-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PIYJI5BtvSOtPXw1jQtP32JZOR0Jr7iqH9+FVYQNdhP9Z5AswVoZ949Xp3MwSurE ucuhXWHhUN6NjR2Tn3FNbQ== 0000074778-95-000018.txt : 19951119 0000074778-95-000018.hdr.sgml : 19951119 ACCESSION NUMBER: 0000074778-95-000018 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ORANGE & ROCKLAND UTILITIES INC CENTRAL INDEX KEY: 0000074778 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [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: 95590302 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, 1995 OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4315 ORANGE AND ROCKLAND UTILITIES, INC. (Exact name of registrant as specified in its charter) New York 13-1727729 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Blue Hill Plaza, Pearl River, New York 10965 (Address of principal executive offices) (Zip Code) (914) 352-6000 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the close of the latest practicable date. Common Stock - $5 Par Value 13,653,613 shares (Class) (Outstanding at October 31, 1995) TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets (Unaudited) at September 30, 1995 and December 31, 1994 1 Consolidated Statements of Income (Unaudited) for the three months and nine months ended September 30, 1995 and September 30, 1994 3 Consolidated Cash Flow Statements (Unaudited) for the nine months ended September 30, 1995 and September 30, 1994 4 Notes to Consolidated Financial Statements 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 17 ITEM 6. Exhibits and Reports on Form 8-K 18 Signatures 19 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Assets
September 30, December 31, 1995 1994 (Thousands of Dollars) Utility Plant: Electric $ 990,878 $ 951,019 Gas 207,254 198,755 Common 56,243 55,445 Utility Plant in Service 1,254,375 1,205,219 Less accumulated depreciation 422,028 398,584 Net Utility Plant in Service 832,347 806,635 Construction work in progress 33,031 49,654 Net Utility Plant 865,378 856,289 Non-utility Property: Non-utility property 32,907 34,585 Less accumulated depreciation, depletion and amortization 13,908 13,977 Net Non-utility Property 18,999 20,608 Current Assets: Cash and cash equivalents 5,076 16,081 Temporary cash investments - 1,839 Customer accounts receivable, less allowance for uncollectible accounts of $2,234 and $2,200 56,749 44,105 Accrued utility revenue 16,091 27,273 Other accounts receivable, less allowance for uncollectible accounts of $170 and $209 10,323 17,384 Gas marketing accounts receivable, less allowance for uncollectible accounts of $112 and $327 36,910 58,470 Materials and supplies (at average cost) 35,989 37,836 Prepaid property taxes 31,569 19,327 Prepayments and other current assets 28,659 28,877 Total Current Assets 221,366 251,192 Deferred Debits: Income tax recoverable in future rates 69,829 73,261 Extraordinary property loss - Sterling nuclear project 5,722 10,139 Deferred Order No. 636 transition costs 9,060 13,480 Deferred revenue taxes 15,759 16,888 Deferred pension and other postretirement benefits 10,610 10,505 IPP settlements 40,195 17,821 Unamortized debt expense (amortized over term of securities) 11,801 10,493 Deferred Federal income taxes 32,790 34,645 Other deferred debits 29,269 32,318 Total Deferred Debits 225,035 219,550 Total $1,330,778 $1,347,639 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Capitalization and Liabilities
September 30, December 31, 1995 1994 (Thousands of Dollars) Capitalization: Common stock (13,653,605 and 13,652,913 shares outstanding) $ 68,268 $ 68,265 Premium on capital stock 133,607 133,595 Capital stock expense (6,118) (6,116) Retained earnings 188,859 183,659 Total Common Stock Equity 384,616 379,403 Non-redeemable preferred stock (428,443 shares outstanding) 42,844 42,844 Non-redeemable cumulative preference stock (12,544 and 13,025 shares outstanding) 409 424 Total Non-Redeemable Stock 43,253 43,268 Redeemable preferred stock (27,738 shares outstanding) 2,774 2,774 Long-term debt 359,757 359,622 Total Capitalization 790,400 785,067 Non-current Liabilities: Reserve for claims and damages 5,179 4,713 Postretirement benefits 13,230 15,625 Pension costs 37,907 39,854 Obligation under capital leases - 275 Total Non-current Liabilities 56,316 60,467 Current Liabilities: Lease obligations due within one year 407 518 Long-term debt due within one year 184 19,392 Preferred stock to be redeemed within one year 1,384 1,384 Notes payable 10,474 - Commercial paper 34,300 29,400 Accounts payable 81,939 63,855 Gas marketing accounts payable 35,911 71,913 Dividends payable 725 725 Customer deposits 5,389 5,669 Accrued Federal income and other taxes 1,082 5,949 Accrued interest 4,518 8,608 Refunds to customers 15,063 10,265 Other current liabilities 16,225 16,127 Total Current Liabilities 207,601 233,805 Deferred Taxes and Other: Deferred Federal income taxes 212,644 207,952 Deferred investment tax credits 16,490 17,109 Accrued Order No. 636 transition costs 9,060 13,480 Accrued IPP settlement agreements 17,500 8,000 Refundable gas costs 10,076 7,554 Refundable fuel costs 6,150 10,366 Other deferred credits 4,541 3,839 Total Deferred Taxes and Other 276,461 268,300 Total $1,330,778 $1,347,639 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
Three Months Nine Months Ended Sept 30, Ended Sept 30, 1995 1994 1995 1994 (Thousands of Dollars)(Thousands of Dollars) Operating Revenues: Electric $138,039 $144,265 $353,985 $370,375 Gas 14,533 12,411 93,943 119,646 Electric sales to other utilities 440 1,414 1,637 6,229 Total Utility Revenues 153,012 158,090 449,565 496,250 Diversified activities 78,894 79,776 339,547 261,973 Total Operating Revenues 231,906 237,866 789,112 758,223 Operating Expenses: Operations: Fuel used in electric production 20,927 22,278 54,772 68,845 Electricity purchased for resale 15,069 14,019 40,209 36,438 Gas purchased for resale 7,046 6,080 47,561 71,352 Non-utility gas marketing purchases 76,730 77,453 332,840 251,003 Other expenses of operation 33,097 37,084 100,685 110,080 Maintenance 9,317 10,980 29,917 31,452 Depreciation and amortization 9,792 9,071 28,165 26,375 Amortization of property losses 1,540 1,416 4,621 4,247 Taxes other than income taxes 24,104 24,344 71,455 73,359 Federal income taxes 7,841 7,077 15,867 21,539 Deferred Federal income taxes 2,717 2,598 6,483 438 Amortization of investment tax credit (28) (30) (88) (90) Total Operating Expenses 208,152 212,370 732,487 695,038 Income from Operations 23,754 25,496 56,625 63,185 Other Income and (Deductions): Investigation costs (1,535) (1,722) (3,542) (7,731) Other - net 52 104 5,283 299 Taxes other than income taxes (39) (33) (560) (87) Federal income taxes 558 412 1,771 2,537 Deferred Federal income taxes (26) 261 (2,100) 188 Amortization of investment tax credit 177 178 531 536 Total Other Income and (Deductions) (813) (800) 1,383 (4,258) Income Before Interest Charges 22,941 24,696 58,008 58,927 Interest Charges: Interest on long-term debt 6,649 7,637 20,501 22,627 Other interest 1,333 469 3,470 1,808 Amortization of debt premium and expense-net 349 300 1,029 903 Allowance for borrowed funds used during construction (182) (92) (827) (241) Total Interest Charges 8,149 8,314 24,173 25,097 Net Income 14,792 16,382 33,835 33,830 Dividends on preferred and preference stock, at required rates 784 812 2,353 2,438 Earnings applicable to common stock $ 14,008 $ 15,570 $ 31,482 $ 31,392 Avg. number of common shares outstanding (000's) 13,654 13,627 13,653 13,575 Earnings per average common share outstanding $ 1.03 $ 1.14 $ 2.31 $ 2.31 Dividends declared per common share outstanding $ - $ - $ 1.93 $ 1.90 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Cash Flow Statements (Unaudited)
Nine Months Ended September 30, 1995 1994 (Thousands of Dollars) Cash Flow from Operations: Net income $33,835 $33,830 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 27,514 26,674 Deferred Federal income taxes 8,583 250 Amortized investment tax credit (619) (626) Deferred and refundable fuel and gas costs (1,694) 7,822 Allowance for funds used during construction (853) (330) Other non-cash charges 6,734 4,537 Changes in certain current assets and liabilities: Accounts and gas marketing accounts receivable, net and accrued utility revenues 27,159 21,108 Materials and supplies 1,620 (547) Prepaid property taxes (12,242) (11,383) Prepayments and other current assets 218 (8,441) Operating and gas marketing accounts payable (17,918) 6,328 Accrued Federal Income and other taxes (4,867) (1,642) Accrued interest (4,090) (4,740) Refunds to customers 4,798 1,353 Other current liabilities (182) 8,820 Other-net (12,190) 3,098 Net Cash Provided from Operations 55,806 86,111 Cash Flow from Investing Activities: Additions to plant (36,463) (29,759) Temporary cash investments 1,839 14 Allowance for funds used during construction 853 330 Net Cash Used in Investing Activities (33,771) (29,415) Cash Flow from Financing Activities: Proceeds from: Issuance of common stock - 3,759 Issuance of long-term debt 44,048 55,000 Retirements of: Long-term debt (63,441) (55,721) Capital lease obligations (386) (357) Net borrowings (repayments) under short-term debt arrangements* 15,374 (40,955) Dividends on preferred and common stock (28,635) (28,185) Net Cash Used in Financing Activities (33,040) (66,459) Net Change in Cash and Cash Equivalents (11,005) (9,763) Cash and Cash Equivalents at Beginning of Period 16,081 14,256 Cash and Cash Equivalents at End of Period $ 5,076 $ 4,493 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized $26,247 $29,001 Federal income taxes $13,575 $15,229 * Debt with maturities of 90 days or less. The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of September 30, 1995, the consolidated statements of income for the three month and nine month periods ended September 30, 1995 and 1994, and the consolidated cash flow statements for the nine month periods then ended have been prepared by Orange and Rockland Utilities, Inc. (the "Company") without an audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations at September 30, 1995, and for all periods presented, have been made. The amounts in the consolidated balance sheet as of December 31, 1994 are from audited financial statements. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Annual Report to Shareholders. The results of operations for the period ended September 30, 1995 are not necessarily indicative of the results of operations for the full year. 3. The consolidated financial statements include the accounts of the Company, all subsidiaries and the Company's pro rata share of an unincorporated joint venture. All significant intercompany balances and transactions have been eliminated. 4. Contingencies at September 30, 1995 are substantially the same as the contingencies described in the "Notes to Consolidated Financial Statements" included in the Company's December 31, 1994 Annual Report to Shareholders, which material is incorporated by reference to the Company's December 31, 1994 Form 10-K Annual Report, except the status of legal proceedings and related regulatory matters is updated in Part II, Item 1. Legal Proceedings. 5. Certain amounts from prior years have been reclassified to conform with the current year presentation. 6. On September 8, 1994, the Company adopted a formal plan to sell the six radio broadcasting properties operated by a wholly owned indirect subsidiary, Atlantic Morris Broadcasting, Inc. ("AMB"), and AMB subsequently entered into contracts for the sale of the stations. The only sale yet to be finalized is WALL/WKOJ in Middletown, New York. On September 15, 1995, the FCC dismissed a Petition for Reconsideration that had been filed with respect to the FCC's approval of this sale. However, on October 4, 1995, an Application for Review of the September 15, 1995 decision was filed and is pending. The Company filed its Opposition to Application for Review on October 19, 1995. The sale of the stations will not have a material effect on the Company's Consolidated Financial Statements. 7. On January 23, 1995, O&R Energy, Inc. (now NORSTAR Holdings, Inc.) a wholly owned indirect subsidiary of the Company, joined with Shell Gas Trading Co. to create a new full service natural gas services and marketing company called NORSTAR Energy Limited Partnership ("NORSTAR Partnership"). During the first quarter of 1995, the Company realized a gain on the formation of the NORSTAR Partnership of $2.9 million. The gain resulted from the effective sale of a 26.9% minority interest in the gas marketing business. This net gain has been recorded in the Consolidated Statements of Income under the title Other Income and (Deductions) as follows: Other-Net, $5.0 million; Taxes other than income taxes, ($.4) million and Federal income taxes, ($1.7) million. 8. The financial statements of the Company are based on generally accepted accounting principles, including the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS No. 71"), which gives recognition to the rate- making and accounting practices of the regulatory agencies. The principal effect of the rate-making process on the Company's financial statements is that of the timing of the recognition of incurred costs. If rate regulation provides reasonable assurance that an incurred cost will be recovered in a future period by inclusion of that cost in rates, SFAS No. 71 requires the capitalization of the cost. Regulatory assets represent probable future revenue associated with certain incurred costs, as these costs are recovered through the rate-making process. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of". This Statement imposes criteria for the continued recognition of regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company anticipates adopting this standard on January 1, 1996 and does not expect that adoption will have a material impact on the financial position or results of operations of the Company based on the current regulatory structure in which the Company operates. This conclusion may change in the future as competitive factors influence wholesale and retail pricing in this industry. 