Exhibit 4

                               CREDIT AGREEMENT

                                  Arranged by

                      FIRST CHICAGO CAPITAL MARKETS, INC.

                         Dated as of December 4, 1998

                                     among

                             CH ENERGY GROUP, INC.

                               as the Borrower,

                               CERTAIN LENDERS,

                                      and

                      THE FIRST NATIONAL BANK OF CHICAGO,

                            as Administrative Agent











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                               TABLE OF CONTENTS


                                                                          Page

SECTION 1 - DEFINITIONS......................................................1
      1.1  Defined Terms.....................................................1
      1.2  Terms Generally..................................................12
      1.3  Accounting Terms; GAAP...........................................12

SECTION 2 - THE COMMITMENTS.................................................12
      2.1  Commitment.......................................................12
      2.2  Required Payments; Termination...................................13
      2.3  Ratable Loans....................................................13
      2.4  Types of Advances................................................13
      2.5  Commitment Fee; Reductions in Aggregate Commitment...............13
      2.6  Minimum Amount of Each Advance...................................13
      2.7  Optional Principal Payments......................................13
      2.8  Method of Selecting Types and Interest Periods for New Advances..14
      2.9  Conversion and Continuation of Outstanding Advances..............14
      2.10  Changes in Interest Rate, etc...................................15
      2.11  Rates Applicable After Default..................................15
      2.12  Method of Payment...............................................15
      2.13  Noteless Agreement; Evidence of Indebtedness....................16
      2.14  Telephonic Notices..............................................16
      2.15  Interest Payment Dates; Interest and Fee Basis..................17
      2.16  Notification of Advances, Interest Rates,
               Prepayments and Commitment Reductions........................17
      2.17  Lending Installations...........................................17
      2.18  Non-Receipt of Funds by the Administrative Agent................17

SECTION 3 - YIELD PROTECTION; TAXES.........................................18
      3.1  Yield Protection.................................................18
      3.2  Changes in Capital Adequacy Regulations..........................19
      3.3  Availability of Types of Advances................................19
      3.4  Funding Indemnification..........................................19
      3.5  Taxes............................................................20
      3.6  Lender Statements; Survival of Indemnity.........................21

SECTION 4 - CONDITIONS PRECEDENT............................................22
      4.1  Initial Advance..................................................22
      4.2  Each Advance.....................................................23

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SECTION 5 - REPRESENTATIONS AND WARRANTIES..................................24
      5.1  Existence and Standing...........................................24
      5.2  Authorization and Validity.......................................24
      5.3  No Conflict; Government Consent..................................24
      5.4  Financial Statements.............................................25
      5.5  No Material Adverse Change.......................................25
      5.6  Taxes............................................................25
      5.7  Litigation and Contingent Obligations............................25
      5.8  ERISA............................................................25
      5.9  Accuracy of Information..........................................26
      5.10  Regulation U....................................................26
      5.11  Material Agreements.............................................26
      5.12  Compliance With Laws............................................26
      5.13  Ownership of Properties.........................................26
      5.14  Plan Assets; Prohibited Transactions............................26
      5.15  Environmental Matters...........................................27
      5.16  Investment Company Act..........................................27
      5.17  Public Utility Holding Company Act..............................27
      5.18  Pari Passu Indebtedness.........................................27
      5.19  Year 2000 Problem...............................................27

SECTION 6 - COVENANTS.......................................................27
      6.1  Financial Reporting..............................................28
      6.2  Use of Proceeds..................................................29
      6.3  Notice of Default or Material Adverse Effect.....................29
      6.4  Conduct of Business..............................................29
      6.5  Taxes............................................................30
      6.6  Insurance........................................................30
      6.7  Compliance with Laws.............................................30
      6.8  Maintenance of Properties........................................30
      6.9  Inspection.......................................................30
      6.10  Consolidations, Mergers and Sales of Assets.....................30
      6.11  Liens...........................................................31
      6.12  Affiliates......................................................33
      6.13  Investments.....................................................34
      6.14  Utility Dividends...............................................34
      6.15  Financial Condition.............................................34
      6.16  Year 2000.......................................................34

SECTION 7 - DEFAULTS........................................................34
      7.1  Breach of Warranty...............................................34

                                   Page ii

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      7.2  Nonpayment Obligations...........................................35
      7.3  Nonperformance of Certain Covenants..............................35
      7.4  Nonperformance of Agreement......................................35
      7.5  Default on Other Material Financial Obligations..................35
      7.6  Voluntary Bankruptcy Proceeding, etc.............................35
      7.7  Involuntary Bankruptcy Proceeding, etc...........................36
      7.8  Government Seizure of Property...................................36
      7.9  Judgments........................................................36
      7.10  ERISA...........................................................36
      7.11  Change in Control...............................................36
      7.12  Ownership of the Utility........................................36

SECTION 8 - ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES..................37
      8.1  Acceleration.....................................................37
      8.2  Amendments.......................................................37
      8.3  Preservation of Rights...........................................38

SECTION 9 - GENERAL PROVISIONS..............................................38
      9.1  Survival of Representations......................................38
      9.2  Governmental Regulation..........................................38
      9.3  Headings.........................................................38
      9.4  Entire Agreement.................................................38
      9.5  Several Obligations; Benefits of this Agreement..................38
      9.6  Expenses; Indemnification........................................39
      9.7  Numbers of Documents.............................................39
      9.8  Accounting.......................................................39
      9.9  Severability of Provisions.......................................39
      9.10  Nonliability of Lenders.........................................40
      9.11  Confidentiality.................................................40
      9.12  Nonreliance.....................................................40

SECTION 10 - THE AGENT......................................................40
      10.1  Appointment; Nature of Relationship.............................40
      10.2  Powers..........................................................41
      10.3  General Immunity................................................41
      10.4.  No Responsibility for Loans, Recitals, etc.....................41
      10.5  Action on Instructions of Lenders...............................42
      10.6  Employment of Administrative Agents and Counsel.................42
      10.7  Reliance on Documents; Counsel..................................42
      10.8  Administrative Agent's Reimbursement and Indemnification........42
      10.9  Notice of Default...............................................43
      10.10  Rights as a Lender.............................................43


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      10.11  Lender Credit Decision.........................................43
      10.12  Successor Administrative Agent.................................43
      10.13  Administrative Agent and Arranger Fees.........................44
      10.14  Delegation to Affiliates.......................................44

SECTION 11 - SETOFF; RATABLE PAYMENTS.......................................45
      11.1  Setoff..........................................................45
      11.2  Ratable Payments................................................45

SECTION 12 - BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..............45
      12.1  Successors and Assigns..........................................45
      12.2  Participations..................................................46
            12.2.1  Permitted Participants; Effect..........................46
            12.2.2  Voting Rights...........................................46
            12.2.3  Benefit of Setoff.......................................46
      12.3  Assignments.....................................................46
            12.3.1  Permitted Assignments...................................47
            12.3.2  Effect; Effective Date..................................47
      12.4  Dissemination of Information....................................47
      12.5  Tax Treatment...................................................48

SECTION 13 - NOTICES........................................................48
      13.1  Notices.........................................................48
      13.2  Change of Address...............................................48

SECTION 14 - COUNTERPARTS...................................................48

SECTION 15 - CHOICE OF LAW; CONSENT TO JURISDICTION;
      WAIVER OF JURY TRIAL..................................................49
      15.1  CHOICE OF LAW...................................................49
      15.2  CONSENT TO JURISDICTION.........................................49
      15.3  WAIVER OF JURY TRIAL............................................49

EXHIBIT A  FORM OF OPINION

EXHIBIT B  COMPLIANCE CERTIFICATE

EXHIBIT C  ASSIGNMENT AGREEMENT

EXHIBIT D  LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION

EXHIBIT E  NOTE

SCHEDULE 1 LIENS


                                   Page iv

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                               CREDIT AGREEMENT


      CREDIT AGREEMENT,  dated as of December 4, 1998 (as amended,  supplemented
or otherwise  modified  from time to time,  this  "Agreement"),  among CH ENERGY
GROUP,  INC., a corporation  organized  and existing  under the laws of New York
(the "Borrower"), the financial institutions,  including THE FIRST NATIONAL BANK
OF  CHICAGO,  from time to time  parties  hereto as lenders  (collectively,  the
"Lenders") and THE FIRST NATIONAL BANK OF CHICAGO,  as administrative  agent for
the Lenders (in such capacity, the "Administrative Agent").

      The parties hereto agree as follows:


                            SECTION 1 - DEFINITIONS


      1.1 Defined Terms.  As used in this  Agreement,  the following terms shall
have the meanings specified below:

      "Administrative  Agent"  means The First  National  Bank of Chicago in its
capacity as contractual  representative  of the Lenders  pursuant to Section 10,
and not in its individual capacity as a Lender, and any successor Administrative
Agent appointed pursuant to Section 10.

      "Advance"  means a borrowing  hereunder  (or  conversion  or  continuation
thereof)  consisting  of the  aggregate  amount of the several Loans made on the
same  Borrowing Date (or date of conversion or  continuation)  by the Lenders to
the Borrower of the same Type and, in the case of Eurodollar  Advances,  for the
same Interest Period.

      "Affiliate"  means,  with respect to a specified  Person,  another  Person
(other than a subsidiary of the Person  specified) that directly,  or indirectly
through one or more  intermediaries,  Controls or is  Controlled  by or is under
common Control with the Person specified.

      "Aggregate  Commitment"  means the aggregate of the Commitments of all the
Lenders,  as reduced from time to time pursuant to the terms hereof. The initial
amount of the Aggregate Commitment is $50,000,000.



<PAGE>

      "Agreement" is defined in the preamble.


      "Alternate Base Rate" means,  for any day, a fluctuating  rate of interest
per annum  equal to the higher of (i) the  Corporate  Base Rate for such day and
(ii)  the  sum  of  the  Federal  Funds  Effective  Rate  as  determined  by the
Administrative Agent for such day plus 1/2% per annum.

      "Applicable Fee Rate" means, at any time, the percentage rate per annum at
which  commitment  fees are  accruing  on the unused  portion  of the  Aggregate
Commitment at such time as set forth in the Pricing Schedule.

      "Applicable  Margin"  means,  with  respect to Advances of any Type at any
time,  the  percentage  rate per  annum  which is  applicable  at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.

      "Arranger"  means  First  Chicago  Capital   Markets,   Inc.,  a  Delaware
corporation, and its successors.

      "Authorized  Officer"  means any of the  President,  the  Treasurer or the
Chief Financial Officer of the Borrower, acting singly.

      "Borrower" is defined in the preamble.

      "Borrowing Date" means a date on which an Advance is made hereunder.

      "Borrowing Notice" is defined in Section 2.8.

      "Business  Day" means (i) with respect to any  borrowing,  payment or rate
selection  of  Eurodollar  Advances,  a day (other than a Saturday or Sunday) on
which  banks  generally  are open in  Chicago  and New York for the  conduct  of
substantially all of their commercial  lending  activities and on which dealings
in United States dollars are carried on in the London  interbank market and (ii)
for all other  purposes,  a day (other than a Saturday or Sunday) on which banks
generally  are open in Chicago  for the  conduct of  substantially  all of their
commercial lending activities.

      "Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person  prepared
in accordance with GAAP.

      "Capitalized  Lease  Obligations"  of a Person  means  the  amount  of the
obligations  of such Person under  Capitalized  Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.



                                      2

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      "Closing  Date"  means the date on which  this  Agreement  shall have been
executed and delivered by the parties hereto.

      "Code" means the Internal  Revenue Code of 1986,  as amended,  reformed or
otherwise modified from time to time.

      "Commitment" means, for each Lender, the obligation of such Lender to make
Loans not exceeding the amount set forth opposite its signature  below or as set
forth in any Notice of  Assignment  relating to any  assignment  that has become
effective  pursuant to Section 12.3.2,  as such amount may be modified from time
to time pursuant to the terms hereof.

      "Contingent  Obligation" of a Person means any  agreement,  undertaking or
arrangement by which such Person  assumes,  guarantees,  endorses,  contingently
agrees to purchase or provide funds for the payment of, or otherwise  becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other  Person,  or  otherwise  assures any  creditor of such other Person
against loss.

      "Conversion/Continuation Notice" is defined in Section 2.9.

      "Control" means the possession,  directly or indirectly,  of (a) the power
to direct or cause the  direction  of the  management  or  policies of a Person,
whether  through the ability to exercise  voting power, by contract or otherwise
and/or  (b)  the  ownership  or  beneficial  ownership  of  10% or  more  of the
securities  having  ordinary  voting  power for the  election of  directors of a
Person. "Controlling" and "Controlled" have meanings correlative thereto.

      "Controlled Group" means all members of a controlled group of corporations
or  other  business  entities  and all  trades  or  businesses  (whether  or not
incorporated)  under common control which,  together with the Borrower or any of
its Subsidiaries, are treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA.

      "Corporate  Base Rate" means a rate per annum equal to the corporate  base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.

      "Default" means an event described in Section 7.

      "Dollars" or "$" refers to lawful money of the United States of America.

      "Environmental  Laws" means any and all applicable  federal,  state, local
and foreign statutes, laws, judicial decisions, regulations,  ordinances, rules,
judgments, orders, decrees, 


                                      3

<PAGE>


plans, injunctions,  permits,  concessions,  grants, franchises,  licenses,
agreements and other governmental restrictions relating to (i) the protection of
the  environment,  (ii) the effect of the  environment  on human  health,  (iii)
emissions,  discharges  or  releases  of  pollutants,   contaminants,  hazardous
substances  or wastes into  surface  water,  ground  water or land,  or (iv) the
manufacture,   processing,  distribution,  use,  treatment,  storage,  disposal,
transport  or handling of  pollutants,  contaminants,  hazardous  substances  or
wastes or the clean-up or other remediation thereof.

      "Environmental  Liability"  means any  liability,  contingent or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties  or  indemnities),  of the  Borrower  or any  Subsidiary  directly  or
indirectly  resulting from or based upon (a) violation of any  Environmental Law
or (b) the release or  threatened  release of any Hazardous  Materials  into the
environment.

      "ERISA"  means the Employee  Retirement  Income  Security Act of 1974,  as
amended from time to time, and any rule or regulation issued thereunder.

      "ERISA  Affiliate"  means any entity (whether or not  incorporated)  that,
together with the Borrower, is treated as a single employer under Section 414(b)
or (c) of the Code or,  solely for  purposes of Section 302 of ERISA and Section
412 of the Code, is treated as a single employer under Section 414 of the Code.

      "ERISA  Event"  means (a) any  "reportable  event",  as defined in Section
4043(c) of ERISA or the  regulations  issued  thereunder  with respect to a Plan
(other  than an event for  which  the  30-day  notice  period  is  waived  under
applicable PBGC regulations); (b) the failure to make a required contribution to
any Plan  sufficient to give rise to a lien under Section  302(f) of ERISA;  (c)
the existence with respect to any Plan of an  "accumulated  funding  deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA),  whether or not
waived;  (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an  application  for a waiver of the minimum  funding  standard with
respect to any plan;  (e) the taking of any steps by the  Borrower or any of its
ERISA Affiliates to terminate any Plan, if such termination  could result in any
liability  under Title IV of ERISA with respect to such Plan; (f) the receipt by
the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any
notice  relating to an intention to terminate  any Plan or Plans or to appoint a
trustee to administer any Plan; (g) the incurrence by the Borrower or any of its
ERISA  Affiliates  of any  liability  with respect to the  withdrawal or partial
withdrawal,   within  the   meaning  of   Section   4063  of  ERISA,   from  any
multiple-employer  Plan;  or  (h)  the  receipt  concerning  the  imposition  of
withdrawal  liability or a  determination  that a  multiemployer  plan is, or is
expected to be, insolvent or in  reorganization,  within the meaning of Title IV
of ERISA.

                                      4

<PAGE>

      "Eurodollar  Advance"  means  an  Advance  which  bears  interest  at  the
applicable Eurodollar Rate.

     "Eurodollar Base Rate" means, with respect to a Eurodollar  Advance for the
relevant Interest Period, the rate determined by the Administrative  Agent to be
the rate at which First Chicago  offers to place  deposits in U.S.  dollars with
first-class  banks in the London interbank  market at  approximately  11:00 a.m.
(London time) two Business Days prior to the first day of such Interest  Period,
in the approximate amount of First Chicago's relevant Eurodollar Loan and having
a maturity approximately equal to such Interest Period.

      "Eurodollar  Loan"  means a Loan which bears  interest  at the  applicable
Eurodollar Rate.

      "Eurodollar  Rate" means,  with  respect to a  Eurodollar  Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate  applicable to such Interest  Period,  divided by (b) one minus the Reserve
Requirement  (expressed as a decimal)  applicable to such Interest Period,  plus
the Applicable  Margin.  The Eurodollar Rate shall be rounded to the next higher
multiple of 1/16 of 1% if the rate is not such a multiple.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Excluded  Taxes" means, in the case of each Lender or applicable  Lending
Installation  and the  Administrative  Agent,  taxes  imposed on its overall net
income,  and franchise  taxes imposed on it, by (i) the  jurisdiction  under the
laws of  which  such  Lender  or the  Administrative  Agent is  incorporated  or
organized or (ii) the jurisdiction in which the  Administrative  Agent's or such
Lender's  principal   executive  office  or  such  Lender's  applicable  Lending
Installation is located.

      "Exhibit" refers to an exhibit to this Agreement,  unless another document
is specifically referenced.

      "Federal Funds  Effective  Rate" means,  for any day, an interest rate per
annum 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  for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York,  or, if such rate is not so  published  for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Administrative Agent from
three   Federal  funds   brokers  of   recognized   standing   selected  by  the
Administrative Agent in its sole discretion.

     "FERC" means the Federal  Energy  Regulatory  Commission  and any successor
agency thereto.


                                      5

<PAGE>


      "First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors.

      "Floating  Rate"  means,  for any  day,  a rate  per  annum  equal  to the
Alternate  Base  Rate  for  such  day,  in each  case  changing  when and as the
Alternate Base Rate changes.

      "Floating  Rate  Advance"  means an Advance  which  bears  interest at the
Floating Rate.

      "Floating  Rate Loan"  means a Loan which bears  interest at the  Floating
Rate.

      "FPA"  means  the  Federal  Power  Act,  as  amended,  and all  rules  and
regulations promulgated thereunder.

      "Funding Date" means the date the conditions  specified in Section 4.1 are
satisfied or waived as evidenced by the making of the initial Loans.

      "GAAP" is defined in Section 1.3.

      "Hazardous  Materials" means all materials defined as hazardous substances
under  the  Federal  Comprehensive  Environmental  Response,   Compensation  and
Liability  Act, as  amended,  petroleum  or  petroleum  distillates,  or friable
asbestos or friable asbestos containing  materials,  and all similar items under
the laws of each jurisdiction where the Borrower and
its Subsidiaries operate.

      "Hedging  Agreement" means, with respect to any Person,  any interest rate
swap, cap or collar agreement,  any commodity or currency swap agreement, or any
similar  agreement  designed to protect  such  Person  against  fluctuations  in
interest rates, commodity prices or currency exchange rates.

      "Indebtedness"  of a  Person  means  such  Person's  (i)  obligations  for
borrowed money,  (ii) obligations  representing  the deferred  purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such  Person's  business  payable on terms  customary  in the  trade),  (iii)
obligations,  whether or not  assumed,  secured  by Liens or payable  out of the
proceeds or production  from property now or hereafter owned or acquired by such
Person,  (iv) obligations  which are evidenced by notes,  acceptances,  or other
instruments,  (v)  obligations  of such Person to purchase  securities  or other
property  arising  out  of or in  connection  with  the  sale  of  the  same  or
substantially   similar   securities  or  property,   (vi)   Capitalized   Lease
Obligations, (vii) Contingent Obligations, (viii) all obligations, contingent or
otherwise,  with respect to the face amount of letters of credit (whether or not
drawn) and bankers'  acceptances issued for the account of such Person, (ix) all
obligations  under Hedging  Agreements and (x) any other obligation for borrowed
money or other  financial

                                      6

<PAGE>

accommodation  which in accordance  with GAAP would be shown as a liability
on the consolidated balance sheet of such Person.

     "Interest Period" means, with respect to a Eurodollar  Advance, a period of
one,  two,  three or six months  commencing  on a Business  Day  selected by the
Borrower  pursuant to this Agreement.  Such Interest Period shall end on the day
which  corresponds  numerically  to such  date  one,  two,  three or six  months
thereafter,   provided,   however,   that  if  there  is  no  such   numerically
corresponding  day in such next,  second,  third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next,  second,  third
or sixth  succeeding  month.  If an Interest Period would otherwise end on a day
which  is not a  Business  Day,  such  Interest  Period  shall  end on the  next
succeeding  Business  Day,  provided,  however,  that  if said  next  succeeding
Business Day falls in a new calendar  month,  such Interest  Period shall end on
the immediately preceding Business Day.

      "Investment"  means,  relative to any Person, (a) any loan or advance made
by such Person to any other Person, (b) any Contingent Obligation of such Person
with respect to another Person and (c) any investment made by such Person in any
other Person.  The amount of any Investment  shall be the original  principal or
capital  amount  thereof  less all returns of  principal  or equity  thereon and
shall,  if made by the  transfer or exchange  of  property  other than cash,  be
deemed to have been made in an original principal or capital amount equal to the
fair market value of such property at the time of such Investment.

      "Lenders" means the lending  institutions listed on the signature pages of
this Agreement and their respective successors and assigns.

      "Lending   Installation"   means,   with   respect  to  a  Lender  or  the
Administrative Agent, the office, branch, subsidiary or affiliate of such Lender
or the  Administrative  Agent  listed  on the  signature  pages  hereof  or on a
Schedule  or  otherwise  selected  by such  Lender or the  Administrative  Agent
pursuant to Section 2.17.

