Document:

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                                                                  Exhibit 10.2.1

Execution Copy

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                         NEW YORK STATE ENERGY RESEARCH

                           AND DEVELOPMENT AUTHORITY

                                      and

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

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

                            PARTICIPATION AGREEMENT

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

                            Dated as of June 1, 2001

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

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                               TABLE OF CONTENTS

                            PARTICIPATION AGREEMENT
                                                                            Page
                                                                            ----

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

                                   ARTICLE I
                    DEFINITIONS; EFFECTIVE DATE AND DURATION
                           OF PARTICIPATION AGREEMENT

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

                                   ARTICLE II
                                REPRESENTATIONS

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

                                  ARTICLE III
                         THE PROJECT; ISSUANCE OF BONDS

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

                                   ARTICLE IV
                               NOTE AND PAYMENTS

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

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

                                   ARTICLE V
                               SPECIAL COVENANTS

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

                                   ARTICLE VI

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

                                  ARTICLE VII
                         EVENTS OF DEFAULT AND REMEDIES

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

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

                                  ARTICLE VIII

                                 MISCELLANEOUS

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

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

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

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

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

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

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

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

                             W I T N E S S E T H :

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

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

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

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

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

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

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

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

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

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

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

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                                   ARTICLE I

                    DEFINITIONS; EFFECTIVE DATE AND DURATION
                           OF PARTICIPATION AGREEMENT

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

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

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                                   ARTICLE II

                                REPRESENTATIONS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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                                  ARTICLE III

                         THE PROJECT; ISSUANCE OF BONDS

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

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

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

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

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

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

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

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

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

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                                   ARTICLE IV

                               NOTE AND PAYMENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                                       11
<PAGE>

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

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

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

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

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

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

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

                                       12
<PAGE>

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

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

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

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

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

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

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

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

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

                                       13
<PAGE>

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

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

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

                                       14
<PAGE>

                                   ARTICLE V

                               SPECIAL COVENANTS

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

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

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

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

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

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

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

                                       15
<PAGE>

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

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

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

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

                                       16
<PAGE>

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

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

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

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

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

                                       17
<PAGE>

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

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

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

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

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

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

                                       18
<PAGE>

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

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

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

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

                                       19
<PAGE>

                                   ARTICLE VI

                              REDEMPTION OF BONDS

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

                                       20
<PAGE>

                                  ARTICLE VII

                         EVENTS OF DEFAULT AND REMEDIES

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

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

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

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

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

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

                                       21
<PAGE>

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

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

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

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

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

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

                                       22
<PAGE>

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

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

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

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

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

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

                                       23
<PAGE>

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

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

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

                                       24
<PAGE>

                                  ARTICLE VIII

                                 MISCELLANEOUS

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

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

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

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

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

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

                                       25
<PAGE>

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

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

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

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

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

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

                   [Signature Page of this Agreement Follows]

                                       26
<PAGE>

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

                                         NEW YORK STATE ENERGY RESEARCH
                                           AND DEVELOPMENT AUTHORITY

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

Attest:

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

                                         CONSOLIDATED EDISON COMPANY OF
                                           NEW YORK, INC.

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

Attest:

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

<PAGE>

                  [Signature Page of Participation Agreement]

                                       28
<PAGE>

                                   EXHIBIT A

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

                             DESCRIPTION OF PROJECT
                               EXEMPT FACILITIES

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

                                      A-1
<PAGE>

                                   EXHIBIT B

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

                    DESCRIPTION OF OTHER PROJECT FACILITIES

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

                                      B-1
<PAGE>

                                   EXHIBIT C

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

                 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

                          $224,600,000 PROMISSORY NOTE

                                      FOR

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

                               New York, New York
                                  June 6, 2001

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

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

                                      C-1
<PAGE>

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

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

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

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

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

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

                                         CONSOLIDATED EDISON COMPANY OF
                                           NEW YORK, INC.

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

ATTEST:

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

                                      C-2<Page>

                                                                  Exhibit 10.2.2

Execution Copy

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

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

                         NEW YORK STATE ENERGY RESEARCH
                           AND DEVELOPMENT AUTHORITY

                                      AND

                                 HSBC BANK USA,
                                   as Trustee

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

                       FIRST SUPPLEMENTAL TRUST INDENTURE

                            Dated as of July 1, 2001

                                       to

                                TRUST INDENTURE

                            Dated as of July 1, 1999

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

                                  relating to

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

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

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

<PAGE>

                               TABLE OF CONTENTS
                                                                            Page

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

                                   ARTICLE I

                           AUTHORIZATION; DEFINITIONS

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

                                   ARTICLE II

                          AMENDMENTS TO THE INDENTURE

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

                                      (i)
<PAGE>

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

                                  ARTICLE III

                                 MISCELLANEOUS

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

                                      (ii)
<PAGE>

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

                                   ARTICLE I

                           AUTHORIZATION; DEFINITIONS

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

                                   ARTICLE II

                         AMENDMENTS TO THE INDENTURE(1)

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

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

----------

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

                                       2
<PAGE>

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

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

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

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

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

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

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

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

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

                                       3
<PAGE>

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

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

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

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

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

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

                                       4
<PAGE>

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

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

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

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

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

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

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

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

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

                                       5
<PAGE>

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

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

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

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

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

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

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

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

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

                                       6
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       7
<PAGE>

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

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

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

                                       8
<PAGE>

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

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

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

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

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

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

                                       9
<PAGE>

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

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

                                       10
<PAGE>

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

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

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

                                       11
<PAGE>

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

                  "Commission" shall mean the Securities and Exchange
      Commission.

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

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

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

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

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

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

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

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

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

                                       12
<PAGE>

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

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

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

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

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

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

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

                                       13
<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 January 1 of each calendar year
      and ending on December 31 of the next calendar year.

