0000074778-95-000014.txt : 19950811 0000074778-95-000014.hdr.sgml : 19950811 ACCESSION NUMBER: 0000074778-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 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: 95560338 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 June 30, 1995 OR __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4315 ORANGE AND ROCKLAND UTILITIES, INC. (Exact name of registrant as specified in its charter) New York 13-1727729 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Blue Hill Plaza, Pearl River, New York 10965 (Address of principal executive offices) (Zip Code) (914) 352-6000 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the close of the latest practicable date. Common Stock - $5 Par Value 13,653,571 Shares (Class) (Outstanding at July 31, 1995) TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Consolidated Balance Sheets (Unaudited) at June 30, 1995 and December 31, 1994 1 Consolidated Statements of Income (Unaudited) for the three months and six months ended June 30, 1995 and June 30, 1994 3 Consolidated Cash Flow Statements (Unaudited) for the three months and six months ended June 30, 1995 and June 30, 1994 4 Notes to Consolidated Financial Statements 5 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 18 ITEM 6. Exhibits and Reports on Form 8-K 19 Signatures 20 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Assets
June 30, December 31, 1995 1994 (Thousands of Dollars) Utility Plant: Electric $ 983,426 $ 951,019 Gas 202,620 198,755 Common 55,969 55,445 Utility Plant in Service 1,242,015 1,205,219 Less accumulated depreciation 414,131 398,584 Net Utility Plant in Service 827,884 806,635 Construction work in progress 33,860 49,654 Net Utility Plant 861,744 856,289 Non-utility Property: Non-utility property 33,962 34,585 Less accumulated depreciation, depletion and amortization 14,153 13,977 Net Non-utility Property 19,809 20,608 Current Assets: Cash and cash equivalents 5,772 16,081 Temporary cash investments 1,321 1,839 Customer accounts receivable, less allowance for uncollectible accounts of $2,221 and $2,200 41,090 44,105 Accrued utility revenue 20,830 27,273 Other accounts receivable, less allowance for uncollectible accounts of $303 and $209 9,829 17,384 Gas marketing accounts receivable, less allowance for uncollectible accounts of $98 and $327 55,000 58,470 Materials and supplies (at average cost) 31,938 37,836 Prepaid property taxes 12,173 19,327 Prepayments and other current assets 41,679 28,877 Total Current Assets 219,632 251,192 Deferred Debits: Income tax recoverable in future rates 71,142 73,261 Extraordinary property loss - Sterling nuclear project 7,195 10,139 Deferred Order No. 636 transition costs 10,710 13,480 Deferred revenue taxes 16,215 16,888 Deferred pension and other postretirement benefits 10,469 10,505 IPP settlements 40,411 17,821 Unamortized debt expense (amortized over term of securities) 9,849 10,493 Other deferred debits 35,344 32,328 Total Deferred Debits 201,335 184,915 Total $1,302,520 $1,313,004 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) Capitalization and Liabilities
June 30, December 31, 1995 1994 (Thousands of Dollars) Capitalization: Common stock (13,653,262 and 13,652,913 shares outstanding) $ 68,266 $ 68,265 Premium on capital stock 133,601 133,595 Capital stock expense (6,118) (6,116) Retained earnings 174,066 183,659 Total Common Stock Equity 369,815 379,403 Non-redeemable preferred stock (428,443 shares outstanding) 42,844 42,844 Non-redeemable cumulative preference stock (12,782 and 13,025 shares outstanding) 417 424 Total Non-Redeemable Stock 43,261 43,268 Redeemable preferred stock (27,738 shares outstanding) 2,774 2,774 Long-term debt 359,454 359,622 Total Capitalization 775,304 785,067 Non-current Liabilities: Reserve for claims and damages 5,116 4,713 Postretirement benefits 12,407 15,625 Pension costs 41,414 39,854 Obligation under capital leases - 275 Total Non-current Liabilities 58,937 60,467 Current Liabilities: Lease obligations due within one year 539 518 Long-term debt due within one year 19,190 19,392 Preferred stock to be redeemed within one year 1,384 1,384 Notes payable 9,965 - Commercial paper 26,050 29,400 Accounts payable 39,837 63,855 Gas marketing accounts payable 54,306 71,913 Dividends payable 10,315 725 Customer deposits 5,431 5,669 Accrued Federal income and other taxes 1,478 5,949 Accrued interest 8,862 8,608 Refundable gas costs 8,711 7,554 Refunds to customers 12,298 10,265 Other current liabilities 16,528 16,127 Total Current Liabilities 214,894 241,359 Deferred Taxes and Other: Deferred Federal income taxes 177,651 173,317 Deferred investment tax credits 16,695 17,109 Accrued Order No. 636 transition costs 10,710 13,480 Accrued IPP settlement agreements 30,000 8,000 Refundable fuel costs 12,695 10,366 Other deferred credits 5,634 3,839 Total Deferred Taxes and Other 253,385 226,111 Total $1,302,520 $1,313,004 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Statements of Income (Unaudited)
Three Months Six Months Ended June 30, Ended June 30, 1995 1994 1995 1994 (Thousands of Dollars)(Thousands of Dollars) Operating Revenues: Electric $108,760 $114,965 $215,946 $226,110 Gas 20,289 25,832 79,410 107,235 Electric sales to other utilities 479 1,674 1,197 4,815 Total Utility Revenues 129,528 142,471 296,553 338,160 Diversified activities 115,831 86,103 260,653 182,197 Total Operating Revenues 245,359 228,574 557,206 520,357 Operating Expenses: Operations: Fuel used in electric production 15,827 21,512 33,845 46,567 Electricity purchased for resale 13,680 11,447 25,140 22,419 Gas purchased for resale 10,183 15,106 40,515 65,272 Non-utility gas marketing purchases 113,985 82,475 256,110 173,550 Other expenses of operation 31,558 37,948 67,588 72,996 Maintenance 11,129 10,400 20,600 20,472 Depreciation and amortization 9,322 8,695 18,373 17,304 Amortization of property losses 1,541 1,416 3,081 2,831 Taxes other than income taxes 22,125 22,867 47,351 49,015 Federal income taxes 112 3,261 8,026 14,461 Deferred Federal income taxes 3,571 70 3,766 (2,159) Amortization of investment tax credit (30) (30) (60) (60) Total Operating Expenses 233,003 215,167 524,335 482,668 Income from Operations 12,356 13,407 32,871 37,689 Other Income and (Deductions): Allowance for other funds used during construction 11 27 22 57 Investigation costs (1,626) (2,797) (2,007) (6,009) Other - net 136 (30) 5,209 140 Taxes other than income taxes (83) (28) (521) (54) Federal income taxes 690 1,044 1,213 2,124 Deferred Federal income taxes 78 (34) (2,074) (73) Amortization of investment tax credit 177 179 354 357 Total Other Income and (Deductions) (617) (1,639) 2,196 (3,458) Income Before Interest Charges 11,739 11,768 35,067 34,231 Interest Charges: Interest on long-term debt 6,926 7,498 13,852 14,990 Other interest 936 655 2,137 1,339 Amortization of debt premium and expense-net 340 302 680 603 Allowance for borrowed funds used during construction (185) (67) (645) (149) Total Interest Charges 8,017 8,388 16,024 16,783 Net Income 3,722 3,380 19,043 17,448 Dividends on preferred and preference stock, at required rates 785 813 1,569 1,626 Earnings applicable to common stock $ 2,937 $ 2,567 $ 17,474 $ 15,822 Avg. number of common shares outstanding (000's) 13,653 13,565 13,653 13,549 Earnings per average common share outstanding $ .22 $ .19 $ 1.28 $ 1.17 Dividends declared per common share outstanding $ 1.29 $ 1.27 $ 1.93 $ 1.90 The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES Consolidated Cash Flow Statements (Unaudited)
Six Months Ended June 30, 1995 1994 (Thousands of Dollars) Cash Flow from Operations: Net income $19,043 $17,448 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 18,415 17,749 Deferred Federal income taxes 6,364 (2,086) Deferred investment tax credit (414) (417) Deferred and refundable fuel and gas costs 3,486 11,979 Allowance for funds used during construction (667) (206) Other non-cash charges 3,617 2,801 Changes in certain current assets and liabilities: Accounts and gas marketing accounts receivable, net and accrued utility revenues 20,483 8,696 Materials and supplies 5,898 7,749 Prepaid property taxes 7,154 6,749 Prepayments and other current assets (12,802) (14,475) Operating and gas marketing accounts payable (41,625) (20,459) Accrued Federal Income and other taxes (4,471) (1,273) Accrued interest 254 56 Refunds to customers 2,033 1,244 Other current liabilities 163 1,605 Other-net (2,804) 10,774 Net Cash Provided from Operations 24,127 47,934 Cash Flow from Investing Activities: Additions to plant (22,532) (16,772) Temporary cash investments 518 498 Allowance for funds used during construction 667 206 Net Cash Used in Investing Activities (21,347) (16,068) Cash Flow from Financing Activities: Proceeds from: Issuance of common stock - 1,820 Retirements of: Long-term debt (384) (455) Capital lease obligations (275) (235) Net borrowings (repayments) under short-term debt arrangements* 6,615 (22,805) Dividends on preferred and common stock (19,045) (18,676) Net Cash Provided From (Used in) Financing Activities (13,089) (40,351) Net Change in Cash and Cash Equivalents (10,309) (8,485) Cash and Cash Equivalents at Beginning of Period 16,081 14,256 Cash and Cash Equivalents at End of Period $ 5,772 $ 5,771 Supplemental Disclosure of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized $14,991 $16,126 Federal income taxes $10,850 $ 8,500 * Debt with maturities of 90 days or less. The accompanying notes are an integral part of these statements.
ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated balance sheet as of June 30, 1995, the consolidated statements of income for the three month and six month periods ended June 30, 1995 and 1994, and the consolidated cash flow statements for the six month periods then ended have been prepared by Orange and Rockland Utilities, Inc. (the "Company") without an audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position and results of operations at June 30, 1995, and for all periods presented, have been made. The amounts in the consolidated balance sheet as of December 31, 1994 are from audited financial statements. 2. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. It is suggested that these unaudited consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Annual Report to Shareholders. The results of operations for the period ended June 30, 1995 are not necessarily indicative of the results of operations for the full year. 3. The consolidated financial statements include the accounts of the Company, all subsidiaries and the Company's pro rata share of an unincorporated joint venture. All significant intercompany balances and transactions have been eliminated. 4. Contingencies at June 30, 1995 are substantially the same as the contingencies described in the "Notes to Consolidated Financial Statements" included in the Company's December 31, 1994 Annual Report to Shareholders, which material is incorporated by reference to the Company's December 31, 1994 Form 10-K Annual Report. 5. Certain amounts from prior years have been reclassified to conform with the current year presentation. 6. On September 8, 1994, the Company adopted a formal plan to sell the six radio broadcasting properties operated by a wholly owned indirect subsidiary, Atlantic Morris Broadcasting, Inc. ("AMB"), and AMB subsequently entered into contracts for the sale of the stations. In June 1995, the sale of the Portland, Maine radio stations was completed. The sale of the radio station in Dundee, Illinois has received Federal Communication Commission ("FCC") approval and is expected to close in August 1995. A petition for reconsideration of the FCC approval of the sale of the Middletown, New York stations has been filed with the FCC and the closing of the sale of these stations may be delayed to the fourth quarter of 1995. FCC approval of the sale of the Ocean City, New Jersey radio station is anticipated in August 1995 with a closing in September or October 1995. The sale of the stations will not have a material effect on the Company's Consolidated Financial Statements. 