-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VrSI98OXnvpWVeZ3J63XKRi4y8vE6jzbXWnG8psDyL78hGXVGbtUAPCJUb3FGT3d oGYFaP7yVNO75J4icIfvvw== 0001061393-00-000023.txt : 20000307 0001061393-00-000023.hdr.sgml : 20000307 ACCESSION NUMBER: 0001061393-00-000023 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 22 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CH ENERGY GROUP INC CENTRAL INDEX KEY: 0001061393 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 141804460 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-52797 FILM NUMBER: 558331 BUSINESS ADDRESS: STREET 1: 284 SOUTH AVE CITY: POUGHKEEPSIE STATE: NY ZIP: 12601 BUSINESS PHONE: 9144522000 MAIL ADDRESS: STREET 1: 284 SOUTH AVENUE CITY: POUGHKEEPSIE STATE: NY ZIP: 12601 10-K405 1 ANNUAL FINANCIAL FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K --------------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended......................December 31, 1999 Commission file number: 0-30512 CH ENERGY GROUP, INC. --------------------------------------------------- (Exact name of registrant as specified in its charter) New York 14-1804460 - ------------------------------- -------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 284 South Avenue, Poughkeepsie, New York 12601-4879 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (914) 452-2000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $0.10 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. No [ X ] Yes [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of February 18, 2000, was $465,815,153 based upon the lowest price at which Registrant's Common Stock was traded on such date, as reported on the New York Stock Exchange listing of composite transactions. The number of shares outstanding of Registrant's Common Stock, as of February 18, 2000 was 16,862,087. DOCUMENTS INCORPORATED BY REFERENCE Registrant's definitive Proxy Statement, to be dated March 1, 2000, and to be used in connection with its Annual Meeting of Shareholders to be held on April 25, 2000, is incorporated by reference in Part III hereof. TABLE OF CONTENTS Page ---- Table of Contents - ----------------- PART I ------ ITEM 1 BUSINESS 1 - ------ ITEM 2 PROPERTIES 16 - ------ ITEM 3 LEGAL PROCEEDINGS 24 - ------ ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY - ------ HOLDERS 26 PART II ------- ITEM 5 MARKET FOR THE CORPORATION'S COMMON EQUITY - ------ AND RELATED STOCKHOLDER MATTERS 26 ITEM 6 SELECTED FINANCIAL DATA OF THE CORPORATION AND - ------ ITS AFFILIATES 27 ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF - ------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS 29 ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT - ------- MARKET RISK 48 ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 49 - ------ ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS - ------ ON ACCOUNTING AND FINANCIAL DISCLOSURE 103 PART III -------- ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE - ------- CORPORATION 103 ITEM 11 EXECUTIVE COMPENSATION 103 - ------- ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL - ------- OWNERS AND MANAGEMENT 104 ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 104 - ------- PART IV ------- ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND - ------- REPORTS ON FORM 8-K 104 SIGNATURES 107 (i) PART I ------ FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K for the fiscal year ended December 31, 1999 ("Form 10-K Annual Report") and the documents incorporated by reference may contain statements which, to the extent they are not recitations of historical fact, constitute "forward-looking statements" within the meaning of the Securities Litigation Reform Act of 1995 ("Reform Act"). These statements will contain words such as "believes," "expects," "intends," "plan," and other similar words. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. A number of important factors affecting the Corporation's business and financial results could cause actual results to differ materially from those stated in the forward-looking statements. Those factors include weather, energy supply and demand, developments in the legislative, regulatory and competitive environment, electric and gas industry restructuring and cost recovery, future market prices for energy, capacity and ancillary services, nuclear industry regulation, the outcome of pending litigation, and certain environmental matters, particularly ongoing development of air quality regulations and industrial waste remediation requirements. ITEM 1 - BUSINESS ----------------- Holding Company CH Energy Group, Inc. ("Corporation") was formed in April 1998 as a wholly-owned subsidiary of Central Hudson Gas & Electric Corporation ("Central Hudson"). On December 15, 1999, effective upon a one-for-one common stock share exchange between the Corporation and the shareholders of Central Hudson, the Corporation became the holding company parent corporation of Central Hudson and its existing subsidiary companies ("Holding Company Restructuring"). Central Hudson's preferred stock and debt were not exchanged and remain securities of Central Hudson. As a result of the Corporation becoming the holding company parent of Central Hudson on December 15, 1999, the prior years' Consolidated Financial Statements herein represent the accounts of Central Hudson on a consolidated basis as predecessor of the Corporation. For further information regarding the Holding Company Restructuring and/or the Amended and Restated Settlement Agreement, dated January 2, 1998, among Central Hudson, the Staff of the Public Service Commission of the State of New York ("PSC") and certain others ("Agreement") entered into in the PSC's Competitive Opportunities Proceeding, which Agreement permitted the Holding Company Restructuring and which Agreement may affect future operations of the Corporation, see Item 7 hereof, under 1 the caption "Competition/Deregulation" and the caption "Competitive Opportunities Proceeding Settlement Agreement" in Note 2 - "Regulatory Matters" of the Notes to the Financial Statements referred to in Item 8 of this Form 10-K Annual Report (each such Note being hereinafter called the "Note"). Because of its ownership of Central Hudson, the Corporation is a "public utility holding company" under the Public Utility Holding Company Act of 1935 ("PUHCA"). However, the Corporation is exempt from the provisions of PUHCA under the intrastate exemption provisions of Section 3(a)(1) of PUHCA, except that, under Section 9(a)(2) of such Act, the approval of the Securities and Exchange Commission ("SEC") is required for a direct or indirect acquisition by a public utility holding company of five percent (5%) or more of the voting securities of any electric or gas utility company subject to PUHCA. The Corporation is not an operating company, but merely holds stock in its affiliates. On November 3, 1999, Central Hudson Energy Services, Inc. ("Services") was formed as a wholly-owned subsidiary of the Corporation for the purpose of becoming, upon the effective date of the Holding Company Restructuring, the sub-holding company parent corporation for each of the Corporation's competitive business affiliates. Effective as of the Holding Company Restructuring date, the Corporation acquired each of Central Hudson's then existing wholly-owned subsidiary companies (with the exception of Phoenix Development Company, Inc. which remains a subsidiary of Central Hudson). Also upon the Holding Company Restructuring, Services became the parent corporation of each of the Corporation's directly and indirectly owned subsidiaries: namely, Central Hudson Enterprises Corporation, SCASCO, Inc., Prime Industrial Energy Services, Inc., CH Resources, Inc., CH Syracuse Properties, Inc., CH Niagara Properties, Inc. and Greene Point Development Corporation ("competitive business affiliates"). For further information regarding affiliates of the Corporation, see Part 1, Item 1 of this Form 10-K Annual Report under the captions "Central Hudson" and "Other Affiliates of the Corporation." Central Hudson Generally: Central Hudson is the principal affiliate of the Corporation. Central Hudson is a New York gas and electric corporation formed on December 31, 1926, as a consolidation of several operating utilities which had been accumulated under one management during the previous 26 years. Central Hudson generates, purchases, sells at wholesale and distributes electricity, and purchases and distributes gas in New York State. 2 Central Hudson, in the opinion of its general counsel, has, with minor exceptions, valid franchises, unlimited in duration, to serve a territory extending about 85 miles along the Hudson River and about 25 to 40 miles east and west from such River. The southern end of the territory is about 25 miles north of New York City, and the northern end is about 10 miles south of the City of Albany. The territory, comprising approximately 2,600 square miles, has a population estimated at 623,500. Electric service is available throughout the territory, and natural gas service is provided in and about the cities of Poughkeepsie, Beacon, Newburgh and Kingston and in certain outlying and intervening territories. The number of Central Hudson employees, at December 31, 1999, was 1,107. Central Hudson's territory reflects a diversified economy, including manufacturing industries, research firms, farms, governmental agencies, public and private institutions, resorts and wholesale and retail trade operations. For information concerning revenues, certain expenses, earnings per share and information regarding assets for the Central Hudson Electric, Gas, and Other segments, which are currently the most significant industry segments of the Corporation, see Note 10 - "Segments and Related Information." In 1999, the competitive marketplace continued to develop for electric utilities and certain Central Hudson electric customers were given the opportunity to purchase energy and related services from sources other than their local utility. These opportunities also exist for Central Hudson natural gas customers. Rates - Central Hudson Generally: The electric and gas rates of Central Hudson applicable to service supplied to retail customers within the State of New York are regulated by the PSC. Transmission rates and rates for electricity sold for resale in interstate commerce by Central Hudson are regulated by the Federal Energy Regulatory Commission ("FERC"). Central Hudson's present full-service retail rate structure consists of various service classifications covering residential, commercial and industrial customers. During 1999, the average price of electricity to such customers was 8.51 cents per kilowatthour ("kWh"), representing a 0.7% increase from the 1998 average price. Rate Proceedings - Electric and Gas: For information regarding Central Hudson's most recent electric and gas cases filed with the PSC, see Item 7 hereof under the caption "Rate Proceedings - Central Hudson." 3 Cost Adjustment Clauses: For information with respect to Central Hudson's electric and gas cost adjustment clauses, see Note 1 - "Summary of Significant Accounting Policies" hereof under the caption "Rates, Revenues and Cost Adjustment Clauses." Regulation Generally: Central Hudson is subject to regulation by the PSC with respect to, among other things, service rendered (including the rates charged), major transmission facility siting, accounting procedures and issuance of securities. For certain restrictions on Central Hudson's activities imposed by the Agreement, see Note 2 hereof under the caption "Competitive Opportunities Proceeding Settlement Agreement." Certain of the Central Hudson and affiliate activities, including accounting and the acquisition and disposition of certain property, are subject to regulation by the FERC, under the Federal Power Act, by reason of Central Hudson's transmission facilities and Central Hudson's and certain affiliates' sales for resale of electric energy in interstate commerce. Central Hudson is not subject to the provisions of the Natural Gas Act. In the opinion of general counsel for Central Hudson, Central Hudson's major hydroelectric facilities are not required to be licensed under the Federal Power Act. Construction Program and Financing - Central Hudson For estimates of construction expenditures, internal funds available, mandatory and optional redemption of long-term securities, and working capital requirements of Central Hudson for the year 2000, see the subcaption "Central Hudson Construction Program" in Item 7 hereof under the caption "Capital Resources and Liquidity." For a discussion of Central Hudson's capital structure, financing program and short-term borrowing arrangements, see Notes 5, 6 and 7 "Short-Term Borrowing Arrangements," "Capitalization - Capital Stock" and "Capitalization - Long-Term Debt," respectively, and Item 7 hereof under the subcaptions "Capital Structure," "Financing Program of the Corporation and Central Hudson" and "Short-Term Debt" of the caption "Capital Resources and Liquidity." Central Hudson's Certificate of Incorporation and its various debt instruments do not contain any limitations upon the issuance of authorized, but unissued, preferred stock or of unsecured short-term debt. 4 Central Hudson's various debt instruments include limitations as to the amount of additional funded indebtedness which Central Hudson can issue. The Corporation believes such limitations will not impair Central Hudson's ability to issue any or all of the debt described under the above-referenced subcaption "Financing Program of the Corporation and Central Hudson." Fuel Supply and Cost - Central Hudson Central Hudson's two primary fossil fuel-fired electric generating stations are the Roseton Steam Electric Generating Plant ("Roseton Plant") (described in Item 2 hereof under the subcaptions "Central Hudson - Electric" and "Central Hudson - Roseton Plant") and the Danskammer Point Steam Electric Generating Station ("Danskammer Plant") (referred to in Item 2 hereof under the subcaption "Central Hudson - Electric"). Units 1 and 2 of the Roseton Plant are fully equipped to burn both residual oil and natural gas. Units 1 and 2 of the Danskammer Plant, which are equipped to burn residual oil or natural gas, are operated when economical. Units 3 and 4 of the Danskammer Plant, which are operated predominantly, are capable of burning coal, natural gas, or residual oil. For a discussion of Central Hudson's plan under the Agreement to sell, by auction, its interests in the Roseton and Danskammer Plants, see Note 2 hereof under the caption "Competitive Opportunities Proceeding Settlement Agreement." For the 12 months ended December 31, 1999, the sources and related costs of electric generation for Central Hudson were as follows: Aggregate Sources of Percentage of Costs in 1999 Generation Energy Generated ($000) - ---------- ---------------- ------------- Purchased Power 25.7% $ 48,051 Coal 33.3 34,747 Gas 7.9 13,978 Nuclear 12.5 3,760 Oil 18.9 31,322 Hydroelectric 1.7 200 ----- 100.0% ===== Nitrogen Oxide ("NOx") Allowances 645 Fuel Handling Costs 1,438 Deferred Fuel Cost (2,562) ----- $131,579 ======= Residual Oil: At December 31, 1999, there were 1,038,775 barrels of fuel oil in inventory in Central Hudson-owned tanks 5 for use in the Danskammer and Roseton Plants, which aggregate amount represents an average daily supply for 42 days at an average of 25,000 barrels per day. The total oil storage capacity as of December 31, 1999, for these Plants was 16,251 and 1,079,000 barrels, respectively. Central Hudson's share of the Roseton Plant's oil storage capacity is 377,650 barrels. During 1999, Central Hudson purchased 6,185 barrels of fuel oil for the Danskammer Plant. During 1999, the Roseton Plant's fuel oil requirements were supplied by spot market purchases. The prices under these spot contracts were determined on the basis of published market indices in effect at the time of delivery. During 1999, Central Hudson purchased just over six million barrels of fuel oil for the Roseton Plant. Coal: In order to provide for its future requirements for coal to be burned in Units 3 and 4 at the Danskammer Plant, Central Hudson entered into three supply contracts for the purchase of an aggregate of 720,000 tons per year of low-sulfur (0.7% maximum) coal. Two contracts provide for the delivery of coal by water from sources in Venezuela and Colombia, South America. The third contract provides for the delivery of domestic coal by water. The base price of purchases under all three contracts is renegotiated by the parties on an annual basis. The contracts, as last renegotiated, cover the term through December 31, 2001. All three contracts can be terminated, effective December 31, 2000, with six-months written notice to the supplier. In 1999, Central Hudson purchased 856,000 tons of coal which arrived by water. Central Hudson purchased 36,000 tons of this coal on the spot market, with the remainder being provided under its three supply contracts. Nuclear: For information regarding fuel reloading at Unit No. 2 of the Nine Mile Point Nuclear Station ("Nine Mile 2 Plant"), of which Central Hudson owns a 9% interest, see Item 7 hereof under the subcaption "Nuclear Operations" of the caption "Results of Operations." Environmental Quality Regulation - Central Hudson Central Hudson is subject to regulation by federal, state and, to some extent, local authorities with respect to the environmental effects of its operations, including regulations relating to air and water quality, aesthetics, levels of noise, hazardous wastes, toxic substances, protection of vegetation and wildlife and limitations on land use. In connection with such 6 regulation, certain permits are required with respect to Central Hudson's facilities, which permits have been obtained and/or are in the renewal process. Generally, the principal environmental areas and requirements to which Central Hudson is subject are as follows: Air: State regulations affecting Central Hudson's existing electric generating plants govern the sulfur content of fuel used therein, the emission of particulate matter and certain other pollutants therefrom and the visibility of such emissions. In addition, federal and state ambient air quality standards for sulfur dioxide ("SO2"), NOx and suspended particulates must be complied with in the area surrounding Central Hudson's generating plants. Based on the operation of continuous emission stack monitoring systems, the Corporation believes that present air quality standards for NOx, SO2 and particulates are satisfied in those areas. Beginning in 1997 the New York State Department of Environmental Conservation ("NYSDEC") began an initiative seeking penalties from all New York electric utilities for past opacity variances and requiring various opacity reduction measures and stipulated penalties for future excursions after execution of a consent order. Each New York State electric utility, including Central Hudson, is in the process of negotiating, or has negotiated, the various terms and conditions of a draft consent order with the NYSDEC. Central Hudson and the NYSDEC entered into an Order on Consent, effective April 26, 1999, pursuant to which Central Hudson, in settlement of a claim by the NYSDEC that emissions from the Roseton and Danskammer Plants exceeded applicable opacity emissions standards, agreed to a civil penalty of $1.5 million for both Plants, of which $500,000 was paid to the NYSDEC, and the remaining $1.0 million of such penalty was suspended upon Central Hudson causing certain environmentally beneficial projects in Dutchess and Orange Counties, New York to be implemented as set forth in said Order. Said Order also provides for (i) a new level of stipulated penalty provisions for future opacity exceedences and (ii) an Opacity Reduction Program, all with respect to said Plants. The Danskammer Plant burns coal having a maximum sulfur content of 0.7%, fuel oil having a maximum sulfur content of 1% and natural gas. The sulfur content of the oil burned at the Roseton Plant is limited by stipulation with, among others, the NYSDEC, to an amount not exceeding 1.5% maximum and 1.3% weighted annual average. Such sulfur content limitation at the Roseton Plant can be modified by the NYSDEC in the event of technological changes at such Plant, provided that the SO2 and NOx emissions are limited to that which would have been generated by the use of oil with a sulfur content of 1.3% on a weighted annual average. Natural gas is also burned at the Roseton Plant. 7 For information on the impact of the (i) Clean Air Act Amendments of 1990 ("CAA Amendments") on Central Hudson's efforts to attain and maintain national ambient air quality standards for emissions from its fossil-fueled electric power plants, (ii) the proposal of the federal Environmental Protection Agency ("EPA") to modify emission standards for NOx and suspended particulates, (iii) the proposal of the NYSDEC to modify NOx standards for generating facilities operating in New York State, (iv) settlements with the NYSDEC by Central Hudson of alleged opacity violations, (v) the New York State Governor's initiatives relating to air quality standards and (vi) an investigation started by the New York State Attorney General regarding air emissions from coal-fired generating plants, see Note 9 - "Commitments and Contingencies," hereof under the caption, "Environmental Matters - Air." Water: Central Hudson is required to comply with applicable state and federal laws and regulations governing the discharge of pollutants into receiving waters. The discharge of any pollution into navigable waterways is prohibited except in compliance with a permit issued by the EPA under the National Pollutant Discharge Elimination System ("NPDES") established under the Clean Water Act. Likewise, under the New York Environmental Conservation Law, pollutants cannot be discharged into state waters without a State Pollutant Discharge Elimination System ("SPDES") permit issued by the NYSDEC. Issuance of a SPDES permit satisfies the NPDES permit requirement. Central Hudson has received SPDES permits for both the Roseton Plant and the Danskammer Plant, its Eltings Corners maintenance and warehouse facility, and its Rifton Recreation and Training Center. The SPDES permits for the Roseton and Danskammer Plants expired on October 1 and November 1, 1992, respectively, and such permit renewal applications for such permits are pending before the NYSDEC. It is the Corporation's belief that the expired SPDES permits continue in full force and effect pending issuance of the new SPDES permits. Restriction on use of water for cooling purposes at the Roseton Plant is being considered as part of the Roseton Plant application (as referred to in Item 3 hereof under the caption "Environmental Litigation"). For further discussion of Central Hudson's compliance with the Clean Water Act and Central Hudson's SPDES permit renewal proceeding, see Note 9 - "Commitments and Contingencies," hereof under the caption "Environmental Matters - Water." For a description of litigation commenced against Central Hudson for alleged violation of the Endangered Species Act with respect to the Roseton and Danskammer Plants, see Item 3 hereof. 8 Toxic Substances and Hazardous Wastes: Central Hudson is subject to state and federal laws and regulations relating to the use, handling, storage, treatment, transportation and disposal of industrial, hazardous and toxic wastes. The NYSDEC, in 1986, added to the New York State Registry of Inactive Hazardous Waste Disposal Sites ("Registry") six locations at which gas manufacturing plants owned or operated by Central Hudson or by predecessors to Central Hudson were once located. Two other sites, which formerly contained gas manufacturing plants, were identified by Central Hudson but not placed on the Registry. Central Hudson studied these eight sites to determine whether they contain any hazardous wastes which could pose a threat to the environment or public health and, if such wastes were located at such sites, to determine the remedial actions which may be appropriate. All of these eight sites were studied by Central Hudson using the Phase I guidelines of the NYSDEC and five such sites were studied using the more extensive Phase II guidelines of the NYSDEC. As a result of these studies, Central Hudson concluded that no remedial actions were required at any of these sites. In 1991, the NYSDEC advised Central Hudson that four of the six sites which had been originally placed on the Registry had been deleted from such Registry. In 1992, the NYSDEC advised Central Hudson that the two remaining sites listed on the Registry had been deleted from the Registry. The NYSDEC also indicated that such deletions of the sites were subject to reconsideration in the future, at which time new analytical tests could be required to determine whether or not wastes on site are hazardous. In February 1999, Central Hudson was notified by the NYSDEC that it suspected that hazardous waste has been disposed at three of the previously identified sites, one located in Beacon, New York and two located in Poughkeepsie, New York. The Corporation expects Central Hudson will perform preliminary site assessments itself under consent orders reached with the NYSDEC. If the NYSDEC determines that significant quantities of residues are not present or that the residues pose no threat to public health or the environment given the current uses of these three sites, NYSDEC will not require additional investigations and/or remediation at such sites. If, after its review of each such site assessment, NYSDEC determines that significant residues are present, or the residues pose a threat to public health or the environment at a site, Central Hudson will likely be responsible for any required remediation. The Corporation can make no prediction as to the outcome of this matter. If, as a result of such potential new analytical tests, or otherwise, remedial actions are ultimately required at any of these eight sites by the NYSDEC, the cost thereof could have a material adverse effect (the extent of which cannot be reasonably estimated) on the financial condition of the Corporation if 9 Central Hudson could not recover all, or a substantial portion thereof, through insurance and rates. Central Hudson has put its insurers on notice as to this matter and it intends to seek reimbursement from such carriers for amounts for which it may become liable. For a discussion of litigation filed by the City of Newburgh, New York against Central Hudson involving one of Central Hudson's eight former manufactured gas sites and a court ruling related thereto, see Note 9 - "Commitments and Contingencies," hereof under the subcaption "Environmental Matters - Former Manufactured Gas Plant Facilities." In August 1992, the NYSDEC notified Central Hudson that the NYSDEC suspected that Central Hudson's offices at Little Britain Road in New Windsor, New York, may constitute an inactive hazardous waste disposal site. As a result of the NYSDEC's review of a site assessment report prepared by Central Hudson's consultant and submitted to the NYSDEC in 1996, Central Hudson agreed to perform additional testing, which testing detected a limited amount of subsurface soil contamination near one corner of the site and contaminants in the groundwater beneath the site. Operations conducted on the site by Central Hudson since it purchased the property in 1978 are not believed to have contributed to either the soil or the groundwater contamination. Central Hudson and the NYSDEC have reached an agreement in principle that Central Hudson will conduct a voluntary clean-up of the site on terms to be further negotiated between the parties. The Corporation believes that the cost of such site assessment and remediation will not be material. Other: Central Hudson expenditures attributable, in whole or in substantial part, to environmental considerations totaled $10.2 million in 1999, of which approximately $1.5 million related to capital projects and $8.7 million were charged to expense. It is estimated that in 2000 the total of such expenditures will be approximately $10.6 million. Neither the Corporation nor Central Hudson is involved as a defendant in any court litigation with respect to environmental matters and, to the best of its knowledge, no litigation against it is threatened with respect thereto, except with respect to the litigation described in Item 3 "Legal Proceedings" hereof under the subcaption "Environmental Litigation - Roseton and Danskammer Plants," and as described in Note 9 - "Commitments and Contingencies," hereof under the subcaption "Environmental Matters - Former Manufactured Gas Plant Facilities." 10 Other Central Hudson Matters Labor Relations: Central Hudson has agreements with the International Brotherhood of Electrical Workers ("IBEW") for its 779 unionized employees, representing production and maintenance employees, customer representatives, service workers and clerical employees (excluding persons in managerial, professional or supervisory positions), which agreements were renegotiated effective July 1, 1998. An agreement with each of Locals 2218 and 320 of the IBEW Non-Production Plant Workers continues through April 30, 2003, and an agreement with IBEW Local 320 Production Plant Workers expires on August 31, 2003. The agreements provide for an average annual general wage increase of 3.0% and certain additional fringe benefits. Effective August 1, 1999, Local 2218 merged with Local 320 and Local 320 assumed the agreement between Central Hudson and Local 2218. Phoenix Development Company, Inc.: Phoenix Development Company, Inc. ("Phoenix"), a New York corporation, is a wholly- owned subsidiary of Central Hudson. Phoenix was established to hold or lease real property for the future use of Central Hudson, or to participate in energy-related ventures. Currently, the assets held by Phoenix are not material. Other Affiliates of the Corporation Central Hudson Energy Services, Inc.: As set forth above under the caption "Holding Company Restructuring," Services was established on November 3, 1999 as a New York corporation and became a wholly-owned subsidiary of the Corporation on November 19, 1999. Services was formed for the purpose of becoming, effective upon the Holding Company Restructuring, the holding company parent for each of the Corporation's competitive business affiliates, other than Phoenix Development Corporation. Services is not an operating company. Central Hudson Enterprises Corporation: Central Hudson Enterprises Corporation ("CHEC"), a New York corporation, is a wholly-owned subsidiary of Services, and is engaged in the business of marketing electricity, gas and oil and related services to retail and wholesale customers; conducting energy audits; providing services including, but not limited to, the design, financing, installation and maintenance of energy conservation measures and generation systems for private businesses, institutional organizations and governmental entities; and participating in cogeneration, small hydro, alternate fuel and energy production projects and services. Prime Industrial Energy Services, Inc.: In June 1999, CHEC formed Prime Industrial Energy Services, Inc. ("Prime"), a New York corporation, as a wholly-owned subsidiary, to acquire the 11 assets of an ongoing business engaged in project construction and providing services with respect to electric generators installed on customers' property, heating, ventilation and air conditioning. SCASCO, Inc.: SCASCO, Inc. ("SCASCO"), a Connecticut corporation, is a wholly-owned subsidiary of CHEC. SCASCO conducts a fuel oil distribution business in Connecticut. In February 1999, SCASCO purchased Island Sound Commercial Energy Sales, Inc. ("Island Sound"), a Delaware corporation which held contracts to sell natural gas to customers in Connecticut and Rhode Island. In December 1999, Island Sound merged into SCASCO. In December 1999, SCASCO acquired the assets of Lindstedt Oil Company, an oil distribution company, to expand its fuel oil sales in Connecticut. SCASCO operates Lindstedt Oil Company as a division. CH Resources, Inc.: CH Resources, Inc. ("Resources"), a New York corporation, is a wholly-owned subsidiary of Services established for the purpose of acquiring, developing and operating electric generation facilities, the output of which is sold at the wholesale level to CHEC and other energy services companies, as well as through the New York State Independent System Operator described in the caption "New York Power Pool/ Independent System Operator" of Item 2 herein. For a description of the electric generating assets operated by Resources, see Item 2 under the caption "Resources." CH Syracuse Properties, Inc. and CH Niagara Properties, Inc.: CH Syracuse Properties, Inc. ("CH Syracuse") and CH Niagara Properties, Inc. ("CH Niagara"), are New York corporations and wholly-owned subsidiaries of Resources used to lease real property for the Niagara Falls and Syracuse (Solvay, New York) electric generating facilities owned and operated by Resources. Greene Point Development Corporation: Greene Point Development Corporation ("Greene Point"), a New York corporation, is a wholly-owned subsidiary of Services, which develops and evaluates business opportunities for the affiliate companies of Services. The current assets held by this subsidiary are not material. 12 Executive Officers of the Corporation The names of the current officers of the Board of Directors and the executive officers of the Corporation, their positions held and business experience during the past five (5) years and ages (at December 31, 1999) are as follows: Principal Occupation or Employment Name of Officer, Age and Positions and Offices and Position Held during the past five (5) years - -------------------- ------------------------------------- Officers of the Board --------------------- Paul J. Ganci, 61, Present position since November 2, Chairman of the 1999; a director of Central Hudson Board, President since 1994; Chairman of the Board and and Chief Executive Chief Executive Officer of Central Officer Hudson, April 1999 to present; President and Chief Executive Officer of Central Hudson, August 1998 - April 1999; President and Chief Operating Officer of Central Hudson, December 1994 - August 1998; a director of Services since November 1999; Chairman of the Board and Chief Executive Officer of Services since November 1999. John E. Mack III, 65, Present position since November 19, Chairman of the 1999; Chairman of the Board and Chief Committee on Finance Executive Officer of the Corporation, April 1998 - November 2, 1999; a director of Central Hudson from December 1994 - December 15, 1999; Chairman of the Board of Central Hudson, August 1998 - April 1999. Chairman of the Board and Chief Executive Officer of Central Hudson, December 1994 - August 1998. Jack Effron, 66, Present position since November 19, Chairman of 1999; a director of Central Hudson Committee on from December 1994 - December 15, Compensation and 1999; Chairman of the Board of EFCO Succession/Retirement Products, a bakery ingredients corporation; member of the St. Francis Health Care Foundation. 13 Principal Occupation or Employment Name of Officer, Age and Positions and Offices and Position Held during the past five (5) years - -------------------- ------------------------------------- Officers of the Board (Cont'd) --------------------- Heinz K. Fridrich, 66, Present position since November 19, Chairman of the 1999; Courtesy Professor, University Committee on Audit of Florida at Gainesville since 1994. Executive Officers of the Corporation ------------------------------------- Carl E. Meyer, 52, Present position since November 19, Executive Vice 1999. For Central Hudson - a director President since December 15, 1999; President and Chief Operating Officer, April 1999 to present; Executive Vice President, April 1998 - April 1999; Senior Vice President - Customer Services, April 1996 - April 1998; Vice President - Customer Services, December 1994 - April 1996. Allan R. Page, 52, Present position since November 19, Executive Vice 1999. For Central Hudson - Vice President President, November 1999 to present; Executive Vice President, April 1998 - November 1999; Senior Vice President - Corporate Services, April 1996 - April 1998; Vice President - Corporate Services, December 1994 - April 1996; For Services - a director since November 12, 1999; President and Chief Operating Officer since December 3, 1999. Principal Occupation or Employment Arthur R. Upright, 56 Present position since November 19, Senior Vice President 1999. For Central Hudson - a director since December 15, 1999; Senior Vice President - November 1998 to present; Assistant Vice President - Cost & Rate and Financial Planning, December 1994 - November 1998; a director of Services since November 1999. 14 Principal Occupation or Employment Name of Officer, Age and Positions and Offices and Position Held during the past five (5) years - -------------------- ------------------------------------- Executive Officers of the Corporation (Cont'd) ------------------------------------- Steven V. Lant, 42, Present position since November 19, Chief Financial 1999; except Chief Financial Officer, Officer and Treasurer Treasurer and Secretary, November 2, 1999 - November 19, 1999. For Central Hudson - a director since December 15, 1999; Chief Financial Officer and Treasurer, November 1999 to present; Chief Financial Officer, Treasurer and Corporate Secretary, November 1998 - November 1999; Treasurer and Assistant Corporate Secretary, December 1994 - November 1998; a director of Services since November 1999. Donna S. Doyle, 51, Present position since November 19, Vice President - 1999; except Controller, November 2, Accounting and 1999 - November 19, 1999. For Central Controller Hudson - Vice President - Accounting and Controller, November 1999 to present; Controller, April 1995 - November 1999; Assistant Controller and Manager of Taxes, Budgets & Customer Accounting, December 1994 - April 1995. Gladys L. Cooper, 48, Present position since November 19, Corporate Secretary 1999; except Assistant Secretary, and Assistant Vice November 2, 1999 - November 19, 1999. President - For Central Hudson - Corporate Governmental Secretary and Assistant Vice President Relations - Governmental Relations, November 1999 to present; Assistant Vice President - Governmental Relations, September 1995 - November 1999; leave of absence for educational purposes, December 1994 - September 1995. 15 Principal Occupation or Employment Name of Officer, Age and Positions and Offices and Position Held during the past five (5) years - -------------------- ------------------------------------- Executive Officers of the Corporation (Cont'd) ------------------------------------- Denise D. VanBuren, 38 Present position since November 19, Assistant Vice 1999; Manager - Corporate President - Corporate Communications, October 1998 - Communications November 19, 1999; Director - Media Relations, December 1994 - October 1998. There are no family relationships existing among any of the executive officers of the Corporation. Each of the above executive officers is elected or appointed annually by the Board of Directors. ITEM 2 - PROPERTIES ------------------- Central Hudson Electric: The net capability of Central Hudson's electric generating plants as of December 31, 1999, the net output of each plant for the year ended December 31, 1999, and the year each plant was placed in service or rehabilitated are as set forth below: 16 Megawatt ("MW")* Electric Net Capability 1999 Unit Generating Year Placed (99) (98-99) Net Output Plant Type of Fuel In Service Summer Winter (MWh) - ---------- ------------ ----------- ------ ------ ---------- Danskammer Residual Oil, Natural 1951-1967 500 501 2,393,799 Plant ** Gas and Coal Roseton Plant Residual Oil 1974 425 413 1,367,433 (35% share)** and Natural Gas Neversink Water 1953 23 22 45,170 Hydro Station Dashville Water 1920 5 5 10,527 Hydro Station Sturgeon Pool Water 1924 16 16 46,916 Hydro Station High Falls Water 1986 3 3 5,343 Hydro Station Coxsackie Gas Kerosene or 1969 19 24 4,161 Turbine ("GT") Natural Gas So. Cairo GT Kerosene 1970 18 22 2,856 Nine Mile 2 Nuclear 1988 103 105 786,507 Plant (9% share) ----- ----- --------- Total 1,112 1,111 4,662,712 ===== ===== ========= * Reflects maximum one-hour net capability of Central Hudson's ownership of generation resources and, therefore, does not include firm purchases or sales. ** Plants subject to auction based on the Agreement as described in Item 7 hereof under the caption "Competition/Deregulation - Competitive Opportunities Proceeding Settlement Agreement" and in Note 2 - "Regulatory Matters" hereof under the caption "Competitive Opportunities Proceeding Settlement Agreement."
17 Central Hudson has a contract with the Power Authority of the State of New York ("PASNY") which entitles Central Hudson to 49 MW net capability from the Blenheim-Gilboa Pumped Storage Hydroelectric Plant through 2002. Central Hudson owns 83 substations having an aggregate transformer capacity of 4.9 million kVa. The transmission system consists of 588 pole miles of line and the distribution system of 7,333 pole miles of overhead lines and 881 trench miles of underground lines. Load and Capacity: Central Hudson's maximum one-hour demand within its own territory, for the year ended December 31, 1999, occurred on July 6, 1999, and amounted to 1,015 MW. Central Hudson's maximum one-hour demand within its own territory, for that part of the 1999-2000 winter capability period, through February 18, 2000, occurred on January 17, 2000 and amounted to 860 MW. Based on current projections of peak one-hour demands for the 2000 summer capability period, it is estimated that Central Hudson will have capacity available to satisfy its projected peak demands plus the estimated installed reserve generating capacity requirements Central Hudson is required to maintain as a member of the New York State Independent System Operator ("ISO"). See Note 2 under the caption "Independent System Operator" for information regarding the termination of the New York Power Pool ("NYPP") and the formation of the ISO and the New York State Reliability Council ("Reliability Council") to coordinate reliability and operation of New York State's bulk power transmission systems. Central Hudson plans to sell by auction its interests in the Roseton and Danskammer Plants under the terms of the Agreement. This sale is expected to occur by early 2001. For further information regarding the Agreement and such auction and sale, see Note 2 - "Regulatory Matters" and the captions thereunder of "Competitive Opportunities Proceeding Settlement Agreement" and "Auction of Fossil Generation Plants." Following such sale, Central Hudson will no longer own sufficient capacity to serve the peak demands of its transmission and distribution customers and will need to rely on purchased capacity from third party providers to meet such demands. 18
The following table sets forth the amounts of any excess capacity of Central Hudson by summer and winter capability periods for 2000 and 2001: Forecasted Forecasted Peak - Peak - Peak Plus Excess of Capacity Total Full Installed over Peak Plus NYSISO Delivery Service Reserve of Available Installed Reserve Capability Rqts. (MW) Rqts. Only 18% (MW) Capacity Requirements Period (1) (2) (3) (MW) (MW)(3) Percent(3) 2000 Summer 985 935 1,103 1,178 75 6.2 2000-2001 Winter 840 800 1,103* 1,177 74 6.7 * Summer period peak plus reserve requirements carry over to the following winter period. (1) Total delivery requirements include requirements for both full service (delivery and energy) and retail access (delivery only) customers (2) Excludes retail access customer requirements (3) Based on full service requirements
19 Roseton Plant: The Roseton Plant is located in Central Hudson's franchise area at Roseton, New York, and is owned by Central Hudson, Consolidated Edison Company of New York, Inc. ("Con Edison") and Niagara Mohawk Power Corporation ("Niagara Mohawk") as tenants-in-common. The Roseton Plant, placed in commercial operation in 1974, has a generating capacity of 1,200 MW consisting of two 600 MW generating units, both of which are capable of being fired either by residual oil or natural gas (see subcaption below entitled "Gas - Sufficiency of Supply and Future Gas Supply"). Central Hudson is acting as agent for the owners with respect to operation of the Roseton Plant. Generally, the owners share the costs and expenses of the operation of such Plant in accordance with their respective ownership interests. Central Hudson, under a 1968 agreement, has the option to purchase the interests of Niagara Mohawk (25%) and of Con Edison (40%) in the Roseton Plant in December 2004. The exercise of this option is subject to PSC approval. In December 1999, Central Hudson, in conjunction with the proposed auction and sale of Central Hudson's interest in the Roseton Plant, notified Con Edison of its intention to exercise its option, as defined in the May 14, 1969 Option Agreement among the Roseton Plant co-tenants, to purchase the interest of Con Edison in the Roseton Plant on December 31, 2004. For information with respect to Central Hudson's PSC obligation to sell its interest in the Roseton and Danskammer Plants, see Note 2 - "Regulatory Matters," under the captions "Competitive Opportunities Proceeding Settlement Agreement" and "Auction of Fossil Generation Plants." The 345 kV transmission lines and related facilities to connect the Roseton Plant with other points in the system of Central Hudson and with the systems of Con Edison and Niagara Mohawk to the north and west of such Plant are 100%-owned by Central Hudson. The share of each of the parties in the output of the Roseton Plant is transmitted over these lines pursuant to a certain transmission agreement relating to such Plant, which provides, among other things, for compensation to Central Hudson for such use by the other parties. In addition, Central Hudson has contract rights which entitle Central Hudson to the lesser of 300 MW, or one quarter of the capacity in a 345 kV transmission line owned by PASNY, which connects the Roseton Plant with a Con Edison substation to the east of such Plant in East Fishkill, New York. In exchange for these rights, Central Hudson agreed to provide PASNY capacity in the 345 kV transmission lines Central Hudson owns from the Roseton Plant, to the extent it can do so after satisfying its obligations to Con Edison and Niagara Mohawk. Nine Mile 2 Plant: For a discussion of Central Hudson's ownership interest in, costs for, proposals of certain other 20 owners to sell their interests in and certain operating matters relating to the Nine Mile 2 Plant, see Item 7 hereof under the subcaption "Nuclear Operations," Note 3 - "Nine Mile 2 Plant," and Note 1 - "Summary of Significant Accounting Policies," under the subcaption "Jointly-Owned Facilities." Gas: Central Hudson's gas system consists of 161 miles of transmission pipelines and 996 miles of distribution pipelines. During 1999, natural gas was available to firm gas customers at a price competitive with that of alternative fuels. As compared to 1998, in 1999 firm retail gas sales, normalized for weather, decreased by 2% and the average number of firm gas customers increased by 1%. Sales to interruptible sales and transportation customers increased 5% in 1999 as compared to 1998. As compared to 1998, in 1999 firm retail transportation sales, normalized for weather, increased by 116% due to the average number of customers using firm retail transportation service increasing to 190 customers. In total, as compared with 1998 normalized, firm gas sales plus firm transportation increased by 1% in 1999. For further information regarding Central Hudson's incentive arrangements for interruptible gas sales, see Item 7 hereof under the subcaption "Sales - Central Hudson - Interruptible Gas Sales." For the year ended December 31, 1999, the total amount of gas purchased by Central Hudson from all sources was 20,812,937 thousand cubic feet ("Mcf."), which includes 2,145,478 Mcf. purchased directly for use as a boiler fuel at the Roseton Plant. Central Hudson also owns two propane-air mixing facilities for emergency and peak shaving purposes located in Poughkeepsie and in Newburgh, New York. Each facility is capable of supplying 8,000 Mcf. per day with propane storage capability adequate to provide maximum facility sendout for up to three consecutive days. Sufficiency of Supply and Future Gas Supply: The peak daily demand for natural gas by Central Hudson's customers for the year ended December 31, 1999, occurred on January 14, 1999, and amounted to 109,676 Mcf. Central Hudson's firm peak-day gas capability in 1999 was 116,918 Mcf. The peak daily demand for natural gas by Central Hudson's customers for that part of the 1999-2000 heating season through February 18, 2000, occurred on January 27, 2000, and amounted to 107,964 Mcf. Other Gas Matters: FERC permits non-discriminatory access to the pipeline facilities of interstate gas pipeline transmission companies subject to the jurisdiction of FERC under the Natural Gas Act. This rule allows access to such pipelines 21 by the pipeline transmission company's customers enabling them to transport gas purchased directly from third parties and spot sources through such pipelines. Such access also permits industrial customers of gas distribution utilities to connect directly with the pipeline transmission company and to contract directly with the pipeline transmission companies to transport gas, thereby bypassing the distribution utility. None of Central Hudson's customers have elected this bypass option. The PSC has authorized New York State distribution gas utilities to transport customer-owned gas through their facilities upon request of a customer. Currently, interstate pipeline transmission companies are located in certain areas where Central Hudson provides retail gas service (the Towns of Carmel, Pleasant Valley, Coxsackie, and LaGrange in New York State). For a discussion of the PSC proceeding relating to issues associated with the restructuring of the natural gas market, see Item 7 hereof under the subcaption "Natural Gas - PSC Restructuring Policy Statement." Other Central Hudson Matters: The Danskammer Plant and the Roseton Plant and all of the other principal generating plants and important property units of Central Hudson are held by it in fee simple, except (1) certain rights-of-way, and (2) a portion of the property used in connection with the hydroelectric plants of Central Hudson consisting of flowage or other riparian rights. Central Hudson's present interests in the Roseton Plant and the Nine Mile 2 Plant are owned as undivided interests as a tenant-in-common with the other utility owners thereof. Certain of the properties of Central Hudson are subject to rights-of-way and easements which do not interfere with Central Hudson's operations. In the case of certain distribution lines, Central Hudson owns only a part interest in the poles upon which its wires are installed, the remaining interest being owned by telephone companies. Certain electric transmission facilities owned by others are used by Central Hudson pursuant to long-term contractual arrangements. All of the physical properties of Central Hudson, other than property such as material and supplies excluded in Central Hudson's First Mortgage Bond Indenture ("Mortgage") and its franchises, are subject to the lien of the Mortgage under which all of its Mortgage Bonds are outstanding. Such properties are from time to time subject to liens for current taxes and assessments which Central Hudson pays regularly as and when due. During the three-year period ended December 31, 1999, Central Hudson made gross property additions of $136.0 million and property retirements and adjustments of $27.7 million, 22 resulting in a net increase (including Construction Work in Progress) in utility plant of $108.3 million, or 7.3%. Resources Resources owns a 100 MW combined cycle gas turbine facility in Solvay, New York ("Syracuse Plant"), a 100 MW combined cycle gas turbine facility in Beaver Falls, New York ("Beaver Falls Plant"), and in June 1999 acquired a 50 MW fluidized bed, coal- fired plant in Niagara County, New York ("Niagara Falls Plant"). Because these electric generating facilities are used exclusively for selling electricity at wholesale, Resources is an "exempt wholesale generator" under Section 32(e) of PUHCA and, therefore, is exempt from the provisions of the Act. The Niagara Falls Plant burns coal with a maximum sulfur content of 5% in a fluidized-bed boiler that effectively captures 90% of the sulfur or more. Total annual usage is 200,000 tons of coal, all of which is bought on the spot market. In addition, the Niagara Falls Plant is permitted under applicable environmental regulations to burn petroleum coke (with a maximum sulfur content of 5%), a solid fuel derived from the distillation of crude oil, up to a maximum of 70% of that Plant's total fuel consumption. NOx emissions from such Plant are limited to 0.30 pounds per Million British Thermal Units. Upon the purchase of the Niagara Falls Plant in June 1999, Resources assumed a NYSDEC Consent Order from the prior owner which required such owner to install a $350,000 ammonia DeNOx system to effect compliance. Resources expects to have such system in place by May 1, 2000 as required in such Consent Order, the cost of which is not material. The Syracuse Plant and the Beaver Falls Plant each burn natural gas and No. 2 fuel oil. SPDES permits are in effect for the Beaver Falls Plant and the Syracuse Plant with expiration dates of May 1, 2003 and December 1, 2001, respectively. All of the Niagara Falls Plant's discharge flows into the local municipal wastewater system subject to local permit (which have been obtained) limits. The operation of these Plants by Resources is subject to the same environmental quality regulations to which Central Hudson is subject, as described under the caption "Central Hudson - Environmental Quality Regulation - Central Hudson" in Item 1 hereof. 23 ITEM 3 - LEGAL PROCEEDINGS -------------------------- Asbestos Litigation For a discussion of litigation against Central Hudson involving asbestos, see Note 9 - "Commitments and Contingencies," hereof under the caption "Asbestos Litigation." Environmental Litigation Roseton Plant: On March 23, 1992, a Consent Order was approved by the Supreme Court of the State of New York, Albany County, in an action against the NYSDEC and Central Hudson brought in 1991 by the Natural Resources Defense Council, Inc., the Hudson River Fisherman's Association and Scenic Hudson, Inc. Such Consent Order provides for certain operating restrictions at the Roseton Plant relating to the use of river water for plant cooling purposes, which restrictions have not, and are not expected to impose material additional costs on the Corporation. The Consent Order has since lapsed; however, both the NYSDEC and Central Hudson continue to consider themselves bound by its terms. For a description of the pending NYSDEC proceeding involving the renewal of the SPDES permit for the Roseton Plant, see Item 1 hereof under the subcaption "Environmental Quality Regulation - Central Hudson - Water," and Note 9 - "Commitments and Contingencies," under the caption "Environmental Matters - Water." For a description of Central Hudson's negotiations with the NYSDEC on a consent order for alleged opacity violations, see Item 1 hereof under the subcaption "Environmental Quality Regulation - Central Hudson - Air." Roseton and Danskammer Plants: In 1999, Riverkeeper, Inc., commenced a citizen suit, in the United States District Court for the Southern District of New York, against Central Hudson under Section 11 of the Endangered Species Act, 16 U.S.C. Section 1540, seeking injunctive relief from Central Hudson's alleged unpermitted takings of the endangered shortnose sturgeon through the Roseton and Danskammer Plants on the Hudson River. Although the Corporation believes Central Hudson has not violated such Act, if the court were to grant the relief requested by plaintiffs, Central Hudson could be required temporarily to cease operations of the Roseton and Danskammer Plants. If Central Hudson were required to cease such operations for a substantial period of time, it could have a material adverse effect on the Corporation's financial position and results of operations. 24 Newburgh Manufactured Gas Site: For a discussion of litigation filed against Central Hudson by the City of Newburgh, New York, on May 26, 1995, in the United States District Court, Southern District of New York, and Central Hudson's response thereto, see Note 9 - "Commitments and Contingencies," under the subcaption "Environmental Matters - Former Manufactured Gas Plant Facilities." Catskill Incident An explosion occurred in a dwelling in Central Hudson's gas service territory in Catskill, New York in November, 1992 which resulted in personal injuries, the death of an occupant and property damage. Lawsuits were commenced against Central Hudson arising out of such incident. All but one of these suits were settled during 1999 on terms which will not have a material effect on Central Hudson. The remaining lawsuit was commenced by complaint, dated October 18, 1993, and filed in the Supreme Court of the State of New York, Greene County, by Frank Reyes for unspecified personal injuries and property damage alleged to have been caused by the Catskill explosion described above. The complaint seeks $2 million in compensatory damages and $2 million in punitive damages from Central Hudson, based on theories of negligence and gross negligence. In January 2000, the Court dismissed this suit on the merits because of the plaintiff's failure to prosecute the case, but the time to appeal has not expired. Central Hudson believes it has adequate insurance with regard to the above Reyes claim for compensatory damages. Central Hudson's insurance, however, does not extend to punitive damages. If the Reyes lawsuit were to be reinstated and if punitive damages were ultimately awarded, such award could have a material adverse effect on the financial condition of the Corporation. Wappingers Falls Incident Two consecutive fires and explosions occurred on February 12, 1994, destroying a residence and commercial establishment in the Village of Wappingers Falls, New York, in Central Hudson's service territory. Lawsuits have been commenced against Central Hudson arising out of such incident, including the following: On August 31, 1994, Central Hudson was served with a summons and complaint in an action brought by John DeLorenzo against Central Hudson and the Village of Wappingers Falls in the Supreme Court of the State of New York, County of Dutchess. The complaint seeks unspecified amounts of damages, based on a theory 25 of negligence, for personal injuries and property damage alleged to have been caused by the incident. On March 9, 1995, Central Hudson was served with a summons and complaint in an action brought in the Supreme Court of the State of New York, County of Dutchess, by Cengiz Ceng, indivi- dually and as executor under the last will and testament of Nizamettin Ceng, and Tarkan Thomas Ceng against Central Hudson and the Village of Wappingers Falls. The complaint seeks recovery of $250,000 from Central Hudson, based on the theory of negligence, for property damages alleged to have been caused by the incident. The above lawsuits have been consolidated into one action against Central Hudson; however, no trial date has been set. The Corporation continues to investigate the Wappingers Falls claims and presently has insufficient information on which to predict their outcome. The Corporation believes that it has adequate insurance with regard to the claims for compensatory damages. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY ------ HOLDERS ------------------------------------------- By unanimous written consent, dated November 19, 1999, of Central Hudson as sole shareholder of the Corporation, effective on such date, the appointment of Paul J. Ganci and John E. Mack III as directors of the Corporation were ratified, confirmed and approved and the following individuals were appointed as directors of the Corporation until the first annual meeting of shareholders of the Corporation or until his/her successor is elected and qualified: Jack Effron, Heinz K. Fridrich, Edward P. Swyer, Edward F. X. Gallagher, Stanley J. Grubel, Charles LaForge and Frances D. Fergusson. PART II ------- ITEM 5 - MARKET FOR THE CORPORATION'S COMMON EQUITY AND ------ RELATED STOCKHOLDER MATTERS ---------------------------------------------- For information regarding the market for the Corporation's common stock and related stockholder matters, see Item 7 hereof under the captions "Capital Resources and Liquidity - Financing Program of the Corporation and Central Hudson" and "Common Stock Dividends and Price Ranges" and Note 6 - "Capitalization - Capital Stock." Pursuant to applicable statutes and its Certificate of Incorporation, Central Hudson may pay dividends on shares of its Preferred Stock only out of surplus. 26
ITEM 6 - SELECTED FINANCIAL DATA OF THE CORPORATION AND ITS AFFILIATES ------ ------------------------------------------------------------- FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA* (In Thousands) 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Operating Revenues Electric........................................ $ 427,809 $ 418,507 $ 416,429 $ 418,761 $ 409,445 Gas............................................. 94,131 84,962 103,848 95,210 102,770 ------- ------- ------- ------- ------- Total......................................... 521,940 503,469 520,277 513,971 512,215 ------- ------- ------- ------- ------- Operating Expenses Operations...................................... 284,149 266,472 284,714 267,779 274,665 Maintenance..................................... 28,213 26,904 27,574 28,938 29,440 Depreciation and amortization................... 46,913 45,560 43,864 42,580 41,467 Taxes, other than income tax.................... 64,269 63,458 64,879 66,145 66,709 Federal income tax.............................. 27,758 29,775 29,190 32,700 29,040 ------- ------- ------- ------- ------- Total......................................... 451,302 432,169 450,221 438,142 441,321 ------- ------- ------- ------- ------- Operating Income.................................. 70,638 71,300 70,056 75,829 70,894 ------- ------- ------- ------- ------- Other Income Equity Earnings - Competitive Business Affiliates..................................... 4 756 362 792 201 Allowance for equity funds used during construction....................... - 585 387 466 986 Federal income tax.............................. (1,167) 1,187 2,953 1,632 353 Other - net..................................... 11,942 6,070 7,717 4,023 8,685 ------ ------ ------ ------ ------ Total......................................... 10,779 8,598 11,419 6,913 10,225 ------ ------ ------ ------ ------ Income before Interest Charges.................... 81,417 79,898 81,475 82,742 81,119 Interest Charges.................................. 29,614 27,354 26,389 26,660 28,397 ------ ------ ------ ------ ------ Premium on Preferred Stock Redemption - Net....... - - - 378 169 Preferred Stock Dividends of Central Hudson....... 3,230 3,230 3,230 3,230 4,903 ------ ------ ------ ------ ------
27
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA*, (CONT'D) (In Thousands) 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Net Income........................................ $ 48,573 49,314 51,856 52,474 47,650 Dividends Declared on Common Stock................ 36,422 36,567 37,137 37,128 36,459 ------- ------- ------- ------- ------- Amount Retained in the Business................... 12,151 12,747 14,719 15,346 11,191 Common Stock Retirement........................... (12,642) - - - - Retained Earnings - beginning of year............. 133,287 120,540 105,821 90,475 79,284 ------- ------- ------- ------- ------- Retained Earnings - end of year................... $ 132,796 $ 133,287 $ 120,540 $ 105,821 $ 90,475 ======= ======= ======= ======= ======= Common Stock Average shares outstanding (000s)............... 16,862 17,034 17,435 17,549 17,380 Earnings per share on average shares outstanding..................... $2.88 $2.90 $2.97 $2.99 $2.74 Dividends declared per share.................... $2.16 $2.155 $2.135 $2.115 $2.095 Book value per share (at year-end).............. $28.80 $28.00 $27.61 $26.87 $25.96 Total Assets...................................... $1,335,899 $1,316,038 $1,252,090 $1,249,106 $1,250,092 Long-term Debt.................................... 335,451 356,918 361,829 362,040 389,245 Cumulative Preferred Stock........................ 56,030 56,030 56,030 56,030 69,030 Common Equity..................................... 484,406 472,180 477,104 471,709 454,239 * This summary should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K Annual Report.
