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 June 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 13,653,571 Shares
(Class) (Outstanding at July 31, 1995)<PAGE>
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets (Unaudited)
at June 30, 1995 and December 31, 1994 1
Consolidated Statements of Income (Unaudited)
for the three months and six months ended
June 30, 1995 and June 30, 1994 3
Consolidated Cash Flow Statements (Unaudited)
for the three months and six months ended
June 30, 1995 and June 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 18
ITEM 6. Exhibits and Reports on Form 8-K 19
Signatures 20
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
Assets
<CAPTION>
June 30, December 31,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Utility Plant:
Electric $ 983,426 $ 951,019
Gas 202,620 198,755
Common 55,969 55,445
Utility Plant in Service 1,242,015 1,205,219
Less accumulated depreciation 414,131 398,584
Net Utility Plant in Service 827,884 806,635
Construction work in progress 33,860 49,654
Net Utility Plant 861,744 856,289
Non-utility Property:
Non-utility property 33,962 34,585
Less accumulated depreciation, depletion and amortization 14,153 13,977
Net Non-utility Property 19,809 20,608
Current Assets:
Cash and cash equivalents 5,772 16,081
Temporary cash investments 1,321 1,839
Customer accounts receivable, less allowance for
uncollectible accounts of $2,221 and $2,200 41,090 44,105
Accrued utility revenue 20,830 27,273
Other accounts receivable, less allowance for
uncollectible accounts of $303 and $209 9,829 17,384
Gas marketing accounts receivable, less allowance
for uncollectible accounts of $98 and $327 55,000 58,470
Materials and supplies (at average cost) 31,938 37,836
Prepaid property taxes 12,173 19,327
Prepayments and other current assets 41,679 28,877
Total Current Assets 219,632 251,192
Deferred Debits:
Income tax recoverable in future rates 71,142 73,261
Extraordinary property loss - Sterling nuclear project 7,195 10,139
Deferred Order No. 636 transition costs 10,710 13,480
Deferred revenue taxes 16,215 16,888
Deferred pension and other postretirement benefits 10,469 10,505
IPP settlements 40,411 17,821
Unamortized debt expense (amortized over
term of securities) 9,849 10,493
Other deferred debits 35,344 32,328
Total Deferred Debits 201,335 184,915
Total $1,302,520 $1,313,004
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>
June 30, December 31,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Capitalization:
Common stock (13,653,262 and 13,652,913 shares
outstanding) $ 68,266 $ 68,265
Premium on capital stock 133,601 133,595
Capital stock expense (6,118) (6,116)
Retained earnings 174,066 183,659
Total Common Stock Equity 369,815 379,403
Non-redeemable preferred stock (428,443 shares
outstanding) 42,844 42,844
Non-redeemable cumulative preference stock (12,782
and 13,025 shares outstanding) 417 424
Total Non-Redeemable Stock 43,261 43,268
Redeemable preferred stock (27,738 shares outstanding) 2,774 2,774
Long-term debt 359,454 359,622
Total Capitalization 775,304 785,067
Non-current Liabilities:
Reserve for claims and damages 5,116 4,713
Postretirement benefits 12,407 15,625
Pension costs 41,414 39,854
Obligation under capital leases - 275
Total Non-current Liabilities 58,937 60,467
Current Liabilities:
Lease obligations due within one year 539 518
Long-term debt due within one year 19,190 19,392
Preferred stock to be redeemed within one year 1,384 1,384
Notes payable 9,965 -
Commercial paper 26,050 29,400
Accounts payable 39,837 63,855
Gas marketing accounts payable 54,306 71,913
Dividends payable 10,315 725
Customer deposits 5,431 5,669
Accrued Federal income and other taxes 1,478 5,949
Accrued interest 8,862 8,608
Refundable gas costs 8,711 7,554
Refunds to customers 12,298 10,265
Other current liabilities 16,528 16,127
Total Current Liabilities 214,894 241,359
Deferred Taxes and Other:
Deferred Federal income taxes 177,651 173,317
Deferred investment tax credits 16,695 17,109
Accrued Order No. 636 transition costs 10,710 13,480
Accrued IPP settlement agreements 30,000 8,000
Refundable fuel costs 12,695 10,366
Other deferred credits 5,634 3,839
Total Deferred Taxes and Other 253,385 226,111
Total $1,302,520 $1,313,004
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 Six Months
Ended June 30, Ended June 30,
1995 1994 1995 1994
(Thousands of Dollars)(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric $108,760 $114,965 $215,946 $226,110
Gas 20,289 25,832 79,410 107,235
Electric sales to other utilities 479 1,674 1,197 4,815
Total Utility Revenues 129,528 142,471 296,553 338,160
Diversified activities 115,831 86,103 260,653 182,197
Total Operating Revenues 245,359 228,574 557,206 520,357
Operating Expenses:
Operations:
Fuel used in electric production 15,827 21,512 33,845 46,567
Electricity purchased for resale 13,680 11,447 25,140 22,419
Gas purchased for resale 10,183 15,106 40,515 65,272
Non-utility gas marketing purchases 113,985 82,475 256,110 173,550
Other expenses of operation 31,558 37,948 67,588 72,996
Maintenance 11,129 10,400 20,600 20,472
Depreciation and amortization 9,322 8,695 18,373 17,304
Amortization of property losses 1,541 1,416 3,081 2,831
Taxes other than income taxes 22,125 22,867 47,351 49,015
Federal income taxes 112 3,261 8,026 14,461
Deferred Federal income taxes 3,571 70 3,766 (2,159)
Amortization of investment tax credit (30) (30) (60) (60)
Total Operating Expenses 233,003 215,167 524,335 482,668
Income from Operations 12,356 13,407 32,871 37,689
Other Income and (Deductions):
Allowance for other funds used
during construction 11 27 22 57
Investigation costs (1,626) (2,797) (2,007) (6,009)
Other - net 136 (30) 5,209 140
Taxes other than income taxes (83) (28) (521) (54)
Federal income taxes 690 1,044 1,213 2,124
Deferred Federal income taxes 78 (34) (2,074) (73)
Amortization of investment tax credit 177 179 354 357
Total Other Income and (Deductions) (617) (1,639) 2,196 (3,458)
Income Before Interest Charges 11,739 11,768 35,067 34,231
Interest Charges:
Interest on long-term debt 6,926 7,498 13,852 14,990
Other interest 936 655 2,137 1,339
Amortization of debt premium and expense-net 340 302 680 603
Allowance for borrowed funds used during
construction (185) (67) (645) (149)
Total Interest Charges 8,017 8,388 16,024 16,783
Net Income 3,722 3,380 19,043 17,448
Dividends on preferred and preference stock,
at required rates 785 813 1,569 1,626
Earnings applicable to common stock $ 2,937 $ 2,567 $ 17,474 $ 15,822
Avg. number of common shares outstanding (000's) 13,653 13,565 13,653 13,549
Earnings per average common share outstanding $ .22 $ .19 $ 1.28 $ 1.17
Dividends declared per common share outstanding $ 1.29 $ 1.27 $ 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>
Six Months Ended
June 30,
1995 1994
(Thousands of Dollars)
<S> <C> <C>
Cash Flow from Operations:
Net income $19,043 $17,448
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 18,415 17,749
Deferred Federal income taxes 6,364 (2,086)
Deferred investment tax credit (414) (417)
Deferred and refundable fuel and gas costs 3,486 11,979
Allowance for funds used during construction (667) (206)
Other non-cash charges 3,617 2,801
Changes in certain current assets and liabilities:
Accounts and gas marketing accounts receivable,
net and accrued utility revenues 20,483 8,696
Materials and supplies 5,898 7,749
Prepaid property taxes 7,154 6,749
Prepayments and other current assets (12,802) (14,475)
Operating and gas marketing accounts payable (41,625) (20,459)
Accrued Federal Income and other taxes (4,471) (1,273)
Accrued interest 254 56
Refunds to customers 2,033 1,244
Other current liabilities 163 1,605
Other-net (2,804) 10,774
Net Cash Provided from Operations 24,127 47,934
Cash Flow from Investing Activities:
Additions to plant (22,532) (16,772)
Temporary cash investments 518 498
Allowance for funds used during construction 667 206
Net Cash Used in Investing Activities (21,347) (16,068)
Cash Flow from Financing Activities:
Proceeds from:
Issuance of common stock - 1,820
Retirements of:
Long-term debt (384) (455)
Capital lease obligations (275) (235)
Net borrowings (repayments) under
short-term debt arrangements* 6,615 (22,805)
Dividends on preferred and common stock (19,045) (18,676)
Net Cash Provided From (Used in) Financing Activities (13,089) (40,351)
Net Change in Cash and Cash Equivalents (10,309) (8,485)
Cash and Cash Equivalents at Beginning of Period 16,081 14,256
Cash and Cash Equivalents at End of Period $ 5,772 $ 5,771
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest, net of amounts capitalized $14,991 $16,126
Federal income taxes $10,850 $ 8,500
* 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 June 30, 1995, the consolidated
statements of income for the three month and six month periods ended
June 30, 1995 and 1994, and the consolidated cash flow statements for the
six 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 June 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 June 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 June 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.
