<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
---------------
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended......................December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from...............to..................
Commission file number.....................................1-3268
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)
New York 14-0555980
(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, $5.00 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Cumulative Preferred Stock:
4 1/2% Series
4.75% Series
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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.
Yes X No
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. [ X ]
The aggregate market value of the voting stock held by
non-affiliates of the Registrant as of February 14, 1997 was
$567,630,454 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 14, 1997, was 17,532,987.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference
in the respective Parts of this Form 10-K noted below:
1. Certain portions of Registrant's Annual Report to
Shareholders, for the fiscal year ended December
31, 1996, are contained in Exhibit 13 hereto and
are incorporated by reference in Parts I, II and
IV of this Report.
2. Registrant's definitive Proxy Statement, dated
February 24, 1997, used in connection with its
Annual Meeting of Shareholders to be held on April
1, 1997, is incorporated by reference in Part III
hereof.
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TABLE OF CONTENTS
Page
Table of Contents
PART I
Item 1 BUSINESS 1
Generally 1
Electric Sales to IBM 2
Construction Program and Financing 2
Rates 3
Generally 3
Rate Proceedings - Electric and Gas 3
Cost Adjustment Clauses 4
Fuel Supply and Cost 4
Residual Oil 5
Coal 5
Natural Gas 6
Nuclear 6
Research and Development 6
Environmental Quality 6
Air 7
Water 7
Toxic Substances and Hazardous Wastes 8
Other 10
Regulation 10
Generally 10
Alternative Electric Power Generation 11
Energy Efficiency Programs 11
(i)
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TABLE OF CONTENTS (Cont'd)
Page
Item 1 BUSINESS (Cont'd)
Other Matters 11
Municipal Utilities 11
PASNY Economic
Development Power 12
Company Electric Economic
Development Rate 12
Marketing 12
Labor Relations 13
Affiliates 13
Executive Officers of the Company 13
Item 2 PROPERTIES 16
Electric 16
General 16
Load and Capacity 18
Roseton Plant 21
Nine Mile 2 Plant 21
Gas 22
General 22
Current Gas Supply 22
Sufficiency of Supply and
Future Gas Supply 22
Other 23
Other Matters 23
(ii)
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TABLE OF CONTENTS (Cont'd)
Page
Item 3 LEGAL PROCEEDINGS 24
Asbestos Litigation 24
Environmental Litigation 25
Environmental Claims - Newburgh
Manufactured Gas Site 25
Catskill Incident 26
Wappingers Falls Incident 27
Income Tax Assessments 28
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 28
PART II
Item 5 MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 28
Item 6 SELECTED FINANCIAL DATA 29
Item 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 29
Item 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 29
(a) Financial Statements and Report of
Independent Accountants 29
(b) Supplementary Financial Information 30
(c) Other Financial Statements and Schedule 30
Item 9 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE 30
PART III
Item 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY 31
Item 11 EXECUTIVE COMPENSATION 31
Item 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 31
Item 13 CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 31
(iii)
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TABLE OF CONTENTS (Cont'd)
Page
PART IV
Item 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K 32
(a) Documents filed as part of this Report:
1. Financial Statements 32
2. Financial Statement Schedule 32
3. Exhibits 32
(b) Reports on Form 8-K 33
(c) Exhibits Required by Item 601 of
Regulation S-K 33
(d) Financial Statement Schedule required
by Regulation S-X which is excluded
from the Company's Annual Report to
Shareholders for the fiscal year ended
December 31, 1996 33
SIGNATURES 34
INDEX TO FINANCIAL STATEMENTS F-1
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE F-2
CONSENT OF INDEPENDENT ACCOUNTANTS F-2
FINANCIAL STATEMENT SCHEDULE FOR THE YEARS
1996, 1995 AND 1994
SCHEDULE II - RESERVES F-3
EXHIBIT INDEX E-1
EXHIBITS
(iv)
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PART I
Item 1 - BUSINESS
Generally
Registrant ("Company") is a 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. The Company generates,
purchases and distributes electricity and purchases and
distributes gas. The Company, 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 626,000.
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 territory. The number of Company
employees at December 31, 1996 was 1,237.
The Company'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.
Total revenues and operating income before income taxes
(expressed as percentages) derived from electric and gas
operations for each of the last three years were as follows:
Percent of Percent of Operating
Total Revenues Income before Income Taxes
Electric Gas Electric Gas
1996 81% 19% 88% 12%
1995 80% 20% 90% 10%
1994 80% 20% 89% 11%
Consumption of electricity in New York State has
stabilized and, with an increase in supply, there is an excess of
electric generating capacity in the State. And, as the utility
industry moves toward competition, large customers may have
increased opportunities to purchase electricity and natural gas
from sources other than the local utility. In some instances,
smaller customers may have the same options as larger customers.
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For further information on factors affecting the
industry, see the caption "Competition" in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" (hereinafter "MD&A"), which MD&A, together with the
Company's Consolidated Financial Statements for the fiscal year
ended December 31, 1996, including the notes ("Notes") thereto,
are hereinafter collectively called "Company's 1996 Financial
Statements", and are incorporated herein by reference as Exhibit
13 hereto ("Exhibit 13"). Under said caption "Competition"
reference is made to the subcaption "New York - Electric -
Competitive Opportunities Proceeding" and the discussion therein
of the current settlement negotiations regarding the October 1,
1996 submissions of the New York utilities as part of the Public
Service Commission of the State of New York's ("PSC") Competitive
Opportunities Proceeding. The date for closing of the record in
these discussions has been extended from March 8, 1997 to May 9,
1997.
Additional information concerning revenues and
operating profits, and information concerning identifiable assets
for the electric and gas segments, which are the significant
industry segments of the Company, are set forth in Note 9
appearing on pages 70 and 71 of the Company's 1996 Financial
Statements, which Note 9 is incorporated herein by reference.
Electric Sales to IBM: Reference is made to the
caption "Other Developments - Electric Sales to IBM" on page 17
of the MD&A, which caption is incorporated herein by reference,
for a discussion of the impact on the Company as a result of
sales to its largest customer, International Business Machines
Corporation ("IBM").
Construction Program and Financing
The Company is engaged in a construction program which
is presently estimated to involve total cash expenditures during
the period 1997 through 2001 of approximately $267.8 million.
The Company's principal construction projects consist of those
designed to improve the reliability, efficiency and environmental
compatibility of the Company's generating facilities and those
required to expand, reinforce and replace the Company's
transmission, substation, distribution and common facilities.
For estimates of construction expenditures, internal
funds available, mandatory and optional redemption of long-term
securities, and working capital requirements for the five-year
period 1997-2001, see the subcaption "Construction Program" under
the caption "Capital Resources and Liquidity" of the MD&A
appearing on pages 12 through 14 of Exhibit 13 hereto, which
subcaption is incorporated herein by reference.
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For a discussion of the Company's capital structure,
financing program and short-term borrowing arrangements, see
Notes 4 through 6 to the Company's 1996 Financial Statements, and
the subcaptions "Capital Structure," "Financing Program" and
"Short-Term Debt" under the caption "Capital Resources and
Liquidity" of the MD&A appearing, in the case of said Notes, on
pages 52 through 58 of Exhibit 13 hereof and, in the case of said
subcaptions, on pages 14 through 16 of Exhibit 13 hereto, which
Notes and subcaptions are incorporated herein by reference.
The Company's Certificate of Incorporation and its
various debt instruments do not contain any limitations upon the
issuance of authorized, but unissued, Preferred Stock and Common
Stock or of unsecured short-term debt.
The Company's various debt instruments include
limitations as to the amount of additional funded indebtedness
which the Company can issue. The Company believes such
limitations will not impair its ability to issue any or all of
the debt described under the above referenced subcaption
"Financing Program", incorporated herein by reference.
Rates
Generally: The electric and gas rates of the Company
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
are regulated by the Federal Energy Regulatory Commission
("FERC").
The Company's present retail rate structure consists of
various rate and service classifications covering residential,
commercial and industrial customers. During 1996, the average
price of electricity to such customers was 8.55 cents per kWh,
representing a decrease of approximately 0.70% as compared to the
8.61 cents average price during 1995.
Rate Proceedings - Electric and Gas: For information
regarding the Company's most recent electric and gas cases filed
with the PSC, see caption "Rate Proceedings" in the MD&A on pages
16 and 17 of Exhibit 13 hereto, which caption is incorporated
herein by reference.
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Cost Adjustment Clauses: For information with respect
to the Company's electric and gas cost adjustment clauses, see
the discussions under the caption "Rates, Revenues and Regulatory
Matters" in Note 1 to the Company's 1996 Financial Statements
appearing on page 44 of Exhibit 13 hereto, which caption is
incorporated herein by reference.
Fuel Supply and Cost
The Company's two primary fossil fuel-fired electric
generating stations are the Roseton Plant (described in Item 2
below under the subcaptions "Electric - General" and "Electric -
Roseton Plant") and the Danskammer Plant (referred to in Item 2
below under the subcaption "Electric - General"). The Roseton
Plant which is fully equipped to burn both residual oil and
natural gas, has had its two units operated on an alternating
basis for six months at a time since August 1, 1994. Commencing
in 1994, Units 1 and 2 of the Danskammer Plant, which are
equipped to burn residual oil or natural gas, have only operated
when the demand for power was high or purchased power and energy
exchange contracts were uneconomical. Units 3 and 4 of the
Danskammer Plant are capable of burning coal, natural gas, or
residual oil.
For the 12 months ended December 31, 1996, the sources
and related costs of electric generation for the Company were as
follows:
Aggregate
Sources of Percentage of Costs in 1996
Generation Energy Generated ($000)
Purchased Power 38.5% $ 55,432
Coal 37.7 40,592
Gas 0.9 1,913
Nuclear 14.0 4,137
Oil 5.5 9,800
Hydroelectric 3.4 964
100.0%
======
Fuel Handling Costs 1,877
Deferred Fuel Cost (318)
$114,397
========
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Residual Oil: Contractual oil storage arrangements for
the Roseton and Danskammer Plants with Amerada Hess Corporation
("Hess") were terminated as of January 31, 1996 due to those
Plants' reduced operations. At December 31, 1996, there were
506,723 barrels of fuel oil in inventory in Company-owned tanks
for use in the Danskammer and Roseton Plants, which amount
represents an average daily supply of 33 days. The oil storage
capacity as of December 31, 1996 for these Plants was 16,251 and
1,079,000 barrels, respectively. The Company's share of the
Roseton Plant's oil storage capacity is 377,650 barrels.
During 1996, there were no purchases of fuel oil made
for the Danskammer Plants.
During 1996, the Roseton Plant's fuel oil requirements
were supplied under two contracts. The prices under each
contract were determined on the basis of published market indices
in effect at the time of delivery. The term of one contract
expired on August 31, 1996, and the second contract became
effective on September 1, 1996, and continues through August 31,
1998. These contracts also permit the Company to make certain
spot purchases from others.
Coal: During 1996, the Company provided for the
majority of its coal requirements under two agreements with
domestic coal suppliers. Coal was transported to the Danskammer
Plant under agreements with two railroads. The two supply
agreements, as well as both rail agreements, expired on December
31, 1996. The Company also purchased a portion of its 1996 coal
supply on the spot market.
In order to provide for its future requirements for
coal to be burned in Units 3 and 4 at the Danskammer Plant, the
Company, effective January 1, 1997, entered into two long-term
supply contracts for the purchase of an aggregate of 720,000 tons
per year of low sulfur (0.7% maximum) coal. The Company will
also purchase a portion of its coal supply on the spot market.
One contract provides for the delivery of coal by water
from sources in Venezuela and Columbia, South America. The base
price of purchases under this contract is fixed for the period
which ends on December 31, 1997, and thereafter, the price will
be negotiated by the parties. The contract term expires on
December 31, 1999.
The second contract, which provides for the delivery of
domestic coal by rail, expires on December 31, 1998. The base
price of purchases is fixed for the term of that contract.
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The Company has also entered into a long-term rail
contract for the delivery of coal. This contract covers the
period January 1, 1997 - December 31, 2001. During the first two
years of this contract, rail rates are fixed, and thereafter,
such rates will be negotiated by the parties.
Natural Gas: For information regarding the Company's
natural gas supply and capacity, see the caption "Natural Gas
Supply" in Note 8 to the Company's 1996 Financial Statements
appearing on pages 64 and 65 of Exhibit 13 hereto, which caption
is incorporated herein by reference.
Nuclear: For information regarding fuel reloading at
the Nine Mile 2 Plant, see the caption "Nuclear Operations" in
the MD&A on pages 22 and 23 of Exhibit 13 hereto, such caption
being incorporated herein by reference.
Research and Development
The Company is engaged in the conduct and support of
research and development ("R&D") activities that are focused on
providing enhanced customer services at lower costs. Individual
projects aim to improve existing energy technologies and to
develop new technologies related to the production, distribution
and conservation of energy. New York law requires electric and
gas utilities to contribute to research undertaken by the New
York State Energy Research and Development Authority as well.
The Company leverages its R&D expenditures by contributing to and
seeking funding for projects sponsored by various state and
national research consortia and those sponsored by the Company.
The Company's expenditures, net of revenues from
royalties, for electric and gas research and development projects
amounted to $4.1 million in 1995 and $3.3 million in 1996. The
Company projects that its 1997 expenditures for research and
development will total approximately $3.4 million.
Environmental Quality
The Company 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
regulation, certain permits are required with respect to the
Company's facilities, which permits have been obtained and/or are
in the renewal process. Generally, the principal environmental
areas and requirements to which the Company is subject are as
follows:
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Air: State regulations affecting the Company'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, nitrogen oxides and suspended particulates must
be complied with in the area surrounding the Company's generating
plants. Based on the operation of its continuous emission stack
monitoring systems and its ambient air quality monitoring system
in the area surrounding the Roseton and Danskammer Plants, the
Company believes that present air quality standards for nitrogen
oxides, sulfur dioxide and particulates are satisfied in those
areas.
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
New York State Department of Environmental Conservation
("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 sulfur
dioxide and nitrogen oxides 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 fuel is also
burned at Roseton.
Reference is made to the caption, "Environmental
Matters - Clean Air Act Amendments" in Note 8 of the Company's
1996 Financial Statements on pages 65 and 66 of Exhibit 13
hereto, which caption is herein incorporated by reference, for a
discussion of the impact of the Clean Air Act Amendments of 1990
("CAA Amendments") on the Company's efforts to attain and
maintain national ambient air quality standards for emissions
from its fossil-fueled electric power plants.
Except as set forth above, the Company is unable to
predict the effect (including cost) of these programs on its
power plant operations since the details of the CAA Amendments
are yet to be completely established by implementing regulations
to be issued over a period of years by the EPA and the NYSDEC.
Water: The Company is required to comply with
applicable state and federal laws and regulations governing the
discharge of pollutants into receiving waters.
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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 industrial waste
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.
The Company 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 permits are the subject of separate
renewal proceedings currently pending before the NYSDEC. In the
Roseton Plant proceeding, the subject of the restriction on use
of water for cooling purposes at that Plant (as referred to in
Item 3 below, under the caption "Environmental Litigation") is
also being discussed. Such SPDES permits may be renewed in 1998,
but the Company can make no estimate as to the conditions, if
any, to which such SPDES permits may be subject. It is the
Company's belief that the expired SPDES permits continue in full
force and effect pending issuance of the new SPDES permits.
Toxic Substances and Hazardous Wastes: The Company 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 (the "Registry") six
locations at which gas manufacturing plants owned or operated by
the Company or by predecessors to the Company were once located.
Two other sites, which formerly contained gas manufacturing
plants, have been identified by the Company. The Company 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.
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All of these eight sites were studied 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, the Company concluded that no remedial
actions were required at any of these sites. In 1991, the NYSDEC
advised the Company that four of the six sites had been deleted
from such Registry. In 1992, the NYSDEC advised the Company 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 may be required to determine
whether or not wastes on site are hazardous. If, as a result of
such potential new analytical tests, or otherwise, remedial
actions were ultimately required at these 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 Company if the Company could not recover all, or
a substantial portion thereof, through rates.
Reference is made to the subcaption "Environmental
Matters - Former Manufactured Gas Plant Facilities" on pages 66
and 67 of Note 8 to the Company's 1996 Financial Statements,
which subcaption is herein incorporated by reference, for a
discussion of litigation filed against the Company, involving one
of the eight sites, by the City of Newburgh, New York and the
Company's response thereto.
In August 1992, the NYSDEC notified the Company that
the NYSDEC suspected that the Company's offices at Little Britain
Road in New Windsor, Orange County, New York, may constitute an
inactive hazardous waste disposal site. Pursuant to a Consent
Order entered into between the Company and the NYSDEC, the
Company performed a preliminary site assessment and, on January
31, 1996, a draft final report ("site assessment report")
prepared by the Company's consultant was submitted to the NYSDEC
for its review, evaluation and comment. As a result of the
NYSDEC's review of this site assessment report, the Company
agreed to perform additional testing. The draft report on this
additional testing was submitted to the NYSDEC on December 6,
1996. These reports both indicated that a limited amount of
subsurface soil contamination was detected near one corner of the
site and that contaminants were also detected in the ground water
beneath the site. Operations conducted on the site by the
Company since it purchased the property in 1978 are not believed
to have contributed to either the soil or the ground water
contamination. The Company can make no (i) prediction regarding
what action the NYSDEC may take with regard to the draft reports,
or (ii) prediction as to the outcome of recovery attempts against
third parties by the Company. However, the Company believes that
the cost of such site assessment and remediation, if any, will
not be material.
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Other: The Company estimates that expenditures
attributable, in whole or in substantial part, to environmental
considerations totaled $9.9 million in 1996, of which about $1.7
million related to capital projects and $8.2 million were charged
to expense. It is estimated that in 1997 the total of such
expenditures will be approximately $9.7 million.
The Company is not involved as a party 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 below under Item 3 hereof under the captions
"Environmental Litigation" and "Environmental Claims - Newburgh
Manufactured Gas Site", and as described above under the
subcaption "Environmental Quality - Toxic Substances and Hazard-
ous Wastes".
Regulation
Generally: The Company is subject to regulation by the
PSC with respect to, among other things, service rendered
(including the rates charged), major transmission facility
siting, energy planning, accounting procedures and issuance of
securities.
Certain of the Company's 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 the Company's transmission and
sale for resale of electric energy in interstate commerce.
The Company is not subject to the provisions of the
Natural Gas Act.
In the opinion of general counsel for the Company, the
Company's major hydroelectric facilities are not required to be
licensed under the Federal Power Act.
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Alternative Electric Power Generation: Pursuant to the
provisions of the federal Public Utility Regulatory Policies Act
of 1978 ("PURPA"), and the New York Public Service Law, the
Company is required to enter into long-term contracts to purchase
electric power generated by small hydro, alternative energy and
cogeneration facilities which meet qualification standards
established by such statutes and the regulatory programs
promulgated thereunder. With respect to facilities qualified
under PURPA, the Company must pay its avoided cost (i.e., the
cost the Company would otherwise incur to generate the increment
of power purchased) for electric power purchased from qualified
facilities, which, under the New York Public Service Law, is "at
rates just and reasonable to electric [...] corporation
ratepayers." As of December 31, 1996, the Company's avoided cost
at the 115 KV transmission level was approximately 3.0 cents per
kWh.
As of December 31, 1996, 19 MW of generation,
qualifying for avoided cost payments by the Company, was
interconnected with the Company's system. The opportunity under
PURPA and the New York Public Service Law to require the Company
to purchase power from qualifying facilities could serve as an
inducement to the Company's industrial and commercial customers
to install their own qualifying on-site generation facilities to
reduce their purchases of electric power from the Company which
would result in losses of revenues from such customers. However,
as of December 31, 1996, no significant customer has indicated to
the Company the intention to pursue such alternative.
Energy Efficiency Programs: In response to the PSC's
directives, the Company filed with the PSC the Company's Energy
Efficiency Program for 1997 on November 14, 1996, which projected
a reduction of 502 kW in the Company's 1997 summer peak load
demand. In its Order, issued and effective on February 27, 1997,
the PSC approved the Company's 1997 Energy Efficiency Program
subject to modification based upon rulings that the PSC may make
in the Competitive Opportunities Proceeding, described above
under the caption "Business - Generally."
Other Matters
Municipal Utilities: Article 14-A of the New York
General Municipal Law permits any municipality to construct,
lease, purchase, own, acquire, use and/or operate any utility
service for the benefit of its inhabitants, and, in furtherance
thereof, permits any municipality to acquire, through purchase or
condemnation, the public utility service of any public utility
company.
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The current and projected excess supply of electricity
in the Northeastern United States and in Canada has significantly
depressed wholesale prices, and the increased level of
competition in the electric utility industry could cause
municipalization efforts to intensify. The Company is not aware
of any municipalization efforts in its franchise area.
PASNY Economic Development Power: The New York State
Economic Development Power Allocation Board is authorized by law
to solicit applications for "economic development power" by
municipalities or municipal agencies on behalf of businesses
which normally use a minimum peak electric demand of 400 kW for
purposes of economic development, particularly job creation.
"Economic Development Power" ("EDP") is electric power generated
at the Fitzpatrick Nuclear Generating Station of the Power
Authority of the State of New York ("PASNY") which is available
for such purpose. Should such power be allocated to a customer
within the Company's service territory, the Company would be
required to wheel such power to the user at a cost-based rate,
which must be approved by the PSC and/or by the FERC.
As of December 31, 1996, the Company is not aware of
any of its electric customers having applied for such EDP.
Company Electric Economic Development Rate: In 1994,
the PSC approved the Company's proposed tariff amendments to
provide an economic development electric rate discount for large
industrial customers (which exhibit new annual electric load of
500 kW or more) taking substation or transmission service which
locate or expand their business operations within the Company's
service territory. Certain energy efficiency guidelines must
also be met by eligible customers. Qualifying customers pay
lower electric prices for the increased load, with savings on
current rates for ten years. Customers must apply for the
discount by October 1, 1999. As of December 31, 1996, the
Company had four industrial customers participating under this
rate structure.
Marketing: The Company promotes the use of gas and
electricity by encouraging the purchase of energy efficient gas
and electric appliances, particularly gas heaters and fireplaces,
ground source heat pumps, electric water heaters and night
security, area and flood lighting.
- 12 -
<PAGE>
Labor Relations: The Company has agreements with the
International Brotherhood of Electrical Workers for its 868
unionized employees, representing production and maintenance
employees, customer relations representatives, service workers
and clerical employees, excluding persons in managerial,
professional or supervisory positions, which agreements were
renegotiated effective July 1, 1994 and continue through June 30,
1998. The agreements provide for an average general wage
increase of 3.2% in each of the first three years of such
agreements and a 3.5% increase in the fourth year of such
agreements, and certain additional fringe benefits.
Affiliates: On June 30, 1996, a merger was effected
between two wholly-owned subsidiaries of the Company whereby
Central Hudson Cogeneration, Inc. was merged into Central Hudson
Enterprises Corporation, with the latter being the surviving
corporation. Said merger had previously been approved by the
PSC.
Central Hudson Enterprises Corporation: Central Hudson
Enterprises Corporation is engaged in the business of conducting
energy audits, providing services related to the design,
financing, installation and maintenance of energy conservation
measures and cogeneration systems for private businesses,
institutional organizations and governmental entities and
participates in cogeneration, small hydro and alternate energy
production projects, directly or through one or more of its
affiliates, including the Cencogen - West Delaware Corporation.
CH Resources, Inc., Phoenix Development Company, Inc.,
and Greene Point Development Corporation: These corporations,
each a wholly-owned subsidiary of the Company, were established
to either hold real property for the future use of the Company or
to participate in energy-related ventures. Currently, such
subsidiaries either do not hold assets or hold assets of little
market value.
Executive Officers of the Company
The names of the current officers of the Board of
Directors and the executive officers of the Company, their
positions held and business experience during the past five (5)
years and ages (at December 31, 1996) are as follows:
- 13 -
<PAGE>
Principal Occupation or
Employment and Positions
Name of Officer and and Offices with the Company
Position Held during the past five (5) years Age
Officers of the Board
John E. Mack, III, Present positions, except Chairman 62
Chairman of the Board of the Committee on Finance,
and Chief Executive April 1996
Officer; Chairman of
the Executive,
Retirement and Finance
Committees
Jack Effron, Present position since April 1994; 63
Chairman of Committee President of Efco Products, a
on Compensation and bakery ingredients corporation;
Succession member of the St. Francis Health
Care Foundation; Chairman of the
Chief Executive's Network for
Manufacturing of the Council of
Industry of Southeastern New York
Heinz K. Fridrich Present position since April 1995; 63
Chairman of Committee Courtesy Professor, University of
on Audit Florida at Gainesville, since 1994;
Vice President - Manufacturing
International Business Machines
Corporation, March 1992 - September
1993; Board of Trustees; Mount St.
Mary College, March 1992 - 1993
Executive Officers of the Company
Paul J. Ganci, Present position 58
President and Chief
Operating Officer
Carl E. Meyer, Present position since April 1996; 49
Sr. Vice President - Vice President - Customer Services,
Customer Services November 1992 - April 1996; Vice
President - Engineering and
Production, March 1992 - November
1992
- 14 -
<PAGE>
Principal Occupation or
Employment and Positions
Name of Officer and and Offices with the Company
Position Held during the past five (5) years Age
Executive Officers of the Company - (Continued)
Allan R. Page, Present position since April 1996; 49
Sr. Vice President - Vice President - Corporate Services,
Corporate Services November 1992 - April 1996; Vice
President - Customer Services, March
1992 - November 1992
Joseph J. DeVirgilio, Present position 45
Jr., Vice President -
Human Resources and
Administration
Ronald P. Brand, Present position since November 58
Vice President - 1992; Assistant Vice President -
Engineering and Engineering, March 1992 - November
Environmental Affairs 1992
Benon Budziak, Present position since February 64
Vice President - 1994; Assistant Vice President -
Fossil Production Fossil Production, November 1992 -
February 1994; Manager - Fossil
Production, March 1992 - November
1992
Ellen Ahearn, Present position since April 1994; 42
Secretary Assistant Secretary and Internal
Auditing Manager, August 1992 -
April 1994; Internal Auditing Manager,
March 1992 - August 1992
Steven V. Lant, Present positions since April 1993; 39
Treasurer and Assistant Treasurer and Assistant
Assistant Secretary Secretary, March 1992 - April
1993;
- 15 -
<PAGE>
Principal Occupation or
Employment and Positions
Name of Officer and and Offices with the Company
Position Held during the past five (5) years Age
Executive Officers of the Company - (Continued)
Donna S. Doyle Present position since April 1995; 48
Controller Assistant Controller April 1994 -
April 1995; Manager of Taxes, Budgets
and Customer Accounting, April 1993 -
April 1995; Manager of Plant and
Depreciation and General Accounting,
March 1992 - April 1993
Arthur R. Upright, Present position since February 53
Assistant Vice 1994; Manager Cost and Rate
President - Cost and Financial Planning, March 1992
and Rate and - February 1994
Financial Planning
Gladys L. Cooper Present position since September 45
Assistant Vice 1995; leave of absence for
President - educational purposes August 1992 -
Governmental September 1995; Secretary, March
Relations 1992 - April 1994
There are no family relationships existing among any of
the executive officers of the Company.
Each of the above executive officers is elected or
appointed annually by the Board of Directors.
Item 2 - PROPERTIES
Electric
General: The net capability of the Company's electric
generating plants as of December 31, 1996, the net output of each
plant for the year ended December 31, 1996, and the year each
plant was placed in service or rehabilitated are as set forth
below:
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<PAGE>
<TABLE>
<CAPTION> (MW)*
Electric Net Capability 1996 Unit
Generating Year Placed (95-96) Net Output
Plant Type of Fuel In Service Summer Winter (MWh)
<S> <C> <C> <C> <C> <C>
Danskammer Residual Oil, Natural 1951-1967 505 502 2,133,513
Plant Gas and Coal
Roseton Plant Residual Oil 1974 422 423 300,459
(35% share)** and Natural Gas
Neversink Water 1953 22 24 88,155
Hydro Station
Dashville Water 1920 5 5 11,464
Hydro Station
Sturgeon Pool Water 1924 16 16 80,685
Hydro Station
High Falls Water 1986 3 3 10,704
Hydro Station
Coxsackie Kerosene or 1969 22 25 1,806
Gas Turbine Natural Gas
So. Cairo Kerosene 1970 20 23 887
Gas Turbine
Nine Mile 2 Nuclear 1988 101 103 779,106
Plant (9% share) ------ ------ ---------
Total 1,116 1,124 3,406,779
* Reflects maximum one-hour net capability of the Company's ownership of generation
resources and, therefore, does not include firm purchases or sales.
** Since August 1, 1994, the Roseton Plant units have been scheduled to operate
alternately on a six-month cycle.
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</TABLE>
<PAGE>
The Company has a contract with PASNY which
entitles the Company to 49 MW net capability from the Blenheim-
Gilboa Pumped Storage Hydroelectric Plant through 2002.
See Item 1 above, under the subcaption
"Regulation - Alternative Electric Power Generation," with
respect to alternative electric power generation interconnected
with the Company's system.
The Company owns 83 substations having an
aggregate transformer capacity of 4.6 million KVA. The
transmission system consists of 588 pole miles of line and the
distribution system of 7,269 pole miles of overhead lines and 829
trench miles of underground lines.
Load and Capacity: The Company's maximum one-
hour demand within its own territory, for the year ended December
31, 1996, occurred on August 23, 1996 and amounted to 838 MW.
The Company's maximum one-hour demand within its own territory,
for that part of the 1996-1997 winter capability period through
February 20, 1997 occurred on January 17, 1997 and amounted to
766 MW.
Based on current projections of peak one-hour
demands for the three-year period comprising the 1997 summer
capability period through the winter capability period of 1999-
2000 the Company estimates that it will have capacity available
to satisfy its projected peak demands plus the estimated
installed reserve generating capacity requirements which it is
required to maintain as a member of the New York Power Pool
("NYPP"), described below. The following table sets forth the
amounts of any excess capacity by summer and winter capability
periods for such three-year period:
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<PAGE>
<TABLE>
<CAPTION>
Peak + Excess of Capacity over
Forecasted Installed Available Peak Plus NYPP Installed
Capability Peak Reserve of Capacity Reserve Requirements
Period (MW) 18% (MW) (MW) (MW) Percent
<S> <C> <C> <C> <C> <C>
1997 Summer 905 1,068 1,183 115 10.8
1997-98 Winter 830 1,068* 1,191 123 11.5
1998 Summer 925 1,092 1,183 91 8.3
1998-99 Winter 845 1,092* 1,191 99 9.1
1999 Summer 940 1,109 1,183 74 6.7
1999-00 Winter 865 1,109* 1,191 82 7.4
* Summer period peak plus reserve requirements carry over to the following winter
period.
The foregoing table reflects the reduction in capacity requirements as a result of
the Company's Energy Efficiency Programs described above in Item 1 under the
subcaption "Regulation - Energy Efficiency Programs".
- 19 -
</TABLE>
<PAGE>
The Company is a member of the NYPP consisting of the major
investor-owned electric utility companies in the State and PASNY.
The members of the NYPP, by agreement, provide for coordinated
operation of their bulk power electric systems with a view to the
use of the most economical source of electricity, for the
maintenance of a reserve margin equal to at least 18% of each
member's forecasted peak load and for the sale and interchange of
electric generating capability and energy among such members.
The members of the NYPP also provide for the cooperative
development of long-range plans for the expansion on an
integrated basis of the bulk power supply system for New York
State, compatible with environmental standards, and appropriately
related to interstate and international capacity and reliability
considerations.
As part of the ongoing discussions regarding the
restructuring of the electric industry in New York State referred
to under the caption "Competition" in the MD&A on pages 6 through
11 of Exhibit 13 hereto, proposals have been made to restructure
the NYPP. In a filing with FERC, dated January 31, 1997, the
member systems of the NYPP proposed a new market structure that
would include as its key elements the establishment of an
Independent System Operator ("ISO"), the New York State
Reliability Council ("NYSRC"), and the New York Power Exchange
("NYPE"). The ISO, NYSRC and NYPE would collectively replace the
NYPP.
The ISO's principal mission would be to maintain the
reliability of the New York State bulk power systems and to
provide transmission service on a comparable and non-
discriminatory basis. The ISO would be open to buyers, sellers,
consumers and environmental groups and transmission providers;
each of these groups would be represented on the Board of
Directors of the ISO, which is proposed to be a not-for-profit
New York corporation. The NYSRC's mission would be 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 would develop the
procedures necessary to operate the system within these
reliability rules. The NYSRC is proposed to be governed by a
committee comprised of transmission providers and representatives
of buyers, sellers, and consumer and environmental groups. The
NYPE is proposed to be established as a non-profit corporation
that would provide a vehicle through which buyers and sellers
could participate in the markets for energy, capacity and
ancillary services.
The Company is unable to predict the outcome of this FERC
filing.
- 20 -
<PAGE>
Roseton Plant: The Roseton Plant is located in the
Company's franchise area at Roseton, New York, and is owned by
the Company, Consolidated Edison Company of New York ("Con
Edison") and 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"). The Company 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.
For more information with respect to the Roseton Plant, see
the caption "Roseton Plant" in Note 8 to the Company's 1996
Financial Statements appearing on pages 62 and 63 of Exhibit 13
hereto, which caption is incorporated herein by reference.
The 345 kV transmission lines and related facilities to
connect the Roseton Plant with other points in the system of the
Company and with the systems of Con Edison and Niagara Mohawk to
the north and west of such Plant are 100%-owned by the Company.
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 the Company for such use
by the other parties. In addition, the Company has contract
rights which entitle the Company 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, the Company agreed to provide PASNY
capacity in the 345 kV transmission lines the Company 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: Reference is made to the caption "Nuclear
Operations" in the MD&A, on pages 22 and 23 of Exhibit 13 hereto
and Note 2 to the Company's 1996 Financial Statements, on pages
48 through 50 of Exhibit 13 hereto, which caption and Note are
incorporated herein by reference, for a discussion of the
Company's ownership interest in, costs for, and certain operating
matters relating to the Nine Mile 2 Plant.
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<PAGE>
Gas
General: The Company's gas system consists of 161 miles of
transmission pipelines and 963 miles of distribution pipelines.
Current Gas Supply: For information on the Company's gas
suppliers and gas storage capability, see the caption "Natural
Gas Supply" in Note 8 to the Company's 1996 Financial Statements
and the subcaption, "Recent Developments - New York - Natural
Gas" in the MD&A appearing on pages 64 and 65 of Exhibit 13
hereto, which caption and subcaption are incorporated herein by
reference.
During 1996, natural gas was available to firm gas customers
at a price competitive with that of alternative fuels. As
compared to 1995, in 1996, firm retail gas sales, normalized for
weather, increased by 2.85% and the average number of firm gas
customers increased by 1.05% or 629. Sales to interruptible
customers decreased 78% in 1996 as compared to 1995. Due to
Sharing Arrangements, as described in the caption "Sharing
Arrangements," in the MD&A appearing on page 24 of Exhibit 13
hereto, which caption is incorporated herein by reference, that
are in place for interruptible gas sales variations from year to
year, the reduction in interruptible gas sales has a minimal
impact on earnings.
For the year ended December 31, 1996, the total amount of
gas purchased from all sources was 1,091,909 Mcf., which includes
461,417 Mcf. purchased directly for use as a boiler fuel at the
Roseton Plant.
The Company 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 the Company's customers for the year
ended December 31, 1996 occurred on December 31, 1996 and
amounted to 91,823 Mcf. The Company's peak-day gas capability in
1996 was 116,865 Mcf. The peak daily demand for natural gas by
the Company's customers for that part of the 1996-1997 heating
season through February 20, 1997, occurred on January 18, 1997
and amounted to 101,175 Mcf.
- 22 -
<PAGE>
Other: 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 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, moreover, 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 by-passing the distribution utility. The
PSC has authorized New York State distribution gas utilities to
transport customer-owned gas through its facilities upon request
of a customer. Currently, interstate pipeline transmission
companies are located in certain areas where the Company provides
retail gas service (the Towns of Carmel, Pleasant Valley,
Coxsackie, and LaGrange).
For a discussion of the PSC proceeding relating to issues
associated with the restructuring of the natural gas market, see
also the subcaption "Competition - New York - Natural Gas" in the
MD&A, on page 11 of Exhibit 13 hereto, and the caption "Natural
Gas Supply" in Note 8 to the Company's 1996 Financial Statements
appearing on pages 64 and 65 of Exhibit 13 hereto, which
subcaption and caption are incorporated herein by reference.
Other Matters
The Danskammer Plant and the Roseton Plant and all of the
other principal generating plants and important property units of
the Company 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 the Company
consisting of flowage or other riparian rights. The Company'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 the
Company are subject to rights-of-way and easements which do not
interfere with the Company's operations. In the case of certain
distribution lines, the Company 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 the Company
pursuant to long-term contractual arrangements.
- 23 -
<PAGE>
All of the physical properties of the Company (other than
property, such as material and supplies, excluded in the
Company'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 it is the Company's practice to pay regularly
as and when due.
The Company's properties have been well maintained and are
in good operating condition.
During the three-year period ended December 31, 1996, the
Company made gross property additions of $164.2 million (which
includes $6 million in property additions related to the Roseton
Plant restoration due to fire damage, which amount was reimbursed
by insurance) and property retirements and adjustments of $36.8
million, resulting in a net increase (including Construction Work
in Progress) in utility plant of $127.4 million, or 9.3%.
Item 3 - LEGAL PROCEEDINGS
Asbestos Litigation
For a discussion of suits against the Company involving
asbestos, see the caption "Asbestos Litigation" in Note 8 to the
Company's 1996 Financial Statements appearing on pages 67 and 68
of Exhibit 13 hereto, which caption is incorporated herein by
reference.
Since 1987, the Company has been involved as a defendant in
the "mass tort" asbestos litigation in the United States District
Courts for the Southern and Eastern Districts of New York and the
New York State Supreme Court, County of New York. This
litigation involves thousands of plaintiffs who seek large
amounts of compensatory and punitive damages from numerous
defendants for deaths and injuries allegedly caused by exposure
to asbestos. The Company has been a defendant in approximately
1,000 such individual lawsuits. Many of these lawsuits have
been disposed of without any payment by the Company, or for
immaterial amounts. While the amounts demanded in all the
remaining lawsuits total several billion dollars, it is the
Company's opinion, based on its experience in such litigation and
on information and relevant circumstances known to it at this
time, that these lawsuits will not have a material adverse effect
on the Company's financial position. However, if the Company
were ultimately held liable under these lawsuits and insurance
coverage were not available, the cost thereof could have a
material adverse effect (a reasonable estimate of which cannot be
made at this time) on the financial condition of the Company if
- 24 -
<PAGE>
the Company could not recover all or a substantial portion
thereof in rates. The Company 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 reimbursement for its defense costs and
liability. The Company's insurance does not extend to punitive
damages.
Environmental Litigation
On March 23, 1992, in an action brought in 1991 by the
Natural Resources Defense Council, Inc., the Hudson River
Fisherman's Association and Scenic Hudson, Inc., a Consent Order
was approved by the Supreme Court of the State of New York,
Albany County.
Such Consent Order provides for certain operating
restrictions at the Roseton Plant relating to the use of river
water for plant cooling purposes, which have not imposed, and are
not expected to impose, material additional costs on the Company.
The Consent Order was extended by agreement of the parties until
February 1, 1997. The parties have now agreed to extend the
Consent Order until February 1, 1998, subject to Court approval.
For a description of the pending NYSDEC proceeding involving
renewal of the SPDES permit for the Roseton Plant (which expired
on October 1, 1992), see Item 1 above under the subcaption
"Environmental Quality - Water."
Environmental Claims - Newburgh Manufactured Gas Site
Reference is made to the subcaption "Environmental Matters -
Former Manufactured Gas Plant Facilities" on pages 66 and 67 of
Exhibit 13 hereto of Note 8 to the Company's 1996 Financial
Statements, which subcaption is herein incorporated by reference,
for a discussion of litigation filed against the Company by the
City of Newburgh, New York, on May 26, 1995 in the United States
District Court, Southern District of New York, and the Company's
response thereto.
Additional testing pursuant to the Order of Consent,
referred to under such subcaption, will be made, in the Spring of
1997, of the Company's property, the property of the City of
Newburgh and the bottom of the Hudson River adjoining the City of
Newburgh's property.
- 25 -
<PAGE>
Catskill Incident
Reference is made to the caption "Other Matters" in Note 8
of the Company's 1996 Financial Statements, on pages 68 and 69 of
Exhibit 13 hereto, which caption is herein incorporated by
reference, for a description of an explosion in a dwelling in the
Company'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 have been commenced against the Company arising out
of such incident, including the following:
By complaint, dated February 2, 1994, Carl Fatzinger, as
executor of the estate of Mildred Fatzinger, and Virginia
Fatzinger commenced an action in the Supreme Court of the State
of New York, Greene County, against the Company and two other
defendants. The complaint seeks an unspecified amount of
compensatory and punitive damages based on theories of
negligence, absolute liability and gross negligence for the death
of Mildred Fatzinger, personal injuries to Virginia Fatzinger and
property damage alleged to have been caused by said explosion.
By complaint, dated October 18, 1993 and filed in the
Supreme Court of the State of New York, Greene County, Frank
Reyes commenced an action against the Company for unspecified
personal injuries and property damage alleged to have been caused
by said explosion. The complaint seeks $2,000,000 in
compensatory damages and $2,000,000 in punitive damages from the
Company, based on theories of negligence and gross negligence.
The Company is investigating these claims and presently has
insufficient information on which to predict their outcome. The
Company believes that it has adequate insurance with regard to
the claims for compensatory damages. The Company's insurance,
however, does not extend to punitive damages. If punitive
damages were ultimately awarded in either or both of these
lawsuits, such award(s) could have a material adverse effect on
the financial condition of the Company. At this time, the
Company can make no prediction as to any other litigation which
may arise out of this incident.
- 26 -
<PAGE>
Wappingers Falls Incident
Reference is made to the caption "Other Matters" in Note 8
to the Company's 1996 Financial Statements, on pages 68 and 69 of
Exhibit 13 hereto, which caption is herein incorporated by
reference, for a description of two consecutive fires and
explosions which occurred on February 12, 1994, destroying a
residence and commercial establishment in the Village of
Wappingers Falls, New York, in the Company's service territory.
Lawsuits have been commenced against the Company arising out
of such incident, including the following:
On August 31, 1994, the Company was served with a summons
and complaint in an action brought by John DeLorenzo against the
Company 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 of
negligence, for personal injuries and property damage alleged to
have been caused by the incident.
On October 13, 1994, the Company was served with a summons
and complaint in an action brought by Edward Baecher d/b/a NTC
Auto Body against the Company, the Town of Wappingers Falls, the
Village of Wappingers Falls, and the Wappingers Falls
Fire Department in the Supreme Court of the State of New York,
County of Dutchess. The complaint seeks recovery from the
Company of compensatory and punitive damages in the sum of
$1,000,000, based on the theory of negligence, for property
damages alleged to have caused by the incident.
On March 9, 1995, the Company was served with a summons and
complaint in an action brought by Cengiz Ceng, individually and
as executor under the last will and testament of Nizamettin Ceng,
and Tarkan Thomas Ceng against the Company and the Village of
Wappingers Falls in the Supreme Court of the State of New York,
County of Dutchess. The complaint seeks recovery of $250,000
from the Company, based on the theory of negligence, for property
damages alleged to have caused by the incident.
The Company is investigating these claims and presently has
insufficient information on which to predict their outcome. The
Company believes that it has adequate insurance with regard to
the claims for compensatory damages. The Company's insurance,
however, does not extend to punitive damages. If punitive
damages were ultimately awarded, in any of these lawsuits, such
award(s) could have a material adverse effect on the financial
condition of the Company. At this time, the Company can make no
prediction as to any other litigation which may arise out of this
incident.
- 27 -
<PAGE>
Income Tax Assessments
Reference is made to the subcaption "Tax Matters -
Assessments" in Note 8 to the Company's 1996 Financial
Statements, on page 68 of Exhibit 13 hereto, which subcaption is
incorporated herein by reference, for a discussion of the
examination by the Internal Revenue Service ("IRS") of the
Company's federal income tax returns for 1987 and 1988.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
No matter was submitted to a vote of security holders during
the fourth quarter of the Company's fiscal year covered by this
Report.
PART II
Item 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information set forth under the caption "Common Stock
Dividends and Price Ranges" in the MD&A, on page 28 of Exhibit 13
hereto, is incorporated herein by reference.
Pursuant to applicable statutes and its Certificate of
Incorporation, the Company may pay dividends on shares of
Preferred and Common Stock only out of surplus.
For information regarding the replacement, effective January
1, 1997, of the Company's Automatic Dividend Reinvestment and
Stock Purchase, Customer Stock Purchase and Employee Stock
Purchase Plans, by a single new Stock Purchase Plan, see Note 5
of the Company's 1996 Financial Statements appearing on pages 53
through 55 and page 15 of the MD&A caption "Financing Program" of
Exhibit 13 hereto, which Note is incorporated herein by
reference.
For a complete description of the Company's new Stock
Purchase Plan, reference is made to the Prospectus, dated
December 9, 1996, which is part of the Company's Registration
Statement on Form S-3 (Registration No. 333-11521), relating to
783,582 shares of Common Stock registered under the Securities
Act of 1933 for issuance under said Plan.
- 28 -
<PAGE>
On January 28, 1997, the Company commenced the monthly
repurchase, in an amount of approximately 20,000 shares per
month, of its issued and outstanding common stock pursuant to a
program approved by the PSC and which is described in Note 5
appearing on pages 53 through 55 of the Company's 1996 Financial
Statements, of Exhibit 13 which Note 5 is incorporated herein by
reference.
Item 6 - SELECTED FINANCIAL DATA
The information required hereunder is incorporated
herein by reference to the material on pages 4 and 5 of Exhibit
13 hereto.
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information required hereunder is incorporated
herein by reference to the material appearing on pages 6 through
28 of Exhibit 13 hereto.
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements and Report of Independent
Accountants
The Company's 1996 Financial Statements, together with
the report thereon of Price Waterhouse LLP, dated January 24,
1997, appearing on pages 29 through 72 of Exhibit 13 hereto, are
incorporated by reference in this Annual Report on Form 10-K.
The Financial Statement Schedule incorporated by reference as
part of this Annual Report on Form 10-K should be read in
conjunction with the Company's 1996 Financial Statements.
Financial Statement Schedules not included with this Form 10-K
Annual Report have been omitted because they are not applicable
or the required information is shown in the Company's 1996
Financial Statements.
The Company's 1996 Financial Statements include the
accounts of the Company and its subsidiaries. Intercompany
balances and transactions have been eliminated. The Company's
subsidiaries are each wholly-owned and consist of landholding,
cogeneration or energy management companies. The net income of
the Company's subsidiaries is reflected in the Company's
Consolidated Statement of Income as Other Income Other-net; such
Consolidated Statement of Income is contained on pages 36 and 37
of Exhibit 13 hereto.
- 29 -
<PAGE>
The following information is being furnished in
accordance with Regulation S-X, Section 210.5-02:
Weighted average December 31,
interest rate on 1996 1995 1994
the Company's
short-term debt
outstanding 5.94% - 6.69%
(b) Supplementary Financial Information
The supplementary financial information specified by
Item 302 of Regulation S-K is found under the caption "Selected
Quarterly Financial Data (Unaudited)," of the Company's 1996
Financial Statements on page 73 of Exhibit 13 hereto, which
caption is incorporated herein by reference pursuant to Item 8
(a) above.
(c) Other Financial Statements and Schedule
Other financial statements and schedule required under
Regulation S-X are filed pursuant to Item 14 of this Annual
Report on Form 10-K.
Item 9 - CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
- 30 -
<PAGE>
PART III
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY
The information with respect to the Directors of the
Company required hereunder is incorporated by reference to the
caption "Election of Directors" in the Company's definitive proxy
statement, dated February 24, 1997, to be used in connection with
its Annual Meeting of Shareholders to be held on April 1, 1997,
which proxy statement has previously been submitted to the
Securities and Exchange Commission pursuant to that Commission's
Regulation S-T.
The information with respect to the executive officers
of the Company required hereunder is incorporated by reference to
Item 1 of this Annual Report on Form 10-K, under the caption
"Executive Officers of the Company."
Item 11 - EXECUTIVE COMPENSATION
The information required hereunder is incorporated by
reference to the caption "Executive Compensation" in the
Company's definitive proxy statement, dated February 24, 1997, to
be used in connection with its Annual Meeting of Shareholders to
be held on April 1, 1997.
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The information required hereunder is incorporated by
reference to the caption "Security Ownership" in the Company's
definitive proxy statement, dated February 24, 1997, to be used
in connection with its Annual Meeting of Shareholders to be held
on April 1, 1997.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
There were no relationships or transactions of the type
required to be described by this Item.
