-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, QldF+Fj046JrN0B7Z7FHWtMJYVLKWaPibhfSsbQmKAhqIc/FFwScHt/a18NGXD6k hR+TbZF35xPbPjyTKu/67Q== 0000074778-94-000083.txt : 19941111 0000074778-94-000083.hdr.sgml : 19941111 ACCESSION NUMBER: 0000074778-94-000083 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORANGE & ROCKLAND UTILITIES INC CENTRAL INDEX KEY: 0000074778 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 131727729 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04315 FILM NUMBER: 94558769 BUSINESS ADDRESS: STREET 1: ONE BLUE HILL PLZ CITY: PEARL RIVER STATE: NY ZIP: 10965 BUSINESS PHONE: 9143526000 MAIL ADDRESS: STREET 1: ONE BLUE HILL PLAZA CITY: PEARL RIVER STATE: NY ZIP: 10965 FORMER COMPANY: FORMER CONFORMED NAME: ROCKLAND LIGHT & POWER CO DATE OF NAME CHANGE: 19681202 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 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 13,652,742 Shares (Class) (Outstanding at October 31, 1994) TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets (Unaudited) at September 30, 1994 and December 31, 1993 1 Consolidated Statements of Income (Unaudited) for the three months and nine months ended September 30, 1994 and September 30, 1993 3 Consolidated Cash Flow Statements (Unaudited) for the nine months ended September 30, 1994 and September 30, 1993 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 21 Signatures 22 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Assets
September 30, December 31, 1994 1993 (Thousands of Dollars) Utility Plant: Electric $ 945,818 $ 931,827 Gas 194,743 189,000 Common 54,292 52,525 Utility Plant in Service 1,194,853 1,173,352 Less accumulated depreciation 394,156 372,279 Net Utility Plant in Service 800,697 801,073 Construction work in progress 33,856 30,907 Net Utility Plant 834,553 831,980 Non-utility Property: Non-utility property 35,356 35,049 Less accumulated depreciation, depletion and amortization 13,789 13,041 Net Non-utility Property 21,567 22,008 Current Assets: Cash and cash equivalents 4,493 14,256 Temporary cash investments 1,433 1,447 Customer accounts receivable, less allowance for uncollectible accounts of $2,011 and $2,026 58,113 60,289 Accrued utility revenue 13,621 23,017 Other accounts receivable, less allowance for uncollectible accounts of $295 and $60 9,131 11,619 Gas marketing accounts receivable, less allowance for uncollectible accounts of $349 and $513 42,158 49,206 Materials and supplies (at average cost) 39,609 39,062 Prepayments and other current assets 60,450 40,626 Total Current Assets 229,008 239,522 Deferred Debits: Income tax recoverable in future rates 74,161 75,468 Extraordinary property loss - Sterling nuclear project 11,474 15,481 Deferred Order No. 636 transition costs 15,010 21,500 Deferred revenue taxes 17,058 17,588 Deferred pension and other postretirement benefits 12,413 7,277 Unamortized debt expense (amortized over term of securities) 10,547 8,565 Other deferred debits 44,815 41,584 Total Deferred Debits 185,478 187,463 Total $1,270,606 $1,280,973 The accompanying notes are an integral part of these statements. /TABLE ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Capitalization and Liabilities
September 30, December 31, 1994 1993 (Thousands of Dollars) Capitalization: Common stock (13,649,050 and 13,532,055 shares outstanding) $ 68,245 $ 67,660 Premium on capital stock 133,501 130,313 Capital stock expense (6,107) (6,108) Retained earnings 189,824 184,179 Total Common Stock Equity 385,463 376,044 Non-redeemable preferred stock (428,443 shares outstanding) 42,844 42,844 Non-redeemable cumulative preference stock (13,178 and 13,590 shares outstanding) 429 443 Total Non-Redeemable Stock 43,273 43,287 Redeemable preferred stock (41,580 shares outstanding) 4,158 4,158 Long-term debt 379,894 380,266 Total Capitalization 812,788 803,755 Non-current Liabilities: Reserve for claims and damages 4,434 3,830 Postretirement benefits 13,619 6,719 Pension costs 38,298 34,275 Obligation under capital leases 407 793 Total Non-current Liabilities 56,758 45,617 Current Liabilities: Lease obligations due within one year 508 479 Long-term debt due within one year 1,068 984 Preferred stock to be redeemed within one year 1,384 1,384 Notes payable - 1,200 Commercial paper 5,245 45,000 Accounts payable 69,074 57,359 Gas marketing accounts payable 48,860 54,247 Dividends payable 751 752 Customer deposits 5,762 5,807 Accrued Federal income and other taxes 7,944 9,586 Accrued interest 5,137 9,877 Refundable gas costs 8,752 8,967 Other current liabilities 27,332 17,114 Total Current Liabilities 181,817 212,756 Deferred Taxes and Other: Deferred Federal income taxes 172,162 172,672 Deferred investment tax credits 17,378 18,004 Accrued Order No. 636 transition costs 15,010 21,500 Refundable fuel costs 12,442 4,405 Other deferred credits 2,251 2,264 Total Deferred Taxes and Other 219,243 218,845 Total $1,270,606 $1,280,973 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
Three Months Nine Months Ended September 30, Ended September 30, 1994 1993 1994 1993 (Thousands of Dollars) Operating Revenues: Electric $144,265 $146,726 $370,375 $370,285 Gas 12,411 14,008 119,646 109,129 Electric sales to other utilities 1,414 2,143 6,229 5,398 Total Utility Revenues 158,090 162,877 496,250 484,812 Diversified activities 81,124 74,671 265,374 231,879 Total Operating Revenues 239,214 237,548 761,624 716,691 Operating Expenses: Operations: Fuel used in electric production 22,278 24,473 68,845 55,122 Electricity purchased for resale 14,019 15,033 36,438 50,688 Gas purchased for resale 6,080 7,050 71,352 62,645 Non-utility gas marketing purchases 77,453 71,294 251,003 220,710 Other expenses of operation 38,191 37,688 113,330 110,435 Maintenance 10,980 11,294 31,452 31,203 Depreciation and amortization 9,173 8,682 26,682 25,718 Amortization of property losses 1,416 1,304 4,247 3,912 Taxes other than income taxes 24,344 24,414 73,367 70,521 Federal income taxes 7,097 8,585 21,400 19,934 Deferred Federal income taxes 2,598 1,310 438 805 Deferred investment tax credit (30) (33) (90) (163) Total Operating Expenses 213,599 211,094 698,464 651,530 Income from Operations 25,615 26,454 63,160 65,161 Other Income and (Deductions): Allowance for other funds used during construction 32 7 89 23 Investigation costs (1,722) (1,019) (7,731) (1,019) Other - net 71 (364) 582 (807) Taxes other than income taxes (33) (19) (87) (71) Federal income taxes 412 514 2,537 896 Deferred Federal income taxes 262 70 188 (16) Deferred investment tax credit 179 197 536 592 Total Other Income and (Deductions) (799) (614) (3,886) (402) Income Before Interest Charges 24,816 25,840 59,274 64,759 Interest Charges: Interest on long-term debt 7,637 7,499 22,627 22,883 Other interest 589 796 2,155 2,238 Amortization of debt premium and expense-net 300 299 903 813 Allowance for borrowed funds used during construction (92) (66) (241) (172) Total Interest Charges 8,434 8,528 25,444 25,762 Net Income 16,382 17,312 33,830 38,997 Dividends on preferred and preference stock, at required rates 812 841 2,438 2,523 Earnings applicable to common stock $ 15,570 $ 16,471 $ 31,392 $ 36,474 Avg. number of common shares outstanding (000's) 13,627 13,532 13,575 13,532 Earnings per average common share outstanding $ 1.14 $ 1.22 $ 2.31 $ 2.70 Dividends declared per common share outstanding $ - $ - $ 1.90 $ 1.86 The accompanying notes are an integral part of these statements. /TABLE ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Cash Flow Statements (Unaudited)
Nine Months Ended September 30, 1994 1993 (Thousands of Dollars) Cash Flow from Operations: Net income $33,830 $38,997 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,674 25,812 Deferred Federal income taxes 797 801 Deferred investment tax credit (626) (755) Deferred and refundable fuel and gas costs 7,822 2,234 Allowance for funds used during construction (330) (195) Changes in certain current assets and liabilities: Accounts and gas marketing accounts receivable, net and accrued utility revenues 21,108 (5,651) Materials and supplies (547) 481 Prepayments and other current assets (19,824) (13,423) Operating and gas marketing accounts payable 6,328 16,941 Accrued Federal Income and other taxes (1,642) 2,535 Accrued interest (4,740) (1,223) Other current liabilities 10,173 9,286 Other-net 7,088 996 Net Cash Provided from Operations 86,111 76,836 Cash Flow from Investing Activities: Additions to plant (29,759) (34,645) Allowance for funds used during construction 330 195 Temporary cash investments 14 (562) Net Cash Used in Investing Activities (29,415) (35,012) Cash Flow from Financing Activities: Proceeds from: Issuance of common stock 3,759 - Issuance of long-term debt 55,000 75,000 Retirements of: Long-term debt (55,721) (74,899) Capital lease obligations (357) (330) Net repayments under short-term debt arrangements* (40,955) (22,500) Dividends on preferred and common stock (28,184) (27,692) Change in dividends payable (1) 1 Net Cash Used in Financing Activities (66,459) (50,420) Net Change in Cash and Cash Equivalents (9,763) (8,596) Cash and Cash Equivalents at Beginning of Period 14,256 15,378 Cash and Cash Equivalents at End of Period $ 4,493 $ 6,782 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized $29,309 $25,942 Federal income taxes $15,229 $19,920 * Debt with maturities of 90 days or less. The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of September 30, 1994, the consolidated statements of income for the three month and nine month periods ended September 30, 1994 and 1993, and the consolidated cash flow statements for the nine month periods then ended have been prepared by Orange and Rockland Utilities, Inc. (the "Company") without an audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations at September 30, 1994, and for all periods presented, have been made. The amounts in the consolidated balance sheet as of December 31, 1993 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, 1993 Annual Report to Shareholders. The results of operations for the period ended September 30, 1994 are not necessarily indicative of the results of operations for the full year. 3. The consolidated financial statements include the accounts of the Company, all subsidiaries and the Company's pro rata share of an unincorporated joint venture. All significant intercompany balances and transactions have been eliminated. 4. Contingencies at September 30, 1994 are substantially the same as the contingencies described in the "Notes to Consolidated Financial Statements" included in the Company's December 31, 1993 Annual Report to Shareholders, which material is incorporated by reference to the Company's December 31, 1993 Form 10-K Annual Report, except, during June, 1994, the Company entered into an agreement with Harriman Energy Partners, LTD. to terminate a long-term power purchase agreement for 57 Mw of capacity. The Company will request NYPSC approval of deferred accounting of all associated termination costs pending recovery of those costs in rates. 5. Certain amounts from prior years have been reclassified to conform with the current year presentation. 