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. In
June 1995, the sale of the Portland, Maine radio stations was completed.
The sale of the radio station in Dundee, Illinois has received Federal
Communication Commission ("FCC") approval and is expected to close in
August 1995. A petition for reconsideration of the FCC approval of the
sale of the Middletown, New York stations has been filed with the FCC and
the closing of the sale of these stations may be delayed to the fourth
quarter of 1995. FCC approval of the sale of the Ocean City, New Jersey
radio station is anticipated in August 1995 with a closing in September
or October 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 June 30, 1995, $40.4 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. 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
$29.3 million at June 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 second quarter of 1995 were $.22 as compared to $.19 for the second
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 second quarter of 1995 and 13.6 million
for the second 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 June 30, 1995 amounted to $2.57 with a dividend payout ratio of 98.5% as
compared to $2.53 a year ago with a payout ratio of 92.0%.
The return on average common equity for the twelve months ended June 30, 1995
was 9.41%, as compared to 9.95% for the twelve months ended June 30, 1994.
Capital Resources and Liquidity
At June 30, 1995, the Company and its utility subsidiaries had unsecured bank
lines of credit totaling $59 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
June 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 six months ended June 30, 1995 amounted to $34.5
million at an effective interest rate of 6.5% as compared to $38.8 million at
an effective interest rate of 3.8% for the same period of 1994. The level of
temporary cash investments for the six months ended June 30, 1995 increased to
an average daily balance of $11.6 million at an effective interest rate of
5.8% from $10.2 million at an effective interest rate of 3.4% 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, will be 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. Proceeds from the issuance of the 1995 Bonds are being held
in escrow by the trustee until the redemption of the 1985 Bonds.
<PAGE>
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 will not
contest this interpretation.
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 earning 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.
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, O&R 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,
<PAGE>
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
acceleration from April 1, 1996 to August 1, 1995 of the Company's proposed
annual rate reduction of $6.1 million. Allowing the reduced rates to become
effective August 1, 1995 would result in a revenue reduction of $3.8 million
(including $0.2 million of revenue taxes) for the period August 1, 1995 -
March 31, 1996. The Stipulation, for the period January 1, 1995 through
March 31, 1996, increases the excess earnings threshold from 10.6% to 11.3%,
with equal sharing of earnings above 11.3% between shareholders and
ratepayers.
The revenue reduction will be offset by the deferred revenue associated
with the 1994 electric equity return 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.
Although the NYPSC has not acted on this request, this amount was charged to
operations in the fourth quarter of 1994. The NYPSC has 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 June 28, 1995, the NYPSC issued the report of the NYPSC Staff on its
investigation of the Company. While the report did not quantify the total
cost of improper charges borne by the Company's New York ratepayers, the
report did state that the NYPSC Staff believes that, in addition to the $3.8
million already refunded or proposed to be refunded, the Company should
reimburse New York ratepayers for the "excess costs" incurred since 1983 in
several specified areas, including the areas of compensation for senior
management of the Company, the Company's internal auditing function, the
compensation of a former employee of the Company for the period of
<PAGE>
time when that employee was embezzling the Company's funds and the cost of
certain employees' time while they were performing personal work for the
Company's officers or were engaged in political or lobbying activities. The
NYPSC Staff recommended that a final determination of the amount that the
Company should refund be determined in either a separate proceeding or
incorporated as part of a rate case proceeding.
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. The final amount of refunds to customers will be determined
under this proceeding. Management is unable to predict the final results of
this proceeding and what modifications, if any, will be made to the amount
proposed to be refunded.
New Jersey
Under an agreement with the New Jersey Board of Public Utilities ("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, Rockland Electric Company ("RECO"), a wholly-owned utility
subsidiary of the Company, 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
at O&R. 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.
QUARTERLY COMPARISON
Earnings per average common share outstanding for the second quarter of 1995
amounted to $.22 per share as compared to $.19 per share for the second
<PAGE>
quarter of 1994. This increase reflects the Company's ability to reduce
operating and interest expenses in its core utility business, and the lower
costs associated with the litigation involving former officers and others
compared to a year ago. The earnings increase was significantly diminished,
however, by the performance of the Company's diversified operations during the
current quarter compared with the same period a year ago.
Electric and Gas Revenues
Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, decreased by $12.9 million in the second quarter of 1995 as
compared to the same quarter of 1994.
Electric operating revenues during the current quarter were $109.2 million as
compared to $116.6 million for the second quarter of 1994, a decrease of $7.4
million. The components of the changes in electric operating revenues for the
quarter ended June 30, 1995 as compared to the same quarter of 1994 are as
follows:
(Millions of Dollars)
Retail sales:
Base Revenues* $ (2.6)
Fuel cost recoveries (2.5)
Sales volume changes .1
Subtotal (5.0)
Sales for resale (1.2)
Other operating revenue:
RDM revenue reconciliation
and DSM incentives -
Other (1.2)
Total $ (7.4)
*Includes miscellaneous surcharges and revenue tax recoveries.
Actual total sales of electric energy to retail customers during the second
quarter of 1995 were 1,064,366 megawatt hours ("Mwh"), compared with 1,063,281
Mwh during the comparable period a year ago. This increase is the result of
an increase in the average number of customers when compared to the same
period a year ago. 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 $113.2 million during the current quarter
compared to $118.2 million during the second quarter of 1994, a decrease of
$5.0 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 $52.4 million for the
second quarter 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 $56.2 million for the second quarter of 1995 was $3.8
million, which was recorded as a reduction to revenues. In the second quarter
of 1994, the Company recorded $3.8 million as a reduction to revenue.
<PAGE>
With regard to the DSM goal achievement incentives, the Company's performance
during the second quarter of 1995 allowed it to record $.2 million of
incentive income, which equals the amount recorded in 1994.
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 second quarter of 1995 amounted
to $.5 million, a decrease of $1.2 million from a year ago. Sales to such
utilities totaled 22,909 Mwh, compared with 69,662 Mwh in the second 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 $20.3 million compared to $25.8
million for the second quarter of 1994, a decrease of $5.5 million. The
components of the changes in gas operating revenues for the quarter ended
June 30, 1995 as compared to the same quarter of 1994 are as follows:
(Millions of Dollars)
Sales to firm customers:
Base revenues* $ (1.2)
Gas cost recoveries (4.4)
Sales volume changes .2
Subtotal (5.4)
Sales to interruptibles ( .2)
Other operating revenue .1
Total $ (5.5)
* Includes miscellaneous surcharges and revenue tax recoveries.
Gas sales to firm customers during the second quarter of 1995 totaled 2,910
million cubic feet ("Mmcf"), compared with 2,829 Mmcf during the same period a
year ago. Gas revenues from firm customers were $18.8 million, compared with
$24.2 million in the second quarter of 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 $3.5 million during the second 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 $ .5
Changes in kilowatt-hours generated
or purchased (1.5)
Deferred fuel charge (2.5)
Total $ (3.5)
The average cost per kilowatt-hour generated and purchased was 2.54 cents for
the quarter ended June 30, 1995 compared to 2.50 for the same quarter of 1994.
<PAGE>
Purchased gas costs for utility operations were $10.2 million in the second
quarter of 1995 compared to $15.1 million in 1994, a decrease of $4.9 million.
The components of the changes in purchased gas costs are as follows:
(Millions of Dollars)
Prices paid for gas supplies* $(4.9)
Gas sendout volume (.9)
Deferred fuel charges .9
Total $(4.9)
*Net of refunds received from gas suppliers.