- 31 -
<PAGE>
PART IV
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K
(a) Documents filed as part of this Report:
1. Financial Statements
See subpart 1 of Index to Financial Statements on
page F-1 of this Report.
2. Financial Statement Schedule
See subpart 2 of Index to Financial Statements on
page F-1 of this Report.
3. Exhibits
Incorporated herein by reference to the Exhibit Index
beginning on page E-1 of 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
Directors' Deferred Compensation Plan, effective October 1,
1980. (Exhibit (10)(iii)1)
Trust Agreement between Registrant and Dutchess Bank & Trust
Company, as trustee, dated as of January 1, 1984, pursuant
to Registrant's Savings Incentive Plan. (Exhibit
(10)(iii)2)
First Amendment, dated December 31, 1990, to Trust Agreement
between Registrant and The Bank of New York, as successor
trustee, dated as of January 1, 1984, pursuant to
Registrant's Savings Incentive Plan. (Exhibit (10)(iii)3)
Agreement, made March 14, 1994 by and between Registrant and
Mellon Bank, N.A., amending and restating, effective April
1, 1994, Registrant'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)18, 19 and 20)
- 32 -
<PAGE>
Executive Deferred Compensation Plan of the Company,
effective March 1, 1992 together with Amendment thereto
dated December 17, 1993. (Exhibits (10)(iii)8 and 15)
Retirement Benefit Restoration Plan of the Company,
effective May 1, 1993, together with Amendment thereto dated
July 23, 1993. (Exhibits (10)(iii)10 and 11)
Executive Incentive Compensation Plan of the Company,
effective January 1, 1993, together with Amendment thereto
dated April 4, 1995. (Exhibits (10)(iii)17 and 21)
Stock Plan for Outside Directors of the Company, dated
November 17, 1995 (Exhibit (10)(iii)22)
Management Incentive Program of the Company, effective April
1, 1994 (Exhibit (10)(iii)23)
(b) Reports on Form 8-K
During the period to the date hereof, the following
Report on Form 8-K was filed by the Company:
Report, dated October 15, 1996, reporting that pursuant
to the October 1995 Order on Consent entered into between the
Company and the New York Department of Environmental Conservation
("NYSDEC"), as referred to in the caption "Environmental Claims -
Newburgh Manufactured Gas Site" in Item 3, of Part I of this
Annual Report on Form 10-K for the fiscal year ending December
31, 1996, the Company filed, on October 10, 1996, a progress
report with the NYSDEC for the investigation and remediation
program being conducted on the Company's former coal gasification
plant site and the City of Newburgh's adjacent and nearby
property. Contemporaneous with such filing the Company's issued
a press release which was filed therewith as Exhibit 99 and
incorporated therein by reference.
(c) Exhibits Required by Item 601 of Regulation S-K
Incorporated herein by reference to subpart (a)-3 of
Item 14, above.
(d) Financial Statement Schedule required by Regulation S-X
which is excluded from the Company's Annual Report to
Shareholders for the fiscal year ended December 31,
1996
Incorporated herein by reference to subpart 2 of
Index to Financial Statements on page F-1 of this Report.
- 33 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly caused
this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CENTRAL HUDSON GAS & ELECTRIC
CORPORATION
By
(John E. Mack, III,
Chairman of the Board
and Chief Executive Officer)
Dated: February 28, 1997
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the following
persons on behalf of the Company and in the capacities and on the
date indicated.
Signature Title Date
(a) Principal Executive
Officer or Officers:
(John E. Mack, III) Chairman of
the Board and
Chief Executive
Officer February 28, 1997
(b) Principal Accounting
Officer:
(Donna S. Doyle) Controller February 28, 1997
(c) Principal Financial
Officer:
(Steven V. Lant) Treasurer and
Assistant
Secretary February 28, 1997
- 34 -
<PAGE>
SIGNATURES - (Continued)
Signature Title Date
(d) Directors:
(L. Wallace Cross) Director February 28, 1997
(Jack Effron) Director February 28, 1997
(Frances D. Fergusson) Director February 28, 1997
(Heinz K. Fridrich) Director February 28, 1997
(Edward F. X. Gallagher) Director February 28, 1997
(Paul J. Ganci) Director February 28, 1997
(Charles LaForge) Director February 28, 1997
(John E. Mack, III) Director February 28, 1997
(Edward P. Swyer) Director February 28, 1997
- 35 -
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
Page(s) in
Exhibit 13
of this Report*
1. Financial Statements
Report of Independent Accountants 29
Consolidated Balance Sheet at
December 31, 1996 and 1995 32-35
Consolidated Statement of Income for
the three years ended December 31, 1996 36-37
Consolidated Statement of Retained
Earnings for the three years
ended December 31, 1996 38
Consolidated Statement of Cash Flows for
the three years ended December 31, 1996 39-40
Notes to Consolidated Financial Statements 41-72
Selected Quarterly Financial Data (Unaudited) 73
Page(s) in
Form 10-K
Report of Independent Accountants on
Financial Statement Schedule F-2
Consent of Independent Accountants F-2
2. The Financial Statement Schedule
for the Years 1996, 1995 and 1994 F-3 - F-5
Schedule II - Reserves
*Incorporated by reference to the indicated pages of Exhibit
13 to this Report.
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
Central Hudson Gas & Electric Corporation
Our audits of the consolidated financial statements referred to
in our report dated January 24, 1997 appearing in the 1996 Annual
Report to Shareholders of Central Hudson Gas & Electric
Corporation (which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed
in Item 14(d) of this Annual Report on Form 10-K. In our
opinion, this Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.
PRICE WATERHOUSE LLP
New York, New York
January 24, 1997
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), relating to Central Hudson
Gas & Electric Corporation's Stock Purchase Plan, of our report
dated January 24, 1997 appearing in the Annual Report to
Shareholders which is incorporated in this Annual Report on Form
10-K. We also consent to the incorporation by reference therein
of our report on the Financial Statement Schedule, which appears
above.
PRICE WATERHOUSE LLP
New York, New York
February 28, 1997
F-2
<PAGE>
<TABLE> CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 1
YEAR ENDED DECEMBER 31, 1996
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Charged to Payments Balance
Balance at Charged to other charged at end
beginning cost and accounts - to of
Description of period expenses describe reserves period
<S> <C> <C> <C> <C> <C>
Operating Reserves:
Reserve for injuries
and damages $2,575,064 $1,063,750 $ - $1,000,655 $ 2,638,159
Workers compensation
deductible 2,186,505 - 181,000 (a) 205,718 2,161,787
Storm reserve 500,000 - - 500,000 -
Nine Mile 2 Plant
miscellaneous reserve 762,532 1,601,386 14,608 (b) 2,423,208 (44,682)
Total Operating Reserves $6,024,101 $2,665,136 $ 195,608 $4,129,581 $ 4,755,264
Reserve for Uncollectible
Accounts $2,500,000 $4,335,676 $ $3,635,676 $ 3,200,000
Note:
(a) Charged to clearing account for workers compensation insurance and subsequently distributed, together with
other insurance premium costs, to various asset and expense accounts.
(b) Charged to regulatory asset account representing future recovery from ratepayers.
F-3
</TABLE>
<PAGE>
<TABLE> CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 2
YEAR ENDED DECEMBER 31, 1995
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Charged to Payments Balance
Balance at Charged to other charged at end
beginning cost and accounts - to of
Description of period expenses describe reserves period
<S> <C> <C> <C> <C> <C>
Operating Reserves:
Reserve for injuries
and damages $1,770,126 $ 907,300 $ 79,200 (a) $ 181,562 $2,575,064
Workers compensation
deductible 1,077,391 - 1,454,000 (b) 344,886 2,186,505
Pensions and benefits
carrying charge reserve 465,338 - (465,338)(c) - -
Storm Reserve 500,000 - - - 500,000
Nine Mile 2 Plant
miscellaneous reserves 1,850,552 2,137,029 23,526 (d) 3,248,575 762,532
Total Operating Reserves $5,663,407 $3,044,329 $1,091,388 $3,775,023 $6,024,101
Reserve for Uncollectible
Accounts $2,000,000 $3,220,608 $ - $2,720,608 $2,500,000
Notes:
(a) Charged to clearing account for costs of operation of automobiles, trucks, etc., and subsequently distributed,
together with other costs of operation and maintenance, to various asset and expense accounts.
(b) Charged to clearing account for workers compensation insurance and subsequently distributed, together with
other insurance premium costs, to various asset and expense accounts.
(c) The pensions and benefits carrying charge reserve has been reclassified as a regulatory liability.
(d) Charged to regulatory asset account representing future recovery from ratepayers.
F-4
</TABLE>
<PAGE>
<TABLE>
CENTRAL HUDSON GAS & ELECTRIC CORPORATION SCHEDULE II
RESERVES Sheet 3
YEAR ENDED DECEMBER 31, 1994
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Charged to Payments Balance
Balance at Charged to other charged at end
beginning cost and accounts - to of
Description of period expenses describe reserves period
<S> <C> <C> <C> <C> <C>
Operating Reserves:
Reserve for injuries
and damages $1,939,151 $ 615,010 $ 32,190 (a) $ 816,225 $1,770,126
Workers compensation
deductible 879,057 - 379,038 (b) 180,704 1,077,391
Pensions and benefits
carrying charge reserve 92,360 372,978 - - 465,338
Storm reserve - 500,000 - - 500,000
Nine Mile 2 Plant
operation and maintenance
expense reserve (564,549) 2,476,805 46,762 (c) 108,466 1,850,552
Total Operating Reserves $2,346,019 $3,964,793 $ 457,990 $1,105,395 $5,663,407
Reserve for Uncollectible
Accounts $2,000,000 $3,305,977 $ - $3,305,977 $2,000,000
Notes:
(a) Charged to clearing account for costs of operation of automobiles, trucks, etc., and subsequently distributed,
together with other costs of operation and maintenance, to various asset and expense accounts.
(b) Charged to clearing account for workers compensation insurance and subsequently distributed, together with
other insurance premium costs, to various asset and expense accounts.
(c) Charged to regulatory asset account representing future recovery from ratepayers.
F-5
</TABLE>
<PAGE>
EXHIBIT 99
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 Registrant under Section 807 of the
Business Corporation Law, filed August
14, 1989. ((1); Exhibit (3)1)
(i) 2-- Certificate of Amendment to the
Certificate of Incorporation of the
Registrant under Section 805 of the
Business Corporation Law, filed April 5,
1990. ((1); Exhibit (3)2)
(i) 3-- Certificate of Amendment to the
Certificate of Incorporation of the
Registrant under Section 805 of the
Business Corporation Law, filed October
19, 1993 ((1); Exhibit (3)3)
(ii) 1-- Bylaws 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
<PAGE>
*(ii) 1-- Indenture dated January 1, 1927 between
the Registrant and American Exchange
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)1)
*(ii) 2-- Supplemental Indenture dated March 1,
1935 between the Registrant and Irving
Trust Company, as Trustee. ((2);
Exhibit (4)(ii)2)
*(ii) 3-- Second Supplemental Indenture dated June
1, 1937 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)3)
*(ii) 4-- Third Supplemental Indenture dated April
1, 1940 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)4)
*(ii) 5-- Fourth Supplemental Indenture dated
March 1, 1941 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)5)
*(ii) 6-- Fifth Supplemental Indenture dated
December 1, 1950 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)6)
*(ii) 7-- Sixth Supplemental Indenture dated
December 1, 1952 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)7)
*(ii) 8-- Seventh Supplemental Indenture dated
October 1, 1954 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)8)
*(ii) 9-- Eighth Supplemental Indenture dated May
15, 1958 between the Registrant and
Irving Trust Company, as Trustee. ((2);
Exhibit (4)(ii)9)
(ii) 10-- Ninth Supplemental Indenture dated
December 1, 1967 between the Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)10)
E-2
<PAGE>
(ii) 11-- Tenth Supplemental Indenture dated as of
January 15, 1969 between the Registrant
and Irving Trust Company, as Trustee.
((3); Exhibit 2.12)
(ii) 12-- Eleventh Supplemental Indenture dated as
of June 1, 1970 between the Registrant
and Irving Trust Company, as Trustee.
((4); Exhibit 1.13)
(ii) 13-- Twelfth Supplemental Indenture dated as
of February 1, 1972 between the
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)13)
(ii) 14-- Thirteenth Supplemental Indenture dated
as of April 15, 1974 between the
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)14)
(ii) 15-- Fourteenth Supplemental Indenture dated
as of November 1, 1975 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)15)
(ii) 16-- Fifteenth Supplemental Indenture dated
as of June 1, 1977 between Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)16)
(ii) 17-- Sixteenth Supplemental Indenture dated
as of September 15, 1979 between
Registrant and Irving Trust Company, as
Trustee. ((4); Exhibit 1.18)
(ii) 18-- Seventeenth Supplemental Indenture dated
as of May 15, 1980 between Registrant
and Irving Trust Company, as Trustee.
((5); Exhibit (4)(a)18)
(ii) 19-- Eighteenth Supplemental Indenture dated
as of November 15, 1980 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)19)
(ii) 20-- Nineteenth Supplemental Indenture dated
as of August 15, 1981 between Registrant
and Irving Trust Company, as Trustee.
((2); Exhibit (4)(ii)20)
E-3
<PAGE>
(ii) 21-- Twentieth Supplemental Indenture dated
as of September 1, 1982 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)21)
(ii) 22-- Twenty-First Supplemental Indenture
dated as of November 22, 1982 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)22)
(ii) 23-- Twenty-Second Supplemental Indenture
dated as of May 24, 1984 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)23)
(ii) 24-- Twenty-Third Supplemental Indenture
dated as of June 15, 1985 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)24)
(ii) 25-- Twenty-Fourth Supplemental Indenture
dated as of September 1, 1986 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)25)
(ii) 26-- Twenty-Fifth Supplemental Indenture
dated as of December 1, 1988 between
Registrant and Irving Trust Company, as
Trustee. ((2); Exhibit (4)(ii)26)
(ii) 27-- Twenty-Sixth Supplemental Indenture
dated as of May 1, 1991 between
Registrant 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
Registrant 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 Registrant's debt
securities attached thereto, as filed
pursuant to Rule 424(b) in connection
E-4
<PAGE>
with Registration Statement No. 33-
46624. ((6)(a)), and, as 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
<PAGE>
(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
Registrant and The Bank of New York, as
Trustee. ((35); 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
Registrant'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 Registrant'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 Registrant and Morgan Guaranty
Trust Company of New York, as Trustee.
((7); Exhibit (4)(ii)29); and
E-6
<PAGE>
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 the Prospectus Dated April 13, 1992,
relating to $125,000,000 principal
amount of Registrant'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))
Prospectus Supplement Dated May 15, 1995
(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 Registrant'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
Registrant'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)
E-7
<PAGE>
(ii) 31-- Form of the Registrant's 4.85%
Promissory Notes. ((9); Exhibit 1.9)
(ii) 32-- Participation Agreement, dated as of
November 1, 1985, by and between New
York State Energy Research and
Development Authority and the
Registrant. ((2); Exhibit (4)(ii)31)
(ii) 33-- The Registrant has entered into certain
other instruments with respect to long-
term debt of the Registrant. No such
instrument relates to securities
authorized thereunder which exceed 10%
of the total assets of the Registrant
and its subsidiaries on a consolidated
basis. The Registrant agrees to provide
the Commission, upon request, copies of
any instruments defining the rights of
holders of long-term debt of the
Registrant and subsidiaries for which
consolidated or unconsolidated financial
statements are required to be filed with
the Commission.
E-8
<PAGE>
(10) Material contracts:
(i) 1-- Agreement dated October 31, 1968 between
the Registrant and Consolidated Edison
Company of New York, Inc. and Niagara
Mohawk Power Corporation. ((3); Exhibit
5.1)
(i) 2-- Agreement dated September 22, 1969
between Registrant and Algonquin Gas
Transmission Company. ((12); Exhibit
5.5)
(i) 3-- Agreement dated as of April 4, 1977
between Registrant, 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) 4-- Agreement dated April 27, 1973 between
Registrant and the Power Authority of
the State of New York. ((13); Exhibit
5.19)
(i) 5-- Agreement dated July 28, 1975 between
Registrant and the Power Authority of
the State of New York. ((14); Exhibit
5.18)
(i) 6-- Agreement dated as of September 22, 1975
between Registrant, Niagara Mohawk Power
Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation, and Rochester Gas and
Electric Corporation. ((14); Exhibit
5.21)
(i) 7-- Agreement dated November 23, 1976
between Registrant and Consolidated
Edison Company of New York, Inc. ((15);
Exhibit 5.29)
E-9
<PAGE>
(i) 8-- Agreement dated December 29, 1975
between Registrant and Niagara Mohawk
Power Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation, and Rochester Gas and
Electric Corporation. ((16); Exhibit
(10)(i)18)
(i) 9-- Assignment and Assumption dated as of
October 24, 1975 between Registrant and
New York State Electric & Gas
Corporation. ((14); Exhibit 5.25)
(i) 10-- Amendment to Assignment and Assumption
dated October 30, 1978 between
Registrant and New York State Electric &
Gas Corporation. ((3); Exhibit 5.34)
(i) 11-- Agreement dated as of May 12, 1977
between Registrant and Niagara Mohawk
Power Corporation. ((17); Exhibit 5.34)
(i) 12-- Agreement, dated May 8, 1980, by and
between Registrant and Jersey Central
Power & Light Company. ((18); Exhibit
(10)(i)21)
(i) 13-- Purchase Agreement, dated as of June 1,
1980, by and between Registrant and
Consolidated Edison Company of New York,
Inc. ((18); Exhibit (10)(i)22)
(i) 14-- Purchase Agreement, dated as of June 16,
1980, by and between Registrant and
Philadelphia Electric Company. ((18);
Exhibit (10)(i)23)
(i) 15-- Purchase Agreement, dated as of June 18,
1980, by and between Registrant and
Public Service Electric and Gas Company.
((18); Exhibit (10)(i)24)
(i) 16-- Purchase Agreement, dated as of July 1,
1980, by and between Registrant and
Connecticut Light and Power Company.
((18); Exhibit (10)(i)25)
E-10
<PAGE>
(i) 17-- Letter Amendment Agreement, dated
December 16, 1980, by and between
Registrant and Niagara Mohawk Power
Corporation. ((18); Exhibit (10)(i)26)
(i) 18-- 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.,
Registrant, 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. ((18); Exhibit
(10)(i)27)
(i) 19-- Agreement dated April 2, 1980 by and
between Registrant and the Power
Authority of the State of New York.
((2); Exhibit (10)(i)24)
(i) 20-- Purchase Agreement, dated April 19,
1983, between Registrant and New York
State Electric & Gas Corporation. ((2);
Exhibit (10)(i)29)
(i) 21-- Transmission Agreement, dated October
25, 1983, between Registrant and Niagara
Mohawk Power Corporation. ((2); Exhibit
(10)(i)30)
(i) 22-- Underground Storage Service Agreement,
dated June 30, 1982, between Registrant
and Penn-York Energy Corporation. ((2);
Exhibit (10)(i)32)
(i) 23-- Interruptible Transmission Service
Agreement, dated December 20, 1983,
between Registrant and Power Authority
of the State of New York. ((19);
Exhibit (10)(i)33)
E-11
<PAGE>
(i) 24-- Agreement, dated December 7, 1983,
between Registrant and the Power
Authority of the State of New York.
((2); Exhibit (10)(i)34)
(i) 25-- 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) 26-- Reimbursement Agreement, dated as of
November 1, 1985, between Registrant and
the Bank named therein. ((2); Exhibit
(10)(i)36)
(i) 27-- General Joint Use Pole Agreement between
Registrant 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) 28-- Agreement, dated June 3, 1985, between
Registrant, 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) 29-- Agreement, dated June 11, 1985, between
the Registrant 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) 30-- Agreement, dated as of April 9, 1986,
among Registrant, 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)
E-12
<PAGE>
(i) 31-- Agreement, dated as of April 9, 1986,
between Registrant, 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)
(i) 32-- Letter of intent, dated February 17,
1987, between Registrant and Niagara
Mohawk Power Corporation, for the
purchase of interests in the Roseton
Steam Electric Generating Plant. ((16);
Exhibits (19)(10)(i)75)
(i) 33-- Roseton Amendment Agreement, dated as of
September 9, 1987, between Registrant
and Niagara Mohawk Power Corporation,
for the purchase of interests in the
Roseton Steam Electric Generating Plant
(subject to PSC approval). ((20);
Exhibit (19)(10)(i)76)
(i) 34-- Agreement dated as of November 20, 1987
between Registrant and Consolidated Rail
Corporation to transport coal to
Danskammer Generating Station. [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.] ((20); Exhibit
(19)(10)(i)83)
(i) 35-- Reimbursement Agreement, dated as of
July 1, 1987, between Registrant and the
Bank named therein. ((20); Exhibit
(19)(10)(i)90)
(i) 36-- First Amendment, dated as of September
1, 1987, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Registrant and the Bank named therein.
((20); Exhibit (19)(10)(i)93)
E-13
<PAGE>
(i) 37-- Purchase and Administration Agreement,
dated as of November 25, 1987, between
Registrant and the finance corporation
named therein providing for the sale of
Registrant's accounts receivables.
((20); Exhibit (19)(10)(i)95)
(i) 38-- Contract dated October 5, 1987, between
Registrant and Norfolk and Western
Railway Company providing for
transportation of coal to the Danskammer
Plant. [Certain portions of said
Contract 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.] ((20);
Exhibit (19)(10)(i)96)
(i) 39-- Memorandum of Understanding, dated as of
March 22, 1988, by and among Registrant,
Alberta Northeast Gas, Limited, the
Brooklyn Union Gas Company, New Jersey
Natural Gas Company and Connecticut
Natural Gas Corporation. ((20); Exhibit
(19)(10)(i)98)
(i) 40-- Agreement for the Sale and Purchase of
Coal, dated as of January 1, 1987, among
Registrant, Kentucky Carbon Corporation
and The Carbon Fuel Sales Company.
[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.] ((21);
Exhibit (28)(10)(i)100)
(i) 41-- Restatement of Purchase and
Administration Agreement, dated as of
April 4, 1989, between Registrant and
CSW Credit, Inc., amending and restating
the Purchase and Administration
E-14
<PAGE>
Agreement, dated as of November 25,
1987, between such parties providing for
the sale of Registrant's accounts
receivables. ((21); Exhibit (28)
(10)(i)101)
(i) 42-- Nine Mile Point Nuclear Station Unit 2
Interim Operating Agreement, effective
August 22, 1989, between and among
Registrant, Niagara Mohawk Power
Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation and Rochester Gas and
Electric Corporation. ((22); Exhibit
(28)(10)(i)102)
(i) 43-- Amendment of Nine Mile Point Nuclear
Station Unit 2 Interim Operating
Agreement, dated as of March 6, 1990,
among Registrant, Niagara Mohawk Power
Corporation, Long Island Lighting
Company, New York State Electric & Gas
Corporation and Rochester Gas and
Electric Corporation. ((18); Exhibit
(19)(10)(i)99)
(i) 44-- Amendment No. 2: One-Year Extension of
Nine Mile Point Nuclear Station Unit 2
Interim Operating Agreement, dated as of
November 27, 1990, among Registrant,
Niagara Mohawk Power Corporation, Long
Island Lighting Company, New York State
Electric & Gas Corporation and Rochester
Gas and Electric Corporation. ((23);
Exhibit (19)(10)(i)71)
(i) 45-- Second Amendment, dated as of July 1,
1990, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Registrant and the Bank named therein.
((23); Exhibit (19)(10)(i)72)
(i) 46-- First Amendment, dated as of July 1,
1990, to the Reimbursement Agreement,
dated as of July 1, 1987, between
Registrant and the Bank named therein.
((23); Exhibit (19)(10)(i)73)
E-15
<PAGE>
(i) 47-- Credit Agreement, dated as of December
17, 1990, among Registrant and the Banks
named therein. ((23); Exhibit
(19)(10)(i)74)
(i) 48-- Agreement, effective as of November 1,
1989, between Columbia Gas Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)75)
(i) 49-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)77)
(i) 50-- Agreement, dated as of November 1, 1989,
between Columbia Gas Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)78)
(i) 51-- Agreement, dated as of November 1, 1989,
between Columbia Gulf Transmission
Company and Registrant. ((23); Exhibit
(19)(10)(i)79)
(i) 52-- Agreement, dated October 9, 1990,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)80)
(i) 53-- Agreement, dated July 2, 1990, between
Texas Eastern Transmission Corporation
and Registrant. ((23); Exhibit
(19)(10)(i)81)
(i) 54-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)82)
(i) 55-- Agreement, dated December 28, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)83)
(i) 56-- Agreement, dated November 3, 1989,
between Texas Eastern Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)84)
E-16
<PAGE>
(i) 57-- Gas Sales Contract, dated as of January
1, 1989, between Tennessee Gas Pipeline
Company and Registrant. ((23); Exhibit
(19)(10)(i)86)
(i) 58-- Agreement, effective December 15, 1989,
between Algonquin Gas Transmission
Company and Registrant. ((23); Exhibit
(19)(10)(i)87)
(i) 59-- Storage Service Agreement, dated July 1,
1989, between CNG Transmission
Corporation and Registrant. ((23);
Exhibit (19)(10)(i)91)
(i) 60-- Agreement dated as of February 7, 1991
between Registrant and Alberta Northeast
Gas, Limited for the purchase of
Canadian natural gas from ATCOR Ltd. to
be delivered on the Iroquois Gas
Transmission System. ((23); Exhibit
(19)(10)(i)92)
(i) 61-- Agreement dated as of February 7, 1991
between Registrant 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.
((23); Exhibit (19)(10)(i)93)
(i) 62-- Agreement dated as of February 7, 1991
between Registrant and Alberta Northeast
Gas, Limited for the purchase of
Canadian natural gas from ProGas Limited
to be delivered on the Iroquois Gas
Transmission System. ((23); Exhibit
(19)(10)(i)94)
(i) 63-- Agreement No. 2 dated as of February 7,
1991 between Registrant 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.
((23); Exhibit (19)(10)(i)95)
E-17
<PAGE>
(i) 64-- Agreement No. 1 dated as of February 7,
1991 between Registrant 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.
((23); Exhibit (19)(10)(i)96)
(i) 65-- Agreement dated as of February 7, 1991
between Registrant and Iroquois Gas
Transmission System to transport gas
imported by Alberta Northeast Gas,
Limited to Registrant. ((23); Exhibit
(19)(10)(i)97)
(i) 66-- Service Agreement, dated September 30,
1986, between Registrant and Algonquin
Gas Transmission Company, for firm
storage transportation under Rate
Schedule SS-III. ((24); Exhibit
(19)(10)(i)95)
(i) 67-- Service Agreement, dated March 12, 1991,
between Registrant and Algonquin Gas
Transmission Company, for firm
transportation of 5,056 dth. of Texas
Eastern Transmission Corporation
incremental volume. ((24); Exhibit
(19)(10)(i)99)
(i) 68-- Agreement, dated December 28, 1990 and
effective February 5, 1991, between
Registrant and National Fuel Gas Supply
Corporation for interruptible
transportation. ((24); Exhibit
(19)(10)(i)100)
(i) 69-- Utility Services Contract, effective
October 1, 1991, between Registrant 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. ((24); Exhibit (19)(10)(i)101)
E-18
<PAGE>
(i) 70-- Fuel Oil Supply Contract, effective
October 1, 1991, among Sun Oil Trading
Company and Registrant, Consolidated
Edison Company of New York, Inc. and
Niagara Mohawk Power Corporation, for
the supply of fuel oil to the Roseton
Plant. [Certain portions of said
contract 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.] ((24);
Exhibit (19)(10)(i)102)
(i) 71-- Service Agreement, effective December 1,
1990, between Registrant and Texas
Eastern Transmission Corporation, for
firm transportation service under Rate
Schedule FT-1. ((24); Exhibit
(19)(10)(i)103)
(i) 72-- Service Agreement, dated February 25,
1991, between Registrant and Texas
Eastern Transmission Corporation, for
incremental 5,056 dth. under Rate
Schedule CD-1. ((24); Exhibit
(19)(10)(i)104)
(i) 73-- Agreement, dated November 6, 1991,
between Registrant and Mingo Logan Coal
Company, for the sale and purchase of
coal. ((24); Exhibit (19)(10)(i)105)
(i) 74-- Service Agreement, dated January 7,
1992, between Registrant and Texas
Eastern Transmission Corporation, for
the firm transportation of 6,000
dth./day under Rate Schedule FTS-5.
((24); Exhibit (19)(10)(i)106)
(i) 75-- Amendment Nos. 1-4, dated February 21,
1989, May 31, 1990, January 8, 1991 and
November 20, 1991, respectively, by and
between Registrant and Norfolk Southern
Railway, to Contract, dated October 5,
1987, between Registrant and Norfolk and
Western Railway Company, providing for
transportation of coal to the Danskammer
E-19
<PAGE>
Plant. [Certain portions of said
amendment 4 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.] ((24);
Exhibit (19)(10)(i)107)
(i) 76-- Amendment Nos. 1-3, dated August 30,
1988, December 10, 1990 (effective
December 22, 1990) and January 31, 1992,
respectively, to Agreement, dated as of
November 20, 1987, between Registrant
and Consolidated Rail Corporation to
transport coal to Danskammer Generating
Station. [Certain portions of said
amendments 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.] ((24);
Exhibit (19)(10)(i)108)
(i) 77-- First Amendment, dated as of November 1,
1991, to Agreement for the Sale and
Purchase of Coal, dated as of January 1,
1987, among Registrant, Kentucky Carbon
Corporation and The Carbon Fuel Sales
Company. [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.] ((24);
Exhibit (19)(10)(i)109)
(i) 78-- Agreement of Assignment, Assumption,
Consent and Release entered into as of
February 29, 1992 by and among Kentucky
Carbon Corporation, The Carbon Fuel
Sales Company, Massey Coal Sales Company
and Registrant. ((24); Exhibit
(19)(10)(i)111)
E-20
<PAGE>
(i) 79-- Agreement dated as of July 1, 1992
between Registrant and Tennessee Gas
Pipeline Company for storage of natural
gas. ((25); Exhibit (10)(i)114)
(i) 80-- Agreement dated as of July 1, 1992
between Registrant and Tennessee Gas
Pipeline Company for firm transportation
periods. ((25); Exhibit (10)(i)115)
(i) 81-- Fuel Oil Supply Agreement, effective as
of September 1, 1992 between Global
Petroleum Corporation and Registrant,
Consolidated Edison Company of New York,
Inc. and Niagara Mohawk Power
Corporation for the Roseton Electric
Generating Plant. [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.] ((19);
Exhibit (19)(10)(i)99)
(i) 82-- Agreement, dated November 1, 1990,
between Tennessee Gas Pipeline and
Registrant for transportation of third-
party gas for injection into and
withdrawal from Penn York storage.
((19); Exhibit (19)(10)(i)100)
(i) 83-- Agreement, dated December 1, 1991,
between Registrant and Iroquois Gas
Transmission System for interruptible
gas transportation service. ((19);
Exhibit (19)(10)(i)101)
(i) 84-- Letter Agreement, dated August 24, 1992,
between Registrant 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)
E-21
<PAGE>
(i) 85-- Tennessee Gas Pipeline Purchase and
Sales Agreement, dated November 1, 1992
between Registrant and Tenngasco
Corporation. ((19); Exhibit
(19)(10)(i)103)
(i) 86-- Agreement, dated as of July 16, 1993,
between Registrant, 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.
((19); Exhibit (19)(10)(i)104)
(i) 87-- Nine Mile Point Nuclear Station Unit 2
Operating Agreement, effective January
1, 1993, between and among Registrant,
Niagara Mohawk Power Corporation, Long
Island Lighting Company, New York State
Electric & Gas Corporation and Rochester
Gas and Electric Corporation. ((19);
Exhibit (19)(10)(i)105)
(i) 88-- Third Amendment, dated as of July 29,
1992, to the Reimbursement Agreement,
dated as of November 1, 1985, between
Registrant and the Bank named therein.
((2); Exhibit (19)(10)(i)106)
(i) 89-- Second Amendment, dated as of July 29,
1992, to the Reimbursement Agreement,
dated as of July 1, 1987, between
Registrant and the Bank named therein.
((2); Exhibit (19)(10)(i)107)
(i) 90-- Gas Transportation Agreement, dated as
of September 1, 1993, by and between
Tennessee Gas Pipeline Company and
Registrant. ((1); Exhibit
(19)(10)(i)108)
(i) 91-- First Amendment, dated as of October 1,
1993, to Fuel Oil Supply Contract,
effective as of September 1, 1992,
between Global Petroleum Corporation and
Registrant, Consolidated Edison Company
E-22
<PAGE>
of New York, Inc. and Niagara Mohawk
Power Corporation for the Roseton
Electric Generating Station. ((1);
Exhibit (19)(10)(i)109)
(i) 92-- Second Amendment, dated as of November
1, 1993, to the Agreement for the Sale
and Purchase of Coal, dated as of
January 1, 1987, among Registrant,
Kentucky Carbon Corporation and The
Carbon Fuel Sales Company. [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.] ((29); Exhibit (10)(i)92)
(i) 93-- Agreement, dated as of May 20, 1993,
between Registrant and New York State
Electric & Gas Corporation. ((29);
Exhibit (10)(i)93)
(i) 94-- Nine Mile Point Nuclear Station Unit 2
Operating Agreement, effective January
1, 1993, among Registrant, Niagara
Mohawk Power Corporation, Long Island
Lighting Company, New York State
Electric & Gas Corporation and Rochester
Gas and Electric Corporation. ((29);
Exhibit (10)(i)94)
(i) 95-- Amendment No. 2 to Irrevocable Letter of
Credit No. S01880, dated August 12,
1993, relating to the Reimbursement
Agreement, dated as of July 1, 1987, as
amended, between Registrant and the Bank
named therein. ((29); Exhibit (10)(i)95)
(i) 96-- Amendment No. 2 to Irrevocable Letter of
Credit No. S01881, dated August 12,
1993, relating to the Reimbursement
Agreement, dated as of July 1, 1987, as
amended, between Registrant and the Bank
named therein. ((29); Exhibit (10)(i)96)
E-23
<PAGE>
(i) 97-- Amendment No. 2 to Irrevocable Letter of
Credit No. A95056-S, dated August 17,
1993, relating to the Reimbursement
Agreement, dated as of November 1, 1985,
as amended, between Registrant and the
Bank named therein. ((29); Exhibit
(10)(i)97)
(i) 98-- Amendment No. 2 to Irrevocable Letter of
Credit No. A95057-S, dated August 17,
1993, relating to the Reimbursement
Agreement, dated as of November 1, 1985,
as amended, between Registrant and the
Bank named therein. ((29); Exhibit
(10)(i)98)
(i) 99-- Second Amendment, effective as of
September 1, 1994, to Fuel Oil Supply
Contract, effective as of September 1,
1992, between Global Petroleum
Corporation and Registrant, Consolidated
Edison Company of New York, Inc. and
Niagara Mohawk Power Corporation for the
Roseton Electric Generating Station.
((31); Exhibit (10)(i)99)
(i) 100-- Third Amendment, dated as of November 1,
1994, to the Agreement for the Sale and
Purchase of Coal, dated as of January 1,
1987, among Registrant, Kentucky Carbon
Corporation and The Carbon Fuel Sales
Company (Exhbit (10)(i)(40) to
Registrant's 10-K Report), as amended.
[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.] ((32);
Exhibit (10)(i)100)
(i) 101-- Agreement of Assignment, Assumption,
Consent and Release, entered into as of
July 1, 1994 by and among Global
Petroleum Corporation, Montello Oil
Corporation, and Registrant for itself
and as Agent for Consolidated Edison
E-24
<PAGE>
Company of New York, Inc., and Niagara
Mohawk Power Corporation for the Roseton
Electric Generating Station, relating to
a Fuel Supply Contract, effective
September 1, 1992 (Exhibit (10)(i)81),
as amended. ((32); Exhibit (10)(i)101)
(i) 102-- Amendment No. 4, dated November 28,
1994, to Agreement, dated as of November
20, 1987, between Registrant and
Consolidated Rail Corporation to
transport coal to Danskammer Generating
Station, as amended. [Certain portions
of the 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.] ((33); Exhibit (10)(i)102)
(i) 103-- Amendment No. 5, dated February 28,
1995, to Agreement, dated as of November
20, 1987, between Registrant and
Consolidated Rail Corporation to
transport coal to Danskammer Generating
Station, as amended. [Certain portions
of the 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.] ((34); Exhibit (10)(i)103)
(i) 104-- Fuel Oil Supply Contract, effective as
of September 1, 1995, between Montello
Oil Corporation and Central Hudson Gas &
Electric Corporation, Consolidated
Edison Company of New York, Inc. and
Niagara Mohawk Power Corporation for the
Roseton Electric Generating Plant.
[Certain portions of the 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.] ((36);
Exhibit (10)(i)104)
E-25
<PAGE>
(i) 105-- Fourth Amendment, dated as of November
1, 1995, to the Agreement for the Sale
and Purchase of Coal, dated as of
January 1, 1987, among Registrant,
Kentucky Carbon Corporation and The
Carbon Fuel Sales Company (Exhibit
(10)(i)40 to Registrant's 10-K Report.
[Certain portions of the 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.] ((36);
Exhibit (10)(i)105)
(i) 106-- Fuel Oil Supply Contract, effective as
of September 1, 1996, between Bayway
Refining Company and Central Hudson Gas
& Electric Corporation, Consolidated
Edison Company of New York, Inc. and
Niagara Mohawk Power Corporation for the
Roseton Electric Generating Plant.
[Certain portions of the contract
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.] ((40);
Exhibit (10)(i)106)
(i) 107-- Agreement for the Sale and Purchase of
Coal, dated as of December 1, 1996,
among Registrant, 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.]
E-26
<PAGE>
(i) 108-- Agreement for the Sale and Purchase of
Coal, dated as of January 1, 1997, among
Registrant, HPM Corporation and
Integrity Coal Sales, Inc. [Certain
portions of the 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) 109-- Transportation Contract by and between
Registrant and Consolidated Rail
Corporation, dated as of November 26,
1996. [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.]
(i) 110-- Credit Agreement, dated as of October
23, 1996, among Registrant and The Banks
listed herein and Morgan Guaranty Trust
Company of New York, as Agent.
(iii) 1-- Directors' Deferred Compensation Plan,
effective October 1, 1980. ((18);
Exhibit (10)(iii)1)
(iii) 2-- Trust Agreement between Registrant and
Dutchess Bank & Trust Company, as
trustee, dated as of January 1, 1984,
pursuant to Registrant's Savings
Incentive Plan. ((2); Exhibit
(10)(iii)2)
(iii) 3-- First Amendment, dated December 31,
1990, to Trust Agreement between
Registrant and The Bank of New York, as
successor trustee, dated as of January
1, 1984, pursuant to Registrant's
Savings Incentive Plan. ((23); Exhibit
(19)(10)(i)99)
E-27
<PAGE>
(iii) 4-- Savings Incentive Plan of Registrant, as
restated as of January 1, 1987, together
with Amendments thereto dated September
23, 1988 and March 17, 1989,
respectively. ((18); Exhibit
(19)(10)(iii)3)
(iii) 5-- Amendment, dated December 31, 1990, to
Savings Incentive Plan of Registrant, as
amended. ((23); Exhibit (19)(10)(i)98)
(iii) 6-- Amendment, dated January 14, 1991, to
Savings Incentive Plan of Registrant, as
amended. ((26); Exhibit (19)(10)(iii)4)
(iii) 7-- Amendment, dated October 25, 1991, to
Savings Incentive Plan of Registrant, as
amended. ((26); Exhibit (19)(10)(iii)5)
(iii) 8-- Executive Deferred Compensation Plan of
Registrant, effective March 1, 1992.
((24); Exhibit (19)(10)(iii)8)
(iii) 9-- Amendment, dated December 11, 1992, to
Savings Incentive Plan of Registrant, as
amended. ((2); Exhibit (19)(10)(iii)9)
(iii) 10-- Retirement Benefit Restoration Plan of
Registrant, effective May 1, 1993.
((27); Exhibit (10)(iii)10)
(iii) 11-- Amendment, dated July 23, 1993, to
Retirement Benefit Restoration Plan of
Registrant. ((27); Exhibit (10)(iii)11)
(iii) 12-- Amendment, dated July 23, 1993, to the
Savings Incentive Plan of Registrant.
((27); Exhibit (10)(iii)12)
(iii) 13-- Amendment, dated September 24, 1993, to
the Savings Incentive Plan of
Registrant, as amended. ((29); Exhibit
(10)(iii)13)
(iii) 14-- Amendment, dated December 17, 1993, to
the Savings Incentive Plan of
Registrant, as amended. ((29); Exhibit
(10)(iii)14)
E-28
<PAGE>
(iii) 15-- First Amendment, dated December 17,
1993, to the Registrant's Executive
Deferred Compensation Plan. ((29);
Exhibit (10)(iii)15)
(iii) 16-- Amendment, dated March 3, 1994, to the
Savings Incentive Plan of Registrant, as
amended. ((29); Exhibit (10)(iii)16)
(iii) 17-- Executive Incentive Compensation Plan of
Registrant, effective January 1, 1993.
((29); Exhibit (10)(iii)17)
(iii) 18-- Agreement, made March 14, 1994, by and
between Registrant and Mellon Bank,
N.A., amending and restating, effective
April 1, 1994, Registrant's Savings
Incentive Plan and related Trust
Agreement with The Bank of New York.
((31); Exhibit (10)(iii)18)
(iii) 19-- Amendment 1, dated July 22, 1994
(effective April 1, 1994) to the Amended
and Restated Savings Incentive Plan of
Registrant. ((33); Exhibit (10)(iii)19)
(iii) 20-- Amendment 2, dated December 16, 1994
(effective January 1, 1995) to the
Amended and Restated Savings Incentive
Plan of Registrant, as amended. ((33);
Exhibit (10)(iii)20)
(iii) 21-- Amendment, dated April 4, 1995, to the
Executive Incentive Compensation Plan of
Registrant.
(iii) 22-- Stock Plan for Outside Directors of
Registrant, dated November 17, 1995.
(iii) 23-- Management Incentive Program of
Registrant, effective April 1, 1994.
(12) -- Statement showing the computation of the ratio of
earnings to fixed charges.
E-29
<PAGE>
(13) (ii)-- Registrant's Consolidated Financial Statements for
the fiscal year ended December 31, 1996, and the
report thereon of Price Waterhouse LLP,
independent accountant, including the Notes to
Consolidated Financial Statements, which form a
part thereof (pages 29 through 72); Management's
Discussion and Analysis of Financial Condition and
Results of Operations (pages 6 through 28); Five-
Year Summary of Consolidated Operations and
Selected Financial Data (pages 4 and 5); Selected
Quarterly Financial Data (Unaudited) (page 73);
and Financial Highlights (pages 1 through 3),
included in Registrant's annual report to
shareholders for the fiscal year ended December
31, 1996. [Note: Except for those portions of
such annual report specified above, such annual
report is not deemed "filed" as part of the filing
of this Report on Form 10-K.]
(21) -- Subsidiaries of the Registrant:
State or other Name under which
Jurisdiction of Subsidiary conducts
Name of Subsidiary Incorporation Business
__________________ ______________ ______________________
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.
Central Hudson New York Central Hudson
Enterprises Enterprises Corporation
Corporation (formerly
Cruger Development
Corporation)
(23) -- Consent of Experts:
The consents of Price Waterhouse LLP appear on page 29
of this Annual Report on Form 10-K.
E-30
<PAGE>
(27) -- Financial Data Schedule
(99) -- Additional Exhibits:
(i) 1 -- Offer to Induce Settlement, dated July 15,
1986, among Niagara Mohawk Power Corporation,
Long Island Lighting Company, New York State
Electric & Gas Corporation, Rochester Gas and
Electric Corporation and Registrant. ((2);
Exhibit (28)(i)1)
(i) 2 -- Response by the Co-tenants to the Public
Service Commission's Inquiry As to
Modification of the Specification of Terms
and Conditions of Offer of Settlement to
Substitute an Allowed Cost of $4.16 Billion,
dated July 15, 1986. ((2); Exhibit (28)(i)2)
(i) 3 -- 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. ((28); Exhibit 28.1)
(i) 4 -- 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, Registrant, Long Island
Lighting Company, New York State Electric &
Gas Corporation, Niagara Mohawk Power
Corporation and Rochester Gas and Electric
Corporation. ((23); Exhibit (19)(28)(i)4)
(i) 5 -- Order on Consent signed on behalf of the New
York State Department of Environmental
Conservation and Registrant relating to
Registrant's former manufactured gas site
located in Newburgh, New York. ((36);
Exhibit (99)(i)5)
____________________
E-31
<PAGE>
The following are notes to the Exhibits listed above:
(1) Incorporated herein by reference to
Registrant's Quarterly report on Form 10-Q
for fiscal quarter ended September 30, 1993
(File No. 1-3268).
(2) Incorporated herein by reference to
Registrant'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
Registrant's Registration Statement No. 2-
65127.
(4) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
67537.
(5) Incorporated herein by reference to
Registrant'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 Registrant'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.
E-32
<PAGE>
(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.
(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.
E-33
<PAGE>
(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
Registrant's Current Report on Form 8-K,
dated May 27, 1992 (File No. 1-3268).
(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 Registrant'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.
E-34
<PAGE>
(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 Registrant'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 Registrant'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) 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 Medium-Term
Notes, Series B, and the Prospectus Dated
April 4, 1995, relating to (i) $80,000,000 of
Registrant'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 Registrant'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.
(11) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
66511.
(12) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
36680.
E-35
<PAGE>
(13) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
50276.
(14) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
54690.
(15) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
58500.
(16) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1986 (File
No. 1-3268).
(17) Incorporated herein by reference to
Registrant's Registration Statement No. 2-
60496.
(18) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989 (File
No. 1-3268).
(19) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (File
No. 1-3268).
(20) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987 (File
No. 1-3268).
(21) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1989
(File No. 1-3268).
(22) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1989 (File No. 1-3268).
(23) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 (File
No. 1-3268).
E-36
<PAGE>
(24) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991 (File
No. 1-3268).
(25) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1992 (File No. 1-3268).
(26) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1991 (File No. 1-3268).
(27) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1993
(File No. 1-3268).
(28) Incorporated herein by reference to
Registrant's Current Report on Form 8-K,
dated May 15, 1987 (File No. 1-3268).
(29) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 (File
No. 1-3268).
(30) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1994
(File No. 1-3268).
(31) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1994
(File No. 1-3268).
(32) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1994 (File No. 1-3268).
(33) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994 (File
No. 1-3268).
E-37
<PAGE>
(34) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended March 31, 1995
(File No. 1-3268).
(35) Incorporated herein by reference to
Registrant's Current Report on Form 8-K,
dated May 15, 1995 (File No. 1-3268).
(36) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1995 (File No. 1-3268).
(37) Incorporated herein by reference to
Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 (File
No. 1-3268).
(38) Incorporated herein by reference to
Registrant's Current Report on Form 8-K,
dated June 11, 1996 (File No. 1-3268).
(39) Incorporated herein by reference to
Registrant's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30,
1996 (File No. 1-3268).
(40) Incorporated herein by reference to
Registrant's Quarterly Report on Form 8-K,
dated October 15, 1996 (File No. 1-3268).
* Exhibits preceded by an asterisk have heretofore been
classified as basic documents under previous Rule 24(b)
of the SEC Rules of Practice.