9. During 1994, the Company negotiated settlement agreements with two of the three independent power producers ("IPP") scheduled to provide electric generating capacity and energy services to the Company in the late 1990's. On June 14, 1995, the Company entered into an agreement with the remaining IPP, Wallkill Generating Company, L.P. ("Wallkill Generating"), which was to construct and operate a gas-fired combined cycle generating facility and sell 95 Mw of capacity and associated energy to the Company. At September 30, 1995, $40.2 million of termination costs associated with these three settlement agreements have been deferred in accordance with regulatory accounting procedures pending a determination of the recoverability of the costs in rates. In January 1995, the New Jersey Board of Public Utility Commissioners ("NJBPU") authorized the recovery of $.9 million over a 12-month period ending December 31, 1995 for the portion of one of the settlement agreements applicable to New Jersey electric operations. Additional recovery of approximately $10.3 million applicable to New Jersey electric operations will be addressed in pending and future proceedings before the NJBPU. The recovery of the portion of termination costs applicable to New York operations, which amounted to approximately $29.2 million at September 30, 1995, will be addressed in the Company's electric base rate proceeding currently pending before the New York Public Service Commission ("NYPSC"). Management believes that the termination costs were prudently incurred and therefore should be fully recoverable in rates. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition: Financial Performance The Company's consolidated earnings per average common share outstanding for the third quarter of 1995 were $1.03 as compared to $1.14 for the third quarter of 1994. Fluctuations within the components of earnings are discussed in the "Results of Operations". The average number of common shares outstanding were 13.7 million for the third quarter of 1995 and 13.6 million for the third quarter of 1994. The current quarterly dividend rate of $.645 is equivalent to an annual dividend rate of $2.58 per share. Dividends declared during the twelve months ended September 30, 1995 amounted to $2.57 with a dividend payout ratio of 103.21% as compared to $2.53 a year ago with a payout ratio of 94.4%. The return on average common equity for the twelve months ended September 30, 1995 was 8.99%, as compared to 9.67% for the twelve months ended September 30, 1994. Capital Resources and Liquidity At September 30, 1995, the Company and its utility subsidiaries had unsecured bank lines of credit totaling $66.5 million. The Company may borrow under the lines of credit through the issuance of promissory notes to the banks. The Company, however, utilizes such lines of credit to fully support commercial paper borrowings. The aggregate amount of borrowings through the issuance of promissory notes and commercial paper cannot exceed the aggregate lines of credit. In addition, non-utility lines of credit amounted to $25.0 million at September 30, 1995, and the non-utility subsidiaries may undertake short- term borrowings or make short-term investments. The average daily balance of short-term borrowings for the nine months ended September 30, 1995 amounted to $34.7 million at an effective interest rate of 6.7% as compared to $30.4 million at an effective interest rate of 5.8% for the same period of 1994. The level of temporary cash investments for the nine months ended September 30, 1995 increased to an average daily balance of $8.3 million at an effective interest rate of 5.8% from $8.0 million at an effective interest rate of 3.6% for the same period of 1994. The NYPSC has authorized the Company to issue up to 750,000 shares of common stock under its Dividend Reinvestment and Stock Purchase Plan ("DRP") and its Employee Stock Purchase and Dividend Reinvestment Plan ("ESPP"). At the option of the Company, however, common stock used to satisfy the requirements of the DRP and ESPP may be purchased on the open market. Effective November 1, 1994, common stock needed to satisfy the DRP and ESPP requirements is being purchased on the open market. On July 27, 1995, the New York State Energy Research and Development Authority ("NYSERDA") issued, on behalf of the Company, $44 million of variable rate Pollution Control Refunding Revenue Bonds due August 1, 2015 ("1995 Bonds"). The proceeds from the issuance of the 1995 Bonds, together with other Company funds, was used to refund, on August 20, 1995, the $44 million NYSERDA 9% Pollution Control Revenue Bonds, 1985 Series ("1985 Bonds") issued on behalf of the Company. Two issues of First Mortgage Bonds matured on August 15, 1995; Orange and Rockland Utilities, Inc., $17 million Series H, 4 7/8% and Rockland Electric Company ("RECO"), a wholly-owned utility subsidiary of the Company, $2 million Series C, 4 5/8%. Rate Activities New York Gas: On January 16, 1992, the Company filed an application for an increase in gas rates with the NYPSC. The Settlement Agreement in that case, which was approved by the NYPSC on September 30, 1992 provided, among other things, for multi-year rate adjustments through 1996 and for certain gas incentives. The second adjustment to gas rates under the Settlement Agreement, which amounted to an increase of $3.8 million or 2.5%, was to become effective on January 1, 1994. As a result of the ongoing investigation of alleged financial improprieties, however, the increase was first extended to June 30, 1994 and then further extended to December 30, 1994. On November 4, 1994, the NYPSC issued an Order terminating the Settlement Agreement effective December 31, 1994. The Order denies the Company the opportunity for rate adjustments in the third and fourth years (1995 and 1996) of the four-year Settlement Agreement. However, the Order authorizes the Company to defer the second- stage rate adjustments and all previously authorized reconciliations pertaining to periods prior to December 31, 1994, pending review and audit by the NYPSC staff and the conclusion of the NYPSC's investigation of alleged financial improprieties. In addition, on February 7, 1995, the Accounting and Finance Division of the NYPSC issued an interpretation of the November 4, 1994 termination order which stated that the gas incentive mechanism related to the attainment of certain goals is no longer available. The Company did not contest this interpretation. On October 2, 1995, the Company, the NYPSC Staff, and the New York State Consumer Protection Board, reached a settlement which resolves all outstanding issues relating to the NYPSC investigation of alleged financial improprieties. The settlement provides for, among other things, the cancellation of the second stage gas base rate increase discussed above. All deferred balances resulting from expense reconciliations and deferral of the second stage rate adjustment are to be offset with an equal amount of deferred credits resulting from certain changes to depreciation approved as part of the original multi-year rate plan. In addition, the settlement provides for the recognition in gas rates of the change in accounting required by SFAS 106 - Employee Postretirement Benefits Other Than Pension. The annual cost increase due to gas operations as a result of SFAS 106 will be offset by an equal amount of deferred depreciation credits. While a majority of the participants have settled, it is being contested by certain parties. A final NYPSC decision is expected by April 1996. Electric: On June 10, 1994, the NYPSC issued an Order (the "June Order") which terminated the Company's January 1993 electric rate increase application. The June Order provided, among other things, for a reduction in the threshold for measuring excess earnings from 12.0% to 10.6% effective retroactively to January 1, 1994. All earnings in excess of 10.6% were to be deferred for future disposition pending the conclusion of the ongoing investigation. On September 19, 1994, the Company filed an appeal with the Supreme Court of New York challenging the legality of the June Order. The appeal argues that by changing the excess earnings threshold from 12.0% to 10.6% for the first six months of 1994, the NYPSC engaged in retroactive ratemaking. The appeal also argues that there is no evidence in the record to support a determination that the cost of equity is 10.6%. This appeal will be withdrawn pursuant to a Stipulation approved by the NYPSC on August 1, 1995, as described below. On February 17, 1995, the Company submitted a compliance filing regarding the operation of the Revenue Decoupling Mechanism ("RDM"). The filing included a proposal to reduce the RDM Adjustment Factor from $7.7 million to $0 effective May 1, 1995 reflecting the completion of the recovery of an RDM undercollection applicable to the year 1993. This equates to a 2.3% annual reduction in revenue. In addition, the filing requested that a net RDM overcollection of $0.7 million for the year 1994 be retained by the Company as a future rate moderator, subject to NYPSC verification. On April 19, 1995, the NYPSC approved the proposals, and the reduction of $7.7 million in the RDM Adjustment Factor became effective on May 1, 1995. On May 25, 1995, the Company filed with the NYPSC for a decrease in electric revenues of $6.1 million to be effective April 1, 1996 (Case 95-E-0491). This equates to an overall reduction of 1.8 percent in retail rates. The filing reflects a reduction in operating expenses due to the complete recovery of Orange and Rockland Utilities, Inc.'s share of the Sterling Nuclear Project and other cost reductions. The Company proposed a multi-year rate plan covering the three-year period ending on March 31, 1999 with no base rate increases in the second and third year of the plan. The Company has proposed an overall return on capital of 9.17% with a sharing mechanism governing any return on common equity above 11.2%. On August 1, 1995, the NYPSC approved a Stipulation which provides for the early implementation of the Company's proposed annual rate reduction of $6.1 million. As a result, reduced rates became effective August 1, 1995, which will produce a revenue reduction of $3.8 million for the period August 1, 1995 - March 31, 1996. The Stipulation also increased the excess earnings threshold from 10.6% to 11.3%, with equal sharing of earnings above 11.3% between shareholders and ratepayers for the period January 1, 1995 through March 31, 1996. The revenue reduction will be offset by the deferred revenue associated with the 1994 electric earned return on equity in excess of 10.6% and the customers' share of earnings under the new sharing mechanism effective January 1, 1995. A NYPSC action regarding permanent rates is expected for rates effective April 1, 1996. The Stipulation also provides that the Company will withdraw its September 19, 1994 appeal to the Supreme Court of New York challenging the June Order. Other: On November 10, 1994, the Company filed with the NYPSC, a quantification of the rate-making effects of its ongoing investigation into prior financial improprieties. The Company requested that the NYPSC approve a refund of approximately $3.4 million to its New York electric and gas customers. This amount would be in addition to the $369,000 already refunded by the Company. This amount was charged to operations in the fourth quarter of 1994. The NYPSC then instituted a proceeding (Case 93-M-0849) to provide the opportunity for other parties, including the NYPSC Staff which was conducting an independent investigation of the Company, to be heard on this matter. On July 6, 1995, the NYPSC issued an order stating that the issues of the amount, timing and allocation of New York ratepayer refunds as a result of the investigation in Case 93-M-0849 should be considered in the context of the Company's current electric base rate case and ordered the consolidation of the two cases. On October 2, 1995, the Company, the NYPSC Staff and the New York State Consumer Protection Board reached a settlement which resolves all outstanding issues relating to the NYPSC investigation of alleged financial improprieties. The settlement provides for a total of $8.5 million in rate relief for the Company's New York customers. The amount attributable to electric operations is $6.5 million and the amount attributable to gas operations is $2.0 million. The full impact of the settlement is reflected in the Company's results of operations after recording a charge of approximately $2.2 million during the third quarter of 1995. A final NYPSC decision is expected by April 1996. The Company is unable to predict the final results of this proceeding and what modification, if any, will be made to the amount proposed to be refunded. New Jersey Under an agreement with the NJBPU to return to customers any funds found to be misappropriated or otherwise questionable as a result of its investigation of certain Company officers and former employees, RECO refunded to New Jersey ratepayers $93,000 through reductions in the applicable fuel adjustment charges in February and March 1994. In December 1994, RECO submitted a proposal to the NJBPU to refund an additional $704,000. By order dated January 27, 1995, the NJBPU approved this proposal and the refund was made in February 1995. On November 3, 1993, the NJBPU commenced its periodic management audit of RECO. The NJBPU audit included, in addition to a standard review of operating procedures, policies and practices, a review of the posture of RECO management regarding business ethics and a determination regarding the effect of such events on RECO ratepayers. The audit findings are contained in a report titled "Final Report on An Ethics Review of Rockland Electric Company" (Docket No. EA900302-48) dated December 1, 1994. The NJBPU subsequently initiated an examination of senior management appointments and changes to the composition of the Company's Board of Directors and the development of an ethics program. The results of this examination are contained in a report titled "Final Report of an Ethics Oversight Review of Rockland Electric Company". The final Management Audit, Ethics Review, and Oversight Ethics Review reports were approved by the NJBPU on July 7, 1995. The Oversight Ethics Review report acknowledges that the NJBPU has approved refunds to the Company's New Jersey customers and generally comments favorably about the changes instituted by the Company. The Company recorded an additional charge of $600,000 to operations during the third quarter of 1995. The NJBPU investigation into these matters is continuing and the Company is unable to predict what modification, if any, will be made to the amount refunded. QUARTERLY COMPARISON Earnings per average common share outstanding for the third quarter of 1995 amounted to $1.03 per share as compared to $1.14 per share for the third quarter of 1994. The results largely reflect the decrease in revenues associated with the customer refund provisions described in the Rate Activities section under the caption "Other" as well as the performance of the Company's diversified operations during the current quarter compared with the same period a year ago. Partially offsetting this, however, were higher electric sales resulting from the unusually warm summer weather, coupled with the Company's ability to reduce operating and interest expenses in its core utility business. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, decreased by $5.1 million in the third quarter of 1995 as compared to the same quarter of 1994. Electric operating revenues during the current quarter were $138.5 million as compared to $145.7 million for the third quarter of 1994, a decrease of $7.2 million. The components of the changes in electric operating revenues for the quarter ended September 30, 1995 as compared to the same quarter of 1994 are as follows: (Millions of Dollars) Retail sales: Base Revenues* $ (3.7) Fuel cost recoveries .3 Sales volume changes 5.9 Subtotal 2.5 Sales for resale (1.0) Other operating revenue: RDM revenue reconciliation and DSM incentives (4.2) Customer refund provision (3.6) Other ( .9) Total $ (7.2) *Includes miscellaneous surcharges and revenue tax recoveries. Actual total sales of electric energy to retail customers during the third quarter of 1995 were 1,310,370 megawatt hours ("Mwh"), compared with 1,242,025 Mwh during the comparable period a year ago. This increase is attributable to warmer weather, which resulted in the Company experiencing record peak demands on seven separate occasions during the summer. Before reflecting the effect of the RDM and the DSM incentives in the Company's New York jurisdiction, electric revenues associated with these sales were $147.7 million during the current quarter compared to $145.2 million during the third quarter of 1994, an increase of $2.5 million. New York electric revenue targets under the Company's RDM, as established in a base rate case, net of fuel and taxes, amounted to $67.3 million for the third quarter of 1995. In accordance with RDM procedures, deviations between revenue targets and actual sales revenue are either recovered from or returned to customers. The variation between the target revenue and the Company's actual sales revenue of $74.6 million for the third quarter of 1995 was $7.3 million, which was recorded as a reduction to revenues. In the third quarter of 1994, the Company recorded $3.2 million as a reduction to revenue. With regard to the DSM goal achievement incentives, the Company's performance during the third quarter of 1995 allowed it to record $.1 million of incentive income. In 1994 the Company recorded $.2 million for the third quarter. The Company's performance during the remainder of 1995 will determine what, if any, RDM revenue adjustments may be recorded. Revenues from sales to other utilities in the third quarter of 1995 amounted to $.4 million, a decrease of $1.0 million from a year ago. Sales to such utilities totaled 20,406 Mwh, compared with 64,500 Mwh in the third quarter a year ago. Because revenues from these sales are primarily a recovery of costs in accordance with applicable tariff regulations, they have little impact on the Company's annual earnings. Gas operating revenues during the quarter were $14.5 million compared to $12.4 million for the third quarter of 1994, an increase of $2.1 million. The components of the changes in gas operating revenues for the quarter ended September 30, 1995 as compared to the same quarter of 1994 are as follows: (Millions of Dollars) Sales to firm customers: Base revenues* $ - Gas cost recoveries ( .2) Sales volume changes - Subtotal ( .2) Sales to interruptibles 1.8 Other operating revenue .5 Total $ 2.1 * Includes miscellaneous surcharges and revenue tax recoveries. Gas sales to firm customers during the third quarter of 1995 totaled 1,556 million cubic feet ("Mmcf"), compared with 1,581 Mmcf during the same period a year ago. Gas revenues from firm customers were $11.0 million, compared with $11.2 million in the third quarter of 1994. The revenue decline results from the recovery of lower gas costs as well as the lower sales compared with the same period a year ago. Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing The cost of fuel used in the production of electricity and purchased electricity costs decreased by $.3 million during the third quarter of 1995 when compared to the same quarter of 1994. The components of the change are as follows: (Millions of Dollars) Prices paid for fuel and purchased power $ ( .6) Changes in kilowatt-hours generated or purchased .5 Deferred fuel charge ( .2) Total $ ( .3) Purchased gas costs for utility operations were $7.0 million in the third quarter of 1995 compared to $6.1 million in 1994, an increase of $.9 million. The components of the changes in purchased gas costs are as follows: (Millions of Dollars) Prices paid for gas supplies* $( .3) Gas sendout volume 6.7 Deferred fuel charges (5.5) Total $ .9 *Net of refunds received from gas suppliers. Other Operating and Maintenance Expenses The Company's total operating and maintenance expenses excluding fuel, purchased power and gas purchased for resale for the third quarter, decreased by $4.2 million compared with the same period in 1994. The decrease in expenses associated with utility operating expenses amounted to $4.8 million. The change in diversified operation and maintenance expenses was an increase of $.6 million. The decrease in other utility operation and maintenance expense is the result of a decrease in operation expenses of $3.4 million, of which $3.3 million is attributable to Demand Side Management costs, a decrease in other taxes of $.3 million and a decrease in maintenance of $1.7 million. These decreases were offset by increases in depreciation and amortization expense of $.3 million and Federal income taxes of $.3. Diversified Activities The Company's diversified activities consist of gas marketing and land development businesses conducted by wholly owned non-utility subsidiaries. Revenues from diversified activities decreased by $.9 million for the third quarter of 1995 as compared to the same quarter of 1994. The decrease in operating expenses for all diversified activities of $.1 million is the result of decreased gas purchases of $.7 million offset by increased operation expenses of $.6 million. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, increased by $.2 million during the third quarter of 1995 when compared to the same quarter of 1994. The increase is primarily the result of the lower costs associated with the litigation involving former officers and others compared to a year ago and lower interest costs. YEAR TO DATE COMPARISON Earnings per average common share outstanding for the nine months ended September 30, 1995 and 1994 both amounted to $2.31 per share. Although earnings are the same as the previous year, the results largely reflect the decrease in revenues associated with the customer refund provisions described in the Rate Activities section under the caption "Other" as well as the adverse performance of the Company's diversified operations during the current year compared with last year. Partially offsetting this were higher electric sales resulting from the unusually warm summer weather, coupled with the Company's ability to reduce operating and interest expenses in its core utility business. Additionally, the current period earnings reflect the impact of the gain realized from the formation of the NORSTAR Partnership and lower investigation and litigation costs. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, decreased by $46.7 million for the first nine months of 1995 as compared to the same period of 1994. Electric operating revenues during the current period were $355.6 million as compared to $376.6 million for the comparable period of 1994, a decrease of $21.0 million. The components of the changes in electric operating revenues for the nine months ended September 30, 1995 as compared to the same period in 1994 were as follows: (Millions of Dollars) Retail sales: Base rates* $(8.9) Fuel cost recoveries (5.4) Sales volume changes 4.4 Subtotal (9.9) Sales for resale (4.6) Other operating revenues: RDM revenue reconciliation and DSM incentives (2.3) Customer refund provision (3.6) Other ( .6) Total $(21.0) *Includes miscellaneous surcharges and revenue tax recoveries. Actual total sales of electric energy to retail customers during the first nine months of 1995 were 3,446,899 Mwh, compared with 3,392,044 Mwh during the comparable period a year ago. Before reflecting the effect of the RDM and the DSM incentives in the Company's New York jurisdiction, electric revenue associated with these sales was $366.2 million during the current period compared to $376.1 million during the first nine months of 1994, a decrease of $9.9 million. New York electric revenue targets under the Company's RDM, as established in a base rate case, amounted to $169.3 million for the first nine months of 1995. In accordance with RDM procedures, deviations between revenue targets and actual sales revenue are either recovered from or returned to customers. The variation between the target revenue and the Company's actual sales revenue of $180.4 million for the first nine months of 1995 was $11.1 million, which is recorded as a reduction to revenue. For the first nine months of 1994, the Company recorded a reduction in revenues of $8.8 million. With regard to the DSM goal achievement incentives provided for in the RDM agreement, the Company's performance during the first nine months of 1995 and 1994 allowed it to record $.3 million of incentive related revenues. The Company's performance during the remainder of 1995 will determine what, if any, additional RDM revenue adjustments may be recorded. Revenues from sales to other utilities in the first nine months of 1995 amounted to $1.6 million compared to $6.2 million a year ago. Such sales totaled 84,910 Mwh compared with 238,675 Mwh in the first nine months of 1994. Because revenues from these sales are primarily a recovery of costs in accordance with applicable tariff regulations, they have little impact on the Company's annual earnings. Gas operating revenues during the first nine months of 1995 were $93.9 million compared to $119.6 million for the first nine months of 1994, a decrease of $25.7 million. The components of the changes in gas operating revenues for the nine months ended September 30, 1995 as compared to the same period in 1994 are as follows: (Millions of Dollars) Sales to firm customers: Base rates* $ 2.0 Gas cost recoveries (23.6) Sales volume changes (5.4) Subtotal (27.0) Sales to interruptibles - Sales for resale (.1) Other operating revenue 1.4 Total $(25.7) *Includes miscellaneous surcharges and revenue tax recoveries. Firm gas sales amounted to 13,268 Mmcf during the first nine months of 1995, a decrease of 11.2% from the 1994 level of 14,937 Mmcf. Gas revenues from firm customers were $85.9 million in the current period compared to $112.9 million during the first nine months of 1994. Sales of interruptible gas for the first nine months of 1995 amounted to 1,273 mcf, an increase of 440 Mmcf from 1994. Revenues from these sales were $3.5 million for 1995 and 1994. Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing The cost of fuel used in the production of electricity and purchased electricity costs decreased by $10.3 million for the first nine months of 1995 when compared to the $105.3 million recorded during the same period of 1994. The components of the changes in electric energy costs are as follows: (Millions of Dollars) Prices paid for fuel and purchased power $( 5.0) Changes in kilowatt-hours generated or purchased ( 3.4) Deferred fuel charge ( 1.9) Total $(10.3) Purchased gas costs for utility operations, excluding the cost of gas purchased for the Company's diversified activities which is discussed in this year-to-date comparison under the heading "Diversified Activities", were $47.6 million for the first nine months of 1995 compared to $71.3 million for the comparable period of 1994. The components of the change are as follows: (Millions of Dollars) Prices paid for gas suppliers* $( 7.9) Gas sendout volume ( 5.0) Deferred fuel charges (10.8) Total $(23.7) *Net of refunds received from gas suppliers Other Operating and Maintenance Expenses The Company's total operation and maintenance expenses excluding fuel, purchased power and gas purchased for resale, decreased by $10.3 million compared to a year ago. Expenses from Diversified Activities increased $.2 million as described below. The decrease associated with utility operations was $10.5 million. The decrease in other utility operation and maintenance expense is the result of a decrease in operation expenses of $9.5 million, which is attributable to Demand Side Management costs, a decrease in other taxes of $1.7 million and a decrease in maintenance costs of $1.5 million. These decreases were offset by increases in depreciation and amortization of $1.0 million and Federal income taxes of $1.2 million. Diversified Activities Revenues from diversified activities increased by $77.6 million for the first nine months of 1995 as compared to the same period of 1994. The increase is primarily the result of increased sales from gas marketing activities. While revenues from gas marketing activities were significantly higher during the first nine months of 1995 as compared to the first nine months of 1994, an extremely competitive market resulted in narrower profit margins during the current period. However, diversified earnings were enhanced by a $2.9 million gain realized as a result of the formation of the NORSTAR Partnership. These revenues were offset by increases in operating expenses for all diversified activities of $82.0 million, which is the result of increased gas purchases of $81.8 million and an increase in depreciation, taxes and other operating expenses of $.2 million. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, increased by $6.6 million during the first nine months of 1995 when compared to the first nine months of 1994. This increase is primarily the result of the lower costs of the investigation and litigation involving former officers and others, as well as the impact of the gain realized on the formation of the NORSTAR Partnership and lower interest rates. PART II. OTHER INFORMATION Item 1. Legal Proceedings Reference is made to Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and to Part II, Item 1, Legal Proceedings, in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 for a description of a criminal action brought against James F. Smith, a former Director and former Chief Executive Officer of the Company, by the Rockland County (New York) District Attorney. As noted therein, a Rockland County Grand Jury indictment charged Mr. Smith with 15 felony counts of grand larceny, seven counts of falsifying business records and two misdemeanor counts of petit larceny. On August 15, 1995, Mr. Smith was acquitted of the charges in a non-jury trial. In a related matter, the Company was served on September 19, 1995 with an Amended Summons and First Amended Complaint in an action filed in the United States District Court for the Southern District of New York by James F. Smith. Named defendants are former Rockland County District Attorney Kenneth Gribetz, the Office of the Rockland County District Attorney, the Company, "John and Jane Does" (identified in the complaint as certain directors of the Company and/or members of the Special Committee of the Board and referred to in the Complaint as the "Defendant Directors"), Edwin Stier and Stier, Anderson & Malone. In the Complaint, Mr. Smith alleges the following three causes of action: (i) the violation by Mr. Gribetz and the District Attorney's office of Mr. Smith's federal constitutional rights to fair trial and due process of law; (ii) malicious prosecution by the Company, Defendant Directors and Mr. Stier in that these defendants caused the arrest and criminal prosecution of Mr. Smith; and (iii) abuse of process by the Company, Defendant Directors and Mr. Stier in that they were responsible for the arrest, indictment and prosecution of Mr. Smith. Mr. Smith seeks $25 million in damages, special damages and punitive damages, attorney fees and other costs on each count. A scheduling conference has been set for November 9, 1995 before Judge William C. Conner. Regulatory Matters: NYPSC Report on Investigation Reference is made to Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and to Part II, Item 1, Legal Proceedings, in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 for background on the New York Public Service Commission ("NYPSC") proceeding investigating the operations and management of the Company. On October 2, 1995, the Company, NYPSC Staff and the New York State Consumer Protection Board reached a settlement regarding all outstanding issues relative to the NYPSC investigation of alleged financial improprieties. The Company is unable to predict the final results of this proceeding and what modification, if any, will be made to the amount proposed to be refunded. Further information regarding the proposed settlement is contained under the caption "Rate Activities" in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations of this quarterly report on Form 10-Q. NJBPU Report on Investigation Reference is made to Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 and to Part II, Item 1, Legal Proceedings, in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 for background on the NJBPU proceeding investigating the operations and management of RECO. Further information regarding the NJBPU investigation and audit is contained under the caption "Rate Activities" in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations of this quarterly report on Form 10-Q. New York Electric Base Rate Case Reference is made to the information contained under the caption "Rate Activities" in Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, of this Quarterly Report on Form 10-Q for background on the Company's electric base rate case filed with the NYPSC (Case 95-E-0491) on May 25, 1995. Cross-examination in this case is scheduled for the week of November 8, 1995. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.31 Letter agreement dated September 21, 1995 between Orange and Rockland Utilities, Inc. and Nancy M. Jakobs regarding participation in the Officer's Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. 10.32 Severance Agreement dated October 18, 1995 between Orange and Rockland Utilities, Inc. and D. Louis Peoples. 10.33 Severance Agreement dated October 18, 1995 between Orange and Rockland Utilities, Inc. and R. Lee Haney. 10.34 Severance Agreement dated October 18, 1995 between Orange and Rockland Utilities, Inc. and G. D. Caliendo. 10.35 Severance Agreement dated October 18, 1995 between Orange and Rockland Utilities, Inc. and Nancy M. Jakobs. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ORANGE AND ROCKLAND UTILITIES, INC. (Registrant) Date: November 13, 1995 By ROBERT J. MCBENNETT Robert J. McBennett Treasurer and Controller Date: November 13, 1995 By JOHN T. FINNEGAN John T. Finnegan Assistant Treasurer 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, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 SEP-30-1995 PER-BOOK 865,378 18,999 221,366 225,035 0 1,330,778 68,268 127,489 188,859 384,616 2,774 43,253 359,757 10,474 0 34,300 184 1,384 0 407 493,629 1,330,778 789,112 22,262 710,225 732,487 56,625 1,383 58,008 24,173 33,835 2,353 31,482 26,282 20,501 55,806 2.31 0
EX-10.31 3 September 21, 1995 Ms. Nancy M. Jakobs 79 Burda Avenue New City, NY 10956 Dear Ms. Jakobs: In connection with and as part of the consideration for your retention by Orange and Rockland Utilities, Inc. and election as Vice President - Human Resources, the Board wishes to enter into this letter agreement concerning your participation in the Officer's Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. (the "Plan"). Upon your election as an officer, you became a participant in the Plan and your participation was governed in all respects by the terms of the Plan, except to the extent specifically provided otherwise as follows: 1. Upon your participation in the Plan, you shall be treated as having satisfied the five years of Service as an Officer requirement for purposes of eligibility for a Vested Retirement Allowance, other Retirement Allowances and Death Allowance protection, but not for the purpose of the calculation of the amount of any such Allowance. 2. For each of the first five years of Service you complete under the Plan, you will receive credit under the Plan for two years of Service. Accordingly, at the end of 1995, you will have credit for two years of Service under the Plan. If you complete a year of Service under the Plan in 1996, you will then have four years of Service under the Plan, and so on through 1999. Thereafter, you will be credited with one year of Service under the Plan for each year of Service you complete under the Plan in accordance with its terms. 3. Because at that time you will be considered to have completed eleven years of Service under the Plan, once Ms. Nancy M. Jakobs September 21, 1995 Page 2 you have actually completed six years of Service under the Plan, in accordance with Section 2 (B) of the Plan, your compensation covered by the Plan shall include a portion of your corporate performance based annual award declared under the Annual Incentive Plan provisions of the Company's Incentive Compensation Plan. 4. In the event your Final Average Compensation must be determined at such time when you have not been an Officer covered by the Plan for 36 months, your Final Average Compensation shall be computed by taking the sum of your compensation (on a monthly basis) covered by the Plan for each month you are an Officer covered by the Plan and dividing the sum by that number of months. In all other respects, the terms of the Plan shall be applicable with respect to your participation and benefit under the Plan. Please indicate your acceptance of this letter agreement by signing the extra copy provided and returning it to me. __/s/ D. L. Peoples____ D. Louis Peoples Vice Chairman and Chief Executive Officer I accept the foregoing letter agreement concerning my participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. and evidence my acceptance by setting forth my signature this _22nd_ day of _September________, 1995. WITNESS: /s/ Susan M. Gregg___________ _/s/Nancy M. Jakobs___ Nancy M. Jakobs EX-10.32 4 ORANGE AND ROCKLAND UTILITIES, INC. SEVERANCE AGREEMENT THIS AGREEMENT, effective this 18th day of October , 1995, by and between Orange and Rockland Utilities, Inc. (the "Company") and D. Louis Peoples (the "Employee"). W I T N E S S E T H T H A T: WHEREAS, the Employee is an integral part of the Company's management who participates in the decision making process relative to planning and policy for the Company; WHEREAS, the Company wishes to encourage the employee to continue his services with the Company for the period during and after an actual or threatened Change in Control; WHEREAS, the Board of Directors of the Company, at its meeting on July 14, 1994, determined that it would be in the best interests of the Company and its share- holders to assure continuity in the management of the Company's administration and operations in the event of a Change in Control by entering into a severance agreement with the Employee; and WHEREAS, the Company has previously entered into letter agreements with the Employee dated July 14, 1994, September 29, 1994 and April 6, 1995 (the "Letter Agreements"); NOW THEREFORE, it is hereby agreed by and between the parties hereto as follows: 1. Definitions. "Board" shall mean the Board of Directors of the Company. "Cause" shall mean (a) the Employee's convic- tion of a felony or (b) the Employee's fraud or dishon- esty which has resulted or is likely to result in materi- al economic damage to the Company, as determined in good faith by a vote of 2/3 of the non-employee directors of the Company at a meeting of the Board of Directors at which the Employee is provided an opportunity to be heard. "Change in Control": shall mean: (i) either (A) receipt by the Company of a report on Schedule 13D, or an amendment to such a report, filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act") disclosing that any person, group, corporation or other entity is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company or (B) actual knowledge by the Company of facts, on the basis of which any Person is required to file such a report on Schedule 13D, or an amendment to make such a report, with the SEC (or would be required to file such a report or amendment upon the lapse of the applicable period of time specified in Section 13(d) of the 1934 Act) disclosing that such Person is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the out- standing stock of the Company; (ii) purchase by any person (as defined in Section 13(d) of the 1934 Act), corporation or other entity, other than the Company or a wholly-owned subsid- iary of the Company, of shares pursuant to a tender or exchange offer to acquire any stock of the Company (or securities convertible into stock) for cash, securities or any other consideration provided that, after consumma- tion of the offer, such person, group, corporation or other entity is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock); (iii) approval by the stockholders of the Company of (a) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of stock of the Company would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which holders of its stock immediately prior to the consolidation or merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger as immediately before, or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (iv) a change in the majority of the members of the Board within a 24-month period unless the election or nomination for election by the Company's stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 24-month period. "Good Reason" shall mean a determination by the Employee in good faith that there has been any (i) material change by the Company of the Employee's func- tions, duties or responsibilities which change would cause the Employee's position with the Company to become of less dignity, responsibility, importance, prestige or scope including, without limitation, the assignment to the Employee of duties and responsibilities inconsistent with his positions; (ii) assignment or reassignment by the Company of the Employee without the Employee's con- sent, to another place of employment more that 50 miles from the Employee's current place of employment; (iii) liquidation, dissolution, consolidation or merger of the Company which has not been approved by a majority of those members of the Board who were members of the Board prior to the Change in Control, or transfer of all or substantially all of its assets, other than a transaction or series of transactions in which the resulting or surviving transferee entity has, in the aggregate, a net worth at least equal to that of the Company and assumes this Agreement and all obligations and undertakings of the Company hereunder; or (iv) reduction in the Employee's total compensation or any component thereof; by written notice to the Company, specifying the event relied upon for such termination and given at any time within 6 months after the occurrence of such event. 2. Term. This Agreement shall be effective as of the date above written and shall continue thereafter for a period of 24 full calendar months following the date of an occurrence of a Change in Control. 