Document:

1997 Stock Plan

 EXHIBIT 10.1 
  
 ECHELON CORPORATION 
  
 1997 STOCK PLAN 
 (as amended and
restated March 26, 2004) 
  
 1. Purposes of the Plan.
The purposes of this 1997 Stock Plan are: 
  

	 	•	 	to attract and retain the best available personnel for positions of substantial responsibility, 

  

	 	•	 	to provide additional incentive to Employees, Directors and Consultants, and 

  

	 	•	 	to promote the success of the Company’s business. 

  
 The Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Stock Purchase Rights, Stock Appreciation Rights, Performance Units and
Performance Shares. 
  
 2. Definitions. As used herein, the
following definitions shall apply: 
  
 (a)
“Administrator” means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan. 
  
 (b) “Affiliated SAR” means an SAR that is granted in connection with a related Option, and which automatically will be deemed to be
exercised at the same time that the related Option is exercised. 
  
 (c) “Applicable Laws” means the requirements relating to the administration of equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on
which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan. 
  

(d) “Award” means, individually or collectively, a grant under the Plan of Options, Stock Purchase Rights, SARs, Performance Units or
Performance Shares. 
  
 (e) “Award Agreement”
means the written or electronic agreement setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan. 
  
 (f) “Board” means the Board of Directors of the Company.

  

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 (g) “Cash Position” means as to any Performance Period, the Company’ s level of
cash and cash equivalents, including, without limitation, amounts classified for financial reporting purposes as short-term investments and restricted investments. 
  
 (h) “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a section of the Code
herein will be a reference to any successor or amended section of the Code. 
  
 (i) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan. 
  

(j) “Common Stock” means the common stock of the Company. 
  
 (k) “Company” means Echelon Corporation, a Delaware corporation. 
  
 (l) “Consultant” means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services to such entity. 
  
 (m) “Determination Date” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Section 162(m)
of the Code. 
  
 (n) “Director” means a member of
the Board. 
  
 (o) “Disability” means total and
permanent disability as defined in Section 22(e)(3) of the Code. 
  
 (p) “Earnings Per Share” means as to any Performance Period, the Company’s or a business unit’s Net Income, divided by a weighted average number of common shares outstanding and dilutive common equivalent shares
deemed outstanding, determined in accordance with U.S. GAAP; provided, however, that if Net Income as to any such Performance Period is a negative amount, then Earnings Per Share means the Company’s or business unit’s Net Income, divided
by a weighted average number of common shares outstanding, determined in accordance with U.S. GAAP. 
  
 (q) “Employee” means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes
of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director
nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by the Company. 
  

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 (r) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
  
 (s) “Excluded Items” includes, without limitation, (i)
incentive compensation, (ii) in-process research and development expenses, (iii) acquisition costs, (iv) compensation expense from equity compensation, (v) operating expenses from acquired businesses, (vi) amortization of acquired intangible assets,
and (vii) such other unusual or one-time items as may be identified by the Administrator. 
  
 (t) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows: 
  
 (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market
or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as
reported in The Wall Street Journal or such other source as the Administrator deems reliable; 
  
 (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of
Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or 
  
 (iii) In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Administrator. 
  
 (u) “Fiscal Year” means the fiscal year of the Company. 
  
 (v) “Freestanding SAR” means a SAR that is granted independently of any Option. 
  
 (w) “Incentive Stock Option” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder. 
  
 (x)
“Individual Objectives” means as to a Participant for any Performance Period, the objective and measurable goals set by a “management by objectives” process and approved by the Administrator (in its discretion).

  

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 (y) “Net Income” means as to any Performance Period, the Company’s or a business
unit’s income after taxes determined in accordance with U.S. GAAP, adjusted for any Excluded Items approved for exclusion by the Administrator. 
  
 (z) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option. 
  
 (aa) “Officer” means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. 
  
 (bb) “Operating Cash Flow” means as to any Performance Period, the Company’s or a business unit’s cash flow generated from
operating activities, as reported in the Company’s cash flow statements and calculated in accordance with U.S. GAAP, adjusted for any Excluded Items approved for exclusion by the Administrator. 
  
 (cc) “Operating Income” means as to any Performance Period,
the Company’s or a business unit’s income from operations determined in accordance with U.S. GAAP, adjusted for any Excluded Items approved for exclusion by the Administrator. 
  
 (dd) “Option” means a stock option granted pursuant to the Plan. 
  
 (ee) “Optionee” means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan. 
  
 (ff)
“Option Exchange Program” means a program whereby outstanding Options or SARs are surrendered in exchange for Options or SARs with a lower exercise price. 
  
 (gg) “Optioned Stock” means the Common Stock subject to an Award. 
  
 (hh) “Parent” means a “parent corporation,”
whether now or hereafter existing, as defined in Section 424(e) of the Code. 
  
 (ii) “Participant” means the holder of an outstanding Award, including any Optionee. 
  
 (jj) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to
a Participant with respect to an Award granted under the Plan. As determined by the Administrator, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement using one or more of the following measures:
(a) Cash Position, (b) Earnings Per Share, (c) Individual Objectives, (d) Net Income, (e) Operating Cash Flow, (f) Operating Income, (g) Return on Assets, (h) Return on Equity, (i) Return on Sales, (j) Revenue and (k) Total Shareholder Return. The
Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator shall determine whether any significant element(s) shall be included in or excluded from the calculation of any
Performance Goal with respect to any Participant. 
  

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 (kk) “Performance Period” means any Fiscal Year of the Company or such other period as
determined by the Administrator in its sole discretion. 
  
 (ll)
“Performance Share” means the right to receive Shares or cash pursuant to Section 9. 
  
 (mm) “Performance Unit” means the right to receive Shares or cash pursuant to Section 9. 
  
 (nn) “Period of Restriction” means the period during which
the transfer of Shares of Restricted Stock are subject to restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of Performance Goals, or the
occurrence of other events as determined by the Administrator. 
  
