UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4315
ORANGE AND ROCKLAND UTILITIES, INC.
(Exact name of registrant as specified in its charter)
New York 13-1727729
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
One Blue Hill Plaza, Pearl River, New York 10965
(Address of principal executive offices) (Zip Code)
(914) 352-6000
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (l) 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 the number of shares outstanding of each of the issuer's
class of common stock, as of the close of the latest practicable date.
Common Stock - $5 Par Value 13,653,613 shares
(Class) (Outstanding at October 31, 1995)<PAGE>
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
at September 30, 1995 and December 31, 1994 1
Consolidated Statements of Income (Unaudited)
for the three months and nine months ended
September 30, 1995 and September 30, 1994 3
Consolidated Cash Flow Statements (Unaudited)
for the nine months ended September 30, 1995
and September 30, 1994 4
Notes to Consolidated Financial Statements 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 17
ITEM 6. Exhibits and Reports on Form 8-K 18
Signatures 19
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Assets
<CAPTION>
September 30, December 31,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Utility Plant:
Electric $ 990,878 $ 951,019
Gas 207,254 198,755
Common 56,243 55,445
Utility Plant in Service 1,254,375 1,205,219
Less accumulated depreciation 422,028 398,584
Net Utility Plant in Service 832,347 806,635
Construction work in progress 33,031 49,654
Net Utility Plant 865,378 856,289
Non-utility Property:
Non-utility property 32,907 34,585
Less accumulated depreciation, depletion and amortization 13,908 13,977
Net Non-utility Property 18,999 20,608
Current Assets:
Cash and cash equivalents 5,076 16,081
Temporary cash investments - 1,839
Customer accounts receivable, less allowance for
uncollectible accounts of $2,234 and $2,200 56,749 44,105
Accrued utility revenue 16,091 27,273
Other accounts receivable, less allowance for
uncollectible accounts of $170 and $209 10,323 17,384
Gas marketing accounts receivable, less allowance
for uncollectible accounts of $112 and $327 36,910 58,470
Materials and supplies (at average cost) 35,989 37,836
Prepaid property taxes 31,569 19,327
Prepayments and other current assets 28,659 28,877
Total Current Assets 221,366 251,192
Deferred Debits:
Income tax recoverable in future rates 69,829 73,261
Extraordinary property loss - Sterling nuclear project 5,722 10,139
Deferred Order No. 636 transition costs 9,060 13,480
Deferred revenue taxes 15,759 16,888
Deferred pension and other postretirement benefits 10,610 10,505
IPP settlements 40,195 17,821
Unamortized debt expense (amortized over
term of securities) 11,801 10,493
Deferred Federal income taxes 32,790 34,645
Other deferred debits 29,269 32,318
Total Deferred Debits 225,035 219,550
Total $1,330,778 $1,347,639
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<PAGE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Capitalization and Liabilities
<CAPTION>
September 30, December 31,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Capitalization:
Common stock (13,653,605 and 13,652,913 shares
outstanding) $ 68,268 $ 68,265
Premium on capital stock 133,607 133,595
Capital stock expense (6,118) (6,116)
Retained earnings 188,859 183,659
Total Common Stock Equity 384,616 379,403
Non-redeemable preferred stock (428,443 shares
outstanding) 42,844 42,844
Non-redeemable cumulative preference stock (12,544
and 13,025 shares outstanding) 409 424
Total Non-Redeemable Stock 43,253 43,268
Redeemable preferred stock (27,738 shares outstanding) 2,774 2,774
Long-term debt 359,757 359,622
Total Capitalization 790,400 785,067
Non-current Liabilities:
Reserve for claims and damages 5,179 4,713
Postretirement benefits 13,230 15,625
Pension costs 37,907 39,854
Obligation under capital leases - 275
Total Non-current Liabilities 56,316 60,467
Current Liabilities:
Lease obligations due within one year 407 518
Long-term debt due within one year 184 19,392
Preferred stock to be redeemed within one year 1,384 1,384
Notes payable 10,474 -
Commercial paper 34,300 29,400
Accounts payable 81,939 63,855
Gas marketing accounts payable 35,911 71,913
Dividends payable 725 725
Customer deposits 5,389 5,669
Accrued Federal income and other taxes 1,082 5,949
Accrued interest 4,518 8,608
Refunds to customers 15,063 10,265
Other current liabilities 16,225 16,127
Total Current Liabilities 207,601 233,805
Deferred Taxes and Other:
Deferred Federal income taxes 212,644 207,952
Deferred investment tax credits 16,490 17,109
Accrued Order No. 636 transition costs 9,060 13,480
Accrued IPP settlement agreements 17,500 8,000
Refundable gas costs 10,076 7,554
Refundable fuel costs 6,150 10,366
Other deferred credits 4,541 3,839
Total Deferred Taxes and Other 276,461 268,300
Total $1,330,778 $1,347,639
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income (Unaudited)
<CAPTION>
Three Months Nine Months
Ended Sept 30, Ended Sept 30,
1995 1994 1995 1994
(Thousands of Dollars)(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $138,039 $144,265 $353,985 $370,375
Gas 14,533 12,411 93,943 119,646
Electric sales to other utilities 440 1,414 1,637 6,229
Total Utility Revenues 153,012 158,090 449,565 496,250
Diversified activities 78,894 79,776 339,547 261,973
Total Operating Revenues 231,906 237,866 789,112 758,223
Operating Expenses:
Operations:
Fuel used in electric production 20,927 22,278 54,772 68,845
Electricity purchased for resale 15,069 14,019 40,209 36,438
Gas purchased for resale 7,046 6,080 47,561 71,352
Non-utility gas marketing purchases 76,730 77,453 332,840 251,003
Other expenses of operation 33,097 37,084 100,685 110,080
Maintenance 9,317 10,980 29,917 31,452
Depreciation and amortization 9,792 9,071 28,165 26,375
Amortization of property losses 1,540 1,416 4,621 4,247
Taxes other than income taxes 24,104 24,344 71,455 73,359
Federal income taxes 7,841 7,077 15,867 21,539
Deferred Federal income taxes 2,717 2,598 6,483 438
Amortization of investment tax credit (28) (30) (88) (90)
Total Operating Expenses 208,152 212,370 732,487 695,038
Income from Operations 23,754 25,496 56,625 63,185
Other Income and (Deductions):
Investigation costs (1,535) (1,722) (3,542) (7,731)
Other - net 52 104 5,283 299
Taxes other than income taxes (39) (33) (560) (87)
Federal income taxes 558 412 1,771 2,537
Deferred Federal income taxes (26) 261 (2,100) 188
Amortization of investment tax credit 177 178 531 536
Total Other Income and (Deductions) (813) (800) 1,383 (4,258)
Income Before Interest Charges 22,941 24,696 58,008 58,927
Interest Charges:
Interest on long-term debt 6,649 7,637 20,501 22,627
Other interest 1,333 469 3,470 1,808
Amortization of debt premium and expense-net 349 300 1,029 903
Allowance for borrowed funds used during
construction (182) (92) (827) (241)
Total Interest Charges 8,149 8,314 24,173 25,097
Net Income 14,792 16,382 33,835 33,830
Dividends on preferred and preference stock,
at required rates 784 812 2,353 2,438
Earnings applicable to common stock $ 14,008 $ 15,570 $ 31,482 $ 31,392
Avg. number of common shares outstanding (000's) 13,654 13,627 13,653 13,575
Earnings per average common share outstanding $ 1.03 $ 1.14 $ 2.31 $ 2.31
Dividends declared per common share outstanding $ - $ - $ 1.93 $ 1.90
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
<PAGE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Cash Flow Statements (Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Cash Flow from Operations:
Net income $33,835 $33,830
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 27,514 26,674
Deferred Federal income taxes 8,583 250
Amortized investment tax credit (619) (626)
Deferred and refundable fuel and gas costs (1,694) 7,822
Allowance for funds used during construction (853) (330)
Other non-cash charges 6,734 4,537
Changes in certain current assets and liabilities:
Accounts and gas marketing accounts receivable,
net and accrued utility revenues 27,159 21,108
Materials and supplies 1,620 (547)
Prepaid property taxes (12,242) (11,383)
Prepayments and other current assets 218 (8,441)
Operating and gas marketing accounts payable (17,918) 6,328
Accrued Federal Income and other taxes (4,867) (1,642)
Accrued interest (4,090) (4,740)
Refunds to customers 4,798 1,353
Other current liabilities (182) 8,820
Other-net (12,190) 3,098
Net Cash Provided from Operations 55,806 86,111
Cash Flow from Investing Activities:
Additions to plant (36,463) (29,759)
Temporary cash investments 1,839 14
Allowance for funds used during construction 853 330
Net Cash Used in Investing Activities (33,771) (29,415)
Cash Flow from Financing Activities:
Proceeds from:
Issuance of common stock - 3,759
Issuance of long-term debt 44,048 55,000
Retirements of:
Long-term debt (63,441) (55,721)
Capital lease obligations (386) (357)
Net borrowings (repayments) under
short-term debt arrangements* 15,374 (40,955)
Dividends on preferred and common stock (28,635) (28,185)
Net Cash Used in Financing Activities (33,040) (66,459)
Net Change in Cash and Cash Equivalents (11,005) (9,763)
Cash and Cash Equivalents at Beginning of Period 16,081 14,256
Cash and Cash Equivalents at End of Period $ 5,076 $ 4,493
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $26,247 $29,001
Federal income taxes $13,575 $15,229
* Debt with maturities of 90 days or less.
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of September 30, 1995, the consolidated
statements of income for the three month and nine month periods ended
September 30, 1995 and 1994, and the consolidated cash flow statements
for the nine month periods then ended have been prepared by Orange and
Rockland Utilities, Inc. (the "Company") without an audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position
and results of operations at September 30, 1995, and for all periods
presented, have been made. The amounts in the consolidated balance sheet
as of December 31, 1994 are from audited financial statements.
2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
unaudited consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Company's
December 31, 1994 Annual Report to Shareholders. The results of
operations for the period ended September 30, 1995 are not necessarily
indicative of the results of operations for the full year.
3. The consolidated financial statements include the accounts of the
Company, all subsidiaries and the Company's pro rata share of an
unincorporated joint venture. All significant intercompany balances and
transactions have been eliminated.
4. Contingencies at September 30, 1995 are substantially the same as the
contingencies described in the "Notes to Consolidated Financial
Statements" included in the Company's December 31, 1994 Annual Report to
Shareholders, which material is incorporated by reference to the
Company's December 31, 1994 Form 10-K Annual Report, except the status of
legal proceedings and related regulatory matters is updated in Part II,
Item 1. Legal Proceedings.
5. Certain amounts from prior years have been reclassified to conform with
the current year presentation.
6. On September 8, 1994, the Company adopted a formal plan to sell the six
radio broadcasting properties operated by a wholly owned indirect
subsidiary, Atlantic Morris Broadcasting, Inc. ("AMB"), and AMB
subsequently entered into contracts for the sale of the stations. The
only sale yet to be finalized is WALL/WKOJ in Middletown, New York. On
September 15, 1995, the FCC dismissed a Petition for Reconsideration that
had been filed with respect to the FCC's approval of this sale. However,
on October 4, 1995, an Application for Review of the September 15, 1995
decision was filed and is pending. The Company filed its Opposition to
Application for Review on October 19, 1995. The sale of the stations
will not have a material effect on the Company's Consolidated Financial
Statements.
7. On January 23, 1995, O&R Energy, Inc. (now NORSTAR Holdings, Inc.) a
wholly owned indirect subsidiary of the Company, joined with Shell Gas
Trading Co. to create a new full service natural gas services and
<PAGE>
marketing company called NORSTAR Energy Limited Partnership ("NORSTAR
Partnership"). During the first quarter of 1995, the Company realized a
gain on the formation of the NORSTAR Partnership of $2.9 million. The
gain resulted from the effective sale of a 26.9% minority interest in the
gas marketing business. This net gain has been recorded in the
Consolidated Statements of Income under the title Other Income and
(Deductions) as follows: Other-Net, $5.0 million; Taxes other than
income taxes, ($.4) million and Federal income taxes, ($1.7) million.
8. The financial statements of the Company are based on generally accepted
accounting principles, including the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types
of Regulation" ("SFAS No. 71"), which gives recognition to the rate-
making and accounting practices of the regulatory agencies. The
principal effect of the rate-making process on the Company's financial
statements is that of the timing of the recognition of incurred costs.
If rate regulation provides reasonable assurance that an incurred cost
will be recovered in a future period by inclusion of that cost in rates,
SFAS No. 71 requires the capitalization of the cost. Regulatory assets
represent probable future revenue associated with certain incurred costs,
as these costs are recovered through the rate-making process.