6. Effective January 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postretirement Benefits" which required the recording of a liability of approximately $.8 million. The Company recorded an offsetting regulatory asset and the adoption of Statement No. 112 did not have a significant impact on the results of current operations. 7. On September 8, 1994 the Company adopted a formal plan to sell the radio broadcasting properties operated by its wholly owned subsidiary, Saddle River Holdings, Inc. The disposal date is anticipated to be June 1, 1995. The assets to be sold consist primarily of radio broadcast licenses and operating plant and equipment. At this time the Company is unable to determine the gain or loss which will result from the disposition of the properties; however, management does not believe the disposition will have a material effect on the Company's financial statements. Further, no material operating income (loss) is expected to result during the period from September 8, 1994 through the date of disposal. Actual operating losses of the radio broadcasting properties, which are included in Income from Operations in the Consolidated Statement of Income, for the nine months ended September 30, 1994 and 1993 were ($370,892) and ($560,138), respectively. 8. Events Subsequent to Earnings Release Legal Proceedings As more fully described in Part II, Item 1. Legal Proceedings, the Company has reached a tentative settlement, subject to court approval, of two purported shareholder class action complaints against the Company agreeing to create a settlement fund of $1.85 million to resolve all claims in both cases. The Company's insurance carrier has agreed to contribute $.7 million to the settlement fund. The net amount of $1.15 million will be charged to operations during the fourth quarter of 1994. Regulatory Matters On or about November 10, 1994, the Company will file with the New York Public Service Commission ("NYPSC") a quantification of the rate making effects of its ongoing investigation into prior financial improprieties. The Company will be requesting the NYPSC to approve the refund of approximately $3.2 million to its New York electric and gas customers. This amount will be charged to operations in the fourth quarter of 1994. The Company anticipates that the NYPSC will require that a proceeding be established to provide the opportunity for other parties, including NYPSC Staff who are conducting an independent investigation, to be heard on this matter. The Company 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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition: Financial Performance The Company's consolidated earnings per average common share outstanding for the third quarter of 1994 were $1.14 as compared to $1.22 for the third quarter of 1993. Fluctuations within the components of earnings are discussed in the "Results of Operations". The average number of common shares outstanding were 13.6 million for the third quarter of 1994 and 13.5 million for the third quarter of 1993. The current quarterly dividend rate of $.64 is equivalent to an annual dividend rate of $2.56 per share. Dividends declared during the twelve months ended September 30, 1994 amounted to $2.53 with a dividend payout ratio of 94.4% as compared to $2.48 a year ago with a payout ratio of 74.5%. The return on average common equity for the twelve months ended September 30, 1994 was 9.67%, as compared to 12.23% for the twelve months ended September 30, 1993. Capital Resources and Liquidity At September 30, 1994, 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 $15.0 million at September 30, 1994, and the non-utility subsidiaries may undertake short-term borrowings or make short-term investments. The average daily balance of short-term borrowings for the nine months ended September 30, 1994 amounted to $30.4 million at an effective interest rate of 4.2% as compared to $33.8 million at an effective interest rate of 3.3% for the same period of 1993. The level of temporary cash investments for the nine months ended September 30, 1994 increased to an average daily balance of $8.0 million from $4.4 million for the same period of 1993. Effective May 1, 1994 through October 31, 1994, all shares of common stock purchased under the Company's Dividend Reinvestment and Stock Purchase Plan ("DRP") and the Employee Stock Purchase and Dividend Reinvestment Plan ("ESPP") with reinvested dividends and optional cash payments, were original issue shares purchased from the Company. During that time, $3.8 million of common equity was generated through the issuance of approximately 116,400 shares of common stock under the Company's DRP and ESPP. The New York Public Service Commission ("NYPSC") has authorized the Company to issue up to 750,000 shares under the DRP and 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 acquired under the DRP and ESPP is being purchased on the open market. On August 31, 1994, the New York State Energy Research and Development Authority ("NYSERDA") issued, on behalf of the Company, $55 million of variable rate Pollution Control Refunding Revenue Bonds due October 1, 2014 (the "1994 Bonds"). The proceeds from the issuance of the 1994 Bonds were used to refund, on October 1, 1994, the $55 million NYSERDA 10 1/4% Pollution Control Revenue Bonds, 1984 Series, issued on behalf of the Company. In anticipation of issuing the 1994 Bonds, the Company entered into a forward interest rate swap agreement in 1992. Pursuant to the swap agreement, the Company will pay interest at a fixed rate of 6.09% to a swap counter party and will receive a variable rate of interest in return which is identical to the variable rate payment made on the 1994 Bonds. The result is to effectively establish a fixed rate of interest on the 1994 Bonds of 6.09%. Rate Activities New York On September 1, 1993, the Company filed with the NYPSC, the first adjustment to gas rates pursuant to a four-year settlement agreement ("Settlement Agreement") that the Company and the NYPSC Staff entered into regarding an application the Company filed with the NYPSC on January 16, 1992. The Settlement Agreement, approved by the NYPSC on September 30, 1992, contains a weather adjustment clause which automatically adjusts rates to offset the effects of variations in weather from that assumed for setting rates. The Settlement Agreement provides for an overall rate of return of 10.26%, with a return on common equity of 12.15% including incentives of 50 basis points. The increase in annual gas revenues as a result of the second-stage adjustment is $3.8 million or 2.5%. Although the Settlement Agreement provided for an effective date for this adjustment of January 1, 1994, the Company agreed to extend the effective date until June 30, 1994, in connection with the ongoing investigations of alleged financial improprieties. The effective date of this adjustment was further extended until December 30, 1994 by NYPSC Order issued June 3, 1994. On September 1, 1994, the Company filed a plan to implement the second-stage rate adjustment on January 1, 1995 and to postpone the next adjustment to gas rates from January 1, 1995 to January 1, 1996. On September 19, 1994, the Company subsequently requested the further postponement of the second-stage gas rate adjustment until the Commission's investigation of alleged financial improprieties is concluded. The purpose of the request was to combine the result of the investigation and staged filings into a single rate change. On November 4, 1994, the NYPSC issued an Order terminating the rate 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 adjustment and all previously authorized reconciliations through the end of 1994, pending review and audit by the NYPSC staff and the conclusion of the NYPSC's investigation of alleged financial improprieties. On January 29, 1993, the Company filed with the NYPSC for an increase in electric rates of $17.1 million to be effective January 1, 1994. The rate application proposed a three-year (1994-1996) extension of the Revenue Decoupling Mechanism ("RDM") revenue reconciliation and operating cost adjustment procedures. Continuation of the energy efficiency and customer service incentive programs was also requested. In addition, the Company sought approval to implement a new power plant efficiency incentive. The rate increase request included a 12.25% return on equity. As a result of ongoing investigations of alleged financial improprieties, the NYPSC issued an Order on December 26, 1993 and related Orders which resulted in (1) the postponement of the effective date of new electric rates from January 1, 1994 until June 30, 1994; (2) the estabishment of up to $3.0 million ($2.25 million electric and $.75 million gas) of annual revenue as temporary and subject to refund; and (3) a change in the Demand Side Management ("DSM") incentive to allow the Company to retain 5% of net resource savings and termination of the customer service incentive, effective January 1, 1994. By Order issued June 10, 1994, (the "June Order") the electric rate application was terminated by the NYPSC. The June Order provides for the continuation of the RDM revenue reconciliation and operating cost adjustment procedures and the continuation of other provisions of the December 16, 1993 Order including up to $3.0 million of revenue made subject to refund, a 5% net resource saving DSM incentive, and elimination of a customer service incentive. The June Order also provides for a reduction in the RDM adjustment factor effective July 1, 1994 reflecting the new recovery level required for 1993 net RDM deferrals. Finally, the June Order reduces the threshold for measuring excess earnings from 12.0% to 10.6% effective retroactively to January 1, 1994. All earnings in excess of 10.6% are to be deferred for future disposition pending the conclusion of the ongoing investigations. 