 (oo) “Plan” means this 1997 Stock Plan, as amended and restated. 
  
 (pp) “Restricted Stock” means shares of Common Stock issued pursuant to a Stock Purchase Right under Section 7 of the Plan, or issued pursuant to the early exercise of an Option. 
  
 (qq) “Return on Assets” means as to any Performance Period,
the percentage equal to the Company’s or a business unit’s Operating Income divided by average net Company or business unit, as applicable, assets, determined in accordance with U.S. GAAP. 
  
 (rr) “Return on Equity” means as to any Performance Period,
the percentage equal to the Company’s Net Income divided by average stockholder’s equity, determined in accordance with U.S. GAAP. 
  
 (ss) “Return on Sales” means as to any Performance Period, the percentage equal to the Company’s or a business unit’s Operating
Income divided by the Company’s or the business unit’s, as applicable, Revenue. 
  
 (tt) “Revenue” means as to any Performance Period, the Company’s or business unit’s net sales, determined in accordance with U.S. GAAP. 
  
 (uu) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or
any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. 
  
 (vv) “Section 16(b)” means Section 16(b) of the Exchange Act. 
  
 (ww) “Service Provider” means an Employee, Director or Consultant. 
  

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 (xx) “Share” means a share of the Common Stock, as adjusted in accordance with Section
11 of the Plan. 
  
 (yy) “Stock Appreciation
Right” or “SAR” means an Award, granted alone or in connection with an Option, that pursuant to Section 8 is designated as a SAR. 
  
 (zz) “Stock Purchase Right” means the right to purchase Common Stock pursuant to Section 7 of the Plan. 
  
 (aaa) “Subsidiary” means a “subsidiary
corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code. 
  
 (bbb) “Tandem SAR” means a SAR that is granted in connection with a related Option, the exercise of which will require forfeiture of the
right to purchase an equal number of Shares under the related Option (and when a Share is purchased under the Option, the SAR will be canceled to the same extent). 
  
 (ccc) “Total Shareholder Return” means as to any Performance Period, the total return (change in share
price plus reinvestment of any dividends) of a Share. 
  
 (ddd)
“U.S. GAAP” means generally accepted accounting principles in the United States. 
  
 3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 6,200,000 Shares, plus an annual increase to be added on the first day of the Company’s fiscal year (beginning in 1999) equal to the lesser of (i) 5,000,000 Shares, (ii) 5% (4% for fiscal years beginning after the
Company’s 2004 fiscal year) of the outstanding shares on such date or (iii) a lesser amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. Shares will not be deemed to have been issued pursuant
to the Plan with respect to any portion of an Award that is settled in cash. Upon payment in Shares pursuant to the exercise of an SAR, the number of Shares available for issuance under the Plan will be reduced only by the number of Shares actually
issued in such payment. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of Shares owned by the Participant, the number of Shares available for issuance under the Plan will be reduced by the gross
number of Shares for which the Option is exercised. 
  
 If an
Award expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan
(unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if
unvested Shares of Restricted Stock are forfeited or repurchased by the Company, such Shares shall become available for future grant under the Plan. 
  

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 4. Administration of the Plan. 
  
 (a) Procedure. 
  
 (i) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service Providers.

  
 (ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more
“outside directors” within the meaning of Section 162(m) of the Code. 
  
 (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption
under Rule 16b-3. 
  
 (iv) Other Administration. Other
than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws. 
  
 (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by
the Board to such Committee, the Administrator shall have the authority, in its discretion: 
  
 (i) to determine the Fair Market Value; 
  
 (ii) to select the Service Providers to whom Awards may be granted hereunder; 
  
 (iii) to determine the number of Shares to be covered by each Award granted hereunder; 
  
 (iv) to approve forms of agreement for use under the Plan; 
  
 (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; 
  
 (vi) to institute an Option Exchange Program; 
  
 (vii) to construe and interpret the terms of the Plan and awards granted
pursuant to the Plan; 
  

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 (viii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and
regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws; 
  
 (ix) to modify or amend each Award (subject to Section 16(c) of the Plan), including the discretionary authority to extend the post-termination
exercisability period of Awards longer than is otherwise provided for in the Plan. Notwithstanding the foregoing, the Administrator may not modify or amend an Option or SAR to reduce the exercise price of such Option or SAR after it has been granted
(except for adjustments made pursuant to Section 11), unless approved by the Company’s stockholders; 
  
 (x) to allow Participants to satisfy withholding tax obligations in such manner as prescribed in Section 12; 
  
 (xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously granted by the Administrator; 
  
 (xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant under an Award; and 
  
 (xiii) to make all other determinations deemed necessary or advisable for
administering the Plan. 
  
 (c) Effect of Administrator’s
Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Participants and any other holders of Awards. 
  
 5. Eligibility. Nonstatutory Stock Options, Stock Purchase Rights, Stock Appreciation Rights, Performance Units and
Performance Shares may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 
  
 6. Stock Options. 
  
 (a) Limitations. 
  
 (i) Each Option shall be designated in the Award Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any
Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market
Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. 
  

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 (ii) The following limitations shall apply to grants of Options: 
  
 (1) No Service Provider shall be granted, in any Fiscal Year, Options to
purchase more than 1,000,000 Shares. 
  
 (2) In connection with
his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,000,000 Shares which shall not count against the limit set forth in subsection (i) above. 
  
 (3) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company’s capitalization as described in Section 11. 
  
 (4) If an Option is cancelled in the same Fiscal Year in which it was granted (other than in connection with a transaction described in Section 11), the cancelled Option will be counted against the limits set forth in
subsections (A) and (B) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 
  
 (b) Term of Option. The term of each Option shall be stated in the
Award Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an Incentive Stock Option granted to a
Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement. 
  
 (c) Option Exercise Price and Consideration. 
  
