Exhibit (10)(iii)16)

                              EMPLOYMENT AGREEMENT

     AGREEMENT by and between Central Hudson Gas & Electric  Corporation,  a New
York corporation (the "Company") and Paul J. Ganci (the  "Executive"),  dated as
of the first day of December, 1998.

     The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its  shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility,  threat or occurrence of a Change of Control (as defined  below) of
the Company.  The Board  believes it is  imperative  to diminish the  inevitable
distraction of the Executive by virtue of the personal  uncertainties  and risks
created  by a pending  or  threatened  Change of Control  and to  encourage  the
Executive's  full attention and  dedication to the Company  currently and in the
event of any  threatened  or  pending  Change of  Control,  and to  provide  the
Executive with  compensation and benefits  arrangements upon a Change of Control
which ensure that the  compensation  and benefits  expectations of the Executive
will be satisfied and which are  competitive  with those of other  corporations.
Therefore,  in order to accomplish  these  objectives,  the Board has caused the
Company to enter into this Agreement.

     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1. Certain Definitions.  (a) The "Effective Date" shall mean the first date
during  the Change of Control  Period  (as  defined in Section  1(b)) on which a
Change of Control (as defined in Section 2) occurs.  Anything in this  Agreement
to the  contrary  notwithstanding,  if a Change  of  Control  occurs  and if the
Executive's employment with the Company is terminated prior to the date on which
the  Change of  Control  occurs,  and if it is  reasonably  demonstrated  by the
Executive that such  termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise  arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.

     (b) The "Change of Control Period" shall mean the period  commencing on the
date hereof and ending on July 31, 1999; provided,  however,  that commencing on
July 31, 1999,  and on each annual  anniversary of such date (such date and each
annual  anniversary  thereof  shall be  hereinafter  referred to as the "Renewal
Date"),  unless  previously  terminated,  the Change of Control  Period shall be
automatically  extended  so as to  terminate  one year from such  Renewal  Date,
unless at least 60 days prior to the Renewal Date the Company  shall give notice
to the  Executive  that the Change of Control  Period  shall not be so extended;
provided,  that  such a  notice  shall  be null  and  void  if it is  reasonably
demonstrated by the Executive that such notice was given (i) at the request of a
third  party who has taken  steps  reasonably  calculated  to effect a Change of
Control or (ii)  otherwise in  connection  with or  anticipation  of a Change of
Control; and provided,  further,  that in any event the Change of Control Period
shall end on May 1, 2003.

<PAGE>

     2.  Change of  Control.  For the  purpose of this  Agreement,  a "Change of
Control" shall mean:

     (a) The acquisition by any individual,  entity or group (within the meaning
of Section  13(d)(3) or  14(d)(2) of the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange Act")) (a "Person") of beneficial  ownership  (within the
meaning  of Rule 13d-3  promulgated  under the  Exchange  Act) of 20% or more of
either  (x) the then  outstanding  shares of common  stock of the  Company  (the
"Outstanding Company Common Stock") or (y) the combined voting power of the then
outstanding  voting  securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting  Securities");  provided,
however,  that for purposes of this subsection  (a), the following  acquisitions
shall not constitute a Change of Control:  (i) any acquisition directly from the
Company,  (ii) any  acquisition  by the Company,  (iii) any  acquisition  by any
employee  benefit plan (or related trust) sponsored or maintained by the Company
or any  corporation  controlled  by the Company or (iv) any  acquisition  by any
corporation  pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (c) of this Section 2; or

     (b)  Individuals  who,  as of the date  hereof,  constitute  the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided,  however, that any individual becoming a director subsequent to
the date hereof whose  election,  or  nomination  for election by the  Company's
shareholders,  was  approved by a vote of at least a majority  of the  directors
then  comprising  the  Incumbent  Board  shall  be  considered  as  though  such
individual  were a  member  of the  Incumbent  Board,  but  excluding,  for this
purpose,  any such  individual  whose  initial  assumption of office occurs as a
result of an actual or threatened  election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or