      "Lien" means,  with respect to any asset,  any lien  (statutory or other),
mortgage,  pledge, charge, security interest or other encumbrance of any kind in
respect of such asset  (including  the  interest of a vendor or lessor under any
conditional sale, Capitalized Lease or other title retention agreement).

      "Loan" means,  with respect to a Lender,  such Lender's loan made pursuant
to Section 2 (or any conversion or continuation thereof).

      "Loan  Documents"  means this  Agreement and any Notes issued  pursuant to
Section 2.13.

                                      7

<PAGE>

      "Material  Adverse  Effect"  means a  material  adverse  effect on (i) the
business, Property,  condition (financial or otherwise),  results of operations,
or prospects of the Borrower  and its  Subsidiaries  taken as a whole,  (ii) the
ability of the Borrower to perform its  obligations  under the Loan Documents or
(iii) the validity or  enforceability of any of the Loan Documents or the rights
or remedies of the Administrative Agent or the Lenders thereunder.

      "Material Financial  Obligation" means Indebtedness of the Borrower or any
Subsidiary,  or  obligations of the Borrower or any Subsidiary in respect of any
Securitization   Transaction,   in  an  aggregate  amount  (for  all  applicable
Indebtedness  and  obligations in respect of  Securitization  Transactions,  but
without duplication) equal to $10,000,000 or more.

      "Moody's" means Moody's Investors Service, Inc.

      "Multiemployer  Plan" means a Plan  maintained  pursuant  to a  collective
bargaining  agreement  or any other  arrangement  to which the  Borrower  or any
member of the  Controlled  Group is a party to which more than one  employer  is
obligated to make contributions.

      "Non-Energy  Related  Business"  means any business other than  businesses
engaged  in or  directly  related  to:  (i)  the  production,  sale,  brokerage,
management,  transportation,  delivery or other  provision  of energy  products,
including but not limited to,  electricity,  natural gas, oil, coal, propane and
renewable energy producing materials,  (ii) the provision of energy conservation
services,  including, but not limited to, energy audits,  installation of energy
conservation devices,  energy efficient equipment and related systems, (iii) the
provision of services and equipment in connection  with the  procurement of such
energy  products  or  conservation  of  energy,  (iv)  engineering,  consulting,
construction, operational or maintenance services in connection with such energy
products,  the  conservation  of energy or with equipment  utilizing such energy
products or (v) the  manufacturing  of equipment used in connection  with energy
production or conservation.

      "Non-Regulated Subsidiary" means a Subsidiary of the Borrower other than a
Regulated Subsidiary.

      "Non-U.S. Lender" is defined in Section 3.5(iv).

      "Note"  means  any  promissory  note  issued  at the  request  of a Lender
pursuant to Section 2.13 in the form of Exhibit E.

      "Notice of Assignment" is defined in Section 12.3.2.

      "Obligations"  means  all  unpaid  principal  of and  accrued  and  unpaid
interest  on  the  Loans,   all  accrued  and  unpaid  fees  and  all  expenses,
reimbursements, indemnities and other


                                      8

<PAGE>

obligations  of  the  Borrower  to  the  Lenders  or  to  any  Lender,  the
Administrative Agent or any indemnified party arising under the Loan Documents.

      "Other Taxes" is defined in Section 3.5(ii).

      "Participants" is defined in Section 12.2.1.

      "Payment Date" means the last Business Day of each March, June,  September
and December.

     "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any  successor
thereto.

      "Person"  means any natural  person,  corporation,  firm,  joint  venture,
partnership, limited liability company, association,  enterprise, trust or other
entity or  organization,  or any  government  or  political  subdivision  or any
agency, department or instrumentality thereof.

      "Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or Section  302 of ERISA or subject to the  minimum  funding  standards
under  Section  412 of the Code as to which the  Borrower  or any  member of the
Controlled Group may have any liability.

      "Pricing Schedule" means the Schedule attached hereto identified as such.

      "Property" of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased or
operated by such Person.

      "Public  Reports"  means the  Utility's (i) annual report on Form 10-K for
the year ended December 31, 1997 and (ii) quarterly reports on Form 10-Q for the
quarterly  periods ending March 31, 1998,  June 30, 1998 and September 30, 1998,
each filed with the SEC under the Exchange Act.

      "PUHCA" means the Public Utility Holding Company Act of 1935, as amended.

      "Purchasers" is defined in Section 12.3.1.

      "Regulated  Subsidiary"  means a  Subsidiary  of the  Borrower  subject to
regulation under the FERC, the FPA, the PUHCA and/or any state utilities code.

      "Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation  or official

                                      9

<PAGE>


interpretation of said Board of Governors relating to reserve requirements
applicable to member banks of the Federal Reserve System.

      "Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve  System  as from  time to time in  effect  and any  successor  or  other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of  purchasing  or carrying  margin
stocks applicable to member banks of the Federal Reserve System.

      "Reportable  Event" means a reportable event as defined in Section 4043 of
ERISA and the  regulations  issued under such  section,  with respect to a Plan,
excluding,  however,  such events as to which the PBGC has by regulation  waived
the  requirement of Section  4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event,  provided,  however, that a failure to meet the
minimum funding  standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.


      "Required  Lenders" means Lenders in the aggregate having at least 66-2/3%
of the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the  aggregate  holding  at least  66-2/3%  of the  aggregate  unpaid
principal amount of the outstanding Advances.

      "Reserve  Requirement"  means,  with  respect to an Interest  Period,  the
maximum  aggregate  reserve  requirement  (including  all  basic,  supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.

      "S&P" means Standard and Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc.

      "SEC" means the Securities and Exchange Commission.

      "Schedule" refers to a specific schedule to this Agreement, unless another
document is specifically referenced.

      "Section"  means a numbered  section  of this  Agreement,  unless  another
document is specifically referenced.

      "Securitization  Transaction" means any sale, assignment or other transfer
by the  Borrower or any  Subsidiary  of  accounts  receivable  or other  payment
obligations  owing to the Borrower or any  Subsidiary  or any interest in any of
the  foregoing,  together in each case with any  collections  and other proceeds
thereof, any collection or deposit accounts related thereto,

                                      10

<PAGE>

and any  collateral,guaranties  or other property or claims in favor of the
Borrower  or such  Subsidiary  supporting  or  securing  payment by the  obligor
thereon of, or otherwise related to, any such receivables.

      "Settlement Agreement" means the amended and restated settlement agreement
dated January 2, 1998 among the Staff of the New York Public Service Commission,
the Utility and others, as adopted by the New York Public Service  Commission in
Opinion No. 98-14, issued and effective June 30, 1998.

      "Single  Employer  Plan" means a Plan  maintained  by the  Borrower or any
member of the  Controlled  Group for  employees of the Borrower or any member of
the Controlled Group.

      "Subsidiary"  of a Person  means at any  date,  any  corporation,  limited
liability  company,  partnership,  association  or other  entity the accounts of
which  would  be  consolidated  with  those  of such  Person  in  such  Person's
consolidated  financial statements if such financial statements were prepared in
accordance with GAAP as of such date, as well as any other corporation,  limited
liability company, partnership,  association or other entity that is, as of such
date, otherwise  Controlled,  by such Person or one or more subsidiaries of such
Person or by such Person and one or more subsidiaries of such Person.


      "Substantial  Portion" means, with respect to the Property of the Borrower
and its  Subsidiaries,  Property  which  (i)  represents  more  than  10% of the
consolidated  assets of the Borrower and its  Subsidiaries  as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as at
the  beginning of the  twelve-month  period  ending with the month in which such
determination  is  made,  or  (ii)  is  responsible  for  more  than  10% of the
consolidated net sales or of the consolidated net income of the Borrower and its
Subsidiaries as reflected in the financial  statements referred to in clause (i)
above.

      "Taxes"  means  any and all  present  or  future  taxes,  duties,  levies,
imposts, deductions,  charges or withholdings,  and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes.

      "Termination Date" means December 4, 2001 or any earlier date on which the
Aggregate  Commitment is reduced to zero or otherwise terminated pursuant to the
terms hereof.

      "Total  Capitalization"  means (a) with  respect to the  Borrower  and its
Subsidiaries,  the sum of  Total  Debt  of the  Borrower  and  its  subsidiaries
determined   on  a   consolidated   basis  plus  the   Borrower's   consolidated
shareholders'  equity and (b) with respect to the Borrower and its Non-Regulated
Subsidiaries,  the Total Debt of the Borrower and its Non-Regulated Subsidiaries
determined   on  a   consolidated   basis  plus  the   Borrower's   consolidated
shareholders'   equity  excluding  any  portion  thereof   attributable  to  the
Borrower's Regulated Subsidiaries.


                                      11

<PAGE>


      "Total Debt" means,  with respect to any Person,  all Indebtedness of such
Person referred to in clauses (i), (ii),  (iii),  (iv), (v), (vi), and (viii) of
the  definition  of  "Indebtedness"  and (without  duplication)  all  Contingent
Obligations in respect of any of the foregoing.

      "Transferee" is defined in Section 12.4.

      "Type" means,  with respect to any Advance,  its nature as a Floating Rate
Advance or a Eurodollar Advance.

      "Unmatured  Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.

      "Utility" means Central Hudson Gas & Electric Corporation,  the Borrower's
parent prior to the Funding Date and a  Wholly-Owned  Subsidiary of the Borrower
on and subsequent to the Funding Date.

     "Wholly-Owned  Subsidiary"  of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or Controlled,
directly or indirectly,  by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more  Wholly-Owned  Subsidiaries of
such Person, or (ii) any partnership,  limited liability  company,  association,
joint venture or similar business  organization 100% of the ownership  interests
having  ordinary  voting  power  of  which  shall  at the  time be so  owned  or
Controlled.

      "Year 2000 Problem" means the risk that computer applications and embedded
microchips  in  non-computing  devices  may be unable to  recognize  and perform
properly date- sensitive functions involving certain dates prior to and any date
after December 31, 1999.

      1.2 Terms  Generally.  The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined.  Whenever the context may
require,  any pronoun shall include the  corresponding  masculine,  feminine and
neuter forms. The words "include", "includes" and "including" shall be deemed to
be  followed  by the  phrase  "without  limitation".  The word  "will"  shall be
construed  to have the same meaning and effect as the word  "shall".  Unless the
context requires  otherwise (a) any definition of or reference to any agreement,
instrument  or other  document  herein  shall be  construed as referring to such
agreement,   instrument  or  other  document  as  from  time  to  time  amended,
supplemented,  amended  and  restated  or  otherwise  modified  (subject  to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any  reference  herein to any Person  shall be  construed  to  include  such
Person's  successors  and  assigns,   (c)  the  words  "herein",   "hereof"  and
"hereunder",  and words of similar  import,  shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof and (d) all
references  herein to  Sections,

                                      12

<PAGE>


Exhibits and Schedules shall be construed to refer to Sections of, and Exhibits
and Schedules to, this Agreement.

      1.3 Accounting  Terms;  GAAP. Unless otherwise  specified,  all accounting
terms  used  herein or in any other  Loan  Document  shall be  interpreted,  all
accounting  determinations and computations  hereunder or thereunder  (including
under Section 6.15) shall be made, and all financial  statements  required to be
delivered  hereunder or thereunder  shall be prepared in accordance  with, those
generally accepted accounting  principles ("GAAP") applied in the preparation of
the financial  statements referred to in Section 5.4. For purposes of clause (b)
of Section 6.15 (and any related definitions),  Regulated Subsidiaries shall not
be consolidated with the Borrower and its Non-Regulated Subsidiaries.


                          SECTION 2 - THE COMMITMENTS


     2.1 Commitment.  From and including the date of this Agreement and prior to
the Termination  Date, each Lender severally agrees, on the terms and conditions
set forth in this Agreement,  to make Loans to the Borrower from time to time in
amounts not to exceed in the aggregate at any one time outstanding the amount of
its Commitment. Subject to the terms of this Agreement, the Borrower may borrow,
repay and reborrow at any time prior to the Termination Date. The Commitments to
lend hereunder shall expire on the Termination Date.

      2.2 Required Payments; Termination. Any outstanding Advances and all other
unpaid  Obligations  shall be paid in full by the  Borrower  on the  Termination
Date.

      2.3 Ratable Loans. Each Advance hereunder shall consist of Loans made from
the several  Lenders  ratably in proportion  to the ratio that their  respective
Commitments bear to the Aggregate Commitment.

      2.4 Types of  Advances.  The  Advances  may be Floating  Rate  Advances or
Eurodollar  Advances,  or a  combination  thereof,  selected by the  Borrower in
accordance with Sections 2.8 and 2.9.

      2.5  Commitment  Fee;  Reductions  in Aggregate  Commitment.  The Borrower
agrees to pay to the  Administrative  Agent  for the  account  of each  Lender a
commitment fee at a per annum rate equal to the Applicable Fee Rate on the daily
unused portion of such Lender's Commitment from the date hereof to and including
the  Termination  Date,  payable  on  each  Payment  Date  hereafter  and on the
Termination Date. The Borrower may permanently  reduce the Aggregate  Commitment
in whole,  or in part  ratably  among  the  Lenders  in  integral  multiples  of
$10,000,000,  upon at least three  Business  Days' prior  written  notice to the
Administrative  Agent,  which  notice  shall  specify  the  amount  of any  such
reduction,  provided,


                                      13

<PAGE>

however,  that the amount of the  Aggregate  Commitment  may not be reduced
below the aggregate  principal amount of the outstanding  Advances.  All accrued
and  unpaid  commitment  fees  shall be  payable  on the  effective  date of any
termination of the obligations of the Lenders to make Loans hereunder.

      2.6 Minimum Amount of Each Advance.  Each  Eurodollar  Advance shall be in
the minimum  amount of  $5,000,000  (and in multiples of $1,000,000 if in excess
thereof),  and each  Floating  Rate  Advance  shall be in the minimum  amount of
$5,000,000  (and in multiples of  $1,000,000  if in excess  thereof),  provided,
however,  that any  Floating  Rate  Advance  may be in the  amount of the unused
Aggregate Commitment.

      2.7 Optional Principal  Payments.  The Borrower may from time to time pay,
without  penalty or premium,  all outstanding  Floating Rate Advances,  or, in a
minimum  aggregate amount of $5,000,000 or any integral  multiple of $100,000 in
excess thereof,  any portion of the outstanding  Floating Rate Advances upon one
Business Day's prior notice to the  Administrative  Agent. The Borrower may from
time to time pay, subject to the payment of any funding  indemnification amounts
required  by  Section  3.4 but  without  penalty  or  premium,  all  outstanding
Eurodollar  Advances,  or, in a minimum  aggregate  amount of  $5,000,000 or any
integral multiple of $100,000 in excess thereof,  any portion of the outstanding
Eurodollar Advances upon three Business Days' prior notice to the Administrative
Agent.



      2.8 Method of Selecting Types and Interest  Periods for New Advances.  The
Borrower  shall select the Type of Advance  and, in the case of each  Eurodollar
Advance,  the Interest Period applicable thereto from time to time. The Borrower
shall give the Administrative  Agent irrevocable  notice (a "Borrowing  Notice")
not later than 11:00 a.m.  (Chicago time) on the Borrowing Date of each Floating
Rate Advance and not later than 11:00 a.m.  (Chicago  time) three  Business Days
before the Borrowing Date for each Eurodollar Advance, specifying:

   (i)      the Borrowing Date, which shall be a Business Day, of such Advance,

  (ii)      the aggregate amount of such Advance,

 (iii)      the Type of Advance selected and

  (iv) in the case of each Eurodollar  Advance,  the Interest Period  applicable
thereto.

Not later than 1:00 p.m.  (Chicago  time) on each  Borrowing  Date,  each Lender
shall make available its Loan or Loans in funds immediately available in Chicago
to the Administrative  Agent at its address specified pursuant to Section 13. To
the extent funds are received from the Lenders, the Administrative Agent will
make such funds available to the Borrower at the


                                      14

<PAGE>

Administrative  Agent's aforesaid address.  No Lender's obligation to make any 
Loan shall be affected by any other Lender's failure to make any Loan.

      2.9 Conversion and  Continuation  of Outstanding  Advances.  Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into  Eurodollar  Advances  pursuant to this Section
2.9 or are repaid in accordance with Section 2.7. Each Eurodollar  Advance shall
continue as a Eurodollar  Advance until the end of the then applicable  Interest
Period  therefor,  at which time such Eurodollar  Advance shall be automatically
converted into a Floating Rate Advance unless (x) such Eurodollar  Advance is or
was repaid in accordance  with Section 2.7 or (y) the Borrower  shall have given
the  Administrative  Agent a  Conversion/Continuation  Notice (as defined below)
requesting  that, at the end of such Interest  Period,  such Eurodollar  Advance
continue  as a  Eurodollar  Advance  for the same or  another  Interest  Period.
Subject to the terms of Section 2.6, the Borrower may elect from time to time to
convert all or any part of a Floating  Rate Advance  into a Eurodollar  Advance.
The  Borrower  shall  give  the  Administrative   Agent  irrevocable  notice  (a
"Conversion/Continuation  Notice") of each conversion of a Floating Rate Advance
into a Eurodollar Advance or continuation of a Eurodollar Advance not later than
10:00 a.m.  (Chicago time) at least three Business Days prior to the date of the
requested conversion or continuation, specifying:

   (i)      the requested date, which shall be a Business Day, of such 
            conversion or continuation,

  (ii)      the aggregate  amount and Type of the Advance which is to be 
            converted or continued and

 (iii)      the  amount  of  such  Advance  which  is to be  converted  into  or
            continued as a  Eurodollar  Advance and the duration of the Interest
            Period applicable thereto.

      2.10 Changes in Interest Rate,  etc. Each Floating Rate Advance shall bear
interest on the  outstanding  principal  amount  thereof,  for each day from and
including  the date such Advance is made or is  automatically  converted  from a
Eurodollar  Advance into a Floating Rate Advance pursuant to Section 2.9, to but
excluding the date it is paid or is converted into a Eurodollar Advance pursuant
to Section 2.9 hereof,  at a rate per annum equal to the Floating  Rate for such
day.  Changes in the rate of interest on that portion of any Advance  maintained
as a Floating Rate Advance will take effect  simultaneously  with each change in
the  Alternate  Base Rate.  Each  Eurodollar  Advance shall bear interest on the
outstanding  principal  amount  thereof from and  including the first day of the
Interest Period  applicable  thereto to (but not including) the last day of such
Interest Period at the Eurodollar Rate determined by the Administrative Agent as
applicable to such Eurodollar Advance based upon the Borrower's selections under
Sections  2.8 and 2.9 and  otherwise in  accordance  with the terms  hereof.  No
Interest Period may end after the Termination Date.


                                      15

<PAGE>

      2.11 Rates  Applicable  After  Default.  Notwithstanding  anything  to the
contrary contained in Section 2.8 or 2.9, during the continuance of a Default or
Unmatured  Default the Required  Lenders may, at their option,  by notice to the
Borrower  (which  notice may be revoked  at the option of the  Required  Lenders
notwithstanding  any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest  rates),  declare that no Advance may be made as,
converted into or continued as a Eurodollar Advance. During the continuance of a
Default the  Required  Lenders may, at their  option,  by notice to the Borrower
(which   notice  may  be  revoked  at  the  option  of  the   Required   Lenders
notwithstanding  any provision of Section 8.2 requiring unanimous consent of the
Lenders to changes in interest rates),  declare that (i) each Eurodollar Advance
shall bear interest for the remainder of the applicable  Interest  Period at the
rate  otherwise  applicable to such  Interest  Period plus 2% per annum and (ii)
each  Floating Rate Advance shall bear interest at a rate per annum equal to the
Floating  Rate in effect  from time to time plus 2% per  annum,  provided  that,
during the continuance of a Default under Section 7.6 or 7.7, the interest rates
set forth in clauses  (i) and (ii) above  shall be  applicable  to all  Advances
without any  election or action on the part of the  Administrative  Agent or any
Lender.

     2.12 Method of Payment. All payments of the Obligations  hereunder shall be
made, without setoff, deduction, or counterclaim, in immediately available funds
to the  Administrative  Agent at the  Administrative  Agent's address  specified
pursuant  to  Section  13,  or  at  any  other  Lending   Installation   of  the
Administrative  Agent  specified in writing by the  Administrative  Agent to the
Borrower,  by noon  (Chicago  time) on the date  when due and  shall be  applied
ratably by the Administrative Agent among the Lenders. Each payment delivered to
the  Administrative  Agent for the  account  of any  Lender  shall be  delivered
promptly  by the  Administrative  Agent to such Lender in the same type of funds
that the  Administrative  Agent  received at its address  specified  pursuant to
Section 13 or at any Lending Installation  specified in a notice received by the
Administrative Agent from such Lender.

      2.13 Noteless Agreement;  Evidence of Indebtedness.  (i) Each Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Loan made by
such Lender from time to time,  including  the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.

      (ii) The  Administrative  Agent shall also  maintain  accounts in which it
will record (a) the amount of each Loan made hereunder, the Type thereof and the
Interest  Period  with  respect  thereto,  (b) the  amount of any  principal  or
interest  due and payable or to become due and payable from the Borrower to each
Lender  hereunder  and (c) the amount of any sum received by the  Administrative
Agent hereunder from the Borrower and each Lender's share thereof.


                                      16

<PAGE>

      (iii) The  entries  maintained  in the  accounts  maintained  pursuant  to
paragraphs (i) and (ii) above shall be prima facie evidence of the existence and
amounts of the Obligations therein recorded; provided, however, that the failure
of the Administrative Agent or any Lender to maintain such accounts or any error
therein shall not in any manner  affect the  obligation of the Borrower to repay
the Obligations in accordance with their terms.