 (i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following: 
  
 (1) In the case of
an Incentive Stock Option 
  
 a) granted to an Employee who, at
the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant. 
  
 b)
granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. 
  

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 (2) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the
Administrator, but shall be no less than 100% of the Fair Market Value per Share on the date of grant. 
  
 (3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the
date of grant pursuant to a merger or other corporate transaction. 
  
 (ii) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option
may be exercised. 
  
 (iii) Form of Consideration. The
Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the
time of grant. Such consideration may consist entirely of: 
  
 (1) cash; 
  
 (2) check; 
  
 (3) promissory note (provided that a promissory note will not be acceptable
consideration to the extent the issuance of a promissory note would not be permitted by Applicable Laws); 
  
 (4) other Shares, provided Shares acquired directly or indirectly from the Company, (A) have been owned by the Participant and not subject to substantial
risk of forfeiture for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option will be exercised; 
  
 (5) consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan; 
  
 (6) a
reduction in the amount of any Company liability to the Participant, including any liability attributable to the Participant’s participation in any Company-sponsored deferred compensation program or arrangement; 
  
 (7) any combination of the foregoing methods of payment; or 
  
 (8) such other consideration and method of payment for the issuance of
Shares to the extent permitted by Applicable Laws. 
  

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 (d) Exercise of Option. 
  
 (i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder shall be exercisable according to
the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a Share. 
  
 An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in such form as the
Administrator specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with any applicable withholding taxes). Full payment may consist
of any consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Participant or, if requested by the
Participant, in the name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 11 of the Plan. 
  
 Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. 
  
 (ii) Termination of Relationship as a Service Provider. If a Participant ceases to be a Service Provider, other than upon the Participant’s
death or Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for three (3) months following the Participant’s termination. If, on the date of
termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 
  
 (iii) Disability of Participant. If a Participant ceases to be a Service Provider as a result of the Participant’s Disability, the
Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the 
  

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 Option shall remain exercisable for twelve (12) months following the Participant’s termination. If, on the date of
termination, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Participant does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. 
  
 (iv) Death of Participant. If a Participant dies while a Service Provider, the Option may be exercised within such period of time as is specified
in the Award Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Participant’s estate or by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of death. In the absence of a specified time in the Award Agreement, the Option shall remain exercisable for twelve (12) months following the Participant’s termination.
If, at the time of death, the Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. The Option may be exercised by the executor or administrator of
the Participant’s estate or, if none, by the person(s) entitled to exercise the Option under the Participant’s will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan. 
  
 7. Stock Purchase Rights. 
  
 (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other Awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically of the terms and conditions related to the offer, including the Period of Restriction, the number of Shares that the Participant shall be
entitled to purchase, the price to be paid, and the time within which the Participant must accept such offer. Notwithstanding the foregoing, during any Fiscal Year no Participant will receive more than an aggregate of 200,000 Shares subject to Stock
Purchase Rights; provided, however, that in connection with a Participant’s initial service as an Employee, an Employee may be granted an aggregate of up to an additional 400,000 Shares subject to Stock Purchase Rights. The offer shall be
accepted by execution of an Award Agreement in the form determined by the Administrator. 
  
 (b) Repurchase Option. Unless the Administrator determines otherwise, during the Period of Restriction, the Award Agreement shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser’s service with the Company for any reason (including death or Disability). Unless the Administrator determines otherwise, the purchase price for Shares repurchased pursuant to the Award Agreement shall
be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. 
  
 (c) Other Provisions. The Award Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator in its sole discretion. 
  

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 (d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the Participant shall
have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 11 of the Plan. 
  
 (e) Section 162(m) Performance Restrictions. For purposes of qualifying a Stock Purchase Right as “performance-based compensation” under
Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals, which shall be set by the Administrator on or before the Determination Date. In this connection, the
Administrator shall follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Stock Purchase Right under Section 162(m) of the Code (e.g., in determining the Performance Goals).

  
 8. Stock Appreciation Rights. 
  
 (a) Grant of SARs. Subject to the terms and conditions of the Plan, a
SAR may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion. The Administrator may grant Affiliated SARs, Freestanding SARs, Tandem SARs, or any combination thereof.

  
 (b) Number of Shares. The Administrator will have
complete discretion to determine the number of SARs granted to any Participant, provided that during any Fiscal Year, no Participant will be granted SARs covering more than 1,000,000 Shares. Notwithstanding the foregoing limitation, in connection
with a Participant’s initial service as an Employee, an Employee may be granted SARs covering up to an additional 1,000,000 Shares. 
  
 (c) Exercise Price and Other Terms. The Administrator, subject to the provisions of the Plan, will have complete discretion to determine the terms
and conditions of SARs granted under the Plan. In the case of a Freestanding SAR, the exercise price will be not less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant. The exercise price of Tandem or
Affiliated SARs will equal the exercise price of the related Option. 
  
 (d) Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then exercisable. With respect to a Tandem SAR granted in connection with an Incentive Stock Option: (a) the Tandem SAR will expire no later than the expiration of the
underlying Incentive Stock Option; (b) the value of the payout with respect to the Tandem SAR will be for no more than one hundred percent (100%) of the difference between the exercise price of the underlying Incentive Stock Option and the Fair
Market Value of the Shares subject to the underlying Incentive Stock Option at the time the Tandem SAR is exercised; and (c) the Tandem SAR will be exercisable only when the Fair Market Value of the Shares subject to the Incentive Stock Option
exceeds the Exercise Price of the Incentive Stock Option. 
  

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 (e) Exercise of Affiliated SARs. An Affiliated SAR will be deemed to be exercised upon the
exercise of the related Option. The deemed exercise of an Affiliated SAR will not necessitate a reduction in the number of Shares subject to the related Option. 
  

(f) Exercise of Freestanding SARs. Freestanding SARs will be exercisable on such terms and conditions as the Administrator, in its sole
discretion, will determine. 
  
