SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) March 6, 1998
-------------
CONECTIV
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware and Virginia I-13895 51-0377417
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
800 King Street, P.O. Box 231, Wilmington, Delaware 19899
--------------------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 302-429-3114
------------
None
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On August 12, 1996, Delmarva Power & Light Company (Delmarva) and Atlantic
Energy, Inc. (Atlantic) announced plans to merge. Final regulatory approvals
were obtained on February 27, 1998, and the merger became effective
March 1, 1998.
Prior to the merger, Atlantic was an investor-owned holding company which owned
Atlantic City Electric Company (ACE), an electric utility, and subsidiaries
engaged in nonutility businesses. ACE serves approximately 481,000 customers
in a 2,700 square mile area in southern New Jersey. Atlantic's 1997 operating
revenues and net income were $1,102.4 million and $74.4 million, respectively,
and its total assets were $2,723.9 million as of December 31, 1997. Atlantic's
assets consist principally of electric generating, transmission, and
distribution plant and those assets will continue to be used in the electric
business.
Conectiv, a corporation formed to accomplish the merger, holds the common stock
of Delmarva and ACE, and is a registered holding company under the Public
Utility Holding Company Act of 1935 as of March 1, 1998. Each outstanding
share of Delmarva's common stock, par value $2.25 per share, is being exchanged
for one share of Conectiv's common stock, par value $0.01 per share. Each
share of Atlantic's common stock, no par value per share, is being exchanged
for 0.75 of one share of Conectiv's common stock and 0.125 of one share of
Conectiv's Class A common stock, par value $0.01 per share. Class A common
stock gives holders of Atlantic common stock a proportionately greater
opportunity to share in the growth prospects of, and a proportionately greater
exposure to the uncertainties associated with the electric utility business of
ACE. Earnings applicable to Class A common stock will be equal to 30% of the
net of (1) earnings attributable to ACE's regulated electric utility business,
as the business existed on August 9, 1996, less (2) $40 million per year.
Earnings applicable to Conectiv common stock will be the consolidated earnings
of Conectiv less earnings applicable to Class A common stock.
The merger will be accounted for under the purchase method of accounting, with
Delmarva as the acquirer. The total consideration being paid to Atlantic's
common stockholders (in the form of Conectiv common stock and Class A common
stock), as measured by the average daily closing market price of Atlantic's
common stock for the three trading days immediately preceding and the three
trading days immediately following the public announcement of the merger, is
$921.0 million. The consideration paid plus estimated acquisition costs and
liabilities assumed in connection with the merger are expected to exceed the
net book value of Atlantic's net assets by approximately $200.5 million, which
will be recorded as goodwill. The actual amount of goodwill recorded will be
based on Atlantic's net assets as of the merger date and, accordingly, will
vary from the preceding estimate which is based on Atlantic's net assets as of
December 31, 1997. The goodwill will be amortized over 40 years.
2
<PAGE>
Item 5. Pursuant to the Merger and Reorganization of Delmarva Power &
Light Company and Atlantic City Energy Company under the Conectiv holding
company which was completed on March 1, 1998, the Board of Directors of the
Company have been changed. The following individuals have been elected as
Directors of the Company to serve until his or her successor is appointed
or his or her earlier resignation or removal.
DIRECTORS:
Howard E. Cosgrove Director/Chairman
Richard B. McGlynn Director
Harold J. Raveche Director
Michael G. Abercrombie Director
R. Franklin Balotti Director
Weston E. Nellius Director
Cyrus H. Holley Director
Jerrold L. Jacobs Director
Sarah I. Gore Director
Michael B. Emery Director
Robert D. Burris Director
Bernard J. Morgan Director
Audrey K. Doberstein Director
Kathleen MacDonnell Director
The following individuals have been elected by the Directors of the Company
to the offices set forth opposite their respective names.
OFFICERS:
Howard E. Cosgrove Chief Executive Officer
Jerrold L. Jacobs Vice Chairman
Meredith I. Harlacher, Jr. President and Chief Operating
Officer
Barbara S. Graham Senior Vice President and Chief
Financial Officer
Barry R. Elson Executive Vice President
Thomas S. Shaw Executive Vice President
Louis M. Walters Treasurer and Assistant Secretary
James E. Franklin II Chief Legal Officer and Secretary
James P. Lavin Controller
3
<PAGE>
Item 7. Financial Statements and Exhibits
Listed below are the financial statements, pro forma financial information and
exhibits filed as a part of this report.
(a) Financial statements of businesses acquired
Atlantic's consolidated financial statements listed below were filed with
Atlantic's Form 8-K dated March 3, 1998, and are incorporated herein by
reference.
Consolidated Statements of Income for the three years ended December 31, 1997
Consolidated Statements of Cash Flows for the three years ended
December 31, 1997
Consolidated Balance Sheets as of December 31, 1997 and 1996
(b) Pro forma financial information
The following unaudited pro forma financial information is included in this
report on Form 8-K:
Pro Forma Combined Conectiv Balance Sheet as of December 31, 1997
Pro Forma Combined Conectiv Statement of Income for the year ended
December 31, 1997
Notes to Pro Forma Combined Conectiv Financial Statements
Delmarva Power & Light Company Adjusted Consolidated Balance Sheet as of
December 31, 1997
Atlantic Energy, Inc. Adjusted Consolidated Balance Sheet as of
December 31, 1997
Delmarva Power & Light Company Adjusted Income Statement for the year ended
December 31, 1997
Atlantic Energy, Inc. Adjusted Income Statement for the year ended
December 31, 1997
Notes to Adjusted Consolidated Financial Statements
Unaudited Pro Forma Combined Financial Statements
The following unaudited pro forma combined financial statements combine the
historical balance sheets and statements of operations of Delmarva and Atlantic
to give effect to the merger discussed in Item 2 under the purchase method of
accounting and the assumptions set forth in the notes thereto. The unaudited
pro forma combined balance sheet as of December 31, 1997, assumes that the
merger was consummated on December 31, 1997. The unaudited pro forma combined
statement of income for the year ended December 31, 1997, assumes that the
merger was consummated on January 1, 1997. The pro forma statement of income
excludes an expected one-time charge of approximately $55 million to $60
million ($33 million to $36 million after taxes) related to the merger for an
enhanced retirement offer, other employee separation costs, and other
merger-related costs. In addition, a $23.6 million ($15.6 million after taxes)
charge for the termination of employee benefit plans (due to the merger)
recorded by Atlantic in December 1997 has been excluded from the pro forma
statement of income. The pro forma financial statements also do not reflect
any cost savings or other synergies anticipated as a result of the merger. The
pro forma information is not necessarily indicative of the results that would
have occurred in 1997, or that will occur in the future. In the opinion of
management, all adjustments necessary to present pro forma financial statements
have been made.
4
<PAGE>
<TABLE>
<CAPTION>
CONECTIV
PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
ASSETS
Delmarva Atlantic Pro Forma Conectiv
As Adjusted As Adjusted Adjustments Pro Forma
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Utility Plant and Nonutility Property, At Cost
Electric utility plant $3,008,442 $2,590,890 $ - $5,599,332
Gas utility plant 241,580 - - 241,580
Common utility plant 152,232 - - 152,232
---------- ---------- ----------- ----------
3,402,254 2,590,890 - 5,993,144
Less: Accumulated depreciation 1,370,726 934,235 - 2,304,961
---------- ---------- ----------- ----------
Net utility plant in service 2,031,528 1,656,655 - 3,688,183
Construction work-in-progress 93,017 95,120 - 188,137
Leased property, net 32,258 39,730 - 71,988
Nonutility property, net 74,811 105,356 - 180,167
Goodwill, net 92,602 - 200,535 (f) 293,137
---------- ---------- ----------- ----------
2,324,216 1,896,861 200,535 4,421,612
---------- ---------- ----------- ----------
Investments
Investment in leveraged leases 46,375 80,448 - 126,823
Funds held by trustee 48,086 92,613 - 140,699
Other investments 9,500 42,896 - 52,396
---------- ---------- ----------- ----------
103,961 215,957 - 319,918
---------- ---------- ----------- ----------
Current Assets
Cash and cash equivalents 35,339 17,638 - 52,977
Accounts receivable 197,561 139,960 - 337,521
Deferred energy costs 18,017 27,424 - 45,441
Inventories, at average cost:
Fuel (coal, oil, and gas) 37,425 29,242 - 66,667
Materials and supplies 40,518 35,605 - 76,123
Prepayments 11,255 3,804 - 15,059
Other - 5,959 - 5,959
---------- ---------- ----------- ----------
340,115 259,632 - 599,747
---------- ---------- ----------- ----------
Deferred Charges and Other Assets
Unrecovered purchased power costs - 66,264 - 66,264
Deferred recoverable income taxes 88,683 85,858 - 174,541
Unrecovered state excise taxes - 45,154 - 45,154
Deferred debt refinancing costs 18,760 30,002 - 48,762
Deferred other post employee benefit costs - 37,476 - 37,476
Other regulatory assets 31,004 24,637 - 55,641
Prepaid employee benefit costs 58,111 8,390 12,110 (g) 78,611
Unamortized debt expense 12,911 14,945 - 27,856
Other 36,944 38,708 (21,800) (i) 53,852
---------- ---------- ----------- ----------
246,413 351,434 (9,690) 588,157
---------- ---------- ----------- ----------
Total Assets $3,014,705 $2,723,884 $ 190,845 $5,929,434
========== ========== =========== ==========
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
5
<PAGE>
<TABLE>
<CAPTION>
CONECTIV
PRO FORMA COMBINED BALANCE SHEETS
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
CAPITALIZATION AND LIABILITIES
Delmarva Atlantic Pro Forma Conectiv
As Adjusted As Adjusted Adjustments Pro Forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Capitalization
Common stock $ 139,116 $ 563,460 $ (701,570) (a) $ 1,006
Class A common stock - - 66 (a) 66
Additional paid-in capital - common stock 526,812 - 936,256 (b) 1,463,068
Additional paid-in capital - Class A common stock - - 107,135 (b) 107,135
Retained earnings 300,757 221,623 (255,431) (d) 266,949
----------- ----------- ----------- -----------
966,685 785,083 86,456 1,838,224
Treasury shares, at cost (11,687) - 11,687 (e) -
Unearned compensation (502) - 502 (k) -
----------- ----------- ----------- -----------
Total common stockholders' equity 954,496 785,083 98,645 1,838,224
Preferred stock not subject to mandatory redemption 89,703 - (89,703) (p) -
Preferred stock of subsidiaries:
Not subject to mandatory redemption - 30,000 89,703 (p) 119,703
Subject to mandatory redemption 70,000 93,950 - 163,950
Long-term debt 983,672 889,744 - 1,873,416
----------- ----------- ------------ -----------
2,097,871 1,798,777 98,645 3,995,293
----------- ----------- ------------ -----------
Current Liabilities
Short-term debt 23,254 55,675 - 78,929
Long-term debt due within one year 33,318 147,566 - 180,884
Variable rate demand bonds 71,500 - - 71,500
Accounts payable 103,607 65,369 - 168,976
Taxes accrued 10,723 6,049 (206) (k) 16,566
Interest accrued 19,902 20,116 - 40,018
Dividends declared 23,775 21,215 - 44,990
Current capital lease obligation 12,516 653 - 13,169
Deferred income taxes, net (776) 1,888 - 1,112
Other 35,819 23,995 98,500 (h)(i) 158,314
----------- ----------- ------------ -----------
333,638 342,526 98,294 774,458
----------- ----------- ------------ -----------
Deferred Credits and Other Liabilities
Deferred income taxes, net 492,792 439,267 (52,342) (l) 879,717
Deferred investment tax credits 39,942 44,043 - 83,985
Long-term capital lease obligations 19,877 39,077 - 58,954
Postretirement obligations - 37,476 46,248 (g) 83,724
Other 30,585 22,718 - 53,303
----------- ----------- ------------ -----------
583,196 582,581 (6,094) 1,159,683
----------- ----------- ------------ -----------
Total Capitalization and Liabilities $3,014,705 $2,723,884 $ 190,845 $5,929,434
=========== =========== ============ ===========
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
6
<PAGE>
<TABLE>
<CAPTION>
CONECTIV
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Delmarva Atlantic Pro Forma Conectiv
As Adjusted As Adjusted Adjustments Pro Forma
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Operating Revenues
Electric $1,092,144 $1,061,986 $ - $2,154,130
Gas 204,057 - - 204,057
Other services 127,301 40,374 - 167,675
----------- ----------- ----------- ----------
1,423,502 1,102,360 - 2,525,862
----------- ----------- ----------- ----------
Operating Expenses
Electric fuel and purchased energy 416,640 293,457 - 710,097
Gas purchased 153,027 - - 153,027
Other services' cost of sales 85,192 - - 85,192
Purchased electric capacity 28,470 197,386 - 225,856
Termination of employee benefit plans due to merger - 23,559 (23,559) (q) -
Operation and maintenance 331,770 197,246 - 529,016
Depreciation and amortization 136,340 94,480 5,013 (j) 235,833
State excise taxes - 103,991 - 103,991
Other taxes 37,634 3,038 - 40,672
----------- ----------- ----------- -----------
1,189,073 913,157 (18,546) 2,083,684
----------- ----------- ----------- -----------
Operating Income 234,429 189,203 18,546 442,178
----------- ----------- ----------- -----------
Other Income
Allowance for equity funds used
during construction 1,337 815 - 2,152
Other income 28,187 14,598 - 42,785
---------- ----------- ----------- -----------
29,524 15,413 - 44,937
---------- ----------- ----------- -----------
Interest Expense
Interest charges 83,398 70,619 - 154,017
Allowance for borrowed funds used
during construction and capitalized interest (2,996) (1,003) - (3,999)
----------- ----------- ----------- -----------
80,402 69,616 - 150,018
----------- ----------- ----------- -----------
Preferred Stock Dividend
Requirements of Subsidiaries 5,687 10,596 4,491 (p) 20,774
----------- ----------- ----------- -----------
Income Before Income Taxes 177,864 124,404 14,055 316,323
Income Taxes 72,155 49,999 8,246 (q) 130,400
----------- ----------- ----------- -----------
Net Income 105,709 74,405 5,809 185,923
Dividends on Preferred Stock 4,491 - (4,491) (p) -
----------- ----------- ----------- -----------
Earnings Applicable to Common Stock:
Common stock 101,218 74,405 (5,618) 170,005
Class A common stock - - 15,918 (m) 15,918
----------- ----------- ----------- -----------
$ 101,218 $ 74,405 $ 10,300 $ 185,923
=========== =========== =========== ===========
Average common shares outstanding (000):
Common stock 61,122 52,280 (12,902) (n) 100,500
Class A common stock - - 6,563 (n) 6,563
Basic and diluted earnings per average share
outstanding of:
Common stock $ 1.66 $ 1.42 $ - $ 1.69
Class A common stock $ - $ - $ - $ 2.43
Dividends declared per share of:
Common stock $ 1.54 $ 1.54 $ - $ 1.54
Class A common stock $ - $ - $ - $ 3.20
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet and
statements of income are an integral part of this statement.
7
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(a) Adjustments to record the estimated par value at $0.01 per share of
Conectiv Common Stock and Conectiv Class A Common Stock to be issued and
outstanding. The number of shares of Conectiv stock was estimated using
the number of Delmarva and Atlantic Common Stock shares outstanding as of
December 31, 1997. Each outstanding share of Delmarva Common Stock was
converted into one share of Conectiv Common Stock and each outstanding
share of Atlantic Common Stock was converted into 0.75 of one share of
Conectiv Common Stock plus 0.125 of one share of Conectiv Class A Common
Stock. The adjustments are summarized below.
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
Common Stock:
- -------------
<S> <C>
Number of Atlantic Common Stock shares outstanding 52,504,479
Conversion Ratio 0.75
------------
Number of Common Stock shares to be issued to
Atlantic Common Stockholders 39,378,359
Number of Common Stock shares to be issued to
Delmarva Common Stockholders (Equal to the
number of Delmarva Common Stock shares outstanding) 61,210,262
------------
Total number of Common Stock shares to be issued 100,588,621
Par value per share $0.01
------------
(In Thousands of Dollars)
Adjusted par value of total number of Common Stock shares
to be issued $1,006
Delmarva's Common Stock, as previously reported (139,116)
Atlantic's Common Stock, as previously reported (563,460)
------------
Adjustment to Common Stock $(701,570)
============
Class A Common Stock:
- ---------------------
Number of Atlantic Common Stock shares outstanding 52,504,479
Conversion Ratio 0.125
------------
Number of Class A Common Stock shares to be issued to
Atlantic Common Stockholders 6,563,060
Par value per share $0.01
------------
Par value (In Thousands of Dollars) $66
============
</TABLE>
8
<PAGE>
(b) Adjustments to record additional paid-in-capital to reflect the following:
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
<S> <C>
Additional Paid-In-Capital--Common Stock:
Cancellation of the Delmarva Treasury Stock cost
in excess of par value $(10,294)
Adjustment to par value of Delmarva Common Stock outstanding 137,111
Consideration to be paid to Atlantic's Common Stockholders in
the form of Conectiv Common Stock in excess of par value 813,439
Estimated registration and issuance costs (4,000)
---------
$936,256
=========
Additional Paid-In-Capital--Class A Common Stock:
Consideration to be paid to Atlantic's Common Stockholders in the
form of Conectiv Class A Common Stock in excess of par value $107,135
=========
</TABLE>
(c) The total consideration to be paid to the Atlantic Common Stockholders was
measured by the average daily closing market price of Atlantic's Common
Stock for the three trading days immediately preceding and following the
public announcement of the Merger Agreement on August 12, 1996.
Delmarva's Common Stockholders will receive one share of Conectiv Common
Stock for each share of Delmarva Common Stock. Therefore, the average
daily market price of Delmarva's Common Stock for the same period was used
to measure the market value of Conectiv Common Stock to be paid to
Atlantic's Common Stockholders. Delmarva's average market price per share
was multiplied by the Atlantic conversion ratio for Conectiv Common Stock
to determine the estimated market value per share of Atlantic Common Stock
attributed to Conectiv Common Stock. This market value per share was
multiplied by the number of Atlantic Common Stock shares outstanding at
December 31, 1997 to estimate the consideration to be paid to Atlantic
Common Stockholders in the form of Conectiv Common Stock.
The difference between the total compensation to be paid to Atlantic's
Common Stockholders and the portion attributed to Conectiv Common Stock
was attributed to Conectiv Class A Common Stock.
The schedules below show the calculation of the total consideration to be
paid to Atlantic's Common Stockholders and the allocation of the total
consideration to be paid between Conectiv Common Stock and Conectiv Class A
Common Stock:
<TABLE>
<CAPTION>
Amounts
--------
<S> <C>
Average market price per share of Atlantic Common Stock used
to determine consideration to be paid $17.542
Number of Atlantic Common Stock shares outstanding as of
December 31, 1997 52,504,479
----------
Total consideration to be paid to Atlantic Common Stockholders
(In Thousands of Dollars) $921,034
==========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Amounts
-------
<S> <C>
Average market price per share of Delmarva Common Stock
for the same period $20.667
Conversion ratio of Conectiv Common Stock for each share of
Atlantic Common Stock 0.75
----------
Estimated market value per share of Atlantic Common Stock
attributed to Conectiv Common Stock $15.50025
Number of Atlantic Common Stock shares outstanding as of
December 31, 1997 52,504,479
----------
Consideration to be paid to Atlantic's Common Stockholders in
the form of Conectiv Common Stock (In Thousands of Dollars) $813,833
----------
(In Thousands of Dollars)
-------------------------
Total consideration to be paid to Atlantic Common Stockholders $921,034
Portion of total consideration attributed to Conectiv
Common Stock 813,833
----------
Portion of total consideration attributed to Conectiv Class A
Common Stock $107,201
==========
</TABLE>
(d) Adjustments to retained earnings as follows:
<TABLE>
<CAPTION>
Amounts
---------------------
(Dollars in Thousands)
<S> <C>
Eliminate retained earnings of Atlantic $(221,623)
Charges to expense of $56.8 million ($33.5 million
after tax) principally for nonrecurring employee
separation costs related to Delmarva employees
[see note (h)] (33,512)
Charge to expense to eliminate unearned income [see Note (k)] (296)
----------
Total adjustment $(255,431)
==========
</TABLE>
(e) Adjustment to reflect the cancellation of the Delmarva treasury stock as a
condition of the merger.
10
<PAGE>
(f) The schedule below shows the calculation of the cost of acquiring Atlantic
and the allocation of the total acquisition cost to identifiable tangible
and intangible assets and liabilities.
