Document:

Exhibit
10.1.11

 

CONSOLIDATED
EDISON INC.

ANNUAL INCENTIVE PLAN

Effective as of January 1, 2003

 

 

CONSOLIDATED
EDISON INC.

ANNUAL INCENTIVE PLAN

PURPOSE

 

The purpose of the Plan
is to provide executives of the Company or any of its Non-utility Subsidiaries
designated by the Company’s Board of Directors as eligible to participate in
the Plan with incentives to achieve goals which are important to shareholders
and customers of the Company and the Non-utility Subsidiaries, to supplement
their salary and benefit programs so as to provide overall compensation for
such executives which is competitive with corporations with which the Company
and the Non-utility Subsidiaries must compete for the best executive talent,
and to assist the Company and the Non-utility Subsidiaries in attracting and
retaining executives who are important to their continued success.

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I.
  DEFINITIONS

  	
   

  
	
  1.01
  Affiliated Company

  	
   

  
	
  1.02 Annual
  Incentive Award

  	
   

  
	
  1.03 Annual
  Salary

  	
   

  
	
  1.04 Award
  Date

  	
   

  
	
  1.05 Board or Board of
  Directors

  	
   

  
	
  1.06 Code

  	
   

  
	
  1.07 Company

  	
   

  
	
  1.08
  Deferred Income Plan

  	
   

  
	
  1.09
  Deferral Portion

  	
   

  
	
  1.10
  Incentive Percentage

  	
   

  
	
  1.11 Management
  Development and Compensation Committee

  	
   

  
	
  1.12
  Non-utility Subsidiaries

  	
   

  
	
  1.13 Participant

  	
   

  
	
  1.14 Plan

  	
   

  
	
  1.15 Plan
  Administrator

  	
   

  
	
  1.16 Valuation Date

  	
   

  
	
  ARTICLE II.
  ELIGIBILITY

  	
   

  
	
  ARTICLE III.
  ADMINISTRATION

  	
   

  
	
  ARTICLE IV.
  DETERMINATION OF AWARDS

  	
   

  
	
  4.01 Incentive
  Percentages

  	
   

  
	
  4.02
  Annual Incentive Award

  	
   

  
	
  ARTICLE V. DEFERRAL
  OF AWARDS

  	
   

  
	
  ARTICLE VI.
  VALUATION OF NON-DEFERRED AWARDS

  	
   

  
	
  ARTICLE VII.
  PAYMENT OF AWARDS

  	
   

  
	
  7.01 Time of Payment

  	
   

  
	
  7.02 Amount
  of Payment

  	
   

  
	
  7.03 Manner
  of Payment

  	
   

  
	
  7.04
  Posthumous Payments

  	
   

  
	
  ARTICLE VIII.
  DEFERRAL ELECTIONS

  	
   

  
	
  8.01 Manner

  	
   

  
	
  8.02 Timing

  	
   

  
	
  ARTICLE IX.
  MISCELLANEOUS

  	
   

  
	
  9.01 Amendment and
  Termination

  	
   

  
	
  9.02 Effect of
  Plan

  	
   

  
	
  9.03 Withholding

  	
   

  

 

i

 

	
  9.04 Funding

  	
   

  
	
  9.05
  Facility of Payment

  	
   

  
	
  9.06 Nonalienation

  	
   

  

 

ii

 

ARTICLE I.  DEFINITIONS

 

The following terms when
capitalized herein shall have the meanings set forth below.

 

1.01                          Affiliated
Company shall mean any company other than the Company which
is a member of a controlled group of corporations (as defined in
Section 414(b) of the Code) which also includes as a member the Company;
any trade or business under common control (as defined in Section 414(c)
of the Code) with the Company; any organization (whether or not incorporated)
which is a member of an affiliated service group (as defined in
Section 414(m) of the Code) which includes the Company; and any other
entity required to be aggregated with the Company pursuant to regulations under
Section 414(o) of the Code.

 

1.02                          Annual
Incentive Award shall have the meaning set
forth in Section 4.02.

 

1.03                          Annual
Salary means the annual rate of
salary of each Participant or such salary as in effect at the end of such year.

 

(a)                                  If
such Participant’s employment is terminated during the year, the annual salary
rate of such Participant in effect at the time of such termination shall be
deemed to be the annual salary rate of such Participant at the end of such
year;

 

(b)                                 A
Participant’s annual rate of salary shall be determined without any deduction
for pre-tax contributions or after-tax contributions made pursuant to the
Consolidated Edison Thrift Savings Plan, the Con Edison Flexible Reimbursement
Account Plan for Management Employees, the Con Edison OPTIONS Program for
Management Employees, or Basic Salary or Supplemental Salary Contributions to
the Deferred Income Plan.

 

1.04                          Award
Date shall mean with respect
to any Annual Incentive Award the date the Board approves the Annual Incentive
Award.

 

1.05                          Board or
Board of Directors shall mean the Board of
Directors of the Company.

 

1.06                          Code means the Internal Revenue Code of 1986, as amended
from time to time.

 

1.07                          Company shall mean Consolidated Edison, Inc. (“CEI”), its
successors or assigns.

 

1.08                          Deferred
Income Plan shall
mean the Consolidated Edison Company of New York, Inc. Deferred Income Plan, as
amended from time to time.

 

1.09                          Deferral
Portion shall
mean the portion of each Annual Incentive Award that is deferred pursuant to
Article V.

 

 

1.10                          Incentive Percentage shall have the meaning set forth in Section 4.01.

 

1.11                          Management
Development and Compensation Committee shall
mean the Management Development and Compensation Committee of the Board or such
other committee as may be appointed by the Board to determine whether the
Participant is entitled to an Annual Incentive Award under the terms of this
Plan.