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

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

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

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

                                       14
<PAGE>

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

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

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

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

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

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

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

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

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

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

                                       15
<PAGE>

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

                  "Interest Payment Date" shall mean:

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

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

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

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

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

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

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

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

                  (i) a Fixed Rate Conversion Date;

                                       16
<PAGE>

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

                  (k) the Stated Maturity;

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

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

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

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

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

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

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

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

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

                                       17
<PAGE>

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

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

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

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

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

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

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

                                       18
<PAGE>

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

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

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

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

                                       19
<PAGE>

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

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

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

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

                                       20
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

                                       21
<PAGE>

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

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

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

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

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

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

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

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

                                       22
<PAGE>

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

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

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

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

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

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

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

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

                                       23
<PAGE>

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

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

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

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

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

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

                  "Semi-annual Period Record Date" shall mean, with respect to
      each Interest Payment Date during a Semi-annual Rate Period, the fifteenth
      day of the calendar month next preceding such Interest Payment Date.

                  "Semi-annual Rate" shall mean with respect to each Calculation
      Period during a Semi-annual Rate Period, a rate of interest equal to the
      rate of interest per annum established and

                                       24
<PAGE>

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

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

                  "Semi-annual Rate Period" shall mean any period during which
      Bonds bear interest at a Semi-annual Rate, which period shall commence on
      the effective date of a Change in the Interest Rate Mode to a Semi-annual
      Rate, and shall extend through the day immediately preceding

                                       25
<PAGE>

      the earlier of (a) the effective date of another Change in the Interest
      Rate Mode, or (b) the Stated Maturity.

                  "Standard Auction Period" initially shall mean an auction
      period of 35 days, and after the establishment of a different Standard
      Auction Period pursuant to Section 3.04, shall mean such different
      Standard Auction Period.

                  "Stated Maturity," with respect to each series of Bonds shall
      mean May 1, 2034, provided that, subject to the next sentence, in any case
      where the date of maturity of, or payment of premium on, interest on, or
      principal of, the Bonds or the date fixed for redemption of any Bonds
      shall be on a day other than a Business Day, then payment of interest,
      principal and premium, if any, need not be made on such date but may be
      made (without additional interest) on the next succeeding Business Day,
      with the same force and effect as if made on the date of maturity or the
      date fixed for redemption. Notwithstanding anything in this Indenture to
      the contrary, in no event shall the final maturity date of the Bonds
      extend beyond 35 years from the Closing Date, and the length of any
      Auction Period shall be reduced at the discretion of the Authority to the
      extent necessary to ensure compliance with the provisions of this
      sentence.

                  "Statutory Corporate Tax Rate" shall mean as of any date of
      determination the highest tax rate bracket (expressed in decimals) now or
      hereafter applicable in each taxable year on the taxable income of every
      corporation as set forth in Section 11 of the Code or any successor
      section without regard to any minimum additional tax provision or
      provisions regarding changes in rates during a taxable year, which on the
      date hereof is .35. Any change in the Statutory Corporate Tax Rate shall
      be evidenced by a certificate of the Company.

                  "Submission Deadline" shall mean 1:00 p.m., New York City
      time, on any Auction Date or such other time on any such Auction Date by
      which Broker-Dealers are required to submit Orders to the Auction Agent as
      specified by the Auction Agent from time to time.

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

                  "Submitted Hold Order" shall mean with respect to Auction Rate
      Bonds, Submitted Hold Order as defined in Section 3.08.

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

                  "Submitted Sell Order" shall mean with respect to Auction Rate
      Bonds, Submitted Sell Order as defined in Section 3.08.

                                       26
<PAGE>

                  "Substitute Commercial Paper Dealers" shall mean Merrill
      Lynch, Pierce, Fenner & Smith Incorporated or any other commercial paper
      dealers specified by the Authority at the request of the Company at the
      time of any Change in the Interest Rate Mode to an Auction Rate or their
      respective affiliates or successors, if any such person is a commercial
      paper dealer, provided that none of such persons nor any of their
      affiliates or successors shall be a Commercial Paper Dealer.

                  "Substitute U.S. Government Securities Dealer" shall mean CS
      First Boston Corporation or Merrill Lynch, Pierce, Fenner & Smith
      Incorporated or any other dealer or dealers in U.S. government securities
      that may be specified by the Authority at the request of the Company at
      the time of a Change in the Interest Rate Mode to an Auction Rate, or
      their respective affiliates or successors, if any such person is a dealer
      in U.S. government securities, provided that none of such persons nor any
      of their affiliates or successors shall be a U.S. Government Securities
      Dealer.

                  "Sufficient Clearing Bids" shall mean with respect to Auction
      Rate Bonds, Sufficient Clearing Bids as defined in Section 3.08.

                  "Supplemental Indenture" shall mean any indenture between the
      Trustee and the Authority entered into pursuant to and in compliance with
      the provisions of Article XIV hereof amending or supplementing the
      provisions of this Indenture as originally executed or as theretofore
      amended or supplemented.

                  "Supplemental Participation Agreement" shall mean an agreement
      supplementing or amending the Participation Agreement.

                  "Support Facility" shall mean any instrument satisfactory to
      the Authority entered into or obtained in connection with the Bonds, such
      as a letter of credit, committed line of credit, insurance policy, surety
      bond or standby bond purchase agreement, or any combination of the
      foregoing, and issued by a bank or banks, other financial institution or
      institutions, or any combination of the foregoing which provides for the
      payment of (i) the Purchase Price on Bonds tendered for purchase pursuant
      to the provisions hereof and the Bond Purchase Trust Agreement and/or (ii)
      principal of and interest on all Bonds coming due and payable during the
      term thereof. The Letter of Credit dated July 29, 1999 issued by Morgan
      Guaranty Trust Company of New York shall constitute a Support Facility
      within the meaning of this Indenture.

                  "Support Facility Issuer" shall mean any bank or banks, or
      other financial institution or institutions which is the issuer of any
      Support Facility.