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 targeted return on common equity from 11.45% to 10.6% for the first six months of 1994, the Commission 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%. In addition, the NYPSC accepted the Company's proposal for a two-month (November and December, 1993) temporary rate reduction of $115,000 per month related to the misappropriation of funds. The Company voluntarily extended the temporary rate reduction for a third month, through January 1994, bringing the total amount refunded to New York ratepayers to $345,000. It is not possible to predict at this time the extent of additional refunds that may be required by the NYPSC, if any. New Jersey In January 1992, in response to Rockland Electric Company's ("RECO's") March 18, 1991 petition requesting a $12.9 million increase in base rates, an increase in electric rates of $5.1 million was granted by the New Jersey Board of Regulatory Commissioners ("NJBRC"). (The NJBRC was renamed effective July 5, 1994 and is now the New Jersey Board of Public Utilities ("NJBPU")). This increase includes a 12% rate of return on common equity. In addition, the NJBRC initiated a Phase II proceeding in this case to address the effect of the State of New Jersey's June 1, 1991 tax legislation. That legislation changed the procedure under which certain taxes are collected from the State's utilities. Previously, utilities had been subject to a 12.5% gross receipts and franchise tax, which the utilities paid in lieu of property taxes; however, the new tax is based upon the number of units of energy (kwh or therms) delivered by a utility rather than revenues. The legislation also requires that utilities accelerate payment to the State of the taxes collected. As a result, RECO is required to make additional tax payments of approximately $16 million during the period 1993-1994. On November 12, 1992, the NJBRC issued a Decision and Order approving the recovery of the additional tax over a ten-year period. A carrying charge of 7.5% on the unamortized balance was also approved. The amount of unrecovered accelerated payments is included in Deferred Revenue Taxes. On February 26, 1993 the New Jersey Department of Public Advocate, Division of Rate Counsel ("Rate Counsel") filed a Notice of Appeal from the NJBRC Decision and Order with the Superior Court of New Jersey, Appellate Division, stating as grounds for the appeal that the Decision is arbitrary and capricious and would result in unjust and unreasonable rates. On March 21, 1994, the Superior Court of New Jersey, Appellate Division, upheld the NJBRC Decision, stating the NJBRC used proper rate-making principles. Under an agreement with the NJBRC to return to customers any funds found to be misappropriated as a result of an ongoing investigation of certain officers and former employees, RECO has refunded to New Jersey ratepayers $94,100 through reductions in the applicable fuel adjustment charges in February and March 1994. The Company has also pledged to return any other funds that are discovered to have been misappropriated. Pennsylvania On November 19, 1992, Pike County Light & Power Company ("Pike") filed with the Pennsylvania Public Utility Commission ("PPUC") for a $497,000 increase in electric rates and a $36,300 increase in gas rates. The proposed rates apply to all residential, commercial, industrial and municipal customers. During April 1993, Pike and the other parties involved in this proceeding signed a stipulated agreement providing for an increase of $270,000, or 6.6% for electric rates and $12,000, or 1.5% for gas rates. On June 10, 1993, the PPUC approved the electric rate settlement with rates effective June 11, 1993. On June 24, 1993, the PPUC approved the gas rate settlement with rates effective June 25, 1993. With regard to the ongoing investigation into the alleged financial improprieties, Pike has pledged to return to ratepayers any funds discovered to have been misappropriated. Results of Operations: QUARTERLY COMPARISON Earnings per average common share outstanding for the third quarter of 1994 amounted to $1.14 per share as compared to $1.22 per share for the third quarter of 1993. This decrease is attributed to the expenses associated with the continuing investigation and litigation involving misappropriation of company funds and lower utility revenues, which were partially offset by lower utility operating expenses. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, decreased by $4.8 million in the third quarter of 1994 as compared to the same quarter of 1993. Electric operating revenues during the current quarter were $145.7 million as compared to $148.9 million for the third quarter of 1993, a decrease of $3.2 million. The components of the changes in electric operating revenues for the quarter ended September 30, 1994 as compared to the same quarter of 1993 are as follows: (Millions of Dollars) Retail sales: Base Revenues* $ (3.6) Fuel cost recoveries (1.6) Sales volume changes .2 Subtotal (5.0) Sales for resale (.7) Other operating revenue: RDM revenue reconciliation and DSM incentives .2 Other 2.3 Total $(3.2) *Includes miscellaneous surcharges and revenue tax recoveries. Actual total sales of electric energy to retail customers during the third quarter of 1994 were 1,242,008 megawatt hours ("Mwh"), compared with 1,239,606 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 $145.2 million during the current quarter compared to $150.2 million during the third quarter of 1993, 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 $70.8 million for the third quarter of 1994. In accordance with RDM procedures, deviations between revenue targets and actual sales revenue are deferred and either recovered from or returned to customers. The variation between the target revenue and the Company's actual sales revenue of $74.0 million for the third quarter of 1994 was $3.2 million, and is recorded as a reduction to revenue. In the third quarter of 1993, the Company recorded $4.0 million as a reduction to revenue. With regard to the DSM goal achievement incentives, the Company's performance during the third quarter of 1994 allowed it to record $.2 million of incentive related revenue. The incentive revenue recorded in the third quarter of 1993 was $.8 million. The Company's performance during the remainder of 1994 will determine what, if any, RDM revenue adjustments may be recorded. Revenues from sales to other utilities in the third quarter of 1994 amounted to $1.4 million, a decrease of $.7 million from a year ago. Sales to such utilities totaled 64,500 Mwh, compared with 81,622 Mwh in the third quarter a year ago. Because revenues from these sales are primarily a recovery of costs in accordance with applicable tariff regulations, they have little impact on the Company's annual earnings. Gas operating revenues during the quarter were $12.4 million compared to $14.0 million for the third quarter of 1993, a decrease of $1.6 million. The components of the changes in gas operating revenues for the quarter ended September 30, 1994 as compared to the same quarter of 1993 are as follows: (Millions of Dollars) Sales to firm customers: Base revenues* $ (.2) Gas cost recoveries (.9) Sales volume changes (.1) Subtotal (1.2) Sales to interruptible .2 Other operating revenue (.6) Total $ (1.6) * Includes miscellaneous surcharges and revenue tax recoveries. Gas sales to firm customers during the third quarter of 1994 totaled 1,581 million cubic feet ("Mmcf"), compared with 1,605 Mmcf during the same period a year ago. Gas revenues from firm customers were $11.2 million, compared with $12.4 million in the third quarter of 1993. 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 $3.2 million during the third quarter of 1994 when compared to the same quarter of 1993. The components of the change are as follows: (Millions of Dollars) Prices paid for fuel and purchased power $ (4.0) Changes in kilowatt-hours generated or purchased (.6) Deferred fuel charge 1.4 Total $ (3.2) The average cost per kilowatt-hour generated and purchased was 2.40 cents for the quarter ended September 30, 1994 compared to 2.68 for the same quarter of 1993. Purchased gas costs for utility operations were $6.1 million in the third quarter of 1994 compared to $7.1 million in 1993, a decrease of $1.0 million. The components of the changes in purchased gas costs are as follows: (Millions of Dollars) Prices paid for gas supplies* $(3.4) Gas sendout volume 1.4 Deferred fuel charges 1.0 Total $(1.0) *Net of refunds received from gas suppliers. The average cost per thousand cubic feet ("Mcf") purchased for the third quarter of 1994 including transportation and storage costs, was $5.97 compared to $7.57 in the third quarter of 1993. Other Operating and Maintenance Expenses The Company's total operating and maintenance expenses excluding fuel, purchased power and gas purchased for resale for the third quarter, increased by $.5 million compared with the same period in 1993. The increase in expenses associated with utility operations accounted for $.1 million of this increase. The increase in other utility operation and maintenance expense is the result of an increase in depreciation and amortization expense of $.5 million offset by decreases in Federal income taxes of $.3 and other taxes of $.1 million. Diversified Activities The Company's diversified activities consist of gas marketing, gas production, land development and communications businesses conducted by wholly owned non- utility subsidiaries. Revenues from diversified activities increased by $6.5 million for the third quarter of 1994 as compared to the same quarter of 1993, as a result of the gas marketing subsidiary's success in adding customers and increasing its sales volume. These revenues were offset by increases in operating expenses for all diversified activities of $6.6 million, which is the result of increased gas purchases of $6.2 and increases in depreciation, taxes, and other operating expenses of $.4 million. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, decreased by $.1 million during the third quarter of 1994 when compared to the same quarter of 1993. This decrease is primarily the result of an increase in outside professional and consulting services related to the investigations of alleged financial improprieties. It is estimated that the Company will incur from $.5 million to $1.0 million of additional expenses in the fourth quarter of 1994 in connection with legal and regulatory proceedings related to these events. YEAR TO DATE COMPARISON Earnings per average common share outstanding for the nine month period ended September 30, 1994 amounted to $2.31 per share as compared to $2.70 for the same period of 1993. This decrease is attributed to the expenses associated with the continuing investigation and litigation involving misappropriation of company funds and increased operating expenses, offset by increased revenues, and the favorable results of the gas marketing subsidiary. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, increased by $11.4 million for the first nine months of 1994 as compared to the same period of 1993. Electric operating revenues during the current period were $376.6 million as compared to $375.7 million for the comparable period of 1993, an increase of $.9 million. The components of the changes in electric operating revenues for the nine months ended September 30, 1994 as compared to the same period in 1993 are as follows: (Millions of Dollars) Retail sales: Base rates* $(2.1) Fuel cost recoveries (2.0) Sales volume changes 6.3 Subtotal 2.2 Sales for resale .8 Other operating revenues: RDM revenue reconciliation and DSM incentives (4.2) Other 2.1 Total $ .9 *Includes miscellaneous surcharges and revenue tax recoveries. Actual total sales of electric energy to retail customers during the first nine months of 1994 were 3,392,027 Mwh, compared with 3,316,118 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 $376.1 million during the current period compared to $373.9 million during the first nine months of 1993, an increase of $2.2 million. New York electric revenue targets under the Company's RDM, as established in a base rate case, amounted to $175.5 million for the first nine months of 1994. In accordance with RDM procedures, deviations between revenue targets and actual sales revenue are deferred and either recovered from or returned to customers. The variation between the target revenue and the Company's actual sales revenue of $184.3 million for the first nine months of 1994 was $8.8 million, which is recorded as a reduction to revenue. For the first nine months of 1993, the Company recorded a reduction in revenues of $6.6 million. With regard to the DSM goal achievement incentives provided for in the RDM agreement, the Company's performance during the first nine months of 1994 allowed it to record $.3 million of incentive related revenue compared to $2.3 million of incentive revenue recorded during the comparable period of 1993. The Company's performance during the remainder of 1994 will determine what, if any, additional RDM revenue adjustments may be recorded. Revenues from sales to other utilities in the first nine months of 1994 amounted to $6.2 million compared to $5.4 million a year ago. Such sales totaled 238,675 Mwh compared with 192,310 Mwh in the first nine months of 1993. Because revenues from these sales are primarily a recovery of costs in accordance with applicable tariff regulations, they have little impact on the Company's annual earnings. Gas operating revenues during the first nine months of 1994 were $119.6 million compared to $109.1 million for the first nine months of 1993, an increase of $10.5 million. The components of the changes in gas operating revenues for the nine months ended September 30, 1994 as compared to the same period in 1993 are as follows: (Millions of Dollars) Sales to firm customers: Base rates* $(1.4) Gas cost recoveries 9.1 Sales volume changes 2.3 Subtotal 10.0 Sales to interruptibles 1.5 Sales for resale (.1) Other operating revenue (.9) Total $10.5 * Includes miscellaneous surcharges and revenue tax recoveries. Firm gas sales amounted to 14,937 Mmcf during the first nine months of 1994, an increase of 5.2% from the 1993 level of 14,194 Mmcf. Gas revenues from firm customers were $112.9 million in the current period compared to $102.9 million during the first nine months of 1993. Sales of interruptible gas for the first nine months of 1994 amounted to 832 Mmcf, an increase of 346 Mmcf from 1993. Revenues from these sales were $3.5 million as compared to $2.0 million for the same period of 1993. 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 $.5 million for the first nine months of 1994 when compared to the $105.8 million recorded during the same period of 1993. The components of the changes in electric energy costs are as follows: (Millions of Dollars) Prices paid for fuel and purchased power $(5.6) Changes in kilowatt-hours generated or purchased 3.7 Deferred fuel charge 1.4 Total $ (.5) The average cost per kilowatt-hour generated and purchased was 2.55 cents in the first nine months of 1994 and 2.69 cents for the same period of 1993. 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 $71.3 million for the first nine months of 1994 compared to $62.6 million for the comparable period of 1993. The components of the change are as follows: (Millions of Dollars) Prices paid for gas suppliers* $(1.0) Gas sendout volume 6.0 Deferred fuel charges 3.7 Total $ 8.7 *Net of refunds received from gas suppliers The average cost per Mcf purchased for the first nine months of 1994, including transportation and storage costs, was $3.72 as compared to $3.77 for the same period of 1993. Other Operating and Maintenance Expenses The Company's total operation and maintenance expenses excluding fuel, purchased power and gas purchased for resale, increased by $8.5 million compared to a year ago. Expenses from Diversified Activities accounted for $2.2 million of this increase, as described below. The increase associated with utility operations was $6.3 million. This increase is the result of a recent NYPSC decision, which resulted in a non-recurring accounting adjustment as well as a reduction in the amount of operating expenses reconciled in the RDM which together amounted to $2.8 million and increases in taxes primarily as a result of increased revenue taxes of $3.1 million. Other operating and maintenance expense plus depreciation increased $.4 million when compared to the same period of 1993. Diversified Activities Revenues from diversified activities increased by $33.5 million for the first nine months of 1994 as compared to the same period of 1993. The increase is primarily the result of increased sales from gas marketing activities. While revenues from gas marketing activities were significantly higher during the first nine months of 1994 as compared to the first nine months of 1993, an extremely competitive market resulted in narrower profit margins during the current period. These revenues were offset by increases in operating expenses for all diversified activities of $32.5 million, which is the result of increased gas purchases of $30.3 million and increases in depreciation, taxes and other operating expenses of $2.2 million. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, decreased by $3.1 million during the first nine months of 1994 when compared to the first nine months of 1993. This decrease is primarily the result of the costs of the investigation and litigation involving former officers and others, partially offset by a decrease in interest expense which resulted from lower interest rates and increases in other income. It is estimated that the Company will incur from $.5 million to $1.0 million of additional expenses in the fourth quarter of 1994 in connection with legal and regulatory proceedings related to these events. PART II. OTHER INFORMATION Item 1. Legal Proceedings Investigation and Related Litigation 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, 1993, for a description of a Joint Cooperation Agreement dated November 3, 1993, executed by the Rockland County (New York) District Attorney and the Company. As stated therein, the Joint Cooperation Agreement provides, among other things, that the Company shall establish, independent from the Company, the position of "Inspector General", for a period of seven years, to be assigned the authority and resources necessary, including staff, to investigate and report on improper or unethical conduct by Company officers or employees, the cost of such Inspector General to be borne by the shareholders of the Company and not the ratepayers. The Joint Cooperation Agreement provides that the duration of the Inspector General's appointment may be modified by the parties as circumstances may warrant. Pursuant to the terms of the Joint Cooperation Agreement, the Company and Kroll Associates, Inc. ("Kroll") have entered into an Agreement dated as of November 1, 1994 (the "IG Agreement"), pursuant to which the Company has engaged, at its expense, for a period of up to seven years, the services of Robert J. McGuire, President of Kroll, to act as Inspector General. A copy of the IG Agreement is attached as an exhibit to this Form 10-Q Quarterly Report. Reference is made to Part II, Item 1. Legal Proceedings, in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, for a description of an action entitled James F. Smith v. Orange and Rockland Utilities, Inc., which was brought in New York State Supreme Court, Rockland County. On September 23, 1994, Judge Howard Miller issued a decision granting the Company's motion for summary judgment thereby dismissing this complaint. Reference is made to Part II, Item 1. Legal Proceedings, in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994, respectively, for a description of an action entitled Feiner, et al. v. Orange and Rockland Utilities, Inc., a purported ratepayer class action complaint against the Company which was filed in the United States District Court, Southern District of New York. As stated therein, on February 18, 1994 the Company filed a motion to dismiss this case. On September 8, 1994, the District Court granted the Company's motion to dismiss this action and on September 16, 1994, plaintiff filed a Notice of Appeal with the United States Court of Appeals for the Second Circuit appealing the District Court's decision. Reference is made to Part II, Item 1. Legal Proceedings, in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994, respectively, for a description of an action entitled Bernstein v. Orange and Rockland Utilities, Inc. and James F. Smith, a purported shareholder class action complaint against the Company and a former Chairman of the Board of Directors and Chief Executive Officer of the Company which was filed in the United States District Court, Southern District of New York, and Gross v. Orange and Rockland Utilities, Inc., a purported shareholder class action complaint, filed against the Company in the United States District Court, Southern District of New York. On November 3, 1994, the Company signed a tentative settlement in each of these actions, subject to Court approval. The settlements have been filed with Judge Brieant who has been asked to consolidate the two cases and certify class actions for settlement purposes only. If the settlements are approved by the Court after members of the classes are given notice and an opportunity to be heard, the Company will create a settlement fund of $1.85 million to resolve all claims in both cases. Additional information regarding these settlements is included under the caption "Notes to Consolidated Financial Statements" in Part I, Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q. Other Litigation Reference is made to Part 2, Item 1. Legal Proceedings, in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994, respectively, for a description of an action entitled Carpenters Local No. 964 Pension Fund v. DiGiacinto, et al., filed in the Supreme Court of the State of New York, County of Rockland. As stated therein, the Company is a third party defendant in this action which is based on an action entitled Guarino et al. v. Carpenters Local No. 964 Pension Fund ("Guarino"), brought in New York State Supreme Court, Rockland County by residents of a subdivision who claim that the deterioration of wallboard materials buried at the subdivision site has resulted in a continuous release of hydrogen sulfide gas thereby rendering their homes unfit for dwelling. On August 8, 1994, the Company was served with an additional third party summons and complaint naming it as a one of 18 third party defendants in United States Gypsum Company v. Broadhaver Realty Corp., et al., filed in the New York Supreme Court, County of Rockland. This action is based on a public nuisance claim entitled State of New York v. Carpenters Local No. 964 Pension Fund, et al., filed in the Supreme Court of the State of New York, County of Rockland, which, in turn, is based on the same facts underlying Guarino. At this time, the Company does not believe that these actions will have a material effect on the business or financial condition of the Company. In September 1994, the Company agreed to contribute $6,500 to, and participate in, together with other defendants in the foregoing actions, a remediation effort at the subdivision site. Regulatory Matters Reference is made to Part II, Item 1. Legal Proceedings, in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994 and June 30, 1994, respectively for a description of an electric rate case filed by the Company with the NYPSC on January 29, 1993 (Case 93-E-0082). On September 19, 1994, the Company filed an appeal in New York State Supreme Court, Albany County, in response to the NYPSC's June 10, 1994 Order setting the Company's targeted rate of return on equity at 10.6% and making it retroactive to January 1, 1994. The appeal contests the retroactivity of the NYPSC Order, contending that during the first six months of 1994 the Company had operated under a December 1993 NYPSC Order that permitted a target return on equity of 11.54%. Further information regarding Case 93-E-0082 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. 