as it shall  deem  appropriate  at the  time,
continue to make its own credit analysis,  appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such  investigation  as it deems  necessary to inform itself as to the business,
operations,  property, financial and other condition and creditworthiness of the
Borrower and its  affiliates.  Except for notices,  reports and other  documents
expressly  required to be furnished to the Lenders by the  Administrative  Agent
hereunder, the Administrative Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations,   property,   condition  (financial  or  otherwise),   prospects  or
creditworthiness  of the Borrower or any affiliate of the Borrower that may come
into  the  possession  of the  Administrative  Agent  or  any  of its  officers,
directors, employees, agents, attorneys-in-fact or affiliates.

               8.7   Indemnification.   The  Lenders   agree  to  indemnify  the
Administrative  Agent in its capacity as such (to the extent not  reimbursed  by
the Borrower  and without  limiting  the  obligation  of the Borrower to do so),
ratably according to their respective  Aggregate Exposure  Percentages in effect
on the date on which  indemnification  is sought  under  this  Section  (or,  if
indemnification  is sought after the date upon which the Commitments  shall have
terminated  and the Loans  shall have been paid in full,  ratably in  accordance
with such Aggregate Exposure  Percentages  immediately prior to such date), from
and against any and all liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits,  costs,  expenses  or  disbursements  of  any  kind
whatsoever  that may at any time  (whether  before or after the  payment  of the
Loans) be imposed on, incurred by or asserted against the  Administrative  Agent
in any way relating to or arising out of, the Commitments,  this Agreement,  any
of the other Loan  Documents  or any  documents  contemplated  by or referred to
herein or  therein  or the  transactions  contemplated  hereby or thereby or any
action taken or omitted by the Administrative  Agent under or in connection with
any of the foregoing; provided that no Lender shall be liable for the payment of
any  portion  of such  liabilities,  obligations,  losses,  damages,  penalties,
actions,  judgments, suits, costs, expenses or disbursements that are found by a
final and  nonappealable  decision of a court of competent  jurisdiction to have
resulted from the Administrative Agent's gross negligence or willful misconduct.
The  agreements  in this Section  shall survive the payment of the Loans and all
other amounts payable hereunder.

               8.8  Administrative  Agent  in  Its  Individual   Capacity.   The
Administrative  Agent and its affiliates may make loans to, accept deposits from
and  generally  engage in any kind of business  with the  Borrower as though the
Administrative Agent was not the Administrative Agent. With respect to its Loans
made or renewed by it, the  Administrative  Agent shall have the same rights and
powers under this  Agreement and the other Loan  Documents as any Lender and may
exercise the same as though it were not the Administrative  Agent, and the terms
"Lender" and "Lenders" shall include the Administrative  Agent in its individual
capacity.

               8.9 Successor  Administrative Agent. The Administrative Agent may
resign as  Administrative  Agent  upon 30 days'  notice to the  Lenders  and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall (unless an Event of
Default  under  Section 7(a) or Section 7(f) with respect to the Borrower  shall
have occurred and be continuing)  be subject to approval by the Borrower  (which
approval  shall  not  be  unreasonably  withheld  or  delayed),  whereupon  such
successor  agent  shall  succeed  to  the  rights,  powers  and  duties  of  the
Administrative  Agent,  and the term  "Administrative  Agent"  shall  mean  such
successor agent effective

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upon such  appointment  and  approval,  and the  former  Administrative  Agent's
rights,  powers and duties as Administrative Agent shall be terminated,  without
any other or further act or deed on the part of such former Administrative Agent
or any of the  parties to this  Agreement  or any  holders  of the Loans.  If no
successor  agent has accepted  appointment as  Administrative  Agent by the date
that  is  30  days  following  a  retiring   Administrative  Agent's  notice  of
resignation,  the retiring Administrative Agent's resignation shall nevertheless
thereupon  become  effective and the Lenders shall assume and perform all of the
duties of the  Administrative  Agent  hereunder  until such time, if any, as the
Required  Lenders  appoint a successor  agent as provided  for above.  After any
retiring   Administrative  Agent's  resignation  as  Administrative  Agent,  the
provisions  of this Section 8 shall inure to its benefit as to any actions taken
or  omitted  to be  taken by it while it was  Administrative  Agent  under  this
Agreement and the other Loan Documents.