                                       27
<PAGE>

                  "Tax Regulatory Agreement" shall mean the Tax Regulatory
      Agreement, dated the Closing Date, between the Authority and the Company,
      and any and all modifications, alterations, amendments and supplements
      thereto.

                  "Term Period Record Date" shall mean, with respect to each
      Interest Payment Date during a Term Rate Period, the fifteenth day of the
      month next preceding such Interest Payment Date.

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

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

                                       28
<PAGE>

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

                  "Terminating Event" shall mean any event or events under the
      terms of a Support Facility or any agreement providing for the issuance of
      such Support Facility which would cause the termination or expiration of
      such Support Facility but would specifically allow for the mandatory
      tender of Bonds pursuant to Section 5.09 with a draw on or borrowing or
      payment under such Support Facility prior to such termination or
      expiration. Specifically with respect to the Initial Liquidity Facility,
      the occurrence of an event of default under, and as defined in, the
      related Reimbursement Agreement shall constitute a Terminating Event
      within the meaning of this Indenture.

                  "Treasury Rate" on any date, shall mean (i) the yield,
      calculated in accordance with prevailing industry convention, of the rate
      on the most recently auctioned direct obligations of the U.S. Government
      having a maturity at the time of issuance of 364 days or less with a
      remaining maturity closest to the length of such Auction Period, as quoted
      in The Wall Street Journal on such date for the Business Day next
      preceding such date; or (ii) in the event that any such rate is not
      published in The Wall Street Journal, then the bond equivalent yield,
      calculated in accordance with prevailing industry convention, as
      calculated by reference to the arithmetic average of the bid price
      quotations of the most recently auctioned direct obligation of the U.S.
      Government having a maturity at the time of issuance of 364 days or less
      with a remaining maturity closest to the length of such Auction Period,
      based on bid price quotations on such date obtained by the Auction Agent
      from a U.S. Government Securities Dealer. If any U.S. Government
      Securities Dealer does not quote a rate required to determine the Treasury
      Rate, the Treasury Rate shall be determined on the basis of the quotation
      or quotations furnished by the remaining U.S. Government Securities Dealer
      or Dealers and any Substitute U.S. Government Securities Dealer or Dealers
      selected by the Authority at the request of the Company to provide such
      rate or rates not being supplied by any U.S. Government Securities Dealer
      or U.S. Government Securities Dealers, as the case may be, or, if the
      Authority does not select any such Substitute U.S. Government Securities
      Dealer or Substitute U.S. Government Securities Dealers, by the remaining
      U.S. Government Securities Dealer or U.S. Government Securities Dealers.

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

                  "Trustee" shall mean the banking corporation having trust
      powers appointed by the Authority as Trustee hereunder and serving as such
      hereunder, and any surviving, resulting or transferee corporation as
      provided in Section 11.13. References to principal office of the Trustee
      shall mean the Principal Corporate Trust Office of the Trustee.

                                       29
<PAGE>

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

                  "U.S. Government Securities Dealers" shall mean the
      Remarketing Agents for any Auction Rate Bonds, or, in lieu of any thereof,
      their respective affiliates or successors, provided that any such entity
      is a U.S. Government securities dealer.

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

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

                  "Weekly Rate Index" shall mean with respect to the
      Determination Date of each Calculation Period during a Weekly Rate Period,
      the average of 30-day yield evaluations at par, determined by the Indexing
      Agent, of securities (whether or not actually issued), the interest on
      which is not included in gross income for federal income tax purposes, of
      no fewer than ten Component Issuers selected by the Indexing Agent,
      including issuers of commercial paper, project notes, bond anticipation
      notes and tax anticipation notes, computed by the Indexing Agent on and as
      of such day. If the Bonds are rated by a Rating Agency in its highest note
      or commercial paper rating category or one of its two highest long-term
      debt rating categories, each Component Issuer must (a) have outstanding
      securities rated by a Rating Agency in its highest note or commercial
      paper rating category or (b) not have outstanding notes or commercial
      paper rated by a Rating Agency but have outstanding securities rated by a
      Rating Agency in one of its two highest long-term debt rating categories.
      If the Bonds are rated by a Rating Agency in a rating category that is
      lower than its highest note or commercial paper rating category or its two
      highest long-term debt rating categories (and the Bonds are not rated in
      one of such categories by the other Rating Agency), each Component Issuer
      must (a) have outstanding securities rated by a Rating Agency in its note
      or commercial paper rating category which is the same or correlative, in
      the Indexing Agent's judgment, to the note or commercial paper rating
      category or the long-term debt rating category of the Bonds or (b) have
      outstanding securities rated by a Rating Agency in the same long-term debt
      rating category as the Bonds are rated by that Rating Agency and not have
      any outstanding notes or commercial paper rated by such Rating Agency. The
      Indexing Agent may change the Component Issuers from time to time in its
      discretion, subject to the foregoing requirements. In

                                       30
<PAGE>

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

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

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

            SECTION 2.02. Amendment to Paragraph 7 of Section 2.02 of the
Indenture. Paragraph 7 of Section 2.02 of the Indenture is hereby amended to
read as follows:

                  The Bonds bearing a Commercial Paper Rate, a Daily Rate, a
      Weekly Rate or a Monthly Rate shall be fully registered Bonds in the
      denomination of $100,000 or any integral multiple thereof. The Bonds
      bearing an Auction Rate shall be fully registered Bonds in the
      denomination of $25,000 or any integral multiple thereof. The Bonds
      bearing a Semi-annual Rate, a Term Rate or a Fixed Rate shall be fully
      registered Bonds in the denomination of $5,000 or any integral multiple
      thereof.