3. Severance Benefit. a. In the event of any termination of the Employee's employment hereunder at any time during the 24-month period immediately following a Change in Control (x) by the Employee for Good Reason, or (y) by the Company for any reason other than Cause, then, within 5 business days after any such termination, the Company shall pay to the Employee or the estate of the Employee as severance pay, a lump sum cash amount equal to three times the Employee's "base amount" as defined and deter- mined under section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), less one dollar ("2.99 times the base amount"). b. For a period of 24 months (commencing with the month in which termination of employment as de- scribed in paragraph 3a above shall have occurred), the Employee shall be entitled to all benefits under the Company's welfare benefit plans as if the Employee were still employed during such period, at the same level of benefits as existed immediately prior to the Change in Control, and if and to the extent that such benefits shall not be payable or provided under any such plan, the Company shall pay or provide such benefits on an individ- ual basis. The benefits provided in accordance with this paragraph 3b shall be secondary to any comparable bene- fits provided by another employer. c. From and after the occurrence of a Change in Control (as defined in the Officers' Supplemen- tal Retirement Plan of Orange and Rockland Utilities, Inc. as Amended and Restated (the "SERP")), notwithstand- ing any provision of the SERP to the contrary, (i) the Benefit Formula Percentage applicable to the Employee under the SERP shall be deemed to be 70% and (ii) the Employee shall be treated as having completed 20 years of Service for purposes of Section 2(8) of the SERP. Not- withstanding any provision of the SERP to the contrary, upon the termination of the Employee's employment by the Employee for Good Reason (as defined in the SERP) or by the Company, in either case at any time following the occurrence of a Change in Control (as defined in the SERP), the Employee shall be deemed to have satisfied all of the requirements for a Normal Retirement Allowance pursuant to Section 6(D) of the SERP and the Employee shall, accordingly, be entitled to commence receipt of such Normal Retirement Allowance, without reduction on account of his age, immediately following such termina- tion of employment. d. Notwithstanding anything else herein to the contrary, to the extent that the Employee is entitled to receive severance payments from another Company severance plan, arrangement or program, the pay- ments to be made pursuant to paragraph 3a hereof shall be correspondingly reduced before implementation of para- graph e below, and, if necessary, the Employee shall make an appropriate refund to the Employer without interest. e. If Independent Tax Counsel shall determine that the aggregate payments made to the Employ- ee pursuant to paragraphs 3a, b and c above and any other payments to the Employee from the Company which consti- tute "parachute payments" as defined in section 280G of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor thereto) ("Parachute Payments") would be subject to the excise tax imposed by section 4999 of the Code (the "Excise Tax"), then the lump sum cash payment payable to the Employee under paragraph 3a above shall be reduced to an amount and to the extent necessary so that such payment would not be subject to the Excise Tax. Notwithstanding the preceding sentence, in the event of a Change in Control that occurs prior to January 1, 1999, the Employee shall be entitled to all payments under paragraphs 3a, b and c above and any other Parachute Payments unless the total of such payments, after giving effect to the Excise Tax, is less than the amount to which the Employee would have been entitled under the preceding sentence. For purposes of this para- graph 3e, "Independent Tax Counsel" shall mean a lawyer with expertise in the area of executive compensation tax law, who shall be selected by the Employee and shall be reasonably acceptable to the Company, and whose fees and disbursements shall be paid by the Company. f. If it is established pursuant to a final determination of a court or a final Internal Reve- nue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Agreement, any part of the aggregate pay- ments paid to the Employee under this Agreement consti- tutes an "excess parachute payment" for purposes of sections 280G and 4999 of the Code, then the amount equal to the excess shall be deemed for all purposes to be a loan from the Company to the Employee made on the date of receipt. The Employee shall have an obligation to repay such loan to the Company within six months of demand, together with interest thereon at the lowest applicable Federal rate (as defined in section 1274(d) of the Code) from the date of the Employee's receipt until the date of such repayment. If it is determined for any reason that the amount described in paragraph a or b above in incor- rectly calculated or reduced, the Company shall pay to the Employee the increased amount, if any, necessary so that, after such an adjustment, the Employee shall have received or be entitled to receive the maximum payments that he may receive without any such payment constituting an "excess parachute payment." 4. Source of Payments. All payments provided for in paragraph 3 above shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Employ- ee or his or her dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the Employee shall have no right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and the Employee or any other person. To the extent that any person acquires a right to receive payments from the Company such right shall be no greater than the right of an unsecured creditor of the Company. 5. Litigation Expenses; Arbitration. a. In the event of any litigation or other proceeding between the Company and the Employee with respect to the subject matter of this Agreement and the enforcement of rights hereunder, the Company shall reimburse the Employee for all reasonable costs and expenses relating to such litigation or other proceeding as they are incurred, including reasonable attorneys fees and expenses, regardless of whether such litigation results in any settlement or judgment or order in favor of any party; provided, however, that any claim or action initiated by the Employee relating to this Agreement shall have been made or brought after reasonable inquiry and shall be well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. The obligation of the Company under this paragraph 5 shall survive the termination for any reason of this Agreement (whether such termination is by the Company, by the Employee, upon the expiration of this Agreement or otherwise). b. In the event of any dispute or dif- ference between the Company and the Employee with respect to the subject matter of this Agreement and the enforce- ment of rights hereunder, the Employee may, in his or her sole discretion by notice to the Company, require such dispute or difference to be submitted to arbitration. The arbitrator or arbitrators shall be selected by agree- ment of the parties or, if they cannot agree on an arbi- trator or arbitrators within 30 days after the Employee had notified the Company of his or her desire to have the question settled by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") in New York, New York upon the application of the Employee. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. Execution of the determination by such arbitrator may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evi- dence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. Unless otherwise agreed by the parties, any such arbitration shall take place in New York, New York, and shall be conducted in accordance with the Rules of AAA. 6. Income Tax Withholding. The Company may withhold from any payments made under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or govern- mental regulation or ruling. 7. Entire Understanding. This Agreement contains the entire understand- ing between the Company and the Employee with respect to the subject matter hereof, i.e., benefits payable to the Employee upon termination of employment following a Change in Control, and supersedes any prior severance agreement between the Company and the Employee, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Employee of any kind elsewhere provided and not expressly provided for in this Agreement and this Agreement shall not super- sede the Letter Agreements entered into on July 14, 1994 and September 29, 1994. 8. Severability. If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unen- forceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so inval- id, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law continue in full force and effect. If this Agreement is held invalid or cannot be enforced, then to the full extent permitted by law any prior agreement between the Company and the Employee shall be deemed reinstated as if this Agreement had not been executed. 9. Consolidation, Merger, or Sale of Assets. If the Company consolidates or merges into or with, or transfers all or substantially all of its assets to, another corporation with a net worth at least equal to that of the Company and which assumes this Agreement and all obligations and undertakings of the Company hereunder, the term "the Company," as used herein shall mean such other corporation and this Agreement shall continue in full force and effect. 10. Notices. All notices, requests, demands and other commu- nications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class, if to the Employee to the address shown in the personnel re- cords of the Company and, if to the Company, as follows: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: Vice President and General Counsel or to such other address as either party shall have previously specified in writing to the other. 11. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to antici- pation, commutation, alienation, sale assignment, encum- brance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involun- tary, to effect any such action shall be null, void and of no effect. 12. Binding Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, the Employee and the Company and their respective permitted successors and assigns. 13. Modification and Waiver. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any es- toppel against the enforcement of any provision of this Agreement except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condi- tion for the future or as to any act other than that specifically waived. 14. Headings of No Effect. The paragraph headings contained in this Agree- ment are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement. 15. Governing Law. This Agreement and its validity, interpreta- tion, performance, and enforcement shall be governed by the laws of the State of New York without giving effect to the choice of law provisions in effect in such State. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized, and the Employee has signed this Agreement, all effective as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By: /s/James O'Grady, Jr. Chairman, Compensation Committee /s/D.L. Peoples D. Louis Peoples EX-10.33 5 ORANGE AND ROCKLAND UTILITIES, INC. SEVERANCE AGREEMENT THIS AGREEMENT, effective this 18th day of October , 1995, by and between Orange and Rockland Utilities, Inc. (the "Company") and R. Lee Haney (the "Employee"). W I T N E S S E T H T H A T: WHEREAS, the Employee is an integral part of the Company's management who participates in the decision making process relative to planning and policy for the Company; WHEREAS, the Company wishes to encourage the employee to continue his services with the Company for the period during and after an actual or threatened Change in Control; WHEREAS, the Board of Directors of the Company, at its meeting on September 8, 1994, determined that it would be in the best interests of the Company and its shareholders to assure continuity in the management of the Company's administration and operations in the event of a Change in Control by entering into a severance agreement with the Employee; and WHEREAS, the Company has previously entered into letter agreements with the Employee dated September 2, 1994 and September 29, 1994 (the "Letter Agreements"); NOW THEREFORE, it is hereby agreed by and between the parties hereto as follows: 1. Definitions. "Board" shall mean the Board of Directors of the Company. "Cause" shall mean (a) the Employee's convic- tion of a felony or (b) the Employee's fraud or dishon- esty which has resulted or is likely to result in materi- al economic damage to the Company, as determined in good faith by a vote of 2/3 of the non-employee directors of the Company at a meeting of the Board of Directors at which the Employee is provided an opportunity to be heard. "Change in Control": shall mean: (i) either (A) receipt by the Company of a report on Schedule 13D, or an amendment to such a report, filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act") disclosing that any person, group, corporation or other entity is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company or (B) actual knowledge by the Company of facts, on the basis of which any Person is required to file such a report on Schedule 13D, or an amendment to make such a report, with the SEC (or would be required to file such a report or amendment upon the lapse of the applicable period of time specified in Section 13(d) of the 1934 Act) disclosing that such Person is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the out- standing stock of the Company; (ii) purchase by any person (as defined in Section 13(d) of the 1934 Act), corporation or other entity, other than the Company or a wholly-owned subsid- iary of the Company, of shares pursuant to a tender or exchange offer to acquire any stock of the Company (or securities convertible into stock) for cash, securities or any other consideration provided that, after consumma- tion of the offer, such person, group, corporation or other entity is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock); (iii) approval by the stockholders of the Company of (a) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of stock of the Company would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which holders of its stock immediately prior to the consolidation or merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger as immediately before, or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (iv) a change in the majority of the members of the Board within a 24-month period unless the election or nomination for election by the Company's stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 24-month period. "Good Reason" shall mean a determination by the Employee in good faith that there has been any (i) material change by the Company of the Employee's func- tions, duties or responsibilities which change would cause the Employee's position with the Company to become of less dignity, responsibility, importance, prestige or scope including, without limitation, the assignment to the Employee of duties and responsibilities inconsistent with his positions; (ii) assignment or reassignment by the Company of the Employee without the Employee's con- sent, to another place of employment more that 50 miles from the Employee's current place of employment; (iii) liquidation, dissolution, consolidation or merger of the Company which has not been approved by a majority of those members of the Board who were members of the Board prior to the Change in Control, or transfer of all or substantially all of its assets, other than a transaction or series of transactions in which the resulting or surviving transferee entity has, in the aggregate, a net worth at least equal to that of the Company and assumes this Agreement and all obligations and undertakings of the Company hereunder; or (iv) reduction in the Employee's total compensation or any component thereof; by written notice to the Company, specifying the event relied upon for such termination and given at any time within 6 months after the occurrence of such event. 2. Term. This Agreement shall be effective as of the date above written and shall continue thereafter for a period of 24 full calendar months following the date of an occurrence of a Change in Control. 