      (iv) Any Lender may request  that its Loans be  evidenced  by a promissory
note (a "Note"). In such event, the Borrower shall prepare,  execute and deliver
to such Lender a Note payable to the order of such Lender in  substantially  the
form of  Exhibit E hereto.  Thereafter,  the  Loans  evidenced  by such Note and
interest thereon shall at all times (including after any assignment  pursuant to
Section  12.3) be  represented  by one or more Notes payable to the order of the
payee named  therein or any  assignee  pursuant to Section  12.3,  except to the
extent that any such Lender or assignee  subsequently  returns any such Note for
cancellation  and requests  that such Loans once again be evidenced as described
in paragraphs (i) and (ii) above.

      2.14 Telephonic  Notices.  The Borrower hereby  authorizes the Lenders and
the  Administrative  Agent to  extend,  convert  or  continue  Advances,  effect
selections  of Types of  Advances  and to  transfer  funds  based on  telephonic
notices made by any person or persons the Administrative  Agent or any Lender in
good faith believes to be acting on behalf of the Borrower.  The Borrower agrees
to deliver promptly to the Administrative Agent a written confirmation,  if such
confirmation  is requested by the  Administrative  Agent or any Lender,  of each
telephonic notice signed by an Authorized Officer.  If the written  confirmation
differs in any  material  respect  from the action  taken by the  Administrative
Agent and the Lenders,  the records of the Administrative  Agent and the Lenders
shall govern absent manifest error.

      2.15 Interest Payment Dates;  Interest and Fee Basis.  Interest accrued on
each  Floating  Rate  Advance  shall  be  payable  on each  Payment  Date and at
maturity.  Interest  accrued on each Eurodollar  Advance shall be payable on the
last day of its applicable  Interest Period, on any date on which the Eurodollar
Advance is prepaid,  whether by  acceleration  or  otherwise,  and at  maturity.
Interest  accrued on each  Eurodollar  Advance having an Interest  Period longer
than three  months  shall  also be  payable on the last day of each  three-month
interval during such Interest  Period.  Interest on Floating Rate Advances which
are bearing  interest at the Corporate  Base Rate shall be calculated for actual
days elapsed on the basis of a 365-day year or, when appropriate,  366-day year.
All other  interest  and  commitment  fees shall be  calculated  for actual days
elapsed on the basis of a 360-day year. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if payment
is  received  prior to noon  (Chicago  time) at the place of  payment  (it being
understood  that the  Administrative  Agent  shall be deemed to have  received a
payment  prior to noon  (Chicago  time) if (x) the  Borrower  has  provided  the
Administrative Agent with evidence satisfactory to the Administrative Agent that
the Borrower has  initiated a wire  transfer of such payment  prior to such time
and (y) the  Administrative  Agent  actually  receives  such payment on the same

                                      17

<PAGE>

Business  Day on which such wire  transfer  was  initiated).  If any  payment of
principal of or interest on an Advance  shall become due on a day which is not a
Business  Day, such payment  shall be made on the next  succeeding  Business Day
and,  in the  case of a  principal  payment,  such  extension  of time  shall be
included in computing interest in connection with such payment.

      2.16 Notification of Advances,  Interest Rates, Prepayments and Commitment
Reductions. Promptly after receipt thereof, the Administrative Agent will notify
each  Lender of the  contents of each  Aggregate  Commitment  reduction  notice,
Borrowing Notice,  Conversion/Continuation Notice, and repayment notice received
by it  hereunder.  The  Administrative  Agent  will  notify  each  Lender of the
interest rate applicable to each Eurodollar  Advance promptly upon determination
of such  interest rate and will give each Lender prompt notice of each change in
the Alternate Base Rate.

      2.17 Lending Installations.  Each Lender may book its Loans at any Lending
Installation  selected by such  Lender and may change its  Lending  Installation
from time to time. All terms of this  Agreement  shall apply to any such Lending
Installation  and the Loans and any Notes issued  hereunder shall be deemed held
by each Lender for the benefit of such Lending Installation. Each Lender may, by
written notice to the  Administrative  Agent and the Borrower in accordance with
Section 13, designate  replacement or additional Lending  Installations  through
which Loans will be made by it and for whose  account  Loan  payments  are to be
made.

     2.18 Non-Receipt of Funds by the Administrative  Agent. Unless the Borrower
or a Lender, as the case may be, notifies the Administrative  Agent prior to the
date on which it is scheduled to make payment to the Administrative Agent of (i)
in the  case of a  Lender,  the  proceeds  of a Loan or (ii) in the  case of the
Borrower,  a payment of principal,  interest or fees to the Administrative Agent
for the account of the  Lenders,  that it does not intend to make such  payment,
the  Administrative  Agent may  assume  that such  payment  has been  made.  The
Administrative Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
the  Administrative  Agent makes the amount of any such payment available to the
intended recipient and a Lender or the Borrower,  as the case may be, has not in
fact made such payment to the  Administrative  Agent,  such recipient  shall, on
demand by the Administrative Agent, repay to the Administrative Agent the amount
so made available  together with interest  thereon in respect of each day during
the  period  commencing  on the date such  amount was so made  available  by the
Administrative  Agent  until the date the  Administrative  Agent  recovers  such
amount at a rate per annum equal to (x) in the case of payment by a Lender,  the
Federal Funds  Effective  Rate for such day or (y) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.



                                      18

<PAGE>


                      SECTION 3 - YIELD PROTECTION; TAXES


      3.1 Yield  Protection.  If, on or after  the date of this  Agreement,  the
adoption of any law or any governmental or quasi-governmental  rule, regulation,
policy,  guideline or directive (whether or not having the force of law), or any
change in the  interpretation or  administration  thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with the
interpretation  or  administration  thereof,  or  compliance  by any  Lender  or
applicable  Lending  Installation with any request or directive  (whether or not
having  the  force of law) of any such  authority,  central  bank or  comparable
agency:

    (i)     subjects any Lender or any applicable  Lending  Installation  to any
            Taxes, or changes the basis of taxation of payments (other than with
            respect  to  Excluded  Taxes)  to  any  Lender  in  respect  of  its
            Eurodollar Loans, or

   (ii)     imposes or increases or deems  applicable  any reserve,  assessment,
            insurance  charge,  special deposit or similar  requirement  against
            assets of,  deposits with or for the account of, or credit  extended
            by, any Lender or any applicable  Lending  Installation  (other than
            reserves  and  assessments  taken into  account in  determining  the
            interest rate applicable to Eurodollar Advances), or

  (iii)     imposes any other  condition  the result of which is to increase the
            cost to any Lender or any applicable Lending Installation of making,
            funding or maintaining  its  Eurodollar  Loans or reduces any amount
            receivable by any Lender or any applicable  Lending  Installation in
            connection with its Eurodollar  Loans, or requires any Lender or any
            applicable  Lending  Installation to make any payment  calculated by
            reference  to the  amount  of  Eurodollar  Loans  held  or  interest
            received by it, by an amount deemed material by such Lender,


and the result of any of the foregoing is to increase the cost to such Lender or
applicable Lending Installation of making or maintaining its Eurodollar Loans or
Commitment or to reduce the return received by such Lender or applicable Lending
Installation  in connection  with such  Eurodollar  Loans or  Commitment,  then,
within 15 days of demand by such Lender, the Borrower shall pay such Lender such
additional  amount or amounts as will  compensate such Lender for such increased
cost or reduction in amount received.

      3.2 Changes in Capital Adequacy  Regulations.  If a Lender  determines the
amount of capital  required or expected to be  maintained  by such  Lender,  any
Lending  Installation of such Lender or any corporation  controlling such Lender
is  increased  as a result of a Change,  then,  within 15 days of demand by such
Lender,  the Borrower  shall pay such Lender the amount  necessary to compensate
for any shortfall in the rate of return on the portion of such increased

                                      19

<PAGE>

capital which such Lender determines is attributable to this Agreement, its
Loans or its Commitment to make Loans hereunder  (after taking into account such
Lender's policies as to capital  adequacy).  "Change" means (i) any change after
the date of this  Agreement in the  Risk-Based  Capital  Guidelines  or (ii) any
adoption of or change in any other law, governmental or quasi-governmental rule,
regulation,  policy,  guideline,  interpretation,  or directive  (whether or not
having  the force of law) after the date of this  Agreement  which  affects  the
amount of capital  required or expected  to be  maintained  by any Lender or any
Lending  Installation  or any corporation  controlling  any Lender.  "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect in the
United States on the date of this Agreement,  including  transition  rules,  and
(ii) the corresponding capital regulations promulgated by regulatory authorities
outside  the  United  States  implementing  the July  1988  report  of the Basle
Committee   on   Banking   Regulation   and   Supervisory   Practices   Entitled
"International  Convergence  of Capital  Measurements  and  Capital  Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.

      3.3 Availability of Types of Advances.  If (i) any Lender  determines that
maintenance of its Eurodollar  Loans at a suitable  Lending  Installation  would
violate any  applicable  law,  rule,  regulation,  or directive,  whether or not
having  the  force  of law,  or (ii) the  Required  Lenders  determine  that (a)
deposits of a type and maturity  appropriate to match fund  Eurodollar  Advances
are not available or (b) the interest rate  applicable to a Type of Advance does
not accurately reflect the cost of making or maintaining such Advance,  then the
Administrative  Agent shall  suspend the  availability  of the affected  Type of
Advance and, in the case of clause (i), require any affected Eurodollar Advances
to be repaid or converted to Floating Rate  Advances,  subject to the payment of
any funding indemnification amounts required by Section 3.4.

     3.4 Funding Indemnification.  If any payment of a Eurodollar Advance occurs
on a date which is not the last day of the applicable  Interest Period,  whether
because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not
made on the date  specified by the Borrower for any reason other than default by
the  Lenders,  the  Borrower  will  indemnify  each  Lender for any loss or cost
incurred by it resulting therefrom, including any loss or cost in liquidating or
employing deposits acquired to fund or maintain such Eurodollar Advance.

      3.5 Taxes.  (i) All  payments by the Borrower to or for the account of any
Lender or the  Administrative  Agent  hereunder  or under any Note shall be made
free and clear of and without  deduction for any and all Taxes.  If the Borrower
shall be  required  by law to deduct  any Taxes  from or in  respect  of any sum
payable hereunder to any Lender or the Administrative Agent, (a) the sum payable
shall be increased  as  necessary  so that after making all required  deductions
(including  deductions  applicable to additional sums payable under this Section
3.5) such Lender or the  Administrative  Agent (as the case may be)  receives an
amount


                                      20

<PAGE>


equal to the sum it would have received had no such deductions been made,
(b) the Borrower shall make such deductions, (c) the Borrower shall pay the full
amount deducted to the relevant  authority in accordance with applicable law and
(d) the Borrower shall furnish to the Administrative  Agent the original copy of
a receipt evidencing payment thereof within 30 days after such payment is made.

      (ii) In addition,  the Borrower hereby agrees to pay any present or future
stamp or documentary  taxes and any other excise or property  taxes,  charges or
similar  levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise  with respect to, this Agreement
or any Note ("Other Taxes").

      (iii) The Borrower hereby agrees to indemnify the Administrative Agent and
each Lender for the full amount of Taxes or Other Taxes  (including any Taxes or
Other  Taxes  imposed on amounts  payable  under this  Section  3.5) paid by the
Administrative  Agent or such  Lender and any  liability  (including  penalties,
interest and expenses) arising  therefrom or with respect thereto.  Payments due
under  this  indemnification  shall  be made  within  30 days  of the  date  the
Administrative  Agent or such Lender makes demand  therefor  pursuant to Section
3.6.

     (iv) Each  Lender  that is not  incorporated  under the laws of the  United
States of America or a state thereof (each a "Non-U.S.  Lender")  agrees that it
will,  not less than ten  Business  Days after the date of this  Agreement,  (i)
deliver to each of the Borrower and the Administrative  Agent two duly completed
copies of United States Internal  Revenue Service Form 1001 or 4224,  certifying
in either  case that such  Lender is  entitled  to receive  payments  under this
Agreement  without  deduction or withholding of any United States federal income
taxes, and (ii) deliver to each of the Borrower and the  Administrative  Agent a
United States Internal  Revenue Form W-8 or W-9, as the case may be, and certify
that it is entitled to an exemption from United States backup  withholding  tax.
Each Non-U.S.  Lender further  undertakes to deliver to each of the Borrower and
the Administrative  Agent (x) renewals or additional copies of such form (or any
successor  form) on or  before  the date  that  such  form  expires  or  becomes
obsolete,  and (y) after the  occurrence of any event  requiring a change in the
most recent  forms so  delivered  by it,  such  additional  forms or  amendments
thereto as may be  reasonably  requested by the  Borrower or the  Administrative
Agent. All forms or amendments described in the preceding sentence shall certify
that such Lender is entitled to receive  payments under this  Agreement  without
deduction or withholding  of any United States  federal income taxes,  unless an
event (including without limitation any change in treaty, law or regulation) has
occurred  prior to the  date on  which  any such  delivery  would  otherwise  be
required which renders all such forms  inapplicable  or which would prevent such
Lender from duly  completing  and  delivering  any such form or  amendment  with
respect to it and such Lender advises the Borrower and the Administrative  Agent
that  it  is  not  capable  of  receiving  payments  without  any  deduction  or
withholding of United States federal income tax.


                                      21

<PAGE>

      (v) For any period  during  which a Non-U.S.  Lender has failed to provide
the Borrower with an  appropriate  form  pursuant to clause (iv),  above (unless
such failure is due to a change in treaty,  law or regulation,  or any change in
the  interpretation  or  administration  thereof by any governmental  authority,
occurring  subsequent to the date on which a form  originally was required to be
provided),  such Non-U.S.  Lender shall not be entitled to indemnification under
this Section 3.5 with respect to Taxes  imposed by the United  States;  provided
that,  should a Non-U.S.  Lender which is otherwise  exempt from or subject to a
reduced rate of  withholding  tax become subject to Taxes because of its failure
to deliver a form required  under clause (iv),  above,  the Borrower  shall take
such steps as such  Non-U.S.  Lender  shall  reasonably  request to assist  such
Non-U.S. Lender to recover such Taxes.

      (vi) Any Lender that is  entitled to an  exemption  from or  reduction  of
withholding  tax with  respect  to  payments  under this  Agreement  or any Note
pursuant to the law of any relevant  jurisdiction or any treaty shall deliver to
the Borrower  (with a copy to the  Administrative  Agent),  at the time or times
prescribed by applicable law, such properly completed and executed documentation
prescribed  by  applicable  law as will permit such  payments to be made without
withholding or at a reduced rate.

     3.6 Lender  Statements;  Survival of  Indemnity.  To the extent  reasonably
possible and upon the request of the  Borrower,  each Lender shall  designate an
alternate  Lending  Installation  with respect to its Eurodollar Loans to reduce
any liability of the Borrower to such Lender under  Sections 3.1, 3.2 and 3.5 or
to avoid the unavailability of Eurodollar Advances under Section 3.3, so long as
such designation is not, in the judgment of such Lender, disadvantageous to such
Lender.  Each Lender  shall  deliver a written  statement  of such Lender to the
Borrower (with a copy to the Administrative Agent) as to the amount due, if any,
under Section 3.1, 3.2, 3.4 or 3.5.  Such written  statement  shall set forth in
reasonable detail the calculations upon which such Lender determined such amount
and shall be final,  conclusive  and  binding on the  Borrower in the absence of
manifest  error.  Determination  of  amounts  payable  under  such  Sections  in
connection  with a  Eurodollar  Loan shall be  calculated  as though each Lender
funded its  Eurodollar  Loan  through the  purchase of a deposit of the type and
maturity  corresponding  to the deposit used as a reference in  determining  the
Eurodollar  Rate  applicable  to such Loan,  whether in fact that is the case or
not.  Unless  otherwise  provided  herein,  the amount  specified in the written
statement  of any Lender  shall be payable  within 10 days after  receipt by the
Borrower of such  written  statement.  The  obligations  of the  Borrower  under
Sections  3.1,  3.2, 3.4 and 3.5 shall survive  payment of the  Obligations  and
termination of this Agreement.



                                      22

<PAGE>

                       SECTION 4 - CONDITIONS PRECEDENT


      4.1 Initial Advance. The Lenders shall not be required to make the initial
Advance  hereunder unless (a) the Borrower has paid for its own account all fees
costs and expenses due and payable  pursuant to Section 9.6 and (b) the Borrower
has  furnished  to the  Administrative  Agent  with  sufficient  copies  for the
Lenders:

   (i)      Copies  of the  articles  or  certificate  of  incorporation  of the
            Borrower,  together with all  amendments,  and a certificate of good
            standing, each certified by the appropriate  governmental officer in
            its jurisdiction of incorporation.

  (ii)      Copies,  certified by the  Secretary  or Assistant  Secretary of the
            Borrower, of its by-laws and of its Board of Directors'  resolutions
            and of  resolutions  or actions of any other  body  authorizing  the
            execution of the Loan Documents to which the Borrower is a party.

 (iii)      An  incumbency  certificate,  executed by the Secretary or Assistant
            Secretary of the  Borrower,  which shall  identify by name and title
            and bear the  signatures  of the  Authorized  Officers and any other
            officers of the Borrower  authorized  to sign the Loan  Documents to
            which  the  Borrower  is  a  party,   upon  which   certificate  the
            Administrative Agent and the Lenders shall be entitled to rely until
            informed of any change in writing by the Borrower.

  (iv)      A  certificate,  signed  by  the  chief  financial  officer  of  the
            Borrower,  stating  that on the Funding Date no Default or Unmatured
            Default has  occurred and is  continuing  and during the period from
            the Closing Date to the Funding Date no event has occurred which has
            had, or is reasonably likely to have, a Material Adverse Effect.

   (v)      A  written  opinion  of the  Borrower's  counsel,  addressed  to the
            Lenders in substantially the form of Exhibit A.

  (vi)      Any Notes  requested by a Lender pursuant to Section 2.15 payable to
            the order of each such requesting Lender.

 (vii)      Written money transfer  instructions,  in substantially  the form of
            Exhibit D,  addressed to the  Administrative  Agent and signed by an
            Authorized Officer,  together with such other related money transfer
            authorizations  as the  Administrative  Agent  may  have  reasonably
            requested.

                                      23

<PAGE>


(viii)      Copies of written  information  evidencing,  as of the Funding Date,
            the  restructuring  of the  Borrower  as a holding  company  for the
            Utility capitalized with contributions of cash equity by the Utility
            to the  Borrower  of not  less  than  the  amount  required  for the
            Borrower to be in  compliance  with  Section  6.15(b),  on terms and
            conditions satisfactory to the Agent and the Lenders.

  (ix)      Copies  of  written  information,  reasonable  satisfactory  to  the
            Lenders and Administrative  Agent,  regarding the Borrower's and its
            Subsidiaries' plans for addressing the Year 2000 Problem.

    (x)     Such  other  documents  as  any  Lender  or  its  counsel  may  have
            reasonably requested.

      4.2 Each  Advance.  The Lenders  shall not be required to make any Advance
(other than an Advance that,  after giving effect thereto and to the application
of the proceeds  thereof,  does not increase the aggregate amount of outstanding
Advances), unless on the applicable Borrowing Date:

   (i)      There exists no Default or Unmatured Default.

  (ii)      There exists no litigation, arbitration, governmental investigation,
            proceeding or inquiry pending against or, to the knowledge of any of
            their  officers,  affecting the Borrower or any of its  Subsidiaries
            which  could  reasonably  be  expected  to have a  Material  Adverse
            Effect,  which seeks to  prevent,  enjoin or delay the making of any
            Loan or to revoke or modify the  exemption  of the  Borrower and its
            Subsidiaries from the provisions (other than Section 9(a)(2)) of the
            PUHCA.

 (iii)      The representations  and warranties  contained in Section 5 are true
            and  correct in all  material  respects  as of such  Borrowing  Date
            except to the extent any such  representation  or warranty is stated
            to  relate   solely  to  an  earlier   date,   in  which  case  such
            representation  or warranty  shall have been true and correct in all
            material respects on and as of such earlier date.

      Each Borrowing Notice shall  constitute a  representation  and warranty by
the Borrower that the conditions set forth above have been satisfied. Any Lender
may require a duly completed compliance certificate in substantially the form of
Exhibit B as a condition to making an Advance.


                                      24

<PAGE>


                  SECTION 5 - REPRESENTATIONS AND WARRANTIES


      The Borrower represents and warrants to the Lenders that:

      5.1 Existence and Standing. The Borrower is a corporation, and each of its
Subsidiaries is a corporation, partnership or limited liability company, in each
case duly and properly  incorporated  or organized,  as the case may be, validly
existing  and (to the  extent  such  concept  applies  to such  entity)  in good
standing under the laws of its  jurisdiction of  incorporation  or organization.
Each of the Borrower and each of its Subsidiaries has all requisite authority to
conduct its business in each jurisdiction in which its business is conducted.

      5.2 Authorization  and Validity.  The Borrower has the power and authority
and legal right to execute and  deliver  the Loan  Documents  and to perform its
obligations  thereunder.  The execution and delivery by the Borrower of the Loan
Documents and the performance by the Borrower of its obligations thereunder have
been duly  authorized by proper  corporate  proceedings,  and the Loan Documents
constitute  legal,  valid and binding  obligations  of the Borrower  enforceable
against the Borrower in accordance  with their terms,  except as  enforceability
may be limited by bankruptcy,  insolvency,  moratorium,  reorganization or other
laws,  judicial  decisions or principles of equity  relating to or affecting the
enforcement of creditors' rights generally (regardless of whether enforceability
is considered in a proceeding in equity or at law).