The average cost per thousand cubic feet ("Mcf") purchased for the second
quarter of 1995 including transportation and storage costs, was $3.06 compared
to $4.58 in the second quarter of 1994.
Other Operating and Maintenance Expenses
The Company's total operating and maintenance expenses excluding fuel,
purchased power and gas purchased for resale for the second quarter, decreased
by $5.3 million compared with the same period in 1994. The decrease in
expenses was entirely associated with utility operating expenses. The change
in diversified operation and maintenance expenses was minimal.
The decrease in other utility operation and maintenance expense is the result
of a decrease in operation expenses of $6.8 million, of which $4.3 million is
attributable to recoverable Demand Side Management costs and $.6 million is
attributable to other taxes. These decreases were offset by increases in
depreciation and amortization expense of $.4 million, Federal income taxes of
$1.0 and maintenance of $.7 million.
Diversified Activities
The Company's diversified activities consist of gas marketing, gas production
and land development businesses conducted by wholly owned non-utility
subsidiaries.
Revenues from diversified activities increased by $29.7 million for the second
quarter of 1995 as compared to the same quarter of 1994, as a result of the
gas marketing subsidiary's success in adding customers and increasing its
sales volumes. The increase in operating expenses for all diversified
activities of $31.5 million is the result of increased gas purchases and the
cost of restructuring the business towards securing higher margin retail
customers.
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, increased by $1.4
million during the second 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.
<PAGE>
YEAR TO DATE COMPARISON
Earnings per average common share outstanding for the six months ended
June 30, 1995 amounted to $1.28 per share as compared to $1.17 for the same
period of 1994. This increase reflects the impact of the gain realized from
the formation of NORSTAR Energy and lower investigation and litigation costs.
This increase is partially offset by lower diversified earnings.
Electric and Gas Revenues
Electric and gas operating revenues, including fuel cost and purchased gas
cost recoveries, decreased by $41.6 million for the first six months of 1995
as compared to the same period of 1994.
Electric operating revenues during the current period were $217.1 million as
compared to $230.9 million for the comparable period of 1994, a decrease of
$13.8 million. The components of the changes in electric operating revenues
for the six months ended June 30, 1995 as compared to the same period in 1994
were as follows:
(Millions of Dollars)
Retail sales:
Base rates* $(5.6)
Fuel cost recoveries (5.8)
Sales volume changes (1.0)
Subtotal (12.4)
Sales for resale (3.6)
Other operating revenues:
RDM revenue reconciliation
and DSM incentives 1.9
Other .3
Total $(13.8)
*Includes miscellaneous surcharges and revenue tax recoveries.
Actual total sales of electric energy to retail customers during the first six
months of 1995 were 2,136,529 Mwh, compared with 2,150,019 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 $218.5 million during the current period
compared to $230.9 million during the first six months of 1994, a decrease of
$12.4 million.
New York electric revenue targets under the Company's RDM, as established in a
base rate case, amounted to $102.0 million for the first six 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
$105.8 million for the first six months of 1995 was $3.7 million, which is
recorded as a reduction to revenue. For the first six months of 1994, the
Company recorded a reduction in revenues of $5.6 million.
<PAGE>
With regard to the DSM goal achievement incentives provided for in the RDM
agreement, the Company's performance during the first six months of 1995 and
1994 allowed it to record $.2 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 six months of 1995
amounted to $1.2 million compared to $4.8 million a year ago. Such sales
totaled 64,504 Mwh compared with 174,175 Mwh in the first six 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 six months of 1995 were $79.4 million
compared to $107.2 million for the first six months of 1994, a decrease of
$27.8 million. The components of the changes in gas operating revenues for
the six months ended June 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 (23.4)
Sales volume changes (5.3)
Subtotal (26.7)
Sales to interruptibles (1.7)
Sales for resale (.1)
Other operating revenue .7
Total $(27.8)
Firm gas sales amounted to 11,713 Mmcf during the first six months of 1995, a
decrease of 12.3% from the 1994 level of 13,357 Mmcf. Gas revenues from firm
customers were $75.0 million in the current period compared to $101.7 million
during the first six months of 1994. Sales of interruptible gas for the first
six months of 1995 amounted to 469 Mmcf, a decrease of 268 Mmcf from 1994.
Revenues from these sales were $1.4 million as compared to $3.1 million for
the same period of 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 $10.0 million for the first six months of 1995
when compared to the $69.0 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 $( 4.2)
Changes in kilowatt-hours
generated or purchased ( 4.2)
Deferred fuel charge ( 1.6)
Total $(10.0)
<PAGE>
The average cost per kilowatt-hour generated and purchased was 2.47 cents in
the first six months of 1995 and 2.64 cents for the same period of 1994.
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
$40.5 million for the first six months of 1995 compared to $65.3 million for
the comparable period of 1994.
The components of the change are as follows:
(Millions of Dollars)
Prices paid for gas suppliers* $(9.1)
Gas sendout volume (10.4)
Deferred fuel charges ( 5.3)
Total $(24.8)
*Net of refunds received from gas suppliers
The average cost per Mcf purchased for the first six months of 1995, including
transportation and storage costs, was $2.64 as compared to $3.38 for the same
period of 1994.
Other Operating and Maintenance Expenses
The Company's total operation and maintenance expenses excluding fuel,
purchased power and gas purchased for resale, decreased by $6.1 million
compared to a year ago. Expenses from Diversified Activities accounted for
$.5 million of this decrease, as described below. The decrease associated
with utility operations was $5.6 million. This decrease is the result of
recoverable Demand Side Management Cost which decreased $6.2 million when
compared to the same period a year ago. Other operating and maintenance
expense had a modest increase of $.6 million when compared to the same period
of 1994.
Diversified Activities
Revenues from diversified activities increased by $78.5 million for the first
six 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 six months of 1995 as compared to the first six 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 $82.1 million, which is the result of increased gas purchases of
$82.6 million, and offset by a decrease in depreciation, taxes and other
operating expenses of $.5 million.
<PAGE>
Other Income, Deductions and Interest Charges - Net
Other income, net of interest charges and other deductions, increased by $6.4
million during the first six months of 1995 when compared to the first six
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.<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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 for background
on the NYPSC proceeding (Case 93-M-0849) investigating the operations and
management of the Company. 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. Further information regarding
the report of the NYPSC Staff on its investigation of the Company as well as
the Company's current electric base rate case 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.
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 for background
on the NJBPU proceeding investigating the operations and management of RECO.
On November 3, 1993, the NJBPU commenced its periodic management audit (Docket
No. EA900302-48) of RECO. The audit findings are contained in three reports
which were issued by the NJBPU on July 7, 1995. 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 a description of the Company's electric base rate case filed
with the NYPSC (Case 95-E-0491) on May 25, 1995. At a prehearing conference
on June 15, 1995, Administrative Law Judge Vaughn established a schedule
for this proceeding. Cross examination of the Company's direct case is
scheduled for the week of August 28, 1995. Staff and other intervenors must
file their direct testimony by October 5, 1995.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.2 By-Laws, as amended through June 29, 1995.
10.30 Letter agreement dated April 6, 1995 between Orange and Rockland
Utilities, Inc. and G. D. Caliendo regarding participation in the
Officers' Supplemental Retirement Plan of Orange and Rockland
Utilities, Inc.
(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: August 10, 1995 By ROBERT J. MCBENNETT
Robert J. McBennett
Treasurer and Controller
Date: August 10, 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
JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 861,744
<OTHER-PROPERTY-AND-INVEST> 19,809
<TOTAL-CURRENT-ASSETS> 219,632
<TOTAL-DEFERRED-CHARGES> 201,335
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,302,520
<COMMON> 68,266
<CAPITAL-SURPLUS-PAID-IN> 127,483
<RETAINED-EARNINGS> 174,066
<TOTAL-COMMON-STOCKHOLDERS-EQ> 369,815
2,774
43,261
<LONG-TERM-DEBT-NET> 359,454
<SHORT-TERM-NOTES> 9,965
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 26,050
<LONG-TERM-DEBT-CURRENT-PORT> 19,190
1,384
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 539
<OTHER-ITEMS-CAPITAL-AND-LIAB> 470,088
<TOT-CAPITALIZATION-AND-LIAB> 1,302,520
<GROSS-OPERATING-REVENUE> 557,206
<INCOME-TAX-EXPENSE> 11,732
<OTHER-OPERATING-EXPENSES> 512,603
<TOTAL-OPERATING-EXPENSES> 524,335
<OPERATING-INCOME-LOSS> 32,871
<OTHER-INCOME-NET> 2,196
<INCOME-BEFORE-INTEREST-EXPEN> 35,067
<TOTAL-INTEREST-EXPENSE> 16,024
<NET-INCOME> 19,043
1,569
<EARNINGS-AVAILABLE-FOR-COMM> 17,474
<COMMON-STOCK-DIVIDENDS> 17,476
<TOTAL-INTEREST-ON-BONDS> 13,852
<CASH-FLOW-OPERATIONS> 24,127
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 0
</TABLE>
<PAGE>
As amended through 6/29/95
ORANGE AND ROCKLAND UTILITIES, INC.