                                   SECTION 9.  MISCELLANEOUS

               9.1 Amendments  and Waivers.  Neither this  Agreement,  any other
Loan Document,  nor any terms hereof or thereof may be amended,  supplemented or
modified  except in  accordance  with the  provisions  of this  Section 9.1. The
Required  Lenders and the  Borrower  may,  or,  with the written  consent of the
Required Lenders,  the  Administrative  Agent and the Borrower may, from time to
time, (a) enter into written amendments, supplements or modifications hereto for
the purpose of adding any provisions to this Agreement or changing in any manner
the rights of the Lenders or of the  Borrower  hereunder  or (b) waive,  on such
terms and conditions as the Required Lenders or the Administrative Agent, as the
case may be, may specify in such  instrument,  any of the  requirements  of this
Agreement  or any  Default or Event of Default and its  consequences;  provided,
however,  that no such waiver and no such amendment,  supplement or modification
shall (i) eliminate or reduce any voting rights under this Section 9.1,  forgive
the principal amount or extend the final scheduled date of maturity of any Loan,
reduce the stated rate of any  interest or fee payable  hereunder  or extend the
scheduled  date of any payment  thereof,  or  increase  the amount or extend the
expiration date of any Lender's Commitment,  in each case without the consent of
each Lender directly affected thereby;  (ii) reduce any percentage  specified in
the definition of Required Lenders, consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement and the other
Loan  Documents,  in each case without the consent of all Lenders;  (iii) amend,
modify  or  waive  any  provision  of  Section  8  without  the  consent  of the
Administrative  Agent.  Any such waiver and any such  amendment,  supplement  or
modification  shall  apply  equally to each of the  Lenders and shall be binding
upon the Borrower,  the Lenders, the Administrative Agent and all future holders
of the Loans.  In the case of any  waiver,  the  Borrower,  the  Lenders and the
Administrative  Agent  shall be  restored to their  former  position  and rights
hereunder  and under the  other  Loan  Documents,  and any  Default  or Event of
Default  waived  shall be  deemed to be cured  and not  continuing;  but no such
waiver shall extend to any  subsequent or other Default or Event of Default,  or
impair any right consequent thereon.

               9.2  Notices.  All  notices,  requests and demands to or upon the
respective  parties  hereto to be effective  shall be in writing  (including  by
telecopy),  and, unless otherwise expressly provided herein,  shall be deemed to
have been duly given or made when delivered,  or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received,   addressed   as  follows  in  the  case  of  the   Borrower  and  the
Administrative  Agent,  and  as set  forth  in an  administrative  questionnaire
delivered to the  Administrative  Agent in the case of the  Lenders,  or to such
other address as may be hereafter notified by the respective parties hereto:


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<PAGE>


                                       41




        The Borrower:                       KeySpan Corporation
                                            One MetroTech Center
                                            Brooklyn, New York  11201
                                            Attention:  Norma Rodriguez
                                            Telecopy:  (718) 858-7105

        The Administrative Agent:           The Chase Manhattan Bank
                                            Brooklyn Middle Market Bank Group
                                            Four MetroTech Center
                                            Brooklyn, New York  11245
                                            Attention:  Peter D'Agostino
                                            Telecopy:  (718) 242-3837

        with a copy to:                     The Chase Manhattan Bank
                                            Agency Bank Services
                                            One Chase Manhattan Plaza
                                            New York, New York
                                            Telecopy: (212) 552-7400

provided that any notice,  request or demand to or upon the Administrative Agent
or the Lenders shall not be effective until received.

               9.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising,  on the part of the Administrative Agent or any Lender, any
right,  remedy,  power or privilege  hereunder or under the other Loan Documents
shall operate as a waiver thereof;  nor shall any single or partial  exercise of
any right,  remedy,  power or privilege  hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights,  remedies,  powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.

