Exhibit
4.2.7


 


NEW YORK STATE
ENERGY RESEARCH


 


AND
DEVELOPMENT AUTHORITY


 


and


 


CONSOLIDATED
EDISON COMPANY OF NEW YORK, INC.


 


 












 


PARTICIPATION
AGREEMENT


 












 


 


Dated as of
January 1, 2004


 


relating to

$146,975,000 Facilities Revenue Bonds, Series 2004B

(Consolidated Edison Company of New York, Inc. Project)


 

















 


TABLE OF
CONTENTS


 


PARTICIPATION AGREEMENT


 


	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PARTIES

  	
   

  	
   

  	
   

  
	
  RECITALS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
   

  	
   

  	
   

  	
   

  
	
  DEFINITIONS; EFFECTIVE DATE AND DURATION OF

  PARTICIPATION AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
   

  	
  Definitions

  	
   

  
	
  Section 1.02.

  	
   

  	
  Effective Date of Participation Agreement;
  Duration of Participation Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  	
   

  	
   

  	
   

  
	
  REPRESENTATIONS

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
   

  	
  Representations and Warranties by the
  Authority

  	
   

  
	
  Section 2.02.

  	
   

  	
  Representations and Warranties by the
  Company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  	
   

  	
   

  	
   

  
	
  THE PROJECT; ISSUANCE OF BONDS

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
   

  	
  The Project

  	
   

  
	
  Section 3.02.

  	
   

  	
  Sale of Bonds and Deposit of Proceeds

  	
   

  
	
  Section 3.03.

  	
   

  	
  Disbursements from Project Fund

  	
   

  
	
  Section 3.04.

  	
   

  	
  Adequacy of Project Fund

  	
   

  
	
  Section 3.05.

  	
   

  	
  Ownership and Possession of the Project

  	
   

  
	
  Section 3.06.

  	
   

  	
  Operation, Maintenance and Repair

  	
   

  
	
  Section 3.07.

  	
   

  	
  Investment of Monies in Funds Under the
  Indenture

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  	
   

  	
   

  	
   

  
	
  NOTE AND PAYMENTS

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
   

  	
  Execution and Delivery of Note to Trustee

  	
   

  
	
  Section 4.02.

  	
   

  	
  Payments Payable; Note Payments; Additional
  Payments

  	
   

  
	
  Section 4.03.

  	
   

  	
  Notice to Pay; Medium of Payment;
  Acceleration

  	
   

  
	
  Section 4.04.

  	
   

  	
  Prepayment of Note Payments

  	
   

  
	
  Section 4.05.

  	
   

  	
  Company’s Payments as Trust Funds

  	
   

  



 


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  Section 4.06.

  	
   

  	
  Absolute Obligation to Make Payments

  	
   

  
	
  Section 4.07.

  	
   

  	
  Assignment of Authority’s Rights

  	
   

  
	
  Section 4.08.

  	
   

  	
  Actions with Respect to or by or on behalf
  of the Authority under the Indenture

  	
   

  
	
  Section 4.09.

  	
   

  	
  Agreements of Company relating to Support
  Facilities

  	
   

  
	
  Section 4.10.

  	
   

  	
  Compensation of Trustee and Paying Agents

  	
   

  
	
  Section 4.11.

  	
   

  	
  Project not Security for Bonds

  	
   

  
	
  Section 4.12.

  	
   

  	
  Payment of Taxes and Assessments; No Liens
  or Charges

  	
   

  
	
  Section 4.13.

  	
   

  	
  Company to Pay Attorneys’ Fees and
  Disbursements

  	
   

  
	
  Section 4.14.

  	
   

  	
  No Abatement of Administration Fees and
  Other Charges

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
   

  	
   

  	
   

  	
   

  
	
  SPECIAL COVENANTS

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
   

  	
  No Warranty as to Suitability of Project

  	
   

  
	
  Section 5.02.

  	
   

  	
  Authority’s Right to Inspect Project

  	
   

  
	
  Section 5.03.

  	
   

  	
  Company Consent to Amendment of Indenture

  	
   

  
	
  Section 5.04.