(New York)
BY-LAWS
ARTICLE ONE
OFFICES
SECTION 1.1. Corporation's Office in New York; Mailing
Address for Service of Process. The location of the Corporation's
office within the State of New York, and the post office address to
which the Secretary of State of the State of New York shall mail a
copy of process in any action or proceeding against the Corporation
that may be served upon him, shall be in each case as stated in the
Certificate of Incorporation.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
*SECTION 2.1. Annual Meetings. An annual meeting of
shareholders to elect directors and transact such other business as
may properly be presented to the meeting shall be held on such date
of each year and at such time as the Board of Directors shall fix.
*SECTION 2.2. Special Meetings. Unless otherwise expressly
provided in the Restated Certificate of Incorporation of the
Corporation with respect to the Cumulative Preferred Stock or
Preference Stock and except for special meetings of shareholders
called pursuant to Section 603 of the New York Business Corporation
Law, special meetings of the shareholders may only be called by the
Board of Directors, its Chairman, its Vice Chairman or the
President. Special meetings of shareholders of the Corporation may
not be called by any other person or persons. At any such special
meeting only such business may be transacted as is related to the
purpose or purposes set forth in the notice required by Section
2.4.
SECTION 2.3. Place of Meetings. Each annual meeting shall
be held at such place, within or without the State of New York, as
_______________
* Amended 6/29/95
<PAGE>
the Board of Directors, its Chairman or the President shall fix.
Each special meeting shall be held at such place, within or without
the State of New York, as the person or persons calling the meeting
shall fix. If no place shall be so fixed, the meeting shall be
held at the offices of the Corporation in the State of New York.
SECTION 2.4. Notice of Meetings. (a) Written notice of a
meeting of shareholders shall be given, personally or by mail, not
less than ten nor more than fifty days before the meeting to each
shareholder entitled to vote at such meeting; such notice shall
state the date, place and hour of the meeting and, unless it is the
annual meeting, shall indicate that it is being issued by or at the
direction of the person or persons calling the meeting. Notice of
a special meeting shall also state the purpose or purposes for
which the meeting is called. If mailed, such notice is given when
deposited in the United States mail, with postage thereon prepaid,
directed to each shareholder at his address as it appears on the
record of shareholders, or, if he shall have duly filed with the
Secretary a written request that notices to him be mailed to some
other address, then directed to him at such other address.
(b) When a meeting is adjourned to another time or place, it
shall not be necessary to give any notice of the adjourned meeting
if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at
the adjourned meeting any business may be transacted that might
have been transacted on the original date of the meeting. However,
if after adjournment the Board of Directors fixes a new record date
for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record on the new record date who
is entitled to notice under paragraph (a) of this Section 2.4.
SECTION 2.5. Waiver of Notice. Notice of a meeting need not
be given to any shareholder who submits a signed waiver of notice,
in person or by proxy, whether before or after the meeting. The
attendance of any shareholder at a meeting, in person or by proxy,
without protesting prior to the conclusion of the meeting the lack
of notice of such meeting, shall constitute a waiver of notice by
him.
SECTION 2.6. Quorum. Except as otherwise required by law or
the Certificate of Incorporation, the holders of record of a
majority of the shares entitled to be voted present in person or
represented by proxy at a meeting shall be necessary and sufficient
to constitute a quorum for the transaction of business at the
meeting, but in the absence of a quorum the holders of record
present or represented by proxy at such meeting may vote to adjourn
the meeting from time to time. A quorum once present to organize a
meeting is not broken by the subsequent withdrawal of any
shareholders.
<PAGE>
SECTION 2.7. Presiding Officer and Secretary at Meetings.
Each shareholders' meeting shall be presided over by the Chairman
of the Board of Directors or in his absence by the Vice Chairman of
the Board of Directors, if any, or in the absence of both of them
by the President, or if none of them is present by the person
designated in writing by the Chairman of the Board of Directors, or
if no person is so designated, then a chairman of the meeting shall
be chosen by the meeting by a plurality vote. The Secretary or in
his absence an Assistant Secretary shall act as secretary of the
meeting, or if no such officer is present a secretary of the
meeting shall be designated by the person presiding at the meeting.
SECTION 2.8. Voting. Except as otherwise required by law or
the Certificate of Incorporation:
(a) each shareholder of record shall be entitled at every
meeting of shareholders to one vote in person or by proxy for each
share standing in his name on the record of shareholders;
(b) directors shall be elected by a plurality vote;
*(c) each other matter properly presented to any meeting in
accordance with these By-Laws shall be decided by a majority of the
votes cast on the matter.
SECTION 2.9. Proxies. Every proxy must be executed in
writing by the shareholder or by his attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date
thereof, unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the shareholder executing it,
except in those cases where an irrevocable proxy is expressly
stated to be given and is permitted by law.
SECTION 2.10. Inspectors of Election. At any meeting for
the election of directors, the presiding officer shall appoint two
inspectors of election to serve at such meeting. The inspectors
shall be sworn to execute their duties with strict impartiality and
according to the best of their ability.
SECTION 2.11. Record Date. (a) For the purpose of
determining the shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or to
express consent to or dissent from any proposal without a meeting,
or for the purpose of determining shareholders entitled to receive
payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix in
______________
* Amended 6/29/95
<PAGE>
advance a date as the record date for any such determination of
shareholders. Such date shall not be more than fifty nor less than
ten days before the date of the meeting, nor more than fifty days
prior to any other action.
(b) When a determination of shareholders of record entitled
to notice of or to vote at any meeting of shareholders has been
made as provided in this section, such determination shall apply to
any adjournment thereof, unless the Board of Directors shall fix a
new record date under this section for the adjourned meeting.
*SECTION 2.12. Business at Annual Meetings. (a) No business
may be transacted at an annual meeting of shareholders, other than
business that is either (i) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board
of Directors (or any duly authorized committee thereof), (ii)
otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized
committee thereof) or (iii) otherwise properly brought before the
annual meeting by any shareholder of the Corporation (1) who is a
shareholder of record on the date of the giving of the notice
provided for in this Section 2.12 and on the record date for the
determination of shareholders entitled to vote at such annual
meetings and (2) who complies with the notice procedure set forth
in this Section 2.12.
(b) In addition to any other applicable requirements, for
business to be properly brought before an annual meeting by a
shareholder, such shareholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
(c) To be timely, a shareholder's notice to the Secretary
pursuant to this Section 2.12 must be delivered to or mailed and
received at the principal executive offices of the Corporation not
less than 90 days nor more than 120 days prior to the date of the
annual meeting of shareholders; provided, however, that in the
event that less than 100 days' notice of the date of the annual
meeting is given to shareholders or there is less than 100 days'
prior public disclosure of the date of the annual meeting, notice
by the shareholder to be timely must be so received not later than
the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such
public disclosure of the date of the annual meeting was made,
whichever first occurs.
______________
* Added 6/29/95
<PAGE>
(d) To be in proper written form, a shareholder's notice to
the Secretary must set forth as to each matter such shareholder
proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting,
(ii) the name and record address of such shareholder, (iii) the
class or series and number of shares of capital stock of the
Corporation that are owned beneficially or of record by such
shareholder, (iv) a description of all arrangements or
understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of
such business by such shareholder and any material interest of such
shareholder in such business and (v) a representation that such
shareholder intends to appear in person or by proxy at the annual
meeting to bring such business before the meeting.
(e) No business shall be conducted at the annual meeting of
shareholders except business brought before the annual meeting in
accordance with the procedures set forth in this Section 2.12;
provided, however, that, once business has been properly brought
before the annual meeting in accordance with such procedures,
nothing in this Section 2.12 shall be deemed to preclude discussion
by any shareholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought
before the annual meeting in accordance with the foregoing
procedures, the Chairman shall declare to the meeting that the
business was not properly brought before the meeting and such
business shall not be transacted.