<TABLE>
<CAPTION>
Cost of Acquiring Atlantic Amounts
-------------------------- ----------------------
(Dollars in Thousands)
<S> <C>
Consideration to be paid to Atlantic's Common
Stockholders [see Note (c)] $921,034
Add: Estimated direct costs of acquisition to be
incurred by Delmarva 24,700
Less: Registration and issuance costs (4,000)
-----------
Total acquisition cost $941,734
===========
Less assets acquired:
Electric utility plant - net $1,791,505
Investments and nonutility property 321,313
Current assets 259,632
Deferred debits 351,434
-----------
Total assets acquired $2,723,884
===========
Add liabilities acquired:
Preferred stock of subsidiaries $123,950
Long-term debt 889,744
Current liabilities 342,526
Deferred credits and other liabilities 582,581
-----------
Total liabilities acquired $1,938,801
===========
Costs incurred and liabilities assumed in connection with
the merger $ 43,884
-----------
Cost in excess of net assets acquired $200,535
===========
</TABLE>
The fair value of the utility assets of Atlantic is their book value due to
the ratemaking process. Utility assets are recognized for ratemaking
purposes at their book values in determining utility revenue requirements.
Accordingly, the economic substance is that fair value of the utility
assets is their book value.
(g) Adjustments to record additional pension prepayment ($12.1 million) and
postretirement benefit liabilities ($46.3 million), assumed in the
acquisition of Atlantic in accordance with Statements of Financial
Accounting Standards (SFAS) Nos. 87 and 106.
(h) Adjustment to record an estimated liability of $38.8 million for employee
separation and relocation costs and facilities integration costs related to
Atlantic's employees and facilities and an estimated liability of $56.8
million, which will be expensed, principally for employee separation costs
related to Delmarva. The Unaudited Pro Forma Combined Statement of Income
for the year ended December 31, 1997 does not reflect expected nonrecurring
estimated expenses of $56.8 million before taxes ($33.5 million after
taxes), principally for employee separation costs related to Delmarva.
11
<PAGE>
(i) Adjustment to record the estimated direct costs of the merger of $24.7
million. These costs are included in the cost to acquire Atlantic.
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
(Dollars in Thousands)
<S> <C>
Other current liabilities $2,900
Deferred debits $(21,800)
</TABLE>
(j) Adjustment to reflect the amortization of goodwill acquired over forty (40)
years.
(k) Adjustment to recognize a pretax expense of $0.5 million to eliminate
unearned and deferred compensation costs payable under employee incentive
plans at the time of the merger. The adjustment is summarized below:
<TABLE>
<CAPTION>
As of December 31, 1997
-----------------------
(Dollars in Thousands)
<S> <C>
Decrease in retained earnings:
Delmarva $(296)
Accrued tax benefit:
Delmarva (206)
------
Eliminate unearned and deferred compensation $502
======
</TABLE>
The Unaudited Pro Forma Combined Statement of Income for the year ended
December 31, 1997 does not reflect the nonrecurring estimated expense of
$0.5 million before taxes ($0.3 million after taxes).
(l) Adjustment to record additional deferred income taxes for the following
temporary differences:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Temporary Deferred
Differences Income Taxes
----------- ------------
<S> <C> <C>
Additional pension prepayment [see note (g)] 12,110 (4,238)
Additional postretirement benefit liabilities
[see Note (g)] 46,248 16,187
Liabilities for employee separation,
relocation, and retraining costs and
facilities integration cost s[see Note (h)] 95,600 36,867
Liability for a portion of DP&L direct
acquisition costs that are deemed to be tax
deductible [see Note (i)] 8,600 3,526
--------
Total deferred income taxes $52,342
========
</TABLE>
In accordance with SFAS No. 109, deferred income taxes were not recorded
on goodwill for which the amortization is not deductible for tax purposes.
12
<PAGE>
(m) Adjustment to present earnings applicable to the Class A Common Stock.
The Class A Common Stock is intended to reflect the growth prospects and
regulatory environment of Atlantic's regulated electric utility business.
The shares of Class A Common Stock to be received by holders of Atlantic
Common Stockholders represent, in aggregate, a 30% interest in any earnings
of Atlantic's regulated electric utility business in excess of $40 million
per year.
The calculation of the pro forma earnings applicable to the Class A Common
Stock for the year ended December 31, 1997 is shown below (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Atlantic City Electric Company (ACE) and
Subsidiary Income Available for Common
Stockholders $80,926
Add: Termination of employee benefit plans due to merger 15,600
Less: Net Earnings of Nonutility Activities Specifically
Excluded (3,466)
Less: Fixed Amount of $40 Million per Year (40,000)
--------
Subtotal 53,060
Percentage Applicable to Class A Common Stock 30%
--------
Earnings Applicable to Class A Common Stock $15,918
========
</TABLE>
(n) Adjustments to decrease the weighted average number of Common Stock shares
outstanding based on the conversion ratio of 0.75 to 1 of Conectiv Common
Stock to be issued to holders of Atlantic Common Stock and reflect the
issuance of Class A Common Stock shares to holders of Atlantic Common
Stock. The number of shares of Conectiv Common Stock and Class A Common
Stock estimated to be issued to holders of Atlantic Common Stock for the
acquisition were deemed to be issued and outstanding for the entire period.
(o) The Merger Agreement provides, subject to certain conditions, that the
dividends declared and paid on the Class A Common Stock will be maintained
at a level of $3.20 per share per annum from the Effective Date until the
earlier of July 1, 2001 or the end of the twelfth calendar quarter
following the calendar quarter in which the Effective Date occurs.
Thereafter, it is the intention of Conectiv, subject to certain conditions,
to pay annual dividends on the Class A Common Stock in an aggregate amount
(including the amount credited to the Intergroup Interest as provided in
the Conectiv Charter) equal to 90% of Conectiv Net Income Attributable to
the Atlantic Utility Group. The Merger Agreement further provides that if
and to the extent that the annual dividends paid on the Class A Common
Stock during the Initial Period (including the aforesaid amount) shall have
exceeded 100% of Conectiv Net Income Attributable to the Atlantic Utility
Group during such period, the Conectiv Board may consider such fact in
determining the appropriate annual dividend rate on the Class A Common
Stock following the Initial Period.
The pro forma Class A Common Stock dividends per share exceed the pro forma
Class A Common Stock earnings per share for the year ended December 31,
1997.
(p) Adjustment to reflect Delmarva's preferred stock as preferred stock
of a subsidiary.
13
<PAGE>
(q) Adjustment to eliminate nonrecurring charge for "Termination of employee
benefit plans due to merger."
(r) As necessary for fair presentation of the pro forma financial statements,
amounts previously reported by Atlantic and Delmarva have been reclassified
for consistency of presentation. The following schedules show the amounts
reclassified.
14
<PAGE>
<TABLE>
<CAPTION>
DELMARVA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
ASSETS
Reported Reclass Adjusted
Amount Adjustments Amount
----------- ----------- -----------
<S> <C> <C> <C>
Utility Plant and Nonutility Property, At Cost
Electric utility plant $3,010,060 $ (1,618) (1) $3,008,442
Gas utility plant 241,580 - 241,580
Common utility plant 154,791 (2,559) (1) 152,232
----------- ----------- ----------
3,406,431 (4,177) 3,402,254
Less: Accumulated depreciation 1,373,676 (2,950) (1) 1,370,726
----------- ----------- ----------
Net utility plant in service 2,032,755 (1,227) 2,031,528
Construction work-in-progress 93,017 - 93,017
Leased property, net 31,031 1,227 (1) 32,258
Nonutility property, net 74,811 - 74,811
Goodwill, net 92,602 - 92,602
----------- ----------- ----------
2,324,216 - 2,324,216
Investments ----------- ----------- ----------
Investment in leveraged leases 46,375 - 46,375
Funds held by trustee 48,086 - 48,086
Other investments 9,500 - 9,500
----------- ----------- ----------
103,961 - 103,961
----------- ----------- ----------
Current Assets
Cash and cash equivalents 35,339 - 35,339
Accounts receivable 197,561 - 197,561
Deferred energy costs 18,017 - 18,017
Inventories, at average cost:
Fuel (coal, oil, and gas) 37,425 - 37,425
Materials and supplies 40,518 - 40,518
Prepayments 11,255 - 11,255
Deferred income taxes, net 776 (776) (3) -
----------- ----------- ----------
340,891 (776) 340,115
----------- ----------- ----------
Deferred Charges and Other Assets
Deferred recoverable income taxes 88,683 - 88,683
Deferred debt refinancing costs 18,760 - 18,760
Other regulatory assets - 31,004 (2) 31,004
Prepaid employee benefit costs 58,111 - 58,111
Unamortized debt expense 12,911 - 12,911
Other 67,948 (31,004) (2) 36,944
----------- ----------- ----------
246,413 - 246,413
----------- ----------- ----------
Total Assets $3,015,481 $ (776) $3,014,705
=========== =========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
15
<PAGE>
<TABLE>
<CAPTION>
DELMARVA POWER & LIGHT COMPANY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
CAPITALIZATION AND LIABILITIES
Reported Reclass Adjusted
Amount Adjustments Amount
------------ ----------- -----------
<S> <C> <C> <C>
Capitalization
Common stock $ 139,116 $ - $ 139,116
Additional paid-in capital - common stock 526,812 - 526,812
Retained earnings 300,757 - 300,757
----------- ----------- -----------
966,685 - 966,685
Treasury shares, at cost (11,687) - (11,687)
Unearned compensation (502) - (502)
----------- ----------- -----------
Total common stockholders' equity 954,496 - 954,496
Preferred stock not subject to mandatory redemption 89,703 - 89,703
Preferred stock of subsidiaries:
Subject to mandatory redemption 70,000 - 70,000
Long-term debt 983,672 - 983,672
----------- ----------- -----------
2,097,871 - 2,097,871
----------- ----------- -----------
Current Liabilities
Short-term debt 23,254 - 23,254
Long-term debt due within one year 33,318 - 33,318
Variable rate demand bonds 71,500 - 71,500
Accounts payable 103,607 - 103,607
Taxes accrued 10,723 - 10,723
Interest accrued 19,902 - 19,902
Dividends declared 23,775 - 23,775
Current capital lease obligation 12,516 - 12,516
Deferred income taxes, net - (776) (3) (776)
Other 35,819 - 35,819
----------- ----------- -----------
334,414 (776) 333,638
----------- ----------- -----------
Deferred Credits and Other Liabilities
Deferred income taxes, net 492,792 - 492,792
Deferred investment tax credits 39,942 - 39,942
Long-term capital lease obligations 19,877 - 19,877
Other 30,585 - 30,585
----------- ----------- -----------
583,196 - 583,196
----------- ----------- -----------
Total Capitalization and Liabilities $3,015,481 $ (776) $3,014,705
=========== =========== ===========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
16
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC ENERGY, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
ASSETS
Reported Reclass Adjusted
Amount Adjustments Amount
---------- ----------- -----------
<S> <C> <C> <C>
Utility Plant and Nonutility Property, At Cost
Electric utility plant in service $2,585,286 $ 5,604 (4) $2,590,890
---------- ----------- -----------
2,585,286 5,604 2,590,890
Less: Accumulated depreciation 934,235 - 934,235
---------- ----------- -----------
Net electric utility plant in service 1,651,051 5,604 1,656,655
Construction work-in-progress 95,120 - 95,120
Land Held for Future Use 5,604 (5,604) (4) -
Nonutility property, net 105,356 - 105,356
Leased property, net 39,730 - 39,730
---------- ----------- -----------
1,896,861 - 1,896,861
---------- ----------- -----------
Investments
Investment in leveraged leases 80,448 - 80,448
Funds held by trustee 81,650 10,963 (5) 92,613
Other investments 53,859 (10,963) (5) 42,896
---------- ----------- -----------
215,957 - 215,957
---------- ----------- -----------
Current Assets
Cash and cash equivalents 17,224 414 (6) 17,638
Accounts receivable 103,045 36,915 (7) 139,960
Unbilled revenues 36,915 (36,915) (7) -
Deferred energy costs 27,424 - 27,424
Inventories, at average cost:
Fuel (coal, oil, and gas) 29,242 - 29,242
Materials and supplies 20,893 14,712 (6) 35,605
Working funds 15,126 (15,126) (6) -
Prepayments 3,804 - 3,804
Deferred income taxes, net - - -
Other 14,349 (8,390) (8) 5,959
---------- ----------- -----------
268,022 (8,390) 259,632
---------- ----------- -----------
Deferred Charges and Other Assets
Unrecovered purchased power costs 66,264 - 66,264
Deferred recoverable income taxes 85,858 - 85,858
Unrecovered state excise taxes 45,154 - 45,154
Deferred debt refinancing costs 44,947 (14,945) (9) 30,002
Deferred other post employee benefit costs 37,476 - 37,476
Other regulatory assets 24,637 - 24,637
Prepaid employee benefit costs - 8,390 (8) 8,390
Unamortized debt expense - 14,945 (9) 14,945
Other 38,708 - 38,708
---------- ----------- -----------
343,044 8,390 351,434
---------- ----------- -----------
Total Assets $2,723,884 $ - $2,723,884
========== =========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are
an integral part of this statement.
17
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC ENERGY, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(Dollars in Thousands)
(Unaudited)
CAPITALIZATION AND LIABILITIES
Reported Reclass Adjusted
Amount Adjustments Amount
---------- ----------- -----------
<S> <C> <C> <C>
Capitalization
Common stock $ 563,460 $ - $ 563,460
Retained earnings 221,623 - 221,623
---------- ----------- ----------
785,083 - 785,083
Unearned compensation - - -
---------- ----------- ---------
Total common stockholders' equity 785,083 - 785,083
Preferred stock of subsidiaries:
Not subject to mandatory redemption 30,000 - 30,000
Subject to mandatory redemption 103,950 (10,000) (10) 93,950
Long-term debt 879,744 10,000 (10) 889,744
---------- ----------- ----------
1,798,777 - 1,798,777
---------- ----------- ----------
Current Liabilities
Short-term debt 55,675 - 55,675
Long-term debt due within one year 147,566 - 147,566
Accounts payable 65,369 - 65,369
Taxes accrued 6,049 - 6,049
Interest accrued 20,116 - 20,116
Dividends declared 21,215 - 21,215
Current capital lease obligation 653 - 653
Deferred income taxes, net 1,888 - 1,888
Other 23,995 - 23,995
---------- ----------- ----------
342,526 - 342,526
---------- ----------- ----------
Deferred Credits and Other Liabilities
Deferred income taxes, net 439,267 - 439,267
Deferred investment tax credits 44,043 - 44,043
Long-term capital lease obligations 39,077 - 39,077
Postretirement obligations 37,476 - 37,476
Other 22,718 - 22,718
---------- ----------- ----------
582,581 - 582,581
---------- ----------- ----------
Total Capitalization and Liabilities $2,723,884 $ - $2,723,884
========== =========== ==========
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
18
<PAGE>
<TABLE>
<CAPTION>
DELMARVA POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reported Reclass Adjusted
Amount Adjustments Amount
----------- ----------- -----------
<S>
Operating Revenues <C> <C> <C>
Electric $1,092,144 $ - $1,092,144
Gas 204,057 - 204,057
Other services 127,301 - 127,301
----------- ----------- -----------
1,423,502 - 1,423,502
----------- ----------- -----------
Operating Expenses
Electric fuel and purchased energy 416,640 - 416,640
Gas purchased 153,027 - 153,027
Other services' cost of sales 85,192 - 85,192
Purchased electric capacity 28,470 - 28,470
Operation and maintenance 331,770 - 331,770
Depreciation and amortization 136,340 - 136,340
Other taxes 37,634 - 37,634
----------- ----------- -----------
1,189,073 - 1,189,073
----------- ----------- -----------
Operating Income 234,429 - 234,429
----------- ----------- -----------
Other Income
Allowance for equity funds used
during construction 1,337 - 1,337
Other income 28,187 - 28,187
----------- ----------- -----------
29,524 - 29,524
----------- ----------- -----------
Interest Expense
Interest charges 83,398 - 83,398
Allowance for borrowed funds used
during construction and capitalized interest (2,996) - (2,996)
----------- ----------- -----------
80,402 - 80,402
Preferred Stock Dividend ----------- ----------- -----------
Requirements of Subsidiaries 5,687 - 5,687
----------- ----------- -----------
Income Before Income Taxes 177,864 - 177,864
Income Taxes 72,155 - 72,155
----------- ----------- -----------
Net Income 105,709 - 105,709
Dividends on Preferred Stock 4,491 - 4,491
----------- ----------- -----------
Earnings Applicable to Common Stock $ 101,218 $ - $ 101,218
=========== =========== ===========
Average shares outstanding (000): 61,122 61,122
Basic and diluted earnings per average share $ 1.66 $ - $ 1.66
Dividends declared $ 1.54 $ - $ 1.54
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
19
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC ENERGY, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in Thousands, Except Per Share Amounts)
(Unaudited)
Reported Reclass Adjusted
Amount Adjustments Amount
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues
Electric $1,061,986 $ - $1,061,986
Other services 40,374 - 40,374
----------- ----------- -----------
1,102,360 - 1,102,360
----------- ----------- -----------
Operating Expenses
Electric fuel and purchased energy 293,457 - 293,457
Other services' cost of sales - - -
Purchased electric capacity 197,386 - 197,386
Termination of employee benefit plans due to merger 23,559 - 23,559
Operation and maintenance 203,198 (5,952) (11,12) 197,246
Depreciation and amortization 83,950 10,530 (12) 94,480
State excise taxes 103,991 - 103,991
Other taxes 7,616 (4,578) (11) 3,038
----------- ----------- -----------
913,157 - 913,157
----------- ----------- -----------
Operating Income 189,203 - 189,203
----------- ----------- -----------
Other Income
Allowance for equity funds used
during construction 815 - 815
Other income 14,598 - 14,598
----------- ----------- -----------
15,413 - 15,413
----------- ----------- -----------
Interest Expense
Interest charges 70,619 - 70,619
Allowance for borrowed funds used
during construction and capitalized interest (1,003) - (1,003)
----------- ----------- -----------
69,616 - 69,616
----------- ----------- -----------
Preferred Stock Dividend
Requirements of Subsidiaries 10,596 - 10,596
----------- ----------- -----------
Income Before Income Taxes 124,404 - 124,404
Income Taxes 49,999 - 49,999
----------- ----------- -----------
Net Income $ 74,405 $ - $ 74,405
=========== =========== ===========
Average shares outstanding (000) 52,280 - 52,280
Basic and diluted earnings per average share $ 1.42 $ - $ 1.42
Dividends declared $ 1.54 $ - $ 1.54
</TABLE>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of this statement.
20
<PAGE>
NOTES TO ADJUSTED CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
(1) Transfer capital leases, net to "Leased property, net."
(2) Transfer regulatory assets from "Other" to "Other regulatory assets."
(3) Transfer "Deferred income taxes, net" to current liabilities.
(4) Transfer "Land held for future use" to "Electric utility plant in
service."
(5) Transfer $10,963 for Investment in Bond Escrow Trust from "Other
investments" to "Funds held by trustee."
(6) Transfer "Working funds" to "Cash" and to "Materials and supplies",
as appropriate.
(7) Transfer "Unbilled revenues" to "Accounts receivable."
(8) Transfer prepaid pension cost to "Deferred Charges and Other Assets."
(9) Transfer unamortized debt costs from "Deferred debt refinancing
costs" to "Unamortized debt expense."
(10) Reclassification to reflect post-balance sheet refinancings in
accordance with SFAS No. 6.
(11) Transfer payroll taxes from "Other taxes" to "Operation and
maintenance".
(12) Transfer nuclear decommissioning costs from "Operation and
maintenance" to "Depreciation and amortization".
21
<PAGE>
Exhibits
- ---------
Exhibit 3(a) Restated Certificate of Incorporation of Conectiv.
Exhibit 3(b) Certificate of Merger of Atlantic Energy, Inc. into Conectiv,
Inc. filed in Delaware.
Exhibit 3(c) Section 102(a) certificate to change name from Conectiv, Inc. to
Conectiv filed in Delaware.
Exhibit 3(d) Certificate of Merger of Atlantic Energy, Inc. into Conectiv,
Inc. filed in New Jersey.
Exhibit 3(e) Certificate of Merger of DS Sub into Delmarva Power & Light
Company filed in Delaware.
Exhibit 3(f) By-laws of Conectiv.
Exhibit 99(a) Letter to the Financial Community.
22
EXHIBIT 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
CONECTIV
Pursuant to Section 245 of the
General Corporation Law of the State of Delaware
Conectiv, a corporation organized and existing under the laws of the
State of Delaware, hereby certifies as follows:
1. The name of the corporation is Conectiv (the "Corporation"). The
Corporation was originally incorporated under the name DS, Inc., which name was
changed to "Conectiv, Inc." on December 24, 1996 and to "Conectiv" on March 1,
1998. The original certificate of incorporation was filed with the Secretary of
State of the State of Delaware on August 8, 1996.
2. This Restated Certificate of Incorporation restates but does not
further amend the Restated Certificate of Incorporation, as heretofore amended,
of the Corporation and has been adopted and approved in accordance with Section
245 of the General Corporation Law of the State of Delaware.
3. The text of the Certificate of Incorporation, as heretofore amended,
is hereby restated to read in its entirety as follows:
<PAGE>
ARTICLE I.
NAME
The name of the Corporation is Conectiv.
ARTICLE II.
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is 800 King
Street, Wilmington, New Castle County, Delaware 19899, and the name of the
registered agent at such office is the Corporation itself.
ARTICLE III.
PURPOSE
The Corporation is organized for the purpose of engaging in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "DGCL").