3. Severance Benefit. a. In the event of any termination of the Employee's employment hereunder at any time during the 24-month period immediately following a Change in Control (x) by the Employee for Good Reason, or (y) by the Company for any reason other than Cause, then, within 5 business days after any such termination, the Company shall pay to the Employee or the estate of the Employee as severance pay, a lump sum cash amount equal to three times the Employee's "base amount" as defined and deter- mined under section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), less one dollar ("2.99 times the base amount"). b. For a period of 24 months (commencing with the month in which termination of employment as de- scribed in paragraph 3a above shall have occurred), the Employee shall be entitled to all benefits under the Company's welfare benefit plans as if the Employee were still employed during such period, at the same level of benefits as existed immediately prior to the Change in Control, and if and to the extent that such benefits shall not be payable or provided under any such plan, the Company shall pay or provide such benefits on an individ- ual basis. The benefits provided in accordance with this paragraph 3b shall be secondary to any comparable bene- fits provided by another employer. c. From and after the occurrence of a Change in Control (as defined in the Officers' Supplemen- tal Retirement Plan of Orange and Rockland Utilities, Inc. as Amended and Restated (the "SERP")), notwithstand- ing any provision of the SERP to the contrary, (i) the Benefit Formula Percentage applicable to the Employee under the SERP shall be deemed to be the greater of (a) the Benefit Formula Percentage determined under the SERP and (b) 40% and (ii) for purposes of Section 2(8) of the SERP, the Employee shall be treated as having completed a number of years of Service equal to the greater of (a) the number of years of Service determined under the SERP and (b) 10. d. Notwithstanding anything else herein to the contrary, to the extent that the Employee is entitled to receive severance payments from another Company severance plan, arrangement or program, the pay- ments to be made pursuant to paragraph 3a hereof shall be correspondingly reduced before implementation of para- graph e below, and, if necessary, the Employee shall make an appropriate refund to the Employer without interest. e. If Independent Tax Counsel shall determine that the aggregate payments made to the Employ- ee pursuant to paragraphs 3a, b and c above and any other payments to the Employee from the Company which consti- tute "parachute payments" as defined in section 280G of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor thereto) ("Parachute Payments") would be subject to the excise tax imposed by section 4999 of the Code (the "Excise Tax"), then the lump sum cash payment payable to the Employee under paragraph 3a above shall be reduced to an amount and to the extent necessary so that such payment would not be subject to the Excise Tax. Notwithstanding the preceding sentence, in the event of a Change in Control that occurs prior to January 1, 2000, the Employee shall be entitled to all payments under paragraphs 3a, b and c above and any other Parachute Payments unless the total of such payments, after giving effect to the Excise Tax, is less than the amount to which the Employee would have been entitled under the preceding sentence. For purposes of this para- graph 3e, "Independent Tax Counsel" shall mean a lawyer with expertise in the area of executive compensation tax law, who shall be selected by the Employee and shall be reasonably acceptable to the Company, and whose fees and disbursements shall be paid by the Company. f. If it is established pursuant to a final determination of a court or a final Internal Reve- nue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Agreement, any part of the aggregate pay- ments paid to the Employee under this Agreement consti- tutes an "excess parachute payment" for purposes of sections 280G and 4999 of the Code, then the amount equal to the excess shall be deemed for all purposes to be a loan from the Company to the Employee made on the date of receipt. The Employee shall have an obligation to repay such loan to the Company within six months of demand, together with interest thereon at the lowest applicable Federal rate (as defined in section 1274(d) of the Code) from the date of the Employee's receipt until the date of such repayment. If it is determined for any reason that the amount described in paragraph a or b above in incor- rectly calculated or reduced, the Company shall pay to the Employee the increased amount, if any, necessary so that, after such an adjustment, the Employee shall have received or be entitled to receive the maximum payments that he may receive without any such payment constituting an "excess parachute payment." 4. Source of Payments. All payments provided for in paragraph 3 above shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Employ- ee or his or her dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the Employee shall have no right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and the Employee or any other person. To the extent that any person acquires a right to receive payments from the Company such right shall be no greater than the right of an unsecured creditor of the Company. 5. Litigation Expenses; Arbitration. a. In the event of any litigation or other proceeding between the Company and the Employee with respect to the subject matter of this Agreement and the enforcement of rights hereunder, the Company shall reimburse the Employee for all reasonable costs and expenses relating to such litigation or other proceeding as they are incurred, including reasonable attorneys fees and expenses, regardless of whether such litigation results in any settlement or judgment or order in favor of any party; provided, however, that any claim or action initiated by the Employee relating to this Agreement shall have been made or brought after reasonable inquiry and shall be well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. The obligation of the Company under this paragraph 5 shall survive the termination for any reason of this Agreement (whether such termination is by the Company, by the Employee, upon the expiration of this Agreement or otherwise). b. In the event of any dispute or dif- ference between the Company and the Employee with respect to the subject matter of this Agreement and the enforce- ment of rights hereunder, the Employee may, in his or her sole discretion by notice to the Company, require such dispute or difference to be submitted to arbitration. The arbitrator or arbitrators shall be selected by agree- ment of the parties or, if they cannot agree on an arbi- trator or arbitrators within 30 days after the Employee had notified the Company of his or her desire to have the question settled by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") in New York, New York upon the application of the Employee. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. Execution of the determination by such arbitrator may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evi- dence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. Unless otherwise agreed by the parties, any such arbitration shall take place in New York, New York, and shall be conducted in accordance with the Rules of AAA. 6. Income Tax Withholding. The Company may withhold from any payments made under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or govern- mental regulation or ruling. 7. Entire Understanding. This Agreement contains the entire understand- ing between the Company and the Employee with respect to the subject matter hereof, i.e., benefits payable to the Employee upon termination of employment following a Change in Control, and supersedes any prior severance agreement between the Company and the Employee, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Employee of any kind elsewhere provided and not expressly provided for in this Agreement and this Agreement shall not super- sede the Letter Agreements. 8. Severability. If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unen- forceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so inval- id, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law continue in full force and effect. If this Agreement is held invalid or cannot be enforced, then to the full extent permitted by law any prior agreement between the Company and the Employee shall be deemed reinstated as if this Agreement had not been executed. 9. Consolidation, Merger, or Sale of Assets. If the Company consolidates or merges into or with, or transfers all or substantially all of its assets to, another corporation with a net worth at least equal to that of the Company and which assumes this Agreement and all obligations and undertakings of the Company hereunder, the term "the Company," as used herein shall mean such other corporation and this Agreement shall continue in full force and effect. 10. Notices. All notices, requests, demands and other commu- nications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class, if to the Employee to the address shown in the personnel re- cords of the Company and, if to the Company, as follows: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: Vice President and General Counsel or to such other address as either party shall have previously specified in writing to the other. 11. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to antici- pation, commutation, alienation, sale assignment, encum- brance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involun- tary, to effect any such action shall be null, void and of no effect. 12. Binding Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, the Employee and the Company and their respective permitted successors and assigns. 13. Modification and Waiver. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any es- toppel against the enforcement of any provision of this Agreement except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condi- tion for the future or as to any act other than that specifically waived. 14. Headings of No Effect. The paragraph headings contained in this Agree- ment are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement. 15. Governing Law. This Agreement and its validity, interpreta- tion, performance, and enforcement shall be governed by the laws of the State of New York without giving effect to the choice of law provisions in effect in such State. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized, and the Employee has signed this Agreement, all effective as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By: /s/James O'Grady, Jr. Chairman, Compensation Committee /s/R. Lee Haney R. Lee Haney EX-10.34 6 ORANGE AND ROCKLAND UTILITIES, INC. SEVERANCE AGREEMENT THIS AGREEMENT, effective this 18th day of October , 1995, by and between Orange and Rockland Utilities, Inc. (the "Company") and G.D. Caliendo (the "Employee"). W I T N E S S E T H T H A T: WHEREAS, the Employee is an integral part of the Company's management who participates in the decision making process relative to planning and policy for the Company; WHEREAS, the Company wishes to encourage the employee to continue his services with the Company for the period during and after an actual or threatened Change in Control; WHEREAS, the Board of Directors of the Company, at its meeting on March 2, 1995, determined that it would be in the best interests of the Company and its share- holders to assure continuity in the management of the Company's administration and operations in the event of a Change in Control by entering into a severance agreement with the Employee; and WHEREAS, the Company has previously entered into letter agreements with the Employee dated February 16, 1995, and April 6, 1995 (the "Letter Agreements"); NOW THEREFORE, it is hereby agreed by and between the parties hereto as follows: 1. Definitions. "Board" shall mean the Board of Directors of the Company. "Cause" shall mean (a) the Employee's convic- tion of a felony or (b) the Employee's fraud or dishon- esty which has resulted or is likely to result in materi- al economic damage to the Company, as determined in good faith by a vote of 2/3 of the non-employee directors of the Company at a meeting of the Board of Directors at which the Employee is provided an opportunity to be heard. "Change in Control": shall mean: (i) either (A) receipt by the Company of a report on Schedule 13D, or an amendment to such a report, filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act") disclosing that any person, group, corporation or other entity is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company or (B) actual knowledge by the Company of facts, on the basis of which any Person is required to file such a report on Schedule 13D, or an amendment to make such a report, with the SEC (or would be required to file such a report or amendment upon the lapse of the applicable period of time specified in Section 13(d) of the 1934 Act) disclosing that such Person is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the out- standing stock of the Company; (ii) purchase by any person (as defined in Section 13(d) of the 1934 Act), corporation or other entity, other than the Company or a wholly-owned subsid- iary of the Company, of shares pursuant to a tender or exchange offer to acquire any stock of the Company (or securities convertible into stock) for cash, securities or any other consideration provided that, after consumma- tion of the offer, such person, group, corporation or other entity is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock); (iii) approval by the stockholders of the Company of (a) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of stock of the Company would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which holders of its stock immediately prior to the consolidation or merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger as immediately before, or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (iv) a change in the majority of the members of the Board within a 24-month period unless the election or nomination for election by the Company's stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 24-month period. "Good Reason" shall mean a determination by the Employee in good faith that there has been any (i) material change by the Company of the Employee's func- tions, duties or responsibilities which change would cause the Employee's position with the Company to become of less dignity, responsibility, importance, prestige or scope including, without limitation, the assignment to the Employee of duties and responsibilities inconsistent with his positions; (ii) assignment or reassignment by the Company of the Employee without the Employee's con- sent, to another place of employment more that 50 miles from the Employee's current place of employment; (iii) liquidation, dissolution, consolidation or merger of the Company which has not been approved by a majority of those members of the Board who were members of the Board prior to the Change in Control, or transfer of all or substantially all of its assets, other than a transaction or series of transactions in which the resulting or surviving transferee entity has, in the aggregate, a net worth at least equal to that of the Company and assumes this Agreement and all obligations and undertakings of the Company hereunder; or (iv) reduction in the Employee's total compensation or any component thereof; by written notice to the Company, specifying the event relied upon for such termination and given at any time within 6 months after the occurrence of such event. 