 

1.12                          Non-utility
Subsidiaries shall mean Consolidated
Edison Communications, Inc., Consolidated Edison Development, Inc.,
Consolidated Edison Energy, Inc., Consolidated Edison Competitive Shared
Services, Inc., Consolidated Edison Solutions, Inc. and any additional
Affiliated Companies that the Board determines to include in this Plan.

 

1.13                          Participant
shall mean any officer of the Company or its
Non-utility subsidiaries who at any time has been designated by the Board as a
participant in the Plan.

 

1.14                          Plan shall mean the Consolidated Edison Inc. Annual
Incentive Plan, as in effect from time to time.

 

1.15                           Plan
Administrator shall mean the individual
appointed by the Company’s Chief Executive Officer to administer the Plan as
provided in Article III.

 

1.16                           Valuation
Date shall have the meaning set forth in
Article VI.

 

ARTICLE II.  ELIGIBILITY

 

The Board, in its
discretion, from time to time, may designate and change the designation of the
executives of the Company or any of the Non-utility Subsidiaries eligible to
participate in the Plan.  To be eligible
to receive an award under the Plan for a particular year, an executive must:
(a) have been employed by the Company or a Non-utility Subsidiary during any
portion of such year and (b) be designated by the Board as eligible to
participate in the Plan.

 

ARTICLE III.  ADMINISTRATION

 

Except as otherwise
provided in the Plan, all determinations, other than who is eligible to
participate, in connection with the Plan shall be made by the Plan
Administrator, whose decisions shall be final and conclusive upon all
Participants and any persons asserting any claim derived from a
Participant.  The Plan Administrator
shall make such determinations after receiving the recommendations of the
Company’s Chief Executive Officer (except as to matters relating to the
participation of the Company’s Chief Executive Officer in the Plan).  The Plan Administrator shall abstain from
any determination under the Plan in which he or she has a personal interest, in
which case such determination shall be made by the Company’s Chief Executive
Officer.  The Plan Administrator shall
be responsible for the administration of the Plan under the direction of the
Company’s Chief Executive Officer.

 

2

 

ARTICLE IV.  DETERMINATION OF AWARDS

 

4.01         Incentive Percentage

 

The Board shall determine
a percentage of Annual Salary deemed to constitute an appropriate incentive for
each Participant eligible to participate in the Plan.  Each such percentage is herein called an “Incentive Percentage.”  The Board may from time to time, increase or
decrease any Incentive Percentage for any Participant as the Board deems
appropriate.

 

4.02                          Annual
Incentive Award

 

In January of any
year, the Management Development and Compensation Committee of the Board, upon
the recommendation of the Company’s Chief Executive Officer, shall make,
subject to confirmation by the Board, awards to individual Participants who are
eligible to participate in the Plan for such year.  Such awards are herein called “Annual Incentive Awards.”  The Annual Incentive Award shall be
determined in the following manner:

 

(a)                                  Each
Annual Incentive Award shall be determined in light of the contribution of the
Participant to the overall performance of any of the Non-utility Subsidiaries
and the Company, and the Participant’s individual performance, taking into
account such factors as the Committee and the Board deem relevant.

 

(b)                                 An
Annual Incentive Award may range from zero to 150 percent of the Participant’s
Incentive Percentage.

 

(c)                                  The
determination of the Committee, upon Board approval, as to the amount of the
Annual Incentive Award to be awarded, shall be final and conclusive.

 

ARTICLE V.  DEFERRAL OF AWARDS

 

All or any portion of
each Annual Incentive Award may, at the Participant’s election, be deferred
(“Deferral Portion”) into the Deferred Income Plan (“DIP”) and shall be
administered and accounted for under the DIP.

 

ARTICLE VI.  VALUATION OF NON-DEFERRED AWARDS

 

The Valuation Date of any
portion of an Annual Incentive Award that is not deferred pursuant to Article V
shall be the Award Date, and the value on the Valuation Date shall be equal to
the amount of such portion.

 

3

 

ARTICLE VII.  PAYMENT OF AWARDS

 

7.01                          Time of
Payment

 

 Any portion of an Annual Incentive Award for
which a deferral election under Article V has not been made shall become
payable as soon as administratively practicable after its respective Valuation
Date.

 

7.02                          Amount
of Payment

 

Any portion of an Annual
Incentive Award for which a deferral election under Article V has not been
made shall be paid at its value on the Valuation Date, as determined pursuant
to Article VI.

 

7.03                          Manner
of Payment

 

Any portion of an Annual
Incentive Award for which a deferral election under Article V has not been
made shall be paid to the Participant in a single lump sum.

 

7.04                          Posthumous
Payments

 

Subject to
Section 9.05, if a Participant shall die before all payments to be made to
the Participant under this Plan have been made, the remaining payment or
payments shall be made to the Participant’s estate or personal representative
in a single lump sum, with such posthumous payment to be made as soon as
administratively practicable after the Participant’s death.

 

ARTICLE VIII.  DEFERRAL ELECTIONS

 

8.01                          Manner

 

The deferral elections
permitted to Participants by Article V shall be made by a writing signed
by the Participant and delivered to the Plan Administrator.  A separate deferral election may be made
with respect to each Annual Incentive Award. 
A deferral election made for any Annual Incentive Award shall be
irrevocable with respect to that Annual Incentive Award and shall govern all
subsequent Annual Incentive Awards, until a new deferral election is timely
made as to subsequent Annual Incentive Awards.