28 ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF ------ FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- COMPETITION/DEREGULATION CH Energy Group, Inc. As part of the Holding Company Restructuring, all of the outstanding shares of Central Hudson common stock were exchanged on a share-for-share basis for shares of the Corporation and Central Hudson became a subsidiary of the Corporation. Certificates for shares of Central Hudson common stock are automatically valid as certificates of the Corporation and do not have to be replaced. The transfer does not affect the value of the stock or the Corporation's dividend policy. The Corporation trades on the New York Stock Exchange under the symbol "CHG." The holding company structure was formed to permit quick response to changes in the evolving competitive energy industry. The new structure permits the use of financing techniques that are better suited to the particular requirements, characteristics and risks of competitive operations without affecting the capital structure or creditworthiness of Central Hudson. This increases the Corporation's financial flexibility by allowing it to establish different capital structures for each of its individual lines of business. The Corporation is not an operating entity. The Corporation's operations are being conducted through its principal affiliates, Central Hudson and Services as described under the captions "Central Hudson" and "Other Affiliates of the Corporation" in Item 1 hereof. Central Hudson remains subject to regulation of retail rates by the PSC and wholesale rates by the FERC. However, as a result of competition/deregulation initiatives and policy changes instituted by these agencies, Central Hudson is experiencing increased electric and gas competition as described in Item 1 hereof. Competitive Opportunities Proceeding Settlement Agreement For a discussion of the Agreement approved by the PSC in its Competitive Opportunities Proceeding and a discussion of the impact of the Agreement on the Corporation's Accounting Policies, see the caption "Competitive Opportunities Proceeding Settlement Agreement" in Note 2 - "Regulatory Matters" hereof. 29 FERC - Electric For information with respect to the establishment of the ISO and Reliability Council and termination of the NYPP, the caption "Independent System Operator" of Note 2 herein. Natural Gas - PSC Restructuring Policy Statement In November 1998, the PSC, by Order, issued its "Policy Statement Concerning the Future of the Natural Gas Industry in New York State and Order Terminating Capacity Assignment" which sets forth the PSC's view of how best to ensure a competitive market for natural gas in New York State. That Order required local distribution companies ("LDCs") to cease assigning capacity to migrating customers no later than April 1, 1999, and indicated LDCs will also be provided a reasonable opportunity to recover strandable capacity costs. LDCs are also required to develop individual plans to effectuate the changes required by the PSC and each LDC must address gas supply and stranded cost strategies, rates and customer education. In such Order, the PSC also identified several generic issues related to the gas industry which must be addressed. The PSC has indicated a desire to address these issues through collaborative sessions on a state-wide basis. The Year 2000 Issue - Central Hudson Certain computer systems and programs were designed to identify the year with two digits. Concern existed prior to 2000 that such systems might read dates in the year 2000 and thereafter as if those dates represent the year 1900 or thereafter. As a result, errors would occur because computers would not distinguish between 1900 and 2000. All mainframe and personal computers, and related system, application code and process control systems using embedded chip technology could have been adversely affected by the use of two digit definitions for the identification of the year component of date information. If such adverse effects were not successfully remediated before December 31, 1999, interruption to Central Hudson's electric and/or natural gas service could have occurred, with attendant lost revenues and adverse customer relations impacts. Central Hudson, in 1998, began a project ("Project") to remediate the year 2000 computer problems affecting all aspects of its operations. As a result of the Project, Central Hudson did not experience any interruptions to its critical operational or customer systems on January 1, 2000 or thereafter as a result of this year 2000 computer problem. The total cost of the Project was estimated not to exceed $3.0 million. The actual cost of the Project was approximately 30 $2.8 million, of which $1.3 million was expended in 1999 and $1.5 million was expended in 1998. None of the Corporation's other competitive business affiliates were affected as a result of the Year 2000 issue. Rate Proceedings - Central Hudson Electric See the caption "Competitive Opportunities Proceeding Settlement Agreement" in Note 2 hereof. Gas Central Hudson currently does not have a gas rate case on file with the PSC. Central Hudson will continue to monitor the financial position of its gas business to determine the necessity of filing a gas rate case in the future. CAPITAL RESOURCES AND LIQUIDITY Construction Program - Central Hudson As shown in the Consolidated Statement of Cash Flows, the cash expenditures related to Central Hudson's construction program amounted to $46.5 million in 1999, a $1.4 million increase from the $45.1 million expended in 1998. As shown in the table below, cash construction expenditures for 2000 are estimated to be $59.1 million, an increase of $12.6 million compared to 1999 expenditures. In 2000, Central Hudson expects to satisfy its external funding requirements, either through short-term borrowings or issuances of Medium Term Notes. 31 Central Hudson's estimates of construction expenditures, internal funds available, mandatory and optional redemption or repurchase of long-term securities, and working capital requirements for 2000 are set forth in the following table: 2000 ---- (In Thousands) Construction Expenditures* Cash Construction Expenditures.................. $59,100 Internal Funds Available.......................... 55,200 ------ Balance of Construction Requirements to be Financed.......................................... 3,900 ------ Mandatory Refunding of Long-Term Securities Long-Term Debt................................... 35,100 Other Cash Requirements............................ 3,000 Equity Transfers to the Corporation for Competitive Business Affiliates............................... 38,000 ------ Total Cash Requirements........................ $80,000 ====== * Excluding the equity portion of Allowance for Funds Used During Construction ("AFDC"), a noncash item. Estimates of construction expenditures are subject to continuous review and adjustment, and actual expenditures may vary from estimates. These construction expenditures include capitalized overheads, nuclear fuel and the debt portion of AFDC and assume that the planned divestiture of the Roseton and Danskammer Plants occurs on or about January 1, 2001. The actual date of divestiture is likely to occur in the first quarter of 2001 at the earliest. As shown in the table above, it is presently estimated that funds available from internal sources will finance 93% of Central Hudson's cash construction expenditures in 2000. During this same period, total external financing requirements of Central Hudson are projected to amount to $80 million, of which $35.1 million is related to mandatory redemption of long-term securities and $38.0 million is related to the equity transfers to the Corporation for allocation to the Corporation's competitive business affiliates. 32 Capital Structure Since 1996 Central Hudson maintained its common equity ratio between 50-53%, which range was targeted in order to maintain a solid A senior debt rating. Central Hudson's senior debt ratings, all reaffirmed during 1999, are A2 by Moody's Investors Service and A by Standard and Poor's Corporation, Duff & Phelps Credit Rating Company and Fitch/IBCA. Central Hudson, under the terms of the Agreement, will divest its fossil generation assets no later than June 30, 2001. A portion of the proceeds of such divestiture is planned to be used to redeem a portion of the existing debt of Central Hudson. While the total proceeds to be realized and portion of such proceeds to be used for debt reduction cannot be accurately predicted, Central Hudson intends to redeem sufficient debt to maintain a strong investment grade rating after divestiture. The capital structure required to realize this goal will depend on the still-evolving policies of the credit rating agencies, the perceived risk profile of Central Hudson after divestiture, and its prospective financial ratios. Central Hudson represents 93% of the Corporation's capital structure, which is set forth below at the end of 1999, 1998 and 1997: Year-end Capital Structure -------------------------- 1999 1998 1997 ---- ---- ---- Long-term debt........... 38.6% 41.0%(a) 40.5% Short-term debt.......... 5.2 1.9 - Preferred stock.......... 5.8 6.1 6.3 Common equity............ 50.4 51.0 53.2 ----- ----- ----- 100.0% 100.0% 100.0% ===== ===== ===== (a) Excludes $16.7 million of bonds issued through the New York Energy Research and Development Authority ("NYSERDA") on December 2, 1998, see Note 7 - "Capitalization - Long-Term Debt." Financing Program of the Corporation and Central Hudson Central Hudson's Stock Purchase Plan, which can be either an original issue plan or an open market purchase plan and is currently an open-market purchase plan, was assumed by the Corporation upon the Holding Company Restructuring. Central Hudson has petitioned the PSC to amend the Agreement to extend the time in which it may transfer up to $100 million to its competitive business affiliates. Currently, such transfer must be made prior to the Holding Company Restructuring. The petition requests an extension prior to the receipt of proceeds 33 from the auction of Central Hudson's fossil generation assets. Approximately $51.5 million has been transferred to such affiliates as of December 31, 1999. Central Hudson may, pursuant to this authorization, issue, not later than June 30, 2001, up to $100 million of new securities, including up to one million shares of common stock in furtherance of its business plan. The Corporation has established a program to repurchase up to one million shares of its Common Stock and future repurchases will be established as conditions warrant. For a discussion of Central Hudson's refinancings on August 3, 1999 of its 1984 7 3/8% Series and 1985 and 1987 Series A and B Pollution Control Revenue Bonds, and the issuance and sale of unsecured Medium Term Notes, Series C, on January 15, 1999 and January 31, 2000, see Note 7 hereof. During 2000, two Central Hudson debt series totaling $35 million will mature. Additionally, Central Hudson will be required to finance a portion of its planned construction expenditures externally, as discussed above, along with potential transfers of up to $50 million of additional equity to the competitive business affiliates. These cash requirements will be financed by a combination of temporary cash reserves, short-term borrowing and the issuance of Medium Term Notes. In addition to the potential equity transfers from Central Hudson, the competitive business affiliates will fund their acquisitions in 2000 through the Corporation's $50 million revolving credit agreement, discussed under the subcaption "Short-Term Debt." For more information with respect to Central Hudson's financing program in general, see Note 6 - "Capitalization - Capital Stock" and Note 7 - "Capitalization - Long-Term Debt." Short-Term Debt As part of the Holding Company Restructuring, the Corporation has established a revolving credit agreement with three commercial banks for borrowing up to $50 million through December 4, 2001. As more fully discussed in Note 5 - "Short-Term Borrowing Arrangements" hereof, Central Hudson has a revolving credit agreement with four commercial banks for borrowing up to $50 million through October 23, 2001. In addition, Central Hudson has several committed and uncommitted bank facilities ranging from $.5 million to $50 million from which it may obtain short- term financing. Such agreements give Central Hudson competitive options to minimize its cost of short-term borrowing. Authorization from the PSC limits the amount Central Hudson may have outstanding at any time under all of its short-term borrowing arrangements to $52 million in the aggregate. 34 Services has short-term lines of credit totaling $10.5 million. RESULTS OF OPERATIONS The following discussion and analysis includes an explanation of the significant changes in revenues and expenses when comparing the 1998 results of Central Hudson to the 1999 results of the Corporation and the 1998 results of Central Hudson to the 1997 results of Central Hudson. Additional information relating to changes between these years is provided in the Notes. Earnings Earnings per share of common stock are shown after provision for dividends on preferred stock and are computed on the basis of the average number of common shares outstanding during the year. The number of common shares, the earnings per share and the rate of return earned on average common equity are as follows: 1999 1998 1997 ---- ---- ---- Average shares outstanding (000s).. 16,862 17,034 17,435 Earnings per share*................ $ 2.88 $ 2.90 $ 2.97 Return earned on common equity per financial statements.......... 10.0% 10.3% 10.8% *See Note 10 - "Segments and Related Information" for earnings per share of the competitive business affiliates. Earnings per share in 1999, when compared to 1998, decreased $.02 per share. This decrease resulted primarily from increased employee welfare costs due to a favorable premium adjustment recorded in 1998, plus an increase in 1999 in labor costs charged to operations expense instead of capital construction costs. In addition, the decrease was due to increased depreciation on Central Hudson's plant and equipment and an increase in maintenance costs due largely to scheduled maintenance performed on one of the electric generating plants. The decreased earnings in 1999 were partially offset by the net effect of various nonrecurring items, including the sale of the Corporation's New York Stock Exchange symbol in 1999 and, in 1998, the write-off of nonrecoverable purchased power expenses. Additional offsets include increases in electric net operating revenues from an increase in own-territory sales due largely to warmer summer weather (cooling degree days were 32% higher than last year) and from sales of electricity for resale. These increases were reduced, in accordance with the Agreement's return on equity cap provision, by the deferral of revenues in excess of 35 the cap. Gas net operating revenues remained flat compared to last year. Firm gas sales increased by 8%; however, the resulting increase in net operating revenues in 1999 was offset by the effect of a favorable reconciling gas cost adjustment recorded in 1998. A further offsetting item is the favorable impact of Central Hudson's common stock repurchase program of $.03. Earnings per share in 1998 when compared to 1997 decreased $.07 per share. This decrease resulted primarily from the net effect of nonrecurring items recorded in 1998 and 1997. The 1998 nonrecurring items are the final provision for the nonrecoverable portion of a purchased power contract and the gain on the sale of an investment. Nonrecurring items in 1997 included the recording of tax adjustments from the favorable settlement of various Internal Revenue Service ("IRS") audits and the initial provision for the nonrecoverable portion of a purchased power contract. Also contributing to the decrease was increased depreciation on Central Hudson's plant and equipment and decreased net operating revenues. The reduction in net operating revenues was primarily from a decrease in gas usage by residential, commercial and industrial customers due to milder weather. Heating billing degree days, as compared to 1997, were 11% lower in 1998. These decreased earnings in 1998 were partially offset by the favorable earnings impact of decreased operation and maintenance expenses, including a reduction in employee compensation due to fewer employees and associated employee welfare costs and the favorable impact of Central Hudson's common stock repurchase program of $.07. The Corporation has established a projection for earnings in calendar year 2000 of $2.97 per share. This projected level, which is $.09 per share above the actual 1999 level of $2.88 per share, reflects the planned transfer of equity capital from Central Hudson's operations to competitive business affiliates over the course of the year. These transfers will fund expansion of competitive business affiliates into new competitive energy markets to take advantage of opportunities expected to develop due to industry restructuring. As a result of the Corporation's strong financial condition and conservative dividend policy, the Corporation expects that new business development activities will not impact the Corporation's ability to maintain the current level of dividend, although no assurances can be given. 36
Operating Revenues Total operating revenues increased $18.5 million (4%) in 1999 as compared to 1998 and decreased $16.8 million (3%) in 1998, as compared to 1997. See the table below for details of the variations: Increase or (Decrease) from Prior Year -------------------------------------- 1999 1998 -------------------------------- -------------------------------- Electric Gas Total Electric Gas Total -------- --- ----- -------- --- ----- (In Thousands) Operating Revenues* Customer sales............. $ 7,527 $ 8,432 $ 15,959 $ 770 $(12,797) $(12,027) Sales to other utilities... 2,254 (436) 1,818 6,991 561 7,552 Fuel cost adjustment....... 8,473 2,727 11,200 1,743 (8,172) (6,429) Deferred revenues.......... (10,195) (1,844) (12,039) (7,013) 1,563 (5,450) Miscellaneous.............. 1,243 290 1,533 (412) (42) (454) ------ ----- ------ ------ ------ ------ Total................ $ 9,302 $ 9,169 $ 18,471 $ 2,079 $(18,887) $(16,808) ====== ===== ====== ====== ====== ====== *These operating revenues reflect only Central Hudson revenues since the competitive business affiliates' earnings are included based on the equity method of accounting.
37 Sales - Central Hudson Central Hudson's sales vary seasonally in response to weather. Generally, electric revenues peak in the summer and gas revenues peak in the winter. Sales of electricity within Central Hudson's service territory, including electricity supplied by others, increased 4% in 1999 compared to 1998 primarily due to the hotter weather in 1999. Cooling degree days in 1999 were 32% higher than in 1998. In 1998, electric sales to residential, commercial and industrial customers increased 1%, 3% and 2%, respectively. Sales of firm natural gas within Central Hudson's service territory, including gas supplied by others, increased by 8% from 1998 to 1999 resulting, in part, from a 3% increase in heating degree days due to colder weather experienced in 1999. Firm sales of natural gas (which excludes interruptible and transportation sales) decreased 10% in 1998 due primarily to a decrease in usage by residential and commercial customers largely due to the unseasonable weather conditions experienced in 1998. Changes in sales from prior years by major customer classification, including interruptible gas sales are set forth below. Also included are the changes related to energy delivery service. % Increase (Decrease) from Prior Year ------------------------------------- Electric (MWh) Gas (Mcf) -------------- --------- 1999 1998 1999 1998 ---- ---- ---- ---- Residential........... 6 1 6 (11) Commercial............ 5 3 7 (7) Industrial............ 1 2 11 (15) Interruptible......... N/A N/A 14 (15) Residential and Commercial Sales: Residential electric and gas sales are primarily affected by the growth in the number of customers and the change in customer usage. In 1999, sales of electricity to residential customers increased 6% due to an increase in usage per customer. Commercial sales increased 5% resulting primarily from a 3% increase in usage per customer. Hotter weather conditions (cooling degree days were 32% higher) contributed to the increase in residential and commercial sales of electricity. Sales of gas to residential customers increased 6% due primarily to a 5% increase in usage per customer. Commercial sales increased 7% due to a 5% increase in usage per customer and a 2% increase in the number of customers. In 1998, sales of electricity to residential customers increased 1% due primarily to an increase in usage per customer. Commercial electric sales increased 3% which was largely the 38 result of an increase in the number of customers. Unseasonable weather conditions (billing degree days were 11% lower) was a significant factor in the decrease in residential and commercial sales of gas. Sales of gas to residential customers decreased 11% due to the net effect of a 12% decrease in usage per customer and a 1% increase in the number of customers. Commercial sales decreased 7% due to the net effect of a 10% decrease in usage per customer and a 3% increase in the number of customers. Industrial Electric Sales: In 1999, as compared to 1998, industrial electric sales increased 1%. In 1998, as compared to 1997, industrial electric sales increased 2% primarily due to increases in usage by several large industrial customers. Industrial Gas Sales: In 1999, firm gas sales to industrial customers increased 11% primarily because of an increase in usage by a large industrial customer. Firm gas sales to industrial customers for 1998 decreased 15% primarily because of decreased usage by a large industrial customer and conversion of several customers to firm transportation service. Interruptible Gas Sales: In 1999, interruptible gas sales, including transportation and boiler fuel, increased 14% largely due to an increase in boiler gas usage for electric generation. Interruptible gas sales decreased 15% in 1998, due largely to a decrease in natural gas sold for use as a boiler fuel for electric generation. The use of gas as a boiler fuel at the Roseton Plant is dependent upon its economic benefit as compared to the use of oil for generation or the purchase of electricity to meet Central Hudson's load requirements. Due to sharing arrangements, as described in the caption "Incentive Arrangements" of Item 7 hereof that are in place for interruptible gas sales and interruptible transportation of customer-owned gas, variations from year to year typically have a minimal impact on earnings. Incentive Arrangements Pursuant to certain incentive formulas approved by the PSC, Central Hudson either shares with its customers, certain revenues and/or cost savings exceeding defined predetermined levels, or is penalized in some cases for shortfalls from the targeted levels or defined performance standards. Incentive formulas are in place for fuel cost variations, sales of electricity to other utilities, interruptible gas sales, gas capacity release transactions and customer satisfaction, electric reliability and keeping customer appointments. 39 The net results of these incentive formulas were to increase pretax earnings by $2.3 million, $1.0 million and $700,000 during 1999, 1998, and 1997, respectively. Operating Expenses Changes from the prior year in the components of Central Hudson's operating expenses are listed below: Increase or (Decrease) from Prior Year ---------------------------------------- 1999 1998 ---- ---- Amount % Amount % ------ --- ------ --- (In Thousands) Operating Expenses*: Fuel and purchased electricity............... $ 6,318 5 $ 3,280 3 Purchased natural gas...... 8,993 20 (16,550) (27) Other expenses of operation................. 2,366 3 (4,972) (5) Maintenance................ 1,309 5 (670) (2) Depreciation and amortization.............. 1,353 3 1,696 4 Taxes, other than income tax................ 811 1 (1,421) (2) Federal income tax......... (2,017) (17) 585 2 ------ -- ------ -- Total.............. $19,133 4% $(18,052) (4)% ====== == ====== == *These operating expenses reflect only Central Hudson expenses since the competitive business affiliates' earnings are included in other income based on the equity method of accounting. The most significant elements of operating expenses are fuel and purchased electricity in Central Hudson's electric department and purchased natural gas in Central Hudson's gas department. Approximately 31% in 1999, and 30% in 1998 of every revenue dollar billed by Central Hudson's electric department was expended for the combined cost of fuel used in electric generation and purchased electricity. The corresponding figures in Central Hudson's gas department for the cost of purchased gas were 57% and 53%, respectively. In an effort to keep the cost of electricity at the lowest reasonable level, Central Hudson purchases energy from sources such as the ISO, Canadian hydro sources and energy marketers whenever energy can be purchased at a unit cost lower than the incremental cost of generating the energy in Central Hudson's plants. Fuel and purchased electricity increased $6.3 million (5%) in 1999 due to the increase in electric sales as well as sales of electricity for resale. 40 Purchased natural gas costs increased $9.0 million (20%) in 1999 largely due to higher firm and interruptible gas sales, including gas used as a boiler fuel. Purchased natural gas decreased $16.6 million (27%) in 1998 primarily due to lower firm and interruptible gas sales, including gas used as a boiler fuel. Other expenses of operation increased by $2.4 million (3%) in 1999 largely due to an increase in employee welfare costs and an increase in the amount of labor costs charged to operations instead of capital construction activities. The increase in employee welfare costs is primarily due to the effect of a favorable premium adjustment recorded in 1998. In 1998 other expenses of operations decreased $5.0 million (5%) resulting from decreased employee compensation due to fewer employees and associated fringe benefits. See Note 4 - "Federal Income Tax," hereof for an analysis and reconciliation of the federal income tax. Other Income and Interest Charges Other income and deductions increased $2.2 million in 1999 as compared to 1998. The net increase results primarily from income (nonrecurring) derived from the sale of the Corporation's stock symbol; interest earned on proceeds held in escrow from debt issued for the scheduled refinancing of existing debt and an increase in carrying charges due Central Hudson on accumulated pension expense credits (noncash) used to reduce customer rates. The net increase in other income was also offset by increases in federal income tax, a reduction in allowance for funds used during construction and a reduction in equity earnings from competitive business affiliates. The reduction in competitive business affiliates' earnings is due to start-up costs of the generating plants acquired by Resources and a nonrecurring item recorded in 1998 for the gain on the sale of an investment. In 1998 other income and deductions decreased $3 million (27%), primarily due to interest refunded in 1997 from the settlement of various IRS audits. Total interest charges (excluding AFDC) increased $2.3 million (8%) in 1999 and increased $1.0 million (4%) in 1998 because of an increase in financing activity. Interest earned on the escrow funds discussed above largely offset the increase in interest on debt in 1999. 41 The following table sets forth some of the pertinent data on the Corporation's outstanding debt: 1999 1998 1997 ---- ---- ---- (In Thousands) Long-term debt: Debt retired................ $ 25,818 $ 90 $ 85 Outstanding at year-end:* Amount (including current portion).................. 371,180 396,998 363,744 Effective rate............. 6.43% 6.56% 6.78% Short-term debt: Average daily amount outstanding ............... $ 10,274 $ 1,171 $ 1,692 Weighted average interest rate ............. 6.22% 5.51% 5.54% *Including debt of competitive business affiliates of $9.0 million in 1998 and $7.6 million in 1997. See Note 5 - "Short-Term Borrowing Arrangements" and Note 7 - "Capitalization - Long-Term Debt" hereof for additional information on short-term and long-term debt of the Corporation. Nuclear Operations Nine Mile 2 Plant: The Nine Mile 2 Plant is owned, as tenants-in-common, by Central Hudson, Niagara Mohawk, New York State Electric & Gas Company ("NYSEG"), Long Island Lighting Company ("LILCO"), a subsidiary of the Long Island Power Authority ("LIPA"), and Rochester Gas and Electric Corporation ("Rochester"). Niagara Mohawk operates the Nine Mile 2 Plant. Central Hudson owns a 9% interest of the Nine Mile 2 Plant, which is discussed in Note 3 - "Nine Mile 2 Plant." Central Hudson's share of operating expenses, taxes and depreciation pertaining to the operation of the Nine Mile 2 Plant are included in the Corporation's financial results. In both 1999 and 1998, underruns in costs of operations and maintenance expenses were entirely deferred for the future benefit of customers (see Note 2 - "Regulatory Matters"). For a discussion of the agreements among and proposals of Niagara Mohawk, NYSEG and Rochester regarding disposition of their interests in the Nine Mile 2 Plant, see Note 3 hereof. In August 1997, the PSC Staff issued a "Notice Soliciting Comments on Nuclear Generation" requesting comments and alternative approaches by interested parties on a "Staff Report on Nuclear Generation" ("Nuclear Report"). The Nuclear Report concludes that nuclear generation along with non-nuclear 42 generation facilities, should be subject to the discipline of market-based pricing. In March 1998, the PSC initiated a proceeding to examine a number of issues raised by the Nuclear Report and the comments received in response to it. In reviewing the Nuclear Report and parties' comments, the PSC, among others: (a) adopted, as a rebuttable presumption, the premise that nuclear power should be priced on a market basis to the same degree as power from other sources, with parties challenging that premise having to bear a substantial burden of persuasion, (b) characterized the proposals in the Staff paper as by and large consistent in concept with the PSC's goal of a competitive, market-based electricity industry, and (c) questioned PSC Staff's position that would leave funding and other decommissioning responsibilities with the sellers of nuclear power interests. The parties in this proceeding developed a consensus report that discusses ownership and rate- making alternatives for future consideration, which report was submitted to the PSC in June 1999. For information on the NRC Plant Performance Review of Nine Mile 1 and Nine Mile 2 Plants, see Note 3 - "Nine Mile 2 Plant" hereof. Nuclear Decommissioning: A decommissioning study for the Nine Mile 2 Plant was completed in 1995. The study's estimate of the cost to decommission that Plant is significantly higher than previous estimates. The Corporation believes that decommissioning costs, if higher than currently estimated, will ultimately be recovered in rates by Central Hudson, although no such assurance can be given. However, future developments in the utility industry, including the effects of deregulation and increasing competition, could change this conclusion. The Corporation cannot predict the outcome of these developments. For further information on decommissioning, see Note 3 - "Nine Mile 2 Plant." In February 1996, the Financial Accounting Standards Board ("FASB") issued an exposure draft entitled "Accounting for Certain Liabilities Related to Closure and Removal of Long-Lived Assets," which includes nuclear plant decommissioning. Over the past four years, this exposure draft has been the source of continual debate. The FASB has committed to completing this project and is proceeding toward issuance of another exposure draft expected in the first quarter of 2000 with an effective date for financial statements for fiscal years beginning after June 15, 2001. If the accounting standard proposed in such exposure draft is adopted, it could result in higher annual provisions for removal or decommissioning to be recognized earlier in the operating life of nuclear and other generating units and an accelerated recognition of the decommissioning obligation. The FASB is continuing to explore various issues 43 associated with this project including liability measurement and recognition issues. The FASB is deliberating this issue and the resulting final pronouncement could be different from that proposed in the exposure draft. The Corporation can make no prediction at this time as to the ultimate form of such proposed accounting standard, assuming it is adopted, nor can it make any prediction as to its ultimate effect(s) on the financial condition of the Corporation. The NRC issued a policy statement on the Restructuring and Economic Deregulation of the Electric Utility Industry ("Policy Statement") in 1997. The Policy Statement addresses NRC's concerns about the adequacy of decommissioning funds and about the potential impact on operational safety and reserves. It gives the NRC the right, in highly unusual situations where adequate protection of public health and safety would be compromised, to consider imposing joint and several liability on minority co-owners when one or more co-owners have defaulted on their contractual obligations. On January 5, 1999, the NRC commenced a rulemaking proceeding initiated by a group of utilities which are non-operating joint owners of nuclear plants. These utilities request that the enforcement provisions of the NRC regulations be amended to clarify NRC policy regarding the potential liability of joint owners if other joint owners become financially incapable of bearing their share of the burden for safe operation or decommissioning of a nuclear power plant. Current NRC regulations allow a utility to set aside decommissioning funds annually over the estimated life of a plant. In addition to the above Policy Statement, the NRC is proposing to amend its regulations on decommissioning funding to reflect conditions expected from deregulation of the electric power industry. Central Hudson is unable to predict how such increased stringency may affect the results of operations or financial condition of the Nine Mile 2 Plant. Refueling Outage: The Nine Mile 2 Plant is scheduled to commence its seventh refueling outage March 3, 2000. Other Matters New Accounting Standards: In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Any gain or loss resulting from changes in such fair value is required to be recognized in earnings to the extent the derivatives are not effective as hedges. The Corporation currently owns derivative instruments under an energy trading 44 risk management program implemented in 1999 to manage the price risks associated with fuel purchases for generation, natural gas purchases for native load customers and wholesale power transactions. The Corporation uses various financial instruments, such as futures, options, swaps, caps, floors and collars to stabilize the price volatility of these commodities. At this time, the Corporation believes that the hedging program will not have a material impact on its financial position or results of operations. The FASB issued Statement No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133" in June 1999, amending SFAS 133 to defer the effective date by one year to all fiscal quarters of all fiscal years beginning after June 15, 2000. This proposed change is made in response to requests to consider delaying the effective date to provide more time to study, understand and implement the provisions of the SFAS 133. For information about market risk and activities relating to derivative financial instruments and other financial instruments, see Item 7A - "Quantitative and Qualitative Disclosure about Market Risk." Other Issues: On an ongoing basis, Central Hudson assesses environmental issues which could impact Central Hudson and its customers. Note 3 - "Nine Mile 2 Plant" and Note 9 - "Commitments and Contingencies" discuss current environmental issues affecting Central Hudson, including (i) the 1995 decommissioning cost study of the Nine Mile 2 Plant, (ii) the Clean Water Act and the CAA Amendments, which Amendments require control of emissions from fossil-fueled electric generating units, and air opacity settlements, (iii) a lawsuit filed against Central Hudson by the Riverkeeper, Inc., (iv) the environmental initiatives of the New York State Governor, (v) the investigation by the New York State Attorney General of older New York State power plants for possible violation of air emission rules and (vi) a legal action filed in 1995 against Central Hudson by the City of Newburgh, New York. 45
FINANCIAL INDICES Selected financial indices for the last five years are set forth in the following table: 1999 1998 1997 1996 1995 ---- ---- ---- ---- ---- Pretax coverage of total interest charges: Including AFDC..................................... 3.59x 3.83x 3.94x 4.08x 3.68x Excluding AFDC..................................... 3.30x 3.54x 3.69x 3.83x 3.43x Funds from Operations.............................. 4.34x 4.39x 5.18x 5.29x 4.69x Pretax coverage of total interest charges and preferred stock dividends.................. 3.09x 3.27x 3.37x 3.47x 2.97x Percent of construction expenditures financed from internal funds........................... 100% 100% 100% 100% 100% AFDC and Mirror CWIP* as a percentage of income available for common stock................... 19% 17% 13% 13% 16% Effective tax rate...................................... 36% 35% 32% 36% 35% *Refer to Note 2 - "Regulatory Matters" under the caption "Summary of Regulatory Assets and Liabilities" and the subcaptions "Deferred Finance Charges and Deferred Nine Mile 2 Plant Costs" for a definition of Mirror CWIP.
46 COMMON STOCK DIVIDENDS AND PRICE RANGES Central Hudson and its principal predecessors have paid dividends on its common stock in each year commencing in 1903, and such common stock has been listed on the New York Stock Exchange since 1945. The price ranges and the dividends paid for each quarterly period during the last two fiscal years are as follows: 1999 1998 ------------------------------ -------------------------- High Low Dividend High Low Dividend ---- --- -------- ---- --- -------- 1st Quarter $45 35 3/4 .54 $43 3/4 $39 5/8 $.535 2nd Quarter 42 3/8 35 15/16 .54 46 38 7/8 .535 3rd Quarter 42 3/4 38 7/8 .54 47 1/16 40 7/8 .54 4th Quarter* 40 1/4 31 7/8 .54 45 1/8 39 7/8 .54 *On December 15, 1999, the Holding Company Restructuring took place. On June 26, 1998, Central Hudson increased its quarterly dividend rate to $.54 per share from $.535 per share. In 1999, Central Hudson maintained its quarterly dividend rate at $.54 per share. Following the Holding Company Restructuring, all future declarations of dividends will be made by the Corporation. Any determination with regard to future dividend declarations, and the amounts and dates of such dividends, will depend on the circumstances at the time of consideration of such declaration. The Agreement provides certain dividend payment restrictions on Central Hudson, including the following: in the event of a downgrade of Central Hudson senior debt rating below BBB+ by more than one credit rating agency, if the stated reason(s) for the downgrade is the performance of, or concerns about, the financial condition of the Corporation or any affiliate other than Central Hudson, dividends will be limited to a rate of not more than 75% of the average annual income available for dividends on a two- year rolling average basis. In the event that Central Hudson's senior debt is placed on "Credit Watch" (or the equivalent) for a rating below BBB by more than one credit rating agency, if the stated reason(s) for the downgrade is the performance of, or concerns about, the financial condition of the Corporation or any affiliate other than Central Hudson, dividends will be limited to a rate of not more than 50% of the average annual income available for dividends on a two-year rolling average basis. In the event of a downgrade of Central Hudson's senior debt rating below BBB- by more than one credit rating agency, if the action is stated as being due in substantial part to the performance of, or concerns about, the financial condition of the Corporation or 47 any affiliate other than Central Hudson, no dividends will be paid by Central Hudson until Central Hudson's senior debt rating has been restored to BBB- or higher by all credit rating agencies then rating Central Hudson. The number of registered holders of common stock of the Corporation as of December 31, 1999, was 20,472. Of these, 19,757 were accounts in the names of individuals with total holdings of 4,746,116 shares, or an average of 240 shares per account. The 715 other accounts, in the names of institutional or other non-individual holders, for the most part, hold shares of common stock for the benefit of individuals. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT ------- MARKET RISK --------------------------------------------- The Corporation's primary market risks are commodity price risk and interest rate risk and, lie principally, in terms of materiality, with Central Hudson, its principal affiliate company. However, Central Hudson's exposure to commodity price risk related to its purchases of natural gas, fuel for electric generation and other power supplies is mitigated by its electric and gas cost adjustment clauses. These adjustment mechanisms provide for the return or collection of costs to or from customers for costs below or in excess of base costs included in rates charged to customers. Additionally, variations in electric fuel costs are subject to a fuel costs incentive mechanism with an annual exposure of up to $3.0 million in additional revenues or costs. In 1999, Central Hudson implemented an energy risk management program (assumed by the Corporation upon the Holding Company Restructuring) with its primary goal being to further manage, through the use of defined risk management practices, price risk associated with commodity purchases in its operations. The Corporation's written policy and procedures for this program allows for the use of derivative financial instruments to hedge price risk and prohibits the use of these instruments for speculative purposes. Additionally, the PSC in a Memorandum and Resolution ("Resolution"), effective April 13, 1999, authorized the inclusion of risk management costs as a recoverable component of the Gas Adjustment Clause ("GAC"). The Resolution defines these costs as "costs associated with transactions that are intended to reduce price volatility or reduce overall costs to customers. These costs include transaction costs, and gains and losses associated with other risk management entities." Central Hudson, starting in September 1999, purchased derivative instruments to hedge a small portion of its total gas supply requirements for the period November 1999 through October 2000. The fair value of these derivative financial instruments 48 at December 31, 1999 is not material to the Corporation's financial position or results of operations. Additionally, resultant transaction gains and losses actually realized in 1999 were included in Central Hudson's GAC, as authorized by the PSC. With regard to electric energy operations, Central Hudson and Services have begun to enter into derivative instruments to hedge purchased electric transactions. There were no electric derivative instruments outstanding at December 31, 1999, and the transactions occurring in 1999 were not material to the Corporation's financial position or results of operations. Central Hudson manages its interest rate risk through the issuance of fixed-rate debt with varying maturities and through economic refundings of debt through optional refunding. A portion of Central Hudson's long-term debt consists of variable rate debt for which interest is reset on a periodic basis reflecting current market conditions. The difference between costs associated with actual interest rates and costs embedded in customer rates are deferred for eventual passback or recovery to or from customers. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------ ------------------------------------------- I - Index to Financial Statements: Page ---- Report of Independent Accountants 50 Statement of Management's Responsibility 51 Consolidated Statement of Income for the three years ended December 31, 1999 53 Consolidated Statement of Retained Earnings for the three years ended December 31, 1999 55 Consolidated Balance Sheet at December 31, 1999 and 1998 56 Consolidated Statement of Cash Flows for the three years ended December 31, 1999 58 Notes to Consolidated Financial Statements 60 Selected Quarterly Financial Data (Unaudited) 101 II - Schedule II - Reserves All other schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or the Notes thereto. Supplementary Data Supplementary data is included in "Selected Quarterly Financial Data (Unaudited)" referred to in I above and reference is made thereto. 49 Report of Independent Accountants To the Board of Directors and Shareholders of CH Energy Group, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of CH Energy Group, Inc. and its subsidiaries at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether or not the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICEWATERHOUSECOOPERS LLP New York, New York January 28, 2000 50 STATEMENT OF MANAGEMENT'S RESPONSIBILITY Management is responsible for the preparation, integrity and objectivity of the consolidated financial statements of CH Energy Group, Inc. and its competitive business affiliates (collectively, the "Corporation") as well as all other information contained in this Form 10-K Annual Report for the fiscal year ended December 31, 1999. The consolidated financial statements have been prepared in conformity with generally accepted accounting principles and, in some cases, reflect amounts based on the best estimates and judgements of the Corporation's Management, giving due consideration to materiality. The Corporation maintains adequate systems of internal control to provide reasonable assurance, that, among other things, transactions are executed in accordance with Management's authorization, that the consolidated financial statements are prepared in accordance with generally accepted accounting principles and that the assets of the Corporation are properly safeguarded. The systems of internal control are documented, evaluated and tested by the Corporation's internal auditors on a continuing basis. Due to the inherent limitations of the effectiveness of internal controls, no internal control system can provide absolute assurance that errors will not occur. Management believes that the Corporation has maintained an effective system of internal control over the preparation of its financial information including the consolidated financial statements of the Corporation as of December 31, 1999. Independent accountants were engaged to audit the consolidated financial statements of the Corporation and issue their report thereon. The Report of Independent Accountants, which is presented above, does not limit the responsibility of Management for information contained in the consolidated financial statements and elsewhere in this Form 10-K Annual Report. The Corporation's Board of Directors maintains a Committee on Audit which is composed of Directors who are not employees of the Corporation. The Committee on Audit meets with Management, the Internal Auditing Manager, and the Corporation's independent 51 accountants several times a year to discuss internal controls and accounting matters, the Corporation's consolidated financial statements, the scope and results of the audits performed by the independent accountants and the Internal Auditing Department. The independent accountants and the Internal Auditing Manager have direct access to the Committee on Audit. PAUL J. GANCI DONNA S. DOYLE Chairman of the Board, President Vice President - Accounting and Chief Executive Officer and Controller February 4, 2000 52 CONSOLIDATED STATEMENT OF INCOME (In Thousands) Year ended December 31, 1999 1998 1997 ---- ---- ---- Operating Revenues Electric................... $427,809 $418,507 $416,429 Gas........................ 94,131 84,962 103,848 ------- ------- ------- Total Operating Revenues. 521,940 503,469 520,277 ------- ------- ------- Operating Expenses Operation: Fuel used in electric generation................ 85,848 84,688 66,117 Purchased electricity...... 45,731 40,573 55,864 Purchased natural gas...... 53,957 44,964 61,514 Other expenses of operation 98,613 96,247 101,219 Maintenance................. 28,213 26,904 27,574 Depreciation and amortization (Note 1).................... 46,913 45,560 43,864 Taxes, other than income tax........................ 64,269 63,458 64,879 Federal income tax (Note 4).................... 27,758 29,775 29,190 ------- ------- ------- Total Operating Expenses. 451,302 432,169 450,221 ------- ------- ------- Operating Income............. 70,638 71,300 70,056 ------- ------- ------- Other Income Equity Earnings - Competitive Business Affiliates....... 4 756 362 Allowance for equity funds used during construction (Note 1).................. - 585 387 Federal income tax (Note 4) (1,167) 1,187 2,953 Other - net................ 11,942 6,070 7,717 ------ ------ ------ Total Other Income....... 10,779 8,598 11,419 ------ ------ ------ Income before Interest Charges.................... 81,417 79,898 81,475 ------ ------ ------ The Notes to Consolidated Financial Statements are an integral part hereof. 53 CONSOLIDATED STATEMENT OF INCOME (CONT'D) (In Thousands) Year ended December 31, 1999 1998 1997 ---- ---- ---- Interest Charges Interest on long-term debt.. 24,151 23,115 23,097 Other interest.............. 4,860 3,639 2,647 Allowance for borrowed funds used during construction (Note 1)...... (390) (324) (261) Amortization of expense on debt....................... 993 924 906 ------ ------ ------ Total Interest Charges.... 29,614 27,354 26,389 ------ ------ ------ Preferred Stock Dividends of Central Hudson.............. 3,230 3,230 3,230 ------ ------ ------ Net Income................... $ 48,573 $ 49,314 $ 51,856 ====== ====== ====== Common Stock: Average shares outstanding (000s)..................... 16,862 17,034 17,435 Earnings per share (basic and diluted).............. $2.88 $2.90 $2.97 The Notes to Consolidated Financial Statements are an integral part hereof. 54 CONSOLIDATED STATEMENT OF RETAINED EARNINGS (In Thousands) Year ended December 31, 1999 1998 1997 ---- ---- ---- Balance at beginning of year........................ $133,287 $120,540 $105,821 Net Income................... 48,573 49,314 51,856 Common Stock Retirement (cancellation)............. (12,642) - - Dividends declared: On common stock ($2.16 per share 1999; $2.155 per share 1998; $2.135 per share 1997................ (36,422) (36,567) (37,137) ------- ------- ------- Balance at end of year....... $132,796 $133,287 $120,540 ======= ======= ======= The Notes to Consolidated Financial Statements are an integral part hereof. 55 CONSOLIDATED BALANCE SHEET (In Thousands) December 31, ASSETS 1999 1998 ---- ---- Utility Plant Electric............................... $1,250,456 $1,222,743 Gas.................................... 164,767 158,165 Common................................. 100,659 94,271 Nuclear fuel........................... 42,847 42,317 --------- --------- 1,558,729 1,517,496 Less: Accumulated depreciation......... 638,910 597,383 Nuclear fuel amortization........ 38,354 35,381 --------- --------- 881,465 884,732 Construction work in progress.......... 39,951 43,512 --------- --------- Net Utility Plant.................... 921,416 928,244 --------- --------- Other Property and Plant................. 31,544 19,059 --------- --------- Investments and Other Assets Prefunded pension costs................ 46,038 40,218 Other.................................. 21,226 18,209 --------- --------- Total Investments and Other Assets... 67,264 58,427 --------- --------- Current Assets Cash and cash equivalents.............. 20,385 10,499 Accounts receivable from customers - net of allowance for doubtful accounts; $2.9 million in 1999 and $2.4 million in 1998............................... 57,600 45,564 Accrued unbilled utility revenues...... 16,327 15,233 Other receivables...................... 4,092 4,555 Materials and supplies, at average cost: Fuel................................. 19,053 11,797 Construction and operating........... 12,432 11,790 Special deposits and prepayments....... 17,533 34,823 --------- --------- Total Current Assets................. 147,422 134,261 --------- --------- Deferred Charges Regulatory assets (Note 2)............. 137,487 149,261 Unamortized debt expense............... 5,016 5,062 Other.................................. 25,750 21,724 --------- --------- Total Deferred Charges............... 168,253 176,047 --------- --------- TOTAL ASSETS $1,335,899 $1,316,038 ========= ========= The Notes to Consolidated Financial Statements are an integral part hereof. 56 CONSOLIDATED BALANCE SHEET (CONT'D) (In Thousands) December 31, CAPITALIZATION AND LIABILITIES 1999 1998 ---- ---- Capitalization Common Stock Equity Common stock, $.10 par value (Note 6)............................. $ 1,686 $ 87,775 Paid-in capital (Note 6).............. 351,230 284,465 Retained earnings..................... 132,796 133,287 Reacquired capital stock (Note 6)..... - (27,143) Capital stock expense................. (1,306) (6,204) --------- --------- Total Common Stock Equity............ 484,406 472,180 --------- --------- Cumulative Preferred Stock (Note 6) Not subject to mandatory redemption... 21,030 21,030 Subject to mandatory redemption....... 35,000 35,000 --------- --------- Total Cumulative Preferred Stock..... 56,030 56,030 --------- --------- Long-term Debt (Note 7)................. 335,451 356,918 --------- --------- Total Capitalization................. 875,887 885,128 --------- --------- Current Liabilities Current maturities of long-term debt.... 35,100 39,507 Notes payable........................... 50,000 18,000 Accounts payable........................ 36,746 23,591 Dividends payable....................... 9,913 9,913 Accrued taxes and interest.............. (162) 6,334 Accrued vacation ....................... 4,344 4,400 Customer deposits....................... 4,471 4,248 Other................................... 7,545 7,932 --------- --------- Total Current Liabilities............ 147,957 113,925 --------- --------- Deferred Credits and Other Liabilities Regulatory liabilities (Note 2)......... 87,039 81,065 Operating reserves...................... 6,294 5,995 Other................................... 19,101 27,251 Total Deferred Credits and --------- --------- Other Liabilities..................... 112,434 114,311 --------- --------- Deferred Income Tax (Note 4)............. 199,621 202,674 --------- --------- Commitments and contingencies (Notes 2, 3 and 9)..................... --------- --------- TOTAL CAPITALIZATION AND LIABILITIES $1,335,899 $1,316,038 ========= ========= The Notes to Consolidated Financial Statements are an integral part hereof. 57 CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) Year ended December 31, 1999 1998 1997 ---- ---- ---- Operating Activities Net Income....................... $ 48,573 $ 49,314 $ 51,856 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization including nuclear fuel amortization............... 51,186 49,011 48,348 Deferred income taxes, net.... 4,219 (116) 14,077 Allowance for equity funds used during construction.......... - (585) (387) Nine Mile 2 Plant deferred finance charges, net......... (4,855) (4,855) (4,855) Provisions for uncollectibles. 2,930 2,639 3,493 Net accrued deferred pension costs........................ (10,968) (12,277) (8,555) Deferred gas costs........... 3,080 1,072 3,475 Deferred gas refunds.......... (19) (1,640) 1,695 Other - net................... 9,423 4,888 7,233 Changes in current assets and liabilities, net: Accounts receivable and unbilled utility revenues............. (15,474) (46) (4,420) Materials and supplies........ (7,898) 513 3,995 Special deposits and prepayments.................. 17,291 (20,613) (770) Accounts payable.............. 13,155 (777) (1,769) Accrued taxes and interest.... (6,665) 3,094 (2,107) Other current liabilities..... (175) 1,695 (61) Net cash provided by operating ------- ------- ------- activities...................... 103,803 71,317 111,248 ------- ------- ------- The Notes to Consolidated Financial Statements are an integral part hereof. 58 CONSOLIDATED STATEMENT OF CASH FLOWS (CONT'D) (In Thousands) 1999 1998 1997 ---- ---- ---- Investing Activities Additions to plant............... (46,495) (45,661) (43,868) Allowance for equity funds used during construction............. - 585 387 Net additions to plant........... (46,495) (45,076) (43,481) ------ ------ ------ Competitive Business Affiliates fixed asset additions........... (11,945) (19,460) - Nine Mile 2 Plant decommissioning trust fund...................... (868) (868) (868) Other - net...................... (589) (801) 396 Net cash used in investing ------ ------ ------ activities...................... (59,897) (66,205) (43,953) ------ ------ ------ Financing Activities Proceeds from issuance of: long-term debt................. 176,250 35,250 2,000 Net borrowings (repayments) of short-term debt................. 32,000 18,000 (15,600) Retirement & redemption of long-term debt............... (201,318) (2,466) (2,282) Dividends paid on common stock........................... (36,422) (36,706) (37,196) Debt issuance costs.............. (4,530) - - Reacquired capital stock......... - (17,745) (9,398) Net cash used in financing ------ ------ ------ activities...................... (34,020) (3,667) (62,476) ------ ------ ------ Net Change in Cash and Cash Equivalents....................... 9,886 1,445 4,819 Cash and Cash Equivalents at Beginning of Year................. 10,499 9,054 4,235 Cash and Cash Equivalents at End ------ ------ ------ of Year........................... $ 20,385 $ 10,499 $ 9,054 ====== ====== ====== Supplemental Disclosure of Cash Flow Information Interest paid (net of amounts capitalized)................... $ 26,307 $ 24,002 $ 24,309 Federal income taxes paid...... 29,025 26,900 17,111 The Notes to Consolidated Financial Statements are an integral part hereof. 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of CH Energy Group, Inc. ("Corporation"), and its subsidiaries. Intercompany balances and transactions have been eliminated. The Corporation's subsidiaries are each directly or indirectly wholly owned and their businesses are comprised of an electric and gas utility landholding, cogeneration, fuel oil, electric generating or energy management companies and electric and gas sales. The net income of the Corporation's subsidiaries, other than Central Hudson, is reflected in the Consolidated Statement of Income as "Equity Earnings - Competitive Business Affiliates." In April 1998, Central Hudson Gas & Electric Corporation ("Central Hudson") formed a wholly-owned subsidiary named CH Energy Group, Inc., which, after a one-for-one share exchange on December 15, 1999 ("Holding Company Restructuring"), became the holding company parent of Central Hudson and its existing subsidiaries (with the exception of Phoenix Development Company, Inc., which remains a subsidiary of Central Hudson). On November 3, 1999, Central Hudson Energy Services, Inc. ("Services") was formed as a New York corporation, and on November 19, 1999, Services became a wholly-owned subsidiary of the Corporation for the purpose of becoming, upon the Holding Company Restructuring, the holding company parent of Central Hudson Enterprises Corporation, SCASCO, Inc., Prime Industrial Energy Services, Inc., CH Resources, Inc., CH Syracuse Properties, Inc., CH Niagara Properties, Inc. and Greene Point Development Corporation ("competitive business affiliates"). See Note 2 - "Regulatory Matters," under the caption "Competitive Opportunities Proceeding Settlement Agreement" for further details. Rates, Revenues and Cost Adjustment Clauses Central Hudson's electric and gas retail rates are regulated by the Public Service Commission of the State of New York ("PSC"). Transmission rates, facilities charges and rates for electricity sold for resale in interstate commerce are regulated by the Federal Energy Regulatory Commission ("FERC"). Central Hudson's tariff for retail electric service includes a fuel cost adjustment clause pursuant to which electric rates are adjusted to reflect changes in the average cost of fuels used for electric generation and in certain purchased power costs, from the average of such costs included in base rates. Central Hudson's 60 tariff for gas service contains a comparable clause to adjust gas rates for changes in the price of purchased natural gas. Utility Plant The costs of additions to utility plant and replacements of retired units of property are capitalized at original cost. Central Hudson's share of the costs of Unit No. 2 of the Nine Mile Point Nuclear Station ("Nine Mile 2 Plant") are capitalized at original cost, less the disallowed investment of $169.3 million which was recorded in 1987. Capitalized costs include labor, materials and supplies, indirect charges for such items as transportation, certain taxes, pension and other employee benefits and Allowance for the Cost of Funds Used During Construction ("AFDC"), a noncash item, or capitalized interest. Replacement of minor items of property is included in maintenance expenses. The original cost of property, together with removal cost, less salvage, is charged to accumulated depreciation at such time as the property is retired and removed from service. Jointly-Owned Facilities Central Hudson has a 9%, or 103 megawatt ("MW"), undivided interest in the 1,143 MW Nine Mile 2 Plant (see Note 3 - "Nine Mile 2 Plant") and a 35%, or 420 MW, undivided interest in the 1,200 MW Roseton Electric Generating Station ("Roseton Plant"). Central Hudson's share of the respective investments in the Nine Mile 2 Plant and the Roseton Plant, as included in its Consolidated Balance Sheet at December 31, 1999 and 1998, were: 1999 1998 ---- ---- (In Thousands) Nine Mile 2 Plant Plant in service.................. $314,844 $315,358 Accumulated depreciation.......... (81,799) (77,178) ------- ------- Net Plant....................... 233,045 238,180 Construction work in progress..... 2,204 2,132 Roseton Plant Plant in service.................. $135,561 $135,197 Accumulated depreciation.......... (83,754) (80,486) ------- ------- Net Plant....................... 51,807 54,711 Construction work in progress..... 325 213 Allowance For Funds Used During Construction Central Hudson's regulated utility plant includes AFDC, which is defined in applicable regulatory systems as the net cost of borrowed funds used for construction purposes and a reasonable 61 rate on other funds when so used. The concurrent credit for the amount so capitalized is reported in the Consolidated Statement of Income as follows: the portion applicable to borrowed funds is reported as a reduction of interest charges while the portion applicable to other funds (the equity component, a noncash item) is reported as other income. The AFDC rate was 6.25% in 1999, 8.5% in 1998 and 8.0% in 1997. For a discussion of the effect of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation ("SFAS 71"), as issued by the Financial Accounting Standards Board ("FASB"), on Central Hudson's fossil-fueled generating plants, see Note 2 - "Regulatory Matters," under the caption "Impact of Settlement Agreement on Accounting Policies." Accordingly, beginning in 1998, significant capital projects relating to the fossil-fueled generating plants include capitalized interest instead of AFDC. For 1999 and 1998, no such projects met the criteria for capitalized interest. Depreciation and Amortization For financial statement purposes, Central Hudson's depreciation provisions are computed on the straight-line method using rates based on studies of the estimated useful lives and estimated net salvage value of properties, with the exception of the Nine Mile 2 Plant which is depreciated on a remaining life amortization method. The year 2026, the year in which the Nine Mile 2 Plant operating license expires, is used as the end date in the development of the remaining life amortization. Central Hudson performs depreciation studies on a continuing basis and, upon approval by the PSC, periodically adjusts the rates of its various classes of depreciable property. Central Hudson's composite rates for depreciation were 3.22% in 1999, 3.21% in 1998 and 3.16% in 1997 of the original cost of average depreciable property. The ratio of the amount of accumulated depreciation to the cost of depreciable property at December 31 was 41.0% in 1999, 39.6% in 1998 and 38.2% in 1997. For federal income tax purposes, the Corporation uses an accelerated method of depreciation and generally uses the shortest life permitted for each class of assets. The cost of the Nine Mile 2 Plant nuclear fuel assemblies and components is amortized to operating expense based on the quantity of heat produced for the generation of electric energy. 62 Cash and Cash Equivalents For purposes of the Consolidated Statement of Cash Flows, the Corporation considers temporary cash investments with a maturity, when purchased, of three months or less to be cash equivalents. Federal Income Tax The Corporation and its affiliates file a consolidated federal income tax return. Federal income taxes are allocated to operating expenses and other income and deductions in the Consolidated Statement of Income. Federal income taxes are deferred under the liability method in accordance with Financial Accounting Standard No. 109, "Accounting for Income Taxes," ("SFAS 109"). Under the liability method, deferred income taxes are provided for all differences between financial statement and tax basis of assets and liabilities. Additional deferred income taxes and offsetting regulatory assets or liabilities are recorded by Central Hudson to recognize that income taxes will be recoverable or refundable through future revenues. Use of Estimates Preparation of the financial statements in accordance with generally accepted accounting principles includes the use of estimates and assumptions by management that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amount of revenues and expenses during the reporting period. Actual results may differ from those estimates. New Accounting Standards and Other FASB Projects In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). This Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. Any gain or loss resulting from changes in such fair value is required to be recognized in earnings to the extent the derivatives are not effective as hedges. The Corporation has implemented an energy trading risk management program to manage the price risks associated with fuel purchases for generation, natural gas purchases for native load customers, and wholesale power transactions. The Corporation may utilize various financial instruments, such as futures, options, swaps, caps, floors and collars to stabilize the price volatility of these commodities. 