E-38
</PAGE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FOR 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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $939,629
<OTHER-PROPERTY-AND-INVEST> $23,091
<TOTAL-CURRENT-ASSETS> $112,788
<TOTAL-DEFERRED-CHARGES> $173,598
<OTHER-ASSETS> $0
<TOTAL-ASSETS> $1,249,106
<COMMON> $87,775
<CAPITAL-SURPLUS-PAID-IN> $278,113
<RETAINED-EARNINGS> $105,821
<TOTAL-COMMON-STOCKHOLDERS-EQ> $471,709
$35,000
$21,030
<LONG-TERM-DEBT-NET> $362,040
<SHORT-TERM-NOTES> $15,600
<LONG-TERM-NOTES-PAYABLE> $0
<COMMERCIAL-PAPER-OBLIGATIONS> $0
<LONG-TERM-DEBT-CURRENT-PORT> $1,362
$0
<CAPITAL-LEASE-OBLIGATIONS> $0
<LEASES-CURRENT> $0
<OTHER-ITEMS-CAPITAL-AND-LIAB> $342,365
<TOT-CAPITALIZATION-AND-LIAB> $1,249,106
<GROSS-OPERATING-REVENUE> $513,971
<INCOME-TAX-EXPENSE> $32,700
<OTHER-OPERATING-EXPENSES> $405,442
<TOTAL-OPERATING-EXPENSES> $438,142
<OPERATING-INCOME-LOSS> $75,829
<OTHER-INCOME-NET> $6,913
<INCOME-BEFORE-INTEREST-EXPEN> $82,742
<TOTAL-INTEREST-EXPENSE> $26,660
<NET-INCOME> $56,082
$3,231
<EARNINGS-AVAILABLE-FOR-COMM> $52,473
<COMMON-STOCK-DIVIDENDS> $37,127
<TOTAL-INTEREST-ON-BONDS> $15,112
<CASH-FLOW-OPERATIONS> $103,088
<EPS-PRIMARY> $2.99
<EPS-DILUTED> $0
</TABLE>
<PAGE>
<TABLE> EXHIBIT 12
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED DIVIDENDS
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
Earnings:
<S> <C> <C> <C> <C> <C>
A. Net Income $ 56,082 $ 52,722 $ 50,929 $ 50,390 $ 47,688
B. Federal Income Tax 31,068 28,687 26,806 27,158 24,363
C. Earnings before Income Taxes $ 87,150 $ 81,409 $ 77,735 $ 77,548 $ 72,051
D. Total Fixed Charges <FN> 27,231 30,433 32,679 33,820 34,888
E. Total Earnings $114,381 $111,842 $110,414 $111,368 $106,939
Preferred Dividend Requirements:
F. Allowance for Preferred Stock
Dividends Under IRC Sec 247 $ 3,231 $ 4,903 $ 5,127 $ 5,562 $ 5,544
G. Less Allowable Dividend Deduction 127 528 528 528 544
H. Net Subject to Gross-up 3,104 4,375 4,599 5,034 5,000
I. Ratio of Earnings before Income
Taxes to Net Income (C/A) 1.554 1.544 1.526 1.539 1.511
J. Pref. Dividend (Pre-tax) (HxI) 4,824 6,755 7,018 7,747 7,555
K. Plus Allowable Dividend Deduction 127 528 528 528 544
L. Preferred Dividend Factor 4,951 7,283 7,546 8,275 8,099
M. Fixed Charges (D) 27,231 30,433 32,679 33,820 34,888
N. Total Fixed Charges
and Preferred Dividends $ 32,182 $ 37,716 $ 40,225 $ 42,095 $ 42,987
O. Ratio of Earnings to Fixed
Charges (E/D) 4.20 3.68 3.38 3.29 3.07
P. Ratio of Earnings to Fixed Charges
and Preferred Dividends (E/N) 3.55 2.97 2.74 2.65 2.49
<FN1> Includes a portion of rent expense deemed to be representative of the interest factor.
</TABLE>
</PAGE>
<PAGE> EXHIBIT 13
FINANCIAL HIGHLIGHTS
Earnings Per Share: (Page 18)
Earnings per share of common stock were $2.99 in 1996
compared to $2.74 in 1995. This $.25 or 9% increase in earnings
per share resulted primarily from increased electric and gas net
operating revenues caused largely by an increase in usage by
residential customers. Partially offsetting this increase in
earnings in 1996 was the 1995 non-recurring gain from the sale of
long-term stock investments. Earnings were also reduced due to
an increase in employee wages and associated fringe benefits,
which the Company has been controlling through the steady
reduction of its workforce.
Dividends Per Share: (Page 28)
The quarterly dividend rate was increased to $.53 per share,
effective June 28, 1996. This represented an increase of 1% over
the previous quarterly rate of $.525 per share. Dividends paid
to shareholders in 1996 were $2.11 per share as compared to $2.09
per share in 1995. No portion of the 1996 dividend constitutes a
return of capital.
Economy:
The Company's involvement with the expanded economic
development efforts of local and state development corporations
has continued to help attract diversified employment
opportunities to meet the needs of the Hudson Valley's qualified
labor force. A number of employers have relocated to or expanded
within the Company's service territory during 1996, including
various manufacturers and service organizations, adding
approximately 600 full-time positions and 3,800 seasonal and
part-time positions. In addition, the United States Postal
Service recently increased its employee count by 1,000 in
Southern Dutchess County.
Electric Sales: (Page 21)
Sales of electricity within the Company's service territory
increased 3% in 1996. This increase in sales of electricity is
due largely to an increase in usage by residential customers.
Gas Sales: (Page 21)
Firm sales of natural gas increased 12% in 1996 due to an
-1-
<PAGE>
increase in usage by residential, commercial and industrial
customers, and the unseasonable hot and/or cold weather
experienced in 1996 when compared to the weather conditions of
1995. Interruptible gas sales decreased 78% due to a significant
decrease in boiler gas usage at the Company's Roseton Electric
Generating Plant.
Rate Proceeding - Electric: (Page 16)
By Order, issued and effective May 20, 1996, the PSC
required the Company to submit, by October 1, 1996, the Company's
plan for the transition of the State's electric industry from a
highly regulated industry to a competitive market.
On October 1, 1996, the Company responded to the Order with
the following key objectives: 1) maintaining the reliability of
electric service, 2) providing electric prices which are
competitive, 3) offering customers choices in selecting their
electric supplier, and 4) keeping the Company financially strong.
Rate Proceeding - Gas: (Page 16)
By Opinion and Order, issued and effective October 3, 1996,
the PSC authorized no increase in the Company's base gas rates.
The Order recognized a $500,000 revenue requirement deficiency,
but eliminates such deficiency through rate moderation by the use
primarily of previously retained profits from interruptible gas
sales.
Common Stock: (Note 5)
In May 1996, the Company converted its Automatic Dividend
Reinvestment and Stock Purchase Plan and its Customer Stock
Purchase Plan from original issues of common stock to open market
purchase. This change was made because the Company achieved its
target common equity ratio of 52%. At the end of 1996, a share
of common stock was selling at $30.375 while the book value per
share was $26.87. The Company plans to repurchase approximately
250,000 shares of its common stock during 1997.
Financing Program: (Notes 5 & 6)
On January 1, 1996, the Company optionally redeemed its
7.72% Series Cumulative Preferred Stock at a redemption price of
$101.00 per share. The $13.1 million redemption price paid and
associated costs were funded through internal sources.
On May 1, 1996, the Company redeemed $30 million of the
Company's First Mortgage Bonds, 8 3/4% Series due 2001 at a
redemption price of 102.07% of the principal amount. The $30.6
million total cash requirements were financed with a combination
of cash and short-term borrowings.
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<PAGE>
By Order, issued and effective December 4, 1996, the PSC has
authorized the future issuance and sale of certain debt and
equity securities of the Company.
Taxes:
In 1996, the Company incurred $98.8 million for operating
taxes levied by federal, state and local governments representing
19 cents of every dollar of revenues.
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<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA*
(Thousands of Dollars)
<CAPTION> 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating Revenues
Electric................................. $ 418,761 $ 409,445 $ 411,082 $ 422,925 $ 427,436
Gas...................................... 95,210 102,770 104,586 94,448 96,121
Total.................................. 513,971 512,215 515,668 517,373 523,557
Operating Expenses
Operations............................... 267,779 274,665 274,497 274,477 283,787
Maintenance.............................. 28,938 29,440 32,716 34,486 34,226
Depreciation and amortization............ 42,580 41,467 40,380 39,682 39,596
Taxes, other than income tax............. 66,145 66,709 66,899 65,564 66,339
Federal income tax....................... 32,700 29,040 28,043 28,603 25,111
Total.................................. 438,142 441,321 442,535 442,812 449,059
Operating Income........................... 75,829 70,894 73,133 74,561 74,498
Other Income
Allowance for equity funds
used during construction................ 466 986 866 934 596
Federal income tax....................... 1,632 353 1,237 1,445 748
Other - net.............................. 4,815 8,886 6,296 5,167 4,427
Total.................................. 6,913 10,225 8,399 7,546 5,771
Income before Interest Charges............. 82,742 81,119 81,532 82,107 80,269
Interest Charges........................... 26,660 28,397 30,603 31,717 32,581
Net Income................................. 56,082 52,722 50,929 50,390 47,688
Premium on Preferred Stock Redemption-Net.. 378 169 - - -
Dividends Declared on
Cumulative Preferred Stock................ 3,231 4,903 5,127 5,562 5,544
Income Available for Common Stock.......... 52,473 47,650 45,802 44,828 42,144
Dividends Declared on Common Stock......... 37,127 36,459 35,541 34,497 31,545
Amount Retained in the Business............ 15,346 11,191 10,261 10,331 10,599
Retained Earnings - beginning of year...... 90,475 79,284 69,023 58,692 48,093
Retained Earnings - end of year............ $ 105,821 $ 90,475 $ 79,284 $ 69,023 $ 58,692
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</TABLE>
<PAGE>
<TABLE>
FIVE-YEAR SUMMARY OF CONSOLIDATED OPERATIONS AND SELECTED FINANCIAL DATA* (CON'T)
(Thousands of Dollars)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Common Stock
Average shares outstanding (000s)........ 17,549 17,380 17,102 16,725 15,901
Earnings per share on
average shares outstanding.............. $2.99 $2.74 $2.68 $2.68 $2.65
Dividends declared per share............. $2.115 $2.095 $2.075 $2.045 $1.98
Book value per share (at year-end)....... $26.87 $25.96 $25.34 $24.65 $23.60
Total Assets............................... $1,249,106 $1,250,092 $1,250,781 $1,264,240 $1,167,124
Long-term Debt............................. 362,040 389,245 389,364 391,810 441,096
Cumulative Preferred Stock................. 56,030 69,030 81,030 81,030 81,030
Common Equity.............................. 471,709 454,239 436,731 417,846 378,214
* This summary should be read in conjunction with the Consolidated Financial Statements and Notes
thereto included in the "Financial Section" of this Annual Report.
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</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPETITION
General
The Company is subject to regulation by the Public Service
Commission of the State of New York (PSC) and by the Federal
Energy Regulatory Commission (FERC). These agencies have each
adopted policies that focus on competition in gas and electric
markets. As a result, the public utility industry is facing
increasing competition and deregulation initiatives across the
country and in New York State.
The Company expects that such initiatives will produce
significant changes in gas and electric markets; however, the
Company cannot predict the scope, timing or consequences of these
changes.
Due to the rapid change in the utility industry, the Company
has considered and will continue to consider various strategies
designed to enhance its competitive position and to adapt to
anticipated changes in its business. The Company's goal is to be
the energy and energy services provider of competitive choice to
its customers. In order to achieve this goal, the Company has
implemented, and will continue to implement, appropriate cost-
reduction measures.
Currently, the Company is the lowest cost electric provider
in New York State and, through strategies and cost-reduction
measures such as those described below, will strive to remain in
that position. The Company seeks to reduce the costs of capital
and to enhance shareholder value by redeeming or refinancing debt
or preferred stock or by repurchasing its common stock. Measures
which have been put into place to improve the Company's position
in a competitive electric marketplace also include: operating
certain of its generating units on alternating six-month
intervals and/or the placement of certain of its generating units
on "ready reserve"; extending routine production maintenance
cycles to 24 months; satisfying a portion of its power
requirements with purchased power from energy providers outside
the Company's service territory when it can be obtained at a
lower cost than if such power were generated by the Company;
reducing contractor costs by redeploying its own workforce; and
reducing its workforce through attrition.
In its gas operations in 1996, the Company began selling gas
for resale to local distribution companies (LDCs) not in the
Company's system. In 1995, the Company entered into a five-year
agreement to sell natural gas to an electric generating plant in
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<PAGE>
Massachusetts. Another strategy implemented is capacity release.
LDCs, such as the Company, are permitted to offer their
unutilized firm transportation service to others for a fee. This
program, which was used at various times in 1996, gives the
Company an opportunity to defray some or all of the monthly fixed
charges when its firm gas transportation capacity is not fully
utilized and reduces the costs billed to the Company's firm gas
customers. The above initiatives resulted in savings of $1.5
million to the Company's firm gas customers in 1996.
Recent Developments
FERC - Electric
On April 24, 1996, the Federal Energy Regulatory
Commission released Order Nos. 888 and 889, promoting wholesale
competition between public utilities by providing open access,
non-discriminatory transmission services. The Orders have the
effect of (i) requiring electric utilities to open their
transmission lines to wholesale competitors, while allowing
recovery of certain "stranded costs," (ii) requiring electric
utilities to establish electronic systems to share information
about available transmission capacity, subject to certain
standards of conduct, and requiring certain "functional
separation" of power marketing from other operations. The
Company duly filed its open access transmission (OAT) tariff with
FERC, as required by Order No. 888. The OAT tariff has been
suspended by FERC subject to its administrative review process,
which is currently on-going. Under the pending OAT, the Company
must offer transmission service to wholesale customers on a basis
that is comparable to that which it provides itself. The Company
is also required to offer and/or provide certain ancillary
services which contribute to the reliability and security of the
transmission system. Pending completion of the administrative
process, the Company can make no prediction as to the effect of
its OAT. On December 30, 1996, the New York Power Pool (NYPP),
of which the Company is a member, filed an interim restructuring
plan with FERC in response to the requirements of Order No. 888.
On January 31, 1997, the NYPP filed an additional restructuring
filing, which includes proposals to establish an Independent
System Operator, a Power Exchange, and a New York State
Reliability Council. Pending the outcome of such proceedings as
the FERC may require in response to such filings, the Company can
make no prediction as to the effect on it of these filings, or of
compliance with FERC Order Nos. 888 or 889.
New York - Electric
Competitive Opportunities Proceeding: In August 1994,
the PSC instituted an investigation of issues related to a
restructuring of the electric industry in New York State
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<PAGE>
(Competitive Opportunities Proceeding). The overall objective of
the Competitive Opportunities Proceeding is to identify
regulatory and rate-making practices that will assist in the
transition to a more competitive electric industry.
On May 20, 1996, the PSC issued its Order (Order) related to
a restructuring of the electric industry in New York State in the
Competitive Opportunities Proceeding. The Order sets forth the
PSC's vision and goals for the future of the electric industry in
New York State. The Order calls for implementation of a
competitive wholesale power market in early 1997 and the
introduction of retail access for all electric customers in early
1998. In addition, the Order calls for reducing rates of
consumers, increasing customer choice, continuing reliability of
service, continuing programs that are in the public interest,
allaying concerns about market power, continuing customer
protections and the obligation to serve. In the Order, the PSC
strongly encourages divestiture, particularly of generation
assets, but does not require it. The Order states that
incentives for divestiture will be developed individually for
each utility in conjunction with its rate and restructuring plan
submission, which was due on October 1, 1996. The Order also
states that utilities should have a reasonable opportunity to
seek recovery of strandable costs, which are those costs which
may not be recoverable in competitive markets, consistent with
the goals of reducing rates, fostering economic development,
increasing customer choices and maintaining reliable service.
Certain aspects of the restructuring envisioned by the PSC,
particularly the PSC's apparent determinations that it can deny a
reasonable opportunity to recover prudent past investments made
on behalf of the public, order retail wheeling, require
divestiture of generation assets and deregulate certain sectors
of the energy market could, if implemented, have a negative
effect on the operations of New York State's investor-owned
electric utilities, including the Company.
On September 18, 1996, the Company joined with six other New
York State utilities and the Energy Association of New York State
(Petitioners) in filing a lawsuit in the New York State Supreme
Court in Albany (Court) to annul the Order. The lawsuit
contended, among other things, that the PSC (i) failed to follow
proper procedures for reaching a decision in the Competitive
Opportunities Proceeding, and (ii) lacked the statutory or legal
authority to (a) disallow a reasonable opportunity for utilities
to recover past expenditures prudently incurred to fulfill their
legal obligation to provide electricity service to the public,
(b) mandate retail wheeling, (c) deregulate the rates charged by
electricity generators or the energy services sector, and (d)
order divestiture of the utilities' assets. The lawsuit sought a
declaration that the Order is unlawful, or in the alternative,
that the Court clarify that the PSC's statements in the Order
constitute a policy statement with no binding effect. By a
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<PAGE>
Decision and Order, dated November 25, 1996, the Court denied
Petitioners' request to invalidate the Order. Although the Court
stated that most of the Order was a non-binding statement of
policy, the Court rejected the Petitioners' substantive
challenges to the Order. On December 24, 1996, Petitioners filed
a Notice of Appeal to the Third Department of the Appellate
Division of the Supreme Court of New York State with respect to
the Court's Decision and Order. Oral argument in the Appellate
Division has not yet been scheduled, but a decision is expected
by the end of 1997.
Despite the commencement by Petitioners of said lawsuit, the
Company was obligated to comply with the provision of the Order
which required the Company and four other electric utilities to
file a response to such Order incorporating its plan for the
transition of New York State's electric industry from a highly
regulated industry to a competitive market.
On October 1, 1996, the Company responded to the provision
of the Order. The Company's response addressed its plan for the
transition of New York State's electric industry from a highly
regulated industry to a competitive market. The Company's
October 1, 1996, filing identified four key objectives for its
transition to a competitive environment: (i) the maintenance of
the reliability of electric service, (ii) the provision of
competitive electric prices, (iii) the offering of choice to
customers in selecting their electric supplier, and (iv) keeping
the Company financially strong. The key provisions of the
Company's submission were: (i) maintaining stable electric base
prices for all customers for three years, (ii) exploration of
opportunities to offer discounts to the Company's largest
industrial and commercial customers in considerations for their
commitment to purchase their full energy requirements from the
Company, (iii) the provision through 1999 to maintain all
services currently provided to all customers, and (iv) the
exploration of the development of a pilot program to provide
customers with a choice of continuing to receive full electric
service from the Company or to purchase electric energy from
other suppliers.
On October 9, 1996, the PSC issued an order establishing
procedures for a completion of discovery and settlement
negotiations regarding the utilities' October 1, 1996
submissions, and, in the absence of settlement, for
administrative litigation before a PSC Administrative Law Judge.
As later amended, the procedures require that any hearings, as
well as the submission of briefs and the closing of the record,
must be completed no later than March 8, 1997. The Company has
been meeting with the PSC staff and active parties to this
proceeding for the purpose of exploring whether a settlement is
possible, and is not able to predict the outcome of these
discussions.
Given the uncertainties regarding the Competitive
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<PAGE>
Opportunities Proceeding and the Petitioners' lawsuit to annul
the Order in the Competitive Opportunities Proceeding, the
Company is unable to predict the outcome of this proceeding or
its ultimate effect on the Company's financial position or
results of operations.
Niagara Mohawk Proposal: On October 6, 1995, as publicly
reported by Niagara Mohawk Power Corporation (Niagara Mohawk),
Niagara Mohawk filed a proposal with the PSC which provides for a
corporate restructuring designed to create an open, competitive
retail electricity market, deregulate electricity generation in
Niagara Mohawk's service area, allow its customers, by year 2000,
to choose their electricity supplier and freeze or reduce
electricity prices over the next five years. The proposal was
subsequently amended on August 1, 1996 by Niagara Mohawk. As
amended, the restructuring would place Niagara Mohawk's non-
nuclear power plants (which would include Niagara Mohawk's
interest in the Roseton Steam Electric Generating Plant, Roseton
Plant) and unregulated generator contracts in a separate
generating company. Niagara Mohawk has also proposed that its
nuclear generation (which would include Niagara Mohawk's interest
in Unit 2 of the Nine Mile Point Nuclear Station, Nine Mile 2
Plant) and electric transmission and distribution business
continue to be rate-regulated on a cost-of-service basis.
Niagara Mohawk has stated that if it appears that such a
proposal were unachievable, Niagara Mohawk could not rule out the
possibility of a restructuring under Chapter 11 of the United
States Bankruptcy Code.
The Company has intervened in the proceeding but cannot
predict whether Niagara Mohawk's proposal will be effected or, if
effected, what impact, if any, Niagara Mohawk's proposal would
have on the gas and electric utility business in New York State,
including the Company's franchise area, or what effect Niagara
Mohawk's proposal and/or a restructuring under Chapter 11 of the
United States Bankruptcy Code would have on the Company's
interest in the Roseton Plant or the Company's interest in the
Nine Mile 2 Plant.
Mergers in the Electric Industry
In response to the increasingly competitive environment,
utilities across the country have been reorganizing to better
position themselves financially in their market areas for the
future. Thus, mergers and possible mergers have been reported in
the news media throughout the past year, including the public
announcement of the proposed merger between Long Island Lighting
Company and Brooklyn Union Gas Company. The Company cannot
predict at this time what effect these mergers or future mergers
will have on the utility industry in New York State.
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<PAGE>
New York - Natural Gas
On March 28, 1996, the PSC issued an Opinion and Order
adopting policies to address the restructuring of the natural gas
market in New York State, designed to open local natural gas
markets to competition and thereby allow residential, small
business and commercial/industrial users the ability to purchase
their gas supplies from sources other than the local utility.
Among other provisions of the restructuring plan, smaller
customers, such as residential and small business customers, may
join together, or "aggregate," to purchase their gas supplies
from third parties. The Company filed tariffs, complying with
the PSC's directives, on April 26, 1996 which were subsequently
amended October 11, 1996. Such tariffs became effective on
October 14, 1996. For 1996, transported gas revenues represented
a very small percentage of the Company's total gas revenues (1.3%
in 1996 and .7% in 1995).
Continuing Applicability of SFAS No. 71
The Company's electric and gas rates, currently subject to
approval by the PSC, are designed to recover the Company's costs
of providing electric and gas services to its customers. A
primary difference between a rate regulated entity and an
unregulated entity is the timing of recognizing certain assets
and expenses for financial reporting purposes. The Statement of
Financial Accounting Standards No. 71, "Accounting for the
Effects of Certain Types of Regulation" (SFAS No. 71), prescribes
the method to be used to record the financial transactions of a
regulated entity. The criteria for applying SFAS No. 71 include
(i) rates are set by an independent third party regulator, (ii)
approved rates are intended to recover the specific costs of the
regulated products or services, (iii) rates are reasonable and
likely to be collected. If the Company were to determine as a
result of competitive changes in New York State, PSC Orders or
otherwise that its business, or a portion of its business, fails
to meet any of these three criteria of SFAS No. 71, it would have
to eliminate from its financial statements the related
transactions prescribed by the regulators that would not have
been recognized if it had been a non-regulated company, which
could result in an impairment of or write-off of utility assets.
Currently, such transactions are included in the Company's
consolidated financial statements as regulatory assets and
liabilities, as described in Note 1 of the Notes to the Company's
Consolidated Financial Statements for the years ended December
31, 1996 and 1995 (Notes). An unfavorable impact on the
financial results of the Company would occur if the Company
determined that it could no longer apply SFAS No. 71. The
Company believes, however, that it continues to meet the criteria
for operating as a rate regulated entity, as prescribed by SFAS
No. 71.
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<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
CONSTRUCTION PROGRAM
As shown in the Consolidated Statement of Cash Flows, the
cash expenditures related to the Company's construction program
amounted to $49.4 million in 1996, a $100,000 increase from the
$49.3 million expended in 1995. As shown in the table below,
cash construction expenditures for 1997 are estimated to be $49.2
million, a decrease of $200,000 compared to 1996 expenditures.
Internal sources funded 100% of the 1996 cash construction
expenditures and are presently estimated to fund 100% of the
forecasted cash construction expenditures for 1997.
In 1997, the Company expects to satisfy its external funding
requirements, if any, through issuances of additional debt
securities, the amount and type of which cannot be predicted.
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<PAGE>
<TABLE>
Estimates of construction expenditures, internal funds available, mandatory and optional redemption of long-term
securities, and working capital requirements for the five-year period 1997-2001 are set forth by year in the following
table:
<CAPTION> Total
1997 1998 1999 2000 2001 1997-2001
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Construction Expenditures*............ $49,200 $60,300 $54,200 $56,800 $ 47,300 $267,800
Internal Funds Available.............. 55,700 57,400 59,800 64,500 70,800 308,200
Excess of Construction
Expenditures over Internal Funds..... (6,500) 2,900 (5,600) (7,700) (23,500) (40,400)
Mandatory Redemption of Long-term
Securities:
Long-term debt....................... 100 100 20,100 35,100 100 55,500
Optional Redemption or Purchase of
Securities:
Long-term debt....................... - 16,700 - - 70,000 86,700
Common stock......................... 7,500 - - - - 7,500
Total........................ 7,500 16,700 - - 70,000 94,200
Other Cash Requirements............... 3,000 3,000 3,000 3,000 3,000 15,000
Total Cash Requirements............... $ 4,100 $22,700 $17,500 $30,400 $ 49,600 $124,300
* Excluding the equity portion of Allowance for Funds Used During Construction (AFDC), a noncash item.
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</TABLE>
<PAGE>
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.
Included in the construction expenditures are expenditures
which are required to comply with the Clean Air Act and related
Amendments of 1990.
As shown in the table above, it is presently estimated that
funds available from internal sources will finance over 100% of
the Company's cash construction expenditures for the five-year
period 1997-2001. During this same five-year period, total
external financing requirements are projected to amount to $124.3
million, of which $55.5 million is related to the mandatory
redemption of long-term securities and $94.2 million is related
to the optional redemption of long-term securities and the
repurchase of common stock.
CAPITAL STRUCTURE
Over the past few years, the Company has substantially
increased its common equity ratio through retention of a portion
of its earnings, offerings of its common stock to the public,
original issuances of its common stock under its Automatic
Dividend Reinvestment and Stock Purchase Plan and its Customer
Stock Purchase Plan (both of which have since been superseded,
effective January 1, 1997, by the Company's Stock Purchase Plan
which is described below under the caption "Financing Program"
and in Note 5 of the Notes under the caption entitled
"Capitalization - Capital Stock") and redemption of debt and
preferred stock. One result of these recent increases in its
common equity ratio has been a significant improvement in its
interest coverage ratios (as shown under "Financial Indices" on
page 27 of this Report). The Company's interest coverage ratios
have also been improved by the refinancing of a portion of its
debt at lower interest rates. Despite a tightening of bond
rating criteria applied to the electric utility industry, the
Company has maintained or improved its bond ratings since 1991.
During 1996, Duff & Phelps Credit Rating Co., upgraded the
Company's senior debt rating from "A-" to "A." The Company's
other bond ratings, which were affirmed during 1996, are "A" by
Fitch Investors Service and "A-" or equivalent by Standard &
Poor's Corporation and Moody's Investors Service, Inc. The
Company's long-term goal is to achieve and maintain bond ratings
at the "A" level.
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<PAGE>
Set forth below is certain information with respect to the
Company's capital structure at the end of 1996, 1995 and 1994:
Year-end Capital Structure
1996 1995 1994
Long-term debt .......... 40.1% 42.8% 43.0%
Short-term debt ......... 1.7 - .3
Preferred stock ......... 6.2 7.5 8.9
Common equity ........... 52.0 49.7 47.8
100.0% 100.0% 100.0%
FINANCING PROGRAM
The Company optionally redeemed on January 1, 1996 its 7.72%
Series Cumulative Preferred Stock (par value $100 per share) at a
redemption price of $101.00 per share. The $13.1 million
redemption price paid and associated costs were funded through
internal sources.
On May 1, 1996, the Company redeemed $30 million of its
First Mortgage Bonds, 8 3/4% Series due 2001 at a redemption
price of 102.07% of the principal amount. The $30.6 million
total cash requirements were financed with a combination of cash
and short-term borrowings.
By an Order issued and effective December 4, 1996, the PSC
granted the Company authorization to issue and sell through
December 31, 1999, up to an additional $40 million of securities.
This $40 million can be comprised of medium term notes or common
stock solely or a combination of medium term notes and common
stock. That Order also authorizes the Company to acquire,
through December 31, 1999, not more than 2.5 million shares of
its issued and outstanding common stock, of which the Company
plans to repurchase approximately 250,000 shares during 1997.
The Company also received approval to combine its Automatic
Dividend Reinvestment and Stock Purchase Plan (DRP), its Customer
Stock Purchase Plan (CSPP) and its Employee Stock Purchase Plan
into a new Stock Purchase Plan, effective January 1, 1997. For
more information with respect to such Order and the Company's
financing program in general, see Notes 5 and 6 of the Notes.
During 1996, the Company issued 58,936 additional shares of
common stock through the DRP and CSPP. Effective May 1, 1996,
the Company converted such plans from original issue to open
market purchase. This change was made because the Company has
achieved its target common equity ratio after several years of
issuing new shares through such Plans. The Company has improved
its common equity ratio from 35.4% at December 31, 1987 to 52.0%
currently, which level the Company feels is deemed appropriate at
this time.
On December 1, 1995, the Company paid in full at maturity
its 4.85% Promissory Notes. The $2.6 million principal amount
was funded through internal sources.
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<PAGE>
The Company redeemed its 7.44% Series Cumulative Preferred
Stock (par value $100 per share) on October 1, 1995, at a
redemption price of $101.22 per share. The $12.1 million total
redemption price paid and associated costs were funded through
internal sources and from the original issuance of 257,587
additional shares of common stock during 1995 through the DRP and
CSPP.
SHORT-TERM DEBT
As more fully discussed in Note 4 of the Notes, the Company
has a revolving credit agreement with four commercial banks for
borrowing up to $50 million through October 23, 2001. In
addition, the Company 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 the
Company competitive options to minimize its cost of short-term
borrowing. Authorization from the PSC limits the amount the
Company may have outstanding at any time under all of its short-
term borrowing arrangements to $52.0 million in the aggregate.
RATE PROCEEDINGS
ELECTRIC: The Company's most recent completed electric
rate case was filed November 12, 1992 and, by Order Determining
Revenue Requirement and Rate Design issued and effective February
11, 1994, the PSC permitted the Company to increase its electric
base rates by $5.133 million (or approximately 1.3% on an annual
basis), based on a 10.6% return on common equity, and an 8.58%
return on total invested capital. See the caption "Competition -
Recent Developments - New York - Electric" and the subcaption
"Competitive Opportunities Proceeding" thereunder, for a
discussion related to the Company's October 1, 1996 filing in
that proceeding.
GAS: On November 10, 1995, the Company filed a request
with the PSC to increase its base rates for firm natural gas
service to produce a net increase in firm gas revenues of $2.422
million based on projected operations during the rate year
comprised of the period November 1, 1996 through October 31,
1997. This represented an overall requested increase in firm gas
revenues of 3%.
The higher rates were requested to cover projected rate year
increases in capital and operating costs. The Company's filing
reflected an 11.50% return on common equity and a 9.22% return on
total invested capital.
The PSC, on October 3, 1996, issued its Order and Opinion
(Order) regarding the Company's request to increase its natural
gas prices. The Order provides for no increase in base prices,
but rather recognizes a projected revenue deficiency of $500,000
which will be eliminated through rate moderation by the use
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<PAGE>
primarily of previously retained profits from interruptible sales
of gas. The PSC determined that a 10% return on common equity is
appropriate at this time for the Company's gas business, as
compared to the existing 10.6% authorized for the Company's
electric operations. The PSC's determination of the projected
amount of labor expense is approximately $1.3 million less than
the Company's projections. This labor determination will be an
impediment to the Company's achieving the authorized 10% return
level. However, the Company expects to offset this shortfall
through continued productivity gains.
OTHER DEVELOPMENTS
Electric Sales to IBM: The Company's largest customer is
International Business Machines Corporation (IBM), which
accounted for approximately 10%, 10% and 12% of the Company's
total electric revenues for the years ended December 31, 1996,
1995 and 1994, respectively. In 1996, electric sales to IBM
remained stable when compared to the prior year. The latest
published reports indicate that IBM reduced its employment in the
Company's service territory to 9,800 employees as of December 31,
1996, as compared to the peak level of IBM employment in excess
of 30,000 in 1985. This downsizing of IBM is the main
contributor to the 18% decline of electric sales to IBM in 1995,
and the declines in electric sales to IBM in 1994 and 1993 of 17%
and 20%, respectively.
New Accounting Standards: 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. If the accounting standard proposed in such
exposure draft were adopted, it could result in higher annual
provisions for decommissioning to be recognized earlier in the
operating life of nuclear units and an accelerated recognition of
the decommissioning obligation. The FASB is deliberating this
issue and the resulting final pronouncement could be different
from that proposed in the exposure draft. The Company 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 Company.
Other Issues: On an ongoing basis, the Company assesses
environmental issues which could impact the Company and its
ratepayers. Notes 1, 2 and 8 of the Notes discuss current
environmental issues affecting the Company, including (i) the
1995 decommissioning study of the Nine Mile 2 Plant, (ii) the
Clean Water Act and Clean Air Act Amendments of 1990, which
require control of emissions from fossil-fueled electric
generating units, (iii) asbestos litigation cases, and (iv) a
legal action filed in 1995 against the Company by the City of
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<PAGE>
Newburgh, New York after that City discovered allegedly hazardous
coal-tar material on its property, in 1994, allegedly migrating
from a former manufactured gas plant facility of the Company
located in Newburgh, New York.
FORWARD LOOKING STATEMENTS
This Annual Report 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). 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 Company's business and financial results
could cause actual results to differ materially from those stated
in the forward-looking statements. Those factors include
developments in the legislative, regulatory and competitive
environment, electric and gas industry restructuring and certain
environmental matters.
RESULTS OF OPERATIONS
The following discussion and analysis includes an
explanation of the significant changes in revenues and expenses
when comparing 1996 to 1995 and 1995 to 1994. Additional
information relating to changes between these years is provided
in the Notes on pages 41 through 72 of this Report.
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:
1996 1995 1994
Average shares outstanding (000s).. 17,549 17,380 17,102
Earnings per share................. $ 2.99 $ 2.74 $ 2.68
Return earned on common equity
per books*........................ 11.1% 10.5% 10.7%
* Return on equity for regulatory rate-making purposes differs
from these figures.
Earnings per share in 1996 increased $.25 per share over
1995 resulting primarily from increased electric and gas net
operating revenues caused largely by an increase in usage by
residential customers, and the unseasonable hot and/or cold
-18-
<PAGE>
weather conditions experienced in 1996 when compared to 1995.
Heating degree days were 17% higher in 1996 than in the prior
year. Also contributing to the increase in 1996 were the
optional redemption of the Company's 7.44% Series Cumulative
Preferred Stock in October 1995, 7.72% Series Cumulative
Preferred Stock in January 1996 and 8 3/4% Series $30 million
First Mortgage Bonds in May 1996.
This 1996 increase in earnings per share was partially
offset by increased employee wages and associated fringe benefits
and the 1995 non-recurring gain from the sale of long-term stock
investments. Various other items unfavorably impacted earnings
per share including increased depreciation costs associated with
the Company's plant and equipment, decreased interest and
dividend income and increased uncollectible accounts.
Earnings per share in 1995 increased $.06 per share over
1994 results primarily because of a decrease in maintenance costs
of the Company's electric generating plants and gas distribution
and transmission system in 1995. A decrease in operation and
maintenance costs associated with the Nine Mile 2 Plant
contributed to the total 1996 decrease in operation and
maintenance costs as well. Also contributing to the increase in
1995 earnings was reduced interest expense in 1995 resulting
primarily from the 1994 retirement at maturity of $50 million
aggregate principal amount of its First Mortgage Bonds, 8 1/8%
Series, increased earnings related to PSC incentive programs
related to fuel costs and energy efficiency, and an $.08 per
share gain from the sale of long-term stock investments in June
and December of 1995.
Partially offsetting these 1995 increases in earnings were
significant decreases in electric and gas net operating revenues
attributable primarily to decreased sales from the warmer winter
weather experienced in the first quarter of 1995, as compared to
the same period of 1994, as well as decreased sales to a large
industrial customer (IBM) in 1995. The earnings per share in
1995 were also unfavorably impacted by increased depreciation
expense on the Company's plant and equipment, increased property
taxes and an increase in the number of shares of common stock
outstanding.
-19-
<PAGE>
<TABLE>
OPERATING REVENUES
Total operating revenues increased $1.8 million (.3%) in 1996 as compared to 1995 and
decreased $3.5 million (.7%) in 1995, as compared to 1994.
See the table below for details of the variations:
<CAPTION>
Increase or (Decrease) from Prior Year
1996 1995
Electric Gas Total Electric Gas Total
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Customer sales............. $ 9,784 $(8,368) $ 1,416 $(7,711) $ 4,779 $(2,932)
Sales to other utilities... 330 2,475 2,805 2,017 - 2,017
Fuel cost adjustment....... (1,248) (2,497) (3,745) 3,346 (6,564) (3,218)
Deferred revenues.......... 677 840 1,517 1,374 21 1,395
Miscellaneous.............. (227) (10) (237) (663) (52) (715)
Total............... $ 9,316 $(7,560) $ 1,756 $(1,637) $(1,816) $(3,453)
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</TABLE>
<PAGE>
SALES
The Company'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 the Company's service territory
increased 3% in 1996 and decreased 2% in 1995. In 1996, electric
sales increased largely from an increase in usage by residential
customers, and the unseasonable hot and/or cold weather
experienced throughout 1996 when compared to the weather
conditions of 1995. The decline in sales experienced in 1995 was
primarily the result of unusually warm winter weather experienced
in the first quarter of 1995 when compared to the same period in
1994. This 1995 sales decrease was also impacted by the
declining usage by a large industrial customer.
Firm sales of natural gas increased 12% in 1996 due to an
increase in usage by residential, commercial and industrial
customers. In 1995, firm sales of natural gas decreased 5%
largely because of a decrease in usage by residential customers.
Interruptible gas sales decreased 78% in 1996, due
substantially to a decrease in natural gas sold for use as a
boiler fuel at the Roseton Plant. 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 the Company's load requirements. In 1995,
interruptible gas sales increased 70%, as compared to 1994 due
primarily to the increased sale of natural gas to the Roseton
Plant for use as a boiler fuel. Due to sharing arrangements, as
described in the caption "Sharing Arrangements," that are in
place for interruptible gas sales, variations from year to year
have a minimal impact on earnings.
Changes in firm sales by major customer classification are
set forth below:
% Increase (Decrease)
from Prior Year
Electric
1996 1995
Residential......................... 5 ( 2)
Commercial.......................... 1 1
Industrial.......................... 3 ( 6)
Gas
1996 1995
Residential......................... 16 (10)
Commercial.......................... 12 ( 1)
Industrial.......................... 15 -
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<PAGE>
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 1996, residential
and commercial electric and gas sales increased primarily due to
an increase in customer usage partly caused by unseasonable hot
and/or cold weather experienced throughout 1996 in the Company's
service territory. Heating degree days were 17% higher in 1996
than in the prior year.
In 1995, residential electric sales and residential and
commercial gas sales decreased primarily from a decrease in
customer usage largely due to the warmer winter weather
experienced in the Company's service territory in the first
quarter of 1995. Heating degree days were 22% lower in this
quarter of 1995 than in the same quarter of 1994.
Industrial Electric Sales: In 1996, as compared to 1995,
industrial electric sales increased 3% largely because of an
increase in usage by a large industrial customer. In 1995, as
compared to 1994, industrial electric sales decreased 6%, due
primarily to an 18% decline in usage by a large industrial
customer (IBM).
Industrial Gas Sales: Firm gas sales to industrial
customers for 1996 increased 15% substantially because of
increased usage by several large industrial customers. In 1995,
firm gas sales to industrial customers remained stable when
compared to the prior year.
NUCLEAR OPERATIONS
The Nine Mile 2 Plant is owned, as tenants in common, by the
Company, Niagara Mohawk, New York State Electric & Gas
Corporation, Long Island Lighting Company and Rochester Gas and
Electric Corporation (Rochester). Niagara Mohawk operates the
Nine Mile 2 Plant.
The Company owns a 9% interest of the Nine Mile 2 Plant,
which is discussed in Note 2 of the Notes under the caption
entitled "Nine Mile 2 Plant." The operations of this Plant have
continued to improve. The actual capacity factor of 86.6% for
1996 exceeded the targeted capacity factor of 73% included in the
Company's electric fuel adjustment clause. This resulted in a
favorable impact on earnings.
The operating expenses, taxes and depreciation pertaining to
the operation of the Nine Mile 2 Plant are included in the
Company's financial results. For both 1996 and 1995, the actual
cost of operations was less than the allowable Nine Mile 2 Plant
operation and maintenance expenses provided in Supplement Nos. 4
(1995) and 5 (1996) to the 1990 Settlement Agreement, as approved
by the PSC. In 1996, the underruns were entirely deferred for
the future benefit of customers and in 1995 the underruns were
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<PAGE>
shared between the Company's customers and shareholders.
The Company has continued to participate actively on the
management, operations and accounting committees for the Nine
Mile 2 Plant and expects to continue to do so in the future.
On or about October 12, 1996, Niagara Mohawk and Rochester
announced plans that they would form a joint nuclear operation
company to support and manage the operations of Rochester's Ginna
Nuclear Plant, the Nine Mile 2 Plant and Niagara Mohawk's Unit
No. 1 of the Nine Mile Point Nuclear Station. Such plans
reportedly include the initial formation of a nuclear services
company to provide support services.
The Company has insufficient information to make an
assessment of such plans or whether it would consent to such
plans to the extent that the Nine Mile 2 Plant is affected, and
until such assessment can be made, the Company can take no
position with respect to such plans.
The Nine Mile 2 Plant completed its fifth refueling outage
November 2, 1996. The Nine Mile 2 Plant is scheduled to commence
its sixth refueling outage in July 1998, with a targeted 35-day
duration.
A decommissioning study for the Nine Mile 2 Plant was
completed in 1995. The study's estimate of the cost to
decommission the Nine Mile 2 Plant is significantly higher than
previous estimates. The Company believes that decommissioning
costs, if higher than currently estimated, will ultimately be
recovered in rates, 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 Company cannot predict the outcome
of these developments. For further information on
decommissioning refer to Note 2 of the Notes.
In October 1996, Niagara Mohawk, as operating cotenant for
the Nine Mile 2 Plant, along with other companies that operate
nuclear plants, received a letter from the Nuclear Regulatory
Commission (NRC), requiring them to provide the NRC with
information on the "adequacy and availability" of design basis
documentation on their nuclear plants within 120 days. Such
information will be used by the NRC to verify that companies are
in compliance with the terms and conditions of their license(s)
and NRC regulations. In addition, it will allow the NRC to
determine if other inspection activities or enforcement actions
should be taken on a particular company.
The Company believes that the NRC is becoming more stringent
as indicated by this letter and that there may be direct cost
impact on companies with nuclear plants as a result. The Company
is unable to predict how a higher risk operating environment may
affect its results of operations or financial condition. Niagara
Mohawk plans to respond to the NRC by the February 9, 1997 due
date.
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<PAGE>
SHARING ARRANGEMENTS
Pursuant to certain incentive formulas approved by the PSC,
the Company shares, with its customers, certain revenues and/or
cost savings exceeding defined predetermined levels. These
incentive formulas, in some cases, include penalty provisions for
shortfalls from the targeted levels.
Incentive formulas are in place for fuel cost variations,
sales of electricity and gas to other utilities, interruptible
gas sales, capacity release transactions and the Company's Energy
Efficiency Program.
The net results of these incentive formulas was to increase
pretax earnings by $4.6, $4.7 and $2.2 million during 1996, 1995
and 1994, respectively.
OPERATING EXPENSES
Changes from the prior year in the components of the
Company's operating expenses are listed below:
Increase or (Decrease)
from Prior Year
1996 1995
Amount % Amount %
(Dollars in Thousands)
Operating Expenses:
Fuel and purchased
electricity............... $ 1,134 1 $ 1,279 1
Purchased natural gas...... (11,703) (19) 1,751 3
Other expenses of
operation................. 3,683 4 (2,862) (3)
Maintenance................ (502) (2) (3,276) (10)
Depreciation and
amortization.............. 1,113 3 1,087 3
Taxes, other than
income tax................ (564) (1) (190) -
Federal income tax......... 3,660 13 997 4
Total................. $ (3,179) (1) $(1,214) -
The most significant elements of operating expenses are fuel
and purchased electricity in the Company's electric department
and purchased natural gas in the Company's gas department.
Approximately 27% in 1996 and 28% in 1995 of every revenue dollar
billed in the Company's electric department was expended for the
combined cost of fuel used in electric generation and purchased
electricity. The corresponding figures in the Company's gas
department for the cost of purchased gas were 53% and 61%,
respectively.
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<PAGE>
In an effort to keep the cost of electricity at the lowest
reasonable level, the Company purchases energy from sources such
as other member companies of the New York Power Pool, Canadian
hydro sources and energy marketers, whenever such energy can be
purchased at a unit cost lower than the incremental cost of
generating the energy in the Company's plants.
In 1996, purchased natural gas decreased $11.7 million (19%)
primarily because of lower interruptible gas sales for usage as a
boiler fuel at the Roseton Plant. In 1995, however, purchased
natural gas increased $1.8 million (3%) largely because of higher
interruptible gas sales including gas used as a boiler fuel at
the Roseton Plant.
Other expenses of operation increased $3.7 million (4%) in
1996 primarily due to increased employee wages and associated
fringe benefits and increased uncollectible accounts. In 1995,
other expenses of operation decreased $2.9 million (3%) primarily
because of decreased costs of the Company's electric distribution
and transmission system.
Maintenance expenses for 1996 remained stable compared to
1995. Maintenance expenses decreased $3.3 million (10%) in 1995
as compared to 1994 due largely to a $3.5 million decrease in
costs associated with the Company's electric generating plants
and a $1.6 million decrease in leak repair costs on the Company's
gas distribution and transmission system. These decreases were
partially offset by a $2.0 million increase in the Company's
electric distribution and transmission system costs largely
resulting from increases to storm costs and tree trimming
expenses in 1995.
See Note 3 of the Notes for an additional analysis and
reconciliation of the federal income tax.
OTHER INCOME AND INTEREST CHARGES
Other income (excluding AFDC) decreased $2.8 million (30%)
in 1996 and increased $1.7 million (23%) in 1995. The 1996
decrease was largely due to the non-recurring gain of $2.1
million realized in 1995 from the sale of long-term stock
investments and the recording of one-time charges associated with
the optional redemption of $30 million 8 3/4% Series of First
Mortgage Bonds in May 1996. The increase noted in 1995 was
substantially due to the gain from the sale of long-term stock
investments in June and December 1995.
-25-
<PAGE>
Total interest charges (excluding AFDC) decreased $1.7
million (6%) in 1996 and $2.2 million (7%) in 1995. The
following table sets forth some of the pertinent data on the
Company's outstanding debt:
1996 1995 1994
(Thousands of Dollars)
Long-term debt:
Debt retired................ $ 30,000 $ 2,562 $ 50,000
Outstanding at year-end*:
Amount (including current
portion).................. 364,026 391,715 393,853
Effective rate............. 6.70% 7.00% 6.71%
Short-term debt:
Average daily amount
outstanding ............... $ 5,477 $ 103 $ 16
Weighted average
interest rate ............ 5.59% 6.16% 6.69%
*Including debt of subsidiaries of $7.6 million in 1996, $5.3
million in 1995 and $4.8 million in 1994.
See Notes 4 and 6 of the Notes for additional information on
short-term and long-term debt of the Company.
-26-
<PAGE>
<TABLE>
FINANCIAL INDICES
<CAPTION>
Selected financial indices for the last five years are set forth in the following
table:
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Pretax coverage of
total interest charges:
Including AFDC..................................... 4.08x 3.68x 3.38x 3.29x 3.07x
Excluding AFDC..................................... 3.83x 3.43x 3.15x 3.15x 2.95x
Funds from Operations.............................. 5.29x 4.69x 4.24x 4.27x 4.04x
Pretax coverage of total interest
charges and preferred stock dividends.................. 3.47x 2.97x 2.74x 2.65x 2.49x
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................... 13% 16% 16% 11% 10%
Effective tax rate...................................... 36% 35% 35% 35% 34%
* Refer to Note 1 of the Notes entitled "Summary of Significant Accounting Policies" under
subcaptions "Rates, Revenues and Regulatory Matters" - "Deferred Finance Charges -
Nine Mile 2 Plant" for a definition of Mirror CWIP.
-27-
</TABLE>
<PAGE>
COMMON STOCK DIVIDENDS AND PRICE RANGES
The Company and its principal predecessors have paid
dividends on its common stock in each year commencing 1903, and
the common stock of the Company has been listed on the New York
Stock Exchange since 1945. The price ranges and the dividends
paid for each quarterly period during the Company's last two
fiscal years are as follows:
1996 1995
High Low Dividend High Low Dividend
1st Quarter $31 1/2 $28 3/4 $.525 $27 5/8 $26 $.52
2nd Quarter 31 1/4 28 7/8 .525 27 1/2 25 1/2 .52
3rd Quarter 31 1/4 29 1/2 .53 30 1/2 26 1/4 .525
4th Quarter 31 1/2 29 .53 31 7/8 29 7/8 .525
On June 28, 1996, the Company increased its quarterly
dividend rate to $.53 per share from $.525 in 1995. On June 23,
1995, the Company increased its quarterly dividend rate to $.525
per share from $.52 per share. The Company presently intends to
increase future common stock dividends by a modest amount if and
to the extent supported by sustained earnings growth, while at
the same time gradually reducing the Company's payout ratio;
however, any determination of 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 number of registered holders of common stock as of
December 31, 1996 was 24,191. Of these, 23,545 were accounts in
the names of individuals with total holdings of 6,020,776
shares, or an average of 256 shares per account. The 646 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.
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<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders of Central Hudson Gas
& Electric Corporation
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of income, of retained
earnings and of cash flows present fairly, in all material
respects, the financial position of Central Hudson Gas & Electric
Corporation and its subsidiaries at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company'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 generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
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.