7. On January 23, 1995, O&R Energy, Inc. (now NORSTAR Holdings, Inc.) a wholly owned indirect subsidiary of the Company, joined with Shell Gas Trading Co. to create a new full service natural gas services and marketing company called NORSTAR Energy Limited Partnership ("NORSTAR Partnership"). During the first quarter of 1995, the Company realized a gain on the formation of the NORSTAR Partnership of $2.9 million. The gain resulted from the effective sale of a 26.9% minority interest in the gas marketing business. This net gain has been recorded in the Consolidated Statements of Income under the title Other Income and (Deductions) as follows: Other-Net, $5.0 million; Taxes other than income taxes, ($.4) million and Federal income taxes, ($1.7) million. 8. The financial statements of the Company are based on generally accepted accounting principles, including the provisions of Statement of Financial Accounting Standards No. 71, "Accounting for the Effects of Certain Types of Regulation" ("SFAS No. 71"), which gives recognition to the rate- making and accounting practices of the regulatory agencies. The principal effect of the rate-making process on the Company's financial statements is that of the timing of the recognition of incurred costs. If rate regulation provides reasonable assurance that an incurred cost will be recovered in a future period by inclusion of that cost in rates, SFAS No. 71 requires the capitalization of the cost. Regulatory assets represent probable future revenue associated with certain incurred costs, as these costs are recovered through the rate-making process. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of". This Statement imposes criteria for the continued recognition of regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company anticipates adopting this standard on January 1, 1996 and does not expect that adoption will have a material impact on the financial position or results of operations of the Company based on the current regulatory structure in which the Company operates. This conclusion may change in the future as competitive factors influence wholesale and retail pricing in this industry. 9. During 1994, the Company negotiated settlement agreements with two of the three independent power producers ("IPP") scheduled to provide electric generating capacity and energy services to the Company in the late 1990's. On June 14, 1995, the Company entered into an agreement with the remaining IPP, Wallkill Generating Company, L.P. ("Wallkill Generating"), which was to construct and operate a gas-fired combined cycle generating facility and sell 95 Mw of capacity and associated energy to the Company. At June 30, 1995, $40.4 million of termination costs associated with these three settlement agreements have been deferred in accordance with regulatory accounting procedures pending a determination of the recoverability of the costs in rates. In January 1995, the New Jersey Board of Public Utility Commissioners ("NJBPU") authorized the recovery of $.9 million over a 12-month period ending December 31, 1995 for the portion of one of the settlement agreements applicable to New Jersey electric operations. Recovery of approximately $10.3 million applicable to New Jersey electric operations will be addressed in pending and future proceedings before the NJBPU. The recovery of the portion of termination costs applicable to New York operations, which amounted to approximately $29.3 million at June 30, 1995, will be addressed in the Company's electric base rate proceeding currently pending before the New York Public Service Commission ("NYPSC"). Management believes that the termination costs were prudently incurred and therefore should be fully recoverable in rates. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition: Financial Performance The Company's consolidated earnings per average common share outstanding for the second quarter of 1995 were $.22 as compared to $.19 for the second quarter of 1994. Fluctuations within the components of earnings are discussed in the "Results of Operations". The average number of common shares outstanding were 13.7 million for the second quarter of 1995 and 13.6 million for the second quarter of 1994. The current quarterly dividend rate of $.645 is equivalent to an annual dividend rate of $2.58 per share. Dividends declared during the twelve months ended June 30, 1995 amounted to $2.57 with a dividend payout ratio of 98.5% as compared to $2.53 a year ago with a payout ratio of 92.0%. The return on average common equity for the twelve months ended June 30, 1995 was 9.41%, as compared to 9.95% for the twelve months ended June 30, 1994. Capital Resources and Liquidity At June 30, 1995, the Company and its utility subsidiaries had unsecured bank lines of credit totaling $59 million. The Company may borrow under the lines of credit through the issuance of promissory notes to the banks. The Company, however, utilizes such lines of credit to fully support commercial paper borrowings. The aggregate amount of borrowings through the issuance of promissory notes and commercial paper cannot exceed the aggregate lines of credit. In addition, non-utility lines of credit amounted to $25.0 million at June 30, 1995, and the non-utility subsidiaries may undertake short-term borrowings or make short-term investments. The average daily balance of short-term borrowings for the six months ended June 30, 1995 amounted to $34.5 million at an effective interest rate of 6.5% as compared to $38.8 million at an effective interest rate of 3.8% for the same period of 1994. The level of temporary cash investments for the six months ended June 30, 1995 increased to an average daily balance of $11.6 million at an effective interest rate of 5.8% from $10.2 million at an effective interest rate of 3.4% for the same period of 1994. The NYPSC has authorized the Company to issue up to 750,000 shares of common stock under its Dividend Reinvestment and Stock Purchase Plan ("DRP") and its Employee Stock Purchase and Dividend Reinvestment Plan ("ESPP"). At the option of the Company, however, common stock used to satisfy the requirements of the DRP and ESPP may be purchased on the open market. Effective November 1, 1994, common stock needed to satisfy the DRP and ESPP requirements is being purchased on the open market. On July 27, 1995, the New York State Energy Research and Development Authority ("NYSERDA") issued, on behalf of the Company, $44 million of variable rate Pollution Control Refunding Revenue Bonds due August 1, 2015 ("1995 Bonds"). The proceeds from the issuance of the 1995 Bonds, together with other Company funds, will be used to refund, on August 20, 1995, the $44 million NYSERDA 9% Pollution Control Revenue Bonds, 1985 Series ("1985 Bonds") issued on behalf of the Company. Proceeds from the issuance of the 1995 Bonds are being held in escrow by the trustee until the redemption of the 1985 Bonds. Rate Activities New York Gas: On January 16, 1992, the Company filed an application for an increase in gas rates with the NYPSC. The Settlement Agreement in that case, which was approved by the NYPSC on September 30, 1992 provided, among other things, for multi-year rate adjustments through 1996 and for certain gas incentives. The second adjustment to gas rates under the Settlement Agreement, which amounted to an increase of $3.8 million or 2.5%, was to become effective on January 1, 1994. As a result of the ongoing investigation of alleged financial improprieties, however, the increase was first extended to June 30, 1994 and then further extended to December 30, 1994. On November 4, 1994, the NYPSC issued an Order terminating the Settlement Agreement effective December 31, 1994. The Order denies the Company the opportunity for rate adjustments in the third and fourth years (1995 and 1996) of the four-year Settlement Agreement. However, the Order authorizes the Company to defer the second- stage rate adjustments and all previously authorized reconciliations pertaining to periods prior to December 31, 1994, pending review and audit by the NYPSC staff and the conclusion of the NYPSC's investigation of alleged financial improprieties. In addition, on February 7, 1995, the Accounting and Finance Division of the NYPSC issued an interpretation of the November 4, 1994 termination order which stated that the gas incentive mechanism related to the attainment of certain goals is no longer available. The Company will not contest this interpretation. Electric: On June 10, 1994, the NYPSC issued an Order (the "June Order") which terminated the Company's January, 1993 electric rate increase application. The June Order provided, among other things, for a reduction in the threshold for measuring excess earning from 12.0% to 10.6% effective retroactively to January 1, 1994. All earnings in excess of 10.6% were to be deferred for future disposition pending the conclusion of the ongoing investigation. On September 19, 1994, the Company filed an appeal with the Supreme Court of New York challenging the legality of the June Order. The appeal argues that by changing the excess earnings threshold from 12.0% to 10.6% for the first six months of 1994, the NYPSC engaged in retroactive ratemaking. The appeal also argues that there is no evidence in the record to support a determination that the cost of equity is 10.6%. This appeal will be withdrawn pursuant to a Stipulation approved by the NYPSC on August 1, 1995, as described below. On February 17, 1995, O&R submitted a compliance filing regarding the operation of the Revenue Decoupling Mechanism ("RDM"). The filing included a proposal to reduce the RDM Adjustment Factor from $7.7 million to $0 effective May 1, 1995 reflecting the completion of the recovery of an RDM undercollection applicable to the year 1993. This equates to a 2.3% annual reduction in revenue. In addition, the filing requested that a net RDM overcollection of $0.7 million for the year 1994 be retained by the Company as a future rate moderator, subject to NYPSC verification. On April 19, 1995, the NYPSC approved the proposals, and the reduction of $7.7 million in the RDM Adjustment Factor became effective on May 1, 1995. On May 25, 1995, the Company filed with the NYPSC for a decrease in electric revenues of $6.1 million to be effective April 1, 1996 (Case 95-E-0491). This equates to an overall reduction of 1.8 percent in retail rates. The filing reflects a reduction in operating expenses due to the complete recovery of Orange and Rockland Utilities, Inc.'s share of the Sterling Nuclear Project and other cost reductions. The Company proposed a multi-year rate plan covering the three-year period ending on March 31, 1999 with no base rate increases in the second and third year of the plan. The Company has proposed an overall return on capital of 9.17% with a sharing mechanism governing any return on common equity above 11.2%. On August 1, 1995, the NYPSC approved a Stipulation which provides for the acceleration from April 1, 1996 to August 1, 1995 of the Company's proposed annual rate reduction of $6.1 million. Allowing the reduced rates to become effective August 1, 1995 would result in a revenue reduction of $3.8 million (including $0.2 million of revenue taxes) for the period August 1, 1995 - March 31, 1996. The Stipulation, for the period January 1, 1995 through March 31, 1996, increases the excess earnings threshold from 10.6% to 11.3%, with equal sharing of earnings above 11.3% between shareholders and ratepayers. The revenue reduction will be offset by the deferred revenue associated with the 