     (c)  Consummation of a  reorganization,  merger or consolidation or sale or
other  disposition of all or  substantially  all of the assets of the Company (a
"Business   Combination"),   in  each  case,  unless,  following  such  Business
Combination,  (i) all or  substantially  all of the individuals and entities who
were the beneficial  owners,  respectively,  of the  Outstanding  Company Common
Stock  and  Outstanding  Company  Voting  Securities  immediately  prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively,  the then  outstanding  shares  of common  stock and the  combined
voting  power  of the  then  outstanding  voting  securities  entitled  to  vote
generally in the election of directors,  as the case may be, of the  corporation
resulting  from such Business  Combination  (including,  without  limitation,  a
corporation  which as a result of such  transaction  owns the  Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries)  in  substantially   the  same  proportions  as  their  ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and  Outstanding  Company Voting  Securities,  as the case may be, (ii) no
Person  (excluding any corporation  resulting from such Business  Combination or
any employee  benefit plan (or related trust) of the Company or such corporation
resulting  from  such  Business  Combination)  beneficially  owns,  directly  or
indirectly, 20% or more of, respectively,  the then outstanding shares of common
stock  of the  corporation  resulting  from  such  Business  Combination  or the
combined
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<PAGE>

voting  power  of the  then  outstanding  voting  securities  of  such
corporation  except to the  extent  that  such  ownership  existed  prior to the
Business  Combination  and (iii) at least a majority of the members of the board
of directors of the corporation  resulting from such Business  Combination  were
members  of the  Incumbent  Board at the time of the  execution  of the  initial
agreement,  or  of  the  action  of  the  Board,  providing  for  such  Business
Combination; or

     (d) Approval by the  shareholders of the Company of a complete  liquidation
or dissolution of the Company.

     3. Employment  Period.  The Company hereby agrees to continue the Executive
in its employ,  subject to the terms and conditions of this  Agreement,  for the
period  commencing  on the  Effective  Date  and  ending  on May  1,  2003  (the
"Employment  Period").  It is understood and agreed that the  termination of the
Executive's  employment for any reason,  whether before,  at or after the end of
the  Employment  Agreement,  shall  be  considered  to be a  retirement  of  the
Executive for all purposes of the employee  benefit plans,  practices,  policies
and programs of the Company and its affiliated companies.

     4. Terms of Employment.  (a) Position and Duties. (i) During the Employment
Period,  (A) the Executive's  position  (including status,  offices,  titles and
reporting  requirements),  authority,  duties and  responsibilities  shall be at
least  commensurate in all material  respects with the most significant of those
held,  exercised and assigned at any time during the 120-day period  immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location  where the  Executive  was employed  immediately  preceding  the
Effective Date or any office or location within the Company's  service territory
(as it  existed  immediately  before the  Effective  Date);  provided,  that the
Executive  may be required to relocate  outside  such  service  territory if the
Company provides the Executive with relocation benefits at least as favorable as
those that would have been provided under the Company's  relocation policy as in
effect immediately before the Effective Date.

(ii) During the  Employment  Period,  and  excluding any periods of vacation and
sick leave to which the Executive is entitled,  the  Executive  agrees to devote
reasonable  attention and time during normal  business hours to the business and
affairs  of  the  Company  and,  to  the  extent   necessary  to  discharge  the
responsibilities  assigned to the Executive  hereunder,  to use the  Executive's
reasonable   best   efforts  to  perform   faithfully   and   efficiently   such
responsibilities.  During the  Employment  Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate,  civic or charitable
boards or committees,  (B) deliver  lectures,  fulfill  speaking  engagements or
teach at educational  institutions and (C) manage personal investments,  so long
as such  activities do not  significantly  interfere with the performance of the
Executive's  responsibilities  as an employee of the Company in accordance  with
this  Agreement.  It is expressly  understood and agreed that to the extent that
any such  activities have been conducted by the Executive prior to the Effective
Date,  the continued  conduct of such  activities  (or the conduct of activities
similar in nature and scope thereto)  subsequent to the Effective Date shall not
thereafter  be deemed  to  interfere  with the  performance  of the  Executive's
responsibilities to the Company.

(b) Compensation.  (i) Base Salary.  During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary"),  which shall be paid
at a
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<PAGE>

     monthly  rate,  at least  equal to twelve  times the highest  monthly  base
salary paid or  payable,  including  any base  salary  which has been earned but
deferred,  to the  Executive  by the Company  and its  affiliated  companies  in
respect of the twelve-month period immediately  preceding the month in which the
Effective  Date occurs.  During the  Employment  Period,  the Annual Base Salary
shall be reviewed no more than 12 months after the last salary increase  awarded
to the Executive  prior to the Effective Date and thereafter at least  annually.
Any  increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this  Agreement.  Annual Base Salary shall not
be reduced  after any such  increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased.  As used in
this  Agreement,  the term  "affiliated  companies"  shall  include  any company
controlled by, controlling or under common control with the Company.