  	
   

  	
  Tax Covenant

  	
   

  
	
  Section 5.05.

  	
   

  	
  Company Agrees to Perform Obligations
  Imposed by Indenture

  	
   

  
	
  Section 5.06.

  	
   

  	
  Authority Agrees to Take Certain Actions at
  Direction of Company

  	
   

  
	
  Section 5.07.

  	
   

  	
  Certificates as to Defaults

  	
   

  
	
  Section 5.08.

  	
   

  	
  Recording and Filing

  	
   

  
	
  Section 5.09.

  	
   

  	
  Limited Obligation of Authority;
  Indemnification of Authority, Registrar and Paying Agent, Auction Agent and
  Trustee

  	
   

  
	
  Section 5.10.

  	
   

  	
  Provision of Information

  	
   

  
	
  Section 5.11.

  	
   

  	
  Ratings

  	
   

  
	
  Section 5.12.

  	
   

  	
  Notices

  	
   

  
	
  Section 5.13.

  	
   

  	
  Maintenance of Office or Agency

  	
   

  
	
  Section 5.14.

  	
   

  	
  Maintenance of Properties

  	
   

  
	
  Section 5.15.

  	
   

  	
  Insurance

  	
   

  
	
  Section 5.16.

  	
   

  	
  Proper Books of Record and Account

  	
   

  
	
  Section 5.17.

  	
   

  	
  Compliance with Laws

  	
   

  
	
  Section 5.18.

  	
   

  	
  Consolidation, Merger or Sale of Assets

  	
   

  
	
  Section 5.19.

  	
   

  	
  Financial Statements of Company

  	
   

  
	
  Section 5.20.

  	
   

  	
  Information to Bond Insurer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  	
   

  	
   

  	
   

  
	
  REDEMPTION OF BONDS

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
   

  	
  Redemption of Bonds

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


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  ARTICLE VII

  
	
   

  	
   

  	
   

  	
   

  
	
  EVENTS OF DEFAULT AND REMEDIES

  
	
   

  	
   

  
	
  Section 7.01.

  	
   

  	
  Events of Default Defined

  	
   

  
	
  Section 7.02.

  	
   

  	
  Remedies on Default

  	
   

  
	
  Section 7.03.

  	
   

  	
  No Remedy Exclusive

  	
   

  
	
  Section 7.04.

  	
   

  	
  No Additional Waiver Implied by One Waiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01.

  	
   

  	
  Disposition of Amounts after Payment of
  Bonds

  	
   

  
	
  Section 8.02.

  	
   

  	
  Notices

  	
   

  
	
  Section 8.03.

  	
   

  	
  Successors and Assigns

  	
   

  
	
  Section 8.04.

  	
   

  	
  Amendment of Participation Agreement

  	
   

  
	
  Section 8.05.

  	
   

  	
  Participation Agreement Supersedes Any
  Prior Agreements

  	
   

  
	
  Section 8.06.

  	
   

  	
  Further Assurances and Corrective
  Instruments

  	
   

  
	
  Section 8.07.

  	
   

  	
  Counterparts

  	
   

  
	
  Section 8.08.

  	
   

  	
  Severability

  	
   

  
	
  Section 8.09.

  	
   

  	
  Delegation of Duties by Authority

  	
   

  
	
  Section 8.10.

  	
   

  	
  Survival of Representations, Warranties and
  Covenants

  	
   

  
	
  Section 8.11.

  	
   

  	
  NEW YORK LAW TO GOVERN

  	
   

  
	
  Section 8.12.