 (g) SAR Agreement. Each SAR
grant will be evidenced by an Award Agreement that will specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine. 
  
 (h) Expiration of SARs. An SAR granted under the Plan will expire upon
the date determined by the Administrator, in its sole discretion, and set forth in the Award Agreement. Notwithstanding the foregoing, the rules of Section 6(d) also will apply to SARs. 
  
 (i) Payment of SAR Amount. Upon exercise of an SAR, a Participant will be entitled to receive payment from the
Company, less any applicable withholding taxes, in an amount determined by multiplying: 
  
 (i) The difference between the Fair Market Value of a Share on the date of exercise and the exercise price; times 
  
 (ii) The number of Shares with respect to which the SAR is exercised. 
 At the discretion of the Administrator, the payment upon SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. 
  
 9. Performance Units and Performance Shares. 
  
 (a) Grant of Performance Units/Shares. Performance Units and Performance Shares may be granted to Service Providers
at any time and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant
provided that during any Fiscal Year, (a) no Participant will receive Performance Units having an initial value greater than $1,000,000, and (b) no Participant will receive more than 1,000,000 Performance Shares. Notwithstanding the foregoing
limitation, in connection with a Participant’s initial service as an Employee, an Employee may be granted up to an additional 1,000,000 Performance Shares. 
  

(b) Value of Performance Units/Shares. Each Performance Unit will have an initial value that is established by the Administrator on or before
the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. 
  

 14 

 (c) Performance Objectives and Other Terms. The Administrator will set performance objectives or
other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be paid
out to the Service Provider. The time period during which the performance objectives or other vesting provisions must be met will be called the “Performance Period.” Each Award of Performance Units/Shares will be evidenced by an Award
Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will determine. 
  
 (i) General Performance Objectives. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, or
individual goals, or any other basis determined by the Administrator in its discretion. 
  
 (ii) Section 162(m) Performance Objectives. For purposes of qualifying grants of Performance Units/Shares as “performance-based compensation” under Section 162(m) of the Code, the Administrator, in
its discretion, may determine that the performance objectives applicable to Performance Units/Shares will be based on the achievement of Performance Goals. The Administrator will set the Performance Goals on or before the Determination Date. In
granting Performance Units/Shares which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the
Performance Units/Shares under Section 162(m) of the Code (e.g., in determining the Performance Goals). 
  
 (d) Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled
to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been
achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such Performance Unit/Share. 
  
 (e) Form and Timing of Payment of Performance Units/Shares. Payment of
earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the form of cash, in Shares (which
have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof, taking into consideration any applicable withholding taxes which may be due
as a result of the Award. 
  
 (f) Cancellation of Performance
Units/Shares. On the date set forth in the Award Agreement, all unearned or unvested Performance Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan. 
  

 15 

 10. Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. If the
Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate. 
  
 11. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale. 
  
 (a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number and
class of Shares that may be delivered under the Plan and/or the number, class, and price of Shares covered by each outstanding Award, and the numerical Share limits set forth in Sections 3, 6, 7, 8 and 9 shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of
consideration.” Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award. 
  
 (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a Participant to have the
right to exercise his or her Award until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon exercise of an Award shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action. 
  
 (c) Merger or Asset Sale. 
  
 (i) General. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the
Company (a “Merger”), each outstanding Award shall be assumed or an equivalent award substituted by the successor corporation or a Parent or Subsidiary of the successor corporation (the “Successor Corporation”). In the event that
the Successor Corporation refuses to assume or substitute for the Award, the Participant shall fully vest in and have the right to exercise his or her Option or Stock Appreciation Right as to all of the Optioned Stock, including Shares as to which
it would not otherwise be vested or exercisable, all restrictions on Restricted Stock will lapse, and, with respect to Performance Shares and/or Units, all 
  

 16 

 performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions
met. If an Option or Stock Appreciation Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a Merger, the Administrator shall notify the Participant in writing or electronically that such Award shall be
fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Award shall terminate upon the expiration of such period. For the purposes of this paragraph, the Award shall be considered assumed if, following
the Merger, the award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Merger, the consideration (whether stock, cash, or other securities or property) or, in the case of a Stock Appreciation
Right, upon the exercise of which the Administrator determines to pay cash or a Performance Share and/or Unit which the Administrator can determine to pay in cash, the fair market value of the consideration received in the Merger by holders of
Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the Merger is not solely common stock of the Successor Corporation or its Parent, the Administrator may, with the consent of the Successor Corporation, provide for the consideration to be
received upon the exercise of an Option or Stock Appreciation Right or upon the payout of a Performance Share and/or Unit, for each Share subject to an Award (or in the case of Performance Units, the number of implied Shares determined by dividing
the value of the Performance Units by the per share consideration received by holders of Common Stock in the Merger), to be solely common stock of the Successor Corporation or its Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the Merger. 
  
 Notwithstanding anything in this Section 11(c) to the contrary, an Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of
such performance goals without the Participant’s consent; provided, however, a modification to such performance goals only to reflect the successor corporation’s corporate structure post-merger or post-sale of assets will not be deemed to
invalidate an otherwise valid Award assumption. 
  
 (ii)
Employee Options Following Assumption or Substitution. Following an assumption or substitution in connection with a Merger as described in Section 11(c)(i) above, and in the event that upon the Merger the stockholders of the Company
immediately prior to the Merger hold less than 50% of the outstanding voting equity securities of the Successor Corporation following the Merger (a “Change of Control Merger”), if a Participant’s status as an Employee of the Successor
Corporation is terminated by the Successor Corporation as a result of an Involuntary Termination (as defined below) within twelve months following the Change of Control Merger, the Participant shall fully vest in and have the right to exercise
Participant’s Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which Participant would not otherwise be vested or exercisable. Thereafter, the Option or Stock Purchase Right shall remain exercisable in
accordance with its terms as determined by the Administrator. 
  