ARTICLE IV.
CAPITAL STOCK
SECTION I. AUTHORIZATION. The aggregate number of shares of stock which
the Corporation shall have authority to issue is one hundred eighty million
(180,000,000) shares, of which one hundred fifty million (150,000,000) shares
shall be shares of a class of common stock designated as "Common Stock," having
a par value of $0.01 per share (the "Company Common Stock"), ten million
(10,000,000) shares shall be shares of a class of common stock designated as
"Class A Common Stock", having a par value of $0.01 per share (the "Class A
Common Stock"), and twenty million (20,000,000) shares shall be shares of a
class of preferred stock having a par value of $.01 per share (the "Preferred
Stock") and issuable in one or more series as hereinafter provided. The Company
Common Stock and the Class A Common Stock shall hereinafter collectively be
called "Common Stock" and either shall sometimes be called a class of Common
Stock. Certain capitalized terms used in this Article IV shall have the meanings
set forth in Section II.7 of this Article IV. For purposes of this Article IV,
the Class A Common Stock, when issued, shall be considered issued in respect of
the Atlantic Utility Group and the Company Common Stock, when issued, shall be
considered issued in respect of the Residual Group, in each case upon the terms
and subject to the conditions of this Article IV.
2
<PAGE>
SECTION II. COMMON STOCK. The voting powers, preferences and relative,
participating, optional or other special rights of the Common Stock, and the
qualifications and restrictions thereon, shall be as follows in this Section II.
1. DIVIDENDS. Subject to any preferences and relative,
participating, optional or special rights of any outstanding series of Preferred
Stock and any qualifications or restrictions on the Common Stock or any class
thereof created thereby, dividends may be declared and paid upon the Company
Common Stock and the Class A Common Stock, upon the terms with respect to each
such class, and subject to the limitations provided for below in this subsection
1, as the Board of Directors may determine.
1.1. LIMITATION ON DIVIDENDS ON COMPANY COMMON STOCK.
Dividends on Company Common Stock may be declared and paid only out of the
lesser of (i) the funds of the Corporation legally available therefor, and (ii)
the Residual Group Available Dividend Amount.
1.2. LIMITATION ON DIVIDENDS ON CLASS A COMMON STOCK.
Dividends on Class A Common Stock may be declared and paid only out of the
lesser of (i) the funds of the Corporation legally available therefor, and (ii)
the Atlantic Utility Group Available Dividend Amount.
1.3. DISCRIMINATION IN DIVIDENDS BETWEEN CLASSES OF
COMMON STOCK. The Board of Directors, subject to the provisions of subsections
1.1 and 1.2 of this Section II, may at any time declare and pay dividends
exclusively on Company Common Stock, exclusively on Class A Common Stock or on
both such classes in equal or unequal amounts, notwithstanding the relative
amounts of the Residual Group Available Dividend Amount and the Atlantic Utility
Group Available Dividend Amount, the amount of dividends previously declared on
each class, the respective voting or liquidation rights of each class or any
other factor.
1.4. SHARE DISTRIBUTIONS. Subject to subsections 1.1
and 1.2, as the case may be, of this Section II, and except as permitted by
subsection 4.1 of this Section II, the Board of Directors may declare and pay
dividends or distributions of shares of Common Stock (or Convertible Securities
convertible into or exchangeable or exercisable for shares of Common Stock) on
shares of Common Stock or shares of Preferred Stock only as follows:
(A) dividends or distributions of shares of
Company Common Stock (or Convertible Securities convertible into or exchangeable
or exercisable for shares of Residual Common Stock) on shares of Company Common
Stock or shares of Preferred Stock attributed to the Residual Group;
(B) dividends or distributions of shares of Class A
Common Stock (or Convertible Securities convertible into or exchangeable or
exercisable for shares of
3
<PAGE>
Class A Common Stock) on shares of Class A Common Stock or shares of Preferred
Stock attributed to the Atlantic Utility Group; and
(C) dividends or distributions of shares of Class A
Common Stock (or Convertible Securities convertible into or exchangeable or
exercisable for shares of Class A Common Stock) on shares of Company Common
Stock or shares of Preferred Stock attributed to the Residual Group, but only if
the sum of (1) the number of shares of Class A Common Stock to be so issued (or
the number of such shares which would be issuable upon conversion, exchange or
exercise of any Convertible Securities to be so issued, as the case may be), and
(2) the number of shares of Class A Common Stock that are issuable upon
conversion, exchange or exercise of any Convertible Securities then outstanding
that are attributed in accordance with this Article IV to the Residual Group is
less than or equal to the Number of Shares Issuable with Respect to the
Intergroup Interest.
For purposes of this subsection 1.4, any outstanding Convertible Securities that
are convertible into or exchangeable or exercisable for any other Convertible
Securities that are themselves convertible into or exchangeable or exercisable
for Company Common Stock or Class A Common Stock (or other Convertible
Securities that are so convertible, exchangeable or exercisable) shall be deemed
to have been converted, exchanged or exercised in full for such Convertible
Securities.
2. VOTING POWERS. Except as otherwise provided by law or by the
terms of any outstanding series of Preferred Stock or any provision of the
certificate of incorporation of the Corporation restricting the power to vote on
a specified matter to other stockholders, the entire voting power of the
stockholders of the Corporation shall be vested in the holders of Common Stock
of the Corporation, who shall be entitled to vote on any matter on which the
holders of stock of the Corporation shall, by law or by the provisions of the
certificate of incorporation or bylaws of the Corporation, be entitled to vote,
and each class of Common Stock shall vote thereon together as though one class.
On each matter to be voted on by the holders of all classes of Common Stock
voting together as one class, (i) each outstanding share of Company Common Stock
shall have one vote, and (ii) each outstanding share of Class A Common Stock
shall have one vote. The number of authorized shares of Company Common Stock or
of Class A Common Stock may be increased or decreased by the affirmative vote of
a majority of the outstanding shares of Common Stock voting as a single class.
3. LIQUIDATION RIGHTS. In the event of the voluntary or
involuntary dissolution of the Corporation or the liquidation and winding up of
the Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and the full preferential amounts (including any
accumulated and unpaid dividends) to which the holders of Preferred Stock are
entitled (regardless of the Group to which such shares of Preferred Stock were
attributed in accordance with this Article IV), unless otherwise provided in
respect of a series of preferred stock by the resolution of the Board of
Directors fixing the liquidation rights and preferences of such series of
preferred stock, the holders of
4
<PAGE>
the outstanding shares of Common Stock shall be entitled to receive the
remaining assets of the Corporation, regardless of the Group to which such
assets are attributed in accordance with this Article IV, divided among the
holders of Common Stock in accordance with the per share "Liquidation Units"
attributable to each class of Common Stock. Each share of Company Common Stock
is hereby attributed one "Liquidation Unit" and each share of Class A Common
Stock is hereby attributed one "Liquidation Unit," in the case of each such
class of Common Stock subject to adjustment as determined by the Board of
Directors to be appropriate to reflect any subdivision (by stock split or
otherwise) or combination (by reverse stock split or otherwise) of such class of
Common Stock or any dividend or other distribution of shares of such class of
Common Stock to holders of shares of such class of Common Stock. None of the
merger or consolidation of the Corporation into or with any other company, the
merger or consolidation of any other company into or with the Corporation, or
the sale, transfer or lease of all or any part of the assets of the Corporation,
shall be deemed a liquidation or winding up of the Corporation, or cause the
dissolution of the Corporation, for purposes of this subsection 3.
4. CONVERSION OR REDEMPTION OF COMMON STOCK. The Class A Common
Stock is subject to conversion or redemption upon the terms provided below in
this subsection 4.
4.1. CONVERSION OR REDEMPTION OF CLASS A
COMMON STOCK.
(A) In the event of the Disposition, in one
transaction or a series of related transactions, by the Corporation and/or its
subsidiaries of all or substantially all of the properties and assets attributed
to the Atlantic Utility Group to one or more persons or entities (other than (1)
the Disposition by the Corporation of its properties and assets in one
transaction or a series of related transactions in connection with the
dissolution or the liquidation and winding up of the Corporation and the
distribution of assets to stockholders as referred to in subsection 3 of this
Section II, (2) the Disposition of the properties and assets of the Atlantic
Utility Group to all holders of shares of Class A Common Stock and to the
Corporation or subsidiaries thereof, divided among such holders and the
Corporation or subsidiaries thereof on a Pro Rata basis in accordance with the
number of shares of Class A Common Stock outstanding and the Number of Shares
Issuable with Respect to the Intergroup Interest, (3) to any person or entity
controlled (as determined by the Board of Directors) by the Corporation or (4)
pursuant to a Related Business Transaction), the Corporation shall, on or prior
to the 85th Trading Day after the date of consummation of such Disposition (the
"Atlantic Utility Group Disposition Date"), pay a dividend on the Class A Common
Stock or redeem some or all of the Class A Common Stock or convert Class A
Common Stock into Company Common Stock (or another class or series of common
stock of the Corporation), all as provided by the following subparagraphs (1)
and (2) of this paragraph (A) and to the extent applicable, by subsection 4.3 of
this Section II, as the Board of Directors shall have selected among such
alternatives:
5
<PAGE>
(1) provided that there are funds of the
Corporation legally available therefor:
(a) pay to the holders of the shares of
Class A Common Stock a dividend, as the Board of Directors shall have declared
subject to compliance with subsection 1 of this Section II, in cash and/or in
securities (other than a dividend of Common Stock) or other property having a
Fair Value as of the Atlantic Utility Group Disposition Date in the aggregate
equal to the product of the Outstanding Atlantic Utility Fraction as of the
record date for determining holders entitled to receive such dividend multiplied
by the Fair Value of the Net Proceeds of such Disposition; or
(b) (i) subject to the last sentence of
this paragraph (A), if such Disposition involves all (not merely substantially
all) of the properties and assets attributed to the Atlantic Utility Group,
redeem as of the Redemption Date provided by paragraph (C) of subsection 4.3 of
this Section II, all outstanding shares of Class A Common Stock in exchange for
cash and/or for securities (other than Common Stock) or other property having a
Fair Value as of the Atlantic Utility Group Disposition Date in the aggregate
amount equal to the product of the Outstanding Atlantic Utility Fraction as of
such Redemption Date multiplied by the Fair Value of the Net Proceeds of such
Disposition; or
(ii) subject to the last sentence of
this paragraph (A), if such Disposition involves substantially all (but not all)
of the properties and assets attributed to the Atlantic Utility Group, redeem as
of the Redemption Date provided by paragraph (D) of subsection 4.3 of this
Section II such number of whole shares of Class A Common Stock (which may be all
of such shares outstanding) as have in the aggregate an average Market Value
during the period of ten consecutive Trading Days beginning on the sixteenth
Trading Day immediately succeeding the Atlantic Utility Group Disposition Date
closest to the product of the Outstanding Atlantic Utility Fraction as of the
date such shares are selected for redemption multiplied by the Fair Value as of
the Atlantic Utility Group Disposition Date of the Net Proceeds of such
Disposition (but in no event more than all the shares of Class A Common Stock
then outstanding), in consideration for cash and/or securities (other than
Common Stock) or other property having a Fair Value in the aggregate equal to
such product; or
(2) declare that each outstanding share of Class A
Common Stock shall be converted as of the Conversion Date provided by paragraph
(E) of subsection 4.3 of this Section II into a number of fully paid and
nonassessable shares of Company Common Stock (or if the Company Common Stock is
not Publicly Traded at such time and shares of another class or series of common
stock of the Corporation (other than Class A Common Stock) are then Publicly
Traded, of such other class or series of common stock as has the largest Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the notice of such conversion required by such paragraph
(E)) equal to 110% of the ratio, expressed as a decimal fraction rounded to the
nearest five decimal places, of the average Market Value of one share of Class A
Common Stock over
6
<PAGE>
the period of ten consecutive Trading Days beginning on the sixteenth Trading
Day following the Atlantic Utility Group Disposition Date to the average Market
Value of one share of Company Common Stock (or such other class or series of
common stock) over the same ten Trading Day period.
Notwithstanding the foregoing provisions of
this paragraph (A), the Corporation shall redeem Class A Common Stock as
provided by subparagraph (1)(b)(i) or (1)(b)(ii) of this paragraph (A) only if
the amount to be paid in redemption of such stock is less than or equal to the
sum of (i) the Atlantic Utility Group Available Dividend Amount as of the
Redemption Date and (ii) the amount determined to be capital in respect of the
shares to be redeemed in accordance with applicable corporation law as of the
Redemption Date.
(B) For purposes of this subsection 4.1:
(1) as of any date, "substantially all of the
properties and assets" attributed to the Atlantic Utility Group shall mean a
portion of such properties and assets (x) that represents at least 80% of the
Fair Value of the properties and assets attributed to the Atlantic Utility Group
as of such date, or (y) from which were derived at least 80% of the aggregate
revenues for the immediately preceding twelve fiscal quarterly periods of the
Corporation (calculated on a pro forma basis to include revenues derived from
any of such properties and assets acquired during such period) derived from the
properties and assets of the Atlantic Utility Group as of such date;
(2) in the case of a Disposition of the
properties and assets attributed to the Atlantic Utility Group in a series of
related transactions, such Disposition shall not be deemed to have been
consummated until the consummation of the last of such transactions; and
(3) the Board of Directors may pay any dividend
or redemption price referred to in paragraph (A) of this subsection 4.1 in cash,
securities (other than Common Stock) or other property, regardless of the form
or nature of the proceeds of the Disposition.
(C) After the payment of the dividend or the
redemption price with respect to the Class A Common Stock provided for by
subparagraph (1) of paragraph (A) of this subsection 4.1, the Board of Directors
may declare that each share of Class A Common Stock remaining outstanding shall
be converted, but only as of a Conversion Date (determined as provided by
paragraph (E) of subsection 4.3 of this Section II) prior to the first
anniversary of the payment of such dividend or redemption price, into a number
of fully paid and nonassessable shares of Company Common Stock (or, if the
Company Common Stock is not Publicly Traded at such time and shares of any other
class or series of common stock of the Corporation (other than Class A Common
Stock) are then Publicly Traded, of such other class or series of common stock
as has the largest Market Capitalization as of the
7
<PAGE>
close of business on the Trading Day immediately preceding the date of the
notice of such conversion required by such paragraph (E)) equal to 110% of the
Market Value Ratio of the Class A Common Stock to the Company Common Stock as of
the fifth Trading Day prior to the date of the notice of such conversion
required by such paragraph (E).
(D) The Board of Directors may declare that each
outstanding share of Class A Common Stock shall be converted, as of the
Conversion Date provided by paragraph (E) of subsection 4.3 of this Section II,
into the number of fully paid and nonassessable shares of Company Common Stock
(or, if the Company Common Stock is not Publicly Traded at such time and shares
of any other class or series of common stock of the Corporation (other than
Class A Common Stock) are then Publicly Traded, of such other class or series of
common stock as has the largest Market Capitalization as of the close of
business on the Trading Day immediately preceding the date of the notice of
conversion required by such paragraph (E) of subsection 4.3) equal to the
applicable percentage, on the Conversion Date, set forth below of the Market
Value Ratio of the Class A Common Stock to the Company Common Stock as of the
fifth Trading Day prior to the date of the notice of such conversion required by
such paragraph (E):
<TABLE>
<CAPTION>
12 MONTH PERIOD PRIOR TO
THE APPLICABLE ANNIVERSARY PERCENTAGE OF
OF THE EFFECTIVE DATE MARKET VALUE RATIO
- ---------------------- -------------------
<S> <C>
First................................................125%
Second...............................................120%
Third................................................115%
Fourth and Thereafter................................110%
</TABLE>
(E) If the Corporation consummates (i) a tender
offer made by the Corporation for all of the outstanding shares of Class A
Common Stock at an all cash price of at least 110% of the Time-Weighted Market
Price of a share of Class A Common Stock as of the Trading Day immediately
preceding the date of such offer or (ii) an exchange offer by the Corporation to
exchange each outstanding share of Class A Common Stock into a number of shares
of Company Common Stock (or, if the Company Common Stock is not Publicly Traded
at such time and shares of any other class or series of common stock of the
Corporation (other than Class A Common Stock) are then Publicly Traded, of such
other class or series of common stock as has the largest Market Capitalization
as of the close of business on the Trading Day immediately preceding the date of
such offer) equal to at least 110% of the Market Value Ratio of the Class A
Common Stock to the Company Common Stock as of the Trading Day immediately
preceding the date of such offer, which, in either case, is accepted by the
holders of greater than 50% of the outstanding shares of Class A Common Stock,
then the Board of Directors may either (x) provided that there are funds of the
Corporation legally available therefor, redeem as of the Redemption Date
provided by paragraph (F) of subsection 4.3 of this Section II each share of
Class A Common Stock
8
<PAGE>
remaining outstanding in exchange for cash in an amount equal to the highest
cash price paid per share by the Corporation pursuant to such tender offer or to
the product of the highest number of shares of Company Common Stock (or such
other class or series of common stock of the Corporation) per share issued in
exchange for any share of Class A Common Stock pursuant to such exchange offer
and the Time-Weighted Market Price of a share of Company Common Stock (or such
other class or series of common stock of the Corporation) as of the Trading Day
immediately preceding the date of such exchange offer, as the case may be, or
(y) declare that each share of Class A Common Stock remaining outstanding shall
be converted as of the Conversion Date provided by paragraph (E) of subsection
4.3 of this Section II into a number of fully paid and nonassessable shares of
Company Common Stock (or, if the Company Common Stock is not Publicly Traded at
such time and shares of any other class or series of common stock of the
Corporation (other than Class A Common Stock) are then Publicly Traded, of such
other class or series of common stock as has the largest Market Capitalization
as of the close of business on the Trading Day immediately preceding the date of
the notice of such conversion required by such paragraph (E)) equal to the
quotient of the highest cash price paid per share by the Corporation pursuant to
such tender offer and the Time-Weighted Market Price of a share of Company
Common Stock (or such other class or series of common stock of the Corporation)
as of the Trading Day immediately preceding the date of the notice of such
conversion required by such paragraph (E) or to the highest number of shares of
Company Common Stock (or such other class or series of common stock of the
Corporation) per share issued in exchange for any share of Class A Common Stock
pursuant to such exchange offer, as the case may be.
(F) If any person (including the Corporation) makes
a tender offer to purchase shares of Company Common Stock (or, if the Company
Common Stock is not Publicly Traded at such time and shares of any other class
or series of common stock of the Corporation (other than Class A Common Stock)
are then Publicly Traded, of such other class or series of common stock as has
the largest Market Capitalization as of the close of business on the Trading Day
immediately preceding the date of such offer) for cash, property or other
securities, the holders of shares of Class A Common Stock will be entitled to
convert each and any such share of Class A Common Stock into the number of fully
paid and nonassessable shares of Company Common Stock (or such other class or
series of common stock, as the case may be) equal to 100% of the Market Value
Ratio of the Class A Common Stock to the Company Common Stock as of the Trading
Day immediately preceding the date of such tender offer; provided, that (x) any
election by such holder to make such conversion may be fully revoked by such
holder with respect to any such share of Class A Common Stock by giving written
notice to the Corporation prior to the consummation of such tender offer and (y)
such conversion will only be effective with respect to such shares of Company
Common Stock (or such other class or series of common stock of the Corporation)
issuable upon such conversion which are actually accepted for purchase pursuant
to such tender offer.
(G) If any person (including the Corporation)
consummates a tender offer for all of the outstanding shares of Company Common
Stock (or, if the Company Common Stock is not Publicly Traded at such time and
shares of any other class or
9
<PAGE>
series of common stock of the Corporation (other than Class A Common Stock) are
then Publicly Traded, of such other class or series of common stock as has the
largest Market Capitalization as of the close of business on the Trading Day
immediately preceding the date of such offer) at an all cash price that is
accepted by the holders of greater than 50% of the outstanding shares of Company
Common Stock (or such other class or series of common stock of the Corporation),
then the Board of Directors may either (x) redeem, as of the Redemption Date
provided by paragraph (F) of subsection 4.3 of this Section II, each share of
Class A Common Stock outstanding in exchange for cash in an amount equal to the
product of the highest cash price paid per share by such person pursuant to such
tender offer and the Market Value Ratio of the Class A Common Stock to the
Company Common Stock as of the fifth Trading Day prior to the date of such
tender offer or (y) declare that each share of Class A Common Stock outstanding
shall be converted as of the Conversion Date provided by paragraph (E) of
subsection 4.3 of this Section II into a number of fully paid and nonassessable
shares of Company Common Stock (or, if the Company Common Stock is not Publicly
Traded at such time and shares of any other class or series of common stock of
the Corporation (other than Class A Common Stock) are then Publicly Traded, of
such other class or series of common stock as has the largest Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the notice of such conversion required by such paragraph
(E)) equal to the quotient of the highest cash price paid per share by such
person pursuant to such tender offer and the Time-Weighted Market Price of a
share of Company Common Stock (or such other class or series of common stock of
the Corporation) as of the Trading Day immediately preceding the date of the
notice of such conversion required by such paragraph (E).