               9.4   Survival   of   Representations    and   Warranties.    All
representations  and warranties made hereunder and in any document,  certificate
or statement  delivered pursuant hereto or in connection  herewith shall survive
the  execution  and delivery of this  Agreement  and the making of the Loans and
other extensions of credit hereunder.

               9.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
or  reimburse  the  Administrative  Agent  for all its  out-of-pocket  costs and
expenses incurred in connection with the development,  preparation and execution
of, and any  amendment,  supplement or  modification  to, this Agreement and the
other Loan Documents and any other documents prepared in connection  herewith or
therewith,   and  the  consummation  and   administration  of  the  transactions
contemplated hereby and thereby, including the reasonable fees and disbursements
of  counsel  to the  Administrative  Agent and  filing  and  recording  fees and
expenses,  with  statements with respect to the foregoing to be submitted to the
Borrower  prior to the  Closing  Date (in the case of  amounts to be paid on the
Closing  Date) and from time to time  thereafter  on a  quarterly  basis or such
other periodic basis as the Administrative Agent shall deem appropriate,  (b) to
pay or reimburse each Lender and the Administrative  Agent for all its costs and
expenses  incurred in connection  with the  enforcement or  preservation  of any
rights  under  this  Agreement,  the other  Loan  Documents  and any such  other
documents, including the fees and

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                                       42




disbursements of counsel  (including the allocated fees and expenses of in-house
counsel) to each Lender and of counsel to the Administrative  Agent, (c) to pay,
indemnify,  and hold each Lender and the Administrative Agent harmless from, any
and all recording and filing fees and any and all  liabilities  with respect to,
or resulting from any delay in paying,  stamp,  excise and other taxes,  if any,
that may be payable or determined to be payable in connection with the execution
and delivery of, or consummation or  administration  of any of the  transactions
contemplated by, or any amendment,  supplement or modification of, or any waiver
or consent under or in respect of, this Agreement,  the other Loan Documents and
any such other documents,  and (d) to pay,  indemnify,  and hold each Lender and
the Administrative  Agent and their respective officers,  directors,  employees,
affiliates, agents and controlling persons (each, an "Indemnitee") harmless from
and  against  any and  all  other  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery,  enforcement,
performance and  administration of this Agreement,  the other Loan Documents and
any such other documents,  including any of the foregoing relating to the use of
proceeds  of the Loans or the  violation  of,  noncompliance  with or  liability
under, any Environmental Law applicable to the operations of the Borrower any of
its  Subsidiaries  or any of the Properties and the reasonable fees and expenses
of legal  counsel in  connection  with  claims,  actions or  proceedings  by any
Indemnitee  against the Borrower  under any Loan  Document (all the foregoing in
this clause (d), collectively,  the "Indemnified  Liabilities"),  provided, that
the Borrower shall have no obligation  hereunder to any Indemnitee  with respect
to Indemnified  Liabilities to the extent such Indemnified Liabilities are found
by a final and  nonappealable  decision of a court of competent  jurisdiction to
have  resulted  from  the  gross  negligence  or  willful   misconduct  of  such
Indemnitee.  Without  limiting  the  foregoing,  and to the extent  permitted by
applicable law, the Borrower agrees not to assert and to cause its  Subsidiaries
not to assert,  and hereby  waives  and agrees to cause its  Subsidiaries  to so
waive,  all rights for contribution or any other rights of recovery with respect
to all claims, demands,  penalties,  fines, liabilities,  settlements,  damages,
costs and expenses of whatever kind or nature, under or related to Environmental
Laws,  that  any of  them  might  have  by  statute  or  otherwise  against  any
Indemnitee.  All  amounts due under this  Section 9.5 shall be payable  promptly
after written demand therefor.  The agreements in this Section 9.5 shall survive
repayment of the Loans and all other amounts payable hereunder.

               9.6 Successors and Assigns;  Participations and Assignments.  (a)
This  Agreement  shall be binding upon and inure to the benefit of the Borrower,
the Lenders, the Administrative Agent, all future holders of the Loans and their
respective  successors  and assigns,  except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.