            SECTION 2.03. Amendment to Section 3.01 of the Indenture. Section
3.01 of the Indenture is hereby amended to read as follows:

                  1. Interest accruing on Bonds bearing interest at a Commercial
      Paper Rate, a Daily Rate, a Weekly Rate, a Monthly Rate or a Semi-annual
      Rate, shall be computed on the basis of a 365 or 366-day year, as
      applicable, for the number of days actually elapsed. Interest accruing on
      Bonds bearing interest at a Term Rate or a Fixed Rate shall be computed on
      the basis of a 360-day year, consisting of twelve (12) thirty (30) day
      months. Interest accruing on Bonds bearing interest at an Auction Rate
      during an Auction Period of 180 days or less shall be computed on the
      basis of a 360-day year for the number of days actually elapsed. Interest
      accruing on Bonds bearing interest at an Auction Rate during an Auction
      Period of over 180 days shall be computed on the basis of a 360-day year,
      consisting of twelve (12) thirty (30) day months. Bonds shall bear
      interest from the date of issuance thereof payable in arrears on each
      Interest Payment Date. The Bonds issued upon registration of transfers or
      exchanges of Bonds shall bear interest from the Interest Payment Date next
      preceding their date of authentication, unless the date of authentication
      is an Interest Payment Date in which case such Bonds shall bear interest
      from such date, or unless

                                       31
<PAGE>

      the date of authentication is after the Record Date next preceding the
      next succeeding Interest Payment Date, in which case such Bonds shall bear
      interest from such next succeeding Interest Payment Date.

                  2. The Bonds shall be initially issued as Weekly Rate Bonds
      during a Weekly Rate Period. Each of the Series of Bonds shall bear
      interest at 3.10% for the period from and including the date of issuance
      of the Bonds to and including the following Tuesday. From and after any
      Change in the Interest Rate Mode pursuant to Section 4.01 or 4.02, the
      Bonds with respect to which such change is effective shall bear interest
      determined in accordance with the provisions of this Indenture pertaining
      to the new Adjustable Rate or the Fixed Rate, as the case may be. Bonds
      shall bear interest for each Calculation Period, Auction Period or Fixed
      Rate Period, as the case may be, at the rate of interest per annum for
      such Calculation Period, Auction Period or Fixed Rate Period established
      in accordance with this Indenture. Interest shall be payable on each
      Interest Payment Date by check mailed to the registered owner at his or
      her address as it appears on the registration books kept by the Registrar
      and Paying Agent pursuant to the Indenture at the close of business on the
      applicable Record Date; provided, that (i) while the Securities Depository
      is the registered owner of the Bonds, all payments of principal of,
      premium, if any, and interest on the Bonds shall be paid to the Securities
      Depository or its nominee by wire transfer, (ii) prior to and including a
      Fixed Rate Conversion Date, interest on the Bonds shall be payable to any
      registered owner of at least one million dollars ($1,000,000) in aggregate
      principal amount of Bonds by wire transfer, upon written notice received
      by the Registrar and Paying Agent at least five days prior to the
      applicable Record Date, from such registered owner containing the wire
      transfer address (which shall be in the continental United States) to
      which such registered owner wishes to have such wire directed and (iii)
      during a Commercial Paper Rate Period, interest shall be payable on the
      Bonds only upon presentation and surrender thereof to the Registrar and
      Paying Agent upon purchase thereof pursuant to Section 5.03 and if such
      presentation and surrender is made by 2:00 p.m. (New York City time) such
      payment shall be by wire transfer. If and to the extent that there shall
      be a default in the payment of the interest due on any Interest Payment
      Date, such interest shall cease to be payableto the person in whose name
      each Bond of such series was registered on such applicable Record Date and
      shall be payable, when and if paid to the person in whose name each Bond
      of such series is registered at the close of business on the record date
      fixed therefor by the Trustee, which shall be the fifth Business Day next
      preceding the date of the proposed payment. Except as provided above,
      payment of the principal of and premium, if any, on all Bonds shall be
      made upon the presentation and surrender of such Bonds at the principal
      office of the Registrar and Paying Agent as the same shall become due and
      payable. The principal of and premium, if any, and interest on the Bonds
      shall be payable in lawful money of the United States of America.

                  3. Not less than one Business Day prior to each Computation
      Date and two Business Days prior to a Fixed Rate Conversion Date, the
      Indexing Agent shall establish and provide to the Remarketing Agent the
      related rate index as set forth in the definition of such rate index in
      Section 1.01; provided that, for each Calculation Period during a Daily
      Rate Period, the Indexing Agent shall establish

                                       32
<PAGE>

      and provide the related rate index to the Remarketing Agent on each
      Determination Date; and provided further that, for each Calculation Period
      during a Monthly Rate Period, the Indexing Agent shall establish and
      provide the related rate index to the Remarketing Agent not later than
      each Computation Date. Notwithstanding the foregoing, in the event that
      the Remarketing Agent, in its sole judgment, shall determine on a
      Determination Date that any Daily Rate Index Weekly Rate Index or any
      Commercial Paper Rate Index so established is sufficiently
      non-representative of current market conditions that the Bonds may not be
      remarketed at par if such rate is set at a rate not greater than 110% of
      the applicable rate index, the Remarketing Agent may establish a new rate
      index on a Determination Date in accordance with the procedures and
      standards described in the definition of such rate index and for purposes
      of such rate index so established, all references to Indexing Agent in
      this Indenture shall be deemed to refer to the Remarketing Agent. On any
      date when any Weekly Rate Index or any Commercial Paper Rate Index is
      established by the Remarketing Agent pursuant to this paragraph, such rate
      index shall have the respective meaning set forth in Section 1.01 (except
      as otherwise provided in the preceding sentence); provided that for any
      Commercial Paper Rate Index, the Remarketing Agent shall select securities
      (whether or not actually issued) having a term approximately equal to the
      applicable Commercial Paper Rate Period or which are subject to optional
      or mandatory tender by the owner thereof at the end of a term
      approximately equal to (or as close thereto as is practicably available)
      the applicable Commercial Paper Rate Period.