     5.3 No Conflict;  Government Consent. Neither the execution and delivery by
the Borrower of the Loan Documents,  nor the  consummation  of the  transactions
therein  contemplated,  nor compliance with the provisions  thereof will violate
(i) any law, rule,  regulation,  order, writ,  judgment,  injunction,  decree or
award binding on the Borrower or any of its  Subsidiaries or (ii) the Borrower's
articles or certificate of  incorporation  or by-laws or (iii) the provisions of
any  indenture,  instrument or agreement to which the Borrower or any Subsidiary
is a party or is subject, or by which any such entity or its Property, is bound,
or conflict with or constitute a default  thereunder,  or result in, or require,
the creation or imposition of any Lien in, of or on the Property of the Borrower
or any  Subsidiary  pursuant to the terms of any such  indenture,  instrument or
agreement (it being understood that prior to the Funding Date, the Utility shall
obtain an amendment to or waiver of the change of control provision set forth in
Section  6.01(l)  of its Credit  Agreement  dated as of  October  23,  1996 with
various financial institutions and Morgan Guaranty Trust Company of New York, as
agent, which amendment or waiver shall permit the Utility to become a Subsidiary
of  the  Borrower).  No  order,  consent,   adjudication,   approval,   license,
authorization,  or validation of, or filing,  recording or registration with, or
exemption by, or other action in respect of any  governmental  or public body or
authority (including the FERC), or any subdivision  thereof,


                                      25

<PAGE>


which has not been obtained by the Borrower or the  applicable  Subsidiary,
is required to be obtained by the Borrower or any Subsidiary in connection  with
the  execution and delivery of the Loan  Documents,  the  borrowings  under this
Agreement, the payment and performance by the Borrower of the Obligations or the
legality,  validity,  binding  effect  or  enforceability  of any  of  the  Loan
Documents.

      5.4 Financial  Statements.  The September 30, 1998 consolidated  financial
statements of the Utility,  contained in the Utility's  Quarterly Report on Form
10-Q filed with the SEC under the  Exchange Act for the  quarterly  period ended
September  30, 1998 and  heretofore  delivered to the Lenders,  were prepared in
accordance with GAAP and fairly present the consolidated  financial  position of
the Utility and its Subsidiaries at such date and the  consolidated  results and
cash flow of their operations for the period then ended.

      5.5 No Material Adverse Change. No material adverse change has occurred in
the Borrower's business or financial condition from that reflected in the report
of the Utility referred to in Section 5.4; and (except for matters  discussed in
the Public  Reports) since the date of such report there has been no development
or event or change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower and its  Subsidiaries  which
has had or could reasonably be expected to have a Material Adverse Effect.

      5.6 Taxes. The Borrower and its Subsidiaries  have filed all United States
federal tax returns and all other tax returns which are required to be filed and
have paid all taxes due pursuant to said  returns or pursuant to any  assessment
received by the Borrower or any of its Subsidiaries,  except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided  in  accordance  with GAAP and as to which no Lien  exists.  The United
States income tax returns of the Borrower and its Subsidiaries have been audited
by the Internal Revenue Service through the fiscal year ended December 31, 1991.
No tax liens have been filed and no  material  claims  are being  asserted  with
respect to any such taxes.  The  charges,  accruals and reserves on the books of
the Borrower and its Subsidiaries in respect of any taxes or other  governmental
charges are adequate.

      5.7 Litigation and Contingent Obligations.  Other than as discussed in the
Public Reports, there is no litigation, arbitration, governmental investigation,
proceeding  or inquiry  pending or, to the  knowledge of any of their  officers,
threatened  against or affecting the Borrower or any of its  Subsidiaries  which
could reasonably be expected to have a Material  Adverse Effect,  or which seeks
to prevent,  enjoin or delay the making of any Loans.  Other than any  liability
incident to any litigation, arbitration or proceeding which could not reasonably
be expected to have a Material  Adverse  Effect,  the  Borrower  has no material
contingent  obligations  not provided for or discussed in the report referred to
in Section 5.4.


                                      26

<PAGE>


     5.8 ERISA.  The Borrower and each other member of the Controlled  Group has
fulfilled its obligations  under the minimum funding  standards of ERISA and the
Code with respect to each Plan and is in  compliance  in all  material  respects
with the presently  applicable  provisions of ERISA and the Code with respect to
each Plan. Neither the Borrower nor any other member of the Controlled Group has
(i) sought a waiver of the minimum  funding  standard  under  Section 412 of the
Code in respect of any Plan, (ii) failed to make any  contribution or payment to
any Plan or  Multiemployer  Plan,  or made any  amendment  to any Plan 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 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.

      5.9 Accuracy of Information.  No information,  exhibit or report furnished
by the Borrower or any of its Subsidiaries to the Administrative Agent or to any
Lender in  connection  with the  negotiation  of, or compliance  with,  the Loan
Documents  contained  any  material  misstatement  of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
misleading.

      5.10  Regulation U. Margin stock (as defined in Regulation U)  constitutes
less than 25% of the value of those assets of the Borrower and its  Subsidiaries
which  are  subject  to any  limitation  on sale,  pledge  or other  restriction
hereunder.

      5.11  Material  Agreements.  Neither the Borrower nor any  Subsidiary is a
party  to any  agreement  or  instrument  or  subject  to any  charter  or other
corporate  restriction  which is  reasonably  likely to have a Material  Adverse
Effect.   Neither  the  Borrower  nor  any  Subsidiary  is  in  default  in  the
performance,  observance or fulfillment of any of the obligations,  covenants or
conditions  contained  in any  agreement to which it is a party,  which  default
could reasonably be expected to have a Material Adverse Effect.

      5.12 Compliance With Laws. The Borrower and its Subsidiaries have complied
with all applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign  government or any  instrumentality or agency thereof having
jurisdiction over the conduct of their respective businesses or the ownership of
their  respective  Property  except for any  failure  to comply  with any of the
foregoing  which could not  reasonably  be  expected to have a Material  Adverse
Effect.

      5.13  Ownership of  Properties.  Except as set forth on Schedule 1, on the
date of this Agreement,  the Borrower and its Subsidiaries will own, free of all
Liens other than those permitted by Section 6.11, all of the Property and assets
reflected  in the  Borrower's  most  recent  consolidated  financial  statements
provided  to  the  Administrative  Agent  as  owned  by  the  Borrower  and  its
Subsidiaries.

                                      27

<PAGE>

      5.14 Plan Assets;  Prohibited Transactions.  The Borrower is not an entity
deemed to hold "plan assets" within the meaning of 29 C.F.R.  ss.  2510.3-101 of
an employee  benefit plan (as defined in Section 3(3) of ERISA) which is subject
to Title I of ERISA or any plan  (within  the  meaning  of  Section  4975 of the
Code),  and  neither the  execution  of this  Agreement  nor the making of Loans
hereunder gives rise to a prohibited  transaction  within the meaning of Section
406 of ERISA or Section 4975 of the Code.


      5.15 Environmental  Matters.  In the ordinary course of its business,  the
Borrower  conducts an ongoing 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 identifies  and evaluates  associated  liabilities  and costs
(including  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,  any costs or liabilities
in connection with off-site disposal of wastes or Hazardous  Materials,  and any
actual or potential liabilities to third parties,  including employees,  and any
related  costs and  expenses).  On the basis of this  review,  the  Borrower has
reasonably concluded that such associated  liabilities and costs,  including the
costs of compliance  with  Environmental  Laws,  are unlikely to have a Material
Adverse Effect.

      5.16 Investment Company Act. Neither the Borrower nor any Subsidiary is an
"investment  company"  or a company  "controlled"  by an  "investment  company",
within the meaning of the Investment Company Act of 1940, as amended.

      5.17 Public Utility  Holding Company Act. As of the date of this Agreement
and at all times prior to the Funding  Date,  the Borrower and its  Subsidiaries
are and will not be  subject  to  PUHCA.  On and  after the  Funding  Date,  the
Borrower and its  Subsidiaries  will be exempt from the provisions of the PUHCA,
except Section 9(a)(2) thereof.

      5.18 Pari Passu  Indebtedness.  The Indebtedness  under the Loan Documents
ranks at least pari passu with all other unsecured Indebtedness of the Borrower.

      5.19  Year  2000  Problem.  The  Borrower  and its  Subsidiaries  (a) have
reviewed the areas within their business and operations which could be adversely
affected  by, and have  developed  or are  developing  a program to address on a
timely basis, the Year 2000 Problem and (b) have made  appropriate  inquiries as
to the effect the Year 2000 Problem will have on their  material  suppliers  and
customers.  Based on such review, program and inquiries, the Borrower reasonably
believes that the "Year 2000 Problem" will not have a Material Adverse Effect.



                                      28

<PAGE>

                             SECTION 6 - COVENANTS


      So long as any Lender has a Commitment  hereunder and thereafter until all
Obligations  are paid in full,  unless  the  Required  Lenders  shall  otherwise
consent in writing:



      6.1 Financial Reporting.  The Borrower will maintain,  for itself and each
Subsidiary,  a system of accounting  established and  administered in accordance
with generally accepted accounting principles, and furnish to the Lenders:

     (i)  Within  90 days  after  the  close  of each of its  fiscal  years,  an
     unqualified audit report certified by  PricewaterhouseCoopers  LLP or other
     firm of independent  certified public  accountants which is a member of the
     "Big Five,"  prepared in accordance  with GAAP on a consolidated  basis for
     itself and its Subsidiaries, including balance sheets as of the end of such
     period and related statements of income,  retained earnings and cash flows,
     accompanied by (a) any management letter prepared by said accountants,  and
     (b) a  certificate  of  said  accountants  that,  in the  course  of  their
     examination  necessary  for  their  audit  report,  they have  obtained  no
     knowledge  of any Default or  Unmatured  Default,  or if, in the opinion of
     such accountants, any Default or Unmatured Default shall exist, stating the
     nature and status thereof;  provided that, if the -------- Borrower is then
     a "registrant" within the meaning of Rule 1-01 of Regulation S-X of the SEC
     and  required  to file a report on Form  10-K  with the SEC,  a copy of the
     Borrower's  annual  report on Form 10-K  (excluding  the exhibits  thereto,
     unless such  exhibits are  requested  under clause (ix) 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 SEC,
     shall satisfy the requirements of this clause (i) other than subclause (b);

     (ii) Within 45 days after the close of the first three quarterly periods of
     each of its  fiscal  years,  for itself  and its  Subsidiaries,  either (i)
     consolidated and consolidating  unaudited balance sheets as at the close of
     each such period and  consolidated  and  consolidating  profit and loss and
     reconciliation of surplus  statements and a statement of cash flows for the
     period from the  beginning of such fiscal year to the end of such  quarter,
     all  certified  by its chief  financial  officer or (ii) if the Borrower is
     then a  "registrant"  within the meaning of Rule 1-01 of Regulation  S-X of
     the SEC and  required to file a report on Form 10-Q with the SEC, a copy of
     the Borrower's report on Form 10-Q for such quarterly period, excluding the
     exhibits  thereto,  unless such exhibits are requested under clause (ix) of
     this Section.


                                      29

<PAGE>

     (iii)  Together  with the  financial  statements  required  under Sections
     6.1(i) and (ii),  a compliance certificate in substantially the form of 
     Exhibit B signed by its chief accounting  officer stating that no Default 
     or Unmatured  Default exists, or if any Default or Unmatured Default 
     exists, stating the nature and status thereof.

     (iv) As soon as possible and in any event within 10 days after the Borrower
     knows that any  Reportable Event has occurred with respect to any Plan, a
     statement, signed by the chief financial officer of the Borrower, 
     describing said Reportable Event and the action which the Borrower proposes
     to take with respect thereto.

     (v) Promptly upon the furnishing thereof to the shareholders of the 
     Borrower, copies of all financial statements, reports and proxy statements 
     so furnished.

     (vi)  Promptly  upon  the  filing  thereof,   copies  of  all  registration
     statements  and annual,  quarterly,  monthly or other regular  reports 
     which the Borrower files with the SEC.

     (vii) Promptly upon the request of the Administrative  Agent or any Lender,
     such updated  information or documentation as may be requested from time to
     time regarding the efforts of the Borrower and its Subsidiaries to address 
     the Year 2000 Problem.

     (ix) Such other information (including non-financial information) as the
     Administrative Agent or any Lender may from time to time reasonably 
     request.

      6.2 Use of Proceeds.  The  Borrower  will use the proceeds of the Advances
for general corporate  purposes of the Borrower and its Subsidiaries,  including
acquisitions  (provided that no such proceeds shall be used to acquire any other
Person unless the board of directors or equivalent governing body of such Person
has approved such acquisition). The Borrower will not use any of the proceeds of
the Advances to purchase or carry any "margin  stock" (as defined in  Regulation
U).

      6.3 Notice of Default or Material  Adverse Effect.  The Borrower will, and
will cause each  Subsidiary  to, give prompt notice in writing to the Lenders of
the occurrence of any Default or Unmatured Default and of any other development,
financial or  otherwise,  which could  reasonably be expected to have a Material
Adverse Effect.

      6.4 Conduct of Business.  The Borrower will, and will cause each Regulated
Subsidiary  to,  carry on and conduct its  business  in  substantially  the same
manner and in  substantially  the same fields of  enterprise  as it is presently
conducted  (provided  that the  foregoing  shall not  prevent any sale of assets
otherwise  permitted  hereunder);  and the  Borrower  will,  and will cause each
Subsidiary to, do all things necessary to remain duly 


                                      30

<PAGE>


incorporated or organized, validly existing and (to the extent such concept
applies to such entity) in good standing as a domestic corporation,  partnership
or  limited   liability   company  in  its   jurisdiction  of  incorporation  or
organization,  as the case may be,  and  maintain  all  requisite  authority  to
conduct its  business in each  jurisdiction  in which its  business is conducted
(provided  that the foregoing  shall not prohibit the voluntary  dissolution  or
liquidation of any Subsidiary,  other than the Utility,  to the extent permitted
hereunder).

      6.5 Taxes.  The Borrower will,  and will cause each  Subsidiary to, timely
file United States federal and applicable  foreign,  state and local tax returns
required by law and pay when due all taxes, assessments and governmental charges
and levies upon it or its income,  profits or  Property,  except those which are
being  contested in good faith by  appropriate  proceedings  and with respect to
which adequate reserves have been set aside in accordance with GAAP.

      6.6  Insurance.  The Borrower  will,  and will cause each  Subsidiary  to,
maintain with financially sound and reputable  insurance  companies insurance on
all their Property in such amounts and covering such risks as is consistent with
sound business  practice as are usually insured against in the same general area
by companies of established  repute  engaged in the same or a similar  business,
and the Borrower will furnish to any Lender upon request full  information as to
the insurance carried.

      6.7  Compliance  with  Laws.  The  Borrower  will,  and  will  cause  each
Subsidiary  to,  comply  with  all  laws,  rules,  regulations,  orders,  writs,
judgments,  injunctions,  decrees or awards to which it may be subject including
all Environmental Laws.

      6.8  Maintenance  of  Properties.  The Borrower  will, and will cause each
Subsidiary to, do all things necessary to maintain,  preserve,  protect and keep
its Property in good repair, working order and condition, and make all necessary
and proper repairs, renewals and replacements so that its business carried on in
connection  therewith  may be properly  conducted  at all times;  provided  that
nothing in this  Section  shall  prevent  the  Borrower or any  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 is not 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.

      6.9  Inspection.  The Borrower  will,  and will cause each  Subsidiary to,
permit  the   Administrative   Agent  and  the  Lenders,   by  their  respective
representatives and agents, to inspect any of the Property,  books and financial
records of the Borrower and each  Subsidiary,  to examine and make copies of the
books  of  accounts  and  other  financial  records  of the  Borrower  and  each
Subsidiary,  and to discuss the  affairs,  finances and accounts of the Borrower
and each Subsidiary  with, and to be advised as to the same by, their respective
officers at such reasonable times and intervals as the  Administrative  Agent or
any Lender may 


                                      31

<PAGE>


designate and upon reasonable  advance notice, all subject to the 
confidentiality  provisions of Section 9.11. After the occurrence and during the
continuance  of a  Default,  any  such  inspection  shall  be at the  Borrower's
expense;  at all  other  times,  the  Borrower  shall  not be  liable to pay the
expenses  of the  Administrative  Agent or any  Lender in  connection  with such
inspections.

     6.10  Consolidations,  Mergers and Sales of Assets.  The Borrower will not,
and  will  not  permit  any   Subsidiary  to,  be  a  party  to  any  merger  or
consolidation,  or sell or otherwise dispose of any of its assets (other than in
the ordinary course of business), or sell or assign with or without recourse any
accounts receivable, except:

    (i)     A  Wholly-Owned  Subsidiary  may be merged into the Borrower or with
            another Wholly-Owned Subsidiary.

   (ii)     Any Subsidiary may sell assets to the Borrower or another 
            Subsidiary.

  (iii)     The  Borrower  may  sell all or  substantially  all of its
            assets  to,  or  consolidate   with  or  merge  into,  any  other
            corporation,  or permit  another  corporation  to merge  into it;
            provided,  however, that (a) the surviving  corporation,  if such
            surviving  corporation  is not the  Borrower,  or the  transferee
            corporation in the case of a sale of all or substantially  all of
            the  Borrower's  assets (1) shall be a corporation  organized and
            existing  under the laws of the  United  States of  America  or a
            state  thereof  or  the  District  of  Columbia,  and  (2)  shall
            expressly  assume in writing the due and punctual  payment of the
            Obligations   and  the  due  and  punctual   performance  of  and
            compliance with all of the terms of this Credit Agreement and the
            other Loan  Documents  to be  performed  or complied  with by the
            Borrower  and (b)  immediately  before  and  after  such  merger,
            consolidation  or sale,  there  shall not exist  any  Default  or
            Unmatured Default.

   (iv)     The  Borrower  and  its  Subsidiaries  may  sell  generating  assets
            (including  the Utility's Nine Mile 2 Nuclear Plant) for fair market
            value.

    (v)     The sale,  assignment  or other  transfer of accounts  receivable or
            other rights to payment pursuant to any Securitization Transaction.

   (vi)     The Borrower and its Subsidiaries may sell or otherwise dispose of 
            assets (other than accounts receivable and other rights to payment 
            unless in connection with the sale of a particular business line) so
            long as the aggregate  amount of all assets sold or otherwise 
            disposed of in any fiscal year of the Borrower (other than assets 
            sold or otherwise disposed of in the ordinary course of business or 
            pursuant to clauses (ii) and (iv) above) does not exceed 5% of the
            consolidated 

                                      32

<PAGE>


            assets of the Borrower and its Subsidiaries as of the
            last day of the preceding fiscal year of the Borrower.

     6.11 Liens.  The Borrower will not, and will not permit any  Subsidiary to,
create,  incur,  or suffer to exist  any Lien in, of or on the  Property  of the
Borrower or any of its Subsidiaries, except:

    (i)     Liens for taxes,  assessments or  governmental  charges or levies on
            its  Property  if the same  shall not at the time be  delinquent  or
            thereafter can be paid without  penalty,  or are being  contested in
            good faith and by appropriate proceedings and for which adequate 
            reserves in accordance  with GAAP shall have been set aside on its 
            books.

   (ii)     Liens  imposed  by  law,  such  as  carriers',   warehousemen's  and
            mechanics'  liens and other  similar  liens  arising in the ordinary
            course of business which secure payment of obligations not more than
            90 days  past due or which  are  being  contested  in good  faith by
            appropriate  proceedings and for which adequate  reserves shall have
            been set aside on its books.

  (iii)     Liens arising out of pledges or deposits under worker's compensation
            laws,  unemployment  insurance,  old age  pensions,  or other social
            security or retirement benefits, or similar legislation.

   (iv)     Utility easements, building restrictions,  zoning laws or ordinances
            and such other  encumbrances or charges against real property as are
            of a nature  generally  existing  with  respect to  properties  of a
            similar  character  and which do not in any  material way affect the
            marketability  of the same or interfere  with the use thereof in the
            business of the Borrower or its Subsidiaries.

    (v)     Liens  existing  on the date  hereof  and  described  in  Schedule 1
            (including Liens on after-acquired property arising under agreements
            described in Schedule 1 as such agreements are in effect on the date
            hereof).

   (vi)     Judgment Liens which secure payment of legal  obligations that would
            not constitute a Default under Section 7.

  (vii)     Liens on Property acquired by the Borrower or a Subsidiary after the
            date hereof,  existing on such  Property at the time of  acquisition
            thereof (and not created in anticipation thereof),  provided that in
            any such  case no such  Lien  shall  extend  to or cover  any  other
            Property of the Borrower or such Subsidiary, as the case may be.



                                      33

<PAGE>

 (viii)     Deposits  and/or similar  arrangements  to secure the performance of
            bids, fuel  procurement  contracts or other trade  contracts  (other
            than for borrowed money), leases, statutory obligations,  surety and
            appeal  bonds,  performance  bonds and other  obligations  of a like
            nature  incurred in the ordinary  course of business by the Borrower
            or any Subsidiary.

   (ix)     Liens on assets of the Borrower and its Subsidiaries  arising out of
            obligations or duties to any  municipality or public  authority with
            respect to any franchise, grant, license, permit or certificate.

    (x)     Rights reserved to or vested in any municipality or public authority
            to control or regulate  any property or asset of the Borrower or any
            Subsidiary or to use

            such property or asset in a manner which does not materially  impair
            the use of such  property or asset for the  purposes for which it is
            held by the Borrower or any Subsidiary.

   (xi)     Irregularities  in or deficiencies of title to any Property which do
            not  materially  affect the use of such  property by the Borrower or
            any Subsidiary in the normal course of its business.