PRICE WATERHOUSE LLP
New York, New York
January 24, 1997
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<PAGE>
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
Management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements of Central
Hudson Gas & Electric Corporation and its subsidiaries
(collectively, the Company) as well as all other information
contained in this Annual Report. 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
Company's Management, giving due consideration to materiality.
The Company 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 Company are properly
safeguarded. The systems of internal control are documented,
evaluated and tested by the Company'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 Company has maintained an effective
system of internal control over the preparation of its financial
information including the consolidated financial statements of
the Company as of December 31, 1996.
Independent accountants were engaged to audit the consolidated
financial statements of the Company 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 the Annual Report.
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<PAGE>
The Company's Board of Directors maintains a Committee on Audit
which is composed of Directors who are not employees of the
Company. The Committee on Audit meets with Management, its
Internal Auditing Manager, and its independent accountants
several times a year to discuss internal controls and accounting
matters, the Company's consolidated financial statements, the
scope and results of the audits performed by the independent
accountants and the Company's Internal Auditing Department. The
independent accountants and the Company's Internal Auditing
Manager have direct access to the Committee on Audit.
JOHN E. MACK, III DONNA S. DOYLE
Chairman of the Board and Controller
Chief Executive Officer
January 24, 1997
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<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
(Thousands of Dollars)
December 31,
ASSETS 1996 1995
<CAPTION>
<S> <C> <C>
Utility Plant
Electric..................................................... $1,171,798 $1,149,233
Gas.......................................................... 145,375 140,341
Common....................................................... 87,591 83,220
Nuclear fuel................................................. 36,913 32,541
1,441,677 1,405,335
Less: Accumulated depreciation............................... 520,999 490,576
Nuclear fuel amortization.............................. 29,748 26,435
890,930 888,324
Construction work in progress................................ 48,699 48,770
Net Utility Plant.......................................... 939,629 937,094
Investments and Other Assets
Prefunded pension costs...................................... 10,672 922
Other........................................................ 12,419 10,410
Total Investments and Other Assets......................... 23,091 11,332
The Notes to Consolidated Financial Statements are an integral part hereof.
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars)
<CAPTION> December 31,
ASSETS 1996 1995
<S> <C> <C>
Current Assets
Cash and cash equivalents...................................... 4,235 15,478
Accounts receivable from customers - net of allowance for
doubtful accounts; $3.2 million in 1996 and $2.5 million
in 1995...................................................... 48,080 44,536
Accrued unbilled utility revenues.............................. 16,042 15,806
Other receivables.............................................. 2,896 4,674
Materials and supplies, at average cost
Fuel......................................................... 14,935 13,319
Construction and operating................................... 13,160 14,271
Special deposits and prepayments............................... 13,440 12,659
Total Current Assets......................................... 112,788 120,743
Deferred Charges
Regulatory assets (Note 1).................................... 151,426 159,907
Unamortized debt expense...................................... 5,393 6,080
Other......................................................... 16,779 14,936
Total Deferred Charges...................................... 173,598 180,923
Total Assets $1,249,106 $1,250,092
The Notes to Consolidated Financial Statements are an integral part hereof.
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars) December 31,
CAPITALIZATION AND LIABILITIES 1996 1995
<CAPTION>
Capitalization
<S> <C> <C>
Common Stock Equity
Common stock, $5 par value (Note 5)......................... $ 87,775 $ 87,480
Paid-in capital (Note 5).................................... 284,465 282,942
Retained earnings........................................... 105,821 90,475
Capital stock expense....................................... (6,352) (6,658)
Total Common Stock Equity................................. 471,709 454,239
Cumulative Preferred Stock (Note 5)
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 6)....................................... 362,040 389,245
Total Capitalization...................................... 889,779 899,514
Current Liabilities
Current redemption of preferred stock......................... - 13,000
Current maturities of long-term debt.......................... 1,362 1,577
Notes payable................................................. 15,600 -
Accounts payable.............................................. 26,137 24,433
Dividends payable............................................. 10,112 10,244
Accrued taxes and interest.................................... 5,347 7,824
Accrued vacation ............................................. 4,251 4,157
Customer deposits............................................. 4,019 4,021
Other......................................................... 6,676 6,166
Total Current Liabilities................................. 73,504 71,422
The Notes to Consolidated Financial Statements are an integral part hereof.
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET (CON'T)
(Thousands of Dollars) December 31,
<CAPTION> CAPITALIZATION AND LIABILITIES 1996 1995
<S> <C> <C>
Deferred Credits and Other Liabilities
Regulatory liabilities (Note 1)............................... 74,587 74,132
Operating reserves............................................ 4,755 6,024
Other......................................................... 9,155 9,659
Total Deferred Credits and Other Liabilities.............. 88,497 89,815
Accumulated Deferred Income Tax (Note 3)........................ 197,326 189,341
Commitments and Contingencies (Notes 2 and 8)...................
Total Capitalization and Liabilities $1,249,106 $1,250,092
The Notes to Consolidated Financial Statements are an integral part hereof.
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
(Thousands of Dollars)
<CAPTION>
Year ended December 31,
<S> 1996 1995 1994
Operating Revenues <C> <C> <C>
Electric................................... $418,761 $409,445 $411,082
Gas........................................ 95,210 102,770 104,586
Total Operating Revenues................. 513,971 512,215 515,668
Operating Expenses
Operation:
Fuel used in electric generation......... 58,874 60,940 67,899
Purchased electricity.................... 55,523 52,323 44,085
Purchased natural gas.................... 50,636 62,339 60,588
Other expenses of operation.............. 102,746 99,063 101,925
Maintenance................................ 28,938 29,440 32,716
Depreciation and amortization (Note 1)..... 42,580 41,467 40,380
Taxes, other than income tax............... 66,145 66,709 66,899
Federal income tax (Note 3)................ 32,700 29,040 28,043
Total Operating Expenses................. 438,142 441,321 442,535
Operating Income............................. 75,829 70,894 73,133
Other Income
Allowance for equity funds used during
construction (Note 1)..................... 466 986 866
Federal income tax (Note 3)................ 1,632 353 1,237
Other - net................................ 4,815 8,886 6,296
Total Other Income....................... 6,913 10,225 8,399
Income before Interest Charges............... 82,742 81,119 81,532
The Notes to Consolidated Financial Statements are an integral part hereof.
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME (CON'T)
(Thousands of Dollars)
<CAPTION> Year ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Interest Charges
Interest on long-term debt................. 23,617 25,925 27,541
Other interest............................. 2,626 1,917 1,784
Allowance for borrowed funds used
during construction (Note 1).............. (523) (514) (515)
Amortization of expense on debt............ 940 1,069 1,793
Total Interest Charges................... 26,660 28,397 30,603
Net Income................................... 56,082 52,722 50,929
Premium on Preferred Stock Redemptions-Net... 378 169 -
Dividends Declared on Cumulative
Preferred Stock............................. 3,231 4,903 5,127
Income Available for Common Stock............ $ 52,473 $ 47,650 $ 45,802
Common Stock:
Average shares outstanding (000s).......... 17,549 17,380 17,102
Earnings per share on
average shares outstanding................ $2.99 $2.74 $2.68
The Notes to Consolidated Financial Statements are an integral part hereof.
-37-
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(Thousands of Dollars)
<CAPTION> Year ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Balance at beginning of year................. $ 90,475 $ 79,284 $ 69,023
Net Income................................... 56,082 52,722 50,929
Premium on preferred stock redemption-net.... 378 169 _
Dividends declared:
On cumulative preferred stock.............. 3,231 4,903 5,127
On common stock ($2.115 per share 1996;
$2.095 per share 1995; $2.075 per share
1994)..................................... 37,127 36,459 35,541
Total dividends declared.............. 40,358 41,362 40,668
Balance at end of year....................... $105,821 $ 90,475 $ 79,284
The Notes to Consolidated Financial Statements are an integral part hereof.
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
<CAPTION>
Year ended December 31,
<S> 1996 1995 1994
Operating Activities <C> <C> <C>
Net Income.......................................... $ 56,082 $ 52,722 $ 50,929
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization including nuclear
fuel amortization............................... 47,073 45,388 44,616
Deferred income taxes............................ 17,901 14,146 12,970
Allowance for equity funds used during
construction.................................... (466) (986) (866)
Nine Mile 2 Plant deferred finance charges, net.. (4,855) (4,855) (4,855)
Provisions for uncollectibles.................... 4,336 3,220 3,306
Accrued pension costs............................ (6,757) (10,627) (2,028)
Gain on sale of long-term investment............. - (2,104) -
Deferred gas costs............................... (4,861) 5,302 3,256
Deferred gas refunds............................. (1,556) (1,784) 2,616
Other - net...................................... 3,986 11,466 4,376
Changes in current assets and
liabilities, net:
Accounts receivable and unbilled utility
revenues..................................... (6,338) (3,300) (2,604)
Materials and supplies........................ (505) 5,799 2,028
Special deposits and prepayments.............. (781) (567) (724)
Accounts payable.............................. 1,704 (5,008) 887
Accrued taxes and interest.................... (2,477) 995 219
Other current liabilities..................... 602 944 1,396
Net cash provided by operating activities........... 103,088 110,751 115,522
The Notes to Consolidated Financial Statements are an integral part hereof.
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</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS (CON'T)
(Thousands of Dollars)<CAPTION> 1996 1995 1994
<S> <C> <C> <C>
Investing Activities
Additions to plant.................................. (49,860) (50,269) (58,045)
Allowance for equity funds used during construction. 466 986 866
Net additions to plant.............................. (49,394) (49,283) (57,179)
Roseton Plant restoration costs related to fire.....
damage............................................. - - (853)
Insurance recoveries related to
Roseton Plant restoration.......................... - - 4,371
Nine Mile 2 Plant decommissioning trust fund........ (1,734) (1,895) (895)
Proceeds from sale of long-term investments......... - 2,879 -
Other - net......................................... 200 (1,161) (2,648)
Net cash used in investing activities............... (50,928) (49,460) (57,204)
Financing Activities
Proceeds from issuance of:
Long-term debt.................................... 3,090 1,000 230
Common stock...................................... 1,817 7,064 7,783
Net borrowings (repayments) of short-term debt...... 15,600 (3,000) 3,000
Retirement and redemption of long-term debt......... (30,779) (3,139) (50,273)
Retirement and redemption of cumulative preferred
stock.............................................. (13,000) (12,000) -
Premium on preferred stock redemption............... (378) (146) -
Dividends paid on cumulative preferred and common
stock.............................................. (40,489) (41,364) (40,328)
Issuance and redemption costs....................... 736 (20) (110)
Net cash used in financing activities............... (63,403) (51,605) (79,698)
Net Change in Cash and Cash Equivalents............... (11,243) 9,686 (21,380)
Cash and Cash Equivalents at Beginning of Year........ 15,478 5,792 27,172
Cash and Cash Equivalents at End of Year.............. $ 4,235 $ 15,478 $ 5,792
Supplemental Disclosure of Cash Flow Information
Interest paid..................................... $ 25,184 $ 26,738 $ 28,681
Federal income taxes paid......................... 15,875 14,100 12,100
The Notes to Consolidated Financial Statements are an integral part hereof.
</TABLE> -40-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General:
The Company is subject to regulation by the Public Service
Commission of the State of New York (PSC) and the Federal Energy
Regulatory Commission (FERC) with respect to its rates for
service and the maintenance of its accounting records. The
Company's accounting policies conform to generally accepted
accounting principles as applied to regulated public utilities
and are in accordance with the accounting requirements and rate-
making practices of the regulatory authorities having
jurisdiction.
Certain amounts from prior years have been reclassified in the
consolidated financial statements to conform with the 1996
presentation. Preparation of the financial statements includes
the use of estimates and assumptions made 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.
Principles of Consolidation:
The consolidated financial statements include the accounts of
the Company and its subsidiaries. Intercompany balances and
transactions have been eliminated.
The Company's subsidiaries are each wholly owned and are
comprised of landholding, cogeneration or energy management
companies. The net income of the Company's subsidiaries is
reflected in the Consolidated Statement of Income as other non-
operating income.
On June 30, 1996, Central Hudson Cogeneration, Inc. merged into
Central Hudson Enterprises Corporation, with the latter being the
surviving corporation.
Utility Plant:
The costs of additions to utility plant and replacements of
retired units of property are capitalized at original cost. The
Company's share of the costs of the Nine Mile 2 Plant are
capitalized at original cost, less the disallowed investment of
$169.3 million which was recorded in 1987. Costs include labor,
materials and supplies, indirect charges for such items as
transportation, certain taxes, pension and other employee
benefits and an allowance for the cost of funds used during
construction (AFDC). Replacement of minor items of property is
included in maintenance expenses.
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<PAGE>
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:
The Company has a 9%, or 103 MW, undivided interest in the
1,143 MW Nine Mile 2 Plant (see Note 2) and a 35%, or 420 MW,
undivided interest in the 1,200 MW Roseton Steam Electric
Generating Plant (Roseton Plant) (see Note 8 caption "Roseton
Plant").
The Company'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, 1996 and 1995, were:
1996 1995
(Thousands of Dollars)
Nine Mile 2 Plant
Plant in service.............. $314,270 $315,423
Construction work in progress. 1,894 594
Accumulated depreciation...... (61,708) (55,319)
Roseton Plant
Plant in service.............. $135,026 $133,741
Construction work in progress. 745 1,872
Accumulated depreciation...... (74,963) (71,880)
Allowance For Funds Used During Construction:
The Company includes in plant costs AFDC approximately
equivalent to the cost of funds used to finance construction
expenditures. 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 7.5% in 1996 and 8.5% in 1995
and 1994.
Depreciation and Amortization:
For financial statement purposes, the Company's depreciation
provisions are computed on the straight-line method using rates
based on studies of the estimated useful lives and estimated net
salvage of properties, with the exception of the Nine Mile 2
Plant which is depreciated on a remaining life amortization
method. The year 2026, which is 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. The Company
performs depreciation studies on a continuing basis and, upon
approval by the PSC, periodically adjusts the rates of its
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<PAGE>
various classes of depreciable property. The most recent study
was performed in 1993. The provision for depreciation of
transportation equipment is charged indirectly to various asset
and expense accounts.
The Company's composite rates for depreciation were 3.13% in
1996, 3.14% in 1995 and 3.15% in 1994 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 36.5% in 1996, 35.3% in 1995 and 34.5% in 1994.
For federal income tax purposes, the Company uses an
accelerated method of depreciation and generally uses the
shortest life permitted for each class of assets.
Amortization of Nuclear Fuel:
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.
Niagara Mohawk, on behalf of the Nine Mile 2 Plant cotenants, has
entered into an agreement with the U.S. Department of Energy
(DOE) for the ultimate disposal and storage of spent nuclear
fuel. The cotenants are assessed a fee for such disposal based
upon the kilowatt-hours generated by the Nine Mile 2 Plant.
These costs are charged to operating expense and recovered from
customers through base rates or through the electric fuel cost
adjustment clause described below. The Company cannot now
determine whether such arrangements with the DOE will ultimately
provide for the satisfactory permanent disposal of such waste
products.
Cash and Cash Equivalents:
For purposes of the Consolidated Statement of Cash Flows,
the Company considers temporary cash investments with an original
maturity of three months or less to be cash equivalents.
Federal Income Tax:
The Company and its wholly owned subsidiaries 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." 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 to recognize that income taxes will be recoverable or
refundable through future revenues.
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<PAGE>
Rates, Revenues and Regulatory Matters:
Electric and gas retail rates, including fuel and gas cost
adjustment clauses, applicable to intrastate service (other than
contractually established rates for service to municipalities and
governmental bodies) are regulated by the PSC. Transmission
rates, facilities charges and rates for electricity sold for
resale in interstate commerce are regulated by the FERC.
Revenues are recognized on the basis of cycle billings
rendered monthly or bimonthly. Estimated revenues are accrued
for those customers billed bimonthly whose meters are not read in
the current month.
The Company'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. The Company's
tariff for gas service contains a comparable clause to adjust gas
rates for changes in the price of purchased natural gas and
certain costs of manufactured gas.
Reference is made to the caption "Rate Proceedings" in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for details of the Company's 1996 Rate
Order for its gas rate case.
Regulatory Assets and Liabilities: The Company's accounting
policies reflect the effects of the rate-making process in
accordance with Statement of Financial Accounting Standards 71,
"Accounting for the Effects of Certain Types of Regulation" (SFAS
No. 71). Accordingly, certain utility expenses and credits
normally reflected currently in income are deferred on the
balance sheet as regulatory assets and liabilities and are
recognized in income as the related amounts are included in
service rates and recovered from or refunded to customers in
utility revenues as permitted by the regulators. If the Company
were no longer subject to the provision of SFAS 71, the Company
would be required to write-off related regulatory assets and
liabilities. Based on current regulation, the Company believes
that its use of regulatory accounting continues to be
appropriate.
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<PAGE>
The following table sets forth the Company's regulatory
assets and liabilities:
At December 31, 1996 1995
Regulatory Assets (Debits): (In thousands)
Deferred finance charges -
Nine Mile 2 Plant..................... $ 69,615 $ 70,760
Income taxes recoverable
through future rates.................. 55,791 65,723
Deferred energy efficiency costs........ 8,894 11,046
Other................................... 17,126 12,378
Total Regulatory Assets............... $151,426 $159,907
Regulatory Liabilities (Credits):
Deferred finance charges -
Nine Mile 2 Plant..................... $ 22,431 $ 28,431
Income taxes refundable................. 29,077 29,093
Deferred Nine Mile 2 Plant costs........ 6,322 3,094
Deferred OPEB costs over collection..... 4,778 3,600
Deferred unbilled gas revenues.......... 4,357 4,030
Other................................... 7,622 5,884
Total Regulatory Liabilities.......... $ 74,587 $ 74,132
Net Regulatory Assets.............. $ 76,839 $ 85,775
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 the Company's
investment in that Plant. The Company 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 other
deferred balances as directed by the PSC. The Company 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
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<PAGE>
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, the Company was authorized
to amortize $6.0 million annually of the deferred credit
beginning in December 1993.
The $6.0 million amortization of the deferred credit will be
continued unless changed by a future PSC rate order or until it
is exhausted. The current level of the deferred debit
amortization of $1.145 million is based on the level of deferred
credits that have been utilized through the most recent rate
year, which has ended. 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, "Accounting for Income Taxes," in 1993 increased the
Company's net deferred tax obligation. As it is probable that
the increase will be recovered from customers, the Company
established a net regulatory asset.
Deferred Energy Efficiency Costs: The PSC has required
utilities to adopt comprehensive long-range planning which
includes demand side management and energy conservation (Energy
Efficiency Program). The Company's 1996 Energy Efficiency
Program was approved by the PSC. The Energy Efficiency Program
costs are deferred and amortized over either five or ten years,
as directed by the PSC.
In addition to the deferral of Energy Efficiency Program
costs, the Company recovers lost net revenues that result from
the Program. Incentive earnings related to the achievement of
energy efficiency goals are recovered through the electric fuel
cost adjustment clause as discussed below. The Company's 1997
Demand Side Management (DSM) Plan, filed with the PSC on November
15, 1996, proposes the elimination of the incentive mechanism and
no recognition, by the Company, of incremental lost net revenues
resulting from either the implementation of additional DSM
measures or modifications to existing programs. The Company
cannot predict the outcome of this filing.
Competition:
The public utility industry is facing increasing competition
and deregulation initiatives across the country and in New York
State. The PSC has a proceeding in process which may affect the
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<PAGE>
Company and other investor-owned utilities operating in New York
State which is called the "Competitive Opportunities Proceeding."
The Company's filing on October 1, 1996, in conjunction with the
PSC's Competitive Opportunities Proceeding, proposed no immediate
wholesale changes in the structure of its business. In the
current settlement process associated with this filing, the
Company is looking to establish an orderly transition over an
extended period of time, from a regulated, vertically integrated,
franchised utility, which has the obligation to serve, to a
restructured entity which ultimately provides customers with
competitive choices for electric energy and related services. It
also seeks to establish confirmation of its right for an
opportunity to recover all prudently incurred costs including
those costs which may not be recoverable in competitive markets.
The Company is hopeful that an agreement will be reached with the
PSC and other parties in the Competitive Opportunities Proceeding
that will continue to provide it with every reasonable
opportunity to recover not only its costs of operation and plant
investments but also its net regulatory assets.
Accordingly, it is management's estimation that the
financial statements and other financial information contained
herein have been prepared based on its best judgement as to the
continued applicability of SFAS No. 71 and that no significant
events have taken place that would alter that judgement regarding
regulatory assurances of costs recovery. If, however, the
Company's business or a portion of its business no longer
qualified under SFAS No. 71, the Company would be required to
write-off to income its regulatory assets and regulatory
liabilities related to the non-regulated portion of the Company
(unless assumed by the regulated portion of the Company), which
could have a material adverse effect on the financial condition
of the Company.
New Accounting Standards:
Impairment: In March 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No.
121), which is applicable to the Company starting in 1996. SFAS
No. 121 requires companies, including utilities, to assess the
need to recognize a loss whenever events or circumstances occur
which indicate that the carrying amount of an asset may not be
fully recoverable. SFAS No. 121 also amends SFAS No. 71,
"Accounting for the Effects of Certain Types of Regulation," to
require the write-off of a regulatory asset if it is no longer
probable that future revenues will recover the cost of the asset.
The adoption of SFAS No. 121 did not have a material impact on
the financial position or results of operations of the Company in
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<PAGE>
1996 based on the current regulatory treatment of its long-lived
and regulatory assets. However, future developments in the
utility industry, including the effects of deregulation and
increasing competition, could change this conclusion.
Plant Decommissioning: The FASB is considering when a
liability for plant decommissioning or other long-lived asset
retirement should be recognized, how any such liability should be
measured, and whether a corresponding asset is created. In an
exposure draft SFAS, issued February 1996, FASB has tentatively
concluded that a liability should be recognized for legal or
unavoidable constructive obligations for closure and removal of
facilities, such as the Nine Mile 2 Plant, as the obligation is
incurred. The liability recognized for those closure and removal
obligations shall reflect the present value of estimated future
cash outflows currently expected to be required to satisfy those
obligations. Initial recognition of a liability for closure and
removal obligations increases the cost of the related asset
because incurrence of the obligation is integral to or a
prerequisite for operating the asset. Further, any securities or
other assets dedicated to future settlement of closure and
removal obligations, cannot be offset to those liabilities for
financial reporting purposes. The FASB is deliberating this
issue and the resulting final pronouncement could be different
from that projected in the exposure draft. The Company does not
believe that such changes, if required, would have an adverse
effect on results of operations due to its current belief that
decommissioning costs will continue to be recovered in rates.
However, future developments in the utility industry, including
the effects of deregulation and increasing competition, could
change this conclusion.
NOTE 2 - 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 the Company (9% interest), Niagara
Mohawk (41% interest), New York State Electric & Gas Corporation
(18% interest), Long Island Lighting Company (18% interest) and
Rochester Gas and Electric Corporation (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 cotenants in the same proportions as the
cotenants' respective ownership interests. The Company'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.
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<PAGE>
Under the Operating Agreement entered into by the cotenants,
Niagara Mohawk acts as operator of the Nine Mile 2 Plant, and all
five cotenants share certain policy, budget and managerial
oversight functions. The Operating Agreement remains in effect
subject to termination on six months' notice.
Radioactive Waste:
Niagara Mohawk has contracted with the DOE for disposal of
high-level radioactive waste (spent fuel) from the Nine Mile 2
Plant. The DOE has forecasted the start of operations of its
high-level radioactive waste repository to be no sooner than
2010. The Company 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
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:
The Company's 9% share of costs to decommission the Nine
Mile 2 Plant is estimated to be approximately $209.6 million
($75.1 million in 1996 dollars) and assumes that decommissioning
will begin in the year 2028. This estimate is based upon a site-
specific study completed in December 1995.
In order to assist the Company in meeting this obligation,
the Company has increased its annual funding to a qualified
external fund from $787,000 to $868,000. This change became
retroactively effective for 1995. 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 the Company.
The qualified external decommissioning trust fund at
December 31, 1996 and 1995 amounted to $8.1 million and $6.4
million, respectively, including net reinvested earnings to date
of $2.3 million. The qualified external decommissioning trust
fund is reflected in the Company's Consolidated Balance Sheet in
"Investments and Other Assets." At December 31, 1996, the
external decommissioning trust fund investments carrying value
approximated fair market value. The amount of accumulated
decommissioning costs recovered through rates and the net
earnings of the external decommissioning trust fund are reflected
in accumulated depreciation in the Consolidated Balance Sheet and
amount to $9.6 million and $7.9 million at December 31, 1996 and
1995, respectively.
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Reference is made to the caption "New Accounting Standards -
Plant Decommissioning" in Note 1 above for details of the
proposed changes in accounting for nuclear decommissioning costs.
The Company believes that if decommissioning costs are
higher than currently estimated, such higher costs would be
recovered in rates. However, future developments in the utility
industry, including the effects of deregulation and increasing
competition, could change this conclusion.
NOTE 3 - 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:
1996 1995 1994
(Thousands of Dollars)
Charged to operating expense:
Federal income tax.......... $18,936 $19,245 $18,190
Deferred income tax......... 13,764 9,795 9,853
Income tax charged to
operating expense....... 32,700 29,040 28,043
Charged (credited) to other
income and deductions:
Federal income tax.......... (5,716) (4,704) (4,354)
Deferred income tax......... 4,084 4,351 3,117
Income tax charged
(credited) to other
income and deductions... (1,632) (353) (1,237)
Total federal income tax.. $31,068 $28,687 $26,806
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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:
1996 1995 1994
(Thousands of Dollars)
Net income.................... $56,082 $52,722 $50,929
Federal income tax............ 13,220 14,541 13,836
Deferred income tax........... 17,848 14,146 12,970
Income before taxes......... $87,150 $81,409 $77,735
Computed tax @ 35%
statutory rate............... $30,503 $28,493 $27,207
Increase (decrease) to computed
tax due to:
Tax depreciation............ (10,499) (10,096) (9,597)
Deferred finance charges -
Nine Mile 2 Plant.......... (1,699) (1,701) (1,700)
Deferred gas costs.......... (1,703) 2,286 1,149
Deferred OPEB expense....... 167 (223) 713
Pension expense............. (2,424) (1,738) (1,471)
Alternative minimum tax..... (2,262) (2,958) (1,544)
Other....................... 1,137 478 (921)
Federal income tax............ 13,220 14,541 13,836
Deferred income tax........... 17,848 14,146 12,970
Total federal income tax.... $31,068 $28,687 $26,806
Effective tax rate........... 35.6% 35.2% 34.5%
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The following is a summary of the components of accumulated
deferred income taxes at December 31, 1996 and 1995, as reported
in the Consolidated Balance Sheet:
1996 1995
(Thousands of Dollars)
Accumulated Deferred Income
Tax Assets:
Future tax benefits on
investment tax credit basis
difference..................... $ 15,318 $ 16,073
Alternative minimum tax.......... 8,398 10,530
Tax depreciation - Nine Mile 2
Plant disallowed investment.... - 3,077
Unbilled revenues................ 5,654 5,434
Other............................ 26,891 22,444
Accumulated Deferred Income Tax
Assets........................... $ 56,261 $ 57,558
Accumulated Deferred Income
Tax Liabilities:
Tax depreciation................. $176,522 $172,033
Accumulated deferred investment
tax credit..................... 28,448 29,850
Future revenues - recovery of
plant basis differences........ 20,321 22,971
Other............................ 28,296 22,045
Accumulated Deferred Income Tax
Liabilities...................... $253,587 $246,899
Net Accumulated Deferred Income
Tax Liability.................... $197,326 $189,341
NOTE 4 - SHORT-TERM BORROWING ARRANGEMENTS
The Company has in effect a revolving credit agreement with
four commercial banks which allows it to borrow up to $50.0
million through October 23, 2001 (Agreement). The Agreement
gives the Company the option of borrowing at either the higher of
the prime rate or the sum of the federal funds rate plus 1/2%, or
three other money market rates if such rates are lower.
Compensating balances are not required under the Agreement. In
addition, the Company continues to maintain confirmed lines of
credit totaling $1.5 million with two regional banks. There were
no outstanding loans under the Agreement or the lines of credit
at December 31, 1996 or 1995. In order to diversify its sources
of short-term financing, the Company has entered into short-term
credit facilities agreements with several commercial banks. At
December 31, 1996, the Company had outstanding short-term debt of
$15.6 million under such facilities with a weighted average
interest rate of 5.94%. There was no outstanding short-term debt
at December 31, 1995 under such facilities.
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Authorization from the PSC limits the amount the Company may
have outstanding, at any time, under all of its short-term
borrowing arrangements to $52.0 million in the aggregate.
NOTE 5 - CAPITALIZATION - CAPITAL STOCK
Common Stock, $5 par value; 30,000,000 shares authorized:
Paid-In Capital:
Common Stock Paid-In
Shares Amount Capital
Outstanding ($000) ($000)
January 1, 1994 16,953,147 $84,766 $270,848
Issued under dividend
reinvestment plan......... 227,772 1,139 5,104
Issued under customer stock
purchase plan............. 57,545 287 1,253
December 31, 1994 17,238,464 86,192 277,205
Issued under dividend
reinvestment plan......... 218,610 1,093 4,897
Issued under customer stock
purchase plan............. 38,977 195 879
Redemption of preferred
stock..................... - - (39)
December 31, 1995 17,496,051 87,480 282,942
Issued under dividend
reinvestment plan ........ 49,023 245 1,278
Issued under customer stock
purchase plan ............ 9,913 50 245
December 31, 1996 17,554,987 $87,775 $284,465
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Cumulative Preferred Stock, $100 par value; 1,200,000 shares
authorized:
Final Redemption Shares Outstanding
Redemption Price December 31,
Series Date 12/31/96 1996 1995
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
7.72% (a) 101.00 - 130,000
210,300 340,300
Subject to
Mandatory
Redemption:
6.20% 10/1/08 (b) 200,000 200,000
6.80% 10/1/27 (b) 150,000 150,000
350,000 350,000
Total 560,300 690,300
(a) Optionally redeemed January 1, 1996, at a redemption price
of $101.00 per share. Costs associated with this redemption
were charged directly to retained earnings.
(b) Cannot be redeemed prior to October 1, 2003.
Reference is made to the caption "Financing Program" in
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for details on issuances and redemptions
of capital stock.
In May 1996, the Company converted its Automatic Dividend
Reinvestment and Stock Purchase Plan and its Customer Stock
Purchase Plan from original issue to open market purchase of
common shares. Such plans have been superseded as of January 1,
1997 by the Company's Stock Purchase Plan, which is discussed
below.
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.
By Order, issued and effective December 4, 1996, the PSC has
authorized the issuance and sale of certain debt and equity
securities of the Company.
The Order authorizes the Company, through December 31, 1999,
to: 1) issue and sell up to $40.0 million of new securities
comprised of common stock and/or medium term notes, 2) acquire
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not more than 2.5 million shares of its issued and outstanding
common stock of which the Company plans to repurchase
approximately 250,000 shares during 1997, and 3) effective
January 1, 1997, combine its existing Automatic Dividend
Reinvestment and Stock Purchase Plan, its Customer Stock Purchase
Plan and its Employee Stock Purchase Plan into a single plan.
Such Plan may operate as an original issue or open market
purchase plan.
NOTE 6 - CAPITALIZATION - LONG-TERM DEBT
Details of long-term debt are shown below:
December 31,
1996 1995
(Thousands of Dollars)
Series Maturity Date
First Mortgage Bonds (Net of Sinking Fund Requirements):
6.10% (a) April 28, 2000 $10,000 $10,000
7.70% (a) June 12, 2000 25,000 25,000
8 3/4%(b) May 1, 2001 - 30,000
7.97% (a) June 11, 2003 8,000 8,000
7.97% (a) June 13, 2003 8,000 8,000
6.46% (a) August 11, 2003 10,000 10,000
6 1/4%(c) June 1, 2007 4,415 4,500
9 1/4% May 1, 2021 70,000 70,000
8.12% (a) August 29, 2022 10,000 10,000
8.14% (a) August 29, 2022 10,000 10,000
8.375%(c) December 1, 2028 16,700 16,700
172,115 202,200
Promissory Notes:
1984 Series A (7 3/8%)(d) Oct. 1, 2014 16,700 16,700
1984 Series B (7 3/8%)(d) Oct. 1, 2014 16,700 16,700
1985 Series A (Var. rate)(d) Nov. 1, 2020 36,250 36,250
1985 Series B (Var. rate)(d) Nov. 1, 2020 36,000 36,000
1987 Series A (Var. rate)(d) June 1, 2027 33,700 33,700
1987 Series B (Var. rate)(d) June 1, 2027 9,900 9,900
5.38% (a) Jan. 15, 1999 20,000 20,000
7.85% (a) July 2, 2004 15,000 15,000
184,250 184,250
Secured Notes Payable of Subsidiary 6,299 3,688
Unamortized Discount on Debt (624) (893)
Total long-term debt $362,040 $389,245
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(a) Issued under the Company's Medium Term Note Program.
(b) Optionally redeemed May 1, 1996 at a redemption price of
102.07% of principle amount.
(c) 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.
(d) Promissory Notes issued in connection with the sale by
NYSERDA of tax-exempt pollution control revenue bonds.
Medium Term Notes: By Order, issued and effective December
4, 1996, the PSC authorized the Company to issue and sell not
later than December 31, 1999, a combination of new debt
securities and/or common stock totaling not more than $40.0
million in the aggregate.
NYSERDA: The NYSERDA Pollution Control Revenue Bonds issued
in 1985 (Series A and B) and 1987 (Series A and B) (collectively,
the "1985 and 1987 NYSERDA Bonds") are variable rate obligations
subject to weekly repricing and investor tender. The Company has
the right, exercisable independently with respect to each series
of the 1985 and 1987 NYSERDA Bonds, to convert the Bonds of each
such series to a fixed rate for the remainder of their term. In
its rate orders, the PSC has authorized deferred accounting for
the interest costs on the Company's 1985 and 1987 Series A and B
Promissory Notes which were issued in connection with the sale of
the 1985 and 1987 NYSERDA Bonds. The authorization provides for
full recovery of the variance between that portion of the actual
interest costs supporting utility operations and the interest
costs allowed in rates. The percent of interest costs supporting
utility operations represents approximately 95% of the total
costs. The deferred balances under such accounting were $2.4
million and $1.3 million at December 31, 1996 and 1995,
respectively, and were included in "Regulatory Assets" in the
Consolidated Balance Sheet. Such deferred balances are to be
addressed in future rate cases. By Order, issued and effective
December 4, 1996, the PSC authorized the Company to issue up to
$132.55 million of tax-exempt NYSERDA Pollution Control Revenue
Bonds for refunding purposes or for the purpose of refinancing,
if economical, a like amount of such bonds presently outstanding.
Letters of Credit: The Company has in place irrevocable
letters of credit which support certain payments required to be
made on the 1985 and 1987 NYSERDA Bonds. Such letters of credit
expire in 1999. The Company anticipates being able to extend
such letters of credit if the interest rate on the related series
of such bonds is not converted to a fixed interest rate. If the
Company were unable to extend the letter of credit that is
related to a particular series of such bonds, that series would
have to be redeemed unless a fixed rate of interest became
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effective. Payments made under the letters of credit in
connection with purchases of tendered 1985 and 1987 NYSERDA Bonds
are repaid with the proceeds from the remarketing of such Bonds.
To the extent the proceeds are not sufficient, the Company would
be required to reimburse the bank that issued the letter of
credit for the amount of any resulting draw under the letter of
credit by the expiration date of the letter of credit. The
letter of credit expiration date for the letters of credit
supporting the 1985 NYSERDA Bonds is November 16, 1999, and the
letter of credit expiration date for the letters of credit
supporting the 1987 NYSERDA Bonds is September 16, 1999. By
Order, issued and effective December 4, 1996, the PSC authorized
the Company to replace its current letters of credit with an
alternate credit assurance mechanism.
Interest Rate Cap: By Order, issued and effective December
4, 1996, the PSC authorized the Company to employ interest rate
caps, collars and floors to manage interest rate risk associated
with its variable rate 1985 and 1987 NYSERDA Bonds and to
recognize the associated costs as interest expense for rate-
making purposes. The Company entered into a three-year interest
rate cap agreement with a bank to manage exposure to upward
changes in interest rates on the 1985 and 1987 NYSERDA Bonds.
Under this agreement, in the event a nationally recognized tax-
exempt bond interest rate index exceeds 8%, the Company will
receive a payment from such bank equal to the amount by which the
actual interest costs on such bonds exceeds 8% per annum. This
agreement has the effect of limiting the interest rate the
Company must pay on such bonds (on a $115.9 million notional
amount) to the lesser of their actual rate or 8% per annum. In
the event such bank failed to make any required payment under
such interest rate cap agreement, the Company's exposure would be
limited to a maximum interest rate of 15% per annum under the
terms of such bonds.
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 the Company of certain financial ratios and
contain other restrictive covenants.
Subsidiary Debt: Secured notes payable of a subsidiary of
the Company consist of term loans to finance the installation of
energy conservation equipment at various host facilities, located
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primarily in the Northeastern United States. The majority of
such loans accrue interest at the prime lending rate. Such loans
are secured principally by contractual rights to payments from
third parties and, in certain instances, security interests in
project assets.
NOTE 7 - POSTEMPLOYMENT BENEFITS
Retirement Income Plan:
The Company has a non-contributory retirement income plan
(Retirement Plan) covering substantially all of its employees.
The Retirement Plan provides pension benefits that are based on
the employee's compensation and years of service. It has been
the Company's practice to provide periodic updates to the benefit
formula stated in the Retirement Plan.
The Company'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 minimum requirement
under the Employee Retirement Income Security Act of 1974.
The favorable return on plan assets has resulted in net
periodic pension income of which 25% was allocated to capital
projects in 1996 and 27% in 1995 and 1994. This allocation
follows the payroll distribution.
Net periodic pension income for 1996, 1995 and 1994 include
the following components:
1996 1995 1994
(Thousands of Dollars)
Service cost - benefits earned
during the period........... $ 4,556 $ 3,877 $ 5,876
Interest cost on projected
benefit obligation.......... 14,594 14,449 13,256
Actual return on Retirement
Plan assets................. (30,772) (38,849) (6,947)
Net amortization and deferral 1,872 9,896 (14,213)
Net periodic pension
(income) ................ $ (9,750) $(10,627) $ (2,028)
The net periodic pension income for 1996, 1995 and 1994 was
determined using a weighted average discount rate of 7.5%, 8.5%
and 6.25%, respectively, and a rate of increase in future
compensation levels of 4.5% for 1996 and 5.5% for 1995 and 1994.
The expected long-term rate of return on Retirement Plan assets
used in determining the net periodic pension income was
9.5%, 10.5%, and 8.5% for 1996, 1995, and 1994, respectively.
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The following table sets forth the Retirement Plan's funded
status at October 1, 1996 and 1995 and amounts recognized in the
Company's Consolidated Balance Sheet at December 31, 1996 and
1995:
1996 1995
(Thousands of Dollars)
Actuarial present value of benefit
obligations:
Accumulated benefit obligation,
including vested benefits
of $173,424 and $170,039............. $176,631 $173,281
Projected benefit obligation for
service rendered to date.............. $199,416 $196,038
Retirement Plan assets at market value. 268,615 250,246
Excess of Retirement Plan assets over
projected benefit obligation.......... 69,199 54,208
Unrecognized net gain.................. (58,464) (52,846)
Prior service cost not yet recognized
in net periodic pension cost.......... 3,273 3,531
Unrecognized net asset being amortized
over 15 years......................... (3,336) (3,971)
Prefunded Pension Cost recognized in the
Consolidated Balance Sheet............ $ 10,672 $ 922
Retirement Plan assets consist primarily of equities, real
estate and fixed income securities. The Retirement Plan is
deemed to be fully funded for federal income tax purposes,
therefore, the Company did not make any contributions to the
Retirement Plan during 1996 or 1995.
The actuarial present value of projected benefit obligations
for October 1, 1996 and 1995 was determined using a weighted
average discount rate of 7.75% and 7.5%, respectively, and an
assumed rate of increase in compensation of 4.5% for 1996 and
1995.
Pursuant to the PSC Statement of Policy and Order Concerning
the Accounting and Rate-making Treatment for Pensions and
Postretirement Benefits Other than Pensions (OPEB), issued
September 7, 1993 (Pension and OPEB Order), effective January 1,
1993 the Company began amortizing each year's experienced gain or
loss over ten years.
Pursuant to the Pension and OPEB Order, deferred accounting
has been granted by the PSC for any variation (above or below)
between actual costs of the Company's pension plans and those
costs allowed for rate-making purposes. Such amounts are
included in regulatory liabilities in the Consolidated Balance
Sheet.
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Other Postretirement Benefits:
The Company provides certain health care and life insurance
benefits for retired employees through its postretirement benefit
plan (Benefit Plan). Substantially all of the Company's
employees may become eligible for these benefits if they reach
retirement age while working for the Company. 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 recover a portion of the costs of these
benefits, the Company requires employees who retire on or after
October 1, 1994 to contribute toward the cost of such benefits.
Net periodic postretirement benefit cost for 1996, 1995 and
1994 includes the following components:
1996 1995 1994
(Thousands of Dollars)
Service cost - benefits
attributed to the period....... $ 1,875 $ 1,384 $ 2,392
Interest cost on accumulated
postretirement benefit
obligation..................... 5,149 4,613 4,654
Actual return on Benefit Plan
assets......................... (1,335) (875) (426)
Amortization of Transition
Obligation..................... 3,114 3,114 3,114
Net amortization and deferral... (784) (1,837) 928
Net periodic postretirement
benefit cost................... $ 8,019 $ 6,399 $10,662
The Company is amortizing the unfunded accumulated
postretirement benefit obligation (Transition Obligation) at
January 1, 1993 over a 20-year period.
The net periodic postretirement benefit cost of the Benefit
Plan for 1996, 1995 and 1994 was determined using a weighted
average discount rate of 7.5%, 8.5% and 6.25%, respectively, and
a rate of increase in future compensation levels of 4.5% for 1996
and 5.5% for 1995 and 1994. The expected long-term rate of
return of Benefit Plan assets used in determining the net
periodic postretirement benefit cost was 6.6% for 1996, 6.7% for
1995 and 6.6% for 1994.
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The Benefit Plan's funded status reconciled with the
Company's Consolidated Balance Sheet is as follows:
December 31,
1996 1995
(Thousands of Dollars)
Accumulated postretirement
benefit obligation:
Retirees...................... $(33,427) $(31,899)
Fully eligible employees...... (4,632) (4,706)
Other employees............... (33,422) (31,495)
(71,481) (68,100)
Benefit Plan assets at fair
value.......................... 31,402 22,899
Excess of accumulated post-
retirement benefit obligation
over Benefit Plan assets....... (40,079) (45,201)
Unrecognized net gain........... (11,419) (8,922)
Prior service cost not yet
recognized in net periodic
postretirement benefit cost.... (149) (160)
Unrecognized Transition
Obligation..................... 49,807 52,921
Postretirement benefit liability
recognized in the
Consolidated Balance Sheet..... $ (1,840) $ (1,362)
The accumulated postretirement benefit obligation under the
Benefit Plan at December 31, 1996 and 1995 was determined using a
weighted average discount rate of 7.75% and 7.5%, respectively
and a rate of increase in future compensation levels of 4.5% for
both 1996 and 1995, respectively. The expected long-term rate of
return of Benefit Plan assets used in determining the periodic
postretirement benefit cost was 6.6% for 1996 and 6.7% for 1995.
The assumed health care cost trend is 11% in the early years
and trends down to an ultimate rate of 5.5% by the year 2010. A
1% increase in health care cost trend rate assumptions would
produce an increase in the accumulated postretirements benefit
obligation at December 31, 1996 and 1995 of $9.4 and $8.9
million, respectively, and an increase in the aggregate service
and interest cost of the net periodic postretirement benefit cost
of $1 million and $873,000 for 1996 and 1995, respectively.
The Company has established a qualified funding vehicle
for such retirement benefits for collective bargaining employees
and a similar vehicle for management employees in the form of
qualified Voluntary Employee Beneficiary Association (VEBA)
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trusts. The Company funded the VEBA trusts in 1996, 1995 and
1994 with tax-deductible contributions totaling $7.4 million,
$7.2 million and $8.3 million, respectively. The VEBA trusts
consists primarily of equities and fixed income securities.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Construction Program:
Reference is made to "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for information
regarding the Company's construction program for the five-year
period 1997-2001.
Roseton Plant:
The Company is acting as agent for the cotenant owners with
respect to operation of the Roseton Plant. Generally, the owners
share the costs and expenses of the operation of the Roseton
Plant in accordance with their respective ownership interests.
The Company's share of direct operating expense for the Roseton
Plant is included in the appropriate expense classification in
the accompanying Consolidated Statement of Income.
The Company, under a 1968 Agreement (Basic Agreement), has
the option to purchase the interests of Niagara Mohawk (25%) and
of Consolidated Edison Company of New York, Inc. (Con Edison)
(40%) in the Roseton Plant in December 2004. The exercise of
this option is subject to PSC approval.
On March 30, 1994, Niagara Mohawk and the Company entered
into a Letter of Understanding which, among other things,
provides for:
(1) consideration by the Company, Niagara Mohawk and Con
Edison for staggering the operation of the two units of the
Roseton Plant in order to take advantage of current market costs
for energy and capacity; and
(2) during the period May 1997 through April 2004, the
Company may from time to time issue requests for proposals to
purchase energy and capacity on the open market. Niagara Mohawk,
among others, will be requested by the Company to bid on these
future purchases.
(3) Subject to regulatory approval, Niagara Mohawk and the
Company may enter into agreements, which would cover (i) the
purchase by the Company of the following electric capacity and
associated energy from Niagara Mohawk if needed: 15 MW each year,
subject to a reservation charge, commencing in 1998 through 2004,
up to a total of 75 MW, and up to an additional 150 MW in the
period 2001 through 2004 not subject to a reservation charge;
(ii) the option of Niagara Mohawk to bid competitively for the
Company's long-term purchases of capacity and energy during the
period May 1997 through April 2004 as indicated in Item (2) and
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(iii) a revision in the Company's 1968 option to purchase Niagara
Mohawk's 25% interest in the Roseton Plant in 2004 which would
give Niagara Mohawk an option to retain said 25% interest. The
Company and Niagara Mohawk have not yet entered into any such
agreements.
Entering into the agreements contemplated by the Letter of
Understanding will result in capital and operating and
maintenance cost savings. The Company's option to buy Con
Edison's interest in the Roseton Plant is not affected by the
Letter of Understanding.
Nuclear Liability and 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 due to a nuclear incident at any such licensed
unit. Under the provisions of the Price-Anderson Act, the
Company's potential assessment (based on its 9% ownership
interest in the Nine Mile 2 Plant and assuming that the other
Nine Mile 2 Plant cotenants were to contribute their
proportionate shares of the potential assessments) would be $6.8
million (subject to adjustment for inflation) and the Company
could be assessed $339,800 (subject to adjustment for inflation)
in respect to 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.
The Company also carries insurance to cover the additional
costs of replacement power (under a Business Interruption and/or
Extra Expense Insurance Policy) incurred by the Company in the
event of a prolonged accidental outage of the Nine Mile 2 Plant.
This insurance arrangement provides for payments of up to
$233,200 per week if the Nine Mile 2 Plant experiences a
continuous accidental outage which extends beyond 21 weeks. Such
payments will continue for 52 weeks after expiration of the 21-
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, the Company 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.
The Company 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 Units 1 and 2 of
the Nine Mile Point Nuclear Station and $2.25 billion of excess
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property damage coverage for the Nine Mile 2 Plant. Such
insurance covers decontamination costs, debris removal and repair
and/or replacement of property.
The Company 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.
Natural Gas Supply:
The Company presently has in place five firm contracts
(Contracts) for the supply of an aggregate of 10,497,708 Mcf. of
natural gas, all of which are with third-party gas suppliers
(Suppliers). Under the Contracts, the Suppliers deliver the gas
to interstate pipeline companies (Pipelines) and the Pipelines
deliver the gas to the Company's gas transmission system under
separate firm transportation contracts which the Company has in
place with such Pipelines. With the exception of 20,000 Mcf. per
day of gas purchased from Canadian sources under contracts which
expire in January 2012, or approximately 30% of total gas
purchases, all of the above gas supply contracts will terminate
in 1997 after the 1996-1997 winter heating season and will be
replaced before the next winter heating season.
The Company has in aggregate, gas storage capability of
39,604 Mcf. per day under long-term contracts. The Company has a
firm gas peaking service, under contract, for the supply of 9,804
Mcf. per day for 15 days during the period November 1-March 31.
This contract became effective November 1, 1995 and will remain
in effect through March 31, 1998.
In addition to the above, the Company has an option for the
supply of up to 100,000 Mcf. per day of gas during April through
October of each year for use as boiler gas at the Roseton Plant.