     (ii) Annual Bonus.  In addition to Annual Base Salary,  the Executive shall
be awarded,  for each fiscal year ending during the Employment Period, an annual
bonus (the  "Annual  Bonus") in cash at least equal to the  Executive's  highest
bonus under the Company's Management  Incentive Plan, or Executive  Compensation
Plan, as  applicable,  or any comparable  annual bonus under any  predecessor or
successor plan, for the last three full fiscal years prior to the Effective Date
(annualized  in the event that the Executive was not employed by the Company for
the whole of such fiscal year) (the  "Recent  Annual  Bonus").  Each such Annual
Bonus  shall be paid no later than the end of the third month of the fiscal year
next following the fiscal year for which the Annual Bonus is awarded.

     (iii)  Incentive,  Savings  and  Retirement  Plans.  During the  Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans,  practices,  policies and programs applicable generally to
other peer  executives of the Company and its  affiliated  companies,  but in no
event shall such plans,  practices,  policies and programs provide the Executive
with incentive  opportunities (measured with respect to both regular and special
incentive  opportunities,  to the  extent,  if any,  that  such  distinction  is
applicable), savings opportunities and retirement benefit opportunities, in each
case,  less  favorable,  in the  aggregate,  than  the most  favorable  of those
provided by the Company and its  affiliated  companies for the  Executive  under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately  preceding the Effective Date or if more favorable to
the Executive,  those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.

     (iv) Welfare  Benefit Plans.  During the Employment  Period,  the Executive
and/or  the  Executive's  family,  as the case may be,  shall  be  eligible  for
participation  in and shall receive all benefits  under welfare  benefit  plans,
practices,  policies  and  programs  provided by the Company and its  affiliated
companies  (including,  without  limitation,   medical,  prescription,   dental,
disability,  employee life,  group life,  accidental  death and travel  accident
insurance plans and programs) to the extent  applicable  generally to other peer
executives of the Company and its  affiliated  companies,  but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less  favorable,  in the  aggregate,  than the most  favorable of such
plans, practices,  policies and programs in effect for the Executive at any time
during the 120-day period  immediately  preceding the Effective Date or, if more

                                        -4-
<PAGE>

favorable to the Executive,  those provided generally at any time after the
Effective  Date to other  peer  executives  of the  Company  and its  affiliated
companies.

     (v) Expenses. During the Employment Period, the Executive shall be entitled
to receive  prompt  reimbursement  for all reasonable  expenses  incurred by the
Executive  in  accordance  with  the  most  favorable  policies,  practices  and
procedures  of the  Company  and its  affiliated  companies  in  effect  for the
Executive  at any time  during the  120-day  period  immediately  preceding  the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.

     (vi) Fringe Benefits.  During the Employment Period, the Executive shall be
entitled to fringe benefits, including, without limitation, use of an automobile
and payment of related  expenses,  in accordance with the most favorable  plans,
practices,  programs and policies of the Company and its affiliated companies in
effect for the  Executive  at any time  during the  120-day  period  immediately
preceding  the  Effective  Date or, if more  favorable to the  Executive,  as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.

     (vii) Office and Support Staff. During the Employment Period, the Executive
shall be  entitled  to an office and  support  staff at least  equal to the most
favorable  of the  foregoing  provided to the  Executive  by the Company and its
affiliated companies at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as provided generally
at any time  thereafter with respect to other peer executives of the Company and
its affiliated companies.

     (viii)  Vacation.  During the  Employment  Period,  the Executive  shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its affiliated  companies as in effect
for the Executive at any time during the 120-day  period  immediately  preceding
the  Effective  Date  or,  if more  favorable  to the  Executive,  as in  effect
generally at any time  thereafter  with respect to other peer  executives of the
Company and its affiliated companies.

     5.  Termination of Employment.  (a) Death or  Disability.  The  Executive's
employment shall terminate  automatically  upon the Executive's death during the
Employment  Period. If the Company  determines in good faith that the Disability
of the  Executive has occurred  during the  Employment  Period  (pursuant to the
definition of Disability set forth below),  it may give to the Executive written
notice in accordance  with Section  12(b) of this  Agreement of its intention to
terminate the Executive's employment.  In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days  after  such  receipt,  the  Executive  shall not have  returned  to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time  basis for 180  consecutive  business  days as a
result of incapacity due to mental or physical illness which is determined to be
total and  permanent by a physician  selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.