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, 1993, for a description of the New York State Department of Law and NYPSC Staff motions regarding the Company's 1992 gas rate case (Case 92-G-0050). On November 4, 1994, the NYPSC issued an Order (the "November 4 Order") which affects the second stage gas rate increase contained in the approved settlement of Case 92-G-0050. Further information regarding the November 4 Order 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. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.26 Letter agreement dated September 29, 1994 between Orange and Rockland Utilities, Inc. and R. Lee Haney regarding participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. 10.27 Letter agreement dated September 29, 1994 between Orange and Rockland Utilities, Inc. and D. Louis Peoples regarding participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. 99.5 Agreement Between Orange and Rockland Utilities, Inc. and Kroll Associates, Inc. dated as of November 1, 1994. (b) Reports on Form 8-K Reference is made to Item 6.(b), Reports on Form 8-K, in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, for a description of a Current Report on Form 8-K dated July 14, 1994, filed by the Company with the SEC on July 18, 1994. On August 24, 1994, the Company filed with the SEC a Current Report on Form 8-K dated August 22, 1994, disclosing the issuance of the Final Report of the Special Committee of the Board of Directors of the Company, which Report summarizes the findings and conclusions of the Special Committee's investigation which commenced on August 20, 1993 following the arrest of a former Vice President of the Company. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ORANGE AND ROCKLAND UTILITIES, INC. (Registrant) Date: November 10, 1994 By TERRY L. DITTRICH Terry L. Dittrich Acting Controller Date: November 10, 1994 By ROBERT J. McBENNETT Robert J. McBennett Treasurer EX-27 2
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ORANGE AND ROCKLAND UTILITIES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1994 SEP-30-1994 PER-BOOK 834,553 21,567 229,008 185,478 0 1,270,606 68,245 127,394 189,824 385,463 4,158 43,273 379,894 0 0 5,245 1,068 1,384 407 508 449,206 1,270,606 761,624 21,748 676,716 698,464 63,160 (3,886) 59,274 25,444 33,830 2,438 31,392 25,746 22,627 86,111 2.31 0
EX-10 3 September 29, 1994 Mr. R. Lee Haney Vice President and Chief Financial Officer Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 Dear Mr. Haney: In connection with and as part of the consideration for your retention by Orange and Rockland Utilities, Inc. and election as Vice President and Chief Financial Officer, 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 specificially 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 calcu- lation of the amount of any such Allowance. 2. A year of Service shall be granted under the Plan for the 1994 Plan Year regardless of the number of hours of service otherwise required or completed. Mr. R. Lee Haney Page 2 September 29, 1994 3. For each of the first five years of Service you complete under the Plan (including 1994), you will receive credit under the Plan for two years of Service. Accordingly, at the end of 1994, you will have credit for two years of Service under the Plan. If you complete a year of Service under the Plan in 1995, you will then have four years of Service under the the Plan, and so on through 1998. 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. 4. 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. 5. 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. Mr. R. Lee Haney Page 3 September 29, 1994 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/Frank A. McDermott, Jr. _______________________ Frank A. McDermott, 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 __6th__ day of __October__, 1994. WITNESS: _/s/Krystyna M. Romas_______ __/s/R. Lee Haney____ R. Lee Haney EX-10 4 September 29, 1994 Mr. D. Louis Peoples Vice Chairman and Chief Executive Officer Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 Dear Mr. Peoples: In connection with, and as part of the consideration for your retention by Orange and Rockland Utilities, Inc. and election as Vice Chairman and Chief Executive Officer, 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. A year of Service shall be granted under the Plan for the 1994 Plan Year regardless of the number of hours of service otherwise required or completed. 3. Your Benefit Formula Percentage under the Plan shall be based upon a maximum of seventy percent. Upon com- pletion of five or more years of Service under the Plan, your Benefit Formula Percentage will be seventy percent. During your first five years of Service under the Plan, the 70% Benefit Formula Percentage shall be earned in increments as follows: Mr. D. Louis Peoples Page 2 September 29, 1994 Total Percent of Seventy Percent Benefit Formula Maximum Earned Percentage Earned Event During That Period At End of Period Date of Election 10% 7% Completion of: One Year of Service 10% 14% Second Year of Service 20% 28% Third Year of Service 20% 42% Fourth Year of Service 20% 56% Fifth Year of Service 20% 70% 4. 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. Upon completion of five or more years of Service under the Plan, the portion of your annual award included shall be equal to 100%. During your first five years of Service under the Plan, the percentage of your annual award included shall be determined as follows: Percentage of Annual Award Event Included Date of Election 10% Completion of: First Year of Service 20% Second Year of Service 40% Third Year of Service 60% Fourth Year of Service 80% Fifth Year of Service 100% 5. 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. Mr. D. Louis Peoples Page 3 September 29, 1994 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. ORANGE AND ROCKLAND UTILITIES, INC. __/s/H. Kent Vanderhoef_____ H. Kent Vanderhoef Chairman of the Board _/s/Frank A. McDermott,Jr.____ Frank A. McDermott, 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 _6th_ Day of _October___, 1994. WITNESS: _/s/Krystyna M. Romas________ _/s/D. Louis Peoples_____ D. Louis Peoples EX-99 5 AGREEMENT This AGREEMENT dated as of November 1, 1994, between ORANGE AND ROCKLAND UTILITIES, INC., a New York corporation (the "Corporation"), with offices at One Blue Hill Plaza, Pearl River, New York 10965, and Kroll Associates, Inc. (the "Contractor"), 900 Third Avenue, New York, N.Y. 10022 (hereinafter "the parties"). W I T N E S S E T H WHEREAS, the Corporation has entered into a Joint Cooperation Agreement ("JCA") dated November 3, 1993 with the Office of the District Attorney, Rockland County ("DAO"), in which the Corporation agreed to engage at its expense for a period of up to seven (7) years, the services of an independent Inspector General; WHEREAS, the DAO, the Corporation, and Contractor recognize that, to utilize an Inspector General successfully in a private sector corporation requires that the Inspector General not only be independent and able, but also function in a cost-effective manner and without interfering with legitimate managerial discretion and business operations; WHEREAS, pursuant to the JCA, the choice of an Inspector General was to be made by the Corporation from a list of reputable and qualified candidates provided by the DAO, and the Corporation has chosen Robert J. McGuire, President of Contractor from that list to act as Inspector General (Robert J. McGuire being hereinafter referred to as the "IG"); and WHEREAS, the Corporation and Contractor desire to set forth their agreement for the performance of services by the Inspector General, more fully described below; NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the parties agree as follows: 1. Work to be performed. The IG, in performing his duties under this agreement, will assist the Corporation in developing the systems and standards necessary to accomplish the purposes of the JCA in a cost effective manner and as soon as practicable. The functions of the IG under this agreement will be to work in cooperation with the management of the Corporation in order to: (a) assure that the business practices of the Corporation remain free of illegal and unethical conduct by and between officers and employees of the corporation and outside vendors and entities with whom the Corporation conducts business; (b) identify illegal and unethical conduct and report possible violations of the law to the appropriate law enforcement and regulatory agencies and subsequently provide necessary cooperation to those agencies; (c) devise, implement and review programs to raise and maintain ethical standards within the Corporation; (d) examine and evaluate the Corporation's policies and practices regarding the contracting of services to outside vendors, political contributions and reimbursement of expenses incurred by Corporation officers and employees; (e) cooperate and interact, if required, with regulatory bodies and officials concerning Contractor's activities and findings (including conferences and testimony); (f) report in writing at least every three months, and upon the completion or termination of this Agreement, describing Contractor's activities and findings to the Corporation's officers, its Board of Directors and relevant committees, the DAO, and, if required, to the relevant public utility commissions; (g) include in each annual report submitted Contractor's views with regard to the measures which the Corporation has taken and still needs to take in order to fulfill the purposes of the JCA in establishing an IG position. 