1994 electric equity return in excess of 10.6% and the customers' share of earnings under the new sharing mechanism effective January 1, 1995. A NYPSC action regarding permanent rates is expected for rates effective April 1, 1996. The Stipulation also provides that the Company will withdraw its September 19, 1994 appeal to the Supreme Court of New York challenging the June Order. Other: On November 10, 1994, the Company filed with the NYPSC, a quantification of the rate-making effects of its ongoing investigation into prior financial improprieties. The Company requested that the NYPSC approve a refund of approximately $3.4 million to its New York electric and gas customers. This amount would be in addition to the $369,000 already refunded by the Company. Although the NYPSC has not acted on this request, this amount was charged to operations in the fourth quarter of 1994. The NYPSC has instituted a proceeding (Case 93-M-0849) to provide the opportunity for other parties, including the NYPSC Staff which was conducting an independent investigation of the Company, to be heard on this matter. On June 28, 1995, the NYPSC issued the report of the NYPSC Staff on its investigation of the Company. While the report did not quantify the total cost of improper charges borne by the Company's New York ratepayers, the report did state that the NYPSC Staff believes that, in addition to the $3.8 million already refunded or proposed to be refunded, the Company should reimburse New York ratepayers for the "excess costs" incurred since 1983 in several specified areas, including the areas of compensation for senior management of the Company, the Company's internal auditing function, the compensation of a former employee of the Company for the period of time when that employee was embezzling the Company's funds and the cost of certain employees' time while they were performing personal work for the Company's officers or were engaged in political or lobbying activities. The NYPSC Staff recommended that a final determination of the amount that the Company should refund be determined in either a separate proceeding or incorporated as part of a rate case proceeding. On July 6, 1995, the NYPSC issued an order stating that the issues of the amount, timing and allocation of New York ratepayer refunds as a result of the investigation in Case 93-M-0849 should be considered in the context of the Company's current electric base rate case and ordered the consolidation of the two cases. The final amount of refunds to customers will be determined under this proceeding. Management is unable to predict the final results of this proceeding and what modifications, if any, will be made to the amount proposed to be refunded. New Jersey Under an agreement with the New Jersey Board of Public Utilities ("NJBPU") to return to customers any funds found to be misappropriated or otherwise questionable as a result of its investigation of certain Company officers and former employees, Rockland Electric Company ("RECO"), a wholly-owned utility subsidiary of the Company, refunded to New Jersey ratepayers $93,000 through reductions in the applicable fuel adjustment charges in February and March 1994. In December 1994, RECO submitted a proposal to the NJBPU to refund an additional $704,000. By order dated January 27, 1995, the NJBPU approved this proposal and the refund was made in February 1995. On November 3, 1993, the NJBPU commenced its periodic management audit of RECO. The NJBPU audit included, in addition to a standard review of operating procedures, policies and practices, a review of the posture of RECO management regarding business ethics and a determination regarding the effect of such events on RECO ratepayers. The audit findings are contained in a report titled "Final Report on An Ethics Review of Rockland Electric Company" (Docket No. EA900302-48) dated December 1, 1994. The NJBPU subsequently initiated an examination of senior management appointments and changes to the composition of the Company's Board of Directors and the development of an ethics program. The results of this examination are contained in a report titled "Final Report of an Ethics Oversight Review of Rockland Electric Company". The final Management Audit, Ethics Review, and Oversight Ethics Review reports were approved by the NJBPU on July 7, 1995. The Oversight Ethics Review report acknowledges that the NJBPU has approved refunds to the Company's New Jersey customers and generally comments favorably about the changes instituted at O&R. The NJBPU investigation into these matters is continuing and the Company is unable to predict what modification, if any, will be made to the amount refunded. QUARTERLY COMPARISON Earnings per average common share outstanding for the second quarter of 1995 amounted to $.22 per share as compared to $.19 per share for the second quarter of 1994. This increase reflects the Company's ability to reduce operating and interest expenses in its core utility business, and the lower costs associated with the litigation involving former officers and others compared to a year ago. The earnings increase was significantly diminished, however, by the performance of the Company's diversified operations during the current quarter compared with the same period a year ago. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, decreased by $12.9 million in the second quarter of 1995 as compared to the same quarter of 1994. Electric operating revenues during the current quarter were $109.2 million as compared to $116.6 million for the second quarter of 1994, a decrease of $7.4 million. The components of the changes in electric operating revenues for the quarter ended June 30, 1995 as compared to the same quarter of 1994 are as follows: (Millions of Dollars) Retail sales: Base Revenues* $ (2.6) Fuel cost recoveries (2.5) Sales volume changes .1 Subtotal (5.0) Sales for resale (1.2) Other operating revenue: RDM revenue reconciliation and DSM incentives - Other (1.2) Total $ (7.4) *Includes miscellaneous surcharges and revenue tax recoveries. Actual total sales of electric energy to retail customers during the second quarter of 1995 were 1,064,366 megawatt hours ("Mwh"), compared with 1,063,281 Mwh during the comparable period a year ago. This increase is the result of an increase in the average number of customers when compared to the same period a year ago. Before reflecting the effect of the RDM and the DSM incentives in the Company's New York jurisdiction, electric revenues associated with these sales were $113.2 million during the current quarter compared to $118.2 million during the second quarter of 1994, a decrease of $5.0 million. New York electric revenue targets under the Company's RDM, as established in a base rate case, net of fuel and taxes, amounted to $52.4 million for the second quarter of 1995. In accordance with RDM procedures, deviations between revenue targets and actual sales revenue are either recovered from or returned to customers. The variation between the target revenue and the Company's actual sales revenue of $56.2 million for the second quarter of 1995 was $3.8 million, which was recorded as a reduction to revenues. In the second quarter of 1994, the Company recorded $3.8 million as a reduction to revenue. With regard to the DSM goal achievement incentives, the Company's performance during the second quarter of 1995 allowed it to record $.2 million of incentive income, which equals the amount recorded in 1994. The Company's performance during the remainder of 1995 will determine what, if any, RDM revenue adjustments may be recorded. Revenues from sales to other utilities in the second quarter of 1995 amounted to $.5 million, a decrease of $1.2 million from a year ago. Sales to such utilities totaled 22,909 Mwh, compared with 69,662 Mwh in the second quarter a year ago. Because revenues from these sales are primarily a recovery of costs in accordance with applicable tariff regulations, they have little impact on the Company's annual earnings. Gas operating revenues during the quarter were $20.3 million compared to $25.8 million for the second quarter of 1994, a decrease of $5.5 million. The components of the changes in gas operating revenues for the quarter ended June 30, 1995 as compared to the same quarter of 1994 are as follows: (Millions of Dollars) Sales to firm customers: Base revenues* $ (1.2) Gas cost recoveries (4.4) Sales volume changes .2 Subtotal (5.4) Sales to interruptibles ( .2) Other operating revenue .1 Total $ (5.5) * Includes miscellaneous surcharges and revenue tax recoveries. Gas sales to firm customers during the second quarter of 1995 totaled 2,910 million cubic feet ("Mmcf"), compared with 2,829 Mmcf during the same period a year ago. Gas revenues from firm customers were $18.8 million, compared with $24.2 million in the second quarter of 1994. Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing The cost of fuel used in the production of electricity and purchased electricity costs decreased by $3.5 million during the second quarter of 1995 when compared to the same quarter of 1994. The components of the change are as follows: (Millions of Dollars) Prices paid for fuel and purchased power $ .5 Changes in kilowatt-hours generated or purchased (1.5) Deferred fuel charge (2.5) Total $ (3.5) The average cost per kilowatt-hour generated and purchased was 2.54 cents for the quarter ended June 30, 1995 compared to 2.50 for the same quarter of 1994. Purchased gas costs for utility operations were $10.2 million in the second quarter of 1995 compared to $15.1 million in 1994, a decrease of $4.9 million. The components of the changes in purchased gas costs are as follows: (Millions of Dollars) Prices paid for gas supplies* $(4.9) Gas sendout volume (.9) Deferred fuel charges .9 Total $(4.9) *Net of refunds received from gas suppliers. The average cost per thousand cubic feet ("Mcf") purchased for the second quarter of 1995 including transportation and storage costs, was $3.06 compared to $4.58 in the second quarter of 1994. Other Operating and Maintenance Expenses The Company's total operating and maintenance expenses excluding fuel, purchased power and gas purchased for resale for the second quarter, decreased by $5.3 million compared with the same period in 1994. The decrease in expenses was entirely associated with utility operating expenses. The change in diversified operation and maintenance expenses was minimal. The decrease in other utility operation and maintenance expense is the result of a decrease in operation expenses of $6.8 million, of which $4.3 million is attributable to recoverable Demand Side Management costs and $.6 million is attributable to other taxes. These decreases were offset by increases in depreciation and amortization expense of $.4 million, Federal income taxes of $1.0 and maintenance of $.7 million. Diversified Activities The Company's diversified activities consist of gas marketing, gas production and land development businesses conducted by wholly owned non-utility subsidiaries. Revenues from diversified activities increased by $29.7 million for the second quarter of 1995 as compared to the same quarter of 1994, as a result of the gas marketing subsidiary's success in adding customers and increasing its sales volumes. The increase in operating expenses for all diversified activities of $31.5 million is the result of increased gas purchases and the cost of restructuring the business towards securing higher margin retail customers. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, increased by $1.4 million during the second quarter of 1995 when compared to the same quarter of 1994. The increase is primarily the result of the lower costs associated with the litigation involving former officers and others compared to a year ago. YEAR TO DATE COMPARISON Earnings per average common share outstanding for the six months ended June 30, 1995 amounted to $1.28 per share as compared to $1.17 for the same period of 1994. This increase reflects the impact of the gain realized from the formation of NORSTAR Energy and lower investigation and litigation costs. This increase is partially offset by lower diversified earnings. Electric and Gas Revenues Electric and gas operating revenues, including fuel cost and purchased gas cost recoveries, decreased by $41.6 million for the first six months of 1995 as compared to the same period of 1994. Electric operating revenues during the current period were $217.1 million as compared to $230.9 million for the comparable period of 1994, a decrease of $13.8 million. The components of the changes in electric operating revenues for the six months ended June 30, 1995 as compared to the same period in 1994 were as follows: (Millions of Dollars) Retail sales: Base rates* $(5.6) Fuel cost recoveries (5.8) Sales volume changes (1.0) Subtotal (12.4) Sales for resale (3.6) Other operating revenues: RDM revenue reconciliation and DSM incentives 1.9 Other .3 Total $(13.8) *Includes miscellaneous surcharges and revenue tax recoveries. Actual total sales of electric energy to retail customers during the first six months of 1995 were 2,136,529 Mwh, compared with 2,150,019 Mwh during the comparable period a year ago. Before reflecting the effect of the RDM and the DSM incentives in the Company's New York jurisdiction, electric revenue associated with these sales was $218.5 million during the current period compared to $230.9 million during the first six months of 1994, a decrease of $12.4 million. New York electric revenue targets under the Company's RDM, as established in a base rate case, amounted to $102.0 million for the first six months of 1995. In accordance with RDM procedures, deviations between revenue targets and actual sales revenue are either recovered from or returned to customers. The variation between the target revenue and the Company's actual sales revenue of $105.8 million for the first six months of 1995 was $3.7 million, which is recorded as a reduction to revenue. For the first six months of 1994, the Company recorded a reduction in revenues of $5.6 million. With regard to the DSM goal achievement incentives provided for in the RDM agreement, the Company's performance during the first six months of 1995 and 1994 allowed it to record $.2 million of incentive related revenues. The Company's performance during the remainder of 1995 will determine what, if any, additional RDM revenue adjustments may be recorded. Revenues from sales to other utilities in the first six months of 1995 amounted to $1.2 million compared to $4.8 million a year ago. Such sales totaled 64,504 Mwh compared with 174,175 Mwh in the first six months of 1994. Because revenues from these sales are primarily a recovery of costs in accordance with applicable tariff regulations, they have little impact on the Company's annual earnings. Gas operating revenues during the first six months of 1995 were $79.4 million compared to $107.2 million for the first six months of 1994, a decrease of $27.8 million. The components of the changes in gas operating revenues for the six months ended June 30, 1995 as compared to the same period in 1994 are as follows: (Millions of Dollars) Sales to firm customers: Base rates* $ 2.0 Gas cost recoveries (23.4) Sales volume changes (5.3) Subtotal (26.7) Sales to interruptibles (1.7) Sales for resale (.1) Other operating revenue .7 Total $(27.8) Firm gas sales amounted to 11,713 Mmcf during the first six months of 1995, a decrease of 12.3% from the 1994 level of 13,357 Mmcf. Gas revenues from firm customers were $75.0 million in the current period compared to $101.7 million during the first six months of 1994. Sales of interruptible gas for the first six months of 1995 amounted to 469 Mmcf, a decrease of 268 Mmcf from 1994. Revenues from these sales were $1.4 million as compared to $3.1 million for the same period of 1994. Fuel, Purchased Electricity and Purchased Gas Costs, Excluding Gas Marketing The cost of fuel used in the production of electricity and purchased electricity costs decreased by $10.0 million for the first six months of 1995 when compared to the $69.0 million recorded during the same period of 1994. The components of the changes in electric energy costs are as follows: (Millions of Dollars) Prices paid for fuel and purchased power $( 4.2) Changes in kilowatt-hours generated or purchased ( 4.2) Deferred fuel charge ( 1.6) Total $(10.0) The average cost per kilowatt-hour generated and purchased was 2.47 cents in the first six months of 1995 and 2.64 cents for the same period of 1994. Purchased gas costs for utility operations, excluding the cost of gas purchased for the Company's diversified activities which is discussed in this year-to-date comparison under the heading "Diversified Activities", were $40.5 million for the first six months of 1995 compared to $65.3 million for the comparable period of 1994. The components of the change are as follows: (Millions of Dollars) Prices paid for gas suppliers* $(9.1) Gas sendout volume (10.4) Deferred fuel charges ( 5.3) Total $(24.8) *Net of refunds received from gas suppliers The average cost per Mcf purchased for the first six months of 1995, including transportation and storage costs, was $2.64 as compared to $3.38 for the same period of 1994. Other Operating and Maintenance Expenses The Company's total operation and maintenance expenses excluding fuel, purchased power and gas purchased for resale, decreased by $6.1 million compared to a year ago. Expenses from Diversified Activities accounted for $.5 million of this decrease, as described below. The decrease associated with utility operations was $5.6 million. This decrease is the result of recoverable Demand Side Management Cost which decreased $6.2 million when compared to the same period a year ago. Other operating and maintenance expense had a modest increase of $.6 million when compared to the same period of 1994. Diversified Activities Revenues from diversified activities increased by $78.5 million for the first six months of 1995 as compared to the same period of 1994. The increase is primarily the result of increased sales from gas marketing activities. While revenues from gas marketing activities were significantly higher during the first six months of 1995 as compared to the first six months of 1994, an extremely competitive market resulted in narrower profit margins during the current period. However, diversified earnings were enhanced by a $2.9 million gain realized as a result of the formation of the NORSTAR Partnership. These revenues were offset by increases in operating expenses for all diversified activities of $82.1 million, which is the result of increased gas purchases of $82.6 million, and offset by a decrease in depreciation, taxes and other operating expenses of $.5 million. Other Income, Deductions and Interest Charges - Net Other income, net of interest charges and other deductions, increased by $6.4 million during the first six months of 1995 when compared to the first six months of 1994. This increase is primarily the result of the lower costs of the investigation and litigation involving former officers and others, as well as the impact of the gain realized on the formation of the NORSTAR Partnership. PART II. OTHER INFORMATION Item 1. Legal Proceedings Regulatory Matters: NYPSC Report on Investigation Reference is made to Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 for background on the NYPSC proceeding (Case 93-M-0849) investigating the operations and management of the Company. On July 6, 1995, the NYPSC issued an order stating that the issues of the amount, timing and allocation of New York ratepayer refunds as a result of the investigation in Case 93-M-0849 should be considered in the context of the Company's current electric base rate case, and ordered the consolidation of the two cases. Further information regarding the report of the NYPSC Staff on its investigation of the Company as well as the Company's current electric base rate case is contained under the caption "Rate Activities" in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q. NJBPU Report on Investigation Reference is made to Item 3, Legal Proceedings, in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 for background on the NJBPU proceeding investigating the operations and management of RECO. On November 3, 1993, the NJBPU commenced its periodic management audit (Docket No. EA900302-48) of RECO. The audit findings are contained in three reports which were issued by the NJBPU on July 7, 1995. Further information regarding the NJBPU investigation and audit is contained under the caption "Rate Activities" in Part I, Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q. New York Electric Base Rate Case Reference is made to the information contained under the caption "Rate Activities" in Part I, Item 2." Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q for a description of the Company's electric base rate case filed with the NYPSC (Case 95-E-0491) on May 25, 1995. At a prehearing conference on June 15, 1995, Administrative Law Judge Vaughn established a schedule for this proceeding. Cross examination of the Company's direct case is scheduled for the week of August 28, 1995. Staff and other intervenors must file their direct testimony by October 5, 1995. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.2 By-Laws, as amended through June 29, 1995. 10.30 Letter agreement dated April 6, 1995 between Orange and Rockland Utilities, Inc. and G. D. Caliendo regarding participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ORANGE AND ROCKLAND UTILITIES, INC. (Registrant) Date: August 10, 1995 By ROBERT J. MCBENNETT Robert J. McBennett Treasurer and Controller Date: August 10, 1995 By JOHN T. FINNEGAN John T. Finnegan Assistant Treasurer 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 JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1995 JUN-30-1995 PER-BOOK 861,744 19,809 219,632 201,335 0 1,302,520 68,266 127,483 174,066 369,815 2,774 43,261 359,454 9,965 0 26,050 19,190 1,384 0 539 470,088 1,302,520 557,206 11,732 512,603 524,335 32,871 2,196 35,067 16,024 19,043 1,569 17,474 17,476 13,852 24,127 1.28 0