63 At this time, the Corporation believes that the hedging program will not have a material impact on its financial position or results of operations. In June 1999, the FASB issued FASB Statement No. 137 "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," amending SFAS 133 to defer the effective date by one year to all fiscal quarters of all fiscal years beginning after June 15, 2000. This proposed change is made in response to requests to consider delaying the effective date to provide more time to study, understand and implement the provisions of the SFAS 133. Plant Decommissioning: In February 1996, the FASB issued an exposure draft entitled "Accounting for Certain Liabilities Related to Closure and Removal of Long-Lived Assets," which includes nuclear plant decommissioning. Over the past four years, this exposure draft has been the source of continual debate. The FASB has committed to completing the project and is proceeding toward issuance of another exposure draft expected in the first quarter of 2000 with an effective date for financial statements for fiscal years beginning after June 15, 2001. If the accounting standard proposed in such exposure draft were adopted, it could result in higher annual provisions for removal or decommissioning to be recognized earlier in the operating life of nuclear and other generating units and an accelerated recognition of the decommissioning obligation. The FASB is continuing to explore various issues associated with this project, including liability measurement and recognition issues. The FASB is deliberating this issue and the resulting final pronouncement could be different from that proposed in the exposure draft. The Corporation can make no prediction at this time as to the ultimate form of such proposed accounting standard, assuming it is adopted, nor can it make any prediction as to its ultimate effect(s) on the financial condition of the Corporation. NOTE 2 - REGULATORY MATTERS Competitive Opportunities Proceeding Settlement Agreement In response to the May 1996 Order of the PSC issued in its generic Competitive Opportunities Proceeding ("Proceeding"), Central Hudson, the PSC Staff and certain other parties entered into an Amended and Restated Settlement Agreement, dated January 2, 1998, ("Agreement"). The PSC approved the Agreement by its final Order issued and effective June 30, 1998. Shortly after the PSC issued its May 1996 Order, Central Hudson and other electric utilities filed a court challenge to such Order. The challenge was denied and Central Hudson and other electric utilities appealed such denial. The Public Utility Law 64 Project ("PULP"), which had intervened in the proceeding, filed a similar appeal. PULP subsequently filed a court challenge to the PSC's Order approving the Agreement of Central Hudson and filed similar challenges to similar agreements of other electric utilities. Central Hudson subsequently moved to dismiss PULP's challenge to the Agreement. In August 1999, Central Hudson and other electric utilities filed with the court a request to withdraw their appeal with respect to the denial of the challenge to the PSC's May 1996 Order without prejudice to restoration of such appeal should PULP's challenge to the restructuring agreement of any of the electric utilities be successful. Said request to withdraw the appeal without prejudice was granted by the Appellate Court on January 12, 2000. The appeal of PULP remains pending at this time, and the Corporation can make no prediction as to the potential outcome. The Agreement generally includes the following provisions: (i) continuation of a basic electric rate freeze, along with a phase-in of retail access, for residential, commercial and small industrial customers through June 2001; (ii) a 5% reduction in base electric rates for large industrial customers; (iii) a 10.6% return on equity ("ROE") cap with excess earnings, if any, deferred for stranded cost mitigation (as of December 31, 1999, Central Hudson has recorded an estimated regulatory liability of $3.5 million due to excess earnings); (iv) a reasonable opportunity to recover all prudently incurred strandable costs, defined as "production expenditures made by Central Hudson in fulfilling its obligation to serve and provide safe, reliable electric service to customers within its franchise territory which are not expected to be recoverable in a competitive electricity market"; (v) functional separation of Central Hudson's Danskammer Steam Generating Station ("Danskammer Plant") and its interest in the Roseton Plant in 1998; (vi) transfer of title by an auction of Central Hudson's Danskammer Plant and its interest in the Roseton Plant to be completed by June 30, 2001 (an affiliate of Central Hudson's was given the option to bid, and the PSC reserved its authority to require an auction and transfer of Central Hudson's fossil-fueled electric generating assets prior to June 30, 2001 if such action is found by the PSC to be in the public interest); (vii) approval to effect a holding company restructuring not later than June 30, 2001; and (viii) certain regulation of Central Hudson's operations; (ix) standards of conduct in transactions between Central Hudson and its competitive business affiliates including the Corporation; (x) prohibitions against Central Hudson making loans to the Corporation or any other affiliate or Central Hudson guaranteeing debt of the Corporation or any other affiliate; (xi) limitations on the transfer of Central Hudson employees to affiliates and on the use of Central Hudson officers in common with affiliates and (xii) permission for Central Hudson to transfer up to $100 million of equity to competitive business affiliates prior to such holding company restructuring; however, Central Hudson has petitioned the PSC to extend such period until 65 receipt of the proceeds from the auction of its fossil generation assets. In addition, the PSC directed the PSC Staff to provide assurance that Central Hudson does not incur imprudent generation costs which could be avoided by divestiture of fossil-fueled electric generating assets prior to June 30, 2001, and added a provision dealing with mergers and acquisitions; namely, pursuant to a petition filed jointly or individually by Central Hudson, Central Hudson will have the flexibility to retain, on a cumulative basis, all savings associated with an acquisition or merger with another utility for a period of five years from the date of closing of any merger or acquisition, up to the amount of the acquisition premium paid over the lesser of book value or fair market value of assets merged or acquired. Savings in excess of the recovery of such premium will be disposed of by the PSC for the benefit of customers. The consideration received by Central Hudson in an auction, referred to in (vi) of the second preceding paragraph above, will, up to the net book value of the assets sold, be available for disposition for the benefit of shareholders without PSC approval. Any excess over such net book value will be required to be used to offset Central Hudson's fossil-fueled generation related regulatory assets and, to the extent of any remaining consideration, to reduce the book cost of Central Hudson's investment in the Nine Mile 2 Plant. In the event that the sale price of any such assets is below Central Hudson's then current net book value, the difference will be preserved for recovery as strandable costs. Central Hudson's potential strandable costs are those prior utility investments and commitments that may not be recoverable in a competitive energy market, which are predominantly related to Central Hudson's investment in the Nine Mile 2 Plant. During the period ending June 30, 2001, Central Hudson will continue to recover its potential electric strandable costs in the rates it charges its transmission and distribution customers. Following June 30, 2001, Central Hudson will be given a reasonable opportunity to recover, through a non-bypassable charge to customers, all prudently incurred, verifiable and appropriately mitigated electric strandable costs. In November 1999 Central Hudson filed a proposal with the PSC that no Central Hudson affiliate would bid in its auction, provided that the PSC approve Central Hudson's auction plan and certain related accounting and rate-making proposals. For further information, see the subcaption below "Auction of Fossil Generation Plants." 66 After such divestiture, Central Hudson expects to be obligated to continue to serve a portion of its electric customers. The Corporation cannot predict the amount of such service which Central Hudson will be obligated to provide or the cost or availability of electricity to satisfy customer service obligations. Impact of Settlement Agreement on Accounting Policies The Agreement created certain changes to the Corporation's accounting policies. The Corporation's accounting policies conform to generally accepted accounting principles, which, for regulated public utilities, include SFAS 71. Under SFAS 71, regulated companies apply AFDC to the cost of construction projects. Because Central Hudson's fossil-fueled generating plants are no longer subject to SFAS 71, capitalized interest will be applied instead of AFDC. Under SFAS 71, regulated companies defer costs and credits on the balance sheet as regulatory assets and liabilities when it is probable that those costs and credits will be allowed in the rate-making process in a period different from when they otherwise would have been reflected in income. These deferred regulatory assets and liabilities are then reflected in the income statement in the period in which the same amounts are reflected in rates. If some of an enterprise's operations are regulated and meet the appropriate criteria, SFAS 71 is applied only to the regulated portion of the enterprise's operations. During 1997, the FASB Emerging Issues Task Force ("EITF") concluded that an entity should discontinue application of SFAS 71, to any portion of its business when a deregulation transition plan is in place and the terms are known. However, the EITF further qualified, in its Issue No. 97-4, that regulatory assets and liabilities should be evaluated based on where the cash flows are to be derived in the determination of the applicability of SFAS 71. When the cash flows are from rates to be charged to customers of the regulated business for recovery and settlement, respectively, of regulatory assets and liabilities, they should not be eliminated until: a) they are recovered or settled through the regulated cash flows or b) they are individually impaired or the regulator eliminates the individual obligation or c) the portion of the business providing the regulated cash flows no longer meets the criteria of SFAS 71. None of these conditions has occurred as it applies to Central Hudson's fossil-fueled generation regulatory assets and liabilities even though the Agreement put into place a deregulation transition plan with the ultimate goal of divesting Central Hudson's fossil-fueled generating plant assets. Therefore, these balances continue to be reflected in the total for regulatory assets and liabilities in the Corporation's Consolidated Balance Sheet. At December 31, 1999 and 1998, net regulatory assets associated with the fossil- 67 fueled generating assets totaled $1.0 million and $2.5 million, respectively. The fossil-fueled generating assets continue to be recorded as utility plant. Summary of Regulatory Assets and Liabilities The following table sets forth Central Hudson's regulatory assets and liabilities: At December 31, 1999 1998 - ----------------------------------------------------------------------------- Regulatory Assets (Debits): (In Thousands) - --------------------------- Deferred finance charges - Nine Mile 2 Plant..................... $ 66,181 $ 67,326 Income taxes recoverable through future rates.................. 26,426 35,221 Deferred Newburgh Gas Site (Note 9)..... 15,114 22,679 Other................................... 29,766 24,035 ------- ------- Total Regulatory Assets............... $ 137,487 $ 149,261 ------- ------- Regulatory Liabilities (Credits): Deferred finance charges - Nine Mile 2 Plant..................... $ 4,431 $ 10,431 Income taxes refundable................. 15,978 17,574 Deferred Nine Mile 2 Plant costs........ 20,895 15,790 Deferred pension costs overcollection (Note 8)............................... 6,545 11,693 Deferred OPEB costs overcollection (Note 8)............................... 13,035 9,796 Customer benefits account............... 9,158 5,447 Other................................... 16,997 10,334 ------- ------- Total Regulatory Liabilities.......... 87,039 81,065 ------- ------- Net Regulatory Assets.............. $ 50,448 $ 68,196 ======= ======= Some of the significant regulatory assets and liabilities include: Deferred Finance Charges - Nine Mile 2 Plant: During the construction of the Nine Mile 2 Plant, the PSC authorized the inclusion in rate base of increasing amounts of Central Hudson's investment in that Plant. Central Hudson did not accrue AFDC on any of the Nine Mile 2 Plant construction work in progress ("CWIP") which was included in rate base and for which a cash return was being allowed; however, the PSC ordered, effective January 1, 1983, that amounts be accumulated in deferred debit and credit accounts equal to the amount of AFDC which was not being accrued on the CWIP included in rate base ("Mirror CWIP"). The balance in the deferred credit account is available to reduce future revenue requirements by amortizing portions of the deferred credit to other income or by the elimination through writing off 68 other deferred balances as directed by the PSC. The Corporation expects such application of the deferred credit will occur over a period substantially shorter than the life of the Nine Mile 2 Plant. When amounts of such deferred credit are applied in order to reduce revenue requirements, amortization is started for a corresponding amount of the deferred debit, which amortization continues on a level basis over the remaining life of the Nine Mile 2 Plant, resulting in recovery of such corresponding amount through rates. Mirror CWIP is expected to be exhausted by the end of the useful life of the Nine Mile 2 Plant either through the amortization or write-off procedures described above or through the write-off of the remaining debit and credit as directed by the PSC. The net effect of this procedure is that at the end of the amortization period for the deferred credit, the accounting and rate-making treatment will be the same as if the Nine Mile 2 Plant CWIP had not been included in rate base during the construction period. Pursuant to a PSC Order issued and effective February 11, 1994, in an electric rate proceeding, Central Hudson was authorized to amortize $6 million annually of the deferred credit beginning in December 1993. The $6 million amortization of the deferred credit will be continued unless changed by a future PSC rate order or until it is exhausted. Under provisions of the Agreement, this amortization will be replaced with other deferred credits to the extent necessary to provide for full replacement of the expiring Mirror CWIP credits. The current level of the deferred debit amortization of $1.1 million is based on the level of deferred credits that have been utilized through the most recent rate year. Credit amounts utilized subsequently are included in the deferred debit amortization level at the time of the next PSC rate order for the new rate year based on the then remaining life of the Nine Mile 2 Plant. Income Taxes Recoverable/Refundable: The adoption of SFAS 109 in 1993 increased Central Hudson's net deferred tax obligation. As it is probable that the increase will be recovered from customers, Central Hudson established a net regulatory asset for the recoverable future taxes. Deferred Nine Mile 2 Plant Costs: The existing rate-making for the Nine Mile 2 Plant, as directed by the PSC in its Order on Nine Mile 2 Operating and Capital Forecast for 1996 ("Supplement No. 5"), provides for the deferral of the difference between actual and authorized operating and maintenance expense. Supplement No. 5 continues in effect until changed by a subsequent rate order. For 1999 and 1998, the Nine Mile 2 Plant incurred less actual expense than authorized, and Central Hudson's share has been recorded as a regulatory liability in accordance with Supplement No. 5. 69 Customer Benefits Account: The Agreement requires that Central Hudson set aside $10.0 million per calendar year in a Customer Benefits Account to fund rate reductions and retail access options. Funding sources include $3.0 million from shareholder sources, $3.5 million from fuel cost savings generated by the installation of Central Hudson's coal dock unloading facility at its Danskammer Plant and $3.5 million from deferred credits related to the reconciliation of pension and OPEB costs. The Agreement also stipulates that unused funding accumulated to the end of the Agreement term is to be used for offsetting strandable costs or providing other ratepayer benefits. Auction of Fossil Generation Plants Under the Agreement, Central Hudson is required to sell its fossil generation plants and transfer title by June 30, 2001. Central Hudson has provided for the necessary internal and external resources to carry out the auction that is called for in the Agreement. Central Hudson has agreements with Niagara Mohawk Power Corporation ("Niagara Mohawk") and Consolidated Edison Company of New York, Inc. ("Consolidated Edison") for the disposition of their co-tenancy interests in the Roseton Plant in conjunction with such auction. On November 19, 1999, Central Hudson filed with the PSC, for review and approval, an auction plan for a combined auction of the Roseton Plant and the Danskammer Plant ("Auction Plan"). The Auction Plan is intended to maximize the value received by the assets and provide for an orderly process and an objective bid evaluation. The Auction Plan filing also requests the PSC's approval for certain accounting and rate-making proposals relating to the Agreement. In the Agreement, the consideration received by Central Hudson, after transaction costs, in the sale of its interest in such Plants is available to Central Hudson, up to the net book value of such Plants, for investment in competitive business affiliates or other disposition for the benefit of shareholders without PSC approval ("Unregulated Investments"). In the Agreement, Central Hudson also retained the right for an affiliate to participate in the auction process of such Plants. In the event that no such affiliate were to bid in such auction, Central Hudson would retain, for Unregulated Investments, an additional amount of such consideration equal to 10% of the consideration of such sale in excess of the net book value of its interest in such Plants; such excess being hereinafter called the "Earned Auction Incentive." However, the aggregate of all such consideration to be so available to Central Hudson cannot exceed $17.5 million ("Cap"). In the Auction Plan filing, Central Hudson stated to the PSC that it is willing to waive the right of an affiliate of Central Hudson to participate in such auction if the PSC approves all the of the accounting and rate-making proposals described in the Auction Plan filing, including the following: (i) an increase 70 in the Cap, on a formula basis, not to exceed $18.5 million; (ii) any Earned Auction Incentive recognized as income over a period of three to five years and (iii) the Earned Auction Incentive would apply not just to Central Hudson's interest in the Roseton Plant and the Danskammer Plant, but would apply to the gross consideration received from a combined auction of these Plants less the gross proceeds to be provided to the other owners of the Roseton Plant. On February 9, 2000, the PSC approved the Auction Plan filing, subject to the issuance of one or more Orders which have not yet been issued. The Corporation can make no prediction as to the terms of such Order(s). Selection of the winning bidder(s) is anticipated later in 2000, with the actual sale to take place in early 2001 after all regulatory approvals are obtained. Independent System Operator Central Hudson was a member of the New York Power Pool ("NYPP"), whose members, major investor-owned State electric utility companies, Long Island Lighting Company ("LILCO"), as a subsidiary of the Long Island Power Authority ("LIPA") and the Power Authority of the State of New York ("PASNY"), by agreement, provided for coordinated operation of their bulk power electric systems. As part of the ongoing discussions regarding the restructuring of the electric industry in New York State referred to under the caption "Competitive Opportunities Proceeding Settlement Agreement" of this Note 2, proposals were made to terminate the NYPP and establish the following: a new market structure that included as its key elements the establishment of an Independent System Operator ("ISO") and the New York State Reliability Council ("Reliability Council"), collectively to replace the NYPP. On September 15, 1999, FERC gave its final approval for the ISO and the Reliability Council. In November 1999, the NYPP was terminated and the ISO and Reliability Council began operations. The ISO is open to buyers, sellers, consumers and transmission providers; each of these groups is represented on the Board of Directors of the ISO, which is a not-for-profit New York corporation. The Reliability Council's mission is to promote and preserve the reliability of the bulk power system within New York State through its primary responsibility for the promulgation of reliability rules; the ISO will develop the procedures necessary to operate the system within these reliability rules. The Reliability Council is governed by a committee comprised of transmission providers and representatives of buyers, sellers and consumer and environmental groups. 71 The Corporation does not expect that such NYPP restructuring will have a material adverse effect on its financial position or results of operations. NOTE 3 - NINE MILE 2 PLANT General The Nine Mile 2 Plant is located in Oswego County, New York, and is operated by Niagara Mohawk. The Nine Mile 2 Plant is owned as tenants-in-common by Central Hudson (9% interest), Niagara Mohawk (41% interest), New York State Electric & Gas Corporation ("NYSEG") (18% interest), LILCO, as a subsidiary of LIPA (18% interest) and Rochester Gas and Electric Corporation ("Rochester") (14% interest). The output of the Nine Mile 2 Plant, which has a rated net capability of 1,143 MW, is shared, and the operating expenses of the Plant are allocated to the co-tenants in the same proportions as the co-tenants' respective ownership interests. Central Hudson's share of direct operating expense for the Nine Mile 2 Plant is included in the appropriate expense classifications in the accompanying Consolidated Statement of Income. Under the Operating Agreement entered into by the co-tenants in January 1993, Niagara Mohawk acts as operator of the Nine Mile 2 Plant, and all five co-tenants share certain policy, budget and managerial oversight functions. The Operating Agreement remains in effect subject to termination on six months notice. On September 30, 1999, the Nuclear Regulatory Commission ("NRC") issued a Plant Performance Review on the Nine Mile 2 and Nine Mile 1 (wholly owned by Niagara Mohawk) Plants. The NRC stated that it will increase its scrutiny of the operation of the Nine Mile Plants over the next six months as a result of a decline in the performance of those Plants due to weaknesses in areas such as plant maintenance, work planning and scheduling and engineering support. Niagara Mohawk has announced significant management changes at the Nine Mile Plants, including the reassignment of several experienced employees to the site. If operating performance of the Nine Mile 2 Plant deteriorates further, significant expenditures may be required to improve performance, the impact of which on the Corporation cannot now be predicted. Niagara Mohawk and NYSEG have each entered into an agreement to sell their interest in the Nine Mile 2 Plant to AmerGen Energy Company, L.L.C. ("AmerGen"). AmerGen would replace Niagara Mohawk as the operator of the Nine Mile 2 Plant. Niagara Mohawk has also entered into an agreement to sell its 100% interest in the adjacent Nine Mile Point Unit No. 1 Nuclear Plant ("Nine Mile 1 Plant") to AmerGen. 72 The co-tenant owners of the Nine Mile 2 Plant have rights of first refusal under the Basic Agreement, dated September 22, 1975, creating the tenancy-in-common ownership of the Nine Mile 2 Plant. Pursuant to such rights, each co-tenant has the right to acquire all or a proportional share of another co-tenant's interest in the Nine Mile 2 Plant by matching the terms of the co-tenant's sale of its interest in the Nine Mile 2 Plant to a third party. In July 1999, AmerGen, Niagara Mohawk and NYSEG filed joint petitions with the PSC, pursuant to Section 70 of the Public Service Law of New York seeking the PSC's consent for the transfer of such interests in the Nine Mile 2 Plant and Nine Mile 1 Plant. In July 1999, Niagara Mohawk, NYSEG and AmerGen jointly filed for requisite approvals with FERC with respect to such transfers. In September 1999, Niagara Mohawk, NYSEG and AmerGen filed jointly with the NRC for requisite approvals with respect to such transfers. In early December 1999, NYSEG petitioned the PSC for an emergency declaratory ruling as to whether Rochester may acquire additional interests in the Nine Mile 1 Plant and the Nine Mile 2 Plant. By Order issued in December 1999, the NRC suspended its proceeding pending the determination of Rochester, Central Hudson and LILCO of their rights of first refusal with respect to the proposed transfer to AmerGen. On December 21, 1999, Rochester exercised its right of first refusal under the Nine Mile 2 Plant Basic Agreement to match the AmerGen offer to purchase the collective 59% interests of Niagara Mohawk and NYSEG in the Nine Mile 2 Plant. Rochester would also match AmerGen's offer to purchase Niagara Mohawk's 100% interest in the Nine Mile 1 Plant. Rochester publicly announced that it had entered into arrangements with a subsidiary of Entergy Corporation to operate the Nine Mile 2 Plant and the Nine Mile 1 Plant. In December 1999, Central Hudson elected not to exercise its right of first refusal with respect to the Nine Mile 2 Plant. The Corporation can make no prediction as to the outcome of the proposed acquisition of interests in the Nine Mile 1 and Nine Mile 2 Plants by AmerGen or Rochester or the effect of any such acquisition on Central Hudson. Radioactive Waste Niagara Mohawk has contracted with the U.S. Department of Energy ("DOE") for disposal of high-level radioactive waste ("spent fuel") from the Nine Mile 2 Plant. Despite a court order reaffirming the DOE's obligation to accept spent nuclear fuel by January 31, 1998, the DOE has forecasted the start of operations of its high-level radioactive waste repository to be no earlier than 2010. Central Hudson has been advised by Niagara Mohawk that the Nine Mile 2 Plant spent fuel storage pool has a capacity for spent fuel that is adequate until 2012. If DOE schedule slippage 73 should occur, facilities that extend the on-site storage capability for spent fuel at the Nine Mile 2 Plant beyond 2012 would need to be acquired. Nuclear Plant Decommissioning Costs Central Hudson's 9% share of costs to decommission the Nine Mile 2 Plant is estimated to be approximately $209.6 million ($83.3 million in 1999 dollars) and assumes that decommissioning will begin shortly after the operating license expires in the year 2026. This estimate is based upon a site-specific study completed in December 1995. In order to assist Central Hudson in meeting this obligation, Central Hudson makes annual contributions of $868,000 to a qualified external decommissioning trust fund. The total annual amount allowed in rates is $999,000, but the maximum annual tax deduction allowed is $868,000. Currently, the difference between the rate allowance ($999,000) and the amount contributed to the external qualified fund ($868,000) is recorded as an internal reserve ($131,000), and the funds are held by Central Hudson. The qualified external decommissioning trust fund at December 31, 1999 and 1998, amounted to $17.4 million and $13.9 million, respectively, including net reinvested earnings to date of $9.0 million. The qualified external decommissioning trust fund is reflected in the Consolidated Balance Sheet in "Investments and Other Assets-Other." At December 31, 1999, the external decommissioning trust fund investments carrying value approximated fair market value. The amount of accumulated decommissioning costs recovered through rates (including both the external fund and the internal reserve) and the net earnings of the external decommissioning trust fund are reflected in accumulated depreciation in the Consolidated Balance Sheet and amount to $19.3 million and $15.6 million at December 31, 1999 and 1998, respectively. Reference is made to the subcaption "New Accounting Standards and Other FASB Projects - Plant Decommissioning" in Note 1 - "Summary of Significant Accounting Policies" for details of the proposed changes in accounting for nuclear decommissioning costs. The Corporation believes that if decommissioning costs are greater than currently estimated, such revised costs would be recovered in Central Hudson's rates. However, future developments in the utility industry, including the effects of deregulation and increasing competition, could change this belief. 74 NOTE 4 - FEDERAL INCOME TAX Components of Federal Income Tax The following is a summary of the components of federal income tax as reported in the Consolidated Statement of Income: 1999 1998 1997 ---- ---- ---- (In Thousands) Charged to operating expense: Federal income tax.......... $22,160 $28,408 $19,004 Deferred income tax......... 5,598 1,367 10,186 Income tax charged to ------ ------ ------ operating expense....... 27,758 29,775 29,190 ------ ------ ------ Charged (credited) to other income and deductions: Federal income tax.......... 2,545 296 (6,844) Deferred income tax......... (1,378) (1,483) 3,891 Income tax (credited) ------- ------ ------ to other income and deductions.............. 1,167 (1,187) (2,953) ------ ------ ------ Total federal income tax.. $28,925 $28,588 $26,237 ====== ====== ====== 75 Reconciliation: The following is a reconciliation between the amount of federal income tax computed on income before taxes at the statutory rate and the amount reported in the Consolidated Statement of Income: 1999 1998 1997 ---- ---- ---- (In Thousands) Net income.................... $48,573 $49,314 $51,856 Preferred Stock Dividend...... 3,230 3,230 3,230 Federal income tax............ 24,705 28,704 12,160 Deferred income tax........... 4,220 (116) 14,077 ------ ------ ------ Income before taxes......... $80,728 $81,132 $81,323 ====== ====== ====== Computed tax @ 35% statutory rate............... $28,255 $28,396 $28,463 Increase (decrease) to computed tax due to: Pension expense............. (3,697) (4,486) (2,855) Deferred finance charges - Nine Mile 2 Plant.......... (1,699) (1,700) (1,699) Deferred environmental remediation costs.......... (1,683) (578) (286) Alternative minimum tax..... - (1,048) (7,350) Tax depreciation............ (550) 4,248 (4,225) Customer Benefits Account... 1,299 1,906 - Nine Mile 2 settlement costs 1,402 1,282 1,567 Deferred gas costs.......... 1,078 375 1,216 Deferred storm costs........ - - (2,257) Other....................... 300 309 (414) ------ ------ ------ Federal income tax............ 24,705 28,704 12,160 Deferred income tax........... 4,220 (116) 14,077 ------ ------ ------ Total federal income tax.... $28,925 $28,588 $26,237 ====== ====== ====== Effective tax rate........... 35.8% 35.2% 32.3% ====== ====== ====== 76 The following is a summary of the components of deferred taxes at December 31, 1999 and 1998, as reported in the Consolidated Balance Sheet: 1999 1998 ---- ---- (In Thousands) Accumulated Deferred Income Tax Assets: Future tax benefits on investment tax credit basis difference................. $ 13,229 $ 14,033 Unbilled revenues............ 5,718 5,261 Other........................ 37,844 32,938 Accumulated Deferred Income ------- ------- Tax Assets..................... $ 56,791 $ 52,232 ------- ------- Accumulated Deferred Income Tax Liabilities: Tax depreciation............. $179,927 $180,339 Accumulated deferred investment tax credit................. 24,569 26,062 Future revenues - recovery of plant basis differences.... 8,787 11,319 Other........................ 43,129 37,186 Accumulated Deferred Income ------- ------- Tax Liabilities................ 256,412 254,906 ------- ------- Net Accumulated Deferred Income Tax Liability.................. $199,621 $202,674 ======= ======= NOTE 5 - SHORT-TERM BORROWING ARRANGEMENTS As part of its establishment as a holding company, the Corporation has established a $50 million revolving credit agreement with three commercial banks through December 4, 2001. At December 31, 1999, the Corporation had no outstanding short- term debt. In addition, Central Hudson has in effect a revolving credit agreement with four commercial banks which allows it to borrow up to $50 million through October 23, 2001, ("Borrowing Agreement"). The Borrowing Agreement gives Central Hudson the option of borrowing at either the higher of the prime rate or the sum of the federal funds rate plus 1/2 of 1%, or three other money market rates, if such rates are lower. Compensating balances are not required under the Borrowing Agreement. In addition, Central Hudson maintains confirmed lines of credit totaling $1.5 million with regional banks. There were no outstanding loans under the Borrowing Agreement or the line of credit at December 31, 1999 or 1998. In order to diversify its sources of short-term financing, Central Hudson has entered into short-term credit facilities 77 agreements with several commercial banks. At December 31, 1999, Central Hudson had outstanding short-term debt of $50 million. Authorization from the PSC limits the amount Central Hudson may have outstanding, at any time, under all of its short-term borrowing arrangements to $52 million in the aggregate. The subsidiaries of Services have lines of credit totaling $10.5 million. There were no borrowings against these lines of credit at December 31, 1999. 78
NOTE 6 - CAPITALIZATION - CAPITAL STOCK Common Stock, $.10 par value; 30,000,000 shares authorized: Reacquired Common Stock Paid-In Capital Shares Amount Capital Stock Outstanding ($000) ($000) ($000) ----------- -------- -------- ---------- January 1, 1997..................... 17,554,987 $ 87,775 $284,465 $ - Repurchased under common stock repurchase plan............. (275,200) - - (9,398) ---------- ------- ------- ------- December 31, 1997................... 17,279,787 87,775 284,465 (9,398) Repurchased under common stock repurchase plan............. (417,700) - - (17,745) ---------- ------- ------- ------- December 31, 1998................... 16,862,087 87,775 284,465 (27,143) Cancellation - Reacquired Stock.... - (3,465) (11,227) 27,143 Share Exchange - Formation of Holding Company Reduction in par value............ - (82,624) 82,624 - Transfer of capital stock expense. - - (4,632) - ---------- ------- ------- ------- December 31, 1999................... 16,862,087 $ 1,686 $351,230 $ - ========== ======= ======= =======
79 Cumulative Preferred Stock, Central Hudson, $100 par value; 1,200,000 shares authorized: Final Redemption Shares Outstanding Redemption Price December 31, Series Date 12/31/99 1999 1998 ------ ---------- ---------- ------------------- Not Subject to Mandatory Redemption: 4 1/2% $107.00 70,300 70,300 4.75% 106.75 20,000 20,000 4.35% 102.00 60,000 60,000 4.96% 101.00 60,000 60,000 ------- ------- 210,300 210,300 ------- ------- Subject to Mandatory Redemption: 6.20% 10/1/08 (a) 200,000 200,000 6.80% 10/1/27 (b) 150,000 150,000 ------- ------- 350,000 350,000 ------- ------- Total 560,300 560,300 ======= ======= (a) Cannot be redeemed prior to October 1, 2003. Subject to mandatory annual sinking fund payment of $1.0 million commencing October 1, 2003 with final payment of $15.0 million on the final redemption date. (b) Cannot be redeemed prior to October 1, 2003. Subject to mandatory annual sinking fund payment of $600,000 commencing October 1, 2003 through final redemption date. Central Hudson had no cumulative preferred stock redemptions or issuances during 1999 and 1998. Expenses incurred on issuance of capital stock are accumulated and reported as a reduction in common stock equity. These expenses are not being amortized, except that, as directed by the PSC, certain issuance and redemption costs and unamortized expenses associated with certain issues of preferred stock that were redeemed have been deferred and are being amortized over the remaining lives of the issues subject to mandatory redemptions. 80 NOTE 7 - CAPITALIZATION - LONG-TERM DEBT Details of long-term debt are as follows: Series Maturity Date December 31, ------ ------------- ----------------- First Mortgage Bonds: 1999 1998 ---- ---- (In Thousands) 6.10% (a) April 28, 2000 $ 10,000 $ 10,000 7.70% (a) June 12, 2000 25,000 25,000 7.97% (a) June 11, 2003 8,000 8,000 7.97% (a) June 13, 2003 8,000 8,000 6.46% (a) Aug. 11, 2003 10,000 10,000 6 1/4%(b) June 1, 2007 4,230 4,325 9 1/4% May 1, 2021 70,000 70,000 8.12% (a) Aug. 29, 2022 10,000 10,000 8.14% (a) Aug. 29, 2022 10,000 10,000 8.375%(b)(d) Dec. 1, 2028 - 16,700 ------- ------- 155,230 172,025 Promissory Notes: 1984 Series A (7 3/8%)(c)(e) Oct. 1, 2014 - 16,700 1984 Series B (7 3/8%)(c)(e) Oct. 1, 2014 - 16,700 1985 Series A (Var. rate)(c)(f) Nov. 1, 2020 - 36,250 1985 Series B (Var. rate)(c)(f) Nov. 1, 2020 - 36,000 1987 Series A (Var. rate)(c)(g) June 1, 2027 - 33,700 1987 Series B (Var. rate)(c)(g) June 1, 2027 - 9,900 1998 Series A (4.20%)(c) Dec. 1, 2028 16,700 16,700 5.38% (a) Jan. 15,1999 - 20,000 5.93% (a) Sept.10,2001 15,000 15,000 7.85% (a) July 2, 2004 15,000 15,000 1999 Series C (6%)(a) Jan. 15,2009 20,000 - 1999 Series A (5.45%)(c) Aug. 1, 2027 33,400 - 1999 Series B (Var. rate)(c) July 1, 2034 33,700 - 1999 Series C (Var. rate)(c) Aug. 1, 2028 41,150 - 1999 Series D (Var. rate)(c) Aug. 1, 2028 41,000 - ------- ------- 215,950 215,950 Secured Notes Payable of Services - 9,023 Unamortized Discount on Debt (629) (573) ------- ------- Total long-term debt $370,551 $396,425 ------- ------- Less Current Portion (35,100) (39,507) ------- ------- $335,451 $356,918 ======= ======= (a) Issued under Central Hudson's Medium Term Note Program. (b) First Mortgage Bonds issued in connection with the sale by the New York State Energy Research and Development Authority ("NYSERDA") of tax-exempt pollution control revenue bonds. (c) Promissory Notes issued in connection with the sale by NYSERDA of tax-exempt pollution control revenue bonds. (d) Redeemed March 1, 1999. (e) Redeemed October 1, 1999. (f) Redeemed November 1, 1999. (g) Redeemed September 1, 1999. 81 The subsidiaries of Services had no long-term debt as of December 31, 1999. Long-Term Debt Maturities The aggregate principal amounts of Central Hudson long-term debt maturing for the next five years, including sinking fund requirements, and thereafter are as follows: $35.1 million in 2000, $22.6 million in 2001, including $7.5 million Medium Term Notes issued January 31, 2000, $.1 million in 2002, $26.1 million in 2003, $15.1 million in 2004 and $279.7 million thereafter. First Mortgage Bonds Central Hudson, on December 2, 1998, refinanced the 8.375% Series of pollution control bonds, issued on its behalf by NYSERDA in 1988 in the aggregate principal amount of $16.7 million, which bonds are supported by Central Hudson's First Mortgage Bonds of like principal amount. Such bonds were refinanced with lower cost NYSERDA pollution control bonds, which bonds are supported by Central Hudson's Promissory Note of like principal amount, at a fixed rate of 4.20% for their initial term of five years and thereafter are subject to repricing. The 8.375% Series was redeemed on March 1, 1999, in order to coordinate with the Article XXI Mortgage Indenture requirements noted below under the subcaption "Mortgage Indenture Covenant." Accordingly, these bonds have been included in the "Current Maturities of Long-Term Debt" on the Corporation's Balance Sheet at December 31, 1998. Medium Term Notes On January 15, 1999, Central Hudson issued and sold a $20 million tranche of its unsecured Medium Term Notes, Series C, under its Medium Term Note program. Such notes bear a fixed annual interest rate of 6.00%, mature on January 15, 2009, and are not redeemable at the option of Central Hudson prior to maturity. The net proceeds to Central Hudson from the sale of such notes were $19,875,000 or 99.875% (before deducting expenses). Such proceeds were applied to the payment at maturity on January 15, 1999, of a $20 million tranche of Central Hudson's unsecured Medium Term Notes, Series A, that bore interest at a fixed annual interest rate of 5.38%. On January 31, 2000, Central Hudson issued and sold a $7.5 million tranche of its unsecured Medium Term Notes, Series C, under its Medium Term Note program. Such notes bear a fixed annual interest rate of 7.05%, mature June 30, 2001, and are not redeemable prior to maturity. The net proceeds to Central Hudson from the sale of such notes were $7,488,750 or 99.85% (before deducting expenses). Such proceeds were applied to the payment of working capital requirements of Central Hudson. 82 Settlement Agreement Central Hudson has petitioned the PSC to amend the Agreement to extend the time in which it may transfer up to $100 million to its competitive business affiliates. Currently, such transfer must be made prior to the Holding Company Restructuring. The petition requests an extension prior to the receipt of proceeds from the auction of Central Hudson's fossil generation assets. Approximately $51.5 million has been transferred to such affiliates as of December 31, 1999. Central Hudson may, pursuant to this authorization, issue, no later than June 30, 2001, up to $100 million of new securities, including up to one million shares of common stock in furtherance of its business plan. Central Hudson expects to issue Medium Term Notes to finance such fund transfers; however, the amount and timing of any such issuance is not determinable at this time. NYSERDA As discussed in the subcaption "First Mortgage Bonds" above, Central Hudson refunded certain of its outstanding NYSERDA Bonds in 1999. On August 3, 1999, Central Hudson refinanced its 7 3/8% Series pollution control bonds issued on its behalf in 1984 in the aggregate principal amount of $33.4 million by NYSERDA by refunding such bonds with the proceeds of the issuance and sale on that date of $33.4 million aggregate principal amount of a new series of NYSERDA bonds (the "1999 NYSERDA Bonds, Series A"). The 1999 NYSERDA Bonds, Series A carry an effective interest rate of 5.47%, are unsecured and are insured as to payment of principal and interest as they become due by a municipal bond insurance policy issued by AMBAC Assurance Corporation. As a part of such refinancing, the maturity of these bonds was extended from October 1, 2014 to August 1, 2027. On August 3, 1999, Central Hudson refinanced its 1985 Series A and B and its 1987 Series A and B NYSERDA Bonds, $115.85 million aggregate principal amount, all of which series were subject to weekly repricing, with three new series of NYSERDA Bonds: 1999 Series B, $33.7 million principal amount, 1999 Series C, $41.15 million principal amount and 1999 Series D, $41.0 million principal amount (the "1999 NYSERDA Bonds, Series B, C, D"). The 1999 NYSERDA Bonds, Series B, C, D are in multi-modal form, which allows Central Hudson to convert these series to various variable rate modes as well as to fix the rate of interest for periods of time up to the remaining life of the bonds. The 1999 NYSERDA Bonds, Series B, C, D were initially issued in Dutch Auction mode, under which the rate of interest is determined every 35 days by an auction process. The 1999 NYSERDA Bonds, Series B, C, D are unsecured and insured as to payment of principal and interest as they become due by a municipal bond insurance policy issued by 83 AMBAC Assurance Corporation. As part of the refinancing, the maturities of such refinanced series were extended to August 1, 2028, except that the maturity date of the 1987 Series B, which is subject to alternative minimum tax, was extended to July 1, 2034. In its rate orders, the PSC has authorized deferred accounting for the interest costs on Central Hudson's variable rate NYSERDA Bonds. The authorization provides for full recovery of the actual interest costs supporting utility operations. The percent of interest costs supporting utility operations represents approximately 95% of the total costs. The deferred balances under such accounting were $5.9 million and $4.9 million at December 31, 1999 and 1998, respectively, and were included in "Regulatory Assets" in the Corporation's Consolidated Balance Sheet. Such deferred balances are to be addressed in future rate cases. Letters of Credit Central Hudson had in place irrevocable letters of credit which supported certain payments required to be made on the 1985 and 1987 NYSERDA Bonds. Such letters of credit were terminated in 1999 as part of the refunding of the underlying NYSERDA bonds in a format that does not require such letters of credit. Debt Expense Expenses incurred on debt issues and any discount or premium on debt are deferred and amortized over the lives of the related issues. Expenses incurred on debt redemptions prior to maturity have been deferred and are generally being amortized over the shorter of the remaining lives of the related extinguished issues or the new issues as directed by the PSC. Debt Covenants Certain debt agreements require the maintenance by Central Hudson of certain financial ratios and contain other restrictive covenants. Mortgage Indenture Covenant Article XXI of Central Hudson's Indenture of Mortgage, pursuant to which Central Hudson's First Mortgage Bonds are outstanding (the "Mortgage"), requires generally that, to the extent that the cost of property additions (as defined in the Mortgage) acquired by Central Hudson during a calendar year is less than the allowance for depreciation on property subject to the Mortgage (calculated pursuant to the Mortgage) for such calendar year, Central Hudson must deposit cash with the Mortgage 84 Trustee in the amount of such deficiency, less certain credits available to Central Hudson under the Mortgage (the "Article XXI Deficiency"). Any cash deposited with the Mortgage Trustee as a result of an Article XXI Deficiency may be withdrawn by Central Hudson in an amount equal to the cost of property additions acquired by Central Hudson subsequent to such calendar year, or may be applied by the Mortgage Trustee, at the request of Central Hudson, to redeem or purchase outstanding mortgage bonds in accordance with the provisions of the Mortgage. If any such cash left on deposit with the Mortgage Trustee for 12 consecutive months or more is in excess of $350,000, the amount of such cash in excess of $250,000 must be applied by the Mortgage Trustee to redeem or purchase mortgage bonds, subject to certain exceptions set forth in the Mortgage. Article XXI of the Mortgage will remain in effect so long as any of Central Hudson's mortgage bonds of any series created prior to 1994 are outstanding under the Mortgage. For calendar year 1998, Central Hudson experienced an Article XXI Deficiency in the approximate amount of $16.3 million, in satisfaction of which it deposited with the Mortgage Trustee cash in that amount received by Central Hudson from the proceeds of the 1998 NYSERDA Bonds. Such cash deposited was applied by the Mortgage Trustee, at the request of Central Hudson, to the redemption, on March 1, 1999, of Central Hudson's First Mortgage Bonds, 8.375% Series due 2028. For calendar year 1999, Central Hudson experienced an Article XXI Deficiency in the approximate amount of $7.6 million, in satisfaction of which it deposited with the Mortgage Trustee cash in that amount. Such cash deposited will be applied by the Mortgage Trustee, at the request of Central Hudson to the redemption, on April 28, 2000, of the 6.10% Series Mortgage Bonds. NOTE 8 - POSTEMPLOYMENT BENEFITS Pension Benefits Central Hudson has a non-contributory retirement income plan ("Retirement Plan") covering substantially all of its employees and certain employees of Central Hudson Enterprises Corporation ("CHEC"), a wholly-owned subsidiary of Services. The Retirement Plan provides pension benefits that are based on the employee's compensation and years of service. It has been Central Hudson's practice to provide periodic updates to the benefit formula stated in the Retirement Plan. Central Hudson's funding policy is to make annual contributions equal to the amount of net periodic pension cost, but not in excess of the maximum allowable tax-deductible contribution under the federal income tax law nor less than the 85 minimum requirement under the Employee Retirement Income Security Act of 1974. The accounting for pension benefits reflects adoption of PSC- prescribed provisions which, among other things, requires ten-year amortization of actuarial gains and losses and deferral of differences between actual pension expense and rate allowances. In addition to the Retirement Plan, Central Hudson sponsors an Executive Deferred Compensation Plan for eligible officers and a nonqualified Retirement Benefit Restoration Plan. Other Postretirement Benefits Central Hudson provides certain health care and life insurance benefits for retired employees through its postretirement benefit plan ("Benefit Plan") (this includes retirees of CHEC). Substantially all of Central Hudson's employees may become eligible for these benefits if they reach retirement age while working for Central Hudson. These and similar benefits for active employees are provided through insurance companies whose premiums are based on the benefits paid during the year. In order to reduce the total costs of these benefits, Central Hudson requires employees who retired on or after October 1, 1994, to contribute toward the cost of such benefits. The Corporation is fully recovering its net periodic postretirement costs in accordance with PSC guidelines. Under these guidelines, the difference between the amounts of postretirement benefits recoverable in rates and the amounts of postretirement benefits determined by the actuary under SFAS 106, "Employers Accounting for Postretirement Benefits Other Than Pensions," are deferred as either a regulatory asset or liability, as appropriate. 86
Reconciliations of Pension and OPEB Plans' benefit obligation, plan assets and funded status, as well as the components of net periodic pension cost and the weighted average assumptions are as follows: Pension Benefits Other Benefits ---------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- In Thousands In Thousands Change in Benefit Obligation: Benefit obligation at beginning of year $270,504 $225,038 $ 93,471 $ 78,953 Service cost 6,417 5,205 2,525 2,076 Interest cost 17,546 16,234 5,832 5,610 Participant contributions - - 206 - Plan amendments 10,633 14,439 - - Benefits paid (13,344) (12,433) (3,396) (2,973) Actuarial (gain)or loss (38,629) 22,021 (18,641) 9,805 Benefit Obligation at End of ------- ------- ------- ------- Year $253,127 $270,504 $ 79,997 $ 93,471 Change in Plan Assets: Fair value of plan assets at beginning of year $309,037 $316,852 $ 57,180 $ 45,109 Actual return on plan assets 46,487 6,040 5,166 10,607 Employer contributions 188 72 4,448 5,489 Participant contributions - - 206 - Benefits paid (13,344) (12,433) (2,733) (3,569) Administrative Expenses (995) (1,494) (259) (456) Fair Value of Plan Assets at ------- ------- ------- ------- End of Year $341,373 $309,037 $ 64,008 $ 57,180
87 Pension Benefits Other Benefits ---------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- In Thousands In Thousands Reconciliation of Funded status Funded status $ 88,246 $ 38,533 $(15,989) $(36,291) Unrecognized actuarial (gain) (73,051) (18,985) (28,862) (9,800) Unrecognized transition (asset) or obligation (1,430) (2,065) 40,465 43,579 Unamortized prior service cost 29,309 20,179 (119) (129) ------- ------- ------- ------- Accrued Benefit Cost $ 43,074 $ 37,662 $ (4,505) $ (2,641) Components of Net Periodic Benefit Cost Service cost $ 6,417 $ 5,205 $ 2,525 $ 2,076 Interest cost 17,546 16,234 5,832 5,610 Expected return on plan assets (24,314) (27,325) (3,756) (2,867) Amortization of prior service cost 1,503 552 (10) (10) Amortization of transitional (asset) or obligation (635) (635) 3,114 3,114 Recognized actuarial (gain) or loss (5,742) (10,162) (1,686) (1,789) ------- ------- ------- ------- Net Periodic Benefit Cost $ (5,225) $(16,131) $ 6,019 $ 6,134 Weighted-average assumptions as of December 31 Discount rate 7.75% 6.50% 7.75% 6.50% Expected long-term rate of return on plan assets 9.75% 8.50% 6.80% 6.80% Rate of compensation increase 4.00% 4.00% 4.00% 4.00%
88 For measurement purposes, a 9.0% (9.4% for participants over age 65) annual rate of increase in the per capita cost of covered health benefits is assumed for 2000. The rate is assumed to decrease gradually to 5.5% for 2008 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one- percentage-point change in assumed health care cost trend rates would have the following effects: One-Percentage- One-Percentage- Point Decrease Point Increase --------------- --------------- Effect on total of service and interest cost compo- nents for 1999 $ 1,254,000 $(1,086,000) Effect on year-end 1999 postretirement benefit obligation $10,480,000 $(9,266,000) NOTE 9 - COMMITMENTS AND CONTINGENCIES Nuclear Liability Insurance The Price-Anderson Act is a federal law which limits the public liability which can be imposed with respect to a nuclear incident at a licensed nuclear electric generating facility. Such Act also provides for assessment of owners of all licensed nuclear units in the United States for losses in excess of certain limits in the event of a nuclear incident at any such licensed unit. Under the provisions of the Price-Anderson Act, Central Hudson's potential assessment (based on its 9% ownership interest in the Nine Mile 2 Plant and assuming that the other Nine Mile 2 Plant co-tenants were to contribute their proportionate shares of the potential assessments) would be $7.6 million (subject to adjustment for inflation) and Central Hudson could be assessed $380,000 (subject to adjustment for inflation) as an additional surcharge, but would be limited to a maximum assessment of $900,000 in any year with respect to any nuclear incident. The public liability insurance coverage of $200 million required under the Price-Anderson Act for the Nine Mile 2 Plant is provided through Niagara Mohawk. Central Hudson also carries insurance to cover the additional costs of replacement power (under a Business Interruption and/or Extra Expense Insurance Policy) incurred by Central Hudson in the event of a prolonged accidental outage of the Nine Mile 2 Plant. This insurance arrangement provides for payments of up to $409,000 per week if the Nine Mile 2 Plant experiences a continuous 89 accidental outage which extends beyond 12 weeks. Such payments will continue for 52 weeks after expiration of the 12-week deductible period, and thereafter the insurer shall pay 80% of the weekly indemnity for a second and third 52-week period. Subject to certain limitations, Central Hudson may request prepayment, in a lump sum amount, of the insurance payments which would otherwise be paid to it with respect to said third 52-week period, calculated on a net present value basis. Central Hudson is insured as to its respective interest in the Nine Mile 2 Plant under property damage insurance provided through Niagara Mohawk. The insurance coverage provides $500 million of primary property damage coverage for both Units of the Nine Mile Point Nuclear Station and $2.25 billion of excess property damage coverage solely for Unit 2 of that station. Such insurance covers decontamination costs, debris removal and repair and/or replacement of property. The Corporation intends to maintain, or cause to be maintained, insurance against such risks at the Nine Mile 2 Plant, provided such coverage can be obtained at an acceptable cost. Environmental Matters General: On an ongoing basis, Central Hudson assesses environmental issues which could impact Central Hudson and its customers. Water: In 1992 Central Hudson filed renewal applications for the State Pollution Discharge Elimination System ("SPDES") permits for its Roseton and Danskammer Plants. Such permits are required to operate the Plants' cooling water systems and wastewater treatment systems. Central Hudson is a party to an active proceeding with other New York utilities before the New York State Department of Environmental Conservation ("NYSDEC") related to the processing of the SPDES permit renewal application for the Roseton Plant. The utility participants in the proceeding prepared and submitted a revised Draft Environmental Impact Statement ("DEIS") on December 15, 1999. At this stage of the proceeding, the Corporation can make no determination as to the outcome of the proceeding or the impact, if any, on the Corporation's financial position. In 1999 Riverkeeper, Inc., commenced a citizen suit, in the United States District Court for the Southern District of New York, against Central Hudson under Section 11 of the Endangered Species Act, 16 U.S.C. Section 1540, seeking injunctive relief from Central Hudson's alleged unpermitted takings of the endangered shortnose sturgeon through Central Hudson's Roseton and Danskammer Plants on the Hudson River. Central Hudson does not believe it has violated such Act and intends to vigorously defend this action. The 90 Corporation can make no prediction as to the outcome of this litigation. Air: The Clean Air Act Amendments of 1990 ("CAA Amendments") added several new programs which address attainment and maintenance of national ambient air quality standards. These include control of emissions from fossil-fueled electric generating plants that affect "acid rain" and ozone. As of December 31, 1999, Central Hudson believes it is in full compliance with regulations promulgated to date under the CAA Amendments. Ongoing federal and state clean air initiatives may require Central Hudson to reduce its emissions in the future. Central Hudson's emissions of nitrogen oxides ("NOx") were subject to additional controls, effective May 31, 1995 and May 1, 1999, under Title I of the CAA Amendments. Central Hudson has installed appropriate controls in compliance with the May 31, 1995 requirements. The 1999 requirements were addressed by fuels and operation management. Backend controls were not required. The NYSDEC has recently promulgated regulations requiring a third round of NOx reductions to go into effect in 2003. In July 1997, the Environmental Protection Agency ("EPA") promulgated proposed revisions to the National Ambient Air Quality Standards for ozone and particulates. These regulations have been stayed by the courts. Further action by the EPA is pending. Beginning in 1997 the NYSDEC, began an initiative seeking penalties from all New York electric utilities for past opacity variances and requiring various opacity reduction measures and stipulated penalties for future excursions after execution of a consent order. Each New York State electric utility, including Central Hudson, is in the process of negotiating, or has negotiated, the various terms and conditions of a draft consent order with the NYSDEC. Central Hudson and the NYSDEC entered into an Order on Consent, effective April 26, 1999, pursuant to which Central Hudson, in settlement of a claim by the NYSDEC that emissions from the Roseton and Danskammer Plants exceeded applicable opacity emissions standards, agreed to a civil penalty of $1.5 million for both Plants, of which $500,000 was paid to the NYSDEC. The remaining $1.0 million of such penalty was suspended upon Central Hudson causing certain environmentally beneficial projects in Dutchess and Orange Counties, New York to be implemented, as set forth in said Order. Said Order also provides for (i) a new level of stipulated penalty provisions for future opacity exceedences and (ii) an Opacity Reduction Program, all with respect to said Plants. In October 1999, New York State Governor Pataki indicated he will cause a rulemaking proceeding to be initiated intended to lead to regulations requiring electric generation plants in New York State to reduce sulfur dioxide and nitrogen dioxide emissions 91 beyond the reductions mandated by federal law. Until the issuance and analysis of any such regulations, the Corporation can make no prediction as to the effect of such regulations, on the cost of operating the Danskammer and Roseton Plants or whether or not capital improvements would be required. In October 1999, the New York State Attorney General indicated he is investigating eight older New York State power plants for possible violations of federal and state air emission rules. By letter dated October 12, 1999 from the Office of said Attorney General, Central Hudson was notified that such investigation indicates that Central Hudson, "may have constructed, and continues to operate, major modifications to its Danskammer [Plant...] without obtaining [certain] requisite preconstruction permits." Such letter requests that Central Hudson provide certain information with respect to such investigation. The NYSDEC, by subpoena dated January 13, 2000, has requested substantially the same information from Central Hudson. The Corporation believes that the NYSDEC has assumed responsibility for such investigation, but Central Hudson has not received formal notification thereof. Central Hudson is reviewing this matter in depth, and believes any required permits were obtained. Former Manufactured Gas Plant Facilities City of Newburgh: In October 1995, Central Hudson and the NYSDEC entered into an Order on Consent regarding the development and implementation of an investigation and remediation program for Central Hudson's former coal gasification plant ("Central Hudson Site"), the City of Newburgh, New York's ("City") adjacent and nearby property and the adjoining areas of the Hudson River. Initial remediation investigations were completed in September 1997. The investigations revealed the presence of contaminants in the soil in portions of the study area. In the majority of the study area contaminants were found deep within the ground and are not a threat to the public. Contaminated ground water is associated with the contaminated soil but it is not used as a drinking water supply. Impacted sediments were also present within the Hudson River adjacent to the City's property which is the location of its sewage treatment plant. In May 1995, the City filed suit against Central Hudson in the United States District Court for the Southern District of New York. The City alleged that Central Hudson released certain allegedly hazardous substances without a permit from the Central Hudson Site in Newburgh, New York into the ground and into adjacent and nearby property of the City, in violation of the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the federal Resources Conservation and Recovery Act ("RCRA") and the federal Emergency Planning and 92 Community Right to Know Act ("EPCRA"). The City also alleged a number of nuisance, trespass, damage and indemnification claims pursuant to New York State law. The City sought injunctive relief against such alleged disposal, storage or release of hazardous substances at the Central Hudson Site, remediation and abatement of the conditions alleged to lead to endangerment of the City's property, payment of restitution of clean-up costs and monetary damages of at least $70 million, assessment of certain civil penalties under RCRA, CERCLA and EPCRA, and recovery of the City's costs and attorneys' fees in such action. Among the City's allegations was that the presence of contamination on its site was preventing it from making required improvements to its sewage treatment plant ("STP") on the site. In partial settlement of the City's claims against Central Hudson, the City and Central Hudson entered into an agreement, in July 1998, whereby the City would construct a clarifier at the STP and deal appropriately with any contaminants that were encountered during the construction, and Central Hudson would fund these construction and related activities. Construction of the clarifier was completed in July 1999; however, all invoices for the construction costs and related work have not yet been received. It is expected that the total cost will be approximately $2.9 million. The trial on this matter began in November 1998, and in December 1998, the jury made its determination that the proper cost of environmental remediation on the City's property is $20 million and Central Hudson's share is 80% (or $16 million). In addition, the jury awarded the City $435,000 in damages for increased costs of future operations of the City's STP due to the existence of contaminants. Subsequent to the December 1998 jury award referred to above, Central Hudson and the City entered into a Settlement Agreement, dated May 4, 1999, which received court approval on the same date. Under the Settlement Agreement (i) said lawsuit was disposed of and the City's claims were dismissed with prejudice; (ii) the City waived its right to have the $16 million awarded by the jury for the cost of said environmental remediation on the City's property and Central Hudson agreed to remediate the City's property at Central Hudson's cost pursuant to said NYSDEC's October 1995 Order on Consent; (iii) Central Hudson paid the City $2 million and will pay the City $500,000 in the future on the occurrence of certain events; (iv) if the total cost of such remediation is less than $16 million, Central Hudson will pay the City an additional amount on a formula basis up to $500,000 depending on the extent to which the cost of remediation is less than $16 million and (v) Central Hudson agreed to indemnify and 93 hold harmless the City against claims or lawsuits by any third party against the City alleging injury, damages or violation of law caused by or arising from the alleged contamination in said lawsuit having migrated from Central Hudson's to the City's property. Pursuant to said October 1995 Order on Consent with the NYSDEC, Central Hudson conducted additional studies as part of the required remedial investigation. The results of these studies were provided to the NYSDEC which determined that the contaminants found in such investigation may pose a significant threat to human health or the environment. As a result, Central Hudson developed a draft Feasibility Study Report ("Report") which was filed with the NYSDEC on December 28, 1999. The Report summarizes the nature and location of the contamination at and around the City's property, evaluates the potential ecological and human health risks associated with that contamination and discusses clean-up alternatives. The Report recommends (1) limited soil removal from the southern portion of the City's property, where there is elevated contamination and (2) capping of contaminated sediments in the Hudson River. The estimated costs for the proposed remediation activities are $3 million for the soil removal and $2.5 million for the capping of sediment in the Hudson River. Central Hudson, in December 1999, provided the Report to NYSDEC and to the City. Central Hudson expects that both NYSDEC and the City will respond with comments on the Report. Subject to anticipated additional negotiations among Central Hudson, the City and NYSDEC, NYSDEC will issue a Proposed Remedial Action Plan, for public review and comment, which is expected to be issued in the second quarter of 2000. Following such public review, NYSDEC will issue a Record of Decision which will specify a remediation plan for Central Hudson's implementation. Such remediation plan is not expected to be issued until late in 2000. As of December 31, 1999, the Corporation recorded liabilities of $6.5 million regarding this matter which are included in "Deferred Credits and Other Liabilities - Other" in the Corporation's Consolidated Balance Sheet. By letter dated June 3, 1997, Central Hudson received authorization from the PSC to defer costs related to this matter, including legal defense costs but excluding Central Hudson's labor, related to environmental site investigation and remediation actions. Central Hudson has deferred costs expended to date that it expects to be recovered in future rates. The cumulative deferred costs through 1999 amounted to $15.1 million and were included in "Deferred Charges - Regulatory Assets" in the Corporation's Consolidated Balance Sheet. The Corporation can make no prediction as to the full financial effect this matter will have on it, including the extent, if any, of insurance reimbursement and including 94 implementation of environmental clean-up under said Order on Consent. However, the Corporation has put its insurers on notice of this matter and the Corporation intends to seek reimbursement from such insurers for the cost of any such liability. Two of such insurers have denied coverage. Former Manufactured Gas Plant Sites: In February 1999 the NYSDEC informed Central Hudson of its intention to perform site assessments at the sites of three manufactured gas plants formerly operated by Central Hudson, two of which are located in Poughkeepsie, New York and one in Beacon, New York. Central Hudson will conduct the site assessments under agreements negotiated with NYSDEC for each site. The purpose of the site assessments will be to determine if there are significant quantities of residues from the manufactured gas operations on the sites. If NYSDEC determines that significant quantities of residues are not present or that the residues pose no threat to public health or the environment given the current uses of the sites, NYSDEC will not require additional investigations and/or remediation at the respective sites. If, after its review of each site assessment, NYSDEC determines that significant residues are present, or that residues pose a threat to public health or the environment at a site, Central Hudson will likely be responsible for any required remediation. The Corporation can make no prediction as to the outcome of these matters at present. Central Hudson has put its comprehensive general liability insurers on notice of these matters, and Central Hudson intends to seek reimbursement from its insurance carriers for amounts for which it may become liable. Central Hudson has requested from the PSC permission to defer the incremental costs of the investigations and potential remediation of these sites. Asbestos Litigation Since 1987, Central Hudson, along with many other parties, has been joined as a defendant or third-party defendant in 1,972 asbestos lawsuits commenced in New York State and federal courts. The plaintiffs in these lawsuits have each sought millions of dollars in compensatory and punitive damages from all defendants. The cases were brought by or on behalf of individuals who have allegedly suffered injury from exposure to asbestos, including exposure which allegedly occurred at Central Hudson facilities. To date, of the 1,972 cases that had been brought against Central Hudson, 1,035 remained pending against Central Hudson. Of the 937 cases no longer pending against Central Hudson, 810 have been dismissed or discontinued, and Central Hudson has settled 127 cases. The Corporation is presently unable to assess the validity of the remaining asbestos lawsuits; accordingly, it cannot 95 determine the ultimate liability relating to these cases. Based on information known to the Corporation at this time, including Central Hudson's experience in settling asbestos cases and in obtaining dismissals of asbestos cases, the Corporation believes that the cost to be incurred in connection with the remaining lawsuits will not have a material adverse effect on the Corporation's financial position or results of operations. Central Hudson is insured under successive comprehensive general liability policies issued by a number of insurers, has put such insurers on notice of the asbestos lawsuits and has demanded indemnification reimbursement for its defense costs and liability. In December 1994, Central Hudson commenced a lawsuit against eight such insurers in the New York State Supreme Court, Dutchess County. By order dated October 2, 1998, the Court granted a motion by Central Hudson against one insurer, Travelers Casualty and Surety Company (f/k/a The Aetna Casualty and Surety Company) ("Travelers"), seeking a declaration that Travelers owed Central Hudson the cost of defense in the underlying asbestos litigation. Travelers has since paid Central Hudson approximately $3.2 million, consisting of the undisputed portion of Central Hudson's past defense costs together with prejudgment interest. Travelers has made this payment subject to the October 2, 1998 order of the Court and without prejudice to its rights to appeal or to seek contribution from the other insurers and from Central Hudson. Purchased Power Commitments Under federal and New York State laws and regulations, Central Hudson is required to purchase the electrical output of unregulated cogeneration facilities ("IPPs") which meet certain criteria for Qualifying Facilities, as such term is defined in the appropriate legislation. Purchases are made under long-term contracts which require payment at rates higher than what can be purchased on the wholesale market. These costs are currently fully recoverable through Central Hudson's electric fuel adjustment clause, with one exception, for which the impaired portion of the contract has been recognized as a reduction to income. IPPs with which Central Hudson has contracts represent 6% of Central Hudson's energy purchases in 1999. Other Matters Central Hudson is involved in various other legal and administrative proceedings incidental to its business which are in various stages. While these matters collectively involve substantial amounts, it is the opinion of management that their ultimate resolution will not have a material adverse effect on the Corporation's financial position or results of operations. 96 Included in such proceedings are lawsuits against Central Hudson arising from a November 1992 explosion in a dwelling in Catskill, New York. One of these lawsuits involving claims for personal injury and property damages was settled in December 1999 in amounts not considered material to the Corporation. A lawsuit alleging personal injuries and property damage and compensatory and punitive damages in the sum of $4 million remains. In January 2000, the court dismissed this lawsuit on the merits because of plaintiff's failure to prosecute the case, but the time to appeal has not expired. In addition to the above, on February 12, 1994, a fire and an explosion destroyed a residence in the Village of Wappingers Falls, New York, in Central Hudson's service territory. A short time later, a second explosion and fire destroyed a nearby commercial facility. Lawsuits commenced against Central Hudson arising out of the Wappingers Falls incident include one alleging property damage and seeking recovery of $250,000 in compensatory damages and one alleging personal injuries and property damage and seeking an unspecified amount of damages against Central Hudson. All such lawsuits have been consolidated; however, no trial date has been set. The Corporation is investigating the Wappingers Falls claims and presently has insufficient information on which to predict their outcome. The Corporation believes that Central Hudson has adequate insurance to cover any compensatory damages that might be awarded. NOTE 10 - SEGMENTS AND RELATED INFORMATION The Corporation's primary reportable operating segments are the regulated electric and gas operations of Central Hudson. The Corporation's "Other" segment consists of the competitive business affiliates of Services. For 1999, "Other" also includes the activity of CH Energy Group, Inc. prior to the formation of the holding company on December 15, 1999. The "Other" earnings per share for 1999 is due to the sale of the Corporation's New York Stock Exchange symbol. All of the segments currently operate in the Northeast region of the United States. Certain additional information regarding these segments is set forth in the following table. General corporate expenses, property common to both segments and depreciation of such common property have been allocated to the segments in accordance with practice established for regulatory purposes. 97 CH Energy Group, Inc. Segment Disclosure - FAS 131 Year Ended December 31, 1999 ---- (In Thousands) Electric Gas Other Total -------------- -------- ---- ----- ----- Revenues from external customers $ 427,729 $ 93,099 $ - $ 520,828 Intersegment revenues 80 1,032 - 1,112 --------- ------- ------- --------- Total revenues 427,809 94,131 - 521,940 Depreciation and amortization 42,157 4,756 - 46,913 Interest expense 25,803 4,201 - 30,004 Interest income 2,133 314 - 2,447 Income tax (credit) expense 24,850 4,075 - 28,925 Earnings per share 2.47 0.33 0.08 2.88 Segment assets 1,078,945 180,357 76,597 1,335,899 Construction Expenditures 38,346 8,149 - 46,495 1998 ---- (In Thousands) Electric Gas Other Total -------------- -------- ---- ----- ----- Revenues from external customers $ 418,427 $ 83,899 $ - $ 502,326 Intersegment revenues 80 1,063 - 1,143 --------- ------- ------- --------- Total revenues 418,507 84,962 - 503,469 Depreciation and amortization 40,996 4,564 - 45,560 Interest expense 23,803 3,875 - 27,678 Interest income 695 87 - 782 Income tax (credit) expense 24,910 3,678 - 28,588 Earnings per share 2.51 0.35 0.04 2.90 Segment assets 1,093,455 169,587 52,996 1,316,038 Construction Expenditures 39,183 6,478 - 45,661 98 CH Energy Group, Inc. Segment Disclosure - FAS 131 Year Ended December 31, 1997 ---- (In Thousands) Electric Gas Other Total --------- ------- ------- --------- Revenues from external customers $ 416,346 $103,044 $ - $ 519,390 Intersegment - revenues 83 804 887 --------- ------- ------- --------- Total revenues 416,429 103,848 - 520,277 Depreciation and amortization 39,480 4,384 - 43,864 Interest expense 23,186 3,464 - 26,650 Interest income 1,970 290 - 2,260 Income tax (credit) expense 21,405 4,832 - 26,237 Earnings per share 2.58 0.37 0.02 2.97 Segment assets 1,067,042 163,021 22,027 1,252,090 Construction Expenditures 36,685 7,183 - 43,868 NOTE 11 - FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: Cash and Temporary Cash Investments: The carrying amount approximates fair value because of the short maturity of those instruments. Cumulative Preferred Stock Subject to Mandatory Redemption: The fair value is estimated based on the quoted market price of similar instruments. Long-Term Debt: The fair value is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to Central Hudson for debt of the same remaining maturities and quality. Long-term debt of Services also approximates fair value. Notes Payable: The carrying amount approximates fair value because of the short maturity of those instruments. 99 The estimated fair values of the Corporation's financial instruments are as follows: December 31, 1999 ----------------- Carrying Fair Amount Value -------- ----- (In Thousands) Cumulative preferred stock subject to mandatory redemption............. $ 35,000 $ 34,455 Long-term debt (including current maturities)................. 370,551 365,741 December 31, 1998 ----------------- Carrying Fair Amount Value -------- ----- Cumulative preferred stock subject to mandatory redemption............. $ 35,000 $ 37,083 Long-term debt (including current maturities)................. 396,425 413,905 100