In March 1995, the Financial Accounting Standards Board issued SFAS
No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of". This Statement imposes criteria for the
continued recognition of regulatory assets by requiring that such assets
be probable of future recovery at each balance sheet date. The Company
anticipates adopting this standard on January 1, 1996 and does not expect
that adoption will have a material impact on the financial position or
results of operations of the Company based on the current regulatory
structure in which the Company operates. This conclusion may change in
the future as competitive factors influence wholesale and retail pricing
in this industry.
9. During 1994, the Company negotiated settlement agreements with two of the
three independent power producers ("IPP") scheduled to provide electric
generating capacity and energy services to the Company in the late
1990's. On June 14, 1995, the Company entered into an agreement with the
remaining IPP, Wallkill Generating Company, L.P. ("Wallkill Generating"),
which was to construct and operate a gas-fired combined cycle generating
facility and sell 95 Mw of capacity and associated energy to the Company.
At September 30, 1995, $40.2 million of termination costs associated with
these three settlement agreements have been deferred in accordance with
regulatory accounting procedures pending a determination of the
recoverability of the costs in rates. In January 1995, the New Jersey
Board of Public Utility Commissioners ("NJBPU") authorized the recovery
of $.9 million over a 12-month period ending December 31, 1995 for the
portion of one of the settlement agreements applicable to New Jersey
electric operations. Additional recovery of approximately $10.3 million
applicable to New Jersey electric operations will be addressed in pending
and future proceedings before the NJBPU. The recovery of the portion of
termination costs applicable to New York operations, which amounted to
approximately $29.2 million at September 30, 1995, will be addressed in
the Company's electric base rate proceeding currently pending before the
New York Public Service Commission ("NYPSC"). Management believes that
the termination costs were prudently incurred and therefore should be
fully recoverable in rates.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition:
Financial Performance
The Company's consolidated earnings per average common share outstanding for
the third quarter of 1995 were $1.03 as compared to $1.14 for the third
quarter of 1994. Fluctuations within the components of earnings are discussed
in the "Results of Operations". The average number of common shares
outstanding were 13.7 million for the third quarter of 1995 and 13.6 million
for the third quarter of 1994.
The current quarterly dividend rate of $.645 is equivalent to an annual
dividend rate of $2.58 per share. Dividends declared during the twelve months
ended September 30, 1995 amounted to $2.57 with a dividend payout ratio of
103.21% as compared to $2.53 a year ago with a payout ratio of 94.4%.
The return on average common equity for the twelve months ended September 30,
1995 was 8.99%, as compared to 9.67% for the twelve months ended September 30,
1994.
Capital Resources and Liquidity
At September 30, 1995, the Company and its utility subsidiaries had unsecured
bank lines of credit totaling $66.5 million. The Company may borrow under the
lines of credit through the issuance of promissory notes to the banks. The
Company, however, utilizes such lines of credit to fully support commercial
paper borrowings. The aggregate amount of borrowings through the issuance
of promissory notes and commercial paper cannot exceed the aggregate lines
of credit. In addition, non-utility lines of credit amounted to $25.0 million
at September 30, 1995, and the non-utility subsidiaries may undertake short-
term borrowings or make short-term investments. The average daily balance
of short-term borrowings for the nine months ended September 30, 1995 amounted
to $34.7 million at an effective interest rate of 6.7% as compared to $30.4
million at an effective interest rate of 5.8% for the same period of 1994.
The level of temporary cash investments for the nine months ended
September 30, 1995 increased to an average daily balance of $8.3 million at an
effective interest rate of 5.8% from $8.0 million at an effective interest
rate of 3.6% for the same period of 1994.
The NYPSC has authorized the Company to issue up to 750,000 shares of common
stock under its Dividend Reinvestment and Stock Purchase Plan ("DRP") and
its Employee Stock Purchase and Dividend Reinvestment Plan ("ESPP"). At
the option of the Company, however, common stock used to satisfy the
requirements of the DRP and ESPP may be purchased on the open market.
Effective November 1, 1994, common stock needed to satisfy the DRP and ESPP
requirements is being purchased on the open market.
On July 27, 1995, the New York State Energy Research and Development Authority
("NYSERDA") issued, on behalf of the Company, $44 million of variable rate
Pollution Control Refunding Revenue Bonds due August 1, 2015 ("1995 Bonds").
The proceeds from the issuance of the 1995 Bonds, together with other Company
funds, was used to refund, on August 20, 1995, the $44 million NYSERDA 9%
Pollution Control Revenue Bonds, 1985 Series ("1985 Bonds") issued on behalf
of the Company.
<PAGE>
Two issues of First Mortgage Bonds matured on August 15, 1995; Orange and
Rockland Utilities, Inc., $17 million Series H, 4 7/8% and Rockland Electric
Company ("RECO"), a wholly-owned utility subsidiary of the Company, $2 million
Series C, 4 5/8%.
Rate Activities
New York
Gas:
On January 16, 1992, the Company filed an application for an increase in gas
rates with the NYPSC. The Settlement Agreement in that case, which was
approved by the NYPSC on September 30, 1992 provided, among other things, for
multi-year rate adjustments through 1996 and for certain gas incentives. The
second adjustment to gas rates under the Settlement Agreement, which amounted
to an increase of $3.8 million or 2.5%, was to become effective on January 1,
1994. As a result of the ongoing investigation of alleged financial
improprieties, however, the increase was first extended to June 30, 1994 and
then further extended to December 30, 1994. On November 4, 1994, the NYPSC
issued an Order terminating the Settlement Agreement effective December 31,
1994. The Order denies the Company the opportunity for rate adjustments in
the third and fourth years (1995 and 1996) of the four-year Settlement
Agreement. However, the Order authorizes the Company to defer the second-
stage rate adjustments and all previously authorized reconciliations
pertaining to periods prior to December 31, 1994, pending review and audit by
the NYPSC staff and the conclusion of the NYPSC's investigation of alleged
financial improprieties. In addition, on February 7, 1995, the Accounting and
Finance Division of the NYPSC issued an interpretation of the November 4, 1994
termination order which stated that the gas incentive mechanism related to the
attainment of certain goals is no longer available. The Company did not
contest this interpretation.
On October 2, 1995, the Company, the NYPSC Staff, and the New York State
Consumer Protection Board, reached a settlement which resolves all
outstanding issues relating to the NYPSC investigation of alleged financial
improprieties. The settlement provides for, among other things, the
cancellation of the second stage gas base rate increase discussed above. All
deferred balances resulting from expense reconciliations and deferral of the
second stage rate adjustment are to be offset with an equal amount of deferred
credits resulting from certain changes to depreciation approved as part of the
original multi-year rate plan. In addition, the settlement provides for the
recognition in gas rates of the change in accounting required by SFAS 106 -
Employee Postretirement Benefits Other Than Pension. The annual cost increase
due to gas operations as a result of SFAS 106 will be offset by an equal
amount of deferred depreciation credits. While a majority of the participants
have settled, it is being contested by certain parties. A final NYPSC
decision is expected by April 1996.
Electric:
On June 10, 1994, the NYPSC issued an Order (the "June Order") which
terminated the Company's January 1993 electric rate increase application. The
June Order provided, among other things, for a reduction in the threshold for
measuring excess earnings from 12.0% to 10.6% effective retroactively to
January 1, 1994. All earnings in excess of 10.6% were to be deferred for
future disposition pending the conclusion of the ongoing investigation.
<PAGE>
On September 19, 1994, the Company filed an appeal with the Supreme Court of
New York challenging the legality of the June Order. The appeal argues that
by changing the excess earnings threshold from 12.0% to 10.6% for the first
six months of 1994, the NYPSC engaged in retroactive ratemaking. The appeal
also argues that there is no evidence in the record to support a determination
that the cost of equity is 10.6%. This appeal will be withdrawn pursuant to a
Stipulation approved by the NYPSC on August 1, 1995, as described below.
On February 17, 1995, the Company submitted a compliance filing regarding the
operation of the Revenue Decoupling Mechanism ("RDM"). The filing included a
proposal to reduce the RDM Adjustment Factor from $7.7 million to $0 effective
May 1, 1995 reflecting the completion of the recovery of an RDM
undercollection applicable to the year 1993. This equates to a 2.3% annual
reduction in revenue. In addition, the filing requested that a net RDM
overcollection of $0.7 million for the year 1994 be retained by the Company as
a future rate moderator, subject to NYPSC verification. On April 19, 1995,
the NYPSC approved the proposals, and the reduction of $7.7 million in the RDM
Adjustment Factor became effective on May 1, 1995.
On May 25, 1995, the Company filed with the NYPSC for a decrease in electric
revenues of $6.1 million to be effective April 1, 1996 (Case 95-E-0491). This
equates to an overall reduction of 1.8 percent in retail rates. The filing
reflects a reduction in operating expenses due to the complete recovery of
Orange and Rockland Utilities, Inc.'s share of the Sterling Nuclear Project
and other cost reductions. The Company proposed a multi-year rate plan
covering the three-year period ending on March 31, 1999 with no base rate
increases in the second and third year of the plan. The Company has proposed
an overall return on capital of 9.17% with a sharing mechanism governing any
return on common equity above 11.2%.
On August 1, 1995, the NYPSC approved a Stipulation which provides for the
early implementation of the Company's proposed annual rate reduction of $6.1
million. As a result, reduced rates became effective August 1, 1995, which
will produce a revenue reduction of $3.8 million for the period August 1,
1995 - March 31, 1996. The Stipulation also increased the excess earnings
threshold from 10.6% to 11.3%, with equal sharing of earnings above 11.3%
between shareholders and ratepayers for the period January 1, 1995 through
March 31, 1996.
The revenue reduction will be offset by the deferred revenue associated
with the 1994 electric earned return on equity in excess of 10.6% and the
customers' share of earnings under the new sharing mechanism effective
January 1, 1995. A NYPSC action regarding permanent rates is expected for
rates effective April 1, 1996. The Stipulation also provides that the Company
will withdraw its September 19, 1994 appeal to the Supreme Court of New York
challenging the June Order.
Other:
On November 10, 1994, the Company filed with the NYPSC, a quantification of
the rate-making effects of its ongoing investigation into prior financial
improprieties. The Company requested that the NYPSC approve a refund of
approximately $3.4 million to its New York electric and gas customers. This
amount would be in addition to the $369,000 already refunded by the Company.
<PAGE>
This amount was charged to operations in the fourth quarter of 1994. The
NYPSC then instituted a proceeding (Case 93-M-0849) to provide the opportunity
for other parties, including the NYPSC Staff which was conducting an
independent investigation of the Company, to be heard on this matter. On
July 6, 1995, the NYPSC issued an order stating that the issues of the amount,
timing and allocation of New York ratepayer refunds as a result of the
investigation in Case 93-M-0849 should be considered in the context of the
Company's current electric base rate case and ordered the consolidation of the
two cases.
On October 2, 1995, the Company, the NYPSC Staff and the New York State
Consumer Protection Board reached a settlement which resolves all outstanding
issues relating to the NYPSC investigation of alleged financial improprieties.
The settlement provides for a total of $8.5 million in rate relief for the
Company's New York customers. The amount attributable to electric operations
is $6.5 million and the amount attributable to gas operations is $2.0 million.
The full impact of the settlement is reflected in the Company's results of
operations after recording a charge of approximately $2.2 million during the
third quarter of 1995. A final NYPSC decision is expected by April 1996. The
Company is unable to predict the final results of this proceeding and what
modification, if any, will be made to the amount proposed to be refunded.
New Jersey
Under an agreement with the NJBPU to return to customers any funds found to
be misappropriated or otherwise questionable as a result of its investigation
of certain Company officers and former employees, RECO refunded to New Jersey
ratepayers $93,000 through reductions in the applicable fuel adjustment
charges in February and March 1994. In December 1994, RECO submitted a
proposal to the NJBPU to refund an additional $704,000. By order dated
January 27, 1995, the NJBPU approved this proposal and the refund was made in
February 1995.
On November 3, 1993, the NJBPU commenced its periodic management audit of
RECO. The NJBPU audit included, in addition to a standard review of operating
procedures, policies and practices, a review of the posture of RECO management
regarding business ethics and a determination regarding the effect of such
events on RECO ratepayers. The audit findings are contained in a report
titled "Final Report on An Ethics Review of Rockland Electric Company" (Docket
No. EA900302-48) dated December 1, 1994. The NJBPU subsequently initiated an
examination of senior management appointments and changes to the composition
of the Company's Board of Directors and the development of an ethics program.
The results of this examination are contained in a report titled "Final Report
of an Ethics Oversight Review of Rockland Electric Company".