 

4

 

8.02                          Timing

 

The deferral election
pursuant to Article V with respect to any Annual Incentive Award must be
made prior to the beginning of the calendar year for which the Annual Incentive
Award relates.

 

ARTICLE IX.  MISCELLANEOUS

 

9.01                          Amendment and Termination

 

The Company reserves the
right, by action of the Board of Directors, to terminate the Plan entirely, or
to temporarily or permanently discontinue the making of awards under the Plan;
and further reserves the right, by action of the Board of Directors or the Plan
Administrator, to otherwise modify the Plan from time to time; provided that no
such modification, termination, or discontinuance shall adversely affect the
rights of Participants with respect to Annual Incentive Awards previously
determined; and provided further, that no modification by action of the Plan
Administrator shall have a material effect on the benefits payable under the
Plan.

 

9.02                          Effect
of Plan

 

The establishment and
continuance of the Plan shall not constitute a contract of employment between
the Company and any executive or Participant. 
No person shall have any claim to be granted an award under the Plan and
there is no obligation for uniformity of treatment of executives or Participants
under the Plan.  Neither the Plan nor
any action taken under the Plan shall be construed as giving to any executives
or Participants the right to be retained in the employ of the Company, nor any
right to examine the books of the Company, or to require an accounting.

 

9.03                          Withholding

 

The Company shall deduct
from any payment under the Plan any federal, state, or local taxes required by
law to be withheld with respect to such payment.

 

9.04                          Funding

 

All amounts payable in
accordance with this Plan shall constitute a general unsecured obligation of
the Company.  Such amounts, as well as
any administrative costs relating to the Plan, shall be paid out of the general
assets of the Company.

 

5

 

9.05                          Facility
of Payment

 

In the event that the
Plan Administrator shall find that a Participant is unable to care for such
Participant’s affairs because of illness or accident or has died, the Plan
Administrator may, unless claim shall have been made therefor by a duly
appointed legal representative, direct that any benefit payment due the
Participant, to the extent not payable from a grantor trust, be paid on the
Participant’s behalf to the Participant’s spouse, a child, a parent or other
blood relative, or to a person with whom the Participant resides or a legal
guardian, and any such payment so made shall be a complete discharge of the
liabilities of the Company and the Plan therefor.

 

9.06                          Nonalienation

 

Subject to any applicable
law, no benefit under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt to do so shall be void, nor shall any such benefit be in any manner
liable for or subject to garnishment, attachment, execution or levy, or liable
for or subject to the debts, contracts, liabilities, engagements or torts of
the person entitled to such benefits.

 

6

 

IN WITNESS WHEREOF,
pursuant to resolutions adopted by the Board of Directors of Consolidated
Edison, Inc. at a meeting held on January 15, 2004, the undersigned duly
authorized officer hereby approves the foregoing instrument as the Consolidated
Edison Inc. Annual Incentive Plan, effective as of January 1, 2003 by
executing this instrument this 19th day of February, 2004.

 

 

	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Claude
  Trahan

  
	
   

  	
   

  	
  Vice
  President-Human Resources

  
	
   

  	
   

  	
  Consolidated
  Edison Company of

  New York, Inc.

  

 

7Exhibit 4.2.6

 

NEW YORK STATE ENERGY RESEARCH

 

AND DEVELOPMENT AUTHORITY

 

and

 

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

 

 

 

PARTICIPATION AGREEMENT

 

 

 

Dated as of January 1, 2004

 

 

relating to

$98,325,000 Facilities Revenue Bonds, Series 2004A

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

 

 

TABLE OF CONTENTS

 

PARTICIPATION AGREEMENT

 

	
  PARTIES

  	
   

  	
   

  
	
  RECITALS

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  
	
  DEFINITIONS; EFFECTIVE DATE AND DURATION OF
  PARTICIPATION AGREEMENT

  	
   

  
	
   

  	
   

  
	
  Section 1.01.

  	
  Definitions

  	
   

  
	
  Section 1.02.

  	
  Effective Date of Participation Agreement;
  Duration of Participation Agreement

  	
   

  
	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
   

  	
   

  
	
  REPRESENTATIONS

  	
   

  
	
   

  	
   

  
	
  Section 2.01.

  	
  Representations and Warranties by the
  Authority

  	
   

  
	
  Section 2.02.

  	
  Representations and Warranties by the
  Company

  	
   

  
	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
   

  	
   

  
	
  THE PROJECT; ISSUANCE OF BONDS

  	
   

  
	
   

  	
   

  
	
  Section 3.01.

  	
  The Project

  	
   

  
	
  Section 3.02.

  	
  Sale of Bonds and Deposit of Proceeds

  	
   

  
	
  Section 3.03.

  	
  Disbursements from Project Fund

  	
   

  
	
  Section 3.04.

  	
  Adequacy of Project Fund

  	
   

  
	
  Section 3.05.

  	
  Ownership and Possession of the Project

  	
   

  
	
  Section 3.06.

  	
  Operation, Maintenance and Repair

  	
   

  
	
  Section 3.07.

  	
  Investment of Monies in Funds Under the
  Indenture

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
   

  	
   

  
	
  NOTE AND PAYMENTS

  	
   

  
	
   

  	
   

  
	
  Section 4.01.

  	
  Execution and Delivery of Note to Trustee

  	
   

  
	
  Section 4.02.

  	
  Payments Payable; Note Payments; Additional
  Payments

  	
   

  
	
  Section 4.03.

  	
  Notice to Pay; Medium of Payment;
  Acceleration

  	
   

  
	
  Section 4.04.

  	
  Prepayment of Note Payments

  	
   

  
	
  Section 4.05.