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) Selected financial data for each quarterly period within 1999 and 1998 are presented below: Earnings Per Average Share of Common Operating Operating Net Stock Revenues Income Income Outstanding --------- --------- ------ ----------- (In Thousands) (Dollars) ------------------------------------------ ----------- Quarter Ended: 1999 ---- March 31............ $146,471 $24,991 $18,297 $1.09 June 30............. 117,035 14,439 8,630 .51 September 30........ 134,323 18,100 13,064 .77 December 31......... 124,111 13,108 8,582 .51 1998 ---- March 31............ $143,882 $24,003 $18,360 $1.06 June 30............. 112,106 14,404 9,234 .54 September 30........ 125,723 18,350 13,003 .77 December 31......... 121,758 14,543 8,717 .53
101
SCHEDULE II - Reserves Additions Payments Balance Balance at Charged to Charged to Charged at End Beginning Cost and Other to of Description of Period Expenses Accounts Reserves Period - ----------- ---------- ---------- ---------- -------- ------- YEAR ENDED DECEMBER 31, 1999 Operating Reserves........ $5,994,600 $2,158,546 $ 520,700 $2,380,188 $6,293,658 ========= ========= ========= ========= ========= Reserve for Uncollectible Accounts................. $2,400,000 $2,972,556 $ - $2,472,556 $2,900,000 ========= ========= ========= ========= ========= YEAR ENDED DECEMBER 31, 1998 Operating Reserves........ $6,581,614 $7,474,979 $ 103,700 $8,165,693 $5,994,600 ========= ========= ========= ========= ========= Reserve for Uncollectible Accounts................. $2,800,000 $2,638,719 $ - $3,038,719 $2,400,000 ========= ========= ========= ========= ========= YEAR ENDED DECEMBER 31, 1997 Operating Reserves........ $4,755,264 $2,142,391 $ 334,700 $ 650,741 $6,581,614 ========= ========= ========= ========= ========= Reserve for Uncollectible Accounts................. $3,200,000 $3,493,405 $ - $3,893,405 $2,800,000 ========= ========= ========= ========= =========
102 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ------ ACCOUNTING AND FINANCIAL DISCLOSURE ------------------------------------------------ None. PART III -------- ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE CORPORATION ------- --------------------------------------------------- The information with respect to the Directors of the Corporation required hereunder is incorporated by reference to the caption "Proposal No. 1 - Election of Directors" in the Corporation's definitive proxy statement, to be dated March 1, 2000, and to be used in connection with its Annual Meeting of Shareholders to be held on April 25, 2000, which proxy statement will be submitted to the SEC pursuant to that Commission's Regulation S-T. The information with respect to the executive officers of the Corporation required hereunder is incorporated by reference to Item 1 herein, under the caption "Executive Officers of the Corporation." Pursuant to Section 727(d) of the New York Business Corporation Law, notice is hereby given to shareholders that the Corporation has provided Directors' and Officers' Liability Insurance through various contracts. These contracts became effective June 1, 1999 and provide aggregate coverage of $60 million with the following carriers: Chubb Group of Insurance Companies, Associated Electric & Gas Insurance Services, Ltd. and American Casualty Excess Insurance, Ltd. The aggregate premium costs for this insurance, which covers the Corporation and its directors and executive officers, are approximately $238,000, a decrease of $165,000 when compared to 1998. ITEM 11 - EXECUTIVE COMPENSATION The information required hereunder is incorporated by reference to the caption "Executive Compensation" in the Corporation's definitive proxy statement, to be dated March 1, 2000, and to be used in connection with its Annual Meeting of Shareholders to be held on April 25, 2000. 103 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ------- AND MANAGEMENT ----------------------------------------------- The information required hereunder is incorporated by reference to the caption "Security Ownership of Directors and Officers" in the Corporation's definitive proxy statement, to be dated March 1, 2000, and to be used in connection with its Annual Meeting of Shareholders to be held on April 25, 2000. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ------- ---------------------------------------------- There were no relationships or transactions of the type required to be described by this Item. PART IV ------- ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND ------- REPORTS ON FORM 8-K ------------------------------------------- (a) Documents filed as part of this Report 1. and 2. All Financial Statements and Financial Statement Schedules filed as part of this Report are included in Item 8 of this Form 10-K and reference is made thereto. 3. Exhibits Incorporated herein by reference to the Exhibit Index for this Report. Such Exhibits include the following management contracts or compensatory plans or arrangements required to be filed as an Exhibit pursuant to Item 14(c) hereof: Description in the Exhibit List and Exhibit Nos. for this Report Central Hudson Directors' Deferred Compensation Plan, effective October 1, 1980, together with Amendment thereto, effective October 1, 1999, merged into the Directors and Executives Deferred Compensation Plan, effective January 1, 2000. (Exhibit (10)(iii)1 and 19) Executive Deferred Compensation Plan, effective March 1, 1992, together with Amendments thereto effective December 17, 1993 and December 1, 1998 and an instrument of assumption by the Corporation, dated December 15, 1999. (Exhibits (10)(iii)2, 5, 17 and 20) 104 Central Hudson Retirement Benefit Restoration Plan, effective May 1, 1993, together with Amendments thereto effective July 23, 1993 and December 1, 1998. (Exhibits (10)(iii)3, 4 and 18) Agreement, made March 14, 1994, by and between Central Hudson and Mellon Bank, N.A., amending and restating, effective April 1, 1994, Central Hudson's Savings Incentive Plan and related Trust Agreement with The Bank of New York, together with amendments dated July 22, 1994, and December 16, 1994. (Exhibits (10)(iii)7, 8 and 9) Central Hudson Executive Incentive Compensation Plan, effective January 3, 1993, as amended and restated, effective April 4, 1995 and terminated effective January 1, 2000. (Exhibits (10)(iii)6 and 10) Amended and Restated Stock Plan for Outside Directors, together with a form of assumption by the Corporation thereof, effective December 15,1999. (Exhibit (10)(iii)11 and 21) Central Hudson Management Incentive Program, effective April 1, 1994, together with Amendment thereto, dated July 25, 1997. (Exhibits (10)(iii)12 and 13) Change-of-Control Severance Policy, effective December 1, 1998, for all management employees, and a form of instrument of assumption by the Corporation, dated December 15, 1999. (Exhibit (10)(iii)14 and 22) Form of Central Hudson Employment Agreement, dated October 23, 1998, effective December 1, 1998, for all officers, and a form of instrument of assumption by the Corporation, dated December 15, 1999. (Exhibit (10)(iii)15 and 23) Central Hudson Employment Agreement, dated October 23, 1998, effective December 1, 1998, for Paul J. Ganci, and a form of instrument of assumption by the Corporation, dated December 15, 1999. (Exhibit (10)(iii)16 and 24) Directors and Executives Deferred Compensation Plan, dated December 17, 1999, effective January 1, 2000. Trust and Agency Agreement, dated December 17, 1999 and effective January 1, 2000, between this Corporation and First America Trust Company for the Corporation's Directors and Executives Deferred Compensation Plan. Long-Term Performance-Based Incentive Plan, dated October 22, 1999, effective January 1, 2000. 105 (b) Reports on Form 8-K During the last quarter of the period covered by this Report and including the period to the date hereof, the following Reports on Form 8-K were filed by Central Hudson and/or the Corporation: 1) Report dated November 12, 1999 for Central Hudson, relating to the change of Central Hudson's stock trading symbol from "CNH" to "CHG." 2) Report dated November 23, 1999 for Central Hudson, relating to the auction of the Roseton and Danskammer Plants, as reported in the caption, "Auction of Fossil Generation Plants," in Note 2 of the Notes to Financial Statements of this Annual Report on Form 10-K; and the appointment of officers of the Corporation. 3) Reports dated December 15, 1999 for the Corporation and Central Hudson, relating to the reorganization of Central Hudson into a holding company structure pursuant to an Agreement and Plan of Exchange between Central Hudson and the Corporation as more fully described in Item I hereof under the caption "Holding Company" and in Note 2 hereof under the caption "Competitive Opportunities Proceeding Settlement Agreement." 4) Report dated February 1, 2000 relating to Central Hudson's sale of a tranche of Medium Term Notes in the aggregate principal amount of $110 million, such sale being authorized under Central Hudson's shelf registration statement on Form S-3 (Registration No. 333-65597), as filed with the SEC. (c) Exhibits Required by Item 601 of Regulation S-K Incorporated herein by reference to subpart (a)-3 of Item 14, above. 106 (d) Financial Statement Schedule required by Regulation S-X which is excluded from the Corporation's Annual Report to Shareholders for the fiscal year ended December 31, 1999 Not applicable, see Item 8 hereof. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Corporation has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. CH ENERGY GROUP, INC. By /s/ Paul J. Ganci ------------------------------- Paul J. Ganci Chairman of the Board, President and Chief Executive Officer Dated: March 1, 2000 107 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following person on behalf of the Corporation and in the capacities and on the date indicated: Signature Title Date --------- ----- ---- (a) Principal Executive Officer or Officers: /s/ Paul J. Ganci - -------------------------- (Paul J. Ganci) Chairman of the Board, President and Chief Executive Officer March 1, 2000 (b) Principal Accounting Officer: /s/ DONNA S. DOYLE - -------------------------- (Donna S. Doyle) Vice President - Accounting and Controller March 1, 2000 (c) Chief Financial Officer: /s/ STEVEN V. LANT - -------------------------- (Steven V. Lant) Chief Financial Officer and Treasurer March 1, 2000 (d) A majority of Directors: Jack Effron*, Frances D. Fergusson*, Heinz K. Fridrich*, Edward F.X.Gallagher*, Paul J. Ganci*, John E. Mack III* and Edward P. Swyer*, Directors By /s/ Paul J. Ganci - -------------------------- (Paul J. Ganci) March 1, 2000 108 - -------------------------------- *Paul J. Ganci, by signing his name hereto, does thereby sign this document for himself and on behalf of the persons named above after whose printed name an asterisk appears, pursuant to powers of attorney duly executed by such persons and filed with the SEC as Exhibit 24 hereof. 109 EX-99 2 EXHIBIT INDEX EXHIBIT INDEX Following is the list of Exhibits, as required by Item 601 of Regulation S-K, filed as a part of this Annual Report on Form 10-K, including Exhibits incorporated herein by reference (1): Exhibit No. (Regulation S-K Item 601 Designation) Exhibits (3) Articles of Incorporation and Bylaws: (i) 1-- Restated Certificate of Incorporation of the Corporation under Section 807 of the Business Corporation Law, filed November 12, 1998. ((37); Exhibit (3)1) (i) 2-- Restated Certificate of Incorporation of Central Hudson under Section 807 of the Business Corporation Law, filed August 14, 1989. ((1); Exhibit (3)1) (i) 3-- Certificate of Amendment to the Certificate of Incorporation of Central Hudson under Section 805 of the Business Corporation Law, filed April 5, 1990. ((1); Exhibit (3)2) (i) 4-- Certificate of Amendment to the Certificate of Incorporation of Central Hudson under Section 805 of the Business Corporation Law, filed October 19, 1993 ((1); Exhibit (3)3) (ii) 1-- By-laws of the Corporation in effect on the date of this Report. (ii) 2-- By-laws of Central Hudson in effect on the date of this Report. (4) Instruments defining the rights of security holders, including indentures (see also Exhibit (3) above): - -------------------- (1) Exhibits which are incorporated by reference to other filings are followed by information contained in parentheses, as follows: The first reference in the parenthesis is a numeral, corresponding to a numeral set forth in the Notes which follow this Exhibit list, which identifies the prior filing in which the Exhibit was physically filed; and the second reference in the parenthesis is to the specific document in that prior filing in which the Exhibit appears. E-1 *(ii) 1-- Indenture dated January 1, 1927 between Central Hudson and American Exchange Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)1) *(ii) 2-- Supplemental Indenture dated March 1, 1935 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)2) *(ii) 3-- Second Supplemental Indenture dated June 1, 1937 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)3) *(ii) 4-- Third Supplemental Indenture dated April 1, 1940 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)4) *(ii) 5-- Fourth Supplemental Indenture dated March 1, 1941 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)5) *(ii) 6-- Fifth Supplemental Indenture dated December 1, 1950 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)6) *(ii) 7-- Sixth Supplemental Indenture dated December 1, 1952 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)7) *(ii) 8-- Seventh Supplemental Indenture dated October 1, 1954 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)8) *(ii) 9-- Eighth Supplemental Indenture dated May 15, 1958 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)9) (ii) 10-- Ninth Supplemental Indenture dated December 1, 1967 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)10) E-2 (ii) 11-- Tenth Supplemental Indenture dated as of January 15, 1969 between Central Hudson and Irving Trust Company, as Trustee. ((3); Exhibit 2.12) (ii) 12-- Eleventh Supplemental Indenture dated as of June 1, 1970 between Central Hudson and Irving Trust Company, as Trustee. ((4); Exhibit 1.13) (ii) 13-- Twelfth Supplemental Indenture dated as of February 1, 1972 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)13) (ii) 14-- Thirteenth Supplemental Indenture dated as of April 15, 1974 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)14) (ii) 15-- Fourteenth Supplemental Indenture dated as of November 1, 1975 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)15) (ii) 16-- Fifteenth Supplemental Indenture dated as of June 1, 1977 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)16) (ii) 17-- Sixteenth Supplemental Indenture dated as of September 15, 1979 between Central Hudson and Irving Trust Company, as Trustee. ((4); Exhibit 1.18) (ii) 18-- Seventeenth Supplemental Indenture dated as of May 15, 1980 between Central Hudson and Irving Trust Company, as Trustee. ((5); Exhibit (4)(a)18) (ii) 19-- Eighteenth Supplemental Indenture dated as of November 15, 1980 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)19) (ii) 20-- Nineteenth Supplemental Indenture dated as of August 15, 1981 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)20) E-3 (ii) 21-- Twentieth Supplemental Indenture dated as of September 1, 1982 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)21) (ii) 22-- Twenty-First Supplemental Indenture dated as of November 22, 1982 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)22) (ii) 23-- Twenty-Second Supplemental Indenture dated as of May 24, 1984 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)23) (ii) 24-- Twenty-Third Supplemental Indenture dated as of June 15, 1985 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)24) (ii) 25-- Twenty-Fourth Supplemental Indenture dated as of September 1, 1986 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)25) (ii) 26-- Twenty-Fifth Supplemental Indenture dated as of December 1, 1988 between Central Hudson and Irving Trust Company, as Trustee. ((2); Exhibit (4)(ii)26) (ii) 27-- Twenty-Sixth Supplemental Indenture dated as of May 1, 1991 between Central Hudson and The Bank of New York, as Trustee. ((2); Exhibit (4)(ii)27) (ii) 28-- Twenty-Seventh Supplemental Indenture dated as of May 15, 1992 between Central Hudson and The Bank of New York, as Trustee. ((2); Exhibit (4)(ii)28); and Prospectus Supplement Dated May 28, 1992 (To Prospectus Dated April 13, 1992) relating to $125,000,000 principal amount of First Mortgage Bonds, designated Secured Medium-Term Notes, Series A, and the Prospectus Dated April 13, 1992, relating to $125,000,000 principal amount of Central Hudson's debt securities attached thereto, as filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-46624. ((6)(a)), and, as E-4 applicable to a tranche of such Secured Medium-Term Notes, one of the following: (a) Pricing Supplement No. 1, Dated June 4, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33- 46624. ((6)(b)) (b) Pricing Supplement No. 2, Dated June 4, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33- 46624. ((6)(c)) (c) Pricing Supplement No. 3, Dated June 4, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33- 46624. ((6)(d)) (d) Pricing Supplement No. 4, Dated August 20, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-46624. ((6)(e)) (e) Pricing Supplement No. 5, Dated August 20, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-46624. ((6)(f)) E-5 (f) Pricing Supplement No. 6, Dated July 26, 1993 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-46624. ((6)(g)) (g) Pricing Supplement No. 7, Dated July 26, 1993 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-46624. ((6)(h)) (ii) 29-- Twenty-Eighth Supplemental Indenture dated as of May 1, 1995 between Central Hudson and The Bank of New York, as Trustee. ((27); Exhibit (4)(ii)33) Prospectus Supplement Dated May 15, 1995 (To Prospectus Dated April 4, 1995) relating to $80,000,000 principal amount of First Mortgage Bonds, designated Secured Medium-Term Notes, Series B, and the Prospectus Dated April 4, 1995, relating to (i) $80,000,000 of Central Hudson's Debt Securities and Common Stock, $5.00 par value, but not in excess of $40 million aggregate initial offering price of such Common Stock and (ii) 250,000 shares of Central Hudson's Cumulative Preferred Stock, par value $100 per share, which may be issued as 1,000,000 shares of Depositary Preferred Shares each representing 1/4 of a share of such Cumulative Preferred Stock attached thereto, as filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-56349). (9) (ii) 30-- Indenture, dated as of April 1, 1992, between Central Hudson and Morgan Guaranty Trust Company of New York, as Trustee. ((7); Exhibit (4)(ii)29); and Prospectus Supplement Dated May 28, 1992 (To Prospectus Dated April 13, 1992) relating to $125,000,000 principal E-6 amount of Medium-Term Notes, Series A, and the Prospectus Dated April 13, 1992, relating to $125,000,000 principal amount of Central Hudson's debt securities attached thereto, as filed pursuant to Rule 424(b) in connection with Registration Statement No. 33- 46624. ((8)(a)), and, as applicable to a tranche of such Medium-Term Notes, one of the following: (a) Pricing Supplement No. 1, Dated June 26, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-46624. ((8)(b)) (b) Pricing Supplement No. 2, Dated October 6, 1993 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-46624. ((8)(c)); and Prospectus Supplement Dated August 24, 1998 (To Prospectus Dated April 4, 1995) related to $80,000,000 principal amount of Medium-Term Notes, Series B, and the Prospectus Dated April 4, 1995, relating to (i) $80,000,000 of Central Hudson's Debt Securities and Common Stock, $5.00 par value, but not in excess of $40 million aggregate initial offering price of such Common Stock and (ii) 250,000 shares of Central Hudson's Cumulative Preferred Stock, par value $100 per share, which may be issued as 1,000,000 shares of Depositary Preferred Shares each representing 1/4 of a share of such Cumulative Preferred Stock attached thereto, as filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-56349). ((10)(a)), and, as applicable to a tranche of such Medium-Term Notes, one of the following: E-7 Pricing Supplement No. 1, Dated September 2, 1998 (To Prospectus Dated April 4, 1995, as supplemented by a Prospectus Supplement Dated August 24, 1998) filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-56349. ((10)(b)); and Prospectus Supplement Dated January 8, 1999 (To Prospectus Dated January 7, 1999) relating to $110,000,000 principal amount of Medium-Term Notes, Series C, and the Prospectus Dated January 7, 1999, relating to $110,000,000 principal amount of Central Hudson's debt securities attached thereto, as filed pursuant to Rule 424(b) in connection with Registration Statement Nos. 333- 65597 and 33-56349. ((36)(a)), and, as applicable to a tranche of such Medium- Term Notes, one of the following: (a) Pricing Supplement No. 1, Dated January 12, 1999 (To Prospectus Dated January 7, 1999, as supplemented by a Prospectus Supplement Dated January 8, 1999) filed pursuant to Rule 424(b) in connection with Registration Statement Nos. 333-65597 and 33- 56349. ((36)(b)) (b) Pricing Supplement No. 2, Dated January 31, 2000 (To Prospectus Dated January 7, 1999, as supplemented by a Prospectus Supplement Dated January 31, 2000) filed pursuant to Rule 424(b) in connection with Registration Statement Nos. 333-65597 and 33-56349. ((41)(5)) (ii) 31-- Participation Agreement, dated as of November 1, 1985, by and between New York State Energy Research and Development Authority and Central Hudson. ((2); Exhibit (4)(ii)31) E-8 (ii) 32-- Central Hudson has entered into certain other instruments with respect to long- term debt of Central Hudson. No such instrument relates to securities authorized thereunder which exceed 10% of the total assets of the Corporation and its other affiliates on a consolidated basis. The Corporation agrees to provide the Commission, upon request, copies of any instruments defining the rights of holders of long- term debt of Central Hudson and other affiliates for which consolidated or unconsolidated financial statements are required to be filed with the Commission. (10) Material contracts: (i) 1-- Agreement dated October 31, 1968 between Central Hudson and Consolidated Edison Company of New York, Inc. and Niagara Mohawk Power Corporation. ((3); Exhibit 5.1) (i) 2-- Agreement dated as of April 4, 1977 between Central Hudson, Consolidated Edison Company of New York, Inc., Long Island Lighting Company, New York State Electric & Gas Corporation, Niagara Mohawk Power Corporation, Orange and Rockland Utilities, Inc., Rochester Gas and Electric Corporation and the Power Authority of the State of New York. ((3); Exhibit 5.6) (i) 3-- Agreement dated April 27, 1973 between Central Hudson and the Power Authority of the State of New York. ((11); Exhibit 5.19) (i) 4-- Agreement dated as of September 22, 1975 between Central Hudson, Niagara Mohawk Power Corporation, Long Island Lighting Company, New York State Electric & Gas Corporation, and Rochester Gas and Electric Corporation. ((12); Exhibit 5.21) E-9 (i) 5-- Agreement dated November 23, 1976 between Central Hudson and Consolidated Edison Company of New York, Inc. ((13); Exhibit 5.29) (i) 6-- Agreement dated December 29, 1975 between Central Hudson and Niagara Mohawk Power Corporation, Long Island Lighting Company, New York State Electric & Gas Corporation, and Rochester Gas & Electric Corporation. ((14); Exhibit (10)(i)18) (i) 7-- Assignment and Assumption dated as of October 24, 1975 between Central Hudson and New York State Electric & Gas Corporation. ((12); Exhibit 5.25) (i) 8-- Amendment to Assignment and Assumption dated October 30, 1978 between Central Hudson and New York State Electric & Gas Corporation. ((3); Exhibit 5.34) (i) 9-- Agreement dated as of May 12, 1977 between Central Hudson and Niagara Mohawk Power Corporation. ((15); Exhibit 5.34) (i) 10-- Agreement, dated May 8, 1980, by and between Central Hudson and Jersey Central Power & Light Company. ((16); Exhibit (10)(i)21) (i) 11-- Purchase Agreement, dated as of June 1, 1980, by and between Central Hudson and Consolidated Edison Company of New York, Inc. ((16); Exhibit (10)(i)22) (i) 12-- Purchase Agreement, dated as of June 16, 1980, by and between Central Hudson and Philadelphia Electric Company. ((16); Exhibit (10)(i)23) (i) 13-- Purchase Agreement, dated as of June 18, 1980, by and between Central Hudson and Public Service Electric and Gas Company. ((16); Exhibit (10)(i)24) (i) 14-- Purchase Agreement, dated as of July 1, 1980, by and between Central Hudson and Connecticut Light and Power Company. ((16); Exhibit (10)(i)25) E-10 (i) 15-- Letter Amendment Agreement, dated December 16, 1980, by and between Central Hudson and Niagara Mohawk Power Corporation. ((16); Exhibit (10)(i)26) (i) 16-- Settlement Agreement, dated December 19, 1980, by and among the United States Environmental Protection Agency, The Department of Environmental Conservation of the State of New York, The Attorney General of the State of New York, Hudson River Fisherman's Association, Inc., Scenic Hudson Preservation Conference, Natural Resources Defense Council, Inc., Central Hudson, Consolidated Edison Company of New York, Inc., Orange and Rockland Utilities, Inc., Niagara Mohawk Power Corporation and Power Authority of the State of New York. ((16); Exhibit (10)(i)27) (i) 17-- Agreement dated April 2, 1980 by and between Central Hudson and the Power Authority of the State of New York. ((2); Exhibit (10)(i)24) (i) 18-- Purchase Agreement, dated April 19, 1983, between Central Hudson and New York State Electric & Gas Corporation. ((2); Exhibit (10)(i)29) (i) 19-- Transmission Agreement, dated October 25, 1983, between Central Hudson and Niagara Mohawk Power Corporation. ((2); Exhibit (10)(i)30) (i) 20-- Underground Storage Service Agreement, dated June 30, 1982, between Central Hudson and Penn-York Energy Corporation. ((2); Exhibit (10)(i)32) (i) 21-- Interruptible Transmission Service Agreement, dated December 20, 1983, between Central Hudson and Power Authority of the State of New York. ((2); Exhibit (10)(i)33) (i) 22-- Agreement, dated December 7, 1983, between Central Hudson and the Power Authority of the State of New York. ((2); Exhibit (10)(i)34) E-11 (i) 23-- Specification of Terms and Conditions of Settlement in State of New York Public Service Commission Proceeding - Case 29124, dated September 3, 1985. ((2); Exhibit (10)(i)35) (i) 24-- Reimbursement Agreement, dated as of November 1, 1985, between Central Hudson and the Bank named therein. ((2); Exhibit (10)(i)36) (i) 25-- General Joint Use Pole Agreement between Central Hudson and the New York Telephone Company effective January 1, 1986 (not including the Administrative and Operating Practices provisions thereof). ((2); Exhibit (10)(i)37) (i) 26-- Agreement, dated June 3, 1985, between Central Hudson, Consolidated Edison Company of New York, Inc. and the Power Authority of the State of New York relating to Marcy South Real Estate - East Fishkill, New York. ((2); Exhibit (10)(i)38) (i) 27-- Agreement, dated June 11, 1985, between Central Hudson and the Power Authority of the State of New York relating to Marcy South Substation - East Fishkill, New York. ((2); Exhibit (10)(i)39) (i) 28-- Agreement, dated as of April 9, 1986, among Central Hudson, Consolidated Edison Company of New York, Inc., Niagara Mohawk Power Corporation and the Power Authority of the State of New York relating to Real Estate - Roseton/ Danskammer. ((2); Exhibit (10)(i)40) (i) 29-- Agreement, dated as of April 9, 1986, between Central Hudson, for itself and as agent for itself, Niagara Mohawk Power Corporation and Consolidated Edison Company of New York, Inc., and the Power Authority of the State of New York relating to Supplemental Land Use - Roseton/Danskammer. ((2); Exhibit (10)(i)41) E-12 (i) 30-- Roseton Amendment Agreement, dated as of September 9, 1987, between Central Hudson and Niagara Mohawk Power Corporation, for the purchase of interests in the Roseton Steam Electric Generating Plant. ((17); Exhibit (19)(10)(i)76) (i) 31-- Memorandum of Understanding, dated as of March 22, 1988, by and among Central Hudson, Alberta Northeast Gas, Limited, the Brooklyn Union Gas Company, New Jersey Natural Gas Company and Connecticut Natural Gas Corporation. ((17); Exhibit (20)(10)(i)98) (i) 32-- Restatement of Purchase and Administration Agreement, dated as of April 4, 1989, between Central Hudson and CSW Credit, Inc., amending and restating the Purchase and Administration Agreement, dated as of November 25, 1987, between such parties providing for the sale of Central Hudson's accounts receivables. ((18); Exhibit (28) (10)(i)101) (i) 33-- Credit Agreement, dated as of December 17, 1990, among Central Hudson and the Banks named therein. ((19); Exhibit (19)(10)(i)74) (i) 34-- Agreement, effective as of November 1, 1989, between Columbia Gas Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)75) (i) 35-- Agreement, dated as of November 1, 1989, between Columbia Gas Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)77) (i) 36-- Agreement, dated as of November 1, 1989, between Columbia Gas Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)78) (i) 37-- Agreement, dated as of November 1, 1989, between Columbia Gulf Transmission Company and Central Hudson. ((19); Exhibit (19)(10)(i)79) E-13 (i) 38-- Agreement, dated October 9, 1990, between Texas Eastern Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)80) (i) 39-- Agreement, dated July 2, 1990, between Texas Eastern Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)81) (i) 40-- Agreement, dated December 28, 1989, between Texas Eastern Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)82) (i) 41-- Agreement, dated December 28, 1989, between Texas Eastern Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)83) (i) 42-- Agreement, dated November 3, 1989, between Texas Eastern Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)84) (i) 43-- Agreement, dated September 4, 1990, between Algonquin Gas Transmission Company and Central Hudson. ((19); Exhibit (19)(10)(i)87) (i) 44-- Storage Service Agreement, dated July 1, 1989, between CNG Transmission Corporation and Central Hudson. ((19); Exhibit (19)(10)(i)91) (i) 45-- Agreement dated as of February 7, 1991 between Central Hudson and Alberta Northeast Gas, Limited for the purchase of Canadian natural gas from ATCOR Ltd. to be delivered on the Iroquois Gas Transmission System. ((19); Exhibit (19)(10)(i)92) (i) 46-- Agreement dated as of February 7, 1991 between Central Hudson and Alberta Northeast Gas, Limited for the purchase of Canadian natural gas from AEC Oil and Gas Company, a Division of Alberta Energy Company, Ltd. to be delivered on the Iroquois Gas Transmission System. ((19); Exhibit (19)(10)(i)93) E-14 (i) 47-- Agreement dated as of February 7, 1991 between Central Hudson and Alberta Northeast Gas, Limited for the purchase of Canadian natural gas from ProGas Limited to be delivered on the Iroquois Gas Transmission System. ((19); Exhibit (19)(10)(i)94) (i) 48-- Agreement No. 2 dated as of February 7, 1991 between Central Hudson and Alberta Northeast Gas, Limited for the purchase of Canadian natural gas from TransCanada Pipelines Limited under Precedent Agreement No. 2 to be delivered on the Iroquois Gas Transmission System. ((19); Exhibit (19)(10)(i)95) (i) 49-- Agreement No. 1 dated as of February 7, 1991 between Central Hudson and Alberta Northeast Gas, Limited for the purchase of Canadian natural gas from TransCanada Pipelines Limited under Precedent Agreement No. 1 to be delivered on the Iroquois Gas Transmission System. ((19); Exhibit (19)(10)(i)96) (i) 50-- Agreement dated as of February 7, 1991 between Central Hudson and Iroquois Gas Transmission System to transport gas imported by Alberta Northeast Gas, Limited to Central Hudson. ((19); Exhibit (19)(10)(i)97) (i) 51-- Service Agreement, dated September 30, 1986, between Central Hudson and Algonquin Gas Transmission Company, for firm storage transportation under Rate Schedule SS-III. ((20); Exhibit (19)(10)(i)95) (i) 52-- Service Agreement, dated March 12, 1991, between Central Hudson and Algonquin Gas Transmission Company, for firm transportation of 5,056 dth. of Texas Eastern Transmission Corporation incremental volume. ((20); Exhibit (19)(10)(i)99) E-15 (i) 53-- Agreement, dated December 28, 1990 and effective February 5, 1991, between Central Hudson and National Fuel Gas Supply Corporation for interruptible transportation. ((20); Exhibit (19)(10)(i)100) (i) 54-- Utility Services Contract, effective October 1, 1991, between Central Hudson and the U.S. Department of the Army, for the provision of natural gas service to the U.S. Military Academy at West Point and Stewart Army Subpost, together with an Amendment thereto, effective October 10, 1991. ((20); Exhibit (19)(10)(i)101) (i) 55-- Service Agreement, effective December 1, 1990, between Central Hudson and Texas Eastern Transmission Corporation, for firm transportation service under Rate Schedule FT-1. ((20); Exhibit (19)(10)(i)103) (i) 56-- Service Agreement, dated February 25, 1991, between Central Hudson and Texas Eastern Transmission Corporation, for incremental 5,056 dth. under Rate Schedule CD-1. ((20); Exhibit (19)(10)(i)104) (i) 57-- Service Agreement, dated January 7, 1992, between Central Hudson and Texas Eastern Transmission Corporation, for the firm transportation of 6,000 dth./day under Rate Schedule FTS-5. ((20); Exhibit (19)(10)(i)106) (i) 58-- Agreement dated as of July 1, 1992 between Central Hudson and Tennessee Gas Pipeline Company for storage of natural gas. ((21); Exhibit (10)(i)114) (i) 59-- Agreement dated as of July 1, 1992 between Central Hudson and Tennessee Gas Pipeline Company for firm transportation periods. ((21); Exhibit (10)(i)115) E-16 (i) 60-- Agreement, dated November 1, 1990, between Tennessee Gas Pipeline and Central Hudson for transportation of third-party gas for injection into and withdrawal from Penn York storage. ((2); Exhibit (19)(10)(i)100) (i) 61-- Agreement, dated December 1, 1991, between Central Hudson and Iroquois Gas Transmission System for interruptible gas transportation service. ((2); Exhibit (19)(10)(i)101) (i) 62-- Letter Agreement, dated August 24, 1992, between Central Hudson and Iroquois Gas Transmission System amending that certain Agreement, dated December 1, 1991 between said parties for interruptible gas transportation service. ((19); Exhibit (19)(10)(i)102) (i) 63-- Agreement, dated as of July 16, 1993, between Central Hudson, Consolidated Edison Company of New York, Inc., Long Island Lighting Company, New York State Electric & Gas Corporation, Niagara Mohawk Power Corporation, Orange and Rockland Utilities, Inc., Rochester Gas and Electric Corporation and the Power Authority of the State of New York. ((2); Exhibit (19)(10)(i)104) (i) 64-- Nine Mile Point Nuclear Station Unit 2 Operating Agreement, effective January 1, 1993, between and among Central Hudson, Niagara Mohawk Power Corporation, Long Island Lighting Company, New York State Electric & Gas Corporation and Rochester Gas and Electric Corporation. ((2); Exhibit (19)(10)(i)105) (i) 65-- Gas Transportation Agreement, dated as of September 1, 1993, by and between Tennessee Gas Pipeline Company and Central Hudson. ((1); Exhibit (19)(10)(i)108) (i) 66-- Agreement, dated as of May 20, 1993, between Central Hudson and New York State Electric & Gas Corporation. ((24); Exhibit (10)(i)93) E-17 (i) 67-- Agreement for the Sale and Purchase of Coal, dated as of December 1, 1996, among Central Hudson, Inter-American Coal N.V. and Inter-American Coal, Inc. [Certain portions of the agreement setting forth or relating to pricing provisions are omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] ((30); Exhibit (10)(i)107) (i) 68-- Credit Agreement, dated as of October 23, 1996, among Central Hudson and The Banks listed herein and Morgan Guaranty Trust Company of New York, as Agent. ((30); Exhibit (10)(i)110) (i) 69-- Settlement Agreement, dated March 20, 1997, among Central Hudson, the Staff of the Public Service Commission of the State of New York and the New York State Department of Economic Development. ((31); Exhibit (10)(i)111) (i) 70-- Amended and Restated Settlement Agreement, dated January 2, 1998, among Central Hudson, the Staff of the Public Service Commission of the State of New York and the New York State Department of Economic Development. ((32); Exhibit (10)(i)112) (i) 71-- Amendment, dated as of March 20, 1994, to the Agreement, dated as of September 9, 1987, between Central Hudson and Niagara Mohawk Power Corporation relating to the purchase of interests in the Roseton Steam Electric Generating Plant (Exhibit (19)(10)(i)76) [Certain portions of said Amendment set forth and relate to confidential terms of said Amendment and will be filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] ((33); Exhibit (10)(i)112) E-18 (i) 72-- Amendment, dated as of November 1, 1997, to the Agreement for the Sale and Purchase of Coal, dated December 1, 1996, among Central Hudson, Inter- American Coal N.V. and Inter-American Coal, Inc. [Certain portions of said Amendment set forth and relate to pricing provisions and will be filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] ((33); Exhibit (10)(i)113) (i) 73-- Order of the Public Service Commission of the State of New York, issued and effective February 19, 1998, adopting the terms of Central Hudson's Amended Settlement Agreement, subject to certain modifications and conditions. ((34); Exhibit (10)(i)114) (i) 74-- Modification to the Amended and Restated Settlement Agreement, dated February 26, 1998, signed by Central Hudson, the Staff of the Public Service Commission of the State of New York, the New York State Consumer Protection Board and Pace Energy Project. ((34); Exhibit (10)(i)115) (i) 75-- Order of the Public Service Commission of the State of New York, issued and effective June 30, 1998, explaining in greater detail and reaffirming its Abbreviated Order, issued and effective February 19, 1998, which February 19, 1998 Order modified, and as modified, approved the Amended and Restated Settlement Agreement, dated January 2, 1998, entered into among Central Hudson, the PSC Staff and others as part of the PSC's "Competitive Opportunities" proceeding (ii) the Order, dated June 24, 1998, of the Federal Energy Regulatory Commission conditionally authorizing the establishment of an Independent System Operator by the member systems of the New York Power Pool and (iii) disclosing, effective August 1, 1998, Paul J. Ganci's appointment by Central Hudson's Board of E-19 Directors as President and Chief Executive Officer and John E. Mack III's (formerly Chairman of the Board and Chief Executive Officer) continuation as Chairman of the Board. ((35); Exhibit (10)(i)116) (i) 76-- Amendment II, dated as of November 1, 1998, to the Agreement for the Sale and Purchase of Coal, dated December 1, 1996, among Central Hudson, Inter- American Coal N.V. and Inter-American Coal, Inc. [Certain portions of said Amendment setting forth or relating to pricing provisions are omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] (i) 77-- Agreement, dated as of November 1, 1998, between Central Hudson and Glencore Ltd., for the Sale and Purchase of Coal. [Certain portions of said Agreement setting forth or relating to pricing provisions are omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] (i) 78-- Participation Agreement, dated as of December 1, 1998, by and between New York State Energy Research and Development Authority and Central Hudson. (i) 79-- Reimbursement Agreement, dated as of July 1, 1987, between Central Hudson and the Bank named therein. ((17); Exhibit (19) (10)(i)90) (i) 80-- First Amendment, dated as of September 1, 1987, to the Reimbursement Agreement, dated as of November 1, 1985, between Central Hudson and the Bank named therein. ((17); Exhibit (19)(10)(i)72) (i) 81-- Second Amendment, dated as of July 1, 1990, to the Reimbursement Agreement, dated as of November 1, 1985, between E-20 Central Hudson and the Bank named therein. ((19); Exhibit (19)(10)(i)93) (i) 82-- First Amendment, dated as of July 1, 1990, to the Reimbursement Agreement, dated as of July 1, 1987, between Central Hudson and the Bank named therein. ((19); Exhibit (19)(10)(i)73) (i) 83-- Third Amendment, dated as of July 29, 1992, to the Reimbursement Agreement, dated as of November 1, 1985, between Central Hudson and the Bank named therein. ((2); Exhibit (19)(10)(i)106) (i) 84-- Second Amendment, dated as of July 29, 1992, to the Reimbursement Agreement, dated as of July 1, 1987, between Central Hudson and the Bank named therein. ((2); Exhibit (19)(10)(i)107) (i) 85-- Credit Agreement, dated December 4, 1998, among the Corporation certain lenders and Bank One N.A. (formerly the First National Bank of Chicago), as agent. ((37); Exhibit (4)) (i) 86-- Agreement, dated April 1, 1999, between Central Hudson and Arch Coal Sales Company, Inc. for the Sale and Purchase of Coal. [Certain portions of the Agreement setting forth or relating to pricing provisions are omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] ((38); Exhibit (10)(i)89) (i) 87-- Agreement and Plan of Exchange by and between Central Hudson and the Corporation (Incorporated by reference to Exhibit A to the Proxy Statement and Prospectus in Part 1 of Registration Statement on Form S-4 of the Corporation (No. 333-52797). ((39; Exhibit 2.1) (i) 88-- Amendment No. 3, dated as of November 1, 1999, to the Agreement for the Sale and Purchase of Coal, dated December 1, 1996, between Central Hudson and Inter- American Coal, Inc. [Certain portions of E-21 said Amendment set forth and relate to pricing provisions and will be filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] (Exhibit (10)(i)88) (i) 89-- Amendment No. 1, dated as of November 1, 1999, to the Agreement for the Sale and Purchase of Coal, dated November 1, 1998, between Central Hudson and Glencore, Ltd. [Certain portions of said Amendment set forth and relate to pricing provisions and will be filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] (Exhibit (10)(i)89) (i) 90-- Amendment No. 1, dated as of November 1, 1999, to the Agreement for the Sale and Purchase of Coal, dated April 1, 1999 between Central Hudson and Arch Coal. [Certain portions of said Amendment set forth and relate to pricing provisions and will be filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under the rules of said Commission.] (Exhibit (10)(i)90) (i) 91-- Amendment No. 1, dated June 11, 1999, to the Corporation's Credit Agreement, dated December 4, 1998, among the Corporation, certain lenders and Bank One N.A. (formerly the First National Bank of Chicago), as agent. (Exhibit (10)(i)91) (iii) 1-- Directors' Deferred Compensation Plan of Central Hudson, effective October 1, 1980. ((16); Exhibit (10)(iii)1) (iii) 2-- Executive Deferred Compensation Plan of Central Hudson, effective March 1, 1992. ((20); Exhibit (19)(10)(iii)8) (iii) 3-- Retirement Benefit Restoration Plan of Central Hudson, effective May 1, 1993. ((22); Exhibit (10)(iii)10) E-22 (iii) 4-- Amendment, dated July 23, 1993, to Retirement Benefit Restoration Plan of Central Hudson. ((22); Exhibit (10)(iii)11) (iii) 5-- First Amendment, dated December 17, 1993, to Central Hudson's Executive Deferred Compensation Plan. ((29); Exhibit (10)(iii)15) (iii) 6-- Executive Incentive Compensation Plan of Central Hudson, effective January 1, 1993. ((24); Exhibit (10)(iii)17) (iii) 7-- Agreement, made March 14, 1994, by and between Central Hudson and Mellon Bank, N.A., amending and restating, effective April 1, 1994, Central Hudson's Savings Incentive Plan and related Trust Agreement with The Bank of New York. ((25); Exhibit (10)(iii)18) (iii) 8-- Amendment 1, dated July 22, 1994 (effective April 1, 1994) to the Amended and Restated Savings Incentive Plan of Central Hudson. ((26); Exhibit (10)(iii)19) (iii) 9-- Amendment 2, dated December 16, 1994 (effective January 1, 1995) to the Amended and Restated Savings Incentive Plan of Central Hudson, as amended. ((26); Exhibit (10)(iii)20) (iii) 10-- Amendment, dated April 4, 1995, to the Executive Incentive Compensation Plan of Central Hudson. ((30); Exhibit (10)(iii)21) (iii) 11-- Stock Plan for Outside Directors of Central Hudson, dated November 17, 1995. ((30); Exhibit (10)(iii)22) (iii) 12-- Management Incentive Program of Central Hudson, effective April 1, 1994. ((30); Exhibit (10)(iii)23) (iii) 13-- Amendment, dated July 25, 1997, to the Management Incentive Program of Central Hudson, effective August 1, 1997. ((33); Exhibit (10)(iii)24) E-23 (iii) 14-- Change-of-Control Severance Policy, as approved by the Board of Directors October 23, 1998 and, effective December 1, 1998, for all management employees of the Company. ((40); Exhibit (10)(iii)14) (iii) 15-- Form of Employment Agreement, dated October 23, 1998, effective December 1, 1998, for all officers of the Company. ((40); Exhibit (10)(iii)15) (iii) 16-- Employment Agreement, dated October 23, 1998, effective December 1, 1998, for the President and Chief Executive Officer of the Company. ((40; Exhibit (10)(iii)16) (iii) 17-- Amendment, dated December 1, 1998, to the Executive Deferred Compensation Plan of Central Hudson. ((40); Exhibit (10)(iii)17) (iii) 18-- Amendment, dated December 1, 1998, to the Retirement Benefit Restoration Plan of Central Hudson. ((40; Exhibit (10)(iii)18) (iii) 19-- Amendment, dated October 1, 1999 to Central Hudson's Directors Deferred Compensation Plan, effective October 1, 1980, which Plan was merged into the Corporation's Directors and Executives Deferred Compensation Plan, effective January 1, 2000. (Exhibit(10)(iii)19) (iii) 20-- Form of Instrument of Assignment and Assumption, dated December 15, 1999, by the Corporation of the Executive Deferred Compensation Plan of Central Hudson, dated March 1, 1992 and as amended, December 17, 1993 and December 1, 1998. (Exhibit (10)(iii)20) (iii) 21-- Amended and Restated Stock Plan for Outside Directors of Central Hudson, together with Form of Instrument of Assignment and Assumption by the Corporation, dated December 15, 1999. (Exhibit (10)(iii)21). E-24 (iii) 22-- Form of Instrument of Assignment and Assumption, dated December 15, 1999, by the Corporation of the Change of Control Severance Policy of Central Hudson, dated December 1, 1998. (Exhibit (10)(iii)22) (iii) 23-- Form of Instrument of Assignment and Assumption, dated December 15, 1999, by the Corporation of Central Hudson Employment Agreements, effective December 1, 1998, covering all officers of the Corporation and Central Hudson. (Exhibit (10)(iii)23) (iii) 24-- Form of Instrument of Assignment and Assumption, dated December 15, 1999, by the Corporation of Central Hudson Employment Agreement, effective December 1, 1998, covering Paul J. Ganci. (Exhibit (10)(iii)24) (iii) 25-- Directors and Executives Deferred Compensation Plan of the Corporation, dated December 17, 1999 and effective January 1, 2000. (Exhibit (10)(iii)25) (iii) 26-- Trust and Agency Agreement, dated December 17, 1999 and effective January 1, 2000, between the Corporation and First America Trust Company for the Corporation's Directors and Executives Deferred Compensation Plan. (Exhibit (10)(iii)26) (iii) 27-- Long-Term Performance-Based Incentive Plan of the Corporation, dated October 22, 1999 and effective January 1, 2000 and Form of Instrument of Assignment and Assumption, dated December 15, 1999. (The long-term incentive portion of such Plan subject to Shareholder approval 4/25/99.) (Exhibit (10)(iii)27) (12) -- Statement showing the computation of the ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred dividends. E-25 (21) -- Affiliates of the Corporation: State or other Name under which Jurisdiction of Affiliate conducts Name of Affiliate Incorporation Business - ----------------- -------------- ------------------ Central Hudson Gas New York Central Hudson Gas & Electric Corporation Electric Corporation Central Hudson Energy New York Central Hudson Services, Inc. Energy Services, Inc. Phoenix Development New York Phoenix Development Company, Inc. Company, Inc. Greene Point New York Greene Point Development Corporation Development Corporation CH Resources, Inc. New York CH Resources, Inc. CH Syracuse New York CH Syracuse Properties, Properties, Inc. Inc. CH Niagara New York CH Niagara Properties, Properties, Inc. Inc. Central Hudson New York Central Hudson Enterprises Enterprises Corporation Corporation SCASCO, Inc. Connecticut SCASCO, Inc. Island Sound Delaware Island Sound Commercial Commercial Energy Energy Sales, Inc. Sales, Inc. (merged into SCASCO, Inc. 12/31/99) Prime Industrial New York Prime Industrial Energy Energy Services, Inc. Services, Inc. (23) -- Consent of Experts: The consents of PricewaterhouseCoopers LLP. (24) -- Powers of Attorney: Powers of Attorney for each of the directors comprising a majority of the Board of Directors of Central Hudson authorizing execution and filing of this Annual Report on Form 10-K by Paul J. Ganci. E-26 (27) -- Financial Data Schedule (99) -- Additional Exhibits: (i) 1-- Stipulation and Order on Consent signed on behalf of the Department of Environmental Protection of the City of New York, Environmental Defense Fund, Inc., Department of Environmental Conservation of the State of New York, Central Hudson Gas & Electric Corporation and Consolidated Edison Company of New York, Inc. ((23); Exhibit 28.1) (i) 2-- Settlement Agreement on Issues Related to Nine Mile Two Nuclear Plant, dated June 6, 1990, among the Staff of the Department of Public Service, the Consumer Protection Board, the Attorney General of the State of New York, Assemblyman Maurice Hinchey, Multiple Intervenors, Central Hudson, Long Island Lighting Company, New York State Electric & Gas Corporation, Niagara Mohawk Power Corporation and Rochester Gas and Electric Corporation. ((19); Exhibit (19)(28)(i)4) (i) 3-- Order on Consent signed on behalf of the New York State Department of Environmental Conservation and Central Hudson relating to Central Hudson's former manufactured gas site located in Newburgh, New York. ((28); Exhibit (99)(i)5) (i) 4-- Summary of principal terms of the Amended and Restated Settlement Agreement, dated January 2, 1998, among Central Hudson, the Staff of the Public Service Commission of the State of New York and the New York State Department of Economic Development. ((32); Exhibit 99(i)9) (i) 5-- Central Hudson's acceptance, dated February 26, 1998, of the Order of the Public Service Commission of the State of New York, issued and effective February 19, 1998, adopting the terms of Central Hudson's Amended and Restated Settlement subject to modifications and conditions. ((34); Exhibit 99(i)10) E-27 The following are notes to the Exhibits listed above: (1) Incorporated herein by reference to Central Hudson's Quarterly report on Form 10-Q for fiscal quarter ended September 30, 1993 (File No. 1-3268). (2) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1992 (File No. 1- 3268). (3) Incorporated herein by reference to Central Hudson's Registration Statement No. 2-65127. (4) Incorporated herein by reference to Central Hudson's Registration Statement No. 2-67537. (5) Incorporated herein by reference to Central Hudson's Registration Statement No. 2-69640 (6) (a) Incorporated herein by reference to Prospectus Supplement Dated May 28, 1992 (To Prospectus Dated April 13, 1992) relating to $125,000,000 principal amount of First Mortgage Bonds, designated Secured Medium-Term Notes, Series A, and to the Prospectus Dated April 13, 1992 relating to $125,000,000 principal amount of Central Hudson's debt securities attached thereto, as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(5) under the Securities Act of 1933, in connection with Registration Statement No. 33-46624. (b) Incorporated herein by reference to Pricing Supplement No. 1, Dated June 4, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (c) Incorporated herein by reference to Pricing Supplement No. 2, Dated June 4, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. E-28 (d) Incorporated herein by reference to Pricing Supplement No. 3, Dated June 4, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (e) Incorporated herein by reference to Pricing Supplement No. 4, Dated August 20, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (f) Incorporated herein by reference to Pricing Supplement No. 5, Dated August 20, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (g) Incorporated herein by reference to Pricing Supplement No. 6, Dated July 26, 1993 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (h) Incorporated herein by reference to Pricing Supplement No. 7, Dated July 26, 1993 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (7) Incorporated herein by reference to Central Hudson's Current Report on Form 8-K, dated May 27, 1992 (File No. 1-3268). E-29 (8) (a) Incorporated herein by reference to Prospectus Supplement Dated May 28, 1992 (To Prospectus Dated April 13, 1992) relating to $125,000,000 principal amount of Medium-Term Notes, Series A, and to the Prospectus Dated April 13, 1992, relating to $125,000,000 principal amount of Central Hudson's debt securities attached thereto, as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(5) under the Securities Act of 1933, in connection with Registration Statement No. 33-46624. (b) Incorporated herein by reference to Pricing Supplement No. 1, Dated June 26, 1992 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (c) Incorporated herein by reference to Pricing Supplement No. 2, Dated October 6, 1993 (To Prospectus Dated April 13, 1992, as supplemented by a Prospectus Supplement Dated May 28, 1992), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement No. 33-46624. (9) Incorporated herein by reference to Prospectus Supplement Dated May 15, 1995 (To Prospectus Dated April 4, 1995) relating to $80,000,000 principal amount of First Mortgage Bonds, designated Secured Medium-Term Notes, Series B, and the Prospectus Dated April 4, 1995, relating to (i) $80,000,000 of Central Hudson's Debt Securities and Common Stock, $5.00 par value, but not in excess of $40 million aggregate initial offering price of such Common Stock and (ii) 250,000 shares of Central Hudson's Cumulative Preferred Stock, par value $100 per share, which may be issued as 1,000,000 shares of Depositary Preferred Shares each representing 1/4 of a share of such Cumulative Preferred Stock attached thereto, as filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-56349. E-30 (10) (a) Incorporated herein by reference to Prospectus Supplement Dated August 24, 1998 (To Prospectus Dated April 4, 1995) relating to $80,000,000 principal amount of Medium-Term Notes, Series B, and the Prospectus Dated April 4, 1995, relating to (i) $80,000,000 of Central Hudson's Debt Securities and Common Stock, $5.00 par value, but not in excess of $40 million aggregate initial offering price of such Common Stock and (ii) 250,000 shares of Central Hudson's Cumulative Preferred Stock, par value $100 per share, which may be issued as 1,000,000 shares of Depositary Preferred Shares each representing 1/4 of a share of such Cumulative Preferred Stock attached thereto, as filed pursuant to Rule 424(b) in connection with Registration Statement No. 33-56349. (b) Incorporated herein by reference to Pricing Supplement No. 1, Dated September 2, 1998 (To Prospectus Dated April 4, 1995, as supplemented by a Prospectus Supplement Dated August 24, 1998), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(2) under the Securities Act of 1933 in connection with Registration Statement No. 33-56349. (11) Incorporated herein by reference to Central Hudson's Registration Statement No. 2-50276. (12) Incorporated herein by reference to Central Hudson's Registration Statement No. 2-54690. (13) Incorporated herein by reference to Central Hudson's Registration Statement No. 2-58500. (14) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1986 (File No. 1- 3268). (15) Incorporated herein by reference to Central Hudson's Registration Statement No. 2-60496. (16) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1989 (File No. 1- 3268). E-31 (17) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No. 1- 3268). (18) Incorporated herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1989 (File No. 1- 3268). (19) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1990 (File No. 1- 3268). (20) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1991 (File No. 1- 3268). (21) Incorporated herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1992 (File No. 1-3268). (22) Incorporated herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1993 (File No. 1-3268). (23) Incorporated herein by reference to Central Hudson's Current Report on Form 8-K, dated May 15, 1987 (File No. 1-3268). (24) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No. 1-3268). (25) Incorporated herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1994 (File No. 1-3268). (26) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-3268). (27) Incorporated herein by reference to Central Hudson's Current Report on Form 8-K, dated May 15, 1995 (File No. 1-3268). E-32 (28) Incorporated herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1995 (File No. 1-3268). (29) Incorporated herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996 (File No. 1-3268). (30) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (File No. 1-3268). (31) Incorporated herein by reference to Central Hudson's Current Report on Form 8-K, dated April 1, 1997 (File No. 1-3268). (32) Incorporated herein by reference to Central Hudson's Current Report on Form 8-K, dated January 7, 1998 (File No. 1-3268). (33) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, as amended December 8, 1998 (File No. 1-3268). (34) Incorporated herein by reference to Central Hudson's Current Report on Form 8-K, dated February 10, 1998 (File No. 1-3268). (35) Incorporated herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998 (File No. 1- 3268). (36) (a) Incorporated herein by reference to Prospectus Supplement Dated January 8, 1999 (To Prospectus Dated January 7, 1999) relating to $110,000,000 principal amount of Medium-Term Notes, Series C, and to the Prospectus Dated January 7, 1999, relating to $110,000,000 principal amount of Central Hudson's debt securities attached thereto, as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(2) under the Securities Act of 1933, in connection with Registration Statement Nos. 333-65597 and 33-56349. E-33 (b) Incorporated herein by reference to Pricing Supplement No. 1, Dated January 12, 1999 (To Prospectus Dated January 7, 1999, as supplemented by a Prospectus Supplement Dated January 8, 1999), as filed with the Securities and Exchange Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 in connection with Registration Statement Nos. 333-65597 and 33-56349. (37) Incorporated herein by reference to the Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 333-52797). (38) Incorporation herein by reference to Central Hudson's Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1999 (File No. 1-3268). (39) Incorporated herein by reference to Central Hudson's Current Report on Form 8-K dated December 15, 1999 (File No. 1-3268) (40) Incorporated herein by reference to Central Hudson's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 1-3268). (41) Incorporated herein by reference to Pricing Supplement No. 2, Dated January 31, 2000 (To Prospectus dated January 7, 1999, as supplemented by a Prospectus Supplement Dated January 31, 2000, as filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933 in connection with Registration Statement Nos. 333-65597 and 33-56349. * Exhibits preceded by an asterisk have heretofore been classified as basic documents under previous Rule 24(b) of the SEC Rules of Practice. E-34 EX-3.(II)1 3 BY-LAWS-CH ENERGY GROUP EXHIBIT 3 (ii) 1 BY-LAWS CH ENERGY GROUP, INC. POUGHKEEPSIE, NEW YORK BY-LAWS CH ENERGY GROUP, INC. POUGHKEEPSIE, NEW YORK INDEX PAGE ---- ARTICLE I MEETINGS OF SHAREHOLDERS Section 1.1 Annual Meetings............................................. 1 Section 1.2 Special Meetings............................................ 1 Section 1.3 Place of Meetings........................................... 1 Section 1.4 Presiding at Meetings....................................... 1 Section 1.5 Quorum...................................................... 1 Section 1.6 Adjournment................................................. 2 Section 1.7 Notice of Meetings.......................................... 2 Section 1.8 Waiver and Consent.......................................... 3 Section 1.9 Fixing Record Date.......................................... 3 Section 1.10 List of Shareholders at Meetings............................ 3 Section 1.11 Proxies..................................................... 3 Section 1.12 Notice of Shareholder Business and Nominations.............. 4 Section 1.13 Inspectors of Elections.................................... 7 Section 1.14 Vote of Shareholders........................................ 7 ARTICLE II BOARD OF DIRECTORS Section 2.1 Number of Directors......................................... 7 Section 2.2 Elections, Terms and Vacancies.............................. 8 Section 2.3 Meetings of the Board....................................... 8 Section 2.4 Notice and Adjournment...................................... 8 (i) PAGE ---- ARTICLE II BOARD OF DIRECTORS (Continued) Section 2.5 Quorum...................................................... 9 Section 2.6 Unanimous Written Consent................................... 9 Section 2.7 Resignation of Directors.................................... 9 Section 2.8 Removal of Directors........................................ 9 Section 2.9 Compensation of Directors.................................. 10 Section 2.10 Time and Place of Meetings................................. 10 Section 2.11 Special Meetings........................................... 10 Section 2.12 Telephonic Meetings........................................ 10 ARTICLE III COMMITTEES Section 3.1 Organization and Authority................................. 10 Section 3.2 Executive Committee........................................ 11 Section 3.3 Action by a Committee...................................... 11 Section 3.4 Quorum..................................................... 11 Section 3.5 Reports to Board of Directors.............................. 12 Section 3.6 Compensation of Committee Members.......................... 12 Section 3.7 Resignation and Removal of Committee Members............... 12 Section 3.8 Unanimous Written Consent.................................. 12 Section 3.9 Place of Committee Meetings................................ 12 Section 3.10 Notice..................................................... 12 ARTICLE IV OFFICERS AND THEIR DUTIES Section 4.1 Officers................................................... 13 Section 4.2 Term of Office; Resignation; Removal; Vacancies............ 13 Section 4.3 Powers and Duties.......................................... 13 Section 4.4 Salaries................................................... 14 Section 4.5 Chairman................................................... 14 Section 4.6 Vice Chairman.............................................. 14 Section 4.7 Vice President............................................. 14 Section 4.8 Secretary.................................................. 15 Section 4.9 Treasurer.................................................. 15 Section 4.10 Controller................................................. 15 Section 4.11 Other Officers............................................. 16 (ii) PAGE ---- ARTICLE V SHARES CERTIFICATED SHARES Section 5.1 Certificates, Registrar and Transfer Agent................. 16 Section 5.2 Authorization of Facsimile Signatures and Seal............. 16 Section 5.3 Transfer of Certificated Shares............................ 16 Section 5.4 Lost, Stolen or Destroyed Share Certificates............... 17 ARTICLE VI INDEMNIFICATION Section 6.1 General Applicability...................................... 17 Section 6.2 Scope of Indemnification................................... 17 Section 6.3 Other Indemnification Provisions........................... 18 Section 6.4 Survival of Indemnification................................ 18 Section 6.5 Inability to Limit Indemnification......................... 18 Section 6.6 Severability............................................... 18 ARTICLE VII OTHER MATTERS Section 7.1 Books to be Kept........................................... 19 Section 7.2 Corporate Seal............................................. 19 Section 7.3 When Notice or Lapse of Time Unnecessary................... 