                                        -5- 
<PAGE>

     (b) Cause. The Company may terminate the Executive's  employment during the
Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean:

     (i)  the  willful  and  continued  failure  of  the  Executive  to  perform
     substantially  the  Executive's  duties  with  the  Company  or  one of its
     affiliates  (other than any such failure  resulting from  incapacity due to
     physical  or  mental  illness),  after a  written  demand  for  substantial
     performance  is  delivered  to the  Executive  by the  Board  or the  Chief
     Executive Officer of the Company which  specifically  identifies the manner
     in which the Board or Chief Executive  Officer  believes that the Executive
     has not substantially performed the Executive's duties, or

     (ii) the willful  engaging  by the  Executive  in illegal  conduct or gross
     misconduct which is materially and demonstrably injurious to the Company.

For  purposes of this  provision,  no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done,  by the  Executive  in bad faith or  without  reasonable  belief  that the
Executive's  action or omission was in the best  interests  of the Company.  Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive  Officer or
a senior  officer of the  Company  or based  upon the advice of counsel  for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.  The cessation
of employment  of the  Executive  shall not be deemed to be for Cause unless and
until there shall have been  delivered  to the  Executive a copy of a resolution
duly  adopted by the  affirmative  vote of not less than  three-quarters  of the
entire  membership  of the Board at a meeting  of the Board  called and held for
such  purpose  (after  reasonable  notice is provided to the  Executive  and the
Executive is given an opportunity, together with counsel, to be heard before the
Board),  finding that, in the good faith opinion of the Board,  the Executive is
guilty  of the  conduct  described  in  subparagraph  (i)  or  (ii)  above,  and
specifying the particulars thereof in detail.

     (c) By the Executive.  The Executive's  employment may be terminated by the
Executive for any reason.

     (d) Notice of  Termination.  Any termination by the Company for Cause or by
the Executive for any reason shall be  communicated  by Notice of Termination to
other party hereto given in accordance with Section 12(b) of this Agreement. For
purposes of this  Agreement,  a "Notice of  Termination"  means a written notice
which (i) indicates the specific termination  provision in this Agreement relied
upon, (ii) to the extent  applicable,  sets forth in reasonable detail the facts
and circumstances  claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined  below) is other than the date of receipt of such notice,  specifies
the  termination  date  (which date shall be not more than thirty days after the
giving of such notice). The failure by the Company to set forth in the Notice of
Termination  any fact or  circumstance  which  contributes to a showing of Cause
shall not waive any right of the Company  hereunder or preclude the Company from
asserting such fact or circumstance in enforcing the Company's rights hereunder.

                                      -6-
<PAGE>


     (e) Date of Termination. "Date of Termination" means (i) if the Executive's
employment is  terminated by the Company for Cause,  or by the Executive for any
reason,  the date of  receipt  of the  Notice of  Termination  or any later date
specified  therein,  as the case may be, (ii) if the  Executive's  employment is
terminated  by the  Company  other  than for  Cause or  Disability,  the Date of
Termination  shall be the date on which the Company  notifies  the  Executive of
such termination and (iii) if the Executive's employment is terminated by reason
of death or Disability,  the Date of  Termination  shall be the date of death of
the Executive or the Disability Effective Date, as the case may be.

     6. Obligations of the Company upon  Termination.  (a) Other Than for Cause,
Death or  Disability.  If,  during the  Employment  Period,  the  Company  shall
terminate the Executive's  employment  other than for Cause or Disability or the
Executive      shall      terminate      employment      for     any     reason:

     (i) until the last day of the Employment  Period,  or such longer period as
     may be provided by the terms of the appropriate plan, program,  practice or
     policy,  the Company shall  continue  benefits to the Executive  and/or the
     Executive's  family at least equal to those which would have been  provided
     to them in  accordance  with the plans,  programs,  practices  and policies
     described  in  Section  4(b)(iv)  of  this  Agreement  if  the  Executive's
     employment had not been  terminated or, if more favorable to the Executive,
     as in effect  generally at any time  thereafter  with respect to other peer
     executives of the Company and its affiliated  companies and their families,
     provided,  however,  that if the Executive becomes  reemployed with another
     employer and is eligible to receive medical or other welfare benefits under
     another  employer  provided  plan,  the medical and other welfare  benefits
     described herein shall be secondary to those provided under such other plan
     during  such  applicable  period  of  eligibility;   and  for  purposes  of
     determining  eligibility  (but not the time of commencement of benefits) of
     the  Executive  for retiree  benefits  pursuant  to such plans,  practices,
     programs and policies,  the Executive  shall be considered to have remained
     employed until May 1, 2003 and to have retired on May 1, 2003; and