  	
  Company’s Payments as Trust Funds

  	
   

  

 

i

 

	
  Section 4.06.

  	
  Absolute Obligation to Make Payments

  	
   

  
	
  Section 4.07.

  	
  Assignment of Authority’s Rights

  	
   

  
	
  Section 4.08.

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

  	
   

  
	
  Section 4.09.

  	
  Agreements of Company relating to Support
  Facilities

  	
   

  
	
  Section 4.10.

  	
  Compensation of Trustee and Paying Agents

  	
   

  
	
  Section 4.11.

  	
  Project not Security for Bonds

  	
   

  
	
  Section 4.12.

  	
  Payment of Taxes and Assessments; No Liens
  or Charges

  	
   

  
	
  Section 4.13.

  	
  Company to Pay Attorneys’ Fees and
  Disbursements

  	
   

  
	
  Section 4.14.

  	
  No Abatement of Administration Fees and
  Other Charges

  	
   

  
	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
   

  	
   

  
	
  SPECIAL
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 5.01.

  	
  No Warranty as to Suitability of Project

  	
   

  
	
  Section 5.02.

  	
  Authority’s Right to Inspect Project

  	
   

  
	
  Section 5.03.

  	
  Company Consent to Amendment of Indenture

  	
   

  
	
  Section 5.04.

  	
  Tax Covenant

  	
   

  
	
  Section 5.05.

  	
  Company Agrees to Perform Obligations
  Imposed by Indenture

  	
   

  
	
  Section 5.06.

  	
  Authority Agrees to Take Certain Actions at
  Direction of Company

  	
   

  
	
  Section 5.07.

  	
  Certificates as to Defaults

  	
   

  
	
  Section 5.08.

  	
  Recording and Filing

  	
   

  
	
  Section 5.09.

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

  	
   

  
	
  Section 5.10.

  	
  Provision of Information

  	
   

  
	
  Section 5.11.

  	
  Ratings

  	
   

  
	
  Section 5.12.

  	
  Notices

  	
   

  
	
  Section 5.13.

  	
  Maintenance of Office or Agency

  	
   

  
	
  Section 5.14.

  	
  Maintenance of Properties

  	
   

  
	
  Section 5.15.

  	
  Insurance

  	
   

  
	
  Section 5.16.

  	
  Proper Books of Record and Account

  	
   

  
	
  Section 5.17.

  	
  Compliance with Laws

  	
   

  
	
  Section 5.18.

  	
  Consolidation, Merger or Sale of Assets

  	
   

  
	
  Section 5.19.

  	
  Financial Statements of Company

  	
   

  
	
  Section 5.20.

  	
  Information to Bond Insurer

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
   

  	
   

  
	
  REDEMPTION
  OF BONDS

  	
   

  
	
   

  	
   

  
	
  Section 6.01.

  	
  Redemption of Bonds

  	
   

  

 

ii

 

	
  ARTICLE VII

  	
   

  
	
   

  	
   

  
	
  EVENTS OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
   

  
	
  Section 7.01.

  	
  Events of Default Defined

  	
   

  
	
  Section 7.02.

  	
  Remedies on Default

  	
   

  
	
  Section 7.03.

  	
  No Remedy Exclusive

  	
   

  
	
  Section 7.04.

  	
  No Additional Waiver Implied by One Waiver

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  
	
   

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 8.01.

  	
  Disposition of Amounts after Payment of
  Bonds

  	
   

  
	
  Section 8.02.

  	
  Notices

  	
   

  
	
  Section 8.03.

  	
  Successors and Assigns

  	
   

  
	
  Section 8.04.

  	
  Amendment of Participation Agreement

  	
   

  
	
  Section 8.05.

  	
  Participation Agreement Supersedes Any
  Prior Agreements

  	
   

  
	
  Section 8.06.

  	
  Further Assurances and Corrective
  Instruments

  	
   

  
	
  Section 8.07.

  	
  Counterparts

  	
   

  
	
  Section 8.08.

  	
  Severability

  	
   

  
	
  Section 8.09.

  	
  Delegation of Duties by Authority

  	
   

  
	
  Section 8.10.

  	
  Survival of Representations, Warranties and
  Covenants

  	
   

  
	
  Section 8.11.

  	
  NEW YORK LAW TO GOVERN

  	
   

  
	
  Section 8.12.

  	
  Third Party Beneficiary

  	
   

  
	
   

  	
   

  
	
  TESTIMONIUM

  	
   

  
	
   

  	
   

  
	
  SIGNATURES AND SEALS

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGMENTS

  	
   

  
	
   

  	
   

  
	
  EXHIBIT A

  	
  Description of Project Exempt Facilities

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  Description of Other Project Facilities

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C

  	
  Form of Note

  	
   

  

 

iii

 

This PARTICIPATION AGREEMENT, dated as of
January 1, 2004, between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT
AUTHORITY, a body corporate and politic, constituting a public benefit
corporation, established and existing under and by virtue of the laws of the
State of New York (the “Authority”) and CONSOLIDATED EDISON COMPANY OF NEW
YORK, INC., a corporation duly organized and existing and qualified to do
business as a public utility under the laws of the State of New York (the
“Company”),

 

W I T N E S S E T H
:

 

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

 

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

 

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

 

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

 

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

 

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

 

WHEREAS, the Company has requested that the
Authority issue bonds for the purpose of refunding the Authority’s 6%
Facilities Revenue Bonds, Series 1993 A (Consolidated Edison Company of
New York, Inc. Project), in the aggregate principal amount of $101,000,000 (the
“Prior Bonds”) issued to finance the acquisition, construction and installation
of certain facilities for the furnishing of gas within the Company’s gas
service area; and