The final Management Audit, Ethics Review, and Oversight Ethics Review reports
were approved by the NJBPU on July 7, 1995. The Oversight Ethics Review
report acknowledges that the NJBPU has approved refunds to the Company's
New Jersey customers and generally comments favorably about the changes
instituted by the Company. The Company recorded an additional charge of
$600,000 to operations during the third quarter of 1995. The NJBPU
investigation into these matters is continuing and the Company is unable to
predict what modification, if any, will be made to the amount refunded.
<PAGE>
QUARTERLY COMPARISON
Earnings per average common share outstanding for the third quarter of 1995
amounted to $1.03 per share as compared to $1.14 per share for the third
quarter of 1994.
The results largely reflect the decrease in revenues associated with the
customer refund provisions described in the Rate Activities section under the
caption "Other" as well as the performance of the Company's diversified
operations during the current quarter compared with the same period a year
ago. Partially offsetting this, however, were higher electric sales resulting
from the unusually warm summer weather, coupled with the Company's ability to
reduce operating and interest expenses in its core utility business.
Electric and Gas Revenues
Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, decreased by $5.1 million in the third quarter of 1995 as
compared to the same quarter of 1994.
Electric operating revenues during the current quarter were $138.5 million as
compared to $145.7 million for the third quarter of 1994, a decrease of $7.2
million. The components of the changes in electric operating revenues for the
quarter ended September 30, 1995 as compared to the same quarter of 1994 are
as follows:
(Millions of Dollars)
Retail sales:
Base Revenues* $ (3.7)
Fuel cost recoveries .3
Sales volume changes 5.9
Subtotal 2.5
Sales for resale (1.0)
Other operating revenue:
RDM revenue reconciliation
and DSM incentives (4.2)
Customer refund provision (3.6)
Other ( .9)
Total $ (7.2)
*Includes miscellaneous surcharges and revenue tax recoveries.
Actual total sales of electric energy to retail customers during the third
quarter of 1995 were 1,310,370 megawatt hours ("Mwh"), compared with 1,242,025
Mwh during the comparable period a year ago. This increase is attributable to
warmer weather, which resulted in the Company experiencing record peak demands
on seven separate occasions during the summer. Before reflecting the effect
of the RDM and the DSM incentives in the Company's New York jurisdiction,
electric revenues associated with these sales were $147.7 million during the
current quarter compared to $145.2 million during the third quarter of 1994,
an increase of $2.5 million.
New York electric revenue targets under the Company's RDM, as established in a
base rate case, net of fuel and taxes, amounted to $67.3 million for the third
quarter of 1995. In accordance with RDM procedures, deviations between
revenue targets and actual sales revenue are either recovered from or returned
<PAGE>
to customers. The variation between the target revenue and the Company's
actual sales revenue of $74.6 million for the third quarter of 1995 was $7.3
million, which was recorded as a reduction to revenues. In the third quarter
of 1994, the Company recorded $3.2 million as a reduction to revenue.
With regard to the DSM goal achievement incentives, the Company's performance
during the third quarter of 1995 allowed it to record $.1 million of incentive
income. In 1994 the Company recorded $.2 million for the third quarter.
The Company's performance during the remainder of 1995 will determine what, if
any, RDM revenue adjustments may be recorded.
Revenues from sales to other utilities in the third quarter of 1995 amounted
to $.4 million, a decrease of $1.0 million from a year ago. Sales to such
utilities totaled 20,406 Mwh, compared with 64,500 Mwh in the third quarter a
year ago. Because revenues from these sales are primarily a recovery of costs
in accordance with applicable tariff regulations, they have little impact on
the Company's annual earnings.
Gas operating revenues during the quarter were $14.5 million compared to $12.4
million for the third quarter of 1994, an increase of $2.1 million. The
components of the changes in gas operating revenues for the quarter ended
September 30, 1995 as compared to the same quarter of 1994 are as follows:
(Millions of Dollars)
Sales to firm customers:
Base revenues* $ -
Gas cost recoveries ( .2)
Sales volume changes -
Subtotal ( .2)
Sales to interruptibles 1.8
Other operating revenue .5
Total $ 2.1
* Includes miscellaneous surcharges and revenue tax recoveries.
Gas sales to firm customers during the third quarter of 1995 totaled 1,556
million cubic feet ("Mmcf"), compared with 1,581 Mmcf during the same period a
year ago. Gas revenues from firm customers were $11.0 million, compared with
$11.2 million in the third quarter of 1994. The revenue decline results from
the recovery of lower gas costs as well as the lower sales compared with the
same period a year ago.
Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas
Marketing
The cost of fuel used in the production of electricity and purchased
electricity costs decreased by $.3 million during the third quarter of 1995
when compared to the same quarter of 1994. The components of the change are
as follows:
(Millions of Dollars)
Prices paid for fuel and purchased power $ ( .6)
Changes in kilowatt-hours generated
or purchased .5
Deferred fuel charge ( .2)
Total $ ( .3)
<PAGE>
Purchased gas costs for utility operations were $7.0 million in the third
quarter of 1995 compared to $6.1 million in 1994, an increase of $.9 million.
The components of the changes in purchased gas costs are as follows:
(Millions of Dollars)
Prices paid for gas supplies* $( .3)
Gas sendout volume 6.7
Deferred fuel charges (5.5)
Total $ .9
*Net of refunds received from gas suppliers.
Other Operating and Maintenance Expenses
The Company's total operating and maintenance expenses excluding fuel,
purchased power and gas purchased for resale for the third quarter, decreased
by $4.2 million compared with the same period in 1994. The decrease in
expenses associated with utility operating expenses amounted to $4.8 million.
The change in diversified operation and maintenance expenses was an increase
of $.6 million.
The decrease in other utility operation and maintenance expense is the result
of a decrease in operation expenses of $3.4 million, of which $3.3 million is
attributable to Demand Side Management costs, a decrease in other taxes of
$.3 million and a decrease in maintenance of $1.7 million. These decreases
were offset by increases in depreciation and amortization expense of $.3
million and Federal income taxes of $.3.
Diversified Activities
The Company's diversified activities consist of gas marketing and land
development businesses conducted by wholly owned non-utility subsidiaries.
Revenues from diversified activities decreased by $.9 million for the third
quarter of 1995 as compared to the same quarter of 1994. The decrease in
operating expenses for all diversified activities of $.1 million is the result
of decreased gas purchases of $.7 million offset by increased operation
expenses of $.6 million.
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, increased by $.2
million during the third quarter of 1995 when compared to the same quarter of
1994. The increase is primarily the result of the lower costs associated with
the litigation involving former officers and others compared to a year ago and
lower interest costs.
YEAR TO DATE COMPARISON
Earnings per average common share outstanding for the nine months ended
September 30, 1995 and 1994 both amounted to $2.31 per share. Although
earnings are the same as the previous year, the results largely reflect the
decrease in revenues associated with the customer refund provisions described
<PAGE>
in the Rate Activities section under the caption "Other" as well as the
adverse performance of the Company's diversified operations during the current
year compared with last year. Partially offsetting this were higher electric
sales resulting from the unusually warm summer weather, coupled with the
Company's ability to reduce operating and interest expenses in its core
utility business. Additionally, the current period earnings reflect the
impact of the gain realized from the formation of the NORSTAR Partnership and
lower investigation and litigation costs.
Electric and Gas Revenues
Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, decreased by $46.7 million for the first nine months of 1995
as compared to the same period of 1994.
Electric operating revenues during the current period were $355.6 million as
compared to $376.6 million for the comparable period of 1994, a decrease of
$21.0 million. The components of the changes in electric operating revenues
for the nine months ended September 30, 1995 as compared to the same period in
1994 were as follows:
(Millions of Dollars)
Retail sales:
Base rates* $(8.9)
Fuel cost recoveries (5.4)
Sales volume changes 4.4
Subtotal (9.9)
Sales for resale (4.6)
Other operating revenues:
RDM revenue reconciliation
and DSM incentives (2.3)
Customer refund provision (3.6)
Other ( .6)
Total $(21.0)
*Includes miscellaneous surcharges and revenue tax recoveries.
Actual total sales of electric energy to retail customers during the first
nine months of 1995 were 3,446,899 Mwh, compared with 3,392,044 Mwh during the
comparable period a year ago. Before reflecting the effect of the RDM and the
DSM incentives in the Company's New York jurisdiction, electric revenue
associated with these sales was $366.2 million during the current period
compared to $376.1 million during the first nine months of 1994, a decrease of
$9.9 million.
New York electric revenue targets under the Company's RDM, as established in a
base rate case, amounted to $169.3 million for the first nine months of 1995.
In accordance with RDM procedures, deviations between revenue targets and
actual sales revenue are either recovered from or returned to customers. The
variation between the target revenue and the Company's actual sales revenue of
$180.4 million for the first nine months of 1995 was $11.1 million, which is
recorded as a reduction to revenue. For the first nine months of 1994, the
Company recorded a reduction in revenues of $8.8 million.
<PAGE>
With regard to the DSM goal achievement incentives provided for in the RDM
agreement, the Company's performance during the first nine months of 1995 and
1994 allowed it to record $.3 million of incentive related revenues.
The Company's performance during the remainder of 1995 will determine what, if
any, additional RDM revenue adjustments may be recorded.
Revenues from sales to other utilities in the first nine months of 1995
amounted to $1.6 million compared to $6.2 million a year ago. Such sales
totaled 84,910 Mwh compared with 238,675 Mwh in the first nine months of 1994.
Because revenues from these sales are primarily a recovery of costs in
accordance with applicable tariff regulations, they have little impact on the
Company's annual earnings.
Gas operating revenues during the first nine months of 1995 were $93.9 million
compared to $119.6 million for the first nine months of 1994, a decrease of
$25.7 million. The components of the changes in gas operating revenues for
the nine months ended September 30, 1995 as compared to the same period in
1994 are as follows:
(Millions of Dollars)
Sales to firm customers:
Base rates* $ 2.0
Gas cost recoveries (23.6)
Sales volume changes (5.4)
Subtotal (27.0)
Sales to interruptibles -
Sales for resale (.1)
Other operating revenue 1.4
Total $(25.7)
*Includes miscellaneous surcharges and revenue tax recoveries.
Firm gas sales amounted to 13,268 Mmcf during the first nine months of 1995, a
decrease of 11.2% from the 1994 level of 14,937 Mmcf. Gas revenues from firm
customers were $85.9 million in the current period compared to $112.9 million
during the first nine months of 1994. Sales of interruptible gas for the
first nine months of 1995 amounted to 1,273 mcf, an increase of 440 Mmcf from
1994. Revenues from these sales were $3.5 million for 1995 and 1994.
Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing
The cost of fuel used in the production of electricity and purchased
electricity costs decreased by $10.3 million for the first nine months of 1995
when compared to the $105.3 million recorded during the same period of 1994.
The components of the changes in electric energy costs are as follows:
(Millions of Dollars)
Prices paid for fuel and
purchased power $( 5.0)
Changes in kilowatt-hours
generated or purchased ( 3.4)
Deferred fuel charge ( 1.9)
Total $(10.3)
<PAGE>
Purchased gas costs for utility operations, excluding the cost of gas
purchased for the Company's diversified activities which is discussed in this
year-to-date comparison under the heading "Diversified Activities", were
$47.6 million for the first nine months of 1995 compared to $71.3 million for
the comparable period of 1994.
The components of the change are as follows:
(Millions of Dollars)
Prices paid for gas suppliers* $( 7.9)
Gas sendout volume ( 5.0)
Deferred fuel charges (10.8)
Total $(23.7)
*Net of refunds received from gas suppliers
Other Operating and Maintenance Expenses
The Company's total operation and maintenance expenses excluding fuel,
purchased power and gas purchased for resale, decreased by $10.3 million
compared to a year ago. Expenses from Diversified Activities increased $.2
million as described below. The decrease associated with utility operations
was $10.5 million.
The decrease in other utility operation and maintenance expense is the result
of a decrease in operation expenses of $9.5 million, which is attributable to
Demand Side Management costs, a decrease in other taxes of $1.7 million and a
decrease in maintenance costs of $1.5 million. These decreases were offset by
increases in depreciation and amortization of $1.0 million and Federal income
taxes of $1.2 million.
Diversified Activities
Revenues from diversified activities increased by $77.6 million for the first
nine months of 1995 as compared to the same period of 1994. The increase is
primarily the result of increased sales from gas marketing activities. While
revenues from gas marketing activities were significantly higher during the
first nine months of 1995 as compared to the first nine months of 1994, an
extremely competitive market resulted in narrower profit margins during the
current period. However, diversified earnings were enhanced by a $2.9 million
gain realized as a result of the formation of the NORSTAR Partnership. These
revenues were offset by increases in operating expenses for all diversified
activities of $82.0 million, which is the result of increased gas purchases of
$81.8 million and an increase in depreciation, taxes and other operating
expenses of $.2 million.