EX-3 3 As amended through 6/29/95 ORANGE AND ROCKLAND UTILITIES, INC. (New York) BY-LAWS ARTICLE ONE OFFICES SECTION 1.1. Corporation's Office in New York; Mailing Address for Service of Process. The location of the Corporation's office within the State of New York, and the post office address to which the Secretary of State of the State of New York shall mail a copy of process in any action or proceeding against the Corporation that may be served upon him, shall be in each case as stated in the Certificate of Incorporation. ARTICLE TWO SHAREHOLDERS' MEETINGS *SECTION 2.1. Annual Meetings. An annual meeting of shareholders to elect directors and transact such other business as may properly be presented to the meeting shall be held on such date of each year and at such time as the Board of Directors shall fix. *SECTION 2.2. Special Meetings. Unless otherwise expressly provided in the Restated Certificate of Incorporation of the Corporation with respect to the Cumulative Preferred Stock or Preference Stock and except for special meetings of shareholders called pursuant to Section 603 of the New York Business Corporation Law, special meetings of the shareholders may only be called by the Board of Directors, its Chairman, its Vice Chairman or the President. Special meetings of shareholders of the Corporation may not be called by any other person or persons. At any such special meeting only such business may be transacted as is related to the purpose or purposes set forth in the notice required by Section 2.4. SECTION 2.3. Place of Meetings. Each annual meeting shall be held at such place, within or without the State of New York, as _______________ * Amended 6/29/95 the Board of Directors, its Chairman or the President shall fix. Each special meeting shall be held at such place, within or without the State of New York, as the person or persons calling the meeting shall fix. If no place shall be so fixed, the meeting shall be held at the offices of the Corporation in the State of New York. SECTION 2.4. Notice of Meetings. (a) Written notice of a meeting of shareholders shall be given, personally or by mail, not less than ten nor more than fifty days before the meeting to each shareholder entitled to vote at such meeting; such notice shall state the date, place and hour of the meeting and, unless it is the annual meeting, shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. Notice of a special meeting shall also state the purpose or purposes for which the meeting is called. If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to each shareholder at his address as it appears on the record of shareholders, or, if he shall have duly filed with the Secretary a written request that notices to him be mailed to some other address, then directed to him at such other address. (b) When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. However, if after adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record on the new record date who is entitled to notice under paragraph (a) of this Section 2.4. SECTION 2.5. Waiver of Notice. Notice of a meeting need not be given to any shareholder who submits a signed waiver of notice, in person or by proxy, whether before or after the meeting. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him. SECTION 2.6. Quorum. Except as otherwise required by law or the Certificate of Incorporation, the holders of record of a majority of the shares entitled to be voted present in person or represented by proxy at a meeting shall be necessary and sufficient to constitute a quorum for the transaction of business at the meeting, but in the absence of a quorum the holders of record present or represented by proxy at such meeting may vote to adjourn the meeting from time to time. A quorum once present to organize a meeting is not broken by the subsequent withdrawal of any shareholders. SECTION 2.7. Presiding Officer and Secretary at Meetings. Each shareholders' meeting shall be presided over by the Chairman of the Board of Directors or in his absence by the Vice Chairman of the Board of Directors, if any, or in the absence of both of them by the President, or if none of them is present by the person designated in writing by the Chairman of the Board of Directors, or if no person is so designated, then a chairman of the meeting shall be chosen by the meeting by a plurality vote. The Secretary or in his absence an Assistant Secretary shall act as secretary of the meeting, or if no such officer is present a secretary of the meeting shall be designated by the person presiding at the meeting. SECTION 2.8. Voting. Except as otherwise required by law or the Certificate of Incorporation: (a) each shareholder of record shall be entitled at every meeting of shareholders to one vote in person or by proxy for each share standing in his name on the record of shareholders; (b) directors shall be elected by a plurality vote; *(c) each other matter properly presented to any meeting in accordance with these By-Laws shall be decided by a majority of the votes cast on the matter. SECTION 2.9. Proxies. Every proxy must be executed in writing by the shareholder or by his attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the shareholder executing it, except in those cases where an irrevocable proxy is expressly stated to be given and is permitted by law. SECTION 2.10. Inspectors of Election. At any meeting for the election of directors, the presiding officer shall appoint two inspectors of election to serve at such meeting. The inspectors shall be sworn to execute their duties with strict impartiality and according to the best of their ability. SECTION 2.11. Record Date. (a) For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix in ______________ * Amended 6/29/95 advance a date as the record date for any such determination of shareholders. Such date shall not be more than fifty nor less than ten days before the date of the meeting, nor more than fifty days prior to any other action. (b) When a determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board of Directors shall fix a new record date under this section for the adjourned meeting. *SECTION 2.12. Business at Annual Meetings. (a) No business may be transacted at an annual meeting of shareholders, other than business that is either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) otherwise properly brought before the annual meeting by any shareholder of the Corporation (1) who is a shareholder of record on the date of the giving of the notice provided for in this Section 2.12 and on the record date for the determination of shareholders entitled to vote at such annual meetings and (2) who complies with the notice procedure set forth in this Section 2.12. (b) In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. (c) To be timely, a shareholder's notice to the Secretary pursuant to this Section 2.12 must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that less than 100 days' notice of the date of the annual meeting is given to shareholders or there is less than 100 days' prior public disclosure of the date of the annual meeting, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. ______________ * Added 6/29/95 (d) To be in proper written form, a shareholder's notice to the Secretary must set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such shareholder, (iii) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by such shareholder, (iv) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business and (v) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. (e) No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.12; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.12 shall be deemed to preclude discussion by any shareholder of any such business. If the Chairman of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. ARTICLE THREE DIRECTORS SECTION 3.1. Number; Term of Office. The business of the Corporation shall be managed under the direction of the Board of Directors. The Board of Directors shall consist of not less than 7(1) or more than 15 persons, the exact number (i) to be 12 persons upon adoption of this Section 3.1, subject to change exclusively by the Board of Directors as provided in this Section 3.1, and (ii) if to be changed from 12 persons to some other number not less than 7 or more than 15 persons subsequent to the adoption of this Section 3.1, to be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the _________ (1) Section 704(a) of the NYBCL requires a minimum of three Directors per class on a staggered board. The minimum number of Directors for O&R is nine. total number of authorized directors from time to time (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). At the annual meeting of the shareholders of the Corporation at which this Section 3.1 is adopted, the directors shall be classified into three classes, as nearly equal in number as possible, with the term of office of the first class to expire at the 1988 annual meeting of shareholders, the term of office of the second class to expire at the 1989 annual meeting of shareholders and the term of office of the third class to expire at the 1990 annual meeting of shareholders. At each annual meeting of the shareholders of the Corporation following the annual meeting of the shareholders at which this Section 3.1 is adopted, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election. SECTION 3.2. Resignation; Removal. Any director of the Corporation may resign at any time either by oral tender of resignation at any meeting of the Board of Directors or by giving written notice thereof to the Corporation. Such resignation shall take effect at the time specified therefor, and unless otherwise specified with respect thereto the acceptance of such resignation shall not be necessary to make it effective. Subject to the rights of the holders of any class or series of Preferred Stock having preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director or directors, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80 percent of the combined voting power of all of the then-outstanding shares of stock of all classes and series of the Corporation entitled to vote generally (the "Voting Stock"), voting together as a single class (it being understood that, for all purposes of these By-Laws, each share of the Voting Stock shall have the number of votes granted to it pursuant to ARTICLE SECOND of the Certificate of Incorporation or any designation of the rights, powers and preferences of any class or series of the Preferred Stock of the Corporation made pursuant to said ARTICLE SECOND (a "Preferred Stock Designation")). The Corporation must notify the director of the grounds of his impending removal and the director shall have an opportunity, at the expense of the Corporation, to present his defense to the shareholders by a statement which accompanies or precedes the Corporation's solicitation of proxies to remove him. The term "entire Board of Directors" as used in these By-Laws means the total number of directors which the Corporation would have if there were no vacancies. SECTION 3.3. Vacancies. Except as otherwise fixed pursuant to the provisions of ARTICLE SECOND of the Certificate of Incorporation relating to the rights of the holders of any class or series of Preferred Stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause may be filled only by a majority vote of the directors then in office, even though less than a quorum of the Board of Directors, acting at a regular or special meeting. Any director elected in accordance with the preceding sentence shall hold office until the next annual meeting of shareholders at which the election of directors is in the regular order of business and until his successor has been elected and qualified. No decrease in the authorized number of directors constituting the entire Board of Directors shall shorten the term of any incumbent director. SECTION 3.4 Qualifications. Each of the directors shall be at least 18 years of age. Each director elected to the Board of Directors pursuant to the provisions of Section 3.1 or Section 3.3 shall not be 70 years of age or older upon election, except those directors elected on or before April 11, 1990 and who are 60 years of age or older on such date shall not be 75 years of age or older upon election. The directors need not be shareholders of the Corporation. SECTION 3.5. Regular and Annual Meetings; Notice. Regular meetings of the Board of Directors shall be held at such time and at such place, within or without the State of New York, as the Board of Directors may from time to time prescribe. No notice need be given of any regular meeting and a notice, if given, need not specify the purposes thereof. A meeting of the Board of Directors may be held without notice immediately after an annual meeting of shareholders at the same place as that at which such meeting was held. SECTION 3.6. Special Meetings; Notice. A special meeting of the Board of Directors may be called at any time by the Board of Directors or its Chairman and shall be called by the Board of Directors, its Chairman or the Secretary upon receipt of a written request to do so specifying the matter or matters, appropriate for action at such a meeting, proposed to be presented at the meeting and signed by at least two directors. Any such meeting shall be held at such time and