ARTICLE THREE
DIRECTORS
SECTION 3.1. Number; Term of Office. The business of the
Corporation shall be managed under the direction of the Board of
Directors. The Board of Directors shall consist of not less than
7(1) or more than 15 persons, the exact number (i) to be 12 persons
upon adoption of this Section 3.1, subject to change exclusively by
the Board of Directors as provided in this Section 3.1, and (ii) if
to be changed from 12 persons to some other number not less than 7
or more than 15 persons subsequent to the adoption of this Section
3.1, to be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the
_________
(1) Section 704(a) of the NYBCL requires a minimum of three Directors per class
on a staggered board. The minimum number of Directors for O&R is nine.
<PAGE>
total number of authorized directors from time to time (whether or
not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the
Board for adoption). At the annual meeting of the shareholders of
the Corporation at which this Section 3.1 is adopted, the directors
shall be classified into three classes, as nearly equal in number
as possible, with the term of office of the first class to expire
at the 1988 annual meeting of shareholders, the term of office of
the second class to expire at the 1989 annual meeting of
shareholders and the term of office of the third class to expire at
the 1990 annual meeting of shareholders. At each annual meeting of
the shareholders of the Corporation following the annual meeting of
the shareholders at which this Section 3.1 is adopted, directors
elected to succeed those directors whose terms expire shall be
elected for a term of office to expire at the third succeeding
annual meeting of shareholders after their election.
SECTION 3.2. Resignation; Removal. Any director of the
Corporation may resign at any time either by oral tender of
resignation at any meeting of the Board of Directors or by giving
written notice thereof to the Corporation. Such resignation shall
take effect at the time specified therefor, and unless otherwise
specified with respect thereto the acceptance of such resignation
shall not be necessary to make it effective. Subject to the rights
of the holders of any class or series of Preferred Stock having
preference over the Common Stock as to dividends or upon
liquidation to elect directors under specified circumstances, any
director or directors, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 80 percent of the
combined voting power of all of the then-outstanding shares of
stock of all classes and series of the Corporation entitled to vote
generally (the "Voting Stock"), voting together as a single class
(it being understood that, for all purposes of these By-Laws, each
share of the Voting Stock shall have the number of votes granted to
it pursuant to ARTICLE SECOND of the Certificate of Incorporation
or any designation of the rights, powers and preferences of any
class or series of the Preferred Stock of the Corporation made
pursuant to said ARTICLE SECOND (a "Preferred Stock Designation")).
The Corporation must notify the director of the grounds of his
impending removal and the director shall have an opportunity, at
the expense of the Corporation, to present his defense to the
shareholders by a statement which accompanies or precedes the
Corporation's solicitation of proxies to remove him. The term
"entire Board of Directors" as used in these By-Laws means the
total number of directors which the Corporation would have if there
were no vacancies.
SECTION 3.3. Vacancies. Except as otherwise fixed pursuant
to the provisions of ARTICLE SECOND of the Certificate of
<PAGE>
Incorporation relating to the rights of the holders of any class or
series of Preferred Stock having a preference over the Common Stock
as to dividends or upon liquidation to elect directors under
specified circumstances, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies
in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause
may be filled only by a majority vote of the directors then in
office, even though less than a quorum of the Board of Directors,
acting at a regular or special meeting. Any director elected in
accordance with the preceding sentence shall hold office until the
next annual meeting of shareholders at which the election of
directors is in the regular order of business and until his
successor has been elected and qualified. No decrease in the
authorized number of directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
SECTION 3.4 Qualifications. Each of the directors shall be
at least 18 years of age. Each director elected to the Board of
Directors pursuant to the provisions of Section 3.1 or Section 3.3
shall not be 70 years of age or older upon election, except those
directors elected on or before April 11, 1990 and who are 60 years
of age or older on such date shall not be 75 years of age or older
upon election. The directors need not be shareholders of the
Corporation.
SECTION 3.5. Regular and Annual Meetings; Notice. Regular
meetings of the Board of Directors shall be held at such time and
at such place, within or without the State of New York, as the
Board of Directors may from time to time prescribe. No notice need
be given of any regular meeting and a notice, if given, need not
specify the purposes thereof. A meeting of the Board of Directors
may be held without notice immediately after an annual meeting of
shareholders at the same place as that at which such meeting was
held.
SECTION 3.6. Special Meetings; Notice. A special meeting of
the Board of Directors may be called at any time by the Board of
Directors or its Chairman and shall be called by the Board of
Directors, its Chairman or the Secretary upon receipt of a written
request to do so specifying the matter or matters, appropriate for
action at such a meeting, proposed to be presented at the meeting
and signed by at least two directors. Any such meeting shall be
held at such time and at such place, within the State of New York
(or without the State of New York if the Chairman of the Board of
Directors shall so direct), as shall be stated in the request or as
shall be determined by the body or person calling such meeting.
Notice of such meeting stating the time and place thereof shall be
given (a) by deposit of the notice in the mails (first class,
postage prepaid) at least two days before the day fixed for the
<PAGE>
meeting addressed to each director at his address as it appears on
the Corporation's records or at such other address as the director
may have furnished the Corporation for that purpose, or (b) by
dispatch of the notice similarly addressed by telegraph, telex,
cable or other electronic means of communication or by delivery of
such notice by telephone or in person, in each case at least 24
hours before the time fixed for the meeting.
SECTION 3.7. Waiver of Notice. Notice of a meeting of the
Board of Directors or of any committee thereof need not be given to
any director who submits a signed waiver of notice whether before
or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of
notice to him.
*SECTION 3.8. Chairman of the Board; Presiding Officer and
Secretary at Meetings. The Board of Directors at its first meeting
following the annual meeting of shareholders in each year may elect
one of its members to serve at its pleasure as Chairman of the
Board. The Chairman of the Board may but need not be an officer of
or employed in an executive or any other capacity by the
Corporation. Each meeting of the Board of Directors shall be
presided over by the Chairman of the Board or in his absence by the
Vice Chairman of the Board, if any, or if neither is present by
such member of the Board of Directors as shall be chosen by the
meeting. The Secretary or in his absence an Assistant Secretary
shall act as secretary of the meeting, or if no such officer is
present, a secretary of the meeting shall be designated by the
person presiding at the meeting. The Chairman of the Board of
Directors shall preside at all meetings of the shareholders, and
shall have such further powers and duties as may be conferred by
the Board of Directors.
SECTION 3.9. Quorum; Voting. A majority of the whole Board
of Directors shall constitute a quorum for the transaction of
business, but in the absence of a quorum a majority of those
present (or if only one be present, then that one) may adjourn the
meeting, without notice other than announcement at the meeting,
until such time as a quorum is present. In the absence of any such
announcement notice of any adjournment shall be given in accordance
with the provisions of Section 3.6.
SECTION 3.10. Meeting by Telephone. At the direction of the
Chairman of the Board of Directors, members of the Board of
Directors or of any committee thereof may participate in meetings
_______________
* Amended 7/14/94
<PAGE>
of the Board of Directors or of such committee by means of
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and such participation shall constitute presence in person
at such meeting.
SECTION 3.11. Action Without Meeting. Any action required
or permitted to be taken at any meeting of the Board of Directors
or of any committee thereof may be taken without a meeting if all
members of the Board of Directors or of such committee, as the case
may be, consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or
of such committee.
SECTION 3.12. Compensation. A director shall receive such
compensation, if any, for his services as a director or as a member
of any committee of the Board of Directors as may from time to time
be fixed by the Board of Directors, which compensation may be
based, in whole or in part, upon his attendance at meetings of the
Board of Directors or of its committees. He may also be reimbursed
for his expenses in attending any meeting.
SECTION 3.13. Executive Committee. (a) The Board of
Directors, at its first meeting following the annual meeting of
shareholders in each year, may, by resolution adopted by a majority
of the entire Board of Directors, appoint an Executive Committee of
the Board of Directors to consist of the Chairman of the Board of
Directors and two or more additional directors as the Board of
Directors may from time to time determine. The Executive Committee
shall have, and may exercise during the intervals between the
meetings of the Board of Directors, all the powers vested in the
Board of Directors, except that the Executive Committee shall not
have authority as to any of the following matters: the declaration
of dividends; the submission to shareholders of any action as to
which shareholder action is required by law; the filling of
vacancies on the Board of Directors or on any committee thereof;
the fixing of compensation of any director for serving on the Board
of Directors or on any committee thereof; the amendment or repeal
of these By-Laws or the adoption of new By-Laws; and the amendment
or repeal of any resolution of the Board of Directors which by its
terms shall not be so amendable or repealable.