  	
   

  	
  Third Party Beneficiary

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TESTIMONIUM

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SIGNATURES AND SEALS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ACKNOWLEDGMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT
  A

  	
   

  	
  Description
  of Project Exempt Facilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT
  B

  	
   

  	
  Description
  of Other Project Facilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT
  C

  	
   

  	
  Form
  of Note

  	
   

  



 


iii

















 


This PARTICIPATION AGREEMENT, dated as of January 1, 2004, 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 5 1/4% Facilities Refunding Revenue
Bonds, Series 1993 B (Consolidated Edison Company of New York, Inc.
Project), in the aggregate principal amount of $127,715,000 and the Authority’s
5 3/8% Facilities Refunding Revenue Bonds, Series 1993C (Consolidated Edison
Company of New York, Inc. Project), in the aggregate principal amount of


 


1

















 


$19,760,000 (the “Prior Bonds”). 
The Prior Bonds were issued for the purpose of refunding a portion of
the Authority’s 9% Electric Facilities Revenue Bonds, Series 1985A
(Consolidated Edison Company of New York, Inc. Project) and 9 1/4% Electric
Facilities Revenue Bonds, Series 1987B (Consolidated Edison Company of New
York, Inc. Project), which were issued to finance the acquisition,
construction, and installation (or any combination thereof) of certain
facilities of the Company for the local furnishing of electric energy within
the Company’s electric energy service area; and


 


WHEREAS, the Authority proposes to issue a series of such bonds in the
aggregate principal amount of $146,975,000 Facilities Revenue Bonds, Series
2004B (Consolidated Edison Company of New York, Inc. Project) (the “Bonds”),
which will be used, together with Company funds, to refund the Prior Bonds,
such Bonds to be issued under and secured by a Trust Indenture dated as of
January 1, 2004, between the Authority and The Bank of New York, as
Trustee (the “Indenture”); and


 


WHEREAS, the Authority, by Resolution No. 1039, adopted
September 22, 2003, has determined to issue the Bonds, in an aggregate
principal amount not to exceed $147,715,000, for the purpose of refunding the
Prior Bonds, all such Bonds to be issued under and secured by the Indenture;


 


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


 


2

















 


ARTICLE I


 


DEFINITIONS; EFFECTIVE DATE AND DURATION

OF PARTICIPATION AGREEMENT


 


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


 


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


 


3

















 


ARTICLE II


 


REPRESENTATIONS


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


4

















 


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 have been
duly executed and delivered by the Company and 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 integrated portions of electric energy
distribution facilities of the


 


6

















 


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


 


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


 


7

















 


ARTICLE IV


 


NOTE AND PAYMENTS


 


Section 4.01.                             Execution
and Delivery of Note to Trustee. 
Concurrently with the authentication by the Trustee and delivery by the
Authority of the Bonds and in order to evidence the obligation of the Company
to the Authority to repay the Bonds, the Authority hereby directs the Company,
and the Company hereby agrees, to execute and deliver to the Trustee its Note,
duly and validly executed and delivered, relating to the Bonds.  The Note shall be in substantially the form
attached hereto as Exhibit C with only such changes to such form as may be
approved by the Authority.  Thereafter,
the Company shall be obligated to make the Note Payments, constituting payments
of principal of, and premium, if any, and interest on the Note, and the
Additional Payments required by this Participation Agreement.  Such obligations shall terminate on the date
when the Note has been paid in full. 
The Note may be prepaid in accordance with Section 4.04
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 and the Bond Insurer 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.


 


8

















 


(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, 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 any
Remarketing Agent under any Remarketing 
Agreement (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 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 of the Authority in the amount of $245,812.50 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
January 1, 2005 and on January 1 of each year thereafter, based upon
the amount of Bonds Outstanding as of such January 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, any
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


 


9

















 


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 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 any 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 any 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


 


10

















 


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


 


The Company shall give notice to the Trustee and the Authority of any
intention to prepay the Note in whole or in part and of the principal amount to
be prepaid not more than sixty (60) nor less than thirty-five (35) days prior
to the date on which such prepayment is to be made on the Note.  Such optional prepayment may be made not
later than one (1) Business Day prior to the date of prepayment of the
Bonds.