  (xii)     Any Lien on any property or asset of any corporation or other entity
            existing at the time such corporation or entity is acquired,  merged
            or  consolidated  or  amalgamated  with or into the  Borrower or any
            Subsidiary and not created in contemplation of such event.

 (xiii)     Liens  arising  out  of  the  refinancing,   extension,  renewal  or
            refunding  of any  Indebtedness  secured  by any Lien  permitted  by
            clause  (v),  (vii) or (xii) of this  Section,  provided  that  such
            Indebtedness  is not increased and is not secured by any  additional
            assets.

  (xiv)     Rights of lessees  arising under leases entered into by the Borrower
            or any Subsidiary as lessor, in the ordinary course of business.

   (xv)     Liens granted by Central  Hudson  Enterprises  Corporation,  SCASCO,
            Inc. or any of their  respective  subsidiaries to its lenders on the
            interests of such entity in (a) energy-related  equipment  installed
            in the premises of third  parties  and/or,  (b) the  performance  by
            third parties of  energy-related  contracts  with such entity and/or
            (c) energy distribution equipment and related assets.

  (xvi)     Other Liens,  in addition to those  permitted by clauses (i) through
            (xv),   securing   Indebtedness   or  arising  in  connection   with
            Securitization   Transactions,   provided   that  the  sum  (without
            duplication) of all such Indebtedness, plus the aggregate 


                                      34

<PAGE>

            investment or claim  held at any time by all purchasers, assignees
            or other transferees of (or of interests in)  receivables and other
            rights to payment in all Securitization Transactions, shall not at
            any time exceed $25,000,000.

      6.12 Affiliates. The Borrower will not, and will not permit any Subsidiary
to, enter into any  transaction  (including the purchase or sale of any Property
or service) with, or make any payment or transfer to, any Affiliate  (other than
the Borrower or another  Subsidiary)  except in the ordinary  course of business
and  pursuant  to  the  reasonable   requirements  of  the  Borrower's  or  such
Subsidiary's  business and upon fair and  reasonable  terms no less favorable to
the  Borrower or such  Subsidiary  than the  Borrower or such  Subsidiary  would
obtain in a comparable arm's-length transaction.

      6.13 Investments. The Borrower will not, and will not permit its Regulated
Subsidiaries to, make Investments in Non-Regulated  Subsidiaries in an aggregate
outstanding  amount at any time  exceeding  $300,000,000  during the period from
November 1, 1998 (even if any Regulated  Subsidiary  did not become a Subsidiary
until after such date) to the  Termination  Date; and the Borrower will not, and
will not permit its  Subsidiaries  to, make  Investments or otherwise invest (by
way of capital  expenditures or otherwise) in Non-energy  Related  Businesses or
activities in an aggregate amount exceeding  $50,000,000 during the term of this
Agreement.

      6.14 Utility Dividends. The Borrower will not permit to exist any legal or
contractual  restriction  on the ability of the Utility to pay  dividends to the
Borrower except as set forth in the Settlement Agreement.

      6.15  Financial  Condition.  The Borrower will not permit (a) the ratio of
Total Debt of the Borrower and its  Subsidiaries  determined  on a  consolidated
basis to Total  Capitalization  of the Borrower and the  Subsidiaries  to exceed
0.65:1.00, provided that, at any time on and after the Funding Date during which
the  maximum  permissible  dividend  payable by the  Utility to the  Borrower is
limited to not more than 50% of the Utility's  average  annual income  available
for dividends (or a lesser percentage)  pursuant to the terms of paragraph 22 of
the  Settlement  Agreement,  the  Borrower  will not permit such ratio to exceed
0.60:1.00;  or (b) the ratio of Total Debt of the Borrower and its Non-Regulated
Subsidiaries  determined on a consolidated basis to Total  Capitalization of the
Borrower and its Non-Regulated Subsidiaries to exceed 0.50:1.00.

      6.16 Year  2000.  The  Borrower  will  take,  and will  cause  each of its
Subsidiaries  to  take,  all  such  actions  as  are  reasonably   necessary  to
successfully implement the Year 2000 Program and to assure that Year 2000 Issues
will not have a Material  Adverse Effect.  At the request of the  Administrative
Agent, the Borrower will provide (for distribution to the Lenders) a description
of the Year 2000  Program,  together  with any updates or progress  reports with
respect thereto.


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<PAGE>


                             SECTION 7 - DEFAULTS


      Each of the following events or occurrences shall constitute a "Default".

      7.1 Breach of Warranty. Any representation or warranty made or deemed made
by or on behalf of the Borrower to the Lenders or the Administrative Agent under
or  in  connection  with  this  Agreement,  any  Loan,  or  any  certificate  or
information  delivered  in  connection  with this  Agreement  or any other  Loan
Document shall be materially false on the date as of which made.

      7.2 Nonpayment Obligations.  Nonpayment of principal of any Loan when due;
or  nonpayment  of  interest  upon  any Loan or of any  commitment  fee or other
obligation  under any of the Loan  Documents  within  five  days  after the same
becomes due.

      7.3 Nonperformance of Certain Covenants. The breach by the Borrower of any
of the terms or provisions of Section 6.2, 6.3, 6.10,  6.11. 6.12, 6.13, 6.14 or
6.15.

      7.4 Nonperformance of Agreement.  The breach by the Borrower (other than a
breach which constitutes a Default under another provision of this Section 7) of
any of the terms or provisions of this  Agreement  which is not remedied  within
five Business Days (or, in the case of Section 6.16, thirty Business Days) after
written notice from the Administrative Agent or any Lender.

      7.5  Default  on Other  Material  Financial  Obligations.  Failure  of the
Borrower or any of its Subsidiaries to pay when due any Indebtedness aggregating
in excess of $10,000,000;  ("Material Financial Obligations"); or the default by
the  Borrower  or any of  its  Subsidiaries  in  the  performance  of any  term,
provision  or  condition  contained  in one or more  agreements  under which any
Material Financial  Obligations were created or are governed, or any other event
shall  occur or  condition  exist,  the  effect of which  default or event is to
cause, or to permit the holder or holders of such Material Financial Obligations
to cause, such Material Financial  Obligations to become due prior to the stated
maturity   thereof  (or  to  be   purchased,   repurchased,   defeased  or  cash
collateralized  prior to the  scheduled  date (if any) for such  event);  or any
Material Financial  Obligations of the Borrower or any of its Subsidiaries shall
be declared to be due and payable or be required to be prepaid  (other than by a
regularly  scheduled  prepayment) prior to the stated maturity thereof (or to be
purchased,  repurchased,  defeased or cash collateralized prior to the scheduled
date (if any) for such event); or the Borrower or any of its Subsidiaries  shall
not pay, or admit in writing its  inability to pay, its debts  generally as they
become due.

      7.6  Voluntary  Bankruptcy  Proceeding,  etc.  The  Borrower or any of its
Subsidiaries shall (i) have an order for relief entered with respect to it under
the  Federal  bankruptcy  laws  as now or  hereafter  in  effect,  (ii)  make an
assignment for the benefit of creditors,  (iii) apply for, seek,


                                      36

<PAGE>
consent to, or  acquiesce  in, the  appointment  of a receiver,  custodian,
trustee,  examiner,  liquidator  or similar  official for it or any  Substantial
Portion of its  Property,  (iv)  institute any  proceeding  seeking an order for
relief  under  the  Federal  bankruptcy  laws as now or  hereafter  in effect or
seeking  to  adjudicate  it a bankrupt  or  insolvent,  or seeking  dissolution,
winding up, liquidation, reorganization,  arrangement, adjustment or composition
of it or  its  debts  under  any  law  relating  to  bankruptcy,  insolvency  or
reorganization  or relief of debtors or fail to file an answer or other pleading
denying the material  allegations of any such  proceeding  filed against it, (v)
take any  corporate  or  partnership  action to  authorize  or effect any of the
foregoing  actions set forth in this Section 7.6 or (vi) fail to contest in good
faith any appointment or proceeding described in Section 7.7.

     7.7  Involuntary  Bankruptcy  Proceeding,  etc.  Without  the  application,
approval  or consent of the  Borrower  or any of its  Subsidiaries,  a receiver,
trustee,  examiner,  liquidator or similar  official  shall be appointed for the
Borrower or any of its Subsidiaries or any Substantial  Portion of its Property,
or a proceeding  described in Section  7.6(iv) shall be  instituted  against the
Borrower or any of its Subsidiaries and such appointment continues  undischarged
or  such  proceeding  continues  undismissed  or  unstayed  for a  period  of 30
consecutive days.

      7.8 Government Seizure of Property. Any court,  government or governmental
agency shall condemn, seize or otherwise appropriate, or take custody or control
of, all or any portion of the  Property  of the  Borrower  and its  Subsidiaries
which,  when taken  together  with all other  Property of the  Borrower  and its
Subsidiaries so condemned, seized, appropriated, or taken custody or control of,
during the  twelve-month  period  ending with the month in which any such action
occurs, constitutes a Substantial Portion.

      7.9 Judgments.  The Borrower or any of its Subsidiaries  shall fail within
30 days to pay,  bond or  otherwise  discharge  any  judgment  or order  for the
payment of money in excess of  $10,000,000  (either  singly or in the  aggregate
with all other such judgments), which is not stayed on appeal or otherwise being
appropriately contested in good faith.

      7.10 ERISA.  An ERISA Event shall have occurred that in the opinion of the
Required  Lenders,  when taken  together,  with all other ERISA Events that have
occurred, could reasonably be expected to have a Material Adverse Effect.

      7.11  Change in  Control.  (a) Any Person or group of Persons  (within the
meaning of  Section  13 or 14 of the  Exchange  Act)  shall  acquire  beneficial
ownership  (within the meaning of Rule 13d-3  promulgated under such Act) of 20%
or more of the outstanding shares of common stock of the Borrower; or (b) during
any  12-month  period (or, if less,  during the period  beginning on the Closing
Date and ending on the date of determination),  individuals who at the beginning
of such period constituted the Borrower's Board of Directors  (together with any
new  directors  whose  election by the  Borrower's  Board of  Directors or whose
nomination for election by the Borrower's shareholders was approved by a vote of
a majority of the directors  who either were


                                      37

<PAGE>


directors at the  beginning of such period or whose  election or nomination
was previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Borrower.

      7.12 Ownership of the Utility.  After the Funding Date, the Borrower shall
cease to  directly  own,  free and clear of all  liens,  100% of the  issued and
outstanding capital stock of the Utility.


          SECTION 8 - ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES


     8.1  Acceleration.  If any Default  described  in Section 7.6 or 7.7 occurs
with  respect to the  Borrower,  the  obligations  of the  Lenders to make Loans
hereunder shall  automatically  terminate and the Obligations  shall immediately
become  due and  payable  without  any  election  or  action  on the part of the
Administrative  Agent or any Lender.  If any other Default occurs,  the Required
Lenders (or the  Administrative  Agent with the consent of the Required Lenders)
may terminate or suspend the obligations of the Lenders to make Loans hereunder,
or  declare  the  Obligations  to be due and  payable,  or both,  whereupon  the
Obligations  shall  become  immediately  due and payable,  without  presentment,
demand,  protest  or  notice  of any  kind,  all of which  the  Borrower  hereby
expressly waives.

      If, within 30 days after  acceleration  of the maturity of the Obligations
or  termination of the  obligations of the Lenders to make Loans  hereunder as a
result of any Default (other than any Default as described in Section 7.6 or 7.7
with respect to the  Borrower) and before any judgment or decree for the payment
of the Obligations due shall have been obtained or entered, the Required Lenders
(in their sole discretion) shall so direct, the  Administrative  Agent shall, by
notice to the Borrower, rescind and annul such acceleration and/or termination.

      8.2 Amendments.  Subject to the provisions of this Section 8, the Required
Lenders (or the Administrative Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements  supplemental hereto for the
purpose of adding or modifying any  provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of all of the Lenders:

    (i)     Extend the final  maturity of any Loan or forgive all or any portion
            of the principal  amount  thereof,  or reduce the rate or extend the
            time of payment of interest or fees thereon.

   (ii)     Reduce the percentage specified in the definition of Required 
            Lenders.



                                      38

<PAGE>


  (iii)     Extend  the  Termination  Date,  or reduce  the amount or extend the
            payment date for, the mandatory payments required under Section 2.2,
            or increase the amount of the Commitment of any Lender hereunder, or
            permit the Borrower to assign its rights under this Agreement.

   (iv)     Amend this Section 8.2.

No amendment of any provision of this Agreement  relating to the  Administrative
Agent  shall be  effective  without the  written  consent of the  Administrative
Agent.  The  Administrative  Agent may waive  payment of the fee required  under
Section  12.3.2  without  obtaining  the  consent  of any  other  party  to this
Agreement.

     8.3  Preservation  of Rights.  No delay or  omission  of the Lenders or the
Administrative Agent to exercise any right under the Loan Documents shall impair
such right or be  construed  to be a waiver of any  Default  or an  acquiescence
therein,  and the making of a Loan notwithstanding the existence of a Default or
the inability of the Borrower to satisfy the  conditions  precedent to such Loan
shall not constitute any waiver or acquiescence.  Any single or partial exercise
of any such right shall not preclude  other or further  exercise  thereof or the
exercise of any other right, and no waiver,  amendment or other variation of the
terms,  conditions or provisions of the Loan Documents whatsoever shall be valid
unless in writing  signed by the Lenders  required  pursuant to Section 8.2, and
then only to the extent in such  writing  specifically  set forth.  All remedies
contained in the Loan  Documents or by law afforded  shall be cumulative and all
shall be  available  to the  Administrative  Agent  and the  Lenders  until  the
Obligations have been paid in full.


                        SECTION 9 - GENERAL PROVISIONS


      9.1 Survival of Representations. All representations and warranties of the
Borrower  contained  in this  Agreement  shall  survive  the making of the Loans
herein contemplated.

      9.2 Governmental  Regulation.  Anything contained in this Agreement to the
contrary  notwithstanding,  no Lender shall be obligated to extend credit to the
Borrower  in  violation  of  any  limitation  or  prohibition  provided  by  any
applicable statute or regulation.

      9.3 Headings.  Section  headings in the Loan Documents are for convenience
of  reference  only,  and  shall not  govern  the  interpretation  of any of the
provisions of the Loan Documents.

      9.4 Entire  Agreement.  The Loan Documents embody the entire agreement and
understanding among the Borrower,  the Administrative  Agent and the Lenders and
supersede  all prior  agreements  and  understandings  among the  Borrower,  the
Administrative  Agent and the 


                                      39

<PAGE>

Lenders  relating to the  subject  matter  thereof other than the letter 
agreement described in Section 10.13.

      9.5  Several  Obligations;  Benefits  of this  Agreement.  The  respective
obligations  of the  Lenders  hereunder  are several and not joint and no Lender
shall be the  partner  or agent of any other  (except to the extent to which the
Administrative Agent is authorized to act as such). The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender from
any of its obligations hereunder. This Agreement shall not be construed so as to
confer any right or  benefit  upon any  Person  other  than the  parties to this
Agreement and their respective successors and assigns,  provided,  however, that
the parties hereto expressly agree that the Arranger shall enjoy the benefits of
the  provisions of Sections 9.6, 9.10 and 10.11 to the extent  specifically  set
forth  therein and shall have the right to enforce  such  provisions  on its own
behalf  and in its own  name to the  same  extent  as if it were a party to this
Agreement.

      9.6  Expenses;  Indemnification.  (i) The  Borrower  shall  reimburse  the
Administrative Agent and the Arranger for any reasonable costs, internal charges
and  out-of-pocket  expenses  (including  attorneys'  fees and time  charges  of
attorneys for the Administrative  Agent, which attorneys may be employees of the
Administrative  Agent)  paid or  incurred  by the  Administrative  Agent  or the
Arranger in connection with the preparation, negotiation, execution, delivery,
syndication,  review,  amendment,  modification,  and administration of the Loan
Documents.  The Borrower also agrees to reimburse the Administrative  Agent, the
Arranger  and the Lenders  for any costs,  internal  charges  and  out-of-pocket
expenses  (including  attorneys'  fees and time  charges  of  attorneys  for the
Administrative  Agent,  the  Arranger and the Lenders,  which  attorneys  may be
employees of the  Administrative  Agent,  the  Arranger or the Lenders)  paid or
incurred by the  Administrative  Agent, the Arranger or any Lender in connection
with the collection and enforcement of the Loan Documents.

      (ii) The Borrower  hereby further  agrees to indemnify the  Administrative
Agent,  the Arranger  and each Lender,  its  directors,  officers and  employees
against all losses,  claims,  damages,  penalties,  judgments,  liabilities  and
reasonable  expenses  (including  all  expenses  of  litigation  or  preparation
therefor whether or not the Administrative  Agent, the Arranger or any Lender is
a party  thereto)  which any of them may pay or incur arising out of or relating
to this  Agreement,  the other Loan  Documents,  the  transactions  contemplated
hereby or the direct or  indirect  application  or proposed  application  of the
proceeds of any Loan hereunder  except to the extent that they are determined in
a final  non-appealable  judgment by a court of competent  jurisdiction  to have
resulted from the gross  negligence  or willful  misconduct of the party seeking
indemnification.  The  obligations  of the Borrower under this Section 9.6 shall
survive the payment of the Obligations and termination of this Agreement.

      9.7 Numbers of Documents. All statements,  notices, closing documents, and
requests  hereunder  shall  be  furnished  to  the  Administrative   Agent  with
sufficient counterparts so that the Administrative Agent may furnish one to each
of the Lenders.



                                      40

<PAGE>


      9.8 Accounting.  Except as provided to the contrary herein, all accounting
terms  used  herein  shall  be  interpreted  and all  accounting  determinations
hereunder shall be made in accordance with GAAP.

      9.9 Severability of Provisions. Any provision in any Loan Document that is
held to be inoperative,  unenforceable, or invalid in any jurisdiction shall, as
to  that  jurisdiction,  be  inoperative,   unenforceable,  or  invalid  without
affecting  the  remaining  provisions  in that  jurisdiction  or the  operation,
enforceability,  or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.

     9.10 Nonliability of Lenders.  The relationship between the Borrower on the
one hand and the Lenders and the Administrative Agent on the other hand shall be
solely  that of borrower  and lender.  Neither  the  Administrative  Agent,  the
Arranger  nor any  Lender  shall  have  any  fiduciary  responsibilities  to the
Borrower.  Neither  the  Administrative  Agent,  the  Arranger  nor  any  Lender
undertakes any  responsibility  to the Borrower to review or inform the Borrower
of any  matter  in  connection  with any  phase of the  Borrower's  business  or
operations.  The Borrower  agrees that  neither the  Administrative  Agent,  the
Arranger nor any Lender shall have liability to the Borrower  (whether  sounding
in  tort,  contract  or  otherwise)  for  losses  suffered  by the  Borrower  in
connection  with,  arising out of, or in any way  related  to, the  transactions
contemplated and the relationship established by the Loan Documents, or any act,
omission or event occurring in connection therewith,  unless it is determined in
a final non-appealable  judgment by a court of competent  jurisdiction that such
losses  resulted from the gross  negligence  or willful  misconduct of the party
from which recovery is sought.  Neither the  Administrative  Agent, the Arranger
nor any Lender shall have any liability with respect to, and the Borrower hereby
waives,  releases  and  agrees  not  to  sue  for,  any  special,   indirect  or
consequential  damages suffered by the Borrower in connection with,  arising out
of, or in any way related to the Loan Documents or the transactions contemplated
thereby.

      9.11  Confidentiality.   Each  Lender  agrees  to  hold  any  confidential
information which it may receive from the Borrower pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders and
their  respective  Affiliates,  (ii) to legal  counsel,  accountants,  and other
professional  advisors to that Lender or to a  Transferee,  (iii) to  regulatory
officials,  (iv) to any Person as  requested  pursuant to or as required by law,
regulation,  or legal  process,  (v) to any Person in connection  with any legal
proceeding to which that Lender is a party and (vi) permitted by Section 12.4.

      9.12 Nonreliance.  Each Lender hereby represents that it is not relying on
or looking  to any margin  stock (as  defined  in  Regulation  U of the Board of
Governors of the Federal Reserve System) for the repayment of the Loans provided
for herein.




                                      41

<PAGE>

                            SECTION 10 - THE AGENT


      10.1  Appointment;  Nature of  Relationship.  The First  National  Bank of
Chicago  is  hereby  appointed  by  each  of  the  Lenders  as  its  contractual
representative (herein referred to as the "Administrative  Agent") hereunder and
under each other Loan Document,  and each of the Lenders irrevocably  authorizes
the Administrative Agent to act as the contractual representative of such Lender
with the  rights  and duties  expressly  set forth  herein and in the other Loan
Documents.   The  Administrative   Agent  agrees  to  act  as  such  contractual
representative  upon  the  express  conditions  contained  in this  Section  10.
Notwithstanding  the  use of the  defined  term  "Administrative  Agent,"  it is
expressly understood and agreed that the Administrative Agent shall not have any
fiduciary  responsibilities  to any  Lender by reason of this  Agreement  or any
other Loan  Document and that the  Administrative  Agent is merely acting as the
contractual  representative  of  the  Lenders  with  only  those  duties  as are
expressly  set forth in this  Agreement  and the other  Loan  Documents.  In its
capacity as the Lenders'  contractual  representative,  the Administrative Agent
(i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a
"representative"  of the  Lenders  within the  meaning  of Section  9-105 of the
Uniform  Commercial Code and (iii) is acting as an independent  contractor,  the
rights and  duties of which are  limited  to those  expressly  set forth in this
Agreement  and the other Loan  Documents.  Each of the Lenders  hereby agrees to
assert no claim  against the  Administrative  Agent on any agency  theory or any
other theory of liability for breach of fiduciary duty, all of which claims each
Lender hereby waives.