 17 

 (1) For purposes of this section, any of the following events shall constitute an “Involuntary
Termination”: (i) without the Participant’s express written consent, a significant reduction of the Participant’s duties, authority or responsibilities, relative to the Participant’s duties, authority or responsibilities as in
effect immediately prior to the Change of Control Merger; (ii) without the Participant’s express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location)
available to the Participant immediately prior to the Change of Control Merger; (iii) a reduction in the base salary of the Participant as in effect immediately prior to the Change of Control Merger; (iv) a material reduction in the kind or level of
employee benefits, including bonuses, to which the Participant was entitled immediately prior to the Change of Control Merger with the result that the Participant’s overall benefits package is significantly reduced; (v) the relocation of the
Participant to a facility or a location more than thirty (30) miles from the Participant’s then present location, without the Participant’s express written consent; or (vi) any purported termination of the Participant which is not effected
for Disability or for Cause (as defined below), or any purported termination for which the grounds relied upon are not valid. 
  
 (2) For purposes of this section, “Cause” shall mean (i) any act of personal dishonesty taken by the Participant in connection with his
responsibilities as a Service Provider and intended to result in substantial personal enrichment of the Participant, (ii) Participant’s conviction of a felony, (iii) a willful act by the Participant which constitutes gross misconduct and which
is injurious to the Successor Corporation, and (iv) following delivery to the Participant of a written demand for performance from the Successor Corporation which describes the basis for the Successor Corporation’s belief that the Participant
has not substantially performed his duties, continued violations by the Participant of the Participant’s obligations to the Successor Corporation which are demonstrably willful and deliberate on the Participant’s part. 
  
 (iii) Director Options Following Assumption or Substitution.
Following an assumption or substitution in connection with a Change of Control Merger, if a Participant’s status as a director of the Successor Corporation terminates other than upon a voluntary resignation by the Participant, the Participant
shall fully vest in and have the right to exercise Participant’s Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which Participant would not otherwise be vested or exercisable. Thereafter, the Option or
Stock Purchase Right shall remain exercisable in accordance with its terms as determined by the Administrator. 
  
 12. Tax Withholding 
  
 (a) Withholding Requirements. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof), the Company will have the
power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other taxes (including the Participant’s FICA obligation) required to be withheld
with respect to such Award (or exercise thereof). 
  

 18 

 (b) Withholding Arrangements. The Administrator, in its sole discretion and pursuant to such
procedures as it may specify from time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (a) paying cash, (b) electing to have the Company withhold otherwise deliverable cash or Shares having a Fair
Market Value equal to the amount required to be withheld, or (c) delivering to the Company already-owned Shares having a Fair Market Value equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to
include any amount which the Administrator agrees may be withheld at the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect
to the Award on the date that the amount of tax to be withheld is to be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld. 
  
 13. No Effect on Employment or Service. Neither the Plan nor any Award
will confer upon a Participant any right with respect to continuing the Participant’s relationship as a Service Provider with the Company, nor will they interfere in any way with the Participant’s right or the Company’s right to
terminate such relationship at any time, with or without cause, to the extent permitted by Applicable Laws. 
  
 14. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting
such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Participant within a reasonable time after the date of such grant. 
  
 15. Term of Plan. Subject to Section 20 of the Plan, the Plan, as
amended and restated on March 26, 2004, shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years from such date, unless terminated earlier under Section 16 of the Plan. 
  
 16. Amendment and Termination of the Plan. 
  
 (a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan. 
  
 (b) Stockholder
Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. 
  
 (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant,
unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise
the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination. 
  

 19 

 17. Conditions Upon Issuance of Shares. 
  
 (a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Award unless the exercise of such Award and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

  
 (b) Investment Representations. As a condition to the
exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute
such Shares if, in the opinion of counsel for the Company, such a representation is required. 
  
 18. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the
lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 
  
 19. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. 
  
 20. Stockholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws. 
  

 20Participation Agreement, dated as of May 1, 2005, between NYSERDA and the Co.

 Exhibit 4.1 
  

NEW YORK STATE ENERGY RESEARCH 
  
 AND DEVELOPMENT AUTHORITY 
  
 and 
  
 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. 
  

  
 PARTICIPATION AGREEMENT 
  

  
 Dated as of May 1, 2005 
  
 relating to 
 $126,300,000 Facilities Revenue Bonds, Series 2005A 
 (Consolidated Edison Company of New York, Inc. Project) 
  

 TABLE OF CONTENTS 
  

PARTICIPATION AGREEMENT 
  

					
	 	  	 	  	Page

	 PARTIES
	  	 	  	1
	 RECITALS
	  	 	  	1
		
	ARTICLE I	  	 
		
	 DEFINITIONS; EFFECTIVE DATE AND DURATION OF
 PARTICIPATION AGREEMENT
	  	 
			
	 Section 1.01.
	  	Definitions	  	3
	 Section 1.02.
	  	Effective Date of Participation Agreement; Duration of Participation Agreement	  	3
		
	ARTICLE II	  	 
		
	REPRESENTATIONS	  	 
			
	 Section 2.01.
	  	Representations and Warranties by the Authority	  	4
	 Section 2.02.
	  	Representations and Warranties by the Company	  	4
		
	ARTICLE III	  	 
		
	THE PROJECT; ISSUANCE OF BONDS	  	 
			
	 Section 3.01.
	  	The Project	  	6
	 Section 3.02.
	  	Sale of Bonds and Deposit of Proceeds	  	6
	 Section 3.03.
	  	Disbursements from Project Fund	  	6
	 Section 3.04.
	  	Adequacy of Project Fund	  	6
	 Section 3.05.
	  	Ownership and Possession of the Project	  	6
	 Section 3.06.
	  	Operation, Maintenance and Repair	  	6
	 Section 3.07.
	  	Investment of Monies in Funds Under the Indenture	  	7
		