at such place, within the State of New York (or without the State of New York if the Chairman of the Board of Directors shall so direct), as shall be stated in the request or as shall be determined by the body or person calling such meeting. Notice of such meeting stating the time and place thereof shall be given (a) by deposit of the notice in the mails (first class, postage prepaid) at least two days before the day fixed for the meeting addressed to each director at his address as it appears on the Corporation's records or at such other address as the director may have furnished the Corporation for that purpose, or (b) by dispatch of the notice similarly addressed by telegraph, telex, cable or other electronic means of communication or by delivery of such notice by telephone or in person, in each case at least 24 hours before the time fixed for the meeting. SECTION 3.7. Waiver of Notice. Notice of a meeting of the Board of Directors or of any committee thereof need not be given to any director who submits a signed waiver of notice whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. *SECTION 3.8. Chairman of the Board; Presiding Officer and Secretary at Meetings. The Board of Directors at its first meeting following the annual meeting of shareholders in each year may elect one of its members to serve at its pleasure as Chairman of the Board. The Chairman of the Board may but need not be an officer of or employed in an executive or any other capacity by the Corporation. Each meeting of the Board of Directors shall be presided over by the Chairman of the Board or in his absence by the Vice Chairman of the Board, if any, or if neither is present by such member of the Board of Directors as shall be chosen by the meeting. The Secretary or in his absence an Assistant Secretary shall act as secretary of the meeting, or if no such officer is present, a secretary of the meeting shall be designated by the person presiding at the meeting. The Chairman of the Board of Directors shall preside at all meetings of the shareholders, and shall have such further powers and duties as may be conferred by the Board of Directors. SECTION 3.9. Quorum; Voting. A majority of the whole Board of Directors shall constitute a quorum for the transaction of business, but in the absence of a quorum a majority of those present (or if only one be present, then that one) may adjourn the meeting, without notice other than announcement at the meeting, until such time as a quorum is present. In the absence of any such announcement notice of any adjournment shall be given in accordance with the provisions of Section 3.6. SECTION 3.10. Meeting by Telephone. At the direction of the Chairman of the Board of Directors, members of the Board of Directors or of any committee thereof may participate in meetings _______________ * Amended 7/14/94 of the Board of Directors or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation shall constitute presence in person at such meeting. SECTION 3.11. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board of Directors or of such committee. SECTION 3.12. Compensation. A director shall receive such compensation, if any, for his services as a director or as a member of any committee of the Board of Directors as may from time to time be fixed by the Board of Directors, which compensation may be based, in whole or in part, upon his attendance at meetings of the Board of Directors or of its committees. He may also be reimbursed for his expenses in attending any meeting. SECTION 3.13. Executive Committee. (a) The Board of Directors, at its first meeting following the annual meeting of shareholders in each year, may, by resolution adopted by a majority of the entire Board of Directors, appoint an Executive Committee of the Board of Directors to consist of the Chairman of the Board of Directors and two or more additional directors as the Board of Directors may from time to time determine. The Executive Committee shall have, and may exercise during the intervals between the meetings of the Board of Directors, all the powers vested in the Board of Directors, except that the Executive Committee shall not have authority as to any of the following matters: the declaration of dividends; the submission to shareholders of any action as to which shareholder action is required by law; the filling of vacancies on the Board of Directors or on any committee thereof; the fixing of compensation of any director for serving on the Board of Directors or on any committee thereof; the amendment or repeal of these By-Laws or the adoption of new By-Laws; and the amendment or repeal of any resolution of the Board of Directors which by its terms shall not be so amendable or repealable. (b) The members of the Executive Committee shall serve at the pleasure of the Board of Directors. The Board of Directors shall designate the Chairman of the Executive Committee and fix the compensation, if any, for his service in such capacity. (c) Three members of the Executive Committee shall constitute a quorum. (d) Meetings of the Executive Committee may be called by the Chairman of the Executive Committee and shall be called by the Chairman of the Executive Committee upon receipt of a written request to do so specifying the matter or matters, appropriate for action at such a meeting, proposed to be presented at the meeting and signed by at least two members of the Executive Committee. (e) The Executive Committee shall serve as the Nominating Committee of the Board of Directors and, in such capacity, when vacancies in the Board of Directors occur, shall evaluate candidates and aid the Board of Directors in attracting qualified candidates to fill such vacancies. *SECTION 3.14. Audit Committee. (a) The Board of Directors at its first meeting following the annual meeting of shareholders in each year, may, by resolution adopted by a majority of the entire Board of Directors, appoint an Audit Committee of the Board of Directors to consist of three or more directors (none of whom shall be officers of the Corporation) as the Board of Directors may from time to time determine. In order to bring a fresh perspective to the Audit Committee, members should be rotated periodically. The Board of Directors will select a member to be chairperson. (b) The Audit Committee as a committee of the Board of Directors is primarily responsible to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information which will be provided to the shareholders and others, the systems of internal controls which management and the Board of Directors has established, and the audit process. The Audit Committee shall have adequate resources to discharge its responsibilities. The Audit Committee shall have the following specific duties and functions and such other duties and functions as from time to time may be prescribed by the Board of Directors: (i) Provide an open avenue of communication between the internal auditors, the independent accountant, and the Board of Directors. (ii) Periodically review and update the Audit Committee's charter and the charter of the internal audit department. (iii) Review management's plans for engaging the independent accountant to perform management advisory services, and projected fees, to satisfy itself that the independence of the auditor is protected. _______________ * Amended 6/23/94 (iv) Recommend to the Board of Directors the independent accountants to be nominated, approve the compensation of the independent accountant, and review and approve the discharge of the independent accountant. (v) Review and concur in the appointment, replacement, reassignment, or dismissal of the manager of internal auditing. (vi) Confirm and assure the independence of the internal auditors and the independent accountant. (vii) Inquire of management, the manager of internal auditing, and the independent accountant about the process each performs to assess significant risks or exposures and evaluate the steps management has taken to minimize such risks to the Corporation. (viii) Consider, in consultation with the independent accountant and the manager of internal auditing, the audit scope and plan of the internal auditors and the independent accountant to ensure coverage is appropriate and the extent to which such plans can be relied upon to detect fraud or weaknesses in controls. The Audit Committee shall formally approve the audit plan of the internal audit department. (ix) Review with the manager of internal auditing and independent accountant the coordination of the audit effort to assure completeness of coverage, reduction of redundant efforts, and the effective use of the audit resources. (x) Consider and review with the independent accountant and the manager of internal auditing: 1. Their assessment of the adequacy of the Corporation's internal controls, including computerized information system controls and security. 2. Any related significant findings and recommendations of the independent accountant and internal auditing, together with management's responses thereto. (xi) Review with management and the independent accountant at the completion of the annual examination: 1. The Corporation's annual financial statements, related footnotes for completeness and appropriateness of accounting principles. 2. The independent accountant's audit of the Corporation's various financial statements and the reports thereon. 3. Any significant changes required in the independent accountant's audit plan. 4. Any serious difficulties or disputes with management encountered during the course of the audit and how they were resolved. 5. Other matters related to the conduct of the audit which are to be communicated to the Audit Committee under generally accepted auditing standards. (xii) Consider and review with management and the manager of internal auditing: 1. Significant findings resulting from internal audits. 2. Any difficulties encountered by the internal audit department in the course of its audits, including any restrictions on the scope of work or access to required information. 3. The internal audit department budget and staffing. 