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, increased by
$6.6 million during the first nine months of 1995 when compared to the first
nine months of 1994. This increase is primarily the result of the lower costs
of the investigation and litigation involving former officers and others, as
well as the impact of the gain realized on the formation of the NORSTAR
Partnership and lower interest rates.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 and to Part
II, Item 1, Legal Proceedings, in the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 for a description of a criminal action
brought against James F. Smith, a former Director and former Chief Executive
Officer of the Company, by the Rockland County (New York) District Attorney.
As noted therein, a Rockland County Grand Jury indictment charged Mr. Smith
with 15 felony counts of grand larceny, seven counts of falsifying business
records and two misdemeanor counts of petit larceny. On August 15, 1995,
Mr. Smith was acquitted of the charges in a non-jury trial.
In a related matter, the Company was served on September 19, 1995 with an
Amended Summons and First Amended Complaint in an action filed in the United
States District Court for the Southern District of New York by James F. Smith.
Named defendants are former Rockland County District Attorney Kenneth Gribetz,
the Office of the Rockland County District Attorney, the Company, "John and
Jane Does" (identified in the complaint as certain directors of the Company
and/or members of the Special Committee of the Board and referred to in the
Complaint as the "Defendant Directors"), Edwin Stier and Stier, Anderson &
Malone.
In the Complaint, Mr. Smith alleges the following three causes of
action: (i) the violation by Mr. Gribetz and the District Attorney's office
of Mr. Smith's federal constitutional rights to fair trial and due process
of law; (ii) malicious prosecution by the Company, Defendant Directors and
Mr. Stier in that these defendants caused the arrest and criminal prosecution
of Mr. Smith; and (iii) abuse of process by the Company, Defendant Directors
and Mr. Stier in that they were responsible for the arrest, indictment and
prosecution of Mr. Smith. Mr. Smith seeks $25 million in damages, special
damages and punitive damages, attorney fees and other costs on each count.
A scheduling conference has been set for November 9, 1995 before Judge William
C. Conner.
Regulatory Matters:
NYPSC Report on Investigation
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 and to Part
II, Item 1, Legal Proceedings, in the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 for background on the New York Public
Service Commission ("NYPSC") proceeding investigating the operations
and management of the Company. On October 2, 1995, the Company, NYPSC Staff
and the New York State Consumer Protection Board reached a settlement
regarding all outstanding issues relative to the NYPSC investigation of
alleged financial improprieties. The Company is unable to predict the final
results of this proceeding and what modification, if any, will be made to
the amount proposed to be refunded. Further information regarding the
proposed settlement is contained under the caption "Rate Activities" in
Part I, Item 2, Management's Discussion and Analysis of Financial Condition
and Results of Operations of this quarterly report on Form 10-Q.
<PAGE>
NJBPU Report on Investigation
Reference is made to Item 3, Legal Proceedings, in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 and to Part
II, Item 1, Legal Proceedings, in the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 for background on the NJBPU proceeding
investigating the operations and management of RECO. Further information
regarding the NJBPU investigation and audit is contained under the caption
"Rate Activities" in Part I, Item 2, Management's Discussion and Analysis
of Financial Condition and Results of Operations of this quarterly report on
Form 10-Q.
New York Electric Base Rate Case
Reference is made to the information contained under the caption "Rate
Activities" in Part I, Item 2, Management's Discussion and Analysis of
Financial Condition and Results of Operations, of this Quarterly Report on
Form 10-Q for background on the Company's electric base rate case filed with
the NYPSC (Case 95-E-0491) on May 25, 1995. Cross-examination in this case is
scheduled for the week of November 8, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.31 Letter agreement dated September 21, 1995 between Orange and
Rockland Utilities, Inc. and Nancy M. Jakobs regarding
participation in the Officer's Supplemental Retirement Plan of
Orange and Rockland Utilities, Inc.
10.32 Severance Agreement dated October 18, 1995 between Orange and
Rockland Utilities, Inc. and D. Louis Peoples.
10.33 Severance Agreement dated October 18, 1995 between Orange and
Rockland Utilities, Inc. and R. Lee Haney.
10.34 Severance Agreement dated October 18, 1995 between Orange and
Rockland Utilities, Inc. and G. D. Caliendo.
10.35 Severance Agreement dated October 18, 1995 between Orange and
Rockland Utilities, Inc. and Nancy M. Jakobs.
(b) Reports on Form 8-K
None.<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ORANGE AND ROCKLAND UTILITIES, INC.
(Registrant)
Date: November 13, 1995 By ROBERT J. MCBENNETT
Robert J. McBennett
Treasurer and Controller
Date: November 13, 1995 By JOHN T. FINNEGAN
John T. Finnegan
Assistant Treasurer
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORANGE AND
ROCKLAND UTILITIES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 865,378
<OTHER-PROPERTY-AND-INVEST> 18,999
<TOTAL-CURRENT-ASSETS> 221,366
<TOTAL-DEFERRED-CHARGES> 225,035
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,330,778
<COMMON> 68,268
<CAPITAL-SURPLUS-PAID-IN> 127,489
<RETAINED-EARNINGS> 188,859
<TOTAL-COMMON-STOCKHOLDERS-EQ> 384,616
2,774
43,253
<LONG-TERM-DEBT-NET> 359,757
<SHORT-TERM-NOTES> 10,474
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 34,300
<LONG-TERM-DEBT-CURRENT-PORT> 184
1,384
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 407
<OTHER-ITEMS-CAPITAL-AND-LIAB> 493,629
<TOT-CAPITALIZATION-AND-LIAB> 1,330,778
<GROSS-OPERATING-REVENUE> 789,112
<INCOME-TAX-EXPENSE> 22,262
<OTHER-OPERATING-EXPENSES> 710,225
<TOTAL-OPERATING-EXPENSES> 732,487
<OPERATING-INCOME-LOSS> 56,625
<OTHER-INCOME-NET> 1,383
<INCOME-BEFORE-INTEREST-EXPEN> 58,008
<TOTAL-INTEREST-EXPENSE> 24,173
<NET-INCOME> 33,835
2,353
<EARNINGS-AVAILABLE-FOR-COMM> 31,482
<COMMON-STOCK-DIVIDENDS> 26,282
<TOTAL-INTEREST-ON-BONDS> 20,501
<CASH-FLOW-OPERATIONS> 55,806
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 0
</TABLE>
September 21, 1995
Ms. Nancy M. Jakobs
79 Burda Avenue
New City, NY 10956
Dear Ms. Jakobs:
In connection with and as part of the consideration for your
retention by Orange and Rockland Utilities, Inc. and election as
Vice President - Human Resources, the Board wishes to enter into
this letter agreement concerning your participation in the
Officer's Supplemental Retirement Plan of Orange and Rockland
Utilities, Inc. (the "Plan").
Upon your election as an officer, you became a participant in the
Plan and your participation was governed in all respects by the
terms of the Plan, except to the extent specifically provided
otherwise as follows:
1. Upon your participation in the Plan, you shall be
treated as having satisfied the five years of Service
as an Officer requirement for purposes of eligibility
for a Vested Retirement Allowance, other Retirement
Allowances and Death Allowance protection, but not for
the purpose of the calculation of the amount of any
such Allowance.
2. For each of the first five years of Service you
complete under the Plan, you will receive credit under
the Plan for two years of Service. Accordingly, at the
end of 1995, you will have credit for two years of
Service under the Plan. If you complete a year of
Service under the Plan in 1996, you will then have four
years of Service under the Plan, and so on through
1999. Thereafter, you will be credited with one year
of Service under the Plan for each year of Service you
complete under the Plan in accordance with its terms.
3. Because at that time you will be considered to have
completed eleven years of Service under the Plan, once
<PAGE>
Ms. Nancy M. Jakobs
September 21, 1995
Page 2
you have actually completed six years of Service under
the Plan, in accordance with Section 2 (B) of the Plan,
your compensation covered by the Plan shall include a
portion of your corporate performance based annual
award declared under the Annual Incentive Plan
provisions of the Company's Incentive Compensation
Plan.
4. In the event your Final Average Compensation must be
determined at such time when you have not been an
Officer covered by the Plan for 36 months, your Final
Average Compensation shall be computed by taking the
sum of your compensation (on a monthly basis) covered
by the Plan for each month you are an Officer covered
by the Plan and dividing the sum by that number of
months.
In all other respects, the terms of the Plan shall be applicable
with respect to your participation and benefit under the Plan.
Please indicate your acceptance of this letter agreement by
signing the extra copy provided and returning it to me.
__/s/ D. L. Peoples____
D. Louis Peoples
Vice Chairman and
Chief Executive Officer
I accept the foregoing letter agreement concerning my
participation in the Officers' Supplemental Retirement Plan of
Orange and Rockland Utilities, Inc. and evidence my acceptance by
setting forth my signature this _22nd_ day of _September________,
1995.
WITNESS:
/s/ Susan M. Gregg___________ _/s/Nancy M. Jakobs___
Nancy M. Jakobs
ORANGE AND ROCKLAND UTILITIES, INC.
SEVERANCE AGREEMENT
THIS AGREEMENT, effective this 18th day of
October , 1995, by and between Orange and Rockland
Utilities, Inc. (the "Company") and D. Louis Peoples (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an integral part of
the Company's management who participates in the decision
making process relative to planning and policy for the
Company;
WHEREAS, the Company wishes to encourage the
employee to continue his services with the Company for
the period during and after an actual or threatened
Change in Control;
WHEREAS, the Board of Directors of the Company,
at its meeting on July 14, 1994, determined that it would
be in the best interests of the Company and its share-
holders to assure continuity in the management of the
Company's administration and operations in the event of a
Change in Control by entering into a severance agreement
with the Employee; and
WHEREAS, the Company has previously entered
into letter agreements with the Employee dated July 14,
1994, September 29, 1994 and April 6, 1995 (the "Letter
Agreements");
NOW THEREFORE, it is hereby agreed by and
between the parties hereto as follows:
1. Definitions.
"Board" shall mean the Board of Directors of
the Company.
"Cause" shall mean (a) the Employee's convic-
tion of a felony or (b) the Employee's fraud or dishon-
esty which has resulted or is likely to result in materi-
al economic damage to the Company, as determined in good
faith by a vote of 2/3 of the non-employee directors of
the Company at a meeting of the Board of Directors at
which the Employee is provided an opportunity to be
heard.
"Change in Control": shall mean:
(i) either (A) receipt by the Company of
a report on Schedule 13D, or an amendment to such a
report, filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Securities Exchange Act
of 1934 (the "1934 Act") disclosing that any person,
group, corporation or other entity is the beneficial
owner, directly or indirectly, of twenty (20) percent or
more of the outstanding stock of the Company or (B)
actual knowledge by the Company of facts, on the basis of
which any Person is required to file such a report on
Schedule 13D, or an amendment to make such a report, with
the SEC (or would be required to file such a report or
amendment upon the lapse of the applicable period of time
specified in Section 13(d) of the 1934 Act) disclosing
that such Person is the beneficial owner, directly or
indirectly, of twenty (20) percent or more of the out-
standing stock of the Company;
(ii) purchase by any person (as defined in
Section 13(d) of the 1934 Act), corporation or other
entity, other than the Company or a wholly-owned subsid-
iary of the Company, of shares pursuant to a tender or
exchange offer to acquire any stock of the Company (or
securities convertible into stock) for cash, securities
or any other consideration provided that, after consumma-
tion of the offer, such person, group, corporation or
other entity is the beneficial owner (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of
twenty (20) percent or more of the outstanding stock of
the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to
acquire stock);
(iii) approval by the stockholders of the
Company of (a) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the
Company would be converted into cash, securities or other
property, other than a consolidation or merger of the
Company in which holders of its stock immediately prior
to the consolidation or merger have substantially the
same proportionate ownership of common stock of the
surviving corporation immediately after the consolidation
or merger as immediately before, or (b) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of the Company; or
(iv) a change in the majority of the
members of the Board within a 24-month period unless the
election or nomination for election by the Company's
stockholders of each new director was approved by the
vote of two-thirds of the directors then still in office
who were in office at the beginning of the 24-month
period.