      10.2 Powers.  The  Administrative  Agent shall have and may exercise  such
powers  under  the  Loan  Documents  as  are   specifically   delegated  to  the
Administrative Agent by the terms of each thereof,  together with such powers as
are  reasonably  incidental  thereto.  The  Administrative  Agent  shall have no
implied  duties to the  Lenders,  or any  obligation  to the Lenders to take any
action thereunder except any action specifically  provided by the Loan Documents
to be taken by the Administrative Agent.

      10.3 General  Immunity.  Neither the  Administrative  Agent nor any of its
directors,  officers,  agents or employees shall be liable to the Borrower,  the
Lenders or any Lender for any action  taken or omitted to be taken by it or them
hereunder  or under  any  other  Loan  Document  or in  connection  herewith  or
therewith  except to the extent such action or inaction is determined in a final
non-appealable judgment by a court of competent jurisdiction to have arisen from
the gross negligence or willful misconduct of such Person.

      10.4.  No   Responsibility   for  Loans,   Recitals,   etc.   Neither  the
Administrative  Agent nor any of its  directors,  officers,  agents or employees
shall be responsible for or have any duty to ascertain,  inquire into, or verify
(a) any statement,  warranty or representation  made in connection with any Loan
Document or any borrowing hereunder; (b) the performance or observance of any of
the covenants or agreements  of any obligor under any Loan  Document,  including
any 

                                      42

<PAGE>


agreement by an obligor to furnish information  directly to each Lender; (c)
the  satisfaction  of any  condition  specified in Section 4, except  receipt of
items  required to be  delivered  solely to the  Administrative  Agent;  (d) the
existence or possible  existence of any Default or  Unmatured  Default;  (e) the
validity, enforceability,  effectiveness, sufficiency or genuineness of any Loan
Document or any other instrument or writing  furnished in connection  therewith;
(f) the value, sufficiency,  creation, perfection or priority of any Lien in any
collateral  security;  or (g) the  financial  condition  of the  Borrower or any
guarantor  of any of the  Obligations  or of any of the  Borrower's  or any such
guarantor's respective Subsidiaries. The Administrative Agent shall have no duty
to disclose to the Lenders  information  that is not required to be furnished by
the  Borrower  to the  Administrative  Agent at such  time,  but is  voluntarily
furnished by the Borrower to the Administrative Agent (either in its capacity as
Administrative Agent or in its individual capacity).

      10.5 Action on Instructions of Lenders.  The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting,  hereunder
and under any other Loan Document in accordance with written instructions signed
by the Required  Lenders,  and such instructions and any action taken or failure
to act  pursuant  thereto  shall be binding on all of the  Lenders.  The Lenders
hereby acknowledge that the Administrative  Agent shall be under no duty to take
any discretionary  action permitted to be taken by it pursuant to the provisions
of this  Agreement  or any other Loan  Document  unless it shall be requested in
writing to do so by the  Required  Lenders.  The  Administrative  Agent shall be
fully  justified in failing or refusing to take any action  hereunder  and under
any other Loan Document unless it shall first be indemnified to its satisfaction
by the Lenders pro rata against any and all liability,  cost and expense that it
may incur by reason of taking or continuing to take any such action.

      10.6 Employment of Administrative  Agents and Counsel.  The Administrative
Agent may execute any of its duties as Administrative  Agent hereunder and under
any other Loan Document by or through employees,  agents, and  attorneys-in-fact
and shall not be  answerable  to the Lenders,  except as to money or  securities
received by it or its  authorized  agents,  for the default or misconduct of any
such  agents or  attorneys-in-fact  selected  by it with  reasonable  care.  The
Administrative  Agent  shall be  entitled  to advice of counsel  concerning  the
contractual arrangement between the Administrative Agent and the Lenders and all
matters pertaining to the Administrative  Agent's duties hereunder and under any
other Loan Document.

      10.7 Reliance on Documents;  Counsel.  The  Administrative  Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram,  statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
to legal  matters,  upon the opinion of counsel  selected by the  Administrative
Agent, which counsel may be employees of the Administrative Agent.

      10.8 Administrative Agent's Reimbursement and Indemnification. The Lenders
agree to reimburse and indemnify the Administrative  Agent ratably in proportion
to their respective 


                                      43

<PAGE>

Commitments (or, if the Commitments have been terminated,  in proportion to
their Commitments immediately prior to such termination) (i) for any amounts not
reimbursed  by the  Borrower for which the  Administrative  Agent is entitled to
reimbursement  by the  Borrower  under  the Loan  Documents,  (ii) for any other
expenses  incurred  by the  Administrative  Agent on behalf of the  Lenders,  in
connection  with  the  preparation,   execution,  delivery,  administration  and
enforcement  of the Loan  Documents  (including  any  expenses  incurred  by the
Administrative  Agent in connection with any dispute between the  Administrative
Agent and any Lender or between  two or more of the  Lenders)  and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Administrative  Agent in any way
relating to or arising out of the Loan Documents or any other document delivered
in connection therewith or the transactions  contemplated thereby (including for
any such amounts  incurred by or asserted  against the  Administrative  Agent in
connection with any dispute between the  Administrative  Agent and any Lender or
between two or more of the Lenders),  or the  enforcement of any of the terms of
the Loan Documents or of any such other documents, provided that no Lender shall
be liable for any of the  foregoing to the extent any of the  foregoing is found
in a final non-appealable  judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful  misconduct of the  Administrative
Agent.  The  obligations  of the Lenders  under this Section 10.8 shall  survive
payment of the Obligations and termination of this Agreement.

      10.9 Notice of Default.  The  Administrative  Agent shall not be deemed to
have knowledge or notice of the  occurrence of any Default or Unmatured  Default
hereunder  unless the  Administrative  Agent has received  written notice from a
Lender or the Borrower  referring to this Agreement  describing  such Default or
Unmatured Default and stating that such notice is a "notice of default".  In the
event that the  Administrative  Agent receives such a notice, the Administrative
Agent shall give prompt notice thereof to the Lenders.


      10.10  Rights as a Lender.  In the  event  the  Administrative  Agent is a
Lender, the Administrative Agent shall have the same rights and powers hereunder
and under any other Loan Document with respect to its  Commitment  and its Loans
as any Lender and may exercise the same as though it were not the Administrative
Agent,  and  the  term  "Lender"  or  "Lenders"  shall,  at any  time  when  the
Administrative  Agent is a  Lender,  unless  the  context  otherwise  indicates,
include the Administrative Agent in its individual capacity.  The Administrative
Agent and its Affiliates may accept  deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other  transaction,  in addition to
those  contemplated  by this  Agreement  or any other  Loan  Document,  with the
Borrower or any of its  Subsidiaries in which the Borrower or such Subsidiary is
not restricted hereby from engaging with any other Person.

      10.11  Lender  Credit  Decision.  Each  Lender  acknowledges  that it has,
independently and without reliance upon the  Administrative  Agent, the Arranger
or any  other  Lender  and based on the  financial  statements  prepared  by the
Borrower and such other documents and information as


                                      44

<PAGE>


it has deemed  appropriate,  made its own credit  analysis  and decision to
enter  into this  Agreement  and the other  Loan  Documents.  Each  Lender  also
acknowledges  that  it  will,   independently  and  without  reliance  upon  the
Administrative  Agent,  the  Arranger  or any  other  Lender  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  action  under  this
Agreement and the other Loan Documents.

     10.12 Successor  Administrative  Agent. The Administrative Agent may resign
at any time by giving  written  notice  thereof to the Lenders and the Borrower,
such   resignation  to  be  effective  upon  the   appointment  of  a  successor
Administrative  Agent  or,  if  no  successor   Administrative  Agent  has  been
appointed,  forty-five days after the retiring Administrative Agent gives notice
of its intention to resign. The Administrative  Agent may be removed at any time
with or without cause by written  notice  received by the  Administrative  Agent
from the Required Lenders, such removal to be effective on the date specified by
the Required Lenders. Upon any such resignation or removal, the Required Lenders
(with,  so long as no Default or Unmatured  Default  exists,  the consent of the
Borrower),  shall have the right to appoint,  on behalf of the  Borrower and the
Lenders, a successor  Administrative Agent. If no successor Administrative Agent
shall have been so appointed by the Required  Lenders  within  thirty days after
the resigning  Administrative  Agent's giving notice of its intention to resign,
then the resigning  Administrative  Agent may appoint, on behalf of the Borrower
and the Lenders, a successor Administrative Agent.  Notwithstanding the previous
sentence,  the  Administrative  Agent may at any time without the consent of the
Borrower or any Lender, appoint any of its Affiliates which is a commercial bank
as a successor  Administrative Agent hereunder.  If the Administrative Agent has
resigned  or  been  removed  and no  successor  Administrative  Agent  has  been
appointed,  the Lenders may perform all the duties of the  Administrative  Agent
hereunder and the Borrower shall make all payments in respect of the Obligations
to the applicable Lender and for all other purposes shall deal directly with the
Lenders.  No  successor  Administrative  Agent  shall be deemed to be  appointed
hereunder   until  such   successor   Administrative   Agent  has  accepted  the
appointment.  Any such successor Administrative Agent shall be a commercial bank
having  capital  and  retained  earnings  of at  least  $100,000,000.  Upon  the
acceptance of any appointment as  Administrative  Agent hereunder by a successor
Administrative  Agent,  such  successor  Administrative  Agent  shall  thereupon
succeed to and become vested with all the rights, powers,  privileges and duties
of the resigning or removed  Administrative Agent. Upon the effectiveness of the
resignation  or removal of the  Administrative  Agent,  the resigning or removed
Administrative  Agent  shall be  discharged  from  its  duties  and  obligations
hereunder  and  under  the  Loan  Documents.  After  the  effectiveness  of  the
resignation  or removal  of an  Administrative  Agent,  the  provisions  of this
Section X shall continue in effect for the benefit of such Administrative  Agent
in respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent hereunder and under the other Loan Documents. In the
event that there is a successor to the  Administrative  Agent by merger,  or the
Administrative Agent assigns its duties and obligations to an Affiliate pursuant
to this  Section  10.12,  then the term  


                                      45

<PAGE>

"Corporate  Base Rate" as used in this Agreement shall mean the prime rate,
base rate or other analogous rate of the new Administrative Agent.

      10.13  Administrative  Agent and Arranger Fees. The Borrower agrees to pay
to the Administrative  Agent and Arranger,  for its own account, the fees agreed
to by the Borrower,  the  Administrative  Agent and the Arranger pursuant to the
letter  agreement dated  September 29, 1998 among such parties,  or as otherwise
agreed among such parties from time to time.

      10.14  Delegation to  Affiliates.  The Borrower and the Lenders agree that
the Administrative  Agent may delegate any of its duties under this Agreement to
any of its  Affiliates.  Any such  Affiliate  (and such  Affiliate's  directors,
officers,  agents and employees)  which performs  duties in connection with this
Agreement shall be entitled to the same benefits of the indemnification,  waiver
and other protective  provisions to which the  Administrative  Agent is entitled
under Sections 9 and 10.


                     SECTION 11 - SETOFF; RATABLE PAYMENTS


      11.1 Setoff. In addition to, and without  limitation of, any rights of the
Lenders  under  applicable  law,  if the  Borrower  becomes  insolvent,  however
evidenced,  or any Default occurs,  any and all deposits  (including all account
balances,  whether  provisional  or  final  and  whether  or  not  collected  or
available) and any other Indebtedness at any time held or owing by any Lender or
any  Affiliate of any Lender to or for the credit or account of the Borrower may
be offset and  applied  toward  the  payment  of the  Obligations  owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be due.

     11.2 Ratable Payments. If any Lender,  whether by setoff or otherwise,  has
payment  made to it upon its Loans  (other than  payments  received  pursuant to
Section 3.1, 3.2, 3.4 or 3.5) in a greater  proportion than that received by any
other Lender, such Lender agrees, promptly upon demand, to purchase a portion of
the Loans held by the other Lenders so that after such purchase each Lender will
hold its ratable proportion of Loans. If any Lender,  whether in connection with
setoff or  amounts  which  might be  subject  to setoff or  otherwise,  receives
collateral or other  protection for its Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral ratably
in  proportion  to their  Loans.  In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.


        SECTION 12 - BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS


                                      46

<PAGE>

      12.1  Successors  and  Assigns.  The  terms  and  provisions  of the  Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders  and  their  respective  successors  and  assigns,  except  that (i) the
Borrower shall not have the right to assign its rights or obligations  under the
Loan  Documents and (ii) any assignment by any Lender must be made in compliance
with Section 12.3.  Notwithstanding  clause (ii) of this Section, any Lender may
at any time,  without the consent of the Borrower or the  Administrative  Agent,
assign all or any portion of its rights under this  Agreement  and any Note to a
Federal Reserve Bank;  provided,  however,  that no such assignment to a Federal
Reserve Bank shall release the transferor Lender from its obligations hereunder.
The Administrative Agent may treat the Person which made any Loan or which holds
any Note as the owner  thereof  for all  purposes  hereof  unless and until such
Person  complies with Section 12.3 in the case of an  assignment  thereof or, in
the case of any other  transfer,  a written notice of the transfer is filed with
the  Administrative  Agent. Any assignee or transferee of the rights to any Loan
or any Note agrees by  acceptance  of such transfer or assignment to be bound by
all the terms and provisions of the Loan  Documents.  Any request,  authority or
consent of any  Person,  who at the time of making  such  request or giving such
authority  or consent is the owner of the rights to any Loan  (whether  or not a
Note has been issued in evidence  thereof),  shall be conclusive  and binding on
any subsequent holder, transferee or assignee of the rights to such Loan.

     12.2  Participations.

             12.2.1  Permitted  Participants;  Effect.  Any Lender may, in the
      ordinary course of its business and in accordance  with  applicable law, 
      at any time sell to one or more banks or other entities ("Participants")  
      participating interests in any Loan owing to such Lender,  any Note held
      by such Lender,  any Commitment of such Lender or any other interest of 
      such Lender under the Loan Documents. In the  event  of any  such  sale  
      by a  Lender  of  participating  interests  to a Participant,  such 
      Lender's  obligations  under the Loan Documents  shall remain unchanged,
      such Lender shall remain  solely  responsible  to the other  parties 
      hereto for the  performance  of such  obligations,  such Lender shall 
      remain the owner of its Loans and the holder of any Note issued to it in
      evidence  thereof for all purposes under the Loan  Documents, all amounts
      payable by the Borrower under this  Agreement  shall be  determined  as if
      such Lender had not sold such participating  interests,  and the Borrower 
      and the  Administrative  Agent shall continue to deal solely and directly 
      with such Lender in  connection  with such Lender's rights and obligations
      under the Loan Documents.

             12.2.2  Voting  Rights.  Each Lender shall retain the sole right to
      approve,   without  the  consent  of  any   Participant,   any  amendment,
      modification  or waiver of any provision of the Loan Documents  other than
      any  amendment,  modification  or  waiver  with  respect  to any  Loan  or
      Commitment  in which  such  Participant  has an  interest  which  forgives
      principal,  interest or fees or reduces the interest  rate or fees payable
      with respect to any such Loan or Commitment,  extends the Termination Date
      or  postpones  any  date  fixed  for


                                      47

<PAGE>

      any regularly-scheduled  payment of principal of, or interest or fees on,
      any such Loan or Commitment.

             12.2.3 Benefit of Setoff. The Borrower agrees that each Participant
      shall be deemed to have the right of setoff  provided  in Section  11.1 in
      respect of its  participating  interest  in amounts  owing  under the Loan
      Documents  to the  same  extent  as if  the  amount  of its  participating
      interest were owing  directly to it as a Lender under the Loan  Documents,
      provided  that each Lender  shall  retain the right of setoff  provided in
      Section 11.1 with respect to the amount of participating interests sold to
      each Participant.  The Lenders agree to share with each  Participant,  and
      each  Participant,  by exercising the right of setoff  provided in Section
      11.1,  agrees to share with each Lender,  any amount received  pursuant to
      the  exercise  of its  right of  setoff,  such  amounts  to be  shared  in
      accordance with Section 11.2 as if each Participant were a Lender.

      12.3  Assignments.

            12.3.1 Permitted Assignments. Any Lender may, in the ordinary course
      of its business and in accordance  with applicable law, at any time assign
      to one or more banks or other entities  ("Purchasers")  all or any part of
      its rights and obligations under the Loan Documents. Such assignment shall
      be  substantially in the form of Exhibit C or in such other form as may be
      agreed to by the  parties  thereto.  The consent of the  Borrower  and the
      Administrative  Agent shall be required  prior to an  assignment  becoming
      effective  with  respect  to a  Purchaser  which  is  not a  Lender  or an
      Affiliate thereof;  provided,  however, that if a Default has occurred and
      is  continuing,  the consent of the Borrower  shall not be required.  Such
      consents  shall  not  be  unreasonably  withheld  or  delayed.  Each  such
      assignment shall (unless each of the Borrower and the Administrative Agent
      otherwise  consents)  be in an  amount  not less  than the  lesser  of (i)
      $5,000,000  or  (ii)  the  remaining  amount  of  the  assigning  Lender's
      Commitment (calculated as at the date of such assignment).

             12.3.2   Effect;   Effective   Date.   Upon  (i)  delivery  to  the
      Administrative Agent of a notice of assignment,  substantially in the form
      attached as Exhibit "I" to Exhibit C (a "Notice of Assignment"),  together
      with any  consents  required by Section  12.3.1,  and (ii)  payment by the
      transferor  Lender or the Purchaser of a $3,000 fee to the  Administrative
      Agent  for  processing  such  assignment,  such  assignment  shall  become
      effective on the effective  date  specified in such  Notice of Assignment.
      The Notice of Assignment shall contain a representation by the Purchaser 
      to the effect that none of the consideration used to make the purchase of 
      the Commitment and Loans under the applicable assignment agreement are 
      "plan assets" as defined  under ERISA and that the rights and interests of
      the Purchaser in and under the Loan Documents will not be "plan assets" 
      under ERISA. On and after the effective date of such assignment,  such 
      Purchaser shall for all purposes be a Lender party to this Agreement and 
      any other Loan Document executed  by or on 



                                      48

<PAGE>

      behalf of the Lenders and shall have all the rights and obligations of a 
      Lender under the Loan Documents, to the same extent as if it were an 
      original party hereto,  and no further consent or action by the  Borrower,
      the  Lenders or the  Administrative  Agent shall be required to
      release  the  transferor  Lender  with  respect to the  percentage  of the
      Aggregate  Commitment  and  Loans  assigned  to such  Purchaser.  Upon the
      consummation  of any  assignment  to a Purchaser  pursuant to this Section
      12.3.2, the transferor  Lender, the Administrative  Agent and the Borrower
      shall, if the transferor Lender or the Purchaser desires that its Loans be
      evidenced by Notes, make appropriate arrangements so that new Notes or, as
      appropriate,  replacement  Notes are issued to such transferor  Lender and
      new  Notes or,  as  appropriate,  replacement  Notes,  are  issued to such
      Purchaser,  in each case in principal amounts  reflecting their respective
      Commitments, as adjusted pursuant to such assignment.

      12.4 Dissemination of Information.  The Borrower authorizes each Lender to
disclose to any  Participant  or  Purchaser  or any other  Person  acquiring  an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective  Transferee  any and all  information  in such  Lender's  possession
concerning the  creditworthiness of the Borrower and its Subsidiaries;  provided
that each Transferee and prospective Transferee agrees in writing to be bound by
Section 9.11 of this Agreement.

      12.5 Tax Treatment. If any interest in any Loan Document is transferred to
any Transferee which is organized under the laws of any jurisdiction  other than
the United States or any State thereof,  the transferor  Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 3.5(iv).


                             SECTION 13 - NOTICES


     13.1 Notices. Except as otherwise permitted by Section 2.16 with respect to
borrowing notices,  all notices,  requests and other communications to any party
hereunder  shall be in writing  (including  electronic  transmission,  facsimile
transmission  or similar  writing) and shall be given to such party:  (x) in the
case of the Borrower or the  Administrative  Agent,  at its address or facsimile
number set forth on the signature  pages hereof,  (y) in the case of any Lender,
at its address or facsimile  number set forth below its signature  hereto or (z)
in the case of any party,  at such other  address  or  facsimile  number as such
party may  hereafter  specify  for the  purpose by notice to the  Administrative
Agent and the Borrower in accordance  with the  provisions of this Section 13.1.
Each such notice, request or other communication shall be effective (i) if given
by facsimile transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt 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  (or, in the case of electronic  transmission,  received) at the


                                      49

<PAGE>

address specified in this Section;  provided that notices to the  Administrative
Agent under Section 2 shall not be effective until received.

      13.2 Change of Address.  The Borrower,  the  Administrative  Agent and any
Lender may each  change the address for service of notice upon it by a notice in
writing to the other parties hereto.


                           SECTION 14 - COUNTERPARTS


      This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart.  This Agreement shall be
effective when it has been executed by the Borrower,  the  Administrative  Agent
and the  Lenders  and  each  party  has  notified  the  Administrative  Agent by
facsimile transmission or telephone that it has taken such action.