 

1

 

WHEREAS, the Authority proposes to issue a
series of such bonds in the aggregate principal amount of $98,325,000
Facilities Revenue Bonds, Series 2004A (Consolidated Edison Company of New
York, Inc. Project) (the “Bonds”), which will be used, together with Company
funds, to refund the Prior Bonds, such Bonds to be issued under and secured by
a Trust Indenture dated as of January 1, 2004, between the Authority and
The Bank of New York, as Trustee (the “Indenture”); and

 

WHEREAS, the Authority, by Resolution No.
1024, adopted January 13, 2003, has determined to issue the Bonds, in an
aggregate principal amount not to exceed $101,000,000, 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 Project will constitute integrated portions of gas distribution
facilities of the Company and that it

 

6

 

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

 

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

 

7

 

ARTICLE IV

 

NOTE AND
PAYMENTS

 

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

 

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

 

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

 

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

 

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

 

8

 

(e)                                  The Company covenants
that it shall deposit, or cause to be deposited with the Trustee, sufficient
funds to assure that no default shall occur in the payment of the principal of
or premium, if any, or the interest on, or the Purchase Price of, the Bonds as
and when due, and that no unreasonable delay shall occur in the payment of the
costs and expenses payable from Additional Payments.

 

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

 

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

 

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

 

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

 

(iv)                              initial
administration fees of the Authority in the amount of $245,812.50 on the date
of authentication and delivery of the Bonds to the initial purchasers thereof,
an annual fee equal to $130 per million dollar principal amount of the Bonds on
January 1, 2005 and on January 1 of each year thereafter, based upon
the amount of Bonds Outstanding as of such January 1 and for purposes of
the calculation of such fee, rounding up to the nearest whole million dollars,
and all reasonable expenses, disbursements, advances, taxes, assessments or
impositions, not otherwise paid under this Participation Agreement or the
Indenture, incurred by or imposed upon the Authority in connection with its
administration and enforcement of, and compliance with, this Participation
Agreement, the Auction Agency Agreement, the Bond Purchase Trust Agreement, any
Remarketing Agreement and the Indenture, which amounts the Company is obligated
to pay, including, but not limited to, reasonable attorneys’ fees.  In addition, the Company shall deliver to the
Authority a check payable to the State

 

9

 

of New York with respect to a bond issuance
charge applicable to the Bonds pursuant to Section 2976 of the Public
Authorities Law of the State of New York in the amount specified by such
section on the date of authentication and delivery of the Bonds.

 

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

 

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

 

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

 

Section 4.04.                             Prepayment
of Note Payments.  The Note may be
prepaid, in whole or in part, at the option of the Company in connection with
an optional redemption of the Bonds pursuant to Article V of the Indenture
and shall be prepaid, in whole or in part, in

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(c)                                  any assignment,
novation, merger, consolidation, transfer of assets, subleasing or other
similar transaction of or affecting the Company whether with or

 

11

 

without the approval of the Trustee, except
as otherwise expressly provided in this Participation Agreement;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 4.07.                             Assignment
of Authority’s Rights.  As security
for the payment of the Bonds, the Authority will assign to the Trustee the
Participation Agreement and the Note and all of the Authority’s rights,
remedies and interest under this Participation Agreement and the Note,
including the right to receive payments under this Participation Agreement and
the Note (except the Authority’s rights with respect to (a) administrative
compensation, attorney’s fees and indemnification, (b) the receipt of notices,
opinions, reports, copies of instruments and other items of a similar nature
required to be delivered to the Authority under this Participation Agreement,
(c) granting approvals and consents and making determinations when required
under this Participation Agreement, (d) making requests for information and
inspections in accordance with this Participation Agreement,
(e) Article III and Sections 4.02(f), 4.14 and 5.09 of this
Participation Agreement and, insofar as the obligations of the Company under
Section 4.12 of this Participation Agreement relate to taxes and
assessments imposed upon the Authority and not the Trustee, Section 4.12
thereof and (f) the right to amend this Participation Agreement) and

 

12

 

hereby directs the Company to make said payments directly to the
Trustee or in the case of the Purchase Price to the Registrar and Paying
Agent.  The Company herewith assents to
such assignment and will make payments under this Participation Agreement and
the Note (except payments made pursuant to Sections 4.02(f) and 5.09 hereof
which shall be made directly to the Authority) directly to the Trustee (or in
the case of the Purchase Price, to the Registrar and Paying Agent) without
defense or set-off by reason of any dispute between any of the Company, the
Trustee or Registrar and Paying Agent. 
Except as provided in the Indenture, the Authority will not sell,
assign, transfer, convey or otherwise dispose of its interest in this
Participation Agreement during the term of this Participation Agreement.

 

Section 4.08.                             Actions
with Respect to or by or on behalf of the Authority under the Indenture.  The Authority hereby grants the right to the
Company to request the Authority to take certain actions under the Indenture
and/or to perform or undertake certain actions as specified under the
Indenture.  The Company agrees to
request the Authority to take action or undertake or perform any action solely
in compliance with or after complying with the requirements and provisions of
the Indenture.  The Company further
agrees to consent to any removal and appointment of the Auction Agent by the
Authority pursuant to the second paragraph of Section 11.21 of the
Indenture.

 

Section 4.09.                             Agreements
of Company relating to Support Facilities. 
The Company agrees not to request that the interest rate mode applicable
to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective
date of the applicable Change in the Interest Rate Mode the Bonds shall be
rated at least “A” by S&P or “A2” by Moody’s or “A” by Fitch or an
equivalent rating by any nationally recognized rating agency.  Subject to the requirements of the next paragraph,
such rating of the Bonds may, but is not required to, be achieved by obtaining
a Support Facility which meets the requirements of Article VI of the
Indenture.