"Good Reason" shall mean a determination
by the Employee in good faith that there has been any (i)
material change by the Company of the Employee's func-
tions, duties or responsibilities which change would
cause the Employee's position with the Company to become
of less dignity, responsibility, importance, prestige or
scope including, without limitation, the assignment to
the Employee of duties and responsibilities inconsistent
with his positions; (ii) assignment or reassignment by
the Company of the Employee without the Employee's con-
sent, to another place of employment more that 50 miles
from the Employee's current place of employment; (iii)
liquidation, dissolution, consolidation or merger of the
Company which has not been approved by a majority of
those members of the Board who were members of the Board
prior to the Change in Control, or transfer of all or
substantially all of its assets, other than a transaction
or series of transactions in which the resulting or
surviving transferee entity has, in the aggregate, a net
worth at least equal to that of the Company and assumes
this Agreement and all obligations and undertakings of
the Company hereunder; or (iv) reduction in the
Employee's total compensation or any component thereof;
by written notice to the Company, specifying the event
relied upon for such termination and given at any time
within 6 months after the occurrence of such event.
2. Term.
This Agreement shall be effective as of the
date above written and shall continue thereafter for a
period of 24 full calendar months following the date of
an occurrence of a Change in Control.
3. Severance Benefit.
a. In the event of any termination of
the Employee's employment hereunder at any time during
the 24-month period immediately following a Change in
Control (x) by the Employee for Good Reason, or (y) by
the Company for any reason other than Cause, then, within
5 business days after any such termination, the Company
shall pay to the Employee or the estate of the Employee
as severance pay, a lump sum cash amount equal to three
times the Employee's "base amount" as defined and deter-
mined under section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), less one dollar ("2.99
times the base amount").
b. For a period of 24 months (commencing
with the month in which termination of employment as de-
scribed in paragraph 3a above shall have occurred), the
Employee shall be entitled to all benefits under the
Company's welfare benefit plans as if the Employee were
still employed during such period, at the same level of
benefits as existed immediately prior to the Change in
Control, and if and to the extent that such benefits
shall not be payable or provided under any such plan, the
Company shall pay or provide such benefits on an individ-
ual basis. The benefits provided in accordance with this
paragraph 3b shall be secondary to any comparable bene-
fits provided by another employer.
c. From and after the occurrence of a
Change in Control (as defined in the Officers' Supplemen-
tal Retirement Plan of Orange and Rockland Utilities,
Inc. as Amended and Restated (the "SERP")), notwithstand-
ing any provision of the SERP to the contrary, (i) the
Benefit Formula Percentage applicable to the Employee
under the SERP shall be deemed to be 70% and (ii) the
Employee shall be treated as having completed 20 years of
Service for purposes of Section 2(8) of the SERP. Not-
withstanding any provision of the SERP to the contrary,
upon the termination of the Employee's employment by the
Employee for Good Reason (as defined in the SERP) or by
the Company, in either case at any time following the
occurrence of a Change in Control (as defined in the
SERP), the Employee shall be deemed to have satisfied all
of the requirements for a Normal Retirement Allowance
pursuant to Section 6(D) of the SERP and the Employee
shall, accordingly, be entitled to commence receipt of
such Normal Retirement Allowance, without reduction on
account of his age, immediately following such termina-
tion of employment.
d. Notwithstanding anything else herein
to the contrary, to the extent that the Employee is
entitled to receive severance payments from another
Company severance plan, arrangement or program, the pay-
ments to be made pursuant to paragraph 3a hereof shall be
correspondingly reduced before implementation of para-
graph e below, and, if necessary, the Employee shall make
an appropriate refund to the Employer without interest.
e. If Independent Tax Counsel shall
determine that the aggregate payments made to the Employ-
ee pursuant to paragraphs 3a, b and c above and any other
payments to the Employee from the Company which consti-
tute "parachute payments" as defined in section 280G of
the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor thereto) ("Parachute Payments")
would be subject to the excise tax imposed by section
4999 of the Code (the "Excise Tax"), then the lump sum
cash payment payable to the Employee under paragraph 3a
above shall be reduced to an amount and to the extent
necessary so that such payment would not be subject to
the Excise Tax. Notwithstanding the preceding sentence,
in the event of a Change in Control that occurs prior to
January 1, 1999, the Employee shall be entitled to all
payments under paragraphs 3a, b and c above and any other
Parachute Payments unless the total of such payments,
after giving effect to the Excise Tax, is less than the
amount to which the Employee would have been entitled
under the preceding sentence. For purposes of this para-
graph 3e, "Independent Tax Counsel" shall mean a lawyer
with expertise in the area of executive compensation tax
law, who shall be selected by the Employee and shall be
reasonably acceptable to the Company, and whose fees and
disbursements shall be paid by the Company.
f. If it is established pursuant to a
final determination of a court or a final Internal Reve-
nue Service proceeding that, notwithstanding the good
faith of the Employee and the Company in applying the
terms of this Agreement, any part of the aggregate pay-
ments paid to the Employee under this Agreement consti-
tutes an "excess parachute payment" for purposes of
sections 280G and 4999 of the Code, then the amount equal
to the excess shall be deemed for all purposes to be a
loan from the Company to the Employee made on the date of
receipt. The Employee shall have an obligation to repay
such loan to the Company within six months of demand,
together with interest thereon at the lowest applicable
Federal rate (as defined in section 1274(d) of the Code)
from the date of the Employee's receipt until the date of
such repayment. If it is determined for any reason that
the amount described in paragraph a or b above in incor-
rectly calculated or reduced, the Company shall pay to
the Employee the increased amount, if any, necessary so
that, after such an adjustment, the Employee shall have
received or be entitled to receive the maximum payments
that he may receive without any such payment constituting
an "excess parachute payment."
4. Source of Payments.
All payments provided for in paragraph 3 above
shall be paid in cash from the general funds of the
Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Employ-
ee or his or her dependents, beneficiaries or estate from
any trust or special or separate fund established by the
Company to assure such payments. The Company shall not
be required to establish a special or separate fund or
other segregation of assets to assure such payments, and,
if the Company shall make any investments to aid it in
meeting its obligations hereunder, the Employee shall
have no right, title or interest whatever in or to any
such investments except as may otherwise be expressly
provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or
a fiduciary relationship, between the Company and the
Employee or any other person. To the extent that any
person acquires a right to receive payments from the
Company such right shall be no greater than the right of
an unsecured creditor of the Company.
5. Litigation Expenses; Arbitration.
a. In the event of any litigation or
other proceeding between the Company and the Employee
with respect to the subject matter of this Agreement and
the enforcement of rights hereunder, the Company shall
reimburse the Employee for all reasonable costs and
expenses relating to such litigation or other proceeding
as they are incurred, including reasonable attorneys fees
and expenses, regardless of whether such litigation
results in any settlement or judgment or order in favor
of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement
shall have been made or brought after reasonable inquiry
and shall be well grounded in fact and warranted by
existing law or a good faith argument for the extension,
modification, or reversal of existing law, and that it is
not interposed for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase
in the cost of litigation. The obligation of the Company
under this paragraph 5 shall survive the termination for
any reason of this Agreement (whether such termination is
by the Company, by the Employee, upon the expiration of
this Agreement or otherwise).
b. In the event of any dispute or dif-
ference between the Company and the Employee with respect
to the subject matter of this Agreement and the enforce-
ment of rights hereunder, the Employee may, in his or her
sole discretion by notice to the Company, require such
dispute or difference to be submitted to arbitration.
The arbitrator or arbitrators shall be selected by agree-
ment of the parties or, if they cannot agree on an arbi-
trator or arbitrators within 30 days after the Employee
had notified the Company of his or her desire to have the
question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration
Association (the "AAA") in New York, New York upon the
application of the Employee. The determination reached
in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be
sought in any court of competent jurisdiction. The
arbitrators shall not be bound by judicial formalities
and may abstain from following the strict rules of evi-
dence and shall interpret this Agreement as an honorable
engagement and not merely as a legal obligation. Unless
otherwise agreed by the parties, any such arbitration
shall take place in New York, New York, and shall be
conducted in accordance with the Rules of AAA.
6. Income Tax Withholding.
The Company may withhold from any payments made
under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or govern-
mental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understand-
ing between the Company and the Employee with respect to
the subject matter hereof, i.e., benefits payable to the
Employee upon termination of employment following a
Change in Control, and supersedes any prior severance
agreement between the Company and the Employee, except
that this Agreement shall not affect or operate to reduce
any benefit or compensation inuring to the Employee of
any kind elsewhere provided and not expressly provided
for in this Agreement and this Agreement shall not super-
sede the Letter Agreements entered into on July 14, 1994
and September 29, 1994.
8. Severability.
If, for any reason, any one or more of the
provisions or part of a provision contained in this
Agreement shall be held to be invalid, illegal or unen-
forceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or
part of a provision of this Agreement not held so inval-
id, illegal or unenforceable, and each other provision or
part of a provision shall to the full extent consistent
with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to
the full extent permitted by law any prior agreement
between the Company and the Employee shall be deemed
reinstated as if this Agreement had not been executed.
9. Consolidation, Merger, or Sale of Assets.
If the Company consolidates or merges into or
with, or transfers all or substantially all of its assets
to, another corporation with a net worth at least equal
to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company
hereunder, the term "the Company," as used herein shall
mean such other corporation and this Agreement shall
continue in full force and effect.
10. Notices.
All notices, requests, demands and other commu-
nications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class, if to
the Employee to the address shown in the personnel re-
cords of the Company and, if to the Company, as follows:
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attention: Vice President and
General Counsel
or to such other address as either party shall have
previously specified in writing to the other.
11. No Attachment.
Except as required by law, no right to receive
payments under this Agreement shall be subject to antici-
pation, commutation, alienation, sale assignment, encum-
brance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involun-
tary, to effect any such action shall be null, void and
of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall
inure to the benefit of, the Employee and the Company and
their respective permitted successors and assigns.
13. Modification and Waiver.
This Agreement may not be modified or amended
except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any es-
toppel against the enforcement of any provision of this
Agreement except by written instrument signed by the
party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condi-
tion for the future or as to any act other than that
specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agree-
ment are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
15. Governing Law.
This Agreement and its validity, interpreta-
tion, performance, and enforcement shall be governed by
the laws of the State of New York without giving effect
to the choice of law provisions in effect in such State.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officers thereunto duly
authorized, and the Employee has signed this Agreement,
all effective as of the date first above written.
ORANGE AND ROCKLAND UTILITIES, INC.
By: /s/James O'Grady, Jr.
Chairman, Compensation Committee
/s/D.L. Peoples
D. Louis Peoples
ORANGE AND ROCKLAND UTILITIES, INC.
SEVERANCE AGREEMENT
THIS AGREEMENT, effective this 18th day of
October , 1995, by and between Orange and Rockland
Utilities, Inc. (the "Company") and R. Lee Haney (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an integral part of
the Company's management who participates in the decision
making process relative to planning and policy for the
Company;
WHEREAS, the Company wishes to encourage the
employee to continue his services with the Company for
the period during and after an actual or threatened
Change in Control;
WHEREAS, the Board of Directors of the Company,
at its meeting on September 8, 1994, determined that it
would be in the best interests of the Company and its
shareholders to assure continuity in the management of
the Company's administration and operations in the event
of a Change in Control by entering into a severance
agreement with the Employee; and
WHEREAS, the Company has previously entered
into letter agreements with the Employee dated September
2, 1994 and September 29, 1994 (the "Letter Agreements");
NOW THEREFORE, it is hereby agreed by and
between the parties hereto as follows:
1. Definitions.
"Board" shall mean the Board of Directors of
the Company.
"Cause" shall mean (a) the Employee's convic-
tion of a felony or (b) the Employee's fraud or dishon-
esty which has resulted or is likely to result in materi-
al economic damage to the Company, as determined in good
faith by a vote of 2/3 of the non-employee directors of
the Company at a meeting of the Board of Directors at
which the Employee is provided an opportunity to be
heard.