                  4. By 12:00 noon (New York City time) on each Determination
      Date or by 3:00 p.m. (New York City time) on each Auction Date, as the
      case may be, the Remarketing Agent or the Auction Agent, as the case may
      be, shall make available to the Authority, the Trustee, the Registrar and
      Paying Agent, any issuer of a Support Facility, the Company, any
      Broker-Dealer or any registered owner of a Bond the interest rate or rates
      determined on such Determination Date or Auction Date.

                  5. If for any reason on any Determination Date (A) any rate of
      interest for a Calculation Period is not determined by the Remarketing
      Agent, (B) no Remarketing Agent is serving as such hereunder or (C) the
      rate so determined is held to be invalid or unenforceable by a final
      judgment of a court of competent jurisdiction, (i) during any Daily Rate
      Period, the interest rate for the next succeeding Calculation Period shall
      be the last interest rate in effect, or, if a Daily Rate is not determined
      by the Remarketing Agent hereunder for five or more consecutive Business
      Days on the next and each succeeding Determination Date, the Daily Rate
      shall be a rate per annum equal to 80% of the latest 30-day dealer taxable
      commercial paper rate published by the Federal Reserve Bank of New York on
      or immediately before such Determination Date, (ii) during any Weekly Rate
      Period, the interest rate for the next succeeding Calculation Period shall
      be the last interest rate in effect, or, if a Weekly Rate is not
      determined by the Remarketing Agent for two or more consecutive
      Calculation Periods, the Weekly Rate shall be equal to 85% of the latest
      30-day dealer taxable commercial paper rate published by the Federal
      Reserve Bank of New York on or before the day next preceding such
      Determination Date, (iii) during any Monthly Rate, Semi-annual Rate or
      Term Rate Period, the interest rate per annum for the next succeeding
      Calculation Period shall be equal to 85% of the rate listed in the table
      most recently circulated by the United States Treasury Department known as
      "Table [applicable dates shown on the most recent Table], Maximum Interest
      Rate Payable on United States Treasury Certificates of Indebtedness, Notes
      and

                                       33
<PAGE>

      Bonds-State and Local Government Series Subscribed for During Period
      [applicable dates shown on the most recent Table]" or any substantially
      equivalent table circulated by the United States Treasury Department for
      the maturity most closely approximating the Calculation Period, and (iv)
      during any Commercial Paper Rate Period, the next succeeding Calculation
      Period shall be a Calculation Period which shall consist of the period
      from and including the prior Interest Payment Date to but excluding the
      first Business Day of the following calendar month and the Commercial
      Paper Rate shall be equal to 85% of the interest rate applicable to 90-day
      United States Treasury Bills determined on the basis of the average per
      annum discount rate at which such 90-day Treasury Bills shall have been
      sold at the most recent Treasury auction within the 30 days next preceding
      such Calculation Period, or if there shall have been no such auction
      within the 30 days next preceding such Calculation Period, the Commercial
      Paper Rate shall be equal to the rate of interest borne by such Bond
      during the next preceding Calculation Period for such Bond. The rate of
      interest or Calculation Period and related Commercial Paper Rate shall be
      established pursuant to this subsection 5 until the Remarketing Agent
      again determines the rates of interest or Calculation Periods and related
      Commercial Paper Rates in accordance with this Indenture. The Trustee
      shall, upon the direction of the Company, select any person otherwise
      meeting the qualifications of Section 11.14 to obtain, calculate and
      prepare any of the information required by this subsection 5.

                  6. The determination of any rate of interest by the
      Remarketing Agent in accordance with this Indenture or by the Auction
      Agent in accordance with the Auction Procedures applicable to Auction Rate
      Bonds, or the establishment of Calculation Periods or Auction Periods by
      the Remarketing Agent as provided in this Indenture shall be conclusive
      and binding upon the Authority, the Company, the Trustee, the Registrar
      and Paying Agent, the Remarketing Agent, the Auction Agent, any issuer of
      a Support Facility, all Broker-Dealers and the registered or beneficial
      owners of the Bonds. Failure of the Remarketing Agent, the Trustee, the
      Registrar and Paying Agent, the Auction Agent or the Securities Depository
      or any Securities Depository participant to give any of the notices
      described in this Indenture, or any defect therein, shall not affect the
      interest rate to be borne by any of the Bonds nor the applicable
      Calculation Period or Auction Period nor in any way change the rights of
      the registered owners of the Bonds to tender their Bonds for purchase or
      to have them redeemed in accordance with this Indenture.

                  7. No transfer or exchange of Bonds shall be required to be
      made by the Registrar and Paying Agent after a Record Date until the next
      succeeding Interest Payment Date.

                  8. Except as otherwise provided in this subsection 8, the
      Trustee shall calculate and notify the Registrar and Paying Agent of the
      amount of interest due and payable on each Interest Payment Date or date
      on which a Bond is subject to purchase by 10:00 a.m. on the Business Day
      next preceding such Interest Payment Date or date set for purchase, as the
      case may be, unless such date is a date on which the interest rate is
      determined, in which case the amount of interest due and payable shall be
      calculated by 12:15 p.m. on such date. In preparing such calculation the
      Trustee may rely on calculations or other services provided by the Auction
      Agent, the Remarketing Agent, the Company or any person or persons
      selected by the Trustee in its discretion. During a Commercial Paper Rate
      Period, the Remarketing Agent shall notify the Trustee, the Registrar and
      Paying Agent and the Company of the amount of interest

                                       34
<PAGE>

      due and payable on each Interest Payment Date by 10:00 a.m. on the
      Business Day next preceding such Interest Payment Date.

                  9. Anything herein to the contrary notwithstanding, in no
      event shall the interest rate borne by any Bond exceed the maximum rate
      allowable by applicable law.