(b) The members of the Executive Committee shall serve at
the pleasure of the Board of Directors. The Board of Directors
shall designate the Chairman of the Executive Committee and fix the
compensation, if any, for his service in such capacity.
(c) Three members of the Executive Committee shall
constitute a quorum.
<PAGE>
(d) Meetings of the Executive Committee may be called by the
Chairman of the Executive Committee and shall be called by the
Chairman of the Executive Committee upon receipt of a written
request to do so specifying the matter or matters, appropriate for
action at such a meeting, proposed to be presented at the meeting
and signed by at least two members of the Executive Committee.
(e) The Executive Committee shall serve as the Nominating
Committee of the Board of Directors and, in such capacity, when
vacancies in the Board of Directors occur, shall evaluate
candidates and aid the Board of Directors in attracting qualified
candidates to fill such vacancies.
*SECTION 3.14. Audit Committee. (a) The Board of Directors at
its first meeting following the annual meeting of shareholders in
each year, may, by resolution adopted by a majority of the entire
Board of Directors, appoint an Audit Committee of the Board of
Directors to consist of three or more directors (none of whom shall
be officers of the Corporation) as the Board of Directors may from
time to time determine. In order to bring a fresh perspective to
the Audit Committee, members should be rotated periodically. The
Board of Directors will select a member to be chairperson.
(b) The Audit Committee as a committee of the Board of
Directors is primarily responsible to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing the
financial information which will be provided to the shareholders
and others, the systems of internal controls which management and
the Board of Directors has established, and the audit process. The
Audit Committee shall have adequate resources to discharge its
responsibilities. The Audit Committee shall have the following
specific duties and functions and such other duties and functions
as from time to time may be prescribed by the Board of Directors:
(i) Provide an open avenue of communication between the
internal auditors, the independent accountant, and
the Board of Directors.
(ii) Periodically review and update the Audit Committee's
charter and the charter of the internal audit
department.
(iii) Review management's plans for engaging the
independent accountant to perform management advisory
services, and projected fees, to satisfy itself that
the independence of the auditor is protected.
_______________
* Amended 6/23/94
<PAGE>
(iv) Recommend to the Board of Directors the independent
accountants to be nominated, approve the compensation
of the independent accountant, and review and approve
the discharge of the independent accountant.
(v) Review and concur in the appointment, replacement,
reassignment, or dismissal of the manager of internal
auditing.
(vi) Confirm and assure the independence of the internal
auditors and the independent accountant.
(vii) Inquire of management, the manager of internal
auditing, and the independent accountant about the
process each performs to assess significant risks or
exposures and evaluate the steps management has taken
to minimize such risks to the Corporation.
(viii) Consider, in consultation with the independent
accountant and the manager of internal auditing, the
audit scope and plan of the internal auditors and the
independent accountant to ensure coverage is
appropriate and the extent to which such plans can be
relied upon to detect fraud or weaknesses in
controls. The Audit Committee shall formally approve
the audit plan of the internal audit department.
(ix) Review with the manager of internal auditing and
independent accountant the coordination of the audit
effort to assure completeness of coverage, reduction
of redundant efforts, and the effective use of the
audit resources.
(x) Consider and review with the independent accountant
and the manager of internal auditing:
1. Their assessment of the adequacy of the
Corporation's internal controls, including
computerized information system controls and
security.
2. Any related significant findings and
recommendations of the independent accountant and
internal auditing, together with management's
responses thereto.
<PAGE>
(xi) Review with management and the independent accountant
at the completion of the annual examination:
1. The Corporation's annual financial statements,
related footnotes for completeness and
appropriateness of accounting principles.
2. The independent accountant's audit of the
Corporation's various financial statements and
the reports thereon.
3. Any significant changes required in the
independent accountant's audit plan.
4. Any serious difficulties or disputes with
management encountered during the course of the
audit and how they were resolved.
5. Other matters related to the conduct of the audit
which are to be communicated to the Audit
Committee under generally accepted auditing
standards.
(xii) Consider and review with management and the manager
of internal auditing:
1. Significant findings resulting from internal
audits.
2. Any difficulties encountered by the internal
audit department in the course of its audits,
including any restrictions on the scope of work
or access to required information.
3. The internal audit department budget and
staffing.
4. The internal audit department charter.
(xiii) Review interim filings with the Securities and
Exchange Commission and other published documents
containing the Corporation's financial statements.
(xiv) Review policies and procedures with respect to
officers' expense accounts and perquisites, including
their use of corporate assets, and consider the
results of any review of these areas by internal
auditing or the independent accountant.
<PAGE>
(xv) Review with the manager of internal auditing and the
independent accountant the results of their review of
the Corporation's monitoring of compliance with the
Corporation's code of conduct. The Audit Committee
shall ensure that appropriate action is taken in
cases of significant violations of such code.
(xvi) Meet with the manager of internal auditing, the
independent accountant, and management in separate
executive sessions to discuss any matters that the
Audit Committee or these groups believe should be
discussed privately with the Audit Committee. The
Audit Committee should also meet periodically in
executive session to assess management's
effectiveness and to assess the performance of the
internal audit department.
(xvii) Report Audit Committee actions to the Board of
Directors with such recommendations as the
Audit Committee may deem appropriate.
(xviii) The Audit Committee shall have the power to conduct
or authorize investigations into any matters within
the Audit Committee's scope of responsibilities. The
Audit Committee shall be empowered to retain
independent counsel, accountants, or others to assist
it in the conduct of any investigation.
(xix) The Audit Committee shall meet at least four times a
year, or more frequently as circumstances require.
The Audit Committee shall meet separately in
executive session with the independent accountant and
the manager of internal auditing at each meeting.
Minutes of the meetings shall be prepared and filed
with the records of the Corporation. Three or more
members shall constitute a quorum for the purpose of
conducting Audit Committee functions.
*(c) The Audit Committee shall have the following
responsibilities and duties with regard to the Company's ethics
program, as approved and endorsed by the Board of Directors (the
"Ethics Program"):
(i) Provide oversight and direction with regard to the
Company's Ethics Program and to the ethics officer
(the "Ethics Officer") appointed pursuant thereto in
_______________
* Added 11/03/94
<PAGE>
a manner that insures that the Company will operate
in accordance with ethical principles;
(ii) Receive reports at least quarterly from the Ethics
Officer detailing the status of ethics initiatives,
investigations, disciplinary procedures, compliance
efforts and other related activities;
(iii) Report to the entire Board of Directors on a periodic
basis regarding the operation of the Company's Ethics
Program and on matters related thereto deemed by the
Committee to be of interest and significance to the
Board;
(iv) Review, determine and recommend to the entire Board
of Directors, the action(s), if any, beyond those
undertaken by the Ethics Officer, that are necessary
to satisfactorily resolve any reported violations of
the Company's Ethics Program;
(v) Be available, through the Ethics Officer, as an
avenue for employees, vendors and others to express
concerns regarding possible ethical transgressions
involving senior management of the Company.
SECTION 3.15. Other Committees. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors,
may appoint such committees, in addition to the committees
specified in this ARTICLE THREE, as it may deem appropriate. Each
such committee shall consist of three or more members of the Board
of Directors and shall have such powers of the Board of Directors
as shall be conferred or authorized by such resolution and as
permitted by law. Each such committee shall have such name as may
be determined by the resolution appointing it. Each such committee
shall serve at the pleasure of the Board of Directors.
*SECTION 3.16. Nomination of Directors. (a) Only persons who
are nominated in accordance with the following procedures shall be
eligible for election as directors of the Corporation except as may
be otherwise expressly provided in the Restated Certificate of
Incorporation of the Corporation with respect to the right of
holders of Cumulative Preferred Stock and Preference Stock to
nominate and elect a specified number of directors in certain
circumstances. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of shareholders (i) by
_______________
* Added 6/29/95
<PAGE>
or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (ii) by any shareholder of the
Corporation (1) who is a shareholder of record on the date of the
giving of the notice provided for in this Section 3.16 and on the
record date for the determination of shareholders entitled to vote
at such annual meeting and (2) who complies with the notice
procedures set forth in this Section 3.16.