4. The internal audit department charter. (xiii) Review interim filings with the Securities and Exchange Commission and other published documents containing the Corporation's financial statements. (xiv) Review policies and procedures with respect to officers' expense accounts and perquisites, including their use of corporate assets, and consider the results of any review of these areas by internal auditing or the independent accountant. (xv) Review with the manager of internal auditing and the independent accountant the results of their review of the Corporation's monitoring of compliance with the Corporation's code of conduct. The Audit Committee shall ensure that appropriate action is taken in cases of significant violations of such code. (xvi) Meet with the manager of internal auditing, the independent accountant, and management in separate executive sessions to discuss any matters that the Audit Committee or these groups believe should be discussed privately with the Audit Committee. The Audit Committee should also meet periodically in executive session to assess management's effectiveness and to assess the performance of the internal audit department. (xvii) Report Audit Committee actions to the Board of Directors with such recommendations as the Audit Committee may deem appropriate. (xviii) The Audit Committee shall have the power to conduct or authorize investigations into any matters within the Audit Committee's scope of responsibilities. The Audit Committee shall be empowered to retain independent counsel, accountants, or others to assist it in the conduct of any investigation. (xix) The Audit Committee shall meet at least four times a year, or more frequently as circumstances require. The Audit Committee shall meet separately in executive session with the independent accountant and the manager of internal auditing at each meeting. Minutes of the meetings shall be prepared and filed with the records of the Corporation. Three or more members shall constitute a quorum for the purpose of conducting Audit Committee functions. *(c) The Audit Committee shall have the following responsibilities and duties with regard to the Company's ethics program, as approved and endorsed by the Board of Directors (the "Ethics Program"): (i) Provide oversight and direction with regard to the Company's Ethics Program and to the ethics officer (the "Ethics Officer") appointed pursuant thereto in _______________ * Added 11/03/94 a manner that insures that the Company will operate in accordance with ethical principles; (ii) Receive reports at least quarterly from the Ethics Officer detailing the status of ethics initiatives, investigations, disciplinary procedures, compliance efforts and other related activities; (iii) Report to the entire Board of Directors on a periodic basis regarding the operation of the Company's Ethics Program and on matters related thereto deemed by the Committee to be of interest and significance to the Board; (iv) Review, determine and recommend to the entire Board of Directors, the action(s), if any, beyond those undertaken by the Ethics Officer, that are necessary to satisfactorily resolve any reported violations of the Company's Ethics Program; (v) Be available, through the Ethics Officer, as an avenue for employees, vendors and others to express concerns regarding possible ethical transgressions involving senior management of the Company. SECTION 3.15. Other Committees. The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may appoint such committees, in addition to the committees specified in this ARTICLE THREE, as it may deem appropriate. Each such committee shall consist of three or more members of the Board of Directors and shall have such powers of the Board of Directors as shall be conferred or authorized by such resolution and as permitted by law. Each such committee shall have such name as may be determined by the resolution appointing it. Each such committee shall serve at the pleasure of the Board of Directors. *SECTION 3.16. Nomination of Directors. (a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation except as may be otherwise expressly provided in the Restated Certificate of Incorporation of the Corporation with respect to the right of holders of Cumulative Preferred Stock and Preference Stock to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of shareholders (i) by _______________ * Added 6/29/95 or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any shareholder of the Corporation (1) who is a shareholder of record on the date of the giving of the notice provided for in this Section 3.16 and on the record date for the determination of shareholders entitled to vote at such annual meeting and (2) who complies with the notice procedures set forth in this Section 3.16. (b) In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. (c) To be timely, a shareholder's notice to the Secretary pursuant to this Section 3.16 must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 120 days prior to the date of the annual meeting of shareholders; provided, however, that in the event that less than 100 days' notice of the date of the annual meeting is given to shareholders or there is less than 100 days' prior public disclosure of the date of the annual meeting, notice by the shareholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever first occurs. (d) To be in proper written form, a shareholder's notice to the Secretary must set forth (i) as to each person whom the shareholder proposes to nominate for election as a director (1) the name, age, business address and residence address of the person, (2) the principal occupation or employment of the person, (3) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by the person and (4) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (ii) as to the shareholder giving the notice (1) the name and record address of such shareholder, (2) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by such shareholder, (3) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such shareholder, (4) a representation that such shareholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (5) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. (e) No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 3.16. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. ARTICLE FOUR OFFICES *SECTION 4.1. Appointment; Qualification. The officers of the Corporation shall be a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers, each of whom shall be appointed by the Board of Directors. The Board of Directors may appoint a Vice Chairman of the Board of Directors and such other officers as it may from time to time determine. Two or more offices may be held by the same person, except the offices of President and Secretary. SECTION 4.2. Term of Office. The term of office of the officers of the Corporation shall be until the first meeting of the Board of Directors following the next annual meeting of shareholders. Subject to Sections 4.3 and 4.4, each officer shall hold office until the expiration of the term for which he is appointed and until his successor is appointed and qualified. Any vacancy in any office shall be filled for the unexpired portion of the term by the Board of Directors. *SECTION 4.3. Resignation. Any officer of the Corporation may resign at any time by giving written notice of such resignation to the Board of Directors, its Chairman, the Chief Executive Officer, the President or the Secretary of the Corporation. _______________ * Amended 7/14/94 SECTION 4.4. Removal. Any officer of the Corporation appointed by the Board of Directors may be removed at any time, with or without cause, by the Board of Directors. SECTION 4.5. Compensation. The compensation of each officer shall be such as the Board of Directors may from time to time determine. *SECTION 4.6. Vice Chairman of the Board of Directors. The Vice Chairman of the Board of Directors, if one be appointed, shall preside in the absence of the Chairman of the Board of Directors at all meetings of the shareholders and the Board of Directors. In the absence or disability of the Chairman of the Board of Directors, he shall exercise the powers and perform the duties of the Chairman of the Board of Directors, subject to the direction of the Board of Directors. He shall have such further powers and duties as may be conferred upon him by the Board of Directors. **SECTION 4.7. Chief Executive Officer. The Chief Executive Officer shall act as the general manager and chief executive officer of the Corporation and, subject to the direction of the Board of Directors, shall have general supervision of the business and affairs of the Corporation. The Chief Executive Officer shall have such further powers and duties as may be conferred by the Board of Directors. ***SECTION 4.8. President. The President, subject to the direction of the Board of Directors, shall have charge of the business of the Corporation relating to general operation, and shall perform all the duties of his office prescribed by law or the Board of Directors. In the absence or disability of the Chairman of the Board of Directors and the Vice Chairman of the Board of Directors, if any, the President shall exercise the powers and perform the duties of the Chairman of the Board of Directors, subject to the direction of the Board of Directors. SECTION 4.9. Vice President. Each Vice President shall have such duties and powers as are usually incident to such office and as the Board of Directors shall from time to time prescribe. In the absence or disability of the President, the Vice President, or if there shall be more than one Vice President, then the one designated by the Board of Directors, shall exercise the powers and _______________ * Former SECTION 4.7, renumbered 7/14/94 ** Added 7/14/94 *** Amended 7/14/94 perform the duties of the President, subject to the direction of the Board of Directors. SECTION 4.10. Secretary. The Secretary shall be the Secretary both of the Board of Directors and of the Corporation. The Secretary shall attend all meetings of shareholders and of the Board of Directors and keep accurate records thereof. The Secretary shall be custodian of the corporate seal and shall perform the other duties incident to the office of Secretary, subject to the direction of the Board of Directors. SECTION 4.11. Assistant Secretary. In the absence or disability of the Secretary, each Assistant Secretary shall have the powers and perform the duties of the Secretary, subject to the direction of the Board of Directors. SECTION 4.12. Treasurer. The Treasurer shall have care of all funds and securities of the Corporation and shall exercise the powers and shall perform the duties incident to the office of Treasurer, subject to the direction of the Board of Directors. SECTION 4.13. Assistant Treasurer. In the absence or disability of the Treasurer, each Assistant Treasurer shall have the power and perform the duties of the Treasurer, subject to the direction of the Board of Directors. SECTION 4.14. Other Officers. Each other officer of the Corporation shall exercise the powers and shall perform the duties incident to his office, subject to the direction of the Board of Directors. SECTION 4.15. Bond. Any officer of the Corporation, if so required by the Board of Directors, shall give to the Corporation such bond or other security for the faithful performance of his duties as may be satisfactory to the Board of Directors. ARTICLE FIVE INDEMNIFICATION AND INSURANCE SECTION 5.1. Indemnification. (a) The Corporation shall indemnify to the fullest extent now or hereafter provided for or permitted by law each person involved in, or made or threatened to be made a party to, any action, suit, claim or proceeding, arbitration, alternative dispute resolution mechanism, investigation, administrative or legislative hearing or any other actual, threatened, pending or completed proceeding, whether civil or criminal, or whether formal or informal, and including an action by or in the right of the Corporation or any other corporation, or any partnership, joint venture, trust, employee benefit plan or other enterprise, whether profit or non-profit (any such entity, other than the Corporation, being hereinafter referred to as an "Enterprise"), and including appeals therein (any such process being hereinafter referred to as a "Proceeding"), by reason of the fact that such person, such person's testator or intestate (i) is or was a director or officer of the Corporation, or (ii) while serving as a director or officer of the Corporation, is or was serving, at the request of the Corporation, as a director, officer, or in any other capacity, any other Enterprise, against any and all judgments, fines, penalties, amounts paid in settlement, and expenses, including attorneys' fees, actually and reasonably incurred as a result of or in connection with any Proceeding, or any appeal therein, except as provided in Section 5.1(b). (b) No indemnification shall be made to or on behalf of any such person if a judgment or other final adjudication adverse to such person establishes that such person's acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that such person personally gained in fact a financial profit or other advantage to which such person was not legally entitled. In addition, no indemnification shall be made with respect to any Proceeding initiated by any such person against the Corporation, or a director or officer of the Corporation, other than to enforce the terms of this ARTICLE FIVE, unless such Proceeding was authorized by the Board of