               (b) Any Lender  may,  without  the  consent of the  Borrower,  in
accordance with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant")  participating  interests
in any Loan owing to such  Lender,  any  Commitment  of such Lender or any other
interest of such Lender  hereunder  and under the other Loan  Documents.  In the
event of any such sale by a Lender of a participating interest to a Participant,
such  Lender's  obligations  under this  Agreement to the other  parties to this
Agreement shall remain  unchanged,  such Lender shall remain solely  responsible
for the  performance  thereof,  such Lender  shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and the
Borrower and the Administrative Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's  rights and obligations  under
this Agreement and the other Loan  Documents.  In no event shall any Participant
under any such  participation  have any right to approve any amendment or waiver
of any

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                                       43




provision of any Loan Document,  or any consent to any departure by the Borrower
therefrom,  except to the extent that such  amendment,  waiver or consent  would
reduce  the  principal  of,  or  interest  on,  the  Loans or any  fees  payable
hereunder, or postpone the date of the final maturity of the Loans, in each case
to the extent subject to such participation. The Borrower agrees that if amounts
outstanding  under this Agreement and the Loans are due or unpaid, or shall have
been  declared or shall have become due and payable  upon the  occurrence  of an
Event of Default,  each  Participant  shall, to the maximum extent  permitted by
applicable  law,  be  deemed  to have the  right of  setoff  in  respect  of its
participating  interest in amounts owing under this Agreement to the same extent
as if the amount of its  participating  interest were owing  directly to it as a
Lender under this  Agreement,  provided that, in purchasing  such  participating
interest,  such  Participant  shall be deemed to have  agreed to share  with the
Lenders the  proceeds  thereof as  provided in Section  9.7(a) as fully as if it
were a Lender hereunder. The Borrower also agrees that each Participant shall be
entitled to the  benefits of Sections  2.13,  2.14 and 2.15 with  respect to its
participation in the Commitments and the Loans  outstanding from time to time as
if it was a Lender; provided that, in the case of Section 2.14, such Participant
shall have complied with the requirements of said Section and provided, further,
that no Participant  shall be entitled to receive any greater amount pursuant to
any such Section than the transferor  Lender would have been entitled to receive
in respect of the amount of the  participation  transferred  by such  transferor
Lender to such Participant had no such transfer occurred.

               (c) Any Lender (an "Assignor") may, in accordance with applicable
law, at any time and from time to time assign to any Lender,  any  affiliate  of
any Lender or any  Approved  Fund or, with the consent of the  Borrower  and the
Administrative Agent (which, in each case, shall not be unreasonably withheld or
delayed),  to an  additional  bank,  financial  institution  or other entity (an
"Assignee") all or, except in the case of an outstanding  Competitive  Loan, any
part  of  its  rights  and  obligations  under  this  Agreement  pursuant  to an
Assignment  and  Acceptance,  executed by such  Assignee,  such Assignor and any
other Person whose consent is required pursuant to this paragraph, and delivered
to the  Administrative  Agent for its  acceptance and recording in the Register;
provided  that no such  assignment  to an Assignee  (other than any Lender,  any
affiliate of any Lender or any Approved Fund) shall be in an aggregate principal
amount of less than  $5,000,000  (other than in the case of an assignment of all
of a Lender's  interests under this  Agreement),  unless otherwise agreed by the
Borrower and the Administrative  Agent. For purposes of the proviso contained in
the  preceding  sentence,  the amount  described  therein shall be aggregated in
respect  of each  Lender  and its  related  Approved  Funds,  if any.  Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined  pursuant  to  such  Assignment  and  Acceptance,  (x)  the  Assignee
thereunder  shall  be a  party  hereto  and,  to the  extent  provided  in  such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a  Commitment  and/or  Loans as set  forth  therein,  and (y) the  Assignor
thereunder  shall, to the extent provided in such Assignment and Acceptance,  be
released  from its  obligations  under this  Agreement  (and,  in the case of an
Assignment and Acceptance  covering all of an Assignor's  rights and obligations
under  this  Agreement,  such  Assignor  shall  cease  to  be a  party  hereto).
Notwithstanding  any  provision of this Section 9.6, the consent of the Borrower
shall not be required  for any  assignment  that occurs when an Event of Default
pursuant to Section 7(f) shall have occurred and be  continuing  with respect to
the Borrower.