19 Section 7.4 Contracts, etc., How Executed.............................. 20 Section 7.5 Loans...................................................... 20 Section 7.6 Deposits................................................... 20 Section 7.7 General and Special Bank Accounts.......................... 20 Section 7.8 Fiscal Year................................................ 21 ARTICLE VIII AMENDMENTS TO BY-LAWS Section 8.1 By Directors............................................... 21 Section 8.2 By Shareholders............................................ 21 (iii) ARTICLE I MEETINGS OF SHAREHOLDERS SECTION 1.1 ANNUAL MEETINGS The annual meeting of the shareholders, for the election of directors and the transaction of such other business as may be brought before the meeting, shall be held each year on the fourth Tuesday in April (or if said day be a legal holiday, then on the next succeeding business day), at such time of day as the directors may determine. SECTION 1.2 SPECIAL MEETINGS Subject to the rights of the holders of any series of stock having a preference over the Common Stock of the Company as to dividends or upon liquidation ("Preferred Stock") with respect to such series of Preferred Stock, special shareholders' meetings may be called by holders of a majority of the votes of the outstanding shares of common stock of the Company entitled to vote or act with respect thereto upon the business to be brought before such meeting, or by the Chairman of the Board of Directors, President and Chief Executive Officer pursuant to a resolution adopted by a majority of the total number of directors which the Company would have if there were no vacancies. At any special meeting, only such business may be transacted which is related to the purpose(s) set forth in the notice of such special meeting given pursuant to Section 1.7 of these By-Laws. SECTION 1.3 PLACE OF MEETINGS Shareholders' meetings shall be held at the principal office of the Company or at such other place as designated by the Board of Directors and stated in the notice of such meeting. SECTION 1.4 PRESIDING AT MEETINGS At all shareholders' meetings, the Chairman of the Board of Directors, President and Chief Executive Officer, Vice Chairman or a Vice President, shall act as Chairman of the meeting as provided for in Sections 4.5, 4.7 and 4.8 and the Secretary or Assistant Secretary shall act as Secretary of the meeting as provided for in Section 4.9. SECTION 1.5 QUORUM Holders of a majority of the votes of the shares of the Company entitled to vote must be present, in person or by proxy, at each shareholders' meeting to constitute a quorum at such meeting. When a specified item of business is required to be voted on by a class or series, voting as a class, the holders of a majority of the votes of the shares of such class or series shall constitute a quorum for the transaction of such specified item of business. When a quorum is 1 once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders. Except as may be provided by or pursuant to the Certificate of Incorporation, at all shareholders' meetings each shareholder entitled to vote shall be entitled to one vote for each share held by him or her, and may vote and otherwise act either in person or by proxy, as provided for in Section 1.11. SECTION 1.6 ADJOURNMENT The Chairman of the meeting, or a majority of the shares so represented at the meeting, may adjourn the meeting despite the absence of a quorum. When a shareholders' meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. However, if after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date entitled to notice under this Section 1.6. SECTION 1.7 NOTICE OF MEETINGS Written notice of the date, time and place of every shareholders' meeting shall be given personally, or by first class mail (not less than ten (10) nor more than sixty (60) days before the date of the meeting) or by third class mail (not less than twenty-four (24) nor more than sixty (60) days before the date of the meeting) or as otherwise may be permitted by law, to each shareholder of record as of the date fixed by the Board of Directors, pursuant to Section 1.9 hereof, and such other notice shall be given as may be required by law. Notice of a special shareholders' meeting shall indicate that it is being issued by or at the direction of the person or persons calling the meeting and shall state the purpose(s) for which the meeting is called. If mailed, such notice shall be deemed given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his or her address as it appears on the shareholders' list or record, or, if he or she shall have filed with the Secretary of the Company a written request that notices to him or her be mailed to some other address, then directed to him or her at such other address. An affidavit of the Secretary of the Corporation or other person giving the notice or of a transfer agent of the Corporation that the notice required by this Section 1.7 has been given shall be supplied at the meeting to which it relates. 2 SECTION 1.8 WAIVER AND CONSENT Notice of meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without objecting to the lack of notice of such meeting prior to the conclusion of the meeting, shall constitute a waiver of notice by such shareholder. The transactions of any shareholders' meeting, however called and noticed, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of the meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Executors, administrators, guardians, trustees, and other fiduciaries entitled to vote shares may sign such waivers, consents and approvals. SECTION 1.9 FIXING RECORD DATE For the purpose of determining the shareholders entitled to notice of or to vote at any shareholders' meeting or any adjournment thereof, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix, in advance, a date as the record date for any such determination. Such date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days before the date of such action. SECTION 1.10 LIST OF SHAREHOLDERS AT MEETINGS A list of shareholders as of the record date, certified by the Secretary or any Assistant Secretary or by a transfer agent, shall be produced at any shareholders' meeting upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors, or the person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. SECTION 1.11 PROXIES (a) Generally. Every person entitled to vote or execute consents shall have the right to do so either in person or by one or more agents authorized by a written proxy executed by such person or his duly authorized agent and filed with the Secretary of the Company or by telephone or electronic transmission as permitted by law. Any executor, administrator, guardian, trustee or other fiduciary, may give proxies. 3 (b) Term of Proxies. A proxy is not valid after the expiration of eleven (11) months from the date of its execution, unless the length of time for which such proxy is to continue in force is otherwise specified therein, which in no case shall exceed seven (7) years from the date of its execution. (c) Revocation and Suspension of Proxies. Any proxy duly executed continues in full force and effect and is not revoked until an instrument revoking it, or until a duly executed proxy bearing a later date, is filed with the Secretary of the Company. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted or the authority is exercised, written notice of the death or incapacity is given to the Company. Notwithstanding that a valid proxy is outstanding, if the person executing the proxy is present at the meeting and elects to vote in person, then the powers of the proxy holder are suspended, except in the case of a proxy coupled with an interest (which states that fact on its face). (d) Voting by Two or More Proxies. If any instrument of proxy designates two or more persons to act as proxy, in the absence of any provision in the proxy to the contrary, the persons designated may represent and vote the shares in accordance with the vote or consent of the majority of the persons named as such proxies. If only one such proxy is present, such proxy may vote all the shares, and all the shares standing in the name of the principal(s) for whom such proxy acts shall be deemed represented for the purpose of obtaining a quorum. The foregoing provisions shall apply to the voting of shares by proxies for any two or more administrators, executors, trustees, or other fiduciaries, unless an instrument or order of court appointing them otherwise directs. (e) Directors' Determination of Execution and Use of Proxies. The Board of Directors may, in advance of any annual or special meeting of the shareholders, prescribe additional regulations concerning the manner of execution and filing of proxies and the validation of the same, which are intended to be voted at any such meeting. SECTION 1.12 NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS A. Annual Shareholders' Meetings (1) Nominations of persons for election to the Board of Directors of the Company and the proposal of business to be considered by the shareholders may be made at an annual shareholders' meeting (a) pursuant to the Company's notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareholder of the Company who was a shareholder of record at the time of giving of notice provided for in this Section 1.12 who is entitled to vote at the meeting and who complies with the notice of procedures set forth in this Section 1.12. 4 (2) For nominations or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (c) of paragraph A.(1) of this Section 1.12, the shareholder must have given timely notice thereof in writing to the Secretary of the Company and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Company not later than the close of business on the 60th day nor earlier than the close of business on the 90th day prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 90th day prior to such annual meeting and no later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which the date of such meeting is first publicly announced or disclosed (in a public filing or otherwise) by the Company. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or reelection as a Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (b) as to any other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such shareholder, as they appear on the Company's books, and of such beneficial owner and (ii) the class and number of shares of the Company which are owned beneficially and of record by such shareholder and such beneficial owner. (3) Notwithstanding anything in the second sentence of paragraph A.(2) of this Section 1.12 to the contrary, in the event that the number of Directors to be elected to the Board of Directors of the Company is increased and there is no public announcement by the Company naming all of the nominees for Director or specifying the size of the increased Board of Directors at least 70 days prior to the first anniversary of the preceding year's annual meeting, a shareholder's notice required by paragraph A. of Section 1.12 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Company not later than the close of business on the 10th day following the day on which such public announcement is first made by the Company. 5 B. Special Shareholders' Meetings Only such business shall be conducted at a special shareholders' meeting as shall have been brought before the meeting pursuant to the Company's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special shareholders' meeting at which Directors are to be elected pursuant to the Company's notice of meeting (a) by or at the direction of the Board of Directors or (b) provided that the Board of Directors has determined that Directors shall be elected at such meeting, by any shareholder of the Company who is a shareholder of record at the time of giving of notice provided for in this Section 1.12 who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 1.12. In the event the Company calls a special shareholders' meeting for the purpose of electing one or more Directors to the Board of Directors, any such shareholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Company's notice of meeting, if the shareholder's notice required by paragraph A.(2) of this Section 1.12 shall be delivered to the Secretary at the principal executive offices of the Company not earlier than the close of business on the 90th day prior to such special meeting and not later than the close of business on the later of the 60th day prior to such special meeting or the 10th day following the day on which public announcement or other disclosure (in a public filing or otherwise) is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a shareholder's notice as described above. C. General (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to serve as Directors and only such business shall be conducted at a shareholders' meeting as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 and, if any proposed nomination or business is not in compliance with this Section 1.12, to declare that such defective proposal or nomination shall be disregarded. (2) For purposes of this Section 1.12, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act. (3) Notwithstanding the foregoing provisions of this Section 1.12, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.12. Nothing in this Section 1.12 6 of Article I shall be deemed to affect any rights (i) of shareholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders of any series of Preferred Stock to elect Directors under specified circumstances. SECTION 1.13 INSPECTORS OF ELECTIONS The Board of Directors by resolution shall appoint, or shall authorize an officer of the Company to appoint, one or more inspectors, which inspector or inspectors may include individuals who serve the Company in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of shareholders and make a written report thereof. One or more persons may be designated as alternate inspector(s) to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of shareholders, the Chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging such person's duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of such person's ability. The inspector(s) shall have the duties prescribed by law. The Chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the shareholders will vote at a meeting. SECTION 1.14 VOTE OF SHAREHOLDERS Subject to the rights of holders of any series of Preferred Stock, Directors shall, except as otherwise required by law or by the Certificate of Incorporation or by a specific provision of these By-Laws adopted by the shareholders, be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election. Subject to the rights of holders of any series of Preferred Stock, whenever any corporate action, other than the election of Directors, is to be taken by vote of the shareholders, it shall, except as otherwise required by law or by the Certificate of Incorporation, be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. ARTICLE II BOARD OF DIRECTORS SECTION 2.1 NUMBER OF DIRECTORS The affairs of this Company shall be managed by no less than one (1) nor more than twenty-five (25) Directors as fixed by resolution adopted by a majority of the entire Board. Each director shall be at least 18 years of age. No person who will reach age 71 during his or her prospective term shall stand for election as a Director. 7 SECTION 2.2 ELECTIONS, TERMS AND VACANCIES At the first annual meeting of shareholders following the adoption of the Restated Certificate of Incorporation of the Company, or any special meeting in lieu thereof, the Board of Directors shall be divided into three classes designated Class I, Class II and Class III. Such classes shall be as nearly equal in number as the then total number of Directors constituting the entire Board permits. Class I, Class II and Class III Directors shall be elected for terms expiring at the next succeeding annual meeting, the second succeeding annual meeting and the third succeeding annual meeting, respectively, and until their respective successors are elected and qualified. At each annual shareholders' meeting after such first annual (or special) meeting of shareholders following the adoption of the Restated Certificate of Incorporation of the Company, the Directors chosen to succeed those in the class whose terms then expire shall be elected by shareholders for terms expiring at the third succeeding annual meeting after election, or for such lesser term for which one or more may be nominated in a particular case in order to assure that the number of Directors in each class shall be appropriately constituted and until their respective successors are elected and qualified. Newly created Directorships or any decrease in Directorships resulting from increases or decreases in the number of Directors shall be so apportioned among the classes of Directors as to make all the classes as nearly equal in number as possible. Vacancies on the Board at any time may be filled by a majority of the Directors then in office, although less than a quorum. A Director elected to fill a vacancy, unless elected by the shareholders, shall hold office until the next meeting of shareholders at which the election of Directors is in the regular order of business, and until his or her successor has been elected and qualified. Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Stock (other than the Common Stock) shall have the right, voting separately by class or series, to elect Directors at an annual or special shareholders' meeting, the election, term of office, filling of vacancies and other features of such Directorships shall be governed by any terms of the Certificate of Incorporation of the Company applicable thereto, and such Directors so elected shall not be divided into classes pursuant to this Section 2.2 unless expressly provided by such terms. SECTION 2.3 MEETINGS OF THE BOARD An annual meeting of the Board of Directors shall be held in each year as soon as practicable after the annual meeting of shareholders. Regular meetings of the Board shall be held at such times as may be fixed by the Board. No notice need be given of annual or regular meetings of the Board of Directors. SECTION 2.4 NOTICE AND ADJOURNMENT Notice of each special meeting of the Board shall be given to each director either by mail not later than noon, New York time, on the fifth business day prior to the meeting or by telegram, 8 by facsimile transmission, by written message or orally to the Directors not later than noon, New York time, on the day prior to the meeting. Notices shall be deemed to have been given by mail when deposited in the United States mail, by telegram at the time of filing, by facsimile transmission upon confirmation of receipt, and by messenger at the time of delivery by the messenger. Notices by mail, telegram, facsimile transmission or messenger shall be sent to each Director at the address or facsimile number designated by him or her for that purpose, or, if none has been so designated, at his or her last known residence or business address. Notice of a meeting of the Board of Directors need not be given to any Director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him or her. A notice or waiver of notice need not specify the purpose of any meeting of the Board of Directors. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. Notice of any adjournment of a meeting to another time or place shall be given in the manner described above to the Directors who were not present at the time of the adjournment and, unless such time and place are announced at the meeting, to the other Directors. SECTION 2.5 QUORUM Unless a greater quorum is required by law, a majority of the number of directors at the time serving on the Board of Directors shall constitute a quorum for the transaction of business, or of any specified item of business, provided, however, that a quorum shall not consist of less than one-third of the entire Board of Directors. Except where otherwise provided by law or in the Certificate of Incorporation or these By-Laws, the vote of a majority of the Directors present at a meeting at the time of such vote, if a quorum is then present, shall be the act of the Board. SECTION 2.6 UNANIMOUS WRITTEN CONSENT Any action authorized, in writing, by all of the Directors entitled to vote thereon and filed with the minutes of the Company shall be the act of the Board with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of the Board. SECTION 2.7 RESIGNATION OF DIRECTORS Any Director of the Company may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Chairman of the Board or Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein. SECTION 2.8 REMOVAL OF DIRECTORS Subject to the rights of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect Directors under specified circumstances, any 9 Director may be removed from office only for cause by a vote of the shareholders entitled to vote thereon. SECTION 2.9 COMPENSATION OF DIRECTORS Members of the Board shall receive such fees and compensation as fixed from time to time by the Board and shall be reimbursed for reasonable expenses for attending Board meetings. In the event of brief unscheduled Board meetings or Board meetings called on short notice, the Chairman of the Board, President and Chief Executive Officer may decide to hold the meeting by conference telephone or similar communications equipment or permit a member of the Board to attend the meeting by such means, in which case each director participating in the meeting by such teleconference shall be compensated at 75% of the then normal fee applicable to such meeting. SECTION 2.10 TIME AND PLACE OF MEETINGS Meetings of the Board of Directors shall be held in such month on such day at such hour and at such place as the Board may from time to time direct. SECTION 2.11 SPECIAL MEETINGS Special meetings of the Board may be held on the call of the Chairman of the Board of Directors, President and Chief Executive Officer or the Secretary or upon written request of a majority of the Directors at the time serving on the Board addressed to the Secretary. SECTION 2.12 TELEPHONIC MEETINGS In the event it is necessary to obtain a quorum, at the discretion of the Chairman of the Board, President and Chief Executive Officer and the presiding committee Chairman, any one or more members of the Board or any committee of the Board may participate in a meeting of the Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. ARTICLE III COMMITTEES SECTION 3.1 ORGANIZATION AND AUTHORITY The Board of Directors, by resolution adopted by a majority of the entire Board, may designate from among its members, such committees as the Board of Directors may from time to time determine, including the committee created by Section 3.2 of this Article III, each consisting of three or more Directors, and each of which, to the extent provided in the resolution, shall have 10 all the authority of the Board, except that no such committee shall have authority as to (1) the submission to shareholders of any action that needs shareholders' approval; (2) the filling of vacancies in the Board or in any committee thereof; (3) the fixing of compensation of the Directors for serving on the Board or on any committee thereof; (4) the amendment or repeal of the By-Laws, or the adoption of new By-Laws; (5) the amendment or repeal of any resolution of the Board which, by its terms, shall not be so amendable or repealable; (6) the fixing or changing of the size of the Board; or (7) the removal or indemnification of Directors. In the event of the absence of any member(s) from a meeting of a committee, replacements may be made from Directors designated as alternate members of such committee by the Board. The Chairman of the Board of Directors, President and Chief Executive Officer, or in his absence or should he so direct, a Vice President, if such officers are members of the committee, shall preside at meetings of the committee, otherwise the presiding officer shall be designated by majority vote of the committee. Vacancies in the membership of the committee shall be filled by the Board of Directors at a regular or special meeting of the Board of Directors. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. SECTION 3.2 EXECUTIVE COMMITTEE The Board of Directors, by resolution adopted by a majority of the entire Board, may designate three or more of the directors, together with the Chairman of the Board of Directors, President and Chief Executive Officer, to constitute an Executive Committee, to serve at the pleasure of the Board, which Committee shall during the intervals between meetings of the Board of Directors, unless limited by the resolution appointing such Committee, have authority to exercise all or any of the powers of the Board of Directors in the management of the affairs of the Corporation, insofar as such powers may lawfully be delegated or as set forth in these By-Laws. The Board may designate one or more directors as alternate members of such Committee, who may replace any absent member or members at any meeting of such Committee. SECTION 3.3 ACTION BY A COMMITTEE The act of a majority of the members of a committee present at any meeting at which a quorum is present shall be the act of such committee. The members of a committee shall act only as a committee, and the individual members thereof shall have no individual powers as such. Each committee may make such rules as it may deem expedient for the regulation and carrying on of its meetings and proceedings. SECTION 3.4 QUORUM A majority of the members of a committee shall constitute a quorum. 11 SECTION 3.5 REPORTS TO BOARD OF DIRECTORS Each such committee shall keep a record of its proceedings and make reports to the Board at its next regular meeting. SECTION 3.6 COMPENSATION OF COMMITTEE MEMBERS Members of committees of the Board shall receive such fees and compensation as fixed from time to time by the Board and shall be reimbursed for reasonable expenses for attending committee meetings. In the event of brief unscheduled committee meetings or committee meetings called on short notice, the Chairman of the Board, President and Chief Executive Officer and the presiding committee Chairman may decide to hold the meeting by conference telephone or similar communications equipment or permit a member of the committee to attend the meeting by such means, in which case each director participating in the meeting by such teleconference shall be compensated at 75% of the then normal fee applicable to such meeting. SECTION 3.7 RESIGNATION AND REMOVAL OF COMMITTEE MEMBERS Any member of any committee may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Chairman of the Board of Directors, President and Chief Executive Officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein. Committee members may be removed by action of the Board of Directors, with or without cause. SECTION 3.8 UNANIMOUS WRITTEN CONSENT Any action authorized in writing, by all of the members of a committee and filed with the minutes of the Company shall be the act of that committee with the same force and effect as if the same had been passed by unanimous vote at a duly called meeting of such committee. SECTION 3.9 PLACE OF COMMITTEE MEETINGS Meetings of each committee shall be held in such month on such day at such hour and at such place as such committee may from time to time direct. SECTION 3.10 NOTICE Unless otherwise provided by resolution of the Board or by vote of a majority of the members of the relevant committee, notice of committee meetings shall be given in the same manner as notice of special meetings of the Board is to be given under Section 2.4 of these By-Laws. 12 ARTICLE IV OFFICERS AND THEIR DUTIES SECTION 4.1 OFFICERS The Board of Directors, at its regular annual meeting, shall elect or appoint from their number a Chairman of the Board of Directors, President and Chief Executive Officer, the Chairmen of Committees of the Board and may elect or appoint a Vice Chairman of the Board of Directors and Vice Chairmen of Committees of the Board, which officers shall be officers of the Board; and it shall elect or appoint one or more Vice Presidents, a Secretary, a Treasurer, and a Controller which officers shall be officers of the Company. Each of said officers, subject to the provisions of Sections 4.2 and 4.3 hereof, shall hold officer, if elected, until the meeting of the board following the next Annual Meeting of shareholders and until his or her successor has been elected and qualified, or, if appointed, for the term specified in the resolution appointing him or her and until his or her successor has been elected or appointed. Any two or more offices may be held by the same person. Should any of the officers of the Board cease to be a director, he shall ipso facto cease to be such officer. SECTION 4.2 TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES Except as otherwise provided in the resolution of the Board of Directors electing or appointing any officer, all officers shall be elected or appointed to hold office until the meeting of the Board of Directors following the next succeeding annual meeting of shareholders. Each officer shall hold office for the term for which he or she is elected or appointed, and until his or her successor has been elected or appointed and qualified. Any officer may resign at any time by giving written notice to the Board or to the Chairman of the Board of Directors, President and Chief Executive Officer, if any, or the Secretary of the Company. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any officer may be removed by the Board, with or without cause, at any time. Removal of an officer without cause shall be without prejudice to his or her contract rights, if any, with the Company, but the election or appointment of an officer shall not of itself create contract rights. Any vacancy occurring in any office of the Company by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board. SECTION 4.3 POWERS AND DUTIES The officers of the Company shall have such authority and perform such duties in the management of the Company as may be prescribed by the Board of Directors and, to the extent not so prescribed, as generally pertain to their respective offices, subject to the control of the Board. Securities of other companies held by the Company may be voted by any officer designated by the Board and, in the absence of any such designation, by the Chairman of the 13 Board of Directors, President and Chief Executive Officer, any Vice President, the Secretary or the Treasurer. The Board may require any officer, agent or employee to give security for the faithful performance of his duties. SECTION 4.4 SALARIES Salaries of all officers of the Company shall be fixed by the Board from time to time; and salaries of all other employees of the Company shall be regulated by the Chief Executive Officer. SECTION 4.5 CHAIRMAN OF THE BOARD OF DIRECTORS, PRESIDENT & CHIEF EXECUTIVE OFFICER The Chairman of the Board of Directors, President and Chief Executive Officer shall, when present, preside at all meetings of the shareholders and the Board of Directors. He shall be Chairman of the Executive Committee. He shall be responsible for direction of the policy of the Board of Directors and shall have the power and perform the duties necessary to implement such responsibility. If the office of the Chairman of the Board, President and Chief Executive Officer is vacated due to the incumbent's death, retirement, or inability to act, or should the Board of Directors elect to leave such office vacant, the Board of Directors shall fill such vacancy as defined in Section 2.2 of these By-Laws. If the Chairman of the Board, President and Chief Executive Officer is unable to perform the duties as identified herein for reason of reasons other than those defined herein on a short-term basis, he may delegate the powers contained herein to an existing member of the Board of Directors and designate such individual to serve in the capacity of Chairman of the Board, President and Chief Executive Officer until his return. SECTION 4.6 VICE CHAIRMAN The Vice Chairman shall do and perform all such duties as shall be assigned to him or her by the Chairman of the Board of Directors, President and Chief Executive Officer or required by the Board of Directors. SECTION 4.7 VICE PRESIDENT The Vice Presidents, respectively, shall do and perform all such duties as shall be assigned to them by the Chairman of the Board of Directors, President and Chief Executive Officer or required of them by the Board of Directors. If designated by the Board of Directors as a member of the Executive Committee, a Vice President shall perform the duties of Chairman of the Board of Directors, President and Chief Executive Officer in case of the Chairman of the Board of Directors, President and Chief Executive Officer's absence or inability to act or in case of a vacancy in that office. An Assistant Vice President in the absence or disability of a Vice President may at the discretion of the Chairman of the Board of Directors, President and Chief Executive Officer perform the duties of a Vice President and shall perform such other duties as may be assigned to him or her. 14 SECTION 4.8 SECRETARY It shall be the duty of the Secretary to keep and attest true records of the proceedings of all meetings of the Board and Executive Committee, to see that all notices are duly given in accordance with the provisions of these By-Laws or as required by law and safely keep and account for all documents, papers and property of the Company which may come into his or her possession. He or she shall be the custodian of the Corporate Seal of the Company and shall affix and attest the same whenever it is necessary and proper so to do, and shall perform such other duties as may be assigned to him or her by the Board. In the absence or disability of the Secretary, an Assistant Secretary or any Vice President shall perform his or her duties and such other duties as may be assigned to him or her. SECTION 4.9 TREASURER The Treasurer shall have the custody of all money, funds and securities of the Company. He or she shall furnish such security for the faithful performance of his or her duties as may be required by the Board of Directors. He or she shall receive all money due to the Company and deposit the same in its corporate name in such banks or trust companies as the Board of Directors shall determine. He or she shall sign all checks, drafts or orders for the payment of money; and perform such other duties as may be required of him or her by the Board of Directors. An Assistant Treasurer shall, in the absence or disability of the Treasurer, perform his or her duties and such other duties as may be assigned to him or her. In the absence or disability of the Treasurer and Assistant Treasurers, any Vice President shall perform his or her duties and such other duties as may be assigned to him or her. The Treasurer shall, when directed by the Board of Directors, open special accounts in the Company's depositories; all checks, drafts or orders for the payment of money out of such special accounts shall be signed in such manner and by such officers or employees of the Company as the Board of Directors shall designate; such checks, drafts or orders for the payment of money shall also be signed, if, as and when so directed by resolution of the Board of Directors, by such persons and in such manner as the Board of Directors shall determine. SECTION 4.10 CONTROLLER The Controller shall: (a) Keep at the office of the Company correct books of account of all its business and transactions; (b) Exhibit at all reasonable times his or her books of accounts and records to any of the directors upon application during business hours at the office of the Company where such books and records are kept; (c) Render a full statement of the financial condition of the Company whenever requested 15 so to do by the Board of Directors, the Chairman of the Board, President and Chief Executive Officer; and (d) In general, perform such duties as may be from time to time assigned to him or her by the Board of Directors, the Chairman of the Board, President and Chief Executive Officer. SECTION 4.11 OTHER OFFICERS Other officers, including one or more additional Vice Presidents, may from time to time be appointed by the Board of Directors or by any officer or committee upon whom a power of appointment may be conferred by the Board of Directors, which other officers shall have such powers and perform such duties as may be assigned to them by the Board of Directors, the Chairman of the Board of Directors, President and Chief Executive Officer and shall hold office for such terms as may be designated by the Board of Directors or the officer or committee appointing them. ARTICLE V SHARES CERTIFICATED SHARES SECTION 5.1 CERTIFICATES, REGISTRAR AND TRANSFER AGENT Certificates for shares of the capital stock of the Company shall be in such form as shall be approved by the Board of Directors. The certificates shall be numbered, as nearly as may be, in the order of their issue and shall be signed by the Chairman of the Board of Directors, President and Chief Executive Officer or a Vice President, and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Company. SECTION 5.2 AUTHORIZATION OF FACSIMILE SIGNATURES AND SEAL The signatures of the officers upon a certificate, and the seal of the Company, may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than Company itself or its employee. SECTION 5.3 TRANSFER OF CERTIFICATED SHARES Shares of the capital stock of the Company shall be transferable by the holder thereof in person or by duly authorized attorney upon surrender of the certificate or certificates for such shares properly endorsed. Every certificate of stock exchanged or returned to the Company shall be appropriately canceled. A person in whose name shares of stock stand on the books of the Company shall be deemed the owner thereof as regards the Company. The Board of Directors may make such other and further rules and regulations as they may deem necessary or proper concerning the issue, transfer and registration of stock certificates. 16 SECTION 5.4 LOST, STOLEN OR DESTROYED SHARE CERTIFICATES The Company may issue a new certificate for shares in place of any certificate theretofore issued by it, alleged to have been lost or destroyed, and the Company may require the owner of the lost or destroyed certificate, or such owner's legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss or destruction of any such certificate or the issuance of any such new certificate. ARTICLE VI INDEMNIFICATION SECTION 6.1 GENERAL APPLICABILITY Except to the extent expressly prohibited by the New York Business Corporation Law, the Company shall indemnify each person made, or threatened to be made, a party to or involved in any action, suit or proceeding, whether criminal or civil, administrative or investigative by reason of the fact that such person or such person's testator or intestate is or was a Director or Officer of the Company, against judgments, fines, penalties, amounts paid in settlement and reasonable expenses, including attorney's fees and expenses, reasonably incurred in enforcing such person's right to indemnification, incurred in connection with such action or proceeding, or any appeal therein, provided that no such indemnification shall be made if a judgment or other final adjudication adverse to such person establishes that such person's acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that such person personally gained in fact a financial profit or other advantage to which such person was not legally entitled, and provided further that no such indemnification shall be required with respect to any settlement or other nonadjudicated disposition of any threatened or pending action or proceeding unless the Company has given its prior consent to such settlement or other disposition. SECTION 6.2 SCOPE OF INDEMNIFICATION The Company promptly shall advance or reimburse upon request, after receipt by the Company of a statement or statements from the claimant requesting such advance or advances of reimbursements, to any person entitled to indemnification hereunder all reasonable expenses, including attorney's fees and expenses, reasonably incurred in defending any action or proceeding in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such person to repay such amount if such person is ultimately found not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or reimbursed exceed the amount to which such person is entitled; provided, however, that such person shall cooperate in good faith with any request by the Company that common counsel be used by the parties to an action or proceeding who are similarly situated unless to do so would be inappropriate due to actual or potential differing interests between or among such parties. 17 SECTION 6.3 OTHER INDEMNIFICATION PROVISIONS Nothing herein shall limit or affect any right of any Director, Officer or other corporate personnel otherwise than hereunder to indemnification or expenses, including attorney's fees, under any statute, rule, regulation, certificate of incorporation, by-law, insurance policy, contract or otherwise; without affecting or limiting the rights of any Director, Officer or other corporate personnel pursuant to this Article VI, the Company is authorized to enter into agreements with any of its Directors, Officers or other corporate personnel extending rights to indemnification and advancement of expenses to the fullest extent permitted by applicable law. Unless limited by resolution of the Board of Directors or otherwise, the Company shall advance the payment of expenses to the fullest extent permitted by applicable law to, and shall indemnify, any Director, Officer or other corporate person who is or was serving at the request of the Company, as a director, officer, partner, trustee, employee or agent of another corporation, whether for profit or not-for-profit, or a partnership, joint venture, trust or other enterprise, whether or not such other enterprise shall be obligated to indemnify such person. SECTION 6.4 SURVIVAL OF INDEMNIFICATION Anything in these By-Laws to the contrary notwithstanding, no elimination or amendment of this Article VI adversely affecting the right of any person to indemnification or advancement of expenses hereunder shall be effective until the 60th day following notice to such person of such action, and no elimination of or amendment to this Article VI shall deprive any such person's rights hereunder arising out of alleged or actual occurrences, acts or failures to act prior to such 60th day. SECTION 6.5 INABILITY TO LIMIT INDEMNIFICATION The Company shall not, except by elimination or amendment of this Article VI in a manner consistent with the preceding Section 6.4 and with the provisions of Article VIII ("Amendments to By-Laws"), take any corporate action or enter into any agreement which prohibits, or otherwise limits the rights of any person to, indemnification in accordance with the provisions of this Article VI. The indemnification of any person provided by this Article VI shall continue after such person has ceased to be a Director or Officer of the Company and shall inure to the benefit of such person's heirs, executors, administrators and legal representatives. SECTION 6.6 SEVERABILITY In case any provision in this Article VI shall be determined at any time to be unenforceable in any respect, the other provisions of this Article VI shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible 18 enforcement in the circumstances, it being the intention of the Company to afford indemnification and advancement of expenses to its Directors or Officers, acting in such capacities or in the other capacities mentioned herein, to the fullest extent permitted by law. ARTICLE VII OTHER MATTERS SECTION 7.1 BOOKS TO BE KEPT The Company shall keep (a) correct and complete books and records of account, (b) minutes of the proceedings of the shareholders, Board of Directors and Executive Committee, if any, and (c) a current list of the Directors and Officers and their residence addresses. The Company shall also keep, at its office located in the County of Dutchess in the State of New York or at the office of its transfer agent or registrar, if any, a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. The Board of Directors shall, subject to the laws of the State of New York, have power to determine from time to time, whether, to what extent, and under what conditions and regulations the accounts and books of the Corporation or any of them shall be open to the inspection of the shareholders, and no shareholder shall have any right to inspect any account book or document of the Corporation except as conferred by the laws of the State of New York unless and until authorized so to do by resolution of the Board of Directors or shareholders of the Corporation. SECTION 7.2 CORPORATE SEAL The Board of Directors may adopt a corporate seal, alter such seal at pleasure, and authorize it to be used by causing it or a facsimile to be affixed or impressed or reproduced in any other manner. SECTION 7.3 WHEN NOTICE OR LAPSE OF TIME UNNECESSARY Whenever for any reason the Company or the Board of Directors or any committee thereof is authorized to take any action after notice to any person or persons or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of such period of time if at any time before or after such action is completed the person or persons entitled to such notice or entitled to participate in the action to be taken or, in the case of a shareholder, his or her attorney-in-fact, submit a signed waiver of notice of such requirements. 19 SECTION 7.4 CONTRACTS, ETC., HOW EXECUTED. The Board of Directors, except as in these By-Laws otherwise provide, may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Company, and such authority may be general or confined to specific instances, and, unless so authorized by the Board of Directors, no officer or agent or employee shall have any power or authority to bind the Company by any contract or engagement or to pledge its credits or to render it liable pecuniarily for any purpose or to any amount. SECTION 7.5 LOANS. No loans shall be contracted on behalf of the Company and no negotiable paper shall be issued in its name, unless authorized by the vote of the Board of Directors. When so authorized, any officer or agent of the Company may effect loans and advances for the Company from any bank, trust company or other institution, or from any firm, Company or individual and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the Company. When so authorized any officer or agent of the Company, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Company, may pledge, hypothecate or transfer any and all stocks, securities and other personal property at any time held by the Company, and to that end endorse, assign and deliver the same. Such authority may be general or confined to specific instances. The Board of Directors may authorize any mortgage or pledge of, or the creation of a security interest in, all or any part of the corporate property, or any interest therein, wherever situated. SECTION 7.6. DEPOSITS. All funds of the Company shall be deposited from time to time to its credit in such banks, trust companies or other depositaries as the Board of Directors may select, or as may be selected by an officer or officers, agent or agents of the Company to whom such power, from time to time, may be delegated by the Board of Directors and, for the purpose of such deposit, checks, drafts and other orders for the payment of money which are payable to the order of the Company may be endorsed, assigned and delivered by the Chairman of the Board, President and Chief Executive Officer or a Vice President, or the Treasurer or the Secretary, or by any officer, agent or employee of the Company to whom any of said officers, or the Board of Directors, by resolution, shall have delegated such power. SECTION 7.7 GENERAL AND SPECIAL BANK ACCOUNTS. The Board of Directors may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may select and may make such special rules and regulations with respect thereto, as it may deem expedient. 20 SECTION 7.8 FISCAL YEAR. The fiscal year of the Company shall be the calendar year. ARTICLE VIII AMENDMENTS TO BY-LAWS SECTION 8.1 BY DIRECTORS By-Laws may be adopted, amended, or repealed or new By-Laws may be adopted by the vote of a majority of the entire Board of Directors at any regular or special meeting of the Board at which a quorum is present; provided, however, that any adoption of, amendment to or repeal of any new By-Law or provision inconsistent with Article I (Section 1.2 - "Special meetings", 1.4 - "Presiding at Meetings" or 1.12 - "Notice of Shareholder Business and Nominations"), Article II (Section 2.1 - "Number of Directors", 2.2 - "Elections, Terms and Vacancies" or 2.8 - "Removal of Directors"), Article VI - "Indemnification" or this Article VIII -"Amendments to By-Laws" hereof, if by action of the Board, shall be only upon the approval of not less than two-thirds of the entire Board at any such regular or special meeting of the Board of Directors. SECTION 8.2 BY SHAREHOLDERS By-Laws may be adopted, amended, or repealed by the vote of a majority of the shareholders entitled to vote in the election of any Directors (as herein provided) at any annual or special shareholders' meeting at which a quorum is present, if notice of such proposed action shall have been given in accordance with the notice requirements of Section 1.12 of these By-Laws; provided, however, that any adoption of, amendment to or repeal of any new By-Laws or provision inconsistent with Article I (Section 1.2 -"Special meetings", 1.4 - "Presiding at Meetings" or 1.12 - "Notice of Shareholder Business and Nominations"), Article II (Section 2.1 - "Number of Directors", 2.2 - - "Elections, Terms and Vacancies" or 2.8 - "Removal of Directors"), Article VI - - - "Indemnification" or this Article VIII - "Amendments to By-Laws" hereof, if by action of shareholders, shall be only upon the affirmative vote of not less than 80% of the shares entitled to vote thereon at such annual or special shareholders' meeting at which any such action is proposed. 11/10/98 Amended effective 11/2/99 & Adopted Retroactive to 9/23/98 Amended 11/19/99, 12/17/99, 2/04/00 21 EX-3.(II)2 4 BY-LAWS - CENTRAL HUDSON EXHIBIT 3 (ii) 2 B Y - L A W S OF CENTRAL HUDSON GAS & ELECTRIC CORPORATION TABLE OF CONTENTS BY-LAWS OF CENTRAL HUDSON GAS & ELECTRIC CORPORATION Page ARTICLE I. MEETING OF SHAREHOLDERS 1 Section 1. Place of Meeting 1 Section 2. Annual Meeting 1 Section 3. Special Meeting 1 Section 4. Notice of Meetings 1 Section 5. Quorum 2 Section 6. Inspectors 2 Section 7. Adjournment of Meetings 2 Section 8. Voting 3 Section 9. Record Date 3 ARTICLE II. BOARD OF DIRECTORS 3 Section 1. Number and Qualifications 3 Section 2. Election of Directors 4 Section 3. Term of Office 4 Section 4. Resignation and Removal 4 Section 5. Newly Created Directorships and Vacancies 4 Section 6. Election of Directors by Holders of Preferred Stock 4 Section 7. Regular Meetings 6 Section 8. Special Meetings 6 Section 9. Notice and Place of Meetings 6 Section 10. Business Transacted at Meetings 6 Section 11. Quorum and Manner of Acting 6 Section 12. Compensation 7 Section 13. Indemnification of Officers and Directors 7 Section 14. Committees of the Board 9 ARTICLE III. EXECUTIVE COMMITTEE 9 Section 1. How Constituted and Powers 9 Section 2. Removal and Resignation 9 - 2 - Page Section 3. Filling of Vacancies 10 Section 4. Quorum 10 Section 5. Record of Proceedings, etc. 10 Section 6. Organization, Meetings, etc. 10 Section 7. Compensation of Members 10 ARTICLE IV. OFFICERS 11 Section 1. Election 11 Section 2. Removal 11 Section 3. Resignation of Officers 11 Section 4. Filling of Vacancies 11 Section 5. Compensation 12 Section 6. Chairman of the Board of Directors and Chief Executive Officer 12 Section 7. Vice Chairman of the Board of Directors 12 Section 8. President and Chief Operating Officer 12 Section 9. The Vice Presidents 12 Section 10. The Treasurer 13 Section 11. Controller 13 Section 12. The Secretary 14 Section 13. Other Officers 14 ARTICLE V. CONTRACTS, LOANS, BANK ACCOUNTS, ETC. 15 Section 1. Contracts, etc., How Executed 15 Section 2. Loans 15 Section 3. Checks, Drafts, etc. 15 Section 4. Deposits 16 Section 5. General and Special Bank Accounts 16 ARTICLE VI. CAPITAL STOCK 16 Section 1. Issue of Certificates of Stock 16 Section 2. Transfer of Stock 16 Section 3. Lost, Destroyed and Mutilated Certificates 17 - 3 - Page ARTICLE VII. DIVIDENDS, SURPLUS, ETC. 17 Section 1. General Discretion of Directors 17 ARTICLE VIII. MISCELLANEOUS PROVISIONS 18 Section 1. Fiscal Year 18 Section 2. Waiver of Notice 18 Section 3. Notices 18 Section 4. Examination of Books 18 Section 5. Gender 19 ARTICLE IX. AMENDMENTS 19 Section 1. Amendment by Directors 19 Section 2. Amendment by Shareholders 19 B Y - L A W S OF CENTRAL HUDSON GAS & ELECTRIC CORPORATION ------------------- ARTICLE I. MEETINGS OF SHAREHOLDERS SECTION 1. Place of Meeting. All meetings of the shareholders shall be held at the principal office of the Corporation in the City of Poughkeepsie, County of Dutchess, State of New York, or at such other place or places in the State of New York as may from time to time be fixed by the Board of Directors. SECTION 2. Annual Meeting. The Annual Meeting of the shareholders, for the election of directors and the transaction of such other business as may brought before the meeting, shall be held each year on the third Tuesday in April (or if said day be a legal holiday, then on the next succeeding business day), at such time of day as the directors may determine. SECTION 3. Special Meetings. Special meetings of the shareholders may be called by (i) all of the Board of Directors or (ii) by the Chairman of the Board and Chief Executive Officer and one other Director of the Corporation or, (iii) in the absence, unavailability, or inability to act of the Chairman of the Board and Chief Executive Officer, by the President and Chief Operating Officer and one other Director of the Corporation, or (iv) by shareholders together holding at least one third of the capital stock of the Corporation entitled to vote or act with respect thereto upon the business to be brought before such meeting. SECTION 4. Notice of Meetings. Notice of any annual or special meeting of the shareholders shall be in writing and shall be signed by the Chairman of the Board of Directors and Chief Executive Officer or the President and Chief Operating Officer or the Secretary or an Assistant Secretary. Such notice shall state the purpose or purposes for which the meeting is called and shall state the place, date and hour of the meeting and, unless it is the annual meeting, indicate that it is being issued by or at the direction of the person or persons calling the meeting. A copy of the notice of any meeting shall be given, personally or by first-class mail, not fewer than - 2 - sixty days before the date of the meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, then directed to him at such other address. An affidavit of the Secretary of the Corporation or other person giving the notice or of a transfer agent of the Corporation that the notice required by this section has been given shall be supplied at the meeting to which it relates. SECTION 5. Quorum. Except as otherwise provided by statute, the holders of a majority of the shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders for the transaction of any business, provided that when a specified item of business is required to be voted on by a class or series, voting as a class, the holders of a majority of the shares of such class or series shall constitute a quorum for the transaction of such specified item of business. SECTION 6. Inspectors. The person presiding at a shareholders' meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. The inspectors shall make a report in writing of any matter determined by them and execute a certificate of any fact found by them. SECTION 7. Adjournment of Meetings. Any meeting of shareholders may be adjourned by a majority vote of the shareholders present or represented by proxy despite the absence of a quorum. When a meeting of shareholders is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the - 3 - adjourned meeting at which a quorum shall be present, any business may be transacted, and any corporate action may be taken, which might have been transacted or taken if the meeting had been held as originally called. SECTION 8. Voting. Every shareholder of record shall be entitled at every meeting of the shareholders to one vote for every share of stock standing in his name on the record of shareholders of the Corporation unless otherwise provided in the Certificate of Incorporation and amend ments thereto and except as provided in Section 9 of this Article I. Every shareholder entitled to vote at a meeting of shareholders may authorize another person or persons to act for him by proxy. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. A list of shareholders as of the record date certified by the officer responsible for its preparation or by a transfer agent shall be available at every meeting of shareholders and shall be produced upon the request of any shareholder, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. SECTION 9. Record Date. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than sixty nor less than ten days before the day of such meeting, nor more than sixty days prior to any other action. ARTICLE II. BOARD OF DIRECTORS SECTION 1. Number and Qualifications. The number of directors constituting the entire Board shall be not less than three nor more than ten. The number of directors may be increased, or decreased, by amendment of the by-laws adopted by vote of a majority of the entire Board of Directors. Each director shall be at least 18 years of age. No person who has reached age 70 shall stand for election as a director. - 4 - SECTION 2. Election of Directors. Except as otherwise required by law or by the Certificate of Incorporation as amended, and except as hereinafter otherwise provided by Sections 5 and 6 of this Article II, directors shall be elected by a plurality of the votes cast at the annual meeting of shareholders by the holders of shares entitled to vote at the election and shall hold office until the next annual meeting of shareholders. SECTION 3. Term of Office. Each director shall, except as hereinafter provided in Section 4 and in Section 6 of this Article II, hold office until the expiration of the term for which he is elected and until his successor has been elected and qualified. SECTION 4. Resignation and Removal. Any director may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the Chairman of the Board of Directors and Chief Executive Officer or the Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein. Any director may at any time, with or without cause, be removed by vote of the shareholders at a special meeting called for that purpose. When, however, pursuant to the provisions of the Certificate of Incorporation as amended, the holders of the shares of any class or series, voting as a class, have the right to elect one or more directors, such director or directors so elected may be removed only by the applicable vote of the holders of the shares of that class or series, voting as a class. SECTION 5. Newly Created Directorships and Vacancies. Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason, except the removal of directors without cause, and except as provided for in Section 6 of this Article II, may be filled by vote of a majority of the directors then in office, although less than a quorum exists. A vacancy occurring in the Board by reason of the removal of a director without cause, may be filled only by vote of the shareholders, subject to the provisions of said Section 6. A director elected to fill a vacancy shall be elected to hold office for the unexpired term of his predecessor, and until his successor is elected and qualified. SECTION 6. Election of Directors by Holders of Preferred Stock. Anything in the by-laws to the contrary notwithstanding: In case dividends on any series of the serial preferred stock of the Corporation at the rate or rates prescribed for such series shall not have been paid in full for periods aggregating one year or more, than, and until full cumulative dividends thereon shall have been paid, the holders of each such series shall have the right, together with holders of all other serial preferred stock in respect - 5 - to which the same right shall be conferred, to elect a majority of the members of the Board of Directors of the corporation. Whenever the holders of any series of serial preferred stock shall become so entitled, either separately or together with the holders of other serial preferred stock as aforesaid, to elect a majority of the members of the Board of Directors, and upon the written request of the holders of record of at least five percent of the total number of shares of serial preferred stock then outstanding and entitled to such right of election, addressed to the Secretary of the Corporation, a special meeting of the holders of serial preferred stock entitled to such right of election and the holders of Common Stock shall be called for the purpose of electing directors. At such meeting the holders of serial preferred stock and the holders of Common Stock shall vote separately, and the holders of serial preferred stock present in person or by proxy at such meeting shall be entitled to elect, by a plurality of votes cast by them, a majority of the members of a new Board of Directors of the corporation, and the holders of Common Stock present in person or by proxy shall be entitled to elect, by a plurality of votes cast by them, the remainder of the new Board of Directors. The persons so elected as directors shall thereupon constitute the Board of Directors of the Corporation, and the terms of office of the previous directors of the Corporation shall thereupon terminate. The term "a majority of the members of Board of Directors" as herein used shall mean one more than one half of the total number of directors provided for by the by-laws, regardless of the number then in office, and in case one half of such number shall not be a whole number, such one half shall be the next smaller whole number. In the event of any vacancy in the Board of Directors among the directors elected by the holders of serial preferred stock, such vacancy may be filled by the other directors elected by them, and if not so filled may be filled by the holders of serial preferred stock entitled to the right of election as aforesaid at a special meeting of the holders of said stock called for that purpose, and such a meeting shall be called upon the written request of at least five percent of the total number of shares of serial preferred stock then outstanding and entitled to such right of election. If and when, however, full cumulative dividends upon any series of the serial preferred stock shall at any subsequent time be paid, then and thereupon such power of the holders of such series of serial preferred stock to vote in the election of a majority of the members of the Board of Directors shall cease; subject, however, to being again revived at any subsequent time if there shall again be default in payment of dividends upon such series of serial preferred stock for periods aggregating one year or more as aforesaid. Whenever such power of the holders of all series of serial preferred stock to vote shall cease, the proper officer of the Corporation may and upon the written request of the holders of record of five percent of the total number of shares of Common Stock then outstanding shall call a special meeting of the holders of Common Stock for the purpose of electing directors. At any meeting so called, the holders of a majority of the Common Stock then outstanding, present in person or by proxy, shall be entitled to elect, by a plurality of votes, a new Board of Directors of the Corporation. The persons so elected as directors shall thereupon constitute the Board of Directors of the Corporation, and the terms of office of the previous directors of the Corporation shall thereupon terminate. - 6 - SECTION 7. Regular Meetings. The directors shall hold a regular annual meeting for the election of officers as soon as practicable after the adjournment of the Annual Meeting of the shareholders, and, in addition, regular meetings of the directors shall be held at such times as the Board of Directors may by resolution determine. No notice of the Annual Meeting shall be required if held immediately after the Annual Meeting of the shareholders and if a quorum is present. SECTION 8. Special Meetings. Special meetings of the directors may be called by (i) the Chairman of the Board of Directors and Chief Executive Officer or, (ii) in the absence, unavailability, or inability to act of the Chairman of the Board and Chief Executive Officer, by the President and Chief Operating Officer and one director of the Corporation, or (iii) by any two directors at any time upon the written request of the Secretary on behalf of the two directors. SECTION 9. Notice and Place of Meetings. Regular meetings shall be held at such place or places either within or without the State of New York as the Board of Directors may from time to time determine. Special meetings shall be held at such place or places either within or without the State of New York as may be specified in the respective notices of the meetings. Except as provided in Section 7 of this Article II, notice of any regular or special meeting of the directors shall be mailed to each director addressed to him at his residence or usual place of business at least two days before the day on which the meeting is to be held, or shall be sent to him at such place by telegraph, or be delivered personally or by telephone, not later than the day before the day on which the meeting is to be held. SECTION 10. Business Transacted at Meetings. Any business may be transacted and any corporate action taken at any regular or special meeting of the directors whether stated in the notice of the meeting or not. SECTION 11. Quorum and Manner of Acting. A majority of the directors in office at the time of any meeting of the Board shall constitute a quorum and, except as by law otherwise provided, the act of a majority of the directors present at any such meeting, at which a quorum is present, shall be the act of the Board of Directors. In the event it is necessary to obtain a quorum, and only in such event, at the discretion of the presiding Board member, any one or more members of the Board may be present and participate in a meeting of the Board by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. In the absence of a quorum, the directors present - 7 - may adjourn the meeting from time to time until a quorum be had. Notice of any adjourned meeting need not be given other than by announcement at the meeting. The directors shall act only as a Board and the individual directors shall have no power as such. SECTION 12. Compensation. The compensation of the directors, other than employees of the Corporation, for services as directors and as members of committees of the Board shall be as fixed by the Board from time to time. Such directors shall also be reimbursed for expenses incurred in attending meetings of the Board and/or committees thereof. SECTION 13. Indemnification of Officers and Directors. A. General Applicability Except to the extent expressly prohibited by the New York Business Corporation Law, the Corporation shall indemnify each person made, or threatened to be made, a party to or involved in any action, suit or proceeding, whether criminal or civil, administrative or investigative by reason of the fact that such person or such person's testator or intestate is or was a Director or Officer of the Corporation, against judgments, fines, penalties, amounts paid in settlement and reasonable expenses, including attorney's fees and expenses, reasonably incurred in enforcing such person's right to indemnification, incurred in connection with such action or proceeding, or any appeal therein, provided that no such indemnification shall be made if a judgment or other final adjudication adverse to such person establishes that such person's acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that such person personally gained in fact a financial profit or other advantage to which such person was not legally entitled, and provided further that no such indemnification shall be required with respect to any settlement or other nonadjudicated disposition of any threatened or pending action or proceeding unless the Corporation has given its prior consent to such settlement or other disposition. b. Scope of Indemnification The Corporation promptly shall advance or reimburse upon request, after receipt by the Corporation of a statement or statements from the claimant requesting such advance or advances of reimbursements, to any person entitled to indemnification hereunder all reasonable expenses, including attorney's fees and expenses, reasonably incurred in defending any action or proceeding in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such person to repay such amount if such person is ultimately found not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or reimbursed exceed the amount to which such person is entitled; provided, however, that such person shall cooperate in good faith with any request by the Corporation that common counsel be used by the parties to an action or proceeding who are similarly situated unless to do so would be inappropriate due to actual or potential differing interests between or among such parties. - 8 - c. Other Indemnification Provisions Nothing herein shall limit or affect any right of any Director, Officer or other corporate personnel otherwise than hereunder to indemnification or expenses, including attorney's fees, under any statute, rule, regulation, certificate of incorporation, by-law, insurance policy, contract or otherwise; without affecting or limiting the rights of any Director, Officer or other corporate personnel pursuant to this Article II, the Corporation is authorized to enter into agreements with any of its Directors, Officers or other corporate personnel extending rights to indemnification and advancement of expenses to the fullest extent permitted by applicable law. Unless limited by resolution of the Board of Directors or otherwise, the Corporation shall advance the payment of expenses to the fullest extent permitted by applicable law to, and shall indemnify, any Director, Officer or other corporate person who is or was serving at the request of the Corporation, as a director, officer, partner, trustee, employee or agent of another corporation, whether for profit or not-for-profit, or a partnership, joint venture, trust or other enterprise, whether or not such other enterprise shall be obligated to indemnify such person. d. Survival of Indemnification Anything in these By-Laws to the contrary notwithstanding, no elimination or amendment of this Article II adversely affecting the right of any person to indemnification or advancement of expenses hereunder shall be effective until the 60th day following notice to such person of such action, and no elimination of or amendment to this Article II shall deprive any such person's rights hereunder arising out of alleged or actual occurrences, acts or failures to act prior to such 60th day. e. Inability to Limit Indemnification The Corporation shall not, except by elimination or amendment of this Article II in a manner consistent with the preceding Section 13D and with the provisions of Article IX ("Amendments"), take any corporate action or enter into any agreement which prohibits, or otherwise limits the rights of any person to, indemnification in accordance with the provisions of this Article II. The indemnification of any person provided by this Article II shall continue after such person has ceased to be a Director or Officer of the Corporation and shall inure to the benefit of such person's heirs, executors, administrators and legal representatives. f. Severability In case any provision in this Article II shall be determined at any time to be unenforceable in any respect, the other provisions of this Article II shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible enforcement in the circumstances, it being the intention of the Corporation to afford indemnification and advancement of expenses to its Directors or Officers, acting in such capacities or in the other capacities mentioned herein, to the fullest extent permitted by law. - 9 - SECTION 14. Committees of the Board. The Board, by resolution adopted by a majority of the entire Board, may designate from among its members, in addition to the Executive Committee provided for in Article III of these By-Laws, committees of the Board, each consisting of three or more directors, and each of which shall have the powers and duties prescribed in the resolution designating such committees. Anything in these By-Laws or in the resolution designating such committees to the contrary notwithstanding, in the event it is necessary to obtain a quorum, and only in such event, at the discretion of the presiding committee member, any one or more members of any committee of the Board of Directors may participate in any meeting of such committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at such meeting. ARTICLE III. EXECUTIVE COMMITTEE SECTION 1. How Constituted and Powers. The Board of Directors, by resolution adopted by a majority of the entire Board, may designate three or more of the directors, together with the Chairman of the Board of Directors and Chief Executive Officer, to constitute an Executive Committee, to serve at the pleasure of the Board, which Committee shall during the intervals between meetings of the Board of Directors, unless limited by the resolution appointing such Committee, have authority to exercise all or any of the powers of the Board of Directors in the management of the affairs of the Corporation, insofar as such powers may lawfully be delegated. The Board may designate one or more directors as alternate members of such Committee, who may replace any absent member or members at any meeting of such Committee. SECTION 2. Removal and Resignation. Any member of the Executive Committee, except a member ex officio, may be removed at any time with or without cause, by resolution adopted by a majority of the entire Board. Any member of the Executive Committee may resign at any time. Such resignation shall be in writing and shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Chairman of the Board of Directors and Chief Executive Officer or the President and Chief Operating Officer or Secretary. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein. Any person ceasing to be a director shall ipso facto cease to be a member of the Executive Committee. - 10 - SECTION 3. Filling of Vacancies. Any vacancy among the members of the Executive Committee occurring from any cause whatsoever may be filled from among the directors by a majority of the entire Board of Directors. SECTION 4. Quorum. A majority of the members of the Executive Committee shall constitute a quorum. The act of a majority of the members of the Executive Committee present at any meeting at which a quorum is present shall be the act of the Executive Committee. The members of the Executive Committee shall act only as a committee and the individual members thereof shall have no powers as such. SECTION 5. Record of Proceedings, etc. The Executive Committee shall keep a record of its acts and proceedings and shall report the same to the Board of Directors when and as required. SECTION 6. Organization, Meetings, etc. The Executive Committee shall make such rules as it may deem expedient for the regulation and carrying on of its meetings and proceedings. SECTION 7. Compensation of Members. The members of the Executive Committee shall be entitled to such compensation as may be allowed them by resolution of the Board of Directors. - 11 - ARTICLE IV. OFFICERS SECTION 1. Election. The Board of Directors, at its regular annual meeting, shall elect or appoint from their number a Chairman of the Board of Directors and Chief Executive Officer and the Chairmen of Committees of the Board and may elect or appoint a vice chairman of the Board of Directors and vice chairmen of Committees of the Board, which officers shall be officers of the Board; and it shall elect or appoint a President and Chief Operating Officer, one or more Vice Presidents, a Secretary, a Treasurer, and a Controller which officers shall be officers of the Corporation. Each of said officers, subject to the provisions of Sections 2 and 3 of this Article, shall hold office, if elected, until the meeting of the Board following the next Annual Meeting of shareholders and until his successor has been elected and qualified, or, if appointed, for the term specified in the resolution appointing him and until his successor has been elected or appointed. Any two or more offices may be held by the same person, except the offices of President and Secretary. Should any of the officers of the Board or the President cease to be a director, he shall ipso facto cease to be such officer. SECTION 2. Removal. Any officer may be removed summarily with or without cause at any time by resolution of the Board of Directors, or, except in the case of any officer elected by the Board of Directors, by any committee or officer upon whom such power of removal may be conferred by the Board of Directors, without prejudice, however, to any rights which any such person may have by contract. SECTION 3. Resignation of Officers. Any officer may resign at any time by giving written notice of such resignation to the Board of Directors, its Chairman and Chief Executive Officer, the President and Chief Operating Officer or Secretary of the Corporation. Such resignation shall take effect at the time specified therein, or, if no time be specified, at the time of its receipt by the Board of Directors or one of the above-named officers of the Corporation. The acceptance of a resignation shall not be necessary to make it effective unless so specified therein. SECTION 4. Filling of Vacancies. A vacancy in any office, from whatever cause arising, shall be filled for the unexpired portion of the term in the manner provided in these by-laws for the regular election or appointment of such officer. - 12 - SECTION 5. Compensation. The compensation of the officers shall be fixed by the Board of Directors or by any committee or superior officer upon whom power in that regard may be conferred by the Board of Directors. SECTION 6. Chairman of the Board of Directors and Chief Executive Officer. The Chairman of the Board of Directors and Chief Executive Officer shall, when present, preside at all meetings of the shareholders and the Board of Directors. He shall be Chairman of the Executive Committee. He shall be responsible for direction of the policy of the Board of Directors and shall have the power and perform the duties necessary to implement such responsibility. SECTION 7. Vice Chairman of the Board of Directors. In the absence of the Chairman of the Board of Directors, the Vice Chairman shall, when present, preside at all meetings of the shareholders and the Board of Directors. He shall have such powers and perform such duties as the Chairman of the Board of Directors and Chief Executive Officer shall delegate to him. SECTION 8. President and Chief Operating Officer. The President and Chief Operating Officer shall, subject to the authority of the Chairman of the Board of Directors and Chief Executive Officer, have the power and perform the duties usually appertaining to the President and Chief Operating Officer of a corporation, and such power and duties as the Chairman of the Board of Directors and Chief Executive Officer shall assign to him. SECTION 9. The Vice Presidents. The Vice Presidents shall have such duties as may from time to time be assigned to them by the Board of Directors or the President and Chief Operating Officer, or by the Chairman of the Board and Chief Executive Officer in the President and Chief Operating Officer's absence. When performing the duties of the President and Chief Operating Officer, they shall have all the powers of, and be subject to all the restrictions upon, the President. - 13 - SECTION 10. The Treasurer. The Treasurer shall: (a) Except as otherwise ordered by the Board, have charge and custody of, and be responsible for all funds, securities, receipts and disbursements of the Corporation and shall deposit, or cause to be deposited, all money and other valuable effects in its name in such banks, trust companies or other depositaries as shall be selected in accordance with these by-laws; (b) Receive and give receipts for payments made to the Corporation and take and preserve proper receipts for all monies disbursed by it; (c) In general, perform such duties as are incident to the office of Treasurer, or as may be from time to time assigned to him by the Board of Directors, the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer, or as may be prescribed by law or by these by-laws. The Treasurer shall give to the Corporation a bond if, and in such sum as, required by the Board of Directors, conditioned for the faithful performance of the duties of his office and the restoration to the Corporation at the expiration of his term of office, or in case of his death, resignation or removal from office, of all books, papers, vouchers, money or other property of whatever kind, in his possession belonging to the Corporation. SECTION 11. Controller. The Controller shall: (a) Keep at the office of the Corporation correct books of account of all its business and transactions, subject to the supervision and control of the President and Chief Operating Officer and Treasurer; (b) Exhibit at all reasonable times his books of accounts and records to any of the directors upon application during business hours at the office of the Corporation where such books and records are kept; (c) Render a full statement of the financial condition of the Corporation whenever requested so to do by the Board of Directors, the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer; and (d) In general, perform such duties as may be from time to time assigned to him by the Board of Directors, the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer. - 14 - SECTION 12. The Secretary. The Secretary shall: (a) Keep the minutes of the meetings of the shareholders, Board of Directors and Executive Committee in books provided for the purpose; (b) See that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) Be custodian of the seal of the Corporation and see that it or a facsimile thereof is affixed to all stock certificates prior to their issue, and that it is affixed to all documents the execution of which under the seal of the Corporation is duly authorized or which require that the seal be affixed thereto; (d) Have charge of the stock certificate books of the Corporation and keep, or cause to be kept, at the office of the Corporation or at the office of its transfer agent or registrar, a record of shareholders of the Corporation, containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof; and (e) In general, perform such duties as are incident to the office of Secretary, or as may be from time to time assigned to him by the Board of Directors, the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer, or as are prescribed by law or by these by-laws. SECTION 13. Other Officers. Other officers, including one or more additional Vice Presidents, may from time to time be appointed by the Board of Directors or by any officer or committee upon whom a power of appointment may be conferred by the Board of Directors, which other officers shall have such powers and perform such duties as may be assigned to them by the Board of Directors, the Chairman of the Board and Chief Executive Officer or the President and Chief Operating Officer and shall hold office for such terms as may be designated by the Board of Directors or the officer or committee appointing them. - 15 - ARTICLE V. CONTRACTS, LOANS, BANK ACCOUNTS, ETC. SECTION 1. Contracts, etc., How Executed. The Board of Directors, except as in these by-laws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances, and, unless so authorized by the Board of Directors, no officer or agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credits or to render it liable pecuniarily for any purpose or to any amount. SECTION 2. Loans. No loans shall be contracted on behalf of the Corporation and no negotiable paper shall be issued in its name, unless authorized by the vote of the Board of Directors. When so authorized, any officer or agent of the Corporation may effect loans and advances for the Corporation from any bank, trust company or other institution, or from any firm, corporation or individual and for such loans and advances may make, execute and deliver promissory notes, bonds or other evidences of indebtedness of the corporation. When so authorized any officer or agent of the Corporation, as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, may pledge, hypothecate or transfer any and all stocks, securities and other personal property at any time held by the Corporation, and to that end endorse, assign and deliver the same. Such authority may be general or confined to specific instances. The Board of Directors may authorize any mortgage or pledge of, or the creation of a security interest in, all or any part of the corporate property, or any interest therein, wherever situated. SECTION 3. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidence of indebtedness issued in the name of the Corporation shall be signed by the Treasurer or such other officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. - 16 - SECTION 4. Deposits. All funds of the Corporation shall be deposited from time to time to its credit in such banks, trust companies or other depositaries as the Board of Directors may select, or as may be selected by an officer or officers, agent or agents of the Corporation to whom such power, from time to time, may be delegated by the Board of Directors and, for the purpose of such deposit, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by the President and Chief Operating Officer or a Vice President, or the Treasurer or the Secretary, or by any officer, agent or employee of the Corporation to whom any of said officers, or the Board of Directors, by resolution, shall have delegated such power. SECTION 5. General and Special Bank Accounts. The Board of Directors may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may select and may make such special rules and regulations with respect thereto, as it may deem expedient. ARTICLE VI. CAPITAL STOCK SECTION 1. Issue of Certificates of Stock. Certificates for shares of the capital stock of the Corporation shall be in such form as shall be approved by the Board of Directors. They shall be numbered, as nearly as may be, in the order of their issue and shall be signed by the Chairman of the Board of Directors and Chief Executive Officer or by the President and Chief Operating Officer or a Vice President, and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the seal of the Corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or its employee. SECTION 2. Transfer of Stock. Shares of the capital stock of the Corporation shall be transferable by the holder thereof in person or by duly authorized attorney upon surrender of the certificate or certificates for such shares properly endorsed. Every certificate of stock exchanged or returned to the Corporation shall be appropriately cancelled. A person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof as regards the Corporation. The Board of Directors may make such other and further rules and regulations as they may deem necessary or proper concerning the issue, transfer and registration of stock certificates. - 17 - SECTION 3. Lost, Destroyed and Mutilated Certificates. The holder of any stock of the Corporation shall immediately notify the corporation of any loss, destruction or mutilation of the certificates therefor. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it alleged to have been lost or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate or his legal representatives to give the Corporation a bond in such sum and with such surety or sureties, as they may require to indemnify the Corporation, and any registrar or transfer agent of its stock, against any claim that may be made against it by reason of the issue of such new certificate and against all other liability in the premises. ARTICLE VII. DIVIDENDS, SURPLUS, ETC. SECTION 1. General Discretion of Directors. The Board of Directors shall have the power from time to time to fix and determine and to vary the amount of working capital of the Corporation, to determine whether any and, if any, what dividends shall be declared and paid to the shareholders, to fix the date or dates for the payment of dividends, and to fix a time, not exceeding 50 days preceding the date fixed for the payment of any dividend, as a date for the determination of shareholders entitled to receive payment of such dividend. When any dividend is paid or any other distribution is made, in whole or in part, from sources other than earned surplus, it shall be accompanied by a written notice (1) disclosing the amounts by which such dividend or distribution affects stated capital, surplus and earned surplus, or (2) if such amounts are not determinable at the time of such notice, disclosing the approximate effect of such dividend or distribution as aforesaid and stating that such amounts are not yet determinable. - 18 - ARTICLE VIII. MISCELLANEOUS PROVISIONS SECTION 1. Fiscal Year. The fiscal year of the Corporation shall be the calendar year. SECTION 2. Waiver of Notice. Notice of meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. Notice of a meeting need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. Whenever the Corporation or the Board of Directors or any committee thereof is authorized to take any action after notice to any person or persons or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of such period of time, if at any time before or after such action is completed the person or persons entitled to such notice or entitled to participate in the action to be taken or, in the case of a shareholder, by his attorney-in-fact, submit a signed waiver of notice of such requirements. SECTION 3. Notices. Whenever by the by-laws any written notice is required to be given to any shareholder, director or officer, the same may be given, unless otherwise required by law and except as hereinbefore otherwise expressly provided, by delivering it personally to him or by mailing or telegraphing it to him at his last known post office address. Where a notice is mailed or telegraphed, it shall be deemed to have been given at the time it is mailed or telegraphed. SECTION 4. Examination of Books. The Board of Directors shall, subject to the laws of the State of New York have power to determine from time to time, whether, to what extent, and under what conditions and regulations the accounts and books of the Corporation or any of them shall be open to the inspection of the shareholders, and no shareholder shall have any right to inspect any account book or document of the Corporation except as conferred by the laws of the State of New York unless and until authorized so to do by resolution of the Board of Directors or shareholders of the Corporation. - 19 - SECTION 5. Gender. Words used in these by-laws importing the male gender shall be construed to include the female gender, wherever appropriate. ARTICLE IX. AMENDMENTS SECTION 1. Amendment by Directors. The Board of Directors shall have the power without the assent or vote of the shareholders to adopt by-laws, and except as hereinafter provided in Section 2 of this Article, and subject to such limitations as may be imposed by law, to rescind, alter, amend or repeal by a vote of a majority of the whole Board any of the by-laws, whether adopted by the Board or by the shareholders. SECTION 2. Amendment by Shareholders. The shareholders shall have power to rescind, alter, amend or repeal any by-laws and to adopt by-laws which, if so expressed, may not be rescinded, altered, amended or repealed by the Board of Directors. EX-4 5 PRICING SUPPLEMENT EXHIBIT 4 (ii) 30 b (5) Rule 424(b)(3) File Nos. 333-65597 and 33-56349 PRICING SUPPLEMENT NO. 2, DATED JANUARY 26, 2000 (To prospectus dated January 7, 1999, as supplemented by a prospectus supplement dated January 8, 1999) CENTRAL HUDSON GAS & ELECTRIC CORPORATION Medium-Term Notes, Series C, as follows: Principal Amount: $7,500,000 Salomon Smith Barney Inc. $3,750,000 Chase Securities Inc. -- Banc One Capital Markets, Inc.* 3,750,000 ---------- Total $7,500,000 Issue Price: 100% Settlement Date (Original Issue Date): January 31, 2000 Maturity Date (Stated Maturity): June 30, 2001 Type of Note: [X]Fixed Rate Note [ Zero Coupon Note Form: [X]Book-Entry [ Definitive Certificates Authorized denominations: $1,000 and integral multiples thereof CUSIP No: 15361G AE 5 Interest Rate: 7.05% per annum Interest Payment Dates: January 1 and July 1, and at maturity Record Dates: December 15 and June 15 - ------- * Formerly First Chicago Capital Markets, Inc. Initial Interest Payment Date: July 1, 2000 Redemption Terms (at option of the issuer): [X]Not redeemable prior to Stated Maturity [ ]Redeemable in accordance with the following terms: Repayment Terms (at option of the holder): [X]Not repayable prior to Stated Maturity [ ]Repayable in accordance with the following terms: Sinking Fund Provisions: [X]None [ ]Applicable in accordance with the following terms: Agents: Salomon Smith Barney Inc. Banc One Capital Markets, Inc. Agent acting in capacity indicated below: [X]As Agents [ ]As Principals The notes are being offered at the Issue Price set forth above. Agents' Commissions (based on amounts placed) as follows: Salomon Smith Barney $5,625 (.15%) Banc One Capital Markets, Inc. $5,625 (.15%) Net proceeds to issuer (before expenses): $7,488,750 Additional Terms: None The notes have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor have any of these organizations determined that this pricing supplement or the applicable prospectus supplement or prospectus is accurate or complete. Any representation to the contrary is a criminal offense. EX-10.88 6 AMENDMENT III: AGREEMENT SALE & PURCHASE OF COAL Exhibit 10 (i) 88 THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. AMENDMENT III TO THE AGREEMENT FOR THE SALE AND PURCHASE OF COAL THIS AMENDMENT ("AMENDMENT"), dated as of November 1, 1999 TO THAT AGREEMENT ("AGREEMENT") FOR THE SALE AND PURCHASE OF COAL made and entered into as of the 1st day of December 1996 and as AMENDED ("AMENDMENT I") ON November 1, 1997 and ("AMENDMENT II") ON November 1, 1998 and between CENTRAL HUDSON GAS & ELECTRIC CORPORATION, (herein-after referred to as "BUYER") and INTER-AMERICAN COAL N.V., (hereinafter referred to as "PRODUCER") and INTER-AMERICAN COAL, INC., (hereinafter referred to as "SALES AGENT"). PRODUCER and SALES AGENT are hereinafter collectively referred to as "SELLER". WITNESSETH: WHEREAS, Article VI of Amendment II of the AGREEMENT provides that beginning July 1, 1999, BUYER and SELLER shall commence good faith negotiations with respect to the price of coal for the next Contract Year; and WHEREAS, notice was duly given and BUYER and SELLER entered into good faith negotiations; and WHEREAS, after completion of good faith negotiations, BUYER and SELLER desire to amend the AGREEMENT to provide for the pricing of coal and certain other AGREEMENT provisions; NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the parties hereto agree as follows: ARTICLE II (TERM OF AGREEMENT), ARTICLE IV (SPECIFICATION & QUALITY & WEIGHT), ARTICLE VI (BASE PRICE) and ARTICLE VII (ADJUSTMENT IN PRICE FOR QUALITY) of AMENDMENT II of the AGREEMENT shall be respectively amended in their entirety and ARTICLE III (DELIVERIES) of the AGREEMENT shall be amended as indicated, all to read as follows: ARTICLE II TERM OF AGREEMENT ----------------- The Term of this AGREEMENT shall be for the period commencing January 1, 1997 and continuing until midnight, December 31, 2001, unless sooner terminated as provided for herein. This AGREEMENT shall terminate automatically, without further obligation or liability to either party, except for payments for coal delivered, at the end of the Term. 2 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. In recognition of the pending Auction of the Danskammer Generating Station, and to provide the new ownership with maximum flexibility, Seller agrees to forgo deliveries under this AGREEMENT in Contract Year 2001 upon six months advance notice from the New Owners. ARTICLE III DELIVERIES ----------- Section 1. Quantities/Delivery Schedule: Except for as provided for below, the quantity of coal sold and purchased hereunder shall be a Firm tonnage of XXX,XXX Metric Tons (+ or - 10%) per year. In addition, there will be up to XX,XXX Metric Tons (+ or - 10%) per year called Incremental Tonnage which will be sold and purchased hereunder provided that the delivered cost per million Btu's of oil, natural gas or spot coal usable at Buyer's Danskammer Plant or the equivalent price of replacement electric energy exceeds the applicable Base Price of coal in delivered cost per million Btu's at appropriately applied heat rates. The Sales Agent/Seller will assume that one Vessel per month of a nominal XX,XXX Metric Tons (+ or - 10%) will be shipped under this Agreement. The third Vessel in the first and 3 fourth quarter will deliver Incremental Tonnage provided (1) Buyer requires the tonnage and (2) Buyer and Seller have agreed on the price for said tonnage as per the notification procedure described herein. On or before the the first day of the Notice Month, Buyer will provide to Seller the fifteen (15) day delivery window for each Vessel for the following quarter as well as a notice of the Incremental Price for the third Vessel to be shipped if the schedule is for the first or the fourth quarter. The Seller is obligated to deliver Incremental Tonnage quoted at the Base Price . On the first working day of each month of the quarter or fifteen (15) days prior to each Vessel's ETA, whichever is sooner, the lay days will be reduced to a ten (10) day window and fifteen (15) days prior to ETA the lay days will be reduced to a seven (7) day window. Vessel's ETA will be narrowed by the Vessel owner. Seller will provide notice to the Buyer on or before the fifteenth day of the Notice Month as to whether Incremental Tonnage will be shipped at the quoted price. If the Seller accepts the quoted price, the coal will be shipped as scheduled, with the Incremental tonnage at the quoted price and the Firm tonnage at the Base Price. The Seller reserves the right to re- offer any unshipped Incremental Tonnage to the Buyer at another 4 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. time in the ensuing twelve (12) months (commencing with the quarter during which the unshipped Incremental Tonnage would otherwise have been shipped) at the Base Price. In each such instance, Buyer will then have the option to accept that Incremental Tonnage or permanently cancel that Incremental Tonnage. Section 3. Delivery Schedule Limitations: All Firm Tonnage in a quarter will be delivered before any Incremental Tonnage is delivered. Both Firm and Incremental Tonnage can be delivered during the same quarter, but Seller will not be obligated to deliver more than three (3) XX,XXX Metric Ton shipments of coal during any one quarter, unless otherwise mutually agreed. There will be a minimum of fifteen (15) calendar days between shipment releases from the Load Port unless otherwise mutually agreed. Section 9.1 Vessel Failure to Discharge at Minimum Rate: Should Seller's Vessel fail to offload cargo at a minimum rate of X,XXX Metric Tons per hour, Buyer shall receive a reduction of U.S. $ .XX per NT for each NT so delivered by said Vessel. This reduction is over and above any allowances previously provided herein. 5 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. ARTICLE IV ---------- SPECIFICATION & QUALITY & WEIGHT -------------------------------- Section 1. Origin: The coal shall be from the ------ Producer's operations as per the component blends indicated and meet the specifications as per Attachment I: Blend A Blend B Santander XX% XXX% Tachira XX% X% Mina Norte X% X% BUYER and SELLER agree that SELLER's Norte de Santander (Santander) coal shall be the primary component (XX % minimum) for each shipment under this agreement. Tachira coal shall be the secondary component (XX% maximum). Blend A above will be shipped unless another blend (B or other) is mutually agreed. The prices for coal shipped as provided in Article VI will prevail provided the secondary coal is limited to a maximum of 30% of the two coal blend. Higher percentages of Santander in blend A will command the same price per short ton. Coal loadings with greater than XX% of the secondary coal or those using a three coal blend that results in a lower price per net ton will be priced at the weighted component price per MMBtu (See Attachment III) provided the cargo is accepted by Central Hudson. 6 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. The two incremental cargoes will be priced in accordance with the contract provisions for incremental tonnage which will be subject to adjustment as provided above if the secondary coal is greater than XX%. The difference between the Base Price of coal and the weighted component price shall be deducted from the agreed incremental price. Mutually agreed shipments of coal blends not provided herein shall be priced at the weighted component price per MMBtu or as mutually agreed between Buyer and Seller. ARTICLE VI BASE PRICE ---------- Section 1. The Base Price for coal shipped under the terms of this Agreement will be $XX.XX DES per NT for Blend A and $XX.XX per NT for Blend B for the Contract Year 2000. Buyer has requested and Seller has agreed to ship Blend A in contract year 2000 however Seller reserves the option to ship Blend B in the event that coal stocks or vessel availability make Blend A untenable. 7 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. Section 2. On or before July 1, 2000, Buyer and Seller will enter into negotiations to fix the Base Price for coal delivered hereunder for the ensuing year. This Agreement will terminate on December 31, 2000, if negotiations for the following year have not been completed by October 1. ARTICLE VII ----------- ADJUSTMENT IN PRICE FOR QUALITY ------------------------------- Section 3. Adjustment for Ash Value: The Price to be paid to Seller by Buyer is based upon coal with an ash content (Ash Value) of XXXXX percent (X%) by weight of the "as received" analysis of the coal. If the Ash Value is between X.X% and X.X%, there will be no adjustment for Ash Value. If the Ash Value is less than X.X%, then a premium of $.XXX per net ton shall be paid to Seller for each .X% Ash Value variation below X.X%. If the Ash Value is greater than X.X%, then a penalty of $X.XXX per net ton shall be deducted from the Price for each .X% Ash Value variation in excess of X.X%. 8 IN WITNESS WHEREOF, each party hereto has caused this AGREEMENT to be executed in its behalf by its proper officer thereunder duly authorized, all as of the day and year first above written. BUYER: CENTRAL HUDSON GAS & ELECTRIC CORPORATION BY: /s/ Arthur R. Upright ------------------------------------------------ Arthur R. Upright Senior Vice President Regulatory Affairs, Financial Planning And Accounting PRODUCER: INTER-AMERICAN COAL N.V. BY: /s/ Marcel L. J. van den Berg ------------------------------------------------ Marcel L. J. van den Berg ITS: President and Chief Executive Officer SALES AGENT: INTER-AMERICAN COAL, INC. BY: /s/ Marcel L. J. van den Berg ------------------------------------------------ Marcel L. J. van den Berg ITS: President 9 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. Attachment III Base Price/Blend: Component $/MMBtu Min % Max % Mina Norte $X.XXX X XX Norte de Santander $X.XXX XX XXX Tachira $X.XXX X XX Weighted Prices per short ton determined using the above $/MMBtu and the guaranteed contract Btu/Lb . EX-10.89 7 AMENDMENT I:AGREEMENT FOR SALE & PURCHASE OF COAL Exhibit 10 (i) 89 THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. AMENDMENT I TO THE AGREEMENT FOR THE SALE AND PURCHASE OF COAL THIS AMENDMENT ("AMENDMENT"), dated as of November 1, 1999 TO THAT AGREEMENT ("AGREEMENT") FOR THE SALE AND PURCHASE OF COAL made and entered into as of the 1st day of November 1998 between CENTRAL HUDSON GAS & ELECTRIC CORPORATION, (herein-after referred to as "BUYER") and GLENCORE Ltd., (hereinafter referred to as "SELLER"). WITNESSETH: WHEREAS, Article IV of the AGREEMENT provides that beginning July 1, 1999, BUYER and SELLER shall commence good faith negotiations with respect to the price of coal for the next Contract Year; and WHEREAS, notice was duly given and BUYER and SELLER entered into good faith negotiations; and WHEREAS, after completion of good faith negotiations, BUYER and SELLER desire to amend the AGREEMENT to provide for the pricing of coal and certain other AGREEMENT provisions; NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the parties hereto agree as follows: SECTION 8, ARTICLE II, (DELIVERIES) ,SECTIONS 1 & 2, ARTICLE IV (PAYMENT) AND SECTION 4, ARTICLE V (ADJUSTMENT IN PRICE FOR QUALITY) of the AGREEMENT shall be respectively amended in their entirety for contract year 2000. The remaining ARTICLES AND SECTIONS of the AGREEMENT shall remain in full force and affect. The amended ARTICLE AND SECTIONS shall read as follows: CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. ARTICLE II DELIVERIES Section 8. If Buyer's coal unloading system or equipment is damaged or forced to shut down as the result of receiving foreign or oversized material from the vessel, then the Seller shall be liable for any damage and/or delays associated with the unauthorized delivery of this extraneous material. Demurrage at Discharge Berth If after completion of discharge Buyer has used more time to receive the entire cargo than allowed, Buyer will reimburse Seller for excess laytime used at the rate of USD $XX,XXX for each 24 hours, fractions pro rata. If after completion of discharge Seller's vessel has failed to offload the entire cargo at a minimum rate of XXXX short tons per hour, Seller will reduce the price as determined by Article IV, Section 1 by USD $ .XX per short ton for each ton of coal delivered. ARTICLE IV PAYMENT Section 1. Price: The Base Price of the Firm cargoes of coal sold hereunder in contract year 2000 is fixed at $XX.XX per short ton CIFFO Roseton Dock. Option Cargoes will be priced in accordance with ARTICLE II, Section 1. Section 2. On or before July 1st 2000, Buyer and Seller will enter into negotiations to fix the Base Price for coal delivered hereunder for the ensuing year. Unless otherwise agreed, this Agreement will terminate on December 31st of that contract year if negotiations for the following year have not been completed by November 1st. 2 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. ARTICLE V ADJUSTMENT IN PRICE FOR QUALITY Section 4. Adjustment for Sulfur Value: If the Sulfur Value of the coal shipment is less than or equal to X.XX% there will be no adjustment for Sulfur Value variation. If the Sulfur Value is greater than X.XX% but less than or equal to X.XX% then a penalty of $X.XX per ton shall be deducted from the Price for each X.XX% Sulfur Value variation in excess of X.XX%. IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be executed in its behalf by its proper officer thereunder duly authorized, all as of the day and year first above written. BUYER: CENTRAL HUDSON GAS & ELECTRIC CORPORATION BY /s/ Arthur R. Upright ------------------------------------------------- Arthur R. Upright ITS Senior Vice President-Regulatory Affairs, Financial Planning And Accounting SELLER: GLENCORE LTD. BY /s/ Gregory L. Marcum ------------------------------------------------ ITS Trader ------------------------------------------------- 3 EX-10.90 8 AMENDMENT I:AGREEMENT FOR SALE & PURCHASE OF COAL Exhibit 10 (i) 90 THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. AMENDMENT I TO THE AGREEMENT FOR THE SALE AND PURCHASE OF COAL This Amendment ("Amendment"), dated as of November 1, 1999 to that Agreement ("Agreement") for the sale and purchase of coal made and entered into as of the 1st day of April 1999 between Central Hudson Gas & Electric Corporation, (hereinafter referred to as "Buyer") and Arch Coal Sales Company, Inc., Agent for the Independent Operating Subsidiaries of Arch Coal, Inc., (hereinafter referred to as "Seller"). WITNESSETH: WHEREAS, Article IV of the Agreement provides that beginning July 1, 1999, Buyer and Seller shall commence good faith negotiations with respect to the price of coal for the next Contract Year; and WHEREAS, notice was duly given and Buyer and Seller entered into good faith negotiations; and WHEREAS, after completion of good faith negotiations, Buyer and Seller desire to amend the Agreement to provide for the pricing of coal and certain other Agreement provisions; NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, the parties hereto agree as follows: ARTICLE III, (SPECIFICATIONS & QUALITY & WEIGHTS), ARTICLE IV (PRICE & PAYMENT) AND ARTICLE V (ADJUSTMENT IN PRICE FOR QUALITY) of the Agreement shall be respectively amended in their entirety for contract year 2000. The remaining ARTICLES of the Agreement shall remain in full force and affect. The amended ARTICLES shall read as follows: CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. ARTICLE III SPECIFICATIONS & QUALITY & WEIGHTS ---------------------------------- Section 1. Origin: The Primary Source of coal for deliveries hereunder shall be from the Mingo Logan Operations and such coal shall meet the specifications herein. Coals from other sources shall not be shipped without the prior written approval of Buyer. Section 2. As Received Quality Specifications: The coal delivered hereunder shall conform to the following Typical Specifications on an "as received" basis determined on a per Vessel basis. The quality of the coal delivered by Seller shall be determined in accordance with Article VI. Typical Minimum Maximum ASTM Method ------- ------- ------- ----------- As Received: Moisture % X XX D 3173 Volatiles % XX XX XX D 3175 Fixed Carbon % XX XX XX D 3172 Ash % X.X -- X.X D 3174 BTU/LB XX,XXX XX,XXX -- D 3286 Sulphur % X.XX X.XX X.XX D 3177/4239 SO2 (LBS./MMBTU) X.XX -- X.X Calculated Grind (HGI) XX XX (1) XX D 409-85 Ash Fusion (Reducing) (I.D., Deg. F) X,XXX X,XXX -- D1587 Coal Fines: (A) 1/4" Round Hole -- -- XX% D4749 (B) 35 Mesh U.S. Standard -- -- XX% D4749 (1) Subject to approval by Buyer. 2 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. THIS COAL SHALL BE FREE OF EXTRANEOUS MATERIAL AND SHALL HAVE A MAXIMUM TOP SIZE OF TWO INCHES. (A) Coal defined as zero times one quarter inch round hole. (B) Coal fines defined as zero by 0.5 mm (35 mesh U.S. Standard sieve or 32 mesh Tyler sieve). Section 3. Buyer's Remedies Related to Quality Specifications: In lieu of any other remedies related to Seller's failure to meet the quality specifications provided for in Section 2 above, except for the price adjustments for quality provided for in Article V herein, Buyer shall have the rights and remedies described in this Section 3 upon Seller's failure to deliver coal in accordance with the specifications set forth in Section 2 of this Article III. Buyer's ability to use the coal being dependent on the coal meeting the specifications set forth above, it is agreed that Buyer shall have the right to reject any and all shipments which fail to meet any of the individual shipment as received rejection limits shown below: INDIVIDUAL SHIPMENT REJECTION LIMITS (As Received) -------------------------------------------------- Sulphur (By Weight) X.X% Maximum Volatiles XX% Minimum Ash % X% Maximum Ash Fusion (I.D. - Degrees F) X,XXX Minimum(1) Grind (HGI) XX Minimum Gross Calorific Value (BTU/LB) XX,XXX Minimum SO2/Million BTU X.X LBS. Maximum (1) Lower value subject to approval by Buyer. 3 Seller shall pay all freight, diversion, demurrage, testing and other expenses in connection with any such rejected shipment, or shipments found to be nonconforming, unless such shipment is accepted by Buyer. Furthermore, Seller certifies that it will not make any shipment shown by sampling and analyses (as provided in Article VI) to exceed the individual shipment rejection limits. Section 4. Seller's Duty of Care: Seller shall, at all times exercise reasonable care and diligence in its efforts to ship to Buyer coal which conforms to the specifications as set forth above in Section 2. Nothing in this Article III shall be construed to relieve Seller of its obligation to conduct its mining and operations in a competent manner, consistent with good industry practices, so as to produce coal which will meet the specifications as set forth in Section 2 above. Section 5. Weights: For rail/water deliveries, The Seller shall submit to Buyer the certified rail weights provided by the origin carrier within five (5) working days after the certified weights become available. For water only deliveries, the weight of coal sold hereunder shall be determined by an Independent Marine Survey(s) of the Vessel at the Load Port or by Independent Marine Survey(s) at Buyer's Discharge Port if Seller's Vessel has multiple Discharge Ports. The Buyer, Seller or their Agents reserve the right to witness any or all Marine Surveys. 4 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. ARTICLE IV PRICE AND PAYMENT Section 1. Price: The Base Price of the Firm cargoes of coal sold hereunder is fixed at $ XX.XX per short ton DES Roseton Dock. Option Cargoes will be priced in accordance with ARTICLE II, Section 1. Section 2. Price Reopener: On or before July 1st 2000, Buyer and Seller will enter into negotiations to fix the Base Price for coal delivered hereunder for the ensuing year. Unless otherwise agreed, this Agreement will terminate on December 31, 2000 if negotiations for the following year have not been completed by October 31st. Submission of Analysis: In addition to Seller's notifications provided for in Article II, Section 3, Seller shall submit to Buyer the analytical data on said shipments from the Operations as obtained by the Independent Laboratory for each shipment within five days after each shipment. Section 3. Invoice: An invoice for any adjustments for quality as hereinafter defined, and all coal shipped from the Operations based on weights determined in accordance with Article III Section 5 will be submitted by the Seller to the Buyer. The coal shipped will be invoiced at the Price as defined in ARTICLE IV, Section 1. 5 Section 4. Taxes: All taxes due on cargo in U.S.A. upon transfer of title per Incoterms (1990) are for Buyer's account. Section 5. Vessel Costs: All usual and customary Vessel costs, including but not limited to docking, are for the account of the Seller (i.e., pilots, tugs). Section 6. Payment: Buyer shall make payment to Seller within thirty (30) calendar days from vessel Bill of Lading Date. There shall be no discount for early payment. Payments due on a Saturday shall be made on the prior Friday and those due on a Sunday shall be made on the following Monday. Payments due on a Holiday shall be made on the following week day. Payment shall be made by wire transfer as directed by Seller upon written notice to Buyer. 6 CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION. ARTICLE V ADJUSTMENT IN PRICE FOR QUALITY Section 1. BTU Value (Gross Calorific Value As Received Basis - BTU/LB): The Price to be paid to Seller by Buyer is based upon coal with XX,XXX BTU/LB heat content (BTU Value) for each net ton of coal in each shipment. The BTU Value of the coal sold hereunder may vary, and the Price for such coal shall be adjusted to compensate for variations in BTU Value, as described below. Section 2. Adjustment for BTU Value: If the BTU Value of the coal shipment is between XX,XXX BTU/LB and XX,XXX BTU/LB (inclusive), there will be no adjustment for BTU Value variation. If the BTU Value is less than XX,XXX BTU/LB or greater than XX,XXX BTU/LB, the Price for a shipment shall be adjusted, based upon variations from the XX,XXX BTU/LB BTU Value, as follows: [a] For a coal shipment with a BTU Value greater than XX,XXX BTU/LB, a premium shall be paid by Buyer to Seller at the rate of $X.XX per 100 BTU/LB, fractions pro rata above XX,XXX BTU/LB; [b] For a coal shipment with a BTU Value less than XX,XXX BTU/LB but greater than XX,XXX BTU/LB, a penalty shall be deducted from the Price at the rate of $X.XX per 100 BTU/LB, fractions pro rata below XX,XXX BTU/LB; [c] For a coal shipment with a BTU Value less than XX,XXX BTU/LB but greater than XX,XXX BTU/LB, a penalty shall be deducted from the Price at the rate of $ X.XX per 100 BTU/LB, fractions pro rata below XX,XXX BTU/LB. Section 3. Adjustments for Ash Value: The Price to be paid to Seller by Buyer is based upon coal with an ash content (Ash Value) of XXXXX percent (X%) by weight of the "as received" analysis of the coal. If the Ash Value is between X.XX% and X.XX% there will be no adjustment for Ash Value. If the Ash Value is less than X.XX% then a premium of $.XX per ton shall be paid to Seller for each 0.X% Ash Value variation below X.X%. If the Ash Value is greater than X.XX% but equal to or less than X% then a penalty of $.XX per ton shall be deducted from the Price for each X.X% Ash Value variation in excess of X.X%. The maximum premium/penalty shall be $ X.XX per ton. 7 IN WITNESS WHEREOF, each Party hereto has caused this Agreement to be executed in its behalf by its proper officer thereunder duly authorized, all as of the day and year first above written. BUYER: CENTRAL HUDSON GAS & ELECTRIC CORPORATION BY /s/ Arthur R. Upright ------------------------------------ Arthur R. Upright ITS Senior Vice President-Regulatory Affairs, Financial Planning And Accounting SELLER: ARCH COAL SALES COMPANY, INC. BY /s/ John W. Eaves ------------------------------------ John W. Eaves ITS President of Arch Coal Sales Company, Inc. -------------------------------------------- 8 EX-10.91 9 AMENDMENT #1 CREDIT AGREEMENT EXHIBIT 10 (i) 91 FIRST AMENDMENT THIS FIRST AMENDMENT dated as of June 11, 1999 (this "Amendment") amends the Credit Agreement dated as of December 4, 1998 (the "Credit Agreement") among CH ENERGY GROUP, INC. (the "Company"), various financial institutions (the "Lenders") and THE FIRST NATIONAL BANK OF CHICAGO, as Administrative Agent for the Lenders (in such capacity, the "Administrative Agent"). Terms defined in the Credit Agreement are, unless otherwise defined herein or the context otherwise requires, used herein as defined therein. WHEREAS, the Company, the Lenders and the Administrative Agent have entered into the Credit Agreement; and WHEREAS, the parties hereto desire to amend the Credit Agreement as hereinafter set forth; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1 Amendment. Effective as set forth in Section 2, clause (iii) of Section 5.3 of the Credit Agreement shall be amended by deleting the following language therefrom: "(it being understood that prior to the Funding Date, the Utility shall obtain an amendment to or waiver of the change of control provision set forth in Section 6.01(l) of its Credit Agreement dated as of October 23, 1996 with various financial institutions and Morgan Guaranty Trust Company of New York, as agent, which amendment or waiver shall permit the Utility to become a Subsidiary of the Borrower)". SECTION 2 Effectiveness. The amendment set forth in Section 1 above shall become effective on the date when the Administrative Agent shall have received counterparts of this Amendment executed by the Company and each Lender (it being understood that, in the case of any Lender, the Administrative Agent may rely upon facsimile confirmation of the execution of a counterpart hereof by such Lender for purposes of determining the effectiveness hereof). SECTION 3 Miscellaneous. 3.1 Continuing Effectiveness, etc. As herein amended, the Credit Agreement shall remain in full force and effect and is hereby ratified and confirmed in all respects. After this Amendment become effective, all references in the Credit Agreement and the other Loan Documents to "Credit Agreement" or similar terms shall refer to the Credit Agreement as amended hereby. 3.2 Counterparts. This Amendment may be executed in any number of counterparts and by the parties herto on separate counterparts, and each such counterpart shall be deemed to be an original but all such counterparts shall together constitute one and the same Amendment. 3.3 Governing Law. This Amendment shall be governed by the laws of the State of Illinois applicable to contracts made and to be performed entirely within such State. 3.4 Successors and Assigns. This Amendment shall be binding upon the Company, the Lenders and the Administrative Agent and their respective successors and assigns, and shall inure to the benefit of the Company, the Lenders and the Administrative Agent and the respective successors and assigns of the Lenders and the Administrative Agent. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written. CH ENERGY GROUP, INC. By: /s/ Steven V. Lant ---------------------------- Title: Secretary and Treasurer THE FIRST NATIONAL BANK OF CHICAGO, Individually and as Administrative Agent By:_______________________ Title______________________ THE CHASE MANHATTAN BANK By:_______________________ Title:______________________ MARINE MIDLAND BANK By:________________________ Title:______________________ EX-10.19 10 DEFERRED COMPENSATION PLAN AMENDMENT EXHIBIT 10 (iii) 19 AMENDMENT TO THE DIRECTORS' DEFERRED COMPENSATION PLAN OF CENTRAL HUDSON GAS & ELECTRIC CORPORATION Central Hudson Gas & Electric Corporation ("Central Hudson"), established the Directors' Deferred Compensation Plan, effective October 1, 1980, and thereafter amended (as amended, the "Plan"). It is proposed to further amend the Plan to permit Directors who participate in the Plan two options by which deferred Compensation can be adjusted prior to distribution. Accordingly, Article 3 of the Plan is hereby amended and restated (all other terms being ratified, affirmed and approved), effective October 1, 1999, to read as follows: "Article 3. PAYMENT OF DEFERRED COMPENSATION 3.1 Compensation deferred by the Corporation for a Director (and adjusted to reflect the "Interest Equivalent" and/or "Equity Factor", as those terms are described below) in accordance with this Plan shall be paid to such Director by the Corporation at such time that he/she ceases being a Director of the Corporation or at such other time after ceasing to be a Director of the Corporation as he/she may specify when he/she makes an election pursuant to Section 2.1; provided, however, that the commencement of such pay-out period shall be at least one year after the effective date of such election. 3.2 At the sole option of the Director, payment by the Corporation pursuant to Section 3.1 shall be a lump sum or in equal quarterly installments, not to exceed 40 installments. 3.3 A.If elected, as provided below, the "Interest Equivalent" shall result in an additional sum to be paid to the Director under the Plan. The Interest Equivalent shall be determined by applying the "United States Treasury Bill Rate", as that term is hereinafter defined, to that part (as the Director shall elect) of Compensation credited by the Corporation to that Director's compensation ledger, during such periods as the Director shall elect, commencing on the date on which each increment of such Compensation would have been paid to such Director by the Corporation in the absence of this Plan, and ending on the date on which each such increment and the applicable Interest Equivalent are fully paid by the Corporation pursuant to this Plan. During periods of more than one month when an Interest Equivalent election is in effect, the United States Treasury Bill Rate shall be compounded monthly and applied to sums of Interest Equivalent remaining unpaid under this Plan until such sums are fully paid. If elected, as provided below, the "Equity Factor" shall increase or decrease monthly the amount of Compensation, subject to such election, credited by the Corporation to that Director's compensation ledger. The Equity Factor shall be determined by applying the "Standard & Poor's 500 Index Rate", as that term is hereinafter defined, to that part (as the Director shall elect) of Compensation credited by the Corporation to that Director's compensation ledger, during such periods as the Director shall elect, commencing on the date on which each increment of such Compensation would have been paid to such Director by the Corporation in the absence of this Plan, and ending on the date on which each such increment is fully paid by the Corporation pursuant to this Plan. 3.4 A.The term "United States Treasury Bill Rate", as used herein, shall be determined for each month in which it is to be applied to that part (as a Director shall elect) of Compensation credited to a Director's Compensation ledger pursuant to the provisions of this Plan, by computing the average of the discount rates in effect during the first and last weeks of the period of three calendar months immediately preceding the month in which the United States Treasury Bill Rate is to be so applied. B.The "Standard & Poor's 500 Index Rate", as used herein, shall be determined for each month in which it is to be applied to that part (as a Director shall elect) of Compensation credit to a Director's Compensation ledger pursuant to the provision of this Plan, by computing the percentage change in the Standard & Poor's 500 Index from the first day of the immediately preceding calendar month to the last day of such month, which percentage shall increase or decrease the amount of such Compensation subject to such election. C.The Director shall have the right to elect and reelect monthly either the United States Treasury Bill Rate or the Standard & Poor's 500 Index Rate, or a combination thereof, to be applied to the Compensation credited by the Corporation to that Director's compensation ledger. The initial election and any reelection must be received at least three (3) business days to the beginning of a month. If no initial election is timely made, the United States Treasury Bill Rate shall apply. If no reelection is timely made the prior timely election shall continue in effect. 3.5 If it is not possible to calculate either the United States Treasury Bill Rate or the Standard & Poor's 500 Index Rate in the above manner for any month, then such terms shall mean, for the Rate it is not possible to calculate, the annual 2 interest rate paid by the Corporation during such month on its customers' deposits, less one percent. 3.6 If the death of a Director shall occur before he has received full payment from the Corporation of all the Compensation, as adjusted, payable under this Plan, the Corporation shall make all remaining payments due or to become due hereunder in a single sum to the beneficiary or beneficiaries designated in writing and filed with the Plan Administrator by the Director in his lifetime, or if the Director fails to make such designation or if the designee predeceases the Director, then to the Director's estate in a single sum upon the appointment of the executor or administrator of such estate." IN WITNESS WHEREOF, the undersigned Chairman of the Board and Chief Executive Officer of Central Hudson Gas & Electric Corporation has signed this instrument this 24th day of September, 1999 as duly authorized by resolutions of its Board of Directors. /s/ Paul J. Ganci ------------------------------------------------- Chairman of the Board and Chief Executive Officer of Central Hudson Gas & Electric Corporation 3 EX-10.20 11 EXECUTIVE DEFERRED COMPENSATION PLAN EXHIBIT 10 (iii) 20 ASSIGNMENT AND ASSUMPTION EXECUTIVE DEFERRED COMPENSATION PLAN Central Hudson Gas & Electric Corporation ("Assignor") hereby assigns the Executive Deferred Compensation Plan ("Plan") of the Corporation, pursuant to authorization of its Board of Directors by action taken on January 28, 2000, in the form attached hereto, to CH Energy Group, Inc. ("Assignee"). Assignor and Assignee hereby agree as follows: Assignor hereby assigns all of its interest and obligations under the attached Plan to Assignee. Assignee, pursuant to authorization of its Board of Directors by action taken on February 4, 2000, hereby assumes all of Assignor interest in and obligations under said Plan, effective December 15, 1999. CENTRAL HUDSON GAS & ELECTRIC CORPORATION Dated: As of December 15,1999 By: /s/ Carl E. Meyer ----------------------------------- Name: Carl E. Meyer Title: President and Chief Operating Officer CH ENERGY GROUP, INC. Dated: As of December 15,1999 By: /s/ Paul J. Ganci ---------------------------------- Name: Paul J. Ganci Title: Chairman of the Board, President and Chief Executive Officer EX-10.21 12 STOCK PLAN FOR OUTSIDE DIRECTORS EXHIBIT 10 (iii) 21 AMENDMENT, ADOPTION, ASSIGNMENT AND ASSUMPTION STOCK PLAN FOR OUTSIDE DIRECTORS Central Hudson Gas & Electric Corporation ("Assignor") hereby agrees to amend and restate its Stock Plan For Outside Directors ("Plan"), and readopts such Plan, as amended and restated, pursuant to authorization of its Board of Directors by action taken on November 19, 1999, such Plan to be in the form attached hereto. Assignor hereby assigns said Plan, as amended and restated, to CH Energy Group, Inc. ("Assignee"). Assignor and Assignee hereby agree as follows: Assignor hereby assigns all of its interest and obligations under the attached Plan, as amended and restated, to Assignee. Assignee, pursuant to authorization of its Board of Directors by action taken on November 19, 1999, hereby assumes all of Assignor interest in and obligations under said Plan, as amended and restated, effective December 15, 1999. CENTRAL HUDSON GAS & ELECTRIC CORPORATION Dated: As of December 15, 1999 By: /s/ Carl E. Meyer ---------------------------------- Name: Carl E. Meyer Title: President and Chief Operating Officer CH ENERGY GROUP, INC. Dated: As of December 15, 1999 By: /s/ Paul J. Ganci --------------------------------- Name: Paul J. Ganci Title: Chairman of the Board, President and Chief Executive Officer EXHIBIT 10 (iii) 21 AMENDED AND RESTATED STOCK PLAN FOR OUTSIDE DIRECTORS OF CH ENERGY GROUP, INC. Central Hudson Gas & Electric Corporation ("Central Hudson"), effective January 1, 1996, established a stock plan for eligible members of its Board of Directors in recognition of their past and future services. Central Hudson, effective December 15, 1999, became a wholly- owned subsidiary of CH Energy Group, Inc. ("Corporation"). Therefore, and, by this amendment and restatement of such plan, the Corporation hereby becomes successor in interest to Central Hudson under such plan, as amended, to read as follows: The loyalty and dedicated service of "outside" directors is essential to the growth and progress of any publicly-held company. Therefore, such plan is intended to better enable the Corporation to attract and retain qualified outside directors until they reach the mandatory retirement age of 70 for all directors. The following shall constitute the terms and conditions of the Corporation's Stock Plan for Outside Directors: SECTION 1. DEFINITIONS 1.1 "Account" means the account referred to in Section 4.1 hereof. 1.2 "Plan" means the CH Energy Group, Inc. Stock Plan for Outside Directors as described in this instrument, and as it from time to time may be amended, which is intended to be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974. 1.3 "Committee" means the Committee referred to in Section 7.1. 1.4 "Corporation" means CH Energy Group, Inc. (or any successor corporation or, prior to December 15, 1999, Central Hudson Gas & Electric Corporation ("Central Hudson")). 1.5 "Director" means a person duly elected and serving as a member of the Corporation's Board of Directors who is also not an employee of the Corporation or any of its affiliates. 1.6 "Fiscal Year" means the fiscal year of the Corporation as established from time to time. 1.7 "Participant" means each Director who participates in the Plan in accordance with the terms and conditions of the Plan. 1.8 "Share Equivalent" means a unit of participation in the Plan, equivalent to one share of Common Stock, credited to a Participant pursuant to Section 3.1. 1.9 "Common Stock" shall mean the common stock of the Corporation, $.10 par value. SECTION 2. ELIGIBILITY AND PARTICIPATION 2.1 Each Director is a Participant. SECTION 3. CREDITED SHARE EQUIVALENTS 3.1 (a) As additional compensation for services rendered, each Participant shall be credited with 25 Share Equivalents for each full quarterly period of a Fiscal Year during which such Participant served as a Director. Such credits shall be made as of the end of each quarterly period (commencing with the first quarterly period ending in March 1996, when the term Corporation meant Central Hudson) during which the Participant served as a Director of the Corporation. (b) As additional compensation for services rendered, each Participant upon ceasing to serve as a member of the Corporation's Board of Directors (except for any such member whose service is terminated for cause) shall also be entitled to receive 25 Share Equivalents for each full quarterly period of a Fiscal Year (but not for more than 40 quarters) during which such Participant served as an Outside Director, including periods prior to January 1, 1996. Such entitlement shall be implemented by crediting such Participant's Account with 25 Share Equivalents as of the end of each full quarterly period of a Fiscal Year commencing with the first such period after such Participant's cessation. Such entitlement shall be personal to such Participant and shall not survive such Participant's death, except for Share Equivalents credited to such participant's Account prior to death. (c) Such credited Share Equivalents shall be treated as deferred compensation to be distributed as provided in Section 5. SECTION 4. DEFERRED COMPENSATION ACCOUNT 4.1 A deferred compensation account (herein referred to as the "Account") shall be established for each Participant, consisting of Share Equivalents credited pursuant to Section 3.1. 4.2 Upon the occurrence of any event affecting the outstanding Common Stock, including any stock dividend, extraordinary non-cash dividend, forward or reverse stock split, recapitalization, reclassification of shares of Common Stock, merger, consolidation or sale by the Corporation of all or a substantial portion of its assets, tender offer for its securities, or 2 other event which could distort the implementation of the Plan or the realization of its objectives, the Committee shall make such appropriate adjustments in the number and kind of securities which Share Equivalents will represent or which may be paid out under the Plan. All such adjustments shall be made so as to prevent dilution or enlargement of the rights of Participants. Effective December 15, 1999 any Share Equivalent of Common Stock of Central Hudson, par value $5.00 per share, shall automatically be converted to a Share Equivalent of Common Stock. SECTION 5. DISTRIBUTION 5.1 The Participant's Account shall be valued as of the end of each such quarterly period and distributions shall be made therefrom as follows: Distribution of an Account shall be in Common Stock, on the basis of one share of such Stock for each Share Equivalent credited to the Account. Distribution of Common Stock shall be made in one lump sum within 60 days following the end of each such quarterly period subject to compliance with all applicable administrative and legal requirements. 5.2 Any Common Stock, which becomes distributable after the death of a Participant, shall be distributed to such person or persons or the survivors thereof, including corporations, unincorporated associations or trusts, as shall be provided by written agreement between the Corporation and the Participant and in the absence of such an agreement such Common Stock shall be distributed to the Participant's estate. 5.3 The Corporation shall deduct from the amount of all distributions under the Plan any taxes required to be withheld by the Federal or any state or local governments. 5.4 At the time of distribution or as soon thereafter as practicable, the Corporation shall deliver to a Participant or to his/her Beneficiary a certificate for the shares of Common Stock to which he or she is entitled. Such certificates shall be registered in the name of the Participant or his/her Beneficiary. Notwithstanding the foregoing, if the registration of ownership of Common Stock is then being maintained by the Corporation or its transfer agent in book-entry form, the delivery of shares of Common Stock to the Participant or his/her Beneficiary may be evidenced by book entry, unless the Participant or Beneficiary requests otherwise in writing. The Corporation shall not be required to issue or deliver any certificates for, or make a book-entry reflecting, shares of Common Stock prior to (a) the listing of such shares on any stock exchange or quotation system on which the Common Stock may then be listed or quoted and (b) the completion of any registration, qualification, approval or authorization of such shares under any federal or state law, or any ruling or regulation or approval or authorization of any governmental body which the Corporation shall, in its sole discretion, determine to be necessary or advisable. 3 All certificates for shares of Common Stock delivered under the Plan, and book entries reflecting such shares, shall be subject to such restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed and any applicable federal or state securities laws. SECTION 6. RIGHTS OF PARTICIPANTS 6.1 Nothing contained in this Plan shall be construed as giving any Participant the right to be retained as a Director of the Corporation. Nothing contained in this Plan shall be construed as limiting, in any way, any right that any party or parties may have to remove a Participant as a Director of the Corporation or to appoint or to elect another individual to replace a Participant as a Director of the Corporation. Nothing contained in this Plan shall be construed as giving any Participant the right to receive any benefit not specifically provided by the Plan. Any other provision of the Plan notwithstanding, a Participant shall not have any interest in the amounts credited to his/her Account until such Account is distributed in accordance with the provisions of Section 5, which, among other things, means that the Participant has no voting rights with respect to the Common Stock represented by Share Equivalents. With respect to amounts credited to a Participant's Account, the rights of the Participant, the Beneficiary of the Participant under this Plan shall be solely those of unsecured general creditors of the Corporation, and the obligations of the Corporation hereunder shall be purely contractual. Such benefits shall be paid from the general assets of the Corporation. As contemplated by Revenue Procedure 92-65, I.R.B. 1992-33, 16, Participants shall have the status of general unsecured creditors of the Corporation and the Plan. 6.2 The rights of a Participant to the payment of shares of Common Stock as provided in this Plan and with respect to Share Equivalents credited to his or her Account are not transferable by a Participant other than by will or the laws of descent and distribution and shall not be assigned, transferred, pledged or encumbered or be subject in any manner to alienation or anticipation. No Participant may borrow against his or her Account. No Account shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, whether voluntary or involuntary, including, but not limited to, any liability which s for alimony or other payments for the support of a spouse or former spouse, or for any other relative of a Participant. Neither a Participant's Account nor a Participant's rights to benefits hereunder may be assigned to any other party by means of a judgment, decree or order (including approval of a property settlement agreement) relating to the provision of child support, alimony payments, or marital property rights of a spouse, former spouse, child or other dependent of the Participant. This Plan shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder. 4 In addition, a Participant or Beneficiary shall have not rights against or security interest in the assets of the Plan, Corporation or any trust which may be established with respect to the Plan, and shall have only the Corporation's unsecured promise to pay benefits. All assets of the Plan, if any, shall remain subject to the claims of the Corporation's general creditors. SECTION 7. ADMINISTRATION OF THE PLAN 7.1 The Plan shall be administered by the Committee on Compensation and Succession of the Corporation's Board of Directors (herein called the "Committee"). 