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

Section 4.12.                             Payment
of Taxes and Assessments; No Liens or Charges.  The Company will (a) pay, when the same shall become due and
payable, all taxes and assessments, including income, profits, property or
excise taxes, if any, or other municipal or governmental charges, imposed,
levied or assessed by the Federal, state or any municipal government upon the Authority
or the Trustee in respect of any payments (other than payments made pursuant to
Section 4.10) made or to be made pursuant to this Participation Agreement
or the Notes and (b) pay or cause to be discharged, within sixty (60) days
after the same shall accrue, any lien or charge upon any such payment (except
as aforesaid) made or to be made under this Participation Agreement; provided
that the Company shall not be required to pay any such tax, assessment or
charge so long as (i) the Company at its expense contests by appropriate
legal proceedings conducted in good faith and with due diligence the amount,
validity or application of any such tax, assessment or charge, (ii) such
proceedings shall have the effect of suspending the collection thereof from the
Authority and the Trustee, and (iii) the Company shall indemnify and hold
the Authority and the Trustee harmless from any losses, costs, charges,
expenses (including reasonable attorneys’ fees and disbursements), judgments
and liabilities arising in respect of such tax, assessment or charge and the
nonpayment thereof.

 

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

 

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

 

14

 

ARTICLE V

 

SPECIAL
COVENANTS

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 5.07.                             Certificates
as to Defaults.  The Company shall
file with the Trustee and the Bond Insurer, on or before August 15 of each
year, commencing on August 15, 2004, a certificate signed by an Authorized
Company Representative stating that, to the best of his or her  knowledge, information and belief, the
Company has kept, observed, performed and fulfilled each and every one of its
covenants and obligations contained in this Participation Agreement, the Tax
Regulatory Agreement and in the Note and, to the best of his knowledge,
information and belief, there does not exist at the date of such certificate
any Event of Default

 

15

 

hereunder or other event which, with notice or the lapse of time
specified in Section 7.01 hereof, or both, would become an Event of
Default or, if any such Event of Default or other event shall so exist,
specifying the same and the nature and status thereof.

 

Section 5.08.                             Recording
and Filing.  The Company hereby
covenants that it will cause all financing statements related to the Indenture
and all supplements thereto and this Participation Agreement and all
supplements thereto, as well as such other security agreements, financing
statements and all supplements thereto and other instruments as may be required
from time to time to be kept, to be recorded and filed in such manner and in
such places as may from time to time be required by law in order to preserve
and protect fully the security of Holders of the Bonds and the rights of the
Trustee hereunder, and to take or cause to be taken any and all other action
necessary to perfect the security interest created by the Indenture and shall,
within ten (10) days after such filing, cause there to be furnished to the
Trustee and the Bond Insurer an opinion of counsel as to the adequacy and
details of such filing and specifying any re-filing to be effected in the
future.

 

Section 5.09.                             Limited
Obligation of Authority; Indemnification of Authority, Registrar and Paying
Agent, Auction Agent and Trustee. 
The Bonds shall not be general obligations of the Authority, and shall
not constitute an indebtedness of or a charge against the general credit of the
Authority or give rise to any pecuniary liability of the Authority.  The liability of the Authority under the
Bonds shall be enforceable only to the extent provided in the Indenture, and
the Bonds shall be payable solely from the Note Payments and any other funds
held by the Trustee under the Indenture and available for such payment.  The Bonds shall not be a debt of the State
of New York, and the State of New York shall not be liable thereon.

 

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

 

16

 

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

 

Section 5.10.                             Provision
of Information.  The Company shall
provide the Trustee with the forms of any notices required to be sent to
holders of Bonds in connection with any redemption of Bonds, a change in the
Auction Period, the Interest Period or Change in the Interest Rate Mode
pursuant to Articles III,  IV and V
of the Indenture or the establishment of a Fixed Rate on the Bonds pursuant to
Section 4.02 of the Indenture.

 

Section 5.11.                             Ratings.  During any Auction Rate Period, the Company
shall take all reasonable action necessary to enable at least two nationally
recognized, statistical rating

 

17

 

organizations (as that term is used in the rules and regulations of the
Commission under the Exchange Act) to provide ratings for the Auction Rate
Bonds.

 

Section 5.12.                             Notices.  During any Auction Rate Period, the Company
on behalf of the Authority shall provide the Trustee and, so long as no Event
of Default has occurred and is continuing and the ownership of any Auction Rate
Bonds is maintained in book-entry form by the Securities Depository, the
Auction Agent, with notice of any change in (a) the Statutory Corporate
Tax Rate under the Indenture, (b) the Applicable Percentage, or
(c) the maximum rate permitted by law on the Bonds.  There is currently no such maximum rate.

 

Section 5.13.                             Maintenance
of Office or Agency.  So long as the
Note remains outstanding and unpaid, the Company will at all times keep, in New
York, New York, or another location in the State of New York, an office or
agency where notices and demands with respect to the Note may be served, and
will, from time to time, give written notice to the Trustee of the location of
such office or agency; and, in case the Company shall fail so to do, notices
may be served and demands may be made at the principal office of the Trustee.

 

Section 5.14.                             Maintenance
of Properties.  So long as the Note
remains outstanding and unpaid, the Company will at all times make or cause to
be made such expenditures for repairs, maintenance and renewals, or otherwise,
as shall be necessary to maintain its properties in good repair, working order
and condition as an operating system or systems to the extent necessary to meet
the Company’s obligations under the Public Service Law of the State of New York
and the Participation Agreement.