                  SECTION 2.04. Amendment to Sections 3.03 through 3.10 of the
Indenture. Sections 3.03 through 3.10 of the Indenture are hereby amended to
read as follows:

                  SECTION 3.03. Auction Rate Period - Auction Rate: Auction
      Period - General. 1. During any Auction Rate Period, the Auction Rate
      Bonds shall bear interest at the Auction Rate determined as set forth in
      this Section 3.03 and Sections 3.04 through 3.10. The initial Auction
      Period for each subseries of the Bonds immediately after any Change in the
      Interest Rate Mode to an Auction Rate, shall be a period from and
      including the effective date of such Change in the Interest Rate Mode to
      and including the initial Auction Date which shall be determined by the
      Authority, with notice to the Trustee, on or prior to the effective date
      of the Change in the Interest Rate Mode. The Auction Rate for any initial
      Auction Period immediately after any Change in the Interest Rate Mode to
      an Auction Rate for an Auction Rate Period, shall be the rate of interest
      per annum determined by the Remarketing Agent, with notice to the Trustee,
      the Authority, the Registrar and Paying Agent and the Company, on a date
      not later than the effective date of such Change in the Interest Rate Mode
      as the minimum rate of interest which, in the opinion of the Remarketing
      Agent, would be necessary as of such date to market Auction Rate Bonds in
      a secondary market transaction at a price equal to the principal amount
      thereof; provided that such interest rate shall not exceed the Maximum
      Allowed Rate. For any other Auction Period, the Auction Rate shall be the
      rate of interest per annum that results from implementation of the Auction
      Procedures. If on any Auction Date the Auction Agent shall fail to take
      any action necessary to determine, or take any action which effectively
      prevents the determination of, a rate of interest pursuant to the Auction
      Procedures, the Auction Rate for the next succeeding Auction Period shall
      be equal to the Maximum Auction Rate as provided in clause (i) of the
      definition thereof on and as of such Auction Date. Determination of an
      Auction Rate pursuant to the Auction Procedures shall be suspended upon a
      Change in the Interest Rate Mode or the occurrence of a Payment Default.
      The Auction Rate for any Auction Period Or remaining portion thereof
      following the occurrence of a Payment Default shall be equal to the
      Overdue Rate as determined on and as of the immediately preceding Auction
      Date. Upon the occurrence of a Payment Default that has not been waived or
      cured on or prior to any Auction Date, no Auction will be held,

                                       35
<PAGE>

      all Submitted Bids and Submitted Sell Orders shall be rejected, the
      existence of Sufficient Clearing Bids shall be of no effect and the
      Auction Rate for the next succeeding Auction Period shall equal the
      Overdue Rate On and as of such Auction Date. In the event of the
      suspension of the auction procedures due to a payment default, the Auction
      Procedures shall resume two Business Days after the date on which the
      Auction Agent receives notice from the Trustee that the Bond Insurer has
      cured the default under the Policy by making all scheduled payments
      thereunder, with the next Auction to occur on the next regularly scheduled
      Auction Date occurring thereafter. The Overdue Rate shall be determined by
      the Remarketing Agent on each succeeding Auction Date.

                  2. Auction Periods may be established pursuant to Section 3.04
      at any time unless a Payment Default has occurred and has not been cured.
      Each Auction Period shall be a Standard Auction Period unless a different
      Auction Period is established pursuant to Section 3.04 and each Auction
      Period which immediately succeeds a non-Standard Auction Period shall be a
      Standard Auction Period unless a different Auction Period is established
      pursuant to Section 3.04.

                  SECTION 3.04. Auction Rate Period - Auction Rate Bonds: Change
      of Auction Period by Authority. 1. During an Auction Rate Period the
      Authority, at the request of the Company, may change the length of a
      single Auction Period or the Standard Auction Period by means of a written
      notice delivered at least 10 days prior to the Auction Date for such
      Auction Period to the Trustee, the Remarketing Agent, the Auction Agent
      and the Company in substantially the form furnished to the Trustee and the
      Auction Agent at the time of a Change in the Interest Rate Mode to an
      Auction Rate. Any Auction Period or Standard Auction Period established by
      the Authority pursuant to this Section 3.04 may not exceed 365 days in
      duration. If such Auction Period will be of less than 28 days, such notice
      shall be effective only if it is accompanied by a written statement of the
      Registrar and Paying Agent, the Trustee, the Remarketing Agent and the
      Auction Agent to the effect that they are capable of performing their
      duties hereunder and under the Remarketing Agreement and the Auction
      Agency Agreement with respect to such Auction Period. If such notice
      specifies a change in the length of the Standard Auction Period, such
      notice shall be effective only if it is accompanied by the written consent
      of the Remarketing Agent to such change. The length of an Auction Period
      or the Standard Auction Period may not be changed pursuant to this Section
      3.04 unless Sufficient Clearing Bids existed at both the Auction
      immediately preceding the date the notice of such change was given and the
      Auction immediately preceding such changed Auction Period or if a Payment
      Default has occurred and has not been cured.

                  2. The change in length of an Auction Period or the Standard
      Auction Period by the Authority at the request of the Company shall take
      effect only if (A) the Trustee, the Credit

                                       36
<PAGE>

      Facility Issuer and the Auction Agent receive, by 11:00 a.m. (New York
      City time) on the Business Day immediately preceding the Auction Date for
      such Auction Period, a certificate from the Authority, on behalf of the
      Company, by telecopy or similar means in substantially the form furnished
      to the Trustee and the Auction Agent at the time of a Change in the
      Interest Rate Mode to an Auction Rate authorizing establishment of and
      specifying the length of the new Auction Period or the Standard Auction
      Period, which shall be specified in such certificate, and confirming that
      Bond Counsel expects to be able to give an Opinion of Bond Counsel on the
      first day of such Auction Period, (B) the Trustee shall not have delivered
      to the Auction Agent by 12:00 noon (New York City time) on the Auction
      Date for such Auction Period notice that a Payment Default has occurred,
      (C) Sufficient Clearing Bids exist at the Auction on the Auction Date for
      such Auction Period, and (C) the Trustee, the Credit Facility Issuer and
      the Auction Agent receive by 9:30 a.m. (New York City time) on the first
      day of such Auction Period, an opinion of Bond Counsel to the effect that
      the change in the Auction Period or the Standard Auction Period is
      authorized by this Indenture, is permitted under the Act and will not have
      an adverse effect on the exclusion of interest on such Bonds from gross
      income for federal income tax purposes. If the condition referred to in
      (A) above is not met, the Auction Rate for the next succeeding Auction
      Period shall be determined pursuant to the Auction Procedures and the next
      succeeding Auction Period shall be a Standard Auction Period. If any of
      the conditions referred to in (B) OR (C) above is not met, the Auction
      Rate for the next succeeding Auction Period shall equal the Maximum
      Auction Rate as determined as of such Auction Date.