4.2. TREATMENT OF CONVERTIBLE SECURITIES. After any
Conversion Date or Redemption Date on which all outstanding shares of Class A
Common Stock were converted or redeemed, any share of Class A Common Stock that
is to be issued on conversion, exchange or exercise of any Convertible
Securities shall, immediately upon such conversion, exchange or exercise and
without any notice from or to, or any other action on the part of, the
Corporation or its Board of Directors or the holder of such Convertible
Security:
(A) in the event the shares of Class A Common
Stock outstanding on such Conversion Date were converted into shares of Company
Common Stock (or another class or series of common stock of the Corporation)
pursuant to subparagraph (A)(2) or paragraph (C), (D), (E), (F) or (G) of
subsection 4.1 of this Section II, be converted into the amount of cash and/or
the number of shares of the kind of capital stock and/or other securities or
property of the Corporation that the number of shares of Class A Common Stock
that were to be issued upon such conversion, exchange or exercise would have
received had such shares been outstanding on such Conversion Date; or
(B) in the event the shares of Class A Common Stock
outstanding on such Redemption Date were redeemed pursuant to subparagraph
(A)(1)(b) of subsection 4.1 of this Section II, be redeemed, to the extent of
funds of the Corporation
10
<PAGE>
legally available therefor, for $.01 per share in cash for each share of Class A
Common Stock that otherwise would be issued upon such conversion, exchange or
exercise.
The provisions of the immediately preceding sentence shall
not apply to the extent that other adjustments in respect of such conversion,
exchange or redemption of Class A Common Stock are otherwise made pursuant to
the provisions of such Convertible Securities.
4.3. NOTICE AND OTHER PROVISIONS.
(A) Not later than the tenth Trading Day following
the consummation of a Disposition referred to in paragraph (A) of subsection 4.1
of this Section II, the Corporation shall announce publicly by press release (1)
the Net Proceeds of such Disposition, (2) the number of shares outstanding of
the Class A Common Stock, (3) the number of shares of Class A Common Stock into
or for which Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof and (4) the
Outstanding Atlantic Utility Fraction on the date of such notice. Not earlier
than the 26th Trading Day and not later than the 30th Trading Day following the
consummation of such Disposition, the Corporation shall announce publicly by
press release which of the actions specified in paragraph (A) of such subsection
4.1 it has irrevocably determined to take in respect of such Disposition.
(B) If the Corporation determines to pay a dividend
on shares of Class A Common Stock pursuant to subparagraph (A)(1)(a) of
subsection 4.1 of this Section II, the Corporation shall, not later than the
30th Trading Day following the consummation of the Disposition referred to in
such subparagraph, cause notice to be given to each holder of shares of Class A
Common Stock and to each holder of Convertible Securities that are convertible
into or exchangeable or exercisable for shares of Class A Common Stock (unless
alternate provision for such notice to the holders of such Convertible
Securities is made pursuant to the terms of such Convertible Securities),
setting forth (1) the record date for determining holders entitled to receive
such dividend, which shall be not earlier than the 40th Trading Day and not
later than the 50th Trading Day following the consummation of such Disposition,
(2) the anticipated payment date of such dividend (which shall not be more than
85 Trading Days following the consummation of such Disposition), (3) the type of
property to be paid as such dividend in respect of the outstanding shares of
Class A Common Stock, (4) the Net Proceeds of such Disposition, (5) the
Outstanding Atlantic Utility Fraction on the date of such notice, (6) the number
of outstanding shares of Class A Common Stock and the number of shares of Class
A Common Stock into or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion, exchange or
exercise price thereof and (7) in the case of notice to be given to holders of
Convertible Securities, a statement to the effect that a holder of such
Convertible Securities shall be entitled to receive such dividend only if such
holder properly converts, exchanges or exercises such Convertible Securities on
or prior to the record date referred to in clause (1) of this sentence. Such
notice shall be sent by first-class
11
<PAGE>
mail, postage prepaid, to each such holder at such holder's address as the same
appears on the transfer books of the Corporation.
(C) If the Corporation determines to redeem Class A
Common Stock pursuant to subparagraph (A)(1)(b)(i) of subsection 4.1 of this
Section II, the Corporation shall, not earlier than the 35th Trading Day and not
later than the 45th Trading Day prior to the Redemption Date, cause notice to be
given to each holder of shares of Class A Common Stock, and to each holder of
Convertible Securities convertible into or exchangeable or exercisable for
shares of Class A Common Stock (unless alternate provision for such notice to
the holders of such Convertible Securities is made pursuant to the terms of such
Convertible Securities), setting forth (1) a statement that all shares of Class
A Common Stock outstanding on the Redemption Date shall be redeemed, (2) the
Redemption Date (which shall not be more than 85 Trading Days following the
consummation of such Disposition), (3) the type of property in which the
redemption price for the shares to be redeemed is to be paid, (4) the Net
Proceeds of such Disposition, (5) the Outstanding Atlantic Utility Fraction on
the date of such notice, (6) the place or places where certificates for shares
of Class A Common Stock, properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), are to be surrendered for delivery of cash
and/or securities or other property, (7) the number of outstanding shares of
Class A Common Stock and the number of shares of Class A Common Stock into or
for which such outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise price
thereof, (8) in the case of notice to be given to holders of Convertible
Securities, a statement to the effect that a holder of such Convertible
Securities shall be entitled to participate in such selection for redemption
only if such holder properly converts, exchanges or exercises such Convertible
Securities on or prior to the Redemption Date referred to in clause (2) of this
sentence and a statement as to what, if anything, such holder will be entitled
to receive pursuant to the terms of such Convertible Securities or, if
applicable, this subsection 4 if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (9) a statement to the effect that,
except as otherwise provided by paragraph (I) of this subsection 4.3, dividends
on such shares of Class A Common Stock shall cease to be paid as of such
Redemption Date. Such notice shall be sent by first-class mail, postage prepaid,
to each such holder at such holder's address as the same appears on the transfer
books of the Corporation.
(D) If the Corporation determines to redeem Class A
Common Stock pursuant to subparagraph (A)(1)(b)(ii) of subsection 4.1 of this
Section II, the Corporation shall, not later than the 30th Trading Day following
the consummation of the Disposition referred to in such subparagraph, cause
notice to be given to each holder of shares of Class A Common Stock and to each
holder of Convertible Securities that are convertible into or exchangeable or
exercisable for shares of Class A Common Stock (unless alternate provision for
such notice to the holders of such Convertible Securities is made pursuant to
the terms of such Convertible Securities) setting forth (1) a date not earlier
than the 40th Trading Day and not later than the 50th Trading Day following the
consummation of the Disposition in respect of which such redemption is to be
made on which shares of Class
12
<PAGE>
A Common Stock shall be selected for redemption, (2) the anticipated Redemption
Date (which shall not be more than 85 Trading Days following the consummation of
such Disposition), (3) the type of property in which the redemption price for
the shares to be redeemed is to be paid, (4) the Net Proceeds of such
Disposition, (5) the Outstanding Atlantic Utility Fraction, (6) the number of
shares of Class A Common Stock outstanding and the number of shares of Class A
Common Stock into or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion, exchange or
exercise price thereof, (7) in the case of notice to be given to holders of
Convertible Securities, a statement to the effect that a holder of such
Convertible Securities shall be eligible to participate in such selection for
redemption only if such holder properly converts, exchanges or exercises such
Convertible Securities on or prior to the record date referred to in clause (1)
of this sentence, and a statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such Convertible Securities or, if
applicable, this subsection 4 if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (8) a statement that the Corporation
will not be required to register a transfer of any shares of Class A Common
Stock for a period of 15 Trading Days next preceding the date referred to in
clause (1) of this sentence. Promptly following the date referred to in clause
(1) of the preceding sentence, but not earlier than 40 Trading Days nor later
than 50 Trading Days following the consummation of such Disposition, the
Corporation shall cause a notice to be given to each holder of record of shares
of Class A Common Stock to be redeemed setting forth (1) the number of shares of
Class A Common Stock held by such holder to be redeemed, (2) a statement that
Class A Common Stock shall be redeemed, (3) the Redemption Date, (4) the kind
and per share amount of cash and/or securities or other property to be received
by such holder with respect to each share of Class A Common Stock to be
redeemed, including details as to the calculation thereof, (5) the place or
places where certificates for shares of Class A Common Stock, properly endorsed
or assigned for transfer (unless the Corporation shall waive such requirement),
are to be surrendered for delivery of such cash and/or securities or other
property, (6) if applicable, a statement to the effect that the shares being
redeemed may no longer be transferred on the transfer books of the Corporation
after the Redemption Date and (7) a statement to the effect that, except as
otherwise provided by paragraph (I) of this subsection 4.3, dividends on such
shares of Class A Common Stock shall cease to be paid as of the Redemption Date.
Such notices shall be sent by first-class mail, postage prepaid, to each such
holder at such holder's address as the same appears on the transfer books of the
Corporation.
(E) If the Corporation determines to convert the
Class A Common Stock into Company Common Stock (or another class or series of
common stock of the Corporation) pursuant to subparagraph (A)(2) or paragraph
(C), (D), (E) or (G) of subsection 4.1 of this Section II, the Corporation
shall, not earlier than the 35th Trading Day and not later than the 45th Trading
Day prior to the Conversion Date, cause notice to be given to each holder of
shares of Class A Common Stock and to each holder of Convertible Securities that
are convertible into or exchangeable or exercisable for shares of Class A Common
Stock (unless alternate provision for such notice to the holders of such
Convertible Securities is made pursuant to the terms of such Convertible
Securities) setting forth (1) a
13
<PAGE>
statement that all outstanding shares of Class A Common Stock shall be
converted, (2) the Conversion Date (which, in the case of a conversion after a
Disposition, shall not be more than 85 Trading Days following the consummation
of such Disposition and, in the case of a conversion after a tender or exchange
offer pursuant to paragraph (E) or (G) of subsection 4.1 of this Section II,
shall not be less than 35 or more than 85 Trading Days following the
consummation of such offer), (3) the per share number of shares of Class A
Common Stock or another class or series of common stock of the Corporation, as
the case may be, to be received with respect to each share of Class A Common
Stock, including details as to the calculation thereof, (4) the place or places
where certificates for shares of Class A Common Stock, properly endorsed or
assigned for transfer (unless the Corporation shall waive such requirement), are
to be surrendered for delivery of certificates for shares of Class A Common
Stock, (5) the number of outstanding shares of Class A Common Stock and the
number of shares of Class A Common Stock into or for which outstanding
Convertible Securities are then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof, (6) a statement to the effect
that, except as otherwise provided by paragraph (I) of this subsection 4.3,
dividends on such shares of Class A Common Stock shall cease to be paid as of
such Conversion Date and (7) in the case of notice to holders of such
Convertible Securities, a statement to the effect that a holder of such
Convertible Securities shall be entitled to receive shares of common stock upon
such conversion only if such holder properly converts, exchanges or exercises
such Convertible Securities on or prior to such Conversion Date and a statement
as to what, if anything, such holder will be entitled to receive pursuant to the
terms of such Convertible Securities or, if applicable, this subsection 4 if
such holder thereafter converts, exchanges or exercises such Convertible
Securities. Such notice shall be sent by first-class mail, postage prepaid, to
each such holder at such holder's address as the same appears on the transfer
books of the Corporation.
(F) If the Corporation determines to redeem Class A
Common Stock pursuant to subparagraph (E) or (G) of subsection 4.1 of this
Section II, the Corporation shall, not earlier than the 35th Trading Day and not
later than the 45th Trading Day prior to the Redemption Date, cause notice to be
given to each holder of shares of Class A Common Stock, and to each holder of
Convertible Securities convertible into or exchangeable or exercisable for
shares of Class A Common Stock (unless alternate provision for such notice to
the holders of such Convertible Securities is made pursuant to the terms of such
Convertible Securities), setting forth (1) a statement that all shares of Class
A Common Stock outstanding on the Redemption Date shall be redeemed, (2) the
Redemption Date (which shall not be less than 35 or more than 85 Trading Days
following the consummation of the applicable tender or exchange offer), (3) the
redemption price for the shares, (4) the place or places where certificates for
shares of Class A Common Stock, properly endorsed or assigned for transfer
(unless the Corporation waives such requirement), are to be surrendered for
delivery of cash, (5) the number of outstanding shares of Class A Common Stock
and the number of shares of Class A Common Stock into or for which such
outstanding Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof, (6) in the
case of notice to be given to holders of Convertible Securities, a statement to
the effect that a holder of such Convertible Securities shall be
14
<PAGE>
entitled to participate in such selection for redemption only if such holder
properly converts, exchanges or exercises such Convertible Securities on or
prior to the Redemption Date referred to in clause (2) of this sentence and a
statement as to what, if anything, such holder will be entitled to receive
pursuant to the terms of such Convertible Securities or, if applicable, this
subsection 4 if such holder thereafter converts, exchanges or exercises such
Convertible Securities and (7) a statement to the effect that, except as
otherwise provided by paragraph (I) of this subsection 4.3, dividends on such
shares of Class A Common Stock shall cease to be paid as of such Redemption
Date. Such notice shall be sent by first-class mail, postage prepaid, to each
such holder at such holder's address as the same appears on the transfer books
of the Corporation.
(G) If less than all of the outstanding shares of
Class A Common Stock are to be redeemed pursuant to subparagraph (A)(1) of
subsection 4.1 of this Section II, the shares to be redeemed by the Corporation
shall be selected from among the holders of shares of Class A Common Stock
outstanding at the close of business on the record date for such redemption on a
pro rata basis among all such holders or by lot or by such other method as may
be determined by the Board of Directors to be equitable.
(H) The Corporation shall not be required to issue
or deliver fractional shares of any capital stock or of any other securities to
any holder of Class A Common Stock upon any conversion, redemption, dividend or
other distribution pursuant to this subsection 4. If more than one share of
Class A Common Stock shall be held at the same time by the same holder, the
Corporation may aggregate the number of shares of any capital stock that shall
be issuable or any other securities or property that shall be distributable to
such holder upon any conversion, redemption, dividend or other distribution
(including any fractional shares). If there are fractional shares of any capital
stock or of any other securities remaining to be issued or distributed to the
holders of Class A Common Stock, the Corporation shall, if such fractional
shares are not issued or distributed to the holder, pay cash in respect of such
fractional shares in an amount equal to the Fair Value thereof on the fifth
Trading Day prior to the date such payment is to be made (without interest).
(I) No adjustments in respect of dividends shall
be made upon the conversion or redemption of any shares of Class A Common Stock;
provided, however, that if the Conversion Date or Redemption Date, as the case
may be, with respect to any shares of Class A Common Stock shall be subsequent
to the record date for the payment of a dividend or other distribution thereon
or with respect thereto, the holders of Class A Common Stock at the close of
business on such record date shall be entitled to receive the dividend or other
distribution payable on or with respect to such shares on the date set for
payment of such dividend or other distribution, in each case without interest,
notwithstanding the subsequent conversion or redemption of such shares.
(J) Before any holder of Class A Common Stock shall
be entitled to receive any cash payment and/or certificates or instruments
representing shares of any capital stock and/or other securities or property to
be distributed to such holder with
15
<PAGE>
respect to Class A Common Stock pursuant to this subsection 4, such holder shall
surrender at such place as the Corporation shall specify certificates for Class
A Common Stock, properly endorsed or assigned for transfer (unless the
Corporation shall waive such requirement). The Corporation shall as soon as
practicable after receipt of certificates representing shares of Class A Common
Stock deliver to the person for whose account such shares were so surrendered,
or to such person's nominee or nominees, the cash and/or the certificates or
instruments representing the number of whole shares of the kind of capital stock
and/or other securities or property to which such person shall be entitled as
aforesaid, together with any payment in respect of fractional shares
contemplated by paragraph (H) of this subsection 4.3, in each case without
interest. If less than all of the shares of Class A Common Stock represented by
any one certificate are to be redeemed or converted, the Corporation shall issue
and deliver a new certificate for the shares of Class A Common Stock not
redeemed.
(K) From and after any applicable Conversion Date
or Redemption Date, as the case may be, all rights of a holder of shares of
Class A Common Stock that were converted or redeemed shall cease except for the
right, upon surrender of the certificates representing such shares as required
by paragraph (J) of this subsection 4.3, to receive the cash and/or the
certificates or instruments representing shares of the kind of capital stock
and/or other securities or property for which such shares were converted or
redeemed, together with any payment in respect of fractional shares contemplated
by paragraph (H) of this subsection 4.3 and rights to dividends as provided in
paragraph (I) of this subsection 4.3, in each case without interest. No holder
of a certificate that immediately prior to the applicable Conversion Date
represented shares of Class A Common Stock shall be entitled to receive any
dividend or other distribution or interest payment with respect to shares of any
kind of capital stock or other security or instrument for which Class A Common
Stock was converted until the surrender as required by this subsection 4 of such
certificate in exchange for a certificate or certificates or instrument or
instruments representing such capital stock or other security. Upon such
surrender, there shall be paid to the holder the amount of any dividends or
other distributions (without interest) which theretofore became payable on any
class or series of capital stock of the Corporation as of a record date after
the Conversion Date, but that were not paid by reason of the foregoing, with
respect to the number of whole shares of the kind of capital stock represented
by the certificate or certificates issued upon such surrender. From and after a
Conversion Date, the Corporation shall, however, be entitled to treat the
certificates for Class A Common Stock that have not yet been surrendered for
conversion as evidencing the ownership of the number of whole shares of the kind
or kinds of capital stock of the Corporation for which the shares of Class A
Common Stock represented by such certificates shall have been converted,
notwithstanding the failure to surrender such certificates.
(L) The Corporation shall pay any and all
documentary, stamp or similar issue or transfer taxes that may be payable in
respect of the issuance or delivery of any shares of capital stock and/or other
securities upon conversion or redemption of shares of Class A Common Stock
pursuant to this subsection 4. The Corporation shall not,
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however, be required to pay any tax that may be payable in respect of any
transfer involved in the issuance or delivery of any shares of capital stock
and/or other securities in a name other than that in which the shares of Class A
Common Stock so converted or redeemed were registered, and no such issuance or
delivery shall be made unless and until the person requesting such issuance or
delivery has paid to the Corporation the amount of any such tax or has
established to the satisfaction of the Corporation that such tax has been paid.
(M) Neither the failure to mail any notice required
by this subsection 4.3 to any particular holder of Class A Common Stock or of
Convertible Securities nor any defect therein shall affect the sufficiency
thereof with respect to any other holder of outstanding shares of Class A Common
Stock or of Convertible Securities or the validity of any such conversion or
redemption.
(N) The Board of Directors may establish such rules
and requirements to facilitate the effectuation of the transactions contemplated
by this subsection 4 as the Board of Directors shall determine to be
appropriate.
5. MERGERS AND CONSOLIDATIONS. In the event of a merger or
consolidation to which the Corporation is a party and pursuant to which the
holders of common stock of the Corporation are entitled to receive securities or
other consideration or pursuant to which shares of common stock of the
Corporation are converted into securities or other consideration, the holder of
each outstanding share of Class A Common Stock shall be entitled to receive, or
to have such share converted into, as the case may be, the securities or other
consideration attributable pursuant to such merger or consolidation to the
number of shares of Company Common Stock (or, if the Company Common Stock is not
Publicly Traded at such time and shares of any other class or series of common
stock of the Corporation (other than Class A Common Stock) are then Publicly
Traded, of such other class or series of common stock as has the largest Market
Capitalization as of the close of business on the Trading Day immediately
preceding the date of the first public announcement of such merger or
consolidation) equal to the Market Value Ratio of the Class A Common Stock to
the Company Common Stock as of the Trading Day immediately preceding the date of
the first public announcement of such merger or consolidation, subject to
adjustment as determined by the Board of Directors to be appropriate to reflect
any subdivision (by stock split or otherwise) or combination (by reverse stock
split or otherwise) of either class of Common Stock or any dividend or other
distribution of shares of such class of Common Stock to holders of shares of
such class of Common Stock after such date and prior to the consummation of such
merger or consolidation.
6. BOARD DETERMINATIONS BINDING. Subject to applicable law, any
determinations made in good faith by the Board of Directors of the Corporation
under any provision of this Article IV, and any determinations with respect to
any Group or the rights of the holders of any class of Common Stock made
pursuant to or in furtherance of this Article IV, shall be final and binding on
all stockholders.
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7. CERTAIN DEFINITIONS. As used in this Article IV, the following
terms shall have the following meanings (with terms defined in the singular
having comparable meaning when used in the plural and vice versa), unless the
context otherwise requires. As used in this Article IV, references to the "Board
of Directors" shall refer to the Board of Directors of the Corporation. As used
in this subsection 7, a "contribution" or "transfer" of assets or properties
from one Group to another shall refer to the re-attribution of such assets or
properties from the contributing or transferring Group to the other Group and
correlative phrases shall have correlative meanings.