	ARTICLE IV	  	 
		
	NOTE AND PAYMENTS	  	 
			
	 Section 4.01.
	  	Execution and Delivery of Note to Trustee	  	8
	 Section 4.02.
	  	Payments Payable; Note Payments; Additional Payments	  	8
	 Section 4.03.
	  	Notice to Pay; Medium of Payment; Acceleration	  	10
	 Section 4.04.
	  	Prepayment of Note Payments	  	11
	 Section 4.05.
	  	Company’s Payments as Trust Funds	  	11

  

					
	 Section 4.06.
	  	Absolute Obligation to Make Payments	  	11
	 Section 4.07.
	  	Assignment of Authority’s Rights	  	12
	 Section 4.08.
	  	Actions with Respect to or by or on behalf of the Authority under the Indenture	  	13
	 Section 4.09.
	  	Agreements of Company relating to Support Facilities	  	13
	 Section 4.10.
	  	Compensation of Trustee and Paying Agents	  	13
	 Section 4.11.
	  	Project not Security for Bonds	  	14
	 Section 4.12.
	  	Payment of Taxes and Assessments; No Liens or Charges	  	14
	 Section 4.13.
	  	Company to Pay Attorneys’ Fees and Disbursements	  	14
	 Section 4.14.
	  	No Abatement of Administration Fees and Other Charges	  	14
		
	ARTICLE V	  	 
		
	SPECIAL COVENANTS	  	 
			
	 Section 5.01.
	  	No Warranty as to Suitability of Project	  	15
	 Section 5.02.
	  	Authority’s Right to Inspect Project	  	15
	 Section 5.03.
	  	Company Consent to Amendment of Indenture	  	15
	 Section 5.04.
	  	Tax Covenant	  	15
	 Section 5.05.
	  	Company Agrees to Perform Obligations Imposed by Indenture	  	15
	 Section 5.06.
	  	Authority Agrees to Take Certain Actions at Direction of Company	  	15
	 Section 5.07.
	  	Certificates as to Defaults	  	15
	 Section 5.08.
	  	Recording and Filing	  	16
	 Section 5.09.
	  	Limited Obligation of Authority; Indemnification of Authority, Registrar and Paying Agent, Auction Agent and Trustee	  	16
	 Section 5.10.
	  	Provision of Information	  	17
	 Section 5.11.
	  	Ratings	  	18
	 Section 5.12.
	  	Notices	  	18
	 Section 5.13.
	  	Maintenance of Office or Agency	  	18
	 Section 5.14.
	  	Maintenance of Properties	  	18
	 Section 5.15.
	  	Insurance	  	18
	 Section 5.16.
	  	Proper Books of Record and Account	  	18
	 Section 5.17.
	  	Compliance with Laws	  	19
	 Section 5.18.
	  	Consolidation, Merger or Sale of Assets	  	19
	 Section 5.19.
	  	Financial Statements of Company	  	20
	 Section 5.20.
	  	Information to Support Facility Issuer	  	20
		
	ARTICLE VI	  	 
		
	REDEMPTION OF BONDS	  	 
			
	 Section 6.01.
	  	Redemption of Bonds	  	21

  

					
		
	ARTICLE VII	  	 
		
	EVENTS OF DEFAULT AND REMEDIES	  	 
			
	 Section 7.01.
	  	Events of Default Defined	  	22
	 Section 7.02.
	  	Remedies on Default	  	23
	 Section 7.03.
	  	No Remedy Exclusive	  	24
	 Section 7.04.
	  	No Additional Waiver Implied by One Waiver	  	25
		
	ARTICLE VIII	  	 
		
	MISCELLANEOUS	  	 
			
	 Section 8.01.
	  	Disposition of Amounts after Payment of Bonds	  	26
	 Section 8.02.
	  	Notices	  	26
	 Section 8.03.
	  	Successors and Assigns	  	26
	 Section 8.04.
	  	Amendment of Participation Agreement	  	26
	 Section 8.05.
	  	Participation Agreement Supersedes Any Prior Agreements	  	26
	 Section 8.06.
	  	Further Assurances and Corrective Instruments	  	26
	 Section 8.07.
	  	Counterparts	  	27
	 Section 8.08.
	  	Severability	  	27
	 Section 8.09.
	  	Delegation of Duties by Authority	  	27
	 Section 8.10.
	  	Survival of Representations, Warranties and Covenants	  	27
	 Section 8.11.
	  	NEW YORK LAW TO GOVERN	  	27
		
	 TESTIMONIUM
	  	28
		
	 SIGNATURES AND SEALS
	  	28
		
	 ACKNOWLEDGMENTS
	  	28
			
	 EXHIBIT A
	  	Description of Project Exempt Facilities	  	A-1
			
	 EXHIBIT B
	  	Description of Other Project Facilities	  	B-1
			
	 EXHIBIT C
	  	Form of Note	  	C-1

  

  
 This PARTICIPATION
AGREEMENT, dated as of May 1, 2005, 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”),

  
 WITNESSETH: 
  
 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 6.10% Facilities Refunding Revenue
Bonds, Series 1995 A (Consolidated Edison Company of New York, Inc. Project), in the aggregate principal amount of $128,285,000 (the “Prior Bonds”) issued in order to provide funds for the refunding of certain 

  

 1 

 
obligations of the Authority originally issued to finance a portion of the cost of acquisition, construction and installation of certain facilities for the
local furnishing of electric energy within the Company’s service area; and 
  
 WHEREAS, the Authority proposes to issue a series of such bonds in the aggregate principal amount of $126,300,000 Facilities Revenue Bonds, Series 2005A (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 May 1, 2005, between the Authority and The Bank of New York, as Trustee (the
“Indenture”); and 
  
 WHEREAS, the Authority, by
Resolution No. 1076, adopted April 11, 2005, has determined to issue the Bonds, in an aggregate principal amount not to exceed $126,300,000, 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. 
  