             SECTION 15 - CHOICE OF LAW; CONSENT TO JURISDICTION;
                             WAIVER OF JURY TRIAL


      15.1 CHOICE OF LAW.  THE LOAN  DOCUMENTS  (OTHER THAN THOSE  CONTAINING  A
CONTRARY  EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF  CONFLICTS) OF THE STATE OF ILLINOIS,  BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

     15.2 CONSENT TO JURISDICTION.  THE BORROWER HEREBY  IRREVOCABLY  SUBMITS TO
THE  NON-EXCLUSIVE  JURISDICTION  OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY  IRREVOCABLY  AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING  MAY BE HEARD AND  DETERMINED
IN ANY SUCH COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT,  ACTION OR  PROCEEDING  BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN  INCONVENIENT  FORUM.  NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT OR ANY LENDER TO BRING  PROCEEDINGS  AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST  THE AGENT OR ANY  LENDER OR ANY  AFFILIATE  OF THE AGENT OR ANY  


                                         50

<PAGE>

LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED  WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS.

      15.3 WAIVER OF JURY TRIAL. THE BORROWER,  THE AGENT AND EACH LENDER HEREBY
WAIVE  TRIAL  BY  JURY  IN  ANY  JUDICIAL  PROCEEDING  INVOLVING,   DIRECTLY  OR
INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.




                                         51

<PAGE>

      IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent
have executed this Agreement as of the date first above written.


                                     CH ENERGY GROUP, INC.


                                     By:     /s/ John E. Mack, III
                                           ____________________________

                                     Title:Chairman of the Board and
                                           Chief Executive Officer
                                           ____________________________
                                     284 South Avenue
                                     Poughkeepsie, New York 12601

                                              Attention: Steven Lant
                                              Telephone:  (914) 452-2000
                                              FAX: (914) 486-5782


Commitments
___________

$20,000,000                          THE FIRST NATIONAL BANK OF CHICAGO,
                                     Individually and as Administrative Agent

                                     By:    /s/ Jane Bek
                                           ____________________________ 

                                     Title: Vice President
                                           ____________________________
                                     One First National Plaza
                                     Chicago, Illinois  60670

                                              Attention: Jane Bek
                                              Telephone: (312) 732-3422
                                              FAX: (312) 732-3055


$15,000,000                          THE CHASE MANHATTAN BANK


                                     By:    /s/ David C. Horan, Jr.
                                           ____________________________

                                     Title: Vice President
                                           ____________________________
                                     12 Corporate Woods Boulevard
                                     Albany, New York 12211

                                              Attention:  David C. Horan, Jr.
                                              Telephone: (518) 433-2524
                                              FAX: (518) 433-0295

                                         52          
<PAGE>


                                 

$15,000,000                          MARINE MIDLAND BANK


                                     By:    /s/ Thomas L. Nolan
                                           ____________________________

                                     Title: Vice President
                                           ____________________________ 
                                     100 Auto Park Place
                                     Newburgh, New York 12550

                                              Attention: Thomas L. Nolan
                                              Telephone:  (914) 569-8101
                                              FAX:        (914) 569-8107

___________

$50,000,000 TOTAL


                                         53
<PAGE>

                               PRICING SCHEDULE


      The Applicable Margin and the Commitment Fee shall be determined from time
to time based upon the  Moody's  Rating and the S&P Rating of the Utility as set
forth in the table below:


                                                     Applicable      Commitment
     Level      Moody's Rating      S&P Rating         Margin            Fee
     -----      --------------      ----------       ----------      ----------
       I         A3 or better       A- or better       0.450%           0.100%
       II           Baa1                BBB+           0.500%           0.125%
       III          Baa2                BBB            0.550%           0.150%
       IV           Baa3                BBB-           0.625%           0.200%
       V         Below Baa3          Below BBB-        0.850%           0.300%

      If there is a split rating  (i.e.,  the Moody's  Rating and the S&P Rating
would not result in the same  pricing),  the  Borrower  shall be entitled to the
benefit of the higher rating;  provided that there is a  differential  of two or
more levels in the table above, the  intermediate  level at the midpoint (or, if
there is no midpoint,  the higher  intermediate level) shall apply. In the event
that a rating is  available  from only one  rating  agency,  such  rating  shall
control.  In the event that a rating is not available from either rating agency,
the Applicable  Margin and the Commitment Fee shall be equal to 0.30% and 0.85%,
respectively.

      In  addition,  at any time that the  outstanding  principal  amount of all
Loans exceeds 50% of the Aggregate  Commitment,  the  Applicable  Margin (at all
levels) shall be increased by 0.05%.

      For the purposes of this Schedule,  the following terms have the following
meanings, subject to the final paragraph of this Schedule:

      "Moody's Rating" means, at any time, the rating issued by Moody's and then
in  effect  with  respect  to the  Utility's  senior  unsecured  long-term  debt
securities without third-party credit enhancement.

      "S&P  Rating"  means,  at any time,  the rating  issued by S&P and then in
effect with respect to the Utility's senior unsecured  long-term debt securities
without third-party credit enhancement.

      The credit  rating in effect on any date for the purposes of this Schedule
shall be that in effect at the close of business on such date.

                                   EXHIBIT A


                                     A-1

<PAGE>



                                FORM OF OPINION



The  Administrative  Agent and the  Lenders  which  are  parties  to the  Credit
Agreement described below.

Gentlemen/Ladies:

      We are counsel for CH Energy  Group,  Inc.,  a New York  corporation  (the
"Borrower"),  and have represented the Borrower in connection with the execution
and  delivery  of the  Credit  Agreement  dated  as of  December  4,  1998  (the
"Agreement")  among the Borrower,  various financial  institutions and The First
National Bank of Chicago, as Administrative Agent, and providing for Advances in
an  aggregate  principal  amount  not  exceeding  $50,000,000  at any  one  time
outstanding.  All  capitalized  terms  used in this  opinion  and not  otherwise
defined  herein shall have the  respective  meanings  attributed  to them in the
Agreement.

      We have  examined the  Borrower's  **[describe  constitutive  documents of
Borrower and appropriate evidence of authority to enter into the transaction]**,
the  Loan  Documents  and  such  other  matters  of fact  and law  which we deem
necessary in order to render this opinion.  In connection with such examination,
we have assumed, without independent investigation, that:

            (a) all signatures of the parties on all items submitted to us are 
      genuine;

            (b) all natural  persons,  including  persons  acting on behalf of a
      business entity, are legally competent;

            (c) all items  submitted to us as originals are  authentic,  and all
      documents  submitted  to  us  as  copies  conform  to  authentic  original
      documents; and

            (d) each of the Administrative  Agent and each Lender has full power
      and authority to execute,  deliver and perform its  obligations  under the
      Agreement,  and the  Agreement  has been duly  authorized by all necessary
      corporate or other action on the part of such parties and  constitutes the
      legal,  valid  and  binding  obligation  of each such  party,  enforceable
      against  each such  party in  accordance  with its  terms.  Based upon the
      foregoing,  and subject to the  qualifications set forth herein, it is our
      opinion that:

       l. Each of the Borrower and each of its  Subsidiaries  is a  corporation,
partnership  or limited  liability  company  duly and properly  incorporated  or
organized,  as the case may be, validly existing and (to the extent such concept
applies to such entity) in good standing under the laws of its  jurisdiction  of
incorporation  or  organization  and has all requisite  authority to conduct its
business in each jurisdiction in which its business is conducted.




                                     A-2

<PAGE>



       2. The execution  and delivery by the Borrower of the Loan  Documents and
the  performance by the Borrower of its  obligations  thereunder  have been duly
authorized by proper corporate  proceedings on the part of the Borrower and will
not:

             (a) require any consent of the Borrower's  shareholders (other than
       any such  consent as has already been given and remains in full force and
       effect);

             (b) violate or conflict  with, or constitute a default  under,  (i)
       any law,  rule or  regulation  or, to our  knowledge,  any  order,  writ,
       judgment,  injunction,  decree or award binding on the Borrower or any of
       its Subsidiaries or (ii) the Borrower's or any  Subsidiary's  articles or
       certificate  of  incorporation,  partnership  agreement,  certificate  of
       partnership,  articles  or  certificate  of  organization,   by-laws,  or
       operating or other management agreement,  as the case may be, or (iii) to
       our knowledge,  the provisions of any indenture,  instrument or agreement
       to which the Borrower or any Subsidiary is a party or is subject;

             (c)  to  our  knowledge,  result  in or  require  the  creation  or
       imposition of any Lien on any Property of the Borrower or any  Subsidiary
       pursuant to the terms of any indenture,  instrument or agreement  binding
       upon the Borrower or such Subsidiary.

       3. The Loan  Documents  have  been duly  executed  and  delivered  by the
Borrower and  constitute  legal,  valid and binding  obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms.

       4. To our knowledge, other than as discussed in the Public Reports, there
is no litigation, arbitration, governmental investigation, proceeding or inquiry
pending or threatened against the Borrower or any of its Subsidiaries  which, if
adversely  determined,  could  reasonably be expected to have a Material Adverse
Effect.

       5. No order, consent,  adjudication,  approval, license, authorization or
validation of, or filing,  recording or  registration  with, or exemption by, or
other action in respect of any governmental or public body or authority,  or any
subdivision thereof is required to be obtained by the Borrower or any Subsidiary
in  connection  with the  execution  and  delivery  by the  Borrower of the Loan
Documents,  the borrowings  under the Agreement,  the payment and performance by
the Borrower of the  Obligations  or the legality,  validity,  binding effect or
enforceability of any of the Loan Documents.

       Our opinions are subject to the following qualifications:

             (a) Our  opinions  are  subject  to the  effect  of any  applicable
       bankruptcy,   insolvency,   reorganization,    receivership,   fraudulent
       conveyance, equitable subordination,  readjustment of debt, moratorium or
       similar law affecting  creditors'  rights  generally and



                                     A-3

<PAGE>


       to the effect of general principles of equity (regardless of whether
       considered in a proceeding in equity or at law), including, without 
       limitation, concepts of materiality, reasonableness, good faith and fair
       dealing and by limitations on the availability of specific  performance,
       injunctive relief or other equitable remedies.

             (b)  We  express  no  opinion  as  to   obligations   relating   to
       indemnification,  contribution  or  exculpation  of  costs,  expenses  or
       liabilities which contravene public policy.

             (c) We express no opinion as to the  enforceability,  under certain
       circumstances,  of provisions  imposing  penalties or  forfeitures,  late
       payment  charges or an  increase  in interest  rate upon  delinquency  in
       payment or the occurrence of a default.

             (d) We express no opinion as to any  provision of any Loan Document
       that purports to establish an evidentiary  standard for determinations by
       the Lenders or the Administrative Agent.

             (e) We  express  no  opinion  as to the  effect  of the  law of any
       jurisdiction other than the State of New York wherein  enforcement of any
       Loan Document may be sought.

             (f) We  express no opinion  as to any  provision  of the  Agreement
       purporting  to  convey  rights  to  Persons  other  than  parties  to the
       Agreement.

             (g) We express no opinion as to:

                       (i) any  agreement  by the Company to the subject  matter
                 jurisdiction  of a United States federal court or to the waiver
                 of the right to jury trial; or

                       (ii) any  provision  purporting to waive any objection to
                 the laying of venue or any claim  that an action or  proceeding
                 has been brought in an inconvenient forum.

            (h) Our  opinions  are  limited  to the  federal  laws of the United
      States  and the  laws of the  State  of New  York.  For  purposes  of this
      opinion,  we have assumed that the Loan  Documents  would be construed and
      interpreted  in  accordance  with  the  laws  of the  State  of  New  York
      (notwithstanding  the parties'  selection of Illinois law as the governing
      law of the Loan Documents).

      (i) For purposes of our opinion,  as to the  incorporation,  existence and
      good standing of _______,  we have relied on a Good  Standing  Certificate
      issued by the Secretary of State of Connecticut.



                                     A-4

<PAGE>

     The opinions  expressed  herein  shall be effective  only as of the date of
this opinion letter. We do not assume  responsibility  for updating this opinion
letter as of any date subsequent to the date of this opinion letter,  and assume
no  responsibility  for  advising  you of any change with  respect to any matter
described in this opinion  letter that may occur  subsequent to the date of this
opinion  letter or from the  discovery  subsequent  to the date of this  opinion
letter of  information  not  previously  known to us  pertaining  to the  events
occurring prior to the date of this opinion letter.

      This  opinion  letter is solely for the benefit of the  addressees  hereof
(and their respective  successors and permitted  assignees and  participants) in
connection with the transactions contemplated by the Agreement, and this opinion
letter may not be relied upon by any other Person or for any other purpose.

      This opinion may be relied upon by the  Administrative  Agent, the Lenders
and their participants, assignees and other transferees.

                                    Very truly yours,





                                     A-5

<PAGE>



                                   EXHIBIT B

                            COMPLIANCE CERTIFICATE



To:   The Lenders which are parties to the
      Credit Agreement described below

      This Compliance  Certificate is furnished pursuant to the Credit Agreement
dated as of  December  4, 1998 (as amended or  otherwise  modified  from time to
time, the "Agreement") among CH Energy Group, Inc. (the "Borrower"), the lenders
party thereto and The First National Bank of Chicago,  as Administrative  Agent.
Unless  otherwise  defined  herein,  capitalized  terms used in this  Compliance
Certificate have the respective meanings ascribed thereto in the Agreement.

      THE UNDERSIGNED HEREBY CERTIFIES THAT:

      1.  I am the duly elected _________________________ of the Borrower;

      2. I have  reviewed the terms of the  Agreement  and I have made,  or have
caused to be made under my supervision,  a detailed  review of the  transactions
and conditions of the Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;

      3.  Based on such  examinations,  set  forth on  Schedule  II hereto is an
accurate calculation of the financial covenants set forth in Section 6.15 of the
Agreement; and

      4. Such  examinations  did not  disclose,  and I have no knowledge of, the
existence  of any  condition or event which  constitutes  a Default or Unmatured
Default  during or at the end of the  accounting  period covered by the attached
financial statements or as of the date of this Certificate,  except as set forth
below.

      Described  below are the  exceptions,  if any, to paragraph 3 listing,  in
detail,  the nature of the  condition or event,  the period  during which it has
existed and the action which the  Borrower  has taken,  is taking or proposes to
take with respect to each such condition or event:












                                     B-1

<PAGE>


      __________________________________________________________________________

      __________________________________________________________________________

      __________________________________________________________________________

      __________________________________________________________________________

      The  foregoing  certifications,  together  with the  financial  statements
delivered with this  Certificate in support hereof,  are made and delivered this
____ day of___________ ,_______ .




                                                  ____________________________



                                     B-2

<PAGE>



                                  SCHEDULE I

                           TO COMPLIANCE CERTIFICATE

                     Reports and Deliveries Currently Due






                                     B-3

<PAGE>



                                  SCHEDULE II

                           TO COMPLIANCE CERTIFICATE

                        Section 6.15 - Financial Ratios

Section 6.15(a)

      (1)   Total Debt (Borrower and
                Subsidiaries-consolidated) _____________

      (2)   Total Shareholders' equity 
                (Borrower and Subsidiaries _____________

      (3)   Total Capitalization 
                (Borrower and Subsidiaries-
                 consolidated)(1) + (2)    _____________

      (4)   Ratio of (1) to (3)            _____________

      Maximum Ratio                        _____________*

Section 6.15(b)

      (1)   Total Debt (Borrower and
                Non-regulated Subsidiaries)_____________

      (2)   Total Shareholders' Equity
                (Borrower and Non-regulated
                 Subsidiaries)             _____________

      (3)   Total Capitalization (Borrower
                and Non-regulated Subsidiaries)
                (1) + (2)                  _____________

      (4)   Ratio of (1) to (3)            _____________


      Maximum Ratio                          0.50:1.00

_____________________________
      */ 0.65:1.00 unless the maximum  permissible dividend  payable by the 
Utility to the Borrower is limited to not more than 50% of the  Utility's
average  annual  income  available for dividends (or a lesser percentage)  
pursuant to the terms of paragraph 22 of the Settlement Agreement,in which case
0.60:1.00.



                                     B-4

<PAGE>





                                   EXHIBIT C

                             ASSIGNMENT AGREEMENT

      This  Assignment  Agreement  (this  "Assignment  Agreement")  between 
_______________ (the"Assignor") and _______________(the  "Assignee") is dated as
 of ________,_____ . The parties hereto agree as follows:

      1.  PRELIMINARY  STATEMENT.  The Assignor is a party to a Credit Agreement
(which, as it may be amended or otherwise  modified from time to time, is herein
called the "Credit Agreement") described in Item 1 of Schedule 1 attached hereto
("Schedule 1").  Capitalized  terms used herein and not otherwise defined herein
shall have the meanings attributed to them in the Credit Agreement.

      2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to the
Assignee,  and the Assignee hereby  purchases and assumes from the Assignor,  an
interest  in and to the  Assignor's  rights  and  obligations  under the  Credit
Agreement  such that after giving effect to such  assignment  the Assignee shall
have purchased  pursuant to this  Assignment  Agreement the percentage  interest
specified  in Item 2 of  Schedule 1 of all  outstanding  rights and  obligations
under  the  Credit  Agreement  relating  to the  facilities  listed in Item 2 of
Schedule 1 and the other Loan Documents.  The aggregate Commitment (or Loans, if
the  applicable  Commitment  has  been  terminated)  purchased  by the  Assignee
hereunder is set forth in Item 3 of Schedule 1.

      3. EFFECTIVE  DATE. The effective date of this  Assignment  Agreement (the
"Effective Date") shall be the later of the date specified in Item 4 of Schedule
1 or two Business Days (or such shorter  period agreed to by the  Administrative
Agent)  after a Notice of  Assignment  substantially  in the form of Exhibit "I"
attached hereto has been delivered to the  Administrative  Agent. Such Notice of
Assignment   must  include  any  consents   required  to  be  delivered  to  the
Administrative Agent by Section 12.3.1 of the Credit Agreement. In no event will
the Effective Date occur if the payments  required to be made by the Assignee to
the Assignor on the Effective Date under Sections 4 and 5 hereof are not made on
the  proposed  Effective  Date.  The  Assignor  will notify the  Assignee of the
proposed  Effective  Date no later than the  Business  Day prior to the proposed
Effective Date. As of the Effective Date, (i) the Assignee shall have the rights
and  obligations of a Lender under the Loan Documents with respect to the rights
and obligations  assigned to the Assignee  hereunder and (ii) the Assignor shall
relinquish its rights and be released from its  corresponding  obligations under
the Loan  Documents with respect to the rights and  obligations  assigned to the
Assignee hereunder.



                                     C-1

<PAGE>



     4. PAYMENT OBLIGATIONS. On and after the Effective Date, the Assignee shall
be entitled to receive from the Administrative  Agent all payments of principal,
interest  and fees with respect to the interest  assigned  hereby.  The Assignee
shall advance  funds  directly to the  Administrative  Agent with respect to all
Loans  and  reimbursement  payments  made on or after  the  Effective  Date with
respect to the interest  assigned hereby.  In the event that either party hereto
receives  any  payment to which the other party  hereto is  entitled  under this
Assignment Agreement,  then the party receiving such amount shall promptly remit
it to the other party hereto.

      5. FEES PAYABLE BY THE ASSIGNEE.  The Assignee shall pay to the Assignor a
fee on each day on which a payment of interest or commitment  fees is made under
the Credit  Agreement  with  respect to the  amounts  assigned  to the  Assignee
hereunder  (other than a payment of interest or  commitment  fees for the period
prior to the  Effective  Date or, in the case of Fixed Rate  Loans,  the Payment
Date,  which the Assignee is  obligated  to deliver to the Assignor  pursuant to
Section 4 hereof).  The amount of such fee shall be the  difference  between (i)
the interest or fee, as applicable, paid with respect to the amounts assigned to
the Assignee hereunder and (ii) the interest or fee, as applicable,  which would
have been paid with respect to the amounts assigned to the Assignee hereunder if
each interest rate was of 1% less than the interest rate paid by the Borrower or
if the  commitment  fee was of 1%  less  than  the  commitment  fee  paid by the
Borrower,  as  applicable.  In  addition,  the  Assignee  agrees to pay % of the
recordation  fee required to be paid to the  Administrative  Agent in connection
with this Assignment Agreement.

      6.  REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE
ASSIGNOR'S LIABILITY.  The Assignor represents and warrants that it is the legal
and  beneficial  owner of the interest  being  assigned by it hereunder and that
such interest is free and clear of any adverse claim created by the Assignor. It
is understood and agreed that the  assignment and assumption  hereunder are made
without  recourse  to  the  Assignor  and  that  the  Assignor  makes  no  other
representation or warranty of any kind to the Assignee. Neither the Assignor nor
any  of its  officers,  directors,  employees,  agents  or  attorneys  shall  be
responsible  for (i)  the due  execution,  legality,  validity,  enforceability,
genuineness,  sufficiency  or  collectability  of any Loan  Document,  including
without  limitation,  documents  granting the  Assignor and the other  Lenders a
security  interest  in  assets  of the  Borrower  or  any  guarantor,  (ii)  any
representation,  warranty or statement made in or in connection  with any of the
Loan  Documents,  (iii)  the  financial  condition  or  creditworthiness  of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or  provisions of any of the Loan  Documents,  (v)  inspecting  any of the
Property,  books or records of the Borrower, (vi) the validity,  enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or  purporting to secure the Loans or (vii) any mistake,  error of judgment,  or
action  taken or  omitted to be taken in  connection  with the Loans or the Loan
Documents.