                  3. On the Auction Date immediately preceding the effective
      date of any change in the length of an Auction Period or the Standard
      Auction Period, any bonds which are not the subject of a specific Order
      shall be deemed to be subject to a Sell Order.

                  SECTION 3.01. Auction Rate Period - Auction Rate Bonds: Change
      of Auction Date by Remarketing Agent. During an Auction Rate Period the
      Remarketing Agent, with the written consent of the Company, may change, in
      order to conform with then-current market practice with respect to similar
      securities or to accommodate economic and financial factors that may
      affect or be relevant to the day of the week constituting an Auction Date,
      the Auction Date for all future Auction Periods to a different day, so
      long as the first such Auction Date will be a Business Day in the calendar
      week in which the next succeeding Auction Date is then scheduled to occur.
      If a change in an Auction Date is undertaken in conjunction with a change
      in an Auction Period and the conditions for the establishment of such
      change in Auction Period are not met, the Auction Date may be, and the
      next succeeding Auction Period may be adjusted to end on a Business Day in
      the calendar week in which such Auction Date was scheduled to occur and
      such Auction Period was scheduled to end to accommodate the change in the
      Auction Date. The Remarketing Agent shall communicate its determination to
      change an Auction Date by means of a written notice delivered at least 10
      days prior to the Auction Date immediately preceding such Auction Date to
      the Authority, the Trustee, the Auction Agent and the

                                       37
<PAGE>

      Company which shall state (i) the determination of the Remarketing Agent
      to change the Auction Date, (ii) the new Auction Date and (iii) the date
      on which such Auction Date shall be changed. If as a result of any
      proposed change in the Auction Date any Auction Period would be less than
      28 days in duration, such notice shall be effective only if it is
      accompanied by a written statement of the Auction Agent, the Registrar and
      Paying Agent, and the Trustee to the effect that they are capable of
      performing their duties hereunder and under the Remarketing Agreement and
      Auction Agency Agreement with respect to any such Auction Period.

                  SECTION 3.02. Auction Rate Period - Auction Rate Bonds: Orders
      by Existing Holders and Potential Holders. (a) Prior to the Submission
      Deadline on each Auction Date during the Auction Rate Period, the
      following orders may be submitted:

                  (i) each Existing Holder may submit to the Broker- Dealer by
            telephone or otherwise information as to:

                        (A) the principal amount of Auction Rate Bonds, if any,
                  held by such Existing Holder which such Existing Holder
                  desires to continue to hold without regard to the Auction Rate
                  for the next succeeding Auction Period;

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

                        (C) the principal amount of Auction Rate Bonds, if any,
                  held by such Existing Holder which such Existing Holder offers
                  to sell without regard to the Auction Rate for the next
                  succeeding Auction Period;

                  (ii) one or more Broker-Dealers may contact Potential Holders
            by telephone or otherwise to determine the principal amount of
            Auction Rate Bonds which each such Potential Holder offers to
            purchase if the Auction Rate for the next succeeding Auction Period
            shall not be less than the interest rate per annum specified by such
            Potential Holder.

      For the purposes hereof, the communication to a Broker-Dealer of
      information referred to in clause (i)(A), (i)(B) or (i)(C) or clause (ii)
      above is hereinafter referred to as an "Order" and collectively

                                       38
<PAGE>

      as "Orders" and each Existing Holder and each Potential Holder placing an
      Order is hereinafter referred to as a "Bidder" and collectively as
      "Bidders"; an Order containing the information referred to in clause
      (i)(A) above is hereinafter referred to as a "Hold Order" and collectively
      as "Hold Orders"; an Order containing the information referred to in
      clause (i)(B) or clause (ii) above is hereinafter referred to as a "Bid"
      and collectively as "Bids"; and an Order containing the information
      referred to in clause (i)(C) above is hereinafter referred to as a "Sell
      Order" and collectively as "Sell Orders". The submission by a
      Broker-Dealer of an Order to the Auction Agent shall likewise be referred
      to herein as an "Order" and collectively as "Orders".

                  Orders may be submitted only in principal amounts of $25,000
      or any integral multiple thereof.

                  (b)(i) Subject to the provisions of Section 3.07, a Bid by an
            Existing Holder shall constitute an irrevocable offer to sell:

                        (A) the principal amount of Auction Rate Bonds specified
                  in such Bid if the Auction Rate determined on such Auction
                  Date shall be less than the interest rate per annum specified
                  therein; or

                        (B) such principal amount or a lesser principal amount
                  of Auction Rate Bonds to be determined as set forth in
                  subsection (a)(iv) of Section 3.09 if the Auction Rate
                  determined on such Auction Date shall be equal to the interest
                  rate per annum specified therein; or

                        (C) such principal amount of Auction Rate Bonds or a
                  lesser principal amount of Auction Rate Bonds to be determined
                  as set forth in subsection (b)(iii) of Section 3.09 if such
                  specified rate shall be higher than the Maximum Auction Rate
                  and Sufficient Clearing Bids do not exist.

                  (ii) Subject to the provisions of Section 3.07, a Sell Order
            by an Existing Holder shall constitute an irrevocable offer to sell:

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

                                       39
<PAGE>

                        (B) such principal amount or a lesser principal amount
                  of Auction Rate Bonds as set forth in subsection (b)(iii) of
                  Section 3.09 if Sufficient Clearing Bids do not exist.