 5 

  
 ARTICLE III 
  
 THE PROJECT; ISSUANCE OF BONDS 
  
 Section 3.01. The Project. Construction of the Project is complete.
The Project is the property of the Company. In order to effectuate the purposes of this Participation Agreement, the Company, in its own name, will do or cause to be done all things requisite or proper for the fulfillment of the obligations of the
Company under this Participation Agreement. 
  
 Section 3.02.
Sale of Bonds and Deposit of Proceeds. In order to provide funds for the refunding of the Prior Bonds, the Authority, on the date specified in the Bond Purchase Agreement or as soon thereafter as practicable, and concurrently with the
issuance and delivery to the Trustee of the Note as provided in Section 4.01 hereof, will issue, sell and deliver the Bonds, all pursuant to and as provided in the Bond Purchase Agreement and subject to the conditions set forth in Section 2.06 of
the Indenture, and will deposit the proceeds of such sale including the accrued interest, if any, paid by the initial purchasers of the Bonds in the Project Fund. 
  
 Section 3.03. Disbursements from Project Fund. 1. The Authority has in the Indenture authorized and directed the
Trustee to make payments from the Project Fund in accordance with Section 8.01 of the Indenture, to pay the redemption price of the Prior Bonds and costs related thereto upon receipt from time to time of letters signed by an Authorized Company
Representative in accordance with Section 8.01 of the Indenture. Concurrently with the delivery by the Company of each such letter to the Trustee, the Company will deliver to the Authority a copy thereof and any attachments thereto. The Company will
indemnify and save harmless the Authority and the Trustee from any liability incurred in connection with any letter so delivered and any payments made in reliance thereon. 
  
 2. All monies remaining in the Project Fund after the redemption of the Prior Bonds and payment of all costs related thereto
shall, at the written direction of an Authorized Company Representative, be paid to the Company. 
  
 Section 3.04. Adequacy of Project Fund. The Company acknowledges that the monies in the Project Fund are not sufficient to pay the redemption price
of the Prior Bonds and costs related thereto in full. The Company shall pay that portion of the redemption price of the Prior Bonds and costs related thereto in excess of the monies available therefor in the Project Fund with its own funds.

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

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

  

 6 

 
Project will constitute integrated portions of electricity distribution facilities of the Company and that it is not feasible to administer the Project
separately from such facilities. The Company shall operate the Project (with such changes, improvements or additions as the Company may deem desirable) as part of such facilities for the joint useful lives of the Project and such facilities and
shall maintain and repair the Project and such facilities in conformity with the Company’s normal maintenance and repair programs for the Project and such facilities; provided that the Company shall have no obligation to operate, maintain or
repair any element or item of the Project or such facilities, 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 Project or such facilities to which the element or item of the Project or such facilities 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, and 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 $315,750 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 May 1, 2006 and on May 1 of each year thereafter, based upon the amount of Bonds Outstanding as of such May 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, any 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 

  

 9 

 
Company shall deliver to the Authority a check payable to the State of New York with respect to a bond issuance charge applicable to the Bonds pursuant to
Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the date of authentication and delivery of the Bonds. 
  
 (g) In the event that the Company shall fail to make any Payment as required by Sections 4.02(a) - (e)
hereof, the Payment so in default shall continue as an obligation of the Company until 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, any 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. 
  

 10 

 Section 4.04. Prepayment of Note Payments. The Note may be prepaid, in whole or in part, at the
option of the Company in connection with an optional redemption of the Bonds pursuant to Article V of the Indenture and shall be prepaid, in whole or in part, in connection with any mandatory redemption of the Bonds pursuant to Article V of the
Indenture other than a mandatory redemption pursuant to Section 5.07 of the Indenture. Prepayment of the Note pursuant to the preceding sentence shall be with or without premium, as required to provide sufficient funds to redeem the Bonds being
redeemed pursuant to Article V of the Indenture. The Note also may be prepaid in whole or in part at any time, without premium, at the option of the Company subsequent to the redemption of the Bonds with moneys furnished by the State of New York
pursuant to Section 5.07 of the Indenture. 
  
 The Company shall
give notice to the Trustee and the Authority of any intention to prepay the Note in whole or in part and of the principal amount to be prepaid not more than sixty (60) nor less than 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; 
  

 11 

 (c) any assignment, novation, merger, consolidation, transfer of assets, subleasing or
other similar transaction of or affecting the Company whether with or without the approval of the Trustee, except as otherwise expressly provided in this Participation Agreement; 
  
 (d) with respect solely to the obligation of the Company to pay the Additional Payments, the termination of
this Agreement and payment or provision for payment in full of the amount due under the Note pursuant to the provisions hereof; 
  
 (e) any failure of any party to perform or observe any agreement or covenant, whether express or implied, or any duty, liability or
obligation arising out of or in connection with this Participation Agreement, the Note, the Auction Agency Agreement, any Broker-Dealer Agreement, 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 

  

 12 

 
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 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 (i) payments made pursuant to Sections 4.02(f) and 5.09 hereof which shall be made directly to
the party entitled thereto and (ii) payments of the Purchase Price, which shall be made directly to the Registrar and Paying Agent) directly to the Trustee 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. 
  
 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 another 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 issued by a financial institution rated not less than “A” by at least one
nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing interest at an Auction Rate, a Fixed Rate or a Term Rate for a Calculation Period in excess of thirteen months. 
  
 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 

  

 13 

 
disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and

  
 (3) to pay to the Registrar and Paying Agent,
if other than the Trustee, reasonable compensation for all services rendered by it as Registrar and Paying Agent under the Indenture and reimburse it for its reasonable expenses incurred under the Indenture, except any such expense as may be
attributable to its negligence or bad faith. 
  