     (ii) to the extent not  theretofore  paid or  provided,  the Company  shall
     timely pay or  provide  to the  Executive  any other  amounts  or  benefits
     required  to be paid or  provided  or which the  Executive  is  eligible to
     receive  under any  plan,  program,  policy  or  practice  or  contract  or
     agreement of the Company and its affiliated  companies  (such other amounts
     and benefits shall be hereinafter referred to as the "Other Benefits").

     (b) Death.  If the  Executive's  employment  is terminated by reason of the
Executive's death during the Employment  Period,  this Agreement shall terminate
without further obligations to the Executive's legal  representatives under this
Agreement,  other than for payment of Accrued Obligations (as defined below) and
the timely payment or provision of Other Benefits.  Accrued Obligations shall be
paid to the Executive's estate or beneficiary,  as applicable,  in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision of
Other  Benefits,  the term Other Benefits as utilized in this Section 6(b) shall
include,  without  limitation,  and the Executive's estate and/or  beneficiaries
shall be  entitled to  receive,  benefits  at least equal to the most  favorable
benefits  provided by the Company and

                                      -7-
<PAGE>

affiliated companies to the estates and beneficiaries of peer executives of
the Company and such affiliated companies under such plans, programs,  practices
and policies  relating to death  benefits,  if any, as in effect with respect to
other peer  executives  and their  beneficiaries  at any time during the 120-day
period  immediately  preceding the Effective  Date or, if more  favorable to the
Executive's  estate and/or the  Executive's  beneficiaries,  as in effect on the
date of the  Executive's  death with  respect to other  peer  executives  of the
Company and its affiliated companies and their beneficiaries.  The term "Accrued
Obligations" means the sum of (1) the Executive's Annual Base Salary through the
Date of Termination to the extent not  theretofore  paid, (2) the product of (x)
the higher of (I) the  Recent  Annual  Bonus and (II) the  Annual  Bonus paid or
payable,  including  any bonus or  portion  thereof  which has been  earned  but
deferred (and annualized for any fiscal year consisting of less than twelve full
months or during  which the  Executive  was  employed  for less than twelve full
months),  for the most  recently  completed  fiscal year  during the  Employment
Period, if any and (y) a fraction,  the numerator of which is the number of days
in the current fiscal year through the Date of Termination,  and the denominator
of which is 365 and (3) any accrued vacation pay, in each case to the extent not
theretofore paid.

     (c) Disability.  If the  Executive's  employment is terminated by reason of
the Executive's  Disability during the Employment  Period,  this Agreement shall
terminate as of the Disability  Effective Date,  without further  obligations to
the  Executive,  other than for  payment of Accrued  Obligations  and the timely
payment or provision of Other Benefits,  and except as provided in Section 6(e).
Accrued  Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of  Termination.  With  respect  to the  provision  of Other
Benefits,  the term  Other  Benefits  as  utilized  in this  Section  6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive,  disability  and other benefits at least equal to the most favorable
of those  generally  provided  by the Company and its  affiliated  companies  to
disabled  executives  and/or  their  families  in  accordance  with such  plans,
programs,  practices and policies  relating to disability,  if any, as in effect
generally  with respect to other peer  executives and their families at any time
during the 120-day period  immediately  preceding the Effective Date or, if more
favorable to the Executive  and/or the Executive's  family,  as in effect at any
time  thereafter  generally with respect to other peer executives of the Company
and its affiliated companies and their families.

     (d) Cause.  If the  Executive's  employment  shall be terminated  for Cause
during the Employment  Period,  this Agreement shall  terminate  without further
obligations  to the Executive  other than the obligation to pay to the Executive
(x) his Annual Base Salary  through the Date of  Termination,  (y) the amount of
any compensation  previously deferred by the Executive,  and (z) Other Benefits,
in each case to the extent theretofore unpaid. 

     (e) Retirement  Benefits.  Notwithstanding the foregoing and the provisions
of the Company's  Executive  Deferred  Compensation Plan and Retirement  Benefit
Restoration Plan (together, the "Nonqualified Plans"), following the termination
of the Executive's  employment during the Employment Period for any reason other
than by the  Company  for Cause or as a result  of the  Executive's  death,  the
Executive and his  beneficiaries  shall receive  benefits under the Nonqualified
Plans  (the  "Guaranteed  Retirement  Benefits")  such that the  total  benefits
received under the Nonqualified  Plans (as modified  hereby),  together with the

                                     -8-
<PAGE>

actual benefits they receive under the Company's  Retirement Income Plan and any
successor  thereto  in  which  the  Executive  participates  (collectively,  the
"Qualified Plan"),  equal the benefits the Executive and his beneficiaries would
have received if (A) the  Executive had continued to be employed  through May 1,
2003, with the compensation and benefits required by Section 4 of this Agreement
except that it shall be assumed that the Executive's  base salary and other cash
compensation  would each have  increased  by 10% annually on each October 1 from
and after the actual Date of Termination,  (B) the Executive had then retired on
May 1, 2003, and (C) the  Nonqualified  Plans and Qualified Plan had remained in
effect without amendment  adverse to the Executive and his  beneficiaries  after
the Effective Date (but taking into account any  amendments  after the Effective
Date that are favorable to the Executive and his beneficiaries).  The Guaranteed
Retirement  Benefits  shall begin to be paid  immediately  following the Date of
Termination  except  to  the  extent  otherwise  elected  by  the  Executive  in
accordance with the applicable plans.

     7.  Non-exclusivity  of Rights.  Nothing in this Agreement shall prevent or
limit the Executive's  continuing or future  participation in any plan, program,
policy or practice  provided by the Company or any of its  affiliated  companies
and for which the Executive may qualify,  nor,  subject to Section 12(f),  shall
anything herein limit or otherwise  affect such rights as the Executive may have
under any  contract  or  agreement  with the  Company  or any of its  affiliated
companies.  Amounts which are vested benefit or which the Executive is otherwise
entitled  to  receive  under any plan,  policy,  practice  or  program of or any
contract or agreement with the Company or any of its affiliated  companies at or
subsequent to the Date of Termination  shall be payable in accordance  with such
plan, policy,  practice or program or contract or agreement except as explicitly
modified by this Agreement.

     8. Full Settlement.  The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its  obligations  hereunder shall
not be  affected  by any  set-off,  counterclaim,  recoupment,  defense or other
claim,  right or action  which the Company may have  against  the  Executive  or
others. In no event shall the Executive be obligated to seek other employment or
take any  other  action  by way of  mitigation  of the  amounts  payable  to the
Executive  under any of the  provisions of this Agreement and such amounts shall
not be reduced  whether  or not the  Executive  obtains  other  employment.  The
Company  agrees to pay as  incurred,  to the full extent  permitted  by law, all
legal fees and expenses which the Executive may reasonably  incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or  enforceability  of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of an contest by the Executive about the amount of any payment  pursuant to this
Agreement),  plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section  7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").

     9. Certain Additional Payments by the Company.

     (a) Anything in this Agreement to the contrary  notwithstanding  and except
as set forth  below,  in the event it shall be  determined  that any  payment or
distribution  by the  Company  or its  affiliates  to or for the  benefit of the
Executive  (whether paid or payable or 
 
                                     -9-
<PAGE>


distributed  or  distributable  pursuant to the terms of this  Agreement or
otherwise,  but determined  without regard to any additional  payments  required
under this Section 9) (a  "Payment")  would be subject to the excise tax imposed
by Section 4999 of the Code or any  interest or  penalties are incurred by the
Executive  with respect to such excise tax (such excise tax,  together  with any
such interest and penalties,  are  hereinafter  collectively  referred to as the
"Excise  Tax"),  then the  executive  shall be entitled to receive an additional
payment (a  "Gross-Up  Payment")  in an amount  such that  after  payment by the
executive of all taxes (including any interest or penalties imposed with respect
to such  taxes),  including,  without  limitation,  any  income  taxes  (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up  Payment,  the Executive  retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment,  but that the Payments do not exceed 110% of the
greatest amount (the "Reduced  Amount") that could be paid to the Executive such
that the  receipt of  Payments  would not give rise to any Excise  Tax,  then no
Gross-Up  Payment  shall  be made to the  Executive  and  the  Payments,  in the
aggregate, shall be reduced to the Reduced Amount.

     (b) Subject to the provisions of Section 9(c), all determinations  required
to be made under this Section 9, including  whether and when a Gross-Up  Payment
is required and the amount of such Gross-Up  Payment and the  assumptions  to be
utilized in arriving at such determination,  shall be made by a major accounting
firm with expertise in such matters designated by the Executive (the "Accounting
Firm") which shall provide detailed supporting  calculations both to the Company
and the  Executive  within 15 busines  days of the  receipt  of notice  from the
Executive that there has been a Payment, or such earlier time as is requested by
the Company.  All fees and expenses of the Accounting Firm shall be borne solely
by the Company.  Any Gross-Up Payment, as determined pursuant to this Section 9,
shall be paid by the Company to the Executive within five days of the receipt of
the Accounting  Firm's  determination.  Any determination by the Accounting Firm
shall be  binding  upon  the  Company  and the  Executive.  As a  result  of the
uncertainty  in the  application  of Section 4999 of the Code at the time of the
initial  determination  by the Accounting  Firm  hereunder,  it is possible that
Gross-Up  Payments which will not have been made by the Company should have been
made  ("Underpayment"),  consistent  with the  calculations  required to be made
hereunder.  In the event that the  Company  exhausts  its  remedies  pursuant to
Section 9(c) and the  Executive  thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall  determine the amount of the  Underpayment
that has  occurred  and any such  Underpayment  shall  be  promptly  paid by the
company to or for the benefit of the Executive.

     (c) The  Executive  shall notify the Company in writing of any claim by the
Internal  Revenue Service that, if successful,  would require the payment by the
Company of the Gross-Up  Payment.  Such  notification  shall be given as soon as
practicable  but no later than ten business days after the Executive is informed
in  writing of such claim and shall  apprise  the  Company of the nature of such
claim and the date on which such claim is  requested to be paid.  The  Executive
shall not pay such claim prior to the expiration of the 30-day period  following
the date on which it gives such notice to the company  (or such  shorter  period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the

                                     -10-
<PAGE>

Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:

     (i) give the Company any  information  reasonably  requested by the Company
     relating to such claim,

     (ii) take such  action in  connection  with  contesting  such  claim as the
     Company shall reasonably  request in writing from time to time,  including,
     without  limitation,  accepting legal  representation  with respect to such
     claim by an attorney reasonably selected by the Company,

     (iii)  cooperate  with the  Company in good faith in order  effectively  to
     contest such claim, and

     (iv) permit the Company to participate in any proceedings  relating to such
     claim;

provided,  however,  that the Company  shall bear and pay directly all costs and
expenses  (including  additional  interest and penalties) incurred in connection
with such contest and shall  indemnify  and hold the Executive  harmless,  on an
after-tax  basis,  for any  Excise  Tax or income tax  (including  interest  and
penalties with respect thereto) imposed as a result of such  representation  and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such  contest  and,  at its sole  option,  may  pursue or forgo any and all
administrative  appeals,  proceedings,  hearings and conferences with the taxing
authority  in respect of such claim and may, at its sole option,  either  direct
the  Executive  to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a  determination  before  any  administrative  tribunal,  in a court of  initial
jurisdiction  and  in  one or  more  appellate  courts,  as  the  company  shall
determine;  provided,  however, that if the company directs the executive to pay
such claim and sue for a refund,  the Company  shall  advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including  interest or penalties with respect  thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further  provided that any extension of the statute of limitations  relating
to payment of taxes for the taxable year of the Executive  with respect to which
such  contested  amount is claimed to be due is limited solely to such contested
amount.  Furthermore,  the Company's  control of the contest shall be limited to
issues with respect to which a Gross-Up  Payment would be payable  hereunder and
the  Executive  shall be entitled to settle or contest,  as the case may be, any
other  issue  raised  by  the  Internal  Revenue  Service  or any  other  taxing
authority.

(d) If, after the receipt by the Executive of an amount  advanced by the Company
pursuant to Section 9(c), the Executive  becomes  entitled to receive any refund
with  respect to such claim,  the  Executive  shall  (subject  to the  Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable  thereto).  If, after the receipt by the Executive of an amount
advanced by the Company  pursuant to Section 9(c), a 

                                        -11-
<PAGE>

determination  is made  that the  Executive  shall not be  entitled  to any
refund with respect to such claim and the Company does not notify the  Executive
in  writing  of its  intent  to  contest  such  denial  of  refund  prior to the
expiration  of 30 days  after such  determination,  then such  advance  shall be
forgiven  and shall not be required to be repaid and the amount of such  advance
shall offset, to the extent thereof,  the amount of Gross-Up Payment required to
be paid.

     10.  Confidential  Information.  The  Executive  shall hold in a  fiduciary
capacity for the benefit of the Company all secret or confidential  information,
knowledge or data  relating to the Company or any of its  affiliated  companies,
and their respective businesses, which shall have been obtained by the Executive
during  the  Executive's  employment  by the  Company  or any of its  affiliated
companies and which shall not be or become public  knowledge (other than by acts
by the  Executive  or  representatives  of the  Executive  in  violation of this
Agreement).  After  termination of the Executive's  employment with the Company,
the Executive shall not,  without the prior written consent of the Company or as
may otherwise be required by law or legal  process,  communicate  or divulge any
such  information,  knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted  violation of the  provisions of
this Section 10  constitute a basis for  deferring  or  withholding  any amounts
otherwise payable to the Executive under this Agreement.

     11. Successors. (a) This Agreement is personal to the Executive and without
the  prior  written  consent  of the  Company  shall  not be  assignable  by the
Executive  otherwise than by will or the laws of descent and distribution.  This
Agreement  shall inure to the benefit of and be enforceable  by the  Executive's
legal representatives. ----------------

     (b) This  Agreement  shall inure to the benefit of and be binding  upon the
Company and its successors and assigns.

     (c) The Company will require any successor (whether direct or indirect,  by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business  and/or assets of the Company to assume  expressly and agree to perform
this  Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. As used in this
Agreement,  "Company"  shall mean the  Company as  hereinbefore  defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.

     12. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance  with  the  laws of the  State  of New  York,  without  reference  to
principles of conflict of laws.  The captions of this  Agreement are not part of
the provisions hereof and shall have no force or effect.  This Agreement may not
be amended or modified  otherwise  than by a written  agreement  executed by the
parties  hereto  or  their  respective  successors  and  legal  representatives.


     (b) All notices and other communications  hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:

                                    -12-
<PAGE>

     If to the Executive:

         Paul J. Ganci
         50 Pleasant Ridge
         Poughkeepsie, New York  12603

     If to the Company:

         Central Hudson Gas & Electric Corporation
         284 South Avenue
         Poughkeepsie, New York  12601-4879

         Attention:  Chairman of the Board

or to such other address as either party shall have  furnished to the other
in writing in accordance herewith.  Notice and communications shall be effective
when actually received by the addressee.

     (c) The invalidity or  unenforceability  of any provision of this Agreement
shall not affect the validity or  enforceability  of any other provision of this
Agreement.

     (d) The Company may withhold from any amounts  payable under this Agreement
such Federal,  state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

     (e)  The  Executive's  or the  Company's  failure  to  insist  upon  strict
compliance  with any  provision  of this  Agreement or the failure to assert any
right the Executive or the Company may have hereunder  shall not be deemed to be
a waiver  of such  provision  or right or any other  provision  or right of this
Agreement.

     (f) The Executive and the Company acknowledge that, except as may otherwise
be provided  under any other  written  agreement  between the  Executive and the
Company,  the  employment  of the  Executive  by the  Company  is "at will" and,
subject to Section 1(a) hereof,  prior to the Effective  Date,  the  Executive's
employment  and/or this  Agreement  may be terminated by either the Executive or
the Company at any time prior to the Effective Date, in which case the Executive
shall have no further rights under this Agreement; provided, that this Agreement
may not be  terminated by the Company if it is  reasonably  demonstrated  by the
Executive that such  termination (i) was at the request of a third party who has
taken  steps  reasonably  calculated  to  effect a  Change  of  Control  or (ii)
otherwise arose in connection with or anticipation of a Change of Control.  From
and after the Effective Date this Agreement  shall supersede any other agreement
between the parties with respect to the subject  matter  hereof,  other than the
letter dated May 30, 1990 regarding confidentiality.

                                     -13-
<PAGE>


IN WITNESS  WHEREOF,  the Executive has hereunto set the  Executive's  hand and,
pursuant  to the  authorization  from its Board of  Directors,  the  Company has
caused  these  presents to be executed in its name on its behalf,  all as of the
day and year first above written.


                                                  /s/ Paul J. Ganci
                                                  _________________

                                                    Paul J. Ganci


                                                  CENTRAL HUDSON GAS & ELECTRIC
                                                  CORPORATION



                                                  By /s/ John E. Mack III
                                                     ____________________
                                  


                                    -14-