 

Section 5.15.                             Insurance.  So long as the Note remains outstanding and
unpaid, the Company will keep or cause to be kept its properties that are of an
insurable nature, insured against loss or damage by fire or other risks, the
risk of which in the opinion of an Authorized Company Representative (who shall
be an officer or employee of the Company responsible for the management of such
risks) is customarily insured against by companies similarly situated and
operating like properties, to the extent that property of similar character is,
in such Authorized Company Representative’s opinion, customarily insured
against by such companies, either (a) by reputable insurers or (b) in
whole or in part in the form of reserves or of one or more insurance funds
created by the Company, whether alone or with other Corporations.

 

Section 5.16.                             Proper
Books of Record and Account.  So
long as the Note remains outstanding and unpaid, the Company will at all times
keep or cause to be kept proper books of record and account, in which full,
true and correct entry will be made of all dealings, business and affairs of
the Company, including proper and complete entries to capital or property
accounts covering property worn out, obsolete, abandoned or sold, all in
accordance with the requirements of any system of accounting or keeping
accounts or the rules, regulations or orders prescribed by a regulatory
commission with jurisdiction over the rates of the Company giving rise to at
least fifty-one percent (51%) of the Company’s gross revenues, or if there are
no such requirements or rules, regulations or orders, then in compliance with
generally accepted accounting principles.

 

Section 5.17.                             Compliance
with Laws.  So long as the Note
remains outstanding and unpaid, the Company agrees to use its best efforts to
comply in all material respects with all

 

18

 

applicable laws, rules and regulations and orders of any governmental
authority, non-compliance with which would have a material adverse effect on
its business, financial condition or results of operations (to the extent the
Company deems it can reasonably comply while maintaining its public utility
operations) or would materially adversely affect the Company’s ability to
perform its obligations hereunder or under the Participation Agreement, except
laws, rules, regulations or orders being contested in good faith or laws,
rules, regulations or orders which the Company has applied for variances from,
or exceptions to.

 

Section 5.18.                             Consolidation,
Merger or Sale of Assets.  So long
as the Note remains outstanding and unpaid, the Company will not consolidate
with or permit itself to be merged into any other corporation or corporations,
or sell, lease, transfer or otherwise dispose of all or substantially all of
its properties and assets, except in the manner and upon the terms and
conditions set forth in this Section 5.18.

 

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

 

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

 

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

 

Section 5.19.                             Financial
Statements of Company.  The Company
agrees to have an annual audit made by independent accountants and to furnish
the Trustee with a balance sheet and statements of income, retained earnings
and cash flow showing the financial condition of the

 

19

 

Company and its consolidated subsidiaries, if any, at the close of each
fiscal year, and the results of operations of the Company and its consolidated
subsidiaries, if any, for each fiscal year, as audited by said accountants, on
or before the last day of the third month following the close of the fiscal
year or as soon thereafter as they are reasonably available.  The Company further agrees to furnish to the
Trustee, the Authority and to any owner of Bonds if requested in writing by
such owner all financial statements which it sends to its shareholders.  The delivery of such financial statements to
the Trustee is for informational purposes only and the Trustee’s receipt of
such shall not constitute constructive notice of any information contained
therein, including the Company’s compliance with any of its covenants
hereunder.

 

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

 

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

 

20

 

ARTICLE VI

 

REDEMPTION OF
BONDS

 

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

 

21

 

ARTICLE VII

 

EVENTS OF
DEFAULT AND REMEDIES

 

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

 

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

 

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

 

(c)                                  The dissolution or
liquidation of the Company or the filing by the Company of a voluntary petition
in bankruptcy, or failure by the Company promptly to discharge or cause to be
discharged any execution, garnishment or attachment of such consequence as will
impair its ability to carry on its operations generally or the commission by
the Company of any act of bankruptcy, or adjudication of the Company as a
bankrupt, or assignment by the Company for the benefit of its creditors, or the
entry by the Company into an agreement of composition with its creditors, or
the approval by a court of competent jurisdiction of a petition applicable to
the Company in any proceeding for its reorganization instituted under the
provisions of the federal bankruptcy laws or the Company becomes insolvent or
is unable to pay its debts as they become due. 
The term “dissolution or liquidation of the Company”, as used in this
subsection, shall not be construed to include the cessation of the corporate
existence of the Company resulting either from a merger or consolidation of the
Company into or with another corporation or a dissolution or liquidation of the
Company following a transfer of all or substantially all of its assets as an
entirety, under the conditions permitting such action with respect to the
Company contained in Section 5.18 hereof.

 

(d)                                 The occurrence of an Event
of Default as defined in Section 12.01 of the Indenture.

 

Subsection (b) of this Section 7.01
is subject to the following limitations: Except for the obligations of the
Company contained in Article IV hereof, if by reason of force majeure

 

22

 

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

 

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

 

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

 

(b)                                 The Authority, with
respect to those rights not assigned to the Trustee, or the Trustee may take
whatever action at law or in equity that may appear necessary or desirable to
collect the amounts then due and thereafter to become due, or to enforce
performance and observance of any obligation, agreement or covenant of the
Company under this Participation Agreement or the Note whether for specific
performance of any covenant or agreement contained herein or therein or in aid
of the execution of any power herein granted.