2. Authority of Contractor. The IG is and shall remain independent of the Corporation for the duration of this Agreement. The IG shall have the right and the responsibility to examine issues within the scope of the IG's assignment, to form his own judgments on such issues, and to report the facts and his judgments to appropriate recipients of such information. In performing these tasks, the IG shall have the following powers, among others, as provided in the JCA: a. access to all books, records, files, accounts and correspondence of the corporation; b. power to interview witnesses and seize documents and to take testimony formally or informally, or otherwise in the discretion of the Contractor, consistent with the due process and other rights of affected individuals; c. power to review and report with respect to certain business operations of the organization including, but not limited to, expenditures, vendor contracts and human resource decisions; and d. power to review, report and recommend the removal from his or her position any officer, supervisor, agent, representative or employee. It is agreed by the parties that the IG will have full authority over his staff, but shall have no authority to hire, fire or determine the terms of employment of any individual officer or employee of the Corporation other than the IG's ability to review, report and recommend as enumerated above. Additionally, to supplement the IG's authority to investigate and provide meaningful access to employees, the Corporation agrees that no official or employee may be disciplined, penalized, or in any way disadvantaged by the Corporation for communicating information to the IG in a manner considered by the IG to have been in good faith. A statement reflecting this policy shall be published and made known to all employees. In exercising his authority, the IG will not perform any managerial function for the Corporation or interfere with the business judgments and managerial discretion of Corporation officials. The IG will also accurately state the views of the Corporation in any oral or written report made by the IG and conveyed to persons outside the Corporation concerning any matter with regard to which the IG and the Corporation may have a difference of views. 3. Facilities and Personnel. The Corporation will supply the IG adequate office space, equipment, and personnel support to perform the work contemplated in this Agreement. The Contractor acknowledges that the Corporation has retained it to provide the services of Robert J. McGuire to perform the role of IG and that his personal services are an essential part of the agreed exchange for this contract. To the extent the IG needs to rely on additional personnel in performing this Agreement, the IG shall endeavor to the extent possible (consistent with the IG's obligations and independence) to rely upon the Corporation's regular employees, agents, and professionals. The Corporation agrees that the IG may routinely utilize the services of the non- Corporation personnel reflected in Appendix A, and their services shall be considered covered by the contract price. Where the IG concludes that, because extraordinary services are required, the use of additional non- Corporation employees, agents, or professionals is necessary, the IG shall so notify the Corporation, specifying the reasons for his conclusion and the type and number of non-Corporation personnel that the IG believes it is necessary to retain. The Corporation and the IG shall discuss any questions each may have with regard to any such proposal, and may seek the assistance of the DAO in resolving any differences. Where the IG believes it is necessary to utilize non-Corporation personnel or otherwise expend funds beyond the contract price without previously notifying the Corporation due to an overriding need for confidentiality, the IG will seek the prior approval of the DAO for such actions and will notify the Corporation as soon as possible. The Corporation will pay the reasonable and necessary costs associated with the retention of non-Corporation personnel, when approved by the Corporation or to the extent considered necessary by the DAO. 4. Compensation. The Corporation will pay Contractor, for all the regular services contemplated in this Agreement, by the IG, the staff of Contractor and any other non-Corporation personnel, the Sum of $250,000.00, to be paid in twelve equal installments at the end of each month during the first year and any subsequent annual renewal. The Corporation will not be responsible for providing the IG or any of Contractor's staff or other non- Corporation personnel with any form of employee benefit. The contract price will cover all services contemplated in this Agreement, and all expenses incurred by the IG, Contractor and the Contractor's staff associated with such services. If additional, extraordinary services are required, or reasonable and necessary expenses associated with such services are incurred, Contractor will file claims for such services and/or expenses in accordance with the Corporation's policies, as set forth in Appendix B of this Agreement. Costs beyond the contract price shall be incurred on the basis of the procedures described in paragraph 3 above. 5. Confidentiality. The IG and Contractor will treat all information received from Corporation personnel, written or oral, as confidential. The IG and Contractor will not disclose any such information to any person or entity except as necessary to fulfill the IG's and Contractor's duties under this Agreement. The IG and Contractor will seek to ensure that all materials supplied by the IG to the DAO and other governmental authorities are accorded the maximum degree of protection permitted by applicable law. See, e.g., N.Y. Freedom of Information Law, N.Y. Pub. Off. Law Sections 84-90. 6. Policies of Employment. The IG and Contractor will at all times in the performance of this Agreement comply with all federal, state and local laws, rules and regulations with respect to labor relations, minimum wages and hours or other matters relating to employment. Without limiting the foregoing, the IG and Contractor will comply with the requirements of Executive Orders 11246 and 11701, as amended, and any regulations thereunder, and, specifically, the IG and Contractor will comply with the Equal Employment Provisions set forth as Appendix C to this Agreement, except as the IG and Contractor may indicate on such attachment an exemption from such provisions. 7. Independence of the IG. The IG and Contractor are independent contractors and neither is an employee, subcontractor, agent or representative of the Corporation, and each of the Contractor's employees to be engaged in the performance of this Agreement, including the IG, shall be at all times an employee of the Contractor and not an employee, agent or representative of the Corporation. 8. Duration. a. This Agreement is for a one-year period, commencing on the date of its complete execution but no sooner than November 1, 1994. It will be extended automatically for up to six consecutive annual periods after the first year, unless the Corporation and the DAO both agree to an earlier termination date, in which case Contractor should be given no less than sixty (60) days written notice of such earlier termination. b. This Agreement may be terminated for cause at any time, on 30 days' written notice to Contractor from the Corporation, with the written consent of the DAO. c. Contractor agrees that any notice of termination for cause or otherwise, received from the Corporation and duly consented to by the DAO, will be final and not subject to any form of challenge by Contractor. d. Contractor may terminate this Agreement on 30 days written notice to the Corporation and the DAO without cause. 9. Disputes. Any controversy or claim arising out of or relating to this Agreement will be settled by arbitration in New York City under the Commercial Arbitration Rules of the American Arbitration Association, before a single arbitrator. The arbitrator must render his or her decision within 30 days following selection. Judgment upon any award of the arbitrator may be entered in any court having jurisdiction thereof. 10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, as if all acts or omissions related hereto occurred in such state. 11. Indemnification. (a) To the fullest extent permitted by law, Contractor shall indemnify and save harmless the Corporation (for purposes of this paragraph 11 and paragraph 12, the word "Corporation" shall be deemed to include its officers, employees, representatives and agents) from all liability, losses, damages, costs and expenses (including attorneys' fees), claims, actions, demands, suits, judgments and settlements of any nature whatsoever resulting from any actions by Contractor or any of its employees, including the IG, constituting negligence, gross negligence, fraud, willful or unlawful conduct during the performance of this Agreement or work performed hereunder, including but not limited to any such liability, losses or claim for injury or death to any person or damage to property. (b) The provisions of this paragraph 11 shall survive Contractor's completion of performance hereunder and any other termination of this Agreement. 12. Insurance. (a) Before commencing work under this Agreement, Contractor shall procure and maintain at its own expense until the termination of this Agreement, and for a longer time period as required below, the following minimum insurance in forms and with insurance companies acceptable to the Corporation: (1) Workers' Compensation Insurance for statutory obligations imposed by Workers' Compensation or Occupational Disease Laws, and Employer's Liability Insurance with a minimum limit of $500,000. When applicable, coverage shall include the United States Longshoreman's and Harbor Workers' Compensation Act and the Jones Act. (2) General Liability Insurance including Personal Injury, Broad form Property Damage, Products/Completed Operations, Contractual Liability and Contractor Protective Liability Insurance covering all operations required to complete Contractor's work with minimum limits of liability of $1,000,000 per occurrence. (3) Automobile Liability Insurance, including coverage for all owned, non-owned and hired automotive equipment used by Contractor in the performance of the work with minimum limits of liability of $1,000,000 per occurrence. (4) Professional liability errors and omissions insurance with minimum limits of liability of $1,000,000 per occurrence. (b) If any of Contractor's work under this Agreement is subcontracted, Contractor shall require each subcontractor to carry all insurance required under this paragraph 12 and to submit acceptable Certificates of Insurance to the Corporation prior to subcontractor's commencement of its work. (c) For all insurance required hereunder, except Worker's Compensation, professional liability errors and omissions, and Employers Liability, the Corporation shall be named as an additional insured. (d) All of the insurance required hereunder shall be primary to any or all other insurance coverage and shall not contribute with similar insurance in effect for the Corporation. (e) All insurance where the Corporation is an additional insured must contain provisions which state that the policy will respond to claims or suits by the Corporation and Contractor or any other insured thereunder. (f) All insurance required hereunder shall provide insurance for occurrences during the performance of services by Contractor and all subcontractors pursuant to this Agreement and for a period of two years after termination of this Agreement. In the event that any insurance as required herein is available only on a "claims-made" basis, such insurance shall provide for a retroactive date not later than the commencement of the work hereunder and such insurance shall be maintained by Contractor, with a retroactive date not later than the retroactive date required above, for a minimum period of five years after termination of this Agreement. (g) All insurance required herein shall be issued by an insurer licensed to do business in the States of New York and New Jersey and shall have a Best's Rating of not less than "A" and a net surplus of not less than $25,000,000. (h) Contractor's insurance carrier shall notify the Corporation of any material change in, or cancellation of, the insurance required hereunder at least 30 days prior to the effective date of any such change or cancellation. (i) Prior to commencement of work, Contractor shall provide, for the Corporation's review and approval, a Certificate of Insurance verifying the existence of insurance coverages in compliance with the requirements of this paragraph 12, from insurance companies acceptable to the Corporation. Unless otherwise specified, the Certificate of Insurance should be mailed to: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: General Counsel 13. Modification; Waiver. (a) No modification of this Agreement shall be valid unless made in writing and duly executed by the party to be bound by such modification. (b) Waiver of the breach of any of the terms or conditions of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition. 