The Company is in the process of discussing option modifications
that allow for greater market flexibility.
In 1992, FERC issued its final rule (Order 636) regarding
the unbundling of natural gas supply services from transportation
and storage services. These changes require the Company to pay a
share of certain transition costs incurred by the Pipelines as a
result of Order 636.
The Company has been billed $4.3 million of transition costs
through December 31, 1996 by the Pipelines. The Public Service
Commission Order issued December 20, 1994 in Case 93-G-0932
allows New York State Utilities to collect transition costs from
firm sales and firm transportation customers. As a result of the
PSC's Order, the Company collects all transition costs incurred
which are applicable to the firm residential, commercial and
industrial customers through the gas adjustment clause and
collects the transition costs applicable to the firm
transportation customers through a surcharge factor billed
directly to the firm transportation customers. The aggregate
amount of transition costs which will be incurred and collected
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by the Company will depend on the outcome of FERC proceedings.
The Company projects that the aggregate amount of transition
costs could reach $6.0 million over the next several years. The
Company expects to continue to recover such costs through its gas
cost adjustment clause.
Environmental Matters:
General: On an ongoing basis, the Company assesses
environmental issues which could impact the Company and its
ratepayers.
Clean Water Act Compliance: The Company is a party to a
proceeding before the New York State Department of Environmental
Conservation related to the processing of permit renewal
applications for the Company's generating stations under the
State Pollution Discharge Elimination System. At this stage of
the proceeding, the Company can make no determination as to the
outcome of the proceeding or the impact, if any, on the Company's
financial position.
Clean Air Act Amendments: 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 power plants that affect "acid rain" and ozone.
The Phase II "acid rain" emissions reduction requirements do
not apply to the Company's generating plants until January 1,
2000; however, the Company has elected to have the Roseton Plant
covered under the Phase I acid rain regulation 40 CFR Part 72
which went into effect in 1995. More specifically, the Roseton
Plant has been conditionally identified as a substitute for a
Phase I plant. Such a substitution, if implemented by the
Company, would result in additional emissions allowances for the
Roseton Plant. Emission allowances that are not needed for
current year emissions may be held for use in future years or
sold. Allowances currently held by the Company have a present
market value of approximately $1.8 million. A decision by the
Company to implement a substitution plan must be made each year
by December 1. The Company has made such election in December
1996 and 1995.
The Company's emissions of nitrogen oxides were subject to
additional controls effective May 31, 1995 under Title I of the
CAA Amendments. The Company has installed appropriate controls
in compliance with this requirement. The Northeast Ozone
Transport Commission, of which New York State is a member, has
agreed that additional reductions of nitrogen oxides emissions
will be required in 1999 and, possibly, in the year 2003.
Because regulations have not yet been promulgated by New York
State to implement this agreement, the specific reductions
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required at the Company's facilities have not been determined.
The Company expects that it will have adequate financial
resources to comply with the requirements of the CAA Amendments.
Former Manufactured Gas Plant Facilities: In May 1995, the
City of Newburgh, New York (City) filed suit against the Company
in the United States District Court for the Southern District of
New York. The City alleges that the Company has released certain
allegedly hazardous substances without a permit from the site of
the Company's former coal gasification plant (Central Hudson
Site) in Newburgh, New York into the ground at the Central Hudson
Site and into adjacent and nearby property of the city, in
violation of the federal Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA), the federal Resource
Conservation and Recovery Act (RCRA) and the federal Emergency
Planning and Community Right to Know Act (EPCRA). The City also
alleges a number of nuisance, trespass, damage and
indemnification claims pursuant to New York State law.
The City seeks 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 money 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.
In its answer to the City's complaint, the Company denied
liability and asserted affirmative defenses and counterclaims
against the City. The Company also filed a third-party complaint
against "John Doe" defendants whose identities are presently
unknown but who may be responsible for some or all of the
contamination that is alleged to exist on the City's property.
In October 1995, the Company and the New York State
Department of Environmental Conservation (NYSDEC) entered into an
Order on Consent regarding the development and implementation of
an investigation and remediation program for the Central Hudson
Site and the City's adjacent and nearby property. Following
approval of the workscope of the investigation and remediation
program in June 1996, studies were initiated in July 1996 in
fulfillment of the Company's obligation under the Order of
Consent. Preliminary results of these studies indicate the
presence of tar-like substance in portions of the study area,
which may be related to the manufacture of gas by the Company and
a predecessor of the Company; however, these studies are not
expected to be completed until early 1998. Inasmuch as the
Company and the City have been unsuccessful in reaching a
settlement agreement, a schedule of proceedings has been approved
by the District Court. Such schedule calls for exchange of
documents and deposition of witnesses beginning in December 1996
and continuing into 1997.
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<PAGE>
At this time, the Company can make no prediction as to the
outcome of this matter, nor can it make reasonable estimates of
the cost of the activities required under the Order on Consent.
However, the Company has put its insurance carriers on notice and
intends to pursue reimbursement from them. The Company cannot
predict the extent of reimbursement that will be available from
its carriers at this time.
By letter dated September 22, 1995, the Company petitioned
the PSC for authorization to defer costs related to this matter,
including legal defense costs, but excluding the Company's labor,
related to environmental site investigation and remediation
actions that were incurred by the Company in 1995 and thereafter
in connection with this matter. These future expenses are not
reasonably estimable by the Company at this time. The Company
has deferred costs expended to date that it expects to be
recovered in future rates. The cumulative deferred costs for
1996 and 1995 amounted to $1.4 million and $719,700,
respectively, and were included in "Deferred Charges-Other" in
the Consolidated Balance Sheet.
Asbestos Litigation:
Since 1987, the Company, along with many other parties, has
been joined as a defendant or third-party defendant in 1,014
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 Company facilities.
As of December 31, 1996, of the 1,014 cases that had been
brought against the Company, 738 remained pending against the
Company. The 276 cases that were no longer pending against the
Company as of December 31, 1996 were resolved as follows: (1) the
Company negotiated voluntary dismissals in 45 cases and won
summary judgement dismissals in 9 cases; (2) 116 third-party
claims were extinguished with respect to the Company when the
third-party plaintiff, Owens-Corning Fiberglas settled the cases
with the plaintiffs; and (3) the Company settled 106 cases.
Although the Company is presently unable to assess the validity
of the remaining asbestos lawsuits, and accordingly cannot
determine the ultimate liability relating to these cases, based
on information known to the Company at this time, including its
experience in settling asbestos cases and in obtaining dismissals
of asbestos cases, the Company believes that the cost to be
incurred in connection with the remaining lawsuits will not have
a material adverse effect on the Company's financial position.
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<PAGE>
The Company 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 reimbursement for its defense costs and liability.
Tax Matters:
Assessments: The Internal Revenue Service (IRS) has
completed its examination of the Company's federal income tax
returns for 1987 and 1988. The IRS Agents' Report proposed
significant adjustments related to the tax in-service date of the
Nine Mile Point 2 Plant and various other items. In May 1994,
the Company filed a Protest with the Appeals Office of the IRS.
The IRS Appeals Office subsequently requested Technical Advice
from the National Office of IRS with regard to the tax in-service
date. In May 1996, the IRS National Office issued a Technical
Advice Memorandum (TAM), in which the matter was resolved in
favor of the Nine Mile Point 2 Plant cotenants. As a result of
the TAM, and a subsequent agreement between the Company and the
Appeals Office of the IRS on most other matters, the Company
believes it has no further tax liabilities for those years, and
in fact, the Company expects to receive a refund in 1997.
Receipt of the refund is contingent upon review by the Joint
Committee on Taxation of the United States Congress.
Rental Expenses and Lease Commitments:
The Company has lease commitments expiring at various dates,
principally for real property and data processing equipment.
None of these leases involves any major facilities, any material
noncancelable rental commitments or capital leases.
Purchased Power Commitments:
Under federal and New York State laws and regulations, the
Company 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 the Company's electric fuel adjustment
clause. IPPs with which the Company has contracts represent 4.5%
of the Company's energy purchases in 1996.
Other Matters:
The Company is involved in various other legal and
administrative proceedings incidental to its business which are
in various stages. While these matters collectively involve
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<PAGE>
substantial amounts, it is the opinion of management that their
ultimate resolution will not have a material adverse effect on
the Company's financial position or results of operations.
Included in such proceedings are lawsuits against the
Company arising from a November 1992 explosion in a dwelling in
Catskill, New York. These lawsuits include: one alleging
personal injuries, including the death of an occupant, and
property damage and seeking recovery of an unspecified amount of
compensatory and punitive damages; and one alleging personal
injuries and property damage and seeking compensatory and
punitive damages in the sum of $4.0 million.
The PSC, by Order issued and effective January 7, 1994,
approved an Agreement which provides for a program for evaluating
and replacing cast iron and unprotected steel pipeline
facilities, and for an investment in four permanent employee
training centers. The Company's shareholders contributed $1.0
million in 1995 and $500,000 in 1994 toward the costs of such
training centers and replacement program. No shareholder
contribution was required in 1996, however, under such Agreement
the Company's shareholders may be required to contribute in 1997
from zero to $500,000 toward the cost of such pipeline
replacement program, depending on the Company's completion of
certain tasks by specified dates. The Company believes these
tasks have been completed by the specified dates and, therefore,
the Company's shareholders should have no further contribution
obligations under such Agreement.
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 the Company's service territory. A short
time later, a second explosion and fire destroyed a nearby
commercial facility. Lawsuits have been commenced against the
Company arising out of the Wappingers Falls incident including:
one alleging property damage and seeking recovery of compensatory
and punitive damages in the sum of $1.0 million; and 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 the Company.
The Company is investigating the above claims and presently
has insufficient information on which to predict their outcome.
The Company believes that it has adequate insurance to cover any
compensatory damages that might be awarded. The Company's
insurance, however, does not extend to punitive damages which, if
awarded, could have a material adverse effect on the Company's
financial position.
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<PAGE>
NOTE 9 - DEPARTMENTAL INFORMATION
The Company is engaged in the electric and natural gas
utility businesses and serves the Mid-Hudson Valley region of New
York State. Total revenues and operating income before income
taxes (expressed as percentages), derived from electric and gas
operations for each of the last three years, were as follows:
Percent of Percent of Operating
Total Revenues Income Before Income Taxes
Electric Gas Electric Gas
1996 81% 19% 88% 12%
1995 80% 20% 90% 10%
1994 80% 20% 89% 11%
For the year ended December 31, 1996, the Company served an
average of 263,781 electric and 60,523 gas customers. Of the
Company's total electric revenues during that period,
approximately 44% was derived from residential customers, 31%
from commercial customers, 18% from industrial customers and 7%
from other utilities and miscellaneous sources. Of the Company's
total gas revenues during that period, approximately 45% was
derived from residential customers, 33% from commercial
customers, 4% from industrial customers, 9% from interruptible
customers and 9% from miscellaneous sources (including revenues
from transportation of customer-owned gas).
The Company's largest customer is International Business
Machines Corporation (IBM), which accounted for approximately 10%
of the Company's total electric revenues and approximately 4% of
its total gas revenues for the year ended December 31, 1996.
Reference is made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for further
information regarding IBM.
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.
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<PAGE>
Electric
1996 1995 1994
(Thousands of Dollars)
Operating Revenues................ $418,761 $409,445 $411,082
Operating Expenses:
Fuel and purchased electricity... 114,397 113,263 111,984
Depreciation and amortization.... 38,401 37,503 36,597
Other, excluding income tax...... 170,498 168,313 172,057
Total......................... 323,296 319,079 320,638
Operating Income before Income Tax 95,465 90,366 90,444
Federal income tax, including
deferred income tax - net........ 28,592 26,632 25,334
Operating Income.................. $ 66,873 $ 63,734 $ 65,110
Construction Expenditures......... $ 43,359 $ 41,195 $ 49,316
Identifiable Assets at December 31*
Net utility plant................ 784,582 $784,345 $776,169
Construction work in progress.... 39,346 38,978 46,879
Total utility plant............ 823,928 823,323 823,048
Materials and supplies........... 22,668 23,167 27,080
Total.......................... $846,596 $846,490 $850,128
Gas
1996 1995 1994
(Thousands of Dollars)
Operating Revenues................ $ 95,210 $102,770 $104,586
Operating Expenses:
Purchased natural gas............ 50,636 62,339 60,588
Depreciation and amortization.... 4,179 3,964 3,783
Other, excluding income tax...... 27,331 26,899 29,483
Total......................... 82,146 93,202 93,854
Operating Income before Income Tax 13,064 9,568 10,732
Federal income tax, including
deferred income tax - net........ 4,108 2,408 2,709
Operating Income.................. $ 8,956 $ 7,160 $ 8,023
Construction Expenditures......... $ 6,501 $ 9,074 $ 8,729
Identifiable Assets at December 31*
Net utility plant................ $106,348 $103,979 $ 96,652
Construction work in progress.... 9,353 9,792 11,373
Total utility plant............ 115,701 113,771 108,025
Materials and supplies........... 5,427 4,423 6,309
Total.......................... $121,128 $118,194 $114,334
*Identifiable assets not included herein are considered to be
corporate assets and have not been allocated between the
electric and gas segments.
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NOTE 10 - 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 the Company for debt of the same remaining maturities
and quality.
Notes Payable:
The carrying amount approximates fair value because of the
short maturity of those instruments.
The estimated fair values of the Company's financial
instruments are as follows:
December 31, 1996
Carrying Fair
Amount Value
(Thousands of Dollars)
Cumulative preferred stock subject
to mandatory redemption............. $(35,000) $ (33,950)
Long-term debt (including
current maturities)................. (363,402) (355,002)
December 31, 1995
Carrying Fair
Amount Value
(Thousands of Dollars)
Cumulative preferred stock subject
to mandatory redemption............. $(35,000) $ (34,875)
Long-term debt (including
current maturities)................. (390,822) (411,299)
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<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<CAPTION>
Selected financial data for each quarterly period within 1996 and 1995 are presented
below:
Earnings Per
Income Average
Available Share of
for Common
Operating Operating Common Stock
Revenues Income Stock Outstanding
(Thousands of Dollars) (Dollars)
Quarter Ended:
<S> <C> <C> <C> <C>
1996
March 31............ $153,846 $27,092 $21,014 $1.20
June 30............. 116,994 16,366 10,195 .58
September 30........ 117,684 18,000 12,857 .73
December 31......... 125,447 14,371 8,407 .48
1995
March 31............ $144,686 $24,204 $18,273 $1.06
June 30............. 118,618 14,731 9,574 .55
September 30........ 127,547 18,817 12,260 .70
December 31......... 121,364 13,142 7,543 .43
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</TABLE>
</PAGE>
<PAGE> EXHIBIT (10)(i) 107
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN
REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
AGREEMENT FOR THE SALE AND PURCHASE OF COAL
BETWEEN
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
AND
INTER-AMERICAN COAL N.V.
AND
INTER-AMERICAN COAL, INC.
Central Hudson Contract #__________
<PAGE>
TABLE OF CONTENTS
Article Page
I. DEFINITIONS 1
II. TERM OF AGREEMENT 3
III. DELIVERIES 3
IV. SPECIFICATIONS & QUALITY & WEIGHT 7
V. PAYMENT 8
VI. BASE PRICE 9
VII. ADJUSTMENT IN PRICE FOR QUALITY 10
VIII. SAMPLING AND ANALYSIS 10
IX. GOVERNMENTAL LEGISLATION, REGULATIONS AND ORDERS 12
X. FORCE MAJEURE 13
XI. RESERVES 15
XII. EMPLOYEE INTEREST 16
XIII. WAIVER 16
XIV. NOTICES 16
XV. GOVERNING LAW 17
XVI. AMENDMENTS 17
XVII. FINALITY 17
XVIII. TITLES 18
XIX. AGREEMENT FOR BENEFIT OF PARTIES ONLY 18
XX. ASSIGNMENT - TERMINATION 18
XXI. COUNTERPARTS 18
XXII. BUYER'S RIGHT TO ADEQUATE ASSURANCE -
TERMINATION 19
XXIII. FAILURE TO PERFORM 19
XXIV. REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES 20<PAGE>
INTER-AMERICAN CONTRACT
Attachment I - Coal Quality Specifications
Attachment II - Roseton Dock and Hudson River
Limitations
<PAGE>
AGREEMENT FOR THE SALE AND PURCHASE OF COAL
This Agreement, made and entered into as of the 1st day
of December 1996 by and between Central Hudson Gas & Electric
Corporation (hereinafter referred to as "Buyer"), with its
principal office at 284 South Avenue, Poughkeepsie, New York
12601-4879, a New York corporation, and Inter-American Coal N.V.,
(hereinafter referred to as "Producer"), with an office at L.G.
Smith Boulevard No. 90, Oranjestad, Aruba an Aruban corporation,
and Inter-American Coal, Inc. (hereinafter referred to as "Sales
Agent"), with its principal office at 5016 Dorsey Hall Drive,
Suite 202, Ellicott City, Maryland 21042, a Maryland corporation.
Producer and Sales Agent are hereinafter collectively referred to
as "Seller".
WITNESSETH:
WHEREAS, Producer controls coal reserves and has
mining, preparation and loading facilities known as the Mina
Norte and Cachiri ("Operations"), located in Zulia State,
Venezuela & also in Colombia (Norte de Santander) and which
Operations (except as hereinafter provided) are the source of
coal to be sold and purchased hereunder; and,
WHEREAS, Sales Agent is the exclusive sales agent for
Producer and is duly authorized to contract to sell said coal and
otherwise represent Producer, all as hereinafter set forth; and,
WHEREAS, Buyer is a consumer of coal and, after
investigation and examination of the Operations and such coal
reserves, desires to purchase coal from Seller; and,
WHEREAS, the parties hereto wish to enter into a coal
supply agreement based on the terms and conditions hereof.
NOW THEREFORE, the parties hereto for good and valuable
mutual consideration, and intending to be legally bound, hereby
agree as follows:
ARTICLE I
DEFINITIONS
ASTM - The American Society for Testing Materials.
Belt Self-Unloading Vessel (BSUV) - Vessel capable of unloading
cargo via a belted boom to the designated receiving facility.
This will be the only type vessel to deliver coal to the Roseton
Dock. See Attachment II for Roseton Dock and vessel limitations.
BL - Bill of Lading.
Buyer's Agent - Party retained by Buyer to represent its
interests at Load Port and other facilities of Seller and Buyer.
1
<PAGE>
Contract Year - Each January 1 through December 31 of the same
year during the Term of the Agreement.
Danskammer Plant - Danskammer Point Generating Station,
specifically Units #3 and #4, the coal burning units.
Demurrage - An agreed daily amount of money payable as a
penalty if vessel takes more than the allowed laytime for
discharging.
DES - Delivered ex-ship.
Discharge Port - Port where coal will be unloaded -- Roseton
Dock (approximately 65 miles north of New York City on the west
side of the Hudson River).
Firm Tons - Must take/must supply annual tonnage under this
Agreement -- 240,000 metric tons (+ or - 10%) at the rate of
30,000 metric tons (+ or - 10%) per delivery.
Handysize Vessel - Vessel of about 35,000 DWT (typical size of
vessel).
Incoterms - International Chamber of Commerce.
Incremental Tons - Variable annual tonnage under this Agreement
- - -- 120,000 metric tons (+ or - 10%) at the rate of 30,000 metric
tons (+ or - 10%) per delivery. Cargoes 3, 6, 9 and 12 annually
will be provided under Incremental terms.
Independent Laboratory - Laboratory retained to sample and
determine the quality of coal as loaded at Load Port.
Laytime - The time available for discharging a vessel's cargo
without incurring demurrage.
Load Port - Port(s) at which BSUV will take on coal for
delivery to the Roseton Dock.
Marine Surveyor - Independent Party contracted to determine
cargo weights at load and/or Discharge Port.
Metric Ton/MT - 1.1023 Short Ton or = 2,204.6 pounds.
Notice Month - The Month preceding the start of each calendar
quarter.
Reserves - Commercially recoverable coal supply controlled by
Seller.
2
<PAGE>
Roseton Dock - Dock at the Roseton Generating Station at which
coal deliveries for Danskammer will take place.
SHEX - Sundays and Holidays excluded.
SHINC - Sundays and Holidays included.
Short Ton/NT - 2,000 pounds (Avoirdupois).
Take-Away Rate (TAR) - Minimum rate at which coal will be
accepted by Buyer at the receiving hopper at the Roseton Dock.
Vessel - Any watercraft.
WCCON - Whether cleared Customs or not.
WIBON - Whether in Berth or not.
WIFPON - Whether in free pratique or not.
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, 1999, unless sooner terminated as provided for herein. This
Agreement shall terminate automatically, without further obliga-
tion or liability to either party, except for payments for coal
delivered, at the end of the Term.
ARTICLE III
DELIVERIES
Section 1. Quantities/Delivery Schedule: Except as
provided for below, the quantity of coal sold and purchased
hereunder shall be a Firm Tonnage of 240,000 Metric Tons (+ or -
10%) per year. In addition, there will be up to 120,000 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 delivered 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 30,000 Metric Tons (+ or - 10%) will be
shipped under this Agreement. Every third Vessel will deliver
Incremental Tonnage provided Buyer and Seller have agreed on the
price for said tonnage as per the notification procedure
described herein.
3
<PAGE>
On or before 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 during that
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 15 days prior to each Vessel's ETA, whichever
is sooner, the lay days will be reduced to a ten (10) day window
and 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 this
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 time in the ensuing 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 2. Limitations on Quantities: Notwith-
standing any of the above, Buyer will not be obligated to
purchase Firm Tonnage coal from Seller under this Contract if
Buyer is unable to utilize such coal at its Danskammer Plant
because of Economic Reasons. For the purposes as used herein,
Economic Reasons is defined as times when electrical energy is
available to Buyer, either from the Danskammer Plant when burning
oil or natural gas or from any other source, at a lower cost than
equivalent electrical energy which would otherwise be produced by
Buyer's Danskammer Plant when burning coal supplied by Seller at
the Base Price. If, because of Economic Reasons, the Danskammer
Plant does not at any time require all of the coal contracted for
hereunder, Buyer shall so notify the Seller in writing allowing
for sufficient lead time for Seller to reconsign scheduled ocean
shipments. If Buyer so notifies Seller, Seller shall have the
right to reduce the Base Price so that the cost of electrical
energy produced by Buyer's Danskammer Plant when burning coal
supplied hereunder is equivalent in cost to other lower cost
electrical energy then available to the Buyer. If Seller so
elects to reduce the Base Price, the Buyer shall be obligated to
purchase the Firm Tonnage contracted for herein.
In the event, upon receipt of such notice, the Seller
does not elect to reduce the Base Price, the Buyer shall have the
right to reduce the Firm Tonnage to that required by Economic
Reasons for the Danskammer Plant. If Buyer so reduces the Firm
Tonnage for more than thirty (30) days for Economic Reasons
during the term of this Contract, the Seller shall have the right
to: 4
<PAGE>
1. Upon sixty days' prior written notice terminate
this Agreement.
2. Extend the Term of this Agreement until such
deferred Firm Tonnage has been shipped in total
quantities provided for in this Agreement. The
prices for the tonnage then shipped will be the
prices in effect at the time of shipment.
Section 3. Delivery Schedule Limitations: All Firm
Tonnage necessary to meet the average 60,000 Metric Tons per
quarter schedule will be delivered before any Incremental Tonnage
is delivered. Both Firm Tonnage and Incremental Tonnage can be
delivered during the same quarter, but Seller will not be
obligated to deliver more than three (3) 30,000 Metric Ton
shipments of coal during any one quarter, unless otherwise
mutually agreed. There shall be a minimum of fifteen (15)
calendar days between shipment releases from the Load Port unless
otherwise mutually agreed.
Section 4. Passage of Title: The coal sold and
delivered to Buyer hereunder is DES Roseton Dock (Incoterms 1990)
and, risk of loss of the coal supplied hereunder shall pass to
Buyer upon discharge at the Roseton Dock.
Section 5. Initial Quality Notification: The
Parties recognize the need to know the quality of the coal as
loaded in the Vessel prior to receipt of the shipment at the
Danskammer Plant. Prior to loading the vessel, the Seller shall
submit in writing a loading plan which lists the source of the
coal inventories at the load terminal, the average (or projected)
quality of each pile, and the quantity of each pile to be loaded.
The loading plan should include a brief description of the method
to mix the coals from the piles into the barges and onto the
vessel. The Buyer or Buyer's agent shall have access to the
Seller's facilities to inspect the coal inventory and loading
equipment. The coal shall be sampled in 5,000 MT sublots as it
is loaded into the Vessel and analyzed by an independent coal
testing laboratory that will within two business days after the
coal is loaded notify Seller and Buyer by telephone, telegram, or
TWX of the average "as received" analytical results of each
shipment. The additional results (AFT, HGI, Ultimate Analysis
and Ash Analysis) of the composite sample shall be reported
within 72 hours.
Section 6. Shipping Notice: For each shipment of
coal hereunder, Seller shall promptly mail to Buyer's Danskammer
Plant and to Financial Records Section, Central Hudson Gas &
Electric Corporation, 284 South Avenue, Poughkeepsie, New York
12601-4879, a shipping notice showing B/L date, total B/L
weights, name of Vessel and ETA Roseton Dock.
Section 7. Delivery: Coal delivered under this
Agreement by Seller is done so DES the Roseton Dock. Prices
quoted in Article VI and Incremental Prices quoted by Buyer and
5
<PAGE>
CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS
BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
accepted by Seller include the shipping component. Coal
deliveries to the Roseton Dock can only be made in BSUV that meet
the Roseton Dock and Hudson River limitations as described in
Attachment II herein. However, Seller and its Agents are
responsible for the safe passage of Vessels under their control
in all waters and any limitations thereon, whether or not they
are included in Attachment II.
Buyer will provide a safe berth, free of wharfage or
dockage charges, to which Vessels may proceed and from which they
may depart, and where they may always lie safely afloat. With
assistance as necessary from Buyer's dockside personnel (Buyer
will provide shoreside labor for line handling during
docking/undocking procedures), it shall be the responsibility of
Seller to secure the Vessel to Buyer's berth prior to such
discharging of coal.
Section 8. Importer of Record: Seller will act as
importer of record on behalf of Buyer. Usual and customary costs
incurred in clearing cargo will be reimbursed by Buyer to Seller
as per a statement from the Customs broker.
Section 9. Vessels can be berthed/deberthed any
time during the day or night and docking/undocking will only be
constrained through directions given by the docking/undocking
pilot if such a pilot is required. Buyer will provide shoreside
labor for line handling during docking/undocking procedures.
If upon arrival of the Vessel the discharge berth at
Roseton Dock is open and ready to receive the Vessel for
immediate docking, Seller's vessel will tender its notice of
readiness to start discharging coal only after the vessel has
cleared Immigration, U.S. Customs, has been granted free pratique
and after the initial draft survey has been completed, provided
that the Vessel is in all respects ready to start discharging
coal from its conveyor boom into Buyer's dockside hopper. Buyer
will receive the coal from the tip of the Vessel's conveyor at an
average minimum rate of x,xxx MT/hour and a maximum rate not to
exceed x,xxx MT/hour. Any delays in discharge time due to
Vessel's inability to discharge at the x,xxx MT/hour average
minimum rate will not count as laytime. In addition, Seller will
be responsible for demurrage charged by other vessels held out
due to Seller's Vessel inability to offload at an average minimum
rate of x,xxx MT per hour and/or by Seller's Vessel arrival
outside of its seven (7) day delivery window.
Any delays experienced shoreside preventing the Vessel
to achieve its x,xxx MT/hour average minimum rate will count as
laytime. Allowed laytime is defined as follows:
Cargo Size in MT = allowed hours
x,xxx MT/Hour
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<PAGE>
CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS
BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
If upon arrival of the Vessel the discharge berth at
Roseton Dock is not available for immediate docking, Seller's
Vessel will tender its notice of readiness WIBON, WIFPON, WCCON
from the closest practical safe anchorage and laytime will start
counting provided the Vessel arrives within Seller's seven (7)
day delivery window and the Roseton Dock is occupied. Subsequent
shifting time from anchorage to berth will not count as laytime,
nor will time for clearing Immigration, U.S. Customs, granting of
free practique or for conducting the initial draft survey.
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.
ARTICLE IV
SPECIFICATIONS & QUALITY & WEIGHT
Section 1. Origin: The coal shipped shall be from
the Producer's operations described herein and meet the
specifications as per Attachment I.
Section 2(a). 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
herein, except for the price adjustments for quality provided for
in Article VII herein, Buyer shall have the rights and remedies
described in this Section 2 upon Seller's failure to deliver coal
in accordance with the specifications set forth in Sections 1 and
2 of this Article IV.
(b). Buyer's Right to Reject Shipments:
Buyer's ability to use the coal being dependent on the coal
meeting the specifications set forth in Attachment I, it is
agreed that Buyer shall have the unilateral right to reject any
and all shipments which fail to meet any of the individual, as
received shipment rejection limits shown below:
INDIVIDUAL SHIPMENT REJECTION LIMITS
Sulphur (By Weight) 0.7% Maximum
Volatiles 30% Minimum
Ash Fusion (I.D.) 2,300 F Minimum
Gross Calorific Value (BTU/LB) 12,500 Minimum
SO2/Million BTU 1.1 LBS. Maximum
The delivered coal must meet the following weighted
average specifications for consecutive shipments:
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CONSECUTIVE SHIPMENTS LIMITS
Grind 48 Minimum
Ash 8% Maximum
Moisture 8% Maximum
If the weighted average grind, ash or moisture of coal
in consecutive shipments delivered hereunder, as determined by
sampling and analysis, does not meet the above Consecutive
Shipments Limits, Buyer shall have the unilateral right to reject
any of the immediately following shipments in the event that such
shipment does not meet said limitation. The basis of any such
rejection shall be the averaged results of two different
independent laboratories as provided for in Article VIII. In
each instance one of the independent laboratories will be the
original independent laboratory test result.
(c). Seller shall pay all freight, diversion,
demurrage, testing and other expenses in connection with any such
rejected shipment, or shipments found by Buyer to be nonconform-
ing, unless such shipment is accepted by Buyer. Furthermore,
Seller certifies that it will not make any shipment shown by
sampling and analysis (as provided for in Article VIII) to exceed
the individual shipment rejection limits.
Section 3. 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 set
forth in Attachment I and above Section 2. Nothing in this
Article IV shall be construed to relieve Seller of its obligation
to conduct its mining and coal operations in a competent manner,
consistent with good industry practices, so as to produce coal
which will meet the specifications set forth above.
Section 4. Weight Measurement: The weight of coal
sold hereunder shall be determined by an Independent Marine
Survey(s) of the Vessel averaged between Load and Discharge Port
or only the Load Port weight if Discharge Port option is not
elected. Buyer's Discharge Port survey will govern if Seller
delivers part of the loaded cargo to Buyer and part to another
party(s).
(Buyer's Option): If Buyer elects to have a survey performed at
the Discharge Port the maximum allowable deviation between the
two surveys will be two percent (2%) from the survey reporting
the lower short tons. Load Port survey results will be used if
no Discharge Port survey is elected. Buyer, Seller or their
Agents can witness the survey at Load and Discharge Port.
ARTICLE V
PAYMENT
Section 1. Price: For coal delivered and accepted,
Buyer shall pay Seller the Price herein provided.
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<PAGE>
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. Invoice: Thereafter, 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 IV Section 4 will be submitted by the
Seller to the Buyer. The coal shipped will be invoiced at the
Price (hereinafter defined).
Section 3. Taxes: All taxes due on Vessel or cargo
in Venezuela are for Seller's account. All taxes due on cargo in
U.S.A. upon acceptance of title are for Buyer's account.
Section 4. 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 5. Payment: Buyer shall make payment to
Seller within fifteen (15) calendar days from the Bill of Lading
date or completion of discharge date, whichever is later.
Payment to Seller's Agent shall be made by wire
transfer, as follows:
Citibank - New York, New York
ABA 021-000-089
For Credit to the Account of
Interbank Aruba N.V.
Oranjestad, Aruba
Account No. 36057156
For Further Credit to the Account of
Inter-American Coal N.V.
Account No. 191000019
The above address may be changed by Seller upon written notice to
Buyer.
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 the
Contract Year 1997.
Section 2. On or before July 1, 1997, 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, 1997 if negotiations for the
following year have not been completed by October 1.
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<PAGE>
CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS
BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
ARTICLE VII
ADJUSTMENT IN PRICE FOR QUALITY
Section 1. BTU Value: The Price to be paid to
Seller by Buyer is based upon coal with 13,000 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 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 xxx BTU/LB, fractions pro rata; or
(b) For a coal shipment with a BTU Value less than
xx,xxx BTU/LB, a penalty shall be deducted from the Price at the
rate of $x.xx per xxx BTU/LB, fractions pro rata.
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.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 $x.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%.
ARTICLE VIII
SAMPLING AND ANALYSES
A recognized Independent Laboratory experienced in the
sampling and analyzing of coal, shall be mutually agreed upon by
Buyer and Seller, and shall be engaged by each party to perform
the sampling and analysis of coal shipped hereunder.
During the loading of the barges, sample increments
shall be collected by the most reliable, practical and mutually
agreeable procedures. The frequency and mass of the increments
shall be in accordance with ASTM standards. The cargo shall be
divided into 5,000 MT sublots. The preparation of each sublot
10
<PAGE>
sample shall yield the following four mesh sample splits: a)
laboratory analyses, b) referee split, c) Seller's split and d)
Buyer's split. The Independent Lab shall provide upon request
the splits of the sublot samples to the Buyer and/or Seller as
soon as the sample is prepared. The Independent Lab shall
properly identify, seal, and retain the referee splits of each
sublot sample for a period of 60 days so that the Buyer or Seller
may analyze such samples.
The sublot samples shall be analyzed for total
moisture, ash, sulfur, volatile, and gross calorific value
(BTU/LB). The initial sublot(s) shall be tested immediately and
the results reported to Seller and Buyer/Buyer's Agent upon
completion of testing. The Vessel certified analyses shall be
the weighted mathematical average of all sublot values for
moisture, ash, volatile, sulphur and calorific value.
A physical composite sample of the sublot samples shall
be prepared and analyzed for grindability index (HGI), ash fusion
temperature, mineral ash, and ultimate analyses. The cost of the
Independent Lab's services for such sampling and analyzing of the
coal in each shipment shall be paid for by the Buyer and Seller,
equally.
If the Buyer or Seller should question the correctness
of the analyses made by the Independent Lab, they may, within 30
days after the Vessel unloading, notify the other Party in
writing to request that the Referee splits be analyzed by a
second mutually agreeable Independent Laboratory. This
notification should specify which analytical parameter or
parameters are in dispute. The Independent Lab shall provide the
Referee Lab with the properly identified sealed sublot samples.
The integrity of the moisture in reserve samples is the
most difficult to preserve. Therefore, if the moisture value is
in dispute, the governing result will be the higher of the
averaged value reported by the Independent and Referee
Laboratory. Other analytical parameters shall be determined on a
'dry basis' and corrected to the 'as received' basis using the
governing moisture.
The following are the acceptable tolerance for other
test parameters: Ash +/- 0.3%; Sulphur +/- 0.03%; Volatile +/-
0.5%; Calorific Value +/- 100 BTU/LB; Ash Fusion Temperature I.D.
+/- 75 Degrees F. and HGI 3. Should the results fall within
these tolerances, the results of the Independent Lab will stand.
Should the results fall outside the tolerance, the average dry
basis analyses of the Independent Laboratory and Referee analyses
shall be the governing result.
Should the grindability (HGI) result be in dispute, the
Referee Lab will prepare a physical composite sample from the
Referee sublot samples, then distribute a split of the physical
composite sample to an additional laboratory. If the HGI test
result of the second laboratory is within tolerance, the original
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<PAGE>
laboratory result will stand. If out of tolerance, the average
of the two results will be the governing analysis.
The cost of this Referee analysis will be paid by the
Party requesting the check analysis.
Neither party shall require the other party to use
equipment or procedures which exceed the requirements of ASTM.
ARTICLE IX
GOVERNMENTAL LEGISLATION, REGULATIONS AND ORDERS
Section 1. Compliance with Law: Each party shall
use its best efforts to comply with the provisions of all
applicable national, federal, state and other governmental laws
and any applicable orders and/or regulations, or any amendments
or supplements thereto, which have been, or may at any time be,
issued by a governmental agency.
Section 2. Effect Upon Buyer's Obligations: The
parties hereto recognize the possibility that, during the
continuance of this Agreement, national, federal, state or local
legislative or regulatory bodies or the courts may impose or
enforce regulations, restrictions or standards, or revise
existing regulations, restrictions or standards which in Buyer's
sole discretion will make it impossible or impractical for Buyer
to utilize the coal hereafter to be delivered hereunder at the
Danskammer Plant. Such regulations or restrictions could pertain
to, but would not necessarily be limited to coal quality. If any
such regulations or restrictions are imposed and if as a result
thereof Buyer, in its sole discretion, decides that it will be
impossible or impractical for Buyer to utilize the coal, Buyer
shall so advise Seller and thereupon Buyer and Seller shall
promptly consider what corrective steps they can take in the
mining and preparation of the coal and in the handling and
combustion of the coal at the Danskammer Plant; and if in Buyer's
judgement such steps will not, without unreasonable expense to
Buyer, make it possible and practical for Buyer to utilize the
coal thereafter to be delivered hereunder without violating such
regulations or restrictions, Buyer shall have the unilateral
right, upon written notice to Seller, to terminate this Agreement
without further obligation to Seller hereunder.
Section 3. Effect Upon Seller's Obligations: In
the event of the enactment of any new national, federal, state or
other governmental law, or the promulgation of any regulation or
order thereunder which may prohibit (or restrict so as
effectively to prohibit) mining, transportation, loading,
processing or shipping, as may be applicable, of the coal
specified in this Agreement, Seller, in its sole discretion,
shall be relieved of its obligation upon the effective date of
implementation (compliance date) of such law, regulation or order
to deliver the total quantity of coal to be delivered under this
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<PAGE>
Agreement to the extent of the amount of tonnage represented by
the percentage of production of such mining, processed or shipped
coal so affected by such law, regulation or order to the total
amount of coal produced and processed to meet the quantity
requirements of this Agreement.
Section 4. Election to Reduce Tonnage or Terminate:
In the event any party elects to invoke Section 2 or 3, above,
the party so invoking shall notify the other parties in writing
and said notice shall state the notifying party's election to
terminate this Agreement or reduce the tonnage to be delivered
under this Agreement, effective on a specified date, which said
date shall not be earlier than the effective date of the
implementation (compliance date) of such law, regulation or order
giving rise to the termination; provided, however, that
notwithstanding anything to the contrary herein, said specified
date shall in no event be earlier than sixty (60) days after the
date of delivery of notice.
Section 5. Effect of Termination: If any party
elects to terminate this Agreement under the provisions of
Section 2, 3, and/or 4 of this Article IX, then no party shall
have, after the effective date of such termination, any further
obligation or liability under this Agreement, provided, however,
that such termination shall not affect any rights or obligations
of the parties existing under this Agreement for coal shipped or
required to be shipped prior to the effective date of said
termination.
ARTICLE X
FORCE MAJEURE
No party shall be subject to liability to the other
party for the failure to perform in conformity with this Agree-
ment where such failure results from an event or occurrence
beyond the control of the party affected thereby, whether
foreseen, foreseeable or unforeseeable, which wholly or partially
prevents the mining, preparation, loading or shipping of coal by
Seller or the receiving, unloading or utilization of coal by
Buyer. Such events shall include, by way of illustration but not
by way of limitation, acts of God, war, insurrection, riots,
nuclear disaster, strikes, labor disputes, labor and material
shortages, fires, explosions, floods, river freezeups, breakdowns
or damage to mines, plant equipment or facilities (including
emergency outages of equipment or facilities to make repairs to
avoid breakdowns thereof or damage thereto), interruptions to
transportation, railway car shortages, embargoes, orders or acts
of civil or military authority, laws, regulations or administra-
tive rulings. The provisions of the above sentence shall not
excuse a party from performing unless such party shall give
reasonable notice to the other party and furnish reasonable
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<PAGE>
CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS
BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
information as to the cause of inability to perform and probable
extent thereof within thirty (30) calendar days after such cause
occurs. Failure to give such notice and furnish such information
within the time specified shall be deemed a waiver of all rights
under this Article for such period of time during which notice
was not given. No suspension or reduction by reasons of force
majeure shall invalidate the remainder of this Agreement but, on
the removal of the cause, shipments shall resume at the specified
rate.
If circumstances arise such that a vessel is prevented
from discharging or completing the discharge of its cargo at the
discharging port, by reason of breakdown or failure of the shore-
side equipment that is necessary to receive and take away the
cargo from the vessel, then in order to mitigate economic losses
the Buyer shall have the right, by notice in writing to the
Seller, to order the vessel to a safe and accessible berth or
anchorage (the substitute berth) where she can safely discharge
without risk, in which event upon the completion of the unloading
of the cargo at such substitute berth or anchorage, all
conditions of the applicable bill of lading shall apply.
If Buyer so declares a substitute berth, then time
shall stop counting 12 hours after declaration, or when the
vessel sails, whichever is sooner and shall recommence when
vessel tenders notice at the substitute berth or anchorage. Time
to count at the substitute berth as it would have at the original
berth, with exception of turn time. Total time used at the
discharging berths to be the sum of time at the original berth
(Roseton Dock) and time used at the substitute berth.
In the event that Buyer declares a substitute berth or
anchorage for the vessel to discharge or complete discharge,
Buyer to compensate Seller as follows:
All reasonably incurred Vessel diversion costs
including out-of-pocket costs such as pilot dues, tug
assistance, port harbor dues, etc., plus the actual
cost of vessel used in such diversion at a rate not to
exceed USD xx,xxx/day calculated on a pro rata basis.
The total of the Vessel diversion costs as identified
above plus the actual cost of the Vessel used in such
diversion shall not exceed USD xx,xxx per occurrence.
All loss of value of coal carried aboard the vessel
(calculated using Buyer's DES coal price as the basis).
If circumstances arise such that Seller's vessel is
prevented from discharging or completing the discharge of its
cargo at the discharging port, by reason of breakdown or failure
of the vessel, then in order to mitigate economic losses, Seller
to compensate Buyer for coal not received as follows:
14
<PAGE>
All freight, diversion, demurrage, testing and other
expenses.
The differential between the value of coal carried
aboard the vessel (calculated using Buyer's DES coal
price as the basis) and the cost of replacement coal or
replacement energy as delivered to the Danskammer
Plant.
During such periods when force majeure conditions
result in a reduction in deliveries, Seller shall equitably
prorate shipments among its customers. Buyer shall equitably
prorate acceptance of deliveries of coal it purchases for the
Danskammer Plant. Nothing herein contained shall be construed as
requiring Seller or Buyer to accede to any demands of labor, or
labor unions, or suppliers, or other parties which Seller or
Buyer considers unacceptable. Deficiencies in shipments so
caused shall not be made up except by mutual consent.
Deficiencies in shipments caused by an event or occurrence within
the control of either party shall, at the option of the other
party, extend the term of this Agreement to the extent necessary
to make up such deficiency except as otherwise herein provided.
Seller shall furnish Buyer a monthly statement by the
fifteenth (15th) day of the calendar month setting forth the
amount of tonnage not shipped because of force majeure causes
asserted during the preceding calendar month.
ARTICLE XI
RESERVES
The coal reserves owned by or otherwise available to
Seller are located in Zulia, Venezuela and Norte De Santander,
Colombia and are accessible for truck transportation to the
loading terminal and are part of the mining properties consti-
tuting the Producer's mines. The total quantity of suitable and
economically recoverable coal of the quality required to meet
Seller's maximum obligation to Buyer under this Agreement is 1.2
million Metric Tons. Seller shall not enter into other agree-
ments for the production and sale of coal from the above reserves
which production and sale would reduce or impair the amount of
reserves required to meet its obligations during the term of this
Agreement.
Buyer shall have the right from time to time, whenever
deemed desirable by Buyer, to audit at Buyer's expense (1) said
reserves owned by or otherwise available to Seller and (2)
Seller's commitments for the purpose of determining if Seller has
sufficient reserves which are not otherwise committed to comply
with the reserve requirements of this Agreement. Buyer may at
its discretion have any such audit conducted by an independent
firm or firms acceptable to Seller.
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ARTICLE XII
EMPLOYEE INTEREST
Seller represents to Buyer that Seller has not given
and will not give, directly or indirectly, anything of value to
any employee or other representative of Central Hudson Gas &
Electric Corporation with the view of securing this Agreement or
obtaining favorable treatment with respect to the performance of
this Agreement. If such representation is untrue, or becomes
untrue, Buyer shall have the right to declare this Agreement null
and void or to terminate it, to sue for damages and to take such
other action as may be provided by law. If Seller obtains
knowledge at any time that any such employee has a direct or
indirect interest in Seller or its affiliates, (excluding routine
purchases in the open market by such employee of securities
issued by Seller or its parent corporations) it will immediately
inform Buyer of such fact.
ARTICLE XIII
WAIVER
The failure of any party to insist in any one or more
instances upon strict performance of any of the provisions of
this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a future waiver of any such
provisions or the relinquishment of any such rights, but the same
shall continue and remain in full force and effect for the term
of this Agreement.
ARTICLE XIV
NOTICES
Notices and other communications provided for or
required herein shall be given (effective, if written, when
presented for delivery by postal authorities when sent by postage
prepaid, certified mail) by facsimile as follows:
TO BUYER:
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
284 SOUTH AVENUE
POUGHKEEPSIE, NEW YORK 12601-4879
ATTENTION: MANAGER OF FUELS RESOURCES
FAX: (914) 486-5268
PHONE: (914) 486-5754
PHONE: (914) 486-5562
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DANSKAMMER GENERATING STATION
FAX: (914) 561-4845
FINANCIAL RECORDS
FAX: (914) 486-5335
TO SALES AGENT:
INTER-AMERICAN COAL, INC.
5016 DORSEY HALL DRIVE, SUITE 202
ELLICOTT CITY, MARYLAND 21042
ATTENTION: MARCEL VAN DEN BERG, PRESIDENT
FAX: (410) 997-6842
PHONE: (410) 730-6800
TO PRODUCER:
C/O INTER-AMERICAN COAL N.V.
L.G. SMITH BOULEVARD NO. 90
ORANJESTAD, ARUBA
ARTICLE XV
GOVERNING LAW
This Agreement shall be construed, enforced and
performed in accordance with the laws of the State of New York.
ARTICLE XVI
AMENDMENTS
This Agreement may be modified or amended at any time
by mutual agreement of the parties, provided that such
modification or amendment shall be in writing and executed by the
duly authorized representatives of the parties.
ARTICLE XVII
FINALITY
This Agreement is intended as the final, complete and
exclusive statement of the terms of the Agreement among the
parties. The parties agree that parole or extrinsic evidence may
not be used to vary or contradict the express terms of this
Agreement. No waiver of any provision hereof shall be effective,
unless set forth in a written instrument authorized and executed
with the same formality as this Agreement.
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ARTICLE XVIII
TITLES
The titles of the articles and sections of this
Agreement have been inserted as a matter of convenience for
reference only.
ARTICLE XIX
AGREEMENT FOR BENEFIT OF PARTIES ONLY
Buyer agrees to indemnify, including reasonable
attorneys fees, defend, and hold Seller harmless from any and all
claims of any broker, consultant, finder or like agent with whom
Buyer has dealt, or is alleged to have dealt, regarding this
Agreement. Seller agrees to indemnify, including reasonable
attorneys' fees, defend, and hold Buyer harmless against any and
all claims of any broker, consultant, finder or like agent with
whom Seller has dealt, or is alleged to have dealt regarding this
Agreement.
ARTICLE XX
ASSIGNMENT - TERMINATION
All of the rights and obligations of this Agreement
shall inure to and be binding upon the legal representatives,
successors and permitted assigns of the parties hereto. No
assignment shall impose upon the non-assigning party any
obligation or burden in excess of those obligations or burdens as
exist between the original parties to this Agreement. This
Agreement or any interest herein shall not be assigned without
the prior written consent of the other parties, which consent
shall not be unreasonably withheld.
Subject to the provisions of the Federal Bankruptcy
Code, this Contract shall not be deemed an asset of either Seller
or Buyer and, upon five (5) days prior written notice, either
such Party may terminate this Agreement without penalty at any
time in the event the other such Party enters into any voluntary
or involuntary receivership, bankruptcy, or insolvency
proceedings in any applicable national jurisdiction.
ARTICLE XXI
COUNTERPARTS
This Agreement is being executed in several
counterparts, each of which is an original and all of which
together constitute but one and the same agreement.