7.2 The Committee shall from time to time establish rules for the administration of the Plan that are not inconsistent with the provisions of the Plan. 7.3 The determination of the Committee as to any disputed question arising under the Plan, including questions of construction and interpretation, shall be final, binding and conclusive upon all persons. 7.4 Neither the Committee nor a member of the Board of Directors of the Corporation and no employee of the Corporation, shall be liable for any act or action hereunder, whether of omission or commission, except in circumstances involving bad faith, or for any act of any other member or employee or of any agent to whom duties in connection with the administration of the plan have been delegated. SECTION 8. AMENDMENTS, ETC. 8.1 The Board of Directors of the Corporation may in its absolute discretion, without notice, at anytime and from time to time, modify or amend, in whole or in part, any or all of the provisions of the Plan or suspend or terminate it entirely. Any such modification, amendment, suspension or termination, however, may not, without the Participant's consent, apply to or affect the payment or distribution to any Participant relating to any Share Equivalent for any quarterly period ended prior to the effective date of such modification, amendment, suspension or termination; provided, however, any such action may be taken to comply with the applicable law and governmental rules and regulations issued thereunder notwithstanding the effect thereof on a Participant's account hereunder. SECTION 9. EFFECTIVE DATE, CONTROLLING LAW 9.1 This Plan became effective as of January 1, 1996 and, effective December 15, 1999, the Corporation became the Plan successor to Central Hudson. This Plan shall be construed under the laws of the State of New York, to the extent Federal law is inapplicable. 5 IN WITNESS WHEREOF, the undersigned Chairman of the Board and Chief Executive Officer of CH Energy Group, Inc. and the President and Chief Operating Officer of Central Hudson Gas & Electric Corporation have each signed this instrument this 15th day of December, 1999 as duly authorized by resolutions of each of their respective Board of Directors. /s/ Paul J. Ganci ------------------------------------------- Chairman of the Board, President and Chief Executive Officer of CH Energy Group, Inc. /s/ Carl E. Meyer ------------------------------------------- President and Chief Operating Officer of Central Hudson Gas & Electric Corporation 6 EX-10.22 13 CHANGE OF CONTROL SEVERANCE POLICY AND PLAN EXHIBIT 10 (iii) 22 ASSIGNMENT AND ASSUMPTION CHANGE OF CONTROL SEVERANCE POLICY AND PLAN Central Hudson Gas & Electric Corporation ("Assignor") hereby assigns its Change of Control Severance Policy and Plan ("Policy and Plan"), pursuant to authorization of its Board of Directors by action taken on January 28, 2000, in the form attached hereto, to CH Energy Group, Inc. ("Assignee"). Assignor and Assignee hereby agree as follows: Assignor hereby assigns all of its interest and obligations under the attached Policy and Plan to Assignee. Assignee, pursuant to authorization of its Board of Directors by action taken on February 4, 2000, hereby assumes all of Assignor interest in and obligations under said Policy and Plan, effective December 15, 1999. CENTRAL HUDSON GAS & ELECTRIC CORPORATION Dated: As of December 15, 1999 By: /s/ Carl E. Meyer --------------------------------------- Name: Carl E. Meyer Title: President and Chief Operating Officer CH ENERGY GROUP, INC. Dated: As of December 15, 1999 By: /s/ Paul J. Ganci ----------------------------------- Name: Paul J. Ganci Title: Chairman of the Board, President and Chief Executive Officer EX-10.23 14 EMPLOYMENT AGREEMENTS WITH OFFICERS EXHIBIT 10 (iii) 23 ASSIGNMENT AND ASSUMPTION EMPLOYMENT AGREEMENTS WITH OFFICERS OF CENTRAL HUDSON GAS & ELECTRIC CORPORATION Reference is made to the employment agreements ("Agreements") between the individuals listed on Annex A hereto and Central Hudson Gas & Electric Corporation ("Central Hudson"). Central Hudson ("hereinafter 'Assignor') hereby assigns such Agreements, pursuant to authorization of its Board of Directors by action taken on January 28, 2000, in the form attached hereto, to CH Energy Group, Inc. ("Assignee"). Assignor and Assignee hereby agree as follows: Assignor hereby assigns all of its interest and obligations under said Agreements to Assignee and Assignee, pursuant to authorization of its Board of Directors by action taken on February 4, 2000, and pursuant to Section 11(c) of said Agreements, as successor corporation to substantially all of the business and/or assets of Assignor, hereby expressly assumes and agrees to perform, effective December 15, 1999, the Agreements in the same manner and to the same extent Assignor would be required to perform the Agreements if no such succession had taken place. Assignee also expressly and unconditionally assumes and agrees to perform, effective December 15, 1999, Assignor's obligations under Assignor's Change of Control Severance Policy and Plan ("Policy"), in the same manner and to the same extent Assignor would be required to perform under the Policy as if no such succession had taken place. References in said Agreement and the Policy to Assignor shall hereinafter be deemed references to Assignee. CENTRAL HUDSON GAS & ELECTRIC CORPORATION Dated:As of December 15, 1999 By: /s/ Carl E. Meyer ------------------------------------ Name: Carl E. Meyer Title: President and Chief Operating Officer CH ENERGY GROUP, INC. Dated:As of December 15, 1999 By: /s/ Paul J. Ganci ---------------------------------- Name: Paul J. Ganci Title:Chairman of the Board, President and Chief Executive Officer ANNEX A OFFICERS OF CENTRAL HUDSON GAS & ELECTRIC CORPORATION COVERED UNDER EMPLOYMENT AGREEMENTS, EFFECTIVE DECEMBER 15, 1999: RONALD P. BRAND JOHN C. CHECKLICK GLADYS L. COOPER JOSEPH J. DE VIRGILIO, JR. DONNA S. DOYLE STEVEN V. LANT JAMES P. LOVETTE CARL E. MEYER ALLAN R. PAGE ARTHUR R. UPRIGHT DENISE D. VAN BUREN EX-10.24 15 ASSIGNMENT AND ASSUMPTION AGREEMENT EXHIBIT 10 (iii) 24 ASSIGNMENT AND ASSUMPTION EMPLOYMENT AGREEMENT WITH PAUL J. GANCI Reference is made to the employment agreement ("Agreement") between Paul J. Ganci and Central Hudson Gas & Electric Corporation ("Central Hudson"). Central Hudson ("hereinafter 'Assignor') hereby assigns its Agreement with Paul J. Ganci, pursuant to authorization of its Board of Directors by action taken on January 28, 2000, in the form attached hereto, to CH Energy Group, Inc. ("Assignee"). Assignor and Assignee hereby agree as follows: Assignor hereby assigns all of its interest and obligations under said Agreement to Assignee and Assignee, pursuant to authorization of its Board of Directors by action taken on February 4, 2000, and pursuant to Section 11(c) of said Agreement, as successor corporation to substantially all of the business and/or assets of Assignor, hereby expressly assumes and agrees to perform, effective December 15, 1999, the Agreement in the same manner and to the same extent Assignor would be required to perform the Agreement if no such succession had taken place. Assignee also expressly and unconditionally assumes and agrees to perform, effective December 15, 1999, Assignor's obligations under Assignor's Change of Control Severance Policy and Plan ("Policy"), in the same manner and to the same extent Assignor would be required to perform under the Policy as if no such succession had taken place. References in said Agreement and the Policy to Assignor shall hereinafter be deemed references to Assignee. CENTRAL HUDSON GAS & ELECTRIC CORPORATION Dated: As of December 15, 1999 By: /s/ Carl E. Meyer ------------------------------------ Name: Carl E. Meyer Title: President and Chief Operating Officer CH ENERGY GROUP, INC. Dated: As of December 15, 1999 By: /s/ Paul J. Ganci --------------------------------------- Name: Paul J. Ganci Title: Chairman of the Board, President and Chief Executive Officer EX-10.25 16 DIRECTORS AND EXECUTIVES DEFERRED COMP. PLAN EXHIBIT 10 (iii) 25 CH ENERGY GROUP, INC. DIRECTORS AND EXECUTIVES DEFERRED COMPENSATION PLAN TABLE OF CONTENTS ----------------- ARTICLE I TITLE AND DEFINITIONS.....................................4 1.1 Title...........................................................4 1.2 Definitions.....................................................4 ARTICLE II PARTICIPATION.............................................6 ARTICLE III DEFERRAL ELECTIONS........................................6 3.1 Elections to Defer Compensation.................................6 3.2 Investment Elections............................................7 ARTICLE IV DEFERRAL ACCOUNTS AND TRUST FUNDING.......................8 4.1 Deferral Accounts...............................................8 4.2 Company Discretionary Contribution Account......................8 4.3 Trust Funding...................................................9 ARTICLE V VESTING...................................................9 ARTICLE VI DISTRIBUTIONS............................................10 6.1 Distribution of Deferred Compensation and Discretionary Company Contributions..........................................10 6.2 Non-Scheduled In-Service Withdrawals...........................11 6.3 Hardship Distribution..........................................12 6.4 Inability to Locate Participant................................12 ARTICLE VII ADMINISTRATION...........................................12 7.1 Committee......................................................12 7.2 Committee Action...............................................12 7.3 Powers and Duties of the Committee.............................13 7.4 Construction and Interpretation................................13 7.5 Information....................................................13 (i) 7.6 Compensation, Expenses and Indemnity...........................14 7.7 Monthly Statements.............................................14 7.8 Disputes.......................................................14 ARTICLE VIII MISCELLANEOUS............................................15 8.1 Unsecured General Creditor.....................................15 8.2 Restriction Against Assignment.................................15 8.3 Withholding....................................................16 8.4 Amendment, Modification, Suspension or Termination.............16 8.5 Governing Law..................................................16 8.6 Receipt or Release.............................................16 8.7 Payments on Behalf of Persons Under Incapacity.................16 8.8 Limitation of Rights and Employment Relationship...............17 8.9 Headings.......................................................17 (ii) CH ENERGY GROUP, INC. DIRECTORS AND EXECUTIVES DEFERRED COMPENSATION PLAN WHEREAS, CH Energy Group, Inc. (the "Company") desires to provide a tax deferred capital accumulation opportunity for members of the Company's Board of Directors and for a select group of executives and key management and highly compensated employees effective as of January 1, 2000; and WHEREAS, Central Hudson Gas & Electric Corporation has previously adopted the Central Hudson Gas & Electric Corporation Directors' Deferred Compensation Plan, which Plan has been assigned to and assumed by the Company; and WHEREAS, Company desires to merge the Central Hudson Gas & Electric Corporation Directors' Deferred Compensation Plan into this Plan with the adoption of this Plan, NOW, THEREFORE, effective as of January 1, 2000, the Plan is hereby adopted to read as follows and the Central Hudson Gas & Electric Corporation Directors' Deferred Compensation Plan is hereby merged into this Plan as described below: ARTICLE I TITLE AND DEFINITIONS 1.1 Title. This Plan shall be known as the CH Energy Group, Inc. Directors and Executives Deferred Compensation Plan. 1.2 Definitions. Whenever the following words and phrases are used in this Plan, with the first letter capitalized, they shall have the meanings specified below. (a) "Account" or "Accounts" shall mean a Participant's Deferral Account and/or the Company Discretionary Contribution Account. (b) "Base Salary" shall mean a Participant's annual base salary, excluding bonus, incentive and all other remuneration for services rendered to the Company and prior to reduction for any salary contributions to a plan established pursuant to Section 125 of the Code or qualified pursuant to Section 401(k) of the Code. (c) "Beneficiary" or "Beneficiaries" shall mean the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant's death. No beneficiary designation shall become effective until it is filed with the Committee. However, no designation of a Beneficiary other than the Participant's spouse shall be valid unless consented to in writing by such spouse. Any designation shall be revocable at any time through a written instrument filed by the Participant with the Committee with or without the consent of the previous Beneficiary. If there is no Beneficiary designation in effect, or there is no surviving designated Beneficiary, the Participant's surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant's estate duly appointed and acting in that capacity within ninety (90) days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed one hundred eighty (180) days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder. In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead be paid (a) to that person's living parent(s) to act as custodian, (b) if that person's parents are then divorced, and one parent is the sole custodial parent, to such custodial parent, or (c) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within sixty (60) days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor. Payment by the Company pursuant to any unrevoked Beneficiary designation, or to the Participant's estate if no such designation exists, of all benefits owed hereunder shall terminate any and all liability of the Company. (d) "Board of Directors" or "Board" shall mean the Board of Directors of CH Energy Group, Inc. (e) "Bonuses" shall mean the incentive compensation determined under the Company's Executive Incentive Plan earned during the Plan Year. (f) "Change of Control" shall mean: (1) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (x) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any -2- acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (3) of this Section 1.2(f); or (2) Individuals who, as of December 1, 1998, constitute the Board of Directors of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then compromising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or consummation of a reorganization, merger or consolidation or sale, or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (3) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company; (g) "Change of Control Payments" shall mean a payment from Company as a result of a Change of Control; (h) "Code" shall mean the Internal Revenue Code of 1986, as amended. (i) "Committee" shall mean the Committee appointed by the Chief Executive Officer of the Company to administer the Plan in accordance with Article VII. -3- (j) "Company" shall mean CH Energy Group, Inc. and any successor corporations. Company shall include each corporation which is a member of a controlled group of corporations (within the meaning of Section 414(b) of the Code) of which CH Energy Group, Inc. is a component member, if the Board provides that such corporation shall participate in the Plan and such corporation's governing Board of Directors adopts this Plan. (k) "Company Discretionary Contribution Account" shall mean the bookkeeping account maintained by the Company for each Participant that is credited with an amount equal to the Company Discretionary Contribution Amount, if any, and earnings and losses pursuant to Section 4.2. (l) "Company Discretionary Contribution Amount" shall mean, for each Participant for a Plan Year, an additional discretionary amount allocated to a Participant under this Plan as determined by the Company. Such amount may differ from Participant to Participant both in amount, including no contribution, and as a percentage of Compensation. (m) "Compensation" shall mean Base Salary, Bonuses, Change of Control Payments and Directors Fees that the Participant is entitled to receive for services rendered to the Company. (n) "Deferral Account" shall mean the bookkeeping account maintained by the Committee for each Participant that is credited with amounts equal to (1) the portion of the Participant's Compensation that he or she elects to defer, including any amounts deferred under the Central Hudson Gas & Electric Corporation Directors' Deferred Compensation Plan and income earned thereon as of the Effective Date, and (2) interest pursuant to Section 4.1. (o) "Directors Fees" shall mean the retainers and fees a member of the Board is entitled to receive for services rendered in his or her capacity as a member of the Board. (p) "Distributable Amount" shall mean the sum of the amounts credited to a Participant's Deferral Account and the Company Discretionary Contribution Account. (q) Effective Date" shall mean January 1, 2000. (r) "Eligible Director" shall mean a member of the Board of Directors. (s) "Eligible Employee" shall mean executive officers and other executives and key management employees of the Company that meet criteria approved by the Committee on Compensation and Succession/Retirement of the Board of Directors. (t) "Eligible Individual" shall mean Eligible Directors and Eligible Employees. (u) "Fund" or "Funds" shall mean one or more of the investment funds or Policies selected by the Committee pursuant to Section 3.2(b). (v) "Hardship Distribution" shall mean a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of his -4- or her Dependent (as defined in Section 152(a) of the Code), loss of a Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. The circumstances that would constitute an unforeseeable emergency will depend upon the facts of each case, but, in any case, a Hardship Distribution may not be made to the extent that such hardship is or may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship, or (iii) by cessation of deferrals under this Plan. (w) "Initial Election Period" for an Eligible Individual shall mean the thirty (30) day period prior to December 20, 1999 or the thirty (30) day period following the time an employee or member of the Board becomes an Eligible Individual. (x) "Rate of Return" shall mean for each Fund an amount equal to the net rate of gain or loss on the assets of such Fund during the period amounts are invested in the Fund. (y) "Long Term Disability" shall have the same meaning as provided in the long term disability policy maintained by the Company for its senior executive employees. (z) "Non-Scheduled In-Service Withdrawal" shall mean an election by a Participant in accordance with Section 6.2 to receive a withdrawal of amounts from his or her Deferral Account and Company Discretionary Contribution Account prior to the time in which such Participant would otherwise be entitled to such amounts. (aa) "Participant" shall mean any Eligible Individual who becomes a Participant in accordance with Article II. (bb) "Payment Date" for payment of a Distributable Amount shall mean the time as soon as administratively practicable after (1) the end of the calendar quarter in which the Participant's employment terminates for any reason, or (2) the Scheduled In-Service Withdrawal Date. (cc) "Plan" shall mean the CH Energy Group, Inc. Directors and Executives Deferred Compensation Plan set forth herein, now in effect, or as amended from time to time. (dd) "Plan Year" shall mean the initial period beginning on January 1, 2000 and ending on December 31, 2000 and thereafter the twelve (12) consecutive month period beginning on each January 1 and ending on each December 31. (ee) "Retirement" shall mean the Participant's termination of employment with the Company on or after age fifty-five (55). (ff) "Scheduled In-Service Withdrawal Date" shall be the distribution date elected by the Participant for an in-service withdrawal of all amounts of Compensation deferred in a given Plan Year and Company Discretionary Contribution Amounts, and earnings and losses attributable thereto, as set forth on the election form for such Plan Year. -5- (gg) "Trust" shall mean the CH Energy Group, Inc. Directors and Executives Deferred Compensation Plan Trust. (hh) "Trustee" shall mean the trustee of the Trust. ARTICLE II PARTICIPATION A Participant in the Central Hudson Gas & Electric Corporation Directors' Deferred Compensation Plan in effect immediately prior to the Effective Date of this Plan shall continue such participation as a Participant in this Plan. Any other Eligible Individual shall become a Participant in this Plan by electing to defer a portion of his or her Compensation in accordance with Section 3.1. ARTICLE III DEFERRAL ELECTIONS 3.1 Elections to Defer Compensation. (a) Initial Election Period. Subject to the provisions of Article II, each Eligible Employee may elect to defer Base Salary, Bonuses and Change of Control Payments by filing with the Committee an election that conforms to the requirements of this Section 3.1 on a form provided by the Committee, no later than the last day of his or her Initial Election Period. An Eligible Director may, subject to the provisions of Article II elect to defer Directors' Fees by filing with the Committee an election that conforms with the requirements of this Section 3.1, on a form provided by the Committee, no later than the last day of his or her Initial Election Period. (b) General Rule. The amount of Compensation which an Eligible Individual may elect to defer is such Compensation earned on or after the time at which the Eligible Individual elects to defer Compensation in accordance with Sections 1.2(w) and 3.1(a). The amount elected by an Eligible Employee shall be a flat dollar amount or a percentage of Base Salary, Bonus and Change of Control Payments which shall not exceed 50% of the Eligible Employee's Base Salary, and 100% of the Eligible Employee's Bonus and 100% of any Change of Control Payment, provided that the total amount deferred by an Eligible Employee shall be limited in any calendar year, to an annual amount that results in an Eligible Employee's Compensation being not less than the Social Security Wage Base. In addition, the Committee may in its sole and absolute discretion further limit deferrals for income tax withholding and employee benefit plan withholding requirements. An Eligible Director may defer up to 100% of his or her Director's Fees. The minimum contribution which may be made in any Plan Year by an Eligible Individual shall not be less than 25% of the expected target contribution which can be satisfied from either Base Salary, targeted Bonuses, and Change of Control Payments or Directors Fees, whether or not the targeted bonus is actually earned. (c) Duration of Compensation Deferral Election. An Eligible Employee's initial election to defer Base Salary must be filed on or before December 20, 1999 and is to be effective for the first day of the next following Plan Year. A Participant may renew, increase, -6- decrease or terminate a deferral election with respect to Base Salary for any subsequent Plan Year by filing a new election on or before December 20 which election shall be effective on the first day of the next following Plan Year. An Eligible Employee's Initial Election to defer Bonuses earned during the calendar year ended December 31, 2000 must be filed prior to December 20, 1999. Any subsequent election with respect to bonuses must be filed by December 20 of the year prior to the year that the Bonuses are earned. An Eligible Employee's Election with respect to a Change of Control Payment must be made on or before December 20 and shall be effective on the first day of the next following Plan Year. An Eligible Employee may change his or her election with respect to a Change of Control Payment at least one year prior to any Change of Control, in order for such election to become effective. An Election by an Eligible Director must be made on or before December 20 of the year prior to the year in which the Director's Fees are earned. All elections under this Section 3.1 shall be for a period of one (1) year. In the case of an employee or director who becomes an Eligible Individual on or after January 1, 2000, such Eligible Individual shall have thirty (30) days from the date he or she has become an Eligible Individual to make an Initial Election with respect to amounts capable of being deferred under the Plan. Such election shall be for the remainder of the Plan Year. (d) Elections other than Elections during the Initial Election Period. Subject to the limitations of Section 3.1(b) above, any Eligible Employee or Eligible Director who fails to elect to defer Compensation during his or her Initial Election Period may subsequently become a Participant, and any Eligible Employee or Eligible Director who has terminated a prior Compensation deferral election may elect to again defer Compensation, by filing an election, on a form provided by the Committee, to defer Compensation as described in Sections 3.1(b) and 3.1(c) above. An election to defer Compensation must be filed on or before December 20 and will be effective for Compensation earned in the next following Plan Year. 3.2 Investment Elections. (a) At the time of making the deferral elections described in Section 3.1, the Participant shall designate, on a form provided by the Committee, the types of investments the Participant's Account will be deemed to be invested in for purposes of determining the amount of earnings and losses to be credited to that Account. In making the designation pursuant to this Section 3.2, the Participant may specify that all or any multiple of his or her Deferral Account and Company Discretionary Contribution Account be deemed to be invested in one or more of the types of investments provided under the Plan. A Participant may change the designation made under this Section 3.2 each day in accordance with procedures established by the Committee. If a Participant fails to elect a type of investment fund under this Section 3.2, he or she shall be deemed to have elected the Money Market type of investment fund. (b) Although the Participant may designate the type of investment funds in Section 3.2(a) above, the Committee shall not be bound by such designation. The Committee shall select from time to time, in its sole discretion, a commercially available investment fund of each of the types provided under the Plan to be the Funds. The Rate of Return of each such -7- commercially available investment fund shall be used to determine the amount of earnings or losses to be credited to Participant's Account under Article IV. ARTICLE IV DEFERRAL ACCOUNTS AND TRUST FUNDING 4.1 Deferral Accounts. The Committee shall establish and maintain a Deferral Account for each Participant under the Plan. Each Participant's Deferral Account shall be further divided into separate subaccounts ("investment fund subaccounts"), each of which corresponds to an investment fund elected by the Participant pursuant to Section 3.2(a). A Participant's Deferral Account shall be credited as follows: (a) Within five (5) days after each payroll date, the Committee shall credit the investment fund subaccounts of the Participant's Deferral Account with an amount equal to the Compensation deferred by the Participant during each pay period in accordance with the Participant's election under Section 3.2(a); that is, the portion of the Participant's deferred Compensation that the Participant has elected to be deemed to be invested in a certain type of investment fund shall be credited to the investment fund subaccount corresponding to that investment fund; (b) As of each day, each investment fund subaccount of a Participant's Deferral Account shall be credited with earnings or losses in an amount equal to that determined by multiplying the balance credited to such investment fund subaccount as of the preceding day plus contributions credited to the Participant's Deferral Account since the preceding day by the Rate of Return for the corresponding fund selected by the Company pursuant to Section 3.2(b). (c) In the event that a Participant elects for a given Plan Year's deferral of Compensation to have a Scheduled In-Service Withdrawal Date, all amounts attributed to the deferral of Compensation for such Plan Year shall be accounted for in a manner which allows separate accounting for the deferral of Compensation and investment gains and losses associated with such Plan Year's deferral of Compensation. 4.2 Company Discretionary Contribution Account. If necessary, the Committee shall establish and maintain a Company Discretionary Contribution Account for each Participant under the Plan. Each Participant's Company Discretionary Contribution Account shall be further divided into separate investment fund subaccounts corresponding to the investment fund elected by the Participant pursuant to Section 3.2(a). A Participant's Company Discretionary Contribution Account shall be credited as follows: (a) Within five (5) days after each payroll date, the Committee shall credit the investment fund subaccounts of the Participant's Company Discretionary Contribution Account with an amount equal to the Company Discretionary Contribution Amount, if any, applicable to that Participant, that is, the portion of the Company Discretionary Contribution Amount, if any, -8- which the Participant elected to be deemed to be invested in a certain type of investment fund shall be credited to the corresponding investment fund subaccount; and (b) As of each day, each investment fund subaccount of a Participant's Company Discretionary Contribution Account shall be credited with earnings or losses in an amount equal to that determined by multiplying the balance credited to such investment fund subaccount as of the prior day plus contributions credited to the Participant's Company Discretionary Contribution Account since the preceding day by the Rate of Return for the corresponding Fund selected by the Company pursuant to Section 3.2(b). (c) In the event that a Participant elects for a given Plan Year's Company Discretionary Contribution Amount to have a Scheduled In-Service Withdrawal Date, all amounts attributed to the Company Discretionary Contribution Amount for such Plan Year shall be accounted for in a manner which allows separate accounting for the Company Discretionary Contribution Amount and investment gains and losses associated with such Plan Year's Company Discretionary Contribution Amount. 4.3 Trust Funding. The Company has created a Trust with First American Trust Company serving as initial trustee. The Company shall cause the Trust to be funded each year. The Company shall contribute to the Trust an amount equal to the Compensation deferred by each Participant for the Plan Year. The Company shall also contribute to the Trust an amount equal to the Company Discretionary Contribution Amount, if any, for the Plan Year. Although the principal of the Trust and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan Participants and beneficiaries as set forth therein, neither the Participants nor their beneficiaries shall have any preferred claim on, or any beneficial ownership in, any assets of the Trust prior to the time such assets are paid to the Participants or beneficiaries as benefits and all rights created under this Plan shall be unsecured contractual rights of Plan Participants and beneficiaries against the Company. Any assets held in the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of insolvency as defined in Section 4.2(a) of the Trust. The assets of the Plan and Trust shall never inure to the benefit of the Company and the same shall be held for the exclusive purpose of providing benefits to Participants and their beneficiaries. The sole exception to the foregoing shall be amounts that remain after payment to a Participant of the Participant's vested Account balance, if any, shall be transferred by the Trustee to the Company. ARTICLE V VESTING A Participant's Deferral Account shall be 100% vested at all times. A Participant's Company Discretionary Contribution Account, if any, shall be 100% vested in the event of a Change of Control and, otherwise, shall vest in accordance with rules established by the -9- Company, in its sole and absolute discretion. Such rules are hereby incorporated by this reference into the Plan. ARTICLE VI DISTRIBUTIONS 6.1 Distribution of Deferred Compensation and Discretionary Company Contributions. (a) Distribution Without Scheduled In-Service Withdrawal Date. In the case of a Participant who terminates employment due to Retirement or Long Term Disability, the Distributable Amount shall be paid to the Participant (and after his or her death to his or her Beneficiary) in the form of substantially equal quarterly installments over fifteen (15) years beginning on his or her Payment Date. Notwithstanding the foregoing, a Participant described in the preceding sentence may elect from among the following optional forms of benefit which may be elected by the Participant on the form provided by the Company during his or her Initial Election Period: (1) A lump sum payment on the Participant's Payment Date; (2) Substantially equal quarterly installments over five (5) years beginning on the Participant's Payment Date; and (3) Substantially equal quarterly installments over ten (10) years beginning on the Participant's Payment Date; Notwithstanding, any provision to the contrary, in the event a Participant's Distributable Amount is less than $25,000, such Distributable Amount shall be distributed to the Participant or his Beneficiary in a lump sum. A Participant may change his or her election with respect to the frequency of payment, provided such change in the frequency of payment occurs at least one year prior to the Participant's Retirement or Long Term Disability. In the event of termination of employment for any other reason, distribution to the Participant shall be made in a lump sum on his or her Payment Date. The Participant's Accounts shall continue to be credited with earnings pursuant to Section 4.1 of the Plan until all amounts credited to his or her Accounts under the Plan have been distributed. (b) Distribution With Scheduled In-Service Withdrawal Date. In the case of a Participant who has elected a Scheduled In-Service Withdrawal Date for a distribution while still in the employ of the Company, such Participant shall receive his or her Distributable Amount, but only with respect to those deferrals of Compensation and vested Company Discretionary Contribution Amounts and earnings on such deferrals of Compensation and vested Company Discretionary Contribution Amounts as shall have been elected by the Participant to be subject to the Scheduled In-Service Withdrawal Date in accordance with Section 1.2(ff) of the Plan. A Participant's Scheduled In-Service Withdrawal Date with respect to amounts of Compensation -10- deferred in a given Plan Year and vested Company Discretionary Contribution Amounts must be at least two (2) years from the last day of the Plan Year for which the deferrals of Compensation and Company Discretionary Contribution Amounts are made. A Participant may extend the Scheduled In-Service Withdrawal Date for the deferral of Compensation and Company Discretionary Contribution Amounts for any Plan Year, provided such extension occurs at least one (1) year before the Scheduled In-Service Withdrawal Date and is for a period of not less than two (2) years from the Scheduled In-Service Withdrawal Date. The Participant shall have the right to twice modify any Scheduled In-Service Withdrawal Date. In the event a Participant terminates employment with Company prior to a Scheduled In-Service Withdrawal Date, the Participant's entire Distributable Amount will be paid in a lump sum as soon as administratively practicable following the end of the quarter in which the termination of employment occurs. (c) Death Benefit. In the event a Participant dies after he or she has retired from the Company and still has a balance in his or her Account, the balance shall continue to be paid in quarterly installments for the remainder of the period as elected by the Participant. In the event a Participant dies while in the active employment of the Company, the Participant's Account balance, whether or not vested, will be paid in a lump sum to the Participant's Beneficiary. 6.2 Non-Scheduled In-Service Withdrawals. A Participant shall be permitted to elect a Non-Scheduled In-Service Withdrawal from his or her Deferral Account and vested Company Discretionary Contribution Account prior to the Payment Date, subject to the following restrictions: (a) The election to take a Non-Scheduled In-Service Withdrawal shall be made by filing a form provided by and filed with the Committee prior to the end of any calendar month. (b) The amount of the Non-Scheduled In-Service withdrawal shall be paid in a single cash lump sum as soon as practicable after the end of the calendar month in which the Non-Scheduled In-Service Withdrawal election is made. (c) If a Participant requests a Non-Scheduled In-Service Withdrawal of his entire Deferral Account and vested Company Discretionary Contribution Account, 10% of the Deferral Account and vested Company Discretionary Contribution Account shall be permanently forfeited and the Company shall have no obligation to the Participant or his Beneficiary with respect to such forfeited amount. If a Participant receives a Non-Scheduled In-Service Withdrawal of less than the entire Deferral Account and vested Company Discretionary Contribution Account, such Participant shall forfeit 10% of the gross amount to be distributed from the Participant's Deferral Account and vested Company Discretionary Contribution Account. (d) If a Participant receives a Non-Scheduled In-Service Withdrawal of either all or a part of his Deferral Account and Company Discretionary Contribution Account, the Participant will be ineligible to participate in the Plan for the balance of the Plan Year and for the following Plan Year. -11- 6.3 Hardship Distribution. A Participant shall be permitted to elect a Hardship Distribution in accordance with Section 1.2(v) of the Plan prior to the Payment Date, subject to the following restrictions: (a) The election to take a Hardship Distribution shall be made by filing a form provided by and filed with Committee prior to the end of any calendar month. (b) The Committee shall have made a determination that the requested distribution constitutes a Hardship Distribution in accordance with Section 1.2(v) of the Plan. (c) The amount determined by the Committee as a Hardship Distribution shall be paid in a single cash lump sum as soon as practicable after the end of the calendar month in which the Hardship Distribution election is made and approved by the Committee. (d) If a Participant receives a Hardship Distribution, the Participant will be ineligible to participate in the Plan for the balance of the Plan Year and the following Plan Year. 6.4 Inability to Locate Participant. In the event that the Committee is unable to locate a Participant or Beneficiary within two (2) years following the required Payment Date, the amount allocated to the Participant's Account shall be forfeited. If, after such forfeiture, the Participant or Beneficiary later claims such benefit, such benefit shall be reinstated without interest or earnings. ARTICLE VII ADMINISTRATION 7.1 Committee. A Committee shall be appointed by, and serve at the pleasure of, the Board of Directors. The number of members comprising the Committee shall be determined by the Board which may from time to time vary the number of members. A member of the Committee may resign by delivering a written notice of resignation to the Chief Executive Officer. The Chief Executive Officer may remove any member by delivering a certified copy of its resolution of removal to such member. Vacancies in the membership of the Committee shall be filled promptly by the Chief Executive Officer. 7.2 Committee Action. The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to him or herself as a Participant. The Chairman or any other member or members of the Committee -12- designated by the Chairman may execute any certificate or other written direction on behalf of the Committee. 7.3 Powers and Duties of the Committee. (a) The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following: (1) To select the Funds in accordance with Section 3.2(b) hereof; (2) To construe and interpret the terms and provisions of this Plan; (3) To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries; (4) To maintain all records that may be necessary for the administration of the Plan; (5) To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law; (6) To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; (7) To appoint a plan administrator or any other agent, and to delegate to them such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe; and (8) To take all actions necessary for the administration of the Plan, including determining whether to hold or discontinue the Policies. 7.4 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretations or construction shall be final and binding on all parties, including but not limited to the Company and any Participant or Beneficiary. The Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan. 7.5 Information. To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the Compensation of all Participants, their death or other events which cause termination of their participation in this Plan, and such other pertinent facts as the Committee may require. -13- 7.6 Compensation, Expenses and Indemnity. (a) The members of the Committee shall serve without compensation for their services hereunder. (b) The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. Expenses and fees in connection with the administration of the Plan shall be paid by the Company. (c) To the extent permitted by applicable state law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board of Directors and any delegate of the Committee who is an employee of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to the Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law. 7.7 Quarterly Statements. Under procedures established by the Committee, a Participant shall receive a quarterly statement with respect to such Participant's Accounts. 7.8 Disputes. (a) Claim. A person who believes that he or she is being denied a benefit to which he or she is entitled under this Agreement (hereinafter referred to as "Claimant") may file a written request for such benefit with the Company, setting forth his or her claim. The request must be addressed to the President of the Company at its then principal place of business. (b) Claim Decision. Upon receipt of a claim, the Committee on behalf of the Company shall advise the Claimant that a reply will be forthcoming within ninety (90) days and shall, in fact, deliver such reply within such period. The Company may, however, extend the reply period for an additional ninety (90) days for special circumstances. If the claim is denied in whole or in part, the Company shall inform the Claimant in writing, using language calculated to be understood by the Claimant, setting forth: (A) the specified reason or reasons for such denial; (B) the specific reference to pertinent provisions of this Agreement on which such denial is based; (C) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (D) appropriate information as to the steps to be -14- taken if the Claimant wishes to submit the claim for review; and (E) the time limits for requesting a review under subsection (c). (c) Request For Review. Within sixty (60) days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination of the Company. Such request must be addressed to the Secretary of the Company, at its then principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review within such sixty (60) day period, he or she shall be barred and estopped from challenging the Company's determination. (d) Review of Decision. Within sixty (60) days after the Committee's receipt of a request for review, after considering all materials presented by the Claimant, the Committee will inform the Participant in writing, in a manner calculated to be understood by the Claimant, the decision setting forth the specific reasons for the decision containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty (60) day time period be extended, the Committee will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred twenty (120) days after receipt of the request for review. ARTICLE VIII MISCELLANEOUS 8.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. It is the intention of the Company that this Plan be unfunded for purposes of the Code and for purposes of Title I of the Employee Retirement Income Security Act of 1974. 8.2 Restriction Against Assignment. The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant's Accounts shall be liable for the debts, contracts, or engagements or any Participant, his or her Beneficiary, or successors in interest, nor shall a Participant's Accounts be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any -15- such person have any right to alienate, anticipate, sell, transfer, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. if any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, commute, assign, pledge, encumber or charge any distribution or payment from the Plan, voluntarily or involuntarily, the Committee, in its discretion, may cancel such distribution or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such manner as the Committee shall direct. 8.3 Withholding. There shall be deducted from each payment made under the Plan or any other Compensation payable to the Participant (or Beneficiary) all taxes which are required to be withheld by the Company in respect to such payment or this Plan. The Company shall have the right to reduce any payment (or compensation) by the amount of cash sufficient to provide the amount of said taxes. 8.4 Amendment, Modification, Suspension or Termination. The Chief Executive Officer of the Company may amend, modify, suspend or terminate the Plan in whole or in part, except that no amendment, modification, suspension or termination shall have any retroactive effect to reduce any amounts allocated to a Participant's Accounts. In the event that this Plan is terminated, the amounts allocated to a Participant's Accounts shall be distributed to the Participant or, in the event of his or her death, his or her Beneficiary in a lump sum within thirty (30) days following the date of termination. 8.5 Governing Law. This Plan shall be construed, governed and administered in accordance with the laws of the State of New York. 8.6 Receipt or Release. Any payment to a Participant or the Participant's Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Committee and the Company. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. 8.7 Payments on Behalf of Persons Under Incapacity. In the event that any amount becomes payable under the Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Company. -16- 8.8 Limitation of Rights and Employment Relationship. Neither the establishment of the Plan and Trust nor any modification thereof, nor the creating of any fund or account, nor the payment of any benefits shall be construed as giving to any Participant or other person any legal or equitable right against the Company or the trustee of the Trust except as provided in the Plan and Trust; and in no event shall the terms of employment of any Employee or Participant be modified or in any way be affected by the provisions of the Plan and Trust. 8.9 Headings. Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof. IN WITNESS WHEREOF, the Company has caused this document to be executed by its duly authorized officer on this 17th day of December, 1999. CH ENERGY GROUP, INC. By: /s/ Paul J. Ganci --------------------- By: Paul J. Ganci --------------------- -17- EX-10.26 17 DEFERRED COMPENSATION PLAN TRUST AGREEMENT EXHIBIT 10 (iii) 26 CH ENERGY GROUP, INC. DIRECTORS AND EXECUTIVES DEFERRED COMPENSATION PLAN TRUST AGREEMENT TABLE OF CONTENTS Page ARTICLE I. TITLE AND DEFINITIONS.....................................1 Section 1.1 Title.....................................................1 Section 1.2 Definitions...............................................2 ARTICLE II. ADMINISTRATION............................................2 Section 2.1 Trustee Responsibility....................................2 Section 2.2 Maintenance of Records....................................2 ARTICLE III. FUNDING...................................................3 Section 3.1 Contributions.............................................3 Section 3.2 Subtrusts.................................................3 ARTICLE IV. PAYMENTS FROM TRUST FUND..................................4 Section 4.1 Payments to Trust Beneficiaries...........................4 Section 4.2 Trustee Responsibility Regarding Payments to Trust Beneficiaries When the Company is Insolvent...............5 Section 4.3 Payments to the Company...................................5 Section 4.4 Trustee Compensation and Expenses; Other Fees and Expenses..................................................5 Section 4.5 Taxes.....................................................6 Section 4.6 Alienation................................................6 Section 4.7 Disputes..................................................6 ARTICLE V. INVESTMENT OF TRUST ASSETS................................6 Section 5.1 Investment of Subtrust Assets.............................6 Section 5.2 Disposition of Income.....................................6 ARTICLE VI. TRUSTEE...................................................7 Section 6.1 General Powers and Duties.................................7 Section 6.2 Records...................................................8 Section 6.3 Third Persons.............................................8 Section 6.4 Limitation on Obligation of Trustee.......................8 ARTICLE VII. RESIGNATION AND REMOVAL OF TRUSTEE........................8 Section 7.1 Method and Procedure......................................8 ARTICLE VIII. AMENDMENT AND TERMINATION.................................9 Section 8.1 Amendments................................................9 Section 8.2 Duration and Termination..................................9 Section 8.3 Distribution upon Termination............................10 (i) ARTICLE IX. MISCELLANEOUS............................................10 Section 9.1 Limitation on Participants' Rights.......................10 Section 9.2 Receipt or Release.......................................10 Section 9.3 Governing Law............................................10 Section 9.4 Headings, etc., No Part of Agreement.....................11 Section 9.5 Instrument in Counterparts...............................11 Section 9.6 Successors and Assigns...................................11 Section 9.7 Indemnity................................................11 (ii) CH ENERGY GROUP, INC. DIRECTORS AND EXECUTIVES DEFERRED COMPENSATION PLAN TRUST AGREEMENT This Trust Agreement made and entered into as of this 1st day of January, 2000, by and between CH ENERGY GROUP, INC. (hereinafter called the "Company") and FIRST AMERICAN TRUST COMPANY (hereinafter called "Trustee"), evidences the terms of a trust for the benefit of members of the Board of Directors of Company, certain employees, former employees and their designated beneficiaries (hereinafter collectively called "Trust Beneficiaries") who will be entitled to receive benefits under the CH Energy Group, Inc. Directors and Executives Deferred Compensation Plan ("Plan"). This Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter J, Chapter l, subtitle A of the Internal Revenue Code of 1986, as amended, (the "Code") and shall be construed accordingly. W I T N E S S E T H: WHEREAS, the Company wishes to establish an irrevocable trust (hereinafter called the "Trust") and to transfer to the Trust assets which shall be held therein, subject to the claims of the Company's creditors in the event of the Company's insolvency, until paid to the Trust Beneficiaries as benefits in such manner and at such times as required hereunder; and WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"); WHEREAS, the inclusion of members of the Board of Directors in the Plan and as Trust Beneficiaries shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of ERISA. NOW, THEREFORE, it is mutually understood and agreed as follows: ARTICLE I. TITLE AND DEFINITIONS Section 1.1 Title. This Trust Agreement shall be known as the CH Energy Group, Inc. Directors and Executives Deferred Compensation Plan Trust Agreement. Section 1.2 Definitions. The following words, when used in this Trust Agreement with initial letter capitalized, shall have the meanings set forth below: "Company" shall mean CH Energy Group, Inc. and any successor corporations. Company shall include each corporation which is a member of a controlled group of corporations (within the meaning of Section 414(b) of the Code) of which CH Energy Group, Inc. is a component member, if the Board of Directors of CH Energy Group, Inc. provides that such corporation shall participate in the Plan and such corporations governing board of directors adopts this Plan. "General Fund" shall mean that portion of the Trust fund which is not allocated to a Subtrust. "Plan" shall mean the CH Energy Group, Inc. Directors and Executives Deferred Compensation Plan as amended from time to time. "Policy" shall mean an insurance policy purchased in accordance with the terms of the Plan. "Subtrust" shall mean a separate subtrust established for a Participant pursuant to Section 3.2. Capitalized terms not defined above shall be defined in accordance with the Plan. ARTICLE II. ADMINISTRATION Section 2.1 Trustee Responsibility. By its acceptance of this Trust, Trustee agrees to make payments under this Trust to Trust Beneficiaries in accordance with the provisions of this Trust Agreement. Section 2.2 Maintenance of Records. The Committee shall have the duty and responsibility to maintain all individual Trust Beneficiary records and to prepare and file all reports and other information required by any federal or state law or regulation relating to the Trust and the Trust assets. -2- ARTICLE III. FUNDING Section 3.1 Contributions. (a) The Company hereby deposits with the Trustee in trust the sum of $100.00 to be held in the General Fund of the Trust. (b) The Company shall contribute to the Trust an amount equal to the amount deferred by each Participant for the Plan Year and Company Discretionary Contribution Amounts for the Plan Year. In no event shall these contributions be made after the Company's tax return due date for that Plan Year. The Company may also contribute cash to the Trust in an amount approximately equal to the "cost of insurance" (as defined in the Policies) needed to fund any death benefits as may be provided in the Plan, whether the Participant is employed or otherwise. (c) Except as provided otherwise herein, all contributions received pursuant to (a) and (b) above, together with the income therefrom and any increment thereon, shall be held by Trustee as a single Trust pursuant to the terms of this Trust Agreement without distinction between principal and income. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan Participants and general creditors as herein set forth. Trust Beneficiaries shall not have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust prior to the time such assets are paid to Trust Beneficiaries as benefits as provided in Section 4.1, and all rights created under this Trust Agreement shall be mere unsecured contractual rights of Trust Beneficiaries against the Company or Trust. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 4.2(a) herein. Section 3.2 Subtrusts. (a) If directed by the Committee, the Trustee shall establish a separate Subtrust for that Participant and credit the amount of such contribution to that Participant's Subtrust. Each Subtrust shall reflect an individual interest in the assets of the Trust fund and shall not require any segregation of particular assets. (b) Following the allocation of assets to Subtrusts pursuant to Section 3.2(a), the Trustee shall allocate investment earnings and losses of the Trust fund, only at the direction of the Committee, among the Subtrusts in accordance with Section 5.2. Payments to general creditors pursuant to Section 4.2 hereof shall be charged against the Subtrusts in proportion to their account balances, except that the payment of benefits to a Trust Beneficiary shall be charged against the Subtrust established or maintained for such Trust Beneficiary. (c) Amounts allocated to a Participant's Subtrust may not be utilized to pay benefits to another Participant or Beneficiary of another Participant. Following payment of a -3- Participant's entire benefit under the Plan, including payment of a Non-Scheduled In-Service Withdrawal or Hardship Distribution under Sections 6.2 and 6.3 of the Plan (whether by the Trustee pursuant to the terms of this Trust Agreement or by the Company or by a combination thereof), any amounts remaining allocated to that Participant's Subtrust (and any Policy held with respect to such Participant) shall be transferred by the Trustee to the Company. In lieu of transferring the Policy, the Committee may direct the Trustee to designate a new beneficiary (which may be the Company) under the Policy or cash in the applicable Policy and transfer the proceeds to the Company ARTICLE IV. PAYMENTS FROM TRUST FUND Section 4.1 Payments to Trust Beneficiaries. (a) The Committee shall direct the Trustee to pay (or to commence to pay) to a Participant (or, in the case of the Participant's death, to the Participant's Beneficiary) the benefit payable to such Participant under the Plan (the "Benefit Amount") as soon as practicable following the Participant's Payment Date (as defined in the Plan). If Subtrusts are established, the Trustee shall make such payment only from funds allocated to the Participant's Subtrust plus the General Fund, if any. (b) The Committee shall have full authority and responsibility to determine the correct time and amount of payment of the Benefit Amount. In making such determination, the Committee shall be governed by the terms of the Plan and this Trust Agreement. (c) Any obligation to a Trust Beneficiary under this Trust Agreement is also an obligation of the Company to the extent not paid from the Trust. Accordingly, to the extent payments to a Trust Beneficiary are discontinued pursuant to Section 4.2, the Company shall be obligated to pay the Trust Beneficiary the same amount (plus applicable interest from its general fund). If the amount credited to the Trust (or a Subtrust if applicable) is not sufficient to make the payment of the Benefit Amount to a Trust Beneficiary in accordance with the determination by the Committee, the Company agrees that it shall make the balance of such payment. (d) Unless a Trust Beneficiary furnishes documentation in form and substance satisfactory to Trustee that no withholding is required with respect to a payment of benefits from the Trust, Trustee shall deduct from any such Benefit Payment any federal, state or local taxes required by law to be withheld by Trustee. Any taxes that are withheld by Trustee shall be paid separately to the Company. The Company shall be responsible for payment and reporting of such withheld taxes to the appropriate taxing authorities. (e) Trustee shall provide the Company and the Committee with written confirmation of the fact and time of any payment hereunder within ten business days after making any payment to a Trust Beneficiary. -4- Section 4.2 Trustee Responsibility Regarding Payments to Trust Beneficiaries When the Company is Insolvent. (a) The Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to pay its debts as they become due, or (ii) is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of the Trust, the principal and income of the Trust shall be subject to claims of general creditors of the Company as hereinafter set forth, and at any time Trustee has actual knowledge, or has determined, that the Company is Insolvent, Trustee shall deliver any undistributed principal and income in the Trust to satisfy such claims as a court of competent jurisdiction may direct. The Company, through its Board of Directors or any of its executive officers, shall advise Trustee promptly in writing of the Company's Insolvency. If Trustee receives such notice, or otherwise receives written notice from a third party which Trustee, in its sole discretion, deems reliable and responsible, Trustee shall discontinue payments to Trust Beneficiaries, shall hold the Trust assets for the benefit of the Company's general creditors, and shall resume payments to Trust Beneficiaries in accordance with Section 4.1 of this Trust Agreement only after Trustee has determined that the Company is not Insolvent or is no longer Insolvent. Unless Trustee has actual knowledge of the Company's Insolvency or has received notice from the Company or a third party alleging the Company is Insolvent, Trustee shall have no duty to inquire whether the Company is Insolvent. Trustee may in all events rely on such evidence concerning the solvency of the Company as may be furnished to Trustee which will give Trustee a reasonable basis for making a determination concerning its solvency. Nothing in this Trust Agreement shall in any way diminish any rights of Trust Beneficiaries to pursue their rights as general creditors of the Company with respect to benefits payable hereunder or otherwise. (c) If Trustee discontinues payments of benefits from the Trust pursuant to Section 4.2(b) and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to Trust Beneficiaries together with interest at the Pension Benefit Guaranty Corporation rate applicable to immediate annuities on the amount delayed during the period of such discontinuance, less the aggregate amount of payments made to Trust Beneficiaries by the Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4.3 Payments to the Company. Except as provided in Sections 3.2(c) or 4.2, the Company shall have no right or power to direct Trustee to return to the Company or to divert to others any of the Trust assets before the Trust is terminated pursuant to Section 8.2. Section 4.4 Trustee Compensation and Expenses; Other Fees and Expenses. The Company shall pay the Trustee such reasonable compensation for its services as shall be agreed upon from time to time by the Company and Trustee, and Trustee shall be reimbursed -5- by the Company for its expenses that are reasonably necessary and incident to its administration of the Trust. Following reasonable consultation with the Company such expenses shall include fees of counsel and other advisors, if any, incurred by Trustee for the purpose of determining its responsibilities under the Trust. Such compensation, expenses or fees, as well as all other administrative fees and expenses, shall be paid from Trust assets unless paid directly by the Company. Section 4.5 Taxes. Trustee shall not be personally liable for any real and personal property taxes, income taxes and other taxes of any kind levied or assessed under the existing or future laws against the Trust assets. Such taxes shall be paid directly from the Trust assets unless paid by the Company, in the discretion of the Company. Section 4.6 Alienation. The benefits, proceeds, payments or claims of Trust Beneficiaries payable from the Trust assets shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution or levy of any kind, either voluntary or involuntary. Any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, garnish, levy or otherwise dispose of or execute upon any right or benefits payable hereunder shall be void. The Trust assets shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any Trust Beneficiary entitled to benefits hereunder and such benefits shall not be considered an asset of Trust Beneficiary in the event of his insolvency or bankruptcy. Section 4.7 Disputes. All disputes, other than disputes between the Trustee and the Committee or Company, shall be resolved in accordance with Section 7.8 of the Plan. ARTICLE V. INVESTMENT OF TRUST ASSETS Section 5.1 Investment of Subtrust Assets. The Trustee shall invest the assets of the Trust (and each Subtrust, if any) in accordance with written directions from the Committee. Section 5.2 Disposition of Income. All income received by the Trust shall be reinvested. Any income that is attributable to the amount credited to a Subtrust in accordance with Section 3.2, and income thereon, shall be credited to such Subtrust and reinvested. -6- ARTICLE VI. TRUSTEE Section 6.1 General Powers and Duties. Subject to written directions from the Committee regarding the investment of Trust assets, Trustee, on behalf of Trust Beneficiaries, shall have all powers necessary to administer the Trust, including, but not by way of limitation, the following powers in addition to other powers as are set forth herein or conferred by law: (a) To hold, invest and reinvest the principal or income of the Trust in bonds, common or preferred stock, other securities, or other personal, real or mixed tangible or intangible property (including investment in deposits with Trustee which bear a reasonable interest rate, including without limitation investments in trust savings accounts, certificates of deposit, time certificates or similar investments or deposits maintained by the Trustee); (b) To hold, invest and reinvest the principal or income of the Trust in the Policies, direct investments under the Policies and take any other action regarding the Policies, as specifically directed by the Committee, including those specified by Sections 3.1(b) or 3.2(c) and enter into split-dollar life insurance agreements with Participants pursuant to which each Participant designates the beneficiary to receive a portion of the death benefits. (c) If directed by the Company or Committee to discontinue a Policy; (d) To pay and provide for the payment of all reasonable and necessary expenses of administering the affairs of the Trust, subject to reimbursement of such expenses within 30 days by the Company in accordance with Section 4.4; (e) To pay and provide for the payment of all benefits to Trust Beneficiaries in accordance with the provisions of this Trust Agreement; (f) To retain noninterest bearing deposits or a cash balance with Trustee of so much of the funds as may be determined to be temporarily held awaiting investment or payment of benefits or expenses; (g) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust and to institute, compromise and defend actions and proceedings; (h) To vote any stock, bonds or other securities of any corporation or other issuer at any time held in the Trust; to otherwise consent to or request any action on the part of any such corporation or other issuer; to give general or special proxies or powers of attorney, with or without power of substitution; to participate in any reorganization, recapitalization, consolidation, merger or similar transaction with respect to such stocks, bonds or other securities and to deposit such stocks, bonds or other securities in any voting trust, or with any protective or like committee, or with a trustee, or with the depositaries designated thereby; to exercise any subscription rights and conversion privileges; and to generally exercise any of the powers of an owner with respect to the stocks, bonds or other securities or properties in the Trust; and -7- (i) Generally, to do all such acts, execute all such instruments, take all such proceedings, and exercise all such rights and privileges with relation to the property constituting the Trust as if Trustee were the absolute owner thereof. Section 6.2 Records. Trustee shall keep a full, accurate and detailed record of all transactions of the Trust which the Company shall have the right to examine at any time during Trustee's regular business hours. Within ninety (90) days after the close of each calendar year and within forty-five (45) days after the removal or resignation of Trustee, Trustee shall furnish the Company with a statement of account with respect to the Trust. This account shall set forth all receipts, disbursements and other transactions (including sales and purchases) effected by Trustee during said year (or until its removal or resignation), shall show the investments at the end of the year (or date of removal or resignation), including the cost and fair market value of each item, and the amounts allocated to each Subtrust. Section 6.3 Third Persons. A third person dealing with Trustee shall not be required to make any inquiry as to whether the Company or the Committee has instructed Trustee, or Trustee is otherwise authorized, to take or omit any action, and shall not be required to follow the application by Trustee of any money or property which may be paid or delivered to Trustee. Section 6.4 Limitation on Obligation of Trustee. Trustee shall have no responsibility for the validity of the Plan or of the Trust and does not guarantee the payment of any amount which may become payable to any Trust Beneficiary under the terms hereof. ARTICLE VII. RESIGNATION AND REMOVAL OF TRUSTEE Section 7.1 Method and Procedure. (a) Trustee may resign at any time by delivering to the Company a written notice of resignation, to take effect on a date specified therein, which shall be not less than sixty (60) days after the delivery thereof, unless such notice shall be waived. (b) The Company may remove Trustee at any time by delivering to Trustee a written notice of removal, to take effect on a date specified therein, which shall be not less than thirty (30) days after the delivery thereof, unless such notice shall be waived. (c) In case of the resignation or removal of Trustee, Trustee shall have a right to a settlement of its accounts, which may be made, at the option of Trustee, either (1) by a judicial settlement in an action instituted by Trustee in a court of competent jurisdiction, or (2) by an agreement of settlement between Trustee and the Company. -8- (d) Upon such settlement, all right, title and interest of such Trustee in the assets of the Trust, and all rights and privileges under the Trust theretofore vested in such Trustee shall vest in the successor Trustee, and thereupon all liabilities of such Trustee shall terminate; provided, however, that Trustee shall execute, acknowledge and deliver all documents and written instruments which are necessary to transfer and convey all the right, title and interest in the assets of the Trust, and all rights and privileges in the Trust to the successor Trustee. (e) The Company, upon receipt of or giving notice of the resignation or removal of Trustee, shall promptly appoint a successor Trustee. The successor Trustee shall be a bank or trust company qualified and authorized to do trust business in any state and having on the date of appointment total assets of at least $10,000,000 and a credit rating from Moody's of A or better. In the event of the failure or refusal of the Company to appoint such a successor Trustee within thirty (30) days after the notice of resignation or removal, Trustee may secure, at the expense of the Company, the appointment of such successor Trustee by an appropriate action in a court of competent jurisdiction. Any successor Trustee so appointed may qualify by executing and delivering to the Company an instrument accepting such appointment and, upon delivery, such successor, without further act, shall become vested with all the right, title and interest, and all rights and privileges of the predecessor Trustee with like effect as if originally named as Trustee herein. ARTICLE VIII. AMENDMENT AND TERMINATION Section 8.1 Amendments. The Company shall have the right to amend (but not terminate) the Trust from time to time and to amend further or cancel any such amendment. Any amendment shall be stated in an instrument in writing executed by the Company and Trustee, and this Trust Agreement shall be amended in the manner and at the time therein set forth, and the Company and Trustee shall be bound thereby; provided, however: (a) No amendment shall have any retroactive effect so as to deprive any Trust Beneficiary of any benefits already vested under the Plan, or create a reversion of Trust assets to the Company except as already provided in this Trust Agreement, other than such changes, if any, as may be required in order for the Trust to be considered a component of a plan described in Section 9.3; (b) No amendment shall make the Trust revocable; and (c) No amendment shall increase the duties or liabilities of Trustee without its written consent. Section 8.2 Duration and Termination. This Trust shall not be revocable and shall continue until the earliest of (a) the accomplishment of the purpose for which it was created, (b) the exhaustion of all appeals of a final determination of a court of competent jurisdiction that the interest in the Trust of Trust -9- Beneficiaries is includable for federal income tax purposes in the gross income of such Trust Beneficiaries, without such determination having been reversed (or the earlier expiration of the time to appeal), (c) if required to comply with California rules regulating the maximum length for which trusts may be established, the expiration of twenty (20) years and six (6) months after the death of the last surviving Trust Beneficiary who is living and is a Trust Beneficiary on the date this Trust is established, (d) a determination of the Company to terminate the Trust because applicable law requires it to be amended in a way that could make it taxable and failure to so amend the Trust would subject the Company to material penalties, or (e) the dissolution or liquidation of the Company. Section 8.3 Distribution upon Termination. Upon termination of this Trust, Trustee shall liquidate the Trust fund and provide a final account to the Company and the Committee. To the extent Trust assets are sufficient, the Trustee shall pay to each Participant the appropriate Benefit Amount. After its final account has been settled as provided in Section 7.1(c), Trustee shall return to the Company any assets remaining after the distributions described in this Section 8.3. Upon making such distributions, Trustee shall be relieved from all further liability. The powers of Trustee hereunder shall continue so long as any assets of the Trust fund remain in its hands. ARTICLE IX. MISCELLANEOUS Section 9.1 Limitation on Participants' Rights. Participation in the Trust shall not give Participants the right to be retained in the Company's employ or any right or interest in the Trust other than as herein provided. The Company reserves the right to dismiss Participants who are employees without any liability for any claim either against the Trust, except to the extent provided herein, or against the Company. All benefits payable hereunder shall be provided solely from the assets of the Trust. Section 9.2 Receipt or Release. Any payment to a Trust Beneficiary in accordance with the provisions of the Trust shall, to the extent thereof, be in full satisfaction of all claims against Trustee and the Company, and Trustee may require such Trust Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. Section 9.3 Governing Law. This Trust Agreement and the Trust hereby created shall be construed, administered and governed in all respects under applicable federal law, and to the extent that federal law is inapplicable, under the laws of the State of California; provided, however, that if any provision is susceptible to more than one interpretation, such interpretation shall be given thereto as is consistent with the Trust being (a) classified as a grantor trust as defined in Sections 671 et seq. of the Code, and (b) classified as a component of an unfunded plan maintained primarily to provide deferred compensation for a select group of management or highly compensated -10- employees, as described in Section 201(2) of ERISA. If any provision of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. Section 9.4 Headings, etc., No Part of Agreement. Headings and subheadings in this Trust Agreement are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof. Section 9.5 Instrument in Counterparts. This Trust Agreement may be executed in several counterparts, each of which shall be deemed an original, and said counterparts shall constitute but one and the same instruments, which may be sufficiently evidenced by any one counterpart. Section 9.6 Successors and Assigns. This Trust Agreement shall inure to the benefit of, and be binding upon, the parties hereto and their successors and assigns. Section 9.7 Indemnity. (a) Except in the case of liabilities and claims arising out of Trustee's willful misconduct or gross negligence, Company shall indemnify and hold Trustee harmless from and against all liabilities and claims (including reasonable attorney's fees and expenses in defense thereof) arising out of or in any way connected with the Plan or the Trust fund or the management, operation, administration or control thereof and based in whole or in part on: (1) Any act or inaction of Company or Committee (which term includes, in this paragraph, any actual or ostensible agent of Company) or (2) Any act or inaction of Trustee resulting from the absence of proper directions hereunder, or in accordance with any directions, purported or real, from Company or Committee, whether or not proper hereunder, if relied upon in good faith by Trustee. (b) The Trustee does not warrant and shall not be liable for any tax consequences associated with the Trust or the Plans. (c) The Trustee shall not be liable for the inadequacy of the Trust to pay all amounts due under the Plans. -11- IN WITNESS WHEREOF the undersigned have executed this Trust Agreement as of the date first written above. CH ENERGY GROUP, INC. By By FIRST AMERICAN TRUST COMPANY By By -12- EX-10.27 18 LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN EXHIBIT 10 (iii) 27 ADOPTION, ASSIGNMENT AND ASSUMPTION LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN Central Hudson Gas & Electric Corporation ("Assignor") hereby adopts the Long-Term Performance-Based Incentive Plan of the Corporation, pursuant to authorization of its Board of Directors by action taken on October 22, 1999, and assigns such Plan, in the form attached hereto, to CH Energy Group, Inc. ("Assignee"). Assignor and Assignee hereby agree as follows: Assignor hereby assigns all of its interest and obligations under the attached Plan to Assignee. Assignee, pursuant to authorization of its Board of Directors by action taken on November 2, 1999, hereby assumes all of Assignor interest in and obligations under said Plan, as amended and restated, effective December 15, 1999. CENTRAL HUDSON GAS & ELECTRIC CORPORATION Dated: As of December 15, 1999 By: /s/ Carl E. Meyer ----------------------------------- Name: Carl E. Meyer Title: President and Chief Operating Officer CH ENERGY GROUP, INC. Dated: As of December 15, 1999 By: /s/ Paul J. Ganci ---------------------------------- Name: Paul J. Ganci Title: Chairman of the Board, President and Chief Executive Officer EXHIBIT 10 (iii) 27 CH ENERGY GROUP, INC. LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN CH ENERGY GROUP, INC. LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN SECTION 1. PURPOSE; DEFINITIONS The Plan has been structured in accordance with the following principles for the Corporation and its Affiliates: (1) Establishing and maintaining salaries of key executives, including base compensation and short and long-term incentives, at competitive market levels, (2) Establishing a portion of compensation that is "at risk" and tied to performance relative to specific objectives. The portion of salary "at risk" will be increased from the 1999 level of a maximum of 10% of total compensation for the Chairman of the Board, President and Chief Executive Officer, to a target range of 15% to 30% for key executives; and (3) The Plan establishes long-term incentives that include: (a) Annual awards of performance based shares that are awarded on the basis of achieving superior total shareholder return as measured against an industry index; and (b) Long-term incentives which are based on awarding stock options, the value of which are directly tied to the long-term increased market value of the Corporation's common stock. For purposes of the Plan, the following terms are defined as set forth below: a. "Affiliate" means a corporation or other entity controlled by the Corporation and designated by the Committee, as defined in Section 2, from time to time as such. b. "Award" means a Stock Appreciation Right, Stock Option, Restricted Stock, Performance Share or Performance Unit. c. "Award Cycle" shall mean a period of consecutive fiscal years or portions thereof designated by the Committee over which Awards are to be earned or are to vest. d. "Board" means the Board of Directors of the Corporation. 