14. Assignment. Contractor shall not assign this personal-service Agreement or any part thereof or interest therein, or any monies due or to become due thereunder without the prior written consent of the Corporation, and any such assignment without such consent shall be void. Any consent by the Corporation, in its exclusive discretion, to any such assignment, shall not in any event relieve Contractor from full responsibility and liability for the due performance of all of the terms and conditions of this Agreement. Furthermore, in the event such consent is given, Contractor shall remain fully responsible to the Corporation for acts and omissions of Contractor's assignee and Contractor shall save Corporation harmless from any and all losses and expense caused thereby. In the event Robert J. McGuire becomes disassociated with Kroll Associates, the parties agrees that at the request of the Corporation they will take all necessary steps to enable Mr. McGuire to continue his service as IG and to relieve Contractor of all its obligations under this Agreement. 15. Notices. (a) Except as otherwise agreed to in writing by the parties hereto, any notice or other communication to either party hereto pursuant to any provision of this Agreement shall be effective only if it is in writing and if delivered personally or mailed postage prepaid, first class mail, return receipt requested, prior to the expiration of any time limitation governing the giving of the same: If to the Corporation, addressed to: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: General Counsel If to the Contractor, addressed to: Robert J. McGuire, Esq. Kroll Associates, Inc. 900 Third Avenue New York, N.Y. 10022 (b) Each party may at any time or times change the place to which such notices or other communications are to be addressed, on 30-days' written notice to the other party. (c) All such notices or other communications shall be deemed given, if mailed, when mailed to the appropriate address provided above, or when delivered personally to the party to receive such notice or other communication, provided, however, if pursuant to any provision of this Agreement, any response to any notice or other communication must be given within a specified time period, such time period shall not begin to run until the actual receipt of such notice or other communication by the party to receive such notice or other communication. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By ___D. L. Peoples_______________ Title _Vice Chairman + CEO________ KROLL ASSOCIATES, INC. By_Robert P. Connolly_____________ Title _Managing Director and General Counsel ACCEPTED AND AGREED _Robert J. McGuire___ Robert J. McGuire APPENDIX A 1. Michael G. Cherkasky 2. James R. Murray 3. Accountants employed by Kroll Associates, Inc. who will be designated from time to time APPENDIX B ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES LAW FIRM BILLING PROCEDURES A. The Firm will bill the Company at the beginning of each month for services rendered and disbursements made in the previous month. Each invoice shall contain the following information: 1. Title of each matter for which time or disbursements are billed and the period covered by the bill. 2. Name of each person whose time is separately billed, such person's billing rate and classification (i.e., partner, associate, paralegal). 3. Total time (expressed in hours and fractions thereof) worked each day by each person, by matter. 4. Brief narrative description of work performed each day by each person. 5. Disbursements for each matter, each item to be listed individually by date and organized by classification (e.g., duplicating, telecopying, postage, air express, etc.); billing for disbursements will be in accordance with Attachment 1 - Billing for Expenses. 6. Total time and fees for each matter billed for the period (including a summary of total time and fees for each person whose time is billed), total disbursements and total charges. 7. Year-to-date amounts billed for services and disbursements by matter and for all matters in the aggregate; if the matter extends over more than one calendar year, additionally the cumulative total for services and disbursements since the matter's inception. 8. Adjustments for fees and disbursements for discounted or nonrecoverable items, capped fees or similarly negotiated reduction. 9. In litigation matters, and in other matters as specified by the Company, time and disbursements also shall be described and billed by task (e.g., work on a particular motion, work on interrogatories). B. The Firm will specify the following items in its bills: time shared with other clients; travel time; legal research and the subject of the research; computer research time and computer charges (if any); the subject of all meetings, conferences and telephone calls. C. There will be no charge for word processing services, computer time (other than computerized legal research) or other support services except as part of authorized clerical overtime (see E below). D. Transportation, lodging and meal charges are expected to be reasonable. The Company will not pay for first class air travel. Billing for expenses will be in accordance with Attachment 1 - Billing for Expenses. E. The Company expects that work by the Firm will ordinarily be performed during the normal working day. Overtime should not be billed unless the Company agrees in advance or there is an extraordinary circumstance. When travel occurs on the Company's behalf, the Company will compensate for time spent in transit at three quarters (3/4) the applicable hourly rate per individual. However, if work is done for other clients in transit, the Company will not reimburse for transit time. If travel time is devoted to working for one or more clients in addition to the Company, the Company should be billed only for the proportionate time. Unless agreed to in advance, time away from home or the office which is not in transit or spent performing legal services will not be compensated. F. Charges in excess of Proposal amounts will not be paid unless the billing attorney is able to provide justification for such charges. Charges will not be accepted for repetitive work, unnecessary internal conferences, training or over-staffing. The Firm will not charge for the negotiation or preparation of any agreement between the Company and the Firm for services by the Firm, for the Firm's billings, for the preparation of billing estimates or explanations of charges or for any work of a similar nature. G. In litigation matters, charges for more than one attorney attending meetings, depositions, court appearances and trial will not be accepted absent advance approval by the Company or unusual circumstances. Expert witnesses, investigators, consultants or local counsel may not be retained without the Company's prior approval. H. The Company reserves the right to audit all charges billed to it utilizing its internal auditors or auditing firms designated by it. I. Please submit invoices to: Legal Department Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, NY 10965 ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES LAW FIRM BILLING PROCEDURES Attachment 1 Billing For Expenses 1. Payment for actual charges only; required documentation With respect to billing for disbursements, the Company will only accept charges which reflect the actual cost incurred. Expenses should be itemized with documentation available on request for all expense items of $100 or above. When documentation is requested, the Company expects to be provided with an actual vendor invoice reflecting the charge. If the allowable expense does not involve a vendor (e.g., in-house document duplication), then a unit log detailing how the costs were incurred should be provided. 2. Copying All billing which includes charges for copying must reflect the number of copies made and the charge per page. Copying should be done in a cost effective manner absent extenuating circumstances. In this regard, large volume copying should be contracted out to a commercial service where appropriate. Large volume copying charges will be reviewed and charges for in-house copying which are substantially higher than commercial rates will be questioned and may be disallowed. Invoices from copying services should be retained and provided to the Company on request. 3. Telecopying; overnight mail The Company will not pay for receipt by counsel of telecopies from the Company or from third parties on Company matters. Counsel should apply discretion when determining to send correspondence via overnight mail. Supporting documentation for telecopying and overnight mail should be available on request. 4. Travel-related Expenses - Air travel The Company expects counsel to obtain the lowest fare available. Any price paid above coach fare will be disallowed absent prior approval or extenuating circumstance. - Mileage; ground transportation Common sense should dictate the mode of transportation utilized on Company matters - personal automobile, public transportation, taxi or rental of automobiles used by counsel. Mileage for personal automobile use will be reimbursed in accordance with the per mile rate approved by the IRS. Reimbursement for car rental expense is limited to compact or intermediate cars. Limousine or car service use will require prior approval. Car rentals should be limited to instances where such method of transportation represents the most economic form in terms of convenience and cost. - Accommodations; personal expenses Reasonable and necessary hotel charges of counsel traveling on Company matters will be reimbursed. Counsel may reserve and use standard, first quality motel and hotel facilities. Luxurious and exorbitantly priced accommodations will not be reimbursed in full. Personal items and services (e.g. dry cleaning, laundry, entertainment, toiletries) are not reimbursable. - Food, beverage and entertainment Counsel are expected to use discretion regarding food and beverage expense while traveling. Counsel may use standard, first quality restaurants while traveling. Meals at expensive restaurants are not considered necessary and will not be reimbursed. Business entertaining is not reimbursable by the Company unless authorized in advance by the Company. 