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ARTICLE XXII
BUYER'S RIGHT TO ADEQUATE ASSURANCE - TERMINATION
If, during the Term of this Agreement, the Seller's
ability to meet its obligations under this Agreement become
impaired to the point that Buyer has reasonable grounds for
believing that Seller may not be able to meet such obligations,
then Buyer, by a written notice to Seller, may require that
Seller provide adequate assurance that Seller is able to continue
to meet its obligations under this Agreement. If such adequate
assurance is not received by Buyer within fifteen (15) days from
Seller's receipt of Buyer's request thereof, Buyer shall have the
right to immediately reduce, by the amount in question, Buyer's
obligation to purchase coal pursuant to this Agreement. Buyer
may obtain the amount of said reduction through purchases from
third parties; such reduction to be reflected in a notice from
Buyer to Seller, which thereupon shall become an amendment to
this Agreement. In the event that Seller cannot offer such
adequate assurance to Buyer upon Buyer's request or in the event
Seller has made a material misrepresentation with respect to its
Warranties and Representations in Article XXIV herein, Buyer
shall also have the right at its option to immediately terminate
this Agreement by written notice to Seller.
ARTICLE XXIII
FAILURE TO PERFORM
In the event of failure to perform by either Seller or
Buyer, the nondefaulting party shall have available, except as
herein otherwise provided, all remedies provided at law or in
equity. These remedies shall include, without limitation, the
right of Buyer to obtain specific performance and/or injunctive
relief where default by Seller would deprive Buyer of a necessary
supply of coal and, because of market conditions or otherwise,
the collection of damages does not afford Buyer an adequate
remedy. In that regard it is expressly recognized and understood
between the parties that prompt and full deliveries by the Seller
in accordance with this Agreement are essential to Buyer. These
remedies also shall include, without limitation, except as herein
otherwise provided, the right of Seller to obtain specific
performance and/or injunctive relief where default by Buyer would
deprive Seller of a necessary market for its coal and, because of
market conditions or otherwise, the collection of damages does
not afford Seller an adequate remedy. In that regard it is
expressly recognized and understood between the parties that
prompt and full acceptance of deliveries and scheduling of
transportation therefore in accordance with this Agreement are
essential to Seller. Notwithstanding any other provision of this
Agreement, neither party shall be entitled to recover incidental
or consequential damages as a result of the other's failure to
perform.
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ARTICLE XXIV
REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES
Each party warrants and represents to the other that:
(i) it has all requisite power, authority, licenses,
permits, permissions, approvals and franchises, corporate or
otherwise, to execute and deliver this Agreement and perform its
obligations hereunder;
(ii) its execution, delivery, and performance of this
Agreement has been duly authorized by, or is in accordance with,
its organic instruments, this Agreement has been duly executed
and delivered for it by the signatories so authorized, and this
Agreement constitutes its legal, valid and binding obligation
enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights in general and by general
principles of equity;
(iii) its execution, delivery, and performance of this
Agreement will not result in a breach or violation of, or
constitute a default under, any agreement, lease or instrument to
which it is a party or by which it or its properties may be bound
or affected; and
(iv) it has not received any notice, nor to the best
of its knowledge is there pending or threatened any notice, of
any violation of any applicable laws, ordinances, regulations,
rules, decrees, awards, permits or orders which would materially
adversely affect its ability to perform hereunder.
20
<PAGE>
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 ________________________________________________
PAUL J. GANCI
ITS President and Chief Operating Officer
PRODUCER: INTER-AMERICAN COAL N.V.
BY ________________________________________________
MARCEL L.J. VAN DEN BERG
ITS President and Chief Executive Officer
SALES AGENT: INTER-AMERICAN COAL, INC.
BY ________________________________________________
MARCEL L.J. VAN DEN BERG
ITS President
21
<PAGE>
Attachment I
Quality Specifications: The quality of coal sold and purchased
hereunder shall meet the following specifications:
Expected Minimum Maximum ASTM Method
As Received:
Moisture % 6 4 8 D 3173
Volatiles % 35 30 38 D 3175
Fixed Carbon % 51 47 60 D 3172
Ash % 7.0 -- 10 D 3174
Gross Calorific
Value (BTU/LB.) 13,000 12,500 -- D 3286
Sulphur % 0.66 0.47 0.70 D 3177/4239
SO2 (LBS./MMBTU) 1.0 -- 1.1 Calculated
Grind (HGI) 52 48 60 D 409-85
Ash Fusion (Reducing)
(I.D., Deg. F) 2,700 2,300 D 1587
Coal Fines (A) -- -- 45% D 4749
THIS COAL SHALL BE FREE OF EXTRANEOUS MATERIAL AND
SHALL HAVE A MAXIMUM TOP SIZE OF THREE INCHES.
(A) Coal Fines are defined as zero times one quarter inch.
<PAGE>
Attachment II
Roseton Dock and Vessel Limitations:
- - - LOA - 890 Feet Maximum
- - - Beam - No Restriction
- - - Water Depth in Berth - 36+ Feet MLW
(Operational Draft 31 Feet MLW Channel at Haverstraw is
Limiting)
<PAGE>
Attachment III
Bunker Fuel Price Adjustment
Fuel to escalate as follows (1998 only):
Freight rates are predicated on a delivered fuel price of USD
100.00 per metric ton for IFO 180 CST. If the price of fuel for
each voyage as determined by the Platt's Oilgram for the port of
New York issued most recently preceding the bill of lading date
is greater or less than USD 100.00 pmt, then the freight rate to
be increased or decreased by USD 0.01 pmt for each dollar that
the fuel price so varies, up to a maximum of USD 0.50 pmt from
the base USD 100.00 per metric ton rate. Owners to supply
Platt's Oilgram for the relevant date as backup on invoicing.
Example: Bill of Lading Date: January 15th
Platt's Oilgram (issued each Thursday) for Jan. 8th
Port of New York: IFO 180 CST - USD 80.00 pmt
Fuel Adjustment: USD 100.00 - USD 80.00 = USD
20.00
USD 20.00 x 0.01 - USD 0.20
Therefore, freight rate decreases by USD 0.20 pmt for this
voyage.
<PAGE>
November 25, 1996
Mr. Marcel Van den Berg
President
Inter-American Coal, Inc.
5016 Dorsey Hall Drive, Suite 202
Ellicott City, MD 21042
In furtherance of the Agreement for the Sale and
Purchase of Coal between Central Hudson Gas & Electric
Corporation (Buyer) and Inter-American Coal N.V. and Inter-
American Coal, Inc. (collectively referred to as Seller), entered
into as of the ___ day of November 1996, Seller recognizes that
Buyer will be scheduling and receiving rail deliveries of coal
during the Contract Term and that the coal unloading system can
not handle both vessel and train unloadings at maximum unloading
rates. Therefore, if Seller's vessel arrives outside of its
seven (7) day delivery window and within the time frame of a
scheduled rail delivery of coal, Buyer will have the option to
delay the commencement of discharge up to twelve hours after the
Notice of Readiness is tendered.
BUYER: CENTRAL HUDSON GAS & ELECTRIC CORPORATION
BY ________________________________________________
PAUL J. GANCI
ITS President and Chief Operating Officer
PRODUCER: INTER-AMERICAN COAL N.V.
BY ________________________________________________
MARCEL L.J. VAN DEN BERG
ITS President and Chief Executive Officer
SALES AGENT: INTER-AMERICAN COAL, INC.
BY ________________________________________________
MARCEL L.J. VAN DEN BERG
ITS President
</PAGE>
<PAGE> EXHIBIT (10)(i) 108
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN
REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
CONTRACT
This Agreement, made and entered into as of the 1st day
of January, 1997 by and between Central Hudson Gas & Electric
Corporation (hereinafter referred to as "Buyer"), with its
principal office at 284 South Avenue, Poughkeepsie, New York
12601-4879, a New York corporation, and HPM Corporation
(hereinafter referred to as "Seller" or "Producer"), with an
office at Drennen, West Virginia a Delaware corporation, and
Integrity Coal Sales, Inc. (hereinafter referred to as "Sales
Agent"), with its principal office at 490 Wheeler Road, Suite
165M, Hauppauge, New York, a New York corporation.
WITNESSETH:
WHEREAS, Seller controls coal reserves and has mining,
preparation and loading facilities known as the High Power
Mountain ("Operations"), located near Drennen, West Virginia and
which Operations (except as hereinafter provided) are the source
of coal to be sold and purchased hereunder; and,
WHEREAS, Sales Agent is the sales agent for Seller and
is duly authorized to contract to sell said coal and otherwise
represent Seller, all as hereinafter set forth; and,
WHEREAS, Buyer is a consumer of coal and, after
investigation and examination of the Operations and such coal
reserves, desires to purchase coal from Seller; and,
WHEREAS, the parties hereto wish to enter into a coal
supply agreement based on the terms and conditions hereof.
NOW THEREFORE, the parties hereto for good and valuable
mutual consideration, and intending to be legally bound, hereby
agree as follows:
ARTICLE I
TERM OF AGREEMENT
The term of this Agreement shall be for the period
commencing January 1, 1997 and continuing until midnight,
December 31, 1998, unless sooner terminated as provided for
herein. A Contract Year is defined as the period from January 1
of a year through December 31 of the same year. 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.
ARTICLE II
DELIVERIES
Section 1. Quantities/Delivery Schedule: Except as
provided for below, the quantity of coal sold and purchased
hereunder shall be a firm tonnage of no less than 240,000 tons
per year ("Firm Tonnage"). In addition, there will be 120,000
tons per year called incremental tonnage ("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 Point Plant ("Danskammer Plant" or
"Buyer's Plant") exceeds the applicable delivered Base Price of
coal in delivered cost per million Btu's.
The Sales Agent/Seller will assume that three trains of
approximately 12,000 tons each will be loaded for shipment during
odd numbered months (1, 3, 5, 7, 9, 11) and two trains of
approximately 12,000 tons each will be loaded in the even
numbered months (2, 4, 6, 8, 10, 12). Buyer will provide
scheduled loading dates to Sales Agent/Seller on or before the
twenty-fifth (25th) of the month preceding the loading month.
Every third train in a contract year will be an
incremental train subject to the provisions contained herein.
The Buyer must indicate to the Sales Agent not later than the
20th day of the first month of the calendar quarter preceding the
calendar quarter of each proposed Incremental Tonnage shipment if
the then-current delivered price of oil, natural gas or spot coal
to the Danskammer Plant is below the delivered Base Price of
coal. Note: Spot coal must meet or be adjusted to the
specifications contained herein. If such notice is not received
by the Sales Agent by the 20th day of the first month of the
calendar quarter preceding the calendar quarter of each proposed
Incremental Tonnage shipment then all trains will be shipped the
next quarter at the Base Price. In the event such a notice is
received, and the Sales Agent/Producer wishes to match the then-
current delivered price of oil, natural gas or spot coal, the
Sales Agent/Seller must notify the Buyer of the same not later
than the last working day of that notice month. In the event
that such notification is given, then the coal will be shipped,
with the Incremental Tonnage at the "matched price" and the Firm
Tonnage at the Base Price. If the notice to match the price is
not received by the Buyer by the last working day of the notice
month, the Incremental Tonnage trains will not be shipped. The
Sales Agent reserves the right to re-offer any unshipped
Incremental Tonnage to the Buyer at another time in the
ensuing 12 months (commencing with the month 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 2. Limitations on Quantities: Notwith-
standing any of the above, Buyer will not be obligated to
purchase Firm Tonnage coal from Producer under this Contract if
Buyer is unable to utilize such coal at its Danskammer Plant
because of Economic Reasons. For the purposes as used herein,
Economic Reasons is defined as times when electrical energy is
available to Buyer, either from the Danskammer Plant when burning
oil or natural gas or from any other source, at a lower cost than
equivalent electrical energy which would otherwise be produced by
Buyer's Danskammer Plant when burning coal supplied by Seller at
the Base Price. If, because of Economic Reasons, the Danskammer
Plant does not at any time require any of the coal contracted for
hereunder, Buyer shall so notify the Seller in writing sixty days
in advance of the scheduled loading of the applicable firm
tonnage. If Buyer so notifies Seller, Seller shall have the
right to reduce the Base Price so that the cost of electrical
energy produced by Buyer's Danskammer Plant when burning coal
supplied hereunder is equivalent in cost to other lower cost
electrical energy then available to the Buyer. If Seller so
elects to reduce the Base Price, the Buyer shall be obligated to
purchase the Firm Tonnage contracted for herein.
In the event, upon receipt of such notice, the Seller
does not elect to reduce the Base Price, the Buyer shall have the
right to reduce the Firm Tonnage to that required by Economic
Reasons for the Danskammer Plant. If Buyer so reduces the Firm
Tonnage for more than thirty (30) days for Economic Reasons
during the term of this Contract, the Seller shall have the right
to:
1. Upon sixty days' prior written notice terminate
this Agreement.
2. Extend the Term of this Agreement until such
deferred Firm Tonnage has been shipped in total
quantities provided for in this Agreement. The
prices for the tonnage then shipped will be the
prices in effect at the time of shipment.
Section 3. Delivery Schedule Limitations: Two
trains of Firm Tonnage will be delivered for every single train
of Incremental Tonnage. Both Firm Tonnage and Incremental
Tonnage can be delivered during the same month, but Seller will
not be obligated to deliver more than three (3) 12,000-ton
shipments of coal during any one month, unless otherwise mutually
agreed. There shall be a minimum of seven (7) calendar days
between shipment releases from the Operations unless otherwise
mutually agreed.
Section 4. Passage of Title: The coal sold and
delivered to Buyer hereunder is f.o.b. railway car at the
Operations; and, title to and risk of loss of the coal supplied
hereunder shall pass to Buyer when Seller completes loading coal
and tenders the loaded cars to the carrier for destination to
Buyer's Plant.
Section 5. Initial Quality Notification: The
parties recognize the need to know the quality of the coal prior
to receipt of the shipment at the Danskammer Plant. Therefore,
the coal shall be sampled as it is loaded into railway cars and
analyzed by an independent coal testing laboratory that will
within 48 hours after the coal is loaded notify Seller and Buyer
by telephone, telegram, or TWX of the average "as received"
analytical results of each shipment.
Section 6. Shipping Notice: For each shipment of
coal hereunder, Seller shall promptly mail to Buyer's Danskammer
Plant and to Financial Records Section, Central Hudson Gas &
Electric Corporation, 284 South Avenue, Poughkeepsie, New York
12601-4879, a shipping notice showing weight, type of car and
number of each railway car contained in the shipment, shipping
date and origin mine.
Section 7. Railroad: Except as otherwise expressly
provided herein, Seller shall deliver coal sold and purchased
hereunder in accordance with the contract between Buyer and
railroad (said price redacted contract to be provided to Seller)
and the applicable railroad tariff provisions. Buyer shall be
responsible for providing any applicable amendments or revisions
to said railroad tariff provisions to Sales Agent and/or Seller.
Buyer shall cooperate with Seller in the scheduling of
work at Seller's Operations and shall be responsible for
arranging and coordinating with the railroad (also referred to
herein as "carrier") the arrival of rail cars for loading. Buyer
shall pay carrier for all rail transportation charges for coal
purchased from Seller under this Agreement, except as provided
for in the remainder of this Section 7 and Article III Section 3.
SELLER SHALL INSPECT ALL COAL CARS FOR THE PRESENCE OF FOREIGN
MATERIAL PRIOR TO LOADING AND SHALL ONLY LOAD CLEAN COAL CARS.
Seller will pay all additional freight charges,
required by Buyer's rail transportation agreements or the
applicable railroad tariffs, on coal delivered hereunder that are
a result of Seller's failure to deliver the quantity of coal as
scheduled by Buyer, in accordance with this Agreement unless the
tonnage deficiency is excused by other provisions of this
Agreement.
Buyer shall be responsible for payment of any and all
increased freight charges which result solely from or on account
of the coal being shipped to more than one destination.
Seller shall pay all additional freight charges,
required by the applicable railroad tariffs or Buyer's rail
transportation agreements on coal delivered hereunder that are a
result of Seller's failure to notify the railroad, in writing, in
accordance with the applicable railroad tariffs or Buyer's rail
transportation agreement, of Seller's inability to make shipment
as scheduled.
Seller shall pay all detention and switching charges at
Seller's Operations resulting from Seller's failure to load and
ship the coal in accordance with the applicable railroad tariffs
or Buyer's rail transportation agreement. Seller shall load coal
so as to permit loading of 12,000-ton trains within a 6-hour
period.
Seller shall pay all charges resulting from overloading
or underloading cars in accordance with the applicable tariffs or
Buyer's rail transportation agreement.
ARTICLE III
SPECIFICATIONS & QUALITY & WEIGHT
Section 1. Origin: The coal shall be from the
Winifred Seam and other such seams meeting the specifications
herein. Coals from other sources shall not be shipped without
prior written approval of Buyer.
Section 2. Quality Specifications: The quality of
coal sold and purchased hereunder shall meet the following
specifications:
Expected Minimum Maximum ASTM Method
As Received:
Moisture % 6 4 8 D 3173
Volatiles % 35 30 36 D 3175
Fixed Carbon % 51 47 60 D 3172
Ash % 8.0 -- 10 D 3174
BTU/LB. 13,100 12,500 -- D 3286
Sulphur % 0.66 0.47 0.70 D 3177/4239
SO2 (LBS./MMBTU) 1.0 -- 1.1 Calculated
Grind (HGI) 42 40 60 D 409-85
Ash Fusion (I.D., F) 2,700 2,300 D 1587
THIS COAL SHALL BE FREE OF EXTRANEOUS MATERIAL AND
SHALL HAVE A MAXIMUM TOP SIZE OF TWO INCHES.
Section 3(a). 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
herein, except for the price adjustments for quality provided for
in Article VI 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 Sections 2 and
3 of this Article III.
(b). Buyer's Right to Reject Shipments:
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 rejection limits
shown below:
INDIVIDUAL SHIPMENT REJECTION LIMITS
Sulphur (As Received) 0.7% Maximum
Volatiles (As Received) 30% Minimum
Ash Fusion (I.D.) 2,300 F Minimum
BTU/LB (As Received) 12,500 Minimum
SO2/Million BTU 1.1 LBS. Maximum
Grind 40 Minimum
The delivered coal must meet the following weighted
average specifications for three consecutive shipments:
THREE CONSECUTIVE SHIPMENTS LIMITS
Grind 42 Minimum
Ash (As Received) 8.51% Maximum
Moisture (As Received) 8% Maximum
If the weighted average grind, ash or moisture of coal
in a series of three consecutive shipments delivered hereunder,
as determined by sampling and analysis, does not meet the above
Three Consecutive Shipments Limits, Buyer shall have the right to
reject the immediately following shipment in the event that such
shipment does not meet said limitation. The basis of any such
rejection shall be the averaged results of 2 different
independent laboratories as provided for in Article VIII. One of
the independent laboratories is that providing the initial
testing results.
(c). Seller shall pay all freight, diversion,
demurrage, testing and other expenses in connection with any such
rejected shipment, or shipments found by Buyer to be nonconform-
ing, unless such shipment is accepted by Buyer. Furthermore,
Seller certifies that it will not make any shipment shown by
sampling and analysis (as provided for in Article VIII) 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 set
forth in above Section 2 and 3. Nothing in this Article III
shall be construed to relieve Seller of its obligation to conduct
its mining and coal cleaning operations in a competent manner,
consistent with good industry practices, so as to produce coal
which will meet the specifications set forth above.
Section 5. Weight Measurement: The weight of coal
sold hereunder shall be determined on Buyer's certified track
scales at the Danskammer Plant, which scales shall be maintained
and certified in accordance with the provisions of the U.S.
Department of Commerce National Bureau of Standards Handbook 44.
If such scales are inoperative at the time of any coal delivery,
the weight of coal shall be the weight as determined by Seller's
batch weighing system at the High Power Mountain loadout.
ARTICLE IV
PAYMENT
Section 1. Price: For coal delivered and accepted,
Buyer shall pay Seller the Base Price herein provided.
Section 2. Submission of Weight to Seller: Buyer
shall submit to Sales Agent the certified weights within five (5)
working days after the certified weights become available.
Section 3. Invoice: Thereafter, an invoice for any
adjustments for quality as hereinafter defined, FCA application
and all coal shipped from the Operations based on certified
weights will be submitted by the Sales Agent to the Buyer. The
coal shipped will be invoiced at the Base Price (hereinafter
defined).
CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS
BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
Section 4. Payment: Buyer shall make payment to
Seller within twenty-five (25) calendar days from shipment of the
coal from the Operations.
Payment to Seller shall be made by wire transfer, as
follows:
Chase Manhattan Bank in New York
Account 323363199
ABA # 021000021
The above address may be changed by Seller upon written notice to
Buyer.
ARTICLE V
BASE PRICE
The Base Price for the Term of this Agreement for Firm
Tonnage and Base Priced Incremental Tonnage shall be $xx.xx (U.S.
Dollars) per net ton, f.o.b. railcar at Seller's loading
facility. Match Priced Firm or Incremental tonnage shall be
priced in accordance with the provisions of Article II.
The Base Price is based on the use of Buyer's track
scales to determine the weight of coal on each train delivered
hereunder. If the delivering railroad determines accurate car
tare weights at delivery, the Base Price charged to Buyer will be
decreased by $.xx per ton. If Buyer's track scales are
inoperative and Seller's batch weights are used for weight
determination, then the Base Price charged to Buyer will be
reduced by $.xx per ton. This reduction relative to weight
determination will also apply to incremental tonnage shipped at
either the Base Price or a Matched Price.
The Base Price shall be adjusted for all costs incurred
by Seller to comply with any Federal, State or Local law,
regulation or order enacted, promulgated, repealed or altered,
after January 1, 1997, including, without limitation, laws
regulations or orders relating to health, safety, conservation,
reclamation, environmental protection, pollution control and air,
water and soil standards. Laws, legislation, rules, regulations
or orders or a new application, interpretation or implementation
of same which are pending as of January 1, 1997 and which are
enacted, repealed, altered, promulgated or effective after
January 1, 1997 shall be considered enacted or promulgated prior
to January 1, 1997.
ARTICLE VI
ADJUSTMENT IN BASE PRICE FOR QUALITY
Section 1. BTU Value: The Base Price to be paid to
Seller by Buyer is based upon coal with xx,xxx BTU/LB heat
content (BTU Value) for each ton of coal in each shipment. The
BTU Value of the coal sold hereunder may vary, and the Base Price
for such coal shall be adjusted to compensate for variations in
BTU Value, as described below.
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. Adjustment for BTU Value: If the BTU
Value of the coal shipment is between xx,xxx BTU/LB and xx,xxx
BTU/LB 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 Base 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 xxx BTU/LB, fractions pro rata; or
(b) For a coal shipment with a BTU Value less than
xx,xxx BTU/LB, a penalty shall be deducted from the Base Price at
the rate of $x.xx per xxx BTU/LB, fractions pro rata.
Section 3. Adjustments for Ash Value: The Base
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 $x.xxx per ton
shall be paid to Seller for each x.x% Ash Value variation below
x.x%. If the Ash Value is greater than x.x% then a penalty of
$x.xxx per ton shall be deducted from the Base Price for each
x.x% Ash Value variation in excess of x.x%.
ARTICLE VII
FREEZE CONDITIONING
Section 1. Freeze Conditioning Agent: Seller shall
apply a freeze conditioning agent ("FCA") at cost to coal
purchased and delivered hereunder as directed by Buyer and in the
manner set forth herein.
Section 2. Method of Application: When application
of a FCA is directed, it will be applied to the full coal stream
as coal is loaded into railroad cars at the Operations at a rate
specified by Buyer. At any time Buyer may have a representative
present to observe and monitor the application of the FCA and to
obtain a sample of the FCA.
Section 3. Buyer's Approval: Seller shall utilize
an FCA with a Diethylene Glycol base that has been approved in
writing by Buyer. Seller shall have the right to use any of the
approved FCA's but shall not change from one FCA to another
without notifying Buyer, such notification to be confirmed in
writing.
Section 4. Price: For application of the FCA,
Buyer shall pay Seller at Seller's cost per gallon of FCA at the
rate of application (pints per ton) as specified by Buyer on each
ton of coal shipped. Buyer shall have the right to purchase and
supply FCA to Seller, in which case there shall be no charge by
Seller to Buyer for application.
ARTICLE VIII
SAMPLING AND ANALYSES
A recognized independent laboratory ("Independent
Lab"), experienced in the sampling and analyzing of coal, shall
be mutually agreed upon by Buyer and Sales Agent/Producer, and
shall be engaged by each Party to perform the sampling and
analysis of all coal shipped hereunder. Independent Lab shall
sample shipments at the Operations, located near Drennen, West
Virginia. The Independent Lab shall perform its sampling and
analysis in accordance with standards approved by the American
Society for Testing and Materials ("ASTM"). The Independent
Laboratory shall divide the sampled material into four (4) sample
splits identified as follows: (a) Laboratory analyses, (b)
Referee split, (c) Seller's split and (d) Buyer's split. The
Independent Laboratory shall provide upon request the sample
splits to Buyer and/or Seller as soon as the sample is prepared.
A proximate and grind analysis shall be done by the
Independent Lab for each shipment. Except as hereinafter
provided the results of the sampling and analyses by the
Independent Lab with respect to samples taken from any shipment
shall be accepted as the quality and characteristics of that
shipment. The cost of the Independent Lab's services for such
sampling and analyzing of the coal in each shipment shall be paid
for by the Buyer and the Seller equally.
Buyer shall have the right to have a representative
present at any and all times to observe the sampling, inspect the
Independent Lab and take check samples at the Operations, and
Buyer may also analyze the coal either from its own samples or
from samples taken by Independent Lab. The Independent Lab shall
retain for a period of 60 days the Referee split coal sample
taken so that Buyer and/or Seller or a commercial laboratory of
their choice may analyze such sample.
If the Buyer or Seller should question the correctness
of the analyses made by the Independent Laboratory, they may,
within 30 days after the train's unloading, notify the other
Party in writing to request that the Referee split be analyzed by
a second mutually agreeable Independent Laboratory. This
notification should specify which analytical parameter or
parameters are in dispute. The Independent Laboratory shall
provide the Referee Laboratory with the properly identified
sealed sample.
The integrity of the moisture in reserve samples is the
most difficult to preserve. Therefore, if the moisture value is
in dispute, the governing result will be the higher of the values
reported by the Independent and Referee Laboratory. Other
analytical parameters shall be determined on a 'dry basis' and
corrected to the 'as received' basis using the governing
moisture.
The following are the acceptable tolerance for other
test parameters: Ash +/- 0.3%; Sulphur +/- 0.03%; Volatile +/-
0.5%; Calorific Value +/- 100 BTU/LB; Ash Fusion Temperature I.D.
+/- 75 Degrees F. and HGI 3. Should the results fall within
these tolerances, the results of the Independent Laboratory will
stand. Should the results fall outside the tolerance, the
average dry basis analyses of the Independent Laboratory and
Referee analyses shall be the governing result.
Should the grindability (HGI) result be in dispute, the
Referee Laboratory will prepare a physical composite sample from
the Referee sample, then distribute a split of the physical
composite sample to an additional laboratory. If the HGI test
result of the second laboratory is within tolerance, the original
laboratory result will stand. If out of tolerance, the average
of the two Referee results will be the governing analysis.
The cost of this Referee analysis will be paid by the
Party requesting the check analysis.
Neither Party shall require the other Party to use
equipment or procedures which exceed the requirements of ASTM.
ARTICLE IX
GOVERNMENTAL LEGISLATION, REGULATIONS AND ORDERS
Section 1. Compliance with Law: Each party shall
use its best efforts to comply with the provisions of all
applicable federal, state and other governmental laws and any
applicable orders and/or regulations, or any amendments or
supplements thereto, which have been, or may at any time be,
issued by a governmental agency.
Section 2. Effect Upon Buyer's Obligations: The
parties hereto recognize the possibility that, during the
continuance of this Agreement, federal, state or local
legislative or regulatory bodies or the courts may impose or
enforce regulations, restrictions or standards, or revise
existing regulations, restrictions or standards which in Buyer's
sole discretion will make it impossible or impractical for Buyer
to utilize the coal hereafter to be delivered hereunder at the
Danskammer Plant. Such regulations or restrictions could pertain
to, but would not necessarily be limited to coal quality. If any
such regulations or restrictions are imposed and if as a result
thereof Buyer, in its sole discretion, decides that it will be
impossible or impractical for Buyer to utilize the coal, Buyer
shall so advise Seller and thereupon Buyer and Seller shall
promptly consider what corrective steps they can take in the
mining and preparation of the coal and in the handling and
combustion of the coal at the Danskammer Plant; and if in Buyer's
judgement such steps will not, without unreasonable expense to
Buyer, make it possible and practical for Buyer to utilize the
coal thereafter to be delivered hereunder without violating such
regulations or restrictions, Buyer shall have the right, upon
written notice to Seller, to terminate this Agreement without
further obligation to Seller hereunder.
Section 3. Effect Upon Seller's Obligations: In
the event of the enactment of any new federal, state or other
governmental law, or the promulgation of any regulation or order
thereunder which may prohibit (or restrict so as effectively to
prohibit) mining, or processing or shipping, as may be
applicable, of the coal specified in this Agreement, Seller shall
be relieved of its obligation upon the effective date of
implementation (compliance date) of such law, regulation or order
to deliver the total quantity of coal to be delivered under this
Agreement to the extent of the amount of tonnage represented by
the percentage of production of such mining, processed or shipped
coal so affected by such law, regulation or order to the total
amount of coal produced and processed to meet the quantity
requirements of this Agreement.
Section 4. Election to Reduce Tonnage or Terminate:
In the event any party elects to invoke Section 2 or 3, above,
the party so invoking shall notify the other parties in writing
and said notice shall state the notifying party's election to
terminate this Agreement or reduce the tonnage to be delivered
under this Agreement, effective on a specified date, which said
date shall not be earlier than the effective date of the
implementation (compliance date) of such law, regulation or order
giving rise to the termination; provided, however, that
notwithstanding anything to the contrary herein, said specified
date shall in no event be earlier than sixty (60) days after the
date of delivery of notice.
Section 5. Effect of Termination: If any party
elects to terminate this Agreement under the provisions of
Section 2, 3, or 4 of this Article IX, then no party shall have,
after the effective date of such termination, any further
obligation or liability under this Agreement, provided, however,
that such termination shall not affect any rights or obligations
of the parties existing under this Agreement for coal shipped or
required to be shipped prior to the effective date of said
termination.
ARTICLE X
FORCE MAJEURE
No party shall be subject to liability to the other
party for the failure to perform in conformity with this Agree-
ment where such failure results from an event or occurrence
beyond the control of the party affected thereby, whether
foreseen, foreseeable or unforeseeable, which wholly or partially
prevents the mining, preparation, loading or shipping of coal by
Seller or the receiving, unloading or utilization of coal by
Buyer. Such events shall include, by way of illustration but not
by way of limitation, acts of God, war, insurrection, riots,
nuclear disaster, strikes, labor disputes, labor and material
shortages, fires, explosions, floods, river freezeups, breakdowns
or damage to mines, plant equipment or facilities (including
emergency outages of equipment or facilities to make repairs to
avoid breakdowns thereof or damage thereto), interruptions to
transportation, railway car shortages, embargoes, orders or acts
of civil or military authority, laws, regulations or administra-
tive rulings. The provisions of the above sentence shall not
excuse a party from performing unless such party shall give
reasonable notice to the other party and furnish reasonable
information as to the cause of inability to perform and probable
extent thereof within thirty (30) calendar days after such cause
occurs. Failure to give such notice and furnish such information
within the time specified shall be deemed a waiver of all rights
under this Article for such period of time during which notice
was not given. No suspension or reduction by reasons of force
majeure shall invalidate the remainder of this Agreement but, on
the removal of the cause, shipments shall resume at the specified
rate. During such periods when force majeure conditions result
in a reduction in deliveries,Seller shall equitably prorate
shipments among its customers. Buyer shall equitably prorate
acceptance of deliveries of coal it purchases for the Danskammer
Plant. Nothing herein contained shall be construed as requiring
Seller or Buyer to accede to any demands of labor, or labor
unions, or suppliers, or other parties which Seller or Buyer
considers unacceptable. Deficiencies in shipments so caused
shall not be made up except by mutual consent. Deficiencies in
shipments caused by an event or occurrence within the control of
either party shall, at the option of the other party, extend the
term of this Agreement to the extent necessary to make up such
deficiency except as otherwise herein provided.
Seller shall furnish Buyer a monthly statement by the
fifteenth (15th) day of the calendar month setting forth the
amount of tonnage not shipped because of force majeure causes
asserted during the preceding calendar month.
ARTICLE XI
RESERVES
The coal reserves owned by or otherwise available to
Seller are located near Drennen, West Virginia and are accessible
to the Conrail Railway and are part of the mining properties
constituting the Producer's mines. The total quantity of
suitable and economically recoverable coal of the quality
required to meet Sales Agent/Seller's maximum annual obligation
to Buyer under this Agreement is 360,000 tons. Sales
Agent/Seller shall not enter into other agreements for the
production and sale of coal from the above reserves which
production and sale would reduce or impair the amount of reserves
required to meet its obligations during the term of this
Agreement.
Buyer shall have the right from time to time, whenever
deemed desirable by Buyer, to audit at Buyer's expense (1) said
reserves owned by or otherwise available to Seller and (2)
Seller's commitments for the purpose of determining if Seller has
sufficient reserves which are not otherwise committed to comply
with the reserve requirements of this Agreement. Buyer may at
its discretion have any such audit conducted by an independent
firm or firms acceptable to Sales Agent/Seller.
ARTICLE XII
EMPLOYEE INTEREST
Seller represents to Buyer that Seller has not given
and will not give, directly or indirectly, anything of value to
any employee or other representative of Central Hudson Gas &
Electric Corporation with the view of securing this Agreement or
obtaining favorable treatment with respect to the performance of
this Agreement. If such representation is untrue, or becomes
untrue, Buyer shall have the right to declare this Agreement null
and void or to terminate it, to sue for damages and to take such
other action as may be provided by law. If Seller obtains
knowledge at any time that any such employee has a direct or
indirect interest in Seller or its affiliates, (excluding routine
purchases in the open market by such employee of securities
issued by Seller or its parent corporations) it will immediately
inform Buyer of such fact.
ARTICLE XIII
WAIVER
The failure of any party to insist in any one or more
instances upon strict performance of any of the provisions of
this Agreement or to take advantage of any of its rights
hereunder shall not be construed as a future waiver of any such
provisions or the relinquishment of any such rights, but the same
shall continue and remain in full force and effect for the term
of this Agreement.
ARTICLE XIV
NOTICES
Notices and other communications provided for or
required herein shall be given (effective, if written, when
presented for delivery by postal authorities when sent by postage
prepaid, certified mail) as follows:
TO BUYER:
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
284 SOUTH AVENUE
POUGHKEEPSIE, NEW YORK 12601-4879
ATTENTION: MANAGER OF FUELS RESOURCES
TO SALES AGENT:
INTEGRITY COAL SALES, INC.
490 WHEELER ROAD, SUITE 165M
HAUPPAUGE, NEW YORK 11788
TO SELLER:
HPM CORPORATION
P. O. BOX 138
DRENNEN, WEST VIRGINIA 26667
ARTICLE XV
GOVERNING LAW
This Agreement shall be construed, enforced and
performed in accordance with the laws of the State of New York.
ARTICLE XVI
AMENDMENTS
This Agreement may be modified or amended at any time
by mutual agreement of the parties, provided that such
modification or amendment shall be in writing and executed by the
duly authorized representatives of the parties.
ARTICLE XVII
FINALITY
This Agreement is intended as the final, complete and
exclusive statement of the terms of the Agreement among the
parties. The parties agree that parole or extrinsic evidence may
not be used to vary or contradict the express terms of this
Agreement. No waiver of any provision hereof shall be effective,
unless set forth in a written instrument authorized and executed
with the same formality as this Agreement.
ARTICLE XVIII
TITLES
The titles of the articles and sections of this
Agreement have been inserted as a matter of convenience for
reference only.
ARTICLE XIX
AGREEMENT FOR BENEFIT OF PARTIES ONLY
Buyer agrees to indemnify, including reasonable
attorneys fees, defend, and hold Sales Agent/Seller harmless from
any and all claims of any broker, consultant, finder or like
agent with whom Buyer has dealt, or is alleged to have dealt,
regarding this Agreement. Sales Agent/Seller agrees to
indemnify, including reasonable attorneys' fees, defend, and hold
Buyer harmless against any and all claims of any broker,
consultant, finder or like agent with whom Sales Agent/Seller has
dealt, or is alleged to have dealt regarding this Agreement.
ARTICLE XX
TRANSPORTATION AGREEMENTS
If Buyer is unable to conclude and maintain rail
transportation agreements on terms satisfactory to Buyer, Buyer
shall notify Sales Agent/Producer and these parties will use
their best efforts to make the terms satisfactory.
ARTICLE XXI
ASSIGNMENT - TERMINATION
All of the rights and obligations of this Agreement
shall inure to and be binding upon the legal representatives,
successors and permitted assigns of the parties hereto. No
assignment shall impose upon the non-assigning party any
obligation or burden in excess of those obligations or burdens as
exist between the original parties to this Agreement. This
Agreement or any interest herein shall not be assigned without
the prior written consent of the other parties, which consent
shall not be unreasonably withheld.
Subject to the provisions of the Federal Bankruptcy
Code, this Contract shall not be deemed an asset of either Seller
or Buyer and, upon five (5) days prior written notice, either
such Party may terminate this Agreement without penalty at any
time in the event the other such Party enters into any voluntary
or involuntary receivership, bankruptcy, or insolvency
proceedings.
ARTICLE XXII
COUNTERPARTS
This Agreement is being executed in several
counterparts, each of which is an original and all of which
together constitute but one and the same agreement.
ARTICLE XXIII
BUYER'S RIGHT TO ADEQUATE ASSURANCE-TERMINATION
If, during the Term of this Agreement, the Producer's
ability to meet its obligations under this Agreement become
impaired to the point that Buyer has reasonable grounds for
believing that Producer may not be able to meet such obligations,
then Buyer, by a written notice to Producer, may require that
Producer provide adequate assurance that Producer is able to
continue to meet its obligations under this Agreement. If such
adequate assurance is not received by Buyer within fifteen (15)
days from Producer's receipt of Buyer's request thereof, Buyer
shall have the right to immediately reduce, by the amount in
question, Buyer's obligation to purchase coal pursuant to this
Agreement. Buyer may obtain the amount of said reduction through
purchases from third parties; such reduction to be reflected in a
notice from Buyer to Sales Agent and Producer, which thereupon
shall become an amendment to this Agreement. In the event that
Producer cannot offer such adequate assurance to Buyer upon
Buyer's request or in the event Producer and/or Sales Agent has
made a material misrepresentation with respect to its Warranties
and Representations in Article XXV herein, Buyer shall also have
the right at its option to immediately terminate this Agreement
by written notice to Sales Agent and Producer.
ARTICLE XXIV
FAILURE TO PERFORM
In the event of failure to perform by either Seller or
Buyer, the nondefaulting party shall have available, except as
herein otherwise provided, all remedies provided at law or in
equity. These remedies shall include, without limitation, the
right of Buyer to obtain specific performance and/or injunctive
relief where default by Seller would deprive Buyer of a necessary
supply of coal and, because of market conditions or otherwise,
the collection of damages does not afford Buyer an adequate
remedy. In that regard it is expressly recognized and understood
between the parties that prompt and full deliveries by the Seller
in accordance with this Agreement are essential to Buyer.
These remedies also shall include, without limitation,
except as herein otherwise provided, the right of Seller to
obtain specific performance and/or injunctive relief where
default by Buyer would deprive Seller of a necessary market for
its coal and, because of market conditions or otherwise, the
collection of damages does not afford Seller an adequate remedy.
In that regard it is expressly recognized and understood between
the parties that prompt and full acceptance of deliveries and
scheduling of transportation therefore in accordance with this
Agreement are essential to Seller. Notwithstanding any other
provision of this Agreement, neither party shall be entitled to
recover incidental or consequential damages as a result of the
other's failure to perform.
ARTICLE XXV
REPRESENTATIONS AND WARRANTIES OF BOTH PARTIES
Each party warrants and represents to the other that:
(i) it has all requisite power, authority, licenses,
permits, permissions, approvals and franchises, corporate or
otherwise, to execute and deliver this Agreement and perform its
obligations hereunder;
(ii) its execution, delivery, and performance of this
Agreement has been duly authorized by, or is in accordance with,
its organic instruments, this Agreement has been duly executed
and delivered for it by the signatories so authorized, and this
Agreement constitutes its legal, valid and binding obligation
enforceable in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights in general and by general
principles of equity;
(iii) its execution, delivery, and performance of this
Agreement will not result in a breach or violation of, or
constitute a default under, any agreement, lease or instrument to
which it is a party or by which it or its properties may be bound
or affected; and
(iv) it has not received any notice, nor to the best
of its knowledge is there pending or threatened any notice, of
any violation of any applicable laws, ordinances, regulations,
rules, decrees, awards, permits or orders which would materially
adversely affect its ability to perform hereunder.
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 ___________________________________________
PAUL J. GANCI
ITS President and Chief Operating Officer
SELLER: HPM CORPORATION
BY ___________________________________________
JAY FRANTZ
ITS President
SALES AGENT: INTEGRITY COAL SALES, INC.
BY ___________________________________________
KEVIN P. MCEVOY
ITS General Manager
</PAGE>
<PAGE> EXHIBIT (10)(i) 109
THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN
REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
CONFIDENTIAL INFORMATION REPRESENTED IN THIS FILING BY AN "X" HAS
BEEN REDACTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION.
TRANSPORTATION CONTRACT
PURSUANT TO
CR-C-20710
This Transportation Contract made and concluded this 26th
day of November, 1996, by and between CONSOLIDATED RAIL
CORPORATION, (hereinafter CR), a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania and
CENTRAL HUDSON GAS & ELECTRIC CORPORATION (hereinafter CH), a
corporation organized and existing under the laws of the State of
New York, having its offices at 284 South Avenue, Poughkeepsie
NY.
1. TERM: The parties agree that the terms, and conditions
contained herein shall apply to shipments made pursuant to this
agreement as of January 1, 1997. The term of this Contract may
be extended only by written amendment. Unless terminated earlier
in accordance with the provisions herein, this Contract shall
remain in effect through December 31, 2001.
2. TRANSPORTATION RATES: CR agrees to transport coal from
the origins named via CR direct routing to CH's Danskammer
Station at Roseton, NY at the following rates:
Rate (Dollars Per Net Ton)
Origin 120 Cars 95 Cars
Buffalo, NY (NS Interchange) $ x.xx - - - - -
Hagerstown, MD (NS Interchange) $ x.xx $ x.xx
Lurgan, PA (CSXT Interchange) $ x.xx $ x.xx
Kanawha Rate District $xx.xx (1) - - - - -
Conway/Leetsdale River Terminals $xx.xx (1,2) $xx.xx (1,2)
(1) - xxxx xxx xxxxxx, xxxxxx xxxx xxxx xxxx xx xx xxxxxxxx xx xx
(2) - xxxx xxxxxxxx xxxxxxxx xx xxxx xxxx xxxxx xx xxxx xxx
xx xxxxx xxxxx xxxxxxxxx
3. CONSIGNMENT SIZE: Shipments made pursuant to this
Contract are subject to a minimum consignment of 9,000 net tons
received from one origin on one 24-hour day, except from
interchange at Buffalo NY and CR's Kanawha Rate District, the
minimum consignment will be 10,500 net tons. For shipments
received at Buffalo NY, Hagerstown MD or Lurgan PA, the rates are
only applicable to shipments received in a single block
unencumbered by cars not moving under the terms of this Contract.
In the event that less than the minimum consignment tons are
loaded, charges will be based on the minimum consignment tons.
However, if CH or the shipper orders equipment to load at least
the minimum consignment and all serviceable cars placed at the
origin are fully loaded, as provided in the next paragraph, the
charges will be based on the actual weight.
For the purpose of this Contract, fully loaded shall mean
loaded to the minimum weight of 90% of the official capacity of
the cars used. Official capacity will be that shown in the
Universal Machine Language Equipment Register (UMLER) File,
maintained by the Association of American Railroads (AAR).
CR will move shipments promptly, reliably and efficiently as
reasonably requested by CH.
4. WEIGHING: Shipment weights for billing purposes shall
be determined on CH's scales at destination which CH agrees to
allow CR or its agent to inspect periodically and approve for
accuracy in accordance with the AAR Scale Handbook and the
National Bureau of Standards Handbook 44.
In the absence of weighing by CH's destination scales,
weights for billing purposes shall be determined as follows:
a. by batch weigh systems at origin, or
b. by NS or CSXT Railroads for shipments loaded on their
respective railroads, or by CR for shipments loaded at
CR origins or at barge/rail terminals provided in
Article 2, or
c. by averaging the weights based on the last three train
deliveries
When weighing is performed by CR, the entire consignment
will be weighed and CH shall pay CR a charge of $30 per carload.
Such weighing by CR shall be performed only when arrangements for
such weighing can be made prior to the arrival of the consignment
at a CR certified scale.
5. ANNUAL VOLUME COMMITMENT: During the initial two-year
term of this Contract, January 1, 1997 to December 31, 1998, CH
agrees to ship a minimum volume of 240,000 net tons, annually,
from origins on CR's Kanawha rate district. Failure by Kanawha
rate district coal producers to meet this volume commitment will
be considered as a force majeure condition in addition to force
majeure conditions as stated in Section 9, and tons not shipped
due to force majeure will be deducted from the annual minimum
commitment.
Firm tonnage coal from the Kanawha rate district coal
producer not shipped because of CH's inability to utilize such
coal at its Danskammer Plant due to "economic reasons" or due to
the loss of a generating unit or units resulting from a forced
outage will be deducted from the annual volume commitment. For
the purposes as used herein, "economic reasons" is defined as
times when electrical energy is available to Buyer, either from
the Danskammer Plant when burning oil or natural gas or from any
other source, at a lower cost than equivalent electrical energy
which would otherwise be produced by burning "firm tonnage" coal.
Within thirty (30) days of the conclusion of each calendar
year, CH shall furnish to CR a statement indicating the number of
tons received during the calendar year as described above listed
by waybill and origin as well as the total bituminous coal
receipts at its Danskammer plant during that period.
If CH fails to meet the minimum annual volume commitment
described herein, CH shall pay CR a penalty charge of $3.00 per
net ton for the tonnage shortfall.
CH shall maintain records sufficient to document its
performance under this Contract and shall make such records
available for inspection by CR or its agent on reasonable notice
and during normal business hours.
6. RATE ADJUSTMENT: For the purpose of this Article, the
base rates will be the rates indicated in Article 2, and the base
weighing charge will be the charge indicated in Article 4. The
rates will be fixed and remain in effect through December 31,
1998.
Beginning July 1, 1998, and six months prior to the end of
the Contract Year thereafter, CR and CH shall commence good faith
negotiations with respect to the base rates for the next Contract
Year. This agreement shall terminate automatically, without
further obligation or liability to either party, at the end of
the initial term or at the end of any successive contract year
thereafter, unless the parties agree three months before the end
of the applicable Contract Year on these rates for the next
Contract year.
7. SHIPPING INSTRUCTIONS AND PAYMENT: CH shall cause to be
placed the following notation on all shipping instructions
prepared for shipments under this Contract "Shipped under
Contract Number CR-C-20710", and for shipments from Hagerstown
MD, Lurgan PA, and Buffalo NY, the additional notation "Rate to
(name CR origin) be handled under Accounting Rule 11. Charges
beyond to be on a collect basis per CR-C-20710".
Freight bills will be presented based on shipping
instructions as provided by shipper. Rates and charges
prescribed in this Contract apply in addition to all other
transportation, accessorial and/or demurrage charges which
lawfully apply at or between points named in Article 2. Payment
of such charges, and any other charges assessed pursuant to this
Contract, shall be made in accordance with CR's general credit
policy in effect at the time the particular transportation
service is performed, as published in tariff(s) lawfully filed.
In the absence of such tariff(s), payment shall be made in
accordance with Credit Regulations, 49 CFR 1320, which are in
effect at the time the particular transportation service is
performed. CR's acceptance of a partial payment containing a
restricted endorsement does not limit CH's obligation for payment
to CR of the full amount of rates and charges due under this
Contract.
8. EQUIPMENT SUPPLY AND CAR DETENTION:
A. These rates are applicable to shipments made in
bottom dump, open top hopper cars and CR shall supply cars for
shipments originating at CR origins or barge/rail transfer
facilities. Additionally, CR agrees to transport all shipments
pursuant to this Contract with its locomotives or locomotives
under its control. However, CR shall have no greater or lesser
equipment supply obligation to CH than it has to any shipper who
does not have a contract with CR.
CH shall provide CR with a monthly loading
forecast of consignments to be shipped pursuant to this Contract.
This monthly forecast shall include the anticipated mine origins,
interchanges, loading dates and quantity for each consignment.