Directors. Further, no indemnification shall be made with respect to any settlement or compromise of any Proceeding unless and until the Corporation has consented to such settlement or compromise. (c) Written notice of any Proceeding for which indemnification may be sought by any person shall be given to the Corporation as soon as practicable. The Corporation shall then be permitted to participate in the defense of any such proceeding or, unless conflicts of interest or position exist between such person and the Corporation in the conduct of such defense, to assume such defense. In the event that the Corporation assumes the defense of any such Proceeding, legal counsel selected by the Corporation shall be acceptable to such person. After such an assumption, the Corporation shall not be liable to such person for any legal or other expenses subsequently incurred unless such expenses have been expressly authorized by the Corporation. In the event that the Corporation participates in the defense of any such Proceeding, such person may select counsel to represent such person in regard to such a Proceeding; however, such person shall cooperate in good faith with any request that common counsel be utilized by the parties to any Proceeding who are similarly situated, unless to do so would be inappropriate due to actual or potential differing interests between or among such parties. (d) In making any determination regarding any person's entitlement to indemnification hereunder, it shall be presumed that such person is entitled to indemnification, and the Corporation shall have the burden of proving the contrary. SECTION 5.2. Advancement of Expenses. Except in the case of a Proceeding against a director or officer specifically approved by the Board of Directors, the Corporation shall, subject to Section 5.1 above, pay expenses actually and reasonably incurred by or on behalf of a director or officer in defending any Proceeding in advance of the final disposition of such Proceeding. Such payments shall be made promptly upon receipt by the Corporation, from time to time, of a written demand of such person for such advancement, together with an undertaking by or on behalf of such person to repay any expenses so advanced to the extent that the person receiving the advancement is ultimately found not to be entitled to indemnification for part or all of such expenses. SECTION 5.3. Rights Not Exclusive. The rights to indemnification and advancement of expenses granted by or pursuant to this ARTICLE FIVE (i) shall not limit or exclude, but shall be in addition to, any other rights which may be granted by or pursuant to any statute, corporate charter, by-law, resolution of shareholders or directors or agreement, (ii) shall be deemed to constitute contractual obligations of the Corporation to any director or officer who serves in a capacity referred to in Section 5.1 at any time while this ARTICLE FIVE is in effect, (iii) shall continue to exist after the repeal or modification of this ARTICLE FIVE with respect to events occurring prior thereto, and (iv) shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the estate, spouse, heirs, executors, administrators or assigns of such person. It is the intent of this ARTICLE FIVE to require the Corporation to indemnify the persons referred to herein for the aforementioned judgments, fines, penalties, amounts paid in settlement, and expenses, including attorney's fees, in each and every circumstance in which such indemnification could lawfully be permitted by express provisions of by-laws, and the indemnification required by this ARTICLE FIVE shall not be limited by the absence of an express recital of such circumstances. SECTION 5.4. Indemnification of Employees and Others. The Corporation may, from time to time, with the approval of the Board of Directors, and to the extent authorized, grant rights to indemnification, and to the advancement of expenses, to any employee or agent of the Corporation or to any person serving at the request of the Corporation as a director or officer, or in any other capacity, any other Enterprise, to the fullest extent of the provisions of this ARTICLE FIVE with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. SECTION 5.5. Authorization of Contracts. The Corporation may, with the approval of the Board of Directors, enter into an agreement with any person who is, or is about to become, a director, officer, employee or agent of the Corporation, or who is serving, or is about to serve, at the request of the Corporation, as a director, officer, or in any other capacity, any other Enterprise, which agreement may provide for indemnification of such person and advancement of expenses to such person upon terms, and to the extent, not prohibited by law. The failure to enter into any such agreement shall not affect or limit the rights of any such person under this ARTICLE FIVE. SECTION 5.6. Insurance. The Corporation may purchase and maintain insurance to indemnify the Corporation and any person eligible to be indemnified under this ARTICLE FIVE within the limits permitted by law. ARTICLE SIX SHARES *SECTION 6.1. Certificates Representing Shares. The shares of the Corporation shall be represented by certificates in such form consistent with law and the Certificate of Incorporation as the Board of Directors may from time to time prescribe, and may be signed by the Chairman of the Board of Directors, or the Vice Chairman of the Board of Directors, if any, or the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. The signatures of the officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation or any of its employees. Such certificates shall also bear the seal of the Corporation or a facsimile thereof. SECTION 6.2. Transfer of Shares. Shares of the Corporation shall be transferable on the books of the Corporation by the holder of record thereof or by his attorney upon surrender of the certificate representing such shares with an assignment endorsed thereon or attached thereto duly executed and with such proof of _______________ * Amended 7/14/94 authenticity of signatures as the Corporation may reasonably require. Prior to the transfer of shares of stock on the books of the Corporation and issuance of a new certificate to the transferee, the Corporation may treat the holder of record of a share as the complete owner thereof exclusively entitled to receive dividends thereon and to vote such share and otherwise entitled to all the rights and powers of a complete owner thereof, notwithstanding notice to the contrary. SECTION 6.3. Lost Certificates. The Corporation shall issue a new certificate for shares to replace a certificate theretofore issued by it alleged to have been lost on such reasonable terms and conditions as the Board of Directors may from time to time prescribe. ARTICLE SEVEN MISCELLANEOUS SECTION 7.1. Inspection of Records. The Board of Directors shall have authority, except as otherwise provided by law, to determine the extent to which the books and records of account of the Corporation shall be open to inspection by a shareholder. SECTION 7.2. Waiver of Notice and Lapse of Time. Any action that is authorized to be taken after notice or after the lapse of a prescribed period of time may be taken without notice and without the lapse of such period of time, if at any time before or after such action is completed the person entitled to such notice or entitled to participate in the action to be taken, or in the case of a shareholder, his attorney-in-fact, submits a signed waiver of notice or of such time requirement. SECTION 7.3. Fiscal Year. The fiscal year of the Corporation shall end on December 31 in each year. SECTION 7.4. Corporate Seal. The corporate seal shall be in such form as the Board of Directors may from time to time prescribe. ARTICLE EIGHT AMENDMENT OF BY-LAWS SECTION 8.1. Amendment of By-Laws. These By-Laws may be amended, added to, rescinded or repealed at any meeting of the Board of Directors or of the shareholders, provided notice of the proposed change was given in the notice of the meeting or, in the case of a meeting of the Board of Directors, in a notice given not less than two days prior to the meeting; provided, however, that, notwithstanding any other provisions of these By-Laws or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law, the Certificate of Incorporation, any Preferred Stock Designation or these By-Laws, the affirmative vote of the holders of at least 80 percent of the combined voting power of all the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal any provision of Section 3.1, 3.2 or 3.3 of these By-Laws or any provision of these By-Laws pertaining to the alteration, amendment or repeal of Section 3.1, 3.2 or 3.3 of these By-Laws. BOD\BY-LAWS.ORU 6/29/95 EX-10 4 April 6, 1995 Mr. G. D. Caliendo 1079 Newgate Drive Allentown, PA 18103 Dear Mr. Caliendo: In connection with and as part of the consideration for your retention by Orange and Rockland Utilities, Inc. and election as Vice President - General Counsel & Corporate Secretary, the Board wishes to enter into this letter agreement concerning your participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. (the "Plan"). Upon your election as an officer, you will become a participant in the Plan and your participation will be governed in all respects by the terms of the Plan, except to the extent specifically provided otherwise as follows: 1. Upon your participation in the Plan, you shall be treated as having satisfied the five years of Service as an Officer requirement for purposes of eligibility for a Vested Retirement Allowance, other Retirement Allowances and Death Allowance protection, but not for the purpose of the calculation of the amount of any such Allowance. 2. For each of the first five years of Service you complete under the Plan, you will receive credit under the Plan for two years of Service. Accordingly, at the end of 1995, you will have credit for two years of Service under the Plan. If you complete a year of Service under the Plan in 1996, you will then have four years of Service under the Plan, and so on through 1999. Thereafter, you will be credited with one year of Service under the Plan for each year of Service you complete under the Plan in accordance with its terms. 3. Because at that time you will be considered to have completed eleven years of Service under the Plan, once you have actually completed six years of Service under the Plan, in accordance with Section 2(B) of the Plan, your compensation covered by the Plan shall include a portion of your corporate performance based annual award declared under the Annual Incentive Plan provisions of the Company's Incentive Compensation Plan. Mr. G. D. Caliendo April 6, 1995 Page 2 4. In the event your Final Average Compensation must be determined at such time when you have not been an Officer covered by the Plan for 36 months, your Final Average Compensation shall be computed by taking the sum of your compensation (on a monthly basis) covered by the Plan for each month you are an Officer covered by the Plan and dividing the sum by that number of months. In all other respects, the terms of the Plan shall be applicable with respect to your participation and benefit under the Plan. Please indicate your acceptance of this letter agreement by signing the extra copy provided and returning it to us. /s/ H. Kent Vanderhoef H. Kent Vanderhoef Chairman of the Board /s/ James F. O'Grady, Jr. James F. O'Grady, Jr. Chairman, Compensation Committee of the Board I accept the foregoing letter agreement concerning my participation in the Officers' Supplemental Retirement Plan of Orange and Rockland Utilities, Inc. and evidence my acceptance by setting forth my signature this __6___ day of ____April______________, 1995. WITNESS: /s/ D. L. Peoples /s/ G. D. Caliendo G. D. Caliendo