2. Term. This Agreement shall be effective as of the date above written and shall continue thereafter for a period of 24 full calendar months following the date of an occurrence of a Change in Control. 3. Severance Benefit. a. In the event of any termination of the Employee's employment hereunder at any time during the 24-month period immediately following a Change in Control (x) by the Employee for Good Reason, or (y) by the Company for any reason other than Cause, then, within 5 business days after any such termination, the Company shall pay to the Employee or the estate of the Employee as severance pay, a lump sum cash amount equal to three times the Employee's "base amount" as defined and deter- mined under section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), less one dollar ("2.99 times the base amount"). b. For a period of 24 months (commencing with the month in which termination of employment as de- scribed in paragraph 3a above shall have occurred), the Employee shall be entitled to all benefits under the Company's welfare benefit plans as if the Employee were still employed during such period, at the same level of benefits as existed immediately prior to the Change in Control, and if and to the extent that such benefits shall not be payable or provided under any such plan, the Company shall pay or provide such benefits on an individ- ual basis. The benefits provided in accordance with this paragraph 3b shall be secondary to any comparable bene- fits provided by another employer. c. From and after the occurrence of a Change in Control (as defined in the Officers' Supplemen- tal Retirement Plan of Orange and Rockland Utilities, Inc. as Amended and Restated (the "SERP")), notwithstand- ing any provision of the SERP to the contrary, (i) the Benefit Formula Percentage applicable to the Employee under the SERP shall be deemed to be the greater of (a) the Benefit Formula Percentage determined under the SERP and (b) 40% and (ii) for purposes of Section 2(8) of the SERP, the Employee shall be treated as having completed a number of years of Service equal to the greater of (a) the number of years of Service determined under the SERP and (b) 10. d. Notwithstanding anything else herein to the contrary, to the extent that the Employee is entitled to receive severance payments from another Company severance plan, arrangement or program, the pay- ments to be made pursuant to paragraph 3a hereof shall be correspondingly reduced before implementation of para- graph e below, and, if necessary, the Employee shall make an appropriate refund to the Employer without interest. e. If Independent Tax Counsel shall determine that the aggregate payments made to the Employ- ee pursuant to paragraphs 3a, b and c above and any other payments to the Employee from the Company which consti- tute "parachute payments" as defined in section 280G of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor thereto) ("Parachute Payments") would be subject to the excise tax imposed by section 4999 of the Code (the "Excise Tax"), then the lump sum cash payment payable to the Employee under paragraph 3a above shall be reduced to an amount and to the extent necessary so that such payment would not be subject to the Excise Tax. Notwithstanding the preceding sentence, in the event of a Change in Control that occurs prior to January 1, 2000, the Employee shall be entitled to all payments under paragraphs 3a, b and c above and any other Parachute Payments unless the total of such payments, after giving effect to the Excise Tax, is less than the amount to which the Employee would have been entitled under the preceding sentence. For purposes of this para- graph 3e, "Independent Tax Counsel" shall mean a lawyer with expertise in the area of executive compensation tax law, who shall be selected by the Employee and shall be reasonably acceptable to the Company, and whose fees and disbursements shall be paid by the Company. f. If it is established pursuant to a final determination of a court or a final Internal Reve- nue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Agreement, any part of the aggregate pay- ments paid to the Employee under this Agreement consti- tutes an "excess parachute payment" for purposes of sections 280G and 4999 of the Code, then the amount equal to the excess shall be deemed for all purposes to be a loan from the Company to the Employee made on the date of receipt. The Employee shall have an obligation to repay such loan to the Company within six months of demand, together with interest thereon at the lowest applicable Federal rate (as defined in section 1274(d) of the Code) from the date of the Employee's receipt until the date of such repayment. If it is determined for any reason that the amount described in paragraph a or b above in incor- rectly calculated or reduced, the Company shall pay to the Employee the increased amount, if any, necessary so that, after such an adjustment, the Employee shall have received or be entitled to receive the maximum payments that he may receive without any such payment constituting an "excess parachute payment." 4. Source of Payments. All payments provided for in paragraph 3 above shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Employ- ee or his or her dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the Employee shall have no right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and the Employee or any other person. To the extent that any person acquires a right to receive payments from the Company such right shall be no greater than the right of an unsecured creditor of the Company. 5. Litigation Expenses; Arbitration. a. In the event of any litigation or other proceeding between the Company and the Employee with respect to the subject matter of this Agreement and the enforcement of rights hereunder, the Company shall reimburse the Employee for all reasonable costs and expenses relating to such litigation or other proceeding as they are incurred, including reasonable attorneys fees and expenses, regardless of whether such litigation results in any settlement or judgment or order in favor of any party; provided, however, that any claim or action initiated by the Employee relating to this Agreement shall have been made or brought after reasonable inquiry and shall be well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. The obligation of the Company under this paragraph 5 shall survive the termination for any reason of this Agreement (whether such termination is by the Company, by the Employee, upon the expiration of this Agreement or otherwise). b. In the event of any dispute or dif- ference between the Company and the Employee with respect to the subject matter of this Agreement and the enforce- ment of rights hereunder, the Employee may, in his or her sole discretion by notice to the Company, require such dispute or difference to be submitted to arbitration. The arbitrator or arbitrators shall be selected by agree- ment of the parties or, if they cannot agree on an arbi- trator or arbitrators within 30 days after the Employee had notified the Company of his or her desire to have the question settled by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") in New York, New York upon the application of the Employee. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. Execution of the determination by such arbitrator may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evi- dence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. Unless otherwise agreed by the parties, any such arbitration shall take place in New York, New York, and shall be conducted in accordance with the Rules of AAA. 6. Income Tax Withholding. The Company may withhold from any payments made under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or govern- mental regulation or ruling. 7. Entire Understanding. This Agreement contains the entire understand- ing between the Company and the Employee with respect to the subject matter hereof, i.e., benefits payable to the Employee upon termination of employment following a Change in Control, and supersedes any prior severance agreement between the Company and the Employee, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Employee of any kind elsewhere provided and not expressly provided for in this Agreement and this Agreement shall not super- sede the Letter Agreements. 8. Severability. If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unen- forceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so inval- id, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law continue in full force and effect. If this Agreement is held invalid or cannot be enforced, then to the full extent permitted by law any prior agreement between the Company and the Employee shall be deemed reinstated as if this Agreement had not been executed. 9. Consolidation, Merger, or Sale of Assets. If the Company consolidates or merges into or with, or transfers all or substantially all of its assets to, another corporation with a net worth at least equal to that of the Company and which assumes this Agreement and all obligations and undertakings of the Company hereunder, the term "the Company," as used herein shall mean such other corporation and this Agreement shall continue in full force and effect. 10. Notices. All notices, requests, demands and other commu- nications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class, if to the Employee to the address shown in the personnel re- cords of the Company and, if to the Company, as follows: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: Vice President and General Counsel or to such other address as either party shall have previously specified in writing to the other. 11. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to antici- pation, commutation, alienation, sale assignment, encum- brance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involun- tary, to effect any such action shall be null, void and of no effect. 12. Binding Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, the Employee and the Company and their respective permitted successors and assigns. 13. Modification and Waiver. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any es- toppel against the enforcement of any provision of this Agreement except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condi- tion for the future or as to any act other than that specifically waived. 14. Headings of No Effect. The paragraph headings contained in this Agree- ment are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement. 15. Governing Law. This Agreement and its validity, interpreta- tion, performance, and enforcement shall be governed by the laws of the State of New York without giving effect to the choice of law provisions in effect in such State. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized, and the Employee has signed this Agreement, all effective as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By: /s/James O'Grady, Jr. Chairman, Compensation Committee /s/G.D. Caliendo G.D. Caliendo EX-10.35 7 ORANGE AND ROCKLAND UTILITIES, INC. SEVERANCE AGREEMENT THIS AGREEMENT, effective this 18th day of October , 1995, by and between Orange and Rockland Utilities, Inc. (the "Company") and Nancy M. Jakobs (the "Employee"). W I T N E S S E T H T H A T: WHEREAS, the Employee is an integral part of the Company's management who participates in the decision making process relative to planning and policy for the Company; WHEREAS, the Company wishes to encourage the employee to continue her services with the Company for the period during and after an actual or threatened Change in Control; WHEREAS, the Board of Directors of the Company, at its meeting on April 6, 1995, determined that it would be in the best interests of the Company and its share- holders to assure continuity in the management of the Company's administration and operations in the event of a Change in Control by entering into a severance agreement with the Employee; and WHEREAS, the Company has previously entered into letter agreements with the Employee dated March 21, 1995 and September 21, 1995 (the "Letter Agreements"); NOW THEREFORE, it is hereby agreed by and between the parties hereto as follows: 1. Definitions. "Board" shall mean the Board of Directors of the Company. "Cause" shall mean (a) the Employee's convic- tion of a felony or (b) the Employee's fraud or dishon- esty which has resulted or is likely to result in materi- al economic damage to the Company, as determined in good faith by a vote of 2/3 of the non-employee directors of the Company at a meeting of the Board of Directors at which the Employee is provided an opportunity to be heard. "Change in Control": shall mean: (i) either (A) receipt by the Company of a report on Schedule 13D, or an amendment to such a report, filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the "1934 Act") disclosing that any person, group, corporation or other entity is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company or (B) actual knowledge by the Company of facts, on the basis of which any Person is required to file such a report on Schedule 13D, or an amendment to make such a report, with the SEC (or would be required to file such a report or amendment upon the lapse of the applicable period of time specified in Section 13(d) of the 1934 Act) disclosing that such Person is the beneficial owner, directly or indirectly, of twenty (20) percent or more of the out- standing stock of the Company; (ii) purchase by any person (as defined in Section 13(d) of the 1934 Act), corporation or other entity, other than the Company or a wholly-owned subsid- iary of the Company, of shares pursuant to a tender or exchange offer to acquire any stock of the Company (or securities convertible into stock) for cash, securities or any other consideration provided that, after consumma- tion of the offer, such