7.1. ATLANTIC UTILITY GROUP shall mean, as of any date
from and after the Effective Date:
(A) the interest of the Corporation on such date
in Atlantic City Electric Company, a New Jersey corporation (the "Atlantic
Utility Group Company"), and any successor companies, and solely those lines of
business in which the Atlantic Utility Group Company was engaged as of August 9,
1996, and the assets and liabilities attributable to those lines of business,
and which meet all of the criteria listed in clause (i) below, as of August 9,
1996, specifically excluding those businesses, lines of business, and products
and services listed in clause (ii) below, and specifically including those
businesses, lines of business and products and services listed in clause (iii)
below:
(i) only those businesses meeting all of
the following criteria as of August 9, 1996 shall be included in the Atlantic
Utility Group: (a) price regulated by the New Jersey Board of Public Utilities,
including, without limitation, off-tariff agreements; (b) directly related to
the supply of electricity (generation and purchase of electricity) or the
delivery of electricity (transmission and distribution of electricity); and (c)
a line of business for which Atlantic Utility Group Company has a franchise;
(ii) specifically excluded from the Atlantic
Utility Group are the following businesses, lines of business and products and
services, which list is not intended to be inclusive: (a) Appliance Shield
program, (b) lighting upgrade programs, (c) water heater service business, (d)
thermostat sales, (e) telecommunications business and investments, (f) energy
services and consulting, (g) utility services and consulting (e.g. plant
services and electrical equipment O&M services), (h) Atlantic Energy
International, and (i) Atlantic Energy Enterprises and its subsidiaries;
(iii) specifically included in the
Atlantic Utility Group is the Deepwater Operating Company.
(B) all assets and liabilities of the Corporation
and its subsidiaries (other than capital stock of a subsidiary) and liabilities
relating to the notional obligation of the Atlantic Utility Group to the
Residual Group described in clause (iii) of the definition of Company Net Income
(Loss) Attributable to the Atlantic Utility Group on such date attributed by the
Board of Directors to any of the Atlantic Utility Group Company or the
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businesses thereof, whether or not such assets or liabilities are or were also
assets and liabilities of the Atlantic Utility Group Company, including, without
limitation, the assets and liabilities as of the Effective Date specified in the
schedules filed with the records of the actions of the Board of Directors (a
copy of which shall be made available to any stockholder of the Corporation upon
written request therefor);
(C) all properties and assets transferred to the
Atlantic Utility Group from the Residual Group (other than a transaction
pursuant to paragraph (D) of this subsection 7.1) after the Effective Date
pursuant to transactions in the ordinary course of business of both the Residual
Group and the Atlantic Utility Group or otherwise as the Board of Directors may
have directed;
(D) all properties and assets transferred to the
Atlantic Utility Group from the Residual Group in connection with an increase in
the Number of Shares Issuable with respect to the Intergroup Interest; and
(E) the interest of the Corporation or any of
its subsidiaries in any business or asset acquired and any liabilities assumed
by the Corporation or any of its subsidiaries outside of the ordinary course of
business and attributed to the Atlantic Utility Group, as determined by the
Board of Directors;
provided that (1) from and after the payment date of any dividend or other
distribution with respect to shares of Class A Common Stock (other than a
dividend or other distribution payable in shares of Class A Common Stock, with
respect to which adjustment shall be made as provided in paragraph (A) of
subsection 7.16, or in securities of the Corporation attributed to the Atlantic
Utility Group, for which provision shall be made as set forth in clause (2) of
this proviso), the Atlantic Utility Group shall no longer include an amount of
assets or properties previously attributed to the Atlantic Utility Group of the
same kind as so paid in such dividend or other distribution with respect of
shares of Class A Common Stock as have a Fair Value on the record date for such
dividend or distribution equal to the product of (a) the Fair Value on such
record date of the aggregate of such dividend or distribution to holders of
shares of Class A Common Stock declared multiplied by (b) a fraction the
numerator of which is equal to the Intergroup Interest Fraction in effect on the
record date for such dividend or distribution and the denominator of which is
equal to the Outstanding Atlantic Utility Fraction in effect on the record date
for such dividend or distribution, (2) if the Corporation shall pay a dividend
or make some other distribution with respect to shares of Class A Common Stock
payable in securities of the Corporation that are attributed to the Atlantic
Utility Group for purposes of this Article IV (other than Class A Common Stock),
there shall be excluded from the Atlantic Utility Group an interest in the
Atlantic Utility Group equivalent to the number or amount of such securities
that is equal to the product of the number or amount of securities so
distributed to holders of Class A Common Stock multiplied by the fraction
specified in clause 1(b) of this proviso (determined as of the record date for
such distribution) (and such interest in the Atlantic Utility Group shall be
attributed to the Residual Group) and, to the extent interest is or dividends
are paid on the securities so
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distributed, the Atlantic Utility Group shall no
longer include a corresponding ratable amount of the kind of assets paid as such
interest or dividends as would have been paid in respect of the securities
equivalent to such interest in the Atlantic Utility Group deemed held by the
Residual Group if the securities equivalent to such interest were outstanding
(and in such eventuality such assets as are no longer included in the Atlantic
Utility Group shall be attributed to the Residual Group) and (3) from and after
any transfer of any assets or properties from the Atlantic Utility Group to the
Residual Group, the Atlantic Utility Group shall no longer include such assets
or properties so contributed or transferred. The Corporation may also, to the
extent a dividend or distribution on the Class A Common Stock has been paid in
Convertible Securities that are convertible into or exchangeable or exercisable
for Class A Common Stock, cause such Convertible Securities as are deemed to be
held by the Residual Group in accordance with the third to last sentence of
subsection 7.21 of this Article IV and clause (2) of the proviso to the
immediately preceding sentence to be deemed to be converted, exchanged or
exercised as provided in the penultimate sentence of subsection 7.21, in which
case such Convertible Securities shall no longer be deemed to be held by the
Residual Group.
7.2. ATLANTIC UTILITY GROUP AVAILABLE DIVIDEND AMOUNT, on any date,
shall mean either:
(i)(x) the amount equal to the product of (1) the Outstanding
Atlantic utility Fraction as of such date multiplied by (2) an amount equal to
the fair market value of the total assets attributed to the Atlantic Utility
Group less the total amount of the liabilities attributed to the Atlantic
Utility Group (provided that preferred stock shall not be treated as a
liability), in each case as of such date and determined on a basis consistent
with that applied in determining Company Net Income (Loss) Attributable to the
Atlantic Utility Group, minus (y) the aggregate par value of, or any greater
amount determined to be capital in respect of, all outstanding shares of Class A
Common Stock and shares of each class or series of Preferred Stock attributed to
the Atlantic Utility Group, plus (z) the amount, as of such date, of
amortization of goodwill during the period from the Effective Date through such
date arising from the mergers (together, the "Mergers") of Atlantic Energy,
Inc., a New Jersey corporation, with and into the Corporation, and of DS Sub,
Inc., a Delaware corporation, with and into Delmarva Power & Light Company, a
Delaware corporation, with respect to the Atlantic Utility Group (determined as
set forth in clause (ii) of the definition of Company Net Income (Loss)
Attributable to the Atlantic Utility Group), or
(ii) in case the total amount calculated pursuant to clause (i)
above is not a positive number, an amount equal to Company Net Income (Loss)
Attributable to the Atlantic Utility Group (if positive) for the fiscal year in
which the dividend is declared and/or the preceding fiscal year.
Notwithstanding the foregoing provisions of this subsection 7.2, and
consistent with subsection 7.6 of this Article IV, at any time when there are
not outstanding both (i) one or more shares of Residual Common Stock or
Convertible Securities convertible into or exchangeable or exercisable for
Residual Common Stock and (ii) one or more shares of Class A Common Stock or
Convertible Securities convertible
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into or exchangeable or exercisable for Class A Common Stock, the "Available
Dividend Amount," on any calculation date during such time period, with respect
to the Residual Common Stock or the Class A Common Stock, as the case may be
(depending on which of such classes of Common Stock or Convertible Securities
convertible into or exchangeable or exercisable for such class of Common Stock
is outstanding), shall mean the amount available for the payment of dividends on
such Common Stock in accordance with law.
7.3. COMPANY NET INCOME (LOSS) ATTRIBUTABLE TO THE ATLANTIC
UTILITY GROUP, for any period through any date, shall mean (i) the net income or
loss of the Atlantic Utility Group for such period (or in respect of the fiscal
periods of the Corporation commencing prior to the Effective Date, the pro forma
net income or loss of the Atlantic Utility Group for such period as if the
Effective Date had been the first day of such period) determined in accordance
with generally accepted accounting principles in effect at such time, reflecting
income and expense of the Corporation attributed to the Atlantic Utility Group
on a basis substantially consistent with attributions of income and expense made
in the calculation of Company Net Income (Loss) Attributable to the Residual
Group, including, without limitation, corporate administrative costs, net
interest and other financial costs and income taxes, increased (or, in the case
of a loss, reduced) by (ii) the amount of amortization of goodwill arising from
the Mergers with respect to the Atlantic Utility Group to the extent but only to
the extent such goodwill would otherwise decrease the Company Net Income
Attributable to the Atlantic Utility Group or increase the Company Net Loss
Attributable to the Atlantic Utility Group (such amount calculated for fiscal
periods of the Corporation commencing prior to the Effective Date on a pro forma
basis as if the Effective Date had been the first day of the relevant period),
determined in accordance with generally accepted accounting principles in effect
at such time applied on a basis substantially consistent with that applied in
determining Company Net Income (Loss) Attributable to the Atlantic Utility Group
and reduced (or, in the case of a loss, increased) by (iii) an amount equal to
$40 million per fiscal year and by (iv) the amount of dividends paid in such
period (or, in respect of fiscal periods of the Corporation commencing prior to
the Effective Date, the pro forma amount of dividends paid in such period as if
the Effective Date had been the first day of such period) with respect to shares
of preferred and preference stock of Atlantic Utility Group Company.
7.4. COMPANY NET INCOME (LOSS) ATTRIBUTABLE TO THE RESIDUAL
GROUP, for any period through any date, shall mean (i) the net income or loss of
the Residual Group for such period (or in respect of fiscal periods of the
Corporation commencing prior to the Effective Date, the pro forma net income or
loss of the Residual Group for such period as if the Effective Date had been the
first day of such period) determined in accordance with generally accepted
accounting principles in effect at such time, reflecting income and expense of
the Corporation attributed to the Residual Group on a basis substantially
consistent with attributions of income and expense made in the calculation of
Company Net Income (Loss) Attributable to the Atlantic Utility Group, including,
without
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limitation, corporate administrative costs, net interest and other financial
costs and income taxes, reduced (or, in the case of a loss, increased) by (ii)
the amount of amortization of goodwill arising from the Mergers with respect to
the Atlantic Utility Group to the extent but only to the extent such goodwill
results in a decrease (increase) in the Company Net Income (Loss) Attributable
to the Atlantic Utility Group pursuant to clause (ii) of subsection 7.3 of this
Article IV (such amount calculated for fiscal periods of the Corporation
commencing prior to the Effective Date on a pro forma basis as if the Effective
Date had been the first day of the relevant period), determined in accordance
with generally accepted accounting principles in effect at such time applied on
a basis substantially consistent with that applied in determining Company Net
Income (Loss) Attributable to the Atlantic Utility Group (excluding the portion
thereof, if any, already applied to reduce net income or increase net loss of
the Residual Group for such period by virtue of the Intergroup Interest
Fraction) and increased (or, in the case of a loss, decreased) by (iii) the
amount described in clause (iii) of the definition of Company Net Income (Loss)
Attributable to the Atlantic Utility Group.
7.5. CONVERSION DATE shall mean the date fixed by the Board of
Directors as the effective date for the conversion of shares of Class A Common
Stock into shares of Company Common Stock (or another class or series of common
stock of the Corporation) as shall be set forth in the notice to holders of
shares of Class A Common Stock and to holders of any Convertible Securities that
are convertible into or exchangeable or exercisable for shares of Class A Common
Stock required pursuant to paragraph (E) of subsection 4.3 of this Section II.
7.6. CONVERTIBLE SECURITIES at any time shall mean any
securities of the Corporation or of any subsidiary thereof (other than shares of
Common Stock), including warrants and options, outstanding at such time that by
their terms are convertible into or exchangeable or exercisable for or evidence
the right to acquire any shares of any class of Common Stock, whether
convertible, exchangeable or exercisable at such time or a later time or only
upon the occurrence of certain events, but in respect of antidilution provisions
of such securities only upon the effectiveness thereof.
7.7. DISPOSITION shall mean a sale, transfer, assignment or
other disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) of properties or assets (including stock, other
securities and goodwill).
7.8. EFFECTIVE DATE shall mean the date on which the merger of
Atlantic Energy, Inc., a New Jersey corporation, with and into the Corporation,
and the merger of DS Sub, Inc., a Delaware corporation, with and into Delmarva
Power & Light Company, a Delaware corporation, shall become effective.
7.9. FAIR VALUE shall mean, in the case of equity securities or
debt securities of a class or series that has previously been Publicly Traded
for a period of at least 15 months, the Market Value thereof (if such value, as
so defined, can be determined) or, in
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the case of an equity security or debt security that has not been Publicly
Traded for at least such period, shall mean the fair value per share of stock or
per other unit of such other security, on a fully distributed basis, as
determined by an independent investment banking firm experienced in the
valuation of securities selected in good faith by the Board of Directors, or, if
no such investment banking firm is, as determined in the good faith judgment of
the Board of Directors, available to make such determination, in good faith by
the Board of Directors; provided, however, that in the case of property other
than securities, the "Fair Value" thereof shall be determined in good faith by
the Board of Directors based upon such appraisals or valuation reports of such
independent experts as the Board of Directors shall in good faith determine to
be appropriate in accordance with good business practice. Any such determination
of Fair Value shall be described in a statement filed with the records of the
actions of the Board of Directors.
7.10. GROUP shall mean, as of any date, the Residual Group or
the Atlantic Utility Group, as the case may be.
7.11. INTERGROUP INTEREST FRACTION as of any date shall mean a
fraction the numerator of which shall be the Number of Shares Issuable with
Respect to the Intergroup Interest on such date and the denominator of which
shall be the sum of (A) such Number of Shares Issuable with Respect to the
Intergroup Interest and (B) the aggregate number of shares of Class A Common
Stock outstanding on such date. A statement setting forth the Intergroup
Interest Fraction as of the record date for any dividend or distribution on any
class of Common Stock, as of the effective date of any conversion, exchange or
exercise of Convertible Securities into or for shares of Class A Common Stock
and as of the end of each fiscal quarter of the Corporation shall be filed by
the Secretary of the Corporation in the records of the Board of Directors of the
Corporation not later than ten days after such date.
7.12. MARKET CAPITALIZATION of any class or series of common
stock on any date shall mean the product of (i) the Market Value of one share of
such class or series of common stock on such date and (ii) the number of shares
of such class or series of common stock outstanding on such date.
7.13. MARKET VALUE of a share of any class or series of capital
stock of the Corporation on any day shall mean the average of the high and low
reported sales prices regular way of a share of such class or series on such
Trading Day or, in case no such reported sale takes place on such Trading Day,
the average of the reported closing bid and asked prices regular way of a share
of such class or series on such Trading Day, in either case as reported on the
New York Stock Exchange Composite Tape or, if the shares of such class or series
are not listed or admitted to trading on such Exchange on such Trading Day, on
the principal national securities exchange in the United States on which the
shares of such class or series are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange on such
Trading Day, on the NASDAQ National Market or, if the shares of such class or
series are not listed or admitted to trading on any national
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securities exchange or quoted on such National Market System on such Trading
Day, the average of the closing bid and asked prices of a share of such class or
series in the over-the-counter market on such Trading Day as furnished by any
New York Stock Exchange member firm selected from time to time by the
Corporation or, if such closing bid and asked prices are not made available by
any such New York Stock Exchange member firm on such Trading Day, the Fair Value
of a share of such class or series; provided that, for purposes of determining
the market value of a share of any class or series of capital stock for any
period, (i) the "Market Value" of a share of capital stock on any day prior to
any "ex-dividend" date or any similar date occurring during such period for any
dividend or distribution (other than any dividend or distribution contemplated
by clause (ii)(B) of this sentence) paid or to be paid with respect to such
capital stock shall be reduced by the Fair Value of the per share amount of such
dividend or distribution and (ii) the "Market Value" of any share of capital
stock on any day prior to (A) the effective date of any subdivision (by stock
split or otherwise) or combination (by reverse stock split or otherwise) of
outstanding shares of such class or series of capital stock occurring during
such period or (B) any "ex-dividend" date or any similar date occurring during
such period for any dividend or distribution with respect to such capital stock
to be made in shares of such class or series of capital stock or Convertible
Securities that are convertible, exchangeable or exercisable for such class or
series of capital stock shall be appropriately adjusted, as determined by the
Board of Directors, to reflect such subdivision, combination, dividend or
distribution.
7.14. MARKET VALUE RATIO OF THE CLASS A COMMON STOCK TO THE
COMPANY COMMON STOCK as of any date shall mean the fraction (which may be
greater than 1/1), expressed as a decimal (rounded to the nearest five decimal
places), of a share of Company Common Stock (or another class or series of
common stock of the Corporation, if so provided by subsection 4.1 or subsection
5 of this Section II because Company Common Stock is not then Publicly Traded)
to be issued in respect of a share of Class A Common Stock upon a conversion of
Class A Common Stock into Company Common Stock (or another class or series of
common stock of the Corporation) in accordance with subsection 4.1 of this
Section II or to determine the consideration attributable to a share of Class A
Common Stock in accordance with subsection 5 of this Section II, based on the
ratio of the market value of a share of Class A Common Stock to the market value
of a share of Company Common Stock (or such other common stock) as of such date,
determined by the fraction the numerator of which shall be the sum of (A) four
times the average Market Value of one share of Class A Common Stock over the
period of five consecutive Trading Days ending on such date, (B) three times the
average Market Value of one share of Class A Common Stock over the period of
five consecutive Trading Days ending on the fifth Trading Day prior to such
date, (C) two times the average Market Value of one share of Class A Common
Stock over the period of five consecutive Trading Days ending on the tenth
Trading Day prior to such date and (D) the average Market Value of one share of
Class A Common Stock over the period of five consecutive Trading Days ending on
the fifteenth Trading Day prior to such date and the denominator of which shall
be the sum of (A) four times the average Market Value of one share of Company
Common Stock (or such other common stock) over the period of five consecutive
Trading Days ending
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on such date, (B) three times the average Market Value of one share of Company
Common Stock (or such other common stock) over the period of five consecutive
Trading Days ending on the fifth Trading Day prior to such date, (C) two times
the average Market Value of one share of Company Common Stock (or such other
common stock) over the period of five consecutive Trading Days ending on the
tenth Trading Day prior to such date and (D) the average Market Value of one
share of Company Common Stock (or such other common stock) over the period of
five consecutive Trading Days ending on the fifteenth Trading Day prior to such
date.
7.15. NET PROCEEDS shall mean, as of any date with respect to
any Disposition of any of the properties and assets attributed to the Atlantic
Utility Group an amount, if any, equal to what remains of the gross proceeds of
such Disposition after payment of, or reasonable provision is made as determined
by the Board of Directors for, (A) any taxes payable by the Corporation (or
which would have been payable but for the utilization of tax benefits
attributable to the Residual Group) in respect of such Disposition or in respect
of any resulting dividend or redemption pursuant to subparagraph (A)(1)(a) or
(b) of subsection 4.1 of this Section II, (B) any transaction costs, including,
without limitation, any legal, investment banking and accounting fees and
expenses, (C) any liabilities (contingent or otherwise) of or attributed to the
Atlantic Utility Group, including, without limitation, any liabilities for
deferred taxes or any indemnity or guarantee obligations of the Corporation
incurred in connection with the Disposition or otherwise, and any liabilities
for future purchase price adjustments and any preferential amounts plus any
accumulated and unpaid dividends in respect of Preferred Stock attributed to the
Atlantic Utility Group and (D) a capitalized amount (as determined by the Board
of Directors) of the notional obligation of the Atlantic Utility Group to the
Residual Group described in clause (iii) of the definition of Company Net Income
(Loss) Attributable to the Atlantic Utility Group. For purposes of this
definition, any properties and assets attributed to the Atlantic Utility Group
remaining after such Disposition shall constitute "reasonable provision" for
such amount of taxes, costs, liabilities (contingent or otherwise) and
capitalized amount as the Board of Directors determines can be expected to be
supported by such properties and assets.