1 e. "Cause" means (1) conviction of a participant for committing a felony under federal law or the law of the state in which such action occurred, (2) dishonesty in the course of fulfilling a participant's employment duties or (3) willful and deliberate failure on the part of a participant to perform employment duties in any material respect, or such other events as shall be determined by the Committee. The Committee shall have the sole discretion to determine whether "Cause" exists, and its determination shall be final. f. "Change of Control" and "Change of Control Price" have the meanings set forth in Sections 10(b) and (c), respectively. g. "Code" means the Internal Revenue Code of 1986, as amended from time to time,and any successor thereto. h. "Commission" means the Securities and Exchange Commission or any successor agency. i. "Committee" means the Committee, as defined in Section 2. j. "Common Stock" means the common stock of the Corporation. k. "Corporation" means Central Hudson Gas & Electric Corporation, a New York corporation and upon the assignment to and assumption of the Plan by CH Energy Group, Inc., "Corporation" shall mean CH Energy Group, Inc. l. "Covered Employee" means a participant designated prior to the grant of an Award or Awards by the Committee who is or may be a "covered employee" within the meaning of Section 162(m)(3) of the Code in the year in which an award or awards are expected to be taxable to such participant. m. "Disability" means permanent and total disability as determined under procedures established by the Committee for purposes of the Plan. n. "Early Retirement" means retirement from active employment with the Corporation or an Affiliate pursuant to the early retirement provisions of the applicable pension plan of such employer. o. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. p. "Fair Market Value" means, as of any given date, the mean between the highest and lowest reported sales prices of the Corporation's Common Stock on the New York Stock Exchange Composite Tape or, if not listed on such exchange, on any other national securities exchange on which the Common Stock is listed or on NASDAQ. If there is no regular public trading market for such Common Stock, the Fair Market Value of the Common Stock shall be determined by the Committee in good faith. q. "Incentive Stock Option" means any Stock Option designated as, and qualified as, an "Incentive Stock Option" within the meaning of Section 422 of the Code. 2 r. "Non-qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. s. "Non-Employee Director" means a member of the Board who qualifies as a Non- Employee Director as defined in Rule 16b-3(b)(3), as promulgated by the Commission under the Exchange Act, or any successor definition adopted by the Commission. t. "Normal Retirement" means retirement from active employment with the Corporation, or an Affiliate at or after age 65. u. "Performance Goals" means the performance goals established by the Committee prior to the grant of Restricted Stock, Performance Shares or Performance Units that are based on the attainment of one or any combination of the following: Specified levels of earnings per share from continuing operations, operating income, revenues, return on assets, return on equity, return on invested capital, shareholder value, economic value added, shareholder return (measured in terms of stock price appreciation) and/or total shareholder return (measured in terms of stock price appreciation and/or dividend growth), achievement of cost controls, delivery cost per Kilowatthour or delivery cost per Millions of Cubic Feet of natural gas, customer satisfaction ratings, frequency or duration of electric or gas service interruptions, number of or severity of gas leaks, avoidance of environmental, public or employee safety problems, realization of the regulated return on equity, or the price of the Common Stock, fixed on a company-wide basis or with reference to the Affiliate, business unit, division or department of the Corporation for or within which the participant is primarily employed, and that are intended to qualify under Section 162(m)(4)(C) of the Code. Such Performance Goals also may be based upon attaining specified levels of performance under one or more of the measures described above relative to the performance of other corporations. Such Performance Goals shall be set by the Committee within the time period prescribed by Section 162(m) of the Code and related regulations. v. "Performance Units" or "Performance Shares" means awards made pursuant to Section 8 or Section 9 respectively. w. "Plan" means the Corporation's Long-Term Performance-Based Incentive Plan, as set forth herein and as hereinafter amended from time to time. x. "Restricted Stock" means an award granted under Section 7. y. "Retirement" means Normal or Early Retirement. z. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission under Section 16(b) of the Exchange Act, as amended from time to time. aa. "Stock Appreciation Right" means a right granted under Section 6. bb. "Stock Option" means an option granted under Section 5. 3 cc. "Termination of Employment" means the termination of the participant's employment with the Corporation and any Affiliate. A participant employed by an Affiliate shall also be deemed to incur a Termination of Employment if the Affiliate ceases to be such an Affiliate and the participant does not immediately thereafter become an employee of the Corporation or another Affiliate. Temporary absences from employment because of illness, vacation or leave of absence and transfers among the Corporation and Affiliates shall not be considered Terminations of Employment. In addition, certain other terms used herein have definitions given to them in the first place in which they are used. SECTION 2. ADMINISTRATION The Corporation, acting by and through its Board of Directors, shall have overall responsibility for the operation of the Plan. The Plan shall be administered by the Committee on Compensation and Succession/Retirement or such other committee of the Board as the Board may from time to time designate (the "Committee"), which shall be composed of not less than two Non-Employee Directors, each of whom shall be required to be an "outside director" for purposes of Section 162(m)(4) of the Code, and shall be appointed by and serve at the pleasure of the Board. The Committee shall have plenary authority to grant Awards pursuant to the terms of the Plan to officers and employees of the Corporation and its Affiliates. Among other things, the Committee shall have the authority, subject to the terms of the Plan and subject to approval of the Board: (a) To select the officers and other employees of the Corporation and its Affiliates to whom Awards may from time to time be granted; (b) Determine whether and to what extent an Award or any combination of Awards are to be granted hereunder; (c) Determine the number of shares of Common Stock to be covered by each Award granted hereunder; (d) Determine the terms and conditions of any Award granted hereunder (including, but not limited to, the option price (subject to Section 5(a)), any vesting condition, restriction or limitation (which may be related to the performance of the participant, the Corporation or any Affiliate) and any vesting acceleration or forfeiture waiver regarding any Award and the shares of Common Stock relating thereto, based on such factors as the Committee shall determine; (e) Modify, amend or adjust the terms and conditions of any Award, at any time or from time to time, including but not limited to Performance Goals; provided however, that the Committee may not adjust upwards the amount payable to a designated Covered Employee with respect to a particular Award upon the satisfaction of applicable Performance Goals; 4 (f) Determine to what extent and under what circumstances Common Stock and other amounts payable with respect to an Award shall be deferred; and (g) Determine under what circumstances and/or in what proportions an Award may be settled in cash or Common Stock under Sections 5(j) and 8(b)(i). The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreement relating thereto) and to otherwise supervise the administration of the Plan. The Committee may act only by a majority of its members then in office, except that the members thereof may (i) delegate to an officer of the Corporation the authority to make decisions pursuant to paragraphs (c), (f), (g), (h) and (i) of Section 5 (provided that no such delegation may be made that would cause any Award or transaction under the Plan to cease to be exempt from Section 16(b) of the Exchange Act or cause any Award or payment made in respect thereof to be "applicable employee remuneration" under Section 162(m)(4)(A) of the Code) and (ii) authorize any one or more of their number or any officer of the Corporation to execute and deliver documents on behalf of the Committee. Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such delegate at the time of the grant of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Corporation and Plan participants, subject to the next paragraph. The Committee annually shall report to the Corporation's Board of Directors with respect to the operation of the Plan and at least annually shall meet with such Board to review the Committee's acts and determinations with respect to the Plan. The Board of Directors of the Corporation shall have the right to review any decision, act or determination made by the Committee and shall have the right to amend, modify, reverse or rescind any such decision, act or determination, which Board action shall be final and binding on all persons, including the Corporation and Plan participants. SECTION 3. COMMON STOCK SUBJECT TO PLAN The total number of shares of Common Stock reserved and available for grant under the Plan shall be 500,000, no more than 50,000 of which shares shall be granted as Awards of Restricted Stock which do not have Performance Goals as the sole or partial conditions for vesting. No participant may be granted Awards covering in excess of 150,000 shares of Common Stock over the life of the Plan, including Awards that expire or terminate unexercised. Shares subject to an Award under the Plan may be authorized and unissued shares or may be treasury shares or may be purchased on the open market or any combination thereof. Any shares subject to an Award under the Plan, which Award for any reason expires or is terminated unexercised as to such shares, shall, subject to the provisions of the previous 5 paragraph that may restrict their reissuance to a particular participant, again be available for the grant of other Awards under the Plan. Subject to Sections 7(c)(iv) and 9(b) (iii), if any shares of Restricted Stock or Performance Shares are forfeited or if any Stock Option (and related Stock Appreciation Right, if any) terminates without being exercised, or if any Stock Appreciation Right is exercised for cash, shares subject to such Awards shall, subject to the provisions of the first paragraph of this section that may restrict their distribution to a particular participant, again be available for distribution in connection with Awards under the Plan. In the event of any change in corporate capitalization, such as a stock split or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of stock or property of the Corporation, any reorganization (whether or not such reorganization comes within the definition of such term in Section 368 of the Code) or any partial or complete liquidation of the Corporation ("Corporate Transaction"), the Committee or Board may make such substitution or adjustments in the aggregate number and kind of shares reserved for issuance under the Plan, in the number, kind and option price of shares subject to outstanding Stock Options and Stock Appreciation Rights, in the number and kind of shares subject to other outstanding Awards granted under the Plan and/or such other equitable substitution or adjustments as it may determine to be appropriate in its sole discretion; provided however, that the number of shares subject to any Award shall always be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Corporation upon the exercise of any Stock Appreciation Right associated with any Stock Option. SECTION 4. ELIGIBILITY Officers and other employees of the Corporation and its Affiliates who are responsible for or contribute to the management, governance, growth and profitability of the business of the Corporation or its Affiliates are eligible to be granted Awards under the Plan. No grant shall be made under this Plan to a director who is not an officer or a salaried employee of the Corporation or its Affiliates. SECTION 5. STOCK OPTIONS Stock Options may be granted alone or in addition to other Awards granted under the Plan and may be of two types, Incentive Stock Options and Non-qualified Stock Options. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve. The Committee shall have the authority to grant any optionee Incentive Stock Options, Non-qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights); provided however, that grants hereunder are subject to the aggregate limit on grants to individual participants set forth in Section 3. Incentive Stock Options may be granted only to employees of the Corporation and its Affiliates (within the meaning of Section 424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Non-qualified Stock Option. 6 Stock Options shall be evidenced by option agreements, the terms and provisions of which may differ. An option agreement shall indicate on its face whether it is intended to be an agreement for an Incentive Stock Option or a Non-qualified Stock Option. The grant of a Stock Option shall occur on the date on which the Committee by resolution selects an individual to be a participant in any grant of a Stock Option, determines the number of shares of Common Stock to be subject to such Stock Option to be granted to such individual and specifies the terms and provisions of the Stock Option. The Corporation shall notify a participant of any grant of a Stock Option, and a written option agreement or agreements shall be duly executed and delivered by the Corporation to the participant. Such agreement or agreements shall become effective upon execution by the Corporation and the participant. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered nor shall any discretion or authority granted under the Plan be exercised so as to disqualify the Plan under Section 422 of the Code or, without the consent of the optionee affected, to disqualify any Incentive Stock Option under said Section 422. Stock Options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions as the Committee shall deem desirable: (a) Option Price. The option price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee and set forth in the option agreement, but shall not be less than the Fair Market Value of the Common Stock subject to the Stock Option on the date of grant. (b) Option Term. The term of each Stock Option shall be fixed by the Committee, but no Incentive Stock Option shall be exercisable more than 10 years after the date on which the Stock Option is granted. (c) Exercisability. Except as otherwise provided herein, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. In addition, the Committee may at any time accelerate the exercisability of any Stock Option. (d) Method of Exercise. Subject to the provisions of this Section 5, Stock Options may be exercised, in whole or in part, at any time during the option term by giving written notice of exercise to the Corporation specifying the number of shares of Common Stock subject to the Stock Option to be purchased. Such notice shall be accompanied by payment in full of the purchase price by certified or bank check or such other instrument as the Corporation may accept. If approved by the Committee, payment, in full or in part, may also be made in the form of unrestricted Common Stock already owned by the optionee (based on the Fair Market Value of the Common Stock on the date the Stock Option is exercised) and which has been held by the optionee for at least six (6) months; provided 7 however, that, in the case of an Incentive Stock Option the right to make a payment in the form of already owned shares of Common Stock may be authorized only at the time the Stock Option is granted. In the discretion of the Committee, payment for any shares subject to a Stock Option may also be made by delivering a properly executed exercise notice to the Corporation, together with a copy of irrevocable instructions to a broker to deliver promptly to the Corporation the amount of sale or loan proceeds to pay the purchase price, and, if requested, by the amount of any federal, state, local or foreign withholding taxes. To facilitate the foregoing, the Corporation may enter into agreements for coordinated procedures with one or more brokerage firms. In addition, in the discretion of the Committee, payment for any shares subject to a Stock Option may also be made by instructing the Committee to withhold a number of such shares having a Fair Market Value on the date of exercise equal to the aggregate exercise price of such Stock Option. No shares of Common Stock shall be issued until full payment therefor has been made. An optionee shall have all of the rights of a shareholder of the Corporation holding the class or series of Common Stock that is subject to such Stock Option (including, if applicable, the right to vote the shares and the right to receive dividends), when the optionee has given written notice of exercise, has paid in full for such shares and, if requested, has given the representation described in Section 13 (a). (e) Nontransferability of Stock Options. No Stock Option shall be transferable by the optionee other than (i) by will or by the laws of descent and distribution; or (ii) in the case of a Non-qualified Stock Option, pursuant to (a) a qualified domestic relations order (as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder) or (b) a gift to such optionee's children, whether directly or indirectly or by means of a trust or partnership or otherwise, if expressly permitted under the applicable option agreement. All Stock Options shall be exercisable, subject to the terms of this Plan, during the optionee's lifetime, only by the optionee or by the guardian or legal representative of the optionee or, in the case of a Non-qualified Stock Option, its alternative payee pursuant to such qualified domestic relations order or the recipient of a gift permitted under the applicable option agreement, it being understood that the terms "holder" and "optionee" include the guardian and legal representative of the optionee named in the option agreement and any person to whom an option is transferred by will or the laws of descent and distribution or, in the case of a Non- qualified Stock Option, pursuant to a qualified domestic relations order or a gift permitted under the applicable option agreement. (f) Termination by Death. Unless otherwise determined by the Committee, if an optionee's employment terminates by reason of death, any Stock Option held by such optionee may thereafter be exercised in full, whether or not then exercisable, or on such accelerated basis as the Committee may determine, for a period of three (3) years (or such other period as the Committee may specify in the option agreement) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. 8 (g) Termination by Reason of Disability. Unless otherwise determined by the Committee, if an optionee's employment terminates by reason of Disability, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of termination, or on such accelerated basis as the Committee may determine, for a period of three (3) years (or such shorter period as the Committee may specify in the option agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided however, that if the optionee dies within such period, any unexercised Stock Option held by such optionee shall, notwithstanding the expiration of such period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of one (1) year from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Disability, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-qualified Stock Option. (h) Termination by Reason of Retirement. Unless otherwise determined by the Committee, if an optionee's employment terminates by reason of Retirement, any Stock Option held by such optionee may thereafter be exercised by the optionee, to the extent it was exercisable at the time of such Retirement, or on such accelerated basis as the Committee may determine, for a period of five (5) years (or such shorter period as the Committee may specify in the option agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is the shorter; provided however, that if the optionee dies within such period, any unexercised Stock Option held by such optionee shall, notwithstanding the expiration of such period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of twelve (12) months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. In the event of termination of employment by reason of Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non- qualified Stock Option. (i) Other Termination. Unless otherwise determined by the Committee: (A) If an optionee incurs a Termination of Employment for Cause, all Stock Options held by such optionee shall thereupon terminate; and (B) If an optionee incurs a Termination of Employment for any reason other than death, Disability or Retirement or for Cause, any Stock Option held by such optionee, to the extent then exercisable, or on such accelerated basis as the Committee may determine, may be exercised for the lesser of three (3) months from the date of such Termination of Employment or the balance of such Stock Option's term; provided however, that if the optionee dies within such three (3)-month period, any unexercised Stock Option held by such optionee shall, notwithstanding the expiration of such three (3)- month period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of 12 months from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is the shorter. Notwithstanding the foregoing, if an optionee incurs a Termination of Employment at or after a Change of Control (as defined Section 10(b)), other than 9 by reason of death, Disability or Retirement, any Stock Option held by such optionee shall be exercisable for the lesser of (1) six (6) months and one (1) day from the date of such Termination of Employment, and (2) the balance of such Stock Option's term. In the event of Termination of Employment, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-qualified Stock Option. (j) Cashing Out of Stock Option. Upon receipt of written notice of exercise, the Committee may elect to cash out all or part of the portion of the shares of Common Stock for which a Stock Option is being exercised by paying the optionee an amount, in cash or Common Stock, equal to the excess of the Fair Market Value of the Common Stock over the option price times the number of shares of Common Stock for which the Option is being exercised on the effective date of such cash-out. (k) Change of Control Cash-Out. Notwithstanding any other provision of the Plan, during the 60-day period from and after a Change of Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of grant, an optionee shall have the right, whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the shares of Common Stock being purchased under the Stock Option and by giving notice to the Corporation, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Corporation and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the exercise price per share of Common Stock under the Stock Option (the "Spread") multiplied by the number of shares of Common Stock granted under the Stock Option as to which the right granted under this Section 5(k) shall have been exercised. (l) Notwithstanding anything in the Plan to the contrary, no Stock Option shall be reissued or repriced. SECTION 6. STOCK APPRECIATION RIGHTS (a) Grant and Exercise. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option granted under the Plan. In the case of a Non-qualified Stock Option, such rights may be granted either at or after the time of grant of such Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of grant of such Stock Option. A Stock Appreciation Right shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option. A Stock Appreciation Right may be exercised by an optionee in accordance with Section 6(b) by surrendering the applicable portion of the related Stock Option in accordance with procedures established by the Committee. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 6(b). Stock Options which have been so surrendered shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised. 10 (b) Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined by the Committee, including the following: (i) Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Stock Options to which they relate are exercisable in accordance with the provisions Section 5 and this Section 6. (ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive an amount in cash, shares of Common Stock or both, equal in value to the excess of the Fair Market Value of one share of Common Stock over the option price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. (iii) Stock Appreciation Rights shall be transferable only to permitted transferees of the underlying Stock Option in accordance with Section 5(e). (iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Section 3 on the number of shares of Common Stock to be issued under the Plan, but only to the extent of the number of shares covered by the Stock Appreciation Right at the time of exercise based on the value of the Stock Appreciation Right at such time. SECTION 7. RESTRICTED STOCK (a) Administration. Shares of Restricted Stock may be awarded either alone or in addition to other Awards granted under the Plan. The Committee shall determine the officers and other employees of the Corporation and its Affiliates to whom and the time or times at which grants of Restricted Stock will be awarded, the number of shares to be awarded to any participant (subject to the aggregate limit on grants to individual participants set forth in Section 3), the conditions for vesting, the time or times within which such Awards may be subject to forfeiture and any other terms and conditions of the Awards, in addition to those contained in Section 7(c). The Committee may, prior to grant, condition vesting of Restricted Stock upon the attainment of Performance Goals. The Committee may, in addition to requiring satisfaction of Performance Goals, condition vesting upon the continued service of the participant. The provisions of Restricted Stock Awards (including the applicable Performance Goals) need not be the same with respect to each recipient. All Performance Goals applicable to Awards of Restricted Stock shall be approved by the Committee in writing as required by Section 162(m) of the Code and the rules and regulations thereunder in order for the value of the Restricted Stock delivered pursuant to such Award to be deductible. (b) Awards and Certificates. Shares of Restricted Stock shall be evidenced in such manner as the Committee may deem appropriate, including book- entry registration 11 or issuance of one or more stock certificates. Any certificate issued in respect of shares of Restricted Stock shall be registered in the name of such participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award, substantially in the following form: "THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF CH ENERGY GROUP, INC. LONG- TERM PERFORMANCE-BASED INCENTIVE PLAN AND A RESTRICTED STOCK AGREEMENT. COPIES OF SUCH PLAN AND AGREEMENT ARE ON FILE AT THE OFFICES OF THE SECRETARY OF CH ENERGY GROUP, INC., 284 SOUTH AVENUE, POUGHKEEPSIE, NEW YORK." The Committee may require that the certificates evidencing such shares be held in custody by the Corporation until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award. (c) Terms and Conditions. Shares of Restricted Stock shall be subject to the following terms and conditions: (i) Subject to the provisions of the Plan and the Restricted Stock Agreement referred to in Section 7(c)(vi), during the period, if any, set by the Committee, commencing with the date of such Award for which such participant's continued service is required (the "Restriction Period"), and until the later of (i) the expiration of the Restriction Period and (ii) the date the applicable Performance Goals (if any) are satisfied, the participant shall not be permitted to sell, assign, transfer, pledge or otherwise encumber shares of Restricted Stock; provided, that the foregoing shall not prevent a participant from pledging Restricted Stock as security for a loan, the sole purpose of which is to provide funds to pay the option price for Stock Options. Within these limits, the Committee may provide for the lapse of restrictions based upon period of service in installments or otherwise and may accelerate or waive, in whole or in part, restrictions based upon period of service or upon performance; provided however, that in the case of Restricted Stock subject to Performance Goals granted to a participant who is a Covered Employee, the applicable Performance Goals have been satisfied. (ii) Except as provided in this paragraph (ii) and Section 7(c)(i) and the Restricted Stock Agreement, the participant shall have, with respect to the shares of Restricted Stock, all of the rights of a shareholder of the Corporation holding the class or series of Common Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any cash dividends. If so determined by the Committee in the applicable Restricted Stock Agreement and subject to Section 13(e) of the Plan, (1) cash dividends on the class or series of Common Stock that is the subject of the Restricted Stock Award shall be automatically deferred and reinvested in additional Restricted Stock, held subject to vesting of the underlying Restricted Stock, or held subject to 12 meeting Performance Goals applicable only to dividends, and (2) dividends payable in Common Stock shall be paid in the form of Restricted Stock of the same class as the Common Stock with which such dividend was paid, held subject to vesting of the underlying Restricted Stock, and/or held subject to meeting Performance Goals applicable only to dividends. (iii) Except to the extent otherwise provided in the applicable Restricted Stock Agreement and Sections 7(c)(i), 7(c)(iv) and 10(a)(ii), upon a participant's Termination of Employment for any reason during the Restriction Period or before the applicable Performance Goals are satisfied, all shares still subject to restriction shall be forfeited by the participant. (iv) Except to the extent otherwise provided in Section 10(a)(ii), in the event that a participant retires or such participant's employment is involuntarily terminated (other than for Cause), the Committee shall have the discretion to waive, in whole or in part, any or all remaining restrictions (other than, in the case of Restricted Stock with respect to which a participant is a Covered Employee, satisfaction of any applicable Performance Goals unless the participant's employment is terminated by reason of death or Disability) with respect to any or all of such participant's shares of Restricted Stock. (v) If and when any applicable Performance Goals are satisfied and the Restriction Period expires without a prior forfeiture of the Restricted Stock, unlegended certificates for such shares shall be delivered to the participant upon surrender of the legended certificates. (vi) Each Award shall be confirmed by, and be subject to, the terms of a Restricted Stock Agreement. SECTION 8. PERFORMANCE UNITS (a) Administration. Performance Units may be awarded either alone or in addition to other Awards granted under the Plan. The Committee shall determine the officers and other employees of the Corporation and its Affiliates to whom and the time or times at which Performance Units shall be awarded, the number of Performance Units to be awarded to any participant (subject to the aggregate limit on grants to individual participants set forth in Section 3), the duration of the Award Cycle and any other terms and conditions of the Award, in addition to those contained in Section 8(b). The Committee may, prior to grant, condition the settlement of Performance Units upon continued employment and/or the attainment of Performance Goals. The provisions of such Awards (including the applicable Performance Goals) need not be the same with respect to each recipient. All Performance Goals applicable to Awards of Performance Units awarded during an Award Cycle shall be approved by the Committee in writing as required by Section 162(m) of the Code and the rules and regulations thereunder in order for the cash and/or property delivered pursuant to such Award to be deductible. 13 (b) Terms and Conditions. Performance Units Awards shall be subject to the following terms and conditions: (i) Subject to the provisions of the Plan and the Performance Units Agreement referred to in Section 8(b)(vi), Performance Units may not be sold, assigned, transferred, pledged or otherwise encumbered during the Award Cycle. At the expiration of the Award Cycle, the Committee shall evaluate the Corporation's performance in light of the Performance Goals for such Award to the extent applicable, and shall determine the value of Performance Units granted to the participant which have been earned, and the Committee may then elect to deliver (1) the cash amount equal to the value and number of the Performance Units determined by the Committee to have been earned, or (2) the number of shares of Common Stock whose Fair Market Value is equal to cash value and number of the Performance Units determined by the Committee to have been earned the participant. The maximum value of cash and/or property that any participant may receive with respect to Performance Units in any year is $600,000. (ii) Except to the extent otherwise provided in the applicable Performance Unit Agreement and Sections 8(b)(iii) and 10(a)(iii), upon a participant's Termination of Employment for any reason during the Award Cycle or before any applicable Performance Goals are satisfied, the rights to the shares still covered by the Performance Units Award shall be forfeited by the participant. (iii) Except to the extent otherwise provided in Section 10(a)(iii), in the event that a participant's employment is terminated (other than for Cause) or in the event a participant retires, the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations (other than, in the case of Performance Units with respect to which a participant is a Covered Employee, satisfaction of any applicable Performance Goals unless the participant's employment is terminated by reason of death or Disability) with respect to any or all of such participant's Performance Units. (iv) A participant may elect to further defer receipt of the Performance Units payable under an Award (or an installment of an Award) for a specified period or until a specified event, subject in each case to the Committee's approval and to such terms as are determined by the Committee (the "Elective Deferral Period"). Such election must generally be made prior to commencement of the Award Cycle for the Award (or for such installment of an Award). (v) If and when any applicable Performance Goals are satisfied and the Elective Deferral Period expires without a prior forfeiture of the Performance Units, payment in accordance with Section 8(b)(i) hereof shall be made to the participant. (vi) Each Award shall be confirmed by, and be subject to, the terms of a Performance Unit Agreement. 14 SECTION 9. PERFORMANCE SHARES (a) Administration. Performance Shares may be awarded either alone or in addition to other Awards granted under the Plan. The Committee shall determine the officers and other employees of the Corporation and its Affiliates to whom and the time or times at which Performance Shares shall be awarded, the number of Performance Shares to be awarded to any participant (subject to the aggregate limit on grants to individual participants set forth in Section 3), the duration of the Award Cycle and any other terms and conditions of the Award, in addition to those contained in Section 9(b). The Committee may, prior to grant, condition the settlement of Performance Shares upon continued employment and/or the attainment of Performance Goals. The provisions of such Awards (including the applicable Performance Goals) need not be the same with respect to each recipient. All Performance Goals applicable to Awards of Performance Shares awarded during an Award Cycle shall be approved by the Committee in writing as required by Section 162(m) of the Code and the rules and regulations thereunder in order for the property delivered pursuant to such Award to be deductible by the Corporation under the Code. (b) Terms and Conditions. Performance Shares Awards shall be subject to the following terms and conditions: (i) Subject to the provisions of the Plan and the Performance Shares Agreement referred to in Section 9(b)(vi), Performance Shares may not be sold, assigned, transferred, pledged or otherwise encumbered during the Award Cycle. At the expiration of the Award Cycle, the Committee shall evaluate the Corporation's performance in light of the Performance Goals for such Award to the extent applicable, and shall determine the value and number of Performance Shares and associated reinvested dividends earned by the participant. If so determined by the Committee in the applicable Performance Shares Agreement and subject to Section 13(e) of the Plan, (1) cash dividends on the class or series of Common Stock that is the subject of the Performance Share Award shall be automatically deferred and reinvested in additional shares of Common Stock, held subject to vesting of the underlying Performance Shares, or held subject to meeting Performance Goals , and (2) dividends payable in Common Stock shall be paid in the form of shares of Common Stock of the same class as the Common Stock with which such dividend was paid, held subject to vesting of the underlying Performance Shares, or held subject to meeting the Performance Goals. The maximum value of property that any participant may receive with respect to Performance Shares in any year is $600,000. Delivery to the participant will be in shares of Common Stock only. (ii)Except to the extent otherwise provided in the applicable Performance Unit Agreement and Sections 9(b)(iii) and 10(a)(iii), upon a participant's Termination of Employment for any reason during the Award Cycle or before any applicable Performance Goals are satisfied, the rights to the shares still covered by the Performance Shares Award shall be forfeited by the participant. 15 (iii) Except to the extent otherwise provided in Section 10(a)(iii), in the event that a participant's employment is terminated (other than for Cause) or in the event a participant retires, the Committee shall have the discretion to waive, in whole or in part, any or all remaining payment limitations (other than, in the case of Performance Shares with respect to which a participant is a Covered Employee, satisfaction of any applicable Performance Goals unless the participant's employment is terminated by reason of death or Disability) with respect to any or all of such participant's Performance Shares. (iv) A participant may elect to further defer receipt of the Performance Shares payable under an Award (or an installment of an Award) for a specified period or until a specified event, subject in each case to the Committee's approval and to such terms as are determined by the Committee (the "Elective Deferral Period"). Such election must be made prior to commencement of the Award Cycle for the Award (or for such installment of an Award). (v) If and when any applicable Performance Goals are satisfied and the Elective Deferral Period expires without a prior forfeiture of the Performance Shares, payment in accordance with Section 9(b)(i) hereof shall be made to the participant. (vi) Each Award shall be confirmed by, and be subject to, the terms of a Performance Unit Agreement. SECTION 10. CHANGE OF CONTROL PROVISIONS (a) Impact of Event. Notwithstanding any other provision of the Plan to the contrary, in the event of a Change of Control: (i) Any Stock Options and Stock Appreciation Rights outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. (ii) The restrictions and deferral limitations applicable to any Restricted Stock shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant. (iii) All Performance Shares shall be considered to be earned and payable to the extent that any Performance Goals which the Committee shall establish have been met or exceeded, and any deferral or other restriction shall lapse and such Performance Shares shall be settled in cash as promptly as is practicable. (b) Definition of Change of Control. For purposes of the Plan, a "Change of Control" shall mean the happening of any of the following events: 16 (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (1) the then outstanding shares of Common Stock of the Corporation (the "Outstanding Corporation Common Stock") or (2) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control; (1) any acquisition directly from the Corporation, (2) any acquisition by the Corporation, or (3) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation. (ii) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation or the sale of all or substantially all of the assets of the Company or the merger or consolidation of the Corporation with or into another corporation. (c) Change of Control Price. For purposes of the Plan, "Change of Control Price" means the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided however, that in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change of Control Price shall be in all cases the Fair Market Value of the Common Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other non- cash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board. SECTION 11. TERM, AMENDMENT AND TERMINATION The Plan will terminate 10 years after the effective date of the Plan. Awards outstanding as of such date shall not be affected or impaired by the termination of the Plan. The Board may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would (i) impair the rights of an optionee under a Stock Option or a recipient of a Stock Appreciation Right, Restricted Stock Award, Performance Share Award or Performance Unit Award therefore granted without the optionee's or recipient's consent, except such an amendment made to cause the Plan to qualify for the exemption provided by Rule 16b-3, or (ii) disqualify the Plan or any Award or transaction thereunder from the exemption provided by Rule 16b-3. In addition, no such amendment shall be made without the approval of the Corporation's shareholders to the 17 extent such approval is required by law, regulation or agreement. The Committee may amend the terms of any Stock Option or other Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any holder without the holder's consent except such an amendment made to cause the Plan, or Award, transaction or payment made under the Plan, to qualify for the exemption provided by Rule 16b-3 and any such amendment shall be subject to Section 2(e) hereof. Subject to the above provisions, the Board shall have authority to amend the Plan to take into account changes in law and tax and accounting rules as will as other developments, and to grant Awards which qualify for beneficial treatment under such rules with shareholder approval. SECTION 12. UNFUNDED STATUS OF PLAN It is presently intended that the Plan shall constitute an "unfunded" plan for incentive and deferred compensation. The Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provided however, that unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan. SECTION 13. GENERAL PROVISIONS (a) The Committee may require each person purchasing or receiving shares pursuant to an Award to represent to and agree with the Corporation in writing that such person is acquiring the shares without a view to the distribution thereof. The certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. Notwithstanding any other provision of the Plan or agreements made pursuant thereto, the Corporation shall not be required to issue or deliver any certificate or certificates for shares of Common Stock under the Plan prior to fulfillment of all of the following conditions: (1) Listing or approval for listing upon notice of issuance of such shares on the New York Stock Exchange,Inc., or such other securities exchange as may at the time be the principal market for the Common Stock; (2) Any registration or other qualification of such shares of the Corporation under any state or federal law or regulation, or maintaining in effect any such registration or other qualification which the Committee shall, in its absolute discretion upon the advice of counsel, deem necessary or advisable; and (3) Obtaining any other consent, approval or permit from any state or federal governmental agency which the Committee shall, in its absolute discretion after receiving the advice of counsel, determine to be necessary or advisable. 18 (b) Nothing contained in the Plan shall prevent the Corporation or any Affiliate from adopting other or additional compensation arrangements for its employees. (c) Neither adoption of the Plan nor the grant or any Award thereunder shall confer upon any employee any right to continued employment, nor shall it interfere in any way with the right of the Corporation or any Affiliate to terminate the employment of any employee at any time. (d) No later than the date as of which an amount first becomes includible in the gross income of the participant for federal income tax purposes with respect to any Award under the Plan, the participant shall pay to the Corporation, or make arrangements satisfactory to the Corporation regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Corporation, withholding obligations may be settled with Common Stock, including Common Stock that is part of the Award that gives rise to the withholding requirement. The obligations of the Corporation under the Plan shall be conditioned upon such payment or arrangements, and the Corporation and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant. The Committee may establish such procedures as it deems appropriate, including making irrevocable elections, for settlement of withholding obligations with Common Stock. (e) Reinvestment of dividends in additional Restricted Stock or Performance Shares at the time of any dividend payment shall only be permissible if sufficient shares of Common Stock are available under Section 3 for such reinvestment (taking into account then outstanding Stock Options and other Awards). (f) The Committee shall establish such procedures as it deems appropriate for a participant to designate a beneficiary to whom any amounts payable in the event of the participant's death are to paid or by whom any rights of the participant, after the participant's death, may be exercised. (g) In the case of a grant of an Award to any employee of an Affiliate of the Corporation, the Corporation may, if the Committee so directs, issue or transfer the shares of Common Stock, if any, covered by the Award to the Affiliate, for such lawful consideration as the Committee may specify, upon the condition or understanding that the Affiliate will transfer the shares of Common Stock to the employee in accordance with the terms of the Award specified by the Committee pursuant to the provisions of the Plan. (h) Notwithstanding the foregoing, if any right granted pursuant to this Plan would make a Change of Control transaction ineligible for pooling-of-interests accounting under APB No.16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for any cash payable pursuant to such right Common Stock with a Fair Market Value equal to the cash that would otherwise be payable hereunder. (i) Notwithstanding anything in this Plan to the contrary, no transaction between a participant and the Corporation that requires as a condition of its exemption from 19 Section 16 of the Exchange Act approval in the manner set forth in paragraph (d)(1) or (d)(2) of Rule 16b-3 shall be consummated until such approval is obtained; but failure to obtain such approval shall not cause a transaction consummated to be void or voidable without the consent of such participant nor shall it disqualify the transaction from the benefit of any of available exemption from said Section 16. (j) Unless the Committee shall otherwise determine or any provision of the Plan shall otherwise specifically require, no delivery of cash and/or property shall be made to any "covered employee", as that term is defined in Section 162(m)(3) of the Code, or any transferee to whom the right of such covered employee to receive such cash and/or property has been transferred as the result of a transfer permitted by the Plan, in any year to the extent that the value such cash and/or property, together with the value of all other cash and/or property delivered to such covered employee or transferee in such year, shall not be deductible by the Corporation as a result of the operation of Section 162(m) of the Code. Any cash and/or property not deliverable because of the application of the previous sentence shall be delivered together with the value of all other cash and/or property delivered to such covered employee or transferee in such year, is so deductible, until such cash and/or property shall have been delivered in full. Such undelivered cash and/or property shall bear interest from the date on which it was first payable, but for the application of this Section (j), until paid in full, at a rate of interest per annum to be determined by the Committee in accordance with any rules adopted under said Section 162. For purposes of computing such interest, the Committee shall determine the value of such property, based upon (i) its Fair Market Value (adjusted as the Committee shall see fit, but at least quarterly) if it is Common Stock or if its value is determinable with reference to the price of Common Stock or (ii) as the Committee shall determine in all other cases. This Section (j) shall cease to have effect upon the occurrence of a Change of Control and the Plan shall thereafter be construed as if this Section (j) had never been part thereof, except in respect of the obligation of the Corporation to pay interest pursuant to the provisions of this Section (j); without limiting the generality of this sentence, (i) all property deliverable as a result of such occurrence shall be delivered when due as if this Section (j) were not part of the Plan and (ii) all property deliverable, but for the provisions of this Section (j), shall become deliverable upon such Change of Control, together with interest accrued thereon. (k) The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. SECTION 14. EFFECTIVE DATE - SHAREHOLDER APPROVAL The Plan shall become effective on January 1, 2000, subject to obtaining the approval of the shareholders of the Corporation as required by Code Section 422(b) and Rule 16 b- 3(d)(2) of the Exchange Act. 20 EX-12 19 STATEMENT RE: COMPUTATION OF RATIOS EXHIBIT 12
CH ENERGY GROUP, INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS Year Ended December 31, 1999 1998 (1) 1997 (1) 1996 (1) 1995 (1) ---- ---- ---- ---- ---- Earnings: A. Net Income $ 48,573 $ 49,314 $ 51,856 $ 52,852 $ 47,819 B. Federal Income Tax 28,925 28,627 26,237 31,068 28,687 -------- -------- -------- -------- -------- C. Earnings before Income Taxes $ 77,498 $ 77,941 $ 78,093 $ 83,920 $ 76,506 ======== ======== ======== ======== ======== D. Total Fixed Charges Interest on Mortgage Bonds 13,057 14,225 14,237 15,112 16,862 Interest on Other Long-Term Debt 11,094 8,890 8,860 8,505 9,063 Other Interest 4,860 3,639 2,647 2,626 1,917 Interest Portion of Rents 993 1,004 1,020 1,094 1,522 Amortization of Premium & Expense on Debt 993 924 906 940 1,069 Preferred Stock Dividends of Central Hudson 5,078 5,031 4,800 5,054 7,528 -------- -------- -------- -------- -------- 36,075 33,713 32,470 33,331 37,961 -------- -------- -------- -------- -------- E. Total Earnings $113,573 $111,654 $110,563 $117,251 $114,467 ======== ======== ======== ======== ======== Preferred Dividend Requirements: F. Allowance for Preferred Stock Dividends Under IRC Sec 247 $ 3,230 $ 3,230 $ 3,230 $ 3,230 $ 4,903 G. Less Allowable Dividend Deduction (127) (127) (127) (127) (528) -------- -------- -------- -------- -------- H. Net Subject to Gross-up 3,103 3,103 3,103 3,103 4,375 I. Ratio of Earnings before Income Taxes to Net Income (C/A) 1.595 1.581 1.506 1.588 1.600 -------- -------- -------- -------- -------- J. Pref. Dividend (Pre-tax) (HxI) 4,951 4,904 4,673 4,927 7,000 K. Plus Allowable Dividend Deduction 127 127 127 127 528 -------- -------- -------- -------- -------- L. Preferred Dividend Factor 5,078 5,031 4,800 5,054 7,528 ======== ======== ======== ======== ======== M. Ratio of Earnings to Fixed Charges and Preferred Dividends (E/D) 3.15 3.31 3.41 3.52 3.02 ======== ======== ======== ======== ======== (1) CH Energy Group, Inc. was formed on December 15, 1999. Prior Periods have been restated to reflect preferred stock dividends as a component of fixed charges.
EX-23 20 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement, on Form S-3 (Registration No. 333-11521-99), relating to CH Energy Group, Inc.'s Stock Purchase Plan, of our report dated January 28, 2000 appearing in this Annual Report on Form 10-K for the year ended December 31, 1999. New York, New York March 1, 2000 EX-24 21 POWER OF ATTORNEY & RESOLUTION Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, PAUL J. GANCI, Chairman of the Board, President and Chief Executive Officer, a Principal Executive Officer and a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, DONNA S. DOYLE and STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ PAUL J. GANCI L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came PAUL J. GANCI to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, JOHN E. MACK III, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ JOHN E. MACK III L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came JOHN E. MACK III to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, EDWARD P. SWYER, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ EDWARD P. SWYER L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came EDWARD P. SWYER to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, JACK EFFRON, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ JACK EFFRON L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came JACK EFFRON to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, HEINZ K. FRIDRICH, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ HEINZ K. FRIDRICH L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came HEINZ K. FRIDRICH to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, EDWARD F. X. GALLAGHER, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ EDWARD F. X. GALLAGHER L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came EDWARD F. X. GALLAGHER to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, CHARLES LAFORGE, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ CHARLES LAFORGE L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came CHARLES LAFORGE to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, FRANCES D. FERGUSSON, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ FRANCIS D. FERGUSSON L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came FRANCES D. FERGUSSON to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that she executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, STANLEY J. GRUBEL, a Director of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ STANLEY J. GRUBEL L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came STANLEY J. GRUBEL to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that she executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, DONNA S. DOYLE, Vice President - Accounting and Controller, Officer of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI and STEVEN V. LANT, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ DONNA S. DOYLE L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came DONNA S. DOYLE to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that I, STEVEN V. LANT, Chief Financial Officer and Treasurer, of CH Energy Group, Inc. ("Corporation"), have made, constituted and appointed, and by these presents do make, constitute and appoint, PAUL J. GANCI, DONNA S. DOYLE, WILLIAM P. REILLY, and each of them, my true and lawful attorneys, for me and in my name, place and stead, and in my office and capacity as aforesaid, to sign and file the Corporation's Annual Report, on Form 10-K, for the year ended December 31, 1999, with the Securities and Exchange Commission, pursuant to the applicable provisions of the Securities Exchange Act of 1934, together with any and all amendments and supplements to said Annual Report and any and all other documents to be signed and filed with the Securities and Exchange Commission in connection therewith, hereby granting to said attorneys, and each of them, full power and authority to do and perform each and every act and thing whatsoever requisite and necessary to be done in the premises as fully, to all intents and purposes, as I might or could do if personally present, hereby ratifying and confirming in all respects all that said attorneys or any of them may or shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, I have set my hand and seal this 4th day of February, 2000. /s/ STEVEN V. LANT L.S. STATE OF NEW YORK ) : ss.: COUNTY OF DUTCHESS ) On this 4th day of February, 2000, before me personally came STEVEN V. LANT to me known and known to me to be the individual described in and who executed the foregoing instrument, and duly acknowledged to me that he executed the same. /s/ DONNA M. GIAMETTA Notary Public EXHIBIT 24 I, Gladys L. Cooper, Corporate Secretary of CH Energy Group, Inc., hereby certify that at the meeting of the Board of Directors of CH Energy Group, Inc., a corporation organized under the laws of the State of New York, duly called and held at the office of said Corporation, 284 South Avenue, in the City of Poughkeepsie, State of New York, on February 4, 2000, at which a quorum was present and voting throughout, the following resolution was unanimously and duly adopted and is now in full force and effect: RESOLVED, that the Annual Report to the Securities and Exchange Commission, on Form 10-K, for the year ended December 31, 1999, in the form presented to this meeting, be and the same hereby is in all respects approved; and that the Chairman of the Board, President and Chief Executive Officer and the officers of this Corporation be and they hereby are authorized in the name and on behalf of this Board of Directors and this Corporation to execute said Form 10-K Report, in the form presented to this meeting, and that the officers and Directors of this Corporation be and they hereby are requested and authorized to join in the execution of said Form 10-K Report, and that the Chairman of the Board, President and Chief Financial Officer and the officers of this Corporation be and they hereby are authorized and directed to file or cause to be filed as required or permitted by law said Form 10-K, together with appropriate Exhibits, as required in connection therewith, subject to such changes therein as the Chairman of the Board, President and Chief Executive Officer and the officers of this Corporation, advised by counsel, may deem necessary or appropriate to comply with the requirements of the Securities and Exchange Commission; and to do and cause to be done any and all things necessary or appropriate to effect the filing of said Form 10-K and any amendments thereto. IN WITNESS WHEREOF, I have hereunto set my hand as Corporate Secretary of Central Hudson Gas & Electric Corporation and affixed it corporate seal this 4th day of February, 2000. /s/ Gladys L. Cooper ---------------------------- Gladys L. Cooper Corporate Secretary EX-27 22 FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 PER-BOOK $921,416 $98,808 $147,422 $168,253 $0 $1,335,899 $1,686 $349,924 $132,796 $484,406 $35,000 $21,030 $335,451 $50,000 $0 $0 $35,100 $0 $0 $0 $374,912 $1,335,899 $521,940 $27,758 $423,544 $451,302 $70,638 $10,779 $81,417 $29,614 $48,573 $3,230 $0 $36,422 $13,057 $103,803 2.88 0
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