               (d) The  Administrative  Agent shall,  on behalf of the Borrower,
maintain at its address referred to in Section 9.2 a copy of each Assignment and
Acceptance  delivered to it and a register (the  "Register") for the recordation
of the names  and  addresses  of the  Lenders  and the  Commitment  of,  and the
principal  amount of the Loans  owing to,  each  Lender  from time to time.  The
entries in the Register

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<PAGE>


                                       44




shall be conclusive,  in the absence of manifest error,  and the Borrower,  each
other Loan Party,  the  Administrative  Agent and the  Lenders  shall treat each
Person  whose name is recorded in the Register as the owner of the Loans and any
Notes  evidencing the Loans recorded therein for all purposes of this Agreement.
Any  assignment  of any  Loan,  whether  or not  evidenced  by a Note,  shall be
effective only upon  appropriate  entries with respect thereto being made in the
Register (and each Note shall expressly so provide).  Any assignment or transfer
of all or part of a Loan evidenced by a Note shall be registered on the Register
only upon  surrender  for  registration  of  assignment  or transfer of the Note
evidencing such Loan,  accompanied by a duly executed Assignment and Acceptance,
and thereupon one or more new Notes shall be issued to the designated Assignee.

               (e) Upon its receipt of an Assignment and Acceptance  executed by
an  Assignor,  an Assignee  and any other  Person  whose  consent is required by
Section  9.6(c),  together  with  payment  to  the  Administrative  Agent  of  a
registration and processing fee of $3,500,  the  Administrative  Agent shall (i)
promptly  accept such  Assignment and Acceptance and (ii) record the information
contained  therein in the Register on the  effective  date  determined  pursuant
thereto.

               (f) For  avoidance  of  doubt,  the  parties  to  this  Agreement
acknowledge  that the provisions of this Section 9.6  concerning  assignments of
Loans and Notes relate only to absolute  assignments and that such provisions do
not prohibit  assignments  creating security interests,  including any pledge or
assignment  by a  Lender  of any  Loan or Note to any  Federal  Reserve  Bank in
accordance with applicable law.

               (g) The  Borrower,  upon  receipt  of  written  notice  from  the
relevant  Lender,  agrees  to  issue  Notes  to any  Lender  requiring  Notes to
facilitate transactions of the type described in paragraph (f) above.

               9.7  Adjustments;  Set-off.  (a) Except to the  extent  that this
Agreement  expressly  provides  for  payments to be  allocated  to a  particular
Lender, if any Lender (a "Benefitted Lender") shall, at any time after the Loans
and other amounts  payable  hereunder shall  immediately  become due and payable
pursuant to Section 7,  receive  any  payment of all or part of the  Obligations
owing to it (whether  voluntarily  or  involuntarily,  by  set-off,  pursuant to
events or proceedings of the nature  referred to in Section 7(f), or otherwise),
in a greater  proportion  than any such payment to any other Lender,  if any, in
respect of the Obligations  owing to such other Lender,  such Benefitted  Lender
shall purchase for cash from the other Lenders a participating  interest in such
portion  of the  Obligations  owing  to each  such  other  Lender,  as  shall be
necessary to cause such  Benefitted  Lender to share the excess payment  ratably
with each of the Lenders; provided,  however, that if all or any portion of such
excess  payment  is  thereafter  recovered  from such  Benefitted  Lender,  such
purchase shall be rescinded,  and the purchase price returned,  to the extent of
such recovery, but without interest.