7.16. NUMBER OF SHARES ISSUABLE WITH RESPECT TO THE INTERGROUP
INTEREST shall, as of the Effective Date, be 15,308,094.66; provided, however,
that such number shall from time to time thereafter be:
(A) adjusted as determined by the Board of Directors
to be appropriate to reflect any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of the Class A Common Stock or
any dividend or other distribution of shares of Class A Common Stock to holders
of shares of Class A Common Stock or any reclassification of Class A Common
Stock;
(B) decreased (but to not less than zero) by action
of the Board of Directors by (1) the number of shares of Class A Common Stock
issued or sold by the Corporation that, immediately prior to such issuance or
sale, were included (as
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determined by the Board of Directors pursuant to paragraph (C) of this
subsection 7.16) in the Number of Shares Issuable with Respect to the Intergroup
Interest, (2) the number of shares of Class A Common Stock issued upon
conversion, exchange or exercise of Convertible Securities that, immediately
prior to the issuance or sale of such Convertible Securities, were included in
the Number of Shares Issuable with Respect to the Intergroup Interest, (3) the
number of shares of Class A Common Stock issued by the Corporation as a dividend
or other distribution (including in connection with any reclassification or
exchange of shares) to holders of Company Common Stock, (4) the number of shares
of Class A Common Stock issued upon the conversion, exchange or exercise of any
Convertible Securities issued by the Corporation as a dividend or other
distribution (including in connection with any reclassification or exchange of
shares) to holders of Company Common Stock, or (5) the number (rounded, if
necessary, to the nearest whole number) equal to the quotient of (a) the
aggregate Fair Value as of the date of contribution of properties or assets
(including cash) transferred from the Atlantic Utility Group to the Residual
Group in consideration for a reduction in the Number of Shares Issuable with
Respect to the Intergroup Interest divided by (b) the Market Value of one share
of Class A Common Stock as of the date of such transfer; and
(C) increased by (1) the number of outstanding shares
of Class A Common Stock repurchased by the Corporation for consideration that is
attributed as provided by subsection 7.21 to the Residual Group and (2) the
number (rounded, if necessary, to the nearest whole number) equal to the
quotient of (a) the Fair Value of properties or assets (including cash)
theretofore attributed as provided by subsection 7.21 to the Residual Group that
are contributed to the Atlantic Utility Group in consideration of an increase in
the Number of Shares Issuable with Respect to the Intergroup Interest, divided
by (b) the Market Value of one share of Class A Common Stock as of the date of
such contribution and (3) the number of shares of Class A Common Stock into or
for which Convertible Securities are deemed converted, exchanged or exercised
pursuant to the penultimate sentence of the definition of "Residual Group" in
subsection 7.21 of this Section II.
7.17. OUTSTANDING ATLANTIC UTILITY FRACTION, as of any date,
means the fraction (which may simplify to 1/1) the numerator of which shall be
the number of shares of Class A Common Stock outstanding on such date and the
denominator of which shall be the sum of the number of shares of Class A Common
Stock outstanding on such date and the Number of Shares Issuable with Respect to
the Intergroup Interest on such date. A statement setting forth the Outstanding
Atlantic Utility Fraction as of the record date for the payment of any dividend
or distribution on any class of Common Stock and as of the end of each fiscal
quarter of the Corporation shall be filed by the Secretary of the Corporation in
the records of the actions of the Board of Directors not later than ten days
after such date.
7.18. PUBLICLY TRADED with respect to any security shall mean
(i) registered under Section 12 of the Securities Exchange Act of 1934, as
amended (or any
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successor provision of law), and (ii) listed for trading on the New York Stock
Exchange or the American Stock Exchange (or any national securities exchange
registered under Section 7 of the Securities Exchange Act of 1934, as amended
(or any successor provision of law), that is the successor to either such
exchange) or quoted in the National Association of Securities Dealers Automation
Quotation System (or any successor system).
7.19. REDEMPTION DATE shall mean the date fixed by the Board of
Directors as the effective date for a redemption of shares of Class A Common
Stock, as set forth in a notice to holders thereof required pursuant to
paragraph (C), (D) or (F) of subsection 4.3 of this Section II.
7.20. RELATED BUSINESS TRANSACTION means any Disposition of all
or substantially all the properties and assets attributed to the Atlantic
Utility Group in a transaction or series of related transactions that result in
the Corporation receiving in consideration of such properties and assets
primarily equity securities (including, without limitation, capital stock, debt
securities convertible into or exchangeable for equity securities or interests
in a general or limited partnership or limited liability company, without regard
to the voting power or other management or governance rights associated
therewith) of (1) any entity which (i) acquires such properties or assets or
succeeds (by merger, formation of a joint venture or otherwise) to the business
conducted with such properties or assets or controls such acquiror or successor
and (ii) is primarily engaged or proposes to engage primarily in one or more
businesses similar or complementary to the businesses conducted by the Atlantic
Utility Group prior to such Disposition, as determined by the Board of
Directors.
7.21. RESIDUAL GROUP shall mean, as of any date from and as of
the Effective Date:
(A) the interest of the Corporation or any of its
subsidiaries on such date in all of the assets, liabilities and businesses of
the Corporation or any of its subsidiaries (and any successor companies), other
than any assets, liabilities and businesses attributed in accordance with this
Article IV to the Atlantic Utility Group;
(B) a proportionate undivided interest in each and
every business, asset and liability attributed to the Atlantic Utility Group
equal to the Intergroup Interest Fraction as of such date;
(C) all properties and assets transferred to the
Residual Group from the Atlantic Utility Group (other than pursuant to paragraph
(D) of this subsection 7.21) after the Effective Date pursuant to transactions
in the ordinary course of business of both the Residual Group and the Atlantic
Utility Group or otherwise as the Board of Directors may have directed;
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(D) all properties and assets transferred to the
Residual Group from the Atlantic Utility Group in connection with a reduction of
the Number of Shares Issuable with Respect to the Intergroup Interest;
(E) the interest of the Corporation or any of its
subsidiaries in any business or asset acquired and any liabilities assumed by
the Corporation or any of its subsidiaries outside the ordinary course of
business and attributed to the Residual Group, as determined by the Board of
Directors; and
(F) from and after the payment date of any dividend
or other distribution with respect to shares of Class A Common Stock (other than
a dividend or other distribution payable in shares of Class A Common Stock, with
respect to which adjustment shall be made as provided in paragraph (A) of
subsection 7.16 of this Section II, or in securities of the Corporation
attributed to the Atlantic Utility Group, for which provision shall be made as
set forth in the third to last sentence of this definition), an amount of assets
or properties previously attributed to the Atlantic Utility Group of the same
kind as were paid in such dividend or other distribution with respect to shares
of Class A Common Stock as have a Fair Value on the record date for such
dividend or distribution equal to the product of (1) the Fair Value on such
record date of the aggregate of such dividend or distribution to holders of
shares of Class A Common Stock declared multiplied by (2) a fraction the
numerator of which is equal to the Intergroup Interest Fraction in effect on the
record date for such dividend or distribution and the denominator of which is
equal to the Outstanding Atlantic Utility Fraction in effect on the record date
for such dividend or distribution; provided that from and after any transfer of
any assets or properties from the Residual Group to the Atlantic Utility Group,
the Residual Group shall no longer include such assets or properties so
transferred (other than as reflected in respect of such a transfer by the
Intergroup Interest Fraction, as provided by paragraph (B) of this subsection
7.21).
If the Corporation shall pay a dividend or make some other
distribution with respect to shares of Class A Common Stock payable in
securities of the Corporation that are attributed to the Atlantic Utility Group
for purposes of this Article IV (other than Class A Common Stock), the Residual
Group shall be deemed to hold an interest in the Atlantic Utility Group
equivalent to the number or amount of such securities that is equal to the
product of the number or amount of securities so distributed to holders of Class
A Common Stock multiplied by the fraction specified in clause (2) of paragraph
(F) of this subsection 7.21 (determined as of the record date for such
distribution) and, to the extent interest is or dividends are paid on the
securities so distributed, the Residual Group shall include, and there shall be
transferred thereto out of the Atlantic Utility Group, a corresponding ratable
amount of the kind of assets paid as such interest or dividends as would have
been paid in respect of such securities so deemed to be held by the Residual
Group if such securities were outstanding. The Corporation may also, to the
extent the securities so paid as a dividend or other distribution to the holders
of Class A Common Stock are Convertible Securities and at the time are
convertible into or exchangeable or exercisable for shares of Class A Common
Stock, treat such Convertible Securities as are so deemed to
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be held by the Residual Group to be deemed to be converted, exchanged or
exercised, and shall do so to the extent such Convertible Securities are
mandatorily converted, exchanged or exercised (and to the extent the terms of
such Convertible Securities require payment of consideration for such
conversion, exchange or exercise, the Residual Group shall then no longer
include an amount of the kind of properties or assets required to be paid as
such consideration for the amount of Convertible Securities deemed converted,
exchanged or exercised (and the Atlantic Utility Group shall be attributed such
properties or assets)), in which case, from and after such time, the securities
into or for which such Convertible Securities so deemed to be held by the
Residual Group were so considered converted, exchanged or exercised shall be
deemed held by the Residual Group (as provided in clause (3) of paragraph (C) of
subsection 7.16 of this Section II) and such Convertible Securities shall no
longer be deemed to be held by the Residual Group. A statement setting forth the
election to effectuate any such deemed conversion, exchange or exercise of
Convertible Securities so deemed to be held by the Residual Group and the
properties or assets, if any, to be attributed to the Atlantic Utility Group in
consideration of such conversion, exchange or exercise (if any) shall be filed
in the records of the actions of the Board of Directors and, upon such filing,
such deemed conversion, exchange or exercise shall be effectuated.
7.22. RESIDUAL GROUP AVAILABLE DIVIDEND AMOUNT, on any date,
shall mean either:
(i)(x) the amount equal to the fair market value of the
total assets attributed to the Residual Group less the total amount of the
liabilities attributed to the Residual Group (provided that preferred stock
shall not be treated as a liability), in each case as of such date and
determined on a basis consistent with that applied in determining Company Net
Income (Loss) Attributable to the Residual Group, minus (y) the aggregate par
value of, or any greater amount determined to be capital in respect of, all
outstanding shares of Company Common Stock and shares of each class or series of
Preferred Stock attributed to the Residual Group, minus (z) the amount, if any,
as of such date, of amortization of goodwill during the period from the
Effective Date through such date arising from the Mergers with respect to the
Atlantic Utility Group (determined as set forth in clause (ii) of the definition
of Company Net Income (Loss) Attributable to the Residual Group and, as in such
clause (ii), excluding the portion thereof, if any, already applied to reduce
net income or increase net loss of the Residual Group for such period by virtue
of the Intergroup Interest Fraction), or
(ii) in case the total amount calculated pursuant to
clause (i) above is not a positive number, an amount equal to Company Net Income
(Loss) Attributable to the Residual Group (if positive) for the fiscal year in
which the dividend is declared and/or the preceding fiscal year.
Notwithstanding the foregoing provisions of this subsection 7.22, at any time
when there are not outstanding both (i) one or more shares of Company Common
Stock or Convertible Securities convertible into or exchangeable or exercisable
for Company Common Stock and
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(ii) one or more shares of Class A Common Stock or Convertible Securities
convertible into or exchangeable or exercisable for Class A Common Stock, the
"Available Dividend Amount," on any calculation date during such time period,
with respect to the Company Common Stock or the Class A Common Stock, as the
case may be (depending on which of such classes of Common Stock or Convertible
Securities convertible into or exchangeable or exercisable for such class of
Common Stock is outstanding), shall mean the amount available for the payment of
dividends on such Common Stock in accordance with law.
7.23. TIME-WEIGHTED MARKET PRICE as of any date with respect to
any class of Common Stock shall mean an amount equal to (i) the sum of (A) four
times the average Market Value of one share of such class of Common Stock over
the period of five consecutive Trading Days ending on such date, (B) three times
the average Market Value of one share of such class of Common Stock over the
period of five consecutive Trading Days ending on the fifth Trading Day prior to
such date, (C) two times the average Market Value of one share of such class of
Common Stock over the period of five consecutive Trading Days ending on the
tenth Trading Day prior to such date and (D) the average Market Value of one
share of such class of Common Stock over the period of five consecutive Trading
Days ending on the fifteenth Trading Day prior to such date, divided by (ii) ten
(10).
7.24. TRADING DAY shall mean each weekday other than any day on
which the relevant class of common stock of the Corporation is not traded on any
national securities exchange or quoted in the NASDAQ National Market or in the
over-the-counter market.
SECTION III. PREFERRED STOCK. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is authorized, by
resolution adopted and filed in accordance with law, to fix the number of shares
in each series, the designation thereof, the voting powers, preferences and
relative participating, optional or other special rights thereof, and the
qualifications or restrictions thereon, of each series and the variations in
such voting powers and preferences and rights as between series. Any shares of
any class or series of Preferred Stock purchased, exchanged, converted or
otherwise acquired by the Corporation, in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock,
without designation as to series, and may be reissued as part of any series of
Preferred Stock created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth in this
certificate of incorporation or in such resolution or resolutions.
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ARTICLE V.
BOARD OF DIRECTORS
SECTION I. POWERS. The business and affairs of the Corporation shall be
managed by, or under the direction of, a Board of Directors, which shall
exercise all of the powers of the Corporation except as are by law or by this
Certificate of Incorporation or the Bylaws of the Corporation conferred upon or
reserved to the stockholders of the Corporation.
SECTION II. NUMBER, TENURE AND QUALIFICATIONS OF DIRECTORS.
1. NUMBER OF DIRECTORS. The Board of Directors shall consist of
no fewer than 9 and no more than 18 directors, as determined from time to time
by resolution of the Board of Directors.
2. TERMS OF DIRECTORS. The directors shall be divided into three
classes for the purpose of providing for staggered director terms, to be
designated Class I, Class II and Class III. Each class shall consist, as nearly
as possible, of one-third of the total number of directors constituting the
entire Board of Directors. Class I directors shall be elected for a term
expiring on the first annual meeting of stockholders following the Effective
Date, Class II directors shall be elected for a term expiring on the second
annual meeting of stockholders following the Effective Date, and Class III
directors shall be elected for a term expiring on the third annual meeting of
stockholders following the Effective Date. At each succeeding annual meeting of
stockholders, successors to the class of directors whose term expires at that
annual meeting shall be elected for three-year terms. If the number of directors
is changed, any increase or decrease shall be apportioned among the classes so
as to maintain the number of directors in each class as nearly equal as
possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent director. A
director shall hold office until the annual meeting of stockholders for the year
in which his or her term expires and until his or her successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Except as otherwise required by law or
in this Certificate of Incorporation, any vacancy on the Board of Directors that
results from an increase in the number of directors and any other vacancy
occurring in the Board of Directors shall be filled by a majority of the
directors then in office, even if less than a quorum, or by the sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his or
her predecessor.
3. REMOVAL OF DIRECTORS. Any director, or the entire Board of
Directors, may be removed from office only for cause and only by the affirmative
vote of not less than a majority of the votes entitled to be cast by the holders
of all the then
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outstanding shares of capital stock of the Corporation of any class or series
entitled to vote in the election of directors generally, voting together as one
class at an annual meeting or at a special meeting of the stockholders called
for such purpose.
4. CLASS VOTES FOR DIRECTORS. Notwithstanding the foregoing,
whenever the holders of any one or more classes or series of stock issued by the
Corporation shall have the right, voting separately by class or series, to elect
directors, the election, term of office, filling of vacancies and other features
of such directorships shall be governed by the terms of this Certificate of
Incorporation applicable thereto, as amended, and such directors so elected
shall not be divided into classes pursuant to this Article V, Section II unless
expressly provided by such terms.
SECTION III. ADDITIONAL AUTHORITY OF BOARD. In furtherance, and not
in limitation, of the powers conferred by statute, the Board of Directors is
expressly authorized to make, alter, amend or repeal the Bylaws of the
Corporation.
SECTION IV. NOMINATION AND ELECTION OF DIRECTORS. Subject to the rights
of holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, dissolution or winding up of the
Corporation, nominations for the election of directors shall be made by a
nominating committee of the Board of Directors if then constituted pursuant to
the Bylaws of the Corporation, or if no nominating committee has been
constituted, by the Board of Directors. In addition, any stockholder entitled to
vote in the election of directors generally may nominate one or more persons for
election as directors at an annual meeting of stockholders, but only if written
notice of such stockholder's intent to make such nomination or nominations has
been received by the Secretary of the Corporation not less than sixty nor more
than ninety days prior to the first anniversary of the preceding year's annual
meeting of stockholders. In the event that the date of the annual meeting of
stockholders is advanced by more than thirty days or delayed by more than sixty
days from such anniversary or in the case of the Corporation's first annual
meeting of stockholders after the Effective Date, notice by the stockholder to
be timely must be received not earlier than the ninetieth day prior to such
annual meeting and not later than the close of business on the later of (a) the
sixtieth day prior to such annual meeting or (b) the tenth day following the day
on which notice of the date of the annual meeting was mailed or public
disclosure thereof was made by the Corporation, whichever first occurs. Each
such notice by a stockholder shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to appear
in person or by proxy at a meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder or any person that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such stockholder (an "Affiliate" of such stockholder) and each nominee and any
other person or persons (naming such person or persons) relating to the
nomination or nominations; (d) the class and number of shares of the Corporation
which are
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beneficially owned by such stockholder and the person to be nominated as of the
date of such stockholder's notice and by any other stockholders known by such
stockholder to be supporting such nominees as of the date of such stockholder's
notice; (e) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (f)
the written consent of each nominee to serve as a director of the Corporation if
so elected. The stockholder shall also comply with all applicable requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations thereunder, with respect to the matters set forth in this
Article V, Section IV.
In addition, in the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors, any stockholder
entitled to vote in the election of directors generally may nominate one or more
persons for election as directors at a special meeting only if written notice of
such stockholder's intent to make such nomination or nominations, setting forth
the information and complying with the form described in the immediately
preceding paragraph, has been received by the Secretary of the Corporation not
earlier than the ninetieth day prior to such special meeting and not later than
the close of business on the later of (i) the sixtieth day prior to such special
meeting or (ii) the tenth day following the day on which notice of the date of
the special meeting was mailed or public disclosure thereof was made by the
Corporation, whichever comes first. The stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Article V, Section IV.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Article V, Section IV. The presiding officer of the meeting shall, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Article V, Section IV, and if
he or she should so determine, the defective nomination shall be disregarded.
Elections of directors shall be by written ballot.
ARTICLE VI.
STOCKHOLDERS
SECTION I. MEETINGS OF STOCKHOLDERS; BOOKS. Meetings of the stockholders
may be held within or without the State of Delaware, as the Bylaws may provide.
Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of such
stockholders and may not be effected by a consent in writing by any such
holders. Subject to the rights of holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation,
dissolution or winding up of the Corporation, special meetings of the
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stockholders of the Corporation may be called only by the Chairman of the Board
or by the Board of Directors pursuant to a resolution approved by a majority of
the entire Board of Directors. The books of the Corporation may be kept (subject
to any provision of law) outside the State of Delaware at such place or places
as may be designated from time to time by the Board of Directors or in the
Bylaws of the Corporation.
Except as otherwise required by law or by this Certificate of
Incorporation, the holders of not less than a majority in voting power of the
shares entitled to vote at any meeting of stockholders, present in person or by
proxy, shall constitute a quorum, and in all matters other than the election of
directors the act of the holders of a majority in voting power of the shares
present in person or by proxy and entitled to vote on the subject matter shall
be deemed the act of the stockholders. Directors shall be elected by a plurality
of the vote of the shares present in person or represented by proxy at a meeting
of stockholders and entitled to vote in the election of directors. If a quorum
shall fail to attend any meeting, the presiding officer may adjourn the meeting
to another place, date or time.
SECTION II. PROPOSALS OF STOCKHOLDERS. At any meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before such meeting. To be brought properly before an annual meeting of
stockholders, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or (c) otherwise properly brought before the meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
received no less than sixty days nor more than ninety days prior to the first
anniversary of the preceding year's annual meeting of stockholders; provided,
however, that in the event that the date of the annual meeting is advanced by
more than thirty days or delayed by more than sixty days from such anniversary
or in the case of the Corporation's first annual meeting of stockholders after
the Effective Date, notice by the stockholder, to be timely, must be received
not earlier than the ninetieth day prior to such annual meeting of stockholders
and not later than the close of business on the later of (a) the sixtieth day
prior to such annual meeting or (b) the tenth day following the date on which
notice of the date of the annual meeting was mailed or public disclosure thereof
was made, whichever first occurs. Each such notice shall set forth as to each
matter the stockholder proposes to bring before the annual meeting of
stockholders: (a) a brief description of the business desired to be brought
before the annual meeting of stockholders and the reasons for conducting such
business at such meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class,
series and number of shares of the Corporation which are beneficially owned by
the stockholder, and (d) any material interest of the stockholder or any
Affiliate of the stockholder in such business. The stockholder shall also comply
with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in this Article VI,
Section II. To be properly brought before a special meeting, business must be
(a) specified in the notice of
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meeting (or any supplement thereto) given by or at the direction of the Board of
Directors or (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors. No business may be brought before a special
meeting by stockholders.
No business shall be conducted at any meeting of the stockholders except
in accordance with the procedures set forth in this Article VI, Section II. The
presiding officer of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this Article VI, Section II, and if he
or she should so determine, any such business not properly brought before the
meeting shall not be transacted. Nothing herein shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act or any successor
provision.
SECTION III. POWER TO AMEND BYLAWS. The stockholders shall have the
power and authority to amend the Bylaws of the Corporation only by the
affirmative vote of 80% or more of the aggregate number of votes that the
holders of the then outstanding shares of Common Stock and Preferred Stock are
entitled to cast on the amendment.
ARTICLE VII.