person, group, corporation or other entity is the beneficial owner (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of twenty (20) percent or more of the outstanding stock of the Company (calculated as provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the case of rights to acquire stock); (iii) approval by the stockholders of the Company of (a) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of stock of the Company would be converted into cash, securities or other property, other than a consolidation or merger of the Company in which holders of its stock immediately prior to the consolidation or merger have substantially the same proportionate ownership of common stock of the surviving corporation immediately after the consolidation or merger as immediately before, or (b) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company; or (iv) a change in the majority of the members of the Board within a 24-month period unless the election or nomination for election by the Company's stockholders of each new director was approved by the vote of two-thirds of the directors then still in office who were in office at the beginning of the 24-month period. "Good Reason" shall mean a determination by the Employee in good faith that there has been any (i) material change by the Company of the Employee's func- tions, duties or responsibilities which change would cause the Employee's position with the Company to become of less dignity, responsibility, importance, prestige or scope including, without limitation, the assignment to the Employee of duties and responsibilities inconsistent with his positions; (ii) assignment or reassignment by the Company of the Employee without the Employee's con- sent, to another place of employment more that 50 miles from the Employee's current place of employment; (iii) liquidation, dissolution, consolidation or merger of the Company which has not been approved by a majority of those members of the Board who were members of the Board prior to the Change in Control, or transfer of all or substantially all of its assets, other than a transaction or series of transactions in which the resulting or surviving transferee entity has, in the aggregate, a net worth at least equal to that of the Company and assumes this Agreement and all obligations and undertakings of the Company hereunder; or (iv) reduction in the Employee's total compensation or any component thereof; by written notice to the Company, specifying the event relied upon for such termination and given at any time within 6 months after the occurrence of such event. 2. Term. This Agreement shall be effective as of the date above written and shall continue thereafter for a period of 24 full calendar months following the date of an occurrence of a Change in Control. 3. Severance Benefit. a. In the event of any termination of the Employee's employment hereunder at any time during the 24-month period immediately following a Change in Control (x) by the Employee for Good Reason, or (y) by the Company for any reason other than Cause, then, within 5 business days after any such termination, the Company shall pay to the Employee or the estate of the Employee as severance pay, a lump sum cash amount equal to three times the Employee's "base amount" as defined and deter- mined under section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), less one dollar ("2.99 times the base amount"). b. For a period of 24 months (commencing with the month in which termination of employment as de- scribed in paragraph 3a above shall have occurred), the Employee shall be entitled to all benefits under the Company's welfare benefit plans as if the Employee were still employed during such period, at the same level of benefits as existed immediately prior to the Change in Control, and if and to the extent that such benefits shall not be payable or provided under any such plan, the Company shall pay or provide such benefits on an individ- ual basis. The benefits provided in accordance with this paragraph 3b shall be secondary to any comparable bene- fits provided by another employer. c. From and after the occurrence of a Change in Control (as defined in the Officers' Supplemen- tal Retirement Plan of Orange and Rockland Utilities, Inc. as Amended and Restated (the "SERP")), notwithstand- ing any provision of the SERP to the contrary, (i) the Benefit Formula Percentage applicable to the Employee under the SERP shall be deemed to be the greater of (a) the Benefit Formula Percentage determined under the SERP and (b) 40% and (ii) for purposes of Section 2(8) of the SERP, the Employee shall be treated as having completed a number of years of Service equal to the greater of (a) the number of years of Service determined under the SERP and (b) 10. d. Notwithstanding anything else herein to the contrary, to the extent that the Employee is entitled to receive severance payments from another Company severance plan, arrangement or program, the pay- ments to be made pursuant to paragraph 3a hereof shall be correspondingly reduced before implementation of para- graph e below, and, if necessary, the Employee shall make an appropriate refund to the Employer without interest. e. If Independent Tax Counsel shall determine that the aggregate payments made to the Employ- ee pursuant to paragraphs 3a, b and c above and any other payments to the Employee from the Company which consti- tute "parachute payments" as defined in section 280G of the Internal Revenue Code of 1986, as amended (the "Code") (or any successor thereto) ("Parachute Payments") would be subject to the excise tax imposed by section 4999 of the Code (the "Excise Tax"), then the lump sum cash payment payable to the Employee under paragraph 3a above shall be reduced to an amount and to the extent necessary so that such payment would not be subject to the Excise Tax. Notwithstanding the preceding sentence, in the event of a Change in Control that occurs prior to January 1, 2000, the Employee shall be entitled to all payments under paragraphs 3a, b and c above and any other Parachute Payments unless the total of such payments, after giving effect to the Excise Tax, is less than the amount to which the Employee would have been entitled under the preceding sentence. For purposes of this para- graph 3e, "Independent Tax Counsel" shall mean a lawyer with expertise in the area of executive compensation tax law, who shall be selected by the Employee and shall be reasonably acceptable to the Company, and whose fees and disbursements shall be paid by the Company. f. If it is established pursuant to a final determination of a court or a final Internal Reve- nue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Agreement, any part of the aggregate pay- ments paid to the Employee under this Agreement consti- tutes an "excess parachute payment" for purposes of sections 280G and 4999 of the Code, then the amount equal to the excess shall be deemed for all purposes to be a loan from the Company to the Employee made on the date of receipt. The Employee shall have an obligation to repay such loan to the Company within six months of demand, together with interest thereon at the lowest applicable Federal rate (as defined in section 1274(d) of the Code) from the date of the Employee's receipt until the date of such repayment. If it is determined for any reason that the amount described in paragraph a or b above in incor- rectly calculated or reduced, the Company shall pay to the Employee the increased amount, if any, necessary so that, after such an adjustment, the Employee shall have received or be entitled to receive the maximum payments that he may receive without any such payment constituting an "excess parachute payment." 4. Source of Payments. All payments provided for in paragraph 3 above shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Employ- ee or his or her dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, the Employee shall have no right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Agreement, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and the Employee or any other person. To the extent that any person acquires a right to receive payments from the Company such right shall be no greater than the right of an unsecured creditor of the Company. 5. Litigation Expenses; Arbitration. a. In the event of any litigation or other proceeding between the Company and the Employee with respect to the subject matter of this Agreement and the enforcement of rights hereunder, the Company shall reimburse the Employee for all reasonable costs and expenses relating to such litigation or other proceeding as they are incurred, including reasonable attorneys fees and expenses, regardless of whether such litigation results in any settlement or judgment or order in favor of any party; provided, however, that any claim or action initiated by the Employee relating to this Agreement shall have been made or brought after reasonable inquiry and shall be well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law, and that it is not interposed for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation. The obligation of the Company under this paragraph 5 shall survive the termination for any reason of this Agreement (whether such termination is by the Company, by the Employee, upon the expiration of this Agreement or otherwise). b. In the event of any dispute or dif- ference between the Company and the Employee with respect to the subject matter of this Agreement and the enforce- ment of rights hereunder, the Employee may, in his or her sole discretion by notice to the Company, require such dispute or difference to be submitted to arbitration. The arbitrator or arbitrators shall be selected by agree- ment of the parties or, if they cannot agree on an arbi- trator or arbitrators within 30 days after the Employee had notified the Company of his or her desire to have the question settled by arbitration, then the arbitrator or arbitrators shall be selected by the American Arbitration Association (the "AAA") in New York, New York upon the application of the Employee. The determination reached in such arbitration shall be final and binding on both parties without any right of appeal or further dispute. Execution of the determination by such arbitrator may be sought in any court of competent jurisdiction. The arbitrators shall not be bound by judicial formalities and may abstain from following the strict rules of evi- dence and shall interpret this Agreement as an honorable engagement and not merely as a legal obligation. Unless otherwise agreed by the parties, any such arbitration shall take place in New York, New York, and shall be conducted in accordance with the Rules of AAA. 6. Income Tax Withholding. The Company may withhold from any payments made under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or govern- mental regulation or ruling. 7. Entire Understanding. This Agreement contains the entire understand- ing between the Company and the Employee with respect to the subject matter hereof, i.e., benefits payable to the Employee upon termination of employment following a Change in Control, and supersedes any prior severance agreement between the Company and the Employee, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to the Employee of any kind elsewhere provided and not expressly provided for in this Agreement and this Agreement shall not super- sede the Letter Agreements. 8. Severability. If, for any reason, any one or more of the provisions or part of a provision contained in this Agreement shall be held to be invalid, illegal or unen- forceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement not held so inval- id, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law continue in full force and effect. If this Agreement is held invalid or cannot be enforced, then to the full extent permitted by law any prior agreement between the Company and the Employee shall be deemed reinstated as if this Agreement had not been executed. 9. Consolidation, Merger, or Sale of Assets. If the Company consolidates or merges into or with, or transfers all or substantially all of its assets to, another corporation with a net worth at least equal to that of the Company and which assumes this Agreement and all obligations and undertakings of the Company hereunder, the term "the Company," as used herein shall mean such other corporation and this Agreement shall continue in full force and effect. 10. Notices. All notices, requests, demands and other commu- nications required or permitted hereunder shall be given in writing and shall be deemed to have been duly given if delivered or mailed, postage prepaid, first class, if to the Employee to the address shown in the personnel re- cords of the Company and, if to the Company, as follows: Orange and Rockland Utilities, Inc. One Blue Hill Plaza Pearl River, New York 10965 Attention: Vice President and General Counsel or to such other address as either party shall have previously specified in writing to the other. 11. No Attachment. Except as required by law, no right to receive payments under this Agreement shall be subject to antici- pation, commutation, alienation, sale assignment, encum- brance, charge, pledge, or hypothecation or to execution, attachment, levy, or similar process or assignment by operation of law, and any attempt, voluntary or involun- tary, to effect any such action shall be null, void and of no effect. 12. Binding Agreement. This Agreement shall be binding upon, and shall inure to the benefit of, the Employee and the Company and their respective permitted successors and assigns. 13. Modification and Waiver. This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any es- toppel against the enforcement of any provision of this Agreement except by written instrument signed by the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condi- tion for the future or as to any act other than that specifically waived. 14. Headings of No Effect. The paragraph headings contained in this Agree- ment are included solely for convenience of reference and shall not in any way affect the meaning or interpretation of any of the provisions of this Agreement. 15. Governing Law. This Agreement and its validity, interpreta- tion, performance, and enforcement shall be governed by the laws of the State of New York without giving effect to the choice of law provisions in effect in such State. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized, and the Employee has signed this Agreement, all effective as of the date first above written. ORANGE AND ROCKLAND UTILITIES, INC. By: /s/James O'Grady, Jr. Chairman, Compensation Committee /s/Nancy M. Jakobs 10/27/95 Nancy M. Jakobs -----END PRIVACY-ENHANCED MESSAGE-----