 


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


 


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


 


11

















 


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, any Remarketing Agreement, the Bond
Purchase Trust Agreement or the Indenture;


 


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


 


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


 


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


 


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


 


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 this 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 this Participation Agreement,
(c) granting approvals and consents and making determinations when required
under this Participation Agreement, (d) making requests for information and
inspections in accordance with this Participation Agreement,
(e) Article III and Sections 4.02(f), 4.14 and 5.09 of this Participation
Agreement and, insofar as the obligations of the Company under
Section 4.12 of this Participation Agreement relate to taxes and
assessments imposed upon the Authority and not the Trustee, Section 4.12
thereof and (f) the right to amend this Participation Agreement) and


 


12

















 


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 5.09 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.  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.  The Company further
agrees to consent to any removal and appointment of the Auction Agent by the
Authority pursuant to the second paragraph of Section 11.21 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 or a Fixed Rate unless on the
effective date of the applicable Change in the Interest Rate Mode the Bonds
shall be rated at least “A” by S&P or “A2” by Moody’s or “A” by Fitch or an
equivalent rating by any nationally recognized rating agency.  Subject to the requirements of the next
paragraph, such rating of the Bonds may, but is not required to, be achieved by
obtaining a Support Facility which meets the requirements of Article VI of
the Indenture.


 


The Company
further agrees that it will maintain a Liquidity Facility acceptable to the
Bond Insurer with respect to the Bonds at all times, except with respect to
Bonds bearing interest at an Auction Rate, a Fixed Rate or a Term
Rate for a period of at least five years.


 


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


 


13

















 


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


 


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


 


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


 


14

















 


ARTICLE V


 


SPECIAL COVENANTS


 


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


 


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


 


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


 


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


 


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


 


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


 


Section 5.07.                             Certificates
as to Defaults.  The Company shall
file with the Trustee and the Bond Insurer, on or before August 15 of each
year, commencing on August 15, 2004, 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,
information and belief, there does not exist at the date of such certificate
any Event of Default


 


15

















 


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.                             Recording
and Filing.  The Company hereby
covenants that it will cause all financing statements related to the Indenture
and all supplements thereto and this Participation Agreement and all
supplements thereto, as well as such other security agreements, financing
statements and all supplements thereto and other instruments as may be required
from time to time to be kept, to be recorded and filed in such manner and in
such places as may from time to time be required by law in order to preserve
and protect fully the security of Holders of the Bonds and the rights of the
Trustee hereunder, and to take or cause to be taken any and all other action
necessary to perfect the security interest created by the Indenture and shall,
within ten (10) days after such filing, cause there to be furnished to the
Trustee and the Bond Insurer an opinion of counsel as to the adequacy and
details of such filing and specifying any re-filing to be effected in the
future.


 


Section 5.09.                             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, any 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.


 


16

















 


The Company releases the Authority (including any person at any time
serving as an officer or employee of the Authority), the Registrar and Paying
Agent, the Auction Agent and the Trustee (including any person at any time
serving as an officer or employee of the Trustee, the Registrar and Paying
Agent or the Auction Agent) from, agrees that the Authority (including any
person at any time serving as an officer or employee of the Authority), the
Registrar and Paying Agent, the Auction Agent and the Trustee (including any
person at any time serving as an officer or employee of the Trustee, the
Registrar and Paying Agent or the Auction Agent) shall not be liable for, and
agrees to indemnify and hold the Authority (including any person at any time
serving as an officer or employee of the Authority) and the Trustee, the
Auction Agent, the Registrar and Paying Agent (including any person at any time
serving as an officer or employee of the Trustee, Auction Agent or the
Registrar and Paying Agent) harmless, to the fullest extent permitted by law
from any losses, costs, charges, expenses (including reasonable attorneys’ and
agents’ fees and expenses), by reason of (i) any
liability for any loss or damage to property or any injury to, or death of, any
person that may be occasioned by any cause whatsoever arising out of the
construction or operation of the Project, or (ii) 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 5.10.                             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 5.11.                             Ratings.  During any Auction Rate Period, the Company
shall take all reasonable action necessary to enable at least two nationally
recognized, statistical rating


 


17

















 


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 5.12.                             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 5.13.                             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
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 5.14.                             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 5.15.                             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 5.16.                             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 5.17.                             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


 


18

















 


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 5.18.                             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, lease, 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 5.18.


 


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


 


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


 


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


 


Section 5.19.                             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


 


19

















 


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.


 


Section 5.20.                             Information
to Bond Insurer.  (a)  To the extent that the Company has entered
into a continuing disclosure agreement with respect to the Bonds, the Bond
Insurer shall be included as party to be notified.