               (b) In  addition  to  any  rights  and  remedies  of the  Lenders
provided by law,  each Lender shall have the right,  without prior notice to the
Borrower,  any such notice being expressly  waived by the Borrower to the extent
permitted by  applicable  law,  upon any amount  becoming due and payable by the
Borrower  hereunder  (whether  at  the  stated  maturity,   by  acceleration  or
otherwise), to set off and appropriate and apply against such amount any and all
deposits  (general or special,  time or demand,  provisional  or final),  in any
currency,  and any other credits,  indebtedness or claims,  in any currency,  in
each case  whether  direct or  indirect,  absolute  or  contingent,  matured  or
unmatured,  at any time  held or owing by such  Lender  or any  branch or agency
thereof to or for the credit or the account of the Borrower,

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                                       45




as the case may be. Each Lender  agrees  promptly to notify the Borrower and the
Administrative  Agent after any such setoff and application made by such Lender,
provided  that the failure to give such notice  shall not affect the validity of
such setoff and application.

               9.8  Counterparts.  This Agreement may be executed by one or more
of the parties to this Agreement on any number of separate counterparts, and all
of said  counterparts  taken  together shall be deemed to constitute one and the
same  instrument.  Delivery of an executed  signature  page of this Agreement by
facsimile  transmission  shall be effective  as delivery of a manually  executed
counterpart  hereof.  A set of the  copies of this  Agreement  signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.

               9.9  Severability.  Any  provision  of  this  Agreement  that  is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

               9.10  Integration.  This  Agreement and the other Loan  Documents
represent  the  agreement  of the  Borrower,  the  Administrative  Agent and the
Lenders with respect to the subject  matter  hereof,  and there are no promises,
undertakings,  representations or warranties by the Administrative  Agent or any
Lender  relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.

               9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES  UNDER THIS  AGREEMENT  SHALL BE GOVERNED BY, AND  CONSTRUED  AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     9.12 Submission To Jurisdiction;  Waivers.  The Borrower hereby irrevocably
and unconditionally:

               (a)  submits for itself and its  property in any legal  action or
        proceeding  relating to this Agreement and the other Loan Documents,  or
        for recognition and enforcement of any judgment in respect  thereof,  to
        the non-exclusive general jurisdiction of the courts of the State of New
        York,  the courts of the United States for the Southern  District of New
        York, and appellate courts from any thereof;

               (b) consents that any such action or proceeding may be brought in
        such courts and waives any objection  that it may now or hereafter  have
        to the venue of any such action or  proceeding in any such court or that
        such  action or  proceeding  was  brought in an  inconvenient  court and
        agrees not to plead or claim the same;

               (c)  agrees  that  service  of  process  in any  such  action  or
        proceeding  may be effected by mailing a copy thereof by  registered  or
        certified  mail (or any  substantially  similar  form of mail),  postage
        prepaid, to the Borrower, as the case may be at its address set forth in
        Section 9.2 or at such other address of which the  Administrative  Agent
        shall have been notified pursuant thereto;


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                                       46




               (d) agrees that  nothing  herein shall affect the right to effect
        service of process in any other  manner  permitted by law or shall limit
        the right to sue in any other jurisdiction; and

               (e) waives,  to the maximum  extent not  prohibited  by law,  any
        right it may have to claim or recover in any legal action or  proceeding
        referred  to  in  this  Section  any  special,  exemplary,  punitive  or
        consequential damages.

               9.13  Acknowledgements.  The Borrower hereby acknowledges that:
                     ----------------

     (a) it has been  advised  by  counsel  in the  negotiation,  execution  and
delivery of this Agreement and the other Loan Documents;

               (b)  neither  the  Administrative  Agent nor any  Lender  has any
        fiduciary relationship with or duty to the Borrower arising out of or in
        connection with this Agreement or any of the other Loan  Documents,  and
        the relationship  between the Administrative  Agent and the Lenders,  on
        one hand, and the Borrower, on the other hand, in connection herewith or
        therewith is solely that of debtor and creditor; and

               (c) no joint  venture  is  created  hereby or by the  other  Loan
        Documents or otherwise exists by virtue of the transactions contemplated
        hereby among the Lenders or among the Borrower and the Lenders.