This forecast shall be provided orally to CR's Assistant
Director-Unit Train Network or a member of his staff in
Philadelphia PA during normal business hours excluding Saturdays,
Sundays, and Holidays no later than five days before the end of
the preceding month. Such notification shall be confirmed in
writing within 10 days forwarded to:
Assistant Director-Unit Train Network
Consolidated Rail Corporation
2001 Market Street - 14C
Philadelphia PA 19101-1414
Any major unforeseen situation which results in
changes to the monthly forecast must be presented to the
Assistant Director-Unit Train Network or his staff as quickly as
possible. Additions to the monthly forecast must be made at
least seven (7) days prior to the scheduled loading dates, unless
otherwise approved.
B. Origin car demurrage is not the responsibility of
CH and is outside the scope of this Contract.
C. Destination car demurrage is subject to the terms
of Freight Tariff CR 4605-Series except that forty-eight (48)
hours free time will be allowed for trains consisting of 120 cars
as scheduled by CH.
9. FORCE MAJEURE: In the event that any party is unable to
perform as stated in this Contract due to or as a result of one
or more of the following causes: Act of God, including, but not
limited to floods, storms, earthquakes, hurricanes, tornadoes, or
other severe weather or climatic conditions; Act of public enemy,
war, blockade, insurrection, riot, vandalism or sabotage; fire,
accident, wreck, derailment, washout or explosion; strike,
lockout or labor dispute; embargoes or AAR service orders; or
governmental laws, orders or regulations, this Contract shall be
suspended at the affected origin(s) and/or destination only
insofar as said origin(s) and/or destination are affected by
described disability and only for the duration of such
disability. The percent of volume commitment which is included
in this Contract shall be suspended to the same extent that this
Contract is suspended, and the absolute amount of volume
commitment which is included in this Contract shall be reduced by
1096 tons per day for each day or portion thereof, of disability
under this Article.
The party experiencing the disability will send written
notice to the other party to this Contract, stating the contract
number and the location and nature of such disability. This
notice shall be sent within ten (10) days of the beginning of the
disability. Written notice shall also be sent within ten (10)
days of the end of such disability.
10. OMNIBUS AND LOSS AND DAMAGE CLAIMS: Rates named in
this Contract apply to the exclusion of rates published
elsewhere, except as otherwise provided in this Contract. Rates
named herein apply only from the origins to the destination named
via the routes shown herein and do not apply from or to
intermediate points. Except as otherwise provided in this
Contract, these rates involved only line-haul transportation and
may not be used in combination with other rates for the purpose
of shipping from or to points other than specifically named in
this Contract.
The rates in this Contract cover the transportation services
traditionally included in a railroad's line-haul rates, including
the placement of cars at origin (if the coal is loaded on CR) and
destination, removal and delivery of cars requiring maintenance
or repair, and the movement of cars to the origin for loading (if
origins are located on CR). However, any special or accessorial
services that CR is requested to provide in conjunction with the
involved line-haul transportation other than demurrage, and for
which a separate charge or rate is set forth in a duly filed
tariff or specified elsewhere in this Contract, are not included
in said line haul rate.
Except as otherwise provided in this Contract, all
classifications tariffs, exempt circulars, government, AAR, and
carriers' rules, regulations and provisions will apply to
shipments hereunder, provided, however, that no diversion,
reconsignment, stop-off or transit privilege will be permitted
unless such services are mutually agreed upon by CR and CH.
Loss and damage claims shall be handled in accordance with
the terms of the Uniform Straight Bill of Lading, 49 CFR Part
1005, and 49 U.S.C. 11707 (d) (2), except that in no case will CR
be liable for special consequential or punitive damages.
11. ABANDONMENT: In the event that CR, pursuant to
appropriate regulatory order abandons, sells or otherwise
disposes of (a) a line of railroad on which either CH power plant
or its coal suppliers are located, or (b) a line of railroad
which provides the only reasonable connection between the line on
which either CH's power plant or its coal suppliers are located
and other portions of the CR system, the provisions of this
Contract are inapplicable with respect to such line on and after
the date said CR line is abandoned, sold or otherwise disposed
of. CR shall notify CH in writing 180 days prior to (1) any
application to any federal or state regulatory agency to abandon,
sell or otherwise dispose of said CR line(s); and, (2) the
adoption by CR of any plans by CR to abandon, sell or otherwise
dispose of said CR line(s).
12. GROSS INEQUITY: It is the intent of the parties hereto
that each shall mutually benefit from the terms, conditions and
provisions of this Contract. In the event that any party shall
suffer a gross inequity resulting from a substantial change in
circumstances or conditions, the parties shall negotiate in good
faith to resolve or remove such gross inequity, provided,
however, that nothing herein shall be construed to relieve any
party of its obligations under this Contract.
13. CONFIDENTIALITY: Except to the extend that disclosure
of information contained in this Contract is required by law or
governing regulatory authority or by existing contracts CR may
have with other parties, the contents of this Contract shall
remain confidential and shall not be disclosed or released by any
party to this Contract, without written consent of the other
party to this Contract. Each party to this Contract shall make
all reasonable efforts to keep the contents of this Contract
confidential if such disclosure is required.
14. NOTICE PROVISION: Unless otherwise provided herein,
any notice required or permitted to be given in writing under the
terms, conditions and provisions of this Contract shall be
considered as having been given upon the hand delivery, faxing or
mailing thereof by first class mail to the office address of the
other party as set forth in this Contract or to such other
addresses as the parties may from time to time specify in
writing. A postal receipt showing the deposit of such notice by
registered or certified mail shall be evidence of the giving of
notice. Notice by mail shall be sent to the following:
Manager, Power Generation Markets-East
Consolidated Rail Corporation
2001 Market Street, 9C
Philadelphia PA 19101-1409
Manager-Transportation Contracts
Consolidated Rail Corporation
2001 Market Street, 23C
Philadelphia PA 19101-1423
Manager-Fuel Resources
Central Hudson Gas and Electric Corporation
284 South Avenue
Poughkeepsie NY 12601
15. ASSIGNMENT: This Contract is not assignable in whole
or in part by one party with the prior written consent of the
other party. This Contract shall inure to and be binding upon
the parties hereto and their respective successors and permitted
assigns.
16. MODIFICATION: This Contract may not be modified except
by an express written agreement signed by the parties hereto.
17. GOVERNING LAW: This Contract shall be governed and
constructed in accordance with the laws of the State of New York,
except as otherwise stated herein.
18. GOVERNMENTAL LEGISLATION: CR and CH agree to recognize
the possibility that, during the term of this Contract, federal,
state or local legislative or regulatory bodies or the courts may
impose or enforce regulations, restrictions or standards, or
revise existing regulations, restrictions or standards which in
CH's sole discretion will make it impossible or impractical for
CH to utilize some or all of the coal thereafter to be delivered
at the Danskammer Plant. Such regulations or restrictions could
pertain to, but would not necessarily be limited to coal quality.
If any such regulations or restrictions are imposed and if as a
result thereof CH, in its sole discretion, decides that it will
be impossible or impractical for CH to utilize some or all of the
coal or other coal of similar quality, CH shall so advise CR. CH
shall have the right, upon written notice to CR to terminate this
Contract without further obligation to CR.
19. ELECTION TO TERMINATE: In the event that CH elects to
invoke Article 18 above, CH shall notify CR in writing and shall
state CH's election to terminate this Contract effective on a
specified date, which said date shall not be earlier than the
effective date of the implementation of such law, regulation or
order.
IN WITNESS THEREOF and intending to be legally bound, the
parties hereto have caused this Contract to be executed by their
duly authorized respective representatives on the day and year
first written above.
CENTRAL HUDSON GAS AND ELECTRIC CORPORATION
BY: ______________________________________
PAUL J. GANCI
TITLE: PRESIDENT AND CHIEF OPERATING OFFER
CONSOLIDATED RAIL CORPORATION
BY: ______________________________________
DOUGLAS P. EVANS
TITLE: MANAGER-COAL MARKETING
</PAGE>
<PAGE>
EXHIBIT (10)(i) 110
$50,000,000
CREDIT AGREEMENT
dated as of
October 23, 1996
among
Central Hudson Gas & Electric Corporation
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
<PAGE>
Table of Contents
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 13
SECTION 1.03. Types of Borrowings 14
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend 14
SECTION 2.02. Notice of Committed Borrowings 14
SECTION 2.03. Money Market Borrowings 15
SECTION 2.04. Notice to Banks; Funding of Loans 19
SECTION 2.05. Notes 20
SECTION 2.06. Maturity of Loans 21
SECTION 2.07. Interest Rates 21
SECTION 2.08. Fees 25
SECTION 2.09. Optional Termination or Reduction of
Commitments 25
SECTION 2.10. Mandatory Termination of Commitments 26
SECTION 2.11. Optional Prepayments 26
SECTION 2.12. General Provisions as to Payments 26
SECTION 2.13. Funding Losses 27
SECTION 2.14. Computation of Interest and Fees 27
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness 28
SECTION 3.02. Borrowings 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power 29
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention 29
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Page
SECTION 4.03. Binding Effect 30
SECTION 4.04. Financial Information 30
SECTION 4.05. Litigation 30
SECTION 4.06. Compliance with ERISA 31
SECTION 4.07. Environmental Matters 31
SECTION 4.08. Taxes 32
SECTION 4.09. Subsidiaries 32
SECTION 4.10. Full Disclosure 32
SECTION 4.11. Equity Capitalization Ratio 32
SECTION 4.12. Fixed Charge Coverage 32
ARTICLE V
COVENANTS
SECTION 5.01. Information 33
SECTION 5.02. Payment of Obligations 35
SECTION 5.03. Maintenance of Property; Insurance 36
SECTION 5.04. Conduct of Business and Maintenance of
Existence 36
SECTION 5.05. Compliance with Laws 37
SECTION 5.06. Inspection of Property, Books and Records 37
SECTION 5.07. Investments 37
SECTION 5.08. Negative Pledge 38
SECTION 5.09. Limitations on Restricted Subsidiaries 39
SECTION 5.10. Consolidations, Mergers and Sales of Assets 39
SECTION 5.11. Use of Proceeds 40
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default 40
SECTION 6.02. Notice of Default 43
SECTION 6.03. Exclusion of Restricted Subsidiaries from
Certain Events of Default 43
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization 43
SECTION 7.02. Agent and Affiliates 43
SECTION 7.03. Action by Agent 43
SECTION 7.04. Consultation with Experts 43
SECTION 7.05. Liability of Agent 44
ii
<PAGE>
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
Page
SECTION 7.06. Indemnification 44
SECTION 7.07. Credit Decision 44
SECTION 7.08. Successor Agent 44
SECTION 7.09. Agent's Fees 45
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair 45
SECTION 8.02. Illegality 46
SECTION 8.03. Increased Cost and Reduced Return 46
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans 48
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices 49
SECTION 9.02. No Waivers 49
SECTION 9.03. Expenses; Documentary Taxes; Indemnification 49
SECTION 9.04. Sharing of Set-Offs 50
SECTION 9.05. Amendments and Waivers 50
SECTION 9.06. Successors and Assigns 51
SECTION 9.07. Collateral 52
SECTION 9.08. Governing Law; Submission to Jurisdiction 52
SECTION 9.09. Counterparts; Integration 53
SECTION 9.10. WAIVER OF JURY TRIAL 53
iii
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of October 23, 1996 among CENTRAL
HUDSON GAS & ELECTRIC CORPORATION, the BANKS listed on the
signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent,
WHEREAS, the Borrower, certain banks and Morgan Bank
(Delaware), as Agent are parties to a Credit Agreement dated as
of December 17, 1990, as amended (the "1990 Credit Agreement");
and
WHEREAS, the 1990 Credit Agreement expires on December
14, 1997 and is to be replaced by this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as
used herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money
Market Quotes setting forth Money Market Absolute Rates pursuant
to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section
2.07(b).
"Adjusted London Interbank Offered Rate" has the
meaning set forth in Section 2.07(c).
"Administrative Questionnaire" means, with respect to
each Bank, an administrative questionnaire in the form prepared
by the Agent and submitted to the Agent (with a copy to the
Borrower) duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York
in its capacity as agent for the Banks hereunder, and its
successors in such capacity.
"Applicable Lending Office" means, with respect to any
Bank, (i) in the case of its Domestic Loans, its Domestic Lending
Office, (ii) in the case of its Euro-Dollar Loans, its
<PAGE>
Euro-Dollar Lending Office and (iii) in the case of its Money
Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section
2.07(b).
"Assignee" has the meaning set forth in Section
9.06(c).
"Bank" means each bank listed on the signature pages
hereof, each Assignee which becomes a Bank pursuant to Section
9.06(c), and their respective successors.
"Base Rate" means, for any day, a rate per annum equal
to the higher of (i) the Prime Rate for such day or (ii) the sum
of 1/2 of 1% plus the Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a
Bank as a Base Rate Loan in accordance with the applicable Notice
of Committed Borrowing or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee
benefit plan within the meaning of Section 3(3) of ERISA which is
not a Plan or a Multiemployer Plan and which is maintained or
otherwise contributed to by any member of the ERISA Group.
"Borrower" means Central Hudson Gas & Electric
Corporation, a New York corporation, and its successors.
"Borrower's 1995 Form 10-K" means the Borrower's Annual
Report, on Form 10-K, for the fiscal year ended December 31,
1995, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section
2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank
as a CD Loan in accordance with the applicable Notice of
Committed Borrowing.
"CD Margin" has the meaning set forth in Section
2.07(b).
"CD Reference Banks" means The Bank of New York and
Morgan Guaranty Trust Company of New York.
2
<PAGE>
"Commitment" means, with respect to each Bank, the
amount set forth opposite the name of such Bank on the signature
pages hereof, as such amount may be reduced from time to time
pursuant to Section 2.09.
"Committed Loan" means a loan made by a Bank pursuant
to Section 2.01.
"Consolidated Earnings Available for Fixed Charges" for
any twelve-month period means (i) consolidated net income,
calculated before any extraordinary items and any gains or losses
from the disposition of assets (other than current assets), less
(ii) allowances for equity funds used during construction to the
extent that such allowances, taken as a whole, increased such
consolidated net income, less (iii) the net positive effect (if
any) on such consolidated net income attributable to the
Borrower's use of "Mirror CWIP" accounts (as "Mirror CWIP" is
described in the paragraph entitled "Deferred Finance
Charges-Nine Mile 2 Plant" of Note 1 of the Notes to the
Borrower's Consolidated Financial Statements for the year ended
December 31, 1995, plus (iv) provisions for Federal income taxes
and deferred income taxes, to the extent that such provisions,
taken as a whole, decreased such consolidated net income, plus
(v) Consolidated Fixed Charges, all determined for such twelve-
month period with respect to the Borrower and its Restricted
Subsidiaries on a consolidated basis in accordance with the
accounting classifications used by the Borrower in its
consolidated statement of income for the year ended December 31,
1995.
"Consolidated Fixed Charges" for any twelve-month
period means the sum of (i) interest on mortgage bonds, (ii)
interest on other long-term debt and (iii) other interest
expense, all determined for such twelve-month period with respect
to the Borrower and its Restricted Subsidiaries on a consolidated
basis in accordance with the accounting classifications used by
the Borrower in its consolidated statement of income for the year
ended December 31, 1995.
"Consolidated Shareholders' Equity" means, at any date,
(i) common stock equity at such date, determined with respect to
the Borrower and its Consolidated Subsidiaries on a consolidated
basis in accordance with the accounting classifications used by
the Borrower in its consolidated balance sheet as at December 31,
1995 less (ii) the aggregate amount of the Investments of the
Borrower and its Restricted Subsidiaries in Unrestricted
Subsidiaries at such date (valued, in the case of equity
Investments, on the equity method).
3
<PAGE>
"Consolidated Subsidiary" means at any date any
Subsidiary or other entity the accounts of which would be
consolidated with those of the Borrower in its consolidated
financial statements if such statements were prepared as of such
date.
"Consolidated Total Capitalization" means, at any date,
the sum at such date of (i) Consolidated Shareholders' Equity,
(ii) preferred stock of the Borrower and (iii) long-term debt
(excluding current maturities of long-term debt), determined with
respect to the Borrower and its Restricted Subsidiaries on a
consolidated basis in accordance with the accounting
classifications used by the Borrower in its consolidated balance
sheet as at December 31, 1995.
"Debt" of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all
obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in
the ordinary course of business, (iv) all obligations of such
Person as lessee which are capitalized in accordance with
generally accepted accounting principles, (v) all obligations of
such Person to purchase securities (or other property) which
arise out of or in connection with the sale of the same or
substantially similar securities or property, (vi) all non-
contingent obligations of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit
or similar instrument, (vii) all Debt of others secured by a Lien
on any asset of such Person, whether or not such Debt is assumed
by such Person, and (viii) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which
constitutes an Event of Default or which with the giving of
notice or lapse of time or both would, unless cured or waived,
become an Event of Default.
"Disclosure Documents" means the Borrower's 1995 Form
10-K, the Borrower's Quarterly Reports, on Form 10-Q, for each of
the fiscal quarters ended March 30, 1996 and June 30, 1996 as
filed with the Securities and Exchange Commission, and the
Borrower's Current Reports, on Form 8-K, dated June 11, 1996 as
filed with the Securities and Exchange Commission.
"Domestic Business Day" means any day except a
Saturday, Sunday or other day on which commercial banks in New
York City or Wilmington, Delaware are authorized by law to close.
4
<PAGE>
"Domestic Lending Office" means, as to each Bank, its
office located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire
as its Domestic Lending Office) or such other office as such Bank
may hereafter designate as its Domestic Lending Office by notice
to the Borrower and the Agent; provided that any Bank may so
designate separate Domestic Lending Offices for its Base Rate
Loans, on the one hand, and its CD Loans, on the other hand, in
which case all references herein to the Domestic Lending Office
of such Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or
both.
"Domestic Reserve Percentage" has the meaning set forth
in Section 2.07(b).
"Effective Date" means the date this Agreement becomes
effective in accordance with Section 3.01.
"Environmental Laws" means any and all federal, state,
local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or hazardous
substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes
or the clean-up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, or any successor statute.
"ERISA Group" means the Borrower and all members of a
controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which,
together with the Borrower, are treated as a single employer
under Section 414 of the Internal Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business
Day on which commercial banks are open for international business
(including dealings in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank,
its office, branch or affiliate located at its address set forth
5
<PAGE>
in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Euro-Dollar Lending Office)
or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by
a Bank as a Euro-Dollar Loan in accordance with the applicable
Notice of Committed Borrowing.
"Euro-Dollar Margin" has the meaning set forth in
Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal
London offices of The Bank of New York and Morgan Guaranty Trust
Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set
forth in Section 2.07(c).
"Event of Default" has the meaning set forth in Section
6.01.
"Federal Funds Rate" means, for any day, the rate per
annum (rounded upward, if necessary, to the nearest 1/100th of
1%) equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such
day is not a Domestic Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next
preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day, the
Federal Funds Rate for such day shall be the average rate quoted
to Morgan Guaranty Trust Company of New York on such day on such
transactions as determined by the Agent.
"First Mortgage Indenture of the Borrower" means the
Indenture dated January 1, 1927 between the Borrower and American
Exchange Irving Trust Company as trustee, as such Indenture has
been and may hereafter be amended, modified or supplemented in
accordance with the provisions thereof.
"First Mortgage Bonds" means first mortgage bonds of
the Borrower which have been and may hereafter be issued under
the First Mortgage Indenture of the Borrower.
6
<PAGE>
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans
or Money Market Loans (excluding Money Market LIBOR Loans bearing
interest at the Prime Rate pursuant to Section 8.01(a)) or any
combination of the foregoing.
"Guarantee" by any Person means any obligation,
contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt of any other Person and, without limiting
the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase
or pay (or advance or supply funds for the purchase or payment
of) such Debt (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of
such Debt of the payment thereof or to protect such obligee
against loss in respect thereof (in whole or in part), provided
that the term Guarantee shall not include (A) endorsements for
collection or deposit in the ordinary course of business or (B)
any agreement which Borrower was obligated to enter into for the
purchase of electric power pursuant to the Public Utility
Regulatory Policy Act of 1978 or Section 66-c of the New York
Public Service Law. The term "Guarantee" used as a verb has a
corresponding meaning.
"Interest Period" means: (1) with respect to each
Euro-Dollar Borrowing, the period commencing on the date of such
Borrowing and ending one, two, three or six months thereafter, as
the Borrower may elect in the applicable Notice of Borrowing;
provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last Euro-
Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (c)
below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period
commencing on the date of such Borrowing and ending 30, 60, 90 or
7
<PAGE>
180 days thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise
end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the
period commencing on the date of such Borrowing and ending 30
days thereafter; provided that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (b) below) which would otherwise
end on a day which is not a Euro-Dollar Business Day shall be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing,
the period commencing on the date of such Borrowing and ending
one, two, three or six months thereafter as the Borrower may
elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar
Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Euro-Dollar
Business Day;
(b) any Interest Period which begins on the last Euro-
Dollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to clause (c)
below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate
Borrowing, the period commencing on the date of such Borrowing
and ending such number of days thereafter (but not less than 7
days) as the Borrower may elect in accordance with Section 2.03;
provided that:
8
<PAGE>
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the
next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, or any successor statute.
"Investment" means any investment in any Person,
whether by means of share purchase, capital contribution, loan,
time deposit or otherwise.
"Level I Status" exists at any date if, at such date,
the First Mortgage Bonds are rated A- or higher by S&P and A3 or
higher by Moody's.
"Level II Status" exists at any date if, at such date,
(i) Level I Status does not exist and (ii) the First Mortgage
Bonds are rated BBB- or higher by S&P and Baa3 or higher by
Moody's.
"Level III Status" exists at any date if, at such date,
(i) Level I Status and Level II Status do not exist and (ii) the
First Mortgage Bonds are rated BB- or higher by S&P and Ba3 or
higher by Moody's.
"Level IV Status" exists at any date if, at such date,
Level I Status, Level II Status and Level III Status do not
exist.
"LIBOR Auction" means a solicitation of Money Market
Quotes setting forth Money Market Margins based on the London
Interbank Offered Rate pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any
kind in respect of such asset. For the purposes of this
Agreement, (i) the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title
retention agreement relating to such asset and (ii) a sale of
receivables that is treated as a sale under generally accepted
accounting principles shall not be deemed to create a Lien on the
sold receivables.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a
Money Market Loan and "Loans" means Domestic Loans or Euro-Dollar
Loans or Money Market Loans or any combination of the foregoing.
9
<PAGE>
"London Interbank Offered Rate" has the meaning set
forth in Section 2.07(c).
"Material Plan" means at any time a Plan or Plans
having aggregate Unfunded Liabilities in excess of $25,000,000.
"Money Market Absolute Rate" has the meaning set forth
in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be
made by a Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank,
its Domestic Lending Office or such other office, branch or
affiliate of such Bank as it may hereafter designate as its Money
Market Lending Office by notice to the Borrower and the Agent;
provided that any Bank may from time to time by notice to the
Borrower and the Agent designate separate Money Market Lending
Offices for its Money Market LIBOR Loans, on the one hand, and
its Money Market Absolute Rate Loans, on the other hand, in which
case all references herein to the Money Market Lending Office of
such Bank shall be deemed to refer to either or both of such
offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a
Bank pursuant to a LIBOR Auction (including such a loan bearing
interest at the Prime Rate pursuant to Section 8.01(a)).
"Money Market Loan" means a Money Market LIBOR Loan or
a Money Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in
Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a
Money Market Loan in accordance with Section 2.03.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means at any time an employee
pension benefit plan within the meaning of Section 4001(a)(3) of
ERISA to which any member of the ERISA Group is then making or
accruing an obligation to make contributions or has within the
preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA
Group during such five year period.
"1990 Credit Agreement" has the meaning set forth in
the first "WHEREAS" clause at the beginning of this Agreement.
10
<PAGE>
"Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A hereto, evidencing the
obligation of the Borrower to repay the Loans, and "Note" means
any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed
Borrowing (as defined in Section 2.02) or a Notice of Money
Market Borrowing (as defined in Section 2.03(f)).
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section
9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation
or any entity succeeding to any or all of its functions under
ERISA.
"Person" means an individual, a corporation, a
partnership, a limited liability company, an association, a trust
or any other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit
plan (other than a Multiemployer Plan) which is covered by Title
IV of ERISA or subject to the minimum funding standards under
Section 412 of the Internal Revenue Code and either (i) is
maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of
the ERISA Group for employees of any Person which was at such
time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York in New
York City from time to time as its Prime Rate.
"Reference Banks" means the CD Reference Banks or the
Euro-Dollar Reference Banks, as the context may require, and
"Reference Bank" means any one of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing
which, after application of the proceeds thereof, results in no
net increase in the outstanding principal amount of Committed
Loans made by any Bank.
"Regulation U" means Regulation U of the Board of
Governors of the Federal Reserve System, as in effect from time
to time.
11
<PAGE>
"Required Banks" means at any time Banks having at
least 2/3 of the aggregate amount of the Commitments or, if the
Commitments shall have been terminated, holding Notes evidencing
at least 2/3 of the aggregate unpaid principal amount of the
Loans.
"Restricted Subsidiary" means any Subsidiary except an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Corporation.
"Subsidiary" means any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time
directly or indirectly owned by the Borrower; provided that a
limited partnership in which one or more Unrestricted
Subsidiaries are limited partners shall not be a "Subsidiary" if
neither the Borrower nor any Restricted Subsidiary has a direct
partnership interest in such limited partnership.
"Temporary Cash Investment" means any Investment
maturing (except as set forth in clauses (v) and (vi) below)
within one year from the date of acquisition thereof by the
Borrower or a Subsidiary in (i) direct obligations of the United
States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated
at least A-1 by S&P and P-1 by Moody's, (iii) time deposits with,
including certificates of deposit issued by, any office located
in the United States of any bank or trust company which is
organized under the laws of the United States or any state
thereof and has capital, surplus and undivided profits
aggregating at least $500,000,000, (iv) repurchase agreements
with any office located in the United States of any bank which is
organized under the laws of the United States or any state
thereof and has capital, surplus and undivided profits
aggregating at least $500,000,000 or of any member of the
National Association of Securities Dealers which has total
capital aggregating at least $200,000,000 if such repurchase
agreements relate to obligations of the United States or any
agency thereof, or commercial paper rated A-1 by S&P or P-1 by
Moody's; provided that the aggregate principal amount of all
repurchase agreements relating to commercial paper outstanding at
any time does not exceed $10,000,000, (v) obligations, regardless
of their maturity, rated not less than "A" or equivalent by S&P
or Moody's issued or guaranteed by any state of the United States
or the District of Columbia, or by any political subdivision,
agency or instrumentality of any such state or District, and
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obligations of a public housing authority fully secured by
contracts with the United States; provided that any such
obligation which matures in more than one year from the date of
acquisition thereof by the Borrower or a Subsidiary shall permit
the holder thereof at least annually to sell back such security
to the issuer at no less than par plus accrued interest, or (vi)
any "money market" fund comprised principally of any of the above
securities provided the average maturity of the securities held
by such fund is not more than one year.
"Termination Date" means October 23, 2001, or, if such
day is not a Euro-Dollar Business Day, the next succeeding Euro-
Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the Termination Date shall
be the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan
at any time, the amount (if any) by which (i) the present value
of all benefits under such Plan exceeds (ii) the fair market
value of all Plan assets allocable to such benefits (excluding
any accrued but unpaid contributions), all determined as of the
then most recent valuation date for such Plan, but only to the
extent that such excess represents a potential liability of a
member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.
"Unrestricted Subsidiary" means (i) Central Hudson
Enterprises Corporation, a New York corporation, (ii) Central
Hudson Cogeneration, Inc., a New York corporation, (iii) CH
Resources, Inc., a New York corporation, (iv) any Subsidiary
designated as an Unrestricted Subsidiary pursuant to Section
6.03, and (v) any other Subsidiary in which shares of capital
stock or other equity interests are directly or indirectly owned
by one or more Unrestricted Subsidiaries and no such shares or
equity interests are directly owned by the Borrower or any
Restricted Subsidiary.
"Wholly-Owned Restricted Subsidiary" means any
Restricted Subsidiary all of the shares of capital stock or other
ownership interests of which (except directors' qualifying
shares) are at the time directly or indirectly owned by the
Borrower.
SECTION 1.02. Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used
herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time
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to time, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants)
with the most recent audited consolidated financial statements of
the Borrower and its Consolidated Subsidiaries delivered to the
Banks.
SECTION 1.03. Types of Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or more Banks
to be made to the Borrower pursuant to Article II on a single
date and for a single Interest Period. Borrowings are classified
for purposes of this Agreement either by reference to the pricing
of Loans comprising such Borrowing (e.g., a "Euro-Dollar
Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by
reference to the provisions of Article II under which
participation therein is determined (i.e., a "Committed
Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money
Market Borrowing" is a Borrowing under Section 2.03 in which the
Bank participants are determined on the basis of their bids in
accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank
severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section
from time to time prior to the Termination Date; provided that
the aggregate principal amount of Committed Loans by such Bank at
any one time outstanding shall not exceed its Commitment. Each
Borrowing under this Section shall be in an aggregate principal
amount of $5,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount available
in accordance with Section 3.02(b)) and shall be made from the
several Banks ratably in proportion to their respective
Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, repay, or to the extent permitted by
Section 2.11, prepay Loans and reborrow at any time prior to the
Termination Date under this Section.
SECTION 2.02. Notice of Committed Borrowings. (a) The
Borrower shall give the Agent notice (a "Notice of Committed
Borrowing") not later than 10:00 A.M. (Wilmington, Delaware time)
on (x) the date of each Base Rate Borrowing, (y) the second
Domestic Business Day before each CD Borrowing and (z) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
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(i) the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic Borrowing or
a Euro-Dollar Business Day in the case of a Euro-Dollar
Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to
be CD Loans, Base Rate Loans or Euro-Dollar Loans, and
(iv) in the case of a Fixed Rate Borrowing, the
duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period.
(b) The provisions of subsection (a) above
notwithstanding, if the Borrower shall not have given a Notice of
Borrowing not later than 10:00 A.M. (Wilmington, Delaware time)
on the last day of the Interest Period applicable to an
outstanding Committed Borrowing, then, unless the Borrower
notifies the Agent before such time that it elects not to borrow
on such date, the Agent shall be deemed to have received a Notice
of Committed Borrowing specifying that (i) the date of the
proposed Borrowing shall be the last day of the Interest Period
applicable to such outstanding Borrowing, (ii) the aggregate
amount of the proposed Borrowing shall be the amount of such
outstanding Borrowing and (iii) the Loans comprising the proposed
Borrowing are to be Base Rate Loans.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed
Borrowings pursuant to Section 2.01, the Borrower may, as set
forth in this Section, request the Banks from time to time prior
to the Termination Date to make offers to make Money Market Loans
to the Borrower. The Banks may, but shall have no obligation to,
make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in
this Section.
(b) Money Market Quote Request. When the Borrower
wishes to request offers to make Money Market Loans under this
Section, it shall transmit to the Agent by telex or facsimile
transmission a Money Market Quote Request substantially in the
form of Exhibit B hereto so as to be received no later than 10:00
A.M. (Wilmington, Delaware time) on (x) the fifth Euro-Dollar
Business Day prior to the date of Borrowing proposed therein, in
the case of a LIBOR Auction or (y) the Domestic Business Day next
preceding the date of Borrowing proposed therein, in the case of
an Absolute Rate Auction (or, in either case, any other time or
date as to which the Borrower and the Agent shall have mutually
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agreed and the Agent shall have notified the Banks not later than
the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be
effective) specifying:
(i) the proposed date of Borrowing, which shall be a
Euro-Dollar Business Day in the case of a LIBOR Auction or a
Domestic Business Day in the case of an Absolute Rate
Auction,
(ii) the aggregate amount of such Borrowing, which
shall be $5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of
Interest Period, and
(iv) whether the Money Market Quotes requested are to
set forth a Money Market Margin or a Money Market Absolute
Rate.
The Borrower may request offers to make Money Market Loans for
more than one Interest Period in a single Money Market Quote
Request. No Money Market Quote Request shall be given within
five Euro-Dollar Business Days (or such other number of days as
the Borrower and the Agent may agree) of any other Money Market
Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon
receipt of a Money Market Quote Request, the Agent shall send to
the Banks by telex or facsimile transmission an Invitation for
Money Market Quotes substantially in the form of Exhibit C
hereto, which shall constitute an invitation by the Borrower to
each Bank to submit Money Market Quotes offering to make the
Money Market Loans to which such Money Market Quote Request
relates in accordance with this Section.
(d) Submission and Contents of Money Market Quotes.
(i) Each Bank may submit a Money Market Quote containing an offer
or offers to make Money Market Loans in response to any
Invitation for Money Market Quotes. Each Money Market Quote must
comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 9.01 not later than
(x) 2:00 P.M. (Wilmington, Delaware time) on the fourth Euro-
Dollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) 9:00 A.M. (Wilmington,
Delaware time) on the proposed date of Borrowing, in the case of
an Absolute Rate Auction (or, in either case, any other time or
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date as to which the Borrower and the Agent shall have mutually
agreed and the Agent shall have notified the Banks not later than
the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be
effective); provided that Money Market Quotes submitted by the
Agent (or any affiliate of the Agent) in the capacity of a Bank
may be submitted, and may only be submitted, if the Agent or such
affiliate notifies the Borrower of the terms of the offer or
offers contained therein (x) at least one hour before the
deadline applicable to other Banks, in the case of a LIBOR
Auction or (y) at least 15 minutes before the deadline applicable
to other Banks, in the case of an Absolute Rate Auction. Subject
to Articles III and VI, any Money Market Quote so made shall be
irrevocable except with the written consent of the Agent given on
the instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially
the form of Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for
which each such offer is being made, which principal amount
(w) may be greater than or less than the Commitment of the
quoting Bank, (x) must be $5,000,000 or a larger multiple of
$1,000,000, (y) may not exceed the principal amount of Money
Market Loans for which offers were requested and (z) may be
subject to an aggregate limitation as to the principal
amount of Money Market Loans for which offers being made by
such quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above
or below the applicable London Interbank Offered Rate (the
"Money Market Margin") offered for each such Money Market
Loan, expressed as a percentage (specified to the nearest
1/10,000th of 1%) to be added to or subtracted from such
base rate,
(D) in the case of an Absolute Rate Auction, the rate
of interest per annum (specified to the nearest 1/10,000th
of 1%) (the "Money Market Absolute Rate") offered for each
such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by
the quoting Bank with respect to each Interest Period specified
in the related Invitation for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if
it:
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(a) is not substantially in conformity with Exhibit D
hereto or does not specify all of the information required
by subsection (d)(ii);
(b) contains qualifying, conditional or similar
language;
(c) proposes terms other than or in addition to those
set forth in the applicable Invitation for Money Market
Quotes; or
(d) arrives after the time set forth in subsection
(d)(i).
(e) Notice to Borrower. The Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote
submitted by a Bank that is in accordance with subsection (d) and
(y) of any Money Market Quote that amends, modifies or is
otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market
Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such
former Money Market Quote. The Agent's notice to the Borrower
shall specify (A) the aggregate principal amount of Money Market
Loans for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B)
the respective principal amounts and Money Market Margins or
Money Market Absolute Rates, as the case may be, so offered and
(C) if applicable, limitations on the aggregate principal amount
of Money Market Loans for which offers in any single Money Market
Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than
10:00 A.M. (Wilmington, Delaware time) on (x) the third Euro-
Dollar Business Day prior to the proposed date of Borrowing, in
the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either
case, such other time or date as the Borrower and the Agent shall
have mutually agreed and shall have notified to the Banks not
later than the date of the Money Market Quote Request for the
first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective), the Borrower shall notify the Agent
of its acceptance or non-acceptance of the offers so notified to
it pursuant to subsection (e). In the case of acceptance, such
notice (a "Notice of Money Market Borrowing") shall specify the
aggregate principal amount of offers for each Interest Period
that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; provided that:
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(i) the aggregate principal amount of each Money
Market Borrowing may not exceed the applicable amount set
forth in the related Money Market Quote Request,
(ii) the principal amount of each Money Market
Borrowing must be $5,000,000 or a larger multiple of
$1,000,000,
(iii) acceptance of offers may only be made on the basis
of ascending Money Market Margins or Money Market Absolute
Rates, as the case may be, and
(iv) the Borrower may not accept any offer that is
described in subsection (d)(iii) or that otherwise fails to
comply with the requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or
more Banks with the same Money Market Margins or Money Market
Absolute Rates, as the case may be, for a greater aggregate
principal amount than the amount in respect of which such offers
are accepted for the related Interest Period, the principal
amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Agent among such Banks as
nearly as possible (in such multiples, not greater than
$1,000,000, as the Agent may deem appropriate) in proportion to
the aggregate principal amounts of such offers. Determinations
by the Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Agent
shall promptly notify each Bank of the contents thereof and of
such Bank's share (if any) of such Borrowing and such Notice of
Borrowing shall not thereafter be revocable by the Borrower.
(b) Not later than 12:00 Noon (Wilmington, Delaware
time) on the date of each Borrowing, each Bank participating
therein shall (except as provided in subsection (c) of this
Section) make available its share of such Borrowing, in Federal
or other funds immediately available in New York City, to the
Agent at its address specified in or pursuant to Section 9.01.
Unless the Agent determines that any applicable condition
specified in Article III has not been satisfied, the Agent will
make the funds so received from the Banks available to the
Borrower at the Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on
which the Borrower is to repay all or any part of an outstanding
Loan from such Bank, such Bank shall apply the proceeds of its
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new Loan to make such repayment and only an amount equal to the
difference (if any) between the amount being borrowed and the
amount being repaid shall be made available by such Bank to the
Agent as provided in subsection (b), or remitted by the Borrower
to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a
Bank prior to the date of any Borrowing that such Bank will not
make available to the Agent such Bank's share of such Borrowing,
the Agent may assume that such Bank has made such share available
to the Agent on the date of such Borrowing in accordance with
subsections (b) and (c) of this Section 2.04 and the Agent may,
in reliance upon such assumption, make available to the Borrower
on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the
Agent, such Bank and the Borrower severally agree to repay to the
Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to
the Agent, at (i) in the case of the Borrower, a rate per annum
equal to the higher of the Federal Funds Rate and the interest
rate applicable thereto pursuant to Section 2.07 and (ii) in the
case of such Bank, the Federal Funds Rate. If such Bank shall
repay to the Agent such corresponding amount, such amount so
repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement. No payment by the
Borrower to the Agent pursuant to this subsection (d) shall
prevent the Borrower from enforcing its rights under this
Agreement against a defaulting Bank or release a defaulting Bank
from its obligations to the Borrower hereunder.
SECTION 2.05. Notes. (a) The Loans of each Bank
shall be evidenced by a single Note payable to the order of such
Bank for the account of its Applicable Lending Office in an
amount equal to the aggregate unpaid principal amount of such
Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the
Agent, request that its Loans of a particular type be evidenced
by a separate Note in an amount equal to the aggregate unpaid
principal amount of such Loans. Each such Note shall be in
substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans
of the relevant type. Each reference in this Agreement to the
"Note" of such Bank shall be deemed to refer to and include any
or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to
Section 3.01(b), the Agent shall mail such Note to such Bank.
Each Bank shall record the date, amount and maturity of each Loan
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made by it and the date and amount of each payment of principal
made by the Borrower with respect thereto, and prior to any
transfer of its Note shall endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing
information with respect to each such Loan then outstanding;
provided that the failure of any Bank to make any such
recordation or endorsement shall not affect the obligations of
the Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by the Borrower so to endorse its Note and
to attach to and make a part of its Note a continuation of any
such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included
in any Borrowing shall mature, and the principal amount thereof
shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate
Loan shall bear interest on the outstanding principal amount
thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to (i) the Base Rate for
such day, for any day on which Level I Status, Level II Status
or Level III Status exists and (ii) the sum of 0.25 of 1% plus
the Base Rate for such day, for any day on which Level IV Status
exists. Such interest shall be payable for each Interest Period
on the last day thereof. Any overdue principal of or interest
on any Base Rate Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the sum of 1%
plus the rate otherwise applicable to Base Rate Loans for such
day.
(b) Each CD Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the
CD Margin plus the applicable Adjusted CD Rate; provided that if
any CD Loan or any portion thereof shall, as a result of clause
(2)(b) of the definition of Interest Period, have an Interest
Period of less than 30 days, such portion shall bear interest
during such Interest Period at the rate applicable to Base Rate
Loans during such period. Such interest shall be payable for
each Interest Period on the last day thereof and, if such
Interest Period is longer than 90 days, 90 days after the first
day thereof. Any overdue principal of or interest on any CD Loan
shall bear interest, payable on demand, for each day until paid
at a rate per annum equal to the sum of 1% plus the higher of (i)
the sum of the CD Margin plus the Adjusted CD Rate applicable to
such Loan or (ii) the rate applicable to Base Rate Loans for such
day.
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"CD Margin" means (i) 0.325 of 1% for any day on which
Level I Status exists, (ii) 0.40 of 1% for any day on which Level
II Status exists, and (iii) 0.625 of 1% for any day on which
Level III Status exists and (iii) 0.875 of 1% for any day on
which Level IV Status exists.
The "Adjusted CD Rate" applicable to any Interest
Period means a rate per annum determined pursuant to the
following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
__________
* The amount in brackets being rounded upward, if
necessary, to the next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is
the rate of interest determined by the Agent to be the average
(rounded upward, if necessary, to the next higher 1/100 of 1%) of
the prevailing rates per annum bid at 10:00 A.M. (Wilmington,
Delaware time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the
purchase at face value from each CD Reference Bank of its
certificates of deposit in an amount comparable to the principal
amount of the CD Loan of such CD Reference Bank to which such
Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the
Federal Reserve System in New York City with deposits exceeding
five billion dollars in respect of new non-personal time deposits
in dollars in New York City having a maturity comparable to the
related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of
the effective date of any change in the Domestic Reserve
Percentage.
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"Assessment Rate" means for any Interest Period the net
annual assessment rate (rounded upward, if necessary, to the next
higher 1/100 of 1%) actually incurred by Morgan Guaranty Trust
Company of New York to the Federal Deposit Insurance Corporation
(or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of Morgan Guaranty Trust
Company of New York in the United States during the most recent
period for which such rate has been determined prior to the
commencement of such Interest Period.
(c) Each Euro-Dollar Loan shall bear interest on the
outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the
Euro-Dollar Margin plus the applicable Adjusted London Interbank
Offered Rate. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is
longer than three months, three months after the first day
thereof.
"Euro-Dollar Margin" means (i) 0.20 of 1% for any day
on which Level I Status exists, (ii) 0.275% of 1% for any day on
which Level II Status exists, (iii) 0.50 of 1% for any day on
which Level III Status exists and (iii) 0.75 of 1% for any day on
which Level IV Status exists.
The "Adjusted London Interbank Offered Rate" applicable
to any Interest Period means a rate per annum equal to the
quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage.
The "London Interbank Offered Rate" applicable to any
Interest Period means the average (rounded upward, if necessary,
to the next higher 1/16 of 1%) of the respective rates per annum
at which deposits in dollars are offered to each of the Euro-
Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business
Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar
Loan of such Euro-Dollar Reference Bank to which such Interest
Period is to apply and for a period of time comparable to such
Interest Period.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
reserve requirement for a member bank of the Federal Reserve
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System in New York City with deposits exceeding five billion
dollars in respect of "Eurocurrency liabilities" (or in respect
of any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is
determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any
Bank to United States residents). The Adjusted London Interbank
Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve
Percentage.
(d) Any overdue principal of or interest on any Euro-
Dollar Loan shall bear interest, payable on demand, for each day
from and including the date payment thereof was due to but
excluding the date of actual payment, at a rate per annum equal
to the sum of 1% plus the higher of (i) the sum of the Euro-
Dollar Margin plus the Adjusted London Interbank Offered Rate
applicable to such Loan or (ii) the Euro-Dollar Margin plus the
quotient obtained (rounded upward, if necessary, to the next
higher 1/100 of 1%) by dividing (x) the average (rounded upward,
if necessary, to the next higher 1/16 of 1%) of the respective
rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such
other period of time not longer than six months as the Agent may
select) deposits in dollars in an amount approximately equal to
such overdue payment due to each of the Euro-Dollar Reference
Banks are offered to such Euro-Dollar Reference Bank in the
London interbank market for the applicable period determined as
provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or
(b) of Section 8.01 shall exist, at a rate per annum equal to the
sum of 1% plus the rate applicable to Base Rate Loans for such
day).
(e) Subject to Section 8.01(a), each Money Market
LIBOR Loan shall bear interest on the outstanding principal
amount thereof, for the Interest Period applicable thereto, at a
rate per annum equal to the sum of the London Interbank Offered
Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing
were a Committed Euro-Dollar Borrowing) plus (or minus) the Money
Market Margin quoted by the Bank making such Loan in accordance
with Section 2.03. Each Money Market Absolute Rate Loan shall
bear interest on the outstanding principal amount thereof, for
the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such
Loan in accordance with Section 2.03. Such interest shall be
payable for each Interest Period on the last day thereof and, if
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such Interest Period is longer than three months, at intervals of
three months after the first day thereof. Any overdue principal
of or interest on any Money Market Loan shall bear interest,
payable on demand, for each day until paid at a rate per annum
equal to the sum of 1% plus the Prime Rate for such day.
(f) The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give prompt
notice to the Borrower and the participating Banks by telex or
cable of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of
manifest error.
(g) Each Reference Bank agrees to use its best efforts
to furnish quotations to the Agent as contemplated by this
Section. If any Reference Bank does not furnish a timely
quotation, the Agent shall determine the relevant interest rate
on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations
is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.08. Fees.
(a) Facility Fee. The Borrower shall pay to the Agent
for the account of the Banks ratably a facility fee at the per
annum rate of (i) 0.10 of 1% for any day on which Level I Status
exists, (ii) 0.125% of 1% for any day on which Level II Status
exists, (iii) 0.25 of 1% for any day on which Level III Status
exists and (iv) 0.50 of 1% for any day on which Level IV Status
exists. Such facility fee shall accrue (i) from and including
October 23, 1996 to but excluding the Termination Date, on the
daily average aggregate amount of the Commitments (whether used
or unused) and (ii) from and including the Termination Date to
but excluding the date the Loans shall be repaid in their
entirety, on the daily average aggregate outstanding principal
amount of the Loans.
(b) Payments. Accrued fees under this Section shall
be payable quarterly on each January 23, April 23, July 23 and
October 23 and upon the date of termination of the Commitments in
their entirety (and, if later, the date the Loans shall be repaid
in their entirety).
SECTION 2.09. Optional Termination or Reduction of
Commitments. The Borrower may, upon at least three Domestic
Business Days' notice to the Agent, (i) terminate the Commitments
at any time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of
$5,000,000 or any larger multiple thereof, the aggregate amount
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of the Commitments in excess of the aggregate outstanding
principal amount of the Loans.
SECTION 2.10. Mandatory Termination of Commitments.
The Commitments shall terminate on the Termination Date, and any
Loans then outstanding (together with accrued interest thereon)
shall be due and payable on such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower
may, upon at least three Domestic Business Days' notice to the
Agent, prepay any Base Rate Borrowing (or any Money Market
Borrowing bearing interest at the Prime Rate pursuant to Section
8.01(a)) in whole at any time, or from time to time in part in
amounts aggregating $5,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together
with accrued interest thereon to the date of prepayment. Each
such optional prepayment shall be applied to prepay ratably the
Loans of the several Banks included in such Borrowing.
(b) Except as provided in Section 8.02, the Borrower
may not prepay all or any portion of the principal amount of any
Fixed Rate Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to
this Section, the Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share (if any) of
such prepayment and such notice shall not thereafter be revocable
by the Borrower.
SECTION 2.12. General Provisions as to Payments.
(a) The Borrower shall make each payment of principal of, and
interest on, the Loans and of fees hereunder, not later than
11:00 A.M. (Wilmington, Delaware time) on the date when due, in
Federal or other immediately available funds to the Agent at its
address referred to in Section 9.01. The Agent will promptly
distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any
payment of principal of, or interest on, the Domestic Loans or of
fees shall be due on a day which is not a Domestic Business Day,
the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of
principal of, or interest on, the Euro-Dollar Loans shall be due
on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-
Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the date for payment
thereof shall be the next preceding Euro-Dollar Business Day.
Whenever any payment of principal of, or interest on, the Money
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Market Loans shall be due on a day which is not a Euro-Dollar
Business Day, the date for payment thereof shall be extended to
the next succeeding Euro-Dollar Business Day. If the date for
any payment of principal is extended by operation of law or
otherwise, interest thereon shall be payable for such extended
time.
(b) Unless the Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the
Banks hereunder that the Borrower will not make such payment in
full, the Agent may assume that the Borrower has made such
payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such
Bank. If and to the extent that the Borrower shall not have so
made such payment, each Bank shall repay to the Agent forthwith
on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes
any payment of principal with respect to any Fixed Rate Loan
(pursuant to Article VI or VIII or otherwise) on any day other
than the last day of the Interest Period applicable thereto, or
the end of an applicable period fixed pursuant to Section
2.07(d), or if the Borrower fails to borrow any Fixed Rate Loans
after notice has been given to any Bank in accordance with
Section 2.04(a), the Borrower shall reimburse each Bank within 15
days after demand for any resulting loss or expense incurred by
it (or by an existing or prospective Participant in the related
Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such
payment or failure to borrow, provided that such Bank shall have
delivered to the Borrower a certificate as to the amount of such
loss or expense (showing in reasonable detail how such amount was
calculated), which certificate shall be conclusive in the absence
of manifest error.