5. Extraordinary expenses Prior approval from the Company is required before extraordinary expenses (e.g., investigative services, retention of consultants or expert witnesses, computer litigation support services, videotaping of depositions) are incurred. APPENDIX C EQUAL EMPLOYMENT PROVISIONS For the purposes of this Exhibit, the following terms shall have the meaning indicated: "Agreement" shall mean the Agreement, to which this Exhibit is appended and of which it is a part. "Contracting officer", "agency contracting officer", and "contracting agency", shall mean Orange and Rockland Utilities, Inc. "Government contracts" shall be deemed to include this Agreement. "Seller" shall mean the Contractor and its permitted assigns under the Agreement. Except as Seller may indicate Seller's exception from the applicability of the following provisions, Seller represents, warrants and agrees as follows: 1. Equal Employment Opportunity: ( / / Seller is exempt ) (a) Seller will not discriminate against any employee or applicant for employment because of age, race, color, religion, sex or national origin. Seller will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their age, race, color, religion, sex or national origin. Such action shall include, but not be limited to, the following: employment, upgrading, demotion or transfer; recruitment or recruitment advertising; lay-off or termination; rates of pay or other forms of compensation; and selection for training, including apprenticeship. Seller agrees to post in conspicuous places, available to employees and applicants for employment, notices to be provided by the contracting officer setting forth the provisions of this non-discrimination clause. (b) Seller will, in all solicitations or advertisements for employees placed by or on behalf of Seller, state that all qualified applicants will receive consideration for employment without regard to age, race, color, religion, sex or national origin. (c) Seller will send to each labor union or representative of workers with which Seller has a collective bargaining agreement or other contract or understanding, a notice to be provided by the agency contracting officer, advising the labor union or workers' representative of the Seller's commitments under this Equal Employment Opportunity clauses and shall post copies of the notice in conspicuous places available to employees and applicants for employment. (d) Seller will comply with all provisions of Executive Order 11246 of September 24, 1965 ("Executive Order 11246") and the rules, regulations and relevant orders of the Secretary of Labor. (e) The Seller will furnish all information and reports required by Executive Order 11246 and by the rules, regulations and orders of the Secretary of Labor and will permit access to his books, records and accounts by the contracting officer and the Secretary of Labor for purposes of investigation to ascertain compliance with such rules, regulations and orders. (f) In the event of Seller's noncompliance with the non- discrimination clauses of this contract or with Executive Order 11246 or any of such rules, regulations or orders of the Secretary of Labor, this Agreement may be cancelled, terminated or suspended in whole or in part and Seller may be declared ineligible for further Government contracts in accordance with procedures authorized in Executive Order 11246, and such other sanctions may be imposed and remedies invoked as provided in Executive Order 11246, or by rule, regulation or order of the Secretary of Labor, or as otherwise provided by law. (g) Seller will include the provisions of paragraph (a) through (g) of this clause in every subcontract or purchase order unless exempt by rules, regulations or orders of the Secretary of Labor issued pursuant to Section 204 of Executive Order 11246, so that such provisions will be binding upon each subcontractor or vendor. Seller will take such action with respect to any subcontract or purchase order as the contracting agency may direct as means of enforcing such provisions, including sanctions for noncompliance; provided, however, that in the event Seller becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of such direction by the contracting agency, Seller may request the United States to enter such litigation to protect the interests of the United States. 2. Certificate of Nonsegregated Facilities: ( / / Seller is exempt) Seller certifies that Seller does not maintain or provide for Seller's employees any segregated facilities at any of Seller's establishments, and that Seller does not permit Seller's employees to perform their services at any location, under Seller's control, where segregated facilities are maintained. Seller certifies further that Seller will not maintain or provide for Seller's employees any segregated facilities at any of Seller's establishments, and that Seller will not permit Seller's employees to perform their services at any location, under Seller's control, where segregated facilities are maintained. Seller agrees that a breach of this certification is a violation of the Equal Opportunity clause in this order. As used in this certification, the term "segregated facilities" means any waiting rooms, work areas, rest rooms and wash rooms, restaurants and other eating areas, time clocks, locker rooms and other storage or dressing areas, parking lots, drinking fountains, recreation or entertainment areas, transportation and housing facilities provided for employees which are segregated by explicit directive or are in fact segregated on the basis of age, race, color, religion or national origin, because of habit, local custom or otherwise. Seller further agrees that (except where Seller has obtained identical certifications from proposed subcontractors for specific time periods) Seller will obtain identical certifications from proposed subcontractors prior to the award of subcontracts exceeding $10,000 which are not exempt from the provisions of the Equal Opportunity clause; that Seller will forward the following notice to such proposed subcontractors (except where the proposed subcontractors have submitted identical certifications for specific time periods): "NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR CERTIFICATIONS ON NON-SEGREGATED FACILITIES" A certificate of Nonsegregated Facilities must be submitted prior to the award of a subcontract exceeding $10,000 which is not exempted from the provisions of the Equal Employment Opportunity clause contained in Section 202 of Executive Order 11246 of September 24, 1965. The certification may be submitted either for each subcontract or for all subcontracts during a period (i.e., quarterly, semi-annually, or annually). NOTE: The Penalty for making false statements in offers is prescribed in 18 U. S. C. 1001. 3. Employment of the Handicapped: ( / / Seller is exempt) Seller shall take affirmative action to employ and advance in employment and otherwise treat qualified handicapped individuals, without discrimination based upon their physical or mental handicap, as required by Section 60-747.3 and Section 60-741.4 of Title 41 of the Code of Federal Regulations. 4. Special Disabled and Vietnam Era Veterans: Unless otherwise exempt from the provisions of the Vietnam Era Veterans Readjustment Act of 1972, Seller shall list all suitable employment openings with the local employment service office and take affirmative action to employ, and advance in employment, qualified special disabled veterans and veterans of the Vietnam Era without discrimination based on their disability or veterans status. 5. Utilization of Small Business Concerns and Small Disadvantaged Business Concerns: ( / / Seller is exempt from this clause.) (a) It is the policy of the United States that small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals shall have the maximum practicable opportunity to participate in the performance of Government contracts. (b) Seller agrees to use Seller's best efforts to carry out this policy in the award of Seller's subcontracts to the fullest extent consistent with the efficient performance of this order. The Seller further agrees to cooperate in any studies as may be conducted by the United States Small Business Administration or the awarding agency of the United States as may be necessary to determine the extent of the Seller's compliance with this clause. (c) As used in this clause, the term "small business concern" shall mean a small business as defined pursuant to Section 3 of the Small Business Act and relevant regulations promulgated pursuant thereto. The term "small business concern controlled by socially and economically disadvantaged individuals" shall mean a small business concern-- 1. which is at least 51 percent owned by one or more socially and economically disadvantaged individuals; or in the case of any publicly-owned business, at least 51 percent of the stock of which is owned by one or more socially and economically disadvantaged individuals, and 2. whose management and daily business operations are controlled by one or more of such individuals. The Seller shall presume that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian- Pacific Americans, Asian-Indian Americans and other minorities, or any other individual found to be disadvantaged by the Administration pursuant to Section 8(a) of the Small Business Act. (d) Seller acting in good faith may rely on written representations by his subcontractors regarding their status as either a small business concern or a small business concern owned and controlled by socially and economically disadvantaged individuals. 6. Utilization of Women-Owned Small Businesses: Seller shall use his best efforts to give women-owned small businesses the maximum practicable opportunity to participate in the subcontracts or orders it awards to the fullest extent consistent with the efficient performance of the contract. As used in this clause "women-owned small businesses" means business that are at least 51 percent owned by women who are United States citizens and who also control and operate the business. "Control" means exercising the power to make policy decisions, and "operate" means being actively involved in the day-to-day management of the business. 7. Affirmative Action Compliance Programs: Seller agrees to develop a written Affirmative Action Compliance Program for each of its establishments as required by Section 60-250 of Title 41 of the Code of Federal Regulations. EQEMPPRO.WP 7/01/94 -----END PRIVACY-ENHANCED MESSAGE-----