"Change in Control": shall mean:
(i) either (A) receipt by the Company of
a report on Schedule 13D, or an amendment to such a
report, filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Securities Exchange Act
of 1934 (the "1934 Act") disclosing that any person,
group, corporation or other entity is the beneficial
owner, directly or indirectly, of twenty (20) percent or
more of the outstanding stock of the Company or (B)
actual knowledge by the Company of facts, on the basis of
which any Person is required to file such a report on
Schedule 13D, or an amendment to make such a report, with
the SEC (or would be required to file such a report or
amendment upon the lapse of the applicable period of time
specified in Section 13(d) of the 1934 Act) disclosing
that such Person is the beneficial owner, directly or
indirectly, of twenty (20) percent or more of the out-
standing stock of the Company;
(ii) purchase by any person (as defined in
Section 13(d) of the 1934 Act), corporation or other
entity, other than the Company or a wholly-owned subsid-
iary of the Company, of shares pursuant to a tender or
exchange offer to acquire any stock of the Company (or
securities convertible into stock) for cash, securities
or any other consideration provided that, after consumma-
tion of the offer, such person, group, corporation or
other entity is the beneficial owner (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of
twenty (20) percent or more of the outstanding stock of
the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to
acquire stock);
(iii) approval by the stockholders of the
Company of (a) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the
Company would be converted into cash, securities or other
property, other than a consolidation or merger of the
Company in which holders of its stock immediately prior
to the consolidation or merger have substantially the
same proportionate ownership of common stock of the
surviving corporation immediately after the consolidation
or merger as immediately before, or (b) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of the Company; or
(iv) a change in the majority of the
members of the Board within a 24-month period unless the
election or nomination for election by the Company's
stockholders of each new director was approved by the
vote of two-thirds of the directors then still in office
who were in office at the beginning of the 24-month
period.
"Good Reason" shall mean a determination
by the Employee in good faith that there has been any (i)
material change by the Company of the Employee's func-
tions, duties or responsibilities which change would
cause the Employee's position with the Company to become
of less dignity, responsibility, importance, prestige or
scope including, without limitation, the assignment to
the Employee of duties and responsibilities inconsistent
with his positions; (ii) assignment or reassignment by
the Company of the Employee without the Employee's con-
sent, to another place of employment more that 50 miles
from the Employee's current place of employment; (iii)
liquidation, dissolution, consolidation or merger of the
Company which has not been approved by a majority of
those members of the Board who were members of the Board
prior to the Change in Control, or transfer of all or
substantially all of its assets, other than a transaction
or series of transactions in which the resulting or
surviving transferee entity has, in the aggregate, a net
worth at least equal to that of the Company and assumes
this Agreement and all obligations and undertakings of
the Company hereunder; or (iv) reduction in the
Employee's total compensation or any component thereof;
by written notice to the Company, specifying the event
relied upon for such termination and given at any time
within 6 months after the occurrence of such event.
2. Term.
This Agreement shall be effective as of the
date above written and shall continue thereafter for a
period of 24 full calendar months following the date of
an occurrence of a Change in Control.
3. Severance Benefit.
a. In the event of any termination of
the Employee's employment hereunder at any time during
the 24-month period immediately following a Change in
Control (x) by the Employee for Good Reason, or (y) by
the Company for any reason other than Cause, then, within
5 business days after any such termination, the Company
shall pay to the Employee or the estate of the Employee
as severance pay, a lump sum cash amount equal to three
times the Employee's "base amount" as defined and deter-
mined under section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), less one dollar ("2.99
times the base amount").
b. For a period of 24 months (commencing
with the month in which termination of employment as de-
scribed in paragraph 3a above shall have occurred), the
Employee shall be entitled to all benefits under the
Company's welfare benefit plans as if the Employee were
still employed during such period, at the same level of
benefits as existed immediately prior to the Change in
Control, and if and to the extent that such benefits
shall not be payable or provided under any such plan, the
Company shall pay or provide such benefits on an individ-
ual basis. The benefits provided in accordance with this
paragraph 3b shall be secondary to any comparable bene-
fits provided by another employer.
c. From and after the occurrence of a
Change in Control (as defined in the Officers' Supplemen-
tal Retirement Plan of Orange and Rockland Utilities,
Inc. as Amended and Restated (the "SERP")), notwithstand-
ing any provision of the SERP to the contrary, (i) the
Benefit Formula Percentage applicable to the Employee
under the SERP shall be deemed to be the greater of (a)
the Benefit Formula Percentage determined under the SERP
and (b) 40% and (ii) for purposes of Section 2(8) of the
SERP, the Employee shall be treated as having completed a
number of years of Service equal to the greater of (a)
the number of years of Service determined under the SERP
and (b) 10.
d. Notwithstanding anything else herein
to the contrary, to the extent that the Employee is
entitled to receive severance payments from another
Company severance plan, arrangement or program, the pay-
ments to be made pursuant to paragraph 3a hereof shall be
correspondingly reduced before implementation of para-
graph e below, and, if necessary, the Employee shall make
an appropriate refund to the Employer without interest.
e. If Independent Tax Counsel shall
determine that the aggregate payments made to the Employ-
ee pursuant to paragraphs 3a, b and c above and any other
payments to the Employee from the Company which consti-
tute "parachute payments" as defined in section 280G of
the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor thereto) ("Parachute Payments")
would be subject to the excise tax imposed by section
4999 of the Code (the "Excise Tax"), then the lump sum
cash payment payable to the Employee under paragraph 3a
above shall be reduced to an amount and to the extent
necessary so that such payment would not be subject to
the Excise Tax. Notwithstanding the preceding sentence,
in the event of a Change in Control that occurs prior to
January 1, 2000, the Employee shall be entitled to all
payments under paragraphs 3a, b and c above and any other
Parachute Payments unless the total of such payments,
after giving effect to the Excise Tax, is less than the
amount to which the Employee would have been entitled
under the preceding sentence. For purposes of this para-
graph 3e, "Independent Tax Counsel" shall mean a lawyer
with expertise in the area of executive compensation tax
law, who shall be selected by the Employee and shall be
reasonably acceptable to the Company, and whose fees and
disbursements shall be paid by the Company.
f. If it is established pursuant to a
final determination of a court or a final Internal Reve-
nue Service proceeding that, notwithstanding the good
faith of the Employee and the Company in applying the
terms of this Agreement, any part of the aggregate pay-
ments paid to the Employee under this Agreement consti-
tutes an "excess parachute payment" for purposes of
sections 280G and 4999 of the Code, then the amount equal
to the excess shall be deemed for all purposes to be a
loan from the Company to the Employee made on the date of
receipt. The Employee shall have an obligation to repay
such loan to the Company within six months of demand,
together with interest thereon at the lowest applicable
Federal rate (as defined in section 1274(d) of the Code)
from the date of the Employee's receipt until the date of
such repayment. If it is determined for any reason that
the amount described in paragraph a or b above in incor-
rectly calculated or reduced, the Company shall pay to
the Employee the increased amount, if any, necessary so
that, after such an adjustment, the Employee shall have
received or be entitled to receive the maximum payments
that he may receive without any such payment constituting
an "excess parachute payment."
4. Source of Payments.
All payments provided for in paragraph 3 above
shall be paid in cash from the general funds of the
Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Employ-
ee or his or her dependents, beneficiaries or estate from
any trust or special or separate fund established by the
Company to assure such payments. The Company shall not
be required to establish a special or separate fund or
other segregation of assets to assure such payments, and,
if the Company shall make any investments to aid it in
meeting its obligations hereunder, the Employee shall
have no right, title or interest whatever in or to any
such investments except as may otherwise be expressly
provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or
a fiduciary relationship, between the Company and the
Employee or any other person. To the extent that any
person acquires a right to receive payments from the
Company such right shall be no greater than the right of
an unsecured creditor of the Company.
5. Litigation Expenses; Arbitration.
a. In the event of any litigation or
other proceeding between the Company and the Employee
with respect to the subject matter of this Agreement and
the enforcement of rights hereunder, the Company shall
reimburse the Employee for all reasonable costs and
expenses relating to such litigation or other proceeding
as they are incurred, including reasonable attorneys fees
and expenses, regardless of whether such litigation
results in any settlement or judgment or order in favor
of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement
shall have been made or brought after reasonable inquiry
and shall be well grounded in fact and warranted by
existing law or a good faith argument for the extension,
modification, or reversal of existing law, and that it is
not interposed for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase
in the cost of litigation. The obligation of the Company
under this paragraph 5 shall survive the termination for
any reason of this Agreement (whether such termination is
by the Company, by the Employee, upon the expiration of
this Agreement or otherwise).
b. In the event of any dispute or dif-
ference between the Company and the Employee with respect
to the subject matter of this Agreement and the enforce-
ment of rights hereunder, the Employee may, in his or her
sole discretion by notice to the Company, require such
dispute or difference to be submitted to arbitration.
The arbitrator or arbitrators shall be selected by agree-
ment of the parties or, if they cannot agree on an arbi-
trator or arbitrators within 30 days after the Employee
had notified the Company of his or her desire to have the
question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration
Association (the "AAA") in New York, New York upon the
application of the Employee. The determination reached
in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be
sought in any court of competent jurisdiction. The
arbitrators shall not be bound by judicial formalities
and may abstain from following the strict rules of evi-
dence and shall interpret this Agreement as an honorable
engagement and not merely as a legal obligation. Unless
otherwise agreed by the parties, any such arbitration
shall take place in New York, New York, and shall be
conducted in accordance with the Rules of AAA.
6. Income Tax Withholding.
The Company may withhold from any payments made
under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or govern-
mental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understand-
ing between the Company and the Employee with respect to
the subject matter hereof, i.e., benefits payable to the
Employee upon termination of employment following a
Change in Control, and supersedes any prior severance
agreement between the Company and the Employee, except
that this Agreement shall not affect or operate to reduce
any benefit or compensation inuring to the Employee of
any kind elsewhere provided and not expressly provided
for in this Agreement and this Agreement shall not super-
sede the Letter Agreements.
8. Severability.
If, for any reason, any one or more of the
provisions or part of a provision contained in this
Agreement shall be held to be invalid, illegal or unen-
forceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or
part of a provision of this Agreement not held so inval-
id, illegal or unenforceable, and each other provision or
part of a provision shall to the full extent consistent
with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to
the full extent permitted by law any prior agreement
between the Company and the Employee shall be deemed
reinstated as if this Agreement had not been executed.
9. Consolidation, Merger, or Sale of Assets.
If the Company consolidates or merges into or
with, or transfers all or substantially all of its assets
to, another corporation with a net worth at least equal
to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company
hereunder, the term "the Company," as used herein shall
mean such other corporation and this Agreement shall
continue in full force and effect.
10. Notices.
All notices, requests, demands and other commu-
nications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class, if to
the Employee to the address shown in the personnel re-
cords of the Company and, if to the Company, as follows:
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attention: Vice President and
General Counsel
or to such other address as either party shall have
previously specified in writing to the other.
11. No Attachment.
Except as required by law, no right to receive
payments under this Agreement shall be subject to antici-
pation, commutation, alienation, sale assignment, encum-
brance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involun-
tary, to effect any such action shall be null, void and
of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall
inure to the benefit of, the Employee and the Company and
their respective permitted successors and assigns.
13. Modification and Waiver.
This Agreement may not be modified or amended
except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any es-
toppel against the enforcement of any provision of this
Agreement except by written instrument signed by the
party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condi-
tion for the future or as to any act other than that
specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agree-
ment are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
15. Governing Law.
This Agreement and its validity, interpreta-
tion, performance, and enforcement shall be governed by
the laws of the State of New York without giving effect
to the choice of law provisions in effect in such State.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officers thereunto duly
authorized, and the Employee has signed this Agreement,
all effective as of the date first above written.
ORANGE AND ROCKLAND UTILITIES, INC.
By: /s/James O'Grady, Jr.
Chairman, Compensation Committee
/s/R. Lee Haney
R. Lee Haney
ORANGE AND ROCKLAND UTILITIES, INC.
SEVERANCE AGREEMENT
THIS AGREEMENT, effective this 18th day of
October , 1995, by and between Orange and Rockland
Utilities, Inc. (the "Company") and G.D. Caliendo (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an integral part of
the Company's management who participates in the decision
making process relative to planning and policy for the
Company;
WHEREAS, the Company wishes to encourage the
employee to continue his services with the Company for
the period during and after an actual or threatened
Change in Control;
WHEREAS, the Board of Directors of the Company,
at its meeting on March 2, 1995, determined that it would
be in the best interests of the Company and its share-
holders to assure continuity in the management of the
Company's administration and operations in the event of a
Change in Control by entering into a severance agreement
with the Employee; and
WHEREAS, the Company has previously entered
into letter agreements with the Employee dated February
16, 1995, and April 6, 1995 (the "Letter Agreements");
NOW THEREFORE, it is hereby agreed by and
between the parties hereto as follows:
1. Definitions.
"Board" shall mean the Board of Directors of
the Company.
"Cause" shall mean (a) the Employee's convic-
tion of a felony or (b) the Employee's fraud or dishon-
esty which has resulted or is likely to result in materi-
al economic damage to the Company, as determined in good
faith by a vote of 2/3 of the non-employee directors of
the Company at a meeting of the Board of Directors at
which the Employee is provided an opportunity to be
heard.