SECTION 2.14. Computation of Interest and Fees.
Interest based on the Prime Rate hereunder shall be computed on
the basis of a year of 365 days (or 366 days in a leap year) and
paid for the actual number of days elapsed (including the first
day but excluding the last day). All other interest and fees
shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but
excluding the last day).
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ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall
become effective on the date that each of the following
conditions shall have been satisfied (or waived in accordance
with Section 9.05):
(a) receipt by the Agent of counterparts hereof signed
by each of the parties hereto (or, in the case of any party
as to which an executed counterpart shall not have been
received, receipt by the Agent in form satisfactory to it of
telegraphic, telex or other written confirmation from such
party of execution of a counterpart hereof by such party);
(b) receipt by the Agent for the account of each Bank
of a duly executed Note dated on or before the Effective
Date complying with the provisions of Section 2.05;
(c) receipt by the Agent of an opinion of Gould &
Wilkie, counsel for the Borrower, substantially in the form
of Exhibit E hereto and covering such additional matters
relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) receipt by the Agent of evidence reasonably
satisfactory to it that the approval of the New York State
Public Service Commission with respect to the execution,
delivery and performance by the Borrower of this Agreement
and the Notes has been obtained and is in full force and
effect;
(e) the commitments of the banks under the 1990 Credit
Agreement shall have terminated and all amounts due and
payable thereunder shall have been paid; and
(f) receipt by the Agent of all documents it may
reasonably request relating to the existence of the
Borrower, the corporate authority for and the validity of
this Agreement and the Notes, and any other matters relevant
hereto, all in form and substance satisfactory to the Agent;
provided that this Agreement shall not become effective or be
binding on any party hereto unless all of the foregoing
conditions are satisfied not later than October 31, 1996. The
Agent shall promptly notify the Borrower and the Banks of the
Effective Date, and such notice shall be conclusive and binding
on all parties hereto.
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SECTION 3.02. Borrowings. The obligation of any Bank
to make a Loan on the occasion of any Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Agent of a Notice of Borrowing as
required by Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing,
the aggregate outstanding principal amount of the Loans will
not exceed the aggregate amount of the Commitments;
(c) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
and
(d) the fact that the representations and warranties
of the Borrower contained in this Agreement (except, in the
case of a Refunding Borrowing, the representations and
warranties set forth in Sections 4.04(c) and 4.05 as to any
matter which has theretofore been disclosed in writing by
the Borrower to the Banks) shall be true on and as of the
date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to
the facts specified in clauses (b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The
Borrower is a corporation duly incorporated, validly existing and
in good standing under the laws of New York and has all corporate
powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now
conducted.
SECTION 4.02. Corporate and Governmental
Authorization; No Contravention. The execution, delivery and
performance by the Borrower of this Agreement and the Notes are
within the Borrower's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or
official (other than approval of the New York State Public
Service Commission, which approval has been obtained and is in
29
<PAGE>
full force and effect) and do not contravene, or constitute a
default under, any provision of applicable law or regulation or
of the certificate of incorporation or by-laws of the Borrower or
of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or result in the creation or
imposition of any Lien on any asset of the Borrower or any of its
Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement
constitutes a valid and binding agreement of the Borrower and the
Notes, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of the
Borrower.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of December 31, 1995 and the
related consolidated statements of income, retained earnings and
cash flows for the fiscal year then ended, reported on by Price
Waterhouse and set forth in the Borrower's 1995 Form 10-K, a copy
of which has been delivered to each of the Banks, fairly present,
in conformity with generally accepted accounting principles, the
consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of June 30, 1996
and the related unaudited consolidated statements of income and
cash flows for the nine months then ended, set forth in the
Borrower's quarterly report for the fiscal quarter ended June 30,
1996 as filed with the Securities and Exchange Commission on Form
10-Q, a copy of which has been delivered to each of the Banks,
fairly present, in conformity with generally accepted accounting
principles applied on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the
consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated
results of operations and cash flows for such nine month period
(subject to normal year-end adjustments).
(c) Except as disclosed in the Disclosure Documents,
there has been no material adverse change since June 30, 1996 in
the business, financial position, results of operations or
prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole.
SECTION 4.05. Litigation. Except as disclosed in the
Disclosure Documents, there is no action, suit or proceeding
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pending against, or to the knowledge of the Borrower threatened
against or affecting, the Borrower or any of its Subsidiaries
before any court or arbitrator or any governmental body, agency
or official in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the
business, consolidated financial position or consolidated results
of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner draws into question
the validity of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of
the ERISA Group has fulfilled its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code with
respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and
the Internal Revenue Code with respect to each Plan. No member
of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code in
respect of any Plan, (ii) failed to make any contribution or
payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the imposition
of a Lien or the posting of a bond or other security under ERISA
or the Internal Revenue Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
SECTION 4.07. Environmental Matters. In the ordinary
course of its business, the Borrower from time to time conducts a
review of the effect of Environmental Laws on the business,
operations and properties of the Borrower and its Subsidiaries,
in the course of which it seeks to identify and evaluate
associated liabilities and costs (including, without limitation,
any capital or operating expenditures required for clean-up or
closure of properties presently or previously owned, any capital
or operating expenditures required to achieve or maintain
compliance with environmental protection standards imposed by law
or as a condition of any license, permit or contract, any related
constraints on operating activities, including any periodic or
permanent shutdown of any facility or reduction in the level of
or change in the nature of operations conducted thereat and any
actual or potential liabilities to third parties, including
employees, and any related costs and expenses). On the basis of
such reviews, the Borrower has reasonably concluded that, except
as disclosed in the Disclosure Statements, Environmental Laws are
unlikely to have a material adverse effect on the business,
financial condition, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a
whole.
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SECTION 4.08. Taxes. United States Federal income tax
returns of the Borrower and its Subsidiaries have been examined
and closed through the fiscal year ended December 31, 1986. The
Borrower and its Subsidiaries have filed all United States
Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes
due pursuant to such returns or pursuant to any assessment
received by the Borrower or any Subsidiary, other than taxes
which the Borrower or any Subsidiary is contesting in good faith
and by proper proceedings and as to which no Lien has attached
and no foreclosure, distraint, sale or similar proceedings have
been commenced. The charges, accruals and reserves on the books
of the Borrower and its Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Borrower,
adequate.
SECTION 4.09. Subsidiaries. Each of the Borrower's
material corporate Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all corporate
powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now
conducted.
SECTION 4.10. Full Disclosure. All information
heretofore furnished by the Borrower to the Agent or any Bank for
purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information
hereafter furnished by the Borrower to the Agent or any Bank will
be, true and accurate in all material respects on the date as of
which such information is stated or certified. The Borrower has
disclosed to the Banks in writing any and all facts which
materially and adversely affect or may affect (to the extent the
Borrower can now reasonably foresee) the business, operations or
financial condition of the Borrower and its Consolidated
Subsidiaries, taken as a whole, or the ability of the Borrower to
perform its obligations under this Agreement.
SECTION 4.11. Equity Capitalization Ratio.
Consolidated Shareholders' Equity is not less than 30% of
Consolidated Total Capitalization.
SECTION 4.12. Fixed Charge Coverage. As of the end of
the most recently ended fiscal quarter of the Borrower (or, if
the requisite financial information for such quarter is not
available to the Borrower when this representation and warranty
is made or deemed made, then as of the end of any calendar month
ended within 45 days before this representation and warranty is
made or deemed made), Consolidated Earnings Available for Fixed
Charges for the twelve months then ended was more than 150% of
Consolidated Fixed Charges for the twelve months then ended.
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ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any
Commitment hereunder or any amount payable under any Note remains
unpaid:
SECTION 5.01. Information. The Borrower will deliver
to each of the Banks:
(a) as soon as available and in any event within 90
days after the end of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of income, retained
earnings and cash flows for such fiscal year, setting forth
in each case in comparative form the figures for the
previous fiscal year, all reported on in a manner acceptable
to the Securities and Exchange Commission by Price
Waterhouse or other independent public accountants of
nationally recognized standing; provided that delivery of a
copy of Borrower's annual report on Form 10K (excluding the
exhibits thereto, unless such exhibits are requested under
clause (i) of this Section) or any successor form and a
manually executed copy of the accompanying report of the
Borrower's independent public accountant, as filed with the
Securities and Exchange Commission, shall satisfy the
requirements of this clause (a);
(b) as soon as available and in any event within 45
days after the end of each of the first three quarters of
each fiscal year of the Borrower, (x) a consolidated balance
sheet of the Borrower and its Consolidated Subsidiaries as
of the end of such quarter, (y) the related consolidated
statements of income for such quarter and for the portion of
the Borrower's fiscal year ended at the end of such quarter
and (z) the related consolidated statement of cash flows for
the portion of the Borrower's fiscal year ended at the end
of such quarter, setting forth in each case in comparative
form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal
year, all certified (subject to normal year-end adjustments)
as to fairness of presentation, generally accepted
accounting principles and consistency by the chief financial
officer or the chief accounting officer of the Borrower;
provided that delivery of a copy of Borrower's Quarterly
Report on Form 10-Q (excluding the exhibits thereto, unless
such exhibits are requested under clause (i) of this
Section) or any successor form, as filed with the Securities
and Exchange Commission, shall satisfy the requirements of
this clause (b);
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(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b)
above, a certificate of the chief financial officer or the
chief accounting officer of the Borrower (i) setting forth
in reasonable detail the calculations or other appropriate
details required to establish whether the Borrower was in
compliance with the requirements of Sections 5.07(d),
5.08(k) and 5.09 on the date of such financial statements
and whether or not the Borrower could have made the
representations and warranties set forth in Sections 4.11
and 4.12 on the date of such financial statements and (ii)
stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth
the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (a) above, a
statement of the firm of independent public accountants
which reported on such statements (i) whether anything has
come to their attention to cause them to believe that any
Default existed on the date of such statements and (ii)
confirming the calculations set forth in the officer's
certificate delivered simultaneously therewith pursuant to
clause (c) above;
(e) within five days after any officer of the Borrower
obtains knowledge of any Default, if such Default is then
continuing, a certificate of the chief financial officer or
the chief accounting officer of the Borrower setting forth
the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the
shareholders of the Borrower generally, copies of all
financial statements, reports and proxy statements so
mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and
any registration statements on Form S-8 or its equivalent)
and reports (excluding the exhibits thereto, unless such
exhibits are requested under clause (i) of this Section) on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the
Borrower shall have filed with the Securities and Exchange
Commission;
(h) if and when any member of the ERISA Group (i)
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA)
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with respect to any Plan which might constitute grounds for
a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy
of the notice of such reportable event given or required to
be given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA or
notice that any Multiemployer Plan is in reorganization, is
insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA
of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such
notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code, a
copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of
such notice and other information filed with the PBGC; (vi)
gives notice of withdrawal from any Plan pursuant to Section
4063 of ERISA, a copy of such notice; or (vii) fails to make
any payment or contribution to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit Arrangement which has
resulted or could result in the imposition of a Lien or the
posting of a bond or other security, a certificate of the
chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and
action, if any, which the Borrower or applicable member of
the ERISA Group is required or proposes to take; and
(i) from time to time such additional information
regarding the financial position or business of the Borrower
and its Subsidiaries as the Agent, at the request of any
Bank, may reasonably request.
SECTION 5.02. Payment of Obligations. The Borrower
(i) will pay and discharge, and will cause each Restricted
Subsidiary to pay and discharge, at or before maturity, all their
respective material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will
maintain, and will cause each Restricted Subsidiary to maintain,
in accordance with generally accepted accounting principles,
appropriate reserves for the accrual of any of the same and (ii)
will cause each Unrestricted Subsidiary to pay and discharge, at
or before maturity, its material obligations and liabilities for
which the Borrower or any Restricted Subsidiary is jointly or
severally liable (such as certain tax liabilities and liabilities
under ERISA), except where the same may be contested in good
faith by appropriate proceedings.
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SECTION 5.03. Maintenance of Property; Insurance. (a)
The Borrower will keep, and will cause each Restricted Subsidiary
to keep, all property useful and necessary in its business in
good working order and condition, ordinary wear and tear
excepted, provided that nothing in this subsection (a) shall
prevent the Borrower or any Restricted Subsidiary from ceasing to
operate, or consenting to cessation of operation of, any of its
plants or any other property, if the Borrower in good faith
determines that it is advisable not to operate the same, that the
operation thereof will not be essential to the maintenance and
continued operation of the rest of its properties and that such
cessation of operation is in the best interest of the Borrower
and is not materially disadvantageous to the Banks.
(b) The Borrower will, and will cause each of its
Restricted Subsidiaries to, maintain (either in the name of the
Borrower or in such Restricted Subsidiary's own name) with
financially sound and responsible insurance companies, insurance
on all their respective properties in at least such amounts and
against at least such risks (and with such risk retention) as are
usually insured against in the same general area by companies of
established repute engaged in the same or a similar business; and
will furnish to the Banks, upon request from the Agent,
information presented in reasonable detail as to the insurance so
carried.
SECTION 5.04. Conduct of Business and Maintenance of
Existence. The Borrower (i) will continue, and will cause each
Restricted Subsidiary to continue, to engage in business of the
same general type as now conducted by the Borrower and its
Restricted Subsidiaries, except as it may be prevented from doing
so by accidents, fires, explosions, strikes, lock-outs,
combinations of workmen, flood, drought, embargo, riot, war,
governmental requirements, acts of God or the public enemy and
other causes beyond its control, and (ii) will preserve, renew
and keep in full force and effect, and will cause each Restricted
Subsidiary to preserve, renew and keep in full force and effect,
their respective corporate existence and their respective rights,
privileges and franchises necessary or desirable in the normal
conduct of business; provided that nothing in this Section 5.04
shall prohibit (x) the merger of a Restricted Subsidiary into the
Borrower or the merger or consolidation of a Restricted
Subsidiary with or into another Person if the corporation
surviving such consolidation or merger is a Wholly-Owned
Restricted Subsidiary and if, in each case, after giving effect
thereto, no Default shall have occurred and be continuing or (y)
the termination of the corporate existence of any Restricted
Subsidiary or the cessation of all or any part of its business or
a change of its business to include any business closely related
36
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to the generation of electricity or the transmission or
distribution of electricity or gas, if the Borrower in good faith
determines that such termination, cessation or change is in the
best interest of the Borrower and is not materially
disadvantageous to the Banks.
SECTION 5.05. Compliance with Laws. The Borrower will
use its best efforts to comply, and will cause each Restricted
Subsidiary to use its best efforts to comply, in all material
respects with all applicable laws, ordinances, rules,
regulations, and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and
the rules and regulations thereunder) except where the necessity
of compliance therewith is contested in good faith by appropriate
proceedings.
SECTION 5.06. Inspection of Property, Books and
Records. The Borrower will keep, and will cause each Subsidiary
to keep, proper books of record and account in which full, true
and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will
permit, and will cause each Subsidiary to permit, representatives
of any Bank at such Bank's expense (i) to visit and inspect any
of their respective properties, to the extent permitted by
applicable law and applicable safety and security policies of the
Borrower and subject to proprietary and confidentiality policies
and agreements of or binding upon the Borrower or the relevant
Subsidiary, (ii) to examine and make abstracts from any of their
respective books and records and (iii) to discuss their
respective affairs, finances and accounts with their respective
officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired.
SECTION 5.07. Investments. Neither the Borrower nor
any Restricted Subsidiary will make or acquire any Investment in
any Person other than:
(a) Investments in the Borrower or any Restricted
Subsidiary;
(b) Investments in Unrestricted Subsidiaries existing
on the date hereof;
(c) Temporary Cash Investments; and
(d) any Investment not otherwise permitted by the
foregoing clauses of this Section, provided that the
aggregate book value of such Investments under this
subsection (d) does not exceed 10% of the total assets of
the Borrower and its Restricted Subsidiaries as reflected in
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the most recent financial statements of the Borrower
required to be delivered by Section 5.01(a).
SECTION 5.08. Negative Pledge. Neither the Borrower
nor any Restricted Subsidiary will create, assume or suffer to
exist any Lien on any asset now or hereafter owned by it, except:
(a) any Lien created or to be created by the First
Mortgage Indenture of the Borrower;
(b) any Lien existing on any asset of any corporation
at the time such corporation becomes a Subsidiary and not
created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the
cost of acquiring such asset, provided that such Lien
attaches to such asset concurrently with or within 90 days
after the acquisition thereof;
(d) any Lien on any asset of any corporation existing
at the time such corporation is merged or consolidated with
or into the Borrower or a Subsidiary and not created in
contemplation of such event;
(e) any Lien existing on any asset prior to the
acquisition thereof by the Borrower or a Subsidiary and not
created in contemplation of such acquisition;
(f) any Lien arising out of the refinancing,
extension, renewal or refunding of any Debt secured by any
Lien permitted by any of the foregoing clauses of this
Section, provided that such Debt is not increased and is not
secured by any additional assets except as permitted in
clause (a) above;
(g) any Lien arising pursuant to any order of
attachment, distraint or similar legal process arising in
connection with court proceedings so long as (i) the amount
of the claims secured by such Lien does not exceed
$25,000,000 and (ii) the execution or other enforcement of
such Lien is effectively stayed and the claims secured
thereby are being contested in good faith by appropriate
proceedings;
(h) any Lien on any asset in favor of the United
States of America, any state, or any department, agency,
instrumentality, or political subdivision of any such
jurisdiction, securing Industrial Revenue bonds the interest
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on which is exempt from federal income tax under Section 103
of the Internal Revenue Code if such bonds shall be issued
for the purpose of financing the construction or improvement
of such asset;
(i) Liens arising in the ordinary course of its
business which (i) do not secure Debt, (ii) do not secure
any obligation in an amount exceeding $25,000,000 and (iii)
do not in the aggregate materially detract from the value of
its assets or materially impair the use thereof in the
operation of its business;
(j) easements, rights of way, restrictions, exceptions
or reservations in or affecting any property of the Borrower
or any Restricted Subsidiary for the purpose of roads, pipe
lines, transmission, distribution or communication lines or
for the joint or common use of real property and equipment
and other like purposes, of real property and other like
purposes, and minor defects and irregularities of title in
any property which do not materially impair the use of such
property in the operation of the business of the Borrower or
any Restricted Subsidiary; and
(k) Liens not otherwise permitted by the foregoing
clauses of this Section securing Debt in an aggregate
principal amount at any time outstanding not to exceed
$10,000,000.
SECTION 5.09. Limitations on Restricted Subsidiaries.
(a) The Borrower will not permit the aggregate outstanding
principal amount of all Debt of its Restricted Subsidiaries
(excluding Debt owing to the Borrower or another Restricted
Subsidiary) to exceed $10,000,000 at any time.
(b) The Borrower will not permit a Restricted
Subsidiary to become an Unrestricted Subsidiary unless the
representations and warranties set forth in Sections 4.11 and
4.12 would be true at the time of such change in status after
giving effect thereto (retroactively for the relevant period in
the case of Section 4.12).
SECTION 5.10. Consolidations, Mergers and Sales of
Assets. The Borrower will not (a) consolidate with or merge into
any other Person or (b) sell, lease or otherwise transfer all or
any substantial part of its assets (other than receivables) to
any other Person. The Borrower will not permit any Restricted
Subsidiary to consolidate with, merge into or transfer all or any
substantial part of its assets (other than receivables) to any
Person other than the Borrower or a Wholly-Owned Restricted
Subsidiary; provided that any Restricted Subsidiary may sell all
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or any part of its assets and distribute the proceeds of such
sale to its parent in connection with a cessation of all or any
part of its business permitted by Section 5.04.
SECTION 5.11. Use of Proceeds. The proceeds of the
Loans made under this Agreement will be used by the Borrower for
its general corporate purposes, including the repayment of its
maturing commercial paper. None of such proceeds will be used,
directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of
the following events ("Events of Default") shall have occurred
and be continuing:
(a) the Borrower shall fail to pay when due any
principal of any Loan, or shall fail to pay within five days
of the due date thereof any interest, fees or other amount
payable hereunder;
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 5.07 to 5.11, inclusive;
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other
than those covered by clause (a) or (b) above) for 15 days
after written notice thereof has been given to the Borrower
by the Agent at the request of any Bank;
(d) any representation and warranty set forth in
Section 4.11 or 4.12 shall prove to have been incorrect when
made on the date hereof or when deemed made on the date of
any Borrowing or when made with respect to a designation
under Section 6.03; it being understood that this clause (d)
shall not apply to certificates pursuant to Section 5.01(c)
as to whether or not the representations and warranties set
forth in Sections 4.11 and 4.12 could have been made on the
dates of specified financial statements;
(e) any representation or warranty (other than those
set forth in Sections 4.11 and 4.12) or any certification or
statement, made by the Borrower in this Agreement or in any
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certificate, financial statement or other document delivered
pursuant to this Agreement, shall prove to have been
incorrect in any material respect when made (or deemed
made);
(f) the Borrower shall fail to make any payment in
respect of any of its Debt (other than the Loans) when due
or within any applicable grace period;
(g) any event or condition shall occur which results
in the acceleration of the maturity of any Debt (other than
the Loans) of the Borrower or enables (or, with the giving
of notice or lapse of time or both, would enable) the holder
of such Debt or any Person acting on such holder's behalf to
accelerate the maturity thereof;
(h) the Borrower (or, subject to Section 6.03, any
Restricted Subsidiary) shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or
other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by
any such official in an involuntary case or other proceeding
commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action
to authorize any of the foregoing;
(i) an involuntary case or other proceeding shall be
commenced against the Borrower (or, subject to Section 6.03,
any Restricted Subsidiary) seeking liquidation,
reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against the Borrower or
any Restricted Subsidiary under the federal bankruptcy laws
as now or hereafter in effect;
(j) any member of the ERISA Group shall fail to pay
when due an amount or amounts aggregating in excess of
$5,000,000 which it shall have become liable to pay under
Title IV of ERISA; or notice of intent to terminate a
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Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of
ERISA) in respect of, or to cause a trustee to be appointed
to administer any Material Plan; or a condition shall exist
by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be
terminated; or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of
the ERISA Group to incur a current payment obligation in
excess of $5,000,000;
(k) a judgment or order for the payment of money in
excess of $5,000,000 shall be rendered against the Borrower
(or, subject to Section 6.03, any Restricted Subsidiary) and
such judgment or order shall continue unsatisfied and
unstayed for a period of 15 days; or
(l) any person or group of persons (within the meaning
of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended) shall have acquired beneficial ownership (within
the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 30% or more of the
outstanding shares of common stock of the Borrower; or,
during any period of 15 consecutive calendar months,
individuals who were directors of the Borrower on the first
day of such period shall cease to constitute a majority of
the board of directors of the Borrower; then, and in every
such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by
notice to the Borrower terminate the Commitments and they
shall thereupon terminate, and (ii) if requested by Banks
holding Notes evidencing more than 50% in aggregate
principal amount of the Loans, by notice to the Borrower
declare the Notes (together with accrued interest thereon)
to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events of
Default specified in clause (h) or (i) above with respect to
the Borrower, without any notice to the Borrower or any
other act by the Agent or the Banks, the Commitments shall
thereupon terminate and the Notes (together with accrued
interest thereon) shall become immediately due and payable
without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.
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SECTION 6.02. Notice of Default. The Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being
requested to do so by any Bank and shall thereupon notify all the
Banks thereof.
SECTION 6.03. Exclusion of Restricted Subsidiaries
from Certain Events of Default. If an event specified in clause
(h), (i) or (k) of Section 6.01 occurs with respect to a
Restricted Subsidiary, such event shall not constitute an Event
of Default if (i) the Borrower promptly, by notice to the Agent,
designates such Subsidiary as an Unrestricted Subsidiary, (ii)
the representations and warranties set forth in Sections 4.11 and
4.12 are true at the time of such designation after giving effect
thereto (retroactively for the relevant period in the case of
Section 4.12) and (iii) the Borrower delivers to the Agent a
certificate representing and warranting that the condition set
forth in clause (ii) is satisfied.
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization. Each
Bank irrevocably appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under
this Agreement and the Notes as are delegated to the Agent by the
terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. Agent and Affiliates. Morgan Guaranty
Trust Company of New York shall have the same rights and powers
under this Agreement as any other Bank and may exercise or
refrain from exercising the same as though it were not the Agent,
and Morgan Guaranty Trust Company of New York and its affiliates
may accept deposits from, lend money to, and generally engage in
any kind of business with the Borrower or any Subsidiary or
affiliate of the Borrower as if it were not the Agent hereunder.
SECTION 7.03. Action by Agent. The obligations of the
Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Agent shall
not be required to take any action with respect to any Default,
except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. The Agent
may consult with legal counsel (who may be counsel for the
Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
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SECTION 7.05. Liability of Agent. Neither the Agent
nor any of its directors, officers, agents, or employees shall be
liable for any action taken or not taken by it in connection
herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or
willful misconduct. Neither the Agent nor any of its directors,
officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement
or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of the Borrower; (iii) the
satisfaction of any condition specified in Article III, except
receipt of items required to be delivered to the Agent; or (iv)
the validity, effectiveness or genuineness of this Agreement, the
Notes or any other instrument or writing furnished in connection
herewith. The Agent shall not incur any liability by acting in
reliance upon any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex or similar
writing) believed by it to be genuine or to be signed by the
proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall,
ratably in accordance with its Commitment, indemnify the Agent
(to the extent not reimbursed by the Borrower) against any cost,
expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from the
Agent's gross negligence or willful misconduct) that the Agent
may suffer or incur in connection with this Agreement or any
action taken or omitted by the Agent hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement. Each Bank also acknowledges that
it will, independently and without reliance upon the Agent or any
other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. Successor Agent. The Agent may resign
at any time by giving written notice thereof to the Banks and the
Borrower. Upon any such resignation, the Required Banks shall
have the right, after consultation with the Borrower, to appoint
a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks, and shall have accepted such
appointment, within 30 days after the retiring Agent gives notice
of resignation, then the retiring Agent may, on behalf of the
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Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and
surplus of at least $50,000,000. Upon the acceptance of its
appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was
Agent.
SECTION 7.09. Agent's Fees. The Borrower shall pay to
the Agent for its own account fees in the amounts and at the
times previously agreed upon between the Borrower and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair. If on or prior to the first day of any
Interest Period for any Fixed Rate Borrowing:
(a) the Agent is advised by the Reference Banks that
deposits in dollars (in the applicable amounts) are not
being offered to the Reference Banks in the relevant market
for such Interest Period, or
(b) in the case of a Committed Borrowing, Banks having
50% or more of the aggregate amount of the Commitments
advise the Agent that the Adjusted CD Rate or the Adjusted
London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or
Euro-Dollar Loans, as the case may be, for such Interest
Period, the Agent shall forthwith give notice thereof to the
Borrower and the Banks, whereupon until the Agent notifies
the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of the Banks to
make CD Loans or Euro-Dollar Loans, as the case may be,
shall be suspended. Unless the Borrower notifies the Agent
at least two Domestic Business Days before the date of any
Fixed Rate Borrowing for which a Notice of Borrowing has
previously been given that it elects not to borrow on such
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date, (i) if such Fixed Rate Borrowing is a Committed
Borrowing, such Borrowing shall instead be made as a Base
Rate Borrowing and (ii) if such Fixed Rate Borrowing is a
Money Market LIBOR Borrowing, the Money Market LIBOR Loans
comprising such Borrowing shall bear interest for each day
from and including the first day to but excluding the last
day of the Interest Period applicable thereto at the Prime
Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of
this Agreement, the adoption of any applicable law, rule or
regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any
Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such
authority, central bank or comparable agency shall make it
unlawful or impossible for any Bank (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such
Bank shall so notify the Agent, the Agent shall forthwith give
notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the
circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be
suspended. Before giving any notice to the Agent pursuant to
this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such Bank shall
determine that it may not lawfully continue to maintain and fund
any of its outstanding Euro-Dollar Loans to maturity and shall so
specify in such notice, the Borrower shall immediately prepay in
full the then outstanding principal amount of each such Euro-
Dollar Loan, together with accrued interest thereon.
Concurrently with prepaying each such Euro-Dollar Loan, the
Borrower shall borrow a Base Rate Loan in an equal principal
amount from such Bank (on which interest and principal shall be
payable contemporaneously with the related Euro-Dollar Loans of
the other Banks), and such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a)
If on or after (x) the date hereof, in the case of any Committed
Loan or any obligation to make Committed Loans or (y) the date of
the related Money Market Quote, in the case of any Money Market
Loan, the adoption of any applicable law, rule or regulation, or
any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
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administration thereof, or compliance by any Bank (or its
Applicable Lending Office) with any request or directive (whether
or not having the force of law) of any such authority, central
bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending
Office) to any tax, duty or other charge with respect to its
Fixed Rate Loans, its Note or its obligation to make Fixed
Rate Loans, or shall change the basis of taxation of
payments to any Bank (or its Applicable Lending Office) of
the principal of or interest on its Fixed Rate Loans or any
other amounts due under this Agreement in respect of its
Fixed Rate Loans or its obligation to make Fixed Rate Loans
(except for changes in the rate of tax on the overall net
income of such Bank or its Applicable Lending Office imposed
by the jurisdiction in which such Bank's principal executive
office or Applicable Lending Office is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the
Board of Governors of the Federal Reserve System, but
excluding (A) with respect to any CD Loan any such
requirement included in an applicable Domestic Reserve
Percentage and (B) with respect to any Euro-Dollar Loan any
such requirement included in an applicable Euro-Dollar
Reserve Percentage) against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its
Applicable Lending Office) or shall impose on any Bank (or
its Applicable Lending Office) or on the United States
market for certificates of deposit or the London interbank
market any other condition affecting its Fixed Rate Loans,
its Note or its obligation to make Fixed Rate Loans; and the
result of any of the foregoing is to increase the cost to
such Bank (or its Applicable Lending Office) of making or
maintaining any Fixed Rate Loan, or to reduce the amount of
any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its
Note with respect thereto, by an amount deemed by such Bank
to be material, then, within 15 days after demand by such
Bank (with a copy to the Agent), the Borrower shall pay to
such Bank such additional amount or amounts as will
compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the
date hereof, the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or any request
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or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the
rate of return on capital of such Bank (or its Parent) as a
consequence of such Bank's obligations hereunder to a level below
that which such Bank (or its Parent) could have achieved but for
such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by
an amount deemed by such Bank to be material, then from time to
time, within 15 days after demand by such Bank (with a copy to
the Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will (after taking into account any
compensation payable under subsection (a) of this Section)
compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower and
the Agent of any event of which it has knowledge, occurring after
the date hereof, which will entitle such Bank to compensation
pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need
for, or reduce the amount of, such compensation and will not, in
the judgment of such Bank, be otherwise disadvantageous to such
Bank. A certificate of any Bank claiming compensation under this
Section and setting forth the additional amount or amounts to be
paid to it hereunder (showing in reasonable detail how such
amount or amounts were calculated) shall be conclusive in the
absence of manifest error. In determining such amount, such Bank
may use any reasonable averaging and attribution methods.
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans. If (i) the obligation of any Bank to make
Euro-Dollar Loans has been suspended pursuant to Section 8.02 or
(ii) any Bank has demanded compensation under Section 8.03(a) and
the Borrower shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Agent, have elected that
the provisions of this Section shall apply to such Bank, then,
unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for
compensation no longer apply:
(a) all Loans which would otherwise be made by such
Bank as CD Loans or Euro-Dollar Loans, as the case may be,
shall be made instead as Base Rate Loans (on which interest
and principal shall be payable contemporaneously with the
related Fixed Rate Loans of the other Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans,
as the case may be, has been repaid, all payments of
principal which would otherwise be applied to repay such
Fixed Rate Loans shall be applied to repay its Base Rate
Loans instead.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and
other communications to any party hereunder shall be in writing
(including bank wire, telex, facsimile transmission or similar
writing) and shall be given to such party: (x) in the case of
the Borrower or the Agent, at its address or telex number set
forth on the signature pages hereof, (y) in the case of any Bank,
at its address or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address
or telex number as such party may hereafter specify for the
purpose by notice to the Agent and the Borrower. Each such
notice, request or other communication shall be effective (i) if
given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate answerback
is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section;
provided that notices to the Agent under Article II or Article
VIII shall not be effective until received.
SECTION 9.02. No Waivers. No failure or delay by the
Agent or any Bank in exercising any right, power or privilege
hereunder or under any Note shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 9.03. Expenses; Documentary Taxes;
Indemnification. (a) The Borrower shall pay (i) all out-of-
pocket expenses of the Agent, including reasonable fees and
disbursements of counsel (including internal counsel) for the
Agent, in connection with the preparation of this Agreement, any
waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent
and each Bank, including reasonable fees and disbursements of
counsel (including internal counsel), in connection with such
Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom. The Borrower shall
indemnify each Bank against any transfer taxes, documentary
taxes, assessments or charges made by any governmental authority
by reason of the execution and delivery of this Agreement or the
Notes.
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(b) The Borrower agrees to indemnify each Bank and
hold each Bank harmless from and against any and all liabilities,
losses, damages, costs and expenses of any kind, including,
without limitation, the reasonable fees and disbursements of
counsel (including internal counsel), which may be incurred by
any Bank (or by the Agent in connection with its actions as Agent
hereunder) in connection with any investigative, administrative
or judicial proceeding (whether or not such Bank shall be
designated a party thereto) relating to or arising out of this
Agreement or any actual or proposed use of proceeds of Loans
hereunder; provided that no Bank shall have the right to be
indemnified hereunder (i) for its own gross negligence or willful
misconduct as determined by a court of competent jurisdiction or
(ii) except as provided in subsection (a) of this Section, for
any amount incurred as a result of actions taken to enforce the
contractual rights and obligations of the parties hereto under
this Agreement.
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees
that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest due with respect to
any Note held by it which is greater than the proportion received
by any other Bank in respect of the aggregate amount of principal
and interest due with respect to any Note held by such other
Bank, the Bank receiving such proportionately greater payment
shall purchase such participations in the Notes held by the other
Banks, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with
respect to the Notes held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of the Borrower other
than its indebtedness under the Notes. The Borrower agrees, to
the fullest extent it may effectively do so under applicable law,
that any holder of a participation in a Note, whether or not
acquired pursuant to the foregoing arrangements, may exercise
rights of set-off or counterclaim and other rights with respect
to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the
amount of such participation.
SECTION 9.05. Amendments and Waivers. Any provision
of this Agreement or the Notes may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by
the Borrower and the Required Banks (and, if the rights or duties
of the Agent are affected thereby, by the Agent); provided that
no such amendment or waiver shall, unless signed by all the
50
<PAGE>
Banks, (i) increase or decrease the Commitment of any Bank
(except for a ratable decrease in the Commitments of all Banks)
or subject any Bank to any additional obligation, (ii) reduce the
principal of or rate of interest on any Loan or any fees
hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for
any reduction or termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action
under this Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors
and assigns, except that the Borrower may not assign or otherwise
transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more
banks or other institutions (each a "Participant") participating
interests in its Commitment or any or all of its Loans. In the
event of any such grant by a Bank of a participating interest to
a Participant, whether or not upon notice to the Borrower and the
Agent, such Bank shall remain responsible for the performance of
its obligations hereunder, and the Borrower and the Agent shall
continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain
the sole right and responsibility to enforce the obligations of
the Borrower hereunder including, without limitation, the right
to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such participation agreement may
provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i),
(ii) or (iii) of Section 9.05 without the consent of the
Participant. The Borrower agrees that each Participant shall, to
the extent provided in its participation agreement, be entitled
to the benefits of Article VIII with respect to its participating
interest. An assignment or other transfer which is not
permitted by subsection (c) or (d) below shall be given effect
for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection
(b).
(c) Any Bank may at any time assign to one or more
banks or other institutions (each an "Assignee") all, or a
proportionate part of all, of its rights and obligations under
51
<PAGE>
this Agreement and the Notes, and such Assignee shall assume such
rights and obligations, pursuant to an Assignment and Assumption
Agreement in substantially the form of Exhibit F hereto executed
by such Assignee and such transferor Bank, with (and subject to)
the subscribed consent of the Borrower and the Agent; provided
that, if an Assignee directly or indirectly controls, is
controlled by or is under common control with such transferor
Bank, no such consent shall be required; and provided further
that such assignment may, but need not, include rights of the
transferor Bank in respect of outstanding Money Market Loans.
Upon execution and delivery of such instrument and payment by
such Assignee to such transferor Bank of an amount equal to the
purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement
and shall have all the rights and obligations of a Bank with a
Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder
to a corresponding extent, and no further consent or action by
any party shall be required. Upon the consummation of any
assignment pursuant to this subsection (c), the transferor Bank,
the Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank shall
pay to the Agent an administrative fee for processing such
assignment in the amount of $2,000.
(d) Any Bank may at any time assign all or any portion
of its rights under this Agreement and its Note to a Federal
Reserve Bank. No such assignment shall release the transferor
Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of
any Bank's rights shall be entitled to receive any greater
payment under Section 8.03 than such Bank would have been
entitled to receive with respect to the rights transferred,
unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02 or 8.03
requiring such Bank to designate a different Applicable Lending
Office under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks
represents to the Agent and each of the other Banks that it in
good faith is not relying upon any "margin stock" (as defined in
Regulation U) as collateral in the extension or maintenance of
the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to
Jurisdiction. This Agreement and each Note shall be governed by
52
<PAGE>
and construed in accordance with the laws of the State of New
York. The Borrower hereby submits to the jurisdiction of the
courts of the State of New York in New York County for purposes
of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower
irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such court and any claim
that any such proceeding brought in such court has been brought
in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This
Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Except as provided in Section 7.09, this Agreement constitutes
the entire agreement and understanding among the parties hereto
and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE
BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
By _________________________
STEVE V. LANT
Title: Treasurer
284 South Avenue
Poughkeepsie, New York 12601-4879
Attention: Treasurer
53
<PAGE>
Commitments
$20,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By __________________________
PHILIP S. DETJENS
Title: Vice President
$15,000,000 THE BANK OF NEW YORK
By __________________________
MARY LOU BRADLEY
Title: Vice President
$10,000,000 MARINE MIDLAND BANK N.A.
By ___________________________
THOMAS NOLAN
Title: Vice President
$5,000,000 UNION BANK OF SWITZERLAND,
New York Branch
By ___________________________
PAUL R. MORRISON
Title: Vice President
By ___________________________
ANDREW R. MERRILL
Title: Vice President
_________________
Total Commitments
$50,000,000
=================
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent
By __________________________
PHILIP S. DETJENS
Title: Vice President
500 Stanton Christiana Road
Newark, Delaware 19713
Attention: Loan Department
54
<PAGE>
EXHIBIT A
NOTE
New York, New York
October 23, 1996
For value received, Central Hudson Gas & Electric
Corporation, a New York corporation (the "Borrower"), promises to
pay to the order of Marine Midland Bank N.A. (the "Bank"), for
the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower
pursuant to the Credit Agreement referred to below on the last
day of the Interest Period relating to such Loan. The Borrower
promises to pay interest on the unpaid principal amount of each
such Loan on the dates and at the rate or rates provided for in
the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of
Morgan Guaranty Trust Company of New York, 500 Stanton Christiana
Road, Newark, Delaware.
All Loans made by the Bank, the respective types and
maturities thereof and all repayments of the principal thereof
shall be recorded by the Bank and, prior to any transfer hereof,
appropriate notations to evidence the foregoing information with
respect to each such Loan then outstanding shall be endorsed by
the Bank on the schedule attached hereto, or on a continuation of
such schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
This note is one of the Notes referred to in the Credit
Agreement dated as of October 23, 1996 among the Borrower, the
banks listed on the signature pages thereof and Morgan Guaranty
Trust Company of New York, as Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the
Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the
prepayment hereof and the acceleration of the maturity hereof.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
By __________________________
STEVE V. LANT
Title: Treasurer
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
_________________________________________________________________
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
2
<PAGE>
EXHIBIT B
Form of Money Market Quote Request
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: Central Hudson Gas & Electric Corporation
Re: Credit Agreement (the "Credit Agreement") dated as
of October 23, 1996 among the Borrower, the Banks
listed on the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following
proposed Money Market Borrowing(s):
Date of Borrowing: __________________
Principal Amount* Interest Period**
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the
London Interbank Offered Rate.]
Terms used herein have the meanings assigned to them
in the Credit Agreement.
CENTRAL HUDSON GAS & ELECTRIC CORPORATION
By________________________
Title:
______________________
* Amount must be $5,000,000 or a larger multiple of
$1,000,000.
** Not less than one month (LIBOR Auction) or not less than
7 days (Absolute Rate Auction), subject to the provisions of the
definition of Interest Period.
<PAGE>
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to Central Hudson Gas & Electric Corporation
(the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated
as of October 23, 1996 among the Borrower, the Banks parties
thereto and the undersigned, as Agent, we are pleased on behalf
of the Borrower to invite you to submit Money Market Quotes to
the Borrower for the following proposed Money Market
Borrowing(s):
Date of Borrowing: __________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market
[Margin] [Absolute Rate]. [The applicable base rate is the
London Interbank Offered Rate.]
Please respond to this invitation by no later than
[2:00 P.M.] [9:00 A.M.] (Wilmington, Delaware time) on [date].
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent
By______________________
Authorized Officer
<PAGE>
EXHIBIT D
Form of Money Market Quote
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent
500 Stanton Christiana Road
Newark, Delaware 19713
Attention:
Re: Money Market Quote to
Central Hudson Gas & Electric
Corporation (the "Borrower")
In response to your invitation on behalf of the
Borrower dated _____________, 19__, we hereby make the following
Money Market Quote on the following terms:
1. Quoting Bank: ________________________________
2. Person to contact at Quoting Bank:
_____________________________
3. Date of Borrowing: ____________________*
4. We hereby offer to make Money Market Loan(s) in the
following principal amounts, for the following Interest
Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
$
$
provided, that the aggregate principal amount of Money Market
Loans for which the above offers may be accepted shall not exceed
$____________.]**
__________
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed
principal amount requested. Specify aggregate limitation if the
sum of the individual offers exceeds the amount the Bank is
willing to lend. Bids must be made for $5,000,000 or a larger
multiple of $1,000,000.
<PAGE>
We understand and agree that the offer(s) set forth
above, subject to the satisfaction of the applicable conditions
set forth in the Credit Agreement dated as of October 23, 1996
among the Borrower, the Banks listed on the signature pages
thereof and yourselves, as Agent, irrevocably obligates us to
make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:_______________ By:__________________________
Authorized Officer
__________
*** Not less than one month or not less than 7 days, as specified
in the related Invitation. No more than five bids are permitted
for each Interest Period.
**** Margin over or under the London Interbank Offered Rate
determined for the applicable Interest Period. Specify
percentage (to the nearest 1/10,000 of 1%) and specify whether
"PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest
1/10,000th of 1%).
2
<PAGE>
EXHIBIT E
OPINION OF GOULD & WILKIE,
COUNSEL FOR THE BORROWER
October 23, 1996
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company of New York,
as Agent
500 Stanton Christiana Road
Newark, Delaware 19713
Dear Sirs:
We have acted as counsel for Central Hudson Gas &
Electric Corporation (the "Borrower") in connection with the
Credit Agreement (the "Credit Agreement") dated as of October 23,
1996 among the Borrower, the banks listed on the signature pages
thereof and Morgan Guaranty Trust Company of New York, as Agent.
Terms defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or
otherwise identified to our satisfaction, of such documents,
corporate records, certificates of public officials and other
instruments and have conducted such other investigations of fact
and law as we have deemed necessary or advisable for purposes of
this opinion.
Upon the basis of the foregoing, we are of the opinion
that:
1. The Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of New York,
and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
2. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are within the
Borrower's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect
of, or filing with, any governmental body, agency or official
<PAGE>
(other than approval of the New York State Public Service
Commission, which approval has been obtained and is in full force
and effect) and do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Borrower, or to
the best of our knowledge, of any agreement, judgment,
injunction, order, decree or other instrument binding upon the
Borrower or result in the creation or imposition of any Lien on
any asset of the Borrower or any of its Subsidiaries.
3. The Credit Agreement (assuming the due and valid
execution thereof by the other parties thereto) constitutes a
valid and binding agreement of the Borrower and the Notes
constitute valid and binding obligations of the Borrower.
4. Except as disclosed in the Disclosure Documents,
there is no action, suit or proceeding pending against, or to the
best of our knowledge threatened against or affecting, the
Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official, in which
there is a reasonable possibility of an adverse decision which
could materially adversely affect the business, consolidated
financial position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole
or which in any manner draws into question the validity of the
Credit Agreement or the Notes.
Our opinion expressed above is limited to the present
law of the State of New York and, to the extent applicable, the
present Federal law of the United States, and we do not express
any opinion herein concerning any other law.
This opinion is solely for the benefit of the named
addressees hereof and is not to be quoted in whole or in part or
otherwise referred to in any oral or written statement, document
or other communication, nor is it to be filed with any government
agency or delivered to any person without our prior written
consent.
Very truly yours,
GOULD & WILKIE
2
<PAGE>
EXHIBIT F
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _________, 19__ among [ASSIGNOR]
(the "Assignor"), [ASSIGNEE] (the "Assignee"), CENTRAL HUDSON GAS
& ELECTRIC CORPORATION (the "Borrower") and MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of October
23, 1996 among the Borrower, the Assignor and the other Banks
party thereto, as Banks, and the Agent (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the
Assignor has a Commitment to make Loans to the Borrower in an
aggregate principal amount at any time outstanding not to exceed
$__________;
WHEREAS, Committed Loans made to the Borrower by the
Assignor under the Credit Agreement in the aggregate principal
amount of $__________ are outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the
Assignee all of the rights of the Assignor under the Credit
Agreement in respect of a portion of its Commitment thereunder in
an amount equal to $__________ (the "Assigned Amount"), together
with a corresponding portion of its outstanding Committed Loans,
and the Assignee proposes to accept assignment of such rights and
assume the corresponding obligations from the Assignor on such
terms;
NOW, THEREFORE, in consideration of the foregoing and
the mutual agreements contained herein, the parties hereto agree
as follows:
SECTION 1. Definitions. All capitalized terms not
otherwise defined herein shall have the respective meanings set
forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns
and sells to the Assignee all of the rights of the Assignor under
the Credit Agreement to the extent of the Assigned Amount, and
the Assignee hereby accepts such assignment from the Assignor and
<PAGE>
assumes all of the obligations of the Assignor under the Credit
Agreement to the extent of the Assigned Amount, including the
purchase from the Assignor of the corresponding portion of the
principal amount of the Committed Loans made by the Assignor
outstanding at the date hereof. Upon the execution and delivery
hereof by the Assignor, the Assignee, the Borrower and the Agent
and the payment of the amounts specified in Section 3 required to
be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the
obligations of a Bank under the Credit Agreement with a
Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be
reduced by a like amount and the Assignor released from its
obligations under the Credit Agreement to the extent such
obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the
assignment and sale contemplated in Section 2 hereof, the
Assignee shall pay to the Assignor on the date hereof in Federal
funds an amount equal to $_________.*** It is understood that
commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and
including the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it
receives any amount under the Credit Agreement which is for the
account of the other party hereto, it shall receive the same for
the account of such other party to the extent of such other
party's interest therein and shall promptly pay the same to such
other party.
SECTION 4. Consent of the Borrower and the Agent.
This Agreement is conditioned upon the consent of the Borrower
and the Agent pursuant to Section 9.06(c) of the Credit
Agreement. The execution of this Agreement by the Borrower and
the Agent is evidence of this consent. Pursuant to Section
9.06(c) the Borrower agrees to execute and deliver a Note payable
to the order of the Assignee to evidence the assignment and
assumption provided for herein.
__________________
*** Amount should combine principal together with accrued
interest and breakage compensation, if any, to be paid by the
Assignee, net of any portion of any upfront fee to be paid by the
Assignor to the Assignee. It may be preferable in an appropriate
case to specify these amounts generically or by formula rather
than as a fixed sum.
2
<PAGE>
SECTION 5. Non-Reliance on Assignor. The Assignor
makes no representation or warranty in connection with, and shall
have no responsibility with respect to, the solvency, financial
condition, or statements of the Borrower, or the validity and
enforceability of the obligations of the Borrower in respect of
the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and
based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter
into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and
financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
SECTION 7. Counterparts. This Agreement may be signed
in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and
hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed and delivered by their duly authorized
officers as of the date first above written.
[ASSIGNOR]
By_________________________
Title:
[ASSIGNEE]
By__________________________
Title:
CENTRAL HUDSON GAS & ELECTRIC
CORPORATION
By__________________________
Title:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent
By__________________________
Title:
3
</PAGE>