               9.14  Confidentiality.  Each of the Administrative Agent and each
Lender agrees to keep confidential all non-public  information provided to it by
the Borrower  pursuant to this  Agreement  that is designated by the Borrower as
confidential;  provided  that nothing  herein shall  prevent the  Administrative
Agent  or  any  Lender  from   disclosing  any  such   information  (a)  to  the
Administrative  Agent,  any other  Lender,  any  affiliate  of any Lender or any
Approved Fund, (b) to any  Transferee or prospective  Transferee  that agrees to
comply with the  provisions of this Section,  (c) to its  employees,  directors,
agents,  attorneys,  accountants and other professional advisors or those of any
of its affiliates, (d) upon the request or demand of any Governmental Authority,
(e) in response to any order of any court or other Governmental  Authority or as
may otherwise be required  pursuant to any  Requirement of Law, (f) if requested
or required to do so in connection  with any  litigation or similar  proceeding,
(g)  that  has been  publicly  disclosed,  (h) to the  National  Association  of
Insurance Commissioners or any similar organization or any nationally recognized
rating agency that requires  access to information  about a Lender's  investment
portfolio in connection with ratings issued with respect to such Lender,  or (i)
in connection with the exercise of any remedy  hereunder or under any other Loan
Document.

               9.15  WAIVERS OF JURY TRIAL.  THE  BORROWER,  THE  ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING  RELATING TO THIS  AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

                                        (End of Page)




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<PAGE>


                                       47




               IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their proper and duly  authorized  officers
as of the day and year first above written.


                                        KEYSPAN CORPORATION


                                     By:
                                           Name:
                                           itle:


                         THE CHASE MANHATTAN BANK, as Administrative
                         Agent and as a Lender

                                     By:
                                           Name:
                                           Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       48




                                                       CITIBANK, NA


                                                       By:
                                                              Name:
                                                              Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       49




MORGAN GUARANTY TRUST COMPANY OF
NEW YORK


By:
                                                                 Name:
                                                                 Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       50




ABN AMRO BANK, N.V.


By:
                                                                 Name:
                                                                 Title:

By:
                                                                 Name:
                                                                 Title:

509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       51




THE BANK OF NEW YORK


By:
                                                                 Name:
                                                                 Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       52




THE BANK OF NOVA SCOTIA


By:
                                                                 Name:
                                                                 Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       53




BANK ONE, NA (MAIN OFFICE-CHICAGO)


By:
                                                                 Name:
                                                                 Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       54




BARCLAYS BANK PLC


By:
                                                                 Name:
                                                                 Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       55




CARIPLO - CASSA DI RISPARMIO DELLE
PROVINCIE LOMBARDE S.p.A.


By:
                                                                 Name:
                                                                 Title:

By:
                                                                 Name:
                                                                 Title:

509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       56




THE DAI ICHI KANGYO BANK, LTD.


By:
                                                                 Name:
                                                                 Title:


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       57




EAB


By:
                                                 Name:  FREDRIC J. HUGUE
                                                 Title:    GROUP VICE PRESIDENT


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       58




FLEET NATIONAL BANK


By:
                                               Name:  ROBERT D. LANIGAN
                                               Title:    SENIOR VICE PRESIDENT


509253-0191-02261-99A5F10H-CRA

<PAGE>


                                       59




THE INDUSTRIAL BANK OF JAPAN, LTD.


By:
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509253-0191-02261-99A5F10H-CRA

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                                       60




MELLON BANK, N.A.


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509253-0191-02261-99A5F10H-CRA

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                                       61




THE ROYAL BANK OF SCOTLAND PLC


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509253-0191-02261-99A5F10H-CRA

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                                       62




ROYAL BANK OF CANADA


By:
                                                       Name:  LINDA M. STEPHENS
   Title:    MANAGING DIRECTOR


509253-0191-02261-99A5F10H-CRA

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                                       63




BANK HAPOALIM B.M.


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By:
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                                                                 Title:

509253-0191-02261-99A5F10H-CRA

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                                       64




CREDIT LYONNAIS NEW YORK BRANCH


By:
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                                                                 Title:


509253-0191-02261-99A5F10H-CRA

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                                       65



PNC BANK, NATIONAL ASSOCIATION


By:
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                                                                 Title: