NEW YORK STATE ELECTRIC & GAS CORPORATION
(Registrant)
FORM 10-K
---------
ANNUAL REPORT
For Fiscal Year Ended December 31, 1993
To
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Business
(a) General development of business. . . . . . . . . 3
Rates and regulatory matters . . . . . . . . . . 3
Diversification. . . . . . . . . . . . . . . . . 5
Restructuring. . . . . . . . . . . . . . . . . . 6
(b) Financial information about industry segments . . 6
(c) Narrative description of business
Principal business . . . . . . . . . . . . . . . 7
New product or segment . . . . . . . . . . . . . 9
Sources and availability of raw materials. . . 10
Franchises . . . . . . . . . . . . . . . . . . .11
Seasonal business. . . . . . . . . . . . . . . .11
Working capital items. . . . . . . . . . . . . .11
Single customer. . . . . . . . . . . . . . . . .11
Backlog of orders. . . . . . . . . . . . . . . .11
Business subject to renegotiation. . . . . . . .11
Competitive conditions . . . . . . . . . . . . .11
Research and development . . . . . . . . . . . .13
Environmental matters. . . . . . . . . . . . . .13
Water quality. . . . . . . . . . . . . . . . .14
Air quality. . . . . . . . . . . . . . . . . .14
Waste disposal . . . . . . . . . . . . . . . .16
Number of employees. . . . . . . . . . . . . . .18
(d) Financial information about foreign and domestic
operations and export sales. . . . . . . . . .18
Item 2. Properties . . . . . . . . . . . . . . . . . . . . .18
Item 3. Legal proceedings. . . . . . . . . . . . . . . . . .19
Item 4. Submission of matters to a vote of security holders.23
Executive officers of the Registrant . . . . . . . . . . . . .23
PART II
Item 5. Market for Registrant's common stock and related
stockholder matters. . . . . . . . . . . . . . . .25
Item 6. Selected financial data. . . . . . . . . . . . . . .26
Principal sources of electric and natural gas revenues . . . .26
Item 7. Management's discussion and analysis of financial
condition and results of operations. . . . . . . .27
<PAGE>
TABLE OF CONTENTS (Cont'd)
Page
Item 8. Financial statements and supplementary data. . . . .45
Financial Statements
Consolidated Statements of Income. . . . . . . . .45
Consolidated Balance Sheets. . . . . . . . . . . .46
Consolidated Statements of Cash Flows. . . . . . .48
Consolidated Statements of Changes in
Common Stock Equity. . . . . . . . . . . . . . .49
Notes to Consolidated Financial Statements . . . . .50
Report of Independent Accountants. . . . . . . . . .74
Financial Statement Schedules
V. Property, Plant, and Equipment . . . . . . .75
VI. Accumulated Depreciation of Property,
Plant, and Equipment . . . . . . . . . . .78
VIII. Allowance for Doubtful Accounts-Accounts
Receivable . . . . . . . . . . . . . . . .81
Item 9. Changes in and disagreements with accountants on
accounting and financial disclosure. . . . . . . .82
PART III
Item 10. Directors and executive officers of the Registrant .82
Item 11. Executive compensation . . . . . . . . . . . . . . .82
Item 12. Security ownership of certain beneficial owners
and management . . . . . . . . . . . . . . . . . .82
Item 13. Certain relationships and related transactions . . .82
PART IV
Item 14. Exhibits, financial statement schedules, and
reports on Form 8-K
(a) List of documents filed as part of this report
Financial statements . . . . . . . . . . . . .82
Financial statement schedules. . . . . . . . .82
Exhibits
Exhibits delivered with this report. . . . .83
Exhibits incorporated herein by reference. .83
(b) Reports on Form 8-K. . . . . . . . . . . . . . .88
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . .89
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
Commission file number 1-3103-2.
NEW YORK STATE ELECTRIC & GAS CORPORATION
(Exact name of Registrant as specified in its charter)
New York 15-0398550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 3287, Ithaca, New York 14852-3287
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (607) 347-4131
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
First Mortgage Bonds, 7 5/8% Series
due 2001 (Due November 1, 2001) New York Stock Exchange
First Mortgage Bonds, 8 5/8% Series
due 2007 (Due November 1, 2007) New York Stock Exchange
3.75% Cumulative Preferred Stock
(Par Value $100) New York Stock Exchange
7.40% Cumulative Preferred Stock
(Par Value $25) New York Stock Exchange
Adjustable Rate Cumulative Preferred
Stock, Series B (Par Value $25) New York Stock Exchange
Common Stock (Par Value $6.66 2/3) New York Stock Exchange
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
4 1/2% Cumulative Preferred Stock (Series 1949) (Par Value $100)
4.15% Cumulative Preferred Stock (Par Value $100)
4.40% Cumulative Preferred Stock (Par Value $100)
4.15% Cumulative Preferred Stock (Series 1954) (Par Value $100)
* * * * * * * * * * *
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X ].
* * * * * * * * * * *
The aggregate market value as of February 28, 1994 of the
common stock held by non-affiliates of the Registrant was
$1,932,112,936.
Common stock - 70,903,227 shares outstanding as of February
28, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Document 10-K Part
The Company has incorporated by reference
certain portions of its Proxy Statement
dated March 31, 1994 which will be filed
with the Commission prior to April 30, 1994. III
<PAGE>
PART I
Item 1. Business
(a) General development of business
New York State Electric & Gas Corporation (Company) was
organized under the laws of the State of New York in 1852.
The following general developments have occurred in the
business of the Company since January 1, 1993:
Rates and regulatory matters
Rate Matters
In September 1993, the Company reached a three-year electric
and natural gas rate settlement agreement (Agreement) with the
Public Service Commission of the State of New York (PSC). The
new electric and natural gas rates became effective September 4,
1993.
The allowed return on equity is 10.8% in year one, 11.4% in
year two, and 11.4% (subject to an indexing mechanism) in year
three. Shareholders will be allowed to keep 100% of any earnings
in excess of the allowed return in year one. Shareholders and
customers will share, on a 50%/50% basis, any earnings in excess
of the allowed return in years two and three.
The Agreement also includes a modified revenue decoupling
mechanism (RDM) for electric sales. Rates are based on sales
forecasts. Since actual sales may differ significantly from
forecasted sales because of conservation efforts, unusual
weather, or changing economic conditions, the revenue collected
may be more or less than forecast. Subject to the caps described
below, the modified RDM will let the Company adjust for most of
the differences between forecasted and actual sales. For
example, if revenues exceed the forecast for a given year, the
excess would be passed back to customers in a future year. If
revenues are below the forecast, customers would receive a
surcharge in a future year. The Company will share excesses or
shortfalls from most large commercial and industrial sales
revenues on a 70%/30% (customer/stockholder) basis.
Customer savings for production and transmission operating
costs of $21 million will be imputed over three years, $7 million
each year, whether or not they are realized.
Incentives for customer service, production cost, and
demand-side management (DSM) could increase the allowed return to
12.3% or decrease it to 9.95% in year one, increase it to 13.05%
or decrease it to 10.4% in year two, and increase it to 13.25% or
decrease it to 10.2% in year three.
The electric and natural gas rate increases discussed below
represent eleven months for year one and twelve months for years
two and three.
<PAGE>
The estimated total electric price increases below include
base rate increases allowed by the Agreement plus estimates of
fuel and purchased power increases which will be collected
through the Fuel Adjustment Clause (FAC). Actual fuel and
purchased power costs could vary from estimates causing the
estimated FAC and total electric price increases below to change.
Base Rate Estimated FAC Total Electric
(Dollar Amounts in Millions)
Year 1 $60.5 4.4% $39.1 3.0% $99.6 7.4%
Year 2 $70.3 4.8% $39.2 2.8% $109.5 7.6%
Year 3 $57.4 3.6% $30.4 2.0% $87.8 5.6%
The natural gas base rate increases allowed by the Agreement
are $7.5 million, or 2.9%, $8.2 million, or 3.0%, and $7.2
million, or 2.5%, in years one, two, and three, respectively.
They do not include changes in natural gas costs, which will be
collected through the Gas Adjustment Clause. Natural gas costs
can be expected to rise and fall with overall natural gas market
conditions. Such fluctuations will affect the total natural gas
price increases.
The Agreement also provides for the stated electric and
natural gas base rate increases to be adjusted up or down in the
second and third years, as well as the year after the Agreement
period (year four). These adjustments will depend on several
factors, such as electric sales and incentive mechanisms. The
Agreement provides that no cap would apply to any downward
revision to base rates for electric and natural gas service. The
electric base rate increases could be increased by up to 1.5% in
years two and three and 1.6% in year four (the caps). The
natural gas base rate increases could also be increased by up to
1% in year two and 1.2% in year three. The Agreement does not
specify a cap for natural gas base rates for year four.
Flexible, Negotiable Rate Tariffs
A major challenge to the Company's Electric Business Unit is
to retain and grow its industrial base. The competitive energy
supply options currently available to the Company's industrial
customers include self-generation, shifting production to plants
in other locations, or relocation. During 1993, the Company
received PSC approval for a flexible, negotiable rate tariff for
some of its high-use industrial customers. Discounts negotiated
in agreements under this tariff are not expected to have a
material effect on the Company's 1994 earnings. Two agreements
have been negotiated which eliminated threats of self-generation
and relocation.
The PSC currently has a generic proceeding to study the
broad subject of flexible, competitive rates, and will establish
guidelines for the Company and other New York State utilities
during 1994.
In November 1993, the Company filed with the PSC an
additional flexible, negotiable rate tariff to address
opportunities for new load. The proposed tariff is for large
additions to load (at least 500 kilowatts [kw]) for new or
<PAGE>
existing industrial and some commercial customers. The tariff
will assist the Company in attracting new customers whose
location or expansion decisions are influenced by electricity
costs. Smaller customers will be assisted by a concurrent
proposal to increase the Company's existing economic development
incentives by one cent per kilowatt-hour. The Company has
proposed and will continue to propose revisions or additional
tariffs to respond to the opportunities or risks that develop in
a changing electric utility industry.
Federal Energy Regulatory Commission (FERC) Order 636
A major challenge to the Company's Gas Business Unit is FERC
Order 636, which became effective in November 1993, and requires
interstate natural gas pipeline companies to offer customers
unbundled or separate services equivalent to their former sales
service. With the unbundling of services, primary responsibility
for reliable natural gas supply will shift from interstate
pipeline companies to local distribution companies, such as the
Company. This should result in increased direct access to low
cost natural gas supplies by local distribution companies and end
users. One goal of FERC Order 636 is to provide equitable access
to interstate pipeline capacity. FERC Order 636 will
substantially restructure the interstate natural gas market and
intensify competition within the natural gas industry. FERC
Order 636 will allow the Company, subject to PSC approval, to
restructure rates and provide multiple service options to its
customers.
In July 1993, certain interstate pipelines serving the
Company began implementing restructured services in compliance
with FERC Order 636. The remaining pipelines implemented
restructured services by November 1993. As a result of these
restructuring changes, pipelines have incurred and will continue
to incur transition costs. These transition costs include those
associated with restructuring existing natural gas supply
contracts, the unrecovered natural gas cost that would otherwise
have been billable to pipeline customers under previously
existing rules, costs of assets needed to implement the order,
and stranded investment costs. FERC Order 636 allows pipelines
to recover all prudently incurred costs from their customers.
The Company's liability for transition costs will be based on the
pipelines' filings with FERC to recover transition costs. Only a
few of those filings have been made. The Company recorded an
estimated liability for transition costs of approximately $29
million. The Company also recorded a deferred asset for that
amount since it is currently recovering transition costs from its
customers through its gas adjustment clause and believes that
such costs will continue to be recoverable from its customers.
Diversification
Diversification will play an important role in the Company's
future. While the strength of the Company's core electric and
natural gas businesses remains its focus, and while the Company
will not compromise its financial integrity, it is actively
evaluating a number of corporate development opportunities for
investment to help augment future earnings and dividend growth.
In April 1992, the PSC issued an order allowing the Company to
<PAGE>
invest up to 5% of its consolidated capitalization (approximately
$175 million at December 31, 1993) in one or more subsidiaries
that may engage or invest in energy-related or environmental
services businesses and provide related services. In May 1993,
NGE Enterprises, Inc. (NGE), a wholly-owned subsidiary of the
Company, formed a computer software company, EnerSoft Corporation
(EnerSoft), to produce and market software applications for
natural gas utilities in the post-FERC Order 636 environment.
This represents NGE's initial diversified investment.
In October 1993, EnerSoft began a strategic alliance with
the New York Mercantile Exchange to develop an information
superhighway that will provide the natural gas industry with a
single system for monitoring and trading natural gas and pipeline
capacity in the North American market. NGE invested
approximately $9 million in EnerSoft through February 1994.
The Company and NGE plan to develop two natural gas storage
projects. One of the projects, which will be regulated by the
PSC, is expected to cost approximately $14 million and will be
used to supplement the Company's natural gas supply.
Construction of this project is scheduled to begin in 1994 and it
is expected to be operating for the 1995-96 heating season. The
other project, which will be regulated by the FERC, is an equal
partnership between NGE and ANR Storage, Inc., and is expected to
cost approximately $44 million in total. The entire capacity of
this project will be marketed to local distribution companies and
non-utility generator (NUG)s, as well as marketers, producers,
and end users of natural gas. Construction of this project is
scheduled to begin in 1995 and it is expected to be operating for
the 1996-1997 heating season.
Restructuring
In the fourth quarter of 1993, the Company recorded a $26
million restructuring charge. The corporate restructuring will
reorganize the way the Company delivers services to its electric
and natural gas customers beginning in March 1994. The
restructuring reduced 1993 earnings available for common stock by
approximately $17.2 million or 25 cents per share. Included in
this amount are $13.2 million for a voluntary early retirement
program, $3.2 million for an involuntary severance program, and
$.8 million for the elimination and closing of electric and
natural gas operations facilities statewide. During 1994, the
restructuring resulted in a work force reduction throughout the
organization of approximately 600, the elimination of customer
walk-in services at 28 satellite locations, and the closing of up
to 10 electric and natural gas operations facilities statewide.
The work force reduction was accomplished through a voluntary
early retirement program (See Note 7 to the Consolidated
Financial Statements on page 60) and an involuntary severance
program. 384 employees accepted the early retirement program.
(b) Financial information about industry segments
See Note 11 to the Consolidated Financial Statements on
page 72.
<PAGE>
(c) Narrative description of business
(i) Principal business
The Company's principal business is generating, purchasing,
transmitting, and distributing electricity and purchasing,
transporting, and distributing natural gas. The service
territory, 99% of which is located outside the corporate limits
of cities, is in the central, eastern, and western parts of the
State of New York. The service territory has an area of
approximately 19,500 square miles, and a population of 2,400,000.
The larger cities in which the Company serves both electricity
and natural gas are Binghamton, Elmira, Auburn, Geneva, Ithaca,
and Lockport. The Company serves approximately 790,000 electric
retail customers and 226,000 natural gas retail customers. Its
service territory reflects a diversified economy, including high-
tech firms, light industry, agriculture, colleges and
universities, and recreational facilities. No customer accounts
for 5% or more of either electric or natural gas revenues. For
the years 1993, 1992, and 1991, 85%, 86%, and 88%, respectively,
of operating revenue was derived from electric service and 15%,
14%, and 12%, respectively, was derived from natural gas service.
The 1993-1994 winter peak load of 2,618,000 kw, was set on
January 19, 1994. This is 21,000 kw more than the previous all
time peak of 2,597,000 kw set during the 1989-1990 winter on
December 21, 1989. Power supply capability to meet peak loads is
currently 3,194,430 kw. This is composed of 2,656,700 kw of
generating capacity (90% coal-fired, 7% nuclear, and 3%
hydroelectric) and 848,730 kw of purchases offset by 311,000 kw
of firm sales. The purchases are composed of 362,280 kw from
NUGs and 486,450 kw from the New York Power Authority (NYPA).
Most purchases from NYPA are hydroelectric power.
In June 1989, New York City, the Counties of Westchester,
Nassau, and Suffolk, and their respective municipal distribution
agencies, commenced Article 78 proceedings in the Supreme Court
of the State of New York (New York County) (Court) against NYPA
to set aside NYPA's contracts expiring in the year 2007 with the
Company and two other utilities for the post January 1, 1990
allocation of NYPA hydroelectric power. The Company has
intervened in these proceedings to protect its contractual
entitlement. In November 1990, the Court issued a decision
granting various motions and dismissing the Article 78
proceedings. On December 29, 1992, the Appellate Division, First
Department unanimously affirmed the decision. On October 12,
1993, the Court of Appeals of the State of New York rejected a
motion for leave to appeal to that court.
The Company has on line and under contract 362 megawatts
(mw) of NUG power. In addition, another 240 mw of NUG power is
under construction. The Company is required to make payments
under these contracts only for the power it receives. During
1993, 1992, and 1991, the Company purchased approximately $138
million, $71 million, and $30 million, respectively, of NUG
power. The Company estimates that it will purchase
approximately $255 million, $291 million, and $335 million of NUG
power for the years 1994, 1995, and 1996, respectively.
<PAGE>
Increases in NUG power purchase costs are expected to be a
significant contributor to price increases over the next three
years.
As part of the Company's effort to meet competition and
minimize future price increases associated with uneconomical
power purchases from NUGs, it negotiated the termination of two
cogeneration projects. This effort, along with the termination
of NUG contracts due to developers' failures to meet contract
obligations, will save customers nearly $1 billion over the terms
of the contracts. The Company has also recently negotiated
amendments with two NUGs whereby the Company may direct the NUGs
to reduce their output or shut down for limited periods each
year. During these periods, lower-cost generation will replace
the NUG energy and result in additional customer savings. The
Company is negotiating with other NUGs for similar amendments.
As part of the Company's effort to reduce costs, one of two
generating units at each of its Goudey and Greenidge Generating
Stations will be placed on long-term cold standby. These actions
are being taken because the abundance of power in the Northeast
has driven down wholesale prices. These units will continue to
be utilized to provide electrical system support.
The Company has implemented a number of demand-side
management (DSM) programs. As a result of its three-year rate
settlement agreement (See Item 1(a)-Rates and regulatory matters
- - Rate Matters), incentives earned for conducting efficient DSM
programs were reduced from 15% to 5% of the net resource savings
achieved by these DSM programs. For 1994, the Company expects to
earn approximately $3 million in incentives as a result of these
DSM programs.
In 1993, the Company's customers saved approximately 282
million kilowatt-hours (kwh) on an annualized basis through the
Company's DSM programs. The implementation of these programs
cost $48 million in 1993 and will cost approximately $16 million
in 1994 with estimated customer savings of 113 million kwh on an
annualized basis. The Company has approximately $73 million and
$44 million of deferred DSM program costs on the Consolidated
Balance Sheets at December 31, 1993, and 1992, respectively. The
two-year (1993-1994) DSM plan, which has received PSC approval,
has been modified to improve cost-effectiveness and reduce rate
impacts.
On January 19, 1994, the Company experienced its 1993-1994
maximum peak daily sendout for natural gas of 431,756 dekatherms.
This is 69,175 dekatherms greater than the 1991-1992 peak of
362,581 dekatherms set on January 16, 1992.
<PAGE>
The following table provides information on the Company's
estimated sources and uses of funds for 1994-1996. This forecast
is subject to periodic review and revision, and actual
construction costs may vary because of revised load estimates,
imposition of additional regulatory requirements, and the
availability and cost of capital.
1994 1995 1996 Total
---- ---- ---- -----
Sources of funds (Millions)
Internal funds $254 $265 $269 $788
Long-term financing
Debt and stock proceeds 413 141 80 634
Debt proceeds held in trust 34 8 - 42
---- ---- ---- -----
Net financing proceeds 447 149 80 676
Increase (decrease) in
short-term debt (50) - - (50)
Decrease (increase) in
temporary cash investments 89 (69) (52) (32)
---- ---- ---- ------
Total $740 $345 $297 $1,382
==== ==== ==== ======
Uses of funds
Construction
Cash expenditures $202 $193 $193 $588
AFDC 8 7 7 22
---- ---- ---- ------
Total construction 210 200 200 610
Retirement of securities and
sinking fund obligations 501 108 63 672
Working capital and deferrals 29 37 34 100
---- ---- ---- ------
Total $740 $345 $297 $1,382
==== ==== ==== ======
As shown in the preceding table, internal sources of funds
represent 129% of construction expenditures for 1994-1996.
Capital expenditures for 1994-1996 have been significantly
reduced from previously forecasted levels. This represents one
of many actions the Company is taking to address competition (See
Item 1(c)(x)-Competitive conditions). Capital expenditures for
1994-1996 will be primarily for extension of service, necessary
improvements at existing facilities, and compliance with the
Clean Air Act Amendments of 1990 (See Item 1(c)(xii)-
Environmental matters). The Company forecasts that its current
reserve margin, coupled with more efficient use of energy and
generation from NUGs, will eliminate the need for additional
generating capacity until after the year 2005.
(ii) New product or segment
(See Item 1(a)-Diversification.)
<PAGE>
(iii) Sources and availability of raw materials
Electric
In 1993, approximately 90% of the Company's generation was
coal-fired steam electric, 8% nuclear and 2% hydroelectric power.
About 37% of the Company's steam electric generation in 1993 was
supplied from its one-half share of the output from the Homer
City Generating Station, which is owned in common with
Pennsylvania Electric Company. An additional 34% was supplied
from the Company's Kintigh Generating Station, and the remaining
29% was supplied from its other generating stations which are
located in New York State.
Coal
Coal for the New York generating stations is obtained
primarily from Pennsylvania and West Virginia. Of the 3.2
million tons of coal purchased for the New York generating
stations in 1993, approximately 46% was purchased under
contract and the balance on the open market. Coal purchased
under contract is expected to be approximately 53% of the
estimated 3.1 million tons to be purchased in 1994.
The annual coal requirement for the Homer City
Generating Station is approximately four million tons, the
majority of which is obtained under long-term contracts.
During 1993, approximately 52% of Homer City Generating
Station coal was obtained under these contracts. The
Company anticipates obtaining approximately 79% of the 1994
requirements under these contracts. The balance will be
purchased under short-term contracts and, when necessary, on
the open market.
Nuclear
During the fall of 1993, Niagara Mohawk Power
Corporation (Niagara Mohawk), the operator of the Nine Mile
Point nuclear generating unit No. 2 (NMP2), in which the
Company has an 18% interest, completed the third refueling
outage. The present core will support NMP2 operations to
1995. Enrichment services are under contract with the U.S.
Department of Energy for 100% of the services through 1995
and 70% of the services from 1996 through 1998. Fuel
fabrication services are under contract for the first seven
reloads. Approximately 55% of the uranium and conversion
requirements are under contract through 1998.
Natural Gas
As a result of FERC Order 636 (See Item 1(a)-Rates and
regulatory matters - Federal Energy Regulatory Commission (FERC)
Order 636), the Company undertook a major restructuring of its
natural gas transportation, storage, and supply contracts.
Bundled pipeline sales, gas and transportation contracts have
been eliminated thereby giving the Company greater flexibility
with respect to its supply of natural gas. The gas supply mix
now includes long-term, short-term, and spot gas purchases
transported on firm transportation contracts, as well as spot gas
purchases transported on interruptible transportation contracts.
<PAGE>
During 1993, about 15% of the Company's natural gas supply was
purchased on firm sales contracts from CNG Transmission and
Columbia Gas Transmission. The remaining 85% was purchased from
other suppliers, approximately 25% under long-term and short-term
sales contracts and 60% on the monthly spot natural gas market to
maximize natural gas cost savings. An additional benefit of FERC
Order 636 is that the Company now has access to increased natural
gas storage space enabling it to purchase natural gas supply when
prices are favorable.
(iv) Franchises
The Company has, with minor exceptions, valid franchises
from the municipalities in which it renders service to the
public. In 1993, the Company obtained PSC authorizations for
natural gas transmission and distribution service in the towns of
Skaneateles, Stillwater, Starkey, and the town and village of
Champlain.
(v) Seasonal business
Sales of electricity are highest during the winter months
primarily due to space heating usage and fewer daylight hours.
Sales of natural gas are highest during the winter months
primarily due to space heating usage.
(vi) Working capital items
The Company has been granted, through the ratemaking
process, an allowance for working capital to operate its ongoing
electric and natural gas utility services.
(vii) Single customer - Not applicable
(viii) Backlog of orders - Not applicable
(ix) Business subject to renegotiation - Not applicable
(x) Competitive conditions (See Item 1(a)-Rates and
regulatory matters - Flexible Negotiable Rate
Tariffs; Federal Energy Regulatory Commission
(FERC) Order 636; and Restructuring and
Item 1(c)(i)-Principal business)
The utility industry is rapidly changing and facing an
increasingly competitive environment. Factors contributing to
this competitive environment are: the National Energy Policy Act
of 1992 (Energy Policy Act), which provides open access at the
wholesale level to electric transmission service, and the FERC
Order 636, which significantly affects the natural gas industry.
In addition, the Company's response to the economic pressures on
its electric industrial and other large use customers, high
purchase costs of NUGs, rising health care costs, increasing
taxes, weak economic conditions, conservation programs, and
compliance with environmental laws and regulations are all
factors that continue to place increased pressure on electric and
natural gas prices.
<PAGE>
The Energy Policy Act, enacted in October 1992, is expected
to result in major changes to the utility industry. Certain
provisions of the Energy Policy Act amended the Public Utility
Holding Company Act of 1935 (PUHCA). These amendments encourage
greater competition in the supply market by establishing a new
category of wholesale electric generators that are exempt from
PUHCA regulation. The Energy Policy Act also enables the FERC to
order utilities to provide open access to transmission systems
for wholesale transactions, expanding opportunities for utilities
and NUGs to enter new and existing wholesale markets. These
developments serve to underscore the increasingly competitive
environment for utilities.
The Company's five-year strategic plan is designed to
address the competitive, rapidly changing utility industry. The
Company's objective is to remain competitive in its core
businesses in the face of increased competition. One of the key
strategies to meet competition is to improve customer value by
becoming a low-cost provider of energy services in the Northeast.
The Company has developed a more aggressive and accelerated
set of strategies in response to the increased challenges of
competition which are necessary to achieve the objectives
outlined in the Company's five-year strategic plan. The
following represent strategies being implemented:
- Reduce forecasted 1994 capital expenditures by one-third, or
approximately $100 million. Additional reductions will be made
in 1995 and 1996.
- Reduce operating and maintenance expenses by five percent in
1994 and again in 1995. By 1995, this will save about $40
million annually. During 1993, the Company reduced its work
force by 200 through attrition. In addition, as part of the O&M
reduction, the Company's work force was further reduced by about
600 through an early retirement opportunity program and
involuntary severance.
- Streamline the field organization to eliminate walk-in
customer service at 28 locations, and to close up to 10 electric
and natural gas operations facilities statewide.
- Place two generating units on long-term cold standby.
- Continue to reduce NUG costs. The Company's previous NUG
contract terminations and renegotiations will save customers more
than $1 billion over the terms of the contracts.
- Continue to reduce capital costs. Since 1988 the Company
has refinanced over $1.4 billion in securities, and reduced
annual interest expense by more than $55 million.
The PSC currently has a generic proceeding to study the
broad subject of flexible, competitive rates, and will establish
guidelines for the Company and other New York State utilities
during 1994. Also in late 1993, the PSC instituted a proceeding
to address issues associated with the restructuring of the
emerging competitive natural gas market. The PSC intends to
investigate services provided by New York State gas utilities
after FERC Order 636 by the 1994-1995 heating season.
Other forms of competition stem from both federal and state
action. Natural gas at the wellhead is available to be purchased
directly by end users from the producer at a delivered price
which may be less than that of the local distributor. Delivery
<PAGE>
of such natural gas is by pipeline transportation. By law, the
Company must provide transportation service so long as it is not
an undue burden on the Company or its customers and the Company's
ability to render adequate service to its customers is not
impaired. The Company has developed, and its customers are
using, various transportation tariff services. Transportation of
natural gas in lieu of retail sales is not expected to have a
material effect on the Company's 1994 earnings.
From time to time, the price of fuel oil has allowed oil
suppliers to compete with the Company's sale of natural gas to
large natural gas customers. To meet the competition from oil,
the Company has flexible sales and transportation rates for
qualifying natural gas customers. The flexible rates provide the
Company with greater opportunity for making available rate
offerings and setting rates which more closely reflect the
competitive needs of dual-fuel customers. This capability
enhances the Company's ability to set multiple rates each month
in a manner which maximizes margins. The Company is now
utilizing and receiving benefits from the various flexible
pricing options. These flexible rates are not expected to have a
material effect on the Company's 1994 earnings and enable the
Company to minimize threats of bypass.
(xi) Research and development
Expenditures on research and development in 1993, 1992, and
1991 amounted to $18.9 million, $14.6 million, and $14.8 million,
respectively, principally for the Company's internal research
programs and for contributions to research administered by the
Electric Power Research Institute, the Empire State Electric
Energy Research Corporation, the New York Gas Group, and the New
York State Energy Research and Development Authority. These
expenditures are designed to improve existing technologies and to
develop new technologies for the production, distribution, and
conservation of energy.
(xii) Environmental matters
(See Item 3-Legal proceedings)
The Company is subject to regulation by the federal
government and by state and local governments in New York and
Pennsylvania with respect to environmental matters and is also
subject to the New York State Public Service Law requiring
environmental approval and certification of proposed major
transmission facilities.
The Company continually assesses actions that may need to be
taken to ensure compliance with changing environmental laws and
regulations. Compliance programs will increase the cost of
electric and natural gas service by requiring changes to the
Company's operations and facilities. Historically, rate recovery
has been authorized for the cost incurred for compliance with
environmental laws and regulations.
Capital additions to meet environmental requirements during
the three years ended December 31, 1993 were approximately $143.0
million and are estimated to be $76.5 million for 1994, $51.4
million for 1995, and $40 million for 1996.
<PAGE>
Water quality
The Company is required to comply with federal and state
water quality statutes and regulations including the Clean Water
Act (Water Act). The Water Act requires that generating stations
be in compliance with federally issued National Pollutant
Discharge Elimination System Permits (NPDES Permits) or state
issued State Pollutant Discharge Elimination System Permits
(SPDES Permits), which must reflect water quality considerations
and application of the best available technology. The Company
has SPDES Permits for its six coal-fired generating stations in
New York and has applied for permit renewals for five of those
stations. Permits for these five stations have either been
renewed or are currently being negotiated with the State of New
York, in which case the existing permits for those facilities
remain in effect. The permit for the sixth station will not
expire until the fall of 1994. The Company's Homer City
Generating Station received a NPDES Permit, which expires in the
fall of 1994, from the Pennsylvania Department of Environmental
Resources (PaDER). Prior to the expiration of the two permits
which expire in the fall of 1994, renewal applications will be
submitted by the Company. Until these permits are renewed, these
stations will operate under their existing permits. SPDES
licensing renewal is currently being addressed by the New York
State Department of Environmental Conservation (NYSDEC) for NMP2.
In connection with the issuance of permits under the Water
Act, the Company has conducted studies of the effects of its coal
pile operations on groundwater quality at its Hickling, Jennison,
Milliken, and Greenidge Stations. New York State groundwater
standards are sometimes exceeded at certain locations at each of
those stations and remedial action may be required. Jennison
Station will require remedial action which is estimated to cost
up to $1 million. The remedial action, if required, at Hickling,
Milliken, and Greenidge Stations is estimated to cost $7.4
million. The Company expects to recover these expenditures in
rates, since the Company has been allowed by the PSC to recover
similar costs in rates, such as groundwater protection costs to
meet permit conditions and regulatory requirements. Remedial
action has already been performed at the Goudey Station and the
Company is currently monitoring the groundwater quality at this
station. Groundwater monitoring data for Kintigh Station does
not indicate facility induced groundwater contamination.
Groundwater studies have been initiated at the Homer City
Station.
Air quality
The Company is required to comply with federal and state air
quality statutes and regulations. All stations have the required
federal or state operating permits. Stack tests and continuous
emission monitoring indicate that the stations are generally in
compliance with permit emission limitations, although occasional
opacity exceedances occur. Efforts are underway to identify and
eliminate the causes of opacity exceedances.
The Clean Air Act Amendments of 1990 (1990 Amendments) will
result in significant expenditures of approximately $178 million,
on a present value basis, over a 25-year period, for all capital
<PAGE>
and operating and maintenance expenses related to the reduction
of sulfur dioxide and nitrogen oxides at several of the Company's
coal-fired generating stations, of which $51 million has been
incurred as of December 31, 1993. The Company's current estimate
is a significant reduction from its prior estimate, primarily due
to the postponement of the construction of a flue gas
desulfurization (FGD) system at its Homer City Generating
Station. The Company plans to re-evaluate the need to construct
an FGD system at the Homer City Generating Station in 1995, since
its present strategy to bank Phase I emissions allowances for use
during Phase II, as discussed below, will allow the Company to
meet Phase II allowance requirements through the year 2005. The
cost to comply with the sulfur dioxide and nitrogen oxide
limitations includes the construction of an innovative FGD system
and a nitrogen oxide reduction system expected to be completed in
1995 at the Company's Milliken Generating Station. The Company
estimates that approximately a 1% electric rate increase will be
required for the cost of reducing sulfur dioxide and nitrogen
oxide emissions in both Phase I (begins January 1, 1995) and
Phase II (begins January 1, 2000). As a result of the 1990
Amendments, the Company plans to reduce its annual sulfur dioxide
emissions by an amount that will allow the Company to meet the
sulfur dioxide levels established for the Company, which is
approximately a 49% reduction from approximately 138,000 tons in
1989 to 71,000 tons by the year 2000.
The cost of controlling toxic emissions under the 1990
Amendments, if required, cannot be estimated at this time.
Regulations may be adopted at the state level which would limit
toxic emissions even further, at an additional cost to the
Company. The Company anticipates that the costs incurred to
comply with the 1990 Amendments will be recoverable through rates
based on previous rate recovery of required environmental costs.
The 1990 Amendments require the U.S. Environmental
Protection Agency (EPA) to allocate annual emissions allowances
to each of the Company's coal-fired generating stations based on
statutory emissions limits. An emissions allowance represents an
authorization to emit, during or after a specified calendar year,
one ton of sulfur dioxide. During Phase I, the Company estimates
that it will have allowances in excess of the affected coal-fired
generating stations' actual emissions. The Company's present
strategy is to bank these allowances for use in later years. By
using a banking strategy, it is estimated that Phase II allowance
requirements will be met through the year 2005 by utilizing the
allowances banked during Phase I, which includes the extension
reserve allowances discussed below, together with the Company's
Phase II annual emissions allowances. This strategy could be
modified should market or business conditions change. In
addition to the annual emissions allowances allocated to the
Company by the EPA, the Company will receive a portion of the
extension reserve allowances issued by the EPA to utilities
electing to build scrubbers, as a result of the pooling agreement
that it entered into with other utilities who were also eligible
to receive some of these extension reserve allowances.
Certain other environmental regulations limit the amount of
particulate matter which may be emitted into the environment.
The Company and Pennsylvania Electric Company may find it
<PAGE>
necessary either to upgrade or install additional equipment at
the Homer City Generating Station in order to consistently meet
the particulate emission requirements.
Waste disposal
The Company has received or applied for SPDES Permits, Solid
Waste Disposal Facilities Permits, and applicable local permits
for its active ash disposal sites for its New York generating
stations. Groundwater standards have been exceeded in areas
close to portions of the Milliken and Weber ash disposal sites.
Corrective actions have been taken and studies are continuing to
monitor the effectiveness of the corrective actions.
The Company has received NPDES permits, a Solid Waste
Disposal Permit, and applicable local permits for its active ash
disposal site for the Homer City Generating Station and for the
active refuse disposal site for the Homer City Coal Cleaning
Plant. In September 1993, the Company completed its study of
costs to comply with the new Pennsylvania residual waste
regulations governing solid waste disposal over the next 30
years.
As a result of existing and new solid waste disposal
legislation and regulations in Pennsylvania, the Company will
incur approximately $24 million, on a present value basis, of
additional costs over the next 30 years, beginning in 1994, at
the Homer City Generating Station. These costs will be incurred
to install new equipment, modify or replace existing equipment,
and improve the design of a proposed expansion of disposal
facilities. The Company expects to recover these expenditures in
rates, since the Company has been allowed by the PSC to recover
similar costs in rates, such as groundwater protection costs to
meet permit conditions and regulatory requirements.
Due to existing and proposed legislation and regulations,
and legal proceedings commenced by governmental bodies and
others, the Company may also incur costs from the past disposal
of hazardous substances produced during the Company's operations
or those of its predecessors. The Company has been notified by
the EPA and the NYSDEC that it is among the potentially
responsible parties (PRPs) who may be liable to pay for costs
incurred to remediate certain hazardous substances at seven waste
sites, not including the Company's inactive gas manufacturing
sites, which are discussed below. With respect to the seven
sites, five sites are included in the New York State Registry of
Inactive Hazardous Waste Sites (New York State Registry).
Any liability may be joint and several for certain of these
sites. The ultimate cost to remediate these sites will be
dependent on such factors as the remedial action plan selected,
the extent of site contamination, and the portion attributed to
the Company. At December 31, 1993, the Company recorded a
liability in the Consolidated Balance Sheets related to four of
these seven waste sites of $1.8 million. The Company has
notified the NYSDEC that it believes it has no responsibility at
two sites and has already incurred expenditures related to the
remediation at the remaining site. A deferred asset has also
been recorded in the amount of $2.6 million, of which $.8 million
<PAGE>
relates to costs that have already been incurred. The Company
believes it will recover these costs, since the PSC has allowed
other utilities to recover these types of remediation costs and
has allowed the Company to recover similar costs in rates, such
as investigation and cleanup costs relating to inactive gas
manufacturing sites. This $1.8 million estimate was derived by
multiplying the total estimated cost to clean up a particular
site by the related Company contribution factor. Estimates of
the total cleanup costs were determined by using information
related to a particular site, such as investigations performed to
date at a site or from the data released by a regulatory agency.
In addition, this estimate was based upon currently available
facts, existing technology, and presently enacted laws and
regulations. The contribution factor is calculated using either
the Company's percentage share of the total PRPs named, which
assumes all PRPs will contribute equally, or the Company's
estimated percentage share of the total hazardous wastes
disposed of at a particular site, or by using a 1% contribution
factor for those sites at which it believes that it has
contributed a minimal amount of hazardous wastes. The Company
has notified its former and current insurance carriers that it
seeks to recover from them certain of these cleanup costs.
However, the Company is unable to predict the amount of insurance
recoveries, if any, that it may obtain.
A number of the Company's inactive gas manufacturing sites
have been listed in the New York State Registry. The Company has
filed petitions to delist the majority of the sites. The
Company's program to investigate and initiate remediation at its
38 known inactive gas manufacturing sites has been extended
through the year 2000. Expenditures over this time period are
estimated to be $25 million. This estimate was determined by
using the Company's experience and knowledge related to these
sites as a result of the investigation and remediation that the
Company has performed to date. It is based upon currently
available facts, existing technology, and presently enacted laws
and regulations. This liability, to investigate and initiate
remediation, as necessary, at the known inactive gas
manufacturing sites is reflected in the Company's Consolidated
Balance Sheets at December 31, 1993 and 1992. The Company also
has recorded a corresponding deferred asset, since it expects to
recover such expenditures in rates, as the Company has previously
been allowed by the PSC to recover such costs in rates. The
Company has notified its former and current insurance carriers
that it seeks to recover from them certain of these cleanup
costs. However, the Company is unable to predict the amount of
insurance recoveries, if any, that it may obtain.
A low level radioactive waste management and contingency
plan that has been developed for NMP2 provides assurance that
NMP2 is properly prepared to handle interim storage of low level
radioactive waste until 1998.
Niagara Mohawk has contracted with the U.S. Department of
Energy (DOE) for disposal of high level radioactive waste (spent
fuel) from NMP2. The Company is reimbursing Niagara Mohawk for
its 18% share of the cost under the contract (currently
approximately $1 per megawatt hour of net generation). The DOE's
schedule for start of operations of their high level radioactive
<PAGE>
waste repository has slipped from 2003 to no sooner than 2010.
The Company has been advised by Niagara Mohawk that the NMP2
Spent Fuel Storage Pool has a capacity for spent fuel that is
adequate until 2014. If further DOE schedule slippage should
occur, the recent development of pre-licensed dry storage
facilities for use at any nuclear power plant extends the on-site
storage capability for spent fuel at NMP2 beyond 2014.
(xiii) Number of employees
The Company had 4,746 employees as of December 31, 1993 (See
Item 1(a)-Restructuring)
(d) Financial information about foreign and domestic operations
and export sales - Not applicable
Item 2. Properties
The Company's electric system includes coal-fired, nuclear,
hydroelectric, and internal combustion generating stations,
substations, and transmission and distribution lines, all of
which are located in the State of New York, except for the Homer
City Generating Station and related facilities which are located
in the Commonwealth of Pennsylvania. Generating facilities are:
Name and location of station Generating
capability (kw)
Coal-fired
Goudey * (Binghamton, N.Y.) 127,000
Greenidge * (Dresden, N.Y.) 162,000
Hickling (East Corning, N.Y.) 86,000
Jennison (Bainbridge, N.Y.) 72,000
Milliken (Lansing, N.Y.) 318,000
Kintigh (Somerset, N.Y.) 675,000
Homer City (Homer City, Pa.) 954,000**
---------
Total coal-fired 2,394,000
Nuclear
NMP2 (Oswego, N.Y.) 189,000***
Hydroelectric (Various - 9 locations) 66,500
Internal combustion (Various - 2 locations) 7,200
---------
Total - all stations 2,656,700
=========
* In the spring and summer of 1994 the Company plans to place
one unit at both Goudey and Greenidge on long-term cold
standby. These units have a combined capability of 97
megawatts.
** Company's 50% share of the generating capability.
***Company's 18% share of the generating capability.
The Company owns 446 substations having an aggregate
transformer capacity of 12,634,177 Kilovolt-amperes. The
transmission system consists of 4,774 circuit miles of line and
the distribution system of 33,410 pole miles of overhead lines
<PAGE>
and 1,790 miles of underground lines.
The Company's natural gas system consists of the
distribution of natural gas through 452 miles of transmission
pipelines (3-inch equivalent) and 5,360 miles of distribution
pipelines (3-inch equivalent).
Somerset Railroad Corporation (SRC), a wholly-owned
subsidiary, owns a rail line consisting of 15 1/2 miles of track
and related property rights in Lockport, Newfane, and Somerset,
New York which is used to transport coal and other materials to
the Kintigh Generating Station.
The Company's first mortgage bond indenture constitutes a
direct first mortgage lien on substantially all of the Company's
properties. Substantially all of the properties of SRC, other
than rolling stock, are subject to a lien of a mortgage and
security agreement.
Item 3. Legal proceedings
(See Item 1(a)-Rates and regulatory matters, 1(c)(i)-Principal
business, (x)-Competitive conditions, and (xii)-Environmental
matters)
The Company is unable to predict the ultimate disposition of
the matters referred to below in (c), (d), (e), (g), (h), (i),
and (j). There is no clear precedent with the PSC for rate
recovery of the types of costs referred to in these matters.
However, since the PSC has previously allowed the Company to
recover similar costs in rates, such as investigation and clean-
up costs relating to coal tar sites, the Company expects to
recover in rates any remediation costs that it may incur.
Therefore, the Company believes that the ultimate disposition of
the matters referred to below in (c), (d), (e), (g), (h), (i),
and (j) will not have a material adverse effect on its results of
operations or financial position.
(a) On January 27, January 31, and February 15, 1984, and on
June 29, 1987, numerous individual plaintiffs instituted lawsuits
in the Supreme Court of the State of New York (Broome County) for
personal injuries allegedly arising out of a transformer fire at
the State Office Building in Binghamton, New York, in February
1981. Multiple defendants, including the Company, are named in
the actions which seek an aggregate of $329 million in
compensatory and exemplary damages. Because the transformers
involved were not owned, installed, or serviced by the Company,
the Company believes that these claims against the Company are
without merit.
(b) On January 15 and January 30, 1985, numerous individual
plaintiffs instituted two lawsuits against the Company in the
Supreme Court of the State of New York (Broome County) seeking a
total of $70 million in compensatory damages, plus punitive
damages in an unstated amount. These actions arise out of a
spill of PCB-contaminated oil on the Company's property on
February 1, 1982. One of the lawsuits alleges mental anguish as
the basis for recovery. The other lawsuit does not specify the
nature of the damages claimed, except for an alleged decrease in
the value of one residential property in the vicinity of the
<PAGE>
spill and deprivation of plaintiffs' right to quiet enjoyment of
their property. Because the spill was contained on the Company's
property and was quickly removed, the Company believes that these
claims are without merit. Plaintiffs' counsel terminated their
representation of the plaintiffs in these actions in 1988. The
Company has not been notified of a substitution of attorneys for
any of the plaintiffs and there has been no activity in these
lawsuits since February 1988.
(c) By letter dated February 29, 1988, the NYSDEC notified the
Company that it has been identified as a potentially responsible
party for investigation and remediation of the disposal of
hazardous wastes at the Lockport City Landfill Site (Lockport
Site) in Lockport, New York. The Lockport Site is listed on the
New York State Registry. Four other potentially responsible
parties were identified in the NYSDEC letter. The Company has
been offered an opportunity to conduct remediation or finance
remediation costs at the Lockport Site, failing which the NYSDEC
might remediate the Lockport Site itself and commence an action
to recover its costs and damages. The Company believes that
remediation costs at the Lockport Site might rise to $6 million.
By letter dated May 2, 1988, the Company notified the NYSDEC that
it declined to finance remediation costs because it believes that
the NYSDEC had not demonstrated that a significant threat to
public health or the environment exists at the Lockport Site.
(d) By letter dated December 10, 1990, the NYSDEC notified the
Company that it had been identified as a potentially responsible
party for investigation and remediation of the disposal of
hazardous wastes at the Schreck's scrapyard site (Schreck's Site)
in the City of North Tonawanda, New York. The Schreck's Site is
listed on the New York State Registry. Seven other potentially
responsible parties were identified in the NYSDEC letter. On
February 3, 1992, the NYSDEC again notified the Company that it
had been identified as a potentially responsible party for
investigation and remediation costs at the Schreck's Site, this
time listing eight other potentially responsible parties. The
Company has been offered an opportunity to conduct remediation or
finance remediation costs at the Schreck's Site, failing which
the NYSDEC might remediate the Schreck's Site itself and commence
an action to recover its costs and damages. The NYSDEC currently
estimates that remediation costs at the Schreck's Site will be
$4.5 million. By letter dated April 1, 1992, the Company
notified the NYSDEC that it believed it had no responsibility for
the alleged contamination at the Schreck's Site, and it declined
to conduct remediation or finance remediation costs.
(e) By letter dated June 7, 1991, the NYSDEC notified the
Company that it had been identified as a potentially responsible
party at the Pfohl Brothers Landfill inactive hazardous waste
disposal site (Pfohl Site) in Cheektowaga, New York. The Pfohl
Site is listed on the New York State Registry. The NYSDEC
offered the Company an opportunity to enter into negotiations
with it to undertake the investigation and remediation of the
Pfohl Site. The NYSDEC informed the Company that if it declined
such negotiations, the NYSDEC would perform the necessary work at
the Pfohl Site using the Hazardous Waste Remedial Fund and would
seek recovery of its expenses from the Company. On July 3, 1991,
the Company responded to the NYSDEC by declining to negotiate to
<PAGE>
undertake work at the Pfohl Site and noted that the NYSDEC had
not shown any significant responsibility on the part of the
Company for the situation at the Pfohl Site. The Company
believes that remediation costs at the Pfohl Site will be $35
million to $55 million. By letter dated April 2, 1992, the
NYSDEC again notified the Company that it had been identified as
a potentially responsible party for the Pfohl Site and offered
the Company an opportunity to conduct or finance the on-site
remedial design and action. This notice letter was also sent to
19 other potentially responsible parties. Ten of these other
named potentially responsible parties have agreed to perform the
remedial work required by the NYSDEC. By letter dated June 1,
1992, the Company notified the NYSDEC that it declined to perform
such remedial work because it believed that it was not a
significant contributor to the Pfohl Site.
(f) By complaint dated October 31, 1991, General Motors
Corporation (GM) commenced a lawsuit against the Company in the
U. S. District Court for the Western District of New York. GM
alleges, among other claims, that the Company violated various
federal antitrust laws in connection with billings for electric
service provided by the Company at GM's Harrison Radiator Plant
at Lockport, New York. GM's claims are for damages incurred and
to be incurred. The Company estimates that GM is claiming
approximately $8 million, after trebling. The Company believes
that it has not violated the federal antitrust laws and that this
lawsuit is without merit.
On October 5, 1993, the Magistrate to whom the case had been
referred issued a decision recommending that GM's complaint be
dismissed. The District Judge responsible for the case, after
reviewing GM's exceptions to the decision and the Company's
reply, will decide whether to adopt the Magistrate's recommended
decision.
(g) By letter dated January 21, 1992, the NYSDEC notified the
Company that it had been identified as a potentially responsible
party at the Peter Cooper Corporation's Landfill Site (Peter
Cooper Site) in the village of Gowanda, New York. Three other
potentially responsible parties were identified in the NYSDEC
letter. The NYSDEC letter also notified the Company that state
surface water and groundwater standards had been exceeded at the
Peter Cooper Site and offered the Company an opportunity to
conduct or finance a remedial program. NYSDEC indicated that if
the Company did not agree to enter into a consent order it would
perform the necessary work itself or seek a court order requiring
the Company to conduct the work. The Company believes that
remediation costs at the Peter Cooper Site might rise to $16
million. By letter dated May 12, 1992, the Company notified the
NYSDEC that it believed it had no responsibility for the alleged
contamination at the Peter Cooper Site, and it declined to
conduct remediation or finance remediation costs.
(h) By letter dated April 20, 1992, the EPA notified the Company
that it had been identified as a potentially responsible party at
the Bern Metals Removal Site (Bern Metals Site) in Buffalo, New
York. Four other potentially responsible parties have been
identified by the EPA. The EPA has taken response actions at the
Bern Metals Site, including investigation, excavation, and
<PAGE>
removal of drums and contaminated soil, and implementation of
measures to prevent surface water run-off. The EPA has demanded
that the Company reimburse the EPA Hazardous Substances Superfund
$2 million in response costs incurred to date by the EPA, with
interest accruing from the date of the demand. Future response
or remedial costs which the EPA may incur at the Bern Metals Site
are not covered by the EPA demand and the EPA has reserved its
rights relating to any such costs.
In addition to the foregoing, the NYSDEC, by letter dated
July 21, 1992, notified the Company that it had been identified
as a potentially responsible party at the Bern Metals Site, which
the NYSDEC defined to include an adjacent property known as the
Universal Iron & Metal Site (Bern Metals/Universal Iron Site).
The Bern Metals/Universal Iron Site is listed on the New York
State Registry. The NYSDEC has also identified eight other
potentially responsible parties for the Bern Metals/Universal
Iron Site. The NYSDEC has requested that the Company, and the
eight other identified potentially responsible parties, enter
into negotiations in which the Company and the other identified
potentially responsible parties would agree to finance or conduct
a Remedial Investigation and Feasibility Study (RI/FS) designed
to determine what further remediation or removal actions may be
appropriate for the Bern Metals/Universal Iron Site. The NYSDEC
has provided no estimate of the cost of the response action it
proposes. By letter dated December 3, 1992, the Company declined
to negotiate with NYSDEC to finance or conduct an RI/FS for the
Bern Metals/Universal Iron Site, because the Company believed it
was only a very small contributor to the Bern Metals/Universal
Iron Site. In addition, the Company believes that it does not
have any connection with the Universal Iron & Metal Site.
(i) By letter dated April 20, 1992, the EPA notified the Company
that the EPA had reason to believe that the Company was a
potentially responsible party for the Clinton-Bender Removal Site
(Clinton-Bender Site) in Buffalo, New York. Four other
potentially responsible parties have been identified by the EPA.
Nine private residential lots and one commercial property at the
Clinton-Bender Site are contaminated with lead, allegedly due to
run-off from the adjacent Bern Metals Site. The EPA has
requested that the Company perform the necessary removal work at
the Clinton-Bender Site and the Company is doing so in
conjunction with the four other identified potentially
responsible parties. The total cost of the removal actions to be
performed at the Clinton-Bender Site is estimated to be
$3.1 million.
On November 3, 1993, the Company was served with a summons
and complaint filed on behalf of certain of the homeowners at the
Clinton-Bender Site. Seven other defendants were named in the
complaint, which was filed in the New York State Supreme Court,
Erie County. The action has since been removed to the U.S.
District Court for the Western District of New York (District
Court). In their complaint, plaintiffs make general allegations
that the defendants violated federal environmental laws without
alleging facts in support of these allegations. Plaintiffs also
allege personal injury, property damage, and fear of cancer which
they claim were caused by the presence of hazardous substances on
their property, allegedly resulting from the disposal of such
<PAGE>
substances by the defendants at the Bern Metals Site. Any
liability incurred as a result of these claims may be joint and
several. The plaintiffs ask for $30 million in direct damages
from all defendants, as well as treble damages (for unspecified
reasons) from all defendants, and an additional $10 million in
punitive damages from each defendant. The Company and some of
the other defendants in this matter have made a motion to the
District Court for dismissal of all claims based upon the Clean
Air Act, the Clean Water Act, and the Comprehensive Environmental
Response, Compensation, and Liability Act, which are the only
claims based upon federal causes of action. The Company believes
that its position in this action is meritorious, and it will
defend this case vigorously.
(j) By letter dated February 12, 1993, NYSDEC notified the
Company that it had been identified as a potentially responsible
party for remediation of hazardous wastes at the Booth Oil Site
(Booth Oil Site) in North Tonawanda, New York. The Booth Oil
Site is listed on the New York State Registry. Twelve other
potentially responsible parties were identified in the NYSDEC
letter. Booth Oil Company is a waste oil re-refiner and
recycler. The Company had sent waste oils to Booth Oil Company
for disposal as had numerous other companies in the Buffalo area.
According to NYSDEC, the Booth Oil Site is contaminated with
PCBs, lead, and other substances. NYSDEC has requested that the
Company and the other identified potentially responsible parties
conduct remediation at the Booth Oil Site pursuant to an Order on
Consent to be negotiated with NYSDEC. NYSDEC has estimated that
the present value of costs for on-site treatment alternatives
range from $12 million to $24 million.
Item 4. Submission of matters to a vote of security holders -
Not applicable.
* * * * * * * * * *
Executive officers of the Registrant
Positions, offices and
business experience -
Name Age January 1989 to date
James A. Carrigg 60 Chairman, President and Chief Execu-
tive Officer, January 1991 to date;
Chairman and Chief Executive Officer,
to January 1991.
Richard P. Fagan 53 Senior Vice President-Management
Services Business Unit, April 1990 to
date; Senior Vice President-
Administration, March 1989 to April
1990; Senior Vice President to March
1989.
<PAGE>
Executive officers of the Registrant (Cont'd)
Positions, offices and
business experience -
Name Age January 1989 to date
Russell Fleming, Jr. 55 Senior Vice President-Gas Business
Unit, October 1990 to date; Partner in
Putnam, Hayes and Bartlett (economic
and management consultants), New York,
New York May 1989 to September 1990;
Partner in Theodore Barry & Associates
(management consultants), New York, NY
to May 1989.
Jack H. Roskoz 55 Senior Vice President-Electric Business
Unit, April 1990 to date; Senior Vice
President, March 1989 to April 1990;
Senior Vice President-Administration to
March 1989.
John J. Bodkin 48 Vice President-Electric Transmission
and Distribution, January 1991 to date;
Manager-Power Supply, to January 1991.
Gerald E. Putman 43 Vice President-Fuel Supply and Opera-
tion Services, May 1993 to date; Vice-
President-East Region Electric, Septem-
ber 1992 to May 1993; Executive
Assistant to the Chairman, President
and Chief Executive Officer, January
1991 to September 1992; District
Manager, Auburn, NY to January 1991.
Sherwood J. Rafferty 46 Vice President and Treasurer, September
1990 to date; Treasurer, to September
1990.
Vincent W. Rider 62 Vice President-Generation.
Everett A. Robinson 50 Vice President and Controller,
September 1990 to date; Controller,
to September 1990.
Irene M. Stillings 54 Vice President-Electric Marketing,
January 1991 to date; Assistant Vice
President-Consumer Services and
Communications, February 1989 to
January 1991; Assistant Vice President-
Consumer Affairs, to February 1989.
Ralph R. Tedesco 40 Vice President-Strategic Growth
Business Unit, February 1994 to date;
Executive Assistant to the Chairman,
President and Chief Executive Officer,
September 1992 to February 1994;
Manager, Corporate Performance June
1991 to September 1992; Manager,
Research and Development to June 1991.
<PAGE>
Executive officers of the Registrant (Cont'd)
Positions, offices and
business experience -
Name Age January 1989 to date
Denis E. Wickham 45 Vice President-Electric Resource
Planning, January 1991 to date;
Assistant to Senior Vice President, to
January 1991.
The Company has entered into an agreement with James A.
Carrigg which provides for his employment as Chairman, President
and Chief Executive Officer of the Company for a term ending on
December 31, 1996, with automatic one-year extensions unless
either he or the Company gives notice that the agreement is not
to be extended.
Each officer holds office for the term for which he or she
is elected or appointed, and until his or her successor shall be
elected and shall qualify. The term of office for each officer
extends to and expires at the meeting of the Board of Directors
following the next annual meeting of stockholders.
PART II
Item 5. Market for Registrant's common stock and related
stockholder matters
See Note 13 to the Consolidated Financial Statements on page
73.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Item 6. Selected Financial Data
(Thousands-except per share data) 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------
Operating revenues $1,800,149 $1,691,689 $1,555,815 $1,496,780 $1,427,745
Net Income $166,028* $183,968 $168,643 $158,013 $157,779**
Earnings per share $2.08* $2.40 $2.36 $2.48 $2.53**
Dividends paid per share $2.18 $2.14 $2.10 $2.06 $2.02
Average shares outstanding 69,990 67,972 62,906 58,678 57,138
Book value per share of common stock(year end) $22.89 $22.85 $22.16 $21.85 $21.29
Interest charges $145,450 $155,388 $163,526 $173,390 $180,068
AFDC and non-cash return $8,003 $6,482 $7,541 $5,776 $6,387
Depreciation and amortization $164,568 $158,977 $152,380 $147,659 $148,375
Other taxes $204,962 $200,941 $178,185 $158,770 $146,605
Construction expenditures $245,029 $245,618 $245,883 $210,725 $192,022
Total assets $5,276,016 $5,077,916 $4,924,836 $4,737,431 $4,670,283
Long-term obligations,capital leases and
redeemable preferred stock $1,755,629 $1,883,927 $1,897,465 $1,766,457 $1,799,800
*Net income and earnings per share for 1993 include the effects of restructuring expenses, which
decreased net income by $17.2 million, and decreased earnings per share by 25 cents.
**Net income and earnings per share for 1989 include the effects of the adjustment recorded in December
1989 to the 1987 Nine Mile Point nuclear generating unit No. 2 write-off. Excluding that adjustment,
net income and earnings per share for 1989 were $151,998 and $2.43, respectively.
</TABLE>
Principal Sources of Electric and Natural Gas Revenues
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
ELECTRIC 1993 % of Total 1992 % of Total 1991 % of Total
-------------------------------------------------------------------------
Kwh Sales (millions):
Residential 5,423 28.0 % 5,472 28.4 % 5,297 29.1
Commercial 3,298 17.1 3,283 17.0 3,285 18.1
Industrial 2,950 15.3 3,082 16.0 3,068 16.9
Other 1,417 7.3 1,457 7.5 1,457 8.0
----------- ------- ----------- ------- ----------- -------
Total retail 13,088 67.7 13,294 68.9 13,107 72.1
Other electric utilities 6,233 32.3 6,003 31.1 5,066 27.9
----------- ------- ----------- ------- ----------- -------
Total 19,321 100.0 % 19,297 100.0 % 18,173 100.0 %
=========== ======= =========== ======= =========== =======
Operating Revenues (thousands):
Residential $635,155 41.6 % $601,042 41.4 % $553,056 40.4 %
Commercial 333,674 21.8 314,272 21.7 293,197 21.5
Industrial 228,215 14.9 225,832 15.5 207,933 15.2
Other 138,320 9.1 133,819 9.2 124,575 9.1
----------- ------- ----------- ------- ----------- -------
Total retail 1,335,364 87.4 1,274,965 87.8 1,178,761 86.2
Other electric utilities 147,175 9.6 143,413 9.9 131,412 9.6
Unbilled revenue recognition-net 2,257 0.2 (427) - 35,333 2.6
Other operating revenues 42,566 2.8 33,574 2.3 22,430 1.6
----------- ------- ----------- ------- ----------- -------
Total operating revenues $1,527,362 100.0 % $1,451,525 100.0 % $1,367,936 100.0 %
=========== ======= =========== ======= =========== =======
Natural Gas
Dekatherm(thousands)
Residential 25,080 43.2 % 24,913 44.2 % 18,115 42.7 %
Commercial 10,640 18.3 10,796 19.1 8,054 19.0
Industrial 1,820 3.2 1,689 3.0 1,788 4.2
Other 1,805 3.1 1,959 3.5 1,917 4.5
----------- ------- ----------- ------- ----------- -------
Total retail sales 39,345 67.8 39,357 69.8 % 29,874 70.4
Transportation of customer-owned
natural gas 18,701 32.2 17,009 30.2 12,530 29.6
----------- ------- ----------- ------- ----------- -------
Total natural gas deliveries 58,046 100.0 % 56,366 100.0 % 42,404 100.0 %
=========== ======= =========== ======= =========== =======
Operating Revenues(thousands):
Residential $170,734 62.6 % 152,325 63.4 % $111,106 59.1 %
Commercial 66,648 24.5 59,939 25.0 43,969 23.4
Industrial 9,602 3.5 8,092 3.4 8,640 4.6
Other 10,943 4.0 10,762 4.5 10,243 5.5
----------- ------- ----------- ------- ----------- -------
Sub-total 257,927 94.6 231,118 96.3 173,958 92.6
Transportation of customer-owned
natural gas 12,091 4.4 11,639 4.8 9,571 5.1
Unbilled revenue recognition-net 2,686 1.0 (3,626) (1.5) 3,770 2.0
Other natural gas revenue 83 0.0 1,033 .4 580 .3
----------- ------- ----------- ------- ----------- -------
Total operating revenues $272,787 100.0 % $240,164 100.0 % $187,879 100.0 %
=========== ======= =========== ======= =========== =======
</TABLE>
<PAGE>
Item 7. Management's discussion and analysis of financial
condition and results of operations
Results of Operations
1993 1992
over over
1992 1991
1993 1992 1991 Change Change
(Thousands, except Per Share Amounts)
Operating revenues $1,800,149 $1,691,689 $1,555,815 6% 9%
Earnings available for
common stock $145,390 $162,973 $148,313 (11%) 10%
Average shares outstanding 69,990 67,972 62,906 3% 8%
Earnings per share $2.08 $2.40 $2.36 (13%) 2%
Dividends per share $2.18 $2.14 $2.10 2% 2%
In 1993, operating revenues increased $108 million, or 6%,
compared to 1992. This increase is primarily because of increases
in electric and natural gas rates that became effective in August
1992 and September 1993, which totaled $61 million, and the
amounts billed to customers for higher costs of non-utility
generation (NUG) power and natural gas totaling $51 million.
In 1992, operating revenues rose $136 million, or 9%,
compared to 1991. The amounts billed to customers for higher
costs of NUG power of $41 million, and increases in electric and
natural gas rates effective in February 1991 and August 1992,
which totaled $40 million, were the primary reasons for this
increase. In addition, higher electric and natural gas retail
sales due to an increase in retail customers, colder weather, and
the April 1991 acquisition of Columbia Gas of New York, Inc.
(CNY) helped boost operating revenues by $51 million in 1992.
Earnings per share decreased 32 cents, or 13%, in 1993
compared to 1992, while earnings per share increased 4 cents, or
2%, in 1992 compared to 1991. Both 1993 and 1992 had non-
recurring items that lowered earnings per share. Earnings in
1993 were reduced by 25 cents per share as a result of a
corporate restructuring that will reorganize the way the Company
delivers services to its electric and natural gas customers
beginning in March 1994. This restructuring resulted in a work
force reduction throughout the organization of approximately 600,
the elimination of customer walk-in services at 28 satellite
locations, and the closing of up to 10 electric and natural gas
operations facilities statewide. This is one of several actions
the Company has taken to reduce future costs, enhance
efficiencies in service to its customers, and be competitive in
the rapidly changing utility industry (See Competitive
<PAGE>
Conditions). A six-month electric rate moratorium, which began
in February 1992, limited 1992 earnings per share by 24 cents.
Excluding the effect of these non-recurring items, earnings per
share decreased 31 cents in 1993 compared to 1992, and increased
28 cents in 1992 compared to 1991.
The 31 cent 1993 decrease in earnings per share was
primarily due to lower electric retail sales prior to the
effective date of the Company's modified revenue decoupling
mechanism (See Regulatory Matters) and lower than anticipated
natural gas sales, both resulting from the sluggish economy in
the Company's service territory. Also, earnings per share
decreased due to changes in the Company's allowed return on
equity from 11.7% effective through July 1992, to 11.2% effective
through July 1993, and then to 10.8% beginning in August 1993.
In 1992, earnings per share were favorably affected by the
growth in electric and natural gas retail sales primarily due to
an increase in retail customers, colder weather, and the April
1991 acquisition of CNY. The Company's efforts to control costs
also contributed to the increase in 1992 earnings per share.
Average shares outstanding were 70 million in 1993, 68
million in 1992, and 63 million in 1991. Average shares
outstanding increased 3% in 1993 compared to 1992 due to the
issuance of 1.2 million shares of common stock through the
Dividend Reinvestment and Stock Purchase Plan (DRP). In 1992,
average shares outstanding increased 8% because of a public
offering of 5 million shares of common stock in March 1992, and
the issuance of 1 million shares of common stock through the DRP.
Interest Expense
Interest expense (before the reduction for allowance for
borrowed funds used during construction) decreased by $10
million, or 6%, in 1993 and $8 million, or 5%, in 1992. Interest
on long-term debt decreased in 1993 and 1992 mainly due to the
refinancing of certain high-coupon long-term debt at lower
interest rates, and lower interest rates on the Company's
variable rate debt. In 1993 and 1992 interest expense also
decreased due to a reduction in the interest rate on the
commercial paper borrowings (See Financing Activities).
<PAGE>
Operating Results by Business Unit
1993 1992
over over
1992 1991
Electric 1993 1992 1991 Change Change
(Thousands)
Retail sales-kilowatt-
hours(kwh) 13,088,175 13,294,466 13,107,115 (2%) 1%
Operating revenues $1,527,362 $1,451,525 $1,367,936 5% 6%
Operating expenses $1,250,000 $1,146,619 $1,056,969 9% 8%
Electric retail sales decreased 2% in 1993 compared to 1992
as a result of the sluggish economy in the Company's service
territory and in spite of a 1% increase of customers. In 1992,
electric retail sales increased 1% compared to 1991 mainly due to
colder but more normal weather and an increase in customers.
The primary cause of the $76 million, or 5%, increase in
electric operating revenues in 1993 was the increase in rates
effective August 1992 and September 1993, which accounted for
$53 million of the increase. Also contributing to this increase
were higher costs of NUG power of $28 million, which were billed
to customers. Electric operating revenues increased $84 million,
or 6%, in 1992 compared to 1991. This increase reflects the
increases in electric rates that became effective February 1991
and August 1992 and that increased revenues by $35 million. The
revenue increase reflects higher NUG costs of $41 million and an
increase in certain New York State gross receipts taxes of $12
million, both of which were billed to customers. Also, increased
electric retail sales, due to colder weather and an increase in
customers, boosted revenues by $9 million.
Electric operating expenses increased $103 million, or 9%,
in 1993 compared to 1992, and $90 million, or 8%, in 1992
compared to 1991. In 1993, electricity purchased from NUGs
increased $67 million. Other operating expenses increased
primarily due to an increase in postretirement benefit costs
other than pensions of $7 million. In addition, electric
operating expenses increased $21 million due to the corporate
restructuring. These increases were partially offset by a
decrease of $17 million in fuel used in electric generation, the
result of lower generation and a decrease in the price of coal,
and a decrease of $12 million in federal income taxes, the
<PAGE>
result of lower pre-tax book income.
In 1992, electricity purchased increased primarily because
of the amounts billed to customers for higher NUG costs, which
totaled $41 million. Other operating expenses increased
primarily because of higher demand-side management (DSM) program
costs of $6 million. Federal income taxes increased $4 million
resulting from higher pre-tax book income. Other taxes increased
primarily because of an increase in certain New York State gross
receipts taxes and property taxes of $16 million. These
increases were partially offset by a decrease of $12 million in
fuel used in electric generation, the result of lower generation
and a decrease in the price of coal, and a decrease in
maintenance expense of $7 million.
1993 1992
over over
1992 1991
Natural Gas 1993 1992 1991 Change Change
(Thousands)
Deliveries
-dekatherms(dth) 58,046 56,366 42,404 3% 33%
Retail sales-(dth) 39,345 39,357 29,874 - 32%
Operating revenues $272,787 $240,164 $187,879 14% 28%
Operating expenses $249,493 $221,307 $177,751 13% 25%
Natural gas deliveries increased 3% in 1993 compared to 1992
while natural gas retail sales were flat. In 1992, natural gas
deliveries and retail sales increased 33% and 32%, respectively,
compared to 1991. The increase in deliveries in 1993 reflects an
increase in the number of transportation customers. The 1992
increases in deliveries, as well as retail sales, are largely
because of the April 1991 acquisition of CNY. Excluding CNY,
natural gas retail sales increased 8% in 1992, primarily because
of the colder but more normal weather.
Natural gas operating revenues rose $33 million, or 14%, in
1993 compared to 1992, and $52 million, or 28%, in 1992 compared
to 1991. In 1993, the increase was primarily due to higher costs
of natural gas of $23 million, which were billed to customers,
and the increases in rates in August 1992 and September 1993,
which totalled $8 million. The 1992 revenue increases are
principally the result of the acquisition of CNY, which added $35
million, and the increases in rates effective February 1991 and
August 1992 amounting to $4 million. Also, the recovery of an
increase in certain New York State gross receipts taxes, which
were billed to customers, boosted 1992 revenues by $2 million.
<PAGE>
Natural gas operating expenses increased $28 million, or
13%, in 1993 compared to 1992. The increase in natural gas
purchased was primarily due to higher costs of natural gas
amounting to $12 million. Federal income taxes increased $3
million due to higher pre-tax book income. Natural gas operating
expenses increased $5 million due to the corporate restructuring.
Natural gas operating expenses increased $44 million, or
25%, in 1992 compared to 1991. Natural gas purchased increased
$31 million due to an increase in the volume of natural gas
purchased. This volume increase was primarily due to the CNY
acquisition. Federal income taxes increased $4 million due to
higher pre-tax book income. Other taxes increased primarily due
to an increase of $3 million in certain New York State gross
receipts taxes and $1 million in property taxes.
Liquidity and Capital Resources
Competitive Conditions
The utility industry is rapidly changing and facing an
increasingly competitive environment. Factors contributing to
this competitive environment are: the National Energy Policy Act
of 1992 (Energy Policy Act), which provides open access at the
wholesale level to electric transmission service, and the FERC
Order 636, which significantly affects the natural gas industry.
In addition, the Company's response to the economic pressures on
its electric industrial and other large use customers, high
purchase costs of NUGs, rising health care costs, increasing
taxes, weak economic conditions, conservation programs, and
compliance with environmental laws and regulations are all
factors that continue to place increased pressure on electric and
natural gas prices.
The Energy Policy Act, enacted in October 1992, is expected
to result in major changes to the utility industry. Certain
provisions of the Energy Policy Act amended the Public Utility
Holding Company Act of 1935 (PUHCA). These amendments encourage
greater competition in the supply market by establishing a new
category of wholesale electric generators that are exempt from
PUHCA regulation. The Energy Policy Act also enables the FERC to
order utilities to provide open access to transmission systems
for wholesale transactions, expanding opportunities for utilities
and NUGs to enter new and existing wholesale markets. These
developments serve to underscore the increasingly competitive
environment for utilities.
<PAGE>
The Company's five-year strategic plan is designed to
address the competitive, rapidly changing utility industry. The
Company's objective is to remain competitive in its core
businesses in the face of increased competition. One of the key
strategies to meet competition is to improve customer value by
becoming a low-cost provider of energy services in the Northeast.
A major challenge to the Company's Electric Business Unit is
to retain and grow its industrial base. The competitive energy
supply options currently available to the Company's industrial
customers include self-generation, shifting production to plants
in other locations, or relocation. During 1993, the Company
received PSC approval for a flexible, negotiable rate tariff for
some of its high-use industrial customers. Discounts negotiated
in agreements under this tariff are not expected to have a
material effect on the Company's 1994 earnings. Two agreements
have been negotiated which eliminated threats of self-generation
and relocation.
The PSC currently has a generic proceeding to study the
broad subject of flexible, competitive rates, and will establish
guidelines for the Company and other New York State utilities
during 1994. Also in late 1993, the PSC instituted a proceeding
to address issues associated with the restructuring of the
emerging competitive natural gas market. The PSC intends to
investigate services provided by New York State gas utilities
after FERC Order 636 by the 1994-1995 heating season.
In November 1993, the Company filed with the PSC an
additional flexible, negotiable rate tariff to address
opportunities for new load. The proposed tariff is for large
additions to load (at least 500 kilowatts [kw]) for new or
existing industrial and some commercial customers. The tariff
will assist the Company in attracting new customers whose
location or expansion decisions are influenced by electricity
costs. Smaller customers will be assisted by a concurrent
proposal to increase the Company's existing economic development
incentives by one cent per kilowatt-hour. The Company has
proposed and will continue to propose revisions or additional
tariffs to respond to the opportunities or risks that develop in
a changing electric utility industry.
A major challenge to the Company's Gas Business Unit is FERC
Order 636, which became effective in November 1993, and requires
interstate natural gas pipeline companies to offer customers
unbundled or separate services equivalent to their former sales
service. With the unbundling of services, primary responsibility
for reliable natural gas supply will shift from interstate
pipeline companies to local distribution companies, such as the
Company. This should result in increased direct access to low
cost natural gas supplies by local distribution companies and end
users. One goal of FERC Order 636 is to provide equitable access
<PAGE>
to interstate pipeline capacity. FERC Order 636 will
substantially restructure the interstate natural gas market and
intensify competition within the natural gas industry. FERC
Order 636 will allow the Company, subject to PSC approval, to
restructure rates and provide multiple service options to its
customers.
In July 1993, certain interstate pipelines serving the
Company began implementing restructured services in compliance
with FERC Order 636. The remaining pipelines implemented
restructured services by November 1993. As a result of these
restructuring changes, pipelines have incurred and will continue
to incur transition costs. These transition costs include those
associated with restructuring existing natural gas supply
contracts, the unrecovered natural gas cost that would otherwise
have been billable to pipeline customers under previously
existing rules, costs of assets needed to implement the order,
and stranded investment costs. FERC Order 636 allows pipelines
to recover all prudently incurred costs from their customers.
The Company's liability for transition costs will be based on the
pipelines' filings with FERC to recover transition costs. Only a
few of those filings have been made. The Company recorded an
estimated liability for transition costs of approximately $29
million. The Company also recorded a deferred asset for that
amount since it is currently recovering transition costs from its
customers through its gas adjustment clause and believes that
such costs will continue to be recoverable from its customers.
The Company has developed a more aggressive and accelerated
set of strategies in response to the increased challenges of
competition which are necessary to achieve the objectives
outlined in the Company's five-year strategic plan. The
following represent strategies being implemented:
- Reduce forecasted 1994 capital expenditures by one-third, or
approximately $100 million. Additional reductions will be made
in 1995 and 1996.
- Reduce operating and maintenance expenses by five percent in
1994 and again in 1995. By 1995, this will save about $40
million annually. During 1993, the Company reduced its work
force by 200 through attrition. In addition, as part of the O&M
reduction, the Company's work force was further reduced by about
600 through an early retirement opportunity program and
involuntary severance.
- Streamline the field organization to eliminate walk-in
customer service at 28 locations, and to close up to 10 electric
and natural gas operations facilities statewide.
- Place two generating units on long-term cold standby.
- Continue to reduce NUG costs. The Company's previous NUG
contract terminations and renegotiations will save customers more
than $1 billion over the terms of the contracts.
- Continue to reduce capital costs. Since 1988 the Company
has refinanced over $1.4 billion in securities, and reduced
<PAGE>
annual interest expense by more than $55 million.
The cost of the corporate restructuring was $26 million and
was a one-time charge against the Company's 1993 earnings. The
restructuring reduced 1993 earnings available for common stock by
approximately $17.2 million or 25 cents per share. Included in
this amount are $13.2 million for a voluntary early retirement
program, $3.2 million for an involuntary severance program, and
$.8 million for the elimination and closing of operations
facilities. The Company expects to recoup the one-time charge
from lower O&M costs in approximately one year.
As part of the Company's effort to meet competition and
minimize future price increases associated with uneconomical
power purchases from NUGs, it negotiated the termination of two
cogeneration projects. This effort, along with the termination
of NUG contracts due to developers' failures to meet contract
obligations, will save customers nearly $1 billion over the terms
of the contracts. The Company has also recently negotiated
amendments with two NUGs whereby the Company may direct the NUGs
to reduce their output or shut down for limited periods each
year. During these periods, lower-cost generation will replace
the NUG energy and result in additional customer savings. The
Company is negotiating with other NUGs for similar amendments.
The Company has on line and under contract 362 megawatts
(mw) of NUG power. In addition, another 240 mw of NUG power is
under construction. The Company is required to make payments
under these contracts only for the power it receives. During
1993, 1992, and 1991, the Company purchased approximately $138
million, $71 million, and $30 million, respectively, of NUG
power. The Company estimates that it will purchase
approximately $255 million, $291 million, and $335 million of NUG
power for the years 1994, 1995, and 1996, respectively. Increases
in NUG power purchase costs are expected to be a significant
contributor to price increases over the next three years.
Diversification
Diversification will play an important role in the Company's
future. While the strength of the Company's core electric and
natural gas businesses remains its focus, and while the Company
will not compromise its financial integrity, it is actively
evaluating a number of corporate development opportunities for
investment to help augment future earnings and dividend growth.
In April 1992, the PSC issued an order allowing the Company to
invest up to 5% of its consolidated capitalization (approximately
$175 million at December 31, 1993) in one or more subsidiaries
that may engage or invest in energy-related or environmental
services businesses and provide related services. In May 1993,
NGE Enterprises, Inc. (NGE), a wholly-owned subsidiary of the
Company, formed a computer software company, EnerSoft Corporation
<PAGE>
(EnerSoft), to produce and market software applications for
natural gas utilities in the post-FERC Order 636 environment.
This represents NGE's initial diversified investment.
In October 1993, EnerSoft began a strategic alliance with
the New York Mercantile Exchange to develop an information
superhighway that will provide the natural gas industry with a
single system for monitoring and trading natural gas and pipeline
capacity in the North American market. NGE invested
approximately $9 million in EnerSoft through February 1994.
The Company and NGE plan to develop two natural gas storage
projects. One of the projects, which will be regulated by the
PSC, is expected to cost approximately $14 million and will be
used to supplement the Company's natural gas supply.
Construction of this project is scheduled to begin in 1994 and it
is expected to be operating for the 1995-96 heating season. The
other project, which will be regulated by the FERC, is an equal
partnership between NGE and ANR Storage, Inc., and is expected to
cost approximately $44 million in total. The entire capacity of
this project will be marketed to local distribution companies and
NUGs, as well as marketers, producers, and end users of natural
gas. Construction of this project is scheduled to begin in 1995
and it is expected to be operating for the 1996-1997 heating
season.
Financing Activities
The Company believes that maintaining a high degree of
financial integrity and flexibility is critical to success in an
increasingly competitive environment. The Company intends to
build on the financial improvements realized over the past
several years with a goal of achieving a 50% common equity ratio.
New money needs are expected to be minimal and excess cash
generated from reduced construction expenditures will be used to
further manage the Company's capital structure (See Investing
Activities - estimated sources and uses of funds for 1994-1996).
The PSC adopted a new, innovative approach in December 1993
when it issued an order to the Company that provides for advanced
approval for financings during the Company's three-year rate
settlement. That order includes authorization for refundings of
first mortgage bonds, preferred stock, and tax-exempt pollution
control notes, issuance of common stock through the Dividend
Reinvestment and Stock Purchase Plan (DRP), and issuances of
other securities as required. With this order, the Company has
the flexibility to achieve its financial goals of further
reducing financing costs and improving its financial health as
market conditions allow.
The common stock equity ratio remained stable during 1993.
Issuance of shares under the DRP was offset by the issuance of
<PAGE>
$100 million of preferred stock and $70 million of tax-exempt
pollution control notes in December 1993. The Company received
$38.4 million from the issuance of 1.2 million shares of common
stock through the DRP.
Common stock dividends paid in 1993 increased 5% over 1992
reflecting the increase in common stock outstanding and an
increase in the dividend paid from $2.14 to $2.18 per share.
The Company's dividend payout ratio has been gradually
rising over the past several years, primarily as a result of
declining earnings. These weak earnings put additional pressure
on an already high dividend payout ratio at a time when growing
competition dictates that we consider a more moderate dividend
policy. We must significantly improve earnings if we are to
continue even modest annual dividend increases.
The Company sold $25 million of 6.30% preferred stock, $50
million of Adjustable Rate Series B preferred stock, and $25
million of 7.40% preferred stock in December 1993. The net
proceeds were used to redeem $25 million of 8.80% preferred stock
and $45 million of Adjustable Rate Series A preferred stock in
January 1994, and $25 million of 8.48% preferred stock in
February 1994. Those refundings will save approximately $1.8
million annually. After those refundings, the capital structure
will be 49.8% long-term debt, 7.1% preferred stock, and 43.1%
common stock equity.
In February 1993, the Company redeemed, at par, through a
sinking fund provision in our mortgage, the remaining $22.5
million of 10 5/8% Series first mortgage bonds due 2018.
In February 1993, the Company priced $100 million of 6.05%
tax-exempt pollution control bonds, due 2034. Proceeds from the
sale, which will be delivered in April 1994, will be used to
redeem, at a premium, $60 million of 12% pollution control bonds,
due 2014, and $40 million of 12.3% pollution control bonds, due
2014. The refunding of those bonds in 1994 will save
approximately $5.3 million annually in interest costs.
In April 1993, the Company sold $50 million of 7.55% Series
first mortgage bonds due 2023. Net proceeds from the sale were
used in connection with the redemption of $50 million of the
9 1/4% Series due 2016. The refunding of those bonds will save
approximately $300,000 annually in interest costs.
In July 1993, the Company sold $100 million of 7.45% Series
first mortgage bonds due 2023. Net proceeds from the sale were
used in connection with the redemption of $100 million of the 9%
Series due 2017. The refunding of those bonds will save
approximately $650,000 annually in interest costs.
<PAGE>
In November 1993, the Company redeemed $50 million of the
8 5/8% Series first mortgage bonds due 1996, at a premium.
Proceeds for the redemption were provided by a borrowing under
the Company's revolving credit agreement. The refunding of those
bonds will save approximately $2 million annually in interest
costs.
In December 1993, $70 million of 5.70% tax-exempt pollution
control notes, due 2028, were issued by a governmental authority
on behalf of the Company. Proceeds from the sale will be used to
finance a portion of the costs incurred in the construction of
certain solid waste disposal and other related facilities at the
Company's Milliken Generating Station.
The Company has reduced its embedded cost of long-term debt
to 7.2% at the end of 1993 from 9.2% in 1988. The Company has
refinanced more than $1.2 billion in long-term debt since 1988,
and reduced annual interest expense by more than $55 million.
Unless interest rates fall further, however, it will be difficult
to significantly improve from the 7.2% level. All opportunities
continue to be pursued aggressively.
In February 1994, the Company redeemed, at par, through a
sinking fund provision in its mortgage, $23 million of 8 5/8%
Series first mortgage bonds due 2007.
In February 1994, $37.5 million of tax-exempt pollution
control notes were issued by a governmental authority on behalf
of the Company. The notes will have several interest rate
options and have an initial rate of 2.4% through April 13, 1994.
Proceeds from the sale will be used to redeem $37.5 million of
annual adjustable rate pollution control notes, due 2015, in
March 1994.
The Company uses interim financing in the form of short-term
unsecured notes, usually commercial paper, to finance certain
refundings and construction expenditures and for other corporate
purposes, thereby providing flexibility in the timing and amounts
of long-term financings. There was $50.2 million of commercial
paper outstanding at December 31, 1993, at a weighted average
interest rate of 3.5%. The weighted average interest rate during
1993 was 3.4%.
The Company also has a revolving credit agreement with
certain banks that provides for borrowing up to $200 million to
July 31, 1997. The Company had an outstanding $50 million loan
under this agreement at December 31, 1993, at an interest rate of
4.06%.
In June 1993, the Company's first mortgage bonds and
unsecured pollution control notes were upgraded by Standard &
Poor's (S&P). The investment rating agency stated that the
<PAGE>
higher ratings reflect expected continued improvements in the
Company's financial condition as a result of the Company's three-
year rate settlement, which was pending at the time of the
upgrade, aggressive cost controls, and limited new money needs.
S&P also noted that regulatory adjustment mechanisms, such as
electric revenue decoupling and natural gas weather
normalization, should add stability to earnings.
In October 1993, S&P completed its review of the U.S.
investor-owned utility industry and concluded that more stringent
financial benchmarks were appropriate for electric utilities to
counter increased competition and mounting business risk. As a
result, it revised the rating outlook downward for about one-
third of the utility industry, including the Company. However,
the Company's ratings were not changed.
Investing Activities
The Company's 1993 capital expenditures for its core
electric and natural gas businesses totaled approximately $245
million. Most of the expenditures were for the extension of
service and for improvements at existing facilities.
Capital expenditures for 1994-1996 have been significantly
reduced from previously forecasted levels. This represents one
of many actions the Company is taking to address competition (See
Competitive Conditions). Capital expenditures for 1994-1996 will
be primarily for extension of service, necessary improvements at
existing facilities, and compliance with the Clean Air Act
Amendments of 1990 (See Environmental Matters). The Company
forecasts that its current reserve margin, coupled with more
efficient use of energy (See Conservation Programs) and
generation from NUGs, will eliminate the need for additional
generating capacity until after the year 2005.
As part of the Company's effort to reduce costs, one of two
generating units at each of its Goudey and Greenidge Generating
Stations will be placed on long-term cold standby. These actions
are being taken because the abundance of power in the Northeast
has driven down wholesale prices. These units will continue to
be utilized to provide electrical system support.
<PAGE>
The following table provides information on the Company's
estimated sources and uses of funds for 1994-1996. This forecast
is subject to periodic review and revision, and actual
construction costs may vary because of revised load estimates,
imposition of additional regulatory requirements, and the
availability and cost of capital.
1994 1995 1996 Total
---- ---- ---- -----
Sources of funds (Millions)
Internal funds $254 $265 $269 $788
Long-term financing
Debt and stock proceeds 413 141 80 634
Debt proceeds held in trust 34 8 - 42
---- ---- ---- -----
Net financing proceeds 447 149 80 676
Increase (decrease) in
short-term debt (50) - - (50)
Decrease (increase) in
temporary cash investments 89 (69) (52) (32)
---- ---- ---- ------
Total $740 $345 $297 $1,382
==== ==== ==== ======
Uses of funds
Construction
Cash expenditures $202 $193 $193 $588
AFDC 8 7 7 22
---- ---- ---- ------
Total construction 210 200 200 610
Retirement of securities and
sinking fund obligations 501 108 63 672
Working capital and deferrals 29 37 34 100
---- ---- ---- ------
Total $740 $345 $297 $1,382
==== ==== ==== ======
As shown in the preceding table, internal sources of funds
represent 129% of construction expenditures for 1994-1996.
Conservation Programs
The Company has implemented a number of demand-side
management (DSM) programs. As a result of its three-year rate
settlement agreement (See Regulatory Matters), incentives earned
for conducting efficient DSM programs were reduced from 15% to 5%
of the net resource savings achieved by these DSM programs. For
1994, the Company expects to earn approximately $3 million in
incentives as a result of these DSM programs.
<PAGE>
In 1993, the Company's customers saved approximately 282
million kilowatt-hours (kwh) on an annualized basis through the
Company's DSM programs. The implementation of these programs
cost $48 million in 1993 and will cost approximately $16 million
in 1994 with estimated customer savings of 113 million kwh on an
annualized basis. The Company has approximately $73 million and
$44 million of deferred DSM program costs on the Consolidated
Balance Sheets at December 31, 1993, and 1992, respectively. The
two-year (1993-1994) DSM plan, which has received PSC approval,
has been modified to improve cost-effectiveness and reduce rate
impacts.
Environmental Matters
The Company continually assesses actions that may need to be
taken to ensure compliance with changing environmental laws and
regulations. Compliance programs will increase the cost of
electric and natural gas service by requiring changes to the
Company's operations and facilities. Historically, rate recovery
has been authorized for the cost incurred for compliance with
environmental laws and regulations.
Due to existing and proposed legislation and regulations,
and legal proceedings commenced by governmental bodies and
others, the Company may also incur costs from the past disposal
of hazardous substances produced during the Company's operations
or those of its predecessors. The Company has been notified by
the EPA and the NYSDEC that it is among the potentially
responsible parties (PRPs) who may be liable to pay for costs
incurred to remediate certain hazardous substances at seven waste
sites, not including the Company's inactive gas manufacturing
sites, which are discussed below. With respect to the seven
sites, five sites are included in the New York State Registry of
Inactive Hazardous Waste Sites (New York State Registry).
Any liability may be joint and several for certain of these
sites. The ultimate cost to remediate these sites will be
dependent on such factors as the remedial action plan selected,
the extent of site contamination, and the portion attributed to
the Company. At December 31, 1993, the Company recorded a
liability in the Consolidated Balance Sheets related to four of
these seven waste sites of $1.8 million. The Company has
notified the NYSDEC that it believes it has no responsibility at
two sites and has already incurred expenditures related to the
remediation at the remaining site. A deferred asset has also
been recorded in the amount of $2.6 million, of which $.8 million
relates to costs that have already been incurred. The Company
believes it will recover these costs, since the PSC has allowed
other utilities to recover these types of remediation costs and
has allowed the Company to recover similar costs in rates, such
as investigation and cleanup costs relating to inactive gas
manufacturing sites. This $1.8 million estimate was derived by
<PAGE>
multiplying the total estimated cost to clean up a particular
site by the related Company contribution factor. Estimates of
the total cleanup costs were determined by using information
related to a particular site, such as investigations performed to
date at a site or from the data released by a regulatory agency.
In addition, this estimate was based upon currently available
facts, existing technology, and presently enacted laws and
regulations. The contribution factor is calculated using either
the Company's percentage share of the total PRPs named, which
assumes all PRPs will contribute equally, or the Company's
estimated percentage share of the total hazardous wastes
disposed of at a particular site, or by using a 1% contribution
factor for those sites at which it believes that it has
contributed a minimal amount of hazardous wastes. The Company
has notified its former and current insurance carriers that it
seeks to recover from them certain of these cleanup costs.
However, the Company is unable to predict the amount of insurance
recoveries, if any, that it may obtain.
A number of the Company's inactive gas manufacturing sites
have been listed in the New York State Registry. The Company has
filed petitions to delist the majority of the sites. The
Company's program to investigate and initiate remediation at its
38 known inactive gas manufacturing sites has been extended
through the year 2000. Expenditures over this time period are
estimated to be $25 million. This estimate was determined by
using the Company's experience and knowledge related to these
sites as a result of the investigation and remediation that the
Company has performed to date. It is based upon currently
available facts, existing technology, and presently enacted laws
and regulations. This liability, to investigate and initiate
remediation, as necessary, at the known inactive gas
manufacturing sites is reflected in the Company's Consolidated
Balance Sheets at December 31, 1993 and 1992. The Company also
has recorded a corresponding deferred asset, since it expects to
recover such expenditures in rates, as the Company has previously
been allowed by the PSC to recover such costs in rates. The
Company has notified its former and current insurance carriers
that it seeks to recover from them certain of these cleanup
costs. However, the Company is unable to predict the amount of
insurance recoveries, if any, that it may obtain.
The Clean Air Act Amendments of 1990 (1990 Amendments) will
result in significant expenditures of approximately $178 million,
on a present value basis, over a 25-year period, for all capital
and operating and maintenance expenses related to the reduction
of sulfur dioxide and nitrogen oxides at several of the Company's
coal-fired generating stations, of which $51 million has been
incurred as of December 31, 1993. The Company's current estimate
is a significant reduction from its prior estimate, primarily due
to the postponement of the construction of a flue gas
desulfurization (FGD) system at its Homer City Generating
<PAGE>
Station. The Company plans to re-evaluate the need to construct
an FGD system at the Homer City Generating Station in 1995, since
its present strategy to bank Phase I emissions allowances for use
during Phase II, as discussed below, will allow the Company to
meet Phase II allowance requirements through the year 2005. The
cost to comply with the sulfur dioxide and nitrogen oxide
limitations includes the construction of an innovative FGD system
and a nitrogen oxide reduction system expected to be completed in
1995 at the Company's Milliken Generating Station. The Company
estimates that approximately a 1% electric rate increase will be
required for the cost of reducing sulfur dioxide and nitrogen
oxide emissions in both Phase I (begins January 1, 1995) and
Phase II (begins January 1, 2000). As a result of the 1990
Amendments, the Company plans to reduce its annual sulfur dioxide
emissions by an amount that will allow the Company to meet the
sulfur dioxide levels established for the Company, which is
approximately a 49% reduction from approximately 138,000 tons in
1989 to 71,000 tons by the year 2000.
The cost of controlling toxic emissions under the 1990
Amendments, if required, cannot be estimated at this time.
Regulations may be adopted at the state level which would limit
toxic emissions even further, at an additional cost to the
Company. The Company anticipates that the costs incurred to
comply with the 1990 Amendments will be recoverable through rates
based on previous rate recovery of required environmental costs.
The 1990 Amendments require the U.S. Environmental
Protection Agency (EPA) to allocate annual emissions allowances
to each of the Company's coal-fired generating stations based on
statutory emissions limits. An emissions allowance represents an
authorization to emit, during or after a specified calendar year,
one ton of sulfur dioxide. During Phase I, the Company estimates
that it will have allowances in excess of the affected coal-fired
generating stations' actual emissions. The Company's present
strategy is to bank these allowances for use in later years. By
using a banking strategy, it is estimated that Phase II allowance
requirements will be met through the year 2005 by utilizing the
allowances banked during Phase I, which includes the extension
reserve allowances discussed below, together with the Company's
Phase II annual emissions allowances. This strategy could be
modified should market or business conditions change. In
addition to the annual emissions allowances allocated to the
Company by the EPA, the Company will receive a portion of the
extension reserve allowances issued by the EPA to utilities
electing to build scrubbers, as a result of the pooling agreement
that it entered into with other utilities who were also eligible
to receive some of these extension reserve allowances.
<PAGE>
As a result of existing and new solid waste disposal
legislation and regulations in Pennsylvania, the Company will
incur approximately $24 million, on a present value basis, of
additional costs over the next 30 years, beginning in 1994, at
the Homer City Generating Station. These costs will be incurred
to install new equipment, modify or replace existing equipment,
and improve the design of a proposed expansion of disposal
facilities. The Company expects to recover these expenditures in
rates, since the Company has been allowed by the PSC to recover
similar costs in rates, such as groundwater protection costs to
meet permit conditions and regulatory requirements.
Regulatory Matters
In September 1993, the Company reached a three-year electric
and natural gas rate settlement agreement (Agreement) with the
PSC. The new electric and natural gas rates became effective
September 4, 1993.
The allowed return on equity is 10.8% in year one, 11.4% in
year two, and 11.4% (subject to an indexing mechanism) in year
three. Shareholders will be allowed to keep 100% of any earnings
in excess of the allowed return in year one. Shareholders and
customers will share, on a 50%/50% basis, any earnings in excess
of the allowed return in years two and three.
The Agreement also includes a modified revenue decoupling
mechanism (RDM) for electric sales. Rates are based on sales
forecasts. Since actual sales may differ significantly from
forecasted sales because of conservation efforts, unusual
weather, or changing economic conditions, the revenue collected
may be more or less than forecast. Subject to the caps described
below, the modified RDM will let the Company adjust for most of
the differences between forecasted and actual sales. For
example, if revenues exceed the forecast for a given year, the
excess would be passed back to customers in a future year. If
revenues are below the forecast, customers would receive a
surcharge in a future year. The Company will share excesses or
shortfalls from most large commercial and industrial sales
revenues on a 70%/30% (customer/stockholder) basis.
Customer savings for production and transmission operating
costs of $21 million will be imputed over three years, $7 million
each year, whether or not they are realized.
Incentives for customer service, production cost, and DSM
could increase the allowed return to 12.3% or decrease it to
9.95% in year one, increase it to 13.05% or decrease it to 10.4%
in year two, and increase it to 13.25% or decrease it to 10.2% in
year three.
<PAGE>
The electric and natural gas rate increases discussed below
represent eleven months for year one and twelve months for years
two and three.
The estimated total electric price increases below include
base rate increases allowed by the Agreement plus estimates of
fuel and purchased power increases which will be collected
through the Fuel Adjustment Clause (FAC). Actual fuel and
purchased power costs could vary from estimates causing the
estimated FAC and total electric price increases below to change.
Base Rate Estimated FAC Total Electric
(Dollar Amounts in Millions)
Year 1 $60.5 4.4% $39.1 3.0% $99.6 7.4%
Year 2 $70.3 4.8% $39.2 2.8% $109.5 7.6%
Year 3 $57.4 3.6% $30.4 2.0% $87.8 5.6%
The natural gas base rate increases allowed by the Agreement
are $7.5 million, or 2.9%, $8.2 million, or 3.0%, and $7.2
million, or 2.5%, in years one, two, and three, respectively.
They do not include changes in natural gas costs, which will be
collected through the Gas Adjustment Clause. Natural gas costs
can be expected to rise and fall with overall natural gas market
conditions. Such fluctuations will affect the total natural gas
price increases.
The Agreement also provides for the stated electric and
natural gas base rate increases to be adjusted up or down in the
second and third years, as well as the year after the Agreement
period (year four). These adjustments will depend on several
factors, such as electric sales and incentive mechanisms. The
Agreement provides that no cap would apply to any downward
revision to base rates for electric and natural gas service. The
electric base rate increases could be increased by up to 1.5% in
years two and three and 1.6% in year four (the caps). The
natural gas base rate increases could also be increased by up to
1% in year two and 1.2% in year three. The Agreement does not
specify a cap for natural gas base rates for year four.
<PAGE>
Item 8. Financial statements and supplementary data
New York State Electric & Gas Corporation
Consolidated Statements of Income
Year Ended December 31 1993 1992 1991
- ----------------------------------------------------------------------------
(Thousands, except Per Share Amounts)
Operating Revenues
Electric . . . . . . . . . . . . . . . . $1,527,362 $1,451,525 $1,367,936
Natural gas. . . . . . . . . . . . . . . 272,787 240,164 187,879
---------- ---------- ----------
Total Operating Revenues . . . . . . $1,800,149 1,691,689 1,555,815
---------- ---------- ----------
Operating Expenses
Fuel used in electric generation . . . . 245,283 262,531 274,877
Electricity purchased (Note 9) . . . . . 161,967 95,026 45,808
Natural gas purchased. . . . . . . . . . 141,635 126,815 99,528
Other operating expenses . . . . . . . . 349,177 318,680 279,364
Restructuring expenses (Notes 6 and 7) . 26,000 - -
Maintenance. . . . . . . . . . . . . . . 111,757 102,500 110,131
Depreciation and amortization (Note 1) . 164,568 158,977 152,380
Federal income taxes (Notes 1 and 2) . . 94,144 102,456 94,447
Other taxes (Note 12). . . . . . . . . . 204,962 200,941 178,185
---------- ---------- ----------
Total Operating Expenses . . . . . . . 1,499,493 1,367,926 1,234,720
---------- ---------- ----------
Operating Income. . . . . . . . . . . . . 300,656 323,763 321,095
Other Income and Deductions . . . . . . . 6,471 12,036 6,076
---------- ---------- ----------
Income Before Interest Charges. . . . . . 307,127 335,799 327,171
---------- ---------- ----------
Interest Charges
Interest on long-term debt . . . . . . . 134,330 145,822 151,649
Other interest . . . . . . . . . . . . . 11,120 9,566 11,877
Allowance for borrowed funds
used during construction. . . . . . . . (4,351) (3,557) (4,998)
---------- ---------- ----------
Interest Charges - Net . . . . . . . . 141,099 151,831 158,528
---------- ---------- ----------
Net Income. . . . . . . . . . . . . . . . 166,028 183,968 168,643
Preferred Stock Dividends . . . . . . . . 20,638 20,995 20,330
---------- ---------- ----------
Earnings Available for Common Stock . . . $145,390 $162,973 $148,313
========== ========== ==========
Earnings Per Share. . . . . . . . . . . . $2.08 $2.40 $2.36
Average Shares Outstanding. . . . . . . . 69,990 67,972 62,906
The notes on pages 50 through 73 are an integral part of the
financial statements.
<PAGE>
New York State Electric & Gas Corporation
Consolidated Balance Sheets
December 31 1993 1992
- -------------------------------------------------------------------------------
(Thousands)
Assets
Utility Plant, at Original Cost (Note 1)
Electric (Note 8). . . . . . . . . . . . . . . . . . . $4,777,368 $4,573,444
Natural gas. . . . . . . . . . . . . . . . . . . . . . 381,389 352,059
Common . . . . . . . . . . . . . . . . . . . . . . . . 158,986 157,979
---------- ----------
. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,317,743 5,083,482
Less accumulated depreciation. . . . . . . . . . . . . 1,541,456 1,427,793
---------- ----------
Net Utility Plant in Service. . . . . . . . . . . . 3,776,287 3,655,689
Construction work in progress. . . . . . . . . . . . . 143,859 177,566
---------- ----------
Total Utility Plant . . . . . . . . . . . . . . . . 3,920,146 3,833,255
Other Property and Investments, net . . . . . . . . . . 73,537 59,157
Current Assets
Cash and cash equivalents (Notes 1 and 10) . . . . . . 4,264 3,968
Special deposits (Note 10) . . . . . . . . . . . . . . 145,335 96,432
Accounts receivable, net (Note 1). . . . . . . . . . . 181,586 171,683
Fuel, at average cost. . . . . . . . . . . . . . . . . 54,791 69,077
Materials and supplies, at average cost. . . . . . . . 48,910 50,637
Prepayments. . . . . . . . . . . . . . . . . . . . . . 30,092 37,897
Accumulated deferred federal income
tax benefits (Notes 1 and 2). . . . . . . . . . . . - 1,182
---------- ----------
Total Current Assets. . . . . . . . . . . . . . . . 464,978 430,876
Deferred Charges (Note 1)
Unfunded future federal income
taxes (Notes 1 and 2) . . . . . . . . . . . . . . . 380,056 393,720
Unamortized debt expense . . . . . . . . . . . . . . . 112,059 96,378
Demand-side management program costs . . . . . . . . . 73,113 44,049
Other. . . . . . . . . . . . . . . . . . . . . . . . . 252,127 220,481
---------- ----------
Total Deferred Charges. . . . . . . . . . . . . . . 817,355 754,628
---------- ----------
Total Assets. . . . . . . . . . . . . . . . . . . . $5,276,016 $5,077,916
========== ==========
The notes on pages 50 through 73 are an integral part of the financial
statements.
<PAGE>
New York State Electric & Gas Corporation
Consolidated Balance Sheets
December 31 1993 1992
- ------------------------------------------------------------------------------
(Thousands)
Capitalization and Liabilities
Capitalization
Common stock equity
Common stock ($6.66 2/3 par value, 90,000,000
shares authorized and 70,595,985 and 69,439,397
shares issued and outstanding at December 31,
1993 and 1992, respectively) . . . . . . . . . . $470,640 $462,929
Capital in excess of par value. . . . . . . . . . 824,943 796,505
Retained earnings . . . . . . . . . . . . . . . . 320,114 327,040
---------- ----------
Total common stock equity. . . . . . . . . . . . . . . 1,615,697 1,586,474
Preferred stock redeemable solely at the option of
the Company (Note 4). . . . . . . . . . . . . . . . 140,500 160,500
Preferred stock subject to mandatory redemption
requirements (Notes 4 and 10) . . . . . . . . . . . 125,000 106,900
Long-term debt (Notes 3 and 10). . . . . . . . . . . . 1,630,629 1,777,027
---------- ----------
Total Capitalization. . . . . . . . . . . . . . . 3,511,826 3,630,901
Current Liabilities
Current portion of long-term debt and preferred
stock (Notes 3 and 4) . . . . . . . . . . . . . . . 332,709 115,659
Commercial paper (Notes 5 and 10). . . . . . . . . . . 50,200 64,100
Accounts payable and accrued liabilities . . . . . . . 111,481 95,996
Interest accrued (Note 10) . . . . . . . . . . . . . . 31,348 37,690
Accumulated deferred federal income taxes
(Notes 1 and 2) . . . . . . . . . . . . . . . . . . 1,132 -
Other. . . . . . . . . . . . . . . . . . . . . . . . . 89,443 65,073
---------- ----------
Total Current Liabilities . . . . . . . . . . . . 616,313 378,518
Deferred Credits
Accumulated deferred investment tax credits
(Notes 1 and 2) . . . . . . . . . . . . . . . . . . 138,478 141,729
Excess deferred federal income taxes (Notes 1 and 2) . 36,378 58,188
Other. . . . . . . . . . . . . . . . . . . . . . . . . 149,620 107,160
---------- ----------
Total Deferred Credits. . . . . . . . . . . . . . 324,476 307,077
Accumulated Deferred Federal Income Taxes
(Notes 1 and 2)
Unfunded future federal income taxes . . . . . . . . . 380,056 393,720
Other. . . . . . . . . . . . . . . . . . . . . . . . . 416,545 342,700
---------- ----------
Total Accumulated Deferred Federal
Income Taxes . . . . . . . . . . . . . . . . . . 796,601 736,420
Commitments and Contingencies (Note 9). . . . . . . . . 26,800 25,000
---------- ----------
Total Capitalization and Liabilities. . . . . . . $5,276,016 $5,077,916
========== ==========
The notes on pages 50 through 73 are an integral part of the financial
statements.
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Consolidated Statements of Cash Flows
<S> <C> <C> <C>
Year Ended December 31 1993 1992 1991
- ------------------------------------------------------------------------------
(Thousands)
Operating Activities
Net Income . . . . . . . . . . . . . . . . . . . . $166,028 $183,968 $168,643
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization. . . . . . . . . . 164,568 158,977 152,380
Deferred fuel and purchased gas. . . . . . . . . (10,671) (14,645) 2,507
Federal income taxes and investment tax credits
deferred - net . . . . . . . . . . . . . . . . 50,761 52,039 59,626
Unbilled revenue recognition (Note 1). . . . . . (11,557) (22,228) (40,147)
Demand-side management program costs . . . . . . (29,064) (22,863) (15,118)
Restructuring expenses . . . . . . . . . . . . . 26,000 - -
Changes in current operating assets and liabilities,
net of effects from the purchase of Columbia Gas
of New York, Inc. in 1991:
Special deposits . . . . . . . . . . . . . . . . 2,438 (1,873) (4,108)
Accounts receivable excluding accounts
receivable sold. . . . . . . . . . . . . . . . (17,483) (11,936) (15,541)
Accounts receivable sold (Note 1). . . . . . . . 13,800 - -
Prepayments. . . . . . . . . . . . . . . . . . . 7,805 (878) (7,882)
Inventory. . . . . . . . . . . . . . . . . . . . 16,013 (1,417) 4,590
Accounts payable and accrued liabilities . . . . 7,384 (8,287) 5,656
Interest accrued . . . . . . . . . . . . . . . . (6,342) (5,750) (3,610)
Other-net. . . . . . . . . . . . . . . . . . . . . 32,510 (18,840) (1,110)
-------- -------- --------
Net Cash Provided by Operating Activities . . . 412,190 286,267 305,886
-------- -------- --------
Investing Activities
Utility plant construction expenditures, net of
allowance for funds used during construction
- other . . . . . . . . . . . . . . . . . . . . (265,109)(243,373)(244,037)
Proceeds received from governmental and
other sources . . . . . . . . . . . . . . . . . 22,808 322 -
Expenditures for other property and investments. . (16,975) - -
Funds set aside for construction expenditures. . . (42,437) - -
Payment for purchase of Columbia Gas of New
York, Inc., net of cash acquired . . . . . . . . - - (57,096)
-------- -------- --------
Net Cash Used in Investing Activities . . . . . (301,713)(243,051)(301,133)
-------- -------- --------
Financing Activities
Issuance of first mortgage bonds and
pollution control notes. . . . . . . . . . . . . 217,362 247,668 147,243
Proceeds from revolving credit agreement . . . . . 50,000 - -
Sale of common stock . . . . . . . . . . . . . . . 38,334 162,965 25,380
Sale of preferred stock. . . . . . . . . . . . . . 97,762 - 98,975
First mortgage bonds and preferred stock
repayments, including premiums . . . . . . . . . (326,091)(178,289)(142,715)
Increase in funds set aside for first
mortgage bond and preferred stock repayments . . (8,904) (83,096) -
Long-term notes - net. . . . . . . . . . . . . . . 8,393 (1,593) (2,322)
Commercial paper - net . . . . . . . . . . . . . . (13,900) (39,800) 30,675
Dividends on common and preferred stock. . . . . . (173,137)(165,704)(150,106)
-------- -------- --------
Net Cash Provided by (Used in) Financing
Activities. . . . . . . . . . . . . . . . . . (110,181) (57,849) 7,130
-------- -------- --------
Net Increase (Decrease) in Cash and Cash Equivalents 296 (14,633) 11,883
Cash and Cash Equivalents, Beginning of Year. . . . 3,968 18,601 6,718
-------- -------- --------
Cash and Cash Equivalents, End of Year
(Notes 1 and 10). . . . . . . . . . . . . . . . . $4,264 $3,968 $18,601
======== ======== ========
The notes on pages 50 through 73 are an integral part of the
financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Consolidated Statements of Changes
in Common Stock Equity
(Thousands, except Shares and Per Share Amounts)
<S> <C> <C> <C> <C> <C>
Common Stock Capital
$6.66 2/3 Par Value in Excess Retained
Shares Amount of Par Value Earnings Total
Balance, January 1, 1991 62,430,297 $416,202 $655,892 $292,250 $1,364,344
Net income 168,643 168,643
Cash dividends declared:
Preferred stock (at serial rates)
Redeemable - optional (11,395) (11,395)
- mandatory (8,935) (8,935)
Common stock ($2.10 per share) (131,875) (131,875)
Issuance of stock:
Dividend reinvestment and stock
purchase plan 969,941 6,466 17,899 24,365
Balance, December 31, 1991 63,400,238 422,668 673,791 308,688 1,405,147
Net income 183,968 183,968
Cash dividends declared:
Preferred stock (at serial rates)
Redeemable - optional (11,164) (11,164)
- mandatory (9,831) (9,831)
Common stock ($2.14 per share) (144,621) (144,621)
Issuance of stock:
Public Offering 5,000,000 33,333 99,367 132,700
Dividend reinvestment and
stock purchase plan 1,039,159 6,928 23,347 30,275
Balance, December 31, 1992 69,439,397 462,929 796,505 327,040 1,586,474
Net income 166,028 166,028
Cash dividends declared:
Preferred stock (at serial rates)
Redeemable - optional (11,085) (11,085)
- mandatory (9,553) (9,553)
Common stock ($2.18 per share) (152,316) (152,316)
Issuance of stock:
Dividend reinvestment and
stock purchase plan 1,156,588 7,711 28,438 36,149
Balance, December 31, 1993 70,595,985 $470,640 $824,943 $320,114 $1,615,697
The notes on pages 50 through 73 are an integral part of the financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
1 Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the Company's
wholly-owned subsidiaries, Somerset Railroad Corporation (SRC)
and NGE Enterprises, Inc. (NGE). All significant intercompany
balances and transactions are eliminated in consolidation.
Utility plant
The cost of repairs and minor replacements is charged to the
appropriate operating expense accounts. The cost of renewals and
betterments, including indirect cost, is capitalized. The
original cost of utility plant retired or otherwise disposed of
and the cost of removal less salvage are charged to accumulated
depreciation.
Depreciation and amortization
Depreciation expense is determined using straight-line
rates, based on the average service lives of groups of
depreciable property in service. Depreciation accruals were
equivalent to 3.4%, 3.3%, and 3.3%, of average depreciable
property for 1993, 1992, and 1991, respectively. Depreciation
expense includes the amortization of certain deferred charges
authorized by the Public Service Commission of the State of New
York (PSC).
Revenue
During 1993, 1992, and 1991, the Company recognized on the
income statement approximately $12 million, $22 million, and $40
million, respectively, of electric and natural gas unbilled
revenues that had been accrued on its balance sheet for energy
provided but not yet billed to minimize the rate increases for
these years in accordance with various PSC rate decisions. The
July 1992 rate decision allowed the Company to recognize on its
income statement, beginning in August 1992, electric and natural
gas unbilled revenues on a full accrual basis.
The Company recognizes as revenue incentives earned as the
result of conducting efficient demand-side management (DSM)
programs. The Company is collecting those incentives in rates
within approximately one year after they are recognized. During
1993, 1992, and 1991, incentives earned were $16.4 million, $15.6
million, and $12.4 million, respectively. At December 31, 1993
and 1992, approximately $14.3 million and $9.8 million,
respectively, of DSM incentives were accrued and included in
accounts receivable.
<PAGE>
Accounts receivable
The Company has an agreement that expires in November 1996
to sell, with limited recourse, undivided percentage interests in
certain of its accounts receivable from customers. The agreement
allows the Company to receive up to $152 million from the sale of
such interests. At December 31, 1993 and 1992, accounts
receivable on the Consolidated Balance Sheets is shown net of
$152 million and $138 million, respectively, of interests in
accounts receivable sold. All fees associated with the program
are included in other income and deductions on the Consolidated
Statements of Income and amounted to approximately $5.7 million,
$6.5 million, and $9.3 million in 1993, 1992, and 1991,
respectively. Accounts receivable on the Consolidated Balance
Sheets is also shown net of an allowance for doubtful accounts of
$4 million and $1.9 million at December 31, 1993 and 1992,
respectively. Bad debt expense was $15.3 million, $11.5 million,
and $10.7 million in 1993, 1992, and 1991, respectively.
Federal income taxes
The Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes, in
January 1993. Since the Company had been accounting for income
taxes under Statement of Financial Accounting Standards No. 96,
Accounting for Income Taxes, there was no effect on the
Consolidated Statements of Income as a result of adopting SFAS
109. However, SFAS 109 did require the Company's deferred tax
balances to be reclassified on its Consolidated Balance Sheets.
The Company files a consolidated federal income tax return
with SRC and NGE. Deferred income taxes are provided on all
temporary differences between financial statement basis and
taxable income. Investment tax credits, which reduce federal
income taxes currently payable, are deferred and amortized over
the estimated lives of the applicable property. The effect of
the alternative minimum tax, which increases federal income taxes
currently payable and generates a tax credit available for future
use, is deferred and amortized at such times as the tax credit is
used on the Company's federal income tax return.
Deferred charges
The Company defers certain incurred expenses when authorized
by the PSC. Those expenses will be recovered from customers in
the future.
Consolidated Statements of Cash Flows
The Company considers all highly liquid investments with a
maturity or put date of three months or less when acquired to be
<PAGE>
cash equivalents. These investments are included in cash and
cash equivalents on the Consolidated Balance Sheets.
Total income taxes paid were $27.3 million, $38.5 million,
and $31.8 million for the years ended December 31, 1993, 1992,
and 1991, respectively.
Interest paid, net of amounts capitalized, was $138.2
million, $149.3 million, and $159.9 million for the years ended
December 31, 1993, 1992, and 1991, respectively.
The Company purchased all of the common stock of Columbia
Gas of New York, Inc. in 1991. In conjunction with the
acquisition, liabilities assumed were $24.9 million (fair value
of assets acquired of $82 million less cash paid of $57.1
million).
Reclassification
Certain amounts have been reclassified on the consolidated
financial statements to conform with the 1993 presentation.
2 Federal Income Taxes
Year ended December 31 1993 1992 1991
(Thousands)
Charged to operations
Current $34,989 $37,237 $22,991
Deferred - net
Accelerated depreciation 49,580 41,492 37,409
Unbilled revenues 5,073 160 13,644
Alternative minimum tax (AMT)
credit (3,194) 2,123 5,557
Demand-side management 13,479 9,324 8,589
NUG termination
agreement 4,760 6,800 -
Nine Mile No. 2 litigation
proceeds 4,756 (2,047) -
Restructuring expenses (6,965) - -
Transmission facility agreement(7,778) (1,172) (1,162)
Miscellaneous (6,198) (3,491) (9,365)
Investment tax credit (ITC)
deferred 5,642 12,030 16,784
------- -------- -------
94,144 102,456 94,447
Included in other income
Amortization of deferred ITC (8,892) (16,927) (11,297)
Miscellaneous 498 3,747 (533)
------- -------- -------
Total $85,750 $89,276 $82,617
======= ======== =======
<PAGE>
The Company's effective tax rate differed from the statutory rate
of 35% in 1993 and 34% in 1992 and 1991 due to the following:
Year ended December 31 1993 1992 1991
(Thousands)
Tax expense at statutory rate $88,684 $92,903 $85,428
Depreciation not normalized 16,984 16,697 16,051
ITC amortization (8,892) (16,927) (11,297)
Research & Development (R&D)
credit (5,139) - -
Cost of removal (4,921) (4,079) (6,120)
Other - net (966) 682 (1,445)
------- ------- ------
Total $85,750 $89,276 $82,617
======= ======= =======
The Company's current and noncurrent deferred taxes, which
net to a tax liability of approximately $936.2 million as of
December 31, 1993, consisted of the following deferred tax assets
and liabilities:
Deferred Tax Deferred Tax
Assets Liabilities
(Thousands)
Depreciation $ 698,939
Loss on reacquired debt 28,440
Regulatory Asset (SFAS 109) 149,636
Accumulated deferred ITC 91,006
Demand-side management 35,381
NUG contract settlement costs 15,163
Alternative minimum tax credit $ 19,953
Excess tax reserve 12,603
Nine Mile No. 2 disallowed plant 19,347
Contributions in aid of construction 20,913
Capitalized interest 8,690
Other 35,369 34,521
----------- ------------
Total deferred taxes $116,875 $1,053,086
=========== ============
The Revenue Reconciliation Act (RRA) of 1993 was enacted on
August 10, 1993. Among other things, RRA 1993 provided for an
increase of 1% in the statutory corporate income tax rate and an
extension of the R&D credit until June 30, 1995.
In September 1993, the Company reached a three-year rate
settlement agreement with the PSC (Agreement) which included a
provision for the Company to petition to defer the effect of RRA
1993 until it is reflected in rates. The Company has deferred
for collection from customers $.6 million representing additional
1993 federal income taxes resulting from RRA 1993.
<PAGE>
The Company has recorded unfunded future federal income
taxes and a corresponding receivable from customers of
approximately $381 million and $393 million as of December 31,
1993 and 1992, respectively, primarily representing the
cumulative amount of federal income taxes on temporary
depreciation differences, which were previously flowed through to
customers. Those amounts, including the tax effect of the future
revenue requirements, are being amortized over the life of the
related depreciable assets concurrent with their recovery in
rates.
The Company has approximately $20 million of AMT credits
which do not expire, and $5.1 million of R&D credits which expire
beginning in 2005.
3 Long-Term Debt
At December 31, 1993 and 1992, long-term debt was (Thousands):
First mortgage bonds
Amount
Series Due 1993 1992
8 3/8% Aug. 15, 1994 $ 100,000 $100,000
8 5/8% June 1, 1996 - 50,000
5 5/8% Jan. 1, 1997 25,000 25,000
6 1/4% Sept. 1, 1997 25,000 25,000
6 1/2% Sept. 1, 1998 30,000 30,000
7 5/8% Nov. 1, 2001 50,000 50,000
6 3/4% Oct. 15, 2002 150,000 150,000
9 3/8% Jan. 1, 2006 - 3,000
7 1/4% June 1, 2006 12,000 12,000
6 7/8% Dec. 1, 2006 25,250 25,500
8 5/8% Nov. 1, 2007 60,000 60,000
9 1/4% Apr. 1, 2016 - 50,000
9% Mar. 1, 2017 - 100,000
10 5/8% Jan. 1, 2018 - 100,000
9 7/8% Feb. 1, 2020 100,000 100,000
9 7/8% May 1, 2020 100,000 100,000
9 7/8% Nov. 1, 2020 100,000 100,000
8 7/8% Nov. 1, 2021 150,000 150,000
8.30 % Dec. 15, 2022 100,000 100,000
7.55 % Apr. 1, 2023 50,000 -
7.45 % July 15, 2023 100,000 -
--------- ---------
Total first mortgage bonds 1,177,250 1,330,500
========= =========
<PAGE>
Pollution control notes
Interest Maturity Interest Rate Letter of Credit Amount
Rate Date Adjustment Date Expiration Date 1993 1992
12% May 1, 2014* - - 60,000 60,000
12.30% July 1, 2014* - - 40,000 40,000
2.80% Dec. 1, 2014 Dec. 1, 1994 Dec. 15, 1995 74,000 74,000
2.75% Mar. 1, 2015 Mar. 1, 1994 Mar. 15, 1995 37,500 37,500
2.50% Mar. 15, 2015 Mar. 15, 1994 Mar. 31, 1995 60,000 60,000
2.60% July 15, 2015 July 15, 1994 July 31, 1995 63,500 63,500
2.85% Oct. 15, 2015 Oct. 15, 1994 Oct. 31, 1995 30,000 30,000
2.75% Dec. 1, 2015 Dec. 1, 1994 Dec. 15, 1995 42,000 42,000
4.10% July 1, 2026 July 1, 1996 July 15, 1996 65,000 65,000
5.95% Dec. 1, 2027 - - 34,000 34,000
5.70% Dec. 1, 2028 - - 70,000 -
---------- ----------
Total pollution control notes 576,000 506,000
========== ==========
Revolving Credit Agreement Note due July 31, 1997 50,000 -
Long-term notes due December 31, 1996 36,100 27,707
CNG Transmission Corp. Note due November 10, 1996 8,862 -
Obligations under capital leases 30,902 38,804
Unamortized premium and discount on debt-net (10,776) (11,975)
---------- ----------
1,868,338 1,891,036
Less: debt due within one year-included
in current liabilities 237,709 114,009
---------- ----------
Total $1,630,629 $1,777,027
========== ==========
* Will be refunded in 1994 with proceeds from the issuance of $100 million of
6.05% pollution control notes due 2034.
At December 31, 1993, long-term debt and capital lease
payments which will become due during the next five years are:
1994 1995 1996 1997 1998
(Thousands)
$237,709 $12,552 $45,651 $102,196 $31,411
The Company's mortgage provides for a sinking and
improvement fund. This provision requires the Company to make
annual cash deposits with the Trustee equivalent to 1% of the
principal amount of all bonds delivered and authenticated by the
Trustee prior to January 1 of that year (excluding any bonds
issued on the basis of the retirement of bonds). The Company
satisfied this requirement in 1993 by depositing $22.5 million in
cash which was used to redeem in February 1993, $22.5 million of
10 5/8% Series first mortgage bonds, due 2018. The Company
satisfied this requirement in 1994 by depositing $23 million in
cash which was used to redeem in February 1994, $23 million of
8 5/8% Series first mortgage bonds, due 2007.
<PAGE>
Mandatory annual cash sinking fund requirements are $600,000
beginning June 1, 2001, for the 7 1/4% Series and $250,000 on
December 1 in each year 1994 to 1996, for the 6 7/8% Series. The
amount increases to $500,000 and $750,000 on December 1, 1997 and
December 1, 2002, respectively, for the 6 7/8% Series.
The Company's first mortgage bond indenture constitutes a
direct first mortgage lien on substantially all utility plant.
Adjustable rate pollution control notes were issued to secure
like amounts of tax-exempt adjustable rate pollution control
revenue bonds (Revenue Bonds) issued by a governmental authority.
The Revenue Bonds bear interest at the rate indicated through the
date preceding the interest rate adjustment date. The pollution
control notes bear interest at the same rate as the Revenue
Bonds. On the interest rate adjustment date and annually
thereafter (every three years thereafter in the case of the
Revenue Bonds due July 1, 2026), the interest rate will be
adjusted, not to exceed a rate of 15%, or at the option of the
Company, subject to certain conditions, a fixed rate of interest,
not to exceed 18%, may become effective. In the case of the
Revenue Bonds due July 1, 2026, at the option of the Company,
subject to certain conditions, a fixed rate of interest may
become effective prior to the interest rate adjustment date or
each third year thereafter. Bond owners may elect, subject to
certain conditions, to have their Revenue Bonds purchased by the
Trustee.
The Company has irrevocable letters of credit which expire on
the letter of credit expiration dates and which the Company
anticipates being able to extend if the interest rate on the
related Revenue Bonds is not converted to a fixed interest rate.
Those letters of credit support certain payments required to be
made on the Revenue Bonds. If the Company is unable to extend
the letter of credit that is related to a particular series of
Revenue Bonds, that series will have to be redeemed unless a
fixed rate of interest becomes effective. Payments made under
the letters of credit in connection with purchases of Revenue
Bonds by the Trustee are repaid with the proceeds from the
remarketing of the Revenue Bonds. To the extent the proceeds are
not sufficient, the Company is required to reimburse the bank
that issued the letter of credit.
<PAGE>
4 Preferred Stock
At December 31, 1993 and 1992, serial cumulative preferred stock was:
Shares
Par Value Authorized
Per Redeemable and Amount
Series Share Prior to Per Share Outstanding(1) 1993 1992
(Thousands)
Redeemable solely at the option of the Company:
3.75% $100 $104.00 150,000 $ 15,000 $ 15,000
4 1/2%(1949) 100 103.75 40,000 4,000 4,000
4.15% 100 101.00 40,000 4,000 4,000
4.40% 100 102.00 75,000 7,500 7,500
4.15% (1954) 100 102.00 50,000 5,000 5,000
6.48% 100 102.00 300,000 30,000 30,000
8.80% (2) 100 102.00 250,000 25,000 25,000
8.48% (3) 25 25.70 1,000,000 25,000 25,000
7.40% (4) 25 12/1/98 26.85 1,000,000 25,000 -
Thereafter 25.00
Adjustable
Rate (5) 25 25.00 1,800,000 45,000 45,000
Adjustable
Rate (6) 25 12/1/98 27.50 2,000,000 50,000 -
Thereafter 25.00
---------- ----------
235,500 160,500
Less: preferred stock redemptions within one year
- included in current liabilities 95,000 -
---------- ----------
Total $ 140,500 $ 160,500
========== ==========
Subject to mandatory redemption requirements:
9.00% (7) 100 - $ - $ 8,550
6.30% (8) 100 1/1/95 105.67 250,000 25,000 -
8.95% (9) 25 1/1/95 26.79 4,000,000 100,000 100,000
---------- ----------
125,000 108,550
Less: sinking fund requirements at par value
- included in current liabilities - 1,650
---------- ----------
Total $ 125,000 $ 106,900
========== ==========
<PAGE>
At December 31, 1993, preferred stock redemptions and annual
redeemable preferred stock sinking fund requirements for the next
five years are:
1994 1995 1996 1997 1998
(Thousands)
$95,000 $ - $ - $5,000 $5,000
(1) At December 31, 1993, and after giving effect to the
redemptions referred to in (2), (3), and (5) below, there were
1,550,000 shares of $100 par value preferred stock, 3,800,000
shares of $25 par value preferred stock and 1,000,000 shares of
$100 par value preference stock authorized but unissued.
(2) Redeemed January 18, 1994.
(3) Redeemed February 1, 1994.
(4) The Company is restricted in its ability to redeem this
Series prior to December 1, 1998.
(5) The Adjustable Rate Serial Preferred Stock, Series A, was
redeemed January 10, 1994.
(6) The payment on the Adjustable Rate Serial Preferred Stock,
Series B, for April 1, 1994, is at an annual rate of 5.12% and
subsequent payments can vary from an annual rate of 4% to 10%,
based on a formula included in the Company's Certificate of
Incorporation. The Company is restricted in its ability to
redeem this Series prior to December 1, 1998.
(7) On October 1, 1993, 33,000 shares were redeemed at par. The
remaining 52,500 shares were redeemed at $100.50 per share on
October 13, 1993. For the years 1991 and 1992, 16,500 shares
were redeemed and cancelled annually.
(8) On January 1, in each year 2004 through 2008, the Company
must redeem 12,500 shares at par, and on January 1, 2009, the
Company must redeem the balance of the shares at par. This
Series is redeemable at the option of the Company at $105.67 per
share prior to January 1, 1995. The $105.67 price will be
reduced annually by 63 cents for the years ending 1995 through
2002; thereafter, the redemption price is $100.00. The Company
is restricted in its ability to redeem this Series prior to
January 1, 2004.
(9) On January 1, in each year 1997 through 2016, the Company
must redeem 200,000 shares at par. This Series is redeemable at
the option of the Company at $26.79 per share prior to January 1,
1995. The $26.79 price will be reduced annually by 15 cents for
<PAGE>
the years ending 1995 through 1999; by 14 cents for the year
ending 2000; and by 15 cents for the years ending 2001 through
2005. The Company is restricted in its ability to redeem this
Series prior to January 1, 1996.
5 Bank Loans and Other Borrowings
The Company has a revolving credit agreement with certain
banks which provides for borrowing up to $200 million to July 31,
1997. At the option of the Company, the interest rate on
borrowings is related to the prime rate, the London Interbank
Offered Rate (LIBOR) or the interest rate applicable to certain
certificates of deposit. The agreement also provides for the
payment of a commitment fee which can fluctuate from .15% to
.375% depending upon the ratings of the Company's first mortgage
bonds. The commitment fee at December 31, 1993 is .1875%.
The Company had an outstanding loan of $50 million under
the revolving credit agreement at December 31, 1993, at an
interest rate of 4.06% under the LIBOR option, and did not have
any outstanding loans under this agreement at December 31, 1992.
The revolving credit agreement does not require compensating
balances.
In order to provide flexibility in the timing and amounts of
long-term financings, the Company uses interim financing in the
form of short-term unsecured notes, usually commercial paper, to
finance certain refundings and construction expenditures, and for
other corporate purposes.
Information relative to short-term borrowings is as follows:
Commercial Paper
1993 1992 1991
(Thousands)
Ending balance $50,200 $64,100 $103,900
Maximum amount outstanding $95,400 $140,000 $111,000
Average amount outstanding (1) $56,300 $31,400 $66,700
Weighted average interest rate
On ending balance 3.5% 4.0% 5.3%
During the period (2) 3.4% 4.3% 6.2%
(1) Calculated as the average of the sum of daily outstanding
borrowings.
(2) Calculated by dividing total interest expense by the average
of the sum of daily outstanding borrowings.
<PAGE>
6 Restructuring
In the fourth quarter of 1993, the Company recorded a $26
million restructuring charge. The corporate restructuring will
reorganize the way the Company delivers services to its electric
and natural gas customers beginning in March 1994. The
restructuring reduced 1993 earnings available for common stock by
approximately $17.2 million or 25 cents per share. Included in
this amount are $13.2 million for a voluntary early retirement
program, $3.2 million for an involuntary severance program, and
$.8 million for the elimination and closing of electric and
natural gas operations facilities statewide. During 1994, the
restructuring resulted in a work force reduction throughout the
organization of approximately 600, the elimination of customer
walk-in services at 28 satellite locations, and the closing of up
to 10 electric and natural gas operations facilities statewide.
The work force reduction was accomplished through a voluntary
early retirement program (See Note 7 - Retirement Benefits) and
an involuntary severance program. 384 employees accepted the
early retirement program.
7 Retirement Benefits
Pensions
The Company has a noncontributory retirement annuity plan
that covers substantially all employees. Benefits are based
principally on the employee's length of service and compensation
for the five highest paid years out of the last 10 years of
service. It is the Company's policy to fund pension costs
accrued each year to the extent deductible for federal income tax
purposes.
The net pension benefit for 1993, 1992, and 1991 totaled
$5.7 million, $1.5 million, and $2.9 million, respectively.
Effective January 1, 1993, the retirement benefit plans for
hourly and salaried employees were combined into one plan.
Combining the two plans did not affect benefit levels.
<PAGE>
Net pension benefit for 1993, 1992, and 1991 included the
following components:
1993 1992 1991
(Thousands)
Service cost: Benefits
earned during the year $ 17,688 $ 15,387 $ 13,252
Interest cost on projected
benefit obligation 40,710 35,253 32,096
Actual return on plan assets (77,129) (60,020) (111,749)
Net amortization and deferral 12,989 7,844 63,487
------- -------- --------
Net pension (benefit) $ (5,742) $ (1,536) $ (2,914)
======= ======== ========
The funded status of the plans at December 31, 1993 and 1992
were:
1993 1992
(Thousands)
Actuarial present value of accumulated
benefit obligation:
Vested $390,716 $287,504
Nonvested 55,476 42,286
-------- --------
Total 446,192 329,790
======== ========
Fair value of plan assets $753,292 $701,893
Actuarial present value of
projected benefit obligation (608,216) (480,429)
-------- --------
Plan assets in excess of projected
benefit obligation 145,076 221,464
Unrecognized net transition asset (73,612) (80,850)
Unrecognized net (gain) loss (83,709) (139,729)
Unrecognized prior service cost 4,182 5,209
--------- --------
Net pension (liability) asset $(8,063) $ 6,094
========= ========
Plan assets primarily consist of equity securities,
corporate, U.S. agency, and Treasury bonds, and cash equivalents.
The projected benefit obligation was measured using an
assumed discount rate of 7% for 1993 and 7.75% for 1992 and 1991,
and a long-term rate of increase in future compensation levels of
5% for 1993 and 6% for 1992 and 1991. The net pension benefit
was measured using an expected long-term rate of return on plan
assets of 8% in 1993 and 7.5% in 1992 and 1991.
<PAGE>
Early Retirement
As part of the corporate restructuring that was announced in
the fourth quarter of 1993 (See Note 6 - Restructuring), the
Company offered a voluntary early retirement program from
December 1, 1993, through January 21, 1994, to employees who were
55 years and older and who had at least 10 years of service with
the Company. The program included two provisions: an unreduced
pension benefit for those eligible employees who were under 60
years old, and a monthly supplemental payment to "bridge"
employees to age 62 when they can begin collecting Social
Security benefits. 384 employees accepted the early retirement
opportunity. In 1993, the Company recorded a $19.9 million
expense for the early retirement program.
Postretirement Benefits Other Than Pensions
The Company has postretirement benefit plans, such as a
comprehensive health insurance plan and a prescription drug plan,
that provide certain benefits for retired employees and their
dependents. Substantially all of the Company's employees who
retire under the Company's pension plan may become eligible for
those benefits at retirement. At December 31, 1993, 1992, and
1991, 1,996, 1,905, and 1,866 retirees and their dependents,
respectively, were covered under these plans. The postretirement
benefit plans are unfunded as of December 31, 1993. However, the
Company is examining the cost-effectiveness of certain funding
alternatives.
In January 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), Employers' Accounting
for Postretirement Benefits Other Than Pensions, which requires
that the Company accrue a liability for estimated future
postretirement benefits during an employee's working career
rather than recognize an expense when benefits are paid. At the
time of adoption, the actuarially determined accumulated
postretirement benefit obligation (APBO) was $206.6 million. The
Company elected to recognize the APBO over 20 years.
In September 1993, the PSC issued a Statement of Policy
concerning the accounting and ratemaking treatment for pensions
and postretirement benefits other than pensions (PSC Policy).
The PSC Policy was effective January 1993, adopted SFAS 106 for
accounting and ratemaking purposes, and complies with generally
accepted accounting principles.
Postretirement benefits cost other than pensions that was
recognized on the income statement for the twelve months ended
December 31, 1993, 1992, and 1991, was $11.4 million, $5 million,
and $4.4 million, respectively. The amount for 1993 represents
the portion of SFAS 106 costs that the Company has been allowed
to collect from its customers. The amounts for the twelve months
<PAGE>
ended December 31, 1992 and 1991, represent the postretirement
benefits cost as determined prior to the adoption of SFAS 106,
when the cost was not recognized as an expense until the benefits
were paid. The Company has deferred $10.1 million of SFAS 106
costs as of December 31, 1993. The Company expects to recover
any deferred SFAS 106 amounts in accordance with the PSC Policy.
The PSC Policy allows various rate mechanisms, including the
use of excess pension fund assets, such as Internal Revenue
Service Code of 1986 Section 420 transfers, to temper the effect
of SFAS 106 on rates. In 1993, the Company transferred
approximately $5 million of its excess pension plan assets to
cover most of the cost of retirees' health care for that year.
As a result of this transfer, the Company recognized a decrease
in its deferred SFAS 106 asset.
The estimated net postretirement benefits cost other than
pensions for the 12 months ended December 31, 1993, includes the
following components:
(Thousands)
Service cost: Benefits accumulated
during the year $ 6,888
Interest cost on accumulated postretirement
benefit obligation 16,304
Amortization of transition obligation over
20 years 10,330
Deferral for future recovery (22,095)
---------
Net periodic postretirement benefits cost $ 11,427
==========
The status of the plans for postretirements benefits other
than pensions, as reflected in the Company's Consolidated Balance
Sheets at December 31, 1993, is as follows:
(Thousands)
Accumulated postretirement benefit
obligation (APBO):
Retired employees $ 69,947
Fully eligible active plan
participants 36,454
Other active plan employees 107,708
----------
Total APBO 214,109
----------
Less unrecognized transition
obligation 196,268
Less unrecognized net (gain) (10,233)
----------
Accrued postretirement liability $ 28,074
==========
<PAGE>
A 12% annual rate of increase in the per capita costs of
covered health care benefits was assumed for 1994, gradually
decreasing to 5% by the year 2003. Increasing the assumed health
care cost trend rates by 1% in each year would increase the APBO
as of January 1, 1994, by $41.5 million and increase the
aggregate of the service cost and interest cost components of the
net postretirement benefits cost for 1994 by $4.6 million. A
discount rate of 7% was used to determine the APBO.
8 Jointly-Owned Generating Stations
Nine Mile Point Unit 2
The Company has an undivided 18% interest in the output and
costs of the Nine Mile Point nuclear generating unit No. 2
(NMP2), which is being operated by Niagara Mohawk Power
Corporation (Niagara Mohawk). Ownership of NMP2 is shared with
Niagara Mohawk 41%, Long Island Lighting Company 18%, Rochester
Gas and Electric Corporation 14%, and Central Hudson Gas &
Electric Corporation 9%. The Company's share of the rated
capability is 189,000 kilowatts. The Company's net utility plant
investment, excluding nuclear fuel, was approximately $652
million and $660 million, at December 31, 1993 and 1992,
respectively. The accumulated provision for depreciation was
approximately $103 million and $90 million, at December 31, 1993
and 1992, respectively. The Company's share of operating
expenses is included in the Consolidated Statements of Income.
A low level radioactive waste management and contingency
plan that has been developed for NMP2 provides assurance that
NMP2 is properly prepared to handle interim storage of low level
radioactive waste until 1998.
Niagara Mohawk has contracted with the U.S. Department of
Energy (DOE) for disposal of high level radioactive waste (spent
fuel) from NMP2. The Company is reimbursing Niagara Mohawk for
its 18% share of the cost under the contract (currently
approximately $1 per megawatt hour of net generation). The DOE's
schedule for start of operations of their high level radioactive
waste repository has slipped from 2003 to no sooner than 2010.
The Company has been advised by Niagara Mohawk that the NMP2
Spent Fuel Storage Pool has a capacity for spent fuel that is
adequate until 2014. If further DOE schedule slippage should
occur, the recent development of pre-licensed dry storage
facilities for use at any nuclear power plant extends the on-site
storage capability for spent fuel at NMP2 beyond 2014.
<PAGE>
Nuclear Insurance
Niagara Mohawk maintains public liability and property
insurance for NMP2. The Company reimburses Niagara Mohawk for
its 18% share of those costs.
The public liability limit for a nuclear incident is
approximately $8.8 billion. Should losses stemming from a
nuclear incident exceed the commercially available public
liability insurance, each licensee of a nuclear facility would be
liable for up to a maximum of $75.5 million per incident, payable
at a rate not to exceed $10 million per year. The Company's
maximum liability for its 18% interest in NMP2 would be
approximately $13.6 million per incident. The $75.5 million
assessment is subject to periodic inflation indexing and a 5%
surcharge should funds prove insufficient to pay claims
associated with a nuclear incident. The Price-Anderson Act also
requires indemnification for precautionary evacuations whether or
not a nuclear incident actually occurs.
Niagara Mohawk maintains nuclear property insurance for NMP2
and is reimbursed by the Company for its 18% interest. Niagara
Mohawk has procured property insurance aggregating approximately
$2.7 billion through the Nuclear Insurance Pools and the Nuclear
Electric Insurance Limited (NEIL). In addition, the Company has
purchased NEIL insurance coverage for the extra expense incurred
in purchasing replacement power during prolonged accidental
outages. Under NEIL programs, should losses resulting from an
incident at a member facility exceed the accumulated reserves of
NEIL, each member, including the Company, would be liable for its
share of the deficiency. The Company's maximum liability under
the property damage and replacement power coverages is
approximately $2.3 million.
Nuclear Plant Decommissioning Costs
In May 1993, the Nuclear Regulatory Commission (NRC) updated
labor, energy, and burial cost factors for determining the
minimum funding requirement for nuclear decommissioning. As a
result, the Company's 18% share of the cost to decommission NMP2
is currently estimated to be $234 million in 2027, when
decommissioning is expected to commence ($74 million in 1993
dollars).
The Company's annual decommissioning allowance currently
included in electric rates is approximately $1.6 million and is
sufficient to recover the minimum funding requirement. The
Company believes that any increase in decommissioning costs will
ultimately be recovered in rates.
The Company has established a Qualified Fund under
applicable provisions of the federal tax law. The fund also
<PAGE>
complies with the NRC regulations which require the use of an
external trust fund to provide funds to decommission the
contaminated portion of NMP2. The balance in this fund was
approximately $5.7 million and $3.9 million at December 31, 1993
and 1992, respectively, and is included in other property and
investments on the Consolidated Balance Sheets.
Homer City
The Company has an undivided 50% interest in the output and
costs of the Homer City Generating Station, which is comprised of
three generating units. The station is owned with Pennsylvania
Electric Company, which operates the facility. The Company's
share of the rated capability is 954,000 kilowatts and its net
utility plant investment was approximately $258 million and $251
million at December 31, 1993 and 1992, respectively. The
accumulated provision for depreciation was approximately $159
million and $148 million, at December 31, 1993 and 1992,
respectively. The Company's share of operating expenses is
included in the Consolidated Statements of Income.
9 Commitments and Contingencies
Capital Expenditures
The Company has substantial commitments in connection with
its construction program and estimates that capital expenditures
for 1994, 1995, and 1996 will approximate $210 million, $200
million, and $200 million, respectively. These forecasted levels
have been significantly reduced as the Company is taking action
to address competition. The program is subject to periodic
review and revision, and actual construction costs may vary
because of revised load estimates, imposition of additional
regulatory requirements, and the availability and cost of
capital.
Environmental Matters
The Company continually assesses actions that may need to be
taken to ensure compliance with changing environmental laws and
regulations. Compliance programs will increase the cost of
electric and natural gas service by requiring changes to the
Company's operations and facilities. Historically, rate recovery
has been authorized for the cost incurred for compliance with
environmental laws and regulations.
Due to existing and proposed legislation and regulations,
and legal proceedings commenced by governmental bodies and
others, the Company may also incur costs from the past disposal
of hazardous substances produced during the Company's operations
or those of its predecessors. The Company has been notified by
the U. S. Environmental Protection Agency (EPA) and the New York
<PAGE>
State Department of Environmental Conservation (NYSDEC) that the
Company is among the potentially responsible parties (PRPs) who
may be liable to pay for costs incurred to remediate certain
hazardous substances at seven waste sites, not including the
Company's inactive gas manufacturing sites, which are discussed
below. With respect to the seven sites, five sites are included
in the New York State Registry of Inactive Hazardous Waste Sites
(New York State Registry).
Any liability may be joint and several for certain of these
sites. The ultimate cost to remediate these sites will be
dependent on such factors as the remedial action plan selected,
the extent of site contamination, and the portion attributed to
the Company. At December 31, 1993, the Company recorded a
liability in the Consolidated Balance Sheets related to four of
these seven sites of $1.8 million. The Company has notified the
NYSDEC that it believes it has no responsibility at two sites and
has already incurred expenditures related to the remediation at
the remaining site. A deferred asset has also been recorded in
the amount of $2.6 million, of which $.8 million relates to costs
that have already been incurred. The Company believes it will
recover these costs, since the PSC has allowed other utilities to
recover these types of remediation costs and has allowed the
Company to recover similar costs in rates, such as investigation
and cleanup costs relating to inactive gas manufacturing sites.
This $1.8 million estimate was derived by multiplying the total
estimated cost to clean up a particular site by the related
Company contribution factor. Estimates of the total cleanup
costs were determined by using information related to a
particular site, such as investigations performed to date at a
site or from the data released by a regulatory agency. In
addition, this estimate was based upon currently available facts,
existing technology, and presently enacted laws and regulations.
The contribution factor is calculated using either the Company's
percentage share of the total PRPs named, which assumes all PRPs
will contribute equally, or the Company's estimated percentage
share of the total hazardous wastes disposed of at a particular
site, or by using a 1% contribution factor for those sites at
which it believes that it has contributed a minimal amount of
hazardous wastes. The Company has notified its former and
current insurance carriers that it seeks to recover from them
certain of these cleanup costs. However, the Company is unable
to predict the amount of insurance recoveries, if any, that it
may obtain.
A number of the Company's inactive gas manufacturing sites
have been listed in the New York State Registry. The Company has
filed petitions to delist the majority of the sites. The
Company's program to investigate and initiate remediation at its
38 known inactive gas manufacturing sites has been extended
through the year 2000. Expenditures over this time period are
estimated to be $25 million. This estimate was determined by
<PAGE>
using the Company's experience and knowledge related to these
sites as a result of the investigation and remediation that the
Company has performed to date. It is based upon currently
available facts, existing technology, and presently enacted laws
and regulations. This liability, to investigate and initiate
remediation, as necessary, at the known inactive gas
manufacturing sites, is reflected in the Company's Consolidated
Balance Sheets at December 31, 1993 and 1992. The Company also
has recorded a corresponding deferred asset, since it expects to
recover such expenditures in rates, as the Company has previously
been allowed by the PSC to recover such costs in rates. The
Company has notified its former and current insurance carriers
that it seeks to recover from them certain of these cleanup
costs. However, the Company is unable to predict the amount of
insurance recoveries, if any, that it may obtain.
The Clean Air Act Amendments of 1990 (1990 Amendments) will
result in significant expenditures of approximately $178 million,
on a present value basis, over a 25 year period, for all capital
and operating and maintenance expenses related to the reduction
of sulfur dioxide and nitrogen oxides at several of the Company's
coal-fired generating stations of which $51 million has been
incurred as of December 31, 1993. The Company's current estimate
is a significant reduction from its prior estimate, primarily due
to the postponement of the construction of a flue gas
desulfurization (FGD) system at the Homer City Generating
Station. The Company plans to reevaluate the need to construct
an FGD system at the Homer City Generating Station in 1995, since
its present strategy to bank Phase I emissions allowances for use
during Phase II, as discussed below, will allow the Company to
meet Phase II allowance requirements through the year 2005. The
cost to comply with the sulfur dioxide and nitrogen oxide
limitations includes the construction of an innovative FGD system
and a nitrogen oxide reduction system expected to be completed in
1995 at the Company's Milliken Generating Station. The Company
estimates that approximately a 1% electric rate increase will be
required for the cost of reducing sulfur dioxide and nitrogen
oxide emissions in both Phase I (begins January 1, 1995) and
Phase II (begins January 1, 2000). As a result of the 1990
Amendments, the Company plans to reduce its annual sulfur dioxide
emissions by an amount that will allow the Company to meet the
sulfur dioxide levels established for the Company, which is
approximately a 49% reduction from approximately 138,000 tons in
1989 to 71,000 tons by the year 2000.
The cost of controlling toxic emissions under the 1990
Amendments, if required, cannot be estimated at this time.
Regulations may be adopted at the state level which would limit
toxic emissions even further, at an additional cost to the
Company. The Company anticipates that the costs incurred to
comply with the 1990 Amendments will be recoverable through rates
based on previous rate recovery of required environmental costs.
<PAGE>
The 1990 Amendments require the EPA to allocate annual
emissions allowances to each of the Company's coal-fired
generating stations based on statutory emissions limits. An
emissions allowance represents an authorization to emit, during
or after a specified calendar year, one ton of sulfur dioxide.
During Phase I, the Company estimates that it will have
allowances in excess of the affected coal-fired generating
stations' actual emissions. The Company's present strategy is to
bank these allowances for use in later years. By using a banking
strategy, it is estimated that Phase II allowance requirements
will be met through the year 2005 by utilizing the allowances
banked during Phase I, which includes the extension reserve
allowances discussed below, together with the Company's Phase II
annual emissions allowances. This strategy could be modified
should market or business conditions change. In addition to the
annual emissions allowances allocated to the Company by the EPA,
the Company will receive a portion of the extension reserve
allowances issued by the EPA to utilities electing to build
scrubbers, as a result of the pooling agreement that it entered
into with other utilities who were also eligible to receive some
of these extension reserve allowances.
As a result of existing and new solid waste disposal
legislation and regulations in Pennsylvania, the Company will
incur approximately $24 million, on a present value basis, of
additional costs over the next 30 years, beginning in 1994, at
the Homer City Generating Station. These costs will be incurred
to install new equipment, modify or replace existing equipment,
and improve the design of a proposed expansion of disposal
facilities. The Company expects to recover these expenditures in
rates, since the Company has been allowed by the PSC to recover
similar costs in rates, such as groundwater protection costs to
meet permit conditions and regulatory requirements.
Long-term Power Purchase Contracts
The Company has on line and under contract 362 megawatts
(mw) of non-utility generation (NUG) power. In addition, another
240 mw of NUG power is under construction. The Company is
required to make payments under these contracts only for the
power it receives. During 1993, 1992, and 1991 the Company
purchased approximately $138 million, $71 million, and $30
million, respectively, of NUG power. The Company estimates that
it will purchase approximately $255 million, $291 million, and
$335 million of NUG power for the years 1994, 1995, and 1996,
respectively. Increases in NUG power purchase costs are expected
to be a significant contributor to price increases over the next
three years.
As part of the Company's continuing effort to minimize
future price increases associated with uneconomical power
purchases from NUGs, the Company negotiated termination of
<PAGE>
agreements for the South Corning and Indeck-Kirkwood cogeneration
projects. The PSC approved full recovery of the $11.5 million in
termination costs for the Indeck-Kirkwood project in rates. The
Company expects to recover the $34 million in termination costs
for the South Corning project in rates because the PSC issued an
order in 1993 allowing the Company to defer these costs and the
Company has been allowed by the PSC to recover costs for the
Indeck-Kirkwood project in rates.
Coal Purchasing Contracts
The Company has long-term contracts with nonaffiliated
mining companies for the purchase of coal for the jointly-owned
Homer City Generating Station. The contracts, which expire
between 1994 and the end of the expected service life of the
generating station, require the purchase of either fixed or
minimum amounts of the station's coal requirements. The price of
the coal under one of these contracts is based on recovery of
production costs plus incentives. The remaining contracts are
based on fixed price plus escalation provisions. The Company's
share of the cost of coal purchased under these agreements is
expected to aggregate $66 million, $45 million, and $31 million
for the years 1994, 1995, and 1996, respectively.
In addition, the Company has a long-term contract for the
purchase of coal for the Kintigh Generating Station. The
contract, which expires in 1997, supplies the annual coal
requirements of the station. One-third of the tonnage price is
renegotiated annually to reflect market conditions. The
delivered cost of coal purchased under this agreement is expected
to be $56 million, $55 million, and $56 million for the years
1994, 1995, and 1996, respectively.
<PAGE>
10 Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments at
December 31, 1993 and 1992, were as follows:
Carrying Amount Fair Value
1993 1992 1993 1992
(Thousands)
First mortgage bonds $1,166,779 $1,318,845 $1,274,883 $1,388,990
Pollution control notes $575,695 $505,680 $581,928 $523,251
Preferred stock subject
to mandatory redemption
requirements $125,000 $108,550 $134,000 $119,031
The carrying amount for the following items approximates
estimated fair value because of the short maturity of those
instruments: cash and cash equivalents, commercial paper, and
interest accrued.
Special deposits include restricted funds that are set aside
for preferred stock and long-term debt redemptions. Special
deposits also include restricted funds that are used to finance a
portion of the costs incurred in the construction of certain
solid waste disposal and other related facilities. The carrying
amount approximates fair value because the special deposits have
been invested in securities with a short-term maturity.
The carrying amount of the revolving credit agreement note
approximates fair value because its pricing is based on short-
term interest rates.
The fair value of the Company's first mortgage bonds,
pollution control notes, and preferred stock is estimated based
on the quoted market prices for the same or similar issues of the
same remaining maturities.
<PAGE>
11 Industry Segment Information
Certain information pertaining to the electric and natural gas operations of
the Company is:
1993 1992 1991
Natural Natural Natural
Electric Gas Electric Gas Electric Gas
(Thousands)
Operating
Revenues $1,527,362 $272,787 $1,451,525 $240,164 $1,367,936 $187,879
Expenses $1,250,000 $249,493 $1,146,619 $221,307 $1,056,969 $177,751
Income $277,362 $23,294 $304,906 $18,857 $310,967 $10,128
Depreciation and
amortization* $155,231 $9,337 $150,549 $8,428 $145,700 $6,680
Construction
expenditures $208,576 $36,453 $210,185 $35,433 $210,127 $35,756
Identifiable
assets** $4,615,963 $458,596 $4,540,724 $377,424 $4,515,237 $340,090
* Included in operating expenses.
** Assets used in both electric and natural gas operations not included
above were $201,457, $159,768, and $69,509 at December 31, 1993, 1992, and
1991, respectively. They consist primarily of cash and cash equivalents,
special deposits, and prepayments.
12 Supplementary Income Statement Information
Charges for maintenance, repairs, and depreciation and amortization, are set
forth in the Consolidated Statements of Income. Taxes, other than federal
income taxes, are:
1993 1992 1991
(Thousands)
Property $84,616 $81,640 $76,589
Franchise and gross receipts 92,810 92,153 76,721
Payroll 17,985 17,096 15,467
Miscellaneous 9,551 10,052 9,408
-------- -------- --------
Total Other Taxes $204,962 $200,941 $178,185
======== ======== ========
<PAGE>
13 Quarterly Financial Information (Unaudited)
Quarter ended March 31 June 30 Sept. 30 Dec. 31
(Thousands, Except Per Share Amounts)
1993
Operating revenues $522,383 $388,601 $396,410 $492,755
Operating income $109,893 $56,649 $66,108 $68,006
Net income $74,039 $21,500 $32,541 $37,948 (1)
Earnings for common stock $68,838 $16,299 $27,340 $32,913
Earnings per share $.99 $.23 $.39 $.47 (1)
Dividends per share $.54 $.54 $.55 $.55
Average shares outstanding 69,561 69,836 70,119 70,431
Common stock price*
High $35.13 $36.50 $36.25 $35.50
Low $31.63 $32.13 $34.63 $28.75
1992
Operating revenues $489,847 $401,934 $367,833 $432,075
Operating income $111,373 $82,755 $60,109 $69,526
Net income $76,416 $46,772 $26,581 $34,199
Earnings for common stock $71,167 $41,488 $21,320 $28,998
Earnings per share $1.10 (2) $.60 (2) $.31 (2) $.42 (2)
Dividends per share $.53 $.53 $.54 $.54
Average shares outstanding 64,682 68,800 69,063 69,318
Common stock price*
High $29.63 $29.38 $32.00 $32.75
Low $26.13 $26.75 $29.25 $30.38
(1) Fourth quarter 1993 results reflect the effects of restructuring expenses,
which decreased net income and earnings for common stock by $17.2 million
and decreased earnings per share by 24 cents.
(2) Late in 1992, the Company began reflecting on its income statement the
value of energy consumed but not yet billed. If the Company had been
allowed by the PSC to include this unbilled revenue factor during all of
1992, quarterly earnings per share in 1992 would have been 94 cents, 39
cents, 38 cents, and 72 cents for the first, second, third, and fourth
quarters, respectively.
* The Company's common stock is listed on the New York Stock Exchange. The
number of stockholders of record at December 31, 1993 was 58,990.
Dividend Limitations: After dividends on all outstanding preferred stock have
been paid, or declared, and funds set apart for their payment, the common
stock is entitled to cash dividends as may be declared by the Board of
Directors out of retained earnings accumulated since December 31, 1946.
Common Stock dividends are limited if Common Stock Equity (45% at December 31,
1993) falls below 25% of total capitalization, as defined in the Company's
Certificate of Incorporation. Dividends on common stock cannot be paid unless
sinking fund requirements of the preferred stock are met. The Company has not
been restricted in the payment of dividends on common stock by these
provisions. Retained earnings accumulated since December 31, 1946, were
approximately $320 million and $327 million as of December 31, 1993 and 1992,
respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
New York State Electric & Gas Corporation and Subsidiaries
Ithaca, New York
We have audited the consolidated financial statements and the financial
statement schedules of New York State Electric & Gas Corporation and
Subsidiaries listed in Item 14(a) of this Form
10-K. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of New York State
Electric & Gas Corporation and Subsidiaries as of December 31, 1993 and 1992,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
As discussed in Note 7 to the consolidated financial statements, the Company
and Subsidiaries changed its method of accounting for postretirement benefits
other than pensions in 1993.
COOPERS & LYBRAND
New York, New York
January 28, 1994
<PAGE>
<TABLE>
<CAPTION>
NEW YORK STATE ELECTRIC & GAS CORPORATION
Schedule V - Property, Plant, and Equipment
For the Year Ended December 31, 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Balance at
Beginning of Additions Other End of
Classification Period at Cost (A) Retirements Changes (B) Period
Utility Plant Electric:
Plant in service:
Intangibles $ 1,583 $ - $ - $ - $ 1,583
Production:
Steam 1,725,890 68,155 9,899 2,168 1,786,314
Nuclear 740,437 6,464 5,311 - 741,590
Hydraulic 113,105 1,053 13 - 114,145
Internal combustion 712 2 1 - 713
Nuclear Fuel Assemblies 47,030 7,586 - - 54,616
Transmission 589,747 16,094 3,033 (538) 602,270
Distribution 1,265,035 81,388 11,459 819 1,335,783
General 84,895 22,471 1,851 33,162 (C) 138,677
------------ ----------- ----------- ----------- -------------
Total plant in service 4,568,434 203,213 31,567 35,611 4,775,691
Plant held for future use 5,010 44 - (3,377) 1,677
------------ ----------- ----------- ----------- -------------
4,573,444 203,257 31,567 32,234 4,777,368
Construction work in progress 120,629 (D) (10,872) - - 109,757 (E)
------------ ----------- ----------- ----------- -------------
Total electric 4,694,073 192,385 31,567 32,234 4,887,125
------------ ----------- ----------- ----------- -------------
Utility Plant Gas:
Plant in service:
Intangibles 390 41 - - 431
Production 8,271 79 25 - 8,325
Transmission 10,724 (6) - - 10,718
Distribution 312,454 28,317 1,501 17 339,287
General 5,539 3,121 270 (28) 8,362
------------ ----------- ----------- ----------- -------------
Total plant in service 337,378 31,552 1,796 (11) 367,123
Plant Acquisition Adjustment 14,654 - - (390)(F) 14,264
Plant held for future use 26 (24) - - 2
------------ ----------- ----------- ----------- -------------
352,058 31,528 1,796 (401) 381,389
Construction work in progress 9,571 (D) 2,985 - - 12,556 (E)
------------ ----------- ----------- ----------- -------------
Total gas 361,629 34,513 1,796 (401) 393,945
------------ ----------- ----------- ----------- -------------
Utility Plant Common:
Plant in service:
Intangibles 100 - - - 100
General 157,880 43,951 1,695 (41,250)(C,G) 158,886
------------ ----------- ----------- ----------- -------------
Total plant in service 157,980 43,951 1,695 (41,250) 158,986
Plant held for future use - - - - -
------------ ----------- ----------- ----------- -------------
157,980 43,951 1,695 (41,250) 158,986
Construction work in progress 47,366 (D) (25,820) - - 21,546 (E)
------------ ----------- ----------- ----------- -------------
Total common 205,346 18,131 1,695 (41,250) 180,532
------------ ----------- ----------- ----------- -------------
Total utility plant $ 5,261,048 $ 245,029 $ 35,058 $ (9,417) $ 5,461,602
============ =========== =========== =========== =============
Other physical property (H) $ 73,192 $ 10,771 $ 1,686 $ (1) $ 82,276
============ =========== =========== =========== =============
Notes:
(A) Includes AFDC.
(B) Transfers and Utility Plant Adjustments, except as noted below.
(C) Includes transfer of Energy Control System (ECS) project from Common to Electric construction work
in progress in service not classified of $33,187.
(D) Current year net additions less amounts placed in service included in beginning balance.
(E) Total Construction work in progress, $143,859.
(F) Adjustments related to the acquisition of Columbia Gas of New York, Inc.
(G) Includes Capital Leases - Vehicles and Computer Equipment.
(H) Included in Other Property and Investments, primarily Somerset Railroad Corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK STATE ELECTRIC & GAS CORPORATION
Schedule V - Property, Plant, and Equipment
For the Year Ended December 31, 1992
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Balance at
Beginning of Additions Other End of
Classification Period at Cost (A) Retirements Changes (B) Period
Utility Plant Electric:
Plant in service:
Intangibles $ 1,583 $ - $ - $ - $ 1,583
Production:
Steam 1,705,610 35,386 14,570 (536) 1,725,890
Nuclear 732,860 8,033 456 - 740,437
Hydraulic 105,095 8,262 252 - 113,105
Internal combustion 712 - - - 712
Nuclear Fuel Assemblies 37,116 9,914 - - 47,030
Transmission 571,563 19,456 1,255 (17) 589,747
Distribution 1,194,756 81,468 11,444 255 1,265,035
General 67,596 17,409 75 (35) 84,895
------------ ----------- ----------- ----------- -------------
Total plant in service 4,416,891 179,928 28,052 (333) 4,568,434
Plant held for future use 4,948 (5) - 67 5,010
------------ ----------- ----------- ----------- -------------
4,421,839 179,923 28,052 (266) 4,573,444
Construction work in progress 115,516 (C) 5,113 - - 120,629 (D)
------------ ----------- ----------- ----------- -------------
Total electric 4,537,355 185,036 28,052 (266) 4,694,073
------------ ----------- ----------- ----------- -------------
Utility Plant Gas:
Plant in service:
Intangibles 193 197 - - 390
Production 7,717 554 - - 8,271
Transmission 8,527 2,458 1 (260) 10,724
Distribution 275,821 37,705 1,349 277 312,454
General 4,866 688 3 (12) 5,539
------------ ----------- ----------- ----------- -------------
Total plant in service 297,124 41,602 1,353 5 337,378
Plant Acquisition Adjustment 20,544 - - (5,890)(E) 14,654
Plant held for future use 26 - - - 26
------------ ----------- ----------- ----------- -------------
317,694 41,602 1,353 (5,885) 352,058
Construction work in progress 18,504 (C) (8,933) - - 9,571 (D)
------------ ----------- ----------- ----------- -------------
Total gas 336,198 32,669 1,353 (5,885) 361,629
------------ ----------- ----------- ----------- -------------
Utility Plant Common:
Plant in service:
Intangibles 100 - - - 100
General 156,242 13,342 266 (11,438)(F) 157,880
------------ ----------- ----------- ----------- -------------
Total plant in service 156,342 13,342 266 (11,438) 157,980
Plant held for future use - - - - -
------------ ----------- ----------- ----------- -------------
156,342 13,342 266 (11,438) 157,980
Construction work in progress 32,795 (C) 14,571 - - 47,366 (D)
------------ ----------- ----------- ----------- -------------
Total common 189,137 27,913 266 (11,438) 205,346
------------ ----------- ----------- ----------- -------------
Total utility plant $ 5,062,690 $ 245,618 $ 29,671 $ (17,589) $ 5,261,048
============ =========== =========== =========== =============
Other physical property (G) $ 69,973 $ 117 $ 21 $ 3,123 $ 73,192
============ =========== =========== =========== =============
Notes:
(A) Includes AFDC.
(B) Transfers and Utility Plant Adjustments, except as noted below.
(C) Current year net additions less amounts placed in service included in beginning balance.
(D) Total Construction work in progress, $177,566.
(E) Adjustments related to the acquisition of Columbia Gas of New York, Inc.
(F) Includes Capital Leases - Vehicles and Computer Equipment.
(G) Included in Other Property and Investments, primarily Somerset Railroad Corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK STATE ELECTRIC & GAS CORPORATION
Schedule V - Property, Plant, and Equipment
For the Year Ended December 31, 1991
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Balance at
Beginning of Additions Other End of
Classification Period at Cost (A) Retirements Changes (B) Period
Utility Plant Electric:
Plant in service:
Intangibles $ 1,583 $ - $ - $ - $ 1,583
Production:
Steam 1,687,918 29,092 4,754 (6,646)(C) 1,705,610
Nuclear 731,657 1,220 17 - 732,860
Hydraulic 104,559 565 29 - 105,095
Internal combustion 712 - - - 712
Nuclear Fuel Assemblies 27,918 9,198 - - 37,116
Transmission 545,547 26,673 1,099 442 571,563
Distribution 1,130,047 75,259 10,711 161 1,194,756
General 43,968 25,245 1,245 (372) 67,596
------------ ----------- ----------- ----------- -------------
Total plant in service 4,273,909 167,252 17,855 (6,415) 4,416,891
Plant held for future use 6,016 - - (1,068) 4,948
------------ ----------- ----------- ----------- -------------
4,279,925 167,252 17,855 (7,483) 4,421,839
Construction work in progress 87,989 (D) 27,527 - - 115,516 (E)
------------ ----------- ----------- ----------- -------------
Total electric 4,367,914 194,779 17,855 (7,483) 4,537,355
------------ ----------- ----------- ----------- -------------
Utility Plant Gas:
Plant in service:
Intangibles 51 113 - 29 (F) 193
Production 4,727 71 - 2,919 (F) 7,717
Transmission 8,503 124 8 (92)(F) 8,527
Distribution 197,956 23,538 1,004 55,331 (F) 275,821
General 2,703 158 117 2,122 (F) 4,866
------------ ----------- ----------- ----------- -------------
Total plant in service 213,940 24,004 1,129 60,309 297,124
Plant Acquisition Adjustment - - - 20,544 (F) 20,544
Plant held for future use 24 2 - - 26
------------ ----------- ----------- ----------- -------------
213,964 24,006 1,129 80,853 317,694
Construction work in progress 8,160 (D) 10,344 - - 18,504 (E)
------------ ----------- ----------- ----------- -------------
Total gas 222,124 34,350 1,129 80,853 336,198
------------ ----------- ----------- ----------- -------------
Utility Plant Common:
Plant in service:
Intangibles 100 - - - 100
General 145,711 13,851 1,733 (1,587)(G) 156,242
------------ ----------- ----------- ----------- -------------
Total plant in service 145,811 13,851 1,733 (1,587) 156,342
Plant held for future use - - - - -
------------ ----------- ----------- ----------- -------------
145,811 13,851 1,733 (1,587) 156,342
Construction work in progress 29,892 (D) 2,903 - - 32,795 (E)
------------ ----------- ----------- ----------- -------------
Total common 175,703 16,754 1,733 (1,587) 189,137
------------ ----------- ----------- ----------- -------------
Total utility plant $ 4,765,741 $ 245,883 $ 20,717 $ 71,783 $ 5,062,690
============ =========== =========== =========== =============
Other physical property (H) $ 69,913 $ 373 $ 470 $ 157 $ 69,973
============ =========== =========== =========== =============
Notes:
(A) Includes AFDC.
(B) Transfers and Utility Plant Adjustments, except as noted below.
(C) Primarily the write-off of a portion of the disallowed Homer City Coal Cleaning Plant.
(D) Current year net additions less amounts placed in service included in beginning balance.
(E) Total Construction work in progress, $166,815.
(F) Adjustments related to the acquisition of Columbia Gas of New York, Inc.
(G) Includes Capital Leases - Vehicles and Computer Equipment.
(H) Included in Other Property and Investments, primarily Somerset Railroad Corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK STATE ELECTRIC & GAS CORPORATION
Schedule VI - Accumulated Depreciation of Property, Plant, and Equipment
For the Year Ended December 31, 1993
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Additions Balance at
Beginning Charged End
of to Costs Other of
Description Period and Expenses Retirements Changes (A) Period
Utility Plant Electric:
Plant in service:
Intangibles $ 407 $ 49 $ - $ - $ 456
Production:
Steam 550,539 65,074 13,927 (7,682)(B) 594,004
Nuclear 93,510 25,988 5,329 (5,131) 109,038
Hydraulic 17,945 2,143 53 - 20,035
Internal combustion 720 28 4 - 744
Nuclear Fuel Assemblies 33,158 - - 5,703 (C) 38,861
Transmission 196,728 12,890 17,096 156 192,678
Distribution 382,086 43,705 3,068 (156) 422,567
General 20,696 2,059 3,295 2,193 (D,E) 21,653
------------ ------------ ----------- ---------- -------------
Total plant in service 1,295,789 151,936 42,772 (4,917) 1,400,036
Plant held for future use 1,075 - 1,073 - 2
------------ ------------ ----------- ---------- -------------
Total electric 1,296,864 151,936 43,845 (4,917) 1,400,038
------------ ------------ ----------- ---------- -------------
Utility Plant Gas:
Plant in service:
Production 5,407 247 56 - 5,598
Transmission 3,933 415 769 - 3,579
Distribution 84,792 7,798 1,292 287 91,585
General 3,095 254 341 137 (D,E) 3,145
------------ ------------ ----------- ---------- -------------
Total gas 97,227 8,714 2,458 424 103,907
------------ ------------ ----------- ---------- -------------
Utility Plant Common:
Plant in service - general 33,702 3,918 1,427 1,318 (D) 37,511
------------ ------------ ----------- ---------- -------------
Total accumulated depreciation
of utility plant $ 1,427,793 $ 164,568(C) $ 47,730 $ (3,175) $ 1,541,456
============ ============ =========== ========== =============
Accumulated depreciation of
other physical property (F) $ 19,320 $ 2,962(G) $ 794 $ 360 $ 21,848
============ ============ =========== ========== =============
Notes:
(A) Transfers, except as noted below.
(B) Includes Somerset Non-Cash Return of $7,317 and $209 related to power plant asbestos removal.
(C) The amortization of nuclear fuel assemblies is classified as fuel expense on the Company's
Consolidated Statements of Income.
(D) Primarily provision for depreciation of automotive equipment, tools and work equipment charged
initially to clearing accounts and subsequently distributed to operating expense and construction
accounts.
(E) Distributed to deferred debits.
(F) Included in Other Property and Investments, primarily Somerset Railroad Corporation.
(G) Charged to non-operating income.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK STATE ELECTRIC & GAS CORPORATION
Schedule VI - Accumulated Depreciation of Property, Plant, and Equipment
For the Year Ended December 31, 1992
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Additions Balance at
Beginning Charged End
of to Costs Other of
Description Period and Expenses Retirements Changes (A) Period
Utility Plant Electric:
Plant in service:
Intangibles $ 358 $ 49 $ - $ - $ 407
Production:
Steam 507,896 64,197 14,128 (7,426)(B) 550,539
Nuclear 73,681 25,374 968 (4,577) 93,510
Hydraulic 16,247 2,128 430 - 17,945
Internal combustion 693 27 - - 720
Nuclear Fuel Assemblies 28,921 - - 4,237 (C) 33,158
Transmission 185,214 13,218 1,725 21 196,728
Distribution 357,227 40,708 15,818 (31) 382,086
General 17,913 1,926 464 1,321 (D,E) 20,696
------------ ------------ ----------- ---------- -------------
Total plant in service 1,188,150 147,627 33,533 (6,455) 1,295,789
Plant held for future use 1,075 - - - 1,075
------------ ------------ ----------- ---------- -------------
Total electric 1,189,225 147,627 33,533 (6,455) 1,296,864
------------ ------------ ----------- ---------- -------------
Utility Plant Gas:
Plant in service:
Production 5,169 238 - - 5,407
Transmission 3,589 223 10 131 3,933
Distribution 79,264 7,224 1,771 75 84,792
General 2,769 217 6 115 (D,E) 3,095
------------ ------------ ----------- ---------- -------------
Total gas 90,791 7,902 1,787 321 97,227
------------ ------------ ----------- ---------- -------------
Utility Plant Common:
Plant in service - general 29,813 3,448 724 1,165 (D) 33,702
------------ ------------ ----------- ---------- -------------
Total accumulated depreciation
of utility plant $ 1,309,829 $ 158,977(C) $ 36,044 $ (4,969) $ 1,427,793
============ ============ =========== ========== =============
Accumulated depreciation of
other physical property (F) $ 16,555 $ 2,421(G) $ (32) $ 312 $ 19,320
============ ============ =========== ========== =============
Notes:
(A) Transfers, except as noted below.
(B) Includes Somerset Non-Cash Return of $7,317 and $105 related to power plant asbestos removal.
(C) The amortization of nuclear fuel assemblies is classified as fuel expense on the Company's
Consolidated Statements of Income.
(D) Primarily provision for depreciation of automotive equipment, tools and work equipment charged
initially to clearing accounts and subsequently distributed to operating expense and construction
accounts.
(E) Distributed to deferred debits.
(F) Included in Other Property and Investments, primarily Somerset Railroad Corporation.
(G) Charged to non-operating income.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK STATE ELECTRIC & GAS CORPORATION
Schedule VI - Accumulated Depreciation of Property, Plant, and Equipment
For the Year Ended December 31, 1991
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Additions Balance at
Beginning Charged End
of to Costs Other of
Description Period and Expenses Retirements Changes (A) Period
Utility Plant Electric:
Plant in service:
Intangibles $ 311 $ 47 $ - $ - $ 358
Production:
Steam 466,294 63,300 12,773 (8,925)(B) 507,896
Nuclear 50,434 24,989 (2,621) (4,363) 73,681
Hydraulic 14,769 1,952 474 - 16,247
Internal combustion 665 28 - - 693
Nuclear Fuel Assemblies 23,042 - - 5,879 (C) 28,921
Transmission 173,032 13,355 1,149 (24) 185,214
Distribution 333,754 37,927 14,478 24 357,227
General 16,779 1,268 962 828 (D,E) 17,913
------------ ------------ ----------- ---------- -------------
Total plant in service 1,079,080 142,866 27,215 (6,581) 1,188,150
Plant held for future use 1,075 - - - 1,075
------------ ------------ ----------- ---------- -------------
Total electric 1,080,155 142,866 27,215 (6,581) 1,189,225
------------ ------------ ----------- ---------- -------------
Utility Plant Gas:
Plant in service:
Production 3,486 209 - 1,474 (F) 5,169
Transmission 3,129 152 (257) 51 (F) 3,589
Distribution 59,960 5,856 1,169 14,617 (F) 79,264
General 945 167 (133) 1,524 (D,E,F) 2,769
------------ ------------ ----------- ---------- -------------
Total gas 67,520 6,384 779 17,666 90,791
------------ ------------ ----------- ---------- -------------
Utility Plant Common:
Plant in service - general 26,976 3,130 938 645 (D) 29,813
------------ ------------ ----------- ---------- -------------
Total accumulated depreciation
of utility plant $ 1,174,651 $ 152,380(C) $ 28,932 $ 11,730 $ 1,309,829
============ ============ =========== ========== =============
Accumulated depreciation of
other physical property (G) $ 14,271 $ 2,296(H) $ (155) $ (167) $ 16,555
============ ============ =========== ========== =============
Notes:
(A) Transfers, except as noted below.
(B) Includes Somerset Non-Cash Return of $7,317 and $1,608 related to the Homer City Coal Cleaning
Plant Write-off.
(C) The amortization of nuclear fuel assemblies is classified as fuel expense on the Company's
Consolidated Statements of Income.
(D) Primarily provision for depreciation of automotive equipment, tools and work equipment charged
initially to clearing accounts and subsequently distributed to operating expense and construction
accounts.
(E) Distributed to deferred debits.
(F) Includes adjustments related to the acquisition of Columbia Gas of New York, Inc.
(G) Included in Other Property and Investments, primarily Somerset Railroad Corporation.
(H) Charged to non-operating income.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NEW YORK STATE ELECTRIC & GAS CORPORATION
SCHEDULE VIII - ALLOWANCE FOR DOUBTFUL ACCOUNTS - ACCOUNTS RECEIVABLE
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Beginning End
Year of Year Additions Write-offs (a) Adjustments of Year (c)
1993 $1,900 $15,306 $(13,206) $4,000
1992 700 11,518 (10,318) 1,900
1991 300 10,719 (10,673) $354 (b) 700
(a) Uncollectible accounts charged against the allowance, net of recoveries.
(b) Due to the acquisition of Columbia Gas of New York, Inc., in April 1991.
(c) Represents an estimate of the write-offs that will not be recovered in rates.
</TABLE>
<PAGE>
Item 9. Changes in and disagreements with accountants on accounting and
financial disclosure - None
PART III
Item 10. Directors and executive officers of the Registrant
Incorporated herein by reference to the information under the caption
"Election of Directors" in the Company's Proxy Statement dated March 31, 1994.
The information regarding executive officers is on pages 23-25 of this report.
Item 11. Executive compensation
Incorporated herein by reference to the information under the captions
"Executive Compensation," "Employment and Change in Control Arrangements,"
"Directors' Compensation," "Compensation Committee Interlocks and Insider
Participation," "Report of Executive Compensation and Succession Committee on
Executive Compensation" and "Stock Performance Graph" in the Company's Proxy
Statement dated March 31, 1994.
Item 12. Security ownership of certain beneficial owners and management
Incorporated herein by reference to the information under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the
Company's Proxy Statement dated March 31, 1994.
Item 13. Certain relationships and related transactions
Incorporated herein by reference to the information under the captions
"Election of Directors" and "Employment and Change in Control Arrangements" in
the Company's Proxy Statement dated March 31, 1994.
PART IV
Item 14. Exhibits, financial statement schedules, and reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial statements
Included in Part II of this report:
a) Consolidated Statements of Income for the three years
ended December 31, 1993
b) Consolidated Balance Sheets as of December 31, 1993 and 1992
c) For the three years ended December 31, 1993:
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Common Stock Equity
d) Notes to Consolidated Financial Statements
e) Report of Independent Accountants
2. Financial statement schedules
Included in Part II of this report:
For the three years ended December 31, 1993:
V. Property, Plant and Equipment
VI. Accumulated Depreciation of Property, Plant and Equipment
VIII. Allowance for Doubtful Accounts - Accounts Receivable
Schedules other than those listed above have been omitted since they are
not required, are inapplicable or the required information is presented in the
Consolidated Financial Statements or notes thereto.
<PAGE>
3. Exhibits
(a)(1) The following exhibits are delivered with this report:
Exhibit No.
3-11 - Certificate of Amendment of the Certificate of Incorporation filed
in the Office of the Secretary of State of the State of New
York on December 10, 1993.
3-12 - Certificate of Amendment of the Certificate of Incorporation filed
in the Office of the Secretary of State of the State of New
York on December 20, 1993.
3-13 - Certificate of Amendment of the Certificate of Incorporation filed
in the Office of the Secretary of State of the State of New
York on December 20, 1993.
3-15 - By-Laws of the Company as amended February 25, 1994.
10-14 - Coal Sales Agreement dated December 21, 1983 between New York
State Electric & Gas Corporation and Consolidation Coal Company.
(A) 10-21 - Retirement Plan for Directors Amendment No. 1.
(A) 10-23 - Deferred Compensation Plan for Directors Amendment No. 1.
(A) 10-32 - Supplemental Executive Retirement Plan Amendment No. 8.
(A) 10-33 - Supplemental Executive Retirement Plan Amendment No. 9.
(A) 10-35 - Annual Executive Incentive Compensation Plan Amendment No. 1.
(A) 10-36 - Annual Executive Incentive Compensation Plan Amendment No. 2.
(A) 10-41 - Performance Share Plan Amendment No. 4.
(A) 10-43 - Performance Share Deferred Compensation Plan Amendment No. 1.
(A) 10-46 - Employment Agreement for J. A. Carrigg.
(A) 10-47 - Form of Severance Agreement for Senior Vice Presidents.
(A) 10-48 - Form of Severance Agreement for Vice Presidents.
12 - Computation of Ratio of Earnings to Fixed Charges.
21 - Subsidiaries.
23 - Consent of Coopers & Lybrand to incorporation by reference into
certain registration statements.
99-1 - Form 11-K for New York State Electric & Gas Corporation Tax
Deferred Savings Plan for Salaried Employees.
99-2 - Form 11-K for New York State Electric & Gas Corporation Tax
Deferred Savings Plan for Hourly Paid Employees.
(a)(2) The following exhibits are incorporated herein by reference:
Exhibit No. Filed in As Exhibit No.
3-1 - Restated Certificate of Incorporation of the
Company pursuant to Section 807 of the Business
Corporation Law filed in the Office of the
Secretary of State of the State of New York on
October 25, 1988 - Registration No. 33-50719 . . . 4-11
3-2 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York
on October 17, 1989 - Registration No. 33-50719 . . 4-12
3-3 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the Secretary
of State of the State of New York on May 22, 1990 -
Registration No. 33-50719 . . . . . . . . . . . . . 4-13
3-4 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York
on October 31, 1990 - Registration No. 33-50719 . . 4-14
______________________________
(A) Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit No. Filed in As Exhibit No.
3-5 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York
on February 6, 1991 - Registration No. 33-50719 . . 4-15
3-6 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York
on October 15, 1991 - Registration No. 33-50719 . . 4-16
3-7 - Certificate of Merger of Columbia Gas of
New York, Inc. into the Company filed in the
Office of the Secretary of State of the State
of New York on April 8, 1991 - Registration
No. 33-50719 . . . . . . . . . . . . . . . . . . . 4-20
3-8 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the Secretary
of State of the State of New York
on May 28, 1992 - Registration No. 33-50719 . . . . 4-17
3-9 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the Secretary
of State of the State of New York
on October 20, 1992 - Registration No. 33-50719 . . . 4-18
3-10 - Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the Secretary
of State of the State of New York on October 14, 1993
Registration No. 33-50719 . . . . . . . . . . . . . . 4-19
3-14 - Certificates of the Secretary of the Company concern-
ing consents dated March 20, 1957 and May 9, 1975 of
holders of Serial Preferred Stock with respect to
issuance of certain unsecured indebtedness -
Registration No. 2-69988. . . . . . . . . . . . . . 4-7
4-1 - First Mortgage dated as of July 1, 1921 executed by
the Company under its then name of "New York State
Gas and Electric Corporation" to The Equitable Trust
Company of New York, as Trustee (Chemical Bank is
Successor Trustee) - Registration No. 33-4186 . . . 4-1
Supplemental Indentures to First Mortgage dated as of July 1, 1921:
4-2 - No. 37 - Registration No. 33-31297. . . . . . . . . 4-2
4-3 - No. 39 - Registration No. 33-31297. . . . . . . . . 4-3
4-4 - No. 43 - Registration No. 33-31297. . . . . . . . . 4-4
4-5 - No. 51 - Registration No. 2-59840 . . . . . . . . . 2-B(46)
4-6 - No. 68 - Registration No. 2-59840 . . . . . . . . . 2-B(63)
4-7 - No. 69 - Registration No. 2-59840 . . . . . . . . . 2-B(64)
4-8 - No. 71 - Registration No. 2-59840 . . . . . . . . . 2-B(66)
4-9 - No. 74 - Registration No. 2-59840 . . . . . . . . . 2-B(69)
4-10 - No. 75 - Registration No. 2-59840 . . . . . . . . . 2-B(70)
4-11 - No. 80 - Registration No. 2-59840 . . . . . . . . . 2-B(75)
4-12 - No. 81 - Registration No. 2-59840 . . . . . . . . . 2-B(76)
4-13 - No. 83 - Registration No. 2-65948 . . . . . . . . . 2-B(78)
4-14 - No. 99 - Registration No. 33-11303. . . . . . . . . 4-9
4-15 - No. 102- Registration No. 33-33838. . . . . . . . . 4-8
4-16 - No. 103- Registration No. 33-43458. . . . . . . . . 4-8
4-17 - No. 104- Registration No. 33-43458. . . . . . . . . 4-9
<PAGE>
4-18 - No. 105- Registration No. 33-52040. . . . . . . . . 4-8
4-19 - No. 106- Company's 10-K for year ended
December 31, 1992 - File No. 1-3103-2. . . 4-23
4-20 - No. 107- Company's 10-K for year ended
December 31, 1992 - File No. 1-3103-2. . . 4-24
4-21 - No. 108- Registration No. 33-50719. . . . . . . . . 4-8
4-22 - No. 109- Registration No. 33-50719. . . . . . . . . 4-9
Contracts, amendments, and letter agreement with the Power Authority of
the State of New York:
10-1 - Contract UD-4 dated July 28, 1975 (FitzPatrick
Power) - Registration No. 2-59840 . . . . . . . . . 5-5
Exhibit No. Filed in As Exhibit No.
10-2 - Contract PS-2 dated March 28, 1973 (Blenheim-
Gilboa) - Registration No. 2-59840. . . . . . . . . 5-6
10-3 - Letter Agreement dated February 3, 1982 relating to
transmission services - Registration No. 2-82192. . 10-1
10-4 - Amendment dated December 21, 1989 to the Letter
Agreement dated February 3, 1982 relating to trans-
mission services - Company's 10-K for year ended
December 31, 1989 - File No. 1-3103-2 . . . . . . 10-4
10-5 - Contract effective as of February 22, 1989 relating
to the purchase of hydroelectric power - Company's
10-K for year ended December 31, 1988 - File No.
1-3103-2. . . . . . . . . . . . . . . . . . . . . . 10-5
10-6 - Transmission Agreement dated December 12, 1983,
with respect to connection of the Company's Kintigh
(Somerset) Generating Station to the Niagara-Edic
345 kv transmission system - Company's 10-K for year
ended December 31, 1988 - File No. 1-3103-2 . . . . 10-6
10-7 - Amendment dated December 21, 1989 to the Transmission
Agreement dated December 12, 1983 with respect to
connection of the Company's Kintigh (Somerset) Gener-
ating Station to the Niagara-Edic 345 kv transmission
system - Company's 10-K for the year ended December
31, 1989 File No. 1-3103-2. . . . . . . . . . . . . 10-7
Coal Sales Agreements and Amendments between New York State Electric & Gas
Corporation, Pennsylvania Electric Company and:
10-8 - Helvetia Coal Company - Agreement made as of
December 22, 1966 - Registration No. 2-59840. . . . 5-11
10-9 - Helvetia Coal Company - Amendment made as of
April 1, 1974 - Registration No. 2-55131. . . . . . 5-F(1)b
10-10 - Amendment dated as of March 15, 1989 to the Coal
Sales Agreement made as of December 22, 1966 between
New York State Electric & Gas Corporation, Penn-
sylvania Electric Company and Helvetia Coal Company -
Company's 10-K for year ended December 31, 1990 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . 10-10
<PAGE>
10-11 - Amendment dated as of July 25, 1990 to the Coal
Sales Agreement made as of December 22, 1966 between
New York State Electric & Gas Corporation, Penn-
sylvania Electric Company and Helvetia Coal Company -
Company's 10-K for year ended December 31, 1990 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . 10-11
* * * * * * * * * *
Exhibit No. Filed in As Exhibit No.
10-12 - New York Power Pool Agreement dated July 11, 1985 -
Company's 10-K for year ended December 31, 1988 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-7
10-13 - Transmission Agreement dated January 10, 1990 between
New York State Electric & Gas Corporation and Niagara
Mohawk Power Corporation, with respect to remote load
and generation wheeling service for the Company -
Company's 10-K for year ended December 31, 1990 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-17
10-15 - Amendment No. 1 dated as of October 1, 1985 to the
Coal Sales Agreement dated December 21, 1983 between
the Company and Consolidation Coal Company -
Company's 10-K for year ended December 31, 1986 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-11
10-16 - Amendment No. 2 dated as of August 28, 1986 to the
Coal Sales Agreement dated December 21, 1983 between
the Company and Consolidation Coal Company -
Company's 10-K for year ended December 31, 1986 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-12
10-17 - Basic Agreement dated as of September 22, 1975
between New York State Electric & Gas Corporation
and others concerning Nine Mile Point Nuclear
Station, Unit No. 2 - Registration No. 2-54903. . . 5-0
10-18 - Nine Mile Point Nuclear Station Unit 2 Operating
Agreement effective as of January 1, 1993 among
New York State Electric & Gas Corporation and
others - Company's 10-K for the year ended
December 31, 1992 - File No. 1-3103-2 . . . . . . . 10-18
10-19 - Coal Hauling Agreement dated as of March 9, 1983
between Somerset Railroad Corporation and New
York State Electric & Gas Corporation -
Registration No. 2-82352. . . . . . . . . . . . . . 10
(A) 10-20 - Retirement Plan for Directors - Company's 10-K
for the year ended December 31, 1991 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-26
(A) 10-22 - Form of Deferred Compensation Plan for Directors -
Company's 10-K for year ended December 31, 1989 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-22
(A) 10-24 - Supplemental Executive Retirement Plan - Company's
10-Q for quarter ended September 30, 1984 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-19
(A) 10-25 - Supplemental Executive Retirement Plan Amendment
No. 1 - Company's 10-Q for quarter ended
March 31, 1985 - File No. 1-3103-2. . . . . . . . . 10-21
______________________________
(A) Management contract or compensatory plan or arrangement.
<PAGE>
Exhibit No. Filed in As Exhibit No.
(A) 10-26 - Supplemental Executive Retirement Plan Amendment
No. 2 - Company's 10-K for year ended December
31, 1987 - File No. 1-3103-2. . . . . . . . . . . . 10-19
(A) 10-27 - Supplemental Executive Retirement Plan Amendment
No. 3 - Company's 10-K for year ended December 31,
1988 - File No. 1-3103-2. . . . . . . . . . . . . . 10-24
(A) 10-28 - Supplemental Executive Retirement Plan Amendment
No. 4 - Company's 10-K for year ended December 31,
1990 - File No. 1-3103-2. . . . . . . . . . . . . . 10-30
(A) 10-29 - Supplemental Executive Retirement Plan Amendment
No. 5 - Company's 10-K for year ended December 31,
1990 - File No. 1-3103-2. . . . . . . . . . . . . . 10-31
(A) 10-30 - Supplemental Executive Retirement Plan Amendment
No. 6 - Company's 10-Q for quarter ended March 31,
1991 - File No. 1-3103-2. . . . . . . . . . . . . . 10-37
(A) 10-31 - Supplemental Executive Retirement Plan Amendment
No. 7 - Company's 10-Q for quarter ended June 30,
1992 - File No. 1-3103-2. . . . . . . . . . . . . . 10-44
(A) 10-34 - Annual Executive Incentive Compensation Plan.
Company's 10-K for year ended December 31, 1992 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-30
(A) 10-37 - Performance Share Plan - Company's 10-K for year
ended December 31, 1990 - File No. 1-3103-2 . . . . 10-36
(A) 10-38 - Performance Share Plan Amendment No. 1 - Company's
10-Q for quarter ended March 31, 1991 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-38
(A) 10-39 - Performance Share Plan Amendment No. 2 - Company's
10-Q for quarter ended June 30, 1991 -
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-39
(A) 10-40 - Performance Share Plan Amendment No. 3 - Company's
10-K for year ended December 31, 1992 - File No.
1-3103-2. . . . . . . . . . . . . . . . . . . . . . 10-34
(A) 10-42 - Performance Share Deferred Compensation Plan -
Company's 10-K for year ended December 31, 1991
File No. 1-3103-2 . . . . . . . . . . . . . . . . . 10-40
(A) 10-44 - Employment Contract for A. E. Kintigh - Company's
10-K for year ended December 31, 1988 - File
No. 1-3103-2. . . . . . . . . . . . . . . . . . . . 10-26
(A) 10-45 - Agreement with R. Fleming, Jr. - Company's 10-K for
year ended December 31, 1990 - File No. 1-3103-2. . 10-34
The Company agrees to furnish to the Commission, upon request, a copy of
the Revolving Credit Agreement dated as of July 31, 1992, between the Company,
Chemical Bank, as Agent, and certain banks; a copy of the Participation
Agreement dated as of February 1, 1984 between the Company and New York State
Energy Research and Development Authority (NYSERDA) relating to Pollution
Control Revenue Bonds; a copy of the Participation Agreements dated as of
October 15, 1984, June 1, 1987 and December 1, 1988 between the Company and
NYSERDA relating to Adjustable Rate Pollution Control Revenue Bonds (1984
Series A), (1987 Series A), and (1988 Series A), respectively; a copy of the
Participation Agreements dated as of March 1, 1985, October 15, 1985, July 15,
1985 and December 1, 1985 between the Company and NYSERDA relating to Annual
______________________________
(A) Management contract or compensatory plan or arrangement.
<PAGE>
Tender Pollution Control Revenue Bonds (1985 Series A), (1985 Series B), (1985
Series C) and (1985 Series D), respectively; a copy of the Participation
Agreements dated as of February 1, 1993 and February 1, 1994 between the
Company and NYSERDA relating to Pollution Control Refunding Revenue Bonds (1994
Series A) and (1994 Series B) respectively; a copy of the Participation
Agreement dated as of December 1, 1993 between the Company and NYSERDA relating
to Solid Waste Disposal Revenue Bonds (1993 Series A); and a copy of the Credit
Agreement dated as of March 9, 1983, as amended, between Somerset Railroad
Corporation and Chemical Bank. The total amount of securities authorized under
each of such agreements does not exceed 10% of the total assets of the Company
and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
A report on Form 8-K, dated November 29, 1993, was filed during the
fourth quarter of 1993 to report certain information under Item 5, "Other
Events."
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NEW YORK STATE ELECTRIC & GAS CORPORATION
Date: March 11, 1994 By Everett A. Robinson
Everett A. Robinson
Vice President and Controller
(Chief Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
PRINCIPAL EXECUTIVE OFFICER
Date: March 11, 1994 By James A. Carrigg
James A. Carrigg
Chairman, President,
Chief Executive Officer and
Director
PRINCIPAL FINANCIAL OFFICER
Date: March 11, 1994 By Sherwood J. Rafferty
Sherwood J. Rafferty
Vice President and Treasurer
PRINCIPAL ACCOUNTING OFFICER
Date: March 11, 1994 By Everett A. Robinson
Everett A. Robinson
Vice President and Controller
<PAGE>
Signatures (Cont'd)
Date: March 11, 1994 By Alison P. Casarett
Alison P. Casarett
Director
Date: March 11, 1994 By Everett A. Gilmour
Everett A. Gilmour
Director
Date: March 11, 1994 By Paul L. Gioia
Paul L. Gioia
Director
Date: March 11, 1994 By John M. Keeler
John M. Keeler
Director
Date: March 11, 1994 By Allen E. Kintigh
Allen E. Kintigh
Director
Date: March 11, 1994 By Ben E. Lynch
Ben E. Lynch
Director
Date: March 11, 1994 By Alton G. Marshall
Alton G. Marshall
Director
Date: March 11, 1994 By David R. Newcomb
David R. Newcomb
Director
Date: March 11, 1994 By Robert A. Plane
Robert A. Plane
Director
Date: March 11, 1994 By C. William Stuart
C. William Stuart
Director
<PAGE>
EXHIBIT INDEX
* 3-1 -- Restated Certificate of Incorporation of the
Company pursuant to Section 807 of the Business
Corporation Law filed in the Office of the
Secretary of State of the State of New York on
October 25, 1988.
* 3-2 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
October 17, 1989.
* 3-3 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
May 22, 1990.
* 3-4 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
October 31, 1990.
* 3-5 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
February 6, 1991.
* 3-6 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
October 15, 1991.
* 3-7 -- Certificate of Merger of Columbia Gas of New
York, Inc. into the Company filed in the Office
of the Secretary of State of the State of New
York on April 8, 1991.
* 3-8 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
May 28, 1992.
* 3-9 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
October 20, 1992.
* 3-10 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
October 14, 1993.
3-11 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
December 10, 1993.
3-12 -- Certificate of Amendment of the Certificate of
Incorporation filed in the Office of the
Secretary of State of the State of New York on
December 20, 1993.
___________________________________
* Incorporated by reference.
<PAGE>
EXHIBIT INDEX (Cont'd)
3-13 -- Certificate of Amendment of the Certificate
of Incorporation filed in the Office of the
Secretary of State of the State of New York on
December 20, 1993.
* 3-14 -- Certificates of the Secretary of the Company
concerning consents dated March 20, 1957 and May
9, 1975 of holders of Serial Preferred Stock with
respect to issuance of certain unsecured
indebtedness.
3-15 -- By-Laws of the Company as amended February 25,
1994.
* 4-1 -- First Mortgage dated as of July 1, 1921 executed
by the Company under its then name of "New York
State Gas and Electric Corporation" to The
Equitable Trust Company of New York, as Trustee
(Chemical Bank is Successor Trustee).
Supplemental Indentures to First Mortgage dated as of July 1, 1921:
* 4-2 -- No. 37 * 4-9 -- No. 74 * 4-16 -- No. 103
* 4-3 -- No. 39 * 4-10 -- No. 75 * 4-17 -- No. 104
* 4-4 -- No. 43 * 4-11 -- No. 80 * 4-18 -- No. 105
* 4-5 -- No. 51 * 4-12 -- No. 81 * 4-19 -- No. 106
* 4-6 -- No. 68 * 4-13 -- No. 83 * 4-20 -- No. 107
* 4-7 -- No. 69 * 4-14 -- No. 99 * 4-21 -- No. 108
* 4-8 -- No. 71 * 4-15 -- No. 102 * 4-22 -- No. 109
Contracts, Amendments, and Letter Agreement with the Power
Authority of the State of New York:
* 10-1 -- Contract UD-4 dated July 28, 1975 (FitzPatrick
Power).
* 10-2 -- Contract PS-2 dated March 28, 1973 (Blenheim-
Gilboa).
* 10-3 -- Letter Agreement dated February 3, 1982 relating
to transmission services.
* 10-4 -- Amendment dated December 21, 1989 to the Letter
Agreement dated February 3, 1982 relating to
transmission services.
* 10-5 -- Contract effective as of February 22, 1989
relating to the purchase of hydroelectric power.
* 10-6 -- Transmission Agreement dated December 12, 1983,
with respect to connection of the Company's
Kintigh (Somerset) Generating Station to the
Niagara-Edic 345 kv transmission system.
___________________________________
* Incorporated by reference.
<PAGE>
EXHIBIT INDEX (Cont'd)
* 10-7 -- Amendment dated December 21, 1989 to the
Transmission Agreement dated December 12, 1983
with respect to connection of the Company's
Kintigh (Somerset) Generating Station to the
Niagara-Edic 345 kv transmission system.
* * * * * * * * * *
Coal Sales Agreements and Amendments between New York State
Electric & Gas Corporation, Pennsylvania Electric Company and:
* 10-8 -- Helvetia Coal Company--Agreement made as of
December 22, 1966.
* 10-9 -- Helvetia Coal Company--Amendment made as of April
1, 1974.
* 10-10 -- Helvetia Coal Company--Amendment made as of March
15, 1989.
* 10-11 -- Helvetia Coal Company--Amendment made as of July
25, 1990.
* * * * * * * * * *
* 10-12 -- New York Power Pool Agreement dated July 11,
1985.
* 10-13 -- Transmission Agreement dated January 10, 1990
between New York State Electric & Gas Corporation
and Niagara Mohawk Power Corporation, with
respect to remote load and generation wheeling
service for the Company.
* * * * * * * * * *
Coal Sales Agreement and Amendments between New York State Electric & Gas
Corporation and Consolidation Coal Company:
10-14 -- Agreement dated December 21, 1983.
* 10-15 -- Amendment No. 1 dated as of October 1, 1985.
* 10-16 -- Amendment No. 2 dated as of August 28, 1986.
* * * * * * * * * *
* 10-17 -- Basic Agreement dated as of September 22, 1975
between New York State Electric & Gas Corporation
and others concerning Nine Mile Point Nuclear
Station, Unit No. 2.
* 10-18 -- Nine Mile Point Nuclear Station Unit 2 Operating
Agreement effective as of January 1, 1993 among
New York State Electric & Gas Corporation and
others.
___________________________________
* Incorporated by reference.
<PAGE>
EXHIBIT INDEX (Cont'd)
* 10-19 -- Coal Hauling Agreement dated as of March 9, 1983
between Somerset Railroad Corporation and New
York State Electric & Gas Corporation.
(A)* 10-20 -- Retirement Plan for Directors.
(A) 10-21 -- Retirement Plan for Directors Amendment No. 1
(A)* 10-22 -- Form of Deferred Compensation Plan for Directors.
(A) 10-23 -- Deferred Compensation Plan for Directors
Amendment No. 1.
(A)* 10-24 -- Supplemental Executive Retirement Plan
(A)* 10-25 -- Supplemental Executive Retirement Plan Amendment
No. 1.
(A)* 10-26 -- Supplemental Executive Retirement Plan Amendment
No. 2.
(A)* 10-27 -- Supplemental Executive Retirement Plan Amendment
No. 3.
(A)* 10-28 -- Supplemental Executive Retirement Plan Amendment
No. 4.
(A)* 10-29 -- Supplemental Executive Retirement Plan Amendment
No. 5.
(A)* 10-30 -- Supplemental Executive Retirement Plan Amendment
No. 6.
(A)* 10-31 -- Supplemental Executive Retirement Plan Amendment
No. 7.
(A) 10-32 -- Supplemental Executive Retirement Plan Amendment
No. 8.
(A) 10-33 -- Supplemental Executive Retirement Plan Amendment
No. 9.
(A)* 10-34 -- Annual Executive Incentive Compensation Plan.
(A) 10-35 -- Annual Executive Incentive Compensation Plan
Amendment No. 1.
(A) 10-36 -- Annual Executive Incentive Compensation Plan
Amendment No. 2.
(A)* 10-37 -- Performance Share Plan.
(A)* 10-38 -- Performance Share Plan Amendment No. 1.
(A)* 10-39 -- Performance Share Plan Amendment No. 2.
(A)* 10-40 -- Performance Share Plan Amendment No. 3
(A) 10-41 -- Performance Share Plan Amendment No. 4
(A)* 10-42 -- Performance Share Deferred Compensation Plan.
(A) 10-43 -- Performance Share Deferred Compensation Plan
Amendment No. 1
(A)* 10-44 -- Employment Contract for A. E. Kintigh.
(A)* 10-45 -- Agreement with R. Fleming, Jr.
(A) 10-46 -- Employment Agreement for J. A. Carrigg.
(A) 10-47 -- Form of Severance Agreement for Senior Vice
Presidents.
(A) 10-48 -- Form of Severance Agreement for Vice Presidents.
___________________________________
(A) Management contract or compenstory plan or arrangement.
* Incorporated by reference.
<PAGE>
EXHIBIT INDEX (Cont'd)
12 -- Computation of Ratio of Earnings to Fixed Charges.
21 -- Subsidiaries.
23 -- Consent of Coopers & Lybrand to incorporation by
reference into certain registration statements.
99-1 -- Form 11-K for New York State Electric & Gas
Corporation Tax Deferred Savings Plan for
Salaried Employees.
99-2 -- Form 11-K for New York State Electric & Gas
Corporation Tax Deferred Savings Plan for Hourly
Paid Employees.
<PAGE>
<PAGE>
EXHIBIT 3-11
NEW YORK STATE ELECTRIC & GAS CORPORATION
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF NEW YORK STATE ELECTRIC & GAS CORPORATION PURSUANT
TO SECTION 805 OF THE BUSINESS CORPORATION LAW
We, SHERWOOD J. RAFFERTY and D. W. FARLEY, a Vice President
and the Secretary, respectively, of NEW YORK STATE ELECTRIC & GAS
CORPORATION, do hereby certify as follows:
1. The name of the Corporation is New York State Electric &
Gas Corporation. The name under which it was originally
incorporated was the Ithaca Gas Light Company.
2. The date of filing of the Certificate of Incorporation in
the office of the Secretary of State of the State of New York was
the 28th day of October, 1852.
3. The Certificate of Incorporation of the Corporation is
amended to add a provision as authorized by subparagraph 12 of
Section 801 of the Business Corporation Law stating the
designations, preferences, privileges and voting powers of the
shares of a series of the Serial Preferred Stock of the
Corporation and the restrictions or qualifications thereof.
4. The provisions of the Certificate of Incorporation which
contain the designations, preferences, privileges, voting powers,
restrictions and qualifications of the Serial Preferred Stock of
the Corporation are hereby amended to include the following:
(Q) The Board of Directors has designated Two Million
(2,000,000) shares of Serial Preferred Stock as Adjustable
Rate Serial Preferred Stock, Series B (Cumulative, $25 Par
Value) (hereinafter referred to as the Adjustable Rate
Series B), and has fixed:
(1) The annual dividend rate for the shares of the
Adjustable Rate Series B at 5.12% per annum for the
first and second dividend periods ending December 31,
1993 and March 31, 1994, respectively, and at the
Applicable Rate (as defined below), from time to time
in effect, for each subsequent dividend period.
However, the dividend rate for any dividend period
shall in no event be less than 4.00% per annum or
greater than 10.00% per annum. Dividends on the
Adjustable Rate Series B shall be cumulative from the
date of original issue.
Except as provided below in this paragraph, the
"Applicable Rate" for any dividend period will be (a)
the highest of the Treasury Bill Rate, the Ten Year
Constant Maturity Rate and the Thirty Year Constant
Maturity Rate (each as hereinafter defined) for such
dividend period, multiplied by (b) 83%. In the event
that the Corporation determines in good faith that for
any reason one or more of such rates cannot be
determined for any dividend period, then the Applicable
Rate for such dividend period shall be (a) the higher
of whichever of such rates can be determined,
multiplied by (b) 83%. In the event that the
Corporation determines in good faith that for any
reason none of such rates can be determined for any
dividend period, then the Applicable Rate for such
dividend period shall be the Applicable Rate in effect
for the preceding dividend period.
Except as provided below in this paragraph, the
"Treasury Bill Rate" for each dividend period will be
the arithmetic average of the two most recent weekly
per annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall
be published during the relevant Calendar Period (as
defined below)) for three-month U.S. Treasury bills, as
published weekly by the Federal Reserve Board during
the Calendar Period immediately prior to the ten
calendar days immediately preceding the last day of
March, June, September or December, as the case may be,
prior to the dividend period for which the dividend
rate on the Adjustable Rate Series B is being
determined. In the event that the Federal Reserve Board
does not publish a weekly per annum market discount
rate during any such Calendar Period, then the Treasury
Bill Rate for the related dividend period shall be the
arithmetic average of the two most recent weekly per
annum market discount rates (or the one weekly per
annum market discount rate, if only one such rate shall
be published during the relevant Calendar Period) for
three-month U.S. Treasury bills, as published weekly
during such Calendar Period by any Federal Reserve Bank
or by any U.S. Government department or agency selected
by the Corporation. In the event that a per annum
market discount rate for three-month U.S. Treasury
bills shall not be published by the Federal Reserve
Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar
Period, then the Treasury Bill Rate for such dividend
period shall be the arithmetic average of the two most
recent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only one
such rate shall be published during the relevant
Calendar Period) for all of the U.S. Treasury bills
then having maturities of not less than 80 nor more
than 100 days, as published during such Calendar Period
by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such rates, by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that
the Corporation determines in good faith that for any
reason no such U.S. Treasury bill rates are published
as provided above during such Calendar Period, then the
Treasury Bill Rate for such dividend period shall be
the arithmetic average of the per annum market discount
rates based upon the closing bids during such Calendar
Period for each of the issues of marketable
non-interest bearing U.S. Treasury securities with a
maturity of not less than 80 nor more than 100 days
from the date of each such quotation, as quoted daily
for each business day in New York City (or less
frequently if daily quotations shall not be generally
available) to the Corporation by at least three
recognized U.S. Government securities dealers selected
by the Corporation. In the event that the Corporation
determines in good faith that for any reason the
Corporation cannot determine the Treasury Bill Rate
for any dividend period as provided above in this
paragraph, the Treasury Bill Rate for such dividend
period shall be the arithmetic average of the per annum
market discount rates based upon the closing bids
during the related Calendar Period for each of the
issues of marketable interest-bearing U.S. Treasury
securities with a maturity of not less than 80 nor more
than 100 days from the date of each such quotation, as
quoted daily for each business day in New York City (or
less frequently if daily quotations shall not be
generally available) to the Corporation by at least
three recognized U.S. Government securities dealers
selected by the Corporation.
Except as provided below in this paragraph, the
"Ten Year Constant Maturity Rate" for each dividend
period shall be the arithmetic average of the two most
recent weekly per annum Ten Year Average Yields (or the
one weekly per annum Ten Year Average Yield, if only
one such Yield shall be published during the relevant
Calendar Period), as published weekly by the Federal
Reserve Board during the Calendar Period immediately
prior to the ten calendar days immediately preceding
the last day of March, June, September or December, as
the case may be, prior to the dividend period for which
the dividend rate on the Adjustable Rate Series B is
being determined. In the event that the Federal Reserve
Board does not publish such a weekly per annum Ten Year
Average Yield during such Calendar Period, then the Ten
Year Constant Maturity Rate for such dividend period
shall be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields (or the one
weekly per annum Ten Year Average Yield, if only one
such Yield shall be published during such Calendar
Period), as published weekly during such Calendar
Period by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the
Corporation. In the event that a per annum Ten Year
Average Yield shall not be published by the Federal
Reserve Board or by any Federal Reserve Bank or by any
U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum average
yields to maturity (or the one weekly average yield to
maturity, if only one such yield shall be published
during such Calendar Period) for all of the actively
traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities (as defined
below)) then having maturities of not less than eight
nor more than twelve years, as published during such
Calendar Period by the Federal Reserve Board or, if
the Federal Reserve Board shall not publish such
yields, by any Federal Reserve Bank or by any U.S.
Government department or agency selected by the
Corporation. In the event that the Corporation
determines in good faith that for any reason the
Corporation cannot determine the Ten Year Constant
Maturity Rate for any dividend period as provided above
in this paragraph, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity
based upon the closing bids during such Calendar Period
for each of the issues of actively traded marketable
U.S. Treasury fixed interest rate securities (other
than Special Securities) with a final maturity date not
less than eight nor more than twelve years from the
date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if
daily quotations shall not be generally available) to
the Corporation by at least three recognized U.S.
Government securities dealers selected by the
Corporation.
Except as provided below in this paragraph, the
"Thirty Year Constant Maturity Rate" for each dividend
period shall be the arithmetic average of the two most
recent weekly per annum Thirty Year Average Yields (or
the one weekly per annum Thirty Year Average Yield, if
only one such Yield shall be published during the
relevant Calendar Period), as published weekly by the
Federal Reserve Board during the Calendar Period
immediately prior to the ten calendar days immediately
preceding the last day of March, June, September or
December, as the case may be, prior to the dividend
period for which the dividend rate on the Adjustable
Rate Series B is being determined. In the event that
the Federal Reserve Board does not publish such a
weekly per annum Thirty Year Average Yield during such
Calendar Period, then the Thirty Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum Thirty
Year Average Yields (or the one weekly per annum Thirty
Year Average Yield, if only one such Yield shall be
published during such Calendar Period), as published
weekly during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that a
per annum Thirty Year Average Yield shall not be
published by the Federal Reserve Board or by any
Federal Reserve Bank or by any U.S. Government
department or agency during such Calendar Period, then
the Thirty Year Constant Maturity Rate for such
dividend period shall be the arithmetic average of
the two most recent weekly per annum average yields to
maturity (or the one weekly per annum average yield to
maturity, if only one such yield shall be published
during such Calendar Period) for all of the actively
traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) then having
maturities of not less than twenty-eight nor more than
thirty years, as published during such Calendar Period
by the Federal Reserve Board or, if the Federal Reserve
Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Corporation. In the event that
per annum average yields to maturity for all of the
actively traded marketable U.S. Treasury fixed interest
rate securities (other than Special Securities) then
having maturities of not less than twenty-eight nor
more than thirty years shall not be published by the
Federal Reserve Board or by any Federal Reserve Bank or
by any U.S. Government department or agency during such
Calendar Period, then the Thirty Year Constant Maturity
Rate for such dividend period shall be determined in
the manner specified in the preceding sentence based
upon all of the actively traded marketable U.S.
Treasury fixed interest rate securities (other than
Special Securities) then having maturities of not less
than twenty-five years or, in the absence of which,
twenty years. In the event that the Corporation
determines in good faith that for any reason the
Corporation cannot determine the Thirty Year Constant
Maturity Rate for any dividend period as provided above
in this paragraph, then the Thirty Year Constant
Maturity Rate for such dividend period shall be the
arithmetic average of the per annum average yields to
maturity based upon the closing bids during such
Calendar Period for each of the issues of actively
traded marketable U.S. Treasury fixed interest rate
securities (other than Special Securities) with a final
maturity date not less than twenty-eight nor more than
thirty years (or, in the absence of which, having
maturities of not less than twenty-five years or, in
the further absence of which, twenty years) from the
date of each such quotation, as quoted daily for each
business day in New York City (or less frequently if
daily quotations shall not be generally available) to
the Corporation by at least three recognized U.S.
Government securities dealers selected by the
Corporation.
The Treasury Bill Rate, the Ten Year Constant
Maturity Rate and the Thirty Year Constant Maturity
Rate shall each be rounded to the nearest one-hundredth
of a percentage point.
The amount of dividends per share payable for each
dividend period shall be computed by dividing the
dividend rate for such dividend period by four and
applying such rate against the par value per share of
the Adjustable Rate Series B. The amount of dividends
payable for the initial dividend period or any period
shorter than a full quarterly dividend period shall be
computed on the basis of 30-day months and a 360-day
year.
The dividend rate with respect to each dividend
period will be calculated as promptly as practicable by
the Corporation according to the appropriate method
described herein. The mathematical accuracy of each
such calculation will be confirmed in writing by
independent accountants of recognized standing. Except
for the dividend rate for the initial dividend period
and for the dividend period commencing January 1, 1994,
the Corporation will cause each dividend rate to be
published in a newspaper of general circulation in New
York City prior to the commencement of the new dividend
period to which it applies and will cause notice of
such dividend rate to be enclosed with the dividend
payment checks next mailed to the holders of the
Adjustable Rate Series B.
As used herein, the term "Calendar Period" means
a period of fourteen calendar days; the term "Special
Securities" means securities which can, at the option
of the holder, be surrendered at face value in payment
of any Federal estate tax or which provide tax benefits
to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or
substantial discount; the term "Ten Year Average Yield"
means the average yield to maturity for actively traded
marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of ten years); and the
term "Thirty Year Average Yield" means the average
yield to maturity for actively traded marketable U.S.
Treasury fixed interest rate securities (adjusted to
constant maturities of thirty years).
(2) The redemption price for the shares of the
Adjustable Rate Series B at $27.50 per share if
redeemed prior to December 1, 1998 and at $25.00 per
share if redeemed on or after December 1, 1998,
together in each case with all dividends accrued and in
arrears thereon to the date fixed for such redemption;
provided, however, that the Corporation will not, prior
to December 1, 1998, redeem any shares of the
Adjustable Rate Series B if such redemption is a part,
or in anticipation, of any refunding operation
involving the application, directly or indirectly, of
borrowed funds or the proceeds of an issue of any stock
ranking superior to or on a parity with the Adjustable
Rate Series B if such borrowed funds have an interest
rate or cost to the Corporation, or such stock has a
dividend rate or cost to the Corporation (calculated in
each case in accordance with generally accepted
financial practice), less than 5.24% per annum.
(3) The amount payable to the holders of the
shares of the Adjustable Rate Series B in the event of
any voluntary liquidation, dissolution or winding-up of
the Corporation at amounts equal to the respective
redemption prices per share specified in subparagraph
(2) above, and the amount per share payable to the
holders thereof in the event of any involuntary
liquidation, dissolution or winding-up of the
Corporation at $25, together in each case with all
dividends accrued and in arrears thereon to the date of
such liquidation, dissolution or winding-up.
(4) The procedure for selection of shares of the
Adjustable Rate Series B in the case of partial
redemption. In every case of redemption of less than
all of the outstanding shares of the Adjustable Rate
Series B, the shares to be redeemed shall be selected
pro rata as among the holders of record of shares of
the Adjustable Rate Series B, in the same proportions,
as nearly as possible, as the total number of shares of
the Adjustable Rate Series B held by such holders,
respectively, bears to all of the shares of the
Adjustable Rate Series B then outstanding.
(5) The treatment of shares of the Adjustable Rate
Series B purchased or redeemed by the Corporation. All
shares of the Adjustable Rate Series B purchased or
redeemed by the Corporation shall be cancelled, shall
not be reissued as shares of the Adjustable Rate Series
B, and shall constitute authorized but unissued shares
of the Serial Preferred Stock with a par value of
Twenty-Five Dollars ($25) per share of the Corporation.
(6) The meaning of the term "dividends accrued and
in arrears" when used with reference to any share of
the Adjustable Rate Series B. The term "dividends
accrued and in arrears," when used with reference to
any share of the Adjustable Rate Series B, shall mean,
whether or not in any period or periods there shall be
earnings or surplus available for the payment of
dividends, (i) an amount in dollars equal to the sum of
the dividends payable for each dividend period on such
share from the date of cumulation (as heretofore
defined) for the shares of such series to the date as
of which the computation of dividends accrued and in
arrears is made, less (ii) the aggregate of all
dividends theretofore paid, or deemed paid as
heretofore provided, on such share.
5. The amendment of the Certificate of Incorporation as set
forth herein was authorized by the Board of Directors of the
Corporation in accordance with Section 502(d) of the Business
Corporation Law.
IN WITNESS WHEREOF, we have subscribed and D.W. Farley has
verified this Certificate this 8th day of December, 1993.
/s/ SHERWOOD J. RAFFERTY
SHERWOOD J. RAFFERTY
Vice President
/s/D.W. FARLEY
D.W. FARLEY
Secretary
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
D.W. FARLEY, being duly sworn, deposes and says, that he is
Vice President and Secretary of New York State Electric & Gas
Corporation, the Corporation named in and described in the
foregoing Certificate, that he has read and signed the foregoing
Certificate and the statements contained therein are true.
/s/ D.W. FARLEY
D.W. FARLEY
Subscribed and sworn to before me this
8th day of December, 1993.
/s/LEONARD BLUM
LEONARD BLUM
Notary Public
State of New York
No. 30-0328750
Qualified in Nassau County
Commission Expires March 30, 1995<PAGE>
STATE OF NEW YORK
PUBLIC SERVICE COMMISSION
Albany, NY, December 8, 1993
CASE 93-M-0744 Petition of New York State Electric & Gas
Corporation for authority to issue and sell long-term debt,
preferred stock and common stock pursuant to a multi-year
financing plan and to negotiate a Revolving Credit Agreement.
* * * *
The Public Service Commission hereby consents to and approves
this Certificate of Amendment of the Certificate of Incorporation
of New York State Electric & Gas Corporation Pursuant to Section
805 of the Business Corporation Law, executed December 8, 1993,
in accordance with the order of the Public Service Commission
dated December 1, 1993.
By the Commission
/s/ J. J. KELLIHER
Secretary
<PAGE>
NEW YORK STATE ELECTRIC & GAS CORPORATION
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF NEW YORK STATE ELECTRIC & GAS CORPORATION PURSUANT
TO SECTION 805 OF THE BUSINESS CORPORATION LAW
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED December 10, 1993
TAX $ NONE
FILING FEE $60
<PAGE>
EXHIBIT 3-12
NEW YORK STATE ELECTRIC & GAS CORPORATION
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF NEW YORK STATE ELECTRIC & GAS CORPORATION PURSUANT
TO SECTION 805 OF THE BUSINESS CORPORATION LAW
We, SHERWOOD J. RAFFERTY and D. W. FARLEY, a Vice President
and the Secretary, respectively, of NEW YORK STATE ELECTRIC & GAS
CORPORATION, do hereby certify as follows:
1. The name of the Corporation is New York State Electric &
Gas Corporation. The name under which it was originally
incorporated was the Ithaca Gas Light Company.
2. The date of filing of the Certificate of Incorporation in
the office of the Secretary of State of the State of New York was
the 28th day of October, 1852.
3. The Certificate of Incorporation of the Corporation is
amended to add a provision as authorized by subparagraph 12 of
Section 801 of the Business Corporation Law stating the
designations, preferences, privileges and voting powers of the
shares of a series of the Serial Preferred Stock of the
Corporation and the restrictions or qualifications thereof.
4. The provisions of the Certificate of Incorporation which
contain the designations, preferences, privileges, voting powers,
restrictions and qualifications of the Serial Preferred Stock of
the Corporation are hereby amended to include the following:
(R) The Board of Directors has designated One Million
(1,000,000) shares of Serial Preferred Stock as 7.40% Serial
Preferred Stock (Cumulative, $25 Par Value) (hereinafter
referred to as the 7.40% Series), and has fixed:
(1) The annual dividend rate for the shares of the
7.40% Series at 7.40% of the par value thereof per
annum and dividends thereon shall be cumulative from
the date of original issue.
(2) The redemption price for the shares of the
7.40% Series at $26.85 per share if redeemed prior to
December 1, 1998 and at $25 per share if redeemed
thereafter, together in each case with all dividends
accrued and in arrears thereon to the date fixed for
such redemption; provided, however, that the
Corporation will not, prior to December 1, 1998, redeem
any shares of the 7.40% Series if such redemption is a
part, or in anticipation, of any refunding operation
involving the application, directly or indirectly, of
borrowed funds or the proceeds of an issue of any stock
ranking superior to or on a parity with the 7.40%
Series if such borrowed funds have an interest rate or
cost to the Corporation, or such stock has a dividend
rate or cost to the Corporation (calculated in each
case in accordance with generally accepted financial
practice), less than 7.64% per annum.
(3) The amount payable to the holders of the
shares of the 7.40% Series in the event of any
voluntary liquidation, dissolution or winding-up of the
Corporation at amounts equal to the respective
redemption prices per share specified in subparagraph
(2) above, and the amount per share payable to the
holders thereof in the event of any involuntary
liquidation, dissolution or winding-up of the
Corporation at $25, together in each case with all
dividends accrued and in arrears thereon to the date of
such liquidation, dissolution or winding-up.
(4) The procedure for selection of shares of the
7.40% Series in the case of partial redemption. In
every case of redemption of less than all of the
outstanding shares of the 7.40% Series, the shares to
be redeemed shall be selected pro rata as among the
holders of record of shares of the 7.40% Series, in the
same proportions, as nearly as possible, as the total
number of shares of the 7.40% Series held by such
holders, respectively, bears to all of the shares of
the 7.40% Series then outstanding.
(5) The treatment of shares of the 7.40% Series
purchased or redeemed by the Corporation. All shares of
the 7.40% Series purchased or redeemed by the
Corporation shall be cancelled, shall not be reissued
as shares of the 7.40% Series, and shall constitute
authorized but unissued shares of the Serial Preferred
Stock with a par value of Twenty-Five Dollars ($25) per
share of the Corporation.
5. The amendment of the Certificate of Incorporation as set
forth herein was authorized by the Board of Directors of the
Corporation in accordance with Section 502(d) of the Business
Corporation Law.
<PAGE>
IN WITNESS WHEREOF, we have subscribed and D.W. Farley has
verified this Certificate this 15th day of December, 1993.
/s/ SHERWOOD J. RAFFERTY
SHERWOOD J. RAFFERTY
Vice President
/s/ D. W. FARLEY
D. W. FARLEY
Secretary
STATE OF NEW YORK )
) ss.:
COUNTY OF TOMPKINS)
D. W. FARLEY, being duly sworn, deposes and says, that he is
Vice President and Secretary of New York State Electric & Gas
Corporation, the Corporation named in and described in the
foregoing Certificate, that he has read and signed the foregoing
Certificate and the statements contained therein are true.
/s/ D. W. FARLEY
D. W. FARLEY
Subscribed and sworn to before me this
15th day of December, 1993.
/s/ ALICE M. JORDAN
ALICE M. JORDAN
Notary Public
State of New York
Qualified in Tioga County
Commission expires 9/30/94
<PAGE>
STATE OF NEW YORK
PUBLIC SERVICE COMMISSION
Albany, NY, December 16, 1993
CASE 93-M-0744-Petition of New York State Electric & Gas
Corporation for authority to issue and sell long-term debt,
preferred stock and common stock pursuant to a multi-year
financing plan and to negotiate a Revolving Credit Agreement.
* * * *
The Public Service Commission hereby consents to and approves
this Certificate of Amendment of the Certificate of Incorporation
of New York State Electric & Gas Corporation under Section 805 of
the Business Corporation Law, executed December 16, 1993, in
accordance with the order of the Public Service Commission dated
December 1, 1993.
By the Commission
/s/ J. J. KELLIHER
Secretary
<PAGE>
NEW YORK STATE ELECTRIC & GAS CORPORATION
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF NEW YORK STATE ELECTRIC & GAS CORPORATION PURSUANT
TO SECTION 805 OF THE BUSINESS CORPORATION LAW
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED December 20, 1993
TAX $ NONE
FILING FEE $60
<PAGE>
EXHIBIT 3-13
NEW YORK STATE ELECTRIC & GAS CORPORATION
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF NEW YORK STATE ELECTRIC & GAS CORPORATION PURSUANT
TO SECTION 805 OF THE BUSINESS CORPORATION LAW
We, SHERWOOD J. RAFFERTY and D. W. FARLEY, a Vice President
and the Secretary, respectively, of NEW YORK STATE ELECTRIC & GAS
CORPORATION, do hereby certify as follows:
1. The name of the Corporation is New York State Electric &
Gas Corporation. The name under which it was originally
incorporated was the Ithaca Gas Light Company.
2. The date of filing of the Certificate of Incorporation in
the office of the Secretary of State of the State of New York was
the 28th day of October, 1852.
3. The Certificate of Incorporation of the Corporation is
amended to add a provision as authorized by subparagraph 12 of
Section 801 of the Business Corporation Law stating the
designations, preferences, privileges and voting powers of the
shares of a series of the Serial Preferred Stock of the
Corporation and the restrictions or qualifications thereof.
4. The provisions of the Certificate of Incorporation which
contain the designations, preferences, privileges, voting powers,
restrictions and qualifications of the Serial Preferred Stock of
the Corporation are hereby amended to include the following:
(S) The Board of Directors has designated Two Hundred Fifty
Thousand (250,000) shares of Serial Preferred Stock as 6.30%
Serial Preferred Stock (Cumulative, $100 Par Value)
(hereinafter referred to as the 6.30% Series), and has
fixed:
(1) The annual dividend rate for the shares of the
6.30% Series at 6.30% of the par value thereof per annum and
dividends thereon shall be cumulative from the date of
original issue.
(2) The redemption price, except as provided in
subparagraphs (4) and (5) below, for the shares of the 6.30%
Series at the following prices per share, applicable to the
redemption periods during which such redemptions occur:
<PAGE>
12-Month 12-Month
Period Redemption Period Redemption
Ended Price Ended Price
December 31 Per Share December 31 Per Share
___________ __________ ___________ __________
1993 ..... $106.30 2001 .... $101.26
1994 ..... 105.67 2002 .... 100.63
1995 ..... 105.04 2003 .... 100.00
1996 ..... 104.41 2004 .... 100.00
1997 ..... 103.78 2005 .... 100.00
1998 ..... 103.15 2006 .... 100.00
1999 ..... 102.52 2007 .... 100.00
2000 ..... 101.89 2008 .... 100.00
and at $100 per share if redeemed thereafter, together in
each case with all dividends accrued and in arrears thereon
to the date fixed for such redemption; provided, however,
that the Corporation will not, prior to January 1, 2004,
redeem any shares of the 6.30% Series if such redemption is
a part, or in anticipation, of any refunding operation
involving the application, directly or indirectly, of
borrowed funds or the proceeds of an issue of any stock
ranking superior to or on a parity with the 6.30% Series if
such borrowed funds have an interest rate or cost to the
Corporation, or such stock has a dividend rate or cost to
the Corporation (calculated in each case in accordance with
generally accepted financial practice), less than 6.30% per
annum.
(3) The amount payable to the holders of the shares
of the 6.30% Series in the event of any voluntary
liquidation, dissolution or winding-up of the Corporation at
amounts equal to the respective redemption prices per share
specified in subparagraph (2) above, and the amount per
share payable to the holders thereof in the event of any
involuntary liquidation, dissolution or winding-up of the
Corporation at $100, together in each case with all
dividends accrued and in arrears thereon to the date of such
liquidation, dissolution or winding-up.
(4) A sinking fund for the benefit of the shares of
the 6.30% Series. So long as there shall remain outstanding
any shares of the 6.30% Series, the Corporation, after full
cumulative dividends upon the outstanding Serial Preferred
Stock of all series shall have been paid, or deemed paid as
heretofore provided, for all past quarter-yearly dividend
periods, and after making payment of or provision for
payment of full dividends on the outstanding Serial
Preferred Stock of all series for the current quarter-yearly
dividend period, shall, on or before December 31 in each
year commencing with the year 2003 to and including 2007,
set aside out of funds legally available therefor as the
sinking fund requirement for each such year an amount in
cash equal to the amount required to redeem, at the Sinking
Fund Redemption Price provided below, 12,500 shares of the
6.30% Series (or if less than 12,500 shares are then
outstanding, such lesser number of shares), and on or before
December 31, 2008, set aside out of funds legally available
therefor as the sinking fund requirement for such year an
amount in cash equal to the amount required to redeem, at
the Sinking Fund Redemption Price provided below, the
balance of the shares of the 6.30% Series outstanding, plus,
in each such year, the amount of all sinking fund
arrearages, if any, with respect to the 6.30% Series;
provided, however, that against the amount so required to be
set aside in any year the Corporation may credit an amount
equal to the Sinking Fund Redemption Price provided below in
respect of any shares of the 6.30% Series which it may have
purchased or redeemed otherwise than through the sinking
fund and not theretofore credited against any sinking fund
requirement for the shares of the 6.30% Series. Unless the
sinking fund requirement for the shares of the 6.30% Series
for all past sinking fund periods shall have been set aside
and are available for application in accordance with this
subparagraph, no dividends shall be paid or declared and no
other distribution shall be made on the stock ranking junior
to the Serial Preferred Stock and no stock ranking junior to
the Serial Preferred Stock shall be redeemed, purchased or
otherwise acquired for value by the Corporation. Commencing
on January 1, 2004, and on each January 1 thereafter, the
Corporation will apply the cash set aside as the sinking
fund requirement for the shares of the 6.30% Series to the
redemption, at the Sinking Fund Redemption Price of $100 per
share, together with all dividends accrued and in arrears
thereon to such date, of shares of the 6.30% Series. All
amounts set aside for the sinking fund for the 6.30% Series
shall be credited first against the sinking fund arrearages,
if any, with respect to the 6.30% Series. If, at any time
when there shall exist sinking fund arrearages with respect
to more than one series of the Serial Preferred Stock, the
Corporation shall set aside any funds (or apply any funds to
purchase or redemption) to satisfy in whole or in part any
such arrearage, all amounts so set aside or applied shall be
applied pro rata as between such series having sinking fund
arrearages in proportion to the amounts of such respective
arrearages.
(5) A non-cumulative option. The Corporation shall
have the non-cumulative option, on any required January
1 sinking fund redemption date as provided in subparagraph
(4) above, to redeem, at the Sinking Fund Redemption Price
provided in subparagraph (4) above, up to 12,500 additional
shares of the 6.30% Series.
(6) The procedure for selection of shares of the
6.30% Series in the case of partial redemption. In every
case of redemption of less than all of the outstanding
shares of the 6.30% Series, the shares to be redeemed shall
be selected pro rata as among the holders of record of
shares of the 6.30% Series, in the same proportions, as
nearly as possible, as the total number of shares of the
6.30% Series held by such holders, respectively, bears to
all of the shares of the 6.30% Series then outstanding.
(7) The treatment of shares of the 6.30% Series
purchased or redeemed by the Corporation. All shares of the
6.30% Series purchased or redeemed by the Corporation shall
be cancelled, shall not be reissued as shares of the 6.30%
Series, and shall constitute authorized but unissued shares
of the Serial Preferred Stock with a par value of One
Hundred Dollars ($100) per share of the Corporation.
5. The amendment of the Certificate of Incorporation as set
forth herein was authorized by the Board of Directors of the
Corporation in accordance with Section 502(d) of the Business
Corporation Law.
<PAGE>
IN WITNESS WHEREOF, we have subscribed and D.W. Farley has
verified this Certificate this 15th day of December, 1993.
/s/ SHERWOOD J. RAFFERTY
SHERWOOD J. RAFFERTY
Vice President
/s/ D. W. FARLEY
D. W. FARLEY
Secretary
STATE OF NEW YORK )
) ss.:
COUNTY OF TOMPKINS )
D.W. FARLEY, being duly sworn, deposes and says, that he is
Vice President and Secretary of New York State Electric & Gas
Corporation, the Corporation named in and described in the
foregoing Certificate, that he has read and signed the foregoing
Certificate and the statements contained therein are true.
/s/ D. W. FARLEY
D. W. FARLEY
Subscribed and sworn to before me this
15th day of December, 1993.
/s/ ALICE M. JORDAN
ALICE M. JORDAN
Notary Public
State of New York
Qualified in Tioga county
Commission expires 9/30/94
<PAGE>
STATE OF NEW YORK
PUBLIC SERVICE COMMISSION
Albany, NY, December 16, 1993
CASE 93-M-0744-Petition of New York State Electric & Gas
Corporation for authority to issue and sell long-term debt,
preferred stock and common stock pursuant to a multi-year
financing plan and to negotiate a Revolving Credit Agreement.
* * * *
The Public Service Commission hereby consents to and approves
this Certificate of Amendment of the Certificate of Incorporation
of New York State Electric & Gas Corporation under Section 805 of
the Business Corporation Law, executed December 16, 1993, in
accordance with the order of the Public Service Commission dated
December 1, 1993.
By the Commission
/s/ J. J. KELLIHER
Secretary
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NEW YORK STATE ELECTRIC & GAS CORPORATION
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF NEW YORK STATE ELECTRIC & GAS CORPORATION PURSUANT
TO SECTION 805 OF THE BUSINESS CORPORATION LAW
STATE OF NEW YORK
DEPARTMENT OF STATE
FILED December 20, 1993
TAX $ NONE
FILING FEE $60
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EXHIBIT 3-15
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NEW YORK STATE ELECTRIC & GAS
CORPORATION
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B Y - L A W S
As Amended
February 25, 1994
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NEW YORK STATE ELECTRIC & GAS CORPORATION
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BY-LAWS
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OFFICES
1. The office shall be at the place specified in the
Certificate of Incorporation as from time to time amended, now
Town of Dryden, County of Tompkins, State of New York.
The Corporation may also have offices at such other places
as the Board of Directors may from time to time designate or the
business of the Corporation may require.
SEAL
2. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words
"CORPORATE SEAL, NEW YORK". If authorized by the Board of
Directors, the corporate seal may be affixed to any certificates
of stock, bonds, debentures, notes or other engraved,
lithographed or printed instruments, by engravings, lithographing
or printing thereon such seal or a facsimile thereof, and such
seal or facsimile thereof so engraved, lithographed or printed
thereon shall have the same force and effect, for all purposes,
as if such corporate seal had been affixed thereto by
indentation.
STOCKHOLDERS' MEETINGS
3. All meetings of the stockholders shall be held at the
principal office of the Corporation, or at such other location in
the State of New York as shall be stated in the notice of the
meeting, except when otherwise expressly provided by statute.
All meetings of stockholders shall be presided over by the
Chairman or by the President or a Vice President except when by
statute the election of a presiding officer is required.
4. The annual meeting of stockholders shall be held on the
second Friday of May in each year, if not a legal holiday, and if
a legal holiday, then on the next business day following, at
eleven o'clock A.M. or at such other time as shall be stated in
the notice of the meeting, at which the stockholders entitled to
vote shall elect directors, and transact such other business as
may properly be brought before the meeting.
5. The holders of a majority of the shares of stock of the
Corporation issued and outstanding and entitled to vote thereat,
without regard to class, present in person or by proxy, shall be
requisite for, and shall constitute a quorum at all meetings of
the stockholders for the transaction of business except for the
election or removal of directors and except as otherwise
expressly provided by statute, by the Certificate of
Incorporation, as amended, or by these By-Laws; provided that, in
the case of any meeting of holders of the serial preferred stock
of the Corporation, the presence in person or by proxy of the
holders of record of shares representing a majority of the votes
entitled to be cast thereat by the holders of the outstanding
shares of serial preferred stock, without regard to series, shall
be necessary to constitute a quorum for the transaction of
business except for the election or removal of directors and
except as otherwise expressly provided by statute, by the
Certificate of Incorporation, as amended, or by these By-Laws.
If, however, the holders of a majority of such shares of stock or
votes, as the case may be, shall not be present or represented by
proxy at any such meeting, the stockholders entitled to vote
thereat, present in person or by proxy, shall have power, by a
majority vote of those present or represented, to adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until the holders of the amount of stock or
votes, as the case may be, requisite to constitute a quorum shall
be present in person or by proxy. At any adjourned meeting at
which a quorum shall be present, in person or by proxy, any
business may be transacted which might have been transacted at
the meeting as originally noticed.
At any meeting for the election of directors by the common
stockholders, the presence in person or by proxy of the holders
of record of a majority of the outstanding shares of common stock
shall be necessary to constitute a quorum for the election of
such directors, except when otherwise expressly provided by
statute.
6. At each meeting of stockholders each holder of record of
shares of capital stock then entitled to vote shall be entitled
to vote in person, or by proxy appointed by instrument executed
in writing, by such stockholder or by his duly authorized
attorney; but no proxy shall be valid after the expiration of
eleven months from the date of its execution unless the
stockholder executing it shall have specified therein its
duration, which shall be for some limited period. Except as
otherwise provided by statute or by the Certificate of
Incorporation, as amended, each holder of record of shares of
capital stock entitled to vote at any meeting of stockholders
shall be entitled to one vote for every share of capital stock
standing in his name on the books of the Corporation, but, as
provided by the Certificate of Incorporation, as amended, at all
elections of directors by the common stockholders, each holder of
common stock shall be entitled to as many votes as shall equal
the number of votes which (except for such provision as to
cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of common stock
multiplied by the number of directors to be elected and he may
cast all of such votes for a single director or may distribute
them among the number of directors to be voted for, or any two or
more of them, as he may see fit. All elections shall be
determined by a plurality vote. The vote for directors shall be
by ballot and, except as otherwise provided by statute or by the
Certificate of Incorporation, as amended, or by these By-Laws,
all other matters shall be determined by a vote of the holders of
a plurality of the shares of the capital stock present or
represented at a meeting and entitled to vote on such matters,
and by ballot, if demanded by any stockholder or his duly
authorized proxy.
7. A list of stockholders as of the record date, certified
by the corporate officer responsible for its preparation or by a
transfer agent, shall be produced at any meeting of stockholders
upon the request thereat or prior thereto of any stockholder. If
the right to vote at any meeting is challenged, the inspectors of
election, or person presiding thereat, shall require such list of
stockholders to be produced as evidence of the right of the
persons challenged to vote at such meeting, and all persons who
appear from such list to be stockholders entitled to vote thereat
may vote at such meeting.
8. Except as may be otherwise provided in the Certificate
of Incorporation, as amended, with respect to the right of
holders of serial preferred stock or preference stock of the
Corporation to elect a specified number of directors in certain
circumstances, only persons who are nominated in accordance with
the following procedures shall be eligible for election as
directors of the Corporation. Nominations of persons for
election to the Board of Directors may be made at any annual
meeting of stockholders, or at any special meeting of
stockholders called for the purpose of electing directors, (a) by
or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any stockholder of the
Corporation (i) who is a stockholder of record on the date of the
giving of the notice provided for in this By-Law and on the
record date for the determination of stockholders entitled to
vote at such meeting and (ii) who complies with the notice
procedures set forth in this By-Law.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must
have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must
be delivered to or mailed and received at the principal executive
offices of the Corporation (a) in the case of an annual meeting,
not less than sixty (60) days nor more than ninety (90) days
prior to the anniversary date of the immediately preceding annual
meeting of stockholders; provided, however, that in the event
that the annual meeting is called for a date that is not within
thirty (30) days before or after such anniversary date, notice by
the stockholder in order to be timely must be so received not
later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs; and (b) in the
case of a special meeting of stockholders called for the purpose
of electing directors, not later than the close of business on
the tenth (10th) day following the day on which notice of the
date of the special meeting was mailed or public disclosure of
the date of the special meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth (a) as to each person whom the stock-
holder proposes to nominate for election as a director (i) the
name, age, business address and residence address of the person,
(ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the
person and (iv) any other information relating to the person that
would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules and regulations promulgated thereunder; and (b) as
to the stockholder giving the notice (i) the name and record
address of such stockholder, (ii) the class or series and number
of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a
description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the
nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person
or by proxy at the meeting to nominate the person(s) named in its
notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the
procedures set forth in this By-Law. If the chairman of the
meeting determines that a nomination was not made in accordance
with the foregoing procedures, the chairman shall declare to the
meeting that the nomination was defective and such defective
nomination shall be disregarded.
9. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in
the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the
annual meeting by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (c) otherwise
properly brought before the annual meeting by any stockholder of
the Corporation (i) who is a stockholder of record on the date of
the giving of the notice provided for in this By-Law and on the
record date for the determination of stockholders entitled to
vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this By-Law.
In addition to any other applicable requirements, for busi-
ness to be properly brought before an annual meeting by a
stockholder, such stockholder must have given timely notice
thereof in proper written form to the Secretary of the
Corporation.
To be timely, a stockholder's notice to the Secretary must
be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty (60) days nor more
than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided,
however, that in the event that the annual meeting is called for
a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure
of the date of the annual meeting was made, whichever first
occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder
proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at
the annual meeting, (ii) the name and record address of such
stockholder, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or
of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any
other person or persons (including their names) in connection
with the proposal of such business by such stockholder and any
material interest of such stockholder in such business and (v) a
representation that such stockholder intends to appear in person
or by proxy at the annual meeting to bring such business before
the meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in
accordance with the procedures set forth in this By-Law. If the
chairman of the annual meeting determines that business was not
properly brought before the annual meeting in accordance with the
foregoing procedures, the chairman shall declare to the meeting
that the business was not properly brought before the meeting and
such business shall not be transacted.
10. Special meetings of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, as amended, may be called by the
Chairman or by the President, and shall be called by the Chairman
or the President or Secretary at the request in writing of a
majority of the Board of Directors. Such request shall state the
purpose or purposes of the proposed meetings.
11. Except as otherwise may be required by provisions of
the Certificate of Incorporation of the Corporation, as amended,
relative to meetings of stockholders required or authorized by
the provisions of paragraph (F) or (H) of Article 7 of the
Restated Certificate of Incorporation filed October 25, 1988,
notice of every meeting of stockholders, setting forth the time,
place and purpose or purposes thereof, shall be mailed, not less
than ten nor more than fifty days prior to such meetings to all
stockholders (at their respective addresses appearing on the
books of the Corporation unless the stockholder shall have filed
with the Secretary of the Corporation a written request that
notices intended for him be mailed to some other address, in
which case the notice shall be mailed to the address designated
in such request) entitled to vote at such meeting, of record as
of a date fixed by the Board of Directors, not more than fifty
days in advance of such meeting, for determining the stockholders
entitled to notice of and to vote at such meeting, unless and
except to the extent that such notice shall have been waived in
writing either before or after the holding of such meeting by
stockholders entitled to notice thereof and to vote thereat.
If any By-Law regulating an impending election of directors
is adopted or amended or repealed by the Board, there shall be
set forth in the notice of the next meeting of the stockholders
of the Corporation for the election of directors the By-Laws so
adopted or amended or repealed together with a concise statement
of the changes made.
DIRECTORS
12. The property and business of the Corporation shall be
managed under the direction of its Board of Directors, which
shall consist of not less than nine (9) nor more than fifteen
(15) directors. Directors need not be stockholders. Directors
shall be elected at the annual meeting of the stockholders, or,
if no such election shall be held, at a meeting called and held
in accordance with the statutes of the State of New York. Each
director shall be elected to hold office until the expiration of
the term for which he is elected, and thereafter until a
successor shall be elected and shall qualify. The directors
shall be divided, with respect to the terms for which they
severally hold office, into three classes, hereby designated
Class I, Class II and Class III. Each class shall have at least
three directors and the three classes shall be as nearly equal in
number as possible. The initial terms of office of the Class I,
Class II and Class III directors, elected at the 1987 annual
meeting of stockholders, shall expire at the next succeeding
annual meeting of stockholders, the second succeeding annual
meeting of stockholders and the third succeeding annual meeting
of stockholders, respectively. At each annual meeting of
stockholders after 1987, the successors of the class of directors
whose term expires at that annual meeting shall be elected to
hold office for a term expiring at the annual meeting of
stockholders to be held in the third year following the year of
their election.
The stockholders, at any annual meeting, or at any special
meeting called for that purpose, or a majority of the entire
Board of Directors, at any regular or special meeting, may
determine to increase or decrease the number of directors to the
respective maximum or minimum limits above prescribed, and, in
the case of an increase, shall thereupon elect the additional
directors. No decrease in the number of directors shall shorten
the term of any incumbent director. Any newly created director-
ships or any decrease in directorships shall be so apportioned
among the classes as to make all classes as nearly equal in
number as possible. If the number of directors is increased by
the Board and any newly created directorships are filled by the
Board, there shall be no classification of the additional
directors until the next annual meeting of stockholders. At any
meeting of the stockholders, the holders of a majority of the
shares of common stock issued and outstanding, voting separately
as a class, or by written consent without a meeting may remove at
any time, with or without cause, any director theretofore elected
by the common stockholders or elected by the Board to fill a
vacancy among the directors elected by the common stockholders,
and may fill the vacancy in the Board for the unexpired term thus
caused.
No director who shall have attained the age of 70 shall
stand for re-election as a director; provided, however, that such
age limitation shall not apply in connection with the election of
directors at the 1994 annual meeting of stockholders.
In the event that the holders of serial preferred stock or
preference stock become entitled to exercise their special rights
to elect directors pursuant to Article 5 or Article 7,
respectively, of the Certificate of Incorporation, as amended,
the above provisions respecting the classification of directors
shall not apply, and election of directors shall be accomplished
in accordance with the provisions of such Article 5 or Article 7.
The election of directors by holders of common stock at the first
annual or special meeting of stockholders after the divestment of
such special rights of the holders of serial preferred stock or
preference stock shall be accomplished in accordance with the
provisions applicable to the initial terms of the classified
directors set forth above.
13. In addition to the powers and authorities by these By-
Laws expressly conferred upon them, the Board may exercise all
such powers of the Corporation, and do all such lawful acts and
things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be
exercised or done by the stockholders. A director or officer of
this Corporation shall not be disqualified by his office from
dealing or contracting with the Corporation either as a vendor,
purchaser or otherwise, nor shall any transaction or contract of
this Corporation be void or voidable by reason of the fact that
any director or officer or any firm of which any director or
officer is a member or employee or any corporation of which any
director or officer is a shareholder, director, officer or
employee, is in any way interested in such transaction or
contract, provided that such transaction or contract is or shall
be authorized, ratified or approved either (1) by vote of a
majority of a quorum of the Board of Directors or of the
Executive Committee without counting in such majority or quorum
any director so interested or member or employee of a firm so
interested or a shareholder, director, officer or employee of a
corporation so interested or (2) by vote at a stockholders'
meeting of the holders of record of a majority of all the
outstanding shares of capital stock of the Corporation having
full voting power or by writing or writings signed by a majority
of such holders; nor shall any director or officer be liable to
account to the Corporation for any profits realized by and from
or through any such transaction, or contract of this Corporation
authorized, ratified or approved as aforesaid by reason of the
fact that he or any firm of which he is a member or employee, or
any corporation of which he is a shareholder, director, officer
or employee was interested in such transaction or contract.
MEETINGS OF THE BOARD
14. The first meeting of the Board of Directors held after
the annual meeting of stockholders at which directors shall have
been elected shall be held for the purpose of organization, the
election of officers, and the transaction of any other business
which may come before the meeting.
15. Regular meetings of the Board may be held without
notice, except as otherwise provided by these By-Laws, at such
time and place as shall from time to time be designated by the
Board.
16. Special meetings of the Board may be called by the
Chairman or by the President or a Vice President or any two
directors and may be held at the time and place designated in the
call and notice of the meeting. The Secretary or other officer
performing his duties shall give notice either personally or by
mail or telegram at least twenty-four hours before the meeting.
Meetings may be held at any time and place without notice if all
the directors are present or if those not present waive notice in
writing either before or after the meeting.
17. At all meetings of the Board one-third of the total
number of directors shall be requisite for and shall constitute a
quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may
be otherwise specifically provided by statute or by the
Certificate of Incorporation or by these By-Laws.
18. Any regular or special meeting may be adjourned to any
other time at the same or any other place by a majority of the
directors present at the meeting, whether or not a quorum shall
be present at such meeting, and no notice of the adjourned
meeting shall be required other than announcement at the meeting.
COMPENSATION OF DIRECTORS
19. Directors, other than salaried officers or employees of
the Corporation or of any affiliated company, shall receive
compensation for their services as directors, at the rate of
$18,000 per annum, payable monthly, and in addition $700 for each
regular or special meeting of the Board of Directors attended,
but compensation for meetings attended by means of conference
telephone or similar equipment, for which no travel is required,
shall be $250 for each such meeting so attended. All directors
shall be reimbursed for their reasonable expenses for attendance,
if any, at each regular or special meeting of the Board of Direc-
tors. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity
and receiving compensation therefor.
20. Members of the Executive Committee other than salaried
officers or employees of the Corporation or of any affiliated
company, shall receive compensation for their services on that
committee at the rate of $1,500 per annum, paid monthly.
Members of special or standing committees, including the
Executive Committee, shall be allowed such additional
compensation and reimbursement for expenses as may be fixed by
the Board of Directors.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
21. The Board of Directors may by vote of a majority of the
whole Board designate three or more of their number to constitute
an Executive Committee to hold office for such period as the
Board shall determine. The Chairman and the President shall each
be a member of the Executive Committee. The Board of Directors
may likewise designate one or more alternate members who shall
serve on the Executive Committee in the absence of any regular
member or members of such Committee. When a regular or alternate
member of the Executive Committee ceases to be a director he
shall automatically cease to be such regular or alternate member
of the Executive Committee. Such Executive Committee shall,
between meetings of the Board, have all the powers of the Board
of Directors in the management of the business and affairs of the
Corporation, except that no such committee shall have authority
as to: the submission to stockholders of any action that needs
stockholders' authorization under the Business Corporation Law;
the filling of vacancies in the Board of Directors or in any
committee; the fixing of compensation of the directors for
serving on the Board or on any committee; the amendment or repeal
of the By-Laws, or the adoption of new By-Laws; the amendment or
repeal of any resolution of the Board which by its terms shall
not be so amendable or repealable.
The Executive Committee shall cause to be kept regular
minutes of its proceedings, which may be transcribed in the
regular minute book of the Corporation, and all such proceedings
shall be reported to the Board of Directors at its next
succeeding meeting, and shall be subject to revision or
alteration by the Board, provided that no rights of third persons
shall be affected by such revision or alteration. A majority of
the Executive Committee shall constitute a quorum at any meeting.
The act of a majority of the Executive Committee present at any
meeting at which there is a quorum shall be the act of the
Executive Committee. The Board of Directors may by vote of a
majority thereof fill any vacancies in the Executive Committee.
The Executive Committee may, from time to time, subject to the
approval of the Board of Directors, prescribe rules and
regulations for the calling and conduct of meetings of the
Committee, and other matters relating to its procedure and the
exercise of its powers.
22. In addition to having the power to designate an
Executive Committee, the Board of Directors may by vote of a
majority of the whole Board designate other committees, whether
special or standing, each to consist of three or more of their
number, to hold office for such period as the Board shall
determine. With respect to each such other committee, the Board
of Directors may likewise designate one or more alternate
members who shall serve in the absence of any regular member or
members of such other committee. When a regular or alternate
member of such other committee ceases to be a director he shall
automatically cease to be a regular or alternate member of such
other committee. Each such other committee shall have authority
only to the extent provided by the Board of Directors, except
that no such other committee shall have authority as to: the
submission to stockholders of any action that needs stockholders'
authorization under the Business Corporation Law; the filling of
vacancies in the Board of Directors or in any committee; the
fixing of compensation of the directors for serving on the Board
or on any committee; the amendment or repeal of the By-Laws, or
the adoption of new By-Laws; the amendment or repeal of any
resolution of the Board which by its terms shall not be so
amendable or repealable. A majority of each such other committee
shall constitute a quorum at any meeting thereof. The act of a
majority of each such other committee present at any meeting
thereof at which there is a quorum shall be the act of such other
committee. The Board of Directors may by vote of a majority
thereof fill any vacancies in each such other committee.
MEETINGS OF THE BOARD AND COMMITTEE THEREOF
BY CONFERENCE TELEPHONE OR SIMILAR MEANS
23. Any one or more of the members of the Board of
Directors, the Executive Committee or any special or standing
committee of the Board of Directors may participate in a meeting
of the Board or such committee by means of a conference telephone
or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person
at a meeting.
ACTION BY BOARD OR COMMITTEE WITHOUT A MEETING
24. If all members of the Board of Directors, the Executive
Committee or any special or standing committee of the Board of
Directors consent in writing to the adoption of a resolution
authorizing action required or permitted to be taken by the Board
or any committee, such action may be taken without a meeting.
The resolution and the written consents thereto shall be filed
with the minutes of the proceeding.
OFFICERS
25. The officers of the Corporation shall be chosen by the
Board of Directors. The officers shall be a Chairman, one or
more Assistants to the Chairman, a President, one or more
Assistants to the President, one or more Vice Presidents, one or
more Assistant Vice Presidents, a Secretary, one or more
Assistant Secretaries, a Treasurer, one or more Assistant
Treasurers, a Controller, one or more Assistant Controllers, and
such other officers as the Board may from time to time choose and
appoint. The Chairman and President may not occupy any other
such office, except that the same person may occupy both the
office of Chairman and the office of President. Neither the
Treasurer nor an Assistant Treasurer may at the same time be
Controller or an Assistant Controller. Except as above set
forth, any two of such offices may be occupied by the same person
but no officer shall execute, acknowledge or verify any
instrument in more than one capacity.
26. The Board of Directors, at its first meeting after the
election of directors by the stockholders, shall choose a
Chairman and a President from among their own number, and a
Secretary, a Treasurer and a Controller, and such Assistants to
the Chairman, Assistants to the President, Vice Presidents,
Assistant Vice Presidents, Assistant Secretaries, Assistant
Treasurers and Assistant Controllers, as it shall deem necessary,
none of whom need be members of the Board.
27. The Board may appoint such other officers and agents as
it shall deem necessary, who shall hold their offices for such
terms, and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
28. The salary or other compensation of the officers of the
Corporation shall be fixed by the Board of Directors. The salary
or other compensation of all other employees shall, in the
absence of any action by the Board be fixed by the Chairman or
the President or by such other officers or executives as shall be
designated by the Chairman or the President.
29. The officers of the Corporation shall hold office until
the first meeting of the Board of Directors after the next
succeeding annual meeting of stockholders and until their
successors are chosen and qualify in their stead. Any officer or
agent elected or appointed by the Board of Directors may be
removed at any time, with or without cause, by the affirmative
vote of a majority of the whole Board of Directors. Any other
employee or agent of the Corporation may be removed at any time,
with or without cause, by the affirmative vote of a majority of
the whole Board of Directors or, in the absence of any action by
the Board, by the Chairman or the President or by such other
officers or executives as shall have been designated by the
Chairman or the President.
CHAIRMAN
30. The Chairman shall be the chief executive officer of
the Corporation and shall, when present, preside at all meetings
of the Board of Directors and of the stockholders, except as
otherwise by law provided. He may sign in the name of and on
behalf of the Corporation, certificates of stock, notes, and any
and all contracts, agreements and other instruments of a
contractual nature pertaining to matters which arise in the
normal conduct and ordinary course of business of the
Corporation. He shall be a member of the Executive Committee and
of all standing committees except the Executive Compensation and
Succession Committee, the Audit Committee and the Nominating
Committee. He shall also generally have the powers and perform
the duties which appertain to the office.
The Assistants to the Chairman shall assist the Chairman in
the performance of his duties and exercise and perform such other
powers and duties as may be conferred or required by the Board.
PRESIDENT
31. The President shall, when present in the absence of the
Chairman, preside at all meetings of the Board of Directors and
of the stockholders, except as otherwise by law provided. He may
sign in the name of and on behalf of the Corporation,
certificates of stock, notes, and any and all contracts,
agreements and other instruments of a contractual nature
pertaining to matters which arise in the normal conduct and
ordinary course of business of the Corporation. He shall be a
member of the Executive Committee and of all standing committees
except the Executive Compensation and Succession Committee, the
Audit Committee and the Nominating Committee. He shall also
generally have the powers and perform the duties which appertain
to the office.
The Assistants to the President shall assist the President
in the performance of his duties and exercise and perform such
other powers and duties as may be conferred or required by the
Board.
VICE PRESIDENT
32. A Vice President may sign, in the name of and on behalf
of the Corporation, certificates of stock, notes and any and all
contracts, agreements and other instruments of a contractual
nature pertaining to matters which arise in the normal conduct
and ordinary course of business, and shall perform such other
duties as the Board of Directors may prescribe.
If there be more than one Vice President, the Board of
Directors may designate one or more Vice Presidents as Executive
Vice Presidents who shall have general supervision, direction and
control of the business and affairs of the Corporation in the
absence or disability of the Chairman and the President, and may
designate one or more Vice Presidents as Senior Vice Presidents
who shall have general supervision, direction and control of the
business and affairs of the Corporation in the absence or
disability of the Chairman and the President and the Executive
Vice Presidents. A Vice President who has not been designated as
Executive Vice President or as Senior Vice President shall have
general supervision, direction and control of the business and
affairs of the Corporation in the absence or disability of the
Chairman and the President, and the Executive Vice Presidents and
the Senior Vice Presidents.
The Assistant Vice Presidents shall assist the President and
Vice Presidents in the performance of their duties and exercise
and perform such other powers and duties as may be conferred or
required by the Board.
SECRETARY
33. The Secretary shall attend all sessions of the Board
and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose;
and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board
of Directors. He shall be sworn to the faithful discharge of his
duty. Any records kept by him shall be the property of the
Corporation and shall be restored to the Corporation in case of
his death, resignation, retirement or removal from office.
He shall be the custodian of the seal of the Corporation
and, when authorized by the Board of Directors or by the
Chairman, the President or a Vice President, shall affix the seal
to all instruments requiring it and shall attest the seal and/or
the execution of such instruments, as required. He shall have
control of the stock ledger, stock certificate book and minute
books of the Corporation and its committees, and other formal
records and documents relating to the corporate affairs of the
Corporation.
The Assistant Secretary or Assistant Secretaries shall
assist the Secretary in the performance of his duties, exercise
and perform his powers and duties in his absence or disability,
and such powers and duties as may be conferred or required by the
Board.
TREASURER
34. (a) The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys, and other valuable
effects in the name and to the credit of the Corporation, in such
depositories as may be designated by the Board of Directors.
(b) He shall disburse the funds of the Corporation in
such manner as may be ordered by the Board, taking proper
vouchers for such disbursements, and shall render to the
Chairman, the President and directors, at the regular meetings of
the Board, or whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the
Corporation.
(c) He shall give the Corporation a bond if required
by the Board of Directors in a sum, and with one or more sureties
satisfactory to the Board, for the faithful performance of the
duties of his office, and for the restoration of the Corporation,
in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property
of whatever kind in his possession or under his control belonging
to the Corporation.
The Assistant Treasurer or Assistant Treasurers shall assist
the Treasurer in the performance of his duties, exercise and
perform his powers and duties in his absence or disability, and
such powers and duties as may be conferred or required by the
Board.
CONTROLLER
35. The Controller of the Corporation shall have full
control of all the books of account of the Corporation and keep a
true and accurate record of all property owned by it, of its
debts and of its revenues and expenses and shall keep all
accounting records of the Corporation other than the record of
receipts and disbursements and those relating to the deposit or
custody of money and securities of the Corporation, which shall
be kept by the Treasurer, and shall also make reports to the
directors and others of or relating to the financial condition of
the Corporation.
The Assistant Controller or Assistant Controllers shall
assist the Controller in the performance of his duties, exercise
and perform his powers and duties in his absence or disability,
and such powers and duties as may be conferred or required by the
Board.
VACANCIES
36. If the office of any director becomes vacant by reason
of death, resignation, removal or disability, or any other cause,
the directors then in office, except as otherwise provided in the
Certificate of Incorporation, as amended, although less than a
quorum, by a majority vote, may choose a successor or successors,
who shall hold office until the next annual meeting of
stockholders, and thereafter until a successor or successors
shall be elected and shall qualify. If the office of any officer
of the Corporation shall become vacant for any reason, the Board,
by a majority vote of those present at any meeting at which a
quorum is present, may choose a successor or successors who shall
hold office for the unexpired term in respect of which such
vacancy occurred.
RESIGNATIONS
37. Any officer or any director of the Corporation may
resign at any time, such resignation to be made in writing and to
take effect from the time of its receipt by the Corporation,
unless some time be fixed in the resignation, and then from that
time.
DUTIES OF OFFICERS MAY BE DELEGATED
38. In case of the absence of any officer of the
Corporation, or for any other reason the Board may deem
sufficient, the Board may delegate, for the time being, the
powers or duties, or any of them, of such officer to any other
officer or to any director, provided a majority of the entire
Board concur therein.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
39. The Corporation shall fully indemnify to the extent not
prohibited by law any person made, or threatened to be made, a
party to an action or proceeding, whether civil or criminal,
including an investigative, administrative, legislative or other
proceeding, and including an action by or in the right of the
Corporation or any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust,
employee benefit plan or other enterprise, by reason of the fact
that he, his testator or intestate, (i) is or was a director,
officer, or employee of the Corporation or (ii) is or was serving
at the request of the Corporation, as a director, officer, or in
any other capacity, any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust,
employee benefit plan or other enterprise, against any and all
judgments, fines, amounts paid in settlement and expenses,
including attorneys' fees, actually and reasonably incurred as a
result of or in connection with any such action or proceeding or
any appeal therein, except as provided in the next paragraph.
No indemnification shall be made to or on behalf of any
director, officer, or employee if a judgment or other final
adjudication adverse to the director, officer, or employee
establishes that his acts were committed in bad faith or were the
result of active and deliberate dishonesty and were material to
the cause of action so adjudicated, or that he personally gained
in fact a financial profit or other advantage to which he was not
legally entitled.
Except in the case of an action or proceeding against a
director, officer, or employee specifically approved by the Board
of Directors, the Corporation shall pay expenses incurred by or
on behalf of such a person in defending such a civil or criminal
action or proceeding (including appeals) in advance of the final
disposition of such action or proceeding. Such payments shall be
made promptly upon receipt by the Corporation, from time to time,
of a written demand of such person for such advancement, together
with an undertaking by or on behalf of such person to repay any
expenses so advanced to the extent that the person receiving the
advancement is ultimately found not to be entitled to
indemnification for such expenses.
The rights to indemnification and advancement of defense
expenses granted by or pursuant to this By-Law (i) shall not
limit or exclude, but shall be in addition to, any other rights
which may be granted by or pursuant to any statute, certificate
of incorporation, by-law, resolution or agreement, (ii) shall be
deemed to constitute contractual obligations of the Corporation
to any director, officer, or employee who serves in such capacity
at any time while this By-Law is in effect, (iii) are intended to
be retroactive and shall be available with respect to events
occurring prior to the adoption of this By-Law and (iv) shall
continue to exist after the repeal or modification hereof with
respect to events occurring prior thereto. It is the intent of
this By-Law to require the Corporation to indemnify the persons
referred to herein for the aforementioned judgments, fines,
amounts paid in settlement and expenses, including attorneys'
fees, in each and every circumstance in which such indem-
nification could lawfully be permitted by an express provision of
a by-law, and the indemnification required by this By-Law shall
not be limited by the absence of an express recital of such
circumstances.
The Corporation may, with the approval of the Board of
Directors, enter into an agreement with any person who is, or is
about to become, a director, officer, or employee of the
Corporation, or who is serving, or is about to serve, at the
request of the Corporation, as a director, officer, or in any
other capacity, any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust,
employee benefit plan or other enterprise, which agreement may
provide for indemnification of such person and advancement of
defense expenses to such person upon such terms, and to the
extent, not prohibited by law.
STOCK OF OTHER CORPORATIONS
40. The Board of Directors shall have the right to
authorize any officer or other person on behalf of the
Corporation to attend, act and vote at meetings of the
stockholders of any corporation in which the Corporation shall
hold stock, and to exercise thereat any and all the rights and
powers incident to the ownership of such stock and to execute
waivers of notice of such meetings and calls therefor; and
authority may be given to exercise the same either on one or more
designated occasions, or generally on all occasions until revoked
by the Board. In the event that the Board shall fail to give
such authority, such authority may be exercised by the Chairman
or the President in person or by proxy appointed by him on behalf
of the Corporation.
CERTIFICATES OF STOCK
41. Stock of the Corporation may be in certificated or
uncertificated form. Stock of the Corporation represented by
certificates shall be numbered and shall be entered in the books
of the Corporation as the certificates are issued. The
certificates shall exhibit the holder's name and number of shares
and shall be signed by the Chairman, President or a Vice
President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary, and the seal of the
Corporation shall be affixed thereto. Where any such
certificates of stock are signed by a transfer agent and by a
registrar, the signatures of the Chairman, President or a Vice
President and the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary upon any such certificates,
if authorized by the Board of Directors, may be made by
engraving, lithographing or printing thereon a facsimile of such
signatures, in lieu of actual signatures, and such facsimile
signatures so engraved, lithographed or printed thereon shall
have the same force and effect as if such officers had actually
signed the same.
In case any officer who has signed, or whose facsimile
signature has been affixed to, any such certificate shall cease
to be such officer before such certificate shall have been
delivered by the Corporation, such certificate may nevertheless
be issued and delivered as though the person who signed such
certificate, or whose facsimile signature has been affixed
thereto, had not ceased to be such officer of the Corporation.
To the extent permitted by law, some or all of any or all
classes and series of stock of the Corporation may be
uncertificated stock, provided that no stock represented by a
certificate shall be registered on the books of the Corporation
as uncertificated stock until such certificate is surrendered to
the Corporation.
TRANSFERS OF STOCK
42. Transfers of certificated stock shall be made on the
books of the Corporation only upon the request of the person
named in the certificate or by attorney, lawfully constituted in
writing, and upon surrender of the certificate therefor.
Transfers of uncertificated stock shall be made on the books
of the Corporation only upon the request of the holder of record
of such uncertificated stock or by attorney, lawfully constituted
in writing, and upon receipt by the Corporation of a written
instruction signed by the holder of record of such uncertificated
stock or by such attorney requesting that the transfer of such
uncertificated stock be registered on the books of the
Corporation.
FIXING OF RECORD DATE
43. Except as otherwise may be required by provisions of
the Certificate of Incorporation, as amended, relative to
meetings of stockholders required or authorized by the provisions
of paragraph (F) or (H) of Article 7 of the Restated Certificate
of Incorporation filed October 25, 1988, the Board of Directors
is hereby authorized to fix a day and hour not exceeding fifty
(50) days (and in the case of a meeting not less than ten (10)
days) preceding the date of any meeting of stockholders or the
date fixed for the payment of any dividend or for the delivery of
evidences of rights, as a record time for the determination of
the stockholders entitled to notice of and to vote at any such
meeting or entitled to receive any such dividend or rights, as
the case may be; and all persons who are holders of record of
voting stock at such time, and no others, shall be entitled to
notice of and to vote at such meeting, and only stockholders of
record at any time so fixed shall be entitled to receive any such
dividend or rights; and the stock transfer books shall not be
closed during any such period.
REGISTERED STOCKHOLDERS
44. The Corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any
equitable or other claim to, or interest in, such share on the
part of any other person, whether or not it shall have express or
other notice thereof, save as expressly provided by the statutes
of the State of New York.
LOST CERTIFICATES
45. Any person claiming a certificate of stock to be lost
or destroyed shall make an affidavit or affirmation of that fact,
whereupon a new certificate may be issued of the same tenor and
for the same number of shares as the one alleged to be lost or
destroyed; provided, however, that the Board of Directors may
require, as a condition to the issuance of a new certificate, a
bond of indemnity in such form and amount and with such surety or
sureties, or without surety, as the Board of Directors shall
determine, and may also require the advertisement of such loss in
such manner as the Board may prescribe.
INSPECTION OF BOOKS
46. The Board of Directors shall have power to determine
whether and to what extent, and at what time and places and under
what conditions and regulations, the accounts and books of the
Corporation (other than the books required by statute to be open
to the inspection of stockholders), or any of them, shall be open
to the inspection of stockholders, and no stockholders shall have
any right to inspect any account or book or document of the
Corporation, except as such right may be conferred by the
statutes of the State of New York or by resolution of the
directors or of the stockholders.
CHECKS, NOTES, BONDS AND OTHER INSTRUMENTS
47. All checks or demands for money and notes of the
Corporation shall be signed by such person or persons (who may
but need not be an officer or officers of the Corporation) as may
be authorized by these By-Laws or as the Board of Directors may
from time to time designate, either directly or through such
officers of the Corporation as shall, by resolution of the Board
of Directors, be authorized to designate such person or persons.
If authorized by the Board of Directors, the signatures of such
persons, or any of them, upon any checks for the payment of money
may be made by engraving, lithographing or printing thereon a
facsimile of such signatures, in lieu of actual signatures, and
such facsimile signatures so engraved, lithographed or printed
thereon shall have the same force and effect as if such persons
had actually signed the same.
All bonds, mortgages and other instruments requiring a seal
shall be executed on behalf of the Corporation by the Chairman or
the President or a Vice President, and the seal of the
Corporation shall be thereunto affixed by the Secretary or an
Assistant Secretary who shall, when required, attest the seal
and/or the execution of said instruments. If authorized by the
Board of Directors, the signatures of the Chairman or the
President or a Vice President and the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer upon any
engraved, lithographed or printed bonds, debentures, notes or
other instruments may be made by engraving, lithographing or
printing thereon a facsimile of such signatures, in lieu of
actual signatures, and such facsimile signatures so engraved,
lithographed or printed thereon shall have the same force and
effect as if such officers had actually signed the same.
In case any officer who has signed any such bonds,
debentures, notes or other instruments shall cease to be such
officer before such bonds, debentures, notes or other instruments
shall have been delivered by the Corporation, such bonds,
debentures, notes or other instruments may nevertheless be
adopted by the Corporation and be issued and delivered as though
the person who signed the same had not ceased to be such officer
of the Corporation.
RECEIPTS FOR SECURITIES
48. All receipts for stocks, bonds or other securities
received by the Corporation shall be signed by the Treasurer or
an Assistant Treasurer or by such other person or persons as the
Board of Directors or Executive Committee shall designate.
FISCAL YEAR
49. The fiscal year shall begin the first day of January in
each year.
DIVIDENDS
50. Dividends upon the capital stock of the Corporation,
when earned, may be declared by the Board of Directors at any
regular or special meeting.
The Board of Directors shall have power to fix and
determine, and from time to time to vary, the amount to be
reserved as working capital; to determine whether any, and if
any, what part of any, accumulated surplus net profits shall be
declared and paid as dividends, to determine the date or dates
for the declaration or payment of dividends and to direct and
determine the use and disposition of any surplus net profits, and
before payment of any dividend or making any distribution of
profits there may be set aside out of the surplus or net profits
of the Corporation such sum or sums as the directors from time to
time, in their absolute discretion, think proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for
such other purpose as the directors shall think conducive to the
interests of the Corporation.
DIRECTORS' ANNUAL STATEMENT
51. The Board of Directors shall present at each annual
meeting, and when called for by vote of the stockholders at any
special meeting of the stockholders, a full and clear statement
of the business and condition of the Corporation.
NOTICES
52. Whenever under the provisions of these By-Laws notice
is required to be given to any director, officer or stockholder,
it shall not be construed to require personal notice, but such
notice may be given in writing, by mail, by depositing a copy of
the same in a post office, letter box or mail chute, maintained
by the Post Office Department, in a postpaid sealed wrapper,
addressed to such stockholder, officer or director, at his
address as the same appears on the books of the Corporation.
A stockholder, director or officer may waive in writing any
notice required to be given to him under these By-Laws.
INSPECTORS OF ELECTION
53. Preceding each meeting of the stockholders for the
election of directors, the Board of Directors shall appoint two
inspectors of election to act at such meeting or any adjournment
or adjournments thereof as inspectors of election. In the event
that such inspectors shall not be so appointed, they shall be
appointed at the meeting at which such election is to be held,
and if any inspector shall refuse to serve, or neglect to attend
at the election or his office become vacant, the meeting may
appoint an inspector in his place. The inspectors appointed to
act at any meeting of the stockholders shall, before entering
upon the discharge of their duties, be sworn to faithfully
execute the duties of inspector at such meeting with strict
impartiality, and according to the best of their ability, and the
oaths so taken shall be subscribed by them and delivered to the
Secretary of the meeting with a certificate of the result of the
vote taken thereat.
AMENDMENTS
54. These By-Laws may be altered or amended by the
affirmative vote of a majority of the stock issued and
outstanding and entitled to vote, or by the affirmative vote of a
majority of the Board of Directors at any meeting duly held as
above provided, the notice of which includes notice of the
proposed amendment; provided, however, that no By-Laws adopted by
the Board of Directors regulating the election of directors or
officers shall be valid unless published for at least once a week
for two successive weeks in a newspaper in the County where the
election is to be held, and at least thirty days before such
election.
EMERGENCY BY-LAWS
1. These Emergency By-Laws shall be effective upon the
order of the New York State Defense Council, as constituted under
the New York State Defense Emergency Act, or any successor body,
in the event of attack and shall cease to be effective when the
Council or successor body declares the end of the period of
attack. During such period, the By-Laws of this Corporation
shall remain in effect except to the extent superseded by or
inconsistent with these Emergency By-Laws.
2. The powers of the Board of Directors of the Corporation
shall be vested in such directors of the Corporation as are
readily available to act. If such directors do not constitute a
quorum, then the full powers of the Board shall be vested in the
members of the Executive Committee who are readily available to
act. If members of the Executive Committee readily available to
act do not constitute a quorum, then the property and business of
the Corporation shall be managed by an Emergency Management
Committee composed of not more than five of the following persons
who are readily available to act: (a) Directors of the
Corporation; (b) to the extent necessary, Executive Vice
Presidents of the Corporation, in order of seniority of service
in that office; (c) to the extent necessary, Senior Vice
Presidents of the Corporation, in order of seniority of service
in that office; (d) to the extent necessary, Vice Presidents of
the Corporation, in order of seniority of service in that office;
and (e) to the extent necessary and in the following order:
Assistant Vice Presidents in order of seniority of service in
that office; Assistants to the Chairman in order of seniority of
service in that office; Assistants to the President in order of
seniority of service in that office; Secretary; Treasurer.
3. Meetings of such Directors, the Executive Committee or
the Emergency Management Committee may be held at any time and
place. At any meeting of the Emergency Management Committee,
three shall constitute a quorum and the act of a majority present
at any meeting at which there is a quorum shall be the act of the
Committee.
In the event it is impracticable to hold a meeting of such
Directors, the Executive Committee or the Emergency Management
Committee, the concurrence of individuals comprising any such
group may be expressed orally or in writing (regardless of the
manner of transmission or communication) and such concurrence
shall be deemed to be the act of any such group.
4. Nothing herein shall be deemed to abrogate the power of
Directors remaining in office to choose a successor or successors
in the event of vacancy in the office of any Director, as
provided in the By-Laws of the Corporation. Upon the taking of
any such action, any powers theretofore vested pursuant to these
Emergency By-Laws in the Executive Committee or the Emergency
Management Committee shall terminate.
5. Any action taken in good faith under these Emergency By-
Laws shall be as valid and binding as if taken by the Board of
Directors even though subsequent developments may show that at
the time such action was taken conditions requisite for such
action did not in fact exist.
I, , the
Secretary of NEW YORK STATE ELECTRIC & GAS CORPORATION, a New
York corporation, DO HEREBY CERTIFY that the foregoing is a true,
correct and complete copy of the By-Laws and Emergency By-Laws of
said Corporation, as amended to date.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of said Corporation this day of
, 19 .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(CORPORATE SEAL)
EXHIBIT 10-14
CONTRACT NO. 83S-248
NEW YORK STATE ELECTRIC & GAS CORPORATION
and
CONSOLIDATION COAL COMPANY
COAL SALES AGREEMENT
DATED: 12/21/83
<PAGE>
TABLE OF CONTENTS
ARTICLE PAGE
I Term of Agreement, Renegotiation, Average Price,
Diversion, and Test Coal 2
II Source of Coal 8
III Quantity of Coal 9
IV Loading 10
V Weighing, Sampling, and Analysis 14
VI Coal Quality 17
VII Price 23
VIII Price Adjustment for Heating Quality 24
IX Adjustment of Base Mine Price 25
X Governmental Imposition 34
XI Force Majeure 36
XII Records and Audits 38
XIII Billing and Payment 39
XIV Laws and Regulations 40
XV Assignment 40
XVI Waivers and Remedies 41
XVII Confidentiality 42
XVIII Miscellaneous 43
<PAGE>
Page 1
COAL SALES AGREEMENT
THIS AGREEMENT, made and entered into as of this 1st day of
November, 1983, by and between NEW YORK STATE ELECTRIC & GAS
CORPORATION, a corporation organized and existing under the laws
of the State of New York ("Buyer"), and CONSOLIDATION COAL
COMPANY, a corporation organized and existing under the laws of
the State of Delaware ("Seller").
WITNESSETH:
WHEREAS, Buyer desires to secure, to the extent of the
quantities and for the Term hereinafter stated, a supply of
bituminous coal of the quality hereinafter set forth which is
suitable for the operation of Buyer's generating unit being
constructed near the Town of Somerset, in the State of New York
("Somerset Unit #l"); and
WHEREAS, Seller represents that it is experienced in the
commercial production of coal and that it owns or has leased for
a term in excess of the Term of this Agreement, the hereinafter
mentioned reserves of bituminous coal which, when mined and
processed, will conform to the quality standards hereinafter set
forth; and
WHEREAS, Seller desires to sell coal to Buyer and Buyer
desires to buy coal from Seller;
<PAGE>
Page 2
NOW, THEREFORE, in consideration of the premises and mutual
covenants and undertakings of the parties herein contained,
Seller agrees to sell to Buyer and Buyer agrees to buy from
Seller the coal subject hereto, upon the following terms and
conditions.
ARTICLE I
TERM OF AGREEMENT, RENEGOTIATION,
AVERAGE PRICE, DIVERSION, AND TEST COAL
Section 1.1 - Term of Agreement
The term of this Agreement shall extend from the date hereof
("Effective Date") through December 31, 1997 (the "Term"). No
later than June 30, 1997 the parties shall meet to determine if
the Agreement is to be extended under mutually agreeable terms
and conditions.
Section 1.2 - Renegotiation of Articles VII and IX
The total coal purchased for Somerset Unit #1, including but
not necessarily limited to this Agreement, shall be defined as
the sum of Lot A, Lot B and Lot C. Within any single calendar
year ("year") each of the three lots shall contain the exact same
tonnage of coal, with each lot representing one-third of the coal
purchased for Somerset Unit #1.
The Base Mine Price, and adjustments thereto pursuant to
Articles IX and X, shall initially apply as follows: for Lot A
from the Effective Date through December 31, 1985, for Lot B from
the Effective Date through December 31, 1986, and for Lot C from
the Effective Date through
<PAGE>
Page 3
December 31, 1987. After the initial term of each lot, each lot
will come up for renegotiation every third year, in alternating
fashion, as set forth in the schedule in Exhibit D-1, contained
in Appendix D, attached hereto ("Schedule"). By July 1, 1985 and
by July 1 of each year thereafter, either party may give the
other party written notice by certified mail, of its desire to
renegotiate one or both of the following Articles:
Article VII - "Price"
Article IX - "Adjustment of Base Mine Price"
Such renegotiation shall apply to the lot, either A, B, or C,
currently up for renegotiation.
If, following such written notice and prior to October 1 of
the year in which the renegotiation request was made, Buyer and
Seller agree on revised terms and conditions for the lot up for
renegotiation, then the terms and conditions for that lot shall
be adjusted accordingly effective on the following January 1.
If, following such written notice and prior to October 1 of
the year in which the renegotiation request was made, Buyer and
Seller are unable to agree on revised terms and conditions for
the lot up for renegotiation, then both parties' obligation with
respect to that lot shall cease as of the next termination date
identified for that lot in the Schedule for a period of one (1)
year. Buyer may then replace said lot's tonnage by any means and
from any source it deems appropriate during that year. In that
year Buyer and Seller may renegotiate not only the lot up for
renegotiation but also the lot lost in the previous year's
renegotiation. Buyer and Seller may agree on revised terms and
conditions for both lots, one of the lots or
<PAGE>
Page 4
neither of the lots. Any lot that is reinstated, having been
lost in the previous year, will have a term such that it expires
on the next termination date identified for that lot on the
Schedule.
If Buyer and Seller are unable to agree on revised terms and
conditions for the same lot for two (2) successive
renegotiations, then both parties' obligation with respect to
that lot shall terminate. Buyer may then replace said lot's
tonnage by any means and from any source it deems appropriate
throughout the remaining Term of this Agreement.
If by July 1, 1985 and by July 1 of each year thereafter
either party does not give the other party written notice of its
desire to renegotiate one or both of the above Articles, then the
existing terms and conditions in effect for the lot currently
expiring shall be automatically extended to the next termination
date identified for that lot on the Schedule.
In any year in which Seller supplies only one of the lots
(i.e., one-third of the coal purchased for Somerset Unit #l) and
that lot is currently up for renegotiation either party may in
its sole discretion terminate this Agreement in accordance with
Section 18.2. Such termination shall become effective on the
next termination date identified for that lot in the Schedule.
If Buyer and Seller agree on revised terms and conditions for
the lot up for renegotiation and/or any previously lost lot then
the terms and conditions for each lot for which agreement was
reached shall be adjusted accordingly effective on the following
January 1.
<PAGE>
Page 5
Section 1.3 - Renegotiation of Article VIII
Beginning July 1, 1985 and every three years thereafter, as
set forth in the Schedule and coinciding with the term for Lot A,
either party may give the other party written notice by certified
mail of its desire to renegotiate Article VIII - "Price
Adjustment for Heating Quality." Such renegotiation shall apply
to all of the lots Buyer purchases from Seller during each
three-year term.
If, following such written notice and prior to October 1 of
the year in which the renegotiation request was made, Buyer and
Seller agree on revised terms and conditions for Article VIII
then the Agreement will be adjusted accordingly effective on the
following January 1. If, however, on October 1 the parties have
failed to agree on revised terms and conditions for Article VIII,
neither party shall have any further obligation with respect to
Lot A, after December 31 of the year in which renegotiation on
this Article takes place, except the option to renegotiate Lot A
with Lot B in the next year. With respect to Lot B and Lot C the
terms and conditions of Article VIII in existence prior to the
renegotiations shall remain in effect until such time as Lot B
and Lot C come up for renegotiation as specified in the Schedule.
In the event the parties fail to agree on revised terms and
conditions for Article VIII, the parties' obligations with
respect to Lot B and later Lot C shall cease on the next
termination date identified for each Lot in the Schedule. If
agreement has not been reached for Lot A, Lot B and Lot C, then
this Agreement shall terminate in accordance with Section 18.2 on
the next termination date identified for Lot C in the Schedule.
<PAGE>
Page 6
Section 1.4 - Average Price
For the purpose of accounting and payment to Seller, Buyer
shall calculate, for each shipment, an Average Price ("Average
Price"). Such Average Price shall be calculated by adding the
Base Mine Price or Adjusted Base Mine Price, as the case may be,
for each of the lots supplied in the then current year and
dividing by the number of such lots. The Average Price shall be
subject to further adjustment, on a per shipment basis, based on
the "as received" heating quality of coal pursuant to Article
VIII and then subject to any reduction pursuant to Article VI
hereof.
In addition, if Seller chooses to provide coal in excess of
the Annual Coal Tonnage Requirement pursuant to Section 3.2,
Buyer and Seller agree that the price for such coal shall be the
Average Price as adjusted pursuant to Article VIII and then
subject to any reduction pursuant to Article VI hereof.
Section 1.5 - Diversion
It is understood that the purchase of coal hereunder is for
the operation of Somerset Unit #1 and that Buyer may, at Buyer's
option, divert any portion or all of the coal deliveries
hereunder to any one or more of Buyer's other coal-fired
generating stations ("Stations"), other commitments of Buyer, or
sell the coal on the open market.
Since Buyer and Seller both understand that the coal is being
purchased F.O.B. Somerset Unit #1, if Buyer diverts coal to one
of Buyer's other Stations pursuant to this Section, then the coal
shall be purchased F.O.B. Station. If Buyer diverts coal to a
destination other than one of Buyer's Stations, pursuant to this
Section, then at the time the carrier
<PAGE>
Page 7
diverts from its route to Somerset Unit #1 or one of Buyer's
other Stations, the risk of loss for the coal in the diverted
shipment shall pass from Seller to Buyer. In the event coal
purchased hereunder is diverted to destination(s) other than
Somerset Unit #1, then the weighing, sampling and analysis of
such coal shall be performed by Seller or by consignee in
accordance with the methods and standards specified in Sections
5.1 and 5.2 hereof or in accordance with methods and standards
agreeable to both Buyer and Seller.
In any year in which coal purchased from Seller is diverted
or sold by Buyer such coal diverted or sold shall apply as a ton
for ton reduction towards Buyer's obligation to purchase coal
from Seller as provided in Article III.
Section 1.6 - Test Coal
Buyer may from time to time test burn various quality coals
(Test Coal) either purchased from Seller or other suppliers for
use at Somerset Unit #1. Should Buyer purchase Test Coal in any
year from another supplier, such coal shall be considered as coal
purchased for Somerset Unit #1 under this Agreement, and shall
apply as a ton for ton reduction in Buyer's obligation to Seller
as provided in Article III up to 100,000 tons per year. Should
Buyer's purchase of such Test Coal from other suppliers exceed
100,000 tons in any year, Buyer shall purchase from Seller
hereunder an amount of coal of an acceptable quality equal to the
excess over 100,000 tons for delivery to Buyer's other Stations
or other commitments during such year. Buyer shall provide
reasonable notice to Seller of its intent to reduce deliveries
hereunder for the purpose of testing other coals.
<PAGE>
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ARTICLE II
SOURCE OF COAL
Section 2.1
The source of coal subject to this Agreement ("Basic Source
Coal") shall be Seller's Blacksville No. 1 and No. 2 Mines (the
"Mines"). Seller, with Buyer's prior written approval, may
deliver to Buyer, coal from an alternate source ("Alternate
Source Coal") so long as such Alternate Source Coal is delivered
to Somerset Unit #1 at no more than the delivered cost per
million British thermal units ("Btu's") of Basic Source Coal and
meets the quality standards described in Sections 6.1, 6.2, and
6.3, and is otherwise suitable, in Buyer's sole judgment, for use
at Somerset Unit #1.
Seller warrants that it owns or controls adequate recoverable
coal reserves associated with Seller's Mines to fulfill the
requirements of this Agreement, including requirements as to
quality and quantity of coal.
Seller agrees that it has not entered into any agreement, and
will not enter into any agreement during the Term, with any
purchaser, which will result in Seller being unable to fulfill
the requirements of this Agreement. Buyer shall have the right
to examine Seller's Mines, dedicated properties, and pertinent
records of such coal reserves associated with Seller's Mines, to
ascertain that Seller has complied with the provisions herein.
Information from such records shall be held in the strictest
confidence by Buyer and shall not be divulged to third parties
without the prior written approval of Seller unless such
disclosure is required by some authority or legal proceeding.
<PAGE>
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ARTICLE III
QUANTITY OF COAL
Section 3.1
Subject to Articles I and VI, Buyer shall order, accept, and
pay for, and Seller shall sell and deliver, the Annual Coal
Tonnage Requirement of Somerset Unit #1.
Section 3.2
The estimated coal tonnage requirements for the years 1984
and 1985 are 800,000 and 900,000 tons, respectively.
Not later than October 1, 1984, Buyer shall by written notice
to Seller specify the Annual Coal Tonnage Requirement ("Annual
Coal Tonnage Requirement") for Somerset Unit #l which is to be
delivered during the year 1985.
Not later than June 1, 1985, and each June 1 thereafter,
Buyer shall in writing to Seller (a) specify the Annual Coal
Tonnage Requirement of Somerset Unit #l for the ensuing year, and
(b) estimate the Annual Coal Tonnage Requirement for an
additional four (4) years. Such one-year specified quantity
shall constitute Buyer's and Seller's responsibility regarding
coal supply for the ensuing year less any quantity adjustments
arising from force majeure, or the provisions of Sections 1.6,
6.1 and 6.3. Should Buyer determine that it requires a greater
tonnage than is specified for any year, Buyer shall provide
Seller first opportunity to supply such additional tonnage under
the terms of this Agreement.
<PAGE>
Page 10
Shipments scheduled by Buyer hereunder shall be, as far as
practicable, in approximately equal monthly quantities taking
into account Buyer's operations and transportation requirements
and the vacation period at Seller's Mines.
Section 3.3
Annual and/or monthly shipments, scheduled by Buyer pursuant
to Section 3.2, may be increased or decreased during any year or
month with the consent of both parties, which consent shall not
be unreasonably withheld.
ARTICLE IV
LOADING
Section 4.l
Seller shall load Buyer's trains at Seller's mines each day
of the year as required by Buyer except the vacation period and
holidays as defined in Seller's collective bargaining agreement
(currently the National Bituminous Coal Wage Agreement of 1981).
Loading on such excepted days and commencement of the loading of
more than one (1) of Buyer's trains on weekends shall be at
Seller's option. Weekends are defined as the period from 4:00
p.m. Friday until 8:00 a.m. Monday, with appropriate adjustments
for holiday weekends.
<PAGE>
Page 11
Section 4.2
Except as provided in Section 4.3, Seller shall complete the
loading of each train within 6 hours from the time the carrier
designates that the train will be at the mine and available for
loading. Such 6-hour period shall be computed from the actual
time the train is made available for loading by the carrier,
unless Seller requests later placement of the train. In such
case, the duration of the requested delay shall be counted toward
Seller's 6-hour period.
Section 4.3
Bunching is defined as the concurrent arrival at one of
Seller's mines of two or more trains which creates a conflict in
the loading of Buyer's train(s). If the carrier must hold
Buyer's train short of a mine because of bunching, Seller shall
have up to three additional hours in excess of the 6-hour period
to receive and load Buyer's train. Seller shall, to the extent
reasonably possible, minimize any delays in loading Buyer's
trains.
Section 4.4
Whenever Seller fails to effect the loading of a train in the
required time period, Seller shall be charged with a service
failure. Such service failures will be accumulated by Buyer
throughout the year. For each six, or multiple of six service
failures that Seller incurs during the year, and provided that
such failures will, in Buyer's reasonable judgment, impair
Buyer's ability to transport the desired tonnage in such year in
Buyer's equipment, Buyer may invoke the penalty provisions in
Section 4.5 (A) and (C), except that, Seller shall not be charged
with a service failure whenever conditions of force majeure
prevent Seller from loading a train.
<PAGE>
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Section 4.5
(A) Each time Seller incurs six, or a multiple of six, service
failures Seller shall, at Buyer's direction, provide Buyer
with a trainset of private rail cars, capable of moving 9000
tons of Seller's coal, similar to Buyer's cars and
compatible with Buyer's unloading equipment at no cost to
Buyer.
(B) In lieu of the penalty in Paragraph A Seller may, at
Seller's option request that Buyer secure a trainset of cars
capable of moving approximately 9000 tons of Seller's coal
and Seller will pay to Buyer the difference in
transportation costs between the per ton railroad car rate
and the per ton private car rate in effect at the time the
coal is shipped, multiplied by the number of tons of coal
shipped.
(C) Whenever the penalty in Paragraph A or Paragraph B is
invoked, Seller shall, in addition to the penalty in
Paragraph A or Paragraph B, remit to Buyer a charge of
$1,000. This charge is for the additional handling costs
Buyer incurs in uncoupling and dumping non-rotary coupled
cars. The charge shall be waived whenever Seller provides
cars under Paragraph A that do not require uncoupling or
extra handling by Buyer to unload. This $1,000 charge shall
be adjusted quarterly, beginning April l, 1984, by
application of the formula used to compute adjustments under
Section 9.2(D) hereof.
(D) In addition to the penalties contained in paragraphs A, B,
and C, Seller shall at all times be responsible for all
costs and/or charges imposed by a carrier for exceeding
allowable times pursuant to Conrail Tariff ICC 4828 or other
appropriate tariffs.
<PAGE>
Page 13
Section 4.6
Buyer and Seller have designed the procedures set forth in
this Article for determining Seller's commitment to provide Buyer
with efficient and effective loading and utilization of its
equipment.
If at any time this Article does not benefit the parties as
intended, or imposes an unreasonable burden on either of the
parties, then the parties agree to renegotiate this Article and
to establish a new basis for determining Seller's commitment to
Buyer which is acceptable to both parties. Until such time as
agreement is reached on a new service commitment, the procedures
set forth in this Article shall remain in effect.
Section 4.7
Seller shall load cars so as not to exceed a maximum gross
weight of 263,000 pounds. Should Seller exceed this maximum and
should carrier require that the lading be removed from any car or
the car be removed from the train, any cost or additional charge
associated with such removal shall be borne by Seller.
Section 4.8
Seller shall not load coal which has an average temperature
greater than 131 degrees F.
Seller shall take every precaution to load coal which has an
average temperature which is less than 131 degrees F. Should
Buyer receive a car load(s) which has an average temperature in
excess of 131 degrees F and should such car load(s) require extra
care in unloading and handling at destinations, then Seller shall
reimburse Buyer for the cost of such extra <PAGE>
Page 14
handling and for any actual damages Buyer incurs attributable to
the condition of the coal. In addition, Buyer reserves the right
to reject or dispose of any shipment, or portion thereof, where
the average temperature of the coal exceeds 150 degrees F. Any
damage to Buyer's equipment resulting from the condition of the
coal shall be paid for by Seller, and Seller will indemnify Buyer
against any claim by a carrier against Buyer for resulting damage
to carrier's equipment.
ARTICLE V
WEIGHING, SAMPLING, AND ANALYSIS
Section 5.1 - Weighing
The weight of coal delivered hereunder shall be determined by
Buyer as soon as practicable after arrival of coal at Somerset
Unit #l on Buyer's scales which shall meet the standards set
forth by the Eastern Weighing and Inspection Bureau (EWIB).
Buyer shall advise Seller of weights shipped as soon as
practicable after receipt of the shipment. Buyer's scales will
be tested and calibrated to EWIB standards on a mutually agreed
to periodic basis. Buyer shall maintain its scales at all times
in accordance with good maintenance practice to insure a high
level of performance and accuracy.
Seller shall have the right to have a representative present
at the location of the scales of Buyer at any time to observe the
weighing of coal or to witness scale calibration and scale
maintenance techniques. If Seller shall at any time question the
accuracy of the scales, Seller shall so advise Buyer, and Buyer
shall demonstrate the accuracy of the scales to the reasonable
satisfaction of Seller. If Seller is not satisfied as to <PAGE>
Page 15
the accuracy or the scales thus demonstrated, Buyer shall have
the scales tested by a testing company recommended by the scale
manufacturer. If such tests show the scales to be in error
beyond EWIB standards, the scales shall be corrected accordingly,
and the cost of the testing and correction shall be borne by
Buyer. If such tests show the scales to be within EWIB
standards, the cost of the testing shall be borne by Seller.
In the event that Buyer's scales are unavailable for any
shipment for any reason, the individual net car weights
pertaining to such shipment shall be the per car average cubic
foot weight of the three (3) most recent similar shipments.
Section 5.2 - Sampling and Analysis
Sampling shall be performed by Buyer at essentially the same
time the coal is weighed at Somerset Unit #1. Sampling shall be
in accordance with ASTM Standard Method D2234-76, as revised from
time to time, or in accordance with methods and standards
agreeable to Buyer and Seller.
Buyer or Buyer's Representative shall obtain increments from
each shipment which shall be accumulated into composite samples
representing the shipment. The composite samples shall be split
into three (3) sets:
(1) One set for analysis by Buyer;
(2) One set to be sent to Seller; and
(3) One set retained by Buyer for a minimum of 30 days.
The methods and procedures for processing samples, and
conducting lab tests and analyses (collectively "analyses"), as
required under this Agreement shall be in accordance with the
applicable current standards of the American Society for Testing
and Materials (ASTM) or with methods agreeable to Buyer and
Seller. Buyer shall maintain its sampling and analytical
equipment at all times in accordance with good maintenance
practices to insure a high level of performance and accuracy.
<PAGE>
Page 16
Seller or Seller's representative, at its sole risk and
expense, may observe and inspect the sampling equipment to be
used by Buyer in taking samples and the laboratory where analyses
are performed.
In the event that Buyer's sampling equipment is unavailable
for any shipment for any reason, Seller's samples, if available,
pertaining to such shipment shall be utilized. Seller shall
accumulate increments from each shipment at the mine into
composite samples representing the shipment. The composite
samples shall be split into three (3) sets:
(1) One set for analysis by Seller;
(2) One set to be sent to Buyer; and
(3) One set retained for a minimum of 30 days.
Buyer or Buyer's representative, at its sole risk and
expense, may observe and inspect the sampling equipment to be
used by Seller, in taking samples and the laboratory where
analyses are performed.
If neither Buyer nor Seller has taken samples for a shipment,
the quality characteristics of the coal shall be the average of
the analyses of such characteristics of the last three (3) most
recent similar shipments as determined by Buyer.
The cost of the analyses will be borne by the Buyer for the
Buyer's analyses and by the Seller for the Seller's analyses.
If Seller has substantial reason to believe there is a bias
in Buyer's sampling equipment ("sampler"), or if Buyer has
substantial reason to believe there is a bias in Seller's
sampler, the sampler in question shall be bias tested by
procedures and standards acceptable to both parties. If such
bias tests show the sampler to be in error beyond the agreed upon
standards, the sampler shall be corrected accordingly, and the
cost of the
<PAGE>
Page 17
testing shall be borne by the party responsible for operation and
maintenance of the sampler. If such tests show the sampler to be
within the agreed upon standards, the cost of the testing shall
be borne by the party requesting the bias test.
Either party may elect to compare the analyses of samples
obtained pursuant to this Section S.2 for each shipment, and if
the two (2) sets of analyses from Buyer's sample, or Seller's
sample if Buyer did not take a sample, do not agree within 100
Btu/Lb. "Dry Basis" of each other, either party may provide
written notification to the other party within thirty (30) days
after the delivery of the shipment, otherwise payment will be
based on Buyer's analyses of samples obtained under Section 5.2.
Upon such written notification the retained set of samples
obtained under Section 5.2 for the shipment in question shall be
sent by the party which performed the sampling, to and analyzed
by, an independent testing company acceptable to Buyer and
Seller. The analyses by the independent testing company of the
retained set of samples shall be conclusive and binding upon both
parties hereto and constitute the "as received" analyses for the
purpose of establishing coal quality and for payment. The cost
of employing the independent testing company shall be shared
equally by Seller and Buyer.
ARTICLE VI
COAL QUALITY
Section 6.1
It is understood that the quality of coal specified hereunder
is to be suitable, in Buyer's sole judgment, for the full load
operation of Buyer's Somerset Unit #l. Buyer shall determine as
soon as practicable, but no later than January 1, 1986, that the
quality of coal specified hereunder is <PAGE>
Page 18
suitable for the full load operation of Buyer's Somerset Unit #l.
The January 1, 1986 date may be extended if due to reasons other
than coal quality Buyer has been unable to demonstrate the Unit's
full load operation to Buyer's satisfaction. In the event that
Buyer determines that full load operation is not attainable,
Buyer may, by telegraphic or written notice to Seller, suspend
future shipment of coal from Seller. Buyer shall give Seller
thirty (30) days, from the date of Buyer's notice of suspension
to Seller, to determine if Seller desires to provide substitute
coal, at no more than the delivered price per million Btu's which
Buyer would have paid if Seller had supplied Basic Source Coal
which, in Buyer's sole judgment, is suitable for full load
operation of Somerset Unit #1, failing which, this Agreement
shall terminate in accordance with Section 18.2. If Buyer
and Seller agree upon a substitute coal of a quality suitable for
full load operation of Somerset Unit #l, the Standards and
Suspension Limits set forth in Sections 6.2 and 6.3 shall be
revised.
<PAGE>
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Section 6.2
The quality of coal supplied in each shipment by Seller
hereunder shall typically meet the following quality standards
("Standards") on an "as received" basis when sampled at Somerset
Unit #l and analyzed in accordance with Section 5.2.
Heating Value (Btu/lb) 13000
Total Moisture (% by weight) 5.0
Ash (% by weight) 10.0
Sulfur (% by weight) 2.70
Volatile Matter (% by weight) 36.0
Ash Fusion Temp. (Spherical, Reducing 2180
Atmosphere, degree F)
Grindability (Hardgrove Index) 55
Size* (Inches) 2 x 0
Chlorine** 0.10
* No more than 20 percent by weight passing 28 mesh.
** Ultimate Analysis (Dry) (By Weight)
<PAGE>
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Section 6.3
In the event Buyer receives a shipment which is less than or
is in excess of, as the case may be, any of the following "as
received" quality limits ("Suspension Limits"), Buyer may take
the actions provided below:
Heating Value less than (Btu/Lb) 12600
Total Moisture in Excess of (% by weight) 8.0
Ash in Excess of (% by Weight) 12.0
Sulfur in Excess of (% by weight) 3.2
Volatile Matter Less than (% by weight) 30.0
Ash Fusion Temperature Less than
(Spherical, reducing atmosphere, degree F) 2160*
Grindability less than (Hardgrove Index) 48
Size - Minimum 1.) No more than 90%
Passing 3/4
round hole
screen.
2.) No more than 10%
Passing No.200
sieve.
- Maximum 100% passing 4"
Chlorine in excess of (dry, ultimate
analysis) (by weight) 0.25
*Suspension, termination and 90% payment, as provided below
may be invoked for failure to meet this Suspension Limit only
if such failure adversely affects boiler performance in
Buyer's sole judgment.<PAGE>
Page 21
Buyer shall specify, by certified mail, ("Notification") to
Seller, Suspension Limits violated in such shipment, and Buyer
shall pay for the shipment at ninety percent (90%) of the then
current Adjusted Average Price of the coal. If, during the sixty
(60) day period following the Notification, Buyer receives a
shipment which violates any of the Suspension Limits, Buyer may,
by certified mail to Seller, suspend future shipments of coal
from Seller until Seller provides written assurance, reasonably
acceptable to Buyer, that future shipments will be in accordance
with the Standards described in Section 6.2 and will not violate
any of the Suspension Limits. If such assurance is not provided
to Buyer within thirty (30) days of the date of Buyer's notice of
suspension to Seller, then Buyer may terminate this Agreement in
accordance with Section 18.2 by certified mail to Seller.
In the event Buyer does not elect to terminate this Agreement
by written notice of such election to Seller on or before the
fortieth (40th) day following the date of Buyer's notice of
suspension, Seller may, within ten (10) days thereafter, commence
providing Buyer Alternate Source Coal in lieu thereof, pursuant
to Article II hereof, and/or, Buyer may acquire substitute coal
by purchases on the open market. Any such coal purchased shall
be comparable in quality, in Buyer's reasonable judgment, to the
specifications set forth in Sections 6.2 and 6.3 of this
Agreement. Should Seller elect to provide Alternate Source Coal,
Seller's obligation to do so at no more than the delivered price
per million Btu which Buyer would have paid if Seller had
supplied Basic Source Coal shall not continue subsequent to
termination of this Agreement pursuant to this Section 6.3.
Should Buyer elect to acquire substitute coal in lieu of or in
addition to <PAGE>
Page 22
Alternate Source Coal, Seller shall reimburse Buyer for any
excess in the delivered cost of such substitute coal above the
delivered price per million Btu's which Buyer would have paid if
Seller had supplied Basic Source Coal. Seller's obligation to
reimburse Buyer for any such excess in the delivered cost of
substitute coal shall not continue subsequent to termination of
this Agreement pursuant to this Section 6.3.
In the event deliveries of Alternate Source Coal or
substitute coal hereunder result in any penalty or charge which
may be imposed on Buyer by a carrier pursuant to a carrier's
tariff or transportation contract, as applicable, Seller shall
reimburse Buyer the amount of such penalty or charge up to the
date of termination of this Agreement pursuant to this Section
6.3.
In the event Buyer elects to acquire substitute coal, Buyer
shall, in the selection of such coal, employ good faith efforts
to minimize any excess cost for which Seller is obligated to
reimburse Buyer.
Shipments suspended under the provisions of this Section 6.3
shall not be made up except by mutual consent of Buyer and Seller
and the Annual Coal Tonnage Requirement for that year will be
reduced by the amount of coal that would have been shipped but
for the suspension of shipments.
If this Agreement has not been previously terminated by
Buyer, either Buyer or Seller may, by certified mail to the
other, terminate this Agreement, in accordance with Section 18.2,
on or after the one hundred eightieth (180th) day following the
date of suspension of shipments of Basic Source Coal provided
that such shipments have not resumed as of the date such notice
is given.
<PAGE>
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ARTICLE VII
PRICE
Section 7.l - Base Mine Price
The Base Mine Price per million Btu ($/MBtu) for Lot A, Lot B
and Lot C from the date hereof until renegotiated pursuant to
Article I is $1.173 excluding the cost of a freeze conditioning
agent. The Base Mine Price shall be adjusted beginning January
1, 1984 pursuant to Articles IX and X ("Adjusted Base Mine
Price").
Section 7.2 - Average Price and Adjusted Average Price
An Average Price shall be calculated pursuant to Section 1.4
for each shipment. The Average Price shall be further adjusted,
on a per shipment basis, for changes in heating quality of coal
pursuant to Article VIII hereof ("Adjusted Average Price") and
subject to a reduction as set forth in Article VI hereof.
Section 7.3 - Billing Price
The Billing Price per ton of coal, pursuant to this
Agreement, to be paid on a per shipment basis is determined by
the following formula:
A x B x 2000
------------
Billing Price ($/ton) = 1,000,000 + FC
Where A = The "as received" heating quality of the coal in
Btu's per pound as determined pursuant to Article
V.
Where B = The Adjusted Average Price and any reduction
pursuant to Article VI in dollars per million Btu.
Where FC = Buyer's share of the cost of freeze conditioning
agent.
Exhibit B-l, contained in Appendix B, attached hereto, sets
forth the calculation of the Billing Price per ton of coal to be
paid to Seller for each shipment pursuant to this Agreement.
<PAGE>
Page 24
Section 7.4 - Freeze Conditioning
A freeze conditioning agent acceptable to Buyer will be
uniformly applied at an application rate of two (2) pints per ton
to all coal shipped to Buyer from November through March or as
directed by Buyer. The cost of this application will be shared
equally between Buyer and Seller. The Buyer's share of cost will
be reflected in the Billing Price per ton, effective with the
application of the freeze conditioning agent.
ARTICLE VIII
PRICE ADJUSTMENT FOR HEATING QUALITY
Section 8.1 - Introduction
The Average Price for each shipment hereunder is subject to a
premium or penalty based on the "as received" heating quality
expressed in Btu's/Lb. of coal. The Average Price will be
increased or decreased for Btu's/Lb. above or below a given
deadband which is + -200 Btu/Lb. of the Standard Btu/Lb.
specified in Section 6.2 according to the equations in Sections
8.2 or 8.3.
Section 8.2 - Penalty
The "as received" heating quality of the coal expressed in
Btu's/Lb. as determined pursuant to Article V for each shipment
which falls below the deadband will result in an Adjusted Average
Price calculated as follows:
<PAGE>
Page 25
Adjusted Average Price = AP x PAF
Where: AP = Average Price
AF = Price Adjustment Factor
The PAF is calculated as follows:
PAF = 1.69 R - 0.69
Where: R = "as received" Btu's/Lb. divided by the Standard
Btu's/Lb.
Section 8.3 - Premium
The "as received" heating quality of the coal expressed in
Btu's/Lb. as determined pursuant to Article V for each shipment
which falls above the deadband up to a maximum of 13400 Btu's/lb.
will result in an Adjusted Average Price calculated as follows:
Adjusted Average Price = AP x PAF
Where: AP = Average Price
PAF = Price Adjustment Factor
The PAF is calculated as follows:
PAF = 0.738 R + 0.262
Where: R = "as received" Btu's/Lb. divided by the
Standard Btu's/Lb.
ARTICLE IX
ADJUSTMENT OF BASE MINE PRICE
Section 9.1
The Base Mine Price per ton as defined in Section 7.1,
expressed on a dollars per ton basis, is composed of the
following elements: (A) Labor and Labor Related Cost, (B) UMWA
Pension and Benefit Trusts Cost,
<PAGE>
Page 26
(C) Materials and Supplies Cost, (D) General and Administrative
Cost, (E) Black Lung Excise Tax and Reclamation Fee Cost, and
(F) Firm. Exhibit A-l contained in Appendix A, attached hereto,
sets forth these elements. The Base Mine Price based upon these
elements shall be adjusted as described below, and as summarized
in Exhibit A-2 and as set forth in the example contained in
Exhibit A-9 contained in Appendix A, attached hereto. All
adjustment calculations shall be carried to four (4) decimal
places and rounded to three (3) decimal places.
Section 9.2
(A) Labor and Labor Related Cost
The Base Mine Price includes a Labor and Labor Related Cost
element ("LLR") of $10.600 per ton which shall be adjusted,
effective as of the date of each change pursuant to Seller's
controlling collective bargaining agreement (currently the
National Bituminous Coal Wage Agreement of 1981) or
applicable legislation for those items not covered in
Article X for changes in the average labor cost per manday,
including benefits of employees covered by such collective
bargaining agreement, including, but not limited to, changes
in wage rates, paid vacations, holidays, sick or other leave
pay, premium pay, overtime pay, shift differential rates,
health and retirement benefits, payroll taxes, black lung
benefits, sickness and accident benefits, worker's
compensation, and clothing and material allowances. The
adjustment shall be determined in accordance with the
following formula and such adjustment shall be used in
substitution for all previous LLR adjustments pursuant to
this Section 9.2(A).
<PAGE>
Page 27
(Current Cost Per Manday - $193.381)
------------------------------------
LLR Adjustment = $10.600 x $193.381
Exhibits A-3 contained in Appendix A, attached hereto, set
forth the calculation of the LLR adjustment.
(B) UMWA Pension and Benefit Trusts Cost
The Base Mine Price includes an element of $1.60 per ton
required by Seller's collective bargaining agreement to be
paid into the UMWA Pension and Benefit Trusts ("PBT"). Any
adjustments in said per ton amount required by Seller's
collective bargaining agreement to be paid into the UMWA
Pension and Benefit Trusts shall be added to or subtracted
from, as the case may be, the Base Mine Price as of the
date Seller first incurs or is relieved from the cost
resulting from such change. Exhibit A-4, contained in
Appendix A, attached hereto, sets forth the calculation of
the PBT adjustment.
(C) Materials and Supplies Cost
The Base Mine Price includes a Materials and Supplies Cost
element of $7.625 per ton ("MS") which shall be adjusted in
each year as of January 1, April 1, July 1, and October 1,
commencing April 1, 1984. Materials and Supplies Cost
element shall be adjusted according to the weighted average
percent change in the materials and supplies indices.
The respective base indices and weighting factors that are
used to calculate the weighted average percent change in the
materials and supplies indices are as follows:
<PAGE>
Page 28
BLS
Materials and Supplies Index Number Weight
Cost Component and Description Factor Base Index Value
Mining Machinery and Code 1192 0.200
Equipment Mining Machinery &
Equipment
Gen. Mat'l. & Supplies No Code # 0.273
Industrial
Commodit.
Less Fuel & Power
Found in Table 8
of the PP&PI
Lumber and Wood Code 0849-0102 0.070
Railway and Mine
Ties
Finished Steel Products No Code # 0.071
Finished Steel,
Including
Fabricated Wire
Products, Found
in Table 8 of the
PP&PI
<PAGE>
Page 29
BLS
Materials and Supplies Index Number Weight
Cost Component and Description Factor Base Index Value
Mine Roof Bolts Code 1081-0241 0.050
Mine Roof Bolts
Wire and Cable Code 1026-03 0.039
10% AL 90% Copper
Power Code 0543-1514 0.114
Industrial Power,
South Atl.
Oil Code 0575 0.033
Lubricating Oil
Gen. Purpose Machinery Code 1143 0.082
and Equipment Fluid Power &
Equipment
Electrical Machinery Code 117 0.068
and Equipment Electrical
Machinery
& Equipment
TOTAL: 1.000
<PAGE>
Page 30
The base index value for each component shall be the average of
the most recent final September, October, and November, 1983
values as published by the Bureau of Labor Statistics available
ten (10) days prior to the adjustment date ("Base Index Value").
The new index value for each component shall be the average of
the most recent final values available ten (10) days prior to the
adjustment date for the fourth, third and second months preceding
the adjustment date ("New Index Value").
The adjustment shall be the product of the MS multiplied by the
summation of the products of the weight factors of each component
and the percent change between the New Index Value and the Base
Index Value for each component.
The Material and Supplies Cost Adjustment shall be calculated as
follows and such adjustment shall be used in substitution for all
previous MS adjustments pursuant to this Section 9.2(C).
MS Adjustment = ($7.625) x
[Weight Factor of Respective Component x
(New Index Value of Component- Base Index Value of Component)]
- -------------------------------------------------------------
Base Index Value of Component
Exhibit A-5, contained in Appendix A, attached hereto, sets forth
the calculation of the MS adjustment.
<PAGE>
Page 31
(D) General and Administrative Cost
The Base Mine Price includes a General and Administration
Cost element of $4.950 per ton ("G&AC"), which shall be
adjusted in each year as of January 1, April 1, July 1, and
October 1, commencing April 1, 1984, based upon changes in
the quarterly index Implicit Price Deflator for the Gross
National Product, seasonally adjusted ("IPD-GNP"), contained
in the Department of Commerce publication, "Survey of
Current Business". The G&AC Adjustment shall be the product
of the G&AC multiplied by the percentage change in the
IPD-GNP between the base period of the third quarter of
1983, which shall be the most recent final index value
available ten (10) days prior to the adjustment date, and
the most recent final index value available ten (10) days
prior to the adjustment date for the second quarter
preceding the applicable quarterly adjustment date,
calculated as follows.
$4.950 x (Current IPD-GNP - Base IPD-GNP) = G&AC
--------------------------------
Base IPD-GNP Adjustment
Such adjustment shall be used in substitution for all
previous G&AC adjustments pursuant to this Section 9.2 (D).
Exhibit A-6, contained in Appendix A, attached hereto, sets
forth the calculation of the G&AC Adjustment.
<PAGE>
Page 32
(E) Black Lung Excise Tax and Reclamation Fee Cost
The Base Mine Price includes a cost element of $1.15 per ton
("BLR") for the sum of the United States Government
Reclamation Fee of $.15 and Black Lung Excise Tax of $1.00.
Any adjustments to the BLR will be separately identified to
Buyer and will be added to or subtracted from, as the case
may be, the Base Mine Price as of the date Seller first
incurs or is relieved from the cost resulting from such fee
or tax. Exhibit A-7, contained in Appendix A, attached
hereto, sets forth the calculation of the BLR adjustment.
(F) Firm
The Base Mine Price includes a cost element of $4.575 per
ton, which shall not be adjusted throughout the Term of the
Agreement, unless adjusted pursuant to the provisions of
Article I.
(G) Discontinuance or Change in Indexes
Should the then current base of any index referred to in
this Article be converted to a new base by the Bureau of
Labor Statistics (BLS) or by the Department of Commerce
(DOC), the new rebased index shall be used to calculate the
adjustments hereunder. The rebased index will be
substantiated by the BLS or DOC's rebased historical series
for the index. If the historical series is not available at
the time of billing, the conversion calculations for the
new index base period will be used to re-compute the value
of indexes contained in this Article. Should publication of
any index be discontinued or should the relative weights of
the components of an index change, an index that is most
closely equivalent to the applicable index referred to
herein shall be substituted by agreement of the parties
hereto.
<PAGE>
Page 33
(H) Payment of Cost Adjustments
As soon as possible, Seller will notify Buyer in writing of
adjustments to the Base Mine Price pursuant to this Article
IX and Article X and submit therewith the amount of the
adjustments claimed and the basis and method of computation
of such amount claimed, together with any documentation that
may be required in support of such claim.
Said adjustments shall become part of the Adjusted Base
Mine Price for billing and payment purposes pursuant to
Article XIII immediately upon their effective date. Any
dispute as to any cost adjustment pursuant to Articles IX and
X shall not result in withholding of, or delay in, payment by
Buyer. If, after resolution of such dispute, it is
determined that the amount of the payment is an underpayment,
then Buyer shall pay to Seller the difference between the
amount paid and the total amount due. If, after resolution
of such dispute, it is determined that the amount of the
payment is an overpayment, then Seller shall pay to Buyer the
difference between the amount paid and the total amount due,
together with interest on such differences from the date of
overpayment to the date of repayment at the prime rate of
Morgan Guaranty Trust Company of New York in effect on the
first day of the calendar month in which the overpayment
occurred.
<PAGE>
Page 34
ARTICLE X
GOVERNMENTAL IMPOSITION
Section 10.1
The parties recognize the possibility that during the Term of
this Agreement, legislative, judicial, or regulatory bodies may
(1) remove, revise, or alter existing legislation, regulations,
orders, requirements or the interpretation or enforcement thereof
("Rules") or (2) impose new Rules, which may pertain to Seller
and may require the adoption of new operating practices or
otherwise change the costs at Seller's Mines from which Basic
Source Coal is obtained.
In the event any such Rule is removed, revised, altered, or
imposed, the Seller shall take all reasonable measures to reduce
the impact of same on Seller's costs and shall so advise the
Buyer. The Buyer may, at its expense, have the matter reviewed
by a consultant to assure itself that the impact has been
minimized to the fullest practicable extent.
An estimate of the change in Seller's cost, pursuant to this
Section 10.1, and a price adjustment based on such estimate,
shall be made as soon as practicable after the effective date of
any change in Rules.
Once the full amount per ton of such change in Seller's cost
has been established and agreed upon, which shall be subject to
audit and verification by Buyer in accordance with the provisions
of Article XII, a settlement shall be made for any difference
between the estimated change and the actual change in Seller's
cost.
<PAGE>
Page 35
In the event the full amount of change in Seller's costs and
subsequent price adjustment exceeds seven percent (7%) of the
then current Adjusted Base Mine Price and if Buyer determines
that such an adjustment to the price makes the continuation of
this Agreement economically unfeasible, then Buyer shall notify
Seller within thirty (30) days of the date upon which the amount
of adjustment is ascertained, and the parties shall attempt to
negotiate an alternate price adjustment. If the parties are
unable to agree upon an alternate price adjustment within thirty
(30) days of the date of such notification by Buyer, then this
Agreement shall terminate, in accordance with Section 18.2, at
the expiration of such thirty (30) days.
Section 10.2
The parties also recognize the possibility that, during the
term of this Agreement, legislative, judicial, or regulatory
bodies may (1) remove, revise, or alter existing Rules or (2)
impose new Rules which may pertain to Buyer, which make
economically unfeasible the continued shipping, storage, or
consumption of the coal under the terms and conditions specified
in this Agreement. In the event any such Rule is removed,
revised, altered, or imposed, the Buyer shall take all reasonable
measures to reduce the resulting impact and so advise the Seller.
The Seller may, at it own expense, have the matter reviewed by a
mutually-acceptable consultant in order to assure itself that the
impact has been minimized to the fullest extent possible. The
Buyer and Seller shall attempt to negotiate a price adjustment to
reflect the removal, revision, alteration, or imposition of any
such Rule.
<PAGE>
Page 36
If the parties are unable to reach agreement on any such
price adjustment and/or the parties mutually determine that
continued shipping, storage, or consumption of coal hereunder is
economically unfeasible, then either party may terminate this
Agreement in accordance with Section 18.2 on a date no earlier
than the effective date of the Rule.
Section 10.3
Should action by legislative, judicial, or regulatory bodies
prohibit the continued mining, processing, shipping, storage, or
consumption of the coal under the terms and conditions specified
in this Agreement, then this Agreement shall be terminated in
accordance with Section 18.2 on a date no later than
the effective date of the Rule.
ARTICLE XI
FORCE MAJEURE
Section 11.1
The term "force majeure" shall mean any causes beyond the
reasonable control of the party affected thereby, such as acts of
God, acts of the public enemy, insurrections, riots, strikes,
labor disputes, walkouts or lockouts, vandalism or sabotage,
fires, explosions, floods, breakdown of or damage to plants,
equipment, or facilities, accidents of or interruptions to
transportation, any governmental or agency action, or other
causes of a similar or dissimilar nature which wholly or partly
prevent the mining, delivering, and/or loading of the coal by
Seller, or the receiving, transporting, and/or delivering the
coal by the carrier of the coal, or the accepting, utilizing,
storing and/or unloading of the coal by the Buyer.
<PAGE>
Page 37
The term force majeure shall also include a default by a carrier
under Buyer's Transportation Agreement. The doctrine of ejusdem
generis shall not be applied to exclude any event dissimilar to
the enumerated events but which is beyond the reasonable control
of a party.
The provisions of the above paragraph shall not excuse a
party from performance unless such party shall give written
notice to the other party; 1) of its inability to perform within
ten (10) calendar days and, 2) to furnish full information as to
the cause of its inability to perform and probable extent and
duration thereof within thirty (30) calendar days, after such
cause occurs.
If, because of force majeure, either party is unable to carry
out any of its responsibilities under this Agreement, then the
responsibilities of the party giving such notice shall be
suspended (other than the payment of monies due) to the extent
made necessary by force majeure and during its continuance,
provided that such force majeure and/or its effects are
eliminated insofar as possible with all reasonable dispatch, but
a party shall not be required to settle any labor dispute, except
on terms it deems acceptable in its absolute discretion.
Any deficiencies in deliveries of coal hereunder caused by
force majeure shall not be made up except by mutual consent.
In the event Seller's performance is curtailed by reason of
force majeure, Buyer shall have the right to obtain coal from
another supplier and such tonnage as is so supplied shall be
included in the Annual Coal Tonnage Requirement.
In the event Buyer's performance is curtailed by reason of
force majeure, Seller shall have the right to sell to others any
quantity of coal which Buyer cannot accept due to such force
majeure.
<PAGE>
Page 38
ARTICLE XII
RECORDS AND AUDITS
Seller shall maintain a system of accounting in accordance
with general industry practices and generally accepted accounting
principles consistently applied, and appropriate to permit the
development of the calculations, reports, accountings, and
statements required by this Agreement, and to facilitate the
review and audit by Buyer or its Representative of Seller's
records and accounts for the purposes of this Agreement.
Seller shall maintain appropriate property maps, mine maps, and
engineering records for the Basic Source Coal which shall be
available at all reasonable times for inspection by Buyer. Buyer
shall at all reasonable times be afforded complete access to such
records and accounts for inspection, audit, and review. Buyer
shall have the right to inspect and audit all of Seller's
internal costing used to support any adjustments to the Base Mine
Price and any adjustments to the elements or other components of
the Base Mine Price. Buyer also reserves the right to inspection
and audit of the Seller's internal costing records for the
General and Administrative Cost element of the Base Mine Price if
adjusted as a result of renegotiation between the parties
pursuant to Article I. Seller shall make appropriate adjustments
as may be required and as are mutually agreed to reflect the
results of Buyer's audit. Seller shall preserve and have subject
to audit, all pertinent records for a period of two (2) years
after final payment pursuant to this Agreement. Buyer shall at
all reasonable times have the right to inspect the mine,
preparation facilities, loading facilities, and related
facilities of Seller utilized for production of coal under this
Agreement.
<PAGE>
Page 39
ARTICLE XIII
BILLING AND PAYMENT
Section 13.1
Billing and payment for each shipment received from Seller
shall be based upon the quantity and quality of coal as
determined hereunder.
Section 13.2
On receipt of the "as received" analysis as determined under
Article V, hereunder, of each shipment of coal, Buyer will
prepare a "Coal Purchase Advice" which shall include the Average
Price, including adjustments pursuant to Article VIII and any
reduction pursuant to Article VI resulting in the Billing Price
and will submit copy of same as soon as practicable, to Seller
at:
Consolidation Coal Company
Consol Plaza
1800 Washington Road
Pittsburgh, Pennsylvania 15241
Attention: Sales Contract Administration
Department
Payment for each shipment of coal shall be due within 30 days
after receipt thereof and shall be made by Federal Reserve Wire
Transfer of same day funds to Mellon Bank, N.A., Pittsburgh,
Pennsylvania, for credit to Consolidation Coal Company, Account
Number 127-7247, or such other account that Seller may from time
to time select on thirty (30) days notice to Buyer.
<PAGE>
Page 40
ARTICLE XIV
LAWS AND REGULATIONS
Section 14.1
This Agreement shall be governed by and construed under the
laws of the State of New York.
Section 14.2
Seller agrees to abide by the Equal Employment Opportunity
Compliance Requirements in Appendix C of this Agreement.
ARTICLE XV
ASSIGNMENT
Section 15.1
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and
assigns; but this Agreement may not be assigned by either party
without the prior written consent of the other, which consent
shall not be unreasonably withheld, except that either party may,
without written consent of the other, assign to any financing
institution or institutions any monies due or to become due
hereunder. Buyer may also, without the consent of the Seller,
assign this Agreement (in whole or in part), to any subsidiary or
affiliated company(ies) of Buyer or to any other company having a
financial interest in Somerset Unit #1. Upon such assignment,
each assignee or assignees shall expressly assume in writing, to
the extent of such assignment, the <PAGE>
Page 41
obligations and responsibilities of Buyer hereunder. If each
such assignee(s) is (are) considered to be creditworthy as
determined by Seller applying reasonable standards, Seller shall
to the extent of such assignment release Buyer from all further
obligations and responsibilities under this Agreement. For
financing purposes only, Buyer may also, without the consent of
Seller, assign this Agreement in whole or in part to any
financial corporation with which Buyer or any of its subsidiary
or affiliated companies may contract, but no such assignment
shall relieve Buyer of its obligations and responsibilities under
this Agreement to make payments to Seller for coal delivered by
Seller under this Agreement, in the event that the assignee
shall not make such payments. Written consent to one or more
assignments shall not be construed as waiving the necessity of
obtaining written consent to other and/or additional assignments.
ARTICLE XVI
WAIVERS AND REMEDIES
Section 16.1
The failure of either party to insist in any one or more
instances upon strict performance of any provision of this
Agreement by the other party, or to take advantage of any of its
rights hereunder, shall not be construed as a waiver by it of any
such provision or the relinquishment by it of any such rights in
respect of any subsequent non-performance of such provision, but
the same shall continue and remain in full force and effect.
<PAGE>
Page 42
Section 16.2
Except for Buyer's remedies pursuant to Section 6.3, which
shall be Buyer's sole and exclusive remedies for Seller's failure
to deliver coal of the quality specified herein, each remedy
specifically provided for under this Agreement shall be taken and
construed as cumulative and in addition to every other remedy
provided for herein or by law.
Section 16.3
In no event shall either party be responsible to the other
for consequential, incidental or special damages as a result of a
default in the performance of any of its covenants or obligations
hereunder except as specifically provided herein.
ARTICLE XVII
CONFIDENTIALITY
Section 17.1 - Confidentiality
To the extent practicable the parties shall keep confidential
the terms and conditions hereof, the transactions provided for
herein, and any documents or other information delivered in
connection herewith unless such is readily ascertainable from
public information or sources, requested by regulatory
commission, necessary for financing or other business purposes,
or otherwise required by law to be disclosed. In the event
either party so discloses any such information to a regulatory
commission, financial institution, or otherwise as required by
law, it shall promptly and fully advise the other of such
disclosure.
<PAGE>
Page 43
ARTICLE XVIII
MISCELLANEOUS
Section 18.1 - Entirety and Titles
This Agreement contains the entire agreement between the
parties, and no alteration or modification thereof shall be
binding unless in writing and signed by Buyer and Seller. The
titles of the Articles and Sections in this Agreement have been
inserted as a matter of convenience of reference only, and shall
not control or affect the meaning or construction of the terms
and provisions hereof.
Section 18.2 - Termination
In the event of termination of this Agreement, neither party
shall have, after the effective date of such termination, any
further obligations or responsibilities under this Agreement
provided, however, that such termination shall not affect any
rights or obligations of Buyer or Seller hereunder solely for
coal shipped or required to be shipped prior to the date of such
termination.
Section 18.3 - Damage
Whenever any loss of, damage to or destruction of Buyer's
and/or Somerset Railroad Corporation (SOM) coal car(s) occurs
while it is on the property of Seller and is caused in whole or
in part by the fault, failure, negligence, misconduct,
malfeasance or misfeasance of Seller, its agents, or employees,
Seller shall settle all claims arising therefrom, and shall
indemnify Buyer from and assume liability for such loss of,
damage to, or destruction of, Buyer's and/or SOM's coal car(s).
<PAGE>
Page 44
Section 18.4 - Severability
If any part, term, or provision of this Agreement is held by
the courts or by any agency purporting to have jurisdiction over
the Agreement or the parties hereto, to be unenforceable,
illegal, against public policy, or in conflict with any Federal,
State, or local laws, and such, part, term or provision does not
affect the substantive rights of the parties to this Agreement,
then such part, term or provision shall be severable from the
rest of this Agreement and the Agreement shall be construed as if
the invalid part, term, or provision did not exist. If such
part, term or provision does affect the substantive rights of one
or both parties to this Agreement, then the parties hereto shall
renegotiate the terms of this Agreement as shall be necessary to
continue the benefits to both parties of this Agreement. If
agreement cannot be reached on such terms, then any party
whose substantive rights pursuant to this Agreement are affected
may terminate this Agreement, pursuant to Section 18.2, on sixty
days prior written notice by certified mail to the other party.
Section 18.5 - Notice
Except as otherwise herein provided all notices under this
Agreement shall be in writing, and shall be sufficient in all
respects if delivered in person to the Vice-President, Purchasing
of Buyer, for Buyer, the Vice-President - Sales, of Seller, for
Seller, or if sent by regular mail, addressed to the respective
parties as follows:
For Buyer: New York State Electric & Gas Corporation
4500 Vestal Parkway East
Binghamton, New York 13903
Attn: Vice President - Purchasing
<PAGE>
Page 45
For Seller: Consolidation Coal Company
Consol Plaza
1800 Washington Road
Pittsburgh, PA 15241
Attn: Vice-President - Sales
Copy to: Consolidation Coal Company
Rochester Sales Office
3380 Monroe Avenue
Rochester, New York 14618
or at any subsequent address of which either party may notify the
other in the manner herein provided.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first above written.
ATTEST: NEW YORK STATE ELECTRIC & GAS
CORPORATION
Dolores R. Hix By James A. Carrigg
Asst. Secretary President
ATTEST: CONSOLIDATION COAL COMPANY
Roland H. Burns Jr. By Ronald R. Palmer
Assistant Secretary
<PAGE>
Page 1 of 20
APPENDIX "A"
BASE MINE PRICE ADJUSTMENT
(Attached to and made a part of that certain Coal Supply
Agreement dated as of the 1st day of November, 1983, entered into
by and between: CONSOLIDATION COAL COMPANY, as Seller, and NEW
YORK STATE ELECTRIC & GAS CORPORATION as Buyer).
<PAGE>
Page 2 of 20
EXHIBIT A-l
ELEMENTS OF BASE MINE PRICE PER TON OF COAL
Base
Price Adjustment Base Mine Price Elements Mine Price Elements
Exhibits Cost Per Ton Ident. Symbol
A-3A, A-3B Labor & Labor Related Cost 10.600 LLR
A-4 UMWA Pension & Benefit 1.600 PBT
Trusts cost
A-5 Materials & Supplies Cost 7.625 MS
A-6 General & Administrative 4.950 G&AC
Cost
A-7 Black Lung Excise Tax and 1.150 BLR
Reclamation Fee Cost
Firm 4.575 F
Total Base Mine
Price Per Ton $30.500
<PAGE>
Page 3 of 20
EXHIBIT A-2
Except for LLRCA, which shall be adjusted as of the date of
each change in Seller's collective bargaining agreement
(currently the National Bituminous Coal Wage Agreement of 1981),
the following calculations will be submitted by the Seller on a
quarterly basis to substantiate the Adjusted Base Mine Price per
ton of coal.
Base Mine Price of Coal Per Ton $30.50
Base Mine Price Adjustment
Labor & Labor Related Cost Adjustment
LLRCA (From Exhibit A-3A and A-3B) = $
UMWA Pension and Benefit Trust Cost Adjustment
PBTCA (From Exhibit A-4) = $
Material & Supplies Cost Adjustment
MSCA (From Exhibit A-5) = $
General & Administrative Cost Adjustment
G& ACA (From Exhibit A-6) = $
Black Lung Excise Tax & Reclamation Fee
Cost Adjustment
BLRCA (From Exhibit A-7) = $
Total Price Adjustment $
Adjusted Base Mine Price Per Ton $
Adjusted Base Mine Price Per MBtu (From Exhibit $
A-8)
<PAGE>
Page 4 of 20
EXHIBIT A-3
Page 1
LABOR AND LABOR RELATED COST ADJUSTMENT
Labor and Labor Related Cost Adjustment is based on changes
in Seller's collective bargaining agreement (currently the
National Bituminous Coal Wage Agreement of 1981) or applicable
legislation.
If there is a change in the amount to be paid by Seller for
Labor and Labor Related costs after the effective date of this
Agreement, the revised calculations as computed in accordance
with Exhibit A-3, Pages 2 through 4, attached hereto, along with
support for the revised costs, are to be submitted to Buyer. The
method of calculating the Labor and Labor Related Cost Adjustment
is as follows:
LLRCA = LLR x (L2-Ll)
-----
L1
LLRCA = Labor and Labor Related Cost
Adjustment
LLR = Base Mine Price Element Cost Per Ton
from Exhibit A-1
L1 = Base Cost Per Manday for Labor and
Labor Related Costs as of the
Effective Date of this Agreement
contained in Exhibit A-3, Pages 2
through 4
L2 = Current Cost Per Manday for Labor and
Labor Related Costs as Computed in
Accordance with Exhibit A-3, Pages 2
through 4
<PAGE>
Page 5 of 20
EXHIBIT A-3
Page 2
LABOR COST PER MANDAY
Average Cost Per Manday Without Shift Differential and Overtime
Pay Rates Percent** Weighted
Pay Grade at 12/7/83 of Mandays Cost/Manday
Underground 5 $109.72 36.3% $39.828
4 $106.48 16.5% $17.569
3 $103.54 19.0% $19.673
2 $101.76 6.8% $ 6.920
1 $101.18 15.1% $15.278
Surface 4 $ 99.07 3.5% $ 3.467
3 $ 97.30 1.2% $ 1.168
2 $ 95.25 - -
1 $ 94.67 1.6% $ 1.515
------ -------
100.0% $105.418
OVERTIME
Average Wage Rate Paid Versus Straight Time Average Wage Rate
10.0 Percent**
SHIFT DIFFERENTIAL
Average Cost Per Manday of Shift Differential
Amounts Percent** Weighted
Shift Per Day of Mandays Cost/Manday
Underground Midnight-8 A.M. $3.200 29.9% $ .957
8 A.M.-4 P.M. - 31.4% -
4 P.M.-Midnight $2.400 32.4% $ .778
Surface Midnight-8 A.M. $2.900 1.7% $ .049
8 A.M.-4 P.M. - 2.7% -
4 P.M.-Midnight $2.175 1.9% $ .041
----- -----
100.0% $ 1.825
**These percentage figures shall remain fixed unless there is a
change in Seller's collective bargaining agreement or
legislation which necessitates a change such as a change in the
number of pay grades or mandatory rules related to overtime.
<PAGE>
Page 6 of 20
EXHIBIT A-3
Page 3
Cost Per Manday
$105.418 (Straight Time)
1.825 (Shift Differential)
- --------
$107.243
x 1.10 (Overtime)
- --------
$117.967
FRINGE BENEFITS
Days of Pay - Assumes each man receives maximum entitled under
the collective bargaining agreement, except graduated vacation
days.
Regular Vacation 12 days
Floating Vacation 4 days
Graduated Vacation 3 days
Holidays 11 days
Allowance for Birthday Worked 1 day
Bereavement 3 days
Personal Days 5 days
--
39 days
39 days x $107.243 = $4,182.477
$4,182.477 divided by 222 days* = $18.840 per manday
Clothing Allowance
$150.00 x 1.08 (Assumed Turnover Factor) = $162.000
$162.000 divided by 222 days* = $.730 per manday
Total Labor Cost Per Manday
$117.967 (Straight Time, Overtime, Shift Differential)
18.840 (Fringe Benefit - Days of Pay)
- --------
$136.807 (Subtotal Labor Cost Per Manday)
.730 (Fringe Benefit - Clothing Allowance)
- --------
$137.537 (Total Labor Cost Per Manday)
* 365 Days Per Year
- - 104 Saturdays and Sundays
- - 39 Fringe Days
---
222
Base work year per man will change as the number of Fringe
Days changes per the controlling collective bargaining
agreement(s).
<PAGE>
Page 7 of 20
EXHIBIT A-3
Page 4
Labor Related Costs Per Manday
F.I.C.A. Tax:
[l]
6.70% x $136.807 = $9.166 per Manday
Federal Unemployment Insurance:
[2]
1.4% x $7,000/222 days = .441
State Unemployment Insurance:
[3]
3.9% x $8,000/222 days = 1.405
Black Lung Self-Insurance:
[4]
5.91% x $136.807 = 8.085
Health and Retirement Benefits:
1. Medical Benefits
[4]
$353.80 per man per month x 12/222
days = 19.124
2. Pension Cost Per Hour
$1.017 per hour x 7.95 hours = 8.085
[(93.7% x 8 hrs.) + (6.3% x 7.25 hrs.)]
Sickness and Accident:
[4]
$17.00 per man per month x 12/222
mandays = .919
Worker's Compensation:
[4]
6.3% x $136.807 = 8.619
------
Total Labor Related Cost Per Manday $55.844
Total Labor Cost Per Manday $137.537
-------
TOTAL COST PER MANDAY $193.381
[1] Rate applicable to maximum base annual wages.
[2] Rate and maximum base annual wages applicable to the State
of W. Virginia.
[3] Seller's rate and maximum base annual wages applicable to
the State of W. Virginia.
[4] Includes self-insured accrual rates. Each January 1 and
periodically during each calendar year, the current rate for
these costs will be substituted for the prior rate. As soon
as possible after the end of each calendar year, the actual
average rate for said calendar year will be substituted for
the prior rates and any necessary adjustment will be made,
retroactive to January 1 of said calendar year.
<PAGE>
Page 8 of 20
EXHIBIT A-4
UMWA PENSION AND BENEFIT TRUSTS COST ADJUSTMENT
The only charges to be included in the UMWA Pension and
Benefit Trusts Cost Adjustment are specific dollar amounts
required by Seller's collective bargaining agreement to be paid
into the UMWA Pension and Benefit Trusts.
If there is a change in the amount to be paid into the UMWA
Pension and Benefits Trusts after the effective date of this
Agreement, the revised calculations, along with support for the
revised costs, are to be submitted to Buyer. The method of
calculating UMWA Pension and Benefit Trusts Cost Adjustment is as
follows:
PBTCA = PBT1 - PBT
PBTCA = UMWA Pension and Benefit Trusts Cost Adjustment
PBT = Base Mine Price Element Cost Per Ton from
Exhibit A-1
PBTl = Current Cost Per Ton for UMWA Pension and
Benefit Trusts
<PAGE>
Page 9 of 20
EXHIBIT A-5
MATERIALS AND SUPPLIES COST ADJUSTMENT
Materials and supplies shall be adjusted according to the
weighted average percent change in the material and supplies
indices. Indices included in the materials and supplies are
published in the BLS publication "Producer Prices and Price
Indexes".
MSCA = MS x [ WAPC] / 100
MSCA = Materials and Supplies Cost Adjustment.
MS = Base Mine Price Element Cost Per Ton from Exhibit
A-l.
WAPC = Weighted average percent change of materials and
supplies indices.
<PAGE>
<TABLE>
<CAPTION>
Page 10 of 20
Exhibit A-5 (CONTINUED)
MATERIALS AND SUPPLIES COST ADJUSTMENT
EXAMPLE CALCULATION TABLE
<S> <C> <C> <C> <C> <C> <C>
(6) (7)
% Change Weighted %
(1) (2) (3) (4) (5) (Column Change
Mat.& Supplies BLS Index Weight Base Index New Index 5-4 x 100) (Column 3x6)
Cost Component Code Factor Value Value 4
Mining Machinery & 1192 0.200
Equipment
General Material PP & PI, 0.273
& Supplies Table 8
Lumber & Wood 0849-0102 0.070
Finished Steel PP & PI,
Products Table 8 0.071
Mine Roof Bolts 1081-0241 0.050
Wire & Cable 1026-03 0.039
Power 0543-1514 0.114
Oil 0575 0.033
General Purpose 1143 0.082
Machinery and
Equipment
Electrical Mach. 117 0.068
& Equipment -----
1.000 Materials & Supplies Weighted =
Average % Change (WAPC)
</TABLE>
<PAGE>
Page 11 of 20
EXHIBIT A-6
GENERAL AND ADMINISTRATIVE COST ADJUSTMENT
Cost adjustment will be based on the quarterly index Implicit
Price Deflator for the Gross National Product, seasonally
adjusted as published in the Department of Commerce publication
"Survey of Current Business".
G & ACA = G&AC X (IPD2 - IPDl)
-------------
IPDl
G & ACA = General and administrative cost adjustment
G&AC = Base Mine Price Element Cost Per Ton from
Exhibit A-l
IPDl = Most current index available ten (10) days
prior to the adjustment date for the base
quarter of this Agreement.
(originally third quarter of 1983)
IPD2 = Most current quarterly index available ten (10)
days prior to the adjustment date for the
second quarter preceding the appropriate
adjustment date of January 1, April 1, July 1,
or October 1.
<PAGE>
Page 12 of 20
EXHIBIT A-7
BLACK LUNG EXCISE TAX AND RECLAMATION FEE COST ADJUSTMENT
The only charges to be included in Black Lung Excise Tax and
Reclamation Fee Cost Adjustment are specific dollar amounts of
Black Lung Excise Tax and Reclamation Fee involved in producing a
ton of coal that are legislated by the Government.
If there is a change in the Black Lung Excise Tax or
Reclamation Fee after the effective date, the revised
calculations, along with support for the revised rates, are to be
submitted to the Buyer. The method of calculating BLR adjustment
is as follows:
BLRCA = BLR1 - BLR
BLRCA = Black Lung Excise Tax and Reclamation Fee
Cost Adjustment
BLR = Base Mine Price Element Cost Per Ton from
Exhibit A-l
BLR1 = Current cost per ton for Black Lung Excise
Tax & Reclamation Fee
<PAGE>
Page 13 of 20
EXHIBIT A-8
ADJUSTED BASE MINE PRICE PER MBTU
The Adjusted Base Mine Price per million Btu shall be
calculated based on 13,000 Btu/Lb. "as received" coal quality as
follows:
Adjusted Base Mine Price C x 1,000,000
per MBtu -------------
13000 x 2000
Where C = The Adjusted Base Mine Price Per Ton from Exhibit
A-2, contained in Appendix A.
<PAGE>
Page 14 of 20
EXHIBIT A-9
SAMPLE ADJUSTMENT CALCULATIONS
Except for LLRPA, which shall be adjusted as of the date of
each change in Seller's collective bargaining agreement
(currently the National Bituminous Coal Wage Agreement of 1981),
the following calculations will be submitted by the Seller on a
quarterly basis to substantiate the Adjusted Base Mine Price per
ton of coal.
Base Mine Price of Coal Per Ton $30.50
Base Mine Price Adjustment
Labor & Labor Related Cost Adjustment
LLRCA (From Exhibit A-3A and A-3B) = $ .027
UMWA Pension and Benefit Trust Cost Adjustment
PBTCA (From Exhibit A-4) = $ .050
Material & Supplies Cost Adjustment
MSCA (From Exhibit A-5) = $ .074
General & Administrative Cost Adjustment
G& ACA (From Exhibit A-6) = $ .233
Black Lung Excise Tax & Reclamation Fee
Cost Adjustment
BLRCA (From Exhibit A-7) = $ 0.000
Total Price Adjustment $ .384
Adjusted Base Mine Price Per Ton $ 30.884
Adjusted Base Mine Price Per MBtu (From Exhibit A-8) $ 1.188
<PAGE>
Page 15 of 20
EXHIBIT A-9
Page 2
LABOR COST PER MANDAY
Average Cost Per Manday Without Shift Differential and Overtime
Pay Rates Percent** Weighted
Pay Grade at 12/7/83 of Mandays Cost/Manday
Underground 5 $109.72 36.3% $39.828
4 $106.48 16.5% $17.569
3 $103.54 19.0% $19.673
2 $101.76 6.8% $ 6.920
1 $101.18 15.1% $15.278
Surface 4 $ 99.07 3.5% $ 3.467
3 $ 97.30 1.2% $ 1.168
2 $ 95.25 - -
1 $ 94.67 1.6% $ 1.515
----- -------
100.0% $105.418
OVERTIME
Average Wage Rate Paid Versus Straight Time Average Wage Rate
10.0 Percent**
SHIFT DIFFERENTIAL
Average Cost Per Manday of Shift Differential
Amounts Percent** Weighted
Shift Per Day of Mandays Cost/Manday
Underground Midnight - 8 A.M. $3.700 29.9% $ 1.106
8 A.M. - 4 P.M. - 31.4% $ -
4 P.M. - Midnight $2.900 32.4% $ .940
Surface Midnight - 8 A.M. $3.400 1.7% $ .058
8 A.M. - 4 P.M. - 2.7% $ -
4 P.M. - Midnight $2.675 1.9% $ .051
---- -------
100.0% $ 2.155
**These percentage figures shall remain fixed unless there is a
change in Seller's collective bargaining agreement or legislation
which necessitates a change such as a change in the number of pay
grades or mandatory rules related to overtime.
<PAGE>
Page 16 of 20
EXHIBIT A-9
Page 3
Cost Per Manday
$105.418 (Straight Time)
2.155 (Shift Differential)
--------
$107.573
x 1.10 (Overtime)
--------
$118.330
FRINGE BENEFITS
Days of Pay - Assumes each man receives maximum entitled
under the collective bargaining agreement, except graduated
vacation days.
Regular Vacation 12 days
Floating Vacation 4 days
Graduated Vacation 3 days
Holidays 11 days
Allowance for Birthday Worked 1 day
Bereavement 3 days
Personal Days 5 days
---
39 days
39 days x $107.573 = $4,195.347
$4,195.347 divided by 222 days* = $18.898 per manday
Clothing Allowance
$150.00 x 1.08 (Assumed Turnover Factor) = $162.000
$162.000 divided by 222 days = $.730 per manday
Total Labor Cost Per Manday
$118.330 (Straight Time, Overtime, Shift Differential)
18.898 (Fringe Benefit - Days of Pay)
--------
$137.228 (Subtotal Labor Cost Per Manday)
.730 (Fringe Benefit - Clothing Allowance)
--------
$137.958 (Total Labor Cost Per Manday)
* 365 Days Per Year
- - 104 Saturdays and Sundays
- - 39 Fringe Days
---
222
Base work year per man will change as the number of Fringe
Days changes per the controlling collective bargaining
agreement(s).
<PAGE>
Page 17 of 20
EXHIBIT A-9
Page 4
Labor Related Costs Per Manday
F.I.C.A. Tax:
[1]
6.70% x $137.228 = $9.194 per Manday
Federal Unemployment Insurance:
[2]
1.4% x $7,000/222 days = .441
State Unemployment Insurance:
[3]
3.9% x $8.000/222 days = 1.405
Black Lung Self-Insurance:
[4]
5.91% x $137.228 = 8.110
Health and Retirement Benefits:
1. Medical Benefits
[4]
$353.80 per man per month x 12/222 days = 19.124
2. Pension Cost Per Hour
$1.017 per hour x 7.95 hours = 8.085
[(93.7% x 8 hrs.) + (6.3% x 7.25 hrs.)]
Sickness and Accident:
[4]
$17.00 per man per month x 12/222 = .919
mandays
Worker's Compensation:
[4]
6.3% x $137.228 = 8.645
------
Total Labor Related Cost Per Manday $55.923
Total Labor Cost Per Manday $137.958
-------
TOTAL COST PER MANDAY $193.881
[1] Rate applicable to maximum base annual wages.
[2] Rate and maximum base annual wages applicable to the State
of W. Virginia.
[3] Seller's rate and maximum base annual wages applicable to
the State of W. Virginia.
[4] Includes self-insured accrual rates. Each January l and
periodically during each calendar year, the current rate for
these costs will be substituted for the prior rate. As soon
as possible after the end of each calendar year, the actual
average rate for said calendar year will be substituted for
the prior rates and any necessary adjustment will be made,
retroactive to January 1 of said calendar year.
<PAGE>
Page 18 of 20
EXHIBIT A-9
Page 5
LABOR AND LABOR RELATED COST ADJUSTMENT
LLRCA = LLR x L2-Ll
-----
L1
LLRCA = Labor and Labor Related Cost Adjustment
LLR = Base Mine Price Element Cost Per Ton from
Exhibit A-l
L1 = Base Cost Per Manday for Labor and Labor Related
Costs as of the Effective Date of this Agreement
contained in Exhibit A-3, Pages 2 through 4
L2 = Current Cost Per Manday for Labor and Labor
Related Costs as Computed in Accordance with
Exhibit A-3, Pages 2 through 4
LLRCA = $10.600 x 193.881 - 193.381
-----------------
193.381
LLRCA = $.027
UMWA PENSION AND BENEFIT TRUSTS COST ADJUSTMENT
PBTCA = PBTl - PBT
PBTCA = UMWA Pension and Benefit Trusts Cost Adjustment
PBT = Base Mine Price Element Cost Per Ton from
Exhibit A-l
PBT1 = Current Cost Per Ton for UMWA Pension and Benefit
Trusts
PBTCA = $1.650 - $l.600
PBTCA = $.050
<PAGE>
<TABLE>
<CAPTION>
Page 19 of 20
EXHIBIT A-9
Page 6
MATERIALS AND SUPPLIES COST ADJUSTMENT
MSCA = MS x [ WAPC] / 100
MSCA = Materials and Supplies Cost Adjustment.
MS = Base Mine Price Element Cost Per Ton from Exhibit A-l.
WAPC = Weighted average percent change of materials and
supplies indexes.
MSCA = $7.625 x [.976] / 100
MSCA = $.074
EXAMPLE CALCULATION TABLE
<S> <C> <C> <C> <C> <C> <C>
(6) (7)
% Change Weighted %
( 1) (2) (3) (4) (5) (Column Change
Mat. & Supplies BLS Index Weight Base Index New Index 5-4 x 100 (Column 3x6)
Cost Component Code Factor Value Value ---
4
Mining Machinery & 1192 0.200 368.500 372.625 1.119 .224
Equipment
General Material PP & PI, 0.273 277.667 277.667 0.000 0.000
& Supplies Table 8
Lumber & Wood 0849-0102 0.070 97.500 98.300 .821 .057
Finished Steel PP & PI, 0.071 347.425 346.815 (.176) (.012)
Products Table 8
Mine Roof Bolts 1081-0241 0.050 187.333 188.100 .409 .020
Wire & Cable 1026-03 0.039 206.133 212.300 2.992 .117
Power 0543-1514 0.114 419.600 438.825 4.582 .522
Oil 0575 0.033 798.775 800.333 .195 .006
General Purpose 1143 0.082 251.500 250.300 (.477) (.039)
Machinery and
Equipment
Electrical Mach. 117 0.068 236.100 238.900 1.186 .081
& Equipment -----
1.000 Materials & Supplies Weighted = .976
Average % Change (WAPC)
</TABLE>
<PAGE>
Page 20 of 20
EXHIBIT A-9
Page 7
GENERAL AND ADMINISTRATIVE COST ADJUSTMENT
G & ACA = G&AC X IPD2 - IPDl
-------------
IPDl
G & ACA = General and administrative cost adjustment
G&AC = Base Mine Price Element Cost Per Ton from Exhibit
A-l
IPDl Base Index = Most current index available ten (10) days
prior to the adjustment date for the base
quarter of contract (originally third quarter
of 1983)
IPD2 Current = Most current quarterly index available ten
(10) days prior to the adjustment date for
the second quarter preceding the appropriate
adjustment date of January 1, April 1, July
1, or October l.
G & ACA = $4.951 x 213.26 - 203.68
---------------
203.68
G & ACA = $.233
RECLAMATION FEE AND BLACK LUNG EXCISE TAX COST ADJUSTMENT
BLRCA = BLR1 - BLR
BLRCA = Black Lung Excise Tax and Reclamation Fee Cost
Adjustment
BLR = Base Mine Price Element Cost Per Ton from
Exhibit A-l
BLR1 = Current cost per ton for Black Lung Tax &
Reclamation Fee
BLRCA = $1.150 - $1.150
BLRCA = $0.00
ADJUSTED BASE MINE PRICE PER MBTU
The Adjusted Base Mine Price per million Btu shall be
calculated based on 13,000 Btu/Lb. "as received" coal quality as
follows:
Adjusted Base Mine Price C x 1,000,000
per MBtu -------------
13000 x 2000
Where C = The Adjusted Base Mine from
Exhibit A-2, contained in Appendix A.
<PAGE>
Adjusted Base Mine Price per MBtu = $30.884 x 1,000,000
-------------------
13,000 x 2,000
Adjusted Base Mine Price Per MBtu = $1.188
<PAGE>
Page 1 of 9
APPENDIX "B"
COAL PRICE AND PAYMENT
(Attached to and made a part of that certain Coal Supply
Agreement dated as of the 1st day of November, 1983, entered into
by and between CONSOLIDATED COAL COMPANY, as Seller, and NEW YORK
STATE ELECTRIC & GAS, as Buyer).
<PAGE>
Page 2 of 9
EXHIBIT B-1
PRICE
The method of calculating the Billing Price in dollars per
ton, to be paid by Buyer to Seller, for the coal tonnage
delivered in each shipment is as follows:
Step 1 - Start with the Base Mine Price of each lot
represented in the shipment as determined
pursuant to Articles I and VII.
Step 2 - Determine the Adjusted Base Mine Price of each
lot represented in the shipment pursuant to
Articles IX and X.
Step 3 - Determine the Average Price for the shipment
pursuant to Article I.
Step 4 - Determine the Adjusted Average Price due to coal
quality pursuant to Article VIII.
Step 5 - Apply any penalty pursuant to Article VI, if
applicable.
Step 6 - Determine the Billing Price in dollars per ton
pursuant to Section 7.3.
The following examples 1 through 6 set forth the method of
calculating the Billing Price in dollars per ton.
<PAGE>
Page 3 of 9
EXAMPLE 1
Basis:
A shipment is received containing 9855 tons of coal with an
"as received" analysis of:
% Moisture - 6.50
% Ash - 8.50
% Volatile - 37.50
As Received Btu/Lb - 13150
% Sulfur - 3.10
Ash Fusion degree F - 2200
Grind - 54
At the time of receipt of this shipment the following lots and
respective Base Mine Prices per million Btu are assumed:
Lot A = $1.195
Lot B = $1.219
Tot C = $1.173
At the time of receipt, the Adjusted Base Mine Price pursuant to
Article IX for each lot and the Average Price is assumed to have
been calculated to be:
Lot A = $1.215
Lot B = $1.256
Lot C = $1.234
------
$3.705/3 = $l.235
Calculations:
Step 1 - The Base Mine Price of each lot is:
Lot A = $1.195/MBtu
Lot B = $1.219/MBtu
Lot C = $1.173/MBtu
Step 2 - The Adjusted Base Mine Price of each lot is:
Lot A = $l.215/MBtu
Lot B = $1.256/MBtu
Lot C = $1.234/MBtu
Step 3 - The Average Price is $1.235/MBtu
Step 4 - Since the "as received" Btu/Lb of 13150 is within
the deadband of 13000 + - 200 Btu/Lb, a premium or
penalty calculation pursuant to Article VIII is not
required and the Adjusted Average Price is the same
as the Average Price ($1.235/MBtu).
Page 4 of 9
Step 5 - Since the "as received" analysis is not less than or
in excess of any of the Suspension Limits pursuant
to Article VI there are no penalties.
Step 6
Billing Price ($/ton) = A x B x 2000
------------ + FC
1,000,000
Where A = 13150
Where B = l.235
Where FC = 0.000
Billing Price ($/ton) = 13150 x 1.235 x 2000
-------------------- + 0.000
1,000,000
= $32.481/ton
<PAGE>
Page 5 of 9
EXAMPLE 2
Basis:
All conditions of Example l are the same except the "as
received" Btu/Lb is 12850.
Calculations:
Step 1
Step 2 These are all the same as Example 1 and the
Step 3 Adjusted Average Price is $1.235/MBtu.
Step 4
Step 5
Step 6 - Billing Price ($/ton) = A x B x 2000
------------- + FC
1,000,000
Where A = 12850
Where B = 1.235
Where FC = 0.000
Billing Price ($/ton) = 12850 x 1.235 x 2000
-------------------- +0.000
1,000,000
= $31.740/ton
<PAGE>
Page 6 of 9
EXAMPLE 3
Basis: All conditions of Example 1 are the same except the "as
received" Btu/Lb is 13250.
Calculations:
Step 1 These are the same as Example 1 and the Average
Step 2 Price is $1.235/MBtu.
Step 3
Step 4 - Since the "as received" Btu/Lb of 13250 is above
the deadband of 13000 + - 200 Btu/Lb, a premium
calculation pursuant to Article VIII is required as
follows:
Adjusted Average Price = AP x PAF
Where AP = 1.235
Where PAF = 0.738 (13250)
------- + 0.262 = 1.014
(13000)
Adjusted Average Price = 1.235 x 1.014
= 1.252
Step 5 Since the "as received" analysis is not less than
or in excess of any of the Suspension Limits
pursuant to Article VI, there are no penalties.
Step 6
Billing Price ($/ton) = A x B x 2000
------------ + FC
1,000,000
Where A = 13250
Where B = 1.252
Where FC = 0.000
Billing Price ($/ton) = 13250 x 1.252 x 2000
-------------------- + FC
1,000,000
= $33.178/ton
<PAGE>
Page 7 of 9
EXAMPLE 4
Basis: All conditions of Example l are the same except the "as
received" Btu/Lb is 12750.
Calculations:
Step 1 These are the same as Example l and the
Step 2 Average Price is $1.235/MBtu.
Step 3
Step 4 - Since the "as received" Btu/Lb of 12750 is
below the deadband of 13000 + - 200 Btu/Lb, a
penalty calculation pursuant to Article VIII
for each lot is required as follows:
Adjusted Average Price = AP x PAF
Where AP = l.235
Where PAF = 1.69 (12750)
------- - 0.69 = 0.968
(13000)
Adjusted Average Price = 1.235 x 0.968
= 1.195
Step 5 Since the "as received" analysis is not less
than or in excess of any of the Suspension
Limits pursuant to Article VI, there are no
penalties.
Step 6
Billing Price ($/ton) = A x B x 2000
------------ + FC
1,000,000
Where A = 12750
Where B = 1.195
Where FC = 0.000
Billing
Price ($/ton) = 12750 x 1.195 x 2000
-------------------- + 0.000
1,000,000
= $30.473/ton
Page 8 of 9
EXAMPLE 5
Basis: All conditions of Example l are the same except the "as
received" Btu/Lb is l2550.
Calculations:
Step 1 These are the same as Example l and the
Step 2 Average Price is $l.235/MBtu.
Step 3
Step 4 - Since the "as received" Btu/Lb of 12550 is
below the deadband of 13000 + - 200 Btu/Lb, a
penalty calculation pursuant to Article VIII
is required as follows:
Adjusted Average Price = AP x PAF
Where AP = l.235
Where PAF = 1.69 (12550)
------- - 0.69 = 0.942
(13000)
Adjusted Average Price = l.235 x 0.942
= 1.163
Step 5 Since the "as received" Btu/Lb of 12550 is
less than the Suspension Limit of 12600
pursuant to Article VI, a penalty of 10% of
the Adjusted Average Price is required.
1.163 x 0.90 = l.047
Step 6
Billing Price ($/ton) = A x B x 2000
------------ + FC
1,000,000
Where A = 12550
Where B = 1.047
Where FC = 0.000
Billing
Price ($/ton) = 12550 x 1.047 x 2000
-------------------- + 0.000
1,000,000
= $26.280/ton
Page 9 of 9
EXAMPLE 6
Basis: All conditions of Example l are the same except the "as
received" Btu/Lb is 13450 and freeze conditioning has
been applied at the rate of 2 pints/ton and a cost of
$0.75 per pint or $1.50 per ton.
Calculations:
Step l These are the same as Example 1 and the
Step 2 Average Price is $1.235/MBtu.
Step 3
Step 4 - Since the "as received" Btu/Lb of l3450 is
above the deadband of 13000 + - 200 Btu/Lb, a
premium calculation pursuant to Article VIII
is required as follows:
NOTE: Since the "as received" Btu/Lb of
13450 is above the upper limit of
13400, the premium is calculated on
the basis of 13400 Btu/Lb.
Adjusted Average Price = AP x PAF
Where AP = l.235
Where PAF = 0.738 (l3400)
------- + 0.262 = 1.023
13000
Adjusted Average Price = 1.235 x 1.023
= 1.263
Step 5 Since the "as received" analysis is not less
than or in excess of any of the Suspension
Limits pursuant to Article VI, there are no
penalties required.
Step 6
Billing Price ($/ton) = A x B x 2000
------------ + FC
1,000,000
Where A = 13450
Where B = 1.263
Where FC = $1.50/ton / 2 = $0.75
Billing
Price per ton = 13450 x 1.263 x 2000
-------------------- + 0.75
1,000,000
= $34.725/ton<PAGE>
Page l of 2
APPENDIX "C"
EQUAL EMPLOYMENT OPPORTUNITY COMPLIANCE (EEOC) REQUIREMENTS
(Attached to and made a part of that certain Coal Supply
Agreement dated as of the 1st day of November, 1983, entered into
by and between CONSOLIDATION COAL COMPANY, as Seller, and NEW
YORK STATE ELECTRIC & GAS CORPORATION, as Buyer).
<PAGE>
EXHIBIT C-1
NEW YORK STATE ELECTRIC & GAS CORPORATION
EQUAL EMPLOYMENT OPPORTUNITY CERTIFICATE OF COMPLIANCE
It is understood that this supplement is a part of all existing
contracts or purchase orders or those which may be entered into
between NEW YORK STATE ELECTRIC & GAS CORPORATION and the
undersigned (hereinafter called Contractor) within one year from
the date of this supplement to the extent that such contracts or
purchase orders are covered by applicable law and rules and
regulations issued thereunder.
1. Equal Opportunity Clause - (Applicable to Contracts and
Orders Amounting to $10,000 or More). Contractor is aware
of and is fully informed of Contractor's responsibilities
under Executive Order 11246 as prescribed in Section 60-1.4
of 41 CFR and shall be bound by and agrees to the
provisions as contained in Section 202 of said Executive
Order, incorporated herein by reference pursuant to Section
60-1.4(d).
2. Segregated Facilities Certificate - (Applicable to
Contracts and Orders Amounting to $10,000 or More).
Contractor certifies that is does not and will not maintain
any facilities it provides for its employees in a
segregated manner, or permit its employees to perform their
services at any location, under its control, where
segregated facilities are maintained and that Contractor
will obtain a similar certification form its proposed
subcontractors in the form approved by the Federal
Government prior to the award of any non-exempt
subcontract.
3. Employer Information Report - (Applicable to Contracts and
Orders Amounting to $50,000 or More and if Contractor has
50 or More Employees). If Contractor is required by
federal regulations to file Employer Information Report
EEO-1 (Standard Form 100). Contractor hereby certifies
that it has done so or will file such reports in accordance
with applicable instructions and will continue to file such
reports unless or until on longer required by law or
regulation.
4. Affirmative Action Program - (Applicable to Contracts and
Orders Amounting to $50,000 or More and if Contractor has
50 or More Employees). If Contractor has 50 or more
employees and contracts or orders are $50,000 or more,
Contractor is required under federal regulations to develop
a written affirmative action program for each of its
establishments. If Contractor is so required, it certifies
that it has such a program or will prepare one not later
than 120 days after first contracts or orders become
effective and maintain such program until no longer
required by law or regulation.
5. Employment of Disabled Veterans and Veterans of the Vietnam
Era - (Applicable to Contracts and Orders Amounting to
$10,000 or More). Contractor shall be bound by and agrees
to the provisions of the Affirmative Action for Disabled
Veterans of the Vietnam Era clause set forth in Section 60-
250.4 of 41 CFR promulgated under the Vietnam Era Veterans
Readjustment Assistance Act of 1974, incorporated herein by
reference pursuant to Section 60-250.22.
6. Employment of the Handicapped - (Applicable to Contracts
and Orders Amounting to $2,500 or More, Executive Order
11758). Contractor shall be bound by and agrees to the
provisions of the Affirmative Action for Handicapped
Workers clause set forth in Section 60-741.4 or 41 CFR
promulgated under Section 503 of the Rehabilitation Act of
1973, incorporated herein by reference pursuant to Section
741.22.
7. Utilization of Minority Business Enterprises - (Applicable
to Contracts and Orders Amounting to $10,000 or More)
Contractor shall be bound by and agrees to the provisions
of the Utilization of Minority Business Enterprises clause
following Section 1-1.1310-2 of 41 CFR, incorporated herein
by reference.
8. Utilization of Women-Owned Business Concerns - (Applicable
to Contracts Amounting to $10,000 or More, Federal Register
Vol. 45, No. 92, 5/9/80). It is the policy of the United
States Government that women-owned businesses shall have
the maximum practicable opportunity to participate in the
performance of contracts awarded by any Federal Agency.
Contractor shall be bound by and agrees to the provisions
of the Utilization of Women-owned Business Concerns clause
set forth at Temporary Regulation 54 of the Federal
Procurement Regulations Chapter 1, Appendix of 41 CFR,
incorporated herein by reference.
9. Utilization of Small Business Concerns and Small Business
Concerns Owned and Controlled by Socially and Economically
Disadvantaged Individuals - (Applicable to Contracts and
Orders Amounting to $10,000 or More, ASPR Section 7-
104.14(a)). It is the policy of the Government that a fair
proportion of the purchases and contracts for supplies and
services for the Government be placed with small business
concerns.
Contractor shall be bound by and agrees to the provisions
of the Utilization of Small Business Concerns and Small
Disadvantaged Business Concerns clause set forth at
Temporary Regulation 50, Supplement 2, of the Federal
Procurement Regulations, Chapter 1, Appendix of 41 CFR,
incorporated herein by reference.
10. Utilization of Labor Surplus Area Concerns - (Applicable to
Contracts and Orders Amounting to $10,0000 or More). It is
the policy of the Government to award contracts to labor
surplus area concerns that have been so identified pursuant
to ASPR Section 1-805. Constracor shall be bound by and
agrees to use its best efforts to place its subcontracts in
accordance with this policy pursuant to ASPR Section
1-1.805-3(a), incorporated herein by reference.
11. New York Equal Opportunity Clause - (Applicable to
Contracts and Orders Amounting to $50,000 or More as to the
Contractor's workforce within the State of New York).
Contractor is aware of and is fully informed of
Contractor's responsibilities under Executive Order No. 45
and shall be bound by and agrees to the provisions as
contained in Section 3.1 of said Executive Order
incorporated herein by reference.
Company Consolidation Coal Company
Address Consol Plaza
Pittsburgh, PA 15241
By: R. M. Haynes VP & General Mgr-Human Resources
(Title)
Date 12/15/83
IMPORTANT: Please be sure to show your Company name and address
above the signature block:
Please remit to: New York State Electric & Gas Corporation
4500 Vestal Parkway East
Binghamton, New York 13902
Att: H. M. Vinci - Manager Contract
Administration
<PAGE>
It is necessary to identify your firm as to whether it is in any
of the following categories. Please take a moment to answer the
questions below, as this may benefit us both considerably.
NO X YES Our firm is a MINORITY BUSINESS ENTERPRISE.
A "minority business enterprise" is defined as a business, at
least fifty percent (50%) of which is owned by minority group
members or, in the case of a publicly owned business at least
fifty-one percent (51%) of the stock of which is owned by
minority group members. For the purpose of the definition,
minority group members are Blacks, Hispanics, Asian America,
American Indians and Aleuts.
NO X YES Our firm is a WOMEN-OWNED BUSINESS.
A "women-owned business" is a business which is, at least
fifty-one percent (51%) owned, controlled and operated by a
woman or women. Controlled is defined as exercising the power to
make policy decisions. Operated is defined as actively
involved in the day-to-day management. For the purposes of this
definition, businesses which are publicly owned, joint stock
associations, and business trusts are exempted. Exempted
businesses may voluntarily represent that they are or are not,
women-owned if this information is available.
NO X YES Our firm is a SMALL BUSINESS CONCERN.
A "small business concern " is a small business as defined in
Section 3 of the Small Business Act and the regulations of the
Small Business Administration.
NO X YES Our firm is a SMALL BUSINESS CONCERN OWNED
AND CONTROLLED BY SOCIALLY AND ECONOMICALLY
DISADVANTAGED INDIVIDUALS
A "small business firm owned and controlled by socially and
economically disadvantaged individuals" is a small business
concern of which at least fifty-one (51%) is owned by one or more
socially and economically disadvantaged individuals, or in the
case of a publicly owned business, at least fifty-one percent
(51%) of the stock is owned by one or more socially and
economically disadvantaged individuals, and whose management and
daily business operations are controlled by one or more of such
individuals.
NO YES X Our firm is a LABOR SURPLUS AREA CONCERN.
A "labor surplus area concern" is defined as a concern that,
together with its first tier subcontractors, will perform sub-
stantially in labor surplus areas. A "labor surplus area" is
defined as a geographical area identified by the Department of
Labor as an area of concentrated unemployment or an area of labor
surplus.
Roger M. Haynes
VENDOR'S NAME AUTHORIZED NAME
Roger M. Haynes
VENDOR'S ADDRESS SIGNATURE
DATE 12/15/83
<PAGE>
Page l of 2
APPENDIX "D"
TERM
(Attached to any made a part of that certain Coal Supply
Agreement dated as of the 1st day of November, 1983, entered into
by and between CONSOLIDATION COAL COMPANY, as Seller, and NEW
YORK STATE ELECTRIC & GAS CORPORATION, as Buyer.)
<PAGE>
Page 2 of 2
EXHIBIT D-1
The total coal purchased for Somerset Unit #1, including but
not necessarily limited to this Agreement, is defined as the sum
of Lot A, Lot B and Lot C. After the initial term of each lot,
as specified in Article I, Section 1.2, each lot will come up for
renegotiation as set forth in the following schedule.
Ending Date
Date Renegotiation Beginning Date of Term
Lot Notice Required By of Term ("Termination Date")
A July 1, 1985 January 1, 1986 December 31, 1988
B July 1, 1986 January 1, 1987 December 31, 1989
C July 1, 1987 January 1, 1988 December 31, 1990
A July 1, 1988 January 1, 1989 December 31, 1991
B July 1, 1989 January 1, 1990 December 31, 1992
C July 1, 1990 January 1, 1991 December 31, 1993
A July 1, 1991 January 1, 1992 December 31, 1994
B July 1, 1992 January 1, 1993 December 31, 1995
C July 1, 1993 January 1, 1994 December 31, 1996
A July 1, 1994 January 1, 1995 December 31, 1997
B July 1, 1995 January 1, 1996 December 31, 1997
C July 1, 1996 January 1, 1997 December 31, 1997
<PAGE>
EXHIBIT 10-21
AMENDMENT NO. 1
to
THE RETIREMENT PLAN FOR DIRECTORS
of
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Retirement Plan for Directors of New York
State Electric & Gas Corporation (the "Plan") is hereby
amended, effective as of February 11, 1994, as follows:
1. Article 8 of the Plan is amended to read,
in its entirety, as follows:
8) Funding
There shall be no funding of any amounts to be
paid pursuant to this Plan; provided, however, that
the Corporation, in its discretion, may establish a
trust to pay such amounts, which trust shall be
subject to the claims of the Corporation's creditors
in the event of the Corporation's bankruptcy or
insolvency; and provided, further, that the Corpora-
tion shall remain responsible for the payment of any
such amounts which are not so paid by any such
trust.
<PAGE>
EXHIBIT 10-23
AMENDMENT NO. 1
to
THE DEFERRED COMPENSATION PLAN FOR DIRECTORS
of
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Deferred Compensation Plan for Directors of
New York State Electric & Gas Corporation (the "Plan") is
hereby amended, effective as of February 11, 1994, as
follows:
1. The last sentence of the section of the
Plan entitled "Amounts Deferred" is amended to read, in
its entirety, as follows:
The deferred amounts, including interest, shall be
reflected in the Corporation's accounts as a liabil-
ity in favor of the participant but shall not be
funded nor shall any monies be set aside for this
purpose; provided, however, that the Corporation, in
its discretion, may establish a trust to pay such
amounts, which trust shall be subject to the claims
of the Corporation's creditors in the event of the
Corporation's bankruptcy or insolvency; and pro-
vided, further, that the Corporation shall remain
responsible for the payment of any such amounts
which are not so paid by any such trust.
<PAGE>
EXHIBIT 10-32
AMENDMENT NO. 8
to
THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
of
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Supplemental Executive Retirement Plan of New York State
Electric & Gas Corporation, effective September 7, 1984, is
hereby amended as follows:
1. All references to the Corporation's tax qualified
Retirement Benefit Plan for Salaried Employees are
hereby changed to references to the Corporation's tax
qualified Retirement Benefit Plan for Employees.
This amendment is effective as of January 1, 1993.
2. Paragraph 4A is hereby amended to read as follows:
A. Determination of Benefit. In addition to the
benefits provided pursuant to Paragraph 3
hereof, all Key Persons who retire either
voluntarily or by reason of a disability at
age 60 (or age 55 in the case of a
Participant in the Corporation's tax
qualified Retirement Benefit Plan for
Employees who is described in Section 2 of
Article XI of said plan) or later shall be
entitled to receive a total retirement
benefit equivalent to the percentage of the
average of such Key Person's highest three
years of earnings within the last ten years
of employment with the Corporation that is
determined as follows: (i) the percentage
benefit shall be 45% for each Key Person who
has ten years of service; (ii) the percentage
amount shall be increased by one percentage
point per year for each additional full year
of Service up to a maximum of 74% for thirty-
nine or more years of service. For the
purpose of determining the earnings of a Key
Person who is a participant in the
Corporation's Annual Executive Incentive
Compensation Plan or Performance Share Plan
there shall be excluded any amounts received
pursuant to such plans.
From the amount determined in accordance with
the provisions of this paragraph there shall
be subtracted (i) any amounts received by the
Key Person from the Corporation's tax
qualified Retirement Benefit Plan for
Employees (prior to reduction for the
survivor's benefit or ten year certain
benefit) and (ii) any social security
benefits which the Key Person is eligible or
expected to become eligible to receive as
determined by the Plan Administrator. If
after the subtraction there remains a
positive amount, that amount shall be paid by
the Corporation as an additional benefit to
the Key Person in accordance with the terms
of this Plan.
For purposes of making the subtraction
set forth in the previous paragraph, if
a Key Person retires at or after age 60
(or age 55 in the case of a Participant
in the Corporation's tax qualified
Retirement Benefit Plan for Employees
who is described in Section 2 of Article
XI of said plan) and prior to age 62,
the amount of social security benefits
subtracted will be the amount of
estimated social security benefits that
the Plan Administrator estimates that
the Key Person would have received if he
had retired at age 62.
This amendment is effective as of September 1, 1993.
3. Paragraph 4A is hereby amended by substituting the
phrase "75% for forty" for the phrase "74% for thirty-nine" in
the text of said paragraph.
This amendment is effective as of January 1, 1994.
<PAGE>
EXHIBIT 10-33
AMENDMENT NO. 9
to
THE SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
of
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Supplemental Executive Retirement Plan of
New York State Electric & Gas Corporation (the "Plan") is
hereby amended, effective as of January 7, 1994, as
follows:
1. The following sentence is added at the end
of Paragraph 3 of the Plan:
The benefit payable pursuant to this Paragraph 3
shall be calculated by subtracting the benefit
payable under the Corporation's Retirement Benefit
Plan for Employees from the benefit without tax
limitations described in the first sentence of this
Paragraph 3.
2. The following two sentences are added at
the end of the first paragraph of Paragraph 4A of the
Plan:
Additionally, upon and after a Change in Control (as
defined in Paragraph 7 hereof), all Key Persons
whose employment is terminated at age 55 or later
for any reason other than death or Cause (as defined
in Paragraph 7 hereof) shall be entitled to receive
the retirement benefit described in this Paragraph
4A, as well as any benefits provided pursuant to the
terms of Paragraph 3 hereof. For purposes of the
benefits payable pursuant to the immediately preced-
ing sentence, the benefit calculated under Paragraph
4A hereof shall be determined by applying the same
reduction in benefits for commencement prior to age
60 as is applied upon early retirement under the
Corporation's Retirement Benefit Plan for Employees.
3. Clause (i) of the first sentence of the
second paragraph of Paragraph 4A is amended to read, in
its entirety, as follows:
...(i) any amounts received by the Key Person pursu-
ant to Paragraph 3 hereof or from the Company's tax
qualified Retirement Benefit Plan for Employees
(prior to reduction for the survivor's benefit or
ten year certain benefit) and...
4. The third paragraph of Paragraph 4A of the
Plan is amended to read, in its entirety, as follows:
For purposes of making the subtraction set
forth in the immediately preceding paragraph, if
(i) a Key Person retires at or after age 60 (or age
55 in the case of a Participant in the Corporation's
tax qualified Retirement Benefit Plan for Employees
who is described in Section 2 of Article XI of said
plan) and prior to age 62, or (ii) a Key Person's
employment is terminated, upon and after a Change in
Control (as defined in Paragraph 7 hereof), for any
reason other than death or Cause (as defined in
Paragraph 7 hereof) at or after age 55 and prior to
age 62, the amount of social security benefits
subtracted will be the amount of estimated social
security benefits that the Plan Administrator esti-
mates that the Key Person would have received if he
had retired at age 62.
5. The introductory phrase of the last sen-
tence of Paragraph 4C is amended to read, in its entire-
ty, as follows:
Except as specifically provided in the last two sen-
tences of the first paragraph of Paragraph 4A hereof
or in the second and third sentences of Paragraph 4B
hereof,
6. Paragraph 6 of the Plan is amended to read,
in its entirety, as follows:
6. Funding. There will be no funding of any
amounts to be paid pursuant to this Plan; provided,
however, that the Corporation, in its discretion,
may establish a trust to pay such amounts, which
trust shall be subject to the claims of the
Corporation's creditors in the event of the
Corporation's bankruptcy or insolvency; and pro-
vided, further, that the Corporation shall remain
responsible for the payment of any such amounts
which are not so paid by any such trust.
7. The following new Paragraph 7 is added to
the Plan:
7. Definitions of Cause and Change in Control.
"Cause" for termination by the Corporation
of a Key Person's employment (for purposes of
this Plan), after any Change in Control, shall
mean (i) the willful and continued failure by
the Key Person to substantially perform the Key
Person's duties with the Corporation (other
than any such failure resulting from the Key
Person's incapacity due to physical or mental
illness) after a written demand for substantial
performance is delivered to the Key Person by
the Board of Directors, which demand specifi-
cally identifies the manner in which the Board
of Directors believes that the Key Person has
not substantially performed the Key Person's
duties, or (ii) the willful engaging by the Key
Person in conduct which is demonstrably and
materially injurious to the Corporation or its
subsidiaries, monetarily or otherwise. For
purposes of clauses (i) and (ii) of this defi-
nition, no act, or failure to act, on the Key
Person's part shall be deemed "willful" unless
done, or omitted to be done, by the Key Person
not in good faith and without reasonable belief
that the Key Person's act, or failure to act,
was in the best interest of the Corporation.
A "Change in Control" shall be deemed to
have occurred if the conditions set forth in
any one of the following paragraphs shall have
been satisfied:
(i) any Person (as defined in this
Paragraph 7) is or becomes the Beneficial Owner
(as defined in this Paragraph 7), directly or
indirectly, of securities of the Corporation
(not including in the securities beneficially
owned by such Person any securities acquired
directly from the Corporation or its affili-
ates) representing 25% or more of the combined
voting power of the Corporation's then out-
standing securities; or
(ii) during any period of two con-
secutive years (not including any period prior
to January 7, 1994), individuals who at the
beginning of such period constitute the Board
of Directors and any new director (other than a
director designated by a Person who has entered
into an agreement with the Corporation to ef-
fect a transaction described in paragraph (i),
(iii) or (iv) of this Change in Control defini-
tion) whose election by the Board of Directors
or nomination for election by the Corporation's
stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors at the begin-
ning of the period or whose election or nomina-
tion for election was previously so approved,
cease for any reason to constitute a majority
thereof; or
(iii) the shareholders of the Corpo-
ration approve a merger or consolidation of the
Corporation with any other corporation, other
than (x) a merger or consolidation which would
result in the voting securities of the Corpora-
tion outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity), in combi-
nation with the ownership of any trustee or
other fiduciary holding securities under an
employee benefit plan of the Corporation, at
least 75% of the combined voting power of the
voting securities of the Corporation or such
surviving entity outstanding immediately after
such merger or consolidation, or (y) a merger
or consolidation effected to implement a recap-
italization of the Corporation (or similar
transaction) in which no Person acquires more
than 50% of the combined voting power of the
Corporation's then outstanding securities; or
(iv) the shareholders of the Corpo-
ration approve a plan of complete liquidation
of the Corporation or an agreement for the sale
or disposition by the Corporation of all or
substantially all the Corporation's assets.
For purposes of the definition of Change in
Control in this Paragraph 7:
"Beneficial Owner" shall have the meaning de-
fined in Rule 13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Ex-
change Act of 1934, as amended from time to
time.
"Person" shall have the meaning given in Sec-
tion 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the
Corporation or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities
under an employee benefit plan of the Corpora-
tion or any of its subsidiaries, (iii) an un-
derwriter temporarily holding securities pursu-
ant to an offering of such securities, or (iv)
a corporation owned, directly or indirectly, by
the stockholders of the Corporation in substan-
tially the same proportions as their ownership
of stock of the Corporation.
<PAGE>
EXHIBIT 10-35
AMENDMENT NO. 1
to
THE ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
of
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Annual Executive Incentive Compensation
Plan of New York State Electric & Gas Corporation (the
"Plan") is hereby amended, effective as of January 7,
1994, as follows:
1. The following new Articles XIII and XIV are
added to the Plan:
XIII. Payments upon a Change in Control
A. Calculation of Payments
Notwithstanding any other provisions hereof
(including, without limitation, Article IX
hereof), if a Change in Control (as defined in
Section B of this Article XIII) shall occur,
the following shall be paid, in cash, no later
than the tenth (10th) day following such Change
in Control:
(i) all incentive awards for any
completed fiscal year of the Company which
preceded the Change in Control, which awards
have been finally determined but not yet either
(x) distributed or (y) deferred pursuant to the
Deferred Compensation Plan for Salaried Employ-
ees,
(ii) if, at the time of the Change in
Control, the Board of Directors has not yet
finally determined the incentive awards with
respect to the fiscal year of the Company imme-
diately preceding the fiscal year in which the
Change in Control occurs, an incentive award
with respect to such fiscal year, determined by
the Board of Directors in accordance with the
provisions of the preceding Articles hereof,
and
(iii) an incentive award with respect
to the fiscal year of the Company in which the
Change in Control occurs which shall be calcu-
lated by (x) assuming that the Threshold Mea-
sure for such fiscal year has been met and
using such adjustments to the Variable Measure
as the Committee has provided and the Board of
Directors has approved prior to the Change in
Control, and (y) multiplying the result so ob-
tained by a fraction the numerator of which is
the number of days elapsed from the beginning
of such fiscal year until the Change in Control
and the denominator of which is three hundred
and sixty-five (365).
B. Definition of a Change in Control
A "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one
of the following paragraphs shall have been
satisfied:
(i) any Person (as defined in this
Section B) is or becomes the Beneficial Owner
(as defined in this Section B), directly or
indirectly, of securities of the Company (not
including in the securities beneficially owned
by such Person any securities acquired directly
from the Company or its affiliates) represent-
ing 25% or more of the combined voting power of
the Company's then outstanding securities; or
(ii) during any period of two con-
secutive years (not including any period prior
to January 7, 1994), individuals who at the
beginning of such period constitute the Board
of Directors and any new director (other than a
director designated by a Person who has entered
into an agreement with the Company to effect a
transaction described in paragraph (i), (iii)
or (iv) of this Change in Control definition)
whose election by the Board of Directors or
nomination for election by the Company's stock-
holders was approved by a vote of at least two-
thirds (2/3) of the directors then still in
office who either were directors at the begin-
ning of the period or whose election or nomina-
tion for election was previously so approved,
cease for any reason to constitute a majority
thereof; or
(iii) the shareholders of the Compa-
ny approve a merger or consolidation of the
Company with any other corporation, other than
(x) a merger or consolidation which would re-
sult in the voting securities of the Company
outstanding immediately prior thereto continu-
ing to represent (either by remaining outstand-
ing or by being converted into voting securi-
ties of the surviving entity), in combination
with the ownership of any trustee or other
fiduciary holding securities under an employee
benefit plan of the Company, at least 75% of
the combined voting power of the voting securi-
ties of the Company or such surviving entity
outstanding immediately after such merger or
consolidation, or (y) a merger or consolidation
effected to implement a recapitalization of the
Company (or similar transaction) in which no
Person acquires more than 50% of the combined
voting power of the Company's then outstanding
securities; or
(iv) the shareholders of the Company
approve a plan of complete liquidation of the
Company or an agreement for the sale or dispo-
sition by the Company of all or substantially
all the Company's assets.
For purposes of the definition of Change in
Control in this Section B:
"Beneficial Owner" shall have the meaning de-
fined in Rule 13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Ex-
change Act of 1934, as amended from time to
time.
"Person" shall have the meaning given in Sec-
tion 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities
under an employee benefit plan of the Company
or any of its subsidiaries, (iii) an underwrit-
er temporarily holding securities pursuant to
an offering of such securities, or (iv) a cor-
poration owned, directly or indirectly, by the
stockholders of the Company in substantially
the same proportions as their ownership of
stock of the Company.
XIV. Plan Administration After a Change in Control
Notwithstanding any other provisions of the
Plan (including, without limitation, Sections
VI(B) and XII hereof), upon and after the oc-
currence of a Change in Control, neither the
Board of Directors nor the Committee shall be
authorized to, and no termination, suspension,
modification or amendment of the Plan shall be
permitted to, amend or modify the terms and
provisions (including, without limitation, the
payment provisions) of any incentive awards
theretofore made to participants in any way
which adversely affects the rights of such
participants.
<PAGE>
EXHIBIT 10-36
AMENDMENT NO. 2
to
THE ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN
of
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Annual Executive Incentive Compensation Plan of New
York State Electric & Gas Corporation (the "Plan") is hereby
amended, effective as of December 31, 1993, as follows:
1. Section B of Article V is hereby amended by
deleting "Strategy Performance Measures" under the column
entitled "Performance Goals".
2. Section D of Article V is hereby amended to read in
its entirety as follows:
D. The corporate customer service goal will be a
combination of customer service standards,
safety and reliability factors.
3. Section E of Article V is hereby deleted in its
entirety and Section F of Article V is hereby redesignated as
Section E of Article V.
4. Article VII is hereby amended by deleting the
entire column entitled "Achievement of Each Strategy Performance
Measure".
<PAGE>
EXHIBIT 10-41
AMENDMENT NO. 4
to
THE PERFORMANCE SHARE PLAN
of
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Performance Share Plan of New York State
Electric & Gas Corporation (the "Plan") is hereby amend-
ed, effective as of January 7, 1994, as follows:
1. The following new Articles 13 and 14 are
added to the Plan:
13. Payments and Forfeitures upon and after a Change in
Control
A. Calculation of Payments. Notwithstanding
any other provisions of this Plan (including, without
limitation, Section 11(E) hereof), if a Change in Control
(as defined in Section C of this Article 13) shall occur
prior to June 30, 2001, the following shall be paid, in
cash, no later than the tenth (10th) day following such
Change in Control:
(i) amounts equal to the fair market value of all
Performance Shares and Dividend Performance Shares
which have already been determined to be payable
pursuant to Article 6 hereof, based on the Company's
Average Ranking for any completed fiscal year of the
Company which preceded the Change in Control, which
amounts have not yet been paid (or deferred pursuant
to procedures established in accordance with Section
11(E) hereof),
(ii) if, at the time of the Change in Control, the
Committee has not yet determined the Company's
Average Ranking with respect to the fiscal year of
the Company immediately preceding the fiscal year in
which the Change in Control occurs, amounts equal to
the fair market value of all Performance Shares and
Dividend Performance Shares determined by the Com-
mittee to be payable, based on its calculation (in
accordance with the provisions of the preceding
Articles hereof) of the Company's Average Ranking
with respect to the Company's fiscal year which
immediately precedes the fiscal year in which the
Change in Control occurs, and
(iii) amounts equal to the fair market value of all
Performance Shares and Dividend Performance Shares
which might otherwise subsequently be determined by
the Committee to be payable immediately after the
fiscal year in which the Change in Control occurs;
provided, however, that the calculation with respect
to such year shall be based on the Company's Average
Ranking for the immediately preceding fiscal year,
using the Company's shareholder return for the
twelve calendar month period that ends with the
month that immediately precedes the month in which
the Change in Control occurs as the Total Sharehold-
er Return and comparing such Total Shareholder
Return to the annual shareholder return for such
immediately preceding fiscal year of the utilities
selected pursuant to Article 6 hereof.
B. Forfeitures After a Change in Control.
Notwithstanding any other provision of this Plan (includ-
ing, without limitation, Article 12 hereof), immediately
after the payments described in Section A of this Article
13 have been made, all Performance Shares and Dividend
Performance Shares then outstanding shall be forfeited to
the Company and cancelled and the Plan shall be terminat-
ed on that date.
C. Definition of a Change in Control. A
"Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following
paragraphs shall have been satisfied:
(i) any Person (as defined in this Section C) is or
becomes the Beneficial Owner (as defined in this
Section C), directly or indirectly, of securities of
the Company (not including in the securities bene-
ficially owned by such Person any securities ac-
quired directly from the Company or its affiliates)
representing 25% or more of the combined voting
power of the Company's then outstanding securities;
or
(ii) during any period of two consecutive years
(not including any period prior to January 7, 1994),
individuals who at the beginning of such period con-
stitute the Board of Directors and any new director
(other than a director designated by a Person who
has entered into an agreement with the Company to
effect a transaction described in paragraph (i),
(iii) or (iv) of this Change in Control definition)
whose election by the Board of Directors or nomina-
tion for election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was previously
so approved, cease for any reason to constitute a
majority thereof; or
(iii) the shareholders of the Company approve a
merger or consolidation of the Company with any
other corporation, other than (x) a merger or con-
solidation which would result in the voting securi-
ties of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting secu-
rities of the surviving entity), in combination with
the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of
the Company, at least 75% of the combined voting
power of the voting securities of the Company or
such surviving entity outstanding immediately after
such merger or consolidation, or (y) a merger or
consolidation effected to implement a recapitaliza-
tion of the Company (or similar transaction) in
which no Person acquires more than 50% of the com-
bined voting power of the Company's then outstanding
securities; or
(iv) the shareholders of the Company approve a plan
of complete liquidation of the Company or an agree-
ment for the sale or disposition by the Company of
all or substantially all the Company's assets.
For purposes of the definition of Change in
Control in this Section C:
"Beneficial Owner" shall have the meaning de-
fined in Rule 13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Ex-
change Act of 1934, as amended from time to
time.
"Person" shall have the meaning given in Sec-
tion 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof;
however, a Person shall not include (i) the
Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities
under an employee benefit plan of the Company
or any of its subsidiaries, (iii) an underwrit-
er temporarily holding securities pursuant to
an offering of such securities, or (iv) a cor-
poration owned, directly or indirectly, by the
stockholders of the Company in substantially
the same proportions as their ownership of
stock of the Company.
14. Plan Administration After a Change in Control
Notwithstanding any other provisions of the
Plan (including, without limitation, Articles 2 and 10
hereof), upon and after the occurrence of a Change in
Control, neither the Board of Directors nor the Committee
shall be authorized to, and no termination, suspension,
modification or amendment of the Plan shall be permitted
to, amend or modify the terms and provisions (including,
without limitation, the payment provisions) of any awards
theretofore made to participants in any way which ad-
versely affects the rights of such participants.
<PAGE>
EXHIBIT 10-43
AMENDMENT NO. 1
TO
THE PERFORMANCE SHARE DEFERRED COMPENSATION PLAN
OF
NEW YORK STATE ELECTRIC & GAS CORPORATION
<PAGE>
The Performance Share Deferred Compensation Plan of New
York State Electric & Gas Corporation (the "Plan") is hereby
amended, effective as of January 7, 1994, as follows:
1. Section 5 of the Plan is amended to read, in its
entirety, as follows:
5. Funding. There will be no funding of any amounts
to be paid pursuant to this Plan; provided, however, that the
Corporation, in its discretion, may establish a trust to pay such
amounts, which trust shall be subject to the claims of the
Corporation's creditors in the event of the Corporation's
bankruptcy or insolvency; and provided, further, that the
Corporation shall remain responsible for the payment of any such
amounts which are not so paid by any such trust.
<PAGE>
EXHIBIT 10-46
EMPLOYMENT AGREEMENT
AGREEMENT made this 19th day of
January, 1994, between New York State Electric & Gas
Corporation, a New York corporation (the "Company"), and
James A. Carrigg (the "Executive").
The Board of Directors of the Company (the
"Board") desires to provide for the employment of the
Executive as a member of the Company's management, in the
best interest of the Company and its shareholders. The
Executive is willing to commit himself to serve the
Company, on the terms and conditions herein provided.
In order to effect the foregoing, the Company
and the Executive wish to enter into an employment agree-
ment on the terms and conditions set forth below. Ac-
cordingly, in consideration of the premises and the
respective covenants and agreements of the parties herein
contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Defined Terms. The definitions of capi-
talized terms used in this Agreement are provided in the
last Section hereof.
2. Employment. The Company hereby agrees to
employ the Executive, and the Executive hereby agrees to
serve the Company, on the terms and conditions set forth
herein, during the term of this Agreement (the "Term").
3. Term of Agreement. The Term will commence
on the date hereof and end on December 31, 1996, unless
further extended as hereinafter provided. Commencing on
January 1, 1996 and each January 1 thereafter, the term
of this Agreement shall automatically be extended for one
additional year unless, not later than September 30 of
the preceding year, the Company (upon authorization by
the Board) or the Executive shall have given notice not
to extend this Agreement; provided, however, if a Change
in Control shall have occurred during the Term of this
Agreement, Sections 6, 7 and 10 through 20 of this Agree-
ment shall continue in effect until at least the end of
the Change-in-Control Protective Period (whether or not
the Term of the Agreement shall have expired for other
purposes).
4. Position and Duties. The Executive shall
serve as Chairman, President and Chief Executive Officer
of the Company and shall have such responsibilities,
duties and authority that are consistent with such posi-
tions as may from time to time be assigned to the Execu-
tive by the Board. The Executive shall devote substan-
tially all his working time and efforts to the business
and affairs of the Company; provided, however, that the
Executive may also serve on the boards of directors or
trustees of other companies and organizations, as long as
such service does not substantially interfere with the
performance of his duties hereunder.
5. Compensation and Related Matters.
5.1 Base Salary. The Company shall pay
Executive a base salary ("Base Salary") during the period
of the Executive's employment hereunder, which shall be
at an initial rate of Four Hundred Twenty-Five Thousand
Dollars ($425,000.00) per annum. The amount to be paid
from the first date of the Term through the immediately
following December 31 shall be the product of Four Hun-
dred Twenty-Five Thousand Dollars ($425,000.00) multi-
plied by a fraction, the numerator of which is the number
of calendar days from first date of the Term through such
December 31 and the denominator of which is 365. The
Base Salary shall be paid in substantially equal bi-
weekly installments, in arrears. The Base Salary may be
discretionarily increased by the Board from time to time
as the Board deems appropriate in its reasonable business
judgment. The Base Salary in effect from time to time
shall not be decreased during the Term. During the
period of the Executive's employment hereunder, the Board
shall make an annual review of the Executive's compensa-
tion.
Compensation of the Executive by Base
Salary payments shall not be deemed exclusive and shall
not prevent the Executive from participating in any other
compensation or benefit plan of the Company. The Base
Salary payments (including any increased Base Salary
payments) hereunder shall not in any way limit or reduce
any other obligation of the Company hereunder, and no
other compensation, benefit or payment hereunder shall in
any way limit or reduce the obligation of the Company to
pay the Executive's Base Salary hereunder.
5.2 Benefit Plans. The Executive shall be
entitled to participate in or receive benefits under any
"employee benefit plan" (as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended from time to time ("ERISA")) or employee benefit
arrangement made available by the Company now or during
the period of the Executive's employment hereunder to its
executives and key management employees, subject to and
on a basis consistent with the terms, conditions and
overall administration of such plans and arrangements;
provided, however, that there shall be no duplication of
the benefits created by this Agreement. The Executive's
participation in such employee benefit plans and arrange-
ments shall be on an appropriate level, as determined by
the Board.
5.3 Expenses. Upon presentation of reasonably
adequate documentation to the Company, the Executive
shall receive prompt reimbursement from the Company for
all reasonable and customary business expenses incurred
by the Executive in accordance with the Company policy in
performing services hereunder.
6. Compensation Related to Disability or
Termination (Other Than Post-Termination Payments).
6.1 During the Term of this Agreement (or, if
later, at any time prior to the end of the Change-in-
Control Protective Period), during any period that the
Executive fails to perform the Executive's full-time
duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the
Executive's Base Salary to the Executive at the rate in
effect at the commencement of any such period, together
with all compensation and benefits payable to the Execu-
tive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during
such period, until the Executive's employment is termi-
nated by the Company for Disability; provided, however,
that such Base Salary payments shall be reduced by the
sum of the amounts, if any, payable to the Executive at
or prior to the time of any such Base Salary payment
under disability benefit plans of the Company or under
the Social Security disability insurance program, which
amounts were not previously applied to reduce any such
Base Salary payment. Subject to Sections 7, 8, 9 and 10
hereof, after completing the expense reimbursements re-
quired by Section 5.3 hereof and making the payments and
providing the benefits required by this Section 6.1, the
Company shall have no further obligations to the Execu-
tive under this Agreement.
6.2 If the Executive's employment shall be
terminated for any reason during the Term of this Agree-
ment (or, if later, prior to the end of the Change-in-
Control Protective Period), the Company shall pay the
Executive's Base Salary (to the Executive or in accor-
dance with Section 14.2 if the Executive's employment is
terminated by his death) through the Date of Termination
at the rate in effect at the time the Notice of Termina-
tion is given, together with all compensation and bene-
fits payable to the Executive through the Date of Termi-
nation under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company
during such period. Subject to Sections 7, 8, 9 and 10
hereof, after completing the expense reimbursements re-
quired by Section 5.3 hereof and making the payments and
providing the benefits required by this Section 6.2, the
Company shall have no further obligations to the Execu-
tive under this Agreement.
7. Normal Post-Termination Payments upon
Termination of Employment. If the Executive's employment
shall be terminated for any reason during the Term of
this Agreement (or, if later, prior to the end of the
Change-in-Control Protective Period), the Company shall
pay the Executive's normal post-termination compensation
and benefits to the Executive as such payments become
due. Subject to Section 10.1 hereof, such post-termi-
nation compensation and benefits shall be determined
under, and paid in accordance with, the Company's retire-
ment, insurance and other compensation or benefit plans,
programs and arrangements (other than this Agreement).
8. Termination of Employment (During the Term
and Prior to a Change in Control) by the Company without
Cause. If the Company shall terminate the Executive's
employment during the Term and prior to a Change in Con-
trol, without Cause (and not for Disability or in con-
nection with the Executive's Retirement or the
Executive's death), then in lieu of any further salary
payments to the Executive for periods subsequent to the
Date of Termination, the Company shall pay to the Execu-
tive, within the five days immediately following the Date
of Termination, a lump sum amount equal to the present
value (calculated using a discount at the appropriate
corresponding United States Treasury Bill rate) of the
aggregate Base Salary otherwise payable to the Executive
through the end of the Term.
9. Post-Termination Continuation of Welfare
Benefit Plan Coverage. If the termination of the
Executive's employment is described in Section 8 hereof, the
Company shall maintain in full force and effect, for the
continued benefit of the Executive for the number of years
(including partial years) remaining in the Term, each "em-
ployee welfare benefit plan" (as defined in section 3(1) of
ERISA) in which the Executive was entitled to participate
immediately prior to the Date of Termination, provided that
the Executive's continued participation is possible under
the general terms and provisions of such plans. In the
event that the Executive's participation in any such plan is
barred, the Company shall arrange to provide the Executive
with benefits substantially similar to those which the Exec-
utive would otherwise have been entitled to receive under
the plan from which his continued participation is barred.
10. Severance Payments.
10.1 Subject to Section 10.2 hereof, the Company
shall pay the Executive the payments described in this
Section 10.1 (the "Severance Payments") upon the termination
of the Executive's employment following a Change in Control
and prior to the end of the Change-in-Control Protective
Period, in addition to the payments and benefits described
in Sections 6 and 7 hereof, unless such termination is (i)
by the Company for Cause, (ii) by reason of death, Disabili-
ty or Retirement, or (iii) by the Executive without Good
Reason. For purposes of the immediately preceding sentence,
if a termination of the Executive's employment occurs prior
to a Change in Control, but following a Potential Change in
Control in which a Person has entered into an agreement with
the Company the consummation of which will constitute a
Change in Control, such termination shall be deemed to have
followed a Change in Control and to have been (i) by the
Company without Cause, if the Executive's employment is
terminated without Cause at the direction of such Person, or
(ii) by the Executive with Good Reason, if the Executive
terminates his employment with Good Reason and the act (or
failure to act) which constitutes Good Reason occurs follow-
ing such Potential Change in Control and at the direction of
such Person.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of
Termination, in lieu of any lump sum payment with
respect to aggregate Base Salary otherwise payable
pursuant to Section 8 hereof, and in lieu of any sever-
ance benefit otherwise payable to the Executive, the
Company shall pay to the Executive a lump sum severance
payment, in cash, equal two (2) times the sum of
(i) the higher of the Executive's annual Base
Salary in effect immediately prior to the
occurrence of the event or circumstance upon
which the Notice of Termination is based or
the Executive's annual Base Salary in effect
immediately prior to the Change in Control,
and
(ii) the higher of (x) the amount paid to the
Executive pursuant to the Company's Annual
Executive Incentive Compensation Plan (or its
successor plan) in the fiscal year preceding
that in which the Date of Termination occurs,
or (y) the average amount so paid in the
three fiscal years preceding that in which
the Change in Control occurs.
(B) Notwithstanding any provision of the
Company's Annual Executive Incentive Compensation Plan,
the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (i) any incentive
compensation which has been allocated or awarded to the
Executive for a completed fiscal year preceding the
Date of Termination under the Annual Executive Incen-
tive Compensation Plan but has not yet been either
(x) paid (pursuant to Section 6.2 hereof or otherwise)
or (y) deferred pursuant to the Deferred Compensation
Plan for Salaried Employees, and (ii) a pro rata por-
tion to the Date of Termination of the aggregate value
of any contingent incentive compensation award to the
Executive for any uncompleted fiscal year under the
Annual Executive Incentive Compensation Plan calculated
as to each such award by (i) assuming the Threshold
Measure of such plan has been met and (ii) using such
adjustments to the Variable Measure as the Committee
(as defined in such plan) may have provided and the
Board may have approved prior to the Change in Control,
in order to produce an appropriate pro-rata award for
such fiscal year;
(C) In determining the retirement benefits
to which the Executive is entitled under the Company's
Supplemental Executive Retirement Plan, the Executive
shall be given an additional two (2) years of service
credit at the Executive's highest annual rate of com-
pensation during the twelve (12) months immediately
preceding the Date of Termination and shall be deemed
to be two (2) years older than he is; such benefits
shall be determined without regard to any amendment to
the Supplemental Executive Retirement Plan made subse-
quent to a Change in Control and on or prior to the
Date of Termination, which amendment adversely affects
in any manner the computation of retirement benefits
thereunder.
(D) For a twenty-four (24) month period
after the Date of Termination, the Company shall ar-
range to provide the Executive with life, disability,
accident and health insurance benefits substantially
similar to those which the Executive is receiving
immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits subse-
quent to a Change in Control if such reduction consti-
tutes Good Reason). Benefits otherwise receivable by
the Executive pursuant to this Section 10.1(D) shall be
reduced to the extent comparable benefits are actually
received by or made available to the Executive without
cost during the twenty-four (24) month period following
the Executive's termination of employment (and any such
benefits actually received by the Executive shall be
reported to the Company by the Executive). If the
benefits provided to the Executive under this Section
10.1(D) shall result in a decrease, pursuant to Section
10.2, in the Severance Payments and these Section
10.1(D) benefits are thereafter reduced pursuant to the
immediately preceding sentence because of the receipt
of comparable benefits, the Company shall, at the time
of such reduction, pay to the Executive the lesser of
(a) the amount of the decrease made in the Severance
Payments pursuant to Section 10.2, or (b) the maximum
amount which can be paid to the Executive without
being, or causing any other payment to be, nondeduct-
ible by reason of section 280G of the Code.
10.2 Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received
or to be received by the Executive in connection with a
Change in Control or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Compa-
ny, any Person whose actions result in a Change in Control
or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the Severance
Payments, being hereinafter called "Total Payments") would
be subject (in whole or part), to the Excise Tax, then the
Severance Payments shall be reduced to the extent necessary
so that no portion of the Total Payments is subject to the
Excise Tax (after taking into account any reduction in the
Total Payments provided by reason of section 280G of the
Code in such other plan, arrangement or agreement) if (A)
the net amount of such Total Payments, as so reduced, (and
after deduction of the net amount of federal, state and
local income tax on such reduced Total Payments) is greater
than (B) the excess of (i) the net amount of such Total
Payments, without reduction (but after deduction of the net
amount of federal, state and local income tax on such Total
Payments), over (ii) the amount of Excise Tax to which the
Executive would be subject in respect of such Total Pay-
ments. For purposes of determining whether and the extent
to which the Total Payments will be subject to the Excise
Tax, (i) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have effectively
waived in writing prior to the Date of Termination shall be
taken into account, (ii) no portion of the Total Payments
shall be taken into account which in the opinion of tax
counsel selected by the Company does not constitute a "para-
chute payment" within the meaning of section 280G(b)(2) of
the Code (including by reason of section 280G(b)(4)(A) of
the Code), and, in calculating the Excise Tax, no portion of
such Total Payments shall be taken into account which con-
stitutes reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the Base Amount allocable to such reason-
able compensation, and (iii) the value of any non-cash
benefit or any deferred payment or benefit included in the
Total Payments shall be determined by the Company in accor-
dance with the principles of sections 280G(d)(3) and (4) of
the Code. Prior to the payment date set forth in Section
10.3 hereof, the Company shall provide the Executive with
its calculation of the amounts referred to in this Section
and such supporting materials as are reasonably necessary
for the Executive to evaluate the Company's calculations.
If the Executive objects to the Company's calculations, the
Company shall pay to the Executive such portion of the
Severance Payments (up to 100% thereof) as the Executive
determines is necessary to result in the Executive receiving
the greater of clauses (A) and (B) of this Section.
10.3 The payments provided for in Section 10.1
hereof (other than Section 10.1(C) and (D)) shall be made
not later than the fifth day following the Date of Termina-
tion, provided, however, that if the amounts of such pay-
ments, and the limitation on such payments set forth in
Section 10.2 hereof, cannot be finally determined on or
before such day, the Company shall pay to the Executive on
such day an estimate, as determined by the Executive, of the
minimum amount of such payments to which the Executive is
clearly entitled and shall pay the remainder of such pay-
ments (together with interest at the rate provided in sec-
tion 1274(b)(2)(B) of the Code) as soon as the amount there-
of can be determined but in no event later than the thirti-
eth (30th) day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable
on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section
1274(b)(2)(B) of the Code).
10.4 The Company also shall pay to the Executive
all legal fees and expenses incurred by the Executive as a
result of a termination which entitles the Executive to the
Severance Payments (including all such fees and expenses, if
any, incurred in disputing any such termination or in seek-
ing in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the appli-
cation of section 4999 of the Code to any payment or benefit
provided hereunder). Such payments shall be made within
five (5) business days after delivery of the Executive's
written requests for payment accompanied with such evidence
of fees and expenses incurred as the Company reasonably may
require.
11. Termination Procedures.
11.1 Notice of Termination. During the Term of
this Agreement (and, if longer, until the end of the Change-
in-Control Protective Period), any purported termination of
the Executive's employment (other than by reason of death)
shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance
with Section 14 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agree-
ment relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provi-
sion so indicated. Further, a Notice of Termination for
Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters (3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable
notice to the Executive and an opportunity for the Execu-
tive, together with the Executive's counsel, to be heard
before the Board) finding that, in the good faith opinion of
the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
11.2 Date of Termination. "Date of Termination",
with respect to any purported termination of the Executive's
employment during the Term of this Agreement (or prior to
the end of the Change-in-Control Protective Period, if a
Change in Control shall have occurred), shall mean (i) if
the Executive's employment is terminated by his death, the
date of his death, (ii) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not
have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and
(iii) if the Executive's employment is terminated for any
other reason, the date specified in the Notice of Termina-
tion (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case
of a termination for Cause) and, in the case of a termina-
tion by the Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
12. No Mitigation. The Company agrees that, if
the Executive's employment by the Company is terminated
during the Term (or, if later, prior to the end of the
Change-in-Control Protective Period), the Executive is not
required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the Compa-
ny hereunder. Further, the amount of any payment or benefit
provided for hereunder (other than pursuant to Section
10.1(D) hereof) shall not be reduced by any compensation
earned by the Executive as the result of employment by
another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the Compa-
ny, or otherwise.
13. Confidentiality and Noncompetition.
13.1 The Executive will not, during or after the
Term, disclose to any entity or person any information which
is treated as confidential by the Company and to which the
Executive gains access by reason of his position as an
employee or director of the Company.
13.2 If, at any time prior to the end of the Term
(or, if later, the end of the Change-in-Control Protective
Period), the Executive terminates his own employment without
Good Reason (and not in connection with his Disability, Re-
tirement or death) or the Company terminates his employment
with Cause, then for a twelve-month period immediately fol-
lowing his Date of Termination, the Executive shall not,
except as permitted by the Company upon its prior written
consent, enter, directly or indirectly, into the employ of
or render or engage in, directly or indirectly, any services
to any person, firm or corporation which is a major competi-
tor of the Company with respect to products which the Compa-
ny is then producing or services the Company is then provid-
ing (a "Competitor"). However, it shall not be a violation
of the immediately preceding sentence for the Executive to
be employed by, or render services to, a Competitor, if the
Executive renders those services only in lines of business
of the Competitor which are not directly competitive with
the primary lines of business of the Company. The current
Competitors of the Company are listed on Exhibit 1 hereto.
With the consent of the Executive, which shall not be unrea-
sonably withheld, additional Competitors may be listed on
Exhibit 1.
14. Successors; Binding Agreement.
14.1 In addition to any obligations imposed by
law upon any successor to the Company, the Company will
require any successor (whether direct or indirect, by pur-
chase, merger, consolidation or otherwise) to all or sub-
stantially all of the business and/or assets of the Company
to expressly assume 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. Failure of the Company to obtain such assump-
tion and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall
entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate
the Executive's employment for Good Reason after a Change in
Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
14.2 This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Execu-
tive shall die while any amount would still be payable to
the Executive hereunder (other than amounts which, by their
terms, terminate upon the death of the Executive) if the
Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
15. Notices. For the purpose of this Agreement,
notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to
such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice
of change of address shall be effective only upon actual
receipt:
To the Company:
New York State Electric & Gas Corporation
Post Office Box 3607
Binghamton, NY 13902-3607
Attention: Corporate Secretary
To the Executive:
James A. Carrigg
3711 Maplehurst Drive
Endwell, New York 13760
16. Miscellaneous. No provision of this Agree-
ment may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer as may be spe-
cifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth
in this Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject
matter contained herein and supercedes all prior agreements,
promises, covenants, arrangements, communications, represen-
tations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and
any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and
cancelled. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws
of the State of New York. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to
any successor provisions to such sections. There shall be
withheld from any payments provided for hereunder any
amounts required to be withheld under federal, state or
local law and any additional withholding amounts to which
the Executive has agreed. The obligations under this Agree-
ment of either the Company or the Executive which by their
nature and terms require satisfaction after the end of the
Term (or after the end of the Change-in-Control Protective
Period) shall survive such event and shall remain binding
upon such party.
17. Validity. The invalidity or unenforceability
of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
18. Counterparts. This Agreement may be executed
in several counterparts, each of which shall be deemed to be
an original but all of which together will constitute one
and the same instrument.
19. Settlement of Disputes; Arbitration. All
claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Board and shall
be in writing. Any denial by the Board of a claim for
benefits under this Agreement shall be delivered to the
Executive in writing and shall set forth the specific rea-
sons for the denial and the specific provisions of this
Agreement relied upon. The Board shall afford a reasonable
opportunity to the Executive for a review of the decision
denying a claim and shall further allow the Executive to
appeal to the Board a decision of the Board within sixty
(60) days after notification by the Board that the
Executive's claim has been denied. To the extent permitted
by applicable law, any further dispute or controversy aris-
ing under or in connection with this Agreement shall be
settled exclusively by arbitration in Binghamton, New York
in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
20. Definitions. For purposes of this Agreement,
the following terms shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning defined
in section 280G(b)(3) of the Code.
(B) "Base Salary" shall have the meaning stated
in Section 5.1 hereof.
(C) "Beneficial Owner" shall have the meaning de-
fined in Rule 13d-3 under the Exchange Act.
(D) "Board" shall mean the Board of Directors of
the Company.
(E) "Cause" for termination by the Company of the
Executive's employment, for purposes of this Agreement,
shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties
with the Company (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance
of a Notice of Termination for Good Reason by the Executive
pursuant to Section 11.1) after a written demand for sub-
stantial performance is delivered to the Executive by the
Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substan-
tially performed the Executive's duties, or (ii) the willful
engaging by the Executive in conduct which is demonstrably
and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and
(ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
(F) A "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied during the
Term:
(I) any Person is or becomes the Bene-
ficial Owner, directly or indirectly, of securi-
ties of the Company (not including in the secu-
rities beneficially owned by such Person any secu-
rities acquired directly from the Company or its
affiliates) representing 25% or more of the com-
bined voting power of the Company's then outstand-
ing securities; or
(II) during any period of two consecu-
tive years (not including any period prior to the
execution of this Agreement), individuals who at
the beginning of such period constitute the Board
and any new director (other than a director desig-
nated by a Person who has entered into an agree-
ment with the Company to effect a transaction
described in paragraph (I), (III) or (IV) of this
Change in Control definition) whose election by
the Board or nomination for election by the
Company's stockholders was approved by a vote of
at least two-thirds (2/3) of the directors then
still in office who either were directors at the
beginning of the period or whose election or nomi-
nation for election was previously so approved,
cease for any reason to constitute a majority
thereof; or
(III) the shareholders of the Company
approve a merger or consolidation of the Company
with any other corporation, other than (i) a merg-
er or consolidation which would result in the
voting securities of the Company outstanding imme-
diately prior thereto continuing to represent
(either by remaining outstanding or by being con-
verted into voting securities of the surviving
entity), in combination with the ownership of any
trustee or other fiduciary holding securities
under an employee benefit plan of the Company, at
least 75% of the combined voting power of the
voting securities of the Company or such surviving
entity outstanding immediately after such merger
or consolidation, or (ii) a merger or consolida-
tion effected to implement a recapitalization of
the Company (or similar transaction) in which no
Person acquires more than 50% of the combined
voting power of the Company's then outstanding
securities; or
(IV) the shareholders of the Company
approve a plan of complete liquidation of the
Company or an agreement for the sale or disposi-
tion by the Company of all or substantially all
the Company's assets.
(G) "Change-in-Control Protective Period" shall
mean the period from the occurrence of a Change in Control
until the later of the second anniversary of such Change in
Control or, if such Change in Control shall be caused by the
shareholder approval of a merger or consolidation described
in Section 20(F)(III) hereof, the second anniversary of the
consummation of such merger or consolidation.
(H) "Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
(I) "Company" shall mean New York State Electric
& Gas Corporation and any successor to its business and/or
assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under
Section 20(F) hereof, whether or not any Change in Control
of the Company has occurred in connection with such succes-
sion).
(J) "Date of Termination" shall have the meaning
stated in Section 11.2 hereof.
(K) "Disability" shall be deemed the reason for
the termination by the Company of the Executive's employ-
ment, if, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's
duties with the Company for the maximum number of months
applicable to the Executive under the Company's Disability
Policy for Salaried Employees (but in no event for less than
six (6) consecutive months), the Company shall have given
the Executive a Notice of Termination for Disability, and,
within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-
time performance of the Executive's duties.
(L) "Exchange Act" shall mean the Securities Ex-
change Act of 1934, as amended from time to time.
(M) "Excise Tax" shall mean any excise tax im-
posed under section 4999 of the Code.
(N) "Executive" shall mean the individual named
in the first paragraph of this Agreement.
(O) "Good Reason" for termination by the Execu-
tive of the Executive's employment shall mean the occurrence
(without the Executive's express written consent) after any
Change in Control, or after any Potential Change in Control
under the circumstances described in the second sentence of
Section 10.1 hereof (treating all references in paragraphs
(I) through (VII) below to a "Change in Control" as refer-
ences to a "Potential Change in Control"), of any one of the
following acts by the Company, or failures by the Company to
act, unless, in the case of any act or failure to act de-
scribed in paragraph (I), (V), (VI) or (VII) below, such act
or failure to act is corrected prior to the Date of Termina-
tion specified in the Notice of Termination given in respect
thereof:
(I) the assignment to the Executive of
any duties inconsistent with the Executive's sta-
tus as an executive officer of the Company or a
substantial adverse alteration in the nature or
status of the Executive's responsibilities from
those in effect immediately prior to the Change in
Control (other than any such alteration primarily
attributable to the fact that the Company may no
longer be a public company);
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the
date hereof or as the same may be increased from
time to time (except for across-the-board salary
reductions which are made after the expiration of
the Term and which similarly affect all executives
of the Company and all executives of any Person in
control of the Company);
(III) the relocation of the Company's
principal executive offices to a location more
than fifty (50) miles from the location of such
offices immediately prior to the Change in Control
or the Company's requiring the Executive to be
based anywhere other than the Company's principal
executive offices except for required travel on
the Company's business to an extent substantially
consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company, with-
out the Executive's consent, to pay to the Execu-
tive any portion of the Executive's current com-
pensation (except pursuant to an across-the-board
compensation deferral similarly affecting all
executives of the Company and all executives of
any Person in control of the Company), or to pay
to the Executive any portion of an installment of
deferred compensation under any deferred compensa-
tion program of the Company, within seven (7) days
of the date such compensation is due;
(V) the failure by the Company to con-
tinue in effect any compensation plan in which the
Executive participates immediately prior to the
Change in Control which is material to the
Executive's total compensation, including but not
limited to the Company's Annual Executive Incen-
tive Compensation Plan, Performance Share Plan,
and Supplemental Executive Retirement Plan, or any
substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has
been made with respect to such plan, or the fail-
ure by the Company to continue the Executive's
participation therein (or in such substitute or
alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits
provided and the level of the Executive's partici-
pation relative to other participants, as existed
at the time of the Change in Control;
(VI) the failure by the Company to con-
tinue to provide the Executive with benefits sub-
stantially similar to those enjoyed by the Execu-
tive under any of the Company's pension, life
insurance, medical, health and accident, or dis-
ability plans in which the Executive was partici-
pating at the time of the Change in Control, the
taking of any action by the Company which would
directly or indirectly materially reduce any of
such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive
at the time of the Change in Control, or the fail-
ure by the Company to provide the Executive with
the number of paid vacation days to which the
Executive is entitled on the basis of years of
service with the Company in accordance with the
Company's normal vacation policy in effect at the
time of the Change in Control; or
(VII) any purported termination of the
Executive's employment which is not effected pur-
suant to a Notice of Termination satisfying the
requirements of Section 11.1; for purposes of this
Agreement, no such purported termination shall be
effective.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder.
(P) "Notice of Termination" shall have the mean-
ing stated in Section 11.1 hereof.
(Q) "Person" shall have the meaning given in Sec-
tion 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof; however, a Person shall
not include (i) the Company or any of its subsidiaries, (ii)
a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsid-
iaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corpo-
ration owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their
ownership of stock of the Company.
(R) "Potential Change in Control" shall be deemed
to have occurred if the conditions set forth in any one of
the following paragraphs shall have been satisfied during
the Term:
(I) the Company enters into an agree-
ment, the consummation of which would result in
the occurrence of a Change in Control;
(II) the Company or any Person publicly
announces an intention to take or to consider
taking actions which, if consummated, would con-
stitute a Change in Control;
(III) any Person (x) is or becomes the
Beneficial Owner, directly or indirectly, (y)
discloses directly or indirectly to the Company
(or publicly) a plan or intention to become the
Beneficial Owner, directly or indirectly, or (z)
makes a filing under the Hart-Scott-Rodino Anti-
trust Improvements Act of 1976, as amended, with
respect to securities to become the Beneficial
Owner, directly or indirectly, of securities of
the Company representing 9.9% or more of the com-
bined voting power of the Company's then outstand-
ing securities; or
(IV) the Board adopts a resolution to
the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(S) "Retirement" shall be deemed the reason for
the termination by the Company or the Executive of the
Executive's employment if such employment is terminated in
accordance with the Company's retirement policy, not includ-
ing early retirement, generally applicable to its salaried
employees, as in effect immediately prior to the Change in
Control, or in accordance with any retirement arrangement
established with the Executive's consent with respect to the
Executive.
(T) "Severance Payments" shall mean those pay-
ments described in Section 10.1 hereof.
(U) "Term" shall have the meaning stated in
Section 3 hereof.
(V) "Total Payments" shall mean those payments
so described in Section 10.2 hereof.
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By Richard P. Fagan
Name: Richard P. Fagan
Title: Senior Vice
President - Management
Services Business Unit
James A. Carrigg
James A. Carrigg
<PAGE>
EXHIBIT 1
COMPETITORS
(1) Central Hudson Gas & Electric Corporation
(2) Consolidated Edison Co. of NY, Inc.
(3) Long Island Lighting Company
(4) Niagara Mohawk Power Corporation
(5) Orange & Rockland Utilities, Inc.
(6) Rochester Gas and Electric Corporation
<PAGE>
EXHIBIT 10-47
SEVERANCE AGREEMENT
THIS AGREEMENT, dated , 1994, is
made by and between New York State Electric & Gas Corporation,
a New York corporation (the "Company"), and ___________ (the
"Executive").
WHEREAS the Company considers it essential to
the best interests of its shareholders to foster the continuous
employment of key management personnel; and
WHEREAS the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many
publicly-held corporations, the possibility of a Change in
Control (as defined in the last Section hereof) exists and that
such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or
distraction of management personnel to the detriment of the
Company and its shareholders; and
WHEREAS the Board has determined that
appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the
Company's management, including the Executive, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:
1. Defined Terms. The definitions of
capitalized terms used in this Agreement are provided in the
last Section hereof.
2. Term of Agreement. This Agreement
shall commence on the date hereof and shall continue in effect
through December 31, 1996; provided, however, that commencing
on January 1, 1996 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one
additional year unless, not later than September 30 of the
preceding year, the Company (upon authorization by the Board)
or the Executive shall have given notice not to extend this
Agreement or a Change in Control shall have occurred prior to
such January 1; provided, however, if a Change in Control shall
have occurred during the term of this Agreement, this Agreement
shall continue in effect until at least the end of the
Change-in-Control Protective Period.
3. Company's Covenants Summarized. In
order to induce the Executive to remain in the employ of the
Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the
"Severance Payments" described in Section 6.1 hereof and the
other payments and benefits described herein in the event the
Executive's employment with the Company is terminated following
a Change in Control and during the term of this Agreement.
Except as provided by the second sentence of Section 6.1 hereof
or the last sentence of Section 9.1 hereof, no amount or
benefit shall be payable under this Agreement unless there
shall have been a termination of the Executive's employment
with the Company following a Change in Control. This Agreement
shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in
writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the
Company.
4. The Executive's Covenants. The
Executive agrees that, subject to the terms and conditions of
this Agreement, in the event of a Potential Change in Control
during the term of this Agreement, the Executive will remain in
the employ of the Company until the earliest of (i) a date
which is two (2) years from the date of such Potential Change
of Control, (ii) the date of a Change in Control, (iii) the
date of termination by the Executive of the
Executive's employment for Good Reason, by reason of death,
Disability or Retirement, or (iv) the termination by the Company
of the Executive's employment for any reason.
5. Compensation Other Than Severance
Payments.
5.1 Following a Change in Control and
during the term of this Agreement, during any period that the
Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's base
salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained
by the Company during such period, until the Executive's
employment is terminated by the Company for Disability;
provided, however, that such base salary payments shall be
reduced by the sum of the amounts, if any, payable to the
Executive at or prior to the time of any such base salary
payment under disability benefit plans of the Company or under
the Social Security disability insurance program, which amounts
were not previously applied to reduce any such base salary
payments.
5.2 If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the term of this Agreement, the Company shall pay the
Executive's base salary to the Executive through the Date of
Termination at the rate in effect at the time the Notice of
Termination is given, together with all compensation and
benefits payable to the Executive through the Date of
Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during
such period.
5.3 If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the term of this Agreement, the Company shall pay the
Executive's normal post-termination compensation and benefits
to the Executive as such payments become due. Subject to
Section 6.1 hereof, such post-termination compensation and
benefits shall be determined under, and paid in accordance
with, the Company's retirement, insurance and other
compensation or benefit plans, programs and arrangements (other
than this Agreement).
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, the
Company shall pay the Executive the payments described in this
Section 6.1 (the "Severance Payments") upon the termination of
the Executive's employment following a Change in Control and
during the term of this Agreement, in addition to the payments
and benefits described in Section 5 hereof, unless such
termination is (i) by the Company for Cause, (ii) by reason of
death, Disability or Retirement, or (iii) by the Executive
without Good Reason. For purposes of the immediately preceding
sentence, if a termination of the Executive's employment occurs
prior to a Change in Control, but following a Potential Change
in Control in which a Person has entered into an agreement with
the Company the consummation of which will constitute a Change
in Control, such termination shall be deemed to have followed a
Change in Control and to have been (i) by the Company without
Cause, if the Executive's employment is terminated without
Cause at the direction of such Person, or (ii) by the Executive
with Good Reason, if the Executive terminates his employment
with Good Reason and the act (or failure to act) which
constitutes Good Reason occurs following such Potential Change
in Control and at the direction of such Person.
(A) In lieu of any further salary
payments to the Executive for periods subsequent to the
Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the
Company shall pay to the Executive a lump sum severance
payment, in cash, equal to one and one-half (1-1/2)
times the sum of (i) the higher of the Executive's
annual base salary in effect immediately prior to the
occurrence of the event or circumstance upon which the
Notice of Termination is based or the Executive's
annual base salary in effect immediately prior to the
Change in Control, and (ii) the higher of (x) the
amount paid to the Executive pursuant to the Company's
Annual Executive Incentive Compensation Plan (or its
successor plan) in the fiscal year preceding that in
which the Date of Termination occurs, or (y) the
average amount so paid in the three fiscal years
preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of
the Company's Annual Executive Incentive Compensation
Plan (but provided that there shall be no duplication
of the benefits thereunder), the Company shall pay to
the Executive a lump sum amount, in cash, equal to the
sum of (i) any incentive compensation which has been
allocated or awarded to the Executive for a completed
fiscal year preceding the Date of Termination under the
Annual Executive Incentive Compensation Plan but has
not yet been either (x) paid (pursuant to Section 5.2
hereof or otherwise) or (y) deferred pursuant to the
Deferred Compensation Plan for Salaried Employees, and
(ii) a pro rata portion to the Date of Termination of
the aggregate value of any contingent incentive
compensation award to the Executive for any uncompleted
fiscal year under the Annual Executive Incentive
Compensation Plan calculated as to each such award by
(i) assuming the Threshold Measure of such plan has
been met and (ii) using such adjustments to the Variable
Measure as the Committee (as defined in such plan) may
have provided and the Board may have approved prior to
the Change in Control, in order to produce an
appropriate pro-rata award for such fiscal year;
(C) In determining the retirement
benefits to which the Executive is entitled under the
Company's Supplemental Executive Retirement Plan, the
Executive shall be given an additional one and one-half
(1-1/2) years of service credit at the Executive's
highest annual rate of compensation during the twelve
(12) months immediately preceding the Date of
Termination and shall be deemed to be one and one-half
(1-1/2) years older than he is; such benefits shall be
determined without regard to any amendment to the
Supplemental Executive Retirement Plan made subsequent
to a Change in Control and on or prior to the Date of
Termination, which amendment adversely affects in any
manner the computation of retirement benefits
thereunder.
(D) For an eighteen (18) month period
after the Date of Termination, the Company shall arrange
to provide the Executive with life, disability, accident
and health insurance benefits substantially similar to
those which the Executive is receiving immediately prior
to the Notice of Termination (without giving effect to
any reduction in such benefits subsequent to a Change in
Control if such reduction constitutes Good Reason).
Benefits otherwise receivable by the Executive pursuant
to this Section 6.1(D) shall be reduced to the extent
comparable benefits are actually received by or made
available to the Executive without cost during the
eighteen (18) month period following the Executive's
termination of employment (and any such benefits
actually received by the Executive shall be reported to
the Company by the Executive). If the benefits provided
to the Executive under this Section 6.1(D) shall result
in a decrease, pursuant to Section 6.2, in the Severance
Payments and these Section 6.1(D) benefits are
thereafter reduced pursuant to the immediately preceding
sentence because of the receipt of comparable benefits,
the Company shall, at the time of such reduction, pay to
the Executive the lesser of (a) the amount of the
decrease made in the Severance Payments pursuant to
Section 6.2, or (b) the maximum amount which can be paid
to the Executive without being, or causing any other
payment to be, nondeductible by reason of section 280G
of the Code.
(E) For a period equal to the lesser of
(i) the period from the Date of Termination to the date
on which the Executive commences employment with another
employer or (ii) an eighteen (18) month period
immediately following the Date of Termination, the
Company shall arrange to provide the Executive with
outplacement counselling; provided, however, that the
aggregate cost of such counselling shall not exceed five
percent (5%) of the Executive's annual base salary in
effect immediately prior to the occurrence of the event
or circumstance upon which the Notice of Termination is
based.
6.2 Notwithstanding any other provisions of
this Agreement, in the event that any payment or benefit
received or to be received by the Executive in connection with
a Change in Control or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (all such
payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") would be subject (in whole
or part), to the Excise Tax, then the Severance Payments shall
be reduced to the extent necessary so that no portion of the
Total Payments is subject to the Excise Tax (after taking into
account any reduction in the Total Payments provided by reason
of section 280G of the Code in such other plan, arrangement or
agreement) if (A) the net amount of such Total Payments, as so
reduced, (and after deduction of the net amount of federal,
state and local income tax on such reduced Total Payments) is
greater than (B) the excess of (i) the net amount of such Total
Payments, without reduction (but after deduction of the net
amount of federal, state and local income tax on such Total
Payments), over (ii) the amount of Excise Tax to which the
Executive would be subject in respect of such Total Payments.
For purposes of determining whether and the extent to which the
Total Payments will be subject to the Excise Tax, (i) no
portion of the Total Payments the receipt or enjoyment of which
the Executive shall have effectively waived in writing prior to
the Date of Termination shall be taken into account, (ii) no
portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Company does not
constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code (including by reason of section
280G(b)(4)(A) of the Code), and, in calculating the Excise Tax,
no portion of such Total Payments shall be taken into account
which constitutes reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the Base Amount allocable to such reasonable
compensation, and (iii) the value of any non-cash benefit or
any deferred payment or benefit included in the Total Payments
shall be determined by the Company in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. Prior
to the payment date set forth in Section 6.3 hereof, the
Company shall provide the Executive with its calculation of the
amounts referred to in this Section and such supporting
materials as are reasonably necessary for the Executive to
evaluate the Company's calculations. If the Executive objects
to the Company's calculations, the Company shall pay to the
Executive such portion of the Severance Payments (up to 100%
thereof) as the Executive determines is necessary to result in
the Executive receiving the greater of clauses (A) and (B) of
this Section.
6.3 The payments provided for in Section
6.1 hereof (other than Section 6.1(C), (D) and (E)) shall be
made not later than the fifth day following the Date of
Termination, provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in
Section 6.2 hereof, cannot be finally determined on or before
such day, the Company shall pay to the Executive on such day an
estimate, as determined by the Executive, of the minimum amount
of such payments to which the Executive is clearly entitled and
shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no
event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to
the Executive, payable on the fifth (5th) business day after
demand by the Company (together with interest at the rate
provided in section 1274(b)(2)(B) of the Code).
6.4 The Company also shall pay to the
Executive all legal fees and expenses incurred by the Executive
as a result of a termination which entitles the Executive to
the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5)
business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
7. Termination Procedures.
7.1 Notice of Termination. After a Change in
Control and during the term of this Agreement, any purported
termination of the Executive's employment (other than by reason
of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which
was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the
good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of
Cause herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of
Termination", with respect to any purported termination of the
Executive's employment after a Change in Control and during the
term of this Agreement, shall mean (i) if the Executive's
employment is terminated by his death, the date of his death,
(ii) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to
the full-time performance of the Executive's duties during such
thirty (30) day period), and (iii) if the Executive's
employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in
the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is
given).
8. No Mitigation. The Company agrees that, if
the Executive's employment by the Company is terminated during
the term of this Agreement, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts
payable to the Executive by the Company pursuant to Section 6.
Further, the amount of any payment or benefit provided for in
Section 6 (other than Section 6.1(D)) shall not be reduced by
any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by the Executive to
the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by
law upon any successor to the Company, 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 expressly assume 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in
Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. For the purpose of this
Agreement, notices and all other communications provided for in
the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to
such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
New York State Electric & Gas Corporation
Post Office Box 3607
Binghamton, NY 13902-3607
Attention: Corporate Secretary
To the Executive:
_______________________
_______________________
_______________________
11. Miscellaneous. No provision of this
Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and
signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New
York. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions
to such sections. There shall be withheld from any payments
provided for hereunder any amounts required to be withheld
under federal, state or local law and any additional
withholding amounts to which the Executive has agreed. The
obligations of the Company and the Executive under Sections 6
and 7 shall survive the expiration of the term of this
Agreement.
12. Validity. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be
executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one
and the same instrument.
14. Settlement of Disputes; Arbitration. All
claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing
and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board
shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board
within sixty (60) days after notification by the Board that the
Executive's claim has been denied. To the extent permitted by
applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Binghamton, New York in
accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
15. Definitions. For purposes of this
Agreement, the following terms shall have the meanings
indicated below:
(A) "Base Amount" shall have the meaning
defined in section 280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning
defined in Rule 13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors
of the Company.
(D) "Cause" for termination by the Company of
the Executive's employment, after any Change in Control (or
after any Potential Change in Control under the circumstances
described in the second sentence of Section 6.1 hereof), shall
mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to
Section 7.1) after a written demand for substantial performance
is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the
Executive in conduct which is demonstrably and materially
injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable
belief that the Executive's act, or failure to act, was in the
best interest of the Company.
(E) A "Change in Control" shall be deemed to
have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(I) any Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by such Person any
securities acquired directly from the Company or
its affiliates) representing 25% or more of the
combined voting power of the Company's then
outstanding securities; or
(II) during any period of two
consecutive years (not including any period
prior to the execution of this Agreement),
individuals who at the beginning of such period
constitute the Board and any new director (other
than a director designated by a Person who has
entered into an agreement with the Company to
effect a transaction described in paragraph (I),
(III) or (IV) of this Change in Control
definition) whose election by the Board or
nomination for election by the Company's
stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors at the
beginning of the period or whose election or
nomination for election was previously so
approved, cease for any reason to constitute a
majority thereof; or
(III) the shareholders of the Company
approve a merger or consolidation of the Company
with any other corporation, other than (i) a
merger or consolidation which would result in the
voting securities of the Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity), in combination with the ownership of any
trustee or other fiduciary holding securities
under an employee benefit plan of the Company,
at least 75% of the combined voting power of the
voting securities of the Company or such
surviving entity outstanding immediately after
such merger or consolidation, or (ii) a merger
or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no Person acquires more
than 50% of the combined voting power of the
Company's then outstanding securities; or
(IV) the shareholders of the Company
approve a plan of complete liquidation of the
Company or an agreement for the sale or
disposition by the Company of all or
substantially all the Company's assets.
(F) "Change-in-Control Protective Period"
shall mean the period from the occurrence of a Change in
Control until the later of the second anniversary of such
Change in Control or, if such Change in Control shall be caused
by the shareholder approval of a merger or consolidation
described in Section 15(E)(III) hereof, the second anniversary
of the consummation of such merger or consolidation.
(G) "Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(H) "Company" shall mean New York State
Electric & Gas Corporation and any successor to its business
and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise (except in
determining, under Section 15(E) hereof, whether or not any
Change in Control of the Company has occurred in connection
with such succession).
(I) "Date of Termination" shall have the
meaning stated in Section 7.2 hereof.
(J) "Disability" shall be deemed the reason
for the termination by the Company of the Executive's
employment, if, as a result of the Executive's incapacity due
to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties
with the Company for the maximum number of months applicable to
the Executive under the Company's Disability Policy for
Salaried Employees (but in no event for less than six (6)
consecutive months), the Company shall have given the Executive
a Notice of Termination for Disability, and, within thirty (30)
days after such Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the
Executive's duties.
(K) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
(L) "Excise Tax" shall mean any excise tax
imposed under section 4999 of the Code.
(M) "Executive" shall mean the individual
named in the first paragraph of this Agreement.
(N) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the
occurrence (without the Executive's express written consent)
after any Change in Control, or after any Potential Change in
Control under the circumstances described in the second
sentence of Section 6.1 hereof (treating all references in
paragraphs (I) through (VII) below to a "Change in Control" as
references to a "Potential Change in Control"), of any one of
the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (I), (V), (VI) or (VII) below, such act
or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of
any duties inconsistent with the Executive's
status as an executive officer of the Company or
a substantial adverse alteration in the nature
or status of the Executive's responsibilities
from those in effect immediately prior to the
Change in Control (other than any such
alteration primarily attributable to the fact
that the Company may no longer be a public
company);
(II) a reduction by the Company in the
Executive's annual base salary as in effect on
the date hereof or as the same may be increased
from time to time (except for across-the-board
salary reductions similarly affecting all
executives of the Company and all executives of
any Person in control of the Company);
(III) the relocation of the Company's
principal executive offices to a location more
than fifty (50) miles from the location of such
offices immediately prior to the Change in
Control or the Company's requiring the Executive
to be based anywhere other than the Company's
principal executive offices except for required
travel on the Company's business to an extent
substantially consistent with the Executive's
present business travel obligations;
(IV) the failure by the Company,
without the Executive's consent, to pay to the
Executive any portion of the Executive's current
compensation (except pursuant to an across-the-
board compensation deferral similarly affecting
all executives of the Company and all executives
of any Person in control of the Company), or to
pay to the Executive any portion of an
installment of deferred compensation under any
deferred compensation program of the Company,
within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to
continue in effect any compensation plan in
which the Executive participates immediately
prior to the Change in Control which is material
to the Executive's total compensation, including
but not limited to the Company's Annual
Executive Incentive Compensation Plan,
Performance Share Plan, and Supplemental
Executive Retirement Plan, or any substitute
plans adopted prior to the Change in Control,
unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure
by the Company to continue the Executive's
participation therein (or in such substitute or
alternative plan) on a basis not materially less
favorable, both in terms of the amount of
benefits provided and the level of the
Executive's participation relative to other
participants, as existed at the time of the
Change in Control;
(VI) the failure by the Company to
continue to provide the Executive with benefits
substantially similar to those enjoyed by the
Executive under any of the Company's pension,
life insurance, medical, health and accident,
or disability plans in which the Executive was
participating at the time of the Change in
Control, the taking of any action by the Company
which would directly or indirectly materially
reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed
by the Executive at the time of the Change in
Control, or the failure by the Company to provide
the Executive with the number of paid vacation
days to which the Executive is entitled on the
basis of years of service with the Company in
accordance with the Company's normal vacation
policy in effect at the time of the Change in
Control; or
(VII) any purported termination of the
Executive's employment which is not effected
pursuant to a Notice of Termination satisfying
the requirements of Section 7.1; for purposes of
this Agreement, no such purported termination
shall be effective.
The Executive's right to terminate the
Executive's employment for Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(O) "Notice of Termination" shall have the
meaning stated in Section 7.1 hereof.
(P) "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof; however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company.
(Q) "Potential Change in Control" shall be
deemed to have occurred if the conditions set forth in any one
of the following paragraphs shall have been satisfied:
(I) the Company enters into an
agreement, the consummation of which would
result in the occurrence of a Change in Control;
(II) the Company or any Person publicly
announces an intention to take or to consider
taking actions which, if consummated, would
constitute a Change in Control;
(III) any Person (x) is or becomes the
Beneficial Owner, directly or indirectly, (y)
discloses directly or indirectly to the Company
(or publicly) a plan or intention to become the
Beneficial Owner, directly or indirectly, or (z)
makes a filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended,
with respect to securities to become the
Beneficial Owner, directly or indirectly, of
securities of the Company representing 9.9% or
more of the combined voting power of the
Company's then outstanding securities; or
(IV) the Board adopts a resolution to
the effect that, for purposes of this Agreement,
a Potential Change in Control has occurred.
(R) "Retirement" shall be deemed the reason
for the termination by the Company or the Executive of the
Executive's employment if such employment is terminated in
accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried
employees, as in effect immediately prior to the Change in
Control, or in accordance with any retirement arrangement
established with the Executive's consent with respect to the
Executive.
(S) "Severance Payments" shall mean those
payments described in Section 6.1 hereof.
(T) "Total Payments" shall mean those payments
so described in Section 6.2 hereof.
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By____________________________
Name:
Title:
____________________________
[Name of Executive]
<PAGE>
EXHIBIT 10-48
SEVERANCE AGREEMENT
THIS AGREEMENT, dated , 1994, is
made by and between New York State Electric & Gas Corporation,
a New York corporation (the "Company"), and ___________ (the
"Executive").
WHEREAS the Company considers it essential to
the best interests of its shareholders to foster the continuous
employment of key management personnel; and
WHEREAS the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many
publicly-held corporations, the possibility of a Change in
Control (as defined in the last Section hereof) exists and that
such possibility, and the uncertainty and questions which it
may raise among management, may result in the departure or
distraction of management personnel to the detriment of the
Company and its shareholders; and
WHEREAS the Board has determined that
appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the
Company's management, including the Executive, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a
Change in Control;
NOW THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the Company and the
Executive hereby agree as follows:
1. Defined Terms. The definitions of
capitalized terms used in this Agreement are provided in the
last Section hereof.
2. Term of Agreement. This Agreement
shall commence on the date hereof and shall continue in effect
through December 31, 1996; provided, however, that commencing
on January 1, 1996 and each January 1 thereafter, the term of
this Agreement shall automatically be extended for one
additional year unless, not later than September 30 of the
preceding year, the Company (upon authorization by the Board)
or the Executive shall have given notice not to extend this
Agreement or a Change in Control shall have occurred prior to
such January 1; provided, however, if a Change in Control shall
have occurred during the term of this Agreement, this Agreement
shall continue in effect until at least the end of the
Change-in-Control Protective Period.
3. Company's Covenants Summarized. In
order to induce the Executive to remain in the employ of the
Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the
"Severance Payments" described in Section 6.1 hereof and the
other payments and benefits described herein in the event the
Executive's employment with the Company is terminated following
a Change in Control and during the term of this Agreement.
Except as provided by the second sentence of Section 6.1 hereof
or the last sentence of Section 9.1 hereof, no amount or
benefit shall be payable under this Agreement unless there
shall have been a termination of the Executive's employment
with the Company following a Change in Control. This Agreement
shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in
writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the
Company.
4. The Executive's Covenants. The
Executive agrees that, subject to the terms and conditions of
this Agreement, in the event of a Potential Change in Control
during the term of this Agreement, the Executive will remain in
the employ of the Company until the earliest of (i) a date
which is two (2) years from the date of such Potential Change
of Control, (ii) the date of a Change in Control, (iii) the
date of termination by the Executive of the Executive's
employment for Good Reason, by reason of death, Disability or
Retirement, or (iv) the termination by the Company of the
Executive's employment for any reason.
5. Compensation Other Than Severance
Payments.
5.1 Following a Change in Control and
during the term of this Agreement, during any period that the
Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's base
salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained
by the Company during such period, until the Executive's
employment is terminated by the Company for Disability;
provided, however, that such base salary payments shall be
reduced by the sum of the amounts, if any, payable to the
Executive at or prior to the time of any such base salary
payment under disability benefit plans of the Company or under
the Social Security disability insurance program, which amounts
were not previously applied to reduce any such base salary
payments.
5.2 If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the term of this Agreement, the Company shall pay the
Executive's base salary to the Executive through the Date of
Termination at the rate in effect at the time the Notice of
Termination is given, together with all compensation and
benefits payable to the Executive through the Date of
Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during
such period.
5.3 If the Executive's employment shall be
terminated for any reason following a Change in Control and
during the term of this Agreement, the Company shall pay the
Executive's normal post-termination compensation and benefits
to the Executive as such payments become due. Subject to
Section 6.1 hereof, such post-termination compensation and
benefits shall be determined under, and paid in accordance
with, the Company's retirement, insurance and other
compensation or benefit plans, programs and arrangements (other
than this Agreement).
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, the
Company shall pay the Executive the payments described in this
Section 6.1 (the "Severance Payments") upon the termination of
the Executive's employment following a Change in Control and
during the term of this Agreement, in addition to the payments
and benefits described in Section 5 hereof, unless such
termination is (i) by the Company for Cause, (ii) by reason of
death, Disability or Retirement, or (iii) by the Executive
without Good Reason. For purposes of the immediately preceding
sentence, if a termination of the Executive's employment occurs
prior to a Change in Control, but following a Potential Change
in Control in which a Person has entered into an agreement with
the Company the consummation of which will constitute a Change
in Control, such termination shall be deemed to have followed a
Change in Control and to have been (i) by the Company without
Cause, if the Executive's employment is terminated without
Cause at the direction of such Person, or (ii) by the Executive
with Good Reason, if the Executive terminates his employment
with Good Reason and the act (or failure to act) which
constitutes Good Reason occurs following such Potential Change
in Control and at the direction of such Person.
(A) In lieu of any further salary
payments to the Executive for periods subsequent to the
Date of Termination and in lieu of any severance benefit
otherwise payable to the Executive, the Company shall
pay to the Executive a lump sum severance payment, in
cash, equal to one (1) times the sum of (i) the higher
of the Executive's annual base salary in effect
immediately prior to the occurrence of the event or
circumstance upon which the Notice of Termination is
based or the Executive's annual base salary in effect
immediately prior to the Change in Control, and (ii) the
higher of (x) the amount paid to the Executive pursuant
to the Company's Annual Executive Incentive Compensation
Plan (or its successor plan) in the fiscal year preceding
that in which the Date of Termination occurs, or (y) the
average amount so paid in the three fiscal years
preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of the
Company's Annual Executive Incentive Compensation Plan
(but provided that there shall be no duplication of the
benefits thereunder), the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of
(i) any incentive compensation which has been allocated
or awarded to the Executive for a completed fiscal year
preceding the Date of Termination under the Annual
Executive Incentive Compensation Plan but has not yet
been either (x) paid (pursuant to Section 5.2 hereof or
otherwise) or (y) deferred pursuant to the Deferred
Compensation Plan for Salaried Employees, and (ii) a pro
rata portion to the Date of Termination of the aggregate
value of any contingent incentive compensation award to
the Executive for any uncompleted fiscal year under the
Annual Executive Incentive Compensation Plan calculated
as to each such award by (i) assuming the Threshold
Measure of such plan has been met and (ii) using such
adjustments to the Variable Measure as the Committee (as
defined in such plan) may have provided and the Board
may have approved prior to the Change in Control, in
order to produce an appropriate pro-rata award for such
fiscal year;
(C) In determining the retirement
benefits to which the Executive is entitled under the
Company's Supplemental Executive Retirement Plan, the
Executive shall be given an additional one (1) year of
service credit at the Executive's highest annual rate of
compensation during the twelve (12) months immediately
preceding the Date of Termination and shall be deemed to
be one (1) year older than he is; such benefits shall be
determined without regard to any amendment to the
Supplemental Executive Retirement Plan made subsequent to
a Change in Control and on or prior to the Date of
Termination, which amendment adversely affects in any
manner the computation of retirement benefits thereunder.
(D) For a twelve (12) month period after
the Date of Termination, the Company shall arrange to
provide the Executive with life, disability, accident and
health insurance benefits substantially similar to those
which the Executive is receiving immediately prior to the
Notice of Termination (without giving effect to any
reduction in such benefits subsequent to a Change in
Control if such reduction constitutes Good Reason).
Benefits otherwise receivable by the Executive pursuant
to this Section 6.1(D) shall be reduced to the extent
comparable benefits are actually received by or made
available to the Executive without cost during the
twelve (12) month period following the Executive's
termination of employment (and any such benefits actually
received by the Executive shall be reported to the
Company by the Executive). If the benefits provided to
the Executive under this Section 6.1(D) shall result in
a decrease, pursuant to Section 6.2, in the Severance
Payments and these Section 6.1(D) benefits are thereafter
reduced pursuant to the immediately preceding sentence
because of the receipt of comparable benefits, the
Company shall, at the time of such reduction, pay to the
Executive the lesser of (a) the amount of the decrease
made in the Severance Payments pursuant to Section 6.2,
or (b) the maximum amount which can be paid to the
Executive without being, or causing any other payment to
be, nondeductible by reason of section 280G of the Code.
(E) For a period equal to the lesser of
(i) the period from the Date of Termination to the date
on which the Executive commences employment with another
employer or (ii) a twelve (12) month period immediately
following the Date of Termination, the Company shall
arrange to provide the Executive with outplacement
counselling; provided, however, that the aggregate cost
of such counselling shall not exceed five percent (5%)
of the Executive's annual base salary in effect
immediately prior to the occurrence of the event or
circumstance upon which the Notice of Termination is
based.
6.2 Notwithstanding any other provisions of
this Agreement, in the event that any payment or benefit
received or to be received by the Executive in connection with
a Change in Control or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (all such
payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") would be subject (in whole
or part), to the Excise Tax, then the Severance Payments shall
be reduced to the extent necessary so that no portion of the
Total Payments is subject to the Excise Tax (after taking into
account any reduction in the Total Payments provided by reason
of section 280G of the Code in such other plan, arrangement or
agreement) if (A) the net amount of such Total Payments, as so
reduced, (and after deduction of the net amount of federal,
state and local income tax on such reduced Total Payments) is
greater than (B) the excess of (i) the net amount of such Total
Payments, without reduction (but after deduction of the net
amount of federal, state and local income tax on such Total
Payments), over (ii) the amount of Excise Tax to which the
Executive would be subject in respect of such Total Payments.
For purposes of determining whether and the extent to which the
Total Payments will be subject to the Excise Tax, (i) no
portion of the Total Payments the receipt or enjoyment of which
the Executive shall have effectively waived in writing prior to
the Date of Termination shall be taken into account, (ii) no
portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Company does not
constitute a "parachute payment" within the meaning of section
280G(b)(2) of the Code (including by reason of section
280G(b)(4)(A) of the Code), and, in calculating the Excise Tax,
no portion of such Total Payments shall be taken into account
which constitutes reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the
Code, in excess of the Base Amount allocable to such reasonable
compensation, and (iii) the value of any non-cash benefit or
any deferred payment or benefit included in the Total Payments
shall be determined by the Company in accordance with the
principles of sections 280G(d)(3) and (4) of the Code. Prior
to the payment date set forth in Section 6.3 hereof, the
Company shall provide the Executive with its calculation of the
amounts referred to in this Section and such supporting
materials as are reasonably necessary for the Executive to
evaluate the Company's calculations. If the Executive objects
to the Company's calculations, the Company shall pay to the
Executive such portion of the Severance Payments (up to 100%
thereof) as the Executive determines is necessary to result in
the Executive receiving the greater of clauses (A) and (B) of
this Section.
6.3 The payments provided for in Section 6.1
hereof (other than Section 6.1(C), (D) and (E)) shall be made
not later than the fifth day following the Date of Termination,
provided, however, that if the amounts of such payments, and
the limitation on such payments set forth in Section 6.2
hereof, cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as
determined by the Executive, of the minimum amount of such
payments to which the Executive is clearly entitled and shall
pay the remainder of such payments (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code) as soon
as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination.
In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive,
payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in section
1274(b)(2)(B) of the Code).
6.4 The Company also shall pay to the
Executive all legal fees and expenses incurred by the Executive
as a result of a termination which entitles the Executive to
the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in
seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5)
business days after delivery of the Executive's written
requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
7. Termination Procedures.
7.1 Notice of Termination. After a Change in
Control and during the term of this Agreement, any purported
termination of the Executive's employment (other than by reason
of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set 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. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which
was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the
good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of
Cause herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of
Termination", with respect to any purported termination of the
Executive's employment after a Change in Control and during the
term of this Agreement, shall mean (i) if the Executive's
employment is terminated by his death, the date of his death,
(ii) if the Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to
the full-time performance of the Executive's duties during such
thirty (30) day period), and (iii) if the Executive's
employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in
the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is
given).
8. No Mitigation. The Company agrees that, if
the Executive's employment by the Company is terminated during
the term of this Agreement, the Executive is not required to
seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to
Section 6. Further, the amount of any payment or benefit
provided for in Section 6 (other than Section 6.1(D)) shall not
be reduced by any compensation earned by the Executive as the
result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by
the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by
law upon any successor to the Company, 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 expressly assume 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change in
Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. For the purpose of this
Agreement, notices and all other communications provided for in
the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to
such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
New York State Electric & Gas Corporation
Post Office Box 3607
Binghamton, NY 13902-3607
Attention: Corporate Secretary
To the Executive:
___________________________
___________________________
___________________________
11. Miscellaneous. No provision of this
Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and
signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at
any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New
York. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions
to such sections. There shall be withheld from any payments
provided for hereunder any amounts required to be withheld
under federal, state or local law and any additional
withholding amounts to which the Executive has agreed. The
obligations of the Company and the Executive under Sections 6
and 7 shall survive the expiration of the term of this
Agreement.
12. Validity. The invalidity or
unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be
executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one
and the same instrument.
14. Settlement of Disputes; Arbitration. All
claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing
and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board
shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow
the Executive to appeal to the Board a decision of the Board
within sixty (60) days after notification by the Board that the
Executive's claim has been denied. To the extent permitted by
applicable law, any further dispute or controversy arising
under or in connection with this Agreement shall be settled
exclusively by arbitration in Binghamton, New York in
accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
15. Definitions. For purposes of this
Agreement, the following terms shall have the meanings
indicated below:
(A) "Base Amount" shall have the meaning
defined in section 280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning
defined in Rule 13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors
of the Company.
(D) "Cause" for termination by the Company of
the Executive's employment, after any Change in Control (or
after any Potential Change in Control under the circumstances
described in the second sentence of Section 6.1 hereof), shall
mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to
Section 7.1) after a written demand for substantial performance
is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the
Executive in conduct which is demonstrably and materially
injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable
belief that the Executive's act, or failure to act, was in the
best interest of the Company.
(E) A "Change in Control" shall be deemed to
have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(I) any Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in
the securities beneficially owned by such Person
any securities acquired directly from the Company
or its affiliates) representing 25% or more of
the combined voting power of the Company's then
outstanding securities; or
(II) during any period of two
consecutive years (not including any period prior
to the execution of this Agreement), individuals
who at the beginning of such period constitute
the Board and any new director (other than a
director designated by a Person who has entered
into an agreement with the Company to effect a
transaction described in paragraph (I), (III) or
(IV) of this Change in Control definition) whose
election by the Board or nomination for election
by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the
directors then still in office who either were
directors at the beginning of the period or whose
election or nomination for election was
previously so approved, cease for any reason to
constitute a majority thereof; or
(III) the shareholders of the Company
approve a merger or consolidation of the Company
with any other corporation, other than (i) a
merger or consolidation which would result in the
voting securities of the Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being
converted into voting securities of the surviving
entity), in combination with the ownership of any
trustee or other fiduciary holding securities
under an employee benefit plan of the Company, at
least 75% of the combined voting power of the
voting securities of the Company or such
surviving entity outstanding immediately after
such merger or consolidation, or (ii) a merger or
consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no Person acquires more
than 50% of the combined voting power of the
Company's then outstanding securities; or
(IV) the shareholders of the Company
approve a plan of complete liquidation of the
Company or an agreement for the sale or
disposition by the Company of all or
substantially all the Company's assets.
(F) "Change-in-Control Protective Period"
shall mean the period from the occurrence of a Change in
Control until the later of the second anniversary of such
Change in Control or, if such Change in Control shall be caused
by the shareholder approval of a merger or consolidation
described in Section 15(E)(III) hereof, the second anniversary
of the consummation of such merger or consolidation.
(G) "Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(H) "Company" shall mean New York State
Electric & Gas Corporation and any successor to its business
and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise (except in
determining, under Section 15(E) hereof, whether or not any
Change in Control of the Company has occurred in connection
with such succession).
(I) "Date of Termination" shall have the
meaning stated in Section 7.2 hereof.
(J) "Disability" shall be deemed the reason
for the termination by the Company of the Executive's
employment, if, as a result of the Executive's incapacity due
to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties
with the Company for the maximum number of months applicable to
the Executive under the Company's Disability Policy for
Salaried Employees (but in no event for less than six (6)
consecutive months), the Company shall have given the Executive
a Notice of Termination for Disability, and, within thirty (30)
days after such Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the
Executive's duties.
(K) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
(L) "Excise Tax" shall mean any excise tax
imposed under section 4999 of the Code.
(M) "Executive" shall mean the individual
named in the first paragraph of this Agreement.
(N) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the
occurrence (without the Executive's express written consent)
after any Change in Control, or after any Potential Change in
Control under the circumstances described in the second
sentence of Section 6.1 hereof (treating all references in
paragraphs (I) through (VII) below to a "Change in Control" as
references to a "Potential Change in Control"), of any one of
the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act
described in paragraph (I), (V), (VI) or (VII) below, such act
or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of
any duties inconsistent with the Executive's
status as an executive officer of the Company or
a substantial adverse alteration in the nature
or status of the Executive's responsibilities
from those in effect immediately prior to the
Change in Control (other than any such alteration
primarily attributable to the fact that the
Company may no longer be a public company);
(II) a reduction by the Company in the
Executive's annual base salary as in effect on
the date hereof or as the same may be increased
from time to time (except for across-the-board
salary reductions similarly affecting all
executives of the Company and all executives of
any Person in control of the Company);
(III) the relocation of the Company's
principal executive offices to a location more
than fifty (50) miles from the location of such
offices immediately prior to the Change in
Control or the Company's requiring the Executive
to be based anywhere other than the Company's
principal executive offices except for required
travel on the Company's business to an extent
substantially consistent with the Executive's
present business travel obligations;
(IV) the failure by the Company, without
the Executive's consent, to pay to the Executive
any portion of the Executive's current
compensation (except pursuant to an across-the-
board compensation deferral similarly affecting
all executives of the Company and all executives
of any Person in control of the Company), or to
pay to the Executive any portion of an
installment of deferred compensation under any
deferred compensation program of the Company,
within seven (7) days of the date such
compensation is due;
(V) the failure by the Company to
continue in effect any compensation plan in which
the Executive participates immediately prior to
the Change in Control which is material to the
Executive's total compensation, including but not
limited to the Company's Annual Executive
Incentive Compensation Plan, Performance Share
Plan, and Supplemental Executive Retirement Plan,
or any substitute plans adopted prior to the
Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to
such plan, or the failure by the Company to
continue the Executive's participation therein
(or in such substitute or alternative plan) on a
basis not materially less favorable, both in
terms of the amount of benefits provided and the
level of the Executive's participation relative
to other participants, as existed at the time of
the Change in Control;
(VI) the failure by the Company to
continue to provide the Executive with benefits
substantially similar to those enjoyed by the
Executive under any of the Company's pension,
life insurance, medical, health and accident, or
disability plans in which the Executive was
participating at the time of the Change in
Control, the taking of any action by the Company
which would directly or indirectly materially
reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed
by the Executive at the time of the Change in
Control, or the failure by the Company to provide
the Executive with the number of paid vacation
days to which the Executive is entitled on the
basis of years of service with the Company in
accordance with the Company's normal vacation
policy in effect at the time of the Change in
Control; or
(VII) any purported termination of the
Executive's employment which is not effected
pursuant to a Notice of Termination satisfying
the requirements of Section 7.1; for purposes of
this Agreement, no such purported termination
shall be effective.
The Executive's right to terminate the
Executive's employment for Good Reason shall not be affected by
the Executive's incapacity due to physical or mental illness.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
(O) "Notice of Termination" shall have the
meaning stated in Section 7.1 hereof.
(P) "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof; however, a Person shall not
include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock
of the Company.
(Q) "Potential Change in Control" shall be
deemed to have occurred if the conditions set forth in any one
of the following paragraphs shall have been satisfied:
(I) the Company enters into an
agreement, the consummation of which would result
in the occurrence of a Change in Control;
(II) the Company or any Person publicly
announces an intention to take or to consider
taking actions which, if consummated, would
constitute a Change in Control;
(III) any Person (x) is or becomes the
Beneficial Owner, directly or indirectly, (y)
discloses directly or indirectly to the Company
(or publicly) a plan or intention to become the
Beneficial Owner, directly or indirectly, or (z)
makes a filing under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended,
with respect to securities to become the
Beneficial Owner, directly or indirectly, of
securities of the Company representing 9.9% or
more of the combined voting power of the
Company's then outstanding securities; or
(IV) the Board adopts a resolution to
the effect that, for purposes of this Agreement,
a Potential Change in Control has occurred.
(R) "Retirement" shall be deemed the reason
for the termination by the Company or the Executive of the
Executive's employment if such employment is terminated in
accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried
employees, as in effect immediately prior to the Change in
Control, or in accordance with any retirement arrangement
established with the Executive's consent with respect to the
Executive.
(S) "Severance Payments" shall mean those
payments described in Section 6.1 hereof.
(T) "Total Payments" shall mean those payments so
described in Section 6.2 hereof.
NEW YORK STATE ELECTRIC & GAS
CORPORATION
By___________________________
Name:
Title:
__________________________
[Name of Executive]
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
NEW YORK STATE ELECTRIC & GAS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Calendar Year
1993 1992 1991 1990 1989
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Net Income (Loss) . . . . . . . . $166,028 $183,968 $168,642 $158,013 $157,779
Add:
Federal income tax - current . . 36,024 38,066 29,513 33,072 24,988
Federal income tax - deferred. . 49,726 51,210 53,104 50,925 36,030
-------- -------- -------- -------- --------
Pre-tax income (loss) . . . . . 251,778 273,244 251,259 242,010 218,797
Fixed charges . . . . . . . . . . 153,696 160,253 169,579 178,335 185,505
-------- -------- -------- -------- --------
Earnings, as defined. . . . . . . $405,474 $433,497 $420,838 $420,345 $404,302
======== ======== ======== ======== ========
Fixed Charges:
Interest on long-term debt . . . $134,331 $145,822 $151,649 $158,209 $164,573
Other interest . . . . . . . . . 3,878 3,634 6,481 9,626 10,257
Amortization of premium and
expense on debt. . . . . . . . 7,242 5,933 5,396 5,555 5,238
Interest portion of rental
charges. . . . . . . . . . . . 8,245 4,864 6,053 4,945 5,437
-------- -------- -------- -------- --------
Total fixed charges, as defined . $153,696 $160,253 $169,579 $178,335 $185,505
======== ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges . . . . . . . . . 2.64 2.71 2.48 2.36 2.18
======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 21
Subsidiaries
Somerset Railroad Corporation - Incorporated in the State of New
York.
NGE Enterprises, Inc. - Incorporated in the State of Delaware.
Enersoft Corporation - Incorporated in the State of Delaware.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of New York State Electric & Gas Corporation on Form
S-3 (Registration Nos. 33-57460 and 33-50719) and on Form S-8
(Registration Nos. 33-13882 and 33-31897) of our report dated
January 28, 1994, on our audits of the consolidated financial
statements and financial statement schedules of New York State
Electric & Gas Corporation and Subsidiaries as of December 31,
1993 and 1992, and for the years ended December 31, 1993, 1992,
and 1991, which report is included in this Annual Report on Form
10-K.
COOPERS & LYBRAND
New York, New York
March 11, 1994
<PAGE>
EXHIBIT 99-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
--------------------------------------------------------
(Full title of the plan)
New York State Electric & Gas Corporation
--------------------------------------------------------
(Name of issuer of the securities held pursuant to the plan)
P. O. Box 3287, Ithaca, New York 14852-3287
--------------------------------------------------------
(Address of principal executive office)
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Year ended December 31, 1993
INDEX
Report of Independent Auditors .......................................... F-1
Items 1 and 2
Statements of Net Assets Available for Plan Benefits .................... F-2
Statements of Changes in Net Assets Available for Plan Benefits ......... F-3
Notes to Financial Statements ........................................... F-5
Schedule I-Investments--December 31, 1993 ............................... F-11
Schedule I-Investments--December 31, 1992 ............................... F-12
Schedule II-Net Assets Available for Plan Benefits--December 31, 1993 ... F-13
Schedule II-Net Assets Available for Plan Benefits--December 31, 1992 ... F-14
Schedule III-Changes in Net Assets Available for Plan
Benefits--Year ended December 31, 1993 ............................... F-15
Schedule III-Changes in Net Assets Available for Plan
Benefits--Year ended December 31, 1992 ............................... F-17
Schedule III-Changes in Net Assets Available for Plan
Benefits--Year ended December 31, 1991 ............................... F-19
Consent of Independent Auditors ......................................... F-21
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee to administer the Tax Deferred Savings Plan for
Salaried Employees has duly caused this Annual Report to be signed by the
undersigned thereunto duly authorized.
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried
Employees
By Richard P. Fagan
_______________________________________
Richard P. Fagan
Date: March 11, 1994 Committee Member
By Sherwood J. Rafferty
______________________________________
Sherwood J. Rafferty
Date: March 11, 1994 Committee Member
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Tax Deferred Savings Plan for Salaried Employees
Administrative Committee
New York State Electric & Gas Corporation
We have audited the accompanying statements of net assets available for plan
benefits of the New York State Electric & Gas Corporation Tax Deferred Savings
Plan for Salaried Employees as of December 31, 1993 and 1992, and the related
statements of changes in net assets available for plan benefits for each of
the three years in the period ended December 31, 1993. Our audits also
included the financial statement schedules listed in the Index at Items 1 and
2. These financial statements and schedules are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the New
York State Electric & Gas Corporation Tax Deferred Savings Plan for Salaried
Employees at December 31, 1993 and 1992, and the changes in its net assets
available for plan benefits for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
Syracuse, New York Ernst & Young
February 18, 1994<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Statements of Net Assets Available for Plan Benefits
December 31,
1993 1992
-----------------------
ASSETS
Investments (Notes 1,3,8, and 9 - Schedules I and II):
Guaranteed investment contracts $ 5,143,036 $ 5,262,959
Common stock of New York Electric & Gas
Corporation (cost - 1993 - $25,183,661
1992 - $23,858,132) 29,814,803 30,058,169
Other (cost - 1993 - $31,839,807
1992 - $20,947,758) 34,976,020 22,274,103
-----------------------
69,933,859 57,595,231
Loans to participants (Note 2 and Schedule II) 2,624,627 2,243,652
-----------------------
Total assets 72,558,486 59,838,883
LIABILITIES
Withdrawals payable to participants
(Note 2 and Schedule II) 5,600,764 3,255,829
-----------------------
Total liabilities 5,600,764 3,255,829
-----------------------
Net assets available for plan benefits $66,957,722 $56,583,054
=======================
See notes to financial statements
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Statements of Changes in Net Assets Available for Plan Benefits
Year ended December 31,
1993 1992 1991
--------------------------------------
ADDITIONS (Notes 1, 2, and 3
and Schedule III)
Investment income:
Net unrealized appreciation in
current value of securities $ 240,973 $ 3,813,895 $ 3,667,421
Net realized gain (loss) on
security sales:
Common stock of New York
State Electric & Gas
Corporation 160,094 108,756 (75,520)
Other 108,161 56,645 36,784
--------------------------------------
509,228 3,979,296 3,628,685
Dividends:
New York State Electric & Gas
Corporation 2,103,495 1,863,115 1,424,117
Other cash dividends (including
capital gain distributions
from mutual funds of
$1,073,499 in 1993, $713,257
in 1992 and $399,504 in 1991) 1,833,245 1,171,944 762,539
--------------------------------------
3,936,740 3,035,059 2,186,656
Interest on securities 299,764 427,678 680,155
Interest on loans to participants 172,628 159,686 86,620
--------------------------------------
4,918,360 7,601,719 6,582,116
Contributions:
Employer 1,062,102 954,441 465,533
Employee 6,754,987 6,013,026 5,258,125
--------------------------------------
7,817,089 6,967,467 5,723,658
Transfers from other plan (Note 7) 1,009,165 627,118 1,592,274
Transfers from Hourly Plan 184,973 589,285 333,258
--------------------------------------
Total additions 13,929,587 15,785,589 14,231,306
DEDUCTIONS (Notes 2 and 6 and
Schedule III)
Withdrawal benefits-stock 585,716 487,607 817,683
Withdrawal benefits-cash 606,010 276,310 375,013
Withdrawal benefits payable 2,344,935 2,376,255 99,274
Trustee fees 18,258 27,380 33,628
--------------------------------------
Total deductions 3,554,919 3,167,552 1,325,598
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Statements of Changes in Net Assets Available for Plan Benefits
(Continued)
Year ended December 31,
1993 1992 1991
--------------------------------------
Net increase 10,374,668 12,618,037 12,905,708
Net assets available for plan
benefits at beginning of year 56,583,054 43,965,017 31,059,309
--------------------------------------
Net assets available for plan
benefits at end of year $66,957,722 $56,583,054 $43,965,017
======================================
See notes to financial statements
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Notes to Financial Statements
December 31, 1993, 1992, and 1991
1. SIGNIFICANT ACCOUNTING POLICIES
The New York State Electric & Gas Corporation Tax Deferred Savings Plan for
Salaried Employees (the Salaried Plan) was established effective January 1,
1985 to provide for before-tax contributions in accordance with Internal
Revenue Code (Code) Section 401(k). The Salaried Plan is maintained on the
accrual basis.
Guaranteed investment contracts are valued at contract value which represents
contributions plus interest thereon at the contract rate.
Other investments are carried at current value using the market price at
closing on the last business day of the year.
The change during the period between current value and carrying value is
reflected in the statement of changes in net assets available for plan
benefits as unrealized appreciation (depreciation) in current value of
securities.
Realized gains (losses) are calculated as the difference between the proceeds
of assets sold during the year and the market value of these assets at the
beginning of the year (or the purchase price if the assets sold were acquired
during the year).
2. DESCRIPTION OF THE SALARIED PLAN
The Salaried Plan is a defined contribution plan for the exclusive benefit of
New York State Electric & Gas Corporation (Company) employees who are eligible
to participate under the Salaried Plan provisions.
Contributions by the participants are invested, at the election of the
participant, in one or a combination of the following five funds: (1) the
Company Stock Fund, consisting of common stock of the Company; (2) the Equity
Fund, a mutual fund, consisting primarily of common stock; (3) the Money
Market Fund, a mutual fund, consisting of money market instruments; (4) the
Capital Appreciation Fund, a mutual fund, consisting primarily of common
stock; or (5) the Government Obligation Fund, a mutual fund, consisting of
securities that are backed by the full faith and credit of the United States
Government. Effective January 1, 1992, the Guaranteed Investment Contract
Fund did not accept any new investments. Prior to November 18, 1988, the
Guaranteed Investment Contract Fund consisted of investments in insurance
contracts that guaranteed an effective annual rate of interest through a
specified period and effective November 18, 1988, included investments in
securities and other obligations issued by any company that guaranteed an
effective annual rate of interest through a specified period.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Notes to Financial Statements (Continued)
2. DESCRIPTION OF THE SALARIED PLAN (Continued)
Employees not covered by a collective bargaining agreement are eligible for
participation in the Salaried Plan upon completion of at least one year of
service and at least 1,000 hours of service in that year.
Employee contributions range from 1% to 15% of the participant's base
compensation plus any overtime pay. A participant's total contribution could
not exceed $8,994 per year in 1993, $8,728 per year in 1992, and $8,475 per
year in 1991 (excluding any Company contributions). The maximum amount is
increased annually for inflation.
During 1993 and 1992, the Company contributed solely to the Company Stock Fund
an amount equivalent to 25% of the participant's contributions to any fund (up
to 1.5% of the participant's annual base compensation). During 1991, the
Company contributed solely to the Company Stock Fund an amount equivalent to
15% of the participant's contribution to the Company Stock Fund (up to 1.5% of
the participant's annual base compensation).
Contributions are also subject to limitations stipulated by the Code.
Contributions to the Salaried Plan are allocated to participant accounts.
Participants have full and immediate vesting rights in all contributions,
Salaried Plan earnings, and other amounts allocated to their accounts.
Participants may make transfers between the various investment funds (other
than the Guaranteed Investment Contract Fund and the Company's contribution to
the Company Stock Fund) once each calendar quarter on any day of the calendar
quarter. Subject to certain restrictions, transfers may be made from the
Guaranteed Investment Contract Fund (with the exception of amounts related to
1987 contributions) on January 1 of each year.
A participant who is no longer employed by the Company may make transfers
between the various investment funds (other than the Guaranteed Investment
Contract Fund) once each calendar quarter on any day of the calendar quarter.
Subject to certain restrictions, transfers may be made from the Guaranteed
Investment Contract Fund (with the exception of amounts related to 1987
contributions) on January 1 of each year.
Participants may obtain a distribution of their accounts due to financial
hardship or upon request after attaining the age of 59-1/2.
Distributions from the Equity Fund, Money Market Fund, Capital Appreciation
Fund, Government Obligation Fund, and Guaranteed Investment Contract Fund are
made in cash. Distributions from the Company Stock Fund are made in either
whole shares of New York State Electric & Gas Corporation common stock or in
cash as specified by the participant and subject to approval by the Salaried
Plan's administrative committee.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Notes to Financial Statements (Continued)
2. DESCRIPTION OF THE SALARIED PLAN (Continued)
Participants may, under certain circumstances, borrow against their account
balances. The principal amount of the loan is subject to certain limitations
as defined in the Salaried Plan document. The term of the loan may not exceed
five years, and the interest rate as established by the Salaried Plan's
administrative committee prior to October 16, 1989 was no less than 1% below
the prime rate. Effective October 16, 1989, the interest rate established by
the Salaried Plan's administrative committee provides the Salaried Plan with a
return commensurate with the interest rate charged by persons in the business
of lending money for loans which would be made under similar circumstances.
The loan must be repaid by payroll deductions over the term of the loan. Loan
payments are credited to an applicable fund based upon the participant's
election. If a participant's employment terminates for any reason, the loan
will become immediately due and payable.
The Salaried Plan sponsor has the right to discontinue contributions at any
time and terminate the Salaried Plan. In the event of termination of the
Salaried Plan, the net assets of the Salaried Plan are set aside, first for
payment of all Salaried Plan expenses and, second, for distribution to the
participants, based upon the balances in their individual accounts.
3. INVESTMENTS
The Salaried Plan's investments (including investments bought, sold, and held)
appreciated (depreciated) in fair value as follows:
Year ended December 31,
1993 1992 1991
------------------------------------
Capital Appreciation Fund $ 1,326,429 $ 325,350 $ 559,756
Equity Fund 648,867 302,548 526,386
Government Obligation Fund (57,267) (392) --
Money Market Fund -- -- --
Company Stock Fund (1,408,801) 3,351,790 2,542,543
Guaranteed Investment Contract Fund -- -- --
------------------------------------
$ 509,228 $3,979,296 $3,628,685
=====================================
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Notes to Financial Statements (Continued)
3. INVESTMENTS (Continued)
Realized gains (losses) on security
sales resulted from the following:
Year ended December 31, 1993
--------------------------------------
Aggregate Aggregate Net Realized
Cost Proceeds Gain
--------------------------------------
Common stock of New York State
Electric & Gas Corporation $6,367,659 $6,527,753 $ 160,094
Other 1,782,833 1,890,994 108,161
Year ended December 31, 1992
--------------------------------------
Aggregate Aggregate Net Realized
Cost Proceeds Gain
--------------------------------------
Common stock of New York State
Electric & Gas Corporation $3,987,968 $4,096,724 $ 108,756
Other 544,264 600,909 56,645
Year ended December 31, 1991
--------------------------------------
Aggregate Aggregate Net Realized
Cost Proceeds Gain (Loss)
--------------------------------------
Common stock of New York State
Electric & Gas Corporation $1,339,894 $1,264,374 $ (75,520)
Other 178,140 214,924 36,784
4. INCOME TAX STATUS
The Company has received a determination letter from the Internal Revenue
Service that the Salaried Plan qualifies as a tax deferred savings plan under
Sections 401(a) and 401(k) of the Code.
The Prospectus for the Salaried Plan and other materials provided to
participants include a discussion of the income tax rules applicable to
participants with respect to the Salaried Plan.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Notes to Financial Statements (Continued)
5. PARTICIPANTS
At December 31, 1993, 1992, and 1991, respectively, there were 1,704, 1,883,
and 1,735 participants in one or more funds as follows:
1993 1992 1991
-----------------------
Capital Appreciation Fund 1,050 846 501
Equity Fund 1,144 935 720
Government Obligation Fund 452 372 --
Money Market Fund 654 620 314
Company Stock Fund 1,661 1,540 1,329
Guaranteed Investment Contract Fund 533 582 674
6. TRANSACTIONS WITH PARTIES-IN-INTEREST
Trustee fees related to the Guaranteed Investment Contract Fund are paid by
the Salaried Plan. All other administrative costs of the Salaried Plan are
paid by the Company. The Salaried Plan may reimburse the Company up to the
limitations specified in the Salaried Plan document.
7. TRANSFERS FROM OTHER PLAN
During 1993, 1992, and 1991, respectively, participants elected to transfer
41,497, 26,676, and 69,927 shares of Company stock (cost: $1,009,165 in 1993,
$627,118 in 1992, and $1,592,274 in 1991) from the New York State Electric &
Gas Corporation Tax Reduction Act Employee Stock Ownership Plan to the
Salaried Plan.
8. SUBSEQUENT EVENT
At February 18, 1994, the Company common stock had a market value of $26.625
per share as compared to $30.75 per share at December 31, 1993. This equates
to a decline in market value of $3,999,546 in the Company Stock Fund from
December 31, 1993 to February 18, 1994. Based upon the February 18, 1994
stock price, the market value of shares held would be $25,815,257 as compared
to the December 31, 1993 cost of $25,183,661.
9. UNCERTAINTY
The State of California Department of Insurance (SCDI) assumed control of
Executive Life Insurance Company of California (an insurance company
subsidiary of First Executive Corporation) on April 11, 1991. The Salaried
Plan's Guaranteed Investment Contract Fund includes a GIC issued by Executive
Life Insurance Company of California (Executive Life) that matured December
31, 1991. Participants contributed to this GIC in 1987. The Executive Life
GIC amounts to $1,430,190, including interest accrued through the GIC's
original maturity date of December 31, 1991, and represents 28% of the total
Guaranteed Investment Contract Fund balance of $5,088,152 at December 31,
<PAGE>
New York State Electric & Gas Corporat
Tax Deferred Savings Plan for Salaried Employees
Notes to Financial Statements (Continued)
9. UNCERTAINTY (Continued)
1993. Although full recovery of participant balances that were invested in
the 1987 Executive Life GIC is not certain, the California courts have
approved a plan which, subject to the outcome of several court proceedings and
in conjunction with state insurance department guaranty funds, may provide
substantial recovery in future years. At February 18, 1994, the Salaried
Plan's management is unable to estimate the loss that may result from the
ultimate settlement of the 1987 Executive Life GIC.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule I - Investments
December 31, 1993
Balance Held at Market
Name of Issuer and Title of Issue End of Year Cost Value
- ------------------------------------------------------------------------------
Capital Appreciation Fund
Putnam Voyager Fund 1,048,467 shares $10,440,029 $12,571,119
Equity Fund
Putnam Fund for Growth and Income 1,218,471 shares 15,507,123 16,571,206
Government Obligation Fund
Putnam U.S. Government Income Trust 217,101 shares 2,978,973 2,920,013
Money Market Fund
Putnam Daily Dividend Trust 2,913,682 shares 2,913,682 2,913,682
-----------------------
Total $31,839,807 $34,976,020
=======================
Company Stock Fund
New York State Electric & Gas
Corporation common stock 969,587 shares $25,183,661 $29,814,803
=======================
Guaranteed Investment Contracts $5,143,036 $5,143,036
========================
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule I - Investments
December 31, 1992
Balance Held at Market
Name of Issuer and Title of Issue End of Year Cost Value
- ------------------------------------------------------------------------------
Capital Appreciation Fund
Putnam Voyager Fund 729,866 shares $ 6,821,374 $ 7,678,193
Equity Fund
Putnam Fund for Growth and Income 864,273 shares 10,624,940 11,097,270
Government Obligation Fund
Putnam U.S.Government Income Trust 107,594 shares 1,482,228 1,479,424
Money Market Fund
Putnam Daily Dividend Trust 2,019,216 shares 2,019,216 2,019,216
------------------------
Total $20,947,758 $22,274,103
========================
Company Stock Fund
New York State Electric & Gas
Corporation common stock 924,867 shares $23,858,132 $30,058,169
========================
Guaranteed Investment Contracts $ 5,262,959 $ 5,262,959
========================
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule II - Net Assets Available for Plan Benefits
December 31, 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
----------------------------------------------------------------------------------------
Guaranteed investment contracts $ 5,143,036 $ 5,143,036
Investments:
Common stock of New York State
Electric & Gas Corporation $29,814,803 29,814,803
Other $12,571,119 $16,571,206 $2,920,013 $2,913,682 34,976,020
Loans to participants 2,022 483,927 (49,318) 87,968 1,456,607 643,421 2,624,627
----------------------------------------------------------------------------------------
Total assets 12,573,141 17,055,133 2,870,695 3,001,650 31,271,410 5,786,457 72,558,486
Withdrawals payable to participants 678,268 990,908 202,217 148,839 2,882,227 698,305 5,600,764
----------------------------------------------------------------------------------------
Net assets available for plan benefits $11,894,873 $16,064,225 $2,668,478 $2,852,811 $28,389,183 $5,088,152 $66,957,722
========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule II - Net Assets Available for Plan Benefits
December 31, 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Guaranteed investment contracts $5,262,959 $ 5,262,959
Investments:
Common stock of New York State
Electric & Gas Corporation $30,058,169 30,058,169
Other $7,678,193 $11,097,270 $1,479,424 $2,019,216 22,274,103
Loans to participants 23,846 413,662 (46,031) 86,009 1,210,659 555,507 2,243,652
------------------------------------------------------------------------------------------
Total assets 7,702,039 11,510,932 1,433,393 2,105,225 31,268,828 5,818,466 59,838,883
Withdrawals payable to participants 92,542 284,786 46,446 67,651 2,255,623 508,781 3,255,829
------------------------------------------------------------------------------------------
Net assets available for plan benefits $7,609,497 $11,226,146 $1,386,947 $2,037,574 $29,013,205 $5,309,685 $56,583,054
==========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Investment income:
Net unrealized appreciation (depre-
ciation) in current value of
securities $ 1,274,271 $ 591,753 $(56,156) $(1,568,895) $240,973
Net realized gain (loss) on security
sales: Common stock of New York
State Electric & Gas Corporation 160,094 160,094
Other 52,158 57,114 (1,111) 108,161
------------------------------------------------------------------------------------------
1,326,429 648,867 (57,267) (1,408,801) 509,228
Dividends:
New York State Electric & Gas
Corporation 2,103,495 2,103,495
Other 456,645 1,153,634 163,085 $ 59,881 1,833,245
Interest on securities $ 299,764 299,764
Interest on loans to participants 13,915 36,200 5,878 9,636 106,999 172,628
------------------------------------------------------------------------------------------
1,796,989 1,838,701 111,696 69,517 801,693 299,764 4,918,360
Contributions:
Employer 1,062,102 1,062,102
Employee 1,614,407 1,469,234 587,474 360,223 2,723,649 6,754,987
Transfers from other plan 1,009,165 1,009,165
Transfers from Hourly Plan 47,447 33,709 23,462 24,344 49,126 6,885 184,973
Interfund transfers (net) 1,570,112 2,544,209 740,870 475,228 (5,057,437) (272,982) -0-
------------------------------------------------------------------------------------------
Total additions 5,028,955 5,885,853 1,463,502 929,312 588,298 33,667 13,929,587
Withdrawal benefits-stock 585,716 585,716
Withdrawal benefits-cash 157,853 341,652 26,200 32,887 47,418 606,010
Withdrawal benefits payable 585,726 706,122 155,771 81,188 626,604 189,524 2,344,935
Trustee fees 18,258 18,258
------------------------------------------------------------------------------------------
Total deductions 743,579 1,047,774 181,971 114,075 1,212,320 255,200 3,554,919
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1993
(Continued)
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Net increase (decrease) 4,285,376 4,838,079 1,281,531 815,237 (624,022) (221,533) 10,374,668
Net assets available for plan
benefits at beginning of year 7,609,497 11,226,146 1,386,947 2,037,574 29,013,205 5,309,685 56,583,054
------------------------------------------------------------------------------------------
Net assets available for plan
benefits at end of year $11,894,873 $16,064,225 $2,668,478 $2,852,811 $28,389,183 $5,088,152 $66,957,722
==========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Investment income:
Net unrealized appreciation (depre-
ciation) in current value of
securities $ 303,883 $ 269,782 $ (2,804) $ 3,243,034 $ 3,813,895
Net realized gain on security sales:
Common stock of New York State
Electric & Gas Corporation 108,756 108,756
Other 21,467 32,766 2,412 56,645
------------------------------------------------------------------------------------------
325,350 302,548 (392) 3,351,790 3,979,296
Dividends:
New York State Electric & Gas
Corporation 1,863,115 1,863,115
Other 342,848 723,073 62,148 $ 43,875 1,171,944
Interest on securities $ 427,678 427,678
Interest on loans to participants 12,775 33,534 1,597 9,581 102,199 159,686
------------------------------------------------------------------------------------------
680,973 1,059,155 63,353 53,456 5,317,104 427,678 7,601,719
Contributions:
Employer 954,441 954,441
Employee 1,257,525 914,491 590,636 403,276 2,847,098 6,013,026
Transfers from other plan 627,118 627,118
Transfers from Hourly Plan 43,787 100,286 15,083 7,219 383,582 39,328 589,285
Interfund transfers (net) 2,794,262 2,226,740 764,888 611,704 (2,527,355) (3,870,239) -0-
------------------------------------------------------------------------------------------
Total additions 4,776,547 4,300,672 1,433,960 1,075,655 7,601,988 (3,403,233) 15,785,589
Withdrawal benefits-stock 487,607 487,607
Withdrawal benefits-cash 13,421 140,425 567 28,437 93,460 276,310
Withdrawal benefits payable 89,341 206,483 46,446 40,045 1,735,019 258,921 2,376,255
Trustee fees 27,380 27,380
------------------------------------------------------------------------------------------
Total deductions 102,762 346,908 47,013 68,482 2,222,626 379,761 3,167,552
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1992
(Continued)
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Net increase (decrease) 4,673,785 3,953,764 1,386,947 1,007,173 5,379,362 (3,782,994) 12,618,037
Net assets available for plan
benefits at beginning of year 2,935,712 7,272,382 -0- 1,030,401 23,633,843 9,092,679 43,965,017
------------------------------------------------------------------------------------------
Net assets available for plan
benefits at end of year $7,609,497 $11,226,146 $1,386,947 $2,037,574 $29,013,205 $5,309,685 $56,583,054
==========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Money Company Investment
Appreciation Equity Market Stock Contract
Fund Fund Fund Fund Fund Total
----------------------------------------------------------------------------------
Investment income:
Net unrealized appreciation in
current value of securities $ 552,936 $ 496,422 $ 2,618,063 $ 3,667,421
Net realized gain (loss) on security
sales: Common stock of New York
State Electric & Gas Corporation (75,520) (75,520)
Other 6,820 29,964 36,784
----------------------------------------------------------------------------------
559,756 526,386 2,542,543 3,628,685
Dividends:
New York State Electric & Gas
Corporation 1,424,117 1,424,117
Other 138,764 573,920 $ 49,855 762,539
Interest on securities $ 680,155 680,155
Interest on loans to participants 1,732 13,859 3,465 38,979 28,585 86,620
----------------------------------------------------------------------------------
700,252 1,114,165 53,320 4,005,639 708,740 6,582,116
Contributions:
Employer 465,533 465,533
Employee 319,950 489,644 132,023 3,411,682 904,826 5,258,125
Transfers from other plan 1,592,274 1,592,274
Transfers from Hourly Plan 24,242 17,907 6,290 221,423 63,396 333,258
Interfund transfers (net) 1,910,447 65,307 155,010 (1,710,311) (420,453) -0-
----------------------------------------------------------------------------------
Total additions 2,954,891 1,687,023 346,643 7,986,240 1,256,509 14,231,306
Withdrawal benefits-stock 817,683 817,683
Withdrawal benefits-cash 15,978 71,742 19,885 267,408 375,013
Withdrawal benefits payable 3,201 33,772 15,149 84,814 (37,662) 99,274
Trustee fees 33,628 33,628
----------------------------------------------------------------------------------
Total deductions 19,179 105,514 35,034 902,497 263,374 1,325,598
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Salaried Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1991
(Continued)
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Money Company Investment
Appreciation Equity Market Stock Contract
Fund Fund Fund Fund Fund Total
----------------------------------------------------------------------------------
Net increase 2,935,712 1,581,509 311,609 7,083,743 993,135 12,905,708
Net assets available for plan
benefits at beginning of year -0- 5,690,873 718,792 16,550,100 8,099,544 31,059,309
----------------------------------------------------------------------------------
Net assets available for plan
benefits at end of year $2,935,712 $7,272,382 $1,030,401 $23,633,843 $9,092,679 $43,965,017
==================================================================================
</TABLE>
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Post-effective Amendment No. 1 to Form S-8 No. 33-31897) pertaining to the
New York State Electric & Gas Corporation Tax Deferred Savings Plan for
Salaried Employees of our report dated February 18, 1994, with respect to the
financial statements and schedules of the New York State Electric & Gas
Corporation Tax Deferred Savings Plan for Salaried Employees included in this
Annual Report (Form 11-K) for the year ended December 31, 1993.
Syracuse, New York Ernst & Young
March 7, 1994
<PAGE>
EXHIBIT 99-2
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1993
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
--------------------------------------------------------
(Full title of the plan)
New York State Electric & Gas Corporation
--------------------------------------------------------
(Name of issuer of the securities held pursuant to the plan)
P. O. Box 3287, Ithaca, New York 14852-3287
--------------------------------------------------------
(Address of principal executive office)
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Year ended December 31, 1993
INDEX
Report of Independent Auditors .......................................... F-1
Items 1 and 2
Statements of Net Assets Available for Plan Benefits .................... F-2
Statements of Changes in Net Assets Available for Plan Benefits ......... F-3
Notes to Financial Statements ........................................... F-5
Schedule I-Investments--December 31, 1993 ............................... F-10
Schedule I-Investments--December 31, 1992 ............................... F-11
Schedule II-Net Assets Available for Plan Benefits--December 31, 1993 ... F-12
Schedule II-Net Assets Available for Plan Benefits--December 31, 1992 ... F-13
Schedule III-Changes in Net Assets Available for Plan
Benefits--Year ended December 31, 1993 ............................... F-14
Schedule III-Changes in Net Assets Available for Plan
Benefits--Year ended December 31, 1992 ............................... F-16
Schedule III-Changes in Net Assets Available for Plan
Benefits--Year ended December 31, 1991 ............................... F-18
Consent of Independent Auditors ......................................... F-20
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Committee to administer the Tax Deferred Savings Plan for Hourly Paid
Employees has duly caused this Annual Report to be signed by the undersigned
thereunto duly authorized.
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid
Employees
By Richard P. Fagan
____________________________________________
Richard P. Fagan
Date: March 11, 1994 Committee Member
By Sherwood J. Rafferty
____________________________________________
Sherwood J. Rafferty
Date: March 11, 1994 Committee Member
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Tax Deferred Savings Plan for Hourly Paid Employees
Administrative Committee
New York State Electric & Gas Corporation
We have audited the accompanying statements of net assets available for plan
benefits of the New York State Electric & Gas Corporation Tax Deferred Savings
Plan for Hourly Paid Employees as of December 31, 1993 and 1992, and the
related statements of changes in net assets available for plan benefits for
each of the three years in the period ended December 31, 1993. Our audits
also included the financial statement schedules listed in the Index at Items 1
and 2. These financial statements and schedules are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the New
York State Electric & Gas Corporation Tax Deferred Savings Plan for Hourly
Paid Employees at December 31, 1993 and 1992, and the changes in its net
assets available for plan benefits for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedules,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
Syracuse, New York Ernst & Young
February 18, 1994
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Statements of Net Assets Available for Plan Benefits
December 31,
1993 1992
----------------------
ASSETS
Investments (Notes 1,3,7, and 8 - Schedules I and II):
Guaranteed investment contracts $ 4,319,938 $ 4,458,875
Common stock of New York Electric & Gas
Corporation (cost - 1993 - $30,343,622
1992 - $25,297,526) 33,942,236 31,080,827
Other (cost - 1993 - $18,834,960
1992 - $12,306,307) 20,322,662 12,882,559
----------------------
58,584,836 48,422,261
Loans to participants (Note 2 and Schedule II) 1,973,289 1,324,508
----------------------
Total assets 60,558,125 49,746,769
LIABILITIES
Withdrawals payable to participants
(Note 2 and Schedule II) 2,884,167 1,947,468
----------------------
Total liabilities 2,884,167 1,947,468
----------------------
Net assets available for plan benefits $57,673,958 $47,799,301
======================
See notes to financial statements
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Statements of Changes in Net Assets Available for Plan Benefits
Year ended December 31,
1993 1992 1991
--------------------------------------
ADDITIONS (Notes 1, 2, and 3
and Schedule III)
Investment income:
Net unrealized appreciation
(depreciation) in current value
of securities $(1,273,238) $ 3,552,321 $ 2,551,402
Net realized gain on security
sales:
Common stock of New York
State Electric & Gas
Corporation 44,022 79,466 7,401
Other 34,192 32,703 27,100
--------------------------------------
(1,195,024) 3,664,490 2,585,903
Dividends:
New York State Electric & Gas
Corporation 2,232,419 1,792,905 1,274,062
Other cash dividends (including
capital gain distributions
from mutual funds of
$571,150 in 1993, $359,204
in 1992 and $206,666 in 1991) 1,040,481 645,634 464,657
--------------------------------------
3,272,900 2,438,539 1,738,719
Interest on securities 259,723 391,487 590,672
Interest on loans to participants 107,088 62,654 31,679
--------------------------------------
2,444,687 6,557,170 4,946,973
Contributions:
Employer 1,177,250 1,062,874 464,588
Employee 8,227,455 7,407,061 6,374,201
--------------------------------------
9,404,705 8,469,935 6,838,789
--------------------------------------
Total additions 11,849,392 15,027,105 11,785,762
DEDUCTIONS (Notes 2 and 6 and
Schedule III)
Withdrawal benefits-stock 620,045 337,311 339,381
Withdrawal benefits-cash 217,229 251,981 223,336
Withdrawal benefits payable 936,699 1,107,652 468,377
Transfers to Salaried Plan 184,973 589,285 333,258
Trustee fees 15,789 25,104 31,311
--------------------------------------
Total deductions 1,974,735 2,311,333 1,395,663
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Statements of Changes in Net Assets Available for Plan Benefits
(Continued)
Year ended December 31,
1993 1992 1991
--------------------------------------
Net increase 9,874,657 12,715,772 10,390,099
Net assets available for plan
benefits at beginning of year 47,799,301 35,083,529 24,693,430
--------------------------------------
Net assets available for plan
benefits at end of year $57,673,958 $47,799,301 $35,083,529
======================================
See notes to financial statements
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Notes to Financial Statements
December 31, 1993, 1992, and 1991
1. SIGNIFICANT ACCOUNTING POLICIES
The New York State Electric & Gas Corporation Tax Deferred Savings Plan for
Hourly Paid Employees (the Hourly Plan) was established effective January 1,
1986 to provide for before-tax contributions in accordance with Internal
Revenue Code (Code) Section 401(k). The Hourly Plan is maintained on the
accrual basis.
Guaranteed investment contracts are valued at contract value which represents
contributions plus interest thereon at the contract rate.
Other investments are carried at current value using the market price at
closing on the last business day of the year.
The change during the period between current value and carrying value is
reflected in the statement of changes in net assets available for plan
benefits as unrealized appreciation (depreciation) in current value of
securities.
Realized gains (losses) are calculated as the difference between the proceeds
of assets sold during the year and the market value of these assets at the
beginning of the year (or the purchase price if the assets sold were acquired
during the year).
2. DESCRIPTION OF THE HOURLY PLAN
The Hourly Plan is a defined contribution plan for the exclusive benefit of
New York State Electric & Gas Corporation (Company) employees who are eligible
to participate under the Hourly Plan provisions.
Contributions by the participants are invested, at the election of the
participant, in one or a combination of the following five funds: (1) the
Company Stock Fund, consisting of common stock of the Company; (2) the Equity
Fund, a mutual fund, consisting primarily of common stock; (3) the Money
Market Fund, a mutual fund, consisting of money market instruments; (4) the
Capital Appreciation Fund, a mutual fund, consisting primarily of common
stock; or (5) the Government Obligation Fund, a mutual fund, consisting of
securities that are backed by the full faith and credit of the United States
Government. Effective January 1, 1992, the Guaranteed Investment Contract
Fund did not accept any new investments. Prior to November 18, 1988, the
Guaranteed Investment Contract Fund consisted of investments in insurance
contracts that guaranteed an effective annual rate of interest through a
specified period and effective November 18, 1988, included investments in
securities and other obligations issued by any company that guaranteed an
effective annual rate of interest through a specified period.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Notes to Financial Statements (Continued)
2. DESCRIPTION OF THE HOURLY PLAN (Continued)
Employees covered by a collective bargaining agreement are eligible for
participation in the Hourly Plan upon completion of at least one year of
service and at least 1,000 hours of service in that year.
Employee contributions range from 1% to 15% of the participant's base
compensation plus any overtime pay. A participant's total contribution could
not exceed $8,994 per year in 1993, $8,728 per year in 1992, and $8,475 per
year in 1991 (excluding any Company contributions). The maximum amount is
increased annually for inflation.
During 1993 and 1992, the Company contributed solely to the Company Stock Fund
an amount equivalent to 25% of the participant's contributions to any fund (up
to 1.5% of the participant's annual base compensation). During 1991, the
Company contributed solely to the Company Stock Fund an amount equivalent to
15% of the participant's contribution to the Company Stock Fund (up to 1.5% of
the participant's annual base compensation).
Contributions are also subject to limitations stipulated by the Code.
Contributions to the Hourly Plan are allocated to participant accounts.
Participants have full and immediate vesting rights in all contributions,
Hourly Plan earnings, and other amounts allocated to their accounts.
Participants may make transfers between the various investment funds (other
than the Guaranteed Investment Contract Fund and the Company's contribution to
the Company Stock Fund) once each calendar quarter on any day of the calendar
quarter. Subject to certain restrictions, transfers may be made from the
Guaranteed Investment Contract Fund (with the exception of amounts related to
1987 contributions) on January 1 of each year.
A participant who is no longer employed by the Company may make transfers
between the various investment funds (other than the Guaranteed Investment
Contract Fund) once each calendar quarter on any day of the calendar quarter.
Subject to certain restrictions, transfers may be made from the Guaranteed
Investment Contract Fund (with the exception of amounts related to 1987
contributions) on January 1 of each year.
Participants may obtain a distribution of their accounts due to financial
hardship or upon request after attaining the age of 59-1/2.
Distributions from the Equity Fund, Money Market Fund, Capital Appreciation
Fund, Government Obligation Fund, and Guaranteed Investment Contract Fund are
made in cash. Distributions from the Company Stock Fund are made in either
whole shares of New York State Electric & Gas Corporation common stock or in
cash, as specified by the participant and subject to approval by the Hourly
Plan's administrative committee.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Notes to Financial Statements (Continued)
2. DESCRIPTION OF THE HOURLY PLAN (Continued)
Participants may, under certain circumstances, borrow against their account
balances. The principal amount of the loan is subject to certain limitations
as defined in the Hourly Plan document. The term of the loan may not exceed
five years, and the interest rate as established by the Hourly Plan's
administrative committee prior to October 16, 1989 was no less than 1% below
the prime rate. Effective October 16, 1989, the interest rate established by
the Hourly Plan's administrative committee provides the Hourly Plan with a
return commensurate with the interest rate charged by persons in the business
of lending money for loans which would be made under similar circumstances.
The loan must be repaid by payroll deductions over the term of the loan. Loan
payments are credited to an applicable fund based upon the participant's
election. If a participant's employment terminates for any reason, the loan
will become immediately due and payable.
The Hourly Plan sponsor has the right to discontinue contributions at any time
and terminate the Hourly Plan. In the event of termination of the Hourly
Plan, the net assets of the Hourly Plan are set aside, first for payment of
all Hourly Plan expenses and, second, for distribution to the participants,
based upon the balances in their individual accounts.
3. INVESTMENTS
The Hourly Plan's investments (including investments bought, sold, and held)
appreciated (depreciated) in fair value as follows:
Year ended December 31,
1993 1992 1991
-------------------------------------
Capital Appreciation Fund $ 593,270 $ 151,061 $ 185,792
Equity Fund 383,832 175,364 301,001
Government Obligation Fund (31,461) (509) --
Money Market Fund -- -- --
Company Stock Fund (2,140,665) 3,338,574 2,099,110
Guaranteed Investment Contract Fund -- -- --
-------------------------------------
$(1,195,024) $3,664,490 $2,585,903
====================================
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Notes to Financial Statements (Continued)
3. INVESTMENTS (Continued)
Realized gains on security sales
resulted from the following:
Year ended December 31, 1993
--------------------------------------
Aggregate Aggregate Net Realized
Cost Proceeds Gain
--------------------------------------
Common stock of New York State
Electric & Gas Corporation $3,471,971 $3,515,993 $ 44,022
Other 634,922 669,114 34,192
Year ended December 31, 1992
--------------------------------------
Aggregate Aggregate Net Realized
Cost Proceeds Gain
--------------------------------------
Common stock of New York State
Electric & Gas Corporation $1,620,493 $1,699,959 $ 79,466
Other 512,796 545,499 32,703
Year ended December 31, 1991
--------------------------------------
Aggregate Aggregate Net Realized
Cost Proceeds Gain
--------------------------------------
Common stock of New York State
Electric & Gas Corporation $ 585,522 $ 592,923 $ 7,401
Other 128,114 155,214 27,100
4. INCOME TAX STATUS
The Company has received a determination letter from the Internal Revenue
Service that the Hourly Plan qualifies as a tax deferred savings plan under
Sections 401(a) and 401(k) of the Code.
The Prospectus for the Hourly Plan and other materials provided to
participants include a discussion of the income tax rules applicable to
participants with respect to the Hourly Plan.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Notes to Financial Statements (Continued)
5. PARTICIPANTS
At December 31, 1993, 1992, and 1991, respectively, there were 2,439, 2,642,
and 2,482 participants in one or more funds as follows:
1993 1992 1991
---------------------
Capital Appreciation Fund 993 786 360
Equity Fund 1,116 878 628
Government Obligation Fund 407 309 --
Money Market Fund 942 920 352
Company Stock Fund 2,363 2,223 1,832
Guaranteed Investment Contract Fund 713 784 960
6. TRANSACTIONS WITH PARTIES-IN-INTEREST
Trustee fees related to the Guaranteed Investment Contract Fund are paid by
the Hourly Plan. All other administrative costs of the Hourly Plan are paid
by the Company. The Hourly Plan may reimburse the Company up to the
limitations specified in the Hourly Plan document.
7. SUBSEQUENT EVENT
At February 18, 1994, the Company common stock had a market value of $26.625
per share as compared to $30.75 per share at December 31, 1993. This equates
to a decline in market value of $4,553,229 in the Company Stock Fund from
December 31, 1993 to February 18, 1994. Based upon the February 18, 1994
stock price, the market value of shares held would be $29,389,007 as compared
to the December 31, 1993 cost of $30,343,622.
8. UNCERTAINTY
The State of California Department of Insurance (SCDI) assumed control of
Executive Life Insurance Company of California (an insurance company
subsidiary of First Executive Corporation) on April 11, 1991. The Hourly
Plan's Guaranteed Investment Contract Fund includes a GIC issued by Executive
Life Insurance Company of California (Executive Life) that matured December
31, 1991. Participants contributed to this GIC in 1987. The Executive Life
GIC amounts to $1,123,156, including interest accrued through the GIC's
original maturity date of December 31, 1991, and represents 26% of the total
Guaranteed Investment Contract Fund balance of $4,332,133 at December 31,
1993. Although full recovery of participant balances that were invested in
the 1987 Executive Life GIC is not certain, the California courts have
approved a plan which, subject to the outcome of several court proceedings and
in conjunction with state insurance department guaranty funds, may provide
substantial recovery in future years. At February 18, 1994, the Hourly Plan's
management is unable to estimate the loss that may result from the ultimate
settlement of the 1987 Executive Life GIC.
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule I - Investments
December 31, 1993
Balance Held at Market
Name of Issuer and Title of Issue End of Year Cost Value
- ------------------------------------------------------------------------------
Capital Appreciation Fund
Putnam Voyager Fund 477,879 shares $ 4,829,848 $ 5,729,770
Equity Fund
Putnam Fund for Growth and Income 723,831 shares 9,222,812 9,844,103
Government Obligation Fund
Putnam U.S. Government Income Trust 117,160 shares 1,609,317 1,575,806
Money Market Fund
Putnam Daily Dividend Trust 3,172,983 shares 3,172,983 3,172,983
------------------------
Total $18,834,960 $20,322,662
========================
Company Stock Fund
New York State Electric & Gas
Corporation common stock 1,103,813 shares $30,343,622 $33,942,236
========================
Guaranteed Investment Contracts $4,319,938 $4,319,938
========================
<PAGE>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule I - Investments
December 31, 1992
Balance Held at Market
Name of Insurer and Title of Issue End of Year Cost Value
- ------------------------------------------------------------------------------
Capital Appreciation Fund
Putnam Voyager Fund 311,074 shares $ 2,944,663 $ 3,272,500
Equity Fund
Putnam Fund for Growth and Income 494,033 shares 6,091,712 6,343,385
Government Obligation Fund
Putnam U.S. Government Income Trust 55,726 shares 769,489 766,231
Money Market Fund
Putnam Daily Dividend Trust 2,500,443 shares 2,500,443 2,500,443
------------------------
Total $12,306,307 $12,882,559
========================
Company Stock Fund
New York State Electric & Gas
Corporation common stock 956,333 shares $25,297,526 $31,080,827
========================
Guaranteed Investment Contracts $ 4,458,875 $ 4,458,875
========================
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule II - Net Assets Available for Plan Benefits
December 31, 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Guaranteed investment contracts $ 4,319,938 $ 4,319,938
Investments:
Common stock of New York State
Electric & Gas Corporation $33,942,236 33,942,236
Other $ 5,729,770 $9,844,103 $1,575,806 $ 3,172,983 20,322,662
Loans to participants 39,968 265,645 22,540 69,510 1,235,410 340,216 1,973,289
------------------------------------------------------------------------------------------
Total assets 5,769,738 10,109,748 1,598,346 3,242,493 35,177,646 4,660,154 60,558,125
Withdrawals payable to participants 234,556 499,497 64,077 82,068 1,675,948 328,021 2,884,167
------------------------------------------------------------------------------------------
Net assets available for plan benefits $ 5,535,182 $9,610,251 $1,534,269 $ 3,160,425 $33,501,698 $4,332,133 $57,673,958
==========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule II - Net Assets Available for Plan Benefits
December 31, 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
-------------------------------------------------------------------------------------------
Guaranteed investment contracts $4,458,875 $ 4,458,875
Investments:
Common stock of New York State
Electric & Gas Corporation $31,080,827 31,080,827
Other $3,272,500 $6,343,385 $766,231 $2,500,443 12,882,559
Loans to participants 20,130 224,054 13,797 59,757 730,838 275,932 1,324,508
------------------------------------------------------------------------------------------
Total assets 3,292,630 6,567,439 780,028 2,560,200 31,811,665 4,734,807 49,746,769
Withdrawals payable to participants 14,965 118,460 40,022 34,273 1,427,294 312,454 1,947,468
------------------------------------------------------------------------------------------
Net assets available for plan benefits $3,277,665 $6,448,979 $740,006 $2,525,927 $30,384,371 $4,422,353 $47,799,301
==========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Investment income:
Net unrealized appreciation (depre-
ciation) in current value of
securities $ 572,085 $ 369,618 $ (30,254) $(2,184,687) $(1,273,238)
Net realized gain (loss) on security sales:
Common stock of New York State
Electric & Gas Corporation 44,022 44,022
Other 21,185 14,214 (1,207) 34,192
------------------------------------------------------------------------------------------
593,270 383,832 (31,461) (2,140,665) (1,195,024)
Dividends:
New York State Electric & Gas
Corporation 2,232,419 2,232,419
Other 206,710 678,852 86,457 $ 68,462 1,040,481
Interest on securities $ 259,723 259,723
Interest on loans to participants 5,861 16,342 2,494 6,830 75,561 107,088
------------------------------------------------------------------------------------------
805,841 1,079,026 57,490 75,292 167,315 259,723 2,444,687
Contributions:
Employer 1,177,250 1,177,250
Employee 1,284,695 1,289,058 463,056 675,717 4,514,929 8,227,455
Interfund transfers (net) 446,305 1,286,825 324,028 6,582 (1,824,342) (239,398) -0-
------------------------------------------------------------------------------------------
Total additions 2,536,841 3,654,909 844,574 757,591 4,035,152 20,325 11,849,392
------------------------------------------------------------------------------------------
Withdrawal benefits-stock 620,045 620,045
Withdrawal benefits-cash 12,286 78,891 2,794 50,954 72,304 217,229
Withdrawal benefits payable 219,591 381,037 24,055 47,795 248,654 15,567 936,699
Transfers to Salaried Plan 47,447 33,709 23,462 24,344 49,126 6,885 184,973
Trustee fees 15,789 15,789
------------------------------------------------------------------------------------------
Total deductions 279,324 493,637 50,311 123,093 917,825 110,545 1,974,735
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1993
(Continued)
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
----------------------------------------------------------------------------------------
Net increase (decrease) 2,257,517 3,161,272 794,263 634,498 3,117,327 (90,220) 9,874,657
Net assets available for plan
benefits at beginning of year 3,277,665 6,448,979 740,006 2,525,927 30,384,371 4,422,353 47,799,301
----------------------------------------------------------------------------------------
Net assets available for plan
benefits at end of year $5,535,182 $9,610,251 $1,534,269 $3,160,425 $33,501,698 $4,332,133 $57,673,958
========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Investment income:
Net unrealized appreciation (depre-
ciation) in current value of
securities $ 145,148 $ 151,323 $ (3,258) $ 3,259,108 $ 3,552,321
Net realized gain on security sales:
Common stock of New York State
Electric & Gas Corporation 79,466 79,466
Other 5,913 24,041 2,749 32,703
------------------------------------------------------------------------------------------
151,061 175,364 (509) 3,338,574 3,664,490
Dividends:
New York State Electric & Gas
Corporation 1,792,905 1,792,905
Other 150,150 419,508 27,552 $ 48,424 645,634
Interest on securities $ 391,487 391,487
Interest on loans to participants 3,133 11,278 1,253 5,639 41,351 62,654
------------------------------------------------------------------------------------------
304,344 606,150 28,296 54,063 5,172,830 391,487 6,557,170
Contributions:
Employer 1,062,874 1,062,874
Employee 919,697 895,177 437,448 821,708 4,333,031 7,407,061
Interfund transfers (net) 1,060,261 877,590 343,167 597,839 835,604 (3,714,461) -0-
------------------------------------------------------------------------------------------
Total additions 2,284,302 2,378,917 808,911 1,473,610 11,404,339 (3,322,974) 15,027,105
Withdrawal benefits-stock 337,311 337,311
Withdrawal benefits-cash 42,038 46,861 13,800 25,146 124,136 251,981
Withdrawal benefits payable 14,437 76,097 40,022 22,707 910,803 43,586 1,107,652
Transfers to Salaried Plan 43,787 100,286 15,083 7,219 375,917 46,993 589,285
Trustee fees 25,104 25,104
------------------------------------------------------------------------------------------
Total deductions 100,262 223,244 68,905 55,072 1,624,031 239,819 2,311,333
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1992
(Continued)
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Government Money Company Investment
Appreciation Equity Obligation Market Stock Contract
Fund Fund Fund Fund Fund Fund Total
------------------------------------------------------------------------------------------
Net increase (decrease) 2,184,040 2,155,673 740,006 1,418,538 9,780,308 (3,562,793) 12,715,772
Net assets available for plan
benefits at beginning of year 1,093,625 4,293,306 -0- 1,107,389 20,604,063 7,985,146 35,083,529
------------------------------------------------------------------------------------------
Net assets available for plan
benefits at end of year $3,277,665 $6,448,979 $740,006 $2,525,927 $30,384,371 $4,422,353 $47,799,301
==========================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Money Company Investment
Appreciation Equity Market Stock Contract
Fund Fund Fund Fund Fund Total
---------------------------------------------------------------------------------
Investment income:
Net unrealized appreciation
in current value of securities $ 182,689 $ 277,004 $ 2,091,709 $ 2,551,402
Net realized gain on security sales:
Common stock of New York State
Electric & Gas Corporation 7,401 7,401
Other 3,103 23,997 27,100
---------------------------------------------------------------------------------
185,792 301,001 2,099,110 2,585,903
Dividends:
New York State Electric & Gas
Corporation 1,274,062 1,274,062
Other 67,968 336,528 $ 60,161 464,657
Interest on securities $ 590,672 590,672
Interest on loans to participants 63 4,435 1,837 18,058 7,286 31,679
---------------------------------------------------------------------------------
253,823 641,964 61,998 3,391,230 597,958 4,946,973
Contributions:
Employer 464,588 464,588
Employee 307,750 661,174 227,447 3,734,039 1,443,791 6,374,201
Interfund transfers (net) 556,822 (118,521) (32,875) (64,277) (341,149) -0-
---------------------------------------------------------------------------------
Total additions 1,118,395 1,184,617 256,570 7,525,580 1,700,600 11,785,762
Withdrawal benefits-stock 339,381 339,381
Withdrawal benefits-cash 36,989 20,202 166,145 223,336
Withdrawal benefits payable 528 22,037 7,318 315,530 122,964 468,377
Transfers to Salaried Plan 24,242 17,907 6,290 221,423 63,396 333,258
Trustee fees 31,311 31,311
---------------------------------------------------------------------------------
Total deductions 24,770 76,933 33,810 876,334 383,816 1,395,663
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York State Electric & Gas Corporation
Tax Deferred Savings Plan for Hourly Paid Employees
Schedule III - Changes in Net Assets Available for Plan Benefits
Year ended December 31, 1991
(Continued)
<S> <C> <C> <C> <C> <C> <C> <C>
Guaranteed
Capital Money Company Investment
Appreciation Equity Market Stock Contract
Fund Fund Fund Fund Fund Total
----------------------------------------------------------------------------------
Net increase 1,093,625 1,107,684 222,760 6,649,246 1,316,784 10,390,099
Net assets available for plan
benefits at beginning of year -0- 3,185,622 884,629 13,954,817 6,668,362 24,693,430
----------------------------------------------------------------------------------
Net assets available for plan
benefits at end of year $1,093,625 $4,293,306 $1,107,389 $20,604,063 $7,985,146 $35,083,529
==================================================================================
</TABLE>
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Post-effective Amendment No. 1 to Form S-8 No. 33-31897) pertaining to the
New York State Electric & Gas Corporation Tax Deferred Savings Plan for Hourly
Paid Employees of our report dated February 18, 1994, with respect to the
financial statements and schedules of the New York State Electric & Gas
Corporation Tax Deferred Savings Plan for Hourly Paid Employees included in
this Annual Report (Form 11-K) for the year ended December 31, 1993.
Syracuse, New York Ernst & Young
March 7, 1994