AMENDMENTS
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation; provided, however, that except
with respect to the designation of the rights and preferences of series of
Preferred Stock pursuant to Article IV, Section III, which is delegated to the
Board of Directors, and notwithstanding any other provisions of this Certificate
of Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Certificate of Incorporation or the Bylaws of the Corporation), any lawful
amendment of this Certificate of Incorporation may be made by affirmative vote
by at least the proportion specified below of the aggregate number of votes
which the holders of the then outstanding shares of Common Stock and Preferred
Stock are entitled to cast on the amendment and, if the shares of one or more
classes or series are entitled under this Certificate of Incorporation or
otherwise by law to vote thereon as a class, affirmative vote by the same
proportion of the aggregate number of votes which the holders of the then
outstanding shares of such one or more classes or series are entitled to cast on
the amendment. The proportion referred to above in this Article VII shall be 80%
in the case of any amendment of the provisions set forth in Section III of
Article IV, Article V and Article VI of this Certificate of Incorporation and
this Article VII and shall be a majority in all other cases.
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ARTICLE VIII.
LIMITATION ON DIRECTOR LIABILITY AND
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION I. LIMITED LIABILITY. A person who is or was a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (a) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the DGCL, or (d) for any transaction from which the director
derived an improper personal benefit. If the DGCL is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of the directors of the Corporation shall be
eliminated or limited to the fullest extent permitted by the DGCL, as so
amended. The elimination and limitation of liability provided herein shall
continue after a director has ceased to occupy such position as to acts or
omissions occurring during such director's term or terms of office, and no
amendment, repeal or modification of this Article IX shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
such amendment, repeal or modification.
SECTION II. RIGHT TO INDEMNIFICATION.
1. Each person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or the person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expenses, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that, except as provided in this Article VIII, Section II, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
authorized by the Board of Directors of the Corporation. Any indemnification
under this Article VIII, Section II (unless ordered by a court) shall be made by
the Corporation only as authorized in the specific case
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upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he or she has met the applicable
standard set forth in the DGCL. Such a determination shall be made (a) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum; (b) by independent legal counsel
(compensated by the Corporation) in a written opinion; (c) by the stockholders;
or (d) in any other manner permitted by the DGCL. In addition to the right to
indemnification conferred in this Article VIII, Section II, each of the above
persons shall have the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the DGCL requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer of the
Corporation (and not in any other capacity in which service was or is rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section II or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers. The right to
indemnification and to an advancement of expenses conferred in this Article
VIII, Section II, shall be a contract right.
2. If a claim under paragraph 1 of this Section II is not paid in
full by the Corporation within 30 days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim (including attorneys' fees). It shall be a defense to any
such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standard of conduct which makes
it permissible under the DGCL for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the DGCL, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct. In
any suit brought by the claimant to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the claimant is not entitled to be indemnified,
37
<PAGE>
or to such advancement of expenses, under this Article VIII or otherwise shall
be on the Corporation.
3. The rights to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article VIII, Section II, shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
this Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
4. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the DGCL.
5. The Corporation may enter into an indemnity agreement with any
director, officer, employee or agent of the Corporation, or of another
corporation, partnership, joint venture, trust or other enterprise, upon terms
and conditions that the Board of Directors deems appropriate, as long as the
provisions of the agreement are not impermissible under applicable law.
6. Any amendment or repeal of this Article VIII, Section II,
shall not be retroactive in effect.
7. In case any provision in this Article VIII, Section II, shall
be determined at any time to be unenforceable in any respect, the other
provisions shall not in any way be affected or impaired thereby, and the
affected provision shall be given the fullest possible enforcement in the
circumstances, it being the intention of the Corporation to afford
indemnification and advancement of expenses to the persons indemnified hereby to
the fullest extent permitted by law.
8. The Corporation may, by action of the Board of Directors,
authorize one or more officers to grant rights to indemnification and
advancement of expenses to employees or agents of the Corporation on such terms
and conditions as such officer or officers deem appropriate under the
circumstances.
38
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Restated
Certificate of Incorporation to be executed by its Senior Vice President and
Chief Financial Officer this 2nd day of March, 1998.
CONECTIV
By /s/ B. S. Graham
---------------------------------------
Name: B. S. Graham
Title: Senior Vice President and
Chief Financial Officer
39
CERTIFICATE OF MERGER
of
ATLANTIC ENERGY, INC.
a New Jersey Corporation,
with and into
CONECTIV, INC.,
a Delaware Corporation
- ------------------------------------------------------------------------------
CONECTIV, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
Atlantic Energy, Inc. New Jersey
Conectiv, Inc. Delaware
SECOND: That an agreement of merger among the parties to the
merger has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations and their respective stockholders in
accordance with the requirements of subsection (c) of Section 252 of the
General Corporation Law of the State of Delaware.
THIRD: That the surviving corporation shall be Conectiv, Inc.,
a Delaware corporation (the "Surviving Corporation"), and the name of the
Surviving Corporation shall be changed to "Conectiv" pursuant hereto.
FOURTH: That the certificate of incorporation and bylaws of
Conectiv, Inc., a Delaware corporation, in effect immediately prior to the
effective time of the merger shall be the certificate of incorporation and
bylaws of the Surviving Corporation, except that, pursuant to this
Certificate of Merger, ARTICLE I of the certificate of incorporation of the
Surviving Corporation shall be amended to read as follows:
<PAGE>
ARTICLE I
The name of the Corporation shall be Conectiv.
FIFTH: That the executed agreement of merger is on file at an
office of the Surviving Corporation. The office of the Surviving
Corporation at which the executed agreement of merger will be on file is
800 King Street, Wilmington, Delaware, 19899.
SIXTH: That a copy of the agreement of merger will be
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of any constituent corporation.
SEVENTH: That the authorized capital stock and par value of
Atlantic Energy, Inc., a New Jersey corporation, is 75,000,000 shares of
Common Stock without par value.
EIGHTH: That the effective date and time of the merger shall be
12:01 a.m. on March 1, 1998.
Dated: February 27, 1998 CONECTIV, INC.
By: /s/ Barbara S. Graham
---------------------
Barbara S. Graham
President
CONECTIV, INC.
ACKNOWLEDGMENT AND REQUEST
pursuant to Section 102(a)
of the
Delaware General Corporation Law
CONECTIV, INC. (the "Corporation"), a corporation duly organized
under the laws of the State of Delaware, DOES HEREBY CERTIFY AND
ACKNOWLEDGE that:
(1) The Certificate of Merger of Atlantic Energy, Inc., a New
Jersey corporation, with and into the Corporation (the "Certificate of
Merger") is being filed contemporaneously herewith. The Corporation will
be the surviving corporation of the merger to be effected pursuant to the
Certificate of Merger. Pursuant to the Certificate of Merger, the
certificate of incorporation of the Corporation will be amended to change
the name of the Corporation to "Conectiv".
(2) As of the effective time set forth in the Certificate of
Merger, the total assets (as that term is defined in subsection (i) of
Section 503 of the Delaware General Corporation Law) of the Corporation
will be not less than $10,000,000.
Pursuant to Section 102(a)(1) of the Delaware General Corporation
Law, the Corporation hereby requests a waiver from the Division of
Corporations of the Secretary of State of the State of Delaware of the
requirement set forth in Section 102(a) of the Delaware General Corporation
Law that the name of a corporation shall contain one of the following words
"association," "company," "corporation," "club," "foundation," "fund,"
"incorporated," "institute," "society," "union," "syndicate," or "limited,"
or such other appropriate abbreviation, and that the name of the
Corporation be permitted to be changed to "Conectiv".
Dated: February 27, 1998 CONECTIV, INC.
By: /s/ Barbara S. Graham
---------------------
Barbara S. Graham
President
CERTIFICATE OF MERGER OF
ATLANTIC ENERGY, INC.,
a New Jersey Corporation,
with and into
CONECTIV, INC.,
a Delaware Corporation
- ------------------------------------------------------------------------------
TO: Secretary of State
State of New Jersey
Pursuant to the pertinent provisions of Chapter 10 of the New
Jersey Business Corporation Act (hereinafter referred to as the "Act"), the
undersigned corporations hereby execute the following Certificate of
Merger.
ARTICLE I
---------
Atlantic Energy, Inc. ("Atlantic"), a corporation organized and
existing under the laws of the State of New Jersey, shall be merged with
and into Conectiv, Inc., a corporation organized and existing under the
laws of the State of Delaware and qualified to do business in the State of
New Jersey, which is designated as the surviving corporation (hereinafter
referred to as the "Surviving Corporation"). The name of the Surviving
Corporation shall be changed to "Conectiv" in Delaware pursuant to Sections
102(a) and 252 of the Delaware General Corporation Law (the "Delaware
GCL"), and shall continue to use the name "Conectiv, Inc." in New Jersey
pursuant to the requirements of the Act, in particular, Section 14A:2-2 of
the Act.
<PAGE>
ARTICLE II
----------
The Agreement and Plan of Merger set forth in Exhibit A hereto
(the "Plan") was approved by the Board of Directors of Atlantic on August
9, 1996. The Plan was amended and restated and such amendment and
restatement was approved by the Board of Directors of Atlantic on December
8, 1996 in accordance with the requirements of Sections 14A:10-1 and
14A:10-7 of the Act. The Plan was approved by the Shareholders of Atlantic
on January 30, 1997. The Plan was approved by the Board of Directors of
Conectiv, Inc. on August 9, 1996. The Plan was amended and restated and
such amendment and restatement was approved by the Board of Directors of
Conectiv, Inc. on December 8, 1996. The Plan was unanimously approved by
the stockholders of Conectiv, Inc. on December 8, 1996. The Plan was
amended by the Boards of Directors of Atlantic and Conectiv, Inc. by
amendment dated August 12, 1997.
ARTICLE III
-----------
As to Atlantic, the number of shares entitled to vote was as
follows:
<TABLE>
<CAPTION>
Total Number of Total Number of
Name of Corporation Total Number of Shares Shares Voting in Shares Voting
- Class of Stock Entitled to Vote Favor Against
---------------- ---------------- ----- -------
<S> <C> <C> <C>
Atlantic Energy, Inc.
- Common Stock 52,704,052 37,843,067 1,539,886
Conectiv, Inc.
- Common Stock 500 500 -
</TABLE>
2
<PAGE>
ARTICLE IV
----------
The merger shall take effect at 12:01 a.m. on March 1, 1998.
ARTICLE V
---------
Such Merger shall be in compliance with all of the applicable
provisions of the Delaware GCL with respect to such Merger as well as the
applicable filing and recording requirements under the Delaware GCL.
ARTICLE VI
----------
The Surviving Corporation does hereby agree that it may be served
with process in the State of New Jersey in any proceeding for enforcement
of any obligation of Atlantic in New Jersey, as well as for enforcement of
any obligation of the Surviving Corporation arising from the Merger
provided for herein. The Surviving Corporation does hereby irrevocably
appoint the Secretary of State of the State of New Jersey as its agent to
accept service of process in any such proceeding and does hereby specify
the following address without the State of New Jersey to which a copy of
such process shall be mailed by the Secretary of State of the State of New
Jersey:
Conectiv
800 King Street
Wilmington, Delaware 19801
ARTICLE VII
-----------
The Surviving Corporation does hereby agree that it will promptly
pay to the dissenting shareholders of Atlantic, if any, the amount, if any,
to which they shall be entitled under the provisions of the Act with
respect to the rights of dissenting shareholders.
3
<PAGE>
IN WITNESS WHEREOF, each of the undersigned corporations has
caused this Certificate of Merger to be executed in its name by its duly
authorized officer, as of the 27th day of February, 1998.
CONECTIV, INC.
By:/s/ Barbara S. Graham
---------------------
Barbara S. Graham
President
ATLANTIC ENERGY, INC.
By:/s/ Jerrold L. Jacobs
---------------------
Jerrold L. Jacobs
Chairman and Chief Executive
Officer
CERTIFICATE OF MERGER
of
DS Sub, Inc.
a Delaware Corporation,
with and into
Delmarva Power & Light Company
a Delaware and Virginia Corporation
DELMARVA POWER & LIGHT COMPANY, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, and the Virginia Stock Corporation Act,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations of the merger are as follows:
NAME STATE OF INCORPORATION
---- ----------------------
DS Sub, Inc. Delaware
Delmarva Power & Light Company Delaware and Virginia
SECOND: That an agreement of merger among the parties to the
merger has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations and their respective stockholders in
accordance with the requirements of subsection (c) of Section 251 of the
General Corporation Law of the State of Delaware and the applicable
provisions of the Virginia Stock Corporation Act.
<PAGE>
THIRD: That the surviving corporation shall be Delmarva Power
& Light Company, a Delaware and Virginia corporation (the "Surviving
Corporation"), and the name of the Surviving Corporation shall be "Delmarva
Power & Light Company".
FOURTH: That the certificate of incorporation and bylaws of
Delmarva Power & Light Company as in effect immediately prior to the
effective time of the merger shall be the certificate of incorporation and
bylaws of the Surviving Corporation.
FIFTH: That the executed agreement of merger is on file at an
office of the Surviving Corporation. The address of the office of the
Surviving Corporation at which a copy of the executed agreement of merger
is on file is 800 King Street, Wilmington, Delaware, 19899.
SIXTH: That a copy of the agreement of merger will be
furnished by the Surviving Corporation, on request and without cost, to any
stockholder of any constituent corporation.
SEVENTH: That the effective date and time of the merger shall be
12:01 a.m. on March 1, 1998.
Delmarva Power & Light Company
By: /s/ Barbara S. Graham
-------------------------
Barbara S. Graham
Senior Vice President and
Chief Financial Officer
2
EXHIBIT 3(f)
BYLAWS
OF
CONECTIV
1. OFFICES.
1.1 Offices. In addition to its registered office in the State of
Delaware, the Corporation shall have a corporate office in Wilmington, Delaware
and a significant presence in New Jersey, and such other offices, either within
or without the State of Delaware, at such locations as the Board of Directors
may from time to time determine or the business of the Corporation may require.
2. SEAL.
2.1 Seal. The Corporation shall have a seal, which shall have inscribed
thereon its name and year of incorporation and the words, "Corporate Seal
Delaware."
3. MEETINGS OF STOCKHOLDERS.
3.1 Annual Meetings. The annual meeting of stockholders of the
Corporation shall be held on such date, at such time and at such place within or
without the State of Delaware as shall be determined by the Board of Directors
from time to time.
3.2 Special Meetings. Special meetings of the stockholders of the
Corporation shall be held on such date, at such time and at such place within or
without the State of Delaware as may be designated by the Chairman of the Board
or by the Board of Directors pursuant to a resolution approved by a majority of
the entire Board of Directors.
3.3 Notice of Meetings. (a) Notices of meetings of stockholders shall be
in writing and shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which a meeting is
called. No business other than that specified in the notice thereof shall be
transacted at any special meeting.
(b) Such notice shall either be delivered personally or mailed,
postage prepaid, to each stockholder entitled to vote at such meeting not less
than 10 nor more than 60 days before the date of the meeting. If mailed, the
notice shall be directed to the stockholder at his or her address as it appears
on the records of the Corporation. Personal delivery of any such notice to any
officer of a corporation or association or to any member of a partnership shall
constitute delivery of such notice to such corporation, association or
partnership.
(c) Notice of any meeting of stockholders need not be given to any
stockholder if waived by such stockholder in writing, whether before or after
such
<PAGE>
meeting is held, or if such stockholder shall sign the minutes or attend the
meeting, except that if such stockholder attends a meeting for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened, such
stockholder shall not be deemed to have waived notice of such meeting.
3.4 Adjourned Meetings. When a meeting is adjourned to another time or
place, unless otherwise provided by these Bylaws, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the meeting
at which the adjournment is taken. At the adjourned meeting the stockholders may
transact any business which might have been transacted at the original meeting.
If an adjournment is for more than 30 days, or if after an adjournment, a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder entitled to vote at the meeting.
3.5 Quorum and Adjournment. Except as otherwise provided by law, by the
Certificate of Incorporation of the Corporation or by these Bylaws, the
presence, in person or by proxy, of the holders of a majority of the aggregate
voting power of the stock issued and outstanding, entitled to vote thereat,
shall constitute a quorum for the transaction of business at all meetings of
stockholders. If such majority shall not be present or represented at any
meeting of stockholders, the stockholders present, although less than a quorum,
shall have the power to adjourn the meeting.
3.6 Vote Required. Except as otherwise provided by law or by the
Certificate of Incorporation:
(a) Directors shall be elected by a plurality of the votes present
in person or represented by proxy at a meeting of stockholders and entitled to
vote in the election of directors, and
(b) whenever any corporate action other than the election of
Directors is to be taken, it shall be authorized by a majority in voting power
of the shares present in person or by proxy at a meeting of stockholders and
entitled to vote on the subject matter.
3.7 Manner of Voting. At each meeting of stockholders, each stockholder
having the right to vote shall be entitled to vote in person or by proxy.
Proxies need not be filed with the Secretary of the Corporation until the
meeting is called to order, but shall be filed before being voted. Each
stockholder shall be entitled to vote each share of stock having voting power
registered in his name on the books of the Corporation on the record date fixed
for determination of stockholders entitled to vote at such meeting. All
elections of Directors by stockholders shall be by written ballot.
3.8 Proxies. (a) At any meeting of stockholders, any stockholder may be
represented and vote by proxy or proxies appointed by a written form of proxy.
In the
2
<PAGE>
event that any form of proxy shall designate two or more persons to act as
proxies, a majority of such persons present at the meeting or, if only one shall
be present, then that one shall have and may exercise all of the powers
conferred by the form of proxy upon all of the persons so designated unless the
form of proxy shall otherwise provide.
(b) The Board of Directors may, in advance of any annual or
special meeting of the stockholders, prescribe additional regulations concerning
the manner of execution and filing of proxies and the validation of the same,
which are intended to be voted at any such meeting.
3.9 Presiding Officer and Secretary. The Chairman of the Board shall act
as chairman of all meetings of the stockholders. In the absence of the Chairman
of the Board, the Vice Chairman of the Board or, in his or her absence, the
Chief Executive Officer or, in his or her absence, the President or, in his or
her absence, any Vice President designated by the Board of Directors shall act
as chairman of the meeting.
The Secretary of the Corporation shall act as secretary of all
meetings of the stockholders, but, in the absence of the Secretary, the
Assistant Secretary designated in accordance with Section 5.11(b) of these
Bylaws shall act as secretary of all meetings of the stockholders, but in the
absence of a designated Assistant Secretary, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
3.10 Procedure. At each meeting of stockholders, the chairman of the
meeting shall fix and announce the date and time of the opening and the closing
of the polls for each matter upon which the stockholders will vote at the
meeting and shall determine the order of business and all other matters of
procedure. Except to the extent inconsistent with any such rules and regulations
as adopted by the Board of Directors, the chairman of the meeting may establish
rules, which need not be in writing, to maintain order and safety and for the
conduct of the meeting. Without limiting the foregoing, he or she may:
(a) restrict attendance at any time to bona fide stockholders of
record and their proxies and other persons in attendance at the invitation of
the chairman;
(b) restrict dissemination of solicitation materials and use of
audio or visual recording devices at the meeting;
(c) adjourn the meeting without a vote of the stockholders,
whether or not there is a quorum present; and
(d) make rules governing speeches and debate, including time
limits and access to microphones.
The chairman of the meeting acts in his or her absolute discretion and his or
her rulings are not subject to appeal.
3
<PAGE>
4. DIRECTORS.
4.1 Powers. The Board of Directors shall exercise all of the powers of
the Corporation except such as are by law, or by the Certificate of
Incorporation of this Corporation or by these Bylaws conferred upon or reserved
to the stockholders of any class or classes.
4.2 Resignations. Any Director may resign at any time by giving written
notice to the Board of Directors or the Secretary. Such resignation shall take
effect at the date of receipt of such notice or at any later time specified
therein. Acceptance of such resignation shall not be necessary to make it
effective.
4.3 Presiding Officer and Secretary. The Chairman of the Board shall act
as chairman of all meetings of the Board of Directors. In the absence of the
Chairman of the Board, the Vice Chairman of the Board, or in his absence, the
Chief Executive Officer or other person designated by the Board of Directors
shall act as chairman of the meeting.
The Secretary of the Corporation shall act as secretary of all
meetings of the Board of Directors, but, in the absence of the Secretary, the
Assistant Secretary designated in accordance with Section 5.11(b) of these
Bylaws shall act as secretary of all meetings of the Board of Directors, but in
the absence of a designated Assistant Secretary, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
4.4 Annual Meetings. The Board of Directors shall meet each year
immediately following the annual meeting of stockholders, at the place where
such meeting of stockholders has been held, or at such other place as shall be
fixed by the person presiding over the meeting of the stockholders, for the
purpose of election of officers and consideration of such other business as the
Board of Directors considers relevant to the management of the Corporation.
4.5 Regular Meetings. Regular meetings of the Board of Directors shall
be held on such dates and at such times and places, within or without the state
of Delaware, as shall from time to time be determined by the Board of Directors.
In the absence of any such determination, such meetings shall be held at such
times and places, within or without the State of Delaware, as shall be
designated by the Chairman of the Board on not less than twelve hours notice to
each Director, given verbally or in writing either personally, by telephone
(including by message or recording device), by facsimile transmission, by
telegram or by telex or on not less than three (3) calendar days' notice to each
Director given by mail.