 Section 4.11.
Project not Security for Bonds. It is expressly recognized by the parties that none of the Project or any of its electricity distribution facilities will 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 Support Facility, on or before May 1 of each year, commencing on May 1, 2006, 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 

  

 15 

 
and belief, there does not exist at the date of such certificate any Event of Default hereunder or other event which, with notice or the lapse of time
specified in Section 7.01 hereof, or both, would become an Event of Default or, if any such Event of Default or other event shall so exist, specifying the same and the nature and status thereof. 
  
 Section 5.08. 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 Support Facility Issuer 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, any 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 any 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, any 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 any 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, any Auction Agent,
the Registrar and Paying Agent (including any person at any time serving as an officer or employee of the Trustee, any 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 any Auction Agent or bad faith or wilful misconduct of the Authority, the Trustee, the
Registrar and Paying Agent, any Remarketing Agent or any 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 any 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 any 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 an 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. 
  

 17 

 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 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. 
  

 18 

 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 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. 
  

 19 

 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 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 Support Facility Issuer. (a) To the extent that the Company has entered into a continuing disclosure agreement with respect to the Bonds, any Support Facility Issuer shall be included as party to be notified. 
  
 (b) The Company shall immediately notify any Support
Facility Issuer 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. 
  

 22 

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

  

 23 

 
overdue installments of interest (to the extent enforceable under applicable law) at the rate or rates per annum specified for the Note and the principal of
and premium, if any, on the Note which shall have become due and payable otherwise than by acceleration, and all other sums payable hereunder, except the principal of, and interest on, the Note which pursuant to such declaration shall have become
due and payable, shall have been paid by or on behalf of the Company or provision satisfactory to the Trustee shall have been made for such payment, then such acceleration of the Note shall ipso facto be deemed to be rescinded and any
such 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 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. 
  

 24 

 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 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, any 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, the Trustee and the Bank 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; 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: New York Municipal
Finance Unit; and if to the Bank, at Wachovia Corporation, 301 South College Street, Charlotte, NC 28288-0206. 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 

  

 26 

 
of the Project or for carrying out the expressed intention of this Participation Agreement in accordance with the provisions of the Indenture. 
  
 Section 8.07. Counterparts. This Participation Agreement may be
executed in any number of counterparts, each of which when so executed and delivered shall be an original; but such counterparts shall together constitute but one and the same Participation Agreement. 
  
 Section 8.08. Severability. If any clause, provision or section of
this Participation Agreement is held illegal, invalid or unenforceable by any court or administrative body, this Participation Agreement shall be construed and enforced as if such illegal or invalid or unenforceable clause, provision or section had
not been contained in this Participation Agreement. In case any agreement or obligation in this Participation Agreement be held to be in violation of law, then such agreement or obligation shall be deemed to be the agreement or obligation of the
Authority or the Company, as the case may be, to the full extent permitted by law. 
  
 Section 8.09. Delegation of Duties by Authority. It is agreed that under the terms of this Participation Agreement and also under the terms of the Indenture the Authority has delegated certain of its duties
hereunder to the Company. The fact of such delegation shall be deemed a sufficient compliance by the Authority to satisfy the duties so delegated and the Authority shall not be liable in any way by reason of acts done or omitted by the Company or
any Authorized Company Representative. The Authority shall have the right at all times to act in reliance upon the authorization, representation or certification of an Authorized Company Representative unless such reliance is in bad faith.

  
 Section 8.10. Survival of Representations, Warranties and
Covenants. The respective agreements, representations, warranties and covenants set forth herein will remain in full force and will survive the execution and delivery of this Participation Agreement. 
  
 Section 8.11. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF NEW YORK
SHALL GOVERN THE CONSTRUCTION OF THIS PARTICIPATION AGREEMENT. 
  
 [Signature Page of this Agreement Follows] 
  

 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:	 	/s/ Peter R. Smith
	 	 	 	 	 	 	 	 	President

  

	
	Attest:
	
	/s/ Jackie Jerry
	Assistant Secretary

  

									
	 	 	 	 	 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

				
	(SEAL)	 	 	 	By:	 	/s/ Joseph P. Oates
	 	 	 	 	 	 	 	 	Vice President and Treasurer

  

	
	Attest:
	
	/s/ Saddie S. Smith
	Secretary

  
 [Signature Page of
Participation Agreement] 
  

 28 

  
 EXHIBIT A 

 
 (To Participation Agreement, 
 dated as of May 1, 2005, 
 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 May 1, 2005, 
 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 May 1, 2005 between 
 New York State Energy Research and Development Authority and 
 Consolidated Edison Company of New York, Inc., 
 relating to Series 2005A Bonds) 
  
 CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. 
  
 $                 PROMISSORY NOTE 
  
 FOR 
  
 FACILITIES REVENUE BONDS, SERIES 2005A 
 (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.
PROJECT) 
  
 New York, New York 
 May 26, 2005 
  
 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 $126,300,000, 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 2005A (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 $126,300,000 pursuant to a Trust Indenture (the “Indenture”) dated as of May 1, 2005, 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 May 1, 2005, between the Company and the Authority (the “Participation Agreement”), the terms and provisions of which are incorporated herein by reference and made a part hereof.
All terms used and not otherwise defined herein are used as defined in the Indenture. 
  
 In the event the Company should fail to make any payment required by this Note, the Company’s obligation to make such payment shall continue as an obligation of the Company until the amount in default shall have
been fully paid, and the Company agrees to pay the same with interest thereon at the rate of interest borne by the Bonds, to the extent, but not exceeding the maximum rate, permitted by law, until paid. 
  

 C-1 

 This Note, unless paid earlier as permitted by the Participation Agreement, shall mature on May 1, 2039.

  
 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:	 	 
	 	 	 	 	 	 	 	 	Vice President and Treasurer

  

	
	
	ATTEST:
	
	  
	Secretary

  

 C-2

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