 

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

 

If any such declaration of acceleration of
the Bonds shall have been annulled pursuant to the terms of the Indenture and
if, at any time after such declaration, but before all the Bonds shall have
matured by their terms, all arrears of interest upon the Note, and interest on
overdue installments of interest (to the extent enforceable under applicable
law) at the rate or rates per annum specified for the Note and the principal of
and premium, if any, on the Note which shall have become due and payable
otherwise than by acceleration, and all other sums

 

23

 

payable hereunder, except the
principal of, and interest on, the Note which pursuant to such declaration
shall have become due and payable, shall have been paid by or on behalf of the
Company or provision satisfactory to the Trustee shall have been made for such
payment, then such acceleration of the Note shall ipso  facto be
deemed to be rescinded and any such Event of Default and its consequences shall
ipso  facto be deemed to be annulled, but no such annulment shall
extend to or affect any subsequent Event of Default or impair or exhaust any
right or remedy consequent thereon.

 

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

 

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

 

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

 

In case the Company shall fail forthwith to
pay such amounts upon such demand, the Authority, with respect to those rights
not assigned to the Trustee, or the Trustee (as assignee of the Authority under
the Indenture) shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and
unpaid, and may prosecute any such action or proceeding to judgment or final
decree, and may enforce any such

 

24

 

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

 

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

 

Nothing herein contained shall be construed
to prevent the Authority from enforcing directly any of its rights under
Sections 4.02(f), 4.13 and 5.09 hereof; provided that, in case the Company
shall have failed to pay amounts required to be paid under
Sections 4.02(f), 4.13 and 5.09 hereof which event shall have continued
for a period of thirty (30) days after the date on which written notice of such
failure, requiring the Company to remedy the same, shall have been given to the
Company by the Authority or the Trustee, the Authority or the Trustee may take
whatever action at law or in equity as may appear necessary or desirable to
enforce performance or observance of any obligations or agreements of the
Company under Sections 4.02(f), 4.13 and 5.09 hereof.

 

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

 

25

 

ARTICLE VIII

 

MISCELLANEOUS

 

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

 

Section 8.02.                             Notices.  All notices, certificates, requests or other
communications between the Authority, the Company and the Trustee required to be
given under this Participation Agreement or under the Indenture shall be
sufficiently given and shall be deemed given when delivered by hand or first
class mail, postage prepaid, addressed as follows: if to the Authority, at 17
Columbia Circle, Albany, New York 12203-6399, Attention:  President; if to the Company, at 4 Irving
Place, New York, New York 10003, Attention: Secretary; and if to the Trustee or
the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street -
21W, New York, New York 10286, Attention: 
Corporate Trust Trustee Administration. 
A duplicate copy of each notice, certificate, request or other
communication given hereunder to the Authority, the Company or the Trustee
shall also be given to the others.  The
Company, the Authority and the Trustee may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.

 

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

 

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

 

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

 

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

 

26

 

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

 

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

 

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

 

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

 

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

 

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

 

 

[Signature Page of this Agreement Follows]

 

27

 

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

 

	
   

  	
   

  	
  NEW YORK
  STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY

  
	
   

  	
   

  	
   

  
	
  (SEAL)

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Acting President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Assistant Secretary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CONSOLIDATED
  EDISON COMPANY OF NEW YORK, INC.

  
	
   

  	
   

  	
   

  
	
  (SEAL)

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Executive Vice President and

  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  

 

 

[Signature Page of Participation Agreement]

 

28

 

EXHIBIT A

 

(To Participation Agreement,

dated as of January 1, 2004,

between New York State Energy Research and Development Authority

and Consolidated Edison Company of New York, Inc.)

 

DESCRIPTION OF PROJECT

EXEMPT FACILITIES

 

 

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

 

A-1

 

EXHIBIT B

 

 

(To Participation Agreement

dated as of January 1, 2004,

between New York State Energy Research and Development Authority

and Consolidated Edison Company of New York, Inc.)

 

DESCRIPTION OF OTHER PROJECT FACILITIES

 

[A copy of Exhibit B to the Participation
Agreement

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

 

B-1

 

EXHIBIT C

 

 

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

New York State Energy Research and Development Authority and

Consolidated Edison Company of New York, Inc.,

relating to Series 2004A Bonds)

 

CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

 

$              PROMISSORY
NOTE

 

FOR

 

FACILITIES REVENUE BONDS, SERIES 2004A

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

 

New York, New York

January 29, 2004

 

FOR VALUE RECEIVED,
Consolidated Edison Company of New York, Inc., a New York corporation (the
“Company”), promises to pay to the order of The Bank of New York, as trustee
(the “Trustee”) under the hereinafter referred to Indenture, in lawful money of
the United States, moneys that are in the aggregate sufficient for, together
with other amounts held by the Trustee and available under the Indenture (as
defined below) for application to, the payment of the principal sum of
$[                       ],
together with interest thereon at such rate or rates applicable to, and with
such redemption premiums, if any, becoming due and payable on, the Facilities
Revenue Bonds, Series 2004A (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 $98,325,000
pursuant to a Trust Indenture (the “Indenture”) dated as of January 1,
2004, between the Authority and the Trustee, and at such times as provided in
the Indenture.  This Note is being
delivered pursuant to and in accordance with the Participation Agreement dated
as of January 1, 2004, between the Company and the Authority (the
“Participation Agreement”), the terms and provisions of which  are incorporated herein by reference and
made a part hereof.  All terms used and
not otherwise defined herein are used as defined in the Indenture.

 

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

 

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

 

C-1

 

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

 

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

 

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

 

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

 

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

 

 

	
   

  	
   

  	
  CONSOLIDATED EDISON COMPANY OF NEW YORK,
  INC.

  
	
   

  	
   

  	
   

  
	
  (SEAL)

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Executive Vice President and

  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ATTEST:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Assistant Secretary

  	
   

  	
   

  

 

C-2

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