4.6 Special Meetings. Special meetings of the Board of Directors shall
be held at the call of the Chairman of the Board at such times and places,
within or without the State of Delaware, as he or she shall designate, on not
less than twelve hours notice to each Director, given verbally or in writing
either personally, by telephone (including by message or recording device), by
facsimile transmission, by telegram or by telex or on not
4
<PAGE>
less than three (3) calendar days' notice to each Director given by mail.
Special meetings shall be called by the Secretary on like notice at the written
request of a majority of the Directors then in office.
4.7 Quorum and Powers of a Majority. At all meetings of the Board of
Directors and of each committee thereof, a majority of the members shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the act of a majority of the members present at any meeting at which a
quorum is present shall be the act of the Board of Directors or such committee,
unless by express provision of law, of the Certificate of Incorporation or these
Bylaws, a different vote is required, in which case such express provision shall
govern and control. In the absence of a quorum, a majority of the members
present at any meeting may, without notice other than announcement at the
meeting, adjourn such meeting from time to time until a quorum is present.
4.8 Waiver of Notice. Notice of any meeting of the Board of Directors,
or any committee thereof, need not be given to any member if waived by him or
her in writing, whether before or after such meeting is held, or if he or she
shall sign the minutes or attend the meeting, except that if such Director
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened, then such Director shall not be deemed to have waived notice
of such meeting.
4.9 Manner of Acting. (a) Members of the Board of Directors, or any
committee thereof, may participate in any meeting of the Board of Directors or
such committee by means of conference telephone or similar communications
equipment by means of which all persons participating therein can hear each
other, and participation in a meeting by such means shall constitute presence in
person at such meeting.
(b) Any action required or permitted to be taken at any meeting of
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writings are filed with the minutes of
proceedings of the Board of Directors or such committee.
4.10 Compensation. (a) The Board of Directors, by a resolution or
resolutions, may fix, and from time to time change, the compensation of
Directors.
(b) Each Director shall be entitled to reimbursement from the
Corporation for his or her reasonable expenses incurred with respect to duties
as a member of the Board of Directors or any committee thereof.
(c) Nothing contained in these Bylaws shall be construed to
preclude any Director from serving the Corporation in any other capacity and
from receiving compensation from the Corporation for service rendered to it in
such other capacity.
5
<PAGE>
4.11 Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more Directors, which to the
extent provided in said resolution or resolutions shall have and may exercise
the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation; provided, however, that no such
committee shall have the power or authority in reference to the following
matters: (i) approving or adopting, or recommending to the stockholders, any
action or matter expressly required by the General Corporation Law of Delaware
(the "GCLD") to be submitted to stockholders for approval or (ii) adopting,
amending, or repealing any bylaw of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member of the committee. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting of such committee and not disqualified from voting, whether or not
such member of members constitute a quorum, may unanimously appoint another
member of the board of directors to act at the meeting in place of such absent
or disqualified director.
4.12 Committee Procedure, Limitations of Committee Powers. (a) Except as
otherwise provided by these Bylaws, each committee shall adopt its own rules
governing the time, place and method of holding its meetings and the conduct of
its proceedings and shall meet as provided by such rules or by resolution of the
Board of Directors. Unless otherwise provided by these Bylaws or any such rules
or resolutions, notice of the time and place of each meeting of a committee
shall be given to each member of such committee as provided in Section 4.6 of
these Bylaws with respect to notices of special meetings of the Board of
Directors.
(b) Each committee shall keep regular minutes of its proceedings
and report the same to the Board of Directors when required.
(c) Any member of any committee may be removed from such committee
either with or without cause, at any time, by the Board of Directors at any
meeting thereof. Any vacancy in any committee shall be filled by the Board of
Directors in the manner prescribed by the Certificate of Incorporation or these
Bylaws for the original appointment of the members of such committee.
5. OFFICERS.
5.1 Number. (a) The officers of the Corporation shall include a Chief
Executive Officer, a President, one or more Vice Presidents (including one or
more Executive Vice Presidents and one or more Senior Vice Presidents if deemed
appropriate by the Board of Directors), a Secretary and a Treasurer. The Board
of Directors shall also elect a Chairman of the Board and may elect a Vice
Chairman of the Board. The Board of Directors may also elect such other officers
as the Board of Directors may from time to time deem appropriate or necessary.
Except for the Chairman of the Board, the Vice Chairman of the Board and the
Chief Executive Officer, none of the officers of the
6
<PAGE>
Corporation needs to be a director of the Corporation. Any two or more offices
may be held by the same person to the extent permitted by the GCLD.
(b) The Board of Directors may delegate to the Chief Executive
Officer or President the power to appoint one or more employees of the
Corporation as divisional or departmental vice presidents and fix the duties of
such appointees. However, no such divisional or departmental vice president
shall be considered as an officer of the Corporation, the officers of the
Corporation being limited to those officers elected by the Board of Directors.
5.2 Election of Officers, Qualification and Term. The officers of the
Corporation shall be elected from time to time by the Board of Directors and,
except as may otherwise be expressly provided in a contract of employment duly
authorized by the Board of Directors or the Merger Agreement, shall hold office
at the pleasure of the Board of Directors.
5.3 Removal. Except as otherwise expressly provided in the Merger
Agreement, any officer elected by the Board of Directors may be removed, either
with or without cause, by the Board of Directors at any meeting thereof, or to
the extent delegated to the Chairman of the Board or the Chief Executive
Officer, by the Chairman of the Board or the Chief Executive Officer.
5.4 Resignations. Any officer of the Corporation may resign at any time
by giving written notice to the Board of Directors or to the Chairman of the
Board or to the Chief Executive Officer. Such resignation shall take effect at
the date of the receipt of such notice or at any later time specified therein
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
5.5 Salaries. The salaries of all officers of the Corporation shall be
fixed by the Board of Directors from time to time, and no officer shall be
prevented from receiving such salary by reason of the fact that he or she is
also a Director of the Corporation.
5.6 The Chairman of the Board. The Chairman of the Board shall have the
powers and duties customarily and usually associated with the office of the
Chairman of the Board. The Chairman of the Board shall preside at meetings of
the stockholders and of the Board of Directors.
5.7 Vice Chairman of the Board. The Vice Chairman of the Board shall
have the powers and duties customarily and usually associated with the office of
the Vice Chairman of the Board.
5.8 Chief Executive Officer. The Chief Executive Officer shall have,
subject to the supervision, direction and control of the Board of Directors, the
general powers and duties of supervision, direction and management of the
affairs and business of
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the Corporation usually vested in the chief executive officer of a corporation,
including, without limitation, all powers necessary to direct and control the
organizational and reporting relationships within the Corporation. If at any
time the office of the Chairman of the Board and the Vice Chairman of the Board
shall not be filled, or in the event of the temporary absence or disability of
the Chairman of the Board and the Vice Chairman of the Board, the Chief
Executive Officer shall have the powers and duties of the Chairman of the Board.
5.9 The President. The President shall serve as chief operating officer
and shall have such other powers and perform such other duties as may be
delegated to him or her from time to time by the Board of Directors or the Chief
Executive Officer.
5.10 The Vice Presidents. Each Vice President shall have such powers and
perform such duties as may from time to time be assigned to him or her by the
Board of Directors, the Chief Executive Officer or the President.
5.11 The Secretary and the Assistant Secretary. (a) The Secretary shall
attend meetings of the Board of Directors and meetings of the stockholders and
record all votes and minutes of all such proceedings in a book kept for such
purpose. He or she shall have all such further powers and duties as generally
are incident to the position of Secretary or as may from time to time be
assigned to him or her by the Board of Directors, the Chief Executive Officer or
the President.
(b) Each Assistant Secretary shall have such powers and perform
such duties as may from time to time be assigned to him or her by the Board of
Directors, the Chief Executive Officer, the President or the Secretary. In case
of the absence or disability of the Secretary, the Assistant Secretary
designated by the Chief Executive Officer (or, in the absence of such
designation, by the Secretary) shall perform the duties and exercise the powers
of the Secretary.
5.12 The Treasurer and the Assistant Treasurer. (a) The Treasurer shall
have custody of the Corporation's funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit or cause to be deposited moneys or other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. The Treasurer shall also maintain
adequate records of all assets, liabilities and transactions of the Corporation
and shall see that adequate audits thereof are currently and regularly made. The
Treasurer shall have such other powers and perform such other duties that
generally are incident to the position of Treasurer or as may from time to time
be assigned to him or her by the Board of Directors, the Chief Executive Officer
or the President.
(b) Each Assistant Treasurer shall have such powers and perform
such duties as may from time to time be assigned to him or her by the Board of
Directors, the Chief Executive Officer, the President or the Treasurer. In case
of the absence or
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disability of the Treasurer, the Assistant Treasurer designated by the Chief
Executive Officer (or, in the absence of such designation, by the Treasurer)
shall perform the duties and exercise the powers of the Treasurer.
6. STOCK
6.1 Certificates. Certificates for shares of stock of the Corporation
shall be issued under the seal of the Corporation, or a facsimile thereof, and
shall be numbered and shall be entered in the books of the Corporation as they
are issued. Each certificate shall bear a serial number, shall exhibit the
holder's name and the number of shares evidenced thereby, and shall be signed by
the Chairman of the Board or a Vice Chairman, if any, or the Chief Executive
Officer or the President or any Vice President, and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer. Any or all of
the signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person or entity were such officer,
transfer agent or registrar at the date of issue.
6.2 Transfers. Transfers of stock of the Corporation shall be made on
the books of the Corporation only upon surrender to the Corporation of a
certificate (if any) for the shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, provided such
succession, assignment or transfer is not prohibited by the Certificate of
Incorporation, these Bylaws, applicable law or contract. Thereupon, the
Corporation shall issue a new certificate (if requested) to the person entitled
thereto, cancel the old certificate (if any) and record the transaction upon its
books.
6.3 Lost, Stolen or Destroyed Certificates. Any person claiming a
certificate of stock to be lost, stolen or destroyed shall make an affidavit or
an affirmation of that fact, and shall give the Corporation a bond of indemnity
in satisfactory form and with one or more satisfactory sureties, whereupon a new
certificate (if requested) may be issued of the same tenor and for the same
number of shares as the one alleged to be lost, stolen or destroyed.
6.4 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares as the person entitled to exercise the rights of a stockholder and
shall not be bound to recognize any equitable or other claim to or interest in
any such shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise expressly provided by the
GCLD.
6.5 Additional Powers of the Board. (a) In addition to those powers set
forth in Section 4.1, the Board of Directors shall have power and authority to
make all such rules and regulations as it shall deem expedient concerning the
issue, transfer and
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registration of certificates for shares of stock of the Corporation, including
the use of uncertificated shares of stock subject to the provisions of the GCLD.
(b) The Board of Directors may appoint and remove transfer agents
and registrars of transfers, and may require all stock certificates to bear the
signature of any such transfer agent and/or any such registrar of transfers.
7. MISCELLANEOUS
7.1 Place and Inspection of Books. (a) The books of the Corporation
other than such books as are required by law to be kept within the State of
Delaware shall be kept in such place or places either within or without the
State of Delaware as the Board of Directors may from time to time determine.
(b) At least ten days before each meeting of stockholders, the
officer in charge of the stock ledger of the Corporation shall prepare a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
(c) The Board of Directors shall determine from time to time
whether and, if allowed, when and under what conditions and regulations the
accounts and books of the Corporation (except such as may be by law specifically
open to inspection or as otherwise provided by these Bylaws) or any of them
shall be open to the inspection of the stockholders and the stockholders' rights
in respect thereof.
7.2 Voting Shares in Other Corporations. The Chief Executive Officer,
the President or any other officer of the Corporation designated by the Board of
Directors may vote any and all shares held by the Corporation in any other
corporation.
7.3 Fiscal Year. The fiscal year of the Corporation shall be such fiscal
year as the Board of Directors from time to time by resolution shall determine.
7.4 Gender/Number. As used in these Bylaws, the masculine, feminine or
neuter gender, and the singular or plural number, shall each include the others
whenever the context so indicates.
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7.5 Paragraph Titles. The titles of the paragraphs have been inserted as
a matter of reference only and shall not control or affect the meaning or
construction of any of the terms and provisions hereof.
7.6 Amendment. These Bylaws may be altered, amended or repealed by (a)
the affirmative vote of 80% or more of the aggregate number of votes that the
holders of the then outstanding shares of common stock and preferred stock are
entitled to cast on the amendment, or (b) by resolution adopted by the
affirmative vote of not less than a majority of the Directors in office, at any
annual or regular meeting of the Board of Directors or at any special meeting of
the Board of Directors if notice of the proposed alteration, amendment or repeal
be contained in written notice of such special meeting. Notwithstanding the
foregoing, the amendment of any provision of these Bylaws requiring an
affirmative vote in excess of a majority of the Directors in office shall
require the affirmative vote of at least the number of directors the affirmative
vote of whom is required by such provision.
7.7 Certificate of Incorporation. Notwithstanding anything to the
contrary contained herein, if any provision contained in these Bylaws is
inconsistent with or conflicts with a provision of the Certificate of
Incorporation, such provision of these Bylaws shall be superseded by the
inconsistent provision in the Certificate of Incorporation to the extent
necessary to give effect to such provision in the Certificate of Incorporation.
11
March 5, 1998
To Members of the Financial Community:
Effective March 1, 1998, Delmarva Power & Light Company and Atlantic
Energy Inc. formed Conectiv, a new kind of power company.
With the receipt of SEC approval under the Public Utility Holding
Company Act last week, we are now one family of companies under Conectiv.
We will have a market capitalization of over $2.3 billion, and will serve
over 1 million electric customers and 100,000 gas customers in Delaware,
New Jersey, Maryland and Virginia. Our regional focus will extend beyond
into those neighboring states in the northeast where we can capitalize on
competitive opportunities for energy, HVAC services, and telecommunications
and continue to provide the excellent customer care both Atlantic and
Delmarva have been long noted for.
We commenced trading on the New York Stock Exchange on March 2, 1998
under the ticker symbols CIV (Common Stock) and CIV A (Class A). As we
begin our new company, we plan to meet with the financial community to
outline Conectiv's strategic objectives and the progress we've made to
date. Included below are some key areas which we plan to cover.
Strategic Focus
Conectiv is committed to creating shareholder value, measured in terms
of top quartile total shareholder return, with a minimum 5% growth in
annual earnings and an overall total return of at least 12%. We will
differentiate ourselves based upon a focused, competency based strategy; a
manageable level of capital investment required to produce those returns,
of which almost all funds are generated internally; and a management team
with the breadth and depth of experience to manage the portfolio of
Conectiv business assets.
Conectiv will manage its portfolio using three strategic business
groups, which are led by executives with broad experience: Conectiv Energy
Supply, led by Tom Shaw, Executive Vice President of Conectiv; Conectiv
Energy Delivery, led by Meredith I. Harlacher, Jr., President of Conectiv,
and Conectiv Enterprises, led by Barry Elson, Executive Vice President of
Conectiv. Our regulated delivery and energy supply businesses generate
strong cash flow, and provide more than adequate coverage of our dividend.
<PAGE>
The Enterprises business group includes five retail business lines:
Conectiv Communications (telecommunications); Conectiv Services (HVAC);
Conectiv Energy (retail energy); Conectiv Thermal Systems (district
heating/cooling); and Conectiv Solutions (energy services). With the
exception of retail energy, these businesses will have higher gross
margins, slightly different measures of value than the utility industry and
are expected to produce revenues of over $750 million by 2000, with a
cumulative capital investment by that time of between $300 million and
$400 million.
1997 Successes
During the last year, we have worked in both companies to bring two
organizations together, obtain the needed regulatory approvals, investing
in new processes for competing in deregulating markets, while achieving
significant progress in forging ahead with our strategy of bringing new
products and services to serve the regional marketplace. 1997 saw
significant progress attained in the Conectiv brand awareness campaign,
increased market share in regional retail pilot electric and gas programs,
the launch of Conectiv Communications as the only facilities-based local
service alternative on the Delmarva peninsula, and dramatic revenue growth
(from $33 million to $95 million on an annual basis) from Conectiv Services
through the acquisition and integration of several additional regional HVAC
contractors.
Looking ahead, we plan to continue to make investments in these
business lines, as well as the Supply and Delivery groups, with expected
consolidated capital and acquisition expenditures of over $1.5 billion
during the five year period. We plan to fund that growth internally, and
will issue new debt securities primarily to cover scheduled redemptions
during that time.
1998 will be a watershed year and contain several key events which
will help mark the beginning of Conectiv. We are committed to achieving
the merger synergies which have been identified. We truly expect that
additional savings can be gained, and have developed a "100 day plan" to
drive the staffing levels where they should be and achieve our vision of
producing value for our investors.
Critical to Conectiv's future success is the outcome of the
restructuring proceedings now pending in New Jersey, to be followed by
proceedings in Delaware and Maryland in the next few years. We plan to
aggressively pursue favorable outcomes in those states so that our
generation assets are free to compete in the energy markets.
Continued growth of Conectiv Enterprises--our retail businesses-- is
also of paramount importance during 1998 and 1999. Those businesses are in
a start-up mode and we expect the pressure on earnings to subside as these
businesses continue to grow. We believe that our investments in these new
businesses made during 1997, funded largely by Delmarva, will pay off over
the long term.
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As we go forward as Conectiv in 1998, we plan to provide you with
periodic updates on selected performance measures. Those measures are in
the areas of merger synergies, electric restructuring, and growth and
profitability measures in our Enterprises business group, which we believe
will demonstrate the progress we are making in those critical areas.
We look forward to speaking with you about Conectiv.
Sincerely,
/s/ Barbara S. Graham
-------------------------
Barbara S. Graham
Senior Vice President and
Chief Financial Officer
The Private Securities Litigation Reform Act of 1995 (Litigation Reform
Act) provides a new safe harbor for forward looking statements to encourage
such disclosures without the threat of litigation, provided those
statements are identified as forward-looking and are accompanied by
meaningful, cautionary statements identifying important factors that could
cause the actual results to differ materially from those projected in the
statement. Forward looking statements are made in this report. Such
statements are based on management's beliefs as well as assumptions made by
and information currently available to management. When used herein, the
words "will", "anticipate", "estimate", "expect", "objective" and similar
expressions are intended to identify forward-looking statements. In
addition to any assumptions, and other factors referred to specifically in
connection with such forward-looking statements, factors that could cause
actual results to differ materially from those contemplated in any forward
looking statements include, among others, the following: deregulation and
the unbundling of energy supplies and services; an increasingly competitive
energy marketplace; sales retention and growth; federal and state
regulatory actions; operating restrictions; and credit market concerns.
The Company undertakes no obligation to publicly update or revise any
forward looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors pursuant to the
Litigation Reform Act should not be construed as exhaustive or as any
admission regarding the adequacy of disclosures made by the Company prior
to the effective date of the Litigation Reform Act.
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<TABLE>
<CAPTION>
Capital and Acquisition Expenditures: 1998-2002 ($000)
- -------------------------------------------------------
5-Year
1998 1999 2000 2001 2002 Total
---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
Total Capital & Acquisition Expenditures* $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535
======== ======== ======== ======== ======== ==========
Energy Supply (2) $53,961 $82,660 $59,288 $96,081 $61,729 $353,719
Energy Delivery (2) $131,067 $142,207 $147,994 $136,267 $134,552 $692,087
Enterprises $97,818 $102,636 $86,414 $82,047 $62,314 $431,229
Conectiv Services $31,510 $27,740 $2,923 $1,174 $1,183
Conectiv Communications $32,770 $34,201 $38,609 $36,606 $25,091
Conectiv Solutions $7,276 $40,211 $28,278 $31,718 $36,001
Conectiv Energy $945 $484 $121 $209 $39
Conectiv Thermal (2) $25,317 $16,483 $12,340
Enertech $7,500 $7,500 $7,500 $7,500 $7,500 $37,500
</TABLE>
Note: (1) Energy Supply and Energy Delivery include one-half of common plant
expenditures.
(2) Represents budgeted common equity contribution.
* Excludes AFUDC
4
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<TABLE>
<CAPTION>
Conectiv Sources and Uses of Cash: 1998-2002 ($000)
- ----------------------------------------------------
5-Year
1998 1999 2000 2001 2002 Total
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Cash Requirements
Capital and Acquisition Expenditures $290,346 $335,003 $301,196 $321,895 $266,095 $1,514,535
Changes in Working Capital 24,803 15,482 26,048 26,202 23,090 115,625
-------- -------- -------- -------- -------- ----------
Total Cash Required $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160
======== ======== ======== ======== ======== ==========
Internally Generated Funds $281,785 $263,120 $296,573 $334,441 $381,732 $1,557,651
External Financings 134,907 149,732 79,398 68,752 18,198 450,987
Redemption of Securities (101,543) (62,367) (48,727) (55,096) (110,745) (378,478)
-------- -------- -------- -------- -------- ----------
Total Sources of Cash $315,149 $350,485 $327,244 $348,097 $289,185 $1,630,160
======== ======== ======== ======== ======== ===========
</TABLE>