(b) In addition to any other applicable requirements, for a
nomination to be made by a shareholder, such shareholder must have
given timely notice thereof in proper written form to the Secretary
of the Corporation.
(c) To be timely, a shareholder's notice to the Secretary
pursuant to this Section 3.16 must be delivered to or mailed and
received at the principal executive offices of the Corporation not
less than 90 days nor more than 120 days prior to the date of the
annual meeting of shareholders; provided, however, that in the
event that less than 100 days' notice of the date of the annual
meeting is given to shareholders or there is less than 100 days'
prior public disclosure of the date of the annual meeting, notice
by the shareholder to be timely must be so received not later than
the close of business on the tenth day following the day on which
such notice of the date of the annual meeting was mailed or such
public disclosure of the date of the annual meeting was made,
whichever first occurs.
(d) To be in proper written form, a shareholder's notice to
the Secretary must set forth (i) as to each person whom the
shareholder proposes to nominate for election as a director (1) the
name, age, business address and residence address of the person,
(2) the principal occupation or employment of the person, (3) the
class or series and number of shares of capital stock of the
Corporation that are owned beneficially or of record by the person
and (4) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder; and (ii) as to the
shareholder giving the notice (1) the name and record address of
such shareholder, (2) the class or series and number of shares of
capital stock of the Corporation that are owned beneficially or of
record by such shareholder, (3) a description of all arrangements
or understandings between such shareholder and each proposed
nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such
shareholder, (4) a representation that such shareholder intends to
appear in person or by proxy at the meeting to nominate the persons
named in its notice and (5) any other information relating to such
<PAGE>
shareholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
(e) No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures
set forth in this Section 3.16. If the Chairman of the meeting
determines that a nomination was not made in accordance with the
foregoing procedures, the Chairman shall declare to the meeting
that the nomination was defective and such defective nomination
shall be disregarded.
ARTICLE FOUR
OFFICES
*SECTION 4.1. Appointment; Qualification. The officers of
the Corporation shall be a Chief Executive Officer, a President,
one or more Vice Presidents, a Secretary, one or more Assistant
Secretaries, a Treasurer and one or more Assistant Treasurers, each
of whom shall be appointed by the Board of Directors. The Board of
Directors may appoint a Vice Chairman of the Board of Directors and
such other officers as it may from time to time determine. Two or
more offices may be held by the same person, except the offices of
President and Secretary.
SECTION 4.2. Term of Office. The term of office of the
officers of the Corporation shall be until the first meeting of the
Board of Directors following the next annual meeting of
shareholders. Subject to Sections 4.3 and 4.4, each officer shall
hold office until the expiration of the term for which he is
appointed and until his successor is appointed and qualified. Any
vacancy in any office shall be filled for the unexpired portion of
the term by the Board of Directors.
*SECTION 4.3. Resignation. Any officer of the Corporation
may resign at any time by giving written notice of such resignation
to the Board of Directors, its Chairman, the Chief Executive
Officer, the President or the Secretary of the Corporation.
_______________
* Amended 7/14/94
<PAGE>
SECTION 4.4. Removal. Any officer of the Corporation
appointed by the Board of Directors may be removed at any time,
with or without cause, by the Board of Directors.
SECTION 4.5. Compensation. The compensation of each officer
shall be such as the Board of Directors may from time to time
determine.
*SECTION 4.6. Vice Chairman of the Board of Directors.
The Vice Chairman of the Board of Directors, if one be appointed,
shall preside in the absence of the Chairman of the Board of
Directors at all meetings of the shareholders and the Board of
Directors. In the absence or disability of the Chairman of the
Board of Directors, he shall exercise the powers and perform the
duties of the Chairman of the Board of Directors, subject to the
direction of the Board of Directors. He shall have such further
powers and duties as may be conferred upon him by the Board of
Directors.
**SECTION 4.7. Chief Executive Officer. The Chief Executive
Officer shall act as the general manager and chief executive
officer of the Corporation and, subject to the direction of the
Board of Directors, shall have general supervision of the business
and affairs of the Corporation. The Chief Executive Officer shall
have such further powers and duties as may be conferred by the
Board of Directors.
***SECTION 4.8. President. The President, subject to the
direction of the Board of Directors, shall have charge of the
business of the Corporation relating to general operation, and
shall perform all the duties of his office prescribed by law or the
Board of Directors. In the absence or disability of the Chairman
of the Board of Directors and the Vice Chairman of the Board of
Directors, if any, the President shall exercise the powers and
perform the duties of the Chairman of the Board of Directors,
subject to the direction of the Board of Directors.
SECTION 4.9. Vice President. Each Vice President shall have
such duties and powers as are usually incident to such office and
as the Board of Directors shall from time to time prescribe. In
the absence or disability of the President, the Vice President, or
if there shall be more than one Vice President, then the one
designated by the Board of Directors, shall exercise the powers and
_______________
* Former SECTION 4.7, renumbered 7/14/94
** Added 7/14/94
*** Amended 7/14/94
<PAGE>
perform the duties of the President, subject to the direction of
the Board of Directors.
SECTION 4.10. Secretary. The Secretary shall be the
Secretary both of the Board of Directors and of the Corporation.
The Secretary shall attend all meetings of shareholders and of the
Board of Directors and keep accurate records thereof. The
Secretary shall be custodian of the corporate seal and shall
perform the other duties incident to the office of Secretary,
subject to the direction of the Board of Directors.
SECTION 4.11. Assistant Secretary. In the absence or
disability of the Secretary, each Assistant Secretary shall have
the powers and perform the duties of the Secretary, subject to the
direction of the Board of Directors.
SECTION 4.12. Treasurer. The Treasurer shall have care of
all funds and securities of the Corporation and shall exercise the
powers and shall perform the duties incident to the office of
Treasurer, subject to the direction of the Board of Directors.
SECTION 4.13. Assistant Treasurer. In the absence or
disability of the Treasurer, each Assistant Treasurer shall have
the power and perform the duties of the Treasurer, subject to the
direction of the Board of Directors.
SECTION 4.14. Other Officers. Each other officer of the
Corporation shall exercise the powers and shall perform the duties
incident to his office, subject to the direction of the Board of
Directors.
SECTION 4.15. Bond. Any officer of the Corporation, if so
required by the Board of Directors, shall give to the Corporation
such bond or other security for the faithful performance of his
duties as may be satisfactory to the Board of Directors.
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
SECTION 5.1. Indemnification. (a) The Corporation shall
indemnify to the fullest extent now or hereafter provided for or
permitted by law each person involved in, or made or threatened to
be made a party to, any action, suit, claim or proceeding,
arbitration, alternative dispute resolution mechanism,
investigation, administrative or legislative hearing or any other
actual, threatened, pending or completed proceeding, whether civil
or criminal, or whether formal or informal, and including an action
<PAGE>
by or in the right of the Corporation or any other corporation, or
any partnership, joint venture, trust, employee benefit plan or
other enterprise, whether profit or non-profit (any such entity,
other than the Corporation, being hereinafter referred to as an
"Enterprise"), and including appeals therein (any such process
being hereinafter referred to as a "Proceeding"), by reason of the
fact that such person, such person's testator or intestate (i) is
or was a director or officer of the Corporation, or (ii) while
serving as a director or officer of the Corporation, is or was
serving, at the request of the Corporation, as a director, officer,
or in any other capacity, any other Enterprise, against any and all
judgments, fines, penalties, amounts paid in settlement, and
expenses, including attorneys' fees, actually and reasonably
incurred as a result of or in connection with any Proceeding, or
any appeal therein, except as provided in Section 5.1(b).
(b) No indemnification shall be made to or on behalf of any
such person if a judgment or other final adjudication adverse to
such person establishes that such person's acts were committed in
bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that
such person personally gained in fact a financial profit or other
advantage to which such person was not legally entitled. In
addition, no indemnification shall be made with respect to any
Proceeding initiated by any such person against the Corporation, or
a director or officer of the Corporation, other than to enforce the
terms of this ARTICLE FIVE, unless such Proceeding was authorized
by the Board of Directors. Further, no indemnification shall be
made with respect to any settlement or compromise of any Proceeding
unless and until the Corporation has consented to such settlement
or compromise.