 


(b)                                 The
Company shall immediately notify the Bond Insurer if at any time there are
insufficient moneys to make any payments of principal and/or interest as
required and immediately upon the occurrence of any Event of Default hereunder.


 


20

















 


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.


 


21

















 


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 5.09 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
or the Company becomes insolvent or is unable to pay its debts as they become
due.  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 5.18 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


 


22

















 


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


 


Section 7.02.                             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, with respect to
those rights not assigned to the Trustee, 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, with respect to those rights not assigned to the Trustee, 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


 


23

















 


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
Event of Default and its consequences shall ipso  facto be deemed
to be annulled, but no such annulment shall extend to or affect any subsequent
Event of 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 Event of 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, the Bond Insurer 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, with respect to those rights not assigned to the
Trustee, 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


 


24

















 


judgment or final decree against the Company and collect, in the manner
provided by law out of the property of the Company, the monies adjudged or
decreed to be payable.


 


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


 


Nothing herein contained shall be construed to prevent the Authority
from enforcing directly any of its rights under Sections 4.02(f), 4.13 and
5.09 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 5.09 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
5.09 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.


 


25

















 


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 17
Columbia Circle, Albany, New York 12203-6399, 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 -
21W, 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 out the expressed intention of this
Participation Agreement in accordance with the provisions of the Indenture.


 


26

















 


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.


 


Section 8.12.                             Third
Party Beneficiary.  To the extent
that this Participation Agreement confers upon or gives or grants to the Bond
Insurer any right, remedy or claim under or by reason of this Participation
Agreement, the Bond Insurer is hereby explicitly recognized as being a
third-party beneficiary hereunder and may enforce any such right remedy or
claim conferred, given or granted hereunder.


 


 


[Signature Page of this Agreement Follows]


 


27

















 


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:

  	
   

  
	
   

  	
   

  	
  Acting President

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Assistant Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CONSOLIDATED EDISON COMPANY OF NEW YORK,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  (SEAL)

  	
  By:

  	
   

  
	
   

  	
   

  	
  Executive Vice President and

  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  
				



 


 


[Signature Page of Participation Agreement]


 


28

















 


EXHIBIT
A


 


(To Participation Agreement,

dated as of January 1, 2004,

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 the Participation
Agreement
 entered into in connection with the Prior
Bonds will be inserted at this place]


 


A-1

















 


EXHIBIT
B


 


(To Participation Agreement

dated as of January 1, 2004,

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 the Participation
Agreement
 entered into in connection with the
Prior Bonds will be inserted at this place]


 


B-1

















 


EXHIBIT C


 


(To Participation Agreement dated as of
January 1, 2004 between

New York State Energy Research and Development Authority and|

Consolidated Edison Company of New York, Inc.,

relating to Series 2004B Bonds)


 


CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.


 


$                
PROMISSORY NOTE


 


FOR


 


FACILITIES REVENUE BONDS, SERIES 2004B

(CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)


 


New York, New York

January 29, 2004


 


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
$[                      ],
together with interest thereon at such rate or rates applicable to, and with such
redemption premiums, if any, becoming due and payable on, the Facilities
Revenue Bonds, Series 2004B (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
$146,975,000 pursuant to a Trust Indenture (the “Indenture”) dated as of
January 1, 2004, 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 January 1, 2004, 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.


 


This Note, unless paid earlier as permitted by the Participation
Agreement, shall mature on May 1, 2032 with respect to the Subseries 2004B-1-1,
Subseries 2004B-1-2, Subseries B-1-3 


 


C-1

















 


and Subseries B-1-4 Bonds, and on October 1, 2035 with respect to
the Subseries B-2 Bonds.


 


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 corporate
trust 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.

  
	
   

  	
   

  	
   

  
	
  (SEAL)

  	
  By:

  	
   

  
	
   

  	
   

  	
  Executive Vice President and

  Chief Financial Officer

  
	
   

  	
   

  
	
  ATTEST:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Assistant Secretary

  	
   

  
				



 


C-2