                                     C-2

<PAGE>



     7.  REPRESENTATIONS OF THE ASSIGNEE.  The Assignee (i) confirms that it has
received a copy of the Credit  Agreement,  together with copies of the financial
statements requested by the Assignee and such other documents and information as
it has deemed  appropriate to make its own credit analysis and decision to enter
into this  Assignment  Agreement,  (ii) agrees that it will,  independently  and
without reliance upon the Administrative Agent, the Assignor or any other Lender
and based on such documents and information at it shall deem  appropriate at the
time,  continue to make its own credit  decisions in taking or not taking action
under the Loan Documents, (iii) appoints and authorizes the Administrative Agent
to take such action as agent on its behalf and to exercise such powers under the
Loan  Documents  as are  delegated  to the  Administrative  Agent  by the  terms
thereof,  together with such powers as are reasonably  incidental thereto,  (iv)
agrees  that  it  will  perform  in  accordance  with  their  terms  all  of the
obligations  which  by the  terms  of the  Loan  Documents  are  required  to be
performed by it as a Lender, (v) agrees that its payment instructions and notice
instructions  are as set forth in the  attachment  to Schedule 1, (vi)  confirms
that none of the funds, monies, assets or other consideration being used to make
the purchase and  assumption  hereunder are "plan assets" as defined under ERISA
and that its rights, benefits and interests in and under the Loan Documents will
not be  "plan  assets"  under  ERISA,  (vii)  confirms  that  it is an  Eligible
Assignee,  **[and (viii) attaches the forms  prescribed by the Internal  Revenue
Service of the United States certifying that the Assignee is entitled to receive
payments under the Loan Documents without deduction or withholding of any United
States federal income taxes]**.**

**to be  inserted  if the  Assignee  is not  incorporated  under the laws of the
United States, or a state thereof.

      8.  INDEMNITY.  The  Assignee  agrees to  indemnify  and hold the Assignor
harmless against any and all losses,  costs and expenses  (including  reasonable
attorneys' fees) and liabilities  incurred by the Assignor in connection with or
arising in any manner from the  Assignee's  non-performance  of the  obligations
assumed under this Assignment Agreement.

      9.  SUBSEQUENT  ASSIGNMENTS.  After the Effective Date, the Assignee shall
have the right pursuant to Section 12.3.1 of the Credit  Agreement to assign the
rights  which are  assigned to the  Assignee  hereunder to any entity or person,
provided  that (i) any such  subsequent  assignment  does not violate any of the
terms and conditions of the Loan Documents or any law, rule, regulation,  order,
writ,  judgment,  injunction or decree and that any consent  required  under the
terms of the Loan  Documents has been obtained and (ii) unless the prior written
consent of the Assignor is obtained,  the Assignee is not thereby  released from
its obligations to the Assignor hereunder, if any remain unsatisfied,  including
its obligations under Sections 4, 5 and 8 hereof.

      10. REDUCTIONS OF AGGREGATE COMMITMENT.  If any reduction in the Aggregate
Commitment  occurs  between  the  date  of  this  Assignment  Agreement  and the
Effective Date, the percentage  interest specified in Item 3 of Schedule 1 shall
remain the same, 


                                     C-3

<PAGE>

but the dollar amount purchased shall be recalculated  based on the reduced 
Aggregate Commitment.

      11. ENTIRE AGREEMENT. This Assignment Agreement and the attached Notice of
Assignment  embody the entire  agreement and  understanding  between the parties
hereto and supersede all prior agreements and understandings between the parties
hereto relating to the subject matter hereof.


      12.  GOVERNING  LAW. This  Assignment  Agreement  shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.

      13. NOTICES. Notices shall be given under this Assignment Agreement in the
manner set forth in the Credit Agreement.  For the purpose hereof, the addresses
of the  parties  hereto  (until  notice of a change is  delivered)  shall be the
address set forth in the attachment to Schedule 1.



                                     C-4

<PAGE>



      IN WITNESS  WHEREOF,  the parties  hereto have  executed  this  Assignment
Agreement by their duly authorized officers as of the date first above written.

                              **[NAME OF ASSIGNOR]**

                              By:    ______________________

                              Title: ______________________

                                     ______________________

                                     ______________________




                              **[NAME OF ASSIGNEE]**

                              By:    ______________________

                              Title: ______________________

                                     ______________________

                                     ______________________






                                     C-5

<PAGE>



                                   SCHEDULE 1
                             to Assignment Agreement

1.  Description  and Date of  Credit  Agreement:  Credit  Agreement  dated as of
December 2, 1998 among CH Energy Group,  Inc.,  various financial  institutions,
and The First National Bank of Chicago, as Administrative Agent.

2. Amounts (As of Date of Item 2 above):

      a.    Total of Commitments
            (Loans)** under
            Credit Agreement        $ _______

      b.    Assignee's Percentage
            of each Facility purchased
            under the Assignment
            Agreement***              _______%

      c.    Amount of Assigned Share in
            each Facility purchased under
            the Assignment
            Agreement                $_______

3.    Assignee's Aggregate (Loan
      Amount)**  Commitment Amount
       Purchased Hereunder:                        $_______

4.    Proposed Effective Date:                      _______

Accepted and Agreed:

**[NAME OF ASSIGNOR]**                       **[NAME OF ASSIGNEE]**
By:    ____________________                  By:    ____________________

Title: ____________________                  Title: ____________________



 **         If a Commitment has been terminated, insert outstanding Loans in
            place of Commitment

***         Percentage taken to 10 decimal places



                                           C-6

<PAGE>



                Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT

                        ADMINISTRATIVE INFORMATION SHEET

         Attach Assignor's Administrative Information Sheet, which must
           include notice addresses for the Assignor and the Assignee
                            (Sample form shown below)

                              ASSIGNOR INFORMATION
Contact:

Name:   _____________________                Telephone No.: __________________

Fax No.:_____________________                Telex No.:     __________________
 
                                             Answerback:    __________________
Payment Information:

Name & ABA # of Destination Bank: ______________________________________________

________________________________________________________________________________


Account Name & Number for Wire Transfer: _______________________________________

________________________________________________________________________________


Other Instructions: ____________________________________________________________

________________________________________________________________________________


Address for Notices for Assignor: ______________________________________________

________________________________________________________________________________

________________________________________________________________________________




                              ASSIGNEE INFORMATION
Credit Contact:

Name:   _____________________                Telephone No.: __________________

Fax No.:_____________________                Telex No.:     __________________
 
                                             Answerback:    __________________




                                           C-7

<PAGE>

Key Operations Contacts:

Booking Installation:_______________     Booking Installation: _________________

Name: ______________________________     Name: _________________________________

Telephone No.: _____________________     Telephone No.: ________________________

Fax No.: ___________________________     Fax No.: ______________________________

Telex No.: _________________________     Telex No.: ____________________________

Answerback:_________________________     Answerback: ___________________________


Payment Information:

Name & ABA # of Destination Bank: ______________________________________________

________________________________________________________________________________


Account Name & Number for Wire Transfer: _______________________________________

________________________________________________________________________________


Other Instructions:_____________________________________________________________

________________________________________________________________________________

________________________________________________________________________________



Address for Notices for Assignee:_______________________________________________

________________________________________________________________________________

________________________________________________________________________________






                                           C-8

<PAGE>



                                FNBC INFORMATION

     Assignee will be called promptly upon receipt of the signed agreement.

Initial Funding Contact:       Subsequent Operations Contact:

Name: ______________________          Name: ________________________

Telephone No.:______________          Telephone No.: _(312)_________

Fax No.:____________________          Fax No.: _(312)_______________

                  FNBC Telex No.: 190201 (Answerback: FNBC UT)

Initial Funding Standards:

Libor - Fund 2 days after rates are set.

FNBC Wire  Instructions:       The First National Bank of Chicago,
                               ABA #071000013 BNF = 7521-7653/DES,Ref:

Address for Notices for FNBC:  One First National Plaza, Chicago, IL  60670
                                    Attn: Agency/Compliance Division, Suite 0353
                                    Fax No. (312) 732-2038 or (312) 732-4339







                                     C-9

<PAGE>



                                   EXHIBIT "I"
                             to Assignment Agreement

                                     NOTICE
                                  OF ASSIGNMENT


                                                          ______________, 19___


To:         CH Energy Group, Inc.

            The First National Bank of Chicago, as Administrative Agent


From:       **[NAME OF ASSIGNOR]** (the "Assignor")

            **[NAME OF ASSIGNEE]** (the "Assignee")


            1. We  refer  to that  Credit  Agreement  (the  "Credit  Agreement")
described in Item 1 of Schedule 1 attached hereto  ("Schedule  1").  Capitalized
terms used  herein and not  otherwise  defined  herein  shall have the  meanings
attributed to them in the Credit Agreement.

            2. This Notice of Assignment  (this "Notice") is given and delivered
to the Borrower and the  Administrative  Agent pursuant to Section 12.3.2 of the
Credit Agreement.

            3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of ________,_______ (the "Assignment"), pursuant to which, 
among other things, the Assignor has sold, assigned, delegated and transferred
to the Assignee, and the Assignee has purchased, accepted and assumed from the 
Assignor the percentage interest specified in Item 3 of Schedule 1 of all 
outstandings, rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1. The Effective Date of the Assignment
shall be the later of the date specified in Item 5 of Schedule 1 or two Business
Days (or such shorter period as agreed to by the Administrative Agent)after this
Notice of Assignment and any consents and fees required by Sections 12.3.1 and 
12.3.2 of the Credit Agreement have been delivered to the Administrative Agent,
provided  that the  Effective  Date shall not occur if any  condition  precedent
agreed to by the Assignor and the Assignee has not been satisfied.

            4. The Assignor and the Assignee hereby give to the Borrower and the
Administrative Agent notice of the assignment and delegation referred to herein.
The Assignor will confer with the Administrative Agent before the date specified
in Item 5 of Schedule 1 to determine if the



<PAGE>


Assignment Agreement will become effective on such date pursuant to Section 3  
hereof,  and will  confer  with the  Administrative  Agent to  determine  the
Effective  Date  pursuant  to  Section  3 hereof if it  occurs  thereafter.  The
Assignor shall notify the Administrative  Agent if the Assignment Agreement does
not become  effective on any proposed  Effective Date as a result of the failure
to satisfy the conditions  precedent agreed to by the Assignor and the Assignee.
At the  request  of  the  Administrative  Agent,  the  Assignor  will  give  the
Administrative  Agent written confirmation of the satisfaction of the conditions
precedent.

            5. The  Assignor  or the  Assignee  shall pay to the  Administrative
Agent on or before the Effective Date the  processing fee of $3,000  required by
Section 12.3.2 of the Credit Agreement.

            6. If Notes are  outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Administrative  Agent prepare and cause
the  Borrower to execute and deliver new Notes or, as  appropriate,  replacement
notes,  to the Assignor and the Assignee.  The Assignor and, if applicable,  the
Assignee  each agree to deliver to the  Administrative  Agent the original  Note
received  by it  from  the  Borrower  upon  its  receipt  of a new  Note  in the
appropriate amount.

            7. The  Assignee  advises the  Administrative  Agent that notice and
payment instructions are set forth in the attachment to Schedule 1.

            8. The Assignee  hereby  represents  and  warrants  that none of the
funds,  monies,  assets or other  consideration  being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that its
rights,  benefits,  and  interests in and under the Loan  Documents  will not be
"plan assets" under ERISA.

            9. The Assignee  authorizes the  Administrative  Agent to act as its
agent  under  the Loan  Documents  in  accordance  with the terms  thereof.  The
Assignee  acknowledges  that  the  Administrative  Agent  has no duty to  supply
information  with respect to the Borrower or the Loan  Documents to the Assignee
until the Assignee becomes a party to the Credit Agreement.*

*May be eliminated if Assignee is a party to the Credit Agreement prior to the 
Effective Date.

NAME OF ASSIGNOR                             NAME OF ASSIGNEE

By: ____________________                     By: ____________________

Title:__________________                     Title: _________________






<PAGE>



ACKNOWLEDGED AND                      [ACKNOWLEDGED AND
 CONSENTED TO]                          CONSENTED TO
 BY   THE FIRST NATIONAL BANK          BY   CH ENERGY GROUP, INC.
      OF CHICAGO, as
           Administrative Agent

By: ________________________           By: ________________________

Title: _____________________           Title:______________________]*





*Include only if consent of the Borrower is required  pursuant to Section 12.3.1
of the Credit Agreement.














                [Attach photocopy of Schedule 1 to Assignment]





<PAGE>



                                    EXHIBIT D
                 LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION

To The First National Bank of Chicago,
 as Administrative Agent (the "Administrative Agent") under the Credit Agreement
 Described Below.

Re:         Credit  Agreement dated as of December 4, 1998 (amended or otherwise
            modified, the "Credit Agreement"),  among CH Energy Group, Inc. (the
            "Borrower") the Lenders named therein and the Administrative  Agent.
            Capitalized terms used herein and not otherwise defined herein shall
            have the meanings assigned thereto in the Credit Agreement.

            The Administrative Agent is specifically  authorized and directed to
act upon the following standing money transfer  instructions with respect to the
proceeds  of  Advances  or other  extensions  of credit  from time to time until
receipt by the  Administrative  Agent of a specific  written  revocation of such
instructions by the Borrower,  provided,  however, that the Administrative Agent
may otherwise transfer funds as hereafter directed in writing by the Borrower in
accordance with Section 13.1 of the Credit  Agreement or based on any telephonic
notice made in accordance with Section 2.14 of the Credit Agreement.

Facility Identification Number(s)______________________________________________

Customer/Account Name__________________________________________________________

Transfer Funds To______________________________________________________________

                 ______________________________________________________________

For Account No.________________________________________________________________

Reference/Attention To_________________________________________________________

Authorized Officer (Customer Representative)          Date________________

__________________________________                        ________________

__________________________________                 _______________________
(Please Print)                                     Signature

Bank Officer Name                     Date___________________________

______________________________        _______________________________
(Please Print)                                         Signature





                                     D-1

<PAGE>

   (Deliver Completed Form to Credit Support Staff For Immediate Processing)



                                     D-2


<PAGE>

                                    EXHIBIT E
                                      NOTE


$_______________                              _________,_______


            CH ENERGY  GROUP,  INC., a New York  corporation  (the  "Borrower"),
promises  to pay  to  the  order  of  ____________________________________  (the
"Lender")  the  lesser of the  principal  sum of  ______________________________
Dollars or the aggregate unpaid principal amount of all Loans made by the Lender
to the Borrower pursuant to Section 2 of the Agreement (as hereinafter defined),
in immediately  available funds at the main office of The First National Bank of
Chicago in Chicago, Illinois, as Administrative Agent, together with interest on
the unpaid  principal  amount  hereof at the rates and on the dates set forth in
the  Agreement.  The Borrower  shall pay the principal of and accrued and unpaid
interest on the Loans in full on the Termination Date.

            The  Lender  shall,  and is  hereby  authorized  to,  record  on the
schedule  attached  hereto,  or to otherwise record in accordance with its usual
practice,  the date and  amount  of each  Loan and the date and  amount  of each
principal payment hereunder.

            This Note is one of the Notes issued pursuant to, and is entitled to
the  benefits  of,  the Credit  Agreement  dated as of  _____________,  1998 (as
amended or otherwise  modified from time to time,  the  "Agreement"),  among the
Borrower,  various financial  institutions,  including the Lender, and The First
National Bank of Chicago, as Administrative  Agent, to which Agreement reference
is hereby made for a statement of the terms and conditions  governing this Note,
including the terms and  conditions  under which this Note may be prepaid or its
maturity  date  accelerated.  Capitalized  terms used  herein and not  otherwise
defined herein are used with the meanings attributed to them in the Agreement.


                                      CH ENERGY GROUP, INC.

                                      By: _____________________________________

                                      Print Name:______________________________

                                      Title:___________________________________




                                     E-1

<PAGE>



                   SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
                                       TO
                          NOTE OF CH ENERGY GROUP, INC.
                            DATED __________,________


                   Principal      Maturity        Principal
                   Amount of     of Interest        Amount           Unpaid
Date                 Loan           Period           Paid            Balance
____               _________     ___________      _________          _______





                                          E-2

<PAGE>



                                   SCHEDULE 1

                                      LIENS
                          (See Sections 5.13 and 6.11)


A.          The following are the exceptions referred to in Section 5.13 of the
            Agreement.

            1. The Utility owns a ten-acre  parcel in Honk Falls,  New York,  on
which  is  located  a  substation  for  the  transmission  and  distribution  of
electricity.  The  Utility  believes  it has good and  marketable  title to this
parcel,  and the county  property  records  support  that belief.  However,  the
Utility has received a letter from an attorney for a neighboring property owner,
Mr. Berger,  claiming that Mr. Berger owns the ten-acre  substation  parcel. Mr.
Berger's claim apparently  rests on two facts:  Mr. Berger received,  in 1994, a
deed  from the  estate  of Ethel  Kooperman,  purportedly  passing  title to the
ten-acre  parcel;  and,  allegedly,  Ms.  Kooperman  and  then Mr.  Berger  were
inappropriately  listed on the  county  tax rolls for a period of time as owners
of, and they allegedly paid the property taxes on, thirty acres which apparently
included the ten-acre parcel.  The tax rolls have been corrected and there is no
indication on the county's  property records that Ethel Kooperman ever had title
to the parcel.


            2.   Utility's Neversink Hydro Electric Generating
Facility  ownership to revert back to the New York City Board of Water Supply in
the year 2003.

B.          The following are the Liens referred to in Section 6.11(v) of the
            Agreement:

            1.  Indenture,  dated January 1, 1927,  between Utility and American
Exchange  Irving  Trust  Company  (now The  Bank of New  York)  as  Trustee,  as
supplemented and amended; being the Utility's First Mortgage Indenture.

            2. The  Company is a  Co-Tenant  Owner with  others in an  undivided
interest  in  the  following  electric   generation  plants:   Roseton  Electric
Generating  Plant,  located at Roseton,  N.Y. and Nine Mile Point Unit 2 Nuclear
Generating Plant located in Oswego County, N.Y. The Company's ownerships therein
are encumbered by certain rights of others (e.g.  rights of  first-refusal  on a
sale of  interest)  and by  related  agreements  among  all or some of such  Co-
Tenants (e.g. Operating Agreements).

            3. The following are documents to which Central  Hudson  Enterprises
Corporation ("CHEC")is a party and which create or relate to Liens of CHEC:




                                     S-1

<PAGE>

                 a)   Marine  Midland  loan  facility   (PSE&G   Standard  Offer
                      Program),  represented  by  a  Term  Loan  Agreement  (and
                      related documents) dated Oct. 22, 1993, amended as of 
                      August 1, 1994, which requires a Security Agreement and an
                      Assignment of Contract Rights and Security Agreement to be
                      executed, and UCC-1 financing statements to be delivered, 
                      for each draw-down. This loan facility is not open for 
                      future draw-downs. The amount outstanding under this loan
                      facility as of October 31, 1998, was $2,281,000.

                 b)   Key  Bank  loan  facility,  represented  by  a  Term  Loan
                      Agreement  (and  related  documents)  dated  June 3, 1994,
                      which  requires a Security  Agreement and an Assignment of
                      Contract Rights and Security Agreement to be executed, and
                      UCC-1  financing  statements  to be  delivered,  for  each
                      draw-down.  This  loan  facility  is not open  for  future
                      draw-downs.   The  amount   outstanding  under  this  loan
                      facility as of October 31, 1998, was $1,508,000.

                 c)   Key  Bank  loan  facility  in the  amount  of  $5,000,000,
                      represented   by  a  Term  Loan   Agreement  (and  related
                      documents)  dated  September  30, 1998,  which  requires a
                      Security  Agreement and an  Assignment of Contract  Rights
                      and Security Agreement to be executed, and UCC-1 financing
                      statements to be delivered, for each draw-down.  This loan
                      facility remains open for future draw-downs.

                 d)   Marine Midland loan facility, represented by a Term Loan
                      Agreement (and related documents) dated as of December 17,
                      1990,  pursuant to which a Security  Agreement  and an  
                      Assignment  of  Contract  Rights and  Security Agreement 
                      were executed,  and UCC-1 financing statements delivered, 
                      at the time of closing. This loan facility is not open for
                      future draw-downs. The amount outstanding under this loan 
                      facility as of October 31, 1998, was $354,000.

                 e)   Marine   Midland  loan  facility   (PSE&G  -  LSCI  Loan),
                      represented by a Loan  Agreement  (and related  documents)
                      dated June 23, 1993,  which requires a Security  Agreement
                      and  an  Assignment   of  Contract   Rights  and  Security
                      Agreement to be executed,  and UCC-1 financing  statements
                      to be delivered, for each draw-down. This loan facility is
                      not open for future  draw-downs.  The  amount  outstanding
                      under this loan  facility  as of  October  31,  1998,  was
                      $1,710,000.






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<PAGE>

                 f)   Commercial  Installment  Loan  Agreement and Variable Rate
                      Installment  Note,  each dated  December 31, 1997 toMarine
                      Midland  Bank  under the  Public  Service  Electric  & Gas
                      Standard  Offer Program for Newark  Airport  Project.  The
                      amount outstanding under this Note as of October 31, 1998,
                      was $314,000.

                 g)   Working  capital  ($500,000)  line of credit with Key Bank
                      under an  Optional  Demand  Line of Credit Grid Note dated
                      July 23, 1998.  As of October 31, 1998,  the entire amount
                      was available.

                 h)   Irrevocable  Standby  Letter of Credit with Marine Midland
                      dated  September  1,  1998  in the  sum of  $650,000.  The
                      beneficiary  under this Letter of Credit is Public Service
                      Electric & Gas.

            4. The following are documents to which SCASCO,  Inc. is a party and
which create or relate to Liens:

                 a)   Commercial  Installment  Loan Agreement,  Installment Note
                      and  General  Security  Agreement,  each dated  August 20,
                      1998,  with Marine Midland Bank in the amount of $502,337.
                      The amount  outstanding  under this loan as of October 31,
                      1998, was $478,000.

                 b)   Working  capital line of credit between  SCASCO,  Inc. and
                      Marine Midland Bank,  under a Note, dated as of August 19,
                      1998  providing  $1,000,000  in credit.  As of October 31,
                      1998 this entire amount was available.




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