(c) Written notice of any Proceeding for which
indemnification may be sought by any person shall be given to the
Corporation as soon as practicable. The Corporation shall then be
permitted to participate in the defense of any such proceeding or,
unless conflicts of interest or position exist between such person
and the Corporation in the conduct of such defense, to assume such
defense. In the event that the Corporation assumes the defense of
any such Proceeding, legal counsel selected by the Corporation
shall be acceptable to such person. After such an assumption, the
Corporation shall not be liable to such person for any legal or
other expenses subsequently incurred unless such expenses have been
expressly authorized by the Corporation. In the event that the
Corporation participates in the defense of any such Proceeding,
such person may select counsel to represent such person in regard
to such a Proceeding; however, such person shall cooperate in good
faith with any request that common counsel be utilized by the
parties to any Proceeding who are similarly situated, unless to do
so would be inappropriate due to actual or potential differing
<PAGE>
interests between or among such parties.
(d) In making any determination regarding any person's
entitlement to indemnification hereunder, it shall be presumed that
such person is entitled to indemnification, and the Corporation
shall have the burden of proving the contrary.
SECTION 5.2. Advancement of Expenses. Except in the case of
a Proceeding against a director or officer specifically approved by
the Board of Directors, the Corporation shall, subject to Section
5.1 above, pay expenses actually and reasonably incurred by or on
behalf of a director or officer in defending any Proceeding in
advance of the final disposition of such Proceeding. Such payments
shall be made promptly upon receipt by the Corporation, from time
to time, of a written demand of such person for such advancement,
together with an undertaking by or on behalf of such person to
repay any expenses so advanced to the extent that the person
receiving the advancement is ultimately found not to be entitled to
indemnification for part or all of such expenses.
SECTION 5.3. Rights Not Exclusive. The rights to
indemnification and advancement of expenses granted by or pursuant
to this ARTICLE FIVE (i) shall not limit or exclude, but shall be
in addition to, any other rights which may be granted by or
pursuant to any statute, corporate charter, by-law, resolution of
shareholders or directors or agreement, (ii) shall be deemed to
constitute contractual obligations of the Corporation to any
director or officer who serves in a capacity referred to in
Section 5.1 at any time while this ARTICLE FIVE is in effect, (iii)
shall continue to exist after the repeal or modification of this
ARTICLE FIVE with respect to events occurring prior thereto, and
(iv) shall continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the estate, spouse,
heirs, executors, administrators or assigns of such person. It is
the intent of this ARTICLE FIVE to require the Corporation to
indemnify the persons referred to herein for the aforementioned
judgments, fines, penalties, amounts paid in settlement, and
expenses, including attorney's fees, in each and every circumstance
in which such indemnification could lawfully be permitted by
express provisions of by-laws, and the indemnification required by
this ARTICLE FIVE shall not be limited by the absence of an express
recital of such circumstances.
SECTION 5.4. Indemnification of Employees and Others. The
Corporation may, from time to time, with the approval of the Board
of Directors, and to the extent authorized, grant rights to
indemnification, and to the advancement of expenses, to any
employee or agent of the Corporation or to any person serving at
the request of the Corporation as a director or officer, or in any
other capacity, any other Enterprise, to the fullest extent of the
<PAGE>
provisions of this ARTICLE FIVE with respect to the indemnification
and advancement of expenses of directors and officers of the
Corporation.
SECTION 5.5. Authorization of Contracts. The Corporation
may, with the approval of the Board of Directors, enter into an
agreement with any person who is, or is about to become, a
director, officer, employee or agent of the Corporation, or who is
serving, or is about to serve, at the request of the Corporation,
as a director, officer, or in any other capacity, any other
Enterprise, which agreement may provide for indemnification of such
person and advancement of expenses to such person upon terms, and
to the extent, not prohibited by law. The failure to enter into
any such agreement shall not affect or limit the rights of any such
person under this ARTICLE FIVE.
SECTION 5.6. Insurance. The Corporation may purchase and
maintain insurance to indemnify the Corporation and any person
eligible to be indemnified under this ARTICLE FIVE within the
limits permitted by law.
ARTICLE SIX
SHARES
*SECTION 6.1. Certificates Representing Shares. The shares
of the Corporation shall be represented by certificates in such
form consistent with law and the Certificate of Incorporation as
the Board of Directors may from time to time prescribe, and may be
signed by the Chairman of the Board of Directors, or the Vice
Chairman of the Board of Directors, if any, or the President or a
Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer. The signatures of the
officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar
other than the Corporation or any of its employees. Such
certificates shall also bear the seal of the Corporation or a
facsimile thereof.
SECTION 6.2. Transfer of Shares. Shares of the Corporation
shall be transferable on the books of the Corporation by the holder
of record thereof or by his attorney upon surrender of the
certificate representing such shares with an assignment endorsed
thereon or attached thereto duly executed and with such proof of
_______________
* Amended 7/14/94
<PAGE>
authenticity of signatures as the Corporation may reasonably
require. Prior to the transfer of shares of stock on the books of
the Corporation and issuance of a new certificate to the
transferee, the Corporation may treat the holder of record of a
share as the complete owner thereof exclusively entitled to receive
dividends thereon and to vote such share and otherwise entitled to
all the rights and powers of a complete owner thereof,
notwithstanding notice to the contrary.
SECTION 6.3. Lost Certificates. The Corporation shall issue
a new certificate for shares to replace a certificate theretofore
issued by it alleged to have been lost on such reasonable terms and
conditions as the Board of Directors may from time to time
prescribe.
ARTICLE SEVEN
MISCELLANEOUS
SECTION 7.1. Inspection of Records. The Board of Directors
shall have authority, except as otherwise provided by law, to
determine the extent to which the books and records of account of
the Corporation shall be open to inspection by a shareholder.
SECTION 7.2. Waiver of Notice and Lapse of Time. Any action
that is authorized to be taken after notice or after the lapse of a
prescribed period of time may be taken without notice and without
the lapse of such period of time, if at any time before or after
such action is completed the person entitled to such notice or
entitled to participate in the action to be taken, or in the case
of a
shareholder, his attorney-in-fact, submits a signed waiver of
notice or of such time requirement.
SECTION 7.3. Fiscal Year. The fiscal year of the
Corporation shall end on December 31 in each year.
SECTION 7.4. Corporate Seal. The corporate seal shall be in
such form as the Board of Directors may from time to time
prescribe.
ARTICLE EIGHT
AMENDMENT OF BY-LAWS
SECTION 8.1. Amendment of By-Laws. These By-Laws may be
amended, added to, rescinded or repealed at any meeting of the
Board of Directors or of the shareholders, provided notice of the
<PAGE>
proposed change was given in the notice of the meeting or, in the
case of a meeting of the Board of Directors, in a notice given not
less than two days prior to the meeting; provided, however, that,
notwithstanding any other provisions of these By-Laws or any
provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, the
Certificate of Incorporation, any Preferred Stock Designation or
these By-Laws, the affirmative vote of the holders of at least 80
percent of the combined voting power of all the then-outstanding
shares of the Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal any provision of
Section 3.1, 3.2 or 3.3 of these By-Laws or any provision of these
By-Laws pertaining to the alteration, amendment or repeal of
Section 3.1, 3.2 or 3.3 of these By-Laws.
BOD\BY-LAWS.ORU
6/29/95
April 6, 1995
Mr. G. D. Caliendo
1079 Newgate Drive
Allentown, PA 18103
Dear Mr. Caliendo:
In connection with and as part of the consideration for your retention by
Orange and Rockland Utilities, Inc. and election as Vice President - General
Counsel & Corporate Secretary, the Board wishes to enter into this letter
agreement concerning your participation in the Officers' Supplemental
Retirement Plan of Orange and Rockland Utilities, Inc. (the "Plan").
Upon your election as an officer, you will become a participant in the Plan
and your participation will be 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 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.
<PAGE>
Mr. G. D. Caliendo
April 6, 1995
Page 2
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 us.
/s/ H. Kent Vanderhoef
H. Kent Vanderhoef
Chairman of the Board
/s/ James F. O'Grady, Jr.
James F. O'Grady, Jr.
Chairman, Compensation
Committee of the Board
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 __6___ day
of ____April______________, 1995.
WITNESS:
/s/ D. L. Peoples /s/ G. D. Caliendo
G. D. Caliendo