                  (iii) Subject to the provisions of Section 3.07, a Bid by a
            Potential Holder shall constitute an irrevocable offer to purchase:

                        (A) the principal amount of Auction Rate Bonds specified
                  in such Bid if the Auction Rate determined on such Auction
                  Date shall be higher than the rate specified therein; or

                        (B) such principal amount or a lesser principal amount
                  of Auction Rate Bonds as set forth in subsection (a)(v) of
                  Section 3.09 if the Auction Rate determined on such Auction
                  Date shall be equal to such specified rate.

                  SECTION 3.07. Auction Rate Period - Auction Rate Bonds:
      Submission of Orders by Broker-Dealers to Auction Agent. (a) During an
      Auction Rate Period each Broker-Dealer shall submit in writing to the
      Auction Agent prior to the Submission Deadline on each Auction Date, all
      Orders obtained by such Broker-Dealer and shall specify with respect to
      each such Order:

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

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

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

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

                        (B) the principal amount of Auction Rate Bonds, if any,
                  subject to any Bid placed by such Existing Holder and the rate
                  specified in such Bid; and

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

                                       40
<PAGE>

                  (iv) to the extent such Bidder is a Potential Holder, the
            principal amount of Auction Rate Bonds subject to any Bid placed by
            such Potential Holder and the rate specified in such Bid.

                  (b) If any rate specified in any Bid contains more than three
      figures to the right of the decimal point, the Auction Agent shall round
      such rate up to the next highest one thousandth (.001) of 1%.

                  (c) If an Order or Orders covering all Auction Rate Bonds held
      by an Existing Holder is not submitted to the Auction Agent prior to the
      Submission Deadline, the Auction Agent shall deem a Hold Order to have
      been submitted on behalf of such Existing Holder covering the principal
      amount of Auction Rate Bonds held by such Existing Holder and not subject
      to Orders submitted to the Auction Agent; provided, however, that if there
      is a change in the length of an Auction Period or the Standard Auction
      Period in accordance with Section 3.04 hereof or an amendment or
      modification to the Auction Procedures or any other provision of the
      Indenture relating to the method of determining the Auction Rate for the
      Auction Rate Bonds in accordance with Section 14.02 hereof and Orders have
      not been submitted to the Auction Agent prior to the Submission Deadline
      covering the aggregate principal amount of Auction Rate Bonds that are
      subject to such change in the length of an Auction Period or the Standard
      Auction Period or amendment or modification, as the case may be, the
      Auction Agent shall deem a sell order to have been submitted on behalf of
      such Existing Holder covering the principal amount of Auction Rate Bonds
      subject to such change or modification or amendment and not subject to
      Orders submitted to the Auction Agent.

                  (d) Neither the Authority, the Company, the Trustee nor the
      Auction Agent shall be responsible for any failure of a Broker-Dealer to
      submit an Order to the Auction Agent on behalf of any Existing Holder OR
      Potential Holder.

                  (e) If any Existing Holder submits through a Broker-Dealer to
      the Auction Agent one or more Orders covering in the aggregate more than
      the principal amount of Auction Rate Bonds held by such Existing Holder,
      such Orders shall be considered valid as follows and in the following
      order of priority:

                  (i) all Hold Orders shall be considered valid, but only up to
            and including the principal amount of Auction Rate Bonds held by
            such Existing Holder, and, if the aggregate principal amount of
            Auction Rate Bonds subject to such Hold Orders exceeds the aggregate
            principal amount of Auction Rate Bonds held by such Existing Holder,
            the aggregate principal amount of Auction Rate Bonds subject to each
            such Hold Order shall be reduced pro rata to cover the aggregate
            principal amount of Auction Rate Bonds held by such Existing Holder;

                                       41
<PAGE>

                  (ii) (A) any Bid shall be considered valid up to and including
            the excess of the principal amount of Auction Rate Bonds held by
            such Existing Holder over the aggregate principal amount of Auction
            Rate Bonds subject to any Hold Orders referred to in paragraph (i)
            above;

                        (B) subject to clause (A) above, if more than one Bid
                  with the same rate is submitted on behalf of such Existing
                  Holder and the aggregate principal amount of Auction Rate
                  Bonds subject to such Bids is greater than such excess, such
                  Bids shall be considered valid up to and including the amount
                  of such excess, and, the principal amount of Auction Rate
                  Bonds subject to each Bid with the same rate shall be reduced
                  pro rata to cover the principal amount of Auction Rate Bonds
                  equal to such excess;

                        (C) subject to clauses (A) and (B) above, if more than
                  one Bid with different rates is submitted on behalf of such
                  Existing Holder, such Bids shall be considered valid in the
                  ascending order of their respective rates until the highest
                  rate is reached at which such excess exists and then at such
                  rate up to and including the amount of such excess; and

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

                  (iii) all Sell Orders shall be considered valid up to and
            including the excess of the principal amount of Auction Rate Bonds
            held by such Existing Holder over the aggregate principal amount of
            Auction Rate Bonds subject to valid Hold Orders referred to in
            paragraph (i) of this subsection (e) and valid Bids referred to in
            paragraph (ii) of this subsection (e).

                  (f) If more than one Bid for Auction Rate Bonds is submitted
      on behalf of any Potential Holder, each Bid submitted shall be a separate
      Bid for Auction Rate Bonds with the rate and principal amount therein
      specified.

                  (g) Any Bid or Sell Order submitted by an Existing Holder
      covering an aggregate principal amount of Auction Rate Bonds not equal to
      $25,000 or an integral multiple thereof shall be rejected and shall be
      deemed a Hold Order. Any Bid submitted by a Potential Holder covering an
      aggregate principal amount of Auction Rate Bonds not equal to $25,000 or
      an integral multiple thereof shall be rejected.

                                       42

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