"Change in Control": shall mean:
(i) either (A) receipt by the Company of
a report on Schedule 13D, or an amendment to such a
report, filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Securities Exchange Act
of 1934 (the "1934 Act") disclosing that any person,
group, corporation or other entity is the beneficial
owner, directly or indirectly, of twenty (20) percent or
more of the outstanding stock of the Company or (B)
actual knowledge by the Company of facts, on the basis of
which any Person is required to file such a report on
Schedule 13D, or an amendment to make such a report, with
the SEC (or would be required to file such a report or
amendment upon the lapse of the applicable period of time
specified in Section 13(d) of the 1934 Act) disclosing
that such Person is the beneficial owner, directly or
indirectly, of twenty (20) percent or more of the out-
standing stock of the Company;
(ii) purchase by any person (as defined in
Section 13(d) of the 1934 Act), corporation or other
entity, other than the Company or a wholly-owned subsid-
iary of the Company, of shares pursuant to a tender or
exchange offer to acquire any stock of the Company (or
securities convertible into stock) for cash, securities
or any other consideration provided that, after consumma-
tion of the offer, such person, group, corporation or
other entity is the beneficial owner (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of
twenty (20) percent or more of the outstanding stock of
the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to
acquire stock);
(iii) approval by the stockholders of the
Company of (a) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the
Company would be converted into cash, securities or other
property, other than a consolidation or merger of the
Company in which holders of its stock immediately prior
to the consolidation or merger have substantially the
same proportionate ownership of common stock of the
surviving corporation immediately after the consolidation
or merger as immediately before, or (b) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of the Company; or
(iv) a change in the majority of the
members of the Board within a 24-month period unless the
election or nomination for election by the Company's
stockholders of each new director was approved by the
vote of two-thirds of the directors then still in office
who were in office at the beginning of the 24-month
period.
"Good Reason" shall mean a determination
by the Employee in good faith that there has been any (i)
material change by the Company of the Employee's func-
tions, duties or responsibilities which change would
cause the Employee's position with the Company to become
of less dignity, responsibility, importance, prestige or
scope including, without limitation, the assignment to
the Employee of duties and responsibilities inconsistent
with his positions; (ii) assignment or reassignment by
the Company of the Employee without the Employee's con-
sent, to another place of employment more that 50 miles
from the Employee's current place of employment; (iii)
liquidation, dissolution, consolidation or merger of the
Company which has not been approved by a majority of
those members of the Board who were members of the Board
prior to the Change in Control, or transfer of all or
substantially all of its assets, other than a transaction
or series of transactions in which the resulting or
surviving transferee entity has, in the aggregate, a net
worth at least equal to that of the Company and assumes
this Agreement and all obligations and undertakings of
the Company hereunder; or (iv) reduction in the
Employee's total compensation or any component thereof;
by written notice to the Company, specifying the event
relied upon for such termination and given at any time
within 6 months after the occurrence of such event.
2. Term.
This Agreement shall be effective as of the
date above written and shall continue thereafter for a
period of 24 full calendar months following the date of
an occurrence of a Change in Control.
3. Severance Benefit.
a. In the event of any termination of
the Employee's employment hereunder at any time during
the 24-month period immediately following a Change in
Control (x) by the Employee for Good Reason, or (y) by
the Company for any reason other than Cause, then, within
5 business days after any such termination, the Company
shall pay to the Employee or the estate of the Employee
as severance pay, a lump sum cash amount equal to three
times the Employee's "base amount" as defined and deter-
mined under section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), less one dollar ("2.99
times the base amount").
b. For a period of 24 months (commencing
with the month in which termination of employment as de-
scribed in paragraph 3a above shall have occurred), the
Employee shall be entitled to all benefits under the
Company's welfare benefit plans as if the Employee were
still employed during such period, at the same level of
benefits as existed immediately prior to the Change in
Control, and if and to the extent that such benefits
shall not be payable or provided under any such plan, the
Company shall pay or provide such benefits on an individ-
ual basis. The benefits provided in accordance with this
paragraph 3b shall be secondary to any comparable bene-
fits provided by another employer.
c. From and after the occurrence of a
Change in Control (as defined in the Officers' Supplemen-
tal Retirement Plan of Orange and Rockland Utilities,
Inc. as Amended and Restated (the "SERP")), notwithstand-
ing any provision of the SERP to the contrary, (i) the
Benefit Formula Percentage applicable to the Employee
under the SERP shall be deemed to be the greater of (a)
the Benefit Formula Percentage determined under the SERP
and (b) 40% and (ii) for purposes of Section 2(8) of the
SERP, the Employee shall be treated as having completed a
number of years of Service equal to the greater of (a)
the number of years of Service determined under the SERP
and (b) 10.
d. Notwithstanding anything else herein
to the contrary, to the extent that the Employee is
entitled to receive severance payments from another
Company severance plan, arrangement or program, the pay-
ments to be made pursuant to paragraph 3a hereof shall be
correspondingly reduced before implementation of para-
graph e below, and, if necessary, the Employee shall make
an appropriate refund to the Employer without interest.
e. If Independent Tax Counsel shall
determine that the aggregate payments made to the Employ-
ee pursuant to paragraphs 3a, b and c above and any other
payments to the Employee from the Company which consti-
tute "parachute payments" as defined in section 280G of
the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor thereto) ("Parachute Payments")
would be subject to the excise tax imposed by section
4999 of the Code (the "Excise Tax"), then the lump sum
cash payment payable to the Employee under paragraph 3a
above shall be reduced to an amount and to the extent
necessary so that such payment would not be subject to
the Excise Tax. Notwithstanding the preceding sentence,
in the event of a Change in Control that occurs prior to
January 1, 2000, the Employee shall be entitled to all
payments under paragraphs 3a, b and c above and any other
Parachute Payments unless the total of such payments,
after giving effect to the Excise Tax, is less than the
amount to which the Employee would have been entitled
under the preceding sentence. For purposes of this para-
graph 3e, "Independent Tax Counsel" shall mean a lawyer
with expertise in the area of executive compensation tax
law, who shall be selected by the Employee and shall be
reasonably acceptable to the Company, and whose fees and
disbursements shall be paid by the Company.
f. If it is established pursuant to a
final determination of a court or a final Internal Reve-
nue Service proceeding that, notwithstanding the good
faith of the Employee and the Company in applying the
terms of this Agreement, any part of the aggregate pay-
ments paid to the Employee under this Agreement consti-
tutes an "excess parachute payment" for purposes of
sections 280G and 4999 of the Code, then the amount equal
to the excess shall be deemed for all purposes to be a
loan from the Company to the Employee made on the date of
receipt. The Employee shall have an obligation to repay
such loan to the Company within six months of demand,
together with interest thereon at the lowest applicable
Federal rate (as defined in section 1274(d) of the Code)
from the date of the Employee's receipt until the date of
such repayment. If it is determined for any reason that
the amount described in paragraph a or b above in incor-
rectly calculated or reduced, the Company shall pay to
the Employee the increased amount, if any, necessary so
that, after such an adjustment, the Employee shall have
received or be entitled to receive the maximum payments
that he may receive without any such payment constituting
an "excess parachute payment."
4. Source of Payments.
All payments provided for in paragraph 3 above
shall be paid in cash from the general funds of the
Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Employ-
ee or his or her dependents, beneficiaries or estate from
any trust or special or separate fund established by the
Company to assure such payments. The Company shall not
be required to establish a special or separate fund or
other segregation of assets to assure such payments, and,
if the Company shall make any investments to aid it in
meeting its obligations hereunder, the Employee shall
have no right, title or interest whatever in or to any
such investments except as may otherwise be expressly
provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or
a fiduciary relationship, between the Company and the
Employee or any other person. To the extent that any
person acquires a right to receive payments from the
Company such right shall be no greater than the right of
an unsecured creditor of the Company.
5. Litigation Expenses; Arbitration.
a. In the event of any litigation or
other proceeding between the Company and the Employee
with respect to the subject matter of this Agreement and
the enforcement of rights hereunder, the Company shall
reimburse the Employee for all reasonable costs and
expenses relating to such litigation or other proceeding
as they are incurred, including reasonable attorneys fees
and expenses, regardless of whether such litigation
results in any settlement or judgment or order in favor
of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement
shall have been made or brought after reasonable inquiry
and shall be well grounded in fact and warranted by
existing law or a good faith argument for the extension,
modification, or reversal of existing law, and that it is
not interposed for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase
in the cost of litigation. The obligation of the Company
under this paragraph 5 shall survive the termination for
any reason of this Agreement (whether such termination is
by the Company, by the Employee, upon the expiration of
this Agreement or otherwise).
b. In the event of any dispute or dif-
ference between the Company and the Employee with respect
to the subject matter of this Agreement and the enforce-
ment of rights hereunder, the Employee may, in his or her
sole discretion by notice to the Company, require such
dispute or difference to be submitted to arbitration.
The arbitrator or arbitrators shall be selected by agree-
ment of the parties or, if they cannot agree on an arbi-
trator or arbitrators within 30 days after the Employee
had notified the Company of his or her desire to have the
question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration
Association (the "AAA") in New York, New York upon the
application of the Employee. The determination reached
in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be
sought in any court of competent jurisdiction. The
arbitrators shall not be bound by judicial formalities
and may abstain from following the strict rules of evi-
dence and shall interpret this Agreement as an honorable
engagement and not merely as a legal obligation. Unless
otherwise agreed by the parties, any such arbitration
shall take place in New York, New York, and shall be
conducted in accordance with the Rules of AAA.
6. Income Tax Withholding.
The Company may withhold from any payments made
under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or govern-
mental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understand-
ing between the Company and the Employee with respect to
the subject matter hereof, i.e., benefits payable to the
Employee upon termination of employment following a
Change in Control, and supersedes any prior severance
agreement between the Company and the Employee, except
that this Agreement shall not affect or operate to reduce
any benefit or compensation inuring to the Employee of
any kind elsewhere provided and not expressly provided
for in this Agreement and this Agreement shall not super-
sede the Letter Agreements.
8. Severability.
If, for any reason, any one or more of the
provisions or part of a provision contained in this
Agreement shall be held to be invalid, illegal or unen-
forceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or
part of a provision of this Agreement not held so inval-
id, illegal or unenforceable, and each other provision or
part of a provision shall to the full extent consistent
with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to
the full extent permitted by law any prior agreement
between the Company and the Employee shall be deemed
reinstated as if this Agreement had not been executed.
9. Consolidation, Merger, or Sale of Assets.
If the Company consolidates or merges into or
with, or transfers all or substantially all of its assets
to, another corporation with a net worth at least equal
to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company
hereunder, the term "the Company," as used herein shall
mean such other corporation and this Agreement shall
continue in full force and effect.
10. Notices.
All notices, requests, demands and other commu-
nications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class, if to
the Employee to the address shown in the personnel re-
cords of the Company and, if to the Company, as follows:
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attention: Vice President and
General Counsel
or to such other address as either party shall have
previously specified in writing to the other.
11. No Attachment.
Except as required by law, no right to receive
payments under this Agreement shall be subject to antici-
pation, commutation, alienation, sale assignment, encum-
brance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involun-
tary, to effect any such action shall be null, void and
of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall
inure to the benefit of, the Employee and the Company and
their respective permitted successors and assigns.
13. Modification and Waiver.
This Agreement may not be modified or amended
except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any es-
toppel against the enforcement of any provision of this
Agreement except by written instrument signed by the
party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condi-
tion for the future or as to any act other than that
specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agree-
ment are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
15. Governing Law.
This Agreement and its validity, interpreta-
tion, performance, and enforcement shall be governed by
the laws of the State of New York without giving effect
to the choice of law provisions in effect in such State.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officers thereunto duly
authorized, and the Employee has signed this Agreement,
all effective as of the date first above written.
ORANGE AND ROCKLAND UTILITIES, INC.
By: /s/James O'Grady, Jr.
Chairman, Compensation Committee
/s/G.D. Caliendo
G.D. Caliendo
ORANGE AND ROCKLAND UTILITIES, INC.
SEVERANCE AGREEMENT
THIS AGREEMENT, effective this 18th day of
October , 1995, by and between Orange and Rockland
Utilities, Inc. (the "Company") and Nancy M. Jakobs (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an integral part of
the Company's management who participates in the decision
making process relative to planning and policy for the
Company;
WHEREAS, the Company wishes to encourage the
employee to continue her services with the Company for
the period during and after an actual or threatened
Change in Control;
WHEREAS, the Board of Directors of the Company,
at its meeting on April 6, 1995, determined that it would
be in the best interests of the Company and its share-
holders to assure continuity in the management of the
Company's administration and operations in the event of a
Change in Control by entering into a severance agreement
with the Employee; and
WHEREAS, the Company has previously entered
into letter agreements with the Employee dated March 21,
1995 and September 21, 1995 (the "Letter Agreements");
NOW THEREFORE, it is hereby agreed by and
between the parties hereto as follows:
1. Definitions.
"Board" shall mean the Board of Directors of
the Company.
"Cause" shall mean (a) the Employee's convic-
tion of a felony or (b) the Employee's fraud or dishon-
esty which has resulted or is likely to result in materi-
al economic damage to the Company, as determined in good
faith by a vote of 2/3 of the non-employee directors of
the Company at a meeting of the Board of Directors at
which the Employee is provided an opportunity to be
heard.
"Change in Control": shall mean:
(i) either (A) receipt by the Company of
a report on Schedule 13D, or an amendment to such a
report, filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Securities Exchange Act
of 1934 (the "1934 Act") disclosing that any person,
group, corporation or other entity is the beneficial
owner, directly or indirectly, of twenty (20) percent or
more of the outstanding stock of the Company or (B)
actual knowledge by the Company of facts, on the basis of
which any Person is required to file such a report on
Schedule 13D, or an amendment to make such a report, with
the SEC (or would be required to file such a report or
amendment upon the lapse of the applicable period of time
specified in Section 13(d) of the 1934 Act) disclosing
that such Person is the beneficial owner, directly or
indirectly, of twenty (20) percent or more of the out-
standing stock of the Company;
(ii) purchase by any person (as defined in
Section 13(d) of the 1934 Act), corporation or other
entity, other than the Company or a wholly-owned subsid-
iary of the Company, of shares pursuant to a tender or
exchange offer to acquire any stock of the Company (or
securities convertible into stock) for cash, securities
or any other consideration provided that, after consumma-
tion of the offer, such person, group, corporation or
other entity is the beneficial owner (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of
twenty (20) percent or more of the outstanding stock of
the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to
acquire stock);
(iii) approval by the stockholders of the
Company of (a) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the
Company would be converted into cash, securities or other
property, other than a consolidation or merger of the
Company in which holders of its stock immediately prior
to the consolidation or merger have substantially the
same proportionate ownership of common stock of the
surviving corporation immediately after the consolidation
or merger as immediately before, or (b) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of the Company; or
(iv) a change in the majority of the
members of the Board within a 24-month period unless the
election or nomination for election by the Company's
stockholders of each new director was approved by the
vote of two-thirds of the directors then still in office
who were in office at the beginning of the 24-month
period.
"Good Reason" shall mean a determination
by the Employee in good faith that there has been any (i)
material change by the Company of the Employee's func-
tions, duties or responsibilities which change would
cause the Employee's position with the Company to become
of less dignity, responsibility, importance, prestige or
scope including, without limitation, the assignment to
the Employee of duties and responsibilities inconsistent
with his positions; (ii) assignment or reassignment by
the Company of the Employee without the Employee's con-
sent, to another place of employment more that 50 miles
from the Employee's current place of employment; (iii)
liquidation, dissolution, consolidation or merger of the
Company which has not been approved by a majority of
those members of the Board who were members of the Board
prior to the Change in Control, or transfer of all or
substantially all of its assets, other than a transaction
or series of transactions in which the resulting or
surviving transferee entity has, in the aggregate, a net
worth at least equal to that of the Company and assumes
this Agreement and all obligations and undertakings of
the Company hereunder; or (iv) reduction in the
Employee's total compensation or any component thereof;
by written notice to the Company, specifying the event
relied upon for such termination and given at any time
within 6 months after the occurrence of such event.
2. Term.
This Agreement shall be effective as of the
date above written and shall continue thereafter for a
period of 24 full calendar months following the date of
an occurrence of a Change in Control.
3. Severance Benefit.
a. In the event of any termination of
the Employee's employment hereunder at any time during
the 24-month period immediately following a Change in
Control (x) by the Employee for Good Reason, or (y) by
the Company for any reason other than Cause, then, within
5 business days after any such termination, the Company
shall pay to the Employee or the estate of the Employee
as severance pay, a lump sum cash amount equal to three
times the Employee's "base amount" as defined and deter-
mined under section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), less one dollar ("2.99
times the base amount").
b. For a period of 24 months (commencing
with the month in which termination of employment as de-
scribed in paragraph 3a above shall have occurred), the
Employee shall be entitled to all benefits under the
Company's welfare benefit plans as if the Employee were
still employed during such period, at the same level of
benefits as existed immediately prior to the Change in
Control, and if and to the extent that such benefits
shall not be payable or provided under any such plan, the
Company shall pay or provide such benefits on an individ-
ual basis. The benefits provided in accordance with this
paragraph 3b shall be secondary to any comparable bene-
fits provided by another employer.
c. From and after the occurrence of a
Change in Control (as defined in the Officers' Supplemen-
tal Retirement Plan of Orange and Rockland Utilities,
Inc. as Amended and Restated (the "SERP")), notwithstand-
ing any provision of the SERP to the contrary, (i) the
Benefit Formula Percentage applicable to the Employee
under the SERP shall be deemed to be the greater of (a)
the Benefit Formula Percentage determined under the SERP
and (b) 40% and (ii) for purposes of Section 2(8) of the
SERP, the Employee shall be treated as having completed a
number of years of Service equal to the greater of (a)
the number of years of Service determined under the SERP
and (b) 10.
d. Notwithstanding anything else herein
to the contrary, to the extent that the Employee is
entitled to receive severance payments from another
Company severance plan, arrangement or program, the pay-
ments to be made pursuant to paragraph 3a hereof shall be
correspondingly reduced before implementation of para-
graph e below, and, if necessary, the Employee shall make
an appropriate refund to the Employer without interest.
e. If Independent Tax Counsel shall
determine that the aggregate payments made to the Employ-
ee pursuant to paragraphs 3a, b and c above and any other
payments to the Employee from the Company which consti-
tute "parachute payments" as defined in section 280G of
the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor thereto) ("Parachute Payments")
would be subject to the excise tax imposed by section
4999 of the Code (the "Excise Tax"), then the lump sum
cash payment payable to the Employee under paragraph 3a
above shall be reduced to an amount and to the extent
necessary so that such payment would not be subject to
the Excise Tax. Notwithstanding the preceding sentence,
in the event of a Change in Control that occurs prior to
January 1, 2000, the Employee shall be entitled to all
payments under paragraphs 3a, b and c above and any other
Parachute Payments unless the total of such payments,
after giving effect to the Excise Tax, is less than the
amount to which the Employee would have been entitled
under the preceding sentence. For purposes of this para-
graph 3e, "Independent Tax Counsel" shall mean a lawyer
with expertise in the area of executive compensation tax
law, who shall be selected by the Employee and shall be
reasonably acceptable to the Company, and whose fees and
disbursements shall be paid by the Company.
f. If it is established pursuant to a
final determination of a court or a final Internal Reve-
nue Service proceeding that, notwithstanding the good
faith of the Employee and the Company in applying the
terms of this Agreement, any part of the aggregate pay-
ments paid to the Employee under this Agreement consti-
tutes an "excess parachute payment" for purposes of
sections 280G and 4999 of the Code, then the amount equal
to the excess shall be deemed for all purposes to be a
loan from the Company to the Employee made on the date of
receipt. The Employee shall have an obligation to repay
such loan to the Company within six months of demand,
together with interest thereon at the lowest applicable
Federal rate (as defined in section 1274(d) of the Code)
from the date of the Employee's receipt until the date of
such repayment. If it is determined for any reason that
the amount described in paragraph a or b above in incor-
rectly calculated or reduced, the Company shall pay to
the Employee the increased amount, if any, necessary so
that, after such an adjustment, the Employee shall have
received or be entitled to receive the maximum payments
that he may receive without any such payment constituting
an "excess parachute payment."
4. Source of Payments.
All payments provided for in paragraph 3 above
shall be paid in cash from the general funds of the
Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Employ-
ee or his or her dependents, beneficiaries or estate from
any trust or special or separate fund established by the
Company to assure such payments. The Company shall not
be required to establish a special or separate fund or
other segregation of assets to assure such payments, and,
if the Company shall make any investments to aid it in
meeting its obligations hereunder, the Employee shall
have no right, title or interest whatever in or to any
such investments except as may otherwise be expressly
provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or
a fiduciary relationship, between the Company and the
Employee or any other person. To the extent that any
person acquires a right to receive payments from the
Company such right shall be no greater than the right of
an unsecured creditor of the Company.
5. Litigation Expenses; Arbitration.
a. In the event of any litigation or
other proceeding between the Company and the Employee
with respect to the subject matter of this Agreement and
the enforcement of rights hereunder, the Company shall
reimburse the Employee for all reasonable costs and
expenses relating to such litigation or other proceeding
as they are incurred, including reasonable attorneys fees
and expenses, regardless of whether such litigation
results in any settlement or judgment or order in favor
of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement
shall have been made or brought after reasonable inquiry
and shall be well grounded in fact and warranted by
existing law or a good faith argument for the extension,
modification, or reversal of existing law, and that it is
not interposed for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase
in the cost of litigation. The obligation of the Company
under this paragraph 5 shall survive the termination for
any reason of this Agreement (whether such termination is
by the Company, by the Employee, upon the expiration of
this Agreement or otherwise).
b. In the event of any dispute or dif-
ference between the Company and the Employee with respect
to the subject matter of this Agreement and the enforce-
ment of rights hereunder, the Employee may, in his or her
sole discretion by notice to the Company, require such
dispute or difference to be submitted to arbitration.
The arbitrator or arbitrators shall be selected by agree-
ment of the parties or, if they cannot agree on an arbi-
trator or arbitrators within 30 days after the Employee
had notified the Company of his or her desire to have the
question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration
Association (the "AAA") in New York, New York upon the
application of the Employee. The determination reached
in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be
sought in any court of competent jurisdiction. The
arbitrators shall not be bound by judicial formalities
and may abstain from following the strict rules of evi-
dence and shall interpret this Agreement as an honorable
engagement and not merely as a legal obligation. Unless
otherwise agreed by the parties, any such arbitration
shall take place in New York, New York, and shall be
conducted in accordance with the Rules of AAA.
6. Income Tax Withholding.
The Company may withhold from any payments made
under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or govern-
mental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understand-
ing between the Company and the Employee with respect to
the subject matter hereof, i.e., benefits payable to the
Employee upon termination of employment following a
Change in Control, and supersedes any prior severance
agreement between the Company and the Employee, except
that this Agreement shall not affect or operate to reduce
any benefit or compensation inuring to the Employee of
any kind elsewhere provided and not expressly provided
for in this Agreement and this Agreement shall not super-
sede the Letter Agreements.
8. Severability.
If, for any reason, any one or more of the
provisions or part of a provision contained in this
Agreement shall be held to be invalid, illegal or unen-
forceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or
part of a provision of this Agreement not held so inval-
id, illegal or unenforceable, and each other provision or
part of a provision shall to the full extent consistent
with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to
the full extent permitted by law any prior agreement
between the Company and the Employee shall be deemed
reinstated as if this Agreement had not been executed.
9. Consolidation, Merger, or Sale of Assets.
If the Company consolidates or merges into or
with, or transfers all or substantially all of its assets
to, another corporation with a net worth at least equal
to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company
hereunder, the term "the Company," as used herein shall
mean such other corporation and this Agreement shall
continue in full force and effect.
10. Notices.
All notices, requests, demands and other commu-
nications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class, if to
the Employee to the address shown in the personnel re-
cords of the Company and, if to the Company, as follows:
Orange and Rockland Utilities, Inc.
One Blue Hill Plaza
Pearl River, New York 10965
Attention: Vice President and
General Counsel
or to such other address as either party shall have
previously specified in writing to the other.
11. No Attachment.
Except as required by law, no right to receive
payments under this Agreement shall be subject to antici-
pation, commutation, alienation, sale assignment, encum-
brance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involun-
tary, to effect any such action shall be null, void and
of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall
inure to the benefit of, the Employee and the Company and
their respective permitted successors and assigns.
13. Modification and Waiver.
This Agreement may not be modified or amended
except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any es-
toppel against the enforcement of any provision of this
Agreement except by written instrument signed by the
party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condi-
tion for the future or as to any act other than that
specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agree-
ment are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
15. Governing Law.
This Agreement and its validity, interpreta-
tion, performance, and enforcement shall be governed by
the laws of the State of New York without giving effect
to the choice of law provisions in effect in such State.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officers thereunto duly
authorized, and the Employee has signed this Agreement,
all effective as of the date first above written.
ORANGE AND ROCKLAND UTILITIES, INC.
By: /s/James O'Grady, Jr.
Chairman, Compensation Committee
/s/Nancy